N-CSRS 1 dncsrs.txt IXIS ADVISOR FUNDS TRUST II UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-242 IXIS Advisor 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, 2004 Date of reporting period: March 31, 2005 Item 1. Reports to Stockholders. [LOGO] Income Funds Semiannual Report March 31, 2005 [LOGO] Loomis Sayles Core Plus Bond Fund Loomis Sayles High Income Fund Loomis Sayles Limited Term Government and Agency Fund Loomis Sayles Massachusetts Tax Free Income Fund Loomis Sayles Municipal Income Fund Loomis Sayles Strategic Income Fund TABLE OF CONTENTS Management Discussion and Performance........Page 1 Schedule of InvestmentsPage 17 Financial Statements...Page 39 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 -------------------------------------------------------------------------------- After delivering strong returns in the fourth quarter of 2004, bonds in many market segments encountered rising interest rates in the January - March period, which depressed prices. Investment-grade corporate bonds, which were solid performers in 2004, underperformed early in 2005, while high-yield and non-U.S.-dollar issues held on to more of their gains. For the six months ended March 31, 2005, the total return of Loomis Sayles Core Plus Bond Fund's Class A shares at net asset value was 0.63%, including $0.34 in dividends reinvested during the period. The fund's benchmark, the Lehman Aggregate Bond Index, returned 0.47% for the same period, while Morningstar's Intermediate-Term Bond category averaged a 0.40% return. At the end of March 2005, the fund's 30-day SEC yield was 3.87%. MARKETS CAME FULL CIRCLE Bond markets rose and then fell, leaving key segments about where they had started six months earlier. Ongoing economic expansion favored corporate sectors, and lower-rated, high-yield holdings made a strong contribution to fund results. Smaller positive returns came from Canadian issues and mortgage-backed securities. However, U.S. agency bonds were held back by political and regulatory pressures. Talk of increased inflation in the United States became widespread in the first quarter of 2005, driving some investors to reduce their exposure to fixed-income securities. WIRELINE, CABLE AND FOOD ISSUES LED RETURNS Cable and media bonds rose as the economy expanded, favoring consumer-related sectors. "Wirelines" (conventional, land-based telephones) saw a flurry of activity centered on the acquisition of AT&T by SBC Communications, which led to a sharp rise in the price of AT&T bonds. Qwest bonds also moved higher as the company strengthened its finances and improved operating effectiveness. Sprint bonds also moved up. Because of their low valuation and high yield, our purchase of Dean Foods - a leading producer of dairy, soy and specialty food products - benefited the fund as bonds appreciated. Bonds of Ambev Cia De Bebidas Das Ame, a Brazilian beverage company, moved higher as the markets digested news of its agreement to join forces with Interbrew of Belgium. HEALTHCARE AND REITS LAGGED, AUTOS FACING DOWNGRADES The portfolio's commitment to high-yielding healthcare bonds and its holdings in bonds issued by real estate investment trusts produced a minimal decline. But automotive holdings were the fund's worst performers by a wide margin. Damage was triggered by General Motors' announcement that it would fall short of key production targets and by its gloomy earnings assessment for upcoming quarters. Ford's obligations also declined as investors focused on potential production cuts. Major ratings agencies have downgraded GM, and the market expects these historically high-quality issues to be downgraded eventually into the high-yield sector. CORPORATE AND HIGH YIELD BONDS REMAIN THE FOCUS Between December and February we trimmed the fund's holdings of high-yield issues as yields shrank. As spreads narrowed, we have been selectively replacing some of that allocation as we find opportunities. At the end of the period, about half of the fund was invested in corporate bonds, reflecting our view that the economy will continue to expand despite continued tightening by the Federal Reserve Board. At the end of the period, high-yield bonds accounted for about 19% of the fund's total net assets, most of which were rated BB, just below investment grade. We also reduced non-U.S.-dollar commitments by taking profits in some of the fund's Canadian bonds and all its euro-denominated positions. Canada and Singapore remain the fund's largest non-U.S.-dollar allocations at the end of the period. 1 LOOMIS SAYLES CORE PLUS BOND FUND Investment Results through March 31, 2005 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares [CHART] March 31, 1995 through March 31, 2005 Net Asset Maximum Sales Lehman Aggregte Lehman U.S. Value /1/ Charge /2/ Bond Index /3/ Credit Index /4/ ---------- ------------- --------------- ---------------- 3/31/1995 $10,000 $ 9,550 $10,000 $10,000 4/30/1995 10,197 9,738 10,140 10,169 5/31/1995 10,647 10,168 10,532 10,648 6/30/1995 10,741 10,258 10,609 10,744 7/31/1995 10,683 10,203 10,586 10,696 8/31/1995 10,873 10,383 10,713 10,869 9/30/1995 11,008 10,513 10,818 10,998 10/31/1995 11,155 10,653 10,958 11,141 11/30/1995 11,329 10,819 11,122 11,354 12/31/1995 11,493 10,976 11,279 11,541 1/31/1996 11,541 11,022 11,353 11,616 2/29/1996 11,291 10,783 11,156 11,340 3/31/1996 11,235 10,729 11,079 11,243 4/30/1996 11,140 10,639 11,016 11,150 5/31/1996 11,130 10,629 10,994 11,130 6/30/1996 11,293 10,784 11,142 11,294 7/31/1996 11,321 10,811 11,172 11,315 8/31/1996 11,321 10,811 11,153 11,281 9/30/1996 11,583 11,062 11,348 11,520 10/31/1996 11,878 11,343 11,599 11,834 11/30/1996 12,164 11,617 11,798 12,087 12/31/1996 12,023 11,482 11,688 11,920 1/31/1997 12,090 11,546 11,724 11,937 2/28/1997 12,166 11,619 11,753 11,987 3/31/1997 11,985 11,446 11,623 11,800 4/30/1997 12,117 11,572 11,797 11,979 5/31/1997 12,280 11,728 11,908 12,115 6/30/1997 12,497 11,934 12,050 12,286 7/31/1997 12,999 12,414 12,374 12,736 8/31/1997 12,778 12,203 12,269 12,548 9/30/1997 13,032 12,446 12,450 12,767 10/31/1997 13,156 12,564 12,630 12,929 11/30/1997 13,217 12,622 12,689 13,002 12/31/1997 13,353 12,752 12,816 13,140 1/31/1998 13,530 12,921 12,981 13,296 2/28/1998 13,574 12,963 12,971 13,292 3/31/1998 13,658 13,043 13,016 13,341 4/30/1998 13,721 13,103 13,084 13,425 5/31/1998 13,861 13,237 13,208 13,584 6/30/1998 13,912 13,286 13,320 13,685 7/31/1998 13,876 13,251 13,348 13,672 8/31/1998 13,738 13,120 13,565 13,736 9/30/1998 14,269 13,627 13,883 14,181 10/31/1998 14,119 13,483 13,810 13,962 11/30/1998 14,400 13,752 13,888 14,225 12/31/1998 14,423 13,774 13,930 14,267 1/31/1999 14,579 13,923 14,029 14,408 2/28/1999 14,284 13,641 13,784 14,066 3/31/1999 14,481 13,830 13,861 14,165 4/30/1999 14,596 13,939 13,905 14,207 5/31/1999 14,279 13,636 13,783 14,017 6/30/1999 14,187 13,549 13,739 13,943 7/31/1999 14,132 13,496 13,680 13,866 8/31/1999 14,076 13,442 13,673 13,833 9/30/1999 14,314 13,669 13,832 13,983 10/31/1999 14,346 13,701 13,883 14,047 11/30/1999 14,368 13,721 13,882 14,062 12/31/1999 14,375 13,728 13,815 13,988 1/31/2000 14,315 13,671 13,770 13,938 2/29/2000 14,477 13,825 13,937 14,068 3/31/2000 14,675 14,014 14,120 14,187 4/30/2000 14,405 13,757 14,080 14,063 5/31/2000 14,298 13,655 14,073 14,010 6/30/2000 14,731 14,069 14,366 14,362 7/31/2000 14,818 14,152 14,496 14,536 8/31/2000 15,010 14,334 14,707 14,725 9/30/2000 15,032 14,356 14,799 14,803 10/31/2000 14,946 14,274 14,897 14,817 11/30/2000 15,088 14,409 15,141 15,009 12/31/2000 15,438 14,744 15,421 15,301 1/31/2001 15,821 15,109 15,674 15,719 2/28/2001 15,978 15,259 15,810 15,857 3/31/2001 15,997 15,277 15,889 15,955 4/30/2001 15,906 15,190 15,824 15,897 5/31/2001 16,008 15,287 15,919 16,043 6/30/2001 16,012 15,292 15,979 16,124 7/31/2001 16,418 15,679 16,336 16,545 8/31/2001 16,600 15,853 16,523 16,767 9/30/2001 16,530 15,786 16,716 16,743 10/31/2001 16,856 16,097 17,066 17,158 11/30/2001 16,745 15,991 16,830 17,009 12/31/2001 16,557 15,812 16,724 16,892 1/31/2002 16,519 15,776 16,859 17,035 2/28/2002 16,454 15,714 17,022 17,164 3/31/2002 16,275 15,543 16,739 16,847 4/30/2002 16,428 15,689 17,064 17,081 5/31/2002 16,566 15,821 17,209 17,308 6/30/2002 16,167 15,439 17,358 17,336 7/31/2002 15,979 15,260 17,567 17,327 8/31/2002 16,344 15,608 17,864 17,775 9/30/2002 16,398 15,660 18,153 18,113 10/31/2002 16,306 15,572 18,070 17,903 11/30/2002 16,616 15,868 18,065 18,135 12/31/2002 17,028 16,261 18,439 18,670 1/31/2003 17,123 16,352 18,454 18,731 2/28/2003 17,370 16,588 18,710 19,105 3/31/2003 17,420 16,636 18,695 19,119 4/30/2003 17,681 16,886 18,850 19,473 5/31/2003 18,033 17,222 19,201 20,087 6/30/2003 18,062 17,249 19,163 20,038 7/31/2003 17,442 16,658 18,519 19,183 8/31/2003 17,610 16,817 18,642 19,333 9/30/2003 18,117 17,302 19,135 20,009 10/31/2003 18,072 17,259 18,957 19,796 11/30/2003 18,182 17,364 19,002 19,886 12/31/2003 18,477 17,645 19,195 20,108 1/31/2004 18,635 17,797 19,350 20,311 2/29/2004 18,779 17,934 19,559 20,567 3/31/2004 18,920 18,068 19,706 20,766 4/30/2004 18,437 17,608 19,193 20,111 5/31/2004 18,275 17,453 19,116 19,970 6/30/2004 18,387 17,559 19,224 20,054 7/31/2004 18,594 17,758 19,415 20,302 8/31/2004 18,966 18,113 19,785 20,781 9/30/2004 19,074 18,216 19,839 20,897 10/31/2004 19,282 18,415 20,005 21,100 11/30/2004 19,244 18,378 19,846 20,888 12/31/2004 19,419 18,545 20,028 21,161 1/31/2005 19,465 18,589 20,154 21,329 2/28/2005 19,446 18,571 20,035 21,203 3/31/2005 19,187 18,329 19,932 20,939 Average Annual Returns -- March 31, 2005
6 MONTHS/7/ 1 YEAR/7/ 5 YEARS/7/ 10 YEARS/7/ CLASS A (Inception 11/7/73) Net Asset Value/1/ 0.63% 1.45% 5.51% 6.73% With Maximum Sales Charge/2/ -3.90 -3.13 4.55 6.25 CLASS B (Inception 9/13/93) Net Asset Value/1/ 0.22 0.71 4.75 5.94 With CDSC/5/ -4.67 -4.12 4.42 5.94 CLASS C (Inception 12/30/94) Net Asset Value/1/ 0.23 0.71 4.75 5.95 With CDSC/5/ -0.75 -0.25 4.75 5.95 CLASS Y (Inception 12/30/94) Net Asset Value/1/ 0.76 1.70 5.96 7.09 ---------------------------------------------------------------------------- COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Lehman Aggregate Bond Index/3/ 0.47% 1.15% 7.14% 7.14% Lehman U.S. Credit Index/4/ 0.20 0.84 8.10 7.67 Morningstar Int.-Term Bond Fund Avg./6/ 0.40 0.79 6.35 6.38
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.ixisadvisorfunds.com. Class Y shares are available to certain institutional investors only. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. PORTFOLIO FACTS
% of Net Assets as of CREDIT QUALITY 3/31/05 ----------------------------- Aaa 46.7 ----------------------------- Aa 0.3 ----------------------------- A 4.8 ----------------------------- Baa 26.7 ----------------------------- Ba 15.9 ----------------------------- B 2.6 ----------------------------- Not rated* 1.1 ----------------------------- Short term & other 1.9 -----------------------------
Credit quality is based on ratings from Moody's Investors Service. * Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles.
% of Net Assets as of EFFECTIVE MATURITY 3/31/05 ---------------------------------------- 1 year or less 2.8 ---------------------------------------- 1-5 years 51.7 ---------------------------------------- 5-10 years 34.6 ---------------------------------------- 10+ years 10.9 ---------------------------------------- Average Effective Maturity 6.2 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 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. 2 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 added to their record of favorable returns through most of the period, thanks to low interest rates, shrinking default rates and ongoing economic expansion. But the market's direction turned in March when inflation and rising interest rates began to preoccupy investors. For the six months ended March 31, 2005, the total return on Loomis Sayles High Income Fund's Class A shares at net asset value was 5.25%, including $0.16 in reinvested dividends. The fund's benchmark, the Lehman High Yield Composite Index, returned 2.89% for the same period, while Morningstar's High Yield Bond category averaged 2.79%. As of March 31, 2005, the fund's 30-day SEC yield was 6.37%. LOWER-RATED ISSUES, SUPRANATIONALS AND UTILITIES DROVE RESULTS The fund's robust results compared to its benchmark reflect its emphasis on issues rated BBB through CCC - the rating tiers where performance was strongest. High-yield issues were especially robust in the fourth quarter of last year, mirroring the post-election rally in the stock market. The Inter-American Development Bank, a supranational organization that works to foster economic and social development in its member nations, rose dramatically thanks largely to the strength of Brazil's currency, the real. Electric and natural gas utilities contributed as these sectors rebounded from earlier lows. There were no material shifts in sector weightings or in the portfolio's sensitivity to interest rates over the period. SELECTED ENERGY, UTILITY AND TELECOM BONDS HAD SOLID RETURNS Although energy was not a major sector for the fund, bonds of Williams Companies rose sharply. Williams has staged a productive restructuring of its exploration, pipeline and other energy businesses and in three years has reduced its debt load by more than $4 billion. Calpine Corporation, an independent power producer serving western states and parts of Canada, rose in a strong utilities sector. And Denver-based Qwest Communications, which provides telephone and related services, boosted revenues beyond estimates and increased sales per customer through bundling of add-on services. RETAIL, PHARMACEUTICAL AND MINING ISSUES FELL Bonds of Saks, Inc., which operates luxury and traditional department store chains, declined as investors raised questions about the company's balance sheet. In addition, the company's high-end Saks Fifth Avenue stores are seen as vulnerable to a possible economic slowdown. Bonds of Vertex Pharmaceuticals also fell. This biotech company develops new treatments both independently and in collaboration with major drug firms, and faces the need to raise additional capital while its newer products move through various trial phases. Mining and construction company North American Energy Partners has disappointed investors by missing initial projections; possible accounting problems have also pressured the bonds. POSITIONING FOR HIGHER RATES AND A FLATTER GROWTH CURVE We view the cooling of the high-yield market that occurred in the first quarter as a healthy breather. There may be other dips in the course of the year, as the Federal Reserve Board continues to raise interest rates in an effort to combat inflation. However, we believe economic growth should continue at a moderate pace, giving us no reason to rethink our strong emphasis on high-yield issues. We will continue to emphasize B-rated bonds because CCC-rated issues have risen to price levels that seem to offer little further potential. Overseas, economic growth in Japan and the European Union is likely to remain sluggish. We see selective opportunities among emerging markets in Asia and Latin America. Nations rich in metals and other natural resources, including Canada, Australia and New Zealand, should continue to prosper. However, these nations' economies are vulnerable to a slowdown in China. Broader concerns include extremely high oil prices, terrorism and the still-volatile situation in Iraq. 3 LOOMIS SAYLES HIGH INCOME FUND Investment Results through March 31, 2005 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares [CHART] March 31, 1995 through March 31, 2005 Net Asset Maximum Sales Lehman High Yield Value /1/ Charge /2/ Composite Index /3/ --------- ------------- ------------------- 3/31/1995 $10,000 $ 9,550 $10,000 4/30/1995 10,198 9,739 10,254 5/31/1995 10,387 9,919 10,542 6/30/1995 10,374 9,907 10,609 7/31/1995 10,553 10,078 10,743 8/31/1995 10,560 10,085 10,777 9/30/1995 10,614 10,136 10,909 10/31/1995 10,656 10,177 10,976 11/30/1995 10,676 10,195 11,073 12/31/1995 10,748 10,264 11,247 1/31/1996 10,945 10,452 11,445 2/29/1996 11,020 10,524 11,454 3/31/1996 10,999 10,504 11,446 4/30/1996 11,131 10,630 11,472 5/31/1996 11,252 10,745 11,541 6/30/1996 11,324 10,814 11,636 7/31/1996 11,433 10,919 11,690 8/31/1996 11,569 11,049 11,817 9/30/1996 11,926 11,389 12,101 10/31/1996 11,900 11,364 12,194 11/30/1996 12,145 11,598 12,437 12/31/1996 12,350 11,794 12,524 1/31/1997 12,360 11,804 12,638 2/28/1997 12,792 12,217 12,849 3/31/1997 12,622 12,054 12,664 4/30/1997 12,693 12,122 12,788 5/31/1997 13,114 12,524 13,071 6/30/1997 13,200 12,606 13,253 7/31/1997 13,560 12,950 13,616 8/31/1997 13,647 13,033 13,586 9/30/1997 14,053 13,421 13,855 10/31/1997 13,931 13,304 13,867 11/30/1997 14,118 13,483 14,000 12/31/1997 14,249 13,608 14,122 1/31/1998 14,463 13,812 14,377 2/28/1998 14,443 13,793 14,461 3/31/1998 14,591 13,935 14,597 4/30/1998 14,670 14,010 14,654 5/31/1998 14,647 13,988 14,705 6/30/1998 14,697 14,035 14,758 7/31/1998 14,674 14,014 14,842 8/31/1998 13,656 13,042 14,023 9/30/1998 13,526 12,918 14,087 10/31/1998 13,242 12,646 13,798 11/30/1998 14,193 13,554 14,370 12/31/1998 14,004 13,374 14,386 1/31/1999 14,319 13,675 14,600 2/28/1999 14,410 13,761 14,514 3/31/1999 14,643 13,984 14,652 4/30/1999 14,958 14,285 14,936 5/31/1999 14,591 13,935 14,734 6/30/1999 14,551 13,896 14,702 7/31/1999 14,492 13,840 14,761 8/31/1999 14,266 13,624 14,598 9/30/1999 14,174 13,536 14,493 10/31/1999 14,301 13,658 14,397 11/30/1999 14,396 13,748 14,565 12/31/1999 14,564 13,909 14,730 1/31/2000 14,402 13,754 14,667 2/29/2000 14,467 13,816 14,695 3/31/2000 14,030 13,399 14,386 4/30/2000 14,022 13,391 14,409 5/31/2000 13,631 13,017 14,261 6/30/2000 14,044 13,412 14,552 7/31/2000 14,126 13,491 14,663 8/31/2000 14,070 13,437 14,763 9/30/2000 13,779 13,159 14,634 10/31/2000 13,091 12,502 14,165 11/30/2000 12,003 11,463 13,604 12/31/2000 12,218 11,668 13,867 1/31/2001 13,637 13,023 14,906 2/28/2001 13,568 12,958 15,104 3/31/2001 12,875 12,296 14,749 4/30/2001 12,480 11,918 14,565 5/31/2001 12,514 11,950 14,827 6/30/2001 11,795 11,264 14,412 7/31/2001 12,028 11,486 14,624 8/31/2001 11,935 11,398 14,796 9/30/2001 10,849 10,361 13,802 10/31/2001 10,730 10,247 14,143 11/30/2001 11,077 10,579 14,659 12/31/2001 10,917 10,425 14,599 1/31/2002 10,984 10,490 14,701 2/28/2002 10,650 10,171 14,496 3/31/2002 10,937 10,445 14,845 4/30/2002 10,847 10,359 15,082 5/31/2002 10,689 10,208 14,998 6/30/2002 9,925 9,478 13,892 7/31/2002 9,256 8,839 13,286 8/31/2002 9,581 9,149 13,664 9/30/2002 9,225 8,810 13,485 10/31/2002 9,220 8,806 13,367 11/30/2002 9,834 9,391 14,195 12/31/2002 9,951 9,503 14,394 1/31/2003 10,162 9,704 14,873 2/28/2003 10,304 9,840 15,056 3/31/2003 10,570 10,094 15,490 4/30/2003 11,181 10,677 16,409 5/31/2003 11,376 10,864 16,578 6/30/2003 11,622 11,099 17,055 7/31/2003 11,391 10,878 16,867 8/31/2003 11,511 10,993 17,061 9/30/2003 11,889 11,354 17,528 10/31/2003 12,142 11,596 17,882 11/30/2003 12,396 11,838 18,153 12/31/2003 12,727 12,154 18,564 1/31/2004 12,924 12,343 18,918 2/29/2004 12,867 12,288 18,871 3/31/2004 12,941 12,358 18,999 4/30/2004 12,644 12,075 18,869 5/31/2004 12,317 11,763 18,550 6/30/2004 12,583 12,017 18,816 7/31/2004 12,685 12,114 19,072 8/31/2004 13,031 12,445 19,446 9/30/2004 13,212 12,618 19,728 10/31/2004 13,504 12,897 20,084 11/30/2004 13,718 13,100 20,327 12/31/2004 14,044 13,412 20,630 1/31/2005 14,091 13,456 20,603 2/28/2005 14,417 13,769 20,906 3/31/2005 13,905 13,273 20,298 Average Annual Total Returns -- March 31, 2005
SINCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS/6/ INCEPTION/6/ CLASS A (Inception 2/22/84) Net Asset Value/1/ 5.25% 7.47% -0.18% 3.35% -- With Maximum Sales Charge/2/ 0.46 2.64 -1.10 2.87 -- CLASS B (Inception 9/20/93) Net Asset Value/1/ 4.64 6.67 -0.92 2.61 -- With CDSC/4/ -0.36 1.67 -1.18 2.61 -- CLASS C (Inception 3/2/98) Net Asset Value/1/ 4.64 6.67 -0.92 -- -1.30% With CDSC/4/ 3.64 5.67 -0.92 -- -1.30 ----------------------------------------------------------------------------------------- SINCE CLASS C COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/7/ Lehman High Yield Composite Index/3/ 2.89% 6.84% 7.13% 7.34% 4.82% Morningstar High Yield Bond Fund Avg./5/ 2.79 6.34 5.04 6.07 2.93
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.ixisadvisorfunds.com. 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 FACTS
% of Net Assets as of CREDIT QUALITY 3/31/05 ------------------------------- Aaa 2.8 ------------------------------- Aa 1.0 ------------------------------- Baa 3.0 ------------------------------- Ba 34.2 ------------------------------- B 26.7 ------------------------------- Caa 15.7 ------------------------------- Ca 1.2 ------------------------------- Not rated* 13.8 ------------------------------- Short term & other 1.6 -------------------------------
Credit quality is based on ratings from Moody's Investors Service. * Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles.
