-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EhDxdSFsrMz5coaiI008nZvgr9Km3N/HlQ6WZP6Xd0vEAX/xdvoexaryRJnWU2UI FtU52ncc7FN+FsP610LjCQ== 0001193125-06-122859.txt : 20060601 0001193125-06-122859.hdr.sgml : 20060601 20060601165707 ACCESSION NUMBER: 0001193125-06-122859 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060601 DATE AS OF CHANGE: 20060601 EFFECTIVENESS DATE: 20060601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IXIS Advisor Funds Trust II CENTRAL INDEX KEY: 0000052136 IRS NUMBER: 041990692 STATE OF INCORPORATION: MA FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-00242 FILM NUMBER: 06880646 BUSINESS ADDRESS: STREET 1: 399 BOYLSTON STREET CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 800-399-7788 MAIL ADDRESS: STREET 1: 399 BOYLSTON STREET CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: CDC NVEST FUNDS TRUST II DATE OF NAME CHANGE: 20010503 FORMER COMPANY: FORMER CONFORMED NAME: NVEST FUNDS TRUST II DATE OF NAME CHANGE: 20000202 FORMER COMPANY: FORMER CONFORMED NAME: NEW ENGLAND FUNDS TRUST II DATE OF NAME CHANGE: 19940615 0000052136 S000008034 Loomis Sayles Massachusetts Tax Free Income Fund C000021806 Class A NEFMX C000021807 Class B NEMBX N-CSRS 1 dncsrs.txt IXIS ADVISOR FUNDS 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 Date of reporting period: March 31, 2006 Item 1. Reports to Stockholders. The Registrant's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: [LOGO] Income Funds Semiannual Report March 31, 2006 [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 Portfolio 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. - -------------------------------------------------------------------------------- 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 - -------------------------------------------------------------------------------- Corporate earnings continued to grow with the U.S. economy as a whole, improving corporate balance sheets and stimulating demand for high-yield corporate bonds. Bonds with longer maturities tended to outperform short- and intermediate-term issues, which remained under pressure as the Federal Reserve Board continued to raise interest rates in an effort to contain inflation. For the six months ended March 31, 2006, Loomis Sayles Core Plus Bond Fund's Class A shares returned 0.42% at net asset value, including $0.38 in dividends reinvested during the period. The fund's benchmark, the Lehman Aggregate Bond Index, returned -0.06% for the same period, while Morningstar's Intermediate-Term Bond category averaged a -0.11% return. At the end of March, the fund's 30-day SEC yield was 4.42%. HIGHER-YIELDING BONDS AND LOWER WEIGHTINGS IN TREASURIES WERE POSITIVE Higher-yielding corporate bonds were the best performers during the period, and the fund's emphasis on this sector helped it outperform its benchmark. As the economic recovery advanced, investors bid up prices on lower-quality bonds, attracted by their income advantage over Treasury issues. The fund's relatively minor exposure to Treasuries and other top-quality bonds was also a plus, as rising interest rates and falling bond prices caused these issues to lag. However, bonds backed by commercial mortgages did well, and the fund's relatively small position in better-performing government agency issues and mortgage-backed bonds was a slight negative. CABLE AND TELECOM WERE STRONG, AUTOS AND SUPERMARKETS RECOVERED Cable company bonds strengthened as investors raised their estimates of the value of subscriber accounts. At the same time, the threats of leveraged buyouts (LBOs) in the industry diminished during the period. Because they are often financed by heavy borrowing, LBOs add to corporate debt and may erode companies' credit ratings. Telecommunications issues also moved higher as yields declined, aiding results of bonds maturing in the 20- to 30-year range. Bonds of General Motors and Ford recovered from low valuations that reflected the U.S. auto industry's difficulties. GM's decision to raise needed cash by selling off part of its GMAC credit division had a positive effect on the industry as a whole. Supermarket chain Albertson's bonds fell when the company put itself up for sale. We took advantage of the slump to purchase the bonds and were rewarded when prices rebounded. COMPANY-SPECIFIC ISSUES, HOMEBUILDERS AND FEDERAL AGENCIES HURT Georgia Pacific detracted from the fund's performance after Koch Industries announced plans for a leveraged buyout of the venerable paper company. AOL Time Warner bonds also hurt fund performance when financier Carl Icahn took a position in the stock and pressured management to initiate shareholder friendly activity that hurt bondholders. Homebuilders also detracted from the fund's results as rising interest rates began to slow the residential housing market. RISING INTEREST RATES MAY SLOW ECONOMY The cumulative effect of the Federal Reserve's interest rate hikes could cause economic growth to slow later this year, perhaps causing high-yield issues to back down after their long climb. With that possibility in mind, we may lighten exposure to this volatile sector and await buying opportunities. Any economic slowdown might also cause the dollar to weaken and make non-dollar commitments more attractive. Over this period, our emphasis was divided between long- and short-maturity bonds, with less focus on intermediate-term issues. This "barbell" approach was beneficial as bonds in the 20- to 30-year range outperformed the five- to ten-year segment. In addition, short-term issues may benefit if the Fed concludes its tightening cycle. However, we reduced holdings of longer-term Treasury issues in the belief that continuing economic expansion domestically and rising rates overseas could push U.S. interest rates higher. The possibility of higher rates also led us to trim the portfolio's duration, reducing its sensitivity to changing interest rates. 1 LOOMIS SAYLES CORE PLUS BOND FUND Investment Results through March 31, 2006 - -------------------------------------------------------------------------------- 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/7/ [CHART] March 31, 1996 through March 31, 2006 Net Asset Maximum Sales Lehman Aggregate Lehman U.S. Value/1/ Charge/2/ Bond Index/3/ Credit Index /4/ ---------- ------------- ---------------- ---------------- 3/31/1996 $10,000 $ 9,550 $10,000 $10,000 4/30/1996 9,916 9,470 9,944 9,917 5/31/1996 9,907 9,461 9,924 9,900 6/30/1996 10,052 9,599 10,057 10,045 7/31/1996 10,077 9,623 10,084 10,064 8/31/1996 10,077 9,623 10,067 10,033 9/30/1996 10,311 9,847 10,243 10,246 10/31/1996 10,573 10,097 10,470 10,526 11/30/1996 10,827 10,340 10,649 10,751 12/31/1996 10,702 10,220 10,550 10,602 1/31/1997 10,762 10,277 10,582 10,617 2/28/1997 10,829 10,342 10,609 10,662 3/31/1997 10,668 10,188 10,491 10,496 4/30/1997 10,785 10,300 10,648 10,655 5/31/1997 10,931 10,439 10,749 10,775 6/30/1997 11,123 10,623 10,876 10,928 7/31/1997 11,571 11,050 11,170 11,328 8/31/1997 11,374 10,862 11,075 11,161 9/30/1997 11,600 11,078 11,238 11,356 10/31/1997 11,710 11,183 11,401 11,500 11/30/1997 11,764 11,235 11,453 11,565 12/31/1997 11,885 11,351 11,569 11,687 1/31/1998 12,044 11,502 11,717 11,826 2/28/1998 12,082 11,538 11,708 11,822 3/31/1998 12,157 11,610 11,749 11,866 4/30/1998 12,213 11,663 11,810 11,941 5/31/1998 12,337 11,782 11,922 12,082 6/30/1998 12,383 11,826 12,023 12,172 7/31/1998 12,351 11,795 12,049 12,160 8/31/1998 12,229 11,678 12,245 12,217 9/30/1998 12,701 12,129 12,531 12,613 10/31/1998 12,567 12,002 12,465 12,418 11/30/1998 12,817 12,241 12,536 12,653 12/31/1998 12,838 12,260 12,574 12,689 1/31/1999 12,977 12,393 12,663 12,815 2/28/1999 12,714 12,142 12,442 12,511 3/31/1999 12,890 12,310 12,511 12,599 4/30/1999 12,992 12,407 12,551 12,636 5/31/1999 12,710 12,138 12,441 12,467 6/30/1999 12,628 12,060 12,401 12,402 7/31/1999 12,579 12,013 12,349 12,333 8/31/1999 12,529 11,965 12,342 12,303 9/30/1999 12,741 12,167 12,486 12,437 10/31/1999 12,770 12,195 12,532 12,494 11/30/1999 12,789 12,214 12,531 12,507 12/31/1999 12,796 12,220 12,470 12,441 1/31/2000 12,742 12,168 12,429 12,397 2/29/2000 12,886 12,306 12,580 12,512 3/31/2000 13,062 12,474 12,745 12,619 4/30/2000 12,822 12,245 12,709 12,508 5/31/2000 12,727 12,154 12,703 12,461 6/30/2000 13,113 12,523 12,967 12,774 7/31/2000 13,190 12,597 13,085 12,929 8/31/2000 13,360 12,759 13,275 13,097 9/30/2000 13,380 12,778 13,358 13,166 10/31/2000 13,304 12,705 13,447 13,179 11/30/2000 13,430 12,826 13,667 13,350 12/31/2000 13,742 13,124 13,920 13,609 1/31/2001 14,083 13,449 14,148 13,982 2/28/2001 14,222 13,582 14,271 14,104 3/31/2001 14,239 13,598 14,343 14,191 4/30/2001 14,158 13,521 14,283 14,140 5/31/2001 14,249 13,607 14,369 14,269 6/30/2001 14,253 13,612 14,423 14,342 7/31/2001 14,614 13,956 14,746 14,716 8/31/2001 14,776 14,111 14,915 14,913 9/30/2001 14,714 14,052 15,089 14,892 10/31/2001 15,004 14,328 15,404 15,261 11/30/2001 14,905 14,234 15,192 15,128 12/31/2001 14,738 14,074 15,096 15,025 1/31/2002 14,704 14,042 15,218 15,152 2/28/2002 14,646 13,987 15,365 15,266 3/31/2002 14,487 13,835 15,110 14,984 4/30/2002 14,623 13,965 15,403 15,193 5/31/2002 14,746 14,082 15,533 15,394 6/30/2002 14,390 13,743 15,668 15,419 7/31/2002 14,223 13,583 15,857 15,411 8/31/2002 14,548 13,893 16,125 15,810 9/30/2002 14,596 13,939 16,386 16,111 10/31/2002 14,514 13,861 16,311 15,924 11/30/2002 14,790 14,124 16,307 16,130 12/31/2002 15,157 14,475 16,644 16,606 1/31/2003 15,241 14,556 16,658 16,660 2/28/2003 15,461 14,765 16,888 16,993 3/31/2003 15,506 14,808 16,875 17,005 4/30/2003 15,738 15,030 17,014 17,320 5/31/2003 16,052 15,329 17,332 17,866 6/30/2003 16,077 15,354 17,297 17,822 7/31/2003 15,526 14,827 16,716 17,062 8/31/2003 15,675 14,969 16,827 17,196 9/30/2003 16,126 15,401 17,272 17,797 10/31/2003 16,086 15,362 17,111 17,607 11/30/2003 16,184 15,456 17,152 17,688 12/31/2003 16,446 15,706 17,327 17,885 1/31/2004 16,588 15,841 17,466 18,066 2/29/2004 16,715 15,963 17,655 18,293 3/31/2004 16,841 16,083 17,787 18,470 4/30/2004 16,411 15,673 17,325 17,888 5/31/2004 16,267 15,535 17,255 17,762 6/30/2004 16,366 15,630 17,353 17,837 7/31/2004 16,551 15,806 17,525 18,057 8/31/2004 16,882 16,122 17,859 18,483 9/30/2004 16,978 16,214 17,907 18,587 10/31/2004 17,163 16,391 18,058 18,767 11/30/2004 17,129 16,358 17,914 18,579 12/31/2004 17,285 16,507 18,078 18,822 1/31/2005 17,326 16,547 18,192 18,971 2/28/2005 17,309 16,530 18,084 18,859 3/31/2005 17,084 16,315 17,992 18,624 4/30/2005 17,156 16,384 18,235 18,874 5/31/2005 17,315 16,536 18,432 19,138 6/30/2005 17,430 16,645 18,533 19,290 7/31/2005 17,381 16,599 18,364 19,097 8/31/2005 17,558 16,768 18,600 19,387 9/30/2005 17,390 16,607 18,408 19,097 10/31/2005 17,268 16,491 18,262 18,888 11/30/2005 17,332 16,552 18,343 19,003 12/31/2005 17,474 16,688 18,517 19,190 1/31/2006 17,532 16,743 18,519 19,151 2/28/2006 17,595 16,803 18,580 19,236 3/31/2006 17,456 16,670 18,398 18,966 Average Annual Total Returns -- March 31, 2006
6 MONTHS/7/ 1 YEAR/7/ 5 YEARS/7/ 10 YEARS/7/ CLASS A (Inception 11/7/73) Net Asset Value/1/ 0.42% 2.23% 4.16% 5.73% With Max Sales Charge/2/ -4.11 -2.39 3.21 5.24 CLASS B (Inception 9/13/93) Net Asset Value/1/ 0.11 1.47 3.42 4.95 With CDSC/5/ -4.75 -3.38 3.09 4.95 CLASS C (Inception 12/30/94) Net Asset Value/1/ 0.02 1.38 3.40 4.94 With CDSC/5/ -0.95 0.41 3.40 4.94 CLASS Y (Inception 12/30/94) Net Asset Value/1/ 0.56 2.48 4.56 6.06 - ------------------------------------------------------------------------------------ COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Lehman Aggregate Bond Index/3/ -0.06% 2.26% 5.11% 6.29% Lehman U.S. Credit Index/4/ -0.69 1.84 5.97 6.61 Morningstar Int.-Term Bond Fund Avg./6/ -0.11 1.89 4.56 5.55
All returns represent past performance and do not guarantee future results. Periods of less than one year are not annualized. Share price and return will vary and you may have a gain or loss when you sell your shares. All results include reinvestment of 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 3/31/06 9/30/05 - ---------------------------------------------------- Aaa 56.4 51.4 - ---------------------------------------------------- Aa 2.0 0.3 - ---------------------------------------------------- A 2.4 3.3 - ---------------------------------------------------- Baa 16.3 22.5 - ---------------------------------------------------- Ba 12.4 15.8 - ---------------------------------------------------- B 4.6 2.7 - ---------------------------------------------------- Not rated* 3.4 2.2 - ---------------------------------------------------- Short-Term Investments & Other 2.5 1.8 - ----------------------------------------------------
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 3/31/06 9/30/05 - -------------------------------------------------- 1 year or less 10.9 6.0 - -------------------------------------------------- 1-5 years 38.2 46.1 - -------------------------------------------------- 5-10 years 36.0 31.8 - -------------------------------------------------- 10+ years 14.9 16.1 - -------------------------------------------------- Average Effective Maturity 7.3 years 6.8 years - --------------------------------------------------
Portfolio characteristics will vary. NOTES TO CHARTS /1/Does not include a sales charge. /2/Includes the maximum sales charge of 4.50%. /3/Lehman Aggregate Bond Index is an unmanaged index of investment-grade bonds with one- to ten-year maturities issued by the U.S. government, its agencies and U.S. corporations. /4/Lehman U.S. Credit Index is an unmanaged index that includes all publicly issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, 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, 0%. 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/reimbursements, 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 performed well during the six months ended March 31, 2006, as investors continued to pursue high current income. Convertible bonds, which convey the right to be converted to the issuer's common stocks, also performed well, as did selected investments denominated in certain foreign currencies. These factors and good security selection helped Loomis Sayles High Income Fund outperform its benchmark and place in the upper half of Morningstar's group of comparable funds. For the fiscal period ended March 31, 2006, the fund's total return based on the net asset value of Class A shares was 6.20%, including $0.17 in reinvested dividends. The fund's benchmark, the Lehman High Yield Composite Index, returned 3.58% for the period, while Morningstar's High Yield Bond category averaged 3.46%. At the end of March the fund's 30-day SEC yield was 5.95%. HIGH-YIELD AND CONVERTIBLE BONDS, AND SELECTED FOREIGN HOLDINGS WERE STRONG High-yield bonds denominated in U.S. dollars benefited as the expanding domestic economy bolstered confidence in the business prospects and financial strength of corporate issuers. Convertible issues also attracted buyers as the underlying stocks rose in value. Fund performance received added impetus from investments in Latin American countries where currencies were strong. The fund's highest-quality domestic bonds were relatively weak. CONVERTIBLES IN AIRLINES, ELECTRONICS AND DRUGS CONTRIBUTED The fund's top-performing individual issues included American Airlines convertible bonds. The price of these issues rebounded along with the carrier's common stock, as oil prices retreated from post-Katrina highs. The airline industry in general benefited from a sharp drop in the cost of jet fuel in the first three months of 2006, and many carriers raised prices while trimming services, improving profit margins. The fund's convertible bonds issued by Level 3 Communications also rose with the underlying equity. Level 3 offers a variety of communications services over its fiber-optic network. Increased demand for telecommunications products powered strong profitability forecasts for the company. In addition, bonds of companies in non-cyclical sectors - those seen as less vulnerable to a possible slackening of economic growth - did well over the period. For example, convertible bonds issued by Vertex Pharmaceuticals responded to investor demand for biotech companies and conventional drug makers. WEAK SECTORS AND COMPANY-SPECIFIC ISSUES HELD BACK RETURNS Weakness in some consumer cyclical areas, particularly in the auto parts and electric power industries, detracted from performance during the period. Individual issues that hurt performance included bonds issued by troubled electric power company Calpine, which filed for bankruptcy. We eliminated the position. IVAX Corporation, a maker of generic and branded pharmaceuticals, and its parent company, Israel-based Teva Pharmaceuticals, suffered from negative press and ultimately were hurt by a patent infringement lawsuit filed against both entities. OUTLOOK CALLS FOR NEAR-TERM CAUTION Our strategy has been to continue to seek opportunities in convertible securities and in bonds denominated in foreign currencies as the global economy continues to improve. Specifically, we like sovereign bonds issued by governments in Latin America. Strategically speaking, the high-yield bond market currently appears to be fairly valued. Spreads (the difference in yield between higher- and lower-quality bonds) are narrow, but within our expected range. However, from a near-term perspective, high-yield bonds appear to be vulnerable to a possible reversal. Thus, while we see some attractive opportunities in the high-yield market, we believe caution is warranted. If we see the start of an economic slowdown or a potential rise in the default rate later this year, we might shift to an even more cautious position. In the meantime, we continue to focus our efforts on careful credit research, seeking the potential for improving credit quality in select names. 3 LOOMIS SAYLES HIGH INCOME FUND Investment Results through March 31, 2006 - -------------------------------------------------------------------------------- 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/6/ [CHART] March 31, 1996 through March 31, 2006 Net Asset Maximum Sales Lehman High Yield Value/1/ Charge/2/ Composite Index/3/ --------- ------------- ----------------- 3/31/1996 $10,000 $ 9,550 $10,000 4/30/1996 10,120 9,665 10,022 5/31/1996 10,229 9,769 10,082 6/30/1996 10,295 9,831 10,166 7/31/1996 10,395 9,927 10,213 8/31/1996 10,518 10,045 10,323 9/30/1996 10,842 10,354 10,572 10/31/1996 10,818 10,332 10,653 11/30/1996 11,041 10,544 10,866 12/31/1996 11,228 10,723 10,941 1/31/1997 11,237 10,731 11,041 2/28/1997 11,630 11,107 11,226 3/31/1997 11,475 10,959 11,064 4/30/1997 11,540 11,020 11,172 5/31/1997 11,923 11,386 11,419 6/30/1997 12,000 11,460 11,578 7/31/1997 12,328 11,773 11,896 8/31/1997 12,407 11,849 11,869 9/30/1997 12,777 12,202 12,104 10/31/1997 12,665 12,095 12,115 11/30/1997 12,835 12,258 12,231 12/31/1997 12,955 12,372 12,338 1/31/1998 13,149 12,557 12,560 2/28/1998 13,130 12,540 12,633 3/31/1998 13,266 12,669 12,752 4/30/1998 13,337 12,737 12,802 5/31/1998 13,316 12,717 12,847 6/30/1998 13,361 12,760 12,893 7/31/1998 13,341 12,741 12,966 8/31/1998 12,415 11,857 12,251 9/30/1998 12,297 11,744 12,306 10/31/1998 12,039 11,497 12,054 11/30/1998 12,904 12,323 12,554 12/31/1998 12,732 12,159 12,568 1/31/1999 13,018 12,433 12,755 2/28/1999 13,100 12,511 12,680 3/31/1999 13,313 12,714 12,801 4/30/1999 13,599 12,987 13,049 5/31/1999 13,266 12,669 12,872 6/30/1999 13,229 12,633 12,845 7/31/1999 13,176 12,583 12,896 8/31/1999 12,970 12,386 12,754 9/30/1999 12,886 12,306 12,662 10/31/1999 13,002 12,417 12,578 11/30/1999 13,088 12,499 12,725 12/31/1999 13,241 12,645 12,869 1/31/2000 13,094 12,504 12,813 2/29/2000 13,153 12,561 12,838 3/31/2000 12,755 12,181 12,568 4/30/2000 12,748 12,174 12,588 5/31/2000 12,392 11,834 12,459 6/30/2000 12,768 12,193 12,713 7/31/2000 12,843 12,265 12,810 8/31/2000 12,792 12,216 12,898 9/30/2000 12,527 11,963 12,785 10/31/2000 11,902 11,366 12,375 11/30/2000 10,913 10,422 11,885 12/31/2000 11,108 10,608 12,115 1/31/2001 12,398 11,840 13,022 2/28/2001 12,336 11,781 13,196 3/31/2001 11,705 11,179 12,885 4/30/2001 11,346 10,835 12,725 5/31/2001 11,377 10,865 12,954 6/30/2001 10,724 10,241 12,590 7/31/2001 10,935 10,443 12,776 8/31/2001 10,851 10,362 12,926 9/30/2001 9,863 9,419 12,058 10/31/2001 9,755 9,316 12,356 11/30/2001 10,071 9,618 12,807 12/31/2001 9,925 9,478 12,754 1/31/2002 9,986 9,537 12,843 2/28/2002 9,683 9,247 12,664 3/31/2002 9,943 9,496 12,969 4/30/2002 9,862 9,418 13,176 5/31/2002 9,718 9,280 13,103 6/30/2002 9,023 8,617 12,137 7/31/2002 8,415 8,036 11,607 8/31/2002 8,710 8,318 11,938 9/30/2002 8,387 8,009 11,781 10/31/2002 8,383 8,005 11,678 11/30/2002 8,940 8,538 12,402 12/31/2002 9,047 8,639 12,575 1/31/2003 9,238 8,823 12,994 2/28/2003 9,368 8,946 13,154 3/31/2003 9,609 9,177 13,532 4/30/2003 10,165 9,707 14,335 5/31/2003 10,343 9,877 14,483 6/30/2003 10,566 10,091 14,900 7/31/2003 10,356 9,890 14,736 8/31/2003 10,466 9,995 14,905 9/30/2003 10,809 10,322 15,313 10/31/2003 11,039 10,542 15,622 11/30/2003 11,270 10,763 15,859 12/31/2003 11,571 11,050 16,218 1/31/2004 11,750 11,221 16,527 2/29/2004 11,698 11,172 16,486 3/31/2004 11,765 11,236 16,598 4/30/2004 11,496 10,978 16,485 5/31/2004 11,198 10,694 16,206 6/30/2004 11,440 10,925 16,438 7/31/2004 11,532 11,013 16,662 8/31/2004 11,847 11,314 16,988 9/30/2004 12,012 11,471 17,235 10/31/2004 12,277 11,725 17,546 11/30/2004 12,471 11,910 17,758 12/31/2004 12,768 12,194 18,023 1/31/2005 12,810 12,234 17,999 2/28/2005 13,107 12,518 18,264 3/31/2005 12,643 12,075 17,733 4/30/2005 12,386 11,828 17,560 5/31/2005 12,708 12,136 17,872 6/30/2005 13,010 12,425 18,223 7/31/2005 13,214 12,620 18,541 8/31/2005 13,284 12,687 18,577 9/30/2005 13,254 12,657 18,391 10/31/2005 13,089 12,500 18,263 11/30/2005 13,218 12,623 18,358 12/31/2005 13,411 12,807 18,516 1/31/2006 13,810 13,189 18,811 2/28/2006 14,022 13,391 18,937 3/31/2006 14,077 13,448 19,050 Average Annual Total Returns -- March 31, 2006
SINCE 6 MONTHS/6/ 1 YEAR/6/ 5 YEARS/6/ 10 YEARS/6/ INCEPTION/6/ CLASS A (Inception 2/22/84) Net Asset Value/1/ 6.20% 11.33% 3.76% 3.48% -- With Maximum Sales Charge/2/ 1.51 6.35 2.81 3.01 -- CLASS B (Inception 9/20/93) Net Asset Value/1/ 5.80 10.50 2.96 2.72 -- With CDSC/4/ 0.80 5.50 2.67 2.72 -- CLASS C (Inception 3/2/98) Net Asset Value/1/ 5.80 10.50 2.95 -- 0.09% With CDSC/4/ 4.80 9.50 2.95 -- 0.09 - -------------------------------------------------------------------------------------------------- SINCE CLASS C COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/7/ Lehman High Yield Composite Index/3/ 3.58% 7.43% 8.13% 6.66% 5.15% Morningstar High Yield Bond Fund Avg./5/ 3.46 6.84 6.98 5.44 3.48
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 3/31/06 9/30/05 - ---------------------------------------------------- Aaa 5.4 -- - ---------------------------------------------------- Aa 3.0 0.9 - ---------------------------------------------------- A 0.5 -- - ---------------------------------------------------- Baa 8.7 6.6 - ---------------------------------------------------- Ba 23.2 29.7 - ---------------------------------------------------- B 28.0 23.6 - ---------------------------------------------------- Caa 11.3 16.3 - ---------------------------------------------------- Ca 1.0 0.5 - ---------------------------------------------------- Not rated* 14.7 21.0 - ---------------------------------------------------- Short-Term Investments & Other 4.2 1.4 - ----------------------------------------------------
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 3/31/06 9/30/05 - -------------------------------------------------- 1 year or less 4.3 1.8 - -------------------------------------------------- 1-5 years 25.2 24.4 - -------------------------------------------------- 5-10 years 26.8 31.2 - -------------------------------------------------- 10+ years 43.7 42.6 - -------------------------------------------------- Average Effective Maturity 12.0 years 12.3 years - --------------------------------------------------
Portfolio characteristics will vary. NOTES TO CHARTS /1/Does not include a sales charge. /2/Includes the maximum sales charge of 4.50%. /3/Lehman High Yield Composite Index is a market-weighted, unmanaged index of fixed-rate, non-investment grade debt. /4/Performance for Class B shares assumes a maximum 5% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /5/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/reimbursements, without which performance would have been lower. /7/The since-inception comparative performance figures shown for Class C shares are calculated from 4/1/98. 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 - -------------------------------------------------------------------------------- From an income standpoint, Loomis Sayles Limited Term Government and Agency Fund benefited from its emphasis on mortgage- and asset-backed securities during the six months ended March 31, 2006. However, this was partially offset by the fund's relatively long duration, as short- and intermediate-term interest rates rose more during the period than longer-term rates, depressing bond prices. Based on the net asset value of Class A shares and $0.21 per share in dividends reinvested during the six-month period, the fund provided a total return of 0.40%. This was less than the fund's benchmark, the Lehman 1-5 Year Government Bond Index, which returned 0.76%, and slightly below the 0.54% average return on Morningstar's Short Government category. The fund's 30-day SEC yield at the end of March was 4.20%. HIGHER INCOME AND "BARBELL" STRUCTURE WERE POSITIVE FACTORS During the six-month period, the Federal Reserve Board raised the federal funds rate (the only interest rate the Fed directly controls) four times in increments of 0.25%, bringing the rate to 4.75%. Rates on longer-term Treasury securities also rose, but to a lesser degree, further flattening the yield curve - a description of what happens when the gap between longer- and shorter-term rates diminishes. This flattening of the yield curve benefited the fund due to its "barbell" structure, with the fund's assets concentrated at both the longer and shorter ends of the yield curve. In this way, the fund balanced higher income on one end with relative price stability on the other. The fund's emphasis on mortgage-backed securities, which typically offer higher yields than straight U.S. government bonds, also helped offset some of the effects of declining bond prices. While the growth in the housing market slowed as interest rates rose, the pace of the slowdown has been more gradual than some observers had feared, which reassured investors. LONGER DURATION OF PORTFOLIO WAS A NEGATIVE Although our strategies helped cushion the fund as interest rates rose, the price of fund shares did decline during the period. In fact, declining bond prices had a somewhat greater impact on this fund than it did on its peer group, on average, because the fund's duration (which determines its sensitivity to changes in interest rates) was slightly longer. As interest rates rose, prices of longer-term securities declined more than shorter-term securities. Longer-term U.S. Treasuries also lagged other sectors with similar maturities as a result of their lower income. Prices of U.S. government instruments, because they are of the highest credit quality, tend to be more sensitive to changes in interest rates than securities of lesser quality. Prices of the fund's mortgage-backed bonds with shorter durations also declined because short-term rates increased more than longer rates. During the final three months of calendar 2005, we trimmed the fund's allocation to U.S. Treasuries and increased its mortgage-backed holdings modestly because valuations of mortgage securities appeared more attractive. We continued to trim U.S. Treasuries in the first three months of 2006, and shifted additional assets into AAA-rated, asset-backed securities because of their yield advantage and our increasingly optimistic outlook. FUND'S MATURITY STRUCTURE REFLECTS POSITIVE LONG-TERM FORECAST We continue to maintain a slightly longer-duration portfolio than comparable funds because we believe interest rates should gradually stabilize, or even decline slightly, over the balance of the year. We also continue to emphasize sectors that respond favorably to stabilizing interest rates, such as mortgage-backed securities. Our forecast is for the yield curve to remain relatively flat for the balance of the fund's fiscal year, potentially accompanied by modest overall declines in interest rates and some increase in bond prices. Consequently, we plan to maintain the fund's emphasis on mortgage securities and its relatively long duration structure in an effort to optimize income and allow for potential price appreciation. 5 LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND Investment Results through March 31, 2006 - -------------------------------------------------------------------------------- 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/6/ [CHART] March 31, 1996 through March 31, 2006 Lehman 1-5 Year Net Asset Maximum Sales Government Bond Value/1/ Charge/2/ Index/3/ --------- ------------- ---------------- 3/31/1996 $10,000 $ 9,700 $10,000 4/30/1996 9,974 9,675 9,992 5/31/1996 9,940 9,642 9,999 6/30/1996 10,018 9,717 10,085 7/31/1996 10,040 9,738 10,121 8/31/1996 10,036 9,735 10,147 9/30/1996 10,163 9,858 10,257 10/31/1996 10,327 10,017 10,398 11/30/1996 10,456 10,142 10,495 12/31/1996 10,372 10,061 10,469 1/31/1997 10,416 10,103 10,516 2/28/1997 10,429 10,116 10,536 3/31/1997 10,375 10,064 10,505 4/30/1997 10,466 10,152 10,606 5/31/1997 10,530 10,214 10,682 6/30/1997 10,631 10,312 10,765 7/31/1997 10,807 10,482 10,920 8/31/1997 10,788 10,465 10,907 9/30/1997 10,901 10,573 11,006 10/31/1997 11,023 10,692 11,109 11/30/1997 11,041 10,710 11,131 12/31/1997 11,125 10,791 11,214 1/31/1998 11,287 10,948 11,342 2/28/1998 11,261 10,923 11,340 3/31/1998 11,241 10,904 11,379 4/30/1998 11,285 10,947 11,434 5/31/1998 11,359 11,018 11,502 6/30/1998 11,442 11,098 11,568 7/31/1998 11,456 11,113 11,617 8/31/1998 11,640 11,291 11,795 9/30/1998 11,973 11,613 12,010 10/31/1998 11,857 11,501 12,057 11/30/1998 11,820 11,465 12,031 12/31/1998 11,845 11,489 12,072 1/31/1999 11,909 11,551 12,124 2/28/1999 11,772 11,418 12,021 3/31/1999 11,827 11,472 12,105 4/30/1999 11,861 11,505 12,140 5/31/1999 11,772 11,419 12,100 6/30/1999 11,696 11,345 12,134 7/31/1999 11,640 11,290 12,154 8/31/1999 11,635 11,286 12,184 9/30/1999 11,768 11,415 12,276 10/31/1999 11,790 11,436 12,304 11/30/1999 11,802 11,448 12,320 12/31/1999 11,764 11,411 12,308 1/31/2000 11,713 11,362 12,284 2/29/2000 11,818 11,463 12,376 3/31/2000 11,964 11,605 12,475 4/30/2000 11,926 11,568 12,491 5/31/2000 11,932 11,574 12,532 6/30/2000 12,102 11,739 12,696 7/31/2000 12,163 11,798 12,779 8/31/2000 12,291 11,922 12,895 9/30/2000 12,385 12,014 13,007 10/31/2000 12,430 12,057 13,084 11/30/2000 12,599 12,221 13,235 12/31/2000 12,746 12,364 13,428 1/31/2001 12,908 12,521 13,611 2/28/2001 13,005 12,615 13,714 3/31/2001 13,087 12,694 13,822 4/30/2001 13,061 12,669 13,832 5/31/2001 13,126 12,732 13,900 6/30/2001 13,135 12,741 13,947 7/31/2001 13,380 12,978 14,151 8/31/2001 13,468 13,064 14,257 9/30/2001 13,679 13,269 14,535 10/31/2001 13,885 13,468 14,709 11/30/2001 13,704 13,293 14,612 12/31/2001 13,620 13,212 14,588 1/31/2002 13,693 13,282 14,635 2/28/2002 13,828 13,413 14,730 3/31/2002 13,629 13,220 14,577 4/30/2002 13,879 13,462 14,795 5/31/2002 13,973 13,554 14,878 6/30/2002 14,113 13,689 15,034 7/31/2002 14,314 13,885 15,268 8/31/2002 14,455 14,021 15,376 9/30/2002 14,585 14,147 15,562 10/31/2002 14,617 14,178 15,587 11/30/2002 14,550 14,113 15,502 12/31/2002 14,732 14,290 15,711 1/31/2003 14,724 14,282 15,696 2/28/2003 14,852 14,407 15,809 3/31/2003 14,842 14,397 15,833 4/30/2003 14,867 14,421 15,870 5/31/2003 14,958 14,509 16,010 6/30/2003 14,931 14,483 16,016 7/31/2003 14,620 14,182 15,804 8/31/2003 14,669 14,228 15,812 9/30/2003 14,912 14,465 16,051 10/31/2003 14,808 14,363 15,945 11/30/2003 14,848 14,402 15,938 12/31/2003 14,952 14,503 16,050 1/31/2004 15,016 14,565 16,107 2/29/2004 15,131 14,678 16,226 3/31/2004 15,189 14,733 16,309 4/30/2004 14,916 14,468 16,050 5/31/2004 14,866 14,420 16,015 6/30/2004 14,923 14,475 16,033 7/31/2004 15,006 14,556 16,118 8/31/2004 15,195 14,740 16,293 9/30/2004 15,191 14,735 16,286 10/31/2004 15,270 14,812 16,361 11/30/2004 15,201 14,745 16,243 12/31/2004 15,251 14,794 16,298 1/31/2005 15,273 14,815 16,292 2/28/2005 15,213 14,757 16,228 3/31/2005 15,168 14,713 16,206 4/30/2005 15,301 14,842 16,340 5/31/2005 15,379 14,918 16,431 6/30/2005 15,402 14,940 16,469 7/31/2005 15,333 14,873 16,378 8/31/2005 15,440 14,977 16,518 9/30/2005 15,352 14,892 16,437 10/31/2005 15,285 14,826 16,404 11/30/2005 15,330 14,871 16,465 12/31/2005 15,432 14,969 16,539 1/31/2006 15,438 14,975 16,559 2/28/2006 15,489 15,024 16,564 3/31/2006 15,414 14,955 16,561 Average Annual Total Returns -- March 31, 2006
