N-CSR 1 dncsr.txt IXIS ADVISOR 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: 811-00242 IXIS Advisor Funds Trust II -------------------------------------------------------------------------------- (Exact name of Registrant as specified in charter) 399 Boylston Street, Boston, Massachusetts 02116 -------------------------------------------------------------------------------- (Address of principal (Zip code) executive offices) Coleen Downs Dinneen, Esq. 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 Date of reporting period: December 31, 2006 Item 1. Reports to Stockholders. The Registrant's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: [LOGO] IXIS ADVISOR FUNDS Equity Funds Annual Report December 31, 2006 CGM Advisor Targeted Equity Fund Hansberger International Fund Harris Associates Focused Value Fund Harris Associates Large Cap Value Fund IXIS U.S. Diversified Portfolio BlackRock Investment Management Harris Associates Loomis, Sayles & Company IXIS Value Fund Harris Associates Loomis, Sayles & Company Vaughan Nelson Investment Management Westpeak Global Advisors Vaughan Nelson Small Cap Value Fund Westpeak Capital Growth Fund TABLE OF CONTENTS Management Discussion and Performance.......Page 1 Portfolio of Investments...................Page 25 Financial Statements.......................Page 43 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
-------------------------------------------------------------------------------- What 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 -------------------------------------------------------------------------------- While energy stocks rose along with oil prices in the first half of 2006, the fund's energy position hurt relative performance in the second half of 2006 when oil prices retreated. However, for the full year, price appreciation from the stocks we selected in other sectors offset some of this decline and helped the fund post positive results. For the year ended December 31, 2006, CGM Advisor Targeted Equity Fund's total return was 8.52% based on the net asset value of Class A shares, with $0.07 in dividends and $0.31 in capital gains reinvested during the period. The fund lagged its benchmark, the S&P 500 Index, which had a return of 15.79%, and trailed the average of funds in Morningstar's Large Blend category, which returned 14.15%. ENERGY STOCKS HURT PERFORMANCE IN 2006 We began 2006 with just under 30% of the fund's net assets in energy-related securities. This weighting rose to more than 40% of assets at midyear through a combination of price appreciation and additional purchases. Unfortunately, energy stocks fell sharply when the price of crude oil retreated from record highs of $78 a barrel in the summer to $60 in the fall. The impact of these price declines was greatest during the third quarter. By year-end 2006 we had reduced the fund's energy-related securities to less than 12% of net assets. EMPHASIS SHIFTED TO FINANCIAL SECTOR AND GLOBALLY ORIENTED COMPANIES During the second half of 2006, the fund established a substantial position in financial companies, including commercial and investment banks that we believe will benefit from moderate growth and a low interest rate environment in the United States. Stocks of foreign companies also have a significant weighting because we believe other countries will experience faster growth than the U.S. economy. The fund's international holdings include Japanese auto giant Toyota; Ryanair Holdings, Europe's largest low-fare carrier; and America Movil, the leading Latin American cellular telephone company. The fund is also positioned to benefit from global economic strength through multi-national companies, including fast-food giant McDonald's; insurance firm American International Group; and Procter & Gamble, a world leader in personal care and household cleaning products. PERFORMANCE STRENGTH FROM SOME HOLDINGS UNDERCUT BY WEAKER ISSUES Toyota, mentioned above, was the fund's top performer in 2006, as the company continued to gain market share in Europe and the United States. Aerospace and defense giant Boeing also contributed to the fund's results. Boeing had been lagging its principal competitor, Airbus, but Boeing vaulted ahead competitively with its pioneering design for its 787 Dreamliner jets. At the same time, Airbus lost market share when the company found itself two years behind schedule in the production of its A380 jumbo jetliner. Merrill Lynch was another strong positive for the fund. This leading investment bank saw its stock price rise on favorable industry trends as well as revitalized management, which assumed leadership of the company several years ago. AT&T was also a plus for the fund. This venerable giant provides local and long-distance telephone and wireless services, as well as internet access; it is active in acquisitions and benefiting from consolidation in the industry. One of the fund's weaker stocks was Walgreens, a leading retail pharmacy. We purchased the stock in September and sold it in November as the price declined after Wal-Mart's controversial $4 generic drug prescription offer. We also sold the fund's holdings in Rio Tinto, a major Australian mining company that declined in value with commodities prices. FOREIGN ECONOMIES EXPECTED TO GROW FASTER THAN U.S. BUSINESSES Going forward, we anticipate continued global growth and low inflation, with foreign economies growing faster than the U.S. economy in 2007. We will continue to look for stocks of established companies with prospects for above-average earnings growth. 1 CGM ADVISOR TARGETED EQUITY FUND Investment Results through December 31, 2006 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide 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 through December 31, 2006 Month Cumulative Class A @M.S.C. S&P 500 Index End Value Cumulative Value Cumulative Value ---------- ---------- ---------------- ---------------- 12/31/1996 10,000 9,425 10,000 1/31/1997 10,903 10,276 10,625 2/28/1997 10,722 10,105 10,708 3/31/1997 10,266 9,676 10,268 4/30/1997 10,852 10,228 10,881 5/31/1997 11,384 10,730 11,544 6/30/1997 11,892 11,208 12,061 7/31/1997 13,044 12,294 13,020 8/31/1997 12,374 11,662 12,291 9/30/1997 13,007 12,260 12,964 10/31/1997 12,498 11,779 12,531 11/30/1997 12,355 11,645 13,111 12/31/1997 12,355 11,645 13,336 1/31/1998 12,556 11,834 13,484 2/28/1998 13,660 12,875 14,456 3/31/1998 14,539 13,703 15,197 4/30/1998 15,097 14,229 15,350 5/31/1998 14,860 14,005 15,086 6/30/1998 15,655 14,755 15,698 7/31/1998 15,738 14,833 15,531 8/31/1998 12,735 12,003 13,286 9/30/1998 12,825 12,088 14,137 10/31/1998 14,117 13,305 15,287 11/30/1998 15,291 14,412 16,213 12/31/1998 16,481 15,533 17,148 1/31/1999 17,599 16,587 17,865 2/28/1999 16,337 15,397 17,310 3/31/1999 16,729 15,767 18,002 4/30/1999 16,670 15,712 18,699 5/31/1999 16,134 15,206 18,258 6/30/1999 17,323 16,326 19,271 7/31/1999 16,915 15,943 18,669 8/31/1999 16,887 15,916 18,577 9/30/1999 15,885 14,972 18,068 10/31/1999 16,495 15,547 19,211 11/30/1999 17,119 16,135 19,601 12/31/1999 18,983 17,892 20,756 1/31/2000 17,499 16,492 19,713 2/29/2000 19,052 17,957 19,340 3/31/2000 19,260 18,153 21,232 4/30/2000 18,536 17,470 20,593 5/31/2000 17,795 16,771 20,171 6/30/2000 17,864 16,837 20,668 7/31/2000 17,294 16,300 20,345 8/31/2000 18,114 17,072 21,608 9/30/2000 17,458 16,454 20,468 10/31/2000 17,495 16,489 20,381 11/30/2000 17,330 16,334 18,774 12/31/2000 18,121 17,079 18,866 1/31/2001 16,513 15,564 19,535 2/28/2001 15,990 15,070 17,754 3/31/2001 15,584 14,688 16,629 4/30/2001 16,262 15,327 17,922 5/31/2001 15,933 15,017 18,042 6/30/2001 16,041 15,119 17,603 7/31/2001 15,575 14,679 17,429 8/31/2001 14,291 13,470 16,338 9/30/2001 12,911 12,168 15,019 10/31/2001 12,988 12,241 15,305 11/30/2001 14,369 13,543 16,479 12/31/2001 15,185 14,312 16,624 1/31/2002 15,651 14,751 16,381 2/28/2002 14,931 14,073 16,065 3/31/2002 15,184 14,310 16,669 4/30/2002 15,223 14,348 15,659 5/31/2002 15,068 14,201 15,543 6/30/2002 14,581 13,743 14,436 7/31/2002 12,967 12,221 13,311 8/31/2002 12,967 12,221 13,398 9/30/2002 12,169 11,470 11,942 10/31/2002 11,877 11,194 12,993 11/30/2002 11,585 10,919 13,758 12/31/2002 10,808 10,186 12,950 1/31/2003 10,808 10,186 12,611 2/28/2003 10,730 10,113 12,421 3/31/2003 10,982 10,351 12,542 4/30/2003 11,682 11,010 13,575 5/31/2003 12,692 11,962 14,290 6/30/2003 12,905 12,163 14,473 7/31/2003 12,653 11,925 14,728 8/31/2003 12,983 12,236 15,015 9/30/2003 13,139 12,383 14,856 10/31/2003 14,772 13,922 15,696 11/30/2003 15,355 14,472 15,834 12/31/2003 15,433 14,546 16,664 1/31/2004 15,083 14,216 16,970 2/29/2004 15,997 15,077 17,206 3/31/2004 16,736 15,774 16,947 4/30/2004 15,414 14,528 16,681 5/31/2004 15,784 14,876 16,909 6/30/2004 15,920 15,004 17,238 7/31/2004 15,162 14,290 16,668 8/31/2004 15,336 14,454 16,735 9/30/2004 16,289 15,352 16,916 10/31/2004 16,483 15,535 17,175 11/30/2004 17,221 16,231 17,870 12/31/2004 17,589 16,578 18,478 1/31/2005 17,435 16,432 18,027 2/28/2005 18,601 17,532 18,407 3/31/2005 17,784 16,762 18,081 4/30/2005 17,299 16,304 17,738 5/31/2005 17,785 16,762 18,302 6/30/2005 18,178 17,133 18,328 7/31/2005 19,112 18,014 19,010 8/31/2005 19,307 18,197 18,836 9/30/2005 20,028 18,876 18,989 10/31/2005 19,561 18,436 18,672 11/30/2005 19,872 18,729 19,379 12/31/2005 19,912 18,767 19,385 1/31/2006 20,768 19,574 19,899 2/28/2006 20,047 18,895 19,953 3/31/2006 20,613 19,427 20,201 4/30/2006 21,567 20,327 20,472 5/31/2006 20,827 19,630 19,883 6/30/2006 20,790 19,594 19,910 7/31/2006 20,908 19,706 20,033 8/31/2006 20,751 19,558 20,510 9/30/2006 20,320 19,151 21,038 10/31/2006 21,007 19,799 21,724 11/30/2006 21,065 19,854 22,137 12/31/2006 21,609 20,366 22,447 Average Annual Total Returns -- December 31, 2006
SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION Class A (Inception 11/27/68) Net Asset Value/1/ 8.52% 7.32% 8.01% -- With Maximum Sales Charge/2/ 2.31 6.04 7.37 -- Class B (Inception 2/28/97) Net Asset Value/1/ 7.83 6.50 -- 6.58% With CDSC/3/ 2.83 6.19 -- 6.58 Class C (Inception 9/1/98) Net Asset Value/1/ 7.72 6.48 -- 5.06 With CDSC/3/ 6.72 6.48 -- 5.06 Class Y (Inception 6/30/99) Net Asset Value/1/ 8.99 7.76 -- 3.39 --------------------------------------------------------------
----------------------------------------------------------------------------------------------------- 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/ 15.79% 6.19% 8.42% 7.82% 6.50% 2.06% Morningstar Large Blend Fund Avg./5/ 14.15 5.92 7.79 7.35 6.85 2.76 -----------------------------------------------------------------------------------------------------
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary, and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those noted. For performance current to the most recent month-end, visit www.ixisadvisorfunds.com. Class Y shares are only available to certain investors, as outlined in the prospectus. 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 12/31/06 12/31/05 ------------------------------------------------------ Common Stocks 99.0 99.0 ------------------------------------------------------ Short-Term Investments and Other 1.0 1.0 ------------------------------------------------------ % of Net Assets as of TEN LARGEST HOLDINGS 12/31/06 12/31/05 ------------------------------------------------------ Toyota Motor Corp. 7.0 5.3 ------------------------------------------------------ Merrill Lynch & Co., Inc. 6.3 -- ------------------------------------------------------ Morgan Stanley 5.4 -- ------------------------------------------------------ JC Penney Co., Inc. 5.4 -- ------------------------------------------------------ AT&T, Inc. 5.3 -- ------------------------------------------------------ Lehman Brothers Holdings, Inc. 5.3 -- ------------------------------------------------------ Deere & Co. 5.1 -- ------------------------------------------------------ America Movil SAB de CV 5.1 3.5 ------------------------------------------------------ Citigroup, Inc. 5.1 -- ------------------------------------------------------ Boeing Co. (The) 5.1 -- ------------------------------------------------------ % of Net Assets as of FIVE LARGEST INDUSTRIES 12/31/06 12/31/05 ------------------------------------------------------ Diversified Financial Services 22.0 1.8 ------------------------------------------------------ Oil & Gas Services 11.5 9.9 ------------------------------------------------------ Telecommunications 10.4 3.5 ------------------------------------------------------ Banks 10.1 -- ------------------------------------------------------ Auto Manufacturers 7.0 5.3 ------------------------------------------------------
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 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 comparative performance figures shown for each Class of fund shares are calculated as follows: Class B from 3/1/97; Class C from 9/1/98; and Class Y from 7/1/99. 2 HANSBERGER INTERNATIONAL FUND PORTFOLIO PROFILE Objective: Seeks long-term growth of capital -------------------------------------------------------------------------------- Strategy: Invests in common stocks of small-, mid- and large-cap companies located outside the United States. Assets are diversified across developed and emerging markets -------------------------------------------------------------------------------- Inception Date: December 29, 1995 -------------------------------------------------------------------------------- Managers: Growth: Trevor Graham 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
-------------------------------------------------------------------------------- What You Should Know: Foreign securities involve risks not associated with domestic securities, such as currency fluctuations, differing political and economic conditions and different 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 -------------------------------------------------------------------------------- Hansberger International Fund's total return was 24.08% for the year ended December 31, 2006 based on the net asset value of Class A shares, including $0.35 in dividends and $2.70 in capital gains reinvested during the period. By comparison, the fund's benchmarks, the MSCI EAFE Index and the MSCI ACWI ex-U.S. Index, returned 26.86% and 27.16%, respectively. The average performance of Morningstar's Foreign Large Blend category was 24.82%. Neither the fund nor its benchmarks include U.S. stocks, and the Morningstar category has only limited exposure to domestic equities. Two teams of Hansberger's international equity specialists manage the fund. One focuses on value and the other seeks growth potential. As they have for the past few years, value stocks outperformed growth stocks in 2006. GROWTH SEGMENT'S TOP PERFORMERS CAME FROM DENMARK AND TAIWAN On an absolute basis, the Pacific ex-Japan region was the strongest area for the growth segment. Europe and the Emerging Markets regions were also strong on an absolute basis, but the fund's holdings in these regions underperformed its benchmarks. Telecommunications and utilities were the best-performing sectors. This segment's top performer in 2006 was Denmark's Vestas Wind Systems, the world's dominant player in the wind turbine industry and a long-time portfolio holding. Increasing demand for wind turbines and sound management had a positive impact on the company's earnings and stock price. The segment got a strong boost late in the year from Foxconn International Holdings, a subsidiary of Taiwan's Hon Hai Precision Industry. Foxconn is principally engaged in the manufacture and design of mobile handset systems and modules for mobile phones. Two Japanese stocks that held this segment back were Yamada Denki Co., a Japan-based retailer comparable to Best Buy, and Nitto Denko, a diversified specialty chemicals company comparable to 3M. Yamada Denki failed to beat analysts' earnings estimates again this year. Key areas for growth at Nitto Denko include specialty films for LCD panels, but demand slowed in 2006 and competition increased, causing the industry to lag. Hansberger's growth team continues to have confidence in both Yamada Denki and Nitto Denko. VALUE SEGMENT FOUND TOP PERFORMERS IN JAPAN, THE U.K., AND RUSSIA Geographically, the value segment's emphasis was on Japan and Europe. Japanese selections were positive, but the segment's European stocks lagged those in the benchmark. Top performers included Nintendo in Japan, Man Group PLC in the U.K., and Russian oil company LUKOIL. Nintendo benefited from the introduction of "Wii," a new game console. Man Group is a financial services company with hedge fund and futures brokerage operations, and a track record of consistently outperforming competitors. LUKOIL benefited from cyclically high oil prices and investor interest in Russian equities. Although the stock price of Hong Kong's Johnson Electric Holdings declined during the year, as the rising cost of raw materials cut into earnings for this leading manufacturer of micro-motors, it remains in the segment. Hansberger's value team believes the cost of raw materials will eventually revert to more normal levels. LG Chemical Ltd, Korea's leading manufacturer of chemicals and auto parts, declined on concerns over the effects of high oil prices on its operations and was sold. Canada's Celestica, Inc, an electronics manufacturing services company, has been actively restructuring and the stock price fell. The team was in the process of selling off Celestica in the last few weeks of 2006 as the company's fundamentals deteriorated. OUTLOOK FOR INTERNATIONAL INVESTING SEEMS POSITIVE Hansberger believes consumers in many emerging markets, especially Asia, may offset slower consumer activity in the United States. We believe Japan's economic recovery will continue in fits and starts, and look for increasing corporate merger and acquisition activity worldwide to contribute to increasing shareholder value. Historically speaking, international stocks are trading at attractive valuations, reinforcing our confidence in international investing. 3 HANSBERGER INTERNATIONAL FUND Investment Results through December 31, 2006 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide 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/7/ [CHART] December 31, 1996 through December 31, 2006 Class A MSCI MSCI @ M.S.C. Index Index Month Cumulative Cumulative Cumulative Cumulative End Value Value Value Value ---------- ---------- ---------- ---------- ---------- 12/31/1996 $10,000 $ 9,425 $10,000 $10,000 1/31/1997 10,403 9,805 9,652 9,816 2/28/1997 10,618 10,008 9,813 9,996 3/31/1997 10,514 9,910 9,850 9,975 4/30/1997 10,618 10,008 9,905 10,059 5/31/1997 11,167 10,525 10,552 10,681 6/30/1997 11,681 11,009 11,136 11,270 7/31/1997 12,125 11,428 11,319 11,498 8/31/1997 11,445 10,787 10,476 10,594 9/30/1997 12,071 11,377 11,065 11,167 10/31/1997 11,196 10,552 10,217 10,216 11/30/1997 11,065 10,428 10,115 10,088 12/31/1997 11,268 10,620 10,206 10,204 1/31/1998 11,232 10,586 10,675 10,510 2/28/1998 11,997 11,307 11,362 11,211 3/31/1998 12,485 11,767 11,715 11,598 4/30/1998 12,558 11,836 11,810 11,681 5/31/1998 12,303 11,595 11,756 11,469 6/30/1998 12,048 11,355 11,847 11,426 7/31/1998 12,012 11,321 11,970 11,535 8/31/1998 10,109 9,528 10,490 9,908 9/30/1998 10,014 9,438 10,171 9,699 10/31/1998 10,743 10,126 11,234 10,715 11/30/1998 11,319 10,668 11,812 11,291 12/31/1998 11,720 11,046 12,281 11,680 1/31/1999 12,128 11,430 12,247 11,667 2/28/1999 11,975 11,286 11,958 11,406 3/31/1999 12,463 11,747 12,460 11,957 4/30/1999 13,134 12,379 12,968 12,555 5/31/1999 12,806 12,069 12,303 11,965 6/30/1999 13,556 12,777 12,786 12,515 7/31/1999 13,403 12,632 13,169 12,808 8/31/1999 13,308 12,543 13,220 12,853 9/30/1999 13,002 12,254 13,356 12,940 10/31/1999 13,461 12,687 13,859 13,421 11/30/1999 14,466 13,634 14,343 13,958 12/31/1999 16,128 15,201 15,633 15,289 1/31/2000 15,528 14,635 14,643 14,460 2/29/2000 16,500 15,552 15,040 14,850 3/31/2000 16,548 15,597 15,626 15,409 4/30/2000 15,348 14,466 14,806 14,549 5/31/2000 14,652 13,809 14,448 14,177 6/30/2000 15,081 14,214 15,016 14,780 7/31/2000 14,675 13,831 14,389 14,197 8/31/2000 15,114 14,245 14,517 14,373 9/30/2000 14,546 13,709 13,813 13,575 10/31/2000 13,995 13,190 13,490 13,144 11/30/2000 13,358 12,590 12,987 12,554 12/31/2000 14,158 13,344 13,451 12,983 1/31/2001 14,433 13,603 13,445 13,178 2/28/2001 13,510 12,733 12,438 12,134 3/31/2001 12,627 11,901 11,615 11,277 4/30/2001 13,441 12,668 12,429 12,044 5/31/2001 13,598 12,817 12,000 11,711 6/30/2001 13,486 12,710 11,514 11,262 7/31/2001 13,239 12,478 11,305 11,011 8/31/2001 12,953 12,208 11,021 10,738 9/30/2001 11,601 10,934 9,908 9,599 10/31/2001 11,828 11,148 10,161 9,868 11/30/2001 12,500 11,781 10,536 10,319 12/31/2001 12,887 12,146 10,599 10,452 1/31/2002 12,581 11,857 10,037 10,004 2/28/2002 12,611 11,886 10,107 10,076 3/31/2002 13,364 12,595 10,708 10,665 4/30/2002 13,274 12,511 10,736 10,693 5/31/2002 13,354 12,586 10,882 10,809 6/30/2002 12,542 11,821 10,453 10,342 7/31/2002 11,339 10,687 9,422 9,334 8/31/2002 11,358 10,705 9,403 9,335 9/30/2002 9,957 9,384 8,395 8,346 10/31/2002 10,503 9,899 8,847 8,793 11/30/2002 11,258 10,611 9,250 9,216 12/31/2002 10,771 10,152 8,939 8,919 1/31/2003 10,393 9,795 8,567 8,606 2/28/2003 10,105 9,524 8,371 8,431 3/31/2003 9,976 9,402 8,213 8,268 4/30/2003 11,019 10,386 9,027 9,064 5/31/2003 11,804 11,125 9,583 9,642 6/30/2003 12,072 11,378 9,820 9,909 7/31/2003 12,320 11,612 10,059 10,173 8/31/2003 12,707 11,977 10,304 10,476 9/30/2003 12,876 12,136 10,623 10,769 10/31/2003 13,790 12,997 11,286 11,467 11/30/2003 14,029 13,222 11,539 11,717 12/31/2003 14,973 14,112 12,441 12,612 1/31/2004 15,312 14,431 12,617 12,814 2/29/2004 15,500 14,609 12,911 13,140 3/31/2004 15,351 14,468 12,989 13,221 4/30/2004 14,914 14,056 12,706 12,810 5/31/2004 14,963 14,102 12,745 12,839 6/30/2004 15,211 14,337 13,046 13,129 7/31/2004 14,525 13,690 12,624 12,747 8/31/2004 14,654 13,812 12,683 12,849 9/30/2004 15,032 14,168 13,016 13,262 10/31/2004 15,470 14,580 13,461 13,723 11/30/2004 16,373 15,432 14,384 14,675 12/31/2004 17,009 16,031 15,016 15,306 1/31/2005 16,641 15,684 14,741 15,042 2/28/2005 17,555 16,545 15,381 15,784 3/31/2005 17,069 16,087 15,001 15,356 4/30/2005 16,671 15,712 14,665 14,977 5/31/2005 16,731 15,769 14,688 15,071 6/30/2005 16,910 15,938 14,888 15,355 7/31/2005 17,556 16,546 15,346 15,921 8/31/2005 18,102 17,061 15,738 16,329 9/30/2005 18,589 17,520 16,442 17,171 10/31/2005 18,072 17,033 15,963 16,546 11/30/2005 18,618 17,547 16,358 17,102 12/31/2005 19,750 18,614 17,120 17,925 1/31/2006 21,190 19,971 18,172 19,175 2/28/2006 20,821 19,624 18,135 19,119 3/31/2006 21,477 20,242 18,742 19,675 4/30/2006 22,370 21,084 19,651 20,689 5/31/2006 21,455 20,222 18,911 19,735 6/30/2006 21,318 20,092 18,918 19,715 7/31/2006 21,561 20,321 19,108 19,917 8/31/2006 22,139 20,866 19,638 20,482 9/30/2006 22,300 21,018 19,672 20,495 10/31/2006 23,121 21,792 20,439 21,330 11/30/2006 23,872 22,500 21,056 22,104 12/31/2006 24,500 23,092 21,718 22,793 Average Annual Total Returns -- December 31, 2006
1 YEAR 5 YEARS/7/ 10 YEARS/7/ CLASS A (Inception 12/29/95) Net Asset Value/1/ 24.08% 13.72% 9.38% With Maximum Sales Charge/2/ 16.96 12.39 8.73 CLASS B (Inception 12/29/95) Net Asset Value/1/ 23.15 12.89 8.58 With CDSC/3/ 18.15 12.65 8.58 CLASS C (Inception 12/29/95) Net Asset Value/1/ 23.14 12.89 8.57 With CDSC/3/ 22.14 12.89 8.57 -------------------------------------------------------------------------- COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS MSCI EAFE Index/4/ 26.86% 15.43% 8.06% MSCI ACWI ex-U.S. Index/5/ 27.16 16.87 8.59 Morningstar Foreign Large Blend Fund Avg./6/ 24.82 13.19 7.37 --------------------------------------------------------------------------
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.ixisadvisorfunds.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 12/31/06 12/31/05 -------------------------------------------------------- Common Stocks 99.1 98.3 -------------------------------------------------------- Preferred Stock -- 0.5 -------------------------------------------------------- Short-Term Investments and Other 0.9 1.2 -------------------------------------------------------- % of Net Assets as of TEN LARGEST HOLDINGS 12/31/06 12/31/05 -------------------------------------------------------- UniCredito Italiano SpA 1.9 1.7 -------------------------------------------------------- Novartis AG 1.7 1.5 -------------------------------------------------------- Saipem SpA 1.6 0.6 -------------------------------------------------------- Smith & Nephew PLC 1.5 0.8 -------------------------------------------------------- British Sky Broadcasting Group PLC 1.4 1.4 -------------------------------------------------------- Telefonica SA 1.3 0.9 -------------------------------------------------------- DBS Group Holdings, Ltd. 1.3 1.2 -------------------------------------------------------- HBOS PLC 1.3 1.7 -------------------------------------------------------- Credit Suisse Group 1.2 0.8 -------------------------------------------------------- Nestle SA 1.2 1.2 -------------------------------------------------------- % of Net Assets as of FIVE LARGEST COUNTRIES 12/31/06 12/31/05 -------------------------------------------------------- Japan 18.3 18.9 -------------------------------------------------------- United Kingdom 17.0 19.8 -------------------------------------------------------- Switzerland 10.4 8.3 -------------------------------------------------------- France 8.7 10.2 -------------------------------------------------------- Italy 4.3 3.1 --------------------------------------------------------
Portfolio holdings and asset allocations will vary. NOTES TO CHARTS /1/Does not include a sales charge. /2/Includes the maximum sales charge of 5.75%. /3/Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /4/Morgan Stanley Capital International Europe Australasia and Far East Index (MSCI EAFE Index) is an unmanaged index designed to measure developed market equity performance, excluding the United States and Canada. /5/Morgan Stanley Capital International All Countries World Index ex-U.S. (MSCI ACWI ex-U.S. Index) is an unmanaged index designed to measure equity market performance in developed and emerging markets, 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/Fund performance has been increased by expense waivers/reimbursements, without which performance would have been lower. 4 HARRIS ASSOCIATES FOCUSED VALUE FUND PORTFOLIO PROFILE Objective: Seeks long-term capital appreciation -------------------------------------------------------------------------------- Strategy: Focuses on 25 to 30 stocks of mid- to large-cap U.S. companies -------------------------------------------------------------------------------- Inception Date: March 15, 2001 -------------------------------------------------------------------------------- Managers: Robert M. Levy Michael Mangan -------------------------------------------------------------------------------- Symbols: Class A NRSAX Class B NRSBX Class C NRSCX
-------------------------------------------------------------------------------- What 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 -------------------------------------------------------------------------------- Energy and other commodity-based companies led equities higher early in 2006, but then stocks meandered into early summer. By fall, large-cap, high-quality issues began to take the lead in a powerful rally fueled by declining energy costs and stabilizing interest rates. Disappointing results in technology and healthcare caused the fund to trail its benchmark over the period, as did its lack of exposure to strong-performing telecommunications and utility issues. Harris Associates Focused Value Fund's total return for the year ended December 31, 2006 was 12.72%, based on the net asset value of the fund's Class A shares, including $2.00 in reinvested capital gains distributions. Performance trailed the fund's benchmark, the Standard & Poor's 500 Index, which returned 15.79% for the period, and the 14.15% average return on Morningstar's Large Blend category. CONSUMER STOCKS AND INDUSTRIALS LED RETURNS Fast-food giant McDonald's was one of the portfolio's biggest gainers in 2006, propelled by its successful turnaround. In addition to building revenues through better store operations and a revised menu, McDonald's is allocating capital more effectively. Shares of Cablevision Systems moved higher thanks to solid operating results and a move by its founders to privatize the company. Cablevision has led the way in bundling internet, cable and telephone services, increasing revenue from each subscriber while strengthening customer ties. Strong sales also boosted Harley-Davidson. Steady demand for its motorcycles makes Harley less sensitive to economic downturns than other high-end consumer businesses. Harrah's Entertainment, a worldwide operator of casino hotels, contributed to the fund's results when it became the subject of intense buyout speculation. Directors eventually chose to sell the company to private investors in one of the largest deals of its kind. Among industrials, Raytheon was a leading performer in the wake of management-led initiatives that introduced operational efficiencies and expanded margins during favorable defense procurement cycles. Investors also concluded that the company's recent business slump was related to the defense cycle and not due to missteps, such as those seen under former management. HEALTHCARE, TECHNOLOGY, AND INSURANCE WERE DISAPPOINTING Omnicare, a distributor of pharmaceutical products to nursing homes, led decliners. Unfavorable developments pressured shares, including a costly settlement with several states over disputed Medicaid billings. In addition, a lawsuit seeks to lower prices paid by Omnicare's customers. If the company loses the suit, we believe the impact on earnings would only be temporary, so it remains in the portfolio. Weakness in the semiconductor industry hurt National Semiconductor amid concerns over the cyclicality of consumer electronics. We think demand will remain strong for devices that rely on National Semi's specialized analog chips to perform key functions. Intel, the world's largest chipmaker, declined when a competitor captured some of its market share. We believe investor reaction was excessive and that Intel is moving to fill competitive gaps in its product line. Both stocks remain in the portfolio. Life and health insurer Conseco has been strengthening its finances as it recovers from bankruptcy, but delay of a ratings upgrade has weighed on shares. A new CEO has been using capital for stock buybacks and other shareholder-friendly initiatives, while working to turn investor focus from ratings to business progress. FOCUSED ON QUALITY COMPANIES THAT APPEAR TO BE UNDERVALUED Overall, we believe equity valuations are reasonable. Better-quality companies like those we favor appear to be regaining their edge and seem poised to outperform next year. In technology, we are seeking an advantage in areas like semiconductors that we feel have been overlooked or oversold. In fact, our tech holdings are doing better in business terms than their stock performance suggests. The fund's large weighting in consumer stocks reflects our confidence in each company's ability to do well on its own, independent of external factors. As always, we try to make money for our shareholders through bottom-up, value-based stock selection rather than relying on economic forecasting. 5 HARRIS ASSOCIATES FOCUSED VALUE FUND Investment Results through December 31, 2006 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide 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/7/ [CHART] March 15, 2001 (inception) through December 31, 2006 Class A S&P 500 @ M.S.C. Index Cumulative Cumulative Cumulative Month End Value Value Value ---------- ---------- ---------- ---------- 3/15/2001 $10,000 $ 9,425 $10,000 3/31/2001 10,090 9,510 10,000 4/30/2001 10,420 9,821 10,777 5/31/2001 10,690 10,075 10,849 6/30/2001 10,990 10,358 10,585 7/31/2001 11,310 10,660 10,481 8/31/2001 10,870 10,245 9,825 9/30/2001 10,240 9,651 9,032 10/31/2001 10,000 9,425 9,204 11/30/2001 10,680 10,066 9,910 12/31/2001 10,960 10,330 9,997 1/31/2002 10,890 10,264 9,851 2/28/2002 10,600 9,990 9,661 3/31/2002 10,910 10,282 10,024 4/30/2002 10,859 10,235 9,416 5/31/2002 10,929 10,300 9,347 6/30/2002 10,079 9,499 8,681 7/31/2002 9,619 9,066 8,005 8/31/2002 9,959 9,386 8,057 9/30/2002 8,568 8,076 7,181 10/31/2002 8,968 8,453 7,813 11/30/2002 9,468 8,924 8,273 12/31/2002 9,238 8,707 7,787 1/31/2003 9,008 8,490 7,583 2/28/2003 8,888 8,377 7,469 3/31/2003 8,988 8,471 7,542 4/30/2003 9,507 8,960 8,163 5/31/2003 10,117 9,535 8,593 6/30/2003 10,336 9,742 8,703 7/31/2003 10,256 9,667 8,856 8/31/2003 10,676 10,062 9,029 9/30/2003 10,556 9,949 8,933 10/31/2003 11,196 10,552 9,439 11/30/2003 11,687 11,015 9,522 12/31/2003 11,787 11,109 10,021 1/31/2004 12,097 11,401 10,205 2/29/2004 12,177 11,477 10,347 3/31/2004 11,937 11,251 10,191 4/30/2004 11,777 11,100 10,031 5/31/2004 12,037 11,345 10,168 6/30/2004 11,907 11,223 10,366 7/31/2004 11,677 11,006 10,023 8/31/2004 11,627 10,959 10,064 9/30/2004 11,938 11,251 10,173 10/31/2004 12,148 11,449 10,328 11/30/2004 12,648 11,921 10,746 12/31/2004 13,058 12,307 11,111 1/31/2005 12,608 11,883 10,841 2/28/2005 12,987 12,240 11,069 3/31/2005 12,817 12,080 10,873 4/30/2005 12,597 11,872 10,667 5/31/2005 13,046 12,296 11,006 6/30/2005 13,415 12,644 11,022 7/31/2005 13,876 13,078 11,431 8/31/2005 13,856 13,059 11,327 9/30/2005 13,607 12,824 11,419 10/31/2005 13,156 12,400 11,229 11/30/2005 13,626 12,843 11,653 12/31/2005 13,806 13,012 11,657 1/31/2006 13,966 13,163 11,966 2/28/2006 14,023 13,217 11,998 3/31/2006 14,103 13,292 12,148 4/30/2006 14,366 13,540 12,311 5/31/2006 13,874 13,076 11,957 6/30/2006 13,795 13,002 11,973 7/31/2006 13,653 12,868 12,047 8/31/2006 13,983 13,179 12,333 9/30/2006 14,444 13,613 12,651 10/31/2006 15,010 14,147 13,063 11/30/2006 15,422 14,536 13,312 12/31/2006 15,560 14,665 13,498 Average Annual Total Returns -- December 31, 2006
SINCE 1 YEAR 5 YEARS/7/ INCEPTION/7/ CLASS A (Inception 3/15/01) Net Asset Value/1/ 12.72% 7.27% 7.93% With Maximum Sales Charge/2/ 6.22 6.01 6.84 CLASS B (Inception 3/15/01) Net Asset Value/1/ 11.85 6.45 7.12 With CDSC/3/ 7.15 6.14 6.99 CLASS C (Inception 3/15/01) Net Asset Value/1/ 11.85 6.45 7.12 With CDSC/3/ 10.91 6.45 7.12 ------------------------------------------------------------------- SINCE COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS INCEPTION/6/ S&P 500 Index/4/ 15.79% 6.19% 5.36% Morningstar Large Blend Fund Avg./5/ 14.15 5.92 5.12
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.ixisadvisorfunds.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 12/31/06 12/31/05 ------------------------------------------------------ Common Stocks 100.2 93.9 ------------------------------------------------------ Short-Term Investments and Other -0.2 6.1 ------------------------------------------------------ % of Net Assets as of TEN LARGEST HOLDINGS 12/31/06 12/31/05 ------------------------------------------------------ Timberland Co. 5.0 3.4 ------------------------------------------------------ CDW Corp. 5.0 3.1 ------------------------------------------------------ Intel Corp. 5.0 2.5 ------------------------------------------------------ Liz Claiborne, Inc. 4.9 3.6 ------------------------------------------------------ National Semiconductor Corp. 4.7 2.3 ------------------------------------------------------ Yum! Brands, Inc. 4.5 4.4 ------------------------------------------------------ McDonald's Corp. 4.5 3.8 ------------------------------------------------------ Sovereign Bancorp, Inc. 4.4 2.7 ------------------------------------------------------ EW Scripps Co. 4.2 4.4 ------------------------------------------------------ Bausch & Lomb, Inc. 3.9 -- ------------------------------------------------------ % of Net Assets as of FIVE LARGEST INDUSTIES 12/31/06 12/31/05 ------------------------------------------------------ Media 14.1 17.8 ------------------------------------------------------ Semiconductors 11.9 4.8 ------------------------------------------------------ Restaurants 9.0 8.2 ------------------------------------------------------ Savings & Loans 8.1 8.3 ------------------------------------------------------ Apparel Retailers 5.0 3.4 ------------------------------------------------------
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 comparative performance figures shown are calculated from 4/1/01. /7/Fund performance has been increased by expense waivers/reimbursements, without which performance would have been lower. 6 HARRIS ASSOCIATES LARGE CAP VALUE FUND PORTFOLIO PROFILE Objective: Seeks opportunities for long-term capital growth and income -------------------------------------------------------------------------------- Strategy: Invests primarily in common stock of large- and mid-cap companies in any industry -------------------------------------------------------------------------------- Inception Date: May 6, 1931 -------------------------------------------------------------------------------- Managers: Edward S. Loeb Michael J. Mangan Diane Mustain -------------------------------------------------------------------------------- Symbols: Class A NEFOX Class B NEGBX Class C NECOX Class Y NEOYX