% of Net Assets as of EFFECTIVE MATURITY 3/31/05 ------------------------------------------ 1 year or less 1.5 ------------------------------------------ 1-5 years 22.3 ------------------------------------------ 5-10 years 34.4 ------------------------------------------ 10+ years 41.8 ------------------------------------------ Average Effective Maturity 12.2 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. 4 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 -------------------------------------------------------------------------------- High-quality bonds with shorter maturities, normally a defensive haven for investors, failed to perform as well as lower-quality, longer-term bonds during most of the six-month period ended March 31, 2005. Rising interest rates sent bond prices down, while demand from investors seeking income supported prices of higher-yielding bonds. Loomis Sayles Limited Term Government and Agency Fund's total return for the first half of its fiscal year was -0.16% based on the net asset value of Class A shares and $0.16 in dividends reinvested. The fund had a slight edge over its benchmark, the Lehman 1-5 Year Government Bond Index, which had a total return of -0.49% for the period, while the average return on the funds in Morningstar's Short Government category was -0.13%. The fund's 30-day SEC yield was 3.12% at the end of March 2005. MORTGAGE-BACKED SECURITIES PROVIDED YIELD ADVANTAGE As the Federal Reserve Board's systematic rate-hike program raised short-term rates, bond prices in that market segment declined. Mortgage-backed securities typically offer a higher payout than Treasury securities because they are regarded as riskier, and the yield advantage they provided helped to offset some of the negative effects of declining bond prices. The fund's relative performance also benefited because it had a smaller portion of assets in lower-yielding U.S. Treasury securities than the benchmark. PORTFOLIO MAINTAINING A "BARBELL" CONFIGURATION Both long- and short-term interest rates generally move in the same direction over time, but the Fed can only directly control the federal funds rate, which has the strongest effect on other short rates. Since the Fed started raising rates last June, long rates have remained relatively stable. When long and short rates come together, a pattern known as a flattened yield curve is created. In this environment, we have been maintaining the portfolio in a "barbell" configuration, with assets clustered at both the shorter and longer end of the yield curve. A barbelled portfolio generally outperforms in a flattening yield-curve environment. DURATION IS NEUTRAL, MORTGAGES ARE TRIMMED DOWN The fund currently has a duration - a measure of a portfolio's sensitivity to changing bond prices - that is similar to its benchmark and peer groups. We expect interest rates to continue to rise through the end of 2005, but at a modest pace. Usually in a rising interest-rate environment, prices on securities with longer maturities will decline more than shorter issues, but this is likely to be at least partially offset by the yield advantage of longer maturity securities. We also gradually reduced the fund's position in mortgage-backed securities. Although we believe there are still opportunities in this sector, they may be more limited at this stage in the market cycle given the relative price appreciation that has already taken place. MARKET SHIFT MAY BE UNDERWAY As the fiscal period drew to a close, increased concerns about the inflationary pressures of high prices for oil and other commodities began to cause interest rates to rise. For most sectors of the bond market, we believe yield spreads are likely to widen modestly in fits and starts throughout 2005, leading to less generous returns than in recent years. Rising rates could mean lackluster returns for Treasuries. However, we view the recent shift in the market as healthy, and our forecast for economic growth, profits and credit quality remains positive. 5 LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND Investment Results through March 31, 2005 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares [CHART] March 31, 1995 through March 31, 2005 Lehman Int. Lehman 1-5 Year Net Asset Maximum Sales Government Bond Government Bond Value (1) Charge (2) Index (3) Index (4) --------- ------------- --------------- --------------- 3/31/1995 $10,000 $ 9,700 $10,000 $10,000 4/30/1995 10,099 9,796 10,116 10,103 5/31/1995 10,382 10,070 10,401 10,334 6/30/1995 10,427 10,115 10,467 10,394 7/31/1995 10,422 10,110 10,472 10,418 8/31/1995 10,514 10,199 10,559 10,490 9/30/1995 10,579 10,262 10,630 10,549 10/31/1995 10,725 10,403 10,746 10,650 11/30/1995 10,854 10,528 10,877 10,761 12/31/1995 10,968 10,639 10,985 10,853 1/31/1996 11,028 10,697 11,077 10,950 2/29/1996 10,896 10,569 10,960 10,876 3/31/1996 10,827 10,502 10,910 10,843 4/30/1996 10,799 10,475 10,878 10,834 5/31/1996 10,762 10,439 10,873 10,842 6/30/1996 10,846 10,521 10,983 10,936 7/31/1996 10,870 10,544 11,017 10,975 8/31/1996 10,866 10,540 11,030 11,003 9/30/1996 11,004 10,674 11,172 11,122 10/31/1996 11,181 10,845 11,355 11,274 11/30/1996 11,321 10,981 11,492 11,380 12/31/1996 11,230 10,893 11,431 11,352 1/31/1997 11,277 10,939 11,475 11,403 2/28/1997 11,292 10,953 11,493 11,425 3/31/1997 11,233 10,896 11,428 11,391 4/30/1997 11,332 10,992 11,557 11,500 5/31/1997 11,401 11,059 11,647 11,583 6/30/1997 11,511 11,165 11,746 11,672 7/31/1997 11,701 11,350 11,963 11,840 8/31/1997 11,681 11,330 11,917 11,827 9/30/1997 11,802 11,448 12,047 11,934 10/31/1997 11,934 11,576 12,187 12,046 11/30/1997 11,955 11,596 12,214 12,070 12/31/1997 12,045 11,684 12,313 12,159 1/31/1998 12,220 11,854 12,474 12,299 2/28/1998 12,192 11,826 12,461 12,297 3/31/1998 12,171 11,806 12,500 12,339 4/30/1998 12,219 11,852 12,559 12,398 5/31/1998 12,298 11,929 12,646 12,472 6/30/1998 12,388 12,016 12,731 12,543 7/31/1998 12,404 12,032 12,780 12,597 8/31/1998 12,603 12,224 13,021 12,790 9/30/1998 12,963 12,574 13,325 13,023 10/31/1998 12,837 12,452 13,347 13,074 11/30/1998 12,797 12,413 13,306 13,045 12/31/1998 12,824 12,440 13,358 13,090 1/31/1999 12,894 12,507 13,418 13,146 2/28/1999 12,745 12,363 13,234 13,035 3/31/1999 12,805 12,421 13,322 13,126 4/30/1999 12,842 12,457 13,358 13,164 5/31/1999 12,746 12,364 13,276 13,121 6/30/1999 12,663 12,283 13,295 13,157 7/31/1999 12,602 12,224 13,297 13,179 8/31/1999 12,597 12,219 13,315 13,211 9/30/1999 12,741 12,359 13,430 13,311 10/31/1999 12,765 12,382 13,456 13,341 11/30/1999 12,778 12,395 13,466 13,358 12/31/1999 12,737 12,355 13,423 13,346 1/31/2000 12,682 12,302 13,378 13,320 2/29/2000 12,795 12,411 13,489 13,420 3/31/2000 12,954 12,565 13,643 13,527 4/30/2000 12,912 12,525 13,637 13,544 5/31/2000 12,919 12,531 13,674 13,589 6/30/2000 13,104 12,710 13,891 13,767 7/31/2000 13,169 12,774 13,983 13,857 8/31/2000 13,307 12,908 14,140 13,983 9/30/2000 13,410 13,007 14,264 14,104 10/31/2000 13,458 13,054 14,361 14,187 11/30/2000 13,641 13,232 14,572 14,351 12/31/2000 13,801 13,387 14,829 14,560 1/31/2001 13,976 13,557 15,026 14,759 2/28/2001 14,081 13,658 15,165 14,870 3/31/2001 14,169 13,744 15,274 14,988 4/30/2001 14,141 13,717 15,226 14,998 5/31/2001 14,212 13,785 15,289 15,072 6/30/2001 14,222 13,795 15,338 15,123 7/31/2001 14,486 14,052 15,624 15,344 8/31/2001 14,582 14,144 15,763 15,459 9/30/2001 14,811 14,367 16,099 15,760 10/31/2001 15,033 14,582 16,351 15,949 11/30/2001 14,838 14,392 16,155 15,844 12/31/2001 14,747 14,305 16,077 15,819 1/31/2002 14,825 14,380 16,147 15,869 2/28/2002 14,972 14,523 16,280 15,972 3/31/2002 14,756 14,314 16,035 15,806 4/30/2002 15,026 14,576 16,335 16,043 5/31/2002 15,129 14,675 16,449 16,133 6/30/2002 15,280 14,822 16,654 16,302 7/31/2002 15,498 15,033 16,968 16,555 8/31/2002 15,650 15,181 17,162 16,672 9/30/2002 15,791 15,317 17,457 16,874 10/31/2002 15,826 15,351 17,445 16,902 11/30/2002 15,753 15,281 17,307 16,809 12/31/2002 15,950 15,472 17,627 17,035 1/31/2003 15,942 15,464 17,588 17,019 2/28/2003 16,081 15,598 17,787 17,143 3/31/2003 16,069 15,587 17,790 17,169 4/30/2003 16,097 15,614 17,840 17,208 5/31/2003 16,195 15,709 18,120 17,360 6/30/2003 16,166 15,681 18,091 17,367 7/31/2003 15,830 15,355 17,652 17,137 8/31/2003 15,882 15,405 17,683 17,145 9/30/2003 16,145 15,661 18,067 17,405 10/31/2003 16,032 15,551 17,889 17,289 11/30/2003 16,076 15,593 17,891 17,282 12/31/2003 16,188 15,703 18,030 17,403 1/31/2004 16,258 15,770 18,128 17,465 2/29/2004 16,383 15,892 18,301 17,595 3/31/2004 16,445 15,952 18,428 17,684 4/30/2004 16,149 15,665 18,016 17,403 5/31/2004 16,096 15,613 17,958 17,366 6/30/2004 16,157 15,672 18,004 17,385 7/31/2004 16,248 15,760 18,134 17,478 8/31/2004 16,452 15,959 18,404 17,667 9/30/2004 16,447 15,954 18,411 17,659 10/31/2004 16,533 16,037 18,524 17,740 11/30/2004 16,459 15,965 18,351 17,613 12/31/2004 16,513 16,018 18,451 17,672 1/31/2005 16,536 16,040 18,475 17,666 2/28/2005 16,472 15,977 18,372 17,596 3/31/2005 16,421 15,929 18,326 17,573 Average Annual Total Returns -- March 31, 2005
6 MONTHS 1 YEAR 5 YEARS 10 YEARS CLASS A (Inception 1/3/89) Net Asset Value/1/ -0.16% -0.15% 4.86% 5.08% With Maximum Sales Charge/2/ -3.15 -3.18 4.23 4.77 CLASS B (Inception 9/27/93) Net Asset Value/1/ -0.53 -0.87 4.16 4.39 With CDSC/5/ -5.45 -5.71 3.81 4.39 CLASS C (Inception 12/30/94) Net Asset Value/1/ -0.62 -0.96 4.17 4.40 With CDSC/5/ -1.60 -1.92 4.17 4.40 CLASS Y (Inception 3/31/94)/7/ Net Asset Value/1/ -0.13 -0.07 5.21 5.45 --------------------------------------------------------------------- COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Lehman 1-5 Yr Gov't Bond Index/4/ -0.49% -0.63% 5.37% 5.80% Lehman Int. Gov't Bond Index/3/ -0.46 -0.55 6.08 6.24 Morningstar Short Gov't Fund Avg./6/ -0.13 -0.26 4.67 5.13
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.ixisadvisorfunds.com. 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 FACTS
% of Net Assets as of FUND COMPOSITION 3/31/05 ---------------------------------------- Treasuries 50.8 ---------------------------------------- Mortgage Related 33.5 ---------------------------------------- Government Agencies 10.3 ---------------------------------------- Asset Backed Securities 4.1 ---------------------------------------- Short Term Investments 1.3 ---------------------------------------- % of Net Assets as of EFFECTIVE MATURITY 3/31/05 ---------------------------------------- 1 year or less 10.6 ---------------------------------------- 1-5 years 73.7 ---------------------------------------- 5-10 years 12.1 ---------------------------------------- 10+ years 3.6 ---------------------------------------- Average Effective Maturity 3.3 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 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/Fund performance has been increased by expense waivers, without which performance would have been lower. Note: Lehman 1-5 Year Government Bond Index replaces the Lehman Intermediate Government Bond Index because IXIS Advisors believes it is more representative of the types of securities in which the fund can invest. 6 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 outperformed its benchmark during the six months ended March 31, 2005, despite its relatively long maturity structure and the overall increase in interest rates during the period. However, the state as a whole was weaker than others in part because a large number of new issues diluted demand. The fund provided a total return of 1.30% based on the net asset value of Class A shares and $0.30 in dividends reinvested during the six-month fiscal period. The fund's benchmark, Lehman Municipal Bond Index, returned 1.21%, while the average return on Morningstar's Muni Massachusetts category was 0.54% for the period. The fund's 30-day SEC yield at the end of March 2005 was 3.05%, equivalent to 4.96% adjusted for the combined maximum federal and Massachusetts income tax rates of 38.45%. HIGHER EDUCATION AND HEALTHCARE BONDS CONTINUE TO BE BEST PERFORMING SECTORS As was true during the previous fiscal year, higher yields available in the healthcare and higher education sectors drove performance. For example, Massachusetts Development Finance Agency for Mount Holyoke College performed well because its high coupon and longer maturity structure were in demand. Massachusetts Health and Educational Facilities Authority for Nichols College also performed well, as investors bid up the price of this lower investment-grade issue. ONE PRE-REFUNDED ISSUE CONTRIBUTED CAPITAL APPRECIATION Massachusetts Bay Transportation Authority bonds were pre-refunded in March, increasing the price of the bonds and making them the best performing individual issue in the portfolio. When a bond is pre-refunded, the issuer refinances the existing, higher-coupon bond by issuing new bonds at lower interest rates. The proceeds of the older issue are invested in high-quality paper, usually U.S. Treasury securities. The bonds then mature at the older bond's first call date, when bondholders are paid off. While pre-refunding interrupts the fund's income stream, the bonds' quality ratings effectively rise, lifting their price. HOLDINGS WITH SHORTER MATURITIES WERE WEAK Two weaker issues both had shorter maturities. These were Massachusetts Health and Educational Facilities for Dana Farber Cancer Project bonds, which we sold, and Broward County Florida Resources Recovery for Wheelabrator South project. We took advantage of the fund's ability to invest a portion of assets out of state to capture some attractively valued, higher-yielding issues, including these Broward County bonds. OUTLOOK IS FOR SUPPORT IN THE LONG END OF THE MUNICIPAL YIELD CURVE During the past nine months, the Federal Reserve Board has pursued a policy of gradually raising the federal funds rate - the only rate over which the Fed has direct control. However, for most of that time, short-term rates rose while long rates remained relatively stable, narrowing the spread between the two rates to a point that seemed unsustainable. Recently, as investors became concerned about the inflationary implications of the rising price of oil and other commodities, long rates began to edge upward. Yield spreads began to widen across most bond market sectors. We believe the Federal Reserve Board will continue to raise rates gradually during the balance of 2005. We also expect yields on long bonds to continue to move higher, though by a smaller amount. We view the widening of yield spreads that affected most bond market sectors in the past few months as a healthy correction, and our forecast for economic growth and credit quality remains positive. However, we expect the markets to move in modest fits and starts throughout the year. Generating the best returns will take hard work and attention to detail. 7 LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND Investment Results through March 31, 2005 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares [CHART] Net Asset Maximum Sales Lehman Municipal Value (1) Charge (2) Bond Index (3) --------- ------------- ---------------- 3/31/1995 $10,000 $ 9,575 $10,000 4/30/1995 10,016 9,590 10,012 5/31/1995 10,333 9,893 10,331 6/30/1995 10,172 9,740 10,241 7/31/1995 10,244 9,808 10,338 8/31/1995 10,365 9,925 10,469 9/30/1995 10,437 9,993 10,535 10/31/1995 10,612 10,161 10,688 11/30/1995 10,820 10,360 10,866 12/31/1995 10,957 10,491 10,970 1/31/1996 10,992 10,525 11,053 2/29/1996 10,882 10,419 10,978 3/31/1996 10,746 10,289 10,838 4/30/1996 10,715 10,259 10,807 5/31/1996 10,730 10,274 10,803 6/30/1996 10,832 10,371 10,921 7/31/1996 10,913 10,449 11,020 8/31/1996 10,907 10,444 11,017 9/30/1996 11,077 10,607 11,171 10/31/1996 11,194 10,718 11,298 11/30/1996 11,386 10,902 11,505 12/31/1996 11,311 10,830 11,456 1/31/1997 11,332 10,850 11,478 2/28/1997 11,440 10,954 11,583 3/31/1997 11,311 10,830 11,429 4/30/1997 11,403 10,918 11,524 5/31/1997 11,565 11,073 11,698 6/30/1997 11,685 11,188 11,822 7/31/1997 12,018 11,507 12,150 8/31/1997 11,906 11,400 12,036 9/30/1997 12,064 11,552 12,179 10/31/1997 12,124 11,608 12,257 11/30/1997 12,196 11,678 12,329 12/31/1997 12,365 11,839 12,509 1/31/1998 12,465 11,935 12,638 2/28/1998 12,447 11,918 12,642 3/31/1998 12,412 11,885 12,653 4/30/1998 12,369 11,843 12,596 5/31/1998 12,560 12,026 12,795 6/30/1998 12,603 12,068 12,846 7/31/1998 12,611 12,075 12,878 8/31/1998 12,812 12,267 13,077 9/30/1998 12,954 12,403 13,240 10/31/1998 12,901 12,352 13,240 11/30/1998 12,923 12,373 13,286 12/31/1998 12,972 12,420 13,320 1/31/1999 13,121 12,563 13,478 2/28/1999 13,061 12,505 13,419 3/31/1999 13,045 12,490 13,438 4/30/1999 13,084 12,528 13,471 5/31/1999 12,999 12,446 13,393 6/30/1999 12,787 12,244 13,201 7/31/1999 12,832 12,286 13,249 8/31/1999 12,650 12,112 13,142 9/30/1999 12,612 12,076 13,148 10/31/1999 12,435 11,907 13,005 11/30/1999 12,544 12,011 13,144 12/31/1999 12,435 11,907 13,046 1/31/2000 12,333 11,809 12,989 2/29/2000 12,486 11,956 13,140 3/31/2000 12,720 12,179 13,427 4/30/2000 12,663 12,124 13,348 5/31/2000 12,613 12,077 13,278 6/30/2000 12,867 12,320 13,630 7/31/2000 13,030 12,476 13,820 8/31/2000 13,193 12,632 14,033 9/30/2000 13,140 12,582 13,960 10/31/2000 13,247 12,684 14,112 11/30/2000 13,302 12,737 14,219 12/31/2000 13,586 13,008 14,570 1/31/2001 13,633 13,054 14,714 2/28/2001 13,681 13,099 14,761 3/31/2001 13,677 13,096 14,893 4/30/2001 13,536 12,961 14,732 5/31/2001 13,667 13,086 14,891 6/30/2001 13,764 13,179 14,990 7/31/2001 13,973 13,380 15,212 8/31/2001 14,236 13,631 15,463 9/30/2001 14,156 13,555 15,411 10/31/2001 14,288 13,681 15,595 11/30/2001 14,182 13,580 15,463 12/31/2001 14,022 13,426 15,317 1/31/2002 14,101 13,501 15,583 2/28/2002 14,260 13,654 15,770 3/31/2002 13,998 13,403 15,461 4/30/2002 14,254 13,648 15,763 5/31/2002 14,365 13,754 15,859 6/30/2002 14,532 13,914 16,027 7/31/2002 14,716 14,091 16,233 8/31/2002 14,896 14,263 16,428 9/30/2002 15,231 14,584 16,788 10/31/2002 14,954 14,318 16,510 11/30/2002 14,859 14,228 16,441 12/31/2002 15,157 14,512 16,788 1/31/2003 15,125 14,482 16,745 2/28/2003 15,362 14,709 16,980 3/31/2003 15,376 14,723 16,990 4/30/2003 15,474 14,817 17,102 5/31/2003 15,871 15,196 17,502 6/30/2003 15,799 15,128 17,428 7/31/2003 15,114 14,471 16,818 8/31/2003 15,212 14,565 16,944 9/30/2003 15,624 14,960 17,442 10/31/2003 15,599 14,936 17,354 11/30/2003 15,772 15,102 17,535 12/31/2003 15,919 15,242 17,680 1/31/2004 16,027 15,346 17,781 2/29/2004 16,263 15,571 18,049 3/31/2004 16,225 15,536 17,986 4/30/2004 15,789 15,118 17,560 5/31/2004 15,719 15,051 17,496 6/30/2004 15,738 15,069 17,560 7/31/2004 15,963 15,285 17,791 8/31/2004 16,276 15,584 18,148 9/30/2004 16,385 15,689 18,244 10/31/2004 16,533 15,830 18,401 11/30/2004 16,364 15,669 18,249 12/31/2004 16,582 15,877 18,472 1/31/2005 16,781 16,067 18,645 2/28/2005 16,712 16,002 18,583 3/31/2005 16,610 15,905 18,465 Average Annual Total Returns -- March 31, 2005
6 MONTHS 1 YEAR 5 YEARS/5/ 10 YEARS/5/ CLASS A (Inception 3/23/84) Net Asset Value/1/ 1.30% 2.30% 5.48% 5.21% With Maximum Sales Charge/2/ -3.03 -2.04 4.57 4.75 CLASS B (Inception 9/13/93) Net Asset Value/1/ 0.98 1.62 4.78 4.52 With CDSC/4/ -3.99 -3.32 4.45 4.52 -------------------------------------------------------------------------- COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Lehman Municipal Bond Index/3/ 1.21% 2.67% 6.58% 6.33% Morningstar Muni Massachusetts Fund Avg./6/ 0.54 1.60 5.67 5.25
Yields as of March 31, 2005
CLASS A CLASS B SEC 30-day Yield/7/ 3.05% 2.43% Taxable Equivalent Yield/8/ 4.96 3.95
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. For performance current to the most recent month-end, visit www.ixisadvisorfunds.com. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. PORTFOLIO FACTS
% of Net Assets as of CREDIT QUALITY 3/31/05 ------------------------------- Aaa 35.2 ------------------------------- Aa 28.9 ------------------------------- A 19.6 ------------------------------- Baa 9.6 ------------------------------- Not rated* 3.7 ------------------------------- Short term & other 3.0 -------------------------------
Credit quality is based on ratings from Moody's Investors Service. * Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles.
% of Net Assets as of EFFECTIVE MATURITY 3/31/05 ------------------------------------------ 1 year or less 2.4 ------------------------------------------ 1-5 years 7.8 ------------------------------------------ 5-10 years 77.4 ------------------------------------------ 10+ years 12.4 ------------------------------------------ Average Effective Maturity 7.9 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. 8 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 -------------------------------------------------------------------------------- Managers: 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 -------------------------------------------------------------------------------- Yields on short-term bonds continued to move higher during the six months ended March 31, 2005, but yields are still at historical lows, and rising rates caused bond prices to decline, cutting into total returns. Higher-yielding bonds were the best performers. Loomis Sayles Municipal Income Fund provided a total return of 1.15% based on the net asset value of Class A shares and $0.14 in dividends reinvested during the six months ended March 31, 2005. This was slightly below the 1.21% return on the broad-based Lehman Municipal Bond Index and slightly better than the 1.01% average return on the funds in Morningstar's Muni National Long category. The fund's 30-day SEC yield at the end of March 2005 was 3.23%, equivalent to 4.96% adjusted for the maximum federal income tax rate of 35.00%. HIGHER-YIELDING BONDS PROVIDED PERFORMANCE ADVANTAGES While bond prices as a whole tended to slide during the fiscal period, investors hungry for income continued to bid on lower-rated and unrated issues, supporting prices in these sectors. The fund's portfolio continues to feature industrial development bonds and resource recovery bonds because they offer a yield advantage over lower-yielding, higher-rated issues. The fund's best performing positions included bonds issued for Adventist Health System in Highlands County, Florida, and bonds issued for a school district in Greenville County, South Carolina - School District Building Equity Sooner Tomorrow. Both these issues benefited from their longer maturity structure as well as recent rating upgrades. INCREASED SUPPLY DIMINISHED ATTRACTIVENESS OF SOME ISSUES The fund's emphasis on municipal bonds issued in California and New York were positives, although not as much as we had expected. Both states came to market with sizable deals, increasing supply and diluting demand. Examples of weaker performing bonds included Endowment bonds issued for California Statewide Communities Development Authority, and New York City Municipal Water Finance Authority bonds. Environmental Improvement bonds issued for Louisiana's DeSoto Parish also underperformed, largely because they came to market in November when prices were at a high. Heavier issuance also diminished the attractiveness of the fund's Massachusetts bonds, although performance in this state was also impacted by the way in which the individual bonds were structured. FUND MOVING GRADUALLY TO A LESS DEFENSIVE STRUCTURE The weakest performers in the fund's portfolio were bonds with maturities in the four- to ten-year area of the yield curve. During the past 12 months, we had been shortening the fund's maturity structure as a defensive measure, in anticipation of higher interest rates, and this detracted from its results as longer-term rates remained relatively stable. However, the spread - or difference in yields - between long- and short-term rates had narrowed to a point where it seemed only a matter of time before long-term rates would follow short rates up. In addition, such inflationary pressures as the rising price of oil and other commodities recently seemed to undermine investors' comfort level with higher-yielding bonds. Consequently, our strategy shifted as the quarter drew to a close. We began slowly extending the fund's maturity, seeking higher-yielding bonds to add to current income. We believe the Federal Reserve Board will do what it said it would do and raise rates gradually during the balance of 2005. We also expect yields on long bonds to continue to move higher, though by a smaller amount. We view the widening of yield spreads that affected most bond market sectors in the past few months as a healthy correction, and our forecast for economic growth and credit quality remains positive. However, we expect the markets to move in modest fits and starts throughout the year. Generating the best returns will take hard work and attention to detail. 9 LOOMIS SAYLES MUNICIPAL INCOME FUND Investment Results through March 31, 2005 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares [CHART] March 31, 1995 through March 31, 2005 Net Asset Maximum Sales Lehman Municipal Value (1) Charge (2) Bond Index (3) --------- ---------- -------------- 3/31/1995 $10,000 $ 9,550 $10,000 4/30/1995 10,019 9,568 10,012 5/31/1995 10,299 9,835 10,331 6/30/1995 10,167 9,709 10,241 7/31/1995 10,255 9,794 10,338 8/31/1995 10,330 9,865 10,469 9/30/1995 10,405 9,937 10,535 10/31/1995 10,551 10,076 10,688 11/30/1995 10,726 10,244 10,866 12/31/1995 10,809 10,322 10,970 1/31/1996 10,894 10,404 11,053 2/29/1996 10,829 10,342 10,978 3/31/1996 10,705 10,224 10,838 4/30/1996 10,682 10,201 10,807 5/31/1996 10,673 10,193 10,803 6/30/1996 10,795 10,309 10,921 7/31/1996 10,874 10,384 11,020 8/31/1996 10,865 10,376 11,017 9/30/1996 11,048 10,550 11,171 10/31/1996 11,172 10,670 11,298 11/30/1996 11,342 10,832 11,505 12/31/1996 11,308 10,799 11,456 1/31/1997 11,320 10,810 11,478 2/28/1997 11,420 10,906 11,583 3/31/1997 11,275 10,768 11,429 4/30/1997 11,358 10,847 11,524 5/31/1997 11,486 10,969 11,698 6/30/1997 11,646 11,122 11,822 7/31/1997 11,960 11,422 12,150 8/31/1997 11,888 11,353 12,036 9/30/1997 11,988 11,449 12,179 10/31/1997 12,072 11,529 12,257 11/30/1997 12,109 11,565 12,329 12/31/1997 12,277 11,724 12,509 1/31/1998 12,429 11,870 12,638 2/28/1998 12,466 11,905 12,642 3/31/1998 12,485 11,923 12,653 4/30/1998 12,426 11,867 12,596 5/31/1998 12,560 11,995 12,795 6/30/1998 12,613 12,045 12,846 7/31/1998 12,635 12,066 12,878 8/31/1998 12,803 12,226 13,077 9/30/1998 12,906 12,325 13,240 10/31/1998 12,862 12,284 13,240 11/30/1998 12,916 12,335 13,286 12/31/1998 12,932 12,350 13,320 1/31/1999 13,059 12,471 13,478 2/28/1999 13,031 12,445 13,419 3/31/1999 13,036 12,450 13,438 4/30/1999 13,076 12,487 13,471 5/31/1999 13,030 12,443 13,393 6/30/1999 12,881 12,302 13,201 7/31/1999 12,920 12,338 13,249 8/31/1999 12,788 12,213 13,142 9/30/1999 12,793 12,217 13,148 10/31/1999 12,608 12,040 13,005 11/30/1999 12,726 12,154 13,144 12/31/1999 12,575 12,009 13,046 1/31/2000 12,508 11,945 12,989 2/29/2000 12,647 12,078 13,140 3/31/2000 12,842 12,264 13,427 4/30/2000 12,771 12,196 13,348 5/31/2000 12,735 12,162 13,278 6/30/2000 12,968 12,385 13,630 7/31/2000 13,112 12,522 13,820 8/31/2000 13,293 12,695 14,033 9/30/2000 13,257 12,661 13,960 10/31/2000 13,366 12,765 14,112 11/30/2000 13,457 12,851 14,219 12/31/2000 13,679 13,063 14,570 1/31/2001 13,775 13,155 14,714 2/28/2001 13,797 13,176 14,761 3/31/2001 13,910 13,284 14,893 4/30/2001 13,761 13,142 14,732 5/31/2001 13,892 13,267 14,891 6/30/2001 14,003 13,373 14,990 7/31/2001 14,248 13,607 15,212 8/31/2001 14,475 13,823 15,463 9/30/2001 14,226 13,585 15,411 10/31/2001 14,418 13,769 15,595 11/30/2001 14,262 13,620 15,463 12/31/2001 14,088 13,454 15,317 1/31/2002 14,319 13,675 15,583 2/28/2002 14,512 13,859 15,770 3/31/2002 14,274 13,632 15,461 4/30/2002 14,508 13,856 15,763 5/31/2002 14,582 13,926 15,859 6/30/2002 14,718 14,056 16,027 7/31/2002 14,812 14,146 16,233 8/31/2002 14,928 14,256 16,428 9/30/2002 15,167 14,484 16,788 10/31/2002 14,781 14,116 16,510 11/30/2002 14,758 14,094 16,441 12/31/2002 15,118 14,437 16,788 1/31/2003 14,929 14,257 16,745 2/28/2003 15,148 14,467 16,980 3/31/2003 15,141 14,459 16,990 4/30/2003 15,275 14,588 17,102 5/31/2003 15,656 14,951 17,502 6/30/2003 15,623 14,920 17,428 7/31/2003 14,945 14,272 16,818 8/31/2003 15,102 14,422 16,944 9/30/2003 15,553 14,853 17,442 10/31/2003 15,480 14,784 17,354 11/30/2003 15,680 14,974 17,535 12/31/2003 15,818 15,106 17,680 1/31/2004 15,914 15,198 17,781 2/29/2004 16,161 15,434 18,049 3/31/2004 16,150 15,423 17,986 4/30/2004 15,753 15,044 17,560 5/31/2004 15,718 15,011 17,496 6/30/2004 15,727 15,020 17,560 7/31/2004 15,930 15,213 17,791 8/31/2004 16,219 15,489 18,148 9/30/2004 16,313 15,579 18,244 10/31/2004 16,450 15,709 18,401 11/30/2004 16,303 15,570 18,249 12/31/2004 16,507 15,764 18,472 1/31/2005 16,687 15,936 18,645 2/28/2005 16,605 15,858 18,583 3/31/2005 16,496 15,745 18,465 Average Annual Total Returns -- March 31, 2005
6 MONTHS 1 YEAR 5 YEARS 10 YEARS CLASS A (Inception 5/9/77) Net Asset Value/1/ 1.15% 2.17% 5.14% 5.13% With Maximum Sales Charge/2/ -3.38 -2.49 4.18 4.64 CLASS B (Inception 9/13/93) Net Asset Value/1/ 0.77 1.54 4.38 4.37 With CDSC/4/ -4.19 -3.39 4.05 4.37 ---------------------------------------------------------------------------- COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Lehman Municipal Bond Index/3/ 1.21% 2.67% 6.58% 6.33% Morningstar Muni National Long Fund Avg./5/ 1.01 2.14 5.72 5.35
Yields as of March 31, 2005
CLASS A CLASS B SEC 30-day Yield/6/ 3.23% 2.63% Taxable Equivalent Yield/7/ 4.96 4.04
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.ixisadvisorfunds.com. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. PORTFOLIO FACTS
% of Net Assets as of CREDIT QUALITY 3/31/05 ------------------------------- Aaa 37.8 ------------------------------- Aa 11.3 ------------------------------- A 20.4 ------------------------------- Baa 15.4 ------------------------------- Not rated* 12.2 ------------------------------- Short term & other 2.9 -------------------------------
Credit quality is based on ratings from Moody's Investors Service. * Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles.
