UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-6241
Loomis Sayles Funds II
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(Exact name of registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
John E. Pelletier, Esq.
CDC IXIS Asset Management Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 449-2801
Date of fiscal year end: September 30, 2003
Date of reporting period: September 30, 2003
Item 1. Reports to Stockholders.
The Registrant's annual reports transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
[LOGO OF CDC NVEST FUNDS(SM)]
CDC IXIS Asset Management Distributors
EQUITY FUNDS
ANNUAL REPORT
September 30, 2003
[LOGO OF LOOMIS SAYLES FUNDS]
Loomis Sayles Growth Fund
Loomis Sayles International Equity Fund
Loomis Sayles Research Fund
TABLE OF CONTENTS
Management Discussion and Performance ......... Page 1
Fund Risks and Index Definitions .............. Page 7
Schedule of Investments ....................... Page 8
Financial Statements .......................... Page 13
Report of Independent Auditors ................ Page 34
Trustee's Information ......................... Page 36
LOOMIS SAYLES GROWTH FUND
PORTFOLIO PROFILE
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OBJECTIVE:
Long-term growth of capital
STRATEGY:
Invests primarily in equity securities, including common stocks, convertible
securities, and warrants; focuses on stocks of large-capitalization companies,
but may invest in companies of any size
FUND INCEPTION:
May 16, 1991
MANAGERS:
Mark Baribeau
Pamela Czekanski
Richard Skaggs
LOOMIS, SAYLES & COMPANY, L.P.
SYMBOLS:
Class A LGRRX
Class B LGRBX
Class C LGRCX
Class Y LSGRX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 4.41
Class B 4.41
Class C 4.41
Class Y 4.55
MANAGEMENT DISCUSSION
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The economy began to pick up in the spring, and investors began bidding up stock
prices, particularly after the fall of Saddam Hussein's regime in March.
Reflecting improving business conditions and accelerating corporate earnings,
cyclical growth sectors have led the market in this rally.
Loomis Sayles Growth Fund Class A shares had a total return of 20.82% at net
asset value for the 12 months ended September 30, 2003. Although this was a
solid return, some of the fund's holdings in retail, defense and technology
caused it to lag early in the period. For the 12-month period, the Russell 1000
Growth Index, returned 25.92%, while the return on the Standard & Poor's Index
was 24.40%. The Russell 1000 Growth Index replaced the S&P 500 as the fund's
benchmark because the manager believes the stocks in the Russell Index are more
representative of the fund's objectives. The average return on Morningstar's
Large Growth category for the period was 22.62%.
Tech, healthcare, finance and consumer discretionary stocks led
Several of our large holdings in the market-leading technology sector performed
well for the fund on solid earnings growth: Intel, the dominant producer of
computer microprocessors, raised its outlook for the second half of this year.
In early August, networking giant Cisco reported that corporate spending on
technology was showing signs of improvement. Dell added to its market share in
personal computers while making inroads in the server and data storage
businesses.
Leadership in the healthcare sector has changed over the past 12 months.
Healthcare companies such as Zimmer Holdings, a leading orthopedic implant
company, and Amgen, the largest biotechnology firm, have emerged as some of the
new leaders. Zimmer continues to post strong earnings and their new, minimally
invasive hip and knee replacement surgery procedures continue to gain
acceptance. Amgen also continues to benefit from strong product sales of its new
drugs.
As expectations of a better economy solidified, financial-services companies
involved in the capital markets, such as Goldman Sachs and Citigroup, posted
solid gains. At the same time, credit-sensitive companies like American Express
and MBNA rebounded, as did asset management firms like Legg Mason. E-Bay and
Lowe's were leading performers in the consumer discretionary sector. On-line
auctioneer e-Bay has gained revenues by selling retailers' overstocked
inventories and building its used car business. Lowe's, the hardware and home
products retailer, benefited from strong spending for home improvement.
Certain retail, defense and semiconductor holdings held the fund back
Weak performers during the period included Kohl's and Michael's Stores, both of
which experienced disappointing comparable store sales. Kohl's execution has
become less consistent than we have seen historically, as has Michael's Stores.
We eliminated these stocks from the portfolio. We also sold defense contractor
L-3 Communications, as we concluded that the bulk of the gains for the defense
industry had passed for this cycle. The fund's holdings in producer durables
also hurt performance. Semiconductor companies, such as Applied Materials and
KLA-Tencor, struggled when we owned them because demand had not yet picked up.
Fund emphasizes economically sensitive companies with strong fundamentals
Signs are building that the economic recovery we have anticipated may be upon
us. As a result, we are emphasizing large companies with strong current earnings
growth that are also positioned to benefit from the current acceleration in
economic activity. Technology, financial services and healthcare stocks appear
to offer many of the most attractive opportunities. We have favored companies we
believe will benefit from an upturn in the economy, those with more consistent
earnings that are not dependent primarily on an upswing in the business cycle.
LOOMIS SAYLES GROWTH FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
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Performance in Perspective
The charts comparing Loomis Sayles Growth Fund's performance to a benchmark
index provide you with a general sense of how the fund performed. To put this
information in context, it may be helpful to understand the differences between
the two. The fund's total return for the period shown below appears with and
without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index, and would
incur transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES/1/
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SEPTEMBER 30, 1993 THROUGH SEPTEMBER 30, 2003
[CHART APPEARS HERE]
LOOMIS SAYLES GROWTH FUND
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RUSSELL LIPPER
Maximum 1000 LARGE CAP S & P
Month Net Asset Sales GROWTH GROWTH FUNDS 500
End Value (2) Charge (3) INDEX INDEX INDEX
- ---------- --------- ----------- --------- ------------ --------
9/30/1993 10,000 9,425 10,000 10,000 10,000
10/31/1993 10,022 9,445 10,278 10,114 10,207
11/30/1993 9,618 9,065 10,209 9,910 10,110
12/31/1993 9,827 9,261 10,385 10,218 10,232
1/31/1994 10,181 9,596 10,625 10,590 10,580
2/28/1994 9,811 9,247 10,431 10,418 10,293
3/31/1994 9,442 8,899 9,927 9,908 9,844
4/30/1994 9,525 8,977 9,972 9,956 9,970
5/31/1994 9,547 8,998 10,123 10,016 10,134
6/30/1994 9,079 8,557 9,824 9,642 9,885
7/31/1994 9,389 8,849 10,159 9,920 10,210
8/31/1994 9,706 9,148 10,725 10,428 10,628
9/30/1994 9,464 8,920 10,580 10,180 10,369
10/31/1994 9,834 9,269 10,828 10,440 10,601
11/30/1994 9,381 8,842 10,481 10,055 10,215
12/31/1994 9,468 8,924 10,657 10,134 10,367
1/31/1995 9,582 9,031 10,885 10,213 10,636
2/28/1995 9,839 9,273 11,341 10,564 11,050
3/31/1995 10,104 9,523 11,672 10,864 11,376
4/30/1995 10,233 9,645 11,927 11,161 11,711
5/31/1995 10,559 9,952 12,342 11,530 12,179
6/30/1995 11,248 10,601 12,818 12,119 12,462
7/31/1995 11,778 11,101 13,351 12,778 12,876
8/31/1995 12,051 11,358 13,366 12,848 12,908
9/30/1995 12,354 11,643 13,982 13,326 13,453
10/31/1995 12,248 11,544 13,991 13,250 13,405
11/30/1995 12,528 11,808 14,535 13,667 13,993
12/31/1995 12,386 11,674 14,618 13,672 14,263
1/31/1996 12,378 11,667 15,107 14,074 14,748
2/29/1996 12,776 12,041 15,384 14,391 14,885
3/31/1996 12,792 12,057 15,404 14,398 15,028
4/30/1996 13,531 12,753 15,809 14,740 15,250
5/31/1996 13,880 13,082 16,361 15,175 15,643
6/30/1996 13,904 13,105 16,383 15,038 15,703
7/31/1996 12,646 11,919 15,423 14,233 15,009
8/31/1996 13,182 12,424 15,822 14,661 15,325
9/30/1996 14,082 13,272 16,974 15,681 16,188
10/31/1996 14,656 13,814 17,076 15,876 16,634
11/30/1996 15,273 14,394 18,358 16,903 17,892
12/31/1996 14,857 14,002 17,999 16,483 17,537
1/31/1997 16,161 15,232 19,261 17,528 18,633
2/28/1997 15,277 14,398 19,131 17,276 18,779
3/31/1997 14,370 13,544 18,095 16,391 18,007
4/30/1997 14,238 13,419 19,297 17,291 19,082
5/31/1997 15,641 14,742 20,689 18,464 20,244
6/30/1997 16,139 15,211 21,518 19,237 21,151
7/31/1997 17,774 16,752 23,421 21,076 22,834
8/31/1997 17,363 16,364 22,050 19,926 21,555
9/30/1997 18,907 17,820 23,135 21,027 22,735
10/31/1997 18,701 17,626 22,280 20,297 21,976
11/30/1997 18,140 17,097 23,226 20,748 22,993
12/31/1997 18,453 17,392 23,486 21,031 23,388
1/31/1998 17,691 16,673 24,189 21,403 23,647
2/28/1998 18,936 17,847 26,008 23,038 25,353
3/31/1998 19,596 18,469 27,045 24,110 26,651
4/30/1998 20,153 18,994 27,419 24,514 26,919
5/31/1998 19,376 18,262 26,641 23,966 26,456
6/30/1998 20,241 19,077 28,273 25,337 27,531
7/31/1998 19,142 18,041 28,086 25,325 27,238
8/31/1998 15,301 14,422 23,871 21,190 23,300
9/30/1998 16,987 16,010 25,704 22,731 24,792
10/31/1998 18,145 17,102 27,770 24,197 26,809
11/30/1998 18,262 17,212 29,882 25,858 28,434
12/31/1998 20,774 19,579 32,577 28,702 30,072
1/31/1999 21,416 20,184 34,490 30,565 31,330
2/28/1999 20,533 19,353 32,914 29,310 30,356
3/31/1999 22,358 21,072 34,648 30,976 31,571
4/30/1999 22,659 21,356 34,692 31,082 32,793
5/31/1999 22,037 20,770 33,626 30,053 32,019
6/30/1999 23,581 22,225 35,981 32,142 33,796
7/31/1999 22,538 21,243 34,838 31,133 32,741
8/31/1999 22,719 21,413 35,407 31,139 32,579
9/30/1999 22,178 20,902 34,663 30,823 31,686
10/31/1999 23,882 22,509 37,281 33,187 33,691
11/30/1999 25,510 24,043 39,292 34,827 34,375
12/31/1999 29,536 27,838 43,379 38,695 36,400
1/31/2000 28,383 26,751 41,345 37,142 34,571
2/29/2000 31,909 30,074 43,366 39,095 33,917
3/31/2000 32,758 30,874 46,470 41,839 37,235
4/30/2000 30,146 28,413 44,259 38,602 36,115
5/31/2000 28,143 26,525 42,030 36,379 35,374
6/30/2000 30,951 29,172 45,215 38,785 36,246
7/31/2000 30,668 28,905 43,330 37,999 35,679
8/31/2000 33,977 32,023 47,254 41,286 37,895
9/30/2000 32,214 30,361 42,784 38,138 35,895
10/31/2000 29,798 28,084 40,759 36,121 35,743
11/30/2000 24,722 23,300 34,751 31,275 32,925
12/31/2000 24,745 23,322 33,652 31,080 33,086
1/31/2001 24,053 22,670 35,976 31,985 34,260
2/28/2001 21,170 19,953 29,869 27,033 31,136
3/31/2001 19,326 18,214 26,618 24,224 29,164
4/30/2001 20,778 19,584 29,985 26,825 31,430
5/31/2001 20,087 18,932 29,544 26,621 31,640
6/30/2001 19,833 18,692 28,859 25,854 30,870
7/31/2001 18,957 17,867 28,138 24,927 30,566
8/31/2001 17,504 16,497 25,837 23,033 28,653
9/30/2001 15,816 14,906 23,258 20,717 26,339
10/31/2001 16,699 15,739 24,478 21,576 26,841
11/30/2001 18,157 17,113 26,829 23,553 28,900
12/31/2001 18,618 17,548 26,779 23,662 29,153
1/31/2002 18,580 17,511 26,306 23,127 28,728
2/28/2002 17,582 16,571 25,214 22,170 28,174
3/31/2002 18,349 17,294 26,086 23,062 29,234
4/30/2002 17,774 16,752 23,957 21,526 27,461
5/31/2002 17,658 16,643 23,378 21,134 27,259
6/30/2002 16,430 15,485 21,215 19,413 25,317
7/31/2002 15,048 14,183 20,049 17,952 23,344
8/31/2002 15,048 14,183 20,109 18,051 23,497
9/30/2002 14,012 13,206 18,023 16,302 20,943
10/31/2002 15,048 14,183 19,676 17,557 22,787
11/30/2002 15,432 14,545 20,745 18,284 24,128
12/31/2002 14,319 13,495 19,312 17,010 22,710
1/31/2003 14,204 13,387 18,843 16,618 22,115
2/28/2003 14,127 13,314 18,757 16,439 21,784
3/31/2003 14,434 13,604 19,106 16,747 21,995
4/30/2003 15,355 14,472 20,518 17,974 23,807
5/31/2003 16,238 15,304 21,543 18,854 25,061
6/30/2003 16,276 15,341 21,839 19,010 25,381
7/31/2003 16,967 15,992 22,383 19,562 25,828
8/31/2003 17,428 16,426 22,939 20,043 26,332
9/30/2003 16,929 15,956 22,694 19,616 26,053
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003
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1 YEAR/5/ 5 YEARS/5/ 10 YEARS/5/
--------- ---------- -----------
CLASS A/1/
Net Asset Value/2/ 20.82% -0.07% 5.41%
With Maximum Sales Charge/3/ 13.95 -1.25 4.78
CLASS B/1/
Net Asset Value/2/ 19.96 -0.81 4.71
With CDSC/4/ 14.96 -0.95 4.71
CLASS C/1/
Net Asset Value/2/ 19.96 -0.81 4.71
With Maximum Sales Charge and CDSC/4/ 17.77 -1.01 4.60
CLASS Y/1/
Net Asset Value/2/ 21.33 0.17 5.58
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
- -------------------------------------- --------- ---------- -----------
Lipper Large Cap Growth Funds Index 20.33% -2.90% 6.97%
Russell 1000 Growth Index 25.92 -2.46 8.54
S&P 500 Index 24.40 1.00 10.05
Morningstar Large Growth Funds Average 22.62 -0.70 7.07
Lipper Large-Cap Growth Funds Average 21.22 -1.34 6.64
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Class Y shares, the
successor to the fund's Institutional Class, are available to certain
institutional investors only.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
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% OF NET ASSETS
AS OF
FUND COMPOSITION 9/30/03
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Common Stocks 98.0
Other Assets 2.0
% OF NET ASSETS
AS OF
TEN LARGEST HOLDINGS 9/30/03
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UnitedHealth Group, Inc. 3.8
Zimmer Holdings, Inc. 3.6
Cisco Systems, Inc. 3.6
MBNA Corp. 3.6
Intel Corp. 3.4
Dell, Inc. 3.0
Amgen, Inc. 2.9
VERITAS Software Corp. 2.9
Merrill Lynch & Co., Inc. 2.7
Lowe's Cos., Inc. 2.6
% OF NET ASSETS
AS OF
FIVE LARGEST INDUSTRIES 9/30/03
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Capital Markets 9.6
Specialty Retail 9.4
Semiconductors & Semiconductor Equipment 7.8
Biotechnology 7.4
Communications Equipment 7.1
Portfolio holdings and asset allocations will vary.
See page 7 for information on the possible risks associated with an investment
in this fund and a description of the indexes.
NOTES TO CHARTS
/1/ Returns shown in the chart reflect performance of the fund's Retail Class
shares, which were converted to Class A shares on 9/12/03. The prior Retail
Class performance has been restated to reflect expenses of Class A shares.
For periods before the inception of Retail Class shares (12/31/96),
performance shown for Class A has been based on the performance of the
fund's Institutional Class shares, adjusted to reflect the higher expenses
paid by Class A shares. The restatement of the fund's performance to
reflect Class A expenses is based on the net expenses of the Class after
taking into effect the fund's current expense cap arrangements. Other
Classes of shares are available for which performance, fees and expenses
differ. For periods prior to the inception of Class B and Class C shares
(9/12/03), performance is based on prior Institutional Class performance,
restated to reflect the loads and expenses of Class B and Class C shares,
respectively. Class Y performance has been restated to reflect the net
expenses of the Institutional Class after taking into effect the fund's
current expense cap arrangements. The growth of $10,000 chart reflects the
performance of Class A shares rather than Class Y shares, because Class A
shares include the highest sales charge. Prior to September 12, 2003, the
fund was offered without a sales charge.
/2/ Does not include a sales charge.
/3/ Includes maximum sales charge of 5.75%.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares. Class C share
performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you
sell shares within one year of purchase.
/5/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
2
LOOMIS SAYLES INTERNATIONAL EQUITY FUND
PORTFOLIO PROFILE
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OBJECTIVE:
High total investment return through a combination of capital appreciation and
current income
STRATEGY:
Invests primarily in common stocks or other equity securities of large companies
organized or headquartered outside of the United States
FUND INCEPTION:
May 10, 1991
MANAGERS:
Eswar Menon
Alexander Muromcew
John Tribolet
LOOMIS, SAYLES & COMPANY, L.P.
SYMBOLS:
Class A LIERX
Class B LSIBX
Class C LSICX
Class Y LSIEX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 9.50
Class B 9.50
Class C 9.50
Class Y 9.60
MANAGEMENT DISCUSSION
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Loomis Sayles International Equity Fund's total return for the fiscal year ended
September 30, 2003 was 23.38%, based on the net asset value of Class A shares.
Differences in industry weighting caused the fund to lag its benchmark, the MSCI
EAFE Index, which had a total return of 26.54% for the period, although results
were above the 21.11% average return on the funds in Morningstar's Foreign Large
Growth category.
During the first half of the fiscal year, the conflict in Iraq and slowing
economies around the world kept stock prices down. However, after the start of
military activities in March of 2003, the global markets began to reflect
positive economic news. Emerging-market countries and Europe outperformed the
United States. Technology and telecommunications were the top sectors. Currency
fluctuations also played a role during the past 12 months, as the dollar
weakened against both the yen and the euro.
Materials and consumer discretionary stocks were positive
Good performers included two Japanese chemical products companies, Nitto Denko
and Kaneka Corp.; Thailand's Siam Cement; UK-listed Anglo American (a South
African resource company); BHP Billiton (a British company active in minerals,
oil and gas, and steel); and Finland's Stora Enso (a paper company). Consumer
discretionary selections also performed well, including auto makers Nissan Motor
(Japan) and Autoliv (Sweden); Kingfisher (international retailer of home goods,
based in Britain); Japan's Daiwa House Industry; and media companies like
British Sky Broadcasting, News Corp. (Australia), and Canada's Rogers
Communications.
Finance, consumer staples and drugs were mixed
The fund had a lower exposure to finance than its benchmark, which was a
positive in the first half of the year, but hurt during the second half when
this sector rallied. Good performance from the fund's regional banks helped
offset its under-representation in finance. Anglo Irish Bank, France's BNP
Paribas, and Royal Bank of Scotland performed well. Food-related companies
rallied in 2003, but we were underweight in consumer staples because growth
prospects appeared stronger in other areas. Positive results from Israel's Teva
Pharmaceutical Industries were offset by market concerns regarding generic
competition and government regulation for the larger pharmaceutical companies.
Information technology helped, but fund was underweight in telecom
Stocks of many of the technology companies, battered during the past three
years, rallied in 2003 on stronger profits and anticipated increases in sales.
The fund had relatively little representation in the large telecommunication
services companies that led the rally because we don't yet see solid evidence of
increasing demand. However, the fund's information technology holdings performed
well, including TDK (a Japanese magnetic head and component maker); Infineon
Technologies (a German computer hardware manufacturer); Korea's Samsung
Electronics (which also has exposure to computer hardware, telecom handsets and
equipment); and Wipro (an Indian IT services company).
Market fundamentals seem to be improving
Looking ahead to 2004, our greatest concerns are the weak U.S. dollar and the
global war on terrorism. However, economic data is confirming that the U.S.
economy is beginning to grow again and corporate spending seems to be on the
rise. We are also encouraged that some U.S. stimulative policies - tax cuts,
government spending and monetary growth - are being implemented in other parts
of the world. For example, Japan is rebuilding its banking infrastructure while
Germany is discussing tax cuts. All of this bodes well for global growth.
3
LOOMIS SAYLES INTERNATIONAL EQUITY FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
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Performance in perspective
The charts comparing Loomis Sayles International Equity Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES/1/
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1993 THROUGH SEPTEMBER 30, 2003
[CHART APPEARS HERE]
LOOMIS SAYLES INTERNATIONAL EQUITY FUND
---------------------------------------------------
LIPPER
MAXIMUM INTERNATIONAL MSCI
MONTH NET ASSET SALES FUNDS EAFE
END VALUE (2) CHARGE (3) INDEX INDEX
- ---------- --------- ----------- ------------- --------
9/30/1993 10,000 9,425 10,000 10,000
10/31/1993 10,656 10,043 10,494 10,310
11/30/1993 10,446 9,845 10,078 9,411
12/31/1993 11,232 10,587 11,089 10,093
1/31/1994 11,981 11,292 11,779 10,948
2/28/1994 11,676 11,005 11,496 10,920
3/31/1994 11,241 10,595 10,970 10,452
4/30/1994 11,354 10,701 11,260 10,898
5/31/1994 11,180 10,537 11,243 10,838
6/30/1994 11,058 10,422 11,066 10,994
7/31/1994 11,363 10,710 11,407 11,102
8/31/1994 11,415 10,759 11,801 11,367
9/30/1994 11,241 10,595 11,497 11,011
10/31/1994 11,276 10,628 11,702 11,381
11/30/1994 10,945 10,316 11,156 10,836
12/31/1994 11,035 10,400 11,007 10,907
1/31/1995 10,826 10,203 10,461 10,490
2/28/1995 11,130 10,490 10,458 10,463
3/31/1995 11,272 10,624 10,733 11,118
4/30/1995 11,814 11,135 11,128 11,539
5/31/1995 12,194 11,493 11,238 11,405
6/30/1995 12,166 11,466 11,280 11,208
7/31/1995 12,489 11,771 11,900 11,909
8/31/1995 11,938 11,251 11,699 11,457
9/30/1995 12,175 11,475 11,895 11,684
10/31/1995 11,928 11,242 11,647 11,373
11/30/1995 11,824 11,144 11,769 11,692
12/31/1995 11,987 11,298 12,110 12,166
1/31/1996 12,399 11,686 12,396 12,219
2/29/1996 12,523 11,803 12,450 12,264
3/31/1996 12,544 11,822 12,644 12,527
4/30/1996 12,894 12,152 13,056 12,895
5/31/1996 12,842 12,104 13,041 12,660
6/30/1996 12,956 12,211 13,160 12,735
7/31/1996 12,647 11,919 12,716 12,366
8/31/1996 12,883 12,143 12,882 12,396
9/30/1996 13,128 12,373 13,170 12,728
10/31/1996 13,344 12,577 13,118 12,601
11/30/1996 13,921 13,121 13,735 13,106
12/31/1996 14,194 13,378 13,857 12,940
1/31/1997 14,280 13,459 13,875 12,490
2/28/1997 14,172 13,357 14,126 12,698
3/31/1997 14,226 13,408 14,201 12,747
4/30/1997 14,205 13,388 14,262 12,818
5/31/1997 14,884 14,028 15,067 13,655
6/30/1997 15,531 14,638 15,790 14,411
7/31/1997 16,030 15,109 16,297 14,647
8/31/1997 14,621 13,780 15,122 13,556
9/30/1997 15,604 14,707 16,093 14,319
10/31/1997 14,260 13,440 14,871 13,221
11/30/1997 13,943 13,142 14,746 13,089
12/31/1997 14,014 13,208 14,862 13,207
1/31/1998 14,561 13,723 15,221 13,814
2/28/1998 15,480 14,590 16,188 14,703
3/31/1998 16,250 15,316 17,067 15,159
4/30/1998 16,275 15,339 17,329 15,283
5/31/1998 15,840 14,929 17,363 15,212
6/30/1998 15,219 14,344 17,212 15,331
7/31/1998 15,455 14,566 17,476 15,489
8/31/1998 13,691 12,904 14,962 13,574
9/30/1998 13,293 12,529 14,496 13,161
10/31/1998 14,175 13,360 15,562 14,537
11/30/1998 14,859 14,004 16,341 15,285
12/31/1998 15,272 14,394 16,744 15,892
1/31/1999 15,247 14,370 16,845 15,849
2/28/1999 14,546 13,710 16,412 15,475
3/31/1999 14,763 13,914 16,958 16,124
4/30/1999 15,374 14,490 17,748 16,781
5/31/1999 14,890 14,034 17,089 15,921
6/30/1999 15,667 14,766 17,899 16,545
7/31/1999 16,393 15,450 18,299 17,041
8/31/1999 16,737 15,775 18,444 17,107
9/30/1999 17,488 16,483 18,503 17,283
10/31/1999 18,851 17,767 19,149 17,934
11/30/1999 23,129 21,799 20,553 18,561
12/31/1999 28,941 27,277 23,078 20,230
1/31/2000 27,615 26,027 21,727 18,948
2/29/2000 32,553 30,681 23,161 19,462
3/31/2000 30,091 28,360 23,221 20,220
4/30/2000 26,519 24,994 21,748 19,160
5/31/2000 24,462 23,056 21,150 18,696
6/30/2000 25,490 24,025 22,130 19,431
7/31/2000 23,840 22,469 21,412 18,620
8/31/2000 24,584 23,170 21,774 18,786
9/30/2000 23,420 22,074 20,506 17,875
10/31/2000 21,404 20,174 19,809 17,456
11/30/2000 20,031 18,879 18,973 16,805
12/31/2000 20,883 19,682 19,682 17,407
1/31/2001 20,854 19,655 19,798 17,398
2/28/2001 18,938 17,849 18,408 16,095
3/31/2001 17,362 16,364 17,114 15,030
4/30/2001 18,285 17,233 18,155 16,084
5/31/2001 18,043 17,006 17,715 15,529
6/30/2001 17,745 16,725 17,215 14,900
7/31/2001 17,234 16,243 16,767 14,630
8/31/2001 16,737 15,775 16,431 14,262
9/30/2001 15,303 14,423 14,641 12,821
10/31/2001 15,625 14,727 15,037 13,149
11/30/2001 15,818 14,909 15,599 13,634
12/31/2001 16,026 15,105 15,877 13,715
1/31/2002 15,188 14,315 15,236 12,988
2/28/2002 15,333 14,451 15,450 13,079
3/31/2002 15,946 15,029 16,267 13,857
4/30/2002 15,752 14,846 16,381 13,893
5/31/2002 15,946 15,029 16,615 14,082
6/30/2002 15,236 14,360 15,960 13,527
7/31/2002 13,817 13,023 14,366 12,192
8/31/2002 13,785 12,992 14,378 12,167
9/30/2002 12,415 11,701 12,829 10,864
10/31/2002 12,850 12,111 13,495 11,448
11/30/2002 13,495 12,719 14,134 11,970
12/31/2002 12,931 12,187 13,682 11,568
1/31/2003 12,463 11,746 13,181 11,086
2/28/2003 12,431 11,716 12,790 10,832
3/31/2003 12,205 11,503 12,477 10,628
4/30/2003 13,156 12,400 13,712 11,682
5/31/2003 13,995 13,190 14,593 12,400
6/30/2003 14,301 13,479 14,938 12,707
7/31/2003 14,495 13,661 15,357 13,017
8/31/2003 14,994 14,132 15,800 13,333
9/30/2003 15,317 14,436 16,117 13,747
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
1 YEAR/5/ 5 YEARS/5/ 10 YEARS/5/
--------- ---------- -----------
CLASS A/1/
Net Asset Value/2/ 23.38% 2.87% 4.36%
With Maximum Sales Charge/3/ 16.28 1.67 3.74
CLASS B/1/
Net Asset Value/2/ 22.39 1.96 3.42
With CDSC/4/ 17.39 1.65 3.42
CLASS C/1/
Net Asset Value/2/ 22.39 1.96 3.42
With Maximum Sales Charge and CDSC/4/ 20.18 1.76 3.32
CLASS Y/1/
Net Asset Value/2/ 23.70 3.18 4.56
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
- ------------------------------------- --------- ---------- -----------
Lipper International Funds Index 25.63% 2.14% 4.89%
MSCI EAFE Index 26.54 0.87 3.23
Morningstar Foreign Large Growth
Average 21.11 -0.64 2.59
Lipper International Funds Average 22.94 1.21 4.04
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Class Y shares, the
successor to the fund's Institutional Class, are available to certain
institutional investors only.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
- --------------------------------------------------------------------------------
% OF NET ASSETS
AS OF
FUND COMPOSITION 9/30/03
- --------------------------------------------------------------------------------
Common Stocks 95.4
Preferred Stocks 0.5
Short Term Investments and Other 4.1
% OF NET ASSETS
AS OF
TEN LARGEST HOLDINGS 9/30/03
- --------------------------------------------------------------------------------
Anglo Irish Bank Corp. Plc 2.0
Vodafone Group Plc 1.9
Novartis AG 1.8
Erste Bank der oesterreichischen 1.6
Sparkasser AG
GlaxoSmithKline Plc 1.6
HBOS Plc 1.5
Smith & Nephew Plc 1.5
BP Plc 1.5
Nokia Oyj ADR 1.4
Sumitomo Trust & Banking Co. Ltd. 1.3
% OF NET ASSETS
AS OF
FIVE LARGEST COUNTRIES 9/30/03
- --------------------------------------------------------------------------------
Japan 23.3
United Kingdom 16.2
Germany 6.0
Switzerland 5.4
France 5.4
Portfolio holdings and asset allocations will vary.
See page 7 for information on the possible risks associated with an investment
in this fund and a description of the indexes.
NOTES TO CHARTS
/1/ Returns shown in the chart reflect performance of the fund's Retail Class
shares, which were converted to Class A shares on 9/12/03. The prior Retail
Class performance has been restated to reflect expenses of Class A shares.
For periods before the inception of Retail Class shares (12/31/96),
performance shown for Class A has been based on the performance of the
fund's Institutional Class shares, adjusted to reflect the higher expenses
paid by Class A shares. The restatement of the fund's performance to
reflect Class A expenses is based on the net expenses of the Class after
taking into effect the fund's current expense cap arrangements. Other
Classes of shares are available for which performance, fees and expenses
differ. For periods prior to the inception of Class B and Class C shares
(9/12/03), performance is based on prior Institutional Class performance,
restated to reflect the loads and expenses of Class B and Class C shares,
respectively. Class Y performance has been restated to reflect the net
expenses of the Institutional Class after taking into effect the fund's
current expense cap arrangements. The growth of $10,000 chart reflects the
performance of Class A shares rather than Class Y shares, because Class A
shares include the highest sales charge. Prior to September 12, 2003, the
fund was offered without a sales charge.
/2/ Does not include a sales charge.
/3/ Includes maximum sales charge of 5.75%.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares. Class C share
performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you
sell shares within one year of purchase.
/5/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
4
LOOMIS SAYLES RESEARCH FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
OBJECTIVE:
Long-term growth of capital
STRATEGY:
Invests primarily in equity securities, including common stocks, convertible
securities and warrants; focuses on large-capitalization companies but may
invest in companies of any size
FUND INCEPTION:
July 31, 2000
MANAGER:
Team Management, led by Lauriann Kloppenburg
LOOMIS, SAYLES & COMPANY, L.P.
SYMBOLS:
Class A LSRRX
Class B LSCBX
Class C LSCCX
Class Y LISRX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 6.90
Class B 6.90
Class C 6.90
Class Y 6.92
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Loomis Sayles Research Fund performed well during the year ended September 30,
2003. Total return based on Class A shares at net asset value was 21.48%, close
to the 21.66% average return generated by its peer group of funds in the
Morningstar Large Blend Category. However, our performance lagged the benchmark,
the S&P 500 Index, which returned 24.40% for the 12-month period.
Most of this underperformance came early in the period (the fourth quarter of
2002), as the market began to anticipate an economic recovery. Many of the more
depressed and leveraged cyclical stocks rallied strongly, and the fund was
positioned too conservatively to fully participate. As calendar 2003 unfolded,
we increased our exposure to cyclical stocks in many sectors, taking advantage
of the price opportunities that are typical during volatile market periods.
Fund's strongest sectors were technology, telecommunications and utilities
Looking at performance on a sector-by-sector basis, our strongest results in
absolute terms came from three sectors that had been beaten down mercilessly in
the past. As fear and emotion lessened their grip on the markets, and hints of
economic improvement appeared, these sectors rebounded sharply.
Individually, the top-performing stocks included technology giant Cisco,
semiconductor manufacturer Maxim Integrated Products, and graphics software
leader Adobe. However, the fund's single best performer was Sprint, the long
distance and wireless telecommunications service provider. Following close
behind was Boston Scientific, a leader in the development of a new generation of
stents for treating cardiac patients. Both of these stocks were strong
contributors to the fund's results.
Most weaker issues were sold
Our performance in consumer staples was challenged first by the sector's lack of
cyclical exposure, and again by disappointing developments at Kimberly Clark and
Kraft Foods, both of which we sold. The fund's results in the consumer
discretionary sector were also relatively weak, restrained by poor performance
in Harley Davidson and Jones Apparel. We also sold both of these stocks.
Our investments in AmerisourceBergen (ABC), UTStarcom and Lockheed Martin were
all painful. Drug company ABC was hurt by reports of federal investigations into
its practices. UTStarcom, a telecommunications company, was pulled down by
concerns about its business in China. Lockheed Martin came under pressure on
concerns that commercial aerospace market problems would blemish an otherwise
strong outlook for defense. Among these, we retained only a position in
UTStarcom, which recently reported strong earnings and encouraging sales in
China.
Fund positioned for continuing economic recovery
Looking out to the next 12 months, we expect a recovering economy, low
inflation, low interest rates and a stimulative government stance to provide a
constructive backdrop for the market. While a pullback or consolidation is
possible after the strong run we have had, we believe valuation levels remain
reasonable and the longer-term prospects seem attractive. In our opinion, our
bottom-up stock picking approach - highlighted by keeping sector emphasis in
line with the S&P 500 - may be well suited for this environment.
5
LOOMIS SAYLES RESEARCH FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in perspective
The charts comparing Loomis Sayles Research Fund's performance to a benchmark
index provide you with a general sense of how the fund performed. To put this
information in context, it may be helpful to understand the differences between
the two. The fund's total return for the period shown below appears with and
without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES/1/
- --------------------------------------------------------------------------------
JULY 31, 2000 THROUGH SEPTEMBER 30, 2003
[CHART APPEARS HERE]
LIPPER
MAXIMUM LARGE CAP S&P
MONTH NET ASSET SALES CORE FUNDS 500
END VALUE (2) CHARGE (3) INDEX INDEX
- ---------- --------- ---------- ---------- -------
7/31/2000 10,000 9,425 10,000 10,000
8/31/2000 10,937 10,308 10,690 10,621
9/30/2000 10,538 9,932 10,121 10,060
10/31/2000 10,110 9,528 10,003 10,018
11/30/2000 8,698 8,198 9,124 9,228
12/31/2000 9,039 8,519 9,235 9,273
1/31/2001 9,149 8,623 9,497 9,602
2/28/2001 8,147 7,678 8,613 8,727
3/31/2001 7,646 7,206 8,084 8,174
4/30/2001 8,297 7,820 8,699 8,809
5/31/2001 8,367 7,886 8,748 8,868
6/30/2001 8,227 7,754 8,515 8,652
7/31/2001 7,996 7,537 8,392 8,567
8/31/2001 7,526 7,093 7,898 8,031
9/30/2001 6,864 6,469 7,298 7,382
10/31/2001 7,105 6,696 7,470 7,523
11/30/2001 7,626 7,187 7,960 8,100
12/31/2001 7,793 7,345 8,050 8,171
1/31/2002 7,713 7,269 7,923 8,052
2/28/2002 7,623 7,184 7,790 7,896
3/31/2002 7,904 7,449 8,055 8,193
4/30/2002 7,583 7,147 7,634 7,697
5/31/2002 7,492 7,061 7,578 7,640
6/30/2002 7,001 6,598 7,055 7,096
7/31/2002 6,429 6,059 6,531 6,543
8/31/2002 6,389 6,022 6,585 6,586
9/30/2002 5,707 5,379 5,945 5,870
10/31/2002 6,148 5,795 6,407 6,387
11/30/2002 6,399 6,031 6,693 6,762
12/31/2002 6,079 5,729 6,341 6,365
1/31/2003 5,938 5,597 6,174 6,198
2/28/2003 5,848 5,512 6,092 6,105
3/31/2003 5,928 5,587 6,144 6,165
4/30/2003 6,360 5,995 6,596 6,672
5/31/2003 6,712 6,326 6,916 7,024
6/30/2003 6,802 6,411 6,984 7,114
7/31/2003 6,953 6,553 7,094 7,239
8/31/2003 7,054 6,648 7,232 7,380
9/30/2003 6,933 6,535 7,138 7,302
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
SINCE FUND
1 YEAR/6/ INCEPTION/6/
--------- ------------
CLASS A/1/
Net Asset Value/2/ 21.48% -10.92%
With Maximum Sales Charge/3/ 14.44 -12.57
CLASS B/1/
Net Asset Value/2/ 20.08 -11.75
With CDSC/4/ 15.08 -12.58
CLASS C/1/
Net Asset Value/2/ 20.08 -11.75
With Maximum Sales Charge and CDSC/4/ 17.88 -12.03
CLASS Y/1/
Net Asset Value/2/ 21.76 -10.67
SINCE
FUND
COMPARATIVE PERFORMANCE 1 YEAR INCEPTION/5/
- -------------------------------------- --------- ------------
Lipper Large Cap Core Funds Index 20.07% -10.10%
S&P 500 Index 24.40 -9.45
Morningstar Large Blend Fund Average 21.66 -9.27
Lipper Large Cap Core Funds Average 20.86 -11.36
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Class Y shares, the
successor to the fund's Institutional Class, are available to certain
institutional investors only.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
- --------------------------------------------------------------------------------
% OF NET ASSETS
AS OF
FUND COMPOSITION 9/30/03
- --------------------------------------------------------------------------------
Common Stocks 99.5
Other Assets 0.5
% OF NET ASSETS
AS OF
TEN LARGEST HOLDINGS 9/30/03
- --------------------------------------------------------------------------------
Microsoft Corp. 4.1
Citigroup, Inc. 3.6
Wal-Mart Stores, Inc. 2.7
Bank of America Corp. 2.7
Wells Fargo & Co. 2.6
MBNA Corp. 2.5
General Electric Co. 2.4
Cisco Systems, Inc. 2.3
Exxon Mobil Corp. 2.2
Procter & Gamble Co. 2.2
% OF NET ASSETS
AS OF
FIVE LARGEST INDUSTRIES 9/30/03
- --------------------------------------------------------------------------------
Commercial Banks 6.9
Communications Equipment 4.9
Food & Staples Retailing 4.9
Software 4.9
Health Care Equipment & Supplies 4.6
Portfolio holdings and asset
allocations will vary.
See page 7 for information on the possible risks associated with an investment
in this fund and a description of the indexes.
NOTES TO CHARTS
/1/ Returns shown in the chart reflect the performance of the fund's Retail
Class shares, which were converted to Class A shares on 9/12/03. The prior
Retail Class performance has been restated to reflect expenses of Class A
shares. For periods before the inception of Retail Class shares
(11/30/01), performance shown for Class A has been based on the performance
of the fund's Institutional Class shares, adjusted to reflect the higher
expenses paid by Class A shares. The restatement of the fund's performance
to reflect Class A expenses is based on the net expenses of the Class after
taking into effect the fund's current expense cap arrangements. Other
Classes of shares are available for which performance, fees and expenses
differ. For periods prior to the inception of Class B and C shares
(9/12/03), performance is based on prior Institutional Class performance,
restated to reflect the loads and expenses of Class B and C shares,
respectively. Class Y performance has been restated to reflect the net
expenses of the Institutional Class after taking into effect the fund's
current expense cap arrangements. The growth of $10,000 chart reflects the
performance of Class A shares rather than Class Y shares, because Class A
shares include the highest sales charge. Prior to September 12, 2003, the
fund was offered without a sales charge.
/2/ Does not include a sales charge.
/3/ Includes maximum sales charge of 5.75%.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares. Class C share
performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you
sell shares within one year of purchase.
/5/ The since-inception performance comparisons shown are calculated from
7/31/00.
/6/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
6
FUND RISKS AND INDEX DEFINITIONS
The views expressed in this report reflect those of the portfolio managers as of
the dates indicated. The managers' views are subject to change at any time
without notice based on changes in market or other conditions. References to
specific securities or industries should not be regarded as investment advice.
Because these funds are actively managed, there is no assurance that they will
continue to invest in the securities or industries mentioned.
Any mutual fund investment involves risk. The following notes describe some of
the risks of the Loomis Sayles Equity Funds discussed in this report. These
risks may affect the value of your investment. See the funds' prospectus for
details.
THE FUNDS
Loomis Sayles Growth Fund invests primarily in equity securities, including
common stocks, convertible securities, and warrants. It focuses on stocks of
large-capitalization companies, but may invest in companies of any size.
Loomis Sayles International Equity Fund invests primarily in stocks and other
equity securities of companies organized or headquartered outside of the United
States. Although it generally focuses on stocks of larger companies, the fund
may invest in securities issued by companies of any size and in securities of
issuers located in countries with emerging markets.
Loomis Sayles Research Fund invests primarily in equity securities, including
common stocks, convertible securities, and warrants. It focuses on stocks of
large-capitalization companies, but the fund may invest in companies of any
size.
THE RISKS
Foreign and emerging market securities convey special risks, including
political, economic, regulatory and currency risks, as well as differing
accounting standards. Emerging markets may be more subject to these risks than
developed markets.
Growth stocks tend to be more sensitive to market movements because their stock
prices are based in part on future expectations, which may not be realized.
Value stocks may fall out of favor with investors and underperform the broader
market; there is no guarantee that they will return to favor.
Convertible securities are bonds that can be exchanged for a specific number of
shares of the company's preferred or common stock. They tend to pay lower
interest rates than non-convertible bonds and they reflect the price volatility
of the underlying equity security.
Warrants entitle the holder to buy a specific number of securities at a set
price, usually above the current market price at the time of issuance, for an
extended period. If the price of the security does not rise above the warrant's
exercise price before it expires, it becomes worthless.
INDEX/AVERAGE DESCRIPTIONS
The Standard & Poor's 500 Stock Index is an unmanaged index of U.S. common stock
performance.
The Russell 1000 Growth Index is an unmanaged index measuring the performance of
the largest 1000 U.S. growth companies within the Russell 3000 Index.
The Morgan Stanley Capital International (MSCI) Europe Australasia Far East
(EAFE) Index is an unmanaged index of common stocks traded outside the United
States.
The Lipper Fund Indexes are equally weighted indexes typically consisting of the
30 largest mutual funds within each fund's category, as calculated by Lipper
Inc.
The Morningstar Funds Averages are the average performance without sales charges
of funds with similar investment objectives, as calculated by Morningstar, Inc.
The Lipper Fund Averages consist of all mutual funds in a stated category,
without sales charges, calculated by Lipper Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
7
LOOMIS SAYLES GROWTH FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
SHARES DESCRIPTION VALUE (a)
- ------------------------------------------------------------------------------
COMMON STOCKS -- 98.0% OF TOTAL NET ASSETS
BIOTECHNOLOGY -- 7.4%
13,600 Amgen, Inc. (b) .............................. $ 878,152
9,500 Genentech, Inc. (b) .......................... 761,330
10,200 Gilead Sciences, Inc. (b) .................... 570,486
--------------
2,209,968
--------------
CAPITAL MARKETS -- 9.6%
27,000 Ameritrade Holding Corp. (b) ................. 303,750
4,850 Goldman Sachs Group, Inc. .................... 406,915
5,925 Legg Mason, Inc. ............................. 427,785
15,225 Merrill Lynch & Co., Inc. .................... 814,994
10,350 State Street Corp. ........................... 465,750
10,975 T. Rowe Price Group, Inc. .................... 452,829
--------------
2,872,023
--------------
COMMERCIAL SERVICES & SUPPLIES -- 2.9%
4,475 Apollo Group, Inc., Class A (b) .............. 295,484
12,625 Career Education Corp. (b) ................... 571,913
--------------
867,397
--------------
COMMUNICATIONS EQUIPMENT -- 7.1%
54,760 Cisco Systems, Inc. (b) ...................... 1,070,010
15,100 QUALCOMM, Inc. ............................... 628,764
13,050 UTStarcom, Inc. (b) .......................... 415,121
--------------
2,113,895
--------------
COMPUTERS & PERIPHERALS -- 5.4%
27,080 Dell, Inc. (b) ............................... 904,201
31,050 EMC Corp. (b) ................................ 392,162
4,900 SanDisk Corp. (b) ............................ 312,326
--------------
1,608,689
--------------
CONSUMER FINANCE -- 4.8%
8,275 American Express Co. ......................... 372,872
46,675 MBNA Corp. ................................... 1,064,190
--------------
1,437,062
--------------
DIVERSIFIED FINANCIAL SERVICES -- 3.0%
12,900 Citigroup, Inc. .............................. 587,079
5,890 Moody's Corp. ................................ 323,773
--------------
910,852
--------------
ELECTRONIC EQUIPMENT & INSTRUMENTS -- 1.5%
17,600 Jabil Circuit, Inc. (b) ...................... 458,480
--------------
Energy Equipment & Services -- 1.7%
14,575 BJ Services Co. (b) .......................... 498,028
--------------
FOOD & STAPLES RETAILING -- 1.9%
10,225 Wal-Mart Stores, Inc. ........................ 571,066
--------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 5.1%
5,800 Stryker Corp. ................................ 436,798
19,650 Zimmer Holdings, Inc. (b) .................... 1,082,715
--------------
1,519,513
--------------
HEALTH CARE PROVIDERS & SERVICES -- 5.9%
27,200 Caremark Rx, Inc. (b) ........................ 614,720
22,545 UnitedHealth Group, Inc. ..................... 1,134,464
--------------
1,749,184
--------------
INDUSTRIAL CONGLOMERATES -- 3.7%
9,000 3M Co. ....................................... 621,630
16,030 General Electric Co. ......................... 477,854
--------------
1,099,484
--------------
INTERNET & CATALOG RETAIL -- 1.9%
10,530 eBay, Inc. (b) ............................... 563,460
--------------
OIL & Gas -- 2.3%
3,575 Apache Corp. ................................. $ 247,891
21,475 XTO Energy, Inc. ............................. 450,760
--------------
698,651
--------------
PHARMACEUTICALS -- 4.4%
5,525 Barr Laboratories, Inc. (b) .................. 376,860
8,925 Pfizer, Inc. ................................. 271,142
14,500 Wyeth ........................................ 668,450
--------------
1,316,452
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT --
7.8%
11,275 Analog Devices, Inc. (b) ..................... 428,676
37,050 Intel Corp. .................................. 1,019,245
13,325 Linear Technology Corp. ...................... 477,168
10,350 Maxim Integrated Products, Inc. .............. 408,825
--------------
2,333,914
--------------
SOFTWARE -- 7.0%
24,750 BEA Systems, Inc. (b) ........................ 298,237
21,540 Microsoft Corp. .............................. 598,597
4,850 Symantec Corp. (b) ........................... 305,647
27,800 VERITAS Software Corp. (b) ................... 872,920
--------------
2,075,401
--------------
SPECIALTY RETAIL -- 9.4%
9,870 Bed Bath & Beyond, Inc. (b) .................. 376,837
10,500 Best Buy Co., Inc. (b) ....................... 498,960
22,100 Home Depot, Inc. ............................. 703,885
14,975 Lowe's Cos., Inc. ............................ 777,202
18,425 Staples, Inc. (b) ............................ 437,594
--------------
2,794,478
--------------
TEXTILES APPAREL & LUXURY GOODS -- 2.5%
13,700 Coach, Inc. (b) .............................. 748,020
--------------
THRIFTS & MORTGAGE FINANCE -- 1.5%
5,850 Countrywide Financial Corp. .................. 457,938
--------------
WIRELESS TELECOMMUNICATION SERVICES -- 1.2%
42,900 AT&T Wireless Services, Inc. (b) ............. 350,922
--------------
Total Common Stocks
(Identified Cost $26,527,676) ................ 29,254,877
Total Investments -- 98.0%
(Identified Cost $26,527,676) (c) ............ 29,254,877
Other assets less liabilities ................ 595,093
--------------
Total Net Assets -- 100% ..................... $ 29,849,970
==============
(a) See Note 2a of Notes to Financial Statements.
(b) Non-income producing security.
(c) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation on
investments based on cost of $26,560,963 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost ................................................ $ 3,086,749
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value .............................................. (392,835)
--------------
Net unrealized appreciation ............................. $ 2,693,914
==============
See accompanying notes to financial statements.
8
LOOMIS SAYLES INTERNATIONAL EQUITY FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
SHARES DESCRIPTION VALUE(a)
- ------------------------------------------------------------------------------
COMMON STOCKS -- 95.4% OF TOTAL NET ASSETS
AUSTRALIA -- 2.8%
69,800 Lend Lease Corp. Ltd. ........................ $ 489,059
25,550 Macquarie Bank Ltd. .......................... 599,623
59,700 News Corp. Ltd. .............................. 488,143
--------------
1,576,825
--------------
AUSTRIA -- 1.6%
9,100 Erste Bank der oesterreichischen
Sparkassen AG ................................ 920,898
--------------
BELGIUM -- 1.0%
10,025 Umicore ...................................... 584,056
--------------
BRAZIL -- 2.0%
16,025 Companhia Vale do Rio Doce ADR ............... 654,140
22,125 Embraer-Empresa Brasileria
de Aeronautica SA ADR ........................ 466,838
--------------
1,120,978
--------------
CANADA -- 3.9%
13,269 Alcan, Inc. .................................. 514,843
11,713 Allstream, Inc., Class B (b) ................. 457,766
9,725 Angiotech Pharmaceuticals, Inc. (b) .......... 424,496
11,729 Encana Corp. ................................. 424,693
24,439 Rogers Communications, Inc., Class B ......... 374,593
--------------
2,196,391
--------------
FINLAND -- 2.3%
50,950 Nokia Oyj ADR ................................ 794,820
43,300 Stora Enso Oyj ............................... 536,317
--------------
1,331,137
--------------
FRANCE -- 5.4%
30,000 Axa .......................................... 505,813
7,500 BNP Paribas SA ............................... 367,912
6,600 Casino Guichard-Perrachon SA ................. 585,618
13,500 Compagnie Generale des
Etablissements Michelin ...................... 502,265
3,100 Pernod-Ricard SA ............................. 293,665
11,800 STMicroelectronics NV ........................ 285,299
3,630 Total Fina SA, Class B ....................... 548,166
--------------
3,088,738
--------------
GERMANY -- 5.4%
11,050 BASF AG ...................................... 485,405
7,600 Bayerische Motoren Werke (BMW) AG ............ 287,362
3,700 Deutsche Bank AG ............................. 225,262
15,400 Linde AG ..................................... 634,502
29,900 MAN AG ....................................... 638,607
13,550 SAP AG ADR ................................... 412,056
7,060 Stada Arzneimittel AG ........................ 378,410
--------------
3,061,604
--------------
GREECE -- 0.5%
21,100 Greek Organization of Football Prognostics ... 258,150
--------------
HONG KONG -- 1.1%
201,400 Esprit Holdings Ltd. ......................... 612,439
--------------
HUNGARY -- 0.7%
33,600 OTP Bank (b) ................................. 398,671
--------------
INDIA -- 0.6%
11,925 Wipro Ltd. ADR ............................... 346,421
--------------
IRELAND -- 3.0%
107,500 Anglo Irish Bank Corp. Plc ................... 1,161,151
79,600 Ryanair Holdings Plc (b) ..................... 528,674
--------------
1,689,825
--------------
ISRAEL -- 1.0%
9,510 Teva Pharmaceutical Industries Ltd. ADR ...... 543,497
--------------
ITALY -- 2.8%
37,033 Banco Popolare di Verona e Novara Scrl ....... 521,262
34,650 ENI Spa ...................................... 529,709
59,300 Mediaset Spa ................................. 543,097
--------------
1,594,068
--------------
JAPAN -- 23.3%
8,400 Aiful Corp. .................................. 508,154
8,300 Canon, Inc. .................................. 406,750
36,000 Dai Nippon Printing Co. Ltd. ................. 495,014
63,000 Daiwa House Industry Co. Ltd. ................ 576,197
132 Fuji Television Network, Inc. ................ 645,694
2,800 Hirose Electric Co. Ltd. ..................... 287,753
167,000 Hiroshima Bank Ltd. .......................... 617,547
13,900 Hosiden Corp. ................................ 197,992
177,000 KAJIMA Corp. ................................. 600,512
59,000 Kaneka Corp. ................................. 430,525
53 KDDI Corp. ................................... 269,246
2,910 Keyence Corp. ................................ 619,532
22,500 KONAMI Corp. ................................. 720,953
69,000 Mitsubishi Corp. ............................. 592,676
61,000 Mitsui Fudosan Co. Ltd. ...................... 542,028
122,000 Nippon Oil Corp. ............................. 538,743
124,000 Nippon Yusen Kabushiki Kaisha ................ 490,814
39,400 Nissan Motor Co. Ltd. ........................ 426,128
8,000 Nitto Denko Corp. ............................ 346,811
103,000 NSK Ltd. ..................................... 404,919
95,000 OJI Paper Co. Ltd. ........................... 531,212
151,000 Sumitomo Trust & Banking Co. Ltd. ............ 737,280
9,500 Takeda Chemical Industries Ltd. .............. 347,036
6,100 TDK Corp. .................................... 362,994
32,475 THK Co. Ltd. ................................. 560,220
8,100 Uni-Charm Corp. .............................. 383,862
22,300 Yamada Denki Co. Ltd. ........................ 660,503
--------------
13,301,095
--------------
MEXICO -- 1.5%
20,225 America Movil SA de CV, Series L, ADR ........ 467,400
11,300 Grupo Televisa SA ADR ........................ 413,467
--------------
880,867
--------------
NETHERLANDS -- 3.2%
40,300 Aegon NV ..................................... 469,106
25,200 ING Groep NV ................................. 461,880
19,700 Koninklijke (Royal) Philips Electronics NV ... 446,693
10,500 Royal Dutch Petroleum Co. .................... 461,367
--------------
1,839,046
--------------
NORWAY -- 0.8%
106,800 Telenor ASA .................................. 475,339
--------------
SINGAPORE -- 1.5%
41,000 DBS Group Holdings Ltd. ...................... 305,855
40,725 Flextronics International Ltd. (b) ........... 577,481
--------------
883,336
--------------
SOUTH AFRICA -- 0.9%
29,300 Anglo American Plc ........................... 526,490
--------------
See accompanying notes to financial statements.
9
LOOMIS SAYLES INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
SHARES DESCRIPTION VALUE (a)
- ------------------------------------------------------------------------------
SOUTH KOREA -- 2.6%
13,000 Hyundai Motor Co. Ltd. ....................... $ 374,125
3,325 Kookmin Bank ADR ............................. 109,392
13,160 Kookmin Bank ................................. 431,363
1,700 Samsung Electronics .......................... 579,403
--------------
1,494,283
--------------
SPAIN -- 0.9%
32,200 Iberdrola SA ................................. 542,156
SWEDEN -- 3.3%
17,500 Atlas Copco AB, Class A ...................... 512,700
9,000 Autoliv, Inc. ADR ............................ 270,063
25,500 Electrolux AB ................................ 554,548
17,200 SKF AB, Class B .............................. 541,648
--------------
1,878,959
--------------
SWITZERLAND -- 5.4%
10,900 Credit Suisse Group .......................... 348,935
26,400 Novartis AG .................................. 1,022,155
6,600 Roche Holding AG ............................. 547,583
700 Synthes-Stratec, Inc. ........................ 620,549
10,100 UBS AG ....................................... 567,063
--------------
3,106,285
--------------
TAIWAN -- 0.6%
70,625 United Microelectronics Corp. ADR (b) ........ 318,519
--------------
THAILAND -- 0.6%
66,400 Siam Cement Public Co. Ltd ................... 335,069
--------------
UNITED KINGDOM -- 16.2%
53,400 Barclays Plc ................................. 409,869
87,485 BHP Billiton Plc ............................. 580,961
123,200 BP Plc ....................................... 845,780
44,100 Diageo Plc ................................... 476,117
48,900 Exel Plc ..................................... 538,507
43,200 GlaxoSmithKline Plc .......................... 896,897
76,300 HBOS Plc ..................................... 872,588
134,618 Kingfisher Plc ............................... 584,037
31,500 Next Plc ..................................... 588,536
26,600 Reckitt Benckiser Plc ........................ 535,012
11,743 Royal Bank of Scotland Group Plc ............. 298,653
131,200 Smith & Nephew Plc ........................... 863,626
550,640 Vodafone Group Plc ........................... 1,098,362
80,700 Xstrata Plc .................................. 623,097
--------------
9,212,042
--------------
UNITED STATES -- 0.5%
13,100 Accenture Ltd., Class A (b) .................. 292,654
--------------
Total Common Stocks
(Identified Cost $47,682,162) ................ 54,409,838
--------------
PREFERRED STOCKS -- 0.5%
GERMANY -- 0.5%
700 Porsche AG ................................... 294,788
--------------
Total Preferred Stocks
(Identified Cost $275,848) ................... 294,788
--------------
RIGHTS -- 0.1%
FRANCE -- 0.0%
30,000 Axa (b) ...................................... 1,398
--------------
GERMANY -- 0.1%
7,060 Stada Arzneimittel AG ........................ 15,795
--------------
Total Rights
(Identified Cost $0) ......................... 17,193
--------------
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- ------------------------------------------------------------------------------
SHORT TERM INVESTMENT -- 2.4% OF TOTAL NET ASSETS
$ 1,370,000 Repurchase Agreement with State Street Corp.,
dated 9/30/03 at 0.350% to be repurchased at
$1,370,013 on 10/01/03, collateralized by
$1,360,000 U.S. Treasury Note, 3.375%, due
4/30/04 with a value of $1,400,970 ........... $ 1,370,000
--------------
Total Short Term Investment
(Identified Cost $1,370,000) ................. 1,370,000
--------------
Total Investments -- 98.4%
(Identified Cost $49,328,010)(c) ............. 56,091,819
Other assets less liabilities ................ 936,215
--------------
Total Net Assets -- 100% ..................... $ 57,028,034
==============
(a) See Note 2a of Notes to Financial Statements.
(b) Non-income producing security.
(c) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation
on investments based on cost of $49,551,427 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost ................................................ $ 7,100,449
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost over
value ................................................... (560,057)
--------------
Net unrealized appreciation ............................. $ 6,540,392
==============
ADR An American Depositary Receipt (ADR) is a certificate issued by a U.S.
bank representing the right to receive securities of the foreign issuer
described. The values of ADRs are significantly influenced by trading on
exchanges not located in the United States.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2003 AS A PERCENTAGE OF NET ASSETS
Commercial Banks 9.1%
Pharmaceuticals 7.3
Metals & Mining 6.1
Oil & Gas 5.9
Machinery 4.7
Media 4.3
Electronic Equipment & Instruments 3.6
Banks/Savings & Loans 3.5
Chemicals 3.3
Specialty Retail 3.3
Wireless Telecommunication Services 3.2
Capital Markets 3.1
Household Durables 2.8
Health Care Equipment & Supplies 2.6
Software 2.0
Other 33.6
See accompanying notes to financial statements.
10
LOOMIS SAYLES RESEARCH FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
SHARES DESCRIPTION VALUE (a)
- ------------------------------------------------------------------------------
COMMON STOCKS -- 99.5% OF TOTAL NET ASSETS
AUTO COMPONENTS -- 0.8%
3,375 Lear Corp. (b) ............................... $ 177,660
--------------
BEVERAGES -- 1.8%
7,900 Anheuser-Busch Cos., Inc. .................... 389,786
--------------
BIOTECHNOLOGY -- 4.3%
6,025 Amgen, Inc. (b) .............................. 389,034
4,175 Genentech, Inc. (b) .......................... 334,584
3,750 Gilead Sciences, Inc. (b) .................... 209,738
--------------
933,356
--------------
BUILDING PRODUCTS -- 1.3%
11,825 Masco Corp. .................................. 289,476
--------------
CAPITAL MARKETS -- 2.2%
12,100 Ameritrade Holding Corp (b) .................. 136,125
4,175 Lehman Brothers Holdings, Inc. ............... 288,409
1,100 Merrill Lynch & Co., Inc. .................... 58,883
--------------
483,417
--------------
CHEMICALS -- 1.1%
3,925 Praxair, Inc. ................................ 243,154
--------------
COMMERCIAL BANKS -- 6.9%
7,500 Bank of America Corp. ........................ 585,300
15,475 U.S. Bancorp ................................. 371,245
10,850 Wells Fargo & Co. ............................ 558,775
--------------
1,515,320
--------------
COMMERCIAL SERVICES & SUPPLIES -- 1.6%
2,550 Apollo Group, Inc., Class A (b) .............. 168,377
3,875 Career Education Corp. (b) ................... 175,537
--------------
343,914
--------------
COMMUNICATIONS EQUIPMENT -- 4.9%
25,400 Cisco Systems, Inc. (b) ...................... 496,316
8,025 QUALCOMM, Inc. ............................... 334,161
7,775 UTStarcom, Inc. (b) .......................... 247,323
--------------
1,077,800
--------------
COMPUTERS & PERIPHERALS -- 2.4%
10,550 Dell, Inc. (b) ............................... 352,264
2,850 SanDisk Corp. (b) ............................ 181,659
--------------
533,923
--------------
CONSUMER FINANCE -- 2.5%
24,425 MBNA Corp. ................................... 556,890
--------------
DIVERSIFIED FINANCIAL SERVICES -- 3.6%
17,191 Citigroup, Inc. .............................. 782,362
--------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.6%
12,450 BellSouth Corp. .............................. 294,816
10,075 SBC Communications, Inc. ..................... 224,169
18,225 Sprint Corp. (FON Group) ..................... 275,197
--------------
794,182
--------------
ELECTRIC UTILITIES -- 3.0%
7,025 Exelon Corp. ................................. 446,087
6,500 FirstEnergy Corp. ............................ 207,350
--------------
653,437
--------------
ELECTRICAL EQUIPMENT -- 0.7%
3,425 Cooper Industries Ltd. ....................... 164,503
--------------
ENERGY EQUIPMENT & Services -- 1.6%
5,750 GlobalSantaFe Corp. .......................... 137,713
8,700 Halliburton Co. .............................. 210,975
--------------
348,688
--------------
FOOD & STAPLES RETAILING -- 4.9%
7,600 CVS Corp. .................................... 236,056
7,150 SYSCO Corp. .................................. 233,876
10,775 Wal-Mart Stores, Inc. ........................ 601,784
--------------
1,071,716
--------------
FOOD PRODUCTS -- 1.2%
8,075 Kellogg Co. .................................. 269,301
--------------
HEALTH CARE EQUIPMENT & SUPPLIES -- 4.6%
5,575 Boston Scientific Corp. (b) .................. 355,685
6,500 St. Jude Medical, Inc. (b) ................... 349,505
5,350 Zimmer Holdings, Inc. (b) .................... 294,785
--------------
999,975
--------------
HEALTH CARE PROVIDERS & SERVICES -- 3.3%
4,575 Aetna, Inc. .................................. 279,212
9,075 Caremark Rx, Inc. (b) ........................ 205,095
4,800 UnitedHealth Group, Inc. ..................... 241,536
--------------
725,843
--------------
HOTELS RESTAURANTS & LEISURE -- 2.3%
6,275 Mandalay Resort Group ........................ 248,553
9,300 Royal Caribbean Cruises Ltd. ................. 261,423
--------------
509,976
--------------
HOUSEHOLD DURABLES -- 0.8%
2,425 Mohawk Industries, Inc. (b) .................. 172,951
--------------
HOUSEHOLD PRODUCTS -- 2.2%
5,150 Procter & Gamble Co. ......................... 478,023
--------------
INDUSTRIAL CONGLOMERATES -- 3.6%
17,525 General Electric Co. ......................... 522,420
13,400 Tyco International Ltd. ...................... 273,762
--------------
796,182
--------------
INSURANCE -- 4.2%
10,200 Ace Ltd. ..................................... 337,416
5,000 Hartford Financial Services Group, Inc. ...... 263,150
4,875 The Chubb Corp. .............................. 316,290
--------------
916,856
--------------
INTERNET & CATALOG RETAIL -- 2.2%
4,700 eBay, Inc. (b) ............................... 251,497
7,175 InterActiveCorp. (b) ......................... 237,134
--------------
488,631
--------------
INFORMATION TECHNOLOGY SERVICES -- 1.5%
6,750 Affiliated Computer Services, Inc.,
Class A (b) .................................. 328,658
--------------
MACHINERY -- 3.3%
3,425 Danaher Corp. ................................ 252,970
4,475 Dover Corp. .................................. 158,281
5,700 Ingersoll-Rand Co., Class A .................. 304,608
--------------
715,859
--------------
MEDIA -- 1.8%
13,150 General Motors Corp., Class H (b) ............ 188,177
6,650 Univision Communications, Inc., Class A (b) .. 212,334
--------------
400,511
--------------
MULTILINE RETAIL -- 0.7%
2,725 Kohl's Corp. (b) ............................. 145,788
--------------
See accompanying notes to financial statements.
11
LOOMIS SAYLES RESEARCH FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
SHARES DESCRIPTION VALUE (a)
- ------------------------------------------------------------------------------
OIL & GAS -- 4.0%
3,350 ChevronTexaco Corp. .......................... $ 239,357
2,750 ConocoPhillips ............................... 150,563
13,400 Exxon Mobil Corp. ............................ 490,440
--------------
880,360
--------------
PAPER & FOREST PRODUCTS -- 1.6%
4,100 Bowater, Inc. ................................ 172,446
4,375 International Paper Co. ...................... 170,713
--------------
343,159
--------------
PERSONAL PRODUCTS -- 1.0%
3,250 Avon Products, Inc. .......................... 209,820
--------------
PHARMACEUTICALS -- 1.8%
2,075 Allergan, Inc. ............................... 163,365
3,325 Barr Laboratories, Inc. (b) .................. 226,798
--------------
390,163
--------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 4.1%
8,125 Intel Corp. .................................. 223,519
8,800 Maxim Integrated Products, Inc. .............. 347,600
20,775 NVIDIA Corp. (b) ............................. 330,551
--------------
901,670
--------------
SOFTWARE -- 4.9%
31,975 Microsoft Corp. .............................. 888,585
2,825 Symantec Corp. (b) ........................... 178,032
--------------
1,066,617
--------------
SPECIALTY RETAIL -- 1.7%
6,775 Home Depot, Inc. ............................. 215,784
7,325 PETsMART, Inc. (b) ........................... 166,277
--------------
382,061
--------------
THRIFTS & MORTGAGE FINANCE -- 1.5%
4,325 Countrywide Financial Corp. .................. 338,561
--------------
Total Common Stocks
(Identified Cost $20,346,868) ................ 21,820,549
--------------
Total Investments -- 99.5%
(Identified Cost $20,346,868) (c) ............ 21,820,549
Other assets less liabilities ................ 106,281
--------------
Total Net Assets -- 100% ..................... $ 21,926,830
==============
(a) See Note 2a of Notes to Financial Statements.
(b) Non-income producing security.
(c) Federal Tax Information:
At September 30, 2003, the net unrealized
appreciation on investments based on cost of
$20,501,580 for federal income tax purposes was
as follows:
Aggregate gross unrealized appreciation
for all investments in which there is an excess
of value over tax cost .................................. $ 1,704,777
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value .................................. (385,808)
--------------
Net unrealized appreciation ............................. $ 1,318,969
==============
See accompanying notes to financial statements.
12
STATEMENTS OF ASSETS & LIABILITIES
September 30, 2003
GROWTH INTERNATIONAL RESEARCH
FUND EQUITY FUND FUND
--------------- --------------- ---------------
ASSETS
Investments at value ..................................... $ 29,254,877 $ 56,091,819 $ 21,820,549
Cash ..................................................... 491,332 300 118,984
Foreign currency at value ................................ -- 454,175 --
Receivable for:
Fund shares sold ....................................... 23 16,633 --
Securities sold ........................................ 978,947 2,739,121 87,778
Dividends and interest ................................. 12,109 164,249 17,867
Foreign tax reclaim .................................... -- 48,223 --
Due from the adviser ..................................... 9,405 23,039 12,111
--------------- --------------- ---------------
TOTALASSETS ............................................ 30,746,693 59,537,559 22,057,289
--------------- --------------- ---------------
LIABILITIES
Payable for:
Securities purchased ................................... 840,790 1,922,174 59,174
Fund shares redeemed ................................... 5,805 467,546 23,623
Foreign taxes .......................................... -- 34,246 --
Accrued expenses:
Management fees ........................................ 12,582 35,406 9,191
Trustees' fees ......................................... 4,011 4,011 4,011
Deferred trustees' fees ................................ 1,142 1,142 1,142
Accounting and administrative fees ..................... 880 1,652 644
Service and distribution fees .......................... 7 26 --
Transfer agent fees .................................... 5,329 5,893 4,438
Other .................................................. 26,177 37,429 28,236
--------------- --------------- ---------------
TOTAL LIABILITIES ...................................... 896,723 2,509,525 130,459
--------------- --------------- ---------------
NET ASSETS ................................................. $ 29,849,970 $ 57,028,034 $ 21,926,830
=============== =============== ===============
NET ASSETS CONSIST OF:
Paid in Capital .......................................... $ 44,483,945 $ 87,570,709 $ 23,986,375
Undistributed (overdistributed) net investment
income (loss) ........................................... (1,142) 785,880 76,148
Accumulated net realized gain (loss) on investments ...... (17,360,034) (38,093,806) (3,609,374)
Unrealized appreciation (depreciation) on:
Investments* ........................................... 2,727,201 6,745,822 1,473,681
Foreign currency translations .......................... -- 19,429 --
--------------- --------------- ---------------
NET ASSETS ................................................. $ 29,849,970 $ 57,028,034 $ 21,926,830
=============== =============== ===============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
CLASS A SHARES:
Net assets ............................................. $ 947,051 $ 3,264,117 $ 41,315
=============== =============== ===============
Shares of beneficial interest .......................... 214,559 343,621 5,985
=============== =============== ===============
Net asset value and redemption price per share ......... $ 4.41 $ 9.50 $ 6.90
=============== =============== ===============
Offering price per share ............................... $ 4.68 $ 10.08 $ 7.32
=============== =============== ===============
CLASS B SHARES: (redemption price is equal to net
asset value less any applicable contingent deferred
sales charges)
Net assets ............................................. $ 2,430 $ 146,961 $ 2,447
=============== =============== ===============
Shares of beneficial interest .......................... 551 15,469 355
=============== =============== ===============
Net asset value and offering price per share ........... $ 4.41 $ 9.50 $ 6.90
=============== =============== ===============
CLASS C SHARES: (redemption price is equal to net
asset value less any applicable contingent deferred
sales charges)
Net assets ............................................. $ 2,430 $ 11,663 $ 2,447
=============== =============== ===============
Shares of beneficial interest .......................... 551 1,228 355
=============== =============== ===============
Net asset value and redemption price per share ......... $ 4.41 $ 9.50 $ 6.90
=============== =============== ===============
Offering price per share ............................... $ 4.45 $ 9.60 $ 6.97
=============== =============== ===============
CLASS Y SHARES:
Net assets ............................................. $ 28,898,059 $ 53,605,293 $ 21,880,621
=============== =============== ===============
Shares of beneficial interest .......................... 6,346,992 5,582,118 3,163,020
=============== =============== ===============
Net asset value, offering and redemption price per
share ................................................. $ 4.55 $ 9.60 $ 6.92
=============== =============== ===============
Identified cost of investments ......................... $ 26,527,676 $ 49,328,010 $ 20,346,868
Cost of foreign currency ............................... $ -- $ 448,101 $ --
* Net of capital gain taxes withheld of $17,987 for
the International Equity Fund
See accompanying notes to financial statements.
13
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 2003
GROWTH INTERNATIONAL RESEARCH
FUND EQUITY FUND FUND
--------------- --------------- ---------------
INVESTMENT INCOME
Dividends * .............................................. $ 162,338 $ 1,175,651 $ 271,335
Interest ................................................. 3,281 4,371 1,161
--------------- --------------- ---------------
165,619 1,180,022 272,496
--------------- --------------- ---------------
Expenses
Management fees ........................................ 127,336 357,744 94,554
Service and distribution fees - Class A ................ 1,582 5,170 93
Service and distribution fees - Class B ................ 1 19 1
Service and distribution fees - Class C ................ 1 2 1
Service and distribution fees - Admin Class ............ 60 2,598 --
Trustees' fees and expenses ............................ 9,869 9,869 9,869
Administrative fees .................................... 8,911 16,465 6,618
Custodian and accounting fees .......................... 59,269 147,339 54,913
Transfer agent fees - Class A .......................... 11,167 12,073 10,196
Transfer agent fees - Class B .......................... 6 38 127
Transfer agent fees - Class C .......................... 6 4 127
Transfer agent fees - Class Y .......................... 22,232 24,511 18,854
Transfer agent fees - Admin Class ...................... 7,164 7,449 --
Audit and tax services ................................. 30,969 34,886 29,735
Registration ........................................... 35,281 47,586 26,327
Printing ............................................... 4,507 9,830 3,965
Legal .................................................. 1,491 3,008 1,522
Other expenses ......................................... 555 4,024 563
--------------- --------------- ---------------
Total expenses ........................................... 320,407 682,615 257,465
Less reimbursement/waiver .............................. (102,292) (197,825) (96,625)
--------------- --------------- ---------------
Net expenses ............................................. 218,115 484,790 160,840
--------------- --------------- ---------------
Net investment income (loss) ............................. (52,496) 695,232 111,656
--------------- --------------- ---------------
NET REALIZED GAIN (LOSS) ON:
Investments .............................................. 258,547 (1,886,640) (511,134)
Foreign currency transactions ............................ -- 90,648 --
--------------- --------------- ---------------
Total net realized gain (loss) ........................... 258,547 (1,795,992) (511,134)
--------------- --------------- ---------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments .............................................. 4,474,372 11,848,405 4,009,118
Foreign currency translations ............................ -- 15,854 --
--------------- --------------- ---------------
Total net change in unrealized appreciation
(depreciation) .......................................... 4,474,372 11,864,259 4,009,118
--------------- --------------- ---------------
Total net realized gain (loss) and change in
unrealized appreciation (depreciation) .................. 4,732,919 10,068,267 3,497,984
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS ................................................ $ 4,680,423 $ 10,763,499 $ 3,609,640
=============== =============== ===============
*Net of foreign taxes withheld of $134,314 for the International Equity Fund.
See accompanying notes to financial statements.
14
STATEMENTS OF CHANGES IN NET ASSETS
GROWTH
FUND
----------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002
--------------- ---------------
FROM OPERATIONS:
Net investment income (loss) ............................. $ (52,496) $ (93,275)
Net realized gain (loss) ................................. 258,547 (2,239,521)
Change in unrealized appreciation (depreciation) ......... 4,474,372 (137,103)
--------------- ---------------
Increase (decrease) in net assets resulting from
operations .............................................. 4,680,423 (2,469,899)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS:
Increase (decrease) in net assets derived from
capital share transactions .............................. 5,060,671 400,616
--------------- ---------------
Total increase (decrease) in net assets .................. 9,741,094 (2,069,283)
NET ASSETS
Beginning of the period .................................. 20,108,876 22,178,159
--------------- ---------------
End of the period ........................................ $ 29,849,970 $ 20,108,876
=============== ===============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME (LOSS) ............................................. $ (1,142) $ --
=============== ===============
INTERNATIONAL EQUITY
FUND
----------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002
--------------- ---------------
FROM OPERATIONS:
Net investment income (loss) ............................. $ 695,232 $ 248,780
Net realized gain (loss) ................................. (1,795,992) (10,540,787)
Change in unrealized appreciation (depreciation) ......... 11,864,259 17,941
--------------- ---------------
Increase (decrease) in net assets resulting from
operations .............................................. 10,763,499 (10,274,066)
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income: Class A ........................... -- (5,046)
Net investment income: Class Y ........................... (105,408) (235,551)
--------------- ---------------
(105,408) (240,597)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS:
Increase (decrease) in net assets derived from
capital share transactions .............................. (46,296) (999,346)
--------------- ---------------
Total increase (decrease) in net assets .................. 10,611,795 (11,514,009)
NET ASSETS
Beginning of the period .................................. 46,416,239 57,930,248
--------------- ---------------
End of the period ........................................ $ 57,028,034 $ 46,416,239
=============== ===============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME (LOSS) ............................................. $ 785,880 $ 105,679
=============== ===============
See accompanying notes to financial statements.
15
STATEMENTS OF CHANGES IN NET ASSETS
RESEARCH
FUND
----------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002
--------------- ---------------
FROM OPERATIONS:
Net investment income (loss) ............................. $ 111,656 $ 63,575
Net realized gain (loss) ................................. (511,134) (1,897,647)
Change in unrealized appreciation (depreciation) ......... 4,009,118 (2,170,405)
--------------- ---------------
Increase (decrease) in net assets resulting from
operations .............................................. 3,609,640 (4,004,477)
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income: Class A ........................... (66) --
Net investment income: Class Y ........................... (81,513) (19,618)
--------------- ---------------
(81,579) (19,618)
--------------- ---------------
FROM CAPITAL SHARES TRANSACTIONS:
Increase (decrease) in net assets derived from
capital share transactions .............................. 2,492,591 15,685,332
--------------- ---------------
Total increase (decrease) in net assets .................. 6,020,652 11,661,237
NET ASSETS
Beginning of the period .................................. 15,906,178 4,244,941
--------------- ---------------
End of the period ........................................ $ 21,926,830 $ 15,906,178
=============== ===============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME (LOSS) ............................................. $ 76,148 $ 47,067
=============== ===============
See accompanying notes to financial statements.
16
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
----------------------------------------------- ---------------------------------------------
NET ASSET
VALUE, NET NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING INVESTMENT AND UNREALIZED TOTAL FROM FROM FROM NET
OF INCOME GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED TOTAL
THE PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
------------ ------------ -------------- ------------ -------------- ------------- -------------
GROWTH FUND
CLASS A
9/30/2003 $ 3.65 $ (0.02)(d) $ 0.78 $ 0.76 $ -- $ -- $ --
9/30/2002 4.12 (0.03)(d) (0.44) (0.47) -- -- --
9/30/2001 14.80 (0.04)(d) (7.31) (7.35) -- (3.33) (3.33)
9/30/2000 11.06 (0.07) 4.83 4.76 -- (1.02) (1.02)
9/30/1999 11.59 (0.06) 2.98 2.92 -- (3.45) (3.45)
CLASS B
9/30/2003* 4.54 --(d)(e) (0.13) (0.13) -- -- --
CLASS C
9/30/2003* 4.54 --(d)(e) (0.13) (0.13) -- -- --
CLASS Y
9/30/2003 3.75 (0.01)(d) 0.81 0.80 -- -- --
9/30/2002 4.23 (0.02)(d) (0.46) (0.48) -- -- --
9/30/2001 15.00 (0.02)(d) (7.42) (7.44) -- (3.33) (3.33)
9/30/2000 11.17 (0.05) 4.90 4.85 -- (1.02) (1.02)
9/30/1999 11.65 (0.04) 3.01 2.97 -- (3.45) (3.45)
* From commencement of Class operations on September 12, 2003 through
September 30, 2003.
(a) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Total returns would have been lower had the advis-
er not reduced its advisory fees and/or borne other operating expenses.
Periods less than one year are not annualized.
(b) The adviser has agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement the Fund's ratio of
operating expenses would have been higher.
(c) Annualized for periods less than one year.
(d) Per share net investment income (loss) has been determined on the basis
of the weighted average number of shares outstanding during the period.
(e) Amount rounds to less than $0.01 per share.
See accompanying notes to financial statements.
17
RATIOS TO AVERAGE NET ASSETS:
-------------------------------------------
NET ASSET NET ASSETS,
VALUE, TOTAL END OF NET GROSS NET INVESTMENT PORTFOLIO
END OF RETURN THE PERIOD EXPENSES EXPENSES INCOME(LOSS) TURNOVER
THE PERIOD (%) (a) (000) (%) (b)(c) (%) (c) (%) (c) RATE (%)
------------ ------------ ------------ ------------ ------------ -------------- ------------
GROWTH FUND
CLASS A
9/30/2003 $ 4.41 20.8 $ 947 1.10 3.11 (0.45) 201
9/30/2002 3.65 (11.4) 456 1.10 5.20 (0.65) 192
9/30/2001 4.12 (50.9) 518 1.10 4.11 (0.42) 281
9/30/2000 14.80 45.3 1,028 1.10 3.29 (0.61) 203
9/30/1999 11.06 30.6 649 1.10 4.43 (0.65) 164
CLASS B
9/30/2003* 4.41 (2.9) 2 1.85 7.92 (1.29) 201
CLASS C
9/30/2003* 4.41 (2.9) 2 1.85 7.92 (1.29) 201
CLASS Y
9/30/2003 4.55 21.3 28,898 0.85 1.18 (0.20) 201
9/30/2002 3.75 (11.4) 19,635 0.85 1.32 (0.39) 192
9/30/2001 4.23 (50.8) 21,653 0.85 1.24 (0.17) 281
9/30/2000 15.00 45.6 45,328 0.85 1.01 (0.36) 203
9/30/1999 11.17 30.9 28,235 0.85 1.18 (0.40) 164
18
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
----------------------------------------------- ---------------------------------------------
NET ASSET
VALUE, NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING NET AND UNREALIZED TOTAL FROM FROM FROM NET
OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED TOTAL
THE PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
----------- ------------ -------------- ------------ -------------- ------------- -------------
INTERNATIONAL
EQUITY FUND
CLASS A
9/30/2003 $ 7.70 $ 0.11(d) $ 1.69 $ 1.80 $ -- $ -- $ --
9/30/2002 9.50 0.02(d) (1.80) (1.78) (0.02) -- (0.02)
9/30/2001 17.31 0.02(d) (5.89) (5.87) -- (1.94) (1.94)
9/30/2000 13.73 (0.05)(d) 4.67 4.62 (0.04) (1.00) (1.04)
9/30/1999 10.70 0.05 3.28 3.33 (0.10) (0.20) (0.30)
CLASS B
9/30/2003* 9.56 --(d)(e) (0.06) (0.06) -- -- --
CLASS C
9/30/2003* 9.56 --(d)(e) (0.06) (0.06) -- -- --
CLASS Y
9/30/2003 7.78 0.12(d) 1.72 1.84 (0.02) -- (0.02)
9/30/2002 9.61 0.04(d) (1.83) (1.79) (0.04) -- (0.04)
9/30/2001 17.41 0.05(d) (5.91) (5.86) -- (1.94) (1.94)
9/30/2000 13.79 (0.06)(d) 4.77 4.71 (0.09) (1.00) (1.09)
9/30/1999 10.74 0.07 3.31 3.38 (0.13) (0.20) (0.33)
* From commencement of Class operations on September 12, 2003 through
September 30, 2003.
(a) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Total returns would have been lower had the
adviser not reduced its advisory fees and/or borne other operating
expenses. Periods less than one year are not annualized.
(b) The adviser has agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement the Fund's ratio of
operating expenses would have been higher.
(c) Annualized for periods less than one year.
(d) Per share net investment income (loss) has been determined on the basis
of the weighted average number of shares outstanding during the period.
(e) Amount rounds to less than $0.01 per share.
See accompanying notes to financial statements.
19
RATIOS TO AVERAGE NET ASSETS:
-------------------------------------------
NET ASSET NET ASSETS,
VALUE, TOTAL END OF NET GROSS NET INVESTMENT PORTFOLIO
END OF RETURN THE PERIOD EXPENSES EXPENSES INCOME (LOSS) TURNOVER
THE PERIOD (%)(a) (000) (%) (b)(c) (%)(c) (%)(c) RATE (%)
------------ ------------ ------------ ------------ ------------ -------------- ------------
INTERNATIONAL
EQUITY FUND
CLASS A
9/30/2003 $ 9.50 23.4 $ 3,264 1.25 2.15 1.33 174
9/30/2002 7.70 (18.8) 1,338 1.25 2.69 0.19 135
9/30/2001 9.50 (34.7) 2,793 1.25 1.99 0.13 207
9/30/2000 17.31 33.9 5,588 1.25 1.67 (0.26) 226
9/30/1999 13.73 31.6 261 1.25 12.33 0.29 207
CLASS B
9/30/2003* 9.50 (0.6) 147 2.35 4.44 (0.91) 174
CLASS C
9/30/2003* 9.50 (0.6) 12 2.35 4.44 (0.83) 174
CLASS Y
9/30/2003 9.60 23.7 53,605 1.00 1.38 1.47 174
9/30/2002 7.78 (18.7) 44,101 1.00 1.43 0.47 135
9/30/2001 9.61 (34.5) 54,080 1.00 1.35 0.34 207
9/30/2000 17.41 34.4 107,792 1.00 1.15 (0.32) 226
9/30/1999 13.79 32.0 79,415 1.00 1.22 0.53 207
20
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
----------------------------------------------- ---------------------------------------------
NET ASSET
VALUE, NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING NET AND UNREALIZED TOTAL FROM FROM FROM NET
OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED TOTAL
THE PERIOD INCOME (LOSS) INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
----------- ------------- -------------- ------------ -------------- ------------- -------------
RESEARCH FUND
CLASS A
9/30/2003 $ 5.69 $ 0.02(d) $ 1.20 $ 1.22 $ (0.01) $ -- $ (0.01)
9/30/2002** 7.61 0.01(d) (1.92) (1.91) (0.01) -- (0.01)
CLASS B
9/30/2003*** 7.05 --(d)(e) (0.15) (0.15) -- -- --
CLASS C
9/30/2003*** 7.05 --(d)(e) (0.15) (0.15) -- -- --
CLASS Y
9/30/2003 5.71 0.04(d) 1.20 1.24 (0.03) -- (0.03)
9/30/2002 6.85 0.03(d) (1.16) (1.13) (0.01) -- (0.01)
9/30/2001 10.54 0.01(d) (3.65) (3.64) -- (0.05) (0.05)
9/30/2000* 10.00 --(e) 0.54 0.54 -- -- --
* From commencement of Class operations on July 31, 2000 through September
30, 2000.
** From commencement of Class operations on November 30, 2001 through
September 30, 2002.
*** From commencement of Class operations on September 12, 2003 through
September 30, 2003.
(a) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Total returns would have been lower had the advis-
er not reduced its advisory fees and/or borne other operating expenses.
Periods less than one year are not annualized.
(b) The adviser has agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement the Fund's ratio of
operating expenses would have been higher.
(c) Annualized for periods less than one year.
(d) Per share net investment income (loss) has been determined on the basis
of the weighted average number of shares outstanding during the period.
(e) Amount rounds to less than $0.01 per share.
See accompanying notes to financial statements.
21
RATIOS TO AVERAGE NET ASSETS:
-------------------------------------------
NET ASSET NET ASSETS,
VALUE, TOTAL END OF NET GROSS NET INVESTMENT PORTFOLIO
END OF RETURN THE PERIOD EXPENSES EXPENSES INCOME (LOSS) TURNOVER
THE PERIOD (%) (a) (000) (%) (b)(c) (%)(c) (%)(c) RATE (%)
------------ ------------ ------------ ------------ ------------ -------------- ------------
RESEARCH FUND
CLASS A
9/30/2003 $ 6.90 21.5 $ 41 1.10 28.75 0.35 138
9/30/2002** 5.69 (25.2) 17 1.10 213.89 0.22 130
CLASS B
9/30/2003*** 6.90 (2.1) 2 2.00 125.11 (0.72) 138
CLASS C
9/30/2003*** 6.90 (2.1) 2 2.00 125.11 (0.72) 138
CLASS Y
9/30/2003 6.92 21.8 21,881 0.85 1.31 0.59 138
9/30/2002 5.71 (16.6) 15,889 0.89 1.46 0.36 130
9/30/2001 6.85 (34.7) 4,245 1.15 4.26 0.09 171
9/30/2000* 10.54 5.4 3,510 1.15 8.02 (0.14) 20
22
This Page Intentionally Left Blank
23
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2003
1. Organization. Loomis Sayles Funds II (formerly Loomis Sayles Funds) (the
"Trust") is organized as a Massachusetts business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as an open-end investment
company. The Declaration of Trust permits the Trustees to issue an unlimited
number of shares of the Trust in multiple series (individually, a "Fund" and
collectively, the "Funds"). Information presented in these financial statements
pertains to certain of the equity funds of the Trust, the financial statements
for the remaining equity funds and the fixed income funds are presented in
separate reports. The following Funds are included in this report:
Loomis Sayles Growth Fund (the "Growth Fund")
Loomis Sayles International Equity Fund (the "International Equity Fund")
Loomis Sayles Research Fund (the "Research Fund")
On May 14, 2003, shareholders of Loomis Sayles Funds I and on June 10, 2003
shareholders of Loomis Sayles Funds II (together, Loomis Sayles Funds I and
Loomis Sayles Funds II comprise the "Loomis Sayles Funds Trusts") approved new
Trustees for the Loomis Sayles Funds Trusts in connection with the integration
of the CDC Nvest Funds Trusts I, II, III, CDC Nvest Companies Trust I, CDC Nvest
Cash Management Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC
Nvest Funds Trusts") and Loomis Sayles Funds Trusts. This approval resulted in a
combined Board of Trustees for the Loomis Sayles Funds Trusts and CDC Nvest
Funds Trusts.
On February 5, 2003, the Board of Trustees approved the closing of the Admin
Class of shares of Growth Fund and International Equity Fund. On May 21, 2003,
all outstanding Admin Class shares for Growth Fund and International Equity Fund
were automatically converted into Retail Class shares having the same aggregate
net asset value as the shares converted.
On June 12, 2003, the Trustees of the Trust adopted a load class structure for
Growth Fund, International Equity Fund and Research Fund consisting of each Fund
offering Class A, Class B, Class C and Class Y shares. On September 12, 2003,
all outstanding Retail Class shares converted into Class A shares and all
outstanding Institutional Class shares converted into Class Y shares for each of
the Funds. Class A shares are sold with a maximum front end sales charge of
5.75%. Class B shares do not pay a front end sales charge, but pay a higher
ongoing distribution fee than Class A shares for eight years (at which point
they automatically convert to Class A shares), and are subject to a contingent
deferred sales charge ("CDSC") if those shares are redeemed within six years of
purchase. Class C shares are sold with a maximum front end sales charge of
1.00%, do not convert to any other class of shares and pay a higher ongoing
distribution fee than Class A shares and may be subject to a CDSC of 1.00% if
those shares are redeemed within one year. Class Y shares do not pay a front end
sales charge, a CDSC or distribution fees. They are intended for institutional
investors with a minimum initial investment of $1,000,000.
Most expenses of the Trust can be directly attributed to a Fund. Expenses which
can not be directly attributed are apportioned based on the relative net assets
of each of the Funds in the Trust. Expenses of a Fund are borne pro rata by the
holders of each class of shares, except that each class bears expenses unique to
that class (including the Rule 12b-1 service and distribution fees and transfer
agent fees applicable to such class). In addition, each class votes as a class
only with respect to its own Rule 12b-1 Plan. Shares of each class would receive
their pro rata share of the net assets of a Fund, if the Fund were liquidated.
The Trustees approve separate dividends from net investment income on each class
of shares.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by each Fund in preparation of its
financial statements. The Funds' financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America
which require the use of management estimates that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
a. Security Valuation. Equity securities for which market quotations are readily
available are valued at market value, as reported by pricing services
recommended by the pricing committee and approved by the Board of Trustees. Such
pricing services generally use the security's last sale price on the exchange or
market where primarily traded or, if there is no reported sale during the day,
the closing bid price. Effective April 14, 2003, securities traded on the NASDAQ
National Market are valued at the NASDAQ Official Closing Price ("NOCP"), or if
lacking an NOCP, at the most recent bid quotation on the NASDAQ National Market.
Debt securities for which market quotations are readily available are generally
valued at market value, as reported by pricing services recommended by the
investment adviser's pricing committee and approved by the Board of Trustees.