-------------------------------------------------------------------------------- What You Should Know: Value stocks may fall out of favor with investors and underperform the overall market during any given period. Management Report -------------------------------------------------------------------------------- After a volatile first half, equity markets sprinted ahead through the end of 2006, as interest rates stabilized and energy prices receded from record highs. Lack of representation in energy hurt performance comparisons during the first half, when oil prices were rising, and its underweight to telecom stocks caused Harris Associates Large Cap Value Fund to lag its benchmark. Most of the shortfall occurred early in the year, before oil prices retreated. Since then the market appears to have gravitated toward higher-quality issues of the kind we emphasize. For the year ended December 31, 2006, Class A shares of the fund provided a total return of 16.50% at net asset value, including $0.03 in reinvested dividends. For the same period, the Russell 1000 Value Index returned 22.25%, while the average return on comparable funds in Morningstar's Large Blend category was 14.15%. CONSUMER, FINANCIAL AND HEALTHCARE ISSUES BOOSTED RETURNS Consumer discretionary stocks, which have languished for years, achieved solid gains in 2006 as investors took note of their attractive valuations. McDonald's advanced further in its successful operational turnaround, while Hewlett-Packard's revamping under a new CEO was reflected in strong stock performance. Stock prices of Walt Disney and Time Warner also rose, after lagging the market for years. We hold each of these investments for its individual potential, and not because of such external factors as anticipated consumer spending patterns. Mellon Financial, a major banking and money management firm, rose sharply following its decision to merge with Bank of New York. JPMorgan Chase also moved higher, thanks to strong financial markets and high volumes of investment banking activity. New management as well as buoyancy on Wall Street rewarded our decision to invest in Morgan Stanley at a time when we believed it was undervalued. And after shedding non-core divisions, American Express enjoyed solid results from its rebounding credit card and travel businesses. In healthcare, Schering-Plough's new CEO has brought renewed impetus; we sold Baxter International on strength. LACK OF EXPOSURE TO TELECOM, DECLINES IN INTEL AND DELL, WERE NEGATIVES One factor that held the fund back relative to its benchmark was its lack of exposure to telecommunications, a leading market sector. An exception was Sprint Nextel, a recent addition to the fund's portfolio. In general, we prefer to avoid businesses that are dependent on volatile commodity prices so we also avoided energy. Competition from Applied Micro Devices (AMD, not in the portfolio) took market share away from Intel, the world's dominant microprocessor maker. Intel is addressing vulnerabilities in its product line while expanding capital outlays and devoting substantial resources to research and development. Sales of Dell's all-Intel-based computers also suffered when AMD processors gained popularity, giving Hewlett-Packard an opening; Dell has since added AMD-driven machines and is implementing solutions that address customer service problems. We are capitalizing on price weakness to add to both Intel and Dell. Forecasts of an active hurricane season in 2006 (that failed to materialize) held down bookings with Carnival Corp., which also faced rising fuel costs. Medtronic's stock declined as concern grew over its stents and other cardiac devices. Both remain in the portfolio. OUTLOOK FOR LARGE-CAP STOCKS SEEMS FAVORABLE Despite the vigorous rally in the latter part of 2006, Harris Associates believes the market is reasonably valued. Investors who quit equities in frustration in recent years may return to stocks as other choices lose luster. In addition, investors seem more risk averse than they have been; quality stocks appear to be gaining in popularity, signaling added potential for the commitments we made during the past several quarters. The pace of economic expansion may slow in 2007, and we believe there are likely to be periods of volatility as earnings retreat from record highs. But we think our focus on quality companies selling at attractive valuations will continue to reward shareholders over the long run. 7 HARRIS ASSOCIATES LARGE CAP VALUE FUND Investment Results through December 31, 2006 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide 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/7/ [CHART] December 31, 1996 through December 31, 2006 . Russell 1000 Cumulative Class A @ M.S.C Value Index Month End Value Cumulative Value Cumulative Value ---------- ---------- ---------------- ---------------- 12/31/1996 $10,000 $ 9,425 $10,000 1/31/1997 10,497 9,893 10,485 2/28/1997 10,627 10,016 10,639 3/31/1997 10,165 9,580 10,256 4/30/1997 10,700 10,084 10,687 5/31/1997 11,385 10,731 11,284 6/30/1997 11,943 11,257 11,768 7/31/1997 12,696 11,966 12,654 8/31/1997 12,334 11,625 12,203 9/30/1997 13,095 12,342 12,940 10/31/1997 12,521 11,801 12,579 11/30/1997 13,061 12,310 13,135 12/31/1997 13,343 12,576 13,518 1/31/1998 13,422 12,650 13,327 2/28/1998 14,500 13,666 14,224 3/31/1998 15,317 14,437 15,094 4/30/1998 15,396 14,510 15,195 5/31/1998 15,186 14,313 14,970 6/30/1998 15,821 14,911 15,162 7/31/1998 15,577 14,682 14,894 8/31/1998 13,222 12,462 12,678 9/30/1998 13,880 13,082 13,405 10/31/1998 14,883 14,027 14,444 11/30/1998 15,558 14,664 15,117 12/31/1998 16,535 15,585 15,631 1/31/1999 17,015 16,037 15,756 2/28/1999 16,607 15,652 15,534 3/31/1999 16,836 15,868 15,855 4/30/1999 17,834 16,809 17,336 5/31/1999 17,754 16,733 17,145 6/30/1999 18,308 17,255 17,643 7/31/1999 17,768 16,746 17,127 8/31/1999 17,528 16,520 16,491 9/30/1999 16,818 15,851 15,915 10/31/1999 17,492 16,486 16,831 11/30/1999 17,543 16,534 16,699 12/31/1999 18,101 17,060 16,780 1/31/2000 17,156 16,170 16,232 2/29/2000 16,578 15,625 15,026 3/31/2000 17,924 16,893 16,860 4/30/2000 17,628 16,615 16,664 5/31/2000 17,085 16,103 16,839 6/30/2000 17,309 16,314 16,070 7/31/2000 17,204 16,214 16,271 8/31/2000 18,358 17,302 17,176 9/30/2000 17,519 16,512 17,333 10/31/2000 17,568 16,558 17,759 11/30/2000 16,521 15,571 17,100 12/31/2000 16,777 15,812 17,957 1/31/2001 16,789 15,823 18,026 2/28/2001 15,791 14,883 17,525 3/31/2001 14,904 14,047 16,905 4/30/2001 16,120 15,193 17,734 5/31/2001 16,144 15,216 18,133 6/30/2001 15,584 14,688 17,731 7/31/2001 15,050 14,184 17,693 8/31/2001 14,126 13,313 16,984 9/30/2001 12,946 12,202 15,789 10/31/2001 13,408 12,637 15,653 11/30/2001 14,358 13,532 16,563 12/31/2001 14,333 13,509 16,953 1/31/2002 14,260 13,440 16,822 2/28/2002 13,882 13,084 16,849 3/31/2002 14,260 13,440 17,647 4/30/2002 13,858 13,061 17,041 5/31/2002 13,797 13,003 17,127 6/30/2002 12,969 12,223 16,143 7/31/2002 12,141 11,443 14,643 8/31/2002 12,445 11,729 14,753 9/30/2002 10,766 10,147 13,113 10/31/2002 11,168 10,526 14,084 11/30/2002 11,922 11,236 14,972 12/31/2002 11,459 10,800 14,321 1/31/2003 11,179 10,537 13,975 2/28/2003 10,826 10,204 13,602 3/31/2003 10,960 10,330 13,625 4/30/2003 11,994 11,304 14,824 5/31/2003 12,895 12,153 15,781 6/30/2003 13,174 12,417 15,978 7/31/2003 13,053 12,303 16,216 8/31/2003 13,492 12,716 16,469 9/30/2003 13,200 12,441 16,308 10/31/2003 13,821 13,026 17,306 11/30/2003 14,307 13,485 17,541 12/31/2003 14,904 14,047 18,622 1/31/2004 15,014 14,151 18,950 2/29/2004 15,367 14,483 19,356 3/31/2004 15,137 14,266 19,186 4/30/2004 15,137 14,266 18,717 5/31/2004 15,149 14,278 18,908 6/30/2004 15,368 14,485 19,355 7/31/2004 14,809 13,957 19,083 8/31/2004 14,882 14,026 19,354 9/30/2004 14,882 14,026 19,654 10/31/2004 15,198 14,325 19,981 11/30/2004 15,612 14,714 20,991 12/31/2004 16,269 15,334 21,694 1/31/2005 15,952 15,035 21,309 2/28/2005 15,891 14,978 22,015 3/31/2005 15,697 14,795 21,713 4/30/2005 15,380 14,496 21,324 5/31/2005 15,757 14,851 21,837 6/30/2005 15,641 14,741 22,076 7/31/2005 16,139 15,211 22,715 8/31/2005 15,884 14,971 22,616 9/30/2005 15,835 14,925 22,934 10/31/2005 15,628 14,729 22,351 11/30/2005 16,273 15,338 23,086 12/31/2005 16,237 15,304 23,224 1/31/2006 16,262 15,327 24,126 2/28/2006 16,444 15,498 24,273 3/31/2006 16,687 15,728 24,602 4/30/2006 16,784 15,819 25,227 5/31/2006 16,443 15,498 24,590 6/30/2006 16,387 15,445 24,747 7/31/2006 16,253 15,319 25,349 8/31/2006 16,716 15,755 25,773 9/30/2006 17,547 16,538 26,287 10/31/2006 18,158 17,114 27,147 11/30/2006 18,426 17,367 27,767 12/31/2006 18,915 17,827 28,390 Average Annual Total Returns -- December 31, 2006
SINCE 1 YEAR/7/ 5 YEARS/7/ 10 YEARS/7/ INCEPTION/7/ CLASS A (Inception 5/6/31) Net Asset Value/1/ 16.50% 5.71% 6.58% -- With Maximum Sales Charge/2/ 9.82 4.46 5.95 -- CLASS B (Inception 9/13/93) Net Asset Value/1/ 15.61 4.91 5.78 -- With CDSC/3/ 10.61 4.57 5.78 -- CLASS C (Inception 5/1/95) Net Asset Value/1/ 15.64 4.89 5.79 -- With CDSC/3/ 14.64 4.89 5.79 -- CLASS Y (Inception 11/18/98) Net Asset Value/1/ 16.97 6.13 -- 3.07% ----------------------------------------------------------------------------------- SINCE CLASS Y COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS INCEPTION/6/ Russell 1000 Value Index/4/ 22.25% 10.86% 11.00% 8.11% Morningstar Large Blend Fund Avg./5/ 14.15 5.92 7.79 4.66
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.ixisadvisorfunds.com. Class Y shares are only available to certain investors, as outlined in the prospectus. 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 12/31/06 12/31/05 ------------------------------------------------------ Common Stocks 97.8 99.0 ------------------------------------------------------ Short-Term Investments and Other 2.2 1.0 ------------------------------------------------------ % of Net Assets as of TEN LARGEST HOLDINGS 12/31/06 12/31/05 ------------------------------------------------------ McDonald's Corp. 5.3 4.6 ------------------------------------------------------ Time Warner, Inc. 4.4 4.3 ------------------------------------------------------ Dell, Inc. 4.3 2.3 ------------------------------------------------------ Viacom, Inc., Class B 4.3 2.6 ------------------------------------------------------ Union Pacific Corp. 4.2 2.5 ------------------------------------------------------ Tyco International, Ltd. 4.2 4.3 ------------------------------------------------------ Morgan Stanley 4.1 4.2 ------------------------------------------------------ Hewlett-Packard Co. 4.0 4.7 ------------------------------------------------------ Intel Corp. 4.0 4.0 ------------------------------------------------------ JPMorgan Chase & Co. 3.8 4.4 ------------------------------------------------------ % of Net Assets as of FIVE LARGEST INDUSTRIES 12/31/06 12/31/05 ------------------------------------------------------ Diversified Financial Services 13.8 15.0 ------------------------------------------------------ Media 12.8 14.9 ------------------------------------------------------ Computers 10.4 8.6 ------------------------------------------------------ Retail 6.9 11.9 ------------------------------------------------------ Semiconductors 6.1 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 that measures the performance of those Russell 1000 companies 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. /6/The since-inception comparative performance figures shown for Class Y are calculated from 12/1/98. /7/Fund performance has been increased by expense waivers/reimbursements, without which performance would have been lower. 8 IXIS U.S. DIVERSIFIED PORTFOLIO PORTFOLIO PROFILE Objective: Seeks long-term growth of capital -------------------------------------------------------------------------------- Strategy: Features growth and value investments through a diversified portfolio of complementary equity investment disciplines provided by specialized money managers -------------------------------------------------------------------------------- Inception Date: July 7, 1994 -------------------------------------------------------------------------------- Subadvisors: BlackRock Investment Management, LLC Harris Associates, L.P. Loomis, Sayles & Company, L.P. -------------------------------------------------------------------------------- Symbols: Class A NEFSX Class B NESBX Class C NECCX Class Y NESYX
-------------------------------------------------------------------------------- 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. Small-cap stocks carry special risks, including narrower markets, limited financial and management resources, less liquidity and greater volatility. Management Discussion -------------------------------------------------------------------------------- The U.S. equity markets posted strong returns in 2006, as relatively strong economic growth, tame inflation and historically low interest rates provided a positive environment for stocks. Most of the stock market's return came during the second half of the year, when oil prices began to decline and the Federal Reserve Board paused in its cycle of raising interest rates. For the year ended December 31, 2006, IXIS U.S. Diversified Portfolio returned 13.68% based on the net asset value of Class A shares. This was less than the 15.79% return of the Standard & Poor's 500 Index, but ahead of the 10.32% return of the Standard & Poor's MidCap 400 Index. The portfolio's return fell short of the 16.07% return of the Dow Jones Wilshire 4500 Index, but outpaced the 9.01% return of the funds in the Morningstar Mid-Cap Growth category. Each of the fund's four segments is managed using a different investment discipline, providing investors with exposure to a wide spectrum of large-, medium- and small-cap stocks using both growth and value investment styles. The Portfolio's BlackRock* segment seeks long-term growth of capital in companies of any size, with an emphasis on those with capitalizations greater than $2 billion. Harris Associates' segment invests primarily in common stocks of large- and mid-cap companies that the manager believes are trading at a substantial discount to their true business value. Loomis Sayles manages two segments: one that invests in mid-cap growth stocks, and one that focuses on small-cap value stocks. BLACKROCK SOUGHT RETURNS IN A VARIETY OF ECONOMIC SECTORS A significant shift in market leadership occurred in the second half of 2006, reflecting growing concerns about the pace of growth in the United States. As of December 31, 2006, energy was the largest sector in BlackRock's segment, with an emphasis on the drilling and services industries. The manager's focus on the oil and gas drilling and services industries stems from their belief that the outlook for the companies selected is as strong as it has been in almost 30 years. Materials and industrials were also areas of emphasis. Although materials and energy produced strong results, the industrials sector had relatively little impact, up or down. The segment had a relatively small position in information technology, reflecting BlackRock's concern about the fundamentals of the sector as a whole. However, individual stocks selected in this sector had a positive impact. Top performers included Schlumberger, an oilfield services company; Cognizant Technology Solutions, a developer of business software and services; and Lockheed Martin, a manufacturer of defense and aerospace products. An underweight position in consumer discretionary stocks had a slightly negative impact on return, as did consumer staples, healthcare and financials. Individual stocks that proved disappointing included Alcon, a developer of eye-care products; Medtronic, a medical device manufacturer; and Yahoo, an internet service provider. Alcon and Yahoo remain, but Medtronic was sold from this segment. HARRIS ASSOCIATES SOUGHT QUALITY BUSINESSES WITH STRONG BALANCE SHEETS Some of the stocks that previously had held back Harris Associates' segment became its strongest holdings in 2006. Healthcare, consumer discretionary, and financial stocks became leaders, and Hewlett Packard, Morgan Stanley, and McDonald's provided strong returns. Hewlett Packard's personal computer and printer businesses gained market share. Morgan Stanley's positive results were driven by its Institutional Securities and Wealth Management Divisions. Board approval of the spin-off of the Discover Card unit was another positive. McDonald's achieved a successful business turnaround, leading to higher earnings and improved valuations for its stock. A lack of exposure to energy early in the year, and relatively small positions in telecommunications, hurt this segment's performance in 2006. Certain technology holdings also limited return. Among technology holdings, Intel detracted from *In September 2006, Merrill Lynch's investment management business, including Mercury Advisors, merged with BlackRock, Inc. to create BlackRock Investment Management, LLC ("BlackRock"). Effective October 2, 2006, BlackRock became subadvisor to this segment of the U.S. Diversified Portfolio, replacing Mercury Advisors. 9 IXIS U.S. DIVERSIFIED PORTFOLIO Management Discussion -------------------------------------------------------------------------------- results. While Intel was down at year-end, it reported encouraging financial results. Dell Inc. was another disappointment. The company's 2006 earnings reports were lower than the previous year, although its fourth-quarter earnings came in better than expected. Cruise ship company Carnival Corp. also held back results. Higher fuel prices increased costs while bookings declined as a result of concerns about a bad hurricane season that did not occur; both factors reduced the cruise line's earnings. All three stocks remain in the segment because Harris Associates believes they are attractively valued, solid businesses. FINANCE, TECHNOLOGY AND UTILITIES BENEFITED LOOMIS SAYLES MID-CAP GROWTH SEGMENT This Loomis segment enjoyed strong performance in the first and fourth quarters of 2006, but mid-year performance was relatively weak. The best returns came from the financial, technology, and utilities sectors. Financial holdings were diverse, but the emphasis was on the capital markets, including publicly traded futures and stock exchanges, brokers and merchant banking firms that had demonstrated increasing levels of profitability. Financial holdings also included commercial real estate companies that benefited from a worldwide upturn in commercial leasing and increased inflows of money into real estate investments. Most of the strength in technology came in the first quarter, and Loomis trimmed this position in the spring in anticipation of a seasonal correction. In utilities, the segment focused on wireless telecommunications companies that serve under-penetrated overseas markets, especially Latin America, which is experiencing vigorous growth. Top performers included Akamai Technologies, whose products expedite audio and video content through the internet; Intercontinental Exchange, an electronic exchange for trading oil and gas futures and swaps; and NII Holdings (formerly Nextel International), which provides wireless communications to small business customers in Mexico, Argentina and Peru. The segment's weakest sectors were energy, consumer staples, and healthcare. Energy was challenging as geopolitical events and weather anomalies contributed to the sector's volatility. The segment's exposure to consumer staples was minimal, and most of the poor performance came from Whole Foods, a natural and organic food supermarket chain. Loomis believes Whole Foods is a great franchise, but it has been experiencing growing pains and earnings expectations have fallen steadily. The weakness in healthcare was broad-based. Omnicare, the largest provider of pharmacy services to nursing homes, was disappointing because of the confusion and extra costs associated with the implementation of the new Medicare drug benefit. Meridian Gold also detracted from results. The company has mining operations in Nevada, Mexico and South America, and the stock declined as commodities lost value in the third quarter. All three positions were sold. LOOMIS SAYLES SMALL-CAP VALUE SEGMENT FOCUSED ON INDIVIDUAL STOCKS RATHER THAN SECTORS This segment's best-performing stocks were in the materials and processing, consumer discretionary, and financial sectors. Star performers included Chaparral Steel, a producer of structural steel, and Trammel Crow, a diversified real estate services company that rose in value when it accepted a buyout offer. Both benefited from strength in the non-residential area of the construction market. Among consumer discretionary companies, the best results came from relatively large positions in Live Nation, a producer and promoter of live entertainment, and Rent-A-Center, the largest chain of rent-to-own stores in the country. Although the segment's financial holdings were not as strong as the overall small-cap market, several of its larger financial holdings generated positive results. These included Nuveen Investments, an asset management company, and Developers Diversified Realty, a real estate investment trust (REIT) that invests primarily in shopping centers. Merger and acquisition activity was a theme in this segment, and several companies benefited from buyout offers during the year. These included Trammel Crow, mentioned above; Aramark, an outsourcer of food and maintenance services; Sybron Dental Specialties, a dental equipment manufacturer; NetRatings, an internet services company; and Realogy Corporation, which finances real estate brokerage companies. The weakest stocks in this segment were ADTRAN, a manufacturer of high-speed network products, and Helix Energy Solutions, a deep-water drilling company. ADTRAN was hurt by a delay in orders from North American telecom service providers. Helix Energy declined as oil and gas prices fell in the second half of 2006. Loomis trimmed its ADTRAN position and is awaiting better market conditions in the industry before adding back shares. Given its current low valuation, Helix stock remains in the portfolio in anticipation of a price recovery once the energy markets improve. 10 IXIS U.S. DIVERSIFIED PORTFOLIO Investment Results through December 31, 2006 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide 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 through December 31, 2006 Class A S&P 400 S&P 500 Wilshire @ M.S.C. Index Index 4500 Index Cumulative Cumulative Cumulative Cumulative Monthly Month End Value Value Value Value Performance ---------- ---------- ---------- ---------- ---------- ----------- 12/31/1996 $10,000 $ 9,425 $10,000 $10,000 $10,000 1/31/1997 10,446 9,845 10,375 10,625 10,323 2/28/1997 10,099 9,518 10,290 10,708 10,105 3/31/1997 9,676 9,120 9,851 10,268 9,577 4/30/1997 9,863 9,296 10,107 10,881 9,601 5/31/1997 10,605 9,996 10,991 11,544 10,556 6/30/1997 11,040 10,405 11,299 12,061 11,056 7/31/1997 11,926 11,240 12,418 13,020 11,817 8/31/1997 11,585 10,919 12,403 12,291 11,925 9/30/1997 12,145 11,447 13,116 12,964 12,751 10/31/1997 11,753 11,077 12,545 12,531 12,266 11/30/1997 11,844 11,163 12,731 13,111 12,269 12/31/1997 12,018 11,327 13,225 13,336 12,569 1/31/1998 12,071 11,376 12,974 13,484 12,390 2/28/1998 12,956 12,211 14,048 14,456 13,337 3/31/1998 13,498 12,722 14,682 15,197 14,027 4/30/1998 13,651 12,866 14,950 15,350 14,205 5/31/1998 13,274 12,511 14,277 15,086 13,541 6/30/1998 13,697 12,910 14,367 15,698 13,752 7/31/1998 13,288 12,524 13,810 15,531 12,973 8/31/1998 11,085 10,447 11,240 13,286 10,459 9/30/1998 11,890 11,207 12,289 14,137 11,214 10/31/1998 12,621 11,895 13,387 15,287 11,851 11/30/1998 13,250 12,488 14,055 16,213 12,588 12/31/1998 14,332 13,507 15,753 17,148 13,654 1/31/1999 15,005 14,142 15,140 17,865 13,873 2/28/1999 14,561 13,724 14,347 17,310 13,118 3/31/1999 15,435 14,547 14,748 18,002 13,630 4/30/1999 16,050 15,128 15,911 18,699 14,717 5/31/1999 15,606 14,709 15,980 18,258 14,590 6/30/1999 16,587 15,634 16,836 19,271 15,203 7/31/1999 16,037 15,115 16,478 18,669 14,743 8/31/1999 15,973 15,054 15,913 18,577 14,376 9/30/1999 16,030 15,108 15,422 18,068 14,265 10/31/1999 16,606 15,651 16,208 19,211 14,994 11/30/1999 18,019 16,983 17,058 19,601 16,259 12/31/1999 20,990 19,783 18,072 20,756 18,499 1/31/2000 20,732 19,540 17,563 19,713 18,278 2/29/2000 23,276 21,937 18,792 19,340 21,120 3/31/2000 23,036 21,711 20,365 21,232 20,339 4/30/2000 21,262 20,040 19,654 20,593 17,892 5/31/2000 19,514 18,392 19,409 20,171 16,572 6/30/2000 19,891 18,747 19,694 20,668 18,562 7/31/2000 19,378 18,264 20,005 20,345 18,035 8/31/2000 20,897 19,695 22,239 21,608 20,048 9/30/2000 20,283 19,116 22,086 20,468 19,232 10/31/2000 19,321 18,210 21,337 20,381 17,660 11/30/2000 16,985 16,009 19,727 18,774 14,655 12/31/2000 17,425 16,423 21,236 18,866 15,582 1/31/2001 17,922 16,891 21,709 19,535 16,430 2/28/2001 16,124 15,197 20,470 17,754 14,434 3/31/2001 15,033 14,168 18,948 16,629 13,110 4/30/2001 16,353 15,412 21,038 17,922 14,497 5/31/2001 16,511 15,562 21,528 18,042 14,841 6/30/2001 16,419 15,475 21,441 17,603 14,961 7/31/2001 16,131 15,204 21,122 17,429 14,265 8/31/2001 15,446 14,558 20,431 16,338 13,572 9/30/2001 13,807 13,013 17,890 15,019 11,827 10/31/2001 14,155 13,341 18,681 15,305 12,446 11/30/2001 15,317 14,436 20,071 16,479 13,413 12/31/2001 15,793 14,885 21,108 16,624 14,132 1/31/2002 15,654 14,754 20,998 16,381 13,857 2/28/2002 15,357 14,474 21,024 16,065 13,465 3/31/2002 16,113 15,186 22,527 16,669 14,378 4/30/2002 15,686 14,784 22,421 15,659 14,237 5/31/2002 15,477 14,587 22,043 15,543 13,922 6/30/2002 14,225 13,407 20,430 14,436 12,968 7/31/2002 12,973 12,227 18,449 13,311 11,707 8/31/2002 13,073 12,321 18,544 13,398 11,775 9/30/2002 11,762 11,085 17,050 11,942 10,981 10/31/2002 12,308 11,600 17,789 12,993 11,342 11/30/2002 13,032 12,283 18,818 13,758 12,126 12/31/2002 12,347 11,637 18,044 12,950 11,615 1/31/2003 12,030 11,338 17,517 12,611 11,365 2/28/2003 11,901 11,217 17,100 12,421 11,075 3/31/2003 11,990 11,301 17,244 12,542 11,239 4/30/2003 12,924 12,181 18,496 13,575 12,175 5/31/2003 13,878 13,080 20,029 14,290 13,331 6/30/2003 14,067 13,258 20,284 14,473 13,649 7/31/2003 14,424 13,595 21,004 14,728 14,286 8/31/2003 15,129 14,259 21,957 15,015 14,885 9/30/2003 14,753 13,904 21,621 14,856 14,700 10/31/2003 15,825 14,915 23,255 15,696 15,813 11/30/2003 16,222 15,290 24,066 15,834 16,354 12/31/2003 16,500 15,551 24,472 16,664 16,694 1/31/2004 16,888 15,916 25,002 16,970 17,292 2/29/2004 17,036 16,057 25,602 17,206 17,594 3/31/2004 17,075 16,093 25,711 16,947 17,668 4/30/2004 16,727 15,765 24,867 16,681 16,958 5/31/2004 16,985 16,008 25,383 16,909 17,216 6/30/2004 17,421 16,419 25,961 17,238 17,665 7/31/2004 16,428 15,483 24,749 16,668 16,681 8/31/2004 16,229 15,296 24,684 16,735 16,688 9/30/2004 16,745 15,783 25,416 16,916 17,369 10/31/2004 17,054 16,073 25,822 17,175 17,759 11/30/2004 17,898 16,869 27,360 17,870 18,967 12/31/2004 18,623 17,552 28,505 18,478 19,794 1/31/2005 18,107 17,066 27,778 18,027 19,145 2/28/2005 18,474 17,412 28,710 18,407 19,491 3/31/2005 18,136 17,093 28,392 18,081 19,146 4/30/2005 17,559 16,550 27,288 17,738 18,499 5/31/2005 18,295 17,243 28,932 18,302 19,596 6/30/2005 18,553 17,486 29,603 18,328 20,227 7/31/2005 19,427 18,310 31,157 19,010 21,340 8/31/2005 19,308 18,198 30,810 18,836 21,088 9/30/2005 19,546 18,422 31,047 18,989 21,218 10/31/2005 19,130 18,030 30,380 18,672 20,762 11/30/2005 19,994 18,845 31,864 19,379 21,734 12/31/2005 20,034 18,882 32,085 19,385 21,827 1/31/2006 21,008 19,800 33,975 19,899 23,200 2/28/2006 20,939 19,735 33,690 19,953 22,989 3/31/2006 21,554 20,315 34,532 20,201 23,849 4/30/2006 21,722 20,473 35,017 20,472 23,961 5/31/2006 20,877 19,677 33,438 19,883 22,993 6/30/2006 20,978 19,771 33,446 19,910 23,030 7/31/2006 20,531 19,350 32,492 20,033 22,385 8/31/2006 20,818 19,621 32,863 20,510 22,880 9/30/2006 21,274 20,051 33,084 21,038 23,141 10/31/2006 22,078 20,809 34,460 21,724 24,293 11/30/2006 22,643 21,341 35,568 22,137 25,206 12/31/2006 22,773 21,463 35,395 22,447 25,335 Average Annual Total Returns -- December 31, 2006
1 YEAR 5 YEARS 10 YEARS CLASS A (Inception 7/7/94) Net Asset Value/1/ 13.68% 7.60% 8.58% With Maximum Sales Charge/2/ 7.15 6.33 7.94 CLASS B (Inception 7/7/94) Net Asset Value/1/ 12.88 6.79 7.77 With CDSC/3/ 7.88 6.48 7.77 CLASS C (Inception 7/7/94) Net Asset Value/1/ 12.87 6.78 7.77 With CDSC/3/ 11.87 6.78 7.77 CLASS Y (Inception 11/15/94) Net Asset Value/1/ 14.20 8.18 9.06 --------------------------------------------------------------- COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS S&P MidCap 400 Index/4/ 10.32% 10.89% 13.47% S&P 500 Index/5/ 15.79 6.19 8.42 Dow Jones Wilshire 4500 Index/6/ 16.07 12.38 9.74 Morningstar Mid-Cap Growth Fund Avg./7/ 9.01 6.48 8.31
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 shown. For performance current to the most recent month-end, visit www.ixisadvisorfunds.com. Class Y shares are only available to certain investors, as outlined in the prospectus. 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 12/31/06 12/31/05 ------------------------------------------------------ Common Stocks 99.0 98.1 ------------------------------------------------------ Short-Term Investments and Other 1.0 1.9 ------------------------------------------------------ % of Net Assets as of TEN LARGEST HOLDINGS 12/31/06 12/31/05 ------------------------------------------------------ McDonald's Corp. 1.6 1.3 ------------------------------------------------------ JPMorgan Chase & Co. 1.4 1.2 ------------------------------------------------------ Time Warner, Inc. 1.3 1.2 ------------------------------------------------------ Dell, Inc. 1.3 0.8 ------------------------------------------------------ Viacom, Inc., Class B 1.3 0.8 ------------------------------------------------------ Union Pacific Corp. 1.2 0.7 ------------------------------------------------------ Tyco International, Ltd. 1.2 1.1 ------------------------------------------------------ Morgan Stanley 1.2 1.2 ------------------------------------------------------ Hewlett-Packard Co. 1.2 1.3 ------------------------------------------------------ Intel Corp. 1.2 1.1 ------------------------------------------------------ % of Net Assets as of FIVE LARGEST INDUSTRIES 12/31/06 12/31/05 ------------------------------------------------------ Diversified Financial Services 9.4 8.3 ------------------------------------------------------ Retail 5.9 6.4 ------------------------------------------------------ Media 5.0 5.1 ------------------------------------------------------ Telecommunications 4.8 2.5 ------------------------------------------------------ Banks 4.3 3.9 ------------------------------------------------------
Portfolio holdings and asset allocations will vary. NOTES TO CHARTS /1/Does not include a sales charge. /2/Includes the maximum sales charge of 5.75%. /3/Performance for Class B shares assumes a maximum 5.00% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /4/S&P MidCap 400 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/Dow Jones Wilshire 4500 Index is an unmanaged index of 4,500 mid- and small-sized 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. 11 IXIS VALUE FUND PORTFOLIO PROFILE Objective: Seeks a reasonable, long-term investment return from a combination of market appreciation and dividend income from equity securities -------------------------------------------------------------------------------- Strategy: Features value investments through a diversified portfolio of complementary equity investment disciplines provided by specialized money managers -------------------------------------------------------------------------------- Inception Date: June 5, 1970 -------------------------------------------------------------------------------- Subadvisors: Harris Associates, L.P. Loomis, Sayles & Company, L.P. Vaughan Nelson Investment Management, L.P. Westpeak Global Advisors, L.P. -------------------------------------------------------------------------------- Symbols: Class A NEFVX Class B NEVBX Class C NECVX
-------------------------------------------------------------------------------- What You Should Know: Value stocks may fall out of favor with investors and underperform the overall market. Small-cap stocks carry special risks, including narrower markets, limited financial and management resources, less liquidity and greater volatility. Management Discussion -------------------------------------------------------------------------------- Against a backdrop of relatively strong global economic growth, domestic and overseas equity markets generated positive returns in 2006. In virtually all markets, value stocks solidly outperformed their growth counterparts, and small-cap stocks maintained their edge over large-cap stocks. For the year ended December 31, 2006, IXIS Value Fund's total return was 19.72% based on the net asset value of Class A shares, including $0.02 in dividends and $1.13 in capital gains reinvested during the period. The fund underperformed its benchmark, the Russell 1000 Value Index, which returned 22.25%, but it beat the 14.15% average return of funds in Morningstar's Large Blend category. IXIS Value Fund's four segments combine the expertise of four separate investment managers, each using a distinct approach to value investing. Harris Associates favors large- and mid-cap companies with positive cash flows, competitive returns and favorable growth potential that are trading at what the managers believe are substantial discounts to their true business value. Loomis, Sayles & Company and Vaughan Nelson Investment Management focus on large-cap value stocks. Loomis Sayles seeks companies with below-average valuations and above-average earnings prospects. Vaughan Nelson emphasizes established, undervalued companies that the manager believes will rebound within 12 to 18 months. Westpeak Global Advisors invests across the capitalization spectrum, using proprietary research to select stocks based on value and growth potential, while seeking to avoid unnecessary risk. HARRIS SOUGHT HIGH QUALITY BUSINESSES SELLING AT ATTRACTIVE PRICES In the course of 2006, some of the stocks that had previously held back Harris Associates' segment became its best performers. Consumer discretionary, healthcare and financial holdings benefited results; Hewlett-Packard, Cablevision Systems and Morgan Stanley had the most significant impact on return. Hewlett Packard's personal computer and printer businesses gained market share. Cablevision reported strong operating and financial results, and its above-average growth is expected to continue as new services help the company gain further market share. Morgan Stanley's positive results were driven by its Institutional Securities and Wealth Management Divisions. Board approval of the spin-off of the Discover Card unit was another positive. A lack of exposure to energy early in the year, and a relatively small position in telecommunications hurt this segment's performance in 2006. Dell, Inc., Liberty Media Corporation, and National Semiconductor had the most significant negative impact on performance. Dell's 2006 earnings reports were lower than the previous year, although its fourth-quarter earnings came in better than expected. Liberty Media split into two entities: Liberty Capital Group and Liberty Interactive Group. The portfolio continues to hold Liberty Capital Group, but Liberty Media Interactive was sold. National Semiconductor reported weak earnings primarily because of lower-than-expected shipments of wireless handsets. Handset sales have been weak and there is an abundance of inventory. Despite these headwinds, Harris Associates believes National Semiconductor has room to improve profit margins. LOOMIS SAYLES SOUGHT COMPANIES THAT WERE UNDER-APPRECIATED BY INVESTORS During a period of solid global economic growth, stocks related to the capital markets performed well, including brokerage firms, investment banks, custody and money center banks, and asset managers. Investments in utilities, another strong area, also played an important part in the segment's performance, as two of its major holdings, AT&T and BellSouth, agreed to merge. The stock price of both companies rallied on the news, and created the largest contribution to return, as earnings estimates for the combined entity rose on the prospect of cost-cutting opportunities. In the energy sector, investors were faced with declining oil prices, and shifted to a more defensive posture. As a result, ExxonMobil was supportive, outperforming companies whose stock price is more closely tied to commodity prices. ABB Ltd., an industrial equipment manufacturer based in Switzerland, was another solid contributor, as the 12 IXIS VALUE FUND Management Discussion -------------------------------------------------------------------------------- company continued to be a major beneficiary of the infrastructure build-out in the power industry. There were no sectors that detracted from performance in 2006, yet individual stocks did underperform. For example, investors turned sour on restaurant stocks in the wake of Burger King's initial public offering of stock earlier in the year. Burger King had two big constraints: the overhang from the private equity holders' large remaining stake and the generally poor outlook for consumer and restaurant sales trends. In healthcare, Omnicare also slightly detracted from performance after reporting disappointing third-quarter results. Burger King was sold, but Omnicare remains in the segment. VAUGHAN NELSON FOCUSED ON STOCKS WITH THE POTENTIAL FOR STRONG RETURNS Vaughan Nelson's research team uses bottom-up stock selection rather than relying on economic forecasts. Relative to its bench-mark, this segment had smaller positions in financial companies (particularly insurance), telecommunications, and the utilities and materials sectors. The segment also had relatively large positions in industrial companies, technology, healthcare, and consumer discretionary stocks. Both the consumer discretionary and technology areas were performance leaders. However, the segment's positions in telecommunications, utilities, and industrials held back results. Stock selection in the healthcare sector was also disappointing. The best-performing stocks included ExxonMobil, Cisco Systems, and Merrill Lynch. Exxon provided a safe haven for energy investors in the face of volatile energy prices. Cisco benefited from a recovery in spending in telecommunications services, and Merrill Lynch was supported by strong performance in the trading and banking areas of Wall Street. Boston Scientific, Intel and Capital One Financial proved disappointing. Product delays and safety issues regarding its cardiac stents hurt Boston Scientific's performance. Its acquisition of Guidant, a developer of cardiovascular medical products, was another negative. Investor concern that technology spending would be weak in 2006 depressed Intel. Investors were also waiting for Intel's new Centrino Duo processor to come to market. Capital One declined on concerns for a potential consumer recession and deteriorating credit quality. All three companies remain in the portfolio, but Vaughan Nelson reduced positions in Intel and Capital One. The manager believes price declines in each of these stocks has made them attractively valued in light of their prospects for earnings growth in 2007. WESTPEAK FOCUSED ON STOCKS WITH LOW PRICE-EARNINGS AND PRICE-TO-BOOK RATIOS Westpeak seeks stocks of high-quality, growing companies that they believe to be attractively valued. This segment had a significant position in the oil refining industry - companies with reasonable valuations and strong momentum - and these boosted results. Good timing and relatively large positions in the securities and asset management industry, as well as in aerospace and defense, were also helpful. Poor timing in the computer software and medical services industries worked against the segment, as did a relatively large commitment to the truck/sea/air freight industry and a smaller position in home products companies. Commercial Metals, a mining company that enjoyed sharp gains early in 2006, was one of the best performers, and Westpeak sold the position on strength. Harvest Natural Resources, an energy reserves company, also aided return. The company entered an agreement with Venezuela and the stock rallied in anticipation of good earnings. Wespeak sold the position before problems with Venezuela arose. USG Corp., a building materials producer, was also positive and Westpeak sold it on strength. Stocks that detracted included Intel, a semiconductor manufacturer, Reliance Steel & Aluminum, a metals processing company, and Todco, an oil services company. Intel was hampered by weaker-than-expected sales of semiconductor chips for desktop computers. After sinking lower through mid-year, Intel shares recovered and the stock remains in the portfolio. Reliance Steel & Aluminum was purchased because of its strong momentum and reasonable valuation. Shares declined along with its industry and the position was sold. Todco was pared back, but the stock remains in the portfolio because it is highly ranked by Westpeak's quantitative analysis team. 13 IXIS VALUE FUND Investment Results through December 31, 2006 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide 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/6/ [CHART] December 31, 1996 through December 31, 2006 Russell 1000 Class A Value @ M.S.C. Index Month Cumulative Cumulative Cumulative End Value Value Value --------- ---------- ---------- ---------- 12/31/1996 $10,000 $ 9,425 $10,000 1/31/1997 10,250 9,661 10,485 2/28/1997 10,365 9,769 10,639 3/31/1997 9,969 9,396 10,256 4/30/1997 10,156 9,572 10,687 5/31/1997 10,729 10,112 11,284 6/30/1997 11,291 10,642 11,768 7/31/1997 12,145 11,447 12,654 8/31/1997 11,676 11,005 12,203 9/30/1997 12,170 11,470 12,940 10/31/1997 11,645 10,976 12,579 11/30/1997 11,919 11,234 13,135 12/31/1997 12,094 11,399 13,518 1/31/1998 12,070 11,376 13,327 2/28/1998 12,881 12,141 14,224 3/31/1998 13,394 12,624 15,094 4/30/1998 13,382 12,612 15,195 5/31/1998 13,001 12,253 14,970 6/30/1998 12,989 12,242 15,162 7/31/1998 12,547 11,826 14,894 8/31/1998 10,424 9,825 12,678 9/30/1998 11,018 10,385 13,405 10/31/1998 11,943 11,256 14,444 11/30/1998 12,564 11,841 15,117 12/31/1998 12,948 12,204 15,631 1/31/1999 12,614 11,889 15,756 2/28/1999 12,387 11,675 15,534 3/31/1999 12,440 11,725 15,855 4/30/1999 13,403 12,633 17,336 5/31/1999 13,283 12,519 17,145 6/30/1999 13,631 12,847 17,643 7/31/1999 13,016 12,268 17,127 8/31/1999 12,454 11,738 16,491 9/30/1999 11,735 11,060 15,915 10/31/1999 12,309 11,601 16,831 11/30/1999 12,132 11,434 16,699 12/31/1999 12,053 11,360 16,780 1/31/2000 11,680 11,009 16,232 2/29/2000 10,677 10,063 15,026 3/31/2000 11,777 11,100 16,860 4/30/2000 11,745 11,070 16,664 5/31/2000 11,680 11,009 16,839 6/30/2000 11,406 10,750 16,070 7/31/2000 11,438 10,780 16,271 8/31/2000 12,136 11,438 17,176 9/30/2000 11,926 11,240 17,333 10/31/2000 12,249 11,545 17,759 11/30/2000 11,861 11,179 17,100 12/31/2000 12,297 11,590 17,957 1/31/2001 12,686 11,956 18,026 2/28/2001 12,346 11,636 17,525 3/31/2001 11,925 11,239 16,905 4/30/2001 12,669 11,940 17,734 5/31/2001 13,008 12,260 18,133 6/30/2001 12,782 12,047 17,731 7/31/2001 12,668 11,940 17,693 8/31/2001 12,118 11,422 16,984 9/30/2001 11,099 10,461 15,789 10/31/2001 11,439 10,781 15,653 11/30/2001 12,200 11,498 16,563 12/31/2001 12,458 11,742 16,953 1/31/2002 12,280 11,574 16,822 2/28/2002 12,151 11,452 16,849 3/31/2002 12,684 11,955 17,647 4/30/2002 12,296 11,589 17,041 5/31/2002 12,296 11,589 17,127 6/30/2002 11,342 10,690 16,143 7/31/2002 10,355 9,760 14,643 8/31/2002 10,517 9,912 14,753 9/30/2002 9,239 8,708 13,113 10/31/2002 9,838 9,272 14,084 11/30/2002 10,631 10,019 14,972 12/31/2002 10,032 9,455 14,321 1/31/2003 9,789 9,227 13,975 2/28/2003 9,563 9,013 13,602 3/31/2003 9,580 9,029 13,625 4/30/2003 10,470 9,868 14,824 5/31/2003 11,230 10,584 15,781 6/30/2003 11,440 10,782 15,978 7/31/2003 11,569 10,904 16,216 8/31/2003 11,860 11,178 16,469 9/30/2003 11,602 10,935 16,308 10/31/2003 12,363 11,652 17,306 11/30/2003 12,671 11,942 17,541 12/31/2003 13,204 12,445 18,622 1/31/2004 13,349 12,582 18,950 2/29/2004 13,640 12,856 19,356 3/31/2004 13,560 12,780 19,186 4/30/2004 13,350 12,582 18,717 5/31/2004 13,511 12,734 18,908 6/30/2004 13,771 12,979 19,355 7/31/2004 13,366 12,597 19,083 8/31/2004 13,334 12,567 19,354 9/30/2004 13,495 12,719 19,654 10/31/2004 13,673 12,887 19,981 11/30/2004 14,305 13,482 20,991 12/31/2004 14,706 13,860 21,694 1/31/2005 14,491 13,658 21,309 2/28/2005 14,853 13,999 22,015 3/31/2005 14,656 13,813 21,713 4/30/2005 14,326 13,502 21,324 5/31/2005 14,754 13,906 21,837 6/30/2005 14,928 14,070 22,076 7/31/2005 15,470 14,581 22,715 8/31/2005 15,385 14,500 22,616 9/30/2005 15,537 14,644 22,934 10/31/2005 15,164 14,293 22,351 11/30/2005 15,656 14,756 23,086 12/31/2005 15,618 14,720 23,224 1/31/2006 16,106 15,179 24,126 2/28/2006 16,143 15,214 24,273 3/31/2006 16,423 15,479 24,602 4/30/2006 16,780 15,815 25,227 5/31/2006 16,310 15,372 24,590 6/30/2006 16,318 15,380 24,747 7/31/2006 16,375 15,434 25,349 8/31/2006 16,739 15,776 25,773 9/30/2006 17,236 16,245 26,287 10/31/2006 17,982 16,948 27,147 11/30/2006 18,383 17,326 27,767 12/31/2006 18,694 17,619 28,390 Average Annual Total Returns -- December 31, 2006
