[LOGO OF LOOMIS SAYLES FUNDS]

STATEMENT OF ADDITIONAL INFORMATION

February 1, 2008

LOOMIS SAYLES FUNDS I

Loomis Sayles Bond Fund
Loomis Sayles Global Bond Fund
Loomis Sayles Inflation Protected Securities Fund
Loomis Sayles Small Cap Value Fund

LOOMIS SAYLES FUNDS II

Loomis Sayles Mid Cap Growth Fund
Loomis Sayles Small Cap Growth Fund
Loomis Sayles Tax-Managed Equity Fund

This Statement of Additional Information (the "Statement") contains information
which may be useful to investors but which is not included in the Prospectuses
of the series of Loomis Sayles Funds I or Loomis Sayles Funds II listed above
(collectively the "Funds," with each series being known as a "Fund"). This
Statement is not a prospectus and is authorized for distribution only when
accompanied or preceded by the Loomis Sayles Retail Income Funds Prospectus or
Loomis Sayles Retail Equity Funds Prospectus, each dated February 1, 2008, as
from time to time revised or supplemented (the "Prospectus" or "Prospectuses").
Investors may obtain the Prospectuses without charge from Loomis Sayles Funds,
P.O. Box 219594, Kansas City, MO 61421-9594, by calling 800-633-3330or by
visiting www.loomissayles.com.

The Funds' financial statements and accompanying notes that appear in the
Funds' annual reports are incorporated by reference into this Statement. Each
Fund's annual and semiannual reports contain additional performance information
and are available upon request and without charge by calling 800-633-3330 or by
visiting the Funds' website at www.loomissayles.com.

                                                                 M-LSLRSAI-0208

                                      1



                               TABLE OF CONTENTS

THE TRUSTS.................................................................   3
INVESTMENT STRATEGIES AND RISKS............................................   3
Investment Restrictions....................................................   3
Investment Strategies......................................................  17
TEMPORARY DEFENSIVE POSITIONS..............................................  36
PORTFOLIO TURNOVER.........................................................  36
PORTFOLIO HOLDINGS INFORMATION.............................................  36
MANAGEMENT OF THE TRUSTS...................................................  38
OWNERSHIP OF FUND SHARES...................................................  48
INVESTMENT ADVISORY AND OTHER SERVICES.....................................  61
PORTFOLIO MANAGEMENT INFORMATION...........................................  69
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................................  73
DESCRIPTION OF THE TRUSTS..................................................  78
HOW TO BUY SHARES..........................................................  80
REDEMPTIONS................................................................  81
SHAREHOLDER SERVICES.......................................................  83
NET ASSET VALUE............................................................  85
TAXES......................................................................  86
PERFORMANCE INFORMATION....................................................  94
FINANCIAL STATEMENTS.......................................................  94
APPENDIX A................................................................. A-1

                                      2



                                  THE TRUSTS

   Loomis Sayles Funds I and Loomis Sayles Funds II (each, a "Trust" and
together, the "Trusts") are each registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company.

   Loomis Sayles Funds I is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company and is
organized as a Massachusetts business trust under the laws of Massachusetts by
an Agreement and Declaration of Trust (a "Declaration of Trust") dated
December 23, 1993, as amended and restated on June 22, 2005, and is a "series"
company as described in Section 18(f)(2) of the Investment Company Act of 1940,
as amended (the "1940 Act"). Prior to July 1, 2003, Loomis Sayles Funds I was
named "Loomis Sayles Investment Trust." The Trust offers a total of ten series.

   The Loomis Sayles Bond Fund, a diversified series of the Trust, was
organized in Massachusetts and commenced operations on May 16, 1991. The Loomis
Sayles Global Bond Fund, a diversified series of the Trust, was organized in
Massachusetts and commenced operations on May 10, 1991. The Loomis Sayles Small
Cap Value Fund, a diversified series of the Trust, was organized in
Massachusetts and commenced operations on May 13, 1991. The Loomis Sayles
Inflation Protected Securities Fund, a diversified series of the Trust, was
organized in Massachusetts and commenced operations on May 21, 1991. The Loomis
Sayles Bond Fund, Loomis Sayles Global Bond Fund and Loomis Sayles Small Cap
Value Fund each reorganized into newly created series of Loomis Sayles Funds I
and ceased to be series of Loomis Sayles Funds II on September 12, 2003.

   Loomis Sayles Funds II is organized as a Massachusetts business trust under
the laws of Massachusetts by Declaration of Trust dated February 20, 1991, as
amended and restated on July 21, 2005, and is a "series" company as described
in Section 18(f)(2) of the 1940 Act. The Trust offers a total of thirteen
series. Prior to July 1, 2003, Loomis Sayles Funds II was named "Loomis Sayles
Funds."

   The Loomis Sayles Mid Cap Growth Fund, a diversified series of the Trust,
was organized in Massachusetts and commenced operations on January 2, 1997.
Prior to February 1, 2007, Loomis Sayles Mid Cap Growth Fund was named "Loomis
Sayles Aggressive Growth Fund". The Loomis Sayles Small Cap Growth Fund, a
diversified series of the Trust, was organized in Massachusetts and commenced
operations on January 2, 1997. The Loomis Sayles Tax-Managed Equity Fund, a
diversified series of the Trust, was organized in Massachusetts and commenced
operations on October 1, 1995. Admin Class shares of each of the Loomis Sayles
Mid Cap Growth Fund and the Loomis Sayles Small Cap Growth Fund were converted
into Retail Class shares on May 21, 2003. The Loomis Sayles Tax-Managed Equity
Fund reorganized into a newly created series of Loomis Sayles Funds II and
ceased to be a series of Loomis Sayles Funds I on September 12, 2003.

                        INVESTMENT STRATEGIES AND RISKS

Investment Restrictions

   The following is a description of restrictions on the investments to be made
by the Funds. The investment objective of the Loomis Sayles Tax-Managed Equity
Fund as set forth in its Prospectus and the restrictions marked with an
asterisk (*) are fundamental policies that may not be changed without the vote
of a majority of the outstanding voting securities of the Fund (as defined in
the 1940 Act). The other restrictions set forth below are not fundamental
policies and may be changed by each Trust's Board of Trustees. Except in the
case of the 15% limitation on illiquid securities, the percentages set forth
below and the percentage limitations set forth in the Prospectus apply at the
time of the purchase of a security and shall not be considered violated unless
an excess or deficiency occurs or exists immediately after and as a result of a
purchase of such security.

                                      3



The Loomis Sayles Bond Fund may not:

     (1) Invest in companies for the purpose of exercising control or
         management.

     *(2)Act as underwriter, except to the extent that, in connection with the
         disposition of portfolio securities, it may be deemed to be an
         underwriter under certain federal securities laws.

     *(3)Invest in oil, gas or other mineral leases, rights or royalty
         contracts or in real estate, commodities or commodity contracts. (This
         restriction does not prevent the Fund from engaging in transactions in
         futures contracts relating to securities indices, interest rates or
         financial instruments or options, or from investing in issuers that
         invest or deal in the foregoing types of assets or from purchasing
         securities that are secured by real estate.)

     *(4)Make loans, except that the Fund may lend its portfolio securities to
         the extent permitted under the 1940 Act. (For purposes of this
         investment restriction, neither (i) entering into repurchase
         agreements nor (ii) purchasing debt obligations in which the Fund may
         invest consistent with its investment policies is considered the
         making of a loan.)

     (5) With respect to 75% of its assets, purchase any security (other than
         U.S. Government securities) if, as a result, more than 5% of the
         Fund's assets (taken at current value) would then be invested in
         securities of a single issuer.

     (6) With respect to 75% of its assets, acquire more than 10% of the
         outstanding voting securities of an issuer.

     (7) Pledge, mortgage, hypothecate or otherwise encumber any of its assets,
         except that the Fund may pledge assets having a value not exceeding
         10% of its assets to secure borrowings permitted by restrictions
         (9) and (10) below. (For purposes of this restriction, collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin
         are not deemed to be a pledge or other encumbrance of assets.)

     *(8)Purchase any security (other than U.S. Government securities) if, as a
         result, more than 25% of the Fund's assets (taken at current value)
         would be invested in any one industry (in the utilities category, gas,
         electric, water and telephone companies will be considered as being in
         separate industries).

     *(9)Borrow money, except to the extent permitted under the 1940 Act.

     (10)Borrow money in excess of 20% of its net assets, nor borrow any money
         except as a temporary measure for extraordinary or emergency purposes.

     (11)Purchase securities on margin (except such short term credits as are
         necessary for clearance of transactions) or make short sales (except
         where, by virtue of ownership of other securities, it has the right to
         obtain, without payment of additional consideration, securities
         equivalent in kind and amount to those sold).

     (12)Participate on a joint or joint and several basis in any trading
         account in securities. (The "bunching" of orders for the purchase or
         sale of portfolio securities with Loomis Sayles or accounts under its
         management to reduce brokerage commissions, to average prices among
         them or to facilitate such transactions is not considered a trading
         account in securities for purposes of this restriction.)

     (13)Purchase any illiquid security, including any security that is not
         readily marketable, if, as a result, more than 15% of the Fund's net
         assets (based on current value) would then be invested in such
         securities.

     (14)Write or purchase puts, calls, or combinations of both, except that
         the Fund may (i) acquire warrants or rights to subscribe to securities
         of companies issuing such warrants or rights, or of parents or
         subsidiaries of such companies, (ii) purchase and sell put and call
         options on securities, and (iii) write, purchase and sell put and call
         options on currencies and enter into currency forward contracts.

                                      4



    *(15)Issue senior securities. (For purposes of this restriction, none of
         the following is deemed to be a senior security: any pledge or other
         encumbrance of assets permitted by restriction (7) above; any
         borrowing permitted by restrictions (9) and (10) above; any collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin;
         and the purchase or sale of options, forward contracts, futures
         contracts, or options on futures contracts.)

     (16)Invest, under normal circumstances, less than 80% of its net assets
         (plus any borrowings made for investment purposes) in fixed-income
         securities. Prior to any change to such policy adopted by the Board of
         Trustees of the Fund, the Fund will provide notice to shareholders as
         required by Rule 35d-1 under the 1940 Act, as such Rule may be
         interpreted from time to by the staff of the SEC

   The Fund intends, based on the views of the SEC, to restrict its investments
in repurchase agreements maturing in more than seven days, together with other
investments in illiquid securities, to the percentage permitted by restriction
(13) above.

   In restriction (16), the 80% policy is applied at the time of investment.
However, if the Fund no longer meets the 80% policy (due to changes in the
value of its portfolio holdings or other circumstances beyond its control), it
must make future investments in a manner that would bring the Fund into
compliance with the 80% requirement, but would not be required to sell
portfolio holdings that have increased in value.

   For purposes of the foregoing restrictions, the Fund does not consider a
swap contract on one or more securities, indices, currencies or interest rates
to be a commodity or a commodity contract, nor, consistent with the position of
the staff of the SEC, does the Fund consider such swap contracts to involve the
issuance of a senior security, provided the Fund designates on its records or
segregates with its custodian liquid assets (marked to market on a daily basis)
sufficient to meet its obligations under such contracts.

The Loomis Sayles Global Bond Fund may not:

     (1) Invest in companies for the purpose of exercising control or
         management.

     *(2)Act as underwriter, except to the extent that, in connection with the
         disposition of portfolio securities, it may be deemed to be an
         underwriter under certain federal securities laws.

     *(3)Invest in oil, gas or other mineral leases, rights or royalty
         contracts or in real estate, commodities or commodity contracts. (This
         restriction does not prevent the Fund from engaging in transactions in
         futures contracts relating to securities indices, interest rates or
         financial instruments or options, or from investing in issuers that
         invest or deal in the foregoing types of assets or from purchasing
         securities that are secured by real estate.)

     *(4)Make loans, except that the Fund may lend its portfolio securities to
         the extent permitted under the 1940 Act. (For purposes of this
         investment restriction, neither (i) entering into repurchase
         agreements nor (ii) purchasing debt obligations in which the Fund may
         invest consistent with its investment policies is considered the
         making of a loan.)

     (5) With respect to 75% of its assets, purchase any security (other than
         U.S. Government securities) if, as a result, more than 5% of the
         Fund's assets (taken at current value) would then be invested in
         securities of a single issuer.

     (6) With respect to 75% of its assets, acquire more than 10% of the
         outstanding voting securities of an issuer.

     (7) Pledge, mortgage, hypothecate or otherwise encumber any of its assets,
         except that the Fund may pledge assets having a value not exceeding
         10% of its assets to secure borrowings permitted by restrictions
         (9) and (10) below. (For purposes of this restriction, collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin
         are not deemed to be a pledge or other encumbrance of assets.)

     *(8)Purchase any security (other than U.S. Government securities) if, as a
         result, more than 25% of the Fund's assets (taken at current value)
         would be invested in any one industry (in the utilities category, gas,
         electric, water and telephone companies will be considered as being in
         separate industries).

                                      5



     *(9)Borrow money, except to the extent permitted under the 1940 Act.

     (10)Borrow money in excess of 20% of its net assets, nor borrow any money
         except as a temporary measure for extraordinary or emergency purposes.

     (11)Purchase securities on margin (except such short term credits as are
         necessary for clearance of transactions) or make short sales (except
         where, by virtue of ownership of other securities, it has the right to
         obtain, without payment of additional consideration, securities
         equivalent in kind and amount to those sold).

     (12)Participate on a joint or joint and several basis in any trading
         account in securities. (The "bunching" of orders for the purchase or
         sale of portfolio securities with Loomis Sayles or accounts under its
         management to reduce brokerage commissions, to average prices among
         them or to facilitate such transactions is not considered a trading
         account in securities for purposes of this restriction.)

     (13)Purchase any illiquid security, including any security that is not
         readily marketable, if, as a result, more than 15% of the Fund's net
         assets (based on current value) would then be invested in such
         securities.

     (14)Write or purchase puts, calls, or combinations of both, except that
         the Fund may (i) acquire warrants or rights to subscribe to securities
         of companies issuing such warrants or rights, or of parents or
         subsidiaries of such companies, (ii) purchase and sell put and call
         options on securities, and (iii) write, purchase and sell put and call
         options on currencies and enter into currency forward contracts.

    *(15)Issue senior securities. (For purposes of this restriction, none of
         the following is deemed to be a senior security: any pledge or other
         encumbrance of assets permitted by restriction (7) above; any
         borrowing permitted by restrictions (9) and (10) above; any collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin;
         and the purchase or sale of options, forward contracts, futures
         contracts, or options on futures contracts.)

     (16)Invest, under normal circumstances, less than 80% of its net assets
         (plus any borrowings made for investment purposes) in fixed-income
         securities. Prior to any change to such policy adopted by the Board of
         Trustees of the Fund, the Fund will provide notice to shareholders as
         required by Rule 35d-1 under the 1940 Act, as such Rule may be
         interpreted from time to time by the staff of the SEC.

   The Fund intends, based on the views of the SEC, to restrict its investments
in repurchase agreements maturing in more than seven days, together with other
investments in illiquid securities, to the percentage permitted by restriction
(13) above.

   In restriction (16), the 80% policy is applied at the time of investment.
However, if the Fund no longer meets the 80% policy (due to changes in the
value of its portfolio holdings or other circumstances beyond its control), it
must make future investments in a manner that would bring the Fund into
compliance with the 80% requirements, but would not be required to sell
portfolio holdings that have increased in value.

   For purposes of the foregoing restrictions, the Fund does not consider a
swap contract on one or more securities, indices, currencies or interest rates
to be a commodity or a commodity contract, nor, consistent with the position of
the staff of the SEC, does the Fund consider such swap contracts to involve the
issuance of a senior security, provided the Fund designates on its records or
segregates with its custodian liquid assets (marked to market on a daily basis)
sufficient to meet its obligations under such contracts.

                                      6



The Loomis Sayles Inflation Protected Securities Fund may not:

     (1) Invest in companies for the purpose of exercising control or
         management.

     *(2)Act as underwriter, except to the extent that, in connection with the
         disposition of portfolio securities, it may be deemed to be an
         underwriter under certain federal securities laws.

     *(3)Invest in oil, gas or other mineral leases, rights or royalty
         contracts or in real estate, commodities or commodity contracts. (This
         restriction does not prevent the Fund from engaging in transactions in
         futures contracts relating to securities indices, interest rates or
         financial instruments or options, or from investing in issuers that
         invest or deal in the foregoing types of assets or from purchasing
         securities that are secured by real estate.)

     *(4)Make loans, except that the Fund may lend its portfolio securities to
         the extent permitted under the 1940 Act. (For purposes of this
         investment restriction, neither (i) entering into repurchase
         agreements nor (ii) purchasing debt obligations in which the Fund may
         invest consistent with its investment policies is considered the
         making of a loan.)

     (5) With respect to 75% of its assets, purchase any security (other than
         U.S. Government securities) if, as a result, more than 5% of the
         Fund's assets (taken at current value) would then be invested in
         securities of a single issuer.

     (6) With respect to 75% of its assets, acquire more than 10% of the
         outstanding voting securities of an issuer.

     (7) Pledge, mortgage, hypothecate or otherwise encumber any of its assets,
         except that the Fund may pledge assets having a value not exceeding
         10% of its assets to secure borrowings permitted by restrictions
         (9) and (10) below. (For purposes of this restriction, collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin
         are not deemed to be a pledge or other encumbrance of assets.)

     *(8)Purchase any security (other than U.S. Government securities) if, as a
         result, more than 25% of the Fund's assets (taken at current value)
         would be invested in any one industry (in the utilities category, gas,
         electric, water and telephone companies will be considered as being in
         separate industries).

     *(9)Borrow money, except to the extent permitted under the 1940 Act.

     (10)Borrow money in excess of 20% of its net assets, nor borrow any money
         except as a temporary measure for extraordinary or emergency purposes.

     (11)Purchase securities on margin (except such short term credits as are
         necessary for clearance of transactions) or make short sales (except
         where, by virtue of ownership of other securities, it has the right to
         obtain, without payment of additional consideration, securities
         equivalent in kind and amount to those sold).

     (12)Participate on a joint or joint and several basis in any trading
         account in securities. (The "bunching" of orders for the purchase or
         sale of portfolio securities with Loomis Sayles or accounts under its
         management to reduce brokerage commissions, to average prices among
         them or to facilitate such transactions is not considered a trading
         account in securities for purposes of this restriction.)

     (13)Purchase any illiquid security, including any security that is not
         readily marketable, if, as a result, more than 15% of the Fund's net
         assets (based on current value) would then be invested in such
         securities.

     (14)Write or purchase puts, calls, or combinations of both, except that
         the Fund may (1) acquire warrants or rights to subscribe to securities
         of companies issuing such warrants or rights, or of

                                      7



         parents or subsidiaries of such companies, (2) purchase and sell put
         and call options on securities, and (3) write, purchase and sell put
         and call options on currencies and enter into currency forward
         contracts.

    *(15)Issue senior securities. (For purposes of this restriction, none of
         the following is deemed to be a senior security: any pledge or other
         encumbrance of assets permitted by restriction (7) above; any
         borrowing permitted by restrictions (9) and (10) above; any collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin;
         and the purchase or sale of options, forward contracts, futures
         contracts, or options on futures contracts.)

     (16)Invest more than 20% of its net assets (plus any borrowings made for
         investment purposes) in securities that are not backed by the full
         faith and credit of the U.S. government. Prior to implementation of
         any change to such policy adopted by the Board of Trustees of the
         Fund, the Fund will provide notice to shareholders. In interpreting
         this restriction, the 20% policy is applied to current market value.

     (17)Invest, under normal circumstances, less than 80% of its net assets
         (plus any borrowings made for investment purposes) in
         inflation-protected securities. Prior to any change to such policy
         adopted by the Board of Trustees of the Fund, the Fund will provide
         notice to shareholders as required by Rule 35d-1 under the 1940 Act,
         as such Rule may be interpreted from time to time by the staff of the
         SEC.

   The Fund intends, based on the views of the SEC, to restrict its investments
in repurchase agreements maturing in more than seven days, together with other
investments in illiquid securities, to the percentage permitted by restriction
(13) above.

   In restriction (16), the 20% policy is applied to current market value.
However, if the Fund no longer meets the 20% policy (due to changes in the
value of its portfolio holdings or other circumstances beyond its control), it
would be required to make future investments in a manner that would bring the
Fund into compliance with the 20% requirement, but would not be required to
sell portfolio holdings that have increased in value.

   In restriction (17), the 80% policy is applied at the time of investment.
However, if the Fund no longer meets the 80% policy (due to changes in the
value of its portfolio holdings or other circumstances beyond its control), it
must make future investments in a manner that would bring the Fund into
compliance with the 80% requirements, but would not be required to sell
portfolio holdings that have increased in value in value.

   For purposes of the foregoing restrictions, the Fund does not consider a
swap contract on one or more securities, indices, currencies or interest rates
to be a commodity or a commodity contract, nor, consistent with the position of
the staff of the SEC, does the Fund consider such swap contracts to involve the
issuance of a senior security, provided the Fund designates on its records or
segregates with its custodian liquid assets (marked to market on a daily basis)
sufficient to meet its obligations under such contracts.

The Loomis Sayles Small Cap Value Fund may not:

     (1) Invest in companies for the purpose of exercising control or
         management.

     *(2)Act as underwriter, except to the extent that, in connection with the
         disposition of portfolio securities, it may be deemed to be an
         underwriter under certain federal securities laws.

     *(3)Invest in oil, gas or other mineral leases, rights or royalty
         contracts or in real estate, commodities or commodity contracts. (This
         restriction does not prevent the Fund from engaging in transactions in
         futures contracts relating to securities indices, interest rates or
         financial instruments or options, or from investing in issuers that
         invest or deal in the foregoing types of assets or from purchasing
         securities that are secured by real estate.)

                                      8



     *(4)Make loans, except that the Fund may lend its portfolio securities to
         the extent permitted under the 1940 Act. (For purposes of this
         investment restriction, neither (i) entering into repurchase
         agreements nor (ii) purchasing debt obligations in which the Fund may
         invest consistent with its investment policies is considered the
         making of a loan.)

     (5) With respect to 75% of its assets, purchase any security (other than
         U.S. Government securities) if, as a result, more than 5% of the
         Fund's assets (taken at current value) would then be invested in
         securities of a single issuer.

     (6) With respect to 75% of its assets, acquire more than 10% of the
         outstanding voting securities of an issuer.

     (7) Pledge, mortgage, hypothecate or otherwise encumber any of its assets,
         except that the Fund may pledge assets having a value not exceeding
         10% of its assets to secure borrowings permitted by restrictions
         (9) and (10) below. (For purposes of this restriction, collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin
         are not deemed to be a pledge or other encumbrance of assets.)

     *(8)Purchase any security (other than U.S. Government securities) if, as a
         result, more than 25% of the Fund's assets (taken at current value)
         would be invested in any one industry (in the utilities category, gas,
         electric, water and telephone companies will be considered as being in
         separate industries).

     *(9)Borrow money, except to the extent permitted under the 1940 Act.

     (10)Borrow money in excess of 20% of its net assets, nor borrow any money
         except as a temporary measure for extraordinary or emergency purposes.

     (11)Purchase securities on margin (except such short term credits as are
         necessary for clearance of transactions) or make short sales (except
         where, by virtue of ownership of other securities, it has the right to
         obtain, without payment of additional consideration, securities
         equivalent in kind and amount to those sold).

     (12)Participate on a joint or joint and several basis in any trading
         account in securities. (The "bunching" of orders for the purchase or
         sale of portfolio securities with Loomis Sayles or accounts under its
         management to reduce brokerage commissions, to average prices among
         them or to facilitate such transactions is not considered a trading
         account in securities for purposes of this restriction.)

     (13)Purchase any illiquid security, including any security that is not
         readily marketable, if, as a result, more than 15% of the Fund's net
         assets (based on current value) would then be invested in such
         securities.

     (14)Write or purchase puts, calls, or combinations of both, except that
         the Fund may (i) acquire warrants or rights to subscribe to securities
         of companies issuing such warrants or rights, or of parents or
         subsidiaries of such companies, (ii) purchase and sell put and call
         options on securities, and (iii) write, purchase and sell put and call
         options on currencies and enter into currency forward contracts.

    *(15)Issue senior securities. (For purposes of this restriction, none of
         the following is deemed to be a senior security: any pledge or other
         encumbrance of assets permitted by restriction (7) above; any
         borrowing permitted by restrictions (9) and (10) above; any collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin;
         and the purchase or sale of options, forward contracts, futures
         contracts, or options on futures contracts.)

     (16)Invest, under normal circumstances, less than 80% of its net assets
         (plus any borrowings made for investment purposes) in equity
         securities of companies with market capitalizations that fall within
         the capitalization range of the Russell 2000 Index. Prior to any
         change to such policy adopted by the Board of Trustees of the Fund,
         the Fund will provide notice to shareholders as required by Rule 35d-1
         under the 1940 Act, as such Rule may be interpreted from time to time
         by the staff of the SEC.

                                      9



   The Fund intends, based on the views of the SEC, to restrict its investments
in repurchase agreements maturing in more than seven days, together with other
investments in illiquid securities, to the percentage permitted by restriction
(13) above.

   In restriction (16), the 80% policy is applied at the time of investment.
However, if the Fund no longer meets the 80% policy (due to changes in the
value of its portfolio holdings or other circumstances beyond its control), it
must make future investments in a manner that would bring the Fund into
compliance with the 80% requirements, but would not be required to sell
portfolio holdings that have increased in value.

   For purposes of the foregoing restrictions, the Fund does not consider a
swap contract on one or more securities, indices, currencies or interest rates
to be a commodity or a commodity contract, nor, consistent with the position of
the staff of the SEC, does the Fund consider such swap contracts to involve the
issuance of a senior security, provided the Fund designates on its records or
segregates with its custodian liquid assets (marked to market on a daily basis)
sufficient to meet its obligations under such contracts.

                                      10



The Loomis Sayles Mid Cap Growth Fund may not:

     (1) Invest in companies for the purpose of exercising control or
         management.

     *(2)Act as underwriter, except to the extent that, in connection with the
         disposition of portfolio securities, it may be deemed to be an
         underwriter under certain federal securities laws.

     *(3)Invest in oil, gas or other mineral leases, rights or royalty
         contracts or in real estate, commodities or commodity contracts. (This
         restriction does not prevent the Fund from engaging in transactions in
         futures contracts relating to securities indices, interest rates or
         financial instruments or options, or from investing in issuers that
         invest or deal in the foregoing types of assets or from purchasing
         securities that are secured by real estate.)

     *(4)Make loans, except that the Fund may lend its portfolio securities to
         the extent permitted under the 1940 Act. (For purposes of this
         investment restriction, neither (i) entering into repurchase
         agreements nor (ii) purchasing debt obligations in which the Fund may
         invest consistent with its investment policies is considered the
         making of a loan.)

     (5) With respect to 75% of its assets, purchase any security (other than
         U.S. Government securities) if, as a result, more than 5% of the
         Fund's assets (taken at current value) would then be invested in
         securities of a single issuer.

     (6) With respect to 75% of its assets, acquire more than 10% of the
         outstanding voting securities of an issuer.

     (7) Pledge, mortgage, hypothecate or otherwise encumber any of its assets,
         except that the Fund may pledge assets having a value not exceeding
         10% of its assets to secure borrowings permitted by restrictions
         (9) and (10) below. (For purposes of this restriction, collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin
         are not deemed to be a pledge or other encumbrance of assets.)

     *(8)Purchase any security (other than U.S. Government securities) if, as a
         result, more than 25% of the Fund's assets (taken at current value)
         would be invested in any one industry (in the utilities category, gas,
         electric, water and telephone companies will be considered as being in
         separate industries).

     *(9)Borrow money, except to the extent permitted under the 1940 Act.

     (10)Borrow money in excess of 20% of its net assets, nor borrow any money
         except as a temporary measure for extraordinary or emergency purposes.

     (11)Purchase securities on margin (except such short term credits as are
         necessary for clearance of transactions) or make short sales (except
         where, by virtue of ownership of other securities, it has the right to
         obtain, without payment of additional consideration, securities
         equivalent in kind and amount to those sold).

     (12)Participate on a joint or joint and several basis in any trading
         account in securities. (The "bunching" of orders for the purchase or
         sale of portfolio securities with Loomis Sayles or accounts under its
         management to reduce brokerage commissions, to average prices among
         them or to facilitate such transactions is not considered a trading
         account in securities for purposes of this restriction.)

     (13)Purchase any illiquid security, including any security that is not
         readily marketable, if, as a result, more than 15% of the Fund's net
         assets (based on current value) would then be invested in such
         securities.

     (14)Write or purchase puts, calls, or combinations of both, except that
         the Fund may (i) acquire warrants or rights to subscribe to securities
         of companies issuing such warrants or rights, or of parents or
         subsidiaries of such companies, (ii) purchase and sell put and call
         options on securities, and (iii) write, purchase and sell put and call
         options on currencies and enter into currency forward contracts.

                                      11



    *(15)Issue senior securities. (For purposes of this restriction, none of
         the following is deemed to be a senior security: any pledge or other
         encumbrance of assets permitted by restriction (7) above; any
         borrowing permitted by restrictions (9) and (10) above; any collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin;
         and the purchase or sale of options, forward contracts, futures
         contracts, or options on futures contracts.)

     (16)Invest, under normal circumstances, less than 80% of its net assets
         (plus any borrowings made for investment purposes) in common stocks or
         other equity securities (which may include securities offered in the
         secondary markets or in initial public offerings) of companies with
         market capitalizations that fall within the capitalization range of
         companies included in the Russell Midcap Growth Index. Prior to any
         change to such policy adopted by the Board of Trustees of the Fund,
         the Fund will provide notice to shareholders as required by Rule 35d-1
         under the 1940 Act, as such rule may be interpreted from time to time
         by the staff of the SEC.

   The Fund intends, based on the views of the SEC, to restrict its investments
in repurchase agreements maturing in more than seven days, together with other
investments in illiquid securities, to the percentage permitted by restriction
(13) above.

   In restriction (16), the 80% policy is applied at the time of investment.
However, if the Fund no longer meets the 80% policy (due to changes in the
value of its portfolio holdings or other circumstances beyond its control), it
must make future investments in a manner that would bring the Fund into
compliance with the 80% requirements, but would not be required to sell
portfolio holdings that have increased in value.

   For purposes of the foregoing restrictions, the Fund does not consider a
swap contract on one or more securities, indices, currencies or interest rates
to be a commodity or a commodity contract, nor, consistent with the position of
the staff of the SEC, does the Fund consider such swap contracts to involve the
issuance of a senior security, provided the Fund designate on its records or
segregates with its custodian liquid assets (marked to market on a daily basis)
sufficient to meet its obligations under such contracts.

                                      12



The Loomis Sayles Small Cap Growth Fund may not:

     (1) Invest in companies for the purpose of exercising control or
         management.

     *(2)Act as underwriter, except to the extent that, in connection with the
         disposition of portfolio securities, it may be deemed to be an
         underwriter under certain federal securities laws.

     *(3)Invest in oil, gas or other mineral leases, rights or royalty
         contracts or in real estate, commodities or commodity contracts. (This
         restriction does not prevent the Fund from engaging in transactions in
         futures contracts relating to securities indices, interest rates or
         financial instruments or options, or from investing in issuers that
         invest or deal in the foregoing types of assets or from purchasing
         securities that are secured by real estate.)

     *(4)Make loans, except that the Fund may lend its portfolio securities to
         the extent permitted under the 1940 Act. (For purposes of this
         investment restriction, neither (i) entering into repurchase
         agreements nor (ii) purchasing debt obligations in which the Fund may
         invest consistent with its investment policies is considered the
         making of a loan.)

     (5) With respect to 75% of its assets, purchase any security (other than
         U.S. Government securities) if, as a result, more than 5% of the
         Fund's assets (taken at current value) would then be invested in
         securities of a single issuer.

     (6) With respect to 75% of its assets, acquire more than 10% of the
         outstanding voting securities of an issuer.

     (7) Pledge, mortgage, hypothecate or otherwise encumber any of its assets,
         except that the Fund may pledge assets having a value not exceeding
         10% of its assets to secure borrowings permitted by restrictions
         (9) and (10) below. (For purposes of this restriction, collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin
         are not deemed to be a pledge or other encumbrance of assets.)

     *(8)Purchase any security (other than U.S. Government securities) if, as a
         result, more than 25% of the Fund's assets (taken at current value)
         would be invested in any one industry (in the utilities category, gas,
         electric, water and telephone companies will be considered as being in
         separate industries).

     *(9)Borrow money, except to the extent permitted under the 1940 Act.

     (10)Borrow money in excess of 20% of its net assets, nor borrow any money
         except as a temporary measure for extraordinary or emergency purposes.

     (11)Purchase securities on margin (except such short term credits as are
         necessary for clearance of transactions) or make short sales (except
         where, by virtue of ownership of other securities, it has the right to
         obtain, without payment of additional consideration, securities
         equivalent in kind and amount to those sold).