Such pricing services generally use the most recent bid prices in the principal
market in which such securities are normally traded. 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. Short-term obligations with a remaining
maturity of 60 days or less are valued at amortized cost, which approximates
market value. Securities for which market quotations are not readily available
(including restricted securities, if any) are valued at fair value as determined
in good faith by the Fund's investment adviser using consistently applied
procedures under the general supervision of the Board of Trustees. If events
occurring after the close of the principal market in which securities are traded
(but before the close of regular trading on the New York Stock Exchange) are
believed to materially affect the value of those securities, such securities are
valued at their fair value taking such events into account.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified, and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of discount and decreased by the amortization of
premium. Investment income is recorded net of foreign taxes withheld when
applicable. In determining net gain or loss on securities sold, the cost of
securities has been determined on an identified cost basis.
c. Foreign Currency Translation. The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than U.S. dollars are translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions.
24
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates from
fluctuations arising from changes in market prices of the investment securities.
Such changes are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign exchange gains or losses arise from: sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities, other than investment securities, at the end of the
fiscal periods, resulting from changes in exchange rates.
Certain Funds use foreign currency exchange contracts to facilitate transactions
in foreign-denominated investments. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
Each Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than those
of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell generally are
used to hedge the Fund's investments against currency fluctuation. Also, a
contract to buy or sell can offset a previous contract. These contracts involve
market risk in excess of the unrealized gain or loss reflected in the Fund's
Statement of Assets and Liabilities. The U.S. dollar value of the currencies the
Fund has committed to buy or sell (if any) is shown in the portfolio composition
under the caption "Forward Currency Contracts Outstanding." These amounts
represent the aggregate exposure to each currency the Fund has acquired or
hedged through currency contracts outstanding at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At September 30, 2003, there were no open forward currency
contracts.
e. Federal and Foreign Income Taxes. The Trust treats each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities, such
taxes are accrued as applicable.
f. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gains distributions are determined in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences are primarily due to differing
treatments for book and tax purposes of items such as distributions from real
estate investment trusts, net operating losses, non-deductible expenses, foreign
currency transactions and gains realized from passive foreign investment
companies. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to capital accounts.
Distributions from net investment income and short-term capital gains are
considered to be ordinary income for tax purposes.
g. Repurchase Agreements. Each Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The Fund's adviser is responsible
for determining that the value of the collateral is at all times at least equal
to 102% of the repurchase price, including interest. Repurchase agreements could
involve certain risks in the event of default or insolvency of the counterparty
including possible delays or restrictions upon a Fund's ability to dispose of
the underlying securities.
3. Purchases and Sales of Securities. For the year ended September 30, 2003,
purchases and sales of securities (excluding short-term investments) were as
follows:
Fund Purchases Sales
- -------------------------- ------------ ------------
Growth Fund $ 54,722,790 $ 49,632,927
International Equity Fund 80,250,964 80,806,552
Research Fund 28,527,024 25,695,708
25
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the
investment adviser to each of the Funds. Under the terms of the management
agreements, each Fund pays a management fee at the following annual rates,
calculated daily and payable monthly, based on each Fund's average daily net
assets:
Percentage of Average
Fund Daily Net Assets
- -------------------------- ---------------------
Growth Fund 0.50%
International Equity Fund 0.75%
Research Fund 0.50%
Loomis Sayles has given binding undertakings to the Funds to reduce its advisory
fees and/or bear other expenses to the extent necessary to limit the total
operating expenses of each Fund to the percentages set forth below. These
undertakings are in effect until the dates indicated and will be reevaluated on
an annual basis.
At September 30, 2003, the expense limits as a percentage of average daily net
assets and expiration dates of the waivers under the expense limitation
agreements were as follows:
Expense Limits
-------------------------------------
Fund Class A Class B Class C Class Y Expiration of Waiver
- --------------------------- ------- ------- ------- ------- --------------------
Growth Fund 1.10% 1.85% 1.85% 0.85% January 31, 2005
International Equity Fund 1.25 2.35 2.35 1.00 January 31, 2004
Research Fund 1.10 2.00 2.00 0.85 January 31, 2004
For the year ended September 30, 2003, the management fees and waivers for each
Fund were as follows:
Percentage of Average
Gross Waiver of Net Daily Net Assets
Management Management Management ---------------------
Fund Fee Fee Fee Gross Net
- --------------------------- ---------- ---------- ---------- ---------------------
Growth Fund $ 127,336 $ 61,706 $ 65,630 0.50% 0.26%
International Equity Fund 357,744 153,766 203,978 0.75 0.43
Research Fund 94,554 67,322 27,232 0.50 0.14
In addition to the waiver of management fees, $40,586, $44,059 and $29,303 of
Class level expenses have been reimbursed for Growth Fund, International Equity
Fund and Research Fund, respectively.
Certain officers and employees of Loomis Sayles are also officers or Trustees of
the Trust. Loomis Sayles' general partner is indirectly owned by CDC IXIS Asset
Management North America, L.P. ("CDC IXIS North America"), whose general partner
is indirectly owned by CDC IXIS Asset Management SA ("CDC IXIS"). CDC IXIS is
part of the Caisse des Depots et Consignations Group.
b. Accounting and Administrative Expense. Effective July 1, 2003, Loomis Sayles
assigned its administrative services agreement with the Loomis Sayles Funds
Trusts to CDC IXIS Asset Management Services, Inc. ("CIS"), a wholly owned
subsidiary of CDC IXIS North America. Pursuant to the agreement between each of
the Loomis Sayles Funds Trusts and CIS, each Fund pays CIS a monthly
administrative fee at the annual rate of 0.035% of each Fund's average daily net
assets. Prior to July 1, 2003, each Fund paid Loomis Sayles a monthly
administrative fee at an annual rate of 0.035% of the Fund's average daily net
assets.
For the year ended September 30, 2003, fees paid to Loomis Sayles and CIS for
accounting and administrative expense were as follows:
Fund Amount
- --------------------------- --------
Growth Fund $ 8,911
International Equity Fund 16,465
Research Fund 6,618
Effective October 1, 2003, each Fund pays CIS its pro rata portion of the
accounting and administrative fee allocated based on the combined assets of the
CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts, for these services
representing the higher amount based on the following calculations:
26
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
(1) Percentage of Average Daily Net Assets
---------------------------------------
First Next Over
$5 billion $5 billion $10 billion
---------- ---------- -----------
0.0675% 0.0625% 0.0500%
or
(2) Each Fund's pro rata portion allocated, based on the
combined assets of the CDC Nvest Funds Trusts and the
Loomis Sayles Funds Trusts, of the annual aggregate
minimum fee of $5 million.
c. Transfer Agent Fees. Effective February 3, 2003, CIS serves as transfer and
shareholder servicing agent for each Fund and has subcontracted with Boston
Financial Data Services ("BFDS") to serve as sub-transfer agent. Prior to
February 3, 2003, BFDS served as transfer and shareholder servicing agent for
the Funds.
Effective September 15, 2003 through December 31, 2003, Classes A, B and C pay
service fees monthly representing the higher amount based on the following
calculations:
(1) Annual aggregate fee determined by applying an annual
fee rate (see schedule below) to the eligible average
daily net assets. Eligible assets are the average daily
net assets of all accounts in load* equity funds.
First Next Over
$ 5.7 billion $5 billion $10.7 billion
------------- ---------- -------------
0.184% 0.180% 0.175%
Class A, Class B and Class C shares are subject to a
monthly class minimum of $1,500.
or
(2) An allocated portion, based on eligible assets, for the
period September 15, 2003 through December 31, 2003, of
an aggregate minimum fee of $2,439,168
*Consisting of all equity Funds within the CDC Nvest Funds
Trusts and Growth Fund, International Equity Fund, and Research
Fund.
Effective September 15, 2003 through December 31, 2003, Class Y pays service
fees monthly representing the higher amount based on the following calculations:
(1) Annual aggregate fee determined by applying an annual
fee rate of 0.026% to the eligible average daily net
assets. Eligible assets are the average daily net assets
of all accounts in no-load Retail* funds and load**
funds - Class Y.
Each Fund is subject to a monthly minimum of $1,250.
or
(2) An allocated portion, based on eligible assets for the
period September 15, 2003 through December 31, 2003, of an
aggregate minimum fee of $190,547.
* No load retail funds consist of Loomis Sayles Aggressive
Growth Fund, Loomis Sayles Bond Fund, Loomis Sayles Global Bond
Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles Small
Cap Value Fund, Loomis Sayles Tax-Managed Equity Fund, Loomis
Sayles Value Fund and Loomis Sayles Worldwide Fund.
** Load funds - Class Y consist of Growth Fund, International
Equity Fund, Research Fund, Loomis Sayles Investment Grade Bond
Fund, Loomis Sayles Limited Term U.S. Government Fund, Loomis
Sayles Strategic Income Fund and all funds with Class Y in the
CDC Nvest Funds Trusts.
For the period from February 3, 2003 to September 14, 2003, each Fund of the
Trust paid to CIS the greater of: $15,000 or 0.026% of average daily net assets,
subject however to the minimum aggregate fee set forth as follows: If the
aggregate fees for the Trust's Funds payable did not equal or exceed $54,167 in
any single month, the Funds would pay the minimum aggregate fee of $54,167
($650,000 annually). Any such amount required to achieve the minimum aggregate
fee would be allocated to all of the Trust's Funds based on the percentage of
net assets each Fund represents of the total assets.
CIS is also reimbursed by the Funds for out-of-pocket expenses. For the period
from February 3, 2003 through September 30, 2003, amounts paid to CIS as
compensation for its services as transfer agent were as follows:
Fund Amount
- ------------------------- --------
Growth Fund $ 16,334
International Equity Fund 16,870
Research Fund 13,244
27
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
d. Service and Distribution Fees. Effective July 1, 2003 the Trust entered into
a distribution agreement with CDC IXIS Asset Management Distributors, L.P. ("CDC
IXIS Distributors"), a wholly owned subsidiary of CDC IXIS North America.
Pursuant to this agreement, CDC IXIS Distributors serves as principal
underwriter of the various funds of the Loomis Sayles Funds Trusts, except for
Loomis Sayles Managed Bond Fund and Loomis Sayles Investment Grade Bond Fund,
Class J. Prior to July 1, 2003, Loomis Sayles Distributors, L.P. ("Loomis Sayles
Distributors") acted as distributor of the Funds.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940 Act ("Rule
12b-1"), the Trust has adopted a Service Plan relating to each Fund's Class A
shares (the "Class A Plan") and Service and Distribution Plans relating to each
Fund's Class B and Class C shares (the "Class B and Class C Plans").
Under the Class A Plan, each Fund pays CDC IXIS Distributors a monthly service
fee at the annual rate of 0.25% of the average daily net assets attributable to
the Fund's Class A shares, as reimbursement for expenses incurred by CDC IXIS
Distributors in providing personal services to investors in Class A shares
and/or the maintenance of shareholder accounts.
Under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a
monthly service fee at the annual rate of 0.25% of the average daily net assets
attributable to the Fund's class B and Class C shares, as compensation for
services provided and expenses incurred by CDC IXIS Distributors in providing
personal services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts.
Also under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a
monthly distribution fee at the annual rate of 0.75% of the average daily net
assets attributable to the Fund's Class B and Class C shares, as compensation
for services provided and expenses incurred by CDC IXIS Distributors in
connections with the marketing or sale of Class B and Class C shares.
Prior to July 1, 2003 in the case of Class A shares (formerly, Retail Class) and
May 21, 2003 in the case of the former Admin Class shares, the Funds, pursuant
to distribution plans adopted in accordance within Rule 12b-1, were subject to
distribution fees payable to Loomis Sayles Distributors at an annual rate of
0.25% of the respective Class' average daily net assets. In addition, Admin
Class shares paid a shareholder service fee at an annual rate of up to 0.25% of
the average daily net assets attributable to Admin Class shares to securities
dealers or financial intermediaries for providing personal service and account
maintenance for their customers who hold such shares.
For the year ended September 30, 2003, the Funds paid the following service and
distribution fees:
Servic Fee Distribution Fee
----------------------------------------- -----------------------------------------
Class A Class B Class C Admin Class Class A Class B Class C Admin Class
------- ------- ------- ----------- ------- ------- ------- -----------
Growth Fund $ 519 $ -- $ -- $ 30 $ 1,063 $ 1 $ 1 $ 30
International Fund 1,776 5 -- 1,299 3,394 14 2 1,299
Research Fund 26 -- -- - 67 1 1 --
Commissions (including contingent deferred sales charges) on Fund shares paid to
CDC IXIS Distributors by investors in shares of the Funds for the period from
July 1, 2003 through September 30, 2003 were $819 and $496 for Growth Fund and
International Equity Fund, respectively.
e. Trustees Fees and Expenses. The Trust pays no compensation to its officers or
to its Trustees who are interested Trustees of Loomis Sayles, CDC IXIS
Distributors, CDC IXIS North America, CIS or their affiliates. Each independent
Trustee, who is also an independent Trustee of the CDC Nvest Funds Trusts,
receives, in the aggregate, a retainer fee at the annual rate of $45,000 and
meeting attendance fees of $4,500 for each meeting of the Board of Trustees that
he or she attended. Each Committee member receives an additional retainer fee at
the annual rate of $7,000. Furthermore, each Committee chairman receives an
additional retainer fee (beyond the $7,000 fee) at the annual rate of $5,000.
The retainer fees assume four Board or Committee meetings per year. Each Trustee
is compensated $4,500 for each meeting and $1,750 per Committee meeting that he
or she attends in excess of four meetings per year. Trustees who are not a
Trustee of the CDC Nvest Funds Trusts are compensated at the rate of $5,000 for
each meeting of the Board of Trustees that he or she attends and receives an
annual retainer of $20,000. Trustee fees are allocated to the various CDC Nvest
Funds Trusts and the Loomis Sayles Funds Trusts based on a formula that takes
into account, among other factors, the relative net assets of each Fund.
Trustees are reimbursed for travel expenses in connection with attendance at
meetings.
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in a
designated Fund or certain other funds of the CDC Nvest Funds Trusts or Loomis
Sayles Funds Trusts on the normal payment date. Deferred amounts remain in the
Funds until distributed in accordance with the Plan.
Prior to May 7, 2003, the Trust paid each independent trustee a $20,000 annual
retainer fee and a $5,000 fee per in person meeting. Prior to November 6, 2002,
each independent Trustee was compensated by the Trust on behalf of each Fund at
the rate of $1,250 per Fund per year and was reimbursed for travel expenses in
connection with attendance at meetings.
28
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
5. Contingent Expense Obligations.
Effective September 12, 2003, Loomis Sayles has entered into arrangements that
provide that it shall be permitted to recover expenses it has borne under the
expense limitation agreements (subsequent to September 12, 2003) in later
periods to the extent that a Fund's expenses fall below the annual rates set
forth in note 4.
If in the following fiscal year the actual operating expenses of a Fund that
previously received a deferral or reimbursement are less than the actual expense
limit for that Fund, the Fund is obligated to pay an amount of additional
expense that is the lower of the difference between the expense limit and the
actual amount of fees previously waived or expenses reimbursed.
At September 30, 2003, amounts subject to possible reimbursement under the
expense limitation agreements were as follows:
Expenses Subject to
Fund Possible Reimbursement
- ------------------------- ----------------------
Growth Fund $ 5,176
International Equity Fund $ 16,695
Research Fund $ 8,076
6. Line of Credit. The Funds together with certain other funds of the Loomis
Sayles Funds Trusts participate in a $25 million unsecured line of credit.
Borrowings under the line of credit will be made solely to temporarily finance
the repurchase of capital shares. Interest is charged to each participating Fund
based on its borrowings at a rate per annum equal to the Federal Funds rate plus
0.50%.
In addition, a commitment fee of 0.09% per annum, payable at the end of each
calendar quarter, is accrued and apportioned among the participating funds based
on their average daily unused portion of the line of credit. During the year
ended September 30, 2003, the Funds had no borrowings under the agreement.
7. Shareholders. At September 30, 2003, CDC IXIS North America owned 202,885
shares, equating to 6% of Research Fund shares outstanding. In addition, at
September 30, 2003, the Loomis, Sayles & Company, L.P. Funded Pension Plan
("Pension Plan"), the Loomis, Sayles & Company, L.P. Employees' Profit Sharing
Retirement Plan and the Loomis Sayles & Company, L.P. Employees' Money Purchase
Pension Plan ("Defined Contribution Plans") held shares of beneficial interest
in the Funds as follows:
Defined
Funds Pension Plan Contribution Plans
- ------------------------- ------------ ------------------
Growth Fund 452,097 2,242,656
International Equity Fund 754,876 436,164
Research Fund 1,935,501 432,778
29
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
8. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
-------------------------- -------------------------
GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------- ---------- ------------ --------- ------------
CLASS A (FORMERLY RETAIL CLASS SHARES) (b)(c)
Issued from the sale of shares ................ 128,533 $ 551,553 16,803 $ 78,394
Issued in connection with the reinvestment of
distributions ................................ -- -- -- --
Issued in Admin Class conversion .............. 17 68 -- --
Redeemed ...................................... (39,038) (165,982) (17,443) (81,138)
---------- ------------ --------- ------------
Net change .................................... 89,512 $ 385,639 (640) $ (2,744)
========== ============ ========= ============
CLASS B (a)
Issued from the sale of shares ................ 551 $ 2,500
Issued in connection with the reinvestment of
distributions ................................ -- --
Redeemed ...................................... -- --
---------- ------------
Net change .................................... 551 $ 2,500
========== ============
CLASS C (a)
Issued from the sale of shares ................ 551 $ 2,500
Issued in connection with the reinvestment of
distributions ................................ -- --
Redeemed ...................................... -- --
---------- ------------
Net change .................................... 551 $ 2,500
========== ============
CLASS Y (formerly Institutional Class Shares) (c)
Issued from the sale of shares ................ 2,404,099 $ 9,912,442 1,092,062 $ 4,833,822
Issued in connection with the reinvestment of
distributions ................................ -- -- -- --
Redeemed ...................................... (1,289,295) (5,222,320) (979,446) (4,445,364)
---------- ------------ --------- ------------
Net change .................................... 1,114,804 $ 4,690,122 112,616 $ 388,458
========== ============ ========= ============
ADMIN CLASS SHARES (b)
Issued from the sale of shares ................ 1,236 $ 4,691 4,658 $ 21,605
Issued in connection with the reinvestment of
distributions ................................ -- -- -- --
Redeemed ...................................... (6,274) (24,713) (1,440) (6,703)
Redeemed in Admin Class Conversion ............ (17) (68) -- --
---------- ------------ --------- ------------
Net change .................................... (5,055) $ (20,090) 3,218 $ 14,902
========== ============ ========= ============
(a) From September 12, 2003, commencement of Class operations.
(b) On May 21, 2003, the outstanding Admin Class shares were automatically
converted into Retail Class shares.
(c) On September 12, 2003, Retail Class converted to Class A shares and
Institutional Class converted to Class Y shares.
30
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
8. Capital Shares.(continued)
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
-------------------------- --------------------------
INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------- ---------- ------------ ---------- ------------
CLASS A (formerly Retail Class Shares) (b)(c)
Issued from the sale of shares ................ 985,553 $ 8,015,317 1,172,999 $ 11,040,404
Issued in connection with the reinvestment of
distributions ................................ -- -- 467 4,568
Issued in Admin Class conversion .............. 592 4,982 -- --
Redeemed ...................................... (816,354) (6,762,492) (1,293,625) (12,252,951)
---------- ------------ ---------- ------------
Net change .................................... 169,791 $ 1,257,807 (120,159) $ (1,207,979)
========== ============ ========== ============
CLASS B (a)
Issued from the sale of shares ................ 15,469 $ 147,461
Issued in connection with the reinvestment of
distributions ................................ -- --
Redeemed ...................................... -- --
---------- ------------
Net change .................................... 15,469 $ 147,461
========== ============
CLASS C (a)
Issued from the sale of shares ................ 1,228 $ 11,697
Issued in connection with the reinvestment of
distributions ................................ -- --
Redeemed ...................................... -- --
---------- ------------
Net change .................................... 1,228 $ 11,697
========== ============
CLASS Y (formerly Institutional Class Shares) (c)
Issued from the sale of shares ................ 4,033,142 $ 34,400,871 5,367,767 $ 48,858,532
Issued in connection with the reinvestment of
distributions ................................ 8,422 68,472 16,890 166,534
Redeemed ...................................... (4,126,813) (34,937,516) (5,347,487) (48,962,671)
---------- ------------ ---------- ------------
Net change .................................... (85,249) $ (468,173) 37,170 $ 62,395
========== ============ ========== ============
ADMIN CLASS SHARES (b)
Issued from the sale of shares ................ 66,246 $ 490,612 135,351 $ 1,315,439
Issued in connection with the reinvestment of
distributions ................................ -- -- -- --
Redeemed ...................................... (192,744) (1,480,718) (119,643) (1,169,201)
Redeemed in Admin Class Conversion ............ (592) (4,982) -- --
---------- ------------ ---------- ------------
Net change .................................... (127,090) $ (995,088) 15,708 $ 146,238
========== ============ ========== ============
(a) From September 12, 2003, commencement of Class operations.
(b) On May 21, 2003, the outstanding Admin Class shares were automatically
converted into Retail Class shares.
(c) On September 12, 2003, Retail Class converted to Class A shares and
Institutional Class converted to Class Y shares.
31
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
8. Capital Shares.(continued)
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------------ -------------------------
RESEARCH FUND SHARES AMOUNT SHARES (b) AMOUNT (b)
- ------------------------------------------------- -------- ------------ --------- ------------
CLASS A (formerly Retail Class Shares) (c)
Issued from the sale of shares ................ 2,958 $ 18,168 3,021 $ 20,548
Issued in connection with the reinvestment of
distributions ................................ 11 66 -- --
Redeemed ...................................... -- -- (5) (40)
-------- ------------ --------- ------------
Net change .................................... 2,969 $ 18,234 3,016 $ 20,508
======== ============ ========= ============
CLASS B (a)
Issued from the sale of shares ................ 355 $ 2,500
Issued in connection with the reinvestment of
distributions ................................ -- --
Redeemed ...................................... -- --
-------- ------------
Net change .................................... 355 $ 2,500
======== ============
CLASS C (a)
Issued from the sale of shares ................ 355 $ 2,500
Issued in connection with the reinvestment of
distributions ................................ -- --
Redeemed ...................................... -- --
-------- ------------
Net change .................................... 355 $ 2,500
======== ============
CLASS Y (formerly Institutional Class Shares) (c)
Issued from the sale of shares ................ 627,487 $ 4,029,763 2,556,524 $ 18,596,223
Issued in connection with the reinvestment of
distributions ................................ 13,233 81,513 2,571 19,617
Redeemed ...................................... (261,319) (1,641,919) (394,931) (2,951,016)
-------- ------------ --------- ------------
Net change .................................... 379,401 $ 2,469,357 2,164,164 $ 15,664,824
======== ============ ========= ============
(a) From September 12, 2003, commencement of Class operations.
(b) From November 30, 2001, commencement of Class operations.
(c) On September 12, 2003, Retail Class converted to Class A shares and
Institutional Class converted to Class Y shares.
32
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
9. Additional Tax Information. The tax character of distributions paid to
shareholders during the year ended September 30, 2003 were as follows:
Growth International Research
Fund Equity Fund Fund
------------- -------------- -------------
Distributions paid from:
Ordinary income $ -- $ 105,408 $ 81,579
Long-term capital gains -- -- --
----------------------------------------------
Total taxable distributions $ -- $ 105,408 $ 81,579
----------------------------------------------
As of September 30, 2003, the components of distributable earnings on a tax
basis were as follows:
Growth International Research
Fund Equity Fund Fund
------------- -------------- -------------
Undistributed ordinary income $ -- $ 848,292 $ 77,290
Undistributed long-term capital gains -- -- --
----------------------------------------------
Total undistributed earnings -- 848,292 77,290
Capital loss carryforward (17,326,747) (37,149,904) (3,176,474)
Deferred net capital losses (post October) -- (781,755) (278,188)
Unrealized appreciation (depreciation) 2,692,772 6,540,692 1,317,827
----------------------------------------------
Total accumulated earnings (losses) $ (14,633,975) $ (30,542,675) $ (2,059,545)
----------------------------------------------
Capital loss carryforward years of expiration 2009-2011 2009-2011 2009-2011
9. Subsequent Event. On November 11, 2003, shareholders of the CDC Nvest Large
Cap Growth Fund (the "Large Cap Growth Fund") voted to approve an Agreement and
Plan of Reorganization providing for the transfer of all of the assets of the
Large Cap Growth Fund to, and the assumption of all of the liabilities of Large
Cap Growth Fund by the Growth Fund, a series of Loomis Sayles Funds II, in
exchange for shares of the Growth Fund, and the distribution of such shares to
the shareholders of the Large Cap Growth Fund in complete liquidation of the
Large Cap Growth Fund.
33
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of Loomis Sayles Funds II:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Loomis Sayles Growth Fund,
Loomis Sayles International Equity Fund, and Loomis Sayles Research Fund, each a
series of Loomis Sayles Funds II (collectively, the "Funds"), at September 30,
2003, and the results of each of their operations, the changes in each of their
net assets and the financial highlights for each of the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2003
34
2003 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
Foreign Tax Credits. The International Equity Fund has made an election under
Internal Revenue Code Section 853 to pass through Foreign taxes paid by the Fund
to its shareholders. For the year ended September 30, 2003, the total amount of
foreign taxes that will be passed through to shareholders and the foreign source
income for information reporting purposes will be $133,522 and $1,180,272,
respectively.
Corporate Dividends Received Deduction. For the fiscal year ended, September 30,
2003, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
Qualifying Percentage
International Equity Fund 0.99%
Research Fund 55.67%
35
TRUSTEES' INFORMATION
The Funds 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.
POSITION(s) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/5/, LENGTH OF TIME PRINCIPAL OCCUPATION(s) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ---------------------------- ------------------------------ ----------------------------
INDEPENDENT TRUSTEES
Joseph Alaimo+ (73) Trustee; Chairman, Wayne Hummer 26;
399 Boylston Street 4 years for Loomis Trust Company and Wayne None
Boston, MA 02116 Sayles Funds Trusts Hummer Investment Trust
Graham T. Allison, Jr. (63) Trustee (2); Douglas Dillon Professor and 44;
399 Boylston Street 19 years for CDC Nvest Director for the Belfer Center Director, Taubman Centers,
Boston, MA 02116 Funds Trusts; Less than 1 of Science and International Inc.; Board Member, USEC
year for Loomis Sayles Affairs, John F. Kennedy Inc.
Funds Trusts School of Government,
Harvard University
Edward A. Benjamin (65) Trustee (1) Retired; formerly, Partner, 44;
399 Boylston Street Less than 1 year Ropes & Gray (law firm) Director, Coal, Energy
Boston, MA 02116 until 1999 Investments &
Management; Director,
Precision Optics Corporation
(optics manufacturer)
Daniel M. Cain (58) Trustee, President and CEO, Cain 44;
452 Fifth Avenue Chairman (1); Brothers & Company, Trustee for Universal Health
New York, NY 10018 7 years for CDC Nvest Incorporated (investment Realty Income Trust;
Funds Trusts; Less than 1 banking) Director, PASC; Director,
year for Loomis Sayles Sheridan Healthcorp
Funds Trusts
Paul G. Chenault (70) Trustee (2) Retired; formerly, Trustee, 44;
5852 Pebble Beach Way Less than 1 year for CDC First Variable Life (variable Director, Mailco Office
San Luis Obispo, CA 93401 Nvest Funds Trusts; 4 years life insurance) Products, Inc.
for Loomis Sayles Funds
Trusts
Kenneth J. Cowan (71) Trustee Retired 44;
399 Boylston Street Chairman (2); None
Boston, MA 02116 28 years for CDC Nvest
Funds Trusts; Less than 1
year for Loomis Sayles
Funds Trusts
Richard Darman (60) Trustee (2); Partner, The Carlyle Group 44;
399 Boylston Street 7 years for CDC Nvest (investments); Chairman of Director and Chairman, AES
Boston, MA 02116 Funds Trusts; Less than 1 the Board of Directors of Corporation
year for Loomis Sayles AES Corporation (interna-
Funds Trusts tional power company); for-
merly, Professor, John F.
Kennedy School of
Government, Harvard
University
36
TRUSTEES' INFORMATION (CONTINUED)
POSITION(s) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(s) FUND COMPLEX OVERSEEN
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS AND OTHER DIRECTORSHIPS HELD
- --------------------------- ---------------------------- ------------------------------ ----------------------------
INDEPENDENT TRUSTEES
(continued)
Sandra O. Moose (61) Trustee (1); Senior Vice President and 44;
One Exchange Place 21 years for CDC Nvest Director, The Boston Director, Verizon
Boston, MA 02109 Funds Trusts; Less than 1 Consulting Group, Inc. Communications
year for Loomis Sayles (management consulting) Director, Rohm and Haas
Funds Trusts Company
John A. Shane (70) Trustee (2); President, Palmer Service 44;
200 Unicorn Park Drive 21 years for CDC Nvest Corporation (venture capital Director, Gensym
Woburn, MA 01801 Funds Trusts; Less than 1 organization) Corporation; Director,
year for Loomis Sayles Overland Storage, Inc.
Funds Trusts Director, ABT Associates
Inc.
Pendleton P. White (72) Trustee (2); Retired 44;
6 Breckenridge Lane 22 years for CDC Nvest None
Savannah, GA 31411 Funds Trusts; Less than 1
year for Loomis Sayles
Funds Trusts
INTERESTED TRUSTEES
- -------------------
Robert J. Blanding/3/ (56) Chief Executive Officer, President, Chairman, 44;
555 California Street Loomis Sayles Funds II; Director, and Chief Executive None
San Francisco, CA 94104 Trustee Officer, Loomis Sayles, Chief
Less than 1 year Executive Officer - Loomis
Sayles Funds II; President
and CEO - Loomis Sayles
Funds I
John T. Hailer/4/ (42) President and Chief President and Chief 44;
399 Boylston Street Executive Officer - CDC Executive Officer, CDC IXIS None
Boston, MA 02116 Nvest Funds Trusts, Asset Management
President - Loomis Sayles Distributors, L.P.; Executive
Funds II, Trustee; Vice President - Loomis
3 years for CDC Nvest Sayles Funds I, formerly,
Funds Trusts; Less than 1 Senior Vice President,
year for Loomis Sayles Fidelity Investments
Funds Trusts
Peter S. Voss/5/ (57) Chairman of the Board, Director, President and Chief 44;
399 Boylston Street Trustee; 11 years for CDC Executive Officer, CDC IXIS Trustee of Harris Associates
Boston, MA 02116 Nvest Funds Trusts; Less Asset Management North Investment Trust/6/
than 1 year for Loomis America, L.P.
Sayles Funds Trusts
37
TRUSTEES' INFORMATION (CONTINUED)
POSITION(s) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(s) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ---------------------------- ------------------------------ ----------------------------
OFFICERS
Nicholas H. Palmerino (38) Treasurer; Senior Vice President, CDC Not Applicable;
399 Boylston Street Not Applicable IXIS Asset Management None
Boston, MA 02116 Services, Inc.; Senior Vice
President, CDC IXIS Asset
Management Advisers, L.P.;
formerly, Vice President,
Loomis, Sayles & Company,
L.P.
John E. Pelletier (39) Secretary; Senior Vice President, Not Applicable;
399 Boylston Street Not Applicable General Counsel, Secretary None
Boston, MA 02116 and Clerk, CDC IXIS
Distribution Corporation;
Senior Vice President,
General Counsel, Secretary
and Clerk, CDC IXIS Asset
Management Distributors,
L.P.; Senior Vice President,
General Counsel, Secretary
and Clerk, CDC IXIS Asset
Management Advisers, L.P.;
Executive Vice President,
General Counsel, Secretary,
Clerk, and Director, CDC
IXIS Asset Management
Services, Inc.
(1) Member of Audit Committee.
(2) Member of Contract Review and Governance Committee.
+ Mr. Alaimo is a Trustee of Loomis Sayles Funds I and Loomis Sayles Funds II,
but not of the CDC Nvest Funds Trusts.
1 Except as noted, each Trustee and Officer holds the same positions with CDC
Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC
Nvest Companies Trust I, AEW Real Estate Income Fund, CDC Nvest Cash Management
Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest Funds Trusts")
and Loomis Sayles Funds I and Loomis Sayles Funds II (the "Loomis Sayles Funds
Trusts" and together with the CDC Nvest Funds Trusts, the "Trusts").
2 All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. Messrs. Alaimo and White are expected to
retire by December 31, 2003.
3 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 & Company, L.P.
("Loomis Sayles").
4 Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution Corporation;
President and Chief Executive Officer of CDC IXIS Asset Management Distributors,
L.P. ("CDC IXIS Distributors").
5 Mr. Voss is an "interested person" of the Trusts because he holds the
following positions with entities that may be considered to be affiliated
persons of the Trusts: Director of CDC IXIS Asset Management Services, Inc.;
Director of CDC IXIS Asset Management Distribution Corporation; Director and
Chairman of CDC IXIS Asset Management Associates, Inc.; Director of AEW Capital
Management, Inc; Director of Harris Associates, Inc; Director of Loomis, Sayles
& Company, Inc.; Member of Reich & Tang Asset Management, LLC; Director of
Westpeak Global Advisors, Inc.; Director of Vaughan, Nelson, Scarborough &
McCullough, Inc.; Director, Hansberger Group, Inc.; Member, Board of Managers,
Harris Alternatives L.L.C.; and Director and Member of Executive Board of CDC
IXIS Asset Management.
6 As of September 30, 2003, Harris Associates Investment Trust has seven series
that were overseen by its Board of Trustees.
38
ADDITIONAL INFORMATION
Shareholder Meeting (unaudited). At the special meeting of shareholders held on
June 10, 2003, shareholders of Loomis Sayles Funds II (formerly, Loomis Sayles
Funds) voted for the following proposal:
1. ELECTION OF TRUSTEES
FOR WITHHELD *
----------- ----------
(01) Joseph Alaimo 134,298,551 8,672,577
(02) Graham T. Allison, Jr. 134,590,902 8,380,227
(03) Edward A. Benjamin 134,546,833 8,424,296
(04) Robert J. Blanding 134,572,705 8,398,423
(05) Daniel M. Cain 134,593,263 8,377,866
(06) Paul G. Chenault 134,352,172 8,618,957
(07) Kenneth J. Cowan 134,524,153 8,446,976
(08) Richard Darman 134,552,047 8,419,081
(09) John T. Hailer 134,613,039 8,358,089
(10) Sandra O. Moose 134,612,285 8,358,843
(11) John A. Shane 134,332,421 8,638,708
(12) Peter S. Voss 134,622,604 8,348,525
(13) Pendleton P. White 134,300,598 8,670,530
* Includes Broker Non-Votes (if any).
Initial Class Purchase CDC IXIS Asset Management Distributors, L.P. (the
"Distributor"), purchased one share each of the Class A, Class B and Class C of
the Loomis Sayles Growth Fund, Loomis Sayles International Equity Fund and
Loomis Sayles Research Fund (the "Funds"), each a series of Loomis Sayles Funds
II at a net asset value of $9.75 per share.
Consent of Sole Shareholder On September 4, 2003, the Distributor, as sole
shareholder of Class A, Class B, and Class C shares of the Funds adopted the
following resolution:
1. Approval of the Rule 12b-1 Plans.
39
[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles Aggressive Growth Fund
Loomis Sayles Small Cap Growth Fund
Loomis Sayles Small Cap Value Fund
Loomis Sayles Value Fund
Loomis Sayles Worldwide Fund
TABLE OF CONTENTS
Fund and Manager Review 1
Portfolio of Investments 7
Statements of Assets and Liabilities 30
Statements of Operations 32
Statements of Changes in Net Assets 34
Financial Highlights 38
Notes to Financial Statements 44
Report of Independent Auditors 53
ANNUAL REPORT
SEPTEMBER 30, 2003
FUND AND MANAGER REVIEW
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
PORTFOLIO REVIEW | Throughout most of the fiscal year we tilted the portfolio
in favor of companies positioned to benefit from a cyclical economic recovery,
de-emphasizing the more stable growth stories that out-performed during the
economic downturn. This posture led to significant over-weights in the
technology and consumer discretionary sectors, where we believed companies were
well positioned to benefit from the unprecedented fiscal and monetary stimuli
characteristic of the fiscal year.
Both sectors were important contributors to the Fund's one-year return given
their large weighting and strong absolute performance. Among our consumer
discretionary stocks, holdings in the internet and business services industries
drove the sector's performance. Despite their strong absolute and relative
performance in the past two quarters, performance of the Fund's tech stocks did
not keep pace with the benchmark's tech stocks for the full
12-month period, consequently the Fund under-performed its benchmark, the
Russell Midcap Growth Index.
The Fund remained under-weighted in the financial services, healthcare and
materials sectors. Within the healthcare sector, we believe growth rates have
peaked for HMOs, drug distributors and many of the device and equipment
manufacturers. We remain over-weighted in biotechnology, though, because we
continue to find companies with emerging product pipelines or exciting
late-stage clinical trials. The Fund typically is under-weighted in the
financial services and materials sectors, because we believe they contain few
true growth stories.
OUTLOOK | We continue to believe that technology stocks may benefit from a
renewed cycle of capital investment, supported by low interest rates and the
accelerated depreciation allowance. Many tech companies reduced their cost
structures during the recent economic downturn, and as such should enjoy strong
operating leverage and the potential for accelerating earnings as the economy
gains ground. In addition, the Fund is positioned to leverage its consumer
discretionary holdings to a general pick-up in the economy and continued
strength in consumer spending.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
their equivalent
STRATEGY | Invests primarily in common stocks or other equity securities
(which may include securities offered in the secondary markets or in IPOs) of
companies with market capitalizations that fall within the capitalization
range of the Russell Midcap Growth Index, although the Fund may invest in
companies of any size.
FUND INCEPTION DATE | 12/31/96
COMMENCEMENT OF OPERATIONS OF CLASS: | Institutional: 1/2/97; Retail: 1/2/97
EXPENSE RATIO | Institutional: 1.00%; Retail: 1.25%
TOTAL NET ASSETS (ALL CLASSES) | $56.7 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE
1 YEAR 3 YEARS 5 YEARS INCEPTION
- ---------------------------------------------------------------------------
LOOMIS SAYLES AGGRESSIVE GROWTH FUND:
INSTITUTIONAL 27.94% -33.72% 7.41% 7.26%
RETAIL 27.58 -33.91 7.10 6.96
LIPPER MID-CAP GROWTH FUNDS INDEX(a) 27.76 -18.72 4.80 3.49
RUSSELL MIDCAP GROWTH INDEX(a) 38.89 -17.28 4.49 5.36
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2003(b)(c)
[CHART]
Loomis Sayles Lipper Mid Russell
Aggressive Cap Growth Midcap
Growth Fund Funds Index Growth Index
-------------- ------------ ------------
12/31/1996 $ 250,000 $ 250,000 $ 250,000
01/31/1997 265,500 256,397 261,061
02/28/1997 257,250 239,354 255,313
03/31/1997 240,750 221,150 240,886
04/30/1997 243,500 219,235 246,786
05/31/1997 265,500 247,788 268,901
06/30/1997 268,000 258,228 276,343
07/31/1997 295,250 273,998 302,793
08/31/1997 288,500 273,237 299,837
09/30/1997 314,250 292,801 315,012
10/31/1997 307,250 276,403 299,240
11/30/1997 297,750 271,981 302,386
12/31/1997 306,624 278,351 306,356
01/31/1998 290,613 273,087 300,840
02/28/1998 313,830 296,284 329,124
03/31/1998 324,504 311,625 342,920
04/30/1998 333,044 312,981 347,577
05/31/1998 318,100 294,737 333,279
06/30/1998 334,378 308,295 342,709
07/31/1998 317,299 287,776 328,029
08/31/1998 252,985 225,733 265,422
09/30/1998 280,472 249,272 285,500
10/31/1998 299,419 258,441 306,521
11/30/1998 301,821 278,080 327,197
12/31/1998 342,010 313,952 361,083
01/31/1999 345,328 329,536 371,908
02/28/1999 338,416 303,940 353,720
03/31/1999 434,080 325,607 373,420
04/30/1999 456,198 338,963 390,435
05/31/1999 473,064 337,552 385,412
06/30/1999 534,996 364,759 412,319
07/31/1999 530,849 359,767 399,191
08/31/1999 561,815 357,945 395,042
09/30/1999 555,179 368,394 391,679
10/31/1999 695,080 400,964 421,963
11/30/1999 815,737 451,259 465,661
12/31/1999 1,018,446 545,390 546,293
01/31/2000 1,046,993 536,026 546,182
02/29/2000 1,423,576 670,359 661,006
03/31/2000 1,292,954 623,177 661,685
04/30/2000 1,170,694 540,968 597,454
05/31/2000 1,052,760 492,337 553,903
06/30/2000 1,201,836 568,843 612,677
07/31/2000 1,173,289 545,247 573,879
08/31/2000 1,388,686 616,555 660,427
09/30/2000 1,377,440 586,921 628,140
10/31/2000 1,166,946 539,463 585,150
11/30/2000 873,581 426,655 457,993
12/31/2000 961,466 457,408 482,109
01/31/2001 882,076 463,620 509,649
02/28/2001 688,729 394,076 421,494
03/31/2001 590,004 352,264 361,172
04/30/2001 686,092 398,709 421,375
05/31/2001 654,160 401,997 419,393
06/30/2001 634,240 400,428 419,614
07/31/2001 570,962 379,366 391,316
08/31/2001 498,603 353,948 362,953
09/30/2001 397,242 302,898 302,968
10/31/2001 435,912 319,762 334,814
11/30/2001 481,026 346,026 370,860
12/31/2001 486,885 361,034 384,958
01/31/2002 470,187 347,226 372,458
02/28/2002 422,729 329,962 351,343
03/31/2002 457,883 350,761 378,158
04/30/2002 433,861 339,101 358,137
05/31/2002 405,738 327,786 347,451
06/30/2002 367,068 298,335 309,107
07/31/2002 330,449 266,160 279,076
08/31/2002 325,176 262,987 278,104
09/30/2002 313,458 246,647 256,009
10/31/2002 326,055 259,085 275,839
11/30/2002 350,663 274,472 297,429
12/31/2002 309,064 258,247 279,459
01/31/2003 305,255 254,417 276,716
02/28/2003 302,619 250,489 274,309
03/31/2003 303,791 254,073 279,417
04/30/2003 326,641 271,896 298,442
05/31/2003 362,967 294,377 327,158
06/30/2003 363,260 298,986 331,824
07/31/2003 382,594 310,778 343,682
08/31/2003 417,456 326,063 362,609
09/30/2003 401,050 315,122 355,578
Past performance is no guarantee of future performance. Average annual total
returns assume reinvestment of dividends and capital gain distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance would be
lower.
(a) Please see page 6 for a description of the indexes and important risk
disclosure. (b) Cumulative performance is shown for the Institutional Class of
shares. Performance of the Retail Class of shares would, due to the higher fees
paid by the Retail Class of shares, be lower. (c) The mountain chart is based
on the initial investment minimum of $250,000 for the Institutional Class. The
Retail Class minimum is $2,500.
1
FUND AND MANAGER REVIEW
LOOMIS SAYLES SMALL CAP GROWTH FUND
PORTFOLIO REVIEW | At the end of the previous fiscal year the bear market of
2000-2002 was reaching its nadir. Investors were selling stocks in nearly all
sectors--and at times indiscriminately. Consequently, valuations became
attractive and fundamentals showed signs of improvement after several difficult
years, particularly among technology stocks. These factors provided the
foundation for the gains experienced during the past 12 months.
We took advantage of these positive valuation trends and over-weighted the
technology and consumer discretionary sectors. These over-weights were not due
to a "top-down" view of the market or the economy; instead, they were the
result of our finding a number of exciting opportunities in these sectors. Both
sectors include an eclectic mix of companies, and we were able to identify many
businesses with steady growth trends and solid profitability.
Despite the Fund's solid performance overall, three sectors in the portfolio
posted declines for the year. Combined, these three sectors--autos &
transportation, materials & processing and utilities--represented approximately
3.2% of the Fund's portfolio (averaged over the 12-month period). The
performance of these three sectors resulted in an approximate 1.0% reduction in
return for the full year.
Although the Fund's total return was strong for the year, it lagged that of the
Russell 2000 Growth Index, the Fund's benchmark. This relative underperformance
primarily was due to the market's overall preference for the smallest companies
in the small cap universe. We tend to favor companies with market
capitalizations at the higher end of the small-cap spectrum. Although these
companies generally performed well for the year, they were not as strong as
many of the "micro-cap" issues represented in the index.
OUTLOOK | We will continue to focus on companies that we believe can produce
sustained and/or accelerating growth over the next few years. We expect the
traditional growth sectors of the economy--services, technology and health
care--to produce the greatest number of opportunities in the months ahead, due
to current economic trends and favorable demographics.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
other equity securities
STRATEGY | Invests primarily in equity securities of companies with market
capitalizations that fall within the capitalization range of the Russell 2000
Index, an index that tracks stocks of the 2,000 smallest companies
FUND INCEPTION DATE | 12/31/96
COMMENCEMENT OF OPERATIONS OF CLASS | Institutional: 1/2/97; Retail: 1/2/97
EXPENSE RATIO | Institutional: 1.00%; Retail: 1.25%
TOTAL NET ASSETS (ALL CLASSES) | $52.9 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE
1 YEAR 3 YEARS 5 YEARS INCEPTION
-----------------------------------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH FUND:
INSTITUTIONAL 35.28% -30.28% -1.44% -0.53%
RETAIL 34.98 -30.44 -1.69 -0.77
LIPPER SMALL-CAP GROWTH FUNDS INDEX(a) 36.14 -12.09 8.26 4.55
RUSSELL 2000 GROWTH INDEX(a) 41.72 -12.67 2.75 0.85
RUSSELL 2000 INDEX(a) 36.50 -0.82 7.46 5.87
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2003(b)(c)
[CHART]
Loomis Sayles Lipper Small-
Small Cap Cap Growth Russell 2000 Russell 2000
Growth Fund Funds Index Growth Index Index
------------- ------------- ------------ ------------
12/31/1996 $ 250,000 $ 250,000 $ 250,000 $ 250,000
01/31/1997 256,500 255,797 256,245 254,996
02/28/1997 237,500 237,326 240,769 248,813
03/31/1997 212,750 220,207 223,779 237,073
04/30/1997 208,750 216,928 221,191 237,734
05/31/1997 242,750 247,023 254,436 264,182
06/30/1997 257,000 260,237 263,063 275,503
07/31/1997 277,750 275,899 276,542 288,323
08/31/1997 282,500 280,282 284,841 294,920
09/30/1997 313,750 303,870 307,571 316,506
10/31/1997 291,750 288,334 289,097 302,603
11/30/1997 288,500 281,817 282,204 300,645
12/31/1997 298,565 278,064 282,363 305,908
01/31/1998 288,806 273,937 278,596 301,080
02/28/1998 320,192 296,085 303,193 323,343
03/31/1998 334,699 309,478 315,911 336,678
04/30/1998 330,215 311,729 317,848 338,541
05/31/1998 302,521 289,667 294,756 320,308
06/30/1998 332,061 298,156 297,767 320,982
07/31/1998 299,356 275,720 272,902 294,997
08/31/1998 231,836 215,500 209,905 237,715
09/30/1998 259,266 227,024 231,187 256,318
10/31/1998 269,553 235,975 243,245 266,771
11/30/1998 303,313 255,166 262,115 280,748
12/31/1998 354,480 280,746 285,834 298,121
01/31/1999 364,766 287,535 298,691 302,083
02/28/1999 341,820 259,868 271,368 277,616
03/31/1999 367,931 271,613 281,033 281,950
04/30/1999 371,360 282,219 305,852 307,215
05/31/1999 364,503 283,757 306,336 311,702
06/30/1999 419,099 310,316 322,473 325,797
07/31/1999 406,703 309,220 312,501 316,858
08/31/1999 418,571 304,885 300,814 305,131
09/30/1999 441,518 315,937 306,616 305,198
10/31/1999 498,224 334,359 314,470 306,434
11/30/1999 550,974 376,545 347,721 324,731
12/31/1999 679,948 452,471 409,007 361,491
01/31/2000 667,551 447,759 405,201 355,685
02/29/2000 908,883 578,948 499,476 414,422
03/31/2000 788,613 533,505 446,973 387,099
04/30/2000 725,313 467,554 401,845 363,805
05/31/2000 627,198 429,327 366,657 342,602
06/30/2000 701,575 504,937 414,022 372,467
07/31/2000 629,571 472,086 378,540 360,483
08/31/2000 735,071 522,857 418,358 387,989
09/30/2000 711,598 496,964 397,574 376,585
10/31/2000 641,968 459,679 365,301 359,775
11/30/2000 476,307 381,396 298,975 322,843
12/31/2000 556,512 415,131 317,270 350,570
01/31/2001 531,328 427,780 342,949 368,822
02/28/2001 413,620 373,014 295,939 344,622
03/31/2001 352,303 336,786 269,033 327,764
04/30/2001 416,905 373,146 301,970 353,405
05/31/2001 405,408 383,257 308,964 362,092
06/30/2001 415,263 392,921 317,390 374,595
07/31/2001 356,683 371,018 290,313 354,318
08/31/2001 316,443 349,053 272,183 342,874
09/30/2001 247,884 294,576 228,265 296,719
10/31/2001 276,518 316,162 250,225 314,083
11/30/2001 297,573 340,661 271,112 338,398
12/31/2001 309,364 361,298 287,991 359,285
01/31/2002 294,485 350,373 277,746 355,548
02/28/2002 257,709 329,170 259,769 345,804
03/31/2002 273,711 356,082 282,348 373,597
04/30/2002 263,605 346,687 276,239 377,002
05/31/2002 250,972 332,779 260,087 360,270
06/30/2002 229,356 308,052 238,032 342,394
07/31/2002 196,791 264,364 201,449 290,682
08/31/2002 194,545 263,980 201,355 289,942
09/30/2002 178,263 247,970 186,811 269,120
10/31/2002 189,773 258,551 196,260 277,749
11/30/2002 200,721 280,207 215,716 302,536
12/31/2002 180,790 261,487 200,840 285,691
01/31/2003 174,894 254,582 195,384 277,784
02/28/2003 172,648 246,649 190,173 269,391
03/31/2003 170,964 251,735 193,052 272,859
04/30/2003 188,931 272,540 211,323 298,731
05/31/2003 209,985 300,331 235,137 330,789
06/30/2003 214,196 310,509 239,668 336,775
07/31/2003 229,075 328,666 257,786 357,847
08/31/2003 247,322 346,094 271,633 374,254
09/30/2003 241,146 337,594 264,757 367,346
Past performance is no guarantee of future performance. Average annual total
returns assume reinvestment of dividends and capital gains distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance would be
lower.
(a) Please see page 6 for a description of the indexes and important risk
disclosure. (b) Cumulative performance is shown for the Institutional Class of
shares. Performance of the Retail Class of shares would, due to the higher fees
paid by the Retail Class of shares, be lower. (c) The mountain chart is based
on the initial investment minimum of $250,000 for the Institutional Class. The
Retail Class minimum is $2,500.
2
FUND AND MANAGER REVIEW
LOOMIS SAYLES SMALL CAP VALUE FUND
PORTFOLIO REVIEW | Small cap stocks led the U.S. equity market during the
fiscal year. As investor expectations of improving corporate profits and better
economic growth strengthened during the fiscal year, investors turned to
companies leveraged to an economic upturn.
During the second half of the fiscal year we modestly over-weighted the
technology sector. We believed valuations were attractive and prospects for
fundamental improvement were strong, given the expectations for an improving
economy. We also over-weighted the consumer discretionary sector, whose diverse
nature presented many attractive opportunities for our value-driven approach.
On the other hand, we under-weighted the materials and processing and the
automotive and transportation sectors, due to competitive challenges and
unattractive valuations.
Although the Fund's return was strong, it lagged that of the Russell 2000
Index, the Fund's benchmark. The factors that led to the Fund's out-performance
in the previous few years--specifically, our preference for higher-quality
stocks with earnings visibility and conservative business models--proved
detrimental during the fiscal year. The best-performing segments of the small
cap market were companies with poor earnings outlooks and micro-cap stocks.
Although we appropriately increased the Fund's weightings in technology and
producer durable stocks, our overall emphasis on solid fundamentals and
valuation muted the favorable impact of these increased weightings. In
addition, our emphasis on cash flow and earnings caused us to avoid the
more-speculative stocks that substantially outperformed during the year.
OUTLOOK | We continue to balance our stock selection between companies with
good near-term earnings visibility and companies positioned to benefit from
steady economic improvement. Although our emphasis remains on individual stock
selection, rather than sector selection, we continue to over-weight consumer,
technology and producer durable stocks in anticipation of better economic
activity in the coming quarters.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
other equity securities
STRATEGY | Invests primarily in equity securities of companies with market
capitalizations that fall within the capitalization range of the Russell 2000
Index
FUND INCEPTION DATE | 5/13/91
COMMENCEMENT OF OPERATIONS OF CLASS | Institutional: 5/13/91; Retail: 1/2/97;
Admin; 1/2/98
EXPENSE RATIO | Institutional: 0.90%; Retail: 1.15%; Admin: 1.40%
TOTAL NET ASSETS (ALL CLASSES) | $467.5 million
[PHOTO] [PHOTO]
Joseph Gatz Daniel Thelen
JOSEPH GATZ DANIEL THELEN
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(a)
- ---------------------------------------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE FUND:
INSTITUTIONAL 23.50% 7.71% 11.20% 11.17% 14.27%
RETAIL(a) 23.19 7.46 10.92 10.97 14.11
ADMIN(a) 22.85 7.14 10.61 10.58 13.73
LIPPER SMALL-CAP CORE FUNDS
INDEX(b)(c) 29.79 0.57 9.77 9.86 N/A
RUSSELL 2000 VALUE INDEX(c) 31.66 11.07 10.84 11.29 13.76
RUSSELL 2000 INDEX(c) 36.50 -0.82 7.46 8.28 10.43
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2003(d)(e)
[CHART]
Loomis Sayles Lipper
Small Cap Small-Cap Core Russell 2000 Russell 2000
Value Fund Funds Index Value Index Index
---------- -------------- ------------ -----
05/13/1991 $250,000 $250,000 $250,000 $250,000
05/31/1991 255,500 250,000 261,728 261,916
06/30/1991 246,500 250,000 249,473 246,653
07/31/1991 266,000 250,000 255,952 255,308
08/31/1991 286,250 250,000 263,720 264,758
09/30/1991 286,500 250,000 264,026 266,831
10/31/1991 292,250 250,000 267,028 273,889
11/30/1991 285,000 250,000 256,192 261,221
12/31/1991 326,192 250,000 272,804 282,138
01/31/1992 359,360 265,945 295,624 304,999
02/29/1992 379,469 273,568 309,725 313,896
03/31/1992 359,099 264,312 306,355 303,271
04/30/1992 340,817 255,365 302,112 292,646
05/31/1992 341,340 254,825 310,327 296,538
06/30/1992 311,567 245,833 300,278 282,514
07/31/1992 320,185 252,555 311,590 292,344
08/31/1992 309,739 248,421 305,517 284,095
09/30/1992 313,134 249,627 311,285 290,647
10/31/1992 323,058 258,944 318,551 299,885
11/30/1992 353,875 277,051 338,259 322,832
12/31/1992 368,973 287,564 352,287 334,079
01/31/1993 385,875 296,024 370,979 345,386
02/28/1993 376,994 289,261 372,463 337,409
03/31/1993 392,750 297,159 386,591 348,358
04/30/1993 382,724 287,452 377,301 338,796
05/31/1993 399,053 298,214 389,167 353,787
06/30/1993 401,058 300,514 392,856 355,994
07/31/1993 410,798 303,304 399,600 360,909
08/31/1993 432,856 312,400 415,222 376,501
09/30/1993 452,622 317,447 425,169 387,126
10/31/1993 464,941 324,170 434,894 397,090
11/30/1993 447,179 316,166 423,565 384,020
12/31/1993 460,032 325,338 436,038 397,150
01/31/1994 469,799 333,938 451,601 409,602
02/28/1994 462,637 333,304 450,293 408,121
03/31/1994 435,940 320,340 430,084 386,573
04/30/1994 431,056 319,794 434,322 388,871
05/31/1994 424,545 320,604 433,699 384,504
06/30/1994 414,452 310,196 422,386 371,448
07/31/1994 416,731 314,670 430,189 377,550
08/31/1994 436,266 329,162 447,122 398,589
09/30/1994 435,940 329,749 442,378 397,254
10/31/1994 433,010 331,467 434,283 395,686
11/30/1994 415,755 323,070 416,763 379,706
12/31/1994 421,818 325,868 429,306 389,907
01/31/1995 423,131 329,229 427,200 384,988
02/28/1995 439,544 342,338 443,008 401,003
03/31/1995 450,049 349,588 445,199 407,909
04/30/1995 451,362 355,463 458,439 416,979
05/31/1995 460,553 359,779 468,257 424,149
06/30/1995 473,027 374,109 484,258 446,152
07/31/1995 504,540 394,788 501,926 471,851
08/31/1995 528,832 407,916 516,837 481,612
09/30/1995 538,680 414,898 524,553 490,213
10/31/1995 510,777 400,223 503,602 468,290
11/30/1995 535,397 412,187 523,618 487,965
12/31/1995 557,183 426,052 539,838 500,839
01/31/1996 558,274 429,170 543,420 500,301
02/29/1996 586,279 444,379 551,937 515,895
03/31/1996 599,735 455,506 563,523 526,396
04/30/1996 635,378 486,931 578,898 554,543
05/31/1996 661,564 508,903 593,556 576,396
06/30/1996 645,925 485,793 586,548 552,727
07/31/1996 609,555 446,334 555,366 504,450
08/31/1996 640,106 469,085 579,461 533,738
09/30/1996 661,712 488,809 595,280 554,597
10/31/1996 671,415 479,658 602,183 546,049
11/30/1996 703,512 496,987 634,587 568,549
12/31/1996 726,762 505,760 655,187 583,449
01/31/1997 739,717 517,036 665,260 595,109
02/28/1997 730,105 503,508 671,575 580,680
03/31/1997 714,224 478,111 653,562 553,280
04/30/1997 707,538 478,242 663,172 554,822
05/31/1997 784,435 529,245 715,970 616,546
06/30/1997 821,212 559,170 752,202 642,968
07/31/1997 868,247 592,820 783,774 672,887
08/31/1997 886,414 607,321 796,217 688,283
09/30/1997 939,228 652,898 849,164 738,661
10/31/1997 909,652 626,902 826,076 706,213
11/30/1997 906,272 618,871 835,128 701,645
12/31/1997 915,645 618,206 863,435 713,926
01/31/1998 895,483 609,161 847,814 702,659
02/28/1998 958,919 654,637 899,067 754,616
03/31/1998 1,001,702 685,496 935,534 785,738
04/30/1998 997,276 692,091 940,158 790,086
05/31/1998 954,493 656,163 906,874 747,534
06/30/1998 942,200 653,811 901,752 749,107
07/31/1998 881,222 606,640 831,121 688,464
08/31/1998 730,254 489,398 700,960 554,778
09/30/1998 767,135 509,982 740,546 598,194
10/31/1998 807,459 530,915 762,535 622,590
11/30/1998 853,192 560,518 783,175 655,209
12/31/1998 905,760 595,725 807,733 695,755
01/31/1999 863,318 591,259 789,399 705,001
02/28/1999 802,402 542,960 735,503 647,899
03/31/1999 802,901 545,426 729,435 658,014
04/30/1999 868,312 582,266 796,024 716,977
05/31/1999 885,788 594,314 820,492 727,450
06/30/1999 926,732 628,657 850,200 760,345
07/31/1999 915,247 625,223 830,023 739,482
08/31/1999 884,789 602,297 799,682 712,114
09/30/1999 865,316 601,830 783,694 712,270
10/31/1999 856,827 607,069 768,013 715,155
11/30/1999 874,618 646,203 771,994 757,856
12/31/1999 909,124 715,909 795,713 843,645
01/31/2000 875,377 702,150 774,905 830,097
02/29/2000 937,246 801,151 822,268 967,176
03/31/2000 990,423 789,758 826,123 903,410
04/30/2000 992,469 745,843 831,013 849,047
05/31/2000 950,029 714,136 818,331 799,563
06/30/2000 981,220 777,128 842,243 869,262
07/31/2000 997,582 752,970 870,306 841,295
08/31/2000 1,059,963 820,051 909,215 905,486
09/30/2000 1,044,112 798,977 904,060 878,874
10/31/2000 1,063,542 774,942 900,851 839,641
11/30/2000 1,029,383 697,771 882,512 753,451
12/31/2000 1,119,971 765,544 977,337 818,159
01/31/2001 1,151,051 792,794 1,004,314 860,755
02/28/2001 1,121,607 742,434 1,002,928 804,277
03/31/2001 1,081,258 707,334 986,842 764,935
04/30/2001 1,140,691 763,688 1,032,519 824,776
05/31/2001 1,173,952 791,519 1,059,070 845,048
06/30/2001 1,219,754 815,994 1,101,681 874,227
07/31/2001 1,226,843 797,090 1,076,976 826,906
08/31/2001 1,212,666 774,784 1,073,245 800,198
09/30/2001 1,084,529 673,267 954,769 692,481
10/31/2001 1,122,698 713,264 979,707 733,006
11/30/2001 1,191,110 766,270 1,050,104 789,753
12/31/2001 1,275,273 820,091 1,114,398 838,499
01/31/2002 1,273,439 810,375 1,129,190 829,778
02/28/2002 1,284,443 788,738 1,136,065 807,036
03/31/2002 1,359,027 849,341 1,221,145 871,899
04/30/2002 1,362,695 853,515 1,264,131 879,845
05/31/2002 1,337,630 821,702 1,222,322 840,796
06/30/2002 1,293,002 775,677 1,195,260 799,078
07/31/2002 1,124,270 670,247 1,017,670 678,393
08/31/2002 1,142,610 673,799 1,013,148 676,665
09/30/2002 1,056,410 626,103 940,778 628,071
10/31/2002 1,074,139 648,354 954,930 648,208
11/30/2002 1,127,938 696,200 1,031,134 706,057
12/31/2002 1,106,540 662,377 987,077 666,744
01/31/2003 1,077,807 643,007 959,285 648,291
02/28/2003 1,054,576 622,929 927,036 628,702
03/31/2003 1,057,633 628,189 936,937 636,798
04/30/2003 1,144,444 680,497 1,025,932 697,177
05/31/2003 1,215,972 740,279 1,130,685 771,993
06/30/2003 1,241,648 757,321 1,149,843 785,964
07/31/2003 1,289,334 796,158 1,207,184 835,142
08/31/2003 1,338,241 830,662 1,253,039 873,432
09/30/2003 1,304,617 812,622 1,238,666 857,310
Past performance is no guarantee of future performance. Average annual total
returns assume reinvestment of dividends and capital gains distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance would be
lower.
(a) Performance shown for periods prior to the inception date of the Retail
Class (December 31, 1996) and Admin Class (January 2, 1998) represents the
performance of the Institutional Class of shares during the periods shown,
adjusted to reflect the current levels of management and 12b-1 fees payable by
the respective Classes of shares. Since index performance data is not available
coincident with the Fund's inception date, the beginning value of the index is
the value as of the month end closest to the Fund's inception date (April 30,
1991). (b) The Lipper Small-Cap-Core Funds Index performance data is not
available prior to January 1, 1992. (c) Please see page 6 for a description of
the indexes and important risk disclosure. (d) Cumulative performance is shown
for the Institutional Class of shares. Performance of the Retail and Admin
Classes of shares would be lower due to their higher fees and expenses. (e) The
mountain chart is based on the initial investment minimum of $250,000 for the
Institutional Class. The initial investment minimums for Retail Class is $2,500
and, because the Admin Class shares are offered exclusively through
intermediaries, there is no initial minimum for such class.
3
FUND AND MANAGER REVIEW
LOOMIS SAYLES VALUE FUND
PORTFOLIO REVIEW | Strong stock selection in the utilities, telecommunication
services and consumer discretionary sectors led to solid performance for the
Fund. In fact, the telecommunication services and utilities sectors--along with
information technology--were among the Fund's best-performing areas for the
year. These sectors had been the worst-performing areas during the bear market,
but they rebounded during the fiscal year, as the market environment and
investor sentiment improved.
Our stock-selection efforts led to over-weighted positions in the financials
and energy sectors. We found several stocks in these areas that offered
attractive valuation characteristics, above-average dividend yields and
leverage to an improving economy.
We remained under-weighted in the information technology and consumer staples
sectors. Although the outlook improved for technology companies and performance
was strong, the huge run-up in stock prices left the sector significantly
overvalued, according to our valuation criteria. The sector ended the fiscal
year with approximately double the price/earnings ratio of the rest of the
market. Our under-weighting was the primary reason the Fund's return lagged
that of its benchmark, the S&P 500 Index. The consumer staples sector
under-performed during the fiscal year, primarily because investors favored
stocks with more leverage to an improving economy. By the end of the period we
thought consumer staples stocks were more attractive than stocks in the
cyclical sectors, and we added to our position.
OUTLOOK | In general, we believe the rebound of the past 12 months has left
most stocks fully valued. With price/earnings ratios relatively high and
interest rates unlikely to decline much more, we believe earnings growth may be
the most important factor driving stock prices higher. We continue to emphasize
companies with more predictable business models, because we believe the
cyclical areas of the market are overvalued. We are currently increasing the
Fund's exposure to stocks in industries such as healthcare services, defense
and insurance, due to attractive valuations and earnings prospects.
KEY FUND FACTS
OBJECTIVE | Long-term growth of capital and income
STRATEGY | Invests primarily in equity securities, including common stocks,
convertible securities, and warrants; The Fund invests primarily in medium-
and large-sized companies
FUND INCEPTION DATE | 5/13/91
EXPENSE RATIO | 0.85%
TOTAL NET ASSETS | $38.0 million
[PHOTO] [PHOTO]
Warren Koontz James Carroll
WARREN KOONTZ JAMES CARROLL
[PHOTO]
Jeffrey Wardlow
JEFFREY WARDLOW
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE
1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(a)
---------------------------------------------------------------------
LOOMIS SAYLES VALUE FUND 21.97% -2.09% 1.45% 8.43% 9.12%
LIPPER LARGE-CAP VALUE
FUNDS INDEX(b) 22.65 -5.94 2.00 8.92 9.88
S&P 500 INDEX(b) 24.40 -10.13 1.00 10.05 10.43
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2003(c)
[CHART]
Loomis Sayles Lipper Large-Cap
Value Fund Value Funds Index S&P 500 Index
------------- ----------------- -------------
05/13/1991 $ 250,000 $ 250,000 $ 250,000
05/31/1991 263,750 260,446 260,785
06/30/1991 248,750 247,339 248,838
07/31/1991 257,000 258,858 260,436
08/31/1991 263,250 265,201 262,978
09/30/1991 256,250 263,184 262,144
10/31/1991 257,250 268,159 265,669
11/30/1991 240,500 256,911 254,964
12/31/1991 267,887 284,716 284,123
01/31/1992 276,529 282,621 278,829
02/29/1992 282,375 287,719 282,440
03/31/1992 275,766 281,277 276,947
04/30/1992 282,120 286,450 285,078
05/31/1992 282,629 288,668 286,476
06/30/1992 276,529 282,325 282,214
07/31/1992 287,712 293,299 293,743
08/31/1992 279,325 287,289 287,731
09/30/1992 281,358 290,677 291,112
10/31/1992 283,900 292,636 292,118
11/30/1992 299,658 304,674 302,065
12/31/1992 305,652 309,352 305,772
01/31/1993 312,545 312,900 308,328
02/28/1993 315,461 315,955 312,530
03/31/1993 321,293 325,136 319,125
04/30/1993 312,810 319,076 311,411
05/31/1993 319,702 327,700 319,741
06/30/1993 319,437 329,180 320,678
07/31/1993 317,051 328,208 319,388
08/31/1993 329,776 341,482 331,507
09/30/1993 327,920 342,711 328,964
10/31/1993 335,078 348,613 335,769
11/30/1993 330,306 343,067 332,569
12/31/1993 341,961 350,389 336,590
01/31/1994 355,103 361,813 348,033
02/28/1994 351,544 353,113 338,586
03/31/1994 337,033 338,450 323,825
04/30/1994 343,878 342,660 327,978
05/31/1994 347,711 347,605 333,360
06/30/1994 337,033 339,230 325,189
07/31/1994 348,806 349,126 335,867
08/31/1994 364,138 363,280 349,637
09/30/1994 351,544 353,816 341,087
10/31/1994 350,996 359,615 348,750
11/30/1994 334,569 347,102 336,049
12/31/1994 338,950 351,034 341,034
01/31/1995 346,131 357,357 349,878
02/28/1995 365,089 370,646 363,513
03/31/1995 374,855 379,335 374,240
04/30/1995 388,930 390,363 385,260
05/31/1995 405,591 404,834 400,658
06/30/1995 408,463 413,616 409,964
07/31/1995 424,262 426,690 423,560
08/31/1995 426,560 429,282 424,625
09/30/1995 440,060 444,703 442,545
10/31/1995 429,145 441,145 440,963
11/30/1995 448,678 460,256 460,320
12/31/1995 458,348 467,728 469,187
01/31/1996 471,875 482,113 485,156
02/29/1996 475,965 487,530 489,655
03/31/1996 480,998 492,803 494,368
04/30/1996 480,998 499,503 501,656
05/31/1996 490,121 508,756 514,594
06/30/1996 491,065 509,051 516,557
07/31/1996 473,133 489,082 493,735
08/31/1996 484,458 501,793 504,150
09/30/1996 508,601 526,381 532,526
10/31/1996 522,477 537,498 547,214
11/30/1996 558,944 576,000 588,576
12/31/1996 555,351 566,255 576,914
01/31/1997 584,543 594,832 612,957
02/28/1997 588,458 599,601 617,761
03/31/1997 568,523 576,688 592,378
04/30/1997 588,458 602,345 627,742
05/31/1997 624,058 637,054 665,961
06/30/1997 654,673 663,641 695,797
07/31/1997 711,826 713,656 751,160
08/31/1997 689,343 683,123 709,079
09/30/1997 724,517 718,085 747,913
10/31/1997 697,684 696,421 722,934
11/30/1997 718,353 719,260 756,401
12/31/1997 717,570 727,491 769,391
01/31/1998 719,197 728,533 777,901
02/28/1998 766,791 776,460 834,007
03/31/1998 789,978 810,968 876,716
04/30/1998 796,486 819,212 885,536
05/31/1998 782,656 805,276 870,316
06/30/1998 781,435 820,337 905,667
07/31/1998 746,452 806,111 896,023
08/31/1998 641,501 696,099 766,478
09/30/1998 685,434 729,554 815,580
10/31/1998 743,604 787,979 881,920
11/30/1998 769,232 828,198 935,371
12/31/1998 793,193 860,189 989,272
01/31/1999 791,361 874,489 1,030,640
02/28/1999 768,005 854,461 998,609
03/31/1999 795,941 880,403 1,038,562
04/30/1999 853,186 932,283 1,078,780
05/31/1999 848,149 916,368 1,053,306
06/30/1999 869,673 956,763 1,111,763
07/31/1999 837,615 929,600 1,077,048
08/31/1999 802,352 912,659 1,071,719
09/30/1999 757,472 878,903 1,042,339
10/31/1999 785,866 921,229 1,108,299
11/30/1999 780,930 924,442 1,130,829
12/31/1999 782,659 952,911 1,197,430
01/31/2000 748,924 912,630 1,137,268
02/29/2000 688,719 874,249 1,115,741
03/31/2000 758,266 954,304 1,224,892
04/30/2000 755,152 943,680 1,188,040
05/31/2000 768,127 944,384 1,163,665
06/30/2000 749,962 933,958 1,192,353
07/31/2000 746,848 929,738 1,173,717
08/31/2000 797,191 983,551 1,246,616
09/30/2000 784,735 968,022 1,180,803
10/31/2000 814,319 975,755 1,175,811
11/30/2000 796,672 933,933 1,083,111
12/31/2000 840,165 971,538 1,088,412
01/31/2001 851,185 979,621 1,127,028
02/28/2001 828,095 932,405 1,024,263
03/31/2001 797,134 896,167 959,376
04/30/2001 835,442 946,942 1,033,930
05/31/2001 849,086 962,182 1,040,857
06/30/2001 834,393 936,035 1,015,524
07/31/2001 827,571 929,657 1,005,527
08/31/2001 796,609 886,115 942,579
09/30/2001 729,438 816,964 866,463
10/31/2001 734,685 822,288 882,986
11/30/2001 775,371 875,034 950,716
12/31/2001 792,655 888,223 959,045
01/31/2002 785,626 871,835 945,049
02/28/2002 781,841 867,010 926,824
03/31/2002 808,335 905,288 961,681
04/30/2002 788,330 866,699 903,376
05/31/2002 793,737 867,866 896,721
06/30/2002 735,882 807,346 832,848
07/31/2002 674,243 737,605 767,941
08/31/2002 682,354 742,570 772,965
09/30/2002 603,953 656,741 688,960
10/31/2002 647,209 704,932 749,600
11/30/2002 687,220 749,126 793,721
12/31/2002 660,364 713,451 747,091
01/31/2003 645,108 696,464 727,520
02/28/2003 620,045 679,041 716,604
03/31/2003 616,776 678,604 723,562
04/30/2003 666,903 735,895 783,162
05/31/2003 715,940 781,191 824,425
06/30/2003 728,471 790,129 834,942
07/31/2003 732,285 801,134 849,663
08/31/2003 746,996 814,674 866,233
09/30/2003 736,644 805,523 857,034
Past performance is no guarantee of future performance. Average annual total
returns assume reinvestment of dividends and capital gains distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance would be
lower.
(a) Since index performance data is not available coincident with the Fund's
inception date, comparative performance is presented from the month end closest
to the Fund's inception date (April 30, 1991). (b) Please see page 6 for a
description of the indexes and important risk disclosure. (c) The mountain
chart is based on the Fund's minimum initial investment of $250,000.
4
FUND AND MANAGER REVIEW
LOOMIS SAYLES WORLDWIDE FUND
PORTFOLIO REVIEW | Global markets rose sharply during the fiscal year, as
investors put money into stocks dependent on economic growth--particularly many
beaten-down stocks in the technology, telecommunication and financial sectors.
Led by emerging market and European issues, international stocks outperformed
U.S. stocks during the period. In addition, value stocks outperformed growth
stocks. Currency also played a role in returns, as the U.S. dollar weakened
against most major currencies.
The Fund outperformed its benchmark, the S&P 500 Index for the one-year period,
due to favorable stock selections in a variety of areas, including the
materials, consumer discretionary and telecommunication services sectors. In
the materials sector, holdings in the chemicals, metals and mining and paper
industries led the way. Good stock selection in the automobile industry helped
propel the consumer discretionary sector higher. In the telecom sector, many
stocks that were beaten-down during the bear market rallied during the period
as investors rewarded their strong growth rates. The Fund's performance also
benefited from good stock selection in Canada, Japan and the United Kingdom.
The Fund underperformed in the information technology, consumer staples and
financials sectors. In the consumer staples sector we missed much of the rally
among food-related stocks, and in the financials area the Fund lacked exposure
to the banking, diversified financial and insurance holdings that rallied late
in the year.
OUTLOOK | The market has moved past the "wall of worry" stage and remains
focused on earnings and fundamentals. The combination of reducing expenses and
increasing revenues has helped the corporate earnings situation. But even
though fundamentals have improved and the general market sentiment is better,
we continue to stress diversification in all asset classes and styles.
KEY FUND FACTS
OBJECTIVE | High total investment return through a combination of capital
appreciation and current income
STRATEGY | Invests primarily in equity and fixed income securities of United
States and foreign issuers including securities of issuers located in emerging
securities markets
FUND INCEPTION DATE | 5/1/96
EXPENSE RATIO| 1.00%
TOTAL NET ASSETS | $10.5 million
[PHOTO] [PHOTO]
Robert Ix Eswar Menon
ROBERT IX ESWAR MENON
[PHOTO] [PHOTO]
Daniel Fuss Alexander Muromcew
DANIEL FUSS ALEXANDER MUROMCEW
[PHOTO] [PHOTO]
David Rolley John Tribolet
DAVID ROLLEY JOHN TRIBOLET
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE
1 YEAR 3 YEARS 5 YEARS INCEPTION(a)
-------------------------------------------------------------------------
LOOMIS SAYLES WORLDWIDE FUND 28.02% 1.82% 14.61% 9.75%
LIPPER GLOBAL FLEXIBLE FUNDS INDEX(b) 21.14 -2.77 4.94 5.64
S&P 500 INDEX(b) 24.40 -10.13 1.00 7.49
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2003(c)
[CHART]
Loomis Sayles Lipper Global
Worldwide Fund Flexible Funds Index S&P 500 Index
-------------- -------------------- -------------
05/01/1996 $ 250,000 $ 250,000 $ 250,000
05/31/1996 252,250 251,586 256,447
06/30/1996 253,000 252,629 257,426
07/31/1996 244,500 246,466 246,053
08/31/1996 250,500 250,102 251,243
09/30/1996 258,500 257,121 265,384
10/31/1996 263,500 260,291 272,704
11/30/1996 276,250 271,371 293,316
12/31/1996 273,097 271,756 287,504
01/31/1997 273,097 276,787 305,466
02/28/1997 273,611 278,385 307,860
03/31/1997 273,097 273,834 295,211
04/30/1997 275,666 276,512 312,835
05/31/1997 283,631 288,138 331,881
06/30/1997 286,971 296,211 346,750
07/31/1997 302,330 308,392 374,340
08/31/1997 295,076 299,543 353,369
09/30/1997 306,742 312,306 372,722
10/31/1997 289,110 301,232 360,274
11/30/1997 289,370 302,170 376,952
12/31/1997 282,692 304,762 383,426
01/31/1998 291,293 305,506 387,666
02/28/1998 309,069 319,280 415,627
03/31/1998 311,936 329,994 436,911
04/30/1998 307,922 332,904 441,306
05/31/1998 294,733 330,053 433,721
06/30/1998 282,405 329,795 451,338
07/31/1998 282,405 326,570 446,532
08/31/1998 252,301 290,436 381,974
09/30/1998 252,014 295,085 406,443
10/31/1998 270,077 310,493 439,504
11/30/1998 286,132 324,396 466,142
12/31/1998 291,114 332,163 493,003
01/31/1999 295,187 336,107 513,619
02/28/1999 289,547 327,933 497,656
03/31/1999 298,634 338,611 517,566
04/30/1999 311,169 356,802 537,609
05/31/1999 312,736 351,118 524,914
06/30/1999 319,943 364,134 554,046
07/31/1999 325,897 363,883 536,746
08/31/1999 324,644 362,603 534,090
09/30/1999 322,137 360,621 519,449
10/31/1999 334,671 367,933 552,320
11/30/1999 387,079 380,851 563,548
12/31/1999 467,272 406,460 596,738
01/31/2000 451,347 398,155 566,757
02/29/2000 515,728 420,307 556,028
03/31/2000 507,934 418,265 610,424
04/30/2000 484,893 404,266 592,059
05/31/2000 472,694 397,916 579,912
06/30/2000 487,942 412,180 594,208
07/31/2000 472,016 407,090 584,921
08/31/2000 485,231 420,974 621,250
09/30/2000 472,016 408,554 588,452
10/31/2000 449,652 400,636 585,964
11/30/2000 426,926 385,157 539,767
12/31/2000 446,497 400,748 542,409
01/31/2001 450,281 405,929 561,653
02/28/2001 438,929 385,458 510,441
03/31/2001 418,591 366,444 478,104
04/30/2001 425,686 385,129 515,258
05/31/2001 432,308 382,183 518,710
06/30/2001 428,997 376,598 506,085
07/31/2001 424,267 371,266 501,103
08/31/2001 421,902 362,098 469,733
09/30/2001 402,510 338,224 431,801
10/31/2001 410,550 346,217 440,035
11/30/2001 417,172 358,725 473,789
12/31/2001 418,713 359,167 477,939
01/31/2002 412,510 356,843 470,965
02/28/2002 413,543 353,916 461,882
03/31/2002 421,297 363,747 479,253
04/30/2002 423,365 358,846 450,197
05/31/2002 430,602 363,067 446,880
06/30/2002 420,780 349,394 415,049
07/31/2002 401,137 328,712 382,703
08/31/2002 405,790 330,347 385,207
09/30/2002 389,248 310,026 343,343
10/31/2002 399,069 323,079 373,562
11/30/2002 415,611 336,044 395,550
12/31/2002 417,580 327,497 372,312
01/31/2003 421,323 322,306 362,559
02/28/2003 425,600 318,934 357,119
03/31/2003 426,670 318,595 360,586
04/30/2003 448,057 337,122 390,288
05/31/2003 471,582 355,162 410,851
06/30/2003 475,325 359,456 416,092
07/31/2003 469,443 362,263 423,429
08/31/2003 479,068 369,911 431,687
09/30/2003 498,316 375,567 427,102
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE PERFORMANCE. Average annual total
returns assume reinvestment of dividends and capital gains distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance would be
lower.
(a) Since index performance data is not available coincident with the Fund's
inception date, comparative performance is presented from the month end closet
to the Fund's inception date (April 30, 1996). (b) Please see page 6 for a
description of the indexes and important risk disclosure. (c) The mountain
chart is based on the Fund's minimum initial investment of $250,000.
5
DISCLOSURE
LOOMIS SAYLES AGGRESSIVE GROWTH FUND, LOOMIS SAYLES SMALL CAP GROWTH FUND,
LOOMIS SAYLES SMALL CAP VALUE FUND
Small and mid-cap stocks may be more volatile and subject to wider value
fluctuations than larger, more established companies. The secondary market of
small- and mid-cap stocks may be less liquid, or harder to sell, which could
also adversely impact the Fund's value.
LOOMIS SAYLES AGGRESSIVE GROWTH FUND, LOOMIS SAYLES SMALL CAP GROWTH FUND,
LOOMIS SAYLES SMALL CAP VALUE FUND, LOOMIS SAYLES VALUE FUND,
LOOMIS SAYLES WORLDWIDE FUND
Foreign investments involve special risks including greater economic, political
and currency fluctuation risks, which may be even greater in emerging markets.
In addition, foreign countries may have different accounting standards than
those of the U.S., which may adversely affect the value of the Fund.
LOOMIS SAYLES AGGRESSIVE GROWTH FUND, LOOMIS SAYLES SMALL CAP GROWTH FUND,
LOOMIS SAYLES WORLDWIDE FUND
Investing in growth Funds involves increased risks because, in part, the value
of the Fund's underlying securities is based on future expectations that may or
may not be met.
Please see the Funds' prospectus for more complete details.
INDEX DEFINITIONS
Indexes are unmanaged and do not have expenses that affect results, unlike
mutual funds. Index returns are adjusted for the investment of capital gains
distributions and income dividends. It is not possible to invest directly in an
index.
Lipper Mid-Cap Growth Funds Index is an equally weighted index of typically the
30 largest mutual funds within the mid-cap growth funds investment objective.
Lipper Small-Cap Growth Funds Index is an equally weighted index of typically
the 30 largest mutual funds within the small-cap growth funds investment
objective.
Lipper Small-Cap Core Funds Index is an equally weighted index of typically the
30 largest mutual funds within the small-cap core funds investment objective.
Lipper Large-Cap Value Funds Index is an equally weighted index of typically
the 30 largest mutual funds within the large-cap value funds investment
objective.
Lipper Global Flexible Funds Index is an equally weighted index of typically
the 30 largest mutual funds within the global flexible portfolio funds
investment objective.
Source: Lipper, Inc.
Russell 2000 Index is an index comprised of the 2,000 smallest companies in the
Russell 3000 Index (a broad market index), representing approximately 8% of the
Russell 3000 total market capitalization.
Russell Midcap Growth Index is an index which measures the performance of those
Russell Midcap companies with higher price-to-book ratios and higher forecasted
growth values. The stocks are also members of the Russell 1000 Growth Index.
Russell 2000 Growth Index is an index comprised of those Russell 2000 companies
with higher price-to-book ratios and higher forecasted growth values.
Russell 2000 Value Index measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and
industry group representation. It is a market-value weighted index (stock price
times number of shares outstanding), with each stock's weight in the index
proportionate to its market value.
6
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
SHARES VALUE +
- -------------------------------------------------------------------
COMMON STOCKS - 95.5% OF NET ASSETS
AIRLINES - 2.0%
Jetblue Airways Corp.* 18,175 $1,108,130
----------
BIOTECHNOLOGY - 7.5%
Amylin Pharmaceuticals, Inc.* 23,000 649,520
Celgene Corp.* 18,325 794,022
Gilead Sciences, Inc.* 7,675 429,263
Human Genome Sciences, Inc.* 27,525 375,991
ICOS Corp.* 15,225 583,422
Invitrogen Corp.* 10,000 579,900
OSI Pharmaceuticals, Inc.* 7,900 256,513
Telik, Inc.* 27,900 559,395
----------
4,228,026
----------
CAPITAL MARKETS - 2.1%
Ameritrade Holding Corp.* 107,025 1,204,031
----------
COMMERCIAL SERVICES & SUPPLIES - 7.9%
Apollo Group, Inc.-University of Phoenix Online* 18,941 1,261,092
Career Education Corp.* 21,750 985,275
Corinthian Colleges, Inc.* 17,775 1,016,019
Monster Worldwide, Inc.* 47,500 1,196,050
----------
4,458,436
----------
COMMUNICATIONS EQUIPMENT - 7.8%
Avaya, Inc.* 69,175 754,007
Foundry Networks, Inc.* 58,825 1,265,326
Juniper Networks, Inc.* 60,250 898,930
NetScreen Technologies, Inc.* 41,700 926,991
Sonus Networks, Inc.* 86,625 600,311
----------
4,445,565
----------
COMPUTERS & PERIPHERALS - 6.5%
ATI Technologies, Inc.* 84,800 1,259,280
Network Appliance, Inc.* 61,325 1,259,002
SanDisk Corp.* 18,300 1,166,442
----------
3,684,724
----------
ENERGY EQUIPMENT & SERVICES - 1.8%
Rowan Cos., Inc. 42,350 1,040,963
----------
HEALTH CARE EQUIPMENT & SUPPLIES - 2.0%
Zimmer Holdings, Inc.* 20,300 1,118,530
----------
HEALTH CARE PROVIDERS & SERVICES - 1.5%
Odyssey Healthcare, Inc.* 27,712 826,372
----------
HOTELS RESTAURANTS & LEISURE - 1.5%
Station Casinos, Inc. 28,125 860,625
----------
INSURANCE - 1.5%
Everest Re Group Ltd. 11,000 826,760
----------
INTERNET & CATALOG RETAIL - 3.7%
Amazon.com, Inc.* 25,725 1,244,061
Netflix, Inc.* 26,075 876,381
----------
2,120,442
----------
7
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES AGGRESSIVE GROWTH FUND - CONTINUED
SHARES VALUE +
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
INTERNET SOFTWARE & SERVICES - 11.6%
Ask Jeeves, Inc.* 42,125 $ 732,975
CNET Networks, Inc.* 65,850 466,218
DoubleClick, Inc. * 70,775 762,247
j2 Global Communications, Inc.* 22,400 847,392
Netease.com, Inc. ADR* 19,975 1,115,004
Sohu.com, Inc.* 24,125 750,288
United Online, Inc.* 34,275 1,190,028
VeriSign, Inc.* 54,100 728,727
-----------
6,592,879
-----------
IT SERVICES - 2.0%
Cognizant Technology Solutions Corp.* 30,925 1,127,835
-----------
LEISURE EQUIPMENT & PRODUCTS - 1.9%
Leapfrog Enterprises, Inc.* 28,425 1,080,150
-----------
MEDIA - 2.9%
Univision Communications, Inc., Class A* 30,825 984,242
XM Satellite Radio Holdings, Inc.* 42,750 663,908
-----------
1,648,150
-----------
PHARMACEUTICALS - 5.5%
Angiotech Pharmaceuticals, Inc.* 18,975 828,259
Esperion Therapeutics, Inc.* 27,850 539,733
Medicines Co.* 26,900 699,400
Pharmaceutical Resources, Inc.* 15,700 1,071,054
-----------
3,138,446
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 12.6%
Amkor Technology, Inc.* 49,450 702,685
Cymer, Inc.* 18,400 758,080
Cypress Semiconductor Corp.* 75,675 1,337,934
KLA-Tencor Corp.* 20,875 1,072,975
Marvell Technology Group Ltd.* 29,575 1,116,456
OmniVision Technologies, Inc.* 18,625 786,720
PMC-Sierra, Inc.* 63,900 842,905
Vitesse Semiconductor Corp.* 83,700 535,680
-----------
7,153,435
-----------
SOFTWARE - 8.7%
BEA Systems, Inc.* 60,875 733,544
Business Objects SA ADR* 31,425 784,054
Electronic Arts, Inc.* 13,775 1,270,468
Mercury Interactive Corp.* 23,125 1,050,106
VERITAS Software Corp.* 34,125 1,071,525
-----------
4,909,697
-----------
SPECIALTY RETAIL - 3.1%
Chico's FAS, Inc.* 32,750 1,003,460
Williams-Sonoma, Inc.* 27,175 733,181
-----------
1,736,641
-----------
TEXTILES APPAREL & LUXURY GOODS - 1.4%
Coach, Inc.* 14,925 814,905
-----------
TOTAL COMMON STOCKS
(Identified Cost $44,361,903) 54,124,742
-----------
8
FACE AMOUNT VALUE +
- --------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 5.8% OF NET ASSETS
Repurchase Agreement with State Street Corp.,
dated 9/30/03 at 0.350% to be repurchased at
$3,264,032 on 10/01/03 collateralized by
$3,245,000 U.S. Treasury Note, 3.625%
due 3/31/04 with a value of $3,329,672 $3,264,000 $ 3,264,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $3,264,000) 3,264,000
-----------
TOTAL INVESTMENTS - 101.3%
(Identified Cost $47,625,903)@ 57,388,742
Liabilities, Less Cash and Other Assets--(1.3%) (709,085)
-----------
NET ASSETS - 100% $56,679,657
-----------
+ See Note 2.
* Non-income producing security
@ At September 30, 2003, the net unrealized appreciation on investments based
on cost of $47,625,903 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost and aggregate gross unrealized depreciation
for all securities in which there is an excess of tax cost over value were
$10,663,513 and $900,674, respectively, resulting in net unrealized
appreciation of $9,762,839.
Key to Abbreviations: ADR: American Depositary Receipt
See accompanying notes to financial statements.
