-----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, PDVDpBqZH6v+/vsMN2w1H1s2SsaxvGMsiywTu3/dIvHz/FOw0Sedt10K7e5eRqF6 1j8nJhkZ8AkPCo5i9Gt1Tg== 0000927016-01-504056.txt : 20020412 0000927016-01-504056.hdr.sgml : 20020412 ACCESSION NUMBER: 0000927016-01-504056 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOOMIS SAYLES FUNDS CENTRAL INDEX KEY: 0000872649 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043113285 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06241 FILM NUMBER: 1803394 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6173103609 MAIL ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 N-30D 1 dn30d.txt LOOMIS SAYLES MANAGED BOND FUNDS LOOMIS SAYLES MANAGED BOND FUND ANNUAL REPORT SEPTEMBER 30, 2001 One Financial Center, Boston, Massachusetts 02111 800 . 633 . 3330 FUND AND MANAGER REVIEW Loomis Sayles Managed Bond Fund - --------------------------------------------------------- PERFORMANCE For the one-year period ended September 30, 2001, the Managed Bond Fund posted a total return of 4.11% (before deducting the maximum 2.50% front end sales charge) and 1.53% (after deducting the maximum 2.50% front end sales charge), compared to the 13.17% total return for the Fund's benchmark, the Lehman Brothers Government/Credit Bond Index. The total return for the Lipper Corporate Debt Funds BBB-Rated Average was 10.01% for the same period. PORTFOLIO REVIEW Declining interest rates and a weakening economy were the key factors influencing the bond market during the fiscal year. This created a favorable environment for higher-quality securities, such as U.S. Treasuries and government-agency bonds. In general, higher-quality sectors outperformed lower-quality sectors throughout the year. Changing sentiment regarding the magnitude of the economic slowdown and the timing of the recovery led to uneven performance among most investment-grade corporate bonds. For the high- yield sector, disappointing corporate earnings and downward estimate revisions, along with rising credit downgrades and defaults, led to a challenging environment and poor overall performance. The Fund's underperformance relative to the benchmark primarily was due to the Fund's exposure to the telecommunications industry. Telecommunications bonds struggled all year, as the industry experienced declining demand and lower capital spending. PORTFOLIO POSITIONING We believe that we continue to find value and opportunity among corporate bonds. Our ongoing objective is to seek bond issuers offering improving credit profiles. At the same time, we attempt to avoid issuers with deteriorating fundamentals. Sincerely, /s/ Daniel Fuss Daniel J. Fuss [Graphic] Loomis Sayles Managed Bond Fund 1 AVERAGE ANNUAL RETURNS (%)-PERIODS ENDED SEPTEMBER 30, 2001
---------------------------------------------------------------------- SINCE 1 YEAR INCEPTION(a) ---------------------------------------------------------------------- LOOMIS SAYLES MANAGED BOND FUND/(b)/ 1.53% 3.71% Lipper Corporate Debt Funds BBB-Rated Index/(c)/ 9.44% 4.64% Lipper Corporate Debt Funds A-Rated Index/(c)/ 11.91% 5.21% Lehman Brothers Government/Credit Bond Index/(d)/ 13.17% 5.92%
CUMULATIVE PERFORMANCE--10/1/98--9/30/01 [CHART]
Loomis Sayles Lipper A-Rated Lehman Brothers Lipper Corporate Managed Bond Corporate Debt Government/Credit Debt Funds BBB Fund (b) Funds Index Bond Index Rated Index 10/1/1998 9,750 10,000 10,000 10,000 10/31/1998 9,593 9,874 9,929 9,877 11/30/1998 10,220 9,981 9,989 10,059 12/31/1998 10,131 10,013 10,013 10,084 1/31/1999 10,429 10,098 10,084 10,172 2/28/1999 10,183 9,874 9,844 9,952 3/31/1999 10,530 9,939 9,893 10,063 4/30/1999 10,712 9,972 9,918 10,135 5/31/1999 10,424 9,858 9,816 9,998 6/30/1999 10,315 9,810 9,785 9,946 7/31/1999 10,260 9,766 9,758 9,896 8/31/1999 10,207 9,739 9,750 9,859 9/30/1999 10,194 9,832 9,838 9,944 10/31/1999 10,197 9,847 9,863 9,963 11/30/1999 10,252 9,854 9,858 9,987 12/31/1999 10,300 9,809 9,798 9,971 1/31/2000 10,224 9,788 9,795 9,942 2/29/2000 10,509 9,892 9,918 10,064 3/31/2000 10,671 10,026 10,061 10,157 04/30/2000 10,384 9,944 10,012 10,034 05/31/2000 10,327 9,906 10,003 9,957 06/30/2000 10,496 10,127 10,207 10,209 07/31/2000 10,394 10,212 10,316 10,253 08/31/2000 10,749 10,348 10,461 10,440 09/30/2000 10,720 10,405 10,501 10,470 10/31/2000 10,349 10,449 10,566 10,436 11/30/2000 10,102 10,604 10,747 10,533 12/31/2000 10,100 10,821 10,959 10,753 1/31/2001 10,616 11,022 11,143 11,013 2/28/2001 10,752 11,122 11,258 11,122 3/31/2001 10,593 11,161 11,310 11,115 4/30/2001 10,493 11,098 11,225 11,054 5/31/2001 11,017 11,171 11,289 11,154 6/30/2001 11,027 11,216 11,344 11,167 7/31/2001 11,410 11,471 11,626 11,420 8/31/2001 11,658 11,600 11,776 11,557 9/30/2001 11,161 11,645 11,884 11,459