6 MONTHS/6/ 1 YEAR/6/ 5 YEARS/6/ 10 YEARS/6/ CLASS A (Inception 1/3/89) Net Asset Value/1/ 0.40% 1.62% 3.33% 4.42% With Maximum Sales Charge/2/ -2.58 -1.40 2.70 4.11 CLASS B (Inception 9/27/93) Net Asset Value/1/ -0.04 0.79 2.62 3.72 With CDSC/4/ -4.96 -4.12 2.27 3.72 CLASS C (Inception 12/30/94) Net Asset Value/1/ 0.06 0.89 2.63 3.72 With CDSC/4/ -0.93 -0.09 2.63 3.72 CLASS Y (Inception 3/31/94) Net Asset Value/1/ 0.59 1.97 3.65 4.78 - --------------------------------------------------------------------------------- COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Lehman 1-5 Yr Gov't Bond Index/3/ 0.76% 2.19% 3.68% 5.17% Morningstar Short Gov't Fund Avg./5/ 0.54 1.77 3.12 4.50
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 3/31/06 9/30/05 - ---------------------------------------------------- Mortgage Related 57.2 55.8 - ---------------------------------------------------- Treasuries 29.0 31.0 - ---------------------------------------------------- Government Agencies 7.3 7.7 - ---------------------------------------------------- Asset Backed Securities 6.1 4.3 - ---------------------------------------------------- Short-Term Investments & Other 0.4 1.2 - ----------------------------------------------------
% of Net Assets as of EFFECTIVE MATURITY 3/31/06 9/30/05 - -------------------------------------------------- 1 year or less 26.6 9.3 - -------------------------------------------------- 1-5 years 46.9 80.9 - -------------------------------------------------- 5-10 years 22.3 5.9 - -------------------------------------------------- 10+ years 4.2 3.9 - -------------------------------------------------- Average Effective Maturity 3.8 years 3.5 years - --------------------------------------------------
Portfolio characteristics will vary. NOTES TO CHARTS /1/Does not include a sales charge. /2/Includes the maximum sales charge of 3.00%. /3/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 one and five years. /4/Performance for Class B shares assumes a maximum 5% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. Class C share performance assumes a 1.00% CDSC applied when you sell shares within one year of purchase. /5/Morningstar Short Government 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/reimbursements, without which performance would have been lower. 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. Realized capital gains are fully taxable. Some investors may be subject to the Alternative Minimum Tax (AMT). Lower-rated bonds entail higher risks. Management Discussion - -------------------------------------------------------------------------------- Loomis Sayles Massachusetts Tax Free Income Fund's total return was 0.85% for the six months ended March 31, 2006, based on the net asset value of Class A shares and $0.31 in dividends reinvested during the period. This was slightly behind the fund's nationally diversified benchmark, the Lehman Municipal Bond Index, which returned 0.98%, but above the 0.67% average return on Morningstar's Muni Massachusetts category. The fund's 30-day SEC yield at the end of March was 3.71%, equivalent to 6.01% adjusted for the combined maximum federal and Massachusetts income tax rates of 38.45%. SUPPLY/DEMAND EQUATION FAVORS MASSACHUSETTS BONDS The fund is largely composed of Massachusetts bonds, which fared well during the past six months, in part because demand was greater than supply. The spread (difference in yields) between higher- and lower-quality bonds continued to narrow during the period, which was a positive for this fund. This strength was partially offset by the fund's exposure to municipal bonds issued in Puerto Rico. Interest on these bonds is not taxable at the state or federal level, which makes them valuable for diversification purposes. However, during the fiscal period Puerto Rico's rising debt servicing costs and budgetary issues that were made public during the period unsettled investors and led to price declines. PRE-REFUNDING AND HIGH YIELDS ATTRACT MUNI BOND INVESTORS The fund's top-performing individual issues included Massachusetts Bay Transportation Authority bonds, which rose in value when they were pre-refunded during the period. Pre-refunding occurs when an issuer refinances older, higher-coupon bonds by issuing new bonds at current, lower interest rates. The proceeds are then invested in a secure investment - usually U.S. Treasury securities - effectively raising their perceived credit quality. The new bonds mature at the original issue's first call date, shortening their maturity. With the strong economy and interest rates still at low levels, investors are continuing to bid up prices on higher-yielding issues, and municipal bonds issued by Massachusetts Development Finance Agency for Mt. Holyoke College performed well for the fund. Strong demand for high tax-free income also put bonds issued by Massachusetts Health & Educational Facilities Authority for Nichols College among the fund's best performers. Although the price increase that typically occurs when a bond is pre-refunded is a positive development for bond owners, the new, shorter maturity may decrease their appeal. In the current interest-rate environment, yields on bonds with shorter maturities rose more than comparable issues with longer maturities. As a result, price appreciation on the fund's pre-refunded bonds was diminished by price declines as interest rates rose. The fund's other holdings in the middle range of the yield curve were also negatively impacted by rising interest rates. In general, our approach recently has been to increase the portfolio's average maturity slightly and to continue our focus on revenue bonds in search of higher yield. (Revenue bonds are issued by municipalities but backed by the credit of the company or institution benefiting from the financing, unlike general obligation bonds that are issued to pay for municipal projects and backed by taxpayer receipts.) Although the increase in the fund's maturity exposes it to greater price volatility, longer-term bonds generate more income. CURRENT TRENDS IN MUNICIPAL MARKET SEEM POSITIVE Credit quality trends in the municipal market appear to be stable or improving, reflecting the strength of the economy in general. We expect municipal bonds to hold their own or perhaps slightly under-perform the taxable markets if the Federal Reserve Board begins to scale back on its tightening efforts later in 2006. We will continue to look for attractive opportunities to add to the fund's income. 7 LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND Investment Results through March 31, 2006 - -------------------------------------------------------------------------------- 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/5/ [CHART] March 31, 1996 through March 31, 2006 Net Asset Maximum Sales Lehman Municipal Value/1/ Charge/2/ Bond Index/3/ --------- ------------- ---------------- 3/31/1996 $10,000 $ 9,575 $10,000 4/30/1996 9,971 9,547 9,972 5/31/1996 9,985 9,561 9,968 6/30/1996 10,080 9,651 10,076 7/31/1996 10,155 9,724 10,168 8/31/1996 10,150 9,719 10,165 9/30/1996 10,309 9,871 10,307 10/31/1996 10,417 9,974 10,424 11/30/1996 10,596 10,146 10,615 12/31/1996 10,526 10,079 10,570 1/31/1997 10,545 10,097 10,590 2/28/1997 10,646 10,194 10,687 3/31/1997 10,526 10,079 10,545 4/30/1997 10,611 10,160 10,633 5/31/1997 10,762 10,305 10,793 6/30/1997 10,874 10,412 10,908 7/31/1997 11,184 10,708 11,210 8/31/1997 11,080 10,609 11,105 9/30/1997 11,227 10,750 11,237 10/31/1997 11,282 10,803 11,309 11/30/1997 11,350 10,867 11,376 12/31/1997 11,506 11,017 11,542 1/31/1998 11,600 11,107 11,661 2/28/1998 11,583 11,091 11,664 3/31/1998 11,551 11,060 11,675 4/30/1998 11,511 11,021 11,622 5/31/1998 11,688 11,191 11,806 6/30/1998 11,729 11,230 11,852 7/31/1998 11,736 11,237 11,882 8/31/1998 11,922 11,416 12,066 9/30/1998 12,055 11,542 12,216 10/31/1998 12,005 11,495 12,216 11/30/1998 12,026 11,515 12,259 12/31/1998 12,071 11,558 12,290 1/31/1999 12,210 11,691 12,436 2/28/1999 12,154 11,638 12,381 3/31/1999 12,139 11,624 12,398 4/30/1999 12,176 11,658 12,429 5/31/1999 12,097 11,583 12,357 6/30/1999 11,900 11,394 12,180 7/31/1999 11,941 11,434 12,224 8/31/1999 11,772 11,271 12,126 9/30/1999 11,736 11,238 12,131 10/31/1999 11,572 11,080 12,000 11/30/1999 11,674 11,178 12,127 12/31/1999 11,572 11,080 12,037 1/31/2000 11,477 10,990 11,984 2/29/2000 11,620 11,126 12,124 3/31/2000 11,837 11,334 12,389 4/30/2000 11,784 11,283 12,315 5/31/2000 11,738 11,239 12,251 6/30/2000 11,974 11,465 12,576 7/31/2000 12,126 11,610 12,751 8/31/2000 12,277 11,756 12,947 9/30/2000 12,228 11,709 12,880 10/31/2000 12,327 11,803 13,021 11/30/2000 12,379 11,853 13,119 12/31/2000 12,643 12,105 13,443 1/31/2001 12,687 12,148 13,576 2/28/2001 12,731 12,190 13,619 3/31/2001 12,728 12,187 13,742 4/30/2001 12,597 12,061 13,593 5/31/2001 12,719 12,178 13,739 6/30/2001 12,809 12,265 13,831 7/31/2001 13,004 12,451 14,036 8/31/2001 13,248 12,685 14,267 9/30/2001 13,174 12,614 14,219 10/31/2001 13,296 12,731 14,389 11/30/2001 13,198 12,637 14,267 12/31/2001 13,049 12,494 14,132 1/31/2002 13,122 12,564 14,377 2/28/2002 13,270 12,706 14,551 3/31/2002 13,026 12,473 14,266 4/30/2002 13,265 12,701 14,544 5/31/2002 13,368 12,800 14,633 6/30/2002 13,523 12,948 14,787 7/31/2002 13,695 13,113 14,978 8/31/2002 13,862 13,273 15,158 9/30/2002 14,174 13,571 15,490 10/31/2002 13,916 13,324 15,233 11/30/2002 13,828 13,240 15,170 12/31/2002 14,105 13,505 15,490 1/31/2003 14,075 13,477 15,450 2/28/2003 14,296 13,688 15,666 3/31/2003 14,309 13,701 15,676 4/30/2003 14,400 13,788 15,779 5/31/2003 14,769 14,141 16,149 6/30/2003 14,703 14,078 16,080 7/31/2003 14,065 13,467 15,517 8/31/2003 14,156 13,554 15,633 9/30/2003 14,540 13,922 16,093 10/31/2003 14,516 13,899 16,012 11/30/2003 14,678 14,054 16,179 12/31/2003 14,814 14,184 16,313 1/31/2004 14,915 14,281 16,406 2/29/2004 15,134 14,491 16,653 3/31/2004 15,099 14,457 16,595 4/30/2004 14,693 14,069 16,202 5/31/2004 14,628 14,007 16,143 6/30/2004 14,646 14,023 16,202 7/31/2004 14,855 14,224 16,415 8/31/2004 15,147 14,503 16,744 9/30/2004 15,248 14,600 16,833 10/31/2004 15,385 14,731 16,978 11/30/2004 15,228 14,581 16,838 12/31/2004 15,431 14,775 17,043 1/31/2005 15,616 14,952 17,203 2/28/2005 15,552 14,891 17,146 3/31/2005 15,448 14,791 17,037 4/30/2005 15,727 15,059 17,306 5/31/2005 15,858 15,184 17,428 6/30/2005 15,925 15,248 17,537 7/31/2005 15,821 15,149 17,457 8/31/2005 15,992 15,312 17,634 9/30/2005 15,842 15,168 17,515 10/31/2005 15,718 15,050 17,408 11/30/2005 15,804 15,133 17,492 12/31/2005 15,948 15,270 17,642 1/31/2006 15,967 15,289 17,690 2/28/2006 16,098 15,414 17,809 3/31/2006 15,989 15,313 17,686 Average Annual Total Returns -- March 31, 2006
6 MONTHS/5/ 1 YEAR/5/ 5 YEARS/5/ 10 YEARS/5/ CLASS A (Inception 3/23/84) Net Asset Value/1/ 0.85% 3.44% 4.66% 4.81% With Maximum Sales Charge/2/ -3.44 -0.94 3.76 4.35 CLASS B (Inception 9/13/93) Net Asset Value/1/ 0.48 2.60 3.94 4.11 With CDSC/4/ -4.47 -2.38 3.59 4.11 - ---------------------------------------------------------------------------------------- COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Lehman Municipal Bond Index/3/ 0.98% 3.81% 5.18% 5.87% Morningstar Muni Massachusetts Fund Avg./6/ 0.67 3.03 4.37 4.98
Yields as of March 31, 2006
CLASS A CLASS B SEC 30-day Yield/7/ 3.71% 3.13% Taxable Equivalent Yield/8/ 6.01 5.07
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 3/31/06 9/30/05 - ---------------------------------------------------- Aaa 37.5 36.2 - ---------------------------------------------------- Aa 24.2 27.1 - ---------------------------------------------------- A 19.6 18.8 - ---------------------------------------------------- Baa 12.3 11.8 - ---------------------------------------------------- Not rated* 3.9 3.9 - ---------------------------------------------------- Short-Term Investments & Other 2.5 2.2 - ----------------------------------------------------
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 3/31/06 9/30/05 - -------------------------------------------------- 1 year or less 1.8 1.5 - -------------------------------------------------- 1-5 years 18.9 21.3 - -------------------------------------------------- 5-10 years 66.2 64.4 - -------------------------------------------------- 10+ years 13.1 12.8 - -------------------------------------------------- Average Effective Maturity 7.0 years 7.3 years - --------------------------------------------------
Portfolio characteristics will vary. 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 bonds issued by municipalities and other government entities having maturities of more than one year. /4/Performance for Class B shares assumes a maximum 5% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. /5/Fund performance has been increased by expense waivers/reimbursements, 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 other than the alternative minimum 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. Realized capital gains are fully taxable. Some investors may be subject to the Alternative Minimum Tax (AMT). Lower-rated bonds entail higher risks. Management Discussion - -------------------------------------------------------------------------------- Based on the net asset value of Class A shares and $0.14 in dividends, Loomis Sayles Municipal Income Fund provided a total return of 0.92% for the first half of its fiscal year, which ended March 31, 2006. This was slightly behind the fund's benchmark, the Lehman Municipal Bond Index, which returned 0.98%, and very close to the 0.93% average return on Morningstar's Muni National Long category. The fund's 30-day SEC yield at the end of March was 3.77%, equivalent to 5.79% adjusted for the maximum federal income tax rate of 35.00%. As interest rates rose during the period, price declines on some of the fund's shorter maturity bonds detracted from performance, as did its exposure to areas affected by Hurricane Katrina. However, the fund's insured municipal bonds were positive contributors, as were revenue bonds issued for healthcare and resource recovery companies. Individual security selection and demand for higher-yielding bonds were key factors. REVENUE BONDS WITH HIGH YIELDS ATTRACTED INVESTORS High yields on the Texas and Illinois revenue bonds we selected put them in demand during the period. The fund's New York revenue bonds also performed well because of strong retail demand, as improving corporate balance sheets stimulated investor interest. Revenue bonds are issued by municipalities but backed by the credit of the company or institution benefiting from the financing, unlike general obligation bonds, which use receipts from taxpayers to finance municipal projects. Most of the fund's weaker holdings were in Louisiana and Mississippi, where concerns about the recovery costs in the wake of last year's devastating storms and flood damage continue to depress municipal bond prices. The fund's Solid Waste Disposal and Pollution Control revenue bonds for Weyerhaeuser Project in Lowndes County, Mississippi were one of its weaker positions during the period. In general, bonds at the shorter end of the maturity curve declined more than longer bonds, as interest rates rose during the period. The fund's exposure to high-yielding municipal bonds issued in Puerto Rico added little to the fund's performance as a result of rising debt servicing costs and budgetary issues that were made public. PRE-REFUNDED BONDS WERE TOP PERFORMERS The fund's top-performing individual issues included South Carolina bonds issued for Greenville County School District and Indianapolis, Indiana Public Improvement Bond Bank bonds. Both of these revenue bonds rose in value when they were pre-refunded during the period. Pre-refunding occurs when an issuer refinances an older, higher-coupon bond by issuing new bonds at current, lower interest rates. The proceeds are then invested in a secure investment - usually U.S. Treasury securities - effectively raising their perceived credit rating. The new bonds mature at the original issue's first call date, shortening their maturity. Although the price appreciation that typically occurs when a bond is pre-refunded is a positive development for bond holders, the new, shorter maturity may decrease their appeal. In the current interest rate environment, yields on bonds with shorter maturities rose more than comparable issues with longer maturities. As a result, price appreciation on the fund's pre-refunded holdings was partially offset by price declines as interest rates rose. We continue to hold the Greenville School District bonds, but we sold the Indianapolis issues. TRENDS IN THE MUNICIPAL MARKETS SEEM FAVORABLE In general, credit quality trends in the municipal market seem to be stable or improving, reflecting the health of the economy. We believe this market should hold its own, or perhaps slightly under-perform the taxable markets if the Federal Reserve Board begins to scale back on its tightening efforts later in 2006. We will continue to look for attractive opportunities to add to the fund's income. 9 LOOMIS SAYLES MUNICIPAL INCOME FUND Investment Results through March 31, 2006 - -------------------------------------------------------------------------------- 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/8/ [CHART] March 31, 1996 through March 31, 2006 Net Asset Maximum Sales Lehman Municipal Value/1/ Charge/2/ Bond Index/3/ --------- ---------- ---------------- 3/31/1996 $10,000 $ 9,550 $10,000 4/30/1996 9,978 9,529 9,972 5/31/1996 9,970 9,521 9,968 6/30/1996 10,084 9,630 10,076 7/31/1996 10,157 9,700 10,168 8/31/1996 10,149 9,692 10,165 9/30/1996 10,320 9,855 10,307 10/31/1996 10,436 9,967 10,424 11/30/1996 10,595 10,118 10,615 12/31/1996 10,563 10,088 10,570 1/31/1997 10,574 10,098 10,590 2/28/1997 10,668 10,188 10,687 3/31/1997 10,532 10,058 10,545 4/30/1997 10,609 10,132 10,633 5/31/1997 10,729 10,246 10,793 6/30/1997 10,878 10,389 10,908 7/31/1997 11,172 10,669 11,210 8/31/1997 11,105 10,605 11,105 9/30/1997 11,198 10,694 11,237 10/31/1997 11,277 10,769 11,309 11/30/1997 11,312 10,803 11,376 12/31/1997 11,468 10,952 11,542 1/31/1998 11,610 11,087 11,661 2/28/1998 11,645 11,121 11,664 3/31/1998 11,662 11,137 11,675 4/30/1998 11,607 11,085 11,622 5/31/1998 11,733 11,205 11,806 6/30/1998 11,782 11,252 11,852 7/31/1998 11,802 11,271 11,882 8/31/1998 11,959 11,421 12,066 9/30/1998 12,056 11,513 12,216 10/31/1998 12,015 11,474 12,216 11/30/1998 12,065 11,522 12,259 12/31/1998 12,080 11,536 12,290 1/31/1999 12,198 11,649 12,436 2/28/1999 12,173 11,625 12,381 3/31/1999 12,177 11,629 12,398 4/30/1999 12,214 11,664 12,429 5/31/1999 12,171 11,623 12,357 6/30/1999 12,032 11,491 12,180 7/31/1999 12,069 11,525 12,224 8/31/1999 11,945 11,408 12,126 9/30/1999 11,950 11,412 12,131 10/31/1999 11,777 11,247 12,000 11/30/1999 11,888 11,353 12,127 12/31/1999 11,746 11,218 12,037 1/31/2000 11,684 11,158 11,984 2/29/2000 11,814 11,282 12,124 3/31/2000 11,996 11,456 12,389 4/30/2000 11,930 11,393 12,315 5/31/2000 11,896 11,361 12,251 6/30/2000 12,114 11,569 12,576 7/31/2000 12,248 11,697 12,751 8/31/2000 12,417 11,859 12,947 9/30/2000 12,384 11,827 12,880 10/31/2000 12,485 11,924 13,021 11/30/2000 12,570 12,005 13,119 12/31/2000 12,778 12,203 13,443 1/31/2001 12,867 12,288 13,576 2/28/2001 12,888 12,308 13,619 3/31/2001 12,993 12,409 13,742 4/30/2001 12,854 12,276 13,593 5/31/2001 12,976 12,393 13,739 6/30/2001 13,080 12,492 13,831 7/31/2001 13,309 12,710 14,036 8/31/2001 13,521 12,912 14,267 9/30/2001 13,288 12,690 14,219 10/31/2001 13,468 12,862 14,389 11/30/2001 13,322 12,723 14,267 12/31/2001 13,160 12,567 14,132 1/31/2002 13,375 12,774 14,377 2/28/2002 13,556 12,946 14,551 3/31/2002 13,334 12,734 14,266 4/30/2002 13,552 12,943 14,544 5/31/2002 13,622 13,009 14,633 6/30/2002 13,748 13,130 14,787 7/31/2002 13,836 13,214 14,978 8/31/2002 13,944 13,317 15,158 9/30/2002 14,167 13,530 15,490 10/31/2002 13,807 13,186 15,233 11/30/2002 13,785 13,165 15,170 12/31/2002 14,122 13,486 15,490 1/31/2003 13,945 13,318 15,450 2/28/2003 14,150 13,513 15,666 3/31/2003 14,143 13,507 15,676 4/30/2003 14,269 13,627 15,779 5/31/2003 14,624 13,966 16,149 6/30/2003 14,593 13,937 16,080 7/31/2003 13,960 13,332 15,517 8/31/2003 14,107 13,472 15,633 9/30/2003 14,528 13,875 16,093 10/31/2003 14,460 13,810 16,012 11/30/2003 14,647 13,988 16,179 12/31/2003 14,776 14,111 16,313 1/31/2004 14,866 14,197 16,406 2/29/2004 15,096 14,417 16,653 3/31/2004 15,086 14,407 16,595 4/30/2004 14,715 14,052 16,202 5/31/2004 14,682 14,021 16,143 6/30/2004 14,691 14,030 16,202 7/31/2004 14,880 14,211 16,415 8/31/2004 15,150 14,468 16,744 9/30/2004 15,238 14,552 16,833 10/31/2004 15,366 14,674 16,978 11/30/2004 15,229 14,544 16,838 12/31/2004 15,419 14,725 17,043 1/31/2005 15,587 14,886 17,203 2/28/2005 15,511 14,813 17,146 3/31/2005 15,412 14,718 17,037 4/30/2005 15,689 14,983 17,306 5/31/2005 15,805 15,094 17,428 6/30/2005 15,897 15,182 17,537 7/31/2005 15,798 15,087 17,457 8/31/2005 15,994 15,274 17,634 9/30/2005 15,831 15,119 17,515 10/31/2005 15,709 15,002 17,408 11/30/2005 15,800 15,089 17,492 12/31/2005 15,935 15,218 17,642 1/31/2006 15,962 15,243 17,690 2/28/2006 16,099 15,375 17,809 3/31/2006 15,978 15,260 17,686 Average Annual Total Returns -- March 31, 2006
6 MONTHS/8/ 1 YEAR/8/ 5 YEARS/8/ 10 YEARS/8/ CLASS A (Inception 5/9/77) Net Asset Value/1/ 0.92% 3.68% 4.23% 4.80% With Maximum Sales Charge/2/ -3.59 -0.99 3.27 4.32 CLASS B (Inception 9/13/93) Net Asset Value/1/ 0.55 2.91 3.48 4.05 With CDSC/4/ -4.40 -2.08 3.13 4.05 - ---------------------------------------------------------------------------------------- COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS Lehman Municipal Bond Index/3/ 0.98% 3.81% 5.18% 5.87% Morningstar Muni National Long Fund Avg./5/ 0.93 3.55 4.51 5.04
Yields as of March 31, 2006
CLASS A CLASS B SEC 30-day Yield/6/ 3.77% 3.19% Taxable Equivalent Yield/7/ 5.79 4.90
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 3/31/06 9/30/05 - ---------------------------------------------------- Aaa 29.6 35.8 - ---------------------------------------------------- Aa 12.0 12.8 - ---------------------------------------------------- A 28.7 24.3 - ---------------------------------------------------- Baa 15.3 14.6 - ---------------------------------------------------- Ba 1.0 -- - ---------------------------------------------------- Not rated* 11.4 10.7 - ---------------------------------------------------- Short-Term Investments & Other 2.0 1.8 - ----------------------------------------------------
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 3/31/06 9/30/05 - -------------------------------------------------- 1 year or less 5.0 4.7 - -------------------------------------------------- 1-5 years 6.1 6.8 - -------------------------------------------------- 5-10 years 74.4 76.6 - -------------------------------------------------- 10+ years 14.5 11.9 - -------------------------------------------------- Average Effective Maturity 8.7 years 8.6 years - --------------------------------------------------
