-----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, EIYukXmn9D/XeRlkto/G0H4YECEM6/nw1os3cDf8dKyefFoDSovIuXzaQbuQNJKG 03VEqBHI88kIQHdo4SFjjw== 0000950156-98-000705.txt : 19981126 0000950156-98-000705.hdr.sgml : 19981126 ACCESSION NUMBER: 0000950156-98-000705 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981125 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: SEC FILE NUMBER: 811-06241 FILM NUMBER: 98759147 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6174822450 MAIL ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 N-30D 1 LOOMIS SAYLES EQUITY FUND - 09/30/98 LOOMIS SAYLES FUNDS EQUITY FUNDS o o o ANNUAL REPORT SEPTEMBER 30, 1998 o Core Value Fund o Growth Fund o International Equity Fund o Mid-Cap Growth Fund o Mid-Cap Value Fund o Small Cap Growth Fund o Small Cap Value Fund o Strategic Value Fund o Worldwide Fund A FAMILY OF NO-LOAD FUNDS LOOMIS ------ SAYLES ------ FUNDS ------ ONE FINANCIAL CENTER, BOSTON, MASSACHUSETTS 02111 800 o 633 o 3330 - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Corporate Overview....................................................... 1 Letter from the President, Loomis Sayles Funds........................... 2 Letter from the President, Loomis Sayles Distributors, L.P............... 3 Economic and Market Overview............................................. 4 Institutional Class Total Return vs. Lipper Category and Lipper Category Index ........................................................ 6 Fund and Manager Reviews................................................. 8 Portfolio of Investments................................................. 26 Statements of Assets and Liabilities..................................... 58 Statements of Operations................................................. 60 Statements of Changes in Net Assets...................................... 64 Financial Highlights..................................................... 74 Notes to Financial Statements............................................ 90 1998 U.S. Tax and Distribution Information.............................. 101 Report of Independent Accountants....................................... 102 Board of Trustees and Officers........................................... 105 - -------------------------------------------------------------------------------- CORPORATE OVERVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES FUNDS - -------------------------------------------------------------------------------- Loomis Sayles Funds is a Boston-based family of 17 no-load mutual funds advised by Loomis, Sayles & Company, L.P. At Loomis Sayles Funds, we follow a simple strategy -- we pay close attention to what we hear from our clients and the marketplace, then work to deliver high-quality products and services that exceed expectations. Our "listening harder" creed lets us design products and services that truly answer our clients' needs. We offer a broad range of no-load funds to complement your investment objectives and strategies. We believe we run one of the most responsive support organizations in the business, providing timely information and insightful solutions. Beyond that, we're structured to take advantage of our institutional heritage. The research department at Loomis, Sayles & Company, L.P. provides our portfolio managers with the fundamental research they need to make sound investment decisions. Our portfolio managers not only manage mutual funds, they manage large institutional accounts that demand and appreciate the style consistency that follows from our disciplined investment approach. FOR INFORMATION ABOUT: o Establishing an account o Account procedures and status o Exchanges o Shareholder services PHONE 800-626-9390 FOR ALL OTHER INFORMATION ABOUT THE FUNDS: PHONE 800-633-3330 To request any of the following, press or say the number |1| Literature and Information |2| Net Asset Values and Yields |3| Speak to a Marketing Representative |4| Advisory and Broker/Dealer Services |5| Institutional and High Net Worth Operations, Trading and Client Services As always, we are interested in your comments about the job we are doing and in answering any questions you may have. For more complete information about any of the Loomis Sayles Funds, including charges and expenses, please call Loomis Sayles Distributors, L.P. for a prospectus at 800-633-3330 Monday through Friday, 8:45 a.m. to 4:45 p.m. EST. Read it carefully before you invest or send money. - -------------------------------------------------------------------------------- LETTER FROM THE PRESIDENT - -------------------------------------------------------------------------------- DEAR SHAREHOLDERS, - -------------------------------------------------------------------------------- [Photo of Daniel J. Fuss] Daniel J. Fuss There is no doubt about it...it was a miserable quarter and a difficult nine months. Unless you were fully invested in Treasuries, your portfolio is probably looking rather unhealthy. However, there is hope on the horizon and, although, perhaps it is my age, I feel very comfortable with the general outlook of the market right now. To use a forest fire analogy, the spark which ignited the global turmoil was Russia. The fuel for the fire was the enormous amount of leverage which existed in the global bond markets. Following the announcement last August that Russia would default on some of their short-term debt, bond prices (other than Governments) declined. The spread in the yield between U.S. Treasuries and corporate bonds widened tremendously. The corporate bond market became relatively illiquid and the spread between bid and ask prices widened by a factor of 10 or more. As one might expect, investors fled into Government bonds. Anything with the slightest hint of risk -- even blue chip, high quality bonds -- were shunned and their performance lagged that of Treasuries. It is little wonder that some hedge funds ran into trouble. It is not that the credits went bad. It was simply that two things happened at once. The Treasuries they shorted went up, and the positions they owned went down (the same thing happened to dealers further reducing the liquidity of the corporate bond market). Fortunately, we believe things are not as bad as they seem. For us, it is strictly a case of "same bonds, new prices", without anything going terribly wrong with our specific holdings, but rather global market conditions. The question remains, how many more sparks are there out there? My guess is that sparks will continue to fly, but the major inferno is behind us. For example, Thailand has taken serious steps to fix their banks. Korea's current account is strong and its foreign exchange reserves have skyrocketed. We have seen some encouraging signs in Japan. Luckily, the Federal Reserve appears inclined to act quickly and decisively to avoid a recession. The two rate cuts which followed each other in quick succession (and I predict there will be more on the way) demonstrate just how quickly things can change. Instead of trying to pull liquidity out of the system, the Reserve Bank is trying to put liquidity into the system. Forests don't regrow overnight and what is required now is patience. Although it may hurt over the short run, we believe that these periods of volatility present opportunities to buy the securities of good companies at lower prices and higher yields. We believe that buying the securities of good companies at low prices is the foundation of future performance. Sincerely, /s/ Daniel J. Fuss Daniel J. Fuss President, Loomis Sayles Funds - -------------------------------------------------------------------------------- LETTER FROM THE PRESIDENT - -------------------------------------------------------------------------------- DEAR SHAREHOLDERS, - -------------------------------------------------------------------------------- [Photo of John F. Yeager, III] John F. Yeager, III As you know, the Year 2000 is approaching rapidly, creating a growing concern about the ability of many computer systems to handle a rollover to the new millennium. Loomis, Sayles & Company is addressing this matter through the creation of a compliance committee and the formation of a Year 2000 project plan. Loomis, Sayles is currently working on this project as outlined in its plan and will continue its assessment, remediation and testing efforts into 1999. We do not expect the amounts required to be spent on the Year 2000 project to have a material effect on our financial position. The Loomis Sayles Funds will share in the work done by Loomis, Sayles & Company, as well as working with our outside vendors to ensure Year 2000 compliance. Our transfer agent, Boston Financial Data Services and our custodian bank, State Street Bank and Trust Company have both established extensive programs to ensure readiness, and have completed much of their testing. We will, of course, monitor their progress closely. Additionally, we have contacted firms which have established agreements to offer our funds to determine their readiness for the Year 2000. It is our goal to make sure that all requirements are met to serve the needs of our shareholders. We will continue to provide you with updates regarding Year 2000 developments. If you have any questions about these issues, please do not hesitate to call us at 1-800-626-9390. Sincerely, /s/ John F. Yeager, III John F. Yeager, III President, Loomis Sayles Distributors, L. P. - -------------------------------------------------------------------------------- ECONOMIC AND MARKET OVERVIEW - -------------------------------------------------------------------------------- THE LOOMIS SAYLES FUNDS ANNUAL REPORT ECONOMIC AND MARKET OVERVIEW -- 1998 - -------------------------------------------------------------------------------- STOCKS Somehow, the world seems a lot smaller than it did this time last year. Developments in countries like Russia, Brazil and Japan had a profound effect on the performance of the U.S. markets over the last 9 months. FIRST QUARTER The action started in Asia, where political, economic and market turmoil combined to create a volatile environment. Economic contraction in nearly all Asian countries led to a free fall in their financial markets and tremendous devaluation in their currencies. In response, capital fled those markets in search of safety. Liquidity, which had been abundant, lessened dramatically. These troubled markets gained back some of the ground they lost, but remained shaky. The strong U.S. economy was able to shake off the Asian contagion throughout the first half of the year. With economic growth in its sixth year, domestic investors still seemed willing to bet that U.S. companies would continue to grow earnings. And with no clear evidence of inflation, the Federal Reserve Bank refused to raise short-term interest rates. SECOND QUARTER Asia continued to make headlines with unrest in Indonesia and atomic rivalry between India and Pakistan and political inertia in Japan made it difficult for most investors to see any light at the end of the tunnel. Despite intervention in the foreign exchange markets by the United States, the Japanese yen fell to new lows against the U.S. dollar. THIRD QUARTER Russia's decision to devalue the ruble and default on some of its short-term debt sent a sudden and ill-timed tremor through the world's markets. Speculators and hedge funds that had relied on derivatives and other forms of leverage to make substantial bets suddenly found themselves having to raise cash. Unable or unwilling to sell their Russian positions, these investors were forced to sell their more liquid positions -- in places such as Brazil. This selling led to a free fall in Brazilian stocks and bonds. As capital fled the country, Brazil's currency reserves fell to dangerously low levels. The news that Brazil, which accounts for half of Latin America's economy, might have to defend its currency with higher interest rates (which would lead to slower growth), was not well received in the U.S. where falling profit growth was already causing anxiety. News of heavy Brazilian exposure by major U.S. and European banks and brokerage firms compounded matters. The U.S. markets were hit hard. The Dow Jones Industrial Average declined 19.26% from its high and the S&P 500 Index fell 19.34%. Investors continued to stampede into the quality and liquidity of U.S. Treasury bonds in an effort to avoid risk of any sort. Borrowing through the corporate bond markets dried up as new issuance fell dramatically and worries about the economy threatened a credit crunch. In an uncharacteristic move, the Federal Reserve made it known that it would lower rates. The Fed's aggressive action to ensure economic growth brought some confidence into the market -- stocks and corporate bonds rebounded slightly. SUMMARY By the end of September, high quality bonds outpaced stocks. This Treasury rally resulted in weak relative performance for virtually all non-Treasury securities. Lower quality bonds lost a lot of ground in the third quarter and the Merrill Lynch High Yield Master Index ended the nine month period with a gain of only 0.77%. Municipal bonds also posted mediocre returns. Despite their high quality, foreign buyers had no use for their tax advantaged status and domestic investors were more than willing to pay a premium for the liquidity of U.S. Treasuries. Year-to-date the Lehman Brothers Government/ Corporate Bond Index gained 9.33% and the Lehman Brothers Government Bond Index turned in a 9.94% return. Concerns over a faltering U.S. economy caused many investors to favor large cap stocks for their perceived quality and greater liquidity. While these issues posted strong returns for the first six months of the year, third quarter returns were weaker. Small cap stocks fell longer and harder than large caps throughout the year, with the Russell 2000 Index finishing the nine-month period with a -16.21% return versus the S&P 500 Index's 6.00% return. Overseas, the fast approaching deadline for the common European currency helped European bond markets. Asian markets flattened out and the unexpected weakness of the U.S. dollar helped performance. The MSCI-EAFE Index posted a - -0.55% year-to-date return while the Salomon Brothers World Government Bond Index gained 11.35% for the same period. - -------------------------------------------------------------------------------- INSTITUTIONAL CLASS - -------------------------------------------------------------------------------- TOTAL RETURN(1) VS. LIPPER CATEGORY AND LIPPER CATEGORY INDEX(2) - -------------------------------------------------------------------------------- CORE GROWTH INTERNATIONAL VALUE FUND EQUITY - -------------------------------------------------------------------------------- YEAR TO DATE Loomis Sayles -4.48 -7.76 -4.96 Lipper -1.85 -0.21 -3.13 Lipper Category Index -2.30 2.38 -2.46 ONE YEAR Loomis Sayles -5.39 -9.92 -14.60 Lipper -1.08 -1.44 -10.65 Rank 525 of 715 727 of 934 377 of 489 Percentile 74 78 78 Lipper Category Index -1.35 3.07 -9.92 THREE YEARS Loomis Sayles 15.92 11.36 3.14 Lipper 16.62 14.73 4.79 Rank 275 of 449 440 of 569 207 of 304 Percentile 62 78 69 Lipper Category Index 16.09 16.43 6.81 FIVE YEARS Loomis Sayles 15.89 11.28 5.96 Lipper 15.09 14.35 6.41 Rank 121 of 289 280 of 359 74 of 142 Percentile 42 78 53 Lipper Category Index 14.85 15.52 7.71 MODIFIED INCEPTION(3) Loomis Sayles 13.90 12.04 6.80 Lipper 13.94 13.74 7.65 Rank 101 of 186 169 of 227 36 of 61 Percentile 55 75 60 Lipper Category Index 14.08 14.46 8.19 ACTUAL INCEPTION(4) Loomis Sayles 14.63 12.94 6.75 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (1) Total return assumes reinvestment of dividends and capital gains distributions. Total return shown for periods of one year or less represents cumulative total return. Total return for periods greater than one year represents average annual total return. Total return shown reflects, if any, the effect of fee waivers and/or expense reimbursements. Absent such fee waivers and/or expense reimbursements, total return would have been lower. (2) Lipper Category total return represents the average total return for all funds in each Fund's corresponding investment category as determined by Lipper Analytical Services, Inc. The Lipper Category Index total return represents the average total return for 30 funds, or 10 funds for the Global Flex Portfolio Index, in each Fund's corresponding investment category as determined by Lipper Analytical Services, Inc. Rankings are based on the total return of each Fund for the period relative to the total return of all funds in that Fund's corresponding investment category.* *Source: Lipper Analytical Services. - -------------------------------------------------------------------------------- MID-CAP MID-CAP SMALL CAP SMALL CAP STRATEGIC GROWTH VALUE GROWTH VALUE VALUE WORLDWIDE - -------------------------------------------------------------------------------- -8.53 -12.49 -13.16 -16.22 -10.97 -10.85 -9.17 -9.17 -16.52 -16.52 -0.21 -0.88 -7.93 -7.93 -16.33 -16.33 2.38 -3.18 -10.75 -13.03 -17.37 -18.32 -18.40 -17.84 -11.95 -11.95 -20.60 -20.60 -1.44 -3.96 137 of 298 178 of 298 158 of 576 190 of 576 846 of 934 83 of 84 46 60 28 33 91 99 -12.30 -12.30 -21.21 -21.21 3.07 -5.51 N/A N/A N/A 12.51 N/A N/A 6.45 39 of 321 13 3.72 N/A N/A N/A 11.13 N/A N/A 9.40 58 of 180 33 8.16 6.80 5.90 2.10 16.17 3.71 -0.04 4.84 4.84 0.20 12.38 13.32 7.30 90 of 256 114 of 256 167 of 462 10 of 84 698 of 802 68 of 68 36 45 37 12 88 100 4.58 4.58 -2.17 11.12 16.73 7.07 6.80 5.90 2.10 16.39 3.71 0.33 (3) Modified inception reflects the nearest Lipper reporting period following actual inception. Lipper performance is reported as of month end. (4) Actual Inception Dates: Core Value Fund May 13, 1991 Growth Fund May 16, 1991 International Equity Fund May 10, 1991 Mid-Cap Growth Fund December 31, 1996 Mid-Cap Value Fund December 31, 1996 Small Cap Growth Fund December 31, 1996 Small Cap Value Fund May 13, 1991 Strategic Value Fund December 31, 1996 Worldwide Fund May 1, 1996 - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES CORE VALUE FUND - ------------------------------------------------------------------------------- [Photo of [Photo of [Photo of James L. Carroll] Isaac H. Green] Jeffrey W. Wardlow] James L. Carroll Isaac H. Green Jeffrey W. Wardlow KEY FUND FACTS Objective: Long-term growth of capital and income Strategy: Invests in stocks considered to be undervalued in relation to the issuer's earnings, dividends, assets and growth prospects Fund Inception Date: 5/13/91 Commencement of Operations of Class: Institutional - 5/13/91, Retail - 1/2/97 Expense Ratio: Institutional - 0.79%, Retail - 1.10% Total Net Assets (all classes): $67.9 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Core Value Fund had total returns of -4.48%, and - -4.71%, respectively, as compared to the Fund's benchmark, the S&P 500 Index, total return of 6.00%. For the same period, the average growth and income fund, as measured by Lipper Analytical Services, had a total return of -1.85%. PORTFOLIO REVIEW For most of the year, large cap stocks have dominated the market averages, masking a deteriorating environment for the majority of stocks. The Fund's performance has fared better versus the market averages over the past three months than during the first half of the year. Our positions in utilities, health care, and food stocks have performed well during the recent weak period of market turmoil. Reducing positions in some of the more volatile areas of our technology holdings has also improved the defensive nature of the portfolio. The weakest performing area of the portfolio was financial services, especially capital markets related firms like Chase Manhattan, Morgan Stanley Dean Witter, and Bear Stearns. Reflecting our value philosophy, the average stock in the portfolio sells at an approximate 20% discount to the S&P 500 Index on valuation measures such as price/earnings and price/cash flow. We believe that the portfolio is also well diversified by industry, with the largest overweighting in consumer cyclicals and the largest underweighting in consumer staples. PORTFOLIO POSITIONING With prices declining substantially for many stocks, our shopping list of ideas has grown considerably. Current holdings that seem unduly depressed like Morgan Stanley Dean Witter, Tenet Healthcare, Federated Department Stores, and Chase Manhattan, appear to be attractively priced. Although we have not altered our portfolio weightings significantly, we have modestly trimmed positions in some of the defensive areas of the portfolio that are trading near highs such as the telephone stocks and have started adding to some of the more undervalued areas of the market such as banks, brokers, and cyclicals. /s/ James L. Carroll /s/ Isaac H. Green /s/ Jeffrey W. Wardlow James L. Carroll Isaac H. Green Jeffrey W. Wardlow AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR 3 YEARS 5 YEARS (a) - -------------------------------------------------------------------------------- Loomis Sayles Core Value Fund (Institutional) -4.48 -5.39 15.92 15.89 14.63 Loomis Sayles Core Value Fund (Retail) -4.71 -5.69 N/A N/A 12.47 Lipper Growth & Income Fund Index(b) -2.30 -1.35 16.09 14.85 14.08 S&P 500 Index (c) 6.00 9.05 22.60 19.91 16.82 CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis S&P As of 5/31/91 10.00 10.00 Period Ended 6/30/91 09.43 09.54 9/30/91 09.72 10.05 12/31/91 10.16 10.89 3/31/92 10.46 10.62 6/30/92 10.48 10.82 9/30/92 10.67 11.16 12/31/92 11.59 11.72 3/31/93 12.18 12.23 6/30/93 12.11 12.29 9/30/93 12.43 12.61 12/31/93 12.97 12.90 3/31/94 12.78 12.41 6/30/94 12.78 12.46 9/30/94 13.33 13.07 12/31/94 12.85 13.07 3/31/95 14.21 14.34 6/30/95 15.49 15.71 9/30/95 16.68 16.96 12/31/95 17.38 17.98 3/31/96 18.24 18.94 6/30/96 18.62 19.79 9/30/96 19.28 20.40 12/31/96 21.06 22.10 3/31/97 21.56 22.69 6/30/97 24.82 26.65 9/30/97 27.47 28.65 12/31/97 27.21 29.47 3/31/98 29.95 33.58 6/30/98 29.64 34.69 9/30/98 25.99 31.24 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional Class of shares is May 13, 1991. Since Lipper and S&P 500 Index performance data is not available coincident with this date, comparative performance is presented from May 31, 1991. Inception date of the Retail Class of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): S&P 500 Index is a capitalization-weighted, total return index comprised of 500 widely held common stocks, representing industrial, utility, transportation, and financial companies traded on the New York Stock Exchange, the American Stock Exchange and in the Over-the-Counter market. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail Class of shares would, due to the higher fees paid by the Retail Class of shares, be lower. - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES GROWTH FUND - ------------------------------------------------------------------------------- [Photo of Jerome A. Castellini] Jerome A. Castellini KEY FUND FACTS Objective: Long-term growth of capital Strategy: Invests in companies with relatively small market capitalization, as well as larger companies, which are selected on the basis of their growth potential Fund Inception Date: 5/16/91 Commencement of Operations of Class: Institutional - 5/16/91, Retail - 1/2/97 Expense Ratio: Institutional - 0.85%, Retail - 1.10% Total Net Assets (all classes): $25.2 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Growth Fund had total returns of -7.76%, and - -7.94%, respectively, as compared to the Fund's benchmark, the S&P 500 Index, total return of 6.00%. For the same period, the average growth fund, as measured by Lipper Analytical Services, had a total return of -0.21%. PORTFOLIO REVIEW Following strong economic and stock market results in the first half of 1998, the third quarter of 1998 turned decidedly negative in response to the unstable economies and financial markets in Asia, Russia and Latin America. Larger capitalization growth stocks, particularly those with perceived lower risk and limited economic sensitivity, were the best performers. Food and beverage, healthcare, utilities, and selected technology stocks experienced positive returns and the Fund benefited from its holdings in MCI WorldCom, Home Depot and Pfizer. Mid-size and smaller company valuations were severely impacted. Our exposure to rapidly growing companies with perceived higher risk had a negative effect on performance. The majority of these companies continue to perform well fundamentally and in the case of Starbucks, Borders Group, Fastenal and MGIC Investment, we view stock price declines as buying opportunities. PORTFOLIO POSITIONING For some time, we have avoided the mega-cap multinational stocks in favor of more domestically-oriented growth companies. The largest companies have much higher earnings risk than earlier thought possible. Coca Cola, 3M and Gillette, as well as many other large multinationals, have confessed to problems with their international markets. Most of the domestic growth companies we own do not have exposure to overseas markets and are continuing to report solid quarterly earnings. Retailing, health care, telecommunications equipment and energy remain areas of focus. We believe the key to preserving and growing capital in this market is in avoiding deflationary businesses and risky balance sheets. We believe exposure to domestically-oriented companies in these sectors positions the Fund well for future recovery in equity markets. /s/ Jerome A. Castellini Jerome A. Castellini AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR 3 YEARS 5 YEARS (a) - ----------------------------------------------------------------------------- Loomis Sayles Growth Fund (Institutional) -7.76 - 9.92 11.36 11.28 12.94 Loomis Sayles Growth Fund (Retail) -7.94 -10.15 N/A N/A 7.97 Lipper Growth Fund Index(b) 2.38 3.07 16.43 15.52 14.46 S&P 500 Index(c) 6.00 9.05 22.60 19.91 16.82 CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis S&P As of 5/31/91 10.00 10.00 Period Ended 6/30/91 09.29 09.54 9/30/91 10.75 10.05 12/31/91 11.69 10.89 3/31/92 10.79 10.62 6/30/92 10.29 10.82 9/30/92 10.64 11.16 12/31/92 12.14 11.72 3/31/93 12.45 12.23 6/30/93 12.78 12.29 9/30/93 13.49 12.61 12/31/93 13.26 12.90 3/31/94 12.74 12.41 6/30/94 12.25 12.46 9/30/94 12.77 13.07 12/31/94 12.78 13.07 3/31/95 13.63 14.34 6/30/95 15.18 15.71 9/30/95 16.67 16.96 12/31/95 16.72 17.98 3/31/96 17.26 18.94 6/30/96 18.76 19.79 9/30/96 19.00 20.40 12/31/96 20.05 22.10 3/31/97 19.39 22.69 6/30/97 21.81 26.65 9/30/97 25.56 28.65 12/31/97 24.96 29.47 3/31/98 26.56 33.58 6/30/98 27.41 34.69 9/30/98 23.02 31.24 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional Class of shares is May 16, 1991. Since Lipper and S&P 500 Index performance data is not available coincident with this date, comparative performance is presented from May 31, 1991. Inception date of the Retail Class of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): S&P 500 Index is a capitalization-weighted, total return index comprised of 500 widely held common stocks, representing industrial, utility, transportation, and financial companies traded on the New York Stock Exchange, the American Stock Exchange and in the Over-the-Counter market. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail Class of shares would, due to the higher fees paid by the Retail Class of shares, be lower. - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES INTERNATIONAL EQUITY FUND - ------------------------------------------------------------------------------ [Photo of Paul H. Drexler] Paul H. Drexler KEY FUND FACTS Objective: High total investment return Strategy: Invests primarily in stocks of companies organized or headquartered outside of the United States Fund Inception Date: 5/10/91 Commencement of Operations of Class: Institutional - 5/10/91, Retail - 1/2/97 Expense Ratio: Institutional - 1.00%, Retail - 1.25% Total Net Assets (all classes): $68.6 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles International Equity Fund had total returns of - -4.96%, and -5.14%, respectively, as compared to the Fund's benchmark, the MSCI-EAFE Index, total return of -0.55%. For the same period, the average international equity fund, as measured by Lipper Analytical Services, had a total return of -3.13%. PORTFOLIO REVIEW During the first nine months of the year, the Fund's stock selection approximately matched the local indexes in the markets in which we were invested. However, our country selections hampered performance as compared to the MSCI-EAFE Index. The Fund's investments in Canada, Australia, and New Zealand posted negative returns, as these markets were hit by slowing world economic growth and weaker currencies. The Fund experienced gains in a number of European markets, notably Italy, Spain and France, which benefited from lower interest rates and corporate restructuring. The strong performance we experienced with the French insurer Axa (+66%), the Portuguese cellular operator Telecel (+27%), and the Italian bank Credito Italiano (+26%) illustrate the type of opportunities that corporate restructuring is providing in Europe. During the sharp correction in international markets over the past three months, the Fund's Institutional class experienced a decline of -12.68%. Although a sharp setback, our performance ranked in the top 5% of international funds during the period. Our value approach and relatively defensive portfolio helped us weather this period with less damage than other international funds. PORTFOLIO POSITIONING At the end of September, the Fund's major holdings included approximately 56% in Continental Europe, 18% in the United Kingdom, 10% in Japan and 6% in Canada. No sector represented more than 15% of the overall portfolio. The major international investment opportunities today are the restructuring process in Europe, the possibility that Japan's eight year bear market may end and, on a selective basis, the potential for sound companies in the emerging markets to revive. While our major focus is currently on Europe, we will continue to monitor Japan and the emerging markets for opportunities to enhance returns. /s/ Paul H. Drexler Paul H. Drexler AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR 3 YEARS 5 YEARS (a) - -------------------------------------------------------------------------------- Loomis Sayles International Equity Fund (Institutional) -4.96 -14.60 3.14 5.96 6.75 Loomis Sayles International Equity Fund (Retail) -5.14 -14.81 N/A N/A -3.68 Lipper International Equity Fund Index(b) -2.46 - 9.92 6.81 7.71 8.19 MSCI-EAFE Index(c) -0.55 - 8.34 3.75 5.35 5.99 CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis MSCI As of 5/31/91 10.00 10.00 Period Ended 6/30/91 09.51 09.27 9/30/91 10.41 10.06 12/31/91 10.42 10.23 3/31/92 10.89 09.01 6/30/92 11.27 09.20 9/30/92 10.58 09.34 12/31/92 09.89 08.98 3/31/93 10.82 10.06 6/30/93 11.05 11.07 9/30/93 12.20 11.81 12/31/93 13.70 11.91 3/31/94 13.71 12.32 6/30/94 13.49 12.95 9/30/94 13.71 12.97 12/31/94 13.46 12.83 3/31/95 13.75 13.07 6/30/95 14.84 13.17 9/30/95 14.85 13.72 12/31/95 14.63 14.27 3/31/96 15.30 14.69 6/30/96 15.80 14.92 9/30/96 16.01 14.90 12/31/96 17.31 15.14 3/31/97 17.36 14.90 6/30/97 18.97 16.83 9/30/97 19.08 16.71 12/31/97 17.14 15.40 3/31/98 19.89 17.67 6/30/98 18.66 17.86 9/30/98 16.29 15.32 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional Class of shares is May 10, 1991. Since Lipper and MSCI-EAFE Index performance data is not available coincident with this date, comparative performance is presented from May 31, 1991. Inception date of the Retail Class of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): MSCI-EAFE Index is a capitalization-weighted average of the performance of over 1,000 securities listed on the stock exchanges of 20 countries in Europe, Australia and the Far East. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail Class of shares would, due to the higher fees paid by the Retail Class of shares, be lower. - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES MID-CAP GROWTH FUND - ------------------------------------------------------------------------------ [Photo of Jerome A. Castellini] [Photo of Scott S. Pape] Jerome A. Castellini Scott S. Pape KEY FUND FACTS Objective: Long term growth of capital Strategy: Invests primarily in stocks with market capitalization falling within the capitalization range of the Standard & Poor's Mid-Cap 400 Index Fund Inception Date: 12/31/96 Commencement of Operations of Class: Institutional - 1/2/97, Retail - 1/2/97 Expense Ratio: Institutional - 1.00%, Retail - 1.25% Total Net Assets (all classes): $2.2 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Mid-Cap Growth Fund had total returns of -8.53%, and -8.70%, respectively, as compared to the Fund's benchmark, the S&P Mid-Cap 400 Index, total return of -6.84%. For the same period, the average mid-cap fund, as measured by Lipper Analytical Services, had a total return of -9.17%. PORTFOLIO REVIEW Following strong economic and stock market results in the first half of 1998, the third quarter of 1998 turned decidedly negative. The most significant developments affecting this downturn were the continued deterioration in the economies, currencies and stock markets of many emerging market countries, instability in Russia and further pressure on the Japanese financial system. As in the prior three years, mid-cap stocks lagged in performance relative to the large capitalization stocks of the S&P 500 Index and the Dow Jones Industrial Average. However, within the mid-cap classification, the stocks of companies with perceived lower risk and limited economic sensitivity were the best performers. Consumer related, health care and selected technology companies experienced positive returns and the Fund benefited from it's holdings in Cintas, Kohls, CVS Corp., Compuware and MedImmune. In contrast, the Fund's overweighted position in the energy sector detracted significantly from performance, as these stocks experienced declines across-the-board in excess of 30%. Performance was also impacted negatively by the collapse of the proposed merger between Ciena Corp. and Tellabs when the value of Ciena stock fell nearly 80% during the period when negotiations ended. PORTFOLIO POSITIONING We continue to favor companies with less economic sensitivity such as health care, consumer products and energy, and technology companies with inherent unit growth opportunities. The securities of industrial, basic materials and capital goods companies continue to be de-emphasized by investors in the current environment. We believe the key to preserving and growing capital in this market is in avoiding deflationary businesses and risky balance sheets. We believe our exposure to domestically-oriented companies in these sectors positions the Fund well for future recovery in the equity markets. /s/ Jerome A. Castellini /s/ Scott S. Pape Jerome A. Castellini Scott S. Pape AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR (a) - -------------------------------------------------------------------------------- Loomis Sayles Mid-Cap Growth Fund (Institutional) -8.53 -10.75 6.80 Loomis Sayles Mid-Cap Growth Fund (Retail) -8.70 -11.07 6.54 Lipper Mid-Cap Fund Index(b) -7.93 -12.30 4.58 S&P Mid-Cap 400 Index(c) -6.84 - 6.07 12.66 CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis S&P As of 12/31/96 10.00 10.00 Period Ended 3/31/97 09.63 09.85 6/30/97 10.72 11.30 9/30/97 12.57 13.12 12/31/97 12.27 13.23 3/31/98 12.98 14.68 6/30/98 13.38 14.37 9/30/98 11.22 12.32 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional and Retail Class of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): S&P Mid-Cap 400 Index consists of 400 domestic stocks chosen for market size liquidity and industry group representation. It is a market-weighted index (stock price times shares outstanding) with each stock affecting the index in proportion to its value. The index is comprised of industrials, utilities, financials and transportations, in size order. The index returns have not been lowered for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail Class of shares would, due to the higher fees paid by the Retail Class of shares, be lower. - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES MID-CAP VALUE FUND - ------------------------------------------------------------------------------- [Photo of Dean A. Gulis] [Photo of Gregg D. Watkins] Dean A. Gulis Gregg D. Watkins KEY FUND FACTS Objective: Long-term growth of capital Strategy: Invests primarily in stocks with market capitalization falling within the capitalization range of the Standard & Poor's Mid-Cap 400 Index, which are believed to be undervalued by the market Fund Inception Date: 12/31/96 Commencement of Operations of Class: Institutional - 1/2/97, Retail - 1/2/97 Expense Ratio: Institutional - 1.00%, Retail - 1.25% Total Net Assets (all classes): $3.4 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Mid-Cap Value Fund had total returns of -12.49%, and -12.66%, respectively, as compared to the Fund's benchmark, the S&P Mid- Cap 400 Index, total return of -6.84%. For the same period, the average mid- cap fund, as measured by Lipper Analytical Services, had a total return of -9.17%. PORTFOLIO REVIEW High volatility and rapid shifts in both sector performance and investor sentiment have continued to drive the stock market's erratic performance over the past nine months. Since the beginning of 1995, large capitalization stocks have outperformed smaller capitalization issues by a significant margin. Additionally, growing fears of a global economic downturn and decelerating corporate earnings growth have led investors to prefer traditional growth stocks on the assumption that their earnings gains will be better sustained should the current pressure on profits continue. The Fund's performance was negatively impacted by both of these factors, as the average market capitalization of its holdings was below that of the benchmark and our value- oriented investment discipline resulted in a generally underweighted position in high priced sectors such as technology and health care. Our modest overweights in consumer cyclical and capital goods issues also weakened returns as both of these sectors lagged the broader market. Over the course of the period we selectively increased the Fund's exposure to technology and health care, maintained a successful position in utilities, and reduced exposure to basic materials, energy, financial and consumer cyclical issues. PORTFOLIO POSITIONING We continue to anticipate that corporate earnings will weaken and that economic growth expectations will be revised downward. As a result, we have maintained broad diversification across market economic sectors and industry groups, with stock selection focused on issues that we believe have a relatively high level of earnings predictability. We have also positioned the portfolio in a somewhat defensive fashion, with modestly overweighted positions in the utility and health care sectors. /s/ Dean A. Gulis /s/ Gregg D. Watkins Dean A. Gulis Gregg D. Watkins AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR (a) - -------------------------------------------------------------------------------- Loomis Sayles Mid-Cap Value Fund (Institutional) -12.49 -13.03 5.90 Loomis Sayles Mid-Cap Value Fund (Retail) -12.66 -13.29 5.63 Lipper Mid-Cap Fund Index(b) - 7.93 -12.30 4.58 S&P Mid-Cap 400 Index(c) - 6.84 - 6.07 12.66 CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis S&P As of 12/31/96 10.00 10.00 Period Ended 3/31/97 10.10 09.85 6/30/97 11.37 11.30 9/30/97 12.71 13.12 12/31/97 12.63 13.23 3/31/98 14.03 14.68 6/30/98 13.65 14.37 9/30/98 11.06 12.32 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional and Retail Classes of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): S&P Mid-Cap 400 Index consists of 400 domestic stocks chosen for market size, liquidity and industry group representation. It is a market- weighted index (stock price times shares outstanding) with each stock affecting the index in proportion to its value. The index is comprised of industrials, utilities, financials and transportation, in size order. The index returns have not been lowered for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail Class of shares would, due to the higher fees paid by the Retail Class of shares, be lower. - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES SMALL CAP GROWTH FUND - -------------------------------------------------------------------------------- [Photo of [Photo of [Photo of Christopher R. Ely] Philip C. Fine] David L. Smith] Christopher R. Ely Philip C. Fine David L. Smith KEY FUND FACTS Objective: Long-term growth of capital Strategy: Invests in stocks of small, rapidly-growing companies, with the potential for accelerating earnings growth and rising profit margins Fund Inception Date: 12/31/96 Commencement of Operations of Class: Institutional - 1/2/97, Retail - 1/2/97 Expense Ratio: Institutional - 1.00%, Retail - 1.25% Total Net Assets (all classes): $18.2 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Small Cap Growth Fund had total returns of -13.16%, and -13.27%, respectively, as compared to the Fund's benchmark, the Russell 2000 Index, total return of -16.21%. For the same period, the average small cap fund, as measured by Lipper Analytical Services, had a total return of -16.52%. PORTFOLIO REVIEW Technology was one of the sectors that contributed to the Fund's nine-month performance, but not without some bumps along the way. Early in the year, we emphasized software and services which we felt were less susceptible to the economic slowdown overseas. This proved effective as the market punished makers of hardware in the technology sector. From the wreckage in these industries, we have been selectively buying in areas that we believe are fundamentally sound but selling at bargain prices. For the first half of the year, the Fund's underweighting in the health care sector helped returns as the sector posted weak performance. However, during the third quarter the health care industry's defensive characteristics caused it to rebound and our underweighting prevented the Fund from fully participating in the sector's outperformance. We believe this trend may continue and have built a market- weight position in stocks such as Sunrise Assisted Living and MedQuist where we anticipate continued strong earnings. We have reduced our position in consumer cyclicals such as business services due to our concerns over the economy. Our positions in the financial services sector were strong throughout the period although returns were hurt somewhat when we lowered our exposure prematurely going into the third quarter. PORTFOLIO POSITIONING We have maintained the Fund's significant exposure to technology stocks. Recently, we began to rebuild our positions in the electronics industry, focusing on the securities of specialty semiconductor chip companies where competition appears limited and demand is robust. We have also expanded our investments in the health care industry where we see attractive values in companies insulated from problems overseas. We continue to stay true to our approach of buying the securities of small cap companies with strong earnings growth and rising profitability. /s/ Christopher R. Ely /s/ Philip C. Fine /s/ David L. Smith Christopher R. Ely Philip C. Fine David L. Smith AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR (a) - -------------------------------------------------------------------------------- Loomis Sayles Small Cap Growth Fund (Institutional) -13.16 -17.37 2.10 Loomis Sayles Small Cap Growth Fund (Retail) -13.27 -17.59 1.90 Lipper Small Cap Fund Index(b) -16.33 -21.21 -2.17 Russell 2000 Index(c) -16.21 -19.02 1.44 CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis Russell As of 12/31/96 10.00 10.00 Period Ended 3/31/97 08.51 09.48 6/30/97 10.28 11.02 9/30/97 12.55 12.66 12/31/97 11.94 12.24 3/31/98 13.39 13.47 6/30/98 13.28 12.84 9/30/98 10.37 10.25 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional and Retail Classes of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): Russell 2000 Index is comprised of the 2,000 smallest companies in the Russell 3000 Index (a broad market index), representing approximately 7% of the Russell 3000 Index total market capitalization. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail Class of shares would, due to the higher fees paid by the Retail Class of shares, be lower. - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES SMALL CAP VALUE FUND - ------------------------------------------------------------------------------- [Photo of Mary C. Champagne] [Photo of Jeffrey C. Petherick] Mary C. Champagne Jeffrey C. Petherick KEY FUND FACTS Objective: Long-term growth of capital Strategy: Invests primarily in stocks with market capitalization falling within the capitalization range of the Russell 2000 Index, which are considered undervalued by the market. Fund Inception Date: 5/13/91 Commencement of Operations of Class: Institutional - 5/13/91, Retail - 1/2/97, Admin. - 1/2/98 Expense Ratio: Institutional - 0.92%, Retail - 1.19%, Admin. - 1.50% Total Net Assets (all classes): $351.2 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional, Retail and Admin classes of the Loomis Sayles Small Cap Value Fund had total returns of - -16.22%, -16.38%, and -16.54%, respectively, as compared to the Fund's benchmark, the Russell 2000 Index, total return of -16.21%. For the same period, the average small cap fund, as measured by Lipper Analytical Services, had a total return of -16.52%. PORTFOLIO REVIEW At the beginning of 1998, the Fund was positioned to avoid the securities of companies whose earnings were exposed to foreign markets in an effort to shield it from the potential effects of the Asian economic crisis. Our emphasis was on defensive sectors such as health care, REIT's (Real Estate Investment Trusts) and consumer staples. The Fund's build-up in defensive areas hurt performance early in the year as strong corporate earnings helped push the stock market higher. Our position in energy stocks was also weakened by inventory liquidation among producer countries and falling economic growth in consumer countries, particularly Asia. Small cap stocks began to falter earlier than large caps and the oversupply in the REIT market resulted in poor performance despite the attractive income these issues provide. However, during the third quarter's hard fall our growing position in utilities and other defensive sectors helped to cushion the blow. Our emphasis on small cap stocks with superior liquidity and high earnings growth, that were selling at a discount to the Russell 2000 Index, helped the Fund to outperform during the period. PORTFOLIO POSITIONING We believe that the portfolio remains broadly diversified with healthy weightings in all of the sectors of the Russell 2000 Index. As of September 30, 1998, the Fund is overweighted in technology, health care and utilities issues and underweighted in financial services, capital goods and basic materials issues. While we are cautious on the market near-term, the significant drop in prices means there are a tremendous number of values in the small cap area that we believe represent attractive investment opportunities. /s/ Mary C. Champagne /s/ Jeffrey C. Petherick Mary C. Champagne Jeffrey C. Petherick AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR 3 YEARS 5 YEARS (a) - -------------------------------------------------------------------------------- Loomis Sayles Small Cap Value Fund (Institutional) -16.22 -18.32 12.51 11.13 16.39 Loomis Sayles Small Cap Value Fund (Retail) -16.38 -18.57 N/A N/A 2.85 Loomis Sayles Small Cap Value Fund (Admin) -16.54 N/A N/A N/A -16.54 Lipper Small Cap Fund Index(b) -16.33 -21.21 3.72 8.16 11.12 Russell 2000 Index(c) -16.21 -19.02 6.86 9.09 11.92 CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis Russell 2000 As of 5/31/91 10.00 10.00 Period Ended 6/30/91 09.65 09.42 9/30/91 11.21 10.19 12/31/91 12.77 10.77 3/31/92 14.05 11.58 6/30/92 12.19 10.79 9/30/92 12.26 11.10 12/31/92 14.44 12.76 3/31/93 15.37 13.30 6/30/93 15.70 13.59 9/30/93 17.72 14.78 12/31/93 18.01 15.16 3/31/94 17.06 14.76 6/30/94 16.22 14.18 9/30/94 17.06 15.17 12/31/94 16.51 14.89 3/31/95 17.61 15.57 6/30/95 18.51 17.03 9/30/95 21.08 18.72 12/31/95 21.82 19.12 3/31/96 23.47 20.10 6/30/96 25.28 21.10 9/30/96 25.90 21.17 12/31/96 28.44 22.28 3/31/97 27.95 21.12 6/30/97 32.14 24.55 9/30/97 36.76 28.20 12/31/97 35.84 27.26 3/31.98 39.21 30.00 6/30/98 36.88 28.60 9/30/98 30.03 22.84 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional Class of shares is May 13, 1991. Since Lipper and Russell 2000 Index performance data is not available coincident with this date, comparative performance is presented from May 31, 1991. Inception dates of the Retail and Admin Classes of shares are December 31, 1996 and January 2, 1998, respectively. (b): Source: Lipper Analytical Services. (c): Russell 2000 Index is comprised on the 2,000 smallest companies in the Russell 3000 Index (a broad market index), representing approximately 7% of the Russell 3000 total market capitalization. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail and Admin Classes of shares would be lower, due to the higher fees paid by the Retail and Admin Classes of shares. - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES STRATEGIC VALUE FUND - ------------------------------------------------------------------------------- [Photo of Philip J. Schettewi] Philip J. Schettewi KEY FUND FACTS Objective: Long-term growth of capital Strategy: Invests in stocks believed to be undervalued by the market Fund Inception Date: 12/31/96 Commencement of Operations of Class: Institutional - 1/2/97, Retail - 1/2/97 Expense Ratio: Institutional - 1.00%, Retail - 1.25% Total Net Assets (all classes): $1.2 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Strategic Value Fund had total returns of -10.97%, and -11.14%, respectively, as compared to the Fund's benchmark, the S&P 500 Index, total return of 6.00%. For the same period, the average growth fund, as measured by Lipper Analytical Services, had a total return of -0.21%. PORTFOLIO REVIEW Over the past nine months, the erratic behavior of the equity markets has taken its toll on the performance of the Strategic Value Fund. Losses in stocks such as basic materials, capital goods and transportation were exacerbated by selling that was based more on investor emotions than on the strengths or weaknesses of individual companies. As the year progressed, many investors rotated into defensive issues such as utilities, telecommunication services, consumer staples and drugs. While our underweighting of these sectors negatively affected performance, we have avoided them because of their rich valuations and/or weak earnings outlook. We continue to underweight these groups because we believe stocks in other sectors offer much greater potential for significant long-term gains. The Fund's returns continued to be weakened by the market's bias towards large capitalization stocks. These securities are selling at valuations well above the upper end of their historical range, which makes them susceptible to significant declines. Earnings projections for many blue chip multinational companies have recently been reduced, proving that they are not immune to global turmoil. We continue to avoid these stocks because we believe their prices will be at risk when investors realize how much they are paying for increasingly unsure growth prospects. PORTFOLIO POSITIONING While the emotional selling in the marketplace has hurt short-term performance for the Fund, it has also created opportunities to purchase high quality companies at significant discounts to their true underlying value. We believe that the Fund is well positioned to outperform the market given that we own companies that are leaders in their respective industries, have improving fundamentals, and are selling at significant discounts to the overall market and to their historical averages. /s/ Philip J. Schettewi Philip J. Schettewi AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR (a) - ------------------------------------------------------------------------------- Loomis Sayles Strategic Value Fund (Institutional) -10.97 -18.40 3.71 Loomis Sayles Strategic Value Fund (Retail) -11.14 -18.63 3.45 Lipper Growth Fund Index(b) 2.38 3.07 16.73 S&P 500 Index(c) 6.00 9.05 21.88 CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis S&P As of 12/31/96 10.00 10.00 Period Ended 3/31/97 09.98 10.27 6/30/97 11.63 12.06 9/30/97 13.06 12.96 12/31/97 11.97 13.34 3/31/98 13.52 15.19 6/30/98 13.25 15.70 9/30/98 10.66 14.14 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional and Retail Classes of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): S&P 500 Index is a capitalization-weighted, total return index comprised of 500 widely held common stocks, representing industrial, utility, transportation, and financial companies traded on the New York Stock Exchange, the American Stock Exchange and in the Over-the-Counter market. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail Class of shares would, due to the higher fees paid by the Retail Class of shares, be lower. - -------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - -------------------------------------------------------------------------------- LOOMIS SAYLES WORLDWIDE FUND - ------------------------------------------------------------------------------- [Photo of Daniel J. Fuss] [Photo of E. John deBeer] Daniel J. Fuss E. John deBeer [Photo of Paul H. Drexler] [Photo of Quentin P. Faulkner] Paul H. Drexler Quentin P. Faulkner KEY FUND FACTS Objective: High total investment return Strategy: Invests in U.S. and foreign equity and debt securities Fund Inception Date: 5/1/96 Commencement of Operations of Class: Institutional - 5/1/96, Retail - 1/2/97 Expense Ratio: Institutional - 1.00%, Retail - 1.25% Total Net Assets (all classes): $5.0 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Worldwide Fund had total returns of -10.85% and - -11.16%, respectively, as compared to the Fund's benchmark, the S&P 500 Index, total return of 6.00%. For the same period, the average global flex fund, as measured by Lipper Analytical Services, had a total return of -0.88%. PORTFOLIO REVIEW The past nine months have been a difficult period for the Worldwide Fund. At the beginning of 1998, we shifted approximately 20% of the portfolio's assets from U.S. equities to U.S. bonds, and by the end of January, U.S. and foreign bonds represented 55% of the portfolio. This asset change proved to be favorable as U.S. and foreign equities experienced high volatility and weakened performance throughout the year. However, good stock selection allowed the Fund's U.S. equities to post a nine-month return of 12.30% versus the S&P 500 Index return of 6.00%. As part of the same January allocation, we increased the Fund's holdings in Asia and other emerging markets, which proved to be far too early. Foreign equities had a return of -24.91%, and foreign bonds had a return of - -8.02%. These negative returns were consistent with the extreme volatility of the Asian and other emerging markets. The Fund's U.S. bonds were largely invested in high yield bonds, and the U.S. bond return of -2.50% is consistent with the returns posted by the U.S. high yield market. PORTFOLIO POSITIONING Despite the Fund's weak returns, we are continuing to adhere to a value-based investment discipline. Broadly speaking, the fundamentals of the countries and companies we hold have changed little since the time of purchase and we continue to have a positive outlook. It is our opinion, that price declines have made what we believed to be good values even better. At September 30, 1998 the Fund had 18.5% of portfolio invested in U.S. equities, 36.7% in U.S. bonds, 27.9% in foreign equities, and 11.4% in foreign bonds. /s/Daniel J. Fuss /s/Paul H. Drexler /s/E. John deBeer /s/Quentin P. Faulkner Daniel J. Fuss Paul H. Drexler E. John deBeer Quentin P. Faulkner AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998 SINCE YEAR INCEPTION TO DATE 1 YEAR (a) - -------------------------------------------------------------------------------- Loomis Sayles Worldwide Fund (Institutional) -10.85 -17.84 0.33 Loomis Sayles Worldwide Fund (Retail) -11.16 -18.15 - 4.78 Lipper Global Flex Portfolio Index(b) - 3.18 - 5.51 7.07 S&P 500 Index(c) 6.00 9.05 21.82 CUMULATIVE PERFORMANCE - MAY 31, 1996 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis S&P As of 5/31/96 10.00 10.00 Period Ended 6/30/96 10.03 10.04 9/30/96 10.25 10.35 12/31/96 10.83 11.21 3/31/97 10.83 11.51 6/30/97 11.38 13.52 9/30/97 12.16 14.53 12/31/97 11.21 14.95 3/31/98 12.37 17.03 6/30/98 11.20 17.60 9/30/98 09.99 15.85 Note: Past performance is not predictive of future performance. Total return assumes reinvestment of dividends and capital gains distributions. The investment return and principal value of an investment in the Fund will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost. (a): Inception date of the Institutional Class of shares is May 1, 1996. Since Lipper and S&P 500 Index performance data is not available coincident with this date, comparative performance is presented from May 31, 1996. Inception date of the Retail Class of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): S&P 500 Index is a capitalization-weighted, total return index comprised of 500 widely held common stocks, representing industrial, utility, transportation, and financial companies traded on the New York Stock Exchange, the American Stock Exchange and in the Over-the-Counter market. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments. (d): Cumulative performance is shown for the Institutional Class of shares. Performance of the Retail Class of shares would, due to the higher fees paid by the Retail Class of shares, be lower. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES CORE VALUE FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 SHARES VALUE (a) - ------------------------------------------------------------------------------- COMMON STOCKS -- 95.0% OF NET ASSETS Aerospace -- 1.9% Northrop Grumman Corp. .......................... 17,500 $ 1,277,500 ----------- Auto & Related -- 1.2% General Motors Corp. ............................ 13,000 710,938 TRW, Inc. ....................................... 1,800 79,875 ----------- 790,813 ----------- Banks/Savings & Loans -- 7.6% Chase Manhattan Corp. ........................... 21,324 922,263 First Chicago NBD Corp. ......................... 8,200 561,700 Fleet Financial Group, Inc. ..................... 21,500 1,578,906 National City Corp. ............................. 16,300 1,074,781 PNC Bank Corp. .................................. 23,000 1,035,000 ----------- 5,172,650 ----------- Beverages -- 1.9% Anheuser-Busch Companies, Inc. .................. 24,000 1,296,000 ----------- Chemicals -- Major -- 0.9% Praxair, Inc. ................................... 18,000 588,375 ----------- Chemicals -- Specialty -- 0.7% E.I. du Pont DeNemours & Co. .................... 7,900 443,388 ----------- Commercial Services -- 1.5% Viad Corp. ...................................... 39,000 1,045,688 ----------- Communications Equipment -- 0.8% Harris Corp. .................................... 16,000 512,000 ----------- Computer Hardware -- 4.8% Hewlett-Packard Co. ............................. 12,600 667,012 International Business Machines Corp. ........... 10,800 1,382,400 Sun Microsystems, Inc. (b) ...................... 24,000 1,195,500 ----------- 3,244,912 ----------- Data Processing Services -- 3.0% Dun & Bradstreet Corp. .......................... 35,000 945,000 First Data Corp. ................................ 47,000 1,104,500 ----------- 2,049,500 ----------- Electronics -- 5.9% Litton Industries, Inc. (b) ..................... 19,000 1,140,000 Philips Electronics NV .......................... 20,000 1,067,500 Raytheon Co. .................................... 32,800 1,769,150 ----------- 3,976,650 ----------- Financial Services -- 3.2% Bear Stearns Companies, Inc. .................... 11,500 355,781 Finova Group, Inc. .............................. 24,924 1,244,642 Morgan Stanley Dean Witter & Co. ................ 14,000 602,875 ----------- 2,203,298 ----------- Food -- Packaged & Miscellaneous -- 3.8% ConAgra, Inc. ................................... 49,100 1,322,631 Sara Lee Corp. .................................. 23,500 1,269,000 ----------- 2,591,631 ----------- Forest Products -- 2.1% Georgia Pacific Corp. ........................... 13,500 615,938 Georgia Pacific Timber Group .................... 41,000 796,937 ----------- 1,412,875 ----------- Freight Transportation -- 0.9% Ryder System, Inc. .............................. 25,800 641,775 ----------- Health Care -- Drugs -- 2.2% Abbott Laboratories ............................. 35,000 1,520,313 ----------- Health Care -- Services -- 2.5% Tenet Healthcare Corp. (b) ...................... 60,000 1,725,000 ----------- Home Products -- 1.3% Premark International, Inc. ..................... 32,500 912,031 ----------- Housing & Building Materials -- 2.7% Armstrong World Industries, Inc. ................ 18,100 968,350 Black & Decker Corp. ............................ 21,000 874,125 ----------- 1,842,475 ----------- Imaging -- 2.0% Xerox Corp. ..................................... 15,600 1,322,100 ----------- Insurance -- 4.3% Ace Ltd. ........................................ 41,450 1,243,500 Aetna, Inc. ..................................... 10,000 695,000 Allstate Corp. .................................. 24,096 1,004,502 ----------- 2,943,002 ----------- Leisure -- 1.8% Hasbro, Inc. .................................... 41,000 1,209,500 ----------- Machinery -- 1.4% Deere & Co. ..................................... 32,000 968,000 ----------- Manufacturing -- 3.2% Eaton Corp. ..................................... 16,500 1,034,344 Tenneco, Inc. ................................... 34,000 1,117,750 ----------- 2,152,094 ----------- Natural Gas -- 1.7% Columbia Energy Group ........................... 19,800 1,160,775 ----------- Oil & Gas Drilling Equipment -- 1.4% BJ Services Co. (b) ............................. 28,900 469,625 Cooper Cameron Corp. (b) ........................ 17,200 483,750 ----------- 953,375 ----------- Oil & Gas -- Major Integrated -- 8.0% British Petroleum Plc ADR ....................... 16,965 1,480,196 Exxon Corp. ..................................... 23,400 1,642,388 Mobil Corp. ..................................... 12,300 934,031 USX Marathon Group .............................. 38,000 1,346,625 ----------- 5,403,240 ----------- Personal Care -- 1.7% Kimberly Clark Corp. ............................ 29,000 1,174,500 ----------- Publishing -- 0.9% McGraw-Hill Cos., Inc. .......................... 7,900 626,075 ----------- Real Estate Investment Trusts -- 1.7% Health Care Property Investments, Inc. .......... 18,600 613,800 Meditrust Corp. ................................. 30,025 512,302 ----------- 1,126,102 ----------- Retail -- Food -- 0.7% Kroger Co. (b) .................................. 9,500 475,000 ----------- Retail -- General -- 3.8% Federated Department Stores, Inc. (b) ........... 36,000 1,309,500 Sears Roebuck & Co. ............................. 29,000 1,281,437 ----------- 2,590,937 ----------- Telecommunications -- 8.5% American Home Products Corp. .................... 21,000 1,099,875 Ameritech Corp. ................................. 28,800 1,364,400 Bell Atlantic Corp. ............................. 24,400 1,181,875 BellSouth Corp. ................................. 17,700 1,331,925 Century Telephone Enterprises, Inc. ............. 12,800 604,800 GTE Corp. ....................................... 4,000 220,000 ----------- 5,802,875 ----------- Tobacco -- 1.5% Philip Morris Cos., Inc. ........................ 22,500 1,036,406 ----------- Utilities -- 3.5% Consolidated Edison, Inc. ....................... 19,000 990,375 Pacificorp ...................................... 27,000 518,063 Pinnacle West Capital Corp. ..................... 19,700 882,806 ----------- 2,391,244 ----------- TOTAL COMMON STOCKS (Identified Cost $61,065,132) ................. 64,582,099 ----------- FACE AMOUNT VALUE (a) - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 9.0% of Net Assets Associates Corp. of North America, 5.600%, 10/01/98 ............................ $3,289,921 $ 3,289,921 Chevron USA Inc., 5.500%, 10/01/98 ............ 2,800,000 2,800,000 ----------- TOTAL SHORT-TERM INVESTMENTS (Identified Cost $6,089,921)................. 6,089,921 ----------- TOTAL INVESTMENTS -- 104.0% (IDENTIFIED COST $67,155,053) (c) ........... 70,672,020 Liabilities, Less Cash and Other Assets -- (4.0%) (2,729,271) ----------- NET ASSETS -- 100% ............................ $67,942,749 =========== (a) See Note 1. (b) Non-income producing security. (c) At September 30, 1998, the net unrealized appreciation on investments b cost of $67,155,742 for federal income tax purposes was as follows: Aggregate grealized appreciation for all securities in which there is an excess of value ovcost and aggregate gross unrealized depreciation for all securities in which there is an ef tax cost over value were $8,568,034 and $5,051,756 respectively, resulting in net unr appreciation of $3,516,278. Key to Abbreviations: ADR: American Depositary Receipt. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES GROWTH FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 SHARES VALUE (a) - ------------------------------------------------------------------------------- COMMON STOCKS -- 92.3% of Net Assets Broadcasting -- 2.5% Comcast Corp. ................................... 13,500 $ 629,438 ----------- Chemicals -- Major -- 4.6% Monsanto Co. .................................... 20,400 1,150,050 ----------- Communications Equipment -- 6.8% Ascend Communications, Inc. (b) ................. 14,200 646,100 Ciena Corp. (b) ................................. 38,900 556,756 Cisco Systems, Inc. (b) ......................... 8,100 500,681 ----------- 1,703,537 ----------- Computer Software & Services -- 8.5% America Online, Inc. (b) ........................ 3,300 367,125 Compuware Corp. (b) ............................. 10,800 635,850 Fiserv, Inc. (b) ................................ 4,800 221,100 HBO & Co. ....................................... 17,700 511,087 Paychex, Inc. ................................... 7,850 404,766 ----------- 2,139,928 ----------- Computers -- 3.0% Dell Computer Corp. (b) ......................... 11,600 762,700 ----------- Entertainment -- 3.9% Time Warner, Inc. ............................... 11,200 980,700 ----------- Financial Services -- 2.2% Associates First Capital Corp. .................. 5,100 332,775 MGIC Investment Corp. ........................... 5,800 213,875 ----------- 546,650 ----------- Government Agencies -- 3.1% Federal National Mortgage Association ........... 12,300 790,275 ----------- Health Care -- Biotechnology -- 1.8% MedImmune, Inc. (b) ............................. 6,500 420,875 Oncor, Inc. (b) ................................. 333,000 41,625 ----------- 462,500 ----------- Health Care -- Drugs -- 6.0% Eli Lilly & Co. ................................. 6,000 469,875 Pfizer, Inc. .................................... 9,900 1,048,781 ----------- 1,518,656 ----------- Health Care -- Medical Technology -- 5.0% Allegiance Corp. ................................ 33,600 999,600 Guidant Corp. ................................... 3,600 267,300 ----------- 1,266,900 ----------- Health Care -- Services -- 0.8% Healthsouth Corp. (b) ........................... 18,000 190,125 ----------- Insurance -- 2.0% American International Group, Inc. .............. 6,587 507,199 ----------- Oil & Gas -- 1.6% EXEL Ltd. ....................................... 6,200 390,600 ----------- Oil & Gas Drilling Equipment -- 6.6% Noble Drilling Corp. (b) ........................ 26,100 384,975 Unit Corp. (b) .................................. 259,300 1,264,087 ----------- 1,649,062 ----------- Oil & Gas Exploration -- 10.0% Anadarko Petroleum Corp. ........................ 47,700 1,875,206 Cross Timbers Oil Co. ........................... 32,600 491,038 Ocean Energy, Inc. (b) .......................... 12,482 163,826 ----------- 2,530,070 ----------- Restaurants -- 2.9% Starbucks Corp. (b) ............................. 20,500 741,844 ----------- Retail -- Food & Drug -- 5.7% CVS Corp. ....................................... 17,600 771,100 Walgreen Co. .................................... 15,200 669,750 ----------- 1,440,850 ----------- Retail -- General -- 5.6% Fastenal Co. .................................... 4,400 110,000 Kohl's Corp. (b) ................................ 10,900 425,100 Wal-Mart Stores, Inc. ........................... 15,900 868,538 ----------- 1,403,638 ----------- Retail -- Specialty -- 6.2% Bed Bath & Beyond, Inc. (b) ..................... 21,000 490,875 Borders Group, Inc. (b) ......................... 16,500 367,125 Home Depot, Inc. ................................ 17,700 699,150 ----------- 1,557,150 ----------- Telecommunications -- 3.5% MCI WorldCom, Inc. (b) .......................... 17,900 874,863 ----------- TOTAL COMMON STOCKS (Identified Cost $23,112,520) ................... 23,236,735 ----------- FACE AMOUNT - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 0.5% OF NET ASSETS Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $120,016 on 10/01/98 collateralized by $90,000 U.S. Treasury Bond, 11.625% due 11/15/04 with a value of $127,547 ................................... $120,000 $ 120,000 ----------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $120,000) .................... 120,000 ----------- TOTAL INVESTMENTS -- 92.8% (IDENTIFIED COST $23,232,520) (c) ............. 23,356,735 Cash and Other Assets, Less Liabilities -- 7.2% ....................... 1,823,085 ----------- NET ASSETS -- 100% ............................ $25,179,820 =========== (a) See Note 1. (b) Non-income producing security. (c) At September 30, 1998, the net unrealized depreciation on investments based on cost of $23,753,733 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 $3,033,316 and $3,430,314, respectively, resulting in net unrealized depreciation of $396,998. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES INTERNATIONAL EQUITY FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 SHARES (a) VALUE (b) - ------------------------------------------------------------------------------- COMMON STOCKS -- 94.2% of Net Assets Australia -- 2.9% Brambles Industries Ltd. ........................ 63,000 $ 1,359,881 Southcorp Ltd. .................................. 235,000 654,054 ----------- 2,013,935 ----------- Belgium -- 0.8% Cimenteries CBR ................................. 7,000 539,320 ----------- Brazil -- 0.2% SABESP .......................................... 1,800,000 111,907 ----------- Canada -- 6.1% Bombardier, Inc. ................................ 86,000 947,130 Canadian National Railway Co. (c) ............... 16,750 754,900 Northern Telecom Ltd. ........................... 19,400 624,432 Petro-Canada .................................... 58,300 731,879 Royal Bank of Canada ............................ 20,000 811,564 Torstar Corp. ................................... 30,000 324,495 ----------- 4,194,400 ----------- Denmark -- 7.2% Carlsberg A/S ................................... 22,000 1,351,075 Codan Forsikring ................................ 2,895 365,060 Sophus Berendsen ................................ 20,000 774,742 Tryg-Baltica Forsikring A/S ..................... 43,250 1,123,731 Unidanmark A/S .................................. 18,500 1,340,052 ----------- 4,954,660 ----------- France -- 9.1% Bank Nationale de Paris ......................... 13,500 723,240 Elf Aquitaine SA ................................ 9,000 1,110,575 Guyenne et Gascogne SA .......................... 1,000 424,122 L' Air Liquide .................................. 6,412 1,016,796 Michelin ........................................ 17,000 667,881 Pernod Ricard ................................... 14,000 1,031,287 St. Gobain ...................................... 9,500 1,260,492 ----------- 6,234,393 ----------- Germany -- 6.7% Henkel KGAA (Preferred) ......................... 26,500 2,008,189 Lufthansa AG .................................... 50,000 988,353 MAN AG (Preferred) .............................. 3,600 735,112 Volkswagen AG ................................... 12,000 865,894 ----------- 4,597,548 ----------- Italy -- 9.0% Credito Italiano ................................ 243,000 1,012,837 Edison Spa ...................................... 140,000 1,065,277 ENI Spa ......................................... 215,000 1,318,148 Ericsson Spa .................................... 19,900 698,034 Istituto Nazionale delle Assicurazioni - INA .... 300,000 763,336 Telecom Italia Spa (Savings Shares) ............. 279,000 1,334,447 ----------- 6,192,079 ----------- Japan -- 9.6% Canon, Inc. ..................................... 45,000 912,485 Daiwa House Industries Co. Ltd. ................. 75,000 680,795 Fuji Photo Film Co. ............................. 30,000 1,032,173 Nichii Gakkan Co. (c) ........................... 20,000 644,193 Nintendo Co. Ltd. ............................... 8,000 751,949 Nippon Telegraph & Telephone Corp. .............. 190 1,383,917 Uny Co. Ltd. .................................... 73,000 1,143,589 ----------- 6,549,101 ----------- Netherlands -- 4.5% Grolsch ......................................... 36,900 1,007,067 Hollandsche Beton Groep ......................... 35,300 432,968 Koninklijke KPN NV .............................. 42,000 1,297,900 Koninklijke Pakhoed ............................. 15,000 338,493 ----------- 3,076,428 ----------- New Zealand -- 0.7% Air New Zealand Ltd., Class B ................... 269,000 212,701 Nuplex Industries Ltd. .......................... 249,940 272,680 ----------- 485,381 ----------- Portugal -- 8.2% BPI ............................................. 45,000 1,241,977 Brisa-Auto Estradas de Portugal SA .............. 29,000 1,322,685 Electricidade Portugal .......................... 60,000 1,381,610 Engil - SGPS .................................... 77,611 566,553 Portugal Telecom SA ............................. 30,000 1,092,709 ----------- 5,605,534 ----------- Spain -- 6.5% Azucarera Ebro Agricolas SA ..................... 31,295 745,250 Banco Santander SA .............................. 882 13,360 Fomento de Construction y Contratas SA .......... 29,000 1,354,634 Iberdrola SA .................................... 85,000 1,419,312 Repsol SA ....................................... 22,325 943,742 ----------- 4,476,298 ----------- Switzerland -- 4.6% Jelmoli Holdings AG ............................. 600 699,797 Novartis AG ..................................... 1,050 1,687,880 Schweizerische Rueckversicherungs-Gesellschaft .. 400 795,422 ----------- 3,183,099 ----------- United Kingdom -- 18.1% Anglian Water ................................... 72,360 1,166,228 Anglian Water, Class B .......................... 77,529 68,540 Boots Co. Plc ................................... 80,000 1,377,760 British Aerospace Plc ........................... 175,000 1,062,137 British Petroleum Co. ........................... 74,000 1,132,266 Commercial Union ................................ 75,000 1,162,230 FKI Plc ......................................... 