-----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, GR+kf8BGe45DagB1LujRqNAiEDT3gMwh+O93hFcukhgEUO2ikR8hPOFR/TzvJEwY nkOvyXhdeZHpJEdEuY4Urg== 0001193125-04-218354.txt : 20041222 0001193125-04-218354.hdr.sgml : 20041222 20041222151121 ACCESSION NUMBER: 0001193125-04-218354 CONFORMED SUBMISSION TYPE: N-CSR/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041222 DATE AS OF CHANGE: 20041222 EFFECTIVENESS DATE: 20041222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CDC NVEST FUNDS TRUST II CENTRAL INDEX KEY: 0000052136 IRS NUMBER: 041990692 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-00242 FILM NUMBER: 041220610 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON ST STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 8003997788 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: NVEST FUNDS TRUST II DATE OF NAME CHANGE: 20000202 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND FUNDS TRUST II DATE OF NAME CHANGE: 19940615 FORMER COMPANY: FORMER CONFORMED NAME: TNE FUNDS TRUST DATE OF NAME CHANGE: 19940615 N-CSR/A 1 dncsra.txt CDC NVEST FUNDS TRUST II - AMENDMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR/A CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-242 CDC Nvest Funds Trust II (Exact name of registrant as specified in charter) 399 Boylston Street, Boston, Massachusetts 02116 (Address of principal executive offices) (Zip code) Coleen Downs Dinneen, Esq. IXIS Asset Management Distributors, L.P. 399 Boylston Street Boston, Massachusetts 02116 (Name and address of agent for service) Registrant's telephone number, including area code: (617) 449-2810 Date of fiscal year end: September 30, 2003 Date of reporting period: September 30, 2004 This Form N-CSR/A is being filed SOLELY to amend and restate the Section 302 certification attached to the N-CSR filed on December 2, 2004 (Accession No. 0001193125-04-206443) in order to correct a clerical error within such certification. Item 1. Reports to Stockholders. The Registrant's annual reports transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 are as follows: - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Even though the Federal Reserve Bank began raising short-term interest rates early in the summer, bonds in general turned in a positive total return for the 12 months ended September 30, 2004. Longer-term and higher-yielding bonds performed particularly well, and mortgage-backed government agency securities did better than U.S. Treasuries. For the fiscal year ended September 30, 2004, the total return of Loomis Sayles Core Plus Bond Fund's Class A shares at net asset value was 5.28%, including $0.54 in dividends reinvested during the period. The fund's benchmark, the Lehman Aggregate Bond Index, returned 3.68% for the same period, while Morningstar's Intermediate-Term Bond category averaged a 3.29% return. At the end of September 2004, the fund's SEC yield was 3.69%. A period of strong overall performance Successful security selection and our emphasis on corporate issues were primary reasons for the fund's good performance. Corporate bonds generally benefited from expanding earnings and improved creditworthiness tied to stronger balance sheets. High-yield issues were the largest contributor to fund results, with investment grade issues not far behind. Non-dollar holdings also boosted returns, as the U.S. budget and trade deficits kept the dollar weak. U.S. Treasury and agency issues, as well as securities backed by mortgages or other assets, added lesser amounts to fund returns. Wireline and chemical issues led returns LCI International, a division of Qwest Communications, was among the wireline companies that performed well, as its profits and finances improved. Bonds issued by IMC Global, a major producer of agricultural chemicals, rose following the announcement of a proposed merger, and IMC benefited further from a worldwide increase in agricultural activity. The improving economy fed solid performance by bonds of cable, media, and automobile companies. These sectors had fallen sharply during the weak credit market period of two years ago. Other areas, including brokerage and retail companies, made smaller overall contributions. Negatives were few and minor The broadly positive tone of bond markets left few issues behind. The highest-quality securities - U.S. Treasuries, agencies, and asset-backed securities - were the weakest performers, but they were still positive. None of the fund's holdings showed a significant decline over this period, with only a handful of laggards. Goldman Sachs and Philip Morris were unchanged, while Dow Chemical recorded a modest decline. We have since sold Dow because its valuation appeared high. We are holding Philip Morris despite negative press regarding tobacco litigation. Prospect for rising interest rates warrants defensive strategy shifts With the economy still in recovery, further interest rate increases seem likely. For that reason, we took steps in recent months to reduce the portfolio's sensitivity to interest rate changes. We kept Treasury obligations underweighted compared to the benchmark because they are highly sensitive to changes in interest rates. Altogether, approximately 15% of the fund was in government obligations at the end of the period. Those assets could easily be redeployed into corporate and mortgage-backed securities as opportunities appear. Since prices of lower-quality, higher-yielding bonds are tied more closely to issuers' fortunes than to interest rates, our emphasis remains on corporate bonds, with a particular focus on lower-tier, investment-grade and better quality high-yield issues. In another defensive measure, we cut exposure to non-dollar-denominated holdings to around 6% of the portfolio, in part by reducing holdings in Australia. However, we are maintaining commitments to securities denominated in Canadian and Singapore dollars and the euro because, unless there are unforeseen reductions in the U.S. trade and budget deficits, we believe the U.S. dollar should stay weak. 1 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund - -------------------------------------------------------------------------------- Investment Results through September 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Loomis Sayles Core Plus Bond Fund Growth of $10,000 Investment in Class A Shares September 30, 1994 through September 30, 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) - ---------- --------- ---------- --------- --------- 9/30/1994 10,000 9,550 10000 10,000 10/31/1994 9,973 9,524 9991 9,977 11/30/1994 9,946 9,498 9969 9,961 12/31/1994 9,998 9,548 10038 10,043 1/31/1995 10,166 9,708 10236 10,256 2/28/1995 10,500 10,028 10480 10,552 3/31/1995 10,503 10,031 10544 10,638 4/30/1995 10,710 10,228 10691 10,817 5/31/1995 11,183 10,679 11105 11,327 6/30/1995 11,282 10,774 11186 11,429 7/31/1995 11,221 10,716 11162 11,379 8/31/1995 11,420 10,906 11296 11,562 9/30/1995 11,563 11,042 11406 11,699 10/31/1995 11,716 11,189 11554 11,851 11/30/1995 11,899 11,364 11728 12,078 12/31/1995 12,072 11,528 11892 12,277 1/31/1996 12,122 11,577 11971 12,356 2/29/1996 11,859 11,326 11763 12,063 3/31/1996 11,800 11,269 11681 11,960 4/30/1996 11,701 11,174 11616 11,861 5/31/1996 11,690 11,164 11592 11,840 6/30/1996 11,861 11,327 11748 12,014 7/31/1996 11,891 11,356 11780 12,037 8/31/1996 11,891 11,356 11760 12,000 9/30/1996 12,167 11,619 11965 12,254 10/31/1996 12,476 11,914 12230 12,589 11/30/1996 12,776 12,201 12440 12,858 12/31/1996 12,628 12,060 12324 12,680 1/31/1997 12,699 12,127 12362 12,698 2/28/1997 12,779 12,204 12392 12,751 3/31/1997 12,588 12,022 12255 12,553 4/30/1997 12,727 12,154 12439 12,743 5/31/1997 12,899 12,318 12556 12,887 6/30/1997 13,126 12,535 12705 13,070 7/31/1997 13,653 13,039 13048 13,548 8/31/1997 13,421 12,817 12936 13,348 9/30/1997 13,688 13,072 13127 13,582 10/31/1997 13,818 13,196 13318 13,754 11/30/1997 13,882 13,257 13379 13,832 12/31/1997 14,025 13,394 13514 13,978 1/31/1998 14,211 13,572 13687 14,144 2/28/1998 14,257 13,615 13677 14,139 3/31/1998 14,345 13,700 13724 14,192 4/30/1998 14,411 13,763 13796 14,281 5/31/1998 14,558 13,903 13926 14,451 6/30/1998 14,612 13,955 14044 14,558 7/31/1998 14,574 13,918 14074 14,544 8/31/1998 14,430 13,780 14303 14,612 9/30/1998 14,987 14,312 14638 15,085 10/31/1998 14,829 14,162 14561 14,853 11/30/1998 15,125 14,444 14644 15,132 12/31/1998 15,149 14,467 14688 15,176 1/31/1999 15,312 14,623 14792 15,326 2/28/1999 15,003 14,328 14534 14,963 3/31/1999 15,210 14,526 14615 15,069 4/30/1999 15,330 14,640 14661 15,113 5/31/1999 14,998 14,323 14533 14,911 6/30/1999 14,902 14,231 14486 14,833 7/31/1999 14,844 14,176 14425 14,751 8/31/1999 14,784 14,119 14417 14,715 9/30/1999 15,034 14,357 14585 14,875 10/31/1999 15,069 14,390 14639 14,943 11/30/1999 15,091 14,412 14637 14,959 12/31/1999 15,099 14,419 14567 14,880 1/31/2000 15,035 14,359 14519 14,827 2/29/2000 15,205 14,521 14695 14,965 3/31/2000 15,414 14,720 14888 15,092 4/30/2000 15,130 14,449 14846 14,960 5/31/2000 15,018 14,342 14839 14,904 6/30/2000 15,473 14,777 15148 15,278 7/31/2000 15,564 14,864 15285 15,463 8/31/2000 15,765 15,056 15507 15,665 9/30/2000 15,789 15,078 15604 15,747 10/31/2000 15,699 14,992 15707 15,763 11/30/2000 15,848 15,135 15964 15,967 12/31/2000 16,216 15,486 16260 16,277 1/31/2001 16,618 15,870 16526 16,722 2/28/2001 16,782 16,027 16670 16,868 3/31/2001 16,802 16,046 16754 16,972 4/30/2001 16,707 15,955 16684 16,911 5/31/2001 16,813 16,057 16785 17,066 6/30/2001 16,819 16,062 16848 17,153 7/31/2001 17,244 16,468 17225 17,601 8/31/2001 17,435 16,651 17422 17,837 9/30/2001 17,362 16,581 17625 17,810 10/31/2001 17,704 16,908 17994 18,252 11/30/2001 17,587 16,796 17746 18,094 12/31/2001 17,390 16,608 17633 17,970 1/31/2002 17,350 16,570 17776 18,122 2/28/2002 17,283 16,505 17948 18,258 3/31/2002 17,094 16,325 17650 17,921 4/30/2002 17,255 16,479 17992 18,171 5/31/2002 17,400 16,617 18145 18,411 6/30/2002 16,981 16,217 18302 18,441 7/31/2002 16,784 16,028 18523 18,432 8/31/2002 17,166 16,394 18836 18,909 9/30/2002 17,223 16,448 19141 19,268 10/31/2002 17,127 16,356 19053 19,045 11/30/2002 17,452 16,667 19048 19,292 12/31/2002 17,885 17,080 19442 19,861 1/31/2003 17,985 17,176 19458 19,925 2/28/2003 18,244 17,423 19728 20,324 3/31/2003 18,297 17,473 19712 20,338 4/30/2003 18,571 17,736 19875 20,715 5/31/2003 18,941 18,088 20246 21,368 6/30/2003 18,971 18,117 20205 21,316 7/31/2003 18,320 17,496 19526 20,407 8/31/2003 18,496 17,664 19656 20,566 9/30/2003 19,029 18,173 20176 21,285 10/31/2003 18,981 18,127 19988 21,058 11/30/2003 19,097 18,238 20036 21,155 12/31/2003 19,407 18,533 20240 21,391 1/31/2004 19,573 18,693 20403 21,607 2/29/2004 19,724 18,837 20623 21,878 3/31/2004 19,872 18,978 20778 22,090 4/30/2004 19,365 18,494 20237 21,394 5/31/2004 19,195 18,331 20156 21,244 6/30/2004 19,312 18,443 20270 21,333 7/31/2004 19,530 18,651 20471 21,596 8/31/2004 19,921 19,024 20862 22,106 9/30/2004 20,028 19,135 20918 22,230 Average Annual Total Returns -- September 30, 2004 - --------------------------------------------------------------------------------
Since 1 Year/7/ 5 Years/7/ 10 Years/7/ Inception/7/ --------- ---------- ----------- ------------ Class A (Inception 11/7/73) Net Asset Value/1/ 5.28% 5.91% 7.19% -- With Maximum Sales Charge/2/ 0.52 4.94 6.70 -- Class B (Inception 9/13/93) Net Asset Value/1/ 4.55 5.13 6.40 -- With CDSC/5/ -0.45 4.80 6.40 -- Class C (Inception 12/30/94) Net Asset Value/1/ 4.55 5.13 -- 6.45% With CDSC5 3.55 5.13 -- 6.45 Class Y (Inception 12/30/94) Net Asset Value/1/ 5.50 6.35 -- 7.69
- --------------------------------------------------------------------------------
Since Class C & Y Comparative Performance 1 Year 5 Years 10 Years Inception/8/ - ----------------------- ------ ------- -------- ------------ Lehman Aggregate Bond Index/3/ 3.68% 7.48% 7.66% 7.82% Lehman U.S. Credit Index/4/ 4.44 8.37 8.32 8.49 Morningstar Int. Term Bond Fund Avg./6/ 3.29 6.59 6.82 6.96
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 September 30, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Credit Quality - -------------------------------------------------------------------------------- [CHART] Pie chart Aaa 46.3% Aa 0.6% A 4.9% Baa 23.5% Ba 16.3% B 4.0% Caa 1.0% Short-Term & Other 3.4% Credit quality is based on bond ratings from Moody's Investor Services, Inc. - -------------------------------------------------------------------------------- Effective Maturity - -------------------------------------------------------------------------------- [CHART] Pie chart 1 year or less 3.4% 1-5 years 53.2% 5-10 years 32.4% 10+ years 11.0% Average Effective Maturity: 6.3 years - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. Effective 2/1/04, a 1% front end sales charge was removed from Class C shares. /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, U.S. investment-grade corporate debt, and foreign debt that meets specific maturity, liquidity and quality requirements. /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%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /6/ Morningstar Intermediate Term Bond Fund Average is the average performance without sales charges of funds with similar investment objectives, as calculated by Morningstar, Inc. /7/ Fund performance has been increased by expense waivers, 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 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 - -------------------------------------------------------------------------------- Loomis Sayles Government Securities Fund provided a total return of 2.77% during the fiscal year ended September 30, 2004, based on the net asset value of Class A shares and $0.44 in dividends reinvested during the period. The fund's benchmark, the Lehman U.S. Long Government Index, outperformed the fund for the period, returning 5.06%, while the fund's Morningstar category, the Long Government Average, returned 2.75%. The fund's 30-day SEC yield was 2.35% at the end of September, 2004. The fund underperformed its benchmark primarily because of its relatively short duration during the period. Duration is a measure of the fund's sensitivity to changing bond prices; a shorter duration normally shelters net assets from price declines when interest rates rise. However, as the Federal Reserve Board's three rate hikes raised the federal funds rate (the only rate the Fed directly controls) from 1.00% to 1.75%, long-term interest rates actually fell, lifting prices of long-term bonds. The result of rising short-term rates and falling long rates was a flattening of the yield curve, as the difference between short- and long-term interest rates narrowed. Long-term bonds outperformed shorter issues. The longer the bond, the better the results in this 12-month period Since this fund's investment universe is composed of bonds issued or guaranteed by the U.S. government or its agencies, selecting securities is a matter of strategy. Within this universe, we seek a high level of current income consistent with safety of principal. The primary risks to principal faced by a fund of this high quality are inflation and market risks - declines in bond prices that occur when interest rates rise. The best performers in the fund's universe during most of the year were long-term U.S. Treasury securities and Treasury Inflation-Protected Securities, called TIPS. TIPS are Treasury securities whose coupon payments are adjusted for inflation. Of the securities in the fund's portfolio, the best results came from Treasury securities and TIPS with long maturities - dates ranging from 2029 to 2033. TIPS also performed well as demand for these issues was heightened by inflation expectations. The fund's weakest performers during the reporting period were Treasuries and government agency obligations with maturities in the one- to two-year range. The lower-coupon, 30-year, mortgage-backed securities we selected were attractive because of their valuations and long duration. As falling interest rates on home mortgages triggered concerns about refinancing, mortgage-backed securities in general lagged U.S. Treasuries. However, the securities we selected offer a yield advantage over Treasuries - and are deemed to be riskier - - because they are backed by government agencies rather than the U.S. government itself. We also purchased and sold TIPS at intervals during the year as their valuations shifted. Outlook for rising interest rates across the board The yield curve flattened considerably during the reporting period, and typically when this occurs, interest rates rise across the board. However, this past year the increase was primarily in the short- to intermediate- area of the yield curve. In light of this, and our forecast for the Federal Reserve to continue to raise the federal funds rate, we will look for an opportunity to further reduce the fund's duration and possibly shift to what is known as a "barbell" configuration. This is a strategy in which portfolio maturities are concentrated in both the long and the short end of the spectrum, allowing us to reach for higher income at one end, and balance it with some measure of price stability at the other. We may also add to the fund's mortgage holdings, especially if volatility remains moderate and the Fed continues its "measured" path of interest-rate increases. 3 - -------------------------------------------------------------------------------- Loomis Sayles Government Securities Fund - -------------------------------------------------------------------------------- Investment Results through September 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Loomis Sayles Government Securities Fund Growth of $10,000 Investment in Class A Shares September 30, 1994 through September 30, 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) - ---------- --------- ---------- ---------- --------- 9/30/1994 10,000 9,550 10,000 10000 10/31/1994 9,999 9,549 9,992 9963 11/30/1994 9,941 9,494 9,974 10026 12/31/1994 9,965 9,516 10,035 10179 1/31/1995 10,119 9,664 10,222 10443 2/28/1995 10,351 9,885 10,442 10742 3/31/1995 10,418 9,950 10,507 10835 4/30/1995 10,526 10,052 10,644 11027 5/31/1995 11,101 10,602 11,074 11877 6/30/1995 11,170 10,668 11,159 12016 7/31/1995 11,062 10,564 11,118 11821 8/31/1995 11,181 10,678 11,248 12086 9/30/1995 11,321 10,812 11,357 12311 10/31/1995 11,534 11,015 11,530 12654 11/30/1995 11,759 11,230 11,709 12978 12/31/1995 11,961 11,423 11,875 13325 1/31/1996 12,008 11,467 11,948 13321 2/29/1996 11,714 11,186 11,705 12675 3/31/1996 11,582 11,061 11,607 12425 4/30/1996 11,492 10,975 11,533 12216 5/31/1996 11,432 10,918 11,514 12152 6/30/1996 11,550 11,030 11,662 12414 7/31/1996 11,571 11,050 11,691 12420 8/31/1996 11,497 10,979 11,665 12263 9/30/1996 11,699 11,173 11,859 12605 10/31/1996 11,975 11,436 12,119 13101 11/30/1996 12,221 11,671 12,330 13541 12/31/1996 12,056 11,513 12,204 13213 1/31/1997 12,070 11,527 12,218 13119 2/28/1997 12,077 11,534 12,235 13126 3/31/1997 11,916 11,379 12,105 12791 4/30/1997 12,062 11,519 12,280 13102 5/31/1997 12,165 11,617 12,386 13250 6/30/1997 12,335 11,780 12,525 13507 7/31/1997 12,853 12,275 12,880 14301 8/31/1997 12,564 11,998 12,753 13906 9/30/1997 12,793 12,217 12,945 14284 10/31/1997 13,045 12,458 13,169 14764 11/30/1997 13,138 12,547 13,236 14962 12/31/1997 13,301 12,703 13,375 15212 1/31/1998 13,489 12,882 13,575 15517 2/28/1998 13,426 12,821 13,538 15408 3/31/1998 13,416 12,812 13,576 15441 4/30/1998 13,456 12,851 13,637 15499 5/31/1998 13,626 13,013 13,777 15795 6/30/1998 13,832 13,209 13,934 16162 7/31/1998 13,805 13,184 13,956 16092 8/31/1998 14,231 13,590 14,319 16804 9/30/1998 14,622 13,964 14,705 17408 10/31/1998 14,439 13,789 14,655 17133 11/30/1998 14,520 13,867 14,660 17283 12/31/1998 14,500 13,847 14,692 17251 1/31/1999 14,640 13,982 14,778 17409 2/28/1999 14,077 13,443 14,426 16570 3/31/1999 14,110 13,476 14,483 16523 4/30/1999 14,157 13,520 14,516 16542 5/31/1999 13,967 13,339 14,388 16288 6/30/1999 13,804 13,183 14,359 16110 7/31/1999 13,702 13,085 14,338 16023 8/31/1999 13,599 12,987 14,338 15966 9/30/1999 13,776 13,156 14,454 16078 10/31/1999 13,766 13,147 14,478 16088 11/30/1999 13,706 13,089 14,458 15983 12/31/1999 13,567 12,957 14,364 15745 1/31/2000 13,581 12,970 14,384 15960 2/29/2000 13,820 13,198 14,589 16427 3/31/2000 14,124 13,488 14,845 16960 4/30/2000 14,009 13,379 14,804 16819 5/31/2000 13,960 13,332 14,813 16749 6/30/2000 14,203 13,564 15,078 17127 7/31/2000 14,337 13,692 15,224 17418 8/31/2000 14,588 13,931 15,449 17822 9/30/2000 14,531 13,877 15,493 17630 10/31/2000 14,663 14,003 15,641 17911 11/30/2000 14,999 14,324 15,948 18473 12/31/2000 15,318 14,629 16,266 18940 1/31/2001 15,422 14,728 16,430 18990 2/28/2001 15,618 14,915 16,617 19301 3/31/2001 15,629 14,926 16,675 19203 4/30/2001 15,404 14,711 16,505 18692 5/31/2001 15,457 14,761 16,559 18715 6/30/2001 15,483 14,786 16,636 18867 7/31/2001 15,944 15,227 17,035 19568 8/31/2001 16,121 15,396 17,247 19983 9/30/2001 16,337 15,602 17,547 20137 10/31/2001 16,896 16,136 18,000 21160 11/30/2001 16,316 15,582 17,596 20143 12/31/2001 16,075 15,352 17,443 19762 1/31/2002 16,232 15,502 17,556 20006 2/28/2002 16,429 15,690 17,718 20243 3/31/2002 15,969 15,250 17,332 19433 4/30/2002 16,410 15,671 17,745 20175 5/31/2002 16,523 15,779 17,852 20240 6/30/2002 16,767 16,013 18,101 20611 7/31/2002 17,166 16,394 18,499 21249 8/31/2002 17,651 16,856 18,865 22190 9/30/2002 18,113 17,298 19,308 23103 10/31/2002 17,856 17,052 19,153 22438 11/30/2002 17,668 16,873 18,988 22199 12/31/2002 18,220 17,400 19,448 23120 1/31/2003 18,178 17,360 19,399 23041 2/28/2003 18,592 17,755 19,712 23750 3/31/2003 18,428 17,599 19,656 23463 4/30/2003 18,515 17,682 19,747 23703 5/31/2003 19,208 18,343 20,259 25054 6/30/2003 19,000 18,145 20,153 24659 7/31/2003 17,750 16,951 19,320 22399 8/31/2003 17,963 17,155 19,428 22791 9/30/2003 18,712 17,870 19,993 23997 10/31/2003 18,263 17,441 19,708 23327 11/30/2003 18,321 17,497 19,731 23435 12/31/2003 18,488 17,656 19,906 23723 1/31/2004 18,684 17,843 20,071 24142 2/29/2004 18,925 18,073 20,311 24626 3/31/2004 19,092 18,232 20,490 24995 4/30/2004 18,162 17,345 19,873 23597 5/31/2004 18,258 17,436 19,800 23469 6/30/2004 18,380 17,553 19,880 23692 7/31/2004 18,614 17,776 20,065 24102 8/31/2004 19,157 18,295 20,456 25003 9/30/2004 19,230 18,367 20,498 25212 Average Annual Total Returns -- September 30, 2004 - -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years ------ ------- -------- Class A (Inception 9/16/85) Net Asset Value/1/ 2.77% 6.90% 6.76% With Maximum Sales Charge/2/ -1.85 5.92 6.27 Class B (Inception 9/23/93) Net Asset Value/1/ 1.92 6.10 5.96 With CDSC/6/ -3.02 5.79 5.96 Class Y (Inception 3/31/94) Net Asset Value/1/ 2.52 7.14 7.01 - -------------------------------------------------------------------------------- Comparative Performance 1 Year 5 Years 10 Years - ----------------------- ------ ------- -------- Lehman U.S. Government Bond Index/3/ 2.53% 7.24% 7.44% Lehman U.S. Long Government Bond Index/4/ 5.06 9.41 9.69 Morningstar Long Government Fund Avg./5/ 2.75 8.47 8.22 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 September 30, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Portfolio Mix - -------------------------------------------------------------------------------- [CHART] Pie chart Treasuries 82.4% Mortgage-Backed 15.6% Government Agencies 1.0% Short Term & Other 1.0% - -------------------------------------------------------------------------------- Effective Maturity - -------------------------------------------------------------------------------- [CHART] Pie chart 1 year or less 7.2% 1-5 years 4.1% 5-10 years 17.5% 10+ years 71.2% Average Effective Maturity: 12.2 years - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. /2/ Includes the maximum sales charge of 4.50%. /3/ Lehman U.S. Government Bond Index is an unmanaged index of U.S. Treasury and U.S. Government Agency securities. /4/ Lehman U.S. Long Government Bond Index is an unmanaged index of U.S. Treasury and U.S. government agency securities with a maturity of 10 years or more. /5/ Morningstar Long Government Fund Average is the average performance without sales charge of funds with similar investment objectives, as calculated by Morningstar, 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%. 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 - -------------------------------------------------------------------------------- High-yield bonds extended their run of favorable returns over the past 12 months, but gains were more modest than in previous years. Emerging market issues gained thanks to improving conditions in many developing nations, and selected convertible securities also moved higher. For the fiscal year ended September 30, 2004, the total return on Loomis Sayles High Income Fund's Class A shares was 11.14% at net asset value, including $0.33 in reinvested dividends. The fund's benchmark, the Lehman High Yield Composite Index, returned 12.55% for the same period, while Morningstar's High Yield Bond category averaged 11.15%. As of September 30, 2004, the fund's SEC yield was 5.54%. Despite the lag, emerging markets and convertibles contributed The fund lagged its benchmark because we had reduced the fund's allocation to high-yielding securities in order to increase exposure to non-dollar-denominated debt and other securities. While performance for these two sectors was positive during the period, it was not as strong as higher-yielding securities. However, the weak U.S. dollar also heightened the value of bonds denominated in stronger currencies. The fund's commitment to emerging markets - as well as stable global economic conditions and healthy economies in several countries - was a positive. Convertible bonds, which can be converted into common stock of the issuing company under specified conditions, were also productive for the fund. Technology and utility companies rebounded after a period of poor results, and successful selection among certain high-yield issues aided returns. Basic industries and energy issues added to returns Companies in basic industries benefited from the expansion of the U.S. economy and continued global growth. Worldwide demand for chemicals, paper and metals has increased, creating higher prices for industrial commodities and better earnings for materials producers. Dana Corporation, a manufacturer of automobile and truck parts, used proceeds from the sale of a division to pay down debt and strengthen its balance sheet. Increased vehicle production and aggressive cost cutting boosted the company's credit standing. Fast-rising energy prices lifted the bonds of Coastal Corp., a subsidiary of energy conglomerate El Paso Corporation. Investors also rewarded Coastal's plan to address problems within its exploration and production division. Airlines and oil services held back returns The U.S airline industry has been buffeted by the rising cost of jet fuel, weak fare structures and costly labor agreements. Delta Airlines has seen its once-solid financial position erode significantly; debt levels are high and cash generation has lagged. With Delta facing a risk of bankruptcy, we eliminated the fund's position. Bonds of Trico Marine, which services oil company rigs in the Gulf of Mexico and the North Sea, fell on concerns about the company's ability to weather its financial difficulties. We eliminated the position. Forecast for strength in high-yield and non-dollar denominated issues Economic conditions continue to improve for high-yield issuers and investors still have a healthy appetite for yield. Demand also appears sufficient to absorb new issues coming to market. Consequently, we believe lower-rated issues will perform satisfactorily in upcoming quarters, although security selection will be key in a market that has risen substantially in the last few years. With no reason to believe the dollar will strengthen, we intend to seek opportunities to increase exposure to non-dollar-denominated issues, including those in emerging markets. In sector terms, we expect to cut exposure to consumer cyclical areas, as U.S. consumers feel the pinch of high energy costs and sluggish job creation. 5 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund - -------------------------------------------------------------------------------- Investment Results through September 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Loomis Sayles High Income Fund Growth of $10,000 Investment in Class A Shares September 30, 1994 through September 30, 2004 [CHART] Line chart Class A Lehman @ Maximum High Yield Month Net Asset Sales Composite End Value (1) Charge (2) Index - ---------- --------- ---------- ---------- 9/30/1994 10,000 9,550 10,000 10/31/1994 9,984 9,535 10,024 11/30/1994 9,826 9,384 9,897 12/31/1994 9,852 9,408 9,970 1/31/1995 9,924 9,477 10,105 2/28/1995 10,181 9,723 10,452 3/31/1995 10,247 9,786 10,564 4/30/1995 10,450 9,980 10,833 5/31/1995 10,643 10,164 11,137 6/30/1995 10,630 10,152 11,208 7/31/1995 10,813 10,327 11,349 8/31/1995 10,821 10,334 11,385 9/30/1995 10,876 10,387 11,525 10/31/1995 10,919 10,428 11,596 11/30/1995 10,939 10,447 11,698 12/31/1995 11,013 10,518 11,882 1/31/1996 11,215 10,710 12,091 2/29/1996 11,292 10,784 12,101 3/31/1996 11,271 10,764 12,092 4/30/1996 11,406 10,893 12,119 5/31/1996 11,529 11,011 12,192 6/30/1996 11,603 11,081 12,293 7/31/1996 11,716 11,189 12,350 8/31/1996 11,855 11,322 12,483 9/30/1996 12,220 11,670 12,784 10/31/1996 12,193 11,645 12,883 11/30/1996 12,445 11,885 13,139 12/31/1996 12,655 12,085 13,231 1/31/1997 12,665 12,095 13,352 2/28/1997 13,108 12,518 13,575 3/31/1997 12,934 12,352 13,379 4/30/1997 13,006 12,421 13,509 5/31/1997 13,438 12,834 13,809 6/30/1997 13,526 12,917 14,000 7/31/1997 13,895 13,270 14,385 8/31/1997 13,984 13,354 14,352 9/30/1997 14,400 13,752 14,637 10/31/1997 14,275 13,633 14,650 11/30/1997 14,466 13,815 14,790 12/31/1997 14,601 13,944 14,919 1/31/1998 14,820 14,153 15,188 2/28/1998 14,799 14,133 15,277 3/31/1998 14,952 14,279 15,420 4/30/1998 15,032 14,356 15,481 5/31/1998 15,008 14,333 15,535 6/30/1998 15,059 14,382 15,591 7/31/1998 15,037 14,360 15,679 8/31/1998 13,993 13,364 14,814 9/30/1998 13,860 13,237 14,881 10/31/1998 13,569 12,959 14,576 11/30/1998 14,544 13,889 15,181 12/31/1998 14,350 13,704 15,198 1/31/1999 14,673 14,013 15,424 2/28/1999 14,765 14,101 15,333 3/31/1999 15,005 14,329 15,479 4/30/1999 15,327 14,638 15,779 5/31/1999 14,952 14,279 15,565 6/30/1999 14,910 14,239 15,532 7/31/1999 14,850 14,182 15,594 8/31/1999 14,619 13,961 15,422 9/30/1999 14,524 13,870 15,311 10/31/1999 14,654 13,995 15,209 11/30/1999 14,751 14,087 15,387 12/31/1999 14,924 14,252 15,561 1/31/2000 14,758 14,094 15,494 2/29/2000 14,824 14,157 15,524 3/31/2000 14,377 13,730 15,198 4/30/2000 14,368 13,721 15,222 5/31/2000 13,967 13,339 15,066 6/30/2000 14,390 13,743 15,373 7/31/2000 14,475 13,824 15,490 8/31/2000 14,417 13,769 15,596 9/30/2000 14,119 13,484 15,460 10/31/2000 13,414 12,811 14,965 11/30/2000 12,300 11,746 14,372 12/31/2000 12,520 11,956 14,650 1/31/2001 13,973 13,345 15,747 2/28/2001 13,903 13,278 15,957 3/31/2001 13,193 12,599 15,581 4/30/2001 12,788 12,213 15,387 5/31/2001 12,822 12,245 15,664 6/30/2001 12,086 11,543 15,225 7/31/2001 12,325 11,770 15,449 8/31/2001 12,230 11,679 15,631 9/30/2001 11,117 10,617 14,581 10/31/2001 10,995 10,500 14,941 11/30/2001 11,351 10,840 15,486 12/31/2001 11,186 10,683 15,423 1/31/2002 11,255 10,749 15,530 2/28/2002 10,913 10,422 15,314 3/31/2002 11,207 10,703 15,682 4/30/2002 11,115 10,615 15,933 5/31/2002 10,953 10,460 15,845 6/30/2002 10,170 9,712 14,676 7/31/2002 9,484 9,057 14,035 8/31/2002 9,817 9,375 14,436 9/30/2002 9,453 9,027 14,246 10/31/2002 9,448 9,023 14,122 11/30/2002 10,076 9,623 14,996 12/31/2002 10,196 9,738 15,206 1/31/2003 10,412 9,944 15,712 2/28/2003 10,558 10,083 15,906 3/31/2003 10,831 10,343 16,364 4/30/2003 11,457 10,941 17,334 5/31/2003 11,657 11,133 17,514 6/30/2003 11,909 11,373 18,017 7/31/2003 11,672 11,147 17,819 8/31/2003 11,796 11,265 18,024 9/30/2003 12,183 11,634 18,517 10/31/2003 12,442 11,882 18,891 11/30/2003 12,702 12,131 19,177 12/31/2003 13,041 12,454 19,611 1/31/2004 13,243 12,647 19,986 2/29/2004 13,185 12,592 19,935 3/31/2004 13,260 12,664 20,071 4/30/2004 12,957 12,374 19,934 5/31/2004 12,621 12,053 19,597 6/30/2004 12,894 12,313 19,878 7/31/2004 12,998 12,413 20,148 8/31/2004 13,353 12,752 20,543 9/30/2004 13,537 12,923 20,841 Average Annual Total Returns -- September 30, 2004 - -------------------------------------------------------------------------------- Since 1 Year 5 Years 10 Years/6/ Inception/6/ ------ ------- ----------- ------------ Class A (Inception 2/22/84) Net Asset Value/1/ 11.14% -1.39% 3.07% -- With Maximum Sales Charge/2/ 6.12 -2.29 2.60 -- Class B (Inception 9/20/93) Net Asset Value/1/ 10.54 -2.09 2.35 -- With CDSC/4/ 5.54 -2.34 2.35 -- Class C (Inception 3/2/98) Net Asset Value/1/ 10.54 -2.09 -- -2.08% With CDSC/4/ 9.54 -2.09 -- -2.08 - --------------------------------------------------------------------------------
