-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VvUG9C5yyIjkTV4BAzaL7YQMNUOMcOFX4U+YsOflspkJ+DRZ+JjlCAvRh4yfBEqD kSTvd4qcnUgJY1yD9jspDA== 0001193125-04-098661.txt : 20040604 0001193125-04-098661.hdr.sgml : 20040604 20040604102213 ACCESSION NUMBER: 0001193125-04-098661 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040604 EFFECTIVENESS DATE: 20040604 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CDC NVEST FUNDS TRUST II CENTRAL INDEX KEY: 0000052136 IRS NUMBER: 041990692 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-00242 FILM NUMBER: 04848701 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 8003997788 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: NVEST FUNDS TRUST II DATE OF NAME CHANGE: 20000202 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND FUNDS TRUST II DATE OF NAME CHANGE: 19940615 FORMER COMPANY: FORMER CONFORMED NAME: TNE FUNDS TRUST DATE OF NAME CHANGE: 19940615 N-CSRS 1 dncsrs.txt CDC NVEST FUNDS TRUST II UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-242 CDC Nvest Funds Trust II (Exact name of registrant as specified in charter) 399 Boylston Street, Boston, Massachusetts 02116 (Address of principal executive offices) (Zip code) John E. Pelletier, Esq. CDC IXIS Asset Management Distributors, L.P. 399 Boylston Street Boston, Massachusetts 02116 (Name and address of agent for service) Registrant's telephone number, including area code: (617) 449-2801 Date of fiscal year end: September 30, 2003 Date of reporting period: March 31, 2004 Item 1. Reports to Stockholders. The Registrant's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: CDC Nvest Funds Fixed Income Report [LOGO] CDC NvestFunds(SM) CDC IXIS Asset Management Distributors - -------------------------------------------------------------------------------- Income Funds Semiannual Report March 31, 2004 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund [LOGO] LOOMIS . SAYLES & COMPANY, L.P. Loomis Sayles Government Securities Fund Loomis Sayles High Income Fund Loomis Sayles Limited Term Government and Agency Fund (formerly Loomis Sayles Limited Term U.S. Government Fund) Loomis Sayles Massachusetts Tax Free Income Fund Loomis Sayles Municipal Income Fund Loomis Sayles Strategic Income Fund TABLE OF CONTENTS Management Discussion and Performance....Page 1 Schedule of Investments.................Page 16 Financial Statements....................Page 37 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- Objective: Seeks a high level of current income consistent with what the fund considers reasonable risk. It invests primarily in corporate and U.S. government bonds. - -------------------------------------------------------------------------------- Strategy: Invests primarily in U.S. corporate and U.S. government bonds - -------------------------------------------------------------------------------- Fund Inception: November 7, 1973 - -------------------------------------------------------------------------------- Managers: Peter W. Palfrey Richard G. Raczkowski Loomis, Sayles & Company, L.P. - -------------------------------------------------------------------------------- Symbols: Class A NEFRX Class B NERBX Class C NECRX Class Y NERYX - -------------------------------------------------------------------------------- What You Should Know: Fixed-income securities are subject to credit risk and interest rate risk; their value generally rises when prevailing interest rates fall and falls when rates rise. This fund may invest in lower-rated bonds with higher yields and increased risks; securities subject to prepayment risk; and foreign market securities with special risks. Management Discussion - -------------------------------------------------------------------------------- Better business conditions arising from the ongoing expansion of the U.S. economy helped companies strengthen their finances. These improvements and the brighter outlook for profits drew investors to corporate issues over the past six months in their quest for better returns. As a result, corporate bond prices generally moved higher. For the six months ended March 31, 2004, the total return on Class A shares at net asset value of Loomis Sayles Core Plus Bond Fund was 4.42%, including $0.31 per share in reinvested dividends. The fund's benchmark, Lehman Aggregate Bond Index, returned 2.98% for the same period. The Fund's 30-day SEC yield at the end of March 2004 was 3.30%. Corporate holdings drove positive returns The economic recovery led us to emphasize corporate bonds, an approach that was key to the fund's strong performance during the period. Investment-grade issues were the leading contributor. High-yield was close behind, following a sharp rally in the fourth quarter of 2003; BB-rated bonds performed particularly well late in this year's first quarter. A lesser, but important contribution came from mortgage-backed securities. Our strategy of downplaying U.S. Treasury and agency bonds was also beneficial, as these assets delivered relatively low returns. Chemical, telecom and cable issues aided performance IMC Global, a leading producer of fertilizers and animal feeds, benefited from growth in world agriculture and rising grain prices. Higher prices for grain encourage farmers to plant more acreage, creating incremental demand for IMC's products. IMC also announced plans to merge its fertilizer business with Cargill. A rebound in telecommunications companies helped push bonds of AT&T, LCI International and others higher. Securities of cable operators Comcast and CSC Holdings also rose. We sold Comcast on this strength. AT&T Wireless climbed sharply on news of its pending acquisition by Cingular Corp. Non-dollar holdings played an important role We took advantage of the weakness in the U.S. dollar with our holdings of non-dollar-denominated bonds, which contributed to the fund's results. Bonds of the Federal National Mortgage Association (FNMA) denominated in Australian dollars were the fund's best performer, as the Australian dollar continued its recent strength. Weak results in scattered sectors With many corporate sectors performing well, restaurants, real estate investment trusts and home builders had only modest returns. Poor investment timing and security selection held the fund back in these sectors, as weakness in 2004 offset gains of last year's fourth quarter. Citizens Communications, a New York local telephone company; publisher News America Holdings; and Dow Chemical lagged the market following gains last year and have been sold. Focus remains on credit quality and the dollar The recovery still appears to be underway, and we remain optimistic about the improving credit quality of U.S. corporate bonds in the months ahead. Many corporate sectors have risen substantially, so current yield may become a greater focus for the fund. We also may adjust our non-dollar commitments by paring back exposure to Canadian dollar-and euro-denominated issues in favor of potentially better prospects among Asian currencies, including Singapore's dollar. Continued growth in the U.S. Gross Domestic Product will probably lead to higher short-term interest rates as the Federal Reserve Board moves to relieve inflationary pressures, perhaps in the post-election period. March's dramatic increase in job creation affirms our expectation that rates are likely to head higher. 1 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund - -------------------------------------------------------------------------------- Investment Results through March 31, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- March 31, 1994 through March 31, 2004 [CHART] Line chart Class A Lehman Lehman @ Maximum Aggregate US Month Net Asset Sales Bond Credit End Value (1) Charge (2) Index (3) Index (4) - ---------- --------- ---------- --------- --------- 3/31/1994 10,000 9,550 10000 10,000 4/30/1994 9,897 9,451 9920 9,904 5/31/1994 9,845 9,402 9919 9,867 6/30/1994 9,784 9,343 9897 9,843 7/31/1994 9,968 9,519 10093 10,092 8/31/1994 10,020 9,570 10106 10,103 9/30/1994 9,914 9,468 9957 9,915 10/31/1994 9,888 9,443 9948 9,892 11/30/1994 9,861 9,417 9926 9,876 12/31/1994 9,912 9,466 9995 9,957 1/31/1995 10,079 9,625 10193 10,169 2/28/1995 10,410 9,942 10435 10,462 3/31/1995 10,413 9,945 10499 10,547 4/30/1995 10,618 10,140 10646 10,725 5/31/1995 11,086 10,587 11058 11,230 6/30/1995 11,185 10,682 11139 11,332 7/31/1995 11,125 10,624 11114 11,282 8/31/1995 11,322 10,813 11248 11,463 9/30/1995 11,464 10,948 11357 11,599 10/31/1995 11,617 11,094 11505 11,750 11/30/1995 11,798 11,267 11677 11,975 12/31/1995 11,970 11,431 11841 12,172 1/31/1996 12,020 11,479 11920 12,251 2/29/1996 11,759 11,230 11713 11,960 3/31/1996 11,701 11,174 11631 11,858 4/30/1996 11,602 11,080 11566 11,760 5/31/1996 11,592 11,071 11542 11,739 6/30/1996 11,762 11,232 11697 11,911 7/31/1996 11,792 11,261 11729 11,934 8/31/1996 11,792 11,261 11710 11,898 9/30/1996 12,066 11,523 11914 12,150 10/31/1996 12,372 11,815 12178 12,482 11/30/1996 12,670 12,099 12386 12,748 12/31/1996 12,522 11,959 12271 12,572 1/31/1997 12,592 12,025 12309 12,590 2/28/1997 12,671 12,101 12339 12,643 3/31/1997 12,482 11,920 12203 12,446 4/30/1997 12,619 12,051 12385 12,634 5/31/1997 12,789 12,214 12502 12,777 6/30/1997 13,014 12,428 12651 12,958 7/31/1997 13,538 12,928 12992 13,433 8/31/1997 13,307 12,708 12881 13,234 9/30/1997 13,571 12,961 13071 13,466 10/31/1997 13,700 13,084 13261 13,637 11/30/1997 13,763 13,144 13322 13,713 12/31/1997 13,906 13,280 13456 13,859 1/31/1998 14,090 13,456 13629 14,023 2/28/1998 14,136 13,500 13618 14,019 3/31/1998 14,223 13,583 13665 14,070 4/30/1998 14,288 13,645 13736 14,159 5/31/1998 14,434 13,784 13867 14,327 6/30/1998 14,488 13,836 13984 14,433 7/31/1998 14,450 13,799 14014 14,420 8/31/1998 14,306 13,663 14242 14,487 9/30/1998 14,859 14,191 14576 14,957 10/31/1998 14,703 14,041 14499 14,726 11/30/1998 14,995 14,320 14581 15,003 12/31/1998 15,018 14,342 14625 15,047 1/31/1999 15,180 14,497 14729 15,196 2/28/1999 14,873 14,204 14472 14,835 3/31/1999 15,078 14,400 14552 14,940 4/30/1999 15,198 14,514 14598 14,984 5/31/1999 14,867 14,198 14470 14,783 6/30/1999 14,772 14,107 14424 14,706 7/31/1999 14,714 14,052 14363 14,625 8/31/1999 14,655 13,996 14356 14,589 9/30/1999 14,903 14,233 14522 14,748 10/31/1999 14,938 14,266 14576 14,815 11/30/1999 14,960 14,287 14575 14,831 12/31/1999 14,967 14,294 14505 14,753 1/31/2000 14,905 14,234 14457 14,701 2/29/2000 15,073 14,394 14632 14,837 3/31/2000 15,279 14,591 14825 14,963 4/30/2000 14,997 14,322 14782 14,832 5/31/2000 14,887 14,217 14775 14,777 6/30/2000 15,338 14,647 15083 15,148 7/31/2000 15,428 14,734 15220 15,331 8/31/2000 15,627 14,923 15440 15,531 9/30/2000 15,650 14,946 15537 15,613 10/31/2000 15,561 14,861 15640 15,628 11/30/2000 15,708 15,002 15896 15,830 12/31/2000 16,074 15,350 16191 16,138 1/31/2001 16,472 15,731 16456 16,579 2/28/2001 16,635 15,887 16599 16,724 3/31/2001 16,656 15,906 16682 16,827 4/30/2001 16,562 15,816 16613 16,767 5/31/2001 16,667 15,917 16713 16,921 6/30/2001 16,671 15,921 16776 17,006 7/31/2001 17,093 16,324 17151 17,450 8/31/2001 17,283 16,505 17348 17,684 9/30/2001 17,211 16,436 17550 17,658 10/31/2001 17,549 16,760 17917 18,097 11/30/2001 17,433 16,649 17670 17,939 12/31/2001 17,238 16,463 17558 17,816 1/31/2002 17,199 16,425 17700 17,967 2/28/2002 17,133 16,362 17872 18,103 3/31/2002 16,945 16,183 17574 17,768 4/30/2002 17,104 16,335 17915 18,016 5/31/2002 17,248 16,471 18067 18,254 6/30/2002 16,832 16,075 18224 18,284 7/31/2002 16,637 15,889 18444 18,274 8/31/2002 17,016 16,251 18755 18,748 9/30/2002 17,073 16,304 19059 19,104 10/31/2002 16,976 16,212 18972 18,883 11/30/2002 17,299 16,521 18967 19,127 12/31/2002 17,728 16,930 19359 19,691 1/31/2003 17,827 17,025 19375 19,755 2/28/2003 18,085 17,271 19643 20,150 3/31/2003 18,136 17,320 19628 20,165 4/30/2003 18,408 17,580 19790 20,538 5/31/2003 18,774 17,929 20159 21,186 6/30/2003 18,804 17,958 20119 21,134 7/31/2003 18,159 17,342 19443 20,232 8/31/2003 18,333 17,508 19572 20,391 9/30/2003 18,861 18,012 20090 21,103 10/31/2003 18,813 17,967 19902 20,878 11/30/2003 18,928 18,076 19950 20,974 12/31/2003 19,234 18,368 20153 21,208 1/31/2004 19,398 18,525 20315 21,422 2/29/2004 19,548 18,668 20535 21,692 3/31/2004 19,694 18,802 20689 21,901 Average Annual Total Returns -- March 31, 2004 - --------------------------------------------------------------------------------
Since 6 Months 1 Year 5 Years 10 Years Inception -------- ------ ------- -------- --------- Class A (Inception 11/7/73) Net Asset Value/1/ 4.42% 8.59% 5.49% 7.01% -- With Maximum Sales Charge/2/ -0.30 3.69 4.51 6.52 -- Class B (Inception 9/13/93) Net Asset Value/1/ 4.05 7.75 4.73 6.22 -- With CDSC/5/ -0.95 2.75 4.40 6.22 -- Class C (Inception 12/30/94) Net Asset Value/1/ 4.05 7.75 4.70 -- 6.75% With CDSC/5/ 3.05 6.75 4.70 -- 6.75 Class Y (Inception 12/30/94) Net Asset Value/1/ 4.52 8.97 5.93 -- 8.01
- --------------------------------------------------------------------------------
Since Class C & Y Comparative Performance 6 Months 1 Year 5 Years 10 Years Inception/7/ - ----------------------- -------- ------ ------- -------- ------------ Lehman Aggregate Bond Index/3/ 2.98% 5.40% 7.29% 7.54% 8.18% Lehman U.S. Credit Index/4/ 3.78 8.61 7.95 8.16 8.90 Lipper Int. Investment Grade Debt Avg./6/ 2.79 5.43 6.45 6.71 7.31
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 any dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. Class Y shares are available to certain institutional investors only. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio as of March 31, 2004 - -------------------------------------------------------------------------------- Credit Quality* [CHART] Pie chart Aaa 43.4% Aa 2.7% A 6.4% Baa 24.7% Ba 16.5% B 2.2% Caa 0.9% Short term & other 3.2% * Determined using the higher of the credit ratings assigned to each security by Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of comparable quality as determined by Loomis Sayles). Effective Maturity [CHART] Pie chart Average Effective Maturity: 6.9 years 1year or less 3.2% 1-5 years 54.9% 5-10 years 29.1% 10+ years 12.8% Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 4.50%. /3/ Lehman Aggregate Bond Index is an unmanaged index of investment-grade bonds with one- to ten-year maturities issued by the U.S. government, its agencies and U.S. corporations. /4/ Lehman U.S. Credit Index is an unmanaged index that includes all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, investment-grade corporate debt. /5/ Performance for Class B shares assumes a maximum 5% 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. /6/ Lipper Intermediate Investment Grade Debt Funds Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Lipper Inc. /7/ The since-inception comparative performance figures shown for each Class of fund shares are calculated as follows: Class C from 12/31/94; Class Y from 12/31/94. 2 - -------------------------------------------------------------------------------- Loomis Sayles Government Securities Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- Objective: Seeks a high level of current income consistent with safety of principal by investing in U.S. government securities - -------------------------------------------------------------------------------- Strategy: Invests primarily in securities issued or guaranteed by the U.S. government or its agencies - -------------------------------------------------------------------------------- Fund Inception: September 16, 1985 - -------------------------------------------------------------------------------- Managers: John Hyll Clifton V. Rowe Loomis, Sayles & Company, L.P. - -------------------------------------------------------------------------------- Symbols: Class A NEFUX Class B NEUBX Class Y NEUYX - -------------------------------------------------------------------------------- What You Should Know: Fixed-income securities are subject to credit risk and interest rate risk; their value generally rises when prevailing interest rates fall and falls when rates rise. The fund also invests in real estate-related securities that are subject to prepayment risks, and U.S. government bonds that are guaranteed by the U.S. government; mutual funds that invest in these securities are not guaranteed. Management Discussion - -------------------------------------------------------------------------------- Interest rates trended irregularly down during the six months ended March 31, 2004, causing prices of longer-term bonds to rise to a greater degree than shorter-term issues. High-quality government bonds also did not fare as well as corporate bonds, as investors sought higher returns from lower quality bonds. For the first half of its fiscal year, Class A shares of Loomis Sayles Government Securities Fund provided a return of 2.02% at net asset value, including $0.22 in reinvested dividends. The Lehman Government Bond Index returned 2.49%, and the fund's new benchmark, the Lehman Long Government Bond Index, returned 4.16%. The benchmark was changed during the period because we believe the new index is more representative of the types of securities in which the fund may invest. Its higher weighting in mortgage-backed securities and shorter duration relative to its benchmarks were primarily responsible for the fund's underperformance. The fund's 30-day SEC yield at the end of March was 2.66%. Fund's duration was trimmed in response to interest rate forecast U.S. Treasury bonds maturing in 10 or more years were the best-performing sector within your fund's universe of government securities. As rates fell, Treasuries with longer maturities rose in value, reflecting investors' need for higher current income. Although interest rates declined during the six-month period, we trimmed the fund's duration to approximately 7.5 years at the end of March from 8.6 years, in anticipation of rate increases in the future. Duration measures a fund's price sensitivity to changing interest rates. When interest rates decline, a long duration is typically a benefit, but it becomes a drawback when rising rates send bond prices lower. A shorter duration also gives the fund greater flexibility to invest in higher-yielding bonds as issues reach maturity. Mortgage-backed holdings were disappointing The fund's mortgage-backed securities lagged longer duration U.S. Treasuries as interest rates continued to fall, triggering fears that mortgage holders would refinance. Nonetheless, the fund continued to maintain its emphasis on mortgage-backed securities. Although they are regarded as riskier than Treasuries securities, they are backed by U.S. agencies and generally offer higher yields. In a declining interest-rate environment, however, prepayment concerns are typical, which can result in their underperformance relative to longer duration U.S. Treasuries. Prices of some of our higher-coupon mortgage securities held up relatively well. Even though the market was concerned about prepayments, these higher-coupon mortgages were part of smaller pools and most prepayments had already occurred. For the most part, however, we traded out of higher-coupon mortgages in exchange for lower-coupon mortgages to enhance prepayment stability. Economic expansion may lead to higher interest rates We believe continued economic expansion will eventually lead to rising rates and falling bond prices. However, the opportunities to extend duration and earn additional income outweigh our concern for rising rates. In this environment, we believe income will be the key to performance. As a result, we are maintaining an emphasis on mortgage-backed securities because of their income advantage. We expect the difference in yields between long- and short-term bonds to lessen somewhat - "flattening" the yield curve - as the economy continues to improve. However, the yield curve is likely to remain steep, historically speaking. Should signs begin to point to a flatter yield curve, we may implement a barbell maturity structure. A barbell structure allows us to reach for income on one end of the curve and provide some principal preservation on the opposite end. 3 - -------------------------------------------------------------------------------- Loomis Sayles Government Securities Fund - -------------------------------------------------------------------------------- Investment Results through March 31, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- March 31, 1994 through March 31, 2004 [CHART] Line chart Class A Lehman Lehman @ Maximum Government Long Month Net Asset Sales Bond Govt Bond End Value (1) Charge (2) Index (3) Index (4) - ---------- --------- ---------- ---------- --------- 3/31/1994 10,000 9,550 10,000 10000 4/30/1994 9,923 9,477 9,921 9881 5/31/1994 9,918 9,472 9,909 9813 6/30/1994 9,804 9,363 9,886 9717 7/31/1994 9,935 9,488 10,068 10049 8/31/1994 9,938 9,491 10,070 9972 9/30/1994 9,800 9,359 9,928 9657 10/31/1994 9,799 9,358 9,920 9621 11/30/1994 9,743 9,304 9,902 9682 12/31/1994 9,767 9,327 9,962 9829 1/31/1995 9,918 9,472 10,148 10085 2/28/1995 10,145 9,689 10,366 10373 3/31/1995 10,212 9,752 10,431 10463 4/30/1995 10,316 9,852 10,567 10648 5/31/1995 10,881 10,391 10,994 11470 6/30/1995 10,948 10,456 11,078 11603 7/31/1995 10,842 10,354 11,037 11415 8/31/1995 10,959 10,465 11,167 11671 9/30/1995 11,095 10,596 11,275 11888 10/31/1995 11,304 10,796 11,446 12219 11/30/1995 11,524 11,006 11,625 12533 12/31/1995 11,723 11,195 11,789 12867 1/31/1996 11,768 11,238 11,862 12864 2/29/1996 11,479 10,963 11,620 12239 3/31/1996 11,351 10,840 11,523 11998 4/30/1996 11,262 10,755 11,450 11796 5/31/1996 11,203 10,699 11,430 11735 6/30/1996 11,319 10,809 11,578 11988 7/31/1996 11,339 10,829 11,606 11994 8/31/1996 11,267 10,760 11,581 11842 9/30/1996 11,465 10,949 11,773 12172 10/31/1996 11,735 11,207 12,032 12651 11/30/1996 11,975 11,436 12,241 13076 12/31/1996 11,814 11,282 12,116 12759 1/31/1997 11,828 11,295 12,130 12668 2/28/1997 11,835 11,302 12,146 12676 3/31/1997 11,676 11,151 12,018 12352 4/30/1997 11,819 11,287 12,191 12653 5/31/1997 11,920 11,383 12,296 12795 6/30/1997 12,086 11,542 12,434 13043 7/31/1997 12,594 12,027 12,787 13810 8/31/1997 12,310 11,756 12,661 13429 9/30/1997 12,534 11,970 12,851 13794 10/31/1997 12,781 12,206 13,074 14257 11/30/1997 12,874 12,294 13,140 14448 12/31/1997 13,033 12,446 13,278 14689 1/31/1998 13,216 12,622 13,476 14984 2/28/1998 13,154 12,562 13,440 14879 3/31/1998 13,146 12,554 13,478 14910 4/30/1998 13,186 12,592 13,539 14967 5/31/1998 13,352 12,751 13,678 15253 6/30/1998 13,554 12,944 13,833 15607 7/31/1998 13,528 12,919 13,855 15539 8/31/1998 13,944 13,317 14,215 16227 9/30/1998 14,327 13,683 14,598 16810 10/31/1998 14,148 13,511 14,548 16545 11/30/1998 14,228 13,587 14,553 16689 12/31/1998 14,208 13,569 14,586 16659 1/31/1999 14,347 13,701 14,671 16811 2/28/1999 13,794 13,173 14,322 16001 3/31/1999 13,827 13,205 14,378 15955 4/30/1999 13,873 13,248 14,411 15974 5/31/1999 13,687 13,071 14,284 15729 6/30/1999 13,527 12,918 14,255 15557 7/31/1999 13,427 12,823 14,234 15473 8/31/1999 13,327 12,727 14,234 15418 9/30/1999 13,500 12,892 14,350 15526 10/31/1999 13,491 12,884 14,373 15536 11/30/1999 13,431 12,827 14,353 15435 12/31/1999 13,296 12,698 14,260 15205 1/31/2000 13,310 12,711 14,280 15412 2/29/2000 13,544 12,934 14,483 15863 3/31/2000 13,842 13,219 14,738 16378 4/30/2000 13,729 13,111 14,697 16241 5/31/2000 13,680 13,065 14,706 16173 6/30/2000 13,918 13,291 14,969 16539 7/31/2000 14,049 13,416 15,113 16820 8/31/2000 14,295 13,652 15,337 17210 9/30/2000 14,239 13,598 15,381 17024 10/31/2000 14,368 13,721 15,528 17296 11/30/2000 14,697 14,036 15,833 17839 12/31/2000 15,011 14,335 16,149 18289 1/31/2001 15,112 14,432 16,311 18337 2/28/2001 15,303 14,615 16,497 18639 3/31/2001 15,315 14,626 16,555 18544 4/30/2001 15,093 14,414 16,386 18050 5/31/2001 15,145 14,464 16,440 18072 6/30/2001 15,170 14,488 16,515 18219 7/31/2001 15,622 14,919 16,912 18896 8/31/2001 15,796 15,085 17,122 19297 9/30/2001 16,007 15,287 17,420 19445 10/31/2001 16,555 15,810 17,869 20434 11/30/2001 15,986 15,267 17,468 19452 12/31/2001 15,750 15,041 17,316 19084 1/31/2002 15,905 15,189 17,429 19319 2/28/2002 16,098 15,374 17,590 19548 3/31/2002 15,647 14,943 17,207 18765 4/30/2002 16,079 15,356 17,617 19482 5/31/2002 16,190 15,462 17,723 19545 6/30/2002 16,430 15,691 17,970 19904 7/31/2002 16,821 16,064 18,365 20519 8/31/2002 17,296 16,517 18,729 21428 9/30/2002 17,748 16,950 19,168 22309 10/31/2002 17,496 16,709 19,014 21668 11/30/2002 17,313 16,534 18,850 21437 12/31/2002 17,853 17,050 19,307 22326 1/31/2003 17,813 17,011 19,259 22250 2/28/2003 18,218 17,399 19,569 22935 3/31/2003 18,059 17,246 19,513 22657 4/30/2003 18,144 17,327 19,604 22889 5/31/2003 18,823 17,976 20,113 24193 6/30/2003 18,619 17,781 20,007 23812 7/31/2003 17,394 16,611 19,180 21629 8/31/2003 17,603 16,811 19,288 22008 9/30/2003 18,338 17,513 19,848 23173 10/31/2003 17,897 17,092 19,566 22526 11/30/2003 17,954 17,146 19,588 22630 12/31/2003 18,118 17,303 19,762 22909 1/31/2004 18,310 17,486 19,926 23313 2/29/2004 18,547 17,712 20,164 23780 3/31/2004 18,708 17,863 20,342 24137 Average Annual Total Returns -- March 31, 2004 - -------------------------------------------------------------------------------- 6 Months 1 Year 5 Years 10 Years -------- ------ ------- -------- Class A (Inception 9/16/85) Net Asset Value/1/ 2.02% 3.60% 6.23% 6.46% With Maximum Sales Charge/2/ -2.57 -1.04 5.26 5.97 Class B (Inception 9/23/93) Net Asset Value/1/ 1.65 2.91 5.46 5.69 With CDSC/6/ -3.35 -2.08 5.14 5.69 Class Y (Inception 3/31/94) Net Asset Value/1/ 1.88 3.58 6.52 6.76 - -------------------------------------------------------------------------------- Comparative Performance 6 Months 1 Year 5 Years 10 Years - ----------------------- -------- ------ ------- -------- Lehman Government Bond Index/3/ 2.49% 4.24% 7.19% 7.36% Lehman Long Government Index/4/ 4.16 6.53 8.63 9.21 Lipper General Government Funds Avg./5/ 2.11 2.98 5.94 6.27 All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. Performance history includes periods from a predecessor fund. Class Y shares are available to certain institutional investors only. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio as of March 31, 2004 - -------------------------------------------------------------------------------- Portfolio Mix [CHART] Pie chart Treasuries 81.4% Mortgage-backed 15.5% Government agencies 0.9% Short-term & other 2.2% Effective Maturity [CHART] Pie chart 1 year or less 1.3% 1-5 years 16.9% 5-10 years 17.2% 10+ years 64.5% Average Effective Maturity: 11.6 years Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 4.50%. /3/ Lehman Government Bond Index is an unmanaged index of public debt of the U.S. Treasury, government agencies, and their obligations. /4/ Lehman Long Government Bond Index is an unmanaged index of U.S. Treasury public debt and their obligations with a maturity of 10 years or more. /5/ Lipper General Government Funds Average is the average performance without sales charge of funds with similar investment objectives, as calculated by Lipper Inc. /6/ Performance for Class B shares assumes a maximum 5% 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%. 4 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- Objective: Seeks high current income plus the opportunity for capital appreciation to produce a high total return - -------------------------------------------------------------------------------- Strategy: Invests primarily in lower-quality fixed-income securities - -------------------------------------------------------------------------------- Fund Inception: February 22, 1984 - -------------------------------------------------------------------------------- Managers: Kathleen C. Gaffney Matthew J. Eagan Loomis, Sayles & Company, L.P. - -------------------------------------------------------------------------------- Symbols: Class A NEFHX Class B NEHBX Class C NEHCX - -------------------------------------------------------------------------------- What You Should Know: Fixed-income securities are subject to credit risk and interest rate risk; their value generally rises when prevailing interest rates fall and falls when rates rise. This fund emphasizes lower-rated, high-yield bonds that may involve extra risks. It also invests in foreign securities which have special risks, including political, economic, regulatory and currency risks. Management Discussion - -------------------------------------------------------------------------------- Gathering strength in the U.S. economy helped boost corporate profits, increasing investor demand for corporate bonds across all rating categories, especially high-yield issues. However, after spectacular performance last year, gains for high-yield bonds were more modest during the first quarter of 2004. For the six months ended March 31, 2004, the total return on Loomis Sayles High Income Fund's Class A shares at net asset value was 8.85%, including $0.17 per share in reinvested dividends. The fund's benchmark, the Lehman High Yield Composite Index, returned 8.39% for the same period. At the end of March 2004, the fund's 30-day SEC yield was 5.55%. Improving credit quality, good security selection, aided returns Successful security selection within high-yield bond sectors was the primary driver of the fund's solid results. Our strategy of structuring the portfolio to take advantage of improvements in credit quality was particularly beneficial during this period. The economic recovery allowed many bond issuers in the lower rating categories to shore up their balance sheets. The lowest default rates in several years also helped boost demand for high-yield issues. Convertible bonds - - those that can be converted into common stock under specified conditions - aided performance, as did holdings in international and emerging markets. Technology, telecom and chemicals among strongest sectors Technology was one of the fund's best-performing sectors, with domestic and overseas issuers in wire telephony and chemical companies also making important contributions. Steadily improving business conditions and competitive pressures encouraged corporations to invest in new technology and upgrade existing systems after years of deferral. In telecommunications, bonds and convertibles of network specialist Lucent Technology benefited from restructuring and cost reduction efforts, an improving earnings outlook and a ratings upgrade by Standard & Poor's. Lucent also won a major fiber-optic contract with Verizon. London-based Colt Telecom, which operates fiber-optic networks in Europe, continued to increase revenues and reduce capital outlays. We sold the fund's Colt holdings when valuations reached our target. Bonds of Philippine Long Distance Telephone also contributed. In chemicals, fertilizer giant IMC Global is benefiting from growth in world agriculture, as well as from its announced plans to merge with Cargill. Oil services and airlines hurt Bonds of Trico Marine Services fell in the wake of disappointing earnings tied to reduced offshore drilling activity and weak demand in the North Sea and Gulf of Mexico. Delta Airline's bonds fell after a ratings downgrade by Standard & Poor's. We took advantage of price declines to add to both positions during the period. Positioned for a changing environment We believe that economic growth will continue, further benefiting lower-rated issues. In fact, we think high-income bonds may offer some of the best returns in 2004, based on extra income and the potential for cyclical gains. However, we also expect interest rates to rise at some point as the economy continues to expand, and rising rates are a potential negative for bond prices. To try to mitigate that risk, we have been selling BBB-rated bonds because they are more sensitive to changes in rates than are bonds of lower-rated issuers. As part of that strategy, we are adding to longer maturity holdings in BB-rated issues to capture favorable current yields and because their prices are affected more by their issuers' earnings and credit quality than by interest-rate trends. Our research-driven investment selection process is key to seeking attractive values among high-yield issuers whose fundamentals may improve in the months ahead, including some that may have potential for ratings upgrades. 5 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund - -------------------------------------------------------------------------------- Investment Results through March 31, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- March 31, 1994 through March 31, 2004 [CHART] Line chart Class A Lehman @ Maximum High Yield Month Net Asset Sales Composite End Value (1) Charge (2) Index - ---------- --------- ---------- ---------- 3/31/1994 10,000 9,550 10,000 4/30/1994 9,837 9,395 9,931 5/31/1994 9,878 9,434 9,937 6/30/1994 9,919 9,473 9,967 7/31/1994 9,857 9,414 10,052 8/31/1994 9,815 9,374 10,123 9/30/1994 9,836 9,394 10,124 10/31/1994 9,820 9,378 10,148 11/30/1994 9,665 9,230 10,020 12/31/1994 9,690 9,254 10,094 1/31/1995 9,761 9,322 10,230 2/28/1995 10,014 9,563 10,581 3/31/1995 10,079 9,625 10,695 4/30/1995 10,278 9,816 10,967 5/31/1995 10,468 9,997 11,275 6/30/1995 10,455 9,985 11,346 7/31/1995 10,635 10,156 11,490 8/31/1995 10,642 10,163 11,525 9/30/1995 10,696 10,215 11,667 10/31/1995 10,739 10,256 11,739 11/30/1995 10,759 10,275 11,843 12/31/1995 10,832 10,344 12,029 1/31/1996 11,030 10,533 12,240 2/29/1996 11,106 10,606 12,250 3/31/1996 11,084 10,585 12,242 4/30/1996 11,217 10,712 12,269 5/31/1996 11,338 10,828 12,343 6/30/1996 11,410 10,897 12,445 7/31/1996 11,521 11,002 12,503 8/31/1996 11,657 11,133 12,638 9/30/1996 12,016 11,475 12,942 10/31/1996 11,990 11,451 13,042 11/30/1996 12,237 11,687 13,302 12/31/1996 12,443 11,883 13,394 1/31/1997 12,453 11,892 13,517 2/28/1997 12,889 12,309 13,742 3/31/1997 12,718 12,146 13,544 4/30/1997 12,789 12,214 13,676 5/31/1997 13,214 12,620 13,980 6/30/1997 13,300 12,701 14,173 7/31/1997 13,663 13,048 14,563 8/31/1997 13,750 13,131 14,530 9/30/1997 14,160 13,522 14,818 10/31/1997 14,036 13,404 14,831 11/30/1997 14,224 13,584 14,972 12/31/1997 14,357 13,711 15,104 1/31/1998 14,572 13,916 15,376 2/28/1998 14,552 13,897 15,466 3/31/1998 14,702 14,041 15,611 4/30/1998 14,782 14,117 15,673 5/31/1998 14,758 14,094 15,727 6/30/1998 14,809 14,143 15,784 7/31/1998 14,786 14,121 15,873 8/31/1998 13,761 13,141 14,997 9/30/1998 13,630 13,017 15,065 10/31/1998 13,345 12,744 14,757 11/30/1998 14,303 13,660 15,369 12/31/1998 14,112 13,477 15,386 1/31/1999 14,430 13,781 15,614 2/28/1999 14,522 13,868 15,522 3/31/1999 14,756 14,092 15,670 4/30/1999 15,074 14,396 15,974 5/31/1999 14,704 14,043 15,758 6/30/1999 14,663 14,003 15,724 7/31/1999 14,604 13,947 15,787 8/31/1999 14,377 13,730 15,613 9/30/1999 14,283 13,640 15,500 10/31/1999 14,412 13,763 15,398 11/30/1999 14,507 13,854 15,577 12/31/1999 14,677 14,017 15,754 1/31/2000 14,515 13,861 15,686 2/29/2000 14,580 13,924 15,716 3/31/2000 14,140 13,503 15,386 4/30/2000 14,131 13,495 15,410 5/31/2000 13,737 13,119 15,252 6/30/2000 14,153 13,516 15,563 7/31/2000 14,237 13,597 15,682 8/31/2000 14,181 13,543 15,789 9/30/2000 13,887 13,262 15,651 10/31/2000 13,195 12,601 15,150 11/30/2000 12,099 11,554 14,550 12/31/2000 12,316 11,761 14,831 1/31/2001 13,746 13,127 15,942 2/28/2001 13,677 13,061 16,154 3/31/2001 12,978 12,394 15,774 4/30/2001 12,579 12,013 15,577 5/31/2001 12,613 12,045 15,858 6/30/2001 11,889 11,354 15,413 7/31/2001 12,123 11,578 15,640 8/31/2001 12,030 11,489 15,824 9/30/2001 10,936 10,444 14,761 10/31/2001 10,815 10,328 15,126 11/30/2001 11,166 10,663 15,678 12/31/2001 11,004 10,509 15,614 1/31/2002 11,072 10,574 15,722 2/28/2002 10,735 10,252 15,503 3/31/2002 11,024 10,528 15,876 4/30/2002 10,934 10,442 16,130 5/31/2002 10,775 10,290 16,040 6/30/2002 10,004 9,554 14,858 7/31/2002 9,330 8,910 14,209 8/31/2002 9,657 9,223 14,614 9/30/2002 9,298 8,880 14,422 10/31/2002 9,294 8,875 14,296 11/30/2002 9,912 9,466 15,182 12/31/2002 10,029 9,578 15,394 1/31/2003 10,242 9,781 15,907 2/28/2003 10,385 9,918 16,103 3/31/2003 10,653 10,174 16,566 4/30/2003 11,269 10,762 17,549 5/31/2003 11,465 10,949 17,730 6/30/2003 11,713 11,186 18,240 7/31/2003 11,480 10,964 18,039 8/31/2003 11,603 11,081 18,247 9/30/2003 11,983 11,444 18,746 10/31/2003 12,238 11,688 19,124 11/30/2003 12,494 11,932 19,414 12/31/2003 12,828 12,251 19,854 1/31/2004 13,027 12,441 20,233 2/29/2004 12,970 12,387 20,182 3/31/2004 13,041 12,459 20,319 Average Annual Total Returns -- March 31, 2004 - --------------------------------------------------------------------------------