     (12)Participate on a joint or joint and several basis in any trading
         account in securities. (The "bunching" of orders for the purchase or
         sale of portfolio securities with Loomis Sayles or accounts under its
         management to reduce brokerage commissions, to average prices among
         them or to facilitate such transactions is not considered a trading
         account in securities for purposes of this restriction.)

     (13)Purchase any illiquid security, including any security that is not
         readily marketable, if, as a result, more than 15% of the Fund's net
         assets (based on current value) would then be invested in such
         securities.

     (14)Write or purchase puts, calls, or combinations of both, except that
         the Fund may (i) acquire warrants or rights to subscribe to securities
         of companies issuing such warrants or rights, or of parents or
         subsidiaries of such companies, (ii) purchase and sell put and call
         options on securities, and (iii) write, purchase and sell put and call
         options on currencies and enter into currency forward contracts.

                                      13



    *(15)Issue senior securities. (For purposes of this restriction, none of
         the following is deemed to be a senior security: any pledge or other
         encumbrance of assets permitted by restriction (7) above; any
         borrowing permitted by restrictions (9) and (10) above; any collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin;
         and the purchase or sale of options, forward contracts, futures
         contracts, or options on futures contracts.)

     (16)Invest, under normal circumstances, less than 80% of its net assets
         (plus any borrowings made for investment purposes) in common stocks or
         other equity securities (which may include securities offered in the
         secondary markets or in initial public offerings) of companies with
         market capitalizations that fall within the capitalization range of
         companies included in the Russell Midcap Growth Index. Prior to any
         change to such policy adopted by the Board of Trustees of the Fund,
         the Fund will provide notice to shareholders as required by Rule 35d-1
         under the 1940 Act, as such rule may be interpreted from time to time
         by the staff of the SEC.

   The Fund intends, based on the views of the SEC, to restrict its investments
in repurchase agreements maturing in more than seven days, together with other
investments in illiquid securities, to the percentage permitted by restriction
(13) above.

   In restriction (16), the 80% policy is applied at the time of investment.
However, if the Fund no longer meets the 80% policy (due to changes in the
value of its portfolio holdings or other circumstances beyond its control), it
must make future investments in a manner that would bring the Fund into
compliance with the 80% requirements, but would not be required to sell
portfolio holdings that have increased in value.

   For purposes of the foregoing restrictions, the Fund does not consider a
swap contract on one or more securities, indices, currencies or interest rates
to be a commodity or a commodity contract, nor, consistent with the position of
the staff of the SEC, does the Fund consider such swap contracts to involve the
issuance of a senior security, provided the Fund designates on its records or
segregates with its custodian liquid assets (marked to market on a daily basis)
sufficient to meet its obligations under such contracts.

The Loomis Sayles Tax-Managed Equity Fund may not:

     *(1)Act as underwriter, except to the extent that, in connection with the
         disposition of portfolio securities, it may be deemed to be an
         underwriter under certain federal securities laws.

     *(2)Invest in oil, gas, or other mineral leases, rights, or royalty
         contracts, or in real estate, commodities, or commodity contracts.
         (This restriction does not prevent the Fund from engaging in
         transactions in futures contracts relating to securities indices,
         interest rates, or financial instruments or options, or from investing
         in issuers that invest or deal in the foregoing types of assets or
         from purchasing securities that are secured by real estate.)

     *(3)Make loans, except to the extent permitted under the 1940 Act. (For
         purposes of this investment restriction, neither (i) entering into
         repurchase agreements nor (ii) purchasing debt obligations in which
         the Fund may invest consistent with its investment policies is
         considered the making of a loan.)

     *(4)Change its classification pursuant to Section 5(b) of the 1940 Act
         from a "diversified" to "non-diversified" management investment
         company.

     *(5)Purchase any security (other than U.S. Government securities) if, as a
         result, more than 25% of the Fund's assets (taken at current value)
         would be invested in any one industry (in the utilities category, gas,
         electric, water, and telephone companies will be considered as being
         in separate industries).

     *(6)Borrow money in excess of 10% of its assets (taken at cost) or 5% of
         its assets (taken at current value), whichever is lower, nor borrow
         any money except as a temporary measure for extraordinary or emergency
         purposes; however, the Fund's use of reverse repurchase agreements and
         "dollar roll" arrangements shall not constitute borrowing by the Fund
         for purposes of this restriction.

                                      14



     (7) Purchase any illiquid security, including any security that is not
         readily marketable, if, as a result, more than 15% of the Fund's net
         assets (based on current value) would then be invested in such
         securities.

     *(8)Issue senior securities other than any borrowing permitted by
         restriction (6) above. (For the purposes of this restriction, none of
         the following is deemed to be a senior security: any pledge, mortgage,
         hypothecation, or other encumbrance of assets; any collateral
         arrangements with respect to options, futures contracts, and options
         on futures contracts and with respect to initial and variation margin;
         and the purchase or sale of or entry into options, forward contracts,
         futures contracts, options on futures contracts, swap contracts, or
         any other derivative investments to the extent that Loomis Sayles
         determines that the Fund is not required to treat such investments as
         senior securities pursuant to the pronouncements of the SEC.

     (9) Invest, under normal circumstances, less than 80% of its net assets
         (plus any borrowings made for investment purposes) in equity
         securities. Prior to any change to such policy adopted by the Board of
         Trustees of the Fund, the Fund will provide notice to shareholders as
         required by Rule 35d-1 under the 1940 Act, as such Rule may be
         interpreted from time to time by the staff of the SEC.

   The Loomis Sayles Tax-Managed Equity Fund intends, based on the views of the
SEC, to restrict its investments, if any, in repurchase agreements maturing in
more than seven days, together with other investments in illiquid securities,
to the percentage permitted by restriction (7) above.

   In restriction (9), the 80% policy is applied at the time of investment.
However, if the Fund no longer meets the 80% policy (due to changes in the
value of its portfolio holdings or other circumstances beyond its control), it
must make future investments in a manner that would bring the Fund into
compliance with the 80% requirements, but would not be required to sell
portfolio holdings that have increased in value.

   Although authorized to invest in restricted securities, the Loomis Sayles
Tax-Managed Equity Fund, as a matter of non-fundamental operating policy,
currently does not intend to invest in such securities, except Rule 144A
securities.

   For purposes of the foregoing restrictions, the Loomis Sayles Tax-Managed
Equity Fund does not consider a swap contract on one or more securities,
indices, currencies or interest rates to be a commodity or a commodity
contract, nor, consistent with the position of the staff of the SEC, does the
Loomis Sayles Tax-Managed Equity Fund consider such swap contracts to involve
the issuance of a senior security, provided the Fund designates on its records
or segregates with its custodian liquid assets (marked to market on a daily
basis) sufficient to meet its obligations under such contracts.

                                      15



Investment Strategies

The following is a list of certain investment strategies, including particular
types of securities or instruments or specific practices, that may be used by
Loomis Sayles in managing the Funds. Each Fund's principal strategies are
detailed in its Prospectus. This Statement describes some of the non-principal
strategies the Funds may use, in addition to providing additional information
about their principal strategies. The list under each category below is not
intended to be an exclusive list of securities, investments and practices for
investments. Unless a strategy, practice or security is specifically prohibited
by the investment restrictions listed in the prospectus, under "Investment
Restrictions" in Part I of this Statement, or under applicable law, each Fund
may engage in the strategies listed below and other strategies, and invest in
the securities and instruments listed below and other securities and
instrument. Loomis Sayles may invest in a general category listed below and,
where applicable, with particular emphasis on a certain type of security, but
investment is not limited to the categories listed below or the securities
specifically enumerated under each category. Loomis Sayles may invest in any
security that falls under the specific category including securities that are
not listed below. The Prospectus and/or this Statement will be updated if a
Fund begins to engage in investment practices that are not described in a
Prospectus and/or this Statement.

Fund            Securities                                Practices
- ----            ----------------------------------------- ---------------------
Bond Fund       Debt Securities (Asset-Backed Securities, Temporary Defensive
                Collateralized Mortgage Obligations,      Strategies
                Commercial Paper, Convertible             Repurchase Agreements
                Securities, Corporate Securities,         Swap Contracts
                Investment Grade Fixed Income             Illiquid Securities
                Securities, Lower Quality Fixed Income    Futures Contracts
                Securities, Mortgage-Related Securities,  Options
                Preferred Stock, REITs, Stripped
                Securities, Mortgage-Backed Securities,
                U.S. Government Securities, When-
                Issued Securities, Zero-Coupon
                Securities, 144A Securities, Mortgage
                Dollar Rolls, Inflation Linked Bonds)
                Equity Securities (Investment
                Companies)
                Foreign Securities (Currency
                Transactions, Emerging Markets,
                Supranational Entities)

                                      16



Fund            Securities                               Practices
- ----            ---------------------------------------- ---------------------
Global Bond     Debt Securities (Investment Grade Fixed  Temporary Defensive
Fund            Income Securities, Corporate Bonds,      Strategies
                Convertible Securities, World            Repurchase Agreements
                Government Securities, Lower Quality     Futures Contracts
                Fixed Income Securities, Asset-Backed    Options
                Securities, Zero-Coupon Securities, 144A Swap Contracts
                Securities, Mortgage-Related Securities,
                REITs, Stripped Securities, Mortgage-
                Backed Securities, When-Issued
                Securities, Commercial Paper,
                Collateralized Mortgage Obligations,
                Mortgage Dollar Rolls, Inflation Linked
                Bonds)
                Equity Securities (Investment
                Companies)
                Foreign Securities (Emerging Markets,
                Supranational Entities, Currency
                Transactions)

Inflation       Debt Securities (U.S. Government         Futures Transactions
Protected       Securities, Mortgage-Related Securities, Options
Securities Fund Inflation Linked Bonds)                  Swap Contracts
                Equity Securities (Investment            Temporary Defensive
                Companies)                               Strategies

Small Cap       Equity Securities (REITs, Investment     144A Securities
Value Fund      Companies, Small Cap Companies)          Hedging Transactions
                Foreign Securities (Emerging Markets,    Temporary Defensive
                Currency Transactions)                   Strategies

Mid Cap Growth  Equity Securities (REITs, Mid Cap        Initial Public
Fund            Companies, Investment Companies)         Offerings
                Foreign Securities (Emerging Markets,    144A Securities
                Currency Transactions)                   Options
                                                         Futures Contracts
                                                         Hedging Transactions
                                                         Temporary Defensive
                                                         Strategies
                                                         Securities Lending

Small Cap       Equity Securities (Small Cap Companies,  144A Securities
Growth Fund     Investment Companies)                    Options
                Foreign Securities (Emerging Markets,    Futures Contracts
                Currency Transactions)                   Securities Lending
                                                         Temporary Defensive
                                                         Strategies

Tax-Managed     Debt Securities (U.S. Government         Temporary Defensive
Equity Fund     Securities, Zero Coupon Securities,      Strategies
                Convertible Securities, Inflation Linked When-Issued
                Bonds)                                   Securities
                Equity Securities (Mid Cap Companies,    144A Securities
                Large Cap Companies, Small Cap
                Companies, REITs, Investment
                Companies)

                                      17



Adjustable Rate Mortgage Security ("ARM")

   An ARM, like a traditional mortgage security, is an interest in a pool of
mortgage loans that provides investors with payments consisting of both
principal and interest as mortgage loans in the underlying mortgage pool are
paid off by the borrowers. ARMs have interest rates that are reset at periodic
intervals, usually by reference to some interest rate index or market interest
rate. Although the rate adjustment feature may act as a buffer to reduce sharp
changes in the value of adjustable rate securities, these securities are still
subject to changes in value based on changes in market interest rates or
changes in the issuer's creditworthiness. Because the interest rates are reset
only periodically, changes in the interest rate on ARMs may lag behind changes
in prevailing market interest rates. Also, some ARMs (or the underlying
mortgages) are subject to caps or floors that limit the maximum change in
interest rate during a specified period or over the life of the security. As a
result, changes in the interest rate on an ARM may not fully reflect changes in
prevailing market interest rates during certain periods. Because of the
resetting of interest rates, ARMs are less likely than non-adjustable rate
securities of comparable quality and maturity to increase significantly in
value when market interest rates fall.

Asset-Backed Securities

   Certain Funds may invest in asset-backed securities. The securitization
techniques used to develop mortgage securities are also being applied to a
broad range of other assets. Mortgage-backed securities are a type of
asset-backed security. Through the use of trusts and special purpose vehicles,
assets, such as automobile and credit card receivables, are being securitized
in pass-through structures similar to mortgage pass-through structures or in a
pay-through structure similar to a collateralized mortgage obligation structure
(described below). Generally, the issuers of asset-backed bonds, notes or
pass-through certificates are special purpose entities and do not have any
significant assets other than the receivables securing such obligations. In
general, the collateral supporting asset-backed securities is of shorter
maturity than mortgage loans. Instruments backed by pools of receivables are
similar to mortgage-backed securities in that they are subject to unscheduled
prepayments of principal prior to maturity. When the obligations are prepaid, a
Fund will ordinarily reinvest the prepaid amounts in securities the yields of
which reflect interest rates prevailing at the time. Therefore, a Fund's
ability to maintain a portfolio that includes high-yielding asset-backed
securities will be adversely affected to the extent that prepayments of
principal must be reinvested in securities that have lower yields than the
prepaid obligations. Moreover, prepayments of securities purchased at a premium
could result in a realized loss.

Bank Loans

   The Loomis Sayles Bond Fund may invest in bank loans, which include senior
secured and unsecured floating rate loans made by U.S. banks and other
financial institutions to corporate customers. Typically, these loans hold the
most senior position in a borrower's capital structure, may be secured by the
borrower's assets and have interest rates that reset frequently. These loans
generally will not be rated investment-grade by the rating agencies. Economic
downturns generally lead to higher non-payment and default rates and a senior
loan could lose a substantial part of its value prior to a default. However, as
compared to junk bonds, senior floating rate loans are typically senior in the
capital structure and are often secured by collateral of the borrower. The
Fund's investments in loans are subject to credit risk, and even secured bank
loans may not be adequately collateralized. The interest rates of bank loans
reset frequently, and thus bank loans are subject to interest rate risk. Most
bank loans, like most investment-grade bonds, are not traded on any national
securities exchange. Bank loans generally have less liquidity than
investment-grade bonds and there may be less public information available about
them. The Fund may participate in the primary syndicate for a loan or it may
also purchase loans from other lenders (sometimes referred to as loan
assignments). The Fund may also acquire a participation interest in another
lender's portion of the senior loan.

                                      18



Collateralized Mortgage Obligations ("CMOs")

   Certain Funds may invest in CMOs which are securities backed by a portfolio
of mortgages or mortgage securities held under indentures. The underlying
mortgages or mortgage securities are issued or guaranteed by the U.S.
Government or an agency or instrumentality thereof. The issuer's obligation to
make interest and principal payments is secured by the underlying portfolio of
mortgages or mortgage securities. CMOs are issued with a number of classes or
series which have different maturities and which may represent interests in
some or all of the interest or principal on the underlying collateral or a
combination thereof. CMOs of different classes are generally retired in
sequence as the underlying mortgage loans in the mortgage pool are repaid. In
the event of sufficient early prepayments on such mortgages, the class or
series of CMO first to mature generally will be retired prior to its maturity.
Thus, the early retirement of a particular class or series of CMO held by a
Fund would have the same effect as the prepayment of mortgages underlying a
mortgage pass-through security. CMOs and other asset-backed and mortgage-backed
securities may be considered derivative securities. CMOs involve risk similar
to those described under "Mortgage-Related Securities" below.

Common Stocks and Other Equity Securities

   Common stocks, preferred stocks, warrants, securities convertible into
common or preferred stocks and similar securities, together called "equity
securities," are generally volatile and more risky than some other forms of
investment. Equity securities of companies with relatively small market
capitalizations may be more volatile than the securities of larger, more
established companies and than the broad equity market indices generally.
Common stock and other equity securities may take the form of stock in
corporations, partnership interests, interests in limited liability companies
and other direct or indirect interests in business organizations.

   Growth stocks of companies that Loomis Sayles believes have earnings that
will grow faster than the economy as a whole are known as growth stocks. The
Loomis Sayles Mid Cap Growth Fund, the Loomis Sayles Small Cap Growth Fund and
the Loomis Sayles Tax-Managed Equity Fund generally invest a significant
portion of their assets in growth stocks. Growth stocks typically trade at
higher multiples of current earnings than other stocks. As a result, the values
of growth stocks may be more sensitive to changes in current or expected
earnings than the values of other stocks. If Loomis Sayles' assessment of the
prospects for a company's earnings growth is wrong, or if its judgment of how
other investors will value the company's earnings growth is wrong, then the
price of that company's stock may fall or may not approach the value that
Loomis Sayles has placed on it.

   Value stocks of companies that are not expected to experience significant
earnings growth, but whose stocks Loomis Sayles believes are undervalued
compared to their true worth, are known as value stocks. These companies may
have experienced adverse business developments or may be subject to special
risks that have caused their stocks to be out of favor. If Loomis Sayles'
assessment of a company's prospects is wrong, or if other investors do not
eventually recognize the value of the company, then the price of the company's
stock may fall or may not approach the value that Loomis Sayles has placed on
it. The Loomis Sayles Small Cap Value Fund generally invest a significant
portion of its assets in value stocks.

   Many stocks may have both "growth" and "value" characteristics, and for some
stocks it may be unclear which category, if any, it fits into.

Convertible Securities

   Certain Funds may invest in convertible securities, including corporate
bonds, notes or preferred stocks of U.S. or foreign issuers that can be
converted into (that is, exchanged for) common stocks or other equity
securities. Convertible securities also include other securities, such as
warrants, that provide an opportunity for equity participation. Since
convertible securities may be converted into equity securities, their values
will normally vary in some proportion with those of the underlying equity
securities. Convertible securities usually provide a higher yield than the
underlying equity, however, so that the price decline of a convertible security
may sometimes be less substantial than that of the underlying equity security.
Convertible securities are generally subject to the same risks as
non-convertible fixed income securities, but usually provide a lower yield than
comparable fixed-income securities. Many convertible securities are relatively
illiquid.

                                      19



Depositary Receipts

   Certain Funds may invest in foreign equity securities by purchasing
"depositary receipts." Depositary receipts are instruments issued by a bank
that represent an interest in equity securities held by an arrangement with the
bank. Depositary receipts can be either "sponsored" or "unsponsored." Sponsored
depositary receipts are issued by banks in cooperation with the issuer of the
underlying equity securities. Unsponsored depositary receipts are arranged
without involvement by the issuer of the underlying equity securities and,
therefore, less information about the issuer of the underlying equity
securities may be available and the price may be more volatile than sponsored
depositary receipts. American Depositary Receipts ("ADRs") are depositary
receipts that are bought and sold in the United States and are typically issued
by a U.S. bank or trust company which evidence ownership of underlying
securities by a foreign corporation. European Depositary Receipts ("EDRs") and
Global Depositary Receipts ("GDRs") are depositary receipts that are typically
issued by foreign banks or trust companies which evidence ownership of
underlying securities issued by either a foreign or United States corporation.
All depositary receipts, including those denominated in U.S. dollars, will be
subject to foreign currency exchange risk.

Emerging Markets

   Investments in foreign securities may include investments in emerging or
developing countries, whose economies or securities markets are not yet highly
developed. Special considerations associated with these investments (in
addition to the considerations regarding foreign investments generally) may
include, among others, greater political uncertainties, an economy's dependence
on revenues from particular commodities or on international aid or development
assistance, currency transfer restrictions, very limited numbers of potential
buyers for such securities, less developed custodial and deposit systems and
delays and disruptions in securities settlement procedures.

   In determining whether to invest in securities of foreign issuers, Loomis
Sayles may consider the likely effects of foreign taxes on the net yield
available to the Fund and its shareholders. Compliance with foreign tax laws
may reduce a Fund's net income available for distribution to shareholders.

Fixed Income Securities

   Fixed income securities pay a specified rate of interest or dividends, or a
rate that is adjusted periodically by reference to some specified index or
market rate. Fixed income securities include securities issued by federal,
state, local, and foreign governments and related agencies, and by a wide range
of private or corporate issuers. Fixed income securities include, among others,
bonds, debentures, notes, bills, and commercial paper. Since interest rates
vary, it is impossible to predict the income of a Fund for any particular
period. In addition, the prices of fixed-income securities generally vary
inversely with changes in interest rates. Prices of debt securities may also be
affected by items related to a particular issue or to the debt markets
generally. The net asset value of a Fund's shares will vary as a result of
changes in the value of the securities in the Fund's portfolio.

   Investment Grade Fixed Income Securities To be considered investment grade
quality, at least one of the three major rating agencies (Fitch Investor
Services, Inc. ("Fitch"), Moody's Investors Services, Inc. ("Moody's") or
Standard & Poor's Rating Services ("S & P")) must have rated the security in
one of its top four rating categories at the time a Fund acquires the security
or, if the security is unrated, Loomis Sayles must have determined it to be of
comparable quality.

   Lower Quality Fixed Income Securities Lower quality fixed income securities
(commonly referred to as "junk bonds") are below investment grade quality. To
be considered below investment grade quality, none of the three major rating
agencies must have rated the security in one of its top four rating categories
at the time a Fund acquires the security or, if the security is unrated, Loomis
Sayles must have determined it to be of comparable quality.

   Lower quality fixed income securities are subject to greater credit risk and
market risk than higher quality fixed income securities. Lower quality fixed
income securities are considered predominantly speculative with respect to the
ability of the issuer to make timely principal and interest payments. If a Fund
invests in lower quality fixed income securities, a Fund's achievement of its
objective may be more dependent on Loomis Sayles' own credit analysis than is
the case with funds that invest in higher quality fixed income securities. The
market for lower quality fixed income securities may be more severely affected
than some other financial markets by economic recession or substantial interest
rate increases, by changing public perceptions of this market, or by
legislation that

                                      20



limits the ability of certain categories of financial institutions to invest in
these securities. In addition, the secondary market may be less liquid for
lower quality fixed income securities. This lack of liquidity at certain times
may affect the values of these securities and may make the evaluation and sale
of these securities more difficult. Lower quality fixed income securities may
be in poor standing or in default and typically have speculative
characteristics.

   For more information about the ratings services' descriptions of the various
rating categories, see Appendix A. A Fund may continue to hold fixed income
securities that are downgraded in quality subsequent to their purchase if
Loomis Sayles believes it would be advantageous to do so.

Foreign Currency Transactions

   Certain Funds may engage in currency transactions. Most foreign securities
in a Fund's portfolio will be denominated in foreign currencies or traded in
securities markets in which settlements are made in foreign currencies.
Similarly, any income on such securities is generally paid to the Fund in
foreign currencies. The value of these foreign currencies relative to the U.S.
dollar varies continually, causing changes in the dollar value of a Fund's
portfolio investments (even if the local market price of the investments is
unchanged) and changes in the dollar value of a Fund's income available for
distribution to its shareholders. The effect of changes in the dollar value of
a foreign currency on the dollar value of a Fund's assets and on the net
investment income available for distribution may be favorable or unfavorable.

   A Fund may incur costs in connection with conversions between various
currencies. In addition, a Fund may be required to liquidate portfolio assets,
or may incur increased currency conversion costs, to compensate for a decline
in the dollar value of a foreign currency occurring between the time that the
Fund declares and pays a dividend, or between the time that the Fund accrues
and pays an operating expense in U.S. dollars.

   To protect against a change in the foreign currency exchange rate between
the date on which a Fund contracts to purchase or sell a security and the
settlement date for the purchase or sale, or to gain exposure to one or more
foreign currencies or to "lock in" the equivalent of a dividend or interest
payment in another currency, a Fund might purchase or sell a foreign currency
on a spot (i.e., cash) basis at the prevailing spot rate. If conditions
warrant, a Fund may also enter into contracts with banks or broker-dealers to
purchase or sell foreign currencies at a future date ("forward contracts"). A
Fund will maintain cash or other liquid assets eligible for purchase by the
Fund either earmarked on the Fund's records or in a segregated account with the
custodian in an amount at least equal to the lesser of (i) the difference
between the current value of the Fund's liquid holdings that settle in the
relevant currency and the Fund's outstanding obligations under currency forward
contracts, or (ii) the current amount, if any, that would be required to be
paid to enter into an offsetting forward currency contract which would have the
effect of closing out the original forward contract. A Fund's use of currency
transactions may be limited by tax considerations. The Loomis Sayles may decide
not to engage in currency transactions and there is no assurance that any
currency hedging strategy used by the Fund will succeed. In addition, suitable
currency transactions may not be available in all circumstances and there can
be no assurance that a Fund will engage in these transactions when they would
be beneficial. A Fund may also purchase or sell foreign currency futures
contracts traded on futures exchanges. Foreign currency futures contract
transactions involve risks similar to those of other futures transactions,
which are described below under below under "Options and Futures Transactions."

Foreign Securities

   Certain Funds may invest in foreign securities. In addition to the risks
associated with investing in securities generally, such investments present
additional risks not typically associated with investments in comparable
securities of U.S. issuers.

                                      21



   Since most foreign securities are denominated in foreign currencies or
traded primarily in securities markets in which settlements are made in foreign
currencies, the value of these investments and the net investment income
available for distribution to shareholders of a Fund may be affected favorably
or unfavorably by changes in currency exchange rates or exchange control
regulations. Because a Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and the
Fund's income available for distribution.

   Although a Fund's income may be received or realized in foreign currencies,
the Fund will be required to compute and distribute its income in U.S. dollars.
Therefore, if the value of a currency relative to the U.S. dollar declines
after a Fund's income has been earned in that currency, translated into U.S.
dollars and declared as a dividend, but before payment of such dividend, the
Fund could be required to liquidate portfolio securities to pay such dividend.
Similarly, if the value of a currency relative to the U.S. dollar declines
between the time a Fund incurs expenses or other obligations in U.S. dollars
and the time such expenses or obligations are paid, the amount of such currency
required to be converted into U.S. dollars in order to pay such expenses in
U.S. dollars will be greater than the equivalent amount in such currency of
such expenses at the time they were incurred.

   There may be less information publicly available about a foreign corporate
or government issuer than about a U.S. issuer, and foreign corporate issuers
are not generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the United States. The
securities of some foreign issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Foreign brokerage commissions and
securities custody costs are often higher than those in the United States, and
judgments against foreign entities may be more difficult to obtain and enforce.
With respect to certain foreign countries, there is a possibility of
governmental expropriation of assets, confiscatory taxation, political or
financial instability and diplomatic developments that could affect the value
of investments in those countries. The receipt of interest on foreign
government securities may depend on the availability of tax or other revenues
to satisfy the issuer's obligations.

Illiquid Securities

   Certain Funds may purchase illiquid securities. Illiquid securities are
those that are not readily resalable, which may include securities whose
disposition is restricted by federal securities laws. Investment in restricted
or other illiquid securities involves the risk that a Fund may be unable to
sell such a security at the desired time or at approximately the price at which
the Fund values the security. Also, a Fund may incur expenses, losses or delays
in the process of registering restricted securities prior to resale.

   Certain Funds may purchase Rule 144A securities, which are privately offered
securities that can be resold only to certain qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"). Certain Funds may also purchase commercial paper issued
under Section 4(2) of the Securities Act. Investing in Rule 144A securities and
Section 4(2) commercial paper could have the effect of increasing the level of
the Fund's illiquidity to the extent that qualified institutional buyers
become, for a time, uninterested in purchasing these securities. Rule 144A
securities and Section 4(2) commercial paper are treated as illiquid, unless
the adviser has determined, under guidelines established by the Trusts' Board
of Trustees, that the particular issue is liquid.

Inflation-Linked Bonds

Certain Funds may invest in inflation linked bonds. Inflation linked bonds are
fixed income securities whose principal value is adjusted periodically
according to the rate of inflation. Some Funds, particularly Loomis Sayles
Global Bond Fund, may invest in inflation linked bonds issued by the Japanese
government. These bonds generally have maturities of ten or thirty years and
interest is payable semiannually. The principal amount of these bonds increases
with increases in the price index used as a reference for the bonds. In
addition, the amounts payable as coupon interest payments increase when the
price index increases because the interest amount is calculated by multiplying
the principal (as adjusted) by a fixed coupon rate.

Although inflation indexed bonds protect their holders from long-term
inflationary trends, short-term increases in inflation may result in a decline
in value. The values of inflation linked bonds generally fluctuate in response
to changes to real interest rates, which are in turn tied to the relationship
between nominal interest rates and the rate of inflation. If inflation were to
rise at a rate faster than nominal interest rates, real interest rates might
decline, leading to an increase in value of the inflation linked bonds. In
contrast, if nominal interest rates increased at a faster rate than inflation,
real interest rate might rise, leading to a decrease in the value of inflation
linked bonds. If inflation is lower than expected during a period holds
inflation linked bonds, the Fund may earn less on such bonds

                                      22



than on a conventional bond. If interest rates rise due to reasons other than
inflation (for example, due to changes in currency exchange rates), investors
in inflation linked bonds may not be protected to the extent the increase is
not reflected in the price index used as a reference for the bonds. There can
be no assurance that the price index used for an inflation linked bond will
accurately measure the real rate of inflation in the prices of goods and
services. Inflation linked bonds issued by the Japanese government will be
subject to the risks described above under "Foreign Securities." Certain Funds
may also invest in Treasury Inflation-Protected Securities issued by the U.S.
government. See "U.S. Government Securities" below for additional information.

Initial Public Offerings

   Certain funds may purchase securities of companies that are offered pursuant
to an initial public offering ("IPO"). An IPO is a company's first offering of
stock to the public in the primary market, typically to raise additional
capital. The Fund may purchase a "hot" IPO (also known as a "hot issue"), which
is an IPO that is oversubscribed and, as a result, is an investment opportunity
of limited availability. As a consequence, the price at which these IPO shares
open in the secondary market may be significantly higher than the original IPO
price. IPO securities tend to involve greater risk due, in part, to public
perception and the lack of publicly available information and trading history.
There is the possibility of losses resulting from the difference between the
issue price and potential diminished value of the stock once traded in the
secondary market. The Fund's investment in IPO securities may have a
significant impact on the Fund's performance and may result in significant
capital gains. The availability of IPOs may be limited so that a Fund does not
get the full allocation desired.

Investment Companies

   Certain Funds may invest in other investment companies. Investment
companies, including companies such as "iShares," "SPDRs" and "VIPERs," are
essentially pools of securities. Investing in other investment companies
involves substantially the same risks as investing directly in the underlying
securities, but may involve additional expenses at the investment company
level, such as investment advisory fees and operating expenses. In some cases,
investing in an investment company may involve the payment of a premium over
the value of the assets held in that investment company's portfolio. As an
investor in another investment company, a Fund will bear its ratable share of
the investment company's expenses, including advisory fees, and the Fund's
shareholders will bear such expenses indirectly, in addition to similar fees
and expenses of the Fund.

   Despite the possibility of greater fees and expenses, investment in other
investment companies may be attractive nonetheless for several reasons,
especially in connection with foreign investments. Because of restrictions on
direct investment by U.S. entities in certain countries, investing indirectly
in such countries (by purchasing shares of another fund that is permitted to
invest in such countries) may be the most practical and efficient way for a
Fund to invest in such countries. In other cases, when a Fund's adviser desires
to make only a relatively small investment in a particular country, investing
through another fund that holds a diversified portfolio in that country may be
more effective than investing directly in issuers in that country. In addition,
it may be efficient for a Fund to gain exposure to particular market segments
by investing in shares of one or more investment companies.

Mortgage Dollar Rolls

   Certain Funds may enter into mortgage dollar rolls. A dollar roll involves
the sale of a security by a Fund and its agreement to repurchase the instrument
at a specified time and price, and may be considered a form of

                                      23



borrowing for some purposes. A Fund will designate on its records or segregate
with its custodian bank assets determined to be liquid in an amount sufficient
to meet its obligations under the transactions. A dollar roll involves
potential risks of loss that are different from those related to the securities
underlying the transactions. A Fund may be required to purchase securities at a
higher price than may otherwise be available on the open market. Since the
counterparty in the transaction is required to deliver a similar, but not
identical, security to the Fund, the security that the Fund is required to buy
under the dollar roll may be worth less than an identical security. There is no
assurance that a Fund's use of the cash that it receives from a dollar roll
will provide a return that exceeds borrowing costs.

Mortgage-Related Securities

   Certain funds may invest in mortgage-related securities, such as Government
National Mortgage Association ("GNMA") or Federal National Mortgage Association
("FNMA") certificates, which differ from traditional debt securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans generally may be prepaid at any time. As
a result, if a Fund purchases these assets at a premium, a faster-than-expected
prepayment rate will tend to reduce yield to maturity, and a
slower-than-expected prepayment rate may have the opposite effect of increasing
yield to maturity. If a Fund purchases mortgage-related securities at a
discount, faster-than-expected prepayments will tend to increase, and
slower-than-expected prepayments tend to reduce, yield to maturity.
Prepayments, and resulting amounts available for reinvestment by a Fund, are
likely to be greater during a period of declining interest rates and, as a
result, are likely to be reinvested at lower interest rates. Accelerated
prepayments on securities purchased at a premium may result in a loss of
principal if the premium has not been fully amortized at the time of
prepayment. Although these securities will decrease in value as a result of
increases in interest rates generally, they are likely to appreciate less than
other fixed-income securities when interest rates decline because of the risk
of prepayments. In addition, an increase in interest rates would also increase
the inherent volatility of a Fund by increasing the average life of the Fund's
portfolio securities.