Since Class C Comparative Performance 1 Year 5 Years 10 Years Inception/7/ - ----------------------- ------ ------- -------- ------------ Lehman High Yield Composite Index/3/ 12.55% 6.36% 7.62% 4.74% Morningstar High Yield Bond Fund Avg./5/ 11.15 4.40 5.74 2.55
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 September 30, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Credit Quality - -------------------------------------------------------------------------------- [CHART] Pie chart Aaa 2.3% Baa 2.4% Ba 36.8% B 31.1% Caa 13.1% Ca 1.1% Not Rated* 9.8% Short Term & Other 3.4% Credit quality is based on bond ratings from Moody's Investor Services Inc. *Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles. - -------------------------------------------------------------------------------- Effective Maturity - -------------------------------------------------------------------------------- [CHART] Pie chart 1 year or less 2.7% 1-5 years 24.2% 5-10 years 38.3% 10+ years 34.8% Average Effective Maturity: 11.2 years - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. Effective 2/1/04, a 1% front end sales charge was removed from Class C shares. /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%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /5/ Morningstar High Yield Bond Fund Average is the average performance without sales charge of funds with similar investment objectives, as calculated by Morningstar, Inc. /6/ Fund performance has been increased by expense waivers, without which performance would have been lower. /7/ The since-inception 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 - -------------------------------------------------------------------------------- Loomis Sayles Limited Term Government and Agency Fund provided a total return of 1.87% during the fiscal year ended September 30, 2004, based on the net asset value of Class A shares and $0.42 in dividends reinvested. The fund's benchmark, the Lehman Intermediate Government Bond Index, had a slight edge over the fund for the period, returning 1.91%, while the average return on the fund's category, Morningstar's Short Government, was 1.15%. For the same period, the Lehman 1-5 Year Government Bond Index returned 1.46%. The fund's 30-day SEC yield was 2.51% at the end of September, 2004. Yield curve flattens, giving advantage to higher-yielding securities Between June and September of 2004, the Federal Reserve Board raised the federal funds rate (the only rate the Fed directly controls) from 1.00% to 1.75%, in a series of three highly publicized moves. Although yields on short-term Treasury bills rose along with the federal funds rate, the strength of the economy and the low inflation rate seemed to ease investor concerns about the future. As a result, long-term interest rates actually fell during the period. On the long-end of the yield curve, falling interest rates meant rising prices, while rising rates hurt prices in the short-term market. Even though long- and short-term interest rates converged during the period - flattening the yield curve - securities with more distant maturity dates continue to offer investors a yield advantage because longer timelines mean higher risk. Mortgage-backed securities also typically offer higher coupons than Treasury securities because they are regarded as higher risk. The fund was able to outperform its Morningstar category for the fiscal year because it had a slightly longer duration and relatively high income from the mortgage-backed and agency securities in the portfolio. Outlook for a stronger economy and moderate increases in interest rates We expect the Fed to continue to raise interest rates through the end of the calendar year, maintaining what has been described as a measured pace. However, we are less convinced than we were of the need for continued Fed tightening in 2005. We believe the Fed may pause once the federal funds rate reaches 2%. If data suggests that what Fed Chairman Alan Greenspan described as an economic "soft patch" is decisively past, yields could rise again. Given the fact that interest rates at the short end of the yield curve have risen, we believe the opportunities to extend duration to earn additional income currently outweigh our concerns. We plan to continue to look for opportunities in intermediate-term securities because we believe they will provide the best price return for the fund and its shareholders. Although they continue to account for a major portion of assets, we have reduced the fund's position in mortgage-backed securities. We believe they will perform well in a moderately rising interest-rate environment, but the sector as a whole no longer has the attractive valuations it had one year ago. 7 - -------------------------------------------------------------------------------- Loomis Sayles Limited Term Government and Agency Fund - -------------------------------------------------------------------------------- Investment Results through September 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Loomis Sayles Limited Term U.S. Government Fund Growth of $10,000 Investment in Class A Shares September 30, 1994 through September 30, 2004 [CHART] Line chart Class A Lehman @ Maximum Intermediate Lehman 1-5 Yr. Month Net Asset Sales Gov't Bond Gov't Bond End Value(1) Charge(2) Index(3) Index - ---------- --------- --------- ------------ -------------- 9/30/1994 10,000 9,700 10,000 10000 10/31/1994 10,000 9,700 10,002 10013 11/30/1994 9,966 9,667 9,957 9962 12/31/1994 9,973 9,674 9,990 9984 1/31/1995 10,107 9,803 10,153 10136 2/28/1995 10,250 9,943 10,348 10308 3/31/1995 10,279 9,970 10,405 10365 4/30/1995 10,381 10,069 10,526 10471 5/31/1995 10,671 10,351 10,823 10711 6/30/1995 10,718 10,397 10,892 10774 7/31/1995 10,713 10,391 10,897 10798 8/31/1995 10,807 10,483 10,987 10873 9/30/1995 10,874 10,548 11,060 10934 10/31/1995 11,024 10,693 11,182 11039 11/30/1995 11,156 10,822 11,318 11153 12/31/1995 11,274 10,935 11,430 11249 1/31/1996 11,336 10,996 11,526 11349 2/29/1996 11,200 10,864 11,404 11273 3/31/1996 11,129 10,795 11,352 11239 4/30/1996 11,100 10,767 11,319 11230 5/31/1996 11,062 10,730 11,313 11237 6/30/1996 11,149 10,814 11,428 11335 7/31/1996 11,173 10,838 11,464 11375 8/31/1996 11,169 10,834 11,477 11404 9/30/1996 11,311 10,971 11,625 11528 10/31/1996 11,493 11,148 11,816 11686 11/30/1996 11,636 11,287 11,958 11795 12/31/1996 11,543 11,197 11,894 11766 1/31/1997 11,592 11,244 11,940 11819 2/28/1997 11,607 11,259 11,959 11842 3/31/1997 11,546 11,200 11,891 11806 4/30/1997 11,648 11,299 12,025 11920 5/31/1997 11,719 11,367 12,119 12006 6/30/1997 11,832 11,477 12,222 12098 7/31/1997 12,027 11,666 12,448 12272 8/31/1997 12,006 11,646 12,400 12258 9/30/1997 12,131 11,767 12,535 12370 10/31/1997 12,267 11,899 12,681 12486 11/30/1997 12,288 11,919 12,709 12510 12/31/1997 12,381 12,010 12,812 12603 1/31/1998 12,561 12,184 12,980 12748 2/28/1998 12,532 12,156 12,966 12745 3/31/1998 12,511 12,135 13,006 12789 4/30/1998 12,559 12,183 13,068 12850 5/31/1998 12,641 12,262 13,158 12927 6/30/1998 12,733 12,351 13,247 13001 7/31/1998 12,750 12,367 13,298 13056 8/31/1998 12,954 12,565 13,549 13257 9/30/1998 13,324 12,925 13,865 13498 10/31/1998 13,195 12,799 13,888 13551 11/30/1998 13,154 12,760 13,846 13521 12/31/1998 13,182 12,786 13,900 13567 1/31/1999 13,253 12,855 13,962 13626 2/28/1999 13,101 12,708 13,770 13511 3/31/1999 13,162 12,767 13,861 13605 4/30/1999 13,200 12,804 13,899 13644 5/31/1999 13,101 12,708 13,814 13599 6/30/1999 13,016 12,626 13,834 13637 7/31/1999 12,954 12,565 13,836 13660 8/31/1999 12,949 12,560 13,855 13693 9/30/1999 13,096 12,703 13,974 13796 10/31/1999 13,121 12,727 14,002 13828 11/30/1999 13,134 12,740 14,011 13846 12/31/1999 13,092 12,699 13,967 13833 1/31/2000 13,036 12,645 13,920 13805 2/29/2000 13,152 12,757 14,036 13910 3/31/2000 13,315 12,916 14,196 14020 4/30/2000 13,272 12,874 14,190 14038 5/31/2000 13,279 12,881 14,228 14085 6/30/2000 13,469 13,065 14,454 14269 7/31/2000 13,536 13,130 14,550 14362 8/31/2000 13,678 13,268 14,713 14493 9/30/2000 13,784 13,370 14,842 14619 10/31/2000 13,833 13,418 14,943 14705 11/30/2000 14,021 13,601 15,163 14875 12/31/2000 14,185 13,760 15,430 15091 1/31/2001 14,366 13,935 15,635 15297 2/28/2001 14,473 14,039 15,779 15413 3/31/2001 14,565 14,128 15,893 15535 4/30/2001 14,535 14,099 15,843 15545 5/31/2001 14,608 14,170 15,909 15622 6/30/2001 14,618 14,180 15,960 15675 7/31/2001 14,890 14,444 16,257 15904 8/31/2001 14,989 14,539 16,402 16023 9/30/2001 15,224 14,767 16,752 16335 10/31/2001 15,452 14,989 17,013 16531 11/30/2001 15,251 14,794 16,810 16422 12/31/2001 15,158 14,704 16,729 16396 1/31/2002 15,239 14,781 16,801 16448 2/28/2002 15,389 14,928 16,940 16555 3/31/2002 15,168 14,713 16,685 16383 4/30/2002 15,445 14,982 16,997 16628 5/31/2002 15,550 15,084 17,116 16721 6/30/2002 15,706 15,235 17,329 16897 7/31/2002 15,931 15,453 17,656 17159 8/31/2002 16,087 15,604 17,858 17281 9/30/2002 16,231 15,745 18,165 17490 10/31/2002 16,267 15,779 18,152 17518 11/30/2002 16,192 15,707 18,009 17422 12/31/2002 16,395 15,903 18,341 17657 1/31/2003 16,387 15,895 18,301 17640 2/28/2003 16,529 16,033 18,507 17768 3/31/2003 16,518 16,022 18,511 17795 4/30/2003 16,546 16,049 18,563 17836 5/31/2003 16,647 16,147 18,855 17993 6/30/2003 16,617 16,118 18,824 18001 7/31/2003 16,271 15,783 18,367 17762 8/31/2003 16,325 15,835 18,400 17771 9/30/2003 16,596 16,098 18,799 18040 10/31/2003 16,479 15,985 18,615 17920 11/30/2003 16,524 16,028 18,616 17912 12/31/2003 16,640 16,140 18,761 18038 1/31/2004 16,711 16,210 18,863 18103 2/29/2004 16,840 16,335 19,042 18237 3/31/2004 16,904 16,397 19,175 18330 4/30/2004 16,600 16,102 18,746 18038 5/31/2004 16,545 16,048 18,686 17999 6/30/2004 16,608 16,109 18,734 18019 7/31/2004 16,701 16,200 18,869 18115 8/31/2004 16,911 16,404 19,150 18311 9/30/2004 16,903 16,399 19,157 18303 Average Annual Total Returns -- September 30, 2004 - -------------------------------------------------------------------------------- Since 1 Year 5 Years 10 Years Inception ------ ------- -------- --------- Class A (Inception 1/3/89) Net Asset Value/1/ 1.87% 5.24% 5.39% -- With Maximum Sales Charge/2/ -1.22 4.61 5.07 -- Class B (Inception 9/27/93) Net Asset Value/1/ 1.18 4.56 4.70 -- With CDSC/5/ -3.73 4.23 4.70 -- Class C (Inception 12/30/94) Net Asset Value/1/ 1.27 4.58 -- 4.79% With CDSC/5/ 0.29 4.58 -- 4.79 Class Y (Inception 3/31/94) Net Asset Value/1/ 2.07 5.64 5.77 -- - --------------------------------------------------------------------------------
Since Class C Comparative Performance 1 Year 5 Years 10 Years Inception/7/ - ----------------------- ------ ------- -------- ------------ Lehman Int. Gov't. Bond Index/3/ 1.91% 6.51% 6.72% 6.91% Lehman 1-5 Yr. Gov't Bond Index/4/ 1.46 5.82 6.23 6.41 Morningstar Short Gov't Fund Avg./6/ 1.15 5.00 5.49 5.63
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 September 30, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Portfolio Mix - -------------------------------------------------------------------------------- [CHART] Pie chart Mortgage-Backed 50.0% Treasuries 30.7% Government Agencies 13.8% Asset-Backed Securities 4.8% Short-Term & Other 0.7% - -------------------------------------------------------------------------------- Effective Maturity - -------------------------------------------------------------------------------- [CHART] Pie chart 1 year or less 8.4% 1-5 years 61.4% 5-10 years 30.2% Average Effective Maturity: 3.7 years - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. Effective 2/1/04, a 1% front end sales charge was removed from Class C shares. /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/ Lehman 1-5 Year Government Bond Index is an unmanaged, market-weighted index of bonds issued by the U.S. government and its agencies, with maturities between 1 and 5 years. /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%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /6/ Morningstar Short Government Fund Average is the average performance without sales charge of funds with similar investment objectives, as calculated by Morningstar, Inc. /7/ 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 - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund provided a total return of 4.88% based on the net asset value of Class A shares and $0.61 in dividends reinvested during the fiscal year ended September 30, 2004. For the same period, the fund's benchmark, Lehman Municipal Bond Index, returned 4.60%, while the average return on Morningstar's Muni Massachusetts category was 3.68%. The fund's emphasis on longer-term bonds and on some of the better performing sectors - healthcare and higher education - helped keep it slightly ahead of its nationally diversified benchmark, and allowed it to outperform its Massachusetts peer group. The fund's 30-day SEC yield at the end of September 2004 was 2.97%, equivalent to 4.82% adjusted for the combined maximum federal and Massachusetts income tax rates of 38.45%. Higher education and healthcare bonds performed well Demand for the higher yields found in the healthcare and higher education sectors was the driving force behind their positive price performance. Specific bonds that performed well include Massachusetts Health & Educational Facilities Authority for Nichols College, which received a boost when the school's bond rating was upgraded. The superior performance of Massachusetts Development Finance Agency for Mount Holyoke College was largely attributable to its longer maturity. We continue to hold both the Nichols and Mount Holyoke bonds. However, we sold bonds issued by Massachusetts Development Finance Agency for Concord Assabet Family Services. Concord Assabet has been in the portfolio for some time; we decided to take advantage of the price rise in these formerly distressed securities and eliminated the position. Relatively high yields from several of the fund's healthcare bonds also contributed to the fund's positive results, as did some of its longer-term bonds in the transportation sector. In general, higher education and healthcare remain the two most promising sectors in Massachusetts. Tax-backed bonds, housing, and one healthcare bond underperformed Sectors with the most negative impact on fund performance included state General Obligation bonds (GOs) and the leases and housing sectors. GOs are backed by receipts from taxpayers and, like the lease sector, they are generally of higher credit quality and offer lower yields. Demand for higher-quality, lower-yielding issues has been relatively weak, so price performance has been relatively anemic. The housing sector was weak as refinancings continued during the year, making the bonds less attractive. Specific bonds that performed poorly included Massachusetts Development Finance Agency for Alliance Health, which experienced operating difficulties. We sold the bonds. Massachusetts Industrial Finance Agency for Briscoe Housing Assisted Living bonds hurt the fund when they were called well ahead of the scheduled maturity date. Massachusetts Housing Finance Agency, Single-Family Housing bonds suffered with the sector as a whole. Short rates rose as long rates fell during the past 12 months Surprisingly, as the Federal Reserve Board raised the federal funds rate (the only interest rate it directly controls), yields on long-term bonds have actually fallen. Meanwhile, the economy has continued to grow with relatively low inflation, supporting lower yields on long bonds. Although we expect interest rates to continue to rise, we believe the Fed will be able to keep up its "measured" pace. However, even a gradual increase in rates is likely to have a negative impact on bond prices. Consequently, we have shortened the average maturity of the portfolio, trimming exposure to longer maturity bonds. Looking ahead, we believe the credit markets will stabilize as investors become more comfortable with the measured pace at which interest rates are expected to rise. We also believe the municipal markets will be less volatile than other markets in the gradually rising environment for interest rates that we anticipate. 9 - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund - -------------------------------------------------------------------------------- Investment Results through September 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Loomis Sayles Massachusetts Tax Free Income Fund Growth of $10,000 Investment in Class A Shares September 30, 1994 through September 30, 2004 [CHART] Line chart Class A Lehman @ Maximum Municipal Month Net Asset Sales Bond End Value (1) Charge (2) Index (3) - ---------- --------- ---------- --------- 9/30/1994 10,000 9,575 10,000 10/31/1994 9,759 9,344 9,822 11/30/1994 9,523 9,118 9,645 12/31/1994 9,795 9,379 9,857 1/31/1995 10,129 9,699 10,139 2/28/1995 10,459 10,015 10,434 3/31/1995 10,535 10,087 10,554 4/30/1995 10,552 10,103 10,566 5/31/1995 10,885 10,422 10,903 6/30/1995 10,716 10,261 10,808 7/31/1995 10,791 10,333 10,910 8/31/1995 10,920 10,456 11,049 9/30/1995 10,995 10,528 11,118 10/31/1995 11,180 10,705 11,280 11/30/1995 11,399 10,914 11,467 12/31/1995 11,543 11,052 11,577 1/31/1996 11,579 11,087 11,665 2/29/1996 11,464 10,976 11,586 3/31/1996 11,320 10,839 11,438 4/30/1996 11,288 10,808 11,406 5/31/1996 11,303 10,823 11,401 6/30/1996 11,411 10,926 11,526 7/31/1996 11,496 11,008 11,630 8/31/1996 11,491 11,002 11,627 9/30/1996 11,670 11,174 11,790 10/31/1996 11,792 11,291 11,923 11/30/1996 11,995 11,485 12,141 12/31/1996 11,916 11,410 12,090 1/31/1997 11,937 11,430 12,113 2/28/1997 12,052 11,540 12,224 3/31/1997 11,916 11,409 12,061 4/30/1997 12,012 11,502 12,162 5/31/1997 12,183 11,665 12,345 6/30/1997 12,310 11,787 12,477 7/31/1997 12,660 12,122 12,822 8/31/1997 12,543 12,010 12,702 9/30/1997 12,710 12,169 12,853 10/31/1997 12,772 12,229 12,936 11/30/1997 12,848 12,302 13,012 12/31/1997 13,026 12,472 13,202 1/31/1998 13,131 12,573 13,338 2/28/1998 13,113 12,556 13,342 3/31/1998 13,076 12,520 13,354 4/30/1998 13,030 12,477 13,293 5/31/1998 13,231 12,669 13,504 6/30/1998 13,277 12,713 13,557 7/31/1998 13,285 12,721 13,591 8/31/1998 13,497 12,923 13,801 9/30/1998 13,646 13,066 13,973 10/31/1998 13,590 13,013 13,973 11/30/1998 13,614 13,035 14,022 12/31/1998 13,665 13,085 14,057 1/31/1999 13,822 13,235 14,224 2/28/1999 13,759 13,174 14,162 3/31/1999 13,742 13,158 14,181 4/30/1999 13,784 13,198 14,217 5/31/1999 13,694 13,112 14,135 6/30/1999 13,471 12,898 13,931 7/31/1999 13,518 12,943 13,982 8/31/1999 13,326 12,760 13,870 9/30/1999 13,286 12,721 13,876 10/31/1999 13,100 12,543 13,725 11/30/1999 13,215 12,654 13,871 12/31/1999 13,100 12,544 13,768 1/31/2000 12,993 12,441 13,708 2/29/2000 13,154 12,595 13,867 3/31/2000 13,400 12,830 14,170 4/30/2000 13,340 12,773 14,086 5/31/2000 13,288 12,723 14,013 6/30/2000 13,555 12,979 14,384 7/31/2000 13,727 13,143 14,585 8/31/2000 13,898 13,308 14,809 9/30/2000 13,843 13,255 14,732 10/31/2000 13,955 13,362 14,893 11/30/2000 14,014 13,418 15,006 12/31/2000 14,312 13,704 15,377 1/31/2001 14,362 13,752 15,529 2/28/2001 14,412 13,800 15,578 3/31/2001 14,408 13,796 15,718 4/30/2001 14,260 13,654 15,547 5/31/2001 14,398 13,786 15,715 6/30/2001 14,500 13,884 15,820 7/31/2001 14,721 14,095 16,054 8/31/2001 14,997 14,360 16,319 9/30/2001 14,913 14,280 16,264 10/31/2001 15,052 14,412 16,458 11/30/2001 14,941 14,306 16,319 12/31/2001 14,772 14,144 16,165 1/31/2002 14,855 14,223 16,445 2/28/2002 15,023 14,384 16,643 3/31/2002 14,746 14,119 16,317 4/30/2002 15,016 14,378 16,636 5/31/2002 15,133 14,490 16,737 6/30/2002 15,309 14,658 16,914 7/31/2002 15,503 14,844 17,132 8/31/2002 15,692 15,025 17,338 9/30/2002 16,045 15,363 17,717 10/31/2002 15,753 15,084 17,424 11/30/2002 15,654 14,989 17,351 12/31/2002 15,967 15,288 17,717 1/31/2003 15,934 15,256 17,672 2/28/2003 16,184 15,496 17,919 3/31/2003 16,198 15,510 17,930 4/30/2003 16,302 15,609 18,049 5/31/2003 16,719 16,009 18,471 6/30/2003 16,644 15,937 18,393 7/31/2003 15,922 15,245 17,749 8/31/2003 16,025 15,344 17,881 9/30/2003 16,459 15,760 18,407 10/31/2003 16,433 15,735 18,315 11/30/2003 16,615 15,909 18,505 12/31/2003 16,770 16,057 18,659 1/31/2004 16,884 16,166 18,766 2/29/2004 17,132 16,404 19,048 3/31/2004 17,093 16,366 18,982 4/30/2004 16,633 15,926 18,532 5/31/2004 16,560 15,856 18,465 6/30/2004 16,580 15,875 18,532 7/31/2004 16,817 16,102 18,776 8/31/2004 17,146 16,418 19,152 9/30/2004 17,273 16,543 19,254 Average Annual Total Returns -- September 30, 2004 - -------------------------------------------------------------------------------- 1 Year 5 Years/5/ 10 Years/5/ ------ ---------- ----------- Class A (Inception 3/23/84) Net Asset Value/1/ 4.88% 5.39% 5.62% With Maximum Sales Charge/2/ 0.41 4.47 5.16 Class B (Inception 9/13/93) Net Asset Value/1/ 4.18 4.69 4.93 With CDSC/4/ -0.82 4.36 4.93 - -------------------------------------------------------------------------------- Comparative Performance 1 Year 5 Years 10 Years - ----------------------- ------ ------- -------- Lehman Municipal Bond Index/3/ 4.60% 6.77% 6.77% Morningstar Muni Massachusetts 3.68 5.84 5.70 Fund Avg./6/ - -------------------------------------------------------------------------------- Yields as of September 30, 2004 - -------------------------------------------------------------------------------- Class A Class B ------- ------- SEC 30-day yield/7/ 2.97% 2.34% Taxable equivalent yield/8/ 4.82 3.80 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 September 30, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Credit Quality - -------------------------------------------------------------------------------- [Chart] Pie chart Aaa 33.2% Aa 25.7% A 22.7% Baa 9.3% Not Rated* 6.2% Short-Term & Other 2.9% - -------------------------------------------------------------------------------- Credit quality is based on bond ratings from Moody's Investor Services, Inc. *Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles. Effective Maturity - -------------------------------------------------------------------------------- 1 year or less 2.3% 1-5 years 6.0% 5-10 years 71.5% 10+ years 20.2% Average effective maturity: 8.0 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 index of municipal bonds. /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%. /5/ Fund performance has been increased by expense waivers, without which performance would have been lower. /6/ Morningstar Muni Massachusetts Fund Average is the average performance without sales charge of funds with similar investment objectives, as calculated by Morningstar, 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 Treasury securities and high-quality corporate bonds during the past 12 months, as demand for their attractive, after-tax yields remained solid. Since interest rates in general were low by historical standards, higher-yielding municipal bonds were in especially strong demand. Loomis Sayles Municipal Income Fund provided a total return of 4.88%, based on the net asset value of Class A shares and $0.29 in dividends reinvested during the fiscal year ended September 30, 2004. This was slightly above both its benchmark, the Lehman Municipal Bond Index, which returned 4.60% for the period, and the average performance of the Morningstar Municipal National Long category, which returned 4.06%. The fund's 30-day SEC yield at the end of September 2004 was 3.07%, equivalent to 4.72% adjusted for the maximum federal income tax rate of 35.00%. Strongest performers were healthcare and resource recovery bonds The fund's portfolio included industrial development bonds (IDBs) and resource recovery bonds. IDBs are issued by municipalities for the benefit of local companies and backed by revenues from the corporations that benefit from the financing. Bonds that contributed most to the fund's performance included the University of Michigan for University Hospital, and Western Generation Agency, Oregon, for Wauna Cogeneration Project. Both of these experienced strong demand during the period. Houston Texas Water & Sewer System bonds also got a lift in price when the bonds were pre-refunded to their 2010 call date. This means that the bonds are now secured by U.S. government securities (the highest credit quality), with payment due in 2010, much earlier than their original maturity date of 2023. Tobacco settlement bonds were among weakest performers Bonds having the most negative performance included state appropriation-backed tobacco bonds, such as the fund's Golden State Tobacco Securitization Corporation, California Tobacco Settlement Enhanced Asset-Backed revenue bonds. Payments from these bonds are secured by income promised to the state of California through legal settlements from tobacco companies, as well as by an appropriation from the state in case tobacco revenues prove insufficient to service the debt. Despite this appropriation, these bonds were affected by negative press and we sold them to avoid price volatility. Massachusetts Housing Finance Agency, Single-Family Housing bonds also had a tough year, as refinancings increased the likelihood that the bonds would be called away, which reduced their attractiveness. We continue to hold these bonds because the housing sector tends to perform relatively well in a rising interest rate environment. However, litigation risks prompted us to eliminate the fund's position in Lehigh County, Pennsylvania, General Purpose Authority for Saint Luke's Hospital. Short rates rose as long rates fell during the past 12 months Surprisingly, as the Federal Reserve Board raised the federal funds rate (the only rate the Fed directly controls), yields on long-term bonds have actually fallen. Meanwhile, the economy has continued to grow with relatively low inflation, easing concerns about sharply rising rates and supporting lower yields on long bonds. Although we expect interest rates to continue to rise, we believe the Fed will be able to keep the pace "measured." However, even a gradual increase in rates is likely to have a negative impact on bond prices. Consequently, we have shortened the average maturity of the portfolio, trimming exposure to longer maturity bonds. Looking ahead, we believe the credit markets will stabilize as investors become more comfortable with the graduated pace at which interest rates are expected to rise. We also believe the municipal markets will be less volatile than other fixed-income markets. 