Since 6 Months 1 Year 5 Years 10 Years/6/ Inception/6/ -------- ------ ------- ----------- ------------ Class A (Inception 2/22/84) Net Asset Value/1/ 8.85% 22.44% -2.44% 2.69% -- With Maximum Sales Charge/2/ 3.93 16.99 -3.34 2.22 -- Class B (Inception 9/20/93) Net Asset Value/1/ 8.45 21.25 -3.17 1.96 -- With CDSC/7/ 3.45 16.25 -3.42 1.96 -- Class C (Inception 3/2/98) Net Asset Value/1/ 8.45 21.25 -3.17 -- -2.55% With CDSC/7/ 7.45 20.25 -3.17 -- -2.55 - --------------------------------------------------------------------------------------------------
Since Class C Comparative Performance 6 Months 1 Year 5 Years 10 Years Inception/7/ - ----------------------- -------- ------ ------- -------- ------------ Lehman High Yield Composite Index/3/ 8.39% 22.66% 5.33% 7.35% 4.49% Lipper High Current Yield Funds Avg./5/ 7.56 19.71 3.47 5.29 2.23
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. Performance history includes periods from a predecessor fund. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio as of March 31, 2004 - -------------------------------------------------------------------------------- Credit Quality* [CHART] Pie chart Baa 4.8% Ba 47.1% B 32.4% Caa 13.1% Short term & other 2.6% *Determined using the higher of the credit ratings assigned to each security by Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of comparable quality as determined by Loomis Sayles). Effective Maturity [CHART] Pie chart 1 year or less 3.7% 1-5 years 30.9% 5-10 years 32.5% 10+ years 32.9% Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 4.50%. /3/ Lehman High Yield Composite Index is a market-weighted, unmanaged index of fixed-rate, non-investment grade debt. /4/ Performance for Class B shares assumes a maximum 5% 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. /5/ Lipper High Current Yield Funds Average is the average performance without sales charge of funds with similar investment objectives, as calculated by Lipper Inc. /6/ Fund performance has been increased by expense waivers, without which performance would have been lower. /7/ The since-inception comparative performance figures shown for Class C shares are calculated from 3/31/98. 6 - -------------------------------------------------------------------------------- Loomis Sayles Limited Term Government and Agency Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- Objective: Seeks a high current return consistent with preservation of capital - -------------------------------------------------------------------------------- Strategy: Invests primarily in securities issued or guaranteed by the U.S. government, its agencies or instrumentalities - -------------------------------------------------------------------------------- Fund Inception: January 3, 1989 - -------------------------------------------------------------------------------- Managers: John Hyll Clifton V. Rowe Loomis, Sayles & Company, L.P. - -------------------------------------------------------------------------------- Symbols: Class A NEFLX Class B NELBX Class C NECLX Class Y NELYX - -------------------------------------------------------------------------------- What You Should Know: Fixed-income securities are subject to credit risk and interest rate risk; their value generally rises when prevailing interest rates fall and falls when rates rise. Securities, issued by the U.S. government are guaranteed by the U.S. government if held to maturity; mutual funds that invest in these securities are not guaranteed. Securities issued by U.S. government agencies may not be government guaranteed. Management Discussion - -------------------------------------------------------------------------------- Interest rates trended irregularly down during the six-months ended March 31, 2004. This was most evident on the longer end of the yield curve, causing prices of longer-term securities to rise. Although longer-term bonds benefited the most from falling rates, the fund's intermediate-term issues - those with three- to five-year maturities - also contributed to price gains. For the first half of its fiscal year, Loomis Sayles Limited Term Government and Agency Fund delivered a total return of 1.86% for Class A shares at net asset value, including $0.23 in reinvested dividends. The fund's benchmark, the Lehman Intermediate Government Bond Index, had a slight lead on the fund with a return of 2.00%. As of March 31, 2004, the fund's 30-day SEC yield on Class A shares was 2.45%. Fund focused on yields from mortgage-backed securities Yields on U.S. Treasuries and other top-quality securities remained at historically low levels throughout the period. As a result, investors turned to government agency and mortgage-backed securities for some additional income. Despite generally declining interest rates throughout the six-month period, mortgage-backed securities enjoyed a yield advantage relative to other government sectors as well as modest price appreciation due to diminishing prepayment concerns. The fund continued to emphasize mortgage-backed holdings, including FNMAs (Federal National Mortgage Association, "Fannie Maes"), because they offer a higher yield than government securities, although they are regarded as higher risk. Together with FNMAs, GNMAs (Government National Mortgage Association, "Ginnie Maes," which are backed by the U.S. government) accounted for a substantial portion of the portfolio during the period. Toward the end of the period these securities began to weaken as concern mounted that the Federal Reserve Board might raise interest rates, so we began to trim the fund's holdings. However, the fund continues to emphasize mortgage securities because of their potential for higher returns over the long term. Treasuries were underweighted We maintained the fund's underweighted position in U.S. Treasury securities during the period, which worked to the fund's advantage because their meager yields could not keep up with Agency bonds and mortgage-backed securities. The fund also maintained a slightly longer duration than its peer group. As interest rates filtered down, longer-term securities benefited more than shorter-term issues. Outlook is for rising interest rates Looking ahead, we believe continued economic expansion will eventually lead to rising rates and falling bond prices. Current interest rate levels are still extremely low by historic standards. However, the opportunities to extend duration and earn additional income outweigh our concern for rising rates. In this environment, we believe income will be the key to performance. As a result, we are maintaining an emphasis on mortgage-backed securities because of their income advantage. In addition, we expect the difference in yields between long- and short-term bonds to lessen somewhat - "flattening" the yield curve - as the economy continues to improve and the possibility of interest rate hikes becomes greater. However, the yield curve is likely to remain steep, historically speaking. Should signs begin to point to a flatter yield curve, we may implement a barbell maturity structure. A barbell structure focuses on bonds at opposite ends of the maturity spectrum to reach a specific duration target, allowing us to reach for income on one end of the curve and provide some principal preservation on the opposite end. 7 - -------------------------------------------------------------------------------- Loomis Sayles Limited Term Government and Agency Fund - -------------------------------------------------------------------------------- Investment Results through March 31, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- [CHART] Line chart March 31, 1994 through March 31, 2004 Class A Lehman @ Maximum Intermediate Month Net Asset Sales Gov't Bond End Value (1) Charge (2) Index (3) - ---------- --------- ---------- ------------ 3/31/1994 10,000 9,700 10,000 4/30/1994 9,942 9,644 9,935 5/31/1994 9,942 9,644 9,942 6/30/1994 9,934 9,636 9,944 7/31/1994 10,018 9,717 10,075 8/31/1994 10,043 9,742 10,104 9/30/1994 9,967 9,668 10,021 10/31/1994 9,967 9,668 10,023 11/30/1994 9,932 9,634 9,978 12/31/1994 9,939 9,641 10,011 1/31/1995 10,072 9,770 10,174 2/28/1995 10,215 9,908 10,370 3/31/1995 10,243 9,936 10,427 4/30/1995 10,344 10,034 10,548 5/31/1995 10,634 10,315 10,845 6/30/1995 10,680 10,360 10,914 7/31/1995 10,675 10,355 10,920 8/31/1995 10,768 10,445 11,010 9/30/1995 10,836 10,510 11,084 10/31/1995 10,985 10,655 11,205 11/30/1995 11,117 10,783 11,342 12/31/1995 11,233 10,896 11,454 1/31/1996 11,295 10,956 11,550 2/29/1996 11,160 10,825 11,428 3/31/1996 11,089 10,757 11,376 4/30/1996 11,061 10,729 11,343 5/31/1996 11,023 10,692 11,337 6/30/1996 11,109 10,776 11,452 7/31/1996 11,133 10,799 11,487 8/31/1996 11,128 10,795 11,501 9/30/1996 11,270 10,932 11,649 10/31/1996 11,451 11,107 11,840 11/30/1996 11,594 11,246 11,983 12/31/1996 11,501 11,156 11,919 1/31/1997 11,549 11,203 11,964 2/28/1997 11,564 11,217 11,984 3/31/1997 11,504 11,159 11,916 4/30/1997 11,605 11,257 12,050 5/31/1997 11,676 11,326 12,144 6/30/1997 11,788 11,435 12,248 7/31/1997 11,983 11,624 12,474 8/31/1997 11,963 11,604 12,426 9/30/1997 12,087 11,725 12,561 10/31/1997 12,223 11,856 12,707 11/30/1997 12,244 11,876 12,735 12/31/1997 12,336 11,966 12,839 1/31/1998 12,516 12,140 13,007 2/28/1998 12,487 12,112 12,993 3/31/1998 12,466 12,092 13,033 4/30/1998 12,514 12,139 13,096 5/31/1998 12,595 12,217 13,186 6/30/1998 12,687 12,307 13,274 7/31/1998 12,704 12,323 13,325 8/31/1998 12,907 12,519 13,577 9/30/1998 13,275 12,877 13,894 10/31/1998 13,147 12,752 13,917 11/30/1998 13,107 12,714 13,875 12/31/1998 13,134 12,740 13,929 1/31/1999 13,204 12,808 13,991 2/28/1999 13,053 12,661 13,799 3/31/1999 13,114 12,720 13,890 4/30/1999 13,152 12,758 13,928 5/31/1999 13,054 12,663 13,842 6/30/1999 12,969 12,580 13,863 7/31/1999 12,907 12,520 13,865 8/31/1999 12,902 12,515 13,884 9/30/1999 13,049 12,658 14,003 10/31/1999 13,074 12,682 14,031 11/30/1999 13,087 12,694 14,041 12/31/1999 13,046 12,654 13,996 1/31/2000 12,989 12,600 13,949 2/29/2000 13,104 12,711 14,065 3/31/2000 13,266 12,868 14,225 4/30/2000 13,224 12,827 14,220 5/31/2000 13,230 12,833 14,258 6/30/2000 13,419 13,016 14,484 7/31/2000 13,486 13,082 14,580 8/31/2000 13,628 13,219 14,744 9/30/2000 13,733 13,321 14,873 10/31/2000 13,783 13,369 14,975 11/30/2000 13,970 13,551 15,194 12/31/2000 14,133 13,709 15,462 1/31/2001 14,313 13,883 15,668 2/28/2001 14,420 13,987 15,812 3/31/2001 14,511 14,075 15,927 4/30/2001 14,482 14,047 15,876 5/31/2001 14,554 14,117 15,942 6/30/2001 14,564 14,128 15,993 7/31/2001 14,836 14,391 16,291 8/31/2001 14,934 14,486 16,436 9/30/2001 15,168 14,713 16,787 10/31/2001 15,395 14,933 17,049 11/30/2001 15,195 14,739 16,845 12/31/2001 15,103 14,650 16,764 1/31/2002 15,184 14,728 16,836 2/28/2002 15,335 14,875 16,975 3/31/2002 15,114 14,661 16,720 4/30/2002 15,391 14,929 17,032 5/31/2002 15,495 15,030 17,151 6/30/2002 15,651 15,181 17,366 7/31/2002 15,875 15,399 17,693 8/31/2002 16,031 15,550 17,895 9/30/2002 16,176 15,690 18,202 10/31/2002 16,211 15,724 18,190 11/30/2002 16,136 15,652 18,046 12/31/2002 16,337 15,847 18,380 1/31/2003 16,329 15,839 18,339 2/28/2003 16,471 15,977 18,546 3/31/2003 16,460 15,966 18,550 4/30/2003 16,488 15,993 18,602 5/31/2003 16,589 16,091 18,894 6/30/2003 16,559 16,063 18,863 7/31/2003 16,214 15,728 18,405 8/31/2003 16,268 15,780 18,438 9/30/2003 16,539 16,042 18,838 10/31/2003 16,423 15,930 18,653 11/30/2003 16,467 15,973 18,655 12/31/2003 16,582 16,084 18,800 1/31/2004 16,654 16,154 18,902 2/29/2004 16,782 16,279 19,082 3/31/2004 16,860 16,360 19,215 Average Annual Total Returns -- March 31, 2004 - --------------------------------------------------------------------------------
Since 6 Months 1 Year 5 Years 10 Years Inception -------- ------ ------- -------- --------- Class A (Inception 1/3/89) Net Asset Value/1/ 1.86% 2.35% 5.14% 5.35% -- With Maximum Sales Charge/2/ -1.23 -0.71 4.49 5.04 -- Class B (Inception 9/27/93) Net Asset Value/1/ 1.53 1.68 4.45 4.67 -- With CDSC/4/ -3.46 -3.23 4.11 4.67 -- Class C (Inception 12/30/94) Net Asset Value/1/ 1.62 1.77 4.46 -- 5.10% With CDSC/4/ 0.62 0.79 4.46 -- 5.10 Class Y (Inception 3/31/94) Net Asset Value/1/ 2.00 2.76 5.56 5.76 -- - --------------------------------------------------------------------------------
Since Class C Comparative Performance 6 Months 1 Year 5 Years 10 Years Inception/6/ - ----------------------- -------- ------ ------- -------- ------------ Lehman Int. Govt. Bond Index/3/ 2.00% 3.58% 6.71% 6.75% 7.30% Lipper Short Int. U.S. Govt. Funds Avg./5/ 1.53 2.35 5.57 5.79 6.30
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. Performance history includes periods from a predecessor fund. Class Y shares are available to certain institutional investors only. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio as of March 31, 2004 - -------------------------------------------------------------------------------- Portfolio Mix [CHART] Pie chart Mortgage-backed 54.0% Government agencies 25.2% Treasuries 12.1% Asset-backed securities 4.0% Supranational 3.3% Short-term and other 1.4% Effective Maturity [CHART] Pie chart 1 year or less 1.0% 1-5 years 79.1% 5-10 years 19.9% Average Effective Maturity: 4 years Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 3.00%. /3/ Lehman Intermediate Government Bond Index is an unmanaged index of bonds issued by the U.S. government and its agencies with maturities between one and ten years. /4/ Performance for Class B shares assumes a maximum 5% 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. /5/ Lipper Short Intermediate U.S. Government Funds Average is the average performance without sales charge of funds with similar investment objectives as calculated by Lipper Inc. /6/ The since-inception comparative performance figures shown for Class C shares are calculated from 12/31/94. 8 - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- Objective: Seeks to maintain a high level of current income exempt from federal and Massachusetts personal income taxes - -------------------------------------------------------------------------------- Strategy: Invests primarily in Massachusetts municipal bonds, including general obligation bonds and issues secured by specific revenue streams - -------------------------------------------------------------------------------- Inception Date: March 23, 1984 - -------------------------------------------------------------------------------- Manager: Martha A. Strom Robert Payne Loomis, Sayles & Company, L.P. - -------------------------------------------------------------------------------- Symbols: Class A NEFMX Class B NEMBX - -------------------------------------------------------------------------------- What You Should Know: Fixed-income securities are subject to credit risk and interest rate risk; their value generally rises when prevailing interest rates fall and falls when rates rise. This fund concentrates in a single geographic region, which can affect your fund's performance. Some income may be subject to federal and state taxes. Capital gains are fully taxable. Management Discussion - -------------------------------------------------------------------------------- Municipal bonds outperformed both Treasuries and corporate bonds during the six months ended March 31, 2004. Investor demand for municipal bonds was fairly steady throughout most of the period until interest rates dropped so low that investors found the market less attractive. Long-term bonds and lower-quality, higher-yielding bonds performed better than lower-yielding issues, as investors reached for as much yield as possible. This benefited prices on the lower end of the quality spectrum, narrowing the price difference between lower- and higher-quality issues. Diminished supply also helped boost municipal bond prices during the period. Loomis Sayles Massachusetts Tax Free Income Fund's total return for the six months ended March 31, 2004, was 3.86% based on the net asset value of Class A Shares and $0.32 in dividends reinvested during the period, while the Lehman Municipal Bond Index returned 3.12%. As of March 31, 2004, the fund's 30-day SEC yield on Class A shares was 3.08% - equivalent to a taxable yield of 5.01% based on the 38.45% combined maximum federal and state income tax rates. Healthcare and Higher Education Were Top-performing Sectors The fund's emphasis on revenue bonds - backed by fees generated by institutions rather than by tax receipts - contributed to the fund's positive performance. Many of these bonds had performed poorly in the past, but low interest rates and improving economic numbers encouraged investors to seek higher yields. Examples of strong performers in the fund's portfolio include municipal bonds issued on behalf of the Massachusetts State Development Finance Agency for Concord Assabet Family Services, which we sold; Massachusetts State Health & Educational Facilities for Nichols College; and Massachusetts State Development Finance Agency for Mount Holyoke College. Housing and Lease-backed Sectors Were Lackluster Performers The fund's performance in these sectors was weaker, largely due to early calls in the housing sector as well as some specific credit problems. Examples in the portfolio include Massachusetts State Housing Finance Agency Single Family Housing bonds, which experienced early calls, limiting any upward price movements. Declining profits have troubled Massachusetts State Health & Educational Facilities Authority for Milton Hospital, although management is responding by improving operations and reducing expenses. Massachusetts State Development Finance Agency Lease revenue bonds issued for University Visual & Performing Arts Project experienced a rating downgrade when doubts arose about the state's commitment to continue funding non-essential programs. Fund is Positioned for a Rising Interest Rate Environment The fund's longer average maturity structure helped performance during the six-month period, as bonds with longer maturities outperformed shorter-term issues. We continue to emphasize yield, most notably in the healthcare sector. However, when interest rates rise, bond prices decline, so the fund also continues to emphasize bonds selling at a premium to their par value. These issues have a tendency to experience less price erosion in a rising interest rate environment. Although we expect some near-term price weakness in municipals versus Treasury issues, ultimately we expect the tax-exempt market to perform well. 9 - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund - -------------------------------------------------------------------------------- Investment Results through March 31, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- March 31, 1994 through March 31, 2004 [CHART] Line chart Class A Lehman @ Maximum Municipal Month Net Asset Sales Bond End Value (1) Charge (2) Index (3) - ---------- --------- ---------- --------- 3/31/1994 10,000 9,575 10,000 4/30/1994 10,027 9,601 10,085 5/31/1994 10,120 9,690 10,172 6/30/1994 10,030 9,604 10,110 7/31/1994 10,226 9,791 10,295 8/31/1994 10,247 9,811 10,331 9/30/1994 10,076 9,648 10,180 10/31/1994 9,833 9,415 9,999 11/30/1994 9,596 9,188 9,818 12/31/1994 9,870 9,450 10,034 1/31/1995 10,206 9,772 10,321 2/28/1995 10,539 10,091 10,621 3/31/1995 10,615 10,164 10,743 4/30/1995 10,631 10,179 10,756 5/31/1995 10,967 10,501 11,099 6/30/1995 10,797 10,338 11,002 7/31/1995 10,873 10,410 11,106 8/31/1995 11,002 10,535 11,247 9/30/1995 11,079 10,608 11,318 10/31/1995 11,264 10,786 11,483 11/30/1995 11,485 10,997 11,673 12/31/1995 11,630 11,136 11,785 1/31/1996 11,667 11,171 11,874 2/29/1996 11,551 11,060 11,794 3/31/1996 11,407 10,922 11,644 4/30/1996 11,374 10,890 11,611 5/31/1996 11,389 10,905 11,606 6/30/1996 11,497 11,008 11,733 7/31/1996 11,584 11,091 11,839 8/31/1996 11,578 11,086 11,836 9/30/1996 11,759 11,259 12,001 10/31/1996 11,883 11,377 12,137 11/30/1996 12,086 11,573 12,359 12/31/1996 12,007 11,496 12,307 1/31/1997 12,028 11,517 12,331 2/28/1997 12,143 11,627 12,444 3/31/1997 12,006 11,495 12,278 4/30/1997 12,103 11,589 12,381 5/31/1997 12,275 11,754 12,567 6/30/1997 12,403 11,876 12,701 7/31/1997 12,756 12,214 13,053 8/31/1997 12,638 12,101 12,930 9/30/1997 12,806 12,262 13,084 10/31/1997 12,868 12,322 13,168 11/30/1997 12,946 12,396 13,245 12/31/1997 13,125 12,567 13,439 1/31/1998 13,231 12,669 13,577 2/28/1998 13,213 12,651 13,581 3/31/1998 13,176 12,616 13,593 4/30/1998 13,129 12,571 13,532 5/31/1998 13,332 12,765 13,746 6/30/1998 13,379 12,810 13,800 7/31/1998 13,386 12,817 13,835 8/31/1998 13,599 13,021 14,049 9/30/1998 13,750 13,165 14,224 10/31/1998 13,694 13,112 14,224 11/30/1998 13,718 13,135 14,273 12/31/1998 13,770 13,185 14,309 1/31/1999 13,928 13,336 14,479 2/28/1999 13,865 13,275 14,416 3/31/1999 13,848 13,260 14,436 4/30/1999 13,889 13,299 14,472 5/31/1999 13,799 13,213 14,388 6/30/1999 13,575 12,998 14,181 7/31/1999 13,623 13,044 14,233 8/31/1999 13,430 12,859 14,119 9/30/1999 13,389 12,820 14,125 10/31/1999 13,203 12,641 13,972 11/30/1999 13,319 12,753 14,120 12/31/1999 13,203 12,642 14,015 1/31/2000 13,095 12,538 13,954 2/29/2000 13,258 12,694 14,116 3/31/2000 13,506 12,932 14,425 4/30/2000 13,445 12,874 14,339 5/31/2000 13,392 12,823 14,265 6/30/2000 13,662 13,081 14,643 7/31/2000 13,836 13,248 14,847 8/31/2000 14,009 13,413 15,075 9/30/2000 13,953 13,360 14,997 10/31/2000 14,065 13,468 15,161 11/30/2000 14,125 13,525 15,275 12/31/2000 14,425 13,812 15,653 1/31/2001 14,475 13,860 15,808 2/28/2001 14,526 13,909 15,858 3/31/2001 14,522 13,905 16,000 4/30/2001 14,372 13,761 15,827 5/31/2001 14,512 13,895 15,997 6/30/2001 14,615 13,994 16,104 7/31/2001 14,837 14,207 16,343 8/31/2001 15,116 14,473 16,612 9/30/2001 15,032 14,393 16,556 10/31/2001 15,172 14,527 16,753 11/30/2001 15,060 14,420 16,612 12/31/2001 14,889 14,257 16,455 1/31/2002 14,972 14,336 16,740 2/28/2002 15,142 14,498 16,942 3/31/2002 14,864 14,232 16,610 4/30/2002 15,136 14,493 16,935 5/31/2002 15,254 14,606 17,038 6/30/2002 15,432 14,776 17,218 7/31/2002 15,628 14,964 17,439 8/31/2002 15,819 15,147 17,649 9/30/2002 16,176 15,488 18,035 10/31/2002 15,881 15,206 17,736 11/30/2002 15,781 15,110 17,663 12/31/2002 16,097 15,413 18,035 1/31/2003 16,063 15,381 17,990 2/28/2003 16,316 15,623 18,241 3/31/2003 16,331 15,636 18,252 4/30/2003 16,435 15,736 18,373 5/31/2003 16,855 16,139 18,803 6/30/2003 16,779 16,066 18,723 7/31/2003 16,051 15,369 18,068 8/31/2003 16,156 15,469 18,203 9/30/2003 16,594 15,889 18,738 10/31/2003 16,568 15,864 18,643 11/30/2003 16,752 16,040 18,838 12/31/2003 16,908 16,190 18,994 1/31/2004 17,023 16,300 19,102 2/29/2004 17,273 16,539 19,390 3/31/2004 17,234 16,501 19,322 Average Annual Total Returns -- March 31, 2004 - -------------------------------------------------------------------------------- 6 Months 1 Year 5 Years/5/ 10 Years/5/ -------- ------ ---------- ----------- Class A (Inception 3/23/84) Net Asset Value/1/ 3.86% 5.53% 4.47% 5.59% With Maximum Sales Charge/2/ -0.57 1.05 3.57 5.14 Class B (Inception 9/13/93) Net Asset Value/1/ 3.52 4.85 3.80 4.90 With CDSC/4/ -1.48 -0.15 3.46 4.90 - -------------------------------------------------------------------------------- Comparative Performance 6 Months 1 Year 5 Years 10 Years -------- ------ ------- -------- Lehman Municipal Bond Index/3/ 3.12% 5.86% 6.00% 6.81% Lipper MA Municipal Debt Funds Avg./6/ 2.85 5.11 4.91 5.93 Yields as of March 31, 2004 - -------------------------------------------------------------------------------- Class A Class B ------- ------- SEC 30-day yield/7/ 3.08% 2.56% Taxable equivalent yield/8/ 5.01 4.17 All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio as of March 31, 2004 - -------------------------------------------------------------------------------- Credit Quality* [CHART] Pie chart Aaa 50.3% Aa 16.6% A 22.8% Baa 6.8% B 2.2% Short term & other 1.3% *Determined using the higher of the credit ratings assigned to each security by Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of comparable quality as determined by Loomis Sayles). Effective Maturity [CHART] Pie chart 1 yeear or less 4.2% 1-5 years 6.9% 5-10 years 65.7% 10+ years 23.2% Average effective maturity: 8.7 years Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 4.25%. /3/ Lehman Municipal Bond Index is an unmanaged composite measure of the performance of the municipal bond market. /4/ Performance for Class B shares assumes a maximum 5% 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%. /5/ Fund performance has been increased by expense waivers, without which performance would have been lower. /6/ Lipper Massachusetts Municipal Debt Funds Average is the average performance without sales charges of funds with similar investment objectives as calculated by Lipper Inc. /7/ SEC yield is based on the fund's net investment income over a 30-day period and is calculated in accordance with SEC guidelines. /8/ Taxable equivalent yield is based on the maximum combined federal and MA income tax bracket of 38.45%. A portion of income may be subject to federal, state and/or alternative minimum tax. Capital gains, if any, are subject to capital gains tax. 10 - -------------------------------------------------------------------------------- Loomis Sayles Municipal Income Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- Objective: Seeks as high a level of current income exempt from federal income taxes as is consistent with reasonable risk and protection of shareholders' capital - -------------------------------------------------------------------------------- Strategy: Invests primarily in municipal securities that pay interest exempt from federal income tax - -------------------------------------------------------------------------------- Fund Inception: May 9, 1977 - -------------------------------------------------------------------------------- Manager: Martha A. Strom Robert Payne Loomis, Sayles & Company, L.P. - -------------------------------------------------------------------------------- Symbols: Class A NEFTX Class B NETBX - -------------------------------------------------------------------------------- What You Should Know: Fixed-income securities are subject to credit risk and interest rate risk; their value generally rises when prevailing interest rates fall and falls when rates rise. Some income may be subject to federal and state taxes. Capital gains are fully taxable. Investors may be subject to the Alternative Minimum Tax (AMT). Lower-rated bonds offer higher risks. Management Discussion - -------------------------------------------------------------------------------- Municipal bonds outperformed both Treasuries and corporate bonds during the six months ended March 31, 2004. Investor demand for municipal bonds was fairly steady throughout most of the period until interest rates dropped so low that investors found the market less attractive. Long-term bonds and lower-quality, higher-yielding bonds performed better than lower-yielding issues, as investors reached for as much yield as possible. This benefited prices on the lower end of the quality spectrum, narrowing the price difference between lower- and higher-quality issues. Diminished supply also helped boost municipal bond prices during the period. Largely because of its emphasis on longer-term bonds and favorable sector weightings, Loomis Sayles Municipal Income Fund outperformed its benchmark for the semiannual period. The fund's total return for the six months ended March 31, 2004 was 3.84%, based on the net asset value of Class A Shares and $0.15 in dividends reinvested during the period, while the Lehman Municipal Bond Index returned 3.12%. As of March 31, 2004, the fund's 30-day SEC yield on Class A shares was 3.26% - - equivalent to a taxable yield of 5.03% based on the 35.0% maximum federal income tax rate. Corporate-backed tax-exempts and healthcare were top-performing sectors As low interest rates and positive economic numbers encouraged investors to scour the market for higher yield, the fund's emphasis on revenue bonds - backed by fees generated by institutions rather than by tax receipts - was primarily responsible for its positive performance. Recently many of these bonds had been lackluster performers, but they finally got their due during the period. Examples in the fund's portfolio include municipal bonds issued on behalf of the Michigan Hospital Finance Authority and Lehigh County Pennsylvania General Purpose Authority for Saint Luke's Hospital. Lowndes County Mississippi Solid Waste Disposal and Pollution Control Revenue bonds for Weyerhaeuser Project also performed well due to their ties with the corporate market. Housing and electric utilities were lackluster performers Massachusetts State Housing Finance Agency Single Family housing bonds are still experiencing early calls resulting from prepayments, limiting any upward price movements. California State Dept of Water Resource Power Supply and North Carolina Eastern Municipal Power Agency Power System bonds were also relatively poor performers, largely due to their shorter maturity structure. Fund is positioned for a rising interest rate environment The fund's longer average maturity structure helped performance during the six-month period, as bonds with longer maturities outperformed shorter-term issues. We continue to emphasize yield, most notably in the healthcare sector. However, when interest rates rise, bond prices decline, so the fund also continues to emphasize bonds selling at a premium to their par value. These issues have a tendency to experience less price erosion in a rising interest rate environment. Although we expect some near-term price weakness in municipals versus Treasury issues, ultimately we believe the tax-exempt market will perform well. 11 - -------------------------------------------------------------------------------- Loomis Sayles Municipal Income Fund - -------------------------------------------------------------------------------- Investment Results through March 31, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- March 31, 1994 through March 31, 2004 [CHART] Line chart Class A Lehman @ Maximum Municipal Month Net Asset Sales Bond End Value (1) Charge (2) Index (3) - ---------- --------- ---------- --------- 3/31/1994 10,000 9,550 10,000 4/30/1994 10,035 9,583 10,085 5/31/1994 10,136 9,680 10,172 6/30/1994 10,070 9,617 10,110 7/31/1994 10,256 9,795 10,295 8/31/1994 10,288 9,825 10,331 9/30/1994 10,109 9,654 10,180 10/31/1994 9,887 9,442 9,999 11/30/1994 9,593 9,161 9,818 12/31/1994 9,845 9,402 10,034 1/31/1995 10,189 9,730 10,321 2/28/1995 10,542 10,068 10,621 3/31/1995 10,678 10,198 10,743 4/30/1995 10,699 10,217 10,756 5/31/1995 10,997 10,503 11,099 6/30/1995 10,856 10,368 11,002 7/31/1995 10,951 10,458 11,106 8/31/1995 11,031 10,535 11,247 9/30/1995 11,111 10,611 11,318 10/31/1995 11,267 10,760 11,483 11/30/1995 11,454 10,938 11,673 12/31/1995 11,541 11,022 11,785 1/31/1996 11,633 11,109 11,874 2/29/1996 11,562 11,042 11,794 3/31/1996 11,431 10,916 11,644 4/30/1996 11,406 10,893 11,611 5/31/1996 11,397 10,884 11,606 6/30/1996 11,527 11,009 11,733 7/31/1996 11,612 11,089 11,839 8/31/1996 11,602 11,080 11,836 9/30/1996 11,797 11,266 12,001 10/31/1996 11,930 11,393 12,137 11/30/1996 12,111 11,566 12,359 12/31/1996 12,075 11,532 12,307 1/31/1997 12,088 11,544 12,331 2/28/1997 12,195 11,646 12,444 3/31/1997 12,040 11,498 12,278 4/30/1997 12,128 11,582 12,381 5/31/1997 12,265 11,713 12,567 6/30/1997 12,435 11,876 12,701 7/31/1997 12,771 12,197 13,053 8/31/1997 12,695 12,124 12,930 9/30/1997 12,801 12,225 13,084 10/31/1997 12,892 12,311 13,168 11/30/1997 12,932 12,350 13,245 12/31/1997 13,111 12,521 13,439 1/31/1998 13,273 12,676 13,577 2/28/1998 13,313 12,714 13,581 3/31/1998 13,334 12,734 13,593 4/30/1998 13,271 12,673 13,532 5/31/1998 13,413 12,810 13,746 6/30/1998 13,470 12,864 13,800 7/31/1998 13,493 12,886 13,835 8/31/1998 13,672 13,057 14,049 9/30/1998 13,782 13,162 14,224 10/31/1998 13,735 13,117 14,224 11/30/1998 13,793 13,173 14,273 12/31/1998 13,809 13,188 14,309 1/31/1999 13,945 13,317 14,479 2/28/1999 13,916 13,290 14,416 3/31/1999 13,922 13,295 14,436 4/30/1999 13,963 13,335 14,472 5/31/1999 13,914 13,288 14,388 6/30/1999 13,756 13,137 14,181 7/31/1999 13,798 13,177 14,233 8/31/1999 13,657 13,042 14,119 9/30/1999 13,662 13,048 14,125 10/31/1999 13,465 12,859 13,972 11/30/1999 13,591 12,979 14,120 12/31/1999 13,429 12,824 14,015 1/31/2000 13,357 12,756 13,954 2/29/2000 13,505 12,897 14,116 3/31/2000 13,712 13,095 14,425 4/30/2000 13,637 13,023 14,339 5/31/2000 13,599 12,987 14,265 6/30/2000 13,847 13,224 14,643 7/31/2000 14,000 13,370 14,847 8/31/2000 14,193 13,554 15,075 9/30/2000 14,154 13,517 14,997 10/31/2000 14,271 13,629 15,161 11/30/2000 14,369 13,722 15,275 12/31/2000 14,605 13,948 15,653 1/31/2001 14,707 14,045 15,808 2/28/2001 14,730 14,067 15,858 3/31/2001 14,851 14,183 16,000 4/30/2001 14,693 14,032 15,827 5/31/2001 14,833 14,165 15,997 6/30/2001 14,952 14,279 16,104 7/31/2001 15,214 14,529 16,343 8/31/2001 15,456 14,760 16,612 9/30/2001 15,190 14,506 16,556 10/31/2001 15,395 14,702 16,753 11/30/2001 15,229 14,544 16,612 12/31/2001 15,043 14,366 16,455 1/31/2002 15,290 14,601 16,740 2/28/2002 15,496 14,799 16,942 3/31/2002 15,242 14,556 16,610 4/30/2002 15,491 14,794 16,935 5/31/2002 15,571 14,870 17,038 6/30/2002 15,716 15,008 17,218 7/31/2002 15,817 15,105 17,439 8/31/2002 15,939 15,222 17,649 9/30/2002 16,194 15,465 18,035 10/31/2002 15,783 15,073 17,736 11/30/2002 15,757 15,048 17,663 12/31/2002 16,142 15,416 18,035 1/31/2003 15,940 15,222 17,990 2/28/2003 16,173 15,446 18,241 3/31/2003 16,165 15,438 18,252 4/30/2003 16,308 15,575 18,373 5/31/2003 16,715 15,963 18,803 6/30/2003 16,680 15,930 18,723 7/31/2003 15,957 15,239 18,068 8/31/2003 16,124 15,399 18,203 9/30/2003 16,607 15,859 18,738 10/31/2003 16,528 15,784 18,643 11/30/2003 16,742 15,989 18,838 12/31/2003 16,889 16,129 18,994 1/31/2004 16,992 16,227 19,102 2/29/2004 17,255 16,479 19,390 3/31/2004 17,242 16,470 19,322 Average Annual Total Returns -- March 31, 2004 - --------------------------------------------------------------------------------