Foreign investments involve special risks including greater economic, political and currency fluctuation risks, which may be even greater in emerging markets. In addition, foreign countries may have different accounting standards than those of the U.S., which may adversely affect the value of the Fund. High yield securities are subject to a higher degree of market and credit risk. In addition, the secondary market for these securities may lack liquidity which, in turn, may adversely affect the value of these securities and that of the Fund. Note: Past performance is no guarantee of future performance. Average annual returns assume reinvestment of dividends and capital gains distributions. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Performance data reflects certain fee waivers and reimbursements. Without such waivers, performance would be lower. /(a)/Inception date of the Loomis Sayles Managed Bond Fund is October 1, 1998. Since Lipper Corporate Debt Funds BBB-Rated Index, Lipper Corporate Debt Funds A-Rated Index and Lehman Brothers Government/Credit Bond Index performance data is not available coincident with the Fund's inception date, comparative performance is presented from the month end closest to the Fund's inception date (September 30, 1998). /(b)/Performance for the Fund includes the effect of the maximum 2.50% front end sales charges. /(c)/The Lipper Corporate Debt Funds BBB-Rated Index is an equally weighted unmanaged index of typically the 30 largest mutual funds within the corporate debt funds BBB-rated investment objective. The Lipper Corporate Debt Funds A-Rated Index is an equally weighted unmanaged index of typically the 30 largest mutual funds within the corporate debt funds A-rated investment objective. Returns are adjusted for the reinvestment of capital gains distributions and income dividends. It is not possible to invest directly in an index. Source: Lipper Inc. /(d)/Lehman Brothers Government/Credit Bond Index is an unmanaged index which is a composite of approximately 5,300 corporate and government issues with at least $100 million outstanding for government issues and $25 million for corporates, and greater than 1 year maturity. The index returns have not been lowered for ongoing management and operating expenses applicable to mutual fund investments. It is not possible to invest in an index. 2 Loomis Sayles Managed Bond Fund PORTFOLIO OF INVESTMENTS--AS OF SEPTEMBER 30, 2001
Face Amount Value + - -------------------------------------------------------------------------------------------- BONDS AND NOTES - 89.8% of net assets NON-CONVERTIBLE BONDS--71.7% AIRLINES--5.5% Delta Air Lines, Inc., 8.300%, 12/15/29 USD 750,000 $ 562,500 --------------- AUTO & RELATED--6.0% TRW, Inc., 6.650%, 1/15/28 750,000 617,340 --------------- CANADIAN--15.0% Canadian Government, Zero Coupon Bond, 6/01/25 CAD 5,900,000 929,735 Province of Ontario, Zero Coupon Bond, 7/13/22 750,000 123,331 Province of Ontario, Zero Coupon Bond, 6/02/27 3,900,000 489,589 --------------- 1,542,655 --------------- FOREST & PAPER PRODUCTS--2.0% Georgia-Pacific Group, 7.375%, 12/01/25 USD 250,000 205,917 --------------- HEALTHCARE--PRODUCTS--5.7% Bausch & Lomb, Inc., 7.125%, 8/01/28 750,000 579,145 --------------- OIL & GAS--7.8% Pennzoil-Quaker State Co., 6.750%, 4/01/09 500,000 431,540 Pennzoil-Quaker State Co., 7.375%, 4/01/29 500,000 364,720 --------------- 796,260 --------------- RAIL--TRANSPORT--1.0% Missouri Pacific Railroad Co., 4.750%, 1/01/20 25,000 16,375 Missouri Pacific Railroad Co., 5.000%, 1/01/45 140,000 81,550 --------------- 97,925 --------------- REAL ESTATE INVESTMENT TRUSTS--13.3% First Industrial, 7.600%, 7/15/28 900,000 844,857 Susa Partnership LP, 7.500%, 12/01/27 600,000 520,392 --------------- 1,365,249 --------------- RETAIL--GENERAL--3.4% Dillon