358,333 688,398 J Sainsbury Plc ................................. 165,000 1,580,710 Lloyds TSB Group ................................ 95,000 1,064,347 London International Group Plc .................. 90,000 241,754 Rolls-Royce Plc ................................. 260,000 897,312 Scottish & Newcastle ............................ 70,000 856,850 Scottish Hydro .................................. 97,000 1,088,404 ----------- 12,386,936 ----------- TOTAL COMMON STOCKS (Identified Cost $70,072,985) ................. 64,601,019 ----------- RIGHTS -- 0.0% of Net Assets Thailand -- 0.0% Industrial Finance Corp. of Thailand (c) ...... 38,500 0 ------------- TOTAL RIGHTS (Identified Cost $0) ........................ 0 ------------- FACE AMOUNT - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 3.7% of Net Assets Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $2,561,338 on 10/01/98 collateralized by $2,170,000 U.S. Treasury Bond, 6.500% due 11/15/26 with a value of $2,612,476 ................................. $2,561,000 $ 2,561,000 ----------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $2,561,000)................. 2,561,000 ----------- TOTAL INVESTMENTS -- 97.9% (IDENTIFIED COST $72,633,985) (d) ........... 67,162,019 Cash and Other Assets, Less Liabilities -- 2.1% .................................... 1,452,036 ----------- NET ASSETS -- 100% ............................ $68,614,055 =========== (a) Ordinary shares unless otherwise noted. (b) See Note 1. (c) Non-income producing security. (d) At September 30, 1998, the net unrealized depreciation on investments based on cost of $72,633,985 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 $3,539,389 and $9,011,355, respectively, resulting in net unrealized depreciation of $5,471,966. Ten Largest Sector Holdings at September 30, 1998 as a Percentage of Net Assets Telecommunications 9.4% Building Materials & Construction 9.3% Oil & Gas 9.1% Utilities 7.3% Banking & Finance 7.2% Beverages 6.2% Insurance 6.1% Retail 5.3% Transportation 3.9% Health Care 3.8% See accompanying notes to financial statements. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES MID-CAP GROWTH FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 SHARES VALUE (a) - ------------------------------------------------------------------------------- COMMON STOCKS -- 96.0% OF NET ASSETS Business Services -- 2.8% ABR Information Services, Inc. (b) .............. 1,100 $ 15,056 Cintas Corp. .................................... 900 45,113 ---------- 60,169 ---------- Chemicals -- Major -- 3.4% Monsanto Co. .................................... 1,300 73,287 ---------- Communications Equipment -- 7.3% Ascend Communications, Inc. (b) ................. 1,000 45,500 Ciena Corp. (b) ................................. 1,600 22,900 Cisco Systems, Inc. (b) ......................... 825 50,995 Lucent Technologies, Inc. ....................... 550 37,985 ---------- 157,380 ---------- Computer Software & Services -- 21.3% America Online, Inc. (b) ........................ 450 50,063 Compuware Corp. (b) ............................. 1,300 76,537 Electronic Arts (b) ............................. 800 35,100 Fiserv, Inc. (b) ................................ 1,150 52,972 HBO & Co. ....................................... 1,800 51,975 Network Associates, Inc. (b) .................... 1,000 35,500 Paychex, Inc. ................................... 1,700 87,656 SunGard Data Systems, Inc. (b) .................. 1,300 40,950 Symantec Corp. (b) .............................. 2,150 28,353 ---------- 459,106 ---------- Financial Services -- 1.2% MGIC Investment Corp. ........................... 700 25,813 ---------- Health Care -- Biotechnology -- 2.9% MedImmune, Inc. (b) ............................. 900 58,275 Oncor, Inc. (b) ................................. 25,900 3,237 ---------- 61,512 ---------- Health Care -- Drugs -- 2.2% Pfizer, Inc. .................................... 450 47,672 ---------- Health Care -- Medical Technology -- 8.6% Allegiance Corp. ................................ 2,800 83,300 Arterial Vascular Engineering, Inc. (b) ......... 1,250 46,250 Steris Corp. (b) ................................ 2,000 56,500 ---------- 186,050 ---------- Health Care -- Services -- 0.9% Healthsouth Corp. (b) ........................... 1,900 20,069 ---------- Oil & Gas -- 2.9% EXEL Ltd. ....................................... 1,000 63,000 ---------- Oil & Gas Drilling Equipment -- 12.6% Cooper Cameron Corp. (b) ........................ 3,600 101,250 Rowan Companies, Inc. (b) ....................... 6,300 70,481 Unit Corp. (b) .................................. 20,600 100,425 ---------- 272,156 ---------- Oil & Gas Exploration -- 15.0% Anadarko Petroleum Corp. ........................ 3,800 149,387 Cross Timbers Oil Co. ........................... 7,650 115,228 Ocean Energy, Inc. (b) .......................... 4,406 57,829 ---------- 322,444 ---------- Restaurants -- 3.5% Starbucks Corp. (b) ............................. 2,100 75,994 ---------- Retail -- Food & Drug -- 2.8% CVS Corp. ....................................... 1,400 61,338 ---------- Retail -- General -- 3.3% Kohl's Corp. (b) ................................ 1,800 70,200 ---------- Retail -- Specialty -- 5.3% Bed Bath & Beyond, Inc. (b) ..................... 2,000 46,750 Borders Group, Inc. (b) ......................... 1,100 24,475 Home Depot, Inc. ................................ 1,100 43,450 ---------- 114,675 ---------- TOTAL COMMON STOCKS (Identified Cost $2,174,033) .................. 2,070,865 ---------- TOTAL INVESTMENTS -- 96.0% (IDENTIFIED COST $2,174,033) (c) .............. 2,070,865 Cash and Other Assets, Less Liabilities -- 4.0% ....................... 87,005 ---------- NET ASSETS -- 100% .............................. $2,157,870 ========== (a) See Note 1. (b) Non-income producing security. (c) At September 30, 1998, the net unrealized depreciation on investments based on cost of $2,177,889 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 $267,554 and $374,578, respectively, resulting in net unrealized depreciation of $107,024. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES MID-CAP VALUE FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 SHARES VALUE (a) - -------------------------------------------------------------------------------- COMMON STOCKS -- 98.4% OF NET ASSETS Advertising -- 0.9% Young & Rubicam, Inc. (b) ....................... 1,050 $ 29,794 ---------- Aerospace/Defense -- 4.5% Gencorp, Inc. ................................... 1,800 34,650 Gulfstream Aerospace Corp. (b) .................. 1,500 60,375 Northrop Grumman Corp. .......................... 800 58,400 ---------- 153,425 ---------- Auto & Related -- 2.7% Hertz Corp. ..................................... 2,200 91,025 ---------- Banks/Savings & Loans -- 8.3% AmSouth Bancorp ................................. 1,850 63,131 Charter One Financial, Inc. ..................... 2,200 54,725 FirstMerit Corp. ................................ 1,820 42,656 M&T Bank Corp. .................................. 100 46,100 Provident Financial Group, Inc. ................. 900 36,000 Trustmark Corp. ................................. 2,500 38,750 ---------- 281,362 ---------- Broadcasting -- 2.3% United Video Satellite Group, Inc. (b) .......... 5,400 79,988 ---------- Chemicals -- Specialty -- 3.4% Ecolab, Inc. .................................... 2,600 73,937 Solutia, Inc. ................................... 1,800 40,613 ---------- 114,550 ---------- Computer Hardware -- 4.9% Apple Computer, Inc. (b) ........................ 2,600 99,125 Cabletron Systems, Inc. (b) ..................... 6,175 69,469 ---------- 168,594 ---------- Computer Software & Services -- 4.7% Symantec Corp. (b) .............................. 4,300 56,706 Synopsys, Inc. (b) .............................. 2,000 66,625 Wang Laboratories, Inc. (b) ..................... 1,900 36,813 ---------- 160,144 ---------- Electronics -- 4.2% Advanced Micro Devices, Inc. (b) ................ 3,000 55,687 Altera Corp. (b) ................................ 1,200 42,150 Novellus Systems, Inc. (b) ...................... 1,760 46,200 ---------- 144,037 ---------- Financial Services -- 5.8% A.G. Edwards, Inc. .............................. 700 21,219 Allmerica Financial Corp. ....................... 600 35,775 Countrywide Credit Industries, Inc. ............. 1,025 42,665 First Plus Financial Group, Inc. (b) ............ 1,300 14,869 Metris Companies, Inc. .......................... 800 37,300 Reliastar Financial Corp. ....................... 1,195 46,605 ---------- 198,433 ---------- Food -- Packaged & Miscellaneous -- 2.1% Smithfield Foods, Inc. (b) ...................... 4,000 70,750 ---------- Health Care -- Medical Supplies -- 1.1% PSS World Medical, Inc. (b) ..................... 2,000 37,000 ---------- Health Care -- Medical Technology -- 6.3% Arterial Vascular Engineering, Inc. (b) ......... 1,700 62,900 Invacare Corp. .................................. 1,600 37,600 Steris Corp. (b) ................................ 4,000 113,000 ---------- 213,500 ---------- Health Care -- Services -- 1.9% AmeriSource Health Corp. (b) .................... 1,200 65,325 ---------- Home Builders -- 2.8% Champion Enterprises, Inc. (b) .................. 4,175 97,069 ---------- Insurance -- 2.3% Protective Life Corp. ........................... 1,150 41,400 Reliance Group Holdings, Inc. ................... 2,650 37,266 ---------- 78,666 ---------- Manufacturing -- 2.6% MascoTech, Inc. ................................. 3,000 54,000 Pentair, Inc. ................................... 1,100 35,475 ---------- 89,475 ---------- Metals -- 1.6% USEC, Inc. (b) .................................. 3,500 54,031 ---------- Natural Gas -- 3.0% Columbia Energy Group ........................... 1,100 64,487 MCN Energy Group, Inc. .......................... 2,300 39,244 ---------- 103,731 ---------- Oil & Gas -- 1.2% Kerr-McGee Corp. ................................ 900 40,950 ---------- Oil & Gas Drilling Equipment -- 2.8% Cooper Cameron Corp. (b) ........................ 2,225 62,578 Noble Drilling Corp. (b) ........................ 2,267 33,438 ---------- 96,016 ---------- Oil & Gas Refining -- 1.6% Tosco Corp. ..................................... 2,608 56,072 ---------- Packaging -- 1.0% Sealed Air Corp. (b) ............................ 1,100 35,063 ---------- Paper Products -- 1.0% Bowater, Inc. ................................... 1,000 35,625 ---------- Refrigeration Systems -- 1.0% Hussmann International, Inc. .................... 2,500 35,469 ---------- Restaurants -- 1.8% Wendy's International, Inc. ..................... 2,800 62,125 ---------- Retail -- Food -- 2.1% Food Lion, Inc. ................................. 6,600 70,125 ---------- Retail -- Specialty -- 6.7% CDW Computer Centers, Inc. (b) .................. 600 31,950 Claire's Stores, Inc. ........................... 2,800 50,400 Jostens, Inc. ................................... 2,500 51,875 Saks, Inc. (b) .................................. 2,000 44,875 Zale Corp. (b) .................................. 1,900 48,687 ---------- 227,787 ---------- Telecommunications -- 0.6% Century Telephone Enterprises, Inc. ............. 400 18,900 ---------- Textile & Apparel -- 1.6% Tommy Hilfiger Corp. (b) ........................ 1,300 53,300 ---------- Utilities -- 9.8% BEC Energy ...................................... 1,300 56,631 Conectiv, Inc. .................................. 3,000 68,437 Energy East Corp. ............................... 1,100 56,100 Florida Progress Corp. .......................... 800 34,650 Peco Energy Co. ................................. 2,000 73,125 Washington Water Power Co. ...................... 2,200 43,588 ---------- 332,531 ---------- Waste Management -- 1.8% Browning Ferris Industries Inc. ................. 2,000 60,500 ---------- TOTAL COMMON STOCKS (Identified Cost $3,736,402) .................. 3,355,362 ---------- TOTAL INVESTMENTS -- 98.4% (IDENTIFIED COST $3,736,402) (c) .............. 3,355,362 Cash and Other Assets, Less Liabilities -- 1.6% .................... 55,945 ---------- NET ASSETS -- 100% ............................ $3,411,307 ========== (a) See Note 1. (b) Non-income producing security. (c) At September 30, 1998, the net unrealized depreciation on investments based on cost of $3,762,201 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 $106,798 and $513,637, respectively, resulting in net unrealized depreciation of $406,839. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES SMALL CAP GROWTH FUND - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 SHARES VALUE (a) - ------------------------------------------------------------------------------- COMMON STOCKS -- 94.7% OF NET ASSETS Advertising -- 2.1% Lamar Advertising Co. (b) ....................... 13,650 $ 382,200 ----------- Agricultural -- 1.2% Delta & Pine Land Co. ........................... 5,165 227,260 ----------- Banks/Savings & Loans -- 6.1% Astoria Financial Corp. ......................... 6,800 286,450 FirstFed Financial Corp. (b) .................... 21,300 363,431 Peoples Heritage Financial Group, Inc. .......... 14,600 261,888 Staten Island Bancorp, Inc. ..................... 11,300 203,400 ----------- 1,115,169 ----------- Broadcasting -- 2.4% Citadel Communications Corp. (b) ................ 9,500 194,156 Metro Networks, Inc. (b) ........................ 6,800 249,050 ----------- 443,206 ----------- Business Services -- 7.3% Abacus Direct Corp. (b) ......................... 9,200 469,200 Ha Lo Industries, Inc. (b) ...................... 14,200 415,350 Lason, Inc. (b) ................................. 8,650 443,312 ----------- 1,327,862 ----------- Communications Equipment -- 1.9% Uniphase Corp. (b) .............................. 8,500 348,500 ----------- Computer Hardware -- 2.5% Network Appliance, Inc. (b) ..................... 9,050 458,156 ----------- Computer Software & Services -- 19.4% Ciber, Inc. (b) ................................. 15,500 312,906 Concord Communications, Inc. (b) ................ 8,300 329,925 Diamond Technology Partners, Inc. (b) ........... 17,500 288,750 Documentum, Inc. (b) ............................ 9,900 392,288 Geotel Communications Corp. (b) ................. 20,800 559,000 Inktomi Corp. (b) ............................... 2,700 203,175 Lernout & Hauspie Speech Products NV (b) ........ 2,300 92,431 Lycos, Inc. (b) ................................. 12,400 419,275 Sapient Corp. (b) ............................... 13,500 460,687 Wind River Systems, Inc. (b) .................... 10,000 472,500 ----------- 3,530,937 ----------- Electronics -- 9.7% Applied Micro Circuits Corp. (b) ................ 8,500 126,438 Novellus Systems, Inc. (b) ...................... 7,200 189,000 PMC Sierra, Inc. (b) ............................ 10,900 347,438 QLogic Corp. (b) ................................ 5,550 362,137 Sanmina Corp. (b) ............................... 7,200 202,500 Sipex Corp. (b) ................................. 21,550 546,831 ----------- 1,774,344 ----------- Financial Services -- 2.2% Healthcare Financial Partners, Inc. (b) ......... 9,700 407,400 ----------- Food -- Packaged & Miscellaneous -- 2.0% Hain Food Group, Inc. (b) ....................... 24,300 364,500 ----------- Health Care -- Biotechnology -- 3.4% MedImmune, Inc. (b) ............................. 4,900 317,275 Sepracor, Inc. (b) .............................. 4,700 309,025 ----------- 626,300 ----------- Health Care -- Services -- 7.3% MedQuist, Inc. (b) .............................. 17,100 540,787 Province Health Care, Inc. (b) .................. 8,700 296,344 Sunrise Assisted Living, Inc. (b) ............... 14,150 485,522 ----------- 1,322,653 ----------- Home Builders -- 4.1% D.R. Horton, Inc. ............................... 27,650 442,400 Lennar Corp. .................................... 13,800 307,912 ----------- 750,312 ----------- Insurance -- 1.6% Annuity and Life Re (Holdings) Ltd. (b) ......... 14,500 286,375 ----------- Oil & Gas Exploration -- 1.1% Stone Energy Corp. (b) .......................... 6,100 191,388 ----------- Restaurants -- 2.0% Papa John's International, Inc. (b) ............. 10,900 359,700 ----------- Retail -- Food -- 1.7% Whole Foods Market, Inc. (b) .................... 7,500 315,938 ----------- Retail -- General -- 2.5% 99 Cents Only Stores (b) ........................ 11,500 454,969 ----------- Retail -- Specialty -- 6.6% AnnTaylor Stores Corp. (b) ...................... 13,100 266,094 Linens 'n Things Inc. (b) ....................... 13,300 365,750 Pacific Sunwear of California (b) ............... 16,900 376,025 Restoration Hardware, Inc. (b) .................. 9,200 189,750 ----------- 1,197,619 ----------- Telecommunications -- 7.6% Exodus Communications, Inc. (b) ................. 10,400 253,500 IDT Corp. (b) ................................... 18,850 433,550 ITC DeltaCom, Inc. (b) .......................... 9,400 195,050 Metromedia Fiber Network, Inc. (b) .............. 8,400 275,100 WinStar Communications, Inc. (b) ................ 9,600 228,000 ----------- 1,385,200 ----------- TOTAL COMMON STOCKS (Identified Cost $18,071,748).................. 17,269,988 ----------- FACE AMOUNT - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 6.0% OF NET ASSETS Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $1,092,144 on 10/01/98 collateralized by $865,000 U.S. Treasury Bond, 7.500% due 11/15/16 with a value of $1,119,094 ................................... $1,092,000 $ 1,092,000 ----------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $1,092,000)................... 1,092,000 ----------- TOTAL INVESTMENTS -- 100.7% (IDENTIFIED COST $19,163,748) (c) ............. 18,361,988 Liabilities, Less Cash and Other Assets -- (0.7%) .......................... (130,798) ----------- NET ASSETS -- 100% .............................. $18,231,190 =========== (a) See Note 1. (b) Non-income producing security. (c) At September 30, 1998, the net unrealized depreciation on investments based on cost of $19,173,304 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 $1,312,037 and $2,123,353, respectively, resulting in net unrealized depreciation of $811,316. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES SMALL CAP VALUE FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 SHARES VALUE (a) - -------------------------------------------------------------------------------- COMMON STOCKS -- 88.1% OF NET ASSETS Advertising -- 0.3% R.H. Donnelley Corp. ............................ 73,600 $ 910,800 ------------ Aerospace/Defense -- 2.6% Alliant Techsystems, Inc. (b) ................... 63,200 4,187,000 Gencorp, Inc. ................................... 75,800 1,459,150 Newport News Shipbuilding, Inc. ................. 75,900 2,035,069 Nichols Research Corp. (b) ...................... 74,150 1,427,387 ------------ 9,108,606 ------------ Auto & Related -- 1.1% Dura Automotive Systems, Inc. (b) ............... 51,600 1,335,150 Intermet Corp. .................................. 152,600 1,936,112 Quaker State Corp. .............................. 50,600 736,863 ------------ 4,008,125 ------------ Banks/Savings & Loans -- 5.0% Bank United Corp. ............................... 87,300 3,126,431 City National Corp. ............................. 85,900 2,689,744 CNB Bancshares, Inc. ............................ 61,380 2,808,135 Commercial Federal Corp. ........................ 103,050 2,428,116 Cullen Frost Bankers, Inc. ...................... 48,200 2,325,650 Downey Financial Corp. .......................... 79,325 1,888,927 Imperial Bancorp (b) ............................ 89,000 1,346,125 Local Financial Corp. (b) ....................... 97,500 840,937 ------------ 17,454,065 ------------ Beverages -- 0.4% Whitman Corp. ................................... 90,800 1,447,125 ------------ Broadcasting -- 0.5% Hearst-Argyle Television, Inc. (b) .............. 49,700 1,658,738 ------------ Business Services -- 1.5% ACNielson Corp. (b) ............................. 97,100 2,160,475 Cort Business Services Corp. (b) ................ 57,900 1,523,494 Harte-Hanks, Inc. ............................... 69,600 1,557,300 ------------ 5,241,269 ------------ Chemicals -- Specialty -- 3.1% Cuno, Inc. (b) .................................. 125,000 2,093,750 Ferro Corp. ..................................... 112,200 2,229,975 Great Lakes Chemical Corp. ...................... 48,900 1,900,987 Scotts Co. (b) .................................. 54,600 1,672,125 Solutia, Inc. ................................... 135,200 3,050,450 ------------ 10,947,287 ------------ Commercial Services -- 1.3% Viad Corp. ...................................... 168,300 4,512,544 ------------ Communications Equipment -- 1.1% Comverse Technology, Inc. (b) ................... 45,700 1,867,988 Inter-Tel, Inc. ................................. 163,900 2,120,456 ------------ 3,988,444 ------------ Computer Hardware -- 2.2% Digi International, Inc. (b) .................... 169,200 2,072,700 Hutchinson Technology, Inc. (b) ................. 78,700 1,347,738 Micron Electronics, Inc. (b) .................... 125,400 2,194,500 SMART Modular Technologies, Inc. (b) ............ 101,700 2,091,206 ------------ 7,706,144 ------------ Computer Software & Services -- 4.0% American Management Systems, Inc. (b) ........... 49,200 1,346,850 DSP Group, Inc. (b) ............................. 88,200 1,300,950 Inprise Corp. (b) ............................... 229,400 1,419,413 Rational Software Corp. (b) ..................... 221,700 3,727,331 Sterling Software, Inc. (b) ..................... 59,100 1,628,944 Sybase, Inc. (b) ................................ 253,200 1,527,112 Sykes Enterprises, Inc. (b) ..................... 68,900 1,171,300 Symantec Corp. (b) .............................. 27,600 363,975 Wang Laboratories, Inc. (b) ..................... 86,000 1,666,250 ------------ 14,152,125 ------------ Data Processing Services -- 1.4% ChoicePoint, Inc. (b) ........................... 67,300 3,238,812 Information Resources, Inc. (b) ................. 136,200 1,787,625 ------------ 5,026,437 ------------ Electrical Equipment -- 1.1% Hadco Corp. (b) ................................. 79,700 1,932,725 Level One Communications, Inc. (b) .............. 104,600 2,105,075 ------------ 4,037,800 ------------ Electronics -- 3.3% Advanced Micro Devices, Inc. (b) ................ 121,900 2,262,769 Alpha Industries, Inc. (b) ...................... 116,800 1,328,600 ATMI, Inc. (b) .................................. 101,100 1,402,762 AVX Corp. ....................................... 112,000 1,666,000 Litton Industries, Inc. (b) ..................... 20,900 1,254,000 Novellus Systems, Inc. (b) ...................... 42,700 1,120,875 SDL, Inc. (b) ................................... 95,500 1,193,750 Vishay Intertechnology, Inc. (b) ................ 127,940 1,543,276 ------------ 11,772,032 ------------ Entertainment -- 0.5% Midway Games, Inc. (b) ........................ 156,100 1,824,419 ------------- Environmental Services -- 0.9% American States Water Co. ....................... 65,700 1,741,050 World Fuel Services Corp. ....................... 101,275 1,259,608 ------------ 3,000,658 ------------ Financial Services -- 1.6% Anthracite Mortgage Capital, Inc. ............... 214,000 1,819,000 DVI, Inc. (b) ................................... 141,300 2,075,344 UniCapital Corp. (b) ............................ 332,900 1,622,887 ------------ 5,517,231 ------------ Food -- Packaged & Miscellaneous -- 2.5% Dean Foods Co. .................................. 32,500 1,430,000 International Multifoods Corp. .................. 178,700 2,937,381 Michael Foods, Inc. ............................. 83,500 1,983,125 Vlasic Foods International, Inc. (b) ............ 128,300 2,397,606 ------------ 8,748,112 ------------ Health Care -- Drugs -- 1.6% Biovail Corp. International (b) ................. 73,000 1,966,438 Jones Pharma, Inc. .............................. 31,200 897,000 PathoGenesis Corp. (b) .......................... 79,700 2,659,987 ------------ 5,523,425 ------------ Health Care -- Medical Supplies -- 0.6% PSS World Medical, Inc. (b) ..................... 119,400 2,208,900 ------------ Health Care -- Medical Technology -- 3.8% ADAC Laboratories (b) ........................... 93,600 2,246,400 Allegiance Corp. ................................ 32,600 969,850 Conmed Corp. (b) ................................ 163,875 3,748,641 Dentsply International, Inc. .................... 150,100 3,358,487 EndoSonics Corp. (b) ............................ 208,100 988,475 Invacare Corp. .................................. 85,500 2,009,250 ------------ 13,321,103 ------------ Health Care -- Services -- 2.3% Alternative Living Services, Inc. (b) ........... 79,400 2,123,950 Capital Senior Living Communities L.P. (b) ...... 106,600 1,092,650 HCR Manor Care, Inc. (b) ........................ 77,900 2,283,444 Trigon Healthcare, Inc. (b) ..................... 80,900 2,507,900 ------------ 8,007,944 ------------ Home Builders -- 1.1% Champion Enterprises, Inc. (b) .................. 164,300 3,819,975 ------------ Home Products -- 1.6% Furniture Brands International, Inc. (b) ........ 