6 Months 1 Year 5 Years 10 Years -------- ------ ------- -------- Class A (Inception 5/9/77) Net Asset Value/1/ 3.84% 6.67% 4.37% 5.60% With Maximum Sales Charge/2/ -0.85 1.83 3.43 5.12 Class B (Inception 9/13/93) Net Asset Value/1/ 3.45 5.73 3.60 4.82 With CDSC/4/ -1.55 0.73 3.26 4.82
- --------------------------------------------------------------------------------
Comparative Performance 6 Months 1 Year 5 Years 10 Years - ----------------------- -------- ------ ------- -------- Lehman Municipal Bond Index/3/ 3.12% 5.86% 6.00% 6.81% Lipper General Municipal Debt Funds Avg./5/ 2.82 5.46 4.70 5.74
Yields as of March 31, 2004 - -------------------------------------------------------------------------------- Class A Class B ------- ------- SEC 30-day yield/6/ 3.26% 2.66% Taxable equivalent yield/7/ 5.03 4.11 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. Performance history includes performance from a predecessor fund. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio as of March 31, 2004 - -------------------------------------------------------------------------------- Credit Quality* [CHART] Pie chart Aaa 35.0% Aa 25.5% A 9.7% Baa 21.1% Ba 3.1% Not rated 1.0% Short term & other 4.6% *Determined using the higher of the credit ratings assigned to each security by Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of comparable quality as determined by Loomis Sayles). Effective Maturity [CHART] Pie chart 1 year or less 14.1% 1-5 years 11.2% 5-10 years 68.0% 10+ years 6.7% Average effective maturity: 7.3 years Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 4.50%. /3/ Lehman Municipal Bond Index is an unmanaged composite measure of the performance of the municipal bond market. /4/ Performance for Class B shares assumes a maximum 5% 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%. /5/ Lipper General Municipal Debt Funds Average is the average performance without sales charges of funds with similar investment objectives as calculated by Lipper Inc. /6/ SEC yield is based on the fund's net investment income over a 30-day period and is calculated in accordance with SEC guidelines. /7/ Taxable equivalent yield is based on the maximum federal income tax bracket of 35%. A portion of income may be subject to federal, state and/or alternative minimum tax. Capital gains distributions, if any, are subject to the capital gains tax. 12 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund - -------------------------------------------------------------------------------- Portfolio Profile - -------------------------------------------------------------------------------- Objective: Seeks high current income, with a secondary objective of capital growth - -------------------------------------------------------------------------------- Strategy: Invests primarily in income-producing securities in the U.S. and around the world - -------------------------------------------------------------------------------- Fund Inception: May 1, 1995 - -------------------------------------------------------------------------------- Managers: Daniel J. Fuss Kathleen C. Gaffney Loomis, Sayles & Company, L.P. - -------------------------------------------------------------------------------- Symbols: Class A NEFZX Class B NEZBX Class C NECZX Class Y NEZYX - -------------------------------------------------------------------------------- What You Should Know: Fixed-income securities are subject to credit risk and interest rate risk; their value generally rises when prevailing interest rates fall and falls when rates rise. Foreign and emerging market securities have special risks, such as currency fluctuations, differing political and economic conditions, and different accounting standards. The fund may also invest in lower-rated bonds that may offer higher yields in return for more risk. Management Discussion - -------------------------------------------------------------------------------- High-yielding U.S. corporate bonds, convertible securities and international issues proved to be a powerful combination of investment tools for Loomis Sayles Strategic Income Fund. The fund's total return was 12.32% for the six months ended March 31, 2004, based on the net asset value of Class A shares and $0.47 in reinvested dividends. By contrast, the total return on the fund's benchmark, the Lehman Aggregate Bond Index, was 2.98% for the period. The fund has more flexibility than the benchmark in pursuit of superior returns. The fund's SEC yield at the end of March was 4.49%. High-yield bonds and convertibles keyed fund's strong performance Positive momentum for corporate profits and the brightening economic outlook led yield-conscious investors to a wide range of corporate bonds. One result was continuing gains among lower-rated, high-yielding issues, which also benefited from improving credit quality. A successful strategy during this period was the use of convertible bonds - securities convertible into common stock under specified conditions - as a way of gaining exposure to high-yielding CCC-rated credits. Convertibles represented about 12% of the portfolio at the end of March. Network specialist Lucent Technologies had been one of the companies hit hardest by the technology downturn. Lucent's convertible bonds rose during this period, reflecting a flow of good corporate news that included a large contract award from Verizon and a ratings upgrade from Standard & Poor's. Bonds of IMC Global, a leading producer of agricultural products and animal feed, have had a strong run based on growth in world agriculture, as well as from its announced plans to merge with Cargill. Higher grain prices also worked in IMC's favor, because high grain prices encourage farming. International holdings also contributed Large trade imbalances, the burgeoning federal deficit and the weakness in the U.S. dollar benefited bonds denominated in other, stronger currencies. Convertibles of London-based Colt Telecom gained on revenue growth, reduced outlays and strength in the euro. In addition, Latin American issues rose thanks to better investor sentiment and attractive yields. Improving economic conditions led to significant appreciation in Brazilian bonds, and we took some profits. Government issues in Venezuela and Ecuador also recorded gains. Our emphasis on Canadian issues was also beneficial. U.S. economic expansion brought spillover benefits to Canada's economy, boosting holdings of bonds issued by Canada's provincial governments; exports to the U.S. represent the bulk of Canada's economic output. Overall, international and emerging market issues made up a lion's share of the portfolio at the end of the period. The Dominican Republic and oil services were negatives Among the disappointments encountered over this period, an economic slump and falling currency drove down bonds of the Dominican Republic. And Trico Marine suffered due to sluggish offshore drilling activity and weak demand in the North Sea and Gulf of Mexico. We took advantage of price weakness to add to the fund's holdings in both. Adjusting to meet changing conditions As the economic expansion continues, interest rate hikes seem more likely. For that reason we are reducing the fund's duration - its sensitivity to interest rate changes. We have also taken profits in bonds that have risen based on the improved credit quality of their issuers. In addition, we added to the fund's government holdings, notably in Norway, Sweden and Singapore. A favorable currency outlook enhances potential in these countries. As always, our security selections will continue to be the result of intensive research. 13 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund - -------------------------------------------------------------------------------- Investment Results through March 31, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares - -------------------------------------------------------------------------------- May 1, 1995 through March 31, 2004 [CHART] Line chart Class A Lehman Lehman @ Maximum Aggregate Universal Month Net Asset Sales Bond Bond End Value /1/ Charge /2/ Index /3/ Index /4/ - ---------- --------- ---------- --------- --------- 5/1/1995 10,000 9,550 10000 10,000 5/31/1995 10,014 9,563 10000 10,000 6/30/1995 10,017 9,566 10073 10,073 7/31/1995 10,096 9,642 10051 10,058 8/31/1995 10,192 9,733 10172 10,176 9/30/1995 10,410 9,942 10271 10,280 10/31/1995 10,355 9,889 10405 10,407 11/30/1995 10,647 10,168 10561 10,564 12/31/1995 11,038 10,541 10709 10,724 1/31/1996 11,302 10,793 10780 10,817 2/29/1996 10,995 10,500 10593 10,630 3/31/1996 11,073 10,575 10519 10,564 4/30/1996 11,057 10,559 10460 10,521 5/31/1996 11,232 10,727 10438 10,506 6/30/1996 11,383 10,871 10579 10,647 7/31/1996 11,360 10,849 10608 10,677 8/31/1996 11,569 11,048 10590 10,674 9/30/1996 11,974 11,435 10774 10,869 10/31/1996 12,316 11,761 11013 11,095 11/30/1996 12,816 12,239 11202 11,292 12/31/1996 12,638 12,069 11098 11,201 1/31/1997 12,674 12,104 11132 11,249 2/28/1997 12,875 12,295 11159 11,289 3/31/1997 12,735 12,162 11036 11,157 4/30/1997 12,816 12,239 11201 11,326 5/31/1997 13,091 12,502 11307 11,446 6/30/1997 13,388 12,785 11441 11,585 7/31/1997 13,990 13,361 11749 11,902 8/31/1997 13,629 13,016 11649 11,804 9/30/1997 14,110 13,475 11821 11,986 10/31/1997 13,814 13,193 11992 12,100 11/30/1997 13,889 13,264 12048 12,166 12/31/1997 13,818 13,196 12169 12,296 1/31/1998 14,043 13,411 12325 12,450 2/28/1998 14,300 13,657 12316 12,460 3/31/1998 14,607 13,949 12358 12,517 4/30/1998 14,611 13,953 12423 12,581 5/31/1998 14,372 13,726 12541 12,672 6/30/1998 14,143 13,507 12647 12,755 7/31/1998 13,966 13,338 12674 12,786 8/31/1998 12,252 11,700 12880 12,785 9/30/1998 12,648 12,079 13182 13,088 10/31/1998 12,785 12,209 13112 13,034 11/30/1998 13,642 13,028 13186 13,164 12/31/1998 13,579 12,968 13226 13,194 1/31/1999 13,814 13,192 13320 13,282 2/28/1999 13,617 13,004 13088 13,071 3/31/1999 14,336 13,691 13160 13,171 4/30/1999 15,255 14,569 13202 13,249 5/31/1999 14,782 14,117 13086 13,115 6/30/1999 14,825 14,158 13045 13,092 7/31/1999 14,532 13,879 12989 13,039 8/31/1999 14,351 13,705 12983 13,024 9/30/1999 14,443 13,793 13133 13,165 10/31/1999 14,564 13,909 13182 13,220 11/30/1999 14,828 14,160 13181 13,242 12/31/1999 15,231 14,546 13117 13,216 1/31/2000 15,090 14,411 13074 13,172 2/29/2000 15,684 14,978 13232 13,339 3/31/2000 15,843 15,130 13407 13,495 4/30/2000 15,390 14,697 13368 13,452 5/31/2000 14,893 14,223 13362 13,428 6/30/2000 15,461 14,765 13640 13,717 7/31/2000 15,597 14,895 13764 13,850 8/31/2000 15,940 15,223 13964 14,052 9/30/2000 15,519 14,820 14051 14,123 10/31/2000 14,887 14,217 14144 14,180 11/30/2000 14,810 14,143 14376 14,371 12/31/2000 15,335 14,645 14642 14,646 1/31/2001 15,822 15,110 14882 14,933 2/28/2001 15,798 15,087 15011 15,058 3/31/2001 15,201 14,517 15087 15,109 4/30/2001 14,953 14,280 15024 15,042 5/31/2001 15,288 14,600 15115 15,150 6/30/2001 15,246 14,560 15172 15,193 7/31/2001 15,258 14,571 15511 15,492 8/31/2001 15,595 14,893 15689 15,685 9/30/2001 14,821 14,154 15872 15,798 10/31/2001 15,170 14,487 16204 16,116 11/30/2001 15,385 14,693 15980 15,927 12/31/2001 15,314 14,625 15879 15,832 1/31/2002 15,488 14,791 16007 15,965 2/28/2002 15,674 14,968 16162 16,114 3/31/2002 15,854 15,141 15894 15,881 4/30/2002 16,237 15,507 16202 16,184 5/31/2002 16,581 15,835 16339 16,306 6/30/2002 16,317 15,583 16481 16,365 7/31/2002 15,931 15,214 16680 16,504 8/31/2002 16,376 15,639 16961 16,808 9/30/2002 16,155 15,428 17236 17,049 10/31/2002 16,476 15,735 17157 16,990 11/30/2002 17,093 16,324 17153 17,036 12/31/2002 17,683 16,888 17507 17,389 1/31/2003 18,181 17,362 17522 17,436 2/28/2003 18,672 17,832 17765 17,684 3/31/2003 18,852 18,004 17751 17,701 4/30/2003 19,934 19,037 17897 17,910 5/31/2003 20,931 19,989 18231 18,252 6/30/2003 21,196 20,242 18195 18,248 7/31/2003 20,618 19,690 17583 17,661 8/31/2003 20,855 19,916 17700 17,787 9/30/2003 21,874 20,890 18168 18,262 10/31/2003 22,369 21,363 17999 18,131 11/30/2003 22,991 21,956 18042 18,194 12/31/2003 23,844 22,771 18226 18,401 1/31/2004 24,269 23,177 18372 18,560 2/29/2004 24,252 23,161 18571 18,743 3/31/2004 24,565 23,458 18710 18,892 Average Annual Total Returns -- March 31, 2004 - --------------------------------------------------------------------------------
Since 6 Months/7/ 1 Year/7/ 5 Years/7/ Inception/7/ ----------- --------- ---------- ------------ Class A (Inception 5/1/95) Net Asset Value/1/ 12.32% 30.33% 11.37% 10.60% With Maximum Sales Charge/2/ 7.29 24.48 10.36 10.03 Class B (Inception 5/1/95) Net Asset Value/1/ 11.83 29.32 10.54 9.76 With CDSC/5/ 6.83 24.32 10.27 9.76 Class C (Inception 5/1/95) Net Asset Value/1/ 11.82 29.34 10.54 9.73 With CDSC/5/ 10.82 28.34 10.54 9.73 Class Y (Inception 12/1/99) Net Asset Value/1/ 12.41 30.65 -- 12.73 - --------------------------------------------------------------------------------
Since Class A, Since B and C Class Y Comparative Performance 6 Months 1 Year 5 Years Inception/8/ Inception/8/ - ----------------------- -------- ------ ------- ------------ ------------ Lehman Aggregate Bond Index/3/ 2.98% 5.40% 7.29% 7.35% 8.72% Lehman Universal Bond Index/4/ 3.45 6.73 7.48 7.47 8.77 Lipper Multi-Sector Income Funds Avg./6/ 5.75 13.87 6.07 6.86 6.87
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. Performance history includes periods from a predecessor fund. For performance current to the most recent month-end, visit www.cdcnvestfunds.com. Class A performance history includes periods from a predecessor fund. Class Y shares are available to certain institutional investors only. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. Portfolio as of March 31, 2004 - -------------------------------------------------------------------------------- Credit Quality* [CHART] Pie Chart Aaa 26.5% Aa 9.5% A 3.6% Baa 6.3% Ba 25.1% B 7.0% Caa 1.5% Not rated 7.7% Short-term & other *Determined using the higher of the credit ratings assigned to each security by Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of comparable quality as determined by Loomis Sayles). Effective Maturity [CHART] Pie Chart 1 year or less 7.0% 1-5 years 41.8% 5-10 years 11.9% 10+ years 39.3% Average Effective Maturity: 11.8 years Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 4.50%. /3/ Lehman Aggregate Bond Index is an unmanaged index of investment-grade bonds with one- to ten-year maturities issued by the U.S. government, its agencies and U.S. corporations. /4/ Lehman Universal Bond Index is an unmanaged index representing a blend of the Lehman Aggregate Bond Index, the High Yield Index, and the Emerging Market Indexes. /5/ Performance for Class B shares assumes a maximum 5% 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%. /6/ Lipper Multi-Sector Income Funds Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Lipper Inc. /7/ The adviser waived certain fees and expenses of each class of share except Class Y during the periods indicated, without which performance would have been lower. /8/ The since-inception comparative performance figures shown for each Class of fund shares are calculated as follows: Class A, B and C from 5/31/95; Class Y from 12/31/99. 14 - -------------------------------------------------------------------------------- Additional Information - -------------------------------------------------------------------------------- The views expressed in this report reflect those of the portfolio managers as of the dates indicated. The managers' views are subject to change at any time without notice based on changes in market or other conditions. References to specific securities or industries should not be regarded as investment advice. Because these funds are actively managed, there is no assurance that they will continue to invest in the securities or industries mentioned. For more complete information on any CDC Nvest Fund, contact your financial professional or call CDC IXIS Asset Management Distributors, L.P. and ask for a free prospectus, which contains more complete information including charges and other ongoing expenses. Investors should read the prospectus and consider a fund's objective, risks and expenses carefully before investing. Proxy Voting Information A description of the Funds' proxy voting policies and procedures is available (i) without charge, upon request, by calling CDC Nvest Funds at 800-225-5478; (ii) on the Funds' website www.cdcnvestfunds.com, and (iii) on the Securities and Exchange Commission's website at www.sec.gov. - -------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - -------------------------------------------------------------------------------- 15 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Bonds and Notes -- 96.9% of Total Net Assets Aerospace & Defense --1.6% $ 1,400,000 Northrop Grumman Corp. 7.125%, 2/15/2011 $ 1,654,815 2,905,000 Raytheon Co. 6.150%, 11/01/2008 3,229,703 ----------- 4,884,518 ----------- Asset-Backed -- 4.2% 2,000,000 American Express Credit Account Master Trust 1.690%, 1/15/2009 1,988,266 690,000 AmeriCredit Automobile Receivables Trust, Series 2003-D-M, Class A-4 2.840%, 8/06/2010 698,557 3,675,000 Citibank Credit Card Issuance Trust 2.700%, 1/15/2008 3,734,970 981,766 Connecticut RRB Special Purpose Trust 5.360%, 3/30/2007 1,007,620 3,430,000 Countrywide Asset Backed Securities, Series 2003-5, Class Af43 4.905%, 8/25/2032 3,552,633 1,850,000 Residential Asset Securities Corp., Series 2003-KS10, Class A14 4.470%, 3/25/2032 1,907,046 ----------- 12,889,092 ----------- Automotive -- 3.9% 1,785,000 Ford Motor Co. 7.450%, 7/16/2031 1,782,631 1,510,000 Ford Motor Credit Co., Global Note 5.625%, 10/01/2008 (c) 1,558,509 715,000 General Motors Acceptance Corp. 8.000%, 11/01/2031 791,401 4,325,000 General Motors Corp. 8.375%, 7/15/2033 4,906,111 2,880,000 Navistar International Corp., Senior Subordinated Note 9.375%, 6/01/2006 3,189,600 ----------- 12,228,252 ----------- Banking -- 3.5% 830,000 Bank of America Corp. 5.875%, 2/15/2009 926,171 2,550,000 Capital One Bank 6.500%, 6/13/2013 2,773,915 1,400,000 Chevy Chase Bank FSB, Senior Note 6.875%, 12/01/2013 1,438,500 1,435,000 Citigroup, Inc. 5.000%, 3/06/2007 1,539,843 1,420,000 J.P. Morgan Chase & Co. 5.750%, 1/02/2013 1,543,432 1,200,000 State Street Institutional Capital A, 144A 7.940%, 12/30/2026 1,391,388 1,205,000 Wells Fargo & Co. 3.500%, 4/04/2008 (c) 1,234,721 ----------- 10,847,970 ----------- Beverages -- 0.5% 1,350,000 Cia Brasileira de Bebidas, Guaranteed Note, 144A 8.750%, 9/15/2013 1,481,625 ----------- Brokerage -- 1.4% 3,815,000 Lehman Brothers Holdings, Inc. 7.000%, 2/01/2008 4,373,409 ----------- Chemicals -- 2.9% $ 3,455,000 Eastman Chemical Co. 6.300%, 11/15/2018 $ 3,726,217 1,470,000 ICI Wilmington, Inc. 5.625%, 12/01/2013 1,534,987 3,045,000 IMC Global, Inc. 10.875%, 6/01/2008 3,669,225 ----------- 8,930,429 ----------- Construction Machinery -- 0.6% 1,600,000 Case New Holland, Inc., 144A 9.250%, 8/01/2011 1,808,000 ----------- Consumer Goods & Services -- 0.3% 770,000 Service Corp. International, US, Senior Note, 144A 6.750%, 4/01/2016 772,406 ----------- Electric -- 4.7% 2,240,000 Centerpoint Energy, Inc., Series B, Senior Note 5.875%, 6/01/2008 2,326,932 2,030,000 Empresa Nacional de Electricidad SA 8.350%, 8/01/2013 2,290,412 2,150,000 FirstEnergy Corp., Series B 6.450%, 11/15/2011 2,353,887 1,325,000 IPALCO Enterprises, Inc. 0/8.375%, 11/14/2008 (d) 1,470,750 4,485,000 Pacific Gas & Electric Co. 6.050%, 3/01/2034 4,536,331 1,450,000 Southern California Edison Co. 7.625%, 1/15/2010 1,724,649 ----------- 14,702,961 ----------- Electronics -- 0.4% 1,225,000 Avnet, Inc. 8.000%, 11/15/2006 (c) 1,347,500 ----------- Entertainment -- 0.5% 1,290,000 AOL Time Warner, Inc. 7.700%, 5/01/2032 1,524,970 ----------- Environmental -- 0.8% 1,250,000 Allied Waste North America, Inc., Series B 8.500%, 12/01/2008 1,400,000 1,015,000 Allied Waste North America, Senior Note, 144A 6.500%, 11/15/2010 1,036,569 ----------- 2,436,569 ----------- Food and Beverage -- 1.2% 788,000 Dean Foods Co. 6.900%, 10/15/2017 827,400 702,000 Dean Foods Co. 8.150%, 8/01/2007 782,730 290,000 Smithfield Foods, Inc. 8.000%, 10/15/2009 324,075 1,655,000 Smithfield Foods, Inc., Senior Note, Series B 7.750%, 5/15/2013 1,820,500 ----------- 3,754,705 ----------- Foreign Governments -- 0.6% 2,375,000 Canadian Government 5.750%, 9/01/2006 (CAD) 1,945,163 ----------- Government Agencies -- 9.0% 10,400,000 Federal Home Loan Mortgage Corp. 2.875%, 12/15/2006 10,603,570 2,750,000 Federal Home Loan Mortgage Corp. 3.220%, 6/20/2007 (SGD) 1,714,110 See accompanying notes to financial statements. 16 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Government Agencies -- continued $ 6,600,000 Federal National Mortgage Association 2.290%, 2/19/2009 (SGD) $ 3,927,781 3,710,000 Federal National Mortgage Association 5.250%, 1/15/2009 4,075,483 7,695,000 United States Treasury Notes 1.875%, 12/31/2005 (c) 7,748,803 ----------- 28,069,747 ----------- Healthcare -- 1.1% 3,050,000 HCA, Inc. 6.950%, 5/01/2012 3,326,702 ----------- Home Construction -- 0.4% 1,315,000 DR Horton, Inc., Senior Note 5.000%, 1/15/2009 1,361,025 ----------- Industrial - Other -- 1.0% 2,865,000 Aramark Services, Inc. 7.000%, 7/15/2006 3,144,690 ----------- Information/Data Technology -- 0.6% 1,700,000 Xerox Corp. 7.125%, 6/15/2010 1,802,000 ----------- Integrated Energy -- 2.4% 3,000,000 Pemex Finance, Ltd. 9.150%, 11/15/2018 3,778,350 3,265,000 Pemex Project Funding Master Trust 0/7.875%, 2/01/2009 (d) 3,762,912 ----------- 7,541,262 ----------- Media Cable -- 3.1% 2,000,000 CSC Holdings, Inc. 7.625%, 7/15/2018 2,110,000 515,000 CSC Holdings, Inc. 7.875%, 2/15/2018 552,337 4,000,000 Shaw Communications, Inc., Class B, 144A 7.400%, 10/17/2007 (CAD) 3,264,683 2,785,000 TCI Communications, Inc. 9.800%, 2/01/2012 3,696,876 ----------- 9,623,896 ----------- Media Non - Cable -- 1.1% 2,480,000 Clear Channel Communications, Inc. 4.250%, 5/15/2009 2,533,513 800,000 Dex Media West LLC/Dex Media West Finance Co., 144A 9.875%, 8/15/2013 888,000 ----------- 3,421,513 ----------- Mortgage Related -- 21.0% 6,091,169 Federal Home Loan Mortgage Corp. 4.500%, 8/01/2018 6,177,786 7,944,354 Federal Home Loan Mortgage Corp. 5.000%, with various maturities to 2018 (e) 8,176,679 2,786,482 Federal Home Loan Mortgage Corp. 5.500%, with various maturities to 2018 (e) 2,906,222 8,101,155 Federal National Mortgage Association 4.500%, with various maturities to 2033 (e) 7,925,507 2,319,560 Federal National Mortgage Association 5.000%, 5/01/2018 2,386,875 7,116,513 Federal National Mortgage Association 5.500%, with various maturities to 2033 (e) 7,351,330 5,212,553 Federal National Mortgage Association 6.000%, with various maturities to 2033 (e) 5,467,685 7,481,330 Federal National Mortgage Association 6.500%, with various maturities to 2033 (e) 7,860,595 1,015,902 Federal National Mortgage Association 7.000%, with various maturities to 2030 (e) 1,078,115 1,071,698 Federal National Mortgage Association 7.500%, with various maturities to 2032 (e) 1,148,953 2,038,692 Government National Mortgage Association 5.500%, 2/20/2034 2,096,353 5,285,141 Government National Mortgage Association 6.000%, with various maturities to 2032 (e) 5,525,139 4,004,199 Government National Mortgage Association 6.500%, with various maturities to 2032 (e) 4,229,413 1,482,820 Government National Mortgage Association 7.000%, with various maturities to 2029 (e) 1,584,004 401,742 Government National Mortgage Association 7.500%, with various maturities to 2030 (e) 433,276 183,978 Government National Mortgage Association 8.000%, 11/15/2029 201,150 378,188 Government National Mortgage Association 8.500%, with various maturities to 2023 (e) 419,913 32,498 Government National Mortgage Association 9.000%, with various maturities to 2016 (e) 36,368 92,606 Government National Mortgage Association 11.500%, with various maturities to 2015 (e) 106,477 ----------- 65,111,840 ----------- Non - Captive Consumer Financial -- 0.8% 1,340,000 Goldman Sachs Group, Inc. 6.600%, 1/15/2012 1,535,722 982,000 Household Finance Corp. 5.750%, 1/30/2007 1,069,530 ----------- 2,605,252 ----------- Non - Captive Diversified Financial -- 1.1% 500,000 General Electric Capital Corp., Series E, Medium Term Note 1.725%, 6/27/2008 (SGD) 290,365 2,895,000 International Lease Finance Corp. 5.625%, 6/01/2007 3,157,278 ----------- 3,447,643 ----------- Oil Field Services -- 1.2% 1,480,000 Halliburton Co., Senior Note, 144A 5.500%, 10/15/2010 1,567,524 1,750,000 Transocean, Inc. 6.625%, 4/15/2011 2,000,955 ----------- 3,568,479 ----------- Paper -- 4.4% 3,165,000 Abitibi-Consolidated Finance LP 7.875%, 8/01/2009 3,367,513 1,495,000 Abitibi-Consolidated, Inc. 8.550%, 8/01/2010 1,634,213 3,130,000 Boise Cascade Corp., Senior Note 6.500%, 11/01/2010 3,355,958 1,970,000 Georgia-Pacific Corp. 7.500%, 5/15/2006 2,117,750 480,000 Georgia-Pacific Corp. 8.875%, 5/15/2031 537,600 2,705,000 International Paper Co. 4.000%, 4/01/2010 2,697,732 ----------- 13,710,766 ----------- See accompanying notes to financial statements. 17 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited)
Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Pharmaceuticals -- 1.4% $ 2,750,000 Valeant Pharmaceuticals International, Senior Note, 144A 7.000%, 12/15/2011 $ 2,839,375 1,470,000 Wyeth Corp. 5.500%, 3/15/2013 1,542,983 ------------ 4,382,358 ------------ Pipelines -- 0.9% 2,464,000 Kinder Morgan Energy Partners LP 7.125%, 3/15/2012 2,880,044 ------------ Railroads -- 0.4% 1,155,000 CSX Corp. 4.875%, 11/01/2009 1,215,786 ------------ Real Estate Investment Trusts -- 0.4% 1,250,000 iStar Financial, Inc., Senior Note 6.000%, 12/15/2010 1,312,500 ------------ Refining -- 0.9% 2,550,000 Premcor Refining Group (The), Inc. 7.500%, 6/15/2015 2,805,000 ------------ Restaurants -- 0.1% 400,000 Domino's, Inc., Senior Subordinated Note 8.250%, 7/01/2011 431,000 ------------ Retailers -- 0.7% 1,982,000 J.C. Penney Co., Inc. 9.750%, 6/15/2021 2,046,415 ------------ Sovereigns -- 1.3% 4,785,000 Canadian Government 5.500%, 6/01/2010 (CAD) 3,980,492 ------------ Supermarkets -- 2.5% 1,365,000 Couche-Tard US LP / Couche-Tard Finance Corp., Senior Subordinated Note, 144A 7.500%, 12/15/2013 1,460,550 2,155,000 Delhaize America, Inc. 8.125%, 4/15/2011 2,478,250 560,000 Delhaize America, Inc. 9.000%, 4/15/2031 668,500 2,720,000 Fred Meyer, Inc. 7.450%, 3/01/2008 3,146,744 ------------ 7,754,044 ------------ Supranational -- 1.2% 2,610,000 Inter-American Development Bank 5.500%, 3/30/2010 (EUR) 3,563,154 ------------ Tobacco -- 1.1% 1,495,000 Altria Group, Inc., Note 7.000%, 11/04/2013 1,647,551 1,550,000 Philip Morris Cos., Inc. 7.750%, 1/15/2027 1,727,627 ------------ 3,375,178 ------------ Transportation Services -- 0.3% 1,015,000 Overseas Shipholding Group, Senior Note 7.500%, 2/15/2024 1,027,687 ------------ Treasuries -- 4.2% 10,675,000 United States Treasury Notes 3.500%, 11/15/2006 (c) 11,126,606 1,540,000 United States Treasury Notes 6.125%, 8/15/2007 1,738,035 ------------ 12,864,641 ------------ U.S. Government Agencies -- 2.0% 7,845,000 Federal National Mortgage Association, Euro Medium Term Note 6.375%, 8/15/2007 (AUD) 6,137,969 ------------ Wireless -- 0.6% 1,345,000 AT&T Wireless Services, Inc. 8.750%, 3/01/2031 1,744,469 ------------ Wirelines -- 4.6% 1,095,000 AT&T Corp. 0/8.750%, 11/15/2031 (d) 1,291,626 3,200,000 LCI International, Inc. 7.250%, 6/15/2007 2,928,000 1,240,000 Qwest Corp. 7.200%, 11/10/2026 1,140,800 670,000 Qwest Corp. 7.250%, 9/15/2025 623,100 1,675,000 Qwest Corp. 7.500%, 6/15/2023 1,566,125 3,600,000 Sprint Capital Corp. 6.875%, 11/15/2028 3,738,568 1,045,000 Telus Corp. 8.000%, 6/01/2011 1,258,817 1,650,000 Verizon Communications, Inc. 7.900%, 2/01/2027 1,859,764 ------------ 14,406,800 ------------ Total Bonds and Notes (Identified Cost $285,268,518) 300,589,921 ------------ Short Term Investments -- 10.1% 5,286,414 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2004 at 0.76% to be repurchased at $5,286,526 on 4/01/2004, collateralized by $5,349,630 Federal National Mortgage Association Bond, 5.617%, due 12/01/2031 valued at $5,550,734 5,286,414 945,667 Bank of Montreal, 1.01%, due 4/20/2004(f) 945,667 2,558,134 Bank of Nova Scotia, 1.01%, due 4/05/2004(f) 2,558,134 3,979,320 BGI Prime Money Market Fund(f) 3,979,320 568,474 BNP Paribas, 1.01%, due 4/16/2004(f) 568,474 568,474 Citigroup, 1.03%, due 6/14/2004(f) 568,474 568,474 Credit Agricole Indosuez, 1.02%, due 4/19/2004(f) 568,474 1,534,880 Credit Agricole Indosuez, 1.03%, due 4/12/2004(f) 1,534,880 568,474 Den Danske Bank, 1.01%, due 4/20/2004(f) 568,474 3,410,845 Fleet National Bank, 1.063%, due 7/21/2004(f) 3,410,845 170,542 Harris Trust & Savings Bank, 1.015%, due 4/30/2004(f) 170,542 1,421,185 Keybank, 0.98%, due 4/01/2004(f) 1,421,185 1,044,085 Merrill Lynch Premier Institional Fund(f) 1,044,085 3,979,319 Merrimac Cash Fund-Premium Class(f) 3,979,319 852,711 Prefco, 1.031%, due 4/26/2004(f) 852,711 852,711 Sheffield Receivables Corp, 1.031%, due 4/30/2004(f) 852,711 284,237 Svenska Handlesbanken, 1.01%, due 4/23/2004(f) 284,237 2,842,371 Wells Fargo, 1.02%, due 4/05/2004(f) 2,842,371 ------------ Total Short Term Investments (Identified Cost $31,436,317) 31,436,317 ------------ Total Investments -- 107.0% (Identified Cost $316,704,835) (b) 332,026,238 Other assets less liabilities (21,642,335) ------------ Total Net Assets -- 100% $310,383,903 ============
See accompanying notes to financial statements. 18 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2004, the net unrealized appreciation on investments based on cost of $317,511,170 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 $ 15,324,992 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (809,924) ------------ Net unrealized appreciation $ 14,515,068 ============ At September 30, 2003, the Fund had a capital loss carryover of approximately $30,523,683 of which $887,621 expires on September 30, 2007, $7,872,697 expires on September 30, 2008 and $21,763,365 expires on September 30, 2010. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) All or a portion of this security was on loan to brokers at March 31, 2004. (d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. (e) The Fund's investment in mortgage related securities of the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Government National Mortgage Association are interests in separate pools of mortgages. All separate investments in securities of each issuer which have the same coupon rate have been aggregated for the purpose of presentation in the schedule of investments. (f) Represents investments of securities lending collateral. 144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations,normally to qualified institutional buyers. At the period end, the value of these amounted to $16,510,120 or 5.3% of net assets. AUD - Australian Dollar CAD - Canadian Dollar EUR - Euro SGD - Singapore Dollar
See accompanying notes to financial statements. 19 - -------------------------------------------------------------------------------- Loomis Sayles Government Securities Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited)
Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Bonds and Notes -- 97.8% of Total Net Assets Government Agencies -- 0.9% $ 600,000 Federal National Mortgage Association 6.625%, 9/15/2009 $ 699,924 ------------ Mortgage Related -- 15.5% 4,416,159 Federal Home Loan Mortgage Corp. 4.500%, 8/01/2033 4,319,642 4,475,075 Federal National Mortgage Association 5.500%, with various maturities to 2034 (c) 4,587,637 373,323 Federal National Mortgage Association 6.500%, 11/01/2031 392,233 246,388 Federal National Mortgage Association 7.500%, 12/01/2030 264,101 1,908,655 Government National Mortgage Association 6.500%, 5/15/2031 2,015,873 20,447 Government National Mortgage Association 8.500%, 2/15/2006 21,533 94,913 Government National Mortgage Association 9.000%, with various maturities to 2009 (c) 103,580 36,549 Government National Mortgage Association 9.500%, 8/15/2009 40,363 16,977 Government National Mortgage Association 10.000%, with various maturities to 2016 (c) 19,138 4,167 Government National Mortgage Association 12.500%, 6/15/2014 4,844 ------------ 11,768,944 ------------ Treasuries -- 81.4% 9,485,000 United States Treasury Bonds 5.250%, 11/15/2028 10,014,083 13,000,000 United States Treasury Bonds 7.250%, 5/15/2016 (d) 16,784,222 15,000,000 United States Treasury Bonds 8.750%, with various maturities to 2020 (c) 21,921,870 4,000,000 United States Treasury Bonds, Zero Coupon, 11/15/2014 3,344,288 9,905,000 United States Treasury Note 1.625%, 9/30/2005 (d) 9,949,876 ------------ 62,014,339 ------------ Total Bonds and Notes (Identified Cost $70,168,235) 74,483,207 ------------ Short Term Investments -- 31.6% 871,450 Bank of Montreal, 1.01%, due 4/20/2004(e) 871,450 2,357,366 Bank of Nova Scotia, 1.01%, due 4/05/2004(e) 2,357,366 3,667,015 BGI Prime Money Market Fund(e) 3,667,015 523,859 BNP Paribas, 1.01%, due 4/16/2004(e) 523,859 523,859 Citigroup, 1.03%, due 6/14/2004(e) 523,859 523,859 Credit Agricole Indosuez, 1.02%, due 4/19/2004(e) 523,859 1,414,420 Credit Agricole Indosuez, 1.03%, due 4/12/2004(e) 1,414,420 523,859 Den Danske Bank, 1.01%, due 4/20/2004(e) 523,859 3,143,155 Fleet National Bank, 1.063%, due 7/21/2004(e) 3,143,155 157,158 Harris Trust & Savings Bank, 1.015%, due 4/30/2004(e) 157,158 1,309,648 Keybank, 0.98%, due 4/01/2004(e) 1,309,648 962,144 Merrill Lynch Premier Institional Fund(e) 962,144 3,667,012 Merrimac Cash Fund-Premium Class(e) 3,667,012 785,789 Prefco, 1.031%, due 4/26/2004(e) 785,789 785,789 Sheffield Receivables Corp, 1.031%, due 4/30/2004(e) 785,789 261,930 Svenska Handlesbanken, 1.01%, due 4/23/2004(e) 261,930 2,619,296 Wells Fargo, 1.02%, due 4/05/2004(e) 2,619,296 ------------ Total Short Term Investments (Identified Cost $24,097,608) 24,097,608 ------------ Total Investments -- 129.4% (Identified Cost $94,265,843)(b) $ 98,580,815 Other assets less liabilities (22,388,762) ------------ Total Net Assets -- 100% $ 76,192,053 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2004, the net unrealized appreciation on investments based on cost of $95,185,255 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 $ 3,578,998 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (183,438) ------------ Net unrealized appreciation $ 3,395,560 ============ At September 30, 2003, the Fund had a capital loss carryover of approximately $8,239,709 of which $1,888,922 expires on September 30, 2004, $5,687,678 expires on September 30, 2007 and $663,109 expires on September 30, 2008. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) The Fund's investment in mortgage related securities of the Federal National Mortgage Association and the Government National Mortgage Association are interests in separate pools of mortgages. All separate investments in securities of each issuer and for United States Treasury Bonds which have the same coupon rate have been aggregated for the purpose of presentation in the schedule of investments. (d) All or a portion of this security was on loan to brokers at March 31, 2004. (e) Represents investments of securities lending collateral.