11 - -------------------------------------------------------------------------------- Loomis Sayles Municipal Income Fund - -------------------------------------------------------------------------------- Investment Results through September 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Loomis Sayles Municipal Income Fund Growth of $10,000 Investment in Class A Shares September 30, 1994 through September 30, 2004 [CHART] Line chart Class A Lehman @ Maximum Municipal Month Net Asset Sales Bond End Value (1) Charge (2) Index (3) - ---------- --------- ---------- --------- 9/30/1994 10,000 9,550 10,000 10/31/1994 9,780 9,340 9,822 11/30/1994 9,489 9,062 9,645 12/31/1994 9,738 9,300 9,857 1/31/1995 10,078 9,624 10,139 2/28/1995 10,428 9,958 10,434 3/31/1995 10,562 10,087 10,554 4/30/1995 10,582 10,106 10,566 5/31/1995 10,878 10,388 10,903 6/30/1995 10,738 10,255 10,808 7/31/1995 10,832 10,344 10,910 8/31/1995 10,911 10,420 11,049 9/30/1995 10,990 10,496 11,118 10/31/1995 11,144 10,643 11,280 11/30/1995 11,329 10,819 11,467 12/31/1995 11,417 10,903 11,577 1/31/1996 11,507 10,989 11,665 2/29/1996 11,438 10,923 11,586 3/31/1996 11,307 10,798 11,438 4/30/1996 11,282 10,775 11,406 5/31/1996 11,273 10,766 11,401 6/30/1996 11,402 10,889 11,526 7/31/1996 11,485 10,968 11,630 8/31/1996 11,476 10,960 11,627 9/30/1996 11,669 11,144 11,790 10/31/1996 11,801 11,270 11,923 11/30/1996 11,980 11,441 12,141 12/31/1996 11,944 11,407 12,090 1/31/1997 11,956 11,418 12,113 2/28/1997 12,062 11,520 12,224 3/31/1997 11,909 11,373 12,061 4/30/1997 11,996 11,456 12,162 5/31/1997 12,132 11,586 12,345 6/30/1997 12,300 11,747 12,477 7/31/1997 12,632 12,064 12,822 8/31/1997 12,557 11,992 12,702 9/30/1997 12,662 12,092 12,853 10/31/1997 12,751 12,177 12,936 11/30/1997 12,790 12,215 13,012 12/31/1997 12,967 12,383 13,202 1/31/1998 13,128 12,537 13,338 2/28/1998 13,167 12,574 13,342 3/31/1998 13,187 12,593 13,354 4/30/1998 13,125 12,534 13,293 5/31/1998 13,266 12,669 13,504 6/30/1998 13,322 12,723 13,557 7/31/1998 13,345 12,744 13,591 8/31/1998 13,522 12,914 13,801 9/30/1998 13,632 13,018 13,973 10/31/1998 13,585 12,974 13,973 11/30/1998 13,643 13,029 14,022 12/31/1998 13,659 13,044 14,057 1/31/1999 13,793 13,172 14,224 2/28/1999 13,764 13,144 14,162 3/31/1999 13,769 13,150 14,181 4/30/1999 13,811 13,189 14,217 5/31/1999 13,762 13,143 14,135 6/30/1999 13,605 12,993 13,931 7/31/1999 13,646 13,032 13,982 8/31/1999 13,507 12,899 13,870 9/30/1999 13,512 12,904 13,876 10/31/1999 13,316 12,717 13,725 11/30/1999 13,442 12,837 13,871 12/31/1999 13,282 12,684 13,768 1/31/2000 13,211 12,617 13,708 2/29/2000 13,358 12,757 13,867 3/31/2000 13,564 12,953 14,170 4/30/2000 13,489 12,882 14,086 5/31/2000 13,451 12,846 14,013 6/30/2000 13,697 13,081 14,384 7/31/2000 13,849 13,226 14,585 8/31/2000 14,041 13,409 14,809 9/30/2000 14,003 13,373 14,732 10/31/2000 14,118 13,482 14,893 11/30/2000 14,214 13,574 15,006 12/31/2000 14,448 13,798 15,377 1/31/2001 14,549 13,894 15,529 2/28/2001 14,572 13,917 15,578 3/31/2001 14,692 14,031 15,718 4/30/2001 14,535 13,881 15,547 5/31/2001 14,673 14,013 15,715 6/30/2001 14,790 14,125 15,820 7/31/2001 15,049 14,372 16,054 8/31/2001 15,288 14,600 16,319 9/30/2001 15,025 14,349 16,264 10/31/2001 15,228 14,543 16,458 11/30/2001 15,064 14,386 16,319 12/31/2001 14,880 14,210 16,165 1/31/2002 15,124 14,443 16,445 2/28/2002 15,328 14,638 16,643 3/31/2002 15,077 14,398 16,317 4/30/2002 15,324 14,634 16,636 5/31/2002 15,402 14,709 16,737 6/30/2002 15,545 14,846 16,914 7/31/2002 15,645 14,941 17,132 8/31/2002 15,767 15,057 17,338 9/30/2002 16,019 15,298 17,717 10/31/2002 15,612 14,910 17,424 11/30/2002 15,587 14,886 17,351 12/31/2002 15,968 15,249 17,717 1/31/2003 15,768 15,059 17,672 2/28/2003 16,000 15,280 17,919 3/31/2003 15,992 15,272 17,930 4/30/2003 16,134 15,408 18,049 5/31/2003 16,536 15,792 18,471 6/30/2003 16,501 15,759 18,393 7/31/2003 15,785 15,075 17,749 8/31/2003 15,951 15,233 17,881 9/30/2003 16,428 15,689 18,407 10/31/2003 16,351 15,615 18,315 11/30/2003 16,561 15,816 18,505 12/31/2003 16,707 15,955 18,659 1/31/2004 16,809 16,053 18,766 2/29/2004 17,070 16,302 19,048 3/31/2004 17,058 16,290 18,982 4/30/2004 16,638 15,889 18,532 5/31/2004 16,601 15,854 18,465 6/30/2004 16,611 15,864 18,532 7/31/2004 16,826 16,069 18,776 8/31/2004 17,130 16,359 19,152 9/30/2004 17,226 16,443 19,254 Average Annual Total Returns -- September 30, 2004 - -------------------------------------------------------------------------------- 1 Year 5 Years 10 Years ------ ------- -------- Class A (Inception 5/9/77) Net Asset Value/1/ 4.88% 4.97% 5.59% With Maximum Sales Charge/2/ 0.15 4.01 5.10 Class B (Inception 9/13/93) Net Asset Value/1/ 4.24 4.22 4.82 With CDSC/4/ -0.76 3.88 4.82 - -------------------------------------------------------------------------------- Comparative Performance 1 Year 5 Years 10 Years - ----------------------- ------ ------- -------- Lehman Municipal Bond Index/3/ 4.60% 6.77% 6.77% Morningstar Muni National Long Fund Avg./5/ 4.06 5.76 5.84 Yields as of September 30, 2004 - -------------------------------------------------------------------------------- Class A Class B ------- ------- SEC 30-day yield/6/ 3.07% 2.47% Taxable equivalent yield/7/ 4.72 3.80 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 September 30, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Credit Quality - -------------------------------------------------------------------------------- [CHART] Pie chart Aaa 31.8% Aa 9.1% A 23.9% Baa 21.0% Not Rated* 12.1% Short Term & Other 2.1% - -------------------------------------------------------------------------------- Credit quality is based on bond ratings from Moody's Investor Services, Inc. *Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles. Effective Maturity - -------------------------------------------------------------------------------- [CHART] Pie chart 1 year or less 12.2% 1-5 years 15.9% 5-10 years 62.9% 10+ years 9.0% Average effective maturity: 7.2 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 index of municipal bonds. /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%. /5/ Morningstar Muni National Long Fund Average is the average performance without sales charge of funds with similar investment objectives, as calculated by Morningstar, 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 - -------------------------------------------------------------------------------- Robust returns from high-yielding U.S. and international bonds helped Loomis Sayles Strategic Income Fund deliver impressive results. The fund's total return was 15.21% for the fiscal year ended September 30, 2004, based on the net asset value of Class A shares and $0.86 in reinvested dividends. These results far outdistanced the fund's benchmark, the Lehman Aggregate Bond Index, which returned 3.68% for the period, and Morningstar's Multisector Bond category, which averaged 7.17%. The fund's SEC yield at the end of September was 4.27%. High-yield bonds and overseas holdings were performance drivers Solid earnings growth in an expanding economy and the search for better yields pushed prices of corporate bonds higher, including high-yield bonds. The improving economy also contributed to lower default rates and bolstered the credit standing of lower-rated, higher-yielding bonds. A weak U.S. dollar provided momentum for fund holdings denominated in stronger foreign currencies. Bonds denominated in Canadian dollars, which accounted for about 16% of the portfolio at the end of the period, were key contributors to performance. Record budget and trade deficits have been weakening the U.S. dollar since late 2003. Meanwhile, the Canadian dollar has appreciated significantly. Canada's economy continued to expand while the U.S. economy was going through what Federal Reserve Board Chairman Alan Greenspan described as a "soft patch." Rising prices for oil, an important export product, gave further impetus to Canada's currency. Energy, emerging market and wireline issues aided results Oil prices rose as global demand ran up against tight supplies. Record oil prices also rewarded the fund's commitment to emerging market securities, which represented about 10% of the portfolio. Bonds in Venezuela and Mexico, nations whose governments rely heavily on revenue from oil taxes, benefited from higher prices. Cerro Negro, a heavy oil project nearing completion in Venezuela, was recently placed under review for a possible upgrade by Moody's. Increased production and higher oil prices enabled Cerro Negro to reduce debt in 2004. Natural gas pipeline issues also gained, thanks to higher energy prices and consolidation within the industry. Philippine Long Distance Telephone and Colt Telecom were leaders in the wireline sector. Philippine Long Distance has enjoyed rapid expansion of subscriber rolls, while Colt reduced its debt burden by buying back some convertible issues that the fund held. Brazilian issues and Imc Global were outstanding performers Brazil's economy continues to rebound following the election of President Lula da Silva in 2002, and the Central Bank recently raised its growth outlook. The real, Brazil's currency, has appreciated dramatically against the dollar, boosting bonds of the Federal Republic of Brazil. At IMC Global, a major producer of agricultural chemicals, strong product demand and a firm pricing environment led to good financial results. We reduced this commitment during the period because of its high valuation. The Dominican Republic and airlines disappointed Despite pledges of timely interest payment, fears of default dragged down the bonds of the Dominican Republic. High debt, high labor costs and expensive fuel brought heavy losses to the U.S. airline industry, leaving it severely weakened financially. We sold Delta Airlines bonds near the end of the period, as the likelihood of bankruptcy grew. Positioned for higher rates We expect further interest-rate hikes by the Federal Reserve Board and have been emphasizing fixed-income sectors that are less vulnerable to rising rates. As a result, we continue to focus on corporate and high-yield bonds while downplaying Treasury and agency issues. We believe careful selection among lower-rated issues offers additional return potential, though not at the levels we have seen. We are also seeking attractive opportunities in selected overseas markets to increase exposure to their strong currencies. 13 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund - -------------------------------------------------------------------------------- Investment Results through September 30, 2004 - -------------------------------------------------------------------------------- Performance in Perspective The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Loomis Sayles Strategic Income Fund Growth of $10,000 Investment in Class A Shares May 1, 1995 (inception) through September 30, 2004 [Chart] Line Chart Class A Lehman Lehman @ Maximum Aggregate Aggregate 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 10,354 9,888 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 10,994 10,499 10593 10,630 3/31/1996 11,072 10,574 10519 10,564 4/30/1996 11,056 10,558 10460 10,521 5/31/1996 11,231 10,726 10438 10,506 6/30/1996 11,382 10,870 10579 10,647 7/31/1996 11,359 10,848 10608 10,677 8/31/1996 11,568 11,048 10590 10,674 9/30/1996 11,973 11,434 10774 10,869 10/31/1996 12,315 11,761 11013 11,095 11/30/1996 12,815 12,239 11202 11,292 12/31/1996 12,637 12,069 11098 11,201 1/31/1997 12,674 12,104 11132 11,249 2/28/1997 12,874 12,295 11159 11,289 3/31/1997 12,734 12,161 11036 11,157 4/30/1997 12,815 12,239 11201 11,326 5/31/1997 13,091 12,502 11307 11,446 6/30/1997 13,388 12,786 11441 11,585 7/31/1997 13,990 13,361 11749 11,902 8/31/1997 13,630 13,016 11649 11,804 9/30/1997 14,111 13,476 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 14,606 13,949 12358 12,517 4/30/1998 14,611 13,953 12423 12,581 5/31/1998 14,373 13,726 12541 12,672 6/30/1998 14,144 13,508 12647 12,755 7/31/1998 13,967 13,339 12674 12,786 8/31/1998 12,252 11,701 12880 12,785 9/30/1998 12,649 12,080 13182 13,088 10/31/1998 12,786 12,210 13112 13,034 11/30/1998 13,644 13,030 13186 13,164 12/31/1998 13,581 12,970 13226 13,194 1/31/1999 13,816 13,194 13320 13,282 2/28/1999 13,618 13,005 13088 13,071 3/31/1999 14,337 13,692 13160 13,171 4/30/1999 15,256 14,570 13202 13,249 5/31/1999 14,783 14,118 13086 13,115 6/30/1999 14,826 14,159 13045 13,092 7/31/1999 14,534 13,880 12989 13,039 8/31/1999 14,352 13,707 12983 13,024 9/30/1999 14,444 13,794 13133 13,165 10/31/1999 14,566 13,910 13182 13,220 11/30/1999 14,829 14,162 13181 13,242 12/31/1999 15,233 14,547 13117 13,216 1/31/2000 15,091 14,412 13074 13,172 2/29/2000 15,686 14,980 13232 13,339 3/31/2000 15,844 15,131 13407 13,495 4/30/2000 15,391 14,698 13368 13,452 5/31/2000 14,894 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 15,520 14,821 14051 14,123 10/31/2000 14,888 14,218 14144 14,180 11/30/2000 14,810 14,144 14376 14,371 12/31/2000 15,336 14,646 14642 14,646 1/31/2001 15,824 15,112 14882 14,933 2/28/2001 15,800 15,089 15011 15,058 3/31/2001 15,203 14,519 15087 15,109 4/30/2001 14,955 14,282 15024 15,042 5/31/2001 15,289 14,601 15115 15,150 6/30/2001 15,247 14,561 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 14,822 14,155 15872 15,798 10/31/2001 15,171 14,489 16204 16,116 11/30/2001 15,387 14,695 15980 15,927 12/31/2001 15,316 14,627 15879 15,832 1/31/2002 15,491 14,794 16007 15,965 2/28/2002 15,677 14,971 16162 16,114 3/31/2002 15,857 15,143 15894 15,881 4/30/2002 16,241 15,510 16202 16,184 5/31/2002 16,585 15,839 16339 16,306 6/30/2002 16,321 15,587 16481 16,365 7/31/2002 15,934 15,217 16680 16,504 8/31/2002 16,381 15,643 16961 16,808 9/30/2002 16,159 15,432 17236 17,049 10/31/2002 16,481 15,739 17157 16,990 11/30/2002 17,097 16,328 17153 17,036 12/31/2002 17,689 16,893 17507 17,389 1/31/2003 18,186 17,368 17522 17,436 2/28/2003 18,677 17,837 17765 17,684 3/31/2003 18,858 18,010 17751 17,701 4/30/2003 19,941 19,043 17897 17,910 5/31/2003 20,938 19,996 18231 18,252 6/30/2003 21,202 20,247 18195 18,248 7/31/2003 20,625 19,697 17583 17,661 8/31/2003 20,862 19,923 17700 17,787 9/30/2003 21,882 20,898 18168 18,262 10/31/2003 22,377 21,370 17999 18,131 11/30/2003 22,999 21,964 18042 18,194 12/31/2003 23,852 22,779 18226 18,401 1/31/2004 24,277 23,184 18372 18,560 2/29/2004 24,260 23,168 18571 18,743 3/31/2004 24,577 23,471 18710 18,892 4/30/2004 23,557 22,497 18223 18,409 5/31/2004 23,164 22,122 18150 18,316 6/30/2004 23,604 22,542 18253 18,432 7/31/2004 23,833 22,761 18434 18,628 8/31/2004 24,567 23,462 18786 18,997 9/30/2004 25,197 24,061 18837 19,071 Average Annual Total Returns -- September 30, 2004 - -------------------------------------------------------------------------------- Since 1 Year/7/ 5 Years/7/ Inception/7/ --------- ---------- ------------ Class A (Inception 5/1/95) Net Asset Value/1/ 15.21% 11.78% 10.31% With Maximum Sales Charge/2/ 10.05 10.76 9.77 Class B (Inception 5/1/95) Net Asset Value/1/ 14.27 10.93 9.47 With CDSC/5/ 9.27 10.67 9.47 Class C (Inception 5/1/95) Net Asset Value/1/ 14.27 10.94 9.45 With CDSC/5/ 13.27 10.94 9.45 Class Y (Inception 12/1/99) Net Asset Value/1/ 15.47 -- 11.95 - --------------------------------------------------------------------------------
Since Class A, Since B and C Class Y Comparative Performance 1 Year 5 Years Inception/8/ Inception/8/ - ----------------------- ------ ------- ------------ ------------ Lehman Aggregate Bond Index/3/ 3.68% 7.48% 7.02% 7.92% Lehman U.S. Universal Bond Index/4/ 4.43 7.69 7.16 8.03 Morningstar Multi-Sector Bond Fund Avg./6/ 7.17 6.73 6.65 5.98
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 prede-cessor fund. 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 September 30, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Credit Quality - -------------------------------------------------------------------------------- [CHART] Pie chart Aaa 21.4% Aa 8.8% A 0.4% Baa 4.1% Ba 11.9% B 22.8% Caa 8.6% Ca 1.4% Not Rated* 8.9% Short Term & Other 11.7% Credit quality is based on bond ratings from Moody's Investor Services, Inc. *Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles. - -------------------------------------------------------------------------------- Effective Maturity - -------------------------------------------------------------------------------- [CHART] Pie chart 1 year or less 10.1% 1-5 years 34.6% 5-10 years 19.2% 10+ years 36.1% Average Effective Maturity: 11.3 years - -------------------------------------------------------------------------------- Notes to Charts /1/ Does not include a sales charge. Effective 2/1/04, a 1% front end sales charge was removed from Class C shares. /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. 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, among other 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%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /6/ Morningstar Multi-Sector Bond Fund Average is the average performance without sales charge of funds with similar investment objectives, as calculated by Morningstar, Inc. /7/ Fund performance has been increased by expense waivers, 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 the funds are actively managed, there is no assurance that they will continue to invest in the securities or industries mentioned. For more complete information on any CDC Nvest Fund, contact your financial professional or call CDC Nvest Funds and ask for a free prospectus, which contains more complete information including charges and other ongoing expenses. Investors should consider a fund's objective, risks and expenses carefully before investing. This and other fund information can be found in the prospectus. Please read the prospectus carefully before investing. Proxy Voting Information A description of the funds' proxy voting policies and procedures is available without charge, upon request, by calling CDC Nvest Funds at 800-225-5478; on the funds' website at www.cdcnvestfunds.com; and on the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the funds' website and the SEC's website. Quarterly Portfolio Schedules Beginning next quarter, the funds will file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q will be available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. - -------------------------------------------------------------------------------- NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE - -------------------------------------------------------------------------------- 15 - -------------------------------------------------------------------------------- Understanding Your Funds' Expenses - -------------------------------------------------------------------------------- As a mutual fund shareholder, you incur different costs: transaction costs, including sales charges (loads) on purchases, redemption fees and certain exchange fees and ongoing costs, including management fees, distribution fees (12b-1 fees), and other fund expenses. In addition, each fund assesses a minimum balance fee of $20 on an annual basis for accounts that fall below the required minimum to establish an account. Certain exemptions may apply. These costs are described in more detail in the funds' prospectus. The examples below are intended to help you understand the ongoing costs of investing in the funds and help you compare these with the ongoing costs of investing in other mutual funds. The first line in the table of each Class of fund shares shows the actual account values and actual fund expenses you would have paid on a $1,000 investment in the fund from April 1, 2004 through September 30, 2004. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual fund returns and expenses. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example $8,600 account value divided by $1,000 = $8.60) and multiply the result by the number in the Expenses Paid During Period column as shown below for your Class. The second line in the table of each Class of fund shares provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown reflect ongoing costs only, and do not include any transaction costs. Therefore, the second line in the table of each fund is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. If transaction costs were included, total costs would be higher.
- ---------------------------------------------------------------------------------------------------- Beginning Account Ending Account Expenses Paid During Value Value Period* 4/1/04 9/30/04 4/1/04 - 9/30/04 - ---------------------------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund - ---------------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,008.20 $5.87 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.15 $5.91 - ---------------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,004.90 $9.62 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.40 $9.67 - ---------------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,004.90 $9.62 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.40 $9.67 - ---------------------------------------------------------------------------------------------------- Class Y - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,009.30 $4.57 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.45 $4.60 - ----------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.17%, 1.92%, 1.92% and 0.91% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 16 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------- Beginning Account Ending Account Expenses Paid During Value Value Period* 4/1/04 9/30/04 4/1/04 - 9/30/04 - ---------------------------------------------------------------------------------------------------- Loomis Sayles Government Securities Fund - ---------------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,007.30 $ 6.77 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.25 $ 6.81 - ---------------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,002.70 $10.51 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.50 $10.58 - ---------------------------------------------------------------------------------------------------- Class Y - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,006.20 $ 7.82 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,017.20 $ 7.87 - ----------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.35%, 2.10%, and 1.56% for Class A, B, and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period).
- ---------------------------------------------------------------------------------------------------- Beginning Account Ending Account Expenses Paid During Value Value Period* 4/1/04 9/30/04 4/1/04 - 9/30/04 - ---------------------------------------------------------------------------------------------------- Loomis Sayles High Income Fund - ---------------------------------------------------------------------------------------------------- Class A - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,021.00 $ 8.54 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,016.55 $ 8.52 - ---------------------------------------------------------------------------------------------------- Class B - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,019.30 $12.37 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.75 $12.33 - ---------------------------------------------------------------------------------------------------- Class C - ---------------------------------------------------------------------------------------------------- Actual $1,000 $1,019.30 $12.37 - ---------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,012.75 $12.33 - ----------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.69%, 2.45%, and 2.45% for Class A, B, and C, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 17 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------- Beginning Account Ending Account Expenses Paid During Value Value Period* 4/1/04 9/30/04 4/1/04 - 9/30/04 - --------------------------------------------------------------------------------------------------------- Loomis Sayles Limited Term Govt and Agcy Fund - --------------------------------------------------------------------------------------------------------- Class A - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,000.10 $ 6.55 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.45 $ 6.61 - --------------------------------------------------------------------------------------------------------- Class B - --------------------------------------------------------------------------------------------------------- Actual $1,000 $ 996.60 $10.03 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.95 $10.13 - --------------------------------------------------------------------------------------------------------- Class C - --------------------------------------------------------------------------------------------------------- Actual $1,000 $ 996.60 $10.03 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.95 $10.13 - --------------------------------------------------------------------------------------------------------- Class Y - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,000.60 $ 5.85 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.15 $ 5.91 - ---------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.31%, 2.01%, 2.01% and 1.17% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period).
- --------------------------------------------------------------------------------------------------------- Beginning Account Ending Account Expenses Paid During Value Value Period* 4/1/04 9/30/04 4/1/04 - 9/30/04 - --------------------------------------------------------------------------------------------------------- Loomis Sayles MA Tax Free Income Fund - --------------------------------------------------------------------------------------------------------- Class A - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,009.80 $ 6.53 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.50 $ 6.56 - --------------------------------------------------------------------------------------------------------- Class B - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,006.30 $10.03 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.00 $10.08 - ---------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.30%, and 2.00% for Class A and B, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 18 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------- Beginning Account Ending Account Expenses Paid During Value Value Period* 4/1/04 9/30/04 4/1/04 - 9/30/04 - --------------------------------------------------------------------------------------------------------- Loomis Sayles Municipal Income Fund - --------------------------------------------------------------------------------------------------------- Class A - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,010.00 $5.58 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,019.45 $5.60 - --------------------------------------------------------------------------------------------------------- Class B - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,007.60 $9.34 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.70 $9.37 - ---------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.11%, and 1.86% for Class A and B, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period).
- --------------------------------------------------------------------------------------------------------- Beginning Account Ending Account Expenses Paid During Value Value Period* 4/1/04 9/30/04 4/1/04 - 9/30/04 - --------------------------------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund - --------------------------------------------------------------------------------------------------------- Class A - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,025.70 $ 6.23 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.85 $ 6.21 - --------------------------------------------------------------------------------------------------------- Class B - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,021.10 $10.00 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.10 $ 9.97 - --------------------------------------------------------------------------------------------------------- Class C - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,021.90 $10.01 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,015.10 $ 9.97 - --------------------------------------------------------------------------------------------------------- Class Y - --------------------------------------------------------------------------------------------------------- Actual $1,000 $1,026.50 $ 5.07 - --------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,020.00 $ 5.05 - ---------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.23%, 1.98%, 1.98% and 1.00% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366 (to reflect the half-year period). 19 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Bonds and Notes -- 96.0% of Total Net Assets Aerospace & Defense -- 0.6% $ 1,400,000 Northrop Grumman Corp., Note 7.125%, 2/15/2011 $ 1,609,248 ----------- Asset Backed Securities -- 6.3% 2,000,000 American Express Credit Account Master Trust, Series 2003-4, Class A 1.690%, 1/15/2009 1,963,090 690,000 AmeriCredit Automobile Receivables Trust, Series 2003-D-M, Class A-4 2.840%, 8/06/2010 687,019 3,755,000 BMW Vehicle Owner Trust, Series 2004-A, Class A4 3.320%, 2/25/2009 3,767,161 3,675,000 Citibank Credit Card Issuance Trust, Series 2003-A2, Class A2 2.700%, 1/15/2008 3,677,862 762,936 Connecticut RRB Special Purpose Trust Connecticut Light & Power, Series 2001-1, Class A2 5.360%, 3/30/2007 772,424 3,430,000 Countrywide Asset-Backed Certificates, Series 2003-5, Class AF4 4.905%, 8/25/2032 3,505,410 1,730,000 Ford Credit Auto Owner Trust, Series 2004-A, Class A4 3.540%, 11/15/2008 1,741,954 1,850,000 Residential Asset Securities Corp., Series 2003-KS10, Class AI4 4.470%, 3/25/2032 1,861,265 ----------- 17,976,185 ----------- Automotive -- 3.5% 1,510,000 Ford Motor Credit Co., Global Note 5.625%, 10/01/2008 (c) 1,561,361 715,000 General Motors Acceptance Corp., Note 8.000%, 11/01/2031 740,019 4,325,000 General Motors Corp., Senior Note 8.375%, 7/15/2033 4,592,164 2,880,000 Navistar International Corp., Senior Subordinated Note 9.375%, 6/01/2006 3,088,800 ----------- 9,982,344 ----------- Banking -- 1.6% 830,000 Bank of America Corp., Senior Note 5.875%, 2/15/2009 898,595 1,400,000 Chevy Chase Bank FSB, Subordinated Note 6.875%, 12/01/2013 1,414,000 715,000 JPMorgan Chase & Co., Global Subordinated Note 5.750%, 1/02/2013 761,313 1,200,000 State Street Institutional Capital A, Series A, Guaranteed Note, 144A 7.940%, 12/30/2026 1,367,404 ----------- 4,441,312 ----------- Beverage -- 1.2% 3,125,000 Cia Brasileira de Bebidas, Guaranteed Note 8.750%, 9/15/2013 3,531,250 ----------- Brokerage -- 1.7% 675,000 Goldman Sachs Group, Inc., Senior Note 6.600%, 1/15/2012 753,817 3,815,000 Lehman Brothers Holdings, Inc., Note 7.000%, 2/01/2008 4,210,150 ----------- 4,963,967 ----------- Chemicals -- 3.1% 475,000 Eastman Chemical Co., Note 3.250%, 6/15/2008 464,657 $ 2,930,000 Eastman Chemical Co., Note 6.300%, 11/15/2018 $ 3,136,914 1,470,000 ICI Wilmington, Inc., Guaranteed Note 5.625%, 12/01/2013 1,510,628 3,045,000 IMC Global, Inc., Senior Note 10.875%, 6/01/2008 3,692,062 ----------- 8,804,261 ----------- Construction Machinery -- 0.6% 1,600,000 Case New Holland, Inc., Senior Note, 144A 9.250%, 8/01/2011 1,792,000 ----------- Consumer Cyclical Services -- 0.3% 770,000 Service Corp. International, US, Senior Note, 144A 6.750%, 4/01/2016 770,000 ----------- Consumer Products -- 0.5% 1,375,000 Jostens IH Corp., Senior Subordinated Note, 144A 7.625%, 10/01/2012 1,381,875 ----------- Electric -- 3.6% 950,000 Centerpoint Energy, Inc., Series B, Senior Note 5.875%, 6/01/2008 991,724 1,455,000 Duke Energy Corp., Senior Note 4.200%, 10/01/2008 1,469,904 2,030,000 Empresa Nacional de Electricidad SA, Chile, Note 8.350%, 8/01/2013 2,265,998 2,150,000 FirstEnergy Corp., Note, Series B 6.450%, 11/15/2011 2,345,370 1,325,000 Ipalco Enterprises, Inc., Senior Secured Note 8.375%, 11/14/2008 1,477,375 1,450,000 Southern California Edison Co., Note 7.625%, 1/15/2010 1,682,919 ----------- 10,233,290 ----------- Environmental -- 0.8% 1,250,000 Allied Waste North America, Inc., Senior Note 8.500%, 12/01/2008 1,356,250 1,015,000 Allied Waste North America, Senior Note 6.500%, 11/15/2010 (c) 1,004,850 ----------- 2,361,100 ----------- Food and Beverage -- 0.5% 788,000 Dean Foods Co., Senior Note 6.900%, 10/15/2017 807,700 702,000 Dean Foods Co., Senior Note 8.150%, 8/01/2007 763,425 ----------- 1,571,125 ----------- Gaming -- 0.2% 450,000 Harrah's Operating Co., Inc., Guaranteed Senior Note 7.500%, 1/15/2009 503,442 185,000 Harrah's Operating Co., Inc., Senior Note 7.125%, 6/01/2007 200,727 ----------- 704,169 ----------- Government Agencies -- 7.0% 10,400,000 FHLMC 2.875%, 12/15/2006 (c) 10,389,371 2,750,000 FHLMC 3.220%, 6/20/2007 (SGD) 1,682,615 6,600,000 FNMA 2.290%, 2/19/2009 (SGD) 3,869,111 See accompanying notes to financial statements. 