                                      24



Money Market Instruments

   Each Fund may seek to minimize risk by investing in money market
instruments, which are high-quality, short-term securities. Although changes in
interest rates may change the market value of a security, a Fund expects those
changes to be minimal with respect to these securities, which are often
purchased for defensive purposes.

   Money market obligations of foreign banks or of foreign branches or
subsidiaries of U.S. banks may be subject to different risks than obligations
of domestic banks, such as foreign economic, political and legal developments
and the fact that different regulatory requirements apply.

Options and Futures Transactions

   An option entitles the holder to receive (in the case of a call option) or
to sell (in the case of a put option) a particular security at a specified
exercise price. An "American style" option allows exercise of the option at any
time during the term of the option. A "European style" option allows an option
to be exercised only at a specified time or times, such as the end of its term.
Options may be traded on or off an established securities exchange.

   If the holder of an option wishes to terminate its position, it may seek to
effect a closing sale transaction by selling an option identical to the option
previously purchased. The effect of the purchase is that the previous option
position will be canceled. A Fund will realize a profit from closing out an
option if the price received for selling the offsetting position is more than
the premium paid to purchase the option; the Fund will realize a loss from
closing out an option transaction if the price received for selling the
offsetting option is less than the premium paid to purchase the option.

   The use of options involves risks. One risk arises because of the imperfect
correlation between movements in the price of options and movements in the
price of the securities that are the subject of the option. A Fund's option
strategies will not be fully effective if such imperfect correlation occurs.

   Price movement correlation may be distorted by illiquidity in the options
markets and the participation of speculators in such markets. If an
insufficient number of contracts are traded, commercial users may not deal in
options because they do not want to assume the risk that they may not be able
to close out their positions within a reasonable amount of time. In such
instances, options market prices may be driven by different forces than those
driving the market in the underlying securities, and price spreads between
these markets may widen. The participation of speculators in the market
enhances its liquidity. Nonetheless, the trading activities of speculators in
the options markets may create temporary price distortions unrelated to the
market in the underlying securities.

   An exchange-traded option may be closed out only on an exchange that
generally provides a liquid secondary market for an option of the same series.
If a liquid secondary market for an exchange-traded option does not exist, it
might not be possible to effect a closing transaction with respect to a
particular option, with the result that the Fund would have to exercise the
option in order to accomplish the desired hedge. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions, or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing Corporation
or other clearing organization may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.

   An over-the-counter option (an option not traded on an established exchange)
may be closed out only by agreement with the other party to the original option
transaction. With over-the-counter options, a Fund is at risk that the other
party to the transaction will default on its obligations, or will not permit a
Fund to terminate the transaction before its scheduled maturity. While the Fund
will seek to enter into over-the-counter options only with dealers who agree to
or are expected to be capable of entering into closing transactions with the
Fund, there can be

                                      25



no assurance that the Fund will be able to liquidate an over-the-counter option
at a favorable price at any time prior to its expiration. Accordingly, the Fund
might have to exercise an over-the-counter option it holds in order to achieve
the intended hedge. Over-the-counter options are not subject to the protections
afforded purchasers of listed options by the Options Clearing Corporation or
other clearing organizations.

   Income earned by a Fund from its options activities will be treated as
capital gain and, if not offset by net recognized capital losses incurred by
the Fund, will be distributed to shareholders in taxable distributions.
Although gain from options transactions may hedge against a decline in the
value of a Fund's portfolio securities, that gain, to the extent not offset by
losses, will be distributed in light of certain tax considerations and will
constitute a distribution of that portion of the value preserved against
decline.

   The Funds are operated by a person who has claimed an exclusion from the
definition of "commodity pool operator" under the Commodity Exchange Act (the
"CEA") and, therefore, such person is not subject to registration or regulation
as a pool operator under the CEA.

   A futures contract is an agreement between two parties to buy and sell a
particular commodity, instrument or index, (e.g., an interest-bearing security)
for a specified price on a specified future date. In the case of futures on an
index, the seller and buyer agree to settle in cash, at a future date, based on
the difference in value of the contract between the date it is opened and the
settlement date. The value of each contract is equal to the value of the index
from time to time multiplied by a specified dollar amount. For example,
long-term municipal bond index futures trade in contracts equal to $1000
multiplied by the Bond Buyer Municipal Bond Index, and S&P 500 Index futures
trade in contracts equal to $500 multiplied by the S&P 500 Index.

   When a trader, such as a Fund, enters into a futures contract, it is
required to deposit with (or for the benefit of) its broker as "initial margin"
an amount of cash or short-term high-quality securities (such as U.S. Treasury
bills or high-quality tax exempt bonds acceptable to the broker) equal to
approximately 2% to 5% of the delivery or settlement price of the contract
(depending on applicable exchange rules). Initial margin is held to secure the
performance of the holder of the futures contract. As the value of the contract
changes, the value of the futures contract position increases or declines. At
the end of each trading day, the amount of such increase and decline is
received and paid respectively by and to the holders of these positions. The
amount received or paid is known as "variation margin." If the Fund has a long
position in a futures contract it will either "earmark" on the Fund's records
or place in a segregated account with the Fund's custodian cash or liquid
securities eligible for purchase by the Fund equal to the purchase price of the
contract (less any margin on deposit). For short positions in futures
contracts, the Fund will either designate on the Fund's records or place in a
segregated account with the custodian cash or liquid securities eligible for
purchase by the Fund that, when added to the amounts deposited as margin, equal
the market value of the instruments or currency underlying the futures
contracts. For futures contracts which are contractually required to settle in
cash (rather than by delivery of the underlying security or commodity), the
Fund may designate or segregate liquid assets in an amount equal to the Fund's
daily marked-to-market (net) obligations rather than the notional value of such
contract.

   Although futures contracts by their terms require actual delivery and
acceptance of securities (or cash in the case of index futures), in most cases
the contracts are closed out before settlement. A futures sale is closed by
purchasing a futures contract for the same aggregate amount of the specific
type of financial instrument or commodity and with the same delivery date.
Similarly, the closing out of a futures purchase is closed by the purchaser
selling an offsetting futures contract.

   Gain or loss on a futures position is equal to the net variation margin
received or paid over the time the position is held, plus or minus the amount
received or paid when the position is closed, minus brokerage commissions.

   The successful use of options depends in part on the ability of Loomis
Sayles to forecast correctly the direction and extent of interest rate, stock
price, or currency value movements within a given time frame. To the extent
interest rates, stock prices, or currency values move differently from that
anticipated, a Fund may realize a loss on the option and futures transaction,
that is not fully or partially offset by an increase in the value of portfolio
securities. In addition, whether or not interest rates or the relevant stock
price or relevant currency values move during the period that the Fund holds
options positions, the Fund will pay the cost of taking those positions (e.g.,
brokerage costs). As a result of these factors, the Fund's total return for
such period may be less than if it had not engaged in the option and futures
transaction.

                                      26



Pay-in-Kind Securities

   Certain Funds may invest in pay-in-kind securities. Pay-in-kind securities
pay dividends or interest in the form of additional securities of the issuer,
rather than in cash. These securities are usually issued and traded at a
discount from their face amounts. The amount of the discount varies depending
on such factors as the time remaining until maturity of the securities,
prevailing interest rates, the liquidity of the security and the perceived
credit quality of the issuer. The market prices of pay-in-kind securities
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than are other types of securities having similar maturities
and credit quality.

Private Placements

   The Funds may invest in securities that are purchased in private placements
and, accordingly, are subject to restrictions on resale as a matter of contract
or under federal securities laws. Because there may be relatively few potential
purchasers for these securities, especially under adverse market or economic
conditions or in the event of adverse changes in the financial condition of the
issuer, a Fund could find it more difficult or impossible to sell the
securities when its investment adviser believes that it is advisable to do so
or may be able to sell the securities only at prices lower than if the
securities were more widely-held. At times, it also may be more difficult to
determine the fair value of the securities for purposes of computing a Fund's
net asset value.

   While private placements may offer opportunities for investment that are not
otherwise available on the open market, the securities so purchased are often
"restricted securities," which are securities that cannot be sold to the public
without registration under the Securities Act or the availability of an
exemption from registration (such as Rule 144 or Rule 144A under the Securities
Act), or that are not readily marketable because they are subject to other
legal or contractual delays or restrictions on resale.

   The absence of a trading market can make it difficult to ascertain a market
value for illiquid investments such as private placements. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for a Fund to sell them promptly at an
acceptable price. A Fund may have to bear the extra expense of registering the
securities for resale and the risk of substantial delay in effecting the
registration. In addition, market quotations typically are less readily
available for these securities. The judgment of the Funds' investment adviser
may at times play a greater role in valuing these securities than in the case
of unrestricted securities.

   Generally speaking, restricted securities may be sold only to qualified
institutional buyers, in a privately-negotiated transaction to a limited number
of purchasers, in limited quantities after they have been held for a specified
period of time and other conditions are met pursuant to an exemption from
registration, or in a public offering for which a registration statement is in
effect under the Securities Act. A Fund may be deemed to be an underwriter for
purposes of the Securities Act when selling restricted securities to the public
so that the Fund may be liable to purchasers of the securities if the
registration statement prepared by the issuer, or the prospectus forming a part
of the registration statement, is materially inaccurate or misleading.

Privatizations

   Certain Funds may participate in privatizations. In a number of countries
around the world, governments have undertaken to sell to investors interests in
enterprises that the government has historically owned or controlled. These
transactions are known as "privatizations" and may in some cases represent
opportunities for significant capital appreciation. In some cases, the ability
of U.S. investors, such as the Funds, to participate in privatizations may be
limited by local law, and the terms of participation for U.S. investors may be
less advantageous than those for local investors. Also, there is no assurance
that privatized enterprises will be successful, or that an investment in such
an enterprise will retain its value or appreciate in value.

                                      27



Real Estate Investment Trusts ("REITs")

   REITs are pooled investment vehicles that invest primarily in either real
estate or real estate-related loans. REITs involve certain unique risks in
addition to those risks associated with investing in the real estate industry
in general (such as possible declines in the value of real estate, lack of
availability of mortgage funds, or extended vacancies of property). Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified
outside of real estate, and are subject to heavy cash flow dependency, risks of
default by borrowers, and self-liquidation. REITs are also subject to the
possibilities of failing to qualify for tax-free pass-through of income under
the Internal Revenue Code of 1986, as amended (the "Code") and failing to
maintain their exemptions from registration under the 1940 Act.

   REITs may have limited financial resources, may trade less frequently and in
limited volume, and may be subject to more abrupt or erratic price movements
than more widely-held securities.

   A Fund's investment in a REIT may require the Fund to accrue and distribute
income not yet received or may result in the Fund making distributions that
constitute a return of capital to Fund shareholders for federal income tax
purposes. In addition, distributions by a Fund from REITs will not qualify for
the corporate dividends-received deduction, or, generally, for treatment as
qualified dividend income.

Repurchase Agreements

   A Fund may enter into repurchase agreements, by which a Fund purchases a
security and obtains a simultaneous commitment from the seller to repurchase
the security at an agreed-upon price and date. The resale price is in excess of
the purchase price and reflects an agreed-upon market interest rate unrelated
to the coupon rate on the purchased security. Repurchase agreements are
economically similar to collateralized loans by a Fund. Such transactions
afford a Fund the opportunity to earn a return on temporarily available cash at
relatively low market risk. While the underlying security may be a bill,
certificate of indebtedness, note or bond issued by an agency, authority or
instrumentality of the U.S. Government, the obligation of the seller is not
guaranteed by the U.S. Government and there is a risk that the seller may fail
to repurchase the underlying security. In such event, a Fund would attempt to
exercise rights with respect to the underlying security, including possible
disposition in the market. However, a Fund may be subject to various delays and
risks of loss, including (i) possible declines in the value of the underlying
security during the period while the Fund seeks to enforce its rights thereto,
(ii) possible reduced levels of income and lack of access to income during this
period and (iii) inability to enforce rights and the expenses involved in the
attempted enforcement.

Rule 144A Securities and Section 4(2) Commercial Paper

   Rule 144A securities are privately offered securities that can be resold
only to certain qualified institutional buyers pursuant to Rule 144A under the
Securities Act. A Fund may also purchase commercial paper issued under
Section 4(2) of the Securities Act. Investing in Rule 144A securities and
Section 4(2) commercial paper could have the effect of increasing the level of
a Fund's illiquidity to the extent that qualified institutional buyers become,
for a time, uninterested in purchasing these securities. Rule 144A securities
and Section 4(2) commercial paper are treated as illiquid, unless the adviser
has determined, under guidelines established by the Trust's Board of Trustees,
that the particular issue is liquid.

Securities Lending

   A Fund may lend from its total assets in the form of portfolio securities to
broker-dealers under contracts calling for collateral equal to at least the
market value of the securities loaned, marked to market on a daily basis. A
Fund will continue to benefit from interest or dividends on the securities
loaned and may also earn a return from the collateral, which may include shares
of a money market fund subject to any investment restrictions listed in this
Statement. Under some securities lending arrangements, a Fund may receive a set
fee for keeping its securities available for lending. Any voting rights, or
rights to consent, relating to securities loaned pass to the borrower. However,
if a material event (as determined by the adviser) affecting the investment
occurs, such loans will be called if possible, so that the securities may be
voted by the Fund. A Fund pays various fees in connection with such loans,
including shipping fees and reasonable custodian and placement fees approved by
the Board of Trustees of the Trust or persons acting pursuant to the direction
of the Boards.

                                      28



   These transactions must be fully collateralized at all times, but involve
some credit risk to the Fund if the borrower or the party (if any) guaranteeing
the loan should default on its obligation and the Fund is delayed in or
prevented from recovering the collateral.

Short-Term Trading

   The Funds may, consistent with their investment objectives, engage in
portfolio trading in anticipation of, or in response to, changing economic or
market conditions and trends. These policies may result in higher turnover
rates in the Fund's portfolio, which may produce higher transaction costs and a
higher level of taxable capital gains. Generally, portfolio turnover
considerations will not limit the adviser's investment discretion in managing a
Fund's assets. The Funds anticipate that their portfolio turnover rates will
vary significantly from time to time depending on the volatility of economic
and market conditions.

Small Capitalization Companies

   The Funds may invest in companies with relatively small market
capitalizations. Such investments may involve greater risk than is usually
associated with more established companies. These companies often have sales
and earnings growth rates that exceed those of companies with larger market
capitalization. Such growth rates may in turn be reflected in more rapid share
price appreciation. However, companies with smaller market capitalization often
have limited product lines, markets or financial resources and may be dependent
upon a relatively small management group. These securities may have limited
marketability and may be subject to more abrupt or erratic movements in price
than securities of companies with larger market capitalization or market
averages in general. The net asset value of funds that invest in companies with
relatively small market capitalizations therefore may fluctuate more widely
than market averages.

Structured Notes

   Certain Funds may invest in a broad category of instruments known as
"structured notes." These instruments are debt obligations issued by industrial
corporations, financial institutions or governmental or international agencies.
Traditional debt obligations typically obligate the issuer to repay the
principal plus a specified rate of interest. Structured notes, by contrast,
obligate the issuer to pay amounts of principal or interest that are determined
by reference to changes in some external factor or factors, or the principal
and interest rate may vary from the stated rate because of changes in these
factors. For example, the issuer's obligations could be determined by reference
to changes in the value of a commodity (such as gold or oil) or commodity
index, a foreign currency, an index of securities (such as the S&P 500 Index)
or an interest rate (such as the U.S. Treasury bill rate). In some cases, the
issuer's obligations are determined by reference to changes over time in the
difference (or "spread") between two or more external factors (such as the U.S.
prime lending rate and the total return of the stock market in a particular
country, as measured by a stock index). In some cases, the issuer's obligations
may fluctuate inversely with changes in an external factor or factors (for
example, if the U.S. prime lending rate goes up, the issuer's interest payment
obligations are reduced). In some cases, the issuer's obligations may be
determined by some multiple of the change in an external factor or factors (for
example, three times the change in the U.S. Treasury bill rate). In some cases,
the issuer's obligations remain fixed (as with a traditional debt instrument)
so long as an external factor or factors do not change by more than the
specified amount (for example, if the value of a stock index does not exceed
some specified maximum), but if the external factor or factors change by more
than the specified amount, the issuer's obligations may be sharply reduced.

   Structured notes can serve many different purposes in the management of a
mutual fund. For example, they can be used to increase a Fund's exposure to
changes in the value of assets that the Fund would not ordinarily purchase
directly (such as commodities or stocks traded in a market that is not open to
U.S. investors). They can also be used to hedge the risks associated with other
investments a Fund holds. For example, if a structured note has an interest
rate that fluctuates inversely with general changes in a country's stock market
index, the value of the structured note would generally move in the opposite
direction to the value of holdings of stocks in that market, thus moderating
the effect of stock market movements on the value of the Fund's portfolio as a
whole.

   Risks. Structured notes involve special risks. As with any debt obligation,
structured notes involve the risk that the issuer will become insolvent or
otherwise default on its payment obligations. This risk is in addition to the
risk that the issuer's obligations (and thus the value of a Fund's investment)
will be reduced because of adverse changes in the external factor or factors to
which the obligations are linked. The value of structured notes will in

                                      29



many cases be more volatile (that is, will change more rapidly or severely)
than the value of traditional debt instruments. Volatility will be especially
high if the issuer's obligations are determined by reference to some multiple
of the change in the external factor or factors. Many structured notes have
limited or no liquidity, so that a Fund would be unable to dispose of the
investment prior to maturity. As with all investments, successful use of
structured notes depends in significant part on the accuracy of the adviser's
analysis of the issuer's creditworthiness and financial prospects, and of the
adviser's forecast as to changes in relevant economic and financial market
conditions and factors. In instances where the issuer of a structured note is a
foreign entity, the usual risks associated with investments in foreign
securities (described below) apply. Structured notes may be considered
derivative securities.

Step-Coupon Securities

   Certain Funds may invest in step-coupon securities. Step-coupon securities
trade at a discount from their face value and pay coupon interest. The coupon
rate is low for an initial period and then increases to a higher coupon rate
thereafter. Market values of these types of securities generally fluctuate in
response to changes in interest rates to a greater degree than do conventional
interest-paying securities of comparable term and quality. Under many market
conditions, investments in such securities may be illiquid, making it difficult
for a Fund to dispose of them or determine their current value.

"Stripped" Securities

   Certain Funds may invest in stripped securities, which are usually
structured with two or more classes that receive different proportions of the
interest and principal distribution on a pool of U.S. Government, or foreign
government securities or mortgage assets. In some cases, one class will receive
all of the interest (the interest-only or "IO" class), while the other class
will receive the entire principal (the principal-only or "PO" class). Stripped
securities commonly have greater market volatility than other types of
fixed-income securities. In the case of stripped mortgage securities, if the
underlying mortgage assets experience greater than anticipated payments of
principal, a Fund may fail to recoup fully its investments in IOs. The staff of
the SEC has indicated that it views stripped mortgage securities as illiquid
unless the securities are issued by the U.S. government or its agencies and are
backed by fixed-rate mortgages. The Funds intend to abide by the staff's
position. Stripped securities may be considered derivative securities.

Supranational Entities

   Certain Funds may invest in obligations of supranational entities. A
supranational entity is an entity designated or supported by national
governments to promote economic reconstruction, development or trade amongst
nations. Examples of supranational entities include the International Bank for
Reconstruction and Development (also known as the World Bank) and the European
Investment Bank. Obligations of supranational entities are subject to the risk
that the governments on whose support the entity depends for its financial
backing or repayment may be unable or unwilling to provide that support. In
addition to the risks of investing in securities generally, obligations of a
supranational entity that are denominated in foreign currencies will also be
subject to the risks associated with investments in foreign currencies, as
described above under "Foreign Securities."

Swap Transactions

   Certain Funds may enter into interest rate or currency swaps to preserve a
return or spread on a particular investment or portion of its portfolio, to
gain exposure to one or more securities, currencies, commodities, or interest
rates, to protect against currency fluctuations, to manage duration, or to
protect against any increase in the price of securities the Fund anticipates
purchasing at a later date. A swap transaction involves an agreement (typically
with a bank, a brokerage firm or other financial institution as counterparty)
to exchange two streams of payments (for example, an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of
principal). The Fund will either designate on its records or segregate at its
custodian bank liquid assets in an amount sufficient to cover its current
obligations under swap agreements. Since swap agreements are not
exchange-traded, but are private contracts into which the Fund and a swap
counterparty enter as principals, the Fund may experience a loss or delay in
recovering assets if the counterparty defaults on its obligations. To the
extent that the Fund invests in swaps whose return corresponds to the
performance of a foreign security or a foreign securities index, such swap
transaction will involve risks similar to the risks of investing in foreign
securities generally. See "Foreign Securities" above. Swaps are often used for
many of the same purposes as, and share many of the same risks with, other
derivative instruments, such as, participation notes and zero-strike warrants
and options and debt-linked and/or equity-linked securities.

                                      30



   Certain Funds may invest may invest in publicly or privately issued
interests in investment pools whose underlying assets are credit default,
credit-linked, interest rate, currency exchange, equity-linked or other types
of swap contracts and related underlying securities or securities loan
agreements. The pools' investment results may be designed to correspond
generally to the performance of a specified securities index or "basket" of
securities, sometimes a single security. These types of pools are often used to
gain exposure to multiple securities with a smaller investment than would be
required to invest directly in the individual securities. They may also be used
to gain exposure to foreign securities markets without investing in the foreign
securities themselves or the relevant foreign market. To the extent that the
Fund invests in pools of swaps and related underlying securities or securities
loan agreements whose return corresponds to the performance of a foreign
securities index or one or more foreign securities, investing in such pools
will involve risks similar to the risks of investing in foreign securities. See
"Foreign Securities" above. In addition to the risks associated with investing
in swaps generally, an investing Fund bears the risks and costs generally
associated with investing in pooled investment vehicles, such as paying the
fees and expenses of the pool and the risk that the pool or the operator of the
pool may default on its obligations to the holder of interests in the pool,
such as the Fund. Interests in privately offered investment pools of swaps may
be considered illiquid and deemed liquid, subject to the Fund's restrictions on
investments in illiquid securities.

Tax Exempt Securities

   The Funds may invest in "Tax Exempt Securities," which term refers to debt
securities the interest from which is, in the opinion of bond counsel to the
issuer (or on the basis of other authority believed by the Fund's portfolio
manager to be reliable), exempt from federal income tax. Tax Exempt Securities
include debt obligations issued by or on behalf of states, territories and
possessions of the United States and their political subdivisions (for example,
counties, cities, towns, villages and school districts) and authorities to
obtain funds for various public purposes, including the construction of a wide
range of public facilities such as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which certain Tax Exempt Securities may be issued
include the refunding of outstanding obligations, obtaining funds for federal
operating expenses, or obtaining funds to lend to public or private
institutions for the construction of facilities such as educational, hospital
and housing facilities. In addition, certain types of private activity bonds
have been or may be issued by public authorities or on behalf of state or local
governmental units to finance privately operated housing facilities, sports
facilities, convention or trade facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity or
sewage or solid waste disposal. Such obligations are included within the term
"Tax Exempt Securities" if the interest paid thereon, is, in the opinion of
bond counsel to the issuer (or on the basis of other authority believed by the
Fund's portfolio manager to be reliable), exempt from federal income taxation.

   Funds that invest in certain tax-exempt bonds or certain private activity
bonds may not be a desirable investment for "substantial users" of facilities
financed by such obligations or bonds or for "related persons" of substantial
users. You should contact your financial adviser or attorney for more
information if you think you may be a "substantial user" or a "related person"
of a substantial user.

   There are variations in the quality of Tax Exempt Securities, both within a
particular classification and between classifications, depending on numerous
factors (see Appendix A for a description of securities ratings).

   The two principal classifications of tax-exempt bonds are general obligation
bonds and limited obligation (or revenue) bonds. General obligation bonds are
obligations involving the credit of an issuer possessing taxing power and are
payable from the issuer's general unrestricted revenues and not from any
particular fund or source. The characteristics and method of enforcement of
general obligation bonds vary according to the law applicable to the particular
issuer, and payment may be dependent upon an appropriation by the issuer's
legislative body. Limited obligation bonds are payable only from the revenues
derived from a particular facility or class of facilities, or in some cases
from the proceeds of a special excise or other specific revenue source such as
the user of the facility. Tax-exempt private activity bonds are in most cases
revenue bonds and generally are not payable from the unrestricted revenues of
the issuer. The credit and quality of such bonds are usually directly related
to the credit standing of the corporate user of the facilities. Principal and
interest on such bonds are the responsibilities of the corporate user (and any
guarantor).

                                      31



   The yields on Tax Exempt Securities are dependent on a variety of factors,
including general money market conditions, the financial condition of the
issuer, general conditions of the Tax Exempt Securities market, the size of a
particular offering, the maturity of the obligation and the rating of the
issue. Further, information about the financial condition of an issuer of
tax-exempt bonds may not be as extensive as that made available by corporations
whose securities are publicly traded. The ratings of Fitch, Moody's and S&P
represent their opinions as to the quality of the Tax Exempt Securities, which
they undertake to rate. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently, Tax Exempt
Securities with the same maturity, interest rate and rating may have different
yields while Tax Exempt Securities of the same maturity and interest rates with
different ratings may have the same yield. Subsequent to its purchase by a
Fund, an issue of Tax Exempt Securities or other investments may cease to be
rated or the rating may be reduced below the minimum rating required for
purchase by the Fund. Neither event will require the elimination of an
investment from the Fund's portfolio, but the Fund's adviser will consider such
an event as part of its normal, ongoing review of all the Fund's portfolio
securities.

   The Funds do not currently intend to invest in so-called "moral obligation"
bonds, in which repayment is backed by a moral commitment of an entity other
than the issuer, unless the credit of the issuer itself, without regard to the
"moral obligation," meets the investment criteria established for investments
by such Fund.

   Securities in which a Fund may invest, including Tax Exempt Securities, are
subject to the provisions of bankruptcy, insolvency and other laws affecting
the rights and remedies of creditors, such as the federal Bankruptcy Code, and
laws, if any, which may be enacted by Congress or the state legislatures
extending the time for payment of principal or interest, or both, or imposing
other constraints upon enforcement of such obligations. There is also the
possibility that as a result of litigation or other conditions the power or
ability of issuers to meet their obligations for the payment of interest and
principal on their Tax Exempt Securities may be materially affected or that
their obligations may be found to be invalid and unenforceable. Such litigation
or conditions may from time to time have the effect of introducing
uncertainties in the market for tax-exempt bonds or certain segments thereof,
or materially affecting the credit risk with respect to particular bonds.
Adverse economic, legal or political developments might affect all or a
substantial portion of the Fund's Tax Exempt Securities in the same manner.

   From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on debt obligations issued by states and their political subdivisions
and similar proposals may well be introduced in the future. If such a proposal
were enacted, the availability of Tax-Exempt Securities for investment by the
Funds and the value of such Funds' portfolios could be materially affected, in
which event such Funds would reevaluate their investment objectives and
policies and consider changes in their structure or dissolution.

   All debt securities, including tax-exempt bonds, are subject to credit and
market risk. Generally, for any given change in the level of interest rates,
prices for longer maturity issues tend to fluctuate more than prices for
shorter maturity issues.

U.S. Government Securities

The Funds may invest in some or all of the following U.S. Government securities:

   U.S. Treasury Bills - Direct obligations of the U.S. Treasury that are
   issued in maturities of one year or less. No interest is paid on Treasury
   bills; instead, they are issued at a discount and repaid at full face value
   when they mature. They are backed by the full faith and credit of the U.S.
   Government.

   U.S. Treasury Notes and Bonds - Direct obligations of the U.S. Treasury
   issued in maturities that vary between one and 30 years, with interest
   normally payable every six months. These obligations are backed by the full
   faith and credit of the U.S. Government.

   Treasury Inflation-Protected Securities ("TIPS") - Fixed-income securities
   whose principal value is periodically adjusted according to the rate of
   inflation. The interest rate on TIPS is fixed at issuance, but over the life
   of the bond this interest may be paid on an increasing or decreasing
   principal value that has been adjusted for inflation. Although repayment of
   the original bond principal upon maturity is guaranteed, the market value of
   TIPS is not guaranteed, and will fluctuate.

                                      32



   "Ginnie Maes" - Debt securities issued by a mortgage banker or other
   mortgagee which represent an interest in a pool of mortgages insured by the
   Federal Housing Administration or the Rural Housing Service or guaranteed by
   the Veterans Administration. GNMA guarantees the timely payment of principal
   and interest when such payments are due, whether or not these amounts are
   collected by the issuer of these certificates on the underlying mortgages.
   It is generally understood that a guarantee by GNMA is backed by the full
   faith and credit of the United States. Mortgages included in single family
   or multi-family residential mortgage pools backing an issue of Ginnie Maes
   have a maximum maturity of 30 years. Scheduled payments of principal and
   interest are made to the registered holders of Ginnie Maes (such as the
   Funds) each month. Unscheduled prepayments may be made by homeowners, or as
   a result of a default. Prepayments are passed through to the registered
   holder (such as the Funds, which reinvest any prepayments) of Ginnie Maes
   along with regular monthly payments of principal and interest.

   "Fannie Maes" - FNMA is a government-sponsored corporation owned entirely by
   private stockholders that purchases residential mortgages from a list of
   approved seller/servicers. Fannie Maes are pass-through securities issued by
   FNMA that are guaranteed as to timely payment of principal and interest by
   FNMA but are not backed by the full faith and credit of the U.S. Government.

   "Freddie Macs" - The Federal Home Loan Mortgage Corporation ("FHLMC") is a
   corporate instrumentality of the U.S. government. Freddie Macs are
   participation certificates issued by FHLMC that represent an interest in
   residential mortgages from FHLMC's National Portfolio. FHLMC guarantees the
   timely payment of interest and ultimate collection of principal, but Freddie
   Macs are not backed by the full faith and credit of the U.S. Government.

   Risks. U.S. Government securities generally do not involve the credit risks
associated with investments in other types of fixed-income securities,
although, as a result, the yields available from U.S. Government securities are
generally lower than the yields available from corporate fixed-income
securities. Like other debt securities, however, the values of U.S. Government
securities change as interest rates fluctuate. Fluctuations in the value of
portfolio securities will not affect interest income on existing portfolio
securities but will be reflected in a Fund's net asset value. Since the
magnitude of these fluctuations will generally be greater at times when a
Fund's average maturity is longer, under certain market conditions a Fund may,
for temporary defensive purposes, accept lower current income from short-term
investments rather than investing in higher yielding long-term securities.
Securities such as Fannie Maes and Freddie Macs are guaranteed as to the
payment of principal and interest by the relevant entity (e.g., FNMA or FHLMC)
but are not backed by the full faith and credit of the U.S. Government. An
event affecting the guaranteeing entity could adversely affect the payment of
principal or interest or both on the security, and therefore, these types of
securities should be considered to be riskier than U.S. Government securities.
FNMA and FHLMC have each been the subject of investigations by federal
regulators over certain accounting matters. Such investigations, and any
resulting restatements of financial statements, may adversely affect the
guaranteeing entity and, as a result, the payment of principal or interest on
these types of securities.

   Please see "Mortgage-Related Securities" above for additional information on
these securities.

   The values of TIPS generally fluctuate in response to changes in real
interest rates, which are in turn tied to the relationship between nominal
interest rates and the rate of inflation. If inflation were to rise at a faster
rate than nominal interest rates, real interest rates might decline, leading to
an increase in value of TIPS. In contrast, if nominal interest rates increased
at a faster rate than inflation, real interest rates might rise, leading to a
decrease in value of TIPS. If inflation is lower than expected during the
period a Fund holds TIPS, the Fund may earn less on the TIPS than on a
conventional bond. If interest rates rise due to reasons other than inflation
(for example, due to changes in currency exchange rates), investors in TIPS may
not be protected to the extent that the increase is not reflected in the bonds'
inflation measure. There can be no assurance that the inflation index for TIPS
will accurately measure the real rate of inflation in the prices of goods and
services.

Warrants and Rights

   Certain Funds may invest in warrants and rights. A warrant is an instrument
that gives the holder a right to purchase a given number of shares of a
particular security at a specified price until a stated expiration date. Buying
a warrant generally can provide a greater potential for profit or loss than an
investment of equivalent amounts in the underlying common stock. The market
value of a warrant does not necessarily move with the value of the underlying
securities. If a holder does not sell the warrant, it risks the loss of its
entire investment if the market price of the underlying security does not,
before the expiration date, exceed the exercise price of the warrant.