See accompanying notes to financial statements. 20 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Bonds and Notes -- 95.0% of Total Net Assets Aerospace & Defense -- 0.5% $ 250,000 TD Funding Corp., Senior Subordinated Note 8.375%, 7/15/2011 $ 265,000 ---------- Airlines -- 4.3% 170,348 Continental Airlines, Inc. 6.648%, 9/15/2017 166,669 225,000 Continental Airlines, Inc., Class C-2 7.434%, 9/15/2004 222,191 170,379 Continental Airlines, Inc., Series 1998-1, Class 1B 6.748%, 3/15/2017 141,268 61,917 Continental Airlines, Inc., Series 1999-1, Class C 6.954%, 8/02/2009 53,564 112,225 Continental Airlines, Inc., Series 1999-2, Class B 7.566%, 3/15/2020 96,580 1,215,000 Delta Air Lines, Inc. 8.300%, 12/15/2029 698,625 800,000 Northwest Airlines, Inc. 7.625%, 3/15/2005 (c) 780,000 ---------- 2,158,897 ---------- Automotive -- 3.8% 600,000 Cummins, Inc. 7.125%, 3/01/2028 594,000 1,000,000 Dana Corp. 9.000%, 8/15/2011 1,202,500 100,000 General Motors Corp. 8.375%, 7/15/2033 113,436 ---------- 1,909,936 ---------- Beverages -- 1.3% 600,000 Bavaria SA, Senior Note, 144A 8.875%, 11/01/2010 637,500 ---------- Building Materials -- 0.2% 110,000 Jacuzzi Brands, Inc., Senior Note 9.625%, 7/01/2010 121,550 ---------- Chemicals -- 6.9% 615,000 Equistar Chemicals LP 6.500%, 2/15/2006 627,300 585,000 Ethyl Corp. 8.875%, 5/01/2010 631,800 1,000,000 Huntsman International LLC 10.125%, 7/01/2009 (c) 1,017,500 100,000 IMC Global, Inc. 7.300%, 1/15/2028 105,500 750,000 IMC Global, Inc. 11.250%, 6/01/2011 888,750 200,000 Nalco Co., Senior Subordinated Note, 144A 8.875%, 11/15/2013 (c) 208,500 ---------- 3,479,350 ---------- Construction Machinery -- 0.9% 350,000 Case Credit Corp. 6.750%, 10/21/2007 355,250 100,000 Case New Holland, Inc., 144A 9.250%, 8/01/2011 113,000 ---------- 468,250 ---------- Consumer Products -- 1.5% 600,000 Hasbro, Inc. 6.600%, 7/15/2028 616,500 $120,000 Rayovac Corp., Senior Subordinated Note 8.500%, 10/01/2013 $ 129,300 ---------- 745,800 ---------- Electric -- 7.1% 540,000 AES Corp. (The) 7.750%, 3/01/2014 540,675 450,000 AES Corp. (The) 8.875%, 2/15/2011 (c) 480,375 200,000 Calpine Corp. 7.875%, 4/01/2008 145,750 560,000 Calpine Corp., 144A 8.750%, 7/15/2013 (c) 512,400 200,000 Empresa Nacional de Electricidad SA 7.875%, 2/01/2027 208,081 250,000 Empresa Nacional de Electricidad SA 8.350%, 8/01/2013 282,070 525,000 Enersis SA 7.400%, 12/01/2016 (yankee) 538,289 140,000 Enersis SA,Chile, 144A 7.375%, 1/15/2014 145,145 235,000 ESI Tractebel Acquisition Corp. 7.990%, 12/30/2011 243,225 280,130 Salton Sea Funding Corp. 7.840%, 5/30/2010 305,342 49,987 Salton Sea Funding Corp. 8.300%, 5/30/2011 56,360 125,000 TECO Energy, Inc. 7.000%, 5/01/2012 131,875 ---------- 3,589,587 ---------- Electronics -- 4.0% 125,000 Corning, Inc. 5.900%, 3/15/2014 123,750 225,000 Corning, Inc. 6.750%, 9/15/2013 236,376 470,000 LSI Logic Corp. 4.000%, 11/01/2006 461,187 785,000 Lucent Technologies, Inc. 6.450%, 3/15/2029 663,325 300,000 Nortel Networks Corp. 4.250%, 9/01/2008 304,875 150,000 Northern Telecom Capital Corp. 6.875%, 9/01/2023 143,250 100,000 Northern Telecom Capital 7.875%, 6/15/2026 (c) 102,500 ---------- 2,035,263 ---------- Entertainment -- 0.9% 415,000 Six Flags, Inc. 8.875%, 2/01/2010 428,487 ---------- Environmental -- 1.0% 400,000 Allied Waste North America, Inc., Senior Note, 144A 5.750%, 2/15/2011 387,000 75,000 Allied Waste North America, Inc., Series B 8.500%, 12/01/2008 84,000 35,000 Allied Waste North America, Senior Note, 144A 6.500%, 11/15/2010 35,744 ---------- 506,744 ---------- See accompanying notes to financial statements. 21 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Food and Beverage -- 2.0% $350,000 Borden Chemical, Inc. 7.875%, 2/15/2023 $ 332,500 550,000 Borden Chemical, Inc. 9.200%, 3/15/2021 577,500 100,000 Borden Chemical, Inc. 9.250%, 6/15/2019 101,000 ---------- 1,011,000 ---------- Gaming -- 0.8% 405,000 MGM Mirage, Senior Note, 144A 5.875%, 2/27/2014 404,494 ---------- Healthcare -- 0.7% 150,000 HCA, Inc. 7.500%, 12/15/2023 158,258 200,000 HCA, Inc., Medium Term Note 7.580%, 9/15/2025 212,078 ---------- 370,336 ---------- Home Construction -- 1.6% 475,000 DR Horton, Inc., Senior Note 5.000%, 1/15/2009 491,625 300,000 K. Hovnanian Enterprises, Inc. 8.000%, 4/01/2012 333,750 ---------- 825,375 ---------- Independent Energy -- 1.0% 100,000 Chesapeake Energy Corp. 7.500%, 9/15/2013 110,500 170,000 Chesapeake Energy Corp., Senior Note, 144A 6.875%, 1/15/2016 (c) 178,500 215,000 Swift Energy Co. 9.375%, 5/01/2012 239,725 ---------- 528,725 ---------- Information/Data Technology -- 1.6% 180,000 Maxtor Corp. 5.750%, 3/01/2012 158,400 100,000 Xerox Capital Trust I 8.000%, 2/01/2027 98,250 200,000 Xerox Corp. 7.625%, 6/15/2013 213,000 300,000 Xerox Corp., Medium Term Note 7.200%, 4/01/2016 312,000 ---------- 781,650 ---------- Integrated Energy -- 3.0% 265,000 Cerro Negro Finance, Ltd., 144A 7.900%, 12/01/2020 226,575 275,000 Grant Prideco Escrow Corp. 9.000%, 12/15/2009 310,063 125,000 PDVSA Finance, Ltd. 6.800%, 11/15/2008 122,500 200,000 PDVSA Finance, Ltd. 7.400%, 8/15/2016 (yankee) 171,500 500,000 PDVSA Finance, Ltd. 9.375%, 11/15/2007 525,000 200,000 Petrozuata Finance, Inc., 144A 8.220%, 4/01/2017 182,000 ---------- 1,537,638 ---------- Life Insurance -- 0.8% 200,000 Provident Cos., Inc. 7.250%, 3/15/2028 (c) 188,203 $200,000 UnumProvident Corp. 7.375%, 6/15/2032 $ 191,050 ---------- 379,253 ---------- Lodging -- 5.3% 300,000 FelCor Lodging LP 0/9.000%, 6/01/2011 (d) 321,750 750,000 Host Marriott LP 9.250%, 10/01/2007 840,000 851,000 La Quinta Corp. 7.000%, 8/15/2007 897,805 300,000 La Quinta Inns, Inc. Medium Term Note 7.330%, 4/01/2008 310,125 300,000 Royal Caribbean Cruises, Ltd. 7.500%, 10/15/2027 304,500 ---------- 2,674,180 ---------- Media Cable -- 3.7% 500,000 Charter Communications Holdings LLC 9.625%, 11/15/2009 422,500 150,000 Charter Communications Holdings, Inc., Senior Note 10.000%, 5/15/2011 124,500 900,000 CSC Holdings, Inc. 7.875%, 12/15/2007 967,500 200,000 Innova S de RL 9.375%, 9/19/2013 217,000 150,000 Rogers Communications, Inc. 2.000%, 11/26/2005 141,750 ---------- 1,873,250 ---------- Media Non - Cable -- 0.5% 250,000 Dex Media, Inc., 144A 8.000%, 11/15/2013 248,125 ---------- Metals & Mining -- 1.3% 500,000 Ispat Inland ULC, 144A 9.750%, 4/01/2014 520,000 175,000 Vale Overseas, Ltd. 8.250%, 1/17/2034 160,125 ---------- 680,125 ---------- Oil Field Services -- 0.8% 820,000 Trico Marine Services, Inc. 8.875%, 5/15/2012 (c) 426,400 ---------- Other -- 0.5% 250,000 Corrections Corp. of America 7.500%, 5/01/2011 263,438 ---------- Packaging -- 1.4% 300,000 Owens-Illinois Glass Container, North America 7.750%, 5/15/2011 313,500 350,000 Owens-Illinois, Inc., Senior Note 7.500%, 5/15/2010 (c) 335,125 75,000 Owens-Illinois, Inc., Senior Note 7.800%, 5/15/2018 69,375 ---------- 718,000 ---------- Paper -- 6.8% 220,000 Abitibi-Consolidated, Inc. 7.500%, 4/01/2028 201,170 250,000 Abitibi-Consolidated, Inc. 8.500%, 8/01/2029 245,442 200,000 Arcel Finance, Ltd., 144A 7.048%, 9/01/2011 212,000 See accompanying notes to financial statements. 22 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Paper -- continued $ 385,000 Boise Cascade Corp. 7.350%, 2/01/2016 $ 407,096 200,000 Boise Cascade Corp., Series A, Medium Term Note 7.450%, 8/10/2011 211,301 685,000 Bowater, Inc. 6.500%, 6/15/2013 670,444 165,000 Georgia-Pacific Corp. 7.250%, 6/01/2028 161,700 200,000 Georgia-Pacific Corp. 7.375%, 12/01/2025 198,000 500,000 Georgia-Pacific Corp. 9.500%, 12/01/2011 (c) 602,500 350,000 Pope & Talbot, Inc. 8.375%, 6/01/2013 364,000 145,000 Tembec Industries, Inc. 7.750%, 3/15/2012 139,925 ----------- 3,413,578 ----------- Pharmaceuticals -- 2.9% 385,000 Human Genome Sciences, Inc. 3.750%, 3/15/2007 372,006 187,000 IVAX Corp. 4.500%, 5/15/2008 189,104 300,000 Nektar Therapeutics 3.500%, 10/17/2007 292,125 250,000 Pharma Services Intermediate Holding Corp., Senior Note, 144A Zero Coupon, 4/01/2014(d)(f) 143,125 200,000 Quintiles Transnational Corp., 144A 10.000%, 10/01/2013 208,000 260,000 Vertex Pharmaceuticals, Inc., 144A 5.750%, 2/15/2011 247,325 ----------- 1,451,685 ----------- Pipelines -- 3.8% 700,000 Coastal Corp. 6.500%, 6/01/2008 (c) 598,500 175,000 Tennessee Gas Pipeline Co. 7.000%, 10/15/2028 163,625 175,000 Williams Cos. (The), Inc. 7.125%, 9/01/2011 (c) 183,750 455,000 Williams Cos. (The), Inc. 7.500%, 1/15/2031 439,075 50,000 Williams Cos. (The), Inc. 7.875%, 9/01/2021 50,625 440,000 Williams Holdings of Delaware 6.500%, 12/01/2008 457,050 ----------- 1,892,625 ----------- Railroads -- 0.6% 300,000 Grupo Transportacion Ferroviaria Mexicana SA de CV 0/11.750%, 6/15/2009 (yankee)(d) 301,500 ----------- Real Estate Investment Trusts -- 2.6% 1,000,000 Crescent Real Estate Equities LP 9.250%, 4/15/2009 1,112,500 200,000 TriNet Corporate Realty Trust, Inc. 7.700%, 7/15/2017 221,500 ----------- 1,334,000 ----------- Refining -- 2.8% 325,000 Citgo Petroleum Corp., Senior Note 11.375%, 2/01/2011 379,438 700,000 Premcor Refining Group (The), Inc. 7.500%, 6/15/2015 770,000 225,000 Premcor Refining Group (The), Inc., Senior Note 6.750%, 2/01/2011 244,688 ----------- 1,394,126 ----------- Restaurants -- 0.3% 125,000 Domino's, Inc., Senior Subordinated Note 8.250%, 7/01/2011 134,688 ----------- Retailers -- 4.5% 250,000 Dillard's, Inc. 6.625%, 1/15/2018 245,625 800,000 Dillard's, Inc. 7.750%, 7/15/2026 816,000 800,000 Foot Locker, Inc. 8.500%, 1/15/2022 897,000 335,000 Toys R US, Inc. 7.375%, 10/15/2018 328,300 ----------- 2,286,925 ----------- Sovereigns -- 3.2% 200,000 Dominican Republic, 144A 9.040%, 1/23/2013 144,000 345,000 Republic of Brazil 8.250%, 1/20/2034 (c) 293,250 1,000,000 Republic of Brazil 9.375%, 4/07/2008 (c) 1,065,000 125,000 Republic of Peru 4.500%, 3/07/2017 110,000 ----------- 1,612,250 ----------- Textile -- 1.9% 905,000 Phillips Van-Heusen Corp. 7.750%, 11/15/2023 936,675 ----------- Transportation Services -- 2.6% 275,000 APL, Ltd. 8.000%, 1/15/2024 259,875 136,181 Atlas Air, Inc., Series 1998-1, Class 1A 7.380%, 1/02/2018 129,274 133,099 Atlas Air, Inc., Series 1999-1, Class 1A 7.200%, 1/02/2019 124,873 129,929 Atlas Air, Inc., Series 2000-1, Class A 8.707%, 1/02/2019 124,290 300,000 Overseas Shipholding Group, Senior Note 7.500%, 2/15/2024 303,750 350,000 Stena AB, Senior Note 7.500%, 11/01/2013 365,750 ----------- 1,307,812 ----------- Wirelines -- 5.6% 150,000 Philippine Long Distance Telephone Co. 8.350%, 3/06/2017 136,500 700,000 Philippine Long Distance Telephone Co. 10.500%, 4/15/2009 770,000 375,000 Qwest Capital Funding, Inc. 6.875%, 7/15/2028 290,626 75,000 Qwest Capital Funding, Inc. 7.000%, 8/03/2009 (c) 65,813 1,890,000 Qwest Capital Funding, Inc. 7.750%, 2/15/2031 1,549,800 ----------- 2,812,739 ----------- Total Bonds and Notes (Identified Cost $44,257,556) 47,946,956 ----------- See accompanying notes to financial statements. 23 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited)
Shares Description Value (a) - ------------------------------------------------------------------------------------ Preferred Stocks -- 2.5% Electric -- 0.7% 8,000 CMS Energy Trust I, 7.75%, 7/15/2027 $ 360,000 ---------- Electronics -- 0.4% 175 Lucent Technologies Capital Trust I, 7.75%, 3/15/2017 220,710 ---------- Entertainment -- 0.2% 3,000 Six Flags, Inc., 7.25%, 8/15/2009 72,450 ---------- Pipelines -- 1.0% 8,000 Williams Cos., Inc., 5.50%, 6/01/2033(c) 510,000 ---------- Wirelines -- 0.2% 2,000 Philippine Long Distance Telephone Co. (GDR), $14.00, 12/31/2049 92,000 ---------- Total Preferred Stocks (Identified Cost $1,134,032) 1,255,160 ----------
Principal Amount - ------------------------------------------------------------------------------------ Short Term Investments -- 15.0% $ 464,304 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2004 at 0.76% to be repurchased at $464,314 on 4/01/2004, collateralized by $474,997 Federal National Mortgage Bond, 3.230%, due 3/25/2022 valued at $487,520 464,304 257,254 Bank of Montreal, 1.01%, due 4/20/2004(e) 257,254 695,900 Bank of Nova Scotia, 1.01%, due 4/05/2004(e) 695,900 1,082,509 BGI Prime Money Market Fund(e) 1,082,509 154,644 BNP Paribas, 1.01%, due 4/16/2004(e) 154,644 154,644 Citigroup, 1.03%, due 6/14/2004(e) 154,644 154,644 Credit Agricole Indosuez, 1.02%, due 4/19/2004(e) 154,644 417,540 Credit Agricole Indosuez, 1.03%, due 4/12/2004(e) 417,540 154,644 Den Danske Bank, 1.01%, due 4/20/2004(e) 154,644 927,867 Fleet National Bank, 1.063%, due 7/21/2004(e) 927,867 46,394 Harris Trust & Savings Bank, 1.015%, due 4/30/2004(e) 46,394 386,611 Keybank, 0.98%, due 4/01/2004(e) 386,611 284,027 Merrill Lynch Premier Institional Fund(e) 284,027 1,082,510 Merrimac Cash Fund-Premium Class(e) 1,082,510 231,967 Prefco, 1.031%, due 4/26/2004(e) 231,967 231,967 Sheffield Receivables Corp, 1.031%, due 4/30/2004(e) 231,967 77,322 Svenska Handlesbanken, 1.01%, due 4/23/2004(e) 77,322 773,222 Wells Fargo, 1.02%, due 4/05/2004(e) 773,222 ----------- Total Short Term Investments (Identified Cost $7,577,970) 7,577,970 ----------- Total Investments -- 112.5% (Identified Cost $52,969,558) (b) 56,780,086 Other assets less liabilities (6,290,236) ----------- Total Net Assets -- 100% $50,489,850 =========== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2004, the net unrealized appreciation on investments based on cost of $52,977,808 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 $ 4,651,778 Aggregate gross unrealized depreciation for all investments in which there is an excessof tax cost over value (865,500) ----------- Net unrealized appreciation $ 3,786,278 =========== At September 30, 2003, the Fund had a capital loss carryover of approximately $87,273,513 of which $458,229 expires on September 30, 2007, $16,613,930 expires on September 30, 2008, $43,374,721 expires on September 30, 2009 and $26,826,633 expires on September 30, 2010. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) All or a portion of this security was on loan to brokers at March 31, 2004. (d) Debt obligation initially issued in zero coupon form which converts to coupon form at a specified rate and date. (e) Represents investments of securities lending collateral. (f) Step Bond: Coupon rate is zero or below market for an initial period and then increases to a higher coupon rate at a specified date and rate. GDR Global Depositary Receipt 144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $4,753,433 or 9.4% of net assets.
See accompanying notes to financial statements. 24 - -------------------------------------------------------------------------------- Loomis Sayles Limited Term Government and Agency Fund Schedule of Investments - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited)
Principal Amount Description Value (a) - ------------------------------------------------------------------------------------- Bonds and Notes -- 98.6% of Total Net Assets Asset-Backed -- 4.0% $ 2,240,000 Residential Asset Mortgage Products, Inc.,Series 2003-RZ5, Class A3 3.800%, 7/25/2030 $ 2,232,484 1,675,000 Residential Funding Mortgage Securities II 5.420%, 2/25/2016 1,729,044 1,376,000 Residential Funding Mortgage Securities II, Series 2003-HI4, Class A4 4.590%, 4/25/2018 1,422,449 ------------ 5,383,977 ------------ Government Agencies -- 13.4% 2,935,000 Federal Farm Credit Bank 2.375%, 10/02/2006 2,956,511 6,200,000 Federal Home Loan Bank 3.625%, 11/14/2008 6,379,738 5,000,000 Federal Home Loan Mortgage Corp. 5.750%, 4/15/2008 5,574,660 3,000,000 Federal National Mortgage Association 5.500%, 5/02/2006 3,223,344 ------------ 18,134,253 ------------ Mortgage Related -- 54.0% 2,611,778 Federal Home Loan Mortgage Corp. 5.000%, 5/01/2018 2,688,157 726,611 Federal Home Loan Mortgage Corp. 7.000%, 2/01/2016 776,844 150,106 Federal Home Loan Mortgage Corp. 7.500%, with various maturities to 2026 (c) 160,658 137,807 Federal Home Loan Mortgage Corp. 8.000%, with various maturities to 2015 (c) 143,835 9,131 Federal Home Loan Mortgage Corp. 10.000%, 7/01/2019 10,269 922,614 Federal Home Loan Mortgage Corp. 11.500%, with various maturities to 2020 (c) 1,048,208 9,335,909 Federal National Mortgage Association 4.000%, with various maturities to 2019 (c) 9,279,438 4,087,970 Federal National Mortgage Association 4.500%, 11/01/2033 3,999,335 19,824,378 Federal National Mortgage Association 5.500%, with various maturities to 2033 (c) 20,578,785 16,526,151 Federal National Mortgage Association 6.000%, with various maturities to 2033 (c) 17,375,516 2,329,846 Federal National Mortgage Association 6.500%, with various maturities to 2032 (c) 2,466,654 712,695 Federal National Mortgage Association 7.000%, 12/01/2022 766,761 2,707,409 Federal National Mortgage Association 7.500%, with various maturities to 2032 (c) 2,901,395 364,242 Federal National Mortgage Association 8.000%, with various maturities to 2016 (c) 391,708 2,817,246 Government National Mortgage Association 5.500%, 7/20/2033 2,896,726 339,225 Government National Mortgage Association 6.000%, 12/15/2031 354,672 4,775,415 Government National Mortgage Association 6.500%, with various maturities to 2033 (c) 5,028,510 1,831,064 Government National Mortgage Association 7.000%, with various maturities to 2031 (c) 1,952,946 26,001 Government National Mortgage Association 12.500%, with various maturities to 2015 (c) 30,288 284,450 Government National Mortgage Association 16.000%, with various maturities to 2012 (c) 340,717 96,230 Government National Mortgage Association 17.000%, with various maturities to 2011 (c) 116,788 ------------ 73,308,210 ------------ Supranational -- 3.3% 3,210,000 Inter-American Development Bank Bonds 12.250%, 12/15/2008 4,514,713 ------------ Treasuries -- 23.9% 10,400,000 United States Treasury Notes 2.000%, 8/31/2005 10,503,189 1,290,000 United States Treasury Notes 2.250%, 2/15/2007 1,300,986 7,125,000 United States Treasury Notes 3.125%, with various maturities to 2008 (c) (d) 7,275,716 4,750,000 United States Treasury Notes 3.375%, 11/15/2008 (d) 4,894,357 3,800,000 United States Treasury Notes 5.000%, 8/15/2011 (d) 4,187,273 3,750,000 United States Treasury Notes 6.625%, 5/15/2007 4,266,945 ------------ 32,428,466 ------------ Total Bonds and Notes (Identified Cost $131,443,925) 133,769,619 ------------ Short Term Investments -- 9.2% 1,364,747 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2004 at 0.76% to be repurchased at $1,364,776 on 4/01/2004, collateralized by $1,388,959 Federal Home Loan Mortgage Corporation, 3.732%, due 1/01/2021 valued at $1,433,116 1,364,747 398,950 Bank of Montreal, 1.01%, due 4/20/2004 (e) 398,950 1,079,204 Bank of Nova Scotia, 1.01%, due 4/05/2004 (e) 1,079,204 1,678,763 BGI Prime Money Market Fund (e) 1,678,763 239,823 BNP Paribas, 1.01%, due 4/16/2004 (e) 239,823 239,823 Citigroup, 1.03%, due 6/14/2004 (e) 239,823 239,823 Credit Agricole Indosuez, 1.02%, due 4/19/2004 (e) 239,823 647,523 Credit Agricole Indosuez, 1.03%, due 4/12/2004 (e) 647,523 239,823 Den Danske Bank, 1.01%, due 4/20/2004 (e) 239,823 1,438,939 Fleet National Bank, 1.063%, due 7/21/2004 (e) 1,438,939 71,947 Harris Trust & Savings Bank, 1.015%, due 4/30/2004 (e) 71,947 599,558 Keybank, 0.98%, due 4/01/2004 (e) 599,558 440,470 Merrill Lynch Premier Institional Fund (e) 440,470 1,678,762 Merrimac Cash Fund-Premium Class (e) 1,678,762 359,735 Prefco, 1.031%, due 4/26/2004 (e) 359,735 359,735 Sheffield Receivables Corp, 1.031%, due 4/30/2004 (e) 359,735 119,912 Svenska Handlesbanken, 1.01%, due 4/23/2004(e) 119,912 1,199,116 Wells Fargo, 1.02%, due 4/05/2004 (e) 1,199,116 ------------ Total Short Term Investments (Identified Cost $12,396,653) 12,396,653 ------------ Total Investments -- 107.8% (Identified Cost $143,840,578) (b) 146,166,272 Other assets less liabilities (10,522,291) ------------ Total Net Assets -- 100% $135,643,981 ============
See accompanying notes to financial statements. 25 - -------------------------------------------------------------------------------- Loomis Sayles Limited Term Government and Agency Fund Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2004, the net unrealized appreciation on investments based on cost of $144,494,978 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 $1,811,411 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (140,117) ---------- Net unrealized appreciation $1,671,294 ========== At September 30, 2003, the Fund had a capital loss carryover of approximately $22,290,822 of which $4,342,078 expires on September 30, 2004, $2,731,339 expires on September 30, 2005, $10,626,315 expires on September 30, 2007, $4,165,768 expires on September 30, 2008 and $425,322 expires on September 30, 2011. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) The Fund's investment in mortgage related securities of the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and the Government National Mortgage Association are interests in separate pools of mortgages. All separate investments in securities of each issuer and for United States Treasury Notes which have the same coupon rate have been aggregated for the purpose of presentation in the schedule of investments. (d) All or a portion of this security was on loan to brokers at March 31, 2004. (e) Represents investments of securities lending collateral. See accompanying notes to financial statements. 26 - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund Schedule of Investments - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Tax Exempt Obligations -- 95.8% of Total Net Assets Highlands County, FL, Health Facilities Authority -- 1.2% $1,000,000 Adventis Health System, 5.875%, 11/15/2029 $ 1,061,210 ----------- Martha's Vineyard, MA -- 1.1% 1,000,000 Land Bank Revenue, 5.000%, 5/01/2032, (AMBAC insured) 1,036,380 ----------- Massachusetts Bay Transportation Authority -- 6.3% 3,000,000 Assessment Series A, 5.250%, 7/01/2030 3,157,260 2,500,000 Series A, 5.000%, 7/01/2032 2,580,225 ----------- 5,737,485 ----------- Massachusetts State -- 5.6% 4,000,000 State Refunding Series A, 6.500%, 11/01/2014, (AMBAC insured) 5,023,440 ----------- Massachusetts State Development Finance Agency -- 16.3% 2,500,000 Cambridge Street Development Series A, 5.125%, 2/01/2034, (MBIA insured) 2,602,125 2,000,000 Health Care Facility Alliance, 7.100%, 7/01/2032 1,963,560 4,000,000 Mount Holyoke College, 5.250%, 7/01/2031 4,203,560 2,800,000 Refunding Springfield Resource Recovery-A, 5.625%, 6/01/2019 2,941,708 1,100,000 Visual and Performing Arts, 6.000%, 8/01/2021 1,325,313 1,610,000 WGBH Educational Foundation Series A, 5.375%, 1/01/2042, (AMBAC insured) 1,715,922 ----------- 14,752,188 ----------- Massachusetts State Health & Educational Facilities Authority -- 37.4% 1,160,000 Baystate Medical Center Series F, 5.700%, 7/01/2027 1,213,685 3,000,000 Boston University, 5.000%, 10/01/2039 3,115,470 2,200,000 Catholic Health East, 5.500%, 11/15/2032 2,236,652 3,000,000 Dana Farber Series G-1, 6.250%, 12/01/2022 3,179,550 3,000,000 Harvard Univerity Series N, 6.250%, 4/01/2020 3,759,390 1,200,000 Harvard University Series F, 5.125%, 7/15/2037 1,255,692 1,550,000 Milford-Whitinsville Regional Corp., 5.250%, 7/15/2018 1,505,019 1,500,000 Milton Hospital Series C, 5.500%, 7/01/2016 1,557,840 3,000,000 Nichols College Series C, 6.000%, 10/01/2017 3,132,210 2,000,000 Partners Healthcare Systems Series B, 5.250%, 7/01/2029 2,045,640 2,500,000 Partners Healthcare Systems Series C, 5.750%, 7/01/2021 2,707,750 1,500,000 Tufts University Series I, 5.250%, 2/15/2030 1,573,755 1,000,000 University of Massachusetts Project Series C, 5.250%, 10/01/2031, (MBIA insured) 1,059,140 2,000,000 University of Massachusetts Series C, 5.125%, 10/01/2034, (FGIC insured) 2,087,760 $2,265,000 Wellesley College Series F, 5.125%, 7/01/2039 $ 2,350,753 1,000,000 Williams College Series H, 5.000%, 7/01/2033 1,035,370 ----------- 33,815,676 ----------- Massachusetts State Housing Finance Agency -- 1.2% 1,110,000 Single Family Mortgage Series 21, 7.125%, 6/01/2025 1,111,687 ----------- Massachusetts State Port Authority -- 3.4% 1,750,000 Delta Air Lines, Inc. Project Series A, 5.500%, 1/01/2019, (AMBAC insured) 1,851,605 1,200,000 Series A, 5.000%, 7/01/2033, (MBIA insured) 1,241,532 ----------- 3,093,137 ----------- Massachusetts State Turnpike Authority -- 3.3% 2,950,000 Metropolitan Highway System, Capital Appreciation Senior Series A, 5.000%, 1/01/2037, (MBIA insured) 3,009,679 ----------- Massachusetts State Water Resources Authority -- 6.8% 2,000,000 General Series B, 5.125%, 8/01/2027, (MBIA insured) 2,098,000 3,240,000 Series A, 6.500%, 7/15/2019, (FGIC insured) 4,017,794 ----------- 6,115,794 ----------- Michigan State Hospital Finance Authority -- 1.8% 1,500,000 Oakwood Obligated Group, 5.500%, 11/01/2017 1,605,780 ----------- New England Education Loan Marketing -- 3.8% 3,000,000 Student Loan Revenue Bond Sub-Issue H, 6.900%, 11/01/2009 3,458,730 ----------- Puerto Rico Commonwealth Aqueduct & Sewer Authority -- 5.0% 3,000,000 Aqueduct & Sewer Authority, 6.250%, 7/01/2013 3,618,810 695,000 Aqueduct & Sewer Authority, 10.250%, 7/01/2009 862,891 ----------- 4,481,701 ----------- University of Massachusetts Building Authority -- 2.6% 2,200,000 SR - Series 1, 5.250%, 11/01/2028, (AMBAC insured) 2,338,446 ----------- Total Tax Exempt Obligations (Cost $81,567,026) 86,641,333 ----------- See accompanying notes to financial statements. 27 - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund Schedule of Investments (Continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Short Term Investment -- 2.9% of Total Net Assets $2,650,803 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2004 at 0.76% to be repurchased at $2,650,859 on 4/01/2004, collateralized by $2,774,873 Federal National Mortgage Association Bond, 1.49%, due 5/15/2032 valued at $2,783,569 $ 2,650,803 ----------- Total Short Term Investment (Cost $2,650,803) 2,650,803 ----------- Total Investments -- 98.7% (Identified Cost $84,217,829) (b) 89,292,136 Other assets less liabilities 1,156,472 ----------- Total Net Assets -- 100.0% $90,448,608 =========== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2004, the net unrealized appreciation on investments based on cost of $84,215,824 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $5,225,577 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (149,265) ---------- Net unrealized appreciation $5,076,312 ========== At September 30, 2003, the Fund had a capital loss carryover of approximately $2,539,647 of which $1,419,707 expires on September 30, 2007, $116,500 expires on September 30, 2008 and $1,003,440 expires on September 30, 2010. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. AMBAC American Municipal Bond Assurance Corp. FGIC Financial Guarantee Insurance Company MBIA Municipal Bond Investors Assurance Corp. Holdings By Revenue Source at March 31, 2004 (unaudited) % of Net Assets --------------- University 14.8 College 11.9 Water 11.7 Financial 8.4 Hospital 7.1 Revenue 4.6 Health 4.2 Student Loan 3.8 Special Assessment 3.5 Miscellaneous 3.4 Turnpike 3.3 Pooled Funds 3.3 Hospital System Bonds 3.0 Financial Services 2.9 Mass Transit 2.9 Nursing Home 2.2 Airport 2.1 Other, less than 2% each 5.6 See accompanying notes to financial statements. 28 - -------------------------------------------------------------------------------- Loomis Sayles Municipal Income Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Tax Exempt Obligations -- 95.4% of Total Net Assets California -- 4.4% $2,000,000 California State, 5.125%, 6/01/2027 $ 2,019,440 100,000 Golden State Tobacco Securitization Corp., 5.750%, 6/01/2021 104,635 250,000 Golden State Tobacco Securitization Corp., 5.750%, 6/01/2022 261,105 250,000 Golden State Tobacco Securitization Corp., 5.750%, 6/01/2023 260,050 3,000,000 Sacramento, CA, Power Authority, 6.000%, 7/01/2022 3,179,970 ----------- 5,825,200 ----------- Colorado -- 1.6% 2,000,000 Denver, CO, City & County Airport, 5.250%, 11/15/2023, (MBIA insured) 2,134,620 ----------- District of Columbia -- 4.1% 5,280,000 Metropolitan Washington D.C. Airports Authority, 5.125%, 10/01/2029, (FGIC insured) 5,451,758 ----------- Florida -- 6.2% 3,000,000 Escambia County, FL, Pollution Control, 6.900%, 8/01/2022 3,099,720 5,000,000 Highlands County, FL, Health Facilities Authority, Multiple Obligors, 5.375%, 11/15/2035 5,086,850 ----------- 8,186,570 ----------- Illinois -- 9.6% 1,000,000 Chicago, IL, Skyway Toll Bridge, 5.375%, 1/01/2011 1,103,030 2,780,000 Illinois Educational Facilities Authority, University of Chicago, 5.000%, 7/01/2033 2,871,962 3,000,000 Illinois Educational Facilities Authority, University of Chicago, 5.125%, 7/01/2038 3,087,810 1,750,000 Illinois State, 5.400%, 12/01/2020, (MBIA insured) 1,922,900 3,500,000 Metropolitan Pier & Exposition Authority, 5.250%, 6/15/2042, (MBIA insured) 3,677,800 ----------- 12,663,502 ----------- Indiana -- 5.6% 2,000,000 Indiana Transportation Finance Authority, 5.375%, 12/01/2025 2,123,060 5,000,000 Indianapolis, IN, Local Public Improvement Bond Bank, 5.250%, 7/01/2033, (MBIA insured) 5,245,650 ----------- 7,368,710 Massachusetts -- 2.3% 900,000 Massachusetts Housing Finance Agency, 6.600%, 12/01/2026 923,985 2,000,000 Massachusetts Turnpike Authority, 5.000%, 1/01/2039, (AMBAC insured) 2,052,540 ----------- 2,976,525 ----------- Michigan -- 7.3% 2,850,000 Michigan Hospital Finance Authority, Henry Ford Health System, 5.500%, 3/01/2014 3,115,677 1,100,000 Michigan State Hospital Finance Authority, Oakwood Obligated Group, 5.500%, 11/01/2014 1,210,792 5,000,000 University of Michigan, 5.250%, 12/01/2020 5,228,000 ----------- 9,554,469 ----------- Mississippi -- 4.0% $2,000,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control, 6.700%, 4/01/2022 $ 2,345,380 2,500,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control, 6.800%, 4/01/2022 2,960,725 ----------- 5,306,105 ----------- New Jersey -- 0.8% 1,000,000 New Jersey Health Care Facilities Financing Authority, Catholic Health East, 5.375%, 11/15/2033 1,026,950 ----------- New York -- 11.7% 2,000,000 New York City, NY, 6.000%, 1/15/2020 2,264,080 3,000,000 New York Dormitory Authority, 5.500%, 5/15/2013 3,445,620 2,740,000 New York Dormitory Authority, 5.750%, 7/01/2013 3,181,880 1,300,000 Port Authority of New York & New Jersey, 7.000%, 10/01/2007 1,348,243 5,000,000 Triborough Bridge & Tunnel Authority, 5.000%, 1/01/2032 5,151,950 ----------- 15,391,773 ----------- North Carolina -- 1.1% 1,300,000 North Carolina Eastern Municipal Power Agency, 5.500%, 1/01/2012 1,436,084 ----------- Oregon -- 3.1% 4,000,000 Western Generation Agency, 7.400%, 1/01/2016 4,094,120 ----------- Pennsylvania -- 11.5% 3,300,000 Lehigh County, PA, General Purpose Authority, Saint Luke's Hospital of Bethlehem, 5.250%, 8/15/2023 3,313,365 3,000,000 Pennsylvania Economic Development Financing Authority, 6.600%, 1/01/2019 3,048,720 3,000,000 Pennsylvania Economic Development Financing Authority, 7.600%, 12/01/2024 3,161,640 5,000,000 Pennsylvania Industrial Development Authority, 5.500%, 7/01/2019, (AMBAC insured) 5,592,650 ----------- 15,116,375 ----------- Puerto Rico -- 0.9% 1,000,000 Puerto Rico Infrastructure Financing Authority, 5.500%, 10/01/2040 1,112,690 ----------- South Carolina -- 2.4% 3,000,000 Greenville County, SC, School District, 5.500%, 12/01/2028 3,202,860 ----------- Tennessee -- 2.0% 2,500,000 Maury County, TN, Industrial Development Board, Pollution Control, 6.500%, 9/01/2024 2,569,150 Texas -- 10.9% 4,275,000 Dallas-Fort Worth, TX, International Airport, 5.500%, 11/01/2033 4,554,457 1,900,000 Denton County, TX, 5.125%, 7/15/2026 1,964,467 3,000,000 Houston, TX, Water & Sewer System, 5.250%, 12/01/2023, (FGIC insured) 3,154,200 1,435,000 Katy, TX, Independent School District, 5.125%, 2/15/2020 1,537,100 3,000,000 Lewisville, TX, Independent School District, 5.250%, 8/15/2027 3,154,950 ----------- 14,365,174 ----------- See accompanying notes to financial statements. 29 - -------------------------------------------------------------------------------- Loomis Sayles Municipal Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Tax Exempt Obligations -- (continued)