Portfolio characteristics will vary. 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 bonds issued by municipalities and other government entities having maturities of more than one year. /4/Performance for Class B shares assumes a maximum 5% contingent deferred sales charge ("CDSC") applied when you sell shares, which declines annually between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%. /5/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. /8/Fund performance has been increased by expense waivers/reimbursements, without which performance would have been lower. 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 - -------------------------------------------------------------------------------- For the first half of its fiscal year, which ended March 31, 2006, Loomis Sayles Strategic Income Fund's Class A shares provided a total return of 3.67% at net asset value, including $0.43 in reinvested dividends. The fund's results were comfortably ahead of its benchmark, the Lehman Aggregate Bond Index, which returned -0.06% for the period. Bear in mind that the fund has greater investment flexibility than the benchmark. It also outperformed Morningstar's Multisector Bond category, which had an average return of 1.20%. The fund's 30-day SEC yield at the end of March was 4.37%. HIGH-YIELD ISSUES, CONVERTIBLES, AND COUNTRY ALLOCATIONS WERE POSITIVE High-yielding corporate bonds denominated in U.S. dollars were the top performers during the period, as investors pursuing attractive yields continued to be drawn to lower-quality issues. Stronger finances fueled by the ongoing economic expansion boosted investor confidence, even though spreads (the difference in yields) between higher- and lower-quality bonds diminished. Convertible bonds, which convey the right to be converted to the issuer's common stock, were also strong during the period. At about two-thirds of the fund's total assets, U.S. bonds dominated the portfolio. Brazilian bonds also contributed, thanks to improving market conditions and strong exports. Strength in Mexico's currency boosted the value of the fund's holdings in that country. TELECOMMUNICATIONS, PHARMACEUTICALS, AND REITS LED SECTORS Good security selection and a trend toward industry consolidation amid improving business conditions aided returns. Telecommunications giant Qwest and Vertex Pharmaceuticals, a biotechnology company, were the fund's top-performing bonds, both driven by growing corporate profits and strengthening balance sheets. Another leading contributor was Equity Residential, a real estate investment trust (REIT) issued by a major developer and operator of rental and condominium housing. IN A STRONG BOND MARKET, DISAPPOINTMENTS WERE FEW Slumping currencies tied to weak export activity and an increasing deficit caused fund holdings in Australia and New Zealand to fall as these currencies were devalued. Fund holdings impacted included European Investment Bank bonds issued in Australian dollars and bonds issued in New Zealand dollars for General Electric. The price of bonds issued by Calpine also fell when this California-based power company filed for bankruptcy. Otherwise, the only negative influences on the fund's results were minor. The fund's position in mortgage-backed and federal agency securities, which were small relative to the benchmark, had a slightly negative impact on the fund's results. FUND'S STRUCTURE ANTICIPATES AN END TO RATE HIKES We believe economic growth may start to decelerate under the weight of the Federal Reserve Board's long series of hikes in short-term interest rates. That scenario could cause rates to stabilize or even fall back a bit, which would be favorable for bond prices. Renewed strength in housing or upward pressure on wages and prices could undercut that expectation. Comparatively high interest rates in the United States will continue to attract capital from investors in countries where prevailing rates are lower. At the end of the period, the portfolio's Treasury holdings were concentrated in shorter-term issues to seek protection against further rate hikes. The other end of our "barbell" structure emphasized longer-term, high-yield bonds, where yields are likely to mute the impact of any further rate hikes. We are cautious toward corporate bonds, given their slim yield advantage over Treasury issues. High-yield issues, in particular, have recorded an impressive price rise over the past few years. Nonetheless, as long as profits continue to grow, we believe opportunities remain in the corporate sector. We may adopt a wait-and-see approach in the high-yield areas, allowing prices to fall and yields to rise before adding to the fund's commitments. At about one-sixth of the portfolio's valuation, oil-rich Canada is our largest commitment outside the United States. Allocations in the Pacific Rim include Singapore, Thailand and South Korea; the fund's holdings in Latin America, Brazil and Mexico also remain important. 11 LOOMIS SAYLES STRATEGIC INCOME FUND Investment Results through March 31, 2006 - -------------------------------------------------------------------------------- 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/7/ [CHART] March 31, 1996 through March 31, 2006 Lehman Net Asset Maximum Sales Lehman Aggregate Universal Bond Value/1/ Charge/2/ Bond Index/3/ Index/4/ --------- ------------- ---------------- --------------- 3/31/1996 $10,000 $ 9,550 $10,000 $10,000 4/30/1996 9,985 9,536 9,944 9,959 5/31/1996 10,144 9,687 9,924 9,945 6/30/1996 10,280 9,817 10,057 10,078 7/31/1996 10,259 9,797 10,084 10,107 8/31/1996 10,448 9,978 10,067 10,104 9/30/1996 10,814 10,327 10,243 10,289 10/31/1996 11,123 10,622 10,470 10,503 11/30/1996 11,574 11,054 10,649 10,689 12/31/1996 11,414 10,900 10,550 10,603 1/31/1997 11,447 10,932 10,582 10,649 2/28/1997 11,628 11,104 10,609 10,686 3/31/1997 11,501 10,983 10,491 10,561 4/30/1997 11,574 11,054 10,648 10,721 5/31/1997 11,823 11,291 10,749 10,835 6/30/1997 12,092 11,547 10,876 10,967 7/31/1997 12,636 12,067 11,170 11,266 8/31/1997 12,310 11,756 11,075 11,174 9/30/1997 12,744 12,171 11,238 11,346 10/31/1997 12,477 11,915 11,401 11,454 11/30/1997 12,544 11,980 11,453 11,517 12/31/1997 12,480 11,918 11,569 11,639 1/31/1998 12,683 12,113 11,717 11,785 2/28/1998 12,916 12,334 11,708 11,794 3/31/1998 13,192 12,598 11,749 11,848 4/30/1998 13,196 12,602 11,810 11,909 5/31/1998 12,981 12,397 11,922 11,995 6/30/1998 12,774 12,200 12,023 12,073 7/31/1998 12,615 12,047 12,049 12,103 8/31/1998 11,066 10,568 12,245 12,102 9/30/1998 11,424 10,910 12,531 12,389 10/31/1998 11,548 11,028 12,465 12,338 11/30/1998 12,322 11,768 12,536 12,461 12/31/1998 12,266 11,714 12,574 12,489 1/31/1999 12,478 11,916 12,663 12,572 2/28/1999 12,299 11,746 12,442 12,373 3/31/1999 12,949 12,366 12,511 12,468 4/30/1999 13,779 13,159 12,551 12,541 5/31/1999 13,352 12,751 12,441 12,415 6/30/1999 13,390 12,788 12,401 12,393 7/31/1999 13,127 12,536 12,349 12,342 8/31/1999 12,963 12,379 12,342 12,329 9/30/1999 13,046 12,459 12,486 12,462 10/31/1999 13,155 12,563 12,532 12,514 11/30/1999 13,393 12,791 12,531 12,535 12/31/1999 13,758 13,138 12,470 12,510 1/31/2000 13,630 13,016 12,429 12,468 2/29/2000 14,167 13,529 12,580 12,627 3/31/2000 14,310 13,666 12,745 12,774 4/30/2000 13,900 13,275 12,709 12,734 5/31/2000 13,451 12,846 12,703 12,711 6/30/2000 13,964 13,336 12,967 12,985 7/31/2000 14,087 13,453 13,085 13,110 8/31/2000 14,397 13,749 13,275 13,301 9/30/2000 14,017 13,386 13,358 13,369 10/31/2000 13,446 12,841 13,447 13,422 11/30/2000 13,376 12,774 13,667 13,603 12/31/2000 13,851 13,228 13,920 13,864 1/31/2001 14,292 13,648 14,148 14,135 2/28/2001 14,270 13,628 14,271 14,254 3/31/2001 13,731 13,113 14,343 14,302 4/30/2001 13,507 12,899 14,283 14,238 5/31/2001 13,808 13,187 14,369 14,341 6/30/2001 13,771 13,151 14,423 14,382 7/31/2001 13,781 13,160 14,746 14,664 8/31/2001 14,085 13,451 14,915 14,847 9/30/2001 13,386 12,784 15,089 14,955 10/31/2001 13,702 13,086 15,404 15,255 11/30/2001 13,897 13,272 15,192 15,076 12/31/2001 13,833 13,211 15,096 14,986 1/31/2002 13,991 13,361 15,218 15,112 2/28/2002 14,159 13,521 15,365 15,253 3/31/2002 14,321 13,677 15,110 15,033 4/30/2002 14,668 14,008 15,403 15,319 5/31/2002 14,979 14,305 15,533 15,435 6/30/2002 14,741 14,077 15,668 15,491 7/31/2002 14,391 13,744 15,857 15,622 8/31/2002 14,794 14,129 16,125 15,910 9/30/2002 14,595 13,938 16,386 16,138 10/31/2002 14,885 14,215 16,311 16,083 11/30/2002 15,442 14,747 16,307 16,126 12/31/2002 15,976 15,257 16,644 16,460 1/31/2003 16,425 15,686 16,658 16,505 2/28/2003 16,868 16,109 16,888 16,740 3/31/2003 17,032 16,266 16,875 16,756 4/30/2003 18,010 17,199 17,014 16,953 5/31/2003 18,910 18,059 17,332 17,277 6/30/2003 19,149 18,287 17,297 17,274 7/31/2003 18,628 17,789 16,716 16,718 8/31/2003 18,842 17,994 16,827 16,838 9/30/2003 19,763 18,874 17,272 17,287 10/31/2003 20,210 19,300 17,111 17,163 11/30/2003 20,772 19,837 17,152 17,222 12/31/2003 21,542 20,573 17,327 17,418 1/31/2004 21,926 20,939 17,466 17,569 2/29/2004 21,910 20,925 17,655 17,742 3/31/2004 22,198 21,199 17,787 17,883 4/30/2004 21,276 20,319 17,325 17,426 5/31/2004 20,921 19,980 17,255 17,337 6/30/2004 21,319 20,359 17,353 17,448 7/31/2004 21,525 20,557 17,525 17,633 8/31/2004 22,188 21,190 17,859 17,982 9/30/2004 22,770 21,745 17,907 18,052 10/31/2004 23,309 22,260 18,058 18,217 11/30/2004 23,869 22,795 17,914 18,104 12/31/2004 24,329 23,235 18,078 18,284 1/31/2005 24,152 23,065 18,192 18,389 2/28/2005 24,468 23,367 18,084 18,314 3/31/2005 24,067 22,984 17,992 18,180 4/30/2005 23,877 22,802 18,235 18,401 5/31/2005 24,115 23,030 18,432 18,616 6/30/2005 24,569 23,463 18,533 18,743 7/31/2005 24,783 23,667 18,364 18,608 8/31/2005 25,070 23,942 18,600 18,836 9/30/2005 25,093 23,963 18,408 18,661 10/31/2005 24,844 23,726 18,262 18,511 11/30/2005 24,968 23,845 18,343 18,601 12/31/2005 25,238 24,102 18,517 18,780 1/31/2006 25,879 24,715 18,519 18,807 2/28/2006 26,161 24,984 18,580 18,882 3/31/2006 25,994 24,828 18,398 18,715 Average Annual Total Returns -- March 31, 2006
SINCE 6 MONTHS 1 YEAR 5 YEARS/7/ 10 YEARS/7/ INCEPTION/7/ CLASS A (Inception 5/1/95) Net Asset Value/1/ 3.67% 8.08% 13.63% 10.02% -- With Maximum Sales Charge/2/ -1.01 3.20 12.59 9.52 -- CLASS B (Inception 5/1/95) Net Asset Value/1/ 3.29 7.36 12.77 9.20 -- With CDSC/5/ -1.71 2.36 12.52 9.20 -- CLASS C (Inception 5/1/95) Net Asset Value/1/ 3.21 7.27 12.77 9.20 -- With CDSC/5/ 2.21 6.27 12.77 9.20 -- CLASS Y (Inception 12/1/99) Net Asset Value/1/ 3.83 8.49 13.92 -- 11.39% - --------------------------------------------------------------------------------------------- SINCE CLASS Y COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/8/ Lehman Aggregate Bond Index/3/ -0.06% 2.26% 5.11% 6.29% 6.25% Lehman U.S. Universal Bond Index/4/ 0.29 2.94 5.53 6.47 6.53 Morningstar Multisector Bond Fund Avg./6/ 1.20 4.23 7.46 6.39 6.48
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 3/31/06 9/30/05 - ---------------------------------------------------- Aaa 31.9 35.1 - ---------------------------------------------------- Aa 9.0 9.9 - ---------------------------------------------------- A 2.9 0.5 - ---------------------------------------------------- Baa 8.9 4.0 - ---------------------------------------------------- Ba 10.5 8.7 - ---------------------------------------------------- B 11.3 10.2 - ---------------------------------------------------- Caa 3.3 7.2 - ---------------------------------------------------- Ca 0.5 0.8 - ---------------------------------------------------- C 0.2 0.2 - ---------------------------------------------------- Not rated* 18.9 14.6 - ---------------------------------------------------- Short-Term Investments & Other 2.6 8.8 - ----------------------------------------------------
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 3/31/06 9/30/05 - -------------------------------------------------- 1 year or less 6.1 10.5 - -------------------------------------------------- 1-5 years 46.5 48.8 - -------------------------------------------------- 5-10 years 15.2 17.7 - -------------------------------------------------- 10+ years 32.2 23.0 - -------------------------------------------------- Average Effective Maturity 10.6 years 8.1 years - --------------------------------------------------
Portfolio characteristics will vary. NOTES TO CHARTS /1/Does not include a sales charge. /2/Includes the maximum sales charge of 4.50%. /3/Lehman Aggregate Bond Index is an unmanaged index of investment-grade bonds with one- to ten-year maturities issued by the U.S. government, its agencies and U.S. corporations. /4/Lehman U.S. 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, 0%. 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/reimbursements, without which performance would have been lower. /8/The since-inception comparative performance figures shown for Class Y are calculated from 12/1/99. 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 (SEC'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, 2005 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, 2005 through March 31, 2006. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example $8,600 account value divided by $1,000 = 8.60) and multiply the result by the number in the Expenses Paid During Period column as shown below for your Class. The second line in the table of each Class of fund shares provides information about hypothetical account values and hypothetical expenses based on the fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid on your investment for the period. You may use this information to compare the ongoing costs of investing in the fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown reflect ongoing costs only, and do not include any transaction costs such as sales charges, redemption fees, or exchange fees. Therefore, the second line in the table of each fund is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. If transaction costs were included, total costs would be higher.
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* LOOMIS SAYLES CORE PLUS BOND FUND 10/1/05 3/31/06 10/1/05 - 3/31/06 - ------------------------------------------------------------------------------------------------------------------ CLASS A - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,004.20 $5.25 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,019.70 $5.29 - ------------------------------------------------------------------------------------------------------------------ CLASS B - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,001.10 $8.98 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,015.96 $9.05 - ------------------------------------------------------------------------------------------------------------------ CLASS C - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,000.20 $8.98 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,015.96 $9.05 - ------------------------------------------------------------------------------------------------------------------ CLASS Y - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,005.60 $4.00 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,020.94 $4.03
*Expenses are equal to the fund's annualized expense ratio (after waiver/reimbursement): 1.05%, 1.80%, 1.80% and 0.80% 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 10/1/05 3/31/06 10/1/05 - 3/31/06 - ------------------------------------------------------------------------------------------------------------------ CLASS A - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,062.00 $7.09 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,018.05 $6.94 - ------------------------------------------------------------------------------------------------------------------ CLASS B - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,058.00 $10.98 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.26 $10.75 - ------------------------------------------------------------------------------------------------------------------ CLASS C - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,058.00 $10.98 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,014.26 $10.75 - ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after waiver/reimbursement): 1.38%, 2.14% and 2.14% 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 10/1/05 3/31/06 10/1/05 - 3/31/06 - ------------------------------------------------------------------------------------------------------------------- CLASS A - ------------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,004.00 $5.35 - ------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000.00 $1,019.60 $5.39 - ------------------------------------------------------------------------------------------------------------------- CLASS B - ------------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $999.60 $9.07 - ------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000.00 $1,015.86 $9.15 - ------------------------------------------------------------------------------------------------------------------- CLASS C - ------------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,000.60 $9.08 - ------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000.00 $1,015.86 $9.15 - ------------------------------------------------------------------------------------------------------------------- CLASS Y - ------------------------------------------------------------------------------------------------------------------- Actual $1,000.00 $1,005.90 $3.85 - ------------------------------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000.00 $1,021.09 $3.88 - -------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after waiver/reimbursement): 1.07%, 1.82%, 1.82% and 0.77% for Class A, B, C and Y, respectively, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 365 (to reflect the half-year period). 15 UNDERSTANDING YOUR FUNDS' EXPENSES
LOOMIS SAYLES MASSACHUSETTS TAX FREE BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD* INCOME FUND 10/1/05 3/31/06 10/1/05 - 3/31/06 - ------------------------------------------------------------------------------------------------------------------ CLASS A - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,008.50 $5.41 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,019.55 $5.44 - ------------------------------------------------------------------------------------------------------------------ CLASS B - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,004.80 $9.15 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,015.81 $9.20
*Expenses are equal to the fund's annualized expense ratio (after waiver/reimbursement): 1.08% and 1.83% 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 10/1/05 3/31/06 10/1/05 - 3/31/06 - ------------------------------------------------------------------------------------------------------------------ CLASS A - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,009.20 $5.01 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04 - ------------------------------------------------------------------------------------------------------------------ CLASS B - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,005.50 $8.75 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,016.21 $8.80
*Expenses are equal to the fund's annualized expense ratio (after waiver/reimbursement): 1.00% and 1.75% 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 10/1/05 3/31/06 10/1/05 - 3/31/06 - ------------------------------------------------------------------------------------------------------------------ CLASS A - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,036.70 $5.28 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,019.75 $5.24 - ------------------------------------------------------------------------------------------------------------------ CLASS B - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,032.90 $9.07 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,016.01 $9.00 - ------------------------------------------------------------------------------------------------------------------ CLASS C - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,032.10 $9.07 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,016.01 $9.00 - ------------------------------------------------------------------------------------------------------------------ CLASS Y - ------------------------------------------------------------------------------------------------------------------ Actual $1,000.00 $1,038.30 $4.01 - ------------------------------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000.00 $1,020.99 $3.98
*Expenses are equal to the fund's annualized expense ratio: 1.04%, 1.79%, 1.79% and 0.79% 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 -- PORTFOLIO OF INVESTMENTS Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - ---------------------------------------------------------------------------------------------- Bonds and Notes -- 97.5% of Net Assets Agencies -- 1.0% $ 2,145,000 Pemex Project Funding Master Trust, 7.875%, 2/01/2009 $ 2,254,395 --------------- Asset-Backed Securities -- 6.0% 662,271 AmeriCredit Automobile Receivables Trust, Series 2003-D-M, Class A-4, 2.840%, 8/06/2010 651,926 2,595,000 AmeriCredit Automobile Receivables Trust, Series 2005-CF, Class A-3, 4.470%, 5/06/2010 2,566,966 1,783,542 Countrywide Asset-Backed Certificates, Series 2003-5, Class AF4, 4.905%, 8/25/2032 1,776,673 790,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A2, 3.872%, 3/25/2020 775,113 1,095,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3, 4.615%, 2/25/2035 1,054,239 1,730,000 Ford Credit Auto Owner Trust, Series 2004-A, Class A4, 3.540%, 11/15/2008 1,690,680 1,800,000 Greenwich Capital Commercial Funding Corp., Series 2005-GG5, Class A2, 5.117%, 4/10/2037 1,780,525 1,850,000 Residential Asset Securities Corp., Series 2003-KS10, Class AI4, 4.470%, 3/25/2032 1,826,741 1,000,000 WFS Financial Owner Trust, Series 2004-4, Class A3, 2.980%, 9/17/2009 986,486 515,000 WFS Financial Owner Trust, Series 2004-4, Class A4, 3.440%, 5/17/2012 498,597 --------------- 13,607,946 --------------- Automotive -- 3.2% 1,645,000 Ford Motor Co., 7.450%, 7/16/2031(c) 1,221,413 1,510,000 Ford Motor Credit Co., Global Note, 5.625%, 10/01/2008(c) 1,380,887 655,000 General Motors Acceptance Corp. (MTN), 6.750%, 12/01/2014(c) 589,634 4,240,000 General Motors Acceptance Corp., 8.000%, 11/01/2031(c) 4,007,233 --------------- 7,199,167 --------------- Banking -- 1.1% 430,000 JPMorgan Chase & Co., 6.750%, 2/01/2011 452,023 715,000 JPMorgan Chase & Co., Global Subordinated Note, 5.750%, 1/02/2013 719,783 1,200,000 State Street Institutional Capital A, Series A, Guaranteed Note, 144A, 7.940%, 12/30/2026 1,263,080 --------------- 2,434,886 --------------- Brokerage -- 1.0% 2,150,000 Goldman Sachs Group, Inc., Senior Note, 6.600%, 1/15/2012 2,254,051 --------------- Chemicals -- 0.2% 600,000 Methanex Corp., Senior Note, 6.000%, 8/15/2015 563,858 --------------- Construction Machinery -- 0.8% 1,600,000 Case New Holland, Inc., Senior Note, 9.250%, 8/01/2011 1,708,000 ---------------
Principal Amount+ Description Value (a) - ----------------------------------------------------------------------------------- Electric -- 8.0% $ 1,455,000 Duke Energy Corp., Senior Note, 4.200%, 10/01/2008 $ 1,411,680 2,030,000 Empresa Nacional de Electricidad SA, Chile, 8.350%, 8/01/2013 2,246,759 1,325,000 Enersis SA, Chile, 7.375%, 1/15/2014 1,386,334 431,000,000 General Electric Capital Corp., 0.550%, 10/14/2008 (JPY) 3,624,589 271,000,000 General Electric Capital Corp. (MTN), 1.400%, 11/02/2006 (JPY) 2,318,729 3,380,000 General Electric Capital Corp. (MTN), 5.450%, 1/15/2013 3,377,458 1,325,000 Ipalco Enterprises, Inc., Senior Secured Note, 8.375%, 11/14/2008 1,384,625 1,710,000 Progress Energy, Inc., 7.100%, 3/01/2011 1,813,623 590,000 Southern California Edison Co., 7.625%, 1/15/2010 628,533 --------------- 18,192,330 --------------- Financial Services -- 1.0% 1,050,000 HSBC Finance Corp., 7.000%, 5/15/2012 1,122,312 1,185,000 Morgan Stanley, 4.000%, 1/15/2010 1,125,925 --------------- 2,248,237 --------------- Food & Beverage -- 0.8% 1,750,000 Smithfield Foods, Inc., 7.000%, 8/01/2011 1,741,250 --------------- Gaming -- 0.5% 450,000 Harrah's Operating Co., Inc., Guaranteed Senior Note, 7.500%, 1/15/2009 470,716 770,000 Harrah's Operating Co., Inc., Senior Note, 7.125%, 6/01/2007 783,044 --------------- 1,253,760 --------------- Government Agencies -- 4.4% 5,025,000 FHLMC, 2.875%, 12/15/2006 4,947,494 140,000,000 FNMA, 1.750%, 3/26/2008 (JPY) 1,214,032 3,710,000 FNMA, 5.250%, 1/15/2009(c) 3,724,796 --------------- 9,886,322 --------------- Healthcare -- 2.5% 1,655,000 Aetna, Inc., Senior Note, 7.875%, 3/01/2011 1,818,019 1,385,000 AmerisourceBergen Corp., Senior Note, 144A, 5.875%, 9/15/2015 1,362,231 575,000 Columbia/HCA, Inc., 7.500%, 12/15/2023 558,390 1,315,000 WellPoint, Inc., 3.750%, 12/14/2007 1,280,580 735,000 WellPoint, Inc., 5.250%, 1/15/2016 708,792 --------------- 5,728,012 ---------------
See accompanying notes to financial statements. 17 LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------------------------ Home Construction -- 1.4% $ 1,405,000 Desarrolladora Homex SA de CV, 7.500%, 9/28/2015 $ 1,362,850 320,000 Pulte Homes, Inc., 6.000%, 2/15/2035(c) 278,578 295,000 Pulte Homes, Inc., 6.375%, 5/15/2033 267,921 1,315,000 Pulte Homes, Inc., Senior Note, 4.875%, 7/15/2009(c) 1,280,004 --------------- 3,189,353 --------------- Industrial Other -- 1.3% 2,865,000 Aramark Services, Inc., Guaranteed Note, 7.000%, 7/15/2006 2,877,093 --------------- Insurance -- 0.3% 665,000 St. Paul Travelers Cos., Inc. (The), 5.500%, 12/01/2015 650,498 --------------- Media Cable -- 1.1% 2,000,000 CSC Holdings, Inc., Senior Note, 7.625%, 7/15/2018 1,977,500 515,000 CSC Holdings, Inc., Senior Note, 7.875%, 2/15/2018(c) 515,644 --------------- 2,493,144 --------------- Media Non-Cable -- 2.1% 1,060,000 Cox Communications, Inc., 7.750%, 11/01/2010 1,133,586 540,000 Reed Elsevier Capital, Inc., 4.625%, 6/15/2012 505,002 2,735,000 Time Warner, Inc., 7.700%, 5/01/2032 3,007,713 --------------- 4,646,301 --------------- Mortgage Backed Securities -- 4.9% 795,000 Banc of America Commercial Mortgage, Inc., Series 2005-6, Class A2, 5.165%, 9/10/2047 787,061 850,000 Banc of America Commercial Mortgage, Inc., Series 2006-1, Class A2, 5.334%, 9/10/2045 846,065 1,245,000 Bear Stearns Commercial Mortgage Securities, Inc., Series 2005-PW10, Class A2, 5.270%, 12/11/2040 1,237,816 710,000 Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2006-CD2, Class A2, 5.408%, 1/15/2046 708,118 1,500,000 GS Mortgage Securities Corp. II, Series 2005-GG4, Class A4A, 4.751%, 7/10/2039 1,413,861 1,710,000 LB-UBS Commercial Mortgage Trust, Series 2005-C3, Class A3, 4.647%, 7/15/2030 1,642,534 2,400,000 Morgan Stanley Capital I, Series 2005-T19, Class A4A, 4.890%, 6/12/2047 2,281,819 2,195,000 Wachovia Bank Commercial Mortgage Trust, Series 2005-C20, Class A2, 4.519%, 7/15/2042 2,116,332 --------------- 11,033,606 --------------- Mortgage Related -- 27.7% 2,467,001 FHLMC, 4.000%, 7/01/2019 2,303,728 7,125,056 FHLMC, 4.500%, with various maturities to 2034(d) 6,731,205
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------- Mortgage Related -- continued $ 2,983,617 FHLMC, 5.000%, 11/01/2018 $ 2,913,671 10,613,930 FHLMC, 5.000%, with various maturities to 2035(d) 10,101,307 2,005,262 FHLMC, 5.500%, with various maturities to 2018(d) 1,992,968 275,532 FHLMC, 6.000%, 6/01/2035 275,850 140,000,000 FNMA, 2.125%, 10/09/2007 (JPY) 1,217,027 968,968 FNMA, 4.000%, 6/01/2019 907,301 6,595,183 FNMA, 4.500%, with various maturities to 2035(d) 6,227,760 1,601,755 FNMA, 5.000%, 5/01/2018 1,564,763 6,581,178 FNMA, 5.000%, 7/01/2035 6,266,919 9,710,599 FNMA, 5.500%, with various maturities to 2035(d) 9,519,230 2,267,946 FNMA, 6.000%, with various maturities to 2034(d) 2,283,901 1,480,960 FNMA, 6.000%, 11/01/2034 1,481,583 3,482,827 FNMA, 6.500%, with various maturities to 2034(d) 3,558,309 331,587 FNMA, 7.000%, with various maturities to 2030(d) 341,918 413,662 FNMA, 7.500%, with various maturities to 2032(d) 432,365 1,385,689 GNMA, 5.500%, 2/20/2034 1,368,723 505,751 GNMA, 6.000%, 1/15/2029 512,528 1,145,640 GNMA, 6.500%, with various maturities to 2032(d) 1,188,409 719,002 GNMA, 7.000%, with various maturities to 2029(d) 750,001 197,986 GNMA, 7.500%, with various maturities to 2030(d) 208,196 91,741 GNMA, 8.000%, 11/15/2029 98,216 193,450 GNMA, 8.500%, with various maturities to 2023(d) 208,653 25,654 GNMA, 9.000%, with various maturities to 2016(d) 27,539 66,922 GNMA, 11.500%, with various maturities to 2015(d) 74,175 --------------- 62,556,245 --------------- Oil & Gas -- 0.5% 1,105,000 Premcor Refining Group, Inc. (The), 6.125%, 5/01/2011 1,123,470 --------------- Paper -- 2.2% 1,618,000 Abitibi-Consolidated Finance, LP, 7.875%, 8/01/2009(c) 1,605,865 1,016,000 Abitibi-Consolidated, Inc., 8.550%, 8/01/2010(c) 1,021,080 1,200,000 Georgia-Pacific Corp., 7.375%, 12/01/2025(c) 1,152,000
See accompanying notes to financial statements. 18 LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - --------------------------------------------------------------------------------------- Paper -- continued $ 755,000 Georgia-Pacific Corp., 7.750%, 11/15/2029 $ 739,900 480,000 Georgia-Pacific Corp., 8.875%, 5/15/2031 516,000 --------------- 5,034,845 --------------- Pharmaceuticals -- 2.9% 1,470,000 Caremark Rx, Inc., Senior Note, 7.375%, 10/01/2006 1,484,569 1,250,000 Medco Health Solutions, 7.250%, 8/15/2013 1,345,890 670,000 Valeant Pharmaceuticals International, Subordinated Note, 3.000%, 8/16/2010 582,063 520,000 Valeant Pharmaceuticals International, Subordinated Note, 4.000%, 11/15/2013 444,600 2,750,000 Valeant Pharmaceuticals International, Senior Note, 7.000%, 12/15/2011 2,722,500 --------------- 6,579,622 --------------- Pipelines -- 0.8% 1,639,000 Kinder Morgan Energy Partners, LP, 7.125%, 3/15/2012 1,746,841 --------------- Real Estate Investment Trusts -- 2.8% 195,000 Colonial Realty, LP, Senior Note, 4.750%, 2/01/2010 187,976 1,350,000 Colonial Realty, LP, Senior Note, 5.500%, 10/01/2015 1,292,719 1,180,000 EOP Operating, LP, Guaranteed Note, 4.650%, 10/01/2010 1,128,801 1,250,000 iStar Financial, Inc., Senior Note, 6.000%, 12/15/2010 1,257,981 1,100,000 Reckson Operating Partnership LP, 6.000%, 3/31/2016 1,091,179 1,340,000 Simon Property Group, LP, 6.375%, 11/15/2007 1,359,401 --------------- 6,318,057 --------------- Sovereigns -- 1.0% 3,685,000 Kingdom of Norway, 5.500%, 5/15/2009 (NOK) 593,142 13,015,000 Kingdom of Sweden, 4.000%, 12/01/2009 (SEK) 1,709,989 --------------- 2,303,131 --------------- Supermarkets -- 2.7% 370,000 Albertson's, Inc., 7.750%, 6/15/2026 333,534 1,535,000 Albertson's, Inc., Senior Note, 7.450%, 8/01/2029 1,355,483 610,000 Albertson's, Inc., Senior Note, 8.000%, 5/01/2031(c) 567,825 35,000 Albertson's, Inc., Senior Note, 8.700%, 5/01/2030 34,137 270,000 Albertson's, Inc., Series C, (MTN), 6.625%, 6/01/2028 217,553 125,000 American Stores Co., 8.000%, 6/01/2026 121,100 2,010,000 Delhaize America, Inc., 9.000%, 4/15/2031 2,324,937 1,015,000 Kroger Co. (The), 7.500%, 4/01/2031 1,115,462 --------------- 6,070,031 ---------------