% of Net Assets as of EFFECTIVE MATURITY 3/31/05 ------------------------------------------ 1 year or less 6.7 ------------------------------------------ 1-5 years 9.4 ------------------------------------------ 5-10 years 76.3 ------------------------------------------ 10+ years 7.6 ------------------------------------------ Average Effective Maturity 7.7 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, if any, are subject to capital gains tax. 10 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 -------------------------------------------------------------------------------- Bolstered by high-yield issues and non-U.S.-dollar investments, Loomis Sayles Strategic Income Fund delivered healthy results over the first half of its fiscal year. The fund's total return was 5.70% for the six months ended March 31, 2005, based on the net asset value of Class A shares and $0.41 in reinvested dividends. These results were substantially better than the fund's benchmark, the Lehman Aggregate Bond Index, which returned 0.47% for the period, and Morningstar's Multisector Bond category, which had an average return of 2.97%. The fund has more flexibility than the benchmark in pursuit of returns. The fund's 30-day SEC yield at the end of March was 4.79%. PERFORMANCE FUELED BY HIGH-YIELD BONDS, OVERSEAS HOLDINGS AND PREFERREDS The continued expansion of the U.S. economy helped increase earnings and strengthen balance sheets among high-yield issuers. Shrinking default rates also encouraged investors to bulk up on lower-rated issues. Performance for the sector was especially strong during the closing quarter of 2004, but higher interest rates led to some slippage early in 2005. Holdings denominated in other currencies benefited from weakness in the U.S. dollar, despite the dollar's first-quarter rally. As global demand increased, export strength in oil and other raw materials boosted the fund's Canadian holdings. Canadian securities accounted for about 17% of the fund's total net assets at the end of the period, much of it in bonds of the provinces. World appetite for natural resources also helped performance of Latin American bonds, with Brazil-based issues the primary contributors. And although exposure was small, the portfolio's allocation to preferred issues made a solid contribution. CAPITAL SPENDING AND RESOURCE-RICH ISSUES WERE STRONG After several quarters of hesitation, the ongoing economic recovery spurred capital spending by U.S. corporations. Portfolio sectors that performed well included packaging, construction machinery and aerospace. Bonds denominated in the currency of resource-rich New Zealand also contributed to performance. Cia Vale Do Rio, a Brazilian mining company, rode waves of demand and higher prices for industrial raw materials. The company added copper to the list of metals it mines; copper has been in short supply, while rapid expansion in China and India has been pushing prices upward. In energy, our equity stake in Chesapeake Energy moved higher, as the company took steps to expand their natural gas producing properties. TREASURY ISSUES, COMMUNICATIONS AND PHARMACEUTICALS DISAPPOINTED The weakest markets during this period were U.S. Treasury and agency bonds, particularly those with shorter maturities. Although the shorter-term government securities in the portfolio held the fund back, it was underweight in these securities relative to the benchmark, which minimized their effect. However, after Federal Reserve Board Chairman Alan Greenspan described persistently low long-term rates as a "conundrum," rates on longer-term issues also rose and prices fell. Regulatory and political scrutiny pressured agency bonds, including those of mortgage giant Fannie Mae. Among corporate sectors, we sold the stock of Covad Communications, a California-based provider of data and voice services, in anticipation of a possible downward earnings revision. Bonds of drug manufacturer Elan Plc also fell. Elan was forced to recall one of its more profitable drugs when a link was suggested between the medication and respiratory disease. FUND BECOMING MORE DEFENSIVE AS RATES MOVE HIGHER We have reduced the portfolio's sensitivity to domestic rates because we believe the Fed will raise rates further in 2005. Higher rates may also make the dollar more attractive, although we think meaningful dollar strengthening is unlikely while the current huge federal budget and trade deficits persist. We are retaining the fund's significant exposure to high-yield issues, based on our belief that the domestic economy will continue to grow. And with little chance that demand for their natural resources will diminish, we think selected issues in both Canada and New Zealand will continue to perform well. 11 LOOMIS SAYLES STRATEGIC INCOME FUND Investment Results through March 31, 2005 -------------------------------------------------------------------------------- PERFORMANCE IN PERSPECTIVE The charts comparing the fund's performance to an index provide you with a general sense of how it performed. The fund's total return for the period shown below appears with and without sales charges and includes fund expenses and fees. An index measures the performance of a theoretical portfolio. Unlike a fund, the index is unmanaged and does not have expenses that affect the results. It is not possible to invest directly in an index. Investors would incur transaction costs and other expenses if they purchased the securities necessary to match the index. Growth of a $10,000 Investment in Class A Shares [CHART] May 1, 1995 (inception) through March 31, 2005 Lehman Net Asset Maximum Sales Lehman Aggregate Universal Bond Value (1) Charge (2) Bond Index (3) Index (4) --------- ------------- ---------------- --------------- 5/01/1995 $10,000 $ 9,550 $10,000 $10,000 5/31/1995 10,014 9,563 10,000 10,000 6/30/1995 10,017 9,566 10,073 10,073 7/31/1995 10,096 9,642 10,051 10,058 8/31/1995 10,192 9,733 10,172 10,176 9/30/1995 10,410 9,942 10,271 10,280 10/31/1995 10,354 9,888 10,405 10,407 11/30/1995 10,647 10,168 10,561 10,564 12/31/1995 11,038 10,541 10,709 10,724 1/31/1996 11,302 10,793 10,780 10,817 2/29/1996 10,994 10,499 10,593 10,630 3/31/1996 11,072 10,574 10,519 10,564 4/30/1996 11,056 10,558 10,460 10,521 5/31/1996 11,231 10,726 10,438 10,506 6/30/1996 11,382 10,870 10,579 10,647 7/31/1996 11,359 10,848 10,608 10,677 8/31/1996 11,568 11,048 10,590 10,674 9/30/1996 11,973 11,434 10,774 10,869 10/31/1996 12,315 11,761 11,013 11,095 11/30/1996 12,815 12,239 11,202 11,292 12/31/1996 12,637 12,069 11,098 11,201 1/31/1997 12,674 12,104 11,132 11,249 2/28/1997 12,874 12,295 11,159 11,289 3/31/1997 12,734 12,161 11,036 11,157 4/30/1997 12,815 12,239 11,201 11,326 5/31/1997 13,091 12,502 11,307 11,446 6/30/1997 13,388 12,786 11,441 11,585 7/31/1997 13,990 13,361 11,749 11,902 8/31/1997 13,630 13,016 11,649 11,804 9/30/1997 14,111 13,476 11,821 11,986 10/31/1997 13,814 13,193 11,992 12,100 11/30/1997 13,889 13,264 12,048 12,166 12/31/1997 13,818 13,196 12,169 12,296 1/31/1998 14,043 13,411 12,325 12,450 2/28/1998 14,300 13,657 12,316 12,460 3/31/1998 14,606 13,949 12,358 12,517 4/30/1998 14,611 13,953 12,423 12,581 5/31/1998 14,373 13,726 12,541 12,672 6/30/1998 14,144 13,508 12,647 12,755 7/31/1998 13,967 13,339 12,674 12,786 8/31/1998 12,252 11,701 12,880 12,785 9/30/1998 12,649 12,080 13,182 13,088 10/31/1998 12,786 12,210 13,112 13,034 11/30/1998 13,644 13,030 13,186 13,164 12/31/1998 13,581 12,970 13,226 13,194 1/31/1999 13,816 13,194 13,320 13,282 2/28/1999 13,618 13,005 13,088 13,071 3/31/1999 14,337 13,692 13,160 13,171 4/30/1999 15,256 14,570 13,202 13,249 5/31/1999 14,783 14,118 13,086 13,115 6/30/1999 14,826 14,159 13,045 13,092 7/31/1999 14,534 13,880 12,989 13,039 8/31/1999 14,352 13,707 12,983 13,024 9/30/1999 14,444 13,794 13,133 13,165 10/31/1999 14,566 13,910 13,182 13,220 11/30/1999 14,829 14,162 13,181 13,242 12/31/1999 15,233 14,547 13,117 13,216 1/31/2000 15,091 14,412 13,074 13,172 2/29/2000 15,686 14,980 13,232 13,339 3/31/2000 15,844 15,131 13,407 13,495 4/30/2000 15,391 14,698 13,368 13,452 5/31/2000 14,894 14,223 13,362 13,428 6/30/2000 15,461 14,765 13,640 13,717 7/31/2000 15,597 14,895 13,764 13,850 8/31/2000 15,940 15,223 13,964 14,052 9/30/2000 15,520 14,821 14,051 14,123 10/31/2000 14,888 14,218 14,144 14,180 11/30/2000 14,810 14,144 14,376 14,371 12/31/2000 15,336 14,646 14,642 14,646 1/31/2001 15,824 15,112 14,882 14,933 2/28/2001 15,800 15,089 15,011 15,058 3/31/2001 15,203 14,519 15,087 15,109 4/30/2001 14,955 14,282 15,024 15,042 5/31/2001 15,289 14,601 15,115 15,150 6/30/2001 15,247 14,561 15,172 15,193 7/31/2001 15,258 14,571 15,511 15,492 8/31/2001 15,595 14,893 15,689 15,685 9/30/2001 14,822 14,155 15,872 15,798 10/31/2001 15,171 14,489 16,204 16,116 11/30/2001 15,387 14,695 15,980 15,927 12/31/2001 15,316 14,627 15,879 15,832 1/31/2002 15,491 14,794 16,007 15,965 2/28/2002 15,677 14,971 16,162 16,114 3/31/2002 15,857 15,143 15,894 15,881 4/30/2002 16,241 15,510 16,202 16,184 5/31/2002 16,585 15,839 16,339 16,306 6/30/2002 16,321 15,587 16,481 16,365 7/31/2002 15,934 15,217 16,680 16,504 8/31/2002 16,381 15,643 16,961 16,808 9/30/2002 16,159 15,432 17,236 17,049 10/31/2002 16,481 15,739 17,157 16,990 11/30/2002 17,097 16,328 17,153 17,036 12/31/2002 17,689 16,893 17,507 17,389 1/31/2003 18,186 17,368 17,522 17,436 2/28/2003 18,677 17,837 17,765 17,684 3/31/2003 18,858 18,010 17,751 17,701 4/30/2003 19,941 19,043 17,897 17,910 5/31/2003 20,938 19,996 18,231 18,252 6/30/2003 21,202 20,247 18,195 18,248 7/31/2003 20,625 19,697 17,583 17,661 8/31/2003 20,862 19,923 17,700 17,787 9/30/2003 21,882 20,898 18,168 18,262 10/31/2003 22,377 21,370 17,999 18,131 11/30/2003 22,999 21,964 18,042 18,194 12/31/2003 23,852 22,779 18,226 18,401 1/31/2004 24,277 23,184 18,372 18,560 2/29/2004 24,260 23,168 18,571 18,743 3/31/2004 24,577 23,471 18,710 18,892 4/30/2004 23,557 22,497 18,223 18,409 5/31/2004 23,164 22,122 18,150 18,316 6/30/2004 23,604 22,542 18,253 18,432 7/31/2004 23,833 22,761 18,434 18,628 8/31/2004 24,567 23,462 18,786 18,997 9/30/2004 25,211 24,076 18,837 19,071 10/31/2004 25,808 24,647 18,995 19,245 11/30/2004 26,428 25,239 18,843 19,126 12/31/2004 26,938 25,726 19,016 19,316 1/31/2005 26,741 25,538 19,136 19,427 2/28/2005 27,092 25,872 19,023 19,347 3/31/2005 26,632 25,432 18,925 19,206 Average Annual Total Returns -- March 31, 2005
SINCE 6 MONTHS 1 YEAR/7/ 5 YEARS/7/ INCEPTION/7/ CLASS A (Inception 5/1/95) Net Asset Value/1/ 5.70% 8.41% 10.95% 10.38% With Maximum Sales Charge/2/ 0.94 3.55 9.93 9.87 CLASS B (Inception 5/1/95) Net Asset Value/1/ 5.31 7.53 10.10 9.53 With CDSC/5/ 0.31 2.53 9.82 9.53 CLASS C (Inception 5/1/95) Net Asset Value/1/ 5.30 7.61 10.12 9.52 With CDSC/5/ 4.30 6.61 10.12 9.52 CLASS Y (Inception 12/1/99) Net Asset Value/1/ 5.76 8.64 11.31 11.95 ------------------------------------------------------------------------------------------- SINCE SINCE CLASS A,B,C CLASS Y COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS INCEPTION/8/ INCEPTION/8/ Lehman Aggregate Bond Index/3/ 0.47% 1.15% 7.14% 6.70% 7.23% Lehman U.S. Universal Bond Index/4/ 0.71 1.66 7.31 6.86 7.38 Morningstar Multisector Bond Fund Avg./6/ 2.97 4.69 6.94 6.60 6.61
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of dividends and capital gains. Current returns may be higher or lower than those shown. Performance history includes periods from a predecessor fund. For performance current to the most recent month-end, visit www.ixisadvisorfunds.com. Class Y shares are available to certain institutional investors only. The table and graph do not reflect taxes shareholders might owe on any fund distributions or when they redeem their shares. PORTFOLIO FACTS
% of Net Assets as of CREDIT QUALITY 3/31/05 ------------------------------- Aaa 36.4 ------------------------------- Aa 12.1 ------------------------------- A 0.6 ------------------------------- Baa 3.0 ------------------------------- Ba 8.9 ------------------------------- B 15.1 ------------------------------- Caa 7.9 ------------------------------- Ca 0.9 ------------------------------- Not rated* 11.3 ------------------------------- Short term & other 3.8 -------------------------------
Credit quality is based on ratings from Moody's Investor Service. * Securities that are not rated by Moody's may be rated by another rating agency or by Loomis Sayles.
% of Net Assets as of EFFECTIVE MATURITY 3/31/05 ------------------------------------------ 1 year or less 4.1 ------------------------------------------ 1-5 years 50.2 ------------------------------------------ 5-10 years 21.9 ------------------------------------------ 10+ years 23.8 ------------------------------------------ Average Effective Maturity 8.4 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 Multisector 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. 12 ADDITIONAL INFORMATION The views expressed in this report reflect those of the portfolio managers as of the dates indicated. The managers' views are subject to change at any time without notice based on changes in market or other conditions. References to specific securities or industries should not be regarded as investment advice. Because the funds are actively managed, there is no assurance that they will continue to invest in the securities or industries mentioned. For more complete information on any IXIS Advisor Fund, contact your financial professional or call IXIS Advisor Funds and ask for a free prospectus, which contains more complete information including charges and other ongoing expenses. Investors should consider a fund's objective, risks and expenses carefully before investing. This and other fund information can be found in the prospectus. Please read the prospectus carefully before investing. PROXY VOTING INFORMATION A description of the funds' proxy voting policies and procedures is available without charge, upon request, by calling IXIS Advisor Funds at 800-225-5478; on the funds' website at www.ixisadvisorfunds.com; and on the Securities and Exchange Commission's website at www.sec.gov. Information regarding how the funds voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004 is available from the funds' website and the SEC's website. QUARTERLY PORTFOLIO SCHEDULES The funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE 13 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 and/or service 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 October 1, 2004 through March 31, 2005. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual fund returns and expenses. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example $8,600 account value divided by $1,000 = $8.60) and multiply the result by the number in the Expenses Paid During Period column as shown below for your Class. The second line in the table of each Class of fund shares provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown reflect ongoing costs only, and do not include any transaction costs such as sales charges, redemption fees, or exchange fees. Therefore, the second line in the table of each fund is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. If transaction costs were included, total costs would be higher.
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* LOOMIS SAYLES CORE PLUS BOND FUND 10/1/04 3/31/05 10/1/04 - 3/31/05 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,006.30 $5.75 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.20 $5.79 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,002.20 $9.48 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.46 $9.55 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,002.30 $9.49 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.46 $9.55 ------------------------------------------------------------------------------------------------------------------ CLASS Y ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,007.60 $4.50 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.44 $4.53
*Expenses are equal to the fund's annualized expense ratio (after advisory fee waiver): 1.15%, 1.90%, 1.90% and 0.90% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 365 (to reflect the half-year period). 14 UNDERSTANDING YOUR FUNDS' EXPENSES
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* LOOMIS SAYLES HIGH INCOME FUND 10/1/04 3/31/05 10/1/04 - 3/31/05 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,052.50 $7.98 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.15 $7.85 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,046.40 $11.79 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,013.41 $11.60 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,046.40 $11.79 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,013.41 $11.60
*Expenses are equal to the fund's annualized expense ratio: 1.56%, 2.31%, and 2.31% for Class A, B, and C, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 365 (to reflect the half-year period).
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* AGENCY FUND 10/1/04 3/31/05 10/1/04 - 3/31/05 ------------------------------------------------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------------------------------------------------- Actual $1,000 $998.40 $6.21 ------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.72 $6.27 ------------------------------------------------------------------------------------------------------------------- CLASS B ------------------------------------------------------------------------------------------------------------------- Actual $1,000 $994.70 $9.93 ------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.98 $10.03 ------------------------------------------------------------------------------------------------------------------- CLASS C ------------------------------------------------------------------------------------------------------------------- Actual $1,000 $993.80 $9.92 ------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,014.98 $10.03 ------------------------------------------------------------------------------------------------------------------- CLASS Y ------------------------------------------------------------------------------------------------------------------- Actual $1,000 $998.70 $6.01 ------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.92 $6.07
*Expenses are equal to the fund's annualized expense ratio: 1.25%, 2.00%, 2.00% and 1.21% for Class A, B, C and Y (after transfer agent fee waiver), respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 365 (to reflect the half-year period). 15 UNDERSTANDING YOUR FUNDS' EXPENSES
LOOMIS SAYLES MASSACHUSETTS TAX FREE BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* INCOME FUND 10/1/04 3/31/05 10/1/04 - 3/31/05 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,013.00 $6.28 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.69 $6.30 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,009.80 $10.03 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.96 $10.05
*Expenses are equal to the fund's annualized expense ratio: 1.25% 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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* LOOMIS SAYLES MUNICIPAL INCOME FUND 10/1/04 3/31/05 10/1/04 - 3/31/05 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,011.50 $5.58 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.38 $5.60 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,007.70 $9.32 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.64 $9.36
*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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* LOOMIS SAYLES STRATEGIC INCOME FUND 10/1/04 3/31/05 10/1/04 - 3/31/05 ------------------------------------------------------------------------------------------------------------------ CLASS A ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,057.00 $5.62 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.47 $5.52 ------------------------------------------------------------------------------------------------------------------ CLASS B ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,053.10 $9.45 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.73 $9.28 ------------------------------------------------------------------------------------------------------------------ CLASS C ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,053.00 $9.45 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.73 $9.28 ------------------------------------------------------------------------------------------------------------------ CLASS Y ------------------------------------------------------------------------------------------------------------------ Actual $1,000 $1,057.60 $4.50 ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.56 $4.41
*Expenses are equal to the fund's annualized expense ratio: 1.10%, 1.85%, 1.85% and 0.88% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 365 (to reflect the half-year period). 16 LOOMIS SAYLES CORE PLUS BOND FUND -- SCHEDULE OF INVESTMENTS Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ---------------------------------------------------------------------------------------------- Bonds and Notes -- 98.1% of Total Net Assets Aerospace & Defense -- 0.6% $ 1,400,000 Northrop Grumman Corp., Note 7.125%, 2/15/2011 $ 1,561,260 --------------- Asset Backed Securities -- 7.8% 2,000,000 American Express Credit Account Master Trust, Series 2003-4, Class A 1.690%, 1/15/2009 1,948,404 690,000 AmeriCredit Automobile Receivables Trust, Series 2003-D-M, Class A-4 2.840%, 8/06/2010 676,941 3,755,000 BMW Vehicle Owner Trust, Series 2004-A, Class A4 3.320%, 2/25/2009 3,691,535 3,675,000 Citibank Credit Card Issuance Trust, Series 2003-A2, Class A2 2.700%, 1/15/2008 3,648,176 273,746 Connecticut RRB Special Purpose Trust Connecticut Light & Power, Series 2001-1, Class A2 5.360%, 3/30/2007 273,746 3,430,000 Countrywide Asset-Backed Certificates, Series 2003-5, Class AF 4 4.905%, 8/25/2032 3,440,452 790,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A2 3.872%, 3/25/2020 779,816 1,095,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3 4.615%, 2/25/2035 1,074,483 1,730,000 Ford Credit Auto Owner Trust, Series 2004-A, Class A4 3.540%, 11/15/2008 1,703,225 1,850,000 Residential Asset Securities Corp., Series 2003-KS10, Class AI4 4.470%, 3/25/2032 1,853,398 1,000,000 WFS Financial Owner Trust, Series 2004-4, Class A3 2.980%, 9/17/2009 984,176 515,000 WFS Financial Owner Trust, Series 2004-4, Class A4 3.440%, 5/17/2012 503,284 --------------- 20,577,636 --------------- Automotive -- 2.8% 1,510,000 Ford Motor Credit Co., Global Note 5.625%, 10/01/2008(c) 1,447,039 715,000 General Motors Acceptance Corp., Note 8.000%, 11/01/2031 622,653 2,630,000 General Motors Corp., Senior Note 8.375%, 7/15/2033(c) 2,250,575 2,880,000 Navistar International Corp., Senior Subordinated Note 9.375%, 6/01/2006 3,002,400 --------------- 7,322,667 --------------- Banking -- 1.3% 1,400,000 Chevy Chase Bank FSB, Subordinated Note 6.875%, 12/01/2013 1,449,000 715,000 JPMorgan Chase & Co., Global Subordinated Note 5.750%, 1/02/2013 743,011 1,200,000 State Street Institutional Capital A, Series A, Guaranteed Note, 144A 7.940%, 12/30/2026 1,287,506 --------------- 3,479,517 --------------- Beverage -- 1.4% 3,125,000 Cia Brasileira de Bebidas, Guaranteed Note 8.750%, 9/15/2013 3,578,125 --------------- Brokerage -- 1.8% 675,000 Goldman Sachs Group, Inc., Senior Note 6.600%, 1/15/2012 730,446
Principal Amount Description Value (a) ---------------------------------------------------------------------------------- Brokerage -- continued $ 3,815,000 Lehman Brothers Holdings, Inc., Note 7.000%, 2/01/2008 $ 4,070,697 --------------- 4,801,143 --------------- Chemicals -- 2.6% 475,000 Eastman Chemical Co., Note 3.250%, 6/15/2008 455,118 2,930,000 Eastman Chemical Co., Note 6.300%, 11/15/2018 3,129,099 1,470,000 ICI Wilmington, Inc., Guaranteed Note 5.625%, 12/01/2013 1,489,470 1,665,000 Lubrizol Corp. 6.500%, 10/01/2034 1,739,196 --------------- 6,812,883 --------------- Construction Machinery -- 0.6% 1,600,000 Case New Holland, Inc., Senior Note, 144A 9.250%, 8/01/2011 1,704,000 --------------- Consumer Products -- 0.8% 865,000 Church & Dwight Co Inc., 144A 6.000%, 12/15/2012 843,375 1,375,000 Jostens IH Corp., Senior Subordinated Note 7.625%, 10/01/2012 1,361,250 --------------- 2,204,625 --------------- Electric -- 3.9% 1,455,000 Duke Energy Corp., Senior Note 4.200%, 10/01/2008 1,437,304 2,030,000 Empresa Nacional de Electricidad SA, Chile, Note 8.350%, 8/01/2013 2,275,660 1,325,000 Enersis SA, Chile, Note 7.375%, 1/15/2014 1,379,337 2,150,000 FirstEnergy Corp., Note, Series B 6.450%, 11/15/2011 2,268,347 1,325,000 Ipalco Enterprises, Inc., Senior Secured Note 8.375%, 11/14/2008 1,444,250 1,450,000 Southern California Edison Co., Note 7.625%, 1/15/2010 1,622,166 --------------- 10,427,064 --------------- Food and Beverage -- 0.4% 788,000 Dean Foods Co., Senior Note 6.900%, 10/15/2017 791,940 150,000 Del Monte Corp., Senior Subordinated Note, 144A 6.750%, 2/15/2015 146,250 --------------- 938,190 --------------- Foreign Local Governments -- 2.7% 3,000,000 Pemex Finance, Ltd., Series 1998, Class 18NT 9.150%, 11/15/2018 3,559,710 3,265,000 Pemex Project Funding Master Trust, Note 7.875%, 2/01/2009 3,529,465 --------------- 7,089,175 --------------- Gaming -- 0.3% 450,000 Harrah's Operating Co., Inc., Guaranteed Senior Note 7.500%, 1/15/2009 489,464 185,000 Harrah's Operating Co., Inc., Senior Note 7.125%, 6/01/2007 194,388 --------------- 683,852 ---------------
See accompanying notes to financial statements. 17 LOOMIS SAYLES CORE PLUS BOND FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ------------------------------------------------------------------------ Government Agencies -- 7.9% $ 10,400,000 FHLMC 2.875%, 12/15/2006(d) $ 10,222,722 2,750,000 FHLMC 3.220%, 6/20/2007 (SGD) 1,694,241 140,000,000 FNMA 1.750%, 3/26/2008 1,362,824 6,600,000 FNMA 2.290%, 2/19/2009 (SGD) 3,929,927 3,710,000 FNMA 5.250%, 1/15/2009 3,823,760 --------------- 21,033,474 --------------- Healthcare -- 1.1% 1,925,000 HCA, Inc., Note 6.950%, 5/01/2012 1,998,065 860,000 Wellpoint Inc., 144A 3.750%, 12/14/2007 844,025 --------------- 2,842,090 --------------- Home Construction -- 0.8% 595,000 D.R. Horton Inc. 5.625%, 9/15/2014 564,845 300,000 D.R. Horton Inc. 6.125%, 1/15/2014 297,441 1,315,000 Pulte Homes, Inc., Senior Note 4.875%, 7/15/2009 1,297,338 --------------- 2,159,624 --------------- Independent Energy -- 0.7% 480,000 Chesapeake Energy Corp., Senior Note, 144A 6.375%, 6/15/2015 474,000 1,295,000 Pioneer Natural Resources Co., Senior Note 6.500%, 1/15/2008 1,356,238 --------------- 1,830,238 --------------- Industrial Other -- 1.1% 2,865,000 Aramark Services, Inc., Guaranteed Note 7.000%, 7/15/2006 2,950,300 --------------- Insurance -- 0.7% 1,725,000 Axis Capital Holdings 5.750%, 12/01/2014 1,747,032 --------------- Media -- Broadcasting & Publishing -- 0.6% 1,290,000 Time Warner, Inc., Note 7.700%, 5/01/2032 1,531,479 --------------- Media Cable -- 4.4% 620,000 Cox Communications Inc., 144A 5.450%, 12/15/2014 603,575 2,000,000 CSC Holdings, Inc., Senior Note 7.625%, 7/15/2018 2,080,000 515,000 CSC Holdings, Inc., Senior Note 7.875%, 2/15/2018 545,900 1,540,000 Rogers Cable, Inc., Series 6.750%, 3/15/2015 1,516,900 4,000,000 Shaw Communications, Inc., Senior Note 7.400%, 10/17/2007 (CAD) 3,545,988 2,785,000 TeleCommunications, Inc., Note 9.800%, 2/01/2012 3,490,833 --------------- 11,783,196 ---------------
Principal Amount Description Value (a) -------------------------------------------------------------------------------- Media Non Cable -- 0.5% $ 1,435,000 Clear Channel Communications, Inc., Global Note 4.250%, 5/15/2009 $ 1,381,150 --------------- Metals and Mining -- 0.6% 1,500,000 International Steel Group, Inc., Note 6.500%, 4/15/2014 1,530,000 --------------- Mortgage Related -- 23.2% 2,839,419 FHLMC 4.000%, 7/01/2019 2,718,873 8,196,334 FHLMC 4.500%, with various maturities to 2034(e) 7,950,512 9,863,373 FHLMC 5.000%, with various maturities to 2034(e) 9,738,261 2,423,059 FHLMC 5.500%, with various maturities to 2018(e) 2,475,603 9,001,030 FNMA 5.000%, with various maturities to 2034(e) 8,852,471 8,160,436 FNMA 5.500%, with various maturities to 2034(e) 8,224,367 3,110,314 FNMA 6.000%, with various maturities to 2034(e) 3,196,879 5,368,893 FNMA 6.500%, with various maturities to 2034(e) 5,577,016 563,501 FNMA 7.000%, with various maturities to 2030(e) 594,652 597,813 FNMA 7.500%, with various maturities to 2032(e) 639,824 5,455,000 FNMA (TBA) 4.000%, 4/01/2020 5,221,461 1,752,376 GNMA 5.500%, 2/20/2034 1,767,701 698,947 GNMA 6.000%, 1/15/2029 720,157 2,026,613 GNMA 6.500%, with various maturities to 2032(e) 2,119,760 907,952 GNMA 7.000%, with various maturities to 2029(e) 962,528 245,609 GNMA 7.500%, with various maturities to 2030(e) 264,138 120,065 GNMA 8.000%, 11/15/2029 129,463 280,751 GNMA 8.500%, with various maturities to 2023(e) 307,879 29,539 GNMA 9.000%, with various maturities to 2016(e) 32,197 81,081 GNMA 11.500%, with various maturities to 2015(e) 90,485 --------------- 61,584,227 --------------- Non - Captive Consumer Financial -- 1.4% 1,305,000 Capital One Bank 6.500%, 6/13/2013 1,401,329 1,380,000 Countrywide Home Loans, Inc., Note, (MTN) 5.500%, 8/01/2006 1,403,043 982,000 Household Finance Corp., Note 5.750%, 1/30/2007 1,007,916 --------------- 3,812,288 ---------------