Principal Amount Description Value (a) - --------------------------------------------------------------------------------- Washington -- 5.9% $2,000,000 Energy Northwest, 5.500%, 7/01/2014 $ 2,300,040 3,000,000 Grant County, WA, Public Utility District No. 2, Wanapum Hydroelectric, 5.000%, 1/01/2035, (MBIA insured) 3,081,600 2,250,000 Port of Seattle, WA, 5.000%, 4/01/2031, (FGIC insured) 2,315,138 ------------ 7,696,778 ------------ Total Tax Exempt Obligations (Identified Cost $118,205,927) 125,479,413 ------------ Short Term Investment -- 1.0% of Total Net Assets 1,392,790 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2004 at 0.76% to be repurchased at $1,392,819 on 4/01/2004, collateralized by $1,450,224 Federal Home Loan Mortgage Bond, 5.00%, due 5/01/2033 valued at $1,462,430 1,392,790 ------------ Total Short Term Investment (Cost $1,392,790) 1,392,790 ------------ Total Investments -- 96.4% (Identified Cost $119,598,717) (b) 126,872,203 Other assets less liabilities 4,676,886 ------------ Total Net Assets-- 100.0% $131,549,089 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2004, the net unrealized appreciation on investments based on cost of $119,229,938 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 $ 7,727,292 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (85,027) ------------ Net unrealized appreciation $ 7,642,265 ============ At September 30, 2003, the Fund had a capital loss carryover of approximately $1,700,392 of which $1,700,392 expires on September 30, 2007. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. AMBAC American Municipal Bond Assurance Corp. FGIC Financial Guarantee Insurance Company MBIA Municipal Bond Investors Assurance Corp.
Holdings By Revenue Source at March 31, 2004 (unaudited) % of Net Assets --------------- University 13.5 Various Purpose 10.3 Improvement 7.5 Solid Waste Disposal 6.4 Water 6.4 Revenue 5.3 Airport 5.1 Pooled Funds 4.3 Financial 4.3 Insured 4.1 Paper/Forest Products 3.1 Electric 2.8 Development 2.8 Hospital 2.5 Public Power/Utility 2.4 Hospital System Bonds 2.4 Public Utility District 2.3 Mining 2.3 Other, less than 2% each 7.6 See accompanying notes to financial statements. 30 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value(a) - ------------------------------------------------------------------------------- Bonds and Notes -- 85.4% of Total Net Assets Convertible Bonds -- 6.0% Canada -- 1.3% $ 5,750,000 Nortel Networks Corp. 4.250%, 9/01/2008 $ 5,843,437 1,500,000 Rogers Communications, Inc. 2.000%, 11/26/2005 1,417,500 315,000 TELUS Corp. 6.750%, 6/15/2010, (CAD) 252,288 ----------- 7,513,225 ----------- Netherlands -- 0.3% 1,550,000 Infineon Technologies Holding BV 4.250%, 2/06/2007, (EUR) 1,874,528 ----------- United Kingdom -- 2.3% 500,000 COLT Telecom Group PLC 2.000%, 3/29/2006, (EUR) 676,142 4,075,000 COLT Telecom Group PLC 2.000%, 12/16/2006, (EUR) 5,685,897 4,885,000 COLT Telecom Group PLC 2.000%, 4/03/2007, (EUR) 6,883,661 ----------- 13,245,700 ----------- United States -- 2.1% 475,000 Amkor Technology, Inc. 5.000%, 3/15/2007(c) 456,594 200,000 Builders Transportation, Inc. 6.500%, 5/01/2011(d) (e) (f) 20 1,000,000 Builders Transportation, Inc. 8.000%, 8/15/2005(d) (e) (f) 100 400,000 Corning, Inc. 3.500%, 11/01/2008 512,500 213,000 Dixie Group, Inc. 7.000%, 5/15/2012 183,180 1,600,000 Human Genome Sciences, Inc. 3.750%, 3/15/2007 1,546,000 500,000 Lam Research Corp. 4.000%, 6/01/2006(c) 502,500 1,165,000 Loews Corp. 3.125%, 9/15/2007 1,150,437 65,000 LSI Logic Corp. 4.000%, 11/01/2006 63,781 2,422,000 Maxtor Corp. 5.750%, 3/01/2012 2,131,360 2,400,000 Nektar Therapeutics 3.500%, 10/17/2007 2,337,000 800,000 Nextel Communications, Inc. 5.250%, 1/15/2010 804,000 355,000 Richardson Electronics, Ltd. 7.250%, 12/15/2006 351,450 1,750,000 Vertex Pharmaceuticals, Inc., 144A 5.750%, 2/15/2011 1,664,687 500,000 Preston Corp. 7.000%, 5/01/2011 450,000 ---------- 12,153,609 ----------- Total Convertible Bonds (Identified Cost $27,953,118) 34,787,062 ----------- Non-Convertible Bonds-- 79.4% Argentina -- 0.6% $ 2,405,000 Pecom Energia SA, 144A 8.125%, 7/15/2010 $ 2,465,125 3,500,000 Republic of Argentina 8.875%, 3/01/2029(d) 796,250 ----------- 3,261,375 ----------- Brazil -- 3.2% 1,927,153 Republic of Brazil 8.000%, 4/15/2014(g) 1,878,974 4,855,000 Republic of Brazil 8.250%, 1/20/2034(c) 4,126,750 7,600,000 Republic of Brazil 8.875%, 4/15/2024 6,954,000 5,808,000 Republic of Brazil 10.125%, 5/15/2027 5,877,696 ----------- 18,837,420 ----------- Canada -- 14.6% 5,990,000 British Columbia Province 5.250%, 12/01/2006, (CAD) 4,856,239 4,240,000 British Columbia Province 6.000%, 6/09/2008, (CAD) 3,557,428 8,100,000 Canadian Government 3.500%, 6/01/2004, (CAD) 6,192,453 7,210,000 Canadian Government 4.500%, 9/01/2007, (CAD) 5,766,790 13,540,000 Canadian Government 6.000%, 9/01/2005, (CAD) 10,874,035 18,000,000 Canadian Government 6.000%, 6/01/2008, (CAD) 15,176,293 6,685,000 Manitoba Province 5.750%, 6/02/2008, (CAD) 5,511,092 495,697 New Brunswick FM Project, Inc. 6.470%, 11/30/2027, (CAD)(h) 420,178 1,750,000 Nortel Networks Corp. 6.875%, 9/01/2023 1,671,250 17,000,000 Ontario Province, Medium Term Note 5.700%, 12/01/2008, (CAD) 14,146,827 1,525,000 Ontario Province, Medium Term Note 3.500%, 9/08/2006, (CAD) 1,185,580 6,240,000 Ontario Province 5.900%, 3/08/2006, (CAD) 5,065,776 2,720,000 Saskatchewan Province 5.500%, 6/02/2008, (CAD) 2,241,355 3,750,000 Saskatchewan Province 5.750%, 3/05/2029, (CAD) 2,974,514 8,500,000 Saskatchewan Province, Zero Coupon, 4/10/2014, (CAD) 3,980,153 850,000 Tembec Industries, Inc. 7.750%, 3/15/2012 820,250 ----------- 84,440,213 ----------- Cayman Islands -- 0.8% 1,000,000 Enersis SA, (yankee) 7.400%, 12/01/2016 1,025,313 1,405,000 PDVSA Finance, Ltd., (yankee) 7.400%, 8/15/2016 1,204,787 250,000 PDVSA Finance, Ltd. 9.375%, 11/15/2007 262,500 See accompanying notes to financial statements. 31 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value(a) - -------------------------------------------------------------------------------- Cayman Islands -- continued $ 2,650,000 Vale Overseas, Ltd. 8.250%, 1/17/2034 $ 2,424,750 ----------- 4,917,350 ----------- Chile -- 0.8% 2,125,000 Empresa Nacional de Electricidad SA 7.875%, 2/01/2027 2,210,865 250,000 Empresa Nacional de Electricidad SA 8.350%, 8/01/2013 282,070 2,250,000 Enersis SA,Chile, 144A 7.375%, 1/15/2014 2,332,681 ----------- 4,825,616 ----------- Dominican Republic -- 0.4% 3,390,000 Dominican Republic, 144A 9.040%, 1/23/2013 2,440,800 ----------- Ecuador -- 0.6% 4,225,000 Republic of Ecuador, 144A 0/7.000%, 8/15/2030(c) (h) 3,739,125 ----------- Hong Kong -- 0.9% 4,505,000 Bangkok Bank PCL, 144A 9.025%, 3/15/2029 5,182,633 ----------- Malaysia -- 1.3% 1,750,000 Telekom Malaysia Berhad, 144A 7.875%, 8/01/2025 2,067,690 5,200,000 Tenaga Nasional Berhad, 144A 7.500%, 11/01/2025(c) 5,738,444 ----------- 7,806,134 ----------- Mexico -- 2.5% 4,395,000 Grupo Transportacion Ferroviaria Mexicana SA de CV, (yankee) 0/11.750%, 6/15/2009(h) 4,416,975 1,000,000 Petroleos Mexicanos, (yankee) 9.250%, 3/30/2018 1,227,500 4,350,000 Petroleos Mexicanos, (yankee) 9.500%, 9/15/2027(c) 5,415,750 3,000,000 Petroleos Mexicanos, 144A, (yankee) 8.625%, 12/01/2023 3,450,000 ----------- 14,510,225 ----------- Norway -- 3.1% 10,000,000 Kingdom of Norway 5.500%, 5/15/2009, (NOK) 1,592,400 100,575,000 Kingdom of Norway 6.750%, 1/15/2007, (NOK) 16,213,543 ----------- 17,805,943 ----------- Philippines -- 1.1% 3,100,000 Bangko Sentral Ng Philipinas, (yankee) 8.600%, 6/15/2027 2,790,000 1,850,000 Philippine Long Distance Telephone Co. 8.350%, 3/06/2017 1,683,500 1,945,313 Quezon Power (Philippines), Ltd., (yankee) 8.860%, 6/15/2017 1,731,328 ----------- 6,204,828 ----------- Republic of Korea -- 0.1% 300,000 Samsung Electronics Co., Ltd., 144A 7.700%, 10/01/2027 336,982 ----------- Singapore -- 0.1% 1,050,000 SP PowerAssets, Ltd., Series E, Medium Term Note 3.730%, 10/22/2010, (SGD) 651,300 ----------- South Africa -- 0.4% $ 11,405,000 Republic of South Africa 12.500%, 12/21/2006, (ZAR) $ 1,931,138 1,470,000 Republic of South Africa 13.500%, 9/15/2015, (ZAR) 292,543 ----------- 2,223,681 ----------- Supranational -- 2.1% 22,300,000 International Bank for Reconstruction & Development, Euro Medium Term Note, Zero Coupon, 8/20/2007, (NZD) 12,187,835 Sweden -- 1.2% 46,000,000 Kingdom of Sweden 6.500%, 5/05/2008, (SEK) 6,850,986 ----------- United Kingdom -- 0.1% 500,000 Xerox Capital (Europe) PLC 5.250%, 12/03/2004, (EUR) 620,822 ----------- United States -- 42.0% 2,395,000 AES Corp. (The) 7.750%, 3/01/2014 2,397,994 4,210,000 AES Corp. (The) 8.375%, 3/01/2011, (GBP) 7,516,254 1,625,000 AES Corp. (The) 8.875%, 11/01/2027 1,576,250 1,750,000 Altria Group, Inc., Note 7.000%, 11/04/2013 1,928,572 750,000 American Airlines, Inc. 7.024%, 10/15/2009 761,425 9,823,000 APL, Ltd. 8.000%, 1/15/2024 9,282,735 8,000,000 ASIF Global Financing, 144A 2.380%, 2/26/2009, (SGD) 4,744,475 2,829,121 Atlas Air, Inc. 7.680%, 1/02/2014 1,694,248 5,701,460 Atlas Air, Inc., Series 1998-1, Class 1A 7.380%, 1/02/2018(e) 5,412,282 4,037,346 Atlas Air, Inc., Series 1999-1, Class 1A 7.200%, 1/02/2019(e) 3,787,799 500,000 Atlas Air, Inc., Series 1999-1, Class A2 6.880%, 7/02/2009(e) 461,224 1,918,546 Atlas Air, Inc., Series 1999-1, Class B 7.630%, 1/02/2015(e) 1,112,027 866,194 Atlas Air, Inc., Series 2000-1, Class A 8.707%, 1/02/2019(e) 828,601 800,000 Bausch & Lomb, Inc. 7.125%, 8/01/2028 842,706 500,000 Boise Cascade Corp., Series A, Medium Term Note 7.450%, 8/10/2011 528,253 5,614,000 Borden Chemical, Inc. 7.875%, 2/15/2023 5,333,300 1,850,000 Borden Chemical, Inc. 9.200%, 3/15/2021 1,942,500 1,155,000 Calpine Corp. 7.750%, 4/15/2009(c) 820,050 900,000 Calpine Corp. 7.875%, 4/01/2008(c) 655,875 900,000 Calpine Corp. 8.500%, 2/15/2011 661,500 2,075,000 Calpine Corp., 144A 8.750%, 7/15/2013(c) 1,898,625 See accompanying notes to financial statements. 32 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value(a) - -------------------------------------------------------------------------------- United States -- continued $ 5,250,000 Charter Communications Holdings LLC 9.625%, 11/15/2009 $ 4,436,250 400,000 Charter Communications Holdings LLC 10.000%, 4/01/2009 342,000 1,725,000 Charter Communications Holdings, Inc., Senior Note 10.000%, 5/15/2011 1,431,750 1,600,000 Coastal Corp. 6.950%, 6/01/2028 1,188,000 250,000 Continental Airlines, Inc. 8.000%, 12/15/2005(c) 232,500 600,802 Continental Airlines, Inc., Class A-1 6.703%, 6/15/2021 591,339 2,210,000 Continental Airlines, Inc., Class C-2 7.434%, 9/15/2004 2,182,409 1,249,292 Continental Airlines, Inc., Series 1997-4, Class 4A 6.900%, 1/02/2018 1,245,720 774,448 Continental Airlines, Inc., Series 1998-1, Class 1B 6.748%, 3/15/2017 642,126 459,958 Continental Airlines, Inc., Series 1999-1, Class C 6.954%, 8/02/2009 397,905 2,064,947 Continental Airlines, Inc., Series 1999-2, Class B 7.566%, 3/15/2020 1,777,063 725,000 Corning, Inc. 5.900%, 3/15/2014 717,750 500,000 Corning, Inc. 6.200%, 3/15/2016 496,250 650,000 Corning, Inc. 6.750%, 9/15/2013 682,865 1,000,000 Corning, Inc. 6.850%, 3/01/2029 929,523 250,000 Corning, Inc. 7.000%, 3/15/2007 250,312 350,000 Corning, Inc., Medium Term Note 8.300%, 4/04/2025 367,360 400,000 CSC Holdings, Inc. 7.875%, 2/15/2018 429,000 250,000 CSC Holdings, Inc. 8.125%, 7/15/2009 268,750 250,000 CSC Holdings, Inc. 8.125%, 8/15/2009 268,750 1,495,000 Cummins, Inc. 7.125%, 3/01/2028 1,480,050 125,000 Dana Corp. 7.000%, 3/15/2028 124,688 1,000,000 Dana Corp. 7.000%, 3/01/2029 997,500 250,000 Dana Corp. 9.000%, 8/15/2011, (EUR) 358,048 4,275,000 Delta Air Lines, Inc. 8.300%, 12/15/2029 2,458,125 250,000 Delta Air Lines, Inc. 10.125%, 5/15/2010 170,000 425,000 Dillard's Department Stores, Inc. 7.875%, 1/01/2023 442,000 5,415,000 Dillard's, Inc. 6.625%, 1/15/2018 5,320,238 550,000 Dillard's, Inc. 7.000%, 12/01/2028 517,000 $ 1,450,000 Dillard's, Inc. 7.130%, 8/01/2018 $ 1,439,125 1,500,000 Dillard's, Inc. 7.750%, 7/15/2026 1,530,000 3,015,000 El Paso Corp. 5.750%, 3/14/2006, (EUR) 3,428,504 400,000 EL Paso Energy Corp., Medium Term Note 7.750%, 1/15/2032(c) 321,000 2,500,000 Federal Home Loan Mortgage Corp. 3.220%, 6/20/2007, (SGD) 1,558,282 7,000,000 Federal Home Loan Mortgage Corp. 4.625%, 2/15/2007, (EUR) 9,073,173 25,000,000 Federal National Mortgage Association 2.290%, 2/19/2009, (SGD) 14,877,957 10,000,000 Federal National Mortgage Association 2.375%, 2/15/2007 10,046,875 34,000,000 Federal National Mortgage Association, Zero Coupon, 10/29/2007, (NZD) 18,449,512 1,000,000 First Industrial LP 7.600%, 7/15/2028 1,103,736 1,000,000 Foot Locker, Inc. 8.500%, 1/15/2022 1,121,250 150,000 Ford Motor Co. 6.625%, 10/01/2028 137,887 250,000 Ford Motor Credit Co. 6.875%, 2/01/2006 265,907 125,000 Ford Motor Credit Co. 7.250%, 2/22/2005, (GBP) 232,922 900,000 Freeport McMoran Resource Partners, Inc., Senior Note 7.000%, 2/15/2008 945,000 500,000 General Electric Capital Corp., Series E, Medium Term Note 1.725%, 6/27/2008, (SGD) 290,365 950,000 Georgia-Pacific Corp. 7.250%, 6/01/2028 931,000 3,200,000 Georgia-Pacific Corp. 7.375%, 12/01/2025 3,168,000 2,850,000 Georgia-Pacific Corp. 7.750%, 11/15/2029 2,892,750 250,000 Hasbro, Inc. 6.600%, 7/15/2028 256,875 820,000 HCA, Inc. 7.050%, 12/01/2027 821,770 500,000 HCA, Inc. 7.500%, 12/15/2023 527,528 500,000 HCA, Inc., Medium Term Note 7.580%, 9/15/2025 530,196 1,000,000 HCA, Inc., Senior Note 5.750%, 3/15/2014 999,183 147,000 HMH Properties, Inc., Senior Note, Series B 7.875%, 8/01/2008 152,696 1,515,000 IMC Global, Inc. 6.875%, 7/15/2007(c) 1,590,750 3,800,000 IMC Global, Inc. 7.300%, 1/15/2028 4,009,000 1,555,000 IMC Global, Inc. 7.375%, 8/01/2018 1,656,075 640,000 J.C. Penney Co., Inc. 7.125%, 11/15/2023 23,200 See accompanying notes to financial statements. 33 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- United States -- continued $ 900,000 J.C. Penney Co., Inc. 7.650%, 8/15/2016 $ 1,050,750 350,000 J.C. Penney Co., Inc. 7.950%, 4/01/2017 413,875 250,000 J.C. Penney Co., Inc. 8.125%, 4/01/2027 281,250 250,000 J.C. Penney Co., Inc. Medium Term Note 6.875%, 10/15/2015 275,625 500,000 La Quinta Properties, Inc., Senior Note 8.875%, 3/15/2011 565,000 770,000 Lucent Technologies, Inc. 5.500%, 11/15/2008(c) 744,975 8,935,000 Lucent Technologies, Inc. 6.450%, 3/15/2029 7,550,075 500,000 McDonald's Corp., Medium Term Note 3.628%, 10/10/2010, (SGD) 305,253 66,000 Missouri Pacific Railroad Co. 4.250%, 1/01/2005 66,136 881,000 Missouri Pacific Railroad Co. 5.000%, 1/01/2045 653,041 125,000 Motorola, Inc. 6.500%, 11/15/2028 126,886 750,000 Nextel Communications, Inc. 9.375%, 11/15/2009 815,625 1,400,000 Nextel Communications, Inc. 9.500%, 2/01/2011 1,596,000 2,700,000 Northern Telecom Capital 7.875%, 6/15/2026 2,767,500 400,000 Owens-Illinois, Inc., Senior Note 7.800%, 5/15/2018 370,000 2,000,000 Pharma Services Intermediate Holding Corp., Senior Note, 144A Zero Coupon, 4/01/2014(h) 1,145,000 1,000,000 Phillips Van-Heusen Corp. 7.750%, 11/15/2023 1,035,000 250,000 Pioneer Natural Resources Co. 7.200%, 1/15/2028 284,590 1,000,000 Provident Cos., Inc. 7.250%, 3/15/2028(c) 941,014 600,000 Qwest Capital Funding, Inc. 6.500%, 11/15/2018 477,000 10,430,000 Qwest Capital Funding, Inc. 6.875%, 7/15/2028 8,083,250 1,300,000 Qwest Capital Funding, Inc. 7.000%, 8/03/2009(c) 1,140,750 1,420,000 Qwest Capital Funding, Inc. 7.625%, 8/03/2021(c) 1,192,800 1,700,000 Qwest Capital Funding, Inc. 7.750%, 2/15/2031 1,394,000 250,000 Qwest Capital Funding, Inc. 7.900%, 8/15/2010(c) 225,000 750,000 Qwest Corp. 5.625%, 11/15/2008 748,125 290,000 Qwest Corp. 6.875%, 9/15/2033 256,650 350,000 Qwest Corp. 7.250%, 9/15/2025 325,500 500,000 Qwest Corp. 7.500%, 6/15/2023 467,500 233,442 Salton Sea Funding Corp. 7.840%, 5/30/2010 254,451 500,000 Southern California Edison Co. 6.375%, 1/15/2006 535,905 750,000 Southern California Edison Co. 6.650%, 4/01/2029 813,004 600,000 Southern California Edison Co. 7.625%, 1/15/2010 713,648 250,000 Sprint Capital Corp. 6.875%, 11/15/2028 259,623 650,000 Tennessee Gas Pipeline 7.500%, 4/01/2017 671,125 2,100,000 Tennessee Gas Pipeline Co. 7.000%, 10/15/2028 1,963,500 500,000 Tiverton Power Associates LP/Rumford Power Associates LP, 144A 9.000%, 7/15/2018 387,500 3,550,000 Trico Marine Services, Inc. 8.875%, 5/15/2012(c) 1,846,000 5,000,000 United States Treasury Notes 1.625%, 2/28/2006(c) 5,007,810 15,000,000 United States Treasury Notes 1.875%, 12/31/2005(c) 15,104,880 300,000 UnumProvident Corp. 7.375%, 6/15/2032 286,575 500,000 Williams Cos. (The), Inc. 7.125%, 9/01/2011(c) 525,000 4,900,000 Williams Cos. (The), Inc. 7.500%, 1/15/2031 4,728,500 600,000 Williams Cos. (The), Inc. 7.875%, 9/01/2021 607,500 1,250,000 Williams Holdings of Delaware 6.500%, 12/01/2008 1,298,438 5,500,000 Xerox Capital Trust I 8.000%, 2/01/2027 5,403,750 155,000 Xerox Corp., Medium Term Note 7.200%, 4/01/2016 161,200 ------------ 243,879,063 ------------ Uruguay -- 0.5% 1,600,000 Republic of Uruguay 7.500%, 3/15/2015 1,380,000 2,203,988 Republic of Uruguay 7.875%, 1/15/2033 1,652,991 ------------ 3,032,991 ------------ Venezuela -- 3.0% 190,000 Cerro Negro Finance, Ltd., 144A 7.330%, 12/01/2009 188,100 11,800,000 Cerro Negro Finance, Ltd., 144A 7.900%, 12/01/2020 10,089,000 4,355,000 Petrozuata Finance, Inc., 144A 8.220%, 4/01/2017 3,963,050 3,640,000 Republic of Venezuela 9.250%, 9/15/2027 3,235,962 ------------ 17,476,112 ------------ Total Non-Convertible Bonds (Identified Cost $423,775,339) 461,231,434 ------------ Total Bonds and Notes (Identified Cost $451,728,457) 496,018,496 ------------ See accompanying notes to financial statements. 34 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004 (unaudited) Shares Description Value (a) - ------------------------------------------------------------------------------- Preferred Stocks -- 4.6% of Total Net Assets Philippines -- 0.9% 117,850 Philippine Long Distance Telephone Co. (GDR), $14.00, $ 5,421,100 12/31/2049 ----------- United States -- 3.7% 5,000 Chesapeake Energy Corp. 442,500 51,500 Cummins Capital Trust I 3,572,813 24,550 Host Marriott Financial Trust 1,285,806 38,486 International Paper Capital Trust 1,919,489 5,910 La Quinta Properties 151,828 7,400 Lucent Technologies Capital Trust I, 7.75%, 3/15/2017 9,332,880 15,000 Newell Financial Trust I 699,375 51,900 Owens-Illinois, Inc. (c) 1,764,600 33,750 Pacific Gas and Electric Co.(d)(e) 1,032,750 800 Pacific Gas and Electric Co.(d)(e) 19,520 500 Pacific Gas and Electric Co., Series D(d)(e) 12,800 600 Pacific Gas and Electric Co., Series E(d)(e) 15,408 9,500 Southern California Edison Co. 1,001,360 ----------- 21,251,129 ----------- Total Preferred Stocks (Identified Cost $20,779,415) 26,672,229 ----------- Common Stocks -- 3.6% United States -- 3.6% 162,900 Associated Estates Realty Corp., 1,493,793 182,500 Developers Diversified Realty Corp. (REIT) 7,373,000 216,500 Duke Energy Corp.(c) 4,892,900 117,700 Simon Property Group, Inc. 6,878,388 ----------- Total Common Stocks (Identified Cost $13,620,869) 20,638,081 ----------- Principal Amount - ------------------------------------------------------------------------------- Short Term Investments -- 14.2% $36,260,798 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2004 at 0.76% to be repurchased at $36,261,564 on 4/01/2004, collateralized by $2,667,015 Federal National Mortgage Association Bond, 7.000%, due 3/01/2031 valued at $2,755,195 and $35,152,295 Federal National Mortgage Bond, 1.590%, due 3/25/2033 valued at $35,318,843 36,260,798 1,662,692 Bank of Montreal, 1.01%, due 4/20/2004(i) 1,662,692 4,497,764 Bank of Nova Scotia, 1.01%, due 4/05/2004(i) 4,497,764 6,996,520 BGI Prime Money Market Fund(i) 6,996,520 999,503 BNP Paribas, 1.01%, due 4/16/2004(i) 999,503 999,503 Citigroup, 1.03%, due 6/14/2004(i) 999,503 999,503 Credit Agricole Indosuez, 1.02%, due 4/19/2004(i) 999,503 2,698,659 Credit Agricole Indosuez, 1.03%, due 4/12/2004(i) 2,698,659 999,503 Den Danske Bank, 1.01%, due 4/20/2004(i) 999,503 5,997,019 Fleet National Bank, 1.063%, due 7/21/2004(i) 5,997,019 299,851 Harris Trust & Savings Bank, 1.015%, due 4/30/2004 (i) 299,851 2,498,758 Keybank, 0.98%, due 4/01/2004(i) 2,498,758 1,835,733 Merrill Lynch Premier Institional Fund(i) 1,835,733 6,996,522 Merrimac Cash Fund-Premium Class(i) 6,996,522 1,499,255 Prefco, 1.031%, due 4/26/2004(i) 1,499,255 1,499,255 Sheffield Receivables Corp, 1.031%, due 4/30/2004(i) 1,499,255 499,752 Svenska Handlesbanken, 1.01%, due 4/23/2004(i) 499,752 4,997,516 Wells Fargo, 1.02%, due 4/05/2004(i) 4,997,516 ------------ Total Short Term Investments (Identified Cost $82,238,106) 82,238,106 ------------ Total Investments -- 107.8% (Identified Cost $568,366,847)(b) $625,566,912 Other assets less liabilities (45,506,481) ------------ Total Net Assets -- 100% $580,060,431 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2004, the net unrealized appreciation on investments based on cost of $568,976,473 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 $ 65,821,320 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (9,230,881) ------------ Net unrealized appreciation $ 56,590,439 ============ At September 30, 2003, the Fund had a capital loss carryover of approximately $59,524,682 of which $13,337,197 expires on September 30, 2007, $6,500,127 expires on September 30, 2008, $10,848,517 expires on September 30, 2009, $21,770,312 expires on September 30, 2010 and $7,068,529 expires on September 30, 2011. This may be available to offset future realized capital gains, if any, to the extent provided by regulations. (c) All or a portion of this security was on loan to brokers at March 31, 2004. (d) Non-income producing security. (e) Issuer filed petition under Chapter 11 of the Federal Bankruptcy Code. (f) Security valued at fair value as determined in good faith by or under the direction of the Board of Directors. (g) Pay in kind securities. (h) Step Bond: Coupon rate is zero or below market for an initial period and then increases to a higher coupon rate at a specified date and rate. (i) Represents investments of securities lending collateral. ADR/GDR An American Depositary (ADR) or Global Depositary Receipt (GDR) 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. REIT Real Estate Investment Trust 144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $51,833,917 or 8.9% of net assets. CAD - Canadian Dollar EUR - Euro GBP - British Pound NOK - Norwegian Krone NZD - New Zealand Dollar SEK - Swedish Krona SGD - Singapore Dollar ZAR - South African Rand See accompanying notes to financial statements. 35 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of March 31, 2004(unaudited) Holdings at March 31, 2004 (unaudited) % of Net Assets --------------- Sovereigns 18.7 Financial Services 14.0 Government Agencies 12.9 Foreign Local Governments 7.6 Wirelines 6.1 Electronics 5.7 Electric 5.6 Transportation Services 4.0 Integrated Energy 2.6 Pipelines 2.5 Retailers 2.5 Supranationals 2.1 Other, less than 2% each 23.5 See accompanying notes to financial statements. 36 - -------------------------------------------------------------------------------- Statements of Assets & Liabilities - -------------------------------------------------------------------------------- March 31, 2004 (unaudited)
Core Plus Bond Government High Income Fund Securities Fund Fund -------------- --------------- ------------ ASSETS Investments at cost $316,704,835 $ 94,265,843 $ 52,969,558 Net unrealized appreciation 15,321,403 4,314,972 3,810,528 ------------ ------------ ------------ Investments at value 332,026,238 98,580,815 56,780,086 Cash -- -- -- Foreign cash at value (identified cost $174,442 and $12,152, respectively) 176,473 -- -- Receivable for Fund shares sold 573,550 18,094 25,376 Receivable for securities sold 6,335,007 1,004,537 89,316 Dividends and interest receivable 3,802,771 988,307 994,695 Tax reclaims receivable -- -- 144 Securities lending income receivable 3,043 902 2,108 ------------ ------------ ------------ TOTAL ASSETS 342,917,082 100,592,655 57,891,725 ------------ ------------ ------------ LIABILITIES Collateral on securities loaned, at value 26,149,903 24,097,608 7,113,666 Payable for securities purchased 5,100,555 -- -- Payable for Fund shares redeemed 418,806 121,321 67,733 Payable to custodian bank -- 3,837 -- Dividends payable 378,221 26,298 120,889 Management fees payable 109,389 36,068 30,272 Deferred Trustees' fees 150,335 78,463 32,112 Transfer agent fees payable 164,967 10,735 10,170 Accounting and administrative fees payable 17,147 4,268 2,815 Other accounts payable and accrued expenses 43,856 22,004 24,218 ------------ ------------ ------------ TOTAL LIABILITIES 32,533,179 24,400,602 7,401,875 ------------ ------------ ------------ NET ASSETS $310,383,903 $ 76,192,053 $ 50,489,850 ------------ ------------ ------------ NET ASSETS CONSIST OF: Paid in capital $319,244,058 $ 81,007,186 $132,278,247 Undistributed (overdistributed) net investment income (loss) (233,061) (110,559) (116,057) Accumulated net realized gain (loss) on investments (23,962,245) (9,019,546) (85,482,868) Net unrealized appreciation (depreciation) of investments 15,335,151 4,314,972 3,810,528 ------------ ------------ ------------ NET ASSETS $310,383,903 $ 76,192,053 $ 50,489,850 ------------ ------------ ------------ COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: Class A shares: Net assets $128,827,816 $ 61,094,298 $ 26,194,717 ============ ============ ============ Shares of beneficial interest 10,890,253 5,042,934 5,359,231 ============ ============ ============ Net asset value and redemption price per share $ 11.83 $ 12.11 $ 4.89 ============ ============ ============ Offering price per share (100/[100-maximum sales charge] of net asset value) $ 12.39 $ 12.68 $ 5.12 ============ ============ ============ Class B shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $157,640,073 $ 12,365,399 $ 21,424,861 ============ ============ ============ Shares of beneficial interest 13,314,140 1,020,463 4,380,820 ============ ============ ============ Net asset value and offering price per share $ 11.84 $ 12.12 $ 4.89 ============ ============ ============ Class C shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $ 7,156,826 $ -- $ 2,870,272 ============ ============ ============ Shares of beneficial interest 604,123 -- 587,119 ============ ============ ============ Net asset value and offering price per share $ 11.85 $ -- $ 4.89 ============ ============ ============ Class Y shares: Net assets $ 16,759,188 $ 2,732,356 $ -- ============ ============ ============ Shares of beneficial interest 1,411,225 226,096 -- ============ ============ ============ Net asset value, offering and redemption price per share $ 11.88 $ 12.08 $ -- ============ ============ ============
See accompanying notes to financial statements. 37 Massachusetts Limited Term Government Tax Free Income Municipal Income Strategic Income and Agency Fund Fund Fund Fund - ----------------------- --------------- ---------------- ---------------- $143,840,578 $84,217,829 $119,598,717 $568,366,847 2,325,694 5,074,307 7,273,486 57,200,065 ------------ ----------- ------------ ------------ 146,166,272 89,292,136 126,872,203 625,566,912 -- -- 3,099,353 62,969 -- -- -- 12,293 11,501 8,712 2,924 7,814,983 12,242 -- -- 203,416 1,059,401 1,377,541 2,016,089 7,492,280 -- -- -- 8,132 1,584 -- -- 5,179 ------------ ----------- ----------- ------------ 147,251,000 90,678,389 131,990,569 641,166,164 ------------ ----------- ----------- ------------ 11,031,906 -- -- 45,977,308 -- -- -- 13,089,569 278,491 35,770 110,926 478,365 -- -- -- -- 123,725 73,802 136,807 1,017,387 65,988 46,300 52,801 288,965 48,910 37,187 87,323 69,085 22,150 13,718 18,659 105,059 7,534 5,022 7,326 30,158 28,315 17,982 27,638 49,837 ------------ ----------- ------------ ------------ 11,607,019 229,781 441,480 61,105,733 ------------ ----------- ------------ ------------ $135,643,981 $90,448,608 $131,549,089 $580,060,431 ============ =========== ============ ============ $157,822,557 $88,006,485 $126,893,290 $573,716,048 (1,043,062) 1,827 138,086 (313,308) (23,461,208) (2,634,011) (2,755,773) (50,543,796) 2,325,694 5,074,307 7,273,486 57,201,487 ------------ ----------- ------------ ------------ $135,643,981 $90,448,608 $131,549,089 $580,060,431 ------------ ----------- ------------ ------------ $111,303,081 $85,306,725 $121,464,523 $263,005,072 ============ =========== ============ ============ 9,683,333 5,103,412 16,119,958 19,299,574 ============ =========== ============ ============ $ 11.49 $ 16.72 $ 7.54 $ 13.63 ============ =========== ============ ============ $ 11.85 $ 17.46 $ 7.90 $ 14.27 ============ =========== ============ ============ $ 11,260,549 $ 5,141,883 $ 10,084,566 $131,664,496 ============ =========== ============ ============ 981,615 308,298 1,337,281 9,634,493 ============ =========== ============ ============ $ 11.47 $ 16.68 $ 7.54 $ 13.67 ============ =========== ============ ============ $ 7,604,014 $ -- $ -- $178,636,137 ============ =========== ============ ============ 661,972 -- -- 13,077,202 ============ =========== ============ ============ $ 11.49 $ -- $ -- $ 13.66 ============ =========== ============ ============ $ 5,476,337 $ -- $ -- $ 6,754,726 ============ =========== ============ ============ 474,843 -- -- 495,443 ============ =========== ============ ============ $ 11.53 $ -- $ -- $ 13.63 ============ =========== ============ ============ 38 - -------------------------------------------------------------------------------- Statements of Operations - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited)
