-----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, SebXeVprok8C6qXKPf1PvC/iYDOJwHTv/of8TSktuI2/g/MXSyYDRRoQs4Lbwjfl oZaPjFSXAOTvaUFkyPeaJA== 0000950156-98-000706.txt : 19981126 0000950156-98-000706.hdr.sgml : 19981126 ACCESSION NUMBER: 0000950156-98-000706 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: 98759205 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 FIXED INCOME - 9/30/98 LOOMIS SAYLES FUNDS FIXED INCOME FUNDS o o o ANNUAL REPORT SEPTEMBER 30, 1998 o Bond Fund o Global Bond Fund o High Yield Fund o Intermediate Maturity Bond Fund o Investment Grade Bond Fund o Municipal Bond Fund o Short-Term Bond Fund o U.S. Government Securities 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.................................................. 24 Statements of Assets and Liabilities...................................... 60 Statements of Operations.................................................. 62 Statements of Changes in Net Assets....................................... 66 Financial Highlights...................................................... 74 Notes to Financial Statements............................................. 88 1998 U.S. Tax and Distribution Information................................ 99 Report of Independent Accountants......................................... 100 Board of Trustees and Officers............................................ 101 - ------------------------------------------------------------------------------ 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 that 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 with 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) - -------------------------------------------------------------------------------- GLOBAL HIGH BOND BOND YIELD - ------------------------------------------------------------------------------ Year to date Loomis Sayles -0.93 0.85 -15.57 Lipper 5.45 3.01 -2.98 Lipper Category Index 5.11 3.23 -3.12 One Year Loomis Sayles -0.41 -2.29 -17.96 Lipper 7.91 3.44 -1.77 Rank 88 of 92 126 of 148 229 of 233 Percentile 96 86 99 Lipper Category Index 7.84 3.47 -1.65 Three Years Loomis Sayles 9.44 8.55 N/A Lipper 8.25 6.55 Rank 4 of 62 27 of 114 Percentile 7 24 Lipper Category Index 8.15 7.22 Five Years Loomis Sayles 9.98 6.57 N/A Lipper 6.94 5.45 Rank 1 of 39 20 of 62 Percentile 1 33 Lipper Category Index 6.79 5.76 Modified Inception(3) Loomis Sayles 12.55 8.45 -2.18 Lipper 9.70 7.17 6.17 Rank 1 of 22 8 of 29 168 of 170 Percentile 1 28 99 Lipper Category Index 9.01 7.36 6.51 Actual Inception(4) Loomis Sayles 12.41 8.38 -1.51 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 returns shown reflect, 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) The 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 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 - ------------------------------------------------------------------------------ INTERMEDIATE INVESTMENT SHORT- MATURITY GRADE MUNICIPAL TERM U.S. GOV'T. BOND BOND BOND BOND SECURITIES - ------------------------------------------------------------------------------ 3.50 0.04 5.92 6.78 9.56 7.42 5.45 5.24 5.22 5.24 7.75 5.11 5.49 5.16 8.11 3.67 1.54 9.25 8.63 14.43 10.02 7.91 8.20 6.68 8.20 216 of 218 81 of 92 20 of 237 1 of 100 15 of 188 99 89 9 1 8 10.36 7.84 8.52 6.70 11.21 N/A N/A 7.99 7.06 9.64 7.52 6.22 7.52 46 of 194 6 of 79 7 of 152 24 8 5 7.79 6.38 7.88 N/A N/A 5.92 6.32 7.41 5.66 5.43 5.66 46 of 134 3 of 51 5 of 97 35 6 6 5.91 5.57 6.00 5.69 8.08 7.87 6.28 10.56 9.17 8.78 7.69 5.53 7.69 189 of 191 62 of 83 31 of 88 4 of 32 2 of 61 99 75 36 13 4 9.50 8.81 7.76 5.78 7.58 5.69 8.08 7.90 6.28 10.55 (3) Modified inception reflects the nearest Lipper reporting period following actual inception. Lipper performance is reported as of month end. (4) Actual Inception Dates: Bond Fund .......................................... May 16, 1991 Global Bond Fund ................................... May 10, 1991 High Yield Fund .............................. September 11, 1996 Intermediate Maturity Bond Fund ............... December 31, 1996 Investment Grade Bond Fund .................... December 31, 1996 Municipal Bond Fund ................................ May 29, 1991 Short-Term Bond Fund ............................. August 3, 1992 U.S. Government Securities Fund .................... May 21, 1991 - ------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - ------------------------------------------------------------------------------- LOOMIS SAYLES BOND FUND - ------------------------------------------------------------------------------- [Photo of Daniel J. Fuss] [Photo of Kathleen C. Gaffney] Daniel J. Fuss Kathleen C. Gaffney KEY FUND FACTS Objective: High total investment return Strategy: Invests in debt securities, although up to 20% of total assets may be in preferred stocks. Fund Inception Date: 5/16/91 Commencement of Operations of Class: Institutional - 5/16/91, Retail - 1/2/97, Admin. - 1/2/98 Expense Ratio: Institutional - 0.75%, Retail - 1.00%, Admin. - 1.25% Total Net Assets (all classes): $1,509.8 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional, Retail and Admin classes of the Loomis Sayles Bond Fund had total returns of -0.93%, - -1.06%, and -1.33%, respectively, as compared to the Fund's benchmark, the Lehman Brothers Government/Corporate Bond Index, total return of 9.33%. For the same period, the average BBB rated debt fund, as measured by Lipper Analytical Services, had a total return of 5.45%. PORTFOLIO REVIEW Over the past nine months, global economic turmoil heightened investor uncertainty and sparked a rally in Treasuries. The Fund's Treasury holdings were among the strongest performers, benefiting from the ongoing global "flight to quality" that began with the "Asian Contagion" and gained momentum with Russia announcing its inability to meet short-term debt obligations. Further complicating matters was Japan's inability to establish a credible plan to restore economic order and the subsequent relatively illiquid nature of the bond market. The rally in Treasuries caused all other market segments to lag considerably, particularly overseas. The Fund's lower rated issues and Yankee bonds (foreign issued, U.S. dollar denominated bonds) were especially hard hit. Cyclical and industrial positions performed well for most of the period, but retreated recently as investors sold out of bonds perceived to be exposed to the waning economic cycle. The Fund's significant position in Canadian government and provincial issues had a mildly positive impact on performance, despite being hampered by a weaker Canadian dollar. Our commitment to the telecommunications and cable/ media sectors proved beneficial as telecommunications providers continued to upgrade their network infrastructures to better accommodate both voice and data/internet traffic. PORTFOLIO POSITIONING We believe that the Fund remains well diversified across 279 issues and 19 countries. We continue to stress call protection, yield advantage, and a moderate degree of international exposure as a means of boosting total return. Although the Fund's performance has recently lagged significantly, we believe that the market has overreacted due to investor fears. We have used these events to opportunistically purchase bonds with strong fundamentals and significant yield advantage at a discount to the market. /s/ Daniel J. Fuss /s/ Kathleen C. Gaffney Daniel J. Fuss Kathleen C. Gaffney AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
YEAR SINCE TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a) - -------------------------------------------------------------------------------------------------------------------- Loomis Sayles Bond Fund (Institutional) -0.93 -0.41 9.44 9.98 12.41 Loomis Sayles Bond Fund (Retail) -1.06 -0.67 N/A N/A 6.25 Loomis Sayles Bond Fund (Admin) -1.33 N/A N/A N/A -1.33 Lipper BBB Rated Corporate Bond Fund Index(b) 5.11 7.84 8.15 6.79 9.01 Lehman Brothers Government/Corp. Bond Index(c) 9.33 12.84 8.92 7.21 9.06
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] LOOMIS LEHMAN As of 5/31/91 10.00 10.00 Period Ended 6/30/91 9.85 9.99 9/30/91 10.52 10.56 12/31/91 10.93 11.13 3/31/92 11.29 10.96 6/30/92 11.84 11.40 9/30/92 12.40 11.96 12/31/92 12.49 11.97 3/31/93 13.45 12.53 6/30/93 14.16 12.90 9/30/93 14.79 13.33 12/31/93 15.27 13.29 3/31/94 15.04 12.88 6/30/94 14.61 12.72 9/30/94 14.87 12.78 12/31/94 14.65 12.83 3/31/95 15.73 13.46 6/30/95 17.41 14.34 9/30/95 18.16 14.61 12/31/95 19.33 15.29 3/31/96 19.14 14.94 6/30/96 19.45 15.01 9/30/96 20.21 15.27 12/31/96 21.32 15.74 3/31/97 21.27 15.60 6/30/97 22.51 16.17 9/30/97 23.90 16.74 12/31/97 24.02 17.27 3/31/98 24.94 17.53 6/30/98 25.05 17.99 9/30/98 23.80 18.89 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 Lehman Brothers Government/Corporate Bond Index performance data is not available coincident with this date, comparative performance is presented from May 31, 1991. Inception date of the Retail and Admin Classes of shares are December 31, 1996 and January 2, 1998, respectively. (b): Source: Lipper Analytical Services. (c): Lehman Brothers Government/Corporate Bond Index is a composite of approximately 5,300 corporate and government issues with at least $100 million outstanding for government issues and $25 million for corporates, and greater than 1 year maturity. The index returns have not been lowered for ongoing management and operating expenses applicable to mutual fund investments. (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 GLOBAL BOND FUND - ------------------------------------------------------------------------------- [Photo of E. John deBeer] E. John deBeer KEY FUND FACTS Objective: High total investment return Strategy: Invests primarily in investment grade fixed income obligations (including convertibles) denominated in various currencies, including U.S. dollars or multicurrency units. Fund Inception Date: 5/10/91 Commencement of Operations of Class: Institutional - 5/10/91, Retail - 1/2/97 Expense Ratio: Institutional - 0.90%, Retail - 1.15% Total Net Assets (all classes): $36.2 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Global Bond Fund had total returns of 0.85% and 0.68%, respectively, as compared to the Fund's benchmark, the Salomon Brothers World Government Bond Index, total return of 11.35%. For the same period, the average global income fund, as measured by Lipper Analytical Services, had a total return of 3.01%. PORTFOLIO REVIEW Over the past nine months, the Fund's investment strategy has continued to follow the course set at the end of 1997. At the end of the year, the Fund's duration was fairly long at 6.5 years, which helped performance as bonds rallied throughout most of 1998. For the past nine months, we have maintained a 40% allocation in core Europe, which posted strong results when the markets began to favor the new euro. The Fund's weak year-to-date performance was driven primarily by its holdings in Japan (7.0% of portfolio on June 30), Australia/New Zealand (15.5% of portfolio on June 30) and Malaysia, South Korea, Thailand and the Philippines (13.7%). Over the past three months, we have continued to buy bonds in these areas that we believe were being indiscriminately sold. PORTFOLIO POSITIONING At the end of September, the Fund's duration was 5.89 years, longer than the market which has helped our performance but shorter than we had been at the beginning of the year given that yields are low. The European core currency commitment has been lowered to 40.1% of the portfolio, nearly neutral versus the benchmark, in recognition of the strength of the Deutsche mark. Japanese holdings comprised 5.6% of the portfolio, with Australia/New Zealand at 16.4%, and Malaysia, the Philippines, South Korea and Thailand at 13.1%. Although the Asian economies have declined far more than expected, we believe the values there appear to be excellent. We believe the Asian economies are fundamentally sound and have the potential to bounce back, so the Fund's commitment to Asia remains high. /s/ E. John deBeer E. John deBeer AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
YEAR SINCE TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a) - -------------------------------------------------------------------------------------------------------------------- Loomis Sayles Global Bond Fund (Institutional) 0.85 -2.29 8.55 6.57 8.38 Loomis Sayles Global Bond Fund (Retail) 0.68 -2.63 N/A N/A 1.55 Lipper General World Income Fund Index(b) 3.23 3.47 7.22 5.76 7.36 Salomon Brothers World Government Bond Index(c) 11.35 11.58 5.99 7.09 9.51
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] LOOMIS SB WORLD As of 5/31/91 10.00 10.00 Period Ended 6/30/91 9.56 9.90 9/30/91 10.53 10.71 12/31/91 11.69 11.56 3/31/92 11.11 11.17 6/30/92 12.04 11.92 9/30/92 11.85 12.66 12/31/92 11.79 12.20 3/31/93 12.36 12.85 6/30/93 12.39 13.22 9/30/93 13.19 13.95 12/31/93 13.51 13.82 3/31/94 13.01 13.82 6/30/94 12.19 13.91 9/30/94 12.16 14.07 12/31/94 12.33 14.14 3/31/95 11.97 15.69 6/30/95 13.12 16.52 9/30/95 14.18 16.35 12/31/95 15.28 16.83 3/31/96 15.40 16.52 6/30/96 16.15 16.58 9/30/96 16.79 17.04 12/31/96 17.57 17.44 3/31/97 17.49 16.72 6/30/97 18.20 17.23 9/30/97 18.56 17.45 12/31/97 17.98 17.48 3/31/98 18.51 17.62 6/30/98 18.31 17.97 9/30/98 18.13 19.47 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 Salomon Brothers World Government Bond 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): Salomon Brothers World Government Bond Index is a capitalization-weighted index which tracks the performance of 14 government bond markets. 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 HIGH YIELD FUND - ------------------------------------------------------------------------------- [Photo of Daniel J. Fuss] [Photo of Kathleen C. Gaffney] Daniel J. Fuss Kathleen C. Gaffney KEY FUND FACTS Objective: High total investment return Strategy: Invests in debt securities, although up to 20% of total assets may be in preferred stocks and up to 10% in common stocks. The Fund normally invests at least 65% of its assets in fixed income securities of below investment grade quality. Fund Inception Date: 9/11/96 Commencement of Operations of Class: Institutional - 9/11/96, Retail - 1/2/97 Expense Ratio: Institutional - 0.75%, Retail - 1.00% Total Net Assets (all classes): $10.6 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles High Yield Fund had total returns of -15.57%, and - -15.78%, respectively, as compared to the Fund's benchmark, the Merrill Lynch High Yield Master Index, total return of 0.77%. For the same period, the average high yield fund, as measured by Lipper Analytical Services, had a total return of -2.98%. PORTFOLIO REVIEW 1998 has been a challenging year for high yield investors. The lingering economic crisis in Asia and the inability of Russia to meet short-term debt obligations triggered a capital flight from high yield bonds that forced hedge fund managers to unwind their leveraged positions to meet margin calls. What resulted was a relatively illiquid high yield market, falling bond prices and the widest yield spreads between Treasuries and all other bonds since the recessionary period of the early 1990s. The Fund's 31.4% allocation to convertible bonds hurt performance as equity markets retreated to twelve-month lows. The liquidity crisis particularly affected our 37.9% exposure to Yankee bonds (foreign-issued U.S. dollar denominated securities) as foreign bond yields rose to their highest levels since the Mexican peso crisis in late 1994. Towards the end of September, the Federal Reserve Bank's lowering of interest rates and encouraging news from Brazil helped bring some stability to the bond markets. PORTFOLIO POSITIONING As of September 30, 1998, the Fund was diversified across 123 issues with a concentration in Yankee and industrial sectors such as telecommunications. The Fund currently has an average dollar price of less than $60, reflecting the embedded potential for capital appreciation as well as a commitment to call protection. Over time, we believe the Fund's incremental yield advantage and international diversification, which has been a source of volatility, will provide the potential for excellent yields and capital appreciation. /s/ Daniel J. Fuss /s/ Kathleen C. Gaffney Daniel J. Fuss Kathleen C. Gaffney AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
YEAR SINCE TO DATE 1 YEAR INCEPTION(a) - ------------------------------------------------------------------------------------------------------ Loomis Sayles High Yield Fund (Institutional) -15.57 -17.96 -1.51 Loomis Sayles High Yield Fund (Retail) -15.78 -18.18 -3.70 Lipper High Current Yield Fund Index(b) - 3.12 - 1.65 6.51 Merrill Lynch High Yield Master Index(c) 0.77 3.37 8.70
CUMULATIVE PERFORMANCE - SEPTEMBER 30, 1996 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] LOOMIS ML As of 9/30/96 10.00 10.00 Period Ended 12/31/96 10.17 10.39 3/31/97 10.15 10.50 6/30/97 10.76 11.00 9/30/97 11.66 11.43 12/31/97 11.33 11.73 3/31/98 12.08 12.05 6/30/98 11.51 12.25 9/30/98 09.57 11.82 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 September 11, 1996. Since Lipper and Merrill Lynch High Yield Master Index performance data is not available coincident with this date, comparative performance is presented from September 30, 1996. Inception date of the Retail Class of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): Merrill Lynch High Yield Master Index consists of fixed-rate, coupon-bearing bonds with an outstanding par which is greater than or equal to $50 million, a maturity range greater than or equal to one year and must be less than BBB/Baa3 rated but not in default. 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 INTERMEDIATE MATURITY BOND FUND - ------------------------------------------------------------------------------- [Photo of Anthony J. Wilkins] Anthony J. Wilkins KEY FUND FACTS Objective: High total investment return Strategy: Invests in investment grade debt securities, with a dollar-weighted average maturity between three and ten years. Fund Inception Date: 12/31/96 Commencement of Operations of Class: Institutional - 1/2/97, Retail - 1/2/97 Expense Ratio: Institutional - 0.55%, Retail - 0.80% Total Net Assets (all classes): $9.3 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Intermediate Maturity Bond Fund had total returns of 3.50%, and 3.37%, respectively, as compared to the Fund's benchmark, the Lehman Brothers Government/Corporate Intermediate Bond Index, total return of 8.12%. For the same period, the average intermediate investment grade debt fund, as measured by Lipper Analytical Services, had a total return of 7.42%. PORTFOLIO REVIEW Like other corporate-oriented bond funds, the Loomis Sayles Intermediate Maturity Bond Fund was negatively impacted by the dramatic difference between strong Treasury price gains and all other segments of the bond market as the year progressed. High quality bonds lagged Treasury returns considerably, and high yield and emerging market bonds experienced major price declines. This flight to quality was the dominant factor in determining relative performance for the Fund. While the Fund's holdings in U.S. Treasury and Canadian government bonds posted strong results, the effect was muted because of our underweighting in this sector. The Fund's small allocation to mortgage-backed securities also underperformed as rates declined and prepayments increased. (Mortgage-backed securities prices can decline when interest rates fall as borrowers refinance their loans. The mortgage holders are then forced to invest the principal at lower interest rates.) Our Yankee bonds (foreign issued, U.S. dollar denominated bonds) were also negatively affected during the past quarter as liquidity dramatically decreased in this sector when buyers fled and dealers backed away from the market. PORTFOLIO POSITIONING We believe that the Fund is well diversified and offers a strong yield advantage and call protection. In our opinion, the widening of yield spreads between Treasuries and all other bonds has created an appropriate opportunity to expand positions into corporate and Yankee bonds, where prices have fallen and yields are attractive versus Treasuries. We are also continuing to focus on credit specific research, weighing the opportunities to enhance investment returns against any incremental credit risk we take on. We believe our portfolio structure continues to offer value to long-term investors. /s/ Anthony J. Wilkins Anthony J. Wilkins AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
YEAR SINCE TO DATE 1 YEAR INCEPTION(a) - ---------------------------------------------------------------------------------------------------------- Loomis Sayles Intermediate Maturity Bond Fund (Institutional) 3.50 3.67 5.69 Loomis Sayles Intermediate Maturity Bond Fund (Retail) 3.37 3.52 5.51 Lipper Intermediate Investment Grade Bond Fund Index(b) 7.75 10.36 9.50 Lehman Brothers Gov't/Corp. Intermediate Bond Index(c) 8.12 10.43 9.19
CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] LOOMIS LEHMAN As of 12/31/96 10.00 10.00 Period Ended 3/31/97 9.99 9.99 6/30/97 10.34 10.28 9/30/97 10.63 10.56 12/31/97 10.64 10.79 3/31/98 10.92 10.95 6/30/98 11.03 11.16 9/30/98 11.02 11.66 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): Lehman Brothers Government/Corporate Intermediate Bond Index consists of those bonds held within the Lehman Brothers Government/Corporate Bond Index which have an average maturity of 1-10 years. The Lehman Brothers Government/Corporate Bond Index consists of approximately 5,300 corporate and government issues with at least $100 million outstanding for government issues and $25 million for corporates, and greater than 1 year maturity. The index returns have not been lowered for ongoing management and operating expenses applicable to mutual fund investments. (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 INVESTMENT GRADE BOND FUND - ------------------------------------------------------------------------------- [Photo of Daniel J. Fuss] Daniel J. Fuss KEY FUND FACTS Objective: High total investment return Strategy: Invests in investment grade debt securities, including convertibles, although up to 20% of assets may be in preferred stocks. Fund Inception Date: 12/31/96 Commencement of Operations of Class: Institutional - 1/2/97, Retail - 1/2/97 Expense Ratio: Institutional - 0.55%, Retail - 0.80% Total Net Assets (all classes): $4.5 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Investment Grade Bond Fund had total returns of 0.04%, and -0.19%, respectively, as compared to the Fund's benchmark, the Lehman Brothers Corporate/Government Bond Index, total return of 9.33%. For the same period, the average BBB rated debt fund, as measured by Lipper Analytical Services, had a total return of 5.45%. PORTFOLIO REVIEW For the first nine months of 1998, the Fund was negatively impacted by the exceptionally strong performance of Treasury bonds versus virtually all other segments of the bond market. The world economic crisis, losses by leveraged investors, including hedge funds and broker/dealers, and the subsequent dramatic lessening of liquidity in world markets resulted in a flight to quality as many investors rushed to purchase Treasury bonds. Corporate bonds, Yankee bonds (foreign issued, U.S. dollar denominated bonds) and lower quality debt all underperformed Treasuries. The Fund stayed true to its style, holding large positions in corporate bonds and modest positions in Yankee and non- dollar bonds. While this positioning helped the portfolio during the first half of the year, the drastic underperformance of nearly all sectors of the bond market versus Treasury bonds hurt performance, particularly during the third quarter. The strong performance of the Fund's top quality, liquid U.S. Treasury and Canadian government bonds was not enough to offset the returns from the portfolio's lower quality, higher yielding positions. PORTFOLIO POSITIONING The Fund continues to maintain its focus on corporate bonds with modest exposure to foreign issuers including Yankee bonds and non-dollar positions, primarily in Canada. We have not changed our positions dramatically as we view this as an opportunity to purchase corporate bonds with significantly higher yields than Treasury bonds, strong fundamentals and call protection. We continue to diligently analyze bonds for credit risk to avoid defaults. We believe that the Fund is well diversified by issues and exhibits very strong yield advantage, call protection and non market-related factors. /s/ Daniel J. Fuss Daniel J. Fuss AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
YEAR SINCE TO DATE 1 YEAR INCEPTION(a) - ---------------------------------------------------------------------------------------------------------- Loomis Sayles Investment Grade Bond Fund (Institutional) 0.04 1.54 8.08 Loomis Sayles Investment Grade Bond Fund (Retail) -0.19 1.29 7.83 Lipper BBB Rated Corporate Bond Fund Index(b) 5.11 7.84 8.81 Lehman Brothers Government/Corporate Bond Index(c) 9.33 12.84 10.98
CUMULATIVE PERFORMANCE - DECEMBER 31, 1996 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] LOOMIS LEHMAN As of 12/31/96 10.00 10.00 Period Ended 3/31/97 9.94 9.91 6/30/97 10.60 10.27 9/30/97 11.28 10.63 12/31/97 11.45 10.98 3/31/98 11.74 11.14 6/30/98 11.85 11.43 9/30/98 11.46 12.00 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): Lehman Brothers Government/Corporate Bond Index consists of approximately 5,300 corporate and government issues with at least $100 million outstanding for government issues and $25 million for corporates, and greater than 1 year maturity. The index returns have not been lowered for ongoing management and operating expenses applicable to mutual fund investments. (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 MUNICIPAL BOND FUND - ------------------------------------------------------------------------------- [Photo of Martha F. Hodgman] Martha F. Hodgman KEY FUND FACTS Objective: Current income Strategy: Invests in fixed income securities the income of which is exempt from federal income tax. Fund Inception Date: 5/29/91 Commencement of Operations of Class: Institutional - 5/29/91 Expense Ratio: Institutional - 0.60% Total Net Assets: $10.1 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Loomis Sayles Municipal Bond Fund had a total return of 5.92%, as compared to the Fund's benchmark, the Lehman Brothers Municipal Bond Index, total return of 5.84%. For the same period, the average municipal debt fund, as measured by Lipper Analytical Services, had a total return of 5.24%. PORTFOLIO REVIEW The Fund's positions in non-callable bonds issued in California posted the strongest returns this year. Non-callable issues generally perform well in a rally and, with the limited supply of California paper this year, demand remained strong. Swapping out of higher coupon issues, trading to short call dates and investing in lower coupon discount issues also added to the Fund's performance. PORTFOLIO POSITIONING We continue to seek undervalued securities and prefer long-term discount bonds and good call protection in order to avoid reinvestment risk. We also look for higher coupon, non-callable issues when they can be purchased at a reasonable price and relative value to provide call protected tax-exempt income. Currently, municipal bonds are a very attractive alternative since they have lagged the rally in Treasury securities due to investors' preference for liquidity. At the end of September, 10-year AAA municipals yielded only 4.03% and long-term bonds 4.82%. Yet, because of the large decline in Treasury yields, municipal yields reached new highs by comparison. The yield on municipals was 97% of the yield on Treasuries. This means that municipal investors were able to achieve yields almost as high as those on Treasuries while continuing to benefit from the tax-exempt status of municipal securities. Historically, these relationships have been closer to 75% on 10- year bonds and 85% on long-term issues. We anticipate that this relationship will ultimately return to more historical levels, although the timing is impossible to determine. Nevertheless, because municipal bonds also tend to be less volatile than their taxable counterparts, we believe that the current environment makes investing in tax-exempt municipal bond funds a very attractive alternative. /s/ Martha F. Hodgman Martha F. Hodgman AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
YEAR SINCE TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a) - -------------------------------------------------------------------------------------------------------------------- Loomis Sayles Municipal Bond Fund 5.92 9.25 7.99 5.92 7.90 Lipper General Municipal Bond Fund Index(b) 5.49 8.52 7.79 5.91 7.76 Lehman Brothers Municipal Bond Index(c) 5.84 8.71 7.92 6.39 8.03
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] LOOMIS LEHMAN As of 5/31/91 10.00 10.00 Period Ended 6/30/91 10.01 9.99 9/30/91 10.42 10.38 12/31/91 10.78 10.73 3/31/92 10.78 10.76 6/30/92 11.24 11.17 9/30/92 11.54 11.46 12/31/92 11.79 11.67 3/31/93 12.18 12.11 6/30/93 12.63 12.50 9/30/93 13.07 12.92 12/31/93 13.15 13.11 3/31/94 12.42 12.39 6/30/94 12.58 12.52 9/30/94 12.61 12.61 12/31/94 12.44 12.43 3/31/95 13.26 13.31 6/30/95 13.50 13.63 9/30/95 13.83 14.02 12/31/95 14.50 14.60 3/31/96 14.23 14.42 6/30/96 14.28 14.53 9/30/96 14.60 14.87 12/31/96 14.98 15.24 3/31/97 14.90 15.21 6/30/97 15.44 15.73 9/30/97 15.96 16.21 12/31/97 16.46 16.65 3/31/98 16.58 16.84 6/30/98 16.81 17.09 9/30/98 17.43 17.62 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 Loomis Sayles Municipal Bond Fund is May 29, 1991. Since Lipper and Lehman Brothers Municipal Bond Index performance data is not available coincident with this date, comparative performance is presented from May 31, 1991. (b): Source: Lipper Analytical Services. (c): Lehman Brothers Municipal Bond Index is computed from prices on approximately 21,000 bonds consisting of roughly 30% revenue bonds, 30% government obligations bonds, 27% insured and 13% prerefunded bonds. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments. - ------------------------------------------------------------------------------- FUND AND MANAGER REVIEW - ------------------------------------------------------------------------------- LOOMIS SAYLES SHORT-TERM BOND FUND - ------------------------------------------------------------------------------- [Photo of John Hyll] John Hyll KEY FUND FACTS Objective: High total investment return Strategy: Invest in debt securities (including convertibles), although up to 20% may be invested in non-convertible preferred stocks. Fund Inception Date: 8/3/92 Commencement of Operations of Class: Institutional - 8/3/92, Retail - 1/2/97 Expense Ratio: Institutional - 0.50%, Retail - 0.75% Total Net Assets (all classes): $28.1 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Institutional and Retail classes of the Loomis Sayles Short-Term Bond Fund had total returns of 6.78%, and 6.58%, respectively, as compared to the Fund's benchmark, the Lehman Brothers 1-3 Year Government/Corporate Bond Index, total return of 6.10%. For the same period, the average short investment grade debt fund, as measured by Lipper Analytical Services, had a total return of 5.22%. PORTFOLIO REVIEW Given the extreme rich values in the corporate sector late in 1997 and early 1998, the Fund began to purchase U.S. Treasury securities, and in particular, zero-coupon Treasuries with a greater sensitivity to changes in Treasury yields. The Fund also purchased high quality mortgage-backed issues. These purchases boosted returns as interest rates fell and investors rushed to purchase Treasuries, avoiding risky securities in a "flight to quality." The Fund was positioned extremely well with over 50% allocated to U.S. government and agency securities. In addition, approximately 58% of its securities were within the three-to-seven year maturity range, which experienced the most significant interest rate decline for the third quarter and the nine and 12 month periods ending September 30, 1998. Falling interest rates caused bond prices to rise, which resulted in excellent performance for this segment of the Fund. The negative effect of the widening yield spread on corporate bonds was more than offset by the Fund's high concentration of government securities and advantageous yield curve positioning. PORTFOLIO POSITIONING As of September 30, 1998, the Fund is positioned with approximately 46% in corporate bonds, 40% U.S. Treasuries, 11% mortgage-backed securities, 1.5% asset-backed securities and 1.5% cash. The average maturity is 2.94 years and the yield to maturity is 5.17%. We believe that the Fund continues to be positioned for an environment of moderate economic growth with low inflationary pressures. Continued emphasis will be placed on asset selection in order to enhance returns. The Fund will use the higher yielding sectors of the bond market both prudently and appropriately and only when opportunities and valuations are present within the overall context of strong domestic and international fundamentals. /s/ John Hyll John Hyll AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
YEAR SINCE TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a) - -------------------------------------------------------------------------------------------------------------------- Loomis Sayles Short-Term Bond Fund (Institutional) 6.78 8.63 7.06 6.32 6.28 Loomis Sayles Short-Term Bond Fund (Retail) 6.58 8.35 N/A N/A 7.73 Lipper Short Investment Grade Bond Fund Index(b) 5.16 6.70 6.38 5.57 5.78 Lehman Brothers 1-3 Year Government/Corp. Bond Index(c) 6.10 7.87 6.83 5.97 5.90
CUMULATIVE PERFORMANCE - AUGUST 31, 1992 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] Loomis Lehman As of 8/31/92 10.00 10.00 10/31/92 9.92 9.94 11/30/92 9.88 9.93 Period Ended 12/31/92 9.95 10.02 3/31/93 10.26 10.24 6/30/93 10.40 10.36 9/30/93 10.55 10.51 12/31/93 10.63 10.58 3/31/94 10.59 10.52 6/30/94 10.61 10.53 9/30/94 10.77 10.63 12/31/94 10.82 10.63 3/31/95 11.18 10.99 6/30/95 11.52 11.35 9/30/95 11.68 11.52 12/31/95 11.97 11.80 3/31/96 11.99 11.85 6/30/96 12.08 11.97 9/30/96 12.27 12.18 12/31/96 12.53 12.41 3/31/97 12.58 12.49 6/30/97 12.89 12.77 9/30/97 13.20 12.87 12/31/97 13.43 13.23 3/31/98 13.64 13.42 6/30/98 13.86 13.63 9/30/98 14.34 14.04 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 August 3, 1992. Since Lipper and Lehman Brothers 1-3 Year Government/Corporate Bond Index performance data is not available coincident with this date, comparative performance is presented from August 31, 1992. Inception date of the Retail Class of shares is December 31, 1996. (b): Source: Lipper Analytical Services. (c): Lehman Brothers 1-3 Year Government/Corporate Bond Index consists of fixed rate debt issues rated investment grade or higher. All issues have at least one year to three years to maturity and an outstanding par value of at least $100 million for U.S. government issues. 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 U.S. GOVERNMENT SECURITIES FUND - -------------------------------------------------------------------------------- [Photo of Kent P. Newmark Kent P. Newmark KEY FUND FACTS Objective: High total investment return Strategy: Invests in securities issued or guaranteed by the U.S. Government or its authorities, agencies or instrumentalities Fund Inception Date: 5/21/91 Commencement of Operations of Class: Institutional - 5/21/91 Expense Ratio: Institutional - 0.60% Total Net Assets: $29.2 MM PERFORMANCE SUMMARY For the nine months ended September 30, 1998, the Loomis Sayles U.S. Government Securities Fund had a total return of 9.56%, as compared to the Fund's benchmark, the Lehman Brothers Government Bond Index, total return of 9.94%. For the same period, the average U.S. government bond fund, as measured by Lipper Analytical Services, had a total return of 5.24%. PORTFOLIO REVIEW The Fund benefited from the sharp decline in interest rates in 1998 driven by a growing "flight to quality" rally. The yield on the long-term Treasury bond has fallen from 5.92% to 5.12%, which would have translated into a return of 14.44% for a hypothetical portfolio comprised entirely of 30-year U.S. government bonds. The Fund participated in this sharp decline in interest rates by maintaining its long duration bias. However, the Fund's GNMA position (31% of the portfolio) had a shortening effect as yields rose as prepayments of home mortgages accelerated. This moderated some of the Fund's gains. As long-term yields have declined to around 5.00%, we believe most of the decline in interest rates is behind us. Mortgage-backed securities have lagged Treasury bonds over the past 12 months, but the Fund has a 37% weighting in non-callable long-term Treasury bonds which have done exceptionally well. This ratio had been close to 50%, but duration was shortened in mid-September, and long-term Treasury bonds were replaced by shorter duration Tennessee Valley Authority bonds. PORTFOLIO POSITIONING The portfolio is currently positioned for fairly stable interest rates going forward. The Fund's holdings of bonds with call features, such as Federal Agencies and GNMAs, currently offer generous relative yields and will offset the aggressive characteristics of very long-term Treasury bonds. /s/ Kent P. Newmark Kent P. Newmark AVERAGE ANNUAL RETURNS (%) - PERIODS ENDED SEPTEMBER 30, 1998
YEAR SINCE TO DATE 1 YEAR 3 YEARS 5 YEARS INCEPTION(a) - -------------------------------------------------------------------------------------------------------------------- Loomis Sayles U.S. Government Securities Fund 9.56 14.43 9.64 7.41 10.55 Lipper General U.S. Gov't Bond Fund Index(b) 8.11 11.21 7.88 6.00 7.58 Lehman Brothers Government Bond Index(c) 9.94 13.59 8.99 7.13 8.90
CUMULATIVE PERFORMANCE - MAY 31, 1991 TO SEPTEMBER 30, 1998 [A line graph depicting the following plot points appears here.] LOOMIS LEHMAN As of 5/31/91 10.00 10.00 Period Ended 6/30/91 9.97 9.99 9/30/91 10.69 10.56 12/31/91 11.49 11.12 3/31/92 11.11 10.93 6/30/92 11.59 11.36 9/30/92 12.40 11.92 12/31/92 12.50 11.92 3/31/93 13.22 12.46 6/30/93 13.83 12.82 9/30/93 14.60 13.24 12/31/93 14.47 13.20 3/31/94 13.71 12.80 6/30/94 13.33 12.65 9/30/94 13.32 12.71 12/31/94 13.56 12.75 3/31/95 14.33 13.35 6/30/95 15.37 14.18 9/30/95 15.84 14.43 12/31/95 16.68 15.09 3/31/96 15.90 14.75 6/30/96 15.91 14.82 9/30/96 16.19 15.07 12/31/96 16.90 15.51 3/31/97 16.49 15.38 6/30/97 17.35 15.91 9/30/97 18.25 16.45 12/31/97 19.06 16.99 3/31/98 19.31 17.25 6/30/98 19.90 17.70 9/30/98 20.88 18.69 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 Loomis Sayles U.S. Government Securities Fund is May 21, 1991. Since Lipper and Lehman Brothers Government Bond Index performance data is not available coincident with this date, comparative performance is presented from May 31, 1991. (b): Source: Lipper Analytical Services. (c): Lehman Brothers Government Bond Index is composed of all publicly issued, nonconvertible, domestic debt of the U.S. government or any of its agencies, quasi- federal corporations, or corporate debt guaranteed by the U.S. government. The index returns have not been reduced for ongoing management and operating expenses applicable to mutual fund investments.
- ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES BOND FUND - ------------------------------------------------------------------------------------------------------ PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 FACE AMOUNT VALUE (a) - ------------------------------------------------------------------------------------------------------ BONDS AND NOTES -- 96.8% OF NET ASSETS NON-CONVERTIBLE BONDS -- 88.3% Airlines -- 0.1% NWA Trust, 9.360%, 3/10/06 ............................. USD 722,700 $ 831,654 ------------- Banks/Savings & Loans -- 0.5% First Union Institutional Trust, 7.850%, 1/01/27 ....... 2,000,000 2,138,540 First Union Institutional Trust, 8.040%, 12/01/26 ...... 5,000,000 5,502,955 ------------- 7,641,495 ------------- Broadcasting -- 0.6% CBS, Inc., 7.125%, 11/01/23 ............................ 1,435,000 1,356,161 Fox Family Worldwide, Inc., Zero Coupon Bond, 11/01/07 (step to 10.250% on 11/01/02) (b) ........... 13,250,000 8,215,000 -------------- 9,571,161 -------------- Building Materials -- 0.3% Owens Corning, 7.500%, 8/01/18 ......................... 4,500,000 4,413,510 -------------- Canadian -- 19.9% Canadian Government, Zero Coupon Bond, 6/01/21 ........... CAD 115,650,000 22,908,522 Canadian Government, Zero Coupon Bond, 6/01/22 ......... 11,050,000 2,085,640 Canadian Government, Zero Coupon Bond, 6/01/25 ......... 281,760,000 45,650,756 Clearnet Communications, Inc., Zero Coupon Bond, 8/13/07 (step to 11.750% on 8/13/02) (b) ............. 40,000,000 14,166,257 Clearnet Communications, Inc., Zero Coupon Bond, 5/15/08 (step to 10.400% on 5/15/03) (b) ............. 4,160,000 1,309,592 Hydro Quebec, Zero Coupon Bond, 8/15/20 ................ 35,000,000 5,867,191 International Semi-Tech Corp., Zero Coupon Bond, 8/15/03 (step to 11.500% on 8/15/00) (b) ............. USD 18,275,000 3,106,750 MetroNet Communications Corp., Zero Coupon Bond, 6/15/08 (step to 9.950% on 6/15/03) (b) .............. 1,500,000 825,000 Microcell Telecommunications, Inc., Zero Coupon Bond, 10/15/07 (step to 11.125% on 10/15/02) (b) ..... CAD 5,000,000 1,770,782 Milit-Air, Inc., 5.750%, 6/30/19 144A (c) .............. 6,950,000 4,631,510 New Brunswick FM Project, Zero Coupon Bond, 11/30/27 (step to 6.470% on 5/30/03) 144A (b) (c) ............. 10,000,000 4,977,209 Province of Alberta, 5.930%, 9/16/16 ................... 27,580,600 19,192,009 Province of British Columbia, Zero Coupon Bond, 8/23/13 33,000,000 9,172,258 Province of British Columbia, Zero Coupon Bond, 6/09/14 10,000,000 2,652,238 Province of British Columbia, Zero Coupon Bond, 9/05/20 54,528,000 9,959,697 Province of British Columbia, Zero Coupon Bond, 6/09/22 96,208,000 15,862,725 Province of British Columbia, Zero Coupon Bond, 8/19/22 25,037,000 4,082,111 Province of British Columbia, Zero Coupon Bond, 9/08/23 37,950,000 5,816,636 Province of British Columbia, Zero Coupon Bond, 8/23/24 CAD 122,250,000 17,727,153 Province of British Columbia, Zero Coupon Bond, 11/19/27 41,600,000 4,992,818 Province of British Columbia, 7.875%, 11/30/23 ......... 1,250,000 1,004,775 Province of British Columbia, 8.000%, 9/08/23 .......... 7,000,000 5,841,207 Province of Manitoba, Zero Coupon Bond, 7/22/13 ........ 2,500,000 712,084 Province of Manitoba, Zero Coupon Bond, 3/05/31 ........ 36,929,000 3,741,945 Province of Manitoba, 6.500%, 9/22/17 .................. 34,300,000 24,475,095 Province of Manitoba, 7.750%, 12/22/25 ................. 39,245,000 32,978,412 Province of Newfoundland, 6.150%, 4/17/28 .............. 2,500,000 1,656,009 Province of Ontario, Zero Coupon Bond, 7/13/22 ......... 13,000,000 2,147,270 Province of Ontario, Zero Coupon Bond, 6/02/27 ......... 96,525,000 12,078,049 Province of Saskatchewan, Zero Coupon Bond, 4/10/14 .... 19,000,000 5,205,857 Province of Saskatchewan, 8.750%, 5/30/25 .............. 11,735,000 10,686,373 Province of Saskatchewan (Certificate of Deposit), Zero Coupon Bond, 2/04/22 ............................ 2,350,000 401,646 Province of Saskatchewan (Certificate of Deposit), Zero Coupon Bond, 5/30/25 ............................ 25,055,000 3,537,853 ------------- 301,223,429 ------------- Communications -- 0.9% Arch Communications Group, Inc., Zero Coupon Bond, 3/15/08 (step to 10.875% on 3/15/01) (b) ............. USD 17,435,000 8,281,625 Century Communications Corp., 8.375%, 11/15/17 ......... 5,000,000 4,750,000 ------------- 13,031,625 ------------- Computers -- 1.6% Apple Computer, Inc., 6.500%, 2/15/04 .................. 5,665,000 5,013,525 Seagate Technology, Inc., 7.370%, 3/01/07 .............. 6,000,000 5,982,420 Seagate Technology, Inc., 7.450%, 3/01/37 .............. 3,850,000 3,859,047 Seagate Technology, Inc., 7.875%, 3/01/17 .............. 10,250,000 9,776,040 Streamlogic Corp., 14.000%, 10/07/98 (d) (e) ........... 139,170 6,959 ------------- 24,637,991 ------------- Electronics -- 1.4% Pioneer Standard Electronics, Inc., 8.500%, 8/01/06 .... 1,000,000 1,045,832 Westinghouse Electric Corp., 7.875%, 9/01/23 ........... 20,350,000 20,361,600 ------------- 21,407,432 ------------- Entertainment -- 5.2% Boston Celtics Ltd., 6.000%, 6/30/38 ................... 981,000 580,016 Time Warner Entertainment Co., 6.875%, 6/15/18 ......... 8,710,000 9,000,217 Time Warner Entertainment Co., 6.950%, 1/15/28 ......... 36,900,000 38,351,277 Time Warner Entertainment Co., 7.570%, 2/01/24 ......... 27,170,000 30,144,300 ------------- 78,075,810 ------------- Food & Beverage -- 0.3% Borden, Inc., 7.875%, 2/15/23 .......................... 5,500,000 5,084,750 ------------- Foreign Government/Agency -- 5.9% Escom, 11.000%, 6/01/08 ................................ ZAR 26,500,000 3,060,376 Republic of Argentina, 5.750%, 3/31/23 (step to 6.000% on 3/31/99) (b) ............................... USD 1,000,000 696,250 Republic of Argentina, 6.625%, 3/31/05 (f) ............. 1,104,500 872,555 Republic of Argentina, 9.750%, 9/19/27 ................. 2,250,000 1,831,500 Republic of Brazil, 10.125%, 5/15/27 ................... 42,481,000 26,656,828 Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (g) ..... 39,215,207 23,285,990 Republic of Ecuador, 3.500%, 2/28/25 (step to 4.000% on 2/28/99) (b) ...................................... 