9
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES SMALL CAP GROWTH FUND
SHARES VALUE +
- ----------------------------------------------------------------
COMMON STOCKS - 102.6% OF NET ASSETS
AIRLINES - 2.7%
AirTran Holdings, Inc.* 51,650 $ 865,138
SkyWest, Inc. 33,675 583,251
----------
1,448,389
----------
BIOTECHNOLOGY - 4.5%
ICOS Corp.* 9,150 350,628
ILEX Oncology, Inc.* 35,600 591,316
Tanox, Inc.* 19,125 382,691
Telik, Inc.* 34,225 686,211
XOMA Ltd.* 52,425 387,945
----------
2,398,791
----------
CAPITAL MARKETS - 1.6%
Knight Trading Group, Inc.* 76,125 871,631
----------
COMMERCIAL BANKS - 2.0%
UCBH Holdings, Inc. 34,300 1,036,889
----------
COMMERCIAL SERVICES & SUPPLIES - 5.2%
Corinthian Colleges, Inc.* 14,725 841,681
Corporate Executive Board Co.* 11,350 532,883
Monster Worldwide, Inc.* 29,525 743,439
Strayer Education, Inc. 6,625 640,704
----------
2,758,707
----------
COMMUNICATIONS EQUIPMENT - 7.3%
Enterasys Networks, Inc.* 117,500 470,000
Foundry Networks, Inc.* 36,800 791,568
NetScreen Technologies, Inc.* 35,350 785,831
SafeNet, Inc.* 32,150 1,161,579
Sonus Networks, Inc.* 90,375 626,299
----------
3,835,277
----------
COMPUTERS & PERIPHERALS - 3.4%
Advanced Digital Information Corp.* 65,775 922,165
Dot Hill Systems Corp.* 61,650 848,304
----------
1,770,469
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.0%
Lexar Media, Inc.* 74,550 1,270,332
TTM Technologies, Inc.* 59,800 853,944
----------
2,124,276
----------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.7%
Epix Medical, Inc.* 24,425 415,714
Kyphon, Inc.* 24,950 486,525
----------
902,239
----------
HEALTH CARE PROVIDERS & SERVICES - 10.3%
Advisory Board Co.* 25,025 1,137,386
Odyssey Healthcare, Inc.* 42,937 1,280,381
Select Medical Corp.* 29,150 839,520
United Surgical Partners International, Inc.* 43,100 1,219,730
VistaCare, Inc., Class A* 31,275 978,908
----------
5,455,925
----------
10
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HOTELS RESTAURANTS & LEISURE - 2.1%
Station Casinos, Inc. 36,450 $1,115,370
----------
INTERNET & CATALOG RETAIL - 2.1%
Netflix, Inc.* 33,800 1,136,018
----------
INTERNET SOFTWARE & SERVICES - 12.6%
Ask Jeeves, Inc.* 58,150 1,011,810
CNET Networks, Inc.* 77,575 549,231
DoubleClick, Inc.* 52,925 570,002
j2 Global Communications, Inc.* 31,750 1,201,103
Netease.com, Inc. ADR* 14,475 807,995
RealNetworks, Inc.* 23,175 151,796
SkillSoft Plc* 76,225 567,876
SonicWALL, Inc.* 69,000 399,510
United Online, Inc.* 39,600 1,374,912
----------
6,634,235
----------
LEISURE EQUIPMENT & PRODUCTS - 2.1%
Leapfrog Enterprises, Inc.* 29,475 1,120,050
----------
MEDIA - 2.1%
Radio One, Inc., Class D* 26,100 374,796
XM Satellite Radio Holdings, Inc.* 47,425 736,510
----------
1,111,306
----------
OIL & GAS - 1.0%
Evergreen Resources, Inc.* 18,800 507,600
----------
PHARMACEUTICALS - 7.8%
Angiotech Pharmaceuticals, Inc.* 18,725 817,346
AtheroGenics, Inc.* 25,400 425,196
Esperion Therapeutics, Inc.* 22,675 439,442
Impax Laboratories, Inc.* 48,300 604,233
Medicines Co.* 28,800 748,800
Pharmaceutical Resources, Inc.* 15,950 1,088,109
----------
4,123,126
----------
ROAD & RAIL - 1.3%
Knight Transportation, Inc.* 27,800 696,946
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 12.7%
Brooks Automation, Inc.* 33,375 697,537
Cymer, Inc.* 17,200 708,640
Cypress Semiconductor Corp.* 68,650 1,213,732
FormFactor, Inc.* 29,425 636,463
Lam Research Corp.* 42,375 938,606
OmniVision Technologies, Inc.* 22,400 946,176
Power Integrations, Inc.* 30,825 1,024,623
Vitesse Semiconductor Corp.* 89,600 573,440
----------
6,739,217
----------
SOFTWARE - 9.3%
Altiris, Inc.* 42,150 1,107,702
Documentum, Inc.* 47,575 1,013,823
Kronos, Inc.* 15,575 824,073
Manhattan Associates, Inc.* 29,250 757,283
RSA Security, Inc.* 86,275 1,232,007
----------
4,934,888
----------
11
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES SMALL CAP GROWTH FUND - CONTINUED
SHARES VALUE +
- --------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
SPECIALTY RETAIL - 5.6%
Aeropostale, Inc.* 37,425 $ 1,012,346
PETCO Animal Supplies, Inc.* 30,025 936,780
The Sports Authority, Inc.* 31,425 988,631
-----------
2,937,757
-----------
WIRELESS TELECOMMUNICATION SERVICES - 1.2%
At Road, Inc.* 45,525 612,311
-----------
TOTAL COMMON STOCKS
(Identified Cost $42,894,359) 54,271,417
-----------
FACE AMOUNT
- --------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 6.2% OF NET ASSETS
Repurchase Agreement with State Street Corp.,
dated 9/30/03 at 0.350% to be repurchased at
$3,262,032 on 10/01/03 collateralized by
$3,245,000 U.S. Treasury Note, 3.625% due
3/31/04 with a value of $3,329,672 $3,262,000 3,262,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $3,262,000) 3,262,000
-----------
TOTAL INVESTMENTS - 108.8%
(Identified Cost $46,156,359)@ 57,533,417
Liabilities, Less Cash and Other Assets--(8.8%) (4,669,456)
-----------
NET ASSETS - 100% $52,863,961
-----------
+ See Note 2.
* Non-income producing security
@ At September 30, 2003, the net unrealized appreciation on investments based
on cost of $46,214,908 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost and aggregate gross unrealized depreciation
for all securities in which there is an excess of tax cost over value were
$12,163,182 and $844,673, respectively, resulting in net unrealized
appreciation of $11,318,509.
Key to Abbreviations: ADR: American Depositary Receipt
See accompanying notes to financial statements.
12
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES SMALL CAP VALUE FUND
SHARES VALUE +
- -----------------------------------------------------------
COMMON STOCKS - 95.8% OF NET ASSETS
AEROSPACE & DEFENSE - 1.9%
Cubic Corp. 77,200 $ 1,939,264
Moog, Inc., Class A* 46,575 1,825,740
The Allied Defense Group, Inc.* 76,175 1,608,054
United Defense Industries, Inc.* 120,625 3,424,544
-----------
8,797,602
-----------
AUTO COMPONENTS - 0.7%
Cooper Tire & Rubber Co. 202,925 3,220,420
-----------
AUTOMOBILES - 0.8%
Monaco Coach Corp.* 225,250 3,727,888
-----------
BIOTECHNOLOGY - 0.7%
Serologicals Corp.* 236,775 3,113,591
-----------
BUILDING PRODUCTS - 1.7%
ElkCorp 185,825 4,378,037
Lennox International, Inc. 233,375 3,409,609
-----------
7,787,646
-----------
CAPITAL MARKETS - 1.1%
Affiliated Managers Group, Inc.* 78,000 4,898,400
-----------
CHEMICALS - 1.8%
Ferro Corp. 118,000 2,520,480
Scotts Co.* 50,600 2,767,820
Spartech Corp. 135,125 2,878,163
-----------
8,166,463
-----------
COMMERCIAL BANKS - 7.7%
Boston Private Financial Holdings, Inc. 107,650 2,536,234
CVB Financial Corp. 146,975 2,792,525
East West Bancorp, Inc. 98,125 4,194,844
F.N.B. Corp. 68,878 2,376,291
First Midwest Bancorp, Inc. 143,675 4,268,584
Gold Banc Corp., Inc. 415,200 5,036,376
Independent Bank Corp. 42,125 1,233,420
Provident Financial Services, Inc. 214,525 4,110,299
Republic Bancorp, Inc. 102,137 1,360,465
Sterling Bancshares, Inc. 242,250 2,890,042
Umpqua Holdings Corp. 165,900 3,157,077
Wintrust Financial Corp. 56,425 2,125,530
-----------
36,081,687
-----------
COMMERCIAL SERVICES & SUPPLIES - 2.9%
Arbitron, Inc.* 93,900 3,314,670
Navigant Consulting, Inc.* 134,675 1,657,849
NCO Group, Inc.* 119,050 2,794,104
School Specialty, Inc.* 73,825 2,082,603
Waste Connections, Inc.* 110,200 3,866,918
-----------
13,716,144
-----------
13
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE +
- -----------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMMUNICATIONS EQUIPMENT - 2.0%
Andrew Corp.* 278,725 $ 3,425,530
CommScope, Inc.* 309,200 3,728,952
Tekelec* 135,925 2,121,789
-----------
9,276,271
-----------
COMPUTERS & PERIPHERALS - 1.8%
Dot Hill Systems Corp.* 166,750 2,294,480
Imation Corp. 85,625 2,795,656
Maxtor Corp.* 254,675 3,099,395
-----------
8,189,531
-----------
CONTAINERS & PACKAGING - 0.4%
Rock-Tenn Co., Class A 139,200 2,029,536
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.8%
Commonwealth Telephone Enterprises, Inc.* 93,800 3,764,194
-----------
ELECTRIC UTILITIES - 0.9%
Black Hills Corp. 75,500 2,329,930
Texas Genco Holdings, Inc. 78,625 1,871,275
-----------
4,201,205
-----------
ELECTRICAL EQUIPMENT - 2.0%
American Power Conversion Corp. 189,875 3,254,457
AMETEK, Inc. 94,100 4,033,126
C&D Technologies, Inc. 106,850 2,021,602
-----------
9,309,185
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.9%
Aeroflex, Inc.* 226,300 2,002,755
Global Imaging System, Inc.* 112,850 2,776,110
Orbotech Ltd.* 96,325 1,968,883
Planar Systems, Inc.* 111,625 2,394,356
ScanSource, Inc.* 93,250 3,407,355
Tech Data Corp.* 107,150 3,305,577
Tektronix, Inc.* 125,950 3,117,263
Varian, Inc.* 121,275 3,798,333
-----------
22,770,632
-----------
ENERGY EQUIPMENT & SERVICES - 1.4%
Grey Wolf, Inc.* 732,825 2,550,231
Hydril Co.* 119,750 2,426,135
TETRA Technologies, Inc.* 84,937 1,751,401
-----------
6,727,767
-----------
FOOD & STAPLES RETAILING - 0.5%
BJ's Wholesale Club, Inc.* 117,100 2,268,227
-----------
FOOD PRODUCTS - 1.0%
Hain Celestial Group, Inc.* 118,950 2,156,564
Ralcorp Holdings, Inc.* 98,250 2,721,525
-----------
4,878,089
-----------
14
SHARES VALUE +
- -----------------------------------------------------------
COMMON STOCKS - CONTINUED
GAS UTILITIES - 1.9%
AGL Resources, Inc. 142,450 $ 4,012,817
New Jersey Resources Corp. 91,300 3,290,452
Southern Union Co. 89,800 1,526,600
-----------
8,829,869
-----------
HEALTH CARE EQUIPMENT & SUPPLIES - 2.0%
Sybron Dental Specialties, Inc.* 139,575 3,499,145
Viasys Healthcare, Inc.* 141,650 2,861,330
Zoll Medical Corp.* 88,325 2,830,816
-----------
9,191,291
-----------
HEALTH CARE PROVIDERS & SERVICES - 1.5%
Molina Healthcare, Inc.* 71,625 1,987,594
NDCHealth Corp. 88,300 1,849,885
Omnicare, Inc. 64,050 2,309,643
Renal Care Group, Inc.* 30,250 1,033,037
-----------
7,180,159
-----------
HOTELS RESTAURANTS & LEISURE - 3.7%
CEC Entertainment, Inc.* 96,875 3,797,500
Dover Downs Entertainment, Inc. 168,065 1,381,494
Fairmont Hotels & Resorts, Inc. 172,375 4,438,656
O'Charley's, Inc.* 197,250 2,925,218
Sonic Corp.* 76,200 1,926,336
The Steak n Shake Co.* 183,450 2,733,405
-----------
17,202,609
-----------
HOUSEHOLD DURABLES - 2.7%
Blyth, Inc. 44,950 1,212,751
Furniture Brands International, Inc.* 193,700 4,668,170
Harman International Industries, Inc. 28,575 2,810,351
La-Z-Boy, Inc. 64,500 1,431,900
Standard Pacific Corp. 62,175 2,356,433
-----------
12,479,605
-----------
INDUSTRIAL CONGLOMERATES - 0.8%
Allete, Inc. 131,675 3,605,262
-----------
INSURANCE - 6.4%
American Financial Group, Inc. 148,550 3,230,962
AmerUs Group Co. 128,975 4,385,150
Delphi Financial Group, Inc. 72,150 3,356,418
Endurance Specialty Holdings Ltd. 131,400 3,836,880
Ohio Casualty Corp.* 162,175 2,351,538
Platinum Underwriters Holdings Ltd. 127,300 3,577,130
PMA Capital Corp., Class A 163,925 2,053,980
ProAssurance Corp.* 63,725 1,646,017
Protective Life Corp. 75,875 2,264,869
RLI Corp. 96,900 3,189,948
-----------
29,892,892
-----------
INTERNET & CATALOG RETAIL - 0.5%
FTD, Inc., Class A* 107,975 2,430,517
-----------
INTERNET SOFTWARE & SERVICES - 0.3%
RADWARE Ltd.* 74,825 1,358,074
-----------
15
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE +
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - 1.3%
Anteon International Corp.* 28,475 $ 871,335
Pegasus Solutions, Inc.* 134,300 1,857,369
Perot Systems Corp. Class A* 327,800 3,278,000
-----------
6,006,704
-----------
MACHINERY - 6.0%
Actuant Corp., Class A* 93,700 5,261,255
Barnes Group, Inc. 105,425 2,736,833
CLARCOR, Inc. 103,775 4,047,225
Gardner Denver, Inc.* 127,875 2,686,654
IDEX Corp. 81,800 2,980,792
Reliance Steel & Aluminum Co. 154,475 3,427,800
Robbins & Myers, Inc. 157,575 3,504,468
Stewart & Stevenson Services, Inc. 236,675 3,554,858
-----------
28,199,885
-----------
MEDIA - 6.9%
A.H. Belo Corp., Series A 143,150 3,471,387
ADVO, Inc.* 162,325 6,757,590
Harte-Hanks, Inc. 77,825 1,435,093
John Wiley & Son, Inc., Class A 171,825 4,465,732
Journal Communications, Inc., Class A* 169,975 2,813,086
R.H. Donnelley Corp.* 179,150 7,239,451
Regent Communications, Inc.* 218,475 1,332,698
Saga Communications, Inc., Class A* 159,225 3,081,004
Scholastic Corp.* 57,025 1,641,750
-----------
32,237,791
-----------
MULTI-UTILITIES & UNREGULATED POWER - 0.4%
Energen Corp. 57,250 2,071,305
-----------
MULTILINE RETAIL - 0.5%
ShopKo Stores, Inc.* 148,875 2,233,125
-----------
OIL & GAS - 1.6%
Evergreen Resources, Inc.* 146,650 3,959,550
Patina Oil & Gas Corp. 101,700 3,685,608
-----------
7,645,158
-----------
PHARMACEUTICALS - 1.6%
CIMA Labs, Inc.* 89,625 2,505,019
Perrigo Co. 396,825 5,051,582
-----------
7,556,601
-----------
REAL ESTATE - 5.4%
American Financial Realty Trust 50,950 718,395
Bedford Property Investors, Inc. 129,250 3,354,038
CBL & Associates Properties, Inc. 74,750 3,730,025
Corporate Office Properties Trust 180,900 3,348,459
Heritage Property Investment Trust 133,750 3,862,700
LaSalle Hotel Properties 77,125 1,336,576
Newcastle Investment Corp. 156,475 3,597,360
Ramco-Gershenson Properties Trust 63,400 1,613,530
The Macerich Co. 98,375 3,713,656
-----------
25,274,739
-----------
16
SHARES VALUE +
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ROAD & RAIL - 1.8%
Genesee & Wyoming, Inc., Class A* 162,825 $ 3,860,581
Landstar System, Inc.* 47,475 2,896,924
Old Dominion Freight Line, Inc.* 61,500 1,789,035
-----------
8,546,540
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.8%
Actel Corp.* 14,700 352,359
Cohu, Inc. 81,375 1,591,695
DSP Group, Inc. 161,650 4,026,702
DuPont Photomasks, Inc.* 61,100 1,387,581
FEI Co.* 107,800 2,516,052
Semtech Corp.* 158,700 2,929,602
Standard Microsystems Corp.* 31,550 851,219
Varian Semiconductor Equipment Associates, Inc.* 58,225 2,180,526
White Electronic Designs Corp.* 164,375 1,767,031
-----------
17,602,767
-----------
SOFTWARE - 2.5%
Actuate Corp.* 260,125 931,247
Ascential Software Corp.* 120,575 2,234,255
Concord Communications, Inc.* 122,500 1,603,525
FileNET Corp.* 105,275 2,112,869
Hyperion Solutions Corp.* 55,300 1,596,511
MSC. Software Corp.* 225,425 1,623,060
Parametric Technology Corp.* 548,175 1,710,306
-----------
11,811,773
-----------
SPECIALTY RETAIL - 2.4%
AnnTaylor Stores Corp.* 91,350 2,935,989
Cole National Corp.* 131,675 1,640,671
Genesco, Inc.* 112,000 1,798,720
Men's Wearhouse, Inc.* 98,975 2,538,709
Party City Corp.* 197,275 2,442,264
-----------
11,356,353
-----------
TEXTILES APPAREL & LUXURY GOODS - 0.6%
Fossil, Inc.* 58,925 1,427,753
Oshkosh B'Gosh, Inc., Class A 51,725 1,330,367
-----------
2,758,120
-----------
THRIFTS & MORTGAGE FINANCE - 4.6%
Bank Mutual Corp. 58,550 2,485,448
BankAtlantic Bancorp, Inc., Class A 174,550 2,487,337
BankUnited Financial Corp.* 173,125 3,649,475
Downey Financial Corp. 47,225 2,206,824
First Niagara Financial Group, Inc. 354,798 5,357,450
Independence Community Bank Corp. 95,525 3,336,688
MAF Bancorp, Inc. 56,775 2,168,805
-----------
21,692,027
-----------
TRADING COMPANIES & DISTRIBUTORS - 0.6%
Hughes Supply, Inc. 91,775 2,978,099
-----------
17
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE +
- ---------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
WATER UTILITIES - 1.0%
American States Water Co. 81,900 $ 1,930,383
Philadelphia Suburban Corp. 122,750 2,955,820
------------
4,886,203
------------
TOTAL COMMON STOCKS
(Identified Cost $386,167,776) 447,951,946
------------
FACE AMOUNT
- ---------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 5.6% OF NET ASSETS
COMMERCIAL PAPER - 5.6%
UBS Finance, Inc., 0.920%, 10/01/03 $26,033,000 26,033,000
------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $26,033,000) 26,033,000
------------
TOTAL INVESTMENTS - 101.4%
(Identified Cost $412,200,776)@ 473,984,946
Liabilities, Less Cash and Other Assets--(1.4%) (6,477,083)
------------
NET ASSETS - 100% $467,507,863
------------
+ See Note 2.
* Non-income producing security
@ At September 30, 2003, the net unrealized appreciation on investments based
on cost of $412,776,059 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost and aggregate gross unrealized depreciation
for all securities in which there is an excess of tax cost over value were
$66,230,735 and $5,021,848, respectively, resulting in net unrealized
appreciation of $61,208,887.
See accompanying notes to financial statements.
18
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES VALUE FUND
SHARES VALUE +
- ---------------------------------------------------------------
COMMON STOCKS - 99.3% OF NET ASSETS
AEROSPACE & DEFENSE - 4.2%
Honeywell International, Inc. 28,975 $ 763,491
Northrop Grumman Corp. 9,800 844,956
----------
1,608,447
----------
BEVERAGES - 1.0%
Anheuser-Busch Cos., Inc. 7,325 361,416
----------
BUILDING PRODUCTS - 1.8%
Masco Corp. 28,500 697,680
----------
CAPITAL MARKETS - 4.7%
J.P. Morgan Chase & Co. 19,750 678,017
Lehman Brothers Holdings, Inc. 9,475 654,533
Merrill Lynch & Co., Inc. 8,700 465,711
----------
1,798,261
----------
CHEMICALS - 1.9%
Praxair, Inc. 11,800 731,010
----------
COMMERCIAL BANKS - 8.7%
Bank of America Corp. 16,000 1,248,640
PNC Financial Services Group 8,100 385,398
U.S. Bancorp 36,000 863,640
Wells Fargo & Co. 16,000 824,000
----------
3,321,678
----------
COMMERCIAL SERVICES & SUPPLIES - 2.9%
Equifax, Inc. 12,525 278,932
Waste Management, Inc. 30,725 804,073
----------
1,083,005
----------
COMPUTERS & PERIPHERALS - 2.2%
Apple Computer, Inc.* 19,575 403,832
Hewlett-Packard Co. 22,850 442,376
----------
846,208
----------
CONSUMER FINANCE - 2.7%
American Express Co. 22,550 1,016,103
----------
DIVERSIFIED FINANCIAL SERVICES - 3.3%
Citigroup, Inc. 27,500 1,251,525
----------
DIVERSIFIED TELECOMMUNICATION SERVICES - 5.1%
BellSouth Corp. 21,000 497,280
SBC Communications, Inc. 25,625 570,156
Sprint Corp. (FON Group) 33,000 498,300
Verizon Communications, Inc. 10,950 355,218
----------
1,920,954
----------
ELECTRIC UTILITIES - 3.3%
Exelon Corp. 13,000 825,500
FirstEnergy Corp. 13,925 444,207
----------
1,269,707
----------
ENERGY EQUIPMENT & SERVICES - 2.0%
GlobalSantaFe Corp. 11,725 280,814
Halliburton Co. 19,825 480,756
----------
761,570
----------
19
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES VALUE FUND - CONTINUED
SHARES VALUE +
- ------------------------------------------------------------
COMMON STOCKS - CONTINUED
FOOD & STAPLES RETAILING - 0.8%
CVS Corp. 9,900 $ 307,494
----------
FOOD PRODUCTS - 1.0%
Kellogg Co. 11,275 376,021
----------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.8%
Baxter International, Inc. 23,350 678,551
----------
HEALTH CARE PROVIDERS & SERVICES - 2.7%
McKesson Corp. 16,475 548,453
Tenet Healthcare Corp.* 33,700 487,976
----------
1,036,429
----------
HOTELS RESTAURANTS & LEISURE - 5.1%
Darden Restaurants, Inc. 14,275 271,225
Harrah's Entertainment, Inc. 9,825 413,731
Mandalay Resort Group 10,300 407,983
McDonald's Corp. 35,300 830,962
----------
1,923,901
----------
HOUSEHOLD DURABLES - 0.7%
Black & Decker Corp. 6,875 278,781
----------
INDUSTRIAL CONGLOMERATES - 2.2%
Tyco International Ltd. 40,000 817,200
----------
INSURANCE - 6.0%
Allstate Corp. 21,900 800,007
Berkshire Hathaway, Inc., Class B* 329 821,184
Prudential Financial, Inc. 17,350 648,196
----------
2,269,387
----------
IT SERVICES - 2.4%
Accenture Ltd., Class A* 14,400 321,696
SunGard Data Systems, Inc.* 22,000 578,820
----------
900,516
----------
LEISURE EQUIPMENT & PRODUCTS - 0.8%
Hasbro, Inc. 15,875 296,545
----------
MEDIA - 6.9%
AOL Time Warner, Inc. 39,475 596,467
General Motors Corp., Class H* 41,875 599,231
Knight-Ridder, Inc. 5,350 356,845
McGraw-Hill Cos., Inc. 4,500 279,585
Tribune Co. 8,650 397,035
Walt Disney Co. 18,500 373,145
----------
2,602,308
----------
MULTI-UTILITIES & UNREGULATED POWER - 1.9%
Constellation Energy Group, Inc. 20,175 721,862
----------
MULTILINE RETAIL - 0.8%
J.C. Penney Co., Inc. (Holding Co.) 13,550 289,564
----------
20
SHARES VALUE +
- --------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
OIL & GAS - 8.5%
BP Plc ADR 22,250 $ 936,725
ChevronTexaco Corp. 5,450 389,402
ConocoPhillips 14,025 767,869
Exxon Mobil Corp. 30,975 1,133,685
-----------
3,227,681
-----------
PAPER & FOREST PRODUCTS - 1.6%
International Paper Co. 15,975 623,345
-----------
PHARMACEUTICALS - 4.7%
Abbott Laboratories 8,600 365,930
Bristol Myers Squibb Co. 25,050 642,783
Merck & Co., Inc. 6,375 322,702
Pfizer, Inc. 15,500 470,890
-----------
1,802,305
-----------
REAL ESTATE - 1.5%
Simon Property Group, Inc. 12,750 555,645
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.9%
NVIDIA Corp.* 22,125 352,031
-----------
SPECIALTY RETAIL - 2.0%
Gap, Inc. 22,000 376,640
TJX Companies, Inc. 18,825 365,582
-----------
742,222
-----------
THRIFTS & MORTGAGE FINANCE - 3.2%
Federal Home Loan Mortgage Corp. 9,950 520,883
Washington Mutual, Inc. 17,500 688,975
-----------
1,209,858
-----------
TOTAL COMMON STOCKS
(Identified Cost $34,924,935) 37,679,210
-----------
FACE AMOUNT
- --------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 0.8% OF NET ASSETS
COMMERCIAL PAPER - 0.8%
UBS Finance, Inc., 0.920%, 10/01/03 $303,000 303,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $303,000) 303,000
-----------
TOTAL INVESTMENTS - 100.1%
(Identified Cost $35,227,935)@ 37,982,210
Liabilities, Less Cash and Other Assets--(0.1%) (22,738)
-----------
NET ASSETS - 100% $37,959,472
-----------
+ See Note 2.
* Non-income producing security
@ At September 30, 2003, the net unrealized appreciation on investments based
on cost of $35,580,554 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost and aggregate gross unrealized depreciation
for all securities in which there is an excess of tax cost over value were
$3,544,512 and $1,142,856, respectively, resulting in net unrealized
appreciation of $2,401,656.
See accompanying notes to financial statements.
21
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES WORLDWIDE FUND
FACE AMOUNT VALUE +
- ----------------------------------------------------------------------------
BONDS AND NOTES - 50.0% OF NET ASSETS
NON-CONVERTIBLE BONDS - 48.3%
AUSTRALIA - 1.1%
Queensland Treasury, 8.000%, 9/14/07 AUD 100,000 $ 74,544
South Australia Government Finance Authority, Zero
Coupon Bond, 12/21/2015 120,000 42,115
--------
116,659
--------
AUSTRIA - 0.2%
Republic of Austria, 6.000%, 2/14/07 HUF 4,000,000 17,941
--------
BELGIUM - 0.7%
Kingdom of Belgium, 4.250%, 9/28/13 EUR 65,000 76,763
--------
BRAZIL - 1.0%
Republic of Brazil, 8.875%, 4/15/24 USD 105,000 84,315
Republic of Brazil, 10.000%, 1/16/07 20,000 21,370
--------
105,685
--------
CANADA - 1.7%
Alcan, Inc., 5.500%, 5/02/06 EUR 25,000 30,843
Brascan Corp., 8.125%, 12/15/08 USD 25,000 29,458
Canadian Pacific Railway Ltd., 4.900%, 6/15/10 144A CAD 25,000 18,459
Methanex Corp., 7.750%, 8/15/05 USD 15,000 15,600
Province of Ontario, 5.900%, 3/08/06 CAD 15,000 11,801
Rogers Cablesystems Ltd., 9.650%, 1/15/14 40,000 31,536
Shaw Communications, Inc., 7.400%, 10/17/07 20,000 15,250
Tembec Industries, Inc., 8.500%, 2/01/11 25,000 24,375
--------
177,322
--------
CAYMAN ISLAND - 0.1%
Arcel Finance Ltd., 7.048%, 9/01/11 144A USD 15,000 15,225
--------
CHILE - 0.5%
Empresa Nacional de Electricidad SA, Series B,
8.500%, 4/01/09 50,000 54,343
--------
DENMARK - 0.9%
Kingdom of Denmark, 4.000%, 8/15/08 DKK 190,000 30,685
Kingdom of Denmark, 5.000%, 8/15/05 360,000 59,091
--------
89,776
--------
DOMINICAN REPUBLIC - 0.3%
Republic of Dominican, 9.040%, 1/23/13 144A USD 35,000 31,675
--------
ECUADOR - 0.2%
Republic of Ecuador, 6.000%, 8/15/30 144A 25,000 15,712
--------
GERMANY - 2.7%
Eurohypo AG - Europaeische Hypothekenbank der
Deutschen Bank, 4.000%, 2/01/07 EUR 150,000 180,841
Kreditanstalt Wiederauf, 5.250%, 1/04/10 80,000 101,796
--------
282,637
--------
IRELAND - 0.6%
Republic of Ireland, 4.600%, 4/18/16 50,000 60,012
--------
ITALY - 0.7%
Republic of Italy, 4.500%, 3/01/07 60,000 73,635
--------
22
FACE AMOUNT VALUE +
- -----------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
MALAYSIA - 0.9%
Telekom Malaysia Berhad, 7.875%, 8/01/25 144A USD 25,000 $ 27,908
Tenaga Nasional Berhad, 7.500%, 11/01/25 144A 60,000 64,116
--------
92,024
--------
MEXICO - 2.4%
Innova S. de R.L., 9.375%, 9/19/13 144A 25,000 25,156
Petroleos Mexicanos, 8.625%, 12/01/23 144A 115,000 126,787
United Mexican States, 8.300%, 8/15/31 85,000 96,518
--------
248,461
--------
NETHERLANDS - 2.1%
GMAC International Finance BV, 8.000%, 3/14/07 NZD 55,000 32,768
Kingdom of Netherlands, 5.500%, 1/15/28 EUR 50,000 63,991
Repsol International Finance BV, 5.750%, 12/04/06 100,000 124,731
--------
221,490
--------
NORWAY - 0.6%
Kingdom of Norway, 6.750%, 1/15/07 NOK 380,000 58,802
--------
PERU - 0.4%
Republic of Peru,
4.500%, 3/07/17 (step to 5.000% on 3/07/05)# USD 50,000 43,625
--------
SINGAPORE - 0.1%
Flextronics International Ltd., 9.750%, 7/01/10 EUR 10,000 12,698
--------
SOUTH AFRICA - 0.5%
Republic of South Africa, 5.250%, 5/16/13 50,000 56,791
--------
SOUTH KOREA - 1.0%
Samsung Electronics Co. Ltd.,
7.700%, 10/01/27 144A* USD 100,000 109,609
--------
SUPRANATIONAL - 0.7%
Corporacion Andina De Fomento, 6.875%, 3/15/12 10,000 11,104
International Bank for Reconstruction & Development,
4.750%, 12/20/04 JPY 7,000,000 66,352
--------
77,456
--------
SWEDEN - 0.7%
Government of Sweden, 5.250%, 3/15/11 SEK 495,000 67,906
--------
UNITED KINGDOM - 0.2%
United Kingdom Treasury, 6.250%, 11/25/10 GBP 10,000 18,457
--------
UNITED STATES - 28.0%
American Standard, Inc., 8.250%, 6/01/09 GBP 10,000 17,536
Arrow Electronics, Inc., 6.875%, 7/01/13 USD 75,000 75,703
AT&T Corp., 6.500%, 11/21/06 EUR 10,000 12,552
Bausch & Lomb, Inc., 7.125%, 8/01/28 USD 95,000 94,050
Borden, Inc., 7.875%, 2/15/23 150,000 123,000
Chesapeake Energy Corp., 7.750%, 1/15/15 50,000 52,750
Chesapeake Energy Corp., 9.000%, 8/15/12 50,000 56,250
CITGO Petroleum Corp., 11.375%, 2/01/11 144A 25,000 28,250
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 50,000 48,474
Columbia/HCA Healthcare Corp., 7.190%, 11/15/15 50,000 53,116
Continental Airlines, Inc., Series 2000-2,
7.487%, 4/02/12 75,000 73,470
23
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
FACE AMOUNT VALUE +
- -------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
UNITED STATES - CONTINUED
Corning Glass, 8.875%, 3/15/16 USD 25,000 $ 26,500
Cummins Engine Co., Inc., 7.125%, 3/01/28 110,000 100,237
Dana Corp., 9.000%, 8/15/11 25,000 30,929
Dillard's, Inc., 7.000%, 12/01/28 50,000 40,000
El Paso Corp., 5.750%, 3/14/06 25,000 25,338
ESI Tractebel Acquisition Corp., Series B,
7.990%, 12/30/11 24,000 23,850
Federal Home Loan Mortgage Corp., 5.125%, 1/15/12 EUR 200,000 249,082
Ford Motor Credit Co., 7.250%, 2/22/05 GBP 15,000 25,427
Fort James Corp., 4.750%, 6/29/04 EUR 50,000 58,073
General Motors Acceptance Corp., 7.000%, 12/07/05 USD 10,000 17,077
Georgia-Pacific Group, 7.375%, 12/01/25 50,000 44,250
Georgia-Pacific Group, 7.750%, 11/15/29 35,000 31,719
Gruma SA de CV, 7.625%, 10/15/07 30,000 32,138
Hasbro, Inc., 6.600%, 7/15/28 50,000 46,000
IMC Global, Inc., 7.375%, 8/01/18 100,000 76,000
J.C. Penney Co., Inc., 7.125%, 11/15/23 105,000 99,225
KfW International Finance, Inc., 4.750%, 12/20/04 JPY 8,000,000 72,545
Lear Corp., 8.125%, 4/01/08 EUR 50,000 65,237
Lucent Technologies, Inc., 5.500%, 11/15/08 USD 105,000 89,250
Moore North America Finance, Inc., 7.875%,
1/15/11 144A 10,000 10,625
Motorola, Inc., 8.000%, 11/01/11 75,000 86,625
National Rural Utilities Cooperative Finance Corp.,
4.125%, 02/24/06 EUR 25,000 29,775
News America Holdings, Inc., 8.625%, 2/07/14 AUD 50,000 36,605
Pioneer Natural Resources Co., 7.200%, 1/15/28 USD 175,000 184,625
Qwest Corp., 8.875%, 6/01/31 25,000 26,125
Southern California Edison Co., 6.375%, 1/15/06 25,000 26,250
Sprint Capital Corp., 6.875%, 11/15/28 25,000 24,380
Teck Cominco Ltd., 7.000%, 9/15/12 15,000 15,772
TFM SA de CV, 11.750%, 6/15/09 10,000 10,250
Time Warner, Inc., 6.625%, 5/15/29 75,000 76,277
Trico Marine Services, Inc., 8.875%, 5/15/12 100,000 73,000
U.S. Treasury Bonds, 5.500%, 8/15/28 50,000 53,559
United Rentals, Inc., Series B, 8.800%, 8/15/08 75,000 76,875
US West Capital Funding, Inc., 6.875%, 7/15/28 200,000 158,000
Williams Cos., Inc., 7.500%, 1/15/31 100,000 89,000
Woolworth Corp., 8.500%, 1/15/22 150,000 157,500
Xerox Corp., 7.200%, 4/01/16 20,000 18,700
----------
2,941,971
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $4,359,970) 5,066,675
----------
CONVERTIBLE BONDS - 1.7%
CANADA - 0.1%
Nortel Networks Corp., 4.250%, 9/01/08 15,000 13,238
----------
24
FACE AMOUNT VALUE +
- -----------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
UNITED STATES - 1.6%
Builders Transportation, Inc., 8.000%, 8/15/05^** USD 95,000 $ 119
Corning, Inc., 3.500%, 11/01/08 50,000 58,563
Genzyme Corp., 3.000%, 5/15/21 25,000 25,156
Human Genome Sciences, Inc., 3.750%, 3/15/07 25,000 21,531
Loews Corp., 3.125%, 9/15/07 70,000 64,487
----------
169,856
----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $234,492) 183,094
----------
TOTAL BONDS AND NOTES
(Identified Cost $4,594,462) 5,249,769
----------
SHARES
- -----------------------------------------------------------------------------
COMMON STOCKS - 46.4% OF NET ASSETS
AUSTRALIA - 1.8%
BHP Steel Ltd. 15,640 53,294
Macquarie Bank Ltd. 3,100 72,742
News Corp. Ltd. 7,750 63,360
----------
189,396
----------
AUSTRIA - 0.6%
Erste Bank der oesterreichischen Sparkassen AG 600 60,706
----------
BELGIUM - 0.3%
Umicore 500 29,124
----------
BRAZIL - 0.6%
Embraer-Empresa Brasileria de Aeronautica SA ADR 2,825 59,607
----------
CANADA - 1.0%
Angiotech Pharmaceuticals, Inc.* 969 42,201
PetroKazakhstan, Inc., Class A* 2,830 59,120
----------
101,321
----------
FINLAND - 1.4%
Nokia Oyj ADR 7,375 115,050
Stora Enso Oyj 2,900 35,912
----------
150,962
----------
FRANCE - 1.1%
BNP Paribas SA 600 29,427
Compagnie Generale des Etablissements Michelin 900 33,477
Pernod-Ricard SA 200 18,942
Total Fina SA, Class B 200 30,195
----------
112,041
----------
GERMANY - 1.6%
BASF AG 1,000 43,918
Linde AG 800 32,954
MAN AG 1,600 34,166
SAP AG 500 61,090
----------
172,128
----------
25
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
SHARES VALUE +
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HONG KONG - 1.6%
Asia Aluminun Holdings Ltd. 272,000 $ 49,519
Esprit Holdings Ltd. 21,000 63,856
Yanzhou Coal Mining Co. Ltd. 90,000 50,550
--------
163,925
--------
INDIA - 0.6%
State Bank of India GDR 2,470 62,195
--------
IRELAND - 1.3%
Anglo Irish Bank Corp. Plc 6,196 66,911
Ryanair Holdings Plc* 10,400 69,058
--------
135,969
--------
ITALY - 0.4%
Mediaset Spa 5,100 46,698
--------
JAPAN - 7.6%
Aioi Insurance Co. Ltd. 15,000 45,208
CAPCOM CO. Ltd. 4,800 59,502
Fuji Television Network, Inc. 12 58,663
GOLDCREST Co. Ltd. 1,300 64,018
Hiroshima Bank Ltd. 15,000 55,433
Kamigumi Co. Ltd. 8,000 50,518
KDDI Corp. 6 30,461
MURATA MANUFACTURING Co. Ltd. 600 31,000
Nippon Yusen Kabushiki Kaisha 15,000 59,335
NITTO DENKO CORP. 800 34,659
OTSUKA KAGU Ltd. 2,200 69,068
Sumitomo Realty & Development Co. Ltd. 4,000 31,251
TDK Corp. ADR 725 43,065
TEIKOKU OIL CO. LTD. 13,000 57,138
TOKYU CORP. 11,000 45,387
YAMADA DENKI CO. LTD. 2,200 65,121
--------
799,827
--------
NETHERLANDS - 0.3%
Aegon NV 2,600 30,258
--------
SINGAPORE - 0.8%
Flextronics International Ltd.* 2,500 35,450
Keppel Corp. Ltd. 17,000 51,605
--------
87,055
--------
SOUTH KOREA - 1.1%
Daewoo Shipbuilding & Marin Engineering Co. Ltd.* 6,910 68,559
Samsung Electronics 130 44,351
--------
112,910
--------
SWEDEN - 0.6%
Atlas Copco AB, Class A 1,100 32,221
SKF AB, Class B 1,100 34,635
--------
66,856
--------
SWITZERLAND - 1.0%
Novartis AG 1,100 42,541
Roche Holding AG 700 58,011
--------
100,552
--------
26
SHARES VALUE +
- -----------------------------------------------------------------
COMMON STOCKS - CONTINUED
TAIWAN - 0.6%
Advanced Semiconductor Engineering, Inc. 84,700 $ 66,535
----------
UNITED KINGDOM - 3.6%
Barclays Plc 3,800 29,166
BHP Billiton Plc 9,365 62,188
Diageo Plc 4,300 46,423
HBOS Plc 4,400 50,318
Next Plc 3,550 66,325
Smith & Nephew Plc 9,600 63,190
Vodafone Group Plc 31,400 62,632
----------
380,242
----------
UNITED STATES - 18.5%
Affiliated Computer Services, Inc., Class A* 1,000 48,690
AFLAC, Inc. 1,700 54,910
American International Group, Inc. 1,000 57,700
Amgen, Inc.* 750 48,428
Brinker International, Inc.* 500 16,680
Cardinal Health, Inc. 1,150 67,148
Caremark Rx, Inc.* 1,750 39,550
Carnival Corp. 1,075 35,357
CenturyTel, Inc. 1,900 64,391
Cisco Systems, Inc.* 2,500 48,850
Citigroup, Inc. 1,200 54,612
ConocoPhillips 800 43,800
Danaher Corp. 650 48,009
Dell Computer Corp. 1,200 40,068
Devon Energy Corp. 1,100 53,009
Dominion Resources, Inc. 1,000 61,900
Exxon Mobil Corp. 1,000 36,600
First Data Corp. 1,500 59,940
General Electric Co. 1,750 52,168
GlobalSantaFe Corp. 2,000 47,900
Goldman Sachs Group, Inc. 500 41,950
Harley-Davidson, Inc. 900 43,380
Harris Corp. 1,500 53,685
Illinois Tool Works, Inc. 700 46,382
International Paper Co. 1,250 48,775
Kohl's Corp.* 400 21,400
Leggett & Platt, Inc. 2,750 59,482
Masco Corp. 2,000 48,960
Maxim Integrated Products, Inc. 1,000 39,500
Medtronic, Inc. 975 45,747
Microsoft Corp. 2,000 55,580
Northrop Grumman Corp. 650 56,043
NVIDIA Corp.* 2,300 36,595
PepsiCo, Inc. 1,400 64,162
Pfizer, Inc. 1,800 54,684
Praxair, Inc. 750 46,463
SunGard Data Systems, Inc.* 2,200 57,882
Target Corp. 1,000 37,630
Viacom, Inc., Class B 1,150 44,045
Wells Fargo & Co. 1,200 61,800
----------
1,943,855
----------
TOTAL COMMON STOCKS
(Identified Cost $4,326,516) 4,872,162
----------
27
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
SHARES VALUE +
- -----------------------------------------------------------------------
PREFERRED STOCKS - 1.4% OF NET ASSETS
NON-CONVERTIBLE PREFERRED STOCKS - 0.2%
UNITED STATES - 0.2%
Highwoods Properties, Inc., Series B, 8.000% 750 $ 18,585
-----------
TOTAL NON-CONVERTIBLE PREFERRED STOCKS
(Identified Cost $12,881) 18,585
-----------
CONVERTIBLE PREFERRED STOCKS - 1.2%
UNITED STATES - 1.2%
Equity Residential Properties Trust, 7.250% 500 13,040
Owens Corning, 6.500% 144A^ 3,250 14,626
Philippine Long Distance Telephone Co., $3.50 GDS 2,500 100,500
-----------
128,166
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $210,807) 128,166
-----------
TOTAL PREFERRED STOCKS
(Identified Cost $223,688) 146,751
-----------
TOTAL INVESTMENTS - 97.8%
(Identified Cost $9,144,666)@ 10,268,682
Cash and Other Assets, Less Liabilities--2.2% 230,372
-----------
NET ASSETS - 100% $10,499,054
-----------
+ See Note 2.
144A Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
** Security valued at fair value as determined in good faith under the
direction of the Board of Trustees.
# Step Bond: Coupon is zero or below market rate for an initial period and
then increases at a specified date and rate.
^ Non-income producing security due to default or bankruptcy filing.
* Non-income producing security
@ At September 30, 2003, the net unrealized appreciation on investments
based on cost of $9,148,467 for federal income tax purposes was as
follows: Aggregate gross unrealized appreciation for all securities in
which there is an excess of value over tax cost and aggregate gross
unrealized depreciation for all securities in which there is an excess of
tax cost over value were $ 1,380,616 and $ 260,401, respectively,
resulting in net unrealized appreciation of $ 1,120,215.
Key to Abbreviations: ADR: American Depositary Receipt; AUD: Australian
Dollar; CAD: Canadian Dollar; DKK: Danish Krone; CHF: Swiss Franc; EUR:
Euro; HKD: Hong Kong Dollar; HUF: Hungarian Forint; GBP: Great British
Pound; GDR: Global Depositary Receipt; GDS: Global Depositary Shares; JPY:
Japanese Yen; KRW: South Korean Won; NOK: Norwegian Krone; NZD: New Zealand
Dollar; SGD: Singapore Dollar; SEK: Swedish Krona; TWD: New Taiwan Dollar;
USD: United States Dollar.
Industry Holdings at September 30, 2003 as a Percentage of Net Assets
Sovereigns 9.1%
Electronics 3.8
Independent/Energy 2.8
Retailers 2.8
Commercial Banks 2.7
Oil & Gas 2.7
Chemicals 2.4
Government/Agencies 2.4
Wirelines 2.4
Automotive 2.3
Pharmaceuticals 2.3
Communications Equipment 2.1
Media 2.0
Other 58.0
See accompanying notes to financial statements.
28
[THIS PAGE INTENTIONALLY LEFT BLANK]
29
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
AGGRESSIVE SMALL CAP
GROWTH FUND GROWTH FUND
- ---------------------------------------------------------------------------------------
ASSETS
Investments at value $ 57,388,742 $ 57,533,417
Cash 554 1,358
Foreign currency at value -- --
Receivable for:
Fund Shares sold 853,221 527,658
Securities sold 733,093 1,734,946
Dividends and interest 32 2,118
Foreign tax reclaim -- --
Due from the adviser -- --
-------------- --------------
58,975,642 59,799,497
-------------- --------------
LIABILITIES
Payable for:
Securities purchased 1,710,963 2,514,271
Fund Shares redeemed 497,395 4,308,354
Foreign taxes -- --
Accrued expenses:
Management fees 43,160 59,315
Trustees' fees 4,010 4,011
Deferred Trustees' fees 1,142 1,142
Transfer agent fees 5,458 5,008
Administrative fees 1,703 1,641
12b-1 fees 229 213
Other 31,925 41,581
-------------- --------------
2,295,985 6,935,536
-------------- --------------
NET ASSETS $ 56,679,657 $ 52,863,961
-------------- --------------
Net Assets consist of:
Capital paid in $ 166,749,261 $ 263,700,650
Undistributed net investment income (loss) (1,142) (1,142)
Accumulated net realized gain (loss) (119,831,301) (222,212,605)
Unrealized appreciation (depreciation) on:
Investments 9,762,839 11,377,058
Foreign currency translations -- --
-------------- --------------
NET ASSETS $ 56,679,657 $ 52,863,961
-------------- --------------
INSTITUTIONAL CLASS:
Net assets $ 23,866,414 $ 22,518,851
Shares of beneficial interest outstanding, no par value 1,743,139 2,620,884
Net asset value and redemption price $ 13.69 $ 8.59
RETAIL CLASS:
Net assets $ 32,813,243 $ 30,345,110
Shares of beneficial interest outstanding, no par value 2,437,441 3,593,129
Net asset value and redemption price $ 13.46 $ 8.45
ADMIN CLASS:
Net assets $ -- $ --
Shares of beneficial interest outstanding, no par value -- --
Net asset value and redemption price $ -- $ --
Identified cost of investments $ 47,625,903 $ 46,156,359
Cost of foreign currency $ -- $ --
See accompanying notes to financial statements.
30
SMALL CAP VALUE WORLDWIDE
VALUE FUND FUND FUND
------------------------------------------------
$ 473,984,946 $ 37,982,210 $ 10,268,682
915,319 350 42,298
-- -- 22,346
849,327 541 8
5,122,462 -- 213,158
426,688 23,650 127,990
-- -- 1,786
-- 3,071 14,599
------------------------------------------------
481,298,742 38,009,822 10,690,867
------------------------------------------------
10,799,335 -- 150,717
2,547,629 -- --
-- -- 982
299,966 16,040 6,556
4,011 4,011 4,010
1,142 1,142 1,142
19,689 2,258 1,634
13,836 1,123 306
1,492 -- --
103,779 25,776 26,466
------------------------------------------------
13,790,879 50,350 191,813
------------------------------------------------
$ 467,507,863 $ 37,959,472 $ 10,499,054
------------------------------------------------
$ 401,491,411 $ 39,683,089 $ 11,415,064
682,317 444,016 443,887
3,549,965 (4,921,908) (2,486,580)
61,784,170 2,754,275 1,124,016
-- -- 2,667
------------------------------------------------
$ 467,507,863 $ 37,959,472 $ 10,499,054
------------------------------------------------
$ 289,945,033 $ 37,959,472 $ 10,499,054
13,588,142 2,808,632 1,127,038
$ 21.34 $ 13.52 $ 9.32
$ 140,151,859 -- --
6,596,916 -- --
$ 21.25 -- --
$ 37,410,971 -- --
1,770,384 -- --
$ 21.13 -- --
$ 412,200,776 $ 35,227,935 $ 9,144,666
$ -- $ -- $ 22,332
See accompanying notes to financial statements.
31
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
AGGRESSIVE SMALL CAP
GROWTH FUND GROWTH FUND
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends* $ 45,660 $ 42,940
Interest 7,387 8,018
-------------- --------------
Total Income 53,047 50,958
-------------- --------------
EXPENSES
Management fees 337,398 457,282
12b-1 fees (Retail Class) 67,664 75,371
12b-1 fees (Admin Class) 3,322 1,379
Shareholder service fees (Admin Class) 3,322 1,379
Trustees' fees and expenses 9,869 9,869
Administrative fees 15,597 23,783
Custodian and accounting fees 63,586 69,222
Transfer Agent fees (Institutional Class) 16,867 19,513
Transfer Agent fees (Retail Class) 21,778 22,031
Transfer Agent fees (Admin Class) 7,868 7,391
Audit and tax services fees 38,970 53,373
Registration fees 36,319 39,655
Printing 3,687 18,500
Legal fees 2,817 6,134
Other expenses 4,037 5,523
-------------- --------------
Total expenses 633,101 810,405
Less expenses waived and reimbursed by the investment adviser (108,946) (122,567)
-------------- --------------
Net expenses 524,155 687,838
-------------- --------------
Net investment income (loss) (471,108) (636,880)
-------------- --------------
NET REALIZED GAIN (LOSS) ON:
Investments (1,638,969) (3,722,740)
Foreign currency transactions -- --
-------------- --------------
Total net realized gain (loss) (1,638,969) (3,722,740)
-------------- --------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments 13,073,722 18,110,700
Foreign currency translations -- --
-------------- --------------
Total net change in unrealized appreciation (depreciation) 13,073,722 18,110,700
-------------- --------------
Total net realized gain (loss) and change in unrealized appreciation (depreciation) 11,434,753 14,387,960
-------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 10,963,645 $ 13,751,080
-------------- --------------
*Net of foreign withholding taxes of $1,672, $3,098 and $7,674 for the Loomis
Sayles Small Cap Value Fund, Value Fund and Worldwide Fund, respectively.
See accompanying notes to financial statements.
32
SMALL CAP
VALUE FUND VALUE FUND WORLDWIDE FUND
---------------------------------------------------
$ 4,293,341 $ 748,651 $ 90,949
250,831 8,563 367,932
---------------------------------------------------
4,544,172 757,214 458,881
---------------------------------------------------
2,963,448 181,735 71,587
276,443 -- --
72,109 -- --
72,109 -- --
9,869 9,869 9,869
138,273 12,719 3,423
181,467 45,011 69,715
90,755 22,631 17,697
43,526 -- --
17,307 -- --
130,184 31,534 22,308
55,919 18,728 15,383
72,662 8,033 1,758
22,790 2,214 630
13,173 2,994 513
---------------------------------------------------
4,160,034 335,468 212,883
(183,237) (26,518) (117,434)
---------------------------------------------------
3,976,797 308,950 95,449
---------------------------------------------------
567,375 448,264 363,432
---------------------------------------------------
4,755,610 (2,165,764) 96,225
-- -- 8,546
---------------------------------------------------
4,755,610 (2,165,764) 104,771
---------------------------------------------------
79,201,327 8,798,027 1,826,303
-- -- 421
---------------------------------------------------
79,201,327 8,798,027 1,826,724
---------------------------------------------------
83,956,937 6,632,263 1,931,495
---------------------------------------------------
$ 84,524,312 $ 7,080,527 $ 2,294,927
---------------------------------------------------
See accompanying notes to financial statements.
33
STATEMENTS OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (471,108) $ (690,149)
Net realized gain (loss) (1,638,969) (25,765,558)
Change in unrealized appreciation
(depreciation) 13,073,722 14,653,848
------------------ ------------------
Increase (decrease) in net assets from
operations 10,963,645 (11,801,859)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets
derived from capital share transactions 2,847,129 (5,538,390)
------------------ ------------------
Total increase (decrease) in net assets 13,810,774 (17,340,249)
NET ASSETS
Beginning of the period 42,868,883 60,209,132
------------------ ------------------
End of the period $56,679,657 $ 42,868,883
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS)
End of the period $ (1,142) $ --
------------------ ------------------
SMALL CAP GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (636,880) $ (1,557,767)
Net realized gain (loss) (3,722,740) (69,953,299)
Change in unrealized appreciation (depreciation) 18,110,700 42,467,218
------------------ ------------------
Increase (decrease) in net assets from operations 13,751,080 (29,043,848)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions (36,514,836) (71,265,569)
------------------ ------------------
Total increase (decrease) in net assets (22,763,756) (100,309,417)
NET ASSETS
Beginning of the period 75,627,717 175,937,134
------------------ ------------------
End of the period $ 52,863,961 $ 75,627,717
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ (1,142) $ --
------------------ ------------------
See accompanying notes to financial statements.
34
STATEMENTS OF CHANGES IN NET ASSETS
SMALL CAP VALUE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 567,375 $ 1,494,746
Net realized gain (loss) 4,755,610 2,148,740
Change in unrealized appreciation (depreciation) 79,201,327 (26,278,549)
------------------ ------------------
Increase (decrease) in net assets from operations 84,524,312 (22,635,063)
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income -- (1,284,900)
Net realized gain on investments -- (23,675,371)
RETAIL CLASS
Net investment income -- (323,268)
Net realized gain on investments -- (10,876,851)
ADMIN CLASS
Net investment income -- (8,857)
Net realized gain on investments -- (1,968,755)
------------------ ------------------
Total Distributions -- (38,138,002)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions 37,141,909 77,160,687
------------------ ------------------
Total increase (decrease) in net assets 121,666,221 16,387,622
NET ASSETS
Beginning of the period 345,841,642 329,454,020
------------------ ------------------
End of the period $467,507,863 $345,841,642
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ 682,317 $ 22,771
------------------ ------------------
VALUE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 448,264 $ 369,503
Net realized gain (loss) (2,165,764) (2,696,017)
Change in unrealized appreciation (depreciation) 8,798,027 (4,495,539)
------------------ ------------------
Increase (decrease) in net assets from operations 7,080,527 (6,822,053)
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income (273,025) (463,295)
Net realized gain on investments -- (791,340)
------------------ ------------------
Total Distributions (273,025) (1,254,635)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions (1,873,138) 1,552,946
------------------ ------------------
Total increase (decrease) in net assets 4,934,364 (6,523,742)
NET ASSETS
Beginning of the period 33,025,108 39,548,850
------------------ ------------------
End of the period $37,959,472 $33,025,108
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ 444,016 $ 271,990
------------------ ------------------
See accompanying notes to financial statements.
35
STATEMENTS OF CHANGES IN NET ASSETS
WORLDWIDE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 363,432 $ 374,183
Net realized gain (loss) 104,771 (1,192,459)
Change in unrealized appreciation (depreciation) 1,826,724 568,809
------------------ ------------------
Increase (decrease) in net assets from operations 2,294,927 (249,467)
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income (284,901) (747,534)
Net realized gain on investments -- --
------------------ ------------------
Total Distributions (284,901) (747,534)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions 148,718 808,897
------------------ ------------------
Total increase (decrease) in net assets 2,158,744 (188,104)
NET ASSETS
Beginning of the period 8,340,310 8,528,414
------------------ ------------------
End of the period $10,499,054 $ 8,340,310
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ 443,887 $ 283,378
------------------ ------------------
See accompanying notes to financial statements.
36
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37
FINANCIAL HIGHLIGHTS
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ----------------------------
Net asset Net realized Dividends Distributions
value, Net and unrealized Total from from from net
beginning investment gain (loss) on investment net investment realized
of period income (loss) investments operations income capital gains
- --------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH FUND
INSTITUTIONAL CLASS
9/30/2003 $10.70 $(0.10)(c) $ 3.09 $ 2.99 $ -- $ --
9/30/2002 13.56 (0.13)(c) (2.73) (2.86) -- --
9/30/2001 47.71 (0.20)(c) (33.43) (33.63) -- (0.52)
9/30/2000 20.08 (0.26)(c) 29.11 28.85 -- (1.22)
9/30/1999 10.51 (0.09)(c) 10.05 9.96 -- (0.39)
RETAIL CLASS
9/30/2003 10.55 (0.13)(c) 3.04 2.91 -- --
9/30/2002 13.41 (0.16)(c) (2.70) (2.86) -- --
9/30/2001 47.33 (0.25)(c) (33.15) (33.40) -- (0.52)
9/30/2000 19.99 (0.38)(c) 28.94 28.56 -- (1.22)
9/30/1999 10.49 (0.14)(c) 10.03 9.89 -- (0.39)
SMALL CAP GROWTH FUND
INSTITUTIONAL CLASS
9/30/2003 $ 6.35 $(0.06)(c) $ 2.30 $ 2.24 $ -- $ --
9/30/2002 8.83 (0.08)(c) (2.40) (2.48) -- --
9/30/2001 26.98 (0.12)(c) (17.06) (17.18) -- (0.97)
9/30/2000 16.74 (0.16)(c) 10.40 10.24 -- --
9/30/1999 9.83 (0.08) 6.99 6.91 -- --
RETAIL CLASS
9/30/2003 6.26 (0.08)(c) 2.27 2.19 -- --
9/30/2002 8.72 (0.10)(c) (2.36) (2.46) -- --
9/30/2001 26.74 (0.15)(c) (16.90) (17.05) -- (0.97)
9/30/2000 16.65 (0.24)(c) 10.33 10.09 -- --
9/30/1999 9.80 (0.08) 6.93 6.85 -- --
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods less than one year
are not annualized. (b) The adviser has agreed to reimburse a portion of the
Fund's expenses during the period. Without this reimbursement the Fund's ratio
of operating expenses would have been higher. (c) Per share net investment
income (loss) has been determined on the basis of the weighted average number
of shares outstanding during the period.
See accompanying notes to financial statements.
38
RATIOS TO AVERAGE NET ASSETS:
- -------------- -----------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total end of Total period Net Gross investment turnover
distributions period Return(a) (000) Expenses(b) Expenses income (loss) rate
- ------------------------------------------------------------------------------------------
$ -- $13.69 27.9% $ 23,866 1.00% 1.23% (0.88)% 248%
-- 10.70 (21.1) 13,421 1.00 1.31 (0.91) 220
(0.52) 13.56 (71.1) 16,347 1.00 1.13 (0.75) 258
(1.22) 47.71 147.8 62,364 1.00 1.11 (0.66) 191
(0.39) 20.08 97.9 13,308 1.00 2.96 (0.56) 199
-- 13.46 27.6 32,813 1.25 1.47 (1.13) 248
-- 10.55 (21.3) 26,885 1.25 1.45 (1.16) 220
(0.52) 13.41 (71.2) 41,456 1.25 1.37 (1.01) 258
(1.22) 47.33 147.0 110,824 1.25 1.35 (0.89) 191
(0.39) 19.99 97.5 1,175 1.25 9.05 (0.80) 199
$ -- $ 8.59 35.3% $ 22,519 1.00% 1.19% (0.91)% 190%
-- 6.35 (28.1) 42,415 1.00 1.07 (0.90) 162
(0.97) 8.83 (65.2) 124,479 0.99 0.99 (0.74) 140
-- 26.98 61.2 262,147 0.92 0.92 (0.62) 170
-- 16.74 70.3 81,132 1.00 1.11 (0.80) 163
-- 8.45 35.0 30,345 1.25 1.43 (1.17) 190
-- 6.26 (28.2) 32,135 1.25 1.33 (1.15) 162
(0.97) 8.72 (65.3) 50,197 1.25 1.26 (1.01) 140
-- 26.74 60.6 69,416 1.23 1.23 (0.92) 170
-- 16.65 69.9 6,032 1.25 1.80 (1.04) 163
See accompanying notes to financial statements.
39
FINANCIAL HIGHLIGHTS
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------- ------------------------
Net asset Net Net realized Dividends Distributions
value, investment and unrealized Total from from net from net
beginning income gain (loss) on investment investment realized
of period (loss) investments operations income capital gains
- ---------------------------------------------------------------------------------------------------
SMALL CAP VALUE FUND
INSTITUTIONAL CLASS
9/30/2003 $17.28 $ 0.05/(c)/ $ 4.01 $ 4.06 $ -- $ --
9/30/2002 19.89 0.10(c) (0.36) (0.26) (0.11) (2.24)
9/30/2001 20.42 0.16(c) 0.60 0.76 (0.20) (1.09)
9/30/2000 17.33 0.14(c) 3.36 3.50 (0.14) (0.27)
9/30/1999 15.60 0.16 1.83 1.99 (0.12) (0.14)
RETAIL CLASS
9/30/2003 17.25 0.00/(c)(d)/ 4.00 4.00 -- --
9/30/2002 19.85 0.05(c) (0.35) (0.30) (0.06) (2.24)
9/30/2001 20.38 0.11(c) 0.60 0.71 (0.15) (1.09)
9/30/2000 17.28 0.10(c) 3.36 3.46 (0.09) (0.27)
9/30/1999 15.57 0.09 1.84 1.93 (0.08) (0.14)
ADMIN CLASS
9/30/2003 17.20 (0.05)(c) 3.98 3.93 -- --
9/30/2002 19.80 0.00(c)(d) (0.35) (0.35) (0.01) (2.24)
9/30/2001 20.34 0.05(c) 0.60 0.65 (0.10) (1.09)
9/30/2000 17.24 0.04(c) 3.37 3.41 (0.04) (0.27)
9/30/1999 15.54 0.04 1.83 1.87 (0.03) (0.14)
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods less than one year
are not annualized. (b) The adviser has agreed to reimburse a portion of the
Fund's expenses during the period. Without this reimbursement the Fund's ratio
of operating expenses would have been higher. (c) Per share net investment
income (loss) has been determined on the basis of the weighted average number
of shares outstanding during the period. (d) Amount is less than $0.01 per
share.
See accompanying notes to financial statements.
40
RATIOS TO AVERAGE NET ASSETS:
- -------------- -----------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total end of Total period Net Gross investment turnover
distributions period Return(a) (000) Expenses(b) Expenses income (loss) rate
- ------------------------------------------------------------------------------------------
$ -- $21.34 23.5% $289,945 0.90% 0.94% 0.26% 74%
(2.35) 17.28 (2.6) 234,370 0.94 0.96 0.48 86
(1.29) 19.89 3.9 215,439 0.98 0.98 0.76 98
(0.41) 20.42 20.7 214,919 0.93 0.93 0.76 102
(0.26) 17.33 12.8 301,496 0.90 0.90 0.87 113
-- 21.25 23.2 140,152 1.15 1.20 (0.01) 74
(2.30) 17.25 (2.8) 86,816 1.19 1.20 0.22 86
(1.24) 19.85 3.6 97,544 1.22 1.22 0.51 98
(0.36) 20.38 20.4 92,698 1.17 1.17 0.53 102
(0.22) 17.28 12.4 75,302 1.20 1.20 0.57 113
-- 21.13 22.9 37,411 1.40 1.47 (0.27) 74
(2.25) 17.20 (3.0) 24,655 1.44 1.53 (0.01) 86
(1.19) 19.80 3.3 16,471 1.50 1.59 0.23 98
(0.31) 20.34 20.1 11,391 1.50 1.68 0.21 102
(0.17) 17.24 12.0 4,863 1.50 1.70 0.30 113
See accompanying notes to financial statements.
41
FINANCIAL HIGHLIGHTS
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ----------------------------
Net asset Net Net realized Dividends Distributions
value, investment and unrealized Total from from from net
beginning income gain (loss) on investment net investment realized
of period (loss) investments operations income capital gains
- ---------------------------------------------------------------------------------------------
VALUE FUND
9/30/2003 $11.17 $0.15(c) $ 2.29 $ 2.44 $(0.09) $ --
9/30/2002 13.90 0.13(c) (2.42) (2.29) (0.16) (0.28)
9/30/2001 15.12 0.14(c) (1.19) (1.05) (0.17) --
9/30/2000 16.54 0.17 0.41 0.58 (0.15) (1.85)
9/30/1999 16.85 0.22 1.53 1.75 (0.24) (1.82)
WORLDWIDE FUND
9/30/2003 $ 7.53 $0.32(c) $ 1.74 $ 2.06 $(0.27) $ --
9/30/2002+ 8.48 0.35(c) (0.55) (0.20) (0.75) --
9/30/2001 13.93 0.65(c) (2.44) (1.79) (0.35) (3.31)
9/30/2000 10.28 0.58(c) 4.02 4.60 (0.48) (0.47)
9/30/1999 8.79 0.50 1.82 2.32 (0.44) (0.39)
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods less than one year
are not annualized. (b) The adviser has agreed to reimburse a portion of the
Fund's expenses during the period. Without this reimbursement the Fund's ratio
of operating expenses would have been higher. (c) Per share net investment
income (loss) has been determined on the basis of the weighted average number
of shares outstanding during the period . + As required effective October 1,
2001, the Fund has adopted the provisions of the AICPA Audit and Accounting
Guide, Audits of Investment Companies, and began amortizing premium on debt
securities for financial statement purposes only. For the year ended September
30, 2002, the impact to the Fund's per share net investment income and net
realized and unrealized gain (loss) was less than $0.01. The ratio of net
investment income to average net assets for the Fund decreased from 4.29% to
4.26% on an annualized basis. Per share ratios and supplemental data for
periods prior to October 1, 2001, have not been restated to reflect this change
in presentation.
See accompanying notes to financial statements.
42
RATIOS TO AVERAGE NET ASSETS:
- -------------- -----------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total end of Total period Net Gross investment turnover
distributions period Return(a) (000) Expenses(b) Expenses income (loss) rate
- ------------------------------------------------------------------------------------------
$(0.09) $13.52 22.0% $37,959 0.85% 0.92% 1.23% 56%
(0.44) 11.17 (17.2) 33,025 0.85 0.90 0.90 66
(0.17) 13.90 (7.1) 39,549 0.85 0.96 0.87 90
(2.00) 15.12 3.6 38,792 0.85 0.89 0.87 73
(2.06) 16.54 10.5 66,726 0.78 0.78 1.20 59
$(0.27) $ 9.32 28.0% $10,499 1.00% 2.23% 3.81% 94%
(0.75) 7.53 (3.0) 8,340 1.00 2.43 4.26 113
(3.66) 8.48 (15.0) 8,528 1.00 2.58 6.85 160
(0.95) 13.93 46.5 9,748 1.00 2.48 4.26 183
(0.83) 10.28 27.8 6,233 1.00 3.46 5.07 165
See accompanying notes to financial statements.
43
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
1. ORGANIZATION. | Loomis Sayles Funds I and Loomis Sayles Funds II (formerly
Loomis Sayles Investment Trust and Loomis Sayles Funds, respectively) (the
"Trusts" and each a "Trust") are organized as Massachusetts business trusts and
were organized as such on December 23, 1993 and February 20, 1991,
respectively. Each Trust is registered under the Investment Company Act of
1940, as amended, as an open-end investment company. Each Declaration of Trust
permits the Trustees to issue an unlimited number of shares of the Trusts in
multiple series (individually, a "Fund" and collectively, the "Funds").
Information presented in these financial statements pertains to certain of the
equity funds of the Trusts, the financial statements for the remaining equity
funds and the fixed income funds are presented in separate reports. The
following Funds are included in this report:
LOOMIS SAYLES FUNDS I:
Loomis Sayles Small Cap Value Fund (the "Small Cap Value Fund")
LOOMIS SAYLES FUNDS II:
Loomis Sayles Aggressive Growth Fund (the "Aggressive Growth Fund")
Loomis Sayles Small Cap Growth Fund (the "Small Cap Growth Fund")
Loomis Sayles Value Fund (the "Value Fund")
Loomis Sayles Worldwide Fund (the "Worldwide Fund")
On May 14, 2003, shareholders of Loomis Sayles Funds I and on June 10, 2003
shareholders of Loomis Sayles Funds II (together, Loomis Sayles Funds I and
Loomis Sayles Funds II comprise the "Loomis Sayles Funds Trusts") approved new
Trustees for the Trusts in connection with the integration of the CDC Nvest
Funds Trusts I, II, III, CDC Nvest Companies Trust I, CDC Nvest Cash Management
Trust and CDC Nvest Exempt Money Market Trust (the "CDC Nvest Funds Trusts")
and the Loomis Sayles Funds Trusts. This approval resulted in a combined Board
of Trustees for Loomis Sayles Funds Trusts and CDC Nvest Funds Trusts.
On February 5, 2003, the Board of Trustees approved the closing of the Admin
Class of shares of Aggressive Growth Fund and Small Cap Growth Fund. On May 21,
2003, outstanding Admin Class shares were automatically converted into Retail
Class shares having the same aggregate net asset value as the shares converted.
After the close of business on September 12, 2003, Small Cap Value Fund was
reorganized into Loomis Sayles Funds I, pursuant to a plan of reorganization
approved by the Trustees on June 12, 2003. Prior to September 12, 2003, Small
Cap Value Fund was a series of Loomis Sayles Funds II.
Most expenses of the Trusts can be directly attributed to a Fund. Expenses
which can not be directly attributed are apportioned based on the relative net
assets of each of the Funds in the Trusts. Expenses of a Fund are borne pro
rata by the holders of each class of shares, except that each class bears
expenses unique to that class (including the Rule 12b-1 service and
distribution fees and transfer agent fees applicable to such class). In
addition, each Class votes as a class only with respect to its own Rule 12b-1
Plan. Shares of each class would receive their pro rata share of the net assets
of a Fund, if the Fund were liquidated. The Trustees approve separate dividends
from net investment income on each class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES. | The following is a summary of significant
accounting policies consistently followed by each Fund in the preparation of
its financial statements. The Funds' financial statements are prepared in
accordance with accounting principles generally accepted in the United States
of America which require the use of management estimates that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. SECURITY VALUATION. | Equity securities for which market quotations are
readily available are valued at market value, as reported by pricing services
recommended by the investment adviser's pricing committee and approved by the
Board of Trustees. Such pricing services generally use the security's last sale
price on the exchange or market where primarily traded or, if there is no
reported sale during the day, the closing bid price. Effective April 14, 2003,
securities traded on the NASDAQ National Market are valued at the NASDAQ
Official Closing Price ("NOCP"), or if lacking an NOCP, at the most recent bid
quotation on the NASDAQ National Market. Debt securities for which market
quotations are readily available are generally valued at market value, as
reported by pricing services recommended by the investment adviser's pricing
committee and approved by the Board of Trustees. Such pricing services
generally use the most recent bid prices in the principal market in which such
securities are normally traded. 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. Short-term obligations with a remaining maturity of 60 days or less
are
44
valued at amortized cost, which approximates market value. Securities for which
market quotations are not readily available (including restricted securities,
if any) are valued at fair value as determined in good faith by the Fund's
investment adviser using consistently applied procedures under the general
supervision of the Board of Trustees. If events occurring after the close of
the principal market in which securities are traded (but before the close of
regular trading on the New York Stock Exchange) are believed to materially
affect the value of those securities, such securities are valued at their fair
value taking such events into account.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. | Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified. Interest income is recorded on an accrual basis, and interest income
is increased by the accretion of discount and decreased by the amortization of
premium. Investment income is recorded net of foreign taxes withheld when
applicable. The Funds estimate the components of distributions received from
Real Estate Investment Trusts (REITs). In determining net gain or loss on
securities sold, the cost of securities has been determined on an identified
cost basis.
C. FOREIGN CURRENCY TRANSLATION. | The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates
from fluctuations arising from changes in market prices of the investment
securities. Such changes are included with the net realized and unrealized gain
or loss on investments.
Net realized foreign exchange gains or losses arise from: sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Funds' books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities, other than investment securities, at the end of the
fiscal periods, resulting from changes in exchange rates.
Certain Funds use foreign currency exchange contracts to facilitate
transactions in foreign-denominated investments. Losses may arise from changes
in the value of the foreign currency or if the counterparties do not perform
under the contracts' terms.
Each Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than
those of comparable U.S. companies and the U.S. government.
D. FORWARD FOREIGN CURRENCY CONTRACTS. | Each Fund that may invest in foreign
investments may enter into forward foreign currency exchange contracts.
Contracts to buy generally are used to acquire exposure to foreign currencies,
while contracts to sell generally are used to hedge a Fund's investments
against currency fluctuation. Also, a contract to buy or sell can offset a
previous contract. These contracts involve market risk in excess of the
unrealized gain or loss reflected in the Fund's Statement of Assets and
Liabilities. The U.S. dollar value of the currencies the Fund has committed to
buy or sell (if any) is shown in the portfolio composition under the caption
"Forward Currency Contracts Outstanding." These amounts represent the aggregate
exposure to each currency the Fund has acquired or hedged through currency
contracts outstanding at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At September 30, 2003, there were no open forward currency
contracts.
E. FEDERAL AND FOREIGN INCOME TAXES. | The Trusts treat each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities, such
taxes are accrued as applicable.
45
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2003
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. | Dividends and distributions
are recorded on ex-dividend date. The timing and characterization of certain
income and capital gains distributions are determined in accordance with
federal tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due
to differing treatments for book and tax purposes of items such as
distributions from real estate investment trusts, net operating losses,
non-deductible expenses, foreign currency transactions and gains realized from
passive foreign investment companies. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications to
capital accounts. Distributions from net investment income and short-term
capital gains are considered to be ordinary income for tax purposes.
G. REPURCHASE AGREEMENTS. | Each Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The Fund's adviser is responsible
for determining that the value of the collateral is at all times at least equal
to 102% of the repurchase price, including interest. Repurchase agreements
could involve certain risks in the event of default or insolvency of the
counterparty including possible delays or restrictions upon a Fund's ability to
dispose of the underlying securities.
3. PURCHASES AND SALES OF SECURITIES. | For the year ended September 30, 2003,
purchases and sales of securities (excluding short-term investments and U.S.
Government Agency Securities) were as follows:
FUND PURCHASES SALES
- ---- ------------ ------------
Aggressive Growth Fund $110,495,768 $108,895,399
Small Cap Growth Fund 112,949,963 146,300,636
Small Cap Value Fund 308,951,248 277,801,050
Value Fund 19,676,388 20,340,409
Worldwide Fund 9,331,099 8,484,803
For the year ended September 30, 2003, purchases and sales of U.S.
Government/Agency securities by Worldwide Fund were $132,286 and $163,927,
respectively.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES. | Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the
investment adviser to each of the Funds. Separate management agreements for
each Fund in effect during the year ended September 30, 2003 provided for fees
at the following annual percentage rates of each Fund's average daily net
assets . Loomis Sayles has contractually agreed, until February 1, 2004, to
reduce its advisory fees and/or bear other expenses, to the extent necessary to
limit the total operating expenses of each Fund, to the following annual
percentage rate of the Fund's average daily net assets:
EXPENSE LIMIT AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
--------------------------------
FUND MANAGEMENT FEES INSTITUTIONAL RETAIL ADMIN
- ---- --------------- ------------- ------ -----
Aggressive Growth Fund 0.75% 1.00% 1.25% N/A
Small Cap Growth Fund 0.75% 1.00% 1.25% N/A
Small Cap Value Fund 0.75% 0.90% 1.15% 1.40%
Value Fund 0.50% 0.85% N/A N/A
Worldwide Fund 0.75% 1.00% N/A N/A
For the year ended September 30, 2003, the management fees and waivers for each
Fund were as follows:
PERCENTAGE OF
AVERAGE DAILY
GROSS WAIVER OF NET NET ASSETS
MANAGEMENT MANAGEMENT MANAGEMENT -------------
FUND FEE FEE FEE GROSS NET
- ---- ---------- ---------- ---------- ----- -----
Aggressive Growth Fund $ 337,398 $58,548 $ 278,850 0.75% 0.62%
Small Cap Growth Fund 457,282 78,790 378,492 0.75% 0.62%
Small Cap Value Fund 2,963,448 32,640 2,930,808 0.75% 0.74%
Value Fund 181,735 26,518 155,217 0.50% 0.43%
Worldwide Fund 71,587 71,587 -- 0.75% --
46
For the year ended September 30, 2003, and in addition to the waiver of
management fees, Class level expenses have been reimbursed as follows:
FUND AMOUNT
- ---- --------
Aggressive Growth Fund $ 50,398
Small Cap Growth Fund 43,777
Small Cap Value Fund 150,597
Value Fund --
Worldwide Fund 45,847
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trusts. Loomis Sayles' general partner is indirectly owned by CDC IXIS
Asset Management North America, L.P. ("CDC IXIS North America"), whose general
partner is indirectly owned by CDC IXIS Asset Management SA ("CDC IXIS"). CDC
IXIS is part of the Caisse des Depots et Consignations Group.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. | Effective July 1, 2003, Loomis
Sayles assigned its administrative services agreement with the Trusts to CDC
IXIS Asset Management Services, Inc. ("CIS"), a wholly owned subsidiary of CDC
IXIS North America. Pursuant to the agreement between each of the Loomis Sayles
Funds Trusts and CIS, each Fund pays CIS a monthly administrative fee at the
annual rate of 0.035% of each Fund's average daily net assets. Prior to July 1,
2003, each Fund paid Loomis Sayles a monthly administrative fee at an annual
rate of 0.035% of the Fund's average daily net assets.
For the year ended September 30, 2003, fees paid to Loomis Sayles and CIS for
accounting and administrative expense were as follows:
FUND AMOUNT
- ---- --------
Aggressive Growth Fund $ 15,597
Small Cap Growth Fund 23,783
Small Cap Value Fund 138,273
Value Fund 12,719
Worldwide Fund 3,423
Effective October 1, 2003, each Fund pays CIS it's pro rata portion of the
accounting and administrative fee, allocated based on the combined assets of
the CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts, for these services
representing the higher amount based on the following calculations:
(1)Percentage of Average Daily Net Assets
FIRST NEXT OVER
$5 BILLION $5 BILLION $10 BILLION
---------- ---------- -----------
0.0675% 0.0625% 0.0500%
or
(2)Each Fund's pro rata portion, allocated based on the combined
assets of the Loomis Sayles Funds Trusts and the CDC Nvest
Funds Trusts, of the annual aggregate minimum fee of $5 million.
C. TRANSFER AGENT FEES. | Effective February 3, 2003, CIS serves as transfer
and shareholder servicing agent for each Fund and has subcontracted with Boston
Financial Data Services ("BFDS") to serve as sub-transfer agent. Prior to
February 3, 2003, BFDS served as transfer and shareholder servicing agent for
the Funds.
47
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2003
Effective September 15, 2003 through December 31, 2003, the Funds pay service
fees monthly representing the higher amount based on the following calculations:
(1)Annual aggregate fee determined by applying an annual fee rate
of 0.026% to the eligible average daily net assets. Eligible
assets are the average daily net assets of all accounts in
funds which are classified under the agreement as No-Load*
Retail Funds and Load** Funds--Class Y.
Each Class of shares are subject to a monthly Class minimum of
$1,250.
or
(2)An allocated portion, based on eligible assets for the period
September 15, 2003, through December 31, 2003, of an annual
aggregate minimum fee of $190,547.
* No load retail funds consist of Aggressive Growth Fund, Small
Cap Growth Fund, Small Cap Value Fund, Value Fund, Worldwide Fund,
Loomis Sayles Tax-Managed Equity Fund, Loomis Sayles Bond Fund and
Loomis Sayles Global Bond Fund.
** Load Funds--Class Y consist of Loomis Sayles Growth Fund,
Loomis Sayles International Equity Fund, Loomis Sayles Investment
Grade Bond Fund, Loomis Sayles Research Fund, Loomis Sayles
Limited Term U.S. Government Fund, Loomis Sayles Strategic Income
Fund and all Funds with Class Y in the CDC Nvest Funds Trusts.
CIS is also reimbursed for out of pocket expenses.
For the period from February 3, 2003 to September 14, 2003, each Fund of the
Trusts paid to CIS the greater of: $15,000 or 0.026% of average daily net
assets, subject however to the minimum aggregate fee calculated as follows: If
the aggregate fees for the Trusts' Funds payable did not equal or exceed
$54,167 in any single month, the Funds would pay the minimum aggregate fee of
$54,167 ($650,000 annually). Any such amount required to achieve the minimum
aggregate fee would be allocated to all of the Trusts' Funds based on the
percentage of net assets each Fund represents of the total assets.
For the period from February 3, 2003 through September 30, 2003, amounts paid
to CIS as compensation for its services as transfer agent were as follows:
FUND AMOUNT
- ---- --------
Aggressive Growth Fund $ 16,773
Small Cap Growth Fund 16,142
Small Cap Value Fund 106,618
Value Fund 12,447
Worldwide Fund 10,450
D. SERVICE AND DISTRIBUTION FEES. | Effective July 1, 2003 the Trusts entered
into a distribution agreement with CDC IXIS Asset Management Distributors, L.P.
("CDC IXIS Distributors"), a wholly owned subsidiary of CDC IXIS North America.
Pursuant to this agreement, CDC IXIS Distributors serves as principal
underwriter of the various Funds of the Trusts except for Loomis Sayles Managed
Bond Fund and Loomis Sayles Investment Grade Bond Fund--Class J. Prior to July
1, 2003 Loomis Sayles Distributors, L.P. served as distributor of the Funds.
Pursuant to Rule 12b-1 under the 1940 Act, Aggressive Growth Fund, Small Cap
Growth Fund and Small Cap Value Fund have adopted Distribution Plans relating
to each Fund's Retail Class shares (the "Retail Class Plan") and, with respect
to the Loomis Sayles Small Cap Value Fund, a separate Distribution Plan
relating to Admin Class shares (the "Admin Class Plan").
Under the respective Retail Class and Admin Class Plans, each Fund pays CDC
IXIS Distributors, the Fund's distributor, a monthly distribution fee at an
annual rate of 0.25% of the average daily net assets attributable to the Fund's
Retail Class and Admin Class Shares, as reimbursement for expenses incurred by
CDC IXIS Distributors in providing personal services to investors in Retail
Class and Admin Class Shares and/or maintenance of shareholder accounts. In
addition, the Admin Class shares of the Small Cap Value Fund may pay a
shareholder service fee at an annual rate of up to 0.25% of the average daily
net assets attributable to Admin Class shares to securities dealers or
financial intermediaries for providing personal service and account maintenance
for their customers who hold such shares.
E. TRUSTEES FEES AND EXPENSES. | The Trusts pay no compensation to their
officers or to their Trustees who are interested Trustees of Loomis Sayles, CDC
IXIS Distributors, CDC IXIS North America, CIS or their affiliates. Each
independent Trustee, who is also an independent Trustee of the CDC Nvest Funds
Trusts, receives, in the aggregate, a retainer fee at the annual rate of
48
$45,000 and meeting attendance fees of $4,500 for each meeting of the Board of
Trustees that he or she attended. Each committee member receives an additional
retainer fee at the annual rate of $7,000. Furthermore, each committee chairman
receives an additional retainer fee (beyond the $7,000 fee) at the annual rate
of $5,000. The retainer fees assume four Board or Committee meetings per year.
Each Trustee is compensated $4,500 for each meeting and $1,750 per Committee
meeting that he or she attends in excess of four meetings per year. Trustees
who are not a Trustee of the CDC Nvest Funds Trusts are compensated at the rate
of $5,000 for each meeting of the Board of Trustees that he or she attends and
receives an annual retainer of $20,000. Trustee fees are allocated to the
various Loomis Sayles Funds Trusts and CDC Nvest Funds Trusts based on a
formula that takes into account, among other factors, the relative net assets
of each fund. Trustees are reimbursed for travel expenses in connection with
attendance at meetings.
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in a
designated Fund or certain other CDC Nvest Funds Trusts or Loomis Sayles Funds
Trusts on the normal payment date. Deferred amounts remain in the Funds until
distributed in accordance with the Plan.
Prior to May 7, 2003, Loomis Sayles Funds II paid each independent trustee a
$20,000 annual retainer fee and a $5,000 fee per in person meeting. Prior to
November 6, 2002, each independent Trustee was compensated by the Trust on
behalf of each Fund at the rate of $1,250 per Fund per year and was reimbursed
for travel expenses in connection with attendance at meetings.
5. LINE OF CREDIT. | The Funds together with certain other funds of the Loomis
Sayles Funds Trusts, participate in a $25 million unsecured line of credit.
Borrowings under the line of credit will be made solely to temporarily finance
the repurchase of capital shares. Interest is charged to each participating
Fund based on its borrowings at a rate per annum equal to the Federal Funds
rate plus 0.50%.
In addition, a commitment fee of 0.09% per annum, payable at the end of each
calendar quarter, is accrued and apportioned among the participating Funds
based on their average daily unused portion of the line of credit. During the
year ended September 30, 2003, the Funds had no borrowings under the agreement.
6. SHAREHOLDERS. | At September 30, 2003, the Loomis, Sayles & Company, L.P.
Funded Pension Plan and Trust ("Pension Plan"), the Loomis, Sayles & Company,
L.P. Employees' Profit Sharing Retirement and Loomis, Sayles & Co., L.P.
Employees' Money Purchase Pension Plan ("Defined Contribution Plans") held
shares of beneficial interest in the Funds as follows:
DEFINED
FUND PENSION PLAN CONTRIBUTION PLANS
- ---- ------------ ------------------
Aggressive Growth Fund 187,842 438,877
Small Cap Growth Fund 234,766 527,144
Small Cap Value Fund 484,068 688,364
Value Fund 423,156 539,261
Worldwide Fund 855,333 212,979
49
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2003
7. CAPITAL SHARES. | Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
AGGRESSIVE GROWTH FUND
YEAR ENDED SEPTEMBER 30, 2003 YEAR ENDED SEPTEMBER 30, 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
INSTITUTIONAL CLASS SHARES ---------- ------------ ----------- -------------
Issued from the sale of shares 1,017,143 $ 12,248,463 528,873 $ 7,971,562
Issued in connection with the
reinvestment of
distributions -- -- -- --
Redeemed (527,813) (5,940,072) (480,585) (7,035,410)
----------------------------------------------------------
Net change 489,330 $ 6,308,391 48,288 $ 936,152
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
RETAIL CLASS SHARES ---------- ------------ ----------- -------------
Issued from the sale of shares 1,142,750 $ 13,044,564 1,502,072 $ 21,291,204
Issued in connection with the
reinvestment of
distributions -- -- -- --
Issued in Admin Class
conversion+ 56,540 631,556
Redeemed (1,309,638) (14,596,979) (2,046,527) (28,777,079)
----------------------------------------------------------
Net change (110,348) $ (920,859) (544,455) $ (7,485,875)
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
ADMIN CLASS SHARES+ ---------- ------------ ----------- -------------
Issued from the sale of shares 29,865 $ 315,554 171,038 $ 2,544,174
Issued in connection with the
reinvestment of
distributions -- -- -- --
Redeemed (216,812) (2,224,401) (106,982) (1,532,841)
Redeemed in Admin Class
conversion+ (56,892) (631,556) -- --
----------------------------------------------------------
Net change (243,839) $ (2,540,403) 64,056 $ 1,011,333
----------------------------------------------------------
+On May 21, 2003, the outstanding Admin Class shares were
automatically converted into Retail Class shares
SMALL CAP GROWTH FUND
YEAR ENDED SEPTEMBER 30, 2003 YEAR ENDED SEPTEMBER 30, 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
INSTITUTIONAL CLASS SHARES ---------- ------------ ----------- -------------
Issued from the sale of shares 1,897,989 $ 13,566,717 3,459,066 $ 34,155,261
Issued in connection with the
reinvestment of
distributions -- -- -- --
Redeemed (5,953,993) (39,030,065) (10,873,243) (101,206,294)
----------------------------------------------------------
Net change (4,056,004) $(25,463,348) (7,414,177) $ (67,051,033)
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
RETAIL CLASS SHARES ---------- ------------ ----------- -------------
Issued from the sale of shares 3,879,141 $ 28,642,137 3,922,968 $ 34,209,113
Issued in connection with the
reinvestment of
distributions -- -- -- --
Issued in Admin Class
conversion+ 2,120 14,288
Redeemed (5,421,506) (38,664,657) (4,543,620) (38,680,650)
----------------------------------------------------------
Net change (1,540,245) $(10,008,232) (620,652) $ (4,471,537)
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
ADMIN CLASS SHARES+ ---------- ------------ ----------- -------------
Issued from the sale of shares 46,488 $ 301,256 210,388 $ 1,951,920
Issued in connection with the
reinvestment of
distributions -- -- -- --
Redeemed (217,093) (1,330,224) (182,328) (1,694,919)
Redeemed in Admin Class
conversion+ (2,135) (14,288) -- --
----------------------------------------------------------
Net change (172,740) $ (1,043,256) 28,060 $ 257,001
----------------------------------------------------------
+On May 21, 2003, the outstanding Admin Class shares were automatically converted
into Retail Class shares
50
SMALL CAP VALUE FUND
YEAR ENDED SEPTEMBER 30, 2003 YEAR ENDED SEPTEMBER 30, 2002
------------------------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
INSTITUTIONAL CLASS SHARES ---------- ------------ ---------- ------------
Issued from the sale of shares 2,271,777 $ 43,519,989 3,116,097 $ 64,829,647
Issued from Subscriptions-in-Kind* -- -- 1,255,230 27,702,947
Issued in connection with the reinvestment
of distributions -- -- 1,260,305 24,587,467
Redeemed (2,246,579) (42,192,200) (2,902,055) (59,739,299)
---------- ------------------------ ---------------------- --------------
Net change 25,198 $ 1,327,789 2,729,577 $ 57,380,762
---------- ------------------------ ---------------------- --------------
SHARES AMOUNT SHARES AMOUNT
RETAIL CLASS SHARES ---------- ------------ ---------- ------------
Issued from the sale of shares 3,698,495 $ 69,872,984 3,822,059 $ 78,710,499
Issued in connection with the reinvestment
of distributions -- -- 573,075 11,150,920
Redeemed (2,135,122) (40,321,887) (4,274,877) (82,423,287)
---------- ------------------------ ---------------------- --------------
Net change 1,563,373 $ 29,551,097 120,257 $ 7,438,132
---------- ------------------------ ---------------------- --------------
SHARES AMOUNT SHARES AMOUNT
ADMIN CLASS SHARES ---------- ------------ ---------- ------------
Issued from the sale of shares 1,219,636 $ 22,714,426 874,273 $ 17,948,150
Issued in connection with the reinvestment
of distributions -- -- 66,334 1,285,090
Redeemed (882,999) (16,451,403) (338,592) (6,891,447)
---------- ------------------------ ---------------------- --------------
Net change 336,637 $ 6,263,023 602,015 $ 12,341,793
---------- ------------------------ ---------------------- --------------
*Issued in exchange for portfolio securities distributed in-kind by the Loomis Sayles Small Company Value Fund to shareholders
thereof and contributed to the Fund in-kind by such shareholders on April 11, 2002.
VALUE FUND
YEAR ENDED SEPTEMBER 30, 2003 YEAR ENDED SEPTEMBER 30, 2002
------------------------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Issued from the sale of shares 328,065 $ 4,071,978 424,683 $ 5,897,759
Issued in connection with the reinvestment
of distributions 18,887 230,605 82,149 1,189,751
Redeemed (493,835) (6,175,721) (395,578) (5,534,564)
---------- ------------------------ ---------------------- --------------
Net change (146,883) $ (1,873,138) 111,254 $ 1,552,946
---------- ------------------------ ---------------------- --------------
WORLDWIDE FUND
YEAR ENDED SEPTEMBER 30, 2003 YEAR ENDED SEPTEMBER 30, 2002
------------------------------------------------ -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Issued from the sale of shares 711,080 $ 5,955,985 330,144 $ 2,533,173
Issued in connection with the reinvestment
of distributions 36,904 284,901 92,976 747,527
Redeemed (728,370) (6,092,168) (320,936) (2,471,803)
---------- ------------------------ ---------------------- --------------
Net change 19,614 $ 148,718 102,184 $ 808,897
---------- ------------------------ ---------------------- --------------
51
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2003
8. ADDITIONAL TAX INFORMATION | The tax character of distributions paid to
shareholders during the year ended September 30, 2003 were as follows:
AGGRESSIVE SMALL CAP SMALL CAP
GROWTH FUND GROWTH FUND VALUE FUND VALUE FUND WORLDWIDE FUND
------------- ------------- ----------- ----------- --------------
Distributions paid from:
Ordinary income $ -- $ -- $ -- $ 273,025 $ 284,901
Long-term capital gains -- -- -- -- --
------------- ------------- ----------- ----------- --------------
Total taxable distributions $ -- $ -- $ -- $ 273,025 $ 284,901
------------- ------------- ----------- ----------- --------------
As of September 30, 2003, the components of distributable earnings on a tax basis were follows:
AGGRESSIVE SMALL CAP SMALL CAP
GROWTH FUND GROWTH FUND VALUE FUND VALUE FUND WORLDWIDE FUND
------------- ------------- ----------- ----------- --------------
Undistributed ordinary income $ -- $ -- $ 568,187 $ 445,158 $ 445,204
Undistributed long-term capital
gains -- -- 4,240,520 -- --
------------- ------------- ----------- ----------- --------------
Total undistributed earnings -- -- 4,808,707 445,158 445,204
Capital loss carryforward (119,831,301) (222,154,056) -- (3,179,432) (2,482,954)
Deferred net capital losses (post
October) -- -- -- (1,389,857) --
Unrealized Appreciation
(Depreciation) 9,761,697 11,317,367 61,207,745 2,400,514 1,121,740
------------- ------------- ----------- ----------- --------------
Total accumulated earnings (losses) $(110,069,604) $(210,836,689) $66,016,452 $(1,723,617) $ (916,010)
------------- ------------- ----------- ----------- --------------
Capital loss carryforward years of
expiration 2009-2011 2009-2011 -- 2010-2011 2009-2011
52
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
Loomis Sayles Funds I and Loomis Sayles Funds II:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Small Cap Value Fund, a series of Loomis Sayles Funds I and Loomis Sayles
Aggressive Growth Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles
Value Fund, and Loomis Sayles Worldwide Fund, each a series of Loomis Sayles
Funds II, (collectively, the "Funds") at September 30, 2003, and the results of
each of their operations, the changes in each of their net assets and the
financial highlights for each of the periods indicated therein, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2003
53
2003 U.S. TAX AND DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
CORPORATE DIVIDENDS RECEIVED DEDUCTION. | For the fiscal year ended, September
30, 2003, a percentage of dividends distributed by the Funds qualify for the
dividends received deduction for corporate shareholders. These percentages are
as follows:
QUALIFYING PERCENTAGE
---------------------
Value Fund 100.00%
Worldwide Fund 3.07%
54
ADDITIONAL INFORMATION
SHAREHOLDER MEETING (UNAUDITED). | At the special meeting of shareholders held
on May 14, 2003, shareholders of Loomis Sayles Funds I (formerly, Loomis Sayles
Investment Trust) voted for the following proposal:
1. ELECTION OF TRUSTEES
FOR WITHHELD*
- ------------------------------------------------
(01) Joseph Alaimo 28,024,125 4,471,942
(02) Graham T. Allison, Jr. 28,012,936 4,483,131
(03) Edward A. Benjamin 28,012,936 4,483,131
(04) Robert J. Blanding 28,024,125 4,471,942
(05) Daniel M. Cain 28,012,936 4,483,131
(06) Paul G. Chenault 28,024,125 4,471,942
(07) Kenneth J. Cowan 28,012,936 4,483,131
(08) Richard Darman 28,012,936 4,483,131
(09) John T. Hailer 28,012,936 4,483,131
(10) Sandra O. Moose 28,012,936 4,483,131
(11) John A. Shane 28,012,936 4,483,131
(12) Peter S. Voss 28,024,125 4,471,942
(13) Pendleton P. White 28,012,936 4,483,131
*Includes Broker Non-Votes (if any).