Principal Amount+ Description Value (a) - ---------------------------------------------------------------------------------- Technology -- 0.5% $ 665,000 Corning, Inc., 6.200%, 3/15/2016 $ 664,969 440,000 Xerox Corp., 6.400%, 3/15/2016 436,700 --------------- 1,101,669 --------------- Transportation Services -- 0.1% 195,000 Overseas Shipholding Group, Senior Note, 7.500%, 2/15/2024 194,512 --------------- Treasuries -- 9.8% 1,450,000 U.S. Treasury Bond, 4.000%, 2/15/2014(c) 1,367,192 4,000,000 U.S. Treasury Bond, 5.250%, 2/15/2029(c) 4,107,188 5,015,000 U.S. Treasury Bond, 5.375%, 2/15/2031(c) 5,279,070 4,570,000 U.S. Treasury Note, 4.250%, 10/31/2007(c) 4,528,226 620,000 U.S. Treasury Note, 4.250%, 11/15/2014(c) 592,584 1,205,000 U.S. Treasury Note, 4.375%, 12/15/2010(c) 1,181,982 3,020,000 U.S. Treasury Note, 4.500%, 2/15/2016(c) 2,937,185 2,290,000 U.S. Treasury Note, 2.875%, 11/30/2006(c) 2,260,480 --------------- 22,253,907 --------------- Wireless -- 0.3% 730,000 Sprint Capital Corp., 6.125%, 11/15/2008 742,945 --------------- Wirelines -- 4.6% 1,650,000 GTE Corp., 7.900%, 2/01/2027 1,725,263 3,200,000 LCI International, Inc., Senior Note, 7.250%, 6/15/2007 3,232,000 210,000 Qwest Capital Funding, Inc., 6.500%, 11/15/2018 201,863 1,240,000 Qwest Corp., 7.200%, 11/10/2026(c) 1,247,750 850,000 Qwest Corp., 7.250%, 9/15/2025 871,250 255,000 Qwest Corp., 7.250%, 10/15/2035(c) 254,681 1,675,000 Qwest Corp., 7.500%, 6/15/2023 1,702,219 1,135,000 Sprint Capital Corp., 6.875%, 11/15/2028 1,171,018 --------------- 10,406,044 --------------- Total Bonds and Notes (Identified Cost $224,672,784) 220,393,528 ---------------
See accompanying notes to financial statements. 19 LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Shares/ Principal Amount+ Description Value (a) - ---------------------------------------------------------------------------------------------------- Short-Term Investments -- 18.1% 35,959,987 State Street Navigator Securities Lending Prime Portfolio(e) $ 35,959,987 $ 4,981,107 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 3/31/2006 at 2.95% to repurchased at $4,982,332 on 4/03/2006, collateralized by $3,680,000 U.S. Treasury Bond, 8.75% due 8/15/2020 valued at $5,084,189 4,981,107 --------------- Total Short-Term Investments (Identified Cost $40,941,094) 40,941,094 --------------- Total Investments -- 115.6% (Identified Cost $265,613,878)(b) 261,334,622 Other assets less liabilities -- (15.6)% (35,296,668) --------------- Total Net Assets -- 100% $ 226,037,954 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales. Amortization of premium on debt securities is excluded for tax purposes.): At March 31, 2006, the net unrealized depreciation on investments based on cost of $266,223,449 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value of tax cost 1,365,526 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (6,254,353) --------------- Net unrealized depreciation $ (4,888,827) =============== (c) All or a portion of this security was on loan to brokers at March 31, 2006. (d) The Fund's investment in mortgage related securities of the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Government National Mortgage Association are interests in separate pools of mortgages. All separate investments in securities of each issuer which have the same coupon rate have been aggregated for the purpose of presentation in the Portfolio of Investments. (e) Represents investment of securities lending collateral. FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association GNMA Government National Mortgage Association MTN Medium Term Note 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 $2,625,311 or 1.2% of net assets. + Principal amount is in U.S. dollars unless otherwise noted. JPY Japanese Yen NOK Norwegian Krone SEK Swedish Krona
Holdings at March 31, 2006 as a Percentage of Net Assets Mortgage Related 27.7% Treasuries 9.8 Electric 8.0 Asset-Backed Securities 6.0 Mortgage Backed Securities 4.9 Wirelines 4.6 Government Agencies 4.4 Automotive 3.2 Pharmaceuticals 2.9 Real Estate Investment Trusts 2.8 Supermarkets 2.7 Healthcare 2.5 Paper 2.2 Media Non-Cable 2.1 Others, less than 2% each 13.7
See accompanying notes to financial statements. 20 LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------------------------------ Bonds and Notes -- 89.6% of Net Assets Airlines -- 2.6% $ 35,000 AMR Corp., Senior Note, 4.500%, 2/15/2024 $ 49,000 225,000 AMR Corp., Senior Note, Convertible, 4.250%, 9/23/2023 378,844 82,157 Continental Airlines, Inc., Series 1997-4, Class 4B, 6.900%, 1/02/2017 77,185 154,100 Continental Airlines, Inc., Series 1998-1, Class 1B, 6.748%, 3/15/2017 142,547 45,655 Continental Airlines, Inc., Series 1999-1, Class C, 6.954%, 8/02/2009 42,103 148,123 Continental Airlines, Inc., Series 1999-2, Class B, 7.566%, 3/15/2020 140,232 215,952 Continental Airlines, Inc., Series 2002-2, Class B, 8.307%, 4/02/2018 207,810 --------------- 1,037,721 --------------- Automotive -- 9.7% 78,000 Delphi Automotive Systems Corp., 7.125%, 5/01/2029(d)(h)(i) 47,970 420,000 Ford Motor Co., 6.375%, 2/01/2029 279,300 815,000 Ford Motor Co., 6.625%, 10/01/2028 546,050 170,000 Ford Motor Co., 7.450%, 7/16/2031(d) 126,225 905,000 Ford Motor Credit Co., 5.700%, 1/15/2010(d) 803,118 185,000 Ford Motor Credit Co., 7.000%, 10/01/2013(d) 165,465 705,000 General Motors Acceptance Corp., (MTN), 6.750%, 12/01/2014(d) 634,645 180,000 General Motors Acceptance Corp., Series E, (MTN), 7.500%, 12/01/2006 (NZD) 107,635 405,000 General Motors Acceptance Corp., 8.000%, 11/01/2031 382,766 125,000 General Motors Acceptance Corp. of Canada, Ltd., Series E., (MTN), 6.625%, 12/17/2010 (GBP) 197,542 10,000 GMAC International Finance BV, 8.000%, 3/14/2007 (NZD) 6,051 430,000 Goodyear Tire & Rubber Co. (The), 7.857%, 8/15/2011 420,325 110,000 Tenneco Automotive, Inc., Senior Subordinated Note, 8.625%, 11/15/2014(d) 110,000 --------------- 3,827,092 --------------- Banking -- 3.5% 9,000,000 Barclays Financial LLC, 144A, 4.100%, 3/22/2010 (THB) 216,718 7,000,000 Barclays Financial LLC, 144A, 4.160%, 2/22/2010 (THB) 168,882 990,000 Citibank NA, 144A, 15.000%, 7/02/2010 (BRL) 498,797 500,000 HSBC Bank USA, 144A, 3.310%, 8/25/2010 506,500 --------------- 1,390,897 --------------- Chemicals -- 3.0% 450,000 Borden, Inc., 7.875%, 2/15/2023 372,375
Principal Amount+ Description Value (a) - -------------------------------------------------------------------------------------------- Chemicals -- continued $ 550,000 Borden, Inc., 9.200%, 3/15/2021 $ 500,500 380,000 Hercules, Inc., Subordinated Note, 6.500%, 6/30/2029 300,200 --------------- 1,173,075 --------------- Construction Machinery -- 1.6% 120,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note, 7.750%, 12/15/2013 112,200 550,000 United Rentals North America, Inc., Senior Subordinated Note, 7.000%, 2/15/2014 529,375 --------------- 641,575 --------------- Consumer Products -- 0.3% 125,000 LPG International, Inc., 144A, 7.250%, 12/20/2015 125,475 --------------- Diversified Financial Services -- 0.2% 1,436,358,000 JPMorgan Chase & Co., 144A, Zero Coupon, 3/28/2011 (IDR) 97,547 --------------- Electric -- 0.6% 40,000 Dynegy Holdings, Inc., 7.125%, 5/15/2018 36,600 90,000 NGC Corp., 7.625%, 10/15/2026 82,350 140,000 NGC Corp. Capital Trust, Series B, 8.316%, 6/01/2027 123,200 --------------- 242,150 --------------- Environmental -- 0.5% 190,000 Allied Waste North America, Series B, Senior Note, 5.750%, 2/15/2011(d) 180,975 --------------- Financial Services -- 0.7% 250,000 Astoria Depositor Corp., 144A, 8.144%, 5/01/2021 262,500 --------------- Healthcare -- 0.9% 150,000 Columbia/HCA, Inc., 7.500%, 12/15/2023 145,667 200,000 Columbia/HCA, Inc., (MTN), 7.580%, 9/15/2025 193,642 --------------- 339,309 --------------- Home Construction -- 2.4% 300,000 K Hovnanian Enterprises, Inc., 6.250%, 1/15/2015 274,858 100,000 K Hovnanian Enterprises, Inc., Senior Note, 6.250%, 1/15/2016 90,647 590,000 KB Home, 7.250%, 6/15/2018 580,467 --------------- 945,972 --------------- Independent Energy -- 1.2% 70,000 Chesapeake Energy Corp., Senior Note, 6.375%, 6/15/2015 68,863 200,000 Chesapeake Energy Corp., 144A, 6.500%, 8/15/2017 197,500 60,000 NRG Energy, Inc., 7.250%, 2/01/2014 60,975 165,000 NRG Energy, Inc., 7.375%, 2/01/2016 168,506 --------------- 495,844 ---------------
See accompanying notes to financial statements. 21 LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - -------------------------------------------------------------------------------- Integrated Energy -- 1.4% $ 265,000 Cerro Negro Finance, Ltd., 144A, 7.900%, 12/01/2020 $ 259,700 300,000 Petrozuata Finance, Inc., Series B, 144A, 8.220%, 4/01/2017 295,500 --------------- 555,200 --------------- Lodging & Gaming -- 0.2% 80,000 Host Marriott, LP, Guaranteed Note, Series O, 6.375%, 3/15/2015(d) 78,700 --------------- Media Cable -- 4.5% 550,000 CSC Holdings, Inc., Senior Note, 7.625%, 7/15/2018(d) 543,813 250,000 NTL Cable PLC, 9.750%, 4/15/2014 (GBP) 456,067 175,000 PanAmSat Corp., 6.875%, 1/15/2028 155,750 650,000 Rogers Cable, Inc., Senior Note, 5.500%, 3/15/2014 615,875 --------------- 1,771,505 --------------- Oil Field Services -- 0.3% 110,000 North American Energy Partners, Inc., Senior Note, 8.750%, 12/01/2011 107,250 --------------- Packaging -- 1.2% 350,000 Owens-Illinois, Inc., Senior Note, 7.500%, 5/15/2010(d) 354,375 135,000 Owens-Illinois, Inc., Senior Note, 7.800%, 5/15/2018 133,988 --------------- 488,363 --------------- Paper -- 5.5% 215,000 Abitibi-Consolidated, Inc., 7.500%, 4/01/2028 178,450 250,000 Abitibi-Consolidated, Inc., 8.500%, 8/01/2029 218,750 210,000 Advance Agro PCL, 144A, 11.000%, 12/19/2012 218,925 685,000 Bowater, Inc., 6.500%, 6/15/2013(d) 638,762 75,000 Georgia-Pacific Corp., 7.250%, 6/01/2028 70,875 120,000 Georgia-Pacific Corp., 7.375%, 12/01/2025 115,200 300,000 Georgia-Pacific Corp., 7.750%, 11/15/2029(d) 294,000 120,000 Georgia-Pacific Corp., 8.000%, 1/15/2024 121,050 305,000 Georgia-Pacific Corp., 8.875%, 5/15/2031 327,875 --------------- 2,183,887 --------------- Pharmaceuticals -- 9.6% 185,000 Bristol-Myers Squibb Co., 5.750%, 10/01/2011 187,033 85,000 Elan Capital Corp., Ltd., Convertible, 6.500%, 11/10/2008 174,463 440,000 Elan Finance Corp., Senior Note, 7.750%, 11/15/2011 416,900 300,000 Enzon, Inc., 4.500%, 7/01/2008 279,375
Principal Amount+ Description Value (a) - ----------------------------------------------------------------------------------------------- Pharmaceuticals -- continued $ 127,000 EPIX Pharmaceuticals, Inc., Senior Note, Convertible, 3.000%, 6/15/2024 $ 81,598 50,000 Incyte Corp., Convertible, 3.500%, 2/15/2011 40,875 360,000 Inhale Therapeutic Systems, Inc., Subordinated Note, Convertible, 3.500%, 10/17/2007 351,450 202,000 IVAX Corp., Senior Subordinated Note, Convertible, 4.500%, 5/15/2008 204,525 210,000 Merck & Co., Inc., 4.750%, 3/01/2015 196,963 250,000 Pharma Services Intermediate Holdings Corp., Senior Note, Convertible, 0.00% (step to 11.50% on 4/01/2009), 4/01/2014(e) 224,687 345,000 Regeneron Pharmaceuticals, Inc., Subordinated Note, Convertible, 5.500%, 10/17/2008 337,237 190,000 Valeant Pharmaceuticals International, Subordinated Note, Convertible, 3.000%, 8/16/2010 165,063 445,000 Valeant Pharmaceuticals International, Subordinated Note, Convertible, 4.000%, 11/15/2013 380,475 310,000 Vertex Pharmaceuticals, Inc., 144A, Convertible, 5.750%, 2/15/2011 765,312 --------------- 3,805,956 --------------- Pipelines -- 2.2% 915,000 El Paso CGP, Co., 144A, 6.950%, 6/01/2028 864,675 --------------- Retailers -- 2.0% 250,000 Dillard's, Inc., 6.625%, 1/15/2018 233,750 765,000 Toys R US, Inc., 7.375%, 10/15/2018 562,275 --------------- 796,025 --------------- Sovereigns -- 7.0% 1,190,000 Republic of Argentina, 2.000%, 9/30/2014 (ARS)(c) 398,276 520,000 Republic of Brazil, 8.250%, 1/20/2034(d) 573,040 4,420,000 United Mexican States, 8.000%, 12/07/2023 (MXN) 380,148 14,850,000 United Mexican States, 9.000%, 12/20/2012 (MXN) 1,406,156 --------------- 2,757,620 --------------- Supermarkets -- 2.5% 95,000 Albertson's, Inc., 7.750%, 6/15/2026 85,637 705,000 Albertson's, Inc., Senior Note, 7.450%, 8/01/2029 622,551 130,000 Albertson's, Inc., Senior Note, 8.000%, 5/01/2031(d) 121,012 25,000 Albertson's, Inc., Senior Note, 8.700%, 5/01/2030 24,384 120,000 Albertson's, Inc., Series C, (MTN), 6.625%, 6/01/2028 96,690 50,000 American Stores Co., 8.000%, 6/01/2026 48,440 --------------- 998,714 ---------------
See accompanying notes to financial statements. 22 LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - ----------------------------------------------------------------------------------------------- Supranational -- 4.5% $ 6,000,000 Inter-American Development Bank, Series E, (MTN), Zero Coupon, 5/11/2009 (BRL) $ 1,788,355 --------------- Technology -- 9.0% 105,000 Amkor Technology, Inc., 5.000%, 3/15/2007(d) 102,506 125,000 Amkor Technology, Inc., Senior Note, 7.750%, 5/15/2013(d) 115,000 40,000 Ciena Corp., Convertible, 3.750%, 2/01/2008 37,800 225,000 Corning, Inc., 5.900%, 3/15/2014 222,184 270,000 Corning, Inc., 6.200%, 3/15/2016 269,987 155,000 Corning, Inc., 6.850%, 3/01/2029(d) 158,055 215,000 Kulicke & Soffa Industries, Inc., Subordinated Note, Convertible, 0.500%, 11/30/2008 184,362 25,000 Kulicke & Soffa Industries, Inc., Subordinated Note, Convertible, 1.000%, 6/30/2010 23,188 910,000 Lucent Technologies, Inc., 6.450%, 3/15/2029 821,275 293,000 Maxtor Corp., Subordinated Note, 5.750%, 3/01/2012(f) 269,560 300,000 Nortel Networks Corp., Guaranteed Senior Note, 4.250%, 9/01/2008(d) 283,125 425,000 Nortel Networks Corp., 6.875%, 9/01/2023 388,875 40,000 Northern Telecom Capital Corp., 7.875%, 6/15/2026 38,600 210,000 Sanmina-SCI Corp., 8.125%, 3/01/2016 212,100 100,000 SCI Systems, Inc., Subordinated Note, Convertible, 3.000%, 3/15/2007 96,750 105,000 Unisys Corp., 6.875%, 3/15/2010(d) 102,113 145,000 Unisys Corp., Senior Note, 8.000%, 10/15/2012 142,463 100,000 Xerox Corp., 6.400%, 3/15/2016 99,250 --------------- 3,567,193 --------------- Transportation Services -- 4.1% 275,000 American President Cos., Ltd., Senior Note, 8.000%, 1/15/2024 272,937 250,000 Bombardier Capital Funding, LP, 6.750%, 5/14/2009 (GBP) 434,350 300,000 Overseas Shipholding Group, Senior Note, 7.500%, 2/15/2024 299,250 295,000 Stena AB, Senior Note, 7.000%, 12/01/2016 277,300 350,000 Stena AB, Senior Note, 7.500%, 11/01/2013 345,625 --------------- 1,629,462 --------------- Treasuries -- 0.9% 350,000 U.S. Treasury Note, 4.375%, 12/31/2007(d) 347,211 ---------------
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------------------ Wireless -- 1.0% $ 435,000 Level 3 Communications, Inc., Convertible, 2.875%, 7/15/2010 $ 388,781 5,000 Level 3 Communications, Inc., Convertible, 6.000%, 3/15/2010(d) 3,969 20,000 Level 3 Communications, Inc., 144A, 11.500%, 3/01/2010(d) 19,450 --------------- 412,200 --------------- Wirelines -- 6.5% 65,000 Cincinnati Bell Telephone Co., 6.300%, 12/01/2028 59,962 50,000 Cincinnati Bell, Inc., 8.375%, 1/15/2014(d) 50,813 95,000 Citizens Communications Co., 7.000%, 11/01/2025 83,837 375,000 Qwest Capital Funding, Inc., 6.875%, 7/15/2028 360,000 75,000 Qwest Capital Funding, Inc., Guaranteed Note, 7.000%, 8/03/2009(d) 76,125 1,890,000 Qwest Capital Funding, Inc., 7.750%, 2/15/2031 1,923,075 --------------- 2,553,812 --------------- Total Bonds and Notes (Identified Cost $32,627,255) 35,466,260 --------------- Shares - ------------------------------------------------------------------------------------ Preferred Stocks -- 5.1% Electric -- 1.7% 6,475 AES Trust III, Convertible, 6.750%, 10/15/2029 302,124 8,000 CMS Energy Trust I, Convertible, 7.750%, 7/15/2027 392,000 --------------- 694,124 --------------- Packaging -- 0.6% 6,500 Owens-Illinois, Inc., Convertible, 4.750%, 224,900 --------------- Pipelines -- 1.9% 9,500 El Paso Energy Capital Trust I, Convertible, 4.750%, 3/31/2028 342,000 4,000 Williams Holdings of Delaware, Convertible, 5.500%, 6/01/2033 404,000 --------------- 746,000 --------------- Technology -- 0.6% 225 Lucent Technologies Capital Trust I, Convertible, 7.750%, 3/15/2017(d) 225,084 --------------- Wirelines -- 0.3% 3,425 Philippine Long Distance Telephone Co., Sponsored GDR, Convertible(d) 128,677 --------------- Total Preferred Stocks (Identified Cost $1,736,428) 2,018,785 --------------- Shares - ------------------------------------------------------------------------------------ Common Stocks -- 1.6% Investment Companies -- 0.1% 2,175 High Income Opportunity Fund, Inc. 13,485 3,835 Morgan Stanley Emerging Markets Debt Fund, Inc.(d) 39,923 --------------- 53,408 ---------------
See accompanying notes to financial statements. 23 LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Shares Description Value (a) - ---------------------------------------------------------------------------------------------------- Metals & Mining -- 0.1% 900 Companhia Vale do Rio Doce, ADR $ 43,677 --------------- Pharmaceuticals -- 1.4% 8,800 Bristol-Myers Squibb Co. 216,568 6,875 Merck & Co., Inc. 242,206 1,717 Teva Pharmaceutical Industries, Ltd., Sponsored ADR 70,706 --------------- 529,480 --------------- Total Common Stocks (Identified Cost $452,996) 626,565 --------------- Shares/ Principal Amount+ - ---------------------------------------------------------------------------------------------------- Short-Term Investments -- 17.6% 5,449,209 State Street Navigator Securities Lending Prime Portfolio(g) $ 5,449,209 $ 1,500,778 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 3/31/2006 at 2.95% to be repurchased at $1,501,147 on 4/03/2006, collateralized by $1,110,000 U.S. Treasury Bond, 8.75% due 8/15/2020 valued at $1,533,546 1,500,778 --------------- Total Short-Term Investments (Identified Cost $6,949,987) 6,949,987 --------------- Total Investments -- 113.9% (Identified Cost $41,766,666)(b) 45,061,597 Other assets less liabilities--(13.9)% (5,491,752) --------------- Net Assets -- 100% $ 39,569,845 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales, return of capital included in dividends received from the Fund's investments in REIT's and interest adjustments on defaulted bonds. Amortization of premium on debt securities is excluded for tax purposes.): At March 31, 2006, the net unrealized appreciation on investments based on cost of $41,771,523 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value of tax cost 3,919,544 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (629,470) --------------- Net unrealized appreciation $ 3,290,074 =============== (c) Variable rate security whose interest rate varies with changes in a designated base rate (such as the prime interest rate) on a specified date (such as coupon date or interest payment date). (d) All or a portion of this security was on loan to brokers at March 31, 2006. (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) Illiquid security. At March 31, 2006, the value of this security amounted to $269,560 or 0.7% of net assets. (g) Represents investment of securities lending collateral. (h) Issuer filed petition under Chapter 11 of the Federal Bankruptcy Code. (i) Security is in default of principal and/or interest payments. + Principal amount is in U.S. dollars unless otherwise noted.
ADR/GDR An American Depositary Receipt (ADR) or Global Depositary Receipt (GDR) is a certificate issued by a U.S. bank representing the right to receive securities of the foreign issuer described. The values of ADRs and GDRs are significantly influenced by trading on exchanges not located in the United States. MTN Medium Term Note 144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registrations, normally to qualified institutional buyers. At the period end, the value of these amounted to $4,497,481 or 11.4% of net assets. ARS Argentine Peso BRL Brazilian Real GBP British Pound IDR Indonesian Rupiah MXN Mexican Peso NZD New Zealand Dollar THB Thailand Baht
Holdings at March 31, 2006 as a Percentage of Net Assets Pharmaceuticals 11.0% Automotive 9.7 Technology 9.6 Sovereigns 7.0 Wirelines 6.8 Paper 5.5 Supranational 4.5 Media Cable 4.5 Transportation Services 4.1 Pipelines 4.1 Banking 3.5 Chemicals 3.0 Airlines 2.6 Supermarkets 2.5 Home Construction 2.4 Electric 2.3 Retailers 2.0 Others, less than 2% each 11.2
See accompanying notes to financial statements. 24 LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND PORTFOLIO OF INVESTMENTS Investments as of March 31, 2006 (Unaudited)
Principal Amount Description Value (a) - ------------------------------------------------------------------------------------------------ Bonds and Notes -- 99.6% of Net Assets Asset-Backed Securities -- 6.1% $ 1,035,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3, 4.615%, 2/25/2035 $ 996,472 2,200,000 Countrywide Asset-Backed Certificates, Series 2006-S1, Class A2, 5.549%, 4/25/2036 2,197,250 922,369 Residential Asset Mortgage Products, Inc., Series 2003-RZ5, Class A3, 3.800%, 7/25/2030 917,569 1,195,535 Residential Funding Mortgage Securities II, Series 2004-HI3, Class A3, 3.810%, 8/25/2017 1,184,353 1,303,405 Residential Funding Mortgage Securities II, Series 2003-HI4, Class A14, 4.590%, 4/25/2018 1,297,449 670,000 Residential Funding Mortgage Securities II, Series 2004-HI3, Class A4, 4.630%, 1/25/2020 659,661 660,000 Residential Funding Mortgage Securities II, Series 2005-HI3, Class A4, 5.490%, 9/25/2035 643,824 853,476 Residential Funding Mortgage Securities II, Inc., Series 2002-HI5, Class A7, 5.700%, 1/25/2028 857,919 --------------- 8,754,497 --------------- Government Agencies -- 7.3% 2,935,000 Federal Farm Credit Bank, 2.375%, 10/02/2006 2,895,650 4,200,000 Federal Home Loan Bank, 3.625%, 11/14/2008(c) 4,052,983 3,000,000 FNMA, 5.500%, 5/02/2006 3,000,951 600,000 FNMA, 6.625%, 9/15/2009 627,673 --------------- 10,577,257 --------------- Mortgage Related -- 57.2% 922,360 FHLMC, 4.500%, 5/01/2034 852,958 11,663,732 FHLMC, 5.000%, with various maturities to 2035(d) 11,273,012 3,050,522 FHLMC, 5.500%, 12/01/2034 2,982,959 278,799 FHLMC, 6.000%, 11/01/2019 282,108 15,642,759 FHLMC, 6.500%, with various maturities to 2034(d) 15,963,231 371,406 FHLMC, 7.000%, 2/01/2016 381,937 67,072 FHLMC, 7.500%, with various maturities to 2026(d) 69,866 51,414 FHLMC, 8.000%, with various maturities to 2015(d) 53,677 7,169 FHLMC, 10.000%, 7/01/2019 7,852 392,444 FHLMC, 11.500%, with various maturities to 2020(d) 424,805 16,856,540 FNMA, 4.000%, with various maturities to 2019(d) 15,794,101 3,217,707 FNMA, 4.500%, with various maturities to 2035(d) 3,016,083
Principal Amount Description Value (a) - ------------------------------------------------------------------------------------- Mortgage Related -- continued $ 8,565,078 FNMA, 5.000%, with various maturities to 2035(d) $ 8,156,085 4,852,018 FNMA, 5.500%, with various maturities to 2034(d) 4,760,594 5,862,756 FNMA, 6.000%, with various maturities to 2034(d) 5,922,166 9,053,448 FNMA, 6.500%, with various maturities to 2034(d) 9,241,967 401,393 FNMA, 7.000%, 12/01/2022 417,351 943,256 FNMA, 7.500%, with various maturities to 2032(d) 986,012 158,177 FNMA, 8.000%, with various maturities to 2016(d) 167,988 183,021 GNMA, 6.000%, 12/15/2031 185,307 729,259 GNMA, 6.500%, 5/15/2031 756,659 669,953 GNMA, 7.000%, with various maturities to 2029(d) 698,668 40,478 GNMA, 9.000%, with various maturities to 2009(d) 41,665 13,529 GNMA, 9.500%, 8/15/2009 14,179 609 GNMA, 10.000%, 9/15/2016 670 11,654 GNMA, 12.500%, with various maturities to 2015(d) 12,898 187,345 GNMA, 16.000%, with various maturities to 2012(d) 213,441 78,770 GNMA, 17.000%, with various maturities to 2011(d) 91,081 --------------- 82,769,320 --------------- Treasuries -- 29.0% 5,155,000 U.S. Treasury Bond, 7.250%, 5/15/2016(c) 6,096,592 3,830,000 U.S. Treasury Note, 2.375%, 8/15/2006(c) 3,796,637 1,290,000 U.S. Treasury Note, 2.500%, 10/31/2006(c) 1,272,817 3,200,000 U.S. Treasury Note, 2.750%, 7/31/2006(c) 3,179,626 8,095,000 U.S. Treasury Note, 3.000%, 12/31/2006(c) 7,984,009 1,000,000 U.S. Treasury Note, 3.125%, 10/15/2008(c) 959,766 12,765,000 U.S. Treasury Note, 3.375%, 2/28/2007(c) 12,595,468 1,930,000 U.S. Treasury Note, 6.125%, 8/15/2007(c) 1,961,664 750,000 U.S. Treasury Note, 6.625%, 5/15/2007 764,062 4,000,000 U.S. Treasury STRIPS, Zero Coupon, 11/15/2009 3,350,160 --------------- 41,960,801 --------------- Total Bonds and Notes (Identified Cost $146,745,510) 144,061,875 ---------------
See accompanying notes to financial statements. 25 LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (unaudited)
Shares/ Principal Amount Description Value (a) - ---------------------------------------------------------------------------------------------------- Short-Term Investments -- 26.3% 37,732,576 State Street Navigator Securities Lending Prime Portfolio(e) $ 37,732,576 $ 297,608 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 03/31/2006 at 2.950% to be repurchased at $297,681 on 04/03/2006, collateralized by $325,000 U.S. Treasury Note, 3.625% due 05/15/2013 valued at $305,153 297,608 --------------- Total Short-Term Investments (Identified Cost $38,030,184) 38,030,184 --------------- Total Investments -- 125.9% (Identified Cost $184,775,694)(b) 182,092,059 Other assets less liabilities -- (25.9)% (37,491,952) --------------- Net Assets -- 100% $ 144,600,107 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales. Amortization of premium on debt securities is excluded for tax purposes.): At March 31, 2006, the net unrealized depreciation on investments based on cost of $185,149,002 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value of tax cost 247,596 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (3,304,539) --------------- Net unrealized depreciation $ (3,056,943) =============== (c) All or a portion of this security was on loan to brokers at March 31, 2006. (d) The Fund's investment in mortgage related securities of the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Government National Mortgage Association are interests in separate pools of mortgages. All separate investments in securities of each issuer which have the same coupon rate have been aggregated for the purpose of presentation in the Portfolio of Investments. (e) Represents investment of securities lending collateral. FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association GNMA Government National Mortgage Association STRIPS Separate Trading of Registered Interest and Principal of Securities
Holdings at March 31, 2006 as a Percentage of Net Assets Mortgage Related 57.2% Treasuries 29.0 Government Agencies 7.3 Asset-Backed Securities 6.1
See accompanying notes to financial statements. 26 LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS Investments as of March 31, 2006 (Unaudited)
Principal Amount Description Value (a) - --------------------------------------------------------------------------- Tax Exempt Obligations -- 97.5% of Net Assets Highlands County, FL, Health Facilities Authority -- 1.4% $ 1,000,000 Adventis Health System, 5.875%, 11/15/2029 $ 1,070,440 --------------- Martha's Vineyard, MA -- 1.4% 1,000,000 Land Bank Revenue, 5.000%, 5/01/2032 (AMBAC insured) 1,031,800 --------------- Massachusetts -- 6.2% 4,000,000 State Refunding Series A, 6.500%, 11/01/2014 (AMBAC insured) 4,706,840 --------------- Massachusetts Bay Transportation Authority -- 4.4% 2,500,000 Series A, 5.000%, 7/01/2032 2,657,950 630,000 Series A, Unrefunded, 5.250%, 7/01/2030 657,638 --------------- 3,315,588 --------------- Massachusetts Development Finance Agency -- 17.2% 2,000,000 Cambridge Street Development Series A, 5.125%, 2/01/2034 (MBIA insured) 2,074,680 1,000,000 Hampshire College, 5.625%, 10/01/2024 1,055,540 4,000,000 Mount Holyoke College, 5.250%, 7/01/2031 4,201,160 2,800,000 Refunding Springfield Resource Recovery-A, 5.625%, 6/01/2019 2,921,072 1,100,000 Visual and Performing Arts, 6.000%, 8/01/2021 1,294,590 1,500,000 WGBH Educational Foundation Series A, 5.375%, 1/01/2042 (AMBAC insured) 1,578,015 --------------- 13,125,057 --------------- Massachusetts Health & Educational Facilities Authority -- 34.4% 1,160,000 Baystate Medical Center Series F, 5.700%, 7/01/2027 1,213,070 2,000,000 Boston University, 5.000%, 10/01/2039 2,054,280 2,200,000 Catholic Health East, 5.500%, 11/15/2032 2,300,166 3,000,000 Harvard University Series N, 6.250%, 4/01/2020 3,663,480 2,845,000 Nichols College Series C, 6.000%, 10/01/2017 2,988,416 2,000,000 Partners Healthcare Systems Series B, 5.250%, 7/01/2029 2,078,480 2,500,000 Partners Healthcare Systems Series C, 5.750%, 7/01/2021 2,726,325 1,500,000 Tufts University Series I, 5.250%, 2/15/2030 1,571,880 1,000,000 University of Massachusetts Project Series C, 5.250%, 10/01/2031 (MBIA insured) 1,058,510 2,000,000 University of Massachusetts Series C, 5.125%, 10/01/2034 (FGIC insured) 2,082,220 2,000,000 Wellesley College Series F, 5.125%, 7/01/2039 2,057,500 1,315,000 Wheaton College Series E, 5.000%, 7/01/2017 1,374,491