1,750,000 701,102 Republic of Ecuador, 6.625%, 2/27/15 PIK (f) (g) ....... 7,129,432 2,424,720 Republic of Korea, 8.875%, 4/15/08 ..................... 2,000,000 1,721,200 Republic of Panama, 4.000%, 7/17/14 (step to 4.250% on 7/17/99) (b) ...................................... 950,000 657,875 Republic of South Africa, 12.000%, 2/28/05 ............. ZAR 20,000,000 2,690,300 Republic of South Africa, 12.500%, 12/21/06 ............ 42,450,000 5,545,657 Republic of South Africa, 13.500%, 9/15/15 ............. 14,850,000 1,990,000 Republic of Venezuela, 9.250%, 9/15/27 ................. USD 31,350,000 17,399,250 ------------- 89,533,603 ------------- Foreign Issuer -- 9.0% Bangko Sentral Pilipinas, 8.600%, 6/15/27 .............. 11,000,000 7,287,500 Bangkok Bank Public Co. Ltd., 8.250%, 3/15/16 144A (c) . 5,370,000 2,369,351 Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A (c) . 34,365,000 14,830,560 Compania de Transporte Energia, 9.250%, 4/01/08 144A (c) 2,250,000 1,687,500 Espirito Santo Centrais Eletricas SA, 10.000%, 7/15/07 . 3,000,000 1,620,000 Export Import Bank of Korea, 6.375%, 2/15/06 ........... 1,000,000 661,819 Hyundai Motor Co. Ltd., 7.600%, 7/15/07 144A (c) ....... 4,000,000 2,958,680 Hyundai Semiconductor, 8.625%, 5/15/07 144A (c) ........ 500,000 345,000 Indah Kiat Finance Mauritius Ltd., 10.000%, 7/01/07 .... 500,000 217,500 Industrial Finance Corp. of Thailand, 7.375%, 1/14/07 144A (c) ...................................... 1,500,000 933,900 Korea Electric Power Corp., 6.750%, 8/01/27 ............ 1,500,000 1,058,610 Korea Electric Power Corp., 7.000%, 2/01/27 ............ 1,500,000 997,470 Korea Electric Power Corp., 7.400%, 4/01/16 ............ 11,998,601 7,772,334 Korea Electric Power Corp., 7.750%, 4/01/13 ............ 8,975,000 5,468,737 Multicanal SA, 10.500%, 4/15/18 144A (c) ............... 4,000,000 2,560,000 National Power Corp., 9.625%, 5/15/28 .................. 3,765,000 2,404,291 Pan Pacific Industrial Investment Plc, Zero Coupon Bond, 4/28/07 144A (c) ............................... 20,760,000 6,573,239 Perez Companc SA, 8.125%, 7/15/07 144A (c) ............. 3,590,000 2,907,900 Petroleos Mexicanos, 9.500%, 9/15/27 ................... 500,000 378,000 Petroleos Mexicanos, Medium Term, 8.625%, 12/01/23 144A (c) ............................................. 3,100,000 2,216,500 Philippine Long Distance Telephone Co., 8.350%, 3/06/17 4,950,000 3,200,581 Pindo Deli Finance Mauritius Ltd., 10.750%, 10/01/07 ... 7,750,000 3,138,750 Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 ... 15,500,000 5,363,000 Pindo Deli Finance Mauritius Ltd., 11.750%, 10/01/17 ... 1,500,000 618,750 Pohang Iron & Steel Co. Ltd., 7.125%, 11/01/06 ......... USD 1,500,000 1,072,365 Pycsa Panama SA, 10.280%, 12/15/12 144A (c) ............ 2,000,000 1,672,500 Quezon Power Philippines Co., 8.860%, 6/15/17 .......... 7,875,000 4,860,686 Samsung Electronics Co. Ltd., 7.450%, 10/01/02 144A(c) . 1,500,000 1,066,365 Samsung Electronics Co. Ltd., 7.700%, 10/01/27 144A(c) . 12,500,000 5,875,000 Samsung Electronics Co. Ltd., 8.500%, 11/01/02 ......... 1,000,000 741,670 Siam Commercial Bank Public Co., 7.500%, 3/15/06 144A (c) ............................................. 7,000,000 3,150,000 Tata Electric Co., 8.500%, 8/19/17 144A (c) ............ 9,000,000 6,367,500 Telekom Malaysia Berhad, 7.875%, 8/01/25 144A (c) ...... 12,025,000 6,374,332 Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (c) ...... 9,075,000 3,412,381 TFM SA de CV, Zero Coupon Bond, 6/15/09 (step to 11.750% on 6/15/02) (b) .............................. 4,650,000 2,278,500 Thai Farmers Bank Plc, 8.250%, 8/21/16 144A (c) ........ 10,240,000 4,414,669 Tjiwi Kimia Mauritius Ltd., 10.000%, 8/01/04 ........... 16,200,000 6,804,000 Total Access Communication Public Co. Ltd., 7.625%, 11/04/01 144A (c) .................................... 5,400,000 3,294,000 Total Access Communication Public Co. Ltd., 8.375%, 11/04/06 144A (c) .................................... 12,575,000 7,167,750 ------------- 136,121,690 ------------ Government Agencies -- 2.4% Federal Home Loan Mortgage Corp., 6.000%, 4/15/28 ...... 5,000,000 5,043,750 Federal National Mortgage Association, Zero Coupon Bond, 10/29/07 ....................................... NZD 103,925,000 30,512,197 ------------- 35,555,947 ------------- Health Care -- Products -- 0.6% Bausch & Lomb, Inc., 7.125%, 8/01/28 ................... USD 9,500,000 9,370,325 ------------- Health Care -- Services -- 0.5% Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 ........ 6,000,000 5,054,400 Columbia/HCA Healthcare Corp., 7.190%, 11/15/15 ........ 2,000,000 1,762,320 Columbia/HCA Healthcare Corp., 7.580%, 9/15/25 ......... 1,300,000 1,134,926 ------------- 7,951,646 ------------- Home Builders -- 0.4% Pulte Corp., 7.300%, 10/24/05 .......................... 1,000,000 1,028,900 Pulte Corp., 7.625%, 10/15/17 .......................... 5,000,000 4,953,950 ------------- 5,982,850 ------------- Insurance -- 0.2% Loews Corp., 7.000%, 10/15/23 .......................... 3,500,000 3,471,860 ------------- Oil & Gas -- 1.3% Chesapeake Energy Corp., 8.500%, 3/15/12 ............... 2,075,000 1,597,750 Pioneer Natural Resources Co., 7.200%, 1/15/28 ......... 2,000,000 1,745,840 R & B Falcon Corp., 7.375%, 4/15/18 .................... 14,000,000 13,315,680 Seagull Energy Corp., 7.500%, 9/15/27 .................. 3,850,000 3,487,677 ------------- 20,146,947 ------------- Rail -- Transport -- 0.0% Missouri Pacific Railroad Co., 5.000%, 1/01 /45 ........ USD 248,000 153,760 ------------- Real Estate Investment Trusts -- 3.6% AMB Property Corp., 7.500%, 6/30/18 .................... 7,500,000 7,194,000 First Industrial, 7.500%, 12/01/17 ..................... 6,000,000 6,180,702 First Industrial, 7.600%, 7/15/28 ...................... 13,000,000 12,244,570 Highwoods Realty LP, 7.500%, 4/15/18 ................... 3,750,000 3,559,200 Security Capital Group, Inc., 7.700%, 6/15/28 144A (c) . 16,725,000 15,763,312 Susa Partnership LP, 7.450%, 7/01/18 ................... 5,300,000 5,002,776 Trinet Corporate Realty Trust, Inc., 7.700%, 7/15/17 ... 4,000,000 3,839,600 ------------- 53,784,160 ------------- Retail -- General -- 1.7% Bradlees, Inc., 9.250%, 3/01/03 (d) (e) ................ 250,000 1,875 Bradlees, Inc., 11.000%, 8/01/02 (d) (e) ............... 250,000 2,500 Dillon Read Structured Finance Corp., 6.660%, 8/15/10 .. 2,467,189 2,442,048 Dillon Read Structured Finance Corp., 7.430%, 8/15/18 .. 2,000,000 1,760,000 Dillon Read Structured Finance Corp., 7.600%, 8/15/07 .. 215,224 205,538 Dillon Read Structured Finance Corp., 8.550%, 8/15/19 .. 500,000 477,500 K Mart Corp., 7.950%, 2/01/23 .......................... 14,365,000 13,934,050 Penn Traffic Co., 8.625%, 12/15/03 ..................... 1,000,000 560,000 Penn Traffic Co., 9.625%, 4/15/05 ...................... 17,083,000 3,074,940 Woolworth Corp., 8.500%, 1/15/22 ....................... 3,000,000 2,962,710 ------------- 25,421,161 ------------- Steel -- 0.1% Geneva Steel Co., 9.500%, 1/15/04 ...................... 3,500,000 1,575,000 ------------- Supranational -- 3.8% International Bank for Reconstruction & Development, Zero Coupon Bond, 8/20/07 ............................ NZD 159,375,000 46,456,963 International Bank for Reconstruction & Development, 8.000%, 5/23/07 ...................................... 19,000,000 10,543,894 ------------- 57,000,857 ------------- Taxable Municipal -- 0.1% Orange County, California Pension Obligation, Zero Coupon Bond, 9/01/16 ................................. USD 5,000,000 1,668,500 ------------- Telecommunications -- 7.1% Hyperion Telecommunications, Inc., Zero Coupon Bond, 4/15/03 (step to 13.000% on 4/15/01) (b) ............. 1,500,000 1,035,000 Nextel Communications, Inc., Zero Coupon Bond, 10/31/07 (step to 9.750% on 10/31/02) (b) ............ 33,180,000 19,908,000 Nextel Communications, Inc., Zero Coupon Bond, 2/15/08 (step to 9.950% on 2/15/03) (b) ...................... 1,800,000 1,062,000 Nextel International, Inc., Zero Coupon Bond, 4/15/08 (step to 12.125% on 4/15/03) (b) ..................... 22,650,000 10,192,500 Nextlink Communications, Inc., Zero Coupon Bond, 4/15/08 (step to 9.450% on 4/15/03) (b) .............. USD 5,000,000 2,900,000 RCN Corp., Zero Coupon Bond, 10/15/07 (step to 11.125% on 10/15/02) (b) ............................. 4,350,000 2,414,250 RCN Corp., Zero Coupon Bond, 2/15/08 (step to 9.800% on 2/15/03) (b) ...................................... 2,500,000 1,325,000 RCN Corp., Zero Coupon Bond, 7/01/08 (step to 11.000% on 7/01/03) (b) .............................. 15,650,000 7,981,500 TCI Communications, Inc., 7.125%, 2/15/28 .............. 4,760,000 5,201,919 TCI Communications, Inc., 7.875%, 8/01/13 .............. 7,850,000 9,136,379 TCI Communications, Inc., 7.875%, 2/15/26 .............. 35,252,000 41,568,806 Teligent, Inc., Zero Coupon Bond, 3/01/08 (step to 11.500% on 3/01/03) (b) .............................. 7,500,000 2,925,000 Triton Communications, Zero Coupon Bond, 5/01/08 (step to 11.000% on 5/01/03) 144A (b) (c) ............ 5,000,000 2,200,000 ------------- 107,850,354 ------------- Textile & Apparel -- 1.0% Burlington Industries, Inc., 7.250%, 8/01/27 ........... 9,000,000 9,199,440 Fruit of the Loom, Inc., 7.375%, 11/15/23 .............. 3,000,000 2,525,370 Kellwood Co., 7.625%, 10/15/17 ......................... 2,500,000 2,440,525 Phillips Van Heusen Corp., 7.750%, 11/15/23 ............ 1,000,000 967,330 ------------- 15,132,665 ------------- Tobacco -- 6.2% Philip Morris Cos., Inc., 7.750%, 1/15/27 .............. 48,410,000 52,401,889 RJR Nabisco, Inc., 7.625%, 9/15/03 ..................... 12,550,000 12,438,305 RJR Nabisco, Inc., 8.500%, 7/01/07 ..................... 8,150,000 8,193,928 RJR Nabisco, Inc., 8.750%, 8/15/05 ..................... 5,500,000 5,593,335 RJR Nabisco, Inc., 9.250%, 8/15/13 ..................... 14,143,000 14,289,663 ------------- 92,917,120 ------------- Transportation -- 0.1% American President Cos. Ltd., 8.000%, 1/15/24 .......... 1,425,000 1,050,852 ------------- U.S. Government -- 11.6% U S. Treasury Bonds, 5.500%, 8/15/28 ................... 30,000,000 32,428,200 U.S. Treasury Bonds, 6.000%, 2/15/26 ................... 102,775,000 114,979,531 U.S. Treasury Bonds, 6.250%, 8/15/23 ................... 15,450,000 17,682,989 U.S. Treasury Strips, Zero Coupon Bond, 8/15/20 ........ 14,000,000 4,291,280 U.S. Treasury Strips, Zero Coupon Bond, 8/15/23 ........ 19,000,000 5,054,950 ------------- 174,436,950 ------------- Utilities -- 1.9% AES Corp., 8.875%, 11/01/27 ............................ 5,000,000 4,350,000 Boston Edison Co., 7.800%, 3/15/23 ..................... 1,000,000 1,090,585 Comed Financing II, 8.500%, 1/15/27 .................... 5,000,000 5,387,700 Commonwealth Edison Co., 4.750%, 12/01/11 .............. 901,000 836,083 KN Capital Trust, 7.630%, 4/15/28 ...................... USD 15,750,000 15,178,858 Mobile Energy Services Co. LLC, 8.665%, 1/01/17 ........ 5,961,835 2,086,642 -------------- 28,929,868 -------------- TOTAL NON-CONVERTIBLE BONDS (Identified Cost $1,405,435,826) ..................... 1,333,974,972 -------------- CONVERTIBLE BONDS -- 8.5% Auto & Related -- 0.1% Exide Corp., 2.900%, 12/15/05 144A (c) ................. 3,375,000 1,674,844 -------------- Canadian -- 0.1% Rogers Communications, Inc., 2.000%, 11/26/05 .......... 3,000,000 1,899,360 ------------- Chemicals -- Major -- 0.1% FMC Corp., 6.750%, 1/16/05 ............................. 1,325,000 1,238,875 Hexcel Corp., 7.000%, 8/01/11 .......................... 675,000 499,500 ------------- 1,738,375 ------------- Computers -- 0.6% Apple Computer, Inc., 6.000%, 6/01/01 .................. 3,190,000 4,202,825 Cray Research, Inc., 6.125%, 2/01/11 ................... 635,000 482,600 Maxtor Corp., 5.750%, 3/01/12 .......................... 3,100,000 1,798,000 Read Rite Corp., Zero Coupon Bond, 9/01/04 ............. 3,125,000 1,750,000 Silicon Graphics, Inc., 5.250%, 9/01/04 ................ 625,000 515,625 Telxon Corp., 5.750%, 1/01/03 .......................... 225,000 215,438 Western Digital, Zero Coupon Bond, 2/18/18 ............. 2,150,000 444,770 ------------- 9,409,258 ------------- Diversified Operations -- 0.3% Ogden Corp., 5.750%, 10/20/02 .......................... 1,750,000 1,693,125 Ogden Corp., 6.000%, 6/01/02 ........................... 500,000 485,000 Thermo Electron Corp., 4.250%, 1/01/03 144A (c) ........ 2,500,000 2,175,000 ------------- 4,353,125 ------------- Electronics -- 0.9% Cirrus Logic, Inc., 6.000%, 12/15/03 ................... 1,600,000 1,016,000 Cypress Semiconductor Corp., 6.000%, 10/01/02 .......... 1,000,000 862,500 EDO Corp., 7.000%, 12/15/11 ............................ 434,000 328,212 Kent Electronics Corp., 4.500%, 9/01/04 ................ 6,800,000 4,692,000 Lam Research Corp., 5.000%, 9/01/02 .................... 5,070,000 3,941,925 National Semiconductor Corp., 6.500%, 10/01/02 ......... 500,000 440,000 Richardson Electronics Ltd., 7.250%, 12/15/06 .......... 450,000 333,000 Thermedics, Inc., Zero Coupon Bond, 6/01/03 ............ 950,000 646,000 Zenith Corp., 6.250%, 4/01/11 (d) ...................... 2,405,000 733,525 ------------- 12,993,162 ------------- Environmental Services -- 0.3% Air & Water Technologies Corp., 8.000%, 5/15/15 ........ USD 1,450,000 1,094,750 Thermo TerraTech, Inc., 4.625%, 5/01/03 ................ 400,000 375,000 Thermo TerraTech, Inc., 4.625%, 5/01/03 144A (c) ....... 3,890,000 3,359,988 ------------- 4,829,738 ------------- Foreign Issuer -- 2.3% Advanced Agro Public Co., 3.500%, 6/17/01 .............. 1,625,000 1,405,625 APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 144A (c) 8,125,000 3,087,500 APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 ........ 5,540,000 2,105,200 Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 .......... 11,000,000 2,915,000 Banpu Public Co., 2.750%, 4/10/03 ...................... 5,030,000 3,168,900 Burns, Philp, 5.500%, 4/30/04 .......................... 4,480,000 2,284,800 Empresas ICA Sociedad, 5.000%, 3/15/04 ................. 3,700,000 2,460,500 Loxley Public Co. Ltd., 2.500%, 4/04/01 ................ 7,700,000 1,540,000 Piltel, 1.750%, 7/17/06 ................................ 2,100,000 1,228,500 Samsung Corp., 0.250%, 6/26/06 ......................... 3,150,000 2,709,000 Samsung Electronics Co. Ltd., Zero Coupon Bond, 12/31/07 ............................................. 5,925,000 3,851,250 Sappi BVI Finance, 7.500%, 8/01/02 ..................... 4,650,000 3,731,625 Siam Commercial Bank Public Co., 3.250%, 1/24/04 ....... 3,075,000 830,250 Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 ..... 1,930,000 897,450 Ssangyong Oil Refining Co., Inc., 3.750%, 12/31/08 ..... 455,000 379,925 Telekom Malaysia Berhad, 4.000%, 10/03/04 .............. 750,000 405,000 Total Access Communication Public Co., Ltd., 2.00%, 5/31/06 ....................................... 3,400,000 2,346,000 ------------- 35,346,525 ------------- Freight Transportation -- 0.1% Builders Transportation, Inc., 8.000%, 8/15/05 (d) (e) . 1,000,000 1,250 Preston Corp., 7.000%, 5/01/11 ......................... 750,000 577,500 Worldway Corp., 6.250%, 4/15/11 ........................ 1,463,000 1,199,660 ------------- 1,778,410 ------------- Health Care -- Drugs -- 0.3% Chiron Corp., 1.900%, 11/17/00 ......................... 1,000,000 942,500 Dura Pharmaceuticals, Inc., 3.500%, 7/15/02 ............ 375,000 258,750 Glycomed, Inc., 7.500%, 1/01/03 ........................ 1,148,100 1,044,771 NABI, Inc., 6.500%, 2/01/03 ............................ 3,750,000 2,226,563 ------------- 4,472,584 ------------- Health Care -- Medical Technology -- 0.0% Heartport, Inc., 7.250%, 5/01/04 ....................... 1,000,000 470,000 ------------- Home Builders -- 0.0% Schuler Homes, Inc., 6.500%, 1/15/03 ................... 750,000 639,375 ------------- Insurance -- 0.8% Loews Corp., 3.125%, 9/15/07 ........................... 14,775,000 11,746,125 ------------- Leisure -- 0.1% AMF Bowling, Inc., Zero Coupon Bond, 5/12/18 144A(c) ... USD 15,200,000 1,482,000 ------------- Machinery -- 0.1% Intevac, Inc., 6.500%, 3/01/04 ......................... 1,250,000 871,875 ------------- Multi-Industry -- 0.0% Thermo Instrument Systems, Inc., 4.500%, 10/15/03 144A (c) ............................................. 450,000 376,313 ------------- Oil & Gas -- 0.6% Baker Hughes, Inc., Zero Coupon Bond, 5/05/08 .......... 11,900,000 7,854,000 Houston Industries, Inc., 6.000%, 3/15/12 .............. 447,500 429,600 Key Energy Group, Inc., 5.000%, 9/15/04 ................ 2,250,000 1,389,375 ------------- 9,672,975 ------------- Publishing -- 0.2% Scholastic Corp., 5.000%, 8/15/05 144A (c) ............. 2,550,000 2,352,375 ------------- Real Estate Investment Trusts -- 0.6% Federal Realty Investors Trust, 5.250%, 10/28/03 ....... 2,250,000 2,092,500 Rockefeller Properties, Zero Coupon Bond, 12/31/00 ..... 7,000,000 5,407,500 Sizeler Property Investors, Inc., 8.000%, 7/15/03 ...... 1,175,000 1,101,562 ------------- 8,601,562 ------------- Restaurants -- 0.4% Boston Chicken, Inc., Zero Coupon Bond, 6/01/15 ........ 4,125,000 72,187 Boston Chicken, Inc., 4.500%, 2/01/04 .................. 3,250,000 227,500 Einstein/Noah Bagel Corp., 7.250%, 6/01/04 ............. 2,880,000 1,296,000 Shoney's, Inc., Zero Coupon Bond, 4/11/04 .............. 8,060,000 3,606,850 TPI Enterprises, Inc., 8.250%, 7/15/02 ................. 700,000 591,500 ------------- 5,794,037 ------------- Retail -- Specialty -- 0.1% Bell Sports Corp., 4.250%, 11/15/00 .................... 96,000 82,200 CML Group, Inc., 5.500%, 1/15/03 ....................... 1,224,000 306,000 Jacobson Stores, Inc., 6.750%, 12/15/11 ................ 540,000 469,800 ------------- 858,000 ------------- Telecommunications -- 0.4% Broadband Technologies, Inc., 5.000%, 5/15/01 .......... 9,800,000 5,745,250 ------------- Textile & Apparel -- 0.1% Dixie Yarns, Inc., 7.000%, 5/15/12 ..................... 282,000 213,615 Fieldcrest Cannon, Inc., 6.000%, 3/15/12 ............... 890,000 738,700 ------------- 952,315 ------------- TOTAL CONVERTIBLE BONDS (Identified Cost $164,036,236) ....................... 128,057,583 -------------- TOTAL BONDS AND NOTES (Identified Cost $1,569,472,062) ..................... 1,462,032,555 -------------- SHARES - ------------------------------------------------------------------------------------------------------ COMMON STOCKS -- 0.2% OF NET ASSETS Computers -- 0.0% Streamlogic Corp. (d) (h) .............................. 266,066 266 ------------- Restaurants -- 0.2% Advantica Restaurant Group, Inc. (h) ................... 646,448 3,070,628 ------------- TOTAL COMMON STOCKS (Identified Cost $8,226,376) ......................... 3,070,894 ------------- PREFERRED STOCKS -- 1.3% of Net Assets Building Materials -- 0.2% Owens Corning, 6.500% .................................. 66,000 3,225,750 ------------- Chemicals -- Major -- 0.0% E.I. du Pont DeNemours & Co., $3.50 .................... 3,775 272,744 ------------- Computer Software & Services -- 0.1% Unisys Corp., $3.75 .................................... 27,300 1,293,338 ------------- Financial Services -- 0.2% Hvide Capital Trust, 6.500% ............................ 77,500 2,247,500 ------------- Freight Transportation -- 0.1% Arkansas Best Corp., $2.875 ............................ 39,670 1,274,399 ------------- Metals -- 0.3% Aluminum Co. of America, $3.75 ......................... 10,000 743,125 Bethlehem Steel Corp., $3.50 ........................... 99,050 4,036,287 ------------- 4,779,412 ------------- Oil & Gas -- 0.2% Chesapeake Energy Corp., 7.000% 144A (c) ............... 45,000 720,000 Chesapeake Energy Corp., 7.000% ........................ 10,000 160,000 Weatherford International, Inc., 5.000% ................ 63,000 2,016,000 ------------- 2,896,000 ------------- Retail -- General -- 0.0% K Mart Financing Corp., 7.750% ......................... 10,000 500,000 -------------- Telecommunications -- 0.0% Hyperion Telecommunications, Inc., 12.875% PIK (g) ..... 591 484,983 ------------- Utilities -- 0.2% Central Maine Power Co., 3.500% ........................ 2,230 122,093 Cleco Corp., 4.750% .................................... 1,500 135,375 Commonwealth Energy Systems, $4.80 ..................... 3,168 277,200 Connecticut Light & Power Co., $1.90 ................... 2,925 78,975 Entergy Louisiana, Inc., 4.160% ........................ 2,600 184,600 Jersey Central Power & Light Co., 4.000% ............... 2,020 137,360 MDU Resources Group, Inc., 5.100% ...................... 4,250 426,062 Minnesota Power & Light Co., 5.000% .................... 200 16,900 Nevada Power Co., 4.700% ............................... 15,886 347,506 Niagara Mohawk Power Corp., 4.850% ..................... 5,000 395,000 Northern States Power Co., $3.60 ....................... 900 58,444 Public Service Co., 4.000% ............................. 360 25,020 ------------- 2,204,535 ------------- TOTAL PREFERRED STOCKS (Identified Cost $20,926,418) ........................ 19,178,661 -------------- WARRANTS -- 0.0% of Net Assets Computers -- 0.0% Streamlogic Corp., expiring 10/7/01 (d) (h) ............ 1,228 0 ------------- TOTAL WARRANTS (Identified Cost $0) ................................. 0 ------------- FACE AMOUNT - ------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT -- 2.4% OF NET ASSETS Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $36,336,794 on 10/01/98 collateralized by $30,785,000 U.S. Treasury Bond, 6.500%, due 11/15/26 with a value of $37,062,246 ..... USD 36,332,000 36,332,000 -------------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $36,332,000) ........................ 36,332,000 -------------- TOTAL INVESTMENTS -- 100.7% (IDENTIFIED COST $1,634,956,856) (i) ................... 1,520,614,110 Liabilities, Less Cash and Other Assets -- (0.7%) ...... (10,764,239) -------------- NET ASSETS -- 100% ....................................... $1,509,849,871 ============== (a) See Note 1. (b) Step Bond: Coupon is zero or below market rate for an initial period and then increases at a specified date and rate. (c) 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. (d) Company in Chapter 11 Bankruptcy. (e) Security in default. (f) Floating Rate Bond: Coupon is six month London Interbank Offered Rate (LIBOR) plus .8125%. (g) All or a portion of income may be received as additional securities. (h) Non-income producing security. (i) At September 30, 1998, the net unrealized depreciation on investments based on cost of $1,634,983,545 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 $96,390,901 and $210,760,336, respectively, resulting in net unrealized depreciation of $114,369,435.