                                      33



Investments in warrants is a speculative activity. Warrants pay no dividends
and confer no rights (other than the right to purchase the underlying
securities) with respect to the assets of the issuer. A right is a privilege
granted to existing shareholders of a corporation to subscribe for shares of a
new issue of common stock before it is issued. Rights normally have a short
life, usually two to four weeks, are freely transferable and entitle the holder
to buy the new common stock at a lower price than the public offering price.

When-Issued Equity Securities

   "When-issued" equity securities are traded on a price basis prior to actual
issuance. Such purchases will only be made to achieve a Fund's investment
objective and not for leverage. The when-issued trading period generally lasts
from a few days to months, or a year or more; during this period dividends on
equity securities are not payable. No dividend income accrues to the Fund prior
to the time it takes delivery. A frequent form of when-issued trading occurs
when corporate securities to be created by a merger of companies are traded
prior to the actual consummation of the merger. When-issued equity securities
may involve a risk of loss if the value of the securities falls below the price
committed to prior to actual issuance. The Fund will either designate on its
records or cause its custodian to establish a segregated account when it
purchases securities on a when-issued basis consisting of cash or liquid
securities equal to the amount of the when-issued commitments. Securities
transactions involving delayed deliveries or forward commitments are frequently
characterized as when-issued transactions and are similarly treated by each
Fund.

Zero-Coupon Securities

   Zero-coupon securities are debt obligations that do not entitle the holder
to any periodic payments of interest either for the entire life of the
obligation or for an initial period after the issuance of the obligations.
These securities are issued and traded at a discount from their face amounts.
The amount of the discount varies depending on such factors as the time
remaining until maturity of the securities, prevailing interest rates, the
liquidity of the security and the perceived credit quality of the issuer. The
market prices of zero-coupon securities generally are more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to changes in interest rates to a greater degree than are other types
of securities having similar maturities and credit quality. In order to satisfy
a requirement for qualification as a "regulated investment company" under the
Code, a Fund must distribute each year at least 90% of its net investment
income, including the original issue discount accrued on zero-coupon
securities. Because a Fund will not, on a current basis, receive cash payments
from the issuer of a zero-coupon security in respect of accrued original issue
discount, in some years a Fund may have to distribute cash obtained from other
sources in order to satisfy the 90% distribution requirement under the Code.
Such cash might be obtained from selling other portfolio holdings of the Fund.
In some circumstances, such sales might be necessary in order to satisfy cash
distribution requirements even though investment considerations might otherwise
make it undesirable for a Fund to sell such securities at such time.

                                      34



                         TEMPORARY DEFENSIVE POSITIONS

   Each Fund has the flexibility to respond promptly to changes in market and
economic conditions. In the interest of preserving shareholders' capital, the
adviser of each Fund may employ a temporary defensive strategy if it determines
such a strategy to be warranted. Pursuant to such a defensive strategy, a Fund
temporarily may hold cash (U.S. dollars, foreign currencies, or multinational
currency units) or invest up to 100% of its assets in high-quality debt
securities or money market instruments of U.S. or foreign issuers. It is
impossible to predict whether, when or for how long a Fund will employ
defensive strategies. The use of temporary defensive strategies may prevent a
Fund from achieving its goal.

   In addition, pending investment of proceeds from new sales of Fund shares or
to meet ordinary daily cash needs, a Fund may temporarily hold cash (U.S.
dollars, foreign currencies or multinational currency units) and may invest any
portion of its assets in money market instruments.

                              PORTFOLIO TURNOVER

   A Fund's portfolio turnover rate for a fiscal year is calculated by dividing
the lesser of purchases or sales of portfolio securities for the fiscal year by
the monthly average of the value of the portfolio securities owned by the Fund
during the fiscal year, in each case excluding securities having maturity dates
at acquisition of one year or less. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs,
which will be borne directly by the Fund, thereby decreasing the Fund's total
return. It is impossible to predict with certainty whether future portfolio
turnover rates will be higher or lower than those experienced during past
periods.

   Generally, the Funds intend to invest for long-term purposes. However, the
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when an adviser believes that portfolio changes
are appropriate.

                        PORTFOLIO HOLDINGS INFORMATION

   The Funds' Board of Trustees has adopted policies to limit the disclosure of
confidential portfolio holdings information and to ensure equal access to such
information, except in certain circumstances as approved by the Board of
Trustees. These policies are summarized below. Generally, portfolio holdings
information will not be disclosed until it is first posted on the Funds'
website at www.loomissayles.com. Generally, full portfolio holdings information
will not be posted until it is aged at least 30 days. Any holdings information
that is released will clearly indicate the date of the information, and will
state that due to active management, the Funds may or may not still invest in
the securities listed. Portfolio characteristics, such as industry/sector
breakdown, current yield, quality breakdown, duration, average price-earnings
ratio and other similar information may be provided on a current basis.
However, portfolio characteristics do not include references to specific
portfolio holdings.

                                      35



   The Board of Trustees has approved exceptions to the general policy on the
sharing of portfolio holdings information as in the best interests of the Funds:

     (1) Disclosure of portfolio holdings posted on the Funds' website,
         provided the information is shared no sooner than the next day
         following the day on which the information is posted;

     (2) Disclosure to firms offering industry-wide services, provided that the
         firm has agreed in writing to maintain the confidentiality of the
         Funds portfolio holdings. Entities that receive information pursuant
         to this exception include Lipper (monthly disclosure of full portfolio
         holdings, provided 5 days after month-end); and FactSet (daily
         disclosure of full portfolio holdings, provided the next business day);

     (3) Disclosure (subject to a written confidentiality provision) to
         Broadridge Financial Solutions, Inc. as part of the proxy voting
         recordkeeping services provided to the Fund, and to vendors that
         provide proxy services, including RiskMetrics Group and Glass Lewis,
         LLC, as part of the proxy voting administration and research services,
         respectively provided to the Funds' adviser (votable portfolio
         holdings of issuers as of record date for shareholder meetings);

     (4) Disclosure to employees of the adviser, principal underwriter,
         administrator, custodian, fund accounting agent, independent
         registered public accounting firm, fund counsel and independent
         trustees' counsel, as well as to broker-dealers executing portfolio
         transactions for the Fund, provided that such disclosure is made for
         bona fide business purposes; and

     (5) Other disclosures made for non-investment purposes, but only if
         approved in writing in advance by an officer of the Funds. Such
         exceptions will be reported to the Board of Trustees.

   With respect to items (2) through (4) above, disclosure is made pursuant to
procedures that have been approved by the Board of Trustees, and may be made by
employees of the Funds' adviser, administrator or custodian. With respect to
(5) above, approval will be granted only when the officer determines that the
Funds have a legitimate business reason for sharing the portfolio holdings
information and the recipients are subject to a duty of confidentiality,
including a duty to not trade on the information. As of the date of this
Statement, the only entities that receive information pursuant to this
exception are GCom2 (quarterly, or more frequently as needed, disclosure of
full portfolio holdings) for the purpose of performing certain functions
related to the production of the Funds' semiannual financial statements,
quarterly Form N-Q filing and other related items. Electra Information Systems,
Inc. (daily disclosure of full portfolio holdings) for the purpose of
performing certain electronic reconciliations of portfolio holdings of the
Funds and Bloomberg (daily disclosure of full portfolio holdings, provided next
business day), Lehman Point (periodic disclosure of full portfolio holdings)
and Yield Book (periodic disclosure of full portfolio holdings) for the purpose
of performing certain portfolio analytics for the adviser. Although the Trust
may enter into written confidentiality agreements, in other circumstances, such
as those described in (4) above, the obligation to keep information
confidential may be based on common law, professional or statutory duties of
confidentiality. Common law, professional or statutory duties of
confidentiality, including the duty not to trade on the information, may not be
as clearly delineated and may be more difficult to enforce than contractual
duties. The Fund's officers determine on a case by case basis whether it is
appropriate for the Fund to rely on such common law, professional or statutory
duties. The Fund's Board of Trustees exercises oversight of the disclosure of
portfolio holdings by, among other things, receiving and reviewing reports from
the Fund's chief compliance officer regarding any material issues concerning
the Fund's disclosure of portfolio holdings or from officers of the Fund in
connection with proposed new exceptions or new disclosures pursuant to item
(5) above. Notwithstanding the above, there is no assurance that the Funds'
policies on the sharing of portfolio holdings information will protect the
Funds from the potential misuse of holdings by individuals or firms in
possession of that information.

   Other registered investment companies that are advised or sub-advised by a
Fund's adviser may be subject to different portfolio holdings disclosure
policies, and neither the adviser nor the Board of Trustees of each Trust
exercises control over such policies or disclosure. In addition, separate
account clients of the adviser have access to their portfolio holdings and are
not subject to the Funds' portfolio holdings disclosure policies. Some of the
funds that are advised or sub-advised by the adviser and some of the separate
accounts managed by the adviser have investment objectives and strategies that
are substantially similar or identical to the Funds', and therefore potentially
substantially similar, and in certain cases nearly identical, portfolio
holdings, as certain Funds.

                                      36



   In addition, any disclosures of portfolio holdings information by a Fund or
its adviser must be consistent with the anti-fraud provisions of the federal
securities laws, the Fund's and the adviser's fiduciary duty to shareholders,
and the Fund's code of ethics. Each Funds' policies expressly prohibit the
sharing of portfolio holdings information if the Fund, its adviser, or any
other affiliated party receives compensation or other consideration in
connection with such arrangement. The term "consideration" includes any
agreement to maintain assets in a Fund or in other funds or accounts managed by
the Fund's adviser or by any affiliated person of the adviser.

                           MANAGEMENT OF THE TRUSTS

   The Trusts are governed by a Board of Trustees, which is responsible for
generally overseeing the conduct of Fund business and for protecting the
interests of shareholders. The trustees meet periodically throughout the year
to oversee the Funds' activities, review contractual arrangements with
companies that provide services to the Funds and review the Funds' performance.

Trustees and Officers

   The table below provides certain information regarding the trustees and
officers of the Trusts. For purposes of this table and for purposes of this
Statement, the term "Independent Trustee" means those trustees who are not
"interested persons", as defined in the 1940 Act, of the relevant Trusts. In
certain circumstances, trustees are also required to have no direct or indirect
financial interest in the approval of a matter being voted on in order to be
considered "independent" for the purposes of the requisite approval. For
purposes of this Statement, the term "Interested Trustee" means those trustees
who are "interested persons" of the relevant Trust.

                                      37



   Unless otherwise indicated, the address of all persons below is 399 Boylston
Street, Boston, MA 02116.



                         Position(s) Held with the
                       Trusts, Length of Time Served                                                 Number of Portfolios in Fund
                                    and                      Principal Occupation(s) During            Complex Overseen*** and
Name and Year of Birth        Term of Office*                        Past 5 Years**                    Other Directorships Held
- ---------------------- ----------------------------- ----------------------------------------------- ----------------------------
                                                                                            

INDEPENDENT TRUSTEES

Graham T. Allison, Jr.      Trustee since 2003       Douglas Dillon Professor and Director of the                 42
(1940)                     Contract Review and       Belfer Center for Science and International          Director, Taubman
                           Governance Committee      Affairs, John F. Kennedy School of               Centers, Inc. (real estate
                                  Member             Government, Harvard University                       investment trust)

Charles D. Baker            Trustee since 2005       President and Chief Executive Officer,                       42
(1956)                     Contract Review and       Harvard Pilgrim Health Care (health plan)                   None
                           Governance Committee
                                  Member
Edward A. Benjamin          Trustee since 2002       Retired                                                      42
(1938)                   Chairman of the Contract                                                                None
                          Review and Governance
                                Committee
Daniel M. Cain (1945)       Trustee since 2003       President and Chief Executive Officer, Cain                  42
                          Chairman of the Audit      Brothers & Company, Incorporated                     Director, Sheridan
                                Committee            (investment banking)                             Healthcare Inc. (physician
                                                                                                        practice management);
                                                                                                          Trustee, Lexington
                                                                                                           Strategic Asset
                                                                                                         Corporation (realty
                                                                                                          investment trust)

Jonathan P. Mason        Trustee since 2007 Audit    Chief Financial Officer, Cabot Corp. (specialty              42
(1958)                       Committee Member        chemicals); formerly, Vice President and                    None
                                                     Treasurer, International Paper Company;
                                                     formerly, Chief Financial Officer, Carter Holt
                                                     Harvey (forest products)

Sandra O. Moose             Trustee since 2003       President, Strategic Advisory Services                       42
(1942)                   Chairperson of the Board    (management consulting); formerly, Senior            Director, Verizon
                            of Trustees since        Vice President and Director, The Boston               Communications;
                              November 2005          Consulting Group, Inc. (management                Director, Rohm and Haas
                         Ex officio member of the    consulting)                                          Company (specialty
                           Audit Committee and                                                               chemicals);
                           Contract Review and                                                        Director, AES Corporation
                           Governance Committee

Cynthia L. Walker           Trustee since 2005       Deputy Dean for Finance & Administration,                    42
(1956)                    Audit Committee Member     Yale University School of Medicine; formerly,               None
                                                     Executive Dean for Administration and
                                                     formerly, Dean for Finance & CFO, Harvard
                                                     Medical School


                                      38



INTERESTED TRUSTEES

                                                                                          
Robert J. Blanding/1/       Trustee since 2002    President, Chairman, Director, and Chief          42
(1947)                     President and Chief    Executive Officer, Loomis, Sayles &              None
555 California Street      Executive Officer -    Company, L.P.
San Francisco, CA         Loomis Sayles Funds I;
94104                    Chief Executive Office -
                          Loomis Sayles Funds II
John T. Hailer/2/ (1960)    Trustee since 2003    President and Chief Executive Officer, Natixis    42
                                President         Asset Management Advisors, L.P. , Natixis        None
                                                  Global Associates, Inc. and Natixis Global
                                                  Asset Management North America; Executive
                                                  Vice President, Loomis Sayles Funds I Natixis
                                                  Distributors, L.P.; President and Chief
                                                  Executive Officer, Natixis Cash Management
                                                  Trust, Natixis Funds Trust I, Natixis Funds
                                                  Trust II, Natixis Funds Trust III, Natixis Funds
                                                  Trust IV, Gateway Trust and Hansberger
                                                  International Series



*   Each Trustee serves until retirement, resignation or removal from the Board
    of Trustees. The current retirement age is 72. The position of Chairperson
    of the Board is appointed for a two-year term. Ms. Moose was re-appointed
    to serve an additional two-year term as the Chairperson of the Board of
    Trustees on September 14, 2007.

**  Each person listed above, except as noted, holds the same position(s) with
    the Trusts. Previous positions during the past five years with Natixis
    Distributors, L.P. (the "Distributor"), Natixis Asset Management Advisors,
    L.P. ("Natixis Advisors") or Loomis, Sayles & Company, L.P. are omitted if
    not materially different from a trustee's or officer's current position
    with such entity.

*** The trustees of the Trusts serve as trustees of a fund complex that
    includes all series of Natixis Funds Trust I, Natixis Funds Trust II,
    Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash Management
    Trust, AEW Real Estate Income Fund, Loomis Sayles Funds I, Loomis Sayles
    Funds II, Gateway Trust and Hansberger International Series (collectively,
    the "Fund Complex").

/1   /Mr. Blanding is deemed an "interested person" of the Trusts because he
     holds the following positions with affiliated persons of the Trusts:
     President, Chairman, Director and Chief Executive Officer of Loomis Sayles.

/2   /Mr. Hailer is deemed an "interested person" of the Trusts because he
     holds the following positions with affiliated persons of the Trusts:
     Chairman of the Board, President and Chief Executive Officer of Natixis
     Distribution Corporation L.P.; President and Chief Executive Officer of
     Natixis Global Asset Management North America, Natixis Advisors, Natixis
     Global Associates, Inc., Natixis Advisors and the Natixis Distributor L.P..

                                      39



Officers of the Trusts



                                        Term of Office*
                       Position(s) Held  and Length of                           Principal Occupation(s)
Name and Year of Birth  With the Trust    Time Served                             During Past 5 Years**
- ---------------------- ---------------- --------------- -------------------------------------------------------------------------
                                               

Coleen Downs Dinneen      Secretary,        Since       Senior Vice President, General Counsel, Secretary and Clerk (formerly,
(1960)                    Clerk and       September     Deputy General Counsel, Assistant Secretary and Assistant Clerk),
                         Chief Legal         2004       Natixis Distribution Corporation, Natixis Distributors, L.P., and Natixis
                           Officer                      Asset Management Advisors, L.P.

Daniel J. Fuss (1933)     Executive       Since June    Vice Chairman and Director, Loomis, Sayles & Company, L.P.
One Financial Center    Vice President       2003
Boston, MA 02111

Russell L. Kane             Chief           Chief       Chief Compliance Officer for Mutual Funds, Senior Vice President,
(1969)                    Compliance      Compliance    Deputy General Counsel, Assistant Secretary and Assistant Clerk,
                           Officer;     Officer, since  Natixis Distributors, L.P. and Natixis Asset Management Advisors,
                          Assistant       May 2006;     L.P.; Vice President, Associate General Counsel, Assistant Secretary
                          Secretary;      Assistant     and Assistant Clerk, Natixis Distribution Corporation; formerly, Senior
                          Anti-Money      Secretary     Counsel, Columbia Management Group.
                          Laundering      since June
                           Officer       2004; Anti-
                                            Money
                                          Laundering
                                        Officer since
                                          April 2007

Michael C. Kardok         Treasurer,    Since October   Senior Vice President, Natixis Asset Management Advisors, L.P. and
(1959)                    Principal          2004       Natixis Distributors, L.P.; formerly, Senior Director, PFPC Inc.
                        Financial and
                          Accounting
                           Officer

Robert Krantz             Executive         Since       Executive Vice President, Natixis Distributors, L.P. and Natixis Asset
(1964)                  Vice President    September     Management Advisors, L.P.
                                             2007


*   Each officer of the Trusts serves for an indefinite term in accordance with
    the Trusts' current By-laws until the date his or her successor is elected
    and qualified, or until he or she sooner dies, retires, is removed or
    becomes disqualified.

**  Each person listed above, except as noted, holds the same position(s) with
    the other trust in the Fund Complex. Mr. Fuss is not an officer of the
    Natixis Funds Trusts. Previous positions during the past five years with
    the Distributor, Natixis Distributors, L.P., Natixis Advisors, or Loomis
    Sayles are omitted, if not materially different from a Trustee's or
    officer's current position with such entity.

                                      40



Standing Board Committees

   The trustees have delegated certain authority to the two standing committees
of each Trust, the Audit Committee and Contract Review and Governance
Committee. The Contract Review and Governance Committee of the Trust consists
solely of Independent Trustees and considers matters relating to advisory,
subadvisory and distribution arrangements, potential conflicts of interest
between the Funds' adviser and the Trust, and governance matters relating to
the Trust. During the fiscal year ended September 30, 2007, this Committee held
five meetings.

   The Contract Review and Governance Committee also makes nominations for
independent trustee membership on the Board of Trustees when necessary and
considers recommendations from shareholders of the Fund that are submitted in
accordance with the procedures by which shareholders may communicate with the
Board of Trustees. Pursuant to those procedures, shareholders must submit a
recommendation for nomination in a signed writing addressed to the attention of
the Board of Trustees, c/o Secretary of the Funds, Natixis Asset Management
Advisors, L.P., 399 Boylston Street, Boston, MA 02116. This written
communication must (i) be signed by the shareholder, (ii) include the name and
address of the shareholder, (iii) identify the Fund(s) to which the
communication relates, and (iv) identify the account number, class and number
of shares held by the shareholder as of a recent date or the intermediary
through which the shares are held. The recommendation must contain sufficient
background information concerning the trustee candidate to enable a proper
judgment to be made as to the candidate's qualifications, which may include
(i) the nominee's knowledge of the mutual fund industry; (ii) any experience
possessed by the nominee as a director or senior officer of other public
companies; (iii) the nominee's educational background; (iv) the nominee's
reputation for high ethical standards and personal and professional integrity;
(v) any specific financial, technical or other expertise possessed by the
nominee, and the extent to which such expertise would complement the Board's
existing mix of skills and qualifications; (vi) the nominee's perceived ability
to contribute to the ongoing functions of the Board, including the nominee's
ability and commitment to attend meetings regularly and work collaboratively
with other members of the Board; (vii) the nominee's ability to qualify as an
Independent Trustee for purposes of applicable regulations; and (viii) such
other factors as the appropriate Board Committee may request in light of the
existing composition of the Board and any anticipated vacancies or other
transitions. The recommendation must be received in a timely manner (and in any
event no later than the date specified for receipt of shareholder proposals in
any applicable proxy statement with respect to the Fund). A recommendation for
trustee nomination shall be kept on file and considered by the Board for six
(6) months from the date of receipt, after which the recommendation shall be
considered stale and discarded.

   The Audit Committee of each Trust consists solely of Independent Trustees
and considers matters relating to the scope and results of the Trusts' audits
and serves as a forum in which the independent registered public accounting
firm can raise any issues or problems identified in the audit with the Board of
Trustees. This Committee also reviews and monitors compliance with stated
investment objectives and policies, SEC and Treasury regulations as well as
operational issues relating to the transfer agent and custodian. During the
fiscal year ended September 30, 2007, this Committee held six meetings.

The current membership of each committee is as follows:

       Audit Committee           Contract Review and Governance Committee
       ---------------           ----------------------------------------
       Daniel M. Cain - Chairman      Edward A. Benjamin - Chairman
       Jonathan P. Mason              Graham T. Allison, Jr.
       Cynthia L. Walker              Charles D. Baker

As chairperson of the Board of Trustees, Ms. Moose is an ex officio member of
both Committees.

                                      41



Fund Securities Owned by the Trustees

   As of December 31, 2007, the trustees had the following ownership in the
Funds:

Interested Trustees:



Dollar Range of Fund Shares*                            Robert J. Blanding John T. Hailer
- ----------------------------                            ------------------ --------------
                                                                     
Loomis Sayles Bond Fund................................         E                A
Loomis Sayles Global Bond Fund.........................         E                A
Loomis Sayles Inflation Protected Securities Fund......         A                A
Loomis Sayles Mid Cap Growth Fund......................         E                A
Loomis Sayles Small Cap Growth Fund....................         E                E
Loomis Sayles Small Cap Value Fund.....................         E                E
Loomis Sayles Tax-Managed Equity Fund..................         A                A
Aggregate Dollar Range of Fund Shares in All Funds
Overseen by Trustee in the Fund Complex................         E                E

*   A. None

B.  $1 - 10,000

C.  $10,001 - $50,000

D.  $50,001 - $100,000

E.  over $100,000

Independent Trustees:



                                               Graham T.    Charles D. Edward A.  Daniel M. Jonathan P. Sandra O. Cynthia L.
Dollar Range of Fund Shares*                 Allison, Jr.**  Baker**   Benjamin**  Cain**     Mason**     Moose    Walker**
- ----------------------------                 -------------- ---------- ---------- --------- ----------- --------- ----------
                                                                                             
Loomis Sayles Bond Fund.....................       A            A          A          A          A          E         A
Loomis Sayles Global Bond Fund..............       A            A          A          A          A          A         A
Loomis Sayles Inflation Protected Securities
  Fund......................................       A            A          A          A          A          A         A

Loomis Sayles Mid Cap Growth Fund                  A            A          A          A          A          A         A

Loomis Sayles Small Cap Growth Fund                A            A          A          A          A          A         A

Loomis Sayles Small Cap Value Fund                 A            A          E          A          A          A         A

Loomis Sayles Tax-Managed Equity Fund              A            A          A          A          A          A         A

Aggregate Dollar Range of Fund Shares in All
  Funds Overseen by Trustee in the Fund
  Complex                                          E            D          E          E          C          E         E


*   A. None

B.  $1 - 10,000

C.  $10,001 - $50,000

D.  $50,001 - $100,000

E.  over $100,000

**  Amounts include economic value of notional investments held through the
    deferred compensation plan.

                                      42



Trustee Fees

   The Trusts pay no compensation to their officers or to their trustees who
are Interested Trustees.

   The Chairperson of the Board receives a retainer fee at the annual rate of
$200,000. The Chairperson does not receive any meeting attendance fees for
Board of Trustees meetings or committee meetings that she attends. Effective
January 1, 2008 Independent Trustee (other than the Chairperson) receives, in
the aggregate, a retainer fee at the annual rate of $65,000. Each Independent
Trustee also receives a meeting attendance fee of $7,500 for each meeting of
the Board of Trustees that he or she attends in person and $3,750 for each
meeting of the Board of Trustees that he or she attends telephonically. In
addition, each committee chairman receives an additional retainer fee at the
annual rate of $10,000. Each Contract Review and Governance Committee member is
compensated $5,000 for each Committee meeting that he or she attends in person
and $2,500 for each committee meeting that he or she attends telephonically.
Each Audit Committee member is compensated $6,250 for each Committee meeting
that he or she attends in person and $3,125 for each meeting he or she attends
telephonically. These fees are allocated among the mutual fund portfolios in
the Natixis Funds Trusts and Loomis Sayles Funds and Hansberger International
Series, Trusts based on a formula that takes into account, among other factors,
the relative net assets of each mutual fund portfolio.

                                      43



   During the fiscal year ended September 30, 2007, the trustees of the Trusts
received the amounts set forth in the following table for serving as trustee of
the Trusts and for also serving as trustees of Natixis Funds Trust I, Natixis
Funds Trust II, Natixis Funds Trust III, Natixis Funds Trust IV, Natixis Cash
Management Trust,Gateway Trust, Hansberger International Series and AEW Real
Estate Income Fund (a closed-end investment company that has since been
liquidated) and Hansberger International Series. The table also sets forth, as
applicable, pension or retirement benefits accrued as part of Fund expenses, as
well as estimated annual retirement benefits:

                              Compensation Table
                 For the Fiscal Year Ended September 30, 2007



                                                         Pension or
                                                         Retirement
                                Aggregate    Aggregate    Benefits  Estimated     Total
                               Compensation Compensation Accrued as   Annual   Compensation
                               from Loomis  from Loomis   Part of    Benefits    from the
                               Sayles Funds Sayles Funds    Fund       Upon        Fund
                                 Trust I*    Trust II**   Expenses  Retirement  Complex***
                               ------------ ------------ ---------- ---------- ------------
                                                                
INDEPENDENT TRUSTEES
Graham T. Allison, Jr.........   $ 40,708     $34,081        $0         $0       $102,125
Charles D. Baker..............   $ 37,473     $31,443        $0         $0       $ 94,075
Edward A. Benjamin............   $ 44,879     $37,531        $0         $0       $112,625
Daniel M. Cain................   $ 45,467     $37,614        $0         $0       $112,825
Paul G. Chenault/1/...........   $  9,721     $ 7,897        $0         $0       $ 25,125
Kenneth J. Cowan/1/...........   $  9,721     $ 7,897        $0         $0       $ 25,125
Richard Darman*****...........   $ 40,168     $33,432        $0         $0       $100,125
Jonathan P. Mason****.........   $ 18,018     $15,152        $0         $0       $ 43,500
Sandra O. Moose...............   $103,163     $71,991        $0         $0       $200,000
John A. Shane/1/..............   $ 10,131     $ 8,230        $0         $0       $ 26,125
Cynthia L. Walker.............   $ 41,296     $34,164        $0         $0       $102,325
INTERESTED TRUSTEES
John T. Hailer................   $      0     $     0        $0         $0       $      0
Robert J. Blanding............   $      0     $     0        $0         $0       $      0


*      Amounts include payments deferred by trustees for the fiscal year ended
       September 30, 2007, with respect to Loomis Sayles Funds I. The total
       amount of deferred compensation accrued for Loomis Sayles Funds I as of
       September 30, 2007 for the trustees is as follows: Allison ($480,500),
       Baker ($15,130), Benjamin ($103,219), Cain ($181,237), Chenault
       ($40,158), Cowan ($86,663), Darman ($209,777), Mason ($4,374) and Walker
       ($36,696).

**     Amounts include payments deferred by trustees for the fiscal year ended
       September 30, 2007, with respect to Loomis Sayles Funds II. The total
       amount of deferred compensation accrued for Loomis Sayles Funds Trust II
       as of September 30, 2007 for the trustees is as follows: Allison
       ($588,297), Baker ($17,580), Benjamin ($119,931), Cain ($210,581),
       Chenault ($46,660), Cowan ($100,695), Darman ($243,741), Mason ($5,082)
       and Walker ($42,638).

***    Total Compensation represents amounts paid during the fiscal year ended
       September 30, 2007 to a trustee for serving on the board of trustees of
       nine (9) trusts with a total of forty-three (43) funds as of
       September 30, 2007. The number of trusts and funds includes the AEW Real
       Estate Income Fund, which was liquidated on April 13, 2007, and the Ixis
       Equity Diversified Portfolio, which was liquidated on August 3, 2007.

/1/    Paul G. Chenault, Kenneth J. Cowan and John A. Shane retired from the
       Board of Trustees of the Trusts on December 31, 2006

****   Mr. Mason was appointed as trustee on April 1, 2007.

*****  Mr. Darman served as trustee until his death on January 25, 2008.

                                      44



   The Natixis Funds Trusts, Loomis Sayles Funds Trusts and Hansberger
International Series do not provide pension or retirement benefits to trustees,
but have adopted a deferred payment arrangement under which each Trustee may
elect not to receive fees from the Funds on a current basis but to receive in a
subsequent period an amount equal to the value that such fees would have been
if they had been invested in a Fund or Funds selected by the Trustee on the
normal payment date for such fees.

   Code of Ethics. The Trusts, Loomis Sayles, and the Distributor each have
adopted a code of ethics under Rule 17j-1 of the 1940 Act. These codes of
ethics permit the personnel of these entities to invest in securities,
including securities that the Funds may purchase or hold. The codes of ethics
are on public file with, and are available from, the SEC.

   Proxy Voting Policies. The Board of Trustees of the Funds have adopted the
Proxy Voting Policy and Guidelines (the "Guidelines") for the voting of proxies
for securities held by the Funds. Under the Guidelines, the responsibility for
voting proxies generally is delegated to the Funds' investment adviser. Under
the Guidelines, decisions regarding the voting of proxies are to be made solely
in the interest of the Fund and its shareholders. The adviser shall exercise
its fiduciary responsibilities to vote proxies with respect to each Fund's
investments that are managed by that adviser in a prudent manner in accordance
with the Guidelines and the proxy voting policies of the adviser. Proposals
that, in the opinion of the adviser, are in the best interests of shareholders
are generally voted "for" and proposals that, in the judgment of the adviser,
are not in the best interests of shareholders are generally voted "against."
The adviser is responsible for maintaining certain records and reporting to the
Audit Committee of the Trusts in connection with the voting of proxies. The
adviser shall make available to each Fund, or Natixis Advisors, the Fund's
administrator, the records and information maintained by the adviser under the
Guidelines.

   Loomis Sayles uses the services of third parties ("Proxy Voting
Service(s)"), to research and administer the vote on proxies for those accounts
and funds for which Loomis Sayles has voting authority. Each Proxy Voting
Service has a copy of Loomis Sayles' proxy voting procedures ("Procedures") and
provides vote recommendations and/or analysis to Loomis Sayles based on the
Proxy Voting Service's own research. Loomis Sayles will generally follow its
express policy with input from the Proxy Voting Services unless Loomis Sayles'
Proxy Committee (the "Proxy Committee") determines that the client's best
interests are served by voting otherwise.

   All issues presented for shareholder vote will be considered under the
oversight of the Proxy Committee. All non-routine issues will be directly
considered by the Proxy Committee and, when necessary, the equity analyst
following the company and/or the portfolio manager of a Fund holding the
security, and will be voted in the best investment interests of the Fund. All
routine issues will be voted according to Loomis Sayles' policy approved by the
Proxy Committee unless special factors require that they be considered by the
Proxy Committee and, when necessary, the equity analyst following the company
and/or the portfolio manager of a Fund holding the security. Loomis Sayles'
Proxy Committee has established these routine policies in what it believes are
the best investment interests of Loomis Sayles' clients.

   The specific responsibilities of the Proxy Committee include (1) developing,
authorizing, implementing and updating the Procedures, including an annual
review of the Procedures, existing voting guidelines and the proxy voting
process in general, (2) oversight of the proxy voting process including
oversight of the vote on proposals according to the predetermined policies in
the voting guidelines, directing the vote on proposals where there is reason
not to vote according to the predetermined policies in the voting guidelines or
where proposals require special consideration, and consultation with the
portfolio managers and analysts for the Fund(s) holding the security when
necessary or appropriate and, (3) engagement and oversight of third-party
vendors, including Proxy Voting Services.

   Loomis Sayles has established several policies to ensure that proxies are
voted in its clients' best interest and are not affected by any possible
conflicts of interest. First, except in certain limited instances, Loomis
Sayles votes in accordance with its pre-determined policies set forth in the
Procedures. Second, where these Procedures

                                      45



allow for discretion, Loomis Sayles will generally consider the recommendations
of the Proxy Voting Services in making its voting decisions. However, if the
Proxy Committee determines that the Proxy Voting Services' recommendation is
not in the best interest of its clients, then the Proxy Committee may use its
discretion to vote against the Proxy Voting Services' recommendation, but only
after taking the following steps: (1) conducting a review for any material
conflict of interest Loomis Sayles may have and, (2) if any material conflict
is found to exist, excluding anyone at Loomis Sayles who is subject to that
conflict of interest from participating in the voting decision in any way.
However, if deemed necessary or appropriate by the Proxy Committee after full
prior disclosure of any conflict, that person may provide information, opinions
or recommendations on any proposal to the Proxy Committee. In such event the
Proxy Committee will make reasonable efforts to obtain and consider, prior to
directing any vote information, opinions or recommendations from or about the
opposing position on any proposal.