20 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Government Agencies -- continued $ 3,710,000 FNMA 5.250%, 1/15/2009 $ 3,951,387 ----------- 19,892,484 ----------- Healthcare -- 1.1% 3,050,000 HCA, Inc., Note 6.950%, 5/01/2012 3,293,277 ----------- Home Construction -- 0.5% 1,315,000 Pulte Homes, Inc., Senior Note 4.875%, 7/15/2009 1,345,120 ----------- Independent Energy -- 0.5% 1,295,000 Pioneer Natural Resources Co., Senior Note 6.500%, 1/15/2008 1,403,766 ----------- Industrial Other -- 1.1% 2,865,000 Aramark Services, Inc., Guaranteed Note 7.000%, 7/15/2006 3,043,561 ----------- Media - Broadcasting & Publishing -- 0.5% 1,290,000 Time Warner, Inc., Note 7.700%, 5/01/2032 1,500,008 ----------- Media Cable -- 3.3% 2,000,000 CSC Holdings, Inc., Senior Note 7.625%, 7/15/2018 2,040,000 515,000 CSC Holdings, Inc., Senior Note 7.875%, 2/15/2018 531,737 4,000,000 Shaw Communications, Inc., Senior Note 7.400%, 10/17/2007 (CAD) 3,340,599 2,785,000 TeleCommunications, Inc., Note 9.800%, 2/01/2012 3,550,998 ----------- 9,463,334 ----------- Media Non Cable -- 0.5% 1,435,000 Clear Channel Communications, Inc., Global Note 4.250%, 5/15/2009 1,421,917 ----------- Metals and Mining -- 0.5% 1,500,000 International Steel Group, Inc., Note, 144A 6.500%, 4/15/2014 1,500,000 ----------- Mortgage Related -- 21.4% 2,965,002 FHLMC 4.000%, 7/01/2019 2,896,053 5,647,854 FHLMC 4.500%, 8/01/2018 5,642,596 10,550,826 FHLMC 5.000%, with various maturities to 2034(d) 10,563,736 2,591,427 FHLMC 5.500%, with various maturities to 2018(d) 2,680,818 5,589,139 FNMA 4.500%, with various maturities to 2034(d) 5,391,981 3,721,483 FNMA 5.000%, with various maturities to 2034(d) 3,746,922 9,105,368 FNMA 5.500%, with various maturities to 2034(d) 9,295,662 2,507,481 FNMA 6.000%, with various maturities to 2033(d) 2,631,033 6,939,849 FNMA 6.500%, with various maturities to 2034(d) 7,285,698 694,114 FNMA 7.000%, with various maturities to 2030(d) 736,695 758,404 FNMA 7.500%, with various maturities to 2032(d) 812,991 $ 1,650,000 FNMA (TBA) 6.000%, 11/01/2034 $ 1,700,015 1,935,152 GNMA 5.500%, 2/20/2034 1,968,110 814,838 GNMA 6.000%, with various maturities to 2032(d) 847,887 2,660,039 GNMA 6.500%, with various maturities to 2032(d) 2,810,863 1,077,322 GNMA 7.000%, with various maturities to 2029(d) 1,151,611 297,282 GNMA 7.500%, with various maturities to 2030(d) 321,096 121,076 GNMA 8.000%, 11/15/2029 132,236 315,130 GNMA 8.500%, with various maturities to 2023(d) 348,996 30,666 GNMA 9.000%, with various maturities to 2016(d) 34,461 85,261 GNMA 11.500%, with various maturities to 2015(d) 97,411 ----------- 61,096,871 ----------- Non Captive Consumer Financial -- 1.4% 1,305,000 Capital One Bank 6.500%, 6/13/2013 1,427,051 1,380,000 Countrywide Home Loans, Inc., Note, (MTN) 5.500%, 8/01/2006 1,439,322 982,000 Household Finance Corp., Note 5.750%, 1/30/2007 1,037,958 ----------- 3,904,331 ----------- Non Captive Diversified Financial -- 0.5% 500,000 General Electric Capital Corp., Series E, Note, (MTN) 1.725%, 6/27/2008 (SGD) 288,726 1,080,000 International Lease Finance Corp., Global Note 5.625%, 6/01/2007 1,140,941 ----------- 1,429,667 ----------- Oil & Gas -- 0.7% 1,750,000 Transocean Sedco Forex, Inc., Note 6.625%, 4/15/2011 1,954,206 ----------- Paper -- 4.5% 3,165,000 Abitibi-Consolidated Finance, LP, Note 7.875%, 8/01/2009 3,299,512 1,495,000 Abitibi-Consolidated, Inc., Note 8.550%, 8/01/2010 1,603,387 3,130,000 Boise Cascade Corp., Senior Note 6.500%, 11/01/2010 3,489,950 1,200,000 Georgia-Pacific Corp., Note 7.375%, 12/01/2025 1,278,000 480,000 Georgia-Pacific Corp., Note 8.875%, 5/15/2031 582,000 2,705,000 International Paper Co., Note 4.000%, 4/01/2010 2,643,055 ----------- 12,895,904 ----------- Pharmaceuticals -- 1.0% 2,750,000 Valeant Pharmaceuticals International, Senior Note 7.000%, 12/15/2011 2,784,375 ----------- See accompanying notes to financial statements. 21 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Pipelines -- 1.2% $ 520,000 Enterprise Products Operating, LP, Senior Note 4.625%, 10/15/2009 $ 524,319 2,464,000 Kinder Morgan Energy Partners, LP, Note 7.125%, 3/15/2012(c) 2,806,755 ------------ 3,331,074 ------------ Railroads -- 1.2% 1,155,000 CSX Corp., Note 4.875%, 11/01/2009 1,187,684 2,350,000 Union Pacific Corp., Senior Note 5.375%, 5/01/2014 2,370,024 ------------ 3,557,708 ------------ Real Estate Investment Trusts -- 1.0% 1,250,000 iStar Financial, Inc., Senior Note 6.000%, 12/15/2010 1,300,592 1,340,000 Simon Property Group, LP, Note 6.375%, 11/15/2007 1,449,213 ------------ 2,749,805 ------------ Refining -- 0.7% 1,775,000 Premcor Refining Group (The), Inc., Senior Note 7.500%, 6/15/2015 1,908,125 ------------ Restaurants -- 0.1% 292,000 Domino's, Inc., Senior Subordinated Note 8.250%, 7/01/2011 316,090 ------------ Sovereigns -- 4.0% 4,785,000 Canada Government 5.500%, 6/01/2010 (CAD) 4,040,684 3,000,000 Pemex Finance, Ltd., Series 1998, Class 18NT 9.150%, 11/15/2018 3,677,970 3,265,000 Pemex Project Funding Master Trust, Note 7.875%, 2/01/2009 3,640,475 ------------ 11,359,129 ------------ Supermarkets -- 2.7% 1,365,000 Couche-Tard US, LP/Couche-Tard Finance Corp., Senior Subordinated Note 7.500%, 12/15/2013 1,453,725 2,155,000 Delhaize America, Inc., Note 8.125%, 4/15/2011 2,461,062 560,000 Delhaize America, Inc., Note 9.000%, 4/15/2031 673,875 2,720,000 Fred Meyer, Inc., Note 7.450%, 3/01/2008 3,038,039 ------------ 7,626,701 ------------ Supranationals -- 1.0% 2,160,000 Inter-American Development Bank, Note 5.500%, 3/30/2010 (EUR) 2,957,310 ------------ Telecommunications -- 0.3% 730,000 Sprint Capital Corp., Note 6.125%, 11/15/2008 787,946 ------------ Tobacco -- 1.1% 1,495,000 Altria Group, Inc., Note 7.000%, 11/04/2013 1,559,828 1,550,000 Philip Morris Cos., Inc., Note 7.750%, 1/15/2027 1,637,271 ------------ 3,197,099 ------------ Transportation Services -- 0.3% $1,015,000 Overseas Shipholding Group, Senior Note 7.500%, 2/15/2024 $ 985,819 ------------ Treasuries -- 8.5% 2,803,503 U.S. Treasury Inflation Indexed Note 2.000%, 7/15/2014 2,865,707 6,405,000 U.S. Treasury Note 1.875%, 12/31/2005 (e) 6,372,226 3,495,000 U.S. Treasury Note 2.750%, 7/31/2006 3,508,106 2,800,000 U.S. Treasury Note 3.250%, 8/15/2007 2,830,954 8,510,000 U.S. Treasury Note 3.500%, 11/15/2006 8,659,257 ------------ 24,236,250 ------------ Wirelines -- 4.9% 1,095,000 AT&T Corp., Senior Note 8.750%, 11/15/2031 1,193,550 1,650,000 GTE Corp., Note 7.900%, 2/01/2027 1,810,858 3,200,000 LCI International, Inc., Senior Note 7.250%, 6/15/2007 2,904,000 1,240,000 Qwest Corp., Note 7.200%, 11/10/2026 1,081,900 670,000 Qwest Corp., Note 7.250%, 9/15/2025 603,000 3,600,000 Sprint Capital Corp., Note 6.875%, 11/15/2028 3,776,015 1,045,000 TELUS Corp., Note 8.000%, 6/01/2011 1,224,467 1,675,000 U.S. West Communications, Inc., Note 7.500%, 6/15/2023 1,524,250 ------------ 14,118,040 ------------ Total Bonds and Notes (Identified Cost $265,278,317) 274,182,043 ------------ Principal Amount - -------------------------------------------------------------------------------- Short Term Investments -- 7.5% 10,720,637 Repurchase Agreement with Investors Bank & Trust Co. dated 9/30/2004 at 1.27% to be repurchased at $10,721,015 on 10/01/2004, collateralized by $11,713,198 Federal Home Loan Mortgage Bond, 4.009%, due 4/01/2004 valued at $11,256,668 10,720,637 1,166,676 Bank of America, 1.875%, due 10/19/2004(g) 1,166,676 188,289 Bank of Montreal, 1.76%, due 10/25/2004(g) 188,289 280,003 Bank of Nova Scotia, 1.75%, due 10/21/2004(g) 280,003 583,338 Bank of Nova Scotia, 1.76%, due 11/12/2004(g) 583,338 665,005 BGI Institutional Money Market Fund(g) 665,005 583,338 BNP Paribas, 1.80%, due 11/23/2004(g) 583,338 350,003 Falcon Asset Securitization Corp, 1.612%, due 350,003 10/01/2004(g) 116,668 Fortis Bank, 1.69%, due 10/14/2004(g) 116,668 348,397 Greyhawk Funding, 1.772%, due 10/19/2004(g) 348,397 378,417 Merrill Lynch Premier Institutional Fund(g) 378,417 933,341 Merrimac Cash Fund-Premium Class(g) 933,341 933,341 Royal Bank of Canada, 1.78%, due 11/10/2004(g) 933,341 350,003 Royal Bank of Scotland, 1.60%, due 10/15/2004(g) 350,003 350,003 Royal Bank of Scotland, 1.65%, due 10/29/2004(g) 350,003 See accompanying notes to financial statements. 22 - -------------------------------------------------------------------------------- Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Short Term Investments -- continued $ 35,000 Royal Bank of Scotland, 1.67%, due 11/02/2004(g) $ 35,000 781,673 Royal Bank of Scotland, 1.88%, due 12/23/2004(g) 781,673 114,988 Sheffield Receivables Corp, 1.622%, due 114,988 10/04/2004(g) 350,003 Sheffield Receivables Corp, 1.773%, due 350,003 10/20/2004(g) 233,335 Toronto Dominion Bank, 1.70%, due 11/08/2004(g) 233,335 1,705,000 U.S. Treasury Bills, 1.635%, due 12/09/2004(f) 1,698,417 350,003 Wells Fargo, 1.60%, due 10/04/2004(g) 350,003 ------------ Total Short Term Investments (Identified Cost $21,510,878) 21,510,878 ------------ Total Investments -- 103.5% (Identified Cost $286,789,195)(b) 295,692,921 Other assets less liabilities (10,025,649) ------------ Total Net Assets -- 100% $285,667,272 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At September 30, 2004, the net unrealized appreciation on investments based on cost of $287,786,671 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 $ 9,462,672 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (1,556,422) ----------- Net unrealized appreciation $ 7,906,250 =========== At September 30, 2004, the Fund had a capital loss carryover of approximately $23,293,740 of which $1,530,375 expires on September 30, 2008 and $21,763,365 expires on September 30, 2010. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. At September 30, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $2,986,290 in undistributed ordinary income and $0 in undistributed long-term gains. (c) All or a portion of this security was on loan to brokers at September 30, 2004. (d) 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. (e) All or a portion of this security has been segregated to cover collateral requirements on TBA obligations (f) Rate is yield to maturity. (g) Represents investments of securities lending collateral. FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association GNMA Government National Mortgage Association MTN Medium Term Note TBA To Be Announced (see Note 2g of Notes to Financial Statements) 144A Securities exempt from registration under Rule Act of 1933. 144A of the Securities 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 $6,811,279 or 2.4% of net assets. CAD Canadian Dollar EUR Euro SGD Singapore Dollar Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited) Mortgage Related 21.4% Treasuries 8.5 Short Term Investments 7.5 Government Agencies 7.0 Asset Backed Securities 6.3 Wirelines 4.9 Paper 4.5 Sovereigns 4.0 Electric 3.6 Automotive 3.5 Media Cable 3.3 Chemicals 3.1 Supermarkets 2.7 Other, less than 2% each 23.2 See accompanying notes to financial statements. 23 - -------------------------------------------------------------------------------- Loomis Sayles Government Securities Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Bonds and Notes -- 99.0% of Total Net Assets Government Agencies -- 1.0% $ 600,000 FNMA 6.625%, 9/15/2009 $ 675,966 ----------- Mortgage Related -- 15.6% 4,267,148 FNMA 4.500%, 9/01/2033 4,119,963 4,244,966 FNMA 5.500%, with various maturities to 2034(c) 4,310,477 280,108 FNMA 6.500%, 11/01/2031 294,015 204,322 FNMA 7.500%, 12/01/2030 218,994 1,378,410 GNMA 6.500%, 5/15/2031 1,456,303 12,139 GNMA 8.500%, 2/15/2006 12,650 80,983 GNMA 9.000%, with various maturities to 2009(c) 87,389 33,202 GNMA 9.500%, 8/15/2009 36,444 2,260 GNMA 10.000%, 9/15/2016 2,532 4,053 GNMA 12.500%, 6/15/2014 4,674 ----------- 10,543,441 ----------- Treasuries -- 82.4% 3,005,000 U.S. Treasury Bond 5.250%, 2/15/2029(d) 3,128,369 13,000,000 U.S. Treasury Bond 7.250%, 5/15/2016 16,364,764 10,000,000 U.S. Treasury Bond 8.750%, 5/15/2017 14,108,980 13,665,828 U.S. Treasury Inflation Indexed Bond 2.375%, 1/15/2025 14,236,486 4,615,000 U.S. Treasury Note 1.625%, 9/30/2005 4,589,581 4,000,000 U.S. Treasury STRIPS Zero Coupon, 11/15/2014 3,324,336 ----------- 55,752,516 ----------- Total Bonds and Notes (Identified Cost $63,218,493) 66,971,923 ----------- Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Short Term Investments -- 1.3% $ 218,192 Repurchase Agreement with Investors Bank & Trust Co. dated 9/30/2004 at 1.27% to be repurchased at $218,200 on 10/01/2004, collateralized by $224,863 Federal National Mortgage Association Bond, 4.449% due 1/01/2033 valued at $229,102 $ 218,192 83,633 Bank of America, 1.875%, due 10/19/2004(e) 83,633 13,498 Bank of Montreal, 1.76%, due 10/25/2004(e) 13,498 20,072 Bank of Nova Scotia, 1.75%, due 10/21/2004(e) 20,072 41,817 Bank of Nova Scotia, 1.76%, due 11/12/2004(e) 41,817 47,671 BGI Institutional Money Market Fund(e) 47,671 41,817 BNP Paribas, 1.80%, due 11/23/2004(e) 41,817 25,090 Falcon Asset Securitization Corp, 1.612%, due 25,090 10/01/2004(e) 8,363 Fortis Bank, 1.69%, due 10/14/2004(e) 8,363 24,975 Greyhawk Funding, 1.772%, due 10/19/2004(e) 24,975 27,127 Merrill Lynch Premier Institutional Fund(e) 27,127 $ 66,907 Merrimac Cash Fund-Premium Class(e) $ 66,907 66,907 Royal Bank of Canada, 1.78%, due 11/10/2004(e) 66,907 25,090 Royal Bank of Scotland, 1.60%, due 10/15/2004(e) 25,090 25,090 Royal Bank of Scotland, 1.65%, due 10/29/2004(e) 25,090 2,509 Royal Bank of Scotland, 1.67%, due 11/02/2004(e) 2,509 56,034 Royal Bank of Scotland, 1.88%, due 12/23/2004(e) 56,034 8,243 Sheffield Receivables Corp, 1.622%, due 8,243 10/04/2004(e) 25,090 Sheffield Receivables Corp, 1.773%, due 25,090 10/20/2004(e) 16,727 Toronto Dominion Bank, 1.70%, due 11/08/2004(e) 16,727 25,090 Wells Fargo, 1.60%, due 10/04/2004(e) 25,090 ----------- Total Short Term Investments (Identified Cost $869,942) 869,942 ----------- Total Investments -- 100.3% (Identified Cost $64,088,435)(b) 67,841,865 Other assets less liabilities (190,692) ----------- Total Net Assets -- 100% $67,651,173 =========== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At September 30, 2004, the net unrealized appreciation on investments based on cost of $64,999,184 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 $ 2,922,795 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (80,114) ----------- Net unrealized appreciation $ 2,842,681 =========== At September 30, 2004, the Fund had a capital loss carryover of approximately $6,350,787 of which $5,687,678 expires on September 30, 2007 and $663,109 expires on September 30, 2008. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. For the year ended September 30, 2004, the Fund has elected to defer $680,774 of capital losses attributable to Post-October losses. At September 30, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $83,740 in undistributed ordinary income and $0 in undistributed long-term gains. (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 September 30, 2004. (e) Represents investments of securities lending collateral. FNMA Federal National Mortgage Association GNMA Government National Mortgage Association STRIPS Separate Trading of Registered Interest and Principal of Securities Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited) Treasuries 82.4% Mortgage Related 15.6 Other, less than 2% each 2.3 See accompanying notes to financial statements. 24 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Bonds and Notes -- 93.5% of Total Net Assets Aerospace & Defense -- 0.6% $ 250,000 TD Funding Corp., Senior Subordinated Note 8.375%, 7/15/2011 $ 267,500 ---------- Airlines -- 2.5% 169,164 Continental Airlines, Inc., Series 1998-1, Class 1A 6.648%, 9/15/2017 158,344 170,379 Continental Airlines, Inc., Series 1998-1, Class 1B 6.748%, 3/15/2017 131,057 61,917 Continental Airlines, Inc., Series 1999-1, Class C 6.954%, 8/02/2009 47,119 111,776 Continental Airlines, Inc., Series 1999-2, Class B 7.566%, 3/15/2020 86,447 870,000 Northwest Airlines Corp., Senior Note 8.875%, 6/01/2006(c) 730,800 ---------- 1,153,767 ---------- Automotive -- 2.7% 600,000 Cummins, Inc., Note 7.125%, 3/01/2028 600,000 500,000 Dana Corp., Note 9.000%, 8/15/2011 603,750 ---------- 1,203,750 ---------- Building Materials -- 0.3% 110,000 Jacuzzi Brands, Inc., Senior Note 9.625%, 7/01/2010 121,550 ---------- Chemicals -- 1.9% 585,000 Ethyl Corp., Senior Note 8.875%, 5/01/2010 631,800 200,000 Nalco Co., Senior Subordinated Note 8.875%, 11/15/2013(c) 215,000 ---------- 846,800 ---------- Construction Machinery -- 2.0% 350,000 Case Credit Corp., Note 6.750%, 10/21/2007(c) 358,750 100,000 Case New Holland, Inc., Senior Note, 144A 9.250%, 8/01/2011 112,000 80,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note 7.750%, 12/15/2013 69,200 400,000 United Rentals North America, Inc., Senior Subordinated Note 7.000%, 2/15/2014(c) 355,000 ---------- 894,950 ---------- Consumer Products -- 0.5% 90,000 Jostens IH Corp., Senior Subordinated Note, 144A 7.625%, 10/01/2012 90,450 120,000 Rayovac Corp., Senior Subordinated Note 8.500%, 10/01/2013 130,200 ---------- 220,650 ---------- Electric -- 7.3% 590,000 AES Corp. (The), Senior Note 7.750%, 3/01/2014 609,175 450,000 AES Corp. (The), Senior Note 8.875%, 2/15/2011(c) 500,625 100,000 Allegheny Energy Supply Co. LLC, Note 7.800%, 3/15/2011 108,250 200,000 Empresa Nacional de Electricidad SA, Chile, Note 7.875%, 2/01/2027 203,863 250,000 Empresa Nacional de Electricidad SA, Chile, Note 8.350%, 8/01/2013 279,064 $ 525,000 Enersis SA, Cayman Island, Note 7.400%, 12/01/2016 (yankee) $ 549,863 140,000 Enersis SA, Chile, Note 7.375%, 1/15/2014 146,736 229,000 ESI Tractebel Acquisition Corp., Series B7, Secured Note 7.990%, 12/30/2011 236,442 275,162 Salton SEA Funding Corp., Series C, Senior Secured Note 7.840%, 5/30/2010 292,779 48,112 Salton SEA Funding Corp., Series E, Senior Note 8.300%, 5/30/2011 53,164 125,000 TECO Energy, Inc., Note 7.000%, 5/01/2012 130,937 200,000 TECO Energy, Inc., Note 7.200%, 5/01/2011 213,000 ---------- 3,323,898 ---------- Electric Utilities -- 2.0% 200,000 Calpine Corp., Senior Note 7.875%, 4/01/2008(c) 135,000 560,000 Calpine Corp., Senior Secured Note, 144A 8.750%, 7/15/2013(c) 422,800 350,000 Edison Mission Energy Corp., Senior Note 7.730%, 6/15/2009 367,500 ---------- 925,300 ---------- Electronics -- 5.7% 125,000 Amkor Technology, Inc., Note 5.000%, 3/15/2007(c) 104,375 125,000 Amkor Technology, Inc., Senior Note 7.750%, 5/15/2013(c) 102,500 225,000 Corning, Inc., Note 5.900%, 3/15/2014 219,921 270,000 Corning, Inc., Note 6.200%, 3/15/2016 265,245 225,000 Corning, Inc., Note 6.750%, 9/15/2013 234,501 155,000 Corning, Inc., Note 6.850%, 3/01/2029 143,926 910,000 Lucent Technologies, Inc., Note 6.450%, 3/15/2029 737,100 300,000 Nortel Networks Corp., Guaranteed Senior Note 4.250%, 9/01/2008(c) 289,500 425,000 Nortel Networks Corp., Note 6.875%, 9/01/2023(c) 388,875 100,000 Northern Telecom Capital Corp., Note 7.875%, 6/15/2026 96,500 ---------- 2,582,443 ---------- Environmental -- 1.1% 75,000 Allied Waste North America, Inc., Senior Note 8.500%, 12/01/2008 81,376 35,000 Allied Waste North America, Senior Note 6.500%, 11/15/2010(c) 34,650 400,000 Allied Waste North America, Series B, Senior Note 5.750%, 2/15/2011 380,000 ---------- 496,026 ---------- Food and Beverage -- 3.3% 600,000 Bavaria SA, Senior Note, 144A 8.875%, 11/01/2010 633,750 See accompanying notes to financial statements. 25 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Food and Beverage -- continued $ 450,000 Borden Chemical, Inc., Note 7.875%, 2/15/2023 $ 364,500 550,000 Borden Chemical, Inc., Note 9.200%, 3/15/2021 508,750 ---------- 1,507,000 ---------- Foreign Local Governments -- 3.0% 16,250,000 United Mexican States 9.000%, 12/20/2012 (MXN) 1,348,981 ---------- Gaming -- 1.8% 450,000 Harrah's Operating Co., Inc., Guaranteed Senior Note 5.375%, 12/15/2013 448,832 405,000 MGM Mirage, Senior Note 5.875%, 2/27/2014 389,812 ---------- 838,644 ---------- Healthcare -- 1.1% 150,000 Columbia/HCA Healthcare Corp., Note 7.500%, 12/15/2023 153,830 200,000 Columbia/HCA Healthcare Corp., Note, (MTN) 7.580%, 9/15/2025 208,586 150,000 Invitrogen Corp., Senior Note, Convertible 1.500%, 2/15/2024(c) 132,562 ---------- 494,978 ---------- Home Construction -- 1.1% 150,000 K Hovnanian Enterprises, Inc., Guaranteed Senior Note 6.500%, 1/15/2014 153,375 300,000 K Hovnanian Enterprises, Inc., Senior Note 8.000%, 4/01/2012 332,250 ---------- 485,625 ---------- Independent Energy -- 1.4% 270,000 Chesapeake Energy Corp., Senior Note 6.875%, 1/15/2016 282,150 100,000 Chesapeake Energy Corp., Senior Note 7.500%, 9/15/2013 109,500 215,000 Swift Energy Co., Senior Subordinated Note 9.375%, 5/01/2012 240,800 ---------- 632,450 ---------- Information/Data Technology -- 2.0% 315,000 Maxtor Corp., Subordinated Note 5.750%, 3/01/2012(f) 277,200 325,000 Xerox Capital Trust I, Guaranteed Note 8.000%, 2/01/2027 320,125 300,000 Xerox Corp., Note, (MTN) 7.200%, 4/01/2016 306,750 ---------- 904,075 ---------- Integrated Energy -- 1.2% 265,000 Cerro Negro Finance, Ltd., Note, 144A 7.900%, 12/01/2020 258,375 300,000 Petrozuata Finance, Inc., Note, Series B, 144A 8.220%, 4/01/2017 295,500 ---------- 553,875 ---------- Lodging -- 1.3% 300,000 La Quinta Inns, Inc., (MTN), (FRN) 7.330%, 4/01/2008 309,000 250,000 Royal Caribbean Cruises, Ltd., Senior Note 7.500%, 10/15/2027 260,000 ---------- 569,000 ---------- Media Cable -- 5.4% $ 500,000 Charter Communications Holdings, Inc., Senior Note 9.625%, 11/15/2009 $ 393,750 150,000 Charter Communications Holdings, Inc., Senior Note 10.000%, 5/15/2011 115,500 950,000 CSC Holdings, Inc., Senior Note 7.625%, 7/15/2018 969,000 200,000 Innova S de RL 9.375%, 9/19/2013 217,500 250,000 NTL CABLE PLC, Note, 144A 9.750%, 4/15/2014 (GBP) 450,325 175,000 PanAmSat Corp., Note 6.875%, 1/15/2028 147,875 150,000 Rogers Communications, Inc., Note 2.000%, 11/26/2005 144,187 ---------- 2,438,137 ---------- Media Non Cable -- 0.6% 250,000 Dex Media, Inc., Note 8.000%, 11/15/2013 262,500 ---------- Metals and Mining -- 2.8% 420,000 AK Steel Corp., Guaranteed Senior Note 7.750%, 6/15/2012(c) 410,550 150,000 Glencore Funding LLC, Guaranteed Note, 144A 6.000%, 4/15/2014 145,477 500,000 Ispat Inland ULC, Senior Secured Note 9.750%, 4/01/2014 551,250 175,000 Vale Overseas, Ltd., Note 8.250%, 1/17/2034 170,187 ---------- 1,277,464 ---------- Other -- 0.6% 250,000 Corrections Corp. of America, Senior Note 7.500%, 5/01/2011 264,062 ---------- Packaging -- 2.1% 300,000 Owens-Brockway, Guaranteed Senior Secured Note 7.750%, 5/15/2011 319,500 350,000 Owens-Illinois, Inc., Senior Note 7.500%, 5/15/2010(c) 357,875 135,000 Owens-Illinois, Inc., Senior Note 7.800%, 5/15/2018 130,950 125,000 Solo Cup Co., Senior Subordinated Note 8.500%, 2/15/2014(c) 123,125 ---------- 931,450 ---------- Paper -- 6.4% 220,000 Abitibi-Consolidated, Inc., Note 7.500%, 4/01/2028 191,950 250,000 Abitibi-Consolidated, Inc., Note 8.500%, 8/01/2029 238,750 100,000 Arcel Finance, Ltd., Note, 144A 6.361%, 5/01/2012 100,943 200,000 Arcel Finance, Ltd., Note, 144A 7.048%, 9/01/2011 209,323 200,000 Boise Cascade Corp., Note, (MTN) 7.450%, 8/10/2011 229,910 685,000 Bowater, Inc., Note 6.500%, 6/15/2013(c) 664,655 165,000 Georgia-Pacific Corp., Note 7.250%, 6/01/2028 170,775 See accompanying notes to financial statements. 26 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Paper -- continued $ 200,000 Georgia-Pacific Corp., Note 7.375%, 12/01/2025 $ 213,000 300,000 Georgia-Pacific Corp., Note 9.500%, 12/01/2011(c) 371,250 350,000 Pope & Talbot, Inc., Senior Note 8.375%, 6/01/2013 365,750 145,000 Tembec Industries, Inc., Senior Note 7.750%, 3/15/2012 145,725 ----------- 2,902,031 ----------- Pharmaceuticals -- 2.6% 300,000 Inhale Therapeutic Systems, Inc., Subordinated Note 3.500%, 10/17/2007 280,125 187,000 IVAX Corp., Senior Subordinated Note, Convertible 4.500%, 5/15/2008 185,130 250,000 Pharma Services Intermediate Holding Corp., Senior Note, 144A 0/11.500%, 4/01/2014(d) 157,500 200,000 Quintiles Transnational Corp., Senior Subordinated Note 10.000%, 10/01/2013 212,000 310,000 Vertex Pharmaceuticals, Inc., Note, 144A 5.750%, 2/15/2011 325,887 ----------- 1,160,642 ----------- Pipelines -- 4.5% 700,000 Coastal Corp., Note 6.500%, 6/01/2008 682,500 175,000 Tennessee Gas Pipeline Co., Note 7.000%, 10/15/2028 166,250 165,000 Williams Cos., Inc., Note 7.875%, 9/01/2021 183,150 982,000 Williams Cos., Inc., Series A, Note 7.500%, 1/15/2031 986,910 ----------- 2,018,810 ----------- Railroads -- 0.6% 265,000 Grupo Transportacion Ferroviaria Mexicana SA de CV, Senior Note (yankee) 0/11.750%, 6/15/2009(d) 267,650 ----------- Real Estate Investment Trusts -- 3.2% 830,000 Crescent Real Estate Equities, LP, Senior Subordinated Note 9.250%, 4/15/2009 894,325 300,000 FelCor Lodging, LP, Senior Note 9.000%, 6/01/2011 330,000 200,000 Trinet Corporate Realty Trust, Note 7.700%, 7/15/2017 226,770 ----------- 1,451,095 ----------- Refining -- 3.0% 325,000 Citgo Petroleum Corp., Senior Note 11.375%, 2/01/2011 382,687 225,000 Premcor Refining Group (The), Inc., Senior Note 6.750%, 2/01/2011 239,625 700,000 Premcor Refining Group (The), Inc., Senior Note 7.500%, 6/15/2015 752,500 ----------- 1,374,812 ----------- Retailers -- 4.3% 250,000 Dillard's Department Stores, Inc., Note 6.625%, 1/15/2018 238,750 800,000 Dillard's, Inc., Note 7.750%, 7/15/2026 792,000 225,000 Rite Aid Corp., Note 6.875%, 8/15/2013 196,875 $ 335,000 Toys R US, Inc., Note 7.375%, 10/15/2018 $ 310,713 400,000 Woolworth Corp., Note 8.500%, 1/15/2022 426,000 ----------- 1,964,338 ----------- Sovereigns -- 1.3% 345,000 Republic of Brazil 8.250%, 1/20/2034 307,568 175,000 Republic of Colombia 8.125%, 5/21/2024 157,938 125,000 Republic of Peru (FRN) 4.500%, 3/07/2017 110,938 ----------- 576,444 ----------- Supranationals -- 2.3% 6,000,000 Inter-American Development Bank, Series E, Note, (MTN) Zero Coupon, 5/11/2009 (BRL)(f) 1,043,816 ----------- Technology -- 1.3% 75,000 Kulicke & Soffa Industries, Inc., Subordinated Note, Convertible 0.500%, 11/30/2008(c) 52,688 500,000 Xerox Corp., Senior Note 6.875%, 8/15/2011 522,500 ----------- 575,188 ----------- Telephone Systems -- 0.6% 375,000 U.S. West Capital Funding, Inc., Note 6.875%, 7/15/2028(c) 269,063 ----------- Transportation Services -- 2.9% 275,000 American President Cos., Ltd., Senior Note 8.000%, 1/15/2024 283,250 136,181 Atlas Air, Inc., Series 1998-1, Class 1A 7.380%, 1/02/2018 128,202 133,068 Atlas Air, Inc., Series 1999-1, Class A1 7.200%, 1/02/2019 125,156 129,929 Atlas Air, Inc., Series 2000-1, Class A 8.707%, 1/02/2019 127,857 300,000 Overseas Shipholding Group, Senior Note 7.500%, 2/15/2024 291,375 350,000 Stena AB, Senior Note 7.500%, 11/01/2013 350,438 ----------- 1,306,278 ----------- Wireless -- 0.3% 150,000 Rogers Wireless Communications, Inc., Senior Secured Note 6.375%, 3/01/2014 138,000 ----------- Wirelines -- 5.9% 200,000 AT&T Corp., Senior Note 8.750%, 11/15/2031 218,000 150,000 Philippine Long Distance Telephone Co., Note, (MTN) 8.350%, 3/06/2017 140,250 700,000 Philippine Long Distance Telephone Co., Note, (MTN) 10.500%, 4/15/2009 794,500 75,000 Qwest Capital Funding, Inc., Guaranteed Note 7.000%, 8/03/2009 (c) 68,625 1,890,000 Qwest Capital Funding, Inc., Note 7.750%, 2/15/2031 1,445,850 ----------- 2,667,225 ----------- Total Bonds and Notes (Identified Cost 42,260,267 $39,739,081) See accompanying notes to financial statements. 27 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Shares Description Value (a) - -------------------------------------------------------------------------------- Preferred Stocks -- 2.9% Electric -- 0.8% 8,000 CMS Energy Trust I Preferred, Convertible, 7.75%, 7/15/2027 $ 357,000 ----------- Packaging -- 0.2% 3,000 Owens-Illinois, Inc. Preferred, Convertible, 4.75%, 12/31/2049(c) 104,550 ----------- Pipelines -- 1.3% 8,000 Williams Holdings of Delaware Preferred, Convertible, 5.50%, 6/01/2033(c) 566,000 ----------- Technology -- 0.4% 175 Lucent Technologies Capital Trust I Preferred, Convertible, 7.75%, 3/15/2017 194,294 ----------- Wirelines -- 0.2% 2,000 Philippine Long Distance Telephone Co. Preferred, Sponsored GDR, Convertible, $24.80, 12/31/2049 99,800 ----------- Total Preferred Stocks (Identified Cost $1,172,782) 1,321,644 ----------- Shares - -------------------------------------------------------------------------------- Common Stocks -- 0.2% Investment Companies -- 0.2% 2,175 High Income Opportunity Fund, Inc. 14,855 3,835 Morgan Stanley Emerging Markets Debt Fund, Inc. 35,129 1,000 PIMCO Strategic Global Government Fund, Inc. 11,900 2,025 Senior High Income Portfolio, Inc. 12,109 1,000 Templeton Emerging Markets Income Fund, Inc.(c) 12,900 ----------- Total Common Stocks (Identified Cost $77,646) 86,893 ----------- Principal Amount - -------------------------------------------------------------------------------- Short Term Investments -- 17.4% $1,463,063 Repurchase Agreement with Investors Bank & Trust Co. dated 9/30/2004 at 1.27% to be repurchased at $1,463,115 on 10/01/2004, collateralized by $1,489,377 Federal National Mortgage Association Bond, 4.142%, due 12/01/2030 valued at $1,536,226 1,463,063 820,498 Bank of America, 1.875%, due 10/19/2004(e) 820,498 132,420 Bank of Montreal, 1.76%, due 10/25/2004(e) 132,420 196,920 Bank of Nova Scotia, 1.75%, due 10/21/2004(e) 196,920 410,249 Bank of Nova Scotia, 1.76%, due 11/12/2004(e) 410,249 467,684 BGI Institutional Money Market Fund(e) 467,684 410,249 BNP Paribas, 1.80%, due 11/23/2004(e) 410,249 246,149 Falcon Asset Securitization Corp, 1.612%, due 10/01/2004(e) 246,149 82,050 Fortis Bank, 1.69%, due 10/14/2004(e) 82,050 245,019 Greyhawk Funding, 1.772%, due 10/19/2004(e) 245,019 266,133 Merrill Lynch Premier Institutional Fund(e) 266,133 656,399 Merrimac Cash Fund-Premium Class(e) 656,399 656,399 Royal Bank of Canada, 1.78%, due 11/10/2004(e) 656,399 246,149 Royal Bank of Scotland, 1.60%, due 10/15/2004(e) 246,149 246,149 Royal Bank of Scotland, 1.65%, due 10/29/2004(e) 246,149 24,615 Royal Bank of Scotland, 1.67%, due 11/02/2004(e) 24,615 549,734 Royal Bank of Scotland, 1.88%, due 12/23/2004(e) 549,734 80,869 Sheffield Receivables Corp, 1.622%, due 10/04/2004(e) 80,869 246,149 Sheffield Receivables Corp, 1.773%, due 10/20/2004(e) 246,149 164,100 Toronto Dominion Bank, 1.70%, due 11/08/2004(e) 164,100 246,149 Wells Fargo, 1.60%, due 10/04/2004(e) 246,149 ----------- Total Short Term Investments (Identified Cost $7,857,146) 7,857,146 ----------- Total Investments -- 114.0% (Identified Cost $48,846,655)(b) $51,525,950 Other assets less liabilities (6,309,252) ----------- Total Net Assets -- 100% $45,216,698 =========== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At September 30, 2004, the net unrealized appreciation on investments based on cost of $48,853,595 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 $ 3,146,690 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (474,335) ----------- Net unrealized appreciation $ 2,672,355 =========== At September 30, 2004, the Fund had a capital loss carryover of approximately $85,140,904 of which $14,939,549 expires on September 30, 2008, $43,374,721 expires on September 30, 2009 and $26,826,634 expires on September 30, 2010. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. For the year ended September 30, 2004, the Fund has elected to defer $0 of capital losses and $522 of foreign currency losses attributable to Post-October losses. At September 30, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $30,075 in undistributed ordinary income and $0 in undistributed long-term gains. (c) All or a portion of this security was on loan to brokers at September 30, 2004. (d) 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. (e) Represents investments of securities lending collateral. (f) Illiquid security. At September 30, 2004, the value of these securities amounted to $1,321,016 or 2.9% of net assets. FRN Floating Rate Note GDR Global Depositary Receipt MTN Medium Term Note yankee U.S. dollar denominated security issued by a non-U.S. company. 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 $3,202,330 or 7.1% of net assets. BRL Brazilian Real GBP British Pound MXN Mexican Peso See accompanying notes to financial statements. 28 - -------------------------------------------------------------------------------- Loomis Sayles High Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited) Short Term Investments 17.4% Electric 7.3 Paper 6.4 Wirelines 5.9 Electronics 5.7 Media Cable 5.4 Pipelines 4.5 Retailers 4.3 Food & Beverage 3.3 Real Estate Investment Trusts 3.2 Foreign Local Governments 3.0 Refining 3.0 Transportation Services 2.9 Metals and Mining 2.8 Automotive 2.7 Pharmaceuticals 2.6 Airlines 2.5 Supranationals 2.3 Packaging 2.1 Electric Utilities 2.0 Information/Data Technology 2.0 Construction Machinery 2.0 Other, less than 2% each 20.7 See accompanying notes to financial statements. 