Key to Abbreviations: CAD: Canadian Dollar NZD: New Zealand Dollar USD: United States Dollar ZAR: South African Rand See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES GLOBAL BOND FUND - ------------------------------------------------------------------------------------------------------------ PORTFOLIO OF INVESTMENTS -- AS OF SEPTEMBER 30, 1998 FACE AMOUNT VALUE (a) - ------------------------------------------------------------------------------------------------------------ BONDS AND NOTES -- 90.8% OF NET ASSETS Argentina -- 1.2% Republic of Argentina, 5.750%, 3/31/23 (step to 6.000% on 3/31/99) (b) ...................................... USD 600,000 $ 417,750 ------------- Australia -- 11.7% New South Wales Trust, 6.500%, 5/01/06 ................... AUD 1,900,000 1,193,898 News America Holdings, Inc., 8.625%, 2/07/14 ........... 1,240,000 816,720 Queensland Treasury, 6.500%, 6/14/05 ................... 730,000 464,127 Queensland Treasury, 8.000%, 9/14/07 ................... 1,600,000 1,124,515 South Australia Government Finance Authority, Zero Coupon Bond, 12/21/15 ................................ 2,750,000 636,904 ------------- 4,236,164 ------------- Canada -- 4.1% Government of Canada, 8.750%, 12/01/05 ................... CAD 700,000 564,701 Province of British Columbia, Zero Coupon Bond, 9/05/20. 5,025,000 917,831 ------------- 1,482,532 ------------- Finland -- 4.3% Republic of Finland, 6.000%, 4/25/08 ..................... FIM 7,000,000 1,556,688 ------------ Germany -- 25.4% Bayerische Vereinsbank, 6.000%, 1/23/06 ................ DEM 2,000,000 1,332,894 Deutsche Finance BV, 7.500%, 2/10/03 ................... 2,300,000 1,549,355 Federal Republic of Germany, 6.500%, 3/15/00 ........... 2,000,000 1,247,627 Geberit International SA, 10.125%, 4/16/07 ............. 800,000 524,535 Germany Unity, 8.000%, 1/21/02 ......................... 2,200,000 1,494,638 Kreditanstalt Wierdarauf, 6.000%, 2/09/06 .............. 1,100,000 736,385 Treuhandanstalt, 6.625%, 7/09/03 ....................... 300,000 202,072 Treuhandanstalt, 6.750%, 5/13/04 ....................... 1,700,000 1,167,773 Westdt Landesbank, 5.250%, 10/14/05 .................... 1,500,000 957,457 ------------- 9,212,736 ------------- Ireland -- 6.9% Republic of Ireland, 6.000%, 8/18/08 ................... IEP 642,000 1,090,666 Republic of Ireland, 8.000%, 8/18/06 ................... 750,000 1,398,476 ------------- 2,489,142 ------------- Japan -- 2.9% MBL International Finance (Bermuda), 3.000%, 11/30/02 (c) USD 300,000 256,125 MBL International Finance (Bermuda), 3.000%, 11/30/02 (c) 950,000 795,625 ------------- 1,051,750 ------------- Malaysia -- 2.2% Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (d) ...... 2,125,000 799,043 ------------- Netherlands -- 3.1% Dutch Government, 5.750%, 9/15/02 ...................... NLG 2,000,000 1,139,459 ------------- New Zealand -- 4.7% Government of New Zealand, 7.000%, 7/15/09 ............. NZD 1,820,000 1,005,892 Government of New Zealand, 8.000%, 11/15/06 ............ 1,200,000 689,069 ------------- 1,694,961 ------------- Philippines -- 5.1% Bangko Sentral Pilipinas, 8.600%, 6/15/27 ................ USD 1,300,000 861,250 FLI Capital Cayman, 3.750%, 2/01/02 (step to 6.250% on 8/01/99) (b) (c) .................................. 900,000 544,500 MBIA, Inc., Zero Coupon Bond, 12/18/01 (c) ............. 800,000 438,000 ------------- 1,843,750 ------------- Poland -- 2.1% Government of Poland, 4.000%, 10/27/14 (step to 5.000% on 10/27/98) (b) .................................... 900,000 770,670 ------------- South Africa -- 5.5% Escom, 11.000%, 6/01/08 ................................ ZAR 6,000,000 692,915 Republic of South Africa, 8.500%, 6/23/17 .............. USD 1,000,000 570,000 Sappi BVI Finance, 7.500%, 8/01/02 .................... 900,000 722,250 ------------- 1,985,165 ------------- South Korea -- 3.0% Korea Development Bank, 6.625%, 11/21/03 ............... 500,000 387,355 Korea Development Bank, 6.750%, 12/01/05 ............... 200,000 147,236 Samsung Electronics Co. Ltd., Zero Coupon Bond, 12/31/07 (c) ......................................... 500,000 325,000 Samsung Electronics Co. Ltd., 5.375%, 12/16/01 ......... DEM 500,000 242,508 ------------- 1,102,099 ------------- Supranational -- 1.2% International Bank for Reconstruction & Development, Zero Coupon Bond, 8/20/07 .............................. NZD 1,500,000 437,242 ------------- Thailand -- 2.8% Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 (c) ...... USD 2,100,000 556,500 Kingdom of Thailand, 7.750%, 4/15/07 ................... 400,000 317,420 Loxley Public Co. Ltd., 2.500%, 4/04/01 (c) ............ 700,000 140,000 ------------ 1,013,920 ------------- United Kingdom -- 0.4% Colt Telecom Group Plc, 7.625%, 7/31/08 .................. DEM 300,000 158,977 ------------- United States -- 4.2% Federal National Mortgage Association, 6.375%, 8/15/07 . AUD 525,000 331,569 Federal National Mortgage Association, 7.250%, 6/20/02 . NZD 1,300,000 669,336 RJR Nabisco, Inc., 9.250%, 8/15/13 ..................... USD 500,000 505,185 ------------- 1,506,090 ------------- TOTAL BONDS AND NOTES (Identified Cost $35,533,105) ........................ 32,898,138 ------------- SHARES - ------------------------------------------------------------------------------------------------------- PREFERRED STOCKS -- 2.7% OF NET ASSETS Japan -- 2.7% Sakura Finance, 0.750% ................................. 186,000,000 $ 528,974 Sanwa International Ltd. (Bermuda), 1.250% 144A (d) .... 102,000,000 448,582 ------------- 977,556 ------------- TOTAL PREFERRED STOCKS (Identified Cost $1,931,253) ......................... 977,556 ------------- FACE AMOUNT - ------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT -- 4.6% OF NET ASSETS Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $1,682,222 on 10/01/98 collateralized by $1,430,000 U.S. Treasury Bond, 6.500%, due 11/15/26 with a value of $1,721,586 ........................................ USD 1,682,000 1,682,000 ------------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $1,682,000) ........................ 1,682,000 ------------- TOTAL INVESTMENTS -- 98.1% (IDENTIFIED COST $39,146,358) (d) ..................... 35,557,694 Cash and Other Assets, Less Liabilities -- 1.9% ....... 677,853 ------------- NET ASSETS -- 100% ...................................... $36,235,547 =========== LOOMIS SAYLES GLOBAL BOND FUND (continued) - ----------------------------------------------------------------------------------------------------------------- Portfolio of Investments -- As of September 30, 1998 (a) See Note 1. (b) Step Bond: Coupon is zero or below market rate for an initial period and then increases at a specified date and rate. (c) Convertible Bond. (d) 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. (e) At September 30, 1998, the net unrealized depreciation on investments based on cost of $39,155,200 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 $1,331,465 and $4,928,971, respectively, resulting in net unrealized depreciation of $3,597,506. Key to Abbreviations: AUD: Australian Dollar NLG: Dutch Guilder CAD: Canadian Dollar NZD: New Zealand Dollar DEM: Deutsche Mark USD: United States Dollar FIM: Finnish Markka ZAR: South African Rand IEP: Irish Punt Ten Largest Sector Holdings at September 30, 1998 as a Percentage of Net Assets Foreign Government/Agency 49.2% Banking & Finance 18.5% Financial 12.2% U.S. Government 2.8% Media & Entertainment 2.3% Utilities 2.2% Electronics 1.6% Consumer Durables 1.4% Tobacco 1.4% Supranational 1.2%
See accompanying notes to financial statements. - ------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------- LOOMIS SAYLES HIGH YIELD FUND - ------------------------------------------------------------------------------------------------------- Portfolio of Investments -- As of September 30, 1998
FACE AMOUNT VALUE (a) - ------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 87.1% of Net Assets NON-CONVERTIBLE BONDS -- 55.7% Broadcasting -- 1.2% Fox Family Worldwide, Inc., Zero Coupon Bond, 11/01/07 (step to 10.250% on 11/01/02) (b) ...................... USD 200,000 $ 124,000 ----------- Canadian -- 5.8% Clearnet Communications, Inc., Zero Coupon Bond, 8/13/07 (step to 11.750% on 8/13/02) (b) ............... CAD 600,000 212,494 Clearnet Communications, Inc., Zero Coupon Bond, 5/15/08 (step to 10.400% on 5/15/03) (b) ............... 300,000 94,441 International Semi-Tech Corp., Zero Coupon Bond, 8/15/03 (step to 11.500% on 8/15/00) (b) ....................... USD 525,000 89,250 MetroNet Communications Corp., Zero Coupon Bond, 6/15/08 (step to 9.950% on 6/15/03) (b) ................ 250,000 137,500 Microcell Telecommunications, Inc., Zero Coupon Bond, 10/15/07 (step to 11.125% on 10/15/02) (b) ............. CAD 235,000 83,227 ----------- 616,912 ----------- Communications -- 1.5% Arch Communications Group, Inc., Zero Coupon Bond, 3/15/08 (step to 10.875% on 3/15/01) (b) .............. USD 340,000 161,500 ----------- Entertainment -- 0.3% Boston Celtics Ltd., 6.000%, 6/30/38 ..................... 62,000 36,658 ----------- Foreign Government/Agency -- 8.8% Escom, 11.000%, 6/01/08 .................................. ZAR 275,000 31,759 Republic of Argentina, 6.625%, 3/31/05 (c) ............... USD 47,000 37,130 Republic of Brazil, 10.125%, 5/15/27 ..................... 255,000 160,012 Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (d) ....... 493,090 292,797 Republic of Ecuador, 6.625%, 2/27/15 PIK (c) (d) ......... 169,747 57,731 Republic of Panama, 4.000%, 7/17/14 (step to 4.250% on 7/17/99) (b) ........................................... 150,000 103,875 Republic of Peru, 3.250%, 3/07/17 (step to 3.750% on 3/07/99) (b) ........................................... 200,000 92,500 Republic of South Africa, 12.500%, 12/21/06 .............. ZAR 500,000 65,320 Republic of Venezuela, 9.250%, 9/15/27 ................... USD 175,000 97,125 ----------- 938,249 ----------- Foreign Issuer -- 23.5% Bangko Sentral Pilipinas, 8.600%, 6/15/27 ................ 350,000 231,875 Bangkok Bank Public Co. Ltd., 8.250%, 3/15/16 144A (e) ... 150,000 66,183 Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A (e) ... 250,000 107,890 Espirito Santo Centrais Eletricas SA, 10.000%, 7/15/07 ... 100,000 54,000 Export Import Bank of Korea, 6.375%, 2/15/06 ............. 50,000 33,091 Hyundai Motor Co. Ltd., 7.600%, 7/15/07 144A (e) ......... 100,000 73,967 Korea Electric Power Corp., 7.400%, 4/01/16 .............. 238,067 154,213 Korea Electric Power Corp., 7.750%, 4/01/13 .............. 200,000 121,866 Multicanal SA, 10.500%, 2/01/07 .......................... 125,000 77,500 Multicanal SA, 10.500%, 4/15/18 144A (e) ................. 125,000 80,000 Murrin Murrin Holdings Property Ltd., 9.375%, 8/31/07 .... USD 50,000 41,500 National Power Corp., 9.625%, 5/15/28 .................... 100,000 63,859 Pan Pacific Industrial Investment Plc, Zero Coupon Bond, 4/28/07 144A (e) ....................................... 300,000 94,989 Petroleos Mexicanos, Medium Term, 8.625%, 12/01/23 144A(e) 145,000 103,675 Philippine Long Distance Telephone Co., 8.350%, 3/06/17 .. 200,000 129,316 Pindo Deli Finance Mauritius Ltd., 10.750%, 10/01/07 ..... 300,000 121,500 Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 ..... 360,000 124,560 Pycsa Panama SA, 10.280%, 12/15/12 144A (e) .............. 100,000 83,625 Quezon Power Philippines Co., 8.860%, 6/15/17 ............ 225,000 138,877 Samsung Electronics Co. Ltd., 8.500%, 11/01/02 ........... 100,000 74,167 Siam Commercial Bank Public Co., 7.500%, 3/15/06 144A(e) . 100,000 45,000 Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (e) ........ 500,000 188,010 Tjiwi Kimia Mauritius Ltd., 10.000%, 8/01/04 ............. 150,000 63,000 Total Access Communication Public Co. Ltd., 7.625%, 11/04/01 144A (e) ...................................... 100,000 61,000 Total Access Communication Public Co. Ltd., 8.375%, 11/04/06 144A (e) ...................................... 300,000 171,000 ----------- 2,504,663 ----------- Health Care -- Services -- 0.6% Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 .......... 75,000 63,180 ----------- Oil & Gas -- 2.2% Chesapeake Energy Corp., 7.875%, 3/15/04 ................. 50,000 42,000 Chesapeake Energy Corp., 8.500%, 3/15/12 ................. 250,000 192,500 ----------- 234,500 ----------- Rail -- Transport -- 0.2% Missouri Pacific Railroad Co., 4.750%, 1/01/20 ........... 30,000 20,400 ----------- Retail -- General -- 2.9% Dillon Read Structured Finance Corp., 7.430%, 8/15/18 .... 300,000 264,000 Penn Traffic Co., 9.625%, 4/15/05 ........................ 275,000 49,500 ----------- 313,500 ----------- Steel -- 0.6% Geneva Steel Co., 9.500%, 1/15/04 ........................ 150,000 67,500 ----------- Telecommunications -- 4.3% Nextel Communications, Inc., Zero Coupon Bond, 10/31/07 (step to 9.750% on 10/31/02) (b) ....................... 145,000 87,000 Nextel Communications, Inc., Zero Coupon Bond, 2/15/08 (step to 9.950% on 2/15/03) (b) ........................ 100,000 59,000 RCN Corp., Zero Coupon Bond, 10/15/07 (step to 11.125% on 10/15/02) (b) ....................................... 175,000 97,125 RCN Corp., Zero Coupon Bond, 2/15/08 (step to 9.800% on 2/15/03) (b) ........................................ 100,000 53,000 RCN Corp., Zero Coupon Bond, 7/01/08 (step to 11.000% on 7/01/03) (b) ........................................ USD 100,000 51,000 Teligent, Inc., Zero Coupon Bond, 3/01/08 (step to 11.500% on 3/01/03) (b) ........................................ 275,000 107,250 ----------- 454,375 ----------- Textile & Apparel -- 2.3% Phillips Van Heusen Corp., 7.750%, 11/15/23 .............. 250,000 241,832 ----------- Transportation -- 0.7% American President Cos. Ltd., 8.000%, 1/15/24 ............ 100,000 73,744 ----------- Utilities -- 0.8% Mobile Energy Services Co. LLC, 8.665%, 1/01/17 .......... 229,301 80,255 ----------- TOTAL NON-CONVERTIBLE BONDS (Identified Cost $8,042,945) ........................... 5,931,268 ----------- CONVERTIBLE BONDS -- 31.4% Canadian -- 1.1% Rogers Communications, Inc., 2.000%, 11/26/05 ............ 190,000 120,293 ----------- Computers -- 2.7% Cray Research, Inc., 6.125%, 2/01/11 ..................... 113,000 85,880 Data General Corp., 6.000%, 5/15/04 ...................... 50,000 39,562 HMT Technology Corp., 5.750%, 1/15/04 .................... 75,000 50,250 Read Rite Corp., 6.500%, 9/01/04 ......................... 150,000 84,000 S3, Inc., 5.750%, 10/01/03 ............................... 50,000 29,500 ----------- 289,192 ----------- Electronics -- 9.4% Cirrus Logic, Inc., 6.000%, 12/15/03 ..................... 150,000 95,250 Cypress Semiconductor Corp., 6.000%, 10/01/02 ............ 100,000 86,250 EDO Corp., 7.000%, 12/15/11 .............................. 25,000 18,906 Integrated Device Technology, 5.500%, 6/01/02 ............ 50,000 38,000 Kent Electronics Corp., 4.500%, 9/01/04 .................. 250,000 172,500 Lam Research Corp., 5.000%, 9/01/02 ...................... 575,000 447,063 Richardson Electronics Ltd., 7.250%, 12/15/06 ............ 50,000 37,000 Zenith Corp., 6.250%, 4/01/11 (f) ........................ 350,000 106,750 ----------- 1,001,719 ----------- Environmental Services -- 0.2% Air & Water Technologies Corp., 8.000%, 5/15/15 .......... 25,000 18,875 ----------- Foreign Issuer -- 5.6% Advanced Agro Public Co., 3.500%, 6/17/01 ................ 125,000 108,125 APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 144A (e) . 125,000 47,500 APP Finance VII Mauritius Ltd., 3.500%, 4/30/03 .......... 50,000 19,000 Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 ............ 225,000 59,625 Banpu Public Co., 2.750%, 4/10/03 ........................ 25,000 15,750 Burns, Philp, 5.500%, 4/30/04 ............................ USD 50,000 25,500 Empresas ICA Sociedad, 5.000%, 3/15/04 ................... 75,000 49,875 Loxley Public Co. Ltd., 2.500%, 4/04/01 .................. 100,000 20,000 Samsung Electronics Co. Ltd., Zero Coupon Bond, 12/31/07 . 100,000 65,000 Sappi BVI Finance, 7.500%, 8/01/02 ....................... 75,000 60,187 Siam Commercial Bank Public Co., 3.250%, 1/24/04 ......... 250,000 67,500 Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 ....... 125,000 58,125 ----------- 596,187 ----------- Freight Transportation -- 0.5% Builders Transportation, Inc., 8.000%, 8/15/05 (f) (g) ... 75,000 94 Worldway Corp., 6.250%, 4/15/11 .......................... 62,000 50,840 ----------- 50,934 ----------- Health Care -- Drugs -- 2.4% Dura Pharmaceuticals, Inc., 3.500%, 7/15/02 .............. 125,000 86,250 Glycomed, Inc., 7.500%, 1/01/03 .......................... 100,000 91,000 NABI, Inc., 6.500%, 2/01/03 .............................. 125,000 74,219 ----------- 251,469 ----------- Health Care -- Services -- 0.6% Tenet Healthcare Corp., 6.000%, 12/01/05 ................. 75,000 62,062 ----------- Home Builders -- 0.6% Schuler Homes, Inc., 6.500%, 1/15/03 ..................... 70,000 59,675 ----------- Insurance -- 3.7% Loews Corp., 3.125%, 9/15/07 ............................. 500,000 397,500 ----------- Leisure -- 0.5% AMF Bowling, Inc., Zero Coupon Bond, 5/12/18 144A (e) .... 600,000 58,500 ----------- Machinery -- 0.2% Intevac, Inc., 6.500%, 3/01/04 ........................... 25,000 17,438 ----------- Oil & Gas -- 0.3% Key Energy Group, Inc., 5.000%, 9/15/04 .................. 50,000 30,875 ----------- Real Estate Investment Trusts -- 0.1% Sizeler Property Investors, Inc., 8.000%, 7/15/03 ........ 15,000 14,063 ----------- Restaurants -- 2.1% Boston Chicken, Inc., Zero Coupon Bond, 6/01/15 .......... 625,000 10,937 Boston Chicken, Inc., 4.500%, 2/01/04 .................... 100,000 7,000 Einstein/Noah Bagel Corp., 7.250%, 6/01/04 ............... 50,000 22,500 Shoney's, Inc., Zero Coupon Bond, 4/11/04 ................ 350,000 156,625 TPI Enterprises, Inc., 8.250%, 7/15/02 ................... 25,000 21,125 ----------- 218,187 ----------- Retail -- Specialty -- 0.6% CML Group, Inc., 5.500%, 1/15/03 ......................... USD 100,000 25,000 Jacobson Stores, Inc., 6.750%, 12/15/11 .................. 50,000 43,500 ----------- 68,500 ----------- Telecommunications -- 0.6% Broadband Technologies, Inc., 5.000%, 5/15/01 ............ 100,000 58,625 ----------- Textile & Apparel -- 0.2% Converse, Inc., 7.000%, 6/01/04 .......................... 50,000 24,500 ----------- TOTAL CONVERTIBLE BONDS (Identified Cost $4,315,745) ........................... 3,338,594 ----------- TOTAL BONDS AND NOTES (Identified Cost $12,358,690) .......................... 9,269,862 ----------- SHARES - ------------------------------------------------------------------------------------------------------ COMMON STOCKS -- 3.7% of Net Assets Foreign Issuer -- 0.6% Sappi Ltd., ADR (h) ...................................... 17,500 61,250 Siam Commercial Bank Public Co. (h) ...................... 16,500 4,276 ----------- 65,526 ----------- Oil & Gas -- 0.2% Chesapeake Energy Corp. .................................. 16,000 19,000 ----------- Real Estate Investment Trusts -- 2.6% Associated Estates Realty Corp. .......................... 7,200 131,400 Berkshire Realty Co., Inc. ............................... 8,000 83,500 Meditrust Corp. .......................................... 3,500 59,719 ----------- 274,619 ----------- Restaurants -- 0.3% Advantica Restaurant Group, Inc. (h) ..................... 7,197 34,186 ----------- TOTAL COMMON STOCKS (Identified Cost $639,150) ............................. 393,331 ----------- PREFERRED STOCKS -- 3.5% of Net Assets Computer Software & Services -- 0.4% Unisys Corp., $3.75 ...................................... 1,000 47,375 ----------- Foreign Issuer -- 0.9% Philippine Long Distance Telephone Co., $3.50, GDS ....... 1,000 39,000 Sakura Finance, 0.750% ................................... 18,000,000 51,191 ----------- 90,191 ----------- Metals -- 0.8% Bethlehem Steel Corp., $3.50 ............................. 2,000 81,500 ----------- Oil & Gas -- 0.7% Chesapeake Energy Corp., 7.000% 144A (e) ................. 3,500 56,000 Chesapeake Energy Corp., 7.000% .......................... 1,250 20,000 ----------- 76,000 ----------- Utilities -- 0.7% Central Maine Power Co., 3.500% .......................... 1,260 68,985 Entergy Gulf States, Inc., 4.400% ........................ 150 9,300 ----------- 78,285 ----------- TOTAL PREFERRED STOCKS (Identified Cost $500,729) ............................. 373,351 ----------- FACE AMOUNT - ------------------------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT -- 2.1% of Net Assets Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $224,030 on 10/01/98 collateralized by $180,000 U.S. ... Treasury Bond, 7.500%, due 11/15/16 with a value of $232,875 ............................................... USD 224,000 224,000 ----------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $224,000) ............................. 224,000 ----------- TOTAL INVESTMENTS -- 96.4% (IDENTIFIED COST $13,722,569) (i) ........................ 10,260,544 Cash and Other Assets, Less Liabilities -- 3.6% .......... 383,869 ----------- NET ASSETS -- 100% ......................................... $10,644,413 =========== (a) See Note 1. (b) Step Bond: Coupon is zero or below market rate for an initial period and then increases at a specified date and rate. (c) Floating Rate Bond: Coupon is six month London Interbank Offered Rate (LIBOR) plus .8125%. (d) All or a portion of income may be received as additional securities. (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) Company in Chapter 11 Bankruptcy. (g) Security in default. (h) Non-income producing security. (i) At September 30, 1998, the net unrealized depreciation on investments based on cost of $13,722,569 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 $80,435 and $3,542,460, respectively, resulting in net unrealized depreciation of $3,462,025. Key to Abbreviations: ADR: American Depositary Receipts CAD: Canadian Dollar GDS: Global Depositary Shares USD: United States Dollar ZAR: South African Rand See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND - ------------------------------------------------------------------------------------------------------ Portfolio of Investments -- As of September 30, 1998