SHAREHOLDER MEETING (UNAUDITED). | At the special meeting of shareholders held
on June 10, 2003, shareholders of Loomis Sayles Funds II (formerly, Loomis
Sayles Funds) voted for the following proposal:
1. ELECTION OF TRUSTEES
FOR WITHHELD*
- -------------------------------------------------
(01) Joseph Alaimo 134,298,551 8,672,577
(02) Graham T. Allison, Jr. 134,590,902 8,380,227
(03) Edward A. Benjamin 134,546,833 8,424,296
(04) Robert J. Blanding 134,572,705 8,398,423
(05) Daniel M. Cain 134,593,263 8,377,866
(06) Paul G. Chenault 134,352,172 8,618,957
(07) Kenneth J. Cowan 134,524,153 8,446,976
(08) Richard Darman 134,552,047 8,419,081
(09) John T. Hailer 134,613,039 8,358,089
(10) Sandra O. Moose 134,612,285 8,358,843
(11) John A. Shane 134,332,421 8,638,708
(12) Peter S. Voss 134,622,604 8,348,525
(13) Pendleton P. White 134,300,598 8,670,530
*Includes Broker Non-Votes (if any).
55
The Funds 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.
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Joseph Alaimo+ (73) Trustee; Chairman, Wayne Hummer Trust 26;
399 Boylston Street Company and Wayne Hummer
Boston, MA 02116 4 years for Loomis Investment Trust None
Sayles Funds
Trusts
Graham T. Allison, Jr. (63) Trustee (2); Douglas Dillon Professor and Director 44;
399 Boylston Street for the Belfer Center of Science and
Boston, MA 02116 19 years for CDC International Affairs, John F. Kennedy Director, Taubman Centers, Inc.;
Nvest Funds School of Government, Harvard Board Member, USEC Inc.
Trusts; Less than 1 University
year for Loomis
Sayles Funds
Trusts
Edward A. Benjamin (65) Trustee (1); Retired; formerly, Partner, Ropes & Gray 44;
399 Boylston Street (law firm) until 1999
Boston, MA 02116 Less than 1 year Director, Coal, Energy
Investments & Management;
Director, Precision Optics
Corporation
(optics manufacturer)
Daniel M. Cain (58) Trustee, President and CEO, Cain Brothers & 44;
452 Fifth Avenue Chairman (1); Company, Incorporated (investment
New York, NY 10018 banking) Trustee, Universal Health Realty
7 years for CDC Income Trust;
Nvest Funds Director, PASC; Director,
Trusts; Less than 1 Sheridan Healthcorp
year for Loomis
Sayles Funds
Trusts
Paul G. Chenault (70) Trustee (2); Retired; formerly, Trustee, First Variable 44;
5852 Pebble Beach Way Life (variable life insurance)
San Luis Obispo, CA 93401 Less than 1 year Director, Mailco Office
for CDC Nvest Products, Inc.
Funds Trusts; 4
years for Loomis
Sayles Funds
Trusts
Kenneth J. Cowan (71) Trustee Retired 44;
399 Boylston Street Chairman (2);
Boston, MA 02116 None
28 years for CDC
Nvest Funds
Trusts; Less than 1
year for Loomis
Sayles Funds
Trusts
56
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------
Richard Darman (60) Trustee (2); Partner, The Carlyle Group (investments); 44;
399 Boylston Street 7 years for CDC Chairman of the Board of Directors of
Boston, MA 02116 Nvest Funds AES Corporation (international power Director and Chairman, AES
Trusts; Less than 1 company); formerly, Professor, John F. Corporation
year for Loomis Kennedy School of Government, Harvard
Sayles Funds University
Trusts
Sandra O. Moose (61) Trustee (1); Senior Vice President and Director, The 44;
One Exchange Place 21 years for CDC Boston Consulting Group, Inc.
Boston, MA 02109 Nvest Funds (management Director, Verizon
Trusts; Less than 1 consulting) Communications;
year for Loomis Director, Rohm and Haas
Sayles Funds Company
Trusts
John A. Shane (70) Trustee (2); President, Palmer Service Corporation 44;
200 Unicorn Park Drive 21 years for CDC (venture capital organization)
Woburn, MA 01801 Nvest Funds Director, Gensym Corporation;
Trusts; Less than 1 Director, Overland Storage,
year for Loomis Inc.; Director, ABT Associates
Sayles Funds Inc.
Trusts
Pendleton P. White (72) Trustee (2); Retired 44;
6 Breckenridge Lane 22 years for CDC
Savannah, GA 31411 Nvest Funds None
Trusts; Less than 1
year for Loomis
Sayles Funds
Trusts
INTERESTED TRUSTEES
Robert J. Blanding/3/ (56) President and President, Chairman, Director and Chief 44;
555 California Street Chief Executive Executive Officer, Loomis, Sayles &
San Francisco, CA 94104 Officer, Loomis Company, L.P.; None
Sayles Funds I;
Chief Executive
Officer Loomis
Sayles Funds II;
Trustee
Less than 1 year
John T. Hailer/4 /(42) President and President and Chief Executive Officer, 44;
399 Boylston Street Chief Executive CDC IXIS Asset Management
Boston, MA 02116 Officer, CDC Distributors, L.P.; formerly, Senior Vice None
Nvest Funds President, Fidelity Investments
Trusts; President,
Loomis Sayles
Funds II;
Executive Vice
President, Loomis
Sayles Funds I;
Trustee
3 years for CDC
Nvest Funds
Trusts; Less than
1 year for Loomis
Sayles Funds
Trusts
57
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------
Peter S. Voss/5/ (57) Chairman of Director, President and Chief Executive 44;
399 Boylston Street the Board, Officer, CDC IXIS Asset Management
Boston, MA 02116 Trustee; North America, L.P. Trustee of Harris Associates
Investment Trust/6/
11 years for
CDC Nvest
Funds Trusts;
Less than 1 year
for Loomis
Sayles Funds
Trusts
OFFICERS
Nicholas H. Palmerino (38) Treasurer; Senior Vice President, CDC IXIS Asset Not Applicable;
399 Boylston Street Management Services, Inc.; Senior Vice
Boston, MA 02116 Not Applicable President, CDC IXIS Asset Management None
Advisers, L.P.; formerly, Vice President,
Loomis, Sayles & Company, L.P.
John E. Pelletier (39) Secretary; Senior Vice President, General Counsel, Not Applicable;
399 Boylston Street Secretary and Clerk, CDC IXIS
Boston, MA 02116 Not Applicable Distribution Corporation; Senior Vice None
President, General Counsel, Secretary
and Clerk, CDC IXIS Asset Management
Distributors, L.P.; Senior Vice President,
General Counsel, Secretary and Clerk,
CDC IXIS Asset Management Advisers,
L.P.; Executive Vice President, General
Counsel, Secretary, Clerk and Director,
CDC IXIS Asset Management Services,
Inc.
(1)Member of Audit Committee.
(2)Member of Contract Review and Governance Committee.
+Mr. Alaimo is a Trustee of Loomis Sayles Funds I and Loomis Sayles Funds II,
but not of the CDC Nvest Funds Trusts.
1Except as noted, each Trustee and Officer holds the same positions with CDC
Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC
Nvest Companies Trust I, AEW Real Estate Income Fund, CDC Nvest Cash
Management Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest
Funds Trusts") and Loomis Sayles Funds I and Loomis Sayles Funds II (the
"Loomis Sayles Funds Trusts" and together with the CDC Nvest Funds Trusts, the
"Trusts").
2All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. Messrs. Alaimo and White are expected to
retire by December 31, 2003.
3Mr. 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 & Company,
L.P. ("Loomis Sayles").
4Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution
Corporation; President and Chief Executive Officer of CDC IXIS Asset
Management Distributors, L.P. ("CDC IXIS Distributors").
5Mr. Voss is an "interested person" of the Trusts because he holds the
following positions with entities that may be considered to be affiliated
persons of the Trusts: Director of CDC IXIS Asset Management Services, Inc.;
Director of CDC IXIS Asset Management Distribution Corporation; Director and
Chairman of CDC IXIS Asset Management Associates, Inc.; Director of AEW
Capital Management, Inc; Director of Harris Associates, Inc; Director of
Loomis, Sayles & Company, Inc.; Member of Reich & Tang Asset Management, LLC;
Director of Westpeak Global Advisors, Inc.; Director of Vaughan, Nelson,
Scarborough & McCullough, Inc.; Director, Hansberger Group, Inc.; Member,
Board of Managers, Harris Alternatives L.L.C.; and Director and Member of
Executive Board of CDC IXIS Asset Management.
6As of September 30, 2003, Harris Associates Investment Trust has seven series
that were overseen by its Board of Trustees.
58
[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles Mid Cap Growth Fund
Loomis Sayles Small Company Growth Fund
Loomis Sayles Tax-Managed Equity Fund
(formerly Loomis Sayles Provident Fund)
TABLE OF CONTENTS
Fund and Manager Review 1
Portfolio of Investments 5
Statements of Assets and Liabilities 13
Statements of Operations 14
Statements of Changes in Net Assets 15
Financial Highlights 18
Notes to Financial Statements 20
Report of Independent Auditors 26
ANNUAL REPORT
SEPTEMBER 30, 2003
FUND AND MANAGER REVIEW
LOOMIS SAYLES MID CAP GROWTH FUND
PORTFOLIO REVIEW | Throughout most of the fiscal year we tilted the Fund in
favor of companies positioned to benefit from a cyclical economic recovery,
de-emphasizing the more stable growth stories that outperformed during the
economic downturn. This posture led to significant over-weights in the
technology and consumer discretionary sectors, where we believed companies were
well positioned to benefit from the unprecedented fiscal and monetary stimuli
characteristic of the fiscal year.
Both sectors were important contributors to the Fund's strong one-year return,
given their large weighting and strong absolute performance. Among our consumer
discretionary stocks, holdings in the technology and business services
industries drove the sector's performance. Despite their strong absolute and
relative performance in the past two quarters, performance of the Fund's tech
stocks did not keep pace with the benchmark's tech stocks for the full 12-month
period, causing the Fund to underperform the benchmark, the Russell Midcap
Growth Index. In addition, our overweight in the energy sector contributed to
the performance shortfall.
The Fund remained under-weighted relative to the index in the financial
services, healthcare and materials sectors. Within the healthcare sector, we
believe growth rates have peaked for HMOs, drug distributors and many of the
device and equipment manufacturers. We remain over-weight in biotech, though,
because we continue to find companies with emerging product pipelines or
exciting late-stage clinical trials. The Fund typically is under-weighted in
the financial services and materials sectors, because we believe they contain
few true growth stories.
OUTLOOK| We continue to believe that technology stocks may benefit from a
renewed cycle of capital investment, supported by low interest rates and the
accelerated depreciation allowance. Many tech companies reduced their cost
structures during the recent economic downturn, and as such should enjoy strong
operating leverage and the potential for accelerating earnings as the economy
gains ground. In addition, we believe the Fund's consumer discretionary
holdings are positioned to benefit from a general pick-up in the economy and
continued strength in consumer spending.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
their equivalents
STRATEGY | Invests primarily in common stocks or other equity securities
(which may include securities offered in secondary markets on IPOs) of
companies with market capitalization that fall within the capitalization range
of the Russell Midcap Growth Index
FUND INCEPTION DATE | 2/28/01
EXPENSE RATIO | 0.90%
TOTAL NET ASSETS | $7.7 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE
DESCRIPTION 1 YEAR INCEPTION
-----------------------------------------------------
LOOMIS SAYLES MID CAP GROWTH FUND 28.69% -17.40%
LIPPER MID-CAP GROWTH FUNDS INDEX(a) 27.76 -8.29
RUSSELL MIDCAP GROWTH INDEX(a) 38.89 -6.37
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2003(b)
[CHART]
Loomis Lipper
Sayles Mid Cap Russell
Mid Cap Growth Midcap
Growth Funds Growth
Fund Index Index
---------- ---------- -----------
02/28/2001 $2,500,000 $2,500,000 $2,500,000
03/31/2001 2,212,500 2,234,746 2,142,213
04/30/2001 2,572,500 2,529,397 2,499,294
05/31/2001 2,460,000 2,550,254 2,487,536
06/30/2001 2,385,000 2,540,300 2,488,846
07/31/2001 2,145,000 2,406,684 2,321,004
08/31/2001 1,882,500 2,245,433 2,152,774
09/30/2001 1,497,500 1,921,570 1,796,985
10/31/2001 1,645,000 2,028,555 1,985,876
11/30/2001 1,820,000 2,195,173 2,199,676
12/31/2001 1,842,500 2,290,384 2,283,291
01/31/2002 1,777,500 2,202,790 2,209,151
02/28/2002 1,595,000 2,093,265 2,083,914
03/31/2002 1,727,500 2,225,216 2,242,963
04/30/2002 1,640,000 2,151,243 2,124,210
05/31/2002 1,535,000 2,079,464 2,060,829
06/30/2002 1,385,000 1,892,628 1,833,400
07/31/2002 1,250,000 1,688,512 1,655,275
08/31/2002 1,230,000 1,668,377 1,649,513
09/30/2002 1,185,000 1,564,722 1,518,462
10/31/2002 1,232,500 1,643,623 1,636,078
11/30/2002 1,327,500 1,741,242 1,764,136
12/31/2002 1,170,000 1,638,309 1,657,550
01/31/2003 1,155,000 1,614,009 1,641,277
02/28/2003 1,145,000 1,589,093 1,627,005
03/31/2003 1,152,500 1,611,832 1,657,302
04/30/2003 1,240,000 1,724,897 1,770,143
05/31/2003 1,377,500 1,867,519 1,940,467
06/30/2003 1,377,500 1,896,753 1,968,141
07/31/2003 1,452,500 1,971,566 2,038,472
08/31/2003 1,590,000 2,068,530 2,150,734
09/30/2003 1,525,000 1,999,120 2,109,033
Past performance is no guarantee of future performance. Average annual total
returns assume reinvestment of dividends and capital gains distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance would be
lower.
(a) Please see page 4 for a description of the indexes and important risk
disclosure. (b) The mountain chart is based on the Fund's minimum initial
investment of $2,500,000.
1
FUND AND MANAGER REVIEW
LOOMIS SAYLES SMALL COMPANY GROWTH FUND
PORTFOLIO REVIEW | At the end of the previous fiscal year the bear market of
2000-2002 was reaching its nadir. Investors were selling stocks in nearly all
sectors--and at times indiscriminately. Consequently, valuations became
attractive and fundamentals showed signs of improvement after several difficult
years, particularly among technology stocks. These factors provided the
foundation for the gains experienced during the past 12 months.
We took advantage of these positive valuation trends and over-weighted the
technology and consumer discretionary sectors relative to the index. These
over-weights were not due to a "top-down" view of the market or the economy;
instead, they were the result of our finding a number of exciting opportunities
in these sectors. Both sectors include an eclectic mix of companies, and we
were able to identify many businesses with steady growth trends and solid
profitability.
The Fund's energy sector was the only group that declined during the year,
primarily due to the defensive nature of energy stocks. But our exposure to
energy was relatively small, so the impact on Fund performance was minimal.
We believe the Fund outperformed the Russell 2000 Growth Index, the Fund's
benchmark, during the fiscal year because we remained loyal to the small cap
growth style throughout the difficult days of the bear market. Despite the
challenges the bear market presented, we did not raise significant amounts of
cash or dramatically alter the portfolio's construction to become more
defensive. As such, when the bear market ended in early October, the Fund was
well positioned to benefit from the rebound.
OUTLOOK | We will continue to focus on companies that we believe can produce
sustained and/or accelerating growth over the next few years. We believe the
traditional growth sectors of the economy--services, technology and
healthcare--may produce the greatest number of opportunities in the months
ahead, due to current economic trends and favorable demographics.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
their equivalents
STRATEGY | Invests primarily in equity securities of companies with market
capitalizations that fall within the capitalization range of the Russell 2000
Index
FUND INCEPTION DATE | 5/7/99
EXPENSE RATIO | 0.90%
TOTAL NET ASSETS | $24.2 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE
FUND NAME 1 YEAR 3 YEARS INCEPTION(a)
-------------------------------------------------------------------
LOOMIS SAYLES SMALL COMPANY GROWTH FUND 43.33% -24.86% -3.90%
LIPPER SMALL-CAP GROWTH FUNDS INDEX(b) 36.14 -12.09 4.14
RUSSELL 2000 GROWTH INDEX(b) 41.72 -12.67 -3.21
RUSSELL 2000 INDEX(b) 36.50 -0.82 4.13
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2003(c)
[CHART]
Loomis Sayles Small Lipper Small-Cap Russell 2000 Russell 2000
Company Growth Fund Growth Funds Index Growth Index Index
------------------- ------------------ ------------ ------------
05/07/1999 $3,000,000 $3,000,000 $3,000,000 $3,000,000
05/31/1999 2,934,000 3,016,354 3,004,753 3,043,821
06/30/1999 3,396,000 3,298,675 3,163,029 3,181,461
07/31/1999 3,273,000 3,287,027 3,065,220 3,094,164
08/31/1999 3,315,000 3,240,941 2,950,585 2,979,653
09/30/1999 3,501,000 3,358,429 3,007,498 2,980,303
10/31/1999 3,951,000 3,554,247 3,084,532 2,992,374
11/30/1999 4,338,000 4,002,685 3,410,680 3,171,047
12/31/1999 5,331,000 4,809,787 4,011,818 3,530,009
01/31/2000 5,382,000 4,759,699 3,974,482 3,473,322
02/29/2000 7,368,000 6,154,247 4,899,203 4,046,892
03/31/2000 6,417,000 5,671,181 4,384,218 3,780,078
04/30/2000 5,703,000 4,970,115 3,941,564 3,552,611
05/31/2000 5,004,000 4,563,770 3,596,423 3,345,559
06/30/2000 6,156,000 5,367,502 4,061,012 3,637,195
07/31/2000 5,229,000 5,018,298 3,712,981 3,520,175
08/31/2000 6,141,000 5,557,998 4,103,539 3,788,767
09/30/2000 5,934,000 5,282,750 3,899,678 3,677,414
10/31/2000 5,349,000 4,886,405 3,583,124 3,513,254
11/30/2000 4,002,000 4,054,260 2,932,549 3,152,614
12/31/2000 4,508,999 4,412,859 3,111,995 3,423,368
01/31/2001 4,393,305 4,547,319 3,363,881 3,601,600
02/28/2001 3,495,159 3,965,154 2,902,774 3,365,283
03/31/2001 3,123,722 3,580,050 2,638,858 3,200,667
04/30/2001 3,534,738 3,966,561 2,961,925 3,451,054
05/31/2001 3,434,268 4,074,036 3,030,531 3,535,880
06/30/2001 3,437,312 4,176,764 3,113,175 3,657,972
07/31/2001 3,248,549 3,943,935 2,847,589 3,459,969
08/31/2001 3,004,984 3,710,450 2,669,754 3,348,217
09/30/2001 2,456,963 3,131,357 2,238,977 2,897,505
10/31/2001 2,700,528 3,360,816 2,454,374 3,067,068
11/30/2001 2,895,380 3,621,247 2,659,251 3,304,510
12/31/2001 3,050,653 3,840,612 2,824,813 3,508,476
01/31/2002 2,892,335 3,724,480 2,724,318 3,471,984
02/28/2002 2,603,102 3,499,090 2,547,990 3,376,829
03/31/2002 2,846,667 3,785,168 2,769,458 3,648,232
04/30/2002 2,715,751 3,685,299 2,709,539 3,681,480
05/31/2002 2,526,988 3,537,460 2,551,112 3,518,089
06/30/2002 2,393,027 3,274,603 2,334,782 3,343,530
07/31/2002 1,918,075 2,810,198 1,975,945 2,838,554
08/31/2002 1,921,120 2,806,116 1,975,026 2,831,326
09/30/2002 1,756,713 2,635,933 1,832,366 2,627,997
10/31/2002 1,863,273 2,748,407 1,925,048 2,712,256
11/30/2002 1,988,100 2,978,613 2,115,891 2,954,308
12/31/2002 1,826,738 2,779,617 1,969,971 2,789,815
01/31/2003 1,762,802 2,706,216 1,916,453 2,712,601
02/28/2003 1,723,223 2,621,886 1,865,348 2,630,638
03/31/2003 1,732,357 2,675,954 1,893,587 2,664,512
04/30/2003 1,918,075 2,897,118 2,072,796 2,917,154
05/31/2003 2,134,239 3,192,537 2,306,381 3,230,202
06/30/2003 2,216,442 3,300,728 2,350,829 3,288,658
07/31/2003 2,389,982 3,493,734 2,528,543 3,494,430
08/31/2003 2,563,523 3,678,998 2,664,357 3,654,645
09/30/2003 2,517,854 3,588,638 2,596,912 3,587,186
Past performance is no guarantee of future performance. Average annual total
returns assume reinvestment of dividends and capital gains distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance would be
lower.
(a) Since index performance data is not available coincident with the Fund's
inception date, comparative performance is presented from the month-end closest
to the Fund's inception date (April 30, 1999). (b) Please see page 4 for a
description of the indexes and important risk disclosure. (c) The mountain
chart is based on the Fund's minimum initial investment of $3,000,000.
2
FUND AND MANAGER REVIEW
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
PORTFOLIO REVIEW | We focused on uncovering companies with solid earnings
growth potential and attractive valuations. We found many such companies within
the consumer discretionary, industrial, information technology and materials
sectors--areas that we feel have a direct correlation to improving economic
growth. In particular, we believe consumer discretionary stocks should benefit
from employment growth and an increase in consumer income levels. The
industrial and materials sectors should benefit from a rebuilding of
inventories and an increased demand for commodities. A rebound in information
technology spending already has led to revenue growth among hardware and
semiconductor manufacturers. In fact, stocks in this sector were among the
Fund's leading performers for the fiscal year.
As of June 1, 2003, the Fund began using a tax-managed approach as a principal
investment strategy. In seeking its investment objective, the Fund will use
this approach in an effort to minimize the effect of U.S. federal (and, in some
cases, state) income tax on investment returns for investors who are subject to
such tax.
In addition, the Fund realized strong performance from the telecommunication
services and utilities sectors. These sectors primarily consist of stocks with
higher dividend yields, and high-dividend stocks benefited from lower interest
rates and the favorable change in the tax treatment of dividends.
In general, we avoided purchasing more stocks in the financials, consumer
staples and health care sectors. We were concerned about the potential for
rising interest rates and the impact higher rates would have on margins at many
banks and financial companies. Consumer staples stocks suffered due to reduced
earnings growth resulting from increased pricing pressures. Pricing issues also
dampened the health care sector, where many large pharmaceutical companies
faced patent expirations.
The Fund underperformed the S&P 500 Index, the Fund's benchmark, for the
one-year period, primarily due to a significant cash position we held pending a
large redemption.
OUTLOOK | We believe stocks may continue to offer attractive return potential
for investors. Low interest rates, productivity enhancements, tax cuts and
improving economic growth may continue to drive strong earnings and cash flow
in the months ahead.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
their equivalents
STRATEGY | Invests primarily in equity securities and may invest in companies
of any size. The Fund uses a tax-managed approach in an effort to minimize the
effect of federal income tax
FUND INCEPTION DATE | 10/1/95
FUND REGISTRATION DATE | 3/7/97
EXPENSE RATIO | 0.65%
TOTAL NET ASSETS | $2.5 million
[PHOTO] [PHOTO]
Robert Ix Mark A. Shank
ROBERT IX MARK A. SHANK
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE SINCE
FUND NAME 1 YEAR 3 YEARS 5 YEARS REGISTRATION(a)(b) INCEPTION(a)(b)
- ----------------------------------------------------------------------------------
LOOMIS SAYLES TAX-
MANAGED EQUITY FUND 13.50% -4.97% 7.20% 8.40% 9.77%
RETURN AFTER TAXES ON
DISTRIBUTION 13.30 -7.46 2.07 4.09 6.11
RETURN AFTER TAXES ON
DISTRIBUTION AND SALE OF
FUND SHARES 8.28 -4.96 4.20 5.48 6.93
LIPPER MULTI-CAP CORE
FUNDS INDEX(c) 24.77 -8.84 2.83 4.93 7.63
S&P 500 INDEX(c) 24.40 -10.13 1.00 5.10 8.61
CUMULATIVE PERFORMANCE REGISTRATION TO SEPTEMBER 30, 2003(d)
[CHART]
Loomis Sayles Tax- Lipper Multi-Cap
Managed Equity Fund Core Index S&P 500 Index
------------------- ---------------- -------------
03/07/1997 $250,000 $250,000 $250,000
03/31/1997 239,400 240,761 239,728
04/30/1997 249,995 249,093 254,039
05/31/1997 260,386 265,902 269,506
06/30/1997 264,664 275,935 281,581
07/31/1997 285,059 296,903 303,985
08/31/1997 272,223 288,745 286,955
09/30/1997 281,799 304,622 302,671
10/31/1997 272,630 293,161 292,563
11/30/1997 273,853 298,142 306,106
12/31/1997 270,575 302,300 311,363
01/31/1998 274,989 303,991 314,807
02/28/1998 295,293 325,697 337,512
03/31/1998 310,079 340,978 354,796
04/30/1998 316,259 344,674 358,365
05/31/1998 307,210 335,215 352,206
06/30/1998 316,700 344,621 366,512
07/31/1998 319,128 337,592 362,609
08/31/1998 272,561 285,037 310,184
09/30/1998 299,927 298,549 330,055
10/31/1998 312,507 318,921 356,902
11/30/1998 327,514 336,014 378,533
12/31/1998 363,190 358,799 400,346
01/31/1999 375,218 370,701 417,087
02/28/1999 362,604 356,420 404,125
03/31/1999 383,139 367,674 420,293
04/30/1999 394,287 382,673 436,569
05/31/1999 388,420 378,397 426,260
06/30/1999 413,943 396,944 449,917
07/31/1999 411,890 388,203 435,868
08/31/1999 406,902 381,437 433,712
09/30/1999 394,874 371,928 421,822
10/31/1999 400,155 390,806 448,515
11/30/1999 402,795 403,387 457,632
12/31/1999 430,627 433,310 484,585
01/31/2000 417,766 421,067 460,238
02/29/2000 439,940 437,289 451,526
03/31/2000 482,958 465,317 495,699
04/30/2000 482,958 448,043 480,785
05/31/2000 489,611 432,472 470,921
06/30/2000 482,515 450,709 482,531
07/31/2000 473,202 443,666 474,989
08/31/2000 510,455 474,966 504,490
09/30/2000 494,933 453,148 477,856
10/31/2000 494,489 448,028 475,836
11/30/2000 482,071 409,881 438,322
12/31/2000 505,560 418,852 440,467
01/31/2001 484,405 433,310 456,094
02/28/2001 473,013 394,303 414,507
03/31/2001 457,825 370,916 388,248
04/30/2001 474,098 400,964 418,418
05/31/2001 477,895 404,342 421,222
06/30/2001 459,995 397,384 410,970
07/31/2001 455,113 389,394 406,924
08/31/2001 436,669 367,333 381,450
09/30/2001 416,056 329,678 350,647
10/31/2001 423,108 338,629 357,333
11/30/2001 438,297 365,222 384,743
12/31/2001 446,478 373,780 388,114
01/31/2002 442,615 365,514 382,450
02/28/2002 440,959 358,912 375,074
03/31/2002 461,931 373,438 389,180
04/30/2002 454,205 357,565 365,585
05/31/2002 451,997 354,636 362,892
06/30/2002 427,714 326,853 337,043
07/31/2002 399,016 301,075 310,776
08/31/2002 397,360 302,980 312,810
09/30/2002 374,181 275,117 278,814
10/31/2002 387,978 292,537 303,354
11/30/2002 399,568 310,351 321,209
12/31/2002 388,649 292,519 302,338
01/31/2003 376,452 287,579 294,418
02/28/2003 374,234 282,614 290,001
03/31/2003 375,343 283,528 292,816
04/30/2003 399,183 305,579 316,936
05/31/2003 418,588 326,243 333,634
06/30/2003 419,142 331,114 337,890
07/31/2003 426,350 337,512 343,848
08/31/2003 434,666 347,890 350,554
09/30/2003 424,695 343,263 346,831
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2003(d)
[CHART]
Loomis Sayles Tax- Lipper Multi-Cap
Managed Equity Fund Core Index S&P 500 Index
------------------- ----------------- -------------
10/01/1995 $250,000 $250,000 $250,000
10/31/1995 245,000 246,367 249,106
11/30/1995 251,000 256,957 260,042
12/31/1995 251,056 260,604 265,051
01/31/1996 250,806 267,360 274,072
02/29/1996 255,316 272,840 276,613
03/31/1996 255,316 276,407 279,276
04/30/1996 261,079 283,096 283,393
05/31/1996 265,087 288,628 290,702
06/30/1996 263,334 285,556 291,811
07/31/1996 248,801 271,583 278,918
08/31/1996 257,070 280,648 284,802
09/30/1996 270,600 294,863 300,832
10/31/1996 277,114 298,544 309,129
11/30/1996 297,158 317,833 332,495
12/31/1996 290,230 313,950 325,907
01/31/1997 308,432 328,827 346,268
02/28/1997 305,904 327,853 348,982
03/31/1997 297,056 315,737 334,643
04/30/1997 310,202 326,663 354,621
05/31/1997 323,096 348,707 376,211
06/30/1997 328,405 361,864 393,066
07/31/1997 353,712 389,362 424,342
08/31/1997 337,783 378,663 400,569
09/30/1997 349,666 399,485 422,507
10/31/1997 338,289 384,455 408,396
11/30/1997 339,806 390,987 427,302
12/31/1997 335,738 396,440 434,641
01/31/1998 341,215 398,658 439,448
02/28/1998 366,409 427,122 471,143
03/31/1998 384,757 447,163 495,270
04/30/1998 392,425 452,009 500,252
05/31/1998 381,197 439,604 491,654
06/30/1998 392,973 451,940 511,625
07/31/1998 395,985 442,722 506,177
08/31/1998 338,203 373,801 432,995
09/30/1998 372,160 391,521 460,733
10/31/1998 387,769 418,236 498,210
11/30/1998 406,391 440,653 528,405
12/31/1998 450,659 470,533 558,855
01/31/1999 465,584 486,141 582,224
02/28/1999 449,931 467,414 564,129
03/31/1999 475,413 482,172 586,699
04/30/1999 489,246 501,842 609,419
05/31/1999 481,965 496,235 595,028
06/30/1999 513,635 520,557 628,051
07/31/1999 511,087 509,094 608,440
08/31/1999 504,898 500,221 605,430
09/30/1999 489,974 487,751 588,833
10/31/1999 496,526 512,507 626,095
11/30/1999 499,802 529,006 638,822
12/31/1999 534,337 568,248 676,446
01/31/2000 518,378 552,192 642,460
02/29/2000 545,893 573,466 630,298
03/31/2000 599,271 610,222 691,960
04/30/2000 599,271 587,569 671,142
05/31/2000 607,526 567,148 657,372
06/30/2000 598,721 591,065 673,578
07/31/2000 587,165 581,829 663,050
08/31/2000 633,390 622,876 704,232
09/30/2000 614,129 594,263 667,053
10/31/2000 613,579 587,549 664,233
11/30/2000 598,171 537,523 611,866
12/31/2000 627,316 549,287 614,860
01/31/2001 601,066 568,248 636,675
02/28/2001 586,931 517,094 578,622
03/31/2001 568,085 486,423 541,966
04/30/2001 588,277 525,828 584,082
05/31/2001 592,989 530,259 587,995
06/30/2001 570,777 521,134 573,684
07/31/2001 564,719 510,656 568,037
08/31/2001 541,834 481,724 532,477
09/30/2001 516,257 432,343 489,478
10/31/2001 525,007 444,082 498,812
11/30/2001 543,854 478,956 537,074
12/31/2001 554,006 490,179 541,779
01/31/2002 549,212 479,339 533,873
02/28/2002 547,158 470,681 523,577
03/31/2002 573,180 489,731 543,268
04/30/2002 563,593 468,915 510,331
05/31/2002 560,854 465,074 506,571
06/30/2002 530,722 428,638 470,488
07/31/2002 495,113 394,834 433,821
08/31/2002 493,058 397,332 436,660
09/30/2002 464,296 360,792 389,204
10/31/2002 481,417 383,636 423,460
11/30/2002 495,797 406,998 448,385
12/31/2002 482,249 383,612 422,043
01/31/2003 467,114 377,135 410,987
02/28/2003 464,363 370,624 404,820
03/31/2003 465,739 371,822 408,751
04/30/2003 495,320 400,739 442,420
05/31/2003 519,398 427,839 465,730
06/30/2003 520,086 434,227 471,671
07/31/2003 529,029 442,617 479,987
08/31/2003 539,349 456,227 489,348
09/30/2003 526,966 450,159 484,151
Past performance is no guarantee of future performance. Average annual total
returns assume reinvestment of dividends and capital gains distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance and rankings
would be lower.
(a) Shares of the Fund were registered for offer and sale under the Securities
Act of 1933 on March 7, 1997. In accordance with SEC regulations, performance
information is provided for the period beginning on March 7, 1997
("Registration"). Performance from inception is also provided for the
convenience of our shareholders. (b) Since index performance data is not
available coincident with the Fund's inception and registration dates,
comparative performance is presented from the month end closest to the Fund's
inception and registration dates (September 30, 1995 and February 28, 1997,
respectively). (c) Please see page 4 for a description of the indexes,
important risk disclosure and disclosure related to after tax returns. (d) The
mountain chart is based on the Fund's minimum initial investment of $250,000.
3
DISCLOSURE
LOOMIS SAYLES MID CAP GROWTH FUND, LOOMIS SAYLES SMALL COMPANY GROWTH FUND,
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
Small and mid-cap stocks may be more volatile and subject to wider value
fluctuations than larger, more established companies. The secondary market of
small and mid-cap stocks may be less liquid, or harder to sell, which could
also adversely impact the Fund's value. Foreign investments involve special
risks including greater economic, political and currency fluctuation risks,
which may be even greater in emerging markets. In addition, foreign countries
may have different accounting standards than those of the U.S., which may
adversely affect the value of the Fund. Growth funds involve increased risks
because, in part, the value of the Fund's underlying securities is based on
future expectations that may or may not be met.
INDEX DEFINITIONS
Indexes are unmanaged and do not have expenses that affect results, unlike
mutual funds. Index returns are adjusted for the reinvestment of capital gain
distributions and income dividends. It is not possible to invest directly in an
index.
Lipper Mid-Cap Growth Funds Index is an equally weighted index of typically the
30 largest mutual funds within the mid-cap growth funds investment objective.
Lipper Multi-Cap Core Funds Index is an equally weighted index of typically the
30 largest mutual funds within the multi-cap core funds investment objective.
Lipper Small-Cap Growth Funds Index is an equally weighted index of typically
the 30 largest mutual funds within the small-cap growth funds investment
objective.
Source: Lipper, Inc.
Russell Midcap Growth Index is an index which measures the performance of those
Russell Midcap companies with higher price-to-book ratios and higher forecasted
growth values. The stocks are also members of the Russell 1000 Growth Index.
Russell 2000 Growth Index is an index comprised of those Russell 2000 companies
with higher price-to-book ratios and higher forecasted growth values.
Russell 2000 Index is an index comprised of the 2,000 smallest companies in the
Russell 3000 Index (a broad market index), representing approximately 8% of the
Russell 3000 total market capitalization.
The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and
industry group representation. It is a market-value weighted index (stock price
times number of shares outstanding), with each stock's weight in the index
proportionate to its market value.
AFTER TAX RETURNS
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on an investor's tax situation and
may differ from those shown. After-tax returns shown are not relevant to
investors who hold their shares through tax-deferred arrangements, such as
401(k) plans, qualified plans, education savings accounts or individual
retirement accounts. Under certain circumstances, the addition of the tax
benefits from capital losses resulting from redemptions may cause the Return
After Taxes on Distributions and Sale of Fund Shares to be greater than the
Return After Taxes on Distribution or even the Return Before Taxes.
4
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES MID CAP GROWTH FUND
SHARES VALUE +
- ----------------------------------------------------------------
COMMON STOCKS - 98.3% OF NET ASSETS
AIRLINES - 2.0%
Jetblue Airways Corp.* 2,500 $152,425
--------
BIOTECHNOLOGY - 7.7%
Amylin Pharmaceuticals, Inc.* 3,200 90,368
Celgene Corp.* 2,650 114,824
Gilead Sciences, Inc.* 1,050 58,727
Human Genome Sciences, Inc.* 3,775 51,567
ICOS Corp.* 2,150 82,388
Invitrogen Corp.* 1,400 81,186
OSI Pharmaceuticals, Inc.* 1,100 35,717
Telik, Inc.* 3,850 77,192
--------
591,969
--------
CAPITAL MARKETS - 2.2%
Ameritrade Holding Corp.* 14,975 168,469
--------
COMMERCIAL SERVICES & SUPPLIES - 7.9%
Apollo Group, Inc.-University of Phoenix Online* 2,616 174,173
Career Education Corp.* 2,675 121,178
Corinthian Colleges, Inc.* 2,500 142,900
Monster Worldwide, Inc.* 6,675 168,076
--------
606,327
--------
COMMUNICATIONS EQUIPMENT - 8.1%
Avaya, Inc.* 9,725 106,003
Foundry Networks, Inc.* 8,250 177,457
Juniper Networks, Inc.* 7,975 118,987
NetScreen Technologies, Inc.* 5,850 130,045
Sonus Networks, Inc.* 12,300 85,239
--------
617,731
--------
COMPUTERS & PERIPHERALS - 6.7%
ATI Technologies, Inc. * 11,850 175,972
Network Appliance, Inc.* 8,550 175,531
SanDisk Corp. * 2,575 164,131
--------
515,634
--------
ENERGY EQUIPMENT & SERVICES - 1.9%
Rowan Cos., Inc. 5,975 146,866
--------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.9%
Zimmer Holdings, Inc.* 2,700 148,770
--------
HEALTH CARE PROVIDERS & SERVICES - 1.5%
Odyssey Healthcare, Inc.* 3,900 116,298
--------
HOTELS RESTAURANTS & LEISURE - 1.6%
Station Casinos, Inc. 3,875 118,575
--------
INSURANCE - 1.4%
Everest Re Group Ltd. 1,400 105,224
--------
INTERNET & CATALOG RETAIL - 3.9%
Amazon.com, Inc.* 3,725 180,141
Netflix, Inc.* 3,625 121,836
--------
301,977
--------
5
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES MID CAP GROWTH FUND - CONTINUED
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
INTERNET SOFTWARE & SERVICES - 12.0%
Ask Jeeves, Inc.* 5,775 $ 100,485
CNET Networks, Inc.* 9,050 64,074
DoubleClick, Inc.* 10,050 108,238
j2 Global Communications, Inc.* 3,050 115,381
Netease.com, Inc. ADR* 2,750 153,505
Sohu.com, Inc.* 3,325 103,408
United Online, Inc.* 4,900 170,128
VeriSign, Inc.* 7,650 103,046
----------
918,265
----------
IT SERVICES - 2.0%
Cognizant Technology Solutions Corp.* 4,225 154,086
----------
LEISURE EQUIPMENT & PRODUCTS - 2.0%
Leapfrog Enterprises, Inc.* 3,950 150,100
----------
MEDIA - 3.1%
Univision Communications, Inc., Class A* 4,600 146,878
XM Satellite Radio Holdings, Inc.* 6,025 93,568
----------
240,446
----------
PHARMACEUTICALS - 5.6%
Angiotech Pharmaceuticals, Inc.* 2,600 113,490
Esperion Therapeutics, Inc.* 3,800 73,644
Medicines Co.* 3,500 91,000
Pharmaceutical Resources, Inc.* 2,175 148,379
----------
426,513
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 13.2%
Amkor Technology, Inc.* 6,825 96,983
Cymer, Inc.* 2,550 105,060
Cypress Semiconductor Corp.* 10,925 193,154
KLA-Tencor Corp.* 2,975 152,915
Marvell Technology Group Ltd.* 4,275 161,382
OmniVision Technologies, Inc.* 2,625 110,880
PMC-Sierra, Inc.* 8,875 117,070
Vitesse Semiconductor Corp.* 11,650 74,560
----------
1,012,004
----------
SOFTWARE - 8.8%
BEA Systems, Inc.* 8,450 101,822
Business Objects SA ADR* 4,325 107,909
Electronic Arts, Inc.* 1,675 154,485
Mercury Interactive Corp.* 3,375 153,259
VERITAS Software Corp.* 4,950 155,430
----------
672,905
----------
SPECIALTY RETAIL - 3.2%
Chico's FAS, Inc.* 4,650 142,476
Williams-Sonoma, Inc.* 3,800 102,524
----------
245,000
----------
6
SHARES VALUE +
- -----------------------------------------------------------------
COMMON STOCKS - CONTINUED
TEXTILES APPAREL & LUXURY GOODS - 1.6%
Coach, Inc.* 2,175 $ 118,755
----------
TOTAL COMMON STOCKS
(Identified Cost $6,092,973) 7,528,339
----------
TOTAL INVESTMENTS - 98.3%
(Identified Cost $6,092,973)@ 7,528,339
Cash and Other Assets, Less Liabilities--1.7% 131,765
----------
NET ASSETS - 100% $7,660,104
----------
+ See Note 2.
* Non-income producing security
@ At September 30, 2003, the net unrealized appreciation on investments based
on cost of $6,093,065 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost and aggregate gross unrealized depreciation
for all securities in which there is an excess of tax cost over value were
$1,558,076 and $ 122,802, respectively, resulting in net unrealized
appreciation of $1,435,274.
Key to Abbreviations: ADR: American Depositary Receipt
See accompanying notes to financial statements.
7
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES SMALL COMPANY GROWTH FUND
SHARES VALUE +
- --------------------------------------------------------------
COMMON STOCKS - 97.8% OF NET ASSETS
AIRLINES - 1.7%
AirTran Holdings, Inc.* 24,975 $ 418,331
----------
BIOTECHNOLOGY - 4.4%
Exact Sciences Corp.* 11,575 156,263
ILEX Oncology, Inc.* 10,350 171,913
NPS Pharmaceuticals, Inc.* 8,450 235,332
Tanox, Inc.* 8,300 166,083
Telik, Inc.* 9,000 180,450
XOMA Ltd.* 22,350 165,390
----------
1,075,431
----------
COMMERCIAL BANKS - 3.1%
East West Bancorp, Inc. 8,575 366,581
UCBH Holdings, Inc. 12,825 387,700
----------
754,281
----------
COMMERCIAL SERVICES & SUPPLIES - 5.6%
Corporate Executive Board Co.* 5,175 242,966
CoStar Group, Inc.* 12,950 336,700
DiamondCluster International, Inc., Class A* 34,075 230,688
Navigant Consulting, Inc.* 15,675 192,959
Strayer Education, Inc. 3,700 357,827
----------
1,361,140
----------
COMMUNICATIONS EQUIPMENT - 7.2%
Enterasys Networks, Inc.* 53,150 212,600
Packeteer, Inc.* 28,375 341,919
Performance Technologies, Inc.* 21,900 268,275
SafeNet, Inc.* 14,200 513,046
SpectraLink Corp.* 21,575 403,021
----------
1,738,861
----------
COMPUTERS & PERIPHERALS - 4.0%
Advanced Digital Information Corp.* 26,350 369,427
Dot Hill Systems Corp.* 26,275 361,544
M-Systems Flash Disk Pioneers Ltd.* 14,775 231,820
----------
962,791
----------
CONSUMER FINANCE - 1.6%
iDine Rewards Networks, Inc.* 23,600 383,500
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.4%
Digital Theater Systems, Inc.* 7,725 220,016
Lexar Media, Inc.* 29,375 500,550
TTM Technologies, Inc.* 24,850 354,858
----------
1,075,424
----------
FOOD PRODUCTS - 1.4%
Peet's Coffee & Tea, Inc.* 17,700 346,035
----------
HEALTH CARE EQUIPMENT & SUPPLIES - 2.3%
Epix Medical, Inc.* 11,250 191,475
Interpore International, Inc.* 10,325 158,592
Kyphon, Inc.* 10,350 201,825
----------
551,892
----------
8
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTH CARE PROVIDERS & SERVICES - 7.4%
Advisory Board Co.* 10,100 $ 459,045
Odyssey Healthcare, Inc.* 15,668 467,220
United Surgical Partners International, Inc.* 14,375 406,812
VistaCare, Inc., Class A* 14,700 460,110
----------
1,793,187
----------
HOTELS RESTAURANTS & LEISURE - 2.0%
Station Casinos, Inc. 15,950 488,070
----------
INTERNET & CATALOG RETAIL - 0.5%
RedEnvelope, Inc.* 9,175 128,450
----------
INTERNET SOFTWARE & SERVICES - 11.7%
Ask Jeeves, Inc.* 18,100 314,940
CNET Networks, Inc.* 12,575 89,031
DoubleClick, Inc.* 20,225 217,823
eCollege.com* 25,300 509,542
j2 Global Communications, Inc.* 11,950 452,068
Netegrity, Inc.* 16,875 168,919
RealNetworks, Inc.* 9,925 65,009
SkillSoft Plc* 34,925 260,191
SonicWALL, Inc.* 29,125 168,634
United Online, Inc.* 16,700 579,824
----------
2,825,981
----------
LEISURE EQUIPMENT & PRODUCTS - 2.0%
Leapfrog Enterprises, Inc.* 12,600 478,800
----------
MEDIA - 2.1%
Cumulus Media, Inc., Class A* 5,550 94,627
Harris Interactive, Inc.* 23,800 167,552
XM Satellite Radio Holdings, Inc.* 15,175 235,668
----------
497,847
----------
PHARMACEUTICALS - 5.8%
Angiotech Pharmaceuticals, Inc.* 3,825 166,961
AtheroGenics, Inc.* 10,850 181,629
Esperion Therapeutics, Inc.* 9,025 174,905
Flamel Technologies S.A.* 5,900 198,889
Impax Laboratories, Inc.* 19,100 238,941
Medicines Co.* 9,425 245,050
POZEN, Inc.* 10,900 193,802
----------
1,400,177
----------
ROAD & RAIL - 1.6%
Old Dominion Freight Line, Inc.* 13,462 391,610
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 10.8%
Actel Corp.* 13,775 330,187
Asyst Technologies, Inc.* 26,300 370,041
ATMI, Inc.* 14,525 367,046
August Technology Corp.* 17,925 255,252
FormFactor, Inc.* 12,200 263,886
OmniVision Technologies, Inc.* 8,350 352,704
9
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES SMALL COMPANY GROWTH FUND - CONTINUED
SHARES VALUE +
- -------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - CONTINUED
Power Integrations, Inc.* 12,225 $ 406,359
Sigmatel, Inc.* 13,175 271,537
-----------
2,617,012
-----------
SOFTWARE - 10.8%
Altiris, Inc.* 16,850 442,818
Concord Communications, Inc.* 23,825 311,869
Documentum, Inc.* 18,750 399,562
Embarcadero Technologies, Inc.* 37,650 378,006
JDA Software Group, Inc.* 24,950 371,007
Kronos, Inc.* 4,450 235,450
RSA Security, Inc.* 33,825 483,021
-----------
2,621,733
-----------
SPECIALTY RETAIL - 6.3%
Jos. A. Bank Clothiers, Inc.* 8,575 377,043
Select Comfort Corp.* 16,125 427,312
The Sports Authority, Inc.* 13,475 423,924
Tractor Supply Co.* 8,825 289,548
-----------
1,517,827
-----------
WIRELESS TELECOMMUNICATION SERVICES - 1.1%
At Road, Inc.* 19,175 257,904
-----------
TOTAL COMMON STOCKS
(Identified Cost $18,929,233) 23,686,284
-----------
FACE AMOUNT
- -------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 5.6% OF NET ASSETS
Repurchase Agreement with State Street Corp., dated 9/30/03 at 0.350%
to be repurchased at $1,366,013 on 10/01/03 collateralized by $1,355,000
U.S. Treasury Note, 3.375% due 4/30/04 with a value of $1,395,819 $1,366,000 1,366,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $1,366,000) 1,366,000
-----------
TOTAL INVESTMENTS - 103.4%
(Identified Cost $20,295,233)@ 25,052,284
Liabilities, Less Cash and Other Assets--(3.4%) (821,926)
-----------
NET ASSETS - 100% $24,230,358
-----------
+ See Note 2.
* Non-income producing security
@ At September 30, 2003, the net unrealized appreciation on investments based
on cost of $20,511,274 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost and aggregate gross unrealized depreciation
for all securities in which there is an excess of tax cost over value were
$4,835,699 and $294,689, respectively, resulting in net unrealized
appreciation of $4,541,010.
See accompanying notes to financial statements.
10
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
SHARES VALUE +
- -------------------------------------------------------------
COMMON STOCKS - 97.4% OF NET ASSETS
AEROSPACE & DEFENSE - 2.3%
Northrop Grumman Corp. 650 $ 56,043
--------
AUTOMOBILES - 2.0%
Harley-Davidson, Inc. 1,050 50,610
--------
BEVERAGES - 2.8%
PepsiCo, Inc. 1,500 68,745
--------
BIOTECHNOLOGY - 2.0%
Amgen, Inc.* 775 50,042
--------
BUILDING PRODUCTS - 2.1%
Masco Corp. 2,175 53,244
--------
CAPITAL MARKETS - 2.4%
Goldman Sachs Group, Inc. 725 60,828
--------
CHEMICALS - 3.0%
Praxair, Inc. 1,200 74,340
--------
COMMERCIAL BANKS - 3.1%
Wells Fargo & Co. 1,475 75,962
--------
COMMUNICATIONS EQUIPMENT - 6.5%
Cisco Systems, Inc.* 3,175 62,039
Harris Corp. 1,625 58,159
Nokia Oyj ADR 2,625 40,950
--------
161,148
--------
COMPUTERS & PERIPHERALS - 2.0%
Dell, Inc.* 1,500 50,085
--------
DIVERSIFIED FINANCIAL SERVICES - 2.7%
Citigroup, Inc. 1,500 68,265
--------
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.8%
CenturyTel, Inc. 2,050 69,475
--------
ELECTRIC UTILITIES - 2.5%
Dominion Resources, Inc. 1,000 61,900
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.9%
Flextronics International Ltd.* 3,300 46,794
--------
ENERGY EQUIPMENT & SERVICES - 1.2%
GlobalSantaFe Corp. 1,200 28,740
--------
HEALTH CARE EQUIPMENT & SUPPLIES - 2.5%
Medtronic, Inc. 1,325 62,169
--------
HEALTH CARE PROVIDERS & SERVICES - 3.9%
Cardinal Health, Inc. 1,025 59,850
Caremark Rx, Inc.* 1,700 38,420
--------
98,270
--------
HOTELS RESTAURANTS & LEISURE - 3.5%
Brinker International, Inc.* 1,100 36,696
Carnival Corp. 1,525 50,157
--------
86,853
--------
HOUSEHOLD DURABLES - 2.3%
Leggett & Platt, Inc. 2,625 56,779
--------
11
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES TAX-MANAGED EQUITY FUND - CONTINUED
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
INDUSTRIAL CONGLOMERATES - 3.2%
General Electric Co. 2,675 $ 79,742
----------
INSURANCE - 6.0%
AFLAC, Inc. 2,450 79,135
American International Group, Inc. 1,225 70,682
----------
149,817
----------
IT SERVICES - 6.5%
Affiliated Computer Services, Inc., Class A* 1,000 48,690
First Data Corp. 1,400 55,944
SunGard Data Systems, Inc.* 2,175 57,224
----------
161,858
----------
MACHINERY - 4.1%
Danaher Corp. 750 55,395
Illinois Tool Works, Inc. 700 46,382
----------
101,777
----------
MEDIA - 2.5%
Viacom, Inc., Class B 1,600 61,280
----------
MULTILINE RETAIL - 4.9%
Kohl's Corp.* 800 42,800
Target Corp. 2,075 78,082
----------
120,882
----------
OIL & GAS - 7.3%
ConocoPhillips 1,100 60,225
Devon Energy Corp. 1,325 63,852
Exxon Mobil Corp. 1,600 58,560
----------
182,637
----------
PAPER & FOREST PRODUCTS - 2.5%
International Paper Co. 1,600 62,432
----------
PHARMACEUTICALS - 3.2%
Pfizer, Inc. 2,650 80,507
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.5%
Maxim Integrated Products, Inc. 1,325 52,337
NVIDIA Corp.* 2,250 35,800
----------
88,137
----------
SOFTWARE - 2.2%
Microsoft Corp. 1,975 54,885
----------
TOTAL COMMON STOCKS
(Identified Cost $2,209,166) 2,424,246
----------
TOTAL INVESTMENTS - 97.4%
(Identified Cost $2,209,166)@ 2,424,246
Cash and Other Assets, Less Liabilities - 2.6% 65,862
----------
NET ASSETS - 100% $2,490,108
----------
+ See Note 2.
* Non-income producing security
@ At September 30, 2003, the net unrealized appreciation on investments based
on cost of $2,248,130 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost and aggregate gross unrealized depreciation
for all securities in which there is an excess of tax cost over value were
$186,944 and $10,828, respectively, resulting in net unrealized appreciation
of $176,116.
Key to Abbreviations: ADR: American Depositary Receipt
See accompanying notes to financial statements.
12
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
MID CAP SMALL COMPANY TAX-MANAGED
GROWTH FUND GROWTH FUND EQUITY FUND
- -------------------------------------------------------------------------------------------------------------
ASSETS
Investments at value $ 7,528,339 $ 25,052,284 $ 2,424,246
Cash 294,635 59,754 443,269
Receivable for:
Securities sold 105,098 191,222 61,274
Dividends and interest -- 398 1,114
Due from the adviser 8,459 -- 6,750
-------------- -------------- --------------
7,936,531 25,303,658 2,936,653
-------------- -------------- --------------
LIABILITIES
Payable for:
Securities purchased 244,104 1,016,397 416,951
Accrued expenses:
Management fees 4,990 26,223 891
Trustees' fees 4,011 4,011 4,011
Deferred Trustees' fees 1,142 1,142 1,142
Transfer agent fees 1,301 1,327 1,526
Administrative fees 233 712 62
Other 20,646 23,488 21,962
-------------- -------------- --------------
276,427 1,073,300 446,545
-------------- -------------- --------------
NET ASSETS $ 7,660,104 $ 24,230,358 $ 2,490,108
-------------- -------------- --------------
Net Assets consist of:
Capital paid in $ 12,379,349 $ 102,399,689 $ 6,419,306
Undistributed net investment income (loss) (1,142) (1,142) 60,856
Accumulated net realized gain (loss) (6,153,469) (82,925,240) (4,205,134)
Unrealized appreciation (depreciation) on investments 1,435,366 4,757,051 215,080
-------------- -------------- --------------
NET ASSETS $ 7,660,104 $ 24,230,358 $ 2,490,108
-------------- -------------- --------------
Shares of beneficial interest outstanding, no par value 1,255,923 2,931,526 325,119
Net asset value and redemption price $ 6.10 $ 8.27 $ 7.66
Identified cost of investments $ 6,092,973 $ 20,295,233 $ 2,209,166
See accompanying notes to financial statements
13
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
SMALL
MID CAP COMPANY TAX-MANAGED
GROWTH FUND GROWTH FUND EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends* $ 6,552 $ 20,978 $ 118,422
Interest 860 4,243 9,465
------------ ------------ ------------
Total income 7,412 25,221 127,887
------------ ------------ ------------
EXPENSES
Management fees 48,742 201,228 43,721
Trustees' fees and expenses 10,499 10,499 10,499
Administrative fees 2,285 9,201 3,018
Custodian and accounting fees 37,712 50,991 35,651
Transfer Agent 15,658 16,871 16,426
Audit and tax services fees 24,811 32,966 23,462
Registration fees 17,141 17,826 20,871
Printing 1,224 8,502 2,857
Legal fees -- 1,293 746
Other expenses 1,357 2,296 1,505
------------ ------------ ------------
Total expenses 159,429 351,673 158,756
Less expenses waived and reimbursed by the investment adviser (100,938) (110,200) (101,919)
------------ ------------ ------------
Net expenses 58,491 241,473 56,837
------------ ------------ ------------
Net investment income (loss) (51,079) (216,252) 71,050
------------ ------------ ------------
NET REALIZED GAIN (LOSS) ON:
Investments (109,243) (3,347,715) (145,271)
------------ ------------ ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments 1,858,351 10,422,651 684,831
------------ ------------ ------------
Total net realized gain (loss) and change in unrealized appreciation
(depreciation) 1,749,108 7,074,936 539,560
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 1,698,029 $ 6,858,684 $ 610,610
------------ ------------ ------------
*Net of foreign withholding taxes of $90 for the Tax-Managed Equity Fund.
See accompanying notes to financial statements
14
STATEMENTS OF CHANGES IN NET ASSETS
MID CAP GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (51,079) $ (63,541)
Net realized gain (loss) on investments (109,243) (2,678,370)
Change in unrealized appreciation (depreciation) on investments 1,858,351 1,188,599
------------------ ------------------
Increase (decrease) in net assets from operations 1,698,029 (1,553,312)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions 32,706 150
------------------ ------------------
Total increase (decrease) in net assets 1,730,735 (1,553,162)
NET ASSETS
Beginning of the period 5,929,369 7,482,531
------------------ ------------------
End of the period $7,660,104 $ 5,929,369
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ (1,142) $ --
------------------ ------------------
SMALL COMPANY GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (216,252) $ (630,457)
Net realized gain (loss) on investments (3,347,715) (26,904,555)
Change in unrealized appreciation (depreciation) on investments 10,422,651 6,766,474
------------------ ------------------
Increase (decrease) in net assets from operations 6,858,684 (20,768,538)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions (30,642,707) (927,166)
------------------ ------------------
Total increase (decrease) in net assets (23,784,023) (21,695,704)
NET ASSETS
Beginning of the period 48,014,381 69,710,085
------------------ ------------------
End of the period $ 24,230,358 $ 48,014,381
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ (1,142) $ --
------------------ ------------------
See accompanying notes to financial statements.
15
STATEMENTS OF CHANGES IN NET ASSETS
TAX-MANAGED EQUITY FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 71,050 $ 137,374
Net realized gain (loss) on investments (145,271) (1,869,638)
Change in unrealized appreciation (depreciation) on investments 684,831 (52,618)
------------------ ------------------
Increase (decrease) in net assets from operations 610,610 (1,784,882)
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (82,181) (335,784)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions (15,464,446) 335,934
------------------ ------------------
Total increase (decrease) in net assets (14,936,017) (1,784,732)
NET ASSETS
Beginning of the period 17,426,125 19,210,857
------------------ ------------------
End of the period $ 2,490,108 $17,426,125
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ 60,856 $ 82,174
------------------ ------------------
See accompanying notes to financial statements.
16
THIS PAGE INTENTIONALLY LEFT BLANK
FINANCIAL HIGHLIGHTS
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ------------------------
Net asset Net realized Dividends Distributions
value, Net and unrealized Total from from net from net
beginning investment gain (loss) on investment investment realized
of period income (loss) investments operations income capital gains
- ------------------------------------------------------------------------------------------
MID CAP GROWTH FUND
9/30/2003 $ 4.74 $(0.04)(d) $ 1.40 $ 1.36 $ -- $ --
9/30/2002 5.99 (0.05)(d) (1.20) (1.25) -- --
9/30/2001* 10.00 (0.03)(d) (3.98) (4.01) -- --
SMALL COMPANY GROWTH FUND
9/30/2003 $ 5.77 $(0.05)(d) $ 2.55 $ 2.50 $ -- $ --
9/30/2002 8.07 (0.07)(d) (2.23) (2.30) -- --
9/30/2001 19.78 (0.07)(d) (11.45) (11.52) -- (0.19)
9/30/2000 11.67 (0.06) 8.17 8.11 -- --
9/30/1999** 10.00 (0.01) 1.68 1.67 -- --
TAX-MANAGED EQUITY FUND
9/30/2003 $ 6.78 $ 0.06(d) $ 0.85 $ 0.91 $(0.03) $ --
9/30/2002 7.67 0.06(d) (0.81) (0.75) (0.14) --
9/30/2001 11.16 0.12(d) (1.60) (1.48) (0.09) (1.92)
9/30/2000 13.46 0.12 2.43 2.55 (0.07) (4.78)
9/30/1999 13.59 0.04 3.87 3.91 (0.10) (3.94)
* From commencement of Fund operations on February 28, 2001 through September
30, 2001. ** From commencement of Fund operations on May 7, 1999 through
September 30, 1999. (a) Total returns would have been lower had the adviser not
reduced its advisory fees and/or borne other operating expenses. Periods less
than one year are not annualized. (b) The adviser has agreed to reimburse a
portion of the Fund's expenses during the period. Without this reimbursement
the Fund's ratio of operating expenses would have been higher. (c) Annualized
for periods less than one year. (d) Per share net investment income (loss) has
been determined on the basis of the weighted average number of shares
outstanding during the period.
See accompanying notes to financial statements.
18
RATIOS TO AVERAGE NET ASSETS:
- -------------- --------------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total end of Total period Net Gross investment turnover
distributions period Return(a) (000) Expenses(b)(c) Expenses(c) income (loss)(c) rate
- ---------------------------------------------------------------------------------------------------
$ -- $ 6.10 28.7% $ 7,660 0.90% 2.45% (0.79)% 246%
-- 4.74 (20.9) 5,929 0.90 1.88 (0.81) 216
-- 5.99 (40.1) 7,483 0.90 1.93 (0.62) 145
$ -- $ 8.27 43.3% $ 24,230 0.90% 1.31% (0.81)% 220%
-- 5.77 (28.5) 48,014 0.90 1.07 (0.82) 157
(0.19) 8.07 (58.6) 69,710 0.90 1.02 (0.61) 150
-- 19.78 69.5 133,784 0.90 0.99 (0.51) 174
-- 11.67 16.7 17,674 0.90 2.17 (0.51) 56
$(0.03) $ 7.66 13.5% $ 2,490 0.65% 1.82% 0.81% 200%
(0.14) 6.78 (10.1) 17,426 0.65 1.14 0.72 188
(2.01) 7.67 (15.9) 19,211 0.65 1.05 1.29 300
(4.85) 11.16 25.3 23,718 0.65 0.95 1.00 356
(4.04) 13.46 31.7 21,886 0.65 1.00 0.30 250
19
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
1. ORGANIZATION. | Loomis Sayles Funds I and Loomis Sayles Funds II (formerly
Loomis Sayles Investment Trust and Loomis Sayles Funds, respectively) (the
"Trusts" and each a "Trust") are organized as Massachusetts business trusts and
were organized as such on December 23, 1993 and February 20, 1991,
respectively. Each Trust is registered under the Investment Company Act of
1940, as amended, as an open-end investment company. Each Declaration of Trust
permits the Trustees to issue an unlimited number of shares of the Trusts in
multiple series (individually, a "Fund" and collectively, the "Funds"). Certain
Funds of Loomis Sayles Funds I were first registered under the Securities Act
of 1933 (the "1933 Act") effective March 7, 1997 (subsequent to the
commencement of investment operations). Information presented in these
financial statements pertains to certain equity funds of the Trusts, the
financial statements for each of the remaining equity funds and the fixed
income funds are presented in separate reports.
LOOMIS SAYLES FUNDS I:
Loomis Sayles Mid Cap Growth Fund (the "Mid Cap Growth Fund")
Loomis Sayles Small Company Growth Fund (the "Small Company Growth Fund")
LOOMIS SAYLES FUNDS II:
Loomis Sayles Tax-Managed Equity Fund (the "Tax-Managed Equity Fund") (formerly
the Loomis Sayles Provident Fund)
On May 14, 2003, shareholders of Loomis Sayles Funds I and on June 10, 2003
shareholders of Loomis Sayles Funds II (together, Loomis Sayles Funds I and
Loomis Sales Funds II comprise the "Loomis Sayles Funds Trusts") approved new
Trustees for the Trusts in connection with the integration of the CDC Nvest
Funds Trust I, II, III, CDC Nvest Companies Trust I, CDC Nvest Cash Management
Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest Funds
Trusts") and Loomis Sayles Funds Trusts. This approval resulted in a combined
Board of Trustees for the Loomis Sayles Funds Trusts and CDC Nvest Funds Trusts.
Effective June 1, 2003, the Tax-Managed Equity Fund adopted a new investment
strategy. This new strategy seeks to minimize the effect of U.S. federal (and,
in some cases, state) income tax on investment returns for investors who are
subject to such tax. In connection with this new strategy the Fund changed its
name from Loomis Sayles Provident Fund.
After the close of business on September 12, 2003, Tax-Managed Equity Fund was
reorganized into the Loomis Sayles Funds II Trust, pursuant to a plan of
reorganization approved by its Trustees on June 12, 2003.
The Mid Cap Growth Fund, Small Company Growth Fund and Tax-Managed Equity Fund
each offer Institutional Class shares.
Most expenses of the Trusts can be directly attributed to a Fund. Expenses
which can not be directly attributed are apportioned based on the relative net
assets of each of the Funds in the Trusts.
2. SIGNIFICANT ACCOUNTING POLICIES. | The following is a summary of significant
accounting policies consistently followed by each Fund in preparation of its
financial statements. The Funds' financial statements are prepared in
accordance with accounting principles generally accepted in the United States
of America which require the use of management estimates that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. SECURITY VALUATION. | Equity securities for which market quotations are
readily available are valued at market value, as reported by pricing services
recommended by the pricing committee and approved by the Board of Trustees.
Such pricing services generally use the security's last sale price on the
exchange or market where primarily traded or, if there is no reported sale
during the day, the closing bid price. Effective April 14, 2003, securities
traded on the NASDAQ National Market are valued at the NASDAQ Official Closing
Price ("NOCP"), or if lacking an NOCP, at the most recent bid quotation on the
NASDAQ National Market. Debt securities for which market quotations are readily
available are generally valued at market value, as reported by pricing services
recommended by the investment adviser's pricing committee and approved by the
Board of Trustees. Such pricing services generally use the most recent bid
prices in the principal market in which such securities are normally traded.
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. Short-term
obligations with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available (including restricted securities, if any)
are valued at fair value as determined in good faith by the Fund's investment
adviser using consistently applied procedures under the general supervision of
the Board of Trustees. If events occurring after the close of the principal
market in which securities are traded (but before the close of regular trading
on the New York Stock Exchange) are believed to materially affect the value of
those securities, such securities are valued at their fair value taking such
events into account.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. | Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified. Interest income is
20
recorded on an accrual basis, and interest income is increased by the accretion
of discount and decreased by the amortization of premium. Investment income is
recorded net of foreign taxes withheld when applicable. In determining net gain
or loss on securities sold, the cost of securities has been determined on an
identified cost basis.
C. FOREIGN CURRENCY TRANSLATION. | The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates
from fluctuations arising from changes in market prices of the investment
securities. Such changes are included with the net realized and unrealized gain
or loss on investments.
Net realized foreign exchange gains or losses arise from: sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities, other than investment securities, at the end of the
fiscal periods, resulting from changes in exchange rates.
Certain funds use foreign currency exchange contracts to facilitate
transactions in foreign-denominated investments. Losses may arise from changes
in the value of the foreign currency or if the counterparties do not perform
under the contracts' terms.
Each Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than
those of comparable U.S. companies and the U.S. government.
D. FORWARD FOREIGN CURRENCY CONTRACTS. | Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell generally are
used to hedge the Fund's investments against currency fluctuation. Also, a
contract to buy or sell can offset a previous contract. These contracts involve
market risk in excess of the unrealized gain or loss reflected in the Fund's
Statement of Assets and Liabilities. The U.S. dollar value of the currencies
the Fund has committed to buy or sell (if any) is shown in the portfolio
composition under the caption "Forward Currency Contracts Outstanding." These
amounts represent the aggregate exposure to each currency the Fund has acquired
or hedged through currency contracts outstanding at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At September 30, 2003, there were no open forward currency
contracts.
E. FEDERAL AND FOREIGN INCOME TAXES. | The Trusts treat each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities, such
taxes are accrued as applicable.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. | Dividends and distributions
are recorded on ex-dividend date. The timing and characterization of certain
income and capital gains distributions are determined in accordance with
federal tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due
to differing treatments for book and tax purposes of items such as
distributions from real estate investment trusts, net operating losses,
non-deductible expenses and foreign currency transactions. Permanent book and
tax basis differences relating to shareholder distributions will result in
reclassifications to capital accounts. Distributions from net investment income
and short-term capital gains are considered to be ordinary income for tax
purposes.
G. REPURCHASE AGREEMENTS. | Each Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase
21
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2003
price, including interest. The Fund's adviser is responsible for determining
that the value of the collateral is at all times at least equal to 102% of the
repurchase price, including interest. Repurchase agreements could involve
certain risks in the event of default or insolvency of the counterparty
including possible delays or restrictions upon a Fund's ability to dispose of
the underlying securities.
3. PURCHASES AND SALES OF SECURITIES. | For the year ended September 30, 2003,
purchases and sales of securities (excluding short-term investments) were as
follows:
PURCHASES SALES
FUND ----------- -----------
Mid Cap Growth Fund $15,672,064 $15,595,417
Small Company Growth Fund 58,563,273* 89,061,975
Tax-Managed Equity Fund 14,695,915 21,630,535
* Purchases of securities included $4,868,716 of subscriptions-in-kind received
from the Energen Corporation Retirement Income Plan.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES. | Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the
investment adviser to each of the Funds. Separate management agreements for
each Fund in effect during the year ended September 30, 2003 provides for fees
at certain annual percentage rates of each Fund's average daily net assets
which are indicated below. Loomis Sayles has contractually agreed, until
February 1, 2004, to reduce its advisory fees and/or bear other expenses, to
the extent necessary to limit the total operating expenses of each Fund, to the
following annual percentage rate of the Fund's average daily net assets:
EXPENSE LIMIT AS A PERCENTAGE OF
MANAGEMENT FEES AVERAGE DAILY NET ASSETS
FUND --------------- --------------------------------
Mid Cap Growth Fund 0.75% 0.90%
Small Company Growth Fund 0.75% 0.90%
Tax-Managed Equity Fund 0.50% 0.65%
For the year ended September 30, 2003, the management fees and waivers for each
Fund were as follows:
GROSS WAIVER OF NET PERCENTAGE OF AVERAGE
MANAGEMENT MANAGEMENT MANAGEMENT DAILY NET ASSETS
FEE FEE FEE GROSS NET
FUND ---------- ---------- ---------- ----- -----
Mid Cap Growth Fund $ 48,742 $ 48,742 $ -- 0.75% 0.00%
Small Company Growth Fund 201,228 110,200 91,028 0.75% 0.34%
Tax-Managed Equity Fund 43,721 43,721 -- 0.50% 0.00%
For the year ended September 30, 2003, and in addition to the waiver of
management fees, Loomis Sayles reimbursed $52,196 of expenses to Mid Cap Growth
Fund and $58,198 of expenses to Tax-Managed Equity Fund.
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trusts. Loomis Sayles' general partner is indirectly owned by CDC IXIS
Asset Management North America, L.P. ("CDC IXIS North America"), whose general
partner is indirectly owned by CDC IXIS Asset Management SA ("CDC IXIS"). CDC
IXIS is part of the Caisse des Depots et Consignations Group.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. | Effective July 1, 2003, Loomis
Sayles assigned its administrative services agreement with the Trusts to CDC
IXIS Asset Management Services, Inc. ("CIS"), a wholly owned subsidiary of CDC
IXIS North America. Pursuant to the agreement between each of the Loomis Sayles
Funds Trusts and CIS, each Fund pays CIS a monthly administrative fee at the
annual rate of 0.035% of each Fund's average daily net assets. Prior to July 1,
2003, each Fund paid Loomis Sayles a monthly administrative fee at an annual
rate of 0.035% of the Fund's average daily net assets.
For the year ended September 30, 2003, fees paid to Loomis Sayles and CIS for
accounting and administrative expense were as follows:
FUND AMOUNT
Mid Cap Growth Fund $2,285
Small Company Growth Fund 9,201
Tax-Managed Equity Fund 3,018
22
Effective October 1, 2003, each Fund pays CIS its pro rata portion of the
accounting and administrative fee allocated based on the combined assets of the
CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts for these services
representing the higher amount based on the following calculations:
(1)Percentage of Average Daily Net Assets
FIRST NEXT OVER
$5 BILLION $5 BILLION $10 BILLION
---------- ---------- -----------
0.0675% 0.0625% 0.0500%
or
(2)Each Fund's pro rata portion, based on the combined assets of
the Loomis Sayles Funds Trusts and the CDC Nvest Funds Trusts,
of the annual aggregate minimum fee of $5 million.
C. TRANSFER AGENT FEES. | Effective February 3, 2003, CIS serves as transfer
and shareholder servicing agent for each Fund and has subcontracted with Boston
Financial Data Services ("BFDS") to serve as sub-transfer agent. Prior to
February 3, 2003, BFDS served as transfer and shareholder servicing agent for
the Funds.
Effective September 15, 2003 through December 31, 2003, Mid Cap Growth Fund and
Small Company Growth Fund pay service fees monthly representing the higher
amount based on the following calculations:
(1)Annual aggregate fee determined by applying an annual fee rate
of 0.01% to the eligible average daily net assets. Eligible
assets are the average daily net assets of all Institutional*
Funds as defined below.
Each Fund is subject to a monthly minimum fee of $1,000.
or
(2)An allocated portion, based on eligible assets for the period
September 15, 2003 through December 31, 2003 of an aggregate
minimum fee of $29,315.
* Institutional Funds consist of Mid Cap Growth Fund, Small
Company Growth Fund, Loomis Sayles Benchmark Core Bond Fund,
Loomis Sayles Core Plus Fixed Income Fund, Loomis Sayles Fixed
Income Fund, Loomis Sayles Institutional High Income Fund, Loomis
Sayles Intermediate Duration Fixed Income Fund, Loomis Sayles
Investment Grade Fixed Income Fund and Loomis Sayles U.S.
Government Securities Fund.
Effective September 15, 2003 through December 31, 2003 Tax-Managed Equity Fund
pays service fees monthly representing the higher amount based on the following
calculations:
(1)Annual aggregate fee determined by applying an annual fee rate
of 0.026% to the eligible average daily net assets. Eligible
assets are the average daily net assets of all accounts in
no-load Retail* Funds and load** Funds Class Y.
Each Fund is subject to a monthly minimum fee of $1,250.
or
(2)An allocated portion, based on eligible assets for the period
September 15, 2003 through December 31, 2003 of an aggregate
minimum fee of $190,547.
* No load retail funds consist of Tax-Managed Equity Fund, Loomis
Sayles Aggressive Growth Fund, Loomis Sayles Bond Fund, Loomis
Sayles Global Bond Fund, Loomis Sayles Small Cap Growth Fund,
Loomis Sayles Small Cap Value Fund, Loomis Sayles Value Fund and
Loomis Sayles Worldwide Fund.
** Load Funds, Class Y consist of Loomis Sayles Growth Fund,
Loomis Sayles International Equity Fund, Loomis Sayles Investment
Grade Bond Fund, Loomis Sayles Research Fund, Loomis Sayles
Limited Term U.S. Government Fund, Loomis Sayles Strategic Income
Fund and all Funds with Class Y in the CDC Nvest Funds Trusts.
CIS is also reimbursed by the Funds for out of pocket expenses.
For the period from February 3, 2003 to September 14, 2003, each Fund of Loomis
Sayles Funds I paid to CIS the greater of: $12,000 or 0.01% of average daily
net assets, subject to the minimum aggregate fee calculated as follows: If the
aggregate fees for Loomis Sayles Funds I payable did not equal or exceed $8,334
in any single month, the Funds would pay the minimum aggregate fee of $8,334
($100,000 annually). Any such amount required to achieve the minimum aggregate
fee would be allocated to all Loomis Sayles Funds I Funds based on the
percentage of net assets each Fund represents of the total assets.
23
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2003
For the period, February 3, 2003 through September 30, 2003, amounts paid to
CIS as compensation for its services as transfer agent were as follows:
AMOUNT
-------
Mid Cap Growth Fund $10,877
Small Company Growth Fund 8,473
Tax-Managed Equity Fund 8,161
D. DISTRIBUTION AGREEMENTS. | Effective July 1, 2003 each Trust entered into a
distribution agreement with CDC IXIS Asset Management Distributors, L.P. ("CDC
IXIS Distributors"), a wholly owned subsidiary of CDC IXIS North America.
Pursuant to these agreements, CDC IXIS Distributors serves as principal
underwriter of the various funds of the Trusts, except Loomis Sayles Managed
Bond Fund and Loomis Sayles Investment Grade Bond Fund-Class J. Prior to July
1, 2003 Loomis Sayles Distributors, L.P. acted as distributor of the Funds. Mid
Cap Growth Fund, Small Company Growth Fund and Tax-Managed Equity Fund paid no
fees under these agreements.
E. TRUSTEES FEES AND EXPENSES. | The Trusts pay no compensation to their
officers or to their Trustees who are interested Trustees of Loomis Sayles, CDC
IXIS Distributors, CDC IXIS North America, CIS or their affiliates. Each
independent Trustee, who is also an independent Trustee of the CDC Nvest Funds
Trusts, receives, in the aggregate, a retainer fee at the annual rate of
$45,000 and meeting attendance fees of $4,500 for each meeting of the Board of
Trustees that he or she attended. Each committee member receives an additional
retainer fee at the annual rate of $7,000. Furthermore, each committee chairman
receives an additional retainer fee (beyond the $7,000 fee) at the annual rate
of $5,000. The retainer fees assume four Board or Committee meetings per year.
Each Trustee is compensated $4,500 for each meeting and $1,750 per Committee
meeting that he or she attends in excess of four meetings per year. Trustees
who are not a Trustee of the CDC Nvest Funds Trusts are compensated at the rate
of $5,000 for each meeting of the Board of Trustees that he or she attends and
receives an annual retainer of $20,000. Trustee fees are allocated to the
various CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts based on a
formula that takes into account, among other factors, the relative net assets
of each fund. Trustees are reimbursed for travel expenses in connection with
attendance at meetings.
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in a
designated Fund or certain other funds of the CDC Nvest Funds Trusts or Loomis
Sayles Funds Trusts on the normal payment date. Deferred amounts remain in the
Funds until distributed in accordance with the Plan.
Prior to May 7, 2003, the Trusts paid each independent trustee a $20,000 annual
retainer fee and a $5,000 fee per in person meeting. Prior to November 6, 2002,
each independent Trustee was compensated by Loomis Sayles Funds I at the rate
of $10,000 per year and was reimbursed for travel expenses in connection with
attendance at meetings.
5. LINE OF CREDIT. | The Funds together with certain other funds of the Loomis
Sayles Funds Trusts participate in a $25 million unsecured line of credit.
Borrowings under the line of credit will be made solely to temporarily finance
the repurchase of capital shares. Interest is charged to each participating
Fund based on its borrowings at a rate per annum equal to the Federal Funds
rate plus 0.50%.
In addition, a commitment fee of 0.09% per annum, payable at the end of each
calendar quarter, is accrued and apportioned among the participating Funds
based on their average daily unused portion of the line of credit. During the
year ended September 30, 2003, the Funds had no borrowings under the agreement.
6. SHAREHOLDERS. | At September 30, 2003, CDC IXIS North America owned 251,066
shares, equating to 77% of Tax-Managed Equity Fund shares outstanding.
7. CAPITAL SHARES. | Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
MID CAP GROWTH FUND
YEAR ENDED SEPTEMBER 30, 2003 YEAR ENDED SEPTEMBER 30, 2002
----------------------------- --------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
Issued from the sale of shares 5,899 $32,706 23 $150
Issued in connection with the reinvestment of
distributions -- -- -- --
Redeemed -- -- -- --
----- -------------- -------------- --------------
Net change 5,899 $32,706 23 $150
----- -------------- -------------- --------------
24
SMALL COMPANY GROWTH FUND
YEAR ENDED SEPTEMBER 30, 2003 YEAR ENDED SEPTEMBER 30, 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Issued from the sale of shares 662,784 $ 4,750,079 1,656,321 $ 15,505,325
Issues from subscriptions-in-kind* 839,609 4,995,673 -- --
Issued in connection with the reinvestment of
distributions -- -- -- --
Redeemed (6,892,544) (40,388,459) (1,969,988) (16,432,491)
---------- -------------- ------------ --------------
Net change (5,390,151) $(30,642,707) (313,667) $ (927,166)
---------- -------------- ------------ --------------
*Issued in exchange for portfolio securities distributed in-kind by Energen Corporation Retirement
Income Plan to shareholders thereof and contributed to the Fund in- kind by such shareholders on
April 15, 2003
TAX-MANAGED EQUITY FUND
YEAR ENDED SEPTEMBER 30, 2003 YEAR ENDED SEPTEMBER 30, 2002
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ -------- -----------
Issued from the sale of shares 324,896 $ 2,267,000 145,579 $ 1,000,150
Issued in connection with the
reinvestment of distributions 11,807 82,181 41,454 335,784
Redeemed (2,580,065) (17,813,627) (123,915) (1,000,000)
---------- -------------- ------------ --------------
Net change (2,243,362) $(15,464,446) 63,118 $ 335,934
---------- -------------- ------------ --------------
8. ADDITIONAL TAX INFORMATION. | The tax character of distributions paid to
shareholders during the year ended September 30, 2003 were as follows:
MID CAP SMALL COMPANY TAX-MANAGED
GROWTH GROWTH EQUITY
FUND FUND FUND
----------- ------------- -----------
Distributions paid from:
Ordinary income $ -- $ -- $ 82,181
Long-term capital gains -- -- --
----------- ---------------- --------------
Total taxable distributions $ -- $ -- $ 82,181
----------- ---------------- --------------
As of September 30, 2003, the components of distributable earnings on a tax basis were as follows:
MID CAP SMALL COMPANY TAX-MANAGED
GROWTH GROWTH EQUITY
FUND FUND FUND
----------- ------------- -----------
Undistributed net income $ -- $ -- $ 61,998
Undistributed long-term capital gains -- -- --
----------- ---------------- --------------
Total undistributed earnings -- -- 61,998
Capital loss carryforward (6,153,377) (82,709,199) (4,053,853)
Deferred net capital losses (post October) -- -- (112,317)
Unrealized Appreciation (Depreciation) 1,434,132 4,539,868 174,974
----------- ---------------- --------------
Total accumulated earnings (losses) $(4,719,245) $(78,169,331) $(3,929,198)
Capital loss carryforward years of expiration 2010-2011 2009-2011 2009-2011
25
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
Loomis Sayles Funds I and Loomis Sayles Funds II:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Mid Cap Growth Fund and Loomis Sayles Small Company Growth Fund, each a series
of Loomis Sayles Funds I, and Loomis Sayles Tax-Managed Equity Fund (formerly
Loomis Sayles Provident Fund), a series of Loomis Sayles Funds II
(collectively, the "Funds") at September 30, 2003, and the results of each of
their operations, the changes in each of their net assets and the financial
highlights for each of the periods indicated therein, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2003
26
2003 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
CORPORATE DIVIDENDS RECEIVED DEDUCTION | For the fiscal year ended September
30, 2003, a percentage of dividends distributed by the Funds listed below
qualify for the dividends received deduction for corporate shareholders. These
percentages are as follows:
FUND QUALIFYING PERCENTAGE
Tax-Managed Equity Fund 51.38%
27
ADDITIONAL INFORMATION
SHAREHOLDER MEETING (UNAUDITED). | At the special meeting of shareholders held
on May 14, 2003, shareholders of Loomis Sayles Funds I (formerly, Loomis Sayles
Investment Trust) voted for the following proposal:
1. ELECTION OF TRUSTEES
FOR WITHHELD*
- ------------------------------------------------
(01) Joseph Alaimo 28,024,125 4,471,942
(02) Graham T. Allison, Jr. 28,012,936 4,483,131
(03) Edward A. Benjamin 28,012,936 4,483,131
(04) Robert J. Blanding 28,024,125 4,471,942
(05) Daniel M. Cain 28,012,936 4,483,131
(06) Paul G. Chenault 28,024,125 4,471,942
(07) Kenneth J. Cowan 28,012,936 4,483,131
(08) Richard Darman 28,012,936 4,483,131
(09) John T. Hailer 28,012,936 4,483,131
(10) Sandra O. Moose 28,012,936 4,483,131
(11) John A. Shane 28,012,936 4,483,131
(12) Peter S. Voss 28,024,125 4,471,942
(13) Pendleton P. White 28,012,936 4,483,131
*Includes Broker Non-Votes (if any).
SHAREHOLDER MEETING (UNAUDITED). | At the special meeting of shareholders held
on June 10, 2003, shareholders of Loomis Sayles Funds II (formerly, Loomis
Sayles Funds) voted for the following proposal:
1. ELECTION OF TRUSTEES
FOR WITHHELD*
- -------------------------------------------------
(01) Joseph Alaimo 134,298,551 8,672,577
(02) Graham T. Allison, Jr. 134,590,902 8,380,227
(03) Edward A. Benjamin 134,546,833 8,424,296
(04) Robert J. Blanding 134,572,705 8,398,423
(05) Daniel M. Cain 134,593,263 8,377,866
(06) Paul G. Chenault 134,352,172 8,618,957
(07) Kenneth J. Cowan 134,524,153 8,446,976
(08) Richard Darman 134,552,047 8,419,081
(09) John T. Hailer 134,613,039 8,358,089
(10) Sandra O. Moose 134,612,285 8,358,843
(11) John A. Shane 134,332,421 8,638,708
(12) Peter S. Voss 134,622,604 8,348,525
(13) Pendleton P. White 134,300,598 8,670,530
*Includes Broker Non-Votes (if any).
28
The Funds 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.
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Joseph Alaimo+ (73) Trustee; Chairman, Wayne Hummer Trust 26;
399 Boylston Street Company and Wayne Hummer
Boston, MA 02116 4 years for Loomis Investment Trust None
Sayles Funds
Trusts
Graham T. Allison, Jr. (63) Trustee (2); Douglas Dillon Professor and Director 44;
399 Boylston Street for the Belfer Center of Science and
Boston, MA 02116 19 years for CDC International Affairs, John F. Kennedy Director, Taubman Centers, Inc.;
Nvest Funds School of Government, Harvard Board Member, USEC Inc.
Trusts; Less than 1 University
year for Loomis
Sayles Funds
Trusts
Edward A. Benjamin (65) Trustee (1); Retired; formerly, Partner, Ropes & Gray 44;
399 Boylston Street (law firm) until 1999
Boston, MA 02116 Less than 1 year Director, Coal, Energy
Investments & Management;
Director, Precision Optics
Corporation
(optics manufacturer)
Daniel M. Cain (58) Trustee, President and CEO, Cain Brothers & 44;
452 Fifth Avenue Chairman (1); Company, Incorporated (investment
New York, NY 10018 banking) Trustee, Universal Health Realty
7 years for CDC Income Trust;
Nvest Funds Director, PASC; Director,
Trusts; Less than 1 Sheridan Healthcorp
year for Loomis
Sayles Funds
Trusts
Paul G. Chenault (70) Trustee (2); Retired; formerly; Trustee, First Variable 44;
5852 Pebble Beach Way Life (variable life insurance)
San Luis Obispo, CA 93401 Less than 1 year Director, Mailco Office
for CDC Nvest Products, Inc.
Funds Trusts; 4
years for Loomis
Sayles Funds
Trusts
Kenneth J. Cowan (71) Trustee Retired 44;
399 Boylston Street Chairman (2);
Boston, MA 02116 None
28 years for CDC
Nvest Funds
Trusts; Less than 1
year for Loomis
Sayles Funds
Trusts
29
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------
Richard Darman (60) Trustee (2); Partner, The Carlyle Group 44;
399 Boylston Street 7 years for CDC (investments); Chairman of the Board of
Boston, MA 02116 Nvest Funds Directors of AES Corporation Director and Chairman, AES
Trusts; Less than 1 (international power company); formerly, Corporation
year for Loomis Professor, John F. Kennedy School of
Sayles Funds Government, Harvard University
Trusts
Sandra O. Moose (61) Trustee (1); Senior Vice President and Director, The 44;
One Exchange Place Boston Consulting Group, Inc.
Boston, MA 02109 21 years for CDC (management Director, Verizon
Nvest Funds consulting) Communications;
Trusts; Less than 1 Director, Rohm and Haas
year for Loomis Company
Sayles Funds
Trusts
John A. Shane (70) Trustee (2); President, Palmer Service Corporation 44;
200 Unicorn Park Drive (venture capital organization)
Woburn, MA 01801 21 years for CDC Director, Gensym Corporation;
Nvest Funds Director, Overland Storage,
Trusts; Less than 1 Inc.; Director, ABT Associates
year for Loomis Inc.
Sayles Funds
Trusts
Pendleton P. White (72) Trustee (2); Retired 44;
6 Breckenridge Lane
Savannah, GA 31411 22 years for CDC None
Nvest Funds
Trusts; Less than 1
year for Loomis
Sayles Funds
Trusts
INTERESTED TRUSTEES
Robert J. Blanding/3/ (56) President and President, Chairman, Director and Chief 44;
555 California Street Chief Executive Executive Officer, Loomis, Sayles &
San Francisco, CA 94104 Officer, Loomis Company, L.P. None
Sayles Funds I;
Chief Executive
Officer, Loomis
Sayles Funds II;
Trustee
Less than 1 year
30
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------
John T. Hailer/4 /(42) President and President and Chief Executive Officer, 44;
399 Boylston Street Chief Executive CDC IXIS Asset Management
Boston, MA 02116 Officer, CDC Distributors, L.P.; formerly, Senior Vice None
Nvest Funds President, Fidelity Investments
Trusts;
President,
Loomis Sayles
Funds II;
Executive Vice
President,
Loomis Sayles
Funds I;
Trustee;
3 years for
CDC Nvest
Funds Trusts;
Less than 1 year
for Loomis
Sayles Funds
Trusts
Peter S. Voss/5/ (57) Chairman of Director, President and Chief Executive 44;
399 Boylston Street the Board, Officer, CDC IXIS Asset Management
Boston, MA 02116 Trustee; North America, L.P. Trustee of Harris Associates
Investment Trust/6/
11 years for
CDC Nvest
Funds Trusts;
Less than 1 year
for Loomis
Sayles Funds
Trusts
OFFICERS
Nicholas H. Palmerino (38) Treasurer; Senior Vice President, CDC IXIS Asset Not Applicable;
399 Boylston Street Management Services, Inc.; Senior Vice
Boston, MA 02116 Not Applicable President, CDC IXIS Asset Management None
Advisers, L.P.; formerly, Vice President,
Loomis, Sayles & Company, L.P.