110,800 2,160,600 Premark International, Inc. ..................... 128,000 3,592,000 ------------ 5,752,600 ------------ Housing & Building Materials -- 1.2% Giant Cement Holding, Inc. (b) .................. 76,600 1,603,813 Shaw Industries, Inc. ........................... 164,400 2,671,500 ------------ 4,275,313 ------------ Insurance -- 7.0% AmerUs Life Holdings, Inc. ...................... 120,400 2,641,275 Capital Reinsurance Corp. ....................... 123,400 3,378,075 Everest Reinsurance Holdings, Inc. .............. 114,000 4,253,625 Horace Mann Educators Corp. ..................... 97,900 2,937,000 Protective Life Corp. ........................... 112,700 4,057,200 Reinsurance Group of America .................... 68,200 4,019,538 Reliance Group Holdings, Inc. ................... 223,300 3,140,156 ------------ 24,426,869 ------------ Lodging & Hotel -- 0.5% MeriStar Hospitality Corp. (b) .................. 110,127 1,879,042 ------------ Manufacturing -- 4.0% A.O. Smith Corp. ................................ 104,400 2,048,850 Federal Signal Corp. ............................ 140,900 2,967,706 MascoTech, Inc. ................................. 151,700 2,730,600 Pentair, Inc. ................................... 71,700 2,312,325 Regal-Beloit Corp. .............................. 88,900 1,978,025 Trinity Industries, Inc. ........................ 67,700 2,196,019 ------------ 14,233,525 ------------ Metals -- 1.6% USEC, Inc. (b) .................................. 232,700 3,592,306 Worthington Industries, Inc. .................... 158,000 1,975,000 ------------ 5,567,306 ------------ Natural Gas -- 1.9% Eastern Enterprises ............................. 64,500 2,717,062 MCN Energy Group, Inc. .......................... 141,200 2,409,225 Public Service Company of North Carolina, Inc. .. 66,000 1,526,250 ------------ 6,652,537 ------------ Office Equipment -- 2.9% Bell & Howell Co. (b) ........................... 140,900 3,654,594 Daisytek International Corp. (b) ................ 59,600 1,341,000 HON Industries, Inc. ............................ 69,300 1,637,212 National Computer Systems, Inc. ................. 119,200 3,516,400 ------------ 10,149,206 ------------ Oil & Gas Drilling Equipment -- 1.0% Halter Marine Group, Inc. (b) ................... 106,300 1,209,163 Key Energy Group, Inc. (b) ...................... 108,700 1,012,269 National Oilwell, Inc. (b) ...................... 111,500 1,379,812 ------------ 3,601,244 ------------ Oil & Gas Exploration -- 2.2% Forcenergy, Inc. (b) ............................ 177,800 1,033,463 Newfield Exploration Co. (b) .................... 84,600 1,903,500 Plains Resources, Inc. (b) ...................... 84,000 1,417,500 Range Resources Corp. ........................... 164,900 1,164,606 Vintage Petroleum, Inc. ......................... 180,400 2,074,600 ------------ 7,593,669 ------------ Paper Products -- 0.7% Chesapeake Corp. ................................ 66,300 2,299,781 ------------ Personal Care -- 0.5% Dial Corp. ...................................... 81,900 1,689,188 ------------ Printing -- 1.2% Banta Corp. ..................................... 104,174 2,838,741 Cadmus Communications Corp. ..................... 79,300 1,546,350 ------------ 4,385,091 ------------ Real Estate Investment Trusts -- 4.9% Brandywine Realty Corp. ......................... 118,000 2,256,750 Capital Automotive .............................. 212,700 2,485,931 Capstone Capital Corp. .......................... 139,500 2,938,219 Imperial Credit Commercial Mortgage Investment Corp. .............................. 8,600 83,850 Koger Equity, Inc. .............................. 155,400 2,913,750 Liberty Property ................................ 118,900 2,831,306 Sun Communities, Inc. ........................... 105,700 3,547,556 ------------ 17,057,362 ------------ Refrigeration Systems -- 0.6% Hussmann International, Inc. .................... 155,400 2,204,738 ------------ Restaurants -- 0.8% Brinker International, Inc. (b) ................. 141,700 2,656,875 ------------ Retail -- Food -- 0.9% Hannaford Brothers Co. .......................... 73,700 3,113,825 ------------ Retail -- General -- 0.6% BJ's Wholesale Club, Inc. (b) ................... 54,300 1,995,525 ------------ Retail -- Specialty -- 3.2% Burlington Coat Factory Warehouse Corp. ......... 141,400 2,085,650 Claire's Stores, Inc. ........................... 116,900 2,104,200 Elder-Beerman Stores Corp. (b) .................. 76,800 1,334,400 Heilig-Meyers Co. ............................... 246,900 1,774,594 Jostens, Inc. ................................... 104,000 2,158,000 OfficeMax, Inc. (b) ............................. 96,700 948,869 Zale Corp. (b) .................................. 34,700 889,187 ------------ 11,294,900 ------------ Security Systems -- 0.8% Borg Warner Security Corp. (b) .................. 137,300 1,922,200 Sensormatic Electronics Corp. (b) ............... 160,000 940,000 ------------ 2,862,200 ------------ Telecommunications -- 1.4% Aliant Communications, Inc. ..................... 130,300 3,224,925 Comsat Corp. .................................... 45,800 1,614,450 ------------ 4,839,375 ------------ Textile & Apparel -- 0.5% Burlington Industries, Inc. (b) ................. 174,900 1,661,550 ------------ Utilities -- 4.3% BEC Energy ...................................... 116,000 5,053,250 Commonwealth Energy System ...................... 39,700 1,444,087 New Jersey Resources Corp. ...................... 5,300 188,813 Rochester Gas & Electric Corp. .................. 121,400 3,793,750 Washington Gas Light Co. ........................ 19,300 534,369 WPS Resources Corp. ............................. 116,700 4,172,025 ------------ 15,186,294 ------------ TOTAL COMMON STOCKS (Identified Cost $342,825,265)................. 309,321,323 ------------ WARRANTS -- 0.0% of Net Assets Entertainment -- 0.0% Iwerks Entertainment, Inc. (b) .................. 1,364 0 ------------ TOTAL WARRANTS (Identified Cost $0) .......................... 0 ------------ FACE AMOUNT - ------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 13.1% OF NET ASSETS Associates Corp. of North America, 5.600%, 10/01/98 ................................ $17,406,645 17,406,645 Chevron USA, Inc., 5.500%, 10/01/98 ............... 17,400,000 17,400,000 Exxon Asset Management Co., 5.500%, 10/01/98 ...... 11,400,000 11,400,000 ------------ TOTAL SHORT-TERM INVESTMENTS (Identified Cost $46,206,645).................. 46,206,645 ------------ TOTAL INVESTMENTS -- 101.2% (IDENTIFIED COST $389,031,910) (c) ............ 355,527,968 Liabilities, Less Cash and Other Assets -- (1.2%) .......................... (4,305,323) ------------ NET ASSETS -- 100% .............................. $351,222,645 ============ (a) See Note 1. (b) Non-income producing security. (c) At September 30, 1998, the net unrealized depreciation on investments based on cost of $389,108,880 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 $17,906,865 and $51,487,777, respectively, resulting in net unrealized depreciation of $33,580,912. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES STRATEGIC VALUE FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 SHARES VALUE (a) - ------------------------------------------------------------------------------- COMMON STOCKS -- 99.9% OF NET ASSETS Aerospace/Defense -- 5.2% Boeing Co. ...................................... 700 $ 24,019 Sundstrand Corp. ................................ 800 37,100 ---------- 61,119 ---------- Banks/Savings & Loans -- 3.1% Fleet Financial Group, Inc. ..................... 500 36,719 ---------- Broadcasting -- 4.5% CBS Corp. (b) ................................... 2,200 53,350 ---------- Chemicals -- Major -- 4.0% IMC Global, Inc. ................................ 1,100 21,312 Praxair, Inc. ................................... 800 26,150 ---------- 47,462 ---------- Chemicals -- Specialty -- 4.9% Crompton & Knowles Corp. ........................ 1,500 21,844 Solutia, Inc. ................................... 1,300 29,331 W.R. Grace & Co. (b) ............................ 500 6,219 ---------- 57,394 ---------- Commercial Services -- 4.1% Viad Corp. ...................................... 1,800 48,262 ---------- Communications Equipment -- 2.5% Loral Space & Communications Ltd. (b) ........... 2,000 29,500 ---------- Computer Hardware -- 14.5% 3Com Corp. (b) .................................. 800 24,050 EMC Corp. (b) ................................... 600 34,312 Gateway 2000, Inc. (b) .......................... 800 41,700 Hewlett-Packard Co. ............................. 500 26,469 Sun Microsystems, Inc. (b) ...................... 900 44,831 ---------- 171,362 ---------- Computer Software & Services -- 4.4% Unisys Corp. (b) ................................ 2,300 52,325 ---------- Electrical Equipment -- 2.1% Raychem Corp. ................................... 1,000 24,375 ---------- Electronics -- 6.4% Applied Materials, Inc. (b) ..................... 1,100 27,775 Texas Instruments, Inc. ......................... 900 47,475 ---------- 75,250 ---------- Forest Products -- 1.5% Georgia Pacific Corp. ........................... 400 18,250 ---------- Freight Transportation -- 8.5% Burlington Northern Santa Fe Corp. .............. 900 28,800 CNF Transportation, Inc. ........................ 1,000 29,125 FDX Corp. (b) ................................... 400 18,050 Ryder System, Inc. .............................. 1,000 24,875 ---------- 100,850 ---------- Gaming -- 1.4% Harrah's Entertainment, Inc. (b) ................ 1,200 15,975 ---------- Health Care -- Services -- 1.2% Healthsouth Corp. (b) ........................... 1,300 13,731 ---------- Housing & Building Materials -- 6.9% Black & Decker Corp. ............................ 1,000 41,625 Masco Corp. ..................................... 1,600 39,400 ---------- 81,025 ---------- Insurance -- 1.9% Travelers, Inc. ................................. 600 22,500 ---------- Manufacturing -- 2.7% AlliedSignal, Inc. .............................. 900 31,838 ---------- Metals -- 2.4% UCAR International, Inc. (b) .................... 800 14,400 USX-US Steel Group, Inc. ........................ 600 14,325 ---------- 28,725 ---------- Retail -- Food -- 5.5% Kroger Co. (b) .................................. 1,300 65,000 ---------- Retail -- General -- 2.8% Federated Department Stores, Inc. (b) ........... 900 32,738 ---------- Telecommunications -- 3.6% Ameritech Corp. ................................. 900 42,638 ---------- Textile & Apparel -- 2.6% Reebok International Ltd. (b) ................... 700 9,494 Warnaco Group, Inc. ............................. 900 20,812 ---------- 30,306 ---------- Waste Management -- 3.2% Waste Management, Inc. (b) ...................... 797 38,306 ---------- TOTAL COMMON STOCKS (Identified Cost $1,245,292) .................. 1,179,000 ---------- TOTAL INVESTMENTS -- 99.9% (IDENTIFIED COST $1,245,292) (c) .............. 1,179,000 Cash and Other Assets, Less Liabilities -- 0.1% ....................... 1,663 ---------- NET ASSETS -- 100% .............................. $1,180,663 ========== (a) See Note 1. (b) Non-income producing security. (c) At September 30, 1998, the net unrealized depreciation on investments based on cost of $1,245,292 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 $151,931 and $218,223, respectively, resulting in net unrealized depreciation of $66,292. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- LOOMIS SAYLES WORLDWIDE FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 FACE AMOUNT VALUE (A) - -------------------------------------------------------------------------------- BONDS AND NOTES -- 48.1% OF NET ASSETS Australia -- 2.4% Queensland Treasury, 8.000%, 9/14/07 ............. AUD 100,000 $ 70,282 South Australia Government Finance Authority, Zero Coupon Bond, 12/21/15 ........ 220,000 50,952 ---------- 121,234 ---------- New Zealand -- 1.7% Government of New Zealand, 8.000%, 11/15/06 ..................................... NZD 150,000 86,134 ---------- Philippines -- 2.9% FLI Capital Cayman, 3.750%, 2/01/02 (step to 6.250% on 8/01/99) (b)(c) ............ USD 150,000 90,750 MBIA, Inc., Zero Coupon Bond, 12/18/01 (b) ..... 100,000 54,750 ---------- 145,500 ---------- South Korea -- 1.0% Samsung Electronics Co. Ltd., Zero Coupon Bond, 12/31/07(b) ............................ 75,000 48,750 ---------- Thailand -- 3.4% Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 (b) 300,000 79,500 Loxley Public Co. Ltd., 2.500%, 4/04/01 (b) .... 450,000 90,000 ---------- 169,500 ---------- United States -- 36.7% AMF Bowling, Inc., Zero Coupon Bond, 5/12/18 144A (b)(e) .................................. 750,000 73,125 Apple Computer, Inc., 6.500%, 2/15/04 .......... 250,000 221,250 Arch Communications Group, Inc., Zero Coupon Bond, 3/15/08 (step to 10.875% on 3/15/01) (c) ................................. 300,000 142,500 Boston Chicken, Inc., 4.500%, 2/01/04 (b) ...... 125,000 8,750 Builders Transportation, Inc., 8.000%, 8/15/05 (b)(d) .............................. 95,000 119 Chesapeake Energy Corp., 7.875%, 3/15/04 ....... 100,000 84,000 CML Group, Inc., 5.500%, 1/15/03 (b) ........... 150,000 37,500 Dillon Read Structured Finance Corp., 6.660%, 8/15/10 .............................. 164,479 162,803 Dura Pharmaceuticals, Inc., 3.500%, 7/15/02 (b) .................................. 100,000 69,000 Envirotest Systems Corp., 9.625%, 4/01/03 ...... 50,000 49,313 Exide Corp., 2.900%, 12/15/05 144A (b)(e) ...... 125,000 62,031 Kent Electronics Corp., 4.500%, 9/01/04 (b) .... 50,000 34,500 Lam Research Corp., 5.000%, 9/01/02 (b) ........ 150,000 116,625 Loews Corp., 3.125%, 9/15/07 (b) ............... 125,000 99,375 Nextel Communications, Inc., Zero Coupon Bond, 9/15/07 (step to 10.650% on 9/15/02) (c) .... 200,000 126,000 Read Rite Corp., 6.500%, 9/01/04 (b) ........... 100,000 56,000 Shoney's, Inc., Zero Coupon Bond, 4/11/04 (b) .. 50,000 22,375 Thermedics, Inc., Zero Coupon Bond, 6/01/03 (b) 100,000 68,000 United States Treasury Bonds, 6.000%, 2/15/26 .. 350,000 391,562 ---------- 1,824,828 ---------- TOTAL BONDS AND NOTES (Identified Cost $2,956,526)................... 2,395,946 ---------- SHARES - -------------------------------------------------------------------------------- COMMON STOCKS -- 45.0% OF NET ASSETS Canada -- 0.6% Abacan Resources Corp. (New) (f) ............... 12,450 $ 2,724 Magna International, Inc. ...................... 450 26,156 ---------- 28,880 ---------- France -- 5.2% Guyenne et Gascogne SA ......................... 400 169,640 St. Gobain ..................................... 700 92,873 ---------- 262,513 ---------- Germany -- 4.0% Henkel KGAA .................................... 2,000 151,552 MAN AG ......................................... 230 46,963 ---------- 198,515 ---------- Italy -- 5.2% ENI Spa ........................................ 30,000 183,899 Ericsson Spa ................................... 2,100 73,651 ---------- 257,550 ---------- Netherlands -- 1.5% Koninklijke KPN NV ............................. 2,400 74,166 ---------- New Zealand -- 2.2% Air New Zealand Ltd., Class B .................. 138,000 109,205 ---------- Portugal -- 2.7% Portugal Telecom SA ............................ 3,750 136,541 ---------- Singapore -- 2.0% Keppel Corp. Ltd. .............................. 85,000 100,178 ---------- United Kingdom -- 3.1% Boots Co. Plc .................................. 9,000 154,893 ---------- United States -- 18.5% Amoco Corp. .................................... 600 32,325 Anadarko Petroleum Corp. ....................... 900 35,381 Analog Devices, Inc. (f) ....................... 900 14,456 BellSouth Corp. ................................ 400 30,100 Burlington Resources, Inc. ..................... 650 24,294 Circuit City Stores, Inc. ...................... 650 21,653 CVS Corp. ...................................... 800 35,050 Delta & Pine Land Co. .......................... 900 39,600 EMC Corp. (f) .................................. 700 40,031 Enron Corp. .................................... 600 31,688 International Business Machines Corp. .......... 350 44,800 Lockheed Martin Corp. .......................... 350 35,284 McDonald's Corp. ............................... 500 29,844 MCI WorldCom, Inc. (f) ......................... 700 34,213 Medtronic, Inc. ................................ 600 34,725 Meritor Automotive, Inc. ....................... 1 15 Raytheon Co. ................................... 700 37,756 Schering-Plough Corp. .......................... 350 36,247 Sprint Corp. ................................... 500 36,000 Staples, Inc. (f) .............................. 1,200 35,250 Star Banc Corp. ................................ 200 13,225 Sun Microsystems, Inc. (f) ..................... 700 34,869 The Learning Company, Inc. (f) ................. 7,105 140,768 Time Warner, Inc. .............................. 400 35,025 Wells Fargo & Co. .............................. 100 35,500 Xerox Corp. .................................... 400 33,900 ---------- 921,999 ---------- TOTAL COMMON STOCKS (Identified Cost $2,662,044) ................. 2,244,440 ---------- PREFERRED STOCKS -- 1.4% of Net Assets Japan -- 1.4% Sakura Finance, 0.750% ......................... 24,000,000 68,255 ---------- TOTAL PREFERRED STOCKS (Identified Cost $186,152) ................... 68,255 ---------- RIGHTS -- 0.0% of Net Assets Thailand -- 0.0% Industrial Finance Corp. of Thailand (f) ....... 25,000 0 ---------- TOTAL RIGHTS (Identified Cost $0) ......................... 0 ----------- FACE AMOUNT - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 4.3% OF NET ASSETS Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $213,028 on 10/01/98 collateralized by $170,000 U.S. Treasury Bond, 7.500% due 11/15/16 with a value of $219,938 ................................. USD 213,000 $ 213,000 ---------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $213,000)................... 213,000 ---------- TOTAL INVESTMENTS -- 98.8% (IDENTIFIED COST $6,017,722) (g) ............ 4,921,641 Cash and Other Assets, Less Liabilities -- 1.2% ..................... 58,689 ---------- NET ASSETS -- 100% ............................ $4,980,330 ========== (a) See Note 1. (b) Convertible Bond. (c) Step Bond: Coupon is zero or below market rate for an initial period and increases at a specified date and rate. (d) Security in default. (e) 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. (f) Non-income producing security. (g) At September 30, 1998, the net unrealized depreciation on investments based on cost of $6,020,520 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 $221,541 and $1,320,420, respectively, resulting in net unrealized depreciation of $1,098,879. Key to Abbreviations: AUD: Australian Dollar NZD: New Zealand Dollar USD: United States Dollar Ten Largest Sector Holdings at September 30, 1998 as a Percentage of Net Assets Retail 12.4% Telecommunications 12.0% Computers 10.8% Oil & Gas 7.9% U.S. Government 7.9% Electronics 6.4% Financial Services 5.7% Chemicals -- Specialty 3.0% Communications 2.9% Airlines 2.2% See accompanying notes to financial statements. [THIS PAGE INTENTIONALLY LEFT BLANK] - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES - ------------------------------------------------------------------------------- As of SEPTEMBER 30, 1998
CORE GROWTH INTERNATIONAL VALUE FUND FUND EQUITY FUND ----------- ----------- ----------- ASSETS Investments at value .............................. $70,672,020 $23,356,735 $67,162,019 Cash .............................................. 0 248 19 Foreign currency at value ......................... 0 0 2,079,526 Receivable for: Fund shares sold ................................ 3,175 635 1,818 Securities sold ................................. 28,031 1,925,448 0 Dividends and interest -- net ................... 96,337 7,398 158,607 Foreign tax reclaim ............................. 1,578 0 108,205 Due from the adviser (Note 3) ..................... 1,494 7,690 13,503 Other assets (Note 1I) ............................ 0 0 0 ----------- ----------- ----------- 70,802,635 25,298,154 69,523,697 ----------- ----------- ----------- LIABILITIES Payable for: Securities purchased ............................ 2,792,350 78,726 796,190 Fund shares redeemed ............................ 1,779 0 1,545 Foreign taxes ................................... 0 0 12,271 Payable to custodian bank ....................... 0 0 0 Accrued expenses: Management fees (Note 3) ........................ 26,192 10,442 43,965 Trustees' fees (Note 3A) ........................ 1,568 1,568 1,568 Administrative fees ............................. 2,958 1,191 3,141 Other ............................................. 35,039 26,407 50,962 ----------- ----------- ----------- 2,859,886 118,334 909,642 ----------- ----------- ----------- NET ASSETS .......................................... $67,942,749 $25,179,820 $68,614,055 =========== =========== =========== Net Assets consist of: Capital paid in ................................. $56,697,436 $19,776,260 $71,963,813 Undistributed (or Distribution in excess of) net investment income ..................... 733,745 0 886,633 Accumulated net realized gain (loss) ............ 6,994,601 5,279,345 1,226,222 Unrealized appreciation (depreciation) on: Investments ................................... 3,516,967 124,215 (5,471,966) Foreign currency translations ................. 0 0 9,353 ----------- ----------- ----------- NET ASSETS .......................................... $67,942,749 $25,179,820 $68,614,055 =========== =========== =========== INSTITUTIONAL CLASS: Net assets ........................................ $66,928,052 $24,663,468 $68,463,963 Shares of beneficial interest outstanding, no par value .................................... 3,972,427 2,117,647 6,374,303 Net asset value and redemption price per Institutional share ............................. $ 16.85 $ 11.65 $ 10.74 RETAIL CLASS: Net assets ........................................ $ 1,014,697 $ 516,352 $ 150,092 Shares of beneficial interest outstanding, no par value .................................... 60,435 44,561 14,032 Net asset value and redemption price per Retail share .................................... $ 16.79 $ 11.59 $ 10.70 ADMIN CLASS: Net assets ........................................ -- -- -- Shares of beneficial interest outstanding, no par value .................................... -- -- -- Net asset value and redemption price per Admin share ..................................... -- -- -- Identified cost of investments ...................... $67,155,053 $23,232,520 $72,633,985 =========== =========== ===========
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------
MID-CAP MID-CAP SMALL CAP SMALL CAP STRATEGIC GROWTH VALUE GROWTH VALUE VALUE WORLDWIDE FUND FUND FUND FUND FUND FUND - ----------- ----------- ----------- ------------ ----------- ----------- $ 2,070,865 $ 3,355,362 $18,361,988 $355,527,968 $ 1,179,000 $ 4,921,641 0 38,301 946 0 10,525 355 0 0 0 0 0 881 0 84 599 1,266,637 0 1,036 94,199 64,010 73,422 3,142,229 0 35,572 929 2,059 144 537,341 928 30,357 0 0 0 0 0 703 16,693 19,936 20,413 1,318 16,050 12,108 0 0 0 0 0 2,340 - ----------- ----------- ----------- ------------ ----------- ----------- 2,182,686 3,479,752 18,457,512 360,475,493 1,206,503 5,004,993 - ----------- ----------- ----------- ------------ ----------- ----------- 0 46,098 183,759 8,054,289 0 0 0 0 0 866,647 749 0 0 0 0 0 0 15 2,793 0 0 0 0 0 1,349 2,162 10,936 212,471 514 3,098 1,568 1,568 1,568 1,568 1,568 1,568 439 370 1,618 14,056 288 321 18,667 18,247 28,441 103,817 22,721 19,661 - ----------- ----------- ----------- ------------ ----------- ----------- 24,816 68,445 226,322 9,252,848 25,840 24,663 - ----------- ----------- ----------- ------------ ----------- ----------- $ 2,157,870 $ 3,411,307 $18,231,190 $351,222,645 $ 1,180,663 $ 4,980,330 =========== =========== =========== ============ =========== =========== $ 2,183,412 $ 3,689,834 $21,254,764 $392,341,481 $ 1,193,079 $ 5,748,253 0 8,185 0 2,737,523 2,949 176,258 77,626 94,328 (2,221,814) (10,352,417) 50,927 151,908 (103,168) (381,040) (801,760) (33,503,942) (66,292) (1,096,081) 0 0 0 0 0 (8) - ----------- ----------- ----------- ------------ ----------- ----------- $ 2,157,870 $ 3,411,307 $18,231,190 $351,222,645 $ 1,180,663 $ 4,980,330 =========== =========== =========== ============ =========== =========== $ 2,073,058 $ 3,290,670 $17,174,173 $296,116,455 $ 932,053 $ 4,907,426 197,199 326,117 1,747,539 18,976,230 89,041 558,157 $ 10.51 $ 10.09 $ 9.83 $ 15.60 $ 10.47 $ 8.79 $ 84,812 $ 120,637 $ 1,057,017 $ 54,060,471 $ 248,610 $ 72,904 8,083 11,980 107,906 3,471,189 23,799 8,320 $ 10.49 $ 10.07 $ 9.80 $ 15.57 $ 10.45 $ 8.76 -- -- -- $ 1,045,719 -- -- -- -- -- 67,276 -- -- -- -- -- $ 15.54 -- -- $ 2,174,033 $ 3,736,402 $19,163,748 $389,031,910 $ 1,245,292 $ 6,017,722 =========== =========== =========== ============ =========== ===========
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS - ------------------------------------------------------------------------------- For The Nine Months Ended September 30, 1998