   Information regarding how the Funds voted proxies related to their
respective portfolio securities during the 12-month period ended June 30, 2007
is available without charge (i) through the Funds' website,
www.loomissayles.com and (ii) on the SEC's website at www.sec.gov.

                                      46



                           OWNERSHIP OF FUND SHARES

   The following table provides information on the principal holders of each
Fund. A principal holder is a person who owns of record or beneficially 5% or
more of any class of a Fund's outstanding securities. Information provided in
this table is as of January 4, 2008.*

   To the extent that any shareholder listed below beneficially owns more than
25% of a Fund, it may be deemed to "control" such Fund within the meaning of
the 1940 Act. The effect of such control may be to reduce the ability of other
shareholders of the Fund to take actions requiring the affirmative vote of
holders of a plurality or majority of the Fund's shares without the approval of
the controlling shareholder.

                                                                  Percentage of
Fund                           Shareholder and Address             shares held
- ----                           -----------------------            -------------
Loomis Sayles Bond Fund/1/
   Institutional Class Shares  Charles Schwab & Co Inc                38.06%
                               Attn Mutual Fund Dept
                               101 Montgomery St
                               San Francisco CA 94104-4151

                               National Financial Services Corp       14.72%
                               For
                               Exclusive Benefit of Our Customers
                               Attn Mutual Funds Department
                               5/th/ FL
                               200 Liberty St
                               One World Financial Center
                               New York NY 10281-1003

                               Merrill Lynch Pierce                    8.09%
                               Fenner & Smith Inc
                               Merrill Lynch Financial Data Svcs
                               Attn: Service Team
                               4800 Deer Lake Dr East 3/rd/ Flr
                               Jacksonville FL 32246-6484

                               Ameritrade Inc for the                  5.49%
                               Exclusive Benefit of Our Customers
                               P.O. Box 2226
                               Omaha, NE 68103-2226

   Retail Class Shares         Charles Schwab & Co Inc                40.89%
                               Attn Mutual Fund Dept
                               101 Montgomery St
                               San Francisco CA 94104-4151

                               National Financial Services Corp       21.19%
                               For
                               Exclusive Benefit of Our Customers
                               Attn Mutual Funds Department
                               5/th/ FL
                               200 Liberty St
                               One World Financial Center
                               New York NY 10281-1003

                                      47



                                                                  Percentage of
Fund                              Shareholder and Address          shares held
- ----                              -----------------------         -------------
Loomis Sayles Bond Fund/1/
   Admin Class Shares             Nationwide Trust Co FSB             18.79%
                                  PO Box 182029
                                  Columbus OH 43218-2029

                                  Merrill Lynch Pierce                14.61%
                                  Fenner & Smith Inc
                                  For The Sole Ben Of Its
                                  Customers
                                  Attn: Service Team
                                  4800 Deer Lake Dr East 3/rd/ Fl
                                  Jacksonville FL 32246-6484

                                  National Financial Services         11.61%
                                  Corp For
                                  Exclusive Benefit of Our
                                  Customers
                                  Attn Mutual Funds Department
                                  5/th/ FL
                                  200 Liberty St
                                  One World Financial Center
                                  New York NY 10281-1003

                                  New York Life Trust Company          7.35%
                                  Client Account
                                  169 Lackawanna Ave
                                  Parsippany NJ 07054-1007

                                  Reliance Trust Company, Trustee      5.17%
                                  FBO MetLife NAV Plans
                                  8515 E Orchard Rd
                                  2T2
                                  Greenwood Vlg CO 80111-5002

Loomis Sayles Global Bond Fund/2/
   Institutional Class Shares     Charles Schwab & Co Inc             26.13%
                                  Attn Mutual Fund Dept
                                  101 Montgomery St
                                  San Francisco CA 94104-4151

                                  National Financial Services         19.70%
                                  Corp For
                                  Exclusive Benefit of Our
                                  Customers
                                  Attn Mutual Funds Department
                                  5/th/ FL
                                  200 Liberty St
                                  One World Financial Center
                                  New York NY 10281-1003

                                      48



                                                                  Percentage of
Fund                                Shareholder and Address        shares held
- ----                                -----------------------       -------------
Loomis Sayles Global Bond Fund/2/
   Institutional Class Shares       Merrill Lynch Pierce               5.97%
                                    Fenner & Smith Inc
                                    Merrill Lynch Financial Data
                                    Svcs
                                    Attn: Service Team
                                    4800 Deer Lake Dr East 3/rd/
                                    Flr
                                    Jacksonville FL 32246-6484

   Retail Class Shares              Charles Schwab & Co Inc           41.24%
                                    Attn Mutual Fund Dept
                                    101 Montgomery St
                                    San Francisco CA 94104-4151

                                    National Financial Services       27.91%
                                    Corp For
                                    Exclusive Benefit of Our
                                    Customers
                                    Attn Mutual Funds Department
                                    5/th/ FL
                                    200 Liberty St
                                    One World Financial Center
                                    New York NY 10281-1003

                                    Ameritrade Inc for the             5.59%
                                    Exclusive Benefit of Our
                                    Customers
                                    P.O. Box 2226
                                    Omaha, NE 68103-2226

Loomis Sayles Small Cap Value Fund
   Institutional Class Shares       Charles Schwab & Co Inc           16.58%
                                    Attn Mutual Fund Dept
                                    101 Montgomery St
                                    San Francisco CA 94104-4151

                                    Citigroup Global Markets Inc.      8.47%
                                    388 Greenwich St
                                    New York NY 10013-2375

                                    National Financial Services        8.86%
                                    Corp For
                                    Exclusive Benefit of Our
                                    Customers
                                    Attn Mutual Funds Department
                                    5/th/ FL
                                    200 Liberty St
                                    One World Financial Center
                                    New York NY 10281-1003

                                    Wells Fargo Bank FA NBO            5.49%
                                    WPS 401K Admin - Loomis
                                    Small Cap
                                    PO Box 1533
                                    Minneapolis MN 55480-1533

                                      49



                                                                  Percentage of
Fund                                Shareholder and Address        shares held
- ----                                -----------------------       -------------
                                    Westfield Contributory             5.71%
                                    Retirement System
                                    59 Court St
                                    PO Box 106
                                    Westfield MA 01086-0106

                                    Fidelity Investments               5.25%
                                    Institutional
                                    Operations Co Inc (FIIOC) As
                                    Agent
                                    For Certain Employee Benefit
                                    Plans
                                    100 Magellan Way #KW1C
                                    Covington KY 41015-1999

Loomis Sayles Small Cap Value Fund
   Retail Class Shares              Charles Schwab & Co Inc           41.09%
                                    Attn Mutual Fund Dept
                                    101 Montgomery St
                                    San Francisco CA 94104-4151

                                    National Financial Services       13.74%
                                    Corp For
                                    Exclusive Benefit of Our
                                    Customers
                                    Attn Mutual Funds Department
                                    5/th/ FL
                                    200 Liberty St
                                    One World Financial Center
                                    New York NY 10281-1003

                                    Fidelity Investments              13.47%
                                    Institutional
                                    Operations Co Inc (FIIOC) As
                                    Agent
                                    For Certain Employee Benefit
                                    Plans
                                    100 Magellan Way #KW1C
                                    Covington KY 41015-1999

   Admin Class Shares               Smith Barney Corp Trust Co        24.99%
                                    TTEE
                                    The Citistreet Retrmnt Group
                                    Trust
                                    DTD 4/21/95 Attn Plan
                                    Valuation
                                    Two Tower Center PO Box 1063
                                    E Brunswick NJ 08816-1063

                                    New York Life Trust Company        9.79%
                                    Client Account
                                    169 Lackawanna Ave
                                    Parsippany NJ 07054-1007

                                      50



                                                                  Percentage of
Fund                         Shareholder and Address              shares held
- ----                         -----------------------              -------------
                             Smith Barney Corp Trust Co TTEE          7.80%
                             Smith Barney 401K Advisor Grp Trust
                             DTD 1/1/98 Attn John Lombardo
                             Two Tower Center PO Box 1063
                             E Brunswick NJ 08816-1063

                                      51



                                                                  Percentage of
Fund                           Shareholder and Address             shares held
- ----                           -----------------------            -------------
                               Merrill Lynch Pierce                   16.18%
                               Fenner & Smith Inc
                               For The Sole Ben Of Its Customers
                               Attn: Service Team
                               4800 Deer Lake Dr East 3/rd/ Flr
                               Jacksonville FL 32246-6484

Loomis Sayles Inflation
  Protected
Securities Fund/3/
   Institutional Class Shares  Charles Schwab & Co Inc                29.73%
                               Attn Mutual Fund Dept
                               101 Montgomery St
                               San Francisco CA 94104-4151

                               Loomis Sayles Distributors LP           9.55%
                               Attn Estelle Gevers
                               1 Financial Ctr
                               Boston MA 02111-2621

                               Loomis Sayles Trust Co LLC              7.65%
                               Attn : Finance
                               One Financial Center, 27/th/ Floor
                               Boston MA 02111-2647

                               Merrill Lynch Pierce                   16.10%
                               Fenner & Smith Inc
                               Merrill Lynch Financial Data Svcs
                               Attn: Service Team
                               4800 Deer Lake Dr East 3/rd/ Flr
                               Jacksonville FL 32246-6484

                               Michigan Peer Review Organization       6.57%
                               22670 Haggerty Rd Ste 100
                               Farmingtn Hls MI 48335-2631

                                      52



                                                                  Percentage of
Fund                                    Shareholder and Address    shares held
- ----                                    -----------------------   -------------
Loomis Sayles Mid Cap Growth Fund/4/
   Institutional Class Shares           Charles Schwab & Co Inc       66.84%
                                        Attn Mutual Fund Dept
                                        101 Montgomery St
                                        San Francisco CA
                                        94104-4151

                                        Brown Brothers Harriman            %
                                        and Company
                                        As Custodian for 8665267
                                        525 Washington Blvd
                                        Jersey City, NJ 07310

                                        National Financial             7.49%
                                        Services Corp For
                                        Exclusive Benefit of Our
                                        Customers
                                        Attn Mutual Funds
                                        Department 5/th/ FL
                                        200 Liberty St
                                        One World Financial
                                        Center
                                        New York NY 10281-1003

   Retail Class Shares                  Reliance Trust Company,       20.76%
                                        Trustee
                                        FBO MetLife NAV Plans
                                        8515 E Orchard Rd
                                        2T2
                                        Greenwood Vlg CO
                                        80111-5002

                                        DCGT As TTEE and/or CUST      12.47%
                                        FBO Indus International
                                        Inc 401K
                                        Retirement Plan
                                        Attn NPIO Trade Desk
                                        711 High Street
                                        Des Moines IA 50309-2732

                                        Charles Schwab & Co Inc       12.02%
                                        Attn Mutual Fund Dept
                                        101 Montgomery St
                                        San Francisco CA
                                        94104-4151

                                      53



                                                                  Percentage of
Fund                                    Shareholder and Address    shares held
- ----                                    -----------------------   -------------
                                        Orchard Trust Company
                                        TTEE
                                        Employee Benefits Clients
                                        8515 East Orchard Rd 2T2
                                        Greenwood Vlg CO
                                        80111-5002

                                        National Financial            13.58%
                                        Services Corp For
                                        Exclusive Benefit of Our
                                        Customers
                                        Attn Mutual Funds
                                        Department 5/th/ FL
                                        200 Liberty St
                                        One World Financial
                                        Center
                                        New York NY 10281-1003

                                      54



                                                                  Percentage of
 Fund                                   Shareholder and Address    shares held
 ----                                   -----------------------   -------------
 Loomis Sayles Small Cap Growth Fund/5/
    Institutional Class Shares          Charles Schwab & Co Inc       54.56%
                                        Attn Mutual Fund Dept
                                        101 Montgomery St
                                        San Francisco CA
                                        94104-4151

                                        Church Mutual                 14.42%
                                        Insurance Company
                                        3000 Schuster Ln
                                        Merrill WI 54452-3863

                                        Saxon & Co                     7.40%
                                        FBO 12-35-040-1095189
                                        543487854
                                        Philadelphia PA
                                        19182-0001

                                        YMCA of Greater Boston         5.21%
                                        316 Huntington Ave
                                        Boston MA 02115-5019




    Retail Class Shares                 National Financial            57.37%
                                        Services Corp For
                                        Exclusive Benefit of Our
                                        Customers
                                        Attn Mutual Funds
                                        Department 5/th/ FL
                                        200 Liberty St
                                        One World Financial
                                        Center
                                        New York NY 10281-1003

                                      55



                                                                  Percentage of
 Fund                                 Shareholder and Address      shares held
 ----                                 -----------------------     -------------
                                      Charles Schwab & Co Inc         16.15%
                                      Attn Mutual Fund Dept
                                      101 Montgomery St
                                      San Francisco CA 94104-4151

                                      56



                                                                  Percentage of
Fund                             Shareholder and Address           shares held
- ----                             -----------------------          -------------
Loomis Sayles Tax-Managed Equity
  Fund
   Institutional Class Shares    National Financial Services          19.86%
                                 Corp For
                                 Exclusive Benefit of Our
                                 Customers
                                 Attn Mutual Funds Department
                                 5/th/ FL
                                 200 Liberty St
                                 One World Financial Center
                                 New York NY 10281-1003

                                 Southeastern Michigan Chapter         8.94%
                                 NECA
                                 PO Box 4207
                                 Troy, MI 48099-4207

                                      57



                                                                  Percentage of
Fund                             Shareholder and Address           shares held
- ----                             -----------------------          -------------
                                 Warren D Chappell &                  5.47%
                                 Elizabeth A Chappell JT WROS
                                 1905 Long Pointe DR
                                 Bloomfield Hills MI 48302-0744

                                 State Street bank & Trust CO         5.34%
                                 Cust for the IRA of George
                                 Bobrowski
                                 29611 N Seaway CT
                                 Harrison TWP MI 48045-2773
- --------
/1/  As of January 4, 2008, Charles Schwab & Company Inc., Attn: Mutual Fund
     Department, 101 Montgomery Street, San Francisco, CA 94104-4151 owned
     40.85%% of the Loomis Sayles Bond Fund and therefore may be presumed to
     "control" the Fund, as that term is defined in the Investment Company Act
     of 1940. However, such ownership may be beneficially held by individuals
     or entities other than Charles Schwab & Company Inc. Charles Schwab &
     Company Inc. California and is wholly-owned by Schwab Holdings, Inc.

/2/  As of January 4, 2008, Charles Schwab & Company Inc., Attn: Mutual Fund
     Department, 101 Montgomery Street, San Francisco, CA 94104-4151 owned
     34.32%% of the Loomis Sayles Global Bond Fund and therefore may be
     presumed to "control" the Fund, as that term is defined in the Investment
     Company Act of 1940. However, such ownership may be beneficially held by
     individuals or entities other than Charles Schwab & Company Inc. Charles
     Schwab & Company Inc. is organized under the laws of California and is
     wholly-owned by Schwab Holdings, Inc.

/3/  As of January 4, 2008, Charles Schwab & Company Inc., Attn: Mutual Fund
     Department, 101 Montgomery Street, San Francisco, CA 94104-4151 owned
     29.73%% of the Loomis Sayles Inflation Protected Securities Fund and
     therefore may be presumed to "control" the Fund, as that term is defined
     in the Investment Company Act of 1940. However, such ownership may be
     beneficially held by individuals or entities other than Charles Schwab &
     Company Inc. Charles Schwab & Company Inc. is organized under the laws of
     California and is wholly-owned by Schwab Holdings, Inc.

/5/  As of January 4, 2008, Charles Schwab & Company Inc., Attn: Mutual Fund
     Department, 101 Montgomery Street, San Francisco, CA 94104-4151 owned
     35.50% of the Loomis Sayles Small Cap Growth Fund and therefore may be
     presumed to "control" the Fund, as that term is defined in the Investment
     Company Act of 1940. However, such ownership may be beneficially held by
     individuals or entities other than Charles Schwab & Company Inc. Charles
     Schwab & Company Inc. is organized under the laws of California and is
     wholly-owned by Schwab Holdings, Inc.

/5/  As of January 4, 2008, National Financial Services Cor For the Exclusive
     Bene of our Customers, Attn: Mutual Funds dept. 5/th/ fl, 200 Liberty St.,
     1 World Financial Center, New York, NY 10281-1003 owned 29.46% of the
     Loomis Sayles Small Cap Growth Fund and therefore may be

                                      58



   presumed to "control" the Fund, as that term is defined in the Investment
   Company Act of 1940. However, such ownership may be beneficially held by
   individuals or entities other than National Financial Services is organized
   under the laws of New York and is wholly-owned by National Financial
   Services.
*  Such ownership may be beneficially held by individuals or entities other
   than the owner listed. To the extent that any listed shareholder
   beneficially owns more than 25% of a Fund, it may be deemed to "control"
   such Fund within the meaning of the 1940 Act. The effect of such control may
   be to reduce the ability of other shareholders of the Fund to take actions
   requiring the affirmative vote of holders of a plurality or majority of the
   Fund's shares without the approval of the controlling shareholder.

Management Ownership

   As of record on January 4, 2008, the officers and trustees of the Trusts
collectively owned less than 1% of the then outstanding shares of the Funds
except that the officers and trustees of the Trusts owned beneficially 3.19% of
the Loomis Sayles Small Cap Growth Fund. These amounts include shares held by
the Loomis Sayles Employees' Profit Sharing Plan (the "Profit Sharing Plan")
for the accounts of officers and trustees of the Trusts, but exclude all other
holdings of the Profit Sharing Plan and the Loomis Sayles Funded Pension Plan
(the "Pension Plan").

   As of January 4, 2008, the Profit Sharing Plan owned the following
percentages of the outstanding Institutional Class shares of the indicated
Funds: 13.02% of the Loomis Sayles Mid Cap Growth Fund, 11.09% of the Loomis
Sayles Inflation Protected Securities Fund, 9.30% of the Loomis Sayles Small
Cap Growth Fund and 1.66% of the Loomis Sayles Small Cap Value Fund.

   As of January 4, 2008, the Pension Plan owned the following percentages of
the outstanding Institutional Class shares of the indicated Funds: 13.72% of
the Loomis Sayles Mid Cap Growth Fund, 13.62% of the Loomis Sayles Inflation
Protected Securities Fund, 9.97% of the Loomis Sayles Small Cap Growth Fund,
0.88% of the Loomis Sayles Small Cap Value Fund.

   The trustee of the Pension Plan and Profit Sharing Plan is Charles Schwab
Trust Company. The Pension Plan's Advisory/Committee, which is composed of the
same individuals listed below as trustees of the Profit Sharing Plan, has the
sole voting and investment power with respect to the Pension Plan's shares. The
trustees of the Profit Sharing Plan are John DeBeer, Stephanie Lord, Teri
Mason, Richard Skaggs, Timothy Hunt, Greg O'Hara, John McGraw, Paul Sherba,
John Russell and Kurt Wagner. Except for Timothy Hunt, John DeBeer and John
McGraw, each member of the Advisory Committee is an officer and employee of
Loomis Sayles. Plan participants are entitled to exercise investment and voting
power over shares owned of record by the Profit Sharing Plan. Shares not voted
by participants are voted in the same proportion as the shares voted by the
voting participants. The address for the Profit Sharing Plan and the Pension
Plan is One Financial Center, Boston, Massachusetts.

                                      59



                    INVESTMENT ADVISORY AND OTHER SERVICES

   Natixis Asset Management Advisors, L.P. ("Natixis Advisors"), (formerly IXIS
Asset Management Advisors, L.P.), formed in 1995, is a limited partnership
owned by Natixis Global Asset Management, L.P. ("Natixis US") (formerly IXIS
Asset Management US Group, L.P.)

   Loomis Sayles, located at One Financial Center, Boston, Massachusetts 02111,
serves as adviser to the Funds. Loomis Sayles is a subsidiary of Natixis Global
Asset Management, L.P. (formerly, IXIS Asset Management U.S. Group, L.P.;
herein referred to as "Natixis US"), which is part of Natixis Global Asset
Management (formerly IXIS Asset Management Group). Founded in 1926, Loomis
Sayles is one of the oldest investment advisory firms in the United States with
over $129.9 billion in assets under management as of December 31, 2007. Loomis
Sayles is well known for its professional research staff, which is one of the
largest in the industry. Loomis Sayles makes investment decisions for each Fund.

   Natixis US is part of Natixis Global Asset Management (formerly IXIS Asset
Management Group), an international asset management group based in Paris,
France. Natixis Global Asset Management is ultimately owned principally by
three large French financial services entities: Natixis, an investment banking
and financial services firm which is publicly traded on Euronext in Paris; the
Caisse Nationale des Caisses d'Epargne ("CNCE"), a financial institution owned
by French regional savings banks known as the Caisses d'Epargne; and Banque
Federale des Banques Populaires ("BFBP"), a financial institution owned by
regional cooperative banks known as the Banques Populaires. The registered
address of Natixis is 45, rue Saint-Dominique, 75007 Paris, France. The
registered address of CNCE is 5, rue Masseran, 75007 Paris, France. The
registered address of BFBP is 5, rue Leblanc, 75011 Paris, France.

   The 14 principal subsidiary or affiliated asset management firms of Natixis
Asset Management US Group, L.P. collectively had over $285.3 billion in assets
under management or administration as of September 30, 2007.

   Advisory Agreements. Each Fund's advisory agreement with Loomis Sayles
provides that the adviser will furnish or pay the expenses of the applicable
Fund for office space, facilities and equipment, services of executive and
other personnel of the Trusts and certain administrative services. The adviser
is responsible for obtaining and evaluating such economic, statistical and
financial data and information and performing such additional research as is
necessary to manage each Fund's assets in accordance with its investment
objectives and policies. For these services, the advisory agreements provide
that each Fund shall pay Loomis Sayles a monthly investment advisory fee at the
following annual percentage rates of the particular Fund's average daily net
assets:

Fund                              Rate
- ----                              ----
Loomis Sayles Mid Cap Growth Fund 0.75%

Loomis Sayles Bond Fund           0.60% of the first $3 billion
                                  0.50% of the next $12 billion
                                  0.49% thereafter

Loomis Sayles Global Bond Fund    0.60% of the first $1 billion
                                  0.50% of the next $1 billion
                                  0.48% thereafter

                                      60



Fund                                              Rate
- ----                                              ----
Loomis Sayles Inflation Protected Securities Fund 0.25%

Loomis Sayles Small Cap Growth Fund               0.75%

Loomis Sayles Small Cap Value Fund                0.75%

Loomis Sayles Tax-Managed Equity Fund             0.50%

   Each Fund pays all expenses not borne by the adviser including, but not
limited to, the charges and expenses of the Funds' custodian and transfer
agent, independent registered public accounting firm legal counsel for the
Funds legal counsel for the Trusts' Independent Trustees, 12b-1 fees, all
brokerage commissions and transfer taxes in connection with portfolio
transactions, all taxes and filing fees, the fees and expenses for registration
or qualification of its shares under federal and state securities laws, all
expenses of shareholders' and trustees' meetings and of preparing, printing and
mailing reports to shareholders and the compensation of trustees who are not
directors, officers or employees of the Funds' adviser, or its affiliates,
other than affiliated registered investment companies. In the case of Class Y
shares, certain expenses may be allocated differently among the Fund's Classes
A and C shares, on the one hand, and Class Y shares on the other hand. (See
"Description of the Trust.")

   Each advisory agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund
and (ii) by vote of a majority of the Independent Trustees, cast in person at a
meeting called for the purpose of voting on such approval.

   Each advisory agreement may be terminated without penalty by vote of the
Board of Trustees of the relevant Trust or by vote of a majority of the
outstanding voting securities of the Fund, upon 60 days' written notice, or by
the Funds' adviser upon 90 days' written notice, and each terminates
automatically in the event of its assignment (as defined in the 1940 Act).

   Each advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.

   During the periods shown below, pursuant to the advisory agreements
described above, Loomis Sayles received the following amounts of investment
advisory fees from each Fund (before fee reductions and expense assumptions)
and bore the following amounts of fee reductions for each Fund. These amounts
include amounts paid by a Fund's predecessor, where applicable.



                                    Fiscal Year Ended      Fiscal Year Ended      Fiscal Year Ended
                                         9/30/05                9/30/06                9/30/07
                                  ---------------------- ---------------------- ----------------------
                                   Advisory      Fee      Advisory      Fee      Advisory      Fee
                                     Fees     Reductions    Fees     Reductions    Fees     Reductions
                                  ----------- ---------- ----------- ---------- ----------- ----------
                                                                          
Loomis Sayles Mid Cap Growth Fund $   385,975 $  116,730 $   360,159  $27,550*  $   353,105  $25,246*
Loomis Sayles Bond Fund           $19,971,293 $1,367,265 $29,144,506       --*  $56,465,051       --*


                                      61





                                               Fiscal Year Ended     Fiscal Year Ended     Fiscal Year Ended
                                                    9/30/05               9/30/06               9/30/07
                                             --------------------- --------------------- ---------------------
                                              Advisory     Fee      Advisory     Fee      Advisory     Fee
                                                Fees    Reductions    Fees    Reductions    Fees    Reductions
                                             ---------- ---------- ---------- ---------- ---------- ----------
                                                                                  
Loomis Sayles Global Bond
  Fund                                       $6,360,185  $755,546  $6,438,776       --*  $8,474,851       --*
Loomis Sayles Inflation Protected Securities
  Fund                                       $   26,236  $26,236*  $   22,966       --*  $   29,106       --*
Loomis Sayles Small Cap Growth Fund          $  168,258  $151,644  $  168,944  $62,772*  $  213,916  $47,316*
Loomis Sayles Small Cap Value Fund           $4,818,972  $225,273  $5,772,364       --*  $7,150,945       --*
Loomis Sayles Tax-Managed Equity Fund        $   39,124  $39,124*  $   46,295       --*  $   33,981       --*

- --------
*  In addition to the reduction of management fees, class level and other
   expenses have been reimbursed as indicated below.

   The table below shows the class level and other expenses of the Funds that
were reimbursed for the fiscal years ended September 30, 2005, September 30,
2006 and September 30, 2007.

                          Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
Fund                           9/30/05           9/30/06           9/30/07
- ----                      ----------------- ----------------- -----------------
Loomis Sayles Mid Cap
  Growth Fund                                   $ 72,883          $ 45,374
Loomis Sayles Bond Fund             --          $171,399          $215,069
Loomis Sayles Global
  Bond Fund                         --          $458,257          $268,311
Loomis Sayles Inflation
  Protected Securities
  Fund                         $69,746          $118,124          $102,653
Loomis Sayles Small Cap
  Growth Fund                                   $ 33,046          $ 18,358
Loomis Sayles Small Cap
  Value Fund                                    $174,650          $450,879
Loomis Sayles
  Tax-Managed Equity
  Fund                         $67,847          $ 91,352          $ 86,601

                                      62



Loomis Sayles has given a binding contractual undertaking (for all classes of
the Funds in the table below) to reduce the advisory fees and, if necessary, to
bear certain expenses related to operating the Funds in order to limit their
expenses, exclusive of acquired fund fees and expenses, brokerage expenses,
interest expense, taxes and organizational and extraordinary expenses, such as
litigation and indemnification expenses, to the annual rates indicated below.
The undertaking is in effect through January 21, 2009, and will be reevaluated
on an annual basis. Loomis Sayles will not be entitled to recover any such
reduced fees more than one year after the end of the fiscal year in which the
fee/expense was incurred.

Fund                                          Expense Limit Date of Undertaking
- ----                                          ------------- -------------------
Loomis Sayles Mid Cap Growth Fund                            February 1, 2008
   Institutional Class                            1.00%
   Retail Class                                   1.25%

Loomis Sayles Bond Fund                                      February 1, 2008
   Institutional Class                            0.70%
   Retail Class                                   0.95%
   Admin Class                                    1.20%

Loomis Sayles Global Bond Fund                               February 1, 2008
   Institutional Class                            0.75%
   Retail Class                                   1.00%

Loomis Sayles Inflation Protected Securities
  Fund                                                       February 1, 2008
   Institutional Class                            0.40%

Loomis Sayles Small Cap Growth Fund                          February 1, 2008
   Institutional Class                            1.00%
   Retail Class                                   1.25%

Loomis Sayles Small Cap Value Fund                           February 1, 2008
   Institutional Class                            0.90%
   Retail Class                                   1.15%
   Admin Class                                    1.40%

Loomis Sayles Tax-Managed Equity Fund                        February 1, 2008
   Institutional Class                            0.65%

   In addition to serving as investment adviser to certain series of the
Trusts, Loomis Sayles also acts as investment adviser to certain series of
Natixis Funds Trust I and Natixis Funds Trust II, each a registered open-end
management investment company. Loomis Sayles also serves as subadviser to a
number of other open-end management companies and provides investment advice to
numerous other corporate and fiduciary clients.


                                      63



   Distribution Agreements and Rule 12b-1 Plans. Under separate agreements with
the Funds, the "Distributor, 399 Boylston Street, Boston, Massachusetts 02116,
serves as the principal distributor of each class of shares of the Funds. The
Distributor's principal business address is 399 Boylston Street, Boston,
Massachusetts 02116. Under these agreements (each a "Distribution Agreement")
the Distributor conducts a continuous offering and is not obligated to sell a
specific number of shares. The Distributor bears the cost of making information
about the Funds available through advertising and other means and the cost of
printing and mailing Prospectuses to persons other than shareholders. Each Fund
pays the cost of registering and qualifying its shares under state and federal
securities laws and distributing the Prospectuses to existing shareholders. The
Distributor currently is paid a fee for serving as Distributor for the Loomis
Sayles Mid Cap Growth Fund, Loomis Sayles Bond Fund, Loomis Sayles Global Bond
Fund, Loomis Sayles Small Cap Growth Fund and Loomis Sayles Small Cap Value
Fund.

   The Distributor is compensated under each agreement through receipt of the
sales charges on Class A shares described below under "Net Asset Value" and is
paid by each Fund the service and distribution fees described in the applicable
Prospectus. The SEC is of the view that dealers receiving all or substantially
all of the sales charge may be deemed underwriters of a fund's shares.

   As described in their Prospectuses, the Loomis Sayles Mid Cap Growth Fund,
Loomis Sayles Bond Fund, Loomis Sayles Global Bond Fund, Loomis Sayles Small
Cap Growth Fund and Loomis Sayles Small Cap Value Fund have adopted Rule 12b-1
plans ("Plans") for their Retail Class shares and with respect to the Loomis
Sayles Bond Fund and Loomis Sayles Small Cap Value Fund, their Admin Class
shares. The Plans, among other things, permit the Retail and Admin Classes to
pay the Distributor monthly fees, at annual rates not exceeding 0.25% of the
assets of the Retail Class and Admin Class as compensation for its services as
principal underwriter of the shares of such class. Some Funds' classes may pay
the Distributor monthly fees of less than 0.25% of the relevant Class's assets.
Pursuant to Rule 12b-1 under the 1940 Act, each Plan (together with the
Distribution Agreements) was approved by the relevant Trust's Board of
Trustees, including a majority of the trustees who are not interested persons
of the Trust (as defined in the 1940 Act) and who have no direct or indirect
financial interest in the operations of the Plan or the Distribution
Agreements. The principal types of activities for which payments under these
Plans may be made include payments to intermediaries for shareholder servicing,
for "no transaction fee" or wrap programs, and for retirement plan record
keeping. Payments under these Plans also may be made for activities such as
advertising, printing, and mailing the Prospectuses to persons who are not
current shareholders, compensation to underwriters, compensation to
broker-dealers, compensation to sales personnel, and interest, carrying, or
other financing charges.

   Each Plan may be terminated by vote of a majority of the Independent
Trustees, or by vote of a majority of the outstanding voting securities of the
relevant class of shares of the relevant Fund. Each Plan may be amended by vote
of the relevant trustees, including a majority of the relevant Independent
Trustees, cast in person at a meeting called for that purpose. Any change in
any Plan that would materially increase the fees payable thereunder by the
relevant Class of shares of the relevant Fund requires approval by a vote of
the holders of a majority of such shares outstanding. The Trusts' trustees
review quarterly a written report of such costs and the purposes for which such
costs have been incurred. For so long as a Plan is in effect, selection and
nomination of those trustees who are Independent Trustees of the relevant Trust
shall be committed to the discretion of such Trustees.

   The Distribution Agreements and the Plans will continue in effect for
successive one-year periods, provided that each such continuance is
specifically approved (i) by the vote of a majority of the Independent Trustees
and (ii) by the vote of a majority of the entire Board of Trustees cast in
person at a meeting called for that purpose or by a vote of a majority of the
outstanding securities of a Fund (or the relevant class, in the case of the
Plans).