John E. Pelletier (39) Secretary; Senior Vice President, General Counsel, Not Applicable;
399 Boylston Street Secretary and Clerk, CDC IXIS
Boston, MA 02116 Not Applicable Distribution Corporation; Senior Vice None
President, General Counsel, Secretary and
Clerk, CDC IXIS Asset Management
Distributors, L.P.; Senior Vice President,
General Counsel, Secretary and Clerk,
CDC IXIS Asset Management Advisers,
L.P.; Executive Vice President, General
Counsel, Secretary, Clerk and Director,
CDC IXIS Asset Management Services, Inc.
(1)Member of Audit Committee.
(2)Member of Contract Review and Governance Committee.
+Mr. Alaimo is a Trustee of Loomis Sayles Funds I and Loomis Sayles Funds II,
but not of the CDC Nvest Funds Trusts.
1Except as noted, each Trustee and Officer holds the same positions with CDC
Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC
Nvest Companies Trust I, AEW Real Estate Income Fund, CDC Nvest Cash
Management Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest
Funds Trusts") and Loomis Sayles Funds I and Loomis Sayles Funds II (the
"Loomis Sayles Funds Trusts" and together with the CDC Nvest Funds Trusts, the
"Trusts").
2All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. Messrs. Alaimo and White are expected to
retire by December 31, 2003.
31
3Mr. 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 & Company,
L.P. ("Loomis Sayles").
4Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution
Corporation; President and Chief Executive Officer of CDC IXIS Asset
Management Distributors, L.P. ("CDC IXIS Distributors").
5Mr. Voss is an "interested person" of the Trusts because he holds the
following positions with entities that may be considered to be affiliated
persons of the Trusts: Director of CDC IXIS Asset Management Services, Inc.;
Director of CDC IXIS Asset Management Distribution Corporation; Director and
Chairman of CDC IXIS Asset Management Associates, Inc.; Director of AEW
Capital Management, Inc; Director of Harris Associates, Inc; Director of
Loomis, Sayles & Company, Inc.; Member of Reich & Tang Asset Management, LLC;
Director of Westpeak Global Advisors, Inc.; Director of Vaughan, Nelson,
Scarborough & McCullough, Inc.; Director, Hansberger Group, Inc.; Member,
Board of Managers, Harris Alternatives L.L.C.; and Director and Member of
Executive Board of CDC IXIS Asset Management.
6As of September 30, 2003, Harris Associates Investment Trust has seven series
that were overseen by its Board of Trustees.
32
[LOGO OF CDC NVEST FUNDS](SM)
CDC IXIS Asset Management Distributors
INCOME FUNDS
ANNUAL REPORT
September 30, 2003
[LOGO OF LOOMIS SAYLES FUNDS]
Loomis Sayles Core Plus Bond Fund
(formerly CDC Nvest Bond Income Fund)
Loomis Sayles Government Securities Fund
(formerly CDC Nvest Government Securities Fund)
Loomis Sayles High Income Fund
(formerly CDC Nvest High Income Fund)
Loomis Sayles Limited Term U.S. Government Fund
(formerly CDC Nvest Limited Term U.S. Government Fund)
Loomis Sayles Strategic Income Fund
(formerly CDC Nvest Strategic Income Fund)
TABLE OF CONTENTS
Management Discussion and Performance .........Page 1
Fund Risks ...................................Page 11
Schedule of Investments ......................Page 12
Financial Statements .........................Page 27
LOOMIS SAYLES CORE PLUS BOND FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
OBJECTIVE:
Seeks a high level of current income consistent with what the fund considers
reasonable risk. It invests primarily in corporate and U.S. government bonds
STRATEGY:
Invests primarily in U.S. corporate and U.S. government bonds
FUND INCEPTION:
November 7, 1973
MANAGERS:
Peter W. Palfrey
Richard G. Raczkowski
Loomis, Sayles & Company, L.P.
SYMBOLS:
Class A NEFRX
Class B NERBX
Class C NECRX
Class Y NERYX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 11.63
Class B 11.62
Class C 11.63
Class Y 11.69
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Encouraged by indications that the economic recovery was gaining traction in
2003, investors in search of yield reduced holdings in cash and government
bonds, favoring higher-yielding alternatives, including corporate bonds. This
shift drove up prices in many corporate sectors, including high-yield issues,
boosting results for Loomis Sayles Core Plus Bond Fund.
For the nine-month period ended September 30, 2003*, the total return on the net
asset value of Class A shares was 6.39%, including $0.36 per share in reinvested
dividends. The fund's benchmark, Lehman Brothers Aggregate Bond Index, returned
3.78% for the same period, and the average return on the funds in Morningstar's
Intermediate Bond Fund category was 4.40%. The fund's 30-day SEC yield at the
end of September, 2003 was 3.30%.
Corporate bonds and non-U.S. issues drove positive results
As the economy began to rebound, investors grew more willing to tolerate risk in
exchange for greater potential returns. Against that background, our decision to
shift the portfolio toward higher-yielding corporate bonds was key to the fund's
ability to outperform its benchmark for the period. An improving economy
typically allows lower-rated companies to strengthen their balance sheets and
invest in their businesses. The fund also benefited from its position in
non-U.S.-dollar securities, as the dollar continued to slide against other
currencies. As of September 30, 2003, the fund held 10% of its assets in high
yield issues and 6% in non-U.S. dollar securities.
Telecom, utilities and supermarket bonds performed well
The continuing rally in corporate bonds benefited telecommunications issues.
Bonds issued by long-distance provider LCI International were the fund's
strongest performers, followed by ATT Wireless. Improved investor sentiment and
debt reduction has led to a sharp recovery in telecom bond prices. Fund holdings
among electric utilities, including NiSource and Southern California Edison,
also recovered from last year's depressed levels. Delhaize America, parent of
the Food Lion and Kash n' Karry supermarket chains, saw its bonds rise as
financial results outpaced market expectations.
Mortgage-backed securities lagged the broader market
Mortgage-backed securities posted positive returns for the period, but lagged
the broader market as individuals refinanced their mortgages to take advantage
of a four-decade low in interest rates. Higher coupon mortgage-backed
securities, in particular, did not participate as fully in the declining
interest-rate environment as other securities with better call protection.
Fund positioned for accelerating economic recovery
We think the economy will continue to recover, and that the Federal Reserve
Board is unlikely to raise interest rates for several quarters. As confidence
grows, investors should continue to favor lower-rated, higher-yielding
securities. Therefore we are carefully researching selective opportunities,
including some rated BB or B, choosing those that appear to trade below our
assessment of their potential in better economic times.
* Effective September 12, 2003, the fund changed its fiscal year end from
December 31 to September 30.
1
LOOMIS SAYLES CORE PLUS BOND FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Loomis Sayles Core Plus Bond Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index, and would
incur transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES
- --------------------------------------------------------------------------------
September 30, 1993 through September 30, 2003
[CHART APPEARS HERE]
LEHMAN LEHMAN
Maximum AGGREGATE U.S.
Month Net Asset Sales BOND CREDIT
End Value/1/ Charge/2/ INDEX/3/ INDEX/4/
- ---------- --------- ---------- --------- --------
09/30/1993 10,000 9,550 10,000 10,000
10/31/1993 10,067 9,614 10,037 10,050
11/30/1993 9,959 9,511 9,952 9,927
12/31/1993 10,037 9,585 10,006 9,985
01/31/1994 10,194 9,735 10,141 10,179
02/28/1994 9,970 9,521 9,965 9,939
03/31/1994 9,704 9,267 9,719 9,634
04/30/1994 9,603 9,171 9,642 9,541
05/31/1994 9,553 9,123 9,640 9,506
06/30/1994 9,494 9,067 9,619 9,483
07/31/1994 9,672 9,237 9,810 9,722
08/31/1994 9,724 9,286 9,822 9,733
09/30/1994 9,621 9,188 9,678 9,552
10/31/1994 9,595 9,163 9,669 9,530
11/30/1994 9,569 9,138 9,647 9,514
12/31/1994 9,618 9,185 9,714 9,593
01/31/1995 9,780 9,340 9,906 9,796
02/28/1995 10,102 9,647 10,142 10,079
03/31/1995 10,105 9,650 10,204 10,161
04/30/1995 10,304 9,840 10,347 10,332
05/31/1995 10,758 10,274 10,747 10,819
06/30/1995 10,854 10,365 10,826 10,917
07/31/1995 10,795 10,310 10,802 10,868
08/31/1995 10,987 10,493 10,932 11,044
09/30/1995 11,125 10,624 11,038 11,174
10/31/1995 11,272 10,765 11,182 11,320
11/30/1995 11,449 10,934 11,349 11,537
12/31/1995 11,615 11,093 11,509 11,727
01/31/1996 11,664 11,139 11,585 11,802
02/29/1996 11,411 10,898 11,384 11,522
03/31/1996 11,354 10,843 11,305 11,424
04/30/1996 11,259 10,752 11,241 11,329
05/31/1996 11,249 10,743 11,218 11,309
06/30/1996 11,413 10,900 11,369 11,475
07/31/1996 11,442 10,928 11,400 11,497
08/31/1996 11,442 10,927 11,381 11,462
09/30/1996 11,708 11,181 11,579 11,705
10/31/1996 12,005 11,465 11,836 12,024
11/30/1996 12,294 11,741 12,038 12,281
12/31/1996 12,151 11,604 11,927 12,112
01/31/1997 12,219 11,669 11,963 12,129
02/28/1997 12,296 11,742 11,993 12,180
03/31/1997 12,112 11,567 11,860 11,990
04/30/1997 12,245 11,694 12,037 12,172
05/31/1997 12,410 11,852 12,151 12,310
06/30/1997 12,628 12,060 12,295 12,484
07/31/1997 13,137 12,545 12,627 12,941
08/31/1997 12,913 12,332 12,519 12,750
09/30/1997 13,169 12,577 12,704 12,973
10/31/1997 13,294 12,696 12,888 13,137
11/30/1997 13,356 12,755 12,948 13,211
12/31/1997 13,494 12,886 13,078 13,351
01/31/1998 13,673 13,058 13,246 13,510
02/28/1998 13,717 13,100 13,236 13,505
03/31/1998 13,802 13,181 13,281 13,555
04/30/1998 13,865 13,241 13,351 13,641
05/31/1998 14,006 13,376 13,477 13,803
06/30/1998 14,059 13,426 13,592 13,905
07/31/1998 14,022 13,391 13,621 13,892
08/31/1998 13,883 13,258 13,842 13,957
09/30/1998 14,419 13,770 14,166 14,409
10/31/1998 14,267 13,625 14,091 14,187
11/30/1998 14,551 13,896 14,171 14,454
12/31/1998 14,573 13,918 14,214 14,496
01/31/1999 14,731 14,068 14,315 14,639
02/28/1999 14,433 13,783 14,066 14,292
03/31/1999 14,632 13,973 14,144 14,393
04/30/1999 14,748 14,084 14,188 14,435
05/31/1999 14,427 13,778 14,064 14,242
06/30/1999 14,335 13,689 14,019 14,168
07/31/1999 14,278 13,636 13,960 14,089
08/31/1999 14,221 13,581 13,952 14,055
09/30/1999 14,462 13,811 14,114 14,208
10/31/1999 14,495 13,843 14,167 14,273
11/30/1999 14,517 13,863 14,166 14,288
12/31/1999 14,524 13,870 14,097 14,212
01/31/2000 14,463 13,812 14,051 14,162
02/29/2000 14,626 13,968 14,221 14,294
03/31/2000 14,826 14,159 14,408 14,415
04/30/2000 14,553 13,898 14,367 14,289
05/31/2000 14,446 13,796 14,360 14,236
06/30/2000 14,883 14,214 14,659 14,593
07/31/2000 14,971 14,297 14,792 14,770
08/31/2000 15,164 14,481 15,007 14,962
09/30/2000 15,186 14,503 15,101 15,041
10/31/2000 15,100 14,420 15,201 15,056
11/30/2000 15,243 14,557 15,450 15,251
12/31/2000 15,597 14,896 15,736 15,547
01/31/2001 15,984 15,265 15,993 15,972
02/28/2001 16,143 15,416 16,133 16,112
03/31/2001 16,162 15,435 16,214 16,211
04/30/2001 16,071 15,348 16,146 16,153
05/31/2001 16,173 15,446 16,244 16,301
06/30/2001 16,178 15,450 16,305 16,384
07/31/2001 16,586 15,840 16,670 16,811
08/31/2001 16,771 16,016 16,861 17,037
09/30/2001 16,701 15,949 17,057 17,012
10/31/2001 17,030 16,263 17,414 17,434
11/30/2001 16,917 16,155 17,174 17,282
12/31/2001 16,728 15,975 17,065 17,164
01/31/2002 16,690 15,939 17,203 17,309
02/28/2002 16,625 15,877 17,370 17,440
03/31/2002 16,443 15,703 17,081 17,118
04/30/2002 16,598 15,851 17,412 17,356
05/31/2002 16,737 15,984 17,560 17,586
06/30/2002 16,334 15,599 17,712 17,614
07/31/2002 16,145 15,418 17,926 17,605
08/31/2002 16,512 15,769 18,228 18,061
09/30/2002 16,567 15,821 18,523 18,404
10/31/2002 16,473 15,732 18,439 18,191
11/30/2002 16,787 16,031 18,434 18,427
12/31/2002 17,203 16,429 18,815 18,970
01/31/2003 17,299 16,521 18,831 19,032
02/28/2003 17,549 16,759 19,092 19,412
03/31/2003 17,599 16,807 19,077 19,426
04/30/2003 17,863 17,059 19,234 19,786
05/31/2003 18,218 17,398 19,593 20,410
06/30/2003 18,247 17,426 19,554 20,360
07/31/2003 17,621 16,828 18,897 19,492
08/31/2003 17,790 16,990 19,022 19,644
09/30/2003 18,302 17,476 19,526 20,330
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003/9/
- --------------------------------------------------------------------------------
SINCE
9 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/8/
-------- ------ ------- -------- ------------
CLASS A (Inception 11/7/73)
Net Asset Value/1/ 6.39% 10.48% 4.88% 6.23% --
With Maximum Sales Charge/2/ 1.62 5.49 3.93 5.74 --
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 5.77 9.54 4.12 5.44 --
With CDSC/5/ 0.77 4.54 3.81 5.44 --
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 5.77 9.64 4.10 -- 6.67%
With Maximum Sales Charge
and CDSC/5/ 3.76 7.57 3.89 -- 6.54
CLASS Y (Inception 12/30/94)
Net Asset Value/1/ 6.87 11.07 5.34 -- 7.94
SINCE
CLASS C & Y
COMPARATIVE PERFORMANCE 9 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/8/
- ---------------------------- -------- ------ ------- -------- ------------
Lehman Aggregate Bond
Index/3/ 3.78% 5.41% 6.63% 6.92% 8.31%
Lehman U.S. Credit Index/4/ 7.17 10.47 7.13 7.35 8.96
Morningstar Int. Bond Fund
Average/6/ 4.40 6.22 5.58 6.02 7.34
Lipper Int. Investment Grade
Debt Avg./7/ 4.16 5.98 5.74 6.13 7.40
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Class Y shares are
available to certain institutional investors only. Other Classes of shares are
available for which fees, expenses and performance differ.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
CREDIT QUALITY
[CHART APPEARS HERE]
Aaa Aa A Baa Ba B Caa and not rated
---- --- --- ---- ---- --- -----------------
50.9% 5.5% 4.1% 22.8% 11.3% 2.3% 3.2%
Credit quality is based on bond ratings from Moody's Investors Service
EFFECTIVE MATURITY
[CHART APPEARS HERE]
1 year 1-5 years 5-10 years 10+ years
------ --------- ---------- ---------
5.1% 52.0% 30.4% 12.5%
Average Effective Maturity: 6.4 years
See page 11 for information on the possible risks associated with an investment
in this fund.
NOTES TO CHARTS
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman Brothers Aggregate Bond Index is an unmanaged index of
investment-grade bonds with one- to ten-year maturities issued by the
U.S. government, its agencies and U.S. corporations.
/4/ Lehman Brothers U.S. Credit Index is an unmanaged index that includes
all publicly issued, fixed-rate, nonconvertible, dollar-denominated,
SEC-registered, investment-grade corporate debt.
/5/ Performance for Class B shares assumes a maximum 5.00% contingent
deferred sales charge ("CDSC") applied when you sell shares. Class C
share performance assumes a 1.00% sales charge and a 1.00% CDSC applied
when you sell shares within one year of purchase.
/6/ Morningstar Intermediate Bond Fund Average is the average performance
without sales charges of funds with similar investment objectives, as
calculated by Morningstar, Inc.
/7/ Lipper Intermediate Investment Grade Debt Funds Average is the average
performance without sales charges of funds with similar investment
objectives, as calculated by Lipper Inc.
/8/ The since-inception comparative performance figures shown for each
Class of fund shares are calculated as follows: Class C from 12/31/94;
Class Y from 12/31/94.
/9/ Returns reflect the results of CDC Nvest Bond Income Fund, whose assets
and liabilities were reorganized into the fund on September 12, 2003.
2
LOOMIS SAYLES GOVERNMENT SECURITIES FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
OBJECTIVE:
Seeks a high level of current income consistent with safety of principal by
investing in U.S. government securities
STRATEGY:
Invests primarily in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities
FUND INCEPTION:
September 16, 1985
MANAGERS:
John Hyll
Clifton V. Rowe
Loomis, Sayles & Company, L.P.
SYMBOLS:
Class A NEFUX
Class B NEUBX
Class Y NEUYX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 12.09
Class B 12.10
Class Y 12.07
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Declining interest rates early in 2003 had a positive effect on U.S. government
bonds, particularly on longer-term securities, but some of these gains were lost
as rates on longer-term bonds moved higher in the third quarter.
For the nine months ended September 30, 2003*, the total return on Class A
shares of Loomis Sayles Government Securities Fund was 2.71% at net asset value,
with $0.35 in reinvested dividends. The fund's mortgage-backed holdings were
primarily responsible for its slight under performance relative to its
benchmark, Lehman Brothers Government Bond Index, which had a return of 2.80%.
The fund also trailed the average return on the funds in Morningstar's Long
Government category, which returned 3.10%. The fund's 30-day SEC yield at the
end of September was 2.80%.
High yields on mortgage-backed securities offset by prepayment risks
The fund had a greater emphasis on mortgage-backed securities than its benchmark
during the period because they offer a higher yield than government securities,
although they are regarded as riskier because they are not issued or guaranteed
by the U.S. Treasury. In the volatile environment for interest rates to date in
2003, the expected maturity or average life of mortgage securities became less
certain, which provided a negative market environment for these securities. By
the third quarter, the fund's FNMA (Federal National Mortgage Association) and
GNMA (Government National Mortgage Association) holdings were lagging the rest
of the portfolio.
Fund responded to shifts in interest rates
As 2003 began, U.S. Treasury bonds maturing in ten or more years accounted for
more than half of the fund's net assets. As the period progressed and interest
rates fell to 45-year lows, Treasuries with longer maturities rose in value,
reflecting investors' need to seek higher current income. By the third quarter,
when interest rates rose, we lengthened the portfolio's duration. Although this
increased its sensitivity to declining bond prices, it also enabled us to lock
in higher yields and prepare for a possible future decline in interest rates. In
hindsight, our timing was fortunate, as interest rates (and bond prices)
appeared to reach a plateau in September.
TIPS and UST Strip Principals were positives
While most government securities did well during the period, TIPS and UST Strip
Principals led the market. TIPS are Treasury Inflation-Protected Securities;
they are indexed to the Consumer Price Index, a primary measure of inflation.
These securities were in demand because of their potential to provide price
protection in an inflationary, rising interest-rate environment. UST Strip
Principals are issued by the U.S. Treasury. They performed well as they rolled
down a very steep yield curve, which resulted in a favorable return profile.
Late in the period, we sold our position in TIPS, as they became increasingly
expensive. However, we are still positive on TIPS and plan to build up the
fund's position in these securities again when prices become more reasonable.
Outlook is for gradually rising interest rates into 2004
As we get closer to 2004, we expect interest rates to trend gradually upward in
anticipation of Fed rate hikes. We expect the gap between long- and short-term
bond yields to remain wide and we plan to continue emphasizing mortgages and
TIPS in anticipation of stronger economic growth and attractive valuations in
both sectors.
* Effective September 12, 2003, the fund changed its fiscal year end from
December 31 to September 30.
3
LOOMIS SAYLES GOVERNMENT SECURITIES FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Loomis Sayles Government Securities Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1993 THROUGH SEPTEMBER 30, 2003
[CHART APPEARS HERE]
LEHMAN
Maximum GOVERNMENT
Month Net Asset Sales BOND
End Value/1/ Charge/2/ INDEX/3/
- ---------- --------- --------- ----------
09/30/1993 10,000 9,550 10,000
10/31/1993 10,029 9,577 10,038
11/30/1993 9,908 9,462 9,928
12/31/1993 9,911 9,465 9,966
01/31/1994 10,013 9,562 10,103
02/28/1994 9,775 9,335 9,889
03/31/1994 9,596 9,164 9,666
04/30/1994 9,523 9,094 9,590
05/31/1994 9,517 9,089 9,578
06/30/1994 9,408 8,985 9,556
07/31/1994 9,534 9,105 9,732
08/31/1994 9,537 9,108 9,733
09/30/1994 9,404 8,981 9,596
10/31/1994 9,404 8,980 9,589
11/30/1994 9,349 8,929 9,572
12/31/1994 9,372 8,950 9,630
01/31/1995 9,517 9,089 9,809
02/28/1995 9,736 9,298 10,020
03/31/1995 9,799 9,358 10,083
04/30/1995 9,900 9,454 10,215
05/31/1995 10,442 9,972 10,627
06/30/1995 10,506 10,033 10,708
07/31/1995 10,404 9,936 10,669
08/31/1995 10,516 10,043 10,794
09/30/1995 10,647 10,168 10,898
10/31/1995 10,848 10,360 11,064
11/30/1995 11,059 10,561 11,237
12/31/1995 11,249 10,743 11,396
01/31/1996 11,293 10,785 11,466
02/29/1996 11,016 10,520 11,232
03/31/1996 10,892 10,402 11,138
04/30/1996 10,807 10,321 11,067
05/31/1996 10,751 10,267 11,049
06/30/1996 10,862 10,373 11,191
07/31/1996 10,881 10,392 11,219
08/31/1996 10,812 10,325 11,194
09/30/1996 11,002 10,507 11,380
10/31/1996 11,261 10,755 11,630
11/30/1996 11,492 10,975 11,832
12/31/1996 11,337 10,827 11,712
01/31/1997 11,350 10,839 11,725
02/28/1997 11,357 10,846 11,741
03/31/1997 11,204 10,700 11,617
04/30/1997 11,342 10,832 11,784
05/31/1997 11,438 10,924 11,886
06/30/1997 11,598 11,076 12,019
07/31/1997 12,085 11,541 12,360
08/31/1997 11,813 11,281 12,238
09/30/1997 12,028 11,487 12,422
10/31/1997 12,265 11,713 12,637
11/30/1997 12,354 11,798 12,702
12/31/1997 12,507 11,944 12,835
01/31/1998 12,683 12,112 13,027
02/28/1998 12,623 12,055 12,991
03/31/1998 12,615 12,047 13,028
04/30/1998 12,653 12,084 13,087
05/31/1998 12,813 12,236 13,221
06/30/1998 13,007 12,421 13,371
07/31/1998 12,982 12,397 13,392
08/31/1998 13,381 12,779 13,741
09/30/1998 13,749 13,130 14,111
10/31/1998 13,577 12,966 14,063
11/30/1998 13,653 13,039 14,068
12/31/1998 13,635 13,021 14,099
01/31/1999 13,767 13,148 14,181
02/28/1999 13,237 12,641 13,844
03/31/1999 13,269 12,672 13,898
04/30/1999 13,312 12,713 13,930
05/31/1999 13,134 12,543 13,807
06/30/1999 12,981 12,396 13,779
07/31/1999 12,885 12,305 13,759
08/31/1999 12,789 12,213 13,759
09/30/1999 12,955 12,372 13,871
10/31/1999 12,946 12,363 13,893
11/30/1999 12,889 12,309 13,874
12/31/1999 12,759 12,185 13,784
01/31/2000 12,772 12,197 13,803
02/29/2000 12,997 12,412 14,000
03/31/2000 13,283 12,685 14,246
04/30/2000 13,175 12,582 14,206
05/31/2000 13,128 12,537 14,215
06/30/2000 13,356 12,755 14,469
07/31/2000 13,481 12,875 14,609
08/31/2000 13,718 13,100 14,825
09/30/2000 13,664 13,049 14,867
10/31/2000 13,788 13,167 15,009
11/30/2000 14,104 13,469 15,305
12/31/2000 14,404 13,756 15,610
01/31/2001 14,502 13,849 15,767
02/28/2001 14,686 14,025 15,946
03/31/2001 14,696 14,035 16,002
04/30/2001 14,484 13,832 15,839
05/31/2001 14,534 13,880 15,891
06/30/2001 14,558 13,903 15,964
07/31/2001 14,991 14,317 16,347
08/31/2001 15,158 14,476 16,550
09/30/2001 15,361 14,670 16,838
10/31/2001 15,887 15,172 17,273
11/30/2001 15,341 14,651 16,885
12/31/2001 15,114 14,434 16,738
01/31/2002 15,263 14,576 16,847
02/28/2002 15,448 14,753 17,002
03/31/2002 15,016 14,340 16,633
04/30/2002 15,430 14,736 17,029
05/31/2002 15,536 14,837 17,131
06/30/2002 15,767 15,057 17,371
07/31/2002 16,141 15,415 17,752
08/31/2002 16,597 15,850 18,104
09/30/2002 17,032 16,265 18,528
10/31/2002 16,789 16,034 18,379
11/30/2002 16,614 15,866 18,221
12/31/2002 17,132 16,361 18,663
01/31/2003 17,093 16,324 18,616
02/28/2003 17,483 16,696 18,916
03/31/2003 17,329 16,550 18,862
04/30/2003 17,411 16,628 18,950
05/31/2003 18,063 17,250 19,442
06/30/2003 17,867 17,063 19,340
07/31/2003 16,691 15,940 18,540
08/31/2003 16,892 16,132 18,644
09/30/2003 17,597 16,800 19,186
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003/8/
- --------------------------------------------------------------------------------
SINCE
9 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION
-------- ------ ------- -------- ------------
CLASS A (Inception 9/16/85)
Net Asset Value/1/ 2.71% 3.32% 5.06% 5.81% --
With Maximum Sales Charge/2/ -1.90 -1.29 4.10 5.33 --
CLASS B (Inception 9/23/93)
Net Asset Value/1/ 2.22 2.63 4.31 5.05 --
With CDSC/4/ -2.77 -2.33 3.97 5.05 --
CLASS Y (Inception 3/31/94)
Net Asset Value/1/ 2.91 3.53 5.42 -- 6.92%
SINCE
CLASS Y
COMPARATIVE PERFORMANCE 9 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/7/
- ---------------------------- -------- ------ ------- -------- ------------
Lehman Government Bond
Index/3/ 2.80% 3.55% 6.34% 6.73% 7.48%
Morningstar Long Government
Fund Avg./5/ 3.10 3.29 5.57 6.96 7.96
Lipper General Government
Funds Avg./6/ 1.53 2.23 5.13 5.66 6.38
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Class Y shares are
available to certain institutional investors only. Other Classes of shares are
available for which fees, expenses and performance differ.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO MIX
[CHART APPEARS HERE]
Treasuries Mortgage-Backed Government Agencies Short Term & Other
---------- --------------- ------------------- ------------------
83.2% 13.2% 0.8% 2.8%
EFFECTIVE MATURITY
[CHART APPEARS HERE]
1 year 1-5 years 5-10 years 10+ years
------ --------- ---------- ---------
2.0% 12.7% 17.0% 68.3%
Average Effective Maturity: 13.8 years
See page 11 for information on the possible risks associated with an investment
in this fund.
NOTES TO CHARTS
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman Brothers Government Bond Index is an unmanaged index of public
debt of the U.S. Treasury, government agencies, and their obligations.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent
deferred sales charge ("CDSC") applied when you sell shares.
/5/ Morningstar Long Government Fund Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Morningstar, Inc.
/6/ Lipper General Government Funds Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Lipper Inc.
/7/ The since-inception comparative performance figures shown for each Class
of fund shares are calculated as follows: Class Y from 3/31/94.
/8/ Returns reflect the results of CDC Nvest Government Securities Fund,
whose assets and liabilities were reorganized into the fund on September
12, 2003.
4
LOOMIS SAYLES HIGH INCOME FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
OBJECTIVE:
Seeks high current income plus the opportunity for capital appreciation to
produce a high total return
STRATEGY:
Invests primarily in lower-quality fixed-income securities
FUND INCEPTION:
February 22, 1984
MANAGERS:
Kathleen C. Gaffney
Matthew J. Eagan
Loomis, Sayles & Company, L.P.
SYMBOLS:
Class A NEFHX
Class B NEHBX
Class C NEHCX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 4.65
Class B 4.65
Class C 4.65
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
High-yield bonds in a wide range of sectors performed well during the first nine
months of 2003. Results were particularly favorable in technology and
telecommunications. Strength in overseas and emerging markets also contributed
to Loomis Sayles High Income Fund's results.
For the nine months ended September 30, 2003*, the total return on the fund's
Class A shares at net asset value was 19.48%, including $0.25 per share in
reinvested dividends. The fund's benchmark, the Lehman Brothers High Yield
Composite Index, returned 21.77% for the same period, and the average return on
the funds in Morningstar's High Yield Bond Fund category was 17.41%. At the end
of September, the fund's 30-day SEC yield was 6.98%.
Telecom and technology were strongest sectors
As business conditions improved, expectations grew that companies would soon be
upgrading and updating their equipment. The result was a vigorous rally in
technology and telecommunications issues from their depressed levels of last
year. Networks specialist Lucent Technologies, which also benefited from its
renewed ability to access capital, was a solid performer. Even debt-ridden power
companies like AES and Calpine benefited from improved fundamentals and
investors' quest for yield, which intensified interest in the sector during the
period. Emerging-market issues were also positive.
Emerging-market issues generally moved higher as low domestic interest rates and
an improving global economy made investors more willing to accept increased risk
in pursuit of higher returns. Coupled with strong economic growth, this
benefited fund holdings in Philippine Long Distance Telephone. And signs that a
new, reform-minded government was adopting more responsible fiscal measures
contributed to higher prices for Brazil's government bonds, which accounted for
2% of the fund's total net assets at the end of September 2003.
Individual holdings hurt performance
Consumers who kept their wallets shut during most of the period depressed sales
for retailer Dillard's, whose credit quality also came into question. Price
competition hurt Trico Marine, which supplies marine drilling services.
Fund positioned for an improving economy
Stimulative fiscal and monetary measures that are already in place - tax cuts
and low interest rates - have the potential to benefit consumers and businesses
alike in the months ahead. Lower withholding rates have given individuals more
spending power, and other recent tax changes provide incentives for corporate
investment that may finally lead to renewed hiring. We have been increasing
exposure to carefully selected bonds rated BB or lower in the belief that
lower-rated companies will do well as the economy gathers momentum. We also
continue to emphasize emerging-market issues and those denominated in euros,
reflecting our belief that companies in Europe and elsewhere will enjoy
increased export opportunities as a result of the weaker U.S. dollar.
* Effective September 12, 2003, the fund changed its fiscal year end from
December 31 to September 30.
5
LOOMIS SAYLES HIGH INCOME FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Loomis Sayles High Income Fund's performance to a benchmark
index provide you with a general sense of how the fund performed. To put this
information in context, it may be helpful to understand the differences between
the two. The fund's total return for the period shown below appears with and
without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES/9/
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1993 THROUGH SEPTEMBER 30, 2003
[CHART APPEARS HERE]
LEHMAN
Maximum HIGH YIELD
Month Net Asset Sales COMPOSITE
End Value/1/ Charge/2/ INDEX/3/
- ---------- --------- --------- ----------
9/30/1993 10,000 9,550 10,000
10/31/1993 10,227 9,766 10,203
11/30/1993 10,316 9,852 10,252
12/31/1993 10,447 9,977 10,379
1/31/1994 10,686 10,205 10,604
2/28/1994 10,707 10,225 10,577
3/31/1994 10,433 9,964 10,177
4/30/1994 10,263 9,801 10,107
5/31/1994 10,306 9,842 10,113
6/30/1994 10,349 9,883 10,144
7/31/1994 10,284 9,821 10,230
8/31/1994 10,240 9,779 10,302
9/30/1994 10,262 9,800 10,303
10/31/1994 10,246 9,785 10,327
11/30/1994 10,084 9,630 10,197
12/31/1994 10,110 9,655 10,272
1/31/1995 10,183 9,725 10,412
2/28/1995 10,448 9,977 10,769
3/31/1995 10,515 10,042 10,884
4/30/1995 10,723 10,241 11,161
5/31/1995 10,921 10,430 11,474
6/30/1995 10,908 10,417 11,547
7/31/1995 11,095 10,596 11,693
8/31/1995 11,103 10,603 11,730
9/30/1995 11,160 10,657 11,874
10/31/1995 11,204 10,700 11,947
11/30/1995 11,225 10,720 12,052
12/31/1995 11,301 10,792 12,242
1/31/1996 11,507 10,990 12,457
2/29/1996 11,587 11,065 12,467
3/31/1996 11,564 11,044 12,459
4/30/1996 11,703 11,176 12,486
5/31/1996 11,829 11,297 12,561
6/30/1996 11,904 11,369 12,665
7/31/1996 12,019 11,479 12,724
8/31/1996 12,162 11,615 12,862
9/30/1996 12,536 11,972 13,172
10/31/1996 12,509 11,946 13,273
11/30/1996 12,767 12,193 13,537
12/31/1996 12,982 12,398 13,632
1/31/1997 12,992 12,407 13,756
2/28/1997 13,447 12,842 13,986
3/31/1997 13,269 12,672 13,784
4/30/1997 13,343 12,743 13,919
5/31/1997 13,787 13,166 14,227
6/30/1997 13,876 13,251 14,425
7/31/1997 14,254 13,613 14,821
8/31/1997 14,345 13,699 14,787
9/30/1997 14,773 14,108 15,080
10/31/1997 14,644 13,985 15,094
11/30/1997 14,840 14,173 15,238
12/31/1997 14,978 14,304 15,371
1/31/1998 15,203 14,519 15,648
2/28/1998 15,182 14,499 15,740
3/31/1998 15,339 14,649 15,887
4/30/1998 15,422 14,728 15,950
5/31/1998 15,397 14,704 16,006
6/30/1998 15,450 14,755 16,063
7/31/1998 15,427 14,733 16,155
8/31/1998 14,356 13,710 15,263
9/30/1998 14,221 13,581 15,332
10/31/1998 13,922 13,296 15,018
11/30/1998 14,923 14,251 15,641
12/31/1998 14,724 14,061 15,658
1/31/1999 15,055 14,378 15,891
2/28/1999 15,150 14,469 15,797
3/31/1999 15,395 14,702 15,948
4/30/1999 15,727 15,019 16,257
5/31/1999 15,341 14,651 16,037
6/30/1999 15,298 14,609 16,003
7/31/1999 15,237 14,551 16,067
8/31/1999 14,999 14,324 15,890
9/30/1999 14,902 14,231 15,775
10/31/1999 15,036 14,359 15,670
11/30/1999 15,135 14,454 15,853
12/31/1999 15,313 14,623 16,033
1/31/2000 15,143 14,462 15,964
2/29/2000 15,212 14,527 15,995
3/31/2000 14,752 14,088 15,658
4/30/2000 14,743 14,079 15,683
5/31/2000 14,332 13,687 15,523
6/30/2000 14,766 14,102 15,839
7/31/2000 14,854 14,185 15,960
8/31/2000 14,795 14,129 16,069
9/30/2000 14,489 13,837 15,928
10/31/2000 13,766 13,147 15,418
11/30/2000 12,622 12,054 14,808
12/31/2000 12,849 12,271 15,094
1/31/2001 14,341 13,696 16,224
2/28/2001 14,269 13,627 16,440
3/31/2001 13,540 12,931 16,053
4/30/2001 13,124 12,533 15,853
5/31/2001 13,159 12,566 16,139
6/30/2001 12,404 11,846 15,686
7/31/2001 12,648 12,079 15,917
8/31/2001 12,551 11,986 16,105
9/30/2001 11,409 10,896 15,022
10/31/2001 11,283 10,775 15,394
11/30/2001 11,649 11,125 15,955
12/31/2001 11,481 10,964 15,890
1/31/2002 11,552 11,032 16,001
2/28/2002 11,200 10,696 15,778
3/31/2002 11,502 10,984 16,157
4/30/2002 11,408 10,894 16,416
5/31/2002 11,241 10,735 16,325
6/30/2002 10,437 9,968 15,121
7/31/2002 9,734 9,296 14,460
8/31/2002 10,075 9,622 14,873
9/30/2002 9,701 9,264 14,678
10/31/2002 9,696 9,260 14,549
11/30/2002 10,341 9,876 15,451
12/31/2002 10,463 9,993 15,667
1/31/2003 10,686 10,205 16,188
2/28/2003 10,835 10,347 16,388
3/31/2003 11,114 10,614 16,859
4/30/2003 11,757 11,228 17,860
5/31/2003 11,962 11,424 18,044
6/30/2003 12,220 11,670 18,563
7/31/2003 11,978 11,439 18,359
8/31/2003 12,105 11,560 18,570
9/30/2003 12,500 11,942 19,078
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003/9/
- --------------------------------------------------------------------------------
SINCE
9 MONTHS 1 YEAR 5 YEARS 10 YEARS/7/ INCEPTION/7/
-------- ------ ------- ----------- ------------
CLASS A (Inception 2/22/84)
Net Asset Value/1/ 19.48% 28.88% -2.55% 2.26% --
With Maximum Sales Charge/2/ 14.22 23.19 -3.45 1.79 --
CLASS B (Inception 9/20/93)
Net Asset Value/1/ 18.82 27.96 -3.27 1.52 --
With CDSC/4/ 13.82 22.96 -3.52 1.52 --
CLASS C (Inception 3/2/98)
Net Asset Value/1/ 18.82 27.93 -3.27 -- -4.18%
With Maximum Sales Charge
and CDSC/4/ 16.68 25.64 -3.47 -- -4.35
SINCE
CLASS C
COMPARATIVE PERFORMANCE 9 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/8/
- --------------------------- -------- ------ ------- -------- ------------
Lehman High Yield Composite
Index/3/ 21.77% 29.98% 4.47% 6.67% 3.38%
Morningstar High Yield Bond
Fund Average/5/ 17.41 24.63 2.81 4.86 1.07
Lipper High Current Yield
Funds Average/6/ 17.62 24.96 2.83 4.78 1.05
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Other Classes of shares
are available for which fees, expenses and performance differ.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
CREDIT QUALITY
[CHART APPEARS HERE]
B Ba Baa Caa and lower
---- ---- --- -------------
34.9% 40.9% 3.3% 20.9%
Credit quality is based on bond ratings from Moody's Investors Service
EFFECTIVE MATURITY
[CHART APPEARS HERE]
1 year 1-5 years 5-10 years 10+ years
------ --------- ---------- ---------
5.1% 28.9% 35.9% 30.1%
Average Effective Maturity: 9.6 years
See page 11 for information on the possible risks associated with an investment
in this fund.
NOTES TO CHARTS
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman Brothers High Yield Composite Index is a market-weighted,
unmanaged index of fixed-rate, non-investment grade debt.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent
deferred sales charge ("CDSC") applied when you sell shares. Class C
share performance assumes a 1.00% sales charge and a 1.00% CDSC applied
when you sell shares within one year of purchase.
/5/ Morningstar High Yield Bond Fund Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Morningstar, Inc.
/6/ Lipper High Current Yield Funds Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Lipper Inc.
/7/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/8/ The since-inception comparative performance figures shown for Class C
shares are calculated from 3/31/98.
/9/ Returns reflect results of CDC Nvest High Income Fund, whose assets and
liabilities were reorganized into the fund on September 12, 2003.
6
LOOMIS SAYLES LIMITED TERM U.S. GOVERNMENT FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
OBJECTIVE:
Seeks a high current return consistent with preservation of capital
STRATEGY:
Invests primarily in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities
FUND INCEPTION:
January 3, 1989
MANAGERS:
John Hyll
Clifton V. Rowe
Loomis, Sayles & Company, L.P.
SYMBOLS:
Class A NEFLX
Class B NELBX
Class C NECLX
Class Y NELYX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 11.51
Class B 11.49
Class C 11.50
Class Y 11.55
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
The nine months ended September 30, 2003* have been a study in contrasts, as
interest rates first fell, sending bond prices up, and then rose, triggering a
price decline. Loomis Sayles Limited Term U.S. Government Fund began the period
in a defensive posture, which limited its participation in the price rally early
in the year.
Based on the net asset value of Class A shares, the fund's total return was
1.23% for the nine-month period, including $0.36 in reinvested dividends. The
fund's benchmark, Lehman Brothers Intermediate Government Bond Index, ended the
period with a return of 2.49%, while the average return on the funds in
Morningstar's Short Government category was 1.31%. The fund's emphasis in
mortgage-backed securities caused it to lag its benchmark because the
yield-advantage of mortgages was offset by their poor price performance during
the period.
As of September 30, 2003, the fund's 30-day SEC yield on Class A shares was
1.81%.
Interest rates reversed course on prospects for improving economy
Early in 2003, interest rates reached 45-year lows, as the sluggish economy and
prospects for war in the Middle East caused the Federal Reserve Board to remain
stimulative. As the year unfolded, economic news began to improve and interest
rates rose, sending bond prices down, although the effects were most noticeable
on the longer end of the maturity spectrum. As prospects for continued
improvement made investors more confident for the future, they became
increasingly willing to leave the perceived "safe harbor" of U.S. government
securities, seeking higher yields. Their focus shifted to longer-term bonds and
the corporate market.
In addition, as signs of economic strength emerged, many homeowners rushed to
refinance mortgages in anticipation of higher rates to come. The fund's
relatively short maturity structure helped it avoid most of the downward
pressure on prices of longer bonds later in the period, but our overall emphasis
on mortgage-backed securities held the fund back. These include FNMAs (Federal
National Mortgage Association, "Fannie Maes") and GNMAs (Government National
Mortgage Association, "Ginnie Maes"). FNMAs, which accounted for a substantial
portion of the fund's assets during the period, offer higher yields than
Treasury Securities but involve greater risk because they are not issued or
guaranteed by the U.S. government. We began to trim the fund's holdings in these
securities as they weakened in the third quarter, although we continue to
overweight mortgages because of their potential for higher returns over the long
term.
Outlook is for gradually rising interest rates into 2004
If investors become concerned that the Fed will tighten monetary policy again,
we believe yields are likely to edge upward as 2004 approaches. The Treasury's
need to finance an increasingly large debt might also keep upward pressure on
interest rates.
In this environment, we believe income will continue to be the key to
performance, even as bond prices gradually decline. Accordingly, we continue to
emphasize the mortgage sector because of its substantial yield advantage versus
Treasury securities. Treasuries remain our least favorite sector of the bond
market, given their low yields and limited opportunity for price gains.
* Effective September 12, 2003, the fund changed its fiscal year end from
December 31 to September 30.
7
LOOMIS SAYLES LIMITED TERM U.S. GOVERNMENT FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Loomis Sayles Limited Term U.S. Government Fund's
performance to a benchmark index provide you with a general sense of how the
fund performed. To put this information in context, it may be helpful to
understand the differences between the two. The fund's total return for the
period shown below appears with and without sales charges and includes fund
expenses and management fees. A securities index measures the performance of a
theoretical portfolio. Unlike a fund, the index is unmanaged and does not have
expenses that affect the results. It is not possible to invest directly in an
index. In addition, few investors could purchase all of the securities necessary
to match the index and would incur transaction costs and other expenses even if
they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1993 THROUGH SEPTEMBER 30, 2003
[CHART APPEARS HERE]
LEHMAN
Maximum INTERMEDIATE
Month Net Asset Sales GOV'T BOND
End Value/1/ Charge/2/ INDEX/3/
- ---------- --------- --------- ------------
9/30/1993 10,000 9,700 10,000
10/31/1993 10,022 9,721 10,024
11/30/1993 9,967 9,668 9,974
12/31/1993 9,982 9,683 10,015
1/31/1994 10,070 9,768 10,114
2/28/1994 9,958 9,659 9,975
3/31/1994 9,821 9,526 9,830
4/30/1994 9,764 9,471 9,766
5/31/1994 9,764 9,471 9,773
6/30/1994 9,756 9,463 9,775
7/31/1994 9,838 9,543 9,904
8/31/1994 9,863 9,567 9,932
9/30/1994 9,788 9,494 9,850
10/31/1994 9,788 9,494 9,852
11/30/1994 9,754 9,462 9,809
12/31/1994 9,761 9,468 9,841
1/31/1995 9,891 9,595 10,001
2/28/1995 10,032 9,731 10,193
3/31/1995 10,060 9,758 10,250
4/30/1995 10,159 9,854 10,368
5/31/1995 10,443 10,130 10,661
6/30/1995 10,489 10,174 10,729
7/31/1995 10,483 10,169 10,734
8/31/1995 10,575 10,258 10,822
9/30/1995 10,641 10,322 10,895
10/31/1995 10,788 10,464 11,014
11/30/1995 10,918 10,590 11,149
12/31/1995 11,032 10,701 11,259
1/31/1996 11,092 10,760 11,354
2/29/1996 10,960 10,631 11,234
3/31/1996 10,890 10,564 11,182
4/30/1996 10,862 10,537 11,150
5/31/1996 10,825 10,500 11,144
6/30/1996 10,910 10,583 11,257
7/31/1996 10,933 10,605 11,292
8/31/1996 10,929 10,601 11,305
9/30/1996 11,067 10,735 11,451
10/31/1996 11,245 10,908 11,639
11/30/1996 11,386 11,044 11,779
12/31/1996 11,294 10,955 11,716
1/31/1997 11,342 11,002 11,761
2/28/1997 11,357 11,016 11,780
3/31/1997 11,297 10,958 11,713
4/30/1997 11,397 11,055 11,845
5/31/1997 11,467 11,123 11,937
6/30/1997 11,577 11,230 12,040
7/31/1997 11,768 11,415 12,262
8/31/1997 11,748 11,396 12,215
9/30/1997 11,870 11,514 12,347
10/31/1997 12,004 11,643 12,491
11/30/1997 12,024 11,663 12,519
12/31/1997 12,115 11,752 12,621
1/31/1998 12,291 11,922 12,785
2/28/1998 12,263 11,895 12,772
3/31/1998 12,242 11,875 12,812
4/30/1998 12,290 11,921 12,873
5/31/1998 12,369 11,998 12,961
6/30/1998 12,460 12,086 13,048
7/31/1998 12,476 12,102 13,099
8/31/1998 12,675 12,295 13,346
9/30/1998 13,037 12,646 13,658
10/31/1998 12,911 12,524 13,680
11/30/1998 12,872 12,486 13,639
12/31/1998 12,898 12,511 13,692
1/31/1999 12,967 12,578 13,753
2/28/1999 12,819 12,434 13,564
3/31/1999 12,879 12,492 13,654
4/30/1999 12,916 12,529 13,691
5/31/1999 12,820 12,435 13,607
6/30/1999 12,737 12,354 13,627
7/31/1999 12,675 12,295 13,629
8/31/1999 12,671 12,291 13,648
9/30/1999 12,815 12,431 13,765
10/31/1999 12,839 12,454 13,792
11/30/1999 12,852 12,466 13,802
12/31/1999 12,811 12,427 13,758
1/31/2000 12,756 12,374 13,712
2/29/2000 12,869 12,483 13,826
3/31/2000 13,028 12,638 13,983
4/30/2000 12,987 12,597 13,978
5/31/2000 12,993 12,603 14,015
6/30/2000 13,178 12,783 14,238
7/31/2000 13,244 12,847 14,332
8/31/2000 13,383 12,982 14,493
9/30/2000 13,487 13,082 14,620
10/31/2000 13,535 13,129 14,720
11/30/2000 13,719 13,308 14,936
12/31/2000 13,880 13,463 15,199
1/31/2001 14,056 13,634 15,402
2/28/2001 14,161 13,736 15,543
3/31/2001 14,250 13,823 15,656
4/30/2001 14,222 13,795 15,606
5/31/2001 14,293 13,864 15,671
6/30/2001 14,303 13,874 15,721
7/31/2001 14,570 14,133 16,014
8/31/2001 14,666 14,226 16,156
9/30/2001 14,896 14,449 16,501
10/31/2001 15,119 14,666 16,759
11/30/2001 14,923 14,475 16,559
12/31/2001 14,832 14,387 16,479
1/31/2002 14,911 14,464 16,550
2/28/2002 15,060 14,608 16,687
3/31/2002 14,843 14,398 16,435
4/30/2002 15,115 14,661 16,743
5/31/2002 15,217 14,760 16,859
6/30/2002 15,370 14,909 17,070
7/31/2002 15,590 15,123 17,392
8/31/2002 15,744 15,271 17,591
9/30/2002 15,886 15,409 17,893
10/31/2002 15,920 15,442 17,881
11/30/2002 15,847 15,371 17,739
12/31/2002 16,044 15,563 18,067
1/31/2003 16,036 15,555 18,027
2/28/2003 16,175 15,690 18,231
3/31/2003 16,165 15,680 18,234
4/30/2003 16,192 15,707 18,286
5/31/2003 16,291 15,803 18,573
6/30/2003 16,262 15,774 18,542
7/31/2003 15,924 15,446 18,092
8/31/2003 15,977 15,497 18,125
9/30/2003 16,241 15,758 18,518
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003/8/
- --------------------------------------------------------------------------------
SINCE
9 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION
-------- ------ ------- -------- ------------
CLASS A (Inception 1/3/89)
Net Asset Value/1/ 1.23% 2.25% 4.49% 4.97% --
With Maximum Sales Charge/2/ -1.78 -0.79 3.86 4.65 --
CLASS B (Inception 9/27/93)
Net Asset Value/1/ 0.74 1.59 3.82 4.27 --
With CDSC/4/ -4.16 -3.31 3.49 4.27 --
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 0.74 1.58 3.82 -- 5.20%
With Maximum Sales Charge
and CDSC/4/ -1.25 -0.41 3.61 -- 5.08
CLASS Y (Inception 3/31/94)
Net Asset Value/1/ 1.49 2.58 4.93 -- 5.85
SINCE SINCE
CLASS C CLASS Y
COMPARATIVE PERFORMANCE 9 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/7/ INCEPTION/7/
- ------------------------- -------- ------ ------- -------- ------------ ------------
Lehman Int. Gov't. Bond
Index/3/ 2.49 3.49% 6.28% 6.36% 7.49% 6.89%
Morningstar Short Gov't.
Fund Avg./5/ 1.31 2.17 5.03 5.25 6.11 5.64
Lipper Short Int.
U.S.Gov't. Funds Avg./6/ 1.58 2.51 5.30 5.52 6.47 5.92
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Class Y shares are
available to certain institutional investors only. Other Classes of shares are
available for which fees, expenses and performance differ.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
PORTFOLIO MIX
[CHART APPEARS HERE]
Mortgage-backed Treasuries Government Agencies Supranational Asset Back Securities Short Term and Other
- --------------- ---------- ------------------- ------------- --------------------- --------------------
64.8% 16.0% 13.0% 3.1% 2.5% 0.6%
EFFECTIVE MATURITY
[CHART APPEARS HERE]
1 year 1-5 years 5-10 years 10+ years
------ --------- ---------- ---------
7.0% 30.7% 9.7% 52.6%
Average Effective Maturity: 12.5 years
See page 11 for information on the possible risks associated with an investment
in this fund.
NOTES TO CHARTS
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 3.00%.
/3/ Lehman Brothers Intermediate Government Bond Index is an unmanaged index
of bonds issued by the U.S. government and its agencies with maturities
between one and ten years.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent
deferred sales charge ("CDSC") applied when you sell shares. Class C
share performance assumes a 1.00% sales charge and a 1.00% CDSC applied
when you sell shares within one year of purchase.
/5/ Morningstar Short Government Fund Average is the average performance
without sales charge of funds with similar investment objectives as
calculated by Morningstar, Inc.
/6/ Lipper Short Intermediate U.S. Government Funds Average is the average
performance without sales charge of funds with similar investment
objectives as calculated by Lipper Inc.
/7/ The since-inception comparative performance figures shown for each Class
of fund shares are calculated as follows: Class C from 12/31/94; Class Y
from 3/31/94.
/8/ Returns reflect results of CDC Nvest Limited Term U.S. Government Fund,
whose assets and liabilities were reorganized into the fund on September
12, 2003.
8
LOOMIS SAYLES STRATEGIC INCOME FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
OBJECTIVE:
Seeks high current income, with a secondary objective of capital growth
STRATEGY:
Invests primarily in income-producing securities in the U.S. and around the
world
FUND INCEPTION:
May 1, 1995
MANAGERS:
Daniel J. Fuss
Kathleen C. Gaffney
Loomis, Sayles & Company, L.P.
SYMBOLS:
Class A NEFZX
Class B NEZBX
Class C NECZX
Class Y NEZYX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 12.57
Class B 12.59
Class C 12.58
Class Y 12.58
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
High-yielding corporate bonds helped Loomis Sayles Strategic Income Fund provide
a total return of 23.70% for the nine months ended September 30, 2003*, based on
the net asset value of Class A shares and $0.65 in reinvested dividends. By
contrast, the total return on the fund's benchmark, Lehman Brothers Aggregate
Bond Index, was 3.78% for the period. The benchmark does not have the investment
flexibility this fund has in pursuit of superior returns. The fund's emphasis on
high-yield and emerging market issues, while adding to risks, also enabled it to
provide substantially better results than the funds in Morningstar's
Multi-Sector Bond Fund category, which averaged 11.07% for the period. The
fund's 30-day SEC yield at the end of September was 5.60%.
Corporate bonds and convertible securities led performance
Prices of corporate bonds across all rating categories rose, led by high-yield
issues. With the economy apparently gaining momentum, default rates down sharply
and low yields from higher-quality bonds, investors directed large cash into
lower-rated issues, driving prices higher. Holdings among convertible securities
- - issues that may be converted into a company's common stock under specified
conditions - also rose broadly, as economic optimism caused stock prices to
rally as well.
Foreign government bonds and currency fluctuations also contributed
Improving international economic conditions and the weak U.S. dollar helped
boost the value of fund holdings in Norway, Canada and South Africa. Sovereign
credits (bonds issued by foreign governments) also rose, led by emerging markets
in South America. Brazil, one of the portfolio's largest sovereign commitments,
provided excellent results. A new government in Brazil has implemented more
responsible fiscal policies and made progress in combating high inflation.
Telecom and technology rebounded
Telecommunications companies rebounded from the depressed levels reached in
2002. As is often the case coming out of a recession, lower-rated issues were
the best performers. COLT Telecom, a leading European provider, benefited from
improved business conditions. In the United States, Qwest's sale of its Yellow
Pages business and other assets eased concerns over its financial stability.
Earnings among technology companies beat analysts' expectations and many of them
recorded revenue growth - a trend not seen for some time.
In a positive overall environment, negatives were limited to specific issues
A few issues in the portfolio did not keep pace because of company-specific
issues. For example, the fund's weaker holdings included independent power
generator Calpine, as volatile gas prices and the company's efforts to execute
its financial plan held the company back. Price competition hurt Trico Marine,
which provides offshore services for oil and gas drillers. However, the
liquidity in the market supported many distressed issues, and the overall tone
was positive during the period.
Strategy reflects positive expectations
We believe the U.S. economy will continue to expand. Therefore, we will maintain
the fund's strong emphasis on high-yield bonds and convertible issues. We also
expect the U.S. dollar to remain weak versus other major currencies, so we will
continue our strategy of international diversification in an effort to increase
the fund's total return.
* Effective September 12, 2003, the fund changed its fiscal year end from
December 31 to September 30.
9
LOOMIS SAYLES STRATEGIC INCOME FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Loomis Sayles Strategic Income Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees.
Securities indexes measure the performance of a theoretical portfolio. Unlike a
fund, indexes are unmanaged and do not have expenses that affect the results. It
is not possible to invest directly in an index. In addition, few investors could
purchase all of the securities necessary to match the index and would incur
transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES
- --------------------------------------------------------------------------------
MAY 1, 1995 THROUGH SEPTEMBER 30, 2003
[CHART APPEARS HERE]
LEHMAN LEHMAN
Maximum AGGREGATE UNIVERSAL
Month Net Asset Sales BOND BOND
End Value/1/ Charge/2/ INDEX/3/ INDEX/4/
- ---------- --------- --------- --------- ---------
05/01/1995 10,000 9,550 10,000 10,000
05/31/1995 10,014 9,563 10,000 10,000
06/30/1995 10,017 9,566 10,073 10,073
07/31/1995 10,096 9,642 10,051 10,058
08/31/1995 10,192 9,733 10,172 10,176
09/30/1995 10,410 9,942 10,271 10,280
10/31/1995 10,355 9,889 10,405 10,407
11/30/1995 10,647 10,168 10,561 10,564
12/31/1995 11,038 10,541 10,709 10,724
01/31/1996 11,302 10,793 10,780 10,817
02/29/1996 10,995 10,500 10,593 10,630
03/31/1996 11,073 10,575 10,519 10,564
04/30/1996 11,057 10,559 10,460 10,521
05/31/1996 11,232 10,727 10,438 10,506
06/30/1996 11,383 10,871 10,579 10,647
07/31/1996 11,360 10,849 10,608 10,677
08/31/1996 11,569 11,048 10,590 10,674
09/30/1996 11,974 11,435 10,774 10,869
10/31/1996 12,316 11,761 11,013 11,095
11/30/1996 12,816 12,239 11,202 11,292
12/31/1996 12,638 12,069 11,098 11,201
01/31/1997 12,674 12,104 11,132 11,249
02/28/1997 12,875 12,295 11,159 11,289
03/31/1997 12,735 12,162 11,036 11,157
04/30/1997 12,816 12,239 11,201 11,326
05/31/1997 13,091 12,502 11,307 11,446
06/30/1997 13,388 12,785 11,441 11,585
07/31/1997 13,990 13,361 11,749 11,902
08/31/1997 13,629 13,016 11,649 11,804
09/30/1997 14,110 13,475 11,821 11,986
10/31/1997 13,814 13,193 11,992 12,100
11/30/1997 13,889 13,264 12,048 12,166
12/31/1997 13,818 13,196 12,169 12,296
01/31/1998 14,043 13,411 12,325 12,450
02/28/1998 14,300 13,657 12,316 12,460
03/31/1998 14,607 13,949 12,358 12,517
04/30/1998 14,611 13,953 12,423 12,581
05/31/1998 14,372 13,726 12,541 12,672
06/30/1998 14,143 13,507 12,647 12,755
07/31/1998 13,966 13,338 12,674 12,786
08/31/1998 12,252 11,700 12,880 12,785
09/30/1998 12,648 12,079 13,182 13,088
10/31/1998 12,785 12,209 13,112 13,034
11/30/1998 13,642 13,028 13,186 13,164
12/31/1998 13,579 12,968 13,226 13,194
01/31/1999 13,814 13,192 13,320 13,282
02/28/1999 13,617 13,004 13,088 13,071
03/31/1999 14,336 13,691 13,160 13,171
04/30/1999 15,255 14,569 13,202 13,249
05/31/1999 14,782 14,117 13,086 13,115
06/30/1999 14,825 14,158 13,045 13,092
07/31/1999 14,532 13,879 12,989 13,039
08/31/1999 14,351 13,705 12,983 13,024
09/30/1999 14,443 13,793 13,133 13,165
10/31/1999 14,564 13,909 13,182 13,220
11/30/1999 14,828 14,160 13,181 13,242
12/31/1999 15,231 14,546 13,117 13,216
01/31/2000 15,090 14,411 13,074 13,172
02/29/2000 15,684 14,978 13,232 13,339
03/31/2000 15,843 15,130 13,407 13,495
04/30/2000 15,390 14,697 13,368 13,452
05/31/2000 14,893 14,223 13,362 13,428
06/30/2000 15,461 14,765 13,640 13,717
07/31/2000 15,597 14,895 13,764 13,850
08/31/2000 15,940 15,223 13,964 14,052
09/30/2000 15,519 14,820 14,051 14,123
10/31/2000 14,887 14,217 14,144 14,180
11/30/2000 14,810 14,143 14,376 14,371
12/31/2000 15,335 14,645 14,642 14,646
01/31/2001 15,822 15,110 14,882 14,933
02/28/2001 15,798 15,087 15,011 15,058
03/31/2001 15,201 14,517 15,087 15,109
04/30/2001 14,953 14,280 15,024 15,042
05/31/2001 15,288 14,600 15,115 15,150
06/30/2001 15,246 14,560 15,172 15,193
07/31/2001 15,258 14,571 15,511 15,492
08/31/2001 15,595 14,893 15,689 15,685
09/30/2001 14,821 14,154 15,872 15,798
10/31/2001 15,170 14,487 16,204 16,116
11/30/2001 15,385 14,693 15,980 15,927
12/31/2001 15,314 14,625 15,879 15,832
01/31/2002 15,488 14,791 16,007 15,965
02/28/2002 15,674 14,968 16,162 16,114
03/31/2002 15,854 15,141 15,894 15,881
04/30/2002 16,237 15,507 16,202 16,184
05/31/2002 16,581 15,835 16,339 16,306
06/30/2002 16,317 15,583 16,481 16,365
07/31/2002 15,931 15,214 16,680 16,504
08/31/2002 16,376 15,639 16,961 16,808
09/30/2002 16,155 15,428 17,236 17,049
10/31/2002 16,476 15,735 17,157 16,990
11/30/2002 17,093 16,324 17,153 17,036
12/31/2002 17,683 16,888 17,507 17,389
01/31/2003 18,181 17,362 17,522 17,436
02/28/2003 18,672 17,832 17,765 17,684
03/31/2003 18,852 18,004 17,751 17,701
04/30/2003 19,934 19,037 17,897 17,910
05/31/2003 20,931 19,989 18,231 18,252
06/30/2003 21,196 20,242 18,195 18,248
07/31/2003 20,618 19,690 17,583 17,661
08/31/2003 20,855 19,916 17,700 17,787
09/30/2003 21,874 20,890 18,168 18,262
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003/10/
- --------------------------------------------------------------------------------
SINCE
9 MONTHS 1 YEAR/8/ 5 YEARS/8/ INCEPTION/8/
-------- --------- ---------- ------------
CLASS A (Inception 5/1/95)
Net Asset Value/1/ 23.70% 35.41% 11.58% 9.74%
With Maximum Sales Charge/2/ 18.08 29.29 10.56 9.14
CLASS B (Inception 5/1/95)
Net Asset Value/1/ 23.01 34.47 10.75 8.91
With CDSC/5/ 18.01 29.47 10.48 8.91
CLASS C (Inception 5/1/95)
Net Asset Value/1/ 23.04 34.51 10.76 8.89
With Maximum Sales Charge
and CDSC/5/ 20.79 32.17 10.53 8.75
CLASS Y (Inception 12/1/99)
Net Asset Value/1/ 23.98 35.92 -- 11.05
SINCE
CLASS A, SINCE
B AND C CLASS Y
COMPARATIVE PERFORMANCE 9 MONTHS 1 YEAR 5 YEARS INCEPTION/9/ INCEPTION/9/
- -------------------------- -------- ------- ------- ------------ ------------
Lehman Aggregate Bond
Index/3/ 3.78% 5.41% 6.63% 7.43% 9.08%
Lehman Universal Bond
Index/4/ 5.02 7.12 6.89 7.49 9.01
Morningstar Multi-Sector
Bond Fund Avg./6/ 11.07 16.27 5.83 6.57 6.20
Lipper Multi-Sector Income
Funds Avg./7/ 11.87 17.36 5.55 6.55 6.21
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. Class Y shares are
available to certain institutional investors only. Other Classes of shares are
available for which fees, expenses and performance differ.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
CREDIT QUALITY
[CHART APPEARS HERE]
A Aa Aaa B Ba Baa Ca and Caa Not Rated
--- --- ---- ---- ---- ---- ---------- ---------
1.9% 6.9% 15.7% 24.3% 12.9% 10.8% 11.4% 16.1%
Credit quality is based on bond ratings from Moody's Investors Service
EFFECTIVE MATURITY
[CHART APPEARS HERE]
1 year 1-5 years 5-10 years 10+ years
------ --------- ---------- ---------
7.0% 30.7% 9.7% 52.6%
Average Effective Maturity: 12.5 years
See page 11 for information on the possible risks associated with an investment
in this fund.
NOTES TO CHARTS
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman Brothers Aggregate Bond Index is an unmanaged index of
investment-grade bonds with one- to ten-year maturities issued by the
U.S. government, its agencies and U.S. corporations.
/4/ Lehman Brothers Universal Bond Index is an unmanaged index representing
a blend of the Lehman Aggregate, High Yield and Emerging Market Indexes.
/5/ Performance for Class B shares assumes a maximum 5.00% contingent
deferred sales charge ("CDSC") applied when you sell shares. Class C
share performance assumes a 1.00% sales charge and a 1.00% CDSC applied
when you sell shares within one year of purchase.
/6/ Morningstar Multi-Sector Bond Fund Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Morningstar, Inc.
/7/ Lipper Multi-Sector Income Funds Average is the average performance
without sales charges of funds with similar investment objectives, as
calculated by Lipper Inc.
/8/ The adviser waived certain fees and expenses of each class of share
except Class Y during the periods indicated, without which performance
would have been lower.
/9/ The since-inception comparative performance figures shown for each Class
of fund shares are calculated as follows: Class A, B and C from 5/31/95;
Class Y from 12/31/99.
/10/ Returns reflect results of CDC Nvest Strategic Income Fund, whose assets
and liabilities were reorganized into the fund on September 12, 2003.
10
FUND RISKS
The views expressed in this report reflect those of the portfolio managers as of
the dates indicated. The managers' views are subject to change at any time
without notice based on changes in market or other conditions. References to
specific securities or industries should not be regarded as investment advice.
Because these funds are actively managed, there is no assurance that they will
continue to invest in the securities or industries mentioned.
Any mutual fund investment involves risk. The following notes describe some of
the risks of the CDC Nvest Funds discussed in this report. These risks may
affect the value of your investment. See the funds' prospectus for details.
THE FUNDS
Loomis Sayles Core Plus Bond Fund invests primarily in quality U.S. corporate
and government bonds. Other securities that may be in the portfolio from time to
time include foreign and emerging market securities and mortgage-related
securities.
Loomis Sayles Government Securities Fund invests primarily in U.S. government
securities. It may also invest a portion of assets in mortgage-related
securities.
Loomis Sayles High Income Fund invests primarily in lower-quality bonds. It may
also invest a portion of assets in foreign and emerging-market securities or
U.S. government securities.
Loomis Sayles Limited Term U.S. Government Fund invests primarily in securities
issued or guaranteed by the U.S. government, it's agencies or instrumentalities.
It may also invest a portion of assets in foreign bonds and mortgage-related
securities.
Loomis Sayles Strategic Income Fund may invest in a wide variety of securities,
with a focus on U.S. and foreign corporate bonds and convertible securities. The
fund may also invest in emerging-market securities and lower-quality bonds.
THE RISKS
Lower-quality bonds offer higher yields than high-quality bonds in return for
more risks. These risks include a greater risk of default than higher-quality
issues and greater risk of loss of principal.
Mortgage securities are subject to prepayment risks; when mortgages underlying
the security are prepaid or refinanced, the fund's income stream may change.
U.S. government and Treasury securities are guaranteed if held to maturity, but
mutual funds that invest in these securities are not guaranteed. The value of
fund shares will fluctuate and you may have a gain or a loss when you sell your
shares.
U.S. government agency securities issued by Fannie Mae or Freddie Mac are not
guaranteed by the U.S. government.
Corporate bonds are backed by the financial strength of the issuing company.
Economic conditions and other factors may affect the company's credit quality
and ability to meet its debt obligations.
Foreign and emerging-market securities have special risks, including risks
resulting from political unrest, currency fluctuations and different regulatory
requirements or accounting standards. Emerging markets may be more subject to
these risks than developed markets.
Changes in interest rates can affect the value of fund shares. The value of
fixed-income securities generally goes down when interest rates rise and goes up
when rates decline.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
11
LOOMIS SAYLES CORE PLUS BOND FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
BONDS AND NOTES -- 95.4% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE -- 1.5%
$ 1,400,000 Northrop Grumman Corp.
7.125%, 2/15/2011 ............................. $ 1,636,604
2,905,000 Raytheon Co.
6.150%, 11/01/2008 ............................ 3,223,940
-------------
4,860,544
-------------
ASSET BACKED SECURITIES -- 2.4%
2,000,000 American Express Credit Account Master Trust
1.690%, 1/15/2009 ............................. 1,972,631
3,675,000 Citibank Credit Card Issuance Trust
2.700%, 1/15/2008 ............................. 3,732,217
1,696,458 Connecticut RRB Special Purpose Trust
5.360%, 3/30/2007 ............................. 1,754,394
298,308 GMAC Mortgage Corp. Loan Trust
5.290%, 6/25/2027 ............................. 298,107
-------------
7,757,349
-------------
AUTOMOTIVE -- 1.9%
1,785,000 Ford Motor Co.
7.450%, 7/16/2031 ............................. 1,646,191
4,325,000 General Motors Corp.
8.375%, 7/15/2033 ............................. 4,522,211
-------------
6,168,402
-------------
BANKING -- 3.2%
2,035,000 Bank of America Corp.
5.875%, 2/15/2009 ............................. 2,264,973
2,975,000 J.P. Morgan Chase & Co.
5.750%, 1/02/2013 (c) ......................... 3,177,452
2,200,000 State Street Institutional Capital A, 144A
7.940%, 12/30/2026 ............................ 2,565,939
2,125,000 Wells Fargo & Co.
3.500%, 4/04/2008 ............................. 2,157,088
-------------
10,165,452
-------------
BROKERAGE -- 2.4%
2,115,000 Goldman Sachs Group, Inc.
6.600%, 1/15/2012 ............................. 2,393,761
850,000 Goldman Sachs Group, Inc.
7.350%, 10/01/2009 ............................ 1,000,863
3,815,000 Lehman Brothers Holdings, Inc.
7.000%, 2/01/2008 ............................. 4,360,690
-------------
7,755,314
-------------
BUILDING MATERIALS -- 0.3%
695,000 American Standard Cos., Inc.
7.375%, 4/15/2005 ............................. 734,963
100,000 American Standard Cos., Inc.
7.375%, 2/01/2008 ............................. 109,250
-------------
844,213
-------------
CHEMICALS -- 1.2%
2,300,000 Dow Chemical Co. (The)
5.750%, 11/15/2009 (c) ........................ 2,461,545
1,455,000 IMC Global, Inc.
10.875%, 6/01/2008 ............................ 1,513,200
-------------
3,974,745
-------------
CONSTRUCTION MACHINERY -- 0.5%
1,600,000 Case New Holland, Inc., 144A
9.250%, 8/01/2011 ............................. 1,720,000
-------------
ELECTRIC -- 2.5%
1,739,000 BVPS II Funding Corp.
8.680%, 6/01/2017 ............................. 2,003,311
450,000 IPALCO Enterprises, Inc.
0/8.375%, 11/14/2008 (d) ...................... 488,250
2,500,000 NiSource Finance Corp.
7.875%, 11/15/2010 ............................ 2,980,483
1,450,000 Southern California Edison Co.
7.625%, 1/15/2010 ............................. 1,555,125
830,000 Transelec SA
7.875%, 4/15/2011 ............................. 954,639
-------------
7,981,808
-------------
ELECTRONICS -- 0.1%
300,000 Avnet, Inc.
8.000%, 11/15/2006 ............................ 312,000
-------------
ENVIRONMENTAL -- 0.5%
1,465,000 Allied Waste North America, Inc.
8.500%, 12/01/2008 ............................ 1,582,200
-------------
FINANCIAL SERVICES -- 0.7%
2,125,000 Citigroup, Inc.
5.000%, 3/06/2007 ............................. 2,289,945
-------------
FOOD AND BEVERAGE -- 1.3%
788,000 Dean Foods Co.
6.900%, 10/15/2017 ............................ 784,060
1,072,000 Dean Foods Co.
8.150%, 8/01/2007 ............................. 1,164,460
290,000 Smithfield Foods, Inc.
8.000%, 10/15/2009 ............................ 316,100
1,655,000 Smithfield Foods, Inc., 144A
7.750%, 5/15/2013 ............................. 1,774,988
-------------
4,039,608
-------------
FOREIGN GOVERNMENTS -- 1.8%
4,785,000 Canadian Government
5.500%, 6/01/2010 (CAD) ....................... 3,807,946
2,375,000 Canadian Government
5.750%, 9/01/2006 (CAD) ....................... 1,879,776
-------------
5,687,722
-------------
GOVERNMENT AGENCIES -- 5.5%
10,150,000 Federal Home Loan Mortgage Corp.
3.875%, 2/15/2005 ............................. 10,499,698
6,500,000 Federal National Mortgage Association
5.250%, 1/15/2009 ............................. 7,115,128
-------------
17,614,826
-------------
HEALTHCARE -- 1.0%
3,050,000 HCA, Inc.
6.950%, 5/01/2012 ............................. 3,235,586
-------------
INDUSTRIAL - OTHER -- 1.0%
2,865,000 Aramark Services, Inc.
7.000%, 7/15/2006 ............................. 3,160,986
-------------
INFORMATION/DATA TECHNOLOGY -- 0.5%
1,700,000 Xerox Corp.
7.125%, 6/15/2010 ............................. 1,687,250
-------------
MEDIA - BROADCASTING & PUBLISHING -- 1.3%
3,595,000 AOL Time Warner, Inc.
7.700%, 5/01/2032 ............................. 4,127,376
-------------
See accompanying notes to financial statements.
12
LOOMIS SAYLES CORE PLUS BOND FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
MEDIA CABLE -- 3.9%
$ 1,760,000 Comcast Cable Communications, Inc.
6.750%, 1/30/2011 ............................. $ 1,984,750
1,200,000 Continental Cablevision, Inc.
9.500%, 8/01/2013 ............................. 1,398,289
2,000,000 CSC Holdings, Inc.
7.625%, 7/15/2018 ............................. 1,920,000
515,000 CSC Holdings, Inc.
7.875%, 2/15/2018 ............................. 502,125
4,000,000 Shaw Communications, Inc., Class B, 144A
7.400%, 10/17/2007 (CAD) ...................... 3,050,722
2,785,000 TCI Communications, Inc.
9.800%, 2/01/2012 ............................. 3,675,663
-------------
12,531,549
-------------
MEDIA NON - CABLE -- 3.1%
2,480,000 Clear Channel Communications, Inc.
4.250%, 5/15/2009 ............................. 2,509,326
800,000 Dex Media West LLC/Dex Media West
Finance Co., 144A
9.875%, 8/15/2013 (c) ......................... 904,000
3,000,000 News America Holdings, Inc.
7.750%, 2/01/2024 ............................. 3,510,351
2,245,000 News America Holdings, Inc.
8.250%, 8/10/2018 ............................. 2,854,971
-------------
9,778,648
-------------
MORTGAGE RELATED -- 30.3%
6,350,573 Federal Home Loan Mortgage Corp.
4.500%, 8/01/2018 ............................. 6,409,861
3,817,745 Federal Home Loan Mortgage Corp.
5.000%, 5/01/2018 ............................. 3,912,891
2,448,435 Federal National Mortgage Association
5.000%, 5/01/2018 ............................. 2,510,985
28,943,828 Federal National Mortgage Association
5.500%, with various maturities to 2033 (e) ... 29,772,208
23,157,071 Federal National Mortgage Association
6.000%, with various maturities to 2033 (e) ... 23,985,854
10,369,677 Federal National Mortgage Association
6.500%, with various maturities to 2033 (e) ... 10,822,119
1,516,870 Federal National Mortgage Association
7.000%, with various maturities to 2030 (e) ... 1,605,436
1,578,973 Federal National Mortgage Association
7.500%, with various maturities to 2032 (e) ... 1,685,464
6,171,274 Government National Mortgage Association
6.000%, with various maturities to 2032 (e) ... 6,419,844
5,861,338 Government National Mortgage Association
6.500%, with various maturities to 2032 (e) ... 6,159,294
2,143,451 Government National Mortgage Association
7.000%, with various maturities to 2029 (e) ... 2,286,372
504,130 Government National Mortgage Association
7.500%, with various maturities to 2030 (e) ... 541,562
306,039 Government National Mortgage Association
8.000%, 11/15/2029 ............................ 330,772
457,596 Government National Mortgage Association
8.500%, with various maturities to 2023 (e) ... 503,924
36,680 Government National Mortgage Association
9.000%, with various maturities to 2016 (e) ... 40,607
95,085 Government National Mortgage Association
11.500%, with various maturities to 2015 (e) .. 109,046
-------------
97,096,239
-------------
NATURAL GAS DISTRIBUTORS -- 0.4%
1,300,000 Sempra Energy
6.950%, 12/01/2005 ............................ 1,431,570
-------------
NON - CAPTIVE CONSUMER FINANCIAL -- 1.3%
982,000 Household Finance Corp.
5.750%, 1/30/2007 ............................. 1,071,990
2,545,000 Household Finance Corp.
7.000%, 5/15/2012 ............................. 2,936,424
-------------
4,008,414
-------------
NON - CAPTIVE DIVERSIFIED FINANCIAL -- 3.9%
2,095,000 CIT Group, Inc.
7.750%, 4/02/2012 (c) ......................... 2,486,486
3,800,000 General Electric Capital Corp.
5.450%, 1/15/2013 ............................. 3,991,512
5,430,000 International Lease Finance Corp.
5.625%, 6/01/2007 (c) ......................... 5,913,628
-------------
12,391,626
-------------
OIL FIELD SERVICES -- 0.6%
1,750,000 Transocean, Inc.
6.625%, 4/15/2011 ............................. 1,965,121
-------------
PAPER -- 1.5%
650,000 Abitibi-Consolidated Finance LP
7.875%, 8/01/2009 ............................. 693,181
1,495,000 Abitibi-Consolidated, Inc.
8.550%, 8/01/2010 ............................. 1,632,380
1,970,000 Georgia-Pacific Corp.
7.500%, 5/15/2006 (c) ......................... 2,029,100
480,000 Georgia-Pacific Corp.
8.875%, 5/15/2031 ............................. 482,400
-------------
4,837,061
-------------
PIPELINES -- 0.9%
2,464,000 Kinder Morgan Energy Partners LP
7.125%, 3/15/2012 ............................. 2,886,046
-------------
RAILROADS -- 0.4%
1,155,000 CSX Corp.
4.875%, 11/01/2009 ............................ 1,211,244
-------------
REFINING -- 0.3%
855,000 Premcor Refining Group (The), Inc.
7.500%, 6/15/2015 ............................. 852,863
-------------
RESTAURANTS -- 0.9%
400,000 Domino's, Inc.,144A
8.250%, 7/01/2011 ............................. 422,500
1,075,000 Yum! Brands, Inc.
7.450%, 5/15/2005 ............................. 1,147,563
1,150,000 Yum! Brands, Inc.
7.650%, 5/15/2008 ............................. 1,270,750
-------------
2,840,813
-------------
RETAILERS -- 0.6%
1,982,000 J.C. Penney Co., Inc.
9.750%, 6/15/2021 ............................. 2,061,280
-------------
SOVEREIGNS -- 2.3%
3,000,000 Pemex Finance, Ltd.
9.150%, 11/15/2018 ............................ 3,682,530
3,265,000 Pemex Project Funding Master Trust
0/7.875%, 2/01/2009 (d) ....................... 3,705,775
-------------
7,388,305
-------------
See accompanying notes to financial statements.
13
LOOMIS SAYLES CORE PLUS BOND FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
SUPERMARKETS -- 1.9%
$ 2,155,000 Delhaize America, Inc.
8.125%, 4/15/2011 ............................. $ 2,370,500
560,000 Delhaize America, Inc.
9.000%, 4/15/2031 ............................. 623,000
2,720,000 Fred Meyer, Inc.
7.450%, 3/01/2008 ............................. 3,153,103
-------------
6,146,603
-------------
SUPRANATIONAL -- 1.0%
2,610,000 Inter-American Development Bank
5.500%, 3/30/2010 (EUR) ....................... 3,336,309
-------------
TREASURIES -- 3.2%
5,520,000 United States Treasury Notes
3.000%, 11/15/2007 (c) ........................ 5,633,635
1,575,000 United States Treasury Notes
3.500%, 11/15/2006 (c) ........................ 1,645,691
2,700,000 United States Treasury Notes
6.125%, 8/15/2007 ............................. 3,075,467
-------------
10,354,793
-------------
U.S. GOVERNMENT AGENCIES -- 2.4%
10,805,000 Federal National Mortgage Association,
Euro Medium Term Note
6.375%, 8/15/2007 (AUD) ....................... 7,710,256
-------------
WIRELESS -- 0.8%
2,135,000 AT&T Wireless Services, Inc
8.750%, 3/01/2031 ............................. 2,640,651
-------------
WIRELINES -- 6.1%
1,095,000 AT&T Corp.
0/8.500%, 11/15/2031 (d) ...................... 1,296,449
1,970,000 Citizens Communications Co.
9.250%, 5/15/2011 (c) ......................... 2,510,562
3,200,000 LCI International, Inc.
7.250%, 6/15/2007 ............................. 2,560,000
1,240,000 Qwest Corp.
7.200%, 11/10/2026 ............................ 1,116,000
670,000 Qwest Corp.
7.250%, 9/15/2025 ............................. 609,700
1,675,000 Qwest Corp.
7.500%, 6/15/2023 ............................. 1,566,125
4,870,000 Sprint Capital Corp.
6.875%, 11/15/2028 ............................ 4,748,250
235,000 Sprint Capital Corp.
6.900%, 5/01/2019 ............................. 240,927
1,540,000 Telefonos de Mexico SA de CV
8.250%, 1/26/2006 ............................. 1,713,250
1,045,000 Telus Corp.
8.000%, 6/01/2011 ............................. 1,219,940
1,650,000 Verizon Communications, Inc.
7.900%, 2/01/2027 ............................. 1,859,614
-------------
19,440,817
-------------
Total Bonds and Notes
(Identified Cost $290,603,429) ................ 305,875,534
-------------
SHORT TERM INVESTMENTS -- 9.5%
12,863,227 Repurchase Agreement with Investors Bank &
Trust Co. dated 9/30/2003 at 0.75% to be
repurchased at $12,863,495 on 10/01/2003,
collateralized by $13,429,895 Federal Home Loan
Mortgage Bond, 2.175%, due 12/15/2023 valued at
$13,512,912 ................................... 12,863,227
419,082 Bank of Montreal, 1.04%, due 10/14/2003 (f) ... 419,082
1,210,700 Bank of Nova Scotia, 1.06%,
due 10/29/2003 (f) ............................ 1,210,700
1,452,840 Bank of Nova Scotia, 1.06%,
due 11/12/2003 (f) ............................ 1,452,840
968,560 BNP Paribas, 1.03%, due 10/10/2003 (f) ........ 968,560
2,179,260 BNP Paribas, 1.03%, due 10/14/2003 (f) ........ 2,179,260
72,642 Comerica Bank, 1.10%, due 11/19/2003 (f) ...... 72,642
968,560 Credit Agricole Indosuez, 1.06%,
due 10/22/2003 (f) ............................ 968,560
726,420 Den Danske Bank, 1.04%, due 10/09/2003 (f) .... 726,420
1,694,980 Fleet National Bank, 1.188%,
due 1/21/2004 (f) ............................. 1,694,980
484,280 Liberty Lighthouse Funding, 1.072%,
due 10/17/2003 (f) ............................ 484,280
104,804 Merrill Lynch Premier Institutional Fund,
1.033%, due 10/01/2003 (f) .................... 104,804
3,485,639 Merrimac Cash Fund-Premium Class, 0.974%,
due 10/01/2003 (f) ............................ 3,485,639
968,560 Royal Bank of Scotland, 1.04%,
due 10/14/2003 (f) ............................ 968,560
484,280 Royal Bank of Scotland, 1.05%,
due 10/08/2003 (f) ............................ 484,280
242,140 Sheffield Receivables Corp, 1.061%,
due 10/22/2003 (f) ............................ 242,140
726,420 The Bank of the West, 1.06%,
due 10/10/2003(f) ............................. 726,420
242,140 Toronto Dominion Bank, 1.07%,
due 12/19/2003 (f) ............................ 242,140
1,210,700 Wells Fargo, 1.06%, due 10/15/2003 (f) ........ 1,210,700
-------------
Total Short Term Investments (Identified
Cost $30,505,234) ............................. 30,505,234
-------------
Total Investments -- 104.9%
(Identified Cost $321,108,663) (b) ............ 336,380,768
Other assets less liabilities ................. (15,675,808)
-------------
Total Net Assets -- 100% ...................... $ 320,704,960
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation on
investments based on cost of $321,624,642 for federal income tax
purposes was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an excess
of value over tax cost ........................ $ 16,428,232
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value ........................ (1,672,106)
-------------
Net unrealized appreciation ................... $ 14,756,126
=============
At September 30, 2003, the Fund had a capital loss carryover of
approximately $30,523,683 of which $887,621 expires on September
30, 2007, $7,872,697 expires on September 30, 2008 and
$21,763,365 expires on September 30, 2010. This may be available
to offset future realized capital gains, if any, to the extent
provided by regulations. At September 30, 2003, the components
of distributable earnings, excluding unrealized
appreciation/depreciation, disclosed on a tax basis consisted of
$1,855,002 in undistributed ordinary income and $0 in
undistributed long-term gains.
(c) All or a portion of this security was on loan to brokers at
September 30, 2003.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date.
(e) The Fund's investment in mortgage related securities of the
Federal National Mortgage Association and the Government
National Mortgage Association are interests in separate pools of
mortgages. All separate investments in securities of this issuer
which have the same coupon rate have been aggregated for the
purpose of presentation in the schedule of investments.
(f) Represents investments of securities lending collateral.
144A Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registrations, normally to qualified
institutional buyers. At the period end, the value of these
amounted to $10,438,149 or 3.3% of net assets.
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
See accompanying notes to financial statements.
14
LOOMIS SAYLES GOVERNMENT SECURITIES FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
BONDS AND NOTES -- 97.2% OF TOTAL NET ASSETS
GOVERNMENT AGENCIES -- 0.8%
$ 600,000 Federal National Mortgage Association
6.625%, 9/15/2009 ............................. $ 698,788
-------------
MORTGAGE RELATED -- 13.2%
444,746 Federal National Mortgage Association
5.500%, 7/01/2033 ............................. 453,988
3,613,545 Federal National Mortgage Association
6.500%, with various maturities to 2032 (c) ... 3,766,764
324,829 Federal National Mortgage Association
7.500%, 12/01/2030 ............................ 346,656
2,719,168 Government National Mortgage Association
6.500%, 5/15/2031 ............................. 2,857,586
3,227,832 Government National Mortgage Association
7.000%, with various maturities to 2031 (c) ... 3,432,958
301,041 Government National Mortgage Association
7.500%, 4/15/2027 ............................. 323,179
40,402 Government National Mortgage Association
8.500%, 2/15/2006 ............................. 42,912
110,992 Government National Mortgage Association
9.000%, with various maturities to 2009 (c) ... 120,156
43,127 Government National Mortgage Association
9.500%, with various maturities to 2009 (c) ... 47,086
32,470 Government National Mortgage Association
10.000%, with various maturities to 2016 (c) .. 36,586
4,274 Government National Mortgage Association
12.500%, 6/15/2014 ............................ 4,967
-------------
11,432,838
-------------
TREASURIES -- 83.2%
19,800,000 United States Treasury Bonds
5.250%, 11/15/2028 ............................ 20,513,117
13,000,000 United States Treasury Bonds
7.250%, 5/15/2016 (d) ......................... 16,621,722
15,000,000 United States Treasury Bonds
8.750%, with various maturities to 2020 (c) ... 21,715,045
4,000,000 United States Treasury Bonds, Zero Coupon,
11/15/2014 .................................... 3,252,052
9,320,000 United States Treasury Notes
5.000%, 2/15/2011 ............................. 10,219,958
-------------
72,321,894
-------------
Total Bonds and Notes (Identified Cost
$80,176,008) .................................. 84,453,520
-------------
SHORT TERM INVESTMENTS -- 16.8%
1,631,908 Repurchase Agreement with Investors Bank &
Trust Co. dated 9/30/2003 at 0.75% to be
repurchased at $1,631,942 on 10/01/2003,
collateralized by $1,669,738 Federal National
Mortgage Bond, 5.455%, due 9/01/2018
valued at $1,713,810 .......................... 1,631,908
308,232 Bank of Montreal, 1.04%, due 10/14/2003(e) .... 308,232
890,463 Bank of Nova Scotia, 1.06%, due 10/29/2003(e) . 890,463
1,068,556 Bank of Nova Scotia,
1.06%, due 11/12/2003 (e) ..................... 1,068,556
712,370 BNP Paribas, 1.03%, due 10/10/2003 (e) ........ 712,370
1,602,834 BNP Paribas, 1.03%, due 10/14/2003 (e) ........ 1,602,834
53,428 Comerica Bank, 1.10%, due 11/19/2003 (e) ...... 53,428
712,371 Credit Agricole Indosuez, 1.06%, due
10/22/2003 (e) ................................ 712,371
534,278 Den Danske Bank, 1.04%, due 10/09/2003 (e) .... 534,278
1,246,648 Fleet National Bank, 1.188%,
due 1/21/2004 (e) ............................. 1,246,648
356,185 Liberty Lighthouse Funding, 1.072%, due
10/17/2003 (e) ................................ 356,185
77,083 Merrill Lynch Premier Institutional Fund,
1.033%, due 10/01/2003 (e) .................... 77,083
2,563,670 Merrimac Cash Fund-Premium Class,
0.974%, due 10/01/2003 (e) .................... 2,563,670
712,370 Royal Bank of Scotland, 1.04%, due
10/14/2003 (e) ................................ 712,370
356,185 Royal Bank of Scotland, 1.05%, due
10/08/2003 (e) ................................ 356,185
178,093 Sheffield Receivables Corp, 1.061%,
due 10/22/2003 (e) ............................ 178,093
534,278 The Bank of the West, 1.06%, due
10/10/2003 (e) ................................ 534,278
178,093 Toronto Dominion Bank, 1.07%, due
12/19/2003 (e) ................................ 178,093
890,463 Wells Fargo, 1.06%, due 10/15/2003 (e) 890,463
-------------
Total Short Term Investments (Identified Cost
$14,607,508) .................................. 14,607,508
-------------
Total Investments -- 114.0%
(Identified Cost $94,783,516) (b) ............. 99,061,028
Other assets less liabilities ................. (12,141,278)
-------------
Total Net Assets -- 100% ...................... $ 86,919,750
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation on
investments based on cost of $95,555,988 for federal income tax
purposes was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an excess
of value over tax cost ........................ $ 3,525,370
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value ........................ (20,330)
-------------
Net unrealized appreciation ................... $ 3,505,040
=============
At September 30, 2003, the Fund had a capital loss carryover of
approximately $8,239,709 of which $1,888,922 expires on
September 30, 2004, $5,687,678 expires on September 30, 2007 and
$663,109 expires on September 30, 2008. This may be available to
offset future realized capital gains, if any, to the extent
provided by regulations.
At September 30, 2003, the components of distributable earnings,
excluding unrealized appreciation/depreciation, disclosed on a
tax basis consisted of $74,970 in undistributed ordinary income
and $0 in undistributed long-term gains.
(c) The Fund's investment in mortgage related securities of the
Federal National Mortgage Association and the Government
National Mortgage Association are interests in separate pools of
mortgages. All separate investments in securities of this issuer
and for United States Treasury Bonds which have the same coupon
rate have been aggregated for the purpose of presentation in the
schedule of investments.
(d) All or a portion of this security was on loan to brokers at
September 30, 2003.
(e) Represents investments of securities lending collateral.
See accompanying notes to financial statements.
15
LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
BONDS AND NOTES -- 96.3% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE -- 0.5%
$ 250,000 TD Funding Corp., 144A
8.375%, 7/15/2011 ............................. $ 268,750
-------------
AIRLINES -- 3.7%
173,368 Continental Airlines, Inc.
6.648%, 9/15/2017 ............................. 165,362
150,000 Continental Airlines, Inc.
8.000%, 12/15/2005 (c) ........................ 137,625
225,000 Continental Airlines, Inc., Class C-2
7.434%, 9/15/2004 ............................. 210,814
1,000,000 Delta Air Lines, Inc.