CORE INTERNATIONAL VALUE GROWTH EQUITY FUND FUND FUND ----------- ----------- ----------- INVESTMENT INCOME Dividends* ........................................ $ 1,025,727 $ 97,554 $ 1,347,327 Interest .......................................... 116,996 24,027 153,722 ----------- ----------- ----------- 1,142,723 121,581 1,501,049 ----------- ----------- ----------- Expenses Management fees (Note 3) ........................ 264,693 114,917 451,871 12b-1 fees (Retail Class) ....................... 2,871 970 385 12b-1 fees (Admin Class) ........................ 0 0 0 Trustees' fees and expenses (Note 3A) ........... 4,249 4,249 4,249 Administrative fees ............................. 26,987 12,703 29,567 Custodian and accounting fees ................... 49,436 44,450 163,332 Transfer Agent fees (Institutional Class) ....... 17,493 15,995 15,186 Transfer Agent fees (Retail Class) .............. 13,781 13,732 13,655 Transfer Agent fees (Admin Class) ............... 0 0 0 Audit and tax services fees ..................... 14,883 14,883 15,482 Registration fees ............................... 26,342 17,205 16,984 Amortization of organization expenses (Note 1I): Institutional Class ........................... 0 0 0 Amortization of deferred registration costs (Note 1I): Institutional Class ........................... 0 0 0 Retail Class .................................. 652 481 488 Other expenses .................................. 15,412 9,129 16,560 ----------- ----------- ----------- Total expenses .................................. 436,799 248,714 727,759 Less expenses waived and reimbursed by the investment adviser (Note 3) ............... (12,673) (52,384) (124,877) ----------- ----------- ----------- Net expenses .................................... 424,126 196,330 602,882 ----------- ----------- ----------- Net investment income (loss) ...................... 718,597 (74,749) 898,167 ----------- ----------- ----------- NET REALIZED GAIN (LOSS) ON: Investments** ..................................... 6,348,814 4,122,682 1,091,528 Foreign currency transactions ..................... 0 0 (8,491) ----------- ----------- ----------- Total net realized gain (loss) .................... 6,348,814 4,122,682 1,083,037 ----------- ----------- ----------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments ....................................... (10,463,537) (6,052,994) (5,078,550) Foreign currency translations ..................... 0 0 10,487 ----------- ----------- ----------- Total net change in unrealized appreciation (depreciation) .................................. (10,463,537) (6,052,994) (5,068,063) ----------- ----------- ----------- Total net realized gain (loss) and change in unrealized appreciation (depreciation) ....... (4,114,723) (1,930,312) (3,985,026) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........................................ $(3,396,126) $(2,005,061) $(3,086,859) =========== =========== =========== * Net of foreign withholding taxes of $3,059, $194,590, $147, $288 and $5,778 for the Core Value, International Equity, Mid-Cap Value, Small Cap Value and Worldwide Funds, respectively. ** Net of capital gain withholding taxes of $2,830 for the International Equity Fund.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------
MID-CAP MID-CAP SMALL CAP SMALL CAP STRATEGIC GROWTH VALUE GROWTH VALUE VALUE WORLDWIDE FUND FUND FUND FUND FUND FUND - --------- --------- ----------- ------------ --------- --------- $ 5,372 $ 33,524 $ 9,171 $ 3,230,155 $ 7,515 $ 31,051 4,888 4,889 32,420 1,972,451 833 201,895 - --------- --------- ----------- ------------ --------- --------- 10,260 38,413 41,591 5,202,606 8,348 232,946 - --------- --------- ----------- ------------ --------- --------- 11,818 23,688 67,049 1,981,662 5,321 32,580 158 363 2,854 95,124 561 158 0 0 0 527 0 0 4,249 4,249 4,249 4,249 4,249 4,249 3,593 4,210 7,498 126,353 3,242 4,155 38,593 48,779 57,860 113,474 37,115 47,589 13,600 13,931 13,774 30,120 13,565 13,656 13,564 13,569 13,680 18,506 13,550 13,592 0 0 0 5,975 0 0 18,858 18,858 18,858 23,983 18,858 15,233 14,508 15,222 16,188 82,281 20,409 17,191 0 0 0 0 0 678 942 901 916 0 5,060 0 37 40 215 521 745 915 5,513 5,962 6,628 62,089 2,802 6,068 - --------- --------- ----------- ------------ --------- --------- 125,433 149,772 209,769 2,544,864 125,477 156,064 (109,517) (117,826) (117,517) (5,254) (114,273) (112,466) - --------- --------- ----------- ------------ --------- --------- 15,916 31,946 92,252 2,539,610 11,204 43,598 - --------- --------- ----------- ------------ --------- --------- (5,656) 6,467 (50,661) 2,662,996 (2,856) 189,348 - --------- --------- ----------- ------------ --------- --------- 21,939 109,933 (1,954,465) (13,552,131) 38,814 14,901 0 (2) 0 0 0 (4,850) - --------- --------- ----------- ------------ --------- --------- 21,939 109,931 (1,954,465) (13,552,131) 38,814 10,051 - --------- --------- ----------- ------------ --------- --------- (274,944) (649,069) (1,631,330) (60,244,726) (180,649) (818,492) 0 0 0 0 0 257 - --------- --------- ----------- ------------ --------- --------- (274,944) (649,069) (1,631,330) (60,244,726) (180,649) (818,235) - --------- --------- ----------- ------------ --------- --------- (253,005) (539,138) (3,585,795) (73,796,857) (141,835) (808,184) - --------- --------- ----------- ------------ --------- --------- $(258,661) $(532,671) $(3,636,456) $(71,133,861) $(144,691) $(618,836) ========= ========= =========== ============ ========= =========
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS - ------------------------------------------------------------------------------ For The Year Ended December 31, 1997
CORE INTERNATIONAL VALUE GROWTH EQUITY FUND FUND FUND ----------- ----------- ----------- INVESTMENT INCOME Dividends* ........................................ $ 925,872 $ 177,794 $ 1,710,007 Interest .......................................... 127,001 27,615 290,807 ----------- ----------- ----------- 1,052,873 205,409 2,000,814 ----------- ----------- ----------- Expenses Management fees (Note 3) ........................ 269,200 174,976 705,111 12b-1 fees (Retail Class) ....................... 1,450 627 499 Trustees' fees and expenses (Note 3A) ........... 5,816 5,816 5,816 Administrative fees (Note 3C) ................... 24,734 15,915 43,862 Custodian and accounting fees ................... 65,808 58,957 241,055 Transfer Agent fees (Institutional Class) ....... 27,392 27,014 30,244 Transfer Agent fees (Retail Class) .............. 18,873 18,618 18,446 Audit and tax services fees ..................... 23,121 23,121 26,121 Registration fees ............................... 25,983 24,366 25,752 Amortization of organization expenses (Note 1I): Institutional Class ........................... 0 0 0 Amortization of deferred registration costs (Note 1I): Institutional Class ........................... 0 0 0 Retail Class .................................. 11,237 11,242 11,402 Other expenses .................................. 10,307 12,088 12,349 ----------- ----------- ----------- Total expenses .................................. 483,921 372,740 1,120,657 Less expenses waived and reimbursed by the investment adviser (Note 3) ................... (29,404) (74,929) (178,102) ----------- ----------- ----------- Net expenses .................................... 454,517 297,811 942,555 ----------- ----------- ----------- Net investment income (loss) ...................... 598,356 (92,402) 1,058,259 ----------- ----------- ----------- NET REALIZED GAIN (LOSS) ON: Investments ....................................... 6,931,274 8,211,774 9,491,460 Foreign currency transactions ..................... 0 0 (248,780) ----------- ----------- ----------- Total net realized gain (loss) .................... 6,931,274 8,211,774 9,242,680 ----------- ----------- ----------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments ....................................... 5,392,568 (649,029) (10,489,664) Foreign currency translations ..................... 0 0 (799) ----------- ----------- ----------- Total net change in unrealized appreciation (depreciation) .................................. 5,392,568 (649,029) (10,490,463) ----------- ----------- ----------- Total net realized gain (loss) and change in unrealized appreciation (depreciation) .......... 12,323,842 7,562,745 (1,247,783) ----------- ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ........................................ $12,922,198 $ 7,470,343 $ (189,524) =========== =========== =========== * Net of foreign withholding taxes of $1,141, $199,346, $342, and $7,934 for the Core Value, International Equity, Small Cap Value and Worldwide Funds, respectively. ** Commencement of Fund operations on January 2, 1997.
See accompanying notes to financial statements - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------
MID-CAP MID-CAP SMALL CAP SMALL CAP STRATEGIC GROWTH VALUE GROWTH VALUE VALUE WORLDWIDE FUND** FUND** FUND** FUND FUND** FUND - ----------- ----------- ----------- ----------- ----------- ----------- $ 5,636 $ 32,648 $ 4,655 $ 2,508,627 $ 7,523 $ 88,870 4,266 10,588 6,550 1,546,170 528 273,029 - ----------- ----------- ----------- ----------- ----------- ----------- 9,902 43,236 11,205 4,054,797 8,051 361,899 - ----------- ----------- ----------- ----------- ----------- ----------- 11,993 18,691 24,894 1,581,667 4,385 55,489 159 203 1,441 31,541 410 33 5,540 5,540 5,540 5,816 5,540 5,816 825 1,268 1,716 96,314 466 3,545 50,140 58,469 68,040 122,758 47,100 58,079 19,358 19,901 19,759 58,327 17,775 18,168 18,054 18,126 18,410 20,935 16,490 16,511 10,175 10,175 14,175 27,621 14,175 21,091 17,462 17,576 17,780 52,210 19,073 22,666 0 0 0 0 0 958 24,084 24,355 21,110 0 16,896 2,597 998 765 3,820 12,170 3,060 10,992 8,466 8,420 8,454 33,138 8,045 6,465 - ----------- ----------- ----------- ----------- ----------- ----------- 167,254 183,489 205,139 2,042,497 153,415 222,410 (151,104) (158,363) (170,503) (12,741) (144,233) (148,392) - ----------- ----------- ----------- ----------- ----------- ----------- 16,150 25,126 34,636 2,029,756 9,182 74,018 - ----------- ----------- ----------- ----------- ----------- ----------- (6,248) 18,110 (23,431) 2,025,041 (1,131) 287,881 - ----------- ----------- ----------- ----------- ----------- ----------- 156,302 261,370 (38,055) 39,443,172 12,191 536,460 0 0 0 0 0 (3,851) - ----------- ----------- ----------- ----------- ----------- ----------- 156,302 261,370 (38,055) 39,443,172 12,191 532,609 - ----------- ----------- ----------- ----------- ----------- ----------- 171,776 268,029 829,570 4,289,783 114,357 (570,300) 0 0 0 0 0 (105) - ----------- ----------- ----------- ----------- ----------- ----------- 171,776 268,029 829,570 4,289,783 114,357 (570,405) - ----------- ----------- ----------- ----------- ----------- ----------- 328,078 529,399 791,515 43,732,955 126,548 (37,796) - ----------- ----------- ----------- ----------- ----------- ----------- $ 321,830 $ 547,509 $ 768,084 $45,757,996 $ 125,417 $ 250,085 =========== =========== =========== =========== =========== ===========
See accompanying notes to financial statements - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
CORE VALUE FUND --------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ----------- ----------- ----------- FROM OPERATIONS Net investment income (loss) ...................... $ 718,597 $ 598,356 $ 569,067 Net realized gain (loss) .......................... 6,348,814 6,931,274 4,564,278 Change in unrealized appreciation (depreciation) .. (10,463,537) 5,392,568 2,599,063 ----------- ----------- ----------- Increase (decrease) in net assets from operations .................................... (3,396,126) 12,922,198 7,732,408 ----------- ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ........................... 0 (590,731) (559,278) Net realized gain on investments ................ 0 (7,124,536) (4,547,630) RETAIL CLASS Net investment income ........................... 0 (10,346) 0 Net realized gain on investments ................ 0 (138,784) 0 ----------- ----------- ----------- 0 (7,864,397) (5,106,908) ----------- ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ................. 6,711,627 15,853,992 4,624,659 ----------- ----------- ----------- Total increase (decrease) in net assets ........... 3,315,501 20,911,793 7,250,159 NET ASSETS Beginning of the period ........................... 64,627,248 43,715,455 36,465,296 ----------- ----------- ----------- End of the period ................................. $67,942,749 $64,627,248 $43,715,455 =========== =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ................................. $ 733,745 $ 15,148 $ 17,869 =========== =========== ===========
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
GROWTH FUND --------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ----------- ----------- ----------- FROM OPERATIONS Net investment income (loss) ...................... $ (74,749) $ (92,402) $ (200,707) Net realized gain (loss) .......................... 4,122,682 8,211,774 10,636,248 Change in unrealized appreciation (depreciation) .. (6,052,994) (649,029) (2,736,567) ----------- ----------- ----------- Increase (decrease) in net assets from operations .................................... (2,005,061) 7,470,343 7,698,974 ----------- ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net realized gain on investments ................ 0 (7,950,061) (10,947,610) RETAIL CLASS Net realized gain on investments ................ 0 (47,193) 0 ----------- ----------- ----------- 0 (7,997,254) (10,947,610) ----------- ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ................. (5,158,661) (6,626,458) (2,265,225) ----------- ----------- ----------- Total increase (decrease) in net assets ........... (7,163,722) (7,153,369) (5,513,861) NET ASSETS Beginning of the period ........................... 32,343,542 39,496,911 45,010,772 ----------- ----------- ----------- End of the period ................................. $25,179,820 $32,343,542 $39,496,911 =========== =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ................................. $ 0 $ 0 $ 11,723 =========== =========== ===========
See accompanying notes to financial statements - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND --------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ----------- ----------- ----------- FROM OPERATIONS Net investment income (loss) ...................... $ 898,167 $ 1,058,259 $ 816,303 Net realized gain (loss) .......................... 1,083,037 9,242,680 5,009,554 Change in unrealized appreciation (depreciation) .. (5,068,063) (10,490,463) 8,432,203 ----------- ----------- ----------- Increase (decrease) in net assets from operations .................................... (3,086,859) (189,524) 14,258,060 ----------- ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ........................... 0 (834,647) (566,307) Net realized gain on investments ................ 0 (10,657,570) (3,500,683) RETAIL CLASS Net investment income ........................... 0 (2,582) 0 Net realized gain on investments ................ 0 (28,988) 0 ----------- ----------- ----------- 0 (11,523,787) (4,066,990) ----------- ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ................. (10,720,218) 3,472,008 983,155 ----------- ----------- ----------- Total increase (decrease) in net assets ........... (13,807,077) (8,241,303) 11,174,225 NET ASSETS Beginning of the period ........................... 82,421,132 90,662,435 79,488,210 ----------- ----------- ----------- End of the period ................................. $68,614,055 $82,421,132 $90,662,435 =========== =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ................................. $ 886,633 $ (213) $ 25,444 =========== =========== ===========
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
MID-CAP GROWTH FUND ------------------------------ NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1998 1997* ----------- ----------- FROM OPERATIONS Net investment income (loss) ................................. $ (5,656) $ (6,248) Net realized gain (loss) ..................................... 21,939 156,302 Change in unrealized appreciation (depreciation) ............. (274,944) 171,776 ----------- ----------- Increase (decrease) in net assets from operations .......... (258,661) 321,830 ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS In excess of net investment income ......................... 0 (18,310) Net realized gain on investments ........................... 0 (92,139) RETAIL CLASS In excess of net investment income ......................... 0 (571) Net realized gain on investments ........................... 0 (3,752) ----------- ----------- 0 (114,772) ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ......................................... 494,979 1,714,474 ----------- ----------- Total increase (decrease) in net assets ...................... 236,318 1,921,532 NET ASSETS Beginning of the period ...................................... 1,921,552 20 ----------- ----------- End of the period ............................................ $ 2,157,870 $ 1,921,552 =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ............................................ $ 0 $ 0 =========== =========== * Commencement of operations on January 2, 1997.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
MID-CAP VALUE FUND ------------------------------ NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1998 1997* ----------- ----------- FROM OPERATIONS Net investment income (loss) ................................. $ 6,467 $ 18,110 Net realized gain (loss) ..................................... 109,931 261,370 Change in unrealized appreciation (depreciation) ............. (649,069) 268,029 ----------- ----------- Increase (decrease) in net assets from operations .......... (532,671) 547,509 ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ...................................... 0 (17,197) In excess of net investment income ......................... 0 (23,118) Net realized gain on investments ........................... 0 (264,726) RETAIL CLASS Net investment income ...................................... 0 (913) In excess of net investment income ......................... 0 (620) Net realized gain on investments ........................... 0 (12,852) ----------- ----------- 0 (319,426) ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ......................................... 39,474 3,676,401 ----------- ----------- Total increase (decrease) in net assets ...................... (493,197) 3,904,484 NET ASSETS Beginning of the period ...................................... 3,904,504 20 ----------- ----------- End of the period ............................................ $ 3,411,307 $ 3,904,504 =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ............................................ $ 8,185 $ 854 =========== =========== * Commencement of operations on January 2, 1997.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
SMALL CAP GROWTH FUND ------------------------------ NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1998 1997* ----------- ----------- FROM OPERATIONS Net investment income (loss) ................................. $ (50,661) $ (23,431) Net realized gain (loss) ..................................... (1,954,465) (38,055) Change in unrealized appreciation (depreciation) ............. (1,631,330) 829,570 ----------- ----------- Increase (decrease) in net assets from operations .......... (3,636,456) 768,084 ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS In excess of net investment income ......................... 0 (1,797) In excess of net realized gain on investments .............. 0 (176,105) RETAIL CLASS In excess of net realized gain on investments .............. 0 (53,076) ----------- ----------- 0 (230,978) ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ......................................... 16,835,145 4,495,375 ----------- ----------- Total increase (decrease) in net assets ...................... 13,198,689 5,032,481 NET ASSETS Beginning of the period ...................................... 5,032,501 20 ----------- ----------- End of the period ............................................ $18,231,190 $ 5,032,501 =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ............................................ $ 0 $ 0 =========== ===========
* Commencement of operations on January 2, 1997. See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
SMALL CAP VALUE FUND --------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ----------- ----------- ----------- FROM OPERATIONS Net investment income (loss) ...................... $ 2,662,996 $ 2,025,041 $ 899,050 Net realized gain (loss) .......................... (13,552,131) 39,443,172 17,761,764 Change in unrealized appreciation (depreciation) .. (60,244,726) 4,289,783 12,441,612 ------------ ------------ ------------ Increase (decrease) in net assets from operations .................................... (71,133,861) 45,757,996 31,102,426 ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ........................... 0 (1,647,014) (847,132) Net realized gain on investments ................ 0 (34,182,555) (18,423,872) RETAIL CLASS Net investment income ........................... 0 (125,063) 0 Net realized gain on investments ................ 0 (4,383,758) 0 ------------ ------------ ------------ 0 (40,338,390) (19,271,004) ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ................. 142,826,216 110,485,816 61,338,511 ------------ ------------ ------------ Total increase (decrease) in net assets ........... 71,692,355 115,905,422 73,169,933 NET ASSETS Beginning of the period ........................... 279,530,290 163,624,868 90,454,935 ------------ ------------ ------------ End of the period ................................. $351,222,645 $279,530,290 $163,624,868 ============ ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period ................................. $ 2,737,523 $ 241,190 $ 67,474 ============ ============ ============
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
STRATEGIC VALUE FUND ------------------------------ NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1998 1997* ----------- ----------- FROM OPERATIONS Net investment income (loss) ................................. $ (2,856) $ (1,131) Net realized gain (loss) ..................................... 38,814 12,191 Change in unrealized appreciation (depreciation) ............. (180,649) 114,357 ----------- ----------- Increase (decrease) in net assets from operations .......... (144,691) 125,417 ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS In excess of net investment income ......................... 0 (14,759) RETAIL CLASS In excess of net investment income ......................... 0 (4,144) ----------- ----------- 0 (18,903) ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ......................................... 80,573 1,138,247 ----------- ----------- Total increase (decrease) in net assets ...................... (64,118) 1,244,761 NET ASSETS Beginning of the period ...................................... 1,244,781 20 ----------- ----------- End of the period ............................................ $ 1,180,663 $ 1,244,781 =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ............................................ $ 2,949 $ 0 =========== =========== * Commencement of operations on January 2, 1997.
See accompanying notes to financial statements. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
WORLDWIDE FUND --------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996* ----------- ----------- ----------- FROM OPERATIONS Net investment income (loss) ...................... $ 189,348 $ 287,881 $ 143,724 Net realized gain (loss) .......................... 10,051 532,609 (6,728) Change in unrealized appreciation (depreciation) .. (818,235) (570,405) 292,551 ----------- ----------- ----------- Increase (decrease) in net assets from operations .................................... (618,836) 250,085 429,547 ----------- ----------- ----------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ........................... 0 (284,030) (140,138) Net realized gain on investments ................ 0 (410,676) 0 RETAIL CLASS Net investment income ........................... 0 (811) 0 Net realized gain on investments ................ 0 (1,202) 0 ----------- ----------- ----------- 0 (696,719) (140,138) ----------- ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) Increase (decrease) in net assets derived from capital share transactions ................. (17,438) 873,745 4,900,074 ----------- ----------- ----------- Total increase (decrease) in net assets ........... (636,274) 427,111 5,189,483 NET ASSETS Beginning of the period ........................... 5,616,604 5,189,493 10 ----------- ----------- ----------- End of the period ................................. $ 4,980,330 $ 5,616,604 $ 5,189,493 =========== =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ................................. $ 176,258 $ (8,240) $ 12,271 =========== =========== =========== * Commencement of operations on May 1, 1996.