See accompanying notes to financial statements. 18 LOOMIS SAYLES CORE PLUS BOND FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) -------------------------------------------------------------------------------------- Non - Captive Diversified Financial -- 0.5% $ 500,000 General Electric Capital Corp., Series E, Note, (MTN) 1.725%, 6/27/2008 (SGD) $ 294,062 1,080,000 International Lease Finance Corp., Global Note 5.625%, 6/01/2007 1,108,246 --------------- 1,402,308 --------------- Oil & Gas -- 0.7% 1,750,000 Transocean Sedco Forex, Inc., Note 6.625%, 4/15/2011 1,911,068 --------------- Paper -- 3.7% 3,165,000 Abitibi-Consolidated Finance, LP, Note 7.875%, 8/01/2009 3,157,087 1,495,000 Abitibi-Consolidated, Inc., Note 8.550%, 8/01/2010 1,517,425 1,200,000 Georgia-Pacific Corp., Note 7.375%, 12/01/2025 1,254,000 755,000 Georgia-Pacific Corp., Note 7.750%, 11/15/2029 822,950 480,000 Georgia-Pacific Corp., Note 8.875%, 5/15/2031 578,400 2,705,000 International Paper Co., Note 4.000%, 4/01/2010 2,601,842 --------------- 9,931,704 --------------- Pharmaceuticals -- 2.1% 1,470,000 Caremark Rx, Inc., Senior Note 7.375%, 10/01/2006 1,529,314 1,250,000 Medco Health Solutions 7.250%, 8/15/2013 1,381,696 2,750,000 Valeant Pharmaceuticals International, Senior Note 7.000%, 12/15/2011 2,777,500 --------------- 5,688,510 --------------- Pipelines -- 1.2% 520,000 Enterprise Products Operating, LP, Series B, Senior Note 4.625%, 10/15/2009 507,452 2,464,000 Kinder Morgan Energy Partners, LP, Note 7.125%, 3/15/2012 2,733,404 --------------- 3,240,856 --------------- Railroads -- 1.3% 1,155,000 CSX Corp., Note 4.875%, 11/01/2009 1,153,319 2,350,000 Union Pacific Corp., Senior Note 5.375%, 5/01/2014 2,375,958 --------------- 3,529,277 --------------- Real Estate Investment Trusts -- 2.4% 195,000 Colonial Realty, LP, Senior Note 4.750%, 2/01/2010 191,728 3,540,000 EOP Operating, LP, Guaranteed Note 4.650%, 10/01/2010 3,460,350 1,250,000 iStar Financial, Inc., Senior Note 6.000%, 12/15/2010 1,288,543 1,340,000 Simon Property Group, LP, Note 6.375%, 11/15/2007 1,396,056 --------------- 6,336,677 --------------- Refining -- 0.2% 515,000 Premcor Refining Group (The), Inc., Senior Note 7.500%, 6/15/2015 529,163 ---------------
Principal Amount Description Value (a) --------------------------------------------------------------------------- Sovereigns -- 1.6% $ 3,180,000 Canadian Government 5.500%, 6/01/2010 (CAD) $ 2,824,185 9,195,000 Kingdom of Sweden 4.000%, 12/01/2009 (SEK) 1,350,540 --------------- 4,174,725 --------------- Supermarkets -- 2.8% 1,365,000 Couche-Tard US, LP/Couche-Tard Finance Corp., Senior Subordinated Note 7.500%, 12/15/2013 1,433,250 2,155,000 Delhaize America, Inc., Note 8.125%, 4/15/2011 2,395,328 560,000 Delhaize America, Inc., Note 9.000%, 4/15/2031 680,365 2,720,000 Fred Meyer, Inc., Note 7.450%, 3/01/2008 2,914,918 --------------- 7,423,861 --------------- Supranationals -- 0.7% 1,210,000 Inter-American Development Bank, Note 5.500%, 3/30/2010 (EUR) 1,743,364 --------------- Telecommunications -- 0.3% 730,000 Sprint Capital Corp., Note 6.125%, 11/15/2008 763,004 --------------- Transportation Services -- 0.4% 1,015,000 Overseas Shipholding Group, Senior Note 7.500%, 2/15/2024 1,020,075 --------------- Treasuries -- 5.4% 750,000 U.S. Treasury Bond 5.375%, 2/15/2031 817,412 1,015,000 U.S. Treasury Note 2.625%, 5/15/2008 975,034 935,000 U.S. Treasury Note 2.750%, 7/31/2006 924,518 3,105,000 U.S. Treasury Note 3.250%, 8/15/2007 3,063,154 7,510,000 U.S. Treasury Note 3.500%, 11/15/2006 7,486,531 1,140,000 U.S. Treasury Note 4.875%, 2/15/2012(c) 1,177,183 --------------- 14,443,832 --------------- Wireless -- 0.0% 100,000 Rogers Wireless, Inc., Series 7.250%, 12/15/2012 102,000 --------------- Wirelines -- 4.8% 1,095,000 AT&T Corp., Senior Note 9.750%, 11/15/2031 1,335,900 1,650,000 GTE Corp., Note 7.900%, 2/01/2027 1,776,065 3,200,000 LCI International, Inc., Senior Note 7.250%, 6/15/2007 3,016,000 1,240,000 Qwest Corp., Note 7.200%, 11/10/2026 1,122,200 670,000 Qwest Corp., Note 7.250%, 9/15/2025 626,450 2,080,000 Sprint Capital Corp., Note 6.875%, 11/15/2028 2,226,829
See accompanying notes to financial statements. 19 LOOMIS SAYLES CORE PLUS BOND FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ----------------------------------------------------------------------------------------- Wirelines -- continued $ 1,045,000 TELUS Corp., Note 8.000%, 6/01/2011 $ 1,210,147 1,675,000 U.S. West Communications, Inc., Note 7.500%, 6/15/2023 1,549,375 --------------- 12,862,966 --------------- Total Bonds and Notes (Identified Cost $257,220,197) 260,468,625 --------------- Principal Amount ----------------------------------------------------------------------------------------- Short Term Investments -- 5.5% 4,350,424 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2005 at 2.02% to be repurchased at $4,350,668 on 4/01/2005, collateralized by $4,515,375 Federal National Mortgage Association Bond, 3.35%, due 3/25/2033 valued at $4,569,477 4,350,424 223,430 Bank of America, 2.77%, due 4/18/2005(g) 223,430 223,430 Bank of America, 2.82%, due 5/16/2005(g) 223,430 68,040 Bank of Montreal, 2.60%, due 4/04/2005(g) 68,040 245,522 Bank of Montreal, 2.75%, due 4/08/2005(g) 245,522 397,706 Bank of Nova Scotia, 2.70%, due 4/11/2005(g) 397,706 89,372 Bank of Nova Scotia, 2.73%, due 4/14/2005(g) 89,372 223,430 Bank of Nova Scotia, 2.78%, due 4/28/2005(g) 223,430 134,057 Barclays, 2.785%, due 4/25/2005(g) 134,057 243,318 BGI Institutional Money Market Fund(g) 243,318 670,291 BNP Paribas, 2.73%, due 4/07/2005(g) 670,291 223,430 BNP Paribas, 2.91%, due 6/15/2005(g) 223,430 91,238 Calyon, 2.77%, due 4/21/2005(g) 91,238 41,184 Den Danske Bank, 2.77%, due 4/26/2005(g) 41,184 89,372 Falcon Asset Securitization Corp, 2.727%, due 4/13/2005(g) 89,372 218,068 Fortis Bank, 2.44%, due 4/14/2005(g) 218,068 223,430 Fortis Bank, 2.80%, due 4/06/2005(g) 223,430 96,812 Goldman Sachs Financial Square Prime Obligations Fund(g) 96,812 223,430 Govco Incorporated, 2.60%, due 4/05/2005(g) 223,430 107,372 Keybank, 2.844%, due 4/01/2005(g) 107,372 110,489 Merrill Lynch Premier Institutional Fund(g) 110,489 63,782 Merrimac Cash Fund-Premium Class(g) 63,782 223,430 Rabobank Nederland, 2.78%, due 4/29/2005(g) 223,430 241,754 Royal Bank of Scotland, 2.75%, due 4/05/2005(g) 241,754 223,430 Svenska Handlesbanken, 2.70%, due 4/11/2005(g) 223,430 44,686 The Bank of the West, 2.79%, due 4/22/2005(g) 44,686 44,686 Toronto Dominion Bank, 3.01%, due 6/24/2005(g) 44,686 5,300,000 U.S. Treasury Bills, 2.648%, due 5/19/2005(f) 5,281,291 89,372 UBS AG, 2.805%, due 5/03/2005(g) 89,372 89,372 Wells Fargo, 2.78%, due 4/20/2005(g) 89,372 31,502 Wells Fargo, 2.79%, due 4/08/2005(g) 31,502 44,686 Yorktown Capital LLC, 2.636%, due 4/01/2005(g) 44,686 --------------- Total Short Term Investments (Identified Cost $14,671,836) 14,671,836 --------------- Total Investments -- 103.6% (Identified Cost $271,892,033)(b) 275,140,461 Other assets less liabilities (9,645,198) --------------- Total Net Assets -- 100% $ 265,495,263 ===============
(a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2005, the net unrealized appreciation on investments based on cost of $273,146,299 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $ 6,510,496 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (4,516,334) ----------- Net unrealized appreciation $ 1,994,162 =========== 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. (c) All or a portion of this security was on loan to brokers at March 31, 2005. (d) All or a portion of this security has been segregated to cover collateral requirements on TBA obligations. (e) The Fund's investment in mortgage related securities of the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Government National Mortgage Association are interests in separate pools of mortgages. All separate investments in securities of each issuer which have the same coupon rate have been aggregated for the purpose of presentation in the schedule of investments. (f) 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 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 $5,902,731 or 2.2% of net assets. CAD Canadian Dollar EUR Euro SEK Swedish Krona SGD Singapore Dollar
Holdings at March 31, 2005 as a Percentage of Net Assets (unaudited) Mortgage Related 23.2% Government Agencies 7.9 Asset Backed Securities 7.8 Treasuries 5.4 Wirelines 4.8 Media Cable 4.4 Electric 3.9 Paper 3.7 Supermarkets 2.8 Automotive 2.8 Foreign Local Governments 2.7 Chemicals 2.6 Real Estate Investment Trusts 2.4 Pharmaceuticals 2.1 Other, less than 2% each 21.6
See accompanying notes to financial statements. 20 LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ----------------------------------------------------------------------------------------- Bonds and Notes -- 93.9% of Total Net Assets Aerospace/Defense -- 0.6% $ 250,000 TD Funding Corp., Senior Subordinated Note 8.375%, 7/15/2011 $ 256,562 --------------- Airlines -- 3.0% 86,366 Continental Airlines, Inc., Series 1997-4, Class 4B 6.900%, 1/02/2017 69,988 165,762 Continental Airlines, Inc., Series 1998-1, Class 1A 6.648%, 9/15/2017 157,322 169,920 Continental Airlines, Inc., Series 1998-1, Class 1B 6.748%, 3/15/2017 138,681 54,100 Continental Airlines, Inc., Series 1999-1, Class C 6.954%, 8/02/2009 44,440 109,326 Continental Airlines, Inc., Series 1999-2, Class B 7.566%, 3/15/2020 91,926 40,606 Continental Airlines, Inc., Series 2002-2, Class B 8.307%, 4/02/2018 34,882 870,000 Northwest Airlines Corp., Senior Note 8.875%, 6/01/2006(c) 735,150 --------------- 1,272,389 --------------- Automotive -- 3.9% 600,000 Cummins, Inc., Note 7.125%, 3/01/2028 606,000 70,000 Dana Corp., Note 7.000%, 3/01/2029 61,473 20,000 Dana Corp., Senior Note, 144A 5.850%, 1/15/2015 17,618 195,000 Delphi Corp., Note 7.125%, 5/01/2029(c) 154,953 125,000 General Motors Acceptance Corp. of Canada, Ltd., Series E., Note, (MTN) 6.625%, 12/17/2010 (GBP) 208,985 505,000 General Motors Acceptance Corp., Note 3.700%, 3/20/2007 480,394 110,000 Tenneco Automotive Inc., Senior Subordinated Note, 144A 8.625%, 11/15/2014 106,975 --------------- 1,636,398 --------------- Banking -- 0.9% 7,000,000 Barclays Bank PLC, Note, 144A 4.160%, 2/22/2010 (THB)(d) 175,752 9,000,000 Barclays Financial, LLC, Note, 144A 4.100%, 3/22/2010 (THB)(d) 225,092 --------------- 400,844 --------------- Chemicals -- 3.2% 450,000 Borden Chemical, Inc., Note 7.875%, 2/15/2023 409,500 550,000 Borden Chemical, Inc., Note 9.200%, 3/15/2021 555,500 195,000 Hercules, Inc., Subordinated Note 6.500%, 6/30/2029 156,000 200,000 Nalco Co., Senior Subordinated Note 8.875%, 11/15/2013 214,000 --------------- 1,335,000 --------------- Construction Machinery -- 2.5% 350,000 Case Credit Corp., Note 6.750%, 10/21/2007 346,500
Principal Amount Description Value (a) ------------------------------------------------------------------------------------------ Construction Machinery -- continued $ 100,000 Case New Holland, Inc., Senior Note, 144A 9.250%, 8/01/2011 $ 106,500 120,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note 7.750%, 12/15/2013 99,600 550,000 United Rentals North America, Inc., Senior Subordinated Note 7.000%, 2/15/2014(c) 503,250 --------------- 1,055,850 --------------- Electric -- 8.4% 340,000 AES Corp. (The), Senior Note 7.750%, 3/01/2014 351,048 100,000 Allegheny Energy Supply Co. LLC, Note 7.800%, 3/15/2011 103,750 100,000 Calpine Corp., Senior Note 7.750%, 4/15/2009(c) 69,000 200,000 Calpine Corp., Senior Note 7.875%, 4/01/2008(c) 145,000 705,000 Calpine Corp., Senior Note 8.500%, 2/15/2011(c) 497,025 170,000 Calpine Corp., Senior Secured Note, 144A 8.750%, 7/15/2013 128,350 350,000 Edison Mission Energy Corp., Senior Note 7.730%, 6/15/2009 364,875 200,000 Empresa Nacional de Electricidad SA, Chile, Note 7.875%, 2/01/2027 216,662 250,000 Empresa Nacional de Electricidad SA, Chile, Note 8.350%, 8/01/2013 280,254 525,000 Enersis SA, Cayman Island, Note 7.400%, 12/01/2016 (yankee) 545,889 140,000 Enersis SA, Chile, Note 7.375%, 1/15/2014 145,741 270,195 Salton SEA Funding Corp., Series C, Senior Secured Note 7.840%, 5/30/2010 288,593 46,237 Salton SEA Funding Corp., Series E, Senior Note 8.300%, 5/30/2011 50,430 125,000 TECO Energy, Inc., Note 7.000%, 5/01/2012 130,469 225,000 Texas Genco LLC/Texas Genaco Financing Corp., Senior Subordinated Note, 144A 6.875%, 12/15/2014 225,562 --------------- 3,542,648 --------------- Electronics -- 0.5% 125,000 Amkor Technology, Inc., Note 5.000%, 3/15/2007(c) 109,531 125,000 Amkor Technology, Inc., Senior Note 7.750%, 5/15/2013(c) 105,000 --------------- 214,531 --------------- Food and Beverage -- 1.8% 600,000 Bavaria SA, Senior Note, 144A 8.875%, 11/01/2010 654,000 115,000 Friendly Ice Cream Corp., Guaranteed Senior Note 8.375%, 6/15/2012(c) 109,250 --------------- 763,250 --------------- Healthcare -- 2.2% 150,000 Columbia/HCA, Inc., Note 7.500%, 12/15/2023 151,999 75,000 Columbia/HCA, Inc., Note 7.690%, 6/15/2025 77,122
See accompanying notes to financial statements. 21 LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ----------------------------------------------------------------------------------------- Healthcare -- continued $ 500,000 Columbia/HCA, Inc., Note 7.750%, 7/15/2036 $ 513,930 200,000 Columbia/HCA, Inc., Note (MTN) 7.580%, 9/15/2025 203,411 --------------- 946,462 --------------- Home Construction -- 0.7% 300,000 K Hovnanian Enterprises, Inc., Guaranteed Senior Note, 144A 6.250%, 1/15/2015 287,120 --------------- Independent Energy -- 0.9% 270,000 Chesapeake Energy Corp., Senior Note 6.875%, 1/15/2016 272,700 100,000 Chesapeake Energy Corp., Senior Note, 144A 6.375%, 6/15/2015 98,750 --------------- 371,450 --------------- Integrated Energy -- 1.2% 265,000 Cerro Negro Finance, Ltd., Note, 144A 7.900%, 12/01/2020 246,450 300,000 Petrozuata Finance, Inc., Note, Series B, 144A 8.220%, 4/01/2017 282,000 --------------- 528,450 --------------- Lodging -- 1.5% 300,000 FelCor Lodging, LP, Senior Note 9.000%, 6/01/2011 322,500 300,000 La Quinta Inns, Inc., (MTN), (FRN) 7.330%, 4/01/2008 312,000 --------------- 634,500 --------------- Media Cable -- 6.3% 500,000 Charter Communications Holdings, Inc., Senior Note 9.625%, 11/15/2009(c) 391,250 150,000 Charter Communications Holdings, Inc., Senior Note 10.000%, 5/15/2011(c) 115,125 550,000 CSC Holdings, Inc., Senior Note 7.625%, 7/15/2018 572,000 200,000 Innova S De RL 9.375%, 9/19/2013 221,500 250,000 NTL Cable PLC, Note, 144A 9.750%, 4/15/2014 (GBP) 486,340 175,000 PanAmSat Corp., Note 6.875%, 1/15/2028 159,250 650,000 Rogers Cable Inc., Senior Note 5.500%, 3/15/2014 596,375 150,000 Rogers Communications, Inc., Note 2.000%, 11/26/2005 147,000 --------------- 2,688,840 --------------- Media Non Cable -- 0.3% 125,000 Dex Media, Inc., Note 8.000%, 11/15/2013 129,375 --------------- Metals and Mining -- 1.9% 520,000 AK Steel Corp., Guaranteed Senior Note 7.750%, 6/15/2012(c) 500,500 150,000 Glencore Funding LLC, Guaranteed Note, 144A 6.000%, 4/15/2014 142,649 175,000 Vale Overseas, Ltd., Note 8.250%, 1/17/2034 182,000 --------------- 825,149 ---------------
Principal Amount Description Value (a) --------------------------------------------------------------------------------------------- Oil Field Services -- 0.1% $ 35,000 North American Energy Partners, Inc., Senior Note 8.750%, 12/01/2011 $ 31,500 --------------- Packaging -- 1.5% 350,000 Owens-Illinois, Inc., Senior Note 7.500%, 5/15/2010(c) 360,500 135,000 Owens-Illinois, Inc., Senior Note 7.800%, 5/15/2018 137,362 125,000 Solo Cup Co., Senior Subordinated Note 8.500%, 2/15/2014 125,000 --------------- 622,862 --------------- Paper -- 5.0% 220,000 Abitibi-Consolidated, Inc., Note 7.500%, 4/01/2028 186,450 250,000 Abitibi-Consolidated, Inc., Note 8.500%, 8/01/2029 226,875 100,000 Arcel Finance, Ltd., Note, 144A 6.361%, 5/01/2012 98,942 200,000 Arcel Finance, Ltd., Note, 144A 7.048%, 9/01/2011 203,186 685,000 Bowater, Inc., Note 6.500%, 6/15/2013(c) 652,462 165,000 Georgia-Pacific Corp., Note 7.250%, 6/01/2028 169,950 200,000 Georgia-Pacific Corp., Note 7.375%, 12/01/2025 209,000 350,000 Pope & Talbot, Inc., Senior Note 8.375%, 6/01/2013 367,500 --------------- 2,114,365 --------------- Pharmaceuticals -- 5.0% 85,000 Elan Capital Corp., Ltd., Convertible 6.500%, 11/10/2008 60,350 127,000 EPIX Pharmaceuticals, Inc., Senior Note 3.000%, 6/15/2024 95,250 300,000 Inhale Therapeutic Systems, Inc., Subordinated Note 3.500%, 10/17/2007 285,000 375,000 IVAX Corp., Senior Note, Convertible 1.500%, 3/01/2024(c) 382,969 187,000 IVAX Corp., Senior Subordinated Note, Convertible 4.500%, 5/15/2008 187,234 250,000 Pharma Services Intermediate Holding Corp., Senior Note, 144A 0/11.500%, 4/01/2014(e) 176,250 200,000 Quintiles Transnational Corp., Senior Subordinated Note 10.000%, 10/01/2013 225,000 150,000 Regeneron Pharmaceuticals, Inc., Subordinated Note, Convertible 5.500%, 10/17/2008 137,625 50,000 Valeant Pharmaceuticals International, Subordinated Note, Convertible 3.000%, 8/16/2010 47,937 235,000 Valeant Pharmaceuticals International, Subordinated Note, Convertible 4.000%, 11/15/2013(c) 225,894 310,000 Vertex Pharmaceuticals, Inc., Note, 144A 5.750%, 2/15/2011 287,912 --------------- 2,111,421 ---------------
See accompanying notes to financial statements. 22 LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) --------------------------------------------------------------------------------------------- Pipelines -- 5.6% $ 300,000 El Paso CGP, Co., Note 6.375%, 2/01/2009 $ 288,000 825,000 El Paso CGP, Co., Note 6.950%, 6/01/2028 717,750 175,000 Tennessee Gas Pipeline Co., Note 7.000%, 10/15/2028 171,714 165,000 Williams Cos., Inc., Note 7.875%, 9/01/2021 179,850 982,000 Williams Cos., Inc., Series A, Note 7.500%, 1/15/2031 1,031,100 --------------- 2,388,414 --------------- Railroads -- 0.6% 245,000 Grupo Transportacion Ferroviaria Mexicana SA de CV, Senior Note 0/11.750%, 6/15/2009 (yankee)(e) 245,000 --------------- Real Estate Investment Trusts -- 1.3% 500,000 Crescent Real Estate Equities, LP, Senior Subordinated Note 9.250%, 4/15/2009 542,500 --------------- Refining -- 1.0% 225,000 Premcor Refining Group (The), Inc., Senior Note 6.750%, 2/01/2011 230,063 205,000 Premcor Refining Group (The), Inc., Senior Note 7.500%, 6/15/2015 210,638 --------------- 440,701 --------------- Retailers -- 4.2% 250,000 Dillard's Department Stores, Inc., Note 6.625%, 1/15/2018 247,500 600,000 Dillard's, Inc., Note 7.750%, 7/15/2026 633,000 200,000 Saks, Inc. 7.375%, 2/15/2019 179,000 335,000 Toys R US, Inc., Note 7.375%, 10/15/2018(c) 279,725 400,000 Woolworth Corp., Note 8.500%, 1/15/2022 434,000 --------------- 1,773,225 --------------- Sovereigns -- 4.7% 95,000 Republic of Brazil 8.250%, 1/20/2034 84,360 175,000 Republic of Colombia 8.125%, 5/21/2024 159,250 100,000,000 Republic of Colombia 11.750%, 3/01/2010 (COP) 41,797 123,750 Republic of Peru (FRN) 5.000%, 3/07/2017 113,231 19,250,000 United Mexican States 9.000%, 12/20/2012 (MXN) 1,590,489 --------------- 1,989,127 --------------- Supranational -- 2.8% 6,000,000 Inter-American Development Bank, Series E, Note, (MTN), Zero Coupon 5/11/2009 (BRL)(d) 1,203,149 --------------- Technology -- 10.6% 225,000 Corning, Inc., Note 5.900%, 3/15/2014 224,280 270,000 Corning, Inc., Note 6.200%, 3/15/2016 271,137
Principal Amount Description Value (a) ----------------------------------------------------------------------------------------------- Technology -- continued $ 225,000 Corning, Inc., Note 6.750%, 9/15/2013 $ 238,317 155,000 Corning, Inc., Note 6.850%, 3/01/2029 153,798 465,000 Fairchild Semiconductor Interanational, Inc., Senior Subordinated Note, Convertible 5.000%, 11/01/2008 469,650 100,000 Kulicke & Soffa Industries, Inc., Subordinated Note, Convertible 0.500%, 11/30/2008(c) 74,875 910,000 Lucent Technologies, Inc., Note 6.450%, 3/15/2029 784,875 315,000 Maxtor Corp., Subordinated Note 5.750%, 3/01/2012(d) 274,050 300,000 Nortel Networks Corp., Guaranteed Senior Note 4.250%, 9/01/2008 277,500 425,000 Nortel Networks Corp., Note 6.875%, 9/01/2023 392,063 100,000 Northern Telecom Capital Corp., Note 7.875%, 6/15/2026 100,500 100,000 SCI Systems, Inc., Subordinated Note, Convertible 3.000%, 3/15/2007 96,375 325,000 Xerox Capital Trust I, Guaranteed Note 8.000%, 2/01/2027 325,000 300,000 Xerox Corp., Note, (MTN) 7.200%, 4/01/2016 309,000 500,000 Xerox Corp., Senior Note 6.875%, 8/15/2011 509,375 --------------- 4,500,795 --------------- Transportation Services -- 4.8% 275,000 American President Cos., Ltd., Senior Note 8.000%, 1/15/2024 288,750 127,723 Atlas Air, Inc., Series 1998-1, Class 1A 7.380%, 1/02/2018 126,341 124,877 Atlas Air, Inc., Series 1999-1, Class A1 7.200%, 1/02/2019 123,978 123,615 Atlas Air, Inc., Series 2000-1, Class A 8.707%, 1/02/2019 126,846 250,000 Bombardier Capital Funding, LP, Note 6.750%, 5/14/2009 (GBP) 451,777 300,000 Overseas Shipholding Group, Senior Note 7.500%, 2/15/2024 301,500 295,000 Stena AB, Senior Note 7.000%, 12/01/2016 272,875 350,000 Stena AB, Senior Note 7.500%, 11/01/2013 346,500 --------------- 2,038,567 --------------- Wireless -- 0.3% 150,000 Rogers Wireless Communications, Inc., Senior Secured Note 6.375%, 3/01/2014 145,500 --------------- Wirelines -- 6.6% 200,000 AT&T Corp., Senior Note 9.750%, 11/15/2031 244,000 50,000 Cincinnati Bell, Inc. 8.375%, 1/15/2014 49,250 95,000 Citizens Communications Co., Note 7.000%, 11/01/2025 83,126
See accompanying notes to financial statements. 23 LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ----------------------------------------------------------------------------------------- Wirelines -- continued $ 155,000 Citizens Communications Co., Senior Note 9.000%, 8/15/2031 $ 161,200 80,000 MCI, Inc., Senior Note 8.735%, 5/01/2014 88,000 200,000 Philippine Long Distance Telephone Co., Note, (MTN) 10.500%, 4/15/2009 225,000 75,000 Qwest Capital Funding, Inc., Guaranteed Note 7.000%, 8/03/2009(c) 70,313 375,000 Qwest Capital Funding, Inc., Note 6.875%, 7/15/2028 290,625 1,890,000 Qwest Capital Funding, Inc., Note 7.750%, 2/15/2031(c) 1,597,050 --------------- 2,808,564 --------------- Total Bonds and Notes (Identified Cost $37,769,167) 39,844,508 --------------- Shares ----------------------------------------------------------------------------------------- Preferred Stocks -- 4.3% Electric -- 1.4% 4,100 AES Trust III, Preferred, 6.75%, 10/15/2029(c) 191,675 8,000 CMS Energy Trust I Preferred, Convertible, 7.75%, 7/15/2027 406,000 --------------- 597,675 --------------- Packaging -- 0.6% 5,500 Owens-Illinois, Inc., Convertible, 4.75%, 12/31/2049(c) 232,375 --------------- Pipelines -- 1.7% 8,000 Williams Holdings of Delaware Preferred, Convertible, 5.50%, 6/01/2033 726,000 --------------- Technology -- 0.4% 175 Lucent Technologies Capital Trust I, Convertible, 7.75%, 3/15/2017(c) 181,825 --------------- Wirelines -- 0.2% 2,000 Philippine Long Distance Telephone Co., Sponsored GDR, Convertible, $24.80, 12/31/2049 98,000 --------------- Total Preferred Stocks (Identified Cost $1,465,602) 1,835,875 --------------- Shares ----------------------------------------------------------------------------------------- Common Stocks -- 0.2% Investment Companies -- 0.1% 2,220 CIM High Yield Securities Fund 8,902 2,175 High Income Opportunity Fund, Inc.(c) 13,724 3,835 Morgan Stanley Emerging Markets Debt Fund, Inc.(c) 35,321 525 Senior High Income Portfolio, Inc. 3,057 --------------- 61,004 --------------- Metals and Mining -- 0.1% 900 Cia Vale do Rio Doce, ADR 28,449 --------------- Total Common Stocks (Identified Cost $77,369) 89,453 ---------------
Principal Amount Description Value (a) ------------------------------------------------------------------------------------------------ Short Term Investments -- 15.2% $ 75,540 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2005 at 2.02% to be repurchased at $75,545 on 4/01/2005, collareralized by $73,433 Small Business Administration Bond, 5.875%, due 10/25/2017 valued at $79,317 $ 75,540 283,119 Bank of America, 2.77%, due 4/18/2005(f) 283,119 283,119 Bank of America, 2.82%, due 5/16/2005(f) 283,119 86,216 Bank of Montreal, 2.60%, due 4/04/2005(f) 86,216 311,113 Bank of Montreal, 2.75%, due 4/08/2005(f) 311,113 503,952 Bank of Nova Scotia, 2.70%, due 4/11/2005(f) 503,952 113,248 Bank of Nova Scotia, 2.73%, due 4/14/2005(f) 113,248 283,119 Bank of Nova Scotia, 2.78%, due 4/28/2005(f) 283,119 169,870 Barclays, 2.785%, due 4/25/2005(f) 169,870 308,320 BGI Institutional Money Market Fund(f) 308,320 849,357 BNP Paribas, 2.73%, due 4/07/2005(f) 849,357 283,119 BNP Paribas, 2.91%, due 6/15/2005(f) 283,119 115,612 Calyon, 2.77%, due 4/21/2005(f) 115,612 52,186 Den Danske Bank, 2.77%, due 4/26/2005(f) 52,186 113,248 Falcon Asset Securitization Corp, 2.727%, due 4/13/2005(f) 113,248 276,324 Fortis Bank, 2.44%, due 4/14/2005(f) 276,324 283,119 Fortis Bank, 2.80%, due 4/06/2005(f) 283,119 122,675 Goldman Sachs Financial Square Prime Obligations Fund(f) 122,675 283,119 Govco Incorporated, 2.60%, due 4/05/2005(f) 283,119 136,055 Keybank, 2.844%, due 4/01/2005(f) 136,055 140,003 Merrill Lynch Premier Institutional Fund(f) 140,003 80,821 Merrimac Cash Fund-Premium Class(f) 80,821 283,119 Rabobank Nederland, 2.78%, due 4/29/2005(f) 283,119 306,337 Royal Bank of Scotland, 2.75%, due 4/05/2005(f) 306,337 283,119 Svenska Handlesbanken, 2.70%, due 4/11/2005(f) 283,119 56,624 The Bank of the West, 2.79%, due 4/22/2005(f) 56,624 56,624 Toronto Dominion Bank, 3.01%, due 6/24/2005(f) 56,624 113,248 UBS AG, 2.805%, due 5/03/2005(f) 113,248 113,248 Wells Fargo, 2.78%, due 4/20/2005(f) 113,248 39,916 Wells Fargo, 2.79%, due 4/08/2005(f) 39,916 56,624 Yorktown Capital LLC, 2.636%, due 4/01/2005(f) 56,624 --------------- Total Short Term Investments (Identified Cost $6,462,113) 6,462,113 --------------- Total Investments --113.6% (Identified Cost $45,774,251)(b) 48,231,949 Other assets less liabilities (5,791,128) --------------- Total Net Assets -- 100% $ 42,440,821 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2005, the net unrealized appreciation on investments based on cost of $45,778,348 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 $ 2,968,712 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (515,111) --------------- Net unrealized appreciation $ 2,453,601 ===============
See accompanying notes to financial statements. 24 LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited) 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. (c) All or a portion of this security was on loan to brokers at March 31, 2005. (d) Illiquid security. At March 31, 2005, the value of these securities was $1,878,043 or 4.4% of net assets. (e) 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. (f) 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 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 $3,949,448 or 9.3% of net assets. BRL Brazilian Real COP Colombian Peso GBP British Pound MXN Mexican Peso THB Thai Baht
Holdings at March 31, 2005 as a Percentage of Net Assets (unaudited) Technology 11.0% Electric 9.8 Pipelines 7.3 Wirelines 6.8 Media Cable 6.3 Paper 5.0 Pharmaceuticals 5.0 Transportation Services 4.8 Sovereigns 4.7 Retailers 4.2 Automotive 3.9 Chemicals 3.2 Airlines 3.0 Supranational 2.8 Construction Machinery 2.5 Healthcare 2.2 Packaging 2.1 Metals and Mining 2.0 Other, less than 2% each 11.8
See accompanying notes to financial statements. 25 LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND SCHEDULE OF INVESTMENTS Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) --------------------------------------------------------------------------------------------- Bonds and Notes -- 98.7% of Total Net Assets Asset Backed Securities -- 4.1% $ 1,035,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3 4.615%, 2/25/2035 $ 1,015,607 2,240,000 Residential Asset Mortgage Products, Inc., Series 2003-RZ5, Class A3 3.800%, 7/25/2030 2,234,825 1,376,000 Residential Funding Mortgage Securities II, Series 2003-HI4, Class AI4 4.590%, 4/25/2018 1,367,706 1,900,000 Residential Funding Mortgage Securities II, Series 2004-HI3, Class A3 3.810%, 12/25/2016 1,862,951 670,000 Residential Funding Mortgage Securities II, Series 2004-HI3, Class A4 4.630%, 3/25/2019 657,036 --------------- 7,138,125 --------------- Government Agencies -- 10.3% 2,935,000 Federal Farm Credit Bank 2.375%, 10/02/2006 2,870,216 6,200,000 Federal Home Loan Bank(d) 3.625%, 11/14/2008 6,061,393 5,000,000 FHLMC 5,750%, 4/15/2008 5,219,085 3,000,000 FNMA 5.500%, 5/02/2006 3,051,912 600,000 FNMA 6.625%, 9/15/2009 651,860 --------------- 17,854,466 --------------- Mortgage Related -- 33.5% 7,793,442 FHLMC 4.000%, with various maturities to 2019(c) 7,462,575 986,775 FHLMC 4.500%, 5/01/2034 937,527 526,956 FHLMC 7.000%, 2/01/2016 553,721 98,731 FHLMC 7.500%, with various maturities to 2026(c) 104,130 82,708 FHLMC 8.000%, with various maturities to 2015(c) 86,461 7,458 FHLMC 10.000%, 7/01/2019 8,359 597,477 FHLMC 11.500%, with various maturities to 2020(c) 658,627 8,387,587 FNMA 4.000%, with various maturities to 2019(c) 8,049,047 6,122,829 FNMA 5.500%, with various maturities to 2034(c)(d) 6,162,393 7,903,669 FNMA 6.000%, with various maturities to 2034(c) 8,143,357 8,803,433 FNMA 6.500%, with various maturities to 2034(c) 9,148,086 433,736 FNMA 7.000%, 12/01/2022 463,882 1,657,461 FNMA 7.500%, with various maturities to 2032(c) 1,765,929
Principal Amount Description Value (a) ---------------------------------------------------------------------------------- Mortgage Related -- continued $ 228,815 FNMA 8.000%, with various maturities to 2016(c) $ 242,044 12,150,000 FNMA (TBA) 4.000%, 4/01/2020 11,629,834 247,939 GNMA 6.000%, 12/15/2031 255,325 1,092,150 GNMA 6.500%, 5/15/2031 1,142,132 1,066,445 GNMA 7.000%, with various maturities to 2031(c) 1,129,084 6,798 GNMA 8.500%, 2/15/2006 6,967 66,461 GNMA 9.000%, with various maturities to 2009(c) 69,975 22,030 GNMA 9.500%, 8/15/2009 23,564 1,772 GNMA 10.000%, 9/15/2016 1,981 28,083 GNMA 12.500%, with various maturities to 2015(c) 31,684 227,448 GNMA 16.000%, with various maturities to 2012(c) 263,699 88,262 GNMA 17.000%, with various maturities to 2011(c) 103,676 --------------- 58,444,059 --------------- Treasuries -- 50.8% 5,155,000 U.S. Treasury Bond 7.250%, 5/15/2016 6,321,520 6,240,000 U.S. Treasury Note 1.500%, 3/31/2006 6,121,783 7,390,000 U.S. Treasury Note 1.625%, with various maturities to 2006(c)(d) 7,283,405 3,200,000 U.S. Treasury Note 1.875%, 12/31/2005(e) 3,166,749 1,290,000 U.S. Treasury Note 2.250%, 2/15/2007(e) 1,254,827 5,330,000 U.S. Treasury Note 2.375%, 8/15/2006 5,240,680 2,645,000 U.S. Treasury Note 2.750%, 6/30/2006 2,618,344 8,095,000 U.S. Treasury Note 3.000%, 12/31/2006 7,992,234 2,500,000 U.S. Treasury Note 3.125%, 10/15/2008 2,425,098 40,375,000 U.S. Treasury Note 3.375%, with various maturities to 2008(c)(e) 40,029,343 1,930,000 U.S. Treasury Note 6.125%, 8/15/2007(e) 2,028,988 750,000 U.S. Treasury Note 6.625%, 5/15/2007 792,510 4,000,000 U.S. Treasury STRIPS, Zero Coupon 11/15/2009(d) 3,295,968 --------------- 88,571,449 --------------- Total Bonds and Notes (Identified Cost $172,967,148) 172,008,099 ---------------