8.300%, 12/15/2029 ............................ 645,000
800,000 Northwest Airlines, Inc.
7.625%, 3/15/2005 (c) ......................... 702,000
-------------
1,860,801
-------------
AUTOMOTIVE -- 4.5%
525,000 Cummins, Inc.
7.125%, 3/01/2028 ............................. 478,406
1,000,000 Dana Corp.
9.000%, 8/15/2011 ............................. 1,095,000
100,000 General Motors Corp.
8.375%, 7/15/2033 ............................. 104,560
550,000 Navistar International Corp.
8.000%, 2/01/2008 (c) ......................... 562,375
-------------
2,240,341
-------------
BIOTECHNOLOGY -- 0.5%
300,000 Nektar Therapeutics
3.500%, 10/17/2007 ............................ 248,250
-------------
CHEMICALS -- 6.9%
615,000 Equistar Chemicals LP
6.500%, 2/15/2006 ............................. 581,175
585,000 Ethyl Corp.
8.875%, 5/01/2010 ............................. 599,625
400,000 FMC Corp.
10.250%, 11/01/2009 ........................... 456,000
1,000,000 Huntsman International LLC
10.125%, 7/01/2009 (c) ........................ 950,000
100,000 IMC Global, Inc.
7.300%, 1/15/2028 ............................. 72,000
750,000 IMC Global, Inc.
11.250%, 6/01/2011 ............................ 780,000
-------------
3,438,800
-------------
COMMERCIAL SERVICES -- 0.4%
200,000 Quintiles Transnational Corp., 144A
10.000%, 10/01/2013 ........................... 206,500
-------------
COMMUNICATIONS -- 0.4%
200,000 Innova S. de R.L., 144A
9.375%, 9/19/2013 (c) ......................... 201,250
-------------
CONSTRUCTION MACHINERY -- 2.3%
350,000 Case Credit Corp.
6.750%, 10/21/2007 ............................ 355,250
750,000 United Rentals, Inc.
9.250%, 1/15/2009 (c) ......................... 776,250
-------------
1,131,500
-------------
CONSUMER PRODUCTS -- 1.4%
600,000 Hasbro, Inc.
6.600%, 7/15/2028 ............................. 552,000
120,000 Rayovac Corp.,
144A 8.500%, 10/01/2013 ....................... 123,600
-------------
675,600
-------------
ELECTRIC -- 8.4%
540,000 AES Corp. (The)
8.500%, 11/01/2007 (c) ........................ 525,150
200,000 AES Corp. (The)
8.875%, 2/15/2011 (c) ......................... 199,000
175,000 Calpine Corp.,
144A 8.750%, 7/15/2013 ........................ 160,125
200,000 Calpine Corp.
7.875%, 4/01/2008 ............................. 141,000
250,000 Empresa Nacional de Electricidad SA, 144A
8.350%, 8/01/2013 ............................. 265,620
200,000 Empresa Nacional de Electricidad SA
7.875%, 2/01/2027 ............................. 173,837
525,000 Enersis SA
7.400%, 12/01/2016 (yankee) ................... 493,437
240,000 ESI Tractebel Acquisition Corp.
7.990%, 12/30/2011 ............................ 238,500
1,323,558 Panda Funding Corp.
11.625%, 8/20/2012 ............................ 1,085,317
290,065 Salton Sea Funding Corp.
7.840%, 5/30/2010 ............................. 306,019
51,718 Salton Sea Funding Corp.
8.300%, 5/30/2011 ............................. 55,209
376,550 South Point Energy Center LLC
LLC/Rockgen Energy LLC, 144A
8.400%, 5/30/2012 ............................. 353,957
210,000 Southern California Edison Co.
7.125%, 7/15/2025 ............................. 212,625
-------------
4,209,796
-------------
ELECTRONICS -- 4.7%
110,000 Corning, Inc.
3.500%, 11/01/2008 (c) ........................ 128,837
225,000 Corning, Inc.
6.750%, 9/15/2013 ............................. 221,625
400,000 Kulicke & Soffa Industries, Inc.
4.750%, 12/15/2006 (c) ........................ 350,500
525,000 LSI Logic Corp.
4.000%, 11/01/2006 ............................ 502,031
685,000 Lucent Technologies, Inc.
6.450%, 3/15/2029 ............................. 476,931
600,000 Nortel Networks Corp.
4.250%, 9/01/2008 ............................. 546,000
150,000 Nortel Networks Corp.
6.875%, 9/01/2023 ............................. 137,250
-------------
2,363,174
-------------
ENTERTAINMENT -- 0.9%
500,000 Six Flags, Inc.
8.875%, 2/01/2010 ............................. 458,750
-------------
ENVIRONMENTAL -- 0.2%
110,000 Allied Waste North America, Inc.
8.500%, 12/01/2008 ............................ 118,800
-------------
See accompanying notes to financial statements.
16
LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.4%
$ 200,000 Arcel Finance, Ltd., 144A
7.048%, 9/01/2011 ............................. $ 203,000
-------------
FOOD AND BEVERAGE -- 2.6%
350,000 Borden Chemical, Inc.
7.875%, 2/15/2023 ............................. 287,000
550,000 Borden Chemical, Inc.
9.200%, 3/15/2021 ............................. 464,750
100,000 Borden Chemical, Inc.
9.250%, 6/15/2019 ............................. 83,000
300,000 Gruma SA
7.625%, 10/15/2007 (yankee) ................... 321,375
145,000 Smithfield Foods, Inc., 144A
7.750%, 5/15/2013 ............................. 155,512
-------------
1,311,637
-------------
FOREIGN GOVERNMENTS -- 2.3%
150,000 Dominican Republic,
144A 9.040%, 1/23/2013 ........................ 135,750
1,000,000 Republic of Brazil
9.375%, 4/07/2008 ............................. 1,022,500
-------------
1,158,250
-------------
FOREST PRODUCTS & PAPER -- 0.8%
220,000 Abitibi-Consolidated, Inc.
7.500%, 4/01/2028 ............................. 201,260
200,000 Boise Cascade Corp., Series A,
Medium Term Note
7.450%, 8/10/2011 ............................. 207,289
-------------
408,549
-------------
GAMING -- 1.0%
475,000 Park Place Entertainment Corp.
8.125%, 5/15/2011 (c) ......................... 511,812
-------------
HEALTHCARE -- 0.7%
150,000 HCA, Inc.
7.500%, 12/15/2023 ............................ 152,166
200,000 HCA, Inc., Medium Term Note
7.580%, 9/15/2025 ............................. 204,972
-------------
357,138
-------------
HEAVY MACHINERY -- 0.2%
100,000 Case New Holland, Inc., 144A
9.250%, 8/01/2011 (c) ......................... 107,500
-------------
HOME CONSTRUCTION -- 1.7%
475,000 D.R. Horton, Inc.
7.875%, 8/15/2011 ............................. 514,187
300,000 K. Hovnanian Enterprises, Inc.
8.000%, 4/01/2012 ............................. 321,000
-------------
835,187
-------------
HOME CONSTRUCTION -- FURNISHINGS &
APPLIANCES -- 0.2%
110,000 Jacuzzi Brands, Inc., 144A
9.625%, 7/01/2010 ............................. 114,125
-------------
INDEPENDENT ENERGY -- 1.3%
150,000 Chesapeake Energy Corp.
9.000%, 8/15/2012 ............................. 168,750
100,000 Chesapeake Energy Corp., 144A
7.500%, 9/15/2013 ............................. 105,000
155,000 Nuevo Energy Co.
9.500%, 6/01/2008 ............................. 162,944
215,000 Swift Energy Co.
9.375%, 5/01/2012 ............................. 232,200
-------------
668,894
-------------
INDUSTRIAL-- 0.3%
125,000 MascoTech, Inc.
4.500%, 12/15/2003 ............................ 122,500
-------------
INFORMATION/DATA TECHNOLOGY -- 2.6%
450,000 CommScope, Inc.
4.000%, 12/15/2006 ............................ 416,812
245,000 Lam Research Corp.
4.000%, 6/01/2006 ............................. 237,344
180,000 Maxtor Corp.
5.750%, 3/01/2012 ............................. 144,000
200,000 Xerox Corp.
7.625%, 6/15/2013 ............................. 197,250
300,000 Xerox Corp., Medium Term Note
7.200%, 4/01/2016 ............................. 280,500
-------------
1,275,906
-------------
INTEGRATED ENERGY -- 2.5%
265,000 Cerro Negro Finance, Ltd., 144A
7.900%, 12/01/2020 ............................ 206,700
275,000 Grant Prideco Escrow Corp.
9.000%, 12/15/2009 ............................ 296,312
125,000 PDVSA Finance, Ltd.
6.800%, 11/15/2008 ............................ 111,875
200,000 PDVSA Finance, Ltd.
7.400%, 8/15/2016 (yankee) .................... 155,000
500,000 PDVSA Finance, Ltd.
9.375%, 11/15/2007 ............................ 500,000
-------------
1,269,887
-------------
LIFE INSURANCE -- 0.8%
200,000 Provident Cos., Inc.
7.250%, 3/15/2028 ............................. 198,248
200,000 UnumProvident Corp.
7.375%, 6/15/2032 ............................. 200,000
-------------
398,248
-------------
LODGING -- 5.2%
300,000 FelCor Lodging LP
0/9.000%, 6/01/2011 (d) ....................... 319,500
750,000 Host Marriott LP
9.250%, 10/01/2007 ............................ 818,438
851,000 La Quinta Corp.
7.000%, 8/15/2007 ............................. 873,339
300,000 La Quinta Inns, Inc. Medium Term Note
7.330%, 4/01/2008 ............................. 301,875
300,000 Royal Caribbean Cruises, Ltd.
7.500%, 10/15/2027 ............................ 271,500
-------------
2,584,652
-------------
MEDIA CABLE -- 2.1%
900,000 CSC Holdings, Inc.
7.875%, 12/15/2007 ............................ 920,250
150,000 Rogers Communications, Inc.
2.000%, 11/26/2005 ............................ 134,438
-------------
1,054,688
-------------
MEDIA NON - CABLE -- 0.5%
150,000 Dex Media East LLC/Dex Media East Finance Co.
12.125%, 11/15/2012 ........................... 181,125
75,000 Dex Media West LLC/Dex Media West Finance
Co., 144A 9.875%, 8/15/2013 ................... 84,750
-------------
265,875
-------------
See accompanying notes to financial statements.
17
LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
OIL & GAS -- 1.5%
$ 150,000 Williams Cos. (The), Inc.
6.500%, 8/01/2006 (c) ......................... $ 150,375
640,000 Williams Holdings of Delaware
6.500%, 12/01/2008 ............................ 620,800
-------------
771,175
-------------
OIL FIELD SERVICES -- 1.0%
100,000 Parker Drilling Co.
5.500%, 8/01/2004 (c) ......................... 98,500
520,000 Trico Marine Services, Inc.
8.875%, 5/15/2012 ............................. 379,600
-------------
478,100
-------------
OTHER -- 0.5%
250,000 Corrections Corp. of America
7.500%, 5/01/2011 ............................. 257,813
-------------
PACKAGING -- 0.6%
300,000 Owens-Illinois Glass Container, North America
7.750%, 5/15/2011 ............................. 310,500
-------------
PAPER -- 5.4%
250,000 Abitibi-Consolidated, Inc.
8.500%, 8/01/2029 ............................. 251,597
500,000 Georgia-Pacific Corp.
9.500%, 12/01/2011 (c) ........................ 553,750
1,000,000 Georgia-Pacific Corp.
9.875%, 11/01/2021 ............................ 1,020,000
350,000 Pope & Talbot, Inc.
8.375%, 6/01/2013 ............................. 332,500
580,000 Tembec Industries, Inc.
7.750%, 3/15/2012 ............................. 545,200
-------------
2,703,047
-------------
PHARMACEUTICALS -- 2.1%
250,000 Genzyme Corp.
3.000%, 5/15/2021 (c) ......................... 251,563
425,000 Human Genome Sciences, Inc.
3.750%, 3/15/2007 ............................. 366,031
125,000 ICN Pharmaceuticals, Inc.
6.500%, 7/15/2008 ............................. 118,594
187,000 IVAX Corp.
4.500%, 5/15/2008 ............................. 183,494
160,000 Vertex Pharmaceuticals, Inc.
5.000%, 9/19/2007 ............................. 135,200
-------------
1,054,882
-------------
PIPELINES -- 1.8%
700,000 El Paso CGP Co.
6.500%, 6/01/2008 ............................. 563,500
175,000 Williams Cos. (The), Inc.
7.125%, 9/01/2011 (c) ......................... 172,813
105,000 Williams Cos. (The), Inc.
7.500%, 1/15/2031 ............................. 93,450
50,000 Williams Cos. (The), Inc.
7.875%, 9/01/2021 ............................. 47,250
-------------
877,013
-------------
RAILROADS -- 1.7%
850,000 Grupo Transportacion Ferroviaria Mexicana
SA de CV 0/11.750%, 6/15/2009 (yankee) (d) .... 871,250
-------------
REAL ESTATE INVESTMENT TRUSTS -- 2.5%
1,000,000 Crescent Real Estate Equities LP
9.250%, 4/15/2009 ............................. 1,075,000
200,000 TriNet Corporate Realty Trust, Inc.
7.700%, 7/15/2017 ............................. 197,000
-------------
1,272,000
-------------
REFINING -- 2.1%
325,000 CITGO Petroleum Corp., 144A
11.375%, 2/01/2011 ............................ 367,250
700,000 Premcor Refining Group (The), Inc.
7.500%, 6/15/2015 ............................. 698,250
-------------
1,065,500
-------------
RESTAURANTS -- 0.3%
125,000 Domino's, Inc.,144A
8.250%, 7/01/2011 ............................. 132,031
-------------
RETAILERS -- 5.4%
800,000 Dillard's, Inc.
7.750%, 7/15/2026 ............................. 700,000
800,000 Foot Locker, Inc.
8.500%, 1/15/2022 ............................. 840,000
1,000,000 J.C. Penney Co., Inc.
8.125%, 4/01/2027 ............................. 1,025,000
128,000 J.C. Penney Co., Inc.
8.250%, 8/15/2022 ............................. 131,840
-------------
2,696,840
-------------
SUPERMARKETS -- 0.3%
150,000 Delhaize America, Inc.
9.000%, 4/15/2031 ............................. 166,875
-------------
TELEPHONE SYSTEMS -- 0.6%
375,000 Qwest Capital Funding, Inc.
6.875%, 7/15/2028 ............................. 296,250
-------------
TEXTILE -- 1.8%
905,000 Phillips Van-Heusen Corp.
7.750%, 11/15/2023 ............................ 886,900
-------------
WIRELESS -- 1.9%
75,000 American Tower Corp., Class A
5.000%, 2/15/2010 ............................. 67,781
850,000 Rogers Wireless Communications, Inc.
8.800%, 10/01/2007 ............................ 871,250
-------------
939,031
-------------
WIRELINES -- 6.8%
300,000 COLT Telecom Group PLC
0/12.000%, 12/15/2006 (c) (d) ................. 300,750
150,000 Philippine Long Distance Telephone Co.
8.350%, 3/06/2017 ............................. 130,268
700,000 Philippine Long Distance Telephone Co.
10.500%, 4/15/2009 ............................ 763,636
75,000 Qwest Capital Funding, Inc.
7.000%, 8/03/2009 ............................. 66,938
1,890,000 Qwest Capital Funding, Inc.
7.750%, 2/15/2031 ............................. 1,606,500
525,000 Sprint Capital Corp.
6.875%, 11/15/2028 ............................ 511,875
-------------
3,379,967
-------------
Total Bonds and Notes
(Identified Cost $45,172,818) ................. 48,229,334
-------------
See accompanying notes to financial statements.
18
LOOMIS SAYLES HIGH INCOME FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
SHARES DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.5%
COMMUNICATIONS -- 0.2%
125 Lucent Technologies Capital Trust I (c)
7.75%, 3/15/17 ................................ $ 103,717
-------------
ENTERTAINMENT -- 0.1%
3,000 Six Flags, Inc., 7.25%, 8/15/2009 ............. 58,800
-------------
WIRELINES -- 0.2%
2,000 Philippine Long Distance Telephone Co. (GDR)
$14.00, 12/31/2049 ............................ 80,400
-------------
Total Preferred Stocks
(Identified Cost $229,604) .................... 242,917
-------------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS -- 14.7%
$ 816,539 Repurchase Agreement with Investors Bank &
Trust Co. dated 9/30/2003 at 0.75% to be
repurchased at $816,556 on 10/01/2003,
collateralized by $832,137 Federal Home Loan
Mortgage Bond, 5.813%, due 10/01/2024 valued
at $857,379 ................................... 816,539
154,953 Bank of Montreal, 1.04%, due 10/14/2003 (e) .. 154,953
447,648 Bank of Nova Scotia, 1.06%, due 10/29/2003(e) . 447,648
537,177 Bank of Nova Scotia, 1.06%, due 11/12/2003(e) . 537,177
358,119 BNP Paribas, 1.03%, due 10/10/2003 (e) ........ 358,119
805,766 BNP Paribas, 1.03%, due 10/14/2003 (e) ........ 805,766
26,859 Comerica Bank, 1.10%, due 11/19/2003 (e) ...... 26,859
358,119 Credit Agricole Indosuez, 1.06%,
due 10/22/2003 (e) ............................ 358,119
268,589 Den Danske Bank, 1.04%, due 10/09/2003 (e) .... 268,589
626,707 Fleet National Bank, 1.188%, due 1/21/2004(e) . 626,707
179,059 Liberty Lighthouse Funding, 1.072%,
due 10/17/2003 (e) ............................ 179,059
38,751 Merrill Lynch Premier Institutional Fund,
1.033%, due 10/01/2003 (e) .................... 38,751
1,288,788 Merrimac Cash Fund-Premium Class, 0.974%,
due 10/01/2003 (e) ............................ 1,288,788
358,119 Royal Bank of Scotland, 1.04%,
due 10/14/2003 (e) ............................ 358,119
179,059 Royal Bank of Scotland, 1.05%,
due 10/08/2003 (e) ............................ 179,059
89,530 Sheffield Receivables Corp, 1.061%,
due 10/22/2003 (e) ............................ 89,530
268,589 The Bank of the West, 1.06%,
due 10/10/2003 (e) ............................ 268,589
89,530 Toronto Dominion Bank, 1.07%,
due 12/19/2003 (e) ............................ 89,530
447,648 Wells Fargo, 1.06%, due 10/15/2003 (e) ........ 447,648
-------------
Total Short Term Investments
(Identified Cost $7,339,549) .................. 7,339,549
-------------
Total Investments -- 111.5%
(Identified Cost $52,741,971) (b) ............. 55,811,800
Other assets less liabilities ................. (5,740,027)
-------------
Total Net Assets -- 100% ...................... $ 50,071,773
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation on
investments based on cost of $52,767,148 for federal income tax
purposes was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an excess of
value over tax cost ........................... $ 4,025,200
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value ........................ (980,548)
-------------
Net unrealized appreciation ................... $ 3,044,652
=============
At September 30, 2003, the Fund had a capital loss carryover of
approximately $87,273,513 of which $458,229 expires on September
30, 2007, $16,613,930 expires on September 30, 2008, $43,374,721
expires on September 30, 2009 and $26,826,633 expires on
September 30, 2010. This may be available to offset future
realized capital gains, if any, to the extent provided by
regulations.
At September 30, 2003, the components of distributable earnings,
excluding unrealized appreciation/depreciation, disclosed on a
tax basis consisted of $0 in undistributed ordinary income and
$0 in undistributed long-term gains.
(c) All or a portion of this security was on loan to brokers at
September 30, 2003.
(d) Debt obligation initially issued in zero coupon form which
converts to coupon form at a specified rate and date.
(e) Represents investments of securities lending collateral.
GDR Global Depository Receipt
144A Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registrations, normally to qualified
institutional buyers. At the period end, the value of these
amounted to $3,191,420 or 6.4% of net assets.
See accompanying notes to financial statements.
19
LOOMIS SAYLES LIMITED TERM U.S. GOVERNMENT FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
BONDS AND NOTES -- 99.4% OF TOTAL NET ASSETS
ASSET-BACKED -- 2.5%
$ 1,845,000 EQCC Home Equity Loan Trust
6.134%, 7/20/2028 ............................. $ 1,931,798
1,675,000 Residential Funding Mortgage Securities II
5.420%, 2/25/2016 ............................. 1,750,584
-------------
3,682,382
-------------
GOVERNMENT AGENCIES -- 13.0%
2,935,000 Federal Farm Credit Bank
2.375%, 10/02/2006 ............................ 2,950,602
5,000,000 Federal Home Loan Mortgage Corp.
5.750%, 4/15/2008 ............................. 5,579,490
2,000,000 Federal National Mortgage Association
5.500%, 2/15/2006 ............................. 2,168,284
3,000,000 Federal National Mortgage Association
5.500%, 5/02/2006 ............................. 3,247,857
3,825,000 Federal National Mortgage Association
6.000%, 12/15/2005 (c) (d) .................... 4,179,260
1,000,000 Federal National Mortgage Association
7.000%, 7/15/2005 (c) (d) ..................... 1,096,744
-------------
19,222,237
-------------
MORTGAGE RELATED -- 64.8%
2,776,542 Federal Home Loan Mortgage Corp.
5.000%, 5/01/2018 ............................. 2,845,739
1,193,080 Federal Home Loan Mortgage Corp.
7.000%, 2/01/2016 ............................. 1,266,823
10,498 Federal Home Loan Mortgage Corp.
7.500%, 6/01/2026 ............................. 11,268
172,829 Federal Home Loan Mortgage Corp.
8.000%, with various maturities to 2015 (c) ... 181,659
10,373 Federal Home Loan Mortgage Corp.
10.000%, 7/01/2019 ............................ 11,669
1,081,215 Federal Home Loan Mortgage Corp.
11.500%, with various maturities to 2020 (c) .. 1,224,595
32,784,569 Federal National Mortgage Association
5.500%, with various maturities to 2033 (c) ... 33,860,860
17,979,508 Federal National Mortgage Association
6.000%, with various maturities to 2032 (c) ... 18,744,025
9,701,073 Federal National Mortgage Association
6.500%, with various maturities to 2032 (c) ... 10,134,376
844,199 Federal National Mortgage Association
7.000%, 12/01/2022 ............................ 903,617
3,874,059 Federal National Mortgage Association
7.500%, with various maturities to 2032 (c) ... 4,136,171
421,118 Federal National Mortgage Association
8.000%, with various maturities to 2016 (c) .. 451,392
2,973,940 Government National Mortgage Association
5.500%, 7/20/2033 ............................. 3,047,773
5,355,909 Government National Mortgage Association
6.000%, with various maturities to 2033 (c) ... 5,560,854
6,824,666 Government National Mortgage Association
6.500%, with various maturities to 2033 ....... 7,142,172
3,251,222 Government National Mortgage Association
7.000%, with various maturities to 2031 (c) ... 3,461,783
1,842,442 Government National Mortgage Association
8.000%, 10/15/2029 ............................ 1,991,346
30,335 Government National Mortgage Association
12.500%, with various maturities to 2015 (c) .. 35,321
302,636 Government National Mortgage Association
16.000%, with various maturities to 2012 (c) .. 362,289
117,412 Government National Mortgage Association
17.000%, with various maturities to 2011 (c) .. 142,496
-------------
95,516,228
-------------
SUPRANATIONAL -- 3.1%
3,210,000 Inter-American Development Bank Bonds
12.250%, 12/15/2008 ........................... 4,616,587
-------------
TREASURIES -- 16.0%
5,800,000 United States Treasury Notes
4.375%, 8/15/2012 (d) ......................... 6,047,631
4,000,000 United States Treasury Notes
4.875%, 2/15/2012 ............................. 4,328,908
3,800,000 United States Treasury Notes
5.000%, 8/15/2011 (d) ......................... 4,156,546
950,000 United States Treasury Notes
6.250%, 2/15/2007 ............................. 1,077,359
500,000 United States Treasury Notes
6.500%, 5/15/2005 ............................. 542,031
2,000,000 United States Treasury Notes
6.500%, 10/15/2006 (d) ........................ 2,265,312
4,500,000 United States Treasury Notes
7.000%, 7/15/2006 ............................. 5,126,485
-------------
23,544,272
-------------
Total Bonds and Notes
(Identified Cost $144,040,784) ................ 146,581,706
-------------
SHORT TERM INVESTMENTS -- 14.7%
4,168,211 Repurchase Agreement with Investors Bank &
Trust Co. dated 9/30/2003 at 0.75% to be
repurchased at $4,168,298 on 10/01/2003,
collateralized by $4,292,399 Federal National
Mortgage Association Bond, 4.353%,
due 10/01/2024 valued at $4,376,781 ........... 4,168,211
414,529 Bank of Montreal, 1.04%, due 10/14/2003 (e) ... 414,529
1,197,547 Bank of Nova Scotia, 1.06%,
due 10/29/2003(e) ............................. 1,197,547
1,437,056 Bank of Nova Scotia, 1.06%,
due 11/12/2003(e) ............................. 1,437,056
958,038 BNP Paribas, 1.03%, due 10/10/2003 (e) ........ 958,038
2,155,584 BNP Paribas, 1.03%, due 10/14/2003 (e) ........ 2,155,584
71,853 Comerica Bank, 1.10%, due 11/19/2003 (e) ...... 71,853
958,038 Credit Agricole Indosuez, 1.06%,
due 10/22/2003 (e) ............................ 958,038
718,528 Den Danske Bank, 1.04%, due 10/09/2003 (e) .... 718,528
1,676,566 Fleet National Bank, 1.188%,
due 1/21/2004 (e) ............................. 1,676,566
479,019 Liberty Lighthouse Funding, 1.072%,
due 10/17/2003 (e) ............................ 479,019
103,664 Merrill Lynch Premier Institutional Fund,
1.033%, due 10/01/2003 (e) .................... 103,664
3,447,774 Merrimac Cash Fund-Premium Class, 0.974%,
due 10/01/2003 (e) ............................ 3,447,774
958,038 Royal Bank of Scotland, 1.04%,
due 10/14/2003 (e) ............................ 958,038
479,019 Royal Bank of Scotland, 1.05%,
due 10/08/2003 (e) ............................ 479,019
239,509 Sheffield Receivables Corp, 1.061%,
due 10/22/2003 (e) ............................ 239,509
718,528 The Bank of the West, 1.06%,
due 10/10/2003(e) ............................. 718,528
239,509 Toronto Dominion Bank, 1.07%,
due 12/19/2003 (e) ............................ 239,509
1,197,547 Wells Fargo, 1.06%, due 10/15/2003 (e) ........ 1,197,547
-------------
Total Short Term Investments
(Identified Cost $21,618,557) ................. 21,618,557
-------------
Total Investments -- 114.1%
(Identified Cost $165,659,341) (b) ............ 168,200,263
Other assets less liabilities ................. (20,747,648)
-------------
Total Net Assets -- 100% ...................... $ 147,452,615
=============
See accompanying notes to financial statements.
20
LOOMIS SAYLES LIMITED TERM U.S. GOVERNMENT FUND --
SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation on
investments based on cost of $166,718,880 for federal income
tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of
value over tax cost ........................... $ 1,921,828
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value ........................ (440,445)
-------------
Net unrealized appreciation ................... $ 1,481,383
=============
At September 30, 2003, the Fund had a capital loss carryover of
approximately $22,290,822 of which $4,342,078 expires on
September 30, 2004, $2,731,339 expires on September 30, 2005,
$10,626,315 expires on September 30, 2007, $4,165,768 expires on
September 30, 2008 and $425,322 expires on September 30, 2011.
This may be available to offset future realized capital gains,
if any, to the extent provided by regulations.
At September 30, 2003, the components of distributable earnings,
excluding unrealized appreciation/depreciation, disclosed on a
tax basis consisted of $0 in undistributed ordinary income and
$0 in undistributed long-term gains.
(c) The Fund's investment in mortgage related securities of the
Federal Home Loan Mortgage Corporation, Federal National
Mortgage Association and Government National Mortgage
Association are interests in separate pools of mortgages. All
separate investments in securities of this issuer which have the
same coupon rate have been aggregated for the purpose of
presentation in the schedule of investments.
(d) All or a portion of this security was on loan to brokers at
September 30, 2003.
(e) Represents investments of securities lending collateral.
See accompanying notes to financial statements.
21
LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
BONDS AND NOTES -- 87.5% OF TOTAL NET ASSETS
CONVERTIBLE BONDS -- 8.9%
CANADA -- 1.7%
$ 5,500,000 Nortel Networks Corp.
4.250%, 9/01/2008 ............................. $ 5,005,000
750,000 Rogers Communications, Inc.
2.000%, 11/26/2005 ............................ 672,187
-------------
5,677,187
-------------
NETHERLANDS -- 0.5%
1,550,000 Infineon Technologies Holding BV
4.250%, 2/06/2007, (EUR) ...................... 1,675,193
-------------
UNITED KINGDOM -- 3.0%
500,000 COLT Telecom Group PLC
2.000%, 3/29/2006, (EUR) ...................... 565,146
4,075,000 COLT Telecom Group PLC
2.000%, 12/16/2006, (EUR) ..................... 4,510,972
4,385,000 COLT Telecom Group PLC
2.000%, 4/03/2007, (EUR) ...................... 4,854,138
-------------
9,930,256
-------------
UNITED STATES -- 3.7%
100,000 American Tower Corp., Class A
5.000%, 2/15/2010 ............................. 90,375
475,000 Amkor Technology, Inc.
5.000%, 3/15/2007 (c) ......................... 432,250
1,000,000 Builders Transport, Inc.
8.000%, 8/15/2005 (d)(e)(i) ................... 1,250
200,000 Builders Transport, Inc.
6.500%, 5/01/2011 (d)(e)(i) ................... 250
800,000 CommScope, Inc.
4.000%, 12/15/2006 ............................ 741,000
400,000 Corning, Inc.
3.500%, 11/01/2008 (c) ........................ 468,500
213,000 Dixie Group, Inc.
7.000%, 5/15/2012 (c) ......................... 172,796
500,000 Genzyme Corp.
3.000%, 5/15/2021 (c) ......................... 503,125
1,600,000 Human Genome Sciences, Inc.
3.750%, 3/15/2007 ............................. 1,378,000
500,000 ICN Pharmaceuticals, Inc.
6.500%, 7/15/2008 ............................. 474,375
900,000 Kulicke & Soffa Industries, Inc.
4.750%, 12/15/2006 (c) ........................ 788,625
1,000,000 Lam Research Corp.
4.000%, 6/01/2006 ............................. 968,750
1,165,000 Loews Corp.
3.125%, 9/15/2007 ............................. 1,083,450
70,000 LSI Logic Corp.
4.000%, 11/01/2006 ............................ 66,937
107,000 MascoTech, Inc.
4.500%, 12/15/2003 ............................ 104,860
2,422,000 Maxtor Corp.
5.750%, 3/01/2012 ............................. 1,937,600
1,825,000 Nektar Therapeutics
3.500%, 10/17/2007 ............................ 1,510,187
800,000 Nextel Communications, Inc.
5.250%, 1/15/2010 ............................. 746,000
355,000 Richardson Electronics, Ltd.
7.250%, 12/15/2006 ............................ 326,600
500,000 Yellow Corp.
7.000%, 5/01/2011 ............................. 405,625
-------------
12,200,555
-------------
Total Convertible Bonds
(Identified Cost $26,356,917) ................. 29,483,191
-------------
NON-CONVERTIBLE BONDS -- 78.6%
ARGENTINA -- 0.9%
2,405,000 Pecom Energia SA, 144A
8.125%, 7/15/2010 ............................. 2,266,712
3,500,000 Republic of Argentina
8.875%, 3/01/2029 (e) ......................... 735,000
-------------
3,001,712
-------------
BRAZIL -- 4.5%
2,542,858 Republic of Brazil
8.000%, 4/15/2014 (g) ......................... 2,319,086
8,600,000 Republic of Brazil
8.875%, 4/15/2024 ............................. 6,905,800
6,308,000 Republic of Brazil
10.125%, 5/15/2027 ............................ 5,639,352
-------------
14,864,238
-------------
CANADA -- 14.9%
8,505,000 British Columbia Province, Zero Coupon,
9/05/2020, (CAD) .............................. 2,382,093
9,775,000 British Columbia Province, Zero Coupon,
8/19/2022, (CAD) .............................. 2,411,866
10,000,000 British Columbia Province, Zero Coupon,
8/23/2024, (CAD) .............................. 2,177,120
4,275,000 British Columbia Province, Zero Coupon,
11/19/2027, (CAD) ............................. 772,381
8,100,000 Canadian Government
3.500%, 6/01/2004, (CAD) ...................... 6,033,465
13,540,000 Canadian Government
6.000%, 9/01/2005, (CAD) ...................... 10,600,201
4,515,000 Canadian Government
4.500%, 9/01/2007, (CAD) ...................... 3,458,948
17,135,000 Manitoba Province, Zero Coupon,
3/05/2031, (CAD) .............................. 2,588,330
500,000 New Brunswick FM Project, Inc.
6.470%%, 11/30/2027, (CAD) .................... 410,352
500,000 Nortel Networks Corp.
6.125%, 2/15/2006 (c) ......................... 502,500
500,000 Nortel Networks Corp.
6.875%, 9/01/2023 ............................. 457,500
1,550,000 Ontario Hydro Bank, Zero Coupon,
10/15/2021, (CAD) ............................. 401,405
3,050,000 Ontario Province
5.900%, 3/08/2006, (CAD) ...................... 2,399,506
750,000 Ontario Province, Zero Coupon,
7/13/2022, (CAD) .............................. 186,670
7,600,000 Ontario Province, Zero Coupon,
6/02/2027, (CAD) .............................. 1,454,270
8,800,000 Ontario Province, Zero Coupon,
3/08/2029, (CAD) .............................. 1,537,214
325,000 Rogers Cablesystems, Ltd.
9.650%, 1/15/2014, (CAD) ...................... 253,772
3,750,000 Saskatchewan Province
5.750%, 3/05/2029, (CAD) ...................... 2,839,754
See accompanying notes to financial statements.
22
LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
CANADA -- continued
$ 8,500,000 Saskatchewan Province, Zero Coupon,
4/10/2014, (CAD) .............................. $ 3,652,829
8,250,000 Saskatchewan Province, Zero Coupon,
2/04/2022, (CAD) .............................. 2,133,576
9,605,000 Saskatchewan Province, Zero Coupon,
5/30/2025, (CAD) .............................. 2,030,599
-------------
48,684,351
-------------
CAYMAN ISLANDS -- 1.0%
750,000 Enersis SA, (yankee)
7.400%, 12/01/2016 ............................ 704,910
1,125,000 Enersis SA
6.600%, 12/01/2026 ............................ 1,128,049
250,000 PDVSA Finance, Ltd.
9.375%, 11/15/2007 ............................ 250,000
1,405,000 PDVSA Finance, Ltd., (yankee)
7.400%, 8/15/2016 ............................. 1,088,875
-------------
3,171,834
-------------
CHILE -- 0.4%
1,375,000 Empresa Nacional de Electricidad SA
7.875%, 2/01/2027 ............................. 1,195,127
250,000 Empresa Nacional de Electricidad SA, 144A
8.350%, 8/01/2013 ............................. 265,620
-------------
1,460,747
-------------
DOMINICAN REPUBLIC -- 0.4%
1,465,000 Dominican Republic, 144A
9.040%, 1/23/2013 ............................. 1,325,825
-------------
ECUADOR -- 0.8%
4,225,000 Republic of Ecuador, 144A
0/6.000%, 8/15/2030 (g) ....................... 2,655,412
-------------
HONG KONG -- 1.6%
4,505,000 Bangkok Bank PCL, 144A
9.025%, 3/15/2029 ............................. 5,139,227
-------------
MALAYSIA -- 2.3%
1,750,000 Telekom Malaysia Berhad, 144A
7.875%, 8/01/2025 ............................. 1,953,539
5,200,000 Tenaga Nasional Berhad, 144A
7.500%, 11/01/2025 ............................ 5,556,756
-------------
7,510,295
-------------
MEXICO -- 5.0%
600,000 Grupo TMM SA de CV, (yankee)
0/10.000%, 11/15/2006 (e) (g) ................. 474,000
5,960,000 Grupo Transportacion Ferroviaria Mexicana
SA de CV, (yankee)
0/11.750%, 6/15/2009 (g) ...................... 6,109,000
1,000,000 Petroleos Mexicanos, (yankee)
9.250%, 3/30/2018 ............................. 1,172,500
4,350,000 Petroleos Mexicanos, (yankee)
9.500%, 9/15/2027 ............................. 5,143,875
3,000,000 Petroleos Mexicanos, 144A, (yankee)
8.625%, 12/01/2023 ............................ 3,307,500
-------------
16,206,875
-------------
NORWAY -- 2.6%
55,575,000 Kingdom of Norway
6.750%, 1/15/2007, (NOK) ...................... 8,596,176
-------------
PHILIPPINES -- 1.9%
3,100,000 Bangko Sentral Ng Philipinas, (yankee)
8.600%, 6/15/2027 ............................. 2,879,125
1,850,000 Philippine Long Distance Telephone Co.
8.350%, 3/06/2017 ............................. 1,606,644
1,976,438 Quezon Power (Philippines), Ltd., (yankee)
8.860%, 6/15/2017 ............................. 1,679,972
-------------
6,165,741
-------------
REPUBLIC OF KOREA -- 0.1%
300,000 Samsung Electronics Co., Ltd., 144A
7.700%, 10/01/2027 ............................ 328,827
-------------
SOUTH AFRICA -- 1.6%
11,405,000 Republic of South Africa
12.500%, 12/21/2006, (ZAR) .................... 1,791,834
7,750,000 Republic of South Africa
13.000%, 8/31/2010, (ZAR) ..................... 1,354,683
11,450,000 Republic of South Africa
13.500%, 9/15/2015, (ZAR) ..................... 2,132,339
-------------
5,278,856
-------------
SUPRANATIONAL -- 3.2%
22,300,000 International Bank for Reconstruction
& Development, Euro Medium Term Note, Zero
Coupon,
8/20/2007, (NZD) ............................. 10,585,658
-------------
UNITED KINGDOM -- 0.2%
500,000 Xerox Capital (Europe) PLC
5.250%, 12/03/2004, (EUR) ..................... 581,168
-------------
UNITED STATES -- 34.6%
1,000,000 AES Corp. (The)
8.375%, 8/15/2007 (c) ......................... 972,500
1,000,000 AES Corp. (The)
8.500%, 11/01/2007 (c) ........................ 972,500
1,190,000 AES Corp. (The)
8.375%, 3/01/2011, (GBP) ...................... 1,740,761
1,075,000 AES Corp. (The)
8.875%, 11/01/2027 ............................ 860,000
750,000 American Airlines, Inc.
7.024%, 10/15/2009 ............................ 732,647
4,948,000 APL, Ltd.
8.000%, 1/15/2024 ............................. 3,463,600
1,285,965 Atlas Air, Inc.
7.680%, 1/02/2014 ............................. 507,956
800,000 Bausch & Lomb, Inc.
7.125%, 8/01/2028 ............................. 792,000
500,000 Boise Cascade Corp., Series A, Medium
Term Note 7.450%, 8/10/2011 ................... 518,223
1,750,000 Borden Chemical, Inc.
9.200%, 3/15/2021 ............................. 1,478,750
3,410,000 Borden Chemical, Inc.
7.875%, 2/15/2023 ............................. 2,796,200
900,000 Calpine Corp.
7.875%, 4/01/2008 ............................. 634,500
1,155,000 Calpine Corp.
7.750%, 4/15/2009 (c) ......................... 796,950
400,000 Calpine Corp., 144A
8.750%, 7/15/2013 ............................. 366,000
400,000 Charter Communications Holdings LLC
10.000%, 4/01/2009 ............................ 316,000
500,000 Charter Communications Holdings LLC
9.625%, 11/15/2009 ............................ 386,250
See accompanying notes to financial statements.
23
LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
UNITED STATES -- continued
$ 100,000 Coastal Corp.
6.950%, 6/01/2028 ............................. $ 68,250
250,000 Continental Airlines, Inc.
8.000%, 12/15/2005 (c) ........................ 229,375
642,498 Continental Airlines, Inc., Class A-1
6.703%, 6/15/2021 ............................. 624,640
750,000 Continental Airlines, Inc., Class C-2
7.434%, 9/15/2004 ............................. 702,714
250,000 Corning, Inc.
7.000%, 3/15/2007 ............................. 249,687
650,000 Corning, Inc.
6.750%, 9/15/2013 ............................. 640,250
350,000 Corning, Inc., Medium Term Note
8.300%, 4/04/2025 ............................. 353,500
250,000 CSC Holdings, Inc.
8.125%, 7/15/2009 ............................. 257,500
250,000 CSC Holdings, Inc.
8.125%, 8/15/2009 ............................. 257,500
400,000 CSC Holdings, Inc.
7.875%, 2/15/2018 ............................. 390,000
350,000 Cummins, Inc.
7.125%, 3/01/2028 ............................. 318,937
250,000 Dana Corp.
9.000%, 8/15/2011, (EUR) ...................... 307,335
125,000 Dana Corp.
7.000%, 3/15/2028 ............................. 112,500
1,000,000 Dana Corp.
7.000%, 3/01/2029 ............................. 900,000
250,000 Delta Air Lines, Inc.
10.125%, 5/15/2010 ............................ 193,125
2,075,000 Delta Air Lines, Inc.
8.300%, 12/15/2029 ............................ 1,338,375
400,000 Dillard's, Inc.
6.625%, 1/15/2018 ............................. 340,000
1,500,000 Dillard's, Inc.
7.750%, 7/15/2026 ............................. 1,312,500
250,000 Dillard's, Inc.
7.000%, 12/01/2028 ............................ 200,000
3,015,000 El Paso Corp.
5.750%, 3/14/2006, (EUR) ...................... 3,056,509
7,000,000 Federal Home Loan Mortgage Corp.
4.625%, 2/15/2007, (EUR) ...................... 8,573,389
34,000,000 Federal National Mortgage Association,
Zero Coupon, 10/29/2007, (NZD) ................ 15,979,267
1,000,000 First Industrial LP
7.600%, 7/15/2028 ............................. 1,068,028
1,000,000 Foot Locker, Inc.
8.500%, 1/15/2022 ............................. 1,050,000
150,000 Ford Motor Co.
6.625%, 10/01/2028 ............................ 126,438
125,000 Ford Motor Credit Co.
7.250%, 2/22/2005, (GBP) ...................... 211,902
250,000 Ford Motor Credit Co.
6.875%, 2/01/2006 ............................. 265,952
1,700,000 Georgia-Pacific Corp.
7.375%, 12/01/2025 ............................ 1,504,500
950,000 Georgia-Pacific Corp.
7.250%, 6/01/2028 ............................. 826,500
2,850,000 Georgia-Pacific Corp.
7.750%, 11/15/2029 ............................ 2,582,813
250,000 Hasbro, Inc.
6.600%, 7/15/2028 ............................. 230,000
500,000 HCA, Inc.
7.500%, 12/15/2023 ............................ 507,221
820,000 HCA, Inc.
7.050%, 12/01/2027 ............................ 794,965
500,000 HCA, Inc., Medium Term Note
7.580%, 9/15/2025 ............................. 512,429
250,000 Host Marriott Corp.
7.875%, 8/01/2008 ............................. 256,875
1,515,000 IMC Global, Inc.
6.875%, 7/15/2007 (c) ......................... 1,371,075
1,055,000 IMC Global, Inc.
7.375%, 8/01/2018 ............................. 801,800
2,500,000 IMC Global, Inc.
7.300%, 1/15/2028 ............................. 1,800,000
900,000 J.C. Penney Co., Inc.
7.650%, 8/15/2016 ............................. 940,500
350,000 J.C. Penney Co., Inc.
7.950%, 4/01/2017 ............................. 369,250
870,000 J.C. Penney Co., Inc.
8.250%, 8/15/2022 ............................. 896,100
1,625,000 J.C. Penney Co., Inc.
7.125%, 11/15/2023 ............................ 1,535,625
250,000 J.C. Penney Co., Inc.
8.125%, 4/01/2027 ............................. 256,250
250,000 J.C. Penney Co., Inc. Medium Term Note
6.875%, 10/15/2015 ............................ 246,250
500,000 La Quinta Corp., 144A
8.875%, 3/15/2011 ............................. 541,875
770,000 Lucent Technologies, Inc.
5.500%, 11/15/2008 (c) ........................ 654,500
6,220,000 Lucent Technologies, Inc.
6.450%, 3/15/2029 ............................. 4,330,675
66,000 Missouri Pacific Railroad Co.
4.250%, 1/01/2005 ............................. 67,703
793,000 Missouri Pacific Railroad Co.
5.000%, 1/01/2045 ............................. 552,126
125,000 Motorola, Inc.
6.500%, 11/15/2028 ............................ 120,469
750,000 Nextel Communications, Inc.
9.375%, 11/15/2009 ............................ 813,750
1,400,000 Nextel Communications, Inc.
9.500%, 2/01/2011 ............................. 1,547,000
2,200,000 Northern Telecom Capital
7.875%, 6/15/2026 ............................. 2,112,000
1,000,000 Phillips Van-Heusen Corp.
7.750%, 11/15/2023 ............................ 980,000
250,000 Pioneer Natural Resources Co.
7.200%, 1/15/2028 ............................. 263,750
1,000,000 ProLogis Trust
7.625%, 7/01/2017 ............................. 1,182,659
1,000,000 Provident Cos., Inc.
7.250%, 3/15/2028 ............................. 991,242
1,300,000 Qwest Capital Funding, Inc.
7.000%, 8/03/2009 ............................. 1,160,250
See accompanying notes to financial statements.
24
LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
UNITED STATES -- continued
$ 250,000 Qwest Capital Funding, Inc.
7.900%, 8/15/2010 (c) ......................... $ 227,500
600,000 Qwest Capital Funding, Inc.
6.500%, 11/15/2018 ............................ 471,000
1,050,000 Qwest Capital Funding, Inc.
7.625%, 8/03/2021 ............................. 903,000
4,370,000 Qwest Capital Funding, Inc.
6.875%, 7/15/2028 ............................. 3,452,300
1,700,000 Qwest Capital Funding, Inc.
7.750%, 2/15/2031 ............................. 1,445,000
750,000 Qwest Corp.
5.625%, 11/15/2008 ............................ 731,250
1,000,000 Qwest Corp.
7.500%, 6/15/2023 ............................. 935,000
100,000 Qwest Corp.
7.250%, 9/15/2025 ............................. 91,000
500,000 Qwest Corp.
7.200%, 11/10/2026 ............................ 450,000
250,000 Qwest Corp.
8.875%, 6/01/2031 ............................. 261,250
500,000 RCN Corp.
10.125%, 1/15/2010 (c) ........................ 227,500
241,721 Salton Sea Funding Corp.
7.840%, 5/30/2010 ............................. 255,015
1,522,060 South Point Energy Center LLC,144A
8.400%, 5/30/2012 ............................. 1,430,736
500,000 Southern California Edison Co.
6.375%, 1/15/2006 ............................. 525,000
600,000 Southern California Edison Co.
7.625%, 1/15/2010 ............................. 643,500
230,000 Southern California Edison Co.
7.125%, 7/15/2025 ............................. 232,875
125,000 Southern California Edison Co.
7.250%, 3/01/2026 ............................. 127,188
750,000 Southern California Edison Co.
6.650%, 4/01/2029 ............................. 701,250
600,000 Sprint Capital Corp.
6.125%, 11/15/2008 ............................ 647,723
250,000 Sprint Capital Corp.
6.875%, 11/15/2028 ............................ 243,750
650,000 Tennessee Gas Pipeline
7.500%, 4/01/2017 (c) ......................... 620,750
500,000 Tennessee Gas Pipeline Co.
7.000%, 10/15/2028 ............................ 433,750
500,000 Tiverton Power Associates LP, 144A
9.000%, 7/15/2018 ............................. 420,000
3,050,000 Trico Marine Services, Inc.
8.875%, 5/15/2012 ............................. 2,226,500
250,000 United Rentals, Inc.
9.500%, 6/01/2008 (c) ......................... 258,750
850,000 United Rentals, Inc.
9.250%, 1/15/2009 (c) ......................... 879,750
300,000 UnumProvident Corp.
7.375%, 6/15/2032 ............................. 300,000
500,000 Williams Cos. (The), Inc.
7.125%, 9/01/2011 ............................. 493,750
600,000 Williams Cos. (The), Inc.
7.875%, 9/01/2021 ............................. 567,000
3,000,000 Williams Cos. (The), Inc.
7.500%, 1/15/2031 ............................. 2,670,000
1,250,000 Williams Holdings of Delaware
6.500%, 12/01/2008 ............................ 1,212,500
1,600,000 Xerox Corp.
3.500%, 2/04/2004, (EUR) ...................... 1,859,739
155,000 Xerox Corp., Medium Term Note
7.200%, 4/01/2016 ............................. 144,925
-------------
113,301,913
-------------
URUGUAY -- 0.5%
1,600,000 Republic of Uruguay
7.500%, 3/15/2015 ............................. 1,232,000
400,000 Republic of Uruguay
7.875%, 1/15/2033 ............................. 269,000
-------------
1,501,000
-------------
VENEZUELA -- 2.1%
205,000 Cerro Negro Finance, Ltd., 144A
7.330%, 12/01/2009 ............................ 189,625
3,650,000 Cerro Negro Finance, Ltd., 144A
7.900%, 12/01/2020 ............................ 2,847,000
1,000,000 Petrozuata Finance, Inc., 144A
8.220%, 4/01/2017 ............................. 855,000
3,640,000 Republic of Venezuela
9.250%, 9/15/2027 (c) ......................... 2,817,360
-------------
6,708,985
-------------
Total Non-Convertible Bonds
(Identified Cost $230,176,266) ................ 257,068,840
-------------
Total Bonds and Notes
(Identified Cost $256,533,183) ................ 286,552,031
-------------
SHARES
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 5.5% OF TOTAL NET ASSETS
PHILIPPINES -- 1.0%
83,750 Philippine Long Distance Telephone Co. (GDR)
$14.00, 12/31/2049 ............................ 3,366,750
-------------
THAILAND -- 0.0%
64,100 Siam Commercial Bank PLC (e) .................. 61,650
-------------
UNITED STATES -- 4.5%
5,000 Chesapeake Energy Corp......................... 378,250
51,500 Cummins Capital Trust I (c) ................... 3,041,023
17,700 Equity Residential ............................ 461,616
24,550 Host Marriott Financial Trust (c) ............. 1,169,194
71,800 International Paper Capital Trust (c) ......... 3,509,225
7,145 La Quinta Properties .......................... 178,411
4,250 Lucent Technologies Capital Trust I (c) ....... 3,526,357
22,500 Owens Corning Capital LLC (d) (e) ............. 101,250
37,500 Pacific Gas and Electric Co. (d) (e) .......... 1,106,250
600 Pacific Gas and Electric Co. (d) (e) .......... 13,170
500 Pacific Gas and Electric Co.,
Series D (d) (e) .............................. 11,625
400 Pacific Gas and Electric Co.,
Series E (d) (e) .............................. 9,000
9,500 Southern California Edison Co.................. 954,750
7,500 Western Gas Resources, Inc. ................... 393,750
-------------
14,853,871
-------------
Total Preferred Stocks
(Identified Cost $17,419,738) ................. 18,282,271
-------------
See accompanying notes to financial statements.
25
LOOMIS SAYLES STRATEGIC INCOME FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
SHARES DESCRIPTION VALUE (a)
- -------------------------------------------------------------------------------
COMMON STOCKS -- 3.7%
INDONESIA -- 0.1%
6,786,500 PT Indah Kiat Pulp & Paper Corp. (e) .......... $ 367,821
-------------
UNITED STATES -- 3.6%
162,900 Associated Estates Realty Corp., .............. 1,062,108
182,500 Developers Diversified Realty Corp. (REIT) .... 5,451,275
117,700 Simon Property Group, Inc...................... 5,129,366
-------------
11,642,749
-------------
Total Common Stocks
(Identified Cost $10,571,980) ................. 12,010,570
-------------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
SHORT TERM INVESTMENTS -- 8.6%
$ 6,567,050 Repurchase Agreement with Investors Bank &
Trust Co. dated 9/30/2003 at 0.75% to be
repurchased at $6,567,187 on 10/01/2003,
collateralized by $6,864,778 Federal Home Loan
Mortgage Bond, 1.62%, due 03/25/2033 valued at
$6,896,162 .................................... 6,567,050
510,002 Bank of Montreal, 1.04%, due 10/14/2003 (h) ... 510,002
1,473,363 Bank of Nova Scotia, 1.06%, due 10/29/2003(h) . 1,473,363
1,768,036 Bank of Nova Scotia, 1.06%, due 11/12/2003(h) . 1,768,036
1,178,691 BNP Paribas, 1.03%, due 10/10/2003 (h) ........ 1,178,691
2,652,054 BNP Paribas, 1.03%, due 10/14/2003 (h) ........ 2,652,054
88,402 Comerica Bank, 1.10%, due 11/19/2003 (h) ...... 88,402
1,178,690 Credit Agricole Indosuez, 1.06%,
due 10/22/2003 (h) ............................ 1,178,690
884,018 Den Danske Bank, 1.04%, due 10/09/2003 (h) .... 884,018
2,062,708 Fleet National Bank, 1.188%, due 1/21/2004(h) . 2,062,708
589,345 Liberty Lighthouse Funding, 1.072%,
due 10/17/2003 (h) ............................ 589,345
127,542 Merrill Lynch Premier Institutional Fund,
1.033%, due 10/01/2003 (h) .................... 127,542
4,241,856 Merrimac Cash Fund-Premium Class,
0.974%, due 10/01/2003 (h) .................... 4,241,856
589,345 Royal Bank of Scotland, 1.05%,
due 10/08/2003 (h) ............................ 589,345
1,178,691 Royal Bank of Scotland, 1.04%,
due 10/14/2003 (h) ............................ 1,178,691
294,673 Sheffield Receivables Corp, 1.061%,
due 10/22/2003 (h) ............................ 294,673
884,018 The Bank of the West, 1.06%,
due 10/10/2003 (h) ............................ 884,018
294,673 Toronto Dominion Bank, 1.07%,
due 12/19/2003 (h) ............................ 294,673
1,473,363 Wells Fargo, 1.06%, due 10/15/2003 (h) ........ 1,473,363
-------------
Total Short Term Investments
(Identified Cost $28,036,520) ................. 28,036,520
-------------
Total Investments -- 105.3%
(Identified Cost $312,561,421) (b) ............ 344,881,392
Other assets less liabilities ................. (17,500,547)
-------------
Total Net Assets -- 100% ...................... $ 327,380,845
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation on
investments based on cost of $311,532,781 for federal income
tax purposes was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an excess
of value over tax cost ........................ $ 42,849,274
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value ........................ (9,500,663)
-------------
Net unrealized appreciation ................... $ 33,348,611
=============
At September 30, 2003, the Fund had a capital loss carryover of
approximately $59,524,682 of which $13,337,197 expires on
September 30, 2007, $6,500,127 expires on September 30, 2008,
$10,848,517 expires on September 30, 2009, $21,770,312 expires
on September 30, 2010 and $7,068,529 expires on September 30,
2011. This may be available to offset future realized capital
gains, if any, to the extent provided by regulations.
At September 30, 2003, the components of distributable earnings,
excluding unrealized appreciation/depreciation, disclosed on a
tax basis consisted of $2,073,537 in undistributed ordinary
income and $0 in undistributed long-term gains.
(c) All or a portion of this security was on loan to brokers at
September 30, 2003.
(d) Issuer filed petition under Chapter 11 of the Federal Bankruptcy
Code.
(e) Non-income producing security.
(f) Pay in kind security.
(g) Step Bond: Coupon rate is zero or below market for an initial
period and then increases to a higher coupon rate at a specified
date and rate.
(h) Represents investments of securities lending collateral.
(i) Security valued at fair value as determined in good faith by or
under the direction of the Board of Trustees.
REIT Real Estate Investment Trust
ADR/GDR An American Depositary (ADR) or Global Depositary Receipt (GDR)
is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The
values of ADRs and GDRs are significantly influenced by trading
144A Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registrations, normally to qualified
institutional buyers. At the period end, the value of these
amounted to $29,449,654 or 9.0% of net assets.
CAD - Canadian Dollar
EUR - Euro
GBP - British Pound
IDR - Indonesian Rupiah
NOK - Norwegian Krone
NZD - New Zealand Dollars
THB - Thai Baht
ZAR - South African Rand
Industry Holdings At September 30, 2003 (unaudited)
Sovereigns 20.8% Supranationals 3.2%
Financial Services 8.6 Government 3.0
U.S. Government Agencies 7.5 Paper 2.7
Wirelines 7.2 Information/Data Technology 2.4
Electric 6.2 Pipelines 2.3
Foreign Local Governments 6.1 Retailers 2.3
Electronics 5.0 Railroads 2.1
Real Estate Investment Trusts 4.1 Other, less than 2% each 21.8
See accompanying notes to financial statements.
26
STATEMENTS OF ASSETS & LIABILITIES
September 30, 2003
CORE PLUS BOND GOVERNMENT HIGH INCOME
FUND SECURITIES FUND FUND
----------------- ----------------- -----------------
ASSETS
Investments at cost ............................ $ 321,108,663 $ 94,783,516 $ 52,741,971
Net unrealized appreciation .................... 15,272,105 4,277,512 3,069,829
----------------- ----------------- -----------------
Investments at value ......................... 336,380,768 99,061,028 55,811,800
Cash ........................................... 2,209 832 1,690
Receivable for Fund shares sold ................ 535,255 7,267 54,746
Receivable for securities sold ................. 10,461,710 -- 233,790
Dividends and interest receivable .............. 3,829,140 1,257,549 1,088,702
Tax reclaims receivable ........................ -- -- --
Securities lending income receivable ........... 2,975 1,280 1,805
----------------- ----------------- -----------------
TOTAL ASSETS ................................. 351,212,057 100,327,956 57,192,533
----------------- ----------------- -----------------
LIABILITIES
Collateral on securities loaned, at value ...... 17,642,007 12,975,600 6,523,010
Payable for securities purchased ............... 11,168,509 -- 316,503
Payable for Fund shares redeemed ............... 361,157 217,889 64,265
Dividends payable .............................. 359,926 29,842 86,028
Management fees payable ........................ 107,775 38,838 28,744
Deferred Trustees' fees ........................ 121,157 63,706 25,547
Transfer agent fees payable .................... 629,921 23,110 13,761
Accounting and administrative fees payable ..... 20,863 5,750 3,224
Other accounts payable and accrued expenses .... 95,782 53,471 59,678
----------------- ----------------- -----------------
TOTAL LIABILITIES ............................ 30,507,097 13,408,206 7,120,760
----------------- ----------------- -----------------
NET ASSETS ....................................... $ 320,704,960 $ 86,919,750 $ 50,071,773
================= ================= =================
NET ASSETS CONSIST OF:
Paid in capital ................................ $ 335,067,794 $ 91,676,266 $ 134,411,210
Undistributed (overdistributed) net
investment income (loss) ...................... 1,397,403 (18,577) (111,575)
Accumulated net realized gain (loss)
on investments ................................ (31,039,662) (9,015,451) (87,297,691)
Net unrealized appreciation
(depreciation) of investments ................. 15,279,425 4,277,512 3,069,829
----------------- ----------------- -----------------
NET ASSETS ....................................... $ 320,704,960 $ 86,919,750 $ 50,071,773
================= ================= =================
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
CLASS A SHARES:
Net assets ................................... $ 133,887,366 $ 68,882,299 $ 23,809,445
================= ================= =================
Shares of beneficial interest ................ 11,509,463 5,697,480 5,118,870
================= ================= =================
Net asset value and redemption price
per share ................................... $ 11.63 $ 12.09 $ 4.65
================= ================= =================
Offering price per share ..................... $ 12.18 $ 12.66 $ 4.87
================= ================= =================
CLASS B SHARES: (redemption price is equal to
net asset value less any applicable contingent
deferred sales charges)
Net assets ................................... $ 161,316,516 $ 15,101,224 $ 23,404,523
================= ================= =================
Shares of beneficial interest ................ 13,877,035 1,248,363 5,028,240
================= ================= =================
Net asset value and offering price per
share ....................................... $ 11.62 $ 12.10 $ 4.65
================= ================= =================
CLASS C SHARES: (redemption price is equal to
net asset value less any applicable contingent
deferred sales charges)
Net assets ................................... $ 7,612,428 $ -- $ 2,857,805
================= ================= =================
Shares of beneficial interest ................ 654,435 -- 614,199
================= ================= =================
Net asset value per share .................... $ 11.63 $ -- $ 4.65
================= ================= =================
Offering price per share ..................... $ 11.75 $ -- $ 4.70
================= ================= =================
CLASS Y SHARES:
Net assets ................................... $ 17,888,650 $ 2,936,227 $ --
================= ================= =================
Shares of beneficial interest ................ 1,530,775 243,360 --
================= ================= =================
Net asset value, offering and redemption
price per share ............................. $ 11.69 $ 12.07 $ --
================= ================= =================
27
LIMITED TERM U.S. STRATEGIC INCOME
GOVERNMENT FUND FUND
----------------- -----------------
ASSETS
Investments at cost ............................ $ 165,659,341 $ 312,561,421
Net unrealized appreciation .................... 2,540,922 32,319,971
----------------- -----------------
Investments at value ......................... 168,200,263 344,881,392
Cash ........................................... 615 3,293
Receivable for Fund shares sold ................ 477,293 2,726,662
Receivable for securities sold ................. 61,401 519,875
Dividends and interest receivable .............. 1,136,378 4,937,156
Tax reclaims receivable ........................ -- 6,035
Securities lending income receivable ........... 1,451 4,956
----------------- -----------------
TOTAL ASSETS ................................. 169,877,401 353,079,369
----------------- -----------------
LIABILITIES
Collateral on securities loaned, at value ...... 17,450,346 21,469,470
Payable for securities purchased ............... 4,418,768 3,090,963
Payable for Fund shares redeemed ............... 266,405 458,773
Dividends payable .............................. 83,419 350,034
Management fees payable ........................ 68,823 93,024
Deferred Trustees' fees ........................ 38,670 52,502
Transfer agent fees payable .................... 26,431 63,895
Accounting and administrative fees payable ..... 9,807 19,508
Other accounts payable and accrued expenses .... 62,117 100,355
----------------- -----------------
TOTAL LIABILITIES ............................ 22,424,786 25,698,524
----------------- -----------------
NET ASSETS ....................................... $ 147,452,615 $ 327,380,845
================= =================
NET ASSETS CONSIST OF:
Paid in capital ................................ $ 169,387,804 $ 352,438,529
Undistributed (overdistributed) net
investment income (loss) ...................... (122,089) 2,204,718
Accumulated net realized gain (loss)
on investments ................................ (24,354,022) (59,724,057)
Net unrealized appreciation
(depreciation) of investments ................. 2,540,922 32,461,655
----------------- -----------------
NET ASSETS ....................................... $ 147,452,615 $ 327,380,845
================= =================
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
CLASS A SHARES:
Net assets ................................... $ 117,225,261 $ 140,576,212
================= =================
Shares of beneficial interest ................ 10,186,151 11,180,401
================= =================
Net asset value and redemption price
per share ................................... $ 11.51 $ 12.57
================= =================
Offering price per share ..................... $ 11.87 $ 13.16
================= =================
CLASS B SHARES: (redemption price is equal to
net asset value less any applicable contingent
deferred sales charges)
Net assets ................................... $ 14,637,443 $ 118,217,312
================= =================
Shares of beneficial interest ................ 1,274,084 9,391,165
================= =================
Net asset value and offering price per
share ....................................... $ 11.49 $ 12.59
================= =================
CLASS C SHARES: (redemption price is equal to
net asset value less any applicable contingent
deferred sales charges)
Net assets ................................... $ 8,703,510 $ 66,393,945
================= =================
Shares of beneficial interest ................ 756,682 5,279,319
================= =================
Net asset value per share .................... $ 11.50 $ 12.58
================= =================
Offering price per share ..................... $ 11.62 $ 12.71
================= =================
CLASS Y SHARES:
Net assets ................................... $ 6,886,401 $ 2,193,376
================= =================
Shares of beneficial interest ................ 596,081 174,311
================= =================
Net asset value, offering and redemption
price per share ............................. $ 11.55 $ 12.58
================= =================
See accompanying notes to financial statements.
28
STATEMENTS OF OPERATIONS
CORE PLUS BOND GOVERNMENT
FUND SECURITIES FUND
----------------------------------- ------------------------------------
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 2003 JANUARY 1, 2003
THROUGH YEAR ENDED THROUGH YEAR ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2003 2002 2003 2002
---------------- ---------------- ---------------- ----------------
INVESTMENT INCOME
Dividends ...................................... $ -- $ -- $ -- $ --
Interest ....................................... 13,410,555 21,719,386 3,115,863 4,694,881
Securities lending income ...................... 25,490 83,135 8,332 12,645
Less net foreign taxes withheld ................ -- -- -- --
---------------- ---------------- ---------------- ----------------
13,436,045 21,802,521 3,124,195 4,707,526
---------------- ---------------- ---------------- ----------------
Expenses
Management fees .............................. 995,746 1,317,903 394,280 502,700
Service and distribution fees - Class A ...... 263,615 397,181 139,173 177,887
Service and distribution fees - Class B ...... 1,147,439 1,314,367 129,149 142,039
Service and distribution fees - Class C ...... 62,083 103,081 -- --
Trustees' fees and expenses .................. 50,068 13,603 23,441 4,721
Accounting and administrative ................ 195,955 181,783 58,828 52,701
Custodian .................................... 58,142 102,256 31,928 46,353
Transfer agent fees - Class A, Class B,
Class C ..................................... 914,271 1,054,730 149,894 196,764
Transfer agent fees - Class Y ................ 14,203 17,483 3,103 6,057
Audit and tax services ....................... 38,619 41,113 31,621 33,910
Legal ........................................ 25,740 25,405 13,139 8,350
Shareholder reporting ........................ 84,219 81,741 28,876 14,864
Registration ................................. 43,320 48,063 24,919 35,888
Miscellaneous ................................ 14,671 16,071 7,005 6,492
---------------- ---------------- ---------------- ----------------
Total expenses ................................. 3,908,091 4,714,780 1,035,356 1,228,726
Less reimbursement/waiver .................... -- -- -- --
---------------- ---------------- ---------------- ----------------
Net expenses ................................... 3,908,091 4,714,780 1,035,356 1,228,726
---------------- ---------------- ---------------- ----------------
Net investment income .......................... 9,527,954 17,087,741 2,088,839 3,478,800
---------------- ---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net .............................. 3,851,142 (18,249,823) 2,186,050 1,754,365
Foreign currency transactions - net ............ 13,541 (474,993) -- --
Change in unrealized appreciation
(depreciation) of:
Investments - net .............................. 5,543,096 9,018,685 (1,862,032) 6,101,934
Foreign currency transactions - net ............ 6,867 948 -- --
---------------- ---------------- ---------------- ----------------
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .................................... 9,414,646 (9,705,183) 324,018 7,856,299
---------------- ---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ....................... $ 18,942,600 $ 7,382,558 $ 2,412,857 $ 11,335,099
================ ================ ================ ================
HIGH INCOME
FUND
-----------------------------------
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
2003 2002
---------------- ----------------
INVESTMENT INCOME
Dividends ...................................... $ 1,359 $ 51,272
Interest ....................................... 3,459,069 5,975,219
Securities lending income ...................... 13,307 41,684
Less net foreign taxes withheld ................ -- --
---------------- ----------------
3,473,735 6,068,175
---------------- ----------------
Expenses
Management fees .............................. 260,331 407,408
Service and distribution fees - Class A ...... 44,308 67,018
Service and distribution fees - Class B ...... 174,650 282,083
Service and distribution fees - Class C ...... 20,020 31,502
Trustees' fees and expenses .................. 14,156 7,362
Accounting and administrative ................ 30,130 32,625
Custodian .................................... 35,037 61,978
Transfer agent fees - Class A, Class B,
Class C ..................................... 96,392 161,543
Transfer agent fees - Class Y ................ -- --
Audit and tax services ....................... 45,593 43,680
Legal ........................................ 6,514 3,938
Shareholder reporting ........................ 22,083 12,894
Registration ................................. 25,658 34,364
Miscellaneous ................................ 6,883 6,821
---------------- ----------------
Total expenses ................................. 781,755 1,153,216
Less reimbursement/waiver .................... -- --
---------------- ----------------
Net expenses ................................... 781,755 1,153,216
---------------- ----------------
Net investment income .......................... 2,691,980 4,914,959
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net .............................. 1,766,058 (20,594,051)
Foreign currency transactions - net ............ -- --
Change in unrealized appreciation
(depreciation) of:
Investments - net .............................. 4,199,027 9,402,597
Foreign currency transactions - net ............ -- --
---------------- ----------------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ... 5,965,085 (11,191,454)
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ....................... $ 8,657,065 $ (6,276,495)
================ ================
See accompanying notes to financial statements.
29
LIMITED TERM U.S. STRATEGIC INCOME
GOVERNMENT FUND FUND
----------------------------------- ------------------------------------
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 2003 JANUARY 1, 2003
THROUGH YEAR ENDED THROUGH YEAR ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2003 2002 2003 2002
---------------- ---------------- ---------------- ----------------
INVESTMENT INCOME
Dividends ...................................... $ -- $ -- $ 1,177,547 $ 1,095,855
Interest ....................................... 4,159,692 6,797,682 14,446,654 17,835,698
Securities lending income ...................... 7,315 21,533 17,252 36,471
Less net foreign taxes withheld ................ -- -- (24,014) (34,444)
---------------- ---------------- ---------------- ----------------
4,167,007 6,819,215 15,617,439 18,933,580
---------------- ---------------- ---------------- ----------------
Expenses
Management fees .............................. 628,035 774,861 1,282,724 1,404,810
Service and distribution fees - Class A ...... 301,134 373,753 212,541 226,621
Service and distribution fees - Class B ...... 119,150 144,101 825,818 984,230
Service and distribution fees - Class C ...... 65,626 68,615 325,425 277,462
Trustees' fees and expenses .................. 23,202 11,830 32,622 15,683
Accounting and administrative ................ 89,774 78,121 162,160 124,140
Custodian .................................... 40,914 70,017 74,674 119,059
Transfer agent fees - Class A, Class B,
Class C ..................................... 200,540 290,059 389,066 512,586
Transfer agent fees - Class Y ................ 5,666 7,891 1,181 656
Audit and tax services ....................... 31,669 33,997 47,757 45,980
Legal ........................................ 14,985 13,532 20,804 19,971
Shareholder reporting ........................ 37,554 16,188 66,348 33,801
Registration ................................. 32,613 47,216 36,280 45,767
Miscellaneous ................................ 8,780 8,232 19,733 16,444
---------------- ---------------- ---------------- ----------------
Total expenses ................................. 1,599,642 1,938,413 3,497,133 3,827,210
Less reimbursement/waiver .................... -- -- (69,643) --
---------------- ---------------- ---------------- ----------------
Net expenses ................................... 1,599,642 1,938,413 3,427,490 3,827,210
---------------- ---------------- ---------------- ----------------
Net investment income .......................... 2,567,365 4,880,802 12,189,949 15,106,370
---------------- ---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net .............................. 1,309,685 2,104,690 (5,012,440) (21,138,332)
Foreign currency transactions - net ............ -- -- 458,794 (109,875)
Change in unrealized appreciation
(depreciation) of:
Investments - net .............................. (2,298,347) 3,563,852 47,693,301 36,446,412
Foreign currency transactions - net ............ -- -- 14,283 114,313
---------------- ---------------- ---------------- ----------------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions ... (988,662) 5,668,542 43,153,938 15,312,518
---------------- ---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ....................... $ 1,578,703 $ 10,549,344 $ 55,343,887 $ 30,418,888
================ ================ ================ ================
See accompanying notes to financial statements.
30
STATEMENTS OF CHANGES IN NET ASSETS
CORE PLUS BOND
FUND
--------------------------------------------------------
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001
---------------- ---------------- ----------------
FROM OPERATIONS:
Net investment income .......................... $ 9,527,954 $ 17,087,741 $ 19,095,393
Net realized gain (loss) on investments and
foreign currency transactions ................. 3,864,683 (18,724,816) (2,966,830)
Net change in unrealized appreciation
(depreciation) of investments ................. 5,549,963 9,019,633 5,153,817
---------------- ---------------- ----------------
Increase (decrease) in net assets resulting
from operations ............................... 18,942,600 7,382,558 21,282,380
---------------- ---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A ...................................... (4,447,575) (8,791,213) (11,319,336)
Class B ...................................... (4,047,373) (6,316,934) (6,512,472)
Class C ...................................... (220,936) (498,081) (697,417)
Class Y ...................................... (668,802) (1,050,339) (1,060,888)
---------------- ---------------- ----------------
(9,384,686) (16,656,567) (19,590,113)
---------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS ......... (5,058,236) (4,698,171) 26,608,353
---------------- ---------------- ----------------
Total increase (decrease) in net assets ........ 4,499,678 (13,972,180) 28,300,620
---------------- ---------------- ----------------
NET ASSETS
Beginning of period ............................ 316,205,282 330,177,462 301,876,842
---------------- ---------------- ----------------
End of period .................................. $ 320,704,960 $ 316,205,282 $ 330,177,462
================ ================ ================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME ........................... $ 1,397,403 $ 127,794 $ (357,817)
================ ================ ================
GOVERNMENT
SECURITIES FUND
--------------------------------------------------------
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001
---------------- ---------------- ----------------
FROM OPERATIONS:
Net investment income .......................... $ 2,088,839 $ 3,478,800 $ 3,808,000
Net realized gain (loss) on investments and
foreign currency transactions ................. 2,186,050 1,754,365 2,078,357
Net change in unrealized appreciation
(depreciation) of investments ................. (1,862,032) 6,101,934 (1,860,288)
---------------- ---------------- ----------------
Increase (decrease) in net assets resulting
from operations ............................... 2,412,857 11,335,099 4,026,069
---------------- ---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A ...................................... (2,185,576) (3,186,452) (3,439,102)
Class B ...................................... (410,467) (530,909) (486,651)
Class C ...................................... -- -- --
Class Y ...................................... (133,483) (289,414) (245,868)
---------------- ---------------- ----------------
(2,729,526) (4,006,775) (4,171,621)
---------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS ......... (12,801,156) 4,088,509 2,920,494
---------------- ---------------- ----------------
Total increase (decrease) in net assets ........ (13,117,825) 11,416,833 2,774,942
---------------- ---------------- ----------------
NET ASSETS
Beginning of period ............................ 100,037,575 88,620,742 85,845,800
---------------- ---------------- ----------------
End of period .................................. $ 86,919,750 $ 100,037,575 $ 88,620,742
================ ================ ================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME ........................... $ (18,577) $ (16,246) $ 23,904
================ ================ ================
See accompanying notes to financial statements.
31
HIGH INCOME
FUND
--------------------------------------------------------
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001
---------------- ---------------- ----------------
FROM OPERATIONS:
Net investment income .......................... $ 2,691,980 $ 4,914,959 $ 9,962,123
Net realized gain (loss) on investments and
foreign currency transactions ................. 1,766,058 (20,594,051) (35,337,692)
Net change in unrealized appreciation
(depreciation) of investments ................. 4,199,027 9,402,597 15,823,831
---------------- ---------------- ----------------
Increase (decrease) in net assets resulting
from operations ............................... 8,657,065 (6,276,495) (9,551,738)
---------------- ---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A ...................................... (1,358,749) (2,389,509) (4,869,014)
Class B ...................................... (1,211,401) (2,310,655) (4,708,520)
Class C ...................................... (138,738) (257,610) (516,760)
Class Y ...................................... -- -- --
---------------- ---------------- ----------------
(2,708,888) (4,957,774) (10,094,294)
---------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS ......... (3,967,380) (13,012,003) (8,138,375)
---------------- ---------------- ----------------
Total increase (decrease) in net assets ........ 1,980,797 (24,246,272) (27,784,407)
---------------- ---------------- ----------------
NET ASSETS
Beginning of period ............................ 48,090,976 72,337,248 100,121,655
---------------- ---------------- ----------------
End of period .................................. $ 50,071,773 $ 48,090,976 $ 72,337,248
================ ================ ================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME ........................... $ (111,575) $ (128,268) $ (118,997)
================ ================ ================
32
STATEMENTS OF CHANGES IN NET ASSETS
LIMITED TERM U.S.
GOVERNMENT FUND
--------------------------------------------------------
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31, DECEMBER 31,
2003 2002 2001
---------------- ---------------- ----------------
FROM OPERATIONS:
Net investment income .......................... $ 2,567,365 $ 4,880,802 $ 6,144,504
Net realized gain (loss) on investments and
foreign currency transactions ................. 1,309,685 2,104,690 3,333,647
Net change in unrealized appreciation
(depreciation) of investments ................. (2,298,347) 3,563,852 (296,704)
---------------- ---------------- ----------------
Increase (decrease) in net assets resulting
from operations ............................... 1,578,703 10,549,344 9,181,447
---------------- ---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A ...................................... (3,580,991) (4,982,529) (5,640,601)
Class B ...................................... (420,988) (580,172) (537,161)
Class C ...................................... (230,278) (272,616) (301,631)
Class Y ...................................... (261,630) (402,890) (173,303)
---------------- ---------------- ----------------
(4,493,887) (6,238,207) (6,652,696)
---------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS ......... 11,483,457 1,774,899 (10,319,170)
---------------- ---------------- ----------------
Total increase (decrease) in net assets ........ 8,568,273 6,086,036 (7,790,419)
---------------- ---------------- ----------------
NET ASSETS
Beginning of period ............................ 138,884,342 132,798,306 140,588,725
---------------- ---------------- ----------------
End of period .................................. $ 147,452,615 $ 138,884,342 $ 132,798,306
================ ================ ================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME ........................... $ (122,089) $ (116,800) $ (105,749)
================ ================ ================
STRATEGIC INCOME
FUND
--------------------------------------------------------
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30 DECEMBER 31, DECEMBER 31,
2003 2002 2001
---------------- ---------------- ----------------
FROM OPERATIONS:
Net investment income .......................... $ 12,189,949 $ 15,106,370 $ 21,144,478
Net realized gain (loss) on investments and
foreign currency transactions ................. (4,553,646) (21,248,207) (15,296,601)
Net change in unrealized appreciation
(depreciation) of investments ................. 47,707,584 36,560,725 (7,360,361)
---------------- ---------------- ----------------
Increase (decrease) in net assets resulting
from operations ............................... 55,343,887 30,418,888 (1,512,484)
---------------- ---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income
Class A ...................................... (6,332,331) (5,702,309) (9,377,635)
Class B ...................................... (5,143,216) (5,565,705) (9,064,495)
Class C ...................................... (2,069,124) (1,567,724) (2,749,603)
Class Y ...................................... (95,199) (42,564) (36,701)
---------------- ---------------- ----------------
(13,639,870) (12,878,302) (21,228,434)
---------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS ......... 66,108,057 (23,656,108) (26,303,974)
---------------- ---------------- ----------------
Total increase (decrease) in net assets ........ 107,812,074 (6,115,522) (49,044,892)
---------------- ---------------- ----------------
NET ASSETS
Beginning of period ............................ 219,568,771 225,684,293 274,729,185
---------------- ---------------- ----------------
End of period .................................. $ 327,380,845 $ 219,568,771 $ 225,684,293
================ ================ ================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME ........................... $ 2,204,718 $ 3,205,477 $ 1,417,755
================ ================ ================
See accompanying notes to financial statements.
33
FINANCIAL HIGHLIGHTS
34
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------- ----------------------------------------------
NET ASSET
VALUE, NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING NET AND UNREALIZED TOTAL FROM FROM FROM NET
OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED TOTAL
THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
---------- ---------- -------------- ---------- -------------- ------------- -------------
CORE PLUS BOND FUND
CLASS A
09/30/2003(f) $ 11.28 $ 0.37(c) $ 0.34 $ 0.71 $ (0.36) $ -- $ (0.36)
12/31/2002 11.59 0.63(c) (0.32) 0.31 (0.62) -- (0.62)
12/31/2001(d) 11.52 0.73 0.10 0.83 (0.76) -- (0.76)
12/31/2000 11.51 0.78 0.03 0.81 (0.80) -- (0.80)
12/31/1999 12.36 0.81 (0.86) (0.05) (0.79) (0.01) (0.80)
12/31/1998 12.39 0.81 0.15 0.96 (0.81) (0.18) (0.99)
CLASS B
09/30/2003(f) 11.28 0.30(c) 0.34 0.64 (0.30) -- (0.30)
12/31/2002 11.59 0.55(c) (0.32) 0.23 (0.54) -- (0.54)
12/31/2001(d) 11.51 0.64 0.10 0.74 (0.66) -- (0.66)
12/31/2000 11.51 0.70 0.02 0.72 (0.72) -- (0.72)
12/31/1999 12.36 0.72 (0.86) (0.14) (0.70) (0.01) (0.71)
12/31/1998 12.39 0.71 0.15 0.86 (0.71) (0.18) (0.89)
CLASS C
09/30/2003(f) 11.29 0.30(c) 0.34 0.64 (0.30) -- (0.30)
12/31/2002 11.60 0.55(c) (0.32) 0.23 (0.54) -- (0.54)
12/31/2001(d) 11.52 0.65 0.09 0.74 (0.66) -- (0.66)
12/31/2000 11.52 0.70 0.02 0.72 (0.72) -- (0.72)
12/31/1999 12.37 0.72 (0.86) (0.14) (0.70) (0.01) (0.71)
12/31/1998 12.40 0.71 0.15 0.86 (0.71) (0.18) (0.89)
CLASS Y
09/30/2003(f) 11.33 0.41(c) 0.35 0.76 (0.40) -- (0.40)
12/31/2002 11.63 0.69(c) (0.32) 0.37 (0.67) -- (0.67)
12/31/2001(d) 11.54 0.79 0.10 0.89 (0.80) -- (0.80)
12/31/2000 11.54 0.83 0.01 0.84 (0.84) -- (0.84)
12/31/1999 12.38 0.85 (0.86) (0.01) (0.82) (0.01) (0.83)
12/31/1998 12.41 0.84 0.15 0.99 (0.84) (0.18) (1.02)
GOVERNMENT SECURITIES
FUND
CLASS A
09/30/2003(f) $ 12.12 $ 0.26(c) $ 0.06 $ 0.32 $ (0.35) $ -- $ (0.35)
12/31/2002 11.18 0.45(c) 1.01 1.46 (0.52) -- (0.52)
12/31/2001(d) 11.18 0.50 0.05 0.55 (0.55) -- (0.55)
12/31/2000 10.47 0.62 0.69 1.31 (0.60) -- (0.60)
12/31/1999 11.90 0.67 (1.42) (0.75) (0.68) -- (0.68)
12/31/1998 11.56 0.68 0.33 1.01 (0.67) -- (0.67)
CLASS B
09/30/2003(f) 12.12 0.20(c) 0.07 0.27 (0.29) -- (0.29)
12/31/2002 11.17 0.36(c) 1.02 1.38 (0.43) -- (0.43)
12/31/2001(d) 11.18 0.42 0.03 0.45 (0.46) -- (0.46)
12/31/2000 10.47 0.54 0.69 1.23 (0.52) -- (0.52)
12/31/1999 11.90 0.59 (1.42) (0.83) (0.60) -- (0.60)
12/31/1998 11.56 0.58 0.34 0.92 (0.58) -- (0.58)
35
RATIOS TO AVERAGE
NET ASSETS:
---------------------
NET ASSET NET ASSETS, NET
VALUE, TOTAL END OF INVESTMENT PORTFOLIO
END OF RETURN THE PERIOD EXPENSES INCOME TURNOVER
THE PERIOD (%)(a) (000) (%)(b) (%)(b) RATE (%)
---------- ------- ----------- -------- ---------- ---------
CORE PLUS BOND FUND
CLASS A
09/30/2003(f) $ 11.63 6.4 $ 133,887 1.28 4.31 61
12/31/2002 11.28 2.8 147,647 1.18 5.65 65
12/31/2001(d) 11.59 7.2 173,836 1.09 6.26 84
12/31/2000 11.52 7.4 174,969 1.04 7.03 83
12/31/1999 11.51 (0.3) 213,769 0.97 6.87 63
12/31/1998 12.36 8.0 221,799 1.01 6.44 65
CLASS B
09/30/2003(f) 11.62 5.8 161,317 2.03 3.55 61
12/31/2002 11.28 2.1 141,188 1.93 4.90 65
12/31/2001(d) 11.59 6.5 127,520 1.84 5.49 84
12/31/2000 11.51 6.5 100,353 1.79 6.28 83
12/31/1999 11.51 (1.1) 89,213 1.72 6.12 63
12/31/1998 12.36 7.2 64,240 1.76 5.69 65
CLASS C
09/30/2003(f) 11.63 5.8 7,612 2.03 3.55 61
12/31/2002 11.29 2.1 9,024 1.93 4.90 65
12/31/2001(d) 11.60 6.5 11,470 1.84 5.52 84
12/31/2000 11.52 6.5 12,541 1.79 6.28 83
12/31/1999 11.52 (1.1) 14,872 1.72 6.12 63
12/31/1998 12.37 7.2 8,969 1.76 5.69 65
CLASS Y
09/30/2003(f) 11.69 6.9 17,889 0.73 4.85 61
12/31/2002 11.33 3.5 18,346 0.67 6.15 65
12/31/2001(d) 11.63 7.8 17,351 0.67 6.68 84
12/31/2000 11.54 7.6 14,013 0.67 7.40 83
12/31/1999 11.54 (0.0)(e) 10,320 0.72 7.12 63
12/31/1998 12.38 8.2 9,289 0.76 6.69 65
GOVERNMENT SECURITIES
FUND
CLASS A
09/30/2003(f) $ 12.09 2.7 $ 68,882 1.33 3.03 41
12/31/2002 12.12 13.4 76,338 1.25 3.90 52
12/31/2001(d) 11.18 4.9 70,551 1.39 4.46 317
12/31/2000 11.18 12.9 70,909 1.41 5.69 622
12/31/1999 10.47 (6.4) 84,904 1.36 6.00 313
12/31/1998 11.90 9.0 103,032 1.38 5.80 106
CLASS B
09/30/2003(f) 12.10 2.2 15,101 2.08 2.29 41
12/31/2002 12.12 12.6 16,878 2.00 3.15 52
12/31/2001(d) 11.17 4.1 13,249 2.14 3.71 317
12/31/2000 11.18 12.1 10,343 2.16 4.94 622
12/31/1999 10.47 (7.1) 9,430 2.11 5.25 313
12/31/1998 11.90 8.2 9,657 2.13 5.05 106
(a) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods less than one year are not annualized.
(b) Computed on an annualized basis for periods less than one year.
(c) Per share net investment income has been calculated using the average
shares outstanding during the period.
(d) As required, effective January 1, 2001, the Funds have adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of this change
for the year ended December 31, 2001 for Core Plus Bond Fund was to
decrease net investment income per share by $.01 for Class A, $.02 for
Class B and $.01 for Class C share and to decrease the ratio of net
investment income to average net assets from 6.34% to 6.26% for Class A,
5.57% to 5.49% for Class B, 5.59% to 5.52% for Class C and 6.75% to 6.68%
for Class Y. For Government Securities Fund, the effect of this change was
to decrease net investment income per share by $0.05 for Class A and $0.04
for Class B and to decrease the ratio of net investment income to average
net assets from 4.85% to 4.46% for Class A and 4.10% to 3.71% for Class B.
Per share, ratios and supplemental data for periods prior to January 1,
2001 have not been restated to reflect this change in presentation.
(e) Amount is less than one tenth of one percent.
(f) For the nine months ended September 30, 2003.
See accompanying notes to financial statements.
36
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
----------------------------------------- --------------------------------------------
NET ASSET
VALUE, NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING NET AND UNREALIZED TOTAL FROM FROM FROM NET
OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED TOTAL
THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
---------- ---------- -------------- ---------- -------------- ------------- -------------
GOVERNMENT SECURITIES FUND
(continued)
CLASS Y
09/30/2003(e) $ 12.11 $ 0.31(c) $ 0.04 $ 0.35 $ (0.39) $ -- $ (0.39)
12/31/2002 11.17 0.49(c) 1.00 1.49 (0.55) -- (0.55)
12/31/2001(d) 11.17 0.55 0.04 0.59 (0.59) -- (0.59)
12/31/2000 10.44 0.65 0.71 1.36 (0.63) -- (0.63)
12/31/1999 11.88 0.70 (1.43) (0.73) (0.71) -- (0.71)
12/31/1998 11.54 0.72 0.32 1.04 (0.70) -- (0.70)
HIGH INCOME FUND*
CLASS A
09/30/2003(e) $ 4.12 $ 0.25(c) $ 0.53 $ 0.78 $ (0.25) $ -- $ (0.25)
12/31/2002 4.94 0.39(c) (0.82) (0.43) (0.39) -- (0.39)
12/31/2001(d) 6.21 0.66 (1.25) (0.59) (0.68) -- (0.68)
12/31/2000 8.30 0.86 (2.11) (1.25) (0.84) -- (0.84)
12/31/1999 8.86 0.89 (0.54) 0.35 (0.91) -- (0.91)
12/31/1998 9.94 0.92 (1.08) (0.16) (0.92) -- (0.92)
CLASS B
09/30/2003(e) 4.12 0.23(c) 0.53 0.76 (0.23) -- (0.23)
12/31/2002 4.95 0.36(c) (0.83) (0.47) (0.36) -- (0.36)
12/31/2001(d) 6.22 0.62 (1.26) (0.64) (0.63) -- (0.63)
12/31/2000 8.30 0.81 (2.11) (1.30) (0.78) -- (0.78)
12/31/1999 8.85 0.82 (0.53) 0.29 (0.84) -- (0.84)
12/31/1998 9.93 0.85 (1.08) (0.23) (0.85) -- (0.85)
CLASS C
09/30/2003(e) 4.12 0.23(c) 0.53 0.76 (0.23) -- (0.23)
12/31/2002 4.94 0.36(c) (0.82) (0.46) (0.36) -- (0.36)
12/31/2001(d) 6.22 0.61 (1.26) (0.65) (0.63) -- (0.63)
12/31/2000 8.30 0.81 (2.11) (1.30) (0.78) -- (0.78)
12/31/1999 8.85 0.82 (0.53) 0.29 (0.84) -- (0.84)
12/31/1998(f) 9.96 0.69 (1.08) (0.39) (0.72) -- (0.72)
LIMITED TERM U.S. GOVERNMENT
FUND**
CLASS A
09/30/2003(e) $ 11.73 $ 0.21(c) $ (0.07) $ 0.14 $ (0.36) $ -- $ (0.36)
12/31/2002 11.36 0.42(c) 0.49 0.91 (0.54) -- (0.54)
12/31/2001(d) 11.16 0.51 0.25 0.76 (0.56) -- (0.56)
12/31/2000 10.97 0.69 0.20 0.89 (0.70) -- (0.70)
12/31/1999 11.70 0.66 (0.74) (0.08) (0.65) -- (0.65)
12/31/1998 11.64 0.67 0.06 0.73 (0.67) -- (0.67)
37
RATIOS TO AVERAGE NET
ASSETS:
---------------------
NET ASSET NET ASSETS, NET
VALUE, TOTAL END OF INVESTMENT PORTFOLIO
END OF RETURN THE PERIOD EXPENSES INCOME TURNOVER
THE PERIOD (%)(a) (000) (%)(b) (%)(b) RATE (%)
---------- ------- ----------- -------- ---------- ---------
GOVERNMENT SECURITIES FUND (continued)
CLASS Y
09/30/2003(e) $ 12.07 2.9 $ 2,936 0.96 3.40 41
12/31/2002 12.11 13.7 6,822 0.87 4.28 52
12/31/2001(d) 11.17 5.3 4,821 1.00 4.85 317
12/31/2000 11.17 13.5 4,593 1.01 6.09 622
12/31/1999 10.44 (6.3) 2,754 1.11 6.25 313
12/31/1998 11.88 9.3 3,404 1.13 6.05 106
HIGH INCOME FUND*
CLASS A
09/30/2003(e) $ 4.65 19.5 $ 23,809 1.71 7.62 41
12/31/2002 4.12 (8.9) 22,454 1.58 8.85 114
12/31/2001(d) 4.94 (10.7) 33,471 1.47 11.31 65
12/31/2000 6.21 (16.1) 46,960 1.36 11.47 60
12/31/1999 8.30 4.0 74,589 1.28 10.22 89
12/31/1998 8.86 (1.8) 73,023 1.32 9.81 75
CLASS B
09/30/2003(e) 4.65 18.8 23,405 2.46 6.89 41
12/31/2002 4.12 (9.7) 23,031 2.33 8.10 114
12/31/2001(d) 4.95 (11.3) 34,713 2.22 10.56 65
12/31/2000 6.22 (16.6) 47,793 2.11 10.72 60
12/31/1999 8.30 3.3 70,218 2.03 9.47 89
12/31/1998 8.85 (2.5) 60,322 2.07 9.06 75
CLASS C
09/30/2003(e) 4.65 18.8 2,858 2.46 6.89 41
12/31/2002 4.12 (9.5) 2,605 2.33 8.10 114
12/31/2001(d) 4.94 (11.5) 4,153 2.22 10.54 65
12/31/2000 6.22 (16.6) 5,369 2.11 10.72 60
12/31/1999 8.30 3.3 9,138 2.03 9.47 89
12/31/1998(f) 8.85 (4.1) 7,732 2.07 9.06 75
LIMITED TERM U.S. GOVERNMENT FUND**
CLASS A
09/30/2003(e) $ 11.51 1.2 $ 117,225 1.37 2.41 53
12/31/2002 11.73 8.2 106,013 1.35 3.66 88
12/31/2001(d) 11.36 6.9 109,189 1.42 4.52 275
12/31/2000 11.16 8.3 118,833 1.40 6.18 384
12/31/1999 10.97 (0.7) 149,756 1.33 5.91 400
12/31/1998 11.70 6.5 194,032 1.31 5.81 1,376
(a) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods less than one year are not annualized.