Read Structured Finance Corp., 7.430%, 8/15/18 125,000 82,500 J.C. Penney Co., Inc., 6.875%, 10/15/15 100,000 72,000 Kmart Corp., 7.950%, 2/01/23 250,000 197,500 --------------- 352,000 --------------- SUPRANATIONAL--5.4% International Bank for Reconstruction & Development, Zero Coupon Bond, 8/20/07 NZD 2,000,000 552,842 --------------- TELECOMMUNICATIONS--3.8% RCN Corp., 0.000%, 10/15/07 (step to 11.125% on 10/15/02)# USD 1,100,000 253,000 RCN Corp., 0.000%, 2/15/08 (step to 9.800% on 2/15/03)# 600,000 138,000 Teligent, Inc., 0.000%, 3/01/08 (step to 11.500% on 3/01/03)# /\ 250,000 625 --------------- 391,625 ---------------
[Graphic] Loomis Sayles Managed Bond Fund 3 Loomis Sayles Managed Bond Fund (continued) PORTFOLIO OF INVESTMENTS--AS OF SEPTEMBER 30, 2001
Face Amount Value + - ------------------------------------------------------------------------------------- BONDS AND NOTES - continued TELECOMMUNICATIONS--WIRELESS--2.8% Nextel Communications, Inc., 0.000%, 10/31/07 (step to 9.750% on 10/31/02) # USD 500,000 $ 290,000 ------------- TOTAL NON-CONVERTIBLE BONDS (Identified Cost $9,448,599) 7,353,458 ------------- CONVERTIBLE BONDS--18.1% COMPUTERS--5.7% Maxtor Corp., 5.750%, 3/01/12 500,000 340,000 Western Digital, Zero Coupon Bond, 2/18/18 750,000 247,500 ------------- 587,500 ------------- DIVERSIFIED OPERATIONS--1.5% Thermo Electron Corp., 4.250%, 1/01/03 144A 150,000 146,850 ------------- INDUSTRIAL EQUIPMENT--4.1% MascoTech, Inc., 4.500%, 12/15/03 500,000 422,500 ------------- INSURANCE--2.9% Loews Corp., 3.125%, 9/15/07 350,000 298,060 ------------- MULTI-INDUSTRY--1.4% Thermo Instrument Systems, Inc., 4.500%, 10/15/03 144A 150,000 144,562 ------------- OFFICE EQUIPMENT--2.5% Xerox Corp., 0.570%, 4/21/18 500,000 250,000 ------------- TOTAL CONVERTIBLE BONDS (Identified Cost $1,871,702) 1,849,472 ------------- TOTAL BONDS AND NOTES (Identified Cost $11,320,301) 9,202,930 ------------- Shares - ------------------------------------------------------------------------------------- COMMON STOCKS -- 0.0% of net assets OIL & GAS--0.0% Seabulk International, Inc. * 1,104 4,140 ------------- TOTAL COMMON STOCKS (Identified Cost $367,529) 4,140 ------------- PREFERRED STOCKS -- 4.4% of net assets NON-CONVERTIBLE PREFERRED STOCKS--1.9% REAL ESTATE INVESTMENT TRUSTS--1.9% CarrAmerica Realty Corp., Series D, 8.450% 5,000 118,200 Developers Diversified Realty Corp., Class C, 8.375% 3,400 80,070 ------------- 198,270 ------------- TOTAL NON-CONVERTIBLE PREFERRED STOCKS (Identified Cost $140,045) 198,270 -------------
Loomis Sayles Managed Bond Fund (continued) PORTFOLIO OF INVESTMENTS--AS OF SEPTEMBER 30, 2001
Shares Value + ---------------------------------------------------------------------- PREFERRED STOCKS -- continued CONVERTIBLE PREFERRED STOCKS - 2.5% REAL ESTATE INVESTMENT TRUSTS--2.5% Equity Residential Properties Trust, 7.250% 10,000 $ 254,300 ----------- TOTAL CONVERTIBLE PREFERRED STOCKS (Identified Cost $235,600) 254,300 ----------- TOTAL PREFERRED STOCKS (Identified Cost $375,645) 452,570 ----------- WARRANTS - 0.0% of net assets OIL & GAS--0.0% Seabulk International, Inc., expiring 12/14/03* 815 306 ----------- TOTAL WARRANTS (Identified Cost $4,523) 306 ----------- TOTAL INVESTMENTS--94.2% (IDENTIFIED COST $12,067,998) @ 9,659,946 Cash and Other Assets, Less Liabilities--5.8% 593,213 ----------- NET ASSETS--100% $10,253,159 ===========
+ See Note 1. # Step Bond: Coupon is zero or below market rate for an initial period and then increases at a specified date and rate. /\ Security in default. 144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. * Non-income producing security @ At September 30, 2001, the net unrealized depreciation on investments based on cost of $12,067,998 for federal income tax purposes was as follows: Aggregate gross unrealized appreciation for all securities in which there is an excess of value over tax cost and aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value were $158,583 and $2,566,635, respectively, resulting in net unrealized depreciation of $2,408,052. Key to Abbreviations: CAD: Canadian Dollar NZD: New Zealand Dollar USD: United States Dollar See accompanying notes to financial statements. [Graphic] Loomis Sayles Managed Bond Fund 5 Statement of