29 - -------------------------------------------------------------------------------- Loomis Sayles Limited Term Government and Agency Fund Schedule of Investments - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Bonds and Notes -- 99.3% of Total Net Assets Asset-Backed -- 4.8% $ 2,240,000 Residential Asset Mortgage Products, Inc., Series 2003-RZ5, Class A3 3.800%, 7/25/2030 $ 2,205,889 1,376,000 Residential Funding Mortgage Securities II, Series 2003-HI4, Class AI4 4.590%, 4/25/2018 1,390,678 1,900,000 Residential Funding Mortgage Securities II, Series 2004-HI3, Class A3 3.810%, 12/25/2016 1,896,734 670,000 Residential Funding Mortgage Securities II, Series 2004-HI3, Class A4 4.630%, 3/25/2019 669,477 ------------ 6,162,778 ------------ Government Agencies -- 13.8% 2,935,000 Federal Farm Credit Bank 2.375%, 10/02/2006 2,906,275 6,200,000 Federal Home Loan Bank 3.625%, 11/14/2008 6,226,176 5,000,000 FHLMC 5.750%, 4/15/2008 5,399,950 3,000,000 FNMA 5.500%, 5/02/2006 3,131,991 ------------ 17,664,392 ------------ Mortgage Related -- 50.0% 8,133,609 FHLMC 4.000%, with various maturities to 2019(c) 7,944,468 994,554 FHLMC 4.500%, 5/01/2034 959,081 623,302 FHLMC 7.000%, 2/01/2016 661,130 118,480 FHLMC 7.500%, with various maturities to 2026(c) 126,056 103,911 FHLMC 8.000%, with various maturities to 2015(c) 107,809 7,625 FHLMC 10.000%, 7/01/2019 8,557 733,530 FHLMC 11.500%, with various maturities to 2020(c) 825,693 8,978,017 FNMA 4.000%, with various maturities to 2019(c) 8,771,295 8,132,814 FNMA 4.500%, with various maturities to 2034(c) 7,846,741 6,904,241 FNMA 5.500%, with various maturities to 2033(c) 7,121,218 14,081,345 FNMA 6.000%, with various maturities to 2033(c) 14,739,561 9,289,853 FNMA 6.500%, with various maturities to 2034(c) 9,764,691 585,902 FNMA 7.000%, 12/01/2022 631,372 1,908,154 FNMA 7.500%, with various maturities to 2032(c) 2,040,238 279,419 FNMA 8.000%, with various maturities to 2016(c) 298,452 284,180 GNMA 6.000%, 12/15/2031 295,259 1,341,086 GNMA 7.000%, with various maturities to 2031(c) 1,431,924 Mortgage Related -- continued $ 25,106 GNMA 12.500%, with various maturities to 2015(c) $ 29,016 268,892 GNMA 16.000%, with various maturities to 2012(c) 318,103 92,419 GNMA 17.000%, with various maturities to 2011(c) 110,763 ------------ 64,031,427 ------------ Treasuries -- 30.7% 6,100,000 U.S. Treasury Note 1.625%, 2/28/2006 6,037,811 4,300,000 U.S. Treasury Note 1.875%, 12/31/2005 4,277,997 10,200,000 U.S. Treasury Note 2.000%, 8/31/2005(d) 10,184,465 1,290,000 U.S. Treasury Note 2.250%, 2/15/2007(d) 1,276,243 5,330,000 U.S. Treasury Note 2.375%, 8/15/2006 5,312,928 2,500,000 U.S. Treasury Note 3.125%, 10/15/2008 2,496,290 4,250,000 U.S. Treasury Note 3.375%, 11/15/2008(d) 4,280,048 4,180,000 U.S. Treasury Note 6.125%, 8/15/2007(d) 4,554,729 750,000 U.S. Treasury Note 6.625%, 5/15/2007(d) 822,392 ------------ 39,242,903 ------------ Total Bonds and Notes (Identified Cost $126,604,258) 127,101,500 ------------ Principal Amount - -------------------------------------------------------------------------------- Short Term Investments -- 15.9% 462,787 Repurchase Agreement with Investors Bank & Trust Co. dated 9/30/2004 at 1.27% to be repurchased at $462,803 on 10/01/2004, collateralized by $488,325 Country Wide Home Loan, 2.29% due 5/25/2034 valued at $485,926 462,787 2,556,513 Bank of America, 1.875%, due 10/19/2004(e) 2,556,513 412,594 Bank of Montreal, 1.76%, due 10/25/2004(e) 412,594 613,563 Bank of Nova Scotia, 1.75%, due 10/21/2004(e) 613,563 1,278,256 Bank of Nova Scotia, 1.76%, due 11/12/2004(e) 1,278,256 1,457,212 BGI Institutional Money Market Fund(e) 1,457,212 1,278,256 BNP Paribas, 1.80%, due 11/23/2004(e) 1,278,256 766,954 Falcon Asset Securitization Corp, 1.612%, due 10/01/2004(e) 766,954 255,651 Fortis Bank, 1.69%, due 10/14/2004(e) 255,651 763,434 Greyhawk Funding, 1.772%, due 10/19/2004(e) 763,434 829,218 Merrill Lynch Premier Institutional Fund(e) 829,218 2,045,210 Merrimac Cash Fund-Premium Class(e) 2,045,210 2,045,210 Royal Bank of Canada, 1.78%, due 11/10/2004(e) 2,045,210 766,954 Royal Bank of Scotland, 1.60%, due 10/15/2004(e) 766,954 766,954 Royal Bank of Scotland, 1.65%, due 10/29/2004(e) 766,954 76,695 Royal Bank of Scotland, 1.67%, due 11/02/2004(e) 76,695 1,712,864 Royal Bank of Scotland, 1.88%, due 12/23/2004(e) 1,712,864 251,970 Sheffield Receivables Corp, 1.622%, due 10/04/2004(e) 251,970 766,954 Sheffield Receivables Corp, 1.773%, due 10/20/2004(e) 766,954 511,303 Toronto Dominion Bank, 1.70%, due 11/08/2004(e) 511,303 766,954 Wells Fargo, 1.60%, due 10/04/2004(e) 766,954 ---------- Total Short Term Investments (Identified Cost $20,385,506) 20,385,506 ---------- See accompanying notes to financial statements. 30 - -------------------------------------------------------------------------------- Loomis Sayles Limited Term Government and Agency Fund Schedule of Investments(continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Total Investments -- 115.2% (Identified Cost $146,989,764)(b) $147,487,006 Other assets less liabilities (19,497,762) ------------ Total Net Assets -- 100% $127,989,244 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At September 30, 2004, the net unrealized appreciation on investments based on cost of $147,204,499 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 $ 800,316 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (517,809) --------- Net unrealized appreciation $ 282,507 ========= At September 30, 2004, the Fund had a capital loss carryover of approximately $18,142,649 of which $2,731,339 expires on September 30, 2005, $10,626,315 expires on September 30, 2007, $4,165,768 expires on September 30, 2008, $425,323 expires on September 30, 2011 and $193,904 expires on September 30, 2012. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. At September 30, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $42,280 in undistributed ordinary income and $0 in undistributed long-term gains. For the year ended September 30, 2004, the Fund has elected to defer $1,140,873 of capital losses attributable to Post-October losses. (c) 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. (d) All or a portion of this security was on loan to brokers at September 30, 2004. (e) Represents investments of securities lending collateral. FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association GNMA Government National Mortgage Association Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited) Mortgage Related 50.0% Treasures 30.7 Short Term Investments 15.9 Government Agencies 13.8 Asset Backed Securities 4.8 See accompanying notes to financial statements. 31 - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund Schedule of Investments - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Tax Exempt Obligations -- 97.1% of Total Net Assets Broward County, FL, Resource Recovery -- 1.2% $1,000,000 Wheelabrator South Broward, 5.000%, 12/01/2007 $ 1,070,970 ----------- Highlands County, FL, Health Facilities Authority -- 1.2% 1,000,000 Adventis Health System, 5.875%, 11/15/2029 1,070,410 ----------- Martha's Vineyard, MA -- 1.2% 1,000,000 Land Bank Revenue, 5.000%, 5/01/2032, (AMBAC insured) 1,020,390 ----------- Massachusetts -- 5.8% 4,000,000 State Refunding Series A, 6.500%, 11/01/2014, (AMBAC insured) 4,979,120 ----------- Massachusetts Bay Transportation Authority -- 6.6% 3,000,000 Assessment Series A, 5.250%, 7/01/2030 3,155,220 2,500,000 Series A, 5.000%, 7/01/2032 2,540,025 ----------- 5,695,245 ----------- Massachusetts Development Finance Agency -- 15.3% 2,000,000 Cambridge Street Development Series A, 5.125%, 2/01/2034, (MBIA insured) 2,057,000 1,000,000 Hampshire College, 5.625%, 10/01/2024 1,049,020 4,000,000 Mount Holyoke College, 5.250%, 7/01/2031 4,167,440 2,800,000 Refunding Springfield Resource Recovery-A, 5.625%, 6/01/2019 2,933,084 1,100,000 Visual and Performing Arts, 6.000%, 8/01/2021 1,326,754 1,500,000 WGBH Educational Foundation Series A, 5.375%, 1/01/2042, (AMBAC insured) 1,583,490 ----------- 13,116,788 ----------- Massachusetts Health & Educational Facilities Authority -- 34.4% 1,160,000 Baystate Medical Center Series F, 5.700%, 7/01/2027 1,207,015 2,000,000 Boston University, 5.000%, 10/01/2039 2,036,900 2,200,000 Catholic Health East, 5.500%, 11/15/2032 2,234,518 3,000,000 Dana Farber Series G-1, 6.250%, 12/01/2022 3,209,970 3,000,000 Harvard Univerity Series N, 6.250%, 4/01/2020 3,758,040 2,925,000 Nichols College Series C, 6.000%, 10/01/2017 3,039,426 2,000,000 Partners Healthcare Systems Series B, 5.250%, 7/01/2029 2,039,400 2,500,000 Partners Healthcare Systems Series C, 5.750%, 7/01/2021 2,734,800 1,500,000 Tufts University Series I, 5.250%, 2/15/2030 1,558,830 1,000,000 University of Massachusetts Project Series C, 5.250%, 10/01/2031, (MBIA insured) 1,046,560 2,000,000 University of Massachusetts Series C, 5.125%, 10/01/2034, (FGIC insured) 2,061,620 2,000,000 Wellesley College Series F, 5.125%, 7/01/2039 2,047,120 1,315,000 Wheaton College Series E, 5.000%, 7/01/2017 1,412,994 1,030,000 Williams College Series H, 5.000%, 7/01/2017 1,118,240 ----------- 29,505,433 ----------- Massachusetts Housing Finance Agency -- 3.2% 665,000 Single Family Mortgage Series 21, 7.125%, 6/01/2025 665,884 2,000,000 Single Family Mortgage Series A, 4.600%, 12/01/2015 2,066,940 ----------- 2,732,824 ----------- Massachusetts Port Authority -- 3.5% 1,750,000 Delta Air Lines, Inc. Project Series A, 5.500%, 1/01/2019, (AMBAC insured) 1,838,218 1,200,000 Series A, 5.000%, 7/01/2033, (MBIA insured) 1,215,384 ----------- 3,053,602 ----------- Massachusetts Water Resources Authority -- 7.1% 2,000,000 General Series B, 5.125%, 8/01/2027, (MBIA insured) 2,078,880 3,240,000 Series A, 6.500%, 7/15/2019, (FGIC insured) 3,999,391 ----------- 6,078,271 ----------- Michigan Hospital Finance Authority -- 1.9% 1,500,000 Oakwood Obligated Group, 5.500%, 11/01/2017 1,613,430 ----------- New England Education Loan Marketing -- 4.0% 3,000,000 Student Loan Revenue Bond Sub-Issue H, 6.900%, 11/01/2009 3,399,330 ----------- Puerto Rico Commonwealth Aqueduct & Sewer Authority -- 5.1% 3,000,000 Aqueduct & Sewer Authority, 6.250%, 7/01/2013 3,585,120 655,000 Aqueduct & Sewer Authority, 10.250%, 7/01/2009 793,120 ----------- 4,378,240 ----------- Puerto Rico Public Finance Corporation -- 3.9% 3,000,000 Commonwealth Appropriation Series A, 5.750%, 8/01/2027 3,377,160 ----------- University of Massachusetts Building Authority -- 2.7% 2,200,000 SR - Series 1, 5.250%, 11/01/2028, (AMBAC insured) 2,305,600 ----------- Total Tax Exempt Obligations (Cost $78,778,370) 83,396,813 ----------- See accompanying notes to financial statements. 32 - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Short Term Investment -- 1.5% of Total Net Assets $1,278,177 Repurchase Agreement with Investors Bank & Trust Co. dated 9/30/2004 at 1.27% to be repurchased at $1,278,223 on 10/1/2004, collateralized by $1,313,528 Federal National Mortgage Association Bond, 5.06%, due 4/01/2032 valued at $1,342,086 $ 1,278,177 ----------- Total Short Term Investment (Cost $1,278,177) 1,278,177 ----------- Total Investments -- 98.6% (Identified Cost $80,056,547)(b) 84,674,990 Other assets less liabilities 1,186,102 ----------- Total Net Assets -- 100.0% $85,861,092 =========== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At September 30, 2004, the net unrealized appreciation on investments based on cost of $80,193,029 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 $ 4,675,533 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (193,572) ---------- Net unrealized appreciation $4,481,961 ========== At September 30, 2004, the Fund had a capital loss carryover of approximately $2,269,828 of which $1,149,888 expires on September 30, 2007, $116,500 expires on September 30, 2008 and $1,003,440 expires on September 30, 2010. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. For the year ended September 30, 2004, the Fund has elected to defer $601,844 of capital losses due to post-October losses. At September 30, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $127,003 in undistributed ordinary income and $0 in undistributed long-term gains. AMBAC American Municipal Bond Assurance Corp. FGIC Financial Guarantee Insurance Company MBIA Municipal Bond Investors Assurance Corp. Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited) College 17.3% University 14.0 Water 12.2 Financial 8.2 Hospital 7.5 Student Loan 4.0 State General Obligation 3.9 Special Assesment 3.7 Pooled Funds 3.4 Hospital System Bonds 3.2 Revenue 3.1 Mass Transit 3.0 Health 2.6 Housing - Multifamily 2.4 Airport 2.1 Other, less than 2% each 8.0 See accompanying notes to financial statements. 33 - -------------------------------------------------------------------------------- Loomis Sayles Municipal Income Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Tax Exempt Obligations -- 97.8% of Total Net Assets Arizona -- 0.8% $1,000,000 Maricopa County, AZ, Pollution Control Corp., Public Service Co. of New Mexico, 4.000%, 1/01/2038 $ 1,001,340 ----------- California -- 10.6% 1,000,000 California Health Facilities Financing Authority, Multiple Obligors, 4.950%, 7/01/2026 1,042,670 2,000,000 California State, 5.125%, 6/01/2027 2,039,740 1,000,000 California State Economic Recovery, 5.000%, 7/01/2023 1,089,040 5,000,000 California State Public Works Board, Coalinga State Hospital, 5.000%, 6/01/2010 5,442,250 3,000,000 Sacramento, CA, Power Authority, 6.000%, 7/01/2022 3,165,000 ----------- 12,778,700 ----------- Colorado -- 1.8% 2,000,000 Denver, CO, City & County Airport, 5.250%, 11/15/2023, (MBIA insured) 2,112,300 ----------- District of Columbia -- 4.1% 1,700,000 District of Columbia, 5.500%, 6/01/2014 1,880,336 3,000,000 Metropolitan Washington D.C. Airports Authority, 5.125%, 10/01/2029, (FGIC insured) 3,053,580 ----------- 4,933,916 ----------- Florida -- 7.5% 1,000,000 Broward County, FL, Resource Recovery, Wheelabrator South Broward, 5.000%, 12/01/2007 1,070,970 1,750,000 Coral Gables, FL, Health Facilities Authority, Multiple Obligors, 5.000%, 8/15/2034 1,898,102 3,000,000 Escambia County, FL, Pollution Control, 6.900%, 8/01/2022 3,077,700 3,000,000 Highlands County, FL, Health Facilities Authority, Multiple Obligors, 5.375%, 11/15/2035 3,033,780 ----------- 9,080,552 ----------- Illinois -- 6.5% 1,000,000 Chicago, IL, Skyway Toll Bridge, 5.375%, 1/01/2011 1,083,850 2,000,000 Illinois Educational Facilities Authority, University of Chicago, 5.000%, 7/01/2033 2,027,060 1,500,000 Illinois State, 5.400%, 12/01/2020, (MBIA insured) 1,645,065 3,000,000 Metropolitan Pier & Exposition Authority, IL, 5.250%, 6/15/2042, (MBIA insured) 3,114,870 ----------- 7,870,845 ----------- Indiana -- 3.5% 320,000 Indiana Transportation Finance Authority, 5.750%, 12/01/2025 363,184 1,680,000 Indiana Transportation Finance Authority, 5.750%, 12/01/2025 1,782,026 2,000,000 Indianapolis, IN, Local Public Improvement Bond Bank, 5.250%, 7/01/2033, (MBIA insured) 2,075,920 ----------- 4,221,130 ----------- Massachusetts -- 0.6% 765,000 Massachusetts State Housing Finance Agency, 6.600%, 12/01/2026 781,409 ----------- Michigan-- 6.2% $1,000,000 Michigan State Comprehensive Transportation, 5.250%, 5/15/2022 $ 1,072,570 2,850,000 Michigan State Hospital Finance Authority, Henry Ford Health System, 5.500%, 3/01/2014 3,089,628 1,100,000 Michigan State Hospital Finance Authority, Oakwood Obligated Group, 5.500%, 11/01/2014 1,197,747 2,000,000 University of Michigan, 5.250%, 12/01/2020 2,094,660 ----------- 7,454,605 ----------- Minnesota -- 1.7% 2,000,000 Minnesota State Municipal Power Agency, 5.250%, 10/01/2024 2,105,580 ----------- Mississippi -- 4.4% 2,000,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control, 6.700%, 4/01/2022 2,349,500 2,500,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control, 6.800%, 4/01/2022 2,965,450 ----------- 5,314,950 ----------- New Jersey -- 0.8% 1,000,000 New Jersey Health Care Facilities Financing Authority, Catholic Health East, 5.375%, 11/15/2033 1,022,110 ----------- New York-- 13.4% 3,000,000 New York State Dormitory Authority, 5.500%, 5/15/2013 3,414,960 2,740,000 New York State Dormitory Authority, 5.750%, 7/01/2013 3,163,631 3,000,000 New York State Municipal Bond Bank Agency, 5.250%, 6/01/2020 3,224,940 2,000,000 New York, NY, 4.250%, 5/15/2019 2,040,200 2,000,000 New York, NY, 6.000%, 1/15/2020 2,282,940 1,000,000 Port Authority, NY/NJ, 7.000%, 10/01/2007 1,036,840 1,000,000 Triborough Bridge & Tunnel Authority, 5.000%, 1/01/2032 1,012,620 ----------- 16,176,131 ----------- North Carolina -- 1.2% 1,300,000 North Carolina Eastern Municipal Power Agency, 5.500%, 1/01/2012 1,427,517 ----------- Oregon -- 5.0% 1,750,000 Multnomah County, OR, Hospital Facilities Authority, Providence Health System, 5.250%, 10/01/2012 1,941,608 4,000,000 Western Generation Agency(c) 7.400%, 1/01/2016 4,110,560 ----------- 6,052,168 ----------- Pennsylvania -- 9.7% 3,000,000 Pennsylvania Economic Development Financing Authority, 6.600%, 1/01/2019 3,035,790 3,000,000 Pennsylvania Economic Development Financing Authority, Sun Co., Inc., 7.600%, 12/01/2024 3,084,240 5,000,000 Pennsylvania State Industrial Development Authority, 5.500%, 7/01/2019, (AMBAC insured) 5,596,100 ----------- 11,716,130 ----------- See accompanying notes to financial statements. 34 - -------------------------------------------------------------------------------- Loomis Sayles Municipal Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Tax Exempt Obligations -- (continued) Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Puerto Rico-- 2.8% $1,000,000 Puerto Rico Commonwealth Infrastructure Financing Authority, 5.500%, 10/01/2040 $ 1,078,050 2,000,000 Puerto Rico Public Finance Corp., 5.750%, 8/01/2027 2,251,440 ------------ 3,329,490 ------------ South Carolina-- 2.6% 3,000,000 Greenville County, SC, School District, 5.500%, 12/01/2028 3,156,780 ------------ South Dakota -- 1.0% 1,250,000 South Dakota Health & Educational Facilities Authority, Sioux Valley Hospital, 5.250%, 11/01/2027 1,259,088 ------------ Tennessee -- 2.1% 2,500,000 Maury County, TN, Industrial Development Board, Saturn Corp./General Motors Corp., 6.500%, 9/01/2024 2,568,425 ------------ Texas -- 9.6% 4,000,000 Dallas-Fort Worth, TX, International Airport, 5.500%, 11/01/2033 4,198,840 1,975,000 El Paso, TX, 5.875%, 8/15/2017 2,157,885 1,000,000 Houston, TX, Water & Sewer System, 5.250%, 12/01/2010, (FGIC insured) 1,127,960 1,000,000 Katy, TX, Independent School District, 5.125%, 2/15/2020 1,061,960 3,000,000 Lewisville, TX, Independent School District, 5.250%, 8/15/2027 3,101,490 ------------ 11,648,135 ------------ Washington -- 1.9% 2,000,000 Energy Northwest, WA, Electric, Project No. 1, 5.500%, 7/01/2014 2,289,520 ------------ Total Tax Exempt Obligations (Identified Cost $112,769,531) 118,300,821 ------------ Short Term Investment -- 0.8% of Total Net Assets 954,346 Repurchase Agreement with Investors Bank & Trust Co. dated 9/30/2004 at 1.27% to be repurchased at $954,379 on 10/1/2004, collateralized by $981,122 Federal Home Loan Mortagage Bond, 5.52%, due on 8/1/2032 valued at 1,002,063 954,346 ------------ Total Short Term Investment (Cost $954,346) 954,346 ------------ Total Investments -- 98.6% (Identified Cost $113,723,877)(b) 119,255,167 Other assets less liabilities 1,633,326 ------------- Total Net Assets-- 100.0% $120,888,493 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At September 30, 2004, the net unrealized appreciation on investments based on cost of $114,084,613 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $ 5,231,670 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (61,116) ------------ Net unrealized appreciation $ 5,170,554 ============ (c) Illiquid security. At September 30, 2004, the value of these securities amounted to $4,110,560 or 3.4% of net assets. At September 30, 2004, the Fund had a capital loss carryover of approximately $1,839,271 of which $1,700,392 expires on September 30, 2007 and $138,879 expires on September 30, 2012. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. At September 30, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $355,327 in undistributed ordinary income and $0 in undistributed long-term gains. For the year ended September 30, 2004, the Fund has elected to defer $57,748 of capital losses due to post-October losses. AMBAC American Municipal Bond Assurance Corp. FGIC Financial Guarantee Insurance Company MBIA Municipal Bond Investors Assurance Corp. Holdings By Revenue Source at September 30, 2004 (unaudited) % of Net Assets --------------- University 8.9% Solid Waste Disposal 6.9 Improvement 6.1 Insured 6.0 Various Purpose 5.8 Electric 5.6 Pooled Funds 4.7 Financial 4.6 State Lease 4.5 Revenue 4.4 Hospital 3.5 Paper/Forest Products 3.4 City and Town 3.3 Municipal Bond Bank 2.7 Water 2.6 Public Power/Utility 2.6 Development 2.6 Hospital System Bonds 2.6 Mining 2.5 Other, less than 2% each 15.3 See accompanying notes to financial statements. 35 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Bonds and Notes -- 84.0% of Total Net Assets Convertible Bonds -- 4.2% Canada -- 1.0% $ 5,750,000 Nortel Networks Corp., Guaranteed Senior Note 4.250%, 9/01/2008(c) $ 5,548,750 1,500,000 Rogers Communications, Inc., Note 2.000%, 11/26/2005 1,441,875 433,000 TELUS Corp., Note 6.750%, 6/15/2010, (CAD) 358,376 ------------ 7,349,001 ------------ United Kingdom -- 1.3% 3,575,000 Colt Telecom Group PLC, Note 2.000%, 12/16/2006, (EUR) 5,185,545 3,270,000 Colt Telecom Group PLC, Note 2.000%, 4/03/2007, (EUR) 4,753,298 ------------ 9,938,843 ------------ United States -- 1.9% 1,819,000 Amkor Technology, Inc., Note 5.000%, 3/15/2007(c) 1,518,865 200,000 Builders Transportation, Inc., Subordinated Note 6.500%, 5/01/2011(d)(e)(f)(g)(h) 20 1,000,000 Builders Transportation, Inc., Subordinated Note 8.000%, 8/15/2005(d)(e)(f)(g)(h) 100 400,000 Corning, Inc., Senior Note 3.500%, 11/01/2008 470,000 194,000 Dixie Group, Inc., Subordinated Note 7.000%, 5/15/2012 173,145 2,400,000 Inhale Therapeutic Systems, Inc., Subordinated Note 3.500%, 10/17/2007 2,241,000 745,000 Kulicke & Soffa Industries, Inc., Subordinated Note, Convertible 0.500%, 11/30/2008(c) 523,362 2,822,000 Maxtor Corp., Subordinated Note 5.750%, 3/01/2012(h) 2,483,360 625,000 Nextel Communications, Inc., Senior Note 5.250%, 1/15/2010(c) 622,656 500,000 Preston Corp., Subordinated Note 7.000%, 5/01/2011 450,000 355,000 Richardson Electronics, Ltd., Subordinated Note 7.250%, 12/15/2006 355,000 4,750,000 Vertex Pharmaceuticals, Inc., Note, 144A 5.750%, 2/15/2011 4,993,437 ------------ 13,830,945 ------------ Total Convertible Bonds (Identified Cost $26,937,128) 31,118,789 ------------ Non-Convertible Bonds -- 79.8% Argentina -- 0.4% 3,500,000 Argentine Republic 8.875%, 3/01/2029(g) 797,825 2,405,000 Pecom Energia SA, Note, 144A 8.125%, 7/15/2010 2,398,987 ------------ 3,196,812 ------------ Brazil -- 2.2% 134,867 Republic of Brazil 8.000%, 4/15/2014 133,357 5,055,000 Republic of Brazil 8.250%, 1/20/2034 4,506,532 6,000,000 Republic of Brazil 8.875%, 4/15/2024 5,748,000 $ 5,808,000 Republic of Brazil 10.125%, 5/15/2027 $ 6,156,480 ------------ 16,544,369 ------------ Canada -- 15.7% 2,000,000 Calpine Canada Energy Finance ULC, Note 8.750%, 10/15/2007, (CAD) 1,108,823 14,000,000 Canadian Government 4.250%, 9/01/2008, (CAD) 11,269,856 7,210,000 Canadian Government 4.500%, 9/01/2007, (CAD) 5,862,279 13,540,000 Canadian Government 6.000%, 9/01/2005, (CAD) 11,027,711 18,000,000 Canadian Government 6.000%, 6/01/2008, (CAD) 15,351,180 3,550,000 Nortel Networks Corp., Note 6.875%, 9/01/2023(c) 3,248,250 5,990,000 Province of British Columbia 5.250%, 12/01/2006, (CAD) 4,929,818 4,240,000 Province of British Columbia 6.000%, 6/09/2008, (CAD) 3,603,631 13,000,000 Province of Manitoba 4.450%, 12/01/2008, (CAD) 10,468,676 6,685,000 Province of Manitoba 5.750%, 6/02/2008, (CAD) 5,635,128 1,525,000 Province of Ontario 3.500%, 9/08/2006, (CAD) 1,212,874 17,000,000 Province of Ontario 5.700%, 12/01/2008, (CAD) 14,319,262 6,240,000 Province of Ontario 5.900%, 3/08/2006, (CAD) 5,131,963 2,525,000 Rogers Wireless Communications, Inc., Senior Secured Note 6.375%, 3/01/2014 2,323,000 8,500,000 Saskatchewan Province Zero Coupon, 4/10/2014, (CAD) 4,146,729 18,470,000 Saskatchewan Province 5.500%, 6/02/2008, (CAD) 15,444,963 850,000 Tembec Industries, Inc., Senior Note 7.750%, 3/15/2012 854,250 ------------ 115,938,393 ------------ Cayman Islands -- 0.7% 1,000,000 Enersis SA, Cayman Island, Note, (yankee) 7.400%, 12/01/2016 1,047,358 3,905,000 Vale Overseas, Ltd., Note 8.250%, 1/17/2034 3,797,612 ------------ 4,844,970 ------------ Chile -- 1.6% 4,875,000 Empresa Nacional de Electricidad SA, Chile, Note 7.875%, 2/01/2027 4,969,165 250,000 Empresa Nacional de Electricidad SA, Chile, Note 8.350%, 8/01/2013 279,064 1,700,000 Empresa Nacional de Electricidad SA, Chile, Note 8.625%, 8/01/2015 1,943,280 4,525,000 Enersis SA, Chile, Note 7.375%, 1/15/2014 4,742,720 ------------ 11,934,229 ------------ See accompanying notes to financial statements. 36 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Dominican Republic -- 0.4% $ 3,390,000 Dominican Republic, 144A 9.040%, 1/23/2013 $ 2,627,250 ----------- Hong Kong -- 0.7% 4,505,000 Bangkok Bank Public Co., Hong Kong, Note, 144A 9.025%, 3/15/2029 5,043,780 ----------- Malaysia -- 0.8% 5,200,000 Tenaga Nasional Berhad, Note, 144A 7.500%, 11/01/2025 5,842,746 ----------- Mexico -- 4.7% 3,905,000 Grupo Transportacion Ferroviaria Mexicana SA de CV, Senior Note, (yankee) 0/11.750%, 6/15/2009(i) 3,944,050 4,350,000 Petroleos Mexicanos, Global Guaranteed Note, (yankee) 9.500%, 9/15/2027 5,298,300 3,000,000 Petroleos Mexicanos, Note, 144A, (MTN), (FRN), (yankee) 8.625%, 12/01/2023 3,390,000 269,200,000 United Mexican States 9.000%, 12/20/2012, (MXN) 22,347,430 ----------- 34,979,780 ----------- Norway -- 0.7% 10,000,000 Kingdom of Norway 5.500%, 5/15/2009, (NOK) 1,610,457 22,740,000 Kingdom of Norway 6.750%, 1/15/2007, (NOK) 3,682,468 ----------- 5,292,925 ----------- Philippines -- 1.1% 3,100,000 Bangko Sentral Ng Pilipinas, Note, (yankee) 8.600%, 6/15/2027 2,666,000 3,700,000 Philippine Long Distance Telephone Co., Note, (MTN) 8.350%, 3/06/2017 3,459,500 1,914,188 Quezon Power (Philippines) Ltd., Senior Secured Note, (yankee) 8.860%, 6/15/2017 1,722,769 ----------- 7,848,269 ----------- Republic of Korea -- 0.0% 300,000 Samsung Electronics Co., Ltd., 144A 7.700%, 10/01/2027 336,415 ----------- Singapore -- 0.1% 1,050,000 SP PowerAssets, Ltd., Series E, Note, (MTN) 3.730%, 10/22/2010, (SGD) 647,015 ----------- South Africa -- 0.3% 11,405,000 Republic of South Africa 12.500%, 12/21/2006, (ZAR) 1,897,325 ----------- Supranational -- 3.6% 80,000,000 Inter-American Development Bank, Series E, Note, (MTN) Zero Coupon, 5/11/2009, (BRL)(h) 13,917,540 22,300,000 International Bank for Reconstruction & Development, Note, (MTN) Zero Coupon, 8/20/2007, (NZD) 12,530,061 ----------- 26,447,601 ----------- Sweden -- 2.7% 132,265,000 Kingdom of Sweden 6.500%, 5/05/2008, (SEK) 19,984,039 ----------- United Kingdom -- 0.9% 500,000 NTL CABLE PLC, Note, 144A 8.750%, 4/15/2014(c) 541,250 3,605,000 NTL CABLE PLC, Note, 144A 9.750%, 4/15/2014, (GBP) 6,493,680 ----------- 7,034,930 ----------- United States -- 39.1% $ 5,565,000 AES Corp. (The), Note 8.375%, 3/01/2011, (GBP) $10,175,344 4,020,000 AES Corp. (The), Senior Note 7.750%, 3/01/2014 4,150,650 1,875,000 AES Corp. (The), Senior Subordinated Note 8.875%, 11/01/2027 1,802,344 6,540,000 AK Steel Corp., Guaranteed Senior Note 7.750%, 6/15/2012(c) 6,392,850 1,750,000 Altria Group, Inc., Note 7.000%, 11/04/2013 1,825,885 750,000 American Airlines, Inc., Series 1999-1, Class A2 7.024%, 10/15/2009 737,007 9,853,000 American President Cos., Ltd., Senior Note 8.000%, 1/15/2024 10,148,590 1,000,000 Amkor Technology, Inc., Senior Note 7.125%, 3/15/2011 820,000 475,000 Amkor Technology, Inc., Senior Note 7.750%, 5/15/2013(c) 389,500 500,000 Amkor Technology, Inc., Senior Subordinated Note 10.500%, 5/01/2009(c) 425,000 8,000,000 ASIF Global Financing, Note, 144A 2.380%, 2/26/2009, (SGD) 4,704,234 788,702 Atlas Air Inc. 9.057%, 1/02/2014 589,271 7,063,273 Atlas Air, Inc., Series 1998-1, Class 1A 7.380%, 1/02/2018 6,649,436 9,258,941 Atlas Air, Inc., Series 1998-1, Class 1B 7.680%, 1/02/2014 6,624,680 4,036,395 Atlas Air, Inc., Series 1999-1, Class A1 7.200%, 1/02/2019 3,796,406 499,597 Atlas Air, Inc., Series 1999-1, Class A2 6.880%, 7/02/2009 466,327 3,456,920 Atlas Air, Inc., Series 1999-1, Class B 7.630%, 1/02/2015 2,453,152 866,194 Atlas Air, Inc., Series 2000-1, Class A 8.707%, 1/02/2019 852,378 800,000 Bausch & Lomb, Inc., Note 7.125%, 8/01/2028 845,901 500,000 Boise Cascade Corp., Note, (MTN) 7.450%, 8/10/2011 574,774 6,964,000 Borden Chemical, Inc., Note 7.875%, 2/15/2023 5,640,840 1,850,000 Borden Chemical, Inc., Note 9.200%, 3/15/2021 1,711,250 2,099,000 Borden, Inc., Note 8.375%, 4/15/2016 1,857,615 500,000 Bowater, Inc., Note 6.500%, 6/15/2013(c) 485,149 1,155,000 Calpine Corp., Senior Note 7.750%, 4/15/2009(c) 739,200 900,000 Calpine Corp., Senior Note 7.875%, 4/01/2008(c) 607,500 900,000 Calpine Corp., Senior Note 8.500%, 2/15/2011(c) 576,000 2,075,000 Calpine Corp., Senior Secured Note, 144A 8.750%, 7/15/2013(c) 1,566,625 10,660,000 Charter Communications Holdings, Inc., Senior Note 9.625%, 11/15/2009 8,394,750 See accompanying notes to financial statements. 37 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- United States -- continued $ 400,000 Charter Communications Holdings, Inc., Senior Note 10.000%, 4/01/2009 $ 324,000 1,725,000 Charter Communications Holdings, Inc., Senior Note 10.000%, 5/15/2011 1,328,250 5,350,000 Coastal Corp., Note 6.950%, 6/01/2028 4,306,750 3,320,000 Columbia/HCA Healthcare Corp., Note 7.050%, 12/01/2027 3,227,462 500,000 Columbia/HCA Healthcare Corp., Note 7.500%, 12/15/2023 512,767 500,000 Columbia/HCA Healthcare Corp., Note, (MTN) 7.580%, 9/15/2025 521,465 250,000 Continental Airlines, Inc., Senior Note 8.000%, 12/15/2005(c) 228,750 1,239,119 Continental Airlines, Inc., Series 1997-4, Class 4A 6.900%, 1/02/2018 1,193,073 2,348,414 Continental Airlines, Inc., Series 1997-4, Class 4B 6.900%, 1/02/2017 1,871,236 774,448 Continental Airlines, Inc., Series 1998-1, Class 1B 6.748%, 3/15/2017 595,714 1,686,375 Continental Airlines, Inc., Series 1999-1, Class A 6.545%, 2/02/2019 1,627,495 459,958 Continental Airlines, Inc., Series 1999-1, Class C 6.954%, 8/02/2009 350,025 2,056,686 Continental Airlines, Inc., Series 1999-2, Class B 7.566%, 3/15/2020 1,590,634 598,749 Continental Airlines, Inc., Series 2001-1, Class A1 6.703%, 6/15/2021 557,988 341,694 Continental Airlines, Inc., Series 2001-1, Class B 7.373%, 12/15/2015 268,008 6,225,000 Corning, Inc., Note 5.900%, 3/15/2014 6,084,483 6,220,000 Corning, Inc., Note 6.200%, 3/15/2016 6,110,466 650,000 Corning, Inc., Note 6.750%, 9/15/2013 677,446 1,000,000 Corning, Inc., Note 6.850%, 3/01/2029 928,553 350,000 Corning, Inc., Note, (MTN) 8.300%, 4/04/2025 364,648 400,000 CSC Holdings, Inc., Senior Note 7.875%, 2/15/2018 413,000 250,000 CSC Holdings, Inc., Series B, Senior Note 8.125%, 7/15/2009 265,625 250,000 CSC Holdings, Inc., Series B, Senior Note 8.125%, 8/15/2009 265,625 2,145,000 Cummins, Inc., Note 7.125%, 3/01/2028 2,145,000 145,000 Dana Corp., Note 9.000%, 8/15/2011, (EUR) 216,178 7,285,000 Dillard's Department Stores, Inc., Note 6.625%, 1/15/2018 6,957,175 425,000 Dillard's Department Stores, Inc., Note 7.875%, 1/01/2023 431,375 850,000 Dillard's, Inc., Note 7.000%, 12/01/2028 799,000 1,600,000 Dillard's, Inc., Note 7.130%, 8/01/2018 1,580,000 1,500,000 Dillard's, Inc., Note 7.750%, 7/15/2026 1,485,000 $ 3,705,000 Edison Mission Energy Corp., Senior Note 7.730%, 6/15/2009 $ 3,890,250 840,000 EL Paso Corp., Note 5.750%, 3/14/2006, (EUR) 1,034,223 900,000 EL Paso Corp., Note 7.000%, 5/15/2011(c) 868,500 750,000 EL Paso Corp., Senior Note, (MTN) 7.800%, 8/01/2031 658,125 400,000 EL Paso Energy Corp., Note, (MTN), (FRN) 7.750%, 1/15/2032(c) 349,000 4,000,000 FHLMC 3.220%, 6/20/2007, (SGD) 2,447,440 7,000,000 FHLMC 4.625%, 2/15/2007, (EUR) 9,046,490 1,000,000 First Industrial, LP, Note 7.600%, 7/15/2028 1,108,228 34,000,000 FNMA Zero coupon, 10/29/2007, (NZD) 18,759,886 28,200,000 FNMA 2.290%, 2/19/2009, (SGD) 16,531,655 6,500,000 FNMA 2.375%, 2/15/2007(c) 6,414,778 150,000 Ford Motor Co., Note 6.625%, 10/01/2028 135,797 125,000 Ford Motor Credit Co., Note 7.250%, 2/22/2005, (GBP) 227,629 500,000 General Electric Capital Corp., Series E, Note, (MTN) 1.725%, 6/27/2008, (SGD) 288,726 950,000 Georgia-Pacific Corp., Note 7.250%, 6/01/2028 983,250 3,200,000 Georgia-Pacific Corp., Note 7.375%, 12/01/2025 3,408,000 3,775,000 Georgia-Pacific Corp., Note 7.750%, 11/15/2029 4,058,125 100,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note 7.750%, 12/15/2013 86,500 250,000 Hasbro, Inc., Note 6.600%, 7/15/2028 251,250 1,000,000 HCA, Inc., Senior Note 5.750%, 3/15/2014 991,353 3,140,000 IMC Global, Inc., Note 7.300%, 1/15/2028 3,171,400 1,880,000 IMC Global, Inc., Note 7.375%, 8/01/2018 1,974,000 640,000 JC Penney Co., Inc., Note 7.125%, 11/15/2023 676,800 900,000 JC Penney Co., Inc., Note 7.650%, 8/15/2016 1,021,500 350,000 JC Penney Co., Inc., Note 7.950%, 4/01/2017 404,250 250,000 JC Penney Co., Inc., Note, (MTN), (FRN) 6.875%, 10/15/2015 266,250 11,285,000 Lucent Technologies, Inc., Note 6.450%, 3/15/2029 9,140,850 1,250,000 McDonald's Corp., Series E, Note, (MTN) 3.6275%, 10/10/2010, (SGD) 757,207 881,000 Missouri Pacific Railroad Co., Note 5.000%, 1/01/2045 636,522 1,485,000 See accompanying notes to financial statements. 