                                      64



   The following table provides information on the amount of fees paid by the
Funds under these Plans during the past three fiscal years:



                                        Fiscal Year Fiscal Year Fiscal Year
                                           Ended       Ended       Ended
    Fund                                  9/30/05     9/30/06     9/30/07
    ----                                ----------- ----------- -----------
                                                       
    Loomis Sayles Mid Cap Growth Fund
       Retail Class                     $   64,455  $   72,783  $    67,913
    TOTAL                               $   64,455  $   72,783  $    67,913

    Loomis Sayles Bond Fund
       Retail Class                     $1,098,667  $3,290,050  $10,826,900
       Admin Class                      $  227,210  $  424,314  $   754,292

    TOTAL                               $1,325,877  $3,714,364  $11,581,192

    Loomis Sayles Global Bond Fund
       Retail Class                     $1,549,625  $1,309,923  $ 1,730,459

    TOTAL                               $1,549,625  $1,309,923  $ 1,730,459

    Loomis Sayles Small Cap Growth Fund
       Retail Class                     $   17,147  $    8,704  $    12,629

    TOTAL                               $   17,147  $    8,704  $    12,629

    Loomis Sayles Small Cap Value Fund
       Retail Class                     $  519,186  $  678,990  $   932,610
       Admin Class                      $  325,226  $  331,716  $   390,830

    TOTAL                               $  844,412  $1,010,706  $ 1,323,440


                                      65



   During the fiscal year ended September 30, 2007, the Distributor's expenses
relating to the Fund's 12b-1 plans were as follows (compensation to
broker-dealers excludes advanced commissions sold to a third party):



                                                      Compensation Compensation Interest, carrying    Other
                                      Compensation to  to Broker-    to Sales    or other finance  Distribution
Fund                      Advertising  Underwriters     Dealers     Personnel        charges          Costs
- ----                      ----------- --------------- ------------ ------------ ------------------ ------------
                                                                                 
Loomis Sayles Mid Cap
  Growth Fund              $    814     $    7,063    $    67,465    $  1,268           $0          $    4,005
Loomis Sayles Bond Fund    $550,658     $4,777,783    $11,475,280    $857,557           $0          $2,709,091
Loomis Sayles Global
  Bond Fund                $ 63,270     $  548,962    $ 1,720,203    $ 98,532           $0          $  311,272
Loomis Sayles Small Cap
  Growth Fund              $  1,364     $   11,839    $    12,234    $  2,125           $0          $    6,713
Loomis Sayles Small Cap
  Value Fund               $ 31,349     $  271,999    $ 1,316,662    $ 48,821           $0          $  154,228


   Other Services. Natixis Advisors performs certain accounting and
administrative services for the Funds, pursuant to an Administrative Services
Agreement dated January 1, 2005, as amended from time to time (the
"Administrative Agreement"). Under the Administrative Agreement, Natixis
Advisors provides the following services to the Funds: (i) personnel that
perform bookkeeping, accounting, internal auditing and financial reporting
functions and clerical functions relating to the Funds, (ii) services required
in connection with the preparation of registration statements and prospectuses,
registration of shares in various states, shareholder reports and notices,
proxy solicitation material furnished to shareholders of the Funds or
regulatory authorities and reports and questionnaires for SEC compliance, and
(iii) the various registrations and filings required by various regulatory
authorities.

   For the period October 1, 2004 to December 31, 2004, Natixis Asset
Management Services Company (formerly, IXIS Asset Management Services Company
("Natixis Services") received the following fees from the Funds:



                                                       Period From October 1,
                                                      2004 to December 31, 2004
                                                      -------------------------
                                                   
Loomis Sayles Mid Cap Growth Fund                             $  8,568
Loomis Sayles Bond Fund                                       $465,140
Loomis Sayles Global Bond Fund                                $131,326
Loomis Sayles Inflation Protected Securities Fund             $  1,184
Loomis Sayles Small Cap Growth Fund                           $  5,022
Loomis Sayles Small Cap Value Fund                            $ 99,788
Loomis Sayles Tax-Managed Equity Fund                         $    996


                                      66



   For the period January 1, 2005 through September 30, 2005 the fiscal years
ended September 30, 2006 and September 30, 2007, pursuant to the administrative
services agreement between Natixis Advisors and the Trusts, Natixis Advisors
was reimbursed or was paid by each Trust, on behalf of the Funds, the following
amounts:



                       January 1, 2005 to Fiscal Year Ended  Fiscal Year Ended
                       September 30, 2005 September 30, 2006 September 30, 2007
                       ------------------ ------------------ ------------------
                                                    
Loomis Sayles Mid Cap
  Growth Fund              $   24,942         $   22,806         $   26,121
Loomis Sayles Bond
  Fund                     $1,725,352         $2,866,243         $5,914,621
Loomis Sayles Global
  Bond Fund                $  565,202         $  614,648         $  827,184
Loomis Sayles
  Inflation Protected
  Securities Fund          $    4,769         $    4,097         $    6,456
Loomis Sayles Small
  Cap Growth Fund          $    9,586         $    7,008         $   15,890
Loomis Sayles Small
  Cap Value Fund           $  318,595         $  404,043         $  528,193
Loomis Sayles
  Tax-Managed Equity
  Fund                     $    4,099         $    4,625         $    3,784


   Custodial Arrangements. State Street Bank and Trust Company ("State Street
Bank"), One Lincoln Street, Boston, Massachusetts, 02111, serves as the
custodian for the Trusts. As such, State Street Bank holds in safekeeping
certificated securities and cash belonging to each Fund and, in such capacity,
is the registered owner of securities in book-entry form belonging to each
Fund. Upon instruction, State Street Bank receives and delivers cash and
securities of each Fund in connection with Fund transactions and collects all
dividends and other distributions made with respect to Fund portfolio
securities. State Street Bank also maintains certain accounts and records of
the Trusts and calculates the total net asset value, total net income and net
asset value per share of each Fund on a daily basis.

   Transfer Agency Services. Pursuant to contracts between the Trusts, on
behalf of each Fund, and Boston Financial Data Services, Inc. ("Boston
Financial"), whose principal business address is Two Heritage Drive, Quincy,
Massachusetts, 02171, Boston Financial acts as shareholder servicing and
transfer agent for the Funds and is responsible for services in connection with
the establishment, maintenance and recording of shareholder accounts, including
all related tax and other reporting requirements and the implementation of
investment and redemption arrangements offered in connection with the sale of
the Funds' shares.

   Prior to October 1, 2005, Natixis Services served as the transfer agent for
the Funds and it, along with Boston Financial as sub-transfer agent, provided
the same services that Boston Financial now provides. For these services,
Natixis Services received the following fees from the Funds:



                                                   Fiscal Year Ended
                                                  September 30, 2005*
                                                  -------------------
                                            
Loomis Sayles Mid Cap Growth Fund                      $ 31,000
Loomis Sayles Bond Fund                                $652,677
Loomis Sayles Global Bond Fund                         $199,313
Loomis Sayles Inflation Protected Securities Fund      $ 20,556
Loomis Sayles Small Cap Growth Fund                    $ 31,000
Loomis Sayles Small Cap Value Fund                     $ 98,289
Loomis Sayles Tax-Managed Equity Fund                  $ 15,500

- --------
*  Prior to October 1, 2005, Natixis Services served as transfer and
   shareholder servicing agent for the Funds.

                                      67



   Independent Registered Public Accounting Firm. The Trusts' independent
registered public accounting firm is PricewaterhouseCoopers LLP, 125 High
Street, Boston, Massachusetts 02110. The independent registered public
accounting firm conducts an annual audit of each Fund's financial statements,
assists in the review of federal and state income tax returns and consults with
the Trusts as to matters of accounting and federal and state income taxation.
The financial highlights in the Prospectuses for the Funds, and the financial
statements contained in the Funds' annual reports for the year ended
September 30, 2007 and incorporated by reference into this Statement, have been
so included in reliance on the reports of the Trusts' independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.

   Counsel to the Funds. Ropes & Gray LLP, located at One International Place,
Boston, MA 02110, serves as counsel to the Funds.

                       PORTFOLIO MANAGEMENT INFORMATION

Portfolio Managers' Management of Other Accounts

   As of September 30, 2007, the Portfolio Managers of the Funds managed other
accounts in addition to managing one or more of the Funds. The following table
provides information on the other accounts managed by each Portfolio Manager.



                          Registered Investment Companies Other Pooled Investment Vehicles         Other Accounts
                          ------------------------------- -----------------------------     -----------------------------
                                           Advisory fee       Other         Advisory fee is     Other      Advisory fee is
                          Other Accounts   is based on       Accounts          based on        Accounts       based on
                             Managed       performance       Managed         performance       Managed      performance
                          ---------------- -------------- --------------    --------------  -------------- --------------
                          # of    Total    # of   Total   # of      Total   # of    Total   # of   Total   # of    Total
Name of Portfolio Manager Accts   Assets   Accts  Assets  Accts     Assets  Accts   Assets  Accts  Assets  Accts   Assets
- ------------------------- -----  --------  -----  ------  -----    -------- -----  -------- ----- -------- -----  --------
                                                                              
Kenneth M. Buntrock         2    $  1.942    0      $0     22      $  2.593   2    $  410.8  79   $  14.16  10    $  1.849
                                  billion                           billion         million        billion         million
Mark F. Burns               2    $  289.2    0      $0      0      $      0   0    $      0  10   $  54.13   0    $      0
                                  million                                                          million
Matthew J. Eagan           10    $ 28.070    0      $0      1      $  128.5   0    $      0  55   $  3.133   1    $  294.4
                                  billion                           million                        billion         million
Philip C. Fine              3    $  427.3    0      $0      0      $      0   0    $      0  17   $   38.6   0    $      0
                                  million                                                          million
Daniel Fuss                15    $  30.47    0      $0      4      $  485.3   0    $      0  81   $ 10.316   4    $  892.2
                                  billion                           million                        billion         million
Kathleen Gaffney           10    $ 28.070    0      $0      0      $      0   0    $      0  66   $  5.055   1    $ 197.05
                                  billion                                                          billion
Joseph R. Gatz              4    $  1.882    0      $0      0      $      0   0    $      0  30   $    863   0    $      0
                                  billion                                                          million
John Hyll                   4    $    188    0      $0      0      $      0   0    $      0  45   $  7.960   0    $      0
                                  million                                                          billion
David Rolley                3    $  1.994    0      $0      7      $  1.220   1    $  340.2  43   $  7.931   1    $  676.5
                                  billion                           billion         million        billion         million


                                      68





                          Registered Investment Companies Other Pooled Investment Vehicles        Other Accounts
                          ------------------------------- -------------------------------- -----------------------------
                                           Advisory fee       Other          Advisory fee      Other       Advisory fee
                          Other Accounts   is based on       Accounts        is based on      Accounts     is based on
                             Managed       performance       Managed         performance      Managed      performance
                          ---------------- -------------- --------------    -------------- -------------- --------------
                          # of    Total    # of   Total   # of      Total   # of   Total   # of   Total   # of   Total
Name of Portfolio Manager Accts   Assets   Accts  Assets  Accts     Assets  Accts  Assets  Accts  Assets  Accts  Assets
- ------------------------- -----  --------  -----  ------  -----    -------- ----- -------- ----- -------- ----- --------
                                                                            
Clifton Rowe                6    $  563.6    0      $0      1      $  202.5   0   $      0   53  $  2.887   0   $      0
                                  million                           million                       billion
Lynda Schweitzer            1    $  1.832    0      $0     19      $  2.306   2   $  410.8   69  $ 14.058   0   $  1.849
                                  billion                           billion        million        billion        billion
Mark Shank                  1    $  6.723    0      $0      0      $      0   0   $      0  284  $  433.4   0   $      0
                                  billion                                                         million
John Slavik                 2    $  289.2    0      $0      0      $      0   0   $      0   14  $  54.37   0   $      0
                                  million                                                         million
David G. Sowerby            1    $  6.723    0      $0      0      $      0   0   $      0  135  $  124.1   0   $      0
                                  million                                                         million
Elaine M. Stokes           14    $ 30.124    0      $0      0      $      0   0   $      0   56  $  1.959   1   $  197.0
                                  billion                                                         billion        million
Daniel G. Thelen            4    $  1.882    0      $0      0      $      0   0   $      0   44  $  732.4   0   $      0
                                  billion                                                         million


Material Conflicts of Interest

   Conflicts of interest may arise in the allocation of investment
opportunities and the allocation of aggregated orders among the Funds and other
accounts managed by the portfolio managers. A portfolio manager potentially
could give favorable treatment to some accounts for a variety of reasons,
including favoring larger accounts, accounts that pay higher fees, accounts
that pay performance-based fees, accounts of affiliated companies and accounts
in which the portfolio manager has an interest. Such favorable treatment could
lead to more favorable investment opportunities or allocations for some
accounts. Loomis Sayles makes investment decisions for all accounts (including
institutional accounts, mutual funds, hedge funds and affiliated accounts)
based on each account's availability of other comparable investment
opportunities and Loomis Sayles' desire to treat all accounts fairly and
equitably over time. Loomis Sayles maintains trade allocation and aggregation
policies and procedures to address these potential conflicts. Conflicts of
interest also may arise to the extent a portfolio manager short sells a stock
in one client account but holds that stock long in other accounts, including
the Funds, or sells short for some accounts while buying it for others and
through the use of "soft dollar arrangements," which are discussed in the
section "Portfolio Transactions and Brokerage."

Portfolio Managers' Compensation

   The following describes the structure of, and the method used to determine,
the compensation of each of the above-listed portfolio managers as of
September 30, 2007:

   Loomis Sayles believes that portfolio manager compensation should be driven
primarily by the delivery of consistent and superior long-term performance for
its clients. Portfolio manager compensation is made up primarily of three main
components: base salary, variable compensation and a long-term incentive
program. Although portfolio manager compensation is not directly tied to assets
under management, a portfolio manager's base salary and/or variable
compensation potential may reflect the amount of assets for which the manager
is responsible relative to other portfolio managers. Loomis Sayles also offers
a profit sharing plan. Base salary is a fixed amount based on a combination of
factors including industry experience, firm experience, job performance and
market considerations. Variable compensation is an incentive-based component
and generally represents a significant multiple of base salary. Variable
compensation is based on four factors: investment performance, profit growth of
the firm, profit growth of the manager's business unit and team commitment.
Investment performance is the primary component of total variable compensation
and generally represents at least 60% of the total. The other three factors are
used to determine the remainder of variable compensation, subject to the
discretion of the department's Chief Investment Officer (CIO) and senior
management. The CIO and senior management evaluate these other factors annually.

                                      69



Equity Managers

   While mutual fund performance and asset size do not directly contribute to
the compensation calculation, investment performance for equity managers is
measured by comparing the performance of the firm's institutional composite
(pre-tax and net of fees) in the manager's style to the performance of a peer
group of institutional managers in that style (or, in the case of the Mid-Cap
Growth and the Small Cap Growth Funds, the performance of the applicable
Morningstar peer group). A manager's performance relative to the peer group for
the 1, 3 and 5 year periods (or since the start of the manager's tenure, if
shorter) is used to calculate the amount of variable compensation payable due
to performance. Longer-term performance (3 and 5 years or since the start of
the manager's tenure, if shorter) combined is weighted more than shorter-term
performance (1 year). If a manager is responsible for more than one product,
the rankings of each product are weighted based on relative asset size of
accounts represented in each product. An external benchmark is used as a
secondary comparison. The external benchmark used for the investment style
utilized for each equity fund is noted in the table below:

FUND                                          MANAGER BENCHMARK
- ----                                          -----------------
Loomis Sayles Small Cap Value Fund            Russell 2000 Value Index
Loomis Sayles Mid Cap Growth Fund             Russell Mid Cap Growth Index
Loomis Sayles Small Cap Growth Fund           Russell 2000 Growth Index
Loomis Sayles Tax-Managed Equity Fund         S&P 500 Index

   Loomis Sayles uses the institutional peer groups as the primary measuring
stick for equity manager performance because it believes they represent the
most competitive product universe while closely matching the investment styles
offered by the firm. Loomis Sayles considers the institutional composite an
accurate proxy for the performance of each investment style.

Fixed-Income Managers

   While mutual fund performance and asset size do not directly contribute to
the compensation calculation, investment performance for fixed-income managers
is measured by comparing the performance of the firm's institutional composite
(pre-tax and net of fees) in the manager's style to the performance of an
external benchmark and a customized peer group. The external benchmark used for
the investment style utilized by each fixed-income fund is noted in the table
below:

FUND                             MANAGER BENCHMARK
- ----                             -----------------
Loomis Sayles Bond Fund          Lehman Government/Credit Index
Loomis Sayles Global Bond Fund   Lehman Global Aggregate Index
                                 Citigroup World Government Bond Index
Loomis Sayles Inflation
  Protected Securities Fund      Lehman U.S. Treasury Inflation Protected Index

   The customized peer group is created by the firm and is made up of
institutional managers in the particular investment style. A manager's relative
performance for the past five years is used to calculate the amount of variable
compensation payable due to performance. To ensure consistency, the firm
analyzes the five year performance on a rolling three year basis. If a manager
is responsible for more than one product, the rankings of each product are
weighted based on relative asset size of accounts represented in each product.

   Loomis Sayles uses both an external benchmark and a customized peer group as
measuring sticks for fixed-income manager performance because it believes they
represent an appropriate combination of the competitive fixed-income product
universe and the investment styles offered by the firm.

   Mr. Fuss's compensation is also based on his overall contributions to the
firm in his various roles as Senior Portfolio Manager, Vice Chairman and
Director. As a result of these factors, the contribution of investment
performance to Mr. Fuss' total variable compensation may be significantly lower
than the percentage reflected above.

General

   Mutual funds are not included in the firm's composites, so unlike other
managed accounts, fund performance and asset size do not directly contribute to
this calculation. However, each fund managed by the firm

                                      70



employs strategies endorsed by the firm and fits into the product category for
the relevant investment style. Loomis Sayles may adjust compensation if there
is significant dispersion among the returns of the composite and accounts not
included in the composite.

   Loomis Sayles has developed and implemented a long-term incentive plan to
attract and retain investment talent. The plan supplements existing
compensation. This plan has several important components distinguishing it from
traditional equity ownership plans:

..  the plan grants units that entitle participants to an annual payment based
   on a percentage of company earnings above an established threshold;

..  upon retirement, a participant will receive a multi-year payout for his or
   her vested units;

..  participation is contingent upon signing an award agreement, which includes
   a non-compete covenant.

   Senior management expects that the variable compensation portion of overall
compensation will continue to remain the largest source of income for those
investment professionals included in the plan. The plan is initially offered to
portfolio managers and over time the scope of eligibility is likely to widen.
Management has full discretion on what units are issued and to whom.

   Portfolio managers also participate in the Loomis Sayles profit sharing
plan, in which Loomis Sayles makes a contribution to the retirement plan of
each employee based on a percentage of base salary (up to a maximum amount).
The portfolio managers also participate in the Loomis Sayles defined benefit
pension plan, which applies to all Loomis Sayles employees who joined the firm
prior to May 1, 2003. The defined benefit is based on years of service and base
compensation (up to a maximum amount).

Portfolio Managers' Ownership of Fund Shares

   As of September 30, 2007, the Portfolio Managers had the following ownership
in the Funds:



                                                         Dollar Range of Equity
Name of Portfolio Manager Fund(s) Managed                 Securities Invested*
- ------------------------- ---------------                ----------------------
                                                   
Kenneth M. Buntrock       Loomis Sayles Global Bond Fund           E

Mark F. Burns             Loomis Sayles Small Cap
                          Growth Fund                              A

Matthew J. Eagan          Loomis Sayles Bond Fund                  E

Philip C. Fine            Loomis Sayles Mid Cap Growth
                          Fund                                     F

Daniel J. Fuss            Loomis Sayles Bond Fund                  G

Kathleen C. Gaffney       Loomis Sayles Bond Fund                  F

Joseph R. Gatz            Loomis Sayles Small Cap Value
                          Fund                                     A

John Hyll                 Loomis Sayles Inflation
                          Protected Securities Fund                E

David Rolley              Loomis Sayles Global Bond Fund           E

Clifton V. Rowe           Loomis Sayles Inflation
                          Protected Securities Fund                A


                                      71





                                                                             Dollar Range of Equity
Name of Portfolio Manager      Fund(s) Managed                                Securities Invested*
- -------------------------      ---------------                               ----------------------
                                                                       
Lynda Schweitzer               Loomis Sayles Global Bond Fund                          E

Mark Shank                     Loomis Sayles Tax-Managed Equity Fund                   E

John Slavik                    Loomis Sayles Small Cap Growth Fund                     E

David G. Sowerby               Loomis Sayles Tax-Managed Equity Fund                   C

Elaine M. Stokes               Loomis Sayles Bond Fund                                 A

Daniel G. Thelen               Loomis Sayles Small Cap Value Fund                      E

- --------
*A. None                   E. $100,001 - $500,000
 B. $1 - 10,000            F. $500,001 - $1,000,000
 C. $10,001 - $50,000      G. over $1,000,000
 D. $50,001 - $100,000

   There are various reasons why a Portfolio Manager may not own shares of the
Fund he or she manages. One reason is that the Fund's investment objectives and
strategies may not match those of the Portfolio Manager. Administrative reasons
(such as facilitating compliance with an adviser's code of ethics) also may
explain why a Portfolio Manager has chosen not to invest in the Natixis Funds.

Allocation of Investment Opportunity Among Natixis Funds Trust and Loomis
Sayles Funds (the "Funds") and Other Investors Managed by the Adviser; Cross
Relationships of Officers and Trustees

   Loomis Sayles has organized its business into two investment groups: the
Fixed-Income Group and the Equity Group. The Fixed-Income Group and the Equity
Group make investment decisions for the funds managed by Loomis Sayles. The
groups make investment decisions independently of one another. These groups
also have responsibility for the management of other client portfolios. The
other investment companies and clients served by Loomis Sayles' investment
platforms sometimes invest in securities in which the funds (or segments
thereof) advised or subadvised by Loomis Sayles also invest. If one of these
funds and such other clients advised or subadvised by the same investment group
of Loomis Sayles desire to buy or sell the same portfolio securities at or
about the same time, the respective group allocates purchases and sales, to the
extent practicable, on a pro rata basis in proportion to the amount desired to
be purchased or sold for each fund or client advised or subadvised by that
investment group. It is recognized that in some cases the practices described
in this paragraph could have a detrimental effect on the price or amount of the
securities which each of the funds purchases or sells. In other cases, however,
it is believed that these practices may benefit the relevant Fund.

                     PORTFOLIO TRANSACTIONS AND BROKERAGE

   In placing orders for the purchase and sale of equity securities, Loomis
Sayles selects only brokers that it believes are financially responsible, will
provide efficient and effective services in executing, clearing and settling an
order and will charge commission rates that, when combined with the quality of
the foregoing services, will produce the best price and execution for the
transaction. This does not necessarily mean that the lowest available brokerage
commission will be paid. However, the commissions are believed to be
competitive with generally prevailing rates. Loomis Sayles will use its best
efforts to obtain information as to the general level of commission rates being
charged by the brokerage community from time to time and will evaluate the
overall reasonableness of brokerage commissions paid on transactions by
reference to such data. In making such evaluation, all factors affecting
liquidity and execution of the order, as well as the amount of the capital
commitment by the broker in connection with the order, are taken into account.

   Subject to the overriding objective of obtaining the best possible execution
of orders, each Fund's adviser may allocate brokerage transactions to
affiliated brokers. Any such transactions will comply with Rule 17e-1 under the
1940 Act. In order for the affiliated broker to effect portfolio transactions
for the Fund, the commissions, fees or other remuneration received by the
affiliated broker must be reasonable and fair compared to the commissions, fees
and other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period. Furthermore, each Trust's Board
of Trustees, including a majority of the Independent Trustees, have adopted
procedures that are reasonably designed to

                                      72



provide that any commissions, fees or other remuneration paid to an affiliated
broker are consistent with the foregoing standard.

   Generally, Loomis Sayles seeks to obtain quality executions at favorable
security prices and at competitive commission rates, where applicable, through
brokers and dealers who, in Loomis Sayles' opinion, can provide the best
overall net results for its clients. Transactions in unlisted equity securities
(including NASDAQ securities) are frequently executed through a primary market
maker but may also be executed on an Electronic Communication Network (ECN),
Alternative Trading System (ATS), or other execution system. Fixed-income
securities are generally purchased from the issuer or a primary market maker
acting as principal on a net basis with no brokerage commission paid by the
client. Such securities, as well as equity securities, may also be purchased
from underwriters at prices which include underwriting fees.

Commissions and Other Factors in Broker or Dealer Selection

   Loomis Sayles uses its best efforts to obtain information as to the general
level of commission rates being charged by the brokerage community from time to
time and to evaluate the overall reasonableness of brokerage commissions paid
on client portfolio transactions by reference to such data. In making this
evaluation, all factors affecting liquidity and execution of the order, as well
as the amount of the capital commitment by the broker or dealer, are taken into
account. Other relevant factors may include, without limitation: (a) the
execution capabilities of the brokers and/or dealers, (b) research and other
products or services (as described under "Soft Dollars" below) provided by such
brokers and/or dealers which are expected to enhance Loomis Sayles' general
portfolio management capabilities, (c) the size of the transaction, (d) the
difficulty of execution, (e) the operations facilities of the brokers and/or
dealers involved, (f) the risk in positioning a block of securities, and
(g) the quality of the overall brokerage and research services provided by the
broker and/or dealer.

Soft Dollars

   Loomis Sayles' receipt of brokerage and research products or services are
factors in Loomis Sayles' selection of a broker dealer to execute transactions
for a Fund where Loomis Sayles believes that the broker or dealer will provide
best execution of the transactions. Such brokerage and research products or
services may be paid for with Loomis Sayles' own assets or may, in connection
with transactions in equity securities effected for client accounts for which
Loomis Sayles exercises investment discretion, be paid for with client
commissions (i.e, "soft dollars").

   Loomis Sayles will only acquire research and brokerage products and services
that are deemed to qualify as eligible products and services under the safe
harbor of Section 28(e) of the Securities and Exchange Act of 1934. Eligible
research services and products that may be acquired by Loomis Sayles are those
products and services that provide advice, analysis or reports that will aid
Loomis Sayles in carrying out its investment decision-making responsibilities.
Eligible research must reflect the expression of reasoning or knowledge (having
inherently intangible and non-physical attributes) and may include the
following research items: traditional research reports; discussions with
research analysts and corporate executives; seminars or conferences; financial
and economic publications that are not targeted to a wide public audience;
software that provides analysis of securities portfolios; market research
including pre-trade and post-trade analytics; and market data. Eligible
brokerage services and products that may be acquired by Loomis Sayles are those
services or products that (i) are required to effect securities transactions;
(ii) perform functions incidental to securities transactions; or (iii) is a
service that is required by an applicable SRO or SEC rule(s). The brokerage and
research products or services provided to Loomis Sayles by a particular broker
or dealer may include both (a) products and services created by such broker or
dealer and (b) products and services created by a third party.

   If Loomis Sayles receives a particular product or service that both aids it
in carrying out its investment decision-making responsibilities (i.e., a
"research use") and provides non-research related uses, Loomis Sayles will make
a good faith determination as to the allocation of the cost of such "mixed-use
item" between the research and non-research uses and will only use soft dollars
to pay for the portion of the cost relating to its research use.

   In connection with Loomis Sayles' use of soft dollars, a Fund may pay a
broker dealer an amount of commission for effecting a transaction for the Fund
in excess of the amount of commission another broker dealer would have charged
for effecting that transaction if Loomis Sayles determines in good faith that
the amount of

                                      73



commission is reasonable in relation to the value of the brokerage and research
products or services received, either in terms of the particular transaction or
Loomis Sayles' overall responsibility to discretionary accounts.

   Loomis Sayles may use soft dollars to acquire brokerage or research products
and services that have potential application to all client accounts including
the Funds or to acquire brokerage or research products and services that will
be applied in the management of a certain group of client accounts and, in some
cases, may not be used with respect to the Funds. The products or services may
not be used in connection with the management of some of the accounts including
the Funds that paid commissions to the broker or dealer providing the products
or services and may be used in connection with the management of other accounts.

   Loomis Sayles' use of soft dollars to acquire brokerage and research
products and services benefits Loomis Sayles by allowing it to obtain such
products and services without having to purchase them with its own assets.
Loomis Sayles believes that its use of soft dollars also benefits the Funds as
described above. However, conflicts may arise between a Fund's interest in
paying the lowest commission rates available and Loomis Sayles' interest in
receiving brokerage and research products and services from particular brokers
and dealers without having to purchase such products and services with Loomis
Sayles' own assets.

   For purposes of this soft dollars discussion, the term "commission" may
include (to the extent applicable) both commissions paid to brokers in
connection with transactions effected on an agency basis and markups,
markdowns, commission equivalents, or other fees paid to dealers in connection
with certain transactions as encompassed by relevant SEC interpretation. Loomis
Sayles does not generate "soft dollars" on fixed-income transactions.

Client Commission Arrangements

   Loomis Sayles has entered into client commission arrangements ("CCAs") (also
known as commission sharing arrangements) with some of its key broker dealer
relationships. At the same time, Loomis Sayles has significantly reduced the
number of brokers with which it will trade. In a CCA, subject to best
execution, Loomis Sayles will allocate a higher portion of its clients' equity
trading with broker dealers who have agreed to unbundle their commission rates
in order to enable Loomis Sayles to separately negotiate rates for execution
and research and research services. The execution rates Loomis Sayles has
negotiated with such firms vary depending on the difficulty of the orders
Loomis Sayles has asked the CCAs to execute.

   Pursuant to the CCA agreements Loomis Sayles has with these broker dealers,
each firm will pool the research commissions accumulated during a calendar
quarter and then, at the direction of Loomis Sayles, pay various broker dealers
from this pool for the research and research services such firms have provided
to Loomis Sayles.

   The CCAs enable Loomis Sayles to: strengthen its relationships with its key
broker dealers, and limit the broker dealers with whom it trades to those with
whom it has an electronic interface, while still maintaining the research
relationships with broker dealers that provide Loomis Sayles with research and
research services. In addition, the ability to unbundle the execution and
research components of commissions enables Loomis Sayles to manage commissions
more efficiently, and to provide greater transparency to its clients in their
commission reports.

   These CCAs are deemed to be soft dollar arrangements, and Loomis Sayles and
each CCA intends to comply with the applicable requirements of Section 28 (e)
of the Securities Exchange Act of 1934, as amended.

Brokerage Commissions

   The following tables set forth, for each of the last three fiscal years,
(1) the aggregate dollar amount of brokerage commissions paid on portfolio
transactions during such year, (2) the dollar amount of transactions on which
brokerage commissions were paid during such year that were directed to brokers
providing research services ("directed transactions") and (3) the dollar amount
of commissions paid on directed transactions during such year. Funds not listed
in a table did not pay brokerage commissions during the relevant year. Amounts
in the tables include amounts paid by the Funds' predecessors, where
appliciable. The information in the tables includes transactions that were
directed to broker dealers based on the internal "broker vote" allocation
policy of Loomis Sayles as well as transactions that were allocated under
arrangements with brokers providing research services. The "broker vote" is an
internal voting process whereby Loomis Sayles' equity portfolio managers and
research analysts vote on various aspects of a broker dealer's qualitative
services, which include without limitation: research and other services, idea
generation, discussions with research analysts and corporate executives,
seminars and conferences. This internal voting process on a quarterly basis,
and Loomis Sayles uses the results of this internal vote to determine, in good
faith, the value of the research and research services it receives from the
broker dealers that provide such services, and it will pay such broker dealers
for these services through its CCAs and/or through trading directly with the
broker dealers.

                                      74



                     FISCAL YEAR ENDED SEPTEMBER 30, 2005



                                                             Directed
                                       Aggregate Brokerage  Brokerage        Commissions
Fund                                       Commission       Commission  Directed Transactions
- ----                                   ------------------- ------------ ---------------------
                                                               
Loomis Sayles Mid Cap Growth Fund          $  320,623      $146,643,510       $160,311
Loomis Sayles Small Cap Growth Fund        $  190,326      $ 59,287,795       $ 95,163
Loomis Sayles Small Cap Value Fund         $1,419,229      $379,562,810       $709,615
Loomis Sayles Tax-Managed Equity Fund      $    6,620      $  4,636,634       $  3,310


                     FISCAL YEAR ENDED SEPTEMBER 30, 2006



                                       Aggregate Brokerage   Directed      Commissions on
Fund                                       Commissions     Transactions Directed Transactions
- ----                                   ------------------- ------------ ---------------------
                                                               
Loomis Sayles Mid Cap Growth Fund          $  154,054      $105,214,492       $ 77,027
Loomis Sayles Small Cap Growth Fund*       $   47,822      $ 22,791,560       $ 23,911
Loomis Sayles Small Cap Value Fund         $1,113,638      $455,746,242       $556,819
Loomis Sayles Tax-Managed Equity Fund      $    4,882      $  4,358,963       $  2,441


                     FISCAL YEAR ENDED SEPTEMBER 30, 2007



                                       Aggregate Brokerage    Directed         Commissions
Fund                                       Commissions      Transactions  Directed Transactions
- ----                                   ------------------- -------------- ---------------------
                                                                 
Loomis Sayles Mid Cap Growth Fund          $  121,979      $70,903,922.10      $ 43,360.84
Loomis Sayles Small Cap Growth Fund        $   63,010      $24,631,596.52      $ 17,652.30
Loomis Sayles Small Cap Value Fund         $1,268,313      $459,439,22.35      $457,642.93
Loomis Sayles Tax-Managed Equity Fund      $    3,831      $ 1,715,224.00      $    935.39

- --------
*  [Brokerage commissions for the Loomis Sayles Small Cap Growth Fund decreased
   from fiscal year 2005 to fiscal year 2006 due in part to a decrease in the
   Fund's portfolio turnover.]