(b) Computed on an annualized basis for periods less than one year.
(c) Per share net investment income has been calculated using the average
shares outstanding during the period.
(d) As required, effective January 1, 2001, the Funds have adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of this change
for the year ended December 31, 2001 for Government Securities Fund was to
decrease net investment income per share by $0.04 for Class Y and to
decrease the ratio of net investment income to average net assets from
5.24% to 4.85% for Class Y. The effect of this change for the year ended
December 31, 2001 for the High Income Fund was to decrease net investment
income per share by $.01 for Class A, Class B and Class C and to decrease
the ratio of net investment income to average net assets from 11.39% to
11.31% for Class A, 10.64% to 10.56% for Class B and 10.63% to 10.54% for
Class C. For Limited Term U.S. Government Fund, the effect of this change
was to decrease net investment income per share by $0.04 for Class A and to
decrease the ratio of net investment income to average net assets from
4.88% to 4.52% for Class A. Per share, ratios and supplemental data for
periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
(e) For the nine months ended September 30, 2003.
(f) For the period March 2, 1998 (inception) to December 31, 1998.
* The financial information for the periods shown reflects the financial
information for the CDC Nvest High Income Fund's Class A, Class B and Class
C shares, which were reorganized into Class A, Class B and Class C shares,
respectively, of the Loomis Sayles High Income Fund, effective September
12, 2003. Prior to September 1, 2003, the predecessor Fund was advised by
CDC IXIS Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P.
(the Fund's current adviser) and, prior to September 12, 2003, had a
December 31 fiscal year end. The Fund's current fiscal year end is
September 30.
** The financial information for the periods shown reflects the financial
information for the CDC Nvest Limited Term U.S. Government Fund's Class A
shares, which were reorganized into Class A shares of the Loomis Sayles
Limited Term U.S. Government Fund, effective September 12, 2003. Prior to
September 1, 2003, the predecessor Fund was advised by CDC IXIS Advisers,
L.P. and subadvised by Loomis, Sayles & Company, L.P. (the Fund's current
adviser) and, prior to September 12, 2003, had a December 31 fiscal year
end. The Fund's current fiscal year end is September 30.
See accompanying notes to financial statements.
38
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
----------------------------------------- --------------------------------------------
NET ASSET
VALUE, NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING NET AND UNREALIZED TOTAL FROM FROM FROM NET
OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED TOTAL
THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
----------- ---------- -------------- ---------- -------------- ------------- -------------
LIMITED TERM U.S.
GOVERNMENT FUND
*(continued)
CLASS B
09/30/2003(d) $ 11.71 $ 0.15(b) $ (0.06) $ 0.09 $ (0.31) $ -- $ (0.31)
12/31/2002 11.34 0.35(b) 0.48 0.83 (0.46) -- (0.46)
12/31/2001(c) 11.14 0.44 0.24 0.68 (0.48) -- (0.48)
12/31/2000 10.95 0.62 0.20 0.82 (0.63) -- (0.63)
12/31/1999 11.69 0.59 (0.75) (0.16) (0.58) -- (0.58)
12/31/1998 11.62 0.60 0.07 0.67 (0.60) -- (0.60)
CLASS C
09/30/2003(d) 11.72 0.15(b) (0.06) 0.09 (0.31) -- (0.31)
12/31/2002 11.35 0.35(b) 0.48 0.83 (0.46) -- (0.46)
12/31/2001(c) 11.15 0.44 0.24 0.68 (0.48) -- (0.48)
12/31/2000 10.96 0.62 0.20 0.82 (0.63) -- (0.63)
12/31/1999 11.70 0.59 (0.75) (0.16) (0.58) -- (0.58)
12/31/1998 11.63 0.60 0.07 0.67 (0.60) -- (0.60)
CLASS Y
09/30/2003(d) 11.78 0.25(b) (0.08) 0.17 (0.40) -- (0.40)
12/31/2002 11.41 0.48(b) 0.48 0.96 (0.59) -- (0.59)
12/31/01(c) 11.20 0.56 0.26 0.82 (0.61) -- (0.61)
12/31/2000 11.00 0.75 0.19 0.94 (0.74) -- (0.74)
12/31/1999 11.73 0.70 (0.74) (0.04) (0.69) -- (0.69)
12/31/1998 11.66 0.72 0.06 0.78 (0.71) -- (0.71)
STRATEGIC INCOME FUND**
CLASS A
09/30/2003(d) $ 10.72 $ 0.57(b) $ 1.93 $ 2.50 $ (0.65) $ -- $ (0.65)
12/31/2002 9.88 0.75(b) 0.72 1.47 (0.63) -- (0.63)
12/31/2001(c) 10.80 0.91(b) (0.92) (0.01) (0.91) -- (0.91)
12/31/2000 11.65 0.99(b) (0.91) 0.08 (0.93) -- (0.93)
12/31/1999 11.37 1.03 0.31 1.34 (1.02) (0.04) (1.06)
12/31/1998 13.42 1.05 (1.30) (0.25) (1.05) (0.75) (1.80)
CLASS B
09/30/2003(d) 10.71 0.51(b) 1.92 2.43 (0.55) -- (0.55)
12/31/2002 9.88 0.67(b) 0.73 1.40 (0.57) -- (0.57)
12/31/2001(c) 10.79 0.83(b) (0.90) (0.07) (0.84) -- (0.84)
12/31/2000 11.65 0.90(b) (0.91) (0.01) (0.85) -- (0.85)
12/31/1999 11.37 0.94 0.31 1.25 (0.93) (0.04) (0.97)
12/31/1998 13.42 0.95 (1.30) (0.35) (0.95) (0.75) (1.70)
39
RATIOS TO AVERAGE
NET ASSETS:
---------------------
NET ASSET NET ASSETS, NET
VALUE, TOTAL END OF INVESTMENT PORTFOLIO
END OF RETURN THE PERIOD EXPENSES INCOME TURNOVER
THE PERIOD (%)(a) (000) (%)(e) (%)(e) RATE (%)
---------- ------- ------------ -------- ---------- ---------
LIMITED TERM U.S. GOVERNMENT
FUND *(continued)
CLASS B
09/30/2003(d) $ 11.49 0.7 $ 14,637 2.02 1.77 53
12/31/2002 11.71 7.5 16,263 2.00 3.01 88
12/31/2001(c) 11.34 6.2 14,317 2.07 3.85 275
12/31/2000 11.14 7.7 11,884 2.05 5.53 384
12/31/1999 10.95 (1.4) 14,601 1.98 5.26 400
12/31/1998 11.69 5.9 18,116 1.96 5.16 1,376
CLASS C
09/30/2003(d) 11.50 0.7 8,704 2.02 1.77 53
12/31/2002 11.72 7.5 8,079 2.00 3.01 88
12/31/2001(c) 11.35 6.2 5,851 2.07 3.89 275
12/31/2000 11.15 7.7 6,617 2.05 5.53 384
12/31/1999 10.96 (1.4) 9,054 1.98 5.26 400
12/31/1998 11.70 5.9 13,962 1.96 5.16 1,376
CLASS Y
09/30/2003(d) 11.55 1.5 6,886 0.93 2.87 53
12/31/2002 11.78 8.6 8,529 0.88 4.14 88
12/31/01(c) 11.41 7.4 3,441 0.95 4.98 275
12/31/2000 11.20 8.8 3,254 0.95 6.63 384
12/31/1999 11.00 (0.3) 7,086 0.98 6.26 400
12/31/1998 11.73 6.9 8,345 0.96 6.16 1,351
STRATEGIC INCOME FUND**
CLASS A
09/30/2003(d) $ 12.57 23.7 $ 140,576 1.28 6.49 27
12/31/2002 10.72 15.5 92,303 1.33 7.38 30
12/31/2001(c) 9.88 (0.1) 94,156 1.31 8.77 10
12/31/2000 10.80 0.7 116,986 1.24 8.73 13
12/31/1999 11.65 12.2 124,869 1.21 9.09 19
12/31/1998 11.37 (1.7) 127,306 1.19 8.33 33
CLASS B
09/30/2003(d) 12.59 23.0 118,217 2.03 5.73 27
12/31/2002 10.71 14.6 98,501 2.08 6.63 30
12/31/2001(c) 9.88 (0.8) 102,159 2.06 8.02 10
12/31/2000 10.79 (0.2) 120,200 1.99 7.98 13
12/31/1999 11.65 11.3 127,723 1.96 8.34 19
12/31/1998 11.37 (2.5) 134,049 1.94 7.58 33
(a) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and class C shares are not reflected in total
return calculations. Periods less than one year are not annualized.
(b) Per share net investment income has been calculated using the average
shares outstanding during the period.
(c) As required, effective January 1, 2001, the Funds have adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of this change
for the year ended December 31, 2001 for Limited Term U.S. Government Fund
was to decrease net investment income per share by $.04 for Class B, Class
C and Class Y and to decrease the ratio of net investment income to average
net assets from 4.22% to 3.85% for Class B, 4.25% to 3.89% for Class C and
5.34% to 4.98% for Class Y. For Strategic Income Fund, there was no effect
on net investment income per share, however, the effect of this change was
to decrease the ratio of net investment income to average net assets from
8.78% to 8.77% for Class A and 8.03% to 8.02% for Class B. Per share,
ratios and supplemental data for periods prior to January 1, 2001 have not
been restated to reflect this change in presentation.
(d) For the nine months ended September 30, 2003.
(e) Computed on an annualized basis for periods less than one year.
* The financial information for the periods shown reflects the financial
information for the CDC Nvest Limited Term U.S. Government Fund's Class B,
Class C and Class Y shares, which were reorganized into Class B, Class C
and Class Y shares, respectively, of the Loomis Sayles Limited Term U.S.
Government Fund, effective September 12, 2003. Prior to September 1, 2003,
the predecessor Fund was advised by CDC IXIS Advisers, L.P. and subadvised
by Loomis, Sayles & Company, L.P. (the Fund's current adviser) and, prior
to September 12, 2003, had a December 31 fiscal year end. The Fund's
current fiscal year end is September 30.
** The financial information for the periods shown reflects the financial
information for CDC Nvest Strategic Income Fund's Class A and Class B
shares, which were reorganized into Class A and Class B shares,
respectively, of Loomis Sayles Strategic Income Fund, effective September
12, 2003. Prior to September 1, 2003, the predecessor Fund was advised by
CDC IXIS Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P.
(the Fund's current adviser) and, prior to September 12, 2003, had a
December 31 fiscal year end. The Fund's current fiscal year end is
September 30.
See accompanying notes to financial statements.
40
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ----------------------------------------------
NET ASSET
VALUE, NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING NET AND UNREALIZED TOTAL FROM FROM FROM NET
OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED TOTAL
THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
---------- ---------- -------------- ---------- -------------- ------------- -------------
STRATEGIC INCOME
FUND* (continued)
CLASS C
09/30/2003(e) $ 10.70 $ 0.50(b) $ 1.93 $ 2.43 $ (0.55) $ -- $ (0.55)
12/31/2002 9.87 0.67(b) 0.73 1.40 (0.57) -- (0.57)
12/31/2001(c) 10.78 0.83(b) (0.91) (0.08) (0.83) -- (0.83)
12/31/2000 11.64 0.90(b) (0.91) (0.01) (0.85) -- (0.85)
12/31/1999 11.36 0.94 0.31 1.25 (0.93) (0.04) (0.97)
12/31/1998 13.41 0.95 (1.30) (0.35) (0.95) (0.75) (1.70)
CLASS Y
09/30/2003(e) 10.74 0.60(b) 1.93 2.53 (0.69) -- (0.69)
12/31/2002 9.90 0.80(b) 0.71 1.51 (0.67) -- (0.67)
12/31/2001(c) 10.81 0.94(b) (0.92) 0.02 (0.93) -- (0.93)
12/31/2000 11.65 0.96(b) (0.84) 0.12 (0.96) -- (0.96)
12/31/1999(f) 11.45 0.86 (0.56) 0.30 (0.10) -- (0.10)
41
RATIOS TO AVERAGE NET
ASSETS:
--------------------------------------
NET ASSET NET ASSETS,
VALUE, TOTAL END OF NET INVESTMENT PORTFOLIO
END OF RETURN THE PERIOD EXPENSES INCOME TURNOVER
THE PERIOD (%) (a) (000) (%) (g) (%) (g) RATE (%)
---------- ---------- ------------ ---------- -------------- ---------
STRATEGIC INCOME FUND*
(continued)
CLASS C
09/30/2003(e) $ 12.58 23.0 $ 66,394 2.03 5.73 27
12/31/2002 10.70 14.7 27,727 2.08 6.63 30
12/31/2001(c) 9.87 (0.8) 28,925 2.06 8.02 10
12/31/2000 10.78 (0.2) 37,208 1.99 7.98 13
12/31/1999 11.64 11.3 40,265 1.96 8.34 19
12/31/1998 11.36 (2.5) 45,457 1.94 7.58 33
CLASS Y
09/30/2003(e) 12.58 24.0 2,193 0.97 6.83 27
12/31/2002 10.74 15.9 1,039 0.94 7.77 30
12/31/2001(c) 9.90 0.3 445 0.93 9.10 10
12/31/2000 10.81 1.0 335 0.90 9.07 13
12/31/1999(f) 11.65 2.7 --(d) 0.96 9.34 19
(a) A contingent deferred sales charge for Class C shares is not reflected in
total return calculations. Periods less than one year are not annualized.
(b) Per share net investment income has been calculated using the average
shares outstanding during the period.
(c) As required, effective January 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
year ended December 31, 2001 was to decrease the ratio of net investment
income to average net assets from 8.04% to 8.02% for Class C. Per share,
ratios and supplemental data for periods prior to January 1, 2001 have not
been restated to reflect this change in presentation.
(d) Amount is less than $500.
(e) For the nine months ended September 30, 2003.
(f) For the period December 1, 1999 (inception) through December 31, 1999.
(g) Computed on an annualized basis for periods less than one year.
* The financial information for the periods shown reflects the financial
information for CDC Nvest Strategic Income Fund's Class C and Class Y
shares, which were reorganized into Class C and Class Y shares,
respectively, of Loomis Sayles Strategic Income Fund, effective September
12, 2003. Prior to September 1, 2003, the predecessor Fund was advised by
CDC IXIS Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P.
(the Fund's current adviser) and, prior to September 12, 2003, had a
December 31 fiscal year end. The Fund's current fiscal year end is
September 30.
See accompanying notes to financial statements.
42
NOTES TO
FINANCIAL STATEMENTS
43
NOTES TO FINANCIAL STATEMENTS
For the Period Ended September 30, 2003
1. Organization. CDC Nvest Funds Trust I and Loomis Sayles Funds II (the
"Trusts" and each a "Trust") are organized as Massachusetts business trusts.
Each Trust is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. Each Declaration of Trust permits
the Trustees to issue an unlimited number of shares of the Trust in multiple
series (individually, a "Fund" and, collectively, the "Funds"). Information
presented in these financial statements pertains to certain taxable fixed income
funds of the Trusts, the financial statements of the other Funds of the Trusts
are presented in separate reports. The following table provides a list of the
Funds included in this report.
CDC Nvest Funds Trust I:
Loomis Sayles Core Plus Bond Fund (the "Core Plus Bond Fund"), formerly CDC
Nvest Bond Income Fund
Loomis Sayles Government Securities Fund (the "Government Securities Fund"),
formerly CDC Nvest Government Securities Fund
Loomis Sayles Funds II:
Loomis Sayles High Income Fund (the "High Income Fund"), formerly CDC Nvest High
Income Fund
Loomis Sayles Limited Term U.S. Government Fund (the "Limited Term U.S.
Government Fund"), formerly CDC Nvest Limited Term U.S. Government Fund
Loomis Sayles Strategic Income Fund (the "Strategic Income Fund"), formerly CDC
Nvest Strategic Income Fund
In June, 2003, the Board of Trustees of the CDC Nvest Funds Trust I, CDC Nvest
Funds Trust II, CDC Nvest Funds Trusts III, CDC Nvest Cash Management Trust, CDC
Nvest Tax Exempt Money Market Trust and CDC Nvest Companies Trust I (the "CDC
Nvest Funds Trusts") approved new Trustees for the Trusts in connection with the
integration of the CDC Nvest Funds Trusts with Loomis Sayles Funds I and Loomis
Sayles Funds II (the "Loomis Sayles Funds Trusts"). This approval resulted in a
combined Board of Trustees for the CDC Funds Trusts and Loomis Sayles Fund
Trusts.
After the close of business on September 12, 2003, CDC Nvest High Income Fund
was reorganized into High Income Fund, a newly established series of Loomis
Sayles Funds II, pursuant to a plan of reorganization approved by its
shareholders on August 28, 2003. The financial statements of High Income Fund
reflect the historical results of CDC Nvest High Income Fund.
After the close of business on September 12, 2003, CDC Nvest Limited Term U.S.
Government Fund was reorganized into Limited Term U.S. Government Fund, a newly
established series of Loomis Sayles Funds II, pursuant to a plan of
reorganization approved by its shareholders on August 28, 2003. The financial
statements of Limited Term U.S. Government Fund reflect the historical results
of CDC Nvest Limited Term U.S. Government Fund.
After the close of business on September 12, 2003, CDC Nvest Strategic Income
Fund was reorganized into Strategic Income Fund, a newly established series of
Loomis Sayles Funds II, pursuant to a plan of reorganization approved by its
shareholders on August 28, 2003. The financial statements of Strategic Income
Fund reflect the historical results of CDC Nvest Strategic Income Fund.
Core Plus Bond Fund, Limited Term U.S. Government Fund and Strategic Income Fund
each offer Class A, Class B, Class C and Class Y shares. Government Securities
Fund offers Class A, Class B and Class Y shares. High Income Fund offers Class
A, Class B, and Class C shares. Class A shares of all Funds except Limited Term
U.S. Government Fund are sold with a maximum front end sales charge of 4.50%.
Class A shares of Limited Term U.S. Government Fund are sold with a maximum
front end sales charge of 3.00%. Class B shares do not pay a front end sales
charge, but pay a higher ongoing distribution fee than Class A shares for eight
years (at which point they automatically convert to Class A shares), and are
subject to a contingent deferred sales charge ("CDSC") if those shares are
redeemed within six years of purchase. Class C shares are sold with a maximum
front end sales charge of 1.00%, do not convert to any other class of shares and
pay a higher ongoing distribution fee than Class A shares and may be subject to
a CDSC of 1.00% if those shares are redeemed within one year. Class Y shares do
not pay a front end sales charge, a CDSC or distribution fees. They are intended
for institutional investors with a minimum initial investment of $1,000,000.
Most expenses of the Trusts can be directly attributed to a Fund. Expenses which
can not be directly attributed are apportioned based on the relative net assets
of each of the Funds in the Trusts.
Expenses of a Fund are borne pro rata by the holders of each class of shares,
except that each class bears expenses unique to that class (including the Rule
12b-1 service and distribution fees and transfer agent fees applicable to such
class), and votes as a class only with respect to its own Rule 12b-1 Plan.
Shares of each class would receive their pro rata share of the net assets of a
Fund, if the Fund were liquidated. The Trustees approve separate dividends from
net investment income on each class of shares.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by each Fund in the preparation of its
financial statements. The Funds' financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America
which require the use of management estimates that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
44
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
a. Security Valuation. Debt securities (other than short-term obligations with a
remaining maturity of less than sixty days) are valued on the basis of
valuations furnished to the Fund by a pricing service, which has been authorized
by the Trustees. The pricing service determines valuations for normal,
institutional size trading units of such securities using market information,
transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders. Effective
April 14, 2003, securities traded on the NASDAQ National Market are valued at
the NASDAQ Official Closing Price ("NOCP"), or if lacking an NOCP, at the most
recent bid quotation on the NASDAQ National Market. Short-term obligations with
a remaining maturity of less than sixty days are stated at amortized cost, which
approximates market value. Equity securities are valued on the basis of
valuations furnished to the Fund by a pricing service, which has been authorized
by the Board of Trustees. The pricing service provides the last reported sale
price for securities listed on an applicable securities exchange or on the
NASDAQ National Market, or, if no sale was reported and in the case of
over-the-counter securities not so listed, the last reported bid price. All
other securities and assets are valued at their fair value as determined in good
faith by the Fund's investment adviser, under the supervision of the Fund's
Trustees.
Certain securities held by Strategic Income Fund were valued on the basis of a
price provided by a principal market maker. The prices provided by the principal
market makers may differ from the value that would be realized if the securities
were sold.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified, and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of discount and decreased by the amortization of
premium. In determining net gain or loss on securities sold, the cost of
securities has been determined on an identified cost basis.
c. Foreign Currency Translation. The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than U.S. dollars are translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates from
fluctuations arising from changes in market prices of the investment securities.
Such changes are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign exchange gains or losses arise from: sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities at the end of the fiscal periods, resulting from changes
in exchange rates.
d. Federal and Foreign Income Taxes. The Trusts treat each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities, such
taxes are accrued as applicable.
e. Dividends and Distributions to Shareholders. Dividends are declared daily to
shareholders of record and are paid monthly. The timing and characterization of
certain income and capital gains distributions are determined in accordance with
federal tax regulations which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments for book and tax purposes of items such as distributions
from real estate investment trusts, capital loss carry-forwards, paydowns on
mortgage-backed securities and foreign currency transactions. Permanent book and
tax basis differences relating to shareholder distributions will result in
reclassifications to capital accounts. Distributions from net investment income
and short-term capital gains are considered to be ordinary income for tax
purposes.
f. Repurchase Agreements. Each Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. Each Fund's investment adviser is
responsible for determining that the value of the collateral is at all times at
least equal to 102% of the repurchase price, including interest. Repurchase
agreements could involve certain risks in the event of default or insolvency of
the counterparty including possible delays or restrictions upon a Fund's ability
to dispose of the underlying securities.
g. Other. Each Fund changed its fiscal year end from December 31st to September
30th.
45
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
3. Purchases and Sales of Securities. For the period ended September 30, 2003,
purchases and sales of securities (excluding short-term investments) were as
follows:
U.S. Government/Agency Other Securities
---------------------------- --------------------------
Fund Purchases Sales Purchases Sales
- --------------------------------- ------------- ------------- ------------ ------------
Core Plus Bond Fund $ 126,331,802 $ 127,126,583 $ 60,888,133 $ 69,945,307
Government Securities Fund 38,502,597 51,466,318 -- --
High Income Fund -- -- 19,658,335 24,693,559
Limited Term U.S. Government Fund 88,021,756 76,250,886 -- --
Strategic Income Fund 2,697,700 2,832,673 122,522,809 66,843,698
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Loomis Sayles & Company, L.P. ("Loomis Sayles") serves as
the investment adviser to each of the Funds. Prior to September 1, 2003, CDC
IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") served as each Fund's
investment adviser and Loomis Sayles served as each Fund's subadviser. Under the
terms of the management agreements, each Fund pays a management fee at the
following annual rates, calculated daily and payable monthly, based on each
Fund's average daily net assets:
Percentage of Average Daily Net Assets
----------------------------------------------------------
First Next Next Next
Fund $100 million $100 million $300 million $500 million
- --------------------------------- ------------ ------------ ------------ ------------
Core Plus Bond Fund 0.250% 0.188% 0.188% 0.188%
Government Securities Fund 0.275% 0.275% 0.263% 0.250%
High Income Fund 0.700% 0.700% 0.650% 0.650%
Limited Term U.S. Government Fund 0.570% 0.570% 0.545% 0.520%
Strategic Income Fund 0.650% 0.650% 0.600% 0.600%
Prior to September 1, 2003, for Core Plus Bond Fund and Government Securities
Fund, the management fee was 0.500% and 0.550% of the first $100 million of
average daily net assets, 0.375% and 0.550% of average daily net assets of the
next $100 million, 0.375% and 0.525% of average daily net assets of the next
$300 million and 0.375% and 0.500% of average daily net assets of the next $500
million, respectively.
For the period ended September 30, 2003, the management fees for each Fund were
as follows:
Gross Percentage of
Management Average
Fund Fee Daily Net Assets*
- --------------------------------- ----------- -----------------
Core Plus Bond Fund $ 941,859 0.391%
Government Securities Fund 374,861 0.523%
High Income Fund 260,331 0.700%
Limited Term U.S. Government Fund 628,035 0.570%
Strategic Income Fund 1,282,724 0.637%
*Annualized
CDC IXIS Advisers serves as the advisory administrator to Core Plus Bond Fund
and Government Securities Fund. Under the terms of the advisory administration
agreements, effective September 1, 2003, each Fund pays an advisory
administration fee at the following annual rates, calculated daily and payable
monthly based on each Fund's average daily net assets. Prior to September 1,
2003, these services were included in the management fee arrangements:
Percentage of Average Daily Net Assets
------------------------------------------------------------
First Next Next Next
Fund $100million $100 million $300 million $500 million
- --------------------------------- ------------ ------------ ------------ ------------
Core Plus Bond Fund 0.2500% 0.1875% 0.1875% 0.1875%
Government Securities Fund 0.2750% 0.2750% 0.2625% 0.2500%
For the period ended September 30, 2003, Core Plus Bond Fund and Government
Securities Fund paid $53,887 (0.022% of average daily net assets) and $19,419
(0.027% of average daily net assets), respectively. Management and advisory
administration fees are combined in the statement of operations as management
fees.
Loomis Sayles and CDC IXIS Advisers are wholly-owned subsidiaries of CDC IXIS
Asset Management North America, L.P. ("CDC IXIS North America"). Certain
officers and directors of Loomis Sayles and CDC IXIS Advisers are also Trustees
of the Funds.
46
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
b. Accounting and Administrative Expense. CDC IXIS Asset Management Services,
Inc. ("CIS"), a wholly owned subsidiary of CDC IXIS North America, performs
certain accounting and administrative services for the Funds and has
subcontracted with Investors Bank & Trust Company ("IBT"), to serve as
sub-administrator. Pursuant to an agreement between the Trusts, CDC Nvest Funds
Trust II, CDC Nvest Trust III, CDC Nvest Cash Management Trust, CDC Nvest Tax
Exempt Money Market Trust, CDC Nvest Companies Trust I and CIS, each Fund pays
CIS its pro rata portion of a group fee for these services representing the
higher amount based on the following calculations:
(1) Percentage of Eligible Average Daily Net Assets
First Next Over
$5 billion $5 billion $10 billion
---------- ---------- -----------
0.060% 0.050% 0.045%
or
(2) Each Fund's pro rata portion, based on eligible assets, of
the annual aggregate minimum fee of $3.4 million.
For the period ended September 30, 2003, fees paid to CIS for accounting and
administrative expense were as follows:
Accounting
And
Fund Administrative
- --------------------------------- --------------
Core Plus Bond Fund $ 195,955
Government Securities Fund 58,828
High Income Fund 30,130
Limited Term U.S. Government Fund 89,774
Strategic Income Fund 162,160
Effective October 1, 2003, each fund pays it's pro rata portion of the
accounting and administrative fee allocated based on the combined assets of the
CDC Nvest Funds Trusts and the Loomis Sayles Funds Trusts. The rates as a
percentage of average daily net assets changed to 0.0675% on the first $5
billion in average daily net assets, 0.0625% on the next $5 billion in average
daily net assets and 0.0500% on average daily net assets over $10 billion. The
annual aggregate minimum fee changed to $5 million.
c. Transfer Agent Fees. CIS is the transfer and shareholder servicing agent for
each Fund and has subcontracted with Boston Financial Data Services ("BFDS") to
serve as sub-transfer agent. Each Fund pays CIS service fees for servicing
shareholder accounts. Classes A, B and C pay service fees monthly representing
the higher amount based on the following calculations:
(1) Annual aggregate fee determined by applying an annual fee
rate (see schedule below) to the eligible average daily net
assets. Eligible assets are the average daily net assets for
Class A, Class B and Class C of accounts in load bond funds.
Load bond funds consist of all bond funds in the CDC Nvest
Funds Trusts, Loomis Sayles High Income Fund, Loomis Sayles
Limited Term U.S. Government Fund, Loomis Sayles Strategic
Income Fund, Loomis Sayles Municipal Income Fund and Loomis
Sayles Investment Grade Bond Fund.
First Next Over
$1.2 billion Next $5 billion $6.2 billion
------------ --------------- ------------
0.142% 0.135% 0.130%
Class A, Class B and Class C shares are subject to a monthly
class minimum of $1,500.
or
(2) An allocated portion, based on eligible assets for the
period September 15, 2003 through December 31, 2003, of an
aggregate minimum fee of $382,986 (for the period January 1
through June 30, the annual aggregate minimum fee was $1.5
million. The annual aggregate minimum fee was reduced to
$1.3 million on July 1).
Class Y pays service fees monthly at the higher amount based on an annual rate
of 0.026% of average daily net assets or the minimum annual aggregate fee for
all retail no load bond funds and load bond funds Class Y of $0.6 million. No
load bond funds consist of Loomis Sayles Bond Fund and Loomis Sayles Global Bond
Fund. Class Y is subject to a monthly class minimum of $1,250. Prior to
September 15, 2003, Class Y paid service fees monthly at an annual rate of 0.10%
of average daily net assets.
In addition, pursuant to other servicing agreements, each class pays service
fees to other firms that provide similar services for their own shareholder
accounts.
47
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
CIS and BFDS and other firms are also reimbursed by the Funds for out-of-pocket
expenses. For the period ended September 30, 2003, amounts paid to CIS as
compensation for its services as transfer agent were as follows:
Transfer
Fund Agent Fee
- --------------------------------- ---------
Core Plus Bond Fund $ 250,569
Government Securities Fund 101,082
High Income Fund 61,539
Limited Term U.S. Government Fund 156,896
Strategic Income Fund 273,373
d. Service and Distribution Fees. Pursuant to Rule 12b-1 under the 1940 Act, the
Trusts have adopted a Service Plan relating to each Fund's Class A shares (the
"Class A Plan") and Service and Distribution Plans relating to each Fund's Class
B and Class C shares (the "Class B and Class C Plans").
Under the Class A Plan, each Fund pays CDC IXIS Asset Management Distributors,
L.P. ("CDC IXIS Distributors"), the Fund's distributor (a wholly owned
subsidiary of CDC IXIS North America), a monthly service fee at the annual rate
of 0.25% of the average daily net assets attributable to the Fund's Class A
shares, as reimbursement for expenses incurred by CDC IXIS Distributors in
providing personal services to investors in Class A shares and/or the
maintenance of shareholder accounts. Also under the Class A Plan, Limited Term
U.S. Government Fund pays CDC IXIS Distributors a monthly distribution fee at
the annual rate of 0.10% of the average daily net assets attributable to the
Fund's Class A shares as reimbursement for expenses incurred by CDC IXIS
Distributors in connection with the marketing or sale of the Fund's Class A
shares.
Under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a
monthly service fee at the annual rate of 0.25% of the average daily net assets
attributable to the Fund's Class B and Class C shares, as compensation for
services provided and expenses incurred by CDC IXIS Distributors in providing
personal services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts.
Also under the Class B and Class C Plans, each Fund pays CDC IXIS Distributors a
monthly distribution fee at the annual rate of 0.75% of the average daily net
assets attributable to the Fund's Class B and Class C shares, as compensation
for services provided and expenses incurred by CDC IXIS Distributors in
connection with the marketing or sale of Class B and Class C shares.
For the period ended September 30, 2003, the Funds paid the following service
and distribution fees:
Service Fee Distribution Fee
------------------------------ --------------------------------
Class A Class B Class C Class A Class B Class C
--------- --------- -------- -------- --------- ---------
Core Plus Bond Fund $ 263,615 $ 286,860 $ 15,521 $ -- $ 860,579 $ 46,562
Government Securities Fund 139,173 32,287 -- -- 96,862 --
High Income Fund 44,308 43,663 5,005 -- 130,987 15,015
Limited Term U.S. Government Fund 215,095 29,788 16,407 86,039 89,362 49,219
Strategic Income Fund 212,541 206,455 81,356 -- 619,363 244,069
Commissions (including contingent deferred sales charges) on Fund shares paid to
CDC IXIS Distributors by investors in shares of the Funds during the period
ended September 30, 2003 were as follows:
Fund
- ---------------------------------
Core Plus Bond Fund $ 373,167
Government Securities Fund 128,108
High Income Fund 74,832
Limited Term U.S. Government Fund 172,226
Strategic Income Fund 886,933
48
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
e. Trustees Fees and Expenses. The Funds do not pay any compensation directly to
their officers or Trustees who are directors, officers or employees of Loomis
Sayles, CDC IXIS Advisers, CDC IXIS Distributors, CDC IXIS North America, CIS or
their affiliates. Each other Trustee, who is a trustee of the CDC Nvest Funds
Trusts and the Loomis Sayles Funds Trusts, receives a retainer fee at the annual
rate of $45,000 and meeting attendance fees of $4,500 for each meeting of the
Board of Trustees attended. Each committee member receives an additional
retainer fee at the annual rate of $7,000 while each committee chairman receives
a retainer fee (beyond the $7,000 fee) at the annual rate of $5,000. The
retainer fees assume four Board or Committee meetings per year; Trustees are
compensated for each additional committee and board meeting, in excess of four
meetings per year, at the rate of $1,750 and $4,500, respectively. Trustees who
are trustees of the Loomis Sayles Funds Trusts but not the CDC Nvest Funds
Trusts receive meeting attendance fees of $5,000 for each meeting of the Board
of Trustees attended and receive a retainer fee at the annual rate of $20,000.
These fees are allocated to the various CDC Nvest Funds and Loomis Sayles Funds
based on a formula that takes into account, among other factors, the relative
net assets of each Fund. Trustees are reimbursed for travel expenses in
connection with attendance at meetings.
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in a
designated Fund or certain other CDC Nvest Funds or Loomis Sayles Funds on the
normal payment date. Deferred amounts remain in the Funds until distributed in
accordance with the Plan.
f. Publishing Services. CIS performs certain desktop publishing services for the
Funds. Fees for these services are presented in the statements of operations as
shareholder reporting. For the period ended September 30, 2003, amounts paid to
CIS as compensation for these services were as follows:
Publishing
Services
Fund Fees
- --------------------------------- ----------
Core Plus Bond Fund $ 1,090
Government Securities Fund 554
High Income Fund 554
Limited Term U.S. Government Fund 554
Strategic Income Fund 554
5. Line of Credit. High Income Fund and Strategic Income Fund, along with
certain other portfolios participate in a $50,000,000 committed line of credit
provided by IBT under a credit agreement (the "Agreement") dated April 30, 2002.
Advances under the Agreement are taken primarily for temporary or emergency
purposes. Borrowings under the Agreement bear interest at a rate tied to one of
several short-term rates that may be selected by the lender from time to time.
In addition, the Funds are charged a facility fee equal to 0.10% per annum on
the unused portion of the line of credit. The annual cost of maintaining the
line of credit and the facility fee is apportioned pro rata among the
participating Funds. There were no borrowings as of or during the period ended
September 30, 2003.
6. Security Lending. The Funds have each entered into an agreement with IBT, as
agent of the Funds, to lend securities to certain designated borrowers. The
loans are collateralized at all times with cash or securities with a market
value at least equal to the market value of the securities on loan. The Funds
receive fees for lending their securities. The market value of securities on
loan to borrowers and the value of collateral held by the Funds with respect to
such loans at September 30, 2003, is as follows:
Market Value of Value of Collateral
Fund Securities on Loan Received
- --------------------------------- ------------------ -------------------
Core Plus Bond Fund $ 17,212,641 $ 17,642,007
Government Securities Fund 12,686,082 12,975,600
High Income Fund 6,371,517 6,523,010
Limited Term U.S. Government Fund 17,081,348 17,450,346
Strategic Income Fund 21,023,091 21,469,470
49
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
7. Contingent Expense Obligation. Effective June 1, 2003, the adviser has given
a binding undertaking to Strategic Income Fund to defer its management fee and,
if necessary, bear certain expenses associated with the Fund to limit its
operating expenses. For the period ended September 30, 2003, $69,643 of class
level expenses have been reimbursed. This limitation is in effect until April
30, 2004 and will be reevaluated on an annual basis.
If in the year following a deferral or reimbursement of expenses the actual
operating expenses of the Fund are less than its expense limit, the Fund is
required to pay an amount of additional expense that is the lower of the
difference between the expense limit and the actual amount of fees previously
waived or expenses reimbursed.
At September 30, 2003, the expense limits as a percentage of average daily net
assets and amount subject to possible reimbursement under the expense limitation
agreement were as follows:
Expense Limit as a Percentage
of Average Daily Net Assets Expenses Subject
---------------------------------------- to Possible
Fund Class A Class B Class C Class Y Reimbursement
- --------------------- ------- ------- ------- ------- ----------------
Strategic Income Fund 1.25% 2.00% 2.00% 1.00% $ 69,643
50
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
8. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 DECEMBER 31, 2002 DECEMBER 31, 2001
-------------------------- -------------------------- --------------------------
CORE PLUS BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------- ----------- ------------- ----------- ------------- ----------- -------------
CLASS A
Shares sold ..................... 2,208,881 $ 25,393,288 2,761,031 $ 30,947,862 3,447,705 $ 40,347,344
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income ....................... 315,868 3,625,104 630,044 7,028,137 793,770 9,313,490
----------- ------------- ----------- ------------- ----------- -------------
2,524,749 29,018,392 3,391,075 37,975,999 4,241,475 49,660,834
Shares repurchased .............. (4,103,015) (47,055,063) (5,298,328) (59,054,703) (4,440,794) (51,917,547)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (1,578,266) $ (18,036,671) (1,907,253) $ (21,078,704) (199,319) $ (2,256,713)
----------- ------------- ----------- ------------- ----------- -------------
CLASS B
Shares sold ..................... 4,544,450 $ 52,121,481 5,113,116 $ 57,147,872 3,873,088 $ 45,336,465
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income ....................... 138,840 1,592,822 309,169 3,449,629 390,437 4,579,223
----------- ------------- ----------- ------------- ----------- -------------
4,683,290 53,714,303 5,422,285 60,597,501 4,263,525 49,915,688
Shares repurchased .............. (3,322,658) (38,077,677) (3,908,528) (43,564,808) (1,978,772) (23,154,898)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... 1,360,632 $ 15,636,626 1,513,757 $ 17,032,693 2,284,753 $ 26,760,790
----------- ------------- ----------- ------------- ----------- -------------
CLASS C
Shares sold ..................... 59,911 $ 688,486 138,295 $ 1,555,372 196,137 $ 2,299,999
Shares Issued in connection
with the reinvestment of:
Dividends from net investment
income ....................... 11,703 134,339 26,871 299,976 38,608 453,189
----------- ------------- ----------- ------------- ----------- -------------
71,614 822,825 165,166 1,855,348 234,745 2,753,188
Shares repurchased .............. (216,706) (2,481,482) (354,452) (3,952,429) (334,314) (3,927,346)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (145,092) $ (1,658,657) (189,286) $ (2,097,081) (99,569) $ (1,174,158)
----------- ------------- ----------- ------------- ----------- -------------
CLASS Y
Shares sold ..................... 360,783 $ 4,157,868 411,293 $ 4,623,829 567,048 $ 6,671,918
Shares Issued in connection
with the reinvestment of:
Dividends from net investment
income ....................... 51,037 588,550 80,315 898,601 73,368 863,333
----------- ------------- ----------- ------------- ----------- -------------
411,820 4,746,418 491,608 5,522,430 640,416 7,535,251
Shares repurchased .............. (500,546) (5,745,952) (363,731) (4,077,509) (362,635) (4,256,817)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (88,726) $ (999,534) 127,877 $ 1,444,921 277,781 $ 3,278,434
----------- ------------- ----------- ------------- ----------- -------------
Increase (decrease) derived
from capital shares transactions (451,452) $ (5,058,236) (454,905) $ (4,698,171) 2,263,646 $ 26,608,353
=========== ============= =========== ============= =========== =============
51
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
8. Capital Shares (continued).
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 DECEMBER 31, 2002 DECEMBER 31, 2001
-------------------------- -------------------------- --------------------------
GOVERNMENT SECURITIES FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------- ----------- ------------- ----------- ------------- ----------- -------------
CLASS A
Shares sold ..................... 679,447 $ 8,249,719 1,163,096 $ 13,583,368 1,567,340 $ 17,673,623
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income ......................... 159,984 1,935,187 243,169 2,819,415 270,123 3,048,950
----------- ------------- ----------- ------------- ----------- -------------
839,431 10,184,906 1,406,265 16,402,783 1,837,463 20,722,573
Shares repurchased .............. (1,441,491) (17,423,672) (1,419,343) (16,327,594) (1,866,222) (20,982,105)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (602,060) $ (7,238,766) (13,078) $ 75,189 (28,759) $ (259,532)
----------- ------------- ----------- ------------- ----------- -------------
CLASS B
Shares sold ..................... 320,801 $ 3,882,546 712,314 $ 8,363,857 505,361 $ 5,709,885
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income ....................... 28,512 345,321 36,766 427,149 33,898 382,953
----------- ------------- ----------- ------------- ----------- -------------
349,313 4,227,867 749,080 8,791,006 539,259 6,092,838
Shares repurchased .............. (493,758) (5,918,693) (541,866) (6,269,688) (278,665) (3,146,944)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (144,445) $ (1,690,826) 207,214 $ 2,521,318 260,594 $ 2,945,894
----------- ------------- ----------- ------------- ----------- -------------
CLASS C
Shares sold ..................... -- $ -- -- $ -- -- $ --
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income ....................... -- -- -- -- -- --
----------- ------------- ----------- ------------- ----------- -------------
-- -- -- -- -- --
Shares repurchased .............. -- -- -- -- -- --
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... -- $ -- -- $ -- -- $ --
----------- ------------- ----------- ------------- ----------- -------------
CLASS Y
Shares sold ..................... 33,551 $ 404,508 220,420 $ 2,524,097 63,952 $ 728,747
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income ....................... 11,024 133,483 24,957 289,414 21,989 245,868
----------- ------------- ----------- ------------- ----------- -------------
44,575 537,991 245,377 2,813,511 85,941 974,615
Shares repurchased .............. (364,336) (4,409,555) (114,051) (1,321,509) (65,429) (740,483)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (319,761) $ (3,871,564) 131,326 $ 1,492,002 20,512 $ 234,132
----------- ------------- ----------- ------------- ----------- -------------
Increase(decrease) derived from
capital shares transactions .... (1,066,266) $ (12,801,156) 325,462 $ 4,088,509 252,347 $ 2,920,494
=========== ============= =========== ============= =========== =============
52
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
8. CAPITAL SHARES (continued).
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 DECEMBER 31, 2002 DECEMBER 31, 2001
-------------------------- -------------------------- --------------------------
HIGH INCOME FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------- ----------- ------------- ----------- ------------- ----------- -------------
CLASS A
Shares sold ..................... 6,787,841 $ 30,994,716 2,021,612 $ 8,897,208 1,247,804 $ 7,562,671
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income ....................... 178,526 792,126 317,560 1,396,013 523,610 3,018,437
----------- ------------- ----------- ------------- ----------- -------------
6,966,367 31,786,842 2,339,172 10,293,221 1,771,414 10,581,108
Shares repurchased .............. (7,296,772) (33,271,653) (3,663,855) (16,220,139) (2,557,348) (14,947,178)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (330,405) $ (1,484,811) (1,324,683) $ (5,926,918) (785,934) $ (4,366,070)
----------- ------------- ----------- ------------- ----------- -------------
CLASS B
Shares sold ..................... 662,229 $ 2,976,263 1,040,581 $ 4,725,693 1,452,751 $ 8,597,030
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income ....................... 105,383 467,995 201,776 889,901 317,495 1,829,605
----------- ------------- ----------- ------------- ----------- -------------
767,612 3,444,258 1,242,357 5,615,594 1,770,246 10,426,635
Shares repurchased .............. (1,323,884) (5,858,921) (2,675,203) (11,769,699) (2,439,710) (14,006,958)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (556,272) $ (2,414,663) (1,432,846) $ (6,154,105) (669,464) $ (3,580,323)
----------- ------------- ----------- ------------- ----------- -------------
CLASS C
Shares sold ..................... 69,446 $ 305,018 90,003 $ 403,036 360,599 $ 2,104,845
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income ....................... 13,856 61,635 26,503 116,430 43,294 252,141
----------- ------------- ----------- ------------- ----------- -------------
83,302 366,653 116,506 519,466 403,893 2,356,986
Shares repurchased .............. (101,125) (434,559) (324,456) (1,450,446) (427,671) (2,548,968)
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... (17,823) $ (67,906) (207,950) $ (930,980) (23,778) $ (191,982)
----------- ------------- ----------- ------------- ----------- -------------
CLASS Y
Shares sold ..................... -- $ -- -- $ -- -- $ --
Shares issued in connection
with the reinvestment of:
Dividends from net investment
income ....................... -- -- -- -- -- --
----------- ------------- ----------- ------------- ----------- -------------
-- -- -- -- -- --
Shares repurchased .............. -- -- -- -- -- --
----------- ------------- ----------- ------------- ----------- -------------
Net increase (decrease) ......... -- $ -- -- $ -- -- $ --
----------- ------------- ----------- ------------- ----------- -------------
Increase(decrease) derived from
capital shares transactions .... (904,500) $ (3,967,380) (2,965,479) $ (13,012,003) (1,479,176) $ (8,138,375)
=========== ============= =========== ============= =========== =============
53
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
8. CAPITAL SHARES (continued).
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 DECEMBER 31, 2002 DECEMBER 31, 2001
--------------------------- --------------------------- ---------------------------
LIMITED TERM U.S. GOVERNMENT FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------- ---------- -------------- ---------- -------------- ---------- --------------
CLASS A
Shares sold ..................... 3,639,344 $ 42,294,961 2,338,561 $ 26,950,560 2,445,579 $ 27,653,033
Shares Issued in connection with
the reinvestment of:
Dividends from net investment
income ...................... 217,806 2,527,837 348,652 4,025,182 396,187 4,499,196
---------- -------------- ---------- -------------- ---------- --------------
3,857,150 44,822,798 2,687,213 30,975,742 2,841,766 32,152,229
Shares repurchased .............. (2,708,272) (31,326,172) (3,260,141) (37,525,210) (3,883,682) (43,935,146)
---------- -------------- ---------- -------------- ---------- --------------
Net increase (decrease) ......... 1,148,878 $ 13,496,626 (572,928) $ (6,549,468) (1,041,916) $ (11,782,917)
---------- -------------- ---------- -------------- ---------- --------------
CLASS B
Shares sold ..................... 328,497 $ 3,816,554 706,265 $ 8,186,137 399,797 $ 4,554,320
Shares Issued in connection with
the reinvestment of:
Dividends from net investment
income ...................... 27,583 319,597 40,792 470,419 39,402 446,829
---------- -------------- ---------- -------------- ---------- --------------
356,080 4,136,151 747,057 8,656,556 439,199 5,001,149
Shares repurchased .............. (470,730) (5,449,483) (620,421) (7,125,410) (244,043) (2,767,660)
---------- -------------- ---------- -------------- ---------- --------------
Net increase (decrease) ......... (114,650) $ (1,313,332) 126,636 $ 1,531,146 195,156 $ 2,233,489
---------- -------------- ---------- -------------- ---------- --------------
CLASS C
Shares sold ..................... 257,384 $ 2,997,797 570,784 $ 6,611,629 256,551 $ 2,890,430
Shares Issued in connection with
the reinvestment of:
Dividends from net investment
income ...................... 13,512 156,679 17,765 205,133 20,583 233,332
---------- -------------- ---------- -------------- ---------- --------------
270,896 3,154,476 588,549 6,816,762 277,134 3,123,762
Shares repurchased .............. (203,605) (2,359,426) (414,627) (4,814,349) (355,306) (4,028,016)
---------- -------------- ---------- -------------- ---------- --------------
Net increase (decrease) ......... 67,291 $ 795,050 173,922 $ 2,002,413 (78,172) $ (904,254)
---------- -------------- ---------- -------------- ---------- --------------
CLASS Y
Shares sold ..................... 194,812 $ 2,266,581 987,271 $ 11,289,831 74,432 $ 855,152
Shares Issued in connection with
the reinvestment of:
Dividends from net investment
income ...................... 21,540 250,898 34,738 402,928 15,149 173,303
---------- -------------- ---------- -------------- ---------- --------------
216,352 2,517,479 1,022,009 11,692,759 89,581 1,028,455
Shares repurchased .............. (344,269) (4,012,366) (599,695) (6,901,951) (78,549) (893,943)
---------- -------------- ---------- -------------- ---------- --------------
Net increase (decrease) ......... (127,917) $ (1,494,887) 422,314 $ 4,790,808 11,032 $ 134,512
---------- -------------- ---------- -------------- ---------- --------------
Increase (decrease) derived from
capital shares transactions .... 973,602 $ 11,483,457 149,944 $ 1,774,899 (913,900) $ (10,319,170)
========== ============== ========== ============== ========== ==============
54
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
8. CAPITAL SHARES (continued).
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 DECEMBER 31, 2002 DECEMBER 31, 2001
---------------------------- --------------------------- ---------------------------
STRATEGIC INCOME FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ----------------------------------- ----------- -------------- ---------- -------------- ---------- --------------
CLASS A
Shares sold ..................... 4,379,870 $ 52,212,398 1,233,640 $ 12,489,877 942,976 $ 9,851,828
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income ....................... 371,875 4,481,650 428,477 4,343,680 710,648 7,330,700
----------- -------------- ---------- -------------- ---------- --------------
4,751,745 56,694,048 1,662,117 16,833,557 1,653,624 17,182,528
Shares repurchased .............. (2,180,800) (25,669,234) (2,583,795) (26,064,953) (2,958,307) (30,455,609)
----------- -------------- ---------- -------------- ---------- --------------
Net increase (decrease) ......... 2,570,945 $ 31,024,814 (921,678) $ (9,231,396) (1,304,683) $ (13,273,081)
----------- -------------- ---------- -------------- ---------- --------------
CLASS B
Shares sold ..................... 11,291,589 $ 137,976,336 996,177 $ 10,066,847 1,049,379 $ 10,945,846
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income ....................... 268,978 3,224,645 364,119 3,688,894 592,151 6,108,437
----------- -------------- ---------- -------------- ---------- --------------
11,560,567 141,200,981 1,360,296 13,755,741 1,641,530 17,054,283
Shares repurchased .............. (11,369,542) (139,122,966) (2,502,784) (25,285,670) (2,433,883) (24,987,009)
----------- -------------- ---------- -------------- ---------- --------------
Net increase (decrease) ......... 191,025 $ 2,078,015 (1,142,488) $ (11,529,929) (792,353) $ (7,932,726)
----------- -------------- ---------- -------------- ---------- --------------
CLASS C
Shares sold ..................... 3,238,168 $ 38,652,520 331,088 $ 3,346,746 336,952 $ 3,647,683
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income ....................... 96,560 1,163,101 101,770 1,030,223 190,747 1,874,620
----------- -------------- ---------- -------------- ---------- --------------
3,334,728 39,815,621 432,858 4,376,969 527,699 5,522,303
Shares repurchased .............. (647,304) (7,733,899) (771,825) (7,794,721) (1,047,238) (10,766,581)
----------- -------------- ---------- -------------- ---------- --------------
Net increase (decrease) ......... 2,687,424 $ 32,081,722 (338,967) $ (3,417,752) (519,539) $ (5,244,278)
----------- -------------- ---------- -------------- ---------- --------------
CLASS Y
Shares sold ..................... 110,719 $ 1,316,510 68,699 $ 692,601 37,158 $ 382,879
Shares issued in connection with
the reinvestment of:
Dividends from net investment
income ....................... 7,237 87,673 4,144 42,230 3,567 36,701
----------- -------------- ---------- -------------- ---------- --------------
117,956 1,404,183 72,843 734,831 40,725 419,580
Shares repurchased .............. (40,357) (480,677) (21,066) (211,862) (26,758) (273,469)
----------- -------------- ---------- -------------- ---------- --------------
Net increase (decrease) ......... 77,599 $ 923,506 51,777 $ 522,969 13,967 $ 146,111
----------- -------------- ---------- -------------- ---------- --------------
Increase(decrease) derived from
capital shares transactions .... 5,526,993 $ 66,108,057 (2,351,356) $ (23,656,108) (2,602,608) $ (26,303,974)
=========== ============== ========== ============== ========== ==============
55
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders of CDC Nvest Funds Trust I and Loomis Sayles
Funds II:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position Loomis Sayles Core Plus Bond Fund
(formerly CDC Nvest Bond Income Fund), Loomis Sayles Government Securities Fund
(formerly CDC Nvest Government Securities Fund), Loomis Sayles High Income Fund
(formerly CDC Nvest High Income Fund), Loomis Sayles Limited Term U.S.
Government Fund (formerly CDC Nvest Limited Term U.S. Government Fund) and
Loomis Sayles Strategic Income Fund (formerly CDC Nvest Strategic Income Fund)
(series of CDC Nvest Funds Trust I or Loomis Sayles Funds II hereafter referred
to as the "Funds") at September 30, 2003, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for each of the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 2003 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2003
56
ADDITIONAL TAX INFORMATION
FEDERAL INCOME TAX INFORMATION (unaudited)
During the period ended September 30, 2003, the tax character of distributions
paid was as follows:
Distributions Paid from Distributions Paid from
Ordinary Income Long-Term Capital Gains
----------------------- -----------------------
Core Plus Bond Fund $ 9,384,686 $ --
Government Securities Fund 2,729,526 --
High Income Fund 2,708,888 --
Limited Term U.S. Government Fund 4,493,887 --
Strategic Income Fund 13,639,870 --
57
TRUSTEES' INFORMATION
The Funds 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.
POSITION(S) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(S) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ------------------------------- -------------------------- ----------------------------
INDEPENDENT TRUSTEES
Joseph Alaimo+ (73) Trustee; Chairman, Wayne Hummer 26;
399 Boylston Street 4 years for Loomis Sayles Trust Company and Wayne None
Boston, MA 02116 Funds Trusts Hummer Investment Trust
Graham T. Allison, Jr. (63) Trustee (2); Douglas Dillon Professor 44;
399 Boylston Street 19 years for CDC Nvest and Director for the Director, Taubman Centers,
Boston, MA 02116 Funds Trusts; Less than 1 Belfer Center of Science Inc.; Board Member, USEC
year for Loomis Sayles Funds and International Affairs, Inc.
Trusts John F. Kennedy School of
Government, Harvard
University
Edward A. Benjamin (65) Trustee (1) Retired; formerly, 44;
399 Boylston Street Less than 1 year Partner, Ropes & Gray (law Director, Coal, Energy
Boston, MA 02116 firm) until 1999 Investments &
Management; Director,
Precision Optics Corporation
(optics manufacturer)
Daniel M. Cain (58) Trustee, President and CEO, Cain 44;
452 Fifth Avenue Chairman (1); Brothers & Company, Trustee, Universal Health
New York, NY 10018 7 years for CDC Nvest Funds Incorporated (investment Realty Income Trust;
Trusts; Less than 1 year for banking) Director, PASC; Director,
Loomis Sayles Funds Trusts Sheridan Healthcorp
Paul G. Chenault (69) Trustee (2) Retired; formerly, 44;
5852 Pebble Beach Way Less than 1 year for CDC Trustee, First Variable Director, Mailco Office
San Luis Obispo, CA 93401 Nvest Funds Trusts; 4 years Life (variable life Products, Inc.
for Loomis Sayles Funds insurance)
Trusts
Kenneth J. Cowan (71) Trustee Retired 44;
399 Boylston Street Chairman (2); None
Boston, MA 02116 28 years for CDC Nvest Funds
Trusts; Less than 1 year for
Loomis Sayles Funds Trusts
Trustee (2);
7 years
Richard Darman (60) Trustee (2); Partner, The Carlyle Group Director and Chairman, AES
399 Boylston Street 7 years for CDC Nvest Funds (investments); Chairman of Corporation
Boston, MA 02116 Trusts; Less than 1 year for the Board of Directors of
Loomis Sayles Funds Trusts AES Corporation
(international power
company); formerly,
Professor, John F. Kennedy
School of Government,
Harvard University
58
TRUSTEES' INFORMATION
POSITION(S) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(S) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ------------------------------- -------------------------- ----------------------------
INDEPENDENT TRUSTEES
(continued)
Sandra O. Moose (61) Trustee (1); Senior Vice President and 44;
One Exchange Place 21 years for CDC Nvest Director, The Boston Director, Verizon
Boston, MA 02109 Funds Trusts; Less than 1 Consulting Group, Inc. Communications
year for Loomis Sayles (management consulting) Director, Rohm and Haas
Funds Trusts Company
John A. Shane (70) Trustee (2); President, Palmer Service 44;
200 Unicorn Park Drive 21 years for CDC Nvest Corporation (venture Director, Gensym
Woburn, MA 01801 Funds Trusts; Less than 1 capital organization) Corporation; Director,
year for Loomis Sayles Overland Storage, Inc.
Funds Trusts Director, Abt Associates
Pendleton P. White (72) Trustee (2); Retired 44;
6 Breckenridge Lane 22 years for CDC Nvest Funds None
Savannah, GA 31411 Trusts; Less than 1
year for Loomis Sayles
Funds Trusts
INTERESTED TRUSTEES
Robert J. Blanding/3/ (56) Chief Executive Officer, Loomis President, Chairman, 44;
555 California Street Sayles Funds II, Trustee Less Director, and Chief None
San Francisco, CA 94104 than 1 year Executive Officer, Loomis
Sayles & Company, L.P.;
President and CEO - Loomis
Sayles Funds I
John T. Hailer/4/ (42) President and Chief Executive President and Chief 44;
399 Boylston Street Officer - CDC Nvest Funds Executive Officer, CDC None
Boston, MA 02116 Trusts, President - Loomis IXIS Asset Management
Sayles Funds II, Trustee; Distributors, L.P.;
3 years for CDC Nvest Funds Executive Vice President -
Trusts; Less than 1 year for Loomis Sayles Funds I;
Loomis Sayles Funds Trusts formerly, Senior Vice
President, Fidelity
Investments
Peter S. Voss/5/ (56) Chairman of the Board, Director, President and 44;
399 Boylston Street Trustee; Chief Executive Officer, Trustee of Harris Associates
Boston, MA 02116 11 years for CDC Nvest CDC IXIS Asset Management Investment Trust/6/
Funds Trusts; Less than 1 North America, L.P.
year for Loomis Sayles Funds
Trusts
59
TRUSTEES' INFORMATION
POSITION(S) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(S) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ------------------------------- -------------------------- ----------------------------
OFFICERS
Nicholas H. Palmerino (38) Treasurer; Senior Vice President, CDC Not Applicable;
399 Boylston Street Not Applicable IXIS Asset Management None
Boston, MA 02116 Services, Inc.; Senior
Vice President, CDC IXIS
Asset Management Advisers,
L.P.; formerly, Vice
President, Loomis, Sayles
& Company, L.P.
John E. Pelletier (39) Secretary; Senior Vice President, Not Applicable;
399 Boylston Street Not Applicable General Counsel, Secretary None
Boston, MA 02116 and Clerk, CDC IXIS
Distribution Corporation;
Senior Vice President,
General Counsel, Secretary
and Clerk, CDC IXIS Asset
Management Distributors,
L.P.; Senior Vice
President, General
Counsel, Secretary and
Clerk, CDC IXIS Asset
Management Advisers, L.P.;
Executive Vice President,
General Counsel,
Secretary, Clerk and
Director, CDC IXIS Asset
Management Services, Inc
(1) Member of Audit Committee.
(2) Member of Contract Review and Governance Committee.
+ Mr. Alaimo is a Trustee of Loomis Sayles Funds I and Loomis Sayles Funds II,
but not of the CDC Nvest Funds Trusts.
/1/ Except as noted, each Trustee and Officer holds the same positions with CDC
Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III,
CDC Nvest Companies Trust I, AEW Real Estate Income Fund, CDC Nvest Cash
Management Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest
Funds Trusts") and Loomis Sayles Funds I and Loomis Sayles Funds II (the
"Loomis Sayles Funds Trusts" and together with the CDC Nvest Funds Trusts,
the "Trusts").
/2/ All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. Messrs. Alaimo and White are expected to
retire by December 31, 2003.
/3/ 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 & Company,
L.P. ("Loomis Sayles").
/4/ Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution
Corporation; President and Chief Executive Officer of CDC IXIS Asset
Management Distributors, L.P. ("CDC IXIS Distributors").
/5/ Mr. Voss is an "interested person" of the Trusts because he holds the
following positions with entities that may be considered to be affiliated
persons of the Trusts: Director of CDC IXIS Asset Management Services, Inc.;
Director of CDC IXIS Asset Management Distribution Corporation; Director and
Chairman of CDC IXIS Asset Management Associates, Inc.; Director of AEW
Capital Management, Inc; Director of Harris Associates, Inc; Director of
Loomis, Sayles & Company, Inc.; Member of Reich & Tang Asset Management,
LLC; Director of Westpeak Global Advisors, Inc.; Director of Vaughan,
Nelson, Scarborough & McCullough, Inc.; Director, Hansberger Group, Inc.;
Member, Board of Managers, Harris Alternatives L.L.C.; and Director and
Member of Executive Board of CDC IXIS Asset Management.
/6/ As of January 20, 2003, Harris Associates Investment Trust has seven series
that were overseen by its Board of Trustees.
60
ADDITIONAL INFORMATION
LOOMIS SAYLES HIGH INCOME FUND
Shareholder Meeting (unaudited). At a special shareholders' meeting held on
August 28, 2003, shareholders of the CDC Nvest High Income Fund (the predecessor
of Loomis Sayles High Income Fund) voted for the following proposals:
1. To approve a new advisory agreement between Loomis, Sayles & Company, L.P.
and CDC Nvest Funds Trust II, on behalf of the CDC Nvest High Income Fund.
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
- ------------- ------------- --------------- ---------------- -------------
9,347,768.851 136,950.838 366,192.132 0.0000 9,850,911.821
2.c. To approve and Agreement and Plan of Reorganization for adoption by CDC
Nvest High Income Fund, pursuant to which such Fund would reorganize as Loomis
Sayles High Income Fund, a series of Loomis Sayles Funds II.
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
- ------------- ------------- --------------- ---------------- -------------
5,786,401.893 152,668.978 382,284.950 3,592,56.000 9,850,911.821
LOOMIS SAYLES LIMITED TERM U.S. GOVERNMENT FUND
Shareholder Meeting (unaudited). At a special shareholders' meeting held on
August 28, 2003, shareholders of the CDC Nvest Limited Term U.S. Government Fund
(the predecessor of Loomis Sayles Limited Term U.S. Government Fund) voted for
the following proposals:
1. To approve a new advisory agreement between Loomis, Sayles & Company, L.P.
and CDC Nvest Funds Trust II, on behalf of the CDC Nvest Limited Term U.S.
Government Fund.
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
- ------------- ------------- --------------- ---------------- --------------
9,718,838.524 163,166.700 416,336.819 0.0000 10,298,342.043
2.d. To approve and Agreement and Plan of Reorganization for adoption by CDC
Nvest Limited Term U.S. Government Fund, pursuant to which such Fund would
reorganize as Loomis Sayles High Income Fund, a series of Loomis Sayles Funds
II.
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
- ------------- ------------- --------------- ---------------- -------------
7,385,982.070 157,458.785 473,844.188 2,281,057.000 10,298,342.043
LOOMIS SAYLES STRATEGIC INCOME FUND
Shareholder Meeting (unaudited). At a special shareholders' meeting held on
August 28, 2003, shareholders of the CDC Nvest Strategic Income Fund (the
predecessor of Loomis Sayles Strategic Income Fund) voted for the following
proposals:
1. To approve a new advisory agreement between Loomis, Sayles & Company, L.P.
and CDC Nvest Funds Trust I, on behalf of the CDC Nvest Strategic Income Fund.
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
- -------------- ------------- --------------- ---------------- --------------
20,099,903.719 340,434.300 665,328.563 0.0000 21,101,666.582
2.b. To approve and Agreement and Plan of Reorganization for adoption by CDC
Nvest Strategic Income Fund, pursuant to which such Fund would reorganize as
Loomis Sayles Strategic Income Fund, a series of Loomis Sayles Funds II.
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
- -------------- ------------- --------------- ---------------- --------------
11,780,023.949 347,947.844 735,964.789 8,241,730.000 21,105,666.582
61
ADDITIONAL INFORMATION
Shareholder Meeting (unaudited). At the special meeting of shareholders held on
June 10, 2003, shareholders of Loomis Sayles Funds II (formerly, Loomis Sayles
Funds) voted for the following proposal:
1. ELECTION OF TRUSTEES
FOR WITHHELD *
----------- ------------
(01) Joseph Alaimo 134,298,551 8,672,577
(02) Graham T. Allison, Jr. 134,590,902 8,380,227
(03) Edward A. Benjamin 134,546,833 8,424,296
(04) Robert J. Blanding 134,572,705 8,398,423
(05) Daniel M. Cain 134,593,263 8,377,866
(06) Paul G. Chenault 134,352,172 8,618,957
(07) Kenneth J. Cowan 134,524,153 8,446,976
(08) Richard Darman 134,552,047 8,419,081
(09) John T. Hailer 134,613,039 8,358,089
(10) Sandra O. Moose 134,612,285 8,358,843
(11) John A. Shane 134,332,421 8,638,708
(12) Peter S. Voss 134,622,604 8,348,525
(13) Pendleton P. White 134,300,598 8,670,530
* Includes Broker Non-Votes (if any).
62
This Page Intentionally Left Blank
[LOGO OF CDC NVEST FUNDS (SM)]
TAX FREE INCOME FUNDS
ANNUAL REPORT
September 30, 2003
[LOGO OF LOOMIS SAYLES FUNDS]
Loomis Sayles Massachusetts Tax Free Income Fund
(formerly CDC Nvest Massachusetts Tax Free Income Fund)
Loomis Sayles Municipal Income Fund
(formerly CDC Nvest Municipal Income Fund)
TABLE OF CONTENTS
Management Discussion and Performance..........Page 1
Fund Risks.....................................Page 5
Schedule of Investments........................Page 6
Financial Statements..........................Page 10
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
OBJECTIVE:
Seeks to maintain a high level of current income exempt from federal and
Massachusetts personal income taxes
STRATEGY:
Invests primarily in Massachusetts municipal bonds, including general
obligation bonds and issues secured by specific revenue streams
INCEPTION DATE:
March 23, 1984
MANAGER:
Martha A. Strom
Robert Payne
Loomis, Sayles & Company, L.P.
SYMBOLS:
Class A NEFMX
Class B NEMBX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 16.41
Class B 16.37
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund's total return for the nine
months ended September 30, 2003* was 3.09% based on the net asset value of Class
A shares and $0.49 in dividends reinvested during the period, while the Lehman
Brothers Municipal Bond Index returned 3.89%. Morningstar's Muni Massachusetts
category had an average return of 3.13% for the same period.
As of September 30, 2003, the fund's 30-day SEC yield on Class A shares was
3.66% - equivalent to a taxable yield of 5.95% based on the 38.45% combined
maximum federal and Massachusetts state income tax rate.
Revenue bonds continue to perform well
Fund revenue bonds issued for companies in the education, healthcare and housing
sectors experienced solid performance year-to-date. The supply of such issues in
Massachusetts has dwindled, while investor demand has increased, improving price
performance. The fund's top performers in these sectors included Massachusetts
State Health & Education for Nichols College and Massachusetts State Health &
Education for Dana Farber Cancer Institute. Bonds issued by Massachusetts State
Development Finance Agency for Concord-Assabet Family Services were upgraded in
September to Ba2 by Moody's (from Caa3), reflecting improved fundamentals.
Tax-backed and shorter maturity bonds had lackluster performance
Tax-backed bonds continue to be volatile due to the negative press surrounding
state and local budget problems in California and various East Coast localities,
including Massachusetts. While the fund's exposure to this sector is of high
average credit quality, continued negative news stories, combined with the
longer maturity structure of the bonds owned, caused the fund to lag. Shorter
maturity bonds, such as pre-refunded and "escrowed to maturity" bonds also
experienced lackluster performance. When bonds are either pre-refunded or
escrowed to maturity, the issuer typically purchases Treasury securities to
replace the original bonds and the "call date" (the earliest date by which the
issuer can call in its debt) becomes the new effective maturity date. The dual
effect of raising quality and shortening maturity ultimately reduces yield to a
level where there is little room for price appreciation. Many of our
transactions during the year have been to reduce exposure to these bonds and
reinvest proceeds in higher-yielding issues.
The fund's insured bonds also lagged because their relatively low yields caused
investor demand for these issues to decline. While individual investors
typically look for insured bonds garnering at least 5% in yield selling at a
discount to par value, the fund has focused on bonds with a coupon of 5% or
better priced above par. There has been little demand for this structure from
retail investors and performance has lagged as a result. Insured bonds accounted
for 32% of the fund's total assets as of the end of September, vs. approximately
48% in the fund's Lehman benchmark.
Fund is positioned for a rising interest rate environment in 2004
As of the end of September, the fund's average maturity was about ten years,
which is short for this fund, in expectation of rising interest rates in 2004.
We believe our emphasis on bonds selling at a premium to their par value will
contribute positively to performance longer term, because premium bonds tend to
experience less price erosion in a rising interest rate environment.
*Effective after the close of business on September 12, 2003, the fund's fiscal
year end was changed from December 31 to September 30.
1
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Loomis Sayles Massachusetts Tax Free Income Fund's
performance to a benchmark index provide you with a general sense of how the
fund performed. To put this information in context, it may be helpful to
understand the differences between the two. The fund's total return for the
period shown below appears with and without sales charges and includes fund
expenses and management fees. A securities index measures the performance of a
theoretical portfolio. Unlike a fund, the index is unmanaged and does not have
expenses that affect the results. It is not possible to invest directly in an
index. In addition, few investors could purchase all of the securities necessary
to match the index and would incur transaction costs and other expenses even if
they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES*
- --------------------------------------------------------------------------------
[CHART APPEARS HERE]
SEPTEMBER 30, 1993 THROUGH SEPTEMBER 30, 2003
Lehman
Maximum Municipal
Month Net Asset Sales Bond
End Value (1) Charge (2) Index (3)
--- -----------------------------------------------------
09/30/1993 10,000 9,575 10,000
10/31/1993 10,012 9,587 10,019
11/30/1993 9,921 9,499 9,931
12/31/1993 10,099 9,669 10,140
01/31/1994 10,232 9,797 10,256
02/28/1994 9,966 9,543 9,991
03/31/1994 9,481 9,078 9,584
04/30/1994 9,507 9,103 9,665
05/31/1994 9,595 9,187 9,749
06/30/1994 9,510 9,106 9,689
07/31/1994 9,695 9,283 9,867
08/31/1994 9,715 9,303 9,901
09/30/1994 9,553 9,147 9,756
10/31/1994 9,323 8,927 9,583
11/30/1994 9,098 8,711 9,409
12/31/1994 9,358 8,960 9,616
01/31/1995 9,677 9,265 9,891
02/28/1995 9,992 9,568 10,179
03/31/1995 10,064 9,637 10,296
04/30/1995 10,080 9,652 10,308
05/31/1995 10,399 9,957 10,637
06/30/1995 10,237 9,802 10,544
07/31/1995 10,309 9,871 10,644
08/31/1995 10,432 9,988 10,779
09/30/1995 10,504 10,058 10,847
10/31/1995 10,680 10,226 11,005
11/30/1995 10,889 10,426 11,187
12/31/1995 11,027 10,558 11,295
01/31/1996 11,062 10,592 11,380
02/29/1996 10,952 10,487 11,303
03/31/1996 10,815 10,356 11,159
04/30/1996 10,784 10,325 11,127
05/31/1996 10,799 10,340 11,123
06/30/1996 10,901 10,437 11,244
07/31/1996 10,983 10,516 11,346
08/31/1996 10,978 10,511 11,343
09/30/1996 11,149 10,675 11,502
10/31/1996 11,266 10,787 11,632
11/30/1996 11,460 10,973 11,845
12/31/1996 11,384 10,900 11,795
01/31/1997 11,404 10,919 11,817
02/28/1997 11,513 11,024 11,926
03/31/1997 11,383 10,899 11,767
04/30/1997 11,476 10,988 11,865
05/31/1997 11,639 11,144 12,044
06/30/1997 11,760 11,260 12,172
07/31/1997 12,095 11,581 12,509
08/31/1997 11,983 11,474 12,392
09/30/1997 12,142 11,626 12,539
10/31/1997 12,201 11,683 12,620
11/30/1997 12,275 11,753 12,694
12/31/1997 12,445 11,916 12,879
01/31/1998 12,545 12,012 13,012
02/28/1998 12,528 11,995 13,016
03/31/1998 12,493 11,962 13,028
04/30/1998 12,448 11,919 12,969
05/31/1998 12,640 12,103 13,174
06/30/1998 12,685 12,146 13,226
07/31/1998 12,692 12,153 13,259
08/31/1998 12,894 12,346 13,464
09/30/1998 13,037 12,483 13,632
10/31/1998 12,984 12,432 13,631
11/30/1998 13,007 12,454 13,679
12/31/1998 13,056 12,501 13,714
01/31/1999 13,206 12,645 13,877
02/28/1999 13,146 12,587 13,816
03/31/1999 13,130 12,572 13,835
04/30/1999 13,169 12,609 13,870
05/31/1999 13,084 12,528 13,789
06/30/1999 12,871 12,324 13,591
07/31/1999 12,916 12,367 13,641
08/31/1999 12,733 12,192 13,531
09/30/1999 12,695 12,156 13,537
10/31/1999 12,518 11,986 13,390
11/30/1999 12,629 12,092 13,533
12/31/1999 12,518 11,986 13,432
01/31/2000 12,416 11,888 13,373
02/29/2000 12,570 12,036 13,529
03/31/2000 12,806 12,262 13,824
04/30/2000 12,748 12,206 13,743
05/31/2000 12,698 12,158 13,671
06/30/2000 12,953 12,403 14,033
07/31/2000 13,118 12,561 14,229
08/31/2000 13,282 12,718 14,448
09/30/2000 13,229 12,667 14,373
10/31/2000 13,336 12,769 14,530
11/30/2000 13,392 12,823 14,639
12/31/2000 13,677 13,096 15,001
01/31/2001 13,725 13,141 15,150
02/28/2001 13,773 13,187 15,198
03/31/2001 13,769 13,184 15,334
04/30/2001 13,627 13,048 15,168
05/31/2001 13,759 13,174 15,331
06/30/2001 13,857 13,268 15,434
07/31/2001 14,068 13,470 15,662
08/31/2001 14,332 13,723 15,920
09/30/2001 14,252 13,646 15,867
10/31/2001 14,385 13,773 16,056
11/30/2001 14,279 13,672 15,921
12/31/2001 14,117 13,517 15,770
01/31/2002 14,196 13,593 16,044
02/28/2002 14,357 13,747 16,237
03/31/2002 14,093 13,494 15,919
04/30/2002 14,351 13,741 16,230
05/31/2002 14,463 13,848 16,328
06/30/2002 14,632 14,010 16,501
07/31/2002 14,818 14,188 16,713
08/31/2002 14,999 14,362 16,914
09/30/2002 15,337 14,685 17,285
10/31/2002 15,057 14,418 16,998
11/30/2002 14,962 14,326 16,927
12/31/2002 15,262 14,613 17,285
01/31/2003 15,230 14,583 17,241
02/28/2003 15,470 14,813 17,482
03/31/2003 15,484 14,826 17,492
04/30/2003 15,583 14,920 17,608
05/31/2003 15,981 15,302 18,020
06/30/2003 15,909 15,233 17,944
07/31/2003 15,219 14,572 17,316
08/31/2003 15,318 14,667 17,445
09/30/2003 15,734 15,062 17,958
-----------------------------------
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
9 MONTHS 1 YEAR 5 YEARS/5/ 10 YEARS/5/
-------- ------ ---------- -----------
Class A (Inception 3/23/84)
Net Asset Value/1/ 3.09% 2.58% 3.83% 4.64%
With Maximum Sales Charge/2/ -1.31 -1.78 2.93 4.18
Class B (Inception 9/13/93)
Net Asset Value/1/ 2.59 1.92 3.15 3.94
With CDSC/4/ -2.41 -3.01 2.82 3.94
COMPARATIVE PERFORMANCE 9 MONTHS 1 YEAR 5 YEARS 10 YEARS
- ----------------------- -------- ------ ------- --------
Lehman Brothers Municipal Bond Index/3/ 3.89% 3.89% 5.67% 6.03%
Morningstar Muni Massachusetts Average/6/ 3.13 2.69 4.45 5.03
Lipper MA Municipal Debt Funds Average/7/ 3.16 2.63 4.46 5.11
YIELDS AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
CLASS A CLASS B
------- -------
SEC 30-day yield/8/ 3.66% 3.18%
Taxable equivalent yield/9/ 5.95 5.17
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
* Other classes of shares are available for which performance, fees, and
expenses will differ.
PORTFOLIO AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
CREDIT QUALITY
[CHART APPEARS HERE]
Aaa Aa A Baa Caa and Not Rated
---- ---- ---- --- -----------------
57.8% 11.7% 10.2% 4.1% 16.2%
Average quality: Aa
Credit quality is based on bond ratings from Moody's Investors Service
EFFECTIVE MATURITY
[CHART APPEARS HERE]
1 year 1-5 years 5-10 years 10+ years
------ --------- ---------- ---------
9.3% 5.9% 56.8% 28.0%
Average effective maturity: 8.7 years
See page 5 for information on the possible risks associated with an investment
in this fund.
NOTES TO CHARTS
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.25%.
/3/ Lehman Brothers Municipal Bond Index is an unmanaged composite measure of
the performance of the municipal bond market.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares.
/5/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/6/ Morningstar Muni Massachusetts Average is the average performance without
sales charges of funds with similar investment characteristics as
calculated by Morningstar, Inc.
/7/ Lipper Massachusetts Municipal Debt Funds Average is the average
performance without sales charges of funds with similar investment
objectives as calculated by Lipper Inc.
/8/ SEC yield is based on the fund's net investment income over a 30-day period
and is calculated in accordance with SEC guidelines.
/9/ Taxable equivalent yield is based on the maximum combined federal and MA
income tax bracket of 38.45%. A portion of income may be subject to
federal, state and/or alternative minimum tax. Capital gains, if any, are
subject to capital gains tax.
2
LOOMIS SAYLES MUNICIPAL INCOME FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
OBJECTIVE:
Seeks as high a level of current income exempt from federal income taxes as is
consistent with reasonable risk and protection of shareholders' capital
STRATEGY:
Invests primarily in municipal securities exempt from federal income tax
FUND INCEPTION:
May 9, 1977
MANAGER:
Martha A. Strom
Robert Payne
Loomis, Sayles & Company, L.P.
SYMBOLS:
Class A NEFTX
Class B NETBX
NET ASSET VALUE PER SHARE:
(September 30, 2003)
Class A $ 7.41
Class B 7.41
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Interest rates sank to 45-year lows this spring, but positive economic news
contributed to a rebound early in the summer and investors became more
aggressive in pursuit of yield. As a result, bond prices first rose and then
fell. Municipal bonds have escaped some of that yield volatility, outperforming
the Treasury market year-to-date.
For the nine months ended September 30, 2003*, Loomis Sayles Municipal Income
Fund's total return was 2.88% based on the net asset value of Class A shares and
$0.23 in reinvested dividends. The fund's benchmark, Lehman Brothers Municipal
Bond Index, returned 3.89% for the period, while the average return on the funds
in Morningstar's Muni National Long category was 3.31%. The fund's
underperformance can largely be attributed to its longer maturity structure,
designed to seek higher income.
As of September 30, 2003, the fund's 30-day SEC yield on Class A shares was
3.77% -equivalent to a taxable yield of 5.80% based on the 35% maximum federal
income tax rate.
Revenue bonds continue to perform well
Municipal bonds backed by corporations (revenue bonds) were among the fund's
best performers. Two examples include Lowndes County, Mississippi, Solid Waste
Disposal & Pollution Control issued for Weyerhaeuser Company and Pennsylvania
Economic Development Finance Authority Wastewater Treatment issued for Sun
Company. The healthcare sector was also positive, as rising investor demand and
lower supply drove prices up. A good example is the fund's position in bonds
issued by the University of Michigan for University Hospital.
Tax-backed and shorter maturity bonds had lackluster performance
Bonds backed by receipts from taxpayers continue to be volatile due to the
negative press surrounding state and local budget problems, particularly in
California and various East Coast localities. While the fund's tax-backed bonds
are of high average credit quality, the continued negative press about municipal
debt - combined with the longer maturity structure of the bonds owned - was a
negative. Shorter maturity bonds, including pre-refunded and "escrowed to
maturity" bonds also experienced lackluster performance. When bonds are either
pre-refunded or escrowed to maturity, the issuer typically purchases Treasury
securities to replace the original bonds and the call date (the earliest date by
which the issuer can call in its debt) becomes the new effective maturity date.
The dual effect of raising quality and shortening maturity ultimately reduces
yield to a level where there is little room for price appreciation. Many of our
transactions over the year have been to reduce exposure to these shorter
maturity bonds and reinvest proceeds in bonds with higher yields.
The fund's exposure to transportation revenue bonds was also a negative during
the period. Mixed economic reports have not convinced consumers that there is a
recovery underway. Hence, airports, toll roads and highway bonds, which rely on
user fees for revenues, have lagged other sectors.
Interest rates expected to rise gradually into 2004
As of the end of September 2003, the fund's average duration was ten years. This
is likely to make it more sensitive to changes in bond prices than its
benchmark, which has an average duration of eight years. In an effort to offset
this, we have emphasized bonds selling at a premium to their par value because
they tend to experience less price erosion in a rising interest rate
environment.
*Effective after the close of business on September 12, 2003, the fund's fiscal
year end was changed from December 31 to September 30.
3
LOOMIS SAYLES MUNICIPAL INCOME FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Loomis Sayles Municipal Income Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES*
- --------------------------------------------------------------------------------
[CHART APPEARS HERE]
SEPTEMBER 30, 1993 THROUGH SEPTEMBER 30, 2003
Lehman
Maximum Municipal
Month Net Asset Sales Bond
End Value (1) Charge (2) Index (3)
--- --------------------------------------------------
09/30/1993 10,000 9,550 10,000
10/31/1993 10,024 9,572 10,019
11/30/1993 9,923 9,477 9,931
12/31/1993 10,151 9,695 10,140
01/31/1994 10,271 9,809 10,256
02/28/1994 9,977 9,528 9,991
03/31/1994 9,487 9,060 9,584
04/30/1994 9,520 9,091 9,665
05/31/1994 9,616 9,183 9,749
06/30/1994 9,554 9,124 9,689
07/31/1994 9,730 9,292 9,867
08/31/1994 9,760 9,321 9,901
09/30/1994 9,591 9,159 9,756
10/31/1994 9,380 8,958 9,583
11/30/1994 9,100 8,691 9,409
12/31/1994 9,340 8,920 9,616
01/31/1995 9,666 9,231 9,891
02/28/1995 10,001 9,551 10,179
03/31/1995 10,131 9,675 10,296
04/30/1995 10,150 9,693 10,308
05/31/1995 10,433 9,964 10,637
06/30/1995 10,299 9,836 10,544
07/31/1995 10,389 9,921 10,644
08/31/1995 10,465 9,994 10,779
09/30/1995 10,541 10,067 10,847
10/31/1995 10,689 10,208 11,005
11/30/1995 10,866 10,377 11,187
12/31/1995 10,949 10,456 11,295
01/31/1996 11,036 10,539 11,380
02/29/1996 10,969 10,476 11,303
03/31/1996 10,844 10,356 11,159
04/30/1996 10,821 10,334 11,127
05/31/1996 10,812 10,326 11,123
06/30/1996 10,936 10,444 11,244
07/31/1996 11,016 10,520 11,346
08/31/1996 11,007 10,512 11,343
09/30/1996 11,192 10,688 11,502
10/31/1996 11,318 10,809 11,632
11/30/1996 11,490 10,973 11,845
12/31/1996 11,456 10,940 11,795
01/31/1997 11,468 10,951 11,817
02/28/1997 11,569 11,049 11,926
03/31/1997 11,422 10,908 11,767
04/30/1997 11,505 10,988 11,865
05/31/1997 11,636 11,112 12,044
06/30/1997 11,797 11,266 12,172
07/31/1997 12,116 11,571 12,509
08/31/1997 12,044 11,502 12,392
09/30/1997 12,145 11,598 12,539
10/31/1997 12,230 11,680 12,620
11/30/1997 12,268 11,716 12,694
12/31/1997 12,438 11,878 12,879
01/31/1998 12,592 12,026 13,012
02/28/1998 12,630 12,062 13,016
03/31/1998 12,650 12,081 13,028
04/30/1998 12,590 12,023 12,969
05/31/1998 12,725 12,153 13,174
06/30/1998 12,779 12,204 13,226
07/31/1998 12,801 12,225 13,259
08/31/1998 12,971 12,387 13,464
09/30/1998 13,075 12,487 13,632
10/31/1998 13,030 12,444 13,631
11/30/1998 13,086 12,497 13,679
12/31/1998 13,101 12,511 13,714
01/31/1999 13,229 12,634 13,877
02/28/1999 13,202 12,608 13,816
03/31/1999 13,207 12,613 13,835
04/30/1999 13,247 12,650 13,870
05/31/1999 13,200 12,606 13,789
06/30/1999 13,050 12,463 13,591
07/31/1999 13,090 12,501 13,641
08/31/1999 12,956 12,373 13,531
09/30/1999 12,961 12,378 13,537
10/31/1999 12,774 12,199 13,390
11/30/1999 12,894 12,313 13,533
12/31/1999 12,740 12,166 13,432
01/31/2000 12,672 12,101 13,373
02/29/2000 12,812 12,235 13,529
03/31/2000 13,009 12,423 13,824
04/30/2000 12,937 12,355 13,743
05/31/2000 12,901 12,320 13,671
06/30/2000 13,136 12,545 14,033
07/31/2000 13,282 12,684 14,229
08/31/2000 13,465 12,859 14,448
09/30/2000 13,428 12,824 14,373
10/31/2000 13,539 12,929 14,530
11/30/2000 13,631 13,018 14,639
12/31/2000 13,856 13,232 15,001
01/31/2001 13,952 13,325 15,150
02/28/2001 13,974 13,345 15,198
03/31/2001 14,089 13,455 15,334
04/30/2001 13,939 13,312 15,168
05/31/2001 14,072 13,438 15,331
06/30/2001 14,185 13,546 15,434
07/31/2001 14,433 13,783 15,662
08/31/2001 14,663 14,003 15,920
09/30/2001 14,411 13,762 15,867
10/31/2001 14,605 13,948 16,056
11/30/2001 14,448 13,798 15,921
12/31/2001 14,271 13,629 15,770
01/31/2002 14,505 13,852 16,044
02/28/2002 14,701 14,040 16,237
03/31/2002 14,460 13,809 15,919
04/30/2002 14,696 14,035 16,230
05/31/2002 14,772 14,107 16,328
06/30/2002 14,909 14,238 16,501
07/31/2002 15,005 14,330 16,713
08/31/2002 15,122 14,441 16,914
09/30/2002 15,363 14,672 17,285
10/31/2002 14,973 14,299 16,998
11/30/2002 14,949 14,276 16,927
12/31/2002 15,314 14,625 17,285
01/31/2003 15,122 14,441 17,241
02/28/2003 15,344 14,653 17,482
03/31/2003 15,336 14,646 17,492
04/30/2003 15,472 14,775 17,608
05/31/2003 15,857 15,144 18,020
06/30/2003 15,824 15,112 17,944
07/31/2003 15,138 14,457 17,316
08/31/2003 15,297 14,609 17,445
09/30/2003 15,753 15,038 17,958
-------------------------------
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
9 MONTHS 1 YEAR 5 YEARS 10 YEARS
-------- ------ ------- --------
Class A (Inception 5/9/77)
Net Asset Value/1/ 2.88% 2.55% 3.80% 4.65%
With Maximum Sales Charge/2/ -1.75 -2.13 2.85 4.16
Class B (Inception 9/13/93)
Net Asset Value/1/ 2.16 1.78 3.03 3.87
With CDSC/4/ -2.82 -3.13 2.69 3.87
COMPARATIVE PERFORMANCE 9 MONTHS 1 YEAR 5 YEARS 10 YEARS
- ----------------------- -------- ------ ------- --------
Lehman Brothers Muncipal Bond Index/3/ 3.89% 3.89% 5.67% 6.03%
Morningstar Muni National Long Fund Avg./5/ 3.31 2.82 4.25 4.98
Lipper General Municipal Debt Funds Avg./6/ 3.31 2.90 4.23 4.94
YIELDS AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
CLASS A CLASS B
------- -------
SEC 30-day yield/7/ 3.77% 3.22%
Taxable equivalent yield/8/ 5.80 4.95
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
* Other classes of shares are available for which performance, fees, and
expenses will differ.
PORTFOLIO AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
CREDIT QUALITY
[CHART APPEARS HERE]
Aaa Aa A Baa Ca and Not Rated
----- ---- ---- ---- ----------------
53.6% 17.6% 4.7% 14.6% 9.5%
Average quality: Aa
Credit quality is based on bond ratings from Moody's Investors Service
EFFECTIVE MATURITY
[CHART APPEARS HERE]
1 year 1-5 years 5-10 years 10+ years
------ --------- ---------- ---------
7.1% 14.0% 59.0% 19.9%
Average effective maturity: 9.7 years
See page 5 for information on the possible risks associated with an investment
in this fund.
NOTES TO CHARTS
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman Brothers Municipal Bond Index is an unmanaged composite measure of
the performance of the municipal bond market.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares.
/5/ Morningstar Muni National Long Fund Average is the average performance
without sales charges of funds with similar investment objectives as
calculated by Morningstar, Inc.
/6/ Lipper General Municipal Debt Funds Average is the average performance
without sales charges of funds with similar investment objectives as
calculated by Lipper Inc.
/7/ SEC yield is based on the fund's net investment income over a 30-day period
and is calculated in accordance with SEC guidelines.
/8/ Taxable equivalent yield is based on the maximum federal income tax bracket
of 35%. A portion of income may be subject to federal, state and/or
alternative minimum tax. Capital gains distributions, if any, are subject
to the capital gains tax.
4
LOOMIS SAYLES TAX FREE INCOME FUNDS RISKS
The views expressed in this report reflect those of the portfolio managers as of
the dates indicated. The managers' views are subject to change at any time
without notice based on changes in market or other conditions. References to
specific securities or industries should not be regarded as investment advice.
Because these funds are actively managed, there is no assurance that they will
continue to invest in the securities or industries mentioned.
Any mutual fund investment involves risk. The following notes describe some of
the risks of the CDC Nvest Funds discussed in this report. These risks may
affect the value of your investment. See the funds' prospectus for details.
THE FUNDS
Loomis Sayles Massachusetts Tax Free Income Fund concentrates its assets in
municipal bonds issued in Massachusetts. The fund may invest a portion of assets
in lower-rated bonds. Some income may be subject to federal and Massachusetts
state taxes.
Loomis Sayles Municipal Income Fund invests primarily in municipal securities
issued by state and local governments. Some income may be subject to federal and
state taxes.
THE RISKS
Lower-quality bonds offer higher yields than high-quality bonds in return for
more risks. These risks include a greater risk of default than higher-quality
issues and greater risk of loss of principal.