Core Plus Bond Government High Income Limited Term Government Fund Securities Fund Fund and Agency Fund -------------- --------------- ----------- ----------------------- INVESTMENT INCOME Dividends $ -- $ -- $ 20,868 $ -- Interest 8,269,329 1,874,118 2,171,377 2,861,201 Securities lending income 13,185 10,457 11,474 3,292 Less net foreign taxes withheld -- -- (824) -- ----------- ---------- ---------- ---------- 8,282,514 1,884,575 2,202,895 2,864,493 ----------- ---------- ---------- ---------- Expenses Management fees 651,583 218,927 181,057 401,495 Service and distribution fees - Class A 161,718 79,563 32,413 199,719 Service and distribution fees - Class B 798,616 65,922 114,413 63,691 Service and distribution fees - Class C 36,463 -- 14,585 40,236 Trustees' fees and expenses 34,351 18,048 9,471 14,090 Accounting and administrative 103,003 26,228 16,949 46,287 Custodian 67,317 27,148 29,869 36,810 Transfer agent fees - Class A, Class B, Class C 539,164 72,354 63,152 131,428 Transfer agent fees - Class Y 31,380 7,742 -- 8,950 Audit and tax services 15,828 12,329 16,691 12,352 Legal 7,635 1,784 1,268 4,169 Shareholder reporting 19,610 8,506 9,135 7,174 Registration 25,029 15,509 19,431 25,801 Miscellaneous 14,814 5,786 4,451 7,041 ----------- ---------- ---------- ---------- Total expenses 2,506,511 559,846 512,885 999,243 Less reimbursement/waiver -- -- -- -- ----------- ---------- ---------- ---------- Net expenses 2,506,511 559,846 512,885 999,243 ----------- ---------- ---------- ---------- Net investment income 5,776,003 1,324,729 1,690,010 1,865,250 ----------- ---------- ---------- ---------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Realized gain (loss) on: Investments - net 6,998,985 (4,095) 1,814,823 892,814 Foreign currency transactions - net 78,432 -- -- -- Change in unrealized appreciation (depreciation) of: Investments - net 49,298 37,460 740,699 (215,228) Foreign currency transactions - net 6,428 -- -- -- ----------- ---------- ---------- ---------- Net realized and unrealized gain (loss) on investments and foreign currency transactions 7,133,143 33,365 2,555,522 677,586 ----------- ---------- ---------- ---------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $12,909,146 $1,358,094 $4,245,532 $2,542,836 =========== ========== ========== ==========
See accompanying notes to financial statements. 39 Massachusetts Tax Free Income Municipal Income Strategic Income Fund Fund Fund - --------------- ---------------- ---------------- $ -- $ -- $ 1,185,400 2,342,077 3,431,782 13,603,497 -- -- 31,680 -- -- (21,965) ---------- ---------- ----------- 2,342,077 3,431,782 14,798,612 ========== ========== =========== 272,755 312,522 1,358,500 149,454 153,428 239,659 27,578 53,012 632,732 -- -- 569,819 11,249 20,814 25,281 29,837 43,850 141,497 24,035 27,880 86,517 78,483 110,589 400,657 -- -- 8,647 12,709 13,086 18,708 2,441 4,258 10,929 11,985 11,824 27,886 9,425 18,528 37,493 4,994 4,906 13,597 ---------- ---------- ----------- 634,945 774,697 3,571,922 -- -- (4,547) ---------- ---------- ----------- 634,945 774,697 3,567,375 ---------- ---------- ----------- 1,707,132 2,657,085 11,231,237 ---------- ---------- ----------- 50,817 (652,504) 8,820,061 -- -- 360,200 1,636,926 2,931,859 24,880,094 -- -- (140,262) ---------- ---------- ----------- 1,687,743 2,279,355 33,920,093 ---------- ---------- ----------- $3,394,875 $4,936,440 $45,151,330 ========== ========== =========== 40 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Core Plus Bond Fund ----------------------------------------------- For the Period Six Months January 1, 2003 Ended through Year Ended March 31, 2004 September 30, December 31, (unaudited) 2003 2002 -------------- --------------- ------------ FROM OPERATIONS: Net investment income $ 5,776,003 $ 9,527,954 $ 17,087,741 Net realized gain (loss) on investments and foreign currency transactions 7,077,417 3,864,683 (18,724,816) Net change in unrealized appreciation (depreciation) of investments 55,726 5,549,963 9,019,633 ------------ ------------ ------------ Increase (decrease) in net assets resulting from operations 12,909,146 18,942,600 7,382,558 ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (3,397,516) (4,447,575) (8,791,213) Class B (3,353,433) (4,047,373) (6,316,934) Class C (153,246) (220,936) (498,081) Class Y (502,272) (668,802) (1,050,339) ------------ ------------ ------------ (7,406,467) (9,384,686) (16,656,567) ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (15,823,736) (5,058,236) (4,698,171) ------------ ------------ ------------ Total increase (decrease) in net assets (10,321,057) 4,499,678 (13,972,180) NET ASSETS Beginning of period 320,704,960 316,205,282 330,177,462 ------------ ------------ ------------ End of period $310,383,903 $320,704,960 $316,205,282 ============ ============ ============ UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (233,061) $ 1,397,403 $ 127,794 ============ ============ ============ Government Securities Fund ----------------------------------------------- For the Period Six Months January 1, 2003 Ended through Year Ended March 31, 2004 September 30, December 31, (unaudited) 2003 2002 -------------- --------------- ------------ FROM OPERATIONS: Net investment income $ 1,324,729 $ 2,088,839 $ 3,478,800 Net realized gain (loss) on investments and foreign currency transactions (4,095) 2,186,050 1,754,365 Net change in unrealized appreciation (depreciation) of investments 37,460 (1,862,032) 6,101,934 ------------ ------------- ------------ Increase (decrease) in net assets resulting from operations 1,358,094 2,412,857 11,335,099 ------------ ------------- ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (1,173,329) (2,185,576) (3,186,452) Class B (193,917) (410,467) (530,909) Class C -- -- -- Class Y (49,465) (133,483) (289,414) ------------ ------------- ------------ (1,416,711) (2,729,526) (4,006,775) ------------ ------------- ------------ INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (10,669,080) (12,801,156) 4,088,509 ------------ ------------- ------------ Total increase (decrease) in net assets (10,727,697) (13,117,825) 11,416,833 NET ASSETS Beginning of period 86,919,750 100,037,575 88,620,742 ------------ ------------- ------------ End of period $ 76,192,053 $ 86,919,750 $100,037,575 ============ ============= ============ UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (110,559) $ (18,577) $ (16,246) ============ ============= ============
See accompanying notes to financial statements. 41
High Income Limited Term Government Fund and Agency Fund - ----------------------------------------------- ----------------------------------------------- For the Period For the Period Six Months January 1, 2003 Six Months January 1, 2003 Ended through Year Ended Ended through Year Ended March 31, 2004 September 30, December 31, March 31, 2004 September 30, December 31, (unaudited) 2003 2002 (unaudited) 2003 2002 - -------------- --------------- ------------ -------------- --------------- ------------ $ 1,690,010 $ 2,691,980 $ 4,914,959 $ 1,865,250 $ 2,567,365 $ 4,880,802 1,814,823 1,766,058 (20,594,051) 892,814 1,309,685 2,104,690 740,699 4,199,027 9,402,597 (215,228) (2,298,347) 3,563,852 ----------- ----------- ------------ ------------ ------------ ------------ 4,245,532 8,657,065 (6,276,495) 2,542,836 1,578,703 10,549,344 ----------- ----------- ------------ ------------ ------------ ------------ (897,007) (1,358,749) (2,389,509) (2,304,387) (3,580,991) (4,982,529) (707,376) (1,211,401) (2,310,655) (216,512) (420,988) (580,172) (90,109) (138,738) (257,610) (136,644) (230,278) (272,616) -- -- -- (128,680) (261,630) (402,890) ----------- ----------- ------------ ------------ ------------ ------------ (1,694,492) (2,708,888) (4,957,774) (2,786,223) (4,493,887) (6,238,207) ----------- ----------- ------------ ------------ ------------ ------------ (2,132,963) (3,967,380) (13,012,003) (11,565,247) 11,483,457 1,774,899 ----------- ----------- ------------ ------------ ------------ ------------ 418,077 1,980,797 (24,246,272) (11,808,634) 8,568,273 6,086,036 50,071,773 48,090,976 72,337,248 147,452,615 138,884,342 132,798,306 ----------- ----------- ------------ ------------ ------------ ------------ $50,489,850 $50,071,773 $ 48,090,976 $135,643,981 $147,452,615 $138,884,342 =========== =========== ============ ============ ============ ============ $ (116,057) $ (111,575) $ (128,268) $ (1,043,062) $ (122,089) $ (116,800) =========== =========== ============ ============ ============ ============
42 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Massachusetts Tax Free Income Fund ----------------------------------------------- For the Period Six Months January 1, 2003 Ended through Year Ended March 31, 2004 September 30, December 31, (unaudited) 2003 2002 -------------- --------------- ------------ FROM OPERATIONS: Net investment income $ 1,707,132 $ 2,789,342 $ 4,082,640 Net realized gain (loss) on investments and foreign currency transactions 50,817 877,919 (916,633) Net change in unrealized appreciation (depreciation) of investments 1,636,926 (851,243) 4,433,497 ----------- ----------- ----------- Increase in net assets resulting from operations 3,394,875 2,816,018 7,599,504 ----------- ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (1,636,754) (2,628,195) (3,827,503) Class B (88,020) (161,498) (276,899) Class C -- -- -- Class Y -- -- -- ----------- ----------- ----------- (1,724,774) (2,789,693) (4,104,402) ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (3,774,233) (6,268,959) (2,388,573) ----------- ----------- ----------- Total increase (decrease) in net assets (2,104,132) (6,242,634) 1,106,529 NET ASSETS Beginning of period 92,552,740 98,795,374 97,688,845 ----------- ----------- ----------- End of period $90,448,608 $92,552,740 $98,795,374 =========== =========== =========== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 1,827 $ 19,469 $ 19,970 =========== =========== =========== Municipal Income Fund ----------------------------------------------- For the Period Six Months January 1, 2003 Ended through Year Ended March 31, 2004 September 30, December 31, (unaudited) 2003 2002 -------------- --------------- ------------ FROM OPERATIONS: Net investment income $ 2,657,085 $ 4,304,402 $ 6,897,727 Net realized gain (loss) on investments and foreign currency transactions (652,504) 1,148,331 2,710,093 Net change in unrealized appreciation (depreciation) of investments 2,931,859 (1,633,204) 872,708 ------------ ------------ ------------ Increase in net assets resulting from operations 4,936,440 3,819,529 10,480,528 ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (2,490,556) (4,027,619) (6,303,086) Class B (175,459) (290,127) (507,956) Class C -- -- -- Class Y -- -- -- ------------ ------------ ------------ (2,666,015) (4,317,746) (6,811,042) ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (8,511,013) (7,043,056) (10,738,646) ------------ ------------ ------------ Total increase (decrease) in net assets (6,240,588) (7,541,273) (7,069,160) NET ASSETS Beginning of period 137,789,677 145,330,950 152,400,110 ------------ ------------ ------------ End of period $131,549,089 $137,789,677 $145,330,950 ============ ============ ============ UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 138,086 $ 147,016 $ 146,7685 ============ ============ ============
See accompanying notes to financial statements. 43
Strategic Income Fund - ----------------------------------------------- For the Period Six Months January 1, 2003 Ended through Year Ended March 31, 2004 September 30, December 31, (unaudited) 2003 2002 - -------------- --------------- ------------ $ 11,231,237 $ 12,189,949 $ 15,106,370 9,180,261 (4,553,646) (21,248,207) 24,739,832 47,707,584 36,560,725 ------------ ------------ ------------ 45,151,330 55,343,887 30,418,888 ------------ ------------ ------------ (6,632,317) (6,332,331) (5,702,309) (3,736,562) (5,143,216) (5,565,705) (3,240,398) (2,069,124) (1,567,724) (139,986) (95,199) (42,564) ------------ ------------ ------------ (13,749,263) (13,639,870) (12,878,302) ------------ ------------ ------------ 221,277,519 66,108,057 (23,656,108) ------------ ------------ ------------ 252,679,586 107,812,074 (6,115,522) 327,380,845 219,568,771 225,684,293 ------------ ------------ ------------ $580,060,431 $327,380,845 $219,568,771 ============ ============ ============ $ (313,308) $ 2,204,718 $ 3,205,477 ============ ============ ============
44 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- For a share outstanding throughout each period
Income (loss) from investment operations: Less distributions: ---------------------------------------- ---------------------------------------------- Net asset value, Net realized Dividends Distributions beginning Net and unrealized Total from from from net of investment gain (loss) on investment net investment realized Total the period income investments operations income capital gains distributions ---------- ---------- -------------- ---------- -------------- ------------- ------------- Core Plus Bond Fund Class A 3/31/2004(g) $11.63 $0.24(c) $ 0.27 $ 0.51 $(0.31) $ -- $(0.31) 9/30/2003(f) 11.28 0.37(c) 0.34 0.71 (0.36) -- (0.36) 12/31/2002 11.59 0.63(c) (0.32) 0.31 (0.62) -- (0.62) 12/31/2001(d) 11.52 0.73 0.10 0.83 (0.76) -- (0.76) 12/31/2000 11.51 0.78 0.03 0.81 (0.80) -- (0.80) 12/31/1999 12.36 0.81 (0.86) (0.05) (0.79) (0.01) (0.80) 12/31/1998 12.39 0.81 0.15 0.96 (0.81) (0.18) (0.99) Class B 3/31/2004(g) 11.62 0.19(c) 0.28 0.47 (0.25) -- (0.25) 9/30/2003(f) 11.28 0.30(c) 0.34 0.64 (0.30) -- (0.30) 12/31/2002 11.59 0.55(c) (0.32) 0.23 (0.54) -- (0.54) 12/31/2001(d) 11.51 0.64 0.10 0.74 (0.66) -- (0.66) 12/31/2000 11.51 0.70 0.02 0.72 (0.72) -- (0.72) 12/31/1999 12.36 0.72 (0.86) (0.14) (0.70) (0.01) (0.71) 12/31/1998 12.39 0.71 0.15 0.86 (0.71) (0.18) (0.89) Class C 3/31/2004(g) 11.63 0.19(c) 0.28 0.47 (0.25) -- (0.25) 9/30/2003(f) 11.29 0.30(c) 0.34 0.64 (0.30) -- (0.30) 12/31/2002 11.60 0.55(c) (0.32) 0.23 (0.54) -- (0.54) 12/31/2001(d) 11.52 0.65 0.09 0.74 (0.66) -- (0.66) 12/31/2000 11.52 0.70 0.02 0.72 (0.72) -- (0.72) 12/31/1999 12.37 0.72 (0.86) (0.14) (0.70) (0.01) (0.71) 12/31/1998 12.40 0.71 0.15 0.86 (0.71) (0.18) (0.89) Class Y 3/31/2004(g) 11.69 0.25(c) 0.27 0.52 (0.33) -- (0.33) 9/30/2003(f) 11.33 0.41(c) 0.35 0.76 (0.40) -- (0.40) 12/31/2002 11.63 0.69(c) (0.32) 0.37 (0.67) -- (0.67) 12/31/2001(d) 11.54 0.79 0.10 0.89 (0.80) -- (0.80) 12/31/2000 11.54 0.83 0.01 0.84 (0.84) -- (0.84) 12/31/1999 12.38 0.85 (0.86) (0.01) (0.82) (0.01) (0.83) 12/31/1998 12.41 0.84 0.15 0.99 (0.84) (0.18) (1.02) Government Securities Fund Class A 3/31/2004(g) $12.09 $0.21(c) $ 0.03 $ 0.24 $(0.22) $ -- $(0.22) 9/30/2003(f) 12.12 0.26(c) 0.06 0.32 (0.35) -- (0.35) 12/31/2002 11.18 0.45(c) 1.01 1.46 (0.52) -- (0.52) 12/31/2001(d) 11.18 0.50 0.05 0.55 (0.55) -- (0.55) 12/31/2000 10.47 0.62 0.69 1.31 (0.60) -- (0.60) 12/31/1999 11.90 0.67 (1.42) (0.75) (0.68) -- (0.68) 12/31/1998 11.56 0.68 0.33 1.01 (0.67) -- (0.67) Class B 3/31/2004(g) 12.10 0.16(c) 0.03 0.19 (0.17) -- (0.17) 9/30/2003(f) 12.12 0.20(c) 0.07 0.27 (0.29) -- (0.29) 12/31/2002 11.17 0.36(c) 1.02 1.38 (0.43) -- (0.43) 12/31/2001(d) 11.18 0.42 0.03 0.45 (0.46) -- (0.46) 12/31/2000 10.47 0.54 0.69 1.23 (0.52) -- (0.52) 12/31/1999 11.90 0.59 (1.42) (0.83) (0.60) -- (0.60) 12/31/1998 11.56 0.58 0.34 0.92 (0.58) -- (0.58)
(a) A sales charge for Class A shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (d) As required, effective January 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended December 31, 2001 for Core Plus Bond Fund was to decrease net investment income per share by $.01 for Class A, $.02 Class B, and $.01 for Class C and to decrease the ratio of net investment income to average net assets from 6.34% to 6.26% for Class A, 5.57% to 5.49% for Class B, 5.59% to 5.52% for Class C and 6.75% to 6.68% for Class Y shares. For the Government Securities Fund, the effect of this change was to decrease net investment income per share by $.05 for Class A and $.04 for both Class B and Class Y and to decrease the ratio of net investment income to average net assets from 4.85% to 4.46% for Class A, and 4.10% to 3.71% for Class B. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. See accompanying notes to financial statements. 45 - -------------------------------------------------------------------------------- Financial Highlights (continued) - -------------------------------------------------------------------------------- Ratios to average net assets: ------------------------- Net asset Net assets, value, Total end of Net investment Portfolio end of return the period Expenses income turnover the period (%)(a) (000) (%)(b) (%)(b) rate(%) - ---------- ------ ----------- -------- -------------- --------- $11.83 4.4 $128,828 1.21 4.06 47 11.63 6.4 133,887 1.28 4.31 61 11.28 2.8 147,647 1.18 5.65 65 11.59 7.2 173,836 1.09 6.26 84 11.52 7.4 174,969 1.04 7.03 83 11.51 (0.3) 213,769 0.97 6.87 63 12.36 8.0 221,799 1.01 6.44 65 11.84 4.1 157,640 1.96 3.31 47 11.62 5.8 161,317 2.03 3.55 61 11.28 2.1 141,188 1.93 4.90 65 11.59 6.5 127,520 1.84 5.49 84 11.51 6.5 100,353 1.79 6.28 83 11.51 (1.1) 89,213 1.72 6.12 63 12.36 7.2 64,240 1.76 5.69 65 11.85 4.1 7,157 1.96 3.32 47 11.63 5.8 7,612 2.03 3.55 61 11.29 2.1 9,024 1.93 4.90 65 11.60 6.5 11,470 1.84 5.52 84 11.52 6.5 12,541 1.79 6.28 83 11.52 (1.1) 14,872 1.72 6.12 63 12.37 7.2 8,969 1.76 5.69 65 11.88 4.5 16,759 0.95 4.32 47 11.69 6.9 17,889 0.73 4.85 61 11.33 3.5 18,346 0.67 6.15 65 11.63 7.8 17,351 0.67 6.68 84 11.54 7.6 14,013 0.67 7.40 83 11.54 (0.0)(e) 10,320 0.72 7.12 63 12.38 8.2 9,289 0.76 6.69 65 $12.11 2.0 $ 61,094 1.28 3.46 36 12.09 2.7 68,882 1.33 3.03 41 12.12 13.4 76,338 1.25 3.90 52 11.18 4.9 70,551 1.39 4.46 317 11.18 12.9 70,909 1.41 5.69 622 10.47 (6.4) 84,904 1.36 6.00 313 11.90 9.0 103,032 1.38 5.80 106 12.12 1.7 12,365 2.03 2.71 36 12.10 2.2 15,101 2.08 2.29 41 12.12 12.6 16,878 2.00 3.15 52 11.17 4.1 13,249 2.14 3.71 317 11.18 12.1 10,343 2.16 4.94 622 10.47 (7.1) 9,430 2.11 5.25 313 11.90 8.2 9,657 2.13 5.05 106 (e) Amount is less than one tenth of one percent. (f) For the nine months ended September 30, 2003. (g) For the six months ended March 31, 2004 (unaudited). 46 - -------------------------------------------------------------------------------- Financial Highlights (continued) - -------------------------------------------------------------------------------- For a share outstanding throughout each period
Income (loss) from investment operations: Less distributions: ----------------------------------------- ------------------- Net asset value, Net realized Dividends Distributions beginning Net and unrealized Total from from from net of investment gain (loss) on investment net investment realized Total the period income investments operations income capital gains distributions ---------- ---------- -------------- ---------- -------------- ------------- ------------- Government Securities Fund (continued) Class Y 3/31/2004(f) $12.07 $0.20(c) $ 0.02 $0.22 $(0.21) $-- $(0.21) 9/30/2003(e) 12.11 0.31(c) 0.04 0.35 (0.39) -- (0.39) 12/31/2002 11.17 0.49(c) 1.00 1.49 (0.55) -- (0.55) 12/31/2001(d) 11.17 0.55 0.04 0.59 (0.59) -- (0.59) 12/31/2000 10.44 0.65 0.71 1.36 (0.63) -- (0.63) 12/31/1999 11.88 0.70 (1.43) (0.73) (0.71) -- (0.71) 12/31/1998 11.54 0.72 0.32 1.04 (0.70) -- (0.70) High Income Fund* Class A 3/31/2004(f) 4.65 $0.17(c) $ 0.24 $0.41 $(0.17) -- $(0.17) 9/30/2003(e) 4.12 0.25(c) 0.53 0.78 (0.25) -- (0.25) 12/31/2002 4.94 0.39(c) (0.82) (0.43) (0.39) -- (0.39) 12/31/2001(d) 6.21 0.66 (1.25) (0.59) (0.68) -- (0.68) 12/31/2000 8.30 0.86 (2.11) (1.25) (0.84) -- (0.84) 12/31/1999 8.86 0.89 (0.54) 0.35 (0.91) -- (0.91) 12/31/1998 9.94 0.92 (1.08) (0.16) (0.92) -- (0.92) Class B 3/31/2004(f) 4.65 0.15(c) 0.24 0.39 (0.15) -- (0.15) 9/30/2003(e) 4.12 0.23(c) 0.53 0.76 (0.23) -- (0.23) 12/31/2002 4.95 0.36(c) (0.83) (0.47) (0.36) -- (0.36) 12/31/2001(d) 6.22 0.62 (1.26) (0.64) (0.63) -- (0.63) 12/31/2000 8.30 0.81 (2.11) (1.30) (0.78) -- (0.78) 12/31/1999 8.85 0.82 (0.53) 0.29 (0.84) -- (0.84) 12/31/1998 9.93 0.85 (1.08) (0.23) (0.85) -- (0.85) Class C 3/31/2004(f) 4.65 0.15(c) 0.24 0.39 (0.15) -- (0.15) 9/30/2003(e) 4.12 0.23(c) 0.53 0.76 (0.23) -- (0.23) 12/31/2002 4.94 0.36(c) (0.82) (0.46) (0.36) -- (0.36) 12/31/2001(d) 6.22 0.61 (1.26) (0.65) (0.63) -- (0.63) 12/31/2000 8.30 0.81 (2.11) (1.30) (0.78) -- (0.78) 12/31/1999 8.85 0.82 (0.53) 0.29 (0.84) -- (0.84) 12/31/1998(f) 9.96 0.69 (1.08) (0.39) (0.72) -- (0.72) Limited Term Government and Agency Fund** Class A 3/31/2004(f) $11.51 $0.16(c) $ 0.05 $0.21 $(0.23) -- $(0.23) 9/30/2003(e) 11.73 0.21(c) (0.07) 0.14 (0.36) -- (0.36) 12/31/2002 11.36 0.42(c) 0.49 0.91 (0.54) -- (0.54) 12/31/2001(d) 11.16 0.51 0.25 0.76 (0.56) -- (0.56) 12/31/2000 10.97 0.69 0.20 0.89 (0.70) -- (0.70) 12/31/1999 11.70 0.66 (0.74) (0.08) (0.65) -- (0.65) 12/31/1998 11.64 0.67 0.06 0.73 (0.67) -- (0.67)
(a) A sales charge for Class A shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. Periods less than one year are not annualized. (b) Computed on an annualized basis for periods less than one year. (c) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (d) As required, effective January 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended December 31, 2001 for the Government Securities Fund, was to decrease net investment income per share by $.04 for Class Y and to decrease the ratio of net investment income to average net assets from 5.24% to 4.85% for Class Y. For High Income Fund, the effect of this change was to decrease net investment income per share by $.01 for Class A, Class B and Class C and to decrease the ratio of net investment income to average net assets from 11.39% to 11.31% for Class A, 10.64% to 10.56% for Class B and 10.63% to 10.54% for Class C. For Limited Term Government and Agency Fund, the effect of the change was to decrease net investment income per share by $.04 for Class A, and to decrease the ratio of net investment income to average net assets from 4.88% to 4.52% for Class A. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. See accompanying notes to financial statements. 47 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Ratios to average net assets: ------------------------- Net asset Net assets, value, Total end of Net investment Portfolio end of return the period Expenses income turnover the period (%)(a) (000) (%)(b) (%)(b) rate(%) - ---------- ------ ----------- -------- -------------- --------- $12.08 1.9 $ 2,732 1.40 3.34 36 12.07 2.9 2,936 0.96 3.40 41 12.11 13.7 6,822 0.87 4.28 52 11.17 5.3 4,821 1.00 4.85 317 11.17 13.5 4,593 1.01 6.09 622 10.44 (6.3) 2,754 1.11 6.25 313 11.88 9.3 3,404 1.13 6.05 106 $ 4.89 8.9 $ 26,195 1.61 6.90 26 4.65 19.5 23,809 1.71 7.62 41 4.12 (8.9) 22,454 1.58 8.85 114 4.94 (10.7) 33,471 1.47 11.31 65 6.21 (16.1) 46,960 1.36 11.47 60 8.30 4.0 74,589 1.28 10.22 89 8.86 (1.8) 73,023 1.32 9.81 75 4.89 8.5 21,425 2.36 6.16 26 4.65 18.8 23,405 2.46 6.89 41 4.12 (9.7) 23,031 2.33 8.10 114 4.95 (11.3) 34,713 2.22 10.56 65 6.22 (16.6) 47,793 2.11 10.72 60 8.30 3.3 70,218 2.03 9.47 89 8.85 (2.5) 60,322 2.07 9.06 75 4.89 8.5 2,870 2.36 6.15 26 4.65 18.8 2,858 2.46 6.89 41 4.12 (9.5) 2,605 2.33 8.10 114 4.94 (11.5) 4,153 2.22 10.54 65 6.22 (16.6) 5,369 2.11 10.72 60 8.30 3.3 9,138 2.03 9.47 89 8.85 (4.1) 7,732 2.07 9.06 75 $11.49 1.9 $111,303 1.33 2.73 46 11.51 1.2 117,225 1.37 2.41 53 11.73 8.2 106,013 1.35 3.66 88 11.36 6.9 109,189 1.42 4.52 275 11.16 8.3 118,833 1.40 6.18 384 10.97 (0.7) 149,756 1.33 5.91 400 11.70 6.5 194,032 1.31 5.81 1,376 (e) For the nine months ended September 30, 2003. (f) For the six months ended March 31, 2004 (unaudited). * The financial information for periods prior to March 31, 2004 reflects the financial information for the CDC Nvest High Income Fund's Class A, Class B and Class C shares, which were reorganized into Class A, Class B and Class C shares, respectively, of the Loomis Sayles High Income Fund, effective September 12, 2003. Prior to September 1, 2003, the predecessor Fund was advised by CDC IXIS Asset Management Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P. (the Fund's current adviser) and, prior to September 12, 2003, had a December 31 fiscal year end. The Fund's current fiscal year end is September 30. ** The financial information for periods prior to March 31, 2004 reflects the financial information for the CDC Nvest Limited Term U.S. Government Fund's Class A shares, which were reorganized into Class A shares of the Loomis Sayles Limited Term Government and Agency Fund, effective September 12, 2003. Prior to September 1, 2003, the predecessor Fund was advised by CDC IXIS Asset Management Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P. (the Fund's current adviser) and, prior to September 12, 2003, had a December 31 fiscal year end. The Fund's current fiscal year end is September 30. 48 - -------------------------------------------------------------------------------- Financial Highlights (continued) - -------------------------------------------------------------------------------- For a share outstanding throughout each period
Income (loss) from investment operations: Less distributions: ----------------------------------------- ---------------------------------------------- Net asset value, Net realized Dividends Distributions beginning Net and unrealized Total from from from net of investment gain (loss) on investment net investment realized Total the period income investments operations income capital gains distributions ---------- ---------- -------------- ---------- -------------- ------------- ------------- Limited Term Government and Agency Fund* (Continued) Class B 3/31/2004(h) $11.49 $0.12(c) $ 0.05 $ 0.17 $(0.19) $ -- $(0.19) 9/30/2003(g) 11.71 0.15(c) (0.06) 0.09 (0.31) -- (0.31) 12/31/2002 11.34 0.35(c) 0.48 0.83 (0.46) -- (0.46) 12/31/2001(d) 11.14 0.44 0.24 0.68 (0.48) -- (0.48) 12/31/2000 10.95 0.62 0.20 0.82 (0.63) -- (0.63) 12/31/1999 11.69 0.59 (0.75) (0.16) (0.58) -- (0.58) 12/31/1998 11.62 0.60 0.07 0.67 (0.60) -- (0.60) Class C 3/31/2004(h) 11.50 0.12(c) 0.06 0.18 (0.19) -- (0.19) 9/30/2003(g) 11.72 0.15(c) (0.06) 0.09 (0.31) -- (0.31) 12/31/2002 11.35 0.35(c) 0.48 0.83 (0.46) -- (0.46) 12/31/2001(d) 11.15 0.44 0.24 0.68 (0.48) -- (0.48) 12/31/2000 10.96 0.62 0.20 0.82 (0.63) -- (0.63) 12/31/1999 11.70 0.59 (0.75) (0.16) (0.58) -- (0.58) 12/31/1998 11.63 0.60 0.07 0.67 (0.60) -- (0.60) Class Y 3/31/2004(h) 11.55 0.17(c) 0.06 0.23 (0.25) -- (0.25) 9/30/2003(g) 11.78 0.25(c) (0.08) 0.17 (0.40) -- (0.40) 12/31/2002 11.41 0.48(c) 0.48 0.96 (0.59) -- (0.59) 12/31/2001(d) 11.20 0.56 0.26 0.82 (0.61) -- (0.61) 12/31/2000 11.00 0.75 0.19 0.94 (0.74) -- (0.74) 12/31/1999 11.73 0.70 (0.74) (0.04) (0.69) -- (0.69) 12/31/1998 11.66 0.72 0.06 0.78 (0.71) -- (0.71) Massachusetts Tax Free Income Fund Class A 3/31/2004(h) $16.41 $0.31 $ 0.32 $ 0.63 $(0.32) $ -- $(0.32) 9/30/2003(g) 16.40 0.49 0.01 0.50 (0.49) -- (0.49) 12/31/2002 15.82 0.67 0.59 1.26 (0.68) -- (0.68) 12/31/2001(d) 16.06 0.75 (0.24) 0.51 (0.75) -- (0.75) 12/31/2000 15.48 0.82 0.57 1.39 (0.81) -- (0.81) 12/31/1999 17.02 0.82 (1.50) (0.68) (0.83) (0.03) (0.86) 12/31/1998 17.13 0.86 (0.04) 0.82 (0.85) (0.08) (0.93) Class B 3/31/2004(h) 16.37 0.26 0.31 0.57 (0.26) -- (0.26) 9/30/2003(g) 16.36 0.41 0.01 0.42 (0.41) -- (0.41) 12/31/2002 15.78 0.57 0.58 1.15 (0.57) -- (0.57) 12/31/2001(d) 16.03 0.64 (0.24) 0.40 (0.65) -- (0.65) 12/31/2000 15.45 0.71 0.58 1.29 (0.71) -- (0.71) 12/31/1999 16.98 0.71 (1.49) (0.78) (0.72) (0.03) (0.75) 12/31/1998 17.09 0.74 (0.03) 0.71 (0.74) (0.08) (0.82)
(a) A sales charge for Class A shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. (b) Computed on an annualized basis for periods less than one year (c) Per share net investment income (loss) has been calculated using the average shares outstanding during the period. (d) As required, effective January 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium and accreting discount on debt securities. The effect of this change for the year ended December 31, 2001, for Limited Term Government and Agency Fund, was to decrease net investment income per share by $.04 for Class B, C and Y and to decrease the ratio of net investment income to average net assets from 4.22% to 3.85% for Class B, 4.25% to 3.89% for Class C and 5.34% to 4.98% for Class Y. For Massachusetts Tax Free Income Fund, the effect of this change was to increase the ratio of net investment income to average net assets from 4.66% to 4.67% for Class A and from 4.02% to 4.03% for Class B shares. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (e) Had certain expenses not been reduced during the period, total returns would have been lower. (f) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period Without this reimbursement, expense ratios would have been higher. See accompanying notes to financial statements. 49 Ratios to average net assets: ----------------------------- Net asset Net assets, value, Total end of Net investment Portfolio end of return the period Expenses income turnover the period (%) (a) (000) (%) (b) (%) (b) rate(%) - ---------- ------- ----------- -------- -------------- --------- $11.47 1.5 $ 11,261 1.98 2.09 46 11.49 0.7 14,637 2.02 1.77 53 11.71 7.5 16,263 2.00 3.01 88 11.34 6.2 14,317 2.07 3.85 275 11.14 7.7 11,884 2.05 5.53 384 10.95 (1.4) 14,601 1.98 5.26 400 11.69 5.9 18,116 1.96 5.16 1,376 11.49 1.6 7,604 1.98 2.09 46 11.50 0.7 8,704 2.02 1.77 53 11.72 7.5 8,079 2.00 3.01 88 11.35 6.2 5,851 2.07 3.89 275 11.15 7.7 6,617 2.05 5.53 384 10.96 (1.4) 9,054 1.98 5.26 400 11.70 5.9 13,962 1.96 5.16 1,376 11.53 2.0 5,476 1.09 2.98 46 11.55 1.5 6,886 0.93 2.87 53 11.78 8.6 8,529 0.88 4.14 88 11.41 7.4 3,441 0.95 4.98 275 11.20 8.8 3,254 0.95 6.63 384 11.00 (0.3) 7,086 0.98 6.26 400 11.73 6.9 8,345 0.96 6.16 1,351 $16.72 3.9 $ 85,307 1.36 3.79 9 16.41 3.1 86,368 1.38 3.99 9 16.40 8.1 92,053 1.34 4.19 33 15.82 3.2(e) 89,376 1.35(f) 4.67 60 16.06 9.3(e) 91,785 1.13(f) 5.24 68 15.48 (4.1)(e) 97,270 1.00(f) 5.02 73 17.02 4.9(e) 113,910 1.00(f) 4.93 125 16.68 3.5 5,142 2.01 3.17 9 16.37 2.6 6,185 2.03 3.34 9 16.36 7.4 6,742 1.99 3.54 33 15.78 2.5(e) 8,313 2.00(f) 4.03 60 16.03 8.6(e) 8,715 1.78(f) 4.59 68 15.45 (4.7)(e) 8,874 1.65(f) 4.37 73 16.98 4.2(e) 9,026 1.65(f) 4.28 125 (g) For the nine months ended September 30, 2003. (h) For the six months ended March 31, 2004 (unaudited). * The financial information for periods prior to March 31, 2004 reflects the financial information for the CDC Nvest Limited Term U.S. Government Fund's Class B, Class C and Class Y shares, which were reorganized into Class B, Class C, and Class Y shares, respectively, of the Loomis Sayles Limited Term Government and Agency Fund, effective September 12, 2003. Prior to September 1, 2003, the predecessor Fund was advised by CDC IXIS Asset Management Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P. (the Fund's current adviser) and, prior to September 12, 2003, had a December 31 fiscal year end. The Fund's current fiscal year end is September 30. 50 - -------------------------------------------------------------------------------- Financial Highlights (continued) - -------------------------------------------------------------------------------- For a share outstanding throughout each period