1 YEAR 5 YEARS/6/ 10 YEARS/6/ CLASS A (Inception 6/5/70) Net Asset Value/1/ 19.72% 8.46% 6.46% With Maximum Sales Charge/2/ 12.81 7.18 5.83 CLASS B (Inception 9/13/93) Net Asset Value/1/ 18.62 7.63 5.66 With CDSC/3/ 13.62 7.33 5.66 CLASS C (Inception 12/30/94) Net Asset Value/1/ 18.78 7.63 5.66 With CDSC/3/ 17.78 7.63 5.66 ------------------------------------------------------------------ COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS Russell 1000 Value Index/4/ 22.25% 10.86% 11.00% Morningstar Large Blend Fund Avg./5/ 14.15 5.92 7.79
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.ixisadvisorfunds.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 12/31/06 12/31/05 ---------------------------------------------------- Common Stocks 97.2 98.1 ---------------------------------------------------- Short-Term Investments and Other 2.8 1.9 ---------------------------------------------------- % of Net Assets as of TEN LARGEST HOLDINGS 12/31/06 12/31/05 ---------------------------------------------------- ExxonMobil Corp. 3.3 3.3 ---------------------------------------------------- JPMorgan Chase & Co. 3.1 2.6 ---------------------------------------------------- Time Warner, Inc. 3.1 2.4 ---------------------------------------------------- Hewlett-Packard Co. 2.7 2.2 ---------------------------------------------------- Citigroup, Inc. 2.7 2.2 ---------------------------------------------------- McDonald's Corp. 2.6 2.4 ---------------------------------------------------- Morgan Stanley 2.3 1.9 ---------------------------------------------------- Intel Corp. 2.2 1.2 ---------------------------------------------------- Tyco International, Ltd. 1.9 1.5 ---------------------------------------------------- Mellon Financial Corp. 1.7 0.2 ---------------------------------------------------- % of Net Assets as of FIVE LARGEST INDUSTRIES 12/31/06 12/31/05 ---------------------------------------------------- Diversified Financial Services 13.1 13.3 ---------------------------------------------------- Oil & Gas 7.6 7.7 ---------------------------------------------------- Media 7.3 6.7 ---------------------------------------------------- Retail 6.2 8.0 ---------------------------------------------------- Banks 5.8 6.3 ----------------------------------------------------
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/Russell 1000 Value Index is an unmanaged index that measures the performance of those Russell 1000 companies 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. /6/Fund performance has been increased by expense waivers/reimbursements, without which performance would have been lower. 14 VAUGHAN NELSON SMALL CAP VALUE FUND PORTFOLIO PROFILE Objective: Seeks capital appreciation -------------------------------------------------------------------------------- Strategy: Invests in small-cap companies with a focus on absolute return, using a bottom-up value-oriented investment process -------------------------------------------------------------------------------- Inception Date: December 31, 1996 -------------------------------------------------------------------------------- Managers: Chris D. Wallis Scott J. Weber -------------------------------------------------------------------------------- Symbols: Class A NEFJX Class B NEJBX Class C NEJCX Class Y NEJYX
-------------------------------------------------------------------------------- What 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 -------------------------------------------------------------------------------- Early in 2006 investor sentiment swung from optimism regarding the economy to concern about slowing growth, as short-term interest rates rose steadily. In the closing quarter, optimism took hold again as the economy remained vigorous and the Federal Reserve Board paused in its tightening policy. These shifts in sentiment were reflected in stock prices, with strong rallies in the opening and closing quarters and weakness in the middle of the year. Vaughan Nelson Small Cap Value Fund's total return for the year ended December 31, 2006 was 18.09% based on the net asset value of Class A shares. For the same period, the fund's benchmark, the Russell 2000 Value Index, returned 23.48%, while the funds in Morningstar's Small Blend category had a total return of 15.06%. Small-cap stocks continued to outperform mid- and large-cap stocks, although their lead was slimmer than it has been, and value-oriented stocks continued to outperform growth stocks. The fund's performance was similar to its benchmark until the third quarter, when it fell behind because we had positioned the portfolio less defensively than the index. However, it bounced back when investor optimism returned in the fourth quarter. ENERGY HOLDINGS WERE TRIMMED ON STRENGTH, ADDED BACK ON WEAKNESS Energy stocks got off to a strong start in 2006 and then declined along with oil prices. We took profits on some of the fund's natural gas holdings in the spring as their valuations rose, but later in the year we began adding to energy again, seeking attractively valued service and exploration companies likely to be able to expand their reserves. Additions included Rosetta Resources, an exploration and production company whose stock is trading below liquidation value, and Oil States International, an energy services company. Oil States' earnings stream is more stable than most energy-services companies because it provides well-site services both on and offshore. The company also has a strong history of value-driven acquisitions. We continue to like Universal Compression Holdings, one of the fund's best-performing stocks this year. The company provides compression services and products to natural gas companies worldwide, and its two-year backlog should give it predictable growth that still does not seem to be reflected in the price of the stock. MANAGER FOCUSES ON INDIVIDUAL COMPANIES RATHER THAN INDUSTRIES The fund's best performers came from diverse industries. In addition to Universal Compression, mentioned above, Century Aluminum was a standout. We took profits on the sale of stock of this custom producer of high-quality aluminum extrusions after it rose to our target price. Another strong stock was LHC Group, which provides healthcare services primarily in the southern United States through home nursing agencies, hospices and long-term care facilities. This low-cost provider has little competition in its service area, and it remains in the portfolio. Birch Mountain Resources, a Canadian company that owns industrial mineral rights in Alberta, failed to meet our earnings expectations and we closed out the position. We also sold Healthsouth after its earnings outlook deteriorated. Healthsouth provides outpatient surgery, diagnostic and rehabilitative services. Weaker-than-expected earnings also hurt the stock price of Briggs & Stratton Corporation, a leading manufacturer of small engines for outdoor power equipment, but it remains in the portfolio because we look for an improvement going forward. PACE OF ECONOMIC GROWTH MAY SLOW We believe the U.S. economy is in the middle of a cyclical slowdown, with relatively little inflation potential. If the Fed becomes concerned about a possible slowdown, it has ample latitude to lower rates a notch or two. Any such decrease would add the prospect of stronger earnings and rising stock prices. Given the market's strength in the last part of 2006, some weakness is possible in the first half of 2007. However, as long as economic growth continues at a moderate pace, we believe corporate earnings should continue to grow in 2007. 15 VAUGHAN NELSON SMALL CAP VALUE FUND Investment Results through December 31, 2006 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide 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 through December 31, 2006 Class A Russell 2000 @ M.S.C. Value Cumulative Cumulative Cumulative Month End Value Value Value ---------- ---------- ----------- ------------ 12/31/1996 $10,000 $ 9,425 $10,000 1/31/1997 10,192 9,606 10,154 2/28/1997 9,920 9,349 10,250 3/31/1997 9,351 8,814 9,975 4/30/1997 9,264 8,731 10,122 5/31/1997 10,447 9,847 10,928 6/30/1997 11,040 10,405 11,481 7/31/1997 11,784 11,106 11,963 8/31/1997 12,104 11,408 12,153 9/30/1997 13,160 12,403 12,961 10/31/1997 12,672 11,943 12,608 11/30/1997 12,375 11,664 12,746 12/31/1997 12,696 11,966 13,178 1/31/1998 12,340 11,631 12,940 2/28/1998 13,348 12,581 13,722 3/31/1998 14,125 13,313 14,279 4/30/1998 13,994 13,189 14,349 5/31/1998 13,135 12,379 13,841 6/30/1998 13,341 12,574 13,763 7/31/1998 12,300 11,593 12,685 8/31/1998 9,624 9,070 10,699 9/30/1998 10,294 9,702 11,303 10/31/1998 10,749 10,131 11,638 11/30/1998 11,758 11,082 11,953 12/31/1998 12,957 12,212 12,328 1/31/1999 13,231 12,470 12,048 2/28/1999 12,122 11,425 11,226 3/31/1999 12,957 12,212 11,133 4/30/1999 13,934 13,133 12,150 5/31/1999 13,818 13,024 12,523 6/30/1999 14,968 14,107 12,976 7/31/1999 14,785 13,935 12,668 8/31/1999 14,654 13,811 12,205 9/30/1999 15,061 14,195 11,961 10/31/1999 16,203 15,271 11,722 11/30/1999 18,066 17,027 11,783 12/31/1999 21,430 20,198 12,145 1/31/2000 21,402 20,172 11,827 2/29/2000 26,682 25,148 12,550 3/31/2000 25,666 24,190 12,609 4/30/2000 22,655 21,352 12,684 5/31/2000 20,815 19,619 12,490 6/30/2000 22,508 21,213 12,855 7/31/2000 20,925 19,722 13,283 8/31/2000 23,526 22,174 13,877 9/30/2000 22,776 21,466 13,799 10/31/2000 20,858 19,659 13,750 11/30/2000 17,223 16,232 13,470 12/31/2000 18,811 17,729 14,917 1/31/2001 19,631 18,502 15,329 2/28/2001 17,102 16,119 15,307 3/31/2001 15,472 14,583 15,062 4/30/2001 17,023 16,044 15,759 5/31/2001 17,375 16,376 16,164 6/30/2001 17,968 16,934 16,815 7/31/2001 16,737 15,774 16,438 8/31/2001 15,711 14,807 16,381 9/30/2001 13,216 12,456 14,572 10/31/2001 14,116 13,304 14,953 11/30/2001 15,358 14,475 16,028 12/31/2001 16,544 15,593 17,009 1/31/2002 16,157 15,228 17,235 2/28/2002 14,869 14,014 17,340 3/31/2002 16,191 15,260 18,638 4/30/2002 15,815 14,906 19,294 5/31/2002 15,051 14,186 18,656 6/30/2002 14,049 13,241 18,243 7/31/2002 11,929 11,243 15,533 8/31/2002 11,917 11,232 15,463 9/30/2002 10,823 10,201 14,359 10/31/2002 11,382 10,727 14,575 11/30/2002 12,259 11,554 15,738 12/31/2002 11,450 10,792 15,066 1/31/2003 10,812 10,190 14,641 2/28/2003 10,436 9,836 14,149 3/31/2003 10,459 9,857 14,300 4/30/2003 11,462 10,803 15,659 5/31/2003 12,636 11,909 17,257 6/30/2003 13,114 12,360 17,550 7/31/2003 13,970 13,166 18,425 8/31/2003 14,688 13,843 19,125 9/30/2003 14,254 13,435 18,906 10/31/2003 15,279 14,401 20,447 11/30/2003 15,724 14,820 21,232 12/31/2003 15,883 14,969 22,000 1/31/2004 16,497 15,549 22,761 2/29/2004 16,407 15,463 23,201 3/31/2004 16,441 15,496 23,522 4/30/2004 15,734 14,829 22,306 5/31/2004 15,791 14,883 22,575 6/30/2004 16,610 15,655 23,721 7/31/2004 15,893 14,979 22,631 8/31/2004 15,734 14,829 22,853 9/30/2004 16,292 15,355 23,757 10/31/2004 16,520 15,570 24,126 11/30/2004 17,774 16,752 26,267 12/31/2004 18,309 17,256 26,894 1/31/2005 17,762 16,740 25,853 2/28/2005 18,343 17,288 26,367 3/31/2005 18,080 17,041 25,824 4/30/2005 17,214 16,224 24,492 5/31/2005 18,125 17,083 25,986 6/30/2005 18,853 17,769 27,135 7/31/2005 19,857 18,715 28,679 8/31/2005 19,708 18,574 28,020 9/30/2005 19,901 18,756 27,974 10/31/2005 19,308 18,197 27,271 11/30/2005 20,140 18,982 28,378 12/31/2005 20,152 18,993 28,160 1/31/2006 21,724 20,475 30,488 2/28/2006 21,609 20,366 30,486 3/31/2006 22,691 21,386 31,963 4/30/2006 22,782 21,472 32,048 5/31/2006 21,973 20,710 30,721 6/30/2006 21,962 20,699 31,099 7/31/2006 21,462 20,227 30,667 8/31/2006 21,668 20,422 31,584 9/30/2006 21,860 20,603 31,892 10/31/2006 22,988 21,667 33,516 11/30/2006 23,524 22,171 34,471 12/31/2006 23,797 22,429 34,772 Average Annual Total Returns -- December 31, 2006
SINCE 1 YEAR 5 YEARS 10 YEARS INCEPTION/6/ CLASS A (Inception 12/31/96) Net Asset Value/1/ 18.09% 7.55% 9.06% -- With Maximum Sales Charge/2/ 11.30 6.27 8.42 -- CLASS B (Inception 12/31/96) Net Asset Value/1/ 17.24 6.74 8.24 -- With CDSC/3/ 12.24 6.43 8.24 -- CLASS C (Inception 12/31/96) Net Asset Value/1/ 17.23 6.75 8.25 -- With CDSC/3/ 16.23 6.75 8.25 -- CLASS Y (Inception 8/31/06) Net Asset Value/1/ -- -- -- 9.94% ------------------------------------------------------------------------- SINCE CLASS Y COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEAR INCEPTION/7/ Russell 2000 Value Index/4/ 23.48% 15.37% 13.27% 10.09% Morningstar Small Blend Fund Avg./5/ 15.06 11.72 11.24 9.19
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.ixisadvisorfunds.com. Class Y shares are only available to certain investors, as outlined in the prospectus. 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 12/31/06 12/31/05 ----------------------------------------------------------- Common Stocks 93.8 95.1 ----------------------------------------------------------- Investment Companies 2.7 -- ----------------------------------------------------------- Short-Term Investments and Other 3.5 4.9 ----------------------------------------------------------- % of Net Assets as of TEN LARGEST HOLDINGS 12/31/06 12/31/05 ----------------------------------------------------------- iShares Russell 2000 Value Index Fund 2.7 4.6 ----------------------------------------------------------- Alliant Techsystems, Inc. 2.5 2.1 ----------------------------------------------------------- Universal Compression Holdings, Inc. 2.2 2.9 ----------------------------------------------------------- Triarc Cos., Inc. 2.1 1.6 ----------------------------------------------------------- Affiliated Managers Group, Inc. 2.1 -- ----------------------------------------------------------- Waste Connections, Inc. 2.1 1.9 ----------------------------------------------------------- Lennox International, Inc. 2.0 -- ----------------------------------------------------------- Pediatrix Medical Group, Inc. 2.0 2.5 ----------------------------------------------------------- Arena Resources, Inc. 1.9 -- ----------------------------------------------------------- Healthcare Services Group, Inc. 1.8 1.3 ----------------------------------------------------------- % of Net Assets as of FIVE LARGEST INDUSTRIES 12/31/06 12/31/05 ----------------------------------------------------------- Retail 10.4 4.6 ----------------------------------------------------------- Commercial Services 6.1 9.0 ----------------------------------------------------------- Diversified Financial Services 5.6 4.6 ----------------------------------------------------------- Health Care--Services 5.4 5.8 ----------------------------------------------------------- Aerospace & Defense 4.9 7.4 -----------------------------------------------------------
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 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. /5/Morningstar Small Blend Fund Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Morningstar, Inc. /6/Fund performance has been increased by expense waivers/reimbursements, without which performance would have been lower. /7/The since-inception comparative performance figures shown are calculated from 9/1/06. 16 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
-------------------------------------------------------------------------------- What You Should Know: Growth stocks can be more sensitive to market movements because their prices are based in part on future expectations. Management Discussion -------------------------------------------------------------------------------- All the major stock market indexes performed well in 2006, but value-oriented investors once again out-performed those who focus on growth, and small-cap stocks beat large caps. Westpeak Capital Growth Fund provided a total return of 10.84% based on the net asset value of Class A shares. It outperformed its benchmark, the Russell 1000 Growth Index, which returned 9.07%, and came out ahead of its peers, measured by Morningstar's Large Growth category, which averaged 6.93%. Our bias for this fund is that we seek attractively valued growth stocks, and we think this approach gave the fund its competitive edge. SECTOR STRENGTH SHIFTED DURING THE YEAR Stock prices got off to a strong start in 2006, but fell off in May and June. The rally later resumed when it appeared that the Federal Reserve Board might be finished raising short-term interest rates, at least for this cycle. Utilities, including telephones, were the best performers. Energy and basic industries were also dominant early in the year, but retreated as prices of oil and other commodities fell. Freight and railroads were strong early in the year but did relatively poorly for the remainder of the year. Banks and other financial services companies were weak early in the year, but performed well later in 2006. SEVERAL OF THE FUND'S STOCKS WERE ESPECIALLY STRONG One of our best performers during the year was Merck. Negative publicity surrounding its anti-arthritic drug, Vioxx, had hurt the stock of this giant pharmaceutical company in 2004. We entered 2006 with a relatively small position in Merck, and added to it early in the year because we believed it was attractively valued. The stock price rose in February and March and we later trimmed the position, but we continue to hold it. Another strong performer was Goldman Sachs. We bought the stock in March, attracted by the company's relatively low price-earnings ratio. The firm had a profitable year, reflecting its participation in the merger and acquisitions markets and its successes in Asia. Toward the end of the year, investors' growing perception that the Fed may be finished raising interest rates gave the stock an additional boost. We believe Goldman Sachs still has upward potential and it remains in the portfolio. Boeing is another of the highest-rated stocks in our universe. We began buying it in 2005, trimming and adding more shares at intervals. The stock rallied sharply in 2006 as Boeing benefited from some problems at its biggest competitor. SOME STOCKS PROVED DISAPPOINTING We entered 2006 with a small position in Intel and added to it early in the year, buying on weakness as the price declined. However, even though consumer spending was stronger than most analysts had expected, Intel's earnings continued to lag expectations. We sold some of the stock in July and closed out the position in December. Sunoco was another disappointment. We continue to like this world leader in oil refining services, although we apparently have more faith in the company than many investors. We trimmed the position early in the year but continued to hold it even after September, when analyst downgrades caused shares to decline further. Based on our perception of their long-term potential, we believe shares of some of the world's strongest energy companies, including Sunoco, are under-valued. WESTPEAK IS NOT THE "GROWTHIEST" OF GROWTH FUND MANAGERS By definition, growth investors look for companies with above-average growth potential, but we strive to avoid over-paying for that potential. The equity markets have enjoyed several years of positive performance, and it is natural to wonder how long it can continue. While we do not look for a banner year in 2007, we believe a value-conscious pursuit of capital growth should reward long-term investors. 17 WESTPEAK CAPITAL GROWTH FUND Investment Results through December 31, 2006 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide 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/6/ [CHART] December 31, 1996 through December 31, 2006 Russell 1000 Class A Growth @ M.S.C. Index Cumulative Cumulative Cumulative Month End Value Value Value ---------- ---------- ---------- ------------ 12/31/1996 $10,000 $ 9,425 $10,000 1/31/1997 10,566 9,958 10,701 2/28/1997 10,275 9,685 10,629 3/31/1997 9,508 8,961 10,054 4/30/1997 9,918 9,347 10,721 5/31/1997 10,789 10,169 11,495 6/30/1997 11,090 10,453 11,955 7/31/1997 11,869 11,187 13,012 8/31/1997 11,324 10,673 12,251 9/30/1997 11,666 10,995 12,854 10/31/1997 11,195 10,551 12,379 11/30/1997 11,488 10,828 12,904 12/31/1997 11,724 11,050 13,049 1/31/1998 11,817 11,138 13,439 2/28/1998 12,628 11,902 14,450 3/31/1998 13,193 12,434 15,026 4/30/1998 13,427 12,655 15,234 5/31/1998 13,104 12,350 14,802 6/30/1998 13,785 12,993 15,708 7/31/1998 13,656 12,870 15,604 8/31/1998 11,487 10,827 13,262 9/30/1998 12,176 11,476 14,281 10/31/1998 13,066 12,315 15,429 11/30/1998 13,850 13,054 16,603 12/31/1998 15,130 14,260 18,100 1/31/1999 15,891 14,978 19,162 2/28/1999 14,998 14,136 18,287 3/31/1999 15,328 14,447 19,250 4/30/1999 15,629 14,730 19,275 5/31/1999 15,343 14,460 18,682 6/30/1999 16,156 15,227 19,991 7/31/1999 15,797 14,889 19,356 8/31/1999 15,936 15,020 19,672 9/30/1999 15,703 14,801 19,259 10/31/1999 16,798 15,832 20,713 11/30/1999 17,297 16,302 21,831 12/31/1999 18,874 17,789 24,101 1/31/2000 17,810 16,786 22,971 2/29/2000 18,553 17,486 24,094 3/31/2000 20,039 18,886 25,819 4/30/2000 19,443 18,325 24,590 5/31/2000 18,535 17,470 23,352 6/30/2000 19,757 18,621 25,122 7/31/2000 19,245 18,139 24,074 8/31/2000 20,750 19,557 26,254 9/30/2000 18,833 17,750 23,771 10/31/2000 18,179 17,134 22,646 11/30/2000 15,727 14,823 19,308 12/31/2000 15,188 14,314 18,697 1/31/2001 15,915 15,000 19,988 2/28/2001 13,754 12,963 16,595 3/31/2001 12,471 11,753 14,789 4/30/2001 14,157 13,343 16,660 5/31/2001 13,995 13,190 16,414 6/30/2001 13,777 12,985 16,034 7/31/2001 13,049 12,299 15,634 8/31/2001 11,999 11,309 14,355 9/30/2001 10,767 10,148 12,922 10/31/2001 11,262 10,614 13,600 11/30/2001 12,242 11,538 14,906 12/31/2001 12,080 11,386 14,878 1/31/2002 12,029 11,338 14,615 2/28/2002 11,594 10,927 14,009 3/31/2002 11,989 11,300 14,493 4/30/2002 11,321 10,670 13,311 5/31/2002 11,078 10,441 12,989 6/30/2002 10,166 9,582 11,787 7/31/2002 9,376 8,837 11,139 8/31/2002 9,387 8,847 11,172 9/30/2002 8,395 7,912 10,013 10/31/2002 9,002 8,485 10,932 11/30/2002 9,296 8,761 11,526 12/31/2002 8,688 8,188 10,730 1/31/2003 8,465 7,979 10,469 2/28/2003 8,506 8,017 10,421 3/31/2003 8,678 8,179 10,615 4/30/2003 9,184 8,656 11,400 5/31/2003 9,690 9,133 11,969 6/30/2003 9,781 9,219 12,134 7/31/2003 9,913 9,343 12,436 8/31/2003 10,035 9,458 12,745 9/30/2003 10,075 9,496 12,609 10/31/2003 10,561 9,953 13,317 11/30/2003 10,682 10,068 13,456 12/31/2003 11,006 10,373 13,922 1/31/2004 11,168 10,525 14,206 2/29/2004 11,168 10,525 14,296 3/31/2004 10,965 10,335 14,031 4/30/2004 10,722 10,105 13,868 5/31/2004 10,914 10,286 14,126 6/30/2004 11,056 10,420 14,303 7/31/2004 10,549 9,943 13,494 8/31/2004 10,539 9,933 13,428 9/30/2004 10,600 9,991 13,555 10/31/2004 10,843 10,219 13,767 11/30/2004 11,248 10,601 14,240 12/31/2004 11,572 10,907 14,799 1/31/2005 11,238 10,592 14,305 2/28/2005 11,329 10,677 14,457 3/31/2005 11,025 10,391 14,194 4/30/2005 10,783 10,163 13,924 5/31/2005 11,370 10,716 14,597 6/30/2005 11,512 10,850 14,543 7/31/2005 12,100 11,404 15,254 8/31/2005 11,877 11,194 15,058 9/30/2005 11,917 11,232 15,127 10/31/2005 11,604 10,937 14,980 11/30/2005 12,131 11,433 15,626 12/31/2005 11,958 11,271 15,577 1/31/2006 12,353 11,643 15,851 2/28/2006 12,333 11,624 15,826 3/31/2006 12,596 11,872 16,059 4/30/2006 12,606 11,881 16,038 5/31/2006 12,069 11,375 15,494 6/30/2006 12,129 11,432 15,433 7/31/2006 11,866 11,184 15,139 8/31/2006 12,099 11,403 15,611 9/30/2006 12,444 11,728 16,040 10/31/2006 12,859 12,120 16,604 11/30/2006 13,244 12,482 16,934 12/31/2006 13,254 12,492 16,991 Average Annual Total Returns -- December 31, 2006
1 YEAR/6/ 5 YEARS/6/ 10 YEARS/6/ CLASS A (Inception 8/3/92) Net Asset Value/1/ 10.84% 1.87% 2.86% With Maximum Sales Charge/2/ 4.47 0.67 2.25 CLASS B (Inception 9/13/93) Net Asset Value/1/ 9.91 1.09 2.04 With CDSC/3/ 4.91 0.70 2.04 CLASS C (Inception 12/30/94) Net Asset Value/1/ 9.93 1.07 2.03 With CDSC/3/ 8.93 1.07 2.03 ---------------------------------------------------------------------- COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS Russell 1000 Growth Index/4/ 9.07% 2.69% 5.44% Morningstar Large Growth Fund Avg./5/ 6.93 2.88 5.88
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.ixisadvisorfunds.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 12/31/06 12/31/05 ------------------------------------------------------ Common Stocks 99.4 99.1 ------------------------------------------------------ Short-Term Investments and Other 0.6 0.9 ------------------------------------------------------ % of Net Assets as of TEN LARGEST HOLDINGS 12/31/06 12/31/05 ------------------------------------------------------ Cisco Systems, Inc. 5.4 2.7 ------------------------------------------------------ General Electric Co. 4.3 2.9 ------------------------------------------------------ Hewlett-Packard Co. 4.1 -- ------------------------------------------------------ Boeing Co. (The) 3.9 2.9 ------------------------------------------------------ Goldman Sachs Group, Inc. 3.8 -- ------------------------------------------------------ Amgen, Inc. 3.3 3.1 ------------------------------------------------------ ExxonMobil Corp. 3.3 -- ------------------------------------------------------ McGraw-Hill Cos., Inc. (The) 3.2 -- ------------------------------------------------------ American Express Co. 3.1 2.9 ------------------------------------------------------ Microsoft Corp. 3.0 5.7 ------------------------------------------------------ % of Net Assets as of FIVE LARGEST INDUSTRIES 12/31/06 12/31/05 ------------------------------------------------------ Retail 17.0 4.1 ------------------------------------------------------ Diversified Financial Services 6.9 6.7 ------------------------------------------------------ Aerospace & Defense 6.9 4.2 ------------------------------------------------------ Oil & Gas 6.5 4.6 ------------------------------------------------------ Computers 6.3 5.5 ------------------------------------------------------
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 that measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. /5/Morningstar Large Growth Fund Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Morningstar, Inc. /6/Fund performance has been increased by expense waivers/reimbursements, without which performance would have been lower. 18 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 IXIS Advisor Fund, contact your financial professional or call IXIS Advisor 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 IXIS Advisor Funds at 800-225-5478; on the funds' website at www.ixisadvisorfunds.com; and on the Securities and Exchange Commission's (SEC) website at www.sec.gov. Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006 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 19 UNDERSTANDING FUND 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, 2006 through December 31, 2006. 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 VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* CGM ADVISOR TARGETED EQUITY FUND 7/1/2006 12/31/2006 7/1/2006 - 12/31/2006 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,039.30 $5.65 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,019.66 $5.60 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,035.60 $9.49 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,015.88 $9.40 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,034.60 $9.54 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,015.83 $9.45 ------------------------------------------------------------------------------------------------------------------ CLASS Y ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,041.80 $4.37 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,020.92 $4.33
*Expenses are equal to the fund's annualized expense ratio: 1.10%, 1.85%, 1.86% and 0.85% 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 365 (to reflect the half-year period). 20 UNDERSTANDING FUND EXPENSES (continued)
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* HANSBERGER INTERNATIONAL FUND 7/1/2006 12/31/2006 7/1/2006 - 12/31/2006 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,149.40 $7.58 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,018.15 $7.12 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,144.90 $11.62 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.37 $10.92 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,144.90 $11.62 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.37 $10.92
*Expenses are equal to the fund's annualized expense ratio: 1.40%, 2.15% and 2.15% 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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* HARRIS ASSOCIATES FOCUSED VALUE FUND 7/1/2006 12/31/2006 7/1/2006 - 12/31/2006 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,128.10 $7.40 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,018.25 $7.02 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,123.30 $11.40 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.47 $10.82 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,123.30 $11.40 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.47 $10.82
*Expenses are equal to the fund's annualized expense ratio: 1.38%, 2.13% and 2.13% 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 365 (to reflect the half-year period). 21 UNDERSTANDING FUND EXPENSES (continued)
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* HARRIS ASSOCIATES LARGE CAP VALUE FUND 7/1/2006 12/31/2006 7/1/2006 - 12/31/2006 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,154.30 $7.06 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,018.65 $6.61 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,150.30 $11.11 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.87 $10.41 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,150.50 $11.11 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.87 $10.41 ------------------------------------------------------------------------------------------------------------------ CLASS Y ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,157.60 $4.19 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,021.32 $3.92
*Expenses are equal to the fund's annualized expense ratio (after waiver/reimbursement): 1.30%, 2.05%, 2.05% and 0.77% 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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* IXIS U.S. DIVERSIFIED PORTFOLIO 7/1/2006 12/31/2006 7/1/2006 - 12/31/2006 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,085.70 $7.20 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,018.30 $6.97 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,082.00 $11.13 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.52 $10.76 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,081.90 $11.12 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.52 $10.76 ------------------------------------------------------------------------------------------------------------------ CLASS Y ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,089.10 $4.69 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,020.72 $4.53
*Expenses are equal to the fund's annualized expense ratio: 1.37%, 2.12%, 2.12% and 0.89% 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 365 (to reflect the half-year period). 22 UNDERSTANDING FUND EXPENSES (continued)
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* IXIS VALUE FUND 7/1/2006 12/31/2006 7/1/2006 - 12/31/2006 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,145.70 $6.98 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,018.70 $6.56 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,141.50 $11.01 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.92 $10.36 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,141.50 $11.01 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.92 $10.36
*Expenses are equal to the fund's annualized expense ratio: 1.29%, 2.04% and 2.04% 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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* VAUGHAN NELSON SMALL CAP VALUE FUND 7/1/2006/1/ 12/31/2006 7/1/2006 - 12/31/2006/1/ ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,083.50 $7.88 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,017.64 $7.63 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,079.40 $11.90 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,013.76 $11.52 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,079.30 $11.84 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,013.81 $11.47 ------------------------------------------------------------------------------------------------------------------ CLASS Y ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,099.40 $4.74 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,012.20 $4.54
/1/Class Y commenced operations on August 31, 2006. *Expenses are equal to the fund's annualized expense ratio (after waiver/reimbursement): 1.50%, 2.27%, 2.26% and 1.35% 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, or from commencement of operations for Class Y, divided by 365 (to reflect the half-year period). 23 UNDERSTANDING FUND EXPENSES (continued)
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* WESTPEAK CAPITAL GROWTH FUND 7/1/2006 12/31/2006 7/1/2006 - 12/31/2006 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,092.60 $7.91 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,017.64 $7.63 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,087.40 $11.84 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,013.86 $11.42 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,087.50 $11.84 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,013.86 $11.42
*Expenses are equal to the fund's annualized expense ratio (after waiver/reimbursement): 1.50%, 2.25% and 2.25% 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 365 (to reflect the half-year period). 24 CGM ADVISOR TARGETED EQUITY FUND -- PORTFOLIO OF INVESTMENTS Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------------------- Common Stocks -- 99.0% of Net Assets Aerospace & Defense -- 5.1% 425,000 Boeing Co .(The) $ 37,757,000 --------------- Airlines -- 4.6% 420,000 Ryanair Holdings PLC, Sponsored ADR(b)(c) 34,230,000 --------------- Auto Manufacturers -- 7.0% 385,000 Toyota Motor Corp., Sponsored ADR(c) 51,709,350 --------------- Banks -- 10.1% 690,000 Bank of America Corp. 36,839,100 680,000 Citigroup, Inc. 37,876,000 --------------- 74,715,100 --------------- Cosmetics & Personal Care -- 4.2% 490,000 Procter & Gamble Co. 31,492,300 --------------- Diversified Financial Services -- 22.0% 505,000 Lehman Brothers Holdings, Inc. 39,450,600 380,000 MasterCard, Inc., Class A(c) 37,426,200 500,000 Merrill Lynch & Co., Inc. 46,550,000 495,000 Morgan Stanley(c) 40,307,850 --------------- 163,734,650 --------------- Insurance -- 3.7% 380,000 American International Group, Inc. 27,230,800 --------------- Machinery -- Diversified -- 5.1% 400,000 Deere & Co. 38,028,000 --------------- Oil & Gas Services -- 11.5% 260,000 Baker Hughes, Inc. 19,411,600 410,000 ConocoPhillips 29,499,500 580,000 Schlumberger, Ltd. 36,632,800 --------------- 85,543,900 --------------- Restaurants -- 5.0% 840,000 McDonald's Corp. 37,237,200 --------------- Retail -- 5.4% 520,000 J.C. Penney Co., Inc. 40,227,200 --------------- Technology -- 4.9% 1,333,000 Cisco Systems, Inc.(b) 36,430,890 --------------- Telecommunications -- 10.4% 840,000 America Movil SA de C.V., Series L, ADR 37,984,800 1,110,000 AT&T, Inc.(c) 39,682,500 --------------- 77,667,300 --------------- Total Common Stocks (Identified Cost $674,945,990) 736,003,690 ---------------
Principal Amount/ Shares Description Value (+) ------------------------------------------------------------------------------------------------------ Short-Term Investments -- 16.4% $ 14,255,000 American Express Credit Corp., 5.260%, due 1/02/2007 $ 14,255,000 107,341,167 State Street Securities Lending Quality Trust(d) 107,341,167 --------------- Total Short-Term Investments (Identified Cost $121,596,167) 121,596,167 --------------- Total Investments -- 115.4% (Identified Cost $796,542,157)(a) 857,599,857 Other assets less liabilities -- (15.4)% (114,268,474) --------------- Total Net Assets -- 100% $ 743,331,383 =============== (+) See Note 2a of Notes to Financial Statements. (a) Federal Tax Information : At December 31, 2006, the net unrealized appreciation on investments based on cost of $796,542,157 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 $ 65,757,727 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (4,700,027) --------------- Net unrealized appreciation $ 61,057,700 =============== (b) Non-income producing security. (c) All or a portion of this security was on loan to brokers at December 31, 2006. (d) Represents investment of securities lending collateral. ADR An American Depositary Receipt is a certificate issued by a custodian bank representing the right to receive securities of the foreign issuer described. The values of ADR's are significantly influenced by trading on exchanges not located in the United States.