FACE AMOUNT VALUE (a) - ------------------------------------------------------------------------------------------------------ BONDS AND NOTES -- 96.6% of Net Assets Banks/Savings & Loans -- 4.6% Capital One Bank, 5.950%, 2/15/01 ........................ USD 200,000 $ 199,998 Capital One Bank, 6.375%, 2/15/03 ........................ 100,000 100,079 Capital One Bank, 6.830%, 5/17/99 ........................ 70,000 70,613 NationsBank Corp., 7.000%, 9/15/01 ....................... 55,000 57,757 ---------- 428,447 ---------- Canadian -- 3.2% Government of Canada, 5.500%, 6/01/09 .................... CAD 150,000 102,656 International Semi-Tech Corp., Zero Coupon Bond, 8/15/03 (step to 11.500% on 8/15/00) (b) ....................... USD 250,000 42,500 MacMillan Bloedel Ltd., 6.750%, 2/15/06 .................. 150,000 148,583 ---------- 293,739 ---------- Entertainment -- 1.9% Time Warner Entertainment Co., Inc., 7.750%, 6/15/05 ..... 155,000 172,806 ---------- Financial Services -- 9.1% Associated Manufactured Housing, 6.475%, 3/15/28 ......... 50,000 51,750 Green Tree Financial Corp., 6.950%, 3/15/27 .............. 200,000 208,346 Household Finance Corp., 5.875%, 9/25/04 ................. 350,000 353,479 OSCC Home Equity Loan Trust, 6.025%, 6/15/08 ............. 223,096 225,624 ---------- 839,199 ---------- Foreign Government/Agency -- 3.3% Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (c) ....... 174,032 103,340 Republic of South Africa, 8.375%, 10/17/06 ............... 250,000 205,000 ---------- 308,340 ---------- Foreign Issuer -- 9.0% Espirito Santo Centrais Eletricas SA, 10.000%, 7/15/07 ... 150,000 81,000 Gruma SA de CV, 7.625%, 10/15/07 ......................... 150,000 123,000 Perez Companc SA, 8.125%, 7/15/07 144A (d) ............... 250,000 202,500 Southern Peru Ltd., 7.900%, 5/30/07 ...................... 220,000 218,064 Tenaga Nasional Berhad, 7.625%, 4/29/07 144A (d) ......... 125,000 60,000 Total Access Communication Public Co. Ltd., 8.375%, 11/04/06 144A (d) ...................................... 220,000 125,400 YPF SA, 7.000%, 10/26/02 ................................. 26,894 26,501 ---------- 836,465 ---------- Government Agencies -- 9.5% Federal Home Loan Mortgage Corp., 6.000%, 4/15/06 ........ 55,000 55,515 Federal Home Loan Mortgage Corp., 6.250%, 10/15/07 ....... 55,000 57,372 Federal National Mortgage Association, 5.500%, 4/25/06 ... 250,000 251,250 Federal National Mortgage Association, 6.000%, 5/25/08 ... 169,629 171,378 Federal National Mortgage Association, 6.500%, 1/18/16 ... 180,000 181,181 Federal National Mortgage Association, 6.500%, 8/15/16 ... 165,000 167,216 ---------- 883,912 ---------- Health Care -- Products -- 2.7% Bausch & Lomb, Inc., 6.500%, 8/01/05 ..................... 250,000 255,572 ---------- Oil & Gas -- 5.8% Pioneer Natural Resources Co., 6.500%, 1/15/08 ........... USD 250,000 $ 235,720 R & B Falcon Corp., 6.750%, 4/15/05 ...................... 300,000 303,930 ---------- 539,650 ---------- Real Estate Investment Trusts -- 20.3% American Health Properties, Inc., 7.050%, 1/15/02 ........ 65,000 65,668 American Health Properties, Inc., 7.500%, 1/15/07 ........ 275,000 280,621 Excel Realty Trust, Inc., 6.875%, 10/15/04 ............... 165,000 172,555 First Industrial, 7.000%, 12/01/06 ....................... 250,000 251,382 Highwoods Realty LP, 6.750%, 12/01/03 .................... 350,000 349,363 Oasis Residential, Inc., 6.750%, 11/15/01 ................ 350,000 356,013 Trinet Corporate Realty Trust, Inc., 6.750%, 3/01/03 ..... 335,000 350,728 Trinet Corporate Realty Trust, Inc., 7.300%, 5/15/01 ..... 55,000 55,866 ---------- 1,882,196 ---------- Securities -- 4.9% Lehman Brothers Holdings, Inc., 5.750%, 11/15/98 ......... 190,000 189,724 Lehman Brothers Holdings, Inc., 6.125%, 2/01/01 .......... 60,000 58,441 Lehman Brothers Holdings, Inc., 7.125%, 9/15/03 .......... 100,000 100,920 Salomon, Inc., 6.700%, 12/01/98 .......................... 105,000 105,310 ---------- 454,395 ---------- Telecommunications -- 6.6% Cox Communications, Inc., 6.500%, 11/15/02 ............... 165,000 170,422 Intermedia Communications, Inc., 8.600%, 6/01/08 ......... 125,000 123,750 TCI Communications, Inc., 6.875%, 2/15/06 ................ 290,000 314,322 ---------- 608,494 ---------- Textile & Apparel -- 2.2% Tommy Hilfiger Corp., 6.500%, 6/01/03 .................... 200,000 201,300 ---------- Tobacco -- 4.2% Philip Morris Cos., Inc., 7.250%, 9/15/01 ................ 65,000 68,084 RJR Nabisco, Inc., 7.625%, 9/15/03 ....................... 65,000 64,421 RJR Nabisco, Inc., 8.250%, 7/01/04 ....................... 90,000 90,497 RJR Nabisco, Inc., 8.750%, 8/15/05 ....................... 160,000 162,715 ---------- 385,717 ---------- Trucking & Leasing -- 2.3% Amerco, 7.490%, 9/18/01 .................................. 200,000 211,490 ---------- U.S. Government -- 7.0% U.S. Treasury Notes, 5.250%, 8/15/03 ..................... 150,000 156,704 U.S. Treasury Notes, 5.500%, 5/31/00 ..................... 240,000 244,049 U.S. Treasury Notes, 5.500%, 2/15/08 ..................... 100,000 108,172 U.S. Treasury Notes, 5.625%, 2/15/06 ..................... 130,000 140,176 ---------- 649,101 ---------- TOTAL BONDS AND NOTES (Identified Cost $9,211,604) ........................... 8,950,823 ---------- SHORT-TERM INVESTMENT -- 2.0% of Net Assets Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $180,024 on 10/01/98 collateralized by $145,000 U.S. Treasury Bond, 7.500%, due 11/15/16 with a value of $187,594 .......... USD 180,000 180,000 ---------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $180,000) ............................. 180,000 ---------- TOTAL INVESTMENTS -- 98.6% (IDENTIFIED COST $9,391,604) (d) ......................... 9,130,823 Cash and Other Assets, Less Liabilities -- 1.4% .......... 133,053 ---------- NET ASSETS -- 100% ......................................... $9,263,876 ========== (a) See Note 1. (b) Step Bond: Coupon is zero or below market rate for an initial period and then increases at a specified date and rate. (c) All or a portion of income may be received as additional securities. (d) 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. (e) At September 30, 1998, the net unrealized depreciation on investments based on cost of $9,394,082 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 $213,501 and $476,760, respectively, resulting in net unrealized depreciation of $263,259. Key to Abbreviations: CAD: Canadian Dollar USD: United States Dollar See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------- LOOMIS SAYLES INVESTMENT GRADE BOND FUND - ------------------------------------------------------------------------------------------------------- Portfolio of Investments -- As of September 30, 1998
FACE AMOUNT VALUE (A) - ------------------------------------------------------------------------------------------------------- BONDS AND NOTES -- 88.9% of Net Assets NON-CONVERTIBLE BONDS -- 78.3% Canadian -- 22.4% Canadian Government, Zero Coupon Bond, 6/01/21 ........... CAD 150,000 $ 29,712 Canadian Government, Zero Coupon Bond, 6/01/25 ........... 940,000 152,299 MacMillan Bloedel Ltd., 7.700%, 2/15/26 .................. USD 100,000 97,553 New Brunswick FM Project, Zero Coupon Bond, 11/30/27 (step to 6.470% on 5/30/03) 144A (b) (c) ..................... CAD 75,000 37,329 Ontario Hydro, 8.900%, 8/18/22 ........................... 55,000 50,172 Province of Alberta, 5.930%, 9/16/16 ..................... 47,800 33,262 Province of British Columbia, Zero Coupon Bond, 6/09/22 .. 250,000 41,220 Province of British Columbia, Zero Coupon Bond, 8/19/22 .. 605,000 98,641 Province of British Columbia, Zero Coupon Bond, 8/23/24 .. 200,000 29,001 Province of Manitoba, Zero Coupon Bond, 3/05/31 .......... 1,100,000 111,461 Province of Manitoba, 6.500%, 9/22/17 .................... 25,000 17,839 Province of Manitoba, 7.750%, 12/22/25 ................... 55,000 46,218 Province of Ontario, Zero Coupon Bond, 6/02/27 ........... 1,000,000 125,129 Province of Saskatchewan (Certificate of Deposit), Zero Coupon Bond, 2/04/22 ................................... 650,000 111,093 Province of Saskatchewan (Certificate of Deposit), Zero Coupon Bond, 5/30/25 ................................... 215,000 30,359 ---------- 1,011,288 ---------- Communications -- 0.5% Arch Communications Group, Inc., Zero Coupon Bond, 3/15/08 (step to 10.875% on 3/15/01) (b) ............... USD 50,000 23,750 ---------- Computers -- 2.1% Seagate Technology, Inc., 7.450%, 3/01/37 ................ 25,000 25,059 Seagate Technology, Inc., 7.875%, 3/01/17 ................ 75,000 71,532 ---------- 96,591 ---------- Foreign Government/Agency -- 3.7% New South Wales Treasury, Zero Coupon Bond, 11/23/20 ..... AUD 300,000 52,890 Republic of Brazil, 10.125%, 5/15/27 ..................... USD 10,000 6,275 Republic of Brazil C Bond, 8.000%, 4/15/14 PIK (d) ....... 29,005 17,223 Republic of South Africa, 12.500%, 12/21/06 .............. ZAR 400,000 52,256 Republic of South Africa, 13.000%, 8/31/10 ............... 125,000 16,531 Republic of South Africa, 13.500%, 9/15/15 ............... 150,000 20,101 ---------- 165,276 ---------- Foreign Issuer -- 7.4% Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 144A (c) ... USD 50,000 21,578 Pan Pacific Industrial Investment Plc, Zero Coupon Bond, 4/28/07 144A (c) ....................................... 125,000 39,579 PDVSA Finance Ltd., 7.500%, 11/15/28 144A (c) ............ 50,000 41,076 Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 ..... 100,000 34,600 Quezon Power Philippines Co., 8.860%, 6/15/17 ............ 50,000 30,862 Samsung Electronics Co. Ltd., 7.700%, 10/01/27 144A (c) .. 100,000 47,000 Telekom Malaysia Berhad, 7.875%, 8/01/25 144A (c) ........ 125,000 66,261 Tenaga Nasional Berhad, 7.500%, 11/01/25 144A (c) ........ USD 100,000 37,602 Total Access Communication Public Co. Ltd., 8.375%, 11/04/06 144A (c) ...................................... 25,000 14,250 ---------- 332,808 ---------- Government Agencies -- 1.3% Federal National Mortgage Association, Zero Coupon Bond, 10/29/07 ............................................... NZD 200,000 58,720 ---------- Health Care -- Products -- 2.2% Bausch & Lomb, Inc., 7.125%, 8/01/28 ..................... USD 100,000 98,635 ---------- Health Care -- Services -- 2.8% Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 .......... 150,000 126,360 ---------- Home Builders -- 0.5% Pulte Corp., 7.625%, 10/15/17 ............................ 25,000 24,770 ---------- Oil & Gas -- 6.5% Pioneer Natural Resources Co., 7.200%, 1/15/28 ........... 40,000 34,917 R & B Falcon Corp., 7.375%, 4/15/18 ...................... 100,000 95,112 Seagull Energy Corp., 7.500%, 9/15/27 .................... 180,000 163,060 ---------- 293,089 ---------- Paper Products -- 3.2% Mead Corp., 7.125%, 8/01/25 .............................. 50,000 48,014 Westvaco Corp., 7.000%, 8/15/23 .......................... 100,000 95,266 ---------- 143,280 ---------- Rail -- Transport -- 3.5% Louisville & Nashville Railroad Co., 2.875%, 4/01/03 ..... 4,000 3,561 Louisville & Nashville Railroad Co., 3.375%, 4/01/03 ..... 12,000 11,195 Missouri Pacific Railroad Co., 4.250%, 1/01/05 ........... 39,000 35,925 Missouri Pacific Railroad Co., 4.750%, 1/01/20 ........... 34,000 23,120 Missouri Pacific Railroad Co., 4.750%, 1/01/30 ........... 86,000 56,868 Missouri Pacific Railroad Co., 5.000%, 1/01/45 ........... 46,000 28,520 ---------- 159,189 ---------- Real Estate Investment Trusts -- 12.8% First Industrial, 7.500%, 12/01/17 ....................... 100,000 103,012 First Industrial, 7.600%, 7/15/28 ........................ 150,000 141,283 Highwoods Realty LP, 7.500%, 4/15/18 ..................... 50,000 47,456 Security Capital Group, Inc., 7.700%, 6/15/28 144A (c) ... 125,000 117,813 Trinet Corporate Realty Trust, Inc., 7.700%, 7/15/17 ..... 175,000 167,982 ---------- 577,546 ---------- Supranational -- 3.3% International Bank for Reconstruction & Development, Zero Coupon Bond, 8/20/07 ................................... NZD 425,000 123,885 International Bank for Reconstruction & Development, 8.000%, 5/23/07 ........................................ 45,000 24,973 ---------- 148,858 ---------- Textile & Apparel -- 0.5% Kellwood Co., 7.625%, 10/15/17 ........................... USD 25,000 24,405 ---------- Tobacco -- 4.2% Philip Morris Cos., Inc., 7.750%, 1/15/27 ................ 120,000 129,895 RJR Nabisco, Inc., 9.250%, 8/15/13 ....................... 60,000 60,622 ---------- 190,517 ---------- Utilities -- 1.4% Comed Financing II, 8.500%, 1/15/27 ...................... 60,000 64,652 ---------- TOTAL NON-CONVERTIBLE BONDS (Identified Cost $3,721,558) ........................... 3,539,734 ---------- CONVERTIBLE BONDS -- 10.6% Electronics -- 1.5% Thermedics, Inc., Zero Coupon Bond, 6/01/03 ............ 100,000 68,000 ---------- Environmental Services -- 2.1% Thermo TerraTech, Inc., 4.625%, 5/01/03 144A (c) ......... 110,000 95,013 ---------- Foreign Issuer -- 2.2% Banpu Public Co., 2.750%, 4/10/03 ........................ 20,000 12,600 Burns, Philp, 5.500%, 4/30/04 ............................ 20,000 10,200 Samsung Corp., 0.250%, 6/26/06 ........................... 20,000 17,200 Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 ....... 30,000 13,950 Telekom Malaysia Berhad, 4.000%, 10/03/04 ................ 50,000 27,000 Total Access Communication Public Co. Ltd., 2.000%, 5/31/06 ................................................ 30,000 20,700 ---------- 101,650 ---------- Insurance -- 2.0% Loews Corp., 3.125%, 9/15/07 ............................. 115,000 91,425 ---------- Multi-Industry -- 0.5% Thermo Instrument Systems, Inc., 4.500%, 10/15/03 144A (c) 25,000 20,906 ---------- Oil & Gas -- 1.3% Houston Industries, Inc., 6.000%, 3/15/12 ................ 60,000 57,600 ---------- Publishing -- 1.0% Scholastic Corp., 5.000%, 8/15/05 144A (c) ............... 50,000 46,125 ---------- TOTAL CONVERTIBLE BONDS (Identified Cost $536,410) ............................. 480,719 ---------- TOTAL BONDS AND NOTES (Identified Cost $4,257,968) ........................... 4,020,453 ---------- SHARES - ------------------------------------------------------------------------------------------------------- PREFERRED STOCKS -- 7.2% of Net Assets Chemicals -- Major -- 3.0% E.I. du Pont DeNemours & Co., $3.50 ...................... 1,250 90,312 E.I. du Pont DeNemours & Co., $4.50 ...................... 500 45,250 ---------- 135,562 ---------- Oil & Gas -- 0.4% Weatherford International, Inc., 5.000% .................. 500 16,000 ---------- Utilities -- 3.8% Duquesne Light Co., 3.750% ............................... 100 3,550 Duquesne Light Co., 4.000% ............................... 600 20,025 Entergy Gulf States, Inc., $4.52 ......................... 50 3,250 Entergy New Orleans, Inc., 4.750% ........................ 175 14,044 Houston Lighting & Power Co., $4.00 ...................... 79 5,688 Jersey Central Power & Light Co., 4.000% ................. 310 21,080 New York State Electric & Gas Corp., 3.750% .............. 460 28,520 Northern Indiana Public Service Co., 4.250% .............. 210 15,409 Northern States Power Co., $3.60 ......................... 110 7,143 Wisconsin Electric Power Co., 3.600% ..................... 850 53,550 ---------- 172,259 ---------- TOTAL PREFERRED STOCKS (Identified Cost $276,656) ............................. 323,821 ---------- TOTAL INVESTMENTS -- 96.1% (IDENTIFIED COST $4,534,624) (d) ......................... 4,344,274 Cash and Other Assets, Less Liabilities -- 3.9% .......... 176,380 ---------- NET ASSETS -- 100% ......................................... $4,520,654 ========== (a) See Note 1. (b) Step Bond: Coupon is zero or below market rate for an initial period and then increases at a specified date and rate. (c) 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. (d) All or a portion of income may be received as additional securities. (e) At September 30, 1998, the net unrealized depreciation on investments based on cost of $4,534,624 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 $240,603 and $430,953, respectively, resulting in net unrealized depreciation of $190,350. Key to Abbreviations: AUD: Australian Dollar CAD: Canadian Dollar NZD: New Zealand Dollar USD: United States Dollar ZAR: South African Rand See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES MUNICIPAL BOND FUND - ------------------------------------------------------------------------------------------------------ Portfolio of Investments -- As of September 30, 1998
FACE AMOUNT VALUE (a) - ------------------------------------------------------------------------------------------------------ MUNICIPAL BONDS AND NOTES -- 97.6% of Net Assets Alaska -- 1.0% Alaska State Housing Finance Corp., 6.600%, 12/01/15 ..... $ 90,000 $ 96,628 ----------- Arizona -- 1.6% Phoenix Street & Highway User, 6.250%, 7/01/11 ........... 150,000 164,007 ----------- California -- 11.5% California State Department Water Resources, 5.625%, 12/01/12 ....................................... 100,000 107,391 California State Public Works Lease, 5.500%, 6/01/14 ..... 300,000 332,379 Foothill Eastern Transportation Corridor, Zero Coupon Bond, 1/01/23 .......................................... 500,000 144,990 Foothill Eastern Transportation Corridor, 6.000%, 1/01/16 ................................................ 250,000 276,057 Fresno Sewer Revenue, (AMBAC Insured), 6.250%, 9/01/14 ... 250,000 299,655 ----------- 1,160,472 ----------- Connecticut -- 2.1% Connecticut State Resources Recovery Authority, 7.625%, 1/01/09 ..................................... 200,000 207,240 ----------- District of Columbia -- 2.7% District of Columbia Water & Sewer, (FSA Insured), 5.500%, 10/01/11 ....................................... 250,000 275,185 ----------- Florida -- 5.6% Florida State Board of Education, Capital Outlay, 5.000%, 6/01/19 ........................................ 300,000 302,946 Florida State, General Obligation, 5.250%, 7/01/15 ....... 250,000 263,845 ----------- 566,791 ----------- Hawaii -- 5.0% Hawaii State, 4.750%, 4/01/18 ............................ 300,000 297,363 Honolulu, Hawaii, General Obligation, 5.000%, 10/01/13 ... 200,000 209,264 ----------- 506,627 ----------- Illinois -- 14.0% Chicago Metropolitan Water Reclamation, 5.950%, 12/01/07 . 300,000 341,799 Chicago O'Hare International Airport, 5.000%, 1/01/16 .... 300,000 299,634 Chicago, Illinois, General Obligation, (AMBAC Insured), 5.250%, 1/01/15 ........................................ 250,000 260,202 Illinois Development Finance Authority Pollution Control, 7.250%, 6/01/11 ........................................ 25,000 27,048 Illinois State Sales Tax Revenue, 6.375%, 6/15/14 ........ 150,000 169,839 Illinois State Sales Tax Revenue, (FGIC Insured), 5.000%, 6/15/16 ........................................ 300,000 305,523 ----------- 1,404,045 ----------- Louisiana -- 2.1% Regional Transportation Authority, (FGIC Insured), 8.000%, 12/01/08 ....................................... 200,000 205,474 ----------- Maryland -- 2.5% Baltimore Maryland Pollution Control, 5.350%, 4/01/08 .... 225,000 245,655 ----------- Massachusetts -- 2.5% Commonwealth of Massachusetts Water Pollution Control, 5.000%, 8/01/14 ........................................ 250,000 254,913 ----------- Michigan -- 5.1% Detroit, Michigan, (MBIA Insured), 5.000%, 4/01/06 ....... 250,000 265,210 Michigan State Trunk Line, Refunding Series A, 4.750%, 11/01/20 ............................................... 250,000 244,965 ----------- 510,175 ----------- New Jersey -- 5.1% New Jersey Building Authority State Building, 5.750%, 6/15/09 ........................................ 250,000 281,482 New Jersey State Turnpike Authority, 6.500%, 1/01/08 ..... 200,000 232,450 ----------- 513,932 ----------- New York -- 20.4% Long Island Power Authority New York, (FSA Insured), 5.000%, 12/01/18 ....................................... 250,000 253,740 New York City Housing Development Corp., 5.625%, 5/01/12 . 150,000 158,822 New York City Transitional Finance Authority, 5.000%, 8/15/13 ........................................ 200,000 205,740 New York State Certificates of Participation, 5.650%, 8/01/02 . 160,000 169,526 New York State Dormitory Authority, 5.100%, 2/15/12 ...... 250,000 258,230 New York State Dormitory Authority, 6.375%, 7/01/08 ...... 85,000 92,743 New York State Dormitory Authority, 6.500%, 5/15/05 ...... 250,000 285,420 New York State Environmental Pollution Control, 5.150%, 6/15/13 ........................................ 125,000 131,115 New York State Environmental Pollution Control, 5.750%, 6/15/10 ........................................ 250,000 283,302 New York State, General Obligation, 5.250%, 7/15/10 ...... 200,000 213,890 ----------- 2,052,528 ----------- Pennsylvania -- 2.7% Indiana County Pennsylvania Industrial Development Authority, 5.350%, 11/01/10 ............................ 250,000 274,780 ----------- Puerto Rico -- 2.6% Puerto Rico Electric Power Authority, 6.125%, 7/01/09 .... 225,000 258,365 ----------- Rhode Island -- 2.7% Rhode Island Convention Center Authority, (MBIA Insured), 5.000%, 5/15/10 ........................................ 250,000 265,630 ----------- Tennessee -- 0.3% Metropolitan Nashville Airport, (FGIC Insured), 6.600%, 7/01/15 ........................................ 30,000 32,624 ----------- Virginia -- 5.6% Pocahontas Parkway Associates Virginia Toll, 5.000%, 8/15/11 ........................................ 300,000 297,456 Southeastern Public Service Authority Virginia, 5.150%, 7/01/09 ........................................ 250,000 268,125 ----------- 565,581 ----------- Washington -- 2.5% Tacoma, Washington Electric Systems Revenue, (FGIC Insured), 6.100%, 1/01/07 .............................. 225,000 249,917 ----------- TOTAL MUNICIPAL BONDS AND NOTES (Identified Cost $9,183,072)............................ 9,810,569 ----------- SHORT-TERM INVESTMENT -- 1.0% of Net Assets Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $100,013 on 10/01/98 collateralized by $90,000 U.S. Treasury Note, 6.625%, due 5/15/07 with a value of $105,244 ........... 100,000 100,000 ----------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $100,000).............................. 100,000 ----------- TOTAL INVESTMENTS -- 98.6% (IDENTIFIED COST $9,283,072) (b) ....................... 9,910,569 Cash and Other Assets, Less Liabilities -- 1.4% ........ 145,791 ----------- NET ASSETS -- 100% ....................................... $10,056,360 =========== (a) See Note 1. (b) At September 30, 1998, the net unrealized appreciation on investments based on cost of $9,283,072 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 $648,812 and $21,315, respectively, resulting in net unrealized appreciation of $627,497. Key to Abbreviations: AMBAC: American Municipal Bond Assurance Corporation FGIC: Federal Guaranty Insurance Corporation FSA: Financial Security Assurance MBIA: Municipal Bond Insurance Association See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------- LOOMIS SAYLES SHORT-TERM BOND FUND - ------------------------------------------------------------------------------------------------------- Portfolio of Investments -- As of September 30, 1998