Income (loss) from investment operations: Less distributions: ----------------------------------------- ---------------------------------------------- Net asset value, Net realized Dividends Distributions beginning Net and unrealized Total from from from net of investment gain (loss) on investment net investment realized Total the period income investments operations income capital gains distributions ---------- ---------- -------------- ---------- -------------- ------------- ------------- Municipal Income Fund Class A 3/31/2004(h) $ 7.41 $0.15 $ 0.13 $ 0.28 $(0.15) $ -- $(0.15) 9/30/2003(g) 7.43 0.23 (0.02) 0.21 (0.23) -- (0.23) 12/31/2002 7.25 0.34 0.18 0.52 (0.34) -- (0.34) 12/31/2001 (d) 7.39 0.36 (0.14) 0.22 (0.36) -- (0.36) 12/31/2000 7.17 0.40 0.21 0.61 (0.39) -- (0.39) 12/31/1999 7.76 0.39 (0.59) (0.20) (0.39) -- (0.39) 12/31/1998 7.75 0.39 0.01 0.40 (0.39) -- (0.39) Class B 3/31/2004(h) 7.41 0.12 0.13 0.25 (0.12) -- (0.12) 9/30/2003(g) 7.44 0.19 (0.03) 0.16 (0.19) -- (0.19) 12/31/2002 7.25 0.29 0.19 0.48 (0.29) -- (0.29) 12/31/2001 (d) 7.39 0.31 (0.14) 0.17 (0.31) -- (0.31) 12/31/2000 7.17 0.35 0.21 0.56 (0.34) -- (0.34) 12/31/1999 7.76 0.33 (0.59) (0.26) (0.33) -- (0.33) 12/31/1998 7.75 0.33 0.01 0.34 (0.33) -- (0.33) Strategic Income Fund* Class A 3/31/2004(h) $12.57 $0.37(c) $ 1.16 $ 1.53 $(0.47) $ -- $(0.47) 9/30/2003(g) 10.72 0.57(c) 1.93 2.50 (0.65) -- (0.65) 12/31/2002 9.88 0.75(c) 0.72 1.47 (0.63) -- (0.63) 12/31/2001(d) 10.80 0.91(c) (0.92) (0.01) (0.91) -- (0.91) 12/31/2000 11.65 0.99(c) (0.91) 0.08 (0.93) -- (0.93) 12/31/1999 11.37 1.03 0.31 1.34 (1.02) (0.04) (1.06) 12/31/1998 13.42 1.05 (1.30) (0.25) (1.05) (0.75) (1.80) Class B 3/31/2004(h) 12.59 0.32(c) 1.15 1.47 (0.39) -- (0.39) 9/30/2003(g) 10.71 0.51(c) 1.92 2.43 (0.55) -- (0.55) 12/31/2002 9.88 0.67(c) 0.73 1.40 (0.57) -- (0.57) 12/31/2001(d) 10.79 0.83(c) (0.90) (0.07) (0.84) -- (0.84) 12/31/2000 11.65 0.90(c) (0.91) (0.01) (0.85) -- (0.85) 12/31/1999 11.37 0.94 0.31 1.25 (0.93) (0.04) (0.97) 12/31/1998 13.42 0.95 (1.30) (0.35) (0.95) (0.75) (1.70)
(a) A sales charge for Class A shares and a contingent deferred sales charge for Class B shares are not reflected in total return calculations. Periods of less than one year are not annualized. (b) Computed on an annualized basis for period less than one year. (c) Per share net investment income has been calculated using the average shares outstanding during the period. (d) As required, effective January 1, 2001, the Funds have adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount and amortizing premium on debt securities. The effect of this change for the year ended December 31, 2001, for Municipal Income Fund, was to increase net investment income per share by $.01 and decrease net realized and unrealized gains and losses per share by $.01 for Class A shares and Class B shares, and increase the ratio of net investment income to average net assets from 4.84% to 4.89% for Class A shares and from 4.09% to to 4.14% for Class B shares. For Strategic Income Fund, there was no effect on net investment income per share, however, the effect of this change was to decrease the ratio of net investment income to average net assets from 8.78% to 8.77% for Class A and 8.03% and 8.02% for Class B. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (e) Had certain expenses not been reduced during the period, total returns would have been lower. (f) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period Without this reimbursement, expense ratios would have been higher. See accompanying notes to financial statements. 51 Ratios to average net assets: ----------------------------- Net asset Net assets, value, Total end of Net investment Portfolio end of return the period Expenses income turnover the period (%) (a) (000) (%) (b) (%) (b) rate (%) - ---------- ------- ----------- -------- -------------- --------- $ 7.54 3.8 $121,465 1.10 4.05 10 7.41 2.9 126,906 1.10 4.14 42 7.43 7.3 133,005 1.06 4.67 33 7.25 3.0 137,852 1.07 4.89 80 7.39 8.8 142,539 0.95 5.39 156 7.17 (2.8) 152,829 0.93 5.13 137 7.76 5.3 172,643 0.93 5.03 26 7.54 3.5 10,085 1.85 3.30 10 7.41 2.2 10,884 1.85 3.39 42 7.44 6.7 12,326 1.81 3.92 33 7.25 2.2 14,549 1.82 4.14 80 7.39 8.0 14,520 1.70 4.64 156 7.17 (3.5) 15,644 1.68 4.38 137 7.76 4.5 15,878 1.68 4.28 26 $13.63 12.3(e) $263,005 1.22(f) 5.56 13 12.57 23.7(e) 140,576 1.28(f) 6.49 27 10.72 15.5 92,303 1.33 7.38 30 9.88 (0.1) 94,156 1.31 8.77 10 10.80 0.7 116,986 1.24 8.73 13 11.65 12.2 124,869 1.21 9.09 19 11.37 (1.7) 127,306 1.19 8.33 33 13.67 11.8(e) 131,664 1.97(f) 4.81 13 12.59 23.0(e) 118,217 2.03(f) 5.73 27 10.71 14.6 98,501 2.08 6.63 30 9.88 (0.8) 102,159 2.06 8.02 10 10.79 (0.2) 120,200 1.99 7.98 13 11.65 11.3 127,723 1.96 8.34 19 11.37 (2.5) 134,049 1.94 7.58 33 (g) For the nine months ended September 30, 2003. (h) For the six months ended March 31, 2004 (unaudited). * The financial information for periods prior to March 31, 2004 reflects the financial information for CDC Nvest Strategic Income Fund's Class A and Class B shares, which were reorganized into Class A and Class B shares, respectively, of Loomis Sayles Strategic Income Fund, effective September 12, 2003. Prior to September 1, 2003, the predecessor Fund was advised by CDC IXIS Asset Management Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P. (the Fund's current adviser) and, prior to September 12, 2003, had a December 31 fiscal year end. The Fund's current fiscal year end is September 30. 52 - -------------------------------------------------------------------------------- Financial Highlights (continued) - -------------------------------------------------------------------------------- For a share outstanding throughout each period
Income (loss) from investment operations: Less distributions: --------------------------------------- ------------------------------------------ Net asset Net realized value, and Dividends Distributions beginning Net unrealized Total from from net from net of the investment gain (loss)on investment investment realized Total period income investments operations income capital gains distributions --------- ---------- ------------- ---------- ---------- ------------- ------------- Strategic Income Fund* (continued) Class C 03/31/2004(j) $12.58 $0.32(c) $1.15 $ 1.47 $(0.39) $ -- $(0.39) 09/30/2003(i) 10.70 0.50(c) 1.93 2.43 (0.55) -- (0.55) 12/31/2002 9.87 0.67(c) 0.73 1.40 (0.57) -- (0.57) 12/31/2001(d) 10.78 0.83(c) (0.91) (0.08) (0.83) -- (0.83) 12/31/2000 11.64 0.90(c) (0.91) (0.01) (0.85) -- (0.85) 12/31/1999 11.36 0.94 0.31 1.25 (0.93) (0.04) (0.97) 12/31/1998 13.41 0.95 (1.30) (0.35) (0.95) (0.75) (1.70) Class Y 03/31/2004(j) 12.58 0.39(c) 1.15 1.54 (0.49) -- (0.49) 09/30/2003(i) 10.74 0.60(c) 1.93 2.53 (0.69) -- (0.69) 12/31/2002 9.90 0.80(c) 0.71 1.51 (0.67) -- (0.67) 12/31/2001(d) 10.81 0.94(c) (0.92) 0.02 (0.93) -- (0.93) 12/31/2000 11.65 0.96(c) (0.84) 0.12 (0.96) -- (0.96) 12/31/1999(h) 11.45 0.86 (0.56) 0.30 (0.10) -- (0.10)
(a) A contingent deferred sales charge for Class C shares is not reflected in total return calculations. Periods of less than one year are not annualized. (b) Computed on an annualized basis for period less than one year. (c) Per share net investment income has been calculated using the average shares outstanding during the period. (d) As required, effective January 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing premium on debt securities. For the year ended December 31, 2001, there was no effect on net investment income per share, however, the effect of this change was to decrease the ratio of net investment income to average net assets from 8.04% to 8.02% for Class C. Per share, ratios and supplemental data for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (e) Had certain expenses not been reduced during the period, total returns would have been lower. (f) The investment adviser agreed to reimburse a portion of the Fund's expenses during the period. Without this reimbursement, expense ratios would have been higher. * The financial information for periods prior to March 31, 2004 reflects the financial information for CDC Nvest Strategic Income Fund's Class C and Class Y shares, which were reorganized into Class C and Class Y shares, respectively, of Loomis Sayles Strategic Income Fund, effective September 12, 2003. Prior to September 1, 2003, the predecessor Fund was advised by CDC IXIS Asset Management Advisers, L.P. and Subadvised by Loomis, Sayles & Company, L.P. (the Fund's current adviser) and, prior to September 12, 2003, had a December 31, fiscal year end. The Fund's current fiscal year is September 30. (g) Amount is less than $500. (h) For the period December 1, 1999 (inception) through December 31, 1999. (i) For the nine months ended September 30, 2003. (j) For the six months ended March 31, 2004 (unaudited). See accompanying notes to financial statements. 53 Ratios to average net assets: ------------------------- Net asset Net assets, value, Total end of Net investment Portfolio end of return the period Expenses income turnover the period (%)(a) (000) (%)(b) (%)(b) rate(%) - ---------- ------- ----------- -------- -------------- --------- $13.66 11.8(e) $178,636 1.97(f) 4.81 13 12.58 23.0(e) 66,394 2.03(f) 5.73 27 10.70 14.7 27,727 2.08 6.63 30 9.87 (0.8) 28,925 2.06 8.02 10 10.78 (0.2) 37,208 1.99 7.98 13 11.64 11.3 40,265 1.96 8.34 19 11.36 (2.5) 45,457 1.94 7.58 33 13.63 12.4(e) 6,755 1.00(f) 5.79 13 12.58 24.0(e) 2,193 0.97(f) 6.83 27 10.74 15.9 1,039 0.94 7.77 30 9.90 0.3 445 0.93 9.10 10 10.81 1.0 335 0.90 9.07 13 11.65 2.7 -(g) 0.96 9.34 19 54 NOTES TO FINANCIAL STATEMENTS 55 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 1. Organization. CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and Loomis Sayles Funds II (the "Trusts" and each a "Trust") are organized as Massachusetts business trusts. Each Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Each Declaration of Trust permits the Trustees to issue an unlimited number of shares of the Trust in multiple series (individually, a "Fund" and, collectively, the "Funds"). Information presented in these financial statements pertains to certain fixed income funds of the Trusts, the financial statements of the other Funds of the Trusts are presented in separate reports. The following Funds are included in this report. CDC Nvest Funds Trust I: Loomis Sayles Core Plus Bond Fund (the "Core Plus Bond Fund") Loomis Sayles Government Securities Fund (the "Government Securities Fund") CDC Nvest Funds Trust II: Loomis Sayles Massachusetts Tax Free Income Fund (the "Massachusetts Tax Free Income Fund") Loomis Sayles Funds II: Loomis Sayles High Income Fund (the "High Income Fund") Loomis Sayles Limited Term Government and Agency Fund (the "Limited Term Government and Agency Fund"), formerly Loomis Sayles Limited Term U.S. Government Fund Loomis Sayles Municipal Income Fund (the "Municipal Income Fund") Loomis Sayles Strategic Income Fund (the "Strategic Income Fund") Core Plus Bond Fund, Limited Term Government and Agency Fund and Strategic Income Fund each offer Class A, Class B, Class C and Class Y shares. Government Securities Fund offers Class A, Class B and Class Y shares. High Income Fund offers Class A, Class B and Class C shares. Massachusetts Tax Free Income Fund and Municipal Income Fund each offer Class A and Class B shares. Class A shares of all Funds except Limited Term Government and Agency Fund and Massachusetts Tax Free Income Fund are sold with a maximum front end sales charge of 4.50%. Class A shares of Limited Term Government and Agency Fund are sold with a maximum front end sales charge of 3.00% and Class A shares of Massachusetts Tax Free Income Fund are sold with a maximum front end sales charge of 4.25%. Class B shares do not pay a front end sales charge, but pay a higher ongoing distribution fee than Class A shares for eight years (at which point they automatically convert to Class A shares), and are subject to a contingent deferred sales charge ("CDSC") if those shares are redeemed within six years of purchase. Class C shares do not pay a front end sales charge, do not convert to any other class of shares and pay a higher ongoing distribution fee than Class A shares and may be subject to a CDSC of 1.00% if those shares are redeemed within one year. Class Y shares do not pay a front end sales charge, a CDSC or distribution fees. They are intended for institutional investors with a minimum initial investment of $1,000,000. Most expenses of the Trusts can be directly attributed to a Fund. Expenses which can not be directly attributed are generally apportioned based on the relative net assets of each of the Funds in the Trusts. Expenses of a Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees and transfer agent fees applicable to such class), and votes as a class only with respect to its own Rule 12b-1 Plan. Shares of each class would receive their pro rata share of the net assets of a Fund, if the Fund were liquidated. The Trustees approve separate dividends from net investment income on each class of shares. 2. Significant Accounting Policies. The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The Funds' financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. a. Security Valuation. Debt securities (other than short-term obligations with a remaining maturity of less than sixty days) are valued on the basis of valuations furnished to the Funds by a pricing service, which has been authorized by the Trustees. The pricing service determines valuations for normal, institutional size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Short-term obligations with a remaining maturity of less than sixty days are stated at amortized cost, which approximates market value. Equity securities are valued on the basis of valuations furnished to the Fund by a pricing service, which has been authorized by the Board of Trustees. The pricing service provides the last reported sale price for securities listed on an applicable securities exchange or, if no sale was reported and in the case of over-the-counter securities not so listed, the last reported bid price. Securities traded on the NASDAQ National Market are valued at the NASDAQ Official Closing Price ("NOCP"), or if lacking a NOCP, at the most recent bid quotation on the NASDAQ National Market. All other securities and assets are valued at their fair value as determined in good faith by the Funds' investment adviser, under the supervision of the Funds' Trustees. When fair valuing certain 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 Fund calculates its net asset value. 56 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) Certain securities held by Strategic Income Fund were 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. 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. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified cost basis. c. Foreign Currency Translation. The books and records of the Funds are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. Since the values of investment securities are presented at the foreign exchange rates prevailing at the end of the period, it is not practical to isolate that portion of the results of operations arising from changes in exchange rates from fluctuations arising from changes in market prices of the investment securities. Such changes are included with the net realized and unrealized gain or loss on investments. Net realized foreign exchange gains or losses arise from: sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities resulting from changes in exchange rates. d. 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. e. Dividends and Distributions to Shareholders. Dividends are declared daily to shareholders of record and are paid monthly. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for book and tax purposes of items such as market discounts, capital loss carryforwards, paydowns on mortgage-backed securities and foreign currency transactions. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to capital accounts. Distributions from net investment income and short-term capital gains are considered to be ordinary income for tax purposes. f. Repurchase Agreements. Each Fund, through its custodian, receives delivery of the underlying securities collateralizing repurchase agreements. It is each Fund's policy that the market value of the collateral be at least equal to 102% of the repurchase price, including interest. Each Fund's investment adviser is responsible for determining that the value of the collateral is at all times at least equal to 102% of the repurchase price, including interest. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty including possible delays or restrictions upon a Fund's ability to dispose of the underlying securities. 3. Purchases and Sales of Securities. For the six months ended March 31, 2004, purchases and sales of securities (excluding short-term investments) were as follows:
U.S. Government/Agency Other Securities ------------------------- -------------------------- Fund Purchases Sales Purchases Sales - ---------------------------------- ----------- ----------- ------------ ----------- Core Plus Bond Fund $59,982,600 $80,899,640 $ 82,038,484 $72,533,011 Government Securities Fund 28,027,482 37,992,981 -- -- High Income Fund -- -- 13,036,525 15,157,317 Limited Term Government and Agency Fund 57,202,660 71,425,840 6,079,673 4,440,733 Massachusetts Tax Free Income Fund -- -- 8,220,173 10,959,611 Municipal Income Fund -- -- 13,208,229 22,211,093 Strategic Income Fund 48,373,086 2,503,027 193,951,604 50,338,737
57 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 4. Management Fees and Other Transactions with Affiliates. a. Management Fees. Loomis Sayles & Company, L.P. ("Loomis Sayles") serves as the investment adviser to each of the Funds. 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 Over Fund $100 million $100 million $300 million $500 million - --------------------------------------- ------------ ------------ ------------ ------------ Core Plus Bond Fund 0.2500% 0.1875% 0.1875% 0.1875% Government Securities Fund 0.2750% 0.2750% 0.2625% 0.2500% High Income Fund 0.7000% 0.7000% 0.6500% 0.6500% Limited Term Government and Agency Fund 0.5700% 0.5700% 0.5450% 0.5200% Massachusetts Tax Free Income Fund 0.3000% 0.2500% 0.2500% 0.2500% Municipal Income Fund 0.5000% 0.3750% 0.3750% 0.3750% Strategic Income Fund 0.6500% 0.6500% 0.6000% 0.6000%
For the six months ended March 31, 2004, the management fees for each Fund were as follows: Gross Percentage of Management Average Fund Fee Daily Net Assets* - --------------------------------------- ---------- ----------------- Core Plus Bond Fund $ 325,792 0.207% Government Securities Fund 109,464 0.275% High Income Fund 181,057 0.700% Limited Term Government and Agency Fund 401,495 0.570% Massachusetts Tax Free Income Fund 136,378 0.300% Municipal Income Fund 312,522 0.469% Strategic Income Fund 1,358,500 0.623% *Annualized CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") serves as the advisory administrator to Core Plus Bond Fund, Government Securities Fund and Massachusetts Tax Free Income Fund. Under the terms of the advisory administration agreements, each Fund pays an advisory administration 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 Fund $100 million $100 million $300 million $500 million - ---------------------------------- ------------ ------------ ------------ ------------ Core Plus Bond Fund 0.2500% 0.1875% 0.1875% 0.1875% Government Securities Fund 0.2750% 0.2750% 0.2625% 0.2500% Massachusetts Tax Free Income Fund 0.3000% 0.2500% 0.2500% 0.2500%
For the six months ended March 31, 2004, the advisory administration fees for each Fund were as follows: Advisory Percentage of Administration Average Fund Fee Daily Net Assets* - ---------------------------------- -------------- ----------------- Core Plus Bond Fund $325,791 0.207% Government Securities Fund 109,463 0.275% Massachusetts Tax Free Income Fund 136,377 0.300% *Annualized Loomis Sayles and CDC IXIS Advisers are wholly-owned subsidiaries of CDC IXIS Asset Management North America, L.P. ("CDC IXIS North America"). Certain officers and directors of Loomis Sayles and CDC IXIS Advisers are also Trustees of the Funds. Management and advisory administration fees are presented in the statement of operations as management fees. 58 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) b. Accounting and Administrative Expense. CDC IXIS Asset Management Services, Inc. ("CIS"), a wholly-owned subsidiary of CDC IXIS North America, performs certain accounting and administrative services for the Funds and has subcontracted with Investors Bank & Trust Company ("IBT"), to serve as sub-administrator. Pursuant to an agreement among the CDC Nvest Funds Trusts (CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC Nvest Cash Management Trust and CDC Nvest Companies Trust I), the Loomis Sayles Funds Trusts (Loomis Sayles Funds I and Loomis Sayles Funds II) and CIS, each Fund pays CIS its pro rata portion of a group fee for these services representing the higher amount based on the following calculations: (1) Percentage of Eligible Average Daily Net Assets First Next Over $5 billion $5 billion $10 billion ---------- ---------- ----------- 0.0675% 0.0625% 0.0500% or (2) Each Fund's pro rata portion, allocated based on the combined assets of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts, of the annual aggregate minimum fee of $5 million. For the six months ended March 31, 2004, fees paid to CIS for accounting and administrative expense were as follows: Accounting And Fund Administrative - ---------------------------------- -------------- Core Plus Bond Fund $103,003 Government Securities Fund 26,228 High Income Fund 16,949 Limited Term Government and Agency Fund 46,287 Massachusetts Tax Free Income Fund 29,837 Municipal Income Fund 43,850 Strategic Income Fund 141,497 c. Transfer Agent Fees. CIS is the transfer and shareholder servicing agent for each Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. Classes A, B and C pay service fees monthly to CIS representing the higher amount based on the following calculations: (1) Each Fund's pro rata portion of an annual aggregate fee determined by applying an annual fee rate (see schedule below) to the eligible average daily net assets. Eligible assets are the average daily net assets of Class A, Class B and Class C accounts in Load Bond Funds. Load Bond Funds consist of all bond funds in the CDC Nvest Funds Trusts, High Income Fund, Limited Term Government and Agency Fund, Municipal Income Fund, Strategic Income Fund and Loomis Sayles Investment Grade Bond Fund. First Next Over $1.2 billion Next $5 billion $6.2 billion ------------ --------------- ------------ 0.142% 0.135% 0.130% Each Class of shares is subject to a monthly class minimum of $1,500, allocated based on the combined assets of Class A, Class B and Class C. or (2) An allocated portion, based on eligible assets, of an annual aggregate minimum fee of $1,502,993. For the period September 15, 2003 through December 31, 2003, the aggregate minimum fee was $382,986. Class Y pays service fees monthly representing the higher amount based on the following calculations: (1) The Fund's pro rata portion of an annual aggregate fee determined by applying an annual rate of 0.026% to the eligible average daily net assets. Eligible assets are the average daily net assets of all accounts in No Load Retail Funds* and Load Funds - Class Y**. 59 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) Class Y shares are subject to a monthly class minimum of $1,250. or (2) An allocated portion, based on eligible assets of an annual aggregate minimum fee of $650,000. For the period September 15, 2003 through December 31, 2003, the aggregate minimum fee was $190,547. * No Load Retail Funds consist of Loomis Sayles Aggressive Growth Fund, Loomis Sayles Bond Fund, Loomis Sayles Global Bond Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles Small Cap Value Fund, Loomis Sayles Tax-Managed Equity Fund, Loomis Syles Value Fund and Loomis Sayles Worldwide Fund. ** Load Funds - Class Y consist of all Funds with Class Y shares offered within the CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts. In addition, pursuant to other servicing agreements, each class pays service fees to other firms that provide similar services for their own shareholder accounts. CIS and BFDS and other firms are also reimbursed by the Funds for out-of-pocket expenses. For the six months ended March 31, 2004, amounts paid to CIS as compensation for its services as transfer agent were as follows: Transfer Agent Fund Fee - --------------------------------------- -------------- Core Plus Bond Fund $148,884 Government Securities Fund 61,682 High Income Fund 41,660 Limited Term Government and Agency Fund 106,227 Massachusetts Tax Free Income Fund 68,926 Municipal Income Fund 95,071 Strategic Income Fund 265,591 d. Service and Distribution Fees. Pursuant to Rule 12b-1 under the 1940 Act, the Trusts have adopted a Service Plan relating to each Fund's Class A shares (the "Class A Plan") and Service and Distribution Plans relating to each Fund's Class B and Class C shares (the "Class B and Class C Plans"). Under the Class A Plan, each Fund pays CDC IXIS Asset Management Distributors, L.P. ("CDC IXIS Distributors"), the Fund's distributor (a wholly owned subsidiary of CDC IXIS North America), a monthly service fee at the annual rate of 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses incurred by CDC IXIS Distributors in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. Also under the Class A Plan, Limited Term Government and Agency Fund and Massachusetts Tax Free Income Fund each pay CDC IXIS Distributors a monthly distribution fee at the annual rate of 0.10% of the average daily net assets attributable to each Fund's Class A shares as reimbursement for expenses incurred by CDC IXIS Distributors in connection with the marketing or sale of each Fund's Class A shares. Under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a monthly service fee at the annual rate of 0.25% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by CDC IXIS Distributors in providing personal services to investors in Class B and Class C shares and/or the maintenance of shareholder accounts. Also under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a monthly distribution fee at the annual rate of 0.75% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by CDC IXIS Distributors in connection with the marketing or sale of Class B and Class C shares. For the six months ended March 31, 2004, the Funds paid the following service and distribution fees:
Service Fee Distribution Fee ------------------------------ ----------------------------- Class A Class B Class C Class A Class B Class C -------- -------- -------- ------- -------- -------- Core Plus Bond Fund $161,718 $199,654 $ 9,116 $ -- $598,962 $ 27,347 Government Securities Fund 79,563 16,481 -- -- 49,441 -- High Income Fund 32,413 28,603 3,646 -- 85,810 10,939 Limited Term Government and Agency Fund 142,656 15,923 10,059 57,063 47,768 30,177 Massachusetts Tax Free Income Fund 106,753 6,895 -- 42,701 20,683 -- Municipal Income Fund 153,428 13,253 -- -- 39,759 -- Strategic Income Fund 239,659 158,183 142,455 -- 474,549 427,364
60 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) Commissions (including CDSCs) on Fund shares paid to CDC IXIS Distributors by investors in shares of the Funds during the six months ended March 31, 2004 were as follows: Fund - --------------------------------------- Core Plus Bond Fund $ 162,360 Government Securities Fund 44,954 High Income Fund 44,559 Limited Term Government and Agency Fund 86,452 Massachusetts Tax Free Income Fund 33,612 Municipal Income Fund 36,800 Strategic Income Fund 1,060,117 e. Trustees Fees and Expenses. The CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts do not pay any compensation directly to their officers or Trustees who are directors, officers or employees of Loomis Sayles, CDC IXIS Advisers, CDC IXIS Distributors, CDC IXIS North America, CIS or their affiliates. Each other Trustee receives a retainer fee at the annual rate of $45,000 and meeting attendance fees of $4,500 for each meeting of the Board of Trustees attended. Each committee member receives an additional retainer fee at the annual rate of $7,000 while each committee chairman receives a retainer fee (beyond the $7,000 fee) at the annual rate of $5,000. The retainer fees assume four Board or Committee meetings per year; Trustees are compensated for each additional Board or Committee meeting in excess of four per year, at the rate of $4,500 and $1,750, respectively. These fees are allocated to the various series of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts based on a formula that takes into account, among other factors, the relative net assets of each Fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings. A deferred compensation plan (the "Plan") is available to the Trustees on a voluntary basis. Each participating Trustee will receive an amount equal to the value that such deferred compensation would have been had it been invested in a designated Fund or certain other funds of the CDC Nvest Funds Trusts or Loomis Sayles Funds Trusts on the normal payment date. Deferred amounts remain in the Funds until distributed in accordance with the Plan. f. Publishing Services. CIS performs certain desktop publishing services for the Funds. Fees for these services are presented in the statements of operations as shareholder reporting. For the period ended March 31, 2004, amounts paid to CIS as compensation for these services were as follows: Publishing Services Fund Fees - --------------------------------------- ------------------- Core Plus Bond Fund $1,106 Government Securities Fund 1,055 High Income Fund 1,823 Limited Term Government and Agency Fund 1,718 Massachusetts Tax Free Income Fund 1,151 Municipal Income Fund 1,706 Strategic Income Fund 1,786 5. Line of Credit. High Income Fund and Strategic Income Fund, along with certain other portfolios, participate in a $50,000,000 committed line of credit provided by IBT under a credit agreement (the "Agreement") dated April 30, 2002. Advances under the Agreement are taken primarily for temporary or emergency purposes. Borrowings under the Agreement bear interest at a rate tied to one of several short-term rates that may be selected by the lender from time to time. In addition, the Funds are charged a facility fee equal to 0.10% per annum on the unused portion of the line of credit. The annual cost of maintaining the line of credit and the facility fee is apportioned pro rata among the participating Funds. There were no borrowings as of or during the six months ended March 31, 2004. 6. Security Lending. Each Fund has entered into an agreement with IBT, as agent of the Funds, to lend securities to certain designated borrowers. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The Funds receive fees for lending their securities. The market value of securities on loan to borrowers and the value of collateral held by the Funds with respect to such loans at March 31, 2004, were as follows:
Market Value of Value of Collateral Fund Securities on Loan Received - --------------------------------------- ------------------ ------------------- Core Plus Bond Fund $25,580,689 $26,149,903 Government Securities Fund 23,539,747 24,097,608 High Income Fund 6,930,719 7,113,666 Limited Term Government and Agency Fund 10,715,818 11,031,906 Strategic Income 44,971,355 45,977,308
61 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 7. Expense Reductions and Contingent Expense Obligations. Loomis Sayles has given binding undertakings to certain Funds to defer its management fees and, if necessary, bear certain expenses associated with these Funds to limit their operating expenses. These undertakings are in effect until the dates indicated below and will be reevaluated on an annual basis. For the six months ended March 31, 2004, certain class level expenses have been reimbursed as follows: Strategic Income Fund $4,547. If in the following fiscal year the actual operating expenses of a Fund that previously received a deferral or reimbursement are less than the expense limit for that Fund, the Fund is required to pay an amount of additional expense that is the lower of the difference between the actual operating expenses and the expense limit or the actual amount of fees previously waived or expenses reimbursed. At March 31, 2004, the expense limits as a percentage of average daily net assets and amount subject to possible reimbursement under the expense limitation agreement were as follows:
Expense Limit as a Percentage Expenses Subject of Average Daily Net Assets Expiration to Possible ------------------------------------- Fund Class A Class B Class C Class Y of Waiver Reimbursement - ---------------------------------- ------- ------- ------- ------- ---------------- ---------------- Massachusetts Tax Free Income Fund 1.40% 2.05% -- -- January 31, 2005 $ -- Strategic Income Fund 1.25% 2.00% 2.00% 1.00% January 31, 2005 74,190
For Strategic Income Fund, $69,643 of expenses deferred in fiscal 2003 is subject to possible reimbursement until September 30, 2004 and an additional $4,547 of expenses deferred in fiscal 2004 is subject to possible reimbursement until September 30, 2005. 8. Concentration of Credit. Massachusetts Tax Free Income Fund primarily invests in debt obligations issued by the Commonwealth of Massachusetts and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Fund is more susceptible to factors adversely affecting issuers of Massachusetts municipal securities than is a comparable municipal bond fund that is not so concentrated. Uncertain economic and fiscal conditions may affect the ability of issuers of Massachusetts municipal securities to meet their financial obligations. At March 31, 2004, the Fund had the following concentrations by revenue source in excess of 10% as a percentage of the Fund's net assets: University 14.8%, College 11.9% and Water 11.7%. The Fund had investments in securities of issuers insured by Municipal Bond Investors Assurance Corporation (MBIA), American Municipal Bond assurance Corporation (AMBAC) and Financial Guaranty Insurance Company (FGIC) which aggregated to 11.1%, 13.2% and 6.8% of its net assets, respectively, at March 31, 2004. At March 31, 2004, Municipal Income Fund had the following concentrations by revenue source in excess of 10% as a percentage of the Fund's net assets: University 13.5% and Various Purpose 10.3%. The Fund also had more than 10% of its net assets invested in: New York 11.7%, Pennsylvania 11.5% and Texas 10.9%. Certain revenue or tax related events in a state may impair the ability of issuers of municipal securities to pay principal and interest on their obligations. 62 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 9. Capital Shares. Each Fund may issue an unlimited number of shares of beneficial interest. Transactions in capital shares were as follows:
Six Months For the Period Ended January 1, 2003 March 31, 2004 through Year Ended (unaudited) September 30, 2003 December 31, 2002 ------------------------- ------------------------- ------------------------- Shares Amount Shares Amount Shares Amount ---------- ------------ ---------- ------------ ---------- ------------ Core Plus Bond Fund Class A Shares sold 854,428 $ 10,008,141 2,208,881 $ 25,393,288 2,761,031 $ 30,947,862 Shares Issued in connection with the reinvestment of: Dividends from net investment income 234,625 2,738,930 315,868 3,625,104 630,044 7,028,137 ---------- ------------ ---------- ------------ ---------- ------------ 1,089,053 12,747,071 2,524,749 29,018,392 3,391,075 37,975,999 Shares repurchased (1,708,263) (19,945,172) (4,103,015) (47,055,063) (5,298,328) (59,054,703) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (619,210) $ (7,198,101) (1,578,266) $(18,036,671) (1,907,253) $(21,078,704) ---------- ------------ ---------- ------------ ---------- ------------ Class B Shares sold 2,030,108 $ 23,740,033 4,544,450 $ 52,121,481 5,113,116 $ 57,147,872 Shares Issued in connection with the reinvestment of: Dividends from net investment income 95,632 1,116,930 138,840 1,592,822 309,169 3,449,629 ---------- ------------ ---------- ------------ ---------- ------------ 2,125,740 24,856,963 4,683,290 53,714,303 5,422,285 60,597,501 Shares repurchased (2,688,635) (31,474,276) (3,322,658) (38,077,677) (3,908,528) (43,564,808) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (562,895) $ (6,617,313) 1,360,632 $ 15,636,626 1,513,757 $ 17,032,693 ---------- ------------ ---------- ------------ ---------- ------------ Class C Shares sold 46,756 $ 547,801 59,911 $ 688,486 138,295 $ 1,555,372 Shares Issued in connection with the reinvestment of: Dividends from net investment income 7,737 90,427 11,703 134,339 26,871 299,976 ---------- ------------ ---------- ------------ ---------- ------------ 54,493 638,228 71,614 822,825 165,166 1,855,348 Shares repurchased (104,805) (1,223,728) (216,706) (2,481,482) (354,452) (3,952,429) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (50,312) $ (585,500) (145,092) $ (1,658,657) (189,286) $ (2,097,081) ---------- ------------ ---------- ------------ ---------- ------------ Class Y Shares sold 199,221 $ 2,335,107 360,783 $ 4,157,868 411,293 $ 4,623,829 Shares Issued in connection with the reinvestment of: Dividends from net investment income 37,138 435,200 51,037 588,550 80,315 898,601 ---------- ------------ ---------- ------------ ---------- ------------ 236,359 2,770,307 411,820 4,746,418 491,608 5,522,430 Shares repurchased (355,909) (4,193,129) (500,546) (5,745,952) (363,731) (4,077,509) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (119,550) $ (1,422,822) (88,726) $ (999,534) 127,877 $ 1,444,921 ---------- ------------ ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions (1,351,967) $(15,823,736) (451,452) $ (5,058,236) (454,905) $ (4,698,171) ========== ============ ========== ============ ========== ============
63 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 9. Capital Shares (continued).
Six Months For the Period Ended January 1, 2003 March 31, 2004 through Year Ended (unaudited) September 30, 2003 December 31, 2002 ----------------------- ------------------------- ------------------------- Shares Amount Shares Amount Shares Amount -------- ------------ ---------- ------------ ---------- ------------ Government Securities Fund Class A Shares sold 196,750 $ 2,336,613 679,447 $ 8,249,719 1,163,096 $ 13,583,368 Shares issued in connection with the reinvestment of: Dividends from net investment income 85,897 1,021,549 159,984 1,935,187 243,169 2,819,415 -------- ------------ ---------- ------------ ---------- ------------ 282,647 3,358,162 839,431 10,184,906 1,406,265 16,402,783 Shares repurchased (937,193) (11,121,792) (1,441,491) (17,423,672) (1,419,343) (16,327,594) -------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (654,546) $ (7,763,630) (602,060) $ (7,238,766) (13,078) $ 75,189 -------- ------------ ---------- ------------ ---------- ------------ Class B Shares sold 56,505 $ 671,574 320,801 $ 3,882,546 712,314 $ 8,363,857 Shares issued in connection with the reinvestment of: Dividends from net investment income 13,467 160,238 28,512 345,321 36,766 427,149 -------- ------------ ---------- ------------ ---------- ------------ 69,972 831,812 349,313 4,227,867 749,080 8,791,006 Shares repurchased (297,872) (3,533,813) (493,758) (5,918,693) (541,866) (6,269,688) -------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (227,900) $ (2,702,001) (144,445) $ (1,690,826) 207,214 $ 2,521,318 -------- ------------ ---------- ------------ ---------- ------------ Class Y Shares sold 9,926 $ 118,322 33,551 $ 404,508 220,420 $ 2,524,097 Shares issued in connection with the reinvestment of: Dividends from net investment income 4,167 49,465 11,024 133,483 24,957 289,414 -------- ------------ ---------- ------------ ---------- ------------ 14,093 167,787 44,575 537,991 245,377 2,813,511 Shares repurchased (31,357) (371,236) (364,336) (4,409,555) (114,051) (1,321,509) -------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (17,264) $ (203,449) (319,761) $ (3,871,564) 131,326 $ 1,492,002 -------- ------------ ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions (899,710) $(10,669,080) (1,066,266) $(12,801,156) 325,462 $ 4,088,509 ======== ============ ========== ============ ========== ============
64 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 9. Capital Shares (continued).
Six Months For the Period Ended January 1, 2003 March 31, 2004 through Year Ended (unaudited) September 30, 2003 December 31, 2002 ---------------------- ------------------------- ------------------------- Shares Amount Shares Amount Shares Amount -------- ----------- ---------- ------------ ---------- ------------ High Income Fund Class A Shares sold 832,202 $ 4,014,165 6,787,841 $ 30,994,716 2,021,612 $ 8,897,208 Shares issued in connection with the reinvestment of: Dividends from net investment income 115,452 560,117 178,526 792,126 317,560 1,396,013 -------- ----------- ---------- ------------ ---------- ------------ 947,654 4,574,282 6,966,367 31,786,842 2,339,172 10,293,221 Shares repurchased (707,293) (3,435,727) (7,296,772) (33,271,653) (3,663,855) (16,220,139) -------- ----------- ---------- ------------ ---------- ------------ Net increase (decrease) 240,361 $ 1,138,555 (330,405) $ (1,484,811) (1,324,683) $ (5,926,918) -------- ----------- ---------- ------------ ---------- ------------ Class B Shares sold 170,148 $ 821,153 662,229 $ 2,976,263 1,040,581 $ 4,725,693 Shares issued in connection with the reinvestment of: Dividends from net investment income 64,184 311,303 105,383 467,995 201,776 889,901 -------- ----------- ---------- ------------ ---------- ------------ 234,332 1,132,456 767,612 3,444,258 1,242,357 5,615,594 Shares repurchased (881,752) (4,271,943) (1,323,884) (5,858,921) (2,675,203) (11,769,699) -------- ----------- ---------- ------------ ---------- ------------ Net increase (decrease) (647,420) $(3,139,487) (556,272) $ (2,414,663) (1,432,846) $ (6,154,105) -------- ----------- ---------- ------------ ---------- ------------ Class C Shares sold 49,541 $ 237,568 69,446 $ 305,018 90,003 $ 403,036 Shares issued in connection with the reinvestment of: Dividends from net investment income 8,807 42,726 13,856 61,635 26,503 116,430 -------- ----------- ---------- ------------ ---------- ------------ 58,348 280,294 83,302 366,653 116,506 519,466 Shares repurchased (85,428) (412,325) (101,125) (434,559) (324,456) (1,450,446) -------- ----------- ---------- ------------ ---------- ------------ Net increase (decrease) (27,080) $ (132,031) (17,823) $ (67,906) (207,950) $ (930,980) -------- ----------- ---------- ------------ ---------- ------------ Increase(decrease) derived from capital shares transactions (434,139) $(2,132,963) (904,500) $ (3,967,380) (2,965,479) $(13,012,003) ======== =========== ========== ============ ========== ============
65 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 9. Capital Shares (continued).
Six Months For the Period Ended January 1, 2003 March 31, 2004 through (unaudited) September 30, 2003 ------------------------- ------------------------- Shares Amount Shares Amount ---------- ------------ ---------- ------------ Limited Term Government and Agency Fund Class A Shares sold 593,003 $ 6,774,385 3,639,344 $ 42,294,961 Shares Issued in connection with the reinvestment of: Dividends from net investment income 135,050 1,543,592 217,806 2,527,837 ---------- ------------ ---------- ------------ 728,053 8,317,977 3,857,150 44,822,798 Shares repurchased (1,230,871) (14,072,144) (2,708,272) (31,326,172) ---------- ------------ ---------- ------------ Net increase (decrease) (502,818) $ (5,754,167) 1,148,878 $ 13,496,626 ---------- ------------ ---------- ------------ Class B Shares sold 66,966 $ 764,604 328,497 $ 3,816,554 Shares Issued in connection with the reinvestment of: Dividends from net investment income 14,897 169,922 27,583 319,597 ---------- ------------ ---------- ------------ 81,863 934,526 356,080 4,136,151 Shares repurchased (374,332) (4,272,751) (470,730) (5,449,483) ---------- ------------ ---------- ------------ Net increase (decrease) (292,469) $ (3,338,225) (114,650) $ (1,313,332) ---------- ------------ ---------- ------------ Class C Shares sold 68,358 $ 782,155 257,384 $ 2,997,797 Shares Issued in connection with the reinvestment of: Dividends from net investment income 7,654 87,416 13,512 156,679 ---------- ------------ ---------- ------------ 76,012 869,571 270,896 3,154,476 Shares repurchased (170,722) (1,952,268) (203,605) (2,359,426) ---------- ------------ ---------- ------------ Net increase (decrease) (94,710) $ (1,082,697) 67,291 $ 795,050 ---------- ------------ ---------- ------------ Class Y Shares sold 43,501 $ 499,132 194,812 $ 2,266,581 Shares Issued in connection with the reinvestment of: Dividends from net investment income 11,208 128,568 21,540 250,898 ---------- ------------ ---------- ------------ 54,709 627,700 216,352 2,517,479 Shares repurchased (175,947) (2,017,858) (344,269) (4,012,366) ---------- ------------ ---------- ------------ Net increase (decrease) (121,238) $ (1,390,158) (127,917) $ (1,494,887) ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions (1,011,235) $(11,565,247) 973,602 $ 11,483,457 ========== ============ ========== ============ Year Ended December 31, 2002 ------------------------- Shares Amount ---------- ------------ Limited Term Government and Agency Fund Class A Shares sold 2,338,561 $ 26,950,560 Shares Issued in connection with the reinvestment of: Dividends from net investment income 348,652 4,025,182 ---------- ------------ 2,687,213 30,975,742 Shares repurchased (3,260,141) (37,525,210) ---------- ------------ Net increase (decrease) (572,928) $ (6,549,468) ---------- ------------ Class B Shares sold 706,265 $ 8,186,137 Shares Issued in connection with the reinvestment of: Dividends from net investment income 40,792 470,419 ---------- ------------ 747,057 8,656,556 Shares repurchased (620,421) (7,125,410) ---------- ------------ Net increase (decrease) 126,636 $ 1,531,146 ---------- ------------ Class C Shares sold 570,784 $ 6,611,629 Shares Issued in connection with the reinvestment of: Dividends from net investment income 17,765 205,133 ---------- ------------ 588,549 6,816,762 Shares repurchased (414,627) (4,814,349) ---------- ------------ Net increase (decrease) 173,922 $ 2,002,413 ---------- ------------ Class Y Shares sold 987,271 $ 11,289,831 Shares Issued in connection with the reinvestment of: Dividends from net investment income 34,738 402,928 ---------- ------------ 1,022,009 11,692,759 Shares repurchased (599,695) (6,901,951) ---------- ------------ Net increase (decrease) 422,314 $ 4,790,808 ---------- ------------ Increase (decrease) derived from capital shares transactions 149,944 $ 1,774,899 ========== ============
66 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 9. Capital Shares (continued).
Six Months For the Period Ended January 1, 2003 March 31, 2004 through Year Ended (unaudited) September 30, 2003 December 31, 2002 --------------------- --------------------- ---------------------- Shares Amount Shares Amount Shares Amount -------- ----------- -------- ----------- -------- ------------ Massachusetts Tax Free Income Fund Class A Shares sold 59,012 $ 977,577 119,001 $ 1,949,577 456,052 $ 7,320,365 Shares issued in connection with the reinvestment of: Dividends from net investment income 72,270 1,198,227 115,722 1,900,796 166,936 2,687,820 -------- ----------- -------- ----------- -------- ------------ 131,282 2,175,804 234,723 3,850,373 622,988 10,008,185 Shares repurchased (291,164) (4,804,645) (584,421) (9,550,818) (659,550) (10,569,788) -------- ----------- -------- ----------- -------- ------------ Net increase (decrease) (159,882) $(2,628,841) (349,698) $(5,700,445) (36,562) $ (561,603) -------- ----------- -------- ----------- -------- ------------ Class B Shares sold 5,410 $ 89,574 22,230 $ 363,317 40,852 $ 652,539 Shares issued in connection with the reinvestment of: Dividends from net investment income 3,321 54,922 5,690 93,253 9,320 149,611 -------- ----------- -------- ----------- -------- ------------ 8,731 144,496 27,920 456,570 50,172 802,150 Shares repurchased (78,211) (1,289,888) (62,206) (1,025,084) (164,730) (2,629,120) -------- ----------- -------- ----------- -------- ------------ Net increase (decrease) (69,480) $(1,145,392) (34,286) $ (568,514) (114,558) $ (1,826,970) -------- ----------- -------- ----------- -------- ------------ Increase(decrease) derived from capital shares transactions (229,362) $(3,774,233) (383,984) $(6,268,959) (151,120) $ (2,388,573) ======== =========== ======== =========== ======== ============
Six Months For the Period Ended January 1, 2003 March 31, 2004 through (unaudited) September 30, 2003 ------------------------- ------------------------- Shares Amount Shares Amount ---------- ------------ ---------- ------------ Municipal Income Fund Class A Shares sold 336,302 $ 2,498,539 1,680,532 $ 12,281,784 Shares issued in connection with the reinvestment of: Dividends from net investment income 228,338 1,705,365 374,960 2,761,288 ---------- ------------ ---------- ------------ 564,640 4,203,904 2,055,492 15,043,072 Shares repurchased (1,578,689) (11,730,445) (2,814,362) (20,686,975) ---------- ------------ ---------- ------------ Net increase (decrease) (1,014,049) $ (7,526,541) (758,870) $ (5,643,903) ---------- ------------ ---------- ------------ Class B Shares sold 49,429 $ 368,747 176,974 $ 1,299,640 Shares issued in connection with the reinvestment of: Dividends from net investment income 14,430 107,812 21,918 161,634 ---------- ------------ ---------- ------------ 63,859 476,559 198,892 1,461,274 Shares repurchased (194,792) (1,461,031) (387,486) (2,860,427) ---------- ------------ ---------- ------------ Net increase (decrease) (130,933) $ (984,472) (188,594) $ (1,399,153) ---------- ------------ ---------- ------------ Increase(decrease) derived from capital shares transactions (1,144,982) $ (8,511,013) (947,464) $ (7,043,056) ========== ============ ========== ============ Year Ended December 31, 2002 ------------------------- Shares Amount ---------- ------------ Municipal Income Fund Class A Shares sold 1,667,649 $ 12,274,988 Shares issued in connection with the reinvestment of: Dividends from net investment income 576,440 4,253,748 ---------- ------------ 2,244,089 16,528,736 Shares repurchased (3,360,408) (24,705,392) ---------- ------------ Net increase (decrease) (1,116,319) $ (8,176,656) ---------- ------------ Class B Shares sold 360,545 $ 2,668,323 Shares issued in connection with the reinvestment of: Dividends from net investment income 37,421 276,214 ---------- ------------ 397,966 2,944,537 Shares repurchased (746,990) (5,506,527) ---------- ------------ Net increase (decrease) (349,024) $ (2,561,990) ---------- ------------ Increase(decrease) derived from capital shares transactions (1,465,343) $(10,738,646) ========== ============
67 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Six Months Ended March 31, 2004 (unaudited) 9. Capital Shares (continued).
Six Months For the Period Ended January 1, 2003 March 31, 2004 through (unaudited) September 30, 2003 ------------------------- --------------------------- Shares Amount Shares Amount ---------- ------------ ----------- ------------- Strategic Income Fund Class A Shares sold 9,191,598 $123,565,698 4,379,870 $ 52,212,398 Shares Issued in connection with the reinvestment of: Dividends from net investment income 345,631 4,611,227 371,875 4,481,650 ---------- ------------ ----------- ------------- 9,537,229 128,176,925 4,751,745 56,694,048 Shares repurchased (1,418,056) (19,024,246) (2,180,800) (25,669,234) ---------- ------------ ----------- ------------- Net increase (decrease) 8,119,173 $109,152,679 2,570,945 $ 31,024,814 ---------- ------------ ----------- ------------- Class B Shares sold 1,364,510 $ 18,183,777 11,291,589 $ 137,976,336 Shares Issued in connection with the reinvestment of: Dividends from net investment income 177,975 2,374,933 268,978 3,224,645 ---------- ------------ ----------- ------------- 1,542,485 20,558,710 11,560,567 141,200,981 Shares repurchased (1,299,157) (17,315,601) (11,369,542) (139,122,966) ---------- ------------ ----------- ------------- Net increase (decrease) 243,328 $ 3,243,109 191,025 $ 2,078,015 ---------- ------------ ----------- ------------- Class C Shares sold 8,069,494 $108,221,496 3,238,168 $ 38,652,520 Shares Issued in connection with the reinvestment of: Dividends from net investment income 109,750 1,467,872 96,560 1,163,101 ---------- ------------ ----------- ------------- 8,179,244 109,689,368 3,334,728 39,815,621 Shares repurchased (381,361) (5,116,714) (647,304) (7,733,899) ---------- ------------ ----------- ------------- Net increase (decrease) 7,797,883 $104,572,654 2,687,424 $ 32,081,722 ---------- ------------ ----------- ------------- Class Y Shares sold 383,251 $ 5,122,553 110,719 $ 1,316,510 Shares Issued in connection with the reinvestment of: Dividends from net investment income 5,715 76,027 7,237 87,673 ---------- ------------ ----------- ------------- 388,966 5,198,580 117,956 1,404,183 Shares repurchased (67,834) (889,503) (40,357) (480,677) ---------- ------------ ----------- ------------- Net increase (decrease) 321,132 $ 4,309,077 77,599 $ 923,506 ---------- ------------ ----------- ------------- Increase (decrease) derived from capital shares transactions 16,481,516 $221,277,519 5,526,993 $ 66,108,057 ========== ============ =========== ============= Year Ended December 31, 2002 ------------------------- Shares Amount ---------- ------------ Strategic Income Fund Class A Shares sold 1,233,640 $ 12,489,877 Shares Issued in connection with the reinvestment of: Dividends from net investment income 428,477 4,343,680 ---------- ------------ 1,662,117 16,833,557 Shares repurchased (2,583,795) (26,064,953) ---------- ------------ Net increase (decrease) (921,678) $ (9,231,396) ---------- ------------ Class B Shares sold 996,177 $ 10,066,847 Shares Issued in connection with the reinvestment of: Dividends from net investment income 364,119 3,688,894 ---------- ------------ 1,360,296 13,755,741 Shares repurchased (2,502,784) (25,285,670) ---------- ------------ Net increase (decrease) (1,142,488) $(11,529,929) ---------- ------------ Class C Shares sold 331,088 $ 3,346,746 Shares Issued in connection with the reinvestment of: Dividends from net investment income 101,770 1,030,223 ---------- ------------ 432,858 4,376,969 Shares repurchased (771,825) (7,794,721) ---------- ------------ Net increase (decrease) (338,967) $ (3,417,752) ---------- ------------ Class Y Shares sold 68,699 $ 692,601 Shares Issued in connection with the reinvestment of: Dividends from net investment income 4,144 42,230 ---------- ------------ 72,843 734,831 Shares repurchased (21,066) (211,862) ---------- ------------ Net increase (decrease) 51,777 $ 522,969 ---------- ------------ Increase (decrease) derived from capital shares transactions (2,351,356) $(23,656,108) ========== ============
68 Supplement LOOMIS SAYLES GOVERNMENT SECURITIES FUND Supplement dated May 1, 2004 to CDC Nvest Income Funds Classes A, B and C Prospectus and CDC Nvest Income Funds Class Y Prospectus, each dated February 1, 2004, each as may be supplemented from time to time (the "Prospectuses") Within the section entitled "Evaluating the Fund's Past Performance", the following text replaces the introductory text and Average Annual Total Returns table for the Loomis Sayles Government Securities Fund. The table below shows how the average annual total returns for each class of the Fund (before and after taxes for Class A) for the one-year, five-year and ten-year periods (or since inception if shorter) compare to those of the Lehman Brothers Long Term Government Bond Index ("Lehman Long Term Gov't Bond Index"), an unmanaged index which is made up of the securities in the Lehman Brothers Government Bond Index ("Lehman Gov't Bond Index") that have a maturity of 10 years or more. They are also compared to the Lehman Gov't Bond Index, an unmanaged index of public debt of the U.S. Treasury, government agencies and their obligations. You may not invest directly in an index. The Fund's total returns reflect, on a class by class basis, its expenses and the maximum sales charges that you may be required to pay when you buy or redeem the Fund's shares. Class A total returns have also been calculated to reflect return after taxes on distributions only and also return after taxes on distributions and sales of Fund shares. The Lehman Long Term Gov't Bond Index and Lehman Gov't Bond Index returns have not been adjusted for ongoing management, distribution and operating expenses and sales charges applicable to mutual fund investments.
- ------------------------------------------------------------------------------------------------------ Since Class Y Average Annual Total Returns Inception (for the periods ended December 31, 2003) Past 1 Year Past 5 Years Past 10 Years (3/31/94) - ------------------------------------------------------------------------------------------------------ Class A - Return Before Taxes -3.08% 4.02% 5.30% -- - ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions* -4.39% 2.04% 3.04% -- - ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions & - ------------------------------------------------------------------------------------------------------ Sales of Fund Shares* -2.00% 2.16% 3.06% -- - ------------------------------------------------------------------------------------------------------ Class B - Return Before Taxes -4.08% 3.88% 5.00% -- - ------------------------------------------------------------------------------------------------------ Class Y - Return Before Taxes 1.64% 5.30% -- 6.60% - ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions* 0.18% 3.18% -- 4.19% - ------------------------------------------------------------------------------------------------------ Return After Taxes on Distributions & - ------------------------------------------------------------------------------------------------------ Sales of Fund Shares* 1.07% 3.17% -- 4.11% - ------------------------------------------------------------------------------------------------------ Lehman Long Term Gov't Bond Index** 2.61% 6.58% 7.96% 8.87% - ------------------------------------------------------------------------------------------------------ Lehman Gov't Bond Index**+ 2.36% 6.26% 6.72% 7.24% - ------------------------------------------------------------------------------------------------------
*After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans, qualified plans, education savings accounts such as 529 plans or individual retirement accounts. The returns are shown for only one class of the Fund. After-tax returns for the other classes of the Fund will vary. In some cases the after-tax returns may exceed the return before taxes due to an assumed tax benefit from any losses on a sale of fund shares at the end of the measurement period. **The returns of the Index do not reflect the effect of taxes. + The Lehman Long Term Gov't Bond Index replaced the Lehman Gov't Bond Index as the Fund's comparative index because Loomis Sayles believes that the new index is more representative of the types of securities in which the Fund may invest. Item 2. Code of Ethics. The Trust has adopted a code of Ethics that applies to the Trust's principal executive officer, principal financial officer and persons performing similar functions. Item 3. Audit Committee Financial Expert. The Board of Trustees of the Trust has established an audit committee and determined that all committee members qualify as financial experts. The committee members are Ms. Sandra O. Moose, Messrs. Edward A. Benjamin and Daniel M. Cain. Each of these individuals is also Independent Trustee of the Trust. Item 4. Principal Accountant Fees and Services. Not applicable. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Included as part of the report to shareholders filed under Item 1. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable Item 10. Controls and Procedures The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. 11. Exhibits. (a) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2), as herewith as exhibits (a)(1)(i) and (a)(1)(ii). (b) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 are filed herewith as Exhibit (b)(2) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CDC Nvest Funds Trust II By: /s/ John Hailer -------------------------------------- Name: John Hailer Title: President & Chief Executive Officer Date: May 19, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John Hailer -------------------------------------- Name: John Hailer Title: President & Chief Executive Officer Date: May 19, 2004 By: /s/ Nicholas H. Palmerino ----------------------------------------- Name: Nicholas H. Palmerino Title: Treasurer Date: May 19, 2004 EX-99.(CERT)(1) 2 dex99cert1.txt CEO SECTION 302 CERTIFICATION CDC Nvest Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certifications I, John T. Hailer, certify that: 1. I have reviewed this report on Form N-CSR of CDC Nvest Funds Trust II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows), of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing of this report (the "Evaluation Date"); and c. Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to the significant deficiencies and material weaknesses. Date: May 19, 2004 /s/ JOHN T. HAILER ----------------------------------- John T. Hailer President & Chief Executive Officer EX-99.(CERT)(2) 3 dex99cert2.txt TREASURER SECTION 302 CERTIFICATION CDC Nvest Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certifications I, Nicholas H. Palmerino, certify that: 1. I have reviewed this report on Form N-CSR of CDC Nvest Funds Trust II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; and 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows), of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing of this report (the "Evaluation Date"); and c. Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to the significant deficiencies and material weaknesses. Date: May 17, 2004 /s/ NICHOLAS H. PALMERINO ---------------------------------------- Nicholas H. Palmerino Treasurer EX-99.(906)(CERT) 4 dex99906cert.txt SECTION 906 CERTIFICATION Exhibit (b)(2) CDC Nvest Funds Trust II Section 906 Certification In connection with the report on Form N-CSR for the period ended March 31, 2004 for the Registrant (the "Report"), the undersigned each hereby certifies to the best of his knowledge, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as applicable; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. By: By: President & Chief Executive Officer Treasurer CDC Nvest Funds Trust II CDC Nvest Funds Trust II /s/ JOHN T. HAILER /s/ NICHOLAS H. PALMERINO - -------------------------------------- --------------------------------------- John T. Hailer Nicholas H. Palmerino Date: May 19, 2004 Date: May 17, 2004 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the CDC Nvest Funds Trust II and will be retained by the CDC Nvest Funds Trust II and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----