Holdings at December 31, 2006 as a Percentage of Net Assets (unaudited) Diversified Financial Services 22.0% Oil & Gas Services 11.5 Telecommunications 10.4 Banks 10.1 Auto Manufacturers 7.0 Retail 5.4 Machinery -- Diversified 5.1 Aerospace & Defense 5.1 Restaurants 5.0 Technology 4.9 Airlines 4.6 Cosmetics & Personal Care 4.2 Insurance 3.7
See accompanying notes to financial statements. 25 HANSBERGER INTERNATIONAL FUND -- PORTFOLIO OF INVESTMENTS Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------------------------- Common Stocks -- 99.1% of Net Assets Australia -- 2.2% 17,953 Rio Tinto, Ltd.(c) $ 1,045,203 67,419 Westpac Banking Corp. 1,286,366 47,739 Woodside Petroleum, Ltd. 1,430,206 --------------- 3,761,775 --------------- Austria -- 0.7% 15,843 Erste Bank Der Oesterreichischen Sparkassen AG 1,213,057 --------------- Belgium -- 0.6% 14,629 InBev NV 962,567 --------------- Brazil -- 3.1% 17,900 Aracruz Celulose SA, Sponsored ADR(c) 1,096,196 20,400 Cia Energetica de Minas Gerais, Sponsored ADR(c) 983,280 46,800 Cia Vale do Rio Doce, Sponsored ADR 1,228,500 19,259 Petroleo Brasileiro SA, ADR 1,983,484 --------------- 5,291,460 --------------- Canada -- 3.2% 28,438 Cameco Corp. 1,150,317 12,630 Celestica, Inc.(b) 98,640 18,400 IGM Financial, Inc. 774,720 20,000 Loblaw Cos., Ltd. 836,771 44,000 Manulife Financial Corp.(c) 1,486,760 13,528 Suncor Energy, Inc. 1,067,495 --------------- 5,414,703 --------------- China -- 2.0% 1,408,000 China Petroleum & Chemical Corp., Class H 1,304,374 896,000 Datang International Power Generation Co., Ltd., Class H 932,233 353,000 Foxconn International Holdings, Ltd.(b) 1,158,118 --------------- 3,394,725 --------------- Denmark -- 0.9% 35,600 Vestas Wind Systems A/S(b)(c) 1,498,213 --------------- Finland -- 1.0% 36,480 Nokia Oyj 740,803 46,380 Nokian Renkaat OYJ(c) 947,281 --------------- 1,688,084 --------------- France -- 8.7% 27,920 Axa(c) 1,125,498 11,830 BNP Paribas(c) 1,286,970 26,780 Carrefour SA(c) 1,620,852 19,500 Credit Agricole SA(c) 817,402 14,069 Electricite de France(c) 1,023,005 50,700 France Telecom SA(c) 1,398,824 10,677 Iliad SA(c) 922,794 8,975 LVMH Moet Hennessy Louis Vuitton SA(c) 944,129 7,130 Schneider Electric SA(c) 789,092 17,740 Suez SA(c) 916,869 17,360 Total SA(c) 1,249,185 19,000 Total SA, Sponsored ADR 1,366,480 34,700 Vivendi(c) 1,353,454 --------------- 14,814,554 --------------- Germany -- 3.2% 33,896 Adidas AG 1,688,202 22,000 Commerzbank AG 831,913 9,144 RWE AG(c) 1,002,822 17,500 SAP AG, Sponsored ADR 929,250 7,166 Wacker Chemie AG(b) 929,938 --------------- 5,382,125 ---------------
Shares Description Value (+) -------------------------------------------------------------------------------- Greece -- 1.1% 25,300 Folli-Follie SA $ 996,494 19,304 National Bank of Greece SA 885,439 --------------- 1,881,933 --------------- Hong Kong -- 2.7% 410,000 Cosco Pacific, Ltd. 954,948 2,204,410 Denway Motors, Ltd. 892,287 177,400 Esprit Holdings, Ltd. 1,980,513 1,193,730 Johnson Electric Holdings, Ltd. 816,742 --------------- 4,644,490 --------------- India -- 1.8% 15,500 HDFC Bank, Ltd. ADR(c) 1,169,940 22,800 Infosys Technologies, Ltd., Sponsored ADR(c) 1,243,968 34,800 Patni Computer Systems, Ltd. ADR(c) 709,224 --------------- 3,123,132 --------------- Indonesia -- 0.5% 2,500,000 PT Bank Mandiri 810,101 --------------- Ireland -- 0.6% 51,797 Anglo Irish Bank Corp. PLC 1,066,422 --------------- Israel -- 1.1% 34,700 Check Point Software Technologies, Ltd.(b) 760,624 33,100 Teva Pharmaceutical Industries, Ltd., Sponsored ADR 1,028,748 --------------- 1,789,372 --------------- Italy -- 4.3% 39,920 ENI SpA 1,342,719 104,882 Saipem SpA(c) 2,721,307 362,020 UniCredito Italiano SpA 3,164,690 --------------- 7,228,716 --------------- Japan -- 18.3% 88,000 Ajinomoto Co., Inc., ADR 1,163,193 131,000 Bank of Yokohama, Ltd. (The) 1,023,109 24,300 Canon, Inc.(c) 1,368,094 53,000 Chugoku Bank, Ltd. (The) 693,578 43,000 Denso Corp. 1,704,983 21,300 Ibiden Co., Ltd. 1,071,340 216,000 Isuzu Motors, Ltd.(c) 1,009,276 174,000 Joyo Bank, Ltd. (The) 960,209 40,400 JS Group Corp. 849,576 161 KDDI Corp. 1,092,968 52,000 Marui Co., Ltd.(c) 605,413 20,500 Millea Holdings, Inc. 726,075 14,700 Nidec Corp.(c) 1,137,698 5,200 Nintendo Co., Ltd.(c) 1,346,220 76,400 Nissan Motor Co., Ltd. 921,896 19,000 Nitto Denko Corp.(c) 949,126 49,000 Nomura Holdings, Inc.(c) 924,373 56,000 Onward Kashiyama Co., Ltd. 713,904 5,690 ORIX Corp. 1,650,054 230,000 Osaka Gas Co., Ltd.(c) 854,877 53,000 Sharp Corp.(c) 911,286 52,000 Shionogi & Co., Ltd.(c) 1,021,236 8,400 SMC Corp. 1,188,803 61,000 Sumitomo Corp. 913,153 120 Sumitomo Mitsui Financial Group, Inc. 1,228,623 86,000 Sumitomo Trust & Banking Co., Ltd. (The) 900,455 12,700 Takeda Pharmaceutical Co., Ltd. 870,407 47,400 THK Co., Ltd.(c) 1,220,111 14,500 Toyota Motor Corp. 970,441 11,000 Yamada Denki Co., Ltd.(c) 933,695 --------------- 30,924,172 ---------------
See accompanying notes to financial statements. 26 HANSBERGER INTERNATIONAL FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006
Shares Description Value (+) ---------------------------------------------------------------------------------------------- Luxembourg -- 0.6% 15,200 Millicom International Cellular SA(b)(c) $ 936,928 --------------- Mexico -- 1.8% 27,000 Cemex SAB de CV, Sponsored ADR(b) 914,760 8,600 Fomento Economico Mexicano, SA de CV, Sponsored ADR 995,536 25,976 Wal-Mart de Mexico SA de CV, Sponsored ADR, Series V(c) 1,139,048 --------------- 3,049,344 --------------- Netherlands -- 2.3% 27,497 ABN AMRO Holding NV 881,518 20,428 ING Groep NV 902,680 29,700 Koninklijke (Royal) Philips Electronics NV 1,116,126 17,300 Royal Numico NV 929,016 --------------- 3,829,340 --------------- Republic of Korea -- 2.2% 23,000 Kookmin Bank, Sponsored ADR(b) 1,854,720 1,300 Samsung Electronics Co., Ltd. 852,811 3,066 Samsung Electronics Co., Ltd., GDR, 144A 1,008,714 --------------- 3,716,245 --------------- Russia -- 0.8% 33,100 Evraz Group SA, GDR, 144A 850,339 6,060 LUKOIL, Sponsored ADR 529,644 --------------- 1,379,983 --------------- Singapore -- 1.9% 150,000 DBS Group Holdings, Ltd. 2,202,146 94,000 Keppel Corp., Ltd. 1,074,768 --------------- 3,276,914 --------------- South Africa -- 0.4% 19,800 Sasol, Ltd. 729,055 --------------- Spain -- 3.5% 73,758 Banco Bilbao Vizcaya Argentaria SA 1,772,081 100,816 Banco Santander Central Hispano SA 1,877,309 104,781 Telefonica SA 2,224,582 --------------- 5,873,972 --------------- Sweden -- 0.5% 69,500 Eniro AB 916,717 --------------- Switzerland -- 10.4% 70,260 ABB, Ltd. 1,258,184 12,400 Ciba Specialty Chemicals AG 823,234 30,055 Credit Suisse Group 2,095,372 14,530 Holcim, Ltd., ADR 1,328,807 13,600 Lonza Group AG 1,172,249 5,856 Nestle SA 2,077,165 51,541 Novartis AG 2,960,836 8,918 Roche Holding AG 1,595,551 65,900 STMicroelectronics NV(c) 1,216,642 7,612 Syngenta AG(b) 1,414,007 7,471 Synthes, Inc. 888,173 14,040 UBS AG 849,668 --------------- 17,679,888 --------------- Taiwan -- 1.2% 430,590 Taiwan Semiconductor Manufacturing Co., Ltd. 884,079 103,259 Taiwan Semiconductor Manufacturing Co., Ltd., Sponsored ADR(c) 1,128,621 --------------- 2,012,700 --------------- Thailand -- 0.5% 237,500 Bangkok Bank PCL 796,657 ---------------
Shares Description Value (+) ----------------------------------------------------------------------------------------------- United Kingdom -- 17.0% 496,085 ARM Holdings PLC $ 1,216,680 17,000 AstraZeneca PLC 911,063 111,740 Barclays PLC 1,595,436 40,000 BHP Billiton PLC 732,525 236,724 British Sky Broadcasting Group PLC 2,420,195 20,884 Carnival PLC 1,055,004 145,629 Cattles PLC 1,249,113 42,958 GlaxoSmithKline PLC 1,130,700 96,152 HBOS PLC 2,125,597 65,200 HSBC Holdings PLC 1,192,465 194,477 Kingfisher PLC 906,785 141,000 Man Group PLC 1,439,211 136,603 Michael Page International PLC 1,206,493 281,020 Old Mutual PLC 956,442 116,755 Prudential PLC 1,595,144 20,484 Reckitt Benckiser PLC 934,429 142,000 Reuters Group PLC 1,234,334 24,407 Royal Bank of Scotland Group PLC 949,885 384,270 Signet Group PLC 895,437 241,870 Smith & Nephew PLC 2,523,075 122,476 Tesco PLC 967,866 544,183 Vodafone Group PLC 1,502,867 --------------- 28,740,746 --------------- Total Common Stocks (Identified Cost $128,438,127) 167,828,090 --------------- Shares/ Principal Amount ----------------------------------------------------------------------------------------------- Short-Term Investments -- 22.7% 37,301,240 State Street Securities Lending Quality Trust(d) 37,301,240 $ 1,199,826 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/29/2006 at 4.250% to be repurchased at $1,200,392 on 1/02/2007, collateralized by $970,000 U.S. Treasury Bond, 7.125% due 2/15/2023 valued at $1,230,312 including accrued interest 1,199,826 --------------- Total Short-Term Investments (Identified Cost $38,501,066) 38,501,066 --------------- Total Investments -- 121.8% (Identified Cost $166,939,193)(a) 206,329,156 Other assets less liabilities--(21.8)% (36,957,217) --------------- Net Assets -- 100% $ 169,371,939 =============== (+) See Note 2a of Notes to Financial Statements. (a) Federal Tax Information: At December 31, 2006, the net unrealized appreciation on investments based on cost of $169,028,170 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 $ 38,671,591 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (1,370,605) --------------- Net unrealized appreciation $ 37,300,986 =============== (b) Non-income producing security. (c) All or a portion of this security was on loan to brokers at December 31, 2006. (d) Represents investment of securities lending collateral.
See accompanying notes to financial statements. 27 HANSBERGER INTERNATIONAL FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006 ADR/GDR An American Depositary Receipt or Global Depositary Receipt is a certificate issued by a custodian 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 registration, normally to qualified institutional buyers. At period end, the value of these amounted to $1,859,053 or 1.1% of net assets.
Holdings at December 31, 2006 as a Percentage of Net Assets (unaudited) Banks 20.5% Oil & Gas 6.5 Pharmaceuticals 5.6 Telecommunications 5.4 Food 4.5 Diversified Financial Services 4.1 Insurance 4.0 Semiconductors 3.7 Media 3.5 Retail 3.2 Chemicals 3.1 Electrical Components & Equipment 2.4 Electric 2.3 Auto Manufacturers 2.2 Hand & Machine Tools 2.1 Health Care -- Products 2.0 Other, less than 2% each 24.0
See accompanying notes to financial statements. 28 HARRIS ASSOCIATES FOCUSED VALUE FUND -- PORTFOLIO OF INVESTMENTS Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------------ Common Stocks -- 100.2% of Net Assets Aerospace & Defense -- 2.7% 117,400 Raytheon Co. $ 6,198,720 --------------- Apparel -- 4.9% 257,600 Liz Claiborne, Inc. 11,195,296 --------------- Apparel Retailers -- 5.0% 363,600 Timberland Co.(b) 11,482,488 --------------- Beverages -- 3.1% 92,000 Molson Coors Brewing Co. 7,032,480 --------------- Chemicals -- 3.1% 142,700 International Flavors & Fragrances, Inc.(c) 7,015,132 --------------- Cosmetics & Personal Care -- 3.5% 193,700 Estee Lauder Cos., Inc. (The), Class A 7,906,834 --------------- Distribution & Wholesale -- 5.0% 162,900 CDW Corp. 11,455,128 --------------- Diversified Financial Services -- 3.0% 85,800 Morgan Stanley 6,986,694 --------------- Hand & Machine Tools -- 1.3% 36,000 Black & Decker Corp. (The) 2,878,920 --------------- Health Care -- Products -- 3.9% 173,100 Bausch & Lomb, Inc.(c) 9,011,586 --------------- Health Care -- Services -- 2.3% 754,600 Tenet Healthcare Corp.(b)(c) 5,259,562 --------------- Home Builders -- 3.4% 293,100 D.R. Horton, Inc. 7,764,219 --------------- Insurance -- 4.7% 367,700 Conseco, Inc.(b) 7,346,646 49,300 PartnerRe, Ltd.(c) 3,501,779 --------------- 10,848,425 --------------- Leisure Time -- 1.5% 47,300 Harley-Davidson, Inc. 3,333,231 --------------- Lodging & Gaming -- 2.0% 55,800 Harrah's Entertainment, Inc. 4,615,776 --------------- Manufacturing -- 3.7% 276,400 Tyco International, Ltd. 8,402,560 --------------- Media -- 14.1% 260,700 Cablevision Systems Corp., Class A 7,424,736 504,220 Discovery Holding Co.(b) 8,112,900 192,400 EW Scripps Co.(c) 9,608,456 327,900 Time Warner, Inc. 7,141,662 --------------- 32,287,754 --------------- Oil & Gas -- 1.1% 54,000 EnCana Corp. 2,481,300 --------------- Pharmaceuticals -- 2.9% 173,500 Omnicare, Inc.(c) 6,702,305 --------------- Restaurants -- 9.0% 231,700 McDonald's Corp. 10,271,261 176,200 Yum! Brands, Inc. 10,360,560 --------------- 20,631,821 --------------- Savings & Loans - 8.1% 399,315 Sovereign Bancorp, Inc. 10,138,608 183,300 Washington Mutual, Inc. 8,338,317 --------------- 18,476,925 ---------------
Shares Description Value (+) ---------------------------------------------------------------------------------------------- Semiconductors -- 11.9% 561,000 Intel Corp. $ 11,360,250 133,800 International Rectifier Corp.(b) 5,155,314 470,100 National Semiconductor Corp. 10,671,270 --------------- 27,186,834 --------------- Total Common Stocks (Identified Cost $193,888,141) 229,153,990 --------------- Shares ---------------------------------------------------------------------------------------------- Short-Term Investments -- 14.6% 33,336,293 State Street Securities Lending Quality Trust(d) (Identified Cost $33,336,293) 33,336,293 --------------- Total Investments -- 114.8% (Identified Cost $227,224,434)(a) 262,490,283 Other assets less liabilities -- (14.8)% (33,903,964) --------------- Total Net Assets -- 100% $ 228,586,319 =============== (+) See Note 2a of Notes to Financial Statements. (a) Federal Tax Information: At December 31, 2006, the unrealized appreciation on investments based on cost of $227,235,315 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 $ 38,677,691 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (3,422,723) --------------- Net unrealized appreciation $ 35,254,968 =============== (b) Non-income producing security. (c) All or a portion of this security was on loan to brokers at December 31, 2006. (d) Represents investment of securities lending collateral.
Holdings at December 31, 2006 as a Percentage of Net Assets (unaudited) Media 14.1% Semiconductors 11.9 Restaurants 9.0 Savings & Loans 8.1 Apparel Retailers 5.0 Distribution & Wholesale 5.0 Apparel 4.9 Insurance 4.7 Health Care -- Products 3.9 Manufacturing 3.7 Cosmetics & Personal Care 3.5 Home Builders 3.4 Beverages 3.1 Chemicals 3.1 Diversified Financial Services 3.0 Pharmaceuticals 2.9 Aerospace & Defense 2.7 Health Care -- Services 2.3 Lodging & Gaming 2.0 Others, less than 2% each 3.9
See accompanying notes to financial statements. 29 HARRIS ASSOCIATES LARGE CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS Investments as of December 31, 2006
Shares Description Value (+) -------------------------------------------------------------------------- Common Stocks -- 97.8% of Net Assets Aerospace & Defense -- 4.5% 87,200 Honeywell International, Inc. $ 3,944,928 155,000 Raytheon Co. 8,184,000 --------------- 12,128,928 --------------- Athletic Footwear -- 1.7% 47,600 NIKE, Inc., Class B 4,713,828 --------------- Banks -- 2.8% 119,700 Mellon Financial Corp. 5,045,355 71,200 U.S. Bancorp 2,576,728 --------------- 7,622,083 --------------- Beverages -- 2.1% 58,900 Coca-Cola Co. (The) 2,841,925 34,300 Diageo PLC, Sponsored ADR 2,720,333 --------------- 5,562,258 --------------- Chemicals -- 1.9% 129,700 Dow Chemical Co. (The) 5,180,218 --------------- Computers -- 10.4% 462,100 Dell, Inc.(b) 11,594,089 261,500 Hewlett-Packard Co. 10,771,185 1,081,800 Sun Microsystems, Inc.(b) 5,863,356 --------------- 28,228,630 --------------- Diversified Financial Services -- 13.8% 129,900 American Express Co. 7,881,033 143,300 Citigroup, Inc. 7,981,810 212,000 JPMorgan Chase & Co. 10,239,600 136,600 Morgan Stanley 11,123,338 --------------- 37,225,781 --------------- Health Care -- Products -- 1.3% 68,000 Medtronic, Inc. 3,638,680 --------------- Home Builders -- 1.8% 39,900 Lennar Corp., Class A 2,093,154 87,200 Pulte Homes, Inc.(c) 2,888,064 --------------- 4,981,218 --------------- Household Products & Wares -- 2.0% 63,200 Fortune Brands, Inc. 5,396,648 --------------- Insurance -- 1.9% 54,300 Aflac, Inc. 2,497,800 114,500 Progressive Corp. 2,773,190 --------------- 5,270,990 --------------- Leisure Time -- 5.8% 188,000 Carnival Corp. 9,221,400 92,200 Harley-Davidson, Inc.(c) 6,497,334 --------------- 15,718,734 --------------- Manufacturing -- 4.2% 370,100 Tyco International, Ltd. 11,251,040 --------------- Media -- 12.8% 45,510 Liberty Media Corp. - Capital, Series A(b) 4,459,070 550,400 Time Warner, Inc. 11,987,712 282,200 Viacom, Inc., Class B(b) 11,578,666 196,700 Walt Disney Co. (The) 6,740,909 --------------- 34,766,357 ---------------
Shares Description Value (+) ----------------------------------------------------------------------------------------------- Office & Business Equipment -- 1.0% 164,500 Xerox Corp.(b) $ 2,788,275 --------------- Pharmaceuticals -- 3.0% 47,100 Abbott Laboratories 2,294,241 248,900 Schering-Plough Corp. 5,883,996 --------------- 8,178,237 --------------- Restaurants -- 5.3% 320,800 McDonald's Corp. 14,221,064 --------------- Retail -- 6.9% 200,200 Home Depot, Inc. 8,040,032 71,800 Limited Brands, Inc. 2,077,892 184,500 Wal-Mart Stores, Inc. 8,520,210 --------------- 18,638,134 --------------- Savings & Loans -- 3.3% 197,500 Washington Mutual, Inc. 8,984,275 --------------- Semiconductors -- 6.1% 530,100 Intel Corp. 10,734,525 196,200 Texas Instruments, Inc. 5,650,560 --------------- 16,385,085 --------------- Telecommunications -- 1.0% 140,000 Sprint Nextel Corp. 2,644,600 --------------- Transportation -- 4.2% 122,400 Union Pacific Corp. 11,263,248 --------------- Total Common Stocks (Identified Cost $210,769,135) 264,788,311 --------------- Shares/ Principal Amount ----------------------------------------------------------------------------------------------- Short-Term Investments -- 3.0% 1,558,900 State Street Securities Lending Quality Trust(d) 1,558,900 $ 6,664,902 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/29/2006 at 4.250% to be repurchased at $6,668,050 on 1/2/2007, collateralized by $5,360,000 U.S. Treasury Note, 7.125% due 2/15/2023 valued at $6,798,426 including accrued interest 6,664,902 --------------- Total Short-Term Investments (Identified Cost $8,223,802) 8,223,802 --------------- Total Investments -- 100.8% (Identified Cost $218,992,937)(a) 273,012,113 Other assets less liabilities -- (0.8)% (2,258,670) --------------- Total Net Assets -- 100% $ 270,753,443 =============== (+) See Note 2a of Notes to Financial Statements. (a) Federal Tax Information: At December 31, 2006, the net unrealized appreciation on investments based on cost of $219,055,011 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. $ 58,779,493 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value. (4,822,391) --------------- Net unrealized appreciation $ 53,957,102 =============== (b) Non-income producing security. (c) All or a portion of this security was on loan to brokers at December 31, 2006.