38 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- United States -- continued $ 125,000 Motorola, Inc., Note 6.500%, 11/15/2028 $ 129,794 3,175,000 Northern Telecom Capital Corp., Note 7.875%, 6/15/2026 3,063,875 4,840,000 Owens-Illinois, Inc., Senior Note 7.800%, 5/15/2018 4,694,800 2,000,000 Pharma Services Intermediate Holding Corp., Senior Note, 144A 0/11.500%, 4/01/2014(i) 1,260,000 310,000 Phillips-Van Heusen Corp., Note 7.750%, 11/15/2023 310,000 250,000 Pioneer Natural Resources Co., Senior Note 7.200%, 1/15/2028 281,558 1,900,000 Qwest Capital Funding, Inc., Guaranteed Note 7.000%, 8/03/2009(c) 1,738,500 2,420,000 Qwest Capital Funding, Inc., Guaranteed Note 7.625%, 8/03/2021 1,893,650 600,000 Qwest Capital Funding, Inc., Note 6.500%, 11/15/2018 438,000 825,000 Qwest Capital Funding, Inc., Note 7.250%, 2/15/2011(c) 736,313 1,700,000 Qwest Capital Funding, Inc., Note 7.750%, 2/15/2031 1,300,500 250,000 Qwest Capital Funding, Inc., Note 7.900%, 8/15/2010(c) 230,625 350,000 Qwest Corp., Note 7.250%, 9/15/2025 315,000 229,302 Salton SEA Funding Corp., Series C, Senior Secured Note 7.840%, 5/30/2010 243,982 750,000 Southern Natural Gas Co., Note 7.350%, 2/15/2031 740,625 250,000 Sprint Capital Corp., Note 6.875%, 11/15/2028 262,223 2,600,000 Tennessee Gas Pipeline Co., Note 7.000%, 10/15/2028 2,470,000 650,000 Tennessee Gas Pipeline Co., Note 7.500%, 4/01/2017 674,375 496,687 Tiverton Power Associates, LP, Note, 144A 9.000%, 7/15/2018 362,582 5,000,000 U.S. Treasury Note 1.625%, 2/28/2006 4,949,025 18,250,000 U.S. West Capital Funding, Inc., Note 6.875%, 7/15/2028(c) 13,094,375 245,000 United Rentals North America, Inc., Senior Subordinated Note 7.000%, 2/15/2014(c) 217,438 600,000 Williams Cos., Inc., Note 7.875%, 9/01/2021 666,000 965,000 Williams Cos., Inc., Senior Note 7.750%, 6/15/2031 979,475 8,600,000 Williams Cos., Inc., Series A, Note 7.500%, 1/15/2031 8,643,000 1,000,000 Woolworth Corp., Note 8.500%, 1/15/2022 1,065,000 13,550,000 Xerox Capital Trust I, Guaranteed Note 8.000%, 2/01/2027 13,346,750 1,730,000 Xerox Corp., Note, (MTN) 7.200%, 4/01/2016 1,768,925 ------------ 288,694,223 ------------ Uruguay -- 0.4% 1,600,000 Republic of Uruguay 7.500%, 3/15/2015 1,416,000 $ 2,248,066 Republic of Uruguay 7.875%, 1/15/2033 $ 1,809,693 ------------ 3,225,693 ------------ Venezuela -- 3.7% 16,235,000 Cerro Negro Finance, Ltd., Note, 144A 7.900%, 12/01/2020 15,829,125 8,155,000 Petrozuata Finance, Inc., Note, Series B, 144A 8.220%, 4/01/2017 8,032,675 3,640,000 Republic of Venezuela 9.250%, 9/15/2027 3,587,220 ------------ 27,449,020 ------------ Total Non-Convertible Bonds (Identified Cost $552,197,319) 589,809,784 ------------ Total Bonds and Notes (Identified Cost $579,134,447) 620,928,573 ------------ Shares - -------------------------------------------------------------------------------- Preferred Stocks -- 4.2% of Total Net Assets Philippines -- 1.1% 156,314 Philippine Long Distance Telephone Co., Sponsored GDR, Convertible, $24.80, 12/31/2049 7,800,069 ------------ United States -- 3.1% 10,000 Chesapeake Energy Corp., Convertible 801,250 51,500 Cummins Capital Trust I, Convertible(c) 4,190,812 10,000 El Paso Tennessee Pipeline Co. Class A 455,625 24,550 Host Marriott Finance Trust (REIT), 1,288,875 Convertible 3,300 La Quinta Corp. 83,655 7,400 Lucent Technologies Capital Trust I, Convertible, 7.75%, 3/15/2017 8,215,850 15,000 Newell Financial Trust I, Convertible 652,500 147,550 Owens-Illinois, Inc., Convertible, 4.75%, 5,142,117 12/31/2049(c) 500 Pacific Gas & Electric Co. 10,625 31,875 Pacific Gas & Electric Co. 817,594 800 Pacific Gas & Electric Co. 16,176 600 Pacific Gas & Electric Co. Class E 12,642 9,500 Southern California Edison Co. 963,954 10,000 United Rentals Trust I, Convertible 380,000 ------------ 23,031,675 ------------ Total Preferred Stocks (Identified Cost $25,125,752) 30,831,744 ------------ Common Stocks -- 3.1% United States -- 3.1% 162,900 Associated Estates Realty Corp. (REIT) 1,627,371 1,440 Covad Communications Group, Inc. 2,419 182,500 Developers Diversified Realty Corp. (REIT) 7,144,875 282,500 Duke Energy Corp.(c) 6,466,425 26,300 High Income Opportunity Fund, Inc. 179,629 47,136 Morgan Stanley Emerging Markets Debt Fund, 431,766 Inc. 12,175 PIMCO Strategic Global Government Fund, Inc. 144,882 24,650 Senior High Income Portfolio, Inc. 147,407 117,700 Simon Property Group, Inc. (REIT) 6,312,251 12,050 Templeton Emerging Markets Income Fund, 155,445 Inc.(c) Total Common Stocks (Identified Cost $15,965,586) 22,612,470 ------------ See accompanying notes to financial statements. 39 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Principal Amount Description Value (a) - -------------------------------------------------------------------------------- Short Term Investments -- 13.5% $60,761,860 Repurchase Agreement with Investors Bank & Trust Co. dated 9/30/2004 at 1.27% to be repurchased at $60,764,003 on 10/01/2004, collateralized by $62,882,562 Government National Mortgage Association Bond and Federal National Mortgage Association Bond, 4.00% due 5/20/2034 and 4.12% due 2/01/2033, respectively, aggregately valued at $63,799,953 $ 60,761,860 5,010,303 Bank of America, 1.875%, due 10/19/2004(j) 5,010,303 808,610 Bank of Montreal, 1.76%, due 10/25/2004(j) 808,610 1,202,473 Bank of Nova Scotia, 1.75%, due 10/21/2004(j) 1,202,473 2,505,152 Bank of Nova Scotia, 1.76%, due 11/12/2004(j) 2,505,152 2,855,873 BGI Institutional Money Market Fund(j) 2,855,873 2,505,152 BNP Paribas, 1.80%, due 11/23/2004(j) 2,505,152 1,503,091 Falcon Asset Securitization Corp, 1.612%, due 10/01/2004(j) 1,503,091 501,030 Fortis Bank, 1.69%, due 10/14/2004(j) 501,030 1,496,193 Greyhawk Funding, 1.772%, due 10/19/2004(j) 1,496,193 1,625,118 Merrill Lynch Premier Institutional Fund(j) 1,625,118 4,008,243 Merrimac Cash Fund-Premium Class(j) 4,008,243 4,008,243 Royal Bank of Canada, 1.78%, due 11/10/2004(j) 4,008,243 1,503,091 Royal Bank of Scotland, 1.60%, due 10/15/2004(j) 1,503,091 1,503,091 Royal Bank of Scotland, 1.65%, due 10/29/2004(j) 1,503,091 150,309 Royal Bank of Scotland, 1.67%, due 11/02/2004(j) 150,309 3,356,903 Royal Bank of Scotland, 1.88%, due 12/23/2004(j) 3,356,903 493,816 Sheffield Receivables Corp, 1.622%, due 10/04/2004(j) 493,816 1,503,091 Sheffield Receivables Corp, 1.773%, due 10/20/2004(j) 1,503,091 1,002,061 Toronto Dominion Bank, 1.70%, due 11/08/2004(j) 1,002,061 1,503,091 Wells Fargo, 1.60%, due 10/04/2004(j) 1,503,091 ------------ Total Short Term Investments (Identified Cost $99,806,794) 99,806,794 ------------ Total Investments -- 104.8% (Identified Cost $720,032,579)(b) 774,179,581 Other assets less liabilities (35,342,683) ------------ Total Net Assets -- 100% $738,836,898 ============ (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At September 30, 2004, the net unrealized appreciation on investments based on cost of $719,991,217 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 $ 64,525,627 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (10,337,263) ------------ Net unrealized appreciation $ 54,188,364 ============ At September 30, 2004, the Fund had a capital loss carryover of approximately $49,383,086 of which $3,167,856 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 $7,096,274 expires on September 30, 2011. These amounts may be available to offset future realized capital gains, if any, to the extent provided by regulations. At September 30, 2004, the components of distributable earnings, excluding unrealized appreciation/depreciation, disclosed on a tax basis consisted of $6,368,311 in undistributed ordinary income and $0 in undistributed long-term gains. (c) All or a portion of this security was on loan to brokers at September 30, 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 Trustees. (g) Security is in default of principal and interest payment. (h) Illiquid security. At September 30, 2004, the value of these securities amounted to $16,401,020 or 2.2% of net assets. (i) 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. (j) 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. FRN Floating Rate Note MTN Medium Term Note REIT Real Estate Investment Trust yankee U.S. dollar denominated security issued by a non-U.S. company. 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 $63,422,786 or 8.6% of net assets. BRL Brazilian Real CAD Canadian Dollar EUR Euro GBP British Pound MXN Mexican Peso NOK Norwegian Krone NZD New Zealand Dollars SEK Swedish Krona SGD Singapore Dollar ZAR South African Rand See accompanying notes to financial statements. 40 - -------------------------------------------------------------------------------- Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued) - -------------------------------------------------------------------------------- Investments as of September 30, 2004 Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited) Sovereigns 14.8% Foreign Local Governments 11.9 Repurchase Agreement 8.2 Government Agencies 7.1 Electric 5.5 Financial Services 5.3 Electronics 5.1 Transportation Services 4.3 Wirelines 3.8 Supranationals 3.6 Integrated Energy 3.2 Pipelines 3.0 Media Cable 2.6 Information/Data Technology 2.3 Real Estate Investment Trusts 2.2 Electric Utilities 2.0 Retailers 2.0 Other, less than 2% each 17.9 See accompanying notes to financial statements. 41 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Page Intentionally Left Blank 42 - -------------------------------------------------------------------------------- Statements of Assets & Liabilities - -------------------------------------------------------------------------------- September 30, 2004
Core Plus Bond Government High Income Fund Securities Fund Fund -------------- --------------- ------------ ASSETS Investments at cost $286,789,195 $64,088,435 $ 48,846,655 Net unrealized appreciation 8,903,726 3,753,430 2,679,295 ------------ ----------- ------------ Investments at value 295,692,921 67,841,865 51,525,950 Receivable for Fund shares sold 655,430 3,910 55,698 Receivable for securities sold 2,882,289 -- 54,167 Dividends and interest receivable 3,459,793 823,586 850,292 Tax reclaims receivable -- -- 144 Receivable from investment adviser 24,079 -- -- Securities lending income receivable 2,993 1,042 3,327 Prepaid expense 2,249 532 349 ------------ ----------- ------------ TOTAL ASSETS 302,719,754 68,670,935 52,489,927 ------------ ----------- ------------ LIABILITIES Collateral on securities loaned, at value 9,091,824 651,750 6,394,083 Payable for securities purchased 6,431,826 -- 555,545 Payable for Fund shares redeemed 517,487 167,473 91,859 Dividends payable 370,639 16,166 104,965 Management fees payable 98,191 30,760 22,147 Deferred Trustees' fees 155,067 80,811 34,427 Transfer agent fees payable 268,126 17,157 14,772 Accounting and administrative fees payable 31,580 7,451 4,897 Deferred expense payable -- -- -- Other accounts payable and accrued expenses 87,742 48,194 50,534 ------------ ----------- ------------ TOTAL LIABILITIES 17,052,482 1,019,762 7,273,229 ------------ ----------- ------------ NET ASSETS $285,667,272 $67,651,173 $ 45,216,698 ============ =========== ============ NET ASSETS CONSIST OF: Paid in capital $298,548,352 $71,852,760 $127,794,625 Undistributed (overdistributed) net investment income 2,485,658 (12,707) (110,020) Accumulated net realized gain (loss) on investments (24,291,216) (7,942,310) (85,147,844) Net unrealized appreciation (depreciation) of investments 8,924,478 3,753,430 2,679,937 ------------ ----------- ------------ NET ASSETS $285,667,272 $67,651,173 $ 45,216,698 ============ =========== ============ COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: Class A shares: Net assets $120,008,636 $54,704,267 $ 24,641,380 ============ =========== ============ Shares of beneficial interest 10,263,189 4,571,299 5,107,177 ============ =========== ============ Net asset value and redemption price per share $ 11.69 $ 11.97 $ 4.82 ============ =========== ============ Offering price per share (100/[100-maximum sales charge] of net asset value) $ 12.24 $ 12.53 $ 5.05 ============ =========== ============ Class B shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $148,556,449 $10,689,247 $ 17,967,471 ============ =========== ============ Shares of beneficial interest 12,698,362 893,053 3,721,753 ============ =========== ============ Net asset value and offering price per share $ 11.70 $ 11.97 $ 4.83 ============ =========== ============ Class C shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $ 6,161,549 $ -- $ 2,607,847 ============ =========== ============ Shares of beneficial interest 526,361 -- 540,386 ============ =========== ============ Net asset value and offering price per share $ 11.71 $ -- $ 4.83 ============ =========== ============ Class Y shares: Net assets $ 10,940,638 $ 2,257,659 $ -- ============ =========== ============ Shares of beneficial interest 931,708 189,140 -- ============ =========== ============ Net asset value, offering and redemption price per share $ 11.74 $ 11.94 $ -- ============ =========== ============
See accompanying notes to financial statements. 43 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Massachusetts Limited Term Government Tax Free Income Municipal Income Strategic Income and Agency Fund Fund Fund Fund - ----------------------- --------------- ---------------- ---------------- $146,989,764 $80,056,547 $113,723,877 $720,032,579 497,242 4,618,443 5,531,290 54,147,002 ------------ ----------- ------------ ------------ 147,487,006 84,674,990 119,255,167 774,179,581 21,741 3,328 46,299 8,314,944 64,260 75,000 300,000 819,467 846,380 1,387,929 1,814,240 10,070,799 -- -- -- 11,264 -- -- -- -- 4,257 -- -- 17,156 1,011 659 943 4,728 ------------ ----------- ------------ ------------ 148,424,655 86,141,906 121,416,649 793,417,939 ------------ ----------- ------------ ------------ 19,922,719 -- -- 39,044,934 -- -- -- 11,383,883 211,180 69,833 192,359 2,014,731 100,247 68,115 118,844 1,290,336 59,988 42,147 47,524 352,992 52,210 39,975 90,297 78,127 26,698 13,819 19,185 116,188 14,181 9,237 13,207 67,718 -- -- -- 69,643 48,188 37,688 46,740 162,489 ------------ ----------- ------------ ------------ 20,435,411 280,814 528,156 54,581,041 ------------ ----------- ------------ ------------ $127,989,244 $85,861,092 $120,888,493 $738,836,898 ============ =========== ============ ============ $147,102,339 $84,232,180 $117,468,117 $729,762,530 (110,117) 18,623 146,840 5,317,888 (19,500,220) (3,008,154) (2,257,754) (50,690,098) 497,242 4,618,443 5,531,290 54,446,578 ------------ ----------- ------------ ------------ $127,989,244 $85,861,092 $120,888,493 $738,836,898 ============ =========== ============ ============ $106,701,169 $81,426,508 $111,801,197 $343,585,555 ============ =========== ============ ============ 9,440,205 4,911,197 14,957,611 25,324,413 ============ =========== ============ ============ $ 11.30 $ 16.58 $ 7.47 $ 13.57 ============ =========== ============ ============ $ 11.65 $ 17.32 $ 7.82 $ 14.21 ============ =========== ============ ============ $ 10,106,991 $ 4,434,584 $ 9,087,296 $128,714,162 ============ =========== ============ ============ 895,976 268,075 1,214,511 9,461,062 ============ =========== ============ ============ $ 11.28 $ 16.54 $ 7.48 $ 13.60 ============ =========== ============ ============ $ 6,948,569 $ -- $ -- $255,704,540 ============ =========== ============ ============ 615,184 -- -- 18,801,081 ============ =========== ============ ============ $ 11.30 $ -- $ -- $ 13.60 ============ =========== ============ ============ $ 4,232,515 $ -- $ -- $ 10,832,641 ============ =========== ============ ============ 373,209 -- -- 798,517 ============ =========== ============ ============ $ 11.34 $ -- $ -- $ 13.57 ============ =========== ============ ============ 44 - -------------------------------------------------------------------------------- Statements of Operations - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004
Core Plus Bond Government High Income Limited Term Government Fund Securities Fund Fund and Agency Fund -------------- --------------- ----------- ----------------------- INVESTMENT INCOME Dividends $ -- $ -- $ 72,343 $ -- Interest 15,836,566 3,277,228 4,113,790 5,323,114 Securities lending income 22,911 19,185 21,672 11,603 Less net foreign taxes withheld -- -- (1,441) -- ------------ ----------- ----------- ----------- 15,859,477 3,296,413 4,206,364 5,334,717 ------------ ----------- ----------- ----------- Expenses Management fees 1,260,438 410,046 330,146 773,694 Service and distribution fees - Class A 312,845 149,737 62,823 361,411 Service and distribution fees - Class B 1,547,638 121,316 208,830 116,983 Service and distribution fees - Class C 68,011 -- 27,615 76,233 Trustees' fees and expenses 45,752 25,336 16,355 22,937 Accounting and administrative 198,429 48,897 31,916 88,981 Custodian 106,109 48,834 58,185 68,532 Transfer agent fees - Class A, Class B, Class C 1,058,776 150,534 125,499 257,277 Transfer agent fees - Class Y 61,698 15,657 -- 17,747 Audit and tax services 31,655 24,657 33,384 24,705 Legal 15,075 3,418 10,766 7,774 Shareholder reporting 62,254 28,325 24,660 23,605 Registration 58,250 34,939 38,640 49,716 Deferred expense reimbursement -- -- -- -- Miscellaneous 30,420 12,090 13,829 26,532 ------------ ----------- ----------- ----------- Total expenses 4,857,350 1,073,786 982,648 1,916,127 Less reimbursement/waiver (74,236) -- -- -- ------------ ----------- ----------- ----------- Net expenses 4,783,114 1,073,786 982,648 1,916,127 ------------ ----------- ----------- ----------- Net investment income 11,076,363 2,222,627 3,223,716 3,418,590 ------------ ----------- ----------- ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments - net 9,433,192 (202,144) 2,160,899 1,021,149 Foreign currency transactions - net 92,695 -- (522) -- Change in unrealized appreciation (depreciation) of: Investments - net (6,368,379) (524,082) (390,534) (2,043,680) Foreign currency transactions - net 13,432 -- 642 -- ------------ ----------- ----------- ----------- Net realized and unrealized gain (loss) on investments and foreign currency transactions 3,170,940 (726,226) 1,770,485 (1,022,531) ------------ ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 14,247,303 $ 1,496,401 $ 4,994,201 $ 2,396,059 ============ =========== =========== ===========
See accompanying notes to financial statements. 45 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Massachusetts Tax Free Income Municipal Income Strategic Income Fund Fund Fund - --------------- ---------------- ---------------- $ -- $ -- $ 2,920,500 4,485,864 6,560,082 33,362,961 -- -- 75,284 -- -- (71,553) ---------- ---------- ----------- 4,485,864 6,560,082 36,287,192 ---------- ---------- ----------- 530,148 606,254 3,264,555 271,068 295,653 590,762 51,109 100,731 1,251,818 -- -- 1,593,979 19,184 29,497 45,798 57,745 84,045 337,400 43,498 48,057 189,045 153,499 214,273 909,550 -- -- 18,916 24,818 26,174 37,414 4,564 7,848 27,004 27,132 23,515 93,502 18,400 37,835 129,744 -- -- 69,643 10,723 22,887 63,220 ---------- ---------- ----------- 1,211,888 1,496,769 8,622,350 -- -- (5,434) ---------- ---------- ----------- 1,211,888 1,496,769 8,616,916 ---------- ---------- ----------- 3,273,976 5,063,313 27,670,276 ---------- ---------- ----------- (325,070) (199,243) 15,214,149 -- -- 190,679 1,181,062 1,189,663 21,827,031 -- -- 157,892 ---------- ---------- ----------- 855,992 990,420 37,389,751 ---------- ---------- ----------- $4,129,968 $6,053,733 65,060,027 ========== ========== =========== 46 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Core Plus Bond Government Fund Securities Fund -------------------------------------------- -------------------------------------------- For the Period For the Period January 1, 2003 January 1, 2003 Year Ended through Year Ended Year Ended through Year Ended September 30, September 30, December 31, September 30, September 30, December 31, 2004 2003 2002 2004 2003 2002 ------------- --------------- ------------ ------------- --------------- ------------ FROM OPERATIONS: Net investment income $ 11,076,363 $ 9,527,954 $ 17,087,741 $ 2,222,627 $ 2,088,839 $ 3,478,800 Net realized gain (loss) on investments and foreign currency transactions 9,525,887 3,864,683 (18,724,816) (202,144) 2,186,050 1,754,365 Net change in unrealized appreciation (depreciation) of investments (6,354,947) 5,549,963 9,019,633 (524,082) (1,862,032) 6,101,934 ------------ ------------ ------------ ------------ ------------ ------------ Increase (decrease) in net assets resulting from operations 14,247,303 18,942,600 7,382,558 1,496,401 2,412,857 11,335,099 ------------ ------------ ------------ ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (5,832,828) (4,447,575) (8,791,213) (2,240,003) (2,185,576) (3,186,452) Class B (5,866,726) (4,047,373) (6,316,934) (363,180) (410,467) (530,909) Class C (259,130) (220,936) (498,081) -- -- -- Class Y (806,864) (668,802) (1,050,339) (90,354) (133,483) (289,414) ------------ ------------ ------------ ------------ ------------ ------------ (12,765,548) (9,384,686) (16,656,567) (2,693,537) (2,729,526) (4,006,775) ------------ ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (36,519,835) (5,058,236) (4,698,171) (18,071,441) (12,801,156) 4,088,509 ------------ ------------ ------------ ------------ ------------ ------------ Redemption Fees Class A 164 -- -- -- -- -- Class B 204 -- -- -- -- -- Class C 7 -- -- -- -- -- Class Y 17 -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ 392 -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Total increase (decrease) in net assets (35,037,688) 4,499,678 (13,972,180) (19,268,577) (13,117,825) 11,416,833 ------------ ------------ ------------ ------------ ------------ ------------ NET ASSETS Beginning of period 320,704,960 316,205,282 330,177,462 86,919,750 100,037,575 88,620,742 ------------ ------------ ------------ ------------ ------------ ------------ End of period $285,667,272 $320,704,960 $316,205,282 $ 67,651,173 $ 86,919,750 $100,037,575 ============ ============ ============ ============ ============ ============ UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME $ 2,485,658 $ 1,397,403 $ 127,794 $ (12,707) $ (18,577) $ (16,246) ============ ============ ============ ============ ============ ============
See accompanying notes to financial statements. 47 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Limited Term High Income Government Fund and Agency Fund - -------------------------------------------- -------------------------------------------- For the Period For the Period January 1, 2003 January 1, 2003 Year Ended through Year Ended Year Ended through Year Ended September 30, September 30, December 31, September 30, September 30, December 31, 2004 2003 2002 2004 2003 2002 - ------------- --------------- ------------ ------------- --------------- ------------ $ 3,223,716 $ 2,691,980 $ 4,914,959 $ 3,418,590 $ 2,567,365 $ 4,880,802 2,160,377 1,766,058 (20,594,051) 1,021,149 1,309,685 2,104,690 (389,892) 4,199,027 9,402,597 (2,043,680) (2,298,347) 3,563,852 - ----------- ----------- ------------ ------------ ------------ ------------ 4,994,201 8,657,065 (6,276,495) 2,396,059 1,578,703 10,549,344 - ----------- ----------- ------------ ------------ ------------ ------------ (1,756,090) (1,358,749) (2,389,509) (4,112,174) (3,580,991) (4,982,529) (1,304,202) (1,211,401) (2,310,655) (358,642) (420,988) (580,172) (172,398) (138,738) (257,610) (232,332) (230,278) (272,616) -- -- -- (214,192) (261,630) (402,890) - ----------- ----------- ------------ ------------ ------------ ------------ (3,232,690) (2,708,888) (4,957,774) (4,917,340) (4,493,887) (6,238,207) - ----------- ----------- ------------ ------------ ------------ ------------ (6,616,858) (3,967,380) (13,012,003) (16,942,090) 11,483,457 1,774,899 - ----------- ----------- ------------ ------------ ------------ ------------ 146 -- -- -- -- -- 110 -- -- -- -- -- 16 -- -- -- -- -- -- -- -- -- -- -- - ----------- ----------- ------------ ------------ ------------ ------------ 272 -- -- -- -- -- - ----------- ----------- ------------ ------------ ------------ ------------ (4,855,075) 1,980,797 (24,246,272) (19,463,371) 8,568,273 6,086,036 - ----------- ----------- ------------ ------------ ------------ ------------ 50,071,773 48,090,976 72,337,248 147,452,615 138,884,342 132,798,306 - ----------- ----------- ------------ ------------ ------------ ------------ $45,216,698 $50,071,773 $ 48,090,976 $127,989,244 $147,452,615 $138,884,342 =========== =========== ============ ============ ============ ============ $ (110,020) $ (111,575) $ (128,268) $ (110,117) $ (122,089) $ (116,800) =========== =========== ============ ============ ============ ============
48 - -------------------------------------------------------------------------------- Statements of Changes in Net Assets - --------------------------------------------------------------------------------
Massachusetts Municipal Income Tax Free Income Fund Fund -------------------------------------------- -------------------------------------------- For the Period For the Period January 1, 2003 January 1, 2003 Year Ended through Year Ended Year Ended through Year Ended September 30, September 30, December 31, September 30, September 30, December 31, 2004 2003 2002 2004 2003 2002 ------------- --------------- ------------ ------------- --------------- ------------ FROM OPERATIONS: Net investment income $ 3,273,976 $ 2,789,342 $ 4,082,640 $ 5,063,313 $ 4,304,402 $ 6,897,727 Net realized gain (loss) on investments and foreign currency transactions (325,070) 877,919 (916,633) (199,243) 1,148,331 2,710,093 Net change in unrealized appreciation (depreciation) of investments 1,181,062 (851,243) 4,433,497 1,189,663 (1,633,204) 872,708 ----------- ----------- ----------- ------------ ------------ ------------ Increase (decrease) in net assets resulting from operations 4,129,968 2,816,018 7,599,504 6,053,733 3,819,529 10,480,528 ----------- ----------- ----------- ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (3,115,670) (2,628,195) (3,827,503) (4,693,919) (4,027,619) (6,303,086) Class B (157,408) (161,498) (276,899) (324,812) (290,127) (507,956) Class C -- -- -- -- -- -- Class Y -- -- -- -- -- -- ----------- ----------- ----------- ------------ ------------ ------------ (3,273,078) (2,789,693) (4,104,402) (5,018,731) (4,317,746) (6,811,042) ----------- ----------- ----------- ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (7,548,538) (6,268,959) (2,388,573) (17,936,186) (7,043,056) (10,738,646) ----------- ----------- ----------- ------------ ------------ ------------ Redemption Fees Class A -- -- -- -- -- -- Class B -- -- -- -- -- -- Class C -- -- -- -- -- -- Class Y -- -- -- -- -- -- ----------- ----------- ----------- ------------ ------------ ------------ -- -- -- -- -- -- ----------- ----------- ----------- ------------ ------------ ------------ Total increase (decrease) in net assets (6,691,648) (6,242,634) 1,106,529 (16,901,184) (7,541,273) (7,069,160) ----------- ----------- ----------- ------------ ------------ ------------ NET ASSETS Beginning of period 92,552,740 98,795,374 97,688,845 137,789,677 145,330,950 152,400,110 ----------- ----------- ----------- ------------ ------------ ------------ End of period $85,861,092 $92,552,740 $98,795,374 $120,888,493 $137,789,677 $145,330,950 =========== =========== =========== ============ ============ ============ UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME $ 18,623 $ 19,469 $ 19,970 $ 146,840 $ 147,016 $ 146,768 =========== =========== =========== ============ ============ ============
See accompanying notes to financial statements. 49 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Strategic Income Fund - --------------------------------------------- For the Period January 1, 2003 Year Ended through Year Ended September 30, September 30, December 31, 2004 2003 2002 - ------------- --------------- ------------ $ 27,670,276 $ 12,189,949 $ 15,106,370 15,404,828 (4,553,646) (21,248,207) 21,984,923 47,707,584 36,560,725 ------------ ------------ ------------ 65,060,027 55,343,887 30,418,888 ------------ ------------ ------------ (14,995,915) (6,332,331) (5,702,309) (6,962,890) (5,143,216) (5,565,705) (8,540,977) (2,069,124) (1,567,724) (428,194) (95,199) (42,564) ------------ ------------ ------------ (30,927,976) (13,639,870) (12,878,302) ------------ ------------ ------------ 377,319,844 66,108,057 (23,656,108) ------------ ------------ ------------ 1,885 -- -- 817 -- -- 1,391 -- -- 65 -- -- ------------ ------------ ------------ 4,158 -- -- ------------ ------------ ------------ 411,456,053 107,812,074 (6,115,522) ------------ ------------ ------------ 327,380,845 219,568,771 225,684,293 ------------ ------------ ------------ $738,836,898 $327,380,845 $219,568,771 ============ ============ ============ $ 5,317,888 $ 2,204,718 $ 3,205,477 ============ ============ ============ 50 - -------------------------------------------------------------------------------- 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 Redemption the period income investments operations income capital gains distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ------------- ---------- Core Plus Bond Fund Class A 9/30/2004 $11.63 $0.47(c) $ 0.13 $ 0.60 $(0.54) $ -- $(0.54) $0.00(g) 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) -- Class B 9/30/2004 11.62 0.38(c) 0.14 0.52 (0.44) -- (0.44) 0.00(g) 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) -- Class C 9/30/2004 11.63 0.38(c) 0.14 0.52 (0.44) -- (0.44) 0.00(g) 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) -- Class Y 9/30/2004 11.69 0.50(c) 0.13 0.63 (0.58) -- (0.58) 0.00(g) 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) -- Government Securities Fund Class A 9/30/2004 $12.09 $0.37(c) $(0.05) $ 0.32 $(0.44) $ -- $(0.44) -- 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) -- Class B 9/30/2004 12.10 0.28(c) (0.06) 0.22 (0.35) -- (0.35) -- 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) --