Assets and Liabilities SEPTEMBER 30, 2001 - --------------------------------------------------------- Assets Investments at value $ 9,659,946 Cash 88,236 Receivable for: Securities sold 394,765 Dividends and interest 136,148 Due from the adviser 38,603 ----------- 10,317,698 ----------- Liabilities Accrued expenses: Management fees 5,146 Trustees' fees 1,500 Administrative fees 898 12b-1 fees payable 6,432 Other 50,563 ----------- 64,539 ----------- Net Assets $10,253,159 =========== Net Assets consist of: Capital paid in $13,134,302 Undistributed net investment income 71,065 Accumulated net realized gain (loss) (544,156) Unrealized appreciation (depreciation) on investments and foreign currency (2,408,052) ----------- Net Assets $10,253,159 =========== Shares of beneficial interest outstanding, no par value 1,133,240 Net asset value and redemption price $ 9.05 Maximum offering price per share (Net asset value/97.50%) $ 9.28 Identified cost of investments $12,067,998
See accompanying notes to financial statements. Statement of Operations FOR THE YEAR ENDED SEPTEMBER 30, 2001 - --------------------------------------------------------- Investment Income Dividends $ 44,408 Interest 1,125,749 ---------- 1,170,157 ---------- Expenses Management fees 74,664 12b-1 fees 93,330 Trustees' fees and expenses 7,136 Administrative fees 8,740 Custodian and accounting fees 44,996 Transfer agent fees 7,281 Legal fees 36,821 Printing fees 71,936 Other expenses 52,731 ---------- Total expenses 397,635 Less expenses waived and reimbursed by the investment adviser (210,975) ---------- Net expenses 186,660 ---------- Net investment income 983,497 ---------- Net Realized Gain (Loss) on: Investments and foreign currency (546,836) ---------- Change in Unrealized Appreciation (Depreciation) on: Investments and foreign currency (148,916) ---------- Total net realized gain (loss) and change in unrealized appreciation (depreciation) (695,752) ---------- Net Increase (Decrease) in Net Assets from Operations $ 287,745 ==========
See accompanying notes to financial statements. [Graphic] Loomis Sayles Managed Bond Fund 7 Statements of Changes in Net Assets
YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, 2001 2000 - ------------------------------------------------------------------------------------------------- From Operations Net investment income $ 983,497 $ 2,270,030 Net realized gain (loss) from investments and foreign currency (546,836) 140,822 Change in unrealized appreciation (depreciation) from investments and foreign currency (148,916) (832,373) ----------- ------------ Increase (decrease) in net assets from operations 287,745 1,578,479 ----------- ------------ From Distributions to Shareholders Net investment income (1,009,344) (2,338,605) Net realized gain on investments (67,016) (567,630) ----------- ------------ (1,076,360) (2,906,235) ----------- ------------ From Capital Share Transactions Proceeds from the sale of shares 634,749 22,574,274 Cost of shares redeemed (7,191,270) (37,911,792) ----------- ------------ Increase (decrease) in net assets derived from capital share transactions (6,556,521) (15,337,518) ----------- ------------ Total increase (decrease) in net assets (7,345,136) (16,665,274) Net Assets Beginning of period 17,598,295 34,263,569 ----------- ------------ End of period $10,253,159 $ 17,598,295 =========== ============ Undistributed Net Investment Income End of the period $ 71,065 $ 99,630 =========== ============ Number of Shares of the Fund: Issued from the sale of shares 71,300 2,357,600 Redeemed (800,460) (3,993,400) ----------- ------------ Net change (729,160) (1,635,800) =========== ============
See accompanying notes to financial statements. Financial Highlights
YEAR ENDED PERIOD ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ------------- 2001 2000 1999* - -------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 9.45 $ 9.79 $ 9.95 ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS-- Net investment income (loss) 0.71 (e) 0.68 0.68 Net realized and unrealized gain (loss) on investments (0.36) (0.20) (0.22) ------- ------- ------- Total from investment operations 0.35 0.48 0.46 ------- ------- ------- LESS DISTRIBUTIONS-- Dividends from net investment income (0.71) (0.67) (0.62) Distributions from net realized capital gains (0.04) (0.15) 0.00 ------- ------- ------- Total distributions (0.75) (0.82) (0.62) ------- ------- ------- Net asset value, end of period $ 9.05 $ 9.45 $ 9.79 ======= ======= ======= Total return (%)(a)(b) 4.1 5.2 4.6 Net assets, end of period (000) $10,253 $17,598 $34,264 Ratio to average net assets: Net expenses (%)(c)(d) 1.50 1.50 1.50 Gross expenses (%)(d) 3.20 2.65 2.03 Net investment income (loss) (%)(d) 7.90 6.84 6.77 Portfolio turnover rate (%) 1 52 34