See accompanying notes to financial statements. 30 HARRIS ASSOCIATES LARGE CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006 (d) Represents investment of securities lending collateral. ADR An American Depositary Receipt is a certificate issued by a custodian 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, 2006 as a Percentage of Net Assets (unaudited) Diversified Financial Services 13.8% Media 12.8 Computers 10.4 Retail 6.9 Semiconductors 6.1 Leisure Time 5.8 Restaurants 5.3 Aerospace & Defense 4.5 Transportation 4.2 Manufacturing 4.2 Savings & Loans 3.3 Pharmaceuticals 3.0 Banks 2.8 Beverages 2.1 Household Products & Wares 2.0 Other, less than 2% each 10.6
See accompanying notes to financial statements. 31 IXIS U.S. DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------------ Common Stocks -- 99.0% of Net Assets Advertising -- 0.3% 2,200 Interpublic Group of Co., Inc. (The)(b)(c) $ 26,928 29,700 Lamar Advertising Co., Class A(b) 1,942,083 ------------- 1,969,011 ------------- Aerospace & Defense -- 2.3% 58,100 Honeywell International, Inc. 2,628,444 13,300 Lockheed Martin Corp. 1,224,531 103,300 Raytheon Co. 5,454,240 31,000 Rockwell Collins, Inc. 1,961,990 48,850 Spirit Aerosystems Holdings, Inc., Class A(b) 1,635,009 20,600 United Technologies Corp. 1,287,912 ------------- 14,192,126 ------------- Apparel -- 1.6% 67,800 Coach, Inc.(b) 2,912,688 45,825 Guess ?, Inc.(b) 2,906,680 81,750 Hanesbrands, Inc.(b) 1,930,935 23,500 Polo Ralph Lauren Corp. 1,825,010 ------------- 9,575,313 ------------- Athletic Footwear -- 0.8% 47,300 NIKE, Inc., Class B 4,684,119 ------------- Banks -- 4.3% 42,600 Bank of America Corp. 2,274,414 55,200 BOK Financial Corp. 3,034,896 131,000 Colonial BancGroup, Inc. 3,371,940 95,188 Dearborn Bancorp, Inc.(b) 1,808,567 67,925 East West Bancorp, Inc.(c) 2,405,903 33,650 Greenhill & Co., Inc.(c) 2,483,370 79,600 Mellon Financial Corp. 3,355,140 87,325 Security Bank Corp.(c) 1,992,757 24,900 State Street Corp. 1,679,256 159,500 Superior Bancorp(b)(c) 1,808,730 47,500 U.S. Bancorp 1,719,025 ------------- 25,933,998 ------------- Beverages -- 0.9% 39,200 Coca-Cola Co. (The) 1,891,400 23,200 Diageo PLC, Sponsored ADR 1,839,992 23,300 PepsiCo, Inc. 1,457,415 ------------- 5,188,807 ------------- Biotechnology -- 1.3% 21,000 Amgen, Inc.(b) 1,434,510 35,400 Celgene Corp.(b) 2,036,562 31,100 Genentech, Inc.(b) 2,523,143 42,800 PDL BioPharma, Inc.(b)(c) 861,992 22,300 Vertex Pharmaceuticals, Inc.(b) 834,466 ------------- 7,690,673 ------------- Building Materials -- 1.3% 58,325 Armstrong World Industries, Inc.(b) 2,472,397 177,225 Comfort Systems USA, Inc. 2,240,124 51,100 Texas Industries, Inc.(c) 3,282,153 ------------- 7,994,674 ------------- Chemicals -- 2.5% 32,700 Air Products & Chemicals, Inc. 2,298,156 51,775 Airgas, Inc. 2,097,923 141,925 Chemtura Corp. 1,366,738 29,350 Cytec Industries, Inc. 1,658,568 85,200 Dow Chemical Co. (The) 3,402,888
Shares Description Value (+) --------------------------------------------------------------------- Chemicals -- continued 40,875 Ecolab, Inc. $ 1,847,550 42,100 Praxair, Inc.(c) 2,497,793 ------------- 15,169,616 ------------- Commercial Services -- 2.3% 16,335 Avis Budget Group, Inc. 354,306 13,625 Corporate Executive Board Co.(c) 1,194,913 110,900 Exponent, Inc.(b)(c) 2,069,394 82,950 Interactive Data Corp. 1,994,118 188,050 Live Nation, Inc.(b)(c) 4,212,320 37,400 Paychex, Inc. 1,478,796 95,375 Rent-A-Center, Inc.(b) 2,814,516 ------------- 14,118,363 ------------- Computers -- 4.0% 72,925 Cognizant Technology Solutions Corp.(b) 5,626,893 307,900 Dell, Inc.(b) 7,725,211 174,300 Hewlett-Packard Co. 7,179,417 719,500 Sun Microsystems, Inc.(b) 3,899,690 ------------- 24,431,211 ------------- Computers & Peripherals -- 0.2% 22,800 Seagate Technology(c) 604,200 28,300 Western Digital Corp.(b) 579,018 ------------- 1,183,218 ------------- Cosmetics & Personal Care -- 0.7% 114,150 Alberto-Culver Co. 2,448,518 29,300 Procter & Gamble Co. 1,883,111 ------------- 4,331,629 ------------- Diversified Financial Services -- 9.4% 24,175 Affiliated Managers Group, Inc.(b)(c) 2,541,518 86,600 American Express Co. 5,254,022 119,300 Charles Schwab Corp. (The) 2,307,262 7,875 Chicago Mercantile Exchange Holdings, Inc. 4,014,281 118,800 Citigroup, Inc. 6,617,160 13,800 Franklin Resources, Inc. 1,520,346 8,800 Goldman Sachs Group, Inc. 1,754,280 35,725 Intercontinental Exchange, Inc.(b) 3,854,727 25,550 International Securities Exchange, Inc.(c) 1,195,485 178,900 JPMorgan Chase & Co. 8,640,870 41,300 Lazard, Ltd., Class A(c) 1,955,142 91,000 Morgan Stanley 7,410,130 81,550 Nasdaq Stock Market, Inc.(b) 2,510,925 63,650 National Financial Partners Corp. 2,798,690 43,650 Nuveen Investments, Class A(c) 2,264,562 8,075 Nymex Holdings, Inc.(b)(c) 1,001,381 18,800 NYSE Group, Inc.(b)(c) 1,827,360 ------------- 57,468,141 ------------- Electric -- 2.8% 104,350 AES Corp. (The)(b) 2,299,874 53,516 Allete, Inc. 2,490,635 203,775 CMS Energy Corp.(b) 3,403,042 80,475 MDU Resources Group, Inc. 2,063,379 76,600 NRG Energy, Inc.(b)(c) 4,290,366 79,850 Portland General Electric Co.(c) 2,175,913 ------------- 16,723,209 ------------- Electrical Components & Equipment -- 1.5% 104,887 AMETEK, Inc. 3,339,602 41,200 Emerson Electric Co. 1,816,508
See accompanying notes to financial statements. 32 IXIS U.S. DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------------- Electrical Components & Equipment -- continued 58,075 General Cable Corp.(b) $ 2,538,458 37,750 Hubbell, Inc., Class B 1,706,678 ------------- 9,401,246 ------------- Electronics -- 2.1% 54,350 Amphenol Corp., Class A(c) 3,374,048 136,525 Avnet, Inc.(b) 3,485,483 43,350 Mettler Toledo International, Inc.(b) 3,418,148 114,575 PerkinElmer, Inc. 2,547,002 ------------- 12,824,681 ------------- Engineering & Construction -- 1.2% 8,700 Fluor Corp. 710,355 7,000 Jacobs Engineering Group, Inc.(b) 570,780 48,435 KBR, Inc.(b)(c) 1,267,060 61,900 McDermott International, Inc.(b) 3,148,234 28,375 Washington Group International, Inc.(b) 1,696,541 ------------- 7,392,970 ------------- Entertainment -- 0.5% 66,100 International Game Technology 3,053,820 ------------- Environmental Control -- 0.6% 51,500 Nalco Holding Co.(b) 1,053,690 35,350 Stericycle, Inc.(b) 2,668,925 ------------- 3,722,615 ------------- Food -- 0.6% 75,850 Spartan Stores, Inc. 1,587,541 172,550 Winn-Dixie Stores, Inc.(b) 2,329,425 ------------- 3,916,966 ------------- Forest Products & Paper -- 0.5% 69,688 Potlatch Corp.(c) 3,053,728 ------------- Gas -- 1.0% 46,050 Oneok, Inc. 1,985,676 141,850 UGI Corp. 3,869,668 ------------- 5,855,344 ------------- Health Care - Capital Equipment -- 0.3% 40,200 Thermo Fisher Scientific, Inc.(b) 1,820,658 ------------- Health Care - Products -- 2.1% 15,900 Alcon, Inc. 1,777,143 53,525 Beckman Coulter, Inc.(c) 3,200,795 23,775 C.R. Bard, Inc. 1,972,612 46,775 Hologic, Inc.(b) 2,211,522 5,900 Intuitive Surgical, Inc.(b)(c) 565,810 45,000 Medtronic, Inc. 2,407,950 12,100 Varian Medical Systems, Inc.(b) 575,597 ------------- 12,711,429 ------------- Health Care - Services -- 0.6% 10,600 Covance, Inc.(b) 624,446 8,800 Laboratory Corp. of America Holdings(b)(c) 646,536 9,300 Quest Diagnostics, Inc. 492,900 41,175 Triad Hospitals, Inc.(b) 1,722,350 ------------- 3,486,232 ------------- Home Builders -- 0.8% 26,600 Lennar Corp., Class A(c) 1,395,436 57,700 Pulte Homes, Inc. 1,911,024 44,900 Winnebago Industries(c) 1,477,659 ------------- 4,784,119 -------------
Shares Description Value (+) --------------------------------------------------------------------- Household Products & Wares -- 1.6% 57,225 Church & Dwight Co., Inc. $ 2,440,646 42,100 Fortune Brands, Inc. 3,594,919 165,550 Fossil, Inc.(b)(c) 3,738,119 ------------- 9,773,684 ------------- Insurance -- 2.9% 36,100 Aflac, Inc. 1,660,600 243,525 AmCOMP, Inc.(b) 2,676,340 24,800 American International Group, Inc. 1,777,168 65,125 Assurant, Inc. 3,598,156 25,175 Navigators Group, Inc.(b) 1,212,931 76,500 Progressive Corp. 1,852,830 52,100 Protective Life Corp. 2,474,750 60,600 United Fire & Casualty Co. 2,136,150 ------------- 17,388,925 ------------- Internet -- 3.4% 106,200 Akamai Technologies, Inc.(b)(c) 5,641,344 19,200 Ctrip.com International, Ltd., ADR(c) 1,199,616 39,975 F5 Networks, Inc.(b) 2,966,545 5,800 Google, Inc., Class A(b) 2,670,784 131,500 McAfee, Inc.(b) 3,731,970 186,400 NetRatings, Inc.(b)(c) 3,263,864 47,400 Yahoo!, Inc.(b) 1,210,596 ------------- 20,684,719 ------------- Iron & Steel -- 0.2% 30,975 Chaparral Steel Co. 1,371,263 ------------- Leisure Time -- 1.7% 125,100 Carnival Corp. 6,136,155 61,400 Harley-Davidson, Inc.(c) 4,326,858 ------------- 10,463,013 ------------- Lodging & Gaming -- 1.3% 59,127 Melco PBL Entertainment, Ltd., ADR(b)(c) 1,257,040 135,870 Wyndham Worldwide Corp.(b) 4,350,557 22,475 Wynn Resorts, Ltd.(c) 2,109,279 ------------- 7,716,876 ------------- Machinery - Diversified -- 1.0% 79,450 Albany International Corp., Class A 2,614,699 12,000 Textron, Inc. 1,125,240 80,500 Wabtec Corp. 2,445,590 ------------- 6,185,529 ------------- Manufacturing -- 2.7% 65,000 Actuant Corp., Class A(c) 3,097,250 122,400 General Electric Co. 4,554,504 42,600 Pall Corp. 1,471,830 246,200 Tyco International, Ltd. 7,484,480 ------------- 16,608,064 ------------- Media -- 5.0% 89,850 Idearc, Inc.(b) 2,574,202 30,305 Liberty Media Corp. - Capital, Series A(b) 2,969,284 42,300 Rogers Communications, Inc., Class B 2,521,080 366,400 Time Warner, Inc. 7,980,192 187,900 Viacom, Inc., Class B(b) 7,709,537 189,700 Walt Disney Co. (The) 6,501,019 ------------- 30,255,314 ------------- Metal Fabricate & Hardware -- 0.6% 48,100 Precision Castparts Corp. 3,765,268 -------------
See accompanying notes to financial statements. 33 IXIS U.S. DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------ Metals -- 0.5% 34,775 Allegheny Technologies, Inc.(c) $ 3,153,397 ------------- Mining -- 0.3% 140,300 Yamana Gold, Inc.(c) 1,849,154 ------------- Office & Business Equipment -- 0.3% 109,500 Xerox Corp.(b) 1,856,025 ------------- Office Furnishings -- 0.4% 176,889 Interface, Inc., Class A(b) 2,515,362 ------------- Oil & Gas -- 0.7% 47,175 Delta Petroleum Corp.(b)(c) 1,092,573 55,100 Southwestern Energy Co.(b) 1,931,255 18,300 Transocean, Inc.(b) 1,480,287 ------------- 4,504,115 ------------- Oil & Gas Services -- 3.2% 16,200 Baker Hughes, Inc. 1,209,492 10,500 Cameron International Corp.(b)(c) 557,025 28,150 Dril-Quip, Inc.(b) 1,102,354 37,875 FMC Technologies, Inc.(b)(c) 2,334,236 44,800 Grant Prideco, Inc.(b)(c) 1,781,696 37,100 Halliburton Co. 1,151,955 101,150 Helix Energy Solutions Group, Inc.(b) 3,173,075 32,400 National Oilwell Varco, Inc.(b) 1,982,232 25,000 Noble Corp. 1,903,750 21,200 Schlumberger, Ltd. 1,338,992 28,450 Universal Compression Holdings, Inc.(b) 1,767,030 26,600 Weatherford International, Ltd.(b) 1,111,614 ------------- 19,413,451 ------------- Pharmaceuticals -- 2.5% 31,400 Abbott Laboratories 1,529,494 22,100 GlaxoSmithKline PLC, ADR 1,165,996 64,025 Hospira, Inc.(b) 2,149,960 39,025 Medicines Co.(b) 1,237,873 35,000 Novartis AG, (CHF) 2,017,850 10,400 Novartis AG, ADR 597,376 6,700 Roche Holding AG, (CHF) 1,201,436 165,900 Schering-Plough Corp. 3,921,876 22,275 Shire PLC, ADR 1,375,704 ------------- 15,197,565 ------------- Pipelines -- 0.2% 15,925 Questar Corp. 1,322,571 ------------- Real Estate -- 0.8% 20,850 Jones Lang LaSalle, Inc. 1,921,744 100,662 Realogy Corp.(b)(c) 3,052,072 ------------- 4,973,816 ------------- REITs -- Financial Services -- 0.5% 63,850 CBL & Associates Properties, Inc. 2,767,898 ------------- REITs -- Shopping Centers -- 0.6% 62,225 Developers Diversified Realty Corp.(c) 3,917,064 ------------- Restaurants -- 1.9% 213,500 McDonald's Corp. 9,464,455 35,600 Yum! Brands, Inc. 2,093,280 ------------- 11,557,735 ------------- Retail -- 5.9% 38,100 American Eagle Outfitters, Inc.(c) 1,189,101 73,825 Applebee's International, Inc.(c) 1,821,263 25,600 Best Buy Co., Inc.(c) 1,259,264
Shares Description Value (+) -------------------------------------------------------------------------------------- Retail -- continued 100,675 CEC Entertainment, Inc.(b) $ 4,052,169 47,575 GameStop Corp., Class A(b)(c) 2,621,858 132,400 Home Depot, Inc. 5,317,184 26,000 Kohl's Corp.(b) 1,779,180 71,900 Limited Brands, Inc. 2,080,786 24,200 Nordstrom, Inc. 1,194,028 73,225 Petsmart, Inc. 2,113,273 85,450 Staples, Inc. 2,281,515 71,200 Starbucks Corp.(b) 2,521,904 34,900 Target Corp. 1,991,045 123,200 Wal-Mart Stores, Inc. 5,689,376 ------------- 35,911,946 ------------- Savings & Loans -- 1.0% 131,500 Washington Mutual, Inc. 5,981,935 ------------- Semiconductors -- 2.5% 352,900 Intel Corp. 7,146,225 56,425 NVIDIA Corp.(b) 2,088,289 273,025 ON Semiconductor Corp.(b)(c) 2,066,799 130,800 Texas Instruments, Inc. 3,767,040 ------------- 15,068,353 ------------- Software -- 3.7% 35,400 Activision, Inc.(b) 610,296 28,500 Adobe Systems, Inc.(b) 1,171,920 61,400 Autodesk, Inc.(b) 2,484,244 27,850 Dun & Bradstreet Corp.(b) 2,305,701 20,100 Electronic Arts, Inc.(b) 1,012,236 86,700 Fidelity National Information Services, Inc. 3,475,803 37,100 Infosys Technologies, Ltd., Sponsored ADR(c) 2,024,176 101,600 Oracle Corp.(b) 1,741,424 62,550 Salesforce.com, Inc.(b) 2,279,947 32,600 SAP AG, Sponsored ADR 1,731,060 79,800 Satyam Computer Services, Ltd.(c) 1,915,998 80,175 Sybase, Inc.(b) 1,980,323 ------------- 22,733,128 ------------- Telecommunications -- 4.8% 68,125 ADTRAN, Inc.(c) 1,546,438 48,675 American Tower Corp., Class A(b) 1,814,604 130,900 Cisco Systems, Inc.(b) 3,577,497 111,100 Corning, Inc.(b) 2,078,681 64,725 Embarq Corp. 3,401,946 67,325 Harris Corp. 3,087,524 53,125 Hutchison Telecommunications International, Ltd., ADR(b)(c) 2,035,750 33,125 Leap Wireless International, Inc.(b) 1,969,944 24,475 Millicom International Cellular SA(b)(c) 1,508,639 52,200 Motorola, Inc. 1,073,232 47,550 NII Holdings, Inc., Class B(b)(c) 3,064,122 55,000 QUALCOMM, Inc. 2,078,450 93,500 Sprint Nextel Corp. 1,766,215 ------------- 29,003,042 ------------- Transportation -- 2.2% 62,425 Horizon Lines, Inc., Class A(c) 1,682,978 135,800 Laidlaw International, Inc. 4,132,394 81,500 Union Pacific Corp. 7,499,631 ------------- 13,315,003 ------------- Water -- 0.1% 16,000 Connecticut Water Service, Inc. 364,000 ------------- Total Common Stocks (Identified Cost $490,547,239) 602,296,131 -------------
See accompanying notes to financial statements. 34 IXIS U.S. DIVERSIFIED PORTFOLIO -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006
Shares/ Principal Amount Description Value (+) ----------------------------------------------------------------------------------------------------- Short-Term Investments -- 13.2% 73,222,927 State Street Securities Lending Quality Trust(d) $ 73,222,927 $ 6,997,760 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/29/2006 at 4.250% to be repurchased at $7,001,064 on 1/2/2007, collateralized by $5,630,000 U.S. Treasury Bond, 7.125% due 2/15/2023 valued at $7,140,884 including accrued interest 6,997,760 ------------- Total Short-Term Investments (Identified Cost $80,220,687) 80,220,687 ------------- Total Investments -- 112.2% (Identified Cost $570,767,926)(a) 682,516,818 Other assets less liabilities -- (12.2)% (74,047,945) ------------- Total Net Assets -- 100% $ 608,468,873 ============= (+) See Note 2a of Notes to Financial Statements. (a) Federal Tax Information: At December 31, 2006, the net unrealized appreciation on investments based on cost of $571,768,615 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 $ 118,723,749 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (7,975,546) ------------- Net unrealized appreciation $ 110,748,203 ============= (b) Non-income producing security. (c) All or a portion of this security was on loan to brokers at December 31, 2006. (d) Represents investment of securities lending collateral. ADR An American Depositary Receipt is a certificate issued by a custodian 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. CHF Swiss Franc REITs Real Estate Investment Trusts
Holdings at December 31, 2006 as a Percentage of Net Assets (unaudited) Diversified Financial Services 9.4% Retail 5.9 Media 5.0 Telecommunications 4.8 Banks 4.3 Computers 4.0 Software 3.7 Internet 3.4 Oil & Gas Services 3.2 Insurance 2.9 Electric 2.8 Manufacturing 2.7 Pharmaceuticals 2.5 Chemicals 2.5 Semiconductors 2.5 Aerospace & Defense 2.3 Commercial Services 2.3 Transportation 2.2 Electronics 2.1 Health Care -- Products 2.1 Other, less than 2% each 28.4
See accompanying notes to financial statements. 35 IXIS VALUE FUND -- PORTFOLIO OF INVESTMENTS Investments as of December 31, 2006
Shares Description Value (+) -------------------------------------------------------------------- Common Stocks -- 97.2% of Net Assets Aerospace & Defense -- 2.5% 5,100 Boeing Co. (The) $ 453,084 6,100 General Dynamics Corp. 453,535 14,875 Northrop Grumman Corp. 1,007,037 19,500 Raytheon Co.(c) 1,029,600 6,450 United Technologies Corp. 403,254 --------------- 3,346,510 --------------- Airlines -- 0.0% 1,500 UAL Corp.(b)(c) 66,000 --------------- Apparel -- 0.6% 8,500 Jones Apparel Group, Inc. 284,155 22,300 Warnaco Group, Inc. (The)(b) 565,974 --------------- 850,129 --------------- Athletic Footwear -- 0.1% 1,625 NIKE, Inc., Class B 160,924 --------------- Banks -- 5.8% 19,775 Bank of America Corp. 1,055,787 9,125 BOK Financial Corp.(c) 501,692 6,700 Comerica, Inc. 393,156 54,400 Mellon Financial Corp. 2,292,960 14,900 National City Corp. 544,744 48,025 U.S. Bancorp 1,738,025 30,725 Wells Fargo & Co. 1,092,581 --------------- 7,618,945 --------------- Beverages -- 1.7% 1,700 Anheuser-Busch Cos., Inc. 83,640 26,250 Coca-Cola Enterprises, Inc. 536,025 8,900 Molson Coors Brewing Co.(c) 680,316 8,200 PepsiAmericas, Inc.(c) 172,036 11,975 PepsiCo, Inc. 749,036 --------------- 2,221,053 --------------- Biotechnology -- 0.6% 11,025 Amgen, Inc.(b) 753,118 --------------- Building Materials -- 0.6% 28,100 Lennox International, Inc.(c) 860,141 --------------- Chemicals -- 0.9% 12,500 E.I. Du Pont de Nemours & Co.(c) 608,875 4,700 Georgia Gulf Corp.(c) 90,757 7,300 Praxair, Inc. 433,109 --------------- 1,132,741 --------------- Commercial Services -- 0.9% 8,050 Apollo Group, Inc., Class A(b)(c) 313,709 10,925 Equifax, Inc. 443,555 11,450 R. R. Donnelley & Sons Co. 406,933 --------------- 1,164,197 --------------- Computers -- 4.9% 70,000 Dell, Inc.(b) 1,756,300 87,300 Hewlett-Packard Co. 3,595,887 11,525 International Business Machines Corp. 1,119,654 --------------- 6,471,841 --------------- Consumer Products -- 0.1% 1,200 Kimberly-Clark Corp. 81,540 --------------- Cosmetics & Personal Care -- 0.1% 4,200 Estee Lauder Cos., Inc., (The), Class A 171,444 ---------------
Shares Description Value (+) ---------------------------------------------------------------------- Distribution & Wholesale -- 0.9% 23,500 Building Materials Holding Corp.(c) $ 580,215 9,800 WESCO International, Inc.(b)(c) 576,338 --------------- 1,156,553 --------------- Diversified Financial Services -- 13.1% 18,025 American Express Co. 1,093,577 9,000 Ameriprise Financial, Inc. 490,500 7,325 Capital One Financial Corp. 562,707 10,200 CIT Group, Inc. 568,854 63,483 Citigroup, Inc. 3,536,003 6,100 Goldman Sachs Group, Inc. 1,216,035 85,425 JPMorgan Chase & Co. 4,126,027 3,000 Knight Capital Group, Inc., Class A(b)(c) 57,510 9,850 Lehman Brothers Holdings, Inc. 769,482 19,825 Merrill Lynch & Co., Inc. 1,845,707 37,700 Morgan Stanley 3,069,911 --------------- 17,336,313 --------------- Electric -- 1.8% 18,450 Duke Energy Corp. 612,725 1,437 Dynegy, Inc., Class A(b) 10,404 8,900 Exelon Corp. 550,821 600 FirstEnergy Corp. 36,180 11,325 NRG Energy, Inc.(b)(c) 634,313 7,100 PG&E Corp.(c) 336,043 3,000 TXU Corp. 162,630 --------------- 2,343,116 --------------- Electrical Components & Equipment -- 0.5% 10,575 Rockwell Automation, Inc.(c) 645,921 --------------- Electronics -- 1.1% 10,525 Arrow Electronics, Inc.(b)(c) 332,064 11,775 Avnet, Inc.(b)(c) 300,616 31,650 Flextronics International, Ltd.(b) 363,342 10,800 Sony Corp., Sponsored ADR 462,564 --------------- 1,458,586 --------------- Engineering & Construction -- 0.8% 30,450 ABB, Ltd., Sponsored ADR 547,491 9,150 Foster Wheeler Ltd.(b) 504,531 --------------- 1,052,022 --------------- Food -- 0.7% 7,000 Kraft Foods, Inc., Class A(c) 249,900 19,200 Safeway, Inc.(c) 663,552 2,200 Smithfield Foods, Inc.(b)(c) 56,452 --------------- 969,904 --------------- Hand & Machine Tools -- 0.5% 8,400 Black & Decker Corp. (The) 671,748 --------------- Health Care - Capital Equipment -- 0.3% 11,300 Applera Corp. - Applied Biosystems Group 414,597 --------------- Health Care - Products -- 2.7% 20,000 Baxter International, Inc. 927,800 6,675 Beckman Coulter, Inc.(c) 399,165 29,200 Boston Scientific Corp.(b) 501,656 27,000 Johnson & Johnson 1,782,540 --------------- 3,611,161 --------------- Health Care - Services -- 1.3% 14,975 Aetna, Inc. 646,620 26,825 Omnicare, Inc.(c) 1,036,250 --------------- 1,682,870 ---------------
See accompanying notes to financial statements. 36 IXIS VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------------- Home Builders -- 1.1% 28,000 Lennar Corp., Class A(c) $ 1,468,880 --------------- Home Furnishings -- 0.3% 5,000 Whirlpool Corp.(c) 415,100 --------------- Household Products & Wares -- 0.3% 7,975 Scotts Miracle-Gro Co. (The), Class A(c) 411,909 --------------- Insurance -- 4.2% 15,525 Allstate Corp. (The) 1,010,833 11,800 American International Group, Inc. 845,588 165 Berkshire Hathaway, Inc., Class B(b)(c) 604,890 4,800 CIGNA Corp. 631,536 6,100 Genworth Financial, Inc., Class A 208,681 3,900 Hartford Financial Services Group, Inc. 363,909 14,400 Loews Corp. 597,168 1,300 MGIC Investment Corp.(c) 81,302 1,000 PMI Group, Inc. (The)(c) 47,170 12,650 Prudential Financial, Inc. 1,086,129 1,900 Radian Group, Inc. 102,429 --------------- 5,579,635 --------------- Internet -- 0.1% 4,000 VeriSign, Inc.(b)(c) 96,200 --------------- Iron & Steel -- 0.3% 600 Nucor Corp. 32,796 10,400 Schnitzer Steel Industries, Inc., Class A(c) 412,880 --------------- 445,676 --------------- Leisure Time -- 1.5% 38,000 Carnival Corp.(c) 1,863,900 2,350 Harley-Davidson, Inc.(c) 165,604 --------------- 2,029,504 --------------- Lodging -- 0.1% 3,200 Marriott International, Inc., Class A 152,704 --------------- Manufacturing -- 3.9% 45,100 General Electric Co. 1,678,171 9,525 Illinois Tool Works, Inc. 439,960 5,850 Parker Hannifin Corp. 449,748 83,600 Tyco International, Ltd. 2,541,440 --------------- 5,109,319 --------------- Media -- 7.3% 50,000 Cablevision Systems Corp., Class A 1,424,000 14,825 Comcast Corp., Class A(b)(c) 627,542 24,275 DIRECTV Group, Inc. (The)(b) 605,418 14,400 EchoStar Communications Corp., Class A(b)(c) 547,632 10,898 Liberty Global, Inc., Class A(b)(c) 317,677 11,052 Liberty Global, Inc., Class C(b) 309,456 11,000 Liberty Media Corp. - Capital, Series A(b) 1,077,780 31,000 News Corp., Class A 665,880 186,600 Time Warner, Inc. 4,064,148 --------------- 9,639,533 --------------- Mining -- 0.0% 800 Newmont Mining Corp. 36,120 --------------- Office Furnishings -- 0.5% 13,450 HNI Corp.(c) 597,315 --------------- Oil & Gas -- 7.6% 4,600 Anadarko Petroleum Corp. 200,192 9,800 Chevron Corp. 720,594 11,225 ConocoPhillips 807,639 57,300 ExxonMobil Corp. 4,390,899
Shares Description Value (+) -------------------------------------------------------------------- Oil & Gas -- continued 11,825 Hess Corp. $ 586,165 32,025 Occidental Petroleum Corp. 1,563,781 14,075 Southwestern Energy Co.(b) 493,329 14,400 Todco, Class A(b)(c) 492,048 5,300 Valero Energy Corp. 271,148 10,750 XTO Energy, Inc. 505,787 --------------- 10,031,582 --------------- Oil & Gas Services -- 1.3% 5,575 Baker Hughes, Inc. 416,230 12,375 BJ Services Co. 362,835 8,175 Schlumberger, Ltd. 516,333 8,425 Tidewater, Inc.(c) 407,433 --------------- 1,702,831 --------------- Pharmaceuticals -- 2.4% 12,000 Abbott Laboratories 584,520 8,300 AmerisourceBergen Corp. 373,168 17,775 Bristol-Myers Squibb Co. 467,838 6,400 Cardinal Health, Inc. 412,352 1,700 Hospira, Inc.(b)(c) 57,086 15,100 Merck & Co., Inc. 658,360 26,000 Pfizer, Inc. 673,400 --------------- 3,226,724 --------------- REITs - Diversified -- 0.2% 16,700 Newkirk Realty Trust, Inc. 301,268 --------------- REITs - Mortgage -- 0.3% 20,800 Deerfield Triarc Capital Corp.(c) 352,144 --------------- Restaurants -- 4.3% 77,700 McDonald's Corp. 3,444,441 37,200 Yum! Brands, Inc. 2,187,360 --------------- 5,631,801 --------------- Retail -- 6.2% 33,475 AutoNation, Inc.(b)(c) 713,687 4,775 AutoZone, Inc.(b) 551,799 32,475 Dollar General Corp.(c) 521,548 7,125 Federated Department Stores 271,676 36,000 Gap, Inc. (The) 702,000 11,750 Home Depot, Inc. 471,880 19,925 Lowe's Cos., Inc. 620,664 13,075 Office Depot, Inc.(b) 499,073 9,825 OSI Restaurant Partners, Inc.(c) 385,140 45,000 Tiffany & Co.(c) 1,765,800 37,350 Wal-Mart Stores, Inc. 1,724,823 --------------- 8,228,090 --------------- Savings & Loans -- 1.4% 7,225 People's Bank(c) 322,379 35,000 Washington Mutual, Inc. 1,592,150 --------------- 1,914,529 --------------- Semiconductors -- 3.6% 144,275 Intel Corp. 2,921,569 60,000 National Semiconductor Corp. 1,362,000 15,475 Texas Instruments, Inc. 445,680 --------------- 4,729,249 --------------- Software -- 1.3% 10,300 Intuit, Inc.(b) 314,253 47,675 Microsoft Corp. 1,423,575 --------------- 1,737,828 ---------------
See accompanying notes to financial statements. 37 IXIS VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006
Shares Description Value (+) ----------------------------------------------------------------------------------------------------- Telecommunications -- 4.1% 19,775 AT&T, Inc. $ 706,956 37,350 Avaya, Inc.(b) 522,153 21,175 BellSouth Corp. 997,554 13,500 CenturyTel, Inc.(c) 589,410 40,525 Cisco Systems, Inc.(b) 1,107,549 11,800 Embarq Corp. 620,208 26,575 Motorola, Inc. 546,382 19,825 Nokia OYJ, Sponsored ADR 402,844 --------------- 5,493,056 --------------- Tobacco -- 0.6% 9,300 Altria Group, Inc. 798,126 --------------- Transportation -- 1.8% 4,600 Burlington Northern Santa Fe Corp. 339,527 10,100 Overseas Shipholding Group, Inc.(c) 568,630 16,000 Union Pacific Corp. 1,472,320 --------------- 2,380,477 --------------- Total Common Stocks (Identified Cost $101,522,410) 128,750,974 --------------- Shares/ Principal Amount ----------------------------------------------------------------------------------------------------- Short-Term Investments -- 16.0% 17,278,289 State Street Securities Lending Quality Trust(d) 17,278,289 $ 3,860,928 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/29/2006 at 4.250% to be repurchased at $3,862,752 on 1/02/2007, collateralized by $3,110,000 U.S. Treasury Bond, 7.125% due 2/15/2023 valued at $3,944,609 including accrued interest 3,860,928 --------------- Total Short-Term Investments (Identified Cost $21,139,217) 21,139,217 --------------- Total Investments -- 113.2% (Identified Cost $122,661,627)(a) 149,890,191 Other assets less liabilities--(13.2)% (17,521,358) --------------- Total Net Assets -- 100% $ 132,368,833 =============== (+) See Note 2a of Notes to Financial Statements. (a) Federal Tax Information: At December 31, 2006, the net unrealized appreciation on investments based on cost of $123,059,759 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 $ 28,678,373 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (1,847,941) --------------- Net unrealized appreciation $ 26,830,432 =============== (b) Non-income producing security. (c) All or a portion of this security was on loan to brokers at December 31, 2006. (d) Represents investment of securities lending collateral. ADR An American Depositary Receipt is a certificate issued by a custodian 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, 2006 as a Percentage of Net Assets (unaudited) Diversified Financial Services 13.1% Oil & Gas 7.6 Media 7.3 Retail 6.2 Banks 5.8 Computers 4.9 Restaurants 4.3 Insurance 4.2 Telecommunications 4.1 Manufacturing 3.9 Semiconductors 3.6 Health Care -- Products 2.7 Aerospace & Defense 2.5 Pharmaceuticals 2.4 Other, less than 2% each 24.6
See accompanying notes to financial statements. 38 VAUGHAN NELSON SMALL CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------------ Common Stocks -- 93.8% of Net Assets Aerospace & Defense -- 4.9% 42,870 Alliant Techsystems, Inc.(b)(c) $ 3,352,005 18,025 DRS Technologies, Inc.(b) 949,557 60,837 Moog, Inc., Class A(b)(c) 2,323,365 --------------- 6,624,927 --------------- Banks -- 3.3% 53,551 MB Financial, Inc.(b) 2,014,053 26,700 PrivateBancorp, Inc.(b) 1,111,521 40,650 Sterling Financial Corp.(b) 1,374,377 --------------- 4,499,951 --------------- Building Materials -- 2.0% 89,050 Lennox International, Inc. 2,725,820 --------------- Chemicals -- 3.7% 34,925 Cytec Industries, Inc.(b) 1,973,612 19,050 FMC Corp.(b) 1,458,277 60,125 Valspar Corp.(b) 1,661,855 --------------- 5,093,744 --------------- Commercial Services -- 6.1% 82,465 Aaron Rents, Inc.(b) 2,373,343 20,900 Dollar Thrifty Automotive Group, Inc.(b)(c) 953,249 45,060 McGrath Rentcorp(b) 1,380,188 42,030 Monro Muffler, Inc.(b) 1,475,253 13,125 On Assignment, Inc.(b)(c) 154,219 37,645 Team, Inc.(b)(c) 1,311,175 28,050 Universal Technical Institute, Inc.(b)(c) 622,990 --------------- 8,270,417 --------------- Computer Services -- 0.5% 49,125 Tyler Technologies, Inc.(b)(c) 690,698 --------------- Computers -- 1.5% 37,620 MICROS Systems, Inc.(c) 1,982,574 --------------- Distribution & Wholesale -- 3.2% 48,200 Brightpoint, Inc.(b)(c) 648,290 38,480 Watsco, Inc.(b) 1,814,717 32,545 WESCO International, Inc.(b)(c) 1,913,971 --------------- 4,376,978 --------------- Diversified Financial Services -- 5.6% 26,825 Affiliated Managers Group, Inc.(b)(c) 2,820,112 30,650 CompuCredit Corp.(b)(c) 1,220,177 49,749 Financial Federal Corp.(b) 1,463,118 70,469 Raymond James Financial, Inc. 2,135,915 --------------- 7,639,322 --------------- Electric -- 2.2% 79,650 Pike Electric Corp.(b)(c) 1,300,684 64,480 Westar Energy, Inc.(b) 1,673,901 --------------- 2,974,585 --------------- Electrical Components & Equipment -- 1.3% 40,150 General Cable Corp.(b)(c) 1,754,957 --------------- Environmental Control -- 2.1% 67,360 Waste Connections, Inc.(b)(c) 2,798,808 --------------- Food -- 0.6% 24,050 Corn Products International, Inc.(b) 830,687 --------------- Gas -- 1.6% 27,075 Northwest Natural Gas Co.(b) 1,149,063 38,325 Vectren Corp. 1,083,831 --------------- 2,232,894 ---------------
Shares Description Value (+) ------------------------------------------------------------------------------- Health Care - Products -- 1.1% 46,946 Medical Action Industries, Inc.(c) $ 1,513,539 --------------- Health Care - Services -- 5.4% 24,800 Amedisys, Inc.(b)(c) 815,176 84,137 Healthcare Services Group, Inc.(b) 2,436,607 49,125 LHC Group, Inc.(b)(c) 1,400,554 54,900 Pediatrix Medical Group, Inc.(b)(c) 2,684,610 --------------- 7,336,947 --------------- Home Builders -- 0.6% 22,625 M/I Homes, Inc.(b) 864,049 --------------- Household Products & Wares -- 1.5% 39,950 Scotts Miracle-Gro Co., (The), Class A(b) 2,063,418 --------------- Insurance -- 3.6% 66,937 HCC Insurance Holdings, Inc.(b) 2,148,008 14,025 Hilb, Rogal & Hobbs Co.(b) 590,733 60,195 United Fire & Casualty Co.(b) 2,121,874 --------------- 4,860,615 --------------- Internet -- 0.6% 51,250 Vignette Corp.(c) 874,838 --------------- Iron & Steel -- 1.2% 34,025 Cleveland-Cliffs, Inc.(b) 1,648,171 --------------- Leisure Time -- 0.5% 21,400 Brunswick Corp. 682,660 --------------- Machinery - Diversified -- 3.3% 28,225 Briggs & Stratton Corp.(b) 760,664 33,175 IDEX Corp. 1,572,827 43,040 Nordson Corp. 2,144,683 --------------- 4,478,174 --------------- Manufacturing -- 2.9% 26,350 Actuant Corp., Class A(b) 1,255,578 52,750 Jacuzzi Brands, Inc.(b)(c) 655,682 32,050 Teleflex, Inc.(b) 2,069,148 --------------- 3,980,408 --------------- Office Furnishings -- 1.3% 39,850 HNI Corp.(b) 1,769,739 --------------- Oil & Gas -- 4.1% 60,750 Arena Resources, Inc.(b)(c) 2,594,632 101,675 Gulfport Energy Corp.(b)(c) 1,381,763 87,350 Rosetta Resources, Inc.(b)(c) 1,630,825 --------------- 5,607,220 --------------- Oil & Gas Services -- 3.8% 27,925 Hornbeck Offshore Services, Inc.(b)(c) 996,923 34,750 Oil States International, Inc.(b)(c) 1,119,992 48,800 Universal Compression Holdings, Inc.(b)(c) 3,030,968 --------------- 5,147,883 --------------- REITs - Financial Services -- 1.0% 172,975 Friedman, Billings, Ramsey Group, Inc., Class A(b) 1,383,800 --------------- REITs - Hotels -- 1.0% 53,925 Ashford Hospitality Trust(b) 671,366 43,900 Highland Hospitality Corp.(b) 625,575 --------------- 1,296,941 --------------- REITs - Mortgage -- 3.6% 79,700 Alesco Financial, Inc. 852,790 34,725 JER Investors Trust, Inc.(b) 717,766
See accompanying notes to financial statements. 39 VAUGHAN NELSON SMALL CAP VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006
Shares Description Value (+) ------------------------------------------------------------------------------------------- REITs - Mortgage -- continued 202,075 MFA Mortgage Investments, Inc. $ 1,553,957 31,145 Redwood Trust, Inc. 1,808,901 --------------- 4,933,414 --------------- Retail -- 10.4% 68,500 First Cash Financial Services, Inc.(b)(c) 1,772,095 46,000 Guitar Center, Inc.(b)(c) 2,091,160 35,400 Men's Wearhouse, Inc. (The)(b) 1,354,404 41,225 Regis Corp.(b) 1,630,037 76,602 Sonic Corp.(b)(c) 1,834,618 22,275 Stage Stores, Inc. 676,937 145,125 Triarc Cos., Inc., Class B(b) 2,902,500 83,425 United Auto Group, Inc.(b) 1,966,327 --------------- 14,228,078 --------------- Semiconductors -- 1.8% 57,525 ATMI, Inc.(b)(c) 1,756,238 33,125 Microsemi Corp.(b)(c) 650,906 --------------- 2,407,144 --------------- Software -- 0.5% 27,875 Blackbaud, Inc.(b) 724,750 --------------- Telecommunications -- 2.9% 55,900 Arris Group, Inc.(b)(c) 699,309 22,300 Ciena Corp.(c) 617,933 36,275 CommScope, Inc.(b)(c) 1,105,662 107,575 Tekelec(b)(c) 1,595,337 --------------- 4,018,241 --------------- Transportation -- 3.2% 75,650 Arlington Tankers, Ltd.(b) 1,767,941 31,660 Genesee & Wyoming, Inc., Class A(b)(c) 830,758 47,080 Landstar System, Inc.(b) 1,797,514 --------------- 4,396,213 --------------- Trucking & Leasing -- 0.9% 14,710 AMERCO, Inc.(b)(c) 1,279,917 --------------- Total Common Stocks (Identified Cost $109,648,824) 127,992,521 --------------- Investment Companies -- 2.7% 46,741 iShares Russell 2000 Value Index Fund(b) (Identified Cost $3,751,440) 3,740,215 --------------- Shares/ Principal Amount ------------------------------------------------------------------------------------------- Short-Term Investments -- 29.4% 34,905,193 State Street Securities Lending Quality Trust(d) $ 34,905,193 $ 5,189,023 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/29/2006 at 4.250% to be repurchased at $5,191,473 on 1/2/2007, collateralized by $4,175,000 U.S. Treasury Bond, 7.125% due 2/15/2023 valued at $5,295,416 including accrued interest 5,189,023 --------------- Total Short-Term Investments (Identified Cost $40,094,216) 40,094,216 --------------- Total Investments -- 125.9% (Identified Cost $153,494,480)(a) 171,826,952 Other assets less liabilities -- (25.9)% (35,322,204) --------------- Total Net Assets -- 100% $ 136,504,748 ===============
(+) See Note 2a of Notes to Financial Statements. (a) Federal Tax Information: At December 31, 2006, the unrealized appreciation on investments based on cost of $153,547,071 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 $ 19,064,219 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (784,338) --------------- Net unrealized appreciation $ 18,279,881 =============== (b) All or a portion of this security was on loan to brokers at December 31, 2006. (c) Non-income producing security. (d) Represents investment of securities lending collateral. REITs Real Estate Investment Trusts
Holdings at December 31, 2006 as a Percentage of Net Assets (unaudited) Retail 10.4% Commercial Services 6.1 Diversified Financial Services 5.6 Health Care -- Services 5.4 Aerospace & Defense 4.9 Oil & Gas 4.1 Oil & Gas Services 3.8 Chemicals 3.7 REITs -- Mortgage 3.6 Insurance 3.6 Banks 3.3 Machinery -- Diversified 3.3 Transportation 3.2 Distribution & Wholesale 3.2 Telecommunications 2.9 Manufacturing 2.9 Investment Companies 2.7 Electric 2.2 Environmental Control 2.1 Building Materials 2.0 Others, less than 2% each 17.5
See accompanying notes to financial statements. 40 WESTPEAK CAPITAL GROWTH FUND -- PORTFOLIO OF INVESTMENTS Investments as of December 31, 2006
Shares Description Value (+) ---------------------------------------------------------------------- Common Stocks -- 99.4% of Net Assets Aerospace & Defense -- 6.9% 25,200 Boeing Co. (The) $ 2,238,768 10,000 Lockheed Martin Corp. 920,700 14,100 Raytheon Co. 744,480 --------------- 3,903,948 --------------- Agriculture -- 1.5% 16,600 Monsanto Co. 871,998 --------------- Beverages -- 1.5% 11,400 Anheuser-Busch Cos., Inc. 560,880 10,300 Pepsi Bottling Group, Inc. (The) 318,373 --------------- 879,253 --------------- Biotechnology -- 3.3% 27,700 Amgen, Inc.(b) 1,892,187 --------------- Building Materials -- 0.9% 10,000 NCI Building Systems, Inc.(b) 517,500 --------------- Commercial Services -- 1.4% 11,100 Moody's Corp. 766,566 --------------- Computers -- 6.3% 5,300 Affiliated Computer Services, Inc.(b) 258,852 35,400 Dell, Inc.(b) 888,186 56,400 Hewlett-Packard Co. 2,323,116 1,100 International Business Machines Corp. 106,865 --------------- 3,577,019 --------------- Distribution & Wholesale -- 2.0% 3,000 Tech Data Corp.(b) 113,610 17,600 WESCO International, Inc.(b) 1,035,056 --------------- 1,148,666 --------------- Diversified Financial Services -- 6.9% 29,400 American Express Co. 1,783,698 10,700 Goldman Sachs Group, Inc. 2,133,045 --------------- 3,916,743 --------------- Electrical Components & Equipment -- 1.2% 15,600 Emerson Electric Co. 687,804 --------------- Electronics -- 1.7% 28,100 Agilent Technologies, Inc.(b) 979,285 --------------- Engineering & Construction -- 1.7% 19,700 Granite Construction, Inc.(c) 991,304 --------------- Food -- 1.3% 16,600 HJ Heinz Co. 747,166 --------------- Health Care - Products -- 1.7% 11,900 IDEXX Laboratories, Inc.(b)(c) 943,670 --------------- Health Care - Services -- 1.9% 19,000 Humana, Inc.(b) 1,050,890 --------------- Internet -- 2.2% 50,900 VeriSign, Inc.(b)(c) 1,224,145 --------------- Machinery - Construction & Mining -- 1.5% 13,300 Terex Corp.(b)(c) 858,914 --------------- Manufacturing -- 4.9% 65,200 General Electric Co. 2,426,092 4,500 Parker Hannifin Corp. 345,960 --------------- 2,772,052 --------------- Media -- 3.2% 26,500 McGraw-Hill Cos., Inc. (The) 1,802,530 ---------------
Shares Description Value (+) ------------------------------------------------------------------------------------------ Mining -- 0.3% 3,700 Newmont Mining Corp. $ 167,055 --------------- Oil & Gas -- 6.5% 24,600 ExxonMobil Corp. 1,885,098 13,800 Sunoco, Inc. 860,568 27,400 Todco, Class A(b)(c) 936,258 --------------- 3,681,924 --------------- Pharmaceuticals -- 5.9% 7,900 AmerisourceBergen Corp. 355,184 17,600 Cardinal Health, Inc. 1,133,968 14,400 Forest Laboratories, Inc.(b) 728,640 25,800 Merck & Co., Inc. 1,124,880 --------------- 3,342,672 --------------- Retail -- 17.0% 36,800 Dollar Tree Stores, Inc.(b) 1,107,680 13,800 DSW, Inc., Class A(b)(c) 532,266 8,500 Federated Department Stores, Inc. 324,105 16,200 Gap, Inc. (The) 315,900 14,700 J.C. Penney Co., Inc. 1,137,192 23,600 Kohl's Corp.(b) 1,614,948 33,400 NBTY, Inc.(b)(c) 1,388,438 25,000 Nordstrom, Inc. 1,233,500 25,500 Office Depot, Inc.(b) 973,335 29,300 Starbucks Corp.(b) 1,037,806 --------------- 9,665,170 --------------- Semiconductors -- 1.1% 21,300 Texas Instruments, Inc. 613,440 --------------- Software -- 5.1% 22,200 Fiserv, Inc.(b) 1,163,724 57,000 Microsoft Corp. 1,702,020 --------------- 2,865,744 --------------- Telecommunications -- 5.4% 111,500 Cisco Systems, Inc.(b) 3,047,295 --------------- Tobacco -- 1.0% 1,200 Altria Group, Inc. 102,984 7,900 UST, Inc.(c) 459,780 --------------- 562,764 --------------- Toys, Games & Hobbies -- 2.0% 41,600 Marvel Entertainment, Inc.(b)(c) 1,119,456 --------------- Transportation -- 3.1% 11,000 Burlington Northern Santa Fe Corp. 811,910 18,700 Norfolk Southern Corp. 940,423 --------------- 1,752,333 --------------- Total Common Stocks (Identified Cost $50,512,842) 56,349,493 --------------- Shares/ Principal Amount ------------------------------------------------------------------------------------------ Short-Term Investments -- 14.9% 7,840,726 State Street Securities Lending Quality Trust(d) $ 7,840,726 $ 618,603 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 12/29/2006 at 4.250% to be repurchased at $618,896 on 1/02/2007, collateralized by $500,000 U.S. Treasury Bond, 7.125% due 2/15/2023 valued at $634,182 including accrued interest. 618,603 --------------- Total Short-Term Investments (Identified Cost $8,459,329) 8,459,329 ---------------
See accompanying notes to financial statements. 41 WESTPEAK CAPITAL GROWTH FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of December 31, 2006 Total Investments -- 114.3% (Identified Cost $58,972,171)(a) $ 64,808,822 Other assets less liabilities -- (14.3)% (8,119,565) --------------- Net Assets -- 100% $ 56,689,257 =============== (+) See Note 2a of Notes to Financial Statements. (a) Federal Tax Information: At December 31, 2006, the net unrealized appreciation on investments based on cost of $59,044,195 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 $ 6,603,687 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (839,060) --------------- Net unrealized appreciation $ 5,764,627 =============== (b) Non-income producing security. (c) All or a portion of this security was on loan to brokers at December 31, 2006. (d) Represents investment of securities lending collateral.