(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 for 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 Class B 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. 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 (%) - ---------- ------ ----------- -------- -------------- --------- $11.69 5.3(h) $120,009 1.19(i) 4.05 69 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 11.70 4.6(h) 148,556 1.94(i) 3.29 69 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 11.71 4.6(h) 6,162 1.94(i) 3.30 69 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 11.74 5.5(h) 10,941 0.94(i) 4.30 69 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 $11.97 2.8 $ 54,704 1.31 3.11 107 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 11.97 1.9 10,689 2.06 2.36 107 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 (e) Amount is less than one tenth of one percent. (f) For the nine months ended September 30, 2003. (g) Amount rounds to less than $0.01. (h) Had certain expenses not been reduced during the period, total returns would have been lower. (i) 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. 52 - -------------------------------------------------------------------------------- Financial Highlights (continued) - -------------------------------------------------------------------------------- For a share outstanding throughout each period
Income (loss) from investment operations: Less distributions: ----------------------------------- --------------------------------------- Net realized Net asset and Dividends Distribution value unrealized from from net beginning Net gain (loss) Total from net realized of investment on investment investment capital Total Redemption the period income investments operations income gains distributions fee ---------- ---------- ----------- ---------- ---------- ------------ ------------- ---------- Government Securities Fund (continued) Class Y 9/30/2004 $12.07 $0.35(c) $(0.06) $ 0.29 $(0.42) $-- $(0.42) $ -- 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) -- High Income Fund* Class A 9/30/2004 $ 4.65 $0.33(c) $ 0.17 $ 0.50 $(0.33) $-- $(0.33) $0.00(f) 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) -- Class B 9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) -- (0.30) 0.00(f) 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) -- Class C 9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) -- (0.30) 0.00(f) 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) -- Limited Term Government and Agency Fund** Class A 9/30/2004 $11.51 $0.30(c) $(0.09) $ 0.21 $(0.42) $-- $(0.42) $ -- 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) --
(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. 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 (%) - ---------- ------- ----------- -------- -------------- --------- $11.94 2.5 $ 2,258 1.47 2.94 107 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 $ 4.82 11.1 $ 24,641 1.65 6.97 51 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 4.83 10.5 17,967 2.40 6.22 51 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 4.83 10.5 2,608 2.40 6.22 51 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 $11.30 1.9 $106,701 1.32 2.60 80 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 (e) For the nine months ended September 30, 2003. (f) Amount rounds to less than $0.01. * The financial information for periods prior to September 30, 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 September 30, 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. 54 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 Redemption the period income investments operations income capital gains distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ------------- ---------- Limited Term Government and Agency Fund* (Continued) Class B 9/30/2004 $11.49 $0.22(c) $(0.09) $ 0.13 $(0.34) $ -- $(0.34) $-- 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) -- Class C 9/30/2004 11.50 0.22(c) (0.08) 0.14 (0.34) -- (0.34) -- 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) -- Class Y 9/30/2004 11.55 0.32(c) (0.09) 0.23 (0.44) -- (0.44) -- 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) -- Massachusetts Tax Free Income Fund Class A 9/30/2004 $16.41 $0.61 $ 0.17 $ 0.78 $(0.61) $ -- $(0.61) $-- 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) -- Class B 9/30/2004 16.37 0.49 0.18 0.67 (0.50) -- (0.50) -- 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) --
(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 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. 55 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 (%) - ---------- ------- ----------- -------- -------------- --------- $11.28 1.2 $10,107 2.00 1.95 80 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 11.30 1.3 6,949 2.00 1.94 80 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 11.34 2.1 4,233 1.13 2.82 80 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 $16.58 4.9 $81,427 1.33 3.74 21 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 16.54 4.2 4,435 2.00 3.08 21 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 (g) For the nine months ended September 30, 2003. * The financial information for periods prior to September 30, 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. 56 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 Redemption the period income investments operations income capital gains distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ------------- ---------- Municipal Income Fund Class A 9/30/2004 $ 7.41 $0.29 $ 0.06 $ 0.35 $(0.29) $ -- $(0.29) $ -- 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) -- Class B 9/30/2004 7.41 0.24 0.07 0.31 (0.24) -- (0.24) -- 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) -- Strategic Income Fund* Class A 9/30/2004 $12.57 $0.75(c) $ 1.11 $ 1.86 $(0.86) $ -- $(0.86) 0.00(h) 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) -- Class B 9/30/2004 12.59 0.65(c) 1.10 1.75 (0.74) -- (0.74) 0.00(h) 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) --
(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 periods 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. 57 Ratios to averagenet 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 (%) - ---------- ------- ----------- -------- -------------- --------- $ 7.47 4.9 $111,801 1.11 4.00 35 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 7.48 4.2 9,087 1.86 3.25 35 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 $13.57 15.2 $343,586 1.23 5.66 28 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 13.60 14.3 128,714 1.98 4.91 28 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 (g) For the nine months ended September 30, 2003. (h) Amount rounds to less than $0.01. * The financial information for periods prior to September 30, 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. 58 - -------------------------------------------------------------------------------- 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 Redemption the period income investments operations income capital gains distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ------------- ---------- Strategic Income Fund* (CONTINUED) Class C 9/30/2004 $12.58 $0.64(c) $ 1.11 $ 1.75 $(0.73) $ -- $(0.73) $0.00(j) 9/30/2003(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) -- Class Y 9/30/2004 12.58 0.78(c) 1.11 1.89 (0.90) -- (0.90) 0.00(j) 9/30/2003(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 periods 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. (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) Amount rounds to less than $0.01. * The financial information for periods prior to September 30, 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 end is September 30. See accompanying notes to financial statements. 59 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Ratios to average net assets: Net asset Net assets, ----------------------------- value, Total end of Net investment Portfolio end of return the period Expenses income turnover the period (%)(a) (000) (%)(b) (%)(b) rate(%) - ---------- ------- ----------- -------- -------------- --------- $13.60 14.3 $255,705 1.98 4.87 28 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 13.57 15.5(e) 10,833 1.00(f) 5.93 28 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 60 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 61 - -------------------------------------------------------------------------------- Notes to Financial Statements - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 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 Board of Trustees to authorize the issuance of an unlimited number of shares of the Trust in multiple series (individually, a "Fund" and, collectively, the "Funds"). Information presented in these financial statements pertains to 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, 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 Fund 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, pursuant to procedures approved by the Board of Trustees. Certain securities held by High Income Fund and 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. 62 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 b. Security Transactions and Related Investment Income. Security transactions are accounted for on trade date. Dividend income is recorded on ex-dividend date, or in the case of certain foreign securities, as soon thereafter as the Fund is notified, and interest income is recorded on an accrual basis. Interest income is increased by the accretion of discount and decreased by the amortization of premium. In determining net gain or loss on securities sold, the cost of securities has been determined on an identified cost basis. Investment income and realized and unrealized gains and losses are allocated on a pro rata basis to each Class based on the relative net assets of each Class to the total net assets of the Fund. c. Foreign Currency Translation. The books and records of the Funds are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. Since the values of investment securities are presented at the foreign exchange rates prevailing at the end of the period, it is not practical to isolate that portion of the results of operations arising from changes in exchange rates from fluctuations arising from changes in market prices of the investment securities. Such changes are included with the net realized and unrealized gain or loss on investments. Net realized foreign exchange gains or losses arise from: sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities at the end of the fiscal periods, resulting from changes in exchange rates. d. 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, premium amortization, wash sales, 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. g. Delayed Delivery Commitments. Each Fund may purchase or sell securities on a when-issued or forward commitment basis. Payment and delivery may take place a month or more after the date of the transaction. The price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract. Collateral consisting of liquid securities or cash and cash equivalents is maintained in an amount at least equal to these commitments with the custodian. For Core Plus Bond Fund, see the Schedule of Investments for open forward commitments as of September 30, 2004. 3. Purchases and Sales of Securities. For the year ended September 30, 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 $96,334,205 $122,512,018 $107,622,880 $114,908,562 Government Securities Fund 78,779,567 95,299,249 -- -- High Income Fund -- -- 24,211,963 31,154,543 Limited Term Government and Agency Fund 98,222,502 113,393,846 8,649,227 10,443,926 Massachusetts Tax Free Income Fund -- -- 18,052,741 23,123,151 Municipal Income Fund -- -- 42,089,637 56,867,233 Strategic Income Fund 51,144,489 20,802,842 405,170,204 120,899,994
63 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 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 0.6000% 0.6000% 0.6000% 0.6000% 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%
Prior to July 1, 2004, the management fee for High Income Fund was 0.7000% on the first $200 million of the Fund's average daily net assets and 0.6500% on such assets in excess of $200 million. For the year ended September 30, 2004, the management fees for each Fund were as follows: Gross Percentage of Management Average Fund Fee Daily Net Assets - ---- ---------- ---------------- Core Plus Bond Fund $ 630,219 0.208% Government Securities Fund 205,023 0.275% High Income Fund 330,146 0.677% Limited Term U.S. Government and Agency Fund 773,694 0.570% Massachusetts Tax Free Income Fund 265,074 0.300% Municipal Income Fund 606,254 0.472% Strategic Income Fund 3,264,555 0.619% 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 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% Massachusetts Tax Free Income Fund 0.3000% 0.2500% 0.2500% 0.2500%
64 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 For the year ended September 30, 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 $630,219 0.208% Government Securities Fund 205,023 0.275% Massachusetts Tax Free Income Fund 265,074 0.300% Loomis Sayles and CDC IXIS Advisers are wholly-owned subsidiaries of CDC IXIS Asset Management North America, L.P. ("CDC IXIS North America"). CDC IXIS North America is ultimately owned by three large affiliated French financial services firms: Caisse des Depots et Consignations; Caisse Nationale des Caisses d'Epargne; and CNP Assurances, a leading French life insurance company. 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. 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 year ended September 30, 2004, fees paid to CIS for accounting and administrative expense were as follows: Accounting And Fund Administrative - ---- -------------- Core Plus Bond Fund $198,429 Government Securities Fund 48,897 High Income Fund 31,916 Limited Term Government and Agency Fund 88,981 Massachusetts Tax Free Income Fund 57,745 Municipal Income Fund 84,045 Strategic Income Fund 337,400 65 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 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 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**. 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 Sayles 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 year ended September 30, 2004, amounts paid to CIS as compensation for its services as transfer agent were as follows: Transfer Agent Fund Fee - ---- -------------- Core Plus Bond Fund $283,969 Government Securities Fund 117,852 High Income Fund 79,510 Limited Term Government and Agency Fund 207,827 Massachusetts Tax Free Income Fund 134,784 Municipal Income Fund 184,026 Strategic Income Fund 597,529 66 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 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, prior to July 1, 2004, Limited Term Government and Agency Fund and Massachusetts Tax Free Income Fund each paid 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 year ended September 30, 2004, the Funds paid the following service and distribution fees:
Service Fee Distribution Fee ------------------------------ --------------------------------- Fund Class A Class B Class C Class A Class B Class C - ---- -------- -------- -------- ------- ---------- ---------- Core Plus Bond Fund $312,845 $386,910 $ 17,003 $ -- $1,160,728 $ 51,008 Government Securities Fund 149,737 30,329 -- -- 90,987 -- High Income Fund 62,823 52,208 6,904 -- 156,622 20,711 Limited Term Government and Agency Fund 277,422 29,246 19,058 83,989 87,737 57,175 Mass Tax Free Income Fund 208,117 12,777 -- 62,951 38,332 -- Municipal Income Fund 295,653 25,183 -- -- 75,548 -- Strategic Income Fund 590,762 312,955 398,495 -- 938,863 1,195,484
Commissions (including CDSC) on Fund shares paid to CDC IXIS Distributors by investors in shares of the Funds during the year ended September 30, 2004 were as follows: Fund - ---- Core Plus Bond Fund $ 274,880 Government Securities Fund 86,747 High Income Fund 74,606 Limited Term Government and Agency Fund 121,912 Massachusetts Tax Free Income Fund 50,696 Municipal Income Fund 80,914 Strategic Income Fund 1,908,906 e. Trustees Fees and Expenses. The CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts do not pay any compensation directly to their officers or Trustees who are directors, officers or employees of CDC IXIS Advisers, CDC IXIS Distributors, CDC IXIS North America, CIS or their affiliates. Each Trustee who is an independent Trustee of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts receives, in the aggregate, a retainer fee at the annual rate of $50,000 and meeting attendance fees of $5,000 for each meeting of the Board of Trustees attended. Each committee chairman receives an additional retainer fee at the annual rate of $7,000. Each committee member receives a meeting attendance fee of $3,750 per committee meeting attended. In addition, the independent co-chairmen of the Board split an additional $50,000 annual retainer fee. 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. 67 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 Prior to July 1, 2004, the Trust paid each independent trustee a $45,000 annual retainer and a $4,500 fee per meeting attended. In addition, each committee member received a retainer fee at the annual rate of $7,000 while each committee chairman received a $5,000 annual retainer (beyond the $7,000). Each committee member received a $1,750 fee per meeting attended. The retainer fees assumed four Board or committee meetings per year. A deferred compensation plan (the "Plan") is available to the Trustees on a voluntary basis. Each participating Trustee will receive an amount equal to the value that such deferred compensation would have been had it been invested in a designated Fund or certain other funds of the CDC Nvest Funds Trusts or Loomis Sayles Funds Trusts on the normal payment date. Deferred amounts remain in the Funds until distributed in accordance with the Plan. f. Redemption Fees. Shareholders of Class A shares and Class Y shares of Core Plus Bond Fund and Strategic Income Fund and shareholders of Class A shares of High Income Fund will be charged a 2% redemption fee if they redeem, including redeeming by exchange, Class A or Class Y shares within 60 days of their acquisition (including acquisition by exchange). The redemption fee is intended to offset the costs to the Funds of short-term trading, such as portfolio transaction and market impact costs associated with redemption activity and administrative costs associated with processing redemptions. The redemption fee is deducted from the shareholder's redemption or exchange proceeds and is paid to the Fund. The "first-in, first-out" (FIFO) method is used to determine the holding period of redeemed or exchanged shares, which means that if shares were acquired on different days, the shares acquired first will be redeemed or exchanged first for purposes of determining whether the redemption fee applies. A new holding period begins with each purchase or exchange. These fees are presented on the Statements of Changes in Net Assets. g. 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 year ended September 30, 2004, amounts paid to CIS as compensation for these services were as follows: Publishing Services Fund Fees - ---- ------------------- Core Plus Bond Fund $2,085 Government Securities Fund 1,939 High Income Fund 2,774 Limited Term Government and Agency Fund 2,602 Massachusetts Tax Free Income Fund 2,042 Municipal Income Fund 2,597 Strategic Income Fund 2,737 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 year ended September 30, 2004. 6. Security Lending. Each Fund has entered into an agreement with IBT, as an agent of the Funds, to lend securities to certain designated borrowers. The loans are collateralized at all times with cash or securities with a market value at least equal to the market value of the securities on loan. The Funds receive fees for lending their securities. The market value of securities on loan to borrowers and the value of collateral held by the Funds with respect to such loans at September 30, 2004, were as follows: Market Value of Value of Collateral Fund Securities on Loan Received - ---- ------------------ ------------------- Core Plus Bond Fund $ 8,884,679 $ 9,091,824 Government Securities Fund 631,383 651,750 High Income Fund 6,225,067 6,394,083 Limited Term Government and Agency Fund 19,528,021 19,922,719 Strategic Income Fund 37,834,180 39,044,934 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 year ended September 30, 2004, certain class level expenses have been reimbursed as follows: Core Plus Bond Fund $74,236 and Strategic Income Fund $5,434. 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 and the actual amount or the actual amount of fees previously waived or expenses reimbursed. For the year ended September 30, 2004, the Strategic Income Fund reimbursed $69,643. 68 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- At September 30, 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 to Possible ------------------------------------- Expiration Reimbursement Fund Class A Class B Class C Class Y of Waiver until September 30, 2005 - ---- ------- ------- ------- ------- ---------------- ------------------------ Core Plus Bond Fund 1.15% 1.90% 1.90% 0.90% January 31, 2005 $74,236 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 5,434
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 September 30, 2004, the Fund had the following concentrations by revenue source in excess of 10% as a percentage of the Fund's net assets: College 17.3%, University 14.0% and Water 12.2%. The Fund had investments in securities of issuers insured by American Municipal Bond assurance Corporation (AMBAC), Municipal Bond Investors Assurance Corporation (MBIA) and Financial Guaranty Insurance Company (FGIC) which aggregated to 13.7%, 7.5%, and 7.1% of its net assets, respectively, at September 30, 2004. At September 30, 2004, Municipal Income Fund had more than 10% of its net assets invested in: California 10.6% and New York 13.4%. 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. 9. Subsequent Event. Effective November 1, 2004, the names of the Distributor, Advisory Administrator, Administrator and Transfer Agent will change as follows:
Old Name New Name -------- -------- CDC IXIS Asset Management Distributors, L.P. IXIS Asset Management Distributors, L.P. CDC IXIS Asset Management Advisers L.P. IXIS Asset Management Advisors L.P. CDC IXIS Asset Management Services, Inc. IXIS Asset Management Services Company
69 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 9. Capital Shares. Each Fund may issue an unlimited number of shares of beneficial interest. Transactions in capital shares were as follows:
For the Period January 1, 2003 Year Ended through Year Ended September 30, 2004 September 30, 2003 December 31, 2002 ------------------------- ------------------------- ------------------------- Core Plus Bond Fund Shares Amount Shares Amount Shares Amount - ------------------------------------------ ---------- ------------ ---------- ------------ ---------- ------------ Class A Shares sold 1,605,711 $ 18,625,859 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 399,777 4,638,774 315,868 3,625,104 630,044 7,028,137 ---------- ------------ ---------- ------------ ---------- ------------ 2,005,488 23,264,633 2,524,749 29,018,392 3,391,075 37,975,999 Shares repurchased (3,251,762) (37,683,812) (4,103,015) (47,055,063) (5,298,328) (59,054,703) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (1,246,274) $(14,419,179) (1,578,266) $(18,036,671) (1,907,253) $(21,078,704) ---------- ------------ ---------- ------------ ---------- ------------ Class B Shares sold 3,593,650 $ 41,729,759 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 162,394 1,885,405 138,840 1,592,822 309,169 3,449,629 ---------- ------------ ---------- ------------ ---------- ------------ 3,756,044 43,615,164 4,683,290 53,714,303 5,422,285 60,597,501 Shares repurchased (4,934,717) (57,311,673) (3,322,658) (38,077,677) (3,908,528) (43,564,808) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (1,178,673) $(13,696,509) 1,360,632 $ 15,636,626 1,513,757 $ 17,032,693 ---------- ------------ ---------- ------------ ---------- ------------ Class C Shares sold 94,805 $ 1,102,148 59,911 $ 688,486 138,295 $ 1,555,372 Shares issued in connection with the reinvestment of: Dividends from net investment income 13,177 153,074 11,703 134,339 26,871 299,976 ---------- ------------ ---------- ------------ ---------- ------------ 107,982 1,255,222 71,614 822,825 165,166 1,855,348 Shares repurchased (236,056) (2,722,618) (216,706) (2,481,482) (354,452) (3,952,429) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (128,074) $ (1,467,396) (145,092) $ (1,658,657) (189,286) $ (2,097,081) ---------- ------------ ---------- ------------ ---------- ------------ Class Y Shares sold 330,962 $ 3,859,687 360,783 $ 4,157,868 411,293 $ 4,623,829 Shares issued in connection with the reinvestment of: Dividends from net investment income 59,164 689,033 51,037 588,550 80,315 898,601 ---------- ------------ ---------- ------------ ---------- ------------ 390,126 4,548,720 411,820 4,746,418 491,608 5,522,430 Shares repurchased (989,193) (11,485,471) (500,546) (5,745,952) (363,731) (4,077,509) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (599,067) $ (6,936,751) (88,726) $ (999,534) 127,877 $ 1,444,921 ---------- ------------ ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions (3,152,088) $(36,519,835) (451,452) $ (5,058,236) (454,905) $ (4,698,171) ========== ============ ========== ============ ========== ============
70 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 9. Capital Shares (continued).
For the Period January 1, 2003 Year Ended through Year Ended September 30, 2004 September 30, 2003 December 31, 2002 ------------------------- ------------------------- ------------------------- Government Securities Fund Shares Amount Shares Amount Shares Amount - ------------------------------------------ ---------- ------------ ---------- ------------ ---------- ------------ Class A Shares sold 307,625 $ 3,620,219 679,447 $ 8,249,719 1,163,096 $ 13,583,368 Shares issued in connection with the reinvestment of: Dividends from net investment income 166,014 1,955,470 159,984 1,935,187 243,169 2,819,415 ---------- ------------ ---------- ------------ ---------- ------------ 473,639 5,575,689 839,431 10,184,906 1,406,265 16,402,783 Shares repurchased (1,599,820) (18,841,760) (1,441,491) (17,423,672) (1,419,343) (16,327,594) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (1,126,181) $(13,266,071) (602,060) $ (7,238,766) (13,078) $ 75,189 ---------- ------------ ---------- ------------ ---------- ------------ Class B Shares sold 128,122 $ 1,502,341 320,801 $ 3,882,546 712,314 $ 8,363,857 Shares issued in connection with the reinvestment of: Dividends from net investment income 25,440 299,768 28,512 345,321 36,766 427,149 ---------- ------------ ---------- ------------ ---------- ------------ 153,562 1,802,109 349,313 4,227,867 749,080 8,791,006 Shares repurchased (508,872) (5,979,197) (493,758) (5,918,693) (541,866) (6,269,688) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (355,310) $ (4,177,088) (144,445) $ (1,690,826) 207,214 $ 2,521,318 ---------- ------------ ---------- ------------ ---------- ------------ Class Y Shares sold 28,283 $ 332,592 33,551 $ 404,508 220,420 $ 2,524,097 Shares issued in connection with the reinvestment of: Dividends from net investment income 7,684 90,336 11,024 133,483 24,957 289,414 ---------- ------------ ---------- ------------ ---------- ------------ 35,967 422,928 44,575 537,991 245,377 2,813,511 Shares repurchased (90,187) (1,051,210) (364,336) (4,409,555) (114,051) (1,321,509) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (54,220) $ (628,282) (319,761) $ (3,871,564) 131,326 $ 1,492,002 ---------- ------------ ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions (1,535,711) $(18,071,441) (1,066,266) $(12,801,156) 325,462 $ 4,088,509 ========== ============ ========== ============ ========== ============
71 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 9. Capital Shares (continued).
For the Period January 1, 2003 Year Ended through Year Ended September 30, 2004 September 30, 2003 December 31, 2002 ------------------------ ------------------------- ------------------------- High Income Fund Shares Amount Shares Amount Shares Amount - ---------------- ---------- ----------- ---------- ------------ ---------- ------------ Class A Shares sold 1,288,493 $ 6,184,887 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 229,520 1,097,920 178,526 792,126 317,560 1,396,013 ---------- ----------- ---------- ------------ ---------- ------------ 1,518,013 7,282,807 6,966,367 31,786,842 2,339,172 10,293,221 Shares repurchased (1,529,706) (7,301,820) (7,296,772) (33,271,653) (3,663,855) (16,220,139) ---------- ----------- ---------- ------------ ---------- ------------ Net increase (decrease) (11,693) $ (19,013) (330,405) $ (1,484,811) (1,324,683) $ (5,926,918) ---------- ----------- ---------- ------------ ---------- ------------ Class B Shares sold 226,956 $ 1,090,578 662,229 $ 2,976,263 1,040,581 $ 4,725,693 Shares issued in connection with the reinvestment of: Dividends from net investment income 117,713 563,684 105,383 467,995 201,776 889,901 ---------- ----------- ---------- ------------ ---------- ------------ 344,669 1,654,262 767,612 3,444,258 1,242,357 5,615,594 Shares repurchased (1,651,156) (7,900,417) (1,323,884) (5,858,921) (2,675,203) (11,769,699) ---------- ----------- ---------- ------------ ---------- ------------ Net increase (decrease) (1,306,487) $(6,246,155) (556,272) $ (2,414,663) (1,432,846) $ (6,154,105) ---------- ----------- ---------- ------------ ---------- ------------ Class C Shares sold 84,117 $ 402,199 69,446 $ 305,018 90,003 $ 403,036 Shares issued in connection with the reinvestment of: Dividends from net investment income 16,780 80,318 13,856 61,635 26,503 116,430 ---------- ----------- ---------- ------------ ---------- ------------ 100,897 482,517 83,302 366,653 116,506 519,466 Shares repurchased (174,710) (834,207) (101,125) (434,559) (324,456) (1,450,446) ---------- ----------- ---------- ------------ ---------- ------------ Net increase (decrease) (73,813) $ (351,690) (17,823) $ (67,906) (207,950) $ (930,980) ---------- ----------- ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions (1,391,993) $(6,616,858) (904,500) $ (3,967,380) (2,965,479) $(13,012,003) ========== =========== ========== ============ ========== ============
72 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 9. Capital Shares (continued).