See accompanying notes to financial statements. 26 LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ------------------------------------------------------------------------------------------------ Short Term Investments -- 32.9% $ 5,822,334 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2005 at 2.02% to be repurchased at at $5,822,660 on 4/01/2005, collateralized by $5,744,461 Small Business Administration Bond, 5.625%, due 1/25/2017 valued at $6,083,677 and $27,810 Small Business Administration Bond, 5.625%, due 1/25/2017 valued at $29,773 $ 5,822,334 1,939,815 Bank of America, 2.77%, due 4/18/2005(g) 1,939,815 1,939,815 Bank of America, 2.82%, due 5/16/2005(g) 1,939,815 590,718 Bank of Montreal, 2.60%, due 4/04/2005(g) 590,718 2,131,617 Bank of Montreal, 2.75%, due 4/08/2005(g) 2,131,617 3,452,872 Bank of Nova Scotia, 2.70%, due 4/11/2005(g) 3,452,872 775,926 Bank of Nova Scotia, 2.73%, due 4/14/2005(g) 775,926 1,939,815 Bank of Nova Scotia, 2.78%, due 4/28/2005(g) 1,939,815 1,163,889 Barclays, 2.785%, due 4/25/2005(g) 1,163,889 2,112,479 BGI Institutional Money Market Fund(g) 2,112,479 5,819,446 BNP Paribas, 2.73%, due 4/07/2005(g) 5,819,446 1,939,815 BNP Paribas, 2.91%, due 6/15/2005(g) 1,939,815 792,127 Calyon, 2.77%, due 4/21/2005(g) 792,127 357,559 Den Danske Bank, 2.77%, due 4/26/2005(g) 357,559 775,926 Falcon Asset Securitization Corp, 2.727%, due 4/13/2005(g) 775,926 1,893,260 Fortis Bank, 2.44%, due 4/14/2005(g) 1,893,260 1,939,816 Fortis Bank, 2.80%, due 4/06/2005(g) 1,939,816 840,515 Goldman Sachs Financial Square Prime Obligations Fund(g) 840,515 1,939,816 Govco Incorporated, 2.60%, due 4/05/2005(g) 1,939,816 932,191 Keybank, 2.844%, due 4/01/2005(g) 932,191 959,252 Merrill Lynch Premier Institutional Fund(g) 959,252 553,752 Merrimac Cash Fund-Premium Class(g) 553,752 1,939,816 Rabobank Nederland, 2.78%, due 4/29/2005(g) 1,939,816 2,098,895 Royal Bank of Scotland, 2.75%, due 4/05/2005(g) 2,098,895 1,939,815 Svenska Handlesbanken, 2.70%, due 4/11/2005(g) 1,939,815 387,963 The Bank of the West, 2.79%, due 4/22/2005(g) 387,963 387,963 Toronto Dominion Bank, 3.01%, due 6/24/2005(g) 387,963 7,705,000 U.S. Treasury Bills, 2.648%, due 5/19/2005(f) 7,677,801 775,926 UBS AG, 2.805%, due 5/03/2005(g) 775,926 775,927 Wells Fargo, 2.78%, due 4/20/2005(g) 775,927 273,490 Wells Fargo, 2.79%, due 4/08/2005(g) 273,490 387,964 Yorktown Capital LLC, 2.636%, due 4/01/2005(g) 387,964 --------------- Total Short Term Investments (Identified Cost $57,258,315) 57,258,315 --------------- Total Investments --131.6% (Identified Cost $230,225,463)(b) $ 229,266,414 Other assets less liabilities (55,042,936) --------------- Total Net Assets -- 100% $ 174,223,478 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2005, the net unrealized depreciation on investments based on cost of $230,678,711 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 $ 628,076 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (2,040,373) --------------- Net unrealized depreciation $ (1,412,297) ===============
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. (c) The Fund's investment in mortgage related securities of the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and the Government National Mortgage Association are interests in separate pools of mortgages. All separate investments in securities of each issuer and for United States Treasury Notes which have the same coupon rate have been aggregated for the purpose of presentation in the schedule of investments. (d) All or a portion of this security has been segregated to cover collateral requirements on TBA obligations. (e) All or a portion of this security was on loan to brokers at March 31, 2005. (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 TBA To Be Announced (see Note 2g of Notes to Financial Statements)
Holdings at March 31, 2005 as a Percentage of Net Assets (unaudited) Treasuries 50.8% Mortgage Related 33.5 Government Agencies 10.3 Asset Backed Securities 4.1
See accompanying notes to financial statements. 27 LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME -- SCHEDULE OF INVESTMENTS Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) -------------------------------------------------------------------------------- Tax Exempt Obligations -- 97.0% of Total Net Assets Broward County, FL, Resource Recovery -- 1.3% $ 1,000,000 Wheelabrator South Broward, 5.000%, 12/01/2007 $ 1,042,060 --------------- Highlands County, FL, Health Facilities Authority -- 1.3% 1,000,000 Adventis Health System, 5.875%, 11/15/2029 1,077,960 --------------- Martha's Vineyard, MA -- 1.3% 1,000,000 Land Bank Revenue, 5.000%, 5/01/2032, (AMBAC insured) 1,028,040 --------------- Massachusetts -- 5.9% 4,000,000 State Refunding Series A, 6.500%, 11/01/2014, (AMBAC insured) 4,820,480 --------------- Massachusetts Bay Transportation Authority -- 7.1% 3,000,000 Assessment Series A, 5.250%, 7/01/2030 3,245,550 2,500,000 Series A, 5.000%, 7/01/2032 2,560,800 --------------- 5,806,350 --------------- Massachusetts Development Finance Agency -- 16.1% 2,000,000 Cambridge Street Development Series A, 5.125%, 2/01/2034, (MBIA insured) 2,068,920 1,000,000 Hampshire College, 5.625%, 10/01/2024 1,053,710 4,000,000 Mount Holyoke College, 5.250%, 7/01/2031 4,207,960 2,800,000 Refunding Springfield Resource Recovery-A, 5.625%, 6/01/2019 2,933,812 1,100,000 Visual and Performing Arts, 6.000%, 8/01/2021 1,300,497 1,500,000 WGBH Educational Foundation Series A, 5.375%, 1/01/2042, (AMBAC insured) 1,580,955 --------------- 13,145,854 --------------- Massachusetts Health & Educational Facilities Authority -- 32.2% 1,160,000 Baystate Medical Center Series F, 5.700%, 7/01/2027 1,212,293 2,000,000 Boston University, 5.000%, 10/01/2039 2,053,200 2,200,000 Catholic Health East, 5.500%, 11/15/2032 2,271,610 3,000,000 Harvard University Series N, 6.250%, 4/01/2020 3,697,860 2,925,000 Nichols College Series C, 6.000%, 10/01/2017 3,071,455 2,000,000 Partners Healthcare Systems Series B, 5.250%, 7/01/2029 2,055,480 2,500,000 Partners Healthcare Systems Series C, 5.750%, 7/01/2021 2,725,550 1,500,000 Tufts University Series I, 5.250%, 2/15/2030 1,573,845 1,000,000 University of Massachusetts Project Series C, 5.250%, 10/01/2031, (MBIA insured) 1,058,300
Principal Amount Description Value (a) ------------------------------------------------------------------------------------ Massachusetts Health & Educational Facilities Authority -- continued $ 2,000,000 University of Massachusetts Series C, 5.125%, 10/01/2034, (FGIC insured) $ 2,069,780 2,000,000 Wellesley College Series F, 5.125%, 7/01/2039 2,061,040 1,315,000 Wheaton College Series E, 5.000%, 7/01/2017 1,383,459 1,030,000 Williams College Series H, 5.000%, 7/01/2017 1,095,673 --------------- 26,329,545 --------------- Massachusetts Housing Finance Agency -- 3.1% 495,000 Single Family Mortgage Series 21, 7.125%, 6/01/2025 495,039 2,000,000 Single Family Mortgage Series A, 4.600%, 12/01/2015 2,041,040 --------------- 2,536,079 --------------- Massachusetts Port Authority -- 3.7% 1,750,000 Delta Air Lines, Inc. Project Series A, 5.500%, 1/01/2019, (AMBAC insured) 1,826,842 1,200,000 Series A, 5.000%, 7/01/2033, (MBIA insured) 1,223,448 --------------- 3,050,290 --------------- Massachusetts Water Resources Authority -- 6.1% 1,000,000 General Series A, 5.250%, 8/01/2020, (MBIA insured) 1,093,080 3,240,000 Series A, 6.500%, 7/15/2019, (FGIC insured) 3,908,088 --------------- 5,001,168 --------------- Michigan Hospital Finance Authority -- 2.0% 1,500,000 Oakwood Obligated Group, 5.500%, 11/01/2017 1,611,180 --------------- New England Education Loan Marketing -- 3.9% 3,000,000 Student Loan Revenue Bond Sub-Issue H, 6.900%, 11/01/2009 3,218,880 --------------- Puerto Rico Commonwealth Aqueduct & Sewer Authority -- 4.3% 3,000,000 Aqueduct & Sewer Authority, 6.250%, 7/01/2013 3,483,300 --------------- Puerto Rico Public Finance Corporation -- 4.0% 3,000,000 Commonwealth Appropriation Series A, 5.750%, 8/01/2027 3,289,920 --------------- Tennessee Housing Development Agency --1.9% 1,500,000 Series A, 5.200%, 7/01/2023 1,555,305 --------------- University of Massachusetts Building Authority -- 2.8% 2,200,000 SR - Series 1, 5.250%, 11/01/2028, (AMBAC insured) 2,335,498 --------------- Total Tax Exempt Obligations (Cost $75,451,677) 79,331,909 ---------------
See accompanying notes to financial statements. 28 LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ----------------------------------------------------------------------------------------------------- Short Term Investment -- 3.1% $ 2,544,814 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2005 at 2.02% to be repurchased at $2,544,957 on 4/01/2005, collateralized by $2,481,530 Small Business Administration Bond, 5.875%, due 5/25/2023 valued at $2,672,055 $ 2,544,814 --------------- Total Short Term Investment (Cost $2,544,814) 2,544,814 --------------- Total Investments -- 100.1% (Identified Cost $77,996,491)(b) 81,876,723 Other assets less liabilities (56,395) --------------- Total Net Assets -- 100.0% $ 81,820,328 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2005, the net unrealized appreciation on investments based on cost of $77,995,003 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 $ 4,062,671 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (180,951) --------------- Net Unrealized Appreciation $ 3,881,720 =============== 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. AMBAC American Municipal Bond Assurance Corp. FGIC Financial Guarantee Insurance Company MBIA Municipal Bond Investors Assurance Corp.
Holdings at March 31, 2005 as a Percentage of Net Assets (unaudited) Colleges & Universities 31.4% Water & Sewer 10.4 Hospital 10.1 State General Obligation 9.9 Transit 7.1 Resource Recovery 4.9 Student Loan 3.9 Airport 3.7 Hospital -- Obligated Group 3.3 Housing -- Multifamily 2.5 Housing -- Single Family 2.5 Redevelopment Agency/Urban Renewal 2.5 Other, less than 2% each 4.8
See accompanying notes to financial statements. 29 LOOMIS SAYLES MUNICIPAL INCOME FUND -- SCHEDULE OF INVESTMENTS Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) --------------------------------------------------------------------------------------------------- Tax Exempt Obligations -- 97.1% of Total Net Assets California -- 8.8% $ 1,000,000 California Health Facilities Financing Authority, Multiple Obligors, 4.950%, 7/01/2026 $ 1,035,940 2,000,000 California State, 5.125%, 6/01/2027 2,065,360 1,000,000 California State Public Works Board, Coalinga State Hospital, 5.000%, 6/01/2010 1,063,840 2,655,000 California Statewide Communities Development Authority, 5.250%, 7/01/2023 2,835,859 3,000,000 Sacramento, CA, Power Authority, 6.000%, 7/01/2022 3,137,700 --------------- 10,138,699 --------------- Colorado -- 1.9% 2,000,000 Denver, CO, City & County Airport, 5.250%, 11/15/2023, (MBIA insured) 2,116,640 --------------- District of Columbia -- 4.3% 1,700,000 District of Columbia, 5.500%, 6/01/2014 1,847,815 3,000,000 Metropolitan Washington D.C. Airports Authority, 5.125%, 10/01/2029, (FGIC insured) 3,063,120 --------------- 4,910,935 --------------- Florida -- 4.3% 1,750,000 Coral Gables, FL, Health Facilities Authority, Multiple Obligors, 5.000%, 8/15/2034 1,854,562 3,000,000 Highlands County, FL, Health Facilities Authority, Multiple Obligors, 5.375%, 11/15/2035 3,079,890 --------------- 4,934,452 --------------- Illinois -- 5.9% 90,000 Illinois Educational Facility Authority Revenue, 5.000%, 7/01/2033 97,906 1,910,000 Illinois Educational Facility Authority Revenue, 5.000%, 7/01/2033 1,948,639 1,500,000 Illinois State, 5.400%, 12/01/2020, (MBIA insured) 1,632,975 3,000,000 Metropolitan Pier & Exposition Authority, IL, 5.250%, 6/15/2042, (MBIA insured) 3,123,360 --------------- 6,802,880 --------------- Indiana -- 1.8% 2,000,000 Indianapolis, IN, Local Public Improvement Bond Bank, 5.250%, 7/01/2033, (MBIA insured) 2,085,380 --------------- Louisiana -- 4.4% 4,000,000 Desoto Parish, LA, Environmental Improvement, 5.000%, 11/01/2018 4,011,920 1,000,000 Ernest N. Morial, New Orleans, LA, Exhibit Hall Authority, 5.000%, 7/15/2033 1,020,310 --------------- 5,032,230 --------------- Massachusetts -- 3.7% 4,000,000 Massachusetts State, 5.000%, 3/01/2019 4,210,560 --------------- Michigan -- 6.5% 1,000,000 Michigan State Comprehensive Transportation, 5.250%, 5/15/2022 1,067,730 2,850,000 Michigan State Hospital Finance Authority, Henry Ford Health System, 5.500%, 3/01/2014 3,057,309
Principal Amount Description Value (a) --------------------------------------------------------------------------------------------- Michigan -- continued $ 1,100,000 Michigan State Hospital Finance Authority, Oakwood Obligated Group, 5.500%, 11/01/2014 $ 1,188,858 2,000,000 University of Michigan, 5.250%, 12/01/2020 2,100,080 --------------- 7,413,977 --------------- Minnesota -- 1.9% 2,000,000 Minnesota State Municipal Power Agency, 5.250%, 10/01/2024 2,121,140 --------------- Mississippi -- 4.7% 2,000,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control, 6.700%, 4/01/2022 2,375,920 2,500,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control, 6.800%, 4/01/2022 2,998,225 --------------- 5,374,145 --------------- New Jersey -- 1.8% 1,000,000 New Jersey Economic Development Authority, 5.500%, 6/15/2024 1,028,570 1,000,000 New Jersey Health Care Facilities Financing Authority, Catholic Health East, 5.375%, 11/15/2033 1,029,180 --------------- 2,057,750 --------------- New York -- 16.0% 3,000,000 New York State Dormitory Authority, 5.500%, 5/15/2013 3,309,450 2,740,000 New York State Dormitory Authority, 5.750%, 7/01/2013 3,033,016 1,000,000 New York State Dormitory Authority, Rockefeller University, 5.000%, 7/01/2032 1,032,400 3,000,000 New York State Municipal Bond Bank Agency, 5.250%, 6/01/2020 3,189,900 1,000,000 New York, NY, 4.250%, 5/15/2019 990,540 2,000,000 New York, NY, 6.000%, 1/15/2020 2,246,500 1,400,000 New York, NY, City Health & Hospital Corp., 5.000%, 2/15/2020 1,461,852 2,000,000 New York, NY, City Municipal Water Finance Authority, 5.000%, 6/15/2025 2,089,240 1,000,000 New York, NY, City Municipal Water Finance Authority, 5.125%, 6/15/2034 1,037,360 --------------- 18,390,258 --------------- North Carolina -- 1.2% 1,300,000 North Carolina Eastern Municipal Power Agency, 5.500%, 1/01/2012 1,391,117 --------------- Oregon -- 5.2% 1,750,000 Multnomah County, OR, Hospital Facilities Authority, Providence Health System, 5.250%, 10/01/2012 1,912,837 4,000,000 Western Generation Agency, 7.400%, 1/01/2016(c) 4,083,720 --------------- 5,996,557 --------------- Pennsylvania -- 6.1% 1,500,000 Pennsylvania Economic Development Financing Authority, 6.600%, 1/01/2019 1,507,515
See accompanying notes to financial statements. 30 LOOMIS SAYLES MUNICIPAL INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ------------------------------------------------------------------------------------------- Pennsylvania -- continued $ 5,000,000 Pennsylvania State Industrial Development Authority, 5.500%, 7/01/2019, (AMBAC insured) $ 5,524,500 --------------- 7,032,015 --------------- Puerto Rico -- 2.9% 1,000,000 Puerto Rico Commonwealth Infrastructure Financing Authority, 5.500%, 10/01/2040 1,076,980 2,000,000 Puerto Rico Public Finance Corp., 5.750%, 8/01/2027 2,193,280 --------------- 3,270,260 --------------- South Carolina -- 2.8% 3,000,000 Greenville County, SC, School District, 5.500%, 12/01/2028 3,195,540 --------------- South Dakota -- 1.1% 1,250,000 South Dakota Health & Educational Facilities Authority, Sioux Valley Hospital, 5.250%, 11/01/2027 1,268,738 --------------- Tennessee -- 3.5% 1,500,000 Maury County, TN, Industrial Development Board, Saturn Corp./ General Motors Corp., 6.500%, 9/01/2024 1,515,405 1,500,000 Tennessee Housing Development Agency, 5.200%, 7/01/2023 1,555,305 860,000 Tennessee Housing Development Agency, Homeownership Program, 5.150%, 7/01/2022 884,209 --------------- 3,954,919 --------------- Texas -- 6.4% 2,000,000 Dallas-Fort Worth, TX, International Airport, 5.500%, 11/01/2033 2,103,100 1,000,000 El Paso, TX, 5.875%, 8/15/2017 1,063,370 1,000,000 Katy, TX, Independent School District, 5.125%, 2/15/2020 1,053,370 3,000,000 Lewisville, TX, Independent School District, 5.250%, 8/15/2027 3,118,980 --------------- 7,338,820 --------------- Washington -- 1.9% 2,000,000 Energy Northwest, WA, Electric, Project No. 1, 5.500%, 7/01/2014 2,228,060 --------------- Total Tax Exempt Obligations (Identified Cost $107,523,738) 111,265,072 --------------- Principal Amount ------------------------------------------------------------------------------------------- Short Term Investment -- 0.4% 487,351 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2005 at 2.02% to be repurchased at $487,379 on 4/01/2005, collateralized by $473,635 Small Business Administration Bond, 5.875%, due 5/25/2027 valued at $511,719 487,351 --------------- Total Short Term Investment (Cost $487,351) 487,351 --------------- Total Investments -- 97.5% (Identified Cost $108,011,089)(b) 111,752,423 Other assets less liabilities 2,858,170 --------------- Total Net Assets -- 100.0% $ 114,610,593 ===============
(a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2005, the net unrealized appreciation on investments based on cost of $107,669,451 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 $4,403,298 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (320,326) ---------- Net unrealized appreciation $4,082,972 ========== 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. (c) Illiquid security. At March 31, 2005, the value of this security was $4,083,720 or 3.6% of net assets. AMBAC American Municipal Bond Assurance Corp. FGIC Financial Guarantee Insurance Company MBIA Municipal Bond Investors Assurance Corp.
Holdings at March 31, 2005 as a Percentage of Net Assets (unaudited) Corporate Backed/Industrial Revenue/Pollution Control 14.3% Hospital 9.2 Colleges & Universities 8.1 Resource Recovery 7.6 State General Obligation 7.4 City and Town 6.6 Hospital -- Obligated Group 6.5 Airport 6.4 Special Tax 4.5 Electric 3.8 Lease 2.8 Bond Bank/Pooled Loan Program 2.8 School District 2.7 Non-Profit 2.5 Other, less than 2% each 11.9
See accompanying notes to financial statements. 31 LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ---------------------------------------------------------------------------------------------- Bonds and Notes -- 90.9% of Total Net Assets Convertible Bonds -- 3.7% Canada -- 0.6% $ 5,750,000 Nortel Networks Corp., Guaranteed Senior Note 4.250%, 9/01/2008 $ 5,318,750 1,500,000 Rogers Communications, Inc., Note 2.000%, 11/26/2005 1,470,000 433,000 TELUS Corp., Note 6.750%, 6/15/2010, (CAD) 365,765 --------------- 7,154,515 --------------- Ireland -- 0.1% 1,545,000 Elan Capital Corp., Ltd., Convertible 6.500%, 11/10/2008 1,096,950 --------------- United Kingdom -- 0.4% 3,270,000 Colt Telecom Group PLC, Note 2.000%, 4/03/2007, (EUR) 5,090,017 --------------- United States -- 2.6% 3,069,000 Amkor Technology, Inc., Note 5.000%, 3/15/2007(c) 2,689,211 200,000 Builders Transport, Inc., Subordinated Note 6.500%, 5/01/2011(d)(e)(f)(g)(h) 20 1,000,000 Builders Transport, Inc., Subordinated Note 8.000%, 8/15/2005(d)(e)(f)(g)(h) 100 3,750,000 Chiron Corp. 1.625%, 8/01/2033 3,473,437 299,000 Corning, Inc., Senior Note 3.500%, 11/01/2008 341,234 194,000 Dixie Group, Inc., Subordinated Note 7.000%, 5/15/2012 188,180 3,901,000 EPIX Pharmaceuticals, Inc., Senior Note 3.000%, 6/15/2024 2,925,750 2,400,000 Inhale Therapeutic Systems, Inc., Subordinated Note 3.500%, 10/17/2007 2,280,000 500,000 IVAX Corp., Senior Note, Convertible 1.500%, 3/01/2024 510,625 1,995,000 Kulicke & Soffa Industries, Inc., Subordinated Note, Convertible 0.500%, 11/30/2008(c) 1,493,756 2,822,000 Maxtor Corp., Subordinated Note 5.750%, 3/01/2012(h) 2,455,140 625,000 Nextel Communications, Inc., Senior Note 5.250%, 1/15/2010 640,625 500,000 Preston Corp., Subordinated Note 7.000%, 5/01/2011(c) 466,250 4,990,000 Regeneron Pharmaceuticals, Inc., Subordinated Note 5.500%, 10/17/2008 4,578,325 311,000 Richardson Electronics, Ltd., 144A 7.750%, 12/15/2011 305,557 600,000 SCI Systems, Inc., Subordinated Note, Convertible 3.000%, 3/15/2007 578,250 1,200,000 Valeant Pharmaceuticals International, Subordinated Note, Convertible 3.000%, 8/16/2010 1,150,500 4,375,000 Valeant Pharmaceuticals International, Subordinated Note, Convertible 4.000%, 11/15/2013(c) 4,205,469 5,225,000 Vertex Pharmaceuticals, Inc., Note, 144A 5.750%, 2/15/2011 4,852,719 --------------- 33,135,148 --------------- Total Convertible Bonds (Identified Cost $45,664,923) 46,476,630 ---------------
Principal Amount Description Value (a) ------------------------------------------------------------------------------ Non-Convertible Bonds -- 87.2% Argentina -- 0.3% $ 2,405,000 Pecom Energia SA, Note, 144A 8.125%, 7/15/2010 $ 2,405,000 3,500,000 Republic of Argentina 8.875%, 3/01/2029(g) 896,280 --------------- 3,301,280 --------------- Brazil -- 1.7% 128,124 Republic of Brazil 8.000%, 4/15/2014 126,842 10,350,000 Republic of Brazil 8.250%, 1/20/2034 9,190,800 6,000,000 Republic of Brazil 8.875%, 4/15/2024 5,691,000 5,808,000 Republic of Brazil 10.125%, 5/15/2027 6,098,400 --------------- 21,107,042 --------------- Canada -- 16.0% 1,790,000 Abitibi-Consolidated, Inc., Note 7.500%, 4/01/2028 1,517,025 1,295,000 Bombardier Inc. 7.350%, 12/22/2026, (CAD) 864,154 2,800,000 Calpine Canada Energy Finance ULC, Note 8.750%, 10/15/2007, (CAD) 1,804,810 14,000,000 Canadian Government 4.250%, 9/01/2008, (CAD) 11,823,816 42,600,000 Canadian Government 4.500%, 9/01/2007, (CAD) 36,143,641 7,210,000 Canadian Government 4.500%, 9/01/2007, (CAD) 6,117,865 13,540,000 Canadian Government 6.000%, 9/01/2005, (CAD) 11,339,428 18,000,000 Canadian Government 6.000%, 6/01/2008, (CAD) 15,975,837 335,000 General Motors Acceptance Corp. of Canada, Ltd., Series E., Note, (MTN) 6.625%, 12/17/2010, (GBP) 560,079 400,000 General Motors Nova Scotia Finance Co., Note 8.875%, 7/10/2023, (GBP) 634,603 3,550,000 Nortel Networks Corp., Note 6.875%, 9/01/2023 3,274,875 5,990,000 Province of British Columbia 5.250%, 12/01/2006, (CAD) 5,112,513 28,490,000 Province of British Columbia 6.000%, 6/09/2008, (CAD) 25,246,646 13,000,000 Province of Manitoba 4.450%, 12/01/2008, (CAD) 11,013,098 6,685,000 Province of Manitoba 5.750%, 6/02/2008, (CAD) 5,876,348 1,525,000 Province of Ontario 3.500%, 9/08/2006, (CAD) 1,266,074 32,000,000 Province of Ontario 5.700%, 12/01/2008, (CAD) 28,212,148 6,240,000 Province of Ontario 5.900%, 3/08/2006, (CAD) 5,290,825 18,470,000 Province of Saskatchewan 5.500%, 6/02/2008, (CAD) 16,120,230 5,300,000 Province of Saskatchewan 6.000%, 6/01/2006, (CAD) 4,525,782
See accompanying notes to financial statements. 32 LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ---------------------------------------------------------------------------------------------- Canada -- continued $ 8,500,000 Rogers Wireless Communications, Inc., Senior Note 7.625%, 12/15/2011, (CAD) $ 7,305,181 2,525,000 Rogers Wireless Communications, Inc., Senior Secured Note 6.375%, 3/01/2014 2,449,250 --------------- 202,474,228 --------------- Cayman Islands -- 0.4% 1,000,000 Enersis SA, Cayman Island, Note, (yankee) 7.400%, 12/01/2016 1,039,789 3,905,000 Vale Overseas, Ltd., Note 8.250%, 1/17/2034 4,061,200 --------------- 5,100,989 --------------- Chile -- 1.0% 4,875,000 Empresa Nacional de Electricidad SA, Chile, Note 7.875%, 2/01/2027 5,281,146 250,000 Empresa Nacional de Electricidad SA, Chile, Note 8.350%, 8/01/2013 280,254 1,700,000 Empresa Nacional de Electricidad SA, Chile, Note 8.625%, 8/01/2015 1,961,946 4,525,000 Enersis SA, Chile, Note 7.375%, 1/15/2014 4,710,566 --------------- 12,233,912 --------------- Dominican Republic -- 0.2% 3,390,000 Dominican Republic, 144A 9.040%, 1/23/2013 3,093,375 --------------- Ireland -- 0.0% 750,000 Elan Finance Corp., Senior Note, 144A 7.750%, 11/15/2011(c) 560,625 --------------- Mexico -- 3.6% 3,905,000 Grupo Transportacion Ferroviaria Mexicana SA de CV, Senior Note, (yankee) 0/11.750%, 6/15/2009(i) 3,905,000 502,200,000 United Mexican States 9.000%, 12/20/2012, (MXN) 41,493,178 --------------- 45,398,178 --------------- Norway -- 0.4% 10,000,000 Kingdom of Norway 5.500%, 5/15/2009, (NOK) 1,705,704 22,740,000 Kingdom of Norway 6.750%, 1/15/2007, (NOK) 3,839,181 --------------- 5,544,885 --------------- Philippines -- 0.4% 3,700,000 Philippine Long Distance Telephone Co., Note, (MTN) 8.350%, 3/06/2017 3,589,000 1,883,063 Quezon Power (Philippines) Ltd., Senior Secured Note, (yankee) 8.860%, 6/15/2017 1,751,248 --------------- 5,340,248 --------------- Republic of Korea -- 0.5% 5,470,000 Hanarotelecom, Inc., Note, 144A 7.000%, 2/01/2012(c) 5,295,261 300,000 Samsung Electronics Co., Ltd., 144A 7.700%, 10/01/2027 338,273 --------------- 5,633,534 --------------- Singapore -- 0.1% 1,050,000 SP PowerAssets, Ltd., Series E, Note, (MTN) 3.730%, 10/22/2010, (SGD) 656,601 ---------------
Principal Amount Description Value (a) ---------------------------------------------------------------------------------------- South Africa -- 0.2% $ 11,405,000 Republic of South Africa 12.500%, 12/21/2006, (ZAR) $ 1,952,848 --------------- Supranational -- 2.3% 80,000,000 Inter-American Development Bank, Series E, Note, (MTN), Zero Coupon 5/11/2009, (BRL)(h) 16,041,987 22,300,000 International Bank for Reconstruction & Development, Note, (MTN), Zero Coupon 8/20/2007, (NZD) 13,541,357 --------------- 29,583,344 --------------- Sweden -- 2.6% 207,265,000 Kingdom of Sweden 6.500%, 5/05/2008, (SEK) 32,546,447 --------------- Thailand -- 3.0% 975,000,000 Barclays Bank PLC, Note, 144A 4.160%, 2/22/2010, (THB)(h) 24,479,677 529,000,000 Barclays Financial, LLC, Note, 144A 4.100%, 3/22/2010, (THB)(h) 13,230,408 --------------- 37,710,085 --------------- United Kingdom -- 0.6% 4,005,000 NTL Cable PLC, Note, 144A 9.750%, 4/15/2014, (GBP) 7,791,171 --------------- United States -- 51.4% 5,565,000 AES Corp. (The), Note 8.375%, 3/01/2011, (GBP) 10,563,169 4,020,000 AES Corp. (The), Senior Note 7.750%, 3/01/2014 4,150,650 1,975,000 AES Corp. (The), Senior Subordinated Note 8.875%, 11/01/2027 2,093,500 7,390,000 AK Steel Corp., Guaranteed Senior Note 7.750%, 6/15/2012(c) 7,112,875 1,750,000 Altria Group, Inc., Note 7.000%, 11/04/2013 1,877,809 750,000 American Airlines, Inc., Series 1999-1, Class A2 7.024%, 10/15/2009 760,734 9,853,000 American President Cos., Ltd., Senior Note 8.000%, 1/15/2024 10,345,650 6,450,000 Amkor Technology, Inc., Senior Note 7.125%, 3/15/2011(c) 5,434,125 475,000 Amkor Technology, Inc., Senior Note 7.750%, 5/15/2013(c) 399,000 925,000 Amkor Technology, Inc., Senior Subordinated Note 10.500%, 5/01/2009(c) 827,875 8,000,000 ASIF Global Financing, Note, 144A 2.380%, 2/26/2009, (SGD) 4,741,861 3,154,807 Atlas Air Inc. 9.057%, 1/02/2014(c) 2,891,728 8,284,941 Atlas Air, Inc., Series 1998-1, Class 1A 7.380%, 1/02/2018 8,195,298 13,716,949 Atlas Air, Inc., Series 1998-1, Class 1B 7.680%, 1/02/2014 11,277,801 3,937,773 Atlas Air, Inc., Series 1999-1, Class A1 7.200%, 1/02/2019 3,909,424 468,125 Atlas Air, Inc., Series 1999-1, Class A2 6.880%, 7/02/2009 449,759 8,319,594 Atlas Air, Inc., Series 1999-1, Class B 7.630%, 1/02/2015 6,742,134 824,098 Atlas Air, Inc., Series 2000-1, Class A 8.707%, 1/02/2019 845,640
See accompanying notes to financial statements. 33 LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) --------------------------------------------------------------------------------- United States -- continued $ 800,000 Bausch & Lomb, Inc., Note 7.125%, 8/01/2028 $ 857,906 12,641,000 Borden Chemical, Inc., Note 7.875%, 2/15/2023 11,503,310 1,850,000 Borden Chemical, Inc., Note 9.200%, 3/15/2021 1,868,500 3,014,000 Borden, Inc., Note 8.375%, 4/15/2016 2,893,440 500,000 Bowater, Inc., Note 6.500%, 6/15/2013(c) 476,250 6,745,000 Calpine Corp., Senior Note 7.750%, 4/15/2009(c) 4,654,050 900,000 Calpine Corp., Senior Note 7.875%, 4/01/2008(c) 652,500 7,905,000 Calpine Corp., Senior Note 8.500%, 2/15/2011(c) 5,573,025 3,560,000 Calpine Corp., Senior Note 8.625%, 8/15/2010(c) 2,483,100 12,060,000 Charter Communications Holdings, Inc., Senior Note 9.625%, 11/15/2009(c) 9,436,950 400,000 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(c) 1,323,937 350,000 Chesapeake Energy Corp., Senior Note, 144A 6.375%, 6/15/2015 345,625 2,500,000 CIT Group, Inc., Series E, Senior Note, (MTN) 5.500%, 12/01/2014, (GBP) 4,674,211 3,320,000 Columbia/HCA Healthcare Corp., Note 7.050%, 12/01/2027 3,169,700 500,000 Columbia/HCA, Inc., Note 7.500%, 12/15/2023 506,663 500,000 Columbia/HCA, Inc., Note (MTN) 7.580%, 9/15/2025 508,528 250,000 Continental Airlines, Inc., Senior Note 8.000%, 12/15/2005(c) 246,250 1,216,590 Continental Airlines, Inc., Series 1997-4, Class 4A 6.900%, 1/02/2018 1,193,756 2,136,699 Continental Airlines, Inc., Series 1997-4, Class 4B 6.900%, 1/02/2017 1,731,501 1,544,726 Continental Airlines, Inc., Series 1998-1, Class 1B 6.748%, 3/15/2017 1,260,735 1,647,514 Continental Airlines, Inc., Series 1999-1, Class A 6.545%, 2/02/2019 1,606,347 2,727,931 Continental Airlines, Inc., Series 1999-1, Class B 6.795%, 8/02/2018 2,321,880 401,887 Continental Airlines, Inc., Series 1999-1, Class C 6.954%, 8/02/2009 330,128 2,011,592 Continental Airlines, Inc., Series 1999-2, Class B 7.566%, 3/15/2020 1,691,436 556,537 Continental Airlines, Inc., Series 2001-1, Class A1 6.703%, 6/15/2021 532,316 311,858 Continental Airlines, Inc., Series 2001-1, Class B 7.373%, 12/15/2015 260,827 4,145,899 Continental Airlines, Inc., Series 2002-2, Class B 8.307%, 4/02/2018 3,561,476 6,225,000 Corning, Inc., Note 5.900%, 3/15/2014 6,205,092 6,220,000 Corning, Inc., Note 6.200%, 3/15/2016 6,246,186