Principal Amount Description Value (a) - ---------------------------------------------------------------------------------------- Massachusetts Health & Educational Facilities Authority -- continued $ 1,030,000 Williams College Series H, 5.000%, 7/01/2017 $ 1,086,835 --------------- 26,255,653 --------------- Massachusetts Housing Finance Agency -- 0.5% 395,000 Single Family Mortgage Series 21, 7.125%, 6/01/2025 395,328 --------------- Massachusetts Port Authority -- 4.0% 1,750,000 Delta Air Lines, Inc. Project Series A, 5.500%, 1/01/2019 (AMBAC insured) 1,818,670 1,200,000 Series A, 5.000%, 7/01/2033 (MBIA insured) 1,228,440 --------------- 3,047,110 --------------- Massachusetts Water Resources Authority -- 6.5% 1,000,000 General Series A, 5.250%, 8/01/2020 (MBIA insured) 1,088,130 3,240,000 Series A, 6.500%, 7/15/2019 (FGIC insured) 3,850,837 --------------- 4,938,967 --------------- Michigan Hospital Finance Authority -- 2.1% 1,500,000 Oakwood Obligated Group, 5.500%, 11/01/2017 1,600,260 --------------- New England Education Loan Marketing -- 4.1% 3,000,000 Student Loan Revenue Bond Sub-Issue H, 6.900%, 11/01/2009 3,136,350 --------------- New Jersey Economic Development Authority -- 2.2% 1,610,000 Series A, 5.625%, 6/15/2018 1,684,173 --------------- Puerto Rico Commonwealth Aqueduct & Sewer Authority -- 4.4% 3,000,000 Aqueduct & Sewer Authority, 6.250%, 7/01/2013 3,382,230 --------------- Puerto Rico Public Finance Corp. -- 4.2% 3,000,000 Commonwealth Appropriation Series A, 5.750%, 8/01/2027(c) 3,224,940 --------------- Tennessee Housing Development Agency -- 1.4% 1,000,000 Series A, 5.200%, 7/01/2023 1,034,340 --------------- University of Massachusetts Building Authority -- 3.1% 2,200,000 SR - Series 1, 5.250%, 11/01/2028 (AMBAC insured) 2,341,108 --------------- Total Tax Exempt Obligations (Identified Cost $70,758,694) 74,290,184 ---------------
See accompanying notes to financial statements. 27 LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount Description Value (a) - -------------------------------------------------------------------------------------------------- Short-Term Investment -- 1.2% $ 948,123 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 3/31/2006 at 2.95% to be repurchased at $948,356 on 4/03/2006, collateralized by $1,030,000 U.S. Treasury Bond, 3.625% due 5/15/2013 valued at $967,099 (Identified Cost $948,123) $ 948,123 --------------- Total Investments -- 98.7% (Identified Cost $71,706,817)(b) 75,238,307 Other assets less liabilities -- 1.3% 961,687 --------------- Net Assets -- 100% $ 76,199,994 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales. Amortization of premium on debt securities is excluded for tax purposes.): At March 31, 2006, the net unrealized depreciation on investments based on cost of $71,706,421 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value of tax cost 3,638,951 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (107,065) --------------- Net unrealized appreciation $ 3,531,886 =============== (c) Variable rate security whose interest rate varies with changes in a designated base rate (such as the prime interest rate) on a specified date (such as coupon date or interest payment date). AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guarantee Insurance Company MBIA Municipal Bond Investors Assurance Corporation
Holdings at March 31, 2006 as a Percentage of Net Assets Colleges & Universities 32.1% Water & Sewerage 10.9 Hospital 10.9 State General Obligation 10.4 Pre-Refunded 8.6 Student Loan 4.1 Airport 4.0 Resource Recovery 3.9 Hospital-Obligated Group 3.5 Redevelopment Agency/Urban Renewal 2.7 Special Tax 2.2 Others, less than 2% each 4.2
See accompanying notes to financial statements. 28 LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS Investments as of March 31, 2006 (Unaudited)
Principal Amount Description Value (a) - ------------------------------------------------------------------------------------------------------ Tax Exempt Obligations -- 97.9% of Net Assets California -- 7.8% $ 1,000,000 California Health Facilities Financing Authority, Multiple Obligors, 4.950%, 7/01/2026 $ 1,032,710 1,000,000 California Health Facilities Financing Authority (Cedar-Sinai Medical Center), 5.000%, 11/15/2027 1,019,840 2,000,000 California State, 5.125%, 6/01/2027 2,060,540 1,000,000 California State Public Works Board (Coalinga State Hospital), 5.000%, 6/01/2010 1,044,110 2,655,000 California Statewide Communities Development Authority, 5.250%, 7/01/2023 2,832,407 --------------- 7,989,607 --------------- Colorado -- 2.4% 2,500,000 Colorado Health Facilities Authority, 5.000%, 12/01/2035 2,420,600 --------------- District of Columbia -- 3.0% 3,000,000 Metropolitan Washington D.C. Airports Authority, 5.125%, 10/01/2029 (FGIC insured) 3,098,820 --------------- Florida -- 3.0% 3,000,000 Highlands County, FL, Health Facilities Authority, Multiple Obligors, 5.375%, 11/15/2035 3,102,930 --------------- Guam -- 1.0% 1,000,000 Guam Government Waterworks Authority, 5.875%, 7/01/2035 1,044,190 --------------- Illinois -- 4.0% 1,910,000 Illinois Educational Facility Authority Revenue, 5.000%, 7/01/2033 1,965,944 2,000,000 Metropolitan Pier & Exposition Authority, IL, 5.250%, 6/15/2042 (MBIA insured) 2,103,740 --------------- 4,069,684 --------------- Indiana -- 1.0% 1,000,000 Indiana Health & Educational Facilities Financing Authority, 5.000%, 2/15/2039 991,960 --------------- Louisiana -- 4.8% 4,000,000 Desoto Parish, LA, Environmental Improvement, 5.000%, 11/01/2018 3,952,080 1,000,000 Ernest N. Morial, New Orleans, LA, Exhibit Hall Authority, 5.000%, 7/15/2033 1,020,090 --------------- 4,972,170 --------------- Massachusetts -- 2.5% 1,500,000 Massachusetts State, 5.000%, 3/01/2019 1,579,215 1,045,000 Massachusetts State Health & Educational Facilities Authority (Lahey Clinic Medical Center), 4.500%, 8/15/2035 (FGIC insured) 1,003,806 --------------- 2,583,021 --------------- Michigan -- 7.2% 2,850,000 Michigan State Hospital Finance Authority, Henry Ford Health System, 5.500%, 3/01/2014 3,041,805 1,100,000 Michigan State Hospital Finance Authority, Oakwood Obligated Group, 5.500%, 11/01/2014 1,177,165 1,000,000 Taylor Brownfield Redevelopment Authority, MI, 5.000%, 5/01/2025 (MBIA insured) 1,044,450
Principal Amount Description Value (a) - ------------------------------------------------------------------------------------------------ Michigan -- continued $ 2,000,000 University of Michigan, 5.250%, 12/01/2020 $ 2,106,480 --------------- 7,369,900 --------------- Minnesota -- 3.1% 1,000,000 Chaska Minnesota Electric Revenue, 5.250%, 10/01/2025 1,058,990 2,000,000 Minnesota State Municipal Power Agency, 5.250%, 10/01/2024 2,110,640 --------------- 3,169,630 --------------- Mississippi -- 5.2% 2,000,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control, 6.700%, 4/01/2022 2,356,640 2,500,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control, 6.800%, 4/01/2022 2,972,975 --------------- 5,329,615 --------------- New Jersey -- 3.0% 1,000,000 New Jersey Economic Development Authority, 5.500%, 6/15/2024 1,043,420 1,000,000 New Jersey Economic Development Authority, Series A, 5.625%, 6/15/2018 1,046,070 1,000,000 New Jersey Health Care Facilities Financing Authority, Catholic Health East, 5.375%, 11/15/2033 1,041,380 --------------- 3,130,870 --------------- New York -- 18.7% 1,000,000 New York State Dormitory Authority, Rockefeller University, 5.000%, 7/01/2032 1,033,460 3,000,000 New York State Dormitory Authority, 5.500%, 5/15/2013 3,240,690 2,740,000 New York State Dormitory Authority, 5.750%, 7/01/2013 2,967,365 1,000,000 New York State Housing Finance Agency, 5.250%, 9/15/2019 1,071,680 3,000,000 New York State Municipal Bond Bank Agency, 5.250%, 6/01/2020 3,171,870 1,000,000 New York, NY, 4.250%, 5/15/2019 986,120 1,020,000 New York, NY, 6.000%, 1/15/2020 1,136,148 1,400,000 New York, NY, City Health & Hospital Corp., 5.000%, 2/15/2020 1,456,112 1,000,000 New York, NY, City Industrial Development Agency, 5.500%, 1/01/2024 1,050,690 2,000,000 New York, NY, City Municipal Water Finance Authority, 5.000%, 6/15/2025 2,092,900 1,000,000 New York, NY, City Municipal Water Finance Authority, 5.125%, 6/15/2034 1,046,040 --------------- 19,253,075 --------------- North Carolina -- 1.3% 1,300,000 North Carolina Eastern Municipal Power Agency, 5.500%, 1/01/2012 1,389,401 --------------- Oregon -- 5.7% 1,750,000 Multnomah County, OR, Hospital Facilities Authority, Providence Health System, 5.250%, 10/01/2012 1,871,870 4,000,000 Western Generation Agency, 7.400%, 1/01/2016(c) 4,015,600 --------------- 5,887,470 ---------------
See accompanying notes to financial statements. 29 LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount Description Value (a) - ------------------------------------------------------------------------------------------ Pennsylvania -- 4.2% $ 4,000,000 Pennsylvania State Industrial Development Authority, 5.500%, 7/01/2019 (AMBAC insured) $ 4,368,640 --------------- Puerto Rico -- 3.1% 1,000,000 Puerto Rico Commonwealth Infrastructure Financing Authority, 5.500%, 10/01/2040 1,069,900 2,000,000 Puerto Rico Public Finance Corp., Commonwealth Appropriation Series A, 5.750%, 8/01/2027(d) 2,149,960 --------------- 3,219,860 --------------- South Carolina -- 5.1% 1,100,000 Charleston Educational Excellence Finance Corp., 5.250%, 12/01/2030 1,151,678 3,000,000 Greenville County, SC, School District, 5.500%, 12/01/2028 3,256,080 800,000 Newberry Investing in Children's Education (Newberry County School District), 5.250%, 12/01/2022 821,280 --------------- 5,229,038 --------------- South Dakota -- 1.3% 1,250,000 South Dakota Health & Educational Facilities Authority, Sioux Valley Hospital, 5.250%, 11/01/2027 1,292,650 --------------- Tennessee -- 2.3% 795,000 Tennessee Housing Development Agency, Homeownership Program, 5.150%, 7/01/2022 815,320 1,500,000 Tennessee Housing Development Agency, Series A, 5.200%, 7/01/2023 1,551,510 --------------- 2,366,830 --------------- Texas -- 6.1% 2,000,000 Dallas-Fort Worth, TX, International Airport, 5.500%, 11/01/2033 (MBIA insured) 2,111,300 1,000,000 Katy, TX, Independent School District, 5.125%, 2/15/2020 1,052,340 3,000,000 Lewisville, TX, Independent School District, 5.250%, 8/15/2027 3,146,100 --------------- 6,309,740 --------------- Washington -- 2.1% 2,000,000 Energy Northwest, WA, Electric, Project No. 1, 5.500%, 7/01/2014 2,193,960 --------------- Total Tax Exempt Obligations (Identified Cost $97,990,770) 100,783,661 --------------- Principal Amount - ------------------------------------------------------------------------------------------ Short-Term Investment -- 1.1% $ 1,064,179 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 3/31/2006 at 2.95% to be repurchased at $1,064,441 on 4/03/2006, collateralized by $1,105,000 U.S. Treasury Note, 4.00% due 6/15/2009 valued at $1,090,246 (Identified Cost $1,064,179) 1,064,179 --------------- Total Investments -- 99.0% (Identified Cost $99,054,949)(b) 101,847,840 Other assets less liabilities -- 1.0% 1,063,315 --------------- Net Assets -- 100% $ 102,911,155 ===============
(a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information: (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales. Amortization of premium on debt securities is excluded for tax purposes.): At March 31, 2006, the net unrealized appreciation on investments based on cost of $98,704,033 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value of tax cost $3,620,239 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (476,432) ---------- Net unrealized appreciation $3,143,807 ========== (c) Illiquid security. At March 31, 2006, the value of this secuity amounted to $4,015,600 or 3.9% of net assets. (d) Variable rate security whose interest rate varies with changes in a designated base rate (such as the prime interest rate) on a specified date (such as coupon date or interest payment date). AMBAC American Municipal Bond Assurance Corporation FGIC Financial Guarantee Insurance Company MBIA Municipal Bond Investors Assurance Corporation
Holdings at March 31, 2006 as a Percentage of Net Assets Corporate Backed/Industrial Revenue/Pollution Control 13.3% Hospital-Obligated Group 9.2 Colleges & Universities 8.9 Electric 6.6 Special Tax 6.1 State General Obligation 5.6 Hospital 5.5 Airport 5.1 School District 4.1 Water & Sewerage 4.1 Bond Bank/Pooled Loan Program 4.0 Resource Recovery 3.9 Pre-Refunded 3.0 Hospital System Bonds 3.0 Lease 2.9 Non-Profit 2.7 Senior Living 2.3 Single-Family 2.3 City & Town 2.1 Others, less than 2% each 3.2
See accompanying notes to financial statements. 30 LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - ----------------------------------------------------------------------------------- Bonds and Notes -- 88.1% of Net Assets Convertible Bonds -- 7.3% Canada -- 0.4% $ 7,234,000 Nortel Networks Corp., Guaranteed Senior Note, 4.250%, 9/01/2008(e) $ 6,827,087 5,300,000 Province of Saskatchewan, 6.000%, 6/01/2006, (CAD) 4,553,185 --------------- 11,380,272 --------------- Ireland -- 0.1% 2,045,000 Elan Capital Corp., Ltd., 6.500%, 11/10/2008 4,197,363 --------------- United Kingdom -- 0.2% 3,270,000 Colt Telecom Group PLC, 2.000%, 4/03/2007, (EUR) 5,052,503 --------------- United States -- 6.6% 4,529,000 Amkor Technology, Inc., 5.000%, 3/15/2007(e) 4,421,436 3,035,000 AMR Corp., Senior Note, 4.500%, 2/15/2024 4,249,000 32,815,000 Bristol-Myers Squibb Co., 4.410%, 9/15/2023(e)(f) 32,773,981 200,000 Builders Transport, Inc., Subordinated Note, 6.500%, 5/01/2011(d)(i)(k)(l) -- 1,000,000 Builders Transport, Inc., Subordinated Note, 8.000%, 8/15/2005(d)(i)(k)(l) -- 7,270,000 Chiron Corp., 1.625%, 8/01/2033 7,079,162 750,000 Ciena Corp., 3.750%, 2/01/2008 708,750 3,120,000 Continental Airlines, Inc., 5.000%, 6/15/2023 4,824,300 176,000 Dixie Group, Inc., Subordinated Note, 7.000%, 5/15/2012 161,920 12,478,000 Enzon, Inc., 4.500%, 7/01/2008 11,620,137 5,111,000 EPIX Pharmaceuticals, Inc., Senior Note, Convertible, 3.000%, 6/15/2024 3,283,818 2,095,000 Human Genome Sciences Inc, 2.250%, 8/15/2012 1,806,938 3,820,000 Incyte Corp., 3.500%, 2/15/2011 3,122,850 4,865,000 Inhale Therapeutic Systems, Inc., Subordinated Note, 3.500%, 10/17/2007 4,749,456 1,380,000 Invitrogen Corp., 1.500%, 2/15/2024 1,200,600 2,360,000 IVAX Corp., Senior Subordinated Note, 4.500%, 5/15/2008 2,389,500 5,105,000 Kellwood Co., 3.500%, 6/15/2034 4,479,638 5,810,000 Kulicke & Soffa Industries, Inc., Subordinated Note, 0.500%, 11/30/2008 4,982,075 860,000 Kulicke & Soffa Industries, Inc., Subordinated Note, 1.000%, 6/30/2010 797,650 7,330,000 Level 3 Communications, Inc., 6.000%, 9/15/2009(e) 6,212,175 1,085,000 Level 3 Communications, Inc., 6.000%, 3/15/2010(e) 861,219 2,335,000 Liberty Media Corp., 3.500%, 1/15/2031 2,358,350
Principal Amount+ Description Value (a) - --------------------------------------------------------------------------------------- United States -- continued $ 2,955,000 Maxtor Corp., Subordinated Note, 5.750%, 3/01/2012(d) $ 2,718,600 625,000 Nextel Communications, Inc., Senior Note, 5.250%, 1/15/2010 625,000 500,000 Preston Corp., Subordinated Note, 7.000%, 5/01/2011 463,750 19,685,000 Regeneron Pharmaceuticals, Inc., Subordinated Note, 5.500%, 10/17/2008 19,242,087 311,000 Richardson Electronics, Ltd., 144A, 7.750%, 12/15/2011 286,120 1,950,000 SCI Systems, Inc., Subordinated Note, 3.000%, 3/15/2007 1,886,625 5,756,000 Sinclair Broadcast Group, Inc., 4.875%, 7/15/2018 5,058,085 19,005,000 Valeant Pharmaceuticals International, Subordinated Note, 3.000%, 8/16/2010(e) 16,510,594 19,305,000 Valeant Pharmaceuticals International, Subordinated Note, 4.000%, 11/15/2013(e) 16,505,775 5,225,000 Vertex Pharmaceuticals, Inc., 144A, 5.750%, 2/15/2011 12,899,219 23,130,000 Wells Fargo & Co., 4.430%, 5/01/2033(e)(f) 22,991,220 --------------- 201,270,030 --------------- Total Convertible Bonds (Identified Cost $204,170,257) 221,900,168 --------------- Non-Convertible Bonds -- 80.8% Argentina -- 0.9% 2,405,000 Pecom Energia SA, 144A, 8.125%, 7/15/2010 2,489,175 40,415,000 Republic of Argentina, 2.000%, 9/30/2014, (ARS)(f) 13,526,318 3,603,541 Republic of Argentina, 1.000%, 12/15/2035 333,328 11,875,000 Republic of Argentina, 4.889%, 8/03/2012(f) 9,707,813 1,322,506 Republic of Argentina, 8.280%, 12/31/2033(h) 1,299,362 --------------- 27,355,996 --------------- Australia -- 0.0% 1,000,000 General Motors Acceptance Corp. of Australia, Ltd., 6.500%, 8/10/2007, (AUD) 684,534 --------------- Brazil -- 1.2% 19,735,000 Republic of Brazil, 12.500%, 1/05/2016, (BRL) 9,210,882 17,907,000 Republic of Brazil, 8.250%, 1/20/2034(e) 19,733,514 6,000,000 Republic of Brazil, 8.875%, 4/15/2024(e) 6,936,000 --------------- 35,880,396 --------------- Canada -- 20.8% 6,605,000 Abitibi-Consolidated, Inc., 7.500%, 4/01/2028(e) 5,482,150 750,000 Avenor Inc, 10.850%, 11/30/2014, (CAD) 701,289 2,445,000 Bombardier, Inc., 7.350%, 12/22/2026 1,889,466 6,700,000 Bombardier, Inc., 144A, 7.450%, 5/01/2034 6,013,250
See accompanying notes to financial statements. 31 LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------------------------------ Canada -- continued $ 2,800,000 Calpine Canada Energy Finance ULC, 8.750%, 10/15/2007, (CAD)(i)(k) $ 1,294,687 361,535,000 Canadian Government, 2.750%, 12/01/2007, (CAD) 303,381,684 70,540,000 Canadian Government, 4.250%, 9/01/2008, (CAD) 60,691,520 111,010,000 Canadian Government, 4.500%, 9/01/2007, (CAD) 95,690,934 24,200,000 Canadian Government, 6.000%, 6/01/2008 21,573,507 3,100,000 General Electric Capital Corp., 6.125%, 5/17/2012, (GBP) 5,712,530 335,000 General Motors Acceptance Corp. of Canada, Ltd., Series E., (MTN), 6.625%, 12/17/2010, (GBP) 529,413 945,000 GMAC Canada, Ltd., 7.750%, 9/26/2008, (NZD) 533,891 6,840,000 Nortel Networks Corp., 6.875%, 9/01/2023 6,258,600 9,550,000 North American Energy Partners, Inc., Senior Note, 8.750%, 12/01/2011 9,311,250 5,600,000 Northern Telecom Capital Corp., 7.875%, 6/15/2026 5,404,000 5,990,000 Province of British Columbia, 5.250%, 12/01/2006, (CAD) 5,168,269 29,235,000 Province of British Columbia, 6.000%, 6/09/2008, (CAD) 26,018,487 13,000,000 Province of Manitoba, 4.450%, 12/01/2008 11,219,951 6,685,000 Province of Manitoba, 5.750%, 6/02/2008, (CAD) 5,916,985 1,525,000 Province of Ontario, 3.500%, 9/08/2006, (CAD) 1,302,789 40,020,000 Province of Ontario, 5.700%, 12/01/2008, (CAD) 35,579,197 18,470,000 Province of Saskatchewan, 5.500%, 6/02/2008, (CAD) 16,267,075 8,500,000 Rogers Wireless Communications, Inc., Senior Note, 7.625%, 12/15/2011, (CAD) 7,833,669 2,525,000 Rogers Wireless Communications, Inc., Senior Secured Note, 6.375%, 3/01/2014 2,518,687 --------------- 636,293,280 --------------- Cayman Islands -- 0.2% 1,000,000 Enersis SA, Cayman Island, 7.400%, 12/01/2016 1,052,424 3,905,000 Vale Overseas, Ltd., 8.250%, 1/17/2034 4,480,987 --------------- 5,533,411 --------------- Chile -- 0.4% 4,875,000 Empresa Nacional de Electricidad SA, Chile, 7.875%, 2/01/2027 5,252,959 250,000 Empresa Nacional de Electricidad SA, Chile, 8.350%, 8/01/2013(e) 276,695 1,700,000 Empresa Nacional de Electricidad SA, Chile, 8.625%, 8/01/2015 1,938,877 4,525,000 Enersis SA, Chile, 7.375%, 1/15/2014(e) 4,734,462 --------------- 12,202,993 ---------------
Principal Amount+ Description Value (a) - -------------------------------------------------------------------------------------- Ireland -- 0.9% $ 28,590,000 Elan Finance Corp., Senior Note, 7.750%, 11/15/2011 $ 27,089,025 --------------- Mexico -- 3.1% 597,900,000 United Mexican States, 8.000%, 12/07/2023, (MXN) 51,423,218 473,800,000 United Mexican States, 9.000%, 12/20/2012, (MXN) 44,864,431 --------------- 96,287,649 --------------- Netherlands -- 0.0% 1,330,000 GMAC International Finance BV, 8.000%, 3/14/2007, (NZD) 804,830 --------------- Norway -- 0.2% 10,000,000 Kingdom of Norway, 5.500%, 5/15/2009, (NOK) 1,609,613 22,740,000 Kingdom of Norway, 6.750%, 1/15/2007, (NOK) 3,570,551 --------------- 5,180,164 --------------- Philippines -- 0.2% 3,700,000 Philippine Long Distance Telephone Co., (MTN), 8.350%, 3/06/2017 4,037,625 1,820,813 Quezon Power (Philippines), Ltd., Senior Secured Note, 8.860%, 6/15/2017 1,811,708 --------------- 5,849,333 --------------- Republic of Korea -- 0.4% 5,470,000 Hanarotelecom, Inc., 144A, 7.000%, 2/01/2012 5,398,589 5,000,000 Hynix Semiconductor, Inc., 144A, 9.875%, 7/01/2012 5,500,000 300,000 Samsung Electronics Co., Ltd., 144A, 7.700%, 10/01/2027 314,855 --------------- 11,213,444 --------------- Singapore -- 0.0% 1,050,000 SP PowerAssets, Ltd., Series E (MTN), 3.730%, 10/22/2010, (SGD) 647,466 --------------- South Africa -- 0.1% 11,405,000 Republic of South Africa, 12.500%, 12/21/2006, (ZAR) 1,918,830 --------------- Supranational -- 2.7% 15,543,570 European Investment Bank, 144A, Zero Coupon, 9/12/2008, (BRL) 5,089,169 128,250,000 European Investment Bank, Senior Note, Zero Coupon, 3/10/2021, (AUD) 40,103,058 24,450,000 Inter-American Development Bank, 6.000%, 12/15/2017, (NZD) 14,805,544 80,000,000 Inter-American Development Bank, Series E, (MTN), Zero Coupon, 5/11/2009, (BRL) 23,844,732 --------------- 83,842,503 --------------- Sweden -- 0.9% 207,265,000 Kingdom of Sweden, 6.500%, 5/05/2008, (SEK) 28,495,777 --------------- United Kingdom -- 0.4% 72,717,436,000 JPMorgan Chase Bank, 144A, Zero Coupon, 10/21/2010, (IDR) 5,104,081 4,570,000 NTL Cable PLC, 9.750%, 4/15/2014, (GBP) 8,336,909 --------------- 13,440,990 ---------------
See accompanying notes to financial statements. 32 LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - --------------------------------------------------------------------------------- United States -- 47.3% $ 1,670,000 Abitibi-Consolidated, Inc., 7.400%, 4/01/2018 $ 1,419,500 5,565,000 AES Corp. (The), 8.375%, 3/01/2011, (GBP) 9,813,655 4,020,000 AES Corp. (The), Senior Note, 7.750%, 3/01/2014 4,221,000 1,190,000 Affiliated Computer Services, Inc., 5.200%, 6/01/2015 1,084,399 4,835,000 Albertson's, Inc., 7.750%, 6/15/2026 4,358,482 26,706,000 Albertson's, Inc., Senior Note, 7.450%, 8/01/2029 23,582,760 4,895,000 Albertson's, Inc., Senior Note, 8.000%, 5/01/2031(e) 4,556,560 1,510,000 Albertson's, Inc., Senior Note, 8.700%, 5/01/2030 1,472,768 5,782,000 Albertson's, Inc., Series C, (MTN), 6.625%, 6/01/2028 4,658,858 1,750,000 Altria Group, Inc., 7.000%, 11/04/2013 1,881,446 825,000 American Airlines, Inc., Series 1999-1, Class B, 7.324%, 10/15/2009 801,489 1,442,789 American Airlines, Inc., Series 93A6, 8.040%, 9/16/2011 1,281,817 9,853,000 American President Cos., Ltd., Senior Note, 8.000%, 1/15/2024 9,779,102 6,450,000 Amkor Technology, Inc., Senior Note, 7.125%, 3/15/2011(e) 5,934,000 475,000 Amkor Technology, Inc., Senior Note, 7.750%, 5/15/2013 437,000 1,525,000 Amkor Technology, Inc., Senior Subordinated Note, 10.500%, 5/01/2009(e) 1,494,500 8,000,000 ASIF Global Financing, 144A, 2.380%, 2/26/2009, (SGD) 4,764,403 10,155,000 Astoria Depositor Corp., 144A, 8.144%, 5/01/2021 10,662,750 8,500,000 AT&T Inc, 6.150%, 9/15/2034(e) 8,071,880 7,098,951 Atlas Air, Inc., Series 1998-1, Class 1A, 7.380%, 1/02/2018 7,169,941 16,288,877 Atlas Air, Inc., Series 1998-1, Class 1B, 7.680%, 1/02/2014 15,148,655 3,394,653 Atlas Air, Inc., Series 1999-1, Class A1, 7.200%, 1/02/2019 3,428,599 402,328 Atlas Air, Inc., Series 1999-1, Class A2, 6.880%, 7/02/2009 392,269 12,740,207 Atlas Air, Inc., Series 1999-1, Class B, 7.630%, 1/02/2015 11,466,186 1,248,567 Atlas Air, Inc., Series 1999-1, Class C, 8.770%, 1/02/2011 836,540 5,323,737 Atlas Air, Inc., Series 2000-1, Class B, 9.057%, 1/02/2014 5,110,787 6,465,000 Avnet, Inc., 6.000%, 9/01/2015 6,195,894 17,310,000,000 Barclays Financial LLC, 144A, 4.060%, 9/16/2010, (KRW) 17,220,920 529,000,000 Barclays Financial LLC, 144A, 4.100%, 3/22/2010, (THB) 12,738,184 1,006,000,000 Barclays Financial LLC, 144A, 4.160%, 2/22/2010, (THB) 24,270,801
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------------------ United States -- continued $21,340,000,000 Barclays Financial LLC, 144A, 4.460%, 9/23/2010, (KRW) $ 21,577,209 337,000,000 Barclays Financial LLC, 144A, 5.500%, 11/01/2010, (THB) 8,489,366 800,000 Bausch & Lomb, Inc., 7.125%, 8/01/2028 820,238 12,475,000 BellSouth Corp, 6.000%, 11/15/2034(e) 11,634,672 16,911,000 Borden, Inc., 7.875%, 2/15/2023 13,993,852 3,744,000 Borden, Inc., 8.375%, 4/15/2016 3,444,480 6,532,000 Borden, Inc., 9.200%, 3/15/2021 5,944,120 1,000,000 Bowater, Inc., 6.500%, 6/15/2013(e) 932,500 3,560,000 Calpine Corp., Senior Note, 8.625%, 8/15/2010(e)(i)(k) 1,424,000 2,840,000 Centex Corp., 5.250%, 6/15/2015(e) 2,637,735 355,000 Chesapeake Energy Corp., 6.500%, 8/15/2017 350,563 425,000 Cincinnati Bell, Inc., 8.375%, 1/15/2014(e) 431,906 2,500,000 CIT Group, Inc., Series E, Senior Note, (MTN), 5.500%, 12/01/2014, (GBP) 4,369,559 18,650,000 Citibank NA, 144A, 15.000%, 7/02/2010, (BRL) 9,396,532 8,140,000 Columbia/HCA, Inc., 7.050%, 12/01/2027 7,424,999 500,000 Columbia/HCA, Inc., 7.500%, 12/15/2023 485,557 1,500,000 Columbia/HCA, Inc., (MTN), 7.580%, 9/15/2025 1,452,312 18,110,000 Comcast Corp., 5.650%, 6/15/2035 15,783,861 23,175,000 Comcast Corp., 6.450%, 3/15/2037 22,299,031 20,175,000 Comcast Corp., 6.500%, 11/15/2035 19,575,722 3,910,660 Continental Airlines, Inc., Series 1997-4, Class 4B, 6.900%, 1/02/2017 3,674,030 1,400,905 Continental Airlines, Inc., Series 1998-1, Class 1B, 6.748%, 3/15/2017 1,295,878 7,256,251 Continental Airlines, Inc., Series 1999-1, Class B, 6.795%, 8/02/2018 6,888,196 2,947,997 Continental Airlines, Inc., Series 1999-1, Class C, 6.954%, 8/02/2009 2,718,653 3,851,193 Continental Airlines, Inc., Series 1999-2, Class B, 7.566%, 3/15/2020 3,646,023 2,380,627 Continental Airlines, Inc., Series 2001-1, Class B, 7.373%, 12/15/2015 2,276,406 8,042,067 Continental Airlines, Inc., Series 2002-2, Class B, 8.307%, 4/02/2018 7,738,844 6,225,000 Corning, Inc., 5.900%, 3/15/2014(e) 6,147,088 6,220,000 Corning, Inc., 6.200%, 3/15/2016 6,219,708 650,000 Corning, Inc., 6.750%, 9/15/2013 677,890
See accompanying notes to financial statements. 33 LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - --------------------------------------------------------------------------- United States -- continued $ 1,000,000 Corning, Inc., 6.850%, 3/01/2029(e) $ 1,019,712 400,000 CSC Holdings, Inc., Senior Note, 7.875%, 2/15/2018 400,500 250,000 CSC Holdings, Inc., Series B, Senior Note, 8.125%, 7/15/2009 258,438 250,000 CSC Holdings, Inc., Series B, Senior Note, 8.125%, 8/15/2009 258,125 2,145,000 Cummins, Inc., 7.125%, 3/01/2028 2,187,900 200,000 Delphi Automotive Systems Corp., 6.550%, 6/15/2006(i)(k) 123,000 3,671,000 Delphi Automotive Systems Corp., 7.125%, 5/01/2029(e)(i)(k) 2,257,665 7,285,000 Dillard's, Inc., 6.625%, 1/15/2018(e) 6,811,475 3,050,000 Dillard's, Inc., 7.000%, 12/01/2028(e) 2,729,750 1,600,000 Dillard's, Inc., 7.130%, 8/01/2018 1,528,000 1,500,000 Dillard's, Inc., 7.750%, 7/15/2026 1,425,000 425,000 Dillard's, Inc., 7.875%, 1/01/2023 411,188 2,570,000 DR Horton Inc, Senior Note, 5.250%, 2/15/2015(e) 2,342,686 7,395,000 Dynegy Holdings Inc, 144A, 8.375%, 5/01/2016 7,358,025 900,000 Dynegy Holdings, Inc., 7.125%, 5/15/2018 823,500 3,705,000 Edison Mission Energy Corp., Senior Note, 7.730%, 6/15/2009 3,797,625 260,000 El Paso CGP, Co., 144A, 6.375%, 2/01/2009 257,075 14,350,000 El Paso CGP, Co., 144A, 6.950%, 6/01/2028 13,560,750 1,965,000 El Paso Corp., 7.000%, 5/15/2011(e) 1,972,369 925,000 El Paso Corp., 144A, 7.750%, 6/15/2010 953,906 750,000 El Paso Corp., Senior Note, (MTN), 7.800%, 8/01/2031(e) 753,750 1,600,000 El Paso Energy Corp., 6.750%, 5/15/2009(e) 1,596,000 1,000,000 El Paso Energy Corp., (MTN), 7.750%, 1/15/2032(e) 1,007,500 5,000,000 FHLMC, 3.220%, 6/20/2007, (SGD) 3,079,704 29,200,000 FNMA, 2.290%, 2/19/2009, (SGD) 17,406,966 6,500,000 FNMA, 2.375%, 2/15/2007 6,349,350 18,726,000 Ford Motor Co., 6.375%, 2/01/2029 12,452,790 31,929,000 Ford Motor Co., 6.625%, 10/01/2028 21,392,430 24,955,000 Ford Motor Credit Co., 5.700%, 1/15/2010(e) 22,145,641 10,685,000 Ford Motor Credit Co., 7.000%, 10/01/2013(e) 9,556,728
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------------------------------- United States -- continued $ 15,465,000 Ford Motor Credit Co., 7.250%, 10/25/2011 $ 14,092,187 900,000 Friendly Ice Cream Corp., Guaranteed Senior Note, 8.375%, 6/15/2012(e) 814,500 141,088,000 General Electric Capital Corp., 6.500%, 9/28/2015, (NZD) 87,584,758 30,350,000 General Electric Capital Corp., 6.625%, 2/04/2010, (NZD) 18,720,571 500,000 General Electric Capital Corp., Series E, (MTN), 1.725%, 6/27/2008, (SGD) 296,342 6,625,000 General Motors Acceptance Corp., 5.550%, 7/16/2007(f) 6,433,140 8,000,000 General Motors Acceptance Corp., 5.620%, 3/20/2007(f) 7,836,632 820,000 General Motors Acceptance Corp., 8.000%, 11/01/2031(e) 774,984 4,650,000 General Motors Acceptance Corp., (MTN), 6.750%, 12/01/2014(e) 4,185,953 5,321,000 General Motors Acceptance Corp., Series E, (MTN), 7.500%, 12/01/2006, (NZD) 3,181,792 7,030,000 Georgia-Pacific Corp., 7.250%, 6/01/2028 6,643,350 8,275,000 Georgia-Pacific Corp., 7.375%, 12/01/2025 7,944,000 32,175,000 Georgia-Pacific Corp., 7.750%, 11/15/2029 31,531,500 1,750,000 Georgia-Pacific Corp., 8.000%, 1/15/2024 1,765,313 4,320,000 Georgia-Pacific Corp., 8.875%, 5/15/2031 4,644,000 1,385,000 Goodyear Tire & Rubber Co., 7.000%, 3/15/2028 1,159,938 1,845,000 Goodyear Tire & Rubber Co., 9.000%, 7/01/2015(e) 1,872,675 2,590,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note, 7.750%, 12/15/2013(e) 2,421,650 840,000 Hawaiian Telcom Communications, Inc., Senior Subordinated Note, 144A, 12.500%, 5/01/2015(e) 831,600 3,125,000 HCA Inc, 7.500%, 11/06/2033 3,059,900 1,000,000 HCA, Inc., Senior Note, 5.750%, 3/15/2014 935,617 6,300,000 Hercules, Inc., Subordinated Note, 6.500%, 6/30/2029 4,977,000 16,050,000 HSBC Bank USA, 144A, 3.310%, 8/25/2010 16,258,650 4,215,000 IMC Global, Inc., 7.300%, 1/15/2028 3,893,606 2,570,000 IMC Global, Inc., 7.375%, 8/01/2018 2,595,700 640,000 JC Penney Co., Inc., 7.125%, 11/15/2023(e) 687,686 92,000,000 JPMorgan Chase Bank, 144A, Zero Coupon, 5/10/2010, (BRL) 24,322,479 599,726,100,000 JPMorgan Chase & Co., 144A, Zero Coupon, 3/28/2011, (IDR) 40,729,236 1,500,000 K Hovnanian Enterprises, Inc., 6.375%, 12/15/2014(e) 1,386,927