* Commencement of fund operations on October 1, 1998. (a)Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. Periods less than one year are not annualized. (b)Total returns do not include the effect of any front-end sales charges for the Fund. (c)The adviser has agreed to reimburse a portion of the Fund's expenses during the period. Without this reimbursement the Fund's ratio of operating expenses would have been higher. (d)Annualized for periods less than one year. (e)Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. [Graphic] Loomis Sayles Managed Bond Fund 9 Notes to Financial Statements SEPTEMBER 30, 2001 1. The Loomis Sayles Managed Bond Fund (the "Fund") is a series of Loomis Sayles Funds (the "Trust"), a diversified, open-end investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (the "1940 Act"), and organized as a Massachusetts business trust on February 20, 1991. At September 30, 2001, the Trust was composed of eighteen funds ("Funds"). The financial statements of the seventeen remaining funds are presented separately. Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the investment adviser of the Fund. The Trust is authorized to issue an unlimited number of full and fractional shares of beneficial interest in multiple series. Purchases of the Fund's shares are subject to a maximum sales charge of 2.50%. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following summarizes the significant accounting policies of the Fund: A. Security Valuation| Long-term debt securities for which quotations are readily available are valued by a pricing service, as approved by the Board of Trustees, which generally uses the most recent bid prices in the principal market in which such securities are normally traded. Equity securities for which quotations are readily available are valued at their last sale price on the exchange or markets where primarily traded or, if there is no reported sale during the day, at the closing bid price. Short-term securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates fair value. Other securities for which quotations are not readily available (including restricted securities, if any) are valued primarily using dealer supplied quotations or at their fair values as determined in good faith under the general supervision of the Board of Trustees. B. Repurchase Agreements| The Fund may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time. This arrangement results in a fixed rate of return that is not subject to market fluctuations during the Fund's holding period. The Fund, through its custodian, receives delivery of the underlying securities collateralizing repurchase agreements. It is the Fund's policy that the market value of the collateral be at least equal to 102% of the repurchase price including accrued interest. These securities are marked-to-market daily. Loomis Sayles is responsible for determining that the value of the collateral is at all times at least equal to 102% of the repurchase price including accrued interest. In connection with transactions in repurchase agreements, if the seller defaults and the value of the collateral declines or if the seller enters into insolvency proceedings, realization of the collateral by the Fund may be delayed or limited. Notes to Financial Statements (continued) SEPTEMBER 30, 2001 C. Foreign Currency Translation and Foreign Investments| The books and records of the Fund are maintained in U.S. dollars. The value of investments, currencies and other assets and liabilities denominated in currencies other than U.S. dollars is translated into U.S. dollars based upon foreign exchange rates prevailing at the end of each day. Purchases and sales of investments, income and expenses are translated at prevailing exchange rates on the respective dates of such transactions. The results of operations resulting from changes in foreign exchange rates on investments are not isolated from fluctuations arising from changes in market prices of investments held. All such fluctuations are included with net realized and unrealized gain or loss from investments. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the differences between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains or losses arise from changes in the value of assets and liabilities, other than investments in securities at fiscal year-end, resulting from changes in exchange rates. The Fund may use foreign currency exchange contracts to facilitate transactions in foreign-denominated investments. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The Fund may purchase investments of foreign issuers. Investing in securities of foreign companies and foreign governments 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 companies and foreign governments and their markets may be less liquid and the prices of such securities may be more volatile than those of securities of comparable U.S. companies and the U.S. Government. D. Security Transactions, Related Investment Income and Expenses| Security transactions are accounted for on the trade date (the date the buy or sell is executed). Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis. Interest income is increased by the accretion of discount. Discounts on zero coupon bonds, original issue discount bonds, step bonds and payment in kind bonds are accreted according to the effective interest method. In determining net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Expenses directly attributable to the Fund are charged to the Fund. Expenses not directly attributable to the Fund are apportioned to all funds within the Trust on the basis of relative net assets. [Graphic] Loomis Sayles Managed Bond Fund 11 Notes to Financial Statements (continued) SEPTEMBER 30, 2001 E. Federal Income Taxes| The Fund is a separate entity for federal income tax purposes. The Fund intends to meet the requirements of the Internal Revenue Code applicable to regulated investment companies, and to distribute to its shareholders all of its net investment income and any net realized capital gains. Accordingly, no provision for federal income tax or excise tax has been made. The capital loss carryforwards are intended to be used to offset future capital gains. At September 30, 2001, the Fund had an available capital loss carryforward amounting to $544,156, expiring in 2009. F. Dividends and Distributions to Shareholders| The Fund declares and pays its net investment income to shareholders monthly. Distributions from net realized capital gains are declared and paid on an annual basis by the Fund. Income and capital gain distributions are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences, which may result in reclassifications to the Fund's capital accounts to reflect income and gains available for distribution, are primarily due to differing book and tax treatments for capital loss carry forwards. Some of these classifications may include temporary book and tax basis differences that will reverse in subsequent periods. Distributions to shareholders are recorded on the ex-dividend date. 2. Portfolio Security Transactions| For the year ended September 30, 2001, the cost of purchases and proceeds from sales and maturities of securities other than short-term and U.S. Government securities, were $118,993 and $7,644,481, respectively. There were no purchases and proceeds from sales and maturities of U.S. Government securities during the year. 3. Management Fees and Other Transactions with Affiliates| For the year ended September 30, 2001, the Fund incurred management fees payable to Loomis Sayles. The management agreement for the Fund in effect during the year ended September 30, 2001 provided for fees at the annual percentage rate of 0.60% of the Fund's average daily net assets. Loomis Sayles has contractually agreed, until February 1, 2002, to reduce its advisory fees and/or bear other expenses, to the extent necessary to limit the total operating expenses of the Fund to 1.50% of the Fund's average daily net assets. Certain officers and employees of Loomis Sayles are also