See accompanying notes to financial statements. [THIS PAGE INTENTIONALLY LEFT BLANK] - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Year Ended December 31,
CORE VALUE FUND ------------------------------- INSTITUTIONAL CLASS ------------------------------- 1998* 1997 ----------- ----------- Net asset value, beginning of period ........................... $ 17.64 $ 15.60 ----------- ----------- Income from investment operations -- Net investment income (loss) ................................. 0.18 0.18 Net realized and unrealized gain (loss) on investments ....... (0.97) 4.32 ----------- ----------- Total from investment operations ........................... (0.79) 4.50 ----------- ----------- Less distributions -- Dividends from net investment income ......................... 0.00 (0.19) Distributions from net realized capital gains ................ 0.00 (2.27) ----------- ----------- Total distributions ........................................ 0.00 (2.46) ----------- ----------- Net asset value, end of period ................................. $ 16.85 $ 17.64 =========== =========== Total return (%)(a)(b) ......................................... (4.5) 29.2 Net assets, end of period (000) ................................ $ 66,928 $ 63,303 Ratio of operating expenses to average net assets (%)(c)(d) .... 0.79 0.84 Ratio of net investment income to average net assets (%)(c) .... 1.36 1.12 Portfolio turnover rate (%)(a) ................................. 49 64 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .................. 0.79 0.84 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ........................................ $ 0.18 $ 0.18 * For the nine months ended September 30, 1998. ** From commencement of class operations on January 2, 1997. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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. (e) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------
Institutional Class Retail Class - ------------------------------------------------------------- ---------------------------- 1996 1995 1994 1993 1998* 1997** - ----------- ----------- ----------- ----------- ----------- ----------- $ 14.57 $ 11.80 $ 12.49 $ 11.53 $ 17.62 $ 15.60 - ----------- ----------- ----------- ----------- ----------- ----------- 0.22 0.23 0.15 0.13 0.15(e) 0.15(e) 2.83 3.93 (0.26) 1.24 (0.98) 4.30 - ----------- ----------- ----------- ----------- ----------- ----------- 3.05 4.16 (0.11) 1.37 (0.83) 4.45 - ----------- ----------- ----------- ----------- ----------- ----------- (0.22) (0.23) (0.15) (0.12) 0.00 (0.16) (1.80) (1.16) (0.43) (0.29) 0.00 (2.27) - ----------- ----------- ----------- ----------- ----------- ----------- (2.02) (1.39) (0.58) (0.41) 0.00 (2.43) - ----------- ----------- ----------- ----------- ----------- ----------- $ 15.60 $ 14.57 $ 11.80 $ 12.49 $ 16.79 $ 17.62 =========== =========== =========== =========== =========== =========== 21.2 35.2 (0.9) 11.9 (4.7) 28.9 $ 43,715 $ 36,465 $ 25,946 $ 20,657 $ 1,015 $ 1,324 1.13 1.20 1.33 1.50 1.10 1.10 1.44 1.61 1.28 1.23 1.07 0.84 58 60 48 53 49 64 1.13 1.20 1.33 1.56 2.20 6.17 $ 0.22 $ 0.23 $ 0.15 $ 0.12 $ 0.00(e) $ (0.73)(e)
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
GROWTH FUND ---------------------------- INSTITUTIONAL CLASS ---------------------------- 1998* 1997 ----------- ----------- Net asset value, beginning of period ........................... $ 12.63 $ 13.44 ----------- ----------- Income from investment operations -- Net investment income (loss) ................................. (0.03) (0.04) Net realized and unrealized gain (loss) on investments ....... (0.95) 3.17 ----------- ----------- Total from investment operations ........................... (0.98) 3.13 ----------- ----------- Less distributions -- Distributions from capital ................................... 0.00 0.00 Distributions from net realized capital gains ................ 0.00 (3.94) ----------- ----------- Total distributions ........................................ 0.00 (3.94) ----------- ----------- Net asset value, end of period ................................. $ 11.65 $ 12.63 =========== =========== Total return (%)(a)(b) ......................................... (7.8) 24.5 Net assets, end of period (000) ................................ $ 24,663 $ 32,149 Ratio of operating expenses to average net assets (%)(c)(d) .... 0.85 0.85 Ratio of net investment income to average net assets (%)(c) .... (0.32) (0.26) Portfolio turnover rate (%)(a) ................................. 118 116 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .................. 1.02 0.98 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ........................................ $ (0.05) $ (0.05) * For the nine months ended September 30, 1998. ** From commencement of class operations on January 2, 1997. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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.
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------
GROWTH FUND - ----------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS - ------------------------------------------------------------- ---------------------------- 1996 1995 1994 1993 1998* 1997** - ----------- ----------- ----------- ----------- ----------- ----------- $ 15.27 $ 12.50 $ 13.02 $ 12.46 $ 12.59 $ 13.44 - ----------- ----------- ----------- ----------- ----------- ----------- (0.07) 0.00 (0.02) 0.00 (0.03) (0.07) 3.08 3.86 (0.45) 1.16 (0.97) 3.16 - ----------- ----------- ----------- ----------- ----------- ----------- 3.01 3.86 (0.47) 1.16 (1.00) 3.09 - ----------- ----------- ----------- ----------- ----------- ----------- 0.00 0.00 (0.01) 0.00 0.00 0.00 (4.84) (1.09) (0.04) (0.60) 0.00 (3.94) - ----------- ----------- ----------- ----------- ----------- ----------- (4.84) (1.09) (0.05) (0.60) 0.00 (3.94) - ----------- ----------- ----------- ----------- ----------- ----------- $ 13.44 $ 15.27 $ 12.50 $ 13.02 $ 11.59 $ 12.59 =========== =========== =========== =========== =========== =========== 19.9 30.9 (3.7) 9.3 (7.9) 24.2 $ 39,497 $ 45,011 $ 36,580 $ 32,385 $ 516 $ 194 1.10 1.08 1.16 1.20 1.10 1.10 (0.47) (0.29) (0.14) (0.17) (0.58) (0.42) 99 48 46 64 118 116 1.10 1.08 1.16 1.20 4.74 12.96 $ (0.07) $ 0.00 $ (0.02) $ 0.00 $ (0.19) $ (2.00)
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
INTERNATIONAL EQUITY FUND ---------------------------- INSTITUTIONAL CLASS ---------------------------- 1998* 1997 ----------- ----------- Net asset value, beginning of period ........................... $ 11.30 $ 13.16 ----------- ----------- Income from investment operations -- Net investment income (loss) ................................. 0.14 0.15(e) Net realized and unrealized gain (loss) on investments ....... (0.70) (0.27) ----------- ----------- Total from investment operations ........................... (0.56) (0.12) ----------- ----------- Less distributions -- Dividends from net investment income ......................... 0.00 (0.19) Distributions from net realized capital gains ................ 0.00 (1.55) ----------- ----------- Total distributions ........................................ 0.00 (1.74) ----------- ----------- Net asset value, end of period ................................. $ 10.74 $ 11.30 =========== =========== Total return (%)(a)(b) ......................................... (5.0) (1.0) Net assets, end of period (000) ................................ $ 68,464 $ 82,188 Ratio of operating expenses to average net assets (%)(c)(d) .... 1.00 1.00 Ratio of net investment income to average net assets (%)(c) .... 1.49 1.12 Portfolio turnover rate (%)(a) ................................. 96 119 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .................. 1.18 1.16 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ........................................ $ 0.12 $ 0.13(e) * For the nine months ended September 30, 1998. ** From commencement of class operations on January 2, 1997. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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. (e) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND - ----------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS - ------------------------------------------------------------- ---------------------------- 1996 1995 1994 1993 1998* 1997** - ----------- ----------- ----------- ----------- ----------- ----------- $ 11.65 $ 11.61 $ 12.90 $ 9.64 $ 11.28 $ 13.16 - ----------- ----------- ----------- ----------- ----------- ----------- 0.12 0.14 0.15 0.11 0.10 0.10(e) 2.01 0.87 (0.38) 3.61 (0.68) (0.26) - ----------- ----------- ----------- ----------- ----------- ----------- 2.13 1.01 (0.23) 3.72 (0.58) (0.16) - ----------- ----------- ----------- ----------- ----------- ----------- (0.09) (0.14) (0.14) (0.10) 0.00 (0.17) (0.53) (0.83) (0.92) (0.36) 0.00 (1.55) - ----------- ----------- ----------- ----------- ----------- ----------- (0.62) (0.97) (1.06) (0.46) 0.00 (1.72) - ----------- ----------- ----------- ----------- ----------- ----------- $ 13.16 $ 11.65 $ 11.61 $ 12.90 $ 10.70 $ 11.28 =========== =========== =========== =========== =========== =========== 18.3 8.7 (1.8) 38.5 (5.1) (1.3) $ 90,662 $ 79,488 $ 73,189 $ 56,560 $ 150 $ 233 1.42 1.45 1.46 1.50 1.25 1.25 0.96 1.16 1.30 1.20 1.16 0.73 151 133 116 128 96 119 1.42 1.45 1.46 1.72 10.26 16.24 $ 0.12 $ 0.14 $ 0.15 $ 0.09 $ (0.67) $ (1.93)(e)
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
MID-CAP GROWTH FUND ----------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS ---------------------------- ---------------------------- 1998* 1997** 1998* 1997** ----------- ----------- ----------- ----------- Net asset value, beginning of period .................. $ 11.49 $ 10.00 $ 11.49 $ 10.00 ----------- ----------- ----------- ----------- Income from investment operations -- Net investment income (loss) ........................ (0.03) (0.03) (0.05) (0.06) Net realized and unrealized gain (loss) on investments ....................................... (0.95) 2.26 (0.95) 2.27 ----------- ----------- ----------- ----------- Total from investment operations .................. (0.98) 2.23 (1.00) 2.21 ----------- ----------- ----------- ----------- Less distributions -- Distributions in excess of net investment income .... 0.00 (0.12) 0.00 (0.10) Distributions from net realized capital gains ....... 0.00 (0.62) 0.00 (0.62) ----------- ----------- ----------- ----------- Total distributions ............................... 0.00 (0.74) 0.00 (0.72) ----------- ----------- ----------- ----------- Net asset value, end of period ........................ $ 10.51 $ 11.49 $ 10.49 $ 11.49 =========== =========== =========== =========== Total return (%)(a)(b) ................................ (8.5) 22.7 (8.7) 22.4 Net assets, end of period (000) ....................... $ 2,073 $ 1,848 $ 85 $ 74 Ratio of operating expenses to average net assets(%)(c)(d) ..................................... 1.00 1.00 1.25 1.25 Ratio of net investment income to average net assets (%)(c) ....................................... (0.35) (0.38) (0.60) (0.67) Portfolio turnover rate (%)(a) ........................ 82 174 82 174 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .................................... 7.13 9.35 27.97 36.58 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ................................................ $ (0.50) $ (0.60) $ (2.08) $ (3.29) * For the nine months ended September 30, 1998. ** Commencement of fund operations on January 2, 1997. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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.
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
MID-CAP VALUE FUND ----------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS ---------------------------- ---------------------------- 1998* 1997** 1998* 1997** ----------- ----------- ----------- ----------- Net asset value, beginning of period .................. $ 11.53 $ 10.00 $ 11.53 $ 10.00 ----------- ----------- ----------- ----------- Income from investment operations -- Net investment income (loss) ........................ 0.02 0.07 (0.01) 0.03 Net realized and unrealized gain (loss) on investments ....................................... (1.46) 2.54 (1.45) 2.55 ----------- ----------- ----------- ----------- Total from investment operations .................. (1.44) 2.61 (1.46) 2.58 ----------- ----------- ----------- ----------- Less distributions -- Dividends from net investment income ................ 0.00 (0.14) 0.00 (0.11) Distributions from net realized capital gains ....... 0.00 (0.94) 0.00 (0.94) ----------- ----------- ----------- ----------- Total distributions ............................... 0.00 (1.08) 0.00 (1.05) ----------- ----------- ----------- ----------- Net asset value, end of period ........................ $ 10.09 $ 11.53 $ 10.07 $ 11.53 =========== =========== =========== =========== Total return (%)(a)(b) ................................ (12.5) 26.3 (12.7) 26.0 Net assets, end of period (000) ....................... $ 3,291 $ 3,736 $ 121 $ 168 Ratio of operating expenses to average net assets (%)(c)(d) .................................... 1.00 1.00 1.25 1.25 Ratio of net investment income to average net assets (%)(c) ........................................ 0.22 0.74 (0.03) 0.42 Portfolio turnover rate (%)(a) ........................ 225 130 225 130 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .................................... 4.33 6.65 13.31 27.99 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ................................................ $ (0.29) $ (0.49) $ (2.40) $ (1.90) * For the nine months ended September 30, 1998. ** Commencement of fund operations on January 2, 1997. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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.
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
SMALL CAP GROWTH FUND ----------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS ---------------------------- ---------------------------- 1998* 1997** 1998* 1997** ----------- ----------- ----------- ----------- Net asset value, beginning of period .................. $ 11.32 $ 10.00 $ 11.30 $ 10.00 ----------- ----------- ----------- ----------- Income from investment operations -- Net investment income (loss) ........................ (0.02) (0.07)(e) (0.08) (0.10)(e) Net realized and unrealized gain (loss) on investments ....................................... (1.47) 1.99 (1.42) 1.99 ----------- ----------- ----------- ----------- Total from investment operations .................. (1.49) 1.92 (1.50) 1.89 ----------- ----------- ----------- ----------- Less distributions -- Distributions in excess of net investment income .... 0.00 (0.01) 0.00 0.00 Distributions in excess of net realized capital gains ............................................. 0.00 (0.59) 0.00 (0.59) ----------- ----------- ----------- ----------- Total distributions ............................... 0.00 (0.60) 0.00 (0.59) ----------- ----------- ----------- ----------- Net asset value, end of period ........................ $ 9.83 $ 11.32 $ 9.80 $ 11.30 =========== =========== =========== =========== Total return (%)(a)(b) ................................ (13.2) 19.4 (13.3) 19.2 Net assets, end of period (000) ....................... $ 17,174 $ 3,893 $ 1,057 $ 1,139 Ratio of operating expenses to average net assets (%)(c)(d) .... ............................... 1.00 1.00 1.25 1.25 Ratio of net investment income to average net assets (%)(c) ....................................... (0.53) (0.65) (0.80) (0.94) Portfolio turnover rate (%)(a) ........................ 116 211 116 211 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .................................... 2.15 5.81 3.70 7.82 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ................................................ $ (0.07) $ (0.56)(e) $ (0.34) $ (0.77(e) * For the nine months ended September 30, 1998. ** Commencement of fund operations on January 2, 1997. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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. (e) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
[THIS PAGE INTENTIONALLY LEFT BLANK] - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
SMALL CAP VALUE FUND ---------------------------- INSTITUTIONAL CLASS ---------------------------- 1998* 1997 ----------- ----------- Net asset value, beginning of period ........................... $ 18.62 $ 17.39 ----------- ----------- Income from investment operations -- Net investment income (loss) ................................. 0.12 0.17 Net realized and unrealized gain (loss) on investments ....... (3.14) 4.26 ----------- ----------- Total from investment operations ........................... (3.02) 4.43 ----------- ----------- Less distributions -- Dividends from net investment income ......................... 0.00 (0.15) Distributions from net realized capital gains ................ 0.00 (3.05) ----------- ----------- Total distributions ........................................ 0.00 (3.20) ----------- ----------- Net asset value, end of period ................................. $ 15.60 $ 18.62 =========== =========== Total return (%)(a)(b) ......................................... (16.2) 26.0 Net assets, end of period (000) ................................ $ 296,116 $ 245,177 Ratio of operating expenses to average net assets (%)(c)(d) .... 0.92 0.94 Ratio of net investment income to average net assets (%)(c) .... 1.04 0.97 Portfolio turnover rate (%)(a) ................................. 78 94 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .................. 0.92 0.94 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ............................. $ 0.12 $ 0.17 * For the nine months ended September 30, 1998. ** From commencement of class operations on January 2, 1997. *** From commencement of class operations on January 2, 1998. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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. (e) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
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SMALL CAP VALUE FUND - -------------------------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS ADMIN CLASS - ----------------------------------------------------------- ------------------------------ ---------- 1996 1995 1994 1993 1998* 1997** 1998*** - ----------- ---------- ---------- ---------- ---------- ---------- ---------- $ 15.33 $ 12.86 $ 14.13 $ 12.88 $ 18.62 $ 17.39 $ 18.62 - ----------- ---------- ---------- ---------- ---------- ---------- ---------- 0.11 0.04 (0.04) 0.00 0.10 0.15(e) 0.03 4.47 4.06 (1.12) 3.15 (3.15) 4.21 (3.11) - ----------- ---------- ---------- ---------- ---------- ---------- ---------- 4.58 4.10 (1.16) 3.15 (3.05) 4.36 (3.08) - ----------- ---------- ---------- ---------- ---------- ---------- ---------- (0.11) (0.04) 0.00 0.00 0.00 (0.08) 0.00 (2.41) (1.59) (0.11) (1.90) 0.00 (3.05) 0.00 - ----------- ---------- ---------- ---------- ---------- ---------- ---------- (2.52) (1.63) (0.11) (1.90) 0.00 (3.13) 0.00 - ----------- ---------- ---------- ---------- ---------- ---------- ---------- $ 17.39 $ 15.33 $ 12.86 $ 14.13 $ 15.57 $ 18.62 $ 15.54 =========== ========== ========== ========== ========== ========== ========== 30.4 32.1 (8.2) 24.7 (16.4) 25.6 (16.5) $ 163,625 $ 90,455 $ 73,126 $ 67,553 $ 54,060 $ 34,353 $ 1,046 1.19 1.25 1.27 1.35 1.19 1.25 1.50 0.80 0.29 (0.30) (0.38) 0.79 0.79 0.95 73 155 87 106 78 94 78 1.19 1.25 1.27 1.35 1.19 1.35 3.99 $ 0.11 $ 0.04 $ (0.04) $ 0.00 $ 0.10 $ 0.13(e) $ (0.05)
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
STRATEGIC VALUE FUND ------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS -------------------------- -------------------------- 1998* 1997** 1998* 1997** --------- ---------- --------- ---------- Net asset value, beginning of period .................. $ 11.76 $ 10.00 $ 11.76 $ 10.00 ----------- ----------- ----------- ----------- Income from investment operations -- Net investment income (loss) ........................ (0.02) (0.01)(e) (0.04) (0.06)(e) Net realized and unrealized gain (loss) on investments ....................................... (1.27) 1.98 (1.27) 2.00 ----------- ----------- ----------- ----------- Total from investment operations .................. (1.29) 1.97 (1.31) 1.94 ----------- ----------- ----------- ----------- Less distributions -- Distributions in excess of net investment income .... 0.00 (0.21) 0.00 (0.18) ----------- ----------- ----------- ----------- Net asset value, end of period ........................ $ 10.47 $ 11.76 $ 10.45 $ 11.76 =========== =========== =========== =========== Total return (%)(a)(b) ................................ (11.0) 19.7 (11.1) 19.4 Net assets, end of period (000) ....................... $ 932 $ 965 $ 249 $ 279 Ratio of operating expenses to average net assets (%)(c)(d) .................................... 1.00 1.00 1.25 1.25 Ratio of net investment income to average net assets (%)(c) ....................................... (0.22) (0.05) (0.47) (0.49) Portfolio turnover rate (%)(a) ........................ 31 34 31 34 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .............................. 10.81 16.55 15.46 21.33 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ........................................... $ (0.97) $ (1.76)(e) $ (1.38) $ (2.50)(e) * For the nine months ended ended September 30, 1998. ** Commencement of fund operations on January 2, 1997. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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. (e) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period.
- ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- [THIS PAGE INTENTIONALLY LEFT BLANK] - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31, WORLDWIDE FUND ------------- INSTITUTIONAL CLASS ------------- 1998* ------------ Net asset value, beginning of period ............................. $ 9.86 --------- Income from investment operations -- Net investment income (loss) ................................... 0.33 Net realized and unrealized gain (loss) on investments ......... (1.40) --------- Total from investment operations ............................. (1.07) --------- Less distributions -- Dividends from net investment income ........................... 0.00 Distributions from net realized capital gains .................. 0.00 --------- Total distributions .......................................... 0.00 --------- Net asset value, end of period ................................... $ 8.79 ========= Total return (%)(a)(b) ........................................... (10.9) Net assets, end of period (000) .................................. $ 4,907 Ratio of operating expenses to average net assets (%)(c)(d) ...... 1.00 Ratio of net investment income to average net assets (%)(c) ...... 4.37 Portfolio turnover rate (%)(a) ................................... 93 The ratios of expenses to average net assets without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements would have been (%)(c) .................... 3.28 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ............................... $ 0.16 * For the nine months ended September 30, 1998. ** Commencement of operations on May 1, 1996. *** Commencement of class operations on January 2, 1997. (a) Periods less than one year are not annualized. (b) Total returns would have been lower had the adviser not reduced its advisory fees and/or borne other operating expenses. (c) Annualized for periods less than one year. (d) 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. (e) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. - ------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - ------------------------------------------------------------------------------- WORLDWIDE FUND - ------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS - --------------------------- ---------------------------- 1997 1996** 1998* 1997*** - ----------- ----------- ----------- ----------- $ 10.63 $ 10.00 $ 9.86 $ 10.63 - ----------- ----------- ----------- ----------- 0.47 0.30 0.30(e) 0.38(e) (0.10) 0.63 (1.40) (0.03) - ----------- ----------- ----------- ----------- 0.37 0.93 (1.10) 0.35 - ----------- ----------- ----------- ----------- (0.47) (0.30) 0.00 (0.45) (0.67) 0.00 0.00 (0.67) - ----------- ----------- ----------- ----------- (1.14) (0.30) 0.00 (1.12) - ----------- ----------- ----------- ----------- $ 9.86 $ 10.63 $ 8.76 $ 9.86 =========== =========== =========== =========== 3.5 9.2 (11.2) 3.3 $ 5,597 $ 5,189 $ 73 $ 20 1.00 1.00 1.25 1.25 3.89 4.62 3.88 3.58 134 76 93 134 2.62 3.72 24.69 214.91 $ 0.27 $ 0.13 $ (1.49)(e) $ (23.33)(e) - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1998 1. Loomis Sayles Funds is comprised of seventeen no-load mutual funds (the "Funds"). Each Fund is a series of Loomis Sayles Funds (the "Trust"). The Trust is a diversified open-end management investment company organized as a Massachusetts business trust. The Trust is authorized to issue an unlimited number of full and fractional shares of beneficial interest in multiple series. Each Fund is separately managed and has its own investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the investment adviser of each Fund. The Trust includes the following Funds:
Fixed Income Funds Equity Funds - ------------------ ------------ Loomis Sayles Bond Fund Loomis Sayles Core Value Fund Loomis Sayles Global Bond Fund Loomis Sayles Growth Fund Loomis Sayles High Yield Fund Loomis Sayles International Equity Fund Loomis Sayles Intermediate Maturity Bond Fund Loomis Sayles Mid-Cap Growth Fund Loomis Sayles Investment Grade Bond Fund Loomis Sayles Mid-Cap Value Fund Loomis Sayles Municipal Bond Fund Loomis Sayles Small Cap Growth Fund Loomis Sayles Short-Term Bond Fund Loomis Sayles Small Cap Value Fund Loomis Sayles U.S. Government Securities Fund Loomis Sayles Strategic Value Fund Loomis Sayles Worldwide Fund
The Equity Funds offer Institutional and Retail Class shares. Each class has equal pro rata interest in the assets of the relevant fund and general voting privileges. Retail and Institutional Classes differ with respect to distribution and certain other class-specific expenses and expense reductions. Retail Class shares are subject to distribution fees at an annual rate of 0.25% of the relevant class' average net assets, pursuant to a distribution plan adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940. Retail Class shares have exclusive voting rights with respect to its distribution plan. On January 2, 1998, the Small Cap Value Fund commenced operations of an additional class of shares ("Admin Class"). Each class has equal pro rata interest in the assets of the relevant fund and general voting privileges. These shares are subject to distribution fees at an annual rate of 0.25% of the Fund's average net assets, pursuant to a distribution plan adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940, and to service and account maintenance fees at an annual rate of 0.25% of the Fund's average daily net assets attributable to the Admin Class. Admin Class shares have exclusive voting rights with respect to its distribution plan. The preparation of financial statements in accordance with generally accepted accounting principles 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. Effective September 30, 1998, the Board of Trustees approved a change in the fiscal year end of the Funds to September 30, 1998. Certain amounts in the Statements of Operations and Statements of Changes in Net Assets for prior periods have been reclassified to conform to current period presentations. The following summarizes the significant accounting policies of the Equity Funds: A. SECURITY VALUATION -- Equity securities for which quotations are readily available are valued at their last sale price on the exchange where primarily traded or, if there is no reported sale during the day, at the closing bid price. Long-term debt securities for which quotations are readily available are valued by a pricing service, 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. Short-term securities with a remaining maturity of 60 days or less are valued at amortized cost, which approximates market 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 Funds may engage in repurchase agreement transactions. Under the terms of a typical repurchase agreement, the Funds take possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Funds 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 Funds' holding period. The Funds, through their custodian, receive delivery of the underlying securities collateralizing repurchase agreements. It is the Funds' policy that the market value of the collateral be at least equal to 102% of the repurchase price. 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. 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 Funds may be delayed or limited. C. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS -- The books and records of each of the Funds (including those Funds that invest in foreign securities) are maintained in U.S. dollars. The value of securities, 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 the period. Purchases and sales of investment securities are translated at contractual currency exchange rates established at the time of the trade. 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 securities held. All such fluctuations are included with net realized and unrealized gain or loss from investments. Net realized and unrealized gains and losses on foreign currency transactions represent foreign exchange gains and losses from the sale of short-term securities and holdings of foreign currencies, foreign currency gains and losses between trade dates and settlement dates on investment securities transactions, sales and maturities of forward foreign currency exchange contracts, and the difference between the amounts of daily interest accruals on the books of the Funds and the amounts actually received resulting from changes in exchange rates on the payable date. Certain funds use foreign currency exchange contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency exchange contracts is determined using contractual currency exchange rates established at the time of each trade. The cost of foreign currency exchange contracts is included in the cost basis of the associated investment. Each Fund may purchase securities 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 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. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- Each Fund that may invest in foreign securities may enter into forward foreign currency exchange contracts to protect its securities against changes in future foreign exchange rates. A forward foreign currency exchange contract is an agreement between two parties to buy or sell currency at a set price on a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily using the forward currency exchange rate and the change in market value is recorded as unrealized appreciation (depreciation) on foreign currency translations in the Funds' Statements of Assets and Liabilities. Realized gain or loss is recognized when the contract is closed equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed and recorded as realized gain (loss) on foreign currency transactions in the Funds' Statements of Operations. Risks may arise upon entering into forward foreign currency exchange contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At September 30, 1998, there were no open forward foreign currency exchange contracts. E. 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 issues, 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 are determined on the identified cost basis. Most expenses of the Trust can be directly attributed to a particular fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets. Investment income, realized and unrealized gains and losses, and the common expenses of a fund are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the fund. Each class of shares differs in its respective distribution and certain other class specific fees and expense reductions. F. WHEN-ISSUED SECURITIES -- Each Fund may purchase securities on a when- issued basis. Securities purchased on a when-issued basis are purchased for delivery beyond the normal settlement period at a stated price and yield, and no income accrues to the Fund on such securities prior to delivery. Each Fund instructs the custodian to establish a segregated account in which it maintains liquid assets at least equal to the amount of its when-issued purchase commitments. Purchasing securities on a when-issued basis may involve a risk that the market price at the time of delivery may be lower than the agreed-upon purchase price, in which case there could be an unrealized loss at the time of delivery. At September 30, 1998, the Funds had no such commitments. G. FEDERAL INCOME TAXES -- Each Fund is 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 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. At September 30, 1998, the Small Cap Growth and Small Cap Value Funds had available capital loss carryforwards of $2,212,258 and $13,209,597, respectively, which will expire on September 30, 2006. These realized losses are intended to be used to offset future net capital gains. H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Each Fund pays its net investment income to shareholders annually. Distributions from net realized capital gains are declared and paid on an annual basis by all of the Funds. Income and capital gain distributions, if any, are determined in accordance with Federal income tax regulations which may differ from generally accepted accounting principles. 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 litigation proceeds, foreign currency transactions, non- deductible organization costs, deferred losses due to wash sales, excise tax regulations and net operating losses. Some of these classifications may include temporary book and tax basis differences that will reverse in subsequent periods. Dividends from net investment income are determined on a class level. Capital gains are determined on a Fund level. I. ORGANIZATION EXPENSE AND DEFERRED REGISTRATION COSTS -- Amortization of initial registration costs incurred in 1996 and 1997 related to commencement of new funds and/or classes were amortized over 12 months. Organization costs incurred by the Worldwide Fund are being amortized over 60 months. 2. PURCHASES AND SALES OF SECURITIES -- (excluding long-term U.S. Government securities and short-term investments) for each Fund for the nine months ended September 30, 1998 were as follows: Purchases Sales ----------- ------- Core Value Fund ............................ $ 40,228,557 $ 33,099,343 Growth Fund ................................ 34,788,420 40,390,495 International Equity Fund .................. 72,217,680 79,153,381 Mid-Cap Growth Fund ........................ 2,099,945 1,584,244 Mid-Cap Value Fund ......................... 9,257,548 8,871,087 Small Cap Growth Fund ...................... 28,970,821 12,903,127 Small Cap Value ............................ 375,417,733 236,709,441 Strategic Value Fund ....................... 671,830 401,695 Worldwide Fund ............................. 4,059,310 4,537,723 Purchases and sales of long-term U.S. Government securities occurred in the Worldwide Fund and totaled $864,563 and $542,977, respectively. 3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES -- For the nine months ended September 30, 1998, the Funds incurred management fees payable to Loomis Sayles. Certain officers and employees of Loomis Sayles are also officers or Trustees of the Trust. Loomis Sayles' general partner is indirectly owned by NVEST, L.P., a publicly-traded limited partnership whose general partner is indirectly owned by Metropolitan Life Insurance Company. Separate management agreements for each Fund in effect during the nine months ended September 30, 1998 provided for fees at the following annual percentage rate of each Fund's average daily net assets indicated below. Loomis Sayles voluntarily agreed, for an indefinite period, to reduce its advisory fees and/ or bear other expenses, to the extent necessary to limit the total operating expenses of each Fund to the following percentage rate of the Fund's average daily net assets: Maximum Expense Ratios ---------------------------------------------- Management Institutional Retail Admin Fund Fees Class Class Class ------ ---------- ------------- ------ ----- Core Value Fund ............... 0.50% 0.85% 1.10% -- Growth Fund ................... 0.50% 0.85% 1.10% -- International Equity Fund ..... 0.75% 1.00% 1.25% -- Mid-Cap Growth Fund ........... 0.75% 1.00% 1.25% -- Mid-Cap Value Fund ............ 0.75% 1.00% 1.25% -- Small Cap Growth Fund ......... 0.75% 1.00% 1.25% -- Small Cap Value Fund .......... 0.75% 1.00% 1.25% 1.50% Strategic Value Fund .......... 0.50% 1.00% 1.25% -- Worldwide Fund ................ 0.75% 1.00% 1.25% -- Loomis Sayles may change or terminate these voluntary agreements at any time, but the relevant prospectus would be supplemented at the time to describe the change. 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, NVEST 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. B. SHAREHOLDERS -- At September 30, 1998, the Loomis Sayles Funded Pension Plan and the Loomis Sayles & Company, Employees Profit Sharing Retirement Plan held shares of beneficial interest in the Funds as follows: Profit Pension Sharing Plan Plan -------- -------- Core Value Fund ................................. 372,470 489,622 Growth Fund ..................................... 136,863 704,478 International Equity Fund ....................... 1,002,404 410,405 Mid-Cap Growth Fund ............................. 0 161,611 Mid-Cap Value Fund .............................. 0 134,674 Small Cap Growth Fund ........................... 244,620 249,853 Small Cap Value Fund ............................ 159,082 889,161 Strategic Value Fund ............................ 0 70,697 Worldwide Fund .................................. 458,729 70,292 C. ADMINISTRATIVE FEES -- Through May 31, 1997, New England Funds, L.P. (a subsidiary of New England Investment Companies) performed certain administrative, accounting and other services for the Trust. The expenses of those services, which were paid by the Trust, include the following: (i) expenses for personnel performing bookeeping, accounting, internal auditing, financial reporting functions and clerical functions relating to the Funds, and (ii) expenses for services required in connection with preparation of registration statements and prospectuses, shareholder reports and reports and questionnaires for SEC compliance. For the period ended May 31, 1997, these expenses amounted to $33,003 for the nine Loomis Sayles Funds presented herein and are included in the financial statements as Administrative fees. Effective June 1, 1997, Loomis Sayles contracted with State Street Bank and Trust Company ("State Street") as Administrator to perform these services. 4. LINE OF CREDIT -- On March 5, 1998, the Trust entered into an agreement which enables each Fund to borrow under a $25 million unsecured line of credit. Borrowings will be made solely to temporarily finance the repurchase of capital shares. Interest is charged to each participating Fund based on its borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.07% 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 nine months ended September 30, 1998, the Funds had no borrowings under the agreement. 5. CAPITAL STOCK TRANSACTIONS -- The tables below summarize the transactions in Fund shares for the periods indicated:
Loomis Sayles Core Value Fund ---------------------------------------------------------------------------------- Nine Months Ended Year Ended Year Ended September 30, 1998 December 31, 1997 December 31, 1996 -------------------- -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ ------ ------ Issued from the sale of shares ............ 769,213 $ 13,780,828 921,281 $ 16,764,969 529,829 $ 8,135,687 Issued in connection with the reinvestment of distributions ........................ 0 0 411,076 7,179,304 317,340 4,975,617 Redeemed .. ............................... (386,005) (6,894,590) (544,799) (9,494,995) (548,491) (8,486,645) ------- ------------ ------- ------------- ------- ------------ Net change ................................ 383,208 $ 6,886,238 787,558 $ 14,449,278 298,678 $ 4,624,659 ======= ============ ======= ============= ======= ============
Retail Class Shares Shares Amount Shares* Amount* - ------------------- ------ ------ ------ ------ Issued from the sale of shares ............ 60,386 $ 1,150,106 107,737 $ 1,958,564 Issued in connection with the reinvestment of distributions ............ 0 0 8,390 145,675 Redeemed .................................. (75,106) (1,324,717) (40,972) (699,525) ------- ------------ ------- ------------- Net change ................................ (14,720) $ (174,611) 75,155 $ 1,404,714 ======= ============ ======= =============
*From January 2, 1997 (commencement of class operations).
Loomis Sayles Growth Fund ---------------------------------------------------------------------------------- Nine Months Ended Year Ended Year Ended September 30, 1998 December 31, 1997 December 31, 1996 -------------------- -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ ------ ------ Issued from the sale of shares ............ 102,992 $ 1,335,788 253,404 $ 3,601,402 544,697 $ 8,655,405 Issued in connection with the reinvestment of distributions ........................ 0 0 616,053 7,726,539 781,186 10,831,597 Redeemed .................................. (531,274) (6,847,399) (1,261,701) (18,196,471) (1,336,333) (21,752,227) ------- ------------ ---------- ------------- ---------- ----------- Net change ................................ (428,282) $ (5,511,611) (392,244) $ (6,868,530) (10,450) $(2,265,225) ======= ============ ========== ============= ========== ===========
Retail Class Shares Shares Amount Shares* Amount* - ------------------- ------ ------ ------ ------ Issued from the sale of shares ............ 31,559 $ 383,814 76,184 $ 1,122,980 Issued in connection with the reinvestment of distributions ........................ 0 0 3,662 45,392 Redeemed .................................. (2,408) (30,864) (64,436) (926,300) ------- ------------ ------- ------------- Net change 29,151 $ 352,950 15,410 $ 242,072 ======= ============ ======= =============
*From January 2, 1997 (commencement of class operations).
Loomis Sayles International Equity Fund ---------------------------------------------------------------------------------- Nine Months Ended Year Ended Year Ended September 30, 1998 December 31, 1997 December 31, 1996 -------------------- -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ ------ ------ Issued from the sale of shares ............ 445,459 $ 5,642,741 784,236 $ 10,550,546 960,299 $ 11,920,606 Issued in connection with the reinvestment of distributions ........................ 0 0 821,217 9,502,779 253,208 3,305,494 Redeemed .................................. 1,342,068) (16,284,413) (1,224,562) (16,864,605) (1,149,339) (14,242,945) --------- ------------ ---------- ------------- ---------- -------------- Net change ................................ (896,609) $(10,641,672) 380,891 $ 3,188,720 64,168 $ 983,155 ========= ============ ========== ============= ========== =============
Retail Class Shares Shares Amount Shares* Amount* - ------------------- ------ ------ ------ ------- Issued from the sale of shares ............ 20,073 $ 255,713 61,345 $ 821,531 Issued in connection with the reinvestment of distributions ........................ 0 0 2,712 31,215 Redeemed .................................. (26,716) (334,259) (43,382) (569,458) ------- ---------- ------- ---------- Net change ................................ (6,643) $ (78,546) 20,675 $ 283,288 ======= ========== ======= ==========
*From January 2, 1997 (commencement of class operations).
Loomis Sayles Mid-Cap Growth Fund --------------------------------------------------- Nine Months Ended Year Ended September 30, 1998 December 31, 1997* -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ Issued from the sale of shares ...................................... 48,843 $ 615,005 177,686 $ 1,840,192 Issued in connection with the reinvestment of distributions ......... 0 0 9,562 106,040 Redeemed ............................................................ (12,466) (140,005) (26,426) (302,973) ------- ---------- ------- ------------ Net change .......................................................... 36,377 $ 475,000 160,822 $ 1,643,259 ======= ========== ======= ============
Retail Class Shares Shares Amount Shares Amount - --------------------- ------ ------ ------ ------ Issued from the sale of shares ...................................... 1,681 $ 19,992 7,906 $ 88,646 Issued in connection with the reinvestment of distributions ......... 0 0 390 4,320 Redeemed ............................................................ (1) (13) (1,893) (21,751) ------ --------- ------ ----------- Net change .......................................................... 1,680 $ 19,979 6,403 $ 71,215 ====== ========= ====== ============
*From January 2, 1997 (commencement of operations).
Loomis Sayles Mid-Cap Value Fund --------------------------------------------------- Nine Months Ended Year Ended September 30, 1998 December 31, 1997* -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ Issued from the sale of shares ...................................... 58,746 $ 698,126 309,654 $ 3,352,605 Issued in connection with the reinvestment of distributions ......... 0 0 26,150 296,025 Redeemed ............................................................ (56,826) (637,787) (11,607) (141,399) ------- -------- ------- ------------ Net change .......................................................... 1,920 $ 60,339 324,197 $ 3,507,231 ======= ========= ======= ============
Retail Class Shares Shares Amount Shares Amount - --------------------- ------ ------ ------ ------ Issued from the sale of shares ...................................... 3,796 $ 44,800 13,686 $ 159,030 Issued in connection with the reinvestment of distributions ......... 0 0 902 10,219 Redeemed ............................................................ (6,398) (65,665) (6) (79) ------ ------- ------ ------------ Net change .......................................................... (2,602) (20,865) 14,582 $ 169,170 ====== ======= ====== ============
*From January 2, 1997 (commencement of operations).
Loomis Sayles Small Cap Growth Fund --------------------------------------------------- Nine Months Ended Year Ended September 30, 1998 December 31, 1997* -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ Issued from the sale of shares ...................................... 1,478,523 $ 17,606,892 365,308 $ 3,697,821 Issued in connection with the reinvestment of distributions ......... 0 0 16,122 174,112 Redeemed ............................................................ (74,994) (881,639) (37,420) (420,264) --------- ------------- ------- ------------ Net change .......................................................... 1,403,529 $ 16,725,253 344,010 $ 3,451,669 ========= ============= ======= ===========
Retail Class Shares Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ Issued from the sale of shares ...................................... 76,042 $ 875,103 108,337 $ 1,114,195 Issued in connection with the reinvestment of distributions ...................................... 0 0 4,792 51,662 Redeemed ............................................................ (68,953) (765,211) (12,312) (122,151) --------- ------------- ------- ----------- Net change .......................................................... 7,089 $ 109,892 100,817 $ 1,043,706 ========= ============= ======= ===========
*From January 2, 1997 (commencement of operations).
Loomis Sayles Small Cap Value Fund ---------------------------------------------------------------------------------- Nine Months Ended Year Ended Year Ended September 30, 1998 December 31, 1997 December 31, 1996 -------------------- -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ ------ ------ Issued from the sale of shares ........... 8,259,098 $ 155,967,344 3,738,215 $ 74,208,026 4,541,136 $ 79,316,546 Issued in connection with the reinvestment of distributions ........... 0 0 1,901,950 34,745,871 1,057,710 18,271,195 Redeemed ................................. (2,451,824) (44,789,595) (1,877,683) (35,245,314) (2,093,985) (36,249,230) ---------- -------------- ---------- ------------- ---------- ------------- Net change ............................... 5,807,274 $ 111,177,749 3,762,482 $ 73,708,583 3,504,861 $ 61,338,511 ========== ============== ========== ============= ========== =============
Retail Class Shares Shares Amount Shares* Amount* - --------------------- ------ ------ ------ ------ Issued from the sale of shares ........... 2,529,087 $ 46,864,876 1,876,793 $ 37,883,528 Issued in connection with the reinvestment of distributions ........... 0 0 225,201 4,104,426 Redeemed ................................. (903,029) (16,373,245) (256,863) (5,210,721) --------- ------------- --------- ------------- Net change 1,626,058 $ 30,491,631 1,845,131 $ 36,777,233 ========= ============= ========= =============
Admin Class Shares** Shares Amount - --------------------- ------ ------ Issued from the sale of shares ........... 94,376 $ 1,573,502 Issued in connection with the reinvestment of distributions ........... 0 0 Redeemed ................................. (27,100) (416,666) ------- ------------ Net change 67,276 $ 1,156,836 ======= ============
*From January 2, 1997 (commencement of class operations). **From January 2, 1998 (commencement of class operations).
Loomis Sayles Strategic Value Fund --------------------------------------------------- Nine Months Ended Year Ended September 30, 1998 December 31, 1997* -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ Issued from the sale of shares ...................................... 18,830 $ 216,976 83,725 $ 892,822 Issued in connection with the reinvestment of distributions ......... 0 0 1,198 13,783 Redeemed ............................................................ (11,888) (136,688) (2,824) (34,372) ------- --------- ------ ----------- Net change .......................................................... 6,942 $ 80,288 82,099 $ 872,233 ======= ========= ====== ===========
Retail Class Shares Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ Issued from the sale of shares ...................................... 481 $ 5,000 24,027 $ 269,111 Issued in connection with the reinvestment of distributions ......... 0 0 360 4,143 Redeemed ............................................................ (453) (4,715) (616) (7,240) ------- --------- ------ ----------- Net change .......................................................... 28 $ 285 23,771 $ 266,014 ======= ========= ====== ===========
*From January 2, 1997 (commencement of operations).
Loomis Sayles Worldwide Fund ---------------------------------------------------------------------------------- Nine Months Ended Year Ended Year Ended September 30, 1998 December 31, 1997 December 31, 1996** -------------------- -------------------- --------------------- Institutional Class Shares Shares Amount Shares Amount Shares Amount - -------------------------- ------ ------ ------ ------ ------ ------ Issued from the sale of shares ........... 3,586 $ 35,988 220,662 $ 2,356,777 475,045 $ 4,759,937 Issued in connection with the reinvestment of distributions ....................... 0 0 70,014 694,603 13,134 140,137 Redeemed ................................. (13,234) (124,115) (211,051) (2,199,192) 0 0 ------- --------- -------- ------------ ------- ------------ Net change ............................... (9,648) $ (88,127) 79,625 $ 852,188 488,179 $ 4,900,074 ======= ========= ======== ============ ======= ============
Retail Class Shares Shares Amount Shares* Amount* - -------------------------- ------ ------ ------ ------ Issued from the sale of shares ........... 25,009 $ 268,294 1,794 $ 19,549 Issued in connection with the reinvestment of distributions ....................... 0 0 204 2,008 Redeemed ................................. (18,687) (197,605) 0 0 ------- --------- ----- ------------ Net change ............................... 6,322 $ 70,689 1,998 $ 21,557 ======= ========= ===== ============
*From January 2, 1997 (commencement of class operations). **From May 1, 1996 (commencement of operations). - -------------------------------------------------------------------------------- LOOMIS SAYLES EQUITY FUNDS - -------------------------------------------------------------------------------- 1998 U.S. TAX AND DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED) FOREIGN TAX CREDITS -- The International Equity Fund has made an election under Internal Revenue Code Section 853 to pass through foreign taxes paid by the Fund to its shareholders. For the nine months ended September 30, 1998, the total amount of foreign taxes that will be passed through to shareholders and the foreign source income for information reporting purposes will be $194,051 (of the total $197,420 taxes withheld) and $1,556,313, respectively. REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Shareholders and Trustees of the Loomis Sayles Equity Funds: In our opinion, the accompanying statements of assets and liabilities, including the portfolio of investments owned, 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 Equity Funds (consisting of the Loomis Sayles Core Value Fund, Growth Fund, International Equity Fund, Mid-Cap Growth Fund, Mid-Cap Value Fund, Small Cap Growth Fund, Small Cap Value Fund, Strategic Value Fund, and Worldwide Fund) (collectively, the "Funds") at September 30, 1998, and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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 investments owned at September 30, 1998 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Boston, Massachusetts November 18, 1998 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] - -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- BOARD OF TRUSTEES - -------------------------------------------------------------------------------- Earl W. Foell Terry R. Lautenbach Daniel J. Fuss Michael T. Murray Richard S. Holway OFFICERS - -------------------------------------------------------------------------------- President Daniel J. Fuss Executive Vice President Treasurer Robert J. Blanding Mark W. Holland Vice Presidents Assistant Treasurers James L. Carroll Philip R. Murray Jerome A. Castellini Nicholas H. Palmerino Mary C. Champagne E. John deBeer Secretary Paul H. Drexler Sheila M. Barry William H. Eigen, Jr. Christopher R. Ely Assistant Secretary Quentin P. Faulkner Bonnie S. Thompson Philip C. Fine Kathleen C. Gaffney Isaac H. Green Dean A. Gulis Martha F. Hodgman John Hyll Jeffrey L. Meade Kent P. Newmark Scott S. Pape Jeffrey C. Petherick Lauren B. Pitalis Philip J. Schettewi David L. Smith Sandra P. Tichenor Jeffrey W. Wardlow Gregg D. Watkins Anthony J. Wilkins John F. Yeager III INVESTMENT ADVISER Loomis, Sayles & Company, L.P. One Financial Center Boston, Massachusetts 02111 TRANSFER AND DIVIDEND PAYING AGENT AND CUSTODIAN OF ASSETS State Street Bank and Trust Company Boston, Massachusetts 02102 SHAREHOLDER SERVICING AGENT FOR STATE STREET BANK AND TRUST COMPANY Boston Financial Data Services, Inc. P.O. Box 8314 Boston, Massachusetts 02266 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP One Post Office Square Boston, Massachusetts 02109 This report has been prepared for the shareholders of the Funds and is not authorized for distribution to prospective investors in the Funds unless it is accompanied or preceded by an effective prospectus. -----END PRIVACY-ENHANCED MESSAGE-----