FACE AMOUNT VALUE (A) - ------------------------------------------------------------------------------------------------------ BONDS AND NOTES -- 97.7% of Net Assets Aerospace/Defense -- 2.0% Lockheed Martin Corp., 6.550%, 5/15/99 ................... $ 570,000 $ 574,326 ----------- Airlines -- 4.4% Delta Air Lines, Inc., 7.790%, 12/01/98 .................. 800,000 802,920 Northwest Airlines Corp., 8.375%, 3/15/04 ................ 400,000 433,152 ----------- 1,236,072 ----------- Banks/Savings & Loans -- 4.3% Capital One Bank, 6.830%, 5/17/99 ........................ 560,000 564,071 Household Bank FSB, 6.250%, 4/01/99 ...................... 625,000 628,150 ----------- 1,192,221 ----------- Computers -- 2.4% Comdisco, Inc., 5.760%, 1/19/99 .......................... 670,000 669,859 ----------- Consumer Services -- 2.1% Loewen Group International, Inc., 7.750%, 10/15/01 ....... 560,000 588,543 ----------- Diversified Operations -- 3.1% Williams Companies, Inc., 5.950%, 2/15/00 ................ 800,000 855,320 ----------- Electronics -- 1.0% Tektronix, Inc., 7.625%, 8/15/02 ......................... 250,000 269,580 ----------- Entertainment -- 0.7% Time Warner, Inc., 7.950%, 2/01/00 ....................... 200,000 206,546 ----------- Financial Services -- 5.1% Fleetwood Credit Grantor Trust, 6.900%, 3/15/12 .......... 338,390 347,665 Ford Motor Credit Co., 6.125%, 4/28/03 ................... 710,000 735,638 Sears Roebuck Acceptance Corp., 6.950%, 5/15/02 .......... 340,000 358,979 ----------- 1,442,282 ----------- Foreign Issuer -- 2.2% PDVSA Finance Ltd., 6.650%, 2/15/06 ...................... 645,000 610,667 ----------- Government Agencies -- 10.2% Federal Home Loan Mortgage Corp., 6.000%, 2/01/13 ........ 472,542 477,706 Federal Home Loan Mortgage Corp., 6.500%, 5/15/08 ........ 501,876 515,517 Federal National Mortgage Association, 6.000%, 3/01/13 ... 1,080,882 1,092,026 Federal National Mortgage Association, 6.000%, 4/01/13 ... 781,821 789,881 ----------- 2,875,130 ----------- Oil & Gas -- 3.6% Occidental Petroleum Corp., 5.850%, 11/09/98 ............. 500,000 499,995 Occidental Petroleum Corp., 6.400%, 4/01/03 .............. 500,000 506,855 ----------- 1,006,850 ----------- Paper Products -- 1.3% Fort James Corp., 6.625%, 9/15/04 ........................ 360,000 375,412 ----------- Real Estate Investment Trusts -- 0.8% Oasis Residential, Inc., 7.000%, 11/15/03 ................ 200,000 213,010 ----------- Retail -- General -- 1.5% Dillard's, Inc., 6.430%, 8/01/04 ......................... 410,000 432,493 ----------- Securities -- 3.9% Salomon Brothers, Inc., 5.500%, 1/15/99 .................. 640,000 641,139 Salomon Brothers, Inc., 7.125%, 8/01/99 .................. 450,000 456,449 ----------- 1,097,588 ----------- Telecommunications -- 1.7% Sprint Spectrum L.P., Zero Coupon Bond, 8/15/06 (step to 12.500% on 8/15/01) (b) ................................ 560,000 470,400 ----------- Textile & Apparel -- 1.1% Tommy Hilfiger Corp., 6.500%, 6/01/03 .................... 300,000 301,950 ----------- Trucking & Leasing -- 1.6% Amerco, 7.850%, 5/15/03 .................................. 420,000 445,788 ----------- U.S. Government -- 40.4% U.S. Treasury Notes, 6.125%, 7/31/00 ..................... 1,495,000 1,539,850 U.S. Treasury Notes, 6.250%, 10/31/01 .................... 1,000,000 1,052,970 U.S. Treasury Notes, 6.250%, 1/31/02 ..................... 3,245,000 3,431,068 U.S. Treasury Notes, 6.250%, 2/15/03 ..................... 1,265,000 1,360,267 U.S. Treasury Notes, 6.375%, 4/30/99 ..................... 300,000 302,907 U.S. Treasury Notes, 6.625%, 7/31/01 ..................... 900,000 952,875 U.S. Treasury Notes, 6.875%, 8/31/99 ..................... 800,000 815,872 U.S. Treasury Strips, Zero Coupon Bond, 11/15/01 ......... 800,000 699,416 U.S. Treasury Strips, Zero Coupon Bond, 2/15/04 .......... 1,510,000 1,193,912 ----------- 11,349,137 ----------- Utilities -- 4.3% Detroit Edison Co., 6.340%, 3/15/00 ...................... 670,000 681,652 El Paso Electric Co., 7.250%, 2/01/99 .................... 520,000 522,085 ----------- 1,203,737 ----------- TOTAL BONDS AND NOTES (Identified Cost $26,729,072)........................... 27,416,911 ----------- SHORT-TERM INVESTMENT -- 1.5% of Net Assets Repurchase Agreement with State Street Bank and Trust Co., dated 9/30/98 at 4.750% to be repurchased at $432,057 on 10/01/98 collateralized by $310,000 U.S. Treasury Bond, 8.500%, due 2/15/20 with a value of $440,878 ........... 432,000 432,000 ----------- TOTAL SHORT-TERM INVESTMENT (Identified Cost $432,000) ............................. 432,000 ----------- TOTAL INVESTMENTS -- 99.2% (IDENTIFIED COST $27,161,072) (c) ...................... 27,848,911 Cash and Other Assets, Less Liabilities -- 0.8% ........ 212,412 ----------- NET ASSETS -- 100% ....................................... $28,061,323 =========== (a) See Note 1. (b) Step Bond: Coupon is zero or below market rate for an initial period and then increases at a specified date and rate. (c) At September 30, 1998, the net unrealized appreciation on investments based on cost of $27,167,813 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 $716,303 and $35,205, respectively, resulting in net unrealized appreciation of $681,098. See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------ LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND - ------------------------------------------------------------------------------------------------------ Portfolio of Investments -- As of September 30, 1998
FACE AMOUNT VALUE (A) - ------------------------------------------------------------------------------------------------------ BONDS AND NOTES -- 99.0% of Net Assets Government Agencies -- 44.8% Federal Home Loan Bank, Zero Coupon Bond, 8/04/17 ........ $5,400,000 $ 1,214,460 Government National Mortgage Association, 6.500%, 5/15/28 3,312,889 3,386,369 Government National Mortgage Association, 6.500%, 8/15/28 1,298,909 1,327,719 Government National Mortgage Association, 6.500%, 8/15/28 749,342 765,962 Government National Mortgage Association, 7.000%, 1/15/28 957,391 988,200 Government National Mortgage Association, 7.500%, 8/15/26 516,805 535,699 Government National Mortgage Association, 7.500%, 9/15/27 2,051,593 2,126,600 Tennessee Valley Authority, 8.625%, 11/15/29 ............. 2,514,000 2,744,785 ----------- 13,089,794 ----------- U.S. Government -- 54.2% U.S. Treasury Bonds, 3.625%, 4/15/28 (b) ................. 2,797,181 2,789,321 U.S. Treasury Bonds, 6.125%, 11/15/27 .................... 2,050,000 2,363,261 U.S. Treasury Bonds, 7.250%, 5/15/16 ..................... 3,525,000 4,375,406 U.S. Treasury Bonds, 7.500%, 11/15/24 .................... 2,910,000 3,861,657 U.S. Treasury Notes, 3.375%, 1/15/07 (b) ................. 2,265,890 2,231,902 U.S. Treasury Notes, 5.750%, 11/15/00 .................... 235,000 241,425 ----------- 15,862,972 ----------- TOTAL BONDS AND NOTES (Identified Cost $27,584,230) .......................... 28,952,766 ----------- TOTAL INVESTMENTS -- 99.0% (IDENTIFIED COST $27,584,230) (c) ..................... 28,952,766 Cash and Other Assets, Less Liabilities -- 1.0% ...... 293,141 ----------- NET ASSETS -- 100% .......................................... $29,245,907 =========== (a) See Note 1. (b) Treasury Inflation Protection Securities (TIPS): Face amount of these bonds and notes will be adjusted for changes in the level of inflation as indexed to the non-seasonally adjusted consumer price index (CPI). (c) At September 30, 1998, the net unrealized appreciation on investments based on cost of $27,584,230 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 $1,368,536 and $0, respectively, resulting in net unrealized appreciation of $1,368,536. See accompanying notes to financial statements.
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STATEMENTS OF ASSETS AND LIABILITIES - -------------------------------------------------------------------------------------------------------------- AS OF SEPTEMBER 30, 1998 GLOBAL BOND BOND FUND FUND --------------- --------------- ASSETS Investments at value ............................................... $ 1,520,614,110 $ 35,557,694 Cash ............................................................... 260 832 Foreign currency at value .......................................... 61 148 Receivable for: Fund shares sold ................................................. 3,508,700 39,178 Securities sold .................................................. 15,653,125 1,426,405 Dividends and interest -- net .................................... 23,137,217 830,456 Due from the adviser (Note 3) ...................................... 101,445 18,094 Other assets ....................................................... 0 0 --------------- --------------- 1,563,014,918 37,872,807 --------------- --------------- LIABILITIES Payable for: Securities purchased ............................................. 50,641,504 0 Fund shares redeemed ............................................. 1,464,440 1,405 Forward foreign currency exchange contracts (Note 1D) ............ 0 149,024 Dividends declared ............................................... 0 0 Payable to custodian bank .......................................... 0 1,426,405 Accrued expenses: Management fees (Note 3) ......................................... 733,238 17,557 Trustees' fees (Note 3A) ......................................... 1,568 1,568 Administrative fees .............................................. 59,854 1,805 Other .............................................................. 264,443 39,496 --------------- --------------- 53,165,047 1,637,260 --------------- --------------- NET ASSETS ........................................................... $ 1,509,849,871 $ 36,235,547 =============== =============== Net Assets consist of: Capital paid in .................................................. $ 1,551,346,834 $ 37,341,928 Undistributed (or Distribution in excess of) net investment income .............................................. 30,934,988 1,753,479 Accumulated net realized gain (loss) ............................. 41,919,124 853,078 Unrealized appreciation (depreciation) on: Investments .................................................... (114,342,746) (3,588,664) Foreign currency translations .................................. (8,329) (124,274) --------------- --------------- NET ASSETS ........................................................... $ 1,509,849,871 $ 36,235,547 =============== =============== INSTITUTIONAL CLASS: Net assets ......................................................... $ 1,455,312,061 $ 29,859,958 Shares of beneficial interest outstanding, no par value ............ 118,291,602 2,501,977 Net asset vlue redemption price per Institutional share* ........... $ 12.30 $ 11.93 RETAIL CLASS: Net assets ......................................................... $ 53,908,199 $ 6,375,589 Shares of beneficial interest outstanding, no par value ............ 4,386,184 535,150 Net asset vlue redemption price per Retail share* .................. $ 12.29 $ 11.91 ADMIN CLASS: Net assets ......................................................... $ 629,611 -- Shares of beneficial interest outstanding, no par value ............ 51,258 -- Net asset vlue redemption price per Admin share .................... $ 12.28 $ -- Identified cost of investments ....................................... $ 1,634,956,856 $ 39,146,358 =============== =============== * The redemption price per share for the Institutional and Retail Classes of the High Yield Fund for shares held less than one year is equal to net asset value less 2% of the amount redeemed (Note 1I). See accompanying notes to financial statements.
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- ------------------------------------------------------------------------------------------------------------- HIGH INTERMEDIATE INVESTMENT MUNICIPAL SHORT-TERM U.S. GOVERNMENT YIELD MATURITY BOND GRADE BOND BOND SECURITIES FUND FUND BOND FUND FUND FUND FUND ----------- ----------- ----------- ----------- ----------- ----------- $10,260,544 $ 9,130,823 $ 4,344,274 $ 9,910,569 $27,848,911 $28,952,766 926 640 81,883 161 199 34,195 0 0 0 0 0 0 246,815 0 59,966 0 1,793 0 30,917 0 82,244 269,409 0 0 273,506 145,557 60,594 150,581 330,629 427,119 23,428 16,627 18,525 10,861 13,743 9,528 5,158 0 0 0 0 0 ----------- ----------- ----------- ----------- ----------- ----------- 10,841,294 9,293,647 4,647,486 10,341,581 28,195,275 29,423,608 ----------- ----------- ----------- ----------- ----------- ----------- 58,111 0 101,042 247,736 0 0 96,438 0 0 0 88,318 146,907 0 0 0 0 0 0 0 0 0 16,941 13,936 0 0 0 0 0 0 0 5,038 3,047 1,466 3,334 5,721 9,496 1,568 1,568 1,579 1,568 1,568 1,568 643 833 651 421 1,411 1,234 35,083 24,323 22,094 15,221 22,998 18,496 ----------- ----------- ----------- ----------- ----------- ----------- 196,881 29,771 126,832 285,221 133,952 177,701 ----------- ----------- ----------- ----------- ----------- ----------- $10,644,413 $ 9,263,876 $ 4,520,654 $10,056,360 $28,061,323 $29,245,907 =========== =========== =========== =========== =========== =========== $13,413,582 $ 9,274,647 $ 4,568,600 $ 9,278,171 $27,767,646 $27,931,509 330,861 183,124 75,724 9,525 (1,502) 348,449 361,875 66,882 66,608 141,167 (392,660) (402,587) (3,462,025) (260,781) (190,350) 627,497 687,839 1,368,536 120 4 72 0 0 0 ----------- ----------- ----------- ----------- ----------- ----------- $10,644,413 $ 9,263,876 $ 4,520,654 $10,056,360 $28,061,323 $29,245,907 =========== =========== =========== =========== =========== =========== $ 6,624,363 $ 8,601,184 $ 2,778,076 $10,056,360 $27,288,330 $29,245,907 810,885 854,576 270,313 840,667 2,739,693 2,562,661 $ 8.17 $ 10.06 $ 10.28 $ 11.96 $ 9.96 $ 11.41 $ 4,020,050 $ 662,692 $ 1,742,578 -- $ 772,993 -- 492,458 65,903 169,753 -- 77,616 -- $ 8.16 $ 10.06 $ 10.27 -- $ 9.96 -- -- -- -- -- -- ----------- -- -- -- -- -- ----------- -- -- -- -- -- ----------- $13,722,569 $ 9,391,604 $ 4,534,624 $ 9,283,072 $27,161,072 $27,584,230 =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements.
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FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 GLOBAL BOND BOND FUND FUND --------------- --------------- INVESTMENT INCOME Dividends* ......................................................... $ 1,170,034 $ 3,104 Interest ........................................................... 92,192,719 1,791,344 --------------- --------------- 93,362,753 1,794,448 --------------- --------------- Expenses Management fees (Note 3) ......................................... 6,920,645 155,995 12b-1 fees (Retail Class) ........................................ 90,481 9,472 12b-1 fees (Admin Class) ......................................... 284 0 Trustees' fees and expenses (Note 3A) ............................ 4,210 4,249 Administrative fees .............................................. 543,148 14,509 Custodian and accounting fees .................................... 346,393 58,067 Transfer agent fees (Institutional Class) ........................ 249,079 13,804 Transfer agent fees (Retail Class) ............................... 26,998 15,329 Transfer agent fees (Admin Class) ................................ 5,975 0 Audit and tax services fees ...................................... 38,980 23,683 Registration fees ................................................ 316,927 20,879 Amortization of organization expenses (Note 1J): Institutional Class ............................................ 0 0 Amortization of deferred registration costs (Note 1J): Institutional Class ............................................ 0 0 Retail Class ................................................... 574 485 Other expenses ................................................... 310,716 12,923 --------------- --------------- Total expenses ................................................... 8,854,410 329,395 Less expenses waived and reimbursed by the investment adviser (Note 3) ............................................... (112,593) (85,930) --------------- --------------- Net expenses ..................................................... 8,741,817 243,465 --------------- --------------- Net investment income .............................................. 84,620,936 1,550,983 --------------- --------------- NET REALIZED GAIN (LOSS) ON: Investments ........................................................ 33,419,958 797,698 Foreign currency transactions ...................................... (290,148) 299,618 --------------- --------------- Total net realized gain (loss) ..................................... 33,129,810 1,097,316 --------------- --------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments ........................................................ (145,219,192) (2,246,596) Foreign currency translations ...................................... 59,219 (271,530) --------------- --------------- Total net change in unrealized appreciation (depreciation) ................................................... (145,159,973) (2,518,126) --------------- --------------- Total net realized gain (loss) and change in unrealized appreciation (depreciation) ...................................... (112,030,163) (1,420,810) --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............ $ (27,409,227) $ 130,173 =============== =============== * Net of foreign withholding taxes of $463 for the High Yield Fund. See accompanying notes to financial statements.
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- ------------------------------------------------------------------------------------------------------------- HIGH INTERMEDIATE INVESTMENT MUNICIPAL SHORT-TERM U.S. GOVERNMENT YIELD MATURITY BOND GRADE BOND BOND SECURITIES FUND FUND BOND FUND FUND FUND FUND ----------- ----------- ----------- ----------- ----------- ----------- $ 54,959 $ 0 $ 10,801 $ 0 $ 0 $ 0 893,606 462,506 211,560 366,941 1,181,688 1,008,898 ----------- ----------- ----------- ----------- ----------- ----------- 948,565 462,506 222,361 366,941 1,181,688 1,008,898 ----------- ----------- ----------- ----------- ----------- ----------- 50,667 25,473 12,300 28,142 45,845 65,031 9,690 1,017 2,453 0 694 0 0 0 0 0 0 0 4,249 4,249 4,221 4,249 4,249 4,249 6,672 5,918 4,429 3,243 7,865 7,783 52,928 44,503 46,365 36,206 44,711 30,162 13,647 13,810 13,502 13,740 14,308 13,932 13,936 13,590 13,668 0 13,602 0 0 0 0 0 0 0 27,183 18,858 18,858 15,234 15,333 15,233 25,873 21,511 15,990 11,402 19,435 13,433 1,280 0 0 0 0 0 0 5,191 738 0 0 0 522 336 298 0 784 0 7,611 3,749 6,442 7,068 0 8,596 ----------- ----------- ----------- ----------- ----------- ----------- 214,258 158,205 139,264 119,284 166,826 158,419 (141,220) (122,162) (119,899) (77,070) (74,443) (60,872) ----------- ----------- ----------- ----------- ----------- ----------- 73,038 36,043 19,365 42,214 92,383 97,547 ----------- ----------- ----------- ----------- ----------- ----------- 875,527 426,463 202,996 324,727 1,089,305 911,351 ----------- ----------- ----------- ----------- ----------- ----------- 281,516 67,050 48,174 145,955 27,770 513,739 (1,244) 0 (1,276) 0 0 0 ----------- ----------- ----------- ----------- ----------- ----------- 280,272 67,050 46,898 145,955 27,770 513,739 ----------- ----------- ----------- ----------- ----------- ----------- (3,203,309) (224,308) (283,786) 92,266 531,158 750,226 171 4 249 0 0 0 ----------- ----------- ----------- ----------- ----------- ----------- (3,203,138) (224,304) (283,537) 92,266 531,158 750,226 ----------- ----------- ----------- ----------- ----------- ----------- (2,922,866) (157,254) (236,639) 238,221 558,928 1,263,965 ----------- ----------- ----------- ----------- ----------- ----------- $(2,047,339) $ 269,209 $ (33,643) $ 562,948 $ 1,648,233 $ 2,175,316 =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements.
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FOR THE YEAR ENDED DECEMBER 31, 1997 GLOBAL BOND BOND FUND FUND --------------- --------------- INVESTMENT INCOME Dividends* ......................................................... $ 2,009,993 $ 6,786 Interest ........................................................... 71,767,785 2,009,694 --------------- --------------- 73,777,778 2,016,480 --------------- --------------- Expenses Management fees (Note 3) ......................................... 5,460,675 178,622 12b-1 fees (Retail Class) ........................................ 43,311 7,484 Trustees' fees and expenses (Note 3A) ............................ 5,929 5,816 Administrative fees (Note 3C) .................................... 449,885 11,644 Custodian and accounting fees .................................... 328,497 75,735 Transfer agent fees (Institutional Class) ........................ 333,172 25,267 Transfer agent fees (Retail Class) ............................... 33,873 21,667 Audit and tax services fees ...................................... 29,122 25,091 Registration fees ................................................ 219,956 27,724 Amortization of organization expenses (Note 1J): Institutional Class ............................................ 0 0 Amortization of deferred registration costs (Note 1J): Institutional Class ............................................ 0 0 Retail Class ................................................... 13,394 11,343 Other expenses ................................................... 148,525 8,467 --------------- --------------- Total expenses ................................................... 7,066,339 398,860 Less expenses waived and reimbursed by the investment adviser (Note 3) ............................................... (197,170) (123,445) --------------- --------------- Net expenses ..................................................... 6,869,169 275,415 --------------- --------------- Net investment income (loss) ....................................... 66,908,609 1,741,065 --------------- --------------- NET REALIZED GAIN (LOSS) ON: Investments ........................................................ 27,841,001 699,462 Foreign currency transactions ...................................... (159,264) 276,509 --------------- --------------- Total net realized gain (loss) ..................................... 27,681,737 975,971 --------------- --------------- CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON: Investments ........................................................ 12,005,127 (2,303,180) Foreign currency translations ...................................... (58,201) 154,594 --------------- --------------- Total net change in unrealized appreciation (depreciation) ......... 11,946,926 (2,148,586) --------------- --------------- Total net realized gain (loss) and change in unrealized appreciation (depreciation) ...................................... 39,628,663 (1,172,615) --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ............ $ 106,537,272 $ 568,450 =============== =============== * Net of foreign withholding taxes of $5,732, $1,696, and $182 for the Bond, Global Bond, and High Yield Funds, respectively. ** Commencement of operations, January 2, 1997. See accompanying notes to financial statements.