                                      75



Regular Broker-Dealers

   The table below presents information regarding the securities of the Funds'
regular broker-dealers* (or the parent of the regular broker-dealers) that were
held by each Fund, if any, as of the fiscal year ending September 30, 2007.



                                                                 Aggregate Value of Securities of each
                                                                       Regular Broker or Dealer
Fund                                   Regular Broker-Dealer         (or its Parent) held by Fund
- ----                                   ---------------------     -------------------------------------
                                                           
Loomis Sayles Bond Fund                Barclays Bank                         $186,246,618
                                       Merrill Lynch                         $ 55,990,180
                                       JP Morgan Chase & Co.                 $284,933,745

Loomis Sayles Global Bond Fund         Barclays Bank                         $ 16,263,660
                                       Bank of America                       $ 15,447,393
                                       JP Morgan Chase & Co.                 $ 31,397,255
                                       Merrill Lynch                         $  5,802,340
                                       Morgan Stanley                        $  3,890,034

Loomis Sayles Tax-Managed Equity Fund  Goldman Sachs                         $    238,414
                                       State Street Bank                     $    126,096
                                       CitiGroup Global Markets              $    111,121

- --------
*  "Regular Broker-Dealers" are defined by the SEC as: (a) one of the 10
   brokers or dealers that received the greatest dollar amount of brokerage
   commissions by virtue of direct or indirect participation in the company's
   portfolio transactions during the company's most recent fiscal year; (b) one
   of the 10 brokers or dealers that engaged as principal in the largest dollar
   amount of portfolio transactions of the investment company during the
   company's most recent fiscal year; or (c) one of the 10 brokers or dealers
   that sold the largest dollar amount of securities of the investment company
   during the company's most recent fiscal year.

                                      76



General

   Subject to procedures adopted by the Board of Trustees of each Trust, the
Funds' brokerage transactions may be executed by brokers that are affiliated
with Natixis Asset Management US Group or Loomis Sayles. Any such transactions
will comply with Rule 17e-1 under the 1940 Act, or other applicable
restrictions as permitted by the SEC pursuant to exemptive relief or otherwise.

   Under the 1940 Act, persons affiliated with each Trust are prohibited from
dealing with each Trust's funds as a principal in the purchase and sale of
securities. Since transactions in the over-the-counter market usually involve
transactions with dealers acting as principals for their own accounts,
affiliated persons of the Trusts may not serve as the Funds' dealer in
connection with such transactions.

   To the extent permitted by applicable law, and in all instances subject to
the foregoing policy of best execution, the adviser may allocate brokerage
transactions to broker-dealers (including affiliates of the Distributor) that
have entered into arrangements in which the broker-dealer allocates a portion
of the commissions paid by a Fund toward the reduction of that Fund's expenses.

   It is expected that the portfolio transactions in fixed-income securities
will generally be with issuers or dealers on a net basis without a stated
commission. Securities firms may receive brokerage commissions on transactions
involving options, futures and options on futures and the purchase and sale of
underlying securities upon exercise of options. The brokerage commissions
associated with buying and selling options may be proportionately higher than
those associated with general securities transactions.

                           DESCRIPTION OF THE TRUSTS

   The Declarations of Trust of Loomis Sayles Funds I and Loomis Sayles Funds
II permit each Trust's trustees to issue an unlimited number of full and
fractional shares of each series. Each share of each Fund represents an equal
proportionate interest in such Fund with each other share of that Fund and is
entitled to a proportionate interest in the dividends and distributions from
that Fund. The Declarations of Trust further permit each Trust's Board of
Trustees to divide the shares of each series into any number of separate
classes, each having such rights and preferences relative to other classes of
the same series as each Trust's Board of Trustees may determine. When you
invest in a Fund, you acquire freely transferable shares of beneficial interest
that entitle you to receive dividends as determined by each Trust's Board of
Trustees and to cast a vote for each share you own at shareholder meetings. The
shares of each Fund do not have any preemptive rights. Upon termination of any
Fund, whether pursuant to liquidation of the Trust or otherwise, shareholders
of each class of that Fund are entitled to share pro rata in the net assets
attributable to that class of shares of that Fund available for distribution to
shareholders. Each Declaration of Trust also permits the Board of Trustees to
charge shareholders directly for custodial, transfer agency, and servicing
expenses.

   Shares of each Fund (other than the Loomis Sayles Inflation Protected
Securities and the Loomis Sayles Tax-Managed Equity Fund) are divided into at
least two classes, designated Retail Class and Institutional Class shares. The
Loomis Sayles Bond Fund and Loomis Sayles Small Cap Value Fund offer a third
class of shares designated Admin Class shares.

   The assets received by each class of a Fund for the issue or sale of its
shares and all income, earnings, profits, losses and proceeds therefrom,
subject only to the rights of creditors, are allocated to, and constitute the
underlying assets of, that class of the Fund. The underlying assets of each
class of a Fund are segregated and are charged with the expenses with respect
to that class of the Fund and with a share of the general expenses of the
relevant Fund and Trust. Any general expenses of the Trust that are not readily
identifiable as belonging to a

                                      77



particular class of a Fund are allocated by or under the direction of the
trustees in such manner as the trustees determine to be fair and equitable.
While the expenses of each Trust are allocated to the separate books of account
of each Fund, certain expenses may be legally chargeable against the assets of
all of the Funds in a Trust.

   Each Declaration of Trust also permits the Trusts' Board of Trustees,
without shareholder approval, to subdivide any Fund or series or class of
shares into various sub-series or sub-classes with such dividend preferences
and other rights as the trustees may designate. Each Trust's Board of Trustees
may also, without shareholder approval, establish one or more additional series
or classes or merge two or more existing series or classes without shareholder
approval. Shareholders' investments in such an additional or merged series
would be evidenced by a separate series of shares (i.e., a new "fund").

   Each Declaration of Trust provides for the perpetual existence of the
Trusts. The Trusts or any Fund, however, may be terminated at any time by vote
of at least two thirds of the outstanding shares of each Fund affected.
Similarly, any class within a Fund may be terminated by vote of at least two
thirds of the outstanding shares of such class. Each Declaration of Trust
further provides that the Board of Trustees may also without shareholder
approval terminate the relevant Trust or Fund upon written notice to its
shareholders.

Voting Rights

   Shareholders of each funds are entitled to one vote for each full share held
(with fractional votes for each fractional share held) and may vote (to the
extent provided therein) on the election of trustees and the termination of the
Trust and on other matters submitted to the vote of shareholders.

   All classes of shares of the Funds have identical voting rights except that
each class of shares has exclusive voting rights on any matter submitted to
shareholders that relates solely to that class, and has separate voting rights
on any matter submitted to shareholders in which the interests of one class
differ from the interests of any other class. On any matters submitted to a
vote of shareholders, all shares of the Trust then entitled to vote shall,
except as otherwise provided in the By-Laws, be voted in the aggregate as a
single class without regard to series or class of shares, except (1) when
required by the 1940 Act, or when the Trustees shall have determined that the
matter affects one or more series or class of shares materially differently
shares shall be voted by individual series or class and (2) when the matter
affects only the interest of one or more series or classes, only shareholders
of such series or class shall be entitled to vote thereon. Consistent with the
current position of the SEC, shareholders of all series and classes vote
together, irrespective of series or class, on the election of trustees and the
selection of the Trusts' independent registered public accounting firm, but
shareholders of each series vote separately on most other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory and subadvisory agreement
relating to that series, and shareholders of each class within a series vote
separately as to the Rule 12b-1 plan (if any) relating to that class.

   There will normally be no meetings of shareholders for the purpose of
electing trustees, except that, in accordance with the 1940 Act, (i) a Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if there is a vacancy on the Board of Trustees, such
vacancy may be filled only by a vote of the shareholders unless, after filling
such vacancy by other means, at least two-thirds of the trustees holding office
shall have been elected by the shareholders. In addition, trustees may be
removed from office by a written consent signed by the holders of two-thirds of
the outstanding shares and filed with a Trust's custodian or by a vote of the
holders of two-thirds of the outstanding shares at a meeting duly called for
that purpose.

   Upon written request by a minimum of ten holders of shares having held their
shares for a minimum of six months and having a net asset value of at least
$25,000 or constituting at least 1% of the outstanding shares, whichever is
less, stating that such shareholders wish to communicate with the other
shareholders for the purpose of obtaining the signatures necessary to demand a
meeting to consider removal of a trustee, the Trusts have undertaken to provide
a list of shareholders or to disseminate appropriate materials (at the expense
of the requesting shareholders).

                                      78



   Except as set forth above, the trustees shall continue to hold office and
may appoint successor trustees. Shareholder voting rights are not cumulative.

   The affirmative vote of a majority of shares of the Trusts voted (assuming a
quorum is present in person or by proxy) is required to amend the Declaration
of Trust if such amendment (1) affects the power of shareholders to vote,
(2) amends the section of the relevant Declaration of Trust governing
amendments, (3) is one for which a vote is required by law or by the Trusts'
registration statement or (4) is submitted to the shareholders by the trustees.
If one or more new series of a Trust is established and designated by the
trustees, the shareholders having beneficial interests in the Funds shall not
be entitled to vote on matters exclusively affecting such new series, such
matters including, without limitation, the adoption of or any change in the
investment objectives, policies or restrictions of the new series and the
approval of the investment advisory contracts of the new series. Similarly, the
shareholders of the new series shall not be entitled to vote on any such
matters as they affect the other funds.

Shareholder and Trustee Liability

   Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trusts. However, each
Declaration of Trust disclaims shareholder liability for acts or obligations of
each Trust and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by a Trust or the
trustees. Each Declaration of Trust provides for indemnification out of each
Fund's property for all loss and expense of any shareholder held personally
liable for the obligations of the Fund by reason of owning shares of such Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered remote since it is limited to circumstances
in which the disclaimer is inoperative and a Fund itself would be unable to
meet its obligations.

   Each Declaration of Trust further provides that the Board of Trustees will
not be liable for errors of judgment or mistakes of fact or law. However,
nothing in the Declarations of Trust protects a trustee against any liability
to which the trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. The By-laws of each Trust provide
for indemnification by the Trusts of trustees and officers of the Trusts,
except with respect to any matter as to which any such person did not act in
good faith in the reasonable belief that his or her action was in the best
interests of the Trust. Such persons may not be indemnified against any
liability to the Trusts or the Trusts' shareholders to whom he or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office. Each Trust offers only its own Funds' shares for sale, but it is
possible that a Trust might become liable for any misstatements in a prospectus
that relate to another Trust. The trustees of the Trusts have considered this
possible liability and approved the use of a combined prospectus for Funds of
the Trusts.

                               HOW TO BUY SHARES

   The procedures for purchasing shares of each Fund are summarized in its
Prospectus. All purchases made by check should be in U.S. dollars and made
payable to Natixis Funds.

   Shares may also be purchased either in writing, by phone, by wire, by
electronic funds transfer using Automated Clearing House ("ACH"), or by
exchange, as described in the Prospectuses, or through firms that are members
of the Financial Industry Regulatory Authority ("FINRA") and that have selling
agreements with the Distributor. For purchase of Fund shares by mail, the trade
date is the day of receipt of the check in good order by the transfer agent so
long as it is received by the close of regular trading of the New York Stock
Exchange (the "Exchange") on a day when the Exchange is open. For purchases
through the ACH system, the shareholder's bank or credit union must be a member
of the ACH system and the shareholder must have approved banking information on
file. With respect to shares purchased by wire or through the ACH system,
shareholders should bear in mind that the transactions may take two or more
days to complete. Banks may charge a fee for transmitting funds by wire.

                                      79



   Shareholders of the Funds may be permitted to open an account without an
initial investment and then wire funds into the account once established. These
shareholders will still be subject to the investment minimums as detailed in
the Prospectus of each Fund.

                                  REDEMPTIONS

   The Funds will only accept medallion signature guarantees bearing the STAMP
2000 Medallion imprint. However, a medallion signature guarantee may not be
required if the proceeds of the redemption do not exceed $50,000 and the
proceeds check is made payable to the registered owner(s) and mailed to the
record address or if the proceeds are going to a bank on file. Please contact
the Funds at 800-633-3330 with any questions regarding when a Medallion
signature guarantee is required.

   If you select the telephone redemption service in the manner described in
the next paragraph, shares of the Funds may be redeemed by calling toll free
800-633-3330. A wire fee may be deducted from the proceeds if you elect to
receive the funds wired to your bank on record. Telephone redemption requests
must be received by the close of regular trading on the Exchange. Requests made
after that time or on a day when the Exchange is not open for business will
receive the next business day's closing price. The proceeds of a telephone
withdrawal will normally be sent within three business days following receipt
of a proper redemption request, although it may take longer.

   In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently on
the Service Options Form, which is available at www.loomissayles.com or from
your investment dealer. When selecting the service, a shareholder may have
their withdrawal proceeds sent to his or her bank, in which case the
shareholder must designate a bank account on his or her application or Service
Options Form to which the redemption proceeds should be sent as well as provide
a check marked "VOID" and/or a deposit slip that includes the routing number of
his or her bank. Any change in the bank account so designated may be made by
furnishing to Boston Financial or your investment dealer a completed Service
Options Form, which may require a medallion signature guarantee. Telephone
redemptions by ACH or wire may only be made if the designated bank is a member
of the Federal Reserve System or has a correspondent bank that is a member of
the System. If the account is with a savings bank, it must have only one
correspondent bank that is a member of the System. The Funds, the Distributor,
the transfer agent and State Street Bank (the Funds' custodian) are not
responsible for the authenticity of withdrawal instructions received by
telephone, although they will apply established verification procedures. Boston
Financial (the Funds' transfer agent), as agreed to with the Funds, will employ
reasonable procedures to confirm that your telephone instructions are genuine,
and if it does not, it may be liable for any losses due to unauthorized or
fraudulent instructions. Such verification procedures include, but are not
limited to, requiring a form of personal identification prior to acting on an
investor's telephone instructions and recording an investor's instructions.

                                      80



   Shares purchased by check or through ACH may not be available immediately
for redemption to the extend that the check or ACH transaction has not cleared.
The Funds may withhold redemption proceeds for 10 days when redemptions are
made within 10 calendar days of purchase by check or through ACH.

   The redemption price will be the net asset value per share (less any
applicable CDSC and redemption fee) next determined after the redemption
request and any necessary special documentation are received by State Street
Bank or your investment dealer in proper form. Payment normally will be made by
State Street Bank on behalf of a Fund within seven days thereafter. However, in
the event of a request to redeem shares for which a Fund has not yet received
good payment, the Funds reserve the right to withhold payments of redemption
proceeds if the purchase of shares was made by a check which was deposited
within ten calendar days prior to the redemption request (unless the Fund is
aware that the check has cleared).

   Each Fund will normally redeem shares for cash; however, each Fund reserves
the right to pay the redemption price wholly or partly in kind if the adviser
determines it to be advisable and in the interest of the remaining shareholders
of a Fund. The redemptions in kind will be selected by the Fund's adviser in
light of the Fund's objective and will not generally represent a pro rata
distribution of each security held in the Fund's portfolio. If portfolio
securities are distributed in lieu of cash, the shareholder will normally incur
brokerage

                                      81



commissions upon subsequent disposition of any such securities. However, the
Funds have elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to
which each Fund is obligated to redeem shares solely in cash for any
shareholder during any 90-day period up to the lesser of $250,000 or 1% of the
total net asset value of each Fund at the beginning of such period.

   The Funds reserve the right to suspend account services or refuse
transaction requests if a Fund receives notice of a dispute between registered
owners or of the death of a registered owner or a Fund suspects a fraudulent
act. If a Fund refuses a transaction request because it receives notice of a
dispute, the transaction will be processed at the net asset value next
determined after a Fund receives notice that the dispute has been settled or a
court order has been entered adjudicating the dispute. If a Fund determines
that its suspicion of fraud or belief that a dispute existed was mistaken, the
transaction will be processed as of the net asset value next determined after
the transaction request was first received in good order.

Other

   The Funds have authorized one or more brokers to accept on their behalf
purchase and redemption orders; such brokers are authorized to designate
intermediaries to accept purchase and redemption orders on the Fund's behalf.
The Funds will be deemed to have received a purchase or redemption order when
an authorized broker or, if applicable, a broker's authorized designee accepts
the order. The broker's customers will receive the Funds' NAV next computed
after an order is accepted by an authorized broker or the broker's authorized
designee.

                             SHAREHOLDER SERVICES

Open Accounts

   A shareholder's investment is automatically credited to an open account
maintained for the shareholder by Boston Financial. Following each additional
investment or redemption from the account initiated by an investor (with the
exception of systematic investment plans), a shareholder will receive a
confirmation statement disclosing the current balance of shares owned and the
details of recent transactions in the account. After the close of each calendar
year, Boston Financial will send each shareholder a statement providing account
information which may include federal tax information on dividends and
distributions paid to the shareholder during the year. This statement should be
retained as a permanent record. Boston Financial may charge a fee for providing
duplicate information.

   The open account system provides for full and fractional shares expressed to
three decimal places and, by making the issuance and delivery of stock
certificates unnecessary, eliminates problems of handling and safekeeping, and
the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates. Certificates will not be issued for any class of shares.

   The costs of maintaining the open account system are paid by the Funds, and
no direct charges are made to shareholders. Although the Funds have no present
intention of making such direct charges to shareholders, they each reserve the
right to do so. Shareholders will receive prior notice before any such charges
are made.

Systematic Withdrawal Plan

   A Systematic Withdrawal Plan, referred to in the Prospectuses under "General
Information How to Redeem Shares," provides for monthly, quarterly, semiannual,
or annual withdrawal payments of $50 or more from the account of an eligible
shareholder, as provided in the Prospectus, provided that the account has a
value of at least $25,000 at the time the plan is established.

   Payments will be made either to the shareholder or to any other person
designated by the shareholder. If payments are issued to an individual other
than the registered owner(s), a medallion signature guarantee will be required
on the Plan application. All shares in an account that is subject to a
Systematic Withdrawal Plan must be held in an open account rather than in
certificated form. Income dividends and capital gain distributions will be
reinvested at the net asset value determined as of the close of regular trading
on the Exchange on the record date for the dividend or distribution.

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   Since withdrawal payments represent proceeds from the liquidation of shares,
withdrawals may reduce and possibly exhaust the value of the account,
particularly in the event of a decline in net asset value. Accordingly, a
shareholder should consider whether a Plan and the specified amounts to be
withdrawn are appropriate under the circumstances. The Funds and the
Distributor make no recommendations or representations in this regard. It may
be appropriate for a shareholder to consult a tax adviser before establishing
such a plan. See "Taxes" for certain information as to federal income taxes.

Exchange Privilege

   Retail Class shares of the Funds may be exchanged, subject to investment
minimums, for Retail Class shares of any other series of the Trusts that offers
Retail Class shares or for Class A shares of Natixis Cash Management Trust, a
money market fund advised by Natixis Asset Management Advisors, L.P., an
affiliate of Loomis Sayles. Admin Class shares of the Funds may be exchanged,
subject to investment minimums, for Admin Class shares of any other series of
the Trusts that offers Admin Class shares or for Class A shares of Natixis Cash
Management Trust. Institutional Class shares of the Funds may be exchanged,
subject to investment minimums, for Institutional Class shares of any other
series of the Trusts that offers Institutional Class shares, for any Natixis
Fund that offers Class Y shares or for Class A shares of the Natixis Cash
Management Trust.

   Exchanges may be effected by (1) making a telephone request by calling
800-633-3330, provided that a special authorization form is on file with the
Funds or (2) sending a written exchange request to Loomis Sayles Funds
accompanied by an account application for the appropriate fund. The Trusts
reserve the right to modify this exchange privilege without prior notice. An
exchange constitutes a sale of shares for federal income tax purposes on which
the investor may realize a capital gain or loss.

   All exchanges are subject to the eligibility requirements of the fund into
which you are exchanging and any other limits on sales of or exchanges into
that fund. The exchange privilege may be exercised only in those states where
shares of such funds may be legally sold. Each Fund reserves the right to
suspend or change the terms of exchanging shares. Each Fund and the Distributor
reserve the right to refuse or limit any exchange order for any reason,
including if the transaction is deemed not to be in the best interests of the
Fund's other shareholders or possibly disruptive to the management of the Fund.

   An exchange transaction is a redemption of shares and is subject to the
redemption fee policy. See the section "Redemptions."

As stated in each Fund's Prospectus, the Funds and the Distributor reserve the
right to reject any purchase or exchange order for any reason. When a purchase
or exchange order is rejected, the Fund or the Distributor will send notice to
the prospective investor or the investor's financial intermediary promptly
after receipt of the rejected order.

                                      83



Individual Retirement Accounts ("IRAs")

   IRAs may be established under a prototype plan made available by Loomis
Sayles. These plans may be funded with shares of any Fund. All income dividends
and capital gain distributions of plan participants must be reinvested. Plan
documents and further information can be obtained from Loomis Sayles.

   Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.

Transcript Requests

   Transcripts of account transactions will be provided, for a fee, at the
shareholders request. Transcripts for the current calendar year and the past
calendar year will be provided free of charge. Requests for transcripts for
periods prior to that will be subject to a fee of $10 per transcript.

                                NET ASSET VALUE

   The method for determining the public offering price and net asset value per
share is summarized in the Prospectus.

   The total net asset value or "NAV" of each class of shares of a Fund (the
excess of the assets of such Fund attributable to such class over the
liabilities attributable to such class) is determined at the close of regular
trading (normally 4:00 p.m. Eastern time) on each day that the Exchange is open
for trading. The Funds do not expect to price their shares on the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Equity securities, including closed-end investment companies and exchange
traded funds, for which market quotations are readily available, are valued at
market value, as reported by pricing services recommended by the investment
adviser and approved by the Board of Trustees. Such pricing services generally
use the security last sale price on the exchange or market where primarily
traded for or, if there is no reported sale during the day, the closing bid
price. Securities traded on the NASDAQ, NASDAQ Global Select Market, NASDAQ
Global Market and NASDAQ Capital Market are valued at the NASDAQ Official
Closing Price ("NOCP") or if lacking an NOCP, at the most recent bid quotation
on the applicable NASDAQ Market. Debt securities (other than short-term
obligations purchased with an original or remaining maturity of sixty days or
less) are generally valued on the basis of evaluated bids furnished to the
Funds by a pricing service recommended by the investment adviser and approved
by the Board of Trustee, which service determines valuation for normal,
institutional size-trading units of such securities using market information,
transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders.
Broker-dealer bid quotations may also be used to value debt and equity
securities where a pricing service does not price a security or where a pricing
service does not provide a reliable price for the security. In instances where
broker-dealer bid quotations are not available, certain securities held by the
Funds may be valued on the basis of a price provided by a principal market
maker. Short-term obligations purchased with an original or remaining maturity
of sixty days or less are value at amortized cost, which approximates market
value. Exchange traded options are valued at the average of the closing bid and
ask. Futures contracts are valued at their most recent settlement price.
Securities for which current market quotations are not readily available and
all other assets are valued at fair value as determined in good faith by the
Board of Trustees, although the actual calculations may be made by persons
acting pursuant to the direction of the Board. Investments in other open-ended
investment companies are valued at their net asset value each day.

   Generally, trading in foreign government securities and other fixed-income
securities, as well as trading in equity securities in markets outside the
United States, is substantially completed each day at various times prior to

                                      84



the close of the Exchange. Securities traded on a foreign exchange will be
valued at their market price on the non-U.S. exchange except for securities
traded on the London Stock Exchange ("British Equities"). British Equities will
be valued at the official close on the London Stock Exchange. The value of
other securities principally traded outside the United States will be computed
as of the completion of substantial trading for the day on the markets on which
such securities principally trade. Securities principally traded outside the
United States will generally be valued several hours before the close of
regular trading on the Exchange, generally 4:00 p.m. Eastern Time, when the
Funds compute the net asset value of their shares. Occasionally, events
affecting the value of securities principally traded outside the United States
may occur between the completion of substantial trading of such securities for
the day and the close of the Exchange, which events will not be reflected in
the computation of a Fund's net asset value. If, in the determination of the
Board of Trustees or persons acting at their direction, events materially
affecting the value of a Fund's securities occur during such period, then these
securities may be fair valued at the time the Fund determines its net asset
value by or pursuant to procedures approved by the Board of Trustees. When fair
valuing their securities, the Funds may, among other things, use modeling tools
or other processes that may take into account factors such as securities market
activity and/or significant events that occur after the close of the local
market and before the time a Fund's net asset value is calculated.

   Securities for which market quotations are not readily available are valued
at fair value as determined in good faith by the Funds' investment adviser
pursuant to procedures approved by the Boards of Trustees. Because of fair
value pricing, securities may not be priced on the basis of quotations from the
primary market in which they are traded but rather may be priced by another
method that the Board of Trustees believes is more likely to result in a price
that reflects fair value. The Funds may also value securities at fair value or
estimate their value pursuant to procedures approved by the Board of Trustees
in other circumstances such as when extraordinary events occur after the close
of the relevant market but prior to the close of the Exchange. This may include
situations relating to a single issuer (such as a declaration of bankruptcy or
a delisting of the issuer's security from the primary market on which it has
traded) as well as events affecting the securities markets in general (such as
market disruptions or closings and significant fluctuations in U.S. and/or
foreign markets).

   Trading in some of the portfolio securities of some of the Funds takes place
in various markets outside the United States on days and at times other than
when the Exchange is open for trading. Therefore, the calculation of these
Funds' net asset value does not take place at the same time as the prices of
many of its portfolio securities are determined, and the value of the Fund's
portfolio may change on days when the Fund is not open for business and its
shares may not be purchased or redeemed.

                                     TAXES

In General

   As described in the Prospectuses, it is the policy of each Fund to pay its
shareholders, as dividends, substantially all net investment income and to
distribute annually all net realized long-term capital gains, if any, after
offsetting any capital loss carryovers.

   Ordinary income dividends and capital gain distributions are payable in full
and fractional shares of the relevant class of the Funds based upon the net
asset value determined as of the close of the Exchange on the record date for
each dividend or distribution. Shareholders, however, may elect to receive
their ordinary income dividends or capital gain distributions, or both, in
cash. The election may be made at any time by submitting a written request
directly to Natixis Funds. In order for a change to be in effect for any
dividend or distribution, it must be received by Natixis Funds on or before the
record date for such dividend or distribution.

   If you elect to receive your dividends in cash and the dividend checks sent
to you are returned "undeliverable" to the Fund or remain uncashed for six
months, your cash election will automatically be changed

                                      85



and your future dividends will be reinvested. No interest will accrue on
amounts represented by uncashed dividend or redemption checks.

   As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before
January 31/st/ of the succeeding year.


                                      86



Taxation of the Funds

   Each Fund intends to elect to be treated and qualify each year as a
regulated investment company under Subchapter M of the Code. In order to
qualify, each Fund must, among other things, (i) derive at least 90% of its
gross income in each taxable year from dividends, interest, payments with
respect to certain securities loans, gains from the sale or other disposition
of stock, securities or foreign currencies, or other income (including, but not
limited to, gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies
and net income derived from interests in "qualified publicly traded
parternerships"; (ii) diversify its holdings so that at the end of each fiscal
quarter, (a) at least 50% of the value of its total assets consists of cash,
U.S. government securities, securities of other regulated investment companies,
and other securities limited generally, with respect to any one issuer, to no
more than 5% of the value of the Fund's total assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the value of the
Fund's total assets is invested in the securities (other than those of the U.S.
government or other regulated investment companies) of any one issuer or of two
or more issuers which the Fund controls and which are engaged in the same,
similar or related trades or businesses, or in the securities of one or more
publicly traded partnerships. and (iii) distribute with respect to each taxable
year at least 90% of the sum of its taxable net investment income, net
tax-exempt income, and the excess, if any, of net short-term capital gains over
net long-term capital losses for such year.

   In general, for purposes of the 90% gross income requirement described in
section(i) of the previous paragraph, income derived from a partnership will be
treated as qualifying income only to the extent such income is attributable to
items of income of the partnership which would be qualifying income if realized
by the regulated investment company. However, 100% of the net income derived
from an interest in a "qualified publicly traded partnership" (defined as a
partnership (x) interests in which are traded on an established securities
market or readily tradable on a secondary market or the substantial equivalent
thereof and (y) that derives less than 90% of its income from the qualifying
income described in (a)(i) of the prior paragraph) will be treated as
qualifying income. In addition, although in general the passive loss rules of
the Code do not apply to regulated investment companies, such rules do apply to
a regulated investment company with respect to items attributable to an
interest in a qualified publicly traded partnership. Finally, for purposes of
(c) above, the term "outstanding voting securities of such issuer" will include
the equity securities of a qualified publicly traded partnership. In addition,
for purposes of meeting the diversification requirement in section (ii) of the
prior paragraph, in the case of a Fund's investment in loans, the Fund shall
treat both the intermediary and the issuer of the underlying loan as an issuer.

   To the extent that it qualifies for treatment as a regulated investment
company, a Fund will not be subject to federal income tax on income distributed
to its shareholders in a timely manner in the form of dividends (including
Capital Gain Dividends, defined below). If a Fund failed to qualify as a
regulated investment company accorded special tax treatment in any taxable
year, the Fund would be subject to tax on its taxable income at corporate
rates, and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital gains, would
be taxable to shareholders as ordinary income. In addition, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest and
make substantial distributions before requalifying as a regulated investment
company that is accorded special tax treatment.

   A nondeductible excise tax at the rate of 4% will be imposed on the excess,
if any, of each Fund's "required distribution" over its actual distributions in
any calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31st plus undistributed
amounts from prior years. For these purposes, each Fund will be treated as
having distributed any amount for which it is subject to income tax. Each Fund
intends to make distributions sufficient to avoid imposition of the excise tax,
although there can be no assurance that it will be able to do so.

                                      87



Taxation of Fund Distributions

   For federal income tax purposes, distributions of investment income are
generally taxable as ordinary income. Taxes on distributions of capital gains
are determined by how long a Fund owned the investments that generated them,
rather than how long a shareholder has owned his or her shares. Distributions
of net capital gains from the sale of investments that the Fund owned for more
than one year and that are properly designated by the Fund as capital gain
dividends ("Capital Gain Dividends") will be taxable as long-term capital
gains. Distributions of gains from the sale of investments that a Fund owned
for one year or less will be taxable as ordinary income. Depending on the
circumstances, a Fund may make such designations with respect to all, some, or
none of its potentially eligible dividends and/or treat such dividends, in
whole or in part, as ineligible for this exemption from withholding. In order
to qualify for this exemption from withholding, a foreign person will need to
comply with applicable certification requirements relating to its non-U.S.
status (including, in general, furnishing an IRS Form W-8BEN or substitute
Form). In the case of shares held through an intermediary, the intermediary may
withhold even if the Fund makes a designation with respect to a payment.
Foreign persons should contact their intermediaries with respect to the
application of these rules to their accounts.

   Distributions are taxable to shareholders even if they are paid from income
or gains earned by a Fund before a shareholder's investment (and thus were
included in the price the shareholder paid). Distributions are taxable whether
shareholders receive them in cash or reinvest them in additional shares (other
than distributions, if any, designated by a Fund as "exempt-interest
dividends"). Any gain resulting from the sale or exchange of Fund shares
generally will be taxable as capital gains. Distributions declared and payable
by a Fund during October, November or December to shareholders of record on a
date in any such month and paid by the Fund during the following January will
be treated for federal tax purposes as paid by the Fund and received by
shareholders on December 31st of the year in which declared rather than the
calendar year in which they were received.

   Long-term capital gain rates applicable to individuals have been temporarily
reduced - in general, to 15% with lower rates applying to taxpayers in the 10%
and 15% rate brackets - for taxable years beginning on or before December 31,
2010.