Principal Amount Description Value (a) ----------------------------------------------------------------------------------- United States -- continued $ 650,000 Corning, Inc., Note 6.750%, 9/15/2013 $ 688,472 1,000,000 Corning, Inc., Note 6.850%, 3/01/2029 992,246 350,000 Corning, Inc., Note, (MTN) 8.300%, 4/04/2025 365,687 400,000 CSC Holdings, Inc., Senior Note 7.875%, 2/15/2018 424,000 250,000 CSC Holdings, Inc., Series B, Senior Note 8.125%, 7/15/2009 263,750 250,000 CSC Holdings, Inc., Series B, Senior Note 8.125%, 8/15/2009 263,750 2,145,000 Cummins, Inc., Note 7.125%, 3/01/2028 2,166,450 835,000 Dana Corp., Note 7.000%, 3/01/2029 733,280 310,000 Dana Corp., Senior Note, 144A 5.850%, 1/15/2015 273,077 8,135,000 Delphi Corp., Note 7.125%, 5/01/2029(c) 6,464,315 7,285,000 Dillard's Department Stores, Inc., Note 6.625%, 1/15/2018 7,212,150 425,000 Dillard's Department Stores, Inc., Note 7.875%, 1/01/2023 447,313 1,350,000 Dillard's, Inc., Note 7.000%, 12/01/2028 1,309,500 1,600,000 Dillard's, Inc., Note 7.130%, 8/01/2018 1,616,000 1,500,000 Dillard's, Inc., Note 7.750%, 7/15/2026 1,582,500 3,705,000 Edison Mission Energy Corp., Senior Note 7.730%, 6/15/2009 3,862,463 5,350,000 El Paso CGP, Co., Note 6.950%, 6/01/2028 4,654,500 900,000 EL Paso Corp., Note 7.000%, 5/15/2011 864,000 750,000 EL Paso Corp., Senior Note, (MTN) 7.800%, 8/01/2031 705,000 1,000,000 EL Paso Energy Corp., Note, (MTN), (FRN) 7.750%, 1/15/2032(c) 942,500 4,000,000 FHLMC 3.220%, 6/20/2007, (SGD) 2,464,350 7,000,000 FHLMC 4.625%, 2/15/2007, (EUR) 9,417,537 28,200,000 FNMA 2.290%, 2/19/2009, (SGD) 16,791,509 6,500,000 FNMA 2.375%, 2/15/2007 6,314,750 34,000,000 FNMA, Zero Coupon 10/29/2007, (NZD) 20,365,060 150,000 Ford Motor Co., Note 6.625%, 10/01/2028 125,821 2,110,000 Friendly Ice Cream Corp., Guaranteed Senior Note 8.375%, 6/15/2012(c) 2,004,500 12,100,000 General Electric Capital Corp., Note 6.625%, 2/04/2010, (NZD) 8,490,030 500,000 General Electric Capital Corp., Series E, Note, (MTN) 1.725%, 6/27/2008, (SGD) 294,062 3,100,000 General Electric Capital Corp., Series E, Note, (MTN) 6.125%, 5/17/2012, (GBP) 6,176,010
See accompanying notes to financial statements. 34 LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Principal Amount Description Value (a) ------------------------------------------------------------------------------------------- United States -- continued $ 6,625,000 General Motors Acceptance Corp., Note 3.610%, 7/16/2007 $ 6,241,512 8,000,000 General Motors Acceptance Corp., Note 3.700%, 3/20/2007 7,610,200 1,250,000 General Motors Acceptance Corp., Series E, Note, (MTN) 7.500%, 12/01/2006, (NZD) 869,807 950,000 Georgia-Pacific Corp., Note 7.250%, 6/01/2028 978,500 3,200,000 Georgia-Pacific Corp., Note 7.375%, 12/01/2025 3,344,000 3,775,000 Georgia-Pacific Corp., Note 7.750%, 11/15/2029 4,114,750 1,730,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note 7.750%, 12/15/2013 1,435,900 1,000,000 HCA, Inc., Senior Note 5.750%, 3/15/2014 954,504 2,515,000 IMC Global, Inc., Note 7.300%, 1/15/2028 2,552,725 1,880,000 IMC Global, Inc., Note 7.375%, 8/01/2018 1,936,400 640,000 JC Penney Co., Inc., Note 7.125%, 11/15/2023 633,600 11,285,000 Lucent Technologies, Inc., Note 6.450%, 3/15/2029 9,733,313 1,250,000 McDonald's Corp., Series E, Note, (MTN) 3.6275%, 10/10/2010, (SGD) 772,422 881,000 Missouri Pacific Railroad Co., Note 5.000%, 1/01/2045 714,711 1,000,000 Morgan Stanley, Note 5.375%, 11/14/2013, (GBP) 1,898,929 3,175,000 Northern Telecom Capital Corp., Note 7.875%, 6/15/2026 3,190,875 5,840,000 Owens-Illinois, Inc., Senior Note 7.800%, 5/15/2018(c) 5,942,200 3,000,000 Pemex Project Funding Master Trust, Note, 144A 8.625%, 12/01/2023 3,397,500 4,350,000 Pemex Project Funding Master Trust, Note, 144A 9.500%, 9/15/2027(c) 5,328,750 2,000,000 Pharma Services Intermediate Holding Corp., Senior Note, 144A 0/11.500%, 4/01/2014(i) 1,410,000 1,900,000 Qwest Capital Funding, Inc., Guaranteed Note 7.000%, 8/03/2009(c) 1,781,250 2,420,000 Qwest Capital Funding, Inc., Guaranteed Note 7.625%, 8/03/2021(c) 2,044,900 600,000 Qwest Capital Funding, Inc., Note 6.500%, 11/15/2018 477,000 33,250,000 Qwest Capital Funding, Inc., Note 6.875%, 7/15/2028(c) 25,768,750 825,000 Qwest Capital Funding, Inc., Note 7.250%, 2/15/2011(c) 769,313 1,700,000 Qwest Capital Funding, Inc., Note 7.750%, 2/15/2031(c) 1,436,500 250,000 Qwest Capital Funding, Inc., Note 7.900%, 8/15/2010(c) 239,375 350,000 Qwest Corp., Note 7.250%, 9/15/2025 327,250 225,162 Salton SEA Funding Corp., Series C, Senior Secured Note 7.840%, 5/30/2010 240,494 750,000 Southern Natural Gas Co., Note 7.350%, 2/15/2031 766,043
Principal Amount Description Value (a) ------------------------------------------------------------------------------------------ United States -- continued $ 2,600,000 Tennessee Gas Pipeline Co., Note 7.000%, 10/15/2028 $ 2,551,180 496,687 Tiverton Power Associates, LP, Note, 144A 9.000%, 7/15/2018 372,515 6,405,000 TTI Holding Corp., Senior Subordinated Note, 144A 10.000%, 3/15/2013 6,356,963 5,000,000 U.S. Treasury Note 1.625%, 2/28/2006 4,920,310 110,775,000 U.S. Treasury Note 2.500%, 5/31/2006 109,450,906 49,730,000 U.S. Treasury Note 2.625%, 5/15/2008(c) 47,771,882 29,225,000 U.S. Treasury Note 2.750%, 6/30/2006(c) 28,930,470 50,270,000 U.S. Treasury Note 3.000%, 2/15/2008(c) 48,995,555 1,020,000 United Rentals North America, Inc., Senior Subordinated Note 7.000%, 2/15/2014(c) 933,300 2,500,000 Wal-Mart Stores, Inc., Note 4.750%, 1/29/2013, (GBP) 4,606,563 600,000 Williams Cos., Inc., Note 7.875%, 9/01/2021 654,000 965,000 Williams Cos., Inc., Senior Note 7.750%, 6/15/2031 1,042,200 8,600,000 Williams Cos., Inc., Series A, Note 7.500%, 1/15/2031 9,030,000 1,000,000 Woolworth Corp., Note 8.500%, 1/15/2022 1,085,000 15,550,000 Xerox Capital Trust I, Guaranteed Note 8.000%, 2/01/2027 15,550,000 1,730,000 Xerox Corp., Note, (MTN) 7.200%, 4/01/2016 1,781,900 --------------- 650,227,456 --------------- Uruguay -- 0.3% 1,600,000 Republic of Uruguay 7.500%, 3/15/2015 1,464,000 2,834,959 Republic of Uruguay 7.875%, 1/15/2033 2,445,152 --------------- 3,909,152 --------------- Venezuela -- 2.2% 16,535,000 Cerro Negro Finance, Ltd., Note, 144A 7.900%, 12/01/2020 15,377,550 8,905,000 Petrozuata Finance, Inc., Note, Series B, 144A 8.220%, 4/01/2017 8,370,700 3,640,000 Republic of Venezuela 9.250%, 9/15/2027 3,609,060 --------------- 27,357,310 --------------- Total Non-Convertible Bonds (Identified Cost $1,055,352,098) 1,101,572,710 --------------- Total Bonds and Notes (Identified Cost $1,101,017,021) 1,148,049,340 --------------- Shares ------------------------------------------------------------------------------------------ Preferred Stocks -- 2.9% Philippines -- 0.6% 156,314 Philippine Long Distance Telephone Co., Sponsored GDR, Convertible, $24.80, 12/31/2049 7,659,386 ---------------
See accompanying notes to financial statements. 35 LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited)
Shares Description Value (a) ------------------------------------------------------------------------------------------------ United States -- 2.3% 27,950 AES Trust III, Convertible, Preferred, 6.75%, 10/15/2029(c) $ 1,306,662 20,725 CMS Energy Trust I, Convertible, 7.75%, 7/15/2027 1,051,794 51,500 Cummins Capital Trust I, Convertible 4,084,671 10,000 El Paso Tennessee Pipeline Co. Class A 505,313 32,900 Felcor Lodging Trust Inc. (REIT) Convertible, 8.08%, 12/31/2049 814,275 24,550 Host Marriott Finance Trust (REIT), Convertible 1,356,387 7,400 Lucent Technologies Capital Trust I, Convertible, 7.75%, 3/15/2017(c) 7,688,600 15,000 Newell Financial Trust I, Convertible 695,625 217,475 Owens-Illinois, Inc., Convertible, 4.75%, 12/31/2049 9,188,319 31,875 Pacific Gas & Electric Co. 811,219 800 Pacific Gas & Electric Co., Series G 17,480 9,500 Southern California Edison Co. 964,844 10,000 United Rentals Trust I, Convertible 442,500 --------------- 28,927,689 --------------- Total Preferred Stocks (Identified Cost $30,204,925) 36,587,075 --------------- Common Stocks -- 2.4% Brazil -- 0.3% 117,000 Cia Vale do Rio Doce, ADR(c) 3,698,370 --------------- United States -- 2.1% 224,500 Associated Estates Realty Corp. (REIT) 2,238,266 53,260 Chesapeake Energy Corp. 1,168,524 27,045 CIM High Yield Securities Fund 108,451 10,439 Corning, Inc. 116,186 182,500 Developers Diversified Realty Corp. (REIT) 7,254,375 282,500 Duke Energy Corp.(c) 7,912,825 51,300 High Income Opportunity Fund, Inc.(c) 323,703 47,136 Morgan Stanley Emerging Markets Debt Fund, Inc.(c) 434,123 6,300 Senior High Income Portfolio, Inc. 36,666 117,700 Simon Property Group, Inc. 7,130,266 --------------- 26,723,385 --------------- Total Common Stocks (Identified Cost $20,117,925) 30,421,755 --------------- Principal Amount ------------------------------------------------------------------------------------------------ Short Term Investments -- 18.5% $ 27,595,571 Repurchase Agreement with Investors Bank & Trust Co. dated 3/31/2005 at 2.02% to be repurchased at $27,597,119 on 4/1/2005, collateralized by $21,060,000 Federal Home Loan Mortgage Corporation Bond, 3.310%, due 1/15/2033 valued at $21,002,991 and $7,918,380 Federal National Mortgage Association Bond, 3.350%, due 9/25/2032 valued at $7,977,662 27,595,571 9,156,322 Bank of America, 2.77%, due 4/18/2005(j) 9,156,322 9,156,322 Bank of America, 2.82%, due 5/16/2005(j) 9,156,322 2,788,315 Bank of Montreal, 2.60%, due 4/04/2005(j) 2,788,315 10,061,659 Bank of Montreal, 2.75%, due 4/08/2005(j) 10,061,659 16,298,253 Bank of Nova Scotia, 2.70%, due 4/11/2005(j) 16,298,252 3,662,529 Bank of Nova Scotia, 2.73%, due 4/14/2005(j) 3,662,529 9,156,322 Bank of Nova Scotia, 2.78%, due 4/28/2005(j) 9,156,322 5,493,794 Barclays, 2.785%, due 4/25/2005(j) 5,493,793 9,971,327 BGI Institutional Money Market Fund(j) 9,971,327 27,468,965 BNP Paribas, 2.73%, due 4/07/2005(j) 27,468,965 9,156,322 BNP Paribas, 2.91%, due 6/15/2005(j) 9,156,322 3,739,001 Calyon, 2.77%, due 4/21/2005(j) 3,739,001 1,687,750 Den Danske Bank, 2.77%, due 4/26/2005(j) 1,687,750
Principal Amount Description Value (a) ------------------------------------------------------------------------------------------------------- Short Term Investments -- continued $ 3,662,529 Falcon Asset Securitization Corp, 2.727%, due 4/13/2005(j) $ 3,662,529 8,936,570 Fortis Bank, 2.44%, due 4/14/2005(j) 8,936,570 9,156,322 Fortis Bank, 2.80%, due 4/06/2005(j) 9,156,322 3,967,404 Goldman Sachs Financial Square Prime Obligations Fund(j) 3,967,404 9,156,322 Govco Incorporated, 2.60%, due 4/05/2005(j) 9,156,322 4,400,129 Keybank, 2.844%, due 4/01/2005(j) 4,400,129 4,527,862 Merrill Lynch Premier Institutional Fund(j) 4,527,861 2,613,819 Merrimac Cash Fund-Premium Class(j) 2,613,819 9,156,322 Rabobank Nederland, 2.78%, due 4/29/2005(j) 9,156,322 9,907,208 Royal Bank of Scotland, 2.75%, due 4/05/2005(j) 9,907,208 9,156,322 Svenska Handlesbanken, 2.70%, due 4/11/2005(j) 9,156,322 1,831,264 The Bank of the West, 2.79%, due 4/22/2005(j) 1,831,264 1,831,264 Toronto Dominion Bank, 3.01%, due 6/24/2005(j) 1,831,264 3,662,529 UBS AG, 2.805%, due 5/03/2005(j) 3,662,529 3,662,529 Wells Fargo, 2.78%, due 4/20/2005(j) 3,662,529 1,290,927 Wells Fargo, 2.79%, due 4/08/2005(j) 1,290,927 1,831,264 Yorktown Capital LLC, 2.636%, due 4/01/2005(j) 1,831,264 --------------- Total Short Term Investments (Identified Cost $234,143,036) 234,143,035 --------------- Total Investments -- 114.7% (Identified Cost $1,385,482,907)(b) 1,449,201,205 Other assets less liabilities (186,158,775) --------------- Total Net Assets -- 100% $ 1,263,042,430 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: At March 31, 2005, the net unrealized appreciation on investments based on cost of $1,387,882,786 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 $ 75,837,320 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (14,518,901) --------------- Net unrealized appreciation $ 61,318,419 =============== 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. (c) All or a portion of this security was on loan to brokers at March 31, 2005. (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 March 31, 2005, the value of these securities amounted to $56,207,332 or 4.45% 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.
See accompanying notes to financial statements. 36 LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued) Investments as of March 31, 2005 (unaudited) 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 $108,326,607 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 Dollar SEK Swedish Krona SGD Singapore Dollar THB Thai Baht ZAR South African Rand
Holdings at March 31, 2005 as a Percentage of Net Assets (unaudited) Treasuries 19.1% Sovereigns 15.9 Foreign Local Governments 7.8 Technology 6.2 Government Agencies 4.3 Wirelines 4.3 Electric 3.9 Banking 3.8 Transportation Services 3.2 Automotive 2.3 Pharmaceuticals 2.1 Other, less than 2% each 23.3
See accompanying notes to financial statements. 37 This Page Intentionally Left Blank 38 STATEMENTS OF ASSETS & LIABILITIES March 31, 2005 (unaudited)
Limited Term Government Core Plus Bond Fund High Income Fund and Agency Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ASSETS Investments at cost $ 271,892,033 $ 45,774,251 $ 230,225,463 Net unrealized appreciation (depreciation) 3,248,428 2,457,698 (959,049) --------------------- --------------------- --------------------- Investments at value(a) 275,140,461 48,231,949 229,266,414 Receivable for Fund shares sold 495,007 15,703 30,472 Receivable for securities sold -- 347,065 13,236 Dividends and interest receivable 3,200,570 745,687 1,082,038 Tax reclaims receivable -- 144 -- Receivable from investment adviser 22,626 -- 9,225 Securities lending income receivable 1,972 3,888 5,318 Prepaid insurance expense 749 116 1,227 --------------------- --------------------- --------------------- TOTAL ASSETS 278,861,385 49,344,552 230,407,930 --------------------- --------------------- --------------------- LIABILITIES Collateral on securities loaned, at value 5,040,121 6,386,573 43,758,180 Payable for securities purchased 6,255,140 170,207 -- Payable for Fund shares redeemed 947,653 130,900 168,135 Dividends payable 372,140 108,366 106,946 Management fees payable 96,522 22,509 80,776 Deferred Trustees' fees 176,614 41,827 154,953 Transfer agent fees payable 373,022 9,170 49,940 Accounting and administrative fees payable 19,790 2,434 12,077 Payable for when-issued securities -- -- 11,789,466 Deferred expense payable -- -- -- Other accounts payable and accrued expenses 85,120 31,745 63,979 --------------------- --------------------- --------------------- TOTAL LIABILITIES 13,366,122 6,903,731 56,184,452 --------------------- --------------------- --------------------- NET ASSETS $ 265,495,263 $ 42,440,821 $ 174,223,478 ===================== ===================== ===================== NET ASSETS CONSIST OF: Paid in capital $ 284,483,693 $ 124,130,868 $ 195,120,845 Undistributed (overdistributed) net investment income (41,105) (107,098) (398,504) Accumulated net realized gain (loss) on investments (22,211,973) (84,043,007) (19,539,814) Net unrealized appreciation (depreciation) of investments and foreign currency translations 3,264,648 2,460,058 (959,049) --------------------- --------------------- --------------------- NET ASSETS $ 265,495,263 $ 42,440,821 $ 174,223,478 ===================== ===================== ===================== COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: Class A shares: Net assets $ 109,329,031 $ 23,928,642 $ 150,251,581 ===================== ===================== ===================== Shares of beneficial interest 9,565,368 4,873,758 13,508,935 ===================== ===================== ===================== Net asset value and redemption price per share $ 11.43 $ 4.91 $ 11.12 ===================== ===================== ===================== Offering price per share (100/[100-maximum sales charge] of net asset value) $ 11.97 $ 5.14 $ 11.46 ===================== ===================== ===================== Class B shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $ 139,669,624 $ 15,644,781 $ 17,421,335 ===================== ===================== ===================== Shares of beneficial interest 12,210,695 3,184,714 1,569,903 ===================== ===================== ===================== Net asset value and offering price per share $ 11.44 $ 4.91 $ 11.10 ===================== ===================== ===================== Class C shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charges) Net assets $ 6,043,707 $ 2,867,398 $ 6,049,392 ===================== ===================== ===================== Shares of beneficial interest 528,013 583,910 544,267 ===================== ===================== ===================== Net asset value and offering price per share $ 11.45 $ 4.91 $ 11.11 ===================== ===================== ===================== Class Y shares: Net assets $ 10,452,901 $ -- $ 501,170 ===================== ===================== ===================== Shares of beneficial interest 910,809 -- 44,906 ===================== ===================== ===================== Net asset value, offering and redemption price per share $ 11.48 $ -- $ 11.16 ===================== ===================== ===================== (a) Including securities on loan with market values of: $ 4,919,602 $ 6,210,266 $ 43,001,407 ===================== ===================== =====================
See accompanying notes to financial statements. 39
Massachusetts Tax Municipal Strategic Free Income Fund Income Fund Income Fund --------------------- --------------------- --------------------- --------------------- --------------------- $ 77,996,491 $ 108,011,089 $ 1,385,482,907 3,880,232 3,741,334 63,718,298 --------------------- --------------------- --------------------- 81,876,723 111,752,423 1,449,201,205 1,853 1,957 16,172,970 -- 1,563,736 -- 1,308,197 1,679,527 16,839,939 -- -- 11,264 -- -- -- -- -- 39,430 220 315 1,576 --------------------- --------------------- --------------------- 83,186,993 114,997,958 1,482,266,384 --------------------- --------------------- --------------------- -- -- 206,547,464 1,098,970 -- 8,252,702 57,104 41,141 1,155,036 62,243 110,342 2,276,944 41,842 47,323 632,566 48,372 103,787 101,665 17,627 27,951 32,457 5,411 8,110 67,024 -- -- -- -- -- 69,643 35,096 48,711 88,453 --------------------- --------------------- --------------------- 1,366,665 387,365 219,223,954 --------------------- --------------------- --------------------- $ 81,820,328 $ 114,610,593 $ 1,263,042,430 ===================== ===================== ===================== $ 80,577,978 $ 112,017,332 $ 1,239,730,227 17,992 150,514 749,097 (2,655,874) (1,298,587) (41,158,670) 3,880,232 3,741,334 63,721,776 --------------------- --------------------- --------------------- $ 81,820,328 $ 114,610,593 $ 1,263,042,430 ===================== ===================== ===================== $ 77,767,103 $ 106,473,498 $ 608,326,284 ===================== ===================== ===================== 4,712,337 14,349,205 43,685,186 ===================== ===================== ===================== $ 16.50 $ 7.42 $ 13.93 ===================== ===================== ===================== $ 17.23 $ 7.77 $ 14.59 ===================== ===================== ===================== $ 4,053,225 $ 8,137,095 $ 136,829,040 ===================== ===================== ===================== 246,155 1,095,371 9,791,727 ===================== ===================== ===================== $ 16.47 $ 7.43 $ 13.97 ===================== ===================== ===================== $ -- $ -- $ 489,501,491 ===================== ===================== ===================== -- -- 35,045,611 ===================== ===================== ===================== $ -- $ -- $ 13.97 ===================== ===================== ===================== $ -- $ -- $ 28,385,615 ===================== ===================== ===================== -- -- 2,038,523 ===================== ===================== ===================== $ -- $ -- $ 13.92 ===================== ===================== ===================== $ -- $ -- $ 201,196,066 ===================== ===================== =====================
40 STATEMENTS OF OPERATIONS For the Six Months Ended March 31, 2005 (unaudited)
Limited Term Government Core Plus Bond Fund High Income Fund and Agency Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- INVESTMENT INCOME Dividends $ -- $ 47,916 $ -- Interest 7,114,625 1,793,928 2,328,896 Securities lending income 12,438 18,351 8,250 Less net foreign taxes withheld -- (618) -- --------------------- --------------------- --------------------- 7,127,063 1,859,577 2,337,146 --------------------- --------------------- --------------------- Expenses Management fees 587,536 137,110 356,566 Service fees - Class A 145,986 31,755 135,203 Service and distribution fees - Class B 731,035 86,755 48,995 Service and distribution fees - Class C 31,011 14,743 32,593 Trustees' fees and expenses 26,922 10,272 13,238 Accounting and administrative 94,223 14,609 42,311 Custodian 44,878 28,721 31,413 Transfer agent fees - Class A, Class B, Class C 494,565 54,189 117,839 Transfer agent fees - Class Y 29,869 -- 8,250 Audit and tax services 15,616 16,613 12,249 Legal 9,972 1,696 5,185 Shareholder reporting 35,322 13,193 15,381 Registration 29,335 16,631 20,209 Miscellaneous 16,922 6,384 13,576 --------------------- --------------------- --------------------- Total expenses 2,293,192 432,671 853,008 Less waiver (124,578) -- (4,425) --------------------- --------------------- --------------------- Net expenses 2,168,614 432,671 848,583 --------------------- --------------------- --------------------- Net investment income 4,958,449 1,426,906 1,488,563 --------------------- --------------------- --------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments - net 2,037,425 1,105,823 (39,594) Foreign currency transactions - net 41,818 (986) -- Change in unrealized appreciation (depreciation) of: Investments - net (5,655,298) (221,597) (1,694,078) Foreign currency transactions - net (4,532) 1,718 -- --------------------- --------------------- --------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions (3,580,587) 884,958 (1,733,672) --------------------- --------------------- --------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,377,862 $ 2,311,864 $ (245,109) ===================== ===================== =====================
See accompanying notes to financial statements. 41
Massachusetts Tax Municipal Strategic Free Income Fund Income Fund Income Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ -- $ -- $ 1,720,351 2,001,591 2,793,942 26,955,070 -- -- 130,578 -- -- (48,273) --------------------- --------------------- --------------------- 2,001,591 2,793,942 28,757,726 --------------------- --------------------- --------------------- 249,213 282,624 2,981,664 98,571 136,170 574,008 21,072 42,773 674,200 -- -- 1,819,431 11,677 17,141 32,375 27,560 39,405 318,487 19,447 20,344 99,925 64,645 89,045 539,635 -- -- 13,793 12,323 12,973 17,610 3,190 5,185 12,964 12,660 10,727 49,415 9,089 16,800 36,600 6,035 12,434 35,750 --------------------- --------------------- --------------------- 535,482 685,621 7,205,857 -- -- -- --------------------- --------------------- --------------------- 535,482 685,621 7,205,857 --------------------- --------------------- --------------------- 1,466,109 2,108,321 21,551,869 --------------------- --------------------- --------------------- 352,280 959,167 8,992,878 -- -- 538,550 (738,211) (1,789,956) 9,571,296 -- -- (296,098) --------------------- --------------------- --------------------- (385,931) (830,789) 18,806,626 --------------------- --------------------- --------------------- $ 1,080,178 $ 1,277,532 $ 40,358,495 ===================== ===================== =====================
42 STATEMENTS OF CHANGES IN NET ASSETS
Core Plus Bond Fund -------------------------------------------- Six Months Ended March 31, Year Ended 2005 September 30, (unaudited) 2004 --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income $ 4,958,449 $ 11,076,363 Net realized gain (loss) on investments and foreign currency transactions 2,079,243 9,525,887 Net change in unrealized appreciation (depreciation) of investments (5,659,830) (6,354,947) --------------------- --------------------- Increase (decrease) in net assets resulting from operations 1,377,862 14,247,303 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (3,372,215) (5,832,828) Class B (3,628,955) (5,866,726) Class C (154,352) (259,130) Class Y (329,690) (806,864) --------------------- --------------------- (7,485,212) (12,765,548) --------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (14,065,774) (36,519,835) --------------------- --------------------- Redemption Fees Class A 465 164 Class B 582 204 Class C 25 7 Class Y 43 17 --------------------- --------------------- 1,115 392 --------------------- --------------------- Total increase (decrease) in net assets (20,172,009) (35,037,688) --------------------- --------------------- NET ASSETS Beginning of period 285,667,272 320,704,960 --------------------- --------------------- End of period $ 265,495,263 $ 285,667,272 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (41,105) $ 2,485,658 ===================== =====================
High Income Fund -------------------------------------------- Six Months Ended March 31, Year Ended 2005 September 30, (unaudited) 2004 --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income $ 1,426,906 $ 3,223,716 Net realized gain (loss) on investments and foreign currency transactions 1,104,837 2,160,377 Net change in unrealized appreciation (depreciation) of investments (219,879) (389,892) --------------------- --------------------- Increase (decrease) in net assets resulting from operations 2,311,864 4,994,201 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (833,413) (1,756,090) Class B (505,123) (1,304,202) Class C (85,448) (172,398) Class Y -- -- --------------------- --------------------- (1,423,984) (3,232,690) --------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (3,667,388) (6,616,858) --------------------- --------------------- Redemption Fees Class A 2,033 146 Class B 1,362 110 Class C 236 16 Class Y -- -- --------------------- --------------------- 3,631 272 --------------------- --------------------- Total increase (decrease) in net assets (2,775,877) (4,855,075) --------------------- --------------------- NET ASSETS Beginning of period 45,216,698 50,071,773 --------------------- --------------------- End of period $ 42,440,821 $ 45,216,698 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (107,098) $ (110,020) ===================== =====================
Limited Term Government and Agency Fund -------------------------------------------- Six Months Ended March 31, Year Ended 2005 September 30, (unaudited) 2004 --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income $ 1,488,563 $ 3,418,590 Net realized gain (loss) on investments and foreign currency transactions (39,594) 1,021,149 Net change in unrealized appreciation (depreciation) of investments (1,694,078) (2,043,680) --------------------- --------------------- Increase (decrease) in net assets resulting from operations (245,109) 2,396,059 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (1,572,384) (4,112,174) Class B (105,816) (358,642) Class C (70,326) (232,332) Class Y (28,424) (214,192) --------------------- --------------------- (1,776,950) (4,917,340) --------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS 48,256,293 (16,942,090) --------------------- --------------------- Redemption Fees Class A -- -- Class B -- -- Class C -- -- Class Y -- -- --------------------- --------------------- -- -- --------------------- --------------------- Total increase (decrease) in net assets 46,234,234 (19,463,371) --------------------- --------------------- NET ASSETS Beginning of period 127,989,244 147,452,615 --------------------- --------------------- End of period $ 174,223,478 $ 127,989,244 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (398,504) $ (110,117) ===================== =====================
See accompanying notes to financial statements. 43
Massachusetts Tax Free Income Fund Municipal Income Fund -------------------------------------------- -------------------------------------------- Six Months Ended Six Months Ended March 31, Year Ended March 31, Year Ended 2005 September 30, 2005 September 30, (unaudited) 2004 (unaudited) 2004 --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ 1,466,109 $ 3,273,976 $ 2,108,321 $ 5,063,313 352,280 (325,070) 959,167 (199,243) (738,211) 1,181,062 (1,789,956) 1,189,663 --------------------- --------------------- --------------------- --------------------- 1,080,178 4,129,968 1,277,532 6,053,733 --------------------- --------------------- --------------------- --------------------- (1,407,423) (3,115,670) (1,981,283) (4,693,919) (59,317) (157,408) (123,364) (324,812) -- -- -- -- -- -- -- -- --------------------- --------------------- --------------------- --------------------- (1,466,740) (3,273,078) (2,104,647) (5,018,731) --------------------- --------------------- --------------------- --------------------- (3,654,202) (7,548,538) (5,450,785) (17,936,186) --------------------- --------------------- --------------------- --------------------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --------------------- --------------------- --------------------- --------------------- -- -- -- -- --------------------- --------------------- --------------------- --------------------- (4,040,764) (6,691,648) (6,277,900) (16,901,184) --------------------- --------------------- --------------------- --------------------- 85,861,092 92,552,740 120,888,493 137,789,677 --------------------- --------------------- --------------------- --------------------- $ 81,820,328 $ 85,861,092 $ 114,610,593 $ 120,888,493 ===================== ===================== ===================== ===================== $ 17,992 $ 18,623 $ 150,514 $ 146,840 ===================== ===================== ===================== =====================
Strategic Income Fund -------------------------------------------- Six Months Ended March 31, Year Ended 2005 September 30, (unaudited) 2004 --------------------- --------------------- --------------------- --------------------- $ 21,551,869 $ 27,670,276 9,531,428 15,404,828 9,275,198 21,984,923 --------------------- --------------------- 40,358,495 65,060,027 --------------------- --------------------- (13,266,322) (14,995,915) (3,372,782) (6,962,890) (8,898,283) (8,540,977) (583,273) (428,194) --------------------- --------------------- (26,120,660) (30,927,976) --------------------- --------------------- 509,940,542 377,319,844 --------------------- --------------------- 12,802 1,885 3,599 817 10,191 1,391 563 65 --------------------- --------------------- 27,155 4,158 --------------------- --------------------- 524,205,532 411,456,053 --------------------- --------------------- 738,836,898 327,380,845 --------------------- --------------------- $ 1,263,042,430 $ 738,836,898 ===================== ===================== $ 749,097 $ 5,317,888 ===================== =====================