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- ------------------------------------------------------------------------------------------------------------- HIGH INTERMEDIATE INVESTMENT MUNICIPAL SHORT-TERM U.S. GOVERNMENT YIELD MATURITY BOND GRADE BOND BOND SECURITIES FUND FUND BOND FUND FUND FUND FUND ----------- ----------- ----------- ----------- ----------- ----------- $ 43,956 $ 0 $ 5,939 $ 0 $ 0 $ 0 507,793 298,034 151,002 469,008 1,127,685 948,463 ----------- ----------- ----------- ----------- ----------- ----------- 551,749 298,034 156,941 469,008 1,127,685 948,463 ----------- ----------- ----------- ----------- ----------- ----------- 34,062 17,125 8,585 34,082 41,211 55,096 4,264 342 885 0 449 0 5,816 5,540 5,729 5,816 5,816 5,816 2,892 2,158 1,097 3,960 7,470 6,187 63,118 51,290 56,182 46,480 60,751 36,450 19,019 17,690 18,951 21,061 23,997 22,052 20,947 16,502 18,251 0 18,437 0 21,091 14,175 14,175 21,091 23,091 21,091 31,176 18,055 18,651 15,057 23,483 15,953 1,545 0 0 0 892 0 10,657 20,550 21,851 0 0 0 11,385 481 3,670 0 11,140 0 6,852 8,084 7,230 5,894 9,399 7,086 ----------- ----------- ----------- ----------- ----------- ----------- 232,824 171,992 175,257 153,441 226,136 169,731 (185,981) (147,955) (162,568) (102,318) (143,266) (87,087) ----------- ----------- ----------- ----------- ----------- ----------- 46,843 24,037 12,689 51,123 82,870 82,644 ----------- ----------- ----------- ----------- ----------- ----------- 504,906 273,997 144,252 417,885 1,044,815 865,819 ----------- ----------- ----------- ----------- ----------- ----------- 281,905 34,360 53,364 70,207 4,131 377,725 (451) 0 (150) 0 0 0 ----------- ----------- ----------- ----------- ----------- ----------- 281,454 34,360 53,214 70,207 4,131 377,725 ----------- ----------- ----------- ----------- ----------- ----------- (263,120) (36,473) 93,436 291,399 82,076 420,082 (34) 0 (177) 0 0 0 ----------- ----------- ----------- ----------- ----------- ----------- (263,154) (36,473) 93,259 291,399 82,076 420,082 ----------- ----------- ----------- ----------- ----------- ----------- 18,300 (2,113) 146,473 361,606 86,207 797,807 ----------- ----------- ----------- ----------- ----------- ----------- $ 523,206 $ 271,884 $ 290,725 $ 779,491 $ 1,131,022 $ 1,663,626 =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - ---------------------------------------------------------------------------------------------------------------
BOND FUND --------------------------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 -------------- -------------- -------------- FROM OPERATIONS Net investment income ..................... $ 84,620,936 $ 66,908,609 $ 29,104,161 Net realized gain (loss) .................. 33,129,810 27,681,737 9,930,396 Change in unrealized appreciation (depreciation) .......................... (145,159,973) 11,946,926 1,537,274 -------------- -------------- -------------- Increase (decrease) in net assets from operations ............................ (27,409,227) 106,537,272 40,571,831 -------------- -------------- -------------- FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ................... (51,713,345) (65,355,045) (28,834,672) Net realized gain on investments ........ 0 (20,396,586) (10,362,123) RETAIL CLASS Net investment income ................... (1,623,641) (1,374,734) 0 Net realized gain on investments ........ 0 (518,253) 0 ADMIN CLASS Net investment income ................... (5,149) 0 0 -------------- -------------- -------------- (53,342,135) (87,644,618) (39,196,795) -------------- -------------- -------------- FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Increase (decrease) in net assets derived from capital share transactions ............................ 295,451,399 735,013,367 284,158,620 -------------- -------------- -------------- Total increase (decrease) in net assets ... 214,700,037 753,906,021 285,533,656 NET ASSETS Beginning of the period ................... 1,295,149,834 541,243,813 255,710,157 -------------- -------------- -------------- End of the period ......................... $1,509,849,871 $1,295,149,834 $ 541,243,813 ============== ============== ============== UNDISTRIBUTED NET INVESTMENT INCOME End of the period ...................... $ 30,934,988 $ (72,275) $ 537,972 ============== ============== ============== See accompanying notes to financial statements.
- --------------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - --------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - ---------------------------------------------------------------------------------------------------------------
GLOBAL BOND FUND --------------------------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ------------ ------------ ------------ FROM OPERATIONS Net investment income ..................... $ 1,550,983 $ 1,741,065 $ 1,015,932 Net realized gain (loss) .................. 1,097,316 975,971 848,733 Change in unrealized appreciation (depreciation) .......................... (2,518,126) (2,148,586) 503,763 ------------ ------------ ------------ Increase (decrease) in net assets from operations ............................ 130,173 568,450 2,368,428 ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ................... 0 (1,536,299) (1,502,252) In excess of net investment income ...... 0 (277,442) 0 RETAIL CLASS Net investment income ................... 0 (205,307) 0 In excess of net investment income ...... 0 (34,122) 0 ------------ ------------ ------------ 0 (2,053,170) (1,502,252) ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Increase (decrease) in net assets derived from capital share transactions ......... 3,010,563 8,066,659 15,342,391 ------------ ------------ ------------ Total increase (decrease) in net assets ... 3,140,736 6,581,939 16,208,567 NET ASSETS Beginning of the period ................... 33,094,811 26,512,872 10,304,305 ------------ ------------ ------------ End of the period ......................... $ 36,235,547 $ 33,094,811 $ 26,512,872 ============ ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period ......................... $ 1,753,479 $ (156,023) $ (34,950) ============ ============ ============ See accompanying notes to financial statements.
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HIGH YIELD FUND --------------------------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996* ------------ ------------ ------------ FROM OPERATIONS Net investment income ..................... $ 875,527 $ 504,906 $ 37,520 Net realized gain (loss) .................. 280,272 281,454 (36) Change in unrealized appreciation (depreciation) .......................... (3,203,138) (263,154) 4,387 ------------ ------------ ------------ Increase (decrease) in net assets from operations ............................ (2,047,339) 523,206 41,871 ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net Investment Income ................... (283,957) (358,018) (36,708) Net realized gain on investments ........ 0 (122,085) 0 RETAIL CLASS Net investment income ................... (259,684) (165,367) 0 Net realized gain on investments ........ 0 (77,373) 0 ------------ ------------ ------------ (543,641) (722,843) (36,708) ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Increase (decrease) in net assets derived from capital share transactions ......... 4,814,422 6,653,668 1,933,717 ------------ ------------ ------------ Redemption Fees (Note 1I) ............... 13,317 14,733 0 ------------ ------------ ------------ Total increase (decrease) in net assets ... 2,236,759 6,468,764 1,938,880 NET ASSETS Beginning of the period ................... 8,407,654 1,938,890 10 ------------ ------------ ------------ End of the period ......................... $ 10,644,413 $ 8,407,654 $ 1,938,890 ============ ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period ......................... $ 330,861 $ (313) $ 8,960 ============ ============ ============ * Commencement of operations on September 11, 1996. See accompanying notes to financial statements.
- ---------------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ---------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - ----------------------------------------------------------------------------------------------------------------
INTERMEDIATE MATURITY BOND FUND -------------------------------------- NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1998 1997* ------------ ------------ FROM OPERATIONS Net investment income .............................................. $ 426,463 $ 273,997 Net realized gain (loss) ........................................... 67,050 34,360 Change in unrealized appreciation (depreciation) ................... (224,304) (36,473) ------------ ------------ Increase (decrease) in net assets from operations ................ 269,209 271,884 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ............................................ (255,807) (261,480) In excess of net investment income ............................... 0 (21,107) Net realized gain on investments ................................. 0 (9,770) RETAIL CLASS Net investment income ............................................ (15,521) (12,922) In excess of net investment income ............................... 0 (1,154) Net realized gain on investments ................................. 0 (660) ------------ ------------ (271,328) (307,093) ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Increase (decrease) in net assets derived from capital share transactions ............................................... 2,538,483 6,762,701 ------------ ------------ Total increase (decrease) in net assets ............................ 2,536,364 6,727,492 NET ASSETS Beginning of the period ............................................ 6,727,512 20 ------------ ------------ End of the period .................................................. $ 9,263,876 $ 6,727,512 ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period .................................................. $ 183,124 $ (768) ============ ============ * Commencement of operations on January 2, 1997. See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - ------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND -------------------------------------- NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, 1998 1997* ------------ ------------ FROM OPERATIONS Net investment income .............................................. $ 202,996 $ 144,252 Net realized gain (loss) ........................................... 46,898 53,214 Change in unrealized appreciation (depreciation) ................... (283,537) 93,259 ------------ ------------ Increase (decrease) in net assets from operations ................ (33,643) 290,725 ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ............................................ (87,749) (116,549) In excess of net investment income ............................... 0 (18,144) Net realized gain on investments ................................. 0 (26,811) RETAIL CLASS Net investment income ............................................ (39,214) (27,969) In excess of net investment income ............................... 0 (5,864) Net realized gain on investments ................................. 0 (9,286) ------------ ------------ (126,963) (204,623) ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Increase (decrease) in net assets derived from capital share transactions ............................................... 1,374,285 3,220,853 ------------ ------------ Total increase (decrease) in net assets ............................ 1,213,679 3,306,955 NET ASSETS Beginning of the period ............................................ 3,306,975 20 ------------ ------------ End of the period .................................................. $ 4,520,654 $ 3,306,975 ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period .................................................. $ 75,724 $ (44) ============ ============ * Commencement of operations on January 2, 1997. See accompanying notes to financial statements.
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MUNICIPAL BOND FUND --------------------------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ------------ ------------ ------------ FROM OPERATIONS Net investment income ..................... $ 324,727 $ 417,885 $ 372,837 Net realized gain (loss) .................. 145,955 70,207 54,589 Change in unrealized appreciation (depreciation) .......................... 92,266 291,399 (147,252) ------------ ------------ ------------ Increase (decrease) in net assets from operations ............................ 562,948 779,491 280,174 ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ................... (324,727) (421,574) (372,889) Net realized gain on investments ........ (11,732) (76,418) (65,728) ------------ ------------ ------------ (336,459) (497,992) (438,617) ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Increase (decrease) in net assets derived from capital share transactions ......... 1,077,927 (230,703) 898,750 ------------ ------------ ------------ Total increase (decrease) in net assets ... 1,304,416 50,796 740,307 NET ASSETS Beginning of the period ................... 8,751,944 8,701,148 7,960,841 ------------ ------------ ------------ End of the period ......................... $ 10,056,360 $ 8,751,944 $ 8,701,148 ============ ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period ......................... $ 9,525 $ 0 $ 3,777 ============ ============ ============ See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------------------------------------
SHORT-TERM BOND FUND --------------------------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ------------ ------------ ------------ FROM OPERATIONS Net investment income ..................... $ 1,089,305 $ 1,044,815 $ 1,145,418 Net realized gain (loss) .................. 27,770 4,131 (48,327) Change in unrealized appreciation (depreciation) .......................... 531,158 82,076 (248,733) ------------ ------------ ------------ Increase (decrease) in net assets from operations ............................ 1,648,233 1,131,022 848,358 ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ................... (1,073,593) (1,046,180) (1,145,361) RETAIL CLASS Net investment income ................... (15,712) (10,909) 0 ------------ ------------ ------------ (1,089,305) (1,057,089) (1,145,361) ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Increase (decrease) in net assets derived from capital share transactions ......... 8,425,891 773,904 (7,513,762) ------------ ------------ ------------ Total increase (decrease) in net assets ... 8,984,819 847,837 (7,810,765) NET ASSETS Beginning of the period ................... 19,076,504 18,228,667 26,039,432 ------------ ------------ ------------ End of the period ......................... $ 28,061,323 $ 19,076,504 $ 18,228,667 ============ ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period ......................... $ (1,502) $ (3,124) $ 10,736 ============ ============ ============ See accompanying notes to financial statements.
- ------------------------------------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES FUND --------------------------------------------------------------- NINE MONTHS ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, DECEMBER 31, DECEMBER 31, 1998 1997 1996 ------------ ------------ ------------ FROM OPERATIONS Net investment income ..................... $ 911,351 $ 865,819 $ 1,351,371 Net realized gain (loss) .................. 513,739 377,725 (716,728) Change in unrealized appreciation (depreciation) .......................... 750,226 420,082 (437,793) ------------ ------------ ------------ Increase (decrease) in net assets from operations ............................ 2,175,316 1,663,626 196,850 ------------ ------------ ------------ FROM DISTRIBUTIONS TO SHAREHOLDERS INSTITUTIONAL CLASS Net investment income ................... (566,117) (857,571) (1,334,711) ------------ ------------ ------------ FROM CAPITAL SHARE TRANSACTIONS (NOTE 6) Increase (decrease) in net assets derived from capital share transactions ......... 9,968,273 2,670,263 (4,169,172) ------------ ------------ ------------ Total increase (decrease) in net assets ... 11,577,472 3,476,318 (5,307,033) NET ASSETS Beginning of the period ................... 17,668,435 14,192,117 19,499,150 ------------ ------------ ------------ End of the period ......................... $ 29,245,907 $ 17,668,435 $ 14,192,117 ============ ============ ============ UNDISTRIBUTED NET INVESTMENT INCOME End of the period ......................... $ 348,449 $ 3,216 $ (4,942) ============ ============ ============ See accompanying notes to financial statements.
- ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
BOND FUND --------------------------------------------- INSTITUTIONAL CLASS --------------------------------------------- 1998* 1997 1996 ----------- ----------- ----------- Net asset value, beginning of period ................ $ 12.83 $ 12.38 $ 12.29 ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS -- Net investment income (loss) ...................... 0.69 0.86 0.86 Net realized and unrealized gain (loss) on investments ..................................... (0.78) 0.67 0.35 ----------- ----------- ----------- Total from investment operations ................ (0.09) 1.53 1.21 ----------- ----------- ----------- LESS DISTRIBUTIONS -- Dividends from net investment income .............. (0.44) (0.86) (0.86) Distributions in excess of net investment income .. 0.00 0.00 0.00 Distributions from net realized capital gains ..... 0.00 (0.22) (0.26) ----------- ----------- ----------- Total distributions ............................. (0.44) (1.08) (1.12) ----------- ----------- ----------- Net asset value, end of period ...................... $ 12.30 $ 12.83 $ 12.38 =========== =========== =========== Total return (%)(a)(b) .............................. (0.9) 12.7 10.3 Net assets, end of period (000) ..................... $ 1,455,312 $ 1,261,910 $ 541,244 Ratio of operating expenses to average net assets (%)(c)(d) .................................. 0.75 0.75 0.75 Ratio of net investment income to average net assets (%)(c) ..................................... 7.34 7.36 7.93 Portfolio turnover rate (%)(a) ...................... 24 41 42 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) ................. 0.76 0.77 0.75 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ......................................... $ 0.69 $ 0.85 $ 0.86 * 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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BOND FUND - ----------------------------------------------------------------------------------------------- ADMIN INSTITUTIONAL CLASS RETAIL CLASS CLASS - -------------------------------------------- ---------------------------- ------------ 1995 1994 1993 1998* 1997** 1998*** - ----------- ----------- ----------- ----------- ----------- ----------- $ 10.05 $ 11.37 $ 10.36 $ 12.82 $ 12.38 $ 12.83 - ----------- ----------- ----------- ----------- ----------- ----------- 0.82 0.83 0.84 0.66 0.84(e) 0.47 2.32 (1.29) 1.43 (0.77) 0.65 (0.62) - ----------- ----------- ----------- ----------- ----------- ----------- 3.14 (0.46) 2.27 (0.11) 1.49 (0.15) - ----------- ----------- ----------- ----------- ----------- ----------- (0.82) (0.84) (0.81) (0.42) (0.83) (0.40) 0.00 (0.02) 0.00 0.00 0.00 0.00 (0.08) 0.00 (0.45) 0.00 (0.22) 0.00 - ----------- ----------- ----------- ----------- ----------- ----------- (0.90) (0.86) (1.26) (0.42) (1.05) (0.40) - ----------- ----------- ----------- ----------- ----------- ----------- $ 12.29 $ 10.05 $ 11.37 $ 12.29 $ 12.82 $ 12.28 =========== =========== =========== =========== =========== =========== 32.0 (4.1) 22.2 (1.1) 12.4 (1.3) $ 255,710 $ 82,985 $ 64,222 $ 53,908 $ 33,240 $ 630 0.79 0.84 0.94 1.00 1.00 1.25 8.34 7.92 8.26 7.13 7.09 7.45 35 87 170 24 41 24 0.79 0.84 0.94 1.06 1.20 6.32 $ 0.82 $ 0.83 $ 0.84 $ 0.66 $ 0.82(e) $ 0.15
- ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
GLOBAL BOND FUND ---------------------------- INSTITUTIONAL CLASS ---------------------------- 1998* 1997 ----------- ----------- Net asset value, beginning of period ........................... $ 11.83 $ 12.35 ----------- ----------- INCOME FROM INVESTMENT OPERATIONS -- Net investment income (loss) ................................. 0.53 0.71 Net realized and unrealized gain (loss) on investments ....... (0.43) (0.42) ----------- ----------- Total from investment operations ........................... 0.10 0.29 ----------- ----------- LESS DISTRIBUTIONS -- Dividends from net investment income ......................... 0.00 (0.69) Distributions in excess of net investment income ............. 0.00 (0.12) Distributions from capital ................................... 0.00 0.00 Distributions from net realized capital gains ................ 0.00 0.00 ----------- ----------- Total distributions ........................................ 0.00 (0.81) ----------- ----------- Net asset value, end of period ................................. $ 11.93 $ 11.83 =========== =========== Total return (%)(a)(b) ......................................... 0.9 2.3 Net assets, end of period (000) ................................ $ 29,860 $ 28,401 Ratio of operating expenses to average net assets (%)(c)(d) .... 0.90 0.90 Ratio of net investment income to average net assets (%)(c) .... 6.00 5.88 Portfolio turnover rate (%)(a) ................................. 28 75 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 1.22 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ............................. $ 0.51 $ 0.67 * 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 FIXED INCOME FUNDS - -------------------------------------------------------------------------------
GLOBAL BOND FUND - ----------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS - ------------------------------------------------------------- ---------------------------- 1996 1995 1994 1993 1998* 1997** - ----------- ----------- ----------- ----------- ----------- ----------- $ 11.39 $ 9.82 $ 11.06 $ 10.32 $ 11.83 $ 12.35 - ----------- ----------- ----------- ----------- ----------- ----------- 0.44 1.04 0.67 0.54 0.44 0.63(e) 1.27 1.31 (1.63) 0.96 (0.36) (0.37) - ----------- ----------- ----------- ----------- ----------- ----------- 1.71 2.35 (0.96) 1.50 0.08 0.26 - ----------- ----------- ----------- ----------- ----------- ----------- (0.75) (0.78) (0.04) (0.49) 0.00 (0.69) 0.00 0.00 0.00 0.00 0.00 (0.09) 0.00 0.00 (0.24) 0.00 0.00 0.00 0.00 0.00 0.00 (0.27) 0.00 0.00 - ----------- ----------- ----------- ----------- ----------- ----------- (0.75) (0.78) (0.28) (0.76) 0.00 (0.78) - ----------- ----------- ----------- ----------- ----------- ----------- $ 12.35 $ 11.39 $ 9.82 $ 11.06 $ 11.91 $ 11.83 =========== =========== =========== =========== =========== =========== 15.0 23.9 (8.7) 14.6 0.7 2.0 $ 26,513 $ 10,304 $ 25,584 $ 21,378 $ 6,376 $ 4,694 1.50 1.50 1.30 1.50 1.15 1.15 6.37 8.17 7.02 5.54 5.77 5.60 131 148 153 150 28 75 1.77 1.69 1.30 1.51 1.78 2.44 $ 0.42 $ 1.02 $ 0.67 $ 0.54 $ 0.39 $ 0.49(e)
- ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Year Ended December 31, HIGH YIELD FUND ------------ INSTITUTIONAL CLASS ------------ 1998* ------------ Net asset value, beginning of period ........................... $ 10.12 --------- INCOME FROM INVESTMENT OPERATIONS -- Net investment income (loss) ................................. 0.78(e) Net realized and unrealized gain (loss) on investments ....... (2.28) --------- Total from investment operations ........................... (1.50) --------- LESS DISTRIBUTIONS -- Dividends from net investment income ......................... (0.46) Distributions from net realized capital gains ................ 0.00 --------- Total distributions ........................................ (0.46) --------- Redemption Fees .............................................. 0.01 --------- Net asset value, end of period ................................. $ 8.17 ========= Total return (%)(a)(b) ......................................... (15.6) Net assets, end of period (000) ................................ $ 6,624 Ratio of operating expenses to average net assets (%)(c)(d) .... 0.75 Ratio of net investment income to average net assets (%)(c) .... 10.54 Portfolio turnover rate (%)(a) ................................. 33 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) .... 2.42 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been .................. $ 0.65(e) * For the nine months ended September 30, 1998. ** Commencement of operations on September 11, 1996, and January 2, 1997, for the Institutional and Retail Classes, respectively. (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 FIXED INCOME FUNDS - -------------------------------------------------------------- HIGH YIELD FUND - -------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS - --------------------------- ---------------------------- 1997 1996** 1998* 1997** - ----------- ----------- ----------- ----------- $ 10.11 $ 10.00 $ 10.12 $ 10.11 - ----------- ----------- ----------- ----------- 0.83 0.20 0.75(e) 0.85(e) 0.27 0.11 (2.27) 0.23 - ----------- ----------- ----------- ----------- 1.10 0.31 (1.52) 1.08 - ----------- ----------- ----------- ----------- (0.86) (0.20) (0.45) (0.84) (0.26) 0.00 0.00 (0.26) - ----------- ----------- ----------- ----------- (1.12) (0.20) (0.45) (1.10) - ----------- ----------- ----------- ----------- 0.03 0.00 0.01 0.03 - ----------- ----------- ----------- ----------- $ 10.12 $ 10.11 $ 8.16 $ 10.12 =========== =========== =========== =========== 11.4 3.1 (15.8) 11.2 $ 5,266 $ 1,939 $ 4,020 $ 3,141 0.75 0.75 1.00 1.00 8.96 8.85 10.17 8.75 68 0 33 68 3.81 12.06 2.67 4.79 $ 0.54 $ (0.05) $ 0.63(e) $ 0.48(e) - ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Year Ended December 31,
INTERMEDIATE MATURITY BOND FUND ----------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS ---------------------------- ---------------------------- 1998* 1997** 1998* 1997** ----------- ----------- ----------- ----------- Net asset value, beginning of period .................. $ 10.03 $ 10.00 $ 10.03 $ 10.00 ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS -- Net investment income (loss) (e) .................... 0.51 0.64 0.49 0.64 Net realized and unrealized gain (loss) on investments ....................................... (0.16) 0.00 (0.15) (0.02) ----------- ----------- ----------- ----------- Total from investment operations .................. 0.35 0.64 0.34 0.62 ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS -- Dividends from net investment income ................ (0.32) (0.56) (0.31) (0.54) Distributions in excess of net investment income .... 0.00 (0.03) 0.00 (0.03) Distributions from net realized capital gains ....... 0.00 (0.02) 0.00 (0.02) ----------- ----------- ----------- ----------- Total distributions ............................... (0.32) (0.61) (0.31) (0.59) ----------- ----------- ----------- ----------- Net asset value, end of period ........................ $ 10.06 $ 10.03 $ 10.06 $ 10.03 =========== =========== =========== =========== Total return (%)(a)(b) ................................ 3.5 6.4 3.4 6.2 Net assets, end of period (000) ....................... $ 8,601 $ 6,305 $ 663 $ 423 Ratio of operating expenses to average net assets (%)(c)(d) ........................................... 0.55 0.55 0.80 0.80 Ratio of net investment income to average net assets (%)(c) .............................................. 6.71 6.38 6.47 6.13 Portfolio turnover rate (%)(a) ........................ 32 119 32 119 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) .............................. 2.27 3.66 5.64 14.56 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been (e) ....................................... $ 0.38 $ 0.29 $ 0.12 $ (0.50) * 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.
- ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
INVESTMENT GRADE BOND FUND --------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS ---------------------------- ---------------------------- 1998* 1997** 1998* 1997** ----------- ----------- ----------- ----------- Net asset value, beginning of period .................. $ 10.59 $ 10.00 $ 10.59 $ 10.00 ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS -- Net investment income (loss) ........................ 0.52 0.65 0.48 0.62(e) Net realized and unrealized gain (loss) on investments ....................................... (0.50) 0.77 (0.49) 0.78 ----------- ----------- ----------- ----------- Total from investment operations .................. 0.02 1.42 (0.01) 1.40 ----------- ----------- ----------- ----------- LESS DISTRIBUTIONS -- Dividends from net investment income ................ (0.33) (0.63) (0.31) (0.62) Distributions in excess of net investment income .... 0.00 (0.08) 0.00 (0.07) Distributions from net realized capital gains ....... 0.00 (0.12) 0.00 (0.12) ----------- ----------- ----------- ----------- Total distributions ............................... (0.33) (0.83) (0.31) (0.81) ----------- ----------- ----------- ----------- Net asset value, end of period ........................ $ 10.28 $ 10.59 $ 10.27 $ 10.59 =========== =========== =========== =========== Total return (%)(a)(b) ................................ 0.0 14.5 (0.2) 14.3 Net assets, end of period (000) ....................... $ 2,778 $ 2,445 $ 1,743 $ 862 Ratio of operating expenses to average net assets (%)(c)(d) ........................................... 0.55 0.55 0.80 0.80 Ratio of net investment income to average net assets (%)(c) .............................................. 6.68 6.74 6.43 6.51 Portfolio turnover rate (%)(a) ........................ 48 112 48 112 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) .............................. 4.19 7.59 5.25 10.95 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ........................................... $ 0.24 $ (0.03) $ 0.15 $ (0.31)(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.
- ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
MUNICIPAL BOND FUND ----------------------- INSTITUTIONAL CLASS ----------------------- 1998* ----------------------- Net asset value, beginning of period ............................. $ 11.70 --------- INCOME FROM INVESTMENT OPERATIONS -- Net investment income (loss) ................................... 0.40 Net realized and unrealized gain (loss) on investments ......... 0.27 --------- Total from investment operations ............................. 0.67 --------- LESS DISTRIBUTIONS -- Dividends from net investment income ........................... (0.40) Distributions from net realized capital gains .................. (0.01) --------- Total distributions .......................................... (0.41) --------- Net asset value, end of period ................................... $ 11.96 ========= Total return (%)(a)(b) ........................................... 5.9 Net assets, end of period (000) .................................. $ 10,056 Ratio of operating expenses to average net assets (%)(c)(d) ...... 0.60 Ratio of net investment income to average net assets (%)(c) ...... 4.62 Portfolio turnover rate (%)(a) ................................... 30 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) ... 1.70 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been .................... $ 0.31 * For the nine months ended September 30, 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.
- ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- MUNICIPAL BOND FUND - ------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 - ----------- ----------- ----------- ----------- ----------- $ 11.29 $ 11.53 $ 10.41 $ 11.54 $ 10.95 - ----------- ----------- ----------- ----------- ----------- 0.56 0.52 0.52 0.52 0.51 0.51 (0.15) 1.16 (1.13) 0.74 - ----------- ----------- ----------- ----------- ----------- 1.07 0.37 1.68 (0.61) 1.25 - ----------- ----------- ----------- ----------- ----------- (0.56) (0.52) (0.52) (0.52) (0.51) (0.10) (0.09) (0.04) 0.00 (0.15) - ----------- ----------- ----------- ----------- ----------- (0.66) (0.61) (0.56) (0.52) (0.66) - ----------- ----------- ----------- ----------- ----------- $ 11.70 $ 11.29 $ 11.53 $ 10.41 $ 11.54 =========== =========== =========== =========== =========== 9.8 3.3 16.5 (5.4) 11.6 $ 8,752 $ 8,701 $ 7,961 $ 7,270 $ 5,160 0.60 1.00 1.00 1.00 1.00 4.90 4.61 4.72 4.79 4.50 50 38 41 28 36 1.80 2.31 2.02 2.37 3.22 $ 0.42 $ 0.37 $ 0.41 $ 0.37 $ 0.26 - ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
SHORT-TERM BOND FUND ------------------------------- INSTITUTIONAL CLASS ------------------------------- 1998* 1997 ----------- ----------- Net asset value, beginning of period ........................... $ 9.75 $ 9.70 ----------- ----------- INCOME FROM INVESTMENT OPERATIONS -- Net investment income (loss) ................................. 0.44 0.61 Net realized and unrealized gain (loss) on investments ....... 0.21 0.06 ----------- ----------- Total from investment operations ........................... 0.65 0.67 ----------- ----------- LESS DISTRIBUTIONS -- Dividends from net investment income ......................... (0.44) (0.62) ----------- ----------- Net asset value, end of period ................................. $ 9.96 $ 9.75 =========== =========== Total return (%)(a)(b) ......................................... 6.8 7.1 Net assets, end of period (000) ................................ $ 27,288 $ 18,792 Ratio of operating expenses to average net assets (%)(c)(d) .... 0.50 0.50 Ratio of net investment income to average net assets (%)(c) .... 5.94 6.34 Portfolio turnover rate (%)(a) ................................. 47 91 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) .................. 0.83 1.19 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been ............................. $ 0.41 $ 0.55 * 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 FIXED INCOME FUNDS - -------------------------------------------------------------------------------
SHORT-TERM BOND FUND - ----------------------------------------------------------------------------------------------- INSTITUTIONAL CLASS RETAIL CLASS - ------------------------------------------------------------- ---------------------------- 1996 1995 1994 1993 1998* 1997** - ----------- ----------- ----------- ----------- ----------- ----------- $ 9.81 $ 9.46 $ 9.95 $ 9.87 $ 9.75 $ 9.70 - ----------- ----------- ----------- ----------- ----------- ----------- 0.55 0.63 0.66 0.59 0.42 0.59 (0.11) 0.35 (0.49) 0.08 0.21 0.06 - ----------- ----------- ----------- ----------- ----------- ----------- 0.44 0.98 0.17 0.67 0.63 0.65 - ----------- ----------- ----------- ----------- ----------- ----------- (0.55) (0.63) (0.66) (0.59) (0.42) (0.60) - ----------- ----------- ----------- ----------- ----------- ----------- $ 9.70 $ 9.81 $ 9.46 $ 9.95 $ 9.96 $ 9.75 =========== =========== =========== =========== =========== =========== 4.7 10.6 1.8 7.0 6.6 6.9 $ 18,229 $ 26,039 $ 19,440 $ 15,226 $ 773 $ 285 1.00 1.00 1.00 1.00 0.75 0.75 5.69 6.46 6.88 5.97 5.66 6.04 120 214 34 81 47 91 1.17 1.03 1.33 1.55 6.00 17.77 $ 0.53 $ 0.62 $ 0.63 $ 0.54 $ 0.03 $ (1.08)
- ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------- Year Ended December 31,
U.S. GOVERNMENT SECURITIES FUND ----------------------- INSTITUTIONAL CLASS ----------------------- 1998* ----------------------- Net asset value, beginning of period ............................. $ 10.70 --------- INCOME FROM INVESTMENT OPERATIONS -- Net investment income (loss) ................................... 0.43 Net realized and unrealized gain (loss) on investments ......... 0.58 --------- Total from investment operations ............................. 1.01 --------- LESS DISTRIBUTIONS -- Dividends from net investment income ........................... (0.30) Distributions from net realized capital gains .................. 0.00 --------- Total distributions .......................................... (0.30) --------- Net asset value, end of period ................................... $ 11.41 ========= Total return (%)(a)(b) ........................................... 9.6 Net assets, end of period (000) .................................. $ 29,246 Ratio of operating expenses to average net assets (%)(c)(d) ...... 0.60 Ratio of net investment income to average net assets (%)(c) ...... 5.61 Portfolio turnover rate (%)(a) ................................... 84 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) ...... 0.97 Without giving effect to the voluntary expense limitations described in Note 3 to the Financial Statements net investment income per share would have been .................... $ 0.40 * For the nine months ended September 30, 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.
- ------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - ------------------------------------------------------------------------------- U.S. GOVERNMENT SECURITIES FUND - ------------------------------------------------------------------------------- INSTITUTIONAL CLASS - ------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 - ----------- ----------- ----------- ----------- ----------- $ 10.08 $ 10.64 $ 9.22 $ 10.53 $ 10.45 - ----------- ----------- ----------- ----------- ----------- 0.63 0.68 0.66 0.64 0.64 0.61 (0.57) 1.42 (1.30) 1.00 - ----------- ----------- ----------- ----------- ----------- 1.24 0.11 2.08 (0.66) 1.64 - ----------- ----------- ----------- ----------- ----------- (0.62) (0.67) (0.66) (0.65) (0.65) 0.00 0.00 0.00 0.00 (0.91) - ----------- ----------- ----------- ----------- ----------- (0.62) (0.67) (0.66) (0.65) (1.56) - ----------- ----------- ----------- ----------- ----------- $ 10.70 $ 10.08 $ 10.64 $ 9.22 $ 10.53 =========== =========== =========== =========== =========== 12.7 1.3 23.0 (6.3) 15.7 $ 17,668 $ 14,192 $ 19,499 $ 17,341 $ 18,317 0.60 1.00 1.00 1.00 1.00 6.29 6.23 6.47 6.60 5.95 156 137 169 242 277 1.23 1.19 1.22 1.22 1.29 $ 0.57 $ 0.66 $ 0.64 $ 0.62 $ 0.61 - -------------------------------------------------------------------------------- LOOMIS SAYLES FIXED INCOME FUNDS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- SEPTEMBER 30, 1998 1. The 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 Fixed Income Funds (excluding the Municipal Bond and U.S. Government Securities Funds which only offer Institutional shares) offer Institutional and Retail Class shares, each of which 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 Bond 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 Fixed Income Funds: A. SECURITY VALUATION -- Long-term debt securities for which quotations are readily available are valued by a pricing service, as approved by the Board of Trustees, which generally uses the most recent bid prices in the principal market in which such securities are normally traded. Municipal debt securities are valued by a pricing service, as approved by the Board of Trustees, which generally uses a computerized matrix system or dealer supplied quotations that consider market transactions for comparable securities. 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. 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 (except the Municipal Bond and U.S. Government Securities Funds) 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 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 the 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, the Global Bond Fund had the following open forward foreign currency exchange contracts:
Local Aggregate Unrealized Delivery Currency Face Total Appreciation Date Amount Amount Value (Depreciation) -------- -------- --------- ----- -------------- Deutsche Mark (sell) 1/21/99 4,300,000 $2,512,269 $2,588,788 $ (76,519) Japanese Yen (sell) 11/30/98 40,560,000 281,413 299,845 (18,432) Japanese Yen (buy) 11/30/98 35,560,000 265,462 262,881 (2,581) Japanese Yen (sell) 2/26/99 145,000,000 1,033,794 1,085,286 (51,492) --------- $(149,024) =========
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. Interest income on the Municipal Bond Fund is decreased by the amortization of premium. Premiums are amortized using the yield to maturity method. In determining net gain or loss on securities sold, the cost of securities has been 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 on relative net assets. Investment income, realized and unrealized gains and losses, and the common expenses of the 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 Funds listed below had available capital loss carryforwards. These realized losses are intended to be used to offset future net capital gains. Fund Amount - ---- ------ Short-Term Bond Fund ................................... $390,181* U.S. Government Securities Fund ........................ 402,587** *$101,591 and $288,590 will expire on September 30, 2002 and 2004, respectively. **$402,587 will expire on September 30, 2004. H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Municipal Bond Fund and Short-Term Bond Fund declare dividends daily to shareholders of record at the time and pay dividends monthly. The Bond, High Yield, Intermediate Maturity Bond, Investment Grade Bond and U.S. Government Securities Funds declare and pay their net investment income quarterly. The Global Bond Fund declares and 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 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, capital loss carryforwards, 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. REDEMPTION FEES -- Shares held in the High Yield Fund less than one year are subject to a redemption fee equal to 2% of the amount redeemed. For the nine months ended September 30, 1998, the redemption fees amounted to $6,700 and $6,617 for the Institutional and Retail Classes, respectively. J. 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 High Yield Fund are being amortized over 60 months. 2. PURCHASES AND SALES OF SECURITIES -- (excluding short-term investments) for each Fund for the nine months ended September 30, 1998 were as follows:
Purchases ---------------------------------- U.S. Government Other --------------- ----- Bond Fund ................................................... $150,202,032 $525,082,756 Global Bond Fund ............................................ 298,072 13,353,856 High Yield Fund ............................................. 696,047 7,441,647 Intermediate Maturity Bond Fund ............................. 1,671,347 3,789,452 Investment Grade Bond Fund .................................. 553,306 2,758,836 Municipal Bond Fund ......................................... 952,000 2,910,769 Short-Term Bond Fund ........................................ 15,775,184 3,792,285 U.S. Government Securities Fund ............................. 28,747,530 0 Sales ---------------------------------- U.S. Government Other --------------- ----- Bond Fund ................................................... $174,818,953 $175,282,623 Global Bond Fund ............................................ 0 9,033,327 High Yield Fund ............................................. 715,559 2,730,909 Intermediate Maturity Bond Fund ............................. 1,610,714 986,011 Investment Grade Bond Fund .................................. 868,559 980,239 Municipal Bond Fund ......................................... 955,328 1,770,140 Short-Term Bond Fund ........................................ 7,785,978 3,425,291 U.S. Government Securities Fund ............................. 18,411,388 0
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 ---- ---------- ------------- ----- ----- Bond Fund .................................... 0.60% 0.75% 1.00% 1.25% Global Bond Fund ............................. 0.60% 0.90% 1.15% -- High Yield Fund .............................. 0.60% 0.75% 1.00% -- Intermediate Maturity Bond Fund .............. 0.40% 0.55% 0.80% -- Investment Grade Bond Fund ................... 0.40% 0.55% 0.80% -- Municipal Bond Fund .......................... 0.40% 0.60% -- -- Short-Term Bond Fund ......................... 0.25% 0.50% 0.75% -- U.S. Government Securities Fund .............. 0.40% 0.60% -- --
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, The New England 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, Loomis Sayles held 113,817 shares of the Investment Grade Bond Fund. In addition, Loomis Sayles Funded Pension Plan and Trust and the Loomis Sayles & Company Incorporated, Employees Profit Sharing Retirement Plan held shares of beneficial interest in the Funds as follows: Profit Pension Sharing Plan Plan ------- ------- Bond Fund ............................................ 683,281 955,007 Global Bond Fund ..................................... 641,305 213,173 High Yield Fund ...................................... 0 237,018 Intermediate Maturity Bond Fund ...................... 313,522 137,326 Investment Grade Bond Fund ........................... 0 54,525 Short-Term Bond Fund ................................. 3,047 322,032 U.S. Government Securities Fund ...................... 742,734 519,509 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 $66,997 for the eight 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. CREDIT RISK -- The Bond Fund may invest up to 35%, the Global Bond and Short-Term Bond Funds each may invest up to 20%, the Intermediate Maturity Bond and the Investment Grade Bond Funds each may invest up to 10%, and the High Yield Fund will normally invest at least 65% of its assets in securities offering high current income, which generally will be in the lower rating categories of recognized rating agencies. These securities are regarded as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligations and will generally involve more credit risk than securities in the higher rating categories. In addition, the trading market for high yield securities may be relatively less liquid than the market for higher-rated securities. 5. 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. 6. CAPITAL STOCK TRANSACTIONS -- The tables below summarize the transactions in Fund shares for the periods indicated:
Loomis Sayles Bond 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 ............. 49,569,713 $643,942,732 63,069,086 $809,023,819 30,770,089 $380,541,907 Issued in connection with the reinvestment of distributions ...... 3,232,707 42,426,449 5,492,835 70,465,752 2,592,881 31,775,376 Redeemed ............... (32,878,290) (415,107,300) (13,902,007) (177,561,664) (10,467,220) (128,158,663) ----------- ------------ ----------- ------------ ----------- ------------ Net change ............. 19,924,130 $271,261,881 54,659,914 $701,927,907 22,895,750 $284,158,620 =========== ============ =========== ============ =========== ============ Retail Class Shares Shares Amount Shares* Amount* - ------------------- ------ ------ ------- ------- Issued from the sale of shares ............. 2,932,181 $ 38,054,173 2,944,758 $ 37,693,272 Issued in connection with the reinvestment of distributions ......... 108,877 1,427,318 124,248 1,597,794 Redeemed ............... (1,247,077) (15,934,708) (476,803) (6,205,606) ----------- ------------ ----------- ------------ Net change ............. 1,793,981 $ 23,546,783 2,592,203 $ 33,085,460 =========== ============ =========== ============ Admin Class Shares** Shares Amount - -------------------- ------ ------ Issued from the sale of shares ............. 56,540 $ 710,656 Issued in connection with the reinvestment of distributions ......... 273 3,555 Redeemed ............... (5,555) (71,476) ----------- ------------ Net change ............. 51,258 $ 642,735 =========== ============ *From January 2, 1997 (commencement of class operations). **From January 2, 1998 (commencement of class operations).
Loomis Sayles Global Bond 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 ............. 318,651 $ 3,936,730 450,349 $ 5,703,587 1,525,167 $ 18,653,771 Issued in connection with the reinvestment of distributions ......... 0 0 141,324 1,676,109 92,817 1,145,834 Redeemed ............... (217,195) (2,625,824) (338,278) (4,226,586) (375,310) (4,457,214) ----------- ------------ ----------- ------------ ----------- ------------ Net change ............. 101,456 $ 1,310,906 253,395 $ 3,153,110 1,242,674 $ 15,342,391 =========== ============ =========== ============ =========== ============ Retail Class Shares Shares Amount Shares* Amount* - ------------------- ------ ------ ------- ------- Issued from the sale of shares ............. 348,774 $ 4,233,202 568,889 $ 7,115,633 Issued in connection with the reinvestment of distributions ......... 0 0 18,404 218,453 Redeemed ............... (210,389) (2,533,545) (190,528) (2,420,537) ----------- ------------ ----------- ------------ Net change ............. 138,385 $ 1,699,657 396,765 $ 4,913,549 =========== ============ =========== ============ *From January 2, 1997 (commencement of class operations).
Loomis Sayles High Yield 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 ............. 403,057 $ 3,805,612 345,923 $ 3,577,772 189,979 $ 1,915,483 Issued in connection with the reinvestment of distributions ......... 24,997 253,653 41,158 424,573 3,048 30,815 Redeemed ............... (137,504) (1,355,726) (58,540) (600,500) (1,234) (12,581) ----------- ------------ ----------- ------------ ----------- ------------ Net change ............. 290,550 $ 2,703,539 328,541 $ 3,401,845 191,793 $ 1,933,717 =========== ============ =========== ============ =========== ============ Retail Class Shares Shares Amount Shares* Amount* - ------------------- ------ ------ ------- ------- Issued from the sale of shares ......... 518,798 $ 5,290,659 343,422 $ 3,602,850 Issued in connection with the reinvestment of distributions ..... 20,313 204,878 20,171 207,933 Redeemed ........... (357,083) (3,384,654) (53,163) (558,960) ------- ------------ ------- ------------ Net change ......... 182,028 $ 2,110,883 310,430 $ 3,251,823 ======= ============ ======= ============ *From January 2, 1997 (commencement of class operations). **From September 11, 1996 (commencement of operations).
Loomis Sayles Intermediate Maturity Bond 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 ............ 233,463 $ 2,368,867 713,449 $ 7,196,630 Issued in connection with the reinvestment of distributions ......... 22,897 232,444 26,496 269,072 Redeemed ............... (30,328) (303,969) (111,401) (1,136,539) ----------- ------------ ----------- ------------ Net change ............. 226,032 $ 2,297,342 628,544 $ 6,329,163 =========== ============ =========== ============ Retail Class Shares Shares Amount Shares Amount - ------------------- ------ ------ ------ ------ Issued from the sale of shares ............ 24,281 $ 245,832 40,713 $ 419,211 Issued in connection with the reinvestment of distributions ......... 1,478 15,004 1,410 14,327 Redeemed ............... (1,979) (19,695) 0 0 ----------- ------------ ----------- ------------ Net change ............. 23,780 $ 241,141 42,123 $ 433,538 =========== ============ =========== ============ *From January 2, 1997 (commencement of operations).
Loomis Sayles Investment Grade Bond 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 ............ 83,930 $ 899,316 217,283 $ 2,218,354 Issued in connection with the reinvestment of distributions ......... 6,974 75,189 14,216 150,066 Redeemed ............... (51,401) (544,680) (689) (7,042) ----------- ------------ ----------- ------------ Net change ............. 39,503 $ 429,825 230,810 $ 2,361,378 =========== ============ =========== ============ Retail Class Shares Shares Amount Shares Amount - ------------------- ------ ------ ------ ------ Issued from the sale of shares ............ 175,281 $ 1,867,621 80,460 $ 849,980 Issued in connection with the reinvestment of distributions ......... 3,339 35,976 3,968 42,198 Redeemed ............... (90,210) (959,137) (3,085) (32,703) ----------- ------------ ----------- ------------ Net change ............. 88,410 $ 944,460 81,343 $ 859,475 =========== ============ =========== ============ *From January 2, 1997 (commencement of operations).
Loomis Sayles Municipal Bond 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 ............. 143,442 $ 1,678,346 146,945 $ 1,692,152 130,141 $ 1,455,513 Issued in connection with the reinvestment of distributions ...... 18,995 222,768 29,000 331,863 28,120 315,911 Redeemed ............... (70,077) (823,187) (198,471) (2,254,718) (77,656) (872,674) ----------- ------------ ----------- ------------ ----------- ------------ Net change ............. 92,360 $ 1,077,927 (22,526) $ (230,703) 80,605 $ 898,750 =========== ============ =========== ============ =========== ============
Loomis Sayles Short-Term Bond 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 ............. 1,356,852 $ 13,272,732 1,184,127 $ 11,497,925 1,283,882 $ 12,426,078 Issued in connection with the reinvestment of distributions ...... 96,022 940,824 94,766 918,722 106,059 1,027,017 Redeemed ............... (639,795) (6,265,207) (1,232,069) (11,926,660) (2,163,540) (20,966,857) ----------- ------------ ----------- ------------ ----------- ------------ Net change ............. 813,079 $ 7,948,349 46,824 $ 489,987 (773,599) $ (7,513,762) =========== ============ =========== ============ =========== ============ Retail Class Shares Shares Amount Shares* Amount* - ------------------- ------ ------ ------- ------- Issued from the sale of shares ............. 82,800 $ 812,944 45,040 $ 436,711 Issued in connection with the reinvestment of distributions ...... 1,371 13,467 1,073 10,404 Redeemed ............... (35,738) (348,869) (16,930) (163,198) ----------- ------------ ----------- ------------ Net change ............. 48,433 $ 477,542 29,183 $ 283,917 =========== ============ =========== ============ *From January 2, 1997 (commencement of class operations).
Loomis Sayles U.S. Government Securities 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 ............. 1,006,132 $ 11,019,527 444,723 $ 4,676,742 864,647 $ 8,983,613 Issued in connection with the reinvestment of distributions ...... 47,646 517,587 77,074 792,744 129,259 1,274,113 Redeemed ............... (142,676) (1,568,841) (277,818) (2,799,223) (1,418,646) (14,426,898) ----------- ------------ ----------- ------------ ----------- ------------ Net change ............. 911,102 $ 9,968,273 243,979 $ 2,670,263 (424,740) $ (4,169,172) =========== ============ =========== ============ =========== ============
1998 U.S. TAX AND DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED) A. CAPITAL GAINS DISTRIBUTIONS -- Pursuant to Internal Revenue Section 852(b), the Municipal Bond Fund paid distributions of $11,732, which have been designated as capital gains distributions for the fiscal year ended September 30, 1998. B. CORPORATE DIVIDENDS RECEIVED DEDUCTION -- For the fiscal year ended September 30, 1998, a percentage of dividends distributed by the Funds listed below qualify for the dividends received deduction for corporate shareholders. These percentages are as follows: Qualifying Percentage ---------- Bond Fund .............................................. 1.17% High Yield Fund ........................................ 3.67% Investment Grade Bond Fund ............................. 4.86% C. EXEMPT INTEREST DIVIDENDS -- 100% of the dividends paid by the Municipal Bond Fund from net investment income for the nine months ended September 30, 1998, constituted exempt interest dividends for Federal income tax purposes. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Shareholders and Trustees of the Loomis Sayles Fixed Income 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 Fixed Income Funds (consisting of the Loomis Sayles Bond Fund, Global Bond Fund, High Yield Fund, Intermediate Maturity Bond Fund, Investment Grade Bond Fund, Municipal Bond Fund, Short-Term Bond Fund, and U.S. Government Securities 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 statements 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 - -------------------------------------------------------------------------------- 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-----