For the Period January 1, 2003 Year Ended through Year Ended September 30, 2004 September 30, 2003 December 31, 2002 ------------------------- ------------------------- ------------------------- Limited Term Government and Agency Fund Shares Amount Shares Amount Shares Amount - --------------------------------------- ---------- ------------ ---------- ------------ ---------- ------------ Class A Shares sold 1,157,697 $ 13,126,606 3,639,344 $ 42,294,961 2,338,561 $ 26,950,560 Shares issued in connection with the reinvestment of: Dividends from net investment income 239,161 2,713,978 217,806 2,527,837 348,652 4,025,182 ---------- ------------ ---------- ------------ ---------- ------------ 1,396,858 15,840,584 3,857,150 44,822,798 2,687,213 30,975,742 Shares repurchased (2,142,804) (24,327,014) (2,708,272) (31,326,172) (3,260,141) (37,525,210) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (745,946) $ (8,486,430) 1,148,878 $ 13,496,626 (572,928) $ (6,549,468) ---------- ------------ ---------- ------------ ---------- ------------ Class B Shares sold 134,092 $ 1,517,724 328,497 $ 3,816,554 706,265 $ 8,186,137 Shares issued in connection with the reinvestment of: Dividends from net investment income 25,006 283,349 27,583 319,597 40,792 470,419 ---------- ------------ ---------- ------------ ---------- ------------ 159,098 1,801,073 356,080 4,136,151 747,057 8,656,556 Shares repurchased (537,206) (6,100,694) (470,730) (5,449,483) (620,421) (7,125,410) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (378,108) $ (4,299,621) (114,650) $ (1,313,332) 126,636 $ 1,531,146 ---------- ------------ ---------- ------------ ---------- ------------ Class C Shares sold 106,715 $ 1,211,584 257,384 $ 2,997,797 570,784 $ 6,611,629 Shares issued in connection with the reinvestment of: Dividends from net investment income 12,725 144,384 13,512 156,679 17,765 205,133 ---------- ------------ ---------- ------------ ---------- ------------ 119,440 1,355,968 270,896 3,154,476 588,549 6,816,762 Shares repurchased (260,938) (2,968,972) (203,605) (2,359,426) (414,627) (4,814,349) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (141,498) $ (1,613,004) 67,291 $ 795,050 173,922 $ 2,002,413 ---------- ------------ ---------- ------------ ---------- ------------ Class Y Shares sold 57,198 $ 653,419 194,812 $ 2,266,581 987,271 $ 11,289,831 Shares issued in connection with the reinvestment of: Dividends from net investment income 18,709 213,178 21,540 250,898 34,738 402,928 ---------- ------------ ---------- ------------ ---------- ------------ 75,907 866,597 216,352 2,517,479 1,022,009 11,692,759 Shares repurchased (298,779) (3,409,632) (344,269) (4,012,366) (599,695) (6,901,951) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (222,872) $ (2,543,035) (127,917) $ (1,494,887) 422,314 $ 4,790,808 ---------- ------------ ---------- ------------ ---------- ------------ Increase (decrease) derived from capital shares transactions (1,488,424) $(16,942,090) 973,602 $ 11,483,457 149,944 $ 1,774,899 ========== ============ ========== ============ ========== ============
73 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 9. Capital Shares (continued).
For the Period January 1, 2003 Year Ended through Year Ended September 30, 2004 September 30, 2003 December 31, 2002 ---------------------- ---------------------- ----------------------- Massachusetts Tax Free Income Fund Shares Amount Shares Amount Shares Amount - ---------------------------------- -------- ----------- -------- ----------- -------- ------------ Class A Shares sold 92,298 $ 1,517,739 119,001 $ 1,949,577 456,052 $ 7,320,365 Shares issued in connection with the reinvestment of: Dividends from net investment income 138,812 2,281,926 115,722 1,900,796 166,936 2,687,820 -------- ----------- -------- ----------- -------- ------------ 231,110 3,799,665 234,723 3,850,373 622,988 10,008,185 Shares repurchased (583,207) (9,546,927) (584,421) (9,550,818) (659,550) (10,569,788) -------- ----------- -------- ----------- -------- ------------ Net increase (decrease) (352,097) $(5,747,262) (349,698) $(5,700,445) (36,562) $ (561,603) -------- ----------- -------- ----------- -------- ------------ Class B Shares sold 6,385 $ 104,899 22,230 $ 363,317 40,852 $ 652,539 Shares issued in connection with the reinvestment of: Dividends from net investment income 5,985 98,181 5,690 93,253 9,320 149,611 -------- ----------- -------- ----------- -------- ------------ 12,370 203,080 27,920 456,570 50,172 802,150 Shares repurchased (122,073) (2,004,356) (62,206) (1,025,084) (164,730) (2,629,120) -------- ----------- -------- ----------- -------- ------------ Net increase (decrease) (109,703) $(1,801,276) (34,286) $ (568,514) (114,558) $ (1,826,970) -------- ----------- -------- ----------- -------- ------------ Increase(decrease) derived from capital shares transactions (461,800) $(7,548,538) (383,984) $(6,268,959) (151,120) $ (2,388,573) ======== =========== ======== =========== ======== ============
For the Period January 1, 2003 Year Ended through Year Ended September 30, 2004 September 30, 2003 December 31, 2002 ------------------------- ------------------------- ------------------------- Municipal Income Fund Shares Amount Shares Amount Shares Amount - --------------------- ---------- ------------ ---------- ------------ ---------- ------------ Class A Shares sold 562,771 $ 4,169,045 1,680,532 $ 12,281,784 1,667,649 $ 12,274,988 Shares issued in connection with the reinvestment of: Dividends from net investment income 431,284 3,197,822 374,960 2,761,288 576,440 4,253,748 ---------- ------------ ---------- ------------ ---------- ------------ 994,055 7,366,867 2,055,492 15,043,072 2,244,089 16,528,736 Shares repurchased (3,170,451) (23,420,778) (2,814,362) (20,686,975) (3,360,408) (24,705,392) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (2,176,396) $(16,053,911) (758,870) $ (5,643,903) (1,116,319) $ (8,176,656) ---------- ------------ ---------- ------------ ---------- ------------ Class B Shares sold Shares issued in connection with the 128,884 $ 956,534 176,974 $ 1,299,640 360,545 $ 2,668,323 reinvestment of: Dividends from net investment income 27,197 201,837 21,918 161,634 37,421 276,214 ---------- ------------ ---------- ------------ ---------- ------------ 156,081 1,158,371 198,892 1,461,274 397,966 2,944,537 Shares repurchased (409,784) (3,040,646) (387,486) (2,860,427) (746,990) (5,506,527) ---------- ------------ ---------- ------------ ---------- ------------ Net increase (decrease) (253,703) $ (1,882,275) (188,594) $ (1,399,153) (349,024) $ (2,561,990) ---------- ------------ ---------- ------------ ---------- ------------ Increase(decrease) derived from capital shares transactions (2,430,099) $(17,936,186) (947,464) $ (7,043,056) (1,465,343) $(10,738,646) ========== ============ ========== ============ ========== ============
74 - -------------------------------------------------------------------------------- Notes to Financial Statements (continued) - -------------------------------------------------------------------------------- For the Year Ended September 30, 2004 9. Capital Shares (continued).
For the Period January 1, 2003 Year Ended through Year Ended September 30, 2004 September 30, 2003 December 31, 2002 -------------------------- --------------------------- ------------------------- Strategic Income Fund Shares Amount Shares Amount Shares Amount - --------------------- ---------- ------------- ----------- ------------- ---------- ------------ Class A Shares sold 18,605,688 $ 246,707,247 4,379,870 $ 52,212,398 1,233,640 $ 12,489,877 Shares issued in connection with the reinvestment of: Dividends from net investment income 769,347 10,148,557 371,875 4,481,650 428,477 4,343,680 ---------- ------------- ----------- ------------- ---------- ------------ 19,375,035 256,855,804 4,751,745 56,694,048 1,662,117 16,833,557 Shares repurchased (5,231,023) (68,866,251) (2,180,800) (25,669,234) (2,583,795) (26,064,953) ---------- ------------- ----------- ------------- ---------- ------------ Net increase (decrease) 14,144,012 $ 187,989,553 2,570,945 $ 31,024,814 (921,678) $ (9,231,396) ---------- ------------- ----------- ------------- ---------- ------------ Class B Shares sold 2,393,606 $ 31,720,078 11,291,589 $ 137,976,336 996,177 $ 10,066,847 Shares issued in connection with the reinvestment of: Dividends from net investment income 330,396 4,369,393 268,978 3,224,645 364,119 3,688,894 ---------- ------------- ----------- ------------- ---------- ------------ 2,724,002 36,089,471 11,560,567 141,200,981 1,360,296 13,755,741 Shares repurchased (2,654,105) (34,998,138) (11,369,542) (139,122,966) (2,502,784) (25,285,670) ---------- ------------- ----------- ------------- ---------- ------------ Net increase (decrease) 69,897 $ 1,091,333 191,025 $ 2,078,015 (1,142,488) $(11,529,929) ---------- ------------- ----------- ------------- ---------- ------------ Class C Shares sold 14,515,841 $ 193,058,623 3,238,168 $ 38,652,520 331,088 $ 3,346,746 Shares issued in connection with the reinvestment of: Dividends from net investment income 242,679 3,207,880 96,560 1,163,101 101,770 1,030,223 ---------- ------------- ----------- ------------- ---------- ------------ 14,758,520 196,266,503 3,334,728 39,815,621 432,858 4,376,969 Shares repurchased (1,236,758) (16,245,858) (647,304) (7,733,899) (771,825) (7,794,721) ---------- ------------- ----------- ------------- ---------- ------------ Net increase (decrease) 13,521,762 $ 180,020,645 2,687,424 $ 32,081,722 (338,967) $ (3,417,752) ---------- ------------- ----------- ------------- ---------- ------------ Class Y Shares sold 850,431 $ 11,206,980 110,719 $ 1,316,510 68,699 $ 692,601 Shares issued in connection with the reinvestment of: Dividends from net investment income 14,335 188,666 7,237 87,673 4,144 42,230 ---------- ------------- ----------- ------------- ---------- ------------ 864,766 11,395,646 117,956 1,404,183 72,843 734,831 Shares repurchased (240,560) (3,177,333) (40,357) (480,677) (21,066) (211,862) ---------- ------------- ----------- ------------- ---------- ------------ Net increase (decrease) 624,206 $ 8,218,313 77,599 $ 923,506 51,777 $ 522,969 ---------- ------------- ----------- ------------- ---------- ------------ Increase (decrease) derived from capital shares transactions 28,359,877 $ 377,319,844 5,526,993 $ 66,108,057 (2,351,356) $(23,656,108) ========== ============= =========== ============= ========== ============
75 - -------------------------------------------------------------------------------- Report of Independent Registered Public Accounting Firm - -------------------------------------------------------------------------------- To the Trustees and Shareholders of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, and Loomis Sayles Funds II: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Loomis Sayles Core Plus Bond Fund and Loomis Sayles Government Securities Fund, each a series of CDC Nvest Funds Trust I, the Loomis Sayles Massachusetts Tax Free Income Fund, a series of CDC Nvest Funds Trust II, and the Loomis Sayles High Income Fund, Loomis Sayles Limited Term U.S. Government and Agency Fund (formerly Loomis Sayles Limited Term U.S. Government Fund), Loomis Sayles Municipal Income Fund, and the Loomis Sayles Strategic Income Fund, each a series of Loomis Sayles Funds II (collectively, the "Funds"), at September 30, 2004, the results of each of their operations, the changes in each of their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts November 16, 2004 76 - -------------------------------------------------------------------------------- Trustee and Officer Information - -------------------------------------------------------------------------------- The table below provides certain information regarding the Trustees and officers of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and Loomis Sayles Funds II. Unless otherwise indicated, the address of all persons below is 399 Boylston Street, Boston, MA 02116.
Position(s) Held with the Number of Portfolios in Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen and Name and Age Served and Term of Office* During Past 5 Years** Other Directorships Held - --------------------------- -------------------------- --------------------------------- ---------------------------- INDEPENDENT TRUSTEES Graham T. Allison, Jr. (64) Trustee, Douglas Dillon Professor and 41; Contract Review and Director for the Belfer Center Director, Taubman Centers, Governance Committee of Science and International Inc.; Advisory Board Member, Member; Affairs, John F. Kennedy USEC Inc. Since 1984 for CDC Nvest School of Government, Funds Trust I, 1995 for Harvard University CDC Nvest Funds Trust II, 2003 for Loomis Sayles Funds II Edward A. Benjamin (66) Trustee, Retired 41; Audit Committee Member, Director, Coal, Energy Since 2003 for CDC Nvest Investments & Management, Funds Trust I and CDC LLC; Director, Precision Nvest Funds Trust II, 2002 Optics Corporation for Loomis Sayles Funds II Daniel M. Cain (59) Trustee, President and CEO, Cain 41; Chairman of the Audit Brothers & Company, Trustee, Universal Health Committee, Incorporated Realty Income Trust; Since 1996 for CDC Nvest Director, Sheridan Funds I and CDC Nvest Healthcorp Funds II, 2003 for Loomis Sayles Funds II; Co-Chairman of the Board since 2004 Paul G. Chenault (71) Trustee, Retired; Trustee, First 41; Contract Review and Variable Life Director, Mailco Office Governance Committee Products, Inc. Member, Since 2003 for CDC Nvest Funds Trust I and CDC Nvest Funds Trust II, 2000 for Loomis Sayles Funds II Kenneth J. Cowan (72) Trustee, Retired 41; Chairman of the Contract None Review and Governance Committee, Since 1993 for CDC Nvest Funds Trust I, 1975 for CDC Nvest Funds Trust II, 2003 for Loomis Sayles Funds II; Co-Chairman of the Board Since 2004
77 - -------------------------------------------------------------------------------- Trustee and Officer Information - --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen and Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held - --------------------------- -------------------------- --------------------------------- ----------------------------- INDEPENDENT TRUSTEES continued Richard Darman (61) Trustee Partner, The Carlyle Group; 41; Contract Review and Chairman of the Board of Director and Chairman, Governance Committee Directors of AES AES Corporation Member, Corporation; formerly, Since 1996 for CDC Nvest Professor, John F. Kennedy Funds Trust I and CDC School of Government, Nvest Funds Trust II, 2003 Harvard University for Loomis Sayles Funds II Sandra O. Moose (62) Trustee President, Strategic Advisory 41 Audit Committee Member; Services; formerly, Senior Director, Verizon Since 1982 for CDC Nvest Vice President and Director, Communications; Funds Trust I, 1993 for The Boston Consulting Director, Rohm and Haas CDC Nvest Funds Trust II, Group, Inc. Company; 2003 Loomis Sayles Director, AES Corporation Funds II John A. Shane (71) Trustee President, Palmer Service 41 Contract Review and Corporation Director, Gensym Governance Committee Corporation; Director, Member, Overland Storage, Inc.; Since 1993 for CDC Nvest Director, Abt Associates Inc. Funds Trust I, 1982 for CDC Nvest Funds Trust II, 2003 for Loomis Sayles Funds II INTERESTED TRUSTEES Robert J. Blanding/1/ (57) Chief Executive Officer, President, Chairman, 41; 555 California Street Loomis Sayles Funds II and Director, and Chief Executive None San Francisco, CA 94104 Trustee, Officer, Loomis Sayles & Since 2003 for CDC Nvest Company, L.P.; President and Funds Trust I and CDC CEO - Loomis Sayles Funds Nvest Funds Trust II, 2002 I for Loomis Sayles Funds II John T. Hailer/2/ (43) President and Trustee; President and Chief Executive 41; Since 2000 for CDC Nvest Officer, CDC IXIS Asset None Funds Trust I and CDC Management Distributors, Nvest Funds Trust II, 2003 L.P.; President and Chief for Loomis Sayles Funds II Executive Officer - CDC Nvest Funds; Executive Vice President, Loomis Sayles Funds I
78 - -------------------------------------------------------------------------------- Trustee and Officer Information - --------------------------------------------------------------------------------
Position(s) Held with Number of Portfolios in the Trust and Length of Principal Occupation(s) Fund Complex Overseen and Name and Age Time Served* During Past 5 Years** Other Directorships held - --------------------------- -------------------------- --------------------------------- ---------------------------- OFFICERS John E. Pelletier (40) Chief Operating Officer President, Director and Chief Not Applicable Since 2004 Executive Officer, CDC IXIS Asset Management Services, Inc.; Executive Vice President, CDC IXIS Distribution Corporation; Executive Vice President and Chief Operating Officer, CDC IXIS Asset Management Distributors, L.P. and CDC IXIS Asset Management Advisers, L.P.; formerly, Senior Vice President, General Counsel, Secretary and Clerk, CDC IXIS Distribution Corporation; Executive Vice President, General Counsel, Secretary and Clerk, CDC IXIS Asset Management Distributors, L.P., CDC IXIS Asset Management Advisers, L.P.; Executive Vice President, General Counsel, Secretary and Clerk, CDC IXIS Asset Management Services, Inc. Coleen Downs Dinneen (43) Secretary, Clerk and Chief Senior Vice President, Not Applicable Legal Officer General Counsel, Secretary Since 2004 and Clerk, CDC IXIS Distribution Corporation, CDC IXIS Asset Management Distributors, L.P., CDC IXIS Asset Management Advisers, L.P. and CDC IXIS Asset Management Services, Inc.; formerly, Senior Vice President, Deputy General Counsel, Assistant Secretary and Assistant Clerk, CDC IXIS Asset Management Advisers, L.P., CDC IXIS Asset Management Services, Inc. and Vice President Deputy General Counsel, Assistant Secretary and Assistant Clerk, CDC IXIS Distribution Corporation
79 - -------------------------------------------------------------------------------- Trustee and Officer Information - --------------------------------------------------------------------------------
Position(s) Held with Number of Portfolios in the Trusts, Length of Principal Occupation(s) Fund Complex Overseen and Name and Age of Time Served* During Past 5 Years** Other Directorships held - --------------------------- -------------------------- --------------------------------- ----------------------------- OFFICERS continued Michael Kardok (45) Treasurer, Principal Senior Vice President, CDC Not Applicable Financial and Accounting IXIS Asset Management Officer Services, Inc.; Senior Vice Since 2004 President, CDC IXIS Asset Management Advisers, L.P.; formerly, Senior Director, PFPC Inc; Vice President - Division Manager, First Data Investor Services, Inc. Kristin Vigneaux (35) Chief Compliance Officer Chief Compliance Officer Not Applicable Since 2004 for Mutual Funds, CDC IXIS Asset Management Distributors, L.P., CDC IXIS Asset Management Advisers, L.P. and CDC IXIS Asset Management Services, Inc.; formerly, Vice President CDC IXIS Asset Management Services, Inc. Daniel J. Fuss (71) Executive Vice President Vice Chairman and Not Applicable One Financial Center Since 2003 Director, Loomis Sayles & Boston, MA 02111 Company, L.P.; Prior to 2002, President and Trustee of Loomis Sayles Funds II Frank LoPiccolo (51) Anti-Money Laundering President and CEO, CDC Not Applicable Officer IXIS Asset Management Since 2003 Services, Inc.
* Each Trustee serves for an indefinite term in accordance with its current By-Laws until the date his or her successor is elected and qualified, or until he or she sooner dies, retires, is removed or becomes disqualified. At a meeting held on February 27, 2004, the Trustees voted to suspend the retirement policy until 2005. ** Previous positions during the past five years with the Distributor, CDC IXIS Advisers or Loomis Sayles are omitted if not materially different from a trustee's or officer's current position with such entity. As indicated, each Trustee is also a trustee of certain other investment companies for which the Distributor acts as principal underwriter. /1/ Mr. Blanding is deemed an "interested person" of Loomis Sayles Funds II because he holds the following positions with affiliated persons of Loomis Sayles Funds II: President, Chairman, Director and Chief Executive Officer of Loomis Sayles. /2/ Mr. Hailer is an "interested person" of Loomis Sayles Funds II because he holds the following positions with affiliated persons of Loomis Sayles Funds II: Director and Executive Vice President of CDC IXIS Asset Management Distribution Corporation ("CDC IXIS Distribution Corporation"); and President and Chief Executive Officer of CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers"). The statement of additional information includes additional information about the Trustees of the Trusts and is available, without charge, by calling CDC Nvest Funds at 800-225-5478. 80 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. Ms. Sandra O. Moose, and Messrs. Edward A. Benjamin and Daniel M. Cain, all members of the audit committee, have been designated as financial experts. Each of these individuals is also an Independent Trustee of the Trust. Item 4. Principal Accountant Fees and Services. Fees paid to Principal Accountant by the Fund. The table below sets forth fees billed by the principal accountant, PricewaterhouseCoopers LLP, for the past two fiscal years for professional services rendered in connection with a) the audit of the Trust's annual financial statements and services provided in connection with regulatory filings; b) audit-related services (including services that are reasonably related to the performance of the audit of the registrant's financial statements and but not reported under "Audit Fees"); c) tax compliance, tax advice and tax planning and d) all other fees billed for professional services rendered by the principal accountant to the Trust, other than the services provided reported as a part of (a) through (c) of this Item.
Audit-related All other Audit fees fees/1/ Tax fees/2/ fees - ----------------------------------------------------------------------------------------------- 2003 2004 2003 2004 2003 2004 2003 2004 - ----------------------------------------------------------------------------------------------- CDC Nvest Massachusetts Tax Free Income Fund $20,400 $21,900 -- -- $5,300 $5,467 -- -- - -----------------------------------------------------------------------------------------------
Aggregate fees billed to the Fund for non-audit services for 2004 and 2003 were $5,300 and $5,467, respectively. Fees paid to Principal Accountant By Adviser and Control Affiliates. The following table sets forth the non-audit services provided by the Trust's principal accountant to CDC IXIS Asset Management Advisers, L.P. and entities controlling, controlled by or under common control with CDC IXIS Asset Management Advisers, L.P. that provide ongoing services to the Trust ("Control Affiliates") for the last two fiscal years. Audit-related All other fees/1/ Tax fees fees - -------------------------------------------------------------------------------- 2003 2004 2003 2004 2003 2004 - -------------------------------------------------------------------------------- Control Affiliates 65,000 73,600 -- -- 45,000 54,400 - -------------------------------------------------------------------------------- [1. The audit related fees consist of performing a SAS 70 internal examination of the Trust's transfer agent and a review of 12b-1 payments made to a Trust affiliate] Aggregate fees billed to Control Affiliates for non-audit services during 2004 and 2003 were $45,000 and $54,400, respectively None of the services described above were approved pursuant to (c)(7)(i)(C) of Regulation S-X. Audit Committee Pre Approval Policies. Annually, the Trust's Audit Committee reviews the audit, audit-related, tax and other non-audit services together with the projected fees, for services proposed to be rendered to the Trust and/or other entities for which pre-approval is required during the upcoming year. Any subsequent revisions to already pre-approved services or fees (including fee increases) and requests for pre-approval of new services would be presented for consideration quarterly as needed. If, in the opinion of management, a proposed engagement by the Trust's independent accountants needs to commence before the next regularly scheduled Audit Committee meeting, any member of the Audit Committee who is an independent Board member is authorized to pre-approve the engagement, but only for engagements to provide audit, audit related and tax services. This approval is subject to review of the full Audit committee at its next quarterly meeting. All other engagements require the approval of all the members of the audit committee. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Included as part of the Report to Shareholders filed as Item 1 herewith. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. Not Applicable. Item 9. Submission of Matters to a Vote of Securities Holders. The following represents new procedures by which shareholders may recommend nominees to the registrant's board of trustees: Shareholders that wish to nominate a candidate to the Board (the "Nominating Shareholder") must submit any such recommendation in writing to the following address: Attention of the Board of Trustees, c/o Secretary of the Funds, IXIS Asset Management Services Advisors Group, 399 Boylston Street, Boston, MA 02116; or by email to secretaryofthefunds@ixisag.com (the "Shareholder Recommendation"). The Shareholder Recommendation must contain sufficient background information concerning the candidate to enable a proper judgment to be made as to the candidate's qualifications, which may include (i) the nominee's knowledge of the mutual fund industry; (ii) any experience possessed by the nominee as a director or senior officer of other public companies; (iii) the nominee's educational background; (iv) the nominee's reputation for high ethical standards and personal and professional integrity; (v) any specific financial, technical or other expertise possessed by the nominee, and the extent to which such expertise would complement the Board's existing mix of skills and qualifications; (vi) the nominee's perceived ability to contribute to the ongoing functions of the Board, including the nominee's ability and commitment to attend meetings regularly and work collaboratively with other members of the Board; (vii) the nominee's ability to qualify as an Independent Trustee for purposes of applicable regulations; and (viii) such other factors as the appropriate Board Committee may request in light of the existing composition of the Board and any anticipated vacancies or other transitions. The Shareholder Recommendation must be received in a timely manner (and in any event no later than the date specified for receipt of shareholder proposals in any applicable proxy statement with respect to a Fund). A Shareholder Recommendation shall be kept on file and considered by the Board for six (6) months from the date of receipt, after which the Shareholder Recommendation shall be considered stale and discarded. Item 10. Controls and Procedures. The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. Item 11. Exhibits. (a) (1) Code of Ethics filed herewith as exhibit (a)(1). (a) (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2), as herewith as exhibit (a)(2) (1)and (a)(2)(2) (a) (3) Not applicable. (b) Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 are filed herewith as Exhibit (b) SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CDC Nvest Funds Trust II By: /s/ JOHN T. HAILER ------------------------------------ Name: John T. Hailer Title: President and Chief Executive Officer Date: December 21, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ JOHN T. HAILER ------------------------------------ Name: John T. Hailer Title: President and Chief Executive Officer Date: December 21, 2004 By: /s/ MICHAEL KARDOK ------------------------------------ Name: Michael Kardok Title: Treasurer, Principal Financial Officer and Accounting Officer Date: December 21, 2004 EX-99.CODE ETH 2 dex99codeeth.txt CODE OF ETHICS Exhibit (a)(1) CDC NVEST FUNDS TRUST I CDC NVEST FUNDS TRUST II CDC NVEST FUNDS TRUST III CDC NVEST CASH MANAGEMENT TRUST CDC NVEST COMPANIES TRUST I AEW REAL ESTATE INCOME FUND LOOMIS SAYLES FUNDS I LOOMIS SAYLES FUNDS II Dated August, 2003 CODE OF ETHICS PURSUANT TO SECTION 406 OF THE SARBANES-OXLEY ACT OF 2002 FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. Covered Persons/Purpose of the Code This Code of Ethics (this "Code") pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 has been adopted by the registered investment companies (each a "Fund" and, collectively, the "Funds") listed on Exhibit A and applies to each Fund's Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer (the "Covered Persons," all covered persons are set forth in Exhibit B) for the purpose of promoting: . Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; . Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the registrant . Compliance with applicable governmental laws, rules and regulations; . The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code of violations of the Code; and . Accountability for adherence to the Code. Each Covered Person should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to conflicts of interest. II. Covered Persons Should Handle Ethically Actual and Apparent Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Person's private interest interferes with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Person's, or a member of the Covered Person's family or household, receives improper personal benefits as a result of the Covered Person's position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Persons and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (including the regulations thereunder, the "1940 Act") and the Investment Advisers Act of 1940 (including the regulations thereunder, the "Investment Advisers Act"). For example, Covered Persons may not engage in certain transactions with the Fund because of their status as "affiliated persons" of the Fund. The Funds and their investment advisers; subadvisers; distributors and administrators (each a "Service Provider" and, collectively, the "Service Providers") compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. See also Section V of this code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Funds and their Service Providers of which the Covered Persons are also officers or employees. As a result, this Code recognizes that the Covered Persons will, in the normal course of their duties (whether for the Funds or for a Service Provider, or for each), be involved in establishing policies and implementing decisions that will have different effects on the Service Providers and the Funds. The participation of the Covered Persons in such activities is inherent in the contractual relationships between the Funds and their Service Providers and is consistent with the performance by the Covered Persons of their duties as officers of the Funds. Thus, if performed in conformity with the provisions of the 1940 Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Trustees ("Boards") that the Covered Persons may also be officers or employees of one or more other investment companies covered by this or other codes and that such service, by itself, does not give rise to a conflict of interest. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not the subject of provisions of the 1940 Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Persons should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Person should not be placed improperly before the interest of a Fund. Each Covered Person must not: . use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Person would benefit personally to the detriment of the Fund; -2- . cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Person rather than the benefit the Fund; or . retaliate against any other Covered Person or any employee of the Funds or their Service Providers for reports of potential violations that are made in good faith. There are some conflict of interest situations that should always be approved by the Chief Legal Officer ("CLO") of the Fund (or, with respect to activities of the CLO if he/she is a Covered Person, by the President ). These conflict of interest situations are listed below: . service on the board of directors or governing board of a publicly traded entity; . acceptance of any investment opportunity, gift, gratuity or other thing of more than nominal value from any person or entity that does business, or desires to do business, with the Fund. This restriction shall not apply to (i) gifts from a single giver so long as their aggregate annual value does not exceed the equivalent of $100 or (ii) attending business meals, business related conferences, sporting events and other entertainment events at the expense of a giver, so long as the expense is reasonable; . any ownership interest in, or any consulting relationship with, any entities doing business with a Fund, other than a Service Provider or an affiliate of a Service Provider. This restriction shall not apply to or otherwise limit the ownership of publicly traded securities so long as the Covered Person's ownership does not exceed more than 2% of the outstanding securities of the relevant class; and . a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Person's employment with a Service Provider or its affiliate. This restriction shall not apply to or otherwise limit (i) the ownership of publicly traded securities so long as the Covered Person's ownership does not exceed more than 2% of the particular class of security outstanding or (ii) the receipt by the Service Provider of research or other benefits in exchange for "soft dollars". III. Disclosure and Compliance . Each Covered Person should familiarize himself with the disclosure requirements generally applicable to a Fund; . Each Covered Person should not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside the -3- Fund, including to the Fund's Board and auditors, and to governmental regulators and self-regulatory organizations; . Each Covered Person should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and . It is the responsibility of each Covered Person to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Person must: . upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Person), affirm in writing to the Funds that he/she has received, read, and understands the Code; . annually thereafter affirm to the Funds that he/she has complied with the requirements of the Code; and . notify the CLO of the Funds promptly if he/she knows of any violation of this Code (with respect to violations by the CLO if he/she is a Covered Person, the Covered Person shall report to the President). Failure to do so is itself a violation of this Code. The CLO of a Fund is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any approvals or waivers other than those this Code states can be granted by the CLO, sought by the CLO or Covered Person will be considered by the relevant Fund's Audit Committee (the "Committee"). The Funds will follow these procedures in investigating and enforcing this Code: . the CLO will take all appropriate action to investigate any potential violations reported, which may include the use of internal or external counsel, accountants or other personnel; . if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action; . any matter that the CLO believes is a violation will be reported to the Committee; -4- . if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Person; . the Committee will be authorized to grant waivers, as it deems appropriate; and . any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities of the Covered Persons who are subject to this Code, they are superseded by this Code to the extent that they conflict with the provisions of this Code. The Funds and their Service Providers' codes of ethics under Rule 17j-1 under the 1940 Act and the Service Providers' more detailed compliance policies and procedures are separate requirements applying to the Covered Persons and others, and are not part of this Code. VI. Amendments Any amendments to this Code with respect to a Fund, other than administrative amendments to Exhibits A and B, must be approved or ratified by a majority vote of the Fund's Board, including a majority of independent trustees. VII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone except as permitted by the Board. VIII. Internal Use The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. -5- Exhibit A Registered Investment Companies CDC Nvest Funds Trust I CDC Nvest Funds Trust II CDC Nvest Funds Trust III CDC Nvest Cash Management Trust CDC Nvest Companies Trust I AEW Real Estate Income Fund Loomis Sayles Funds I Loomis Sayles Funds II -6- Exhibit B Persons Covered by this Code of Ethics - ------------------------------------------------------------------------------- Principal Executive Principal Financial Principal Trust Officer Officer Accounting Officer - ------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Funds Trust I Trustee, Treasurer Treasurer President and Chief Executive Officer - ------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Funds Trust II Trustee, Treasurer Treasurer President and Chief Executive Officer - ------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Funds Trust Trustee, Treasurer Treasurer III President and Chief Executive Officer - ------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Companies Trustee, Treasurer Treasurer Trust I President and Chief Executive Officer - ------------------------------------------------------------------------------- CDC Nvest John. T. Hailer, Michael Kardok, Michael Kardok, Cash Trustee, Treasurer Treasurer Management President and Chief Trust Executive Officer - ------------------------------------------------------------------------------- AEW Real John. T. Hailer, Michael Kardok, Michael Kardok, Estate Income Trustee, Treasurer Treasurer Fund President and Chief Executive Officer - ------------------------------------------------------------------------------- Loomis Sayles Robert J. Blanding, Michael Kardok, Michael Kardok, Funds I and Trustee, Treasurer Treasurer Loomis Sayles Chief Executive Funds Officer II - ------------------------------------------------------------------------------- -7- EX-99.CERT (1) 3 dex99cert1.txt CEO SECTION 302 CERTIFICATION Exhibit (a)(2)(1) CDC Nvest Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certifications I, John T. Hailer, certify that: 1. I have reviewed this report on Form N-CSR of CDC Nvest Funds Trust II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows), of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. [Reserved] c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 21, 2004 /s/ JOHN T. HAILER ----------------------------------- John T. Hailer President & Chief Executive Officer EX-99.CERT (2) 4 dex99cert2.txt TREASURER SECTION 302 CERTIFICATION Exhibit (a)(2)(2) CDC Nvest Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certifications I, Michael Kardok, certify that: 1. I have reviewed this report on Form N-CSR of CDC Nvest Funds Trust II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows), of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. [Reserved] c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 21, 2004 /s/ MICHAEL KARDOK ---------------------------- Michael Kardok Treasurer CDC Nvest Funds Trust II EX-99.(906) 5 dex99906.txt SECTION 906 CERTIFICATION Exhibit (b) CDC Nvest Funds Trust II Section 906 Certification In connection with the report on Form N-CSR for the period ended September 30, 2004 for the Registrant (the "Report"), the undersigned each hereby certifies to the best of his knowledge, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as applicable; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. By: By: President & Chief Executive Officer Treasurer CDC Nvest Funds Trust II CDC Nvest Funds Trust II /s/ JOHN T. HAILER /s/ MICHAEL KARDOK - ----------------------------------- -------------------------------------- John T. Hailer Michael Kardok Date: December 21, 2004 Date: December 21, 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-----