44 FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions: --------------------------------------- ----------------------------------------- Net asset value, Net realized Dividends Distributions beginning Net and unrealized Total from from from net of investment gain (loss) on investment net investment realized Total Redemption period income investments operations income capital gains distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ------------- ---------- CORE PLUS BOND FUND Class A 03/31/2005(k) $ 11.69 $ 0.23(c) $ (0.15) $ 0.08 $ (0.34) $ -- $ (0.34) 0.00(g) 09/30/2004 11.63 0.47(c) 0.13 0.60 (0.54) -- (0.54) 0.00(g) 09/30/2003(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 03/31/2005(k) 11.70 0.19(c) (0.16) 0.03 (0.29) -- (0.29) 0.00(g) 09/30/2004 11.62 0.38(c) 0.14 0.52 (0.44) -- (0.44) 0.00(g) 09/30/2003(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 03/31/2005(k) 11.71 0.19(c) (0.16) 0.03 (0.29) -- (0.29) 0.00(g) 09/30/2004 11.63 0.38(c) 0.14 0.52 (0.44) -- (0.44) 0.00(g) 09/30/2003(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 03/31/2005(k) 11.74 0.25(c) (0.15) 0.09 (0.35) -- (0.35) 0.00(g) 09/30/2004 11.69 0.50(c) 0.13 0.63 (0.58) -- (0.58) 0.00(g) 09/30/2003(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) -- HIGH INCOME FUND* Class A 03/31/2005(k) $ 4.82 $ 0.16(c) $ 0.09 $ 0.25 $ (0.16) $ -- $ (0.16) 0.00(g) 09/30/2004 4.65 0.33(c) 0.17 0.50 (0.33) -- (0.33) 0.00(g) 09/30/2003(f) 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 03/31/2005(k) 4.83 0.15(c) 0.08 0.23 (0.15) -- (0.15) 0.00(g) 09/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) -- (0.30) 0.00(g) 09/30/2003(f) 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) --
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. Periods less than one year are not annualized. (b)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 High Income Fund, the effect of this change was to decrease net investment income per share by $.01 for Class A and Class B and to decrease the ratio of net investment income to average net assets from 11.39% to 11.31% for Class A and 10.64% to 10.56% for Class B. Per share, ratios and supplemental data for the periods prior to January 1, 2001 have not been restated to reflect this change in presentation. (e)Amount is less than one tenth of one percent. See accompanying notes to financial statements. 45
Ratios to average net assets: ---------------------------------------- Net asset Net assets, Expenses after value, end Total end of reimbursement/ Net investment Portfolio of return the period Expenses waiver income turnover the period (%) (a) (000's) (%) (b)(i) (%) (b) (%) (b) rate (%) ---------- --------- ----------- ---------- -------------- -------------- --------- $ 11.43 0.6(h) $ 109,329 1.23 1.15(j) 3.94 23 11.69 5.3(h) 120,009 1.22 1.19(j) 4.05 69 11.63 6.4 133,887 1.28 N/A 4.31 61 11.28 2.8 147,647 1.18 N/A 5.65 65 11.59 7.2 173,836 1.09 N/A 6.26 84 11.52 7.4 174,969 1.04 N/A 7.03 83 11.51 (0.3) 213,769 0.97 N/A 6.87 63 11.44 0.2(h) 139,670 1.98 1.90(j) 3.19 23 11.70 4.6(h) 148,556 1.97 1.94(j) 3.29 69 11.62 5.8 161,317 2.03 N/A 3.55 61 11.28 2.1 141,188 1.93 N/A 4.90 65 11.59 6.5 127,520 1.84 N/A 5.49 84 11.51 6.5 100,353 1.79 N/A 6.28 83 11.51 (1.1) 89,213 1.72 N/A 6.12 63 11.45 0.2(h) 6,044 1.98 1.90(j) 3.18 23 11.71 4.6(h) 6,162 1.98 1.94(j) 3.30 69 11.63 5.8 7,612 2.03 N/A 3.55 61 11.29 2.1 9,024 1.93 N/A 4.90 65 11.60 6.5 11,470 1.84 N/A 5.52 84 11.52 6.5 12,541 1.79 N/A 6.28 83 11.52 (1.1) 14,872 1.72 N/A 6.12 63 11.48 0.8(h) 10,453 1.16 0.90(j) 4.19 23 11.74 5.5(h) 10,941 0.98 0.94(j) 4.30 69 11.69 6.9 17,889 0.73 N/A 4.85 61 11.33 3.5 18,346 0.67 N/A 6.15 65 11.63 7.8 17,351 0.67 N/A 6.68 84 11.54 7.6 14,013 0.67 N/A 7.40 83 11.54 (0.0)(e) 10,320 0.72 N/A 7.12 63 $ 4.91 5.3 $ 23,929 1.56 N/A 6.57 21 4.82 11.1 24,641 1.65 N/A 6.97 51 4.65 19.5 23,809 1.71 N/A 7.62 41 4.12 (8.9) 22,454 1.58 N/A 8.85 114 4.94 (10.7) 33,471 1.47 N/A 11.31 65 6.21 (16.1) 46,960 1.36 N/A 11.47 60 8.30 4.0 74,589 1.28 N/A 10.22 89 4.91 4.6 15,645 2.31 N/A 5.84 21 4.83 10.5 17,967 2.40 N/A 6.22 51 4.65 18.8 23,405 2.46 N/A 6.89 41 4.12 (9.7) 23,031 2.33 N/A 8.10 114 4.95 (11.3) 34,713 2.22 N/A 10.56 65 6.22 (16.6) 47,793 2.11 N/A 10.72 60 8.30 3.3 70,218 2.03 N/A 9.47 89
(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)Represents the total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses. Prior to 2005, expenses in this table were presented net of such waivers and/or reimbursements. (j)The investment adviser waived a portion of its advisory fee during the period. Without this waiver, expenses would have been higher. (k)For the six months ended March 31, 2005 (unaudited). * The financial information for periods prior to September 30, 2004 reflects the financial information for the CDC Nvest High Income Fund's Class A and Class B shares which were reorganized into Class A and Class B 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. 46 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions: --------------------------------------- ----------------------------------------- Net asset value, Net realized Dividends Distributions beginning Net and unrealized Total from from from net of investment gain (loss) on investment net investment realized Total period income investments operations income capital gains distributions ---------- ---------- -------------- ---------- -------------- ------------- ------------- HIGH INCOME FUND* (continued) Class C 03/31/2005(h) $ 4.83 $ 0.14(c) $ 0.08 $ 0.22 $ (0.14) $ -- $ (0.14) 09/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) -- (0.30) 09/30/2003(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 03/31/2005(h) $ 11.30 $ 0.14(c) $ (0.16) $ (0.02) $ (0.16) $ -- $ (0.16) 09/30/2004 11.51 0.30(c) (0.09) 0.21 (0.42) -- (0.42) 09/30/2003(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) Class B 03/31/2005(h) 11.28 0.10(c) (0.16) (0.06) (0.12) -- (0.12) 09/30/2004 11.49 0.22(c) (0.09) 0.13 (0.34) -- (0.34) 09/30/2003(e) 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 03/31/2005(h) 11.30 0.10(c) (0.17) (0.07) (0.12) -- (0.12) 09/30/2004 11.50 0.22(c) (0.08) 0.14 (0.34) -- (0.34) 09/30/2003(e) 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 03/31/2005(h) 11.34 0.14(c) (0.15) (0.01) (0.17) -- (0.17) 09/30/2004 11.55 0.32(c) (0.09) 0.23 (0.44) -- (0.44) 09/30/2003(e) 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)
Redemption fee ---------- HIGH INCOME FUND* (continued) Class C 03/31/2005(h) $ 0.00(f) 09/30/2004 0.00(f) 09/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999 -- LIMITED TERM GOVERNMENT AND AGENCY FUND** Class A 03/31/2005(h) $ -- 09/30/2004 -- 09/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999 -- Class B 03/31/2005(h) -- 09/30/2004 -- 09/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999 -- Class C 03/31/2005(h) -- 09/30/2004 -- 09/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999 -- Class Y 03/31/2005(h) -- 09/30/2004 -- 09/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999 --
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. Periods less than one year are not annualized. (b)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 High Income Fund was to decrease net investment income per share by $.01 for Class C and to decrease the ratio of net investment income to average net assets from 10.63% to 10.54% for Class C. For Limited Term Government and Agency Fund, the effect of this change was to decrease net investment income per share by $.04 for Class A, B, C, and Y and to decrease the ratio of net investment income to average net assets from 4.88% to 4.52% for Class A, 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. Per share, ratios and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in presentation. (e)For the nine months ended September 30, 2003. (f)Amount rounds to less than $0.01. See accompanying notes to financial statements. 47
Ratios to average net assets: ---------------------------------------- Net asset Net assets, Expenses after value, end Total end of reimbursement/ Net investment Portfolio of return the period Expenses waiver income turnover the period (%) (a) (000's) (%) (b)(g) (%) (b) (%) (b) rate (%) ---------- --------- ----------- ---------- -------------- -------------- --------- $ 4.91 4.6 $ 2,867 2.31 N/A 5.81 21 4.83 10.5 2,608 2.40 N/A 6.22 51 4.65 18.8 2,858 2.46 N/A 6.89 41 4.12 (9.5) 2,605 2.33 N/A 8.10 114 4.94 (11.5) 4,153 2.22 N/A 10.54 65 6.22 (16.6) 5,369 2.11 N/A 10.72 60 8.30 3.3 9,138 2.03 N/A 9.47 89 $ 11.12 (0.2) $ 150,252 1.25 N/A 2.45 56 11.30 1.9 106,701 1.32 N/A 2.60 80 11.51 1.2 117,225 1.37 N/A 2.41 53 11.73 8.2 106,013 1.35 N/A 3.66 88 11.36 6.9 109,189 1.42 N/A 4.52 275 11.16 8.3 118,833 1.40 N/A 6.18 384 10.97 (0.7) 149,756 1.33 N/A 5.91 400 11.10 (0.5) 17,421 2.00 N/A 1.70 56 11.28 1.2 10,107 2.00 N/A 1.95 80 11.49 0.7 14,637 2.02 N/A 1.77 53 11.71 7.5 16,263 2.00 N/A 3.01 88 11.34 6.2 14,317 2.07 N/A 3.85 275 11.14 7.7 11,884 2.05 N/A 5.53 384 10.95 (1.4) 14,601 1.98 N/A 5.26 400 11.11 (0.6) 6,049 2.00 N/A 1.71 56 11.30 1.3 6,949 2.00 N/A 1.94 80 11.50 0.7 8,704 2.02 N/A 1.77 53 11.72 7.5 8,079 2.00 N/A 3.01 88 11.35 6.2 5,851 2.07 N/A 3.89 275 11.15 7.7 6,617 2.05 N/A 5.53 384 10.96 (1.4) 9,054 1.98 N/A 5.26 400 11.16 (0.1) 501 1.67 1.21(i) 2.49 56 11.34 2.1 4,233 1.13 N/A 2.82 80 11.55 1.5 6,886 0.93 N/A 2.87 53 11.78 8.6 8,529 0.88 N/A 4.14 88 11.41 7.4 3,441 0.95 N/A 4.98 275 11.20 8.8 3,254 0.95 N/A 6.63 384 11.00 (0.3) 7,086 0.98 N/A 6.26 400
(g)Represents total expenses prior to waiver of a portion of the Fund's transfer agent expenses. (h)For the six months ended March 31, 2005 (unaudited). (i)IXIS Services waived a portion of its transfer agent fee during the period. Without this waiver, expenses would have been higher. * The financial information for periods prior to September 30, 2004 reflects the financial information for the CDC Nvest High Income Fund's Class C shares which were reorganized into Class C shares 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, Class B, Class C and Class Y shares which were reorganized into Class A, 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. 48 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: --------------------------------------- Net asset value, Net realized beginning Net and unrealized Total from of investment gain (loss) on investment period income investments operations ---------- ---------- -------------- ---------- MASSACHUSETTS TAX FREE INCOME FUND Class A 03/31/2005(i) $ 16.58 $ 0.30(c) $ (0.08) $ 0.22 09/30/2004 16.41 0.61 0.17 0.78 09/30/2003(g) 16.40 0.49 0.01 0.50 12/31/2002 15.82 0.67 0.59 1.26 12/31/2001(d) 16.06 0.75 (0.24) 0.51 12/31/2000 15.48 0.82 0.57 1.39 12/31/1999 17.02 0.82 (1.50) (0.68) Class B 03/31/2005(i) 16.54 0.23(c) (0.07) 0.16 09/30/2004 16.37 0.49 0.18 0.67 09/30/2003(g) 16.36 0.41 0.01 0.42 12/31/2002 15.78 0.57 0.58 1.15 12/31/2001(d) 16.03 0.64 (0.24) 0.40 12/31/2000 15.45 0.71 0.58 1.29 12/31/1999 16.98 0.71 (1.49) (0.78) MUNICIPAL INCOME FUND Class A 03/31/2005(i) $ 7.47 $ 0.14(c) $ (0.05) $ 0.09 09/30/2004 7.41 0.29 0.06 0.35 09/30/2003(g) 7.43 0.23 (0.02) 0.21 12/31/2002 7.25 0.34 0.18 0.52 12/31/2001(d) 7.39 0.36 (0.14) 0.22 12/31/2000 7.17 0.40 0.21 0.61 12/31/1999 7.76 0.39 (0.59) (0.20) Class B 03/31/2005(i) 7.48 0.11(c) (0.05) 0.06 09/30/2004 7.41 0.24 0.07 0.31 09/30/2003(g) 7.44 0.19 (0.03) 0.16 12/31/2002 7.25 0.29 0.19 0.48 12/31/2001(d) 7.39 0.31 (0.14) 0.17 12/31/2000 7.17 0.35 0.21 0.56 12/31/1999 7.76 0.33 (0.59) (0.26)
Less distributions: ----------------------------------------- Dividends Distributions from from net net investment realized Total income capital gains distributions -------------- ------------- ------------- MASSACHUSETTS TAX FREE INCOME FUND Class A 03/31/2005(i) $ (0.30) $ -- $ (0.30) 09/30/2004 (0.61) -- (0.61) 09/30/2003(g) (0.49) -- (0.49) 12/31/2002 (0.68) -- (0.68) 12/31/2001(d) (0.75) -- (0.75) 12/31/2000 (0.81) -- (0.81) 12/31/1999 (0.83) (0.03) (0.86) Class B 03/31/2005(i) (0.23) -- (0.23) 09/30/2004 (0.50) -- (0.50) 09/30/2003(g) (0.41) -- (0.41) 12/31/2002 (0.57) -- (0.57) 12/31/2001(d) (0.65) -- (0.65) 12/31/2000 (0.71) -- (0.71) 12/31/1999 (0.72) (0.03) (0.75) MUNICIPAL INCOME FUND Class A 03/31/2005(i) $ (0.14) $ -- $ (0.14) 09/30/2004 (0.29) -- (0.29) 09/30/2003(g) (0.23) -- (0.23) 12/31/2002 (0.34) -- (0.34) 12/31/2001(d) (0.36) -- (0.36) 12/31/2000 (0.39) -- (0.39) 12/31/1999 (0.39) -- (0.39) Class B 03/31/2005(i) (0.11) -- (0.11) 09/30/2004 (0.24) -- (0.24) 09/30/2003(g) (0.19) -- (0.19) 12/31/2002 (0.29) -- (0.29) 12/31/2001(d) (0.31) -- (0.31) 12/31/2000 (0.34) -- (0.34) 12/31/1999 (0.33) -- (0.33)
(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 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 Massachusetts Tax Free Income Fund 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. For Municipal Income Fund, the effect of this change was to increase net investment income per share by $0.01 and to decrease net realized and unrealized gains and losses per share by $0.01 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 4.14% 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. See accompanying notes to financial statements. 49
Ratios to average net assets: ---------------------------------------- Net asset Net assets, Expenses after value, end Total end of reimbursement/ Net investment Portfolio of return the period Expenses waiver income turnover the period (%) (a) (000's) (%) (b)(h) (%) (b) (%) (b) rate (%) ---------- --------- ----------- ---------- -------------- -------------- --------- $ 16.50 1.3 $ 77,767 1.25 N/A 3.57 3 16.58 4.9 81,427 1.33 N/A 3.74 21 16.41 3.1 86,368 1.38 N/A 3.99 9 16.40 8.1 92,053 1.34 N/A 4.19 33 15.82 3.2(e) 89,376 1.35 1.33(f) 4.67 60 16.06 9.3(e) 91,785 1.39 1.13(f) 5.24 68 15.48 (4.1)(e) 97,270 1.31 1.00(f) 5.02 73 16.47 1.0 4,053 2.00 N/A 2.82 3 16.54 4.2 4,435 2.00 N/A 3.08 21 16.37 2.6 6,185 2.03 N/A 3.34 9 16.36 7.4 6,742 1.99 N/A 3.54 33 15.78 2.5(e) 8,313 2.00 1.98(f) 4.03 60 16.03 8.6(e) 8,715 2.04 1.78(f) 4.59 68 15.45 (4.7)(e) 8,874 1.96 1.65(f) 4.37 73 $ 7.42 1.2 $ 106,473 1.11 N/A 3.64 19 7.47 4.9 111,801 1.11 N/A 4.00 35 7.41 2.9 126,906 1.10 N/A 4.14 42 7.43 7.3 133,005 1.06 N/A 4.67 35 7.25 3.0 137,852 1.07 N/A 4.89 80 7.39 8.8 142,539 0.95 N/A 5.39 156 7.17 (2.8) 152,829 0.93 N/A 5.13 137 7.43 0.8 8,137 1.86 N/A 2.89 19 7.48 4.2 9,087 1.86 N/A 3.25 35 7.41 2.2 10,884 1.85 N/A 3.39 42 7.44 6.7 12,326 1.81 N/A 3.92 33 7.25 2.2 14,549 1.82 N/A 4.14 80 7.39 8.0 14,520 1.70 N/A 4.64 156 7.17 (3.5) 15,644 1.68 N/A 4.38 137
(e)Had certain expenses not been reduced during the period, total returns would have been lower. (f)The investment adviser waived a portion of its advisory fee during the period. Without this waiver, expenses would have been higher. (g)For the nine months ended September 30, 2003. (h)Represents total expenses prior to advisory fee waiver and/or reimbursement or a portion of the Fund's expenses. Prior to 2005, expenses in this table were presented net of such waivers and/or reimbursements. (i)For the six months ended March 31, 2005 (unaudited). 50 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions: --------------------------------------- ----------------------------------------- Net asset value, Net realized Dividends Distributions beginning Net and unrealized Total from from from net of investment gain (loss) on investment net investment realized Total period income investments operations income capital gains distributions ---------- ---------- -------------- ---------- -------------- ------------- ------------- STRATEGIC INCOME FUND* Class A 03/31/2005(l) $ 13.57 $ 0.34(c) $ 0.44 $ 0.77 $ (0.41) $ -- $ (0.41) 09/30/2004 12.57 0.75(c) 1.11 1.86 (0.86) -- (0.86) 09/30/2003(i) 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 03/31/2005(l) 13.60 0.29(c) 0.43 0.72 (0.35) -- (0.35) 09/30/2004 12.59 0.65(c) 1.10 1.75 (0.74) -- (0.74) 09/30/2003(i) 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) Class C 03/31/2005(l) 13.60 0.28(c) 0.44 0.72 (0.35) -- (0.35) 09/30/2004 12.58 0.64(c) 1.11 1.75 (0.73) -- (0.73) 09/30/2003(i) 10.70 0.50(c) 1.93 2.43 (0.55) -- (0.55) 12/31/2002 9.87 0.67(c) 0.73 1.40 (0.57) -- (0.57) 12/31/2001(d) 10.78 0.83(c) (0.91) (0.08) (0.83) -- (0.83) 12/31/2000 11.64 0.90(c) (0.91) (0.01) (0.85) -- (0.85) 12/31/1999 11.36 0.94 0.31 1.25 (0.93) (0.04) (0.97) Class Y 03/31/2005(l) 13.57 0.35(c) 0.43 0.78 (0.43) -- (0.43) 09/30/2004 12.58 0.78(c) 1.11 1.89 (0.90) -- (0.90) 09/30/2003(i) 10.74 0.60(c) 1.93 2.53 (0.69) -- (0.69) 12/31/2002 9.90 0.80(c) 0.71 1.51 (0.67) -- (0.67) 12/31/2001(d) 10.81 0.94(c) (0.92) 0.02 (0.93) -- (0.93) 12/31/2000 11.65 0.96(c) (0.84) 0.12 (0.96) -- (0.96) 12/31/1999(h) 11.45 0.86 (0.56) 0.30 (0.10) -- (0.10)
Redemption fee ---------- STRATEGIC INCOME FUND* Class A 03/31/2005(l) $ 0.00(j) 09/30/2004 0.00(j) 09/30/2003(i) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999 -- Class B 03/31/2005(l) 0.00(j) 09/30/2004 0.00(j) 09/30/2003(i) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999 -- Class C 03/31/2005(l) 0.00(j) 09/30/2004 0.00(j) 09/30/2003(i) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999 -- Class Y 03/31/2005(l) 0.00(j) 09/30/2004 0.00(j) 09/30/2003(i) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- 12/31/1999(h) --
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares and a contingent deferred sales charge for Class B and Class C shares are not reflected in total return calculations. Periods 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. 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, 8.03% to 8.02% for Class B, and 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 waived a portion of its advisory fee during the period. Without this waiver, expenses would have been higher. (g)Amount is less than $500. See accompanying notes to financial statements. 51
Ratios to average net assets: ---------------------------------------- Net asset Net assets, Expenses after value, end Total end of reimbursement/ Net investment Portfolio of return the period Expenses waiver income turnover the period (%) (a) (000's) (%) (b)(k) (%) (b) (%) (b) rate (%) ---------- --------- ----------- ---------- -------------- -------------- --------- $ 13.93 5.7 $ 608,326 1.10 N/A 4.80 4 13.57 15.2 343,586 1.23 N/A 5.66 28 12.57 23.7(e) 140,576 1.31 1.28(f) 6.49 27 10.72 15.5 92,303 1.33 N/A 7.38 30 9.88 (0.1) 94,156 1.31 N/A 8.77 10 10.80 0.7 116,986 1.24 N/A 8.73 13 11.65 12.2 124,869 1.21 N/A 9.09 19 13.97 5.3 136,829 1.85 N/A 4.09 4 13.60 14.3 128,714 1.98 N/A 4.91 28 12.59 23.0(e) 118,217 2.06 2.03(f) 5.73 27 10.71 14.6 98,501 2.08 N/A 6.63 30 9.88 (0.8) 102,159 2.06 N/A 8.02 10 10.79 (0.2) 120,200 1.99 N/A 7.98 13 11.65 11.3 127,723 1.96 N/A 8.34 19 13.97 5.3 489,501 1.85 N/A 4.00 4 13.60 14.3 255,705 1.98 N/A 4.87 28 12.58 23.0(e) 66,394 2.06 2.03(f) 5.73 27 10.70 14.7 27,727 2.08 N/A 6.63 30 9.87 (0.8) 28,925 2.06 N/A 8.02 10 10.78 (0.2) 37,208 1.99 N/A 7.98 13 11.64 11.3 40,265 1.96 N/A 8.34 19 13.92 5.8 28,386 0.88 N/A 5.01 4 13.57 15.5(e) 10,833 1.08 1.00(f) 5.93 28 12.58 24.0 2,193 0.97 N/A 6.83 27 10.74 15.9 1,039 0.94 N/A 7.77 30 9.90 0.3 445 0.93 N/A 9.10 10 10.81 1.0 335 0.90 N/A 9.07 13 11.65 2.7 --(g) 0.96 N/A 9.34 19
(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. (k)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses. Prior to 2005, expenses in this table were presented net of such waivers and/or reimbursements. (l)For the six months ended March 31, 2005 (unaudited). * The financial information for periods prior to September 30, 2004 reflects the financial information for CDC Nvest Strategic Income Fund's Class A, Class B, Class C and Class Y shares, which were reorganized into Class A, Class B, 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. 52 NOTES TO FINANCIAL STATEMENTS For the Six Months Ended March 31, 2005 (unaudited) 1. Organization. CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and Loomis Sayles Funds II (the "Trusts" and each a "Trust") are organized as Massachusetts business trusts. Each Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. Each Declaration of Trust permits the 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") 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") 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. 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 higher ongoing Rule 12b-1 fees than Class A shares for eight years (at which point they automatically convert to Class A shares), and are subject to a contingent deferred sales charge ("CDSC") if those shares are redeemed within six years of purchase. Class C shares do not pay a front end sales charge, do not convert to any other class of shares and pay higher ongoing Rule 12b-1 fees, than Class A shares and may be subject to a CDSC of 1.00% if those shares are redeemed within one year. Class Y shares do not pay a front end sales charge, a CDSC or Rule 12b-1 fees. They are intended for institutional investors with a minimum initial investment of $1,000,000, though some categories of investors are excepted from the minimum investment amounts. Most expenses of the Trusts can be directly attributed to a Fund. Expenses which can not be directly attributed to a Fund are generally apportioned based on the relative net assets of each of the Funds in the Trusts. Expenses of a Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees and transfer agent fees applicable to such class), 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 for which market quotations are readily available (other than short-term obligations with a remaining maturity of less than sixty days) are generally valued at market price on the basis of valuations furnished to the Fund by a pricing service authorized by the Board of Trustees, which service determines valuations for normal, institutional-size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Short-term obligations with a remaining maturity of less than sixty days are stated at amortized cost, which approximates market value. Equity securities for which market quotations are readily available are valued at market price on the basis of valuations furnished to the Fund by a pricing service which has been authorized by the Board of Trustees. The pricing service provides the last reported sale price for securities listed on an applicable securities exchange or, if no sale was reported and in the case of over-the-counter securities not so listed, the last reported bid price. Securities traded on the NASDAQ National Market are valued at the NASDAQ Official Closing Price ("NOCP"), or if lacking 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 and subadviser, pursuant to the procedures approved by the Board of Trustees. Certain securities held by High Income 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. The Funds may hold securities traded in foreign markets. Foreign securities are valued at the market price in the foreign market. However, if events occurring after the close of the foreign market (but before the close of regular trading on the New York Stock Exchange) are believed to materially affect the value of those securities, such securities are fair valued pursuant to procedures approved by the Board of Trustees. When fair valuing equity securities, a Fund may, among other things, use modeling tools or other processes that may take into account factors such as securities market activity and/or significant events that occur after the close of the foreign market and before the Fund calculates its net asset value. 53 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 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 Funds' books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities at the end of the fiscal period, resulting from changes in exchange rates. d. 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 and distributions are recorded on ex-dividend date. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for book and tax purposes of items such as 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 Funds' 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 Funds' 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 and Limited Term Government and Agency Fund, see the Schedule of Investments for open forward commitments as of March 31, 2005. 3. Purchases and Sales of Securities. For the six months ended March 31, 2005, 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 $ 36,345,603 $45,944,891 $ 25,623,786 $25,426,583 High Income Fund -- -- 9,358,052 12,365,732 Limited Term Government and Agency Fund 118,851,089 71,986,622 -- -- Massachusetts Tax Free Income Fund -- -- 2,684,605 6,264,826 Municipal Income Fund -- -- 21,376,802 27,383,858 Strategic Income Fund 237,316,075 -- 320,359,672 38,617,344
54 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 4. Management Fees and Other Transactions with Affiliates. a. Management Fees. Loomis, Sayles & Company, L.P. ("Loomis Sayles") serves as the investment adviser to each of the Funds. Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund's average daily net assets:
Percentage of Average Daily Net Assets - --------------------------------------------------- First Next Next Over Fund $100 million $100 million $300 million $500 million ---- ------------ ------------ ------------ ------------ Core Plus Bond Fund 0.2500% 0.1875% 0.1875% 0.1875% High Income Fund 0.6000% 0.6000% 0.6000% 0.6000% Limited Term Government and Agency Fund 0.5000% 0.5000% 0.5000% 0.5000% 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 March 21, 2005, the management fee for Limited Term Government and Agency Fund was 0.57% on the first $200 million of the Fund's average daily net assets, 0.545% on the next $300 million and 0.52% on such assets in excess of $500 million. For the six months ended March 31, 2005, the management fees for each Fund were as follows:
Gross Percentage of Management Average Fund Fee Daily Net Assets* ---- ---------- ----------------- Core Plus Bond Fund $ 293,768 0.210% High Income Fund 137,110 0.600% Limited Term Government and Agency Fund 356,566 0.564% Massachusetts Tax Free Income Fund 124,606 0.300% Municipal Income Fund 282,625 0.481% Strategic Income Fund 2,981,664 0.610%
* Annualized IXIS Asset Management Advisors, L.P. ("IXIS Advisors") formerly CDC IXIS Asset Management Advisers, L.P., serves as the advisory administrator to Core Plus Bond 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% Massachusetts Tax Free Income Fund 0.3000% 0.2500% 0.2500% 0.2500%
55 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) For the six months ended March 31, 2005, the advisory administration fees for each Fund were as follows:
Gross Advisory Percentage of Administration Average Fund Fee Daily Net Assets* ---- -------------- ----------------- Core Plus Bond Fund $293,768 0.210% Massachusetts Tax Free Income Fund 124,607 0.300%
* Annualized Loomis Sayles and IXIS Advisors are wholly-owned subsidiaries of IXIS Asset Management North America, L.P. ("IXIS North America"), formerly CDC IXIS Asset Management North America, L.P., which is part of IXIS Asset Management Group, an international asset management group based in Paris, France. IXIS Asset Management Group is ultimately owned principally, directly, or indirectly by three large affiliated French financial services entities: Caisse des Depots et Consignations ("CDC"), a public sector financial institution created by the French government in 1816; Caisse Nationales des Caisses d'Epargne, a financial institution owned by CDC and by French regional savings banks known as Caisse d'Epargne; and CNP Assurances, a large French life insurance company. Certain officers and directors of Loomis Sayles and IXIS Advisors 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. During the period October 1, 2004 through December 31, 2004, IXIS Asset Management Services Company ("IXIS Services"), formerly CDC IXIS Asset Management Services, Inc., a wholly-owned subsidiary of IXIS North America, performed certain accounting and administrative services for the Funds and subcontracted with Investors Bank & Trust Company ("IBT") to serve as subadministrator. Pursuant to an agreement among the 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 "CDC Nvest Funds Trusts"), Loomis Sayles Funds I and Loomis Sayles Funds II (the "Loomis Sayles Funds Trusts") (collectively the "Trusts") and IXIS Services, each Fund paid IXIS Services its pro rata portion of a group fee for these services representing the higher amount based on the following calculations: (1)Percentage of Eligible Average Daily Net Assets
First Next Over $5 billion $5 billion $10 billion ---------- ---------- ----------- 0.0675% 0.0625% 0.0500%
or (2)Each Funds' pro rata portion, allocated based on the combined assets of the Trusts, of the annual aggregate minimum fee of $5 million. Effective January 1, 2005, IXIS Asset Management Advisors, L.P. ("IXIS Advisors") assumed responsibility for providing accounting and administrative services to the Funds pursuant to the same fee structure. IBT continues to serve as subadministrator. For the six months ended March 31, 2005, amounts paid to IXIS Services and IXIS Advisors for accounting and administrative expense were as follows:
Accounting And Fund Administrative ---- -------------- Core Plus Bond Fund $ 94,223 High Income Fund 14,609 Limited Term Government and Agency Fund 42,311 Massachusetts Tax Free Income Fund 27,560 Municipal Income Fund 39,405 Strategic Income Fund 318,487