Holdings at December 31, 2006 as a Percentage of Net Assets (unaudited) Retail 17.0% Diversified Financial Services 6.9 Aerospace & Defense 6.9 Oil & Gas 6.5 Computers 6.3 Pharmaceuticals 5.9 Telecommunications 5.4 Software 5.1 Manufacturing 4.9 Biotechnology 3.3 Media 3.2 Transportation 3.1 Internet 2.2 Distribution & Wholesale 2.0 Toys, Games & Hobbies 2.0 Others, less than 2% each 18.7
See accompanying notes to financial statements. 42 STATEMENTS OF ASSETS AND LIABILITIES December 31, 2006
CGM Advisor Hansberger Harris Associates Targeted Equity Fund International Fund Focused Value Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ASSETS Investments at cost $ 796,542,157 $ 166,939,193 $ 227,224,434 Net unrealized appreciation 61,057,700 39,389,963 35,265,849 --------------------- --------------------- --------------------- Investments at value(a) 857,599,857 206,329,156 262,490,283 Cash 666 -- -- Foreign currency at value (identified cost $0, $260,273, $0, $0, $0, $0, $0 and $0) -- 260,869 -- Receivable for Fund shares sold 145,935 227,828 4,372,142 Receivable for securities sold 2,044,873 390,837 1,026,976 Dividends and interest receivable 247,252 126,487 126,564 Tax reclaims receivable 12,973 54,768 -- Securities lending income receivable 29,117 6,551 2,811 --------------------- --------------------- --------------------- TOTAL ASSETS 860,080,673 207,396,496 268,018,776 --------------------- --------------------- --------------------- LIABILITIES Collateral on securities loaned, at value (Note 2) 107,341,167 37,301,240 33,336,293 Payable for securities purchased 7,344,108 178,322 -- Payable for Fund shares redeemed 710,611 157,591 576,209 Payable to custodian bank -- 13,139 5,126,112 Management fees payable (Note 4) 438,438 113,064 174,968 Deferred Trustees' fees (Note 4) 708,618 105,757 77,212 Administrative fees payable (Note 4) 48,246 5,647 20,627 Other accounts payable and accrued expenses 158,102 149,797 121,036 --------------------- --------------------- --------------------- TOTAL LIABILITIES 116,749,290 38,024,557 39,432,457 --------------------- --------------------- --------------------- NET ASSETS $ 743,331,383 $ 169,371,939 $ 228,586,319 ===================== ===================== ===================== NET ASSETS CONSIST OF: Paid-in capital $ 657,862,165 $ 128,248,868 $ 191,203,129 Undistributed (overdistributed) net investment income (loss) 4,251,080 (828,914) (77,212) Accumulated net realized gain (loss) on investments, written options and foreign currency transactions 20,160,438 2,559,014 2,194,553 Net unrealized appreciation on investments and foreign currency translations 61,057,700 39,392,971 35,265,849 --------------------- --------------------- --------------------- NET ASSETS $ 743,331,383 $ 169,371,939 $ 228,586,319 ===================== ===================== ===================== COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: Class A shares: Net assets $ 679,896,888 $ 112,814,220 $ 62,603,387 ===================== ===================== ===================== Shares of beneficial interest 63,519,422 5,247,790 5,415,377 ===================== ===================== ===================== Net asset value and redemption price per share $ 10.70 $ 21.50 $ 11.56 ===================== ===================== ===================== Offering price per share (100/[100-maximum sales charge] of net asset value) (Note 1) $ 11.35 $ 22.81 $ 12.27 ===================== ===================== ===================== Class B shares: (redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1) Net assets $ 43,032,455 $ 33,016,473 $ 78,950,332 ===================== ===================== ===================== Shares of beneficial interest 4,372,959 1,692,553 7,232,270 ===================== ===================== ===================== Net asset value and offering price per share $ 9.84 $ 19.51 $ 10.92 ===================== ===================== ===================== Class C shares: (redemption price per share is equal to net asset value less any applicable contingent deferred sales charge) (Note 1) Net assets $ 8,687,620 $ 23,541,246 $ 87,032,600 ===================== ===================== ===================== Shares of beneficial interest 883,296 1,208,196 7,971,486 ===================== ===================== ===================== Net asset value and offering price per share $ 9.84 $ 19.48 $ 10.92 ===================== ===================== ===================== Class Y shares: Net assets $ 11,714,420 $ -- $ -- ===================== ===================== ===================== Shares of beneficial interest 1,072,245 -- -- ===================== ===================== ===================== Net asset value, offering and redemption price per share $ 10.93 $ -- $ -- ===================== ===================== ===================== (a) Including securities on loan with market values of: $ 105,389,588 $ 35,697,604 $ 32,309,413 ===================== ===================== =====================
See accompanying notes to financial statements. 43
Harris Associates Vaughan Nelson Westpeak Large Cap Value IXIS U.S. Diversified IXIS Value Small Cap Value Capital Growth Fund Portfolio Fund Fund Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ 218,992,937 $ 570,767,926 $ 122,661,627 $ 153,494,480 $ 58,972,171 54,019,176 111,748,892 27,228,564 18,332,472 5,836,651 --------------------- --------------------- --------------------- --------------------- --------------------- 273,012,113 682,516,818 149,890,191 171,826,952 64,808,822 -- 53,212 -- -- -- -- -- -- -- -- 41,206 152,099 147,197 175,943 2,252 112,443 1,407,569 602,159 531,248 -- 340,977 576,087 168,914 178,025 52,834 -- 6,566 50 -- -- 145 16,616 5,875 19,658 587 --------------------- --------------------- --------------------- --------------------- --------------------- 273,506,884 684,728,967 150,814,386 172,731,826 64,864,495 --------------------- --------------------- --------------------- --------------------- --------------------- 1,558,900 73,222,927 17,278,289 34,905,193 7,840,726 -- 1,152,805 548,856 686,404 -- 316,598 678,932 185,013 255,194 29,793 -- -- 44,437 -- -- 346,519 469,284 83,593 147,673 101,180 292,212 397,708 204,615 110,177 112,145 16,613 36,256 6,437 4,960 3,496 222,599 302,182 94,313 117,477 87,898 --------------------- --------------------- --------------------- --------------------- --------------------- 2,753,441 76,260,094 18,445,553 36,227,078 8,175,238 --------------------- --------------------- --------------------- --------------------- --------------------- $ 270,753,443 $ 608,468,873 $ 132,368,833 $ 136,504,748 $ 56,689,257 ===================== ===================== ===================== ===================== ===================== $ 301,870,583 $ 569,496,525 $ 102,677,999 $ 132,389,809 $ 102,507,502 446,071 (404,299) (63,059) (110,178) (112,145) (85,582,387) (72,372,538) 2,525,329 (14,107,355) (51,542,751) 54,019,176 111,749,185 27,228,564 18,332,472 5,836,651 --------------------- --------------------- --------------------- --------------------- --------------------- $ 270,753,443 $ 608,468,873 $ 132,368,833 $ 136,504,748 $ 56,689,257 ===================== ===================== ===================== ===================== ===================== $ 195,713,670 $ 393,430,197 $ 110,588,026 $ 85,285,228 $ 47,331,760 ===================== ===================== ===================== ===================== ===================== 12,634,975 17,148,830 12,606,618 4,081,393 3,617,155 ===================== ===================== ===================== ===================== ===================== $ 15.49 $ 22.94 $ 8.77 $ 20.90 $ 13.09 ===================== ===================== ===================== ===================== ===================== $ 16.44 $ 24.34 $ 9.31 $ 22.18 $ 13.89 ===================== ===================== ===================== ===================== ===================== $ 42,893,574 $ 147,818,826 $ 18,794,626 $ 32,605,853 $ 8,599,429 ===================== ===================== ===================== ===================== ===================== 2,980,584 7,269,536 2,426,218 1,699,373 767,718 ===================== ===================== ===================== ===================== ===================== $ 14.39 $ 20.33 $ 7.75 $ 19.19 $ 11.20 ===================== ===================== ===================== ===================== ===================== $ 18,088,795 $ 46,064,359 $ 2,986,181 $ 18,186,476 $ 758,068 ===================== ===================== ===================== ===================== ===================== 1,258,706 2,263,016 385,494 947,473 67,805 ===================== ===================== ===================== ===================== ===================== $ 14.37 $ 20.36 $ 7.75 $ 19.19 $ 11.18 ===================== ===================== ===================== ===================== ===================== $ 14,057,404 $ 21,155,491 $ -- $ 427,191 $ -- ===================== ===================== ===================== ===================== ===================== 877,865 865,223 -- 20,430 -- ===================== ===================== ===================== ===================== ===================== $ 16.01 $ 24.45 $ -- $ 20.91 $ -- ===================== ===================== ===================== ===================== ===================== $ 1,525,254 $ 71,332,377 $ 16,764,688 $ 33,826,317 $ 7,609,915 ===================== ===================== ===================== ===================== =====================
44 STATEMENTS OF OPERATIONS For the Year Ended December 31, 2006
CGM Advisor Hansberger Harris Associates Targeted Equity International Focused Value Fund Fund Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- INVESTMENT INCOME Dividends $ 14,079,597 $ 3,692,855 $ 3,098,322 Interest 653,306 72,714 410,617 Securities lending income (Note 2) 153,455 92,310 24,558 Less net foreign taxes withheld (276,656) (330,856) (1,710) --------------------- --------------------- --------------------- 14,609,702 3,527,023 3,531,787 --------------------- --------------------- --------------------- Expenses Management fees (Note 4) 5,291,650 1,250,812 2,425,826 Service fees - Class A (Note 4) 1,728,516 252,677 171,625 Service and distribution fees - Class B (Note 4) 495,409 336,226 852,125 Service and distribution fees - Class C (Note 4) 74,953 216,585 1,004,564 Trustees' fees and expenses (Note 4) 97,767 24,966 29,063 Administrative fees (Note 4) 429,903 96,502 145,192 Custodian fees and expenses 54,949 105,279 26,727 Transfer agent fees and expenses - Class A 673,518 203,774 105,500 Transfer agent fees and expenses - Class B 49,560 69,890 130,315 Transfer agent fees and expenses - Class C 6,857 43,876 155,861 Transfer agent fees and expenses - Class Y 7,508 -- -- Audit fees 42,586 47,847 40,185 Legal fees 29,426 4,957 7,755 Shareholder reporting expenses 103,801 38,632 80,503 Registration fees 57,593 41,767 43,061 Expense waiver recapture - Class Y (Note 4) -- -- -- Miscellaneous expenses 49,828 20,484 25,684 --------------------- --------------------- --------------------- Total expenses 9,193,824 2,754,274 5,243,986 Less reimbursement/waiver (Note 4) -- -- -- --------------------- --------------------- --------------------- Net expenses 9,193,824 2,754,274 5,243,986 --------------------- --------------------- --------------------- Net investment income (loss) 5,415,878 772,749 (1,712,199) --------------------- --------------------- --------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, WRITTEN OPTIONS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments - net 98,076,120 21,386,335 32,289,793 Written options - net -- -- -- Foreign currency transactions - net -- (85,610) -- Change in unrealized appreciation (depreciation) on: Investments - net (41,577,124) 11,334,026 (3,254,755) Foreign currency translations - net -- 5,806 -- --------------------- --------------------- --------------------- Net realized and unrealized gain on investments, written options and foreign currency transactions 56,498,996 32,640,557 29,035,038 --------------------- --------------------- --------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 61,914,874 $ 33,413,306 $ 27,322,839 ===================== ===================== =====================
Harris Associates Large Cap Value Fund --------------------- --------------------- INVESTMENT INCOME Dividends $ 4,429,839 Interest 163,974 Securities lending income (Note 2) 5,495 Less net foreign taxes withheld -- --------------------- 4,599,308 --------------------- Expenses Management fees (Note 4) 1,822,308 Service fees - Class A (Note 4) 461,466 Service and distribution fees - Class B (Note 4) 487,110 Service and distribution fees - Class C (Note 4) 182,570 Trustees' fees and expenses (Note 4) 44,963 Administrative fees (Note 4) 148,050 Custodian fees and expenses 28,681 Transfer agent fees and expenses - Class A 383,145 Transfer agent fees and expenses - Class B 105,970 Transfer agent fees and expenses - Class C 38,676 Transfer agent fees and expenses - Class Y 3,583 Audit fees 37,729 Legal fees 4,079 Shareholder reporting expenses 76,024 Registration fees 55,148 Expense waiver recapture - Class Y (Note 4) 5,495 Miscellaneous expenses 24,508 --------------------- Total expenses 3,909,505 Less reimbursement/waiver (Note 4) (14,496) --------------------- Net expenses 3,895,009 --------------------- Net investment income (loss) 704,299 --------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, WRITTEN OPTIONS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments - net 24,797,461 Written options - net -- Foreign currency transactions - net -- Change in unrealized appreciation (depreciation) on: Investments - net 14,208,318 Foreign currency translations - net -- --------------------- Net realized and unrealized gain on investments, written options and foreign currency transactions 39,005,779 --------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 39,710,078 =====================
See accompanying notes to financial statements. 45
Vaughan Nelson Westpeak IXIS U.S. Diversified Small Cap Value Capital Growth Portfolio IXIS Value Fund Fund Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ 9,504,045 $ 2,114,238 $ 1,343,348 $ 552,723 427,258 132,021 237,224 29,913 148,849 8,954 35,039 3,846 (23,074) (4,129) -- -- --------------------- --------------------- --------------------- --------------------- 10,057,078 2,251,084 1,615,611 586,482 --------------------- --------------------- --------------------- --------------------- 5,557,166 932,836 1,118,892 433,385 972,878 254,242 180,258 119,496 1,606,428 198,514 363,120 91,488 470,141 28,297 158,630 8,375 69,675 32,009 25,273 22,547 349,523 72,347 70,513 35,338 56,092 25,656 22,992 18,213 719,922 169,083 172,970 148,318 303,895 34,430 96,641 28,877 87,713 4,766 38,543 2,672 996 -- 316 -- 45,122 41,080 36,420 36,236 19,312 2,441 3,854 1,762 147,260 27,055 36,255 19,240 63,011 33,301 42,732 35,197 -- -- -- -- 47,714 36,234 15,579 12,864 --------------------- --------------------- --------------------- --------------------- 10,516,848 1,892,291 2,382,988 1,014,008 -- -- (237) (9,850) --------------------- --------------------- --------------------- --------------------- 10,516,848 1,892,291 2,382,751 1,004,158 --------------------- --------------------- --------------------- --------------------- (459,770) 358,793 (767,140) (417,676) --------------------- --------------------- --------------------- --------------------- 69,038,846 16,600,274 15,201,715 1,359,930 22,971 -- -- -- (4,271) -- -- -- 9,002,528 5,401,523 5,842,036 4,795,603 293 -- -- -- --------------------- --------------------- --------------------- --------------------- 78,060,367 22,001,797 21,043,751 6,155,533 --------------------- --------------------- --------------------- --------------------- $ 77,600,597 $ 22,360,590 $ 20,276,611 $ 5,737,857 ===================== ===================== ===================== =====================
46 STATEMENTS OF CHANGES IN NET ASSETS
CGM Advisor Targeted Equity Fund Hansberger International Fund -------------------------------------------- -------------------------------------------- Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income (loss) $ 5,415,878 $ 5,455,563 $ 772,749 $ 460,052 Net realized gain on investments, written options and foreign currency transactions 98,076,120 84,395,181 21,300,725 10,947,858 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (41,577,124) 2,836,954 11,339,832 8,310,253 --------------------- --------------------- --------------------- --------------------- Net increase (decrease) in net assets resulting from operations 61,914,874 92,687,698 33,413,306 19,718,163 --------------------- --------------------- --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (4,805,342) (1,593,713) (1,649,325) -- Class B (344,672) (75,336) (308,165) -- Class C (50,730) (4,738) (228,856) -- Class Y (117,501) (49,839) -- -- Net realized capital gain Class A (18,905,325) -- (12,651,380) -- Class B (1,296,659) -- (4,129,524) -- Class C (261,882) -- (2,916,961) -- Class Y (317,675) -- -- -- --------------------- --------------------- --------------------- --------------------- Total distributions (26,099,786) (1,723,626) (21,884,211) -- --------------------- --------------------- --------------------- --------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 8) (55,926,861) (87,386,245) 15,400,963 (13,245,555) --------------------- --------------------- --------------------- --------------------- Redemption fees Class A 3,687 7,519 1,759 411 Class B 250 600 582 216 Class C 46 39 378 88 Class Y 64 110 -- -- --------------------- --------------------- --------------------- --------------------- 4,047 8,268 2,719 715 --------------------- --------------------- --------------------- --------------------- Net increase (decrease) in net assets (20,107,726) 3,586,095 26,932,777 6,473,323 --------------------- --------------------- --------------------- --------------------- NET ASSETS Beginning of the year 763,439,109 759,853,014 142,439,162 135,965,839 --------------------- --------------------- --------------------- --------------------- End of the year $ 743,331,383 $ 763,439,109 $ 169,371,939 $ 142,439,162 ===================== ===================== ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 4,251,080 $ 4,156,656 $ (828,914) $ (159,969) ===================== ===================== ===================== =====================
See accompanying notes to financial statements. 47
Harris Associates Focused Value Fund Harris Associates Large Cap Value Fund -------------------------------------------- -------------------------------------------- Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ (1,712,199) $ (1,906,104) $ 704,299 $ 595,285 32,289,793 57,991,221 24,797,461 25,778,595 (3,254,755) (40,207,477) 14,208,318 (29,282,480) --------------------- --------------------- --------------------- --------------------- 27,322,839 15,877,640 39,710,078 (2,908,600) --------------------- --------------------- --------------------- --------------------- -- -- (435,177) (231,035) -- -- (124,953) (81,761) -- -- (46,052) (28,415) -- -- (30,568) (16,672) (9,867,493) (10,494,877) -- -- (13,053,352) (12,897,474) -- -- (14,611,917) (16,300,067) -- -- -- -- -- -- --------------------- --------------------- --------------------- --------------------- (37,532,762) (39,692,418) (636,750) (357,883) --------------------- --------------------- --------------------- --------------------- (63,505,817) (37,006,144) (50,651,493) (61,204,054) --------------------- --------------------- --------------------- --------------------- 801 6,748 -- -- 1,006 7,032 -- -- 1,149 9,087 -- -- -- -- -- -- --------------------- --------------------- --------------------- --------------------- 2,956 22,867 -- -- --------------------- --------------------- --------------------- --------------------- (73,712,784) (60,798,055) (11,578,165) (64,470,537) --------------------- --------------------- --------------------- --------------------- 302,299,103 363,097,158 282,331,608 346,802,145 --------------------- --------------------- --------------------- --------------------- $ 228,586,319 $ 302,299,103 $ 270,753,443 $ 282,331,608 ===================== ===================== ===================== ===================== $ (77,212) $ (58,725) $ 446,071 $ 378,522 ===================== ===================== ===================== =====================
IXIS U.S. Diversified Portfolio IXIS Value Fund -------------------------------------------- -------------------------------------------- Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ (459,770) $ (5,426,695) $ 358,793 $ 36,516 69,057,546 85,718,676 16,600,274 14,669,814 9,002,821 (36,729,033) 5,401,523 (7,165,564) --------------------- --------------------- --------------------- --------------------- 77,600,597 43,562,948 22,360,590 7,540,766 --------------------- --------------------- --------------------- --------------------- -- -- (278,098) -- -- -- (9,395) -- -- -- (1,244) -- -- -- -- -- -- -- (12,893,672) (12,510,896) -- -- (2,496,747) (3,162,413) -- -- (391,442) (411,818) -- -- -- -- --------------------- --------------------- --------------------- --------------------- -- -- (16,070,598) (16,085,127) --------------------- --------------------- --------------------- --------------------- (98,667,360) (114,045,267) 2,351,488 (3,970,555) --------------------- --------------------- --------------------- --------------------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --------------------- --------------------- --------------------- --------------------- -- -- -- -- --------------------- --------------------- --------------------- --------------------- (21,066,763) (70,482,319) 8,641,480 (12,514,916) --------------------- --------------------- --------------------- --------------------- 629,535,636 700,017,955 123,727,353 136,242,269 --------------------- --------------------- --------------------- --------------------- $ 608,468,873 $ 629,535,636 $ 132,368,833 $ 123,727,353 ===================== ===================== ===================== ===================== $ (404,299) $ (348,230) $ (63,059) $ (129,408) ===================== ===================== ===================== =====================
48 STATEMENTS OF CHANGES IN NET ASSETS (continued)
Vaughan Nelson Small Cap Value Fund Westpeak Capital Growth Fund -------------------------------------------- -------------------------------------------- Year Ended Year Ended Year Ended Year Ended December 31, December 31, December 31, December 31, 2006 2005 2006 2005 --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income (loss) $ (767,140) $ (950,930) $ (417,676) $ (632,456) Net realized gain on investments, written options and foreign currency transactions 15,201,715 12,955,895 1,359,930 984,436 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations 5,842,036 (2,141,269) 4,795,603 1,466,262 --------------------- --------------------- --------------------- --------------------- Net increase (decrease) in net assets resulting from operations 20,276,611 9,863,696 5,737,857 1,818,242 --------------------- --------------------- --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A -- -- -- -- Class B -- -- -- -- Class C -- -- -- -- Class Y -- -- -- -- Net realized capital gain Class A -- -- -- -- Class B -- -- -- -- Class C -- -- -- -- Class Y -- -- -- -- --------------------- --------------------- --------------------- --------------------- Total distributions -- -- -- -- --------------------- --------------------- --------------------- --------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 8) 4,860,769 (11,845,326) (9,528,533) (12,686,062) --------------------- --------------------- --------------------- --------------------- Redemption fees Class A 3,304 2,646 -- -- Class B 1,780 2,033 -- -- Class C 731 649 -- -- Class Y -- -- -- -- --------------------- --------------------- --------------------- --------------------- 5,815 5,328 -- -- --------------------- --------------------- --------------------- --------------------- Net increase (decrease) in net assets 25,143,195 (1,976,302) (3,790,676) (10,867,820) --------------------- --------------------- --------------------- --------------------- NET ASSETS Beginning of the year 111,361,553 113,337,855 60,479,933 71,347,753 --------------------- --------------------- --------------------- --------------------- End of the year $ 136,504,748 $ 111,361,553 $ 56,689,257 $ 60,479,933 ===================== ===================== ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (110,178) $ (92,028) $ (112,145) $ (95,208) ===================== ===================== ===================== =====================
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 Dividends Distributions beginning investment Net realized Total from from from net of income and unrealized investment net investment realized Total period (loss) (b) gain (loss) operations income capital gains distributions ---------- ---------- -------------- ---------- -------------- ------------- ------------- CGM ADVISOR TARGETED EQUITY FUND Class A 12/31/2006 $ 10.22 $ 0.08 $ 0.78 $ 0.86 $ (0.07) $ (0.31) $ (0.38) 12/31/2005 9.05 0.07 1.12 1.19 (0.02) -- (0.02) 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) -- -- -- Class B 12/31/2006 9.48 0.00(e) 0.74 0.74 (0.07) (0.31) (0.38) 12/31/2005 8.45 0.00(e) 1.04 1.04 (0.01) -- (0.01) 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) -- -- -- Class C 12/31/2006 9.48 0.00(e) 0.74 0.74 (0.07) (0.31) (0.38) 12/31/2005 8.45 0.00(e) 1.04 1.04 (0.01) -- (0.01) 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) -- -- -- Class Y 12/31/2006 10.42 0.11 0.82 0.93 (0.11) (0.31) (0.42) 12/31/2005 9.23 0.10 1.14 1.24 (0.05) -- (0.05) 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) -- -- -- HANSBERGER INTERNATIONAL FUND Class A 12/31/2006 $ 19.88 $ 0.16 $ 4.51 $ 4.67 $ (0.35) $ (2.70) $ (3.05) 12/31/2005 17.12 0.11 2.65 2.76 -- -- -- 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) (0.05) -- (0.05) Class B 12/31/2006 18.27 0.01 4.11 4.12 (0.18) (2.70) (2.88) 12/31/2005 15.85 0.00(e) 2.42 2.42 -- -- -- 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) (0.05) -- (0.05)
Redemption fees (e) ---------- CGM ADVISOR TARGETED EQUITY FUND Class A 12/31/2006 $ 0.00 12/31/2005 0.00 12/31/2004 0.00 12/31/2003 -- 12/31/2002 -- Class B 12/31/2006 0.00 12/31/2005 0.00 12/31/2004 0.00 12/31/2003 -- 12/31/2002 -- Class C 12/31/2006 0.00 12/31/2005 0.00 12/31/2004 0.00 12/31/2003 -- 12/31/2002 -- Class Y 12/31/2006 0.00 12/31/2005 0.00 12/31/2004 0.00 12/31/2003 -- 12/31/2002 -- HANSBERGER INTERNATIONAL FUND Class A 12/31/2006 $ 0.00 12/31/2005 0.00 12/31/2004 0.00 12/31/2003 -- 12/31/2002 -- Class B 12/31/2006 0.00 12/31/2005 0.00 12/31/2004 0.00 12/31/2003 -- 12/31/2002 --
(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, if applicable, 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, if applicable, total return would have been lower. See accompanying notes to financial statements. 51
Ratios to average net assets: --------------------------------- Net asset Net assets, value, Total end of Gross Net Net investment Portfolio end of return period expenses expenses income (loss) turnover period (%) (a) (c) (000's) (%) (f) (%) (d) (%) rate (%) ---------- ----------- ----------- --------- --------- -------------- --------- $ 10.70 8.5 $ 679,897 1.16 N/A 0.76 171 10.22 13.2 694,121 1.28 N/A 0.78 196 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 9.84 7.8 43,032 1.91 N/A 0.02 171 9.48 12.4 53,005 2.03 N/A 0.03 196 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 9.84 7.7 8,688 1.90 N/A 0.04 171 9.48 12.4 5,133 2.04 N/A 0.03 196 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 10.93 9.0 11,714 0.87 N/A 1.05 171 10.42 13.4 11,181 1.07 N/A 0.99 196 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 $ 21.50 24.1 $ 112,814 1.49 N/A 0.75 49 19.88 16.1 89,663 1.81 N/A 0.62 45 17.12 13.6 73,707 1.92 1.91 0.14 81 15.07 39.0 59,762 2.32 2.30 (0.34) 92 10.84 (16.4) 50,053 2.19 N/A (0.45) 91 19.51 23.2 33,016 2.25 N/A 0.03 49 18.27 15.3 33,388 2.55 N/A (0.02) 45 15.85 12.7 45,213 2.67 2.66 (0.60) 81 14.06 38.0 60,296 3.07 3.05 (1.09) 92 10.19 (17.0) 53,306 2.94 N/A (1.20) 91
(d)The investment adviser agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, if applicable, expenses would have been higher. (e)Amount rounds to less than $0.01 per share, if applicable. (f)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses, if applicable. 52 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: --------------------------------------- Net asset value, Net beginning investment Net realized Total from of income and unrealized investment period (loss) (b) gain (loss) operations ---------- ---------- -------------- ---------- HANSBERGER INTERNATIONAL FUND (continued) Class C 12/31/2006 $ 18.28 $ 0.00(f) $ 4.11 $ 4.11 12/31/2005 15.86 (0.02) 2.44 2.42 12/31/2004 14.06 (0.09) 1.89 1.80 12/31/2003 10.19 (0.12) 3.99 3.87 12/31/2002 12.33 (0.14) (1.95) (2.09) HARRIS ASSOCIATES FOCUSED VALUE FUND Class A 12/31/2006 $ 12.08 $ (0.02) $ 1.50 $ 1.48 12/31/2005 13.06 0.00(f) 0.76 0.76 12/31/2004 11.79 (0.02) 1.29 1.27 12/31/2003 9.24 (0.03) 2.58 2.55 12/31/2002 10.96 (0.03) (1.69) (1.72) Class B 12/31/2006 11.59 (0.10) 1.43 1.33 12/31/2005 12.69 (0.10) 0.74 0.64 12/31/2004 11.55 (0.11) 1.25 1.14 12/31/2003 9.12 (0.10) 2.53 2.43 12/31/2002 10.90 (0.11) (1.67) (1.78) Class C 12/31/2006 11.59 (0.10) 1.43 1.33 12/31/2005 12.69 (0.10) 0.74 0.64 12/31/2004 11.55 (0.11) 1.25 1.14 12/31/2003 9.12 (0.10) 2.53 2.43 12/31/2002 10.90 (0.11) (1.67) (1.78) HARRIS ASSOCIATES LARGE CAP VALUE FUND Class A 12/31/2006 $ 13.33 $ 0.06 $ 2.13 $ 2.19 12/31/2005 13.37 0.05 (0.08) (0.03) 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) Class B 12/31/2006 12.48 (0.04) 1.98 1.94 12/31/2005 12.62 (0.04) (0.09) (0.13) 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)
Less distributions: ----------------------------------------- Distributions Dividends from from net net investment realized Total Redemption income capital gains distributions fees (f) -------------- ------------- ------------- ---------- HANSBERGER INTERNATIONAL FUND (continued) Class C 12/31/2006 $ (0.21) $ (2.70) $ (2.91) $ 0.00 12/31/2005 -- -- -- 0.00 12/31/2004 -- -- -- 0.00 12/31/2003 -- -- -- -- 12/31/2002 (0.05) -- (0.05) -- HARRIS ASSOCIATES FOCUSED VALUE FUND Class A 12/31/2006 $ -- $ (2.00) $ (2.00) $ 0.00 12/31/2005 -- (1.74) (1.74) 0.00 12/31/2004 -- -- -- 0.00 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- Class B 12/31/2006 -- (2.00) (2.00) 0.00 12/31/2005 -- (1.74) (1.74) 0.00 12/31/2004 -- -- -- 0.00 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- Class C 12/31/2006 -- (2.00) (2.00) 0.00 12/31/2005 -- (1.74) (1.74) 0.00 12/31/2004 -- -- -- 0.00 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- HARRIS ASSOCIATES LARGE CAP VALUE FUND Class A 12/31/2006 $ (0.03) $ -- $ (0.03) $ -- 12/31/2005 (0.01) -- (0.01) -- 12/31/2004 -- -- -- -- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- Class B 12/31/2006 (0.03) -- (0.03) -- 12/31/2005 (0.01) -- (0.01) -- 12/31/2004 -- -- -- -- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- --
(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, if applicable, 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 agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, if applicable, expenses would have been higher. See accompanying notes to financial statements. 53
Ratios to average net assets: --------------------------------- Net asset Net assets, value, Total end of Gross Net Net investment Portfolio end of return period expenses expenses income (loss) turnover period (%) (a) (d) (000's) (%) (g) (%) (c) (%) rate (%) ---------- ----------- ----------- --------- --------- -------------- --------- $ 19.48 23.1 $ 23,541 2.25 N/A 0.01 49 18.28 15.3 19,388 2.56 N/A (0.11) 45 15.86 12.8 17,046 2.67 2.66 (0.63) 81 14.06 38.0 12,557 3.07 3.05 (1.09) 92 10.19 (17.0) 11,013 2.94 N/A (1.20) 91 $ 11.56 12.7 $ 62,603 1.51 N/A (0.12) 36 12.08 5.7 82,298 1.68 N/A (0.04) 39 13.06 10.8 108,042 1.70 N/A (0.15) 26 11.79 27.6 95,957 1.84 1.70 (0.28) 30 9.24 (15.7) 68,660 1.79 1.70 (0.35) 12 10.92 11.9 78,950 2.26 N/A (0.87) 36 11.59 5.0 97,256 2.43 N/A (0.80) 39 12.69 9.9 110,275 2.45 N/A (0.90) 26 11.55 26.6 107,017 2.59 2.45 (1.03) 30 9.12 (16.3) 85,794 2.54 2.45 (1.10) 12 10.92 11.9 87,033 2.27 N/A (0.88) 36 11.59 5.0 122,745 2.43 N/A (0.79) 39 12.69 9.9 144,780 2.45 N/A (0.90) 26 11.55 26.6 124,427 2.59 2.45 (1.03) 30 9.12 (16.3) 86,269 2.54 2.45 (1.10) 12 $ 15.49 16.5 $ 195,714 1.30 1.30 0.44 23 13.33 (0.2) 188,763 1.46 1.30 0.40 39 13.37 9.1 222,434 1.49 1.30 0.30 27 12.25 30.0 215,259 1.62 1.45 0.07 30(e) 9.42 (20.0) 130,751 1.56 N/A 0.07 195 14.39 15.6 42,894 2.07 2.05 (0.33) 23 12.48 (1.0) 59,035 2.21 2.05 (0.35) 39 12.62 8.4 79,949 2.24 2.05 (0.46) 27 11.64 29.1 91,085 2.37 2.20 (0.69) 30(e) 9.02 (20.7) 71,436 2.31 N/A (0.68) 195
(d)Had certain expenses not been reduced during the period, if applicable, total return would have been lower. (e)Portfolio turnover excludes the impact of assets resulting from a merger with another fund. (f)Amount rounds to less than $0.01 per share, if applicable. (g)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses, if applicable. 54 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: ---------------------------------------- Net asset value, Net beginning investment Net realized Total from of income and unrealized investment period (loss) (b) gain (loss) operations ---------- ---------- -------------- ---------- HARRIS ASSOCIATES LARGE CAP VALUE FUND (continued) Class C 12/31/2006 $ 12.46 $ (0.04) $ 1.98 $ 1.94 12/31/2005 12.60 (0.04) (0.09) (0.13) 12/31/2004 11.63 (0.05) 1.02 0.97 12/31/2003 9.01 (0.07) 2.69 2.62 12/31/2002 11.36 (0.07) (2.28) (2.35) Class Y 12/31/2006 13.72 0.12 2.20 2.32 12/31/2005 13.74 0.09 (0.10) (0.01) 12/31/2004 12.54 0.07 1.13 1.20 12/31/2003 9.59 0.06 2.89 2.95 12/31/2002 11.93 0.07 (2.41) (2.34) IXIS U.S. DIVERSIFIED PORTFOLIO Class A 12/31/2006 $ 20.17 $ 0.04 $ 2.73 $ 2.77 12/31/2005 18.75 (0.11) 1.53 1.42 12/31/2004 16.61 (0.12) 2.26 2.14 12/31/2003 12.43 (0.13) 4.31 4.18 12/31/2002 15.90 (0.11) (3.36) (3.47) Class B 12/31/2006 18.01 (0.11) 2.43 2.32 12/31/2005 16.87 (0.22) 1.36 1.14 12/31/2004 15.06 (0.23) 2.04 1.81 12/31/2003 11.35 (0.22) 3.93 3.71 12/31/2002 14.64 (0.20) (3.09) (3.29) Class C 12/31/2006 18.03 (0.11) 2.44 2.33 12/31/2005 16.89 (0.22) 1.36 1.14 12/31/2004 15.08 (0.23) 2.04 1.81 12/31/2003 11.37 (0.22) 3.93 3.71 12/31/2002 14.66 (0.20) (3.09) (3.29) Class Y 12/31/2006 21.41 0.14 2.90 3.04 12/31/2005 19.82 (0.03) 1.62 1.59 12/31/2004 17.46 (0.05) 2.41 2.36 12/31/2003 12.98 (0.04) 4.52 4.48 12/31/2002 16.50 (0.02) (3.50) (3.52)
Less distributions: --------------------------- Dividends from net investment Total income distributions -------------- ------------- HARRIS ASSOCIATES LARGE CAP VALUE FUND (continued) Class C 12/31/2006 $ (0.03) $ (0.03) 12/31/2005 (0.01) (0.01) 12/31/2004 -- -- 12/31/2003 -- -- 12/31/2002 -- -- Class Y 12/31/2006 (0.03) (0.03) 12/31/2005 (0.01) (0.01) 12/31/2004 -- -- 12/31/2003 -- -- 12/31/2002 -- -- IXIS U.S. DIVERSIFIED PORTFOLIO Class A 12/31/2006 $ -- $ -- 12/31/2005 -- -- 12/31/2004 -- -- 12/31/2003 -- -- 12/31/2002 -- -- Class B 12/31/2006 -- -- 12/31/2005 -- -- 12/31/2004 -- -- 12/31/2003 -- -- 12/31/2002 -- -- Class C 12/31/2006 -- -- 12/31/2005 -- -- 12/31/2004 -- -- 12/31/2003 -- -- 12/31/2002 -- -- Class Y 12/31/2006 -- -- 12/31/2005 -- -- 12/31/2004 -- -- 12/31/2003 -- -- 12/31/2002 -- --
(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, if applicable, 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 agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, if applicable, expenses would have been higher. See accompanying notes to financial statements. 55