See accompanying notes to financial statements. 34 LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------------------------ United States -- continued $ 6,180,000 K Hovnanian Enterprises, Inc., 7.500%, 5/15/2016 $ 6,092,646 5,335,000 K Hovnanian Enterprises, Inc., Senior Note, 6.250%, 1/15/2016 4,836,039 10,975,000 KB Home, 7.250%, 6/15/2018 10,797,666 810,000 Kellwood Co, 7.625%, 10/15/2017 757,847 1,600,000 Lennar Corp., 5.600%, 5/31/2015(e) 1,520,494 16,375,000 Level 3 Communications, Inc., 2.875%, 7/15/2010(e) 14,635,156 380,000 Level 3 Communications, Inc., 144A, 11.500%, 3/01/2010(e) 369,550 12,035,000 Lucent Technologies, Inc., 6.450%, 3/15/2029(e) 10,861,587 1,250,000 McDonalds Corp., Series E, (MTN), 3.628%, 10/10/2010, (SGD) 763,184 2,675,000 Methanex Corp., Senior Note, 6.000%, 8/15/2015 2,513,869 1,153,000 Missouri Pacific Railroad Co., 5.000%, 1/01/2045 893,786 1,000,000 Morgan Stanley, 5.375%, 11/14/2013, (GBP) 1,758,105 2,730,000 Nektar Therapeutics, 144A, 3.250%, 9/28/2012 3,156,563 2,145,000 NGC Corp., 7.625%, 10/15/2026 1,962,675 18,375,000 NGC Corp. Capital Trust, Series B, 8.316%, 6/01/2027 16,170,000 2,500,000 NRG Energy, Inc., 7.250%, 2/01/2014 2,540,625 5,000,000 NRG Energy, Inc., 7.375%, 2/01/2016 5,106,250 9,245,000 Owens-Illinois, Inc., Senior Note, 7.800%, 5/15/2018(e) 9,175,662 3,000,000 Pemex Project Funding Master Trust, 8.625%, 12/01/2023(e) 3,525,000 4,350,000 Pemex Project Funding Master Trust, 9.500%, 9/15/2027(e) 5,568,000 2,000,000 Pharma Services Intermediate Holdings Corp., Senior Note, Convertible, 0.00% (step to 11.50% on 4/01/2009), 4/01/2014(g) 1,797,500 1,920,000 Pioneer Natural Resource, 5.875%, 7/15/2016(e) 1,819,538 3,165,000 Pulte Homes, Inc., 5.200%, 2/15/2015(e) 2,921,200 2,615,000 Pulte Homes, Inc., 6.000%, 2/15/2035(e) 2,276,504 1,100,000 Pulte Homes, Inc., 6.375%, 5/15/2033 999,027 9,110,000 Qwest Capital Funding, Inc., 6.500%, 11/15/2018 8,756,987 35,040,000 Qwest Capital Funding, Inc., 6.875%, 7/15/2028(e) 33,638,400 950,000 Qwest Capital Funding, Inc., 7.250%, 2/15/2011 963,063 2,875,000 Qwest Capital Funding, Inc., 7.750%, 2/15/2031(e) 2,925,313
Principal Amount+ Description Value (a) - ------------------------------------------------------------------------------------------- United States -- continued $ 2,025,000 Qwest Capital Funding, Inc., Guaranteed Note, 7.000%, 8/03/2009(e) $ 2,055,375 2,420,000 Qwest Capital Funding, Inc., Guaranteed Note, 7.625%, 8/03/2021 2,462,350 1,350,000 Qwest Corp., 7.250%, 9/15/2025 1,383,750 6,100,000 SLM Corp., 6.500%, 6/15/2010, (NZD) 3,749,033 2,595,000 Sungard Data Systems, Inc., 144A, 10.250%, 8/15/2015 2,731,238 1,810,000 Sungard Data Systems, Inc., Senior Note, 144A, 9.125%, 8/15/2013 1,914,075 2,310,000 Telcordia Technologies, Inc., Senior Subordinated Note, 144A, 10.000%, 3/15/2013 2,113,650 242,000 Tennessee Gas Pipeline Co., 7.000%, 10/15/2028(e) 239,238 10,120,000 Time Warner, Inc., 6.625%, 5/15/2029 9,946,493 4,755,000 Time Warner, Inc., 6.950%, 1/15/2028 4,822,835 3,150,000 Time Warner, Inc., 7.625%, 4/15/2031 3,431,430 2,025,000 Time Warner, Inc., 7.700%, 5/01/2032 2,226,917 496,687 Tiverton Power Associates, LP, 144A, 9.000%, 7/15/2018(i)(k) 429,634 4,245,000 Toll Brothers Financial Corp., 5.150%, 5/15/2015(e) 3,841,725 4,000,000 Toys R US, Inc., 7.375%, 10/15/2018(e) 2,940,000 315,000 TXU Corp., 5.550%, 11/15/2014(e) 294,650 2,225,000 TXU Corp., 6.550%, 11/15/2034(e) 2,007,942 81,775,000 U.S. Treasury Note, 2.500%, 5/31/2006(e) 81,490,668 49,730,000 U.S. Treasury Note, 2.625%, 5/15/2008(e) 47,546,555 29,225,000 U.S. Treasury Note, 2.750%, 6/30/2006(e) 29,090,302 50,270,000 U.S. Treasury Note, 3.000%, 2/15/2008(e) 48,626,422 5,245,000 U.S. Treasury Note, 3.500%, 5/31/2007(e) 5,164,479 100,000,000 U.S. Treasury Note, 3.625%, 4/30/2007(e) 98,703,100 25,000,000 U.S. Treasury Note, 3.625%, 6/30/2007(e) 24,623,050 1,545,000 United Rentals North America, Inc., Senior Subordinated Note, 7.000%, 2/15/2014(e) 1,487,063 27,440,000 Verizon Global Funding Corp., 5.850%, 9/15/2035 24,612,143 2,460,000 Verizon Maryland, Inc., 5.125%, 6/15/2033 1,938,967 2,500,000 Wal-Mart Stores, Inc., 4.750%, 1/29/2013, (GBP) 4,310,387 600,000 Williams Cos., Inc., 7.875%, 9/01/2021 645,000 965,000 Williams Cos., Inc., Senior Note, 7.750%, 6/15/2031(e) 1,022,900
See accompanying notes to financial statements. 35 LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited)
Principal Amount+ Description Value (a) - --------------------------------------------------------------------------------------------- United States -- continued $ 8,600,000 Williams Cos., Inc., Series A, 7.500%, 1/15/2031 $ 8,922,500 2,200,000 Woolworth Corp., 8.500%, 1/15/2022 2,332,000 15,550,000 Xerox Capital Trust I, Guaranteed Note, 8.000%, 2/01/2027(e) 16,094,250 1,730,000 Xerox Corp., (MTN), 7.200%, 4/01/2016(e) 1,820,825 --------------- 1,449,928,491 --------------- Uruguay -- 0.1% 1,600,000 Republic of Uruguay, 7.500%, 3/15/2015(e) 1,664,000 2,906,258 Republic of Uruguay, 7.875%, 1/15/2033(e)(h) 3,022,508 --------------- 4,686,508 --------------- Venezuela -- 1.0% 16,535,000 Cerro Negro Finance, Ltd., 144A, 7.900%, 12/01/2020 16,204,300 13,790,000 Petrozuata Finance, Inc., Series B, 144A, 8.220%, 4/01/2017 13,583,150 --------------- 29,787,450 --------------- Total Non-Convertible Bonds (Identified Cost $2,420,206,570) 2,477,123,070 --------------- Total Bonds and Notes (Identified Cost $2,624,376,827) 2,699,023,238 --------------- Shares - --------------------------------------------------------------------------------------------- Common Stocks -- 7.0% Brazil -- 0.2% 117,000 Companhia Vale do Rio Doce, ADR 5,678,010 --------------- Israel -- 0.0% 2,288 Teva Pharmaceutical Industries, Ltd., Sponsored ADR 94,220 --------------- United States -- 6.8% 200,925 Apartment Investment & Management Co., Class A 9,423,383 889,730 Associated Estates Realty Corp., (REIT) 10,009,462 2,238,800 Bristol-Myers Squibb Co. 55,096,868 137,000 Camden Property Trust, (REIT) 9,870,850 53,260 Chesapeake Energy Corp.(e) 1,672,897 2,309,175 ConAgra Foods, Inc. 49,554,895 41,343 Corning, Inc.(c) 1,112,540 182,500 Developers Diversified Realty Corp., (REIT) 9,991,875 282,500 Duke Energy Corp. 8,234,875 460,000 Equity Residential Properties Trust, (REIT) 21,523,400 1,755,800 High Income Opportunity Fund, Inc. 10,885,960 79,878 Host Marriott Corp. 1,709,385 1,368,400 Managed High Income Porfolio, Inc. 8,251,452 110,211 Morgan Stanley Emerging Markets Debt Fund, Inc.(e) 1,147,297 117,700 Simon Property Group, Inc., (REIT) 9,903,278 --------------- 208,388,417 --------------- Total Common Stocks (Identified Cost $175,479,466) 214,160,647 --------------- Shares - --------------------------------------------------------------------------------------------- Preferred Stocks -- 2.3% Philippines -- 0.3% 267,750 Philippine Long Distance Telephone Co., Sponsored GDR, Convertible, Zero Coupon, 12/31/2049(e) 10,059,368 ---------------
Shares Description Value (a) - ------------------------------------------------------------------------------------------------ United States -- 2.0% 158,175 AES Trust III, Convertible, 6.750%, 10/15/2029 $ 7,380,445 107,725 CMS Energy Trust I, Convertible, 7.750%, 7/15/2027 5,278,525 51,500 Cummins Capital Trust I, Convertible, 7.000%, 6/15/2031 5,690,750 58,650 El Paso Energy Capital Trust I, 4.750%, 3/31/2028 2,111,400 393 Entergy New Orleans, Inc., 4.750%, 12/31/2045(c)(k) 15,057 41,300 Felcor Lodging Trust, Inc., (REIT) Convertible, 1.950%, 12/31/2049(e) 1,032,500 15,600 Lucent Technologies Capital Trust I, Convertible, 7.750%, 3/15/2017(e) 15,605,850 31,750 Newell Financial Trust I, 5.250%, 12/01/2027 1,361,281 429,200 Owens-Illinois, Inc., Convertible, 4.750%, 12/31/2049 14,850,320 800 Pacific Gas & Electric Co., Series G, 4.80% 16,800 267,925 Travelers Property Casualty, Convertible, 4.500%, 4/15/2032(e) 6,427,521 11,000 United Rentals Trust I, Convertible, 6.500%, 8/01/2028(e) 517,000 --------------- 60,287,449 --------------- Total Preferred Stocks (Identified Cost $62,323,917) 70,346,817 --------------- Shares/ Principal Amount+ - ------------------------------------------------------------------------------------------------ Short-Term Investments -- 18.1% 526,836,696 State Street Navigator Securities Lending Prime Portfolio(j) 526,836,696 $ 30,154,360 Tri-Party Repurchase Agreement with Fixed Income Clearing Corporation, dated 3/31/2006 at 2.950% to be repurchased at $30,161,773 on 4/03/2006, collateralized by $22,265,000 U.S. Treasury Bond, 8.75% due 8/15/2020 valued at $30,760,723 30,154,360 --------------- Total Short-Term Investments (Identified Cost $556,991,056) 556,991,056 --------------- Total Investments -- 115.5% (Identified Cost $3,419,171,266)(b) 3,540,521,758 Other assets less liabilities -- (15.5)% (476,348,093) --------------- Net Assets -- 100% $ 3,064,173,665 =============== (a) See Note 2a of Notes to Financial Statements. (b) Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales, return of capital included in dividends received from the Fund's investments in REIT's and interest adjustments on defaulted bonds. Amortization of premium on debt securities is excluded for tax purposes.): At March 31, 2006, the net unrealized appreciation on investments based on cost of $3,425,210,102 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all investments in which there is an excess of value of tax cost 160,504,841 Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (45,193,185) --------------- Net unrealized appreciation $ 115,311,656 ===============
See accompanying notes to financial statements. 36 LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued) Investments as of March 31, 2006 (Unaudited) (c) Non-income producing security. (d) Illiquid security. At March 31, 2006, the value of these securities amounted to 2,718,600 or 0.1% of net assets. (e) All or a portion of this security was on loan to brokers at March 31, 2006. (f) Variable rate security whose interest rate varies with changes in a designated base rate (such as the prime interest rate) on a specified date (such as coupon date or interest payment date). (g) 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. (h) All or a portion of interest payment is paid-in-kind. (i) Security is in default of principal and/or interest payments. (j) Represents investment of securities lending collateral. (k) Issuer filed petition under Chapter 11 of the Federal Bankruptcy Code. (l) Security valued at fair value as determined in good faith by or under the direction of the Board of Trustees. + Principal amount is in U.S. dollars unless otherwise noted. 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 $296,988,504 or 9.7% of net assets. ADR/GDR An American Depositary Receipt (ADR) or Global Depositary Receipt (GDR) is a certificate issued by a U.S. bank representing the right to receive securities of the foreign issuer described. The values of ADRs and GDRs are significantly influenced by trading on exchanges not located in the United States. FHLMC Federal Home Loan Mortgage Corporation FNMA Federal National Mortgage Association MTN Medium Term Note REITS Real Estate Investment Trusts ARS Argentine Peso AUD Australian Dollar BRL Brazilian Real CAD Canadian Dollar EUR Euro GBP British Pound IDR Indonesian Rupiah KRW South Korean Won MXN Mexican Peso NOK Norwegian Krone NZD New Zealand Dollar SEK Swedish Krona SGD Singapore Dollar THB Thailand Baht ZAR South African Rand
Holdings at March 31, 2006 as a Percentage of Net Assets Sovereigns 25.6% Treasuries 10.9 Pharmaceuticals 7.3 Banking 4.7 Automotive 3.8 Non-Captive Diversified 3.7 Technology 3.7 Supranational 2.7 Electric 2.7 Wireless 2.6 Media Cable 2.2 Real Estate Investment Trusts 2.0 Others, less than 2% each 25.5
See accompanying notes to financial statements. 37 This Page Intentionally Left Blank 38 STATEMENTS OF ASSETS & LIABILITIES March 31, 2006 (Unaudited)
Limited Term Government and Core Plus Bond Fund High Income Fund Agency Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- ASSETS Investments at cost $ 265,613,878 $ 41,766,666 $ 184,775,694 Net unrealized appreciation (depreciation) (4,279,256) 3,294,931 (2,683,635) --------------------- --------------------- --------------------- Investments at value(a) 261,334,622 45,061,597 182,092,059 Cash 31,222 97,619 -- Foreign currency (Identified Cost $10,500, $0, $0, $0, $0 and $2,296,013, respectively) 10,405 -- -- Dividends and interest receivable 2,452,393 603,085 924,065 Receivable for Fund shares sold 601,603 49,148 9,913 Receivable for securities sold 2,688,744 333,963 -- Securities lending income receivable 8,791 2,848 2,035 Receivable from investment adviser 41,351 16,064 37,826 --------------------- --------------------- --------------------- TOTAL ASSETS 267,169,131 46,164,324 183,065,898 --------------------- --------------------- --------------------- LIABILITIES Collateral on securities loaned, at value (Note 2) 35,959,987 5,449,209 37,732,576 Payable for securities purchased 3,570,426 820,997 -- Dividends payable 414,723 96,952 132,787 Payable for Fund shares redeemed 465,144 92,512 229,696 Management fees payable 83,332 20,181 62,150 Deferred Trustees' fees 228,977 58,960 200,010 Administrative fees payable 19,884 2,821 14,102 Other accounts payable and accrued expenses 388,704 52,847 94,470 --------------------- --------------------- --------------------- TOTAL LIABILITIES 41,131,177 6,594,479 38,465,791 --------------------- --------------------- --------------------- NET ASSETS $ 226,037,954 $ 39,569,845 $ 144,600,107 ===================== ===================== ===================== NET ASSETS CONSIST OF: Paid-in capital 252,477,340 119,705,002 174,103,347 Undistributed (overdistributed) net investment income (418,886) (98,717) (452,801) Accumulated net realized loss on investments and foreign currency transactions (21,742,184) (83,329,535) (26,366,804) Net unrealized appreciation (depreciation) on investments and foreign currency translations (4,278,316) 3,293,095 (2,683,635) --------------------- --------------------- --------------------- NET ASSETS $ 226,037,954 $ 39,569,845 $ 144,600,107 ===================== ===================== ===================== COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE: Class A shares: Net assets $ 94,964,638 $ 26,767,248 $ 125,067,979 ===================== ===================== ===================== Shares of beneficial interest 8,572,381 5,238,449 11,450,211 ===================== ===================== ===================== Net asset value and redemption price per share $ 11.08 $ 5.11 $ 10.92 ===================== ===================== ===================== Offering price per share (100/[100-maximum sales charge] of net asset value) $ 11.60 $ 5.35 $ 11.26 ===================== ===================== ===================== Class B shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charge) Net assets $ 117,003,896 $ 9,322,533 $ 12,347,677 ===================== ===================== ===================== Shares of beneficial interest 10,554,491 1,823,365 1,132,350 ===================== ===================== ===================== Net asset value and offering price per share $ 11.09 $ 5.11 $ 10.90 ===================== ===================== ===================== Class C shares: (redemption price is equal to net asset value less any applicable contingent deferred sales charge) Net assets $ 5,791,589 $ 3,480,064 $ 4,860,646 ===================== ===================== ===================== Shares of beneficial interest 522,086 681,001 445,065 ===================== ===================== ===================== Net asset value and offering price per share $ 11.09 $ 5.11 $ 10.92 ===================== ===================== ===================== Class Y shares: Net assets $ 8,277,831 $ -- $ 2,323,805 ===================== ===================== ===================== Shares of beneficial interest 743,970 -- 212,075 ===================== ===================== ===================== Net asset value, offering and redemption price per share $ 11.13 $ -- $ 10.96 ===================== ===================== ===================== (a) Including securities on loan with market values of $ 35,274,100 $ 5,349,582 $ 36,996,242 ===================== ===================== =====================
See accompanying notes to financial statements. 39
Massachusetts Tax Free Municipal Strategic Income Fund Income Fund Income Fund --------------------- --------------------- --------------------- --------------------- --------------------- $ 71,706,817 $ 99,054,949 $ 3,419,171,266 3,531,490 2,792,891 121,350,492 --------------------- --------------------- --------------------- 75,238,307 101,847,840 3,540,521,758 -- -- 358,836 -- -- 2,302,796 1,254,045 1,640,501 36,047,304 3,217 3,432 41,753,102 -- -- 15,943,811 -- -- 84,955 20,082 20,018 -- --------------------- --------------------- --------------------- 76,515,651 103,511,791 3,637,012,562 --------------------- --------------------- --------------------- -- -- 526,836,696 -- -- 34,587,340 61,373 103,459 5,539,312 102,106 259,752 3,716,821 39,110 43,936 1,455,876 68,147 136,271 192,015 5,931 8,262 111,856 38,990 48,956 398,981 --------------------- --------------------- --------------------- 315,657 600,636 572,838,897 --------------------- --------------------- --------------------- $ 76,199,994 $ 102,911,155 $ 3,064,173,665 ===================== ===================== ===================== 75,169,415 100,422,803 2,993,976,639 18,022 156,822 163,945 (2,518,933) (461,361) (51,142,148) 3,531,490 2,792,891 121,175,229 --------------------- --------------------- --------------------- $ 76,199,994 $ 102,911,155 $ 3,064,173,665 ===================== ===================== ===================== $ 73,295,419 $ 96,463,175 $ 1,633,689,637 ===================== ===================== ===================== 4,455,650 13,020,890 114,662,664 ===================== ===================== ===================== $ 16.45 $ 7.41 $ 14.25 ===================== ===================== ===================== $ 17.18 $ 7.76 $ 14.92 ===================== ===================== ===================== $ 2,904,575 $ 6,447,980 $ 152,987,890 ===================== ===================== ===================== 176,966 869,360 10,695,155 ===================== ===================== ===================== $ 16.41 $ 7.42 $ 14.30 ===================== ===================== ===================== $ -- $ -- $ 1,146,214,643 ===================== ===================== ===================== -- -- 80,158,367 ===================== ===================== ===================== $ -- $ -- $ 14.30 ===================== ===================== ===================== $ -- $ -- $ 131,281,495 ===================== ===================== ===================== -- -- 9,214,993 ===================== ===================== ===================== $ -- $ -- $ 14.25 ===================== ===================== ===================== $ -- $ -- $ 516,322,518 ===================== ===================== =====================
40 STATEMENTS OF OPERATIONS For the Six Months Ended March 31, 2006 (Unaudited)
Limited Term Government Core Plus Bond Fund High Income Fund and Agency Fund --------------------- --------------------- ----------------------- --------------------- --------------------- --------------------- INVESTMENT INCOME Dividends $ -- $ 68,669 $ -- Interest 6,630,412 1,521,545 3,490,101 Securities lending income 30,552 21,529 13,429 Less net foreign taxes withheld -- (525) -- --------------------- --------------------- --------------------- 6,660,964 1,611,218 3,503,530 --------------------- --------------------- --------------------- Expenses Management fees 508,389 118,748 385,655 Service fees - Class A 123,416 32,213 166,157 Service and distribution fees - Class B 622,862 52,017 67,351 Service and distribution fees - Class C 29,190 17,043 26,671 Trustees' fees and expenses 44,734 15,580 38,175 Administrative fees 80,049 12,796 52,755 Custodian fees 20,195 10,771 16,156 Transfer agent fees and expenses - Class A, Class B, Class C 297,886 41,562 98,625 Transfer agent fees and expenses - Class Y 8,758 -- 633 Audit fees 15,914 16,937 12,474 Legal fees 10,072 1,895 4,787 Registration 31,064 19,940 30,136 Shareholder reporting 59,228 20,701 41,569 Miscellaneous 3,451 4,029 2,721 --------------------- --------------------- --------------------- Total expenses 1,855,208 364,232 943,865 Less waiver/reimbursement (128,158) (38,317) (50,980) --------------------- --------------------- --------------------- Net expenses 1,727,050 325,915 892,885 --------------------- --------------------- --------------------- Net investment income 4,933,914 1,285,303 2,610,645 --------------------- --------------------- --------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Realized gain (loss) on: Investments - net 246,107 161,235 (483,469) Foreign currency transactions - net 183,073 3,793 -- Change in unrealized appreciation (depreciation) of: Investments - net (4,864,371) 868,454 (1,628,717) Foreign currency translations - net (5,032) (3,970) -- --------------------- --------------------- --------------------- Net realized and unrealized gain (loss) on investments and foreign currency transactions (4,440,223) 1,029,512 (2,112,186) --------------------- --------------------- --------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 493,691 $ 2,314,815 $ 498,459 ===================== ===================== =====================
See accompanying notes to financial statements. 41
Massachusetts Tax Municipal Strategic Free Income Fund Income Fund Income Fund --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ -- $ -- $ 5,807,587 1,886,622 2,532,080 63,413,686 -- -- 703,467 -- -- (47,462) --------------------- --------------------- --------------------- 1,886,622 2,532,080 69,877,278 --------------------- --------------------- --------------------- 233,031 261,831 7,089,530 93,322 124,337 1,554,184 15,097 34,656 729,893 -- -- 4,583,788 17,822 28,336 85,366 25,305 34,971 710,103 10,771 11,967 101,720 27,187 31,920 1,037,737 -- -- 29,208 13,297 13,222 17,958 3,190 5,185 33,907 9,477 17,565 44,415 13,459 15,206 255,015 2,263 2,341 13,683 --------------------- --------------------- --------------------- 464,221 581,537 16,286,507 (31,940) (25,888) -- --------------------- --------------------- --------------------- 432,281 555,649 16,286,507 --------------------- --------------------- --------------------- 1,454,341 1,976,431 53,590,771 --------------------- --------------------- --------------------- 40,979 361,763 (9,965,984) -- -- 2,416,653 (828,743) (1,410,626) 39,163,715 -- -- 31,158 --------------------- --------------------- --------------------- (787,764) (1,048,863) 31,645,542 --------------------- --------------------- --------------------- $ 666,577 $ 927,568 $ 85,236,313 ===================== ===================== =====================
42 STATEMENTS OF CHANGES IN NET ASSETS
Core Plus Bond Fund -------------------------------------------- Period Ended Year Ended March 31, 2006 September 30, (Unaudited) 2005 --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income $ 4,933,914 $ 9,537,622 Net realized gain (loss) on investments and foreign currency transactions 429,180 4,343,339 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (4,869,403) (8,333,391) --------------------- --------------------- Net increase in net assets resulting from operations 493,691 5,547,570 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (3,330,469) (5,451,945) Class B (3,703,742) (5,851,384) Class C (173,879) (254,068) Class Y (305,017) (529,060) --------------------- --------------------- Total distributions (7,513,107) (12,086,457) --------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 7) (19,401,843) (26,672,030) --------------------- --------------------- Redemption Fees Class A 611 578 Class B 770 727 Class C 35 32 Class Y 52 53 --------------------- --------------------- 1,468 1,390 --------------------- --------------------- Net increase (decrease) in net assets (26,419,791) (33,209,527) --------------------- --------------------- NET ASSETS Beginning of period 252,457,745 285,667,272 --------------------- --------------------- End of period $ 226,037,954 $ 252,457,745 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME $ (418,886) $ 2,160,307 ===================== =====================
High Income Fund -------------------------------------------- Period Ended Year Ended March 31, 2006 September 30, (Unaudited) 2005 --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income $ 1,285,303 $ 2,727,688 Net realized gain (loss) on investments and foreign currency transactions 165,028 1,697,305 Net change in unrealized appreciation (depreciation) on investments and foreign currency translations 864,484 (251,326) --------------------- --------------------- Net increase in net assets resulting from operations 2,314,815 4,173,667 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (892,785) (1,635,303) Class B (321,251) (908,339) Class C (105,298) (182,735) Class Y -- -- --------------------- --------------------- Total distributions (1,319,334) (2,726,377) --------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 7) (2,831,581) (5,264,082) --------------------- --------------------- Redemption Fees Class A 499 3,017 Class B 217 1,868 Class C 68 370 Class Y -- -- --------------------- --------------------- 784 5,255 --------------------- --------------------- Net increase (decrease) in net assets (1,835,316) (3,811,537) --------------------- --------------------- NET ASSETS Beginning of period 41,405,161 45,216,698 --------------------- --------------------- End of period $ 39,569,845 $ 41,405,161 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME $ (98,717) $ (64,686) ===================== =====================
Limited Term Government and Agency Fund -------------------------------------------- Period Ended Year Ended March 31, 2006 September 30, (Unaudited) 2005 --------------------- --------------------- --------------------- --------------------- FROM OPERATIONS: Net investment income $ 2,610,645 $ 3,584,070 Net realized gain (loss) on investments and foreign currency transactions (483,469) (6,238) Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (1,628,717) (1,789,947) --------------------- --------------------- Net increase in net assets resulting from operations 498,459 1,787,885 --------------------- --------------------- FROM DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class A (2,591,218) (3,733,934) Class B (203,030) (285,636) Class C (80,658) (135,224) Class Y (53,956) (65,428) --------------------- --------------------- Total distributions (2,928,862) (4,220,222) --------------------- --------------------- INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 7) (17,748,317) 39,221,920 --------------------- --------------------- Redemption Fees Class A -- -- Class B -- -- Class C -- -- Class Y -- -- --------------------- --------------------- -- -- --------------------- --------------------- Net increase (decrease) in net assets (20,178,720) 36,789,583 --------------------- --------------------- NET ASSETS Beginning of period 164,778,827 127,989,244 --------------------- --------------------- End of period $ 144,600,107 $ 164,778,827 ===================== ===================== UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME $ (452,801) $ (134,584) ===================== =====================
See accompanying notes to financial statements. 43
Massachusetts Tax Free Income Fund Municipal Income Fund - -------------------------------------------- -------------------------------------------- Period Ended Year Ended Period Ended Year Ended March 31, 2006 September 30, March 31, 2006 September 30, (Unaudited) 2005 (Unaudited) 2005 - --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- --------------------- $ 1,454,341 $ 2,935,764 $ 1,976,431 $ 4,158,144 40,979 447,715 361,763 1,495,771 (828,743) (258,210) (1,410,626) (1,327,773) - --------------------- --------------------- --------------------- --------------------- 666,577 3,125,269 927,568 4,326,142 - --------------------- --------------------- --------------------- --------------------- (1,408,416) (2,824,718) (1,857,178) (3,981,690) (45,558) (111,486) (103,348) (243,518) -- -- -- -- -- -- -- -- - --------------------- --------------------- --------------------- --------------------- (1,453,974) (2,936,204) (1,960,526) (4,225,208) - --------------------- --------------------- --------------------- --------------------- (3,237,608) (5,825,158) (5,920,657) (11,124,657) - --------------------- --------------------- --------------------- --------------------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - --------------------- --------------------- --------------------- --------------------- -- -- -- -- - --------------------- --------------------- --------------------- --------------------- (4,025,005) (5,636,093) (6,953,615) (11,023,723) - --------------------- --------------------- --------------------- --------------------- 80,224,999 85,861,092 109,864,770 120,888,493 - --------------------- --------------------- --------------------- --------------------- $ 76,199,994 $ 80,224,999 $ 102,911,155 $ 109,864,770 ===================== ===================== ===================== ===================== $ 18,022 $ 17,655 $ 156,822 $ 140,917 ===================== ===================== ===================== =====================