56 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) c. Transfer Agent Fees. IXIS Services is the transfer and shareholder servicing agent for each Fund and has subcontracted with Boston Financial Data Services ("BFDS") to serve as sub-transfer agent. During the period October 1, 2004 through December 31, 2004, Classes A, B and C paid service fees monthly representing the higher amount based on the following calculations: (1)Each Fund's pro rata portion of an annual aggregate fee determined by applying an annual fee rate (see schedule below) to the eligible average daily net assets. Eligible assets are the average daily net assets of Class A, Class B and Class C accounts in Load 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 $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. Class Y paid service fees monthly representing the higher amount based on the following calculations: (1)Each Fund's pro rata portion of an annual aggregate fee determined by applying an annual rate of 0.026% to the eligible average daily net assets. Eligible assets are the average daily net assets of all accounts in No Load Retail Funds* and Load Funds - Class Y**. Class Y shares are subject to a monthly class minimum of $1,250. or (2)An allocated portion, based on eligible assets of an annual aggregate minimum fee of $650,000. * No Load Retail Funds consist of Loomis Sayles Aggressive Growth Fund, Loomis Sayles Bond Fund, Loomis Sayles Global Bond Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles Small Cap Value Fund, Loomis Sayles Tax-Managed Equity Fund, Loomis Sayles Value Fund and Loomis Sayles Worldwide Fund. ** Load Funds -- Class Y consist of all Funds with Class Y offered within the CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts. Effective January 1, 2005, each Load Fixed Income Fund, for its Class A, B and C shares, pays fees to IXIS Services representing a pro rata portion of the greater of: (1)An aggregate annual minimum fee of approximately $1.7 million for all Load Fixed Income Funds; or (2)An annual account based fee of $25.25 for each open account and $2.00 for each closed account, aggregated for all Load Fixed Income Funds. Each Load Fixed Income Fund, for its Class Y shares, pays fees to IXIS Services representing a pro rata portion of the greater of: (1)An aggregate annual minimum fee of approximately $1 million for all No Load Retail Funds and Load Funds Class Y; or (2)An annual account based fee of $25.44 for each open account in an Equity Fund, $25.25 for each open account in a Fixed Income Fund and $2.00 for each closed account, aggregated for all No Load Retail Funds and Load Funds Class Y. Each class of shares is subject to a monthly class minimum of $1,500. In addition, pursuant to other servicing agreements, each class pays service fees to other firms that provide similar services for their own shareholder accounts. 57 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) IXIS Services and BFDS and other firms are also reimbursed by the Funds for out-of-pocket expenses. For the six months ended March 31, 2005, amounts paid to IXIS Services as compensation for its services as transfer agent were as follows:
Transfer Agent Fund Fee ---- -------------- Core Plus Bond Fund $151,494 High Income Fund 45,441 Limited Term Government and Agency Fund 103,292 Massachusetts Tax Free Income Fund 50,909 Municipal Income Fund 64,243 Strategic Income Fund 437,076
IXIS Services waived a portion of its fees for Limited Term Government and Agency Fund Class Y in the amount of $4,425. d. Service and Distribution Fees. Pursuant to Rule 12b-1 under the 1940 Act, the Trusts have adopted a Service Plan relating to each Fund's Class A shares (the "Class A Plan") and Service and Distribution Plans relating to each Fund's Class B and Class C shares (the "Class B and Class C Plans"). Under the Class A Plan, each Fund pays IXIS Asset Management Distributors, L.P. ("IXIS Distributors"), formerly CDC IXIS Asset Management Distributors, L.P., the Fund's distributor (a wholly-owned subsidiary of IXIS North America), a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses incurred by IXIS Distributors in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. Under the Class B and Class C Plans, each Fund pays IXIS Distributors a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by IXIS Distributors in providing personal services to investors in Class B and Class C shares and/or the maintenance of shareholder accounts. Also under the Class B and Class C Plans, each Fund pays IXIS Distributors a monthly distribution fee at the annual rate of 0.75% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by IXIS Distributors in connection with the marketing or sale of Class B and Class C shares. For the six months ended March 31, 2005, the Funds paid the following service and distribution fees:
Service Fee Distribution Fee - ----------------------------------------- -------------------------- Fund Class A Class B Class C Class B Class C ---- ------------- ------------- ------------- ------------ ------------- Core Plus Bond Fund $ 145,986 $ 182,759 $ 7,753 $ 548,276 $ 23,258 High Income Fund 31,755 21,689 3,686 65,066 11,057 Limited Term Government and Agency Fund 135,203 12,249 8,148 36,746 24,445 Mass Tax Free Income Fund 98,571 5,268 -- 15,804 -- Municipal Income Fund 136,170 10,693 -- 32,080 -- Strategic Income Fund 574,008 168,550 454,858 505,650 1,364,573
Commissions (including CDSC) on Fund shares paid to IXIS Distributors by investors in shares of the Funds during the six months ended March 31, 2005 were as follows:
Fund ---- Core Plus Bond Fund $ 88,181 High Income Fund 34,503 Limited Term Government and Agency Fund 39,028 Massachusetts Tax Free Income Fund 14,591 Municipal Income Fund 24,854 Strategic Income Fund 1,481,597
58 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 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 Loomis Sayles, IXIS Advisors, IXIS Distributors, IXIS North America, IXIS Services or their affiliates. Each Trustee who is an independent Trustee of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts receives, in the aggregate, a retainer fee at the annual rate of $50,000 and meeting attendance fees of $5,000 for each meeting of the Board of Trustees attended. Each committee chairman receives an additional retainer fee at the annual rate of $7,000. Each committee member receives a meeting attendance fee of $3,750 per committee meeting attended. The co-chairmen of the Board each receive an additional annual retainer of $25,000. These fees are allocated to the various series of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts based on a formula that takes into account, among other factors, the relative net assets of each Fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings. A deferred compensation plan (the "Plan") is available to the Trustees on a voluntary basis. Each participating Trustee will receive an amount equal to the value that such deferred compensation would have been had it been invested in a designated Fund or certain other funds of the CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts on the normal payment date. Deferred amounts remain in the Funds until distributed in accordance with the Plan. f. Redemption fees. Shareholders of Class A shares of Core Plus Bond Fund, High Income Fund and Strategic Income Fund and shareholders of Class Y shares of Core Plus Bond Fund and Strategic Income Fund will be charged a 2% redemption fee if they redeem, including redeeming by exchange, Class A shares and Class Y shares within 60 days of their acquisition (including acquisition by exchange). The redemption fee is intended to offset the costs of the Funds of short-term trading, such as portfolio transaction and market impact costs associated with redemption activity and administrative costs associated with processing redemptions. The redemption fee is deducted from the shareholder's redemption or exchange proceeds and is paid to the Fund. The "first-in, first-out" (FIFO) method is used to determine the holding period of redeemed or exchanged shares, which means that if you acquired shares on different days, the shares acquired first will be redeemed or exchanged first for purposes of determining whether the redemption fee applies. A new holding period beings with each purchase or exchange. These fees are broken out on the Statements of Changes in Net Assets. g. Publishing Services. IXIS Services performs certain desktop publishing services for the Funds. Fees for these services are presented in the Statements of Operations as part of shareholder reporting. For the six months ended March 31, 2005, amounts paid to IXIS Services as compensation for these services were as follows:
Publishing Services Fund Fees ---- ------------------- Core Plus Bond Fund $412 High Income Fund 64 Limited Term Government and Agency Fund 64 Massachusetts Tax Free Income Fund 151 Municipal Income Fund 70 Strategic Income Fund 70
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. Interest is charged to each participating Fund based on its borrowing at a rate per annum equal to the Federal Funds rate plus 0.45%. In addition, the Funds are charged a facility fee equal to 0.10% per annum on the unused portion of the line of credit. The annual cost of maintaining the line of credit and the facility fee is apportioned pro rata among the participating Funds. There were no borrowings as of or during the six months ended March 31, 2005. 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 March 31, 2005, were as follows:
Market Value of Value of Collateral Fund Securities on Loan Received ---- ------------------ ------------------- Core Plus Bond Fund $ 4,919,602 $ 5,040,121 High Income Fund 6,210,266 6,386,573 Limited Term Government and Agency Fund 43,001,407 43,758,180 Strategic Income Fund 201,196,066 206,547,464
7. 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 under "Expiration of Waiver" below and will be reevaluated on an annual basis. For the six months ended March 31, 2005, certain class level expenses have been reimbursed as follows: Core Plus Bond Fund $124,578. 59 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) Loomis Sayles shall be permitted to recover expenses it has borne (whether through reduction of its management fee of otherwise) in later periods to the extent the Funds' expenses fall below the expense limits, provided, however, that the Funds are not obligated to pay such deferred fees more than one year after the end of the fiscal year in which the fee was deferred. At March 31, 2005, 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 of Average Expenses Subject 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, 2006 $74,236 Massachusetts Tax Free Income Fund* 1.40% 2.05% -- -- January 31, 2006 -- Strategic Income Fund 1.25% 2.00% 2.00% 1.00% January 31, 2006 5,434
Expenses Subject to Possible - Reimbursement Fund Until September 30, 2006 ---- ------------------------ Core Plus Bond Fund* $124,578 Massachusetts Tax Free Income Fund* -- Strategic Income Fund --
*The expense limits above account for advisory administration fees payable to IXIS Advisors. Loomis Sayles and IXIS Advisors have agreed to equally bear the waiver. 8. Concentration of Credit. Massachusetts Tax Free Income Fund primarily invests in debt obligations issued by the Commonwealth of Massachusetts and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Fund is more susceptible to factors adversely affecting issuers of Massachusetts municipal securities than is a comparable municipal bond fund that is not so concentrated. Uncertain economic and fiscal conditions may affect the ability of issuers of Massachusetts municipal securities to meet their financial obligations. At March 31, 2005, the Fund had the following concentrations by revenue source in excess of 10% as a percentage of the Fund's net assets: Colleges and Universities 31.4%, Water and Sewer 10.4%, and Hospital 10.1%. The Fund had investments in securities of issuers insured by American Municipal Bond assurance Corporation (AMBAC), Financial Guaranty Insurance Company (FGIC), and Municipal Bond Investors Assurance Corporation (MBIA) which aggregated to 14.2%, 7.3%, and 6.7% of its net assets, respectively, at March 31, 2005. At March 31, 2005, Municipal Income Fund had more than 10% of its net assets invested in: New York 16.0%. 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. Acquisition of Assets. After the close of business on March 18, 2005, the Limited Term Government and Agency Fund (the "Fund") acquired all of the assets and liabilities of Loomis Sayles Government Securities Fund ("Government Securities Fund"), pursuant to a plan of reorganization approved by the shareholders of the Government Securities Fund on March 10, 2005. The acquisition was accomplished by a tax-free exchange of 4,449,445.112 Class A shares of the Fund for 4,190,454.806 shares of Government Securities Fund Class A, 834,916.727 Class B shares of the Fund for 783,996.906 shares of Government Securities Class B, and 356.134 Class Y shares of the Fund for 337.738 shares of Government Securities Class Y. Government Securities Fund net assets at that date of $58,846,725, including $237,787 of net unrealized appreciation, were combined with those of the Fund. The aggregate net assets of the Fund immediately before the acquisition were $116,337,680. The combined net assets of the Fund immediately following the acquisition were $175,184,405. 10. Subsequent Event. Effective May 1, 2005, the names of the CDC Nvest Funds Trusts changed as follows:
Current Name New Name ------------------------------- ---------------------------------- CDC Nvest Funds Trust I IXIS Advisor Funds Trust I CDC Nvest Funds Trust II IXIS Advisor Funds Trust II CDC Nvest Funds Trust III IXIS Advisor Funds Trust III CDC Nvest Cash Management Trust IXIS Advisor Cash Management Trust CDC Nvest Companies Trust I IXIS Advisor Funds Trust IV
60 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 11. Capital Shares. Each Fund may issue an unlimited number of shares of beneficial interest. Transactions in capital shares were as follows: Six Months Ended March 31, 2005 Year Ended (unaudited) September 30, 2004 ----------------------------------- ----------------------------------- Core Plus Bond Fund Shares Amount Shares Amount ------------------- ---------------- ----------------- ---------------- ----------------- Class A Shares sold 691,977 $ 8,084,527 1,605,711 $ 18,625,859 Shares issued in connection with the reinvestment of: Dividends from net investment income 227,830 2,655,362 399,777 4,638,774 ---------------- ----------------- ---------------- ----------------- 919,807 10,739,889 2,005,488 23,264,633 Shares repurchased (1,617,628) (18,898,417) (3,251,762) (37,683,812) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (697,821) $ (8,158,528) (1,246,274) $ (14,419,179) ---------------- ----------------- ---------------- ----------------- Class B Shares sold 1,635,801 $ 19,111,500 3,593,650 $ 41,729,759 Shares issued in connection with the reinvestment of: Dividends from net investment income 87,698 1,023,243 162,394 1,885,405 ---------------- ----------------- ---------------- ----------------- 1,723,499 20,134,743 3,756,044 43,615,164 Shares repurchased (2,211,166) (25,818,301) (4,934,717) (57,311,673) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (487,667) $ (5,683,558) (1,178,673) $ (13,696,509) ---------------- ----------------- ---------------- ----------------- Class C Shares sold 56,830 $ 665,296 94,805 $ 1,102,148 Shares issued in connection with the reinvestment of: Dividends from net investment income 7,617 88,910 13,177 153,074 ---------------- ----------------- ---------------- ----------------- 64,447 754,206 107,982 1,255,222 Shares repurchased (62,795) (734,512) (236,056) (2,722,618) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) 1,652 $ 19,694 (128,074) $ (1,467,396) ---------------- ----------------- ---------------- ----------------- Class Y Shares sold 117,229 $ 1,375,700 330,962 $ 3,859,687 Shares issued in connection with the reinvestment of: Dividends from net investment income 22,031 257,866 59,164 689,033 ---------------- ----------------- ---------------- ----------------- 139,260 1,633,566 390,126 4,548,720 Shares repurchased (160,159) (1,876,948) (989,193) (11,485,471) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (20,899) $ (243,382) (599,067) $ (6,936,751) ---------------- ----------------- ---------------- ----------------- Increase (decrease) derived from capital shares transactions (1,204,735) $ (14,065,774) (3,152,088) $ (36,519,835) ================ ================= ================ =================
61 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 11. Capital Shares (continued). Six Months Ended March 31, 2005 Year Ended (unaudited) September 30, 2004 ----------------------------------- ----------------------------------- High Income Fund Shares Amount Shares Amount ---------------- ---------------- ----------------- ---------------- ----------------- Class A Shares sold 847,779 $ 4,222,009 1,288,493 $ 6,184,887 Shares issued in connection with the reinvestment of: Dividends from net investment income 102,065 509,192 229,520 1,097,920 ---------------- ----------------- ---------------- ----------------- 949,844 4,731,201 1,518,013 7,282,807 Shares repurchased (1,183,263) (5,912,615) (1,529,706) (7,301,820) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (233,419) $ (1,181,414) (11,693) $ (19,013) ---------------- ----------------- ---------------- ----------------- Class B Shares sold 77,184 $ 384,260 226,956 $ 1,090,578 Shares issued in connection with the reinvestment of: Dividends from net investment income 43,954 219,549 117,713 563,684 ---------------- ----------------- ---------------- ----------------- 121,138 603,809 344,669 1,654,262 Shares repurchased (658,177) (3,299,176) (1,651,156) (7,900,417) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (537,039) $ (2,695,367) (1,306,487) $ (6,246,155) ---------------- ----------------- ---------------- ----------------- Class C Shares sold 120,564 $ 599,408 84,117 $ 402,199 Shares issued in connection with the reinvestment of: Dividends from net investment income 8,477 42,352 16,780 80,318 ---------------- ----------------- ---------------- ----------------- 129,041 641,760 100,897 482,517 Shares repurchased (85,517) (432,367) (174,710) (834,207) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) 43,524 $ 209,393 (73,813) $ (351,690) ---------------- ----------------- ---------------- ----------------- Increase (decrease) derived from capital shares transactions (726,934) $ (3,667,388) (1,391,993) $ (6,616,858) ================ ================= ================ =================
62 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 11. Capital Shares (continued). Six Months Ended March 31, 2005 (unaudited) ----------------------------------- Limited Term Government and Agency Fund Shares Amount --------------------------------------- ---------------- ----------------- Class A Shares sold 598,532 $ 6,737,910 Shares issued--merger 4,449,445 49,566,819 Shares issued in connection with the reinvestment of: Dividends from net investment income 88,888 998,099 ---------------- ----------------- 5,136,865 57,302,828 Shares repurchased (1,068,135) (12,001,774) ---------------- ----------------- Net increase (decrease) 4,068,730 $ 45,301,054 ---------------- ----------------- Class B Shares sold 37,526 $ 419,794 Shares issued--merger 834,917 9,275,925 Shares issued in connection with the reinvestment of: Dividends from net investment income 7,370 82,578 ---------------- ----------------- 879,813 9,778,297 Shares repurchased (205,886) (2,308,872) ---------------- ----------------- Net increase (decrease) 673,927 $ 7,469,425 ---------------- ----------------- Class C Shares sold 37,742 $ 423,460 Shares issued in connection with the reinvestment of: Dividends from net investment income 3,776 42,385 ---------------- ----------------- 41,518 465,845 Shares repurchased (112,435) (1,263,790) ---------------- ----------------- Net increase (decrease) (70,917) $ (797,945) ---------------- ----------------- Class Y Shares sold 4,887 $ 55,255 Shares issued--merger 356 3,981 Shares issued in connection with the reinvestment of: Dividends from net investment income 2,452 27,739 ---------------- ----------------- 7,695 86,975 Shares repurchased (335,998) (3,803,216) ---------------- ----------------- Net increase (decrease) (328,303) $ (3,716,241) ---------------- ----------------- Increase (decrease) derived from capital shares transactions 4,343,437 $ 48,256,293 ================ =================
Year Ended September 30, 2004 ----------------------------------- Limited Term Government and Agency Fund Shares Amount --------------------------------------- ---------------- ----------------- Class A Shares sold 1,157,697 $ 13,126,606 Shares issued--merger -- -- Shares issued in connection with the reinvestment of: Dividends from net investment income 239,161 2,713,978 ---------------- ----------------- 1,396,858 15,840,584 Shares repurchased (2,142,804) (24,327,014) ---------------- ----------------- Net increase (decrease) (745,946) $ (8,486,430) ---------------- ----------------- Class B Shares sold 134,092 $ 1,517,724 Shares issued--merger -- -- Shares issued in connection with the reinvestment of: Dividends from net investment income 25,006 283,349 ---------------- ----------------- 159,098 1,801,073 Shares repurchased (537,206) (6,100,694) ---------------- ----------------- Net increase (decrease) (378,108) $ (4,299,621) ---------------- ----------------- Class C Shares sold 106,715 $ 1,211,584 Shares issued in connection with the reinvestment of: Dividends from net investment income 12,725 144,384 ---------------- ----------------- 119,440 1,355,968 Shares repurchased (260,938) (2,968,972) ---------------- ----------------- Net increase (decrease) (141,498) $ (1,613,004) ---------------- ----------------- Class Y Shares sold 57,198 $ 653,419 Shares issued--merger -- -- Shares issued in connection with the reinvestment of: Dividends from net investment income 18,709 213,178 ---------------- ----------------- 75,907 866,597 Shares repurchased (298,779) (3,409,632) ---------------- ----------------- Net increase (decrease) (222,872) $ (2,543,035) ---------------- ----------------- Increase (decrease) derived from capital shares transactions (1,488,424) $ (16,942,090) ================ =================
63 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 11. Capital Shares (continued). Six Months Ended March 31, 2005 Year Ended (unaudited) September 30, 2004 ----------------------------------- ----------------------------------- Massachusetts Tax Free Income Fund Shares Amount Shares Amount ---------------------------------- ---------------- ----------------- ---------------- ----------------- Class A Shares sold 51,212 $ 853,267 92,298 $ 1,517,739 Shares issued in connection with the reinvestment of: Dividends from net investment income 62,094 1,031,859 138,812 2,281,926 ---------------- ----------------- ---------------- ----------------- 113,306 1,885,126 231,110 3,799,665 Shares repurchased (312,166) (5,176,202) (583,207) (9,546,927) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (198,860) $ (3,291,076) (352,097) $ (5,747,262) ---------------- ----------------- ---------------- ----------------- Class B Shares sold 1,673 $ 27,939 6,385 $ 104,899 Shares issued in connection with the reinvestment of: Dividends from net investment income 2,305 38,226 5,985 98,181 ---------------- ----------------- ---------------- ----------------- 3,978 66,165 12,370 203,080 Shares repurchased (25,898) (429,291) (122,073) (2,004,356) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (21,920) $ (363,126) (109,703) $ (1,801,276) ---------------- ----------------- ---------------- ----------------- Increase (decrease) derived from capital shares transactions (220,780) $ (3,654,202) (461,800) $ (7,548,538) ================ ================= ================ =================
64 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 11. Capital Shares (continued). Six Months Ended March 31, 2005 Year Ended (unaudited) September 30, 2004 ----------------------------------- ----------------------------------- Municipal Income Fund Shares Amount Shares Amount --------------------- ---------------- ----------------- ---------------- ----------------- Class A Shares sold 186,375 $ 1,396,149 562,771 $ 4,169,045 Shares issued in connection with the reinvestment of: Dividends from net investment income 178,427 1,334,519 431,284 3,197,822 ---------------- ----------------- ---------------- ----------------- 364,802 2,730,668 994,055 7,366,867 Shares repurchased (973,208) (7,285,715) (3,170,451) (23,420,778) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (608,406) $ (4,555,047) (2,176,396) $ (16,053,911) ---------------- ----------------- ---------------- ----------------- Class B Shares sold 55,720 $ 417,891 128,884 $ 956,534 Shares issued in connection with the reinvestment of: Dividends from net investment income 10,174 76,193 27,197 201,837 ---------------- ----------------- ---------------- ----------------- 65,894 494,084 156,081 1,158,371 Shares repurchased (185,034) (1,389,822) (409,784) (3,040,646) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) (119,140) $ (895,738) (253,703) $ (1,882,275) ---------------- ----------------- ---------------- ----------------- Increase (decrease) derived from capital shares transactions (727,546) $ (5,450,785) (2,430,099) $ (17,936,186) ================ ================= ================ =================
65 NOTES TO FINANCIAL STATEMENTS (continued) For the Six Months Ended March 31, 2005 (unaudited) 11. Capital Shares (continued). Six Months Ended March 31, 2005 Year Ended (unaudited) September 30, 2004 ----------------------------------- ----------------------------------- Strategic Income Fund Shares Amount Shares Amount --------------------- ---------------- ----------------- ---------------- ----------------- Class A Shares sold 21,537,213 $ 303,193,019 18,605,688 $ 246,707,247 Shares issued in connection with the reinvestment of: Dividends from net investment income 606,156 8,538,669 769,347 10,148,557 ---------------- ----------------- ---------------- ----------------- 22,143,369 311,731,688 19,375,035 256,855,804 Shares repurchased (3,782,596) (53,247,385) (5,231,023) (68,866,251) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) 18,360,773 $ 258,484,303 14,144,012 $ 187,989,553 ---------------- ----------------- ---------------- ----------------- Class B Shares sold 1,617,407 $ 22,785,310 2,393,606 $ 31,720,078 Shares issued in connection with the reinvestment of: Dividends from net investment income 140,266 1,981,848 330,396 4,369,393 ---------------- ----------------- ---------------- ----------------- 1,757,673 24,767,158 2,724,002 36,089,471 Shares repurchased (1,427,008) (20,113,600) (2,654,105) (34,998,138) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) 330,665 $ 4,653,558 69,897 $ 1,091,333 ---------------- ----------------- ---------------- ----------------- Class C Shares sold 17,343,919 $ 244,858,053 14,515,841 $ 193,058,623 Shares issued in connection with the reinvestment of: Dividends from net investment income 167,537 2,366,765 242,679 3,207,880 ---------------- ----------------- ---------------- ----------------- 17,511,456 247,224,818 14,758,520 196,266,503 Shares repurchased (1,266,926) (17,861,702) (1,236,758) (16,245,858) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) 16,244,530 $ 229,363,116 13,521,762 $ 180,020,645 ---------------- ----------------- ---------------- ----------------- Class Y Shares sold 1,313,377 $ 18,470,619 850,431 $ 11,206,980 Shares issued in connection with the reinvestment of: Dividends from net investment income 12,444 175,307 14,335 188,666 ---------------- ----------------- ---------------- ----------------- 1,325,821 18,645,926 864,766 11,395,646 Shares repurchased (85,815) (1,206,361) (240,560) (3,177,333) ---------------- ----------------- ---------------- ----------------- Net increase (decrease) 1,240,006 $ 17,439,565 624,206 $ 8,218,313 ---------------- ----------------- ---------------- ----------------- Increase (decrease) derived from capital shares transactions 36,175,974 $ 509,940,542 28,359,877 $ 377,319,844 ================ ================= ================ =================
66 Item 2. Code of Ethics. Not applicable Item 3. Audit Committee Financial Expert. Not applicable Item 4. Principal Accountant Fees and Services. Not applicable Item 5. Audit Committee of Listed Registrants. Not applicable Item 6. Schedule of Investments. Included as part of the Report to Shareholders filed as Item 1 herewith. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable Item 8. Portfolio Managers of Closed-End Management Investment Companies Not applicable Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. Not applicable Item 10. Submission of Matters to a Vote of Securities Holders. There were no material changes to the procedures by which shareholders may recommend nominees to the Trust's Board of Trustees. Item 11. Controls and Procedures. The Trust's principal executive officer and principal financial officer have concluded that the Trust's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Trust IIn this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses in the Trust's internal controls or in other factors that could significantly affect the Trust's internal controls subsequent to the date of their evaluation. Item 12. Exhibits. (a) (1) Not applicable (a) (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 30a-2 under the Investment Company Act of 1940 (17 CFR 270.30a-2), as herewith as exhibit (a)(2)(1) and a(2)(2), respectively (a) (3) Not applicable. (b) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 are filed herewith as Exhibit (b)(1) and (b)(2), respectively. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IXIS Advisor Funds Trust II By: /s/ John T. Hailer ----------------------------------------- Name: John T. Hailer Title: President and Chief Executive Officer Date: May 23, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ John T. Hailer ----------------------------------------- Name: John T. Hailer Title: President and Chief Executive Officer Date: May 23, 2005 By: /s/ Michael C. Kardok ----------------------------------------- Name: Michael C. Kardok Title: Treasurer Date: May 23, 2005