officers or Trustees of the Trust. Loomis Sayles' general partner is indirectly owned by CDC IXIS Asset Management North America, L.P., whose general partner is indirectly owned by CDC IXIS Asset Management SA ("CDC IXIS"). CDC IXIS is part of the Caisse des Depots et Consignation Group. The Fund has adopted a Shareholder Service and Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Fund pays Loomis Sayles Distributors, L.P. (the "Distributor"), a subsidiary of Loomis Sayles, a Notes to Financial Statements (continued) SEPTEMBER 30, 2001 monthly service fee at an annual rate of 0.25% of the Fund's average daily net assets and a monthly distribution fee at an annual rate of 0.50% of the Fund's average daily net assets. Loomis Sayles charges the Fund an administrative fee related to Loomis Sayles' performance of certain administrative services. For the period ended September 30, 2001, the Fund incurred a fee of $4,343. A. Trustees Fees and Expenses| The Trust does not pay any compensation directly to its officers or trustees who are directors, officers or employees of Loomis Sayles, CDC IXIS Asset Management North America or their affiliates. Each independent trustee is compensated by the Trust on behalf of each Fund at the rate of $1,250 per Fund per year, plus travel expenses for each meeting attended. 4. Credit Risk| The Fund may invest up to 35% of its assets in investments offering high current income, which generally will be in the lower rating categories of recognized rating agencies. These investments are regarded as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligations and will generally involve more credit risk than investments in the higher rating categories. In addition, the trading market for high yield investments may be relatively less liquid than the market for higher-rated investments. 5. Line of Credit| The Trust has entered into an agreement which enables each Fund in the Trust to borrow under a $25 million unsecured line of credit with several banks. Borrowings will be made solely to temporarily finance the repurchase of capital shares. Interest is charged to a participating Fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.450%. In addition, a commitment fee of 0.08% per annum, payable at the end of each calendar quarter, is accrued by the Trust and apportioned among the Funds based on each Fund's average daily unused portion of the line of credit. During the year ended September 30, 2001, the Fund had no borrowing under the agreement. 6. Change in Accounting Principle| In November 2000, the American Institute of Certified Public Accountants (AICPA) issued a revised AICPA Audit and Accounting Guide, Audits of Investment Companies (the "Guide"), which is effective for fiscal years beginning after December 15, 2000. The revised Guide will require funds to amortize premiums and discounts for fixed-income securities. Upon initial adoption, the Fund will be required to adjust the cost of its fixed-income securities by the cumulative amount of amortization that would have been recognized had the amortization been in effect from the purchase date of each holding. Adopting this accounting principle will not affect the Fund's net asset value, but will change the classification of certain amounts between interest income and realized and unrealized gain/loss. [Graphic] Loomis Sayles Managed Bond Fund 13 Report of Independent Accountants - --------------------------------------------------------- To the Board of Trustees and Shareholders of the Loomis Sayles Managed Bond Fund: In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Loomis Sayles Managed Bond Fund (the "Fund") at September 30, 2001, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts November 16, 2001 2001 U.S. TAX AND DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED) CORPORATE DIVIDENDS RECEIVED DEDUCTION -- For the year ended September 30, 2001, 3.94% of dividends distributed by the Fund qualify for the dividends received deduction for corporate shareholders. CAPITAL GAINS DISTRIBUTIONS -- Pursuant to Internal Revenue Section 852 (b), $73,570 has been designated as capital gains distributions for the fiscal year ended September 30, 2001. [Graphic] Loomis Sayles Managed Bond Fund 15 -----END PRIVACY-ENHANCED MESSAGE-----