Strategic Income Fund - -------------------------------------------- Period Ended Year Ended March 31, 2006 September 30, (Unaudited) 2005 - --------------------- --------------------- - --------------------- --------------------- $ 53,590,771 $ 54,660,282 (7,549,331) 21,963,471 39,194,873 27,533,778 - --------------------- --------------------- 85,236,313 104,157,531 - --------------------- --------------------- (37,504,835) (31,992,206) (3,811,033) (6,262,718) (23,615,230) (21,270,824) (2,282,624) (1,531,716) - --------------------- --------------------- (67,213,722) (61,057,464) - --------------------- --------------------- 1,109,254,647 1,154,844,870 - --------------------- --------------------- 25,533 32,202 2,955 6,890 18,676 25,315 1,522 1,499 - --------------------- --------------------- 48,686 65,906 - --------------------- --------------------- 1,127,325,924 1,198,010,843 - --------------------- --------------------- 1,936,847,741 738,836,898 - --------------------- --------------------- $ 3,064,173,665 $ 1,936,847,741 ===================== ===================== $ 163,945 $ 13,786,896 ===================== =====================
44 FINANCIAL HIGHLIGHTS For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions: --------------------------------------- --------------------------- Net asset value, Dividends beginning Net Net realized Total from from of investment and unrealized investment net investment Total Redemption period income gain (loss) operations income distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ---------- CORE PLUS BOND FUND Class A 3/31/2006(i) $ 11.41 $ 0.26(c) $ (0.21) $ 0.05 $ (0.38) $ (0.38) $ 0.00(g) 9/30/2005 11.69 0.46(c) (0.18) 0.28 (0.56) (0.56) 0.00(g) 9/30/2004 11.63 0.47(c) 0.13 0.60 (0.54) (0.54) 0.00(g) 9/30/2003(f) 11.28 0.37(c) 0.34 0.71 (0.36) (0.36) -- 12/31/2002 11.59 0.63(c) (0.32) 0.31 (0.62) (0.62) -- 12/31/2001(d) 11.52 0.73 0.10 0.83 (0.76) (0.76) -- 12/31/2000 11.51 0.78 0.03 0.81 (0.80) (0.80) -- Class B 3/31/2006(i) 11.41 0.21(c) (0.20) 0.01 (0.33) (0.33) 0.00(g) 9/30/2005 11.70 0.37(c) (0.18) 0.19 (0.48) (0.48) 0.00(g) 9/30/2004 11.62 0.38(c) 0.14 0.52 (0.44) (0.44) 0.00(g) 9/30/2003(f) 11.28 0.30(c) 0.34 0.64 (0.30) (0.30) -- 12/31/2002 11.59 0.55(c) (0.32) 0.23 (0.54) (0.54) -- 12/31/2001(d) 11.51 0.64 0.10 0.74 (0.66) (0.66) -- 12/31/2000 11.51 0.70 0.02 0.72 (0.72) (0.72) -- Class C 3/31/2006(i) 11.42 0.21(c) (0.21) 0.00 (0.33) (0.33) 0.00(g) 9/30/2005 11.71 0.37(c) (0.18) 0.19 (0.48) (0.48) 0.00(g) 9/30/2004 11.63 0.38(c) 0.14 0.52 (0.44) (0.44) 0.00(g) 9/30/2003(f) 11.29 0.30(c) 0.34 0.64 (0.30) (0.30) -- 12/31/2002 11.60 0.55(c) (0.32) 0.23 (0.54) (0.54) -- 12/31/2001(d) 11.52 0.65 0.09 0.74 (0.66) (0.66) -- 12/31/2000 11.52 0.70 0.02 0.72 (0.72) (0.72) -- Class Y 3/31/2006(i) 11.46 0.27(c) (0.21) 0.06 (0.39) (0.39) 0.00(g) 9/30/2005 11.74 0.49(c) (0.18) 0.31 (0.59) (0.59) 0.00(g) 9/30/2004 11.69 0.50(c) 0.13 0.63 (0.58) (0.58) 0.00(g) 9/30/2003(f) 11.33 0.41(c) 0.35 0.76 (0.40) (0.40) -- 12/31/2002 11.63 0.69(c) (0.32) 0.37 (0.67) (0.67) -- 12/31/2001(d) 11.54 0.79 0.10 0.89 (0.80) (0.80) -- 12/31/2000 11.54 0.83 0.01 0.84 (0.84) (0.84) -- HIGH INCOME FUND* Class A 3/31/2006(i) $ 4.98 $ 0.17(c) $ 0.13 $ 0.30 $ (0.17) $ (0.17) $ 0.00(g) 9/30/2005 4.82 0.33(c) 0.16 0.49 (0.33) (0.33) 0.00(g) 9/30/2004 4.65 0.33(c) 0.17 0.50 (0.33) (0.33) 0.00(g) 9/30/2003(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) -- Class B 3/31/2006(i) 4.98 0.15(c) 0.13 0.28 (0.15) (0.15) 0.00(g) 9/30/2005 4.83 0.29(c) 0.15 0.44 (0.29) (0.29) 0.00(g) 9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) (0.30) 0.00(g) 9/30/2003(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) --
(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 has been calculated using the average shares outstanding during the period. (d)As required, effective January 1, 2001, the Funds 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 data and ratios for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. See accompanying notes to financial statements. 45
Ratios to average net assets: ---------------------------------------- Net asset Net assets, value, Total end of Gross Net Net investment Portfolio end of return period Expenses Expenses income turnover period (%) (a) (000's) (%) (b) (%) (b) (%) (b) rate (%) - ---------- --------- ----------- --------- --------- -------------- --------- $ 11.08 0.4(h) $ 94,965 1.16(e) 1.05(j) 4.55 42 11.41 2.4(h) 105,111 1.18(e) 1.13(j) 3.93 64 11.69 5.3(h) 120,009 1.22(e) 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 11.09 0.1(h) 117,004 1.91(e) 1.80(j) 3.80 42 11.41 1.6(h) 132,221 1.93(e) 1.88(j) 3.18 64 11.70 4.6(h) 148,556 1.97(e) 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 11.09 0.0(h) 5,792 1.91(e) 1.80(j) 3.81 42 11.42 1.6(h) 6,065 1.93(e) 1.88(j) 3.17 64 11.71 4.6(h) 6,162 1.98(e) 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 11.13 0.6(h) 8,278 0.85(e) 0.80(j) 4.79 42 11.46 2.7(h) 9,060 0.99(e) 0.88(j) 4.18 64 11.74 5.5(h) 10,941 0.98(e) 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 $ 5.11 6.2(h) $ 26,767 1.58(e) 1.38(j) 6.76 25 4.98 10.3(h) 25,817 1.72(e) 1.58(j) 6.60 42 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 5.11 5.8(h) 9,323 2.32(e) 2.14(j) 6.00 25 4.98 9.3(h) 12,034 2.47(e) 2.33(j) 5.85 42 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
(e)Represents the total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses. (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 return would have been lower. (i)For the six months ended March 31, 2006 (unaudited). (j)The investment adviser agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, expenses would have been higher. See Note 4. * 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 Bshares, 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, Dividends beginning Net Net realized Total from from of investment and unrealized investment net investment Total period income gain (loss) operations income distributions ---------- ---------- -------------- ---------- -------------- ------------- HIGH INCOME FUND* (continued) Class C 3/31/2006(j) $ 4.98 $ 0.15(c) $ 0.13 $ 0.28 $ (0.15) $ (0.15) 9/30/2005 4.83 0.29(c) 0.15 0.44 (0.29) (0.29) 9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) (0.30) 9/30/2003(e) 4.12 0.23(c) 0.53 0.76 (0.23) (0.23) 12/31/2002 4.94 0.36(c) (0.82) (0.46) (0.36) (0.36) 12/31/2001(d) 6.22 0.61 (1.26) (0.65) (0.63) (0.63) 12/31/2000 8.30 0.81 (2.11) (1.30) (0.78) (0.78) LIMITED TERM GOVERNMENT AND AGENCY FUND** Class A 3/31/2006(j) $ 11.09 $ 0.19(c) $ (0.15) $ 0.04 $ (0.21) $ (0.21) 9/30/2005 11.30 0.28(c) (0.16) 0.12 (0.33) (0.33) 9/30/2004 11.51 0.30(c) (0.09) 0.21 (0.42) (0.42) 9/30/2003(e) 11.73 0.21(c) (0.07) 0.14 (0.36) (0.36) 12/31/2002 11.36 0.42(c) 0.49 0.91 (0.54) (0.54) 12/31/2001(d) 11.16 0.51 0.25 0.76 (0.56) (0.56) 12/31/2000 10.97 0.69 0.20 0.89 (0.70) (0.70) Class B 3/31/2006(j) 11.07 0.15(c) (0.15) 0.00 (0.17) (0.17) 9/30/2005 11.28 0.20(c) (0.17) 0.03 (0.24) (0.24) 9/30/2004 11.49 0.22(c) (0.09) 0.13 (0.34) (0.34) 9/30/2003(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) Class C 3/31/2006(j) 11.08 0.15(c) (0.14) 0.01 (0.17) (0.17) 9/30/2005 11.30 0.20(c) (0.18) 0.02 (0.24) (0.24) 9/30/2004 11.50 0.22(c) (0.08) 0.14 (0.34) (0.34) 9/30/2003(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) Class Y 3/31/2006(j) 11.13 0.21(c) (0.14) 0.07 (0.24) (0.24) 9/30/2005 11.34 0.31(c) (0.17) 0.14 (0.35) (0.35) 9/30/2004 11.55 0.32(c) (0.09) 0.23 (0.44) (0.44) 9/30/2003(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)
Redemption fee ---------- HIGH INCOME FUND* (continued) Class C 3/31/2006(j) $ 0.00(f) 9/30/2005 0.00(f) 9/30/2004 0.00(f) 9/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- LIMITED TERM GOVERNMENT AND AGENCY FUND** Class A 3/31/2006(j) $ -- 9/30/2005 -- 9/30/2004 -- 9/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- Class B 3/31/2006(j) -- 9/30/2005 -- 9/30/2004 -- 9/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- Class C 3/31/2006(j) -- 9/30/2005 -- 9/30/2004 -- 9/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 -- Class Y 3/31/2006(j) -- 9/30/2005 -- 9/30/2004 -- 9/30/2003(e) -- 12/31/2002 -- 12/31/2001(d) -- 12/31/2000 --
(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 has been calculated using the average shares outstanding during the period. (d)As required, effective January 1, 2001, the Funds 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 data and ratios for period 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)Amounts round to less than $0.01. (g)Represents total expenses prior to waiver of a portion of the Class's transfer agent expenses. See accompanying notes to financial statements. 47
Ratios to average net assets: ---------------------------------------- Net asset Net assets, value, Total end of Gross Net Net investment Portfolio end of return period Expenses Expenses income turnover period (%) (a) (000's) (%) (b) (%) (b) (%) (b) rate (%) - ---------- --------- ----------- --------- --------- -------------- --------- $ 5.11 5.8(h) $ 3,480 2.33(i) 2.14(k) 6.01 25 4.98 9.3 (h) 3,554 2.47(i) 2.33(k) 5.82 42 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 $ 10.92 0.4(h) $ 125,068 1.14(i) 1.07(k) 3.47 18 11.09 1.1 141,417 1.24 N/A 2.50 93 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 10.90 (0.0)(h) 12,348 1.89(i) 1.82(k) 2.71 18 11.07 0.3 15,114 1.99 N/A 1.75 93 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 10.92 0.1(h) 4,861 1.89(i) 1.82(k) 2.72 18 11.08 0.2 5,715 1.99 N/A 1.75 93 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 0.6(h) 2,324 0.81(i) 0.77(k) 3.78 18 11.13 1.2(h) 2,533 1.59(g) 1.02(k) 2.77 93 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
(h)Had certain expenses not been reduced during the period, total return 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. (j)For the six months ended March 31, 2006 (unaudited). (k)The investment adviser agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, expenses would have been higher. See Note 4. * The financial information 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: Less distributions: ----------------------------------------- --------------------------- Net asset value, Dividends beginning Net Net realized Total from from of investment and unrealized investment net investment Total period income gain (loss) operations income distributions ---------- ---------- -------------- ---------- -------------- ------------- MASSACHUSETTS TAX FREE INCOME FUND Class A 3/31/2006(g) $ 16.62 $ 0.31 $ (0.17) $ 0.14 $ (0.31) $ (0.31) 9/30/2005 16.58 0.60 0.04 0.64 (0.60) (0.60) 9/30/2004 16.41 0.61 0.17 0.78 (0.61) (0.61) 9/30/2003(f) 16.40 0.49 0.01 0.50 (0.49) (0.49) 12/31/2002 15.82 0.67 0.59 1.26 (0.68) (0.68) 12/31/2001(d) 16.06 0.75 (0.24) 0.51 (0.75) (0.75) 12/31/2000 15.48 0.82 0.57 1.39 (0.81) (0.81) Class B 3/31/2006(g) 16.58 0.25 (0.17) 0.08 (0.25) (0.25) 9/30/2005 16.54 0.46 0.05 0.51 (0.47) (0.47) 9/30/2004 16.37 0.49 0.18 0.67 (0.50) (0.50) 9/30/2003(f) 16.36 0.41 0.01 0.42 (0.41) (0.41) 12/31/2002 15.78 0.57 0.58 1.15 (0.57) (0.57) 12/31/2001(d) 16.03 0.64 (0.24) 0.40 (0.65) (0.65) 12/31/2000 15.45 0.71 0.58 1.29 (0.71) (0.71) MUNICIPAL INCOME FUND Class A 3/31/2006(g) $ 7.48 $ 0.14 $ (0.07) $ 0.07 $ (0.14) $ (0.14) 9/30/2005 7.47 0.28 0.01 0.29 (0.28) (0.28) 9/30/2004 7.41 0.29 0.06 0.35 (0.29) (0.29) 9/30/2003(f) 7.43 0.23 (0.02) 0.21 (0.23) (0.23) 12/31/2002 7.25 0.34 0.18 0.52 (0.34) (0.34) 12/31/2001(d) 7.39 0.36 (0.14) 0.22 (0.36) (0.36) 12/31/2000 7.17 0.40 0.21 0.61 (0.39) (0.39) Class B 3/31/2006(g) 7.49 0.11 (0.07) 0.04 (0.11) (0.11) 9/30/2005 7.48 0.22 0.01 0.23 (0.22) (0.22) 9/30/2004 7.41 0.24 0.07 0.31 (0.24) (0.24) 9/30/2003(f) 7.44 0.19 (0.03) 0.16 (0.19) (0.19) 12/31/2002 7.25 0.29 0.19 0.48 (0.29) (0.29) 12/31/2001(d) 7.39 0.31 (0.14) 0.17 (0.31) (0.31) 12/31/2000 7.17 0.35 0.21 0.56 (0.34) (0.34)
(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)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses. (d)As required, effective January 1, 2001, the Funds 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 data and ratios 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, value, Total end of Gross Net Net investment Portfolio end of return period Expenses Expenses income turnover period (%) (a) (000's) (%) (b) (%) (b) (%) (b) rate (%) - ---------- --------- ----------- --------- --------- -------------- --------- $ 16.45 0.9(e) $ 73,295 1.17(c) 1.08(h) 3.77 0 16.62 3.9(e) 77,018 1.22(c) 1.22(h) 3.59 5 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(c) 1.33(h) 4.67 60 16.06 9.3(e) 91,785 1.39(c) 1.13(h) 5.24 68 16.41 0.5(e) 2,905 1.91(c) 1.83(h) 3.02 0 16.58 3.1(e) 3,207 1.97(c) 1.97(h) 2.84 5 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(c) 1.98(h) 4.03 60 16.03 8.6(e) 8,715 2.04(c) 1.78(h) 4.59 68 $ 7.41 0.9(e) $ 96,463 1.04(c) 1.00(h) 3.76 4 7.48 3.9 102,255 1.07 N/A 3.65 29 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 33 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 7.42 0.6(e) 6,448 1.79(c) 1.75(h) 3.01 4 7.49 3.1 7,610 1.82 N/A 2.90 29 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
(e)Had certain expenses not been reduced during the period, total returns would have been lower. (f)For the nine months ended September 30, 2003. (g)For the six months ended March 31, 2006 (unaudited). (h)The investment adviser agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, expenses would have been higher. See Note 4. 50 FINANCIAL HIGHLIGHTS (continued) For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions: ---------------------------------------- --------------------------- Net asset value, Dividends beginning Net Net realized Total from from of investment and unrealized investment net investment Total Redemption period income (c) gain (loss) operations income distributions fee ---------- ---------- -------------- ---------- -------------- ------------- ---------- STRATEGIC INCOME FUND* Class A 3/31/2006(i) $ 14.17 $ 0.34 $ 0.17 $ 0.51 $ (0.43) $ (0.43) $ 0.00(g) 9/30/2005 13.57 0.66 0.70 1.36 (0.76) (0.76) 0.00(g) 9/30/2004 12.57 0.75 1.11 1.86 (0.86) (0.86) 0.00(g) 9/30/2003(d) 10.72 0.57 1.93 2.50 (0.65) (0.65) -- 12/31/2002 9.88 0.75 0.72 1.47 (0.63) (0.63) -- 12/31/2001(f) 10.80 0.91 (0.92) (0.01) (0.91) (0.91) -- 12/31/2000 11.65 0.99 (0.91) 0.08 (0.93) (0.93) -- Class B 3/31/2006(i) 14.22 0.29 0.16 0.45 (0.37) (0.37) 0.00(g) 9/30/2005 13.60 0.56 0.71 1.27 (0.65) (0.65) 0.00(g) 9/30/2004 12.59 0.65 1.10 1.75 (0.74) (0.74) 0.00(g) 9/30/2003(d) 10.71 0.51 1.92 2.43 (0.55) (0.55) -- 12/31/2002 9.88 0.67 0.73 1.40 (0.57) (0.57) -- 12/31/2001(f) 10.79 0.83 (0.90) (0.07) (0.84) (0.84) -- 12/31/2000 11.65 0.90 (0.91) (0.01) (0.85) (0.85) -- Class C 3/31/2006(i) 14.22 0.29 0.16 0.45 (0.37) (0.37) 0.00(g) 9/30/2005 13.60 0.55 0.72 1.27 (0.65) (0.65) 0.00(g) 9/30/2004 12.58 0.64 1.11 1.75 (0.73) (0.73) 0.00(g) 9/30/2003(d) 10.70 0.50 1.93 2.43 (0.55) (0.55) -- 12/31/2002 9.87 0.67 0.73 1.40 (0.57) (0.57) -- 12/31/2001(f) 10.78 0.83 (0.91) (0.08) (0.83) (0.83) -- 12/31/2000 11.64 0.90 (0.91) (0.01) (0.85) (0.85) -- Class Y 3/31/2006(i) 14.17 0.36 0.17 0.53 (0.45) (0.45) 0.00(g) 9/30/2005 13.57 0.70 0.70 1.40 (0.80) (0.80) 0.00(g) 9/30/2004 12.58 0.78 1.11 1.89 (0.90) (0.90) 0.00(g) 9/30/2003(d) 10.74 0.60 1.93 2.53 (0.69) (0.69) -- 12/31/2002 9.90 0.80 0.71 1.51 (0.67) (0.67) -- 12/31/2001(f) 10.81 0.94 (0.92) 0.02 (0.93) (0.93) -- 12/31/2000 11.65 0.96 (0.84) 0.12 (0.96) (0.96) --
(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 period less than one year. (c)Per share net investment income has been calculated using the average shares outstanding during the period. (d)For the nine months ended September 30, 2003. (e)Had certain expenses not been reduced during the period, total return would have been lower. (f)As required, effective January 1, 2001, the Funds adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began 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 data and ratios for periods prior to January 1, 2001 have not been restated to reflect this change in presentation. See accompanying notes to financial statements. 51
Ratios to average net assets: ---------------------------------------- Net asset Net assets, value, Total end of Gross Net Net investment Portfolio end of return period Expenses Expenses income turnover period (%) (a) (000's) (%) (b) (%) (b) (%) (b) rate (%) - ---------- --------- ----------- --------- --------- -------------- --------- $ 14.25 3.7 $1,633,690 1.04 N/A 4.84 7 14.17 10.2 977,198 1.18 N/A 4.71 14 13.57 15.2 343,586 1.23 N/A 5.66 28 12.57 23.7(e) 140,576 1.31(h) 1.28(j) 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 14.30 3.3 152,988 1.79 N/A 4.11 7 14.22 9.5 144,081 1.93 N/A 3.98 14 13.60 14.3 128,714 1.98 N/A 4.91 28 12.59 23.0(e) 118,217 2.06(h) 2.03(j) 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 14.30 3.2 1,146,215 1.79 N/A 4.07 7 14.22 9.5 765,200 1.93 N/A 3.93 14 13.60 14.3 255,705 1.98 N/A 4.87 28 12.58 23.0(e) 66,394 2.06(h) 2.03(j) 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 14.25 3.8 131,281 0.79 N/A 5.10 7 14.17 10.5 50,369 0.91 N/A 4.98 14 13.57 15.5(e) 10,833 1.08(h) 1.00(j) 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
(g)Amount rounds to less than $0.01. (h)Represents total expenses prior to advisory fee waiver and/or reimbursement of a portion of the Fund's expenses. (i)For the six months ended March 31, 2006 (unaudited). (j)The investment adviser agreed to reimburse a portion of the Fund's expenses and/or waive its management fee during the period. Without this reimbursement/waiver, expenses would have been higher. See Note 4. * 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 March 31, 2006 (Unaudited) 1. Organization. IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II and Loomis Sayles Funds II (the "Trusts" and each a "Trust") are each organized as a Massachusetts business trust. Each Trust is registered under the Investment Company Act of 1940, as amended ("1940 Act"), as an open-end management investment company. Each Declaration of Trust permits the Board of Trustees to authorize the issuance of an unlimited number of shares of the Trust in multiple series (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: IXIS Advisor Funds Trust I: Loomis Sayles Core Plus Bond Fund (the "Core Plus Bond Fund") IXIS Advisor 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 generally intended for institutional investors with a minimum initial investment of $1,000,000, though some categories of investors are excepted from the minimum investment amount. Most expenses of the Trusts can be directly attributed to a Fund. Expenses which cannot be directly attributed are generally apportioned based on the relative net assets of each of the funds in the Trusts. Expenses of a Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the Rule 12b-1 service and distribution fees and, for those Funds that offer Class Y shares, 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 Funds 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, including closed-end investment companies, for which market quotations are readily available are valued at market price on the basis of valuations furnished to the Funds 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. Securities traded on foreign exchanges are valued at the market price on the non-U.S. exchange, unless a Fund believes that an occurrence after the closing of that exchange will materially affect a security's value. In that case, the security may be fair valued at the time the Fund determines its net asset value by or pursuant to procedures approved by the Board of Trustees. When fair valuing their securities, the Funds may, among other things, use modeling tools or other processes that may take into account factors such as securities market activity and/or significant events that occur after the close of the local market and before the time a Fund's net asset value is calculated. All other securities and assets are valued at their fair value as determined in good faith by the Funds' investment adviser, pursuant to the procedures approved by the Board of Trustees. Certain securities held by High Income Fund and Strategic Income Fund were valued on the basis of a price provided by a principal market maker. The prices provided by the principal market makers may differ from the value that would be realized if the securities were sold. 53 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (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 non-class specific expenses are allocated on a pro rata basis to each class based on the relative value of settled shares of each class to the total for the Fund. 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 for the Fund. c. Foreign Currency Translation. The books and records of the Funds are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the period. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions. Since the values of investment securities are presented at the foreign exchange rates prevailing at the end of the period, it is not practical to isolate that portion of the results of operations arising from changes in exchange rates from fluctuations arising from changes in market prices of the investment securities. Such changes are included with the net realized and unrealized gain or loss on investments. Net realized foreign exchange gains or losses arise from sales of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds' books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities at the end of the fiscal period, resulting from changes in exchange rates. The Funds may use foreign currency exchange contracts to facilitate transactions in foreign-denominated investments. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. Each Fund (except Massachusetts Tax Free Income Fund and Municipal Income Fund) may purchase investments of foreign issuers. Investing in securities of foreign issuers involves special risks and considerations not typically associated with investing in U.S. companies and securities of the U.S. government. These risks include revaluation of currencies and the risk of appropriation. Moreover, the markets for securities of many foreign issuers may be less liquid and the prices of such securities may be more volatile than those of comparable U.S. companies and the U.S. government. 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 gain distributions are determined in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. Permanent differences are primarily due to differing treatments for book and tax purposes of items such as paydowns on mortgage-backed securities and foreign currency transactions. Permanent book and tax basis differences relating to shareholder distributions, net investment income, and net realized gains will result in reclassifications to the capital accounts. Temporary differences between book and tax distributable earnings are primarily due to deferred Trustees' fees, defaulted bond income accruals, premium amortization accruals, market discounts, capital loss carryforwards, and wash sales. Distributions from net investment income and short-term capital gains are considered to be ordinary income for tax purposes. Tax characterization of distributions is determined on an annual basis. The tax character of distributions paid to shareholders during the year ended September 30, 2005 is as follows:
2005 Distributions Paid From: - ----------------------------- Exempt Ordinary Interest Fund Income Dividends Total ---- ------ --------- ----- Core Plus Bond Fund $12,086,457 $ -- $12,086,457 High Income Fund 2,726,377 -- 2,726,377 Limited Term Government and Agency Fund 4,220,222 -- 4,220,222 Massachusetts Tax Free Income Fund 11,120 2,925,084 2,936,204 Municipal Income Fund 105,537 4,119,671 4,225,208 Strategic Income Fund 61,057,464 -- 61,057,464
54 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) As of September 30, 2005, capital loss carryforwards and post-October losses were as follows:
Limited Term Massachusetts Core Plus High Government and Tax Free Municipal Strategic Bond Fund Income Fund Agency Fund Income Fund Income Fund Income Fund - - --------- ----------- ----------- ----------- ----------- ----------- Capital loss carryforward: Expires September 30, 2007 $ -- $ -- $ (9,755,614) $(1,149,888) $(564,858) $ -- Expires September 30, 2008 -- (13,289,736) (4,165,768) (116,500) -- -- Expires September 30, 2009 -- (43,374,721) (4,128,091) -- -- (10,758,584) Expires September 30, 2010 (20,960,955) (26,826,634) (663,109) (1,003,440) -- (21,770,312) Expires September 30, 2011 -- -- (425,323) -- -- (7,096,274) Expires September 30, 2012 -- -- (193,904) -- (138,879) -- Expires September 30, 2013 -- -- -- (154,156) -- -- ------------ ------------ ------------ ----------- --------- ------------ Total capital loss carryforward (20,960,955) (83,491,091) (19,331,809) (2,423,984) (703,737) (39,625,170) Deferred net capital losses (post October) -- -- (5,436,058) -- -- --
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. The repurchase agreements are tri-party arrangements whereby the collateral is held at the custodian bank in a segregated account for the benefit of the Fund and on behalf of the counterparty. Repurchase agreements could involve certain risks in the event of default or insolvency of the counterparty including possible delays or restrictions upon a Fund's ability to dispose of the underlying securities. g. Securities Lending. Each Fund has entered into an agreement with State Street Bank ("SSB"), as an agent of the Funds, to lend securities to certain designated borrowers. The loans are collateralized with cash or securities in an amount equal to at least 105% or 102% of the market value of the loaned international or domestic securities, respectively, when the loan is initiated. Thereafter, the value of the collateral must remain at 102% of the market value of loaned securities for U.S. equities and U.S. corporate debt; at least 105% of the market value of loaned non-U.S. equities; and at least 100% of the market value of loaned securities for U.S. government and agency securities, sovereign debt issued by non-U.S. governments and non-U.S. corporate debt. In the event that the market value of the collateral falls below the required percentages described above, the borrower will deliver additional collateral on the next business day. The Funds invest cash collateral in short-term investments, a portion of the income from which is remitted to the borrowers and the remainder allocated between the Funds and SSB as lending agent. The Funds bear the risk of loss with respect to the investment of cash collateral. 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, 2006 were as follows:
Market Value of Value of Collateral Fund Securities on Loan Received ---- ------------------ ------------------- Core Plus Bond Fund $ 35,274,100 $ 35,959,987 High Income Fund 5,349,582 5,449,209 Limited Term Government and Agency Fund 36,996,242 37,732,576 Strategic Income Fund 516,322,518 526,836,696
h. 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. i. Indemnifications. Under the Funds' organizational documents, their officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Funds. Additionally, in the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 55 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) 3. Purchases and Sales of Securities. For the six months ended March 31, 2006, purchases and sales of securities (excluding short-term investments and including paydowns) were as follows:
U.S. Government/Agency Other Securities - - ---------------------- ---------------- Fund Purchases Sales Purchases Sales - ---- --------- ----- --------- ----- Core Plus Bond Fund $50,903,153 $56,710,238 $ 46,895,884 $ 63,506,958 High Income Fund 349,964 23,913 9,392,957 13,745,699 Limited Term Government and Agency Fund 23,948,431 43,491,169 3,719,237 807,872 Massachusetts Tax Free Income Fund -- -- -- 3,117,620 Municipal Income Fund -- -- 4,207,189 10,118,324 Strategic Income Fund 5,780,704 64,265,852 1,240,500,430 102,351,200
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 Fund. Under the terms of the management agreements, each Fund pays a management fee at the following annual rates, calculated daily and payable monthly, based on each Fund's average daily net assets:
Percentage of Average Daily Net Assets - - ------------------------------------------------- First Next Next Over Fund $100 million $100 million $1.8 billion $2 billion - ---- ------------ ------------ ------------ ---------- 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% 0.5500%
IXIS Asset Management Advisors, L.P. ("IXIS Advisors"), 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 its average daily net assets:
Percentage of Average Daily Net Assets - ------------------------------------- First Over Fund $100 million $100 million ---- ------------ ------------ Core Plus Bond Fund 0.2500% 0.1875% Massachusetts Tax Free Income Fund 0.3000% 0.2500%
Loomis Sayles has given binding undertakings to the Funds to defer its management fees and/or reimburse certain expenses associated with these Funds to limit their operating expenses. These undertakings are in effect until January 31, 2007 and will be reevaluated on an annual basis. At March 31, 2006, the expense limits as a percentage of average daily net assets under the expense limitation agreements were as follows:
Expense Limit as a Percentage of Average Daily Net Assets - -------------------------------------------------------- Fund Class A Class B Class C Class Y ---- ------- ------- ------- ------- Core Plus Bond Fund 1.05% 1.80% 1.80% 0.80% High Income Fund 1.25% 2.00% 2.00% -- Limited Term Government and Agency Fund 1.00% 1.75% 1.75% 0.75% Massachusetts Tax Free Income Fund 0.95% 1.70% -- -- Municipal Income Fund 0.95% 1.70% -- -- Strategic Income Fund 1.25% 2.00% 2.00% 1.00%
56 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) Prior to February 1, 2006, the expense limits as a percentage of average daily net assets were as follows:
Fund Class A Class B Class C Class Y ---- ------- ------- ------- ------- Core Plus Bond Fund 1.05% 1.80% 1.80% 0.80% High Income Fund 1.45% 2.20% 2.20% -- Limited Term Government and Agency Fund -- -- -- -- Massachusetts Tax Free Income Fund 1.15% 1.90% -- -- Municipal Income Fund -- -- -- -- Strategic Income Fund 1.25% 2.00% 2.00% 1.00%
Expense limits account for advisory administration fees payable to IXIS Advisors. Loomis Sayles and IXIS Advisors have agreed to equally bear the fee waiver and/or expense reimbursement. For the six months ended March 31, 2006, the management fees for each Fund were as follows:
Percentage of Average Gross Waiver of Net Daily Net Assets Management Management Management ---------------- Fund Fee Fee Fee Gross Net - ---- ---------- ---------- ---------- ----- --- Core Plus Bond Fund $ 254,195 $ -- $ 254,195 0.214% 0.214% High Income Fund 118,748 -- 118,748 0.600% 0.600% Limited Term Government and Agency Fund 385,655 -- 385,655 0.500% 0.500% Massachusetts Tax Free Income Fund 116,516 (2,377) 114,139 0.300% 0.294% Municipal Income Fund 261,831 -- 261,831 0.492% 0.492% Strategic Income Fund 7,089,530 -- 7,089,530 0.596% 0.596%
For the six months ended March 31, 2006, the advisory administration fees for each Fund were as follows:
Percentage of Waiver of Average Advisory Advisory Net Advisory Daily Net Assets Administration Administration Administration ---------------- Fund Fee Fee Fee Gross Net - ---- -------------- -------------- -------------- ----- --- Core Plus Bond Fund $254,194 $ -- $254,194 0.214% 0.214% Massachusetts Tax Free Income Fund 116,515 (2,376) 114,139 0.300% 0.294%
For the six months ended March 31, 2006, in addition to the waiver of management fees and/or advisory administration fees, expenses have been reimbursed as follows:
Fund Reimbursement ---- ------------- Core Plus Bond Fund $128,158 High Income Fund 38,317 Limited Term Government and Agency Fund 50,980 Massachusetts Tax Free Income Fund 27,187 Municipal Income Fund 25,888
Loomis Sayles and IXIS Advisors are permitted to recover expenses borne (whether through reduction of the management fee or otherwise) in later periods to the extent the Funds' expenses fall below the expense limits, provided, however, that the Funds are not obligated to pay such deferred fees more than one year after the end of the fiscal year in which the fee was deferred. 57 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) At March 31, 2006, the amount subject to possible reimbursement under the expense limitation agreements were as follows:
Expenses Subject Expenses Subject to Possible to Possible Reimbursement Reimbursement until until Fund September 30, 2006 September 30, 2007 ---- ------------------ ------------------ Core Plus Bond Fund $154,449 $128,158 High Income Fund 61,643 38,317 Limited Term Government and Agency Fund -- 50,980 Massachusetts Tax Free Income Fund 3,589 31,940 Municipal Income Fund -- 25,888
Loomis Sayles and IXIS Advisors are wholly-owned subsidiaries of IXIS Asset Management US Group, L.P. ("IXIS US Group") (formerly IXIS Asset Management North America, L.P.), which is part of IXIS Asset Management Group, an international asset management group based in Paris, France. IXIS Asset Management Group is ultimately owned principally, directly or indirectly by three large affiliated French financial services entities: the Caisse Nationale des Caisses d'Epargne, a financial institution owned by CDC (as defined below) and by French regional savings banks known as the Caisses d'Epargne; the Caisse des Depots et Consignations ("CDC"), a public sector financial institution created by the French government in 1816; 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 Statements of Operations as management fees. b. Administrative Expense. IXIS Advisors provides certain administrative services to the Funds and has subcontracted with State Street Bank and Trust Company ("State Street Bank") to serve as subadministrator. Pursuant to an agreement among IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV and IXIS Advisor Cash Management Trust ("IXIS Advisor Funds Trusts"), Loomis Sayles Funds I, Loomis Sayles Funds II ("Loomis Sayles Funds Trusts") and IXIS Advisors, each Fund pays IXIS Advisors monthly its pro rata portion of fees equal to an annual rate of 0.0675% of the first $5 billion of the average daily net assets of the IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts, 0.0625% of the next $5 billion, and 0.0500% of such assets in excess of $10 billion, subject to an annual aggregate minimum fee for the IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts of $5 million. For the six months ended March 31, 2006, amounts paid to IXIS Advisors for administrative fees were as follows:
Administrative Fund Fees ---- -------------- Core Plus Bond Fund $ 80,049 High Income Fund 12,796 Limited Term Government and Agency Fund 52,755 Massachusetts Tax Free Income Fund 25,305 Municipal Income Fund 34,971 Strategic Income Fund 710,103
c. 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"), the Fund's distributor (a wholly-owned subsidiary of IXIS US Group), a monthly service fee at an annual rate not to exceed 0.25% of the average daily net assets attributable to the Fund's Class A shares, as reimbursement for expenses incurred by IXIS Distributors in providing personal services to investors in Class A shares and/or the maintenance of shareholder accounts. Under the Class B and Class C Plans, each Fund pays IXIS Distributors a monthly service fee at an annual rate of 0.25% of the average daily net assets attributable to the Fund's Class B and Class C shares, as compensation for services provided and expenses incurred by IXIS Distributors in providing personal services to investors in Class B and Class C shares and/or the maintenance of shareholder accounts. 58 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) 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, 2006, the Funds paid the following service and distribution fees:
Service Fee Distribution Fee - - ------------------------------ ------------------- Fund Class A Class B Class C Class B Class C - ---- ------- ------- ------- ------- ------- Core Plus Bond Fund $ 123,416 $155,716 $ 7,298 $467,146 $ 21,892 High Income Fund 32,213 13,004 4,261 39,013 12,782 Limited Term Government and Agency Fund 166,157 16,838 6,668 50,513 20,003 Massachusetts Tax Free Income Fund 93,322 3,774 -- 11,323 -- Municipal Income Fund 124,337 8,664 -- 25,992 -- Strategic Income Fund 1,554,184 182,473 1,145,947 547,420 3,437,841
d. Commissions. The Funds have been informed that commissions (including CDSC) on Fund shares paid to IXIS Distributors by investors in shares of the Funds during the six months ended March 31, 2006 were as follows:
Fund Commission ---- ---------- Core Plus Bond Fund $ 49,634 High Income Fund 21,097 Limited Term Government and Agency Fund 38,358 Massachusetts Tax Free Income Fund 13,735 Municipal Income Fund 33,363 Strategic Income Fund 2,705,704
e. Trustees Fees and Expenses. The Funds do not pay any compensation directly to its officers or Trustees who are directors, officers or employees of IXIS Advisors, IXIS Distributors, IXIS US Group, Loomis Sayles or their affiliates. The Chairperson of the Board receives a retainer fee at the annual rate of $200,000. The Chairperson does not receive any meeting attendance fees for Board of Trustees meetings or committee meetings that she attends. Each independent Trustee (other than the Chairperson) receives, in the aggregate, a retainer fee at the annual rate of $55,000. Each independent Trustee also receives a meeting attendance fee of $6,000 for each meeting of the Board of Trustees that he or she attends in person and $3,000 for each meeting of the Board of Trustees that he or she attends telephonically. In addition, each committee chairman receives an additional retainer fee at the annual rate of $10,000. Each committee member receives $4,000 or $5,000 for each Contract and Governance or Audit Committee meeting, respectively, that he or she attends in person and $2,000 or $2,500 for each Contract and Governance or Audit Committee meeting, respectively, that he or she attends telephonically. These fees are allocated among the funds in the Trusts based on a formula that takes into account, among other factors, the relative net assets of each fund. Trustees are reimbursed for travel expenses in connection with attendance at meetings. Prior to November 18, 2005, the Trusts had co-chairmen of the Board. Prior to October 1, 2005, each independent Trustee received, 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 that he or she attended. The co-chairmen of the Board each received an additional annual retainer of $25,000. Each committee chairman received an additional retainer fee at the annual rate of $7,000. Each committee member received $3,750 for each committee meeting that he or she attended. In addition, during the period October 1, 2005 to November 18, 2005, each co-chairman received an additional one-time payment of $25,000 as compensation for their services as chairmen. Prior to January 1, 2006, each committee member was compensated $4,000 for each Audit Committee meeting that he or she attended in person and $2,000 for each such meeting he or she attended telephonically. 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 Trusts on the normal payment date. Deferred amounts remain in the fund until distributed in accordance with the Plan. Additionally, the Board of Trustees has approved the use of the Funds' assets to pay their portion of the annual salary for 2005 of an employee of IXIS Advisors who supports the Funds' Chief Compliance Officer. For the period from October 1, 2005 to December 31, 2005, each Fund's portion of such expense was approximately $575. 59 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) 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 a shareholder acquired shares on different days, the shares acquired first will be redeemed or exchanged first for purposes of determining whether the redemption fee applies. A new holding period begins with each purchase or exchange. These fees are accounted for as an addition to paid-in capital and are presented on the Statements of Changes in Net Assets. 5. Line of Credit. High Income Fund and Strategic Income Fund, together with certain other funds of IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts, participate in a $75,000,000 committed line of credit provided by State Street Bank. Interest is charged to a Fund based on its borrowing at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a Fund is charged its pro rata portion of a facility fee equal to 0.09% per annum on the unused portion of the line of credit. There were no borrowings by High Income Fund and Strategic Income Fund during the six months ended March 31, 2006. 6. 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, 2006, 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 32.1%. 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 15.1%, 7.8%, and 7.2% of its net assets, respectively, at March 31, 2006. At March 31, 2006, Municipal Income Fund had more than 10% of its net assets invested in the following: New York 18.7%. 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. 7. Capital Shares. Each Fund may issue an unlimited number of shares of beneficial interest, without par value. Transactions in capital shares were as follows: Six Months Ended Year Ended March 31, 2006 September 30, 2005 ------------------------ ------------------------ Core Plus Bond Fund Shares Amount Shares Amount - --------------------------------------------------------------------- ---------- ------------ ---------- ------------ Class A: Shares sold 662,874 $ 7,436,747 1,388,801 $ 16,079,888 Shares issued in connection with the reinvestment of distributions 235,172 2,630,947 374,646 4,342,323 ---------- ------------ ---------- ------------ 898,046 10,067,694 1,763,447 20,422,211 Shares repurchased (1,537,552) (17,271,472) (2,814,749) (32,644,448) ---------- ------------ ---------- ------------ Net increase (decrease) (639,506) $ (7,203,778) (1,051,302) $(12,222,237) ---------- ------------ ---------- ------------ Class B: Shares sold 1,308,554 $ 14,704,827 3,051,314 $ 35,378,116 Shares issued in connection with the reinvestment of distributions 83,478 934,445 138,384 1,605,875 ---------- ------------ ---------- ------------ 1,392,032 15,639,272 3,189,698 36,983,991 Shares repurchased (2,421,024) (27,211,613) (4,304,577) (49,860,073) ---------- ------------ ---------- ------------ Net increase (decrease) (1,028,992) $(11,572,341) (1,114,879) $(12,876,082) ---------- ------------ ---------- ------------ Class C: Shares sold 60,131 $ 675,842 117,915 $ 1,367,189 Shares issued in connection with the reinvestment of distributions 8,524 95,483 12,453 144,537 ---------- ------------ ---------- ------------ 68,655 771,325 130,368 1,511,726 Shares repurchased (77,543) (873,751) (125,755) (1,458,081) ---------- ------------ ---------- ------------ Net increase (decrease) (8,888) $ (102,426) 4,613 $ 53,645 ---------- ------------ ---------- ------------ Class Y: Shares sold 96,424 $ 1,087,257 294,003 $ 3,417,059 Shares issued in connection with the reinvestment of distributions 23,071 259,271 36,213 421,543 ---------- ------------ ---------- ------------ 119,495 1,346,528 330,216 3,838,602 Shares repurchased (166,129) (1,869,826) (471,320) (5,465,958) ---------- ------------ ---------- ------------ Net increase (decrease) (46,634) $ (523,298) (141,104) $ (1,627,356) ---------- ------------ ---------- ------------ Increase (decrease) from capital share transactions (1,724,020) $(19,401,843) (2,302,672) $(26,672,030) ========== ============ ========== ============
60 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) 7. Capital Shares (continued). Six Months Ended Year Ended March 31, 2006 September 30, 2005 ---------------------- ----------------------- High Income Fund Shares Amount Shares Amount - --------------------------------------------------------------------- --------- ----------- ---------- ----------- Class A: Shares sold 605,420 $ 3,025,519 1,843,627 $ 9,144,401 Shares issued in connection with the reinvestment of distributions 111,875 559,989 201,974 1,002,839 --------- ----------- ---------- ----------- 717,295 3,585,508 2,045,601 10,147,240 Shares repurchased (663,525) (3,307,299) (1,968,099) (9,761,214) --------- ----------- ---------- ----------- Net increase (decrease) 53,770 $ 278,209 77,502 $ 386,026 --------- ----------- ---------- ----------- Class B: Shares sold 68,839 $ 346,913 127,125 $ 632,910 Shares issued in connection with the reinvestment of distributions 28,231 141,076 79,627 395,537 --------- ----------- ---------- ----------- 97,070 487,989 206,752 1,028,447 Shares repurchased (688,952) (3,438,575) (1,513,258) (7,517,536) --------- ----------- ---------- ----------- Net increase (decrease) (591,882) $(2,950,586) (1,306,506) $(6,489,089) --------- ----------- ---------- ----------- Class C: Shares sold 52,832 $ 268,151 304,056 $ 1,494,195 Shares issued in connection with the reinvestment of distributions 8,459 42,305 17,043 84,652 --------- ----------- ---------- ----------- 61,291 310,456 321,099 1,578,847 Shares repurchased (93,992) (469,660) (147,783) (739,866) --------- ----------- ---------- ----------- Net increase (decrease) (32,701) $ (159,204) 173,316 $ 838,981 --------- ----------- ---------- ----------- Increase (decrease) from capital share transactions (570,813) $(2,831,581) (1,055,688) $(5,264,082) ========= =========== ========== ===========
61 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) 7. Capital Shares (continued). Six Months Ended March 31, 2006 ------------------------ Limited Term Government and Agency Fund Shares Amount - ------------------------------------------------------------------------------------------- ---------- ------------ Class A: Shares sold 288,967 $ 3,245,859 Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund -- -- Shares issued in connection with the reinvestment of distributions 163,664 1,800,218 ---------- ------------ 452,631 5,046,077 Shares repurchased (1,750,958) (19,284,230) ---------- ------------ Net increase (decrease) (1,298,327) $(14,238,153) ---------- ------------ Class B: Shares sold 48,754 $ 536,041 Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund -- -- Shares issued in connection with the reinvestment of distributions 15,322 168,252 ---------- ------------ 64,076 704,293 Shares repurchased (297,374) (3,269,001) ---------- ------------ Net increase (decrease) (233,298) $ (2,564,708) ---------- ------------ Class C: Shares sold 33,070 $ 364,582 Shares issued in connection with the reinvestment of distributions 4,694 51,613 ---------- ------------ 37,764 416,195 Shares repurchased (108,247) (1,192,886) ---------- ------------ Net increase (decrease) (70,483) $ (776,691) ---------- ------------ Class Y: Shares sold 8,868 $ 98,232 Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund -- -- Shares issued in connection with the reinvestment of distributions 4,709 51,962 ---------- ------------ 13,577 150,194 Shares repurchased (28,994) (318,959) ---------- ------------ Net increase (decrease) (15,417) $ (168,765) ---------- ------------ Increase (decrease) from capital share transactions (1,617,525) $(17,748,317) ========== ============
Year Ended September 30, 2005 ------------------------ Limited Term Government and Agency Fund Shares Amount - ------------------------------------------------------------------------------------------- ---------- ------------ Class A: Shares sold 1,025,368 $ 11,507,822 Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund 4,449,445 49,566,819 Shares issued in connection with the reinvestment of distributions 223,935 2,506,659 ---------- ------------ 5,698,748 63,581,300 Shares repurchased (2,390,415) (26,770,920) ---------- ------------ Net increase (decrease) 3,308,333 $ 36,810,380 ---------- ------------ Class B: Shares sold 90,600 $ 1,011,141 Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund 834,917 9,275,925 Shares issued in connection with the reinvestment of distributions 20,684 230,974 ---------- ------------ 946,201 10,518,040 Shares repurchased (476,529) (5,324,127) ---------- ------------ Net increase (decrease) 469,672 $ 5,193,913 ---------- ------------ Class C: Shares sold 67,790 $ 759,450 Shares issued in connection with the reinvestment of distributions 7,387 82,688 ---------- ------------ 75,177 842,138 Shares repurchased (174,813) (1,960,779) ---------- ------------ Net increase (decrease) (99,636) $ (1,118,641) ---------- ------------ Class Y: Shares sold 206,094 $ 2,316,707 Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund 356 3,981 Shares issued in connection with the reinvestment of distributions 5,628 63,325 ---------- ------------ 212,078 2,384,013 Shares repurchased (357,795) (4,047,745) ---------- ------------ Net increase (decrease) (145,717) $ (1,663,732) ---------- ------------ Increase (decrease) from capital share transactions 3,532,652 $ 39,221,920 ========== ============
On March 31, 2006, one shareholder owned 7.01% of the Fund's total shares outstanding. 62 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) 7. Capital Shares (continued). Six Months Ended Year Ended March 31, 2006 September 30, 2005 ----------------------- ------------------------ Massachusetts Tax Free Income Fund Shares Amount Shares Amount - --------------------------------------------------------------------- ---------- ----------- ---------- ------------ Class A: Shares sold 73,356 $ 1,214,467 108,967 $ 1,818,083 Shares issued in connection with the reinvestment of distributions 64,113 1,059,300 124,767 2,082,631 ---------- ----------- ---------- ------------ 137,469 2,273,767 233,734 3,900,714 Shares repurchased (317,003) (5,240,168) (509,747) (8,484,290) ---------- ----------- ---------- ------------ Net increase (decrease) (179,534) $(2,966,401) (276,013) $ (4,583,576) ---------- ----------- ---------- ------------ Class B: Shares sold 2,432 $ 40,057 3,203 $ 53,537 Shares issued in connection with the reinvestment of distributions 1,993 32,857 4,326 72,024 ---------- ----------- ---------- ------------ 4,425 72,914 7,529 125,561 Shares repurchased (20,866) (344,121) (82,197) (1,367,143) ---------- ----------- ---------- ------------ Net increase (decrease) (16,441) $ (271,207) (74,668) $ (1,241,582) ---------- ----------- ---------- ------------ Increase (decrease) from capital share transactions (195,975) $(3,237,608) (350,681) $ (5,825,158) ========== =========== ========== ============ Six Months Ended Year Ended March 31, 2006 September 30, 2005 ----------------------- ------------------------ Municipal Income Fund Shares Amount Shares Amount - --------------------------------------------------------------------- ---------- ----------- ---------- ------------ Class A: Shares sold 256,330 $ 1,945,444 417,124 $ 3,133,149 Shares issued in connection with the reinvestment of distributions 171,113 1,272,802 359,731 2,701,656 ---------- ----------- ---------- ------------ 427,443 3,218,246 776,855 5,834,805 Shares repurchased (1,080,487) (8,046,578) (2,060,532) (15,468,783) ---------- ----------- ---------- ------------ Net increase (decrease) (653,044) $(4,828,332) (1,283,677) $ (9,633,978) ---------- ----------- ---------- ------------ Class B: Shares sold 37,210 $ 278,169 91,090 $ 683,767 Shares issued in connection with the reinvestment of distributions 8,537 63,567 20,236 152,169 ---------- ----------- ---------- ------------ 45,747 341,736 111,326 835,936 Shares repurchased (192,787) (1,434,061) (309,437) (2,326,615) ---------- ----------- ---------- ------------ Net increase (decrease) (147,040) $(1,092,325) (198,111) $ (1,490,679) ---------- ----------- ---------- ------------ Increase (decrease) from capital share transactions (800,084) $(5,920,657) (1,481,788) $(11,124,657) ========== =========== ========== ============
63 NOTES TO FINANCIAL STATEMENTS (continued) March 31, 2006 (Unaudited) 7. Capital Shares (continued). Six Months Ended Year Ended March 31, 2006 September 30, 2005 -------------------------- -------------------------- Strategic Income Fund Shares Amount Shares Amount - --------------------------------------------------------------------- ---------- -------------- ---------- -------------- Class A: Shares sold 53,471,579 $ 756,636,872 50,308,376 $ 706,576,467 Shares issued in connection with the reinvestment of distributions 1,780,367 25,158,828 1,468,469 20,639,715 ---------- -------------- ---------- -------------- 55,251,946 781,795,700 51,776,845 727,216,182 Shares repurchased (9,535,558) (134,930,972) (8,154,982) (114,434,654) ---------- -------------- ---------- -------------- Net increase (decrease) 45,716,388 $ 646,864,728 43,621,863 $ 612,781,528 ---------- -------------- ---------- -------------- Class B: Shares sold 1,693,091 $ 24,043,352 3,250,360 $ 45,753,417 Shares issued in connection with the reinvestment of distributions 135,922 1,925,497 252,300 3,556,640 ---------- -------------- ---------- -------------- 1,829,013 25,968,849 3,502,660 49,310,057 Shares repurchased (1,266,525) (17,945,228) (2,831,055) (39,810,800) ---------- -------------- ---------- -------------- Net increase (decrease) 562,488 $ 8,023,621 671,605 $ 9,499,257 ---------- -------------- ---------- -------------- Class C: Shares sold 29,653,688 $ 421,041,631 37,693,843 $ 531,354,799 Shares issued in connection with the reinvestment of distributions 425,821 6,036,013 386,067 5,441,310 ---------- -------------- ---------- -------------- 30,079,509 427,077,644 38,079,910 536,796,109 Shares repurchased (3,746,977) (53,157,554) (3,055,156) (42,960,385) ---------- -------------- ---------- -------------- Net increase (decrease) 26,332,532 $ 373,920,090 35,024,754 $ 493,835,724 ---------- -------------- ---------- -------------- Class Y: Shares sold 6,014,573 $ 85,451,868 3,058,044 $ 42,955,389 Shares issued in connection with the reinvestment of distributions 27,203 384,224 30,007 421,552 ---------- -------------- ---------- -------------- 6,041,776 85,836,092 3,088,051 43,376,941 Shares repurchased (380,517) (5,389,884) (332,834) (4,648,580) ---------- -------------- ---------- -------------- Net increase (decrease) 5,661,259 $ 80,446,208 2,755,217 $ 38,728,361 ---------- -------------- ---------- -------------- Increase (decrease) from capital share transactions 78,272,667 $1,109,254,647 82,073,439 $1,154,844,870 ========== ============== ========== ==============
64 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 Registrant's principal executive officer and principal financial officer have concluded that the Registrant's disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report. There were no changes in the Registrant's internal control over financial reporting that occurred during the Registrant's last fiscal quarter of the period covered by the report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. Item 12. Exhibits. (a) (1) 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 of2002 are filed herewith as Exhibit (b). SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IXIS Advisor Funds Trust II By: /s/ John T. Hailer ----------------------------- Name: John T. Hailer Title: President and Chief Executive Officer Date: May 24, 2006 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 24, 2006 By: /s/ Michael C. Kardok ----------------------------- Name: Michael C. Kardok Title: Treasurer Date: May 24, 2006 EX-99.(CERT) 2 dex99cert.txt SECTION 302 CERTIFICATIONS Exhibit (a)(2)(1) IXIS Advisor Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certification I, John T. Hailer, certify that: 1. I have reviewed this report on Form N-CSR of IXIS Advisor Funds Trust II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 24, 2006 /s/ John T. Hailer ------------------------------------- John T. Hailer President and Chief Executive Officer Exhibit (a)(2)(2) IXIS Advisor Funds Trust II Exhibit to SEC Form N-CSR Section 302 Certification I, Michael C. Kardok, certify that: 1. I have reviewed this report on Form N-CSR of IXIS Advisor Funds Trust II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materials respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 24, 26 /s/ Michael C. Kardok ------------------------------------- Michael C. Kardok Treasurer EX-99.(906CT) 3 dex99906ct.txt SECTION 906 CERTIFICATIONS Exhibit (b) IXIS Advisor Funds Trust II Section 906 Certification In connection with the report on Form N-CSR for the period ended March 31, 2006 for the Registrant (the "Report"), the undersigned each hereby certifies to the best of his knowledge, pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as applicable; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. By: By: President & Chief Executive Officer Treasurer IXIS Advisor Funds Trust II IXIS Advisor Funds Trust II /s/ John T. Hailer /s/ Michael C. Kardok - -------------------------------------- -------------------------------------- John T. Hailer Michael C. Kardok Date: May 24, 2006 Date: May 24, 2006 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the IXIS Advisor Funds Trust II, and will be retained by the IXIS Advisor Funds Trust II and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----