Ratios to average net assets: ------------------------------------ Net asset Net assets, value, Total end of Gross Net Net investment Portfolio end of return period expenses expenses income (loss) turnover period (%) (a) (d) (000's) (%) (f) (%) (c) (%) rate (%) ---------- ----------- ----------- --------- --------- -------------- --------- $ 14.37 15.6 $ 18,089 2.06 2.05 (0.32) 23 12.46 (1.0) 20,308 2.21 2.05 (0.35) 39 12.60 8.3 26,392 2.24 2.05 (0.42) 27 11.63 29.1 15,553 2.37 2.20 (0.69) 30(e) 9.01 (20.7) 6,440 2.31 N/A (0.68) 195 16.01 17.0 14,057 0.91(g) N/A 0.82 23 13.72 (0.0) 14,226 1.09 1.05 0.65 39 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 $ 22.94 13.7 $ 393,430 1.46 N/A 0.17 83 20.17 7.6 386,084 1.73 N/A (0.57) 97 18.75 12.9 392,726 1.87 N/A (0.71) 104 16.61 33.6 354,755 1.99 N/A (0.94) 102 12.43 (21.8) 269,180 1.89 N/A (0.75) 95 20.33 12.9 147,819 2.22 N/A (0.60) 83 18.01 6.8 174,745 2.48 N/A (1.32) 97 16.87 12.0 223,349 2.62 N/A (1.50) 104 15.06 32.7 272,533 2.74 N/A (1.69) 102 11.35 (22.5) 282,361 2.64 N/A (1.50) 95 20.36 12.9 46,064 2.22 N/A (0.59) 83 18.03 6.8 48,262 2.48 N/A (1.32) 97 16.89 12.0 58,883 2.62 N/A (1.48) 104 15.08 32.6 60,783 2.74 N/A (1.69) 102 11.37 (22.4) 54,291 2.64 N/A (1.50) 95 24.45 14.2 21,155 1.03 N/A 0.60 83 21.41 8.0 20,445 1.32 N/A (0.16) 97 19.82 13.5 25,060 1.33 N/A (0.27) 104 17.46 34.5 47,485 1.34 N/A (0.30) 102 12.98 (21.3) 37,911 1.29 N/A (0.15) 95
(d)Had certain expenses not been reduced during the period, if applicable, total return would have been lower. (e)Portfolio turnover excludes the impact resulting from a merger with another fund. (f)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses, if applicable. (g)Includes expense waiver recapture of 0.04%. 56 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: --------------------------------------- Net asset value, Net beginning investment Net realized Total from of income and unrealized investment period (loss) (b) gain (loss) operations ---------- ---------- -------------- ---------- IXIS VALUE FUND Class A 12/31/2006 $ 8.32 $ 0.04 $ 1.56 $ 1.60 12/31/2005 8.92 0.02 0.54 0.56 12/31/2004 8.16 0.00(c) 0.93 0.93 12/31/2003 6.20 (0.01) 1.97 1.96 12/31/2002 7.70 (0.01) (1.49) (1.50) Class B 12/31/2006 7.51 (0.03) 1.40 1.37 12/31/2005 8.21 (0.05) 0.51 0.46 12/31/2004 7.57 (0.06) 0.87 0.81 12/31/2003 5.80 (0.06) 1.83 1.77 12/31/2002 7.26 (0.06) (1.40) (1.46) Class C 12/31/2006 7.50 (0.03) 1.41 1.38 12/31/2005 8.21 (0.05) 0.50 0.45 12/31/2004 7.57 (0.05) 0.86 0.81 12/31/2003 5.80 (0.06) 1.83 1.77 12/31/2002 7.26 (0.06) (1.40) (1.46) VAUGHAN NELSON SMALL CAP VALUE FUND Class A 12/31/2006 $ 17.69 $ (0.05) $ 3.26 $ 3.21 12/31/2005 16.07 (0.08) 1.70 1.62 12/31/2004 13.94 (0.13) 2.26 2.13 12/31/2003 10.05 (0.19) 4.08 3.89 12/31/2002 14.52 (0.21) (4.26) (4.47) Class B 12/31/2006 16.36 (0.20) 3.03 2.83 12/31/2005 14.97 (0.19) 1.58 1.39 12/31/2004 13.08 (0.22) 2.11 1.89 12/31/2003 9.51 (0.26) 3.83 3.57 12/31/2002 13.84 (0.28) (4.05) (4.33) Class C 12/31/2006 16.37 (0.19) 3.01 2.82 12/31/2005 14.98 (0.19) 1.58 1.39 12/31/2004 13.09 (0.22) 2.11 1.89 12/31/2003 9.51 (0.26) 3.84 3.58 12/31/2002 13.84 (0.28) (4.05) (4.33) Class Y 12/31/2006(e) 19.02 0.02 1.87 1.89
Less distributions: ------------------------------------------- Dividends Distributions from from net net investment realized Total Redemption income capital gains distributions fees (c) -------------- ------------- ------------- ---------- IXIS VALUE FUND Class A 12/31/2006 $ (0.02) $ (1.13) $ (1.15) $ -- 12/31/2005 -- (1.16) (1.16) -- 12/31/2004 -- (0.17) (0.17) -- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- Class B 12/31/2006 (0.00)(c) (1.13) (1.13) 12/31/2005 -- (1.16) (1.16) -- 12/31/2004 -- (0.17) (0.17) -- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- Class C 12/31/2006 (0.00)(c) (1.13) (1.13) -- 12/31/2005 -- (1.16) (1.16) -- 12/31/2004 -- (0.17) (0.17) -- 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- VAUGHAN NELSON SMALL CAP VALUE FUND Class A 12/31/2006 $ -- $ -- $ -- $ 0.00 12/31/2005 -- -- -- 0.00 12/31/2004 -- -- -- 0.00 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- Class B 12/31/2006 -- -- -- 0.00 12/31/2005 -- -- -- 0.00 12/31/2004 -- -- -- 0.00 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- Class C 12/31/2006 -- -- -- 0.00 12/31/2005 -- -- -- 0.00 12/31/2004 -- -- -- 0.00 12/31/2003 -- -- -- -- 12/31/2002 -- -- -- -- Class Y 12/31/2006(e) -- -- -- --
(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, if applicable, 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, if applicable. (d)Effect of voluntary waiver of expenses by advisor was less than 0.005%. (e)From commencement of Class operations on August 31, 2006 through December 31, 2006. See accompanying notes to financial statements. 57
Ratios to average net assets: --------------------------------------- Net assets, Net asset Total end of Gross Net Net investment Portfolio value, end return period expenses expenses income (loss) turnover of period (%) (a) (g) (000's) (%) (h) (i) (%) (f) (i) (%) (i) rate (%) ---------- ----------- ----------- ----------- ----------- -------------- --------- $ 8.77 19.7 $ 110,588 1.38 N/A 0.43 61 8.32 6.2 98,353 1.60(d) N/A 0.19 62 8.92 11.4 105,359 1.66 N/A 0.03 56 8.16 31.6 110,228 1.81 N/A (0.15) 75 6.20 (19.5) 99,894 1.68 N/A (0.21) 67 7.75 18.6 18,795 2.14 N/A (0.34) 61 7.51 5.5 22,458 2.35(d) N/A (0.56) 62 8.21 10.7 27,804 2.41 N/A (0.72) 56 7.57 30.5 30,029 2.56 N/A (0.90) 75 5.80 (20.1) 27,808 2.43 N/A (0.96) 67 7.75 18.8 2,986 2.14 N/A (0.33) 61 7.50 5.4 2,916 2.35(d) N/A (0.56) 62 8.21 10.7 3,079 2.41 N/A (0.70) 56 7.57 30.5 2,134 2.56 N/A (0.90) 75 5.80 (20.1) 2,047 2.43 N/A (0.96) 67 $ 20.90 18.1 $ 85,285 1.59 N/A (0.28) 88 17.69 10.1 58,963 1.92 N/A (0.47) 80 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 19.19 17.2 32,606 2.37 N/A (1.10) 88 16.36 9.3 38,732 2.66 N/A (1.24) 80 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 19.19 17.2 18,186 2.35 N/A (1.04) 88 16.37 9.3 13,667 2.67 N/A (1.23) 80 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 20.91 9.9 427 1.90 1.35 0.35 88
(f)The investment adviser agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, if applicable, expenses would have been higher. (g)Had certain expenses not been reduced during the period, if applicable, total return would have been lower. (h)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses, if applicable. (i)Computed on an annualized basis for periods less than one year. 58 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions: ---------------------------------------- --------------------------- Net asset value, Net Distributions beginning investment Net realized Total from from net of income and unrealized investment realized Total period (loss) (b) gain (loss) operations capital gains distributions ---------- ---------- -------------- ---------- ------------- ------------- WESTPEAK CAPITAL GROWTH FUND Class A 12/31/2006 $ 11.81 $ (0.07) $ 1.35 $ 1.28 $ -- $ -- 12/31/2005 11.43 (0.10) 0.48 0.38 -- -- 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) -- -- Class B 12/31/2006 10.19 (0.14) 1.15 1.01 -- -- 12/31/2005 9.94 (0.16) 0.41 0.25 -- -- 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) -- -- Class C 12/31/2006 10.17 (0.14) 1.15 1.01 -- -- 12/31/2005 9.92 (0.16) 0.41 0.25 -- -- 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) -- --
(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, if applicable, 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 assets, Net Net asset Total end of Gross Net investment Portfolio value, end return period expenses expenses income turnover of period (%) (a) (e) (000's) (%) (f) (%) (d) (loss) (%) rate (%) ---------- ----------- ----------- --------- --------- ---------- --------- $ 13.09 10.8 $ 47,332 1.62 1.61 (0.59) 126 11.81 3.3 49,680 1.88 N/A (0.84) 132 11.43 5.2 57,420 1.89 N/A (0.18)(c) 121 10.87 26.7 63,380 1.93 N/A (0.85) 107 8.58 (28.1) 58,729 1.75 N/A (0.84) 103 11.20 9.9 8,599 2.38 2.36 (1.35) 126 10.19 2.5 9,864 2.63 N/A (1.59) 132 9.94 4.4 12,916 2.64 N/A (0.97)(c) 121 9.52 25.9 16,485 2.68 N/A (1.60) 107 7.56 (28.8) 16,267 2.50 N/A (1.59) 103 11.18 9.9 758 2.38 2.36 (1.35) 126 10.17 2.5 936 2.63 N/A (1.59) 132 9.92 4.4 1,013 2.64 N/A (0.94)(c) 121 9.50 25.7 1,174 2.68 N/A (1.60) 107 7.56 (28.7) 847 2.50 N/A (1.59) 103
(d)The investment adviser agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, if applicable, expenses would have been higher. (e)Had certain expenses not been reduced during the period, if applicable, total return would have been lower. (f)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses, if applicable. 60 NOTES TO FINANCIAL STATEMENTS December 31, 2006 1. Organization. IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II and IXIS Advisor Funds Trust III (the "Trusts" and each a "Trust") are each organized as a Massachusetts business trust. 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. Information presented in these financial statements pertains to certain equity funds of the Trusts; the financial statements for the other funds of the Trusts are presented in separate reports. The following funds (individually, a "Fund" and collectively the "Funds") are included in this report: IXIS Advisor Funds Trust I: CGM Advisor Targeted Equity Fund (the "Targeted Equity Fund") Hansberger International Fund (the "International Fund") IXIS U.S. Diversified Portfolio (the "U.S. Diversified Portfolio") IXIS Value Fund (the "Value Fund") Vaughan Nelson Small Cap Value Fund (the "Small Cap Value Fund") Westpeak Capital Growth Fund (the "Capital Growth Fund") IXIS Advisor Funds Trust II: Harris Associates Large Cap Value Fund (the "Large Cap Value Fund") IXIS Advisor Funds Trust III: Harris Associates Focused Value Fund (the "Focused Value Fund") Each Fund offers Class A, Class B, and Class C shares. Targeted Equity Fund, Small Cap Value Fund, Large Cap Value Fund and U.S. Diversified Portfolio 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 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 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. Class Y shares do not pay a front-end sales charge, a CDSC or Rule 12b-1 fees. They are generally 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 as outlined in the Prospectus. Most expenses of the Trusts can be directly attributed to a fund. Expenses which cannot be directly attributed to a fund 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). In addition, each Class 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, including closed-end investment companies, for which market quotations are readily available are valued at market value, as reported by pricing services recommended by the investment adviser and the subadvisors and approved by the Board of Trustees. Such pricing services generally use the security's last sale price on the exchange or market where primarily traded or, if there is no reported sale during the day, the closing bid price. Securities traded on the NASDAQ National Market are valued at the NASDAQ Official Closing Price ("NOCP"), or if lacking a 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 sixty days or less) are generally valued at market price on the basis of valuations furnished to the Funds by a pricing service recommended by the investment adviser and the subadvisors and approved 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. Broker-dealer bid quotations may also be used to value debt and equity securities where a pricing service does not price a security or where a pricing service does not provide a reliable price for the security. In instances where broker-dealer bid quotations are not available, certain securities held by the Funds may be valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold. Short-term obligations with a remaining maturity of sixty days or less are valued at amortized cost, which approximates market value. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by the Funds' subadvisors using consistently applied procedures under the general supervision of the Board of Trustees . As of December 31, 2006, approximately 68% of the market value of the investments for the Hansberger International Fund was fair valued pursuant to procedures approved by the Board of Trustees. Investments in other open-end investment companies are valued at their net asset value each day. The Funds may hold securities traded in foreign markets. Foreign securities are valued at the market price in the foreign market. However, if events occurring after the close of the foreign market (but before the close of regular trading on the New York Stock Exchange) are believed to materially affect the value of those securities, such securities are fair valued pursuant to procedures approved by the Board of Trustees. When fair valuing securities, the Funds may, among other things, use modeling tools or other processes that may take into account factors such as securities market activity and/or significant events that occur after the close of the foreign market and before the Funds calculate their net asset values. 61 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 b. Security Transactions and Related Investment Income. Security transactions are accounted for on trade date. Dividend income is recorded on ex-dividend date, or in the case of certain foreign securities, as soon as the Fund is notified, and interest income is recorded on an accrual basis. Interest income is increased by the accretion of discount and decreased by the amortization of premium. Investment income is recorded net of foreign taxes withheld when applicable. 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. 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 and 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, other than investment securities, at the end of the fiscal period, resulting from changes in exchange rates. Each Fund may use foreign currency exchange contracts to facilitate transactions in foreign-denominated investments. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. Each Fund may purchase investments of foreign issuers. Investing in securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. 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. Moreover, the markets for securities of many foreign issuers may be less liquid and the price of such securities may be more volatile that those of comparable U.S. companies and the U.S. government. d. Forward Foreign Currency Contracts. The International Fund, the U.S. Diversified Portfolio and the Value Fund may enter into forward foreign currency contracts. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell generally are used to hedge a Fund's investments against currency fluctuation. Also, a contract to buy or sell can offset a previous contract. These contracts involve market risk in excess of the unrealized gain or loss reflected in the Funds' Statement of Assets and Liabilities. The U.S. dollar value of the currencies a Fund has committed to buy or sell represents the aggregate exposure to each currency a 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. At December 31, 2006, there were no open forward currency contracts. e. Options. Certain Funds may enter into option contracts. An option contract is a contract in which the writer of the option grants the buyer of the option the right to purchase from (call option) or sell to (put option) the writer a designated instrument at a specified price within a specified period of time. When a Fund writes an option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value. Premiums received from writing options which expire are treated as realized gains. Premiums received from writing options which are exercised or closed are added to the proceeds from or offset against the amounts paid on the underlying instrument to determine the realized gain or loss. When a Fund writes an option, it bears the risk of an unfavorable change in the price of the underlying instrument. The writer of an option may enter into a closing transaction by purchasing an option identical to the option written. The Fund bears the risk that an illiquid market may limit its ability to enter into a closing transaction. At December 31, 2006, there were no open written option contracts. When a Fund purchases an option, it pays a premium and the option is subsequently marked to market to reflect the current value. Premiums paid for purchasing options which expire are treated as realized losses. Premiums paid for purchasing options which are exercised or closed are added to the cost or deducted from the proceeds on the underlying instrument to determine the realized gain or loss. The risk associated with purchasing options is limited to the premium paid. At December 31, 2006, there were no open purchased option contracts. Exchange-traded options are valued at the last sale price, or if no sale is reported, the last bid price for purchased options and the last ask price for written options. 62 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 For the year ended December 31, 2006, written option transactions for the U.S. Diversified Portfolio were as follows:
Number of Contracts Premiums --------- -------- Outstanding at beginning of period -- -- Options written (186) $(22,971) Options closed -- -- Options exercised -- -- Options expired 186 22,971 ---- -------- Outstanding at end of period -- $ -- ==== ========
f. 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. g. Dividends and Distributions to Shareholders. Dividends and distributions are recorded on ex-dividend date. The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. Permanent differences are primarily due to differing treatments for book and tax purposes of items such as net operating losses and foreign currency transactions. Permanent book and tax basis differences relating to shareholder distributions, net investment income, and net realized gains will result in reclassifications to capital accounts. Temporary differences between book and tax distributable earnings are primarily due to deferred Trustees' fees, capital loss carryforwards, wash sales, distributions from REITs and gains realized from passive foreign investment companies. Distributions from net investment income and short-term capital gains are considered to be ordinary income for tax purposes. The tax characterization of distributions is determined on an annual basis. The tax character of distributions paid to shareholders during the years ended December 31, 2006 and December 31, 2005 was as follows:
2006 Distributions Paid From: 2005 Distributions Paid From: ----------------------------------------- ----------------------------------------- Ordinary Long-Term Ordinary Long-Term Fund Income Capital Gains Total Income Capital Gains Total ---- ------ ------------- ----- ------ ------------- ----- Targeted Equity Fund $ 5,318,245 $ 20,781,541 $ 26,099,786 $ 1,723,626 $ -- $ 1,723,626 International Fund 5,684,336 16,199,875 21,884,211 -- -- -- Focused Value Fund -- 37,532,762 37,532,762 -- 39,692,418 39,692,418 Large Cap Value Fund 636,750 -- 636,750 357,883 -- 357,883 Value Fund 3,406,132 12,664,466 16,070,598 2,535,529 13,549,598 16,085,127
As of December 31, 2006, the components of distributable earnings on a tax basis were as follows:
U.S. Targeted International Focused Large Cap Diversified Equity Fund Fund Value Fund Value Fund Portfolio Value Fund ----------- ---- ---------- ---------- --------- ---------- Undistributed ordinary income $ 11,640,410 $ 1,550,549 $ -- $ 738,282 $ -- $ 1,210,027 Undistributed long-term capital gains 13,479,725 2,374,284 2,205,434 -- -- 1,854,989 ------------- ------------- ------------- ------------- ------------- ------------- Total undistributed earnings 25,120,135 3,924,833 2,205,434 738,282 -- 3,065,016 Capital loss carryforward: Expires December 31, 2009 -- -- -- (50,921,004) (8,873,074) -- Expires December 31, 2010 -- -- -- (24,633,843) (62,468,898) -- Expires December 31, 2011 -- -- -- (9,965,466) -- -- ------------- ------------- ------------- ------------- ------------- ------------- Total capital loss carryforward -- -- -- (85,520,313) (71,341,972) -- Deferred net currency losses (post October) -- -- -- -- (6,591) -- Unrealized appreciation (depreciation) 61,057,700 37,303,994 35,254,968 53,957,102 110,748,496 26,830,432 ------------- ------------- ------------- ------------- ------------- ------------- Total accumulated earnings (losses) $ 86,177,835 $ 41,228,827 $ 37,460,402 $ (30,824,929) $ 39,399,933 $ 29,895,448 ------------- ------------- ------------- ------------- ------------- ------------- Capital loss carryforward utilized in the current year $ 55,280,538 $ -- $ -- $ 24,472,911 $ 68,135,269 $ -- ============= ============= ============= ============= ============= =============
Small Cap Capital Value Fund Growth Fund ---------- ----------- Undistributed ordinary income $ -- $ -- Undistributed long-term capital gains -- -- ------------- ------------- Total undistributed earnings -- -- Capital loss carryforward: Expires December 31, 2009 -- (20,489,767) Expires December 31, 2010 (14,054,764) (26,883,047) Expires December 31, 2011 -- (4,097,913) ------------- ------------- Total capital loss carryforward (14,054,764) (51,470,727) Deferred net currency losses (post October) -- -- Unrealized appreciation (depreciation) 18,279,881 5,764,627 ------------- ------------- Total accumulated earnings (losses) $ 4,225,117 $ (45,706,100) ------------- ------------- Capital loss carryforward utilized in the current year $ 15,219,336 $ 627,143 ============= =============
63 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 h. Repurchase Agreements. Each Fund, through its custodian, receives delivery of the underlying securities collateralizing repurchase agreements. It is each Fund's policy that the market value of the collateral be at least equal to 102% of the repurchase price, including interest. The repurchase agreements are tri-party arrangements whereby the collateral is held at the custodian bank in a segregated account for the benefit of the Fund and on behalf of the counterparty. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty including possible delays or restrictions upon a Fund's ability to dispose of the underlying securities. i. Securities Lending. The Funds have entered into an agreement with State Street Bank and Trust Company ("State Street Bank"), as agent of the Funds, to lend securities to certain designated borrowers. The loans are collateralized with cash or securities in an amount equal to at least 105% or 102% of the market value of the loaned international or domestic securities, respectively, when the loan is initiated. Thereafter, the value of the collateral must remain at least 102% of the market value of loaned securities for U.S. equities and U.S. corporate debt; at least 105% of the market value of loaned securities for non-U.S. equities; and at least 100% of the market value of loaned securities for U.S. government securities, sovereign debt issued by non-U.S. governments and non-U.S. corporate debt. In the event that the market value of the collateral falls below the required percentages described above, the borrower will deliver additional collateral on the next business day. As with other extensions of credit, the Funds may bear the risk of loss with respect to the investment of the collateral. The Funds invest cash collateral in short-term investments, a portion of the income from which is remitted to the borrowers and the remainder allocated between the Funds and State Street Bank as lending agent. 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, 2006 were as follows:
Market Value Value of of Securities Collateral Fund on Loan Received ---- ------------- ------------ Targeted Equity Fund $105,389,588 $107,341,167 International Fund 35,697,604 37,301,240 Focused Value Fund 32,309,413 33,336,293 Large Cap Value Fund 1,525,254 1,558,900 U.S. Diversified Portfolio 71,332,377 73,222,927 Value Fund 16,764,688 17,278,289 Small Cap Value Fund 33,826,317 34,905,193 Capital Growth Fund 7,609,915 7,840,726
j. Indemnifications. Under the Trusts' organizational documents, their officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. k. New Accounting Pronouncements. Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement 109 ("FIN 48") was issued and became effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Subsequent thereto, the United States Securities and Exchange Commission ("SEC") indicated that it would not object if a fund first adopts FIN 48 on the last business day of the first required financial reporting period for fiscal years beginning after December 15, 2006. Accordingly, Management is continuing to evaluate the impact the adoption of FIN 48 may have on each Fund's net assets and results of operations. In compliance with the recently issued SEC guidance the impacts, if any, will be reflected in the Funds' semiannual financial statements as of June 30, 2007. In addition, in September, 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("SFAS 157"), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact, if any, the adoption of SFAS 157 will have on the Funds' financial statements. 3. Purchases and Sales of Securities. For the year ended December 31, 2006, purchases and sales of securities (excluding short-term investments) were as follows:
Fund Purchases Sales ---- -------------- -------------- Targeted Equity Fund $1,285,893,374 $1,361,600,040 International Fund 75,299,526 80,875,851 Focused Value Fund 87,684,282 167,406,942 Large Cap Value Fund 59,807,343 113,459,076 U.S. Diversified Portfolio 504,369,821 597,171,122 Value Fund 73,770,770 87,759,008 Small Cap Value Fund 109,209,670 104,220,130 Capital Growth Fund 72,066,130 81,784,360
64 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 4. Management Fees and Other Transactions with Affiliates. a. Management Fees. IXIS Asset Management Advisors, L.P. ("IXIS Advisors") serves as investment advisor to each Fund except the Targeted Equity Fund. Capital Growth Management Limited Partnership ("CGM") is the investment advisor to the Targeted Equity Fund. Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund's average daily net assets:
Percentage of Average Daily Net Assets - ----------------------------------------------------------- First Next Next Next Over Fund $200 million $300 million $500 million $1 billion $2 billion ---- ------------ ------------ ------------ ---------- ---------- Targeted Equity Fund 0.75% 0.70% 0.65% 0.65% 0.60% International Fund 0.80% 0.75% 0.75% 0.75% 0.75% Focused Value Fund 0.90% 0.90% 0.90% 0.90% 0.90% Large Cap Value Fund 0.70% 0.65% 0.60% 0.60% 0.60% U.S. Diversified Portfolio 0.90% 0.90% 0.90% 0.80% 0.80% Value Fund 0.75% 0.70% 0.65% 0.65% 0.65% Small Cap Value Fund 0.90% 0.90% 0.90% 0.90% 0.90% Capital Growth Fund 0.75% 0.70% 0.65% 0.65% 0.65%
Prior to July 1, 2006, the management fee for Focused Value Fund was 1.00% of the Fund's first $1 billion of the Fund's average daily net assets and 0.95% of such assets in excess of $1 billion. IXIS Advisors has entered into subadvisory agreements for each Fund as listed below. International Fund Hansberger Global Investors, Inc. ("Hansberger") Focused Value Fund Harris Associates L.P. ("Harris") Large Cap Value Fund Harris U.S. Diversified Portfolio Harris Loomis, Sayles & Company, L.P. ("Loomis Sayles") BlackRock Investment Management LLC ("BlackRock") Value Fund Harris Loomis Sayles Vaughan Nelson Investment Management, L.P. ("Vaughan Nelson") Westpeak Global Advisors, L.P. ("Westpeak") Small Cap Value Fund Vaughan Nelson Capital Growth Fund Westpeak
Prior to October 2, 2006, Mercury Advisors served as subadvisor to a segment of U.S. Diversified Portfolio. Payments to IXIS Advisors are reduced in the amount of payments to the subadvisors. IXIS Advisors has given binding undertakings to the Funds to defer its management fees and/or reimburse certain expenses associated with these Funds to limit their operating expenses. These undertakings are in effect until April 30, 2007 and will be reevaluated on an annual basis. For the year ended December 31, 2006 (for the period May 1, 2006 through December 31, 2006 for Small Cap Value Fund and Capital Growth Fund), the expense limits as a percentage of average daily net assets under the expense limitation agreements were as follows:
Expense limit as a Percentage of Average Daily Net Assets --------------------------------------- Fund Class A Class B Class C Class Y ---- ------- ------- ------- ------- Focused Value Fund 1.70% 2.45% 2.45% -- Large Cap Value Fund 1.30% 2.05% 2.05% 1.05% Small Cap Value Fund 1.60% 2.35% 2.35% 1.35% Capital Growth Fund 1.50% 2.25% 2.25% --
65 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 Prior to May 1, 2006, Small Cap Value Fund and Capital Growth Fund had no expense limits. For the year ended December 31, 2006, the management fees and waivers of management fees for each Fund were as follows:
Percentage of Average Gross Waiver of Net Daily Net Assets Management Management Management --------------- Fund Fee Fee Fee Gross Net ---- ---------- ---------- ---------- ----- --- Targeted Equity Fund $5,291,650 $-- $5,291,650 0.70% 0.70% International Fund 1,250,812 -- 1,250,812 0.80% 0.80% Focused Value Fund 2,425,826 -- 2,425,826 0.95% 0.95% Large Cap Value Fund 1,822,308 -- 1,822,308 0.69% 0.69% U.S. Diversified Portfolio 5,557,166 -- 5,557,166 0.90% 0.90% Value Fund 932,836 -- 932,836 0.75% 0.75% Small Cap Value Fund 1,118,892 -- 1,118,892 0.90% 0.90% Capital Growth Fund 433,385 -- 433,385 0.75% 0.75%
For the year ended December 31, 2006, class specific expenses have been reimbursed as follows:
Fund Reimbursement ---- ------------- Large Cap Value Fund $14,496 Small Cap Value Fund 237 Capital Growth Fund 9,850
IXIS Advisors shall be permitted to recover management fees waived and/or expenses it has borne under the expense limitation agreements on a Class by Class basis in later periods to the extent the expenses of a Class fall below a Class' expense limits, provided, however, that a Class is not obligated to pay such deferred fees/expenses more than one year after the end of the fiscal year in which the fee/expense was deferred. The amounts subject to possible reimbursement under the expense limitation agreements at December 31, 2006 were as follows: Expenses Subject to Possible Reimbursement until December 31, 2007
Fund Class A Class B Class C Class Y Total ---- ------- ------- ------- ------- ----- Large Cap Value Fund $5,520 $7,469 $1,507 $ -- $14,496 Small Cap Value Fund -- -- -- 237 237 Capital Growth Fund 7,891 1,802 157 -- 9,850
Certain officers and directors of IXIS Advisors and its affiliates are also Trustees of the Funds. IXIS Advisors, CGM, Harris, Loomis Sayles, Vaughan Nelson and Westpeak are subsidiaries of IXIS Asset Management US Group, L.P. ("IXIS US Group") (formerly, IXIS Asset Management North America, L.P.), which is part of IXIS Asset Management Group, an international asset management group based in Paris, France. b. Administrative Fees. IXIS Advisors provides certain administrative services for the Funds and has subcontracted with State Street Bank to serve as sub-administrator. IXIS Advisors is a wholly-owned subsidiary of IXIS US Group. Pursuant to an agreement among IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash Management Trust ("IXIS Advisor Funds Trusts"), Loomis Sayles Funds I, Loomis Sayles Funds II ("Loomis Sayles Funds Trusts") and IXIS Advisors, each Fund pays IXIS Advisors monthly its pro rata portion of fees equal to an annual rate of 0.0675% of the first $5 billion of the average daily net assets of the IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts, 0.0625% of the next $5 billion, and 0.0500% of such assets in excess of $10 billion, subject to an annual aggregate minimum fee for the IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts of $5 million, which is reevaluated on an annual basis. New funds are subject to a prorated annual fee of $50,000 plus $12,500 per class and an additional $50,000 if managed by multiple subadvisors in their first calendar year of operations. 66 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 For the year ended December 31, 2006, amounts paid to IXIS Advisors for administrative fees were as follows:
Administrative Fund Fees ---- -------------- Targeted Equity Fund $429,903 International Fund 96,502 Focused Value Fund 145,192 Large Cap Value Fund 148,050 U.S. Diversified Portfolio 349,523 Value Fund 72,347 Small Cap Value Fund 70,513 Capital Growth Fund 35,338
c. Service and Distribution Fees. The Trusts have entered into a distribution agreement with IXIS Asset Management Distributors, L.P. ("IXIS Distributors"), a wholly-owned subsidiary of IXIS US Group. Pursuant to this agreement, IXIS Distributors serves as principal underwriter of the funds of the Trusts. 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 Distributors a monthly service fee at an annual rate not to exceed 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 an 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. Also under the Class B and Class C Plans, each Fund pays IXIS Distributors a monthly distribution fee at an 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, 2006, the Funds paid the following service and distribution fees:
Service Fee Distribution Fee ---------------------------- ------------------- Fund Class A Class B Class C Class B Class C ---- ------- ------- ------- ------- ------- Targeted Equity Fund $1,728,516 $123,852 $ 18,738 $ 371,557 $ 56,215 International Fund 252,677 84,057 54,146 252,169 162,439 Focused Value Fund 171,625 213,031 251,141 639,094 753,423 Large Cap Value Fund 461,466 121,778 45,643 365,332 136,927 U.S. Diversified Portfolio 972,878 401,607 117,535 1,204,821 352,606 Value Fund 254,242 49,629 7,074 148,885 21,223 Small Cap Value Fund 180,258 90,780 39,658 272,340 118,972 Capital Growth Fund 119,496 22,872 2,094 68,616 6,281
d. Commissions. The Funds have been informed that commissions (including CDSC) on Fund shares paid to IXIS Distributors by investors in shares of the Funds during the year ended December 31, 2006 were as follows:
Fund Commission ---- ---------- Targeted Equity Fund $408,420 International Fund 128,778 Focused Value Fund 342,303 Large Cap Value Fund 145,056 U.S. Diversified Portfolio 493,669 Value Fund 113,653 Small Cap Value Fund 115,922 Capital Growth Fund 69,540
67 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 For the year ended December 31, 2006, brokerage commissions for portfolio transactions paid to affiliated broker/dealers by the U.S. Diversified Portfolio were $24,951. e. Trustees Fees and Expenses. The Funds do not pay any compensation directly to their officers or Trustees who are directors, officers or employees of IXIS Advisors, IXIS Distributors and IXIS US Group, or their affiliates. The Chairperson of the Board receives a retainer fee at the annual rate of $200,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that she attends. Each Independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $55,000. Each Independent Trustee also receives a meeting attendance fee of $6,000 for each meeting of the Board of Trustees that he or she attends in person and $3,000 for each meeting of the Board of Trustees that he or she attends telephonically. In addition, each committee chairman receives an additional retainer fee at the annual rate of $10,000. Each Contract Review and Governance Committee member is compensated $4,000 for each Committee meeting that he or she attends in person and $2,000 for each meeting that he or she attends telephonically. Each Audit Committee member is compensated $5,000 for each Committee meeting that he or she attends in person and $2,500 for each meeting that he or she attends telephonically. These fees are allocated among the funds in the IXIS Advisor Funds Trusts and 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. 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 IXIS Advisor 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. Shareholders of Class A shares and Class Y shares of Targeted Equity Fund, International Fund, Focused Value Fund and Small Cap Value Fund are charged a 2% redemption fee if they redeem, including redeeming by exchange, Class A shares and Class Y shares within 60 days of their acquisition (including acquisition by exchange). The redemption fee is intended to offset the costs to the Funds of short-term trading, such as portfolio transaction and market impact costs associated with redemption activity and administrative costs associated with processing redemptions. The redemption fee is deducted from the shareholder's redemption or exchange proceeds and is paid to the Fund. The "first-in, first-out" (FIFO) method is used to determine the holding period of redeemed or exchanged shares, which means that if a shareholder 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 accounted for as an addition to paid-in capital and are presented in the Statements of Changes in Net Assets. 5. Line of Credit. Each Fund, together with certain other funds of IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts, participates in a $75,000,000 committed line of credit provided by State Street Bank. Interest is charged to each participating fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.09% per annum, payable at the end of each calendar quarter, is accrued and apportioned among the participating funds based on their average daily unused portion of the line of credit. For the year ended December 31, 2006, the Funds had no borrowings under this agreement. 6. 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 included in realized gains on investments in the Statements of Operations. For the year ended December 31, 2006, amounts rebated under these agreements were as follows:
Fund Rebates ---- -------- Targeted Equity Fund $402,508 International Fund 17,195 Focused Value Fund 83,253 Large Cap Value Fund 40,733 U.S. Diversified Portfolio 148,810 Value Fund 38,006 Small Cap Value Fund 31,504 Capital Growth Fund 18,216
7. Concentration of Risk. Focused Value Fund is a non-diversified fund. Compared with diversified mutual funds, the Focused Value Fund may invest a greater percentage of its assets in a particular company. Therefore, the Focused Value Fund's returns could be significantly affected by the performance of any one of the small number of stocks in its portfolio. 68 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 8. Capital Shares. Each Fund may issue an unlimited number of shares of beneficial interest without par value. Transactions in capital shares were as follows: Year Ended December 31, 2006 ----------------------------------- Targeted Equity Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 3,021,026 $ 32,094,011 Issued in connection with the reinvestment of distributions 2,175,752 22,722,255 ---------------- ----------------- 5,196,778 54,816,266 Redeemed (9,606,296) (102,106,132) ---------------- ----------------- Net change (4,409,518) $ (47,289,866) ---------------- ----------------- Class B Issued from the sale of shares 527,280 $ 5,168,973 Issued in connection with the reinvestment of distributions 158,904 1,525,452 ---------------- ----------------- 686,184 6,694,425 Redeemed (1,901,868) (18,667,272) ---------------- ----------------- Net change (1,215,684) $ (11,972,847) ---------------- ----------------- Class C Issued from the sale of shares 491,071 $ 4,828,598 Issued in connection with the reinvestment of distributions 19,469 187,296 ---------------- ----------------- 510,540 5,015,894 Redeemed (168,586) (1,657,411) ---------------- ----------------- Net change 341,954 $ 3,358,483 ---------------- ----------------- Class Y Issued from the sale of shares 134,863 $ 1,446,830 Issued in connection with the reinvestment of distributions 40,781 435,176 ---------------- ----------------- 175,644 1,882,006 Redeemed (175,923) (1,904,637) ---------------- ----------------- Net change (279) $ (22,631) ---------------- ----------------- Increase (decrease) from capital share transactions (5,283,527) $ (55,926,861) ================ =================
Year Ended December 31, 2005 ----------------------------------- Targeted Equity Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 2,114,436 $ 20,342,978 Issued in connection with the reinvestment of distributions 157,595 1,531,634 ---------------- ----------------- 2,272,031 21,874,612 Redeemed (10,590,304) (100,805,465) ---------------- ----------------- Net change (8,318,273) $ (78,930,853) ---------------- ----------------- Class B Issued from the sale of shares 479,091 $ 4,271,772 Issued in connection with the reinvestment of distributions 8,192 70,535 ---------------- ----------------- 487,283 4,342,307 Redeemed (1,703,082) (15,113,085) ---------------- ----------------- Net change (1,215,799) $ (10,770,778) ---------------- ----------------- Class C Issued from the sale of shares 247,891 $ 2,279,688 Issued in connection with the reinvestment of distributions 427 3,675 ---------------- ----------------- 248,318 2,283,363 Redeemed (87,175) (772,409) ---------------- ----------------- Net change 161,143 $ 1,510,954 ---------------- ----------------- Class Y Issued from the sale of shares 154,883 $ 1,499,898 Issued in connection with the reinvestment of distributions 4,853 49,839 ---------------- ----------------- 159,736 1,549,737 Redeemed (77,671) (745,305) ---------------- ----------------- Net change 82,065 $ 804,432 ---------------- ----------------- Increase (decrease) from capital share transactions (9,290,864) $ (87,386,245) ================ =================
Year Ended December 31, 2006 ----------------------------------- International Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 882,514 $ 19,025,323 Issued in connection with the reinvestment of distributions 620,244 13,054,791 ---------------- ----------------- 1,502,758 32,080,114 Redeemed (765,037) (16,553,658) ---------------- ----------------- Net change 737,721 $ 15,526,456 ---------------- ----------------- Class B Issued from the sale of shares 281,932 $ 5,558,168 ---------------- ----------------- Issued in connection with the reinvestment of distributions 217,726 4,157,074 ---------------- ----------------- 499,658 9,715,242 Redeemed (634,271) (12,632,454) ---------------- ----------------- Net change (134,613) $ (2,917,212) ---------------- ----------------- Class C Issued from the sale of shares 191,194 $ 3,765,350 Issued in connection with the reinvestment of distributions 123,876 2,364,479 ---------------- ----------------- 315,070 6,129,829 Redeemed (167,643) (3,338,110) ---------------- ----------------- Net change 147,427 $ 2,791,719 ---------------- ----------------- Increase (decrease) from capital share transactions 750,535 $ 15,400,963 ================ =================
Year Ended December 31, 2005 ----------------------------------- International Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 1,043,158 $ 18,504,622 Issued in connection with the reinvestment of distributions -- -- ---------------- ----------------- 1,043,158 18,504,622 Redeemed (837,941) (14,808,970) ---------------- ----------------- Net change 205,217 $ 3,695,652 ---------------- ----------------- Class B Issued from the sale of shares 203,605 $ 3,346,613 ---------------- ----------------- Issued in connection with the reinvestment of distributions -- -- ---------------- ----------------- 203,605 3,346,613 Redeemed (1,228,248) (20,075,132) ---------------- ----------------- Net change (1,024,643) $ (16,728,519) ---------------- ----------------- Class C Issued from the sale of shares 171,446 $ 2,829,915 Issued in connection with the reinvestment of distributions -- -- ---------------- ----------------- 171,446 2,829,915 Redeemed (185,571) (3,042,603) ---------------- ----------------- Net change (14,125) $ (212,688) ---------------- ----------------- Increase (decrease) from capital share transactions (833,551) $ (13,245.555) ================ =================
69 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 Year Ended December 31, 2006 ----------------------------------- Focused Value Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 762,517 $ 9,168,276 Issued in connection with the reinvestment of distributions 594,724 6,857,113 ---------------- ----------------- 1,357,241 16,025,389 Redeemed (2,756,214) (33,719,620) ---------------- ----------------- Net change (1,398,973) $ (17,694,231) ---------------- ----------------- Class B Issued from the sale of shares 460,413 $ 5,172,828 Issued in connection with the reinvestment of distributions 850,572 9,284,689 ---------------- ----------------- 1,310,985 14,457,517 Redeemed (2,469,943) (28,816,298) ---------------- ----------------- Net change (1,158,958) $ (14,358,781) ---------------- ----------------- Class C Issued from the sale of shares 840,633 $ 9,434,145 Issued in connection with the reinvestment of distributions 760,727 8,305,493 ---------------- ----------------- 1,601,360 17,739,638 Redeemed (4,218,781) (49,192,443) ---------------- ----------------- Net change (2,617,421) $ (31,452,805) ---------------- ----------------- Increase (decrease) from capital share transactions (5,175,352) $ (63,505,817) ================ =================
Year Ended December 31, 2005 ----------------------------------- Focused Value Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 1,278,667 $ 16,573,289 Issued in connection with the reinvestment of distributions 580,779 7,068,077 ---------------- ----------------- 1,859,446 23,641,366 Redeemed (3,318,671) (43,905,787) ---------------- ----------------- Net change (1,459,225) $ (20,264,421) ---------------- ----------------- Class B Issued from the sale of shares 576,120 $ 7,060,801 Issued in connection with the reinvestment of distributions 766,254 8,949,845 ---------------- ----------------- 1,342,374 16,010,646 Redeemed (1,639,139) (21,010,935) ---------------- ----------------- Net change (296,765) $ (5,000,289) ---------------- ----------------- Class C Issued from the sale of shares 1,319,958 $ 16,274,937 Issued in connection with the reinvestment of distributions 758,307 8,857,031 ---------------- ----------------- 2,078,265 25,131,968 Redeemed (2,893,997) (36,873,402) ---------------- ----------------- Net change (815,732) $ (11,741,434) ---------------- ----------------- Increase (decrease) from capital share transactions (2,571,722) $ (37,006,144) ================ =================
Year Ended December 31, 2006 ----------------------------------- Large Cap Value Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 1,331,189 $ 18,612,209 Issued in connection with the reinvestment of distributions 27,510 358,457 ---------------- ----------------- 1,358,699 18,970,666 Redeemed (2,887,544) (40,026,448) ---------------- ----------------- Net change (1,528,845) $ (21,055,782) ---------------- ----------------- Class B Issued from the sale of shares 176,257 $ 2,291,417 Issued in connection with the reinvestment of distributions 9,192 111,770 ---------------- ----------------- 185,449 2,403,187 Redeemed (1,936,076) (25,010,219) ---------------- ----------------- Net change (1,750,627) $ (22,607,032) ---------------- ----------------- Class C Issued from the sale of shares 113,625 $ 1,446,870 Issued in connection with the reinvestment of distributions 1,654 20,078 ---------------- ----------------- 115,279 1,466,948 Redeemed (486,431) (6,230,411) ---------------- ----------------- Net change (371,152) $ (4,763,463) ---------------- ----------------- Class Y Issued from the sale of shares 76,363 $ 1,102,604 Issued in connection with the reinvestment of distributions 2,238 30,077 ---------------- ----------------- 78,601 1,132,681 Redeemed (237,315) (3,357,897) ---------------- ----------------- Net change (158,714) $ (2,225,216) ---------------- ----------------- Increase (decrease) from capital share transactions (3,809,338) $ (50,651,493) ================ =================
Year Ended December 31, 2005 ----------------------------------- Large Cap Value Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 1,068,733 $ 13,952,739 Issued in connection with the reinvestment of distributions 14,688 191,232 ---------------- ----------------- 1,083,421 14,143,971 Redeemed (3,550,446) (46,275,347) ---------------- ----------------- Net change (2,467,025) $ (32,131,376) ---------------- ----------------- Class B Issued from the sale of shares 262,250 $ 3,214,063 Issued in connection with the reinvestment of distributions 6,033 73,844 ---------------- ----------------- 268,283 3,287,907 Redeemed (1,873,402) (22,992,338) ---------------- ----------------- Net change (1,605,119) $ (19,704,431) ---------------- ----------------- Class C Issued from the sale of shares 233,814 $ 2,864,911 Issued in connection with the reinvestment of distributions 976 11,942 ---------------- ----------------- 234,790 2,876,853 Redeemed (699,505) (8,571,119) ---------------- ----------------- Net change (464,715) $ (5,694,266) ---------------- ----------------- Class Y Issued from the sale of shares 68,963 $ 925,029 Issued in connection with the reinvestment of distributions 1,195 16,006 ---------------- ----------------- 70,158 941,035 Redeemed (345,786) (4,615,016) ---------------- ----------------- Net change (275,628) $ (3,673,981) ---------------- ----------------- Increase (decrease) from capital share transactions (4,812,487) $ (61,204,054) ================ =================
70 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 Year Ended December 31, 2006 ----------------------------------- U.S. Diversified Portfolio Shares Amount ------------------------------------------------------ ---------------- ----------------- Class A Issued from the sale of shares 1,699,970 $ 36,351,386 Redeemed (3,689,517) (78,838,491) ---------------- ----------------- Net change (1,989,547) $ (42,487,105) ---------------- ----------------- Class B Issued from the sale of shares 536,719 $ 10,239,866 Redeemed (2,967,752) (56,524,819) ---------------- ----------------- Net change (2,431,033) $ (46,284,953) ---------------- ----------------- Class C Issued from the sale of shares 77,624 $ 1,484,914 Redeemed (490,888) (9,387,689) ---------------- ----------------- Net change (413,264) $ (7,902,775) ---------------- ----------------- Class Y Issued from the sale of shares 123,141 $ 2,825,376 Redeemed (212,914) (4,817,903) ---------------- ----------------- Net change (89,773) $ (1,992,527) ---------------- ----------------- Increase (decrease) from capital share transactions (4,923,617) $ (98,667,360) ================ =================
Year Ended December 31, 2005 ----------------------------------- U.S. Diversified Portfolio Shares Amount ------------------------------------------------------ ---------------- ----------------- Class A Issued from the sale of shares 2,385,720 $ 44,954,334 Redeemed (4,189,901) (79,262,654) ---------------- ----------------- Net change (1,804,181) $ (34,308,320) ---------------- ----------------- Class B Issued from the sale of shares 669,095 $ 11,320,578 Redeemed (4,207,942) (71,182,972) ---------------- ----------------- Net change (3,538,847) $ (59,862,394) ---------------- ----------------- Class C Issued from the sale of shares 102,734 $ 1,746,851 Redeemed (912,989) (15,415,642) ---------------- ----------------- Net change (810,255) $ (13,668,791) ---------------- ----------------- Class Y Issued from the sale of shares 142,301 $ 2,842,762 Redeemed (451,903) (9,048,524) ---------------- ----------------- Net change (309,602) $ (6,205,762) ---------------- ----------------- Increase (decrease) from capital share transactions (6,462,885) $ (114,045,267) ================ =================
Year Ended December 31, 2006 ----------------------------------- Value Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 1,203,187 $ 10,847,757 Issued in connection with the reinvestment of distributions 1,483,355 12,855,774 ---------------- ----------------- 2,686,542 23,703,531 Redeemed (1,895,422) (16,798,467) ---------------- ----------------- Net change 791,120 $ 6,905,064 ---------------- ----------------- Class B Issued from the sale of shares 265,829 $ 2,112,444 Issued in connection with the reinvestment of distributions 312,207 2,393,002 ---------------- ----------------- 578,036 4,505,446 Redeemed (1,144,083) (9,035,508) ---------------- ----------------- Net change (566,047) $ (4,530,062) ---------------- ----------------- Class C Issued from the sale of shares 44,612 $ 357,458 Issued in connection with the reinvestment of distributions 40,018 306,916 ---------------- ----------------- 84,630 664,374 Redeemed (87,753) (687,888) ---------------- ----------------- Net change (3,123) $ (23,514) ---------------- ----------------- Increase (decrease) from capital share transactions 221,950 $ 2,351,488 ================ =================
Year Ended December 31, 2005 ----------------------------------- Value Fund Shares Amount -------------------------------------------------------------- ---------------- ----------------- Class A Issued from the sale of shares 752,413 $ 6,758,994 Issued in connection with the reinvestment of distributions 1,432,023 12,200,602 ---------------- ----------------- 2,184,436 18,959,596 Redeemed (2,182,286) (19,556,017) ---------------- ----------------- Net change 2,150 $ (596,421) ---------------- ----------------- Class B Issued from the sale of shares 229,964 $ 1,881,852 Issued in connection with the reinvestment of distributions 393,062 3,030,283 ---------------- ----------------- 623,026 4,912,135 Redeemed (1,018,265) (8,370,264) ---------------- ----------------- Net change (395,239) $ (3,458,129) ---------------- ----------------- Class C Issued from the sale of shares 51,464 $ 417,159 Issued in connection with the reinvestment of distributions 39,420 303,708 ---------------- ----------------- 90,884 720,867 Redeemed (77,457) (636,872) ---------------- ----------------- Net change 13,427 $ 83,995 ---------------- ----------------- Increase (decrease) from capital share transactions (379,662) $ (3,970,555) ================ =================
71 NOTES TO FINANCIAL STATEMENTS (continued) December 31, 2006 Year Ended December 31, 2006 ----------------------------------- Small Cap Value Fund Shares Amount ------------------------------------------------------ ---------------- ----------------- Class A Issued from the sale of shares 1,565,095 $ 30,243,879 Redeemed (817,467) (15,859,750) ---------------- ----------------- Net change 747,628 $ 14,384,129 ---------------- ----------------- Class B Issued from the sale of shares 154,897 $ 2,772,776 Redeemed (822,694) (14,729,819) ---------------- ----------------- Net change (667,797) $ (11,957,043) ---------------- ----------------- Class C Issued from the sale of shares 364,171 $ 6,498,460 Redeemed (251,618) (4,488,816) ---------------- ----------------- Net change 112,553 $ 2,009,644 ---------------- ----------------- Class Y* Issued from the sale of shares 20,430 $ 424,039 Redeemed -- -- ---------------- ----------------- Net change 20,430 $ 424,039 ---------------- ----------------- Increase (decrease) from capital share transactions 212,814 $ 4,860,769 ================ =================
Year Ended December 31, 2005 ----------------------------------- Small Cap Value Fund Shares Amount ------------------------------------------------------ ---------------- ----------------- Class A Issued from the sale of shares 1,322,502 $ 21,908,202 Redeemed (797,816) (13,154,538) ---------------- ----------------- Net change 524,686 $ 8,753,664 ---------------- ----------------- Class B Issued from the sale of shares 172,453 $ 2,628,609 Redeemed (1,455,176) (22,158,268) ---------------- ----------------- Net change (1,282,723) $ (19,529,659) ---------------- ----------------- Class C Issued from the sale of shares 177,290 $ 2,719,736 Redeemed (246,708) (3,789,067) ---------------- ----------------- Net change (69,418) $ (1,069,331) ---------------- ----------------- Class Y* Issued from the sale of shares -- -- Redeemed -- -- ---------------- ----------------- Net change -- -- ---------------- ----------------- Increase (decrease) from capital share transactions (827,455) $ (11,845,326) ================ =================
Year Ended December 31, 2006 ----------------------------------- Capital Growth Fund Shares Amount ------------------------------------------------------ ---------------- ----------------- Class A Issued from the sale of shares 209,910 $ 2,590,783 Redeemed (798,809) (9,769,562) ---------------- ----------------- Net change (588,899) $ (7,178,779) ---------------- ----------------- Class B Issued from the sale of shares 81,915 $ 870,627 Redeemed (282,316) (2,968,891) ---------------- ----------------- Net change (200,401) $ (2,098,264) ---------------- ----------------- Class C Issued from the sale of shares 12,274 $ 135,304 Redeemed (36,537) (386,794) ---------------- ----------------- Net change (24,263) $ (251,490) ---------------- ----------------- Increase (decrease) from capital share transactions (813,563) $ (9,528,533) ================ =================
Year Ended December 31, 2005 ----------------------------------- Capital Growth Fund Shares Amount ------------------------------------------------------ ---------------- ----------------- Class A Issued from the sale of shares 241,489 $ 2,743,935 Redeemed (1,057,103) (12,074,125) ---------------- ----------------- Net change (815,614) $ (9,330,190) ---------------- ----------------- Class B Issued from the sale of shares 93,730 $ 919,070 Redeemed (425,145) (4,178,212) ---------------- ----------------- Net change (331,415) $ (3,259,142) ---------------- ----------------- Class C Issued from the sale of shares 5,876 $ 57,428 Redeemed (15,868) (154,158) ---------------- ----------------- Net change (9,992) $ (96,730) ---------------- ----------------- Increase (decrease) from capital share transactions (1,157,021) $ (12,686,062) ================ =================
* From commencement of Class operations on August 31, 2006 through December 31, 2006. 72 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, and IXIS Advisor Funds Trust III and Shareholders of CGM Advisor Targeted Equity Fund, Hansberger International Fund, IXIS U.S. Diversified Portfolio, IXIS Value Fund, Vaughan Nelson Small Cap Value Fund, Westpeak Capital Growth Fund, Harris Associates Large Cap Value Fund and Harris Associates Focused Value Fund: In our opinion, the accompanying statements of assets and liabilities, including the portfolios 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 CGM Advisor Targeted Equity Fund, Hansberger International Fund, IXIS U.S. Diversified Portfolio, IXIS Value Fund, Vaughan Nelson Small Cap Value Fund and Westpeak Capital Growth Fund, each a series of IXIS Advisor Funds Trust I; the Harris Associates Large Cap Value Fund, a series of IXIS Advisor Funds Trust II; and the Harris Associates Focused Value Fund, a series of IXIS Advisor Funds Trust III (collectively, the "Funds"), at December 31, 2006, 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, 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 audit 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, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts February 23, 2007 73 2006 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (unaudited) Corporate Dividends Received Deduction. For the fiscal year ended December 31, 2006, a percentage of dividends distributed by the Funds listed below qualify for the dividends received deduction for corporate shareholders. These percentages are as follows:
Qualifying Fund Percentage ---- ---------- Targeted Equity Fund 61.52% Large Cap Value Fund 100.00% Value Fund 52.26%
Capital Gains Distributions. Pursuant to Internal Revenue Section 852(b), the following Funds paid distributions, which have been designated as capital gains distributions for the fiscal year ended December 31, 2006.
Fund Amount ---- ----------- Targeted Equity Fund $20,781,541 International Fund 16,199,875 Focused Value 37,532,762 Value Fund 12,664,466
Qualified Dividend Income. A percentage of dividends distributed by the Funds during the fiscal year ended December 31, 2006 are considered qualified dividend income, and are eligible for reduced tax rates. These lower rates range from 5% to 15% depending on an individual's tax bracket. These percentages are noted below:
Fund Percentage ---- ---------- Targeted Equity Fund 100.00% International Fund 33.80% Large Cap Value Fund 100.00% Value Fund 51.18%
74 TRUSTEE AND OFFICER INFORMATION The tables below provide certain information regarding the Trustees and officers of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II and IXIS Advisor Funds Trust III (the "Trusts"). Unless otherwise indicated, the address of all persons below is 399 Boylston Street, Boston, MA 02116. The Trusts' Statements of Additional Information include additional information about the Trustees of the Trusts and are available by calling IXIS Advisor 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, Douglas Dillon Professor and 38 (3/23/40) since 1984 for IXIS Advisor Director of the Belfer Center Director, Taubman Centers, Funds Trust I, (including its for Science and International Inc. (real estate investment predecessors) since 1995 Affairs, John F. Kennedy trust) for IXIS Advisor Funds School of Government, Trust II and IXIS Advisor Harvard University Funds Trust III Contract Review and Governance Committee Member Charles D. Baker Trustee, President and Chief Executive 38 (11/13/56) since 2005 Officer, Harvard Pilgrim None Audit Committee Member Health Care (health plan) Edward A. Benjamin Trustee, Retired 38 (5/30/38) since 2003 for IXIS Advisor Director, Precision Optics Funds Trust I, IXIS Advisor Corporation (optics Funds Trust II, and IXIS manufacturer) Advisor Funds Trust III Chairman of the Contract Review and Governance Committee Member Daniel M. Cain Trustee, President and Chief Executive 38 (2/24/45) since 1996 for IXIS Advisor Officer, Cain Brothers & Director, Sheridan Funds Trust I, IXIS Advisor Company, Incorporated Healthcare Inc. (physician Funds Trust II and IXIS (investment banking) practice management); Advisor Funds Trust III Trustee, Lexington Strategic Chairman of the Audit Asset Corporation (realty Committee investment trust) Richard Darman Trustee, Partner, The Carlyle Group 38 (5/10/43) since 1996 for IXIS Advisor (investments); formerly, Director and Chairman of Funds Trust I, IXIS Advisor Professor, John F. Kennedy Board of Directors, AES Funds Trust II and IXIS School of Government, Corporation (international Advisor Funds Trust III Harvard University power company) Contract Review and Governance Committee Member
75 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, since 1982 for President, Strategic Advisory 38 (2/17/42) IXIS Advisor Funds Trust I Services (management Director, Verizon (including its predecessors) consulting); formerly, Senior Communications; since 1993 for IXIS Advisor Vice President and Director, Director, Rohm and Haas Funds Trust II; and since The Boston Consulting Group, Company (specialty 1995 for IXIS Advisor Inc. (management consulting) chemicals); Funds Trust III Director, AES Corporation Chairperson of the Board (international power of Trustees since November company) 2005 Ex officio member of the Audit Committee and Contract Review and Governance Committee Cynthia L. Walker Trustee, Executive Dean for 38 (7/25/56) since 2005 Administration (formerly, None Audit Committee Member Dean for Finance and CFO), Harvard Medical School INTERESTED TRUSTEES Robert J. Blanding/1/ Trustee, President, Chairman, Director, 38 (4/14/47) since 2003 and Chief Executive Officer, None 555 California Street Loomis, Sayles & Company, San Francisco, CA 94104 L.P.; President and Chief Executive Officer for Loomis Sayles Funds I; Chief Executive Officer for Loomis Sayles Funds II John T. Hailer/2/ President, Chief Executive President and Chief Executive 38 (11/23/60) Officer and Trustee Officer, IXIS Asset None since 2000 Management Advisors, L.P., IXIS Asset Management Distributors, L.P. and IXIS Asset Management Global Associates, L.P.; Executive Vice President, Loomis Sayles Funds I; President and Chief Executive Officer, AEW Real Estate Income Fund, IXIS Advisor Cash Management Trust, and IXIS Advisor Funds Trust IV
* Each Trustee serves until retirement, resignation or removal from the Board of Trustees. The current retirement age is 72. The position of Chairperson of the Board is appointed for a two-year term. 76 TRUSTEE AND OFFICER INFORMATION ** Each person listed above, except as noted, holds the same position(s) with the Trusts. Previous positions during the past five years with IXIS Asset Management Distributors, L.P. (the "Distributor"), IXIS Asset Management Advisors, L.P. ("IXIS Advisors") or Loomis, Sayles & Company, L.P. are omitted if not materially different from a trustee's or officer's current position with such entity. ***The Trustees of the Trusts serve as trustees of a fund complex that includes all series of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash Management Trust, AEW Real Estate Income Fund, Loomis Sayles Funds I and Loomis Sayles Funds II (together the "IXIS Advisor Funds and Loomis Sayles Funds Trusts"). /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. /2/ Mr. Hailer is deemed 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 ("IXIS Distribution Corporation"); and President and Chief Executive Officer of IXIS Asset Management Global Associates, L.P., IXIS Asset Management Advisors and IXIS Asset Management Distributors, L.P. 77 TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Trusts Term of Principal Occupation(s) Name and Date of Birth Office and Length of Time Served* During Past 5 Years** ---------------------- --------------------------------- --------------------- OFFICERS OF THE TRUSTS Coleen Downs Dinneen Secretary, Clerk and Chief Legal Officer Senior Vice President, General (12/16/60) since September 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. and IXIS Asset Management Advisors, L.P. Russell L. Kane Chief Compliance Officer, Chief Compliance Officer for Mutual (7/23/69) since May 2006; Assistant Secretary Funds, Vice President, Associate since June 2004 General Counsel, Assistant Secretary and Assistant Clerk, IXIS Asset Management Distribution Corporation, IXIS Asset Management Distributors, L.P. and IXIS Asset Management Advisors, L.P.; formerly, Senior Counsel, Columbia Management Group. Michael C. Kardok Treasurer, Principal Financial and Senior Vice President, IXIS Asset (7/17/59) Accounting Officer Management Advisors, L.P. and IXIS since October 2004 Asset Management Distributors, L.P.; formerly, Senior Director, PFPC Inc; formerly, Vice President--Division Manager, First Data Investor Services, Inc. Max J. Mahoney Anti-Money Laundering Officer Senior Vice President, Deputy (5/1/62) and Assistant Secretary General Counsel, Assistant Secretary since August 2005 and Assistant Clerk, IXIS Asset Management Distribution Corporation, IXIS Asset Management Distributors, L.P. and IXIS Asset Management Advisors, L.P.; Chief Compliance Officer, IXIS Asset Management Advisors L.P. formerly, Senior Counsel, MetLife, Inc.; formerly, Associate Counsel, LPL Financial Services, Inc. John E. Pelletier Chief Operating Officer Executive Vice President and Chief (6/24/64) since September 2004 Operating Officer (formerly, Senior Vice President, General Counsel, Secretary and Clerk), IXIS Asset Management Distribution Corporation, IXIS Asset Management Distributors, L.P. and IXIS Asset Management Advisors, L.P.
* Each officer of the Trusts serves for an indefinite term in accordance with their current By-laws until the date his or her successor is elected and qualified, or until he or she sooner dies, retires, is removed or becomes disqualified. ** Each person listed above, except as noted, holds the same position(s) with the IXIS Advisor Funds and Loomis Sayles Funds Trusts. Previous positions during the past five years with the Distributor, IXIS Advisors or Loomis Sayles are omitted, if not materially different from a trustee's or officer's current position with such entity. 78 Item 2. Code of Ethics. The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer and persons performing similar functions. Item 3. Audit Committee Financial Expert. The Board of Trustees of the Registrant has established an audit committee. Ms. Cynthia L. Walker, Mr. Daniel M. Cain and Mr. Charles D. Baker are members of the audit committee and have been designated as "audit committee financial experts" by the Board of Trustees. Each of these individuals is also an Independent Trustee of the Registrant. Item 4. Principal Accountant Fees and Services. Fees paid to Principal Accountant by the Fund. The table below sets forth fees billed by the principal accountant, PricewaterhouseCoopers LLP, for the past two fiscal years for professional services rendered in connection with a) the audit of the Registrant'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 Registrant, other than the services provided reported as a part of (a) through (c) of this Item.
Audit fees Audit-related fees/1/ Tax fees/2/ All other fees/3/ --------------- --------------------- ------------- ----------------- 2005 2006 2005 2006 2005 2006 2005 2006 ------- ------- ---- ------ ------ ------ ---- ------ Harris Associates Large Cap Value Fund $23,700 $29,504 $729 $3,750 $1,316 $1,313 -- $2,755
-------- 1. The audit-related fees for 2005 consist of the performance of agreed upon procedures relating to the Trust's deferred compensation plan. The audit-related fees for 2006 consist of the performance of agreed upon procedures related to a change in the Trust's custodian. 2. The tax fees consist of a review of the Trust's year-end shareholder reporting. 3. Other fees consist of a review of income and expense allocation methods in conjunction with the annual review of the Trust's management contract. Aggregate fees billed to the Registrant for non-audit services during 2005 and 2006 were $2,045 and $7,818, 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 IXIS Asset Management Advisors, L.P. and entities controlling, controlled by or under common control with IXIS Asset Management Advisors, L.P. that provide ongoing services to the Trust ("Control Affiliates") for the last two fiscal years.
Audit-related fees Tax fees All other fees ------------------ --------------- --------------- 2005 2006 2005 2006 2005 2006 -------- ---- ------- ------- ------- ------- Control Affiliates $102,000 -- $34,715 $96,670 $35,000 $15,800
Aggregate fees billed to Control Affiliates for non-audit services during 2005 and 2006 were $171,715 and $112,470, 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 Registrant'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 Registrant'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 engagements 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. Included as part of the Report to Shareholders filed as Item 1 herewith. 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. There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees. Item 11. Controls and Procedures. The Registrant's principal executive officer and principal financial officer have concluded that the Registrant's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Registrant 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 changes in the Registrant's internal control over financial reporting that occurred during the Registrant's last fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. Item 12. Exhibits. (a) (1) Code of Ethics required by Item 2 hereof, filed herewith as exhibit (a)(1). (b) (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 [17 CFR 270.30a-2(a)], filed herewith as exhibits (a)(2)(1)and (a)(2)(2), respectively. (a) (3) Not applicable. (a) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 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. IXIS Advisor Funds Trust II By: /s/ John T. Hailer ----------------------------- Name: John T. Hailer Title: President and Chief Executive Officer Date: February 26, 2007 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 26, 2007 By: /s/ Michael C. Kardok ----------------------------- Name: Michael C. Kardok Title: Treasurer Date: February 26, 2007