   For taxable years beginning on or before December 31, 2010, "qualified
dividend income" received by an individual will be taxed at the rates
applicable to long-term capital gain. In order for some portion of the
dividends received by a Fund shareholder to be qualified dividend income, the
Fund must meet holding period and other requirements with respect to some
portion of the dividend -paying stocks in its portfolio and the shareholder
must meet holding period and other requirements with respect to the Fund's
shares. A dividend will not be treated as qualified dividend income (at either
the Fund or shareholder level) (1) if the dividend is received with respect to
any share of stock held for fewer than 61 days during the 121-day period
beginning on the date which is 60 days before the date on which such share
becomes ex-dividend with respect to such dividend (or, in the case of certain
preferred stock, 91 days during the 181-day period beginning 90 days before
such date), (2) to the extent that the recipient is under an obligation
(whether pursuant to a short sale or otherwise) to make related payments with
respect to positions in substantially similar or related property, (3) if the
recipient elects to have the dividend income treated as investment income for
purposes of the limitation on deductibility of investment interest, or (4) if
the dividend is received from a foreign corporation that is (a) not eligible
for the benefits of a comprehensive income tax treaty with the United States
(with the exception of dividends paid on stock of such a foreign corporation
readily tradable on an established securities market in the United States) or
(b) treated as a passive foreign investment company. Income derived from
investments in fixed-income securities and REITs is not eligible for treatment
as qualified dividend income.

   In general, distributions of investment income designated by a Fund as
derived from qualified dividend income will be treated as qualified dividend
income by a shareholder taxed as an individual provided the shareholder meets
the holding period and other requirements described above with respect to such
Fund's shares. In any event, if the aggregate qualified dividends received by a
Fund during any taxable year are 95% or more of its gross income, excluding net
long-term capital gain over net short-term capital loss, then 100% of the
Fund's dividends (other than properly designated capital gain dividends) will
be eligible to be treated as qualified dividend income.

                                      88



   If a Fund makes a distribution in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess distribution will be
treated as a return of capital to the extent of a shareholder's tax basis in
his or her shares, and thereafter as capital gain. A return of capital is not
taxable, but it reduces a shareholder's basis in his or her shares, thus
reducing any loss or increasing any gain on a subsequent taxable disposition by
the shareholder of such shares.

Sale or Redemption of Shares

   The sale, exchange or redemption of Fund shares may give rise to a gain or
loss. In general, any gain or loss realized upon a taxable disposition of
shares will be treated as long-term capital gain or loss if the shares have
been held for more than 12 months. Otherwise, the gain or loss on the taxable
disposition of Fund shares will be treated as short-term capital gain or loss.
However, any loss realized upon a taxable disposition of shares held for six
months or less will be treated as long-term, rather than short-term, to the
extent of any long-term capital gain distributions received (or deemed
received) by the shareholder with respect to the shares. All or a portion of
any loss realized upon a taxable disposition of Fund shares will be disallowed
if other substantially identical shares of the Fund are purchased within 30
days before or after the disposition. In such a case, the basis of the newly
purchased shares will be adjusted to reflect the disallowed loss.

   A loss on the sale of shares held for six months or less will be disallowed
for federal income tax purposes to the extent of any exempt-interest dividends
received with respect to such shares and thereafter treated as a long-term
capital loss to the extent of any long-term capital gain dividend paid to the
shareholder with respect to such shares. Furthermore, no loss will be allowed
on the sale of Fund shares to the extent the shareholder acquired other shares
of the same Fund within a period beginning 30 days prior to the sale of the
loss shares and ending 30 days after such sale.

Passive Foreign Investment Companies

   Funds that invest in foreign securities may own shares in certain foreign
investment entities, referred to as "passive foreign investment companies"
("PFICs"). In order to avoid U.S. federal income tax on distributions received
from a PFIC, and an additional charge on a portion of any "excess distribution"
from such companies or gain from the disposition of such shares, each Fund may
elect to "mark-to-market" annually its investments in such entities and to
distribute any resulting net gain to shareholders. Such gains are taxed as
ordinary income. Each Fund may also elect to treat the PFIC as a "qualified
electing fund" (a "QEF election"), in which case the Fund would be required to
include its share of the company's income and net capital gains annually,
regardless of whether it receives distributions from the company. The QEF and
mark-to-market elections may require a Fund to sell securities it would have
otherwise continued to hold in order to make distributions to shareholders to
avoid any Fund-level tax. Income from investments in PFICs generally will not
qualify for treatment as qualified dividend income.

Foreign Taxes

   Funds that invest in foreign securities, such as the Loomis Sayles Global
Bond Fund, may be liable to foreign governments for taxes relating primarily to
investment income or capital gains on foreign securities in the Fund's
portfolio. Each Fund may in some circumstances be eligible to, and in its
discretion may, make an election under the Code that would allow Fund
shareholders who are U.S. citizens or U.S. corporations to claim a foreign tax
credit or deduction (but not both) on their U.S. income tax return for their
pro rata portion of qualified taxes paid by that Fund to foreign countries in
respect of foreign securities held at least a minimum period specified in the
Code. If a Fund makes the election, the amount of each shareholder's
distribution reported on the information returns filed by such Fund with the
IRS must be increased by the amount of the shareholder's portion of the Fund's
foreign tax paid. A shareholder's ability to claim all or a part of a foreign
tax credit or deduction in respect of foreign taxes paid by a Fund may be
subject to certain limitations imposed by the Code.

                                      89



Foreign Currency Transactions

   Transactions in foreign currencies, foreign-currency denominated debt
obligations and certain foreign currency options, futures contracts, and
forward contracts (and similar instruments) may give rise to ordinary income or
loss to the extent such income or loss results from fluctuations in the value
of the foreign currency concerned.

Financial Products

   A Fund's investments in options, futures contracts, hedging transactions,
forward contracts, swaps and certain other transactions will be subject to
special tax rules (including mark-to-market, constructive sale, straddle, wash
sale, short sale and other rules), the effect of which may be to accelerate
income to the Fund, defer Fund losses, cause adjustments in the holding periods
of Fund securities, convert capital gain into ordinary income and convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character distributions to Fund
shareholders.

   Certain of each Fund's hedging activities (including its transactions, if
any, in foreign currencies and foreign currency denominated instruments) are
likely to result in a difference between the Fund's book income and taxable
income. This difference may cause a portion of the Fund's income distributions
to constitute a return of capital or capital gain for tax purposes or require
the Fund to make distributions exceeding book income to avoid excise tax
liability and to qualify as a regulated investment company.

Securities issued or purchased at a discount and Payment-in-Kind Securities

   A Fund's investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a discount may)
require that Fund to accrue and distribute income not yet received. In order to
generate sufficient cash to make the requisite distributions, the Fund may be
required to sell securities in its portfolio that it otherwise would have
continued to hold.

Real Estate Investment Trusts

   A Fund's investments in REIT equity securities may require the Fund to
accrue and distribute income not yet received. In order to generate sufficient
cash to make required distributions, the Fund may be required to sell
securities in its portfolio that it otherwise would have continued to hold
(including when it is not advantageous to do so). The Fund's investments in
REIT equity securities may at other times result in the Fund's receipt of cash
in excess of the REIT's earnings; if the Fund distributes such amounts, such
distribution could constitute a return of capital to Fund shareholders for
federal income tax purposes. Income from REIT securities generally will not be
eligible for treatment as qualified dividend income.

Certain Investments in REITs

   Some Funds may invest in real estate investment trusts ("REITs"), including
REITs that hold residual interests in real estate mortgage investment conduits
("REMICs"), are themselves taxable mortgage pools ("TMPs"), or invest in TMPs.
Under a notice recently issued by the IRS and Treasury regulations that
have-yet to be issued but may apply retroactively, a portion of such a Fund's
income from a REIT that is attributable to the REIT's residual interest in a
REMIC or TMP (referred to in the Code as an "excess inclusion") will be subject
to federal income tax in all events. This notice also provides, and the
regulations are expected to provide, that "excess inclusion income" of a
regulated investment company will generally be allocated to shareholders of the
regulated investment company in proportion to the dividends received by such
shareholders, with the same consequences as if the shareholders held the
related REMIC or TMP residual interest directly. Dividends paid by REITs
generally will not be eligible to be treated as "qualified dividend income."

   In general, excess inclusion income allocated to shareholders (i) cannot be
offset by net operating losses (subject to a limited exception for certain
thrift institutions), (ii) will constitute unrelated business taxable income to
entities (including a qualified pension plan, an individual retirement account,
a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on
unrelated business income, thereby potentially requiring such an entity that is

                                      90



allocated excess inclusion income, and otherwise might not be required to file
a tax return, to file a tax return and pay tax on such income, and (iii) in the
case of a non-U.S. shareholder, will not qualify for any reduction in U.S.
federal withholding tax. In addition, if at any time during any taxable year a
"disqualified organization" (as defined in the Code) is a record holder of a
share in a regulated investment company, then the regulated investment company
will be subject to a tax equal to that portion of its excess inclusion income
for the taxable year that is allocable to the disqualified organization,
multiplied by the highest federal income tax rate imposed on corporations.
Special tax consequences apply where charitable remainder trusts invest in
regulated investment companies that invest directly or indirectly in residual
interests in REMICs or in TMPs. The Fund does not intend to invest in REITS in
which a substantial portion of the assets will consist of residual interests in
REMICs.

Tax-Exempt Shareholders

Under current law, a regulated investment company ("RIC") generally serves to
block (that is, prevent the attribution to shareholder of) unrelated business
taxable income ("UBTI") from being realized by its tax exempt shareholders.
Nonetheless, a tax-exempt shareholder (other than a charitable remainder trust)
may realize UBTI by virtue of its investments in a Fund if (i) the Fund invests
in REITs that hold residual interests in real estate mortgage investment
conduits (REMICs); or (ii) shares in the Fund constitute debt-financed property
in the hands of the tax-exempt shareholder within the meaning of Code section
514(b).

   Under recent IRS guidance, if a charitable remainder trust (as defined in
section 664 of the Code) realizes any unrelated business taxable income, it
must pay an excise tax annually of an amount equal to such UBTI. However, under
recent guidance, a charitable remainder trust will not realize UBTI solely by
virtue of its investments in a Fund which in turn invests in REITs that hold
REMICs or TMPs. Rather, if the charitable remainder trust is a shareholder in
such a Fund, which recognizes "excess inclusion income," then the Fund will be
subject to a tax on that portion of its "excess inclusion income" allocable to
the charitable remainder trust. To the extent permitted under the 1940 Act, the
Fund may elect to specially allocate any such tax to the applicable charitable
remainder trust, and thus reduce such shareholder's distributions for the year
by the amount of the tax that relates to such shareholder's interest in the
Fund.

                                      91



Backup Withholding

   Each Fund generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and redemption proceeds paid to any
individual shareholder who fails to properly furnish a Fund with a correct
taxpayer identification number ("TIN"), who has under-reported dividend or
interest income, or who fails to certify to a Fund that he or she is not
subject to such withholding. The backup withholding rules may also apply to
distributions that are properly designated as exempt-interest dividends. The
backup withholding tax rate is 28% for amounts paid through 2010. The backup
withholding tax rate will be 31% for amounts paid after December 31, 2010.

Non-U.S. Shareholders

   Capital Gain Dividends will not be subject to withholding of Federal income
tax. In general, dividends (other than Capital Gain Dividends) paid by a Fund
to a shareholder that is not a "U.S. person" within the meaning of the Code
(such shareholder, a "foreign person") are subject to withholding of U.S.
federal income tax at a rate of 30% (or lower applicable treaty rate) even if
they are funded by income or gains (such as portfolio interest, short-term
capital gains, or foreign-source dividend and interest income) that, if paid to
a foreign person directly, would not be subject to withholding. However,
effective for taxable years of a Fund beginning before January 1, 2008, a Fund
will not be required to withhold any amounts (i) with respect to distributions
(other than distributions to a foreign person (w) that has not provided a
satisfactory statement that the beneficial owner is not a U.S. person, (x) to
the extent that the dividend is attributable to certain interest on an
obligation if the foreign person is the issuer or is a 10% shareholder of the
issuer, (y) that is within certain foreign countries that have inadequate
information exchange with the United States, or (z) to the extent the dividend
is attributable to interest paid by a person that is a related person of the
foreign person and the foreign person is a controlled foreign corporation) from
U.S.-source interest income that would not be subject to U.S. federal income
tax if earned directly by an individual foreign person, to the extent such
distributions are properly designated by a Fund, and (ii) with respect to
distributions (other than distributions to an individual foreign person who is
present in the United States for a period or periods aggregating 183 days or
more during the year of the distribution) of net short-term capital gains in
excess of net long-term capital losses, to the extent such distributions are
properly designated by the Fund.

   If a beneficial holder who is a foreign person has a trade or business in
the United States, and the dividends are effectively connected with the conduct
by the beneficial holder of a trade or business in the United States, the
dividend will be subject to U.S. federal net income taxation at regular income
tax rates.

   Under U.S. federal tax law, a beneficial holder of shares who is a foreign
person is not, in general, subject to U.S. federal income tax on gains (and is
not allowed a deduction for losses) realized on the sale of shares of a Fund or
on Capital Gain Dividends unless (i) such gain or Capital Gain Dividend is
effectively connected with the conduct of a trade or business carried on by
such holder within the United States or (ii) in the case of an individual
holder, the holder is present in the United States for a period or periods
aggregating 183 days or more during the year of the sale or Capital Gain
Dividend and certain other conditions are met.

Other Tax Matters

   Special tax rules apply to investments though defined contribution plans and
other tax-qualified plans. Shareholders should consult their tax adviser to
determine the suitability of shares of a fund as an investment through such
plans and the precise effect of and investment on their particular tax
situation.

   The foregoing discussion relates solely to U.S. federal income tax law.
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state, local and, where applicable, foreign taxes.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the certification
and filing requirements imposed on foreign investors in order to qualify for
exemption from the backup withholding tax rates described above (or a reduced
rate of withholding provided by treaty).

   If a shareholder recognizes a loss with respect to the Fund's shares of $2
million or more for an individual shareholder or $10 million or more for a
corporate shareholder, the shareholder must file with the Internal Revenue
Service a disclosure statement on Form 8886. Direct shareholders of portfolio
securities are in many cases excepted

                                      92



from this reporting requirement, but under current guidance, shareholders of a
regulated investment company are not excepted. Future guidance may extend the
current exception from this reporting requirement to shareholders of most or
all regulated investment companies. The fact that a loss is reportable under
these regulations does not affect the legal determination of whether the
taxpayer's treatment of the loss is proper. Shareholders should consult their
tax advisors to determine the applicability of these regulations in light of
their individual circumstances.

   The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and regulations. The Code and regulations are subject to change by legislative
or administrative actions.

                            PERFORMANCE INFORMATION

Yield and Total Return

   Each Fund may from time to time include its yield and total return
information in advertisements or in information furnished to present or
prospective shareholders. Each of the Loomis Sayles Bond Fund, Loomis Sayles
Global Bond Fund and Loomis Sayles Inflation Protected Securities Fund may from
time to time include the yield and/or total return of its shares in
advertisements or information in advertisements or information furnished to
present or prospective shareholders.

   Each Fund's yield and total return will vary from time to time depending
upon market conditions, the composition of its portfolios and operating
expenses of the Trusts allocated to each Fund. These factors, possible
differences in the methods used in calculating yield and total return, and the
tax exempt status of distributions, should be considered when comparing a
Fund's yield and total return to yields and total return published for other
investment companies and other investment vehicles. Yield and total return
should also be considered relative to changes in the value of the Fund's shares
and to the relative risks associated with the investment objectives and
policies of the Fund.

   At any time in the future, yields and total return may be higher or lower
than past yields and there can be no assurance that any historical results will
continue.

   Investors in the Funds are specifically advised that share prices, expressed
as the net asset values per share, will vary just as yield will vary. An
investor's focus on the yield of a Fund to the exclusion of the consideration
of the share price of that Fund may result in the investor's misunderstanding
the total return he or she may derive from the Fund.

                             FINANCIAL STATEMENTS

   The financial statements, financial highlights and the reports of the
Independent Registered Public Accounting Firm included in the Funds' annual
reports dated September 30, 2007, are also incorporated herein by reference to
such reports. The Funds' annual and semiannual reports are available upon
request and without charge. Each Fund will send a single copy of its annual and
semiannual report to an address at which more than one shareholder of record
with the same last name has indicated that mail is to be delivered.
Shareholders may request additional copies of any annual or semiannual report
by telephone at 800-633-3330, by writing Loomis Sayles Funds, P.O. Box 219594,
Kansas City, MO 61421-9594 or by visiting the Funds' website at
www.loomissayles.com. The annual and semiannual reports are also available
on-line at the SEC's website at www.sec.gov.

                                      93



                                                                     APPENDIX A

                       DESCRIPTION OF SECURITIES RATINGS

   The Funds may make use of average portfolio credit quality standards to
assist institutional investors whose own investment guidelines limit their
investments accordingly. In determining a Fund's overall dollar-weighted
average quality, unrated securities are treated as if rated, based on the
adviser's view of their comparability to rated securities. A Fund's use of
average quality criteria is intended to be a guide for those investors whose
investment guidelines require that assets be invested according to comparable
criteria. Reference to an overall average quality rating for a Fund does not
mean that all securities held by the Fund will be rated in that category or
higher. A Fund's investments may range in quality from securities rated in the
lowest category in which the Fund is permitted to invest to securities rated in
the highest category (as rated by Fitch, Moody's, or S&P or, if unrated,
determined by the adviser to be of comparable quality). The percentage of a
Fund's assets invested in securities in a particular rating category will vary.
Following is a description of Fitch, Moody's and S&P's ratings applicable to
fixed-income securities.

Moody's Investors Service, Inc.

   Long-Term Obligations Ratings

Moody's long-term obligation ratings are opinions of the relative credit risk
of fixed-income obligations with an original maturity of one year or more. They
address the possibility that a financial obligation will not be honored as
promised. Such ratings reflect both the likelihood of default and any financial
loss suffered in the event of default.

   Aaa: Obligations rated Aaa are judged to be of the highest quality, with
minimal credit risk.

   Aa: Obligations rated Aa are judged to be of high quality and are subject to
very low credit risk.

   A: Obligations rated A are considered upper-medium grade and are subject to
low credit risk.

   Baa: Obligations rated Baa are subject to moderate credit risk. They are
considered medium-grade and as such may possess certain speculative
characteristics.

   Ba: Obligations rated Ba are judged to have speculative elements and are
subject to substantial credit risk.

   B: Obligations rated B are considered speculative and are subject to high
credit risk.

                                      A-1



   Caa: Obligations rated Caa are judged to be of poor standing and are subject
to very high credit risk.

   Ca: Obligations rated Ca are highly speculative and are likely in or very
near default, with some prospect of recovery of principal and interest.

   C: Obligations rated C are the lowest rated class od bonds and are typically
in default, with little prospect for recovery of principal or interest.

   Moody's appends numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.

Short-Term Ratings

   Moody's short-term ratings are opinions of the ability of issuers to honor
short-term financial obligations. Ratings may be assigned to issuers,
short-term programs or to individual short-term debt instruments. Such
obligations generally have an original maturity not exceeding thirteen months,
unless explicitly noted.

   Moody's employs the following designations to indicate the relative
repayment ability of rated issuers:

   P-1 Issuers (or supporting institutions) rated Prime-1 have a superior
ability to repay short-term debt obligations.

                                      A-2



   P-2: Issuers (or supporting institutions) rated Prime-2 have a strong
ability to repay short-term debt obligations.

   P-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable
ability to repay short-term debt obligations.

   NP: Issuers (or supporting institutions) rated Not Prime do not fall within
any of the Prime rating categories.

Note: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced
by the senior-most long-term rating of the issuer, its guarantor or
support-provider.

Standard & Poor's Ratings Services

   Issue Credit Rating Definitions

   A S&P's issue credit rating is a current opinion of the creditworthiness of
an obligor with respect to a specific financial obligation, a specific class of
financial obligations, or a specific financial program (including ratings on
medium term note programs and commercial paper programs). It takes into
consideration the creditworthiness of guarantors, insurers, or other forms of
credit enhancement on the obligation and takes into account the currency in
which the obligation is denominated. The issue credit rating is not a
recommendation to purchase, sell, or hold a financial obligation, inasmuch as
it does not comment as to market price or suitability for a particular investor.

   Issue credit ratings are based on current information furnished by the
obligors or obtained by Standard & Poor's from other sources it considers
reliable. Standard & Poor's does not perform an audit in connection with any
credit rating and may, on occasion, rely on unaudited financial information.
Credit ratings may be changed, suspended, or withdrawn as a result of changes
in, or unavailability of, such information, or based on other circumstances.

   Issue credit ratings can be either long-term or short-term. Short-term
ratings are generally assigned to those obligations considered short term in
the relevant market. In the U.S., for example, that means obligations with an
original maturity of no more than 365 days, including commercial paper.
Short-term ratings are also used to indicate the creditworthiness of an obligor
with respect to put features on long-term obligations. The result is a dual
rating, in which the short-term rating addresses the put feature, in addition
to the usual long-term rating. Medium-term notes are assigned long-term ratings.

   Issue credit ratings are based, in varying degrees, on the following
considerations: likelihood of payment - capacity and willingness of the obligor
to meet its financial commitment on an obligation in accordance with the terms
of the obligation; nature of and provisions of the obligation; protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy
and other laws affecting creditors' rights.

                                      A-3



   The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above. (Such differentiation applies when an entity has
both senior and subordinated obligations, secured and unsecured obligations, or
operating company and holding company obligations.) Accordingly, in the case of
junior debt, the rating may not conform exactly with the category definition.

Corporate and Municipal Bond Ratings

   Investment-grade

   AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.

   AA: An obligation rated AA differs from the highest rated obligations only
in small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

   A: An obligation rated A is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

   BBB: An obligation rated BB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

   Speculative Grade

   Obligations rated BB, B, CCC, CC, and are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.

   BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

   B: An obligation rated B is more vulnerable to nonpayment than obligations
rated BB, but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

   CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

   CC: An obligation rated CC is currently highly vulnerable to nonpayment.

                                      A-4



   C: A subordinated debt or preferred stock obligation rated C is currently
highly vulnerable to nonpayment. The 'C' rating may be used to cover a
situation where a bankruptcy petition has been filed or similar action taken,
but payments on this obligation are being continued. A C also will be assigned
to a preferred stock issue in arrears on dividends or sinking fund payments,
but that is currently paying.

   D: An obligation rated D is in payment default. The D rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.

   Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

   pr: The letter "pr" indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project being financed by the
debt being rated indicates that payment of debt service requirements is largely
or entirely dependent upon the successful and timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.

   r: The 'r' modifier was assigned to securities containing extraordinary
risks, particularly market risk, that are not covered in the credit rating. The
absence of an 'r' modifier should not be taken as an indication that an
obligation will not exhibit extraordinary non-credit related risks. Standard &
Poor's discontinued use of the 'r' modifier for most obligations in June 2000
and for the balance of obligations (mainly structured finance transactions) in
November 2002.

   N.R.: This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy.

   Commercial Paper Rating Definitions

   A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded into several categories, ranging from A for
the highest quality obligations to D for the lowest. These categories are as
follows:

   A-1: This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

   A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated 'A-1'.

                                      A-5



   A-3: Issues carrying this designation have an adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances that obligations carrying the higher designations.

   B: Issues rated `B' are regarded as having only speculative capacity for
timely payment.

   C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.

   D: Debt rated `D' is in payment default. The `D' rating category is used
when interest payments of principal payments are not made on the date due, even
if the applicable grace period has not expired, unless Standard & Poor's
believes such payments will be made during such grace period.

Fitch Investor Services, Inc

Credit Ratings

Fitch's credit ratings provide an opinion on the relative ability of an entity
to meet financial commitments, such as interest, preferred dividends, repayment
of principal, insurance claims or counterparty obligations. Credit ratings are
used by investors as indications of the likelihood of receiving their money
back in accordance with the terms on which they invested. Fitch's credit
ratings cover the global spectrum of corporate, sovereign (including
supranational and sub-national), financial, bank, insurance, municipal and
other public finance entities and the securities or other obligations they
issue, as well as structured finance securities backed by receivables or other
financial assets.

The use of credit ratings defines their function: "investment grade" ratings
(international Long-term 'AAA' to 'BBB-' categories; Short-term 'F1' to'F3')
indicate relatively low to moderate credit risk, while those in the
"speculative" or "non investment grade" categories (international Long-term
'BB+' to 'D'; Short-term 'B' to 'D') either signal a higher level of credit
risk or that a default has already occurred. Credit ratings express risk in
relative rank order, which is to say they are ordinal measures of credit risk
and are not predictive of a specific frequency of default or loss.

Depending on their application, credit ratings address benchmark measures of
probability of default as well relative expectations of loss given default. For
example, issuers are typically assigned Issuer Default Ratings that are
relative measures of default probability. Similarly, short-term credit ratings
give primary consideration to the likelihood that obligations will be met on a
timely basis. Securities, however, are rated taking into consideration
probability of default and loss given default. As a result, for entities such
as corporations security ratings may be rated higher, lower or the same as

                                      A-6



the issuer rating to reflect expectations of the security's relative recovery
prospects, as well as differences in ability and willingness to pay. While
recovery analysis plays an important role throughout the ratings scale, it
becomes a more critical consideration for below investment-grade securities and
obligations, particularly at the lower end of the non-investment-grade ratings
scale where Fitch often publishes actual Recovery Ratings, that are
complementary to the credit ratings.

Structured finance ratings typically are assigned to each individual security
or tranche in a transaction, and not to an issuer. Each structured finance
tranche is rated on the basis of various stress scenarios in combination with
its relative seniority, prioritization of cash flows and other structural
mechanisms.

International Long-Term Credit Ratings

International Long-Term Credit Ratings (LTCR) may also be referred to as
Long-Term Ratings. When assigned to most issuers, it is used as a benchmark
measure of probability of default and is formally described as an Issuer
Default Rating (IDR). The major exception is within Public Finance, where IDRs
will not be assigned as market convention has always focused on timeliness and
does not draw analytical distinctions between issuers and their underlying
obligations. When applied to issues or securities, the LTCR may be higher or
lower than the issuer rating (IDR) to reflect relative differences in recovery
expectations.

The following rating scale applies to foreign currency and local currency
ratings:

Investment Grade

AAA

Highest credit quality. 'AAA' ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA

Very high credit quality. 'AA' ratings denote expectations of very low credit
risk. They indicate very strong capacity for payment of financial commitments.
This capacity is not significantly vulnerable to foreseeable events.

A

High credit quality. 'A' ratings denote expectations of low credit risk. The
capacity for payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or
in economic conditions than is the case for higher ratings.

BBB

Good credit quality. 'BBB' ratings indicate that there are currently
expectations of low credit risk. The capacity for payment of financial
commitments is considered adequate but adverse changes in circumstances and
economic conditions are more likely to impair this capacity. This is the lowest
investment grade category.
Speculative Grade

                                      A-7



BB

Speculative

'BB' ratings indicate that there is a possibility of credit risk developing,
particularly as the result of adverse economic change over time; however,
business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.

B

Highly speculative

[ ] For issuers and performing obligations, 'B' ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.

[ ] For individual obligations, may indicate distressed or defaulted
obligations with potential for extremely high recoveries. Such obligations
would possess a Recovery Rating of 'RR1' (outstanding).

CCC

[ ] For issuers and performing obligations, default is a real possibility.
Capacity for meeting financial commitments is solely reliant upon sustained,
favorable business or economic conditions.

[ ] For individual obligations, may indicate distressed or defaulted
obligations with potential for average to superior levels of recovery.
Differences in credit quality may be denoted by plus/minus distinctions. Such
obligations typically would possess a Recovery Rating of 'RR2' (superior), or
'RR3' (good) or 'RR4' (average).

CC

[ ] For issuers and performing obligations, default of some kind appears
probable.

[ ] For individual obligations, may indicate distressed or defaulted
obligations with a Recovery Rating of 'RR4' (average) or 'RR5' (below average).

C

[ ] For issuers and performing obligations, default is imminent.

[ ] For individual obligations, may indicate distressed or defaulted
obligations with potential for below-average to poor recoveries. Such
obligations would possess a Recovery Rating of 'RR6' (poor).

RD

Indicates an entity that has failed to make due payments (within the applicable
grace period) on some but not all material financial obligations, but continues
to honor other classes of obligations.

D

Indicates an entity or sovereign that has defaulted on all of its financial
obligations. Default generally is defined as one of the following:

- - failure of an obligor to make timely payment of principal and/or interest
under the contractual terms of any financial obligation; - the bankruptcy
filings, administration, receivership, liquidation or other winding-up or
cessation of business of an obligor; or - the distressed or other coercive
exchange of an obligation, where creditors were offered securities with
diminished structural or economic terms compared with the existing obligation.

Default ratings are not assigned prospectively; within this context,
non-payment on an instrument that contains a deferral feature or grace period
will not be considered a default until after the expiration of the deferral or
grace period.

Issuers will be rated 'D' upon a default. Defaulted and distressed obligations
typically are rated along the continuum of 'C' to 'B' ratings categories,
depending upon their recovery prospects and other relevant characteristics.
Additionally, in structured finance transactions, where analysis indicates that
an instrument is irrevocably impaired such that it is not expected to meet pay
interest and/or principal in full in accordance with the terms of the
obligation's documentation during the life of the transaction, but where no
payment default in accordance with the terms of the documentation is imminent,
the obligation may be rated in the 'B' or 'CCC-C' categories.

                                      A-8



Default is determined by reference to the terms of the obligations'
documentation. Fitch will assign default ratings where it has reasonably
determined that payment has not been made on a material obligation in
accordance with the requirements of the obligation's documentation, or where it
believes that default ratings consistent with Fitch's published definition of
default are the most appropriate ratings to assign.

International Short-Term Credit Ratings

The following ratings scale applies to foreign currency and local currency
ratings. A Short-term rating has a time horizon of less than 13 months for most
obligations, or up to three years for US public finance, in line with industry
standards, to reflect unique risk characteristics of bond, tax, and revenue
anticipation notes that are commonly issued with terms up to three years.
Short-term ratings thus place greater emphasis on the liquidity necessary to
meet financial commitments in a timely manner.

F1

Highest credit quality. Indicates the strongest capacity for timely payment of
financial commitments; may have an added "+" to denote any exceptionally strong
credit feature.

F2

Good credit quality. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.

F3

Fair credit quality. The capacity for timely payment of financial commitments
is adequate; however, near term adverse changes could result in a reduction to
non investment grade.

B

Speculative. Minimal capacity for timely payment of financial commitments, plus
vulnerability to near term adverse changes in financial and economic conditions.

C

High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.

RD

Indicates an entity that has defaulted on one or more of its financial
commitments, although it continues to meet other obligations.

D

Indicates an entity or sovereign that has defaulted on all of its financial
obligations.

Notes to International Long-Term and Short-Term ratings:

The modifiers "+" or "-" may be appended to a rating to denote relative status
within major rating categories. Such suffixes are not added to the 'AAA'
Long-term rating category, to categories below 'CCC', or to Short-term ratings
other than 'F1'. (The +/- modifiers are only used to denote issues within the
CCC category, whereas issuers are only rated CCC without the use of modifiers.)

Rating Watch: Ratings are placed on Rating Watch to notify investors that there
is a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive," indicating a potential upgrade,
"Negative," for a potential downgrade, or "Evolving," if ratings may be raised,
lowered or maintained. Rating Watch is typically resolved over a relatively
short period.

                                      A-9



Rating Outlook: An Outlook indicates the direction a rating is likely to move
over a one to two-year period. Outlooks may be positive, stable or negative. A
positive or negative Rating Outlook does not imply a rating change is
inevitable. Similarly, ratings for which outlooks are 'stable' could be
upgraded or downgraded before an outlook moves to positive or negative if
circumstances warrant such an action. Occasionally, Fitch Ratings may be unable
to identify the fundamental trend. In these cases, the Rating Outlook may be
described as evolving.

Program ratings (such as the those assigned to MTN shelf registrations) relate
only to standard issues made under the program concerned; it should not be
assumed that these ratings apply to every issue made under the program. In
particular, in the case of non-standard issues, i.e. those that are linked to
the credit of a third party or linked to the performance of an index, ratings
of these issues may deviate from the applicable program rating.

Variable rate demand obligations and other securities which contain a
short-term 'put' or other similar demand feature will have a dual rating, such
as AAA/F1+. The first rating reflects the ability to meet long-term principal
and interest payments, whereas the second rating reflects the ability to honor
the demand feature in full and on time.

Interest Only
Interest Only ratings are assigned to interest strips. These ratings do not
address the possibility that a security holder might fail to recover some or
all of its initial investment due to voluntary or involuntary principal
repayments.

Principal Only
Principal Only ratings address the likelihood that a security holder will
receive their initial principal investment either before or by the scheduled
maturity date.

Rate of Return
Ratings also may be assigned to gauge the likelihood of an investor receiving a
certain predetermined internal rate of return without regard to the precise
timing of any cash flows.

'PIF'

The tranche has reached maturity and has been "paid-in-full", regardless of
whether it was amortized or called early. As the issue no longer exist, it is
therefore no longer rated.

'NR'

Denotes that Fitch Ratings does not publicly rate the associated issue or
issuer or issue.

'WD': Indicates that the rating has been withdrawn and is no longer maintained
by Fitch.

                                     A-10