U.S. government securities are guaranteed if held to maturity, but mutual funds
that invest in these securities are not guaranteed. The value of fund shares
will fluctuate and you may have a gain or a loss when you sell your shares.
State-specific mutual funds focus investments in a single state, so the fund's
income level and/or the value of fund shares may rise or fall to reflect the
state's financial strength; a fund that owns securities issued in different
states is able to diversify risks.
Capital gains distributions, if any, are fully taxable.
Alternative Minimum Tax (AMT) may apply to certain shareholders who receive
large amounts of income from tax-free investments.
Changes in interest rates can affect the value of fund shares. The value of
fixed-income securities generally goes down when interest rates rise and goes up
when rates decline.
Principal and interest payments on insured bonds are backed by an insurance
company if held to maturity, but mutual funds that invest in these securities
are not insured. The fund's dividend rate and the value of its shares will
fluctuate and you may have a gain or a loss when you sell your shares.
5
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE(a)
- ---------------------------------------------------------------------------------------
TAX EXEMPT OBLIGATIONS -- 94.8% OF TOTAL NET ASSETS
GUAM AIRPORT AUTHORITY -- 1.7%
$ 1,500,000 Airport Authority Revenue Bond Series B,
6.600%, 10/01/2010 .................................. $ 1,538,250
-------------
MARTHA'S VINEYARD, MA,
LAND BANK REVENUE -- 1.1%
1,000,000 5.000%, 5/01/2032, (AMBAC insured) .................. 1,010,090
-------------
MASSACHUSETTS BAY
TRANSPORTATION AUTHORITY -- 6.1%
3,000,000 Assessment Series A,
5.250%, 7/01/2030 ................................... 3,086,970
2,500,000 Series A,
5.000%, 7/01/2032 ................................... 2,523,150
-------------
5,610,120
-------------
MASSACHUSETTS STATE -- 5.4%
4,000,000 State Refunding Series A,
6.500%, 11/01/2014, (AMBAC insured) ................ 4,992,760
-------------
MASSACHUSETTS STATE DEVELOPMENT
FINANCE AGENCY -- 18.8%
2,500,000 Cambridge Street Development Series A,
5.125%, 2/01/2034, (MBIA insured) ................... 2,541,625
2,505,000 Concord-Assabet Family Services,
5.900%, 11/01/2018 .................................. 1,983,083
3,000,000 Health Care Facility Alliance,
7.100%, 7/01/2032 ................................... 2,882,010
4,000,000 Mount Holyoke College,
5.250%, 7/01/2031 ................................... 4,115,200
2,800,000 Refunding Springfield Resource Recovery-A,
5.625%, 6/01/2019 ................................... 2,910,264
1,100,000 Visual and Performing Arts,
6.000%, 8/01/2021 ................................... 1,314,434
1,610,000 WGBH Educational Foundation Series A,
5.375%, 1/01/2042, (AMBAC insured) .................. 1,667,574
-------------
17,414,190
-------------
MASSACHUSETTS STATE HEALTH &
EDUCATIONAL FACILITIES AUTHORITY -- 32.6%
1,160,000 Baystate Medical Center Series F,
5.700%, 7/01/2027 ................................... 1,199,811
1,500,000 Beverly Hospital Rib, Pre-Refunded,
10.270%, 6/18/2020, (MBIA insured) (c) .............. 1,728,960
2,200,000 Catholic Health East,
5.500%, 11/15/2032 .................................. 2,206,886
3,000,000 Dana Farber Series G-1,
6.250%, 12/01/2022 .................................. 3,140,940
3,000,000 Harvard Univerity Series N,
6.250%, 4/01/2020 ................................... 3,747,420
1,200,000 Harvard University Series F,
5.125%, 7/15/2037 ................................... 1,229,556
500,000 Milton Hospital Series C,
5.500%, 7/01/2016 ................................... 512,335
1,000,000 New England Medical Center Series H,
5.000%, 5/15/2022, (FGIC insured) ................... 1,033,370
3,000,000 Nichols College Series C,
6.000%, 10/01/2017 .................................. 2,819,250
2,000,000 Partners Healthcare Systems Series B,
5.250%, 7/01/2029 ................................... 2,022,780
2,500,000 Partners Healthcare Systems Series C,
5.750%, 7/01/2021 ................................... 2,665,200
1,500,000 Tufts University Series I,
5.250%, 2/15/2030 ................................... 1,541,385
1,000,000 University of Massachusetts Project Series C,
5.250%, 10/01/2031, (MBIA insured) .................. 1,032,040
2,000,000 University of Massachusetts Series C,
5.125%, 10/01/2034, (FGIC insured) .................. 2,035,740
2,265,000 Wellesley College Series F,
5.125%, 7/01/2039 ................................... 2,300,357
1,000,000 Williams College Series H,
5.000%, 7/01/2033 ................................... 1,009,440
-------------
30,225,470
-------------
MASSACHUSETTS STATE HOUSING
FINANCE AGENCY -- 2.6%
1,455,000 Single Family Mortgage Series 21,
7.125%, 6/01/2025 ................................... 1,465,389
910,000 Single Family Mortgage Series 89,
5.400%, 12/01/2023 .................................. 930,475
-------------
2,395,864
-------------
MASSACHUSETTS STATE INDUSTRIAL
FINANCE AGENCY -- 2.4%
2,000,000 FHA Briscoe House Assisted Living,
7.125%, 2/01/2036, (FHA insured) .................... 2,230,480
-------------
MASSACHUSETTS STATE PORT AUTHORITY -- 3.3%
1,750,000 Delta Air Lines, Inc. Project Series A,
5.500%, 1/01/2019, (AMBAC insured) .................. 1,838,795
1,200,000 Series A,
5.000%, 7/01/2033, (MBIA insured) ................... 1,213,188
-------------
3,051,983
-------------
MASSACHUSETTS STATE TURNPIKE AUTHORITY -- 3.2%
2,950,000 Metropolitan Highway System,
Capital Appreciation Senior Series A,
5.000%, 1/01/2037, (MBIA insured) ................... 2,958,230
-------------
MASSACHUSETTS STATE WATER
RESOURCES AUTHORITY -- 6.5%
2,000,000 General Series B,
5.125%, 8/01/2027, (MBIA insured) ................... 2,047,820
3,240,000 Series A,
6.500%, 7/15/2019, (FGIC insured) ................... 4,020,808
-------------
6,068,628
-------------
NEW ENGLAND EDUCATION LOAN MARKETING -- 3.7%
3,000,000 Student Loan Revenue Bond Sub-Issue H,
6.900%, 11/01/2009 .................................. 3,469,950
-------------
PUERTO RICO COMMONWEALTH AQUEDUCT &
SEWER AUTHORITY -- 4.9%
3,000,000 Aqueduct & Sewer Authority,
6.250%, 7/01/2013 ................................... 3,579,150
745,000 Aqueduct & Sewer Authority,
10.250%, 7/01/2009 .................................. 935,176
-------------
4,514,326
-------------
UNIVERSITY OF MASSACHUSETTS BUILDING
AUTHORITY -- 2.5%
2,200,000 SR - Series I
5.250%, 11/01/2028, (AMBAC insured) ................. 2,282,654
-------------
Total Tax Exempt Obligations
(Cost $84,325,614) .................................. 87,762,995
-------------
See accompanying notes to financial statements.
6
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE(a)
- --------------------------------------------------------------------------------------
SHORT TERM INVESTMENT -- 2.6% OF TOTAL NET ASSETS
$ 2,428,204 Repurchase Agreement with Investors Bank &
Trust Co. dated 9/30/2003 at 0.75% to be
repurchased at $2,428,255 on 10/01/2003,
collateralized by $2,463,126 Federal Home
Loan Mortgage Bond, 3.77%, due 2/01/2026
valued at $2,549,793 ............................... $ 2,428,204
-------------
Total Short Term Investment
(Cost $2,428,204) .................................. 2,428,204
-------------
Total Investments - 97.4%
(Identified Cost $86,753,818) (b) .................. 90,191,199
Other assets less liabilities ...................... 2,361,541
-------------
Total Net Assets - 100.0% .......................... $ 92,552,740
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation on investments based
on cost of $86,752,908 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ............. $ 4,448,631
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value ..................................................... (1,010,340)
-------------
Net unrealized appreciation .................................... $ 3,438,291
=============
At September 30, 2003, the Fund had a capital loss carryover of
approximately $2,539,647 of which $1,419,707 expires on December 31, 2007,
$116,500 expires on December 31, 2008 and $1,003,440 expires on December
31, 2010. This may be available to offset future realized capital gains, if
any, to the extent provided by regulations.
At September 30, 2003, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$154,869 in undistributed ordinary income and $0 in undistributed long-term
gains.
(c) Inverse floating rate security.
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Company
FHA Federal Housing Administration
MBIA Municipal Bond Investors Assurance Corp.
Rib Residual interest bond
HOLDINGS BY REVENUE SOURCE AT SEPTEMBER 30, 2003
(unaudited)
% of Net Assets
---------------
University 14.2
Water 11.4
College 11.1
Financial 8.1
Hospital 8.0
Mass Transit 4.9
Student Loan 3.8
Airport 3.7
Special Assessment 3.3
Turnpike 3.2
Pooled Funds 3.2
Nursing Home 3.1
Health 2.9
Hospital System Bonds 2.9
Financial Services 2.6
Single-Family 2.6
Assisted Living 2.4
Other, less than 2% each 6.0
See accompanying notes to financial statements.
7
LOOMIS SAYLES MUNICIPAL INCOME FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE(a)
- --------------------------------------------------------------------------------------
TAX EXEMPT OBLIGATIONS -- 96.0% OF TOTAL NET ASSETS
CALIFORNIA -- 7.8%
$ 500,000 California Department of Water Resources,
5.875%, 5/01/2016 ................................... $ 561,505
2,000,000 California State,
5.000%, 10/01/2032 .................................. 1,929,220
2,500,000 California State,
5.000%, 2/01/2029, (MBIA insured) ................... 2,515,325
2,000,000 California State,
5.125%, 6/01/2027 ................................... 1,990,560
100,000 Golden State Tobacco Securitization Corp.,
5.750%, 6/01/2021 ................................... 105,502
250,000 Golden State Tobacco Securitization Corp.,
5.750%, 6/01/2022 ................................... 263,215
250,000 Golden State Tobacco Securitization Corp.,
5.750%, 6/01/2023 ................................... 262,142
3,000,000 Sacramento, CA, Power Authority,
6.000%, 7/01/2022 ................................... 3,136,050
-------------
10,763,519
-------------
COLORADO -- 1.5%
2,000,000 Denver, CO, City & County Airport,
5.250%, 11/15/2023, (MBIA insured) .................. 2,071,380
-------------
DISTRICT OF COLUMBIA -- 3.9%
5,280,000 Metropolitan Washington D.C. Airports Authority,
5.125%, 10/01/2029, (FGIC insured) .................. 5,320,656
-------------
FLORIDA -- 2.3%
3,000,000 Escambia County, FL, Pollution Control,
6.900%, 8/01/2022 ................................... 3,129,000
-------------
ILLINOIS -- 11.1%
3,400,000 Chicago, IL, Neighborhoods Alive 21,
5.000%, 1/01/2041, (FGIC insured) ................... 3,432,538
2,500,000 Chicago, IL, O'Hare International Airport,
6.100%, 11/01/2035 (c) .............................. 547,150
2,780,000 Illinois Educational Facilities Authority,
University of Chicago,
5.000%, 7/01/2033 ................................... 2,789,091
3,000,000 Illinois Educational Facilities Authority,
University of Chicago,
5.125%, 7/01/2038 ................................... 3,018,960
1,750,000 Illinois State,
5.400%, 12/01/2020, (MBIA insured) .................. 1,887,655
3,500,000 Metropolitan Pier & Exposition Authority,
5.250%, 6/15/2042, (MBIA insured) ................... 3,605,420
-------------
15,280,814
-------------
INDIANA -- 5.3%
2,000,000 Indiana Transportation Finance Authority,
5.375%, 12/01/2025 .................................. 2,088,540
5,000,000 Indianapolis, IN, Local Public Improvement Bond Bank,
5.250%, 7/01/2033, (MBIA insured) ................... 5,174,200
-------------
7,262,740
-------------
MASSACHUSETTS -- 3.0%
1,145,000 Massachusetts Housing Finance Agency,
6.600%, 12/01/2026 .................................. 1,181,548
1,000,000 Massachusetts Port Authority,
5.000%, 7/01/2033, (MBIA insured) ................... 1,010,990
2,000,000 Massachusetts Turnpike Authority,
5.000%, 1/01/2039, (AMBAC insured) .................. 2,005,860
-------------
4,198,398
-------------
MICHIGAN -- 5.9%
2,850,000 Michigan Hospital Finance Authority,
Henry Ford Health System,
5.500%, 3/01/2014 ................................... 3,054,915
5,000,000 University of Michigan,
5.250%, 12/01/2020 .................................. 5,156,100
-------------
8,211,015
-------------
MISSISSIPPI -- 3.8%
2,000,000 Lowndes County, MS, Solid Waste
Disposal & Pollution Control,
6.700%, 4/01/2022 ................................... 2,299,300
2,500,000 Lowndes County, MS, Solid Waste
Disposal & Pollution Control,
6.800%, 4/01/2022 ................................... 2,903,175
-------------
5,202,475
-------------
NEW JERSEY -- 0.7%
1,000,000 New Jersey Health Care Facilities Financing Authority,
Catholic Health East,
5.375%, 11/15/2033 .................................. 1,013,650
-------------
NEW YORK -- 12.5%
1,500,000 New York City, NY,
6.000%, 5/15/2030 ................................... 1,629,555
2,000,000 New York City, NY,
6.000%, 1/15/2020 ................................... 2,224,560
3,000,000 New York Dormitory Authority,
5.500%, 5/15/2013 ................................... 3,408,930
2,740,000 New York Dormitory Authority,
5.750%, 7/01/2013 ................................... 3,160,891
1,700,000 Port Authority of New York & New Jersey,
7.000%, 10/01/2007 .................................. 1,793,874
5,000,000 Triborough Bridge & Tunnel Authority,
5.000%, 1/01/2032 ................................... 5,030,350
-------------
17,248,160
-------------
NORTH CAROLINA -- 1.0%
1,300,000 North Carolina Eastern Municipal Power Agency,
5.500%, 1/01/2012 ................................... 1,414,088
-------------
OREGON -- 3.0%
4,000,000 Western Generation Agency,
7.400%, 1/01/2016 ................................... 4,078,560
-------------
PENNSYLVANIA -- 12.3%
3,300,000 Lehigh County, PA, General Purpose Authority,
Saint Luke's Hospital of Bethlehem,
5.250%, 8/15/2023 ................................... 3,212,022
3,000,000 Pennsylvania Economic Development Financing Authority,
6.600%, 1/01/2019 ................................... 3,027,540
3,000,000 Pennsylvania Economic Development Financing Authority,
7.600%, 12/01/2024 .................................. 3,180,540
5,000,000 Pennsylvania Industrial Development Authority,
5.500%, 7/01/2019, (AMBAC insured) .................. 5,554,150
2,000,000 Pennsylvania Turnpike Commission,
5.000%, 7/15/2041, (AMBAC insured) .................. 2,011,200
-------------
16,985,452
-------------
PUERTO RICO -- 1.6%
2,000,000 Puerto Rico Infrastructure Financing Authority,
5.500%, 10/01/2040 .................................. 2,178,780
-------------
SOUTH CAROLINA -- 2.3%
3,000,000 Greenville County, SC, School District,
5.500%, 12/01/2028 .................................. 3,137,820
-------------
See accompanying notes to financial statements.
8
LOOMIS SAYLES MUNICIPAL INCOME FUND -- SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
TAX EXEMPT OBLIGATIONS -- (continued)
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- --------------------------------------------------------------------------------------
TENNESSEE -- 1.9%
$ 2,500,000 Maury County, TN, Industrial Development Board,
Pollution Control,
6.500%, 9/01/2024 ................................... $ 2,588,375
-------------
TEXAS -- 10.6%
5,000,000 Dallas/Fort Worth, TX, International Airport,
5.000%, 11/01/2032, (AMBAC insured) ................. 4,963,200
1,900,000 Denton County, TX,
5.125%, 7/15/2026 ................................... 1,937,962
3,000,000 Houston, TX, Water & Sewer System,
5.250%, 12/01/2023, (FGIC insured) .................. 3,108,330
1,435,000 Katy, TX, Independent School District,
5.125%, 2/15/2020 ................................... 1,515,590
3,000,000 Lewisville, TX, Independent School District,
5.250%, 8/15/2027 ................................... 3,113,370
-------------
14,638,452
-------------
WASHINGTON -- 5.5%
2,000,000 Energy Northwest,
5.500%, 7/01/2014 ................................... 2,268,540
3,000,000 Grant County, WA, Public Utility District No. 2,
Wanapum Hydroelectric,
5.000%, 1/01/2035, (MBIA insured) ................... 3,002,640
2,250,000 Port of Seattle, WA,
5.000%, 4/01/2031, (FGIC insured) ................... 2,264,873
-------------
7,536,053
-------------
Total Tax Exempt Obligations
(Identified Cost $127,917,760) ...................... 132,259,387
-------------
SHORT TERM INVESTMENT -- 6.6% OF TOTAL NET ASSETS
9,114,501 Repurchase Agreement with Investors Bank & Trust Co.
dated 9/30/2003 at 0.75% to be repurchased at
$9,114,691 on 10/01/2003, collateralized by
$9,534,646 Federal National Mortgage Association
Bond, 1.62%, due 11/25/2030 valued at $9,573,702 .... 9,114,501
-------------
Total Short Term Investment
(Cost $9,114,501) ................................... 9,114,501
-------------
Total Investments -- 102.6%
(Identified Cost $137,032,261) (b) .................. 141,373,888
Other assets less liabilities ....................... (3,584,211)
-------------
Total Net Assets -- 100.0% .......................... $ 137,789,677
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2003, the net unrealized appreciation on investments based
on cost of $136,677,988 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost ................................................... $ 6,407,360
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value ...................................................... (1,711,460)
-------------
Net unrealized appreciation ..................................... $ 4,695,900
=============
At September 30, 2003, the Fund had a capital loss carryover of
approximately $1,700,392 of which expires on December 31, 2007.
This may be available to offset future realized capital gains, if any, to
the extent provided by regulations.
At September 30, 2003, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$505,752 in undistributed ordinary income and $0 in undistributed long-term
gains.
(c) Non-income producing security.
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Company
MBIA Municipal Bond Investors Assurance Corp.
HOLDINGS BY REVENUE SOURCE AT SEPTEMBER 30, 2003 (unaudited)
% of Net Assets
---------------
Various Purpose 14.0
University 12.7
Improvement 9.5
Financial Services 6.6
Solid Waste Disposal 6.1
Water 6.0
Airport 5.1
Pooled Funds 4.1
Financial 4.0
Insured 3.9
Electric 3.1
Paper/Forest Products 3.0
Turnpike 2.9
Development 2.6
Hospital 2.3
Public Power/Utility 2.3
Hospital System Bonds 2.2
Mining 2.2
Public Utility District 2.2
Other, less than 2% each 7.8
See accompanying notes to financial statements.
9
STATEMENTS OF ASSETS & LIABILITIES
September 30, 2003
MASSACHUSETTS
TAX FREE INCOME MUNICIPAL INCOME
FUND FUND
--------------- ----------------
ASSETS
Investments at cost ........................................ $ 86,753,818 $ 137,032,261
Net unrealized appreciation ................................ 3,437,381 4,341,627
--------------- ----------------
Investments at value ................................... 90,191,199 141,373,888
Receivable for Fund shares sold ............................ 3,693 24,986
Receivable for securities sold ............................. 1,326,000 --
Interest receivable ........................................ 1,491,135 2,000,596
--------------- ----------------
TOTAL ASSETS ........................................... 93,012,027 143,399,470
--------------- ----------------
LIABILITIES
Payable for securities purchased ........................... -- 5,246,021
Payable for Fund shares redeemed ........................... 141,174 70,679
Dividends payable .......................................... 83,120 89,686
Management fees payable .................................... 139,541 52,336
Deferred Trustees' fees .................................... 29,398 70,562
Transfer agent fees payable ................................ 13,707 19,700
Accounting and administrative fees payable ................. 6,004 8,911
Other accounts payable and accrued expenses ................ 46,343 51,898
--------------- ----------------
TOTAL LIABILITIES ...................................... 459,287 5,609,793
--------------- ----------------
NET ASSETS ...................................................... $ 92,552,740 $ 137,789,677
=============== ================
NET ASSETS CONSIST OF:
Paid in capital ............................................ $ 91,780,718 $ 135,404,303
Undistributed (overdistributed) net investment income ...... 19,469 147,016
Accumulated net realized gain (loss) on investments ........ (2,684,828) (2,103,269)
Net unrealized appreciation (depreciation) of investments .. 3,437,381 4,341,627
--------------- ----------------
NET ASSETS ...................................................... $ 92,552,740 $ 137,789,677
=============== ================
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets ............................................. $ 86,367,598 $ 126,905,761
=============== ================
Shares of beneficial interest .......................... 5,263,294 17,134,007
=============== ================
Net asset value and redemption price per share ......... $ 16.41 $ 7.41
=============== ================
Offering price per share ............................... $ 17.14 $ 7.76
=============== ================
Class B shares: (redemption price is equal to net asset
value less any applicable contingent deferred sales
charges)
Net assets ............................................. $ 6,185,142 $ 10,883,916
=============== ================
Shares of beneficial interest .......................... 377,778 1,468,214
=============== ================
Net asset value and offering price per share ........... $ 16.37 $ 7.41
=============== ================
See accompanying notes to financial statements.
10
STATEMENTS OF OPERATIONS
MASSACHUSETTS TAX FREE MUNICIPAL INCOME
INCOME FUND FUND
------------------------------ ------------------------------
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 2003 JANUARY 1, 2003
THROUGH YEAR ENDED THROUGH YEAR ENDED
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
2003 2002 2003 2002
--------------- ------------ --------------- ------------
INVESTMENT INCOME
Interest ................................................... $ 3,800,868 $ 5,446,946 $ 5,533,365 $ 8,578,121
--------------- ------------ --------------- ------------
Expenses
Management fees ........................................ 424,577 590,987 488,937 686,999
Service and distribution fees - Class A ................ 230,730 318,340 242,276 341,958
Service and distribution fees - Class B ................ 48,402 75,554 85,415 130,927
Trustees' fees and expenses ............................ 17,668 10,181 27,357 7,960
Accounting and administrative .......................... 57,630 56,477 85,899 85,701
Custodian .............................................. 27,827 52,516 29,161 57,233
Transfer agent ......................................... 121,454 189,599 173,510 278,149
Audit and tax services ................................. 39,318 35,479 34,874 37,479
Legal .................................................. 8,356 8,488 11,227 12,852
Shareholder reporting .................................. 17,188 5,606 21,731 5,525
Registration ........................................... 11,794 14,351 20,528 26,963
Miscellaneous .......................................... 6,582 6,728 8,048 8,648
--------------- ------------ --------------- ------------
Total expenses ............................................. 1,011,526 1,364,306 1,228,963 1,680,394
--------------- ------------ --------------- ------------
Net investment income ...................................... 2,789,342 4,082,640 4,304,402 6,897,727
--------------- ------------ --------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on:
Investments - net ...................................... 877,919 (916,633) 1,148,331 2,710,093
Change in unrealized appreciation (depreciation) of:
Investments - net ...................................... (851,243) 4,433,497 (1,633,204) 872,708
--------------- ------------ --------------- ------------
Net realized and unrealized gain (loss) on investments ..... 26,676 3,516,864 (484,873) 3,582,801
--------------- ------------ --------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . $ 2,816,018 $ 7,599,504 $ 3,819,529 $ 10,480,528
=============== ============ =============== ============
See accompanying notes to financial statements.
11
STATEMENTS OF CHANGES IN NET ASSETS
MASSACHUSETTS TAX FREE
INCOME FUND MUNICIPAL INCOME FUND
--------------------------------------------- ----------------------------------------------
FOR THE PERIOD FOR THE PERIOD
JANUARY 1, 2003 JANUARY 1, 2003
THROUGH YEAR ENDED YEAR ENDED THROUGH YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
2003 2002 2001 2003 2002 2001
--------------- ------------ ------------- --------------- -------------- -------------
FROM OPERATIONS:
Net investment income ........... $ 2,789,342 $ 4,082,640 $ 4,627,821 $ 4,304,402 $ 6,897,727 $ 7,609,976
Net realized gain (loss) on
investments ..................... 877,919 (916,633) 776,917 1,148,331 2,710,093 1,576,039
Net change in unrealized
appreciation (depreciation) of
investments ..................... (851,243) 4,433,497 (2,286,354) (1,633,204) 872,708 (4,432,914)
--------------- ------------ ------------- --------------- -------------- -------------
Increase in net assets resulting
from operations ................. 2,816,018 7,599,504 3,118,384 3,819,529 10,480,528 4,753,101
--------------- ------------ ------------- --------------- -------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A ....................... (2,628,195) (3,827,503) (4,279,023) (4,027,619) (6,303,086) (6,957,695)
Class B ....................... (161,498) (276,899) (346,489) (290,127) (507,956) (613,563)
--------------- ------------ ------------- --------------- -------------- -------------
(2,789,693) (4,104,402) (4,625,512) (4,317,746) (6,811,042) (7,571,258)
--------------- ------------ ------------- --------------- -------------- -------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED
FROM CAPITAL SHARE TRANSACTIONS ... (6,268,959) (2,388,573) (1,303,920) (7,043,056) (10,738,646) (1,840,581)
--------------- ------------ ------------- --------------- -------------- -------------
Total increase (decrease) in net
assets ........................... (6,242,634) 1,106,529 (2,811,048) (7,541,273) (7,069,160) (4,658,738)
NET ASSETS
Beginning of period ............. 98,795,374 97,688,845 100,499,893 145,330,950 152,400,110 157,058,848
--------------- ------------ ------------- --------------- -------------- -------------
End of period ................... $ 92,552,740 $ 98,795,374 $ 97,688,845 $ 137,789,677 $ 145,330,950 $ 152,400,110
=============== ============ ============= =============== ============== =============
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME ............. $ 19,469 $ 19,970 $ 41,608 $ 147,016 $ 146,768 $ 172,699
=============== ============ ============= =============== ============== =============
12
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
----------------------------------------- -------------------------------
NET ASSET
VALUE, NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING NET AND UNREALIZED TOTAL FROM FROM FROM NET
OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED
THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS
---------- ---------- -------------- ---------- -------------- -------------
MASSACHUSETTS TAX FREE INCOME FUND
CLASS A
9/30/2003(e) $ 16.40 $ 0.49 $ 0.01 $ 0.50 $ (0.49) $ --
12/31/2002 15.82 0.67 0.59 1.26 (0.68) --
12/31/2001 (d) 16.06 0.75 (0.24) 0.51 (0.75) --
12/31/2000 15.48 0.82 0.57 1.39 (0.81) --
12/31/1999 17.02 0.82 (1.50) (0.68) (0.83) (0.03)
12/31/1998 17.13 0.86 (0.04) 0.82 (0.85) (0.08)
CLASS B
9/30/2003(e) 16.36 0.41 0.01 0.42 (0.41) --
12/31/2002 15.78 0.57 0.58 1.15 (0.57) --
12/31/2001 (d) 16.03 0.64 (0.24) 0.40 (0.65) --
12/31/2000 15.45 0.71 0.58 1.29 (0.71) --
12/31/1999 16.98 0.71 (1.49) (0.78) (0.72) (0.03)
12/31/1998 17.09 0.74 (0.03) 0.71 (0.74) (0.08)
MUNICIPAL INCOME FUND
CLASS A
9/30/2003(e) $ 7.43 $ 0.23 $ (0.02) $ 0.21 $ (0.23) $ --
12/31/2002 7.25 0.34 0.18 0.52 (0.34) --
12/31/2001 (d) 7.39 0.36 (0.14) 0.22 (0.36) --
12/312000 7.17 0.40 0.21 0.61 (0.39) --
12/31/1999 7.76 0.39 (0.59) (0.20) (0.39) --
12/31/1998 7.75 0.39 0.01 0.40 (0.39) --
CLASS B
9/30/2003(e) 7.44 0.19 (0.03) 0.16 (0.19) --
12/31/2002 7.25 0.29 0.19 0.48 (0.29) --
12/31/2001 (d) 7.39 0.31 (0.14) 0.17 (0.31) --
12/31/2000 7.17 0.35 0.21 0.56 (0.34) --
12/31/1999 7.76 0.33 (0.59) (0.26) (0.33) --
12/31/1998 7.75 0.33 0.01 0.34 (0.33) --
LESS DISTRIBUTIONS:
-------------------
NET ASSET
VALUE, TOTAL
TOTAL END OF RETURN
DISTRIBUTIONS THE PERIOD (%) (a)
------------- ---------- ---------
MASSACHUSETTS TAX FREE INCOME FUND
CLASS A
9/30/2003(e) $ (0.49) $ 16.41 3.1
12/31/2002 (0.68) 16.40 8.1
12/31/2001 (d) (0.75) 15.82 3.2(b)
12/31/2000 (0.81) 16.06 9.3(b)
12/31/1999 (0.86) 15.48 (4.1)(b)
12/31/1998 (0.93) 17.02 4.9(b)
CLASS B
9/30/2003(e) (0.41) 16.37 2.6
12/31/2002 (0.57) 16.36 7.4
12/31/2001 (d) (0.65) 15.78 2.5(b)
12/31/2000 (0.71) 16.03 8.6(b)
12/31/1999 (0.75) 15.45 (4.7)(b)
12/31/1998 (0.82) 16.98 4.2(b)
MUNICIPAL INCOME FUND
CLASS A
9/30/2003(e) $ (0.23) $ 7.41 2.9
12/31/2002 (0.34) 7.43 7.3
12/31/2001 (d) (0.36) 7.25 3.0
12/312000 (0.39) 7.39 8.8
12/31/1999 (0.39) 7.17 (2.8)
12/31/1998 (0.39) 7.76 5.3
CLASS B
9/30/2003(e) (0.19) 7.41 2.2
12/31/2002 (0.29) 7.44 6.7
12/31/2001 (d) (0.31) 7.25 2.2
12/31/2000 (0.34) 7.39 8.0
12/31/1999 (0.33) 7.17 (3.5)
12/31/1998 (0.33) 7.76 4.5
13
RATIOS TO AVERAGE NET ASSETS:
----------------------------------------------------------------
NET ASSETS,
END OF NET INVESTMENT PORTFOLIO
THE PERIOD EXPENSES INCOME TURNOVER
(000) (%)(f) (%)(f) RATE (%)
-------------- ---------- -------------- -----------
MASSACHUSETTS TAX FREE INCOME FUND
$ 86,368 1.38 3.99 9
CLASS A 92,053 1.34 4.19 33
9/30/2003(e) 89,376 1.35(c) 4.67 60
12/31/2002 91,785 1.13(c) 5.24 68
12/31/2001 (d) 97,270 1.00(c) 5.02 73
12/31/2000 113,910 1.00(c) 4.93 125
12/31/1999
12/31/1998 6,185 2.03 3.34 9
6,742 1.99 3.54 33
CLASS B 8,313 2.00(c) 4.03 60
9/30/2003(e) 8,715 1.78(c) 4.59 68
12/31/2002 8,874 1.65(c) 4.37 73
12/31/2001 (d) 9,026 1.65(c) 4.28 125
12/31/2000
12/31/1999
12/31/1998
MUNICIPAL INCOME FUND
CLASS A
9/30/2003(e)
12/31/2002 $ 126,906 1.10 4.14 42
12/31/2001 (d) 133,005 1.06 4.67 33
12/312000 137,852 1.07 4.89 80
12/31/1999 142,539 0.95 5.39 156
12/31/1998 152,829 0.93 5.13 137
172,643 0.93 5.03 26
CLASS B
9/30/2003(e) 10,884 1.85 3.39 42
12/31/2002 12,326 1.81 3.92 33
12/31/2001 (d) 14,549 1.82 4.14 80
12/31/2000 14,520 1.70 4.64 156
12/31/1999 15,644 1.68 4.38 137
12/31/1998 15,878 1.68 4.28 26
(a) A sales charge for Class A shares and a contingent deferred sales charge
for Class B shares are not reflected in total return calculations.
(b) Had certain expenses not been reduced during the period, total returns
would have been lower.
(c) The investment adviser agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement, expense ratios would have
been higher.
(d) As required, effective January 1, 2001, the Funds have adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began accreting discount on debt securities. The effect of this change
for the year ended December 31, 2001, for Massachusetts Tax Free Income
Fund was to increase the ratio of net investment income to average net
assets from 4.66% to 4.67% for Class A shares and from 4.02% to 4.03% for
Class B shares. For Municipal Income Fund, the effect of this change was to
increase net investment income per share by $.01 and decrease net realized
and unrealized gains and losses per share by $.01 for Class A shares and
Class B shares, and increase the ratio of net investment income to average
net assets from 4.84% to 4.89% for Class A shares and from 4.09% to 4.14%
for Class B shares. Per share, ratios and supplemental data for periods
prior to January 1, 2001 have not been restated to reflect this change in
presentation.
(e) For the nine months ended September 30, 2003.
(f) Computed on an annualized basis for periods less than one year.
See accompanying notes to financial statements.
14
NOTES TO FINANCIAL STATEMENTS
For the Period Ended September 30, 2003
1. Organization. CDC Nvest Funds Trust II and Loomis Sayles Funds II (the
"Trusts" and each a "Trust") are organized as Massachusetts business trusts.
Each Trust is registered under the Investment Company Act of 1940, as amended,
as an open-end investment company. Each Declaration of Trust permits the
Trustees to issue an unlimited number of shares of the Trust in multiple series
(individually, a "Fund" and, collectively, the "Funds"). Information presented
in these financial statements pertains to the tax free income funds of the
Trusts, the financial statements of the other Funds of the Trusts are presented
in separate reports.
CDC Nvest Funds Trust II:
Loomis Sayles Massachusetts Tax Free Income Fund (the "Massachusetts Tax Free
Income Fund"), formerly CDC Nvest Massachusetts Tax Free Income Fund.
Loomis Sayles Funds II:
Loomis Sayles Municipal Income Fund (the "Municipal Income Fund"), formerly CDC
Nvest Municipal Income Fund.
In June, 2003 the Board of Trustees of the CDC Nvest Funds Trust I, CDC Nvest
Funds Trust II, CDC Nvest Funds Trust III, CDC Nvest Cash Management Trust, CDC
Nvest Tax Exempt Money Market Trust and CDC Nvest Companies Trust I (the "CDC
Nvest Funds Trusts") approved new Trustees for the Trusts in connection with the
integration of the CDC Nvest Funds Trusts with Loomis Sayles Funds I and Loomis
Sayles Funds II (the "Loomis Sayles Funds Trusts"). This approval resulted in a
combined Board of Trustees for the CDC Nvest Funds Trusts and Loomis Sayles
Funds Trusts.
Each Fund offers Class A and Class B shares. Class A shares of Massachusetts Tax
Free Income Fund are sold with a maximum front end sales charge of 4.25%. Class
A shares of Municipal Income Fund are sold with a maximum front end sales charge
of 4.50%. Class B shares do not pay a front end sales charge, but pay a higher
ongoing distribution fee than Class A shares for eight years (at which point
they automatically convert to Class A shares), and are subject to a contingent
deferred sales charge ("CDSC") if those shares are redeemed within six years of
purchase.
Most expenses of the Trusts can be directly attributed to a Fund. Expenses which
can not be directly attributed are apportioned based on the relative net assets
of each of the Funds in the Trusts.
Expenses of a Fund are borne pro rata by the holders of each class of shares,
except that each class bears expenses unique to that class (including the Rule
12b-1 service and distribution fees applicable to such class), and votes as a
class only with respect to its own Rule 12b-1 Plan. Shares of each class would
receive their pro rata share of the net assets of a Fund, if the Fund were
liquidated. The Trustees approve separate dividends from net investment income
on each class of shares.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by each Fund in the preparation of its
financial statements. The Funds' financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America
which require the use of management estimates that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
a. Security Valuation. Debt securities (other than short-term obligations with a
remaining maturity of less than sixty days) are valued on the basis of
valuations furnished to the Fund by a pricing service, which has been authorized
by the Trustees. The pricing service determines valuations for normal,
institutional size trading units of such securities using market information,
transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders. Short-term
obligations with a remaining maturity of less than sixty days are stated at
amortized cost, which approximates market value. All other securities and assets
are valued at their fair value as determined in good faith by the Funds'
investment adviser, under the supervision of the Funds' Trustees.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, and interest income is recorded on an accrual basis. Interest income is
increased by the accretion of discount and decreased by the amortization of
premium. In determining net gain or loss on securities sold, the cost of
securities has been determined on an identified cost basis.
c. Federal Income Taxes. The Trusts treat each Fund as a separate entity for
Federal income tax purposes. Each Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies, and to
distribute to its shareholders substantially all of its net investment income
and any net realized capital gains, at least annually. Accordingly, no provision
for federal income tax has been made.
d. Dividends and Distributions to Shareholders. Dividends are declared daily to
shareholders of record and are paid monthly. The timing and characterization of
certain income and capital gains distributions are determined in accordance with
federal tax regulations which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments for book and tax purposes of market discount. Permanent
book and tax basis differences relating to shareholder distributions will result
in reclassifications to capital accounts. Distributions from short-term capital
gains are considered to be ordinary income for tax purposes.
15
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
e. Repurchase Agreements. Each Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. Each Fund's investment adviser is
responsible for determining that the value of the collateral is at all times at
least equal to 102% of the repurchase price, including interest. Repurchase
agreements could involve certain risks in the event of default or insolvency of
the counterparty including possible delays or restrictions upon a Fund's ability
to dispose of the underlying securities.
f. Other. Each Fund changed its fiscal year end from December 31st to September
30th.
3. Purchases and Sales of Securities. For the nine months ended September 30,
2003, purchases and sales of securities (excluding short-term investments) were
as follows:
Fund Purchases Sales
- ---------------------------------- -------------- --------------
Massachusetts Tax Free Income Fund $ 8,713,541 $ 17,325,049
Municipal Income Fund 58,430,439 68,310,938
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Loomis Sayles & Company, L.P. ("Loomis Sayles") serves as
the investment adviser to each of the Funds. Prior to September 1, 2003, CDC
IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") served as each Fund's
investment adviser and Loomis Sayles served as each Fund's subadviser. Under the
terms of the management agreements, each Fund pays a management fee at the
following annual rates, calculated daily and payable quarterly for Massachusetts
Tax Free Income Fund and monthly for Municipal Income Fund, based on each Fund's
average daily net assets:
Percentage of
Average Daily Net Assets
----------------------------------
First Over
Fund $100 million $100 million
- ---------------------------------- -------------- --------------
Massachusetts Tax Free Income Fund 0.300% 0.250%
Municipal Income Fund 0.500% 0.375%
Prior to September 1, 2003, for Massachusetts Tax Free Income Fund, the
management fee was 0.600% of the first $100 million of average daily net assets
and 0.500% of average daily net assets in excess of $100 million.
For the period ended September 30, 2003, the management fees for each Fund were
as follows:
Management Percentage of Average
Fund Fee Daily Net Assets*
- ---------------------------------- -------------- ---------------------
Massachusetts Tax Free Income Fund $ 402,028 0.568%
Municipal Income Fund 488,937 0.464%
*Annualized
CDC IXIS Advisers serves as the advisory administrator to Massachusetts Tax Free
Income Fund. Under the terms of the advisory administration agreement, effective
September 1, 2003, the Fund pays an advisory administration fee at the following
annual rates, calculated daily and payable quarterly based on the Fund's average
daily net assets. Prior to September 1, 2003 these services were included in the
management fee arrangements:
Percentage of
Average Daily Net Assets
----------------------------------
First Over
Fund $100 million $100 million
- ---------------------------------- -------------- --------------
Massachusetts Tax Free Income Fund 0.300% 0.250%
For the period ended September 30, 2003, the advisory administration fee for the
Fund was as follows:
Advisory Percentage of Average
Fund Administration Fee Daily Net Assets*
- ---------------------------------- ------------------ ---------------------
Massachusetts Tax Free Income Fund $ 22,549 0.032%
*Annualized
Management and advisory administration fees are combined in the statement of
operations as management fees.
16
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
Loomis Sayles and CDC IXIS Advisers are wholly-owned subsidiaries of CDC IXIS
Asset Management North America, L.P. ("CDC IXIS North America"). Certain
officers and directors of Loomis Sayles and CDC IXIS Advisers are also Trustees
of the Funds.
b. Accounting and Administrative Expense. CDC IXIS Asset Management Services,
Inc. ("CIS"), a wholly owned subsidiary of CDC IXIS North America, performs
certain accounting and administrative services for the Funds and has
subcontracted with Investors Bank & Trust Company ("IBT"), to serve as
sub-administrator. Pursuant to an agreement between each of the Trusts, CDC
Nvest Funds Trust I, CDC Nvest Funds Trust III, CDC Nvest Cash Management Trust,
CDC Nvest Tax Exempt Money Market Trust, CDC Nvest Companies Trust I, and CIS
each Fund pays CIS its pro rata portion of a group fee for these services
representing the higher amount based on the following calculations:
(1) Percentage of Eligible Average Daily Net Assets
First Next Over
$5 billion $5 billion $10 billion
0.0600% 0.0500% 0.0450%
or
(2) Each Fund's pro rata portion, based on eligible assets, of the annual
aggregate minimum fee of $3.4 million.
For the period ended September 30, 2003, fees paid to CIS for accounting and
administrative expense were as follows:
Accounting
And
Fund Administrative
- ---------------------- --------------
Massachusetts Tax Free Income Fund $ 57,630
Municipal Income Fund 85,899
Effective October 1, 2003, each Fund pays its pro rata portion of the accounting
and administrative fee allocated based on the combined assets of the CDC Nvest
Funds Trusts and the Loomis Sayles Funds Trusts. The rates as a percentage of
average daily net assets changed to 0.0675% on the first $5 billion in average
daily net assets, 0.0625% on the next $5 billion in average daily net assets and
0.0500% on average daily net assets over $10 billion. The annual aggregate
minimum fee changed to $5 million.
c. Transfer Agent Fees. CIS is the transfer and shareholder servicing agent for
each Fund and has subcontracted with Boston Financial Data Services ("BFDS") to
serve as sub-transfer agent. Each Fund pays CIS service fees for servicing
shareholder accounts. Class A and Class B pay service fees monthly representing
the higher amount based on the following calculations:
(1) Annual aggregate fee determined by applying an annual fee rate (see
schedule below) to the eligible average daily net assets. Eligible assets
are the average daily net assets for Classs A, Class B and Class C of all
accounts in load bond funds. Load bond funds consist of all bond funds in
the CDC Nvest Funds Trusts, Municipal Income Fund, Loomis Sayles High
Income Fund, Loomis Sayles Limited Term U.S. Government Fund, Loomis Sayles
Strategic Income Fund and Loomis Sayles Investment Grade Bond Fund.
First Next Over
$1.2 billion $5 billion $6.2 billion
------------ ---------- ------------
0.142% 0.135% 0.130%
or
(2) An allocated portion, based on eligible assets for the period September
15, 2003 through December 31, 2003, of an aggregate minimum fee of $382,986
(for the period from January 1 through June 30, the annual aggregate
minimum fee was $1.5 million. The annual aggregate minimum fee was reduced
to $1.3 million on July 1).
Each Class is subject to a monthly Class minimum of $1,500.
In addition, pursuant to other servicing agreements, shareholders pay service
fees to other firms that provide similar services for their own shareholder
accounts.
CIS, BFDS and other firms are also reimbursed by the Funds for out-of-pocket
expenses. For the period ended September 30, 2003, amounts paid to CIS as
compensation for its services as transfer agent were as follows:
Transfer Agent
Fund Fee
- ----------------------------------- --------------
Massachusetts Tax Free Income Fund $ 107,952
Municipal Income Fund 151,736
17
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
d. Service and Distribution Fees. Pursuant to Rule 12b-1 under the 1940 Act, the
Trusts have adopted a Service Plan relating to each Fund's Class A shares (the
"Class A Plan") and a Service and Distribution Plan relating to each Fund's
Class B shares (the "Class B Plan").
Under the Class A Plan, each Fund pays CDC IXIS Asset Management Distributors,
L.P. ("CDC IXIS Distributors"), the Fund's distributor (a wholly owned
subsidiary of CDC IXIS North America), a monthly service fee at the annual rate
of 0.25% of the average daily net assets attributable to the Fund's Class A
shares, as reimbursement for expenses incurred by CDC IXIS Distributors in
providing personal services to investors in Class A shares and/or the
maintenance of shareholder accounts.
Also under the Class A Plan, Massachusetts Tax Free Income Fund pays CDC IXIS
Distributors a monthly distribution fee at the annual rate of 0.10% of the
average daily net assets attributable to the Fund's Class A shares as
reimbursement for expenses incurred by CDC IXIS Distributors in connection with
the marketing or sale of the Fund's Class A shares.
Under the Class B Plan, each Fund pays CDC IXIS Distributors a monthly service
fee at the annual rate of 0.25% of the average daily net assets attributable to
the Fund's Class B shares, as compensation for services provided and expenses
incurred by CDC IXIS Distributors in providing personal services to investors in
Class B shares and/or the maintenance of shareholder accounts.
Also under the Class B Plan, each Fund pays CDC IXIS Distributors a monthly
distribution fee at the annual rate of 0.75% of the average daily net assets
attributable to the Fund's Class B shares, as compensation for services provided
and expenses incurred by CDC IXIS Distributors in connection with the marketing
or sale of Class B shares.
For the period ended September 30, 2003, the Funds paid the following service
and distribution fees:
Service Fee Distribution Fee
--------------------- --------------------
Class A Class B Class A Class B
--------- --------- --------- ---------
Massachusetts Tax Free Income Fund $ 164,807 $ 12,101 $ 65,923 $ 36,301
Municipal Income Fund 242,276 21,354 -- 64,061
Commissions (including contingent deferred sales charges) on Fund shares paid to
CDC IXIS Distributors by investors in shares of the Funds during the period
ended September 30, 2003 were as follows:
Fund
----------------------------------
Massachusetts Tax Free Income Fund $ 42,637
Municipal Income Fund 76,857
e. Trustees Fees and Expenses. The Funds do not pay any compensation directly to
their officers or Trustees who are directors, officers or employees of Loomis
Sayles, CDC IXIS Advisers, CDC IXIS Distributors, CDC IXIS North America, CIS or
their affiliates. Each other Trustee, who is a trustee of the CDC Nvest Funds
Trusts and the Loomis Sayles Funds Trusts, receives a retainer fee at the annual
rate of $45,000 and meeting attendance fees of $4,500 for each meeting of the
Board of Trustees attended. Each committee member receives an additional
retainer fee at the annual rate of $7,000 while each committee chairman receives
a retainer fee (beyond the $7,000 fee) at the annual rate of $5,000. The
retainer fees assume four Board or Committee meetings per year; Trustees are
compensated for each additional committee and board meeting, in excess of four
meetings per year, at the rate of $1,750 and $4,500, respectively. Trustees who
are trustees of the Loomis Sayles Funds Trusts but not the CDC Nvest Funds
Trusts receive meeting attendance fees of $5,000 for each meeting of the Board
of Trustees attended and receive a retainer fee at the annual rate of $20,000.
These fees are allocated to the various CDC Nvest Funds and Loomis Sayles Funds
based on a formula that takes into account, among other factors, the relative
net assets of each Fund. Trustees are reimbursed for travel expenses in
connection with attendance at meetings.
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in a
designated Fund or certain other CDC Nvest Funds or Loomis Sayles Funds on the
normal payment date. Deferred amounts remain in the Funds until distributed in
accordance with the Plan.
18
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended September 30, 2003
f. Publishing Services. CIS performs certain desktop publishing services for the
Funds. Fees for these services are presented in the statements of operations as
shareholder reporting. For the period ended September 30, 2003, amounts paid to
CIS as compensation for these services were as follows:
Publishing
Services
Fund Fees
- ----------------------------- -------------
Massachusetts Tax Free Income $ 437
Fund
Municipal Income Fund 437
5. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED
SEPTEMBER 30, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
MASSACHUSETTS TAX FREE INCOME FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------- --------------- --------------- --------------- ---------------
CLASS A
Shares sold ........................................ 119,001 $ 1,949,577 456,052 $ 7,320,365
Shares issued in connection with the
reinvestment of:
Dividends from net investment income ............ 115,722 1,900,796 166,936 2,687,820
--------------- --------------- --------------- ---------------
234,723 3,850,373 622,988 10,008,185
Shares repurchased ................................. (584,421) (9,550,818) (659,550) (10,569,788)
--------------- --------------- --------------- ---------------
Net increase (decrease) ............................ (349,698) $ (5,700,445) (36,562) $ (561,603)
--------------- --------------- --------------- ---------------
CLASS B
Shares sold ........................................ 22,230 $ 363,317 40,852 $ 652,539
Shares issued in connection with the
reinvestment of:
Dividends from net investment income ............ 5,690 93,253 9,320 149,611
--------------- --------------- --------------- ---------------
27,920 456,570 50,172 802,150
Shares repurchased ................................. (62,206) (1,025,084) (164,730) (2,629,120)
--------------- --------------- --------------- ---------------
Net increase (decrease) ............................ (34,286) $ (568,514) (114,558) $ (1,826,970)
--------------- --------------- --------------- ---------------
Increase(decrease) derived from capital shares
transactions ...................................... (383,984) $ (6,268,959) (151,120) $ (2,388,573)
=============== =============== =============== ===============
YEAR ENDED
DECEMBER 31, 2001
----------------------------------
MASSACHUSETTS TAX FREE INCOME FUND SHARES AMOUNT
- ------------------------------------------------------- --------------- ---------------
CLASS A
Shares sold ........................................ 509,197 $ 8,157,232
Shares issued in connection with the
reinvestment of:
Dividends from net investment income ............ 187,505 3,002,608
--------------- ---------------
696,702 11,159,840
Shares repurchased ................................. (761,186) (12,187,109)
--------------- ---------------
Net increase (decrease) ............................ (64,484) $ (1,027,269)
--------------- ---------------
CLASS B
Shares sold ........................................ 69,544 $ 1,113,757
Shares issued in connection with the
reinvestment of:
Dividends from net investment income ............ 11,907 190,203
--------------- ---------------
81,451 1,303,960
Shares repurchased ................................. (98,615) (1,580,611)
--------------- ---------------
Net increase (decrease) ............................ (17,164) $ (276,651)
--------------- ---------------
Increase(decrease) derived from capital shares
transactions ...................................... (81,648) $ (1,303,920)
=============== ===============
FOR THE PERIOD
JANUARY 1, 2003
THROUGH YEAR ENDED
SEPTEMBER 30, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
MUNICIPAL INCOME FUND SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------- --------------- --------------- --------------- ---------------
CLASS A
Shares sold ........................................ 1,680,532 $ 12,281,784 1,667,649 $ 12,274,988
Shares issued in connection with the
reinvestment of:
Dividends from net investment income ............ 374,960 2,761,288 576,440 4,253,748
--------------- --------------- --------------- ---------------
2,055,492 15,043,072 2,244,089 16,528,736
Shares repurchased ................................. (2,814,362) (20,686,975) (3,360,408) (24,705,392)
--------------- --------------- --------------- ---------------
Net increase (decrease) ............................ (758,870) $ (5,643,903) (1,116,319) $ (8,176,656)
--------------- --------------- --------------- ---------------
CLASS B
Shares sold ........................................ 176,974 $ 1,299,640 360,545 $ 2,668,323
Shares issued in connection with the
reinvestment of:
Dividends from net investment income ............... 21,918 161,634 37,421 276,214
--------------- --------------- --------------- ---------------
198,892 1,461,274 397,966 2,944,537
Shares repurchased ................................. (387,486) (2,860,427) (746,990) (5,506,527)
--------------- --------------- --------------- ---------------
Net increase (decrease) ............................ (188,594) $ (1,399,153) (349,024) $ (2,561,990)
--------------- --------------- --------------- ---------------
Increase(decrease) derived from capital shares
transactions ...................................... (947,464) $ (7,043,056) (1,465,343) $ (10,738,646)
=============== =============== =============== ===============
YEAR ENDED
DECEMBER 31, 2001
----------------------------------
MUNICIPAL INCOME FUND SHARES AMOUNT
- ------------------------------------------------------- --------------- ---------------
CLASS A
Shares sold ........................................ 2,337,838 $ 17,278,030
Shares issued in connection with the
reinvestment of:
Dividends from net investment income ............ 630,423 4,666,919
--------------- ---------------
2,968,261 21,944,949
Shares repurchased ................................. (3,251,737) (24,090,858)
--------------- ---------------
Net increase (decrease) ............................ (283,476) $ (2,145,909)
--------------- ---------------
CLASS B
Shares sold ........................................ 345,205 $ 2,561,560
Shares issued in connection with the
reinvestment of:
Dividends from net investment income ............... 45,127 334,174
--------------- ---------------
390,332 2,895,734
Shares repurchased ................................. (349,414) (2,590,406)
--------------- ---------------
Net increase (decrease) ............................ 40,918 $ 305,328
--------------- ---------------
Increase(decrease) derived from capital shares
transactions ...................................... (242,558) $ (1,840,581)
=============== ===============
19
NOTES TO FINANCIAL STATEMENTS (continued)
For The Period Ended September 30, 2003
6. Contingent Expense Obligation. Loomis Sayles has given a binding undertaking
to Massachusetts Tax Free Income Fund to defer its management fee and, if
necessary, bear certain expenses associated with the Fund to limit its operating
expenses. This limitation is in effect until April 30, 2004 and will be
reevaluated on an annual basis.
If in the year following a deferral or reimbursement of expenses the actual
operating expenses of the Fund are less than its expense limit, the Fund is
required to pay an amount of additional expense that is the lower of the
difference between the expense limit and the actual amount of fees previously
waived or expenses reimbursed.
At September 30, 2003, the expense limits as a percentage of average daily net
assets and amount subject to possible reimbursement under the expense limitation
agreement were as follows:
Expense Limit as a Percentage
of Average Daily Net Assets Cumulative Expenses Waived
---------------------------- Expiration or Reimbursed Subject
Class A Class B of Waiver to Future Payment
------------ ----------- -------------- ----------------------------
Massachusetts Tax Free Income Fund 1.40% 2.05% April 30, 2004 $ --
7. Concentration of Credit. Massachusetts Tax Free Income Fund primarily invests
in debt obligations issued by the Commonwealth of Massachusetts and its
political subdivisions, agencies and public authorities to obtain funds for
various public purposes. The Fund is more susceptible to factors adversely
affecting issuers of Massachusetts municipal securities than is a comparable
municipal bond fund that is not so concentrated. Uncertain economic and fiscal
conditions may affect the ability of issuers of Massachusetts municipal
securities to meet their financial obligations. At September 30, 2003, the Fund
had the following concentrations by revenue source in excess of 10% of the
Fund's net assets: University 14.2%, Water 11.4% and College 11.1%. The Fund
had investments in securities of issuers insured by Municipal Bond Investors
Assurance Corporation (MBIA), American Municipal Bond Assurance Corporation
(AMBAC), Financial Guaranty Insurance Company (FGIC) and Federal Housing
Administration (FHA) which aggregated to 12.5%, 12.7%, 7.7% and 2.4% of its net
assets, respectively, at September 30, 2003.
At September 30, 2003, Municipal Income Fund had the following concentrations by
revenue source in excess of 10% as a percentage of the Fund's net assets:
Various Purpose 14.0% and University 12.7%. The Fund also had more than 10% of
its net assets invested in: New York 12.5%, Pennsylvania 12.3%, Illinois 11.1%
and Texas 10.6%. Certain revenue or tax related events in a state may impair the
ability of issuers of municipal securities to pay principal and interest on
their obligations.
8. Reorganization. After the close of business on September 12, 2003, CDC Nvest
Municipal Income Fund was reorganized into Municipal Income Fund, a newly
established series of Loomis Sayles Funds II, pursuant to a plan of
reorganization approved by its shareholders on August 28, 2003. The financial
statements of Municipal Income Fund reflect the historical results of CDC Nvest
Municipal Income Fund.
20
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders of CDC Nvest Funds Trust II and Loomis Sayles
Funds II:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Loomis Sayles Massachusetts Tax
Free Income Fund (formerly CDC Nvest Massachusetts Tax Free Income Fund), a
series of CDC Nvest Funds Trust II and Loomis Sayles Municipal Income Fund
(formerly CDC Nvest Municipal Income Fund), a series of Loomis Sayles Funds II
(collectively the "Funds") at September 30, 2003, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for each of the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 2003 by correspondence with the custodian, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2003
21
ADDITIONAL TAX INFORMATION
Federal Income Tax Information (unaudited)
During the period ended September 30, 2003, the tax character of distributions
paid was as follows:
DISTRIBUTIONS PAID DISTRIBUTIONS PAID DISTRIBUTIONS PAID
FROM FROM FROM
ORDINARY INCOME TAX EXEMPT INCOME LONG-TERM CAPITAL GAINS
------------------ ------------------ -----------------------
Massachusetts Tax Free Income Fund $ 2,370 $ 2,787,323 $ --
Municipal Income Fund 73,861 4,243,885 --
22
TRUSTEES' INFORMATION
The Funds 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.
POSITION(S) HELD WITH NUMBER OF PORTFOLIOS IN
FUND/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(S) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ---------------------------- ------------------------------ -------------------------
INDEPENDENT TRUSTEES
Joseph Alaimo+(73) Trustee; Chairman, Wayne Hummer 26;
399 Boylston Street 4 years for Loomis Trust Company and Wayne None
Boston, MA 02116 Sayles Funds Trusts Hummer Investment Trust
Graham T. Allison, Jr. (63) Trustee (2); Douglas Dillon Professor and 44;
399 Boylston Street 19 years for CDC Nvest Director for the Belfer Center Director, Taubman Centers,
Boston, MA 02116 Funds Trusts; Less than 1 of Science and International Inc.; Board Member, USEC
year for Loomis Sayles Affairs, John F. Kennedy Inc.
Funds Trusts School of Government,
Harvard University
Edward A. Benjamin (65) Trustee (1) Retired; formerly, Partner, 44;
399 Boylston Street Less than 1 year Ropes & Gray (law firm) Director, Coal, Energy
Boston, MA 02116 until 1999 Investments &
Management; Director,
Precision Optics Corporation
(optics manufacturer)
Daniel M. Cain (58) Trustee, President and CEO, Cain 44;
452 Fifth Avenue Chairman (1); Brothers & Company, Trustee for Universal Health
New York, NY 10018 7 years for CDC Nvest Incorporated (investment Realty Income Trust;
Funds Trusts; Less than 1 banking) Director, PASC; Director,
year for Loomis Sayles Sheridan Healthcorp
Funds Trusts
Paul G. Chenault (70) Trustee (2) Retired; formerly, Trustee, 44;
5852 Pebble Beach Way Less than 1 year for CDC First Variable Life (variable Director, Mailco Office
San Luis Obispo, CA 93401 Nvest Funds Trusts; 4 years life insurance) Products, Inc.
for Loomis SaylesFunds
Trusts
Kenneth J. Cowan (71) Trustee Retired 44;
399 Boylston Street Chairman (2); None
Boston, MA 02116 28 years for CDC Nvest
Funds Trusts; Less than 1
year for Loomis Sayles
Funds Trusts
Richard Darman (60) Trustee (2); Partner, The Carlyle Group 44;
399 Boylston Street 7 years for CDC Nvest (investments); Chairman of Director and Chairman, AES
Boston, MA 02116 Funds Trusts; Less than 1 the Board of Directors of Corporation
year for Loomis Sayles AES Corporation (interna-
Funds Trusts tional power company); for-
merly, Professor, John F.
Kennedy School of
Government, Harvard
University
23
TRUSTEES' INFORMATION
NUMBER OF PORTFOLIOS IN
POSITION(S) HELD WITH FUND COMPLEX OVERSEEN
FUNDS, LENGTH OF TIME PRINCIPAL OCCUPATION(S) AND OTHER DIRECTORSHIPS
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/1/ DURING PAST 5 YEARS HELD
- --------------------------- ---------------------------- ------------------------------ -------------------------
INDEPENDENT TRUSTEES
(continued)
Sandra O. Moose (61) Trustee (1); Senior Vice President and 44;
One Exchange Place 21 years for CDC Nvest Director, The Boston Director, Verizon
Boston, MA 02109 Funds Trusts; Less than 1 Consulting Group, Inc. Communications
year for Loomis Sayles (management consulting) Director, Rohm and Haas
Funds Trusts Company
John A. Shane (70) Trustee (2); President, Palmer Service 44;
200 Unicorn Park Drive 21 years for CDC Nvest Corporation (venture capital Director, Gensym
Woburn, MA 01801 Funds Trusts; Less than 1 organization) Corporation; Director,
year for Loomis Sayles Retired Overland Storage, Inc.
Funds Trusts Director, ABT Associates
Inc.
Pendleton P. White (72) Trustee (2); Retired 44;
6 Breckenridge Lane 22 years for CDC Nvest None
Savannah, GA 31411 Funds Trusts; Less than 1
year for Loomis Sayles
Funds Trusts
INTERESTED TRUSTEES
Robert J. Blanding/3/ (56) CEO, Loomis Sayles Funds President, Chairman, 44;
555 California Street II, Trustee Director, and Chief None
San Francisco, CA 94104 Less than 1 year Executive Officer, Loomis
Sayles, Chief Executive
Officer - Loomis Sayles
Funds II; President and
CEO - Loomis Sayles Funds
I
John T. Hailer/4/ (42) President and Chief President and Chief 44;
399 Boylston Street Executive Officer - CDC Executive Officer, CDC IXIS None
Boston, MA 02116 Nvest Funds Trusts, Asset Management
President - Loomis Sayles Distributors, L.P.; Executive
Funds II, Trustee; Vice President - Loomis
3 years for CDC Nvest Sayles Funds I, formerly,
Funds Trusts; Less than 1 Senior Vice President,
year for Loomis Sayles Fidelity Investments
Funds Trusts
Peter S. Voss/5/ (57) Chairman of the Board, Director, President and Chief 44;
399 Boylston Street Trustee; 11 years for CDC Executive Officer, CDC IXIS Trustee of Harris Associates
Boston, MA 02116 Nvest Funds Trusts; Less Asset Management North Investment Trust/5/
than 1 year for Loomis America, L.P.
Sayles Funds Trusts
24
TRUSTEES' INFORMATION
NUMBER OF PORTFOLIOS IN
POSITION(S) HELD WITH FUND COMPLEX OVERSEEN
FUNDS, LENGTH OF TIME PRINCIPAL OCCUPATION(S) AND OTHER DIRECTORSHIPS
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/1/ DURING PAST 5 YEARS HELD
- --------------------------- ---------------------------- ------------------------------ -------------------------
OFFICERS
Nicholas H. Palmerino (38) Treasurer; Senior Vice President, CDC Not Applicable;
399 Boylston Street Not Applicable IXIS Asset Management None
Boston, MA 02116 Services, Inc.; Senior Vice
President, CDC IXIS Asset
Management Advisers, L.P.;
formerly, Vice President,
Loomis, Sayles & Company,
L.P.
John E. Pelletier (39) Secretary and Clerk; Senior Vice President, Not Applicable;
399 Boylston Street Not Applicable General Counsel, Secretary None
Boston, MA 02116 and Clerk, CDC IXIS
Distribution Corporation;
Senior Vice President,
General Counsel, Secretary
and Clerk, CDC IXIS Asset
Management Distributors,
L.P.; Senior Vice President,
General Counsel, Secretary and
Clerk, CDC IXIS Asset
Management Advisers, L.P.;
Executive Vice President,
General Counsel, Secretary,
Clerk, and Director, CDC
IXIS Asset Management
Services, Inc.
(1) Member of Audit Committee.
(2) Member of Contract Review and Governance Committee.
+ Mr. Alaimo is a Trustee of Loomis Sayles Funds I and Loomis Sayles Funds
II, but not of the CDC Nvest Funds Trusts.
/1/ Except as noted, each Trustee and Officer holds the same positions with CDC
Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC
Nvest Companies Trust I, AEW Real Estate Income Fund, CDC Nvest Cash Management
Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest Funds Trusts")
and Loomis Sayles Funds I and Loomis Sayles Funds II (the "Loomis Sayles Funds
Trusts" and together with the CDC Nvest Funds Trusts, the "Trusts").
/2/ All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. Messrs. Alaimo and White are expected to
retire by December 31, 2003.
/3/ 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 & Company, L.P.
("Loomis Sayles").
/4/ Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution Corporation;
President and Chief Executive Officer of CDC IXIS Asset Management Distributors,
L.P. ("CDC IXIS Distributors").
/5/ Mr. Voss is an "interested person" of the Trusts because he holds the
following positions with entities that may be considered to be affiliated
persons of the Trusts: Director of CDC IXIS Asset Management Services, Inc.;
Director of CDC IXIS Asset Management Distribution Corporation; Director and
Chairman of CDC IXIS Asset Management Associates, Inc.; Director of AEW Capital
Management, Inc; Director of Harris Associates, Inc; Director of Loomis, Sayles
& Company, Inc.; Member of Reich & Tang Asset Management, LLC; Director of
Westpeak Global Advisors, Inc.; Director of Vaughan, Nelson, Scarborough &
McCullough, Inc.; Director, Hansberger Group, Inc.; Member, Board of Managers,
Harris Alternatives L.L.C.; and Director and Member of Executive Board of CDC
IXIS Asset Management.
/6/ As of September 30, 2003, Harris Associates Investment Trust has seven
series that were overseen by its Board of Trustees.
25
ADDITIONAL INFORMATION
Shareholder Meeting (unaudited). At the special meeting of shareholders held on
June 10, 2003, shareholders of Loomis Sayles Funds II (formerly, Loomis Sayles
Funds) voted for the following proposal:
1. Election of Trustees
FOR WITHHELD *
--------------- ---------------
(01) Joseph Alaimo 134,298,551 8,672,577
(02) Graham T. Allison, Jr. 134,590,902 8,380,227
(03) Edward A. Benjamin 134,546,833 8,424,296
(04) Robert J. Blanding 134,572,705 8,398,423
(05) Daniel M. Cain 134,593,263 8,377,866
(06) Paul G. Chenault 134,352,172 8,618,957
(07) Kenneth J. Cowan 134,524,153 8,446,976
(08) Richard Darman 134,552,047 8,419,081
(09) John T. Hailer 134,613,039 8,358,089
(10) Sandra O. Moose 134,612,285 8,358,843
(11) John A. Shane 134,332,421 8,638,708
(12) Peter S. Voss 134,622,604 8,348,525
(13) Pendleton P. White 134,300,598 8,670,530
* Includes Broker Non-Votes (if any).
26
ADDITIONAL INFORMATION
Shareholder Meeting (unaudited). At a special shareholders' meeting held on
August 28, 2003, shareholders of the CDC Nvest Municipal Income Fund*
(hereinafter referred to as the "Fund") voted for the following proposals:
1. Approval of a new Investment Advisory Agreement between Loomis, Sayles &
Company, L.P. and the Trust on behalf of the Fund.
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
- --------- ------------- --------------- ---------------- -----------
12,154,318.965 199,679.027 502,406.720 0 12,856,404.712
2. Approval of an Agreement and Plan of Reorganization providing for the
transfer of all of the assets of the Fund to, and the assumption of all of the
liabilities of the Fund by, the Loomis Sayles Municipal Income Fund in exchange
for shares of the Loomis Sayles Municipal Income Fund and the distribution of
such shares to the shareholders of the Fund in complete liquidation of the Fund
VOTED FOR VOTED AGAINST ABSTAINED VOTES BROKER NON-VOTES TOTAL VOTES
- --------- ------------- --------------- ---------------- -----------
10,139,160.478 260,332.747 601,953.487 1,854,985.000 12,856,404.712
* The CDC Nvest Municipal Income Fund reorganized into the Loomis Sayles
Municipal Income Fund as of the close of business on September 12, 2003.
27
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[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles Managed Bond Fund
TABLE OF CONTENTS
Fund and Manager Review 1
Portfolio of Investments 2
Statement of Assets and Liabilities 5
Statement of Operations 6
Statements of Changes in Net Assets 7
Financial Highlights 8
Notes to Financial Statements 10
Report of Independent Auditors 14
ANNUAL REPORT
SEPTEMBER 30, 2003
FUND AND MANAGER REVIEW
LOOMIS SAYLES MANAGED BOND FUND
PORTFOLIO REVIEW | The Fund significantly outperformed its benchmark, the
Lehman Brothers Government/Credit Index, during the one-year period ended
September 30, 2003, primarily due to the Fund's heavy exposure to foreign
issues, high-yield securities and convertible bonds. Each of these areas
performed strongly as investors' desire for risk increased.
The declining value of the U.S. dollar played a pivotal role in the value of
the Fund's foreign holdings. Foreign bonds were worth more in U.S. dollar
terms. In addition, a declining interest-rate environment throughout the world
pushed up the value of foreign issues.
Many new investors entered the high-yield market due to declining default rates
and the attractive yields available among high-yield bonds versus other
securities. Bonds in the technology and airlines industries performed well. A
rebound in technology spending combined with a significant effort on the part
of many technology companies to improve their balance sheets and their credit
ratings fueled the rally. The airline industry benefited from a recovery in
business travel, focus on profitability and stabilization after the September
11, 2001 terrorist attacks.
In general, we invested the Fund's cash inflows in U.S. Treasuries and
agencies, awaiting the availability of more attractive bonds. These securities
performed reasonably well, but they did not match the performance of other
sectors.
OUTLOOK | As the Fund will be liquidating in the near future, we will be moving
to cash in order to facilitate the Fund's Plan of Liquidation.
KEY FUND FACTS
OBJECTIVE | High total investment return through a combination of current
income and capital appreciation
STRATEGY | Invests in investment grade fixed income securities, although up to
35% of assets may be in lower-rated fixed income securities and up to 20% in
preferred stock.
FUND INCEPTION DATE | 10/1/98
EXPENSE RATIO | 1.50%
TOTAL NET ASSETS | $9.4 million
[PHOTO]
Daniel Fuss
DAN FUSS
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2003
SINCE
1 YEAR 3 YEARS INCEPTION
----------------------------------------------------------------------
LOOMIS SAYLES MANAGED BOND FUND(b) 17.96% 11.76% 8.94%
LIPPER BBB RATED FUNDS INDEX(a)(c) 11.16 8.46 5.96
LEHMAN BROTHERS GOVERNMENT/CREDIT INDEX(a)(d) 6.51 9.60 6.69
CUMULATIVE PERFORMANCE(b) INCEPTION TO SEPTEMBER 30, 2003
[CHART]
Lipper Lehman Brothers
Loomis Sayles BBB Rated Government/Credit
Managed Bond Fund Funds Index Index
----------------- ----------- -----------------
10/01/1998 9,750 10,000 10,000
10/31/1998 9,593 9,877 9,929
11/30/1998 10,220 10,059 9,989
12/31/1998 10,131 10,084 10,013
01/31/1999 10,429 10,172 10,084
02/28/1999 10,183 9,952 9,845
03/31/1999 10,530 10,063 9,893
04/30/1999 10,712 10,135 9,918
05/31/1999 10,424 9,998 9,816
06/30/1999 10,315 9,946 9,785
07/31/1999 10,260 9,896 9,758
08/31/1999 10,207 9,859 9,750
09/30/1999 10,194 9,944 9,838
10/31/1999 10,197 9,963 9,863
11/30/1999 10,252 9,987 9,858
12/31/1999 10,300 9,971 9,798
01/31/2000 10,224 9,942 9,795
02/29/2000 10,509 10,064 9,918
03/31/2000 10,671 10,157 10,061
04/30/2000 10,384 10,034 10,012
05/31/2000 10,327 9,957 10,003
06/30/2000 10,496 10,209 10,207
07/31/2000 10,394 10,253 10,316
08/31/2000 10,749 10,440 10,461
09/30/2000 10,720 10,470 10,501
10/31/2000 10,349 10,436 10,566
11/30/2000 10,102 10,533 10,747
12/31/2000 10,100 10,753 10,959
01/31/2001 10,616 11,013 11,143
02/28/2001 10,752 11,122 11,258
03/31/2001 10,593 11,115 11,310
04/30/2001 10,493 11,054 11,225
05/31/2001 11,017 11,154 11,289
06/30/2001 11,027 11,167 11,344
07/31/2001 11,410 11,420 11,626
08/31/2001 11,658 11,557 11,776
09/30/2001 11,148 11,459 11,884
10/31/2001 11,515 11,702 12,185
11/30/2001 11,739 11,626 11,985
12/31/2001 11,680 11,555 11,891
01/31/2002 11,642 11,618 11,978
02/28/2002 11,620 11,674 12,080
03/31/2002 11,807 11,520 11,835
04/30/2002 12,292 11,697 12,064
05/31/2002 12,512 11,789 12,176
06/30/2002 12,478 11,734 12,279
07/31/2002 12,373 11,675 12,427
08/31/2002 12,788 11,911 12,706
09/30/2002 12,680 12,018 12,979
10/31/2002 12,565 11,933 12,855
11/30/2002 13,094 12,105 12,862
12/31/2002 13,426 12,386 13,203
01/31/2003 13,669 12,468 13,203
02/28/2003 13,955 12,678 13,438
03/31/2003 13,988 12,700 13,420
04/30/2003 14,490 12,956 13,564
05/31/2003 15,124 13,296 13,949
06/30/2003 15,258 13,313 13,894
07/31/2003 14,636 12,859 13,311
08/31/2003 14,756 12,961 13,399
09/30/2003 15,339 13,360 13,823
Foreign investments involve special risks including greater economic, political
and currency fluctuation risks, which may be even greater in emerging markets.
In addition, foreign countries may have different accounting standards than
those of the U.S., which may adversely affect the value of the Fund. High yield
securities are subject to a high degree of market and credit risk. In addition,
the secondary market for these securities may lack liquidity which, in turn,
may adversely affect the value of these securities and that of the Fund.
Past performance is no guarantee of future performance. Average annual total
returns assume reinvestment of dividends and capital gains distributions.
Investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Returns do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of shares. Performance data reflects certain
fee waivers and reimbursements. Without such waivers, performance would be
lower.
(a) Since index performance data is not available coincident with the Fund's
inception date, comparative performance is presented as of the month end
closest to the Fund's inception date (September 30, 1998). (b) Performance for
the Fund includes the effect of the maximum 2.50% front-end sales load. (c)
Lipper BBB Rated Funds Index is an equally weighted unmanaged index of
typically the 30 largest mutual funds within the corporate debt funds BBB-rated
investment objective. Returns are adjusted for the reinvestment of capital
gains distributions and income dividends. It is not possible to invest directly
in an index. Source: Lipper, Inc. (d) Lehman Brothers Government/Credit Index
includes treasuries (public obligations of the U.S. Treasury that have
remaining maturities of more than one year) and agencies (publicly issued debt
of U.S. Government agencies, quasi-federal corporations, and corporate or
foreign debt guaranteed by the U.S. Government) as well as other publicly
issued investment grade corporate and non-corporate debentures that meet
specified maturity, liquidity, and quality requirements. The index returns have
not been reduced for ongoing management and operating expenses applicable to
mutual fund investments. It is not possible to invest directly in an index.
1
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES MANAGED BOND FUND
FACE AMOUNT VALUE +
- --------------------------------------------------------------------------
BONDS AND NOTES - 92.9% OF NET ASSETS
NON-CONVERTIBLE BONDS - 83.5%
AIRLINES - 3.4%
Delta Air Lines, Inc., 8.300%, 12/15/29 USD 500,000 $322,500
--------
AUTOMOTIVE - 4.8%
Cummins Engine Co., Inc., 7.125%, 3/01/28 150,000 136,688
Delphi Automotive Systems Corp., 7.125%, 5/01/29 100,000 97,526
Ford Motor Credit Co., 7.375%, 10/28/09 100,000 106,590
General Motors Acceptance Corp., 6.875%, 9/15/11 100,000 103,800
--------
444,604
--------
CHEMICALS - 1.5%
IMC Global, Inc., 6.875%, 7/15/07 90,000 81,450
IMC Global, Inc., 7.300%, 1/15/28 75,000 54,000
--------
135,450
--------
CONSTRUCTION MACHINERY - 0.6%
United Rentals, Inc., Series B, 9.500%, 6/01/08 50,000 51,750
--------
CONSUMER PRODUCTS - 6.8%
Bausch & Lomb, Inc., 7.125%, 8/01/28 500,000 495,000
Hasbro, Inc., 6.600%, 7/15/28 150,000 138,000
--------
633,000
--------
ELECTRIC - 4.2%
American Electric Power, Inc., 5.375%, 3/15/10 75,000 78,705
Calpine Corp., 7.750%, 4/15/09 100,000 69,000
Constellation Energy Group, Inc., 4.550%, 6/15/15 150,000 139,405
MidAmerican Energy Holdings Co., 5.875%, 10/01/12 100,000 105,754
--------
392,864
--------
ELECTRONICS - 1.9%
Lucent Technologies, Inc., 6.450%, 3/15/29 175,000 120,750
Motorola, Inc., 8.000%, 11/01/11 50,000 57,750
--------
178,500
--------
ENTERTAINMENT - 1.6%
Time Warner, Inc., 6.625%, 5/15/29 150,000 152,555
--------
FOREIGN LOCAL GOVERNMENTS - 8.4%
Province of Ontario, Zero Coupon Bond, 7/13/22 CAD 750,000 186,622
Province of Ontario, Zero Coupon Bond, 6/02/27 3,145,000 601,644
--------
788,266
--------
HEALTHCARE - 1.6%
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 USD 50,000 48,474
HCA, Inc., 6.250%, 2/15/13 100,000 101,405
--------
149,879
--------
LIFE INSURANCE - 1.1%
UnumProvident Corp., 7.375%, 6/15/32 100,000 100,000
--------
2
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES MANAGED BOND FUND
FACE AMOUNT VALUE +
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
MEDIA CABLE - 2.1%
Rogers Cablesystems Ltd., 9.650%, 1/15/14 CAD 250,000 $ 197,098
----------
PAPER - 2.4%
Georgia-Pacific Group, 7.375%, 12/01/25 USD 250,000 221,250
----------
PIPELINES - 1.7%
El Paso Corp., 7.000%, 5/15/11 50,000 41,250
Tennessee Gas Pipeline Co., 7.500%, 4/01/17 125,000 119,375
----------
160,625
----------
RAILROADS - 4.0%
Canadian Pacific Railway Ltd., 4.900%, 6/15/10 144A CAD 350,000 258,425
Missouri Pacific Railroad Co., 4.750%, 1/01/20 USD 25,000 19,701
Missouri Pacific Railroad Co., 5.000%, 1/01/45 140,000 95,550
----------
373,676
----------
REAL ESTATE INVESTMENT TRUSTS - 5.9%
First Industrial LP, 7.600%, 7/15/28 400,000 427,211
Health Care Property Investors, Inc., 6.000%, 3/01/15 125,000 129,043
----------
556,254
----------
RETAILERS - 3.2%
Dillard's, Inc., 7.750%, 7/15/26 30,000 26,250
J.C. Penney Co., Inc., 6.875%, 10/15/15 100,000 98,500
Sears Roebuck Acceptance Corp., 6.500%, 12/01/28 100,000 103,010
Sears Roebuck Acceptance Corp., 7.000%, 6/01/32 65,000 71,363
----------
299,123
----------
SOVEREIGNS - 8.3%
Canadian Government, Zero Coupon Bond, 6/01/25 CAD 1,735,000 406,621
Canadian Government, 6.000%, 9/01/05 475,000 371,870
----------
778,491
----------
SUPRANATIONAL - 10.1%
International Bank for Reconstruction & Development,
Zero Coupon Bond, 8/20/07 NZD 2,000,000 948,111
----------
TREASURIES - 7.3%
U.S. Treasury Bonds, 5.250%, 11/15/28 USD 560,000 580,169
U.S. Treasury Bonds, 5.500%, 8/15/28 100,000 107,117
----------
687,286
----------
WIRELESS - 2.2%
Nextel Communications, Inc., 9.750%, 10/31/07 200,000 206,000
----------
WIRELINES - 0.4%
US West Capital Funding, Inc., 6.875%, 7/15/28 50,000 39,500
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $7,160,072) 7,816,782
----------
3
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2003
LOOMIS SAYLES MANAGED BOND FUND - CONTINUED
FACE AMOUNT VALUE +
- -----------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
CONVERTIBLE BONDS - 9.4%
ELECTRONICS - 2.2%
Analog Devices, Inc., 4.750%, 10/01/05 USD 200,000 $ 203,500
----------
INDUSTRIAL OTHER - 0.9%
MascoTech, Inc., 4.500%, 12/15/03 92,000 90,160
----------
INFORMATION/DATA TECHNOLOGY - 4.2%
Maxtor Corp., 5.750%, 3/01/12 490,000 392,000
----------
TOBACCO - 2.1%
Loews Corp., 3.125%, 9/15/07 210,000 193,462
----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $868,729) 879,122
----------
TOTAL BONDS AND NOTES
(Identified Cost $8,028,801) 8,695,904
----------
SHARES
- -----------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 4.1% OF NET ASSETS
FOREST & PAPER PRODUCTS - 1.3%
International Paper Capital Trust, 5.250% 2,500 121,875
----------
REAL ESTATE INVESTMENT TRUSTS - 2.8%
Equity Residential Properties Trust, 7.250% 10,000 260,800
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $357,263) 382,675
----------
TOTAL INVESTMENTS - 97.0%
(Identified Cost $8,386,064)@ 9,078,579
Cash and Other Assets, Less Liabilities--3.0% 279,508
----------
NET ASSETS - 100% $9,358,087
----------
+ See Note 2.
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
@ At September 30, 2003, the net unrealized appreciation on investments based
on cost of $8,392,571 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is
an excess of value over tax cost and aggregate gross unrealized depreciation
for all securities in which there is an excess of tax cost over value were
$891,595 and $205,587, respectively, resulting in net unrealized
appreciation of $686,008.
Key to Abbreviations: CAD: Canadian Dollar; NZD: New Zealand Dollar; USD:
United States Dollar
See accompanying notes to financial statements.
4
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
----------------------------------------------------------------------
ASSETS
Investments at value $ 9,078,579
Cash 146,530
Receivable for:
Securities sold 165,887
Dividends and interest 117,842
Due from the adviser 29,167
-----------
9,538,005
-----------
LIABILITIES
Payable for:
Securities purchased 140,453
Accrued expenses:
Management fees 4,638
Trustees' fees 4,011
Deferred Trustees' fees 1,142
Administrative fees 270
12b-1 fees 191
Other 29,213
-----------
179,918
-----------
NET ASSETS $ 9,358,087
-----------
Net Assets consist of:
Capital paid in $10,251,397
Undistributed net investment income 27,979
Accumulated net realized gain (loss) (1,613,978)
Unrealized appreciation (depreciation) on:
Investments and foreign currency (net) 692,689
-----------
NET ASSETS $ 9,358,087
-----------
Shares of beneficial interest outstanding, no par value 851,340
Net asset value and redemption price $ 10.99
Maximum offering price per share (net asset value/97.50%) $ 11.27
Identified cost of investments $ 8,386,064
See accompanying notes to financial statements.
5
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
--------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 676,672
Dividends 23,186
-----------
Total income 699,858
-----------
EXPENSES
Management fees 62,042
12b-1 fees 77,552
Trustees' fees and expenses 9,869
Administrative fees 3,573
Custodian and accounting fees 42,661
Transfer agent fees 6,724
Audit and tax services fees 33,993
Legal fees 6,721
Printing fees 51,066
Other expenses 3,894
-----------
Total expenses 298,095
Less expenses waived and reimbursed by the investment adviser (142,991)
-----------
Net expenses 155,104
-----------
Net investment income 544,754
-----------
NET REALIZED GAIN ON:
Investments and other assets 454,579
-----------
CHANGE IN UNREALIZED APPRECIATION ON:
Investments and other assets 972,787
-----------
Total net realized gain and change in unrealized appreciation 1,427,366
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,972,120
-----------
See accompanying notes to financial statements.
6
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income $ 544,754 $ 678,929
Net realized gain (loss) 454,579 (1,523,927)
Change in unrealized appreciation (depreciation) 972,787 2,127,954
------------------ ------------------
Increase in net assets from operations 1,972,120 1,282,956
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (565,865) (701,378)
------------------ ------------------
FROM CAPITAL SHARES TRANSACTIONS
Proceeds from the sale of shares 2,129,721 733,158
Cost of shares redeemed (3,906,725) (1,839,059)
------------------ ------------------
Increase (decrease) in net assets derived from capital share transactions (1,777,004) (1,105,901)
------------------ ------------------
Total (decrease) in net assets (370,749) (524,323)
NET ASSETS
Beginning of the period 9,728,836 10,253,159
------------------ ------------------
End of the period $ 9,358,087 $ 9,728,836
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME
End of the period $ 27,979 $ 43,702
------------------ ------------------
CAPITAL SHARE TRANSACTIONS:
Issued from the sale of shares 212,100 76,200
Redeemed (375,400) (194,800)
------------------ ------------------
Net change (163,300) (118,600)
------------------ ------------------
See accompanying notes to financial statements.
7
FINANCIAL HIGHLIGHTS
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ----------------------------
Net asset Net realized Dividends Distributions
value, Net and unrealized Total from from from net
beginning investment gain (loss) on investment net investment realized
of period income investments operations income capital gains
- ---------------------------------------------------------------------------------------------
9/30/2003 $9.59 $0.54(e) $ 1.42 $1.96 $(0.56) $ --
9/30/2002+ 9.05 0.64(e) 0.55 1.19 (0.65) --
9/30/2001 9.45 0.71(e) (0.36) 0.35 (0.71) (0.04)
9/30/2000 9.79 0.68 (0.20) 0.48 (0.67) (0.15)
9/30/1999* 9.95 0.68 (0.22) 0.46 (0.62) --
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods less than one year
are not annualized. (b) Total returns do not include the effect of any
front-end sales charges for the Fund. (c) The adviser has agreed to reimburse a
portion of the Fund's expenses during the period. Without this reimbursement
the Fund's ratio of operating expenses would have been higher. (d) Annualized
for periods less than one year. (e) Per share net investment income has been
determined on the basis of the weighted average number of shares outstanding
during the period. + As required effective October 1, 2001, the Fund adopted
the provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities for financial
statement purposes only. For the year ended September 30, 2002, the impact to
the Fund's per share net investment income and net realized and unrealized gain
(loss) was less than $.01 and the impact to the ratio of net investment income
to the average net assets was less then .01%. Per share ratios and supplemental
data for periods prior to October 1, 2001, have not been restated to reflect
this change in presentation. * Commencement of fund operations on October 1,
1998 through September 30, 1999.
See accompanying notes to financial statements.
8
RATIOS TO AVERAGE NET ASSETS
- -------------- --------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total end of Total period Net Gross investment turnover
distributions period Return(a)(b) (000) Expenses(c)(d) Expenses(d) income(d) rate
- ------------------------------------------------------------------------------------------------
$(0.56) $10.99 21.0% $ 9,358 1.50% 2.88% 5.27% 51%
(0.65) 9.59 13.6 9,729 1.50 2.97 6.80 19
(0.75) 9.05 4.1 10,253 1.50 3.20 7.90 1
(0.82) 9.45 5.2 17,598 1.50 2.65 6.84 52
(0.62) 9.79 4.6 34,264 1.50 2.03 6.77 34
See accompanying notes to financial statements.
9
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
1. ORGANIZATION | Loomis Sayles Funds II (formerly Loomis Sayles Funds) (the
"Trust") is organized as a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
investment company. The Declaration of Trust permits the Trustees to issue an
unlimited number of shares of the Trust in multiple series (individually, a
"Fund" and collectively, the "Funds"). Information presented in these financial
statements pertains to the Loomis Sayles Managed Bond Fund (the "Managed Bond
Fund"), the financial statements for the remaining fixed income funds and the
equity funds of the Trust are presented in separate reports.
On May 14, 2003, shareholders of Loomis Sayles Funds I and on June 10, 2003,
shareholders of Loomis Sayles Funds II (together, Loomis Sayles Funds I and
Loomis Sayles Funds II comprise the "Loomis Sayles Funds Trusts") approved new
Trustees for the Loomis Sayles Funds Trusts in connection with the integration
of the Loomis Sayles Funds Trusts and the CDC Nvest Funds Trusts I, II, III,
CDC Nvest Companies Trust I, CDC Nvest Cash Management Trust and CDC Nvest Tax
Exempt Money Market Trust (the "CDC Nvest Funds Trusts"). This approval
resulted in a combined Board of Trustees for the Loomis Sayles Funds Trusts and
CDC Nvest Funds Trusts.
Managed Bond Fund shares are only offered to non-U.S. investors and are sold
with a maximum front end sales charge of 2.50%.
Most expenses of the Trust can be directly attributed to a Fund. Expenses which
can not be directly attributed are apportioned based on the relative net assets
of each of the Funds in the Trust.
2. SIGNIFICANT ACCOUNTING POLICIES | The following is a summary of significant
accounting policies consistently followed by the Fund in preparation of its
financial statements. The Fund's financial statements are prepared in
accordance with accounting principles generally accepted in the United States
of America which require the use of management estimates that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. SECURITY VALUATION | Debt securities for which market quotations are readily
available are generally valued at market value, as reported by pricing services
recommended by the investment adviser's pricing committee and approved by the
Board of Trustees. Such pricing services generally use the most recent bid
prices in the principal market in which such securities are normally traded.
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. Equity securities
for which market quotations are readily available are valued at market value,
as reported by pricing services recommended by the investment adviser's pricing
committee and approved by the Board of Trustees. Such pricing services
generally use the security's last sale price on the exchange or market where
primarily traded or, if there is no reported sale during the day, the closing
bid price. Effective April 14, 2003, securities traded on the NASDAQ National
Market are valued at the NASDAQ Official Closing Price ("NOCP"), or if lacking
an NOCP, at the most recent bid quotation on the NASDAQ National Market.
Short-term obligations with a remaining maturity of 60 days or less are valued
at amortized cost, which approximates market value. Securities for which market
quotations are not readily available (including restricted securities, if any)
are valued at fair value as determined in good faith by the Fund's investment
adviser using consistently applied procedures under the general supervision of
the Board of Trustees. If events occurring after the close of the principal
market in which securities are traded (but before the close of regular trading
on the New York Stock Exchange) are believed to materially affect the value of
those securities, such securities are valued at their fair value taking such
events into account.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME | Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified. Interest income is recorded on an accrual basis. Interest income is
increased by the accretion of discount and decreased by the amortization of
premium. Investment income is recorded net of foreign taxes withheld when
applicable. In determining net gain or loss on securities sold, the cost of
securities has been determined on an identified cost basis.
C. FOREIGN CURRENCY TRANSLATION | The books and records of the Fund are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates
from fluctuations arising from changes in market prices of the investment
securities. Such changes are included with the net realized and unrealized gain
or loss on investments.
10
Net realized foreign exchange gains or losses arise from: sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities, other than investment securities, at the end of the
fiscal periods, resulting from changes in exchange rates.
The Fund may use foreign currency exchange contracts to facilitate transactions
in foreign-denominated investments. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than
those of comparable U.S. companies and the U.S. government.
D. FORWARD FOREIGN CURRENCY CONTRACTS | Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell generally are
used to hedge the Fund's investments against currency fluctuation. Also, a
contract to buy or sell can offset a previous contract. These contracts involve
market risk in excess of the unrealized gain or loss reflected in the Fund's
Statement of Assets and Liabilities. The U.S. dollar value of the currencies
the Fund has committed to buy or sell (if any) is shown in the portfolio
composition under the caption "Forward Currency Contracts Outstanding." These
amounts represent the aggregate exposure to each currency the Fund has acquired
or hedged through currency contracts outstanding at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At September 30, 2003, there were no open forward currency
contracts.
E. FEDERAL AND FOREIGN INCOME TAXES | The Trust treats the Fund as a separate
entity for federal income tax purposes. The Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. The Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities, such
taxes are accrued as applicable.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS | Dividends and distributions
are recorded on ex-dividend date. The timing and characterization of certain
income and capital gains distributions are determined in accordance with
federal tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due
to differing treatments for book and tax purposes of items such as
distributions from real estate investment trusts, net operating losses,
non-deductible expenses, foreign currency transactions and gains realized from
passive foreign investment companies. Permanent book and tax basis differences
relating to shareholder distributions will result in reclassifications to
capital accounts. Distributions from net investment income and short-term
capital gains are considered to be ordinary income for tax purposes.
G. REPURCHASE AGREEMENTS | The Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The Fund's adviser is responsible
for determining that the value of the collateral is at all times at least equal
to 102% of the repurchase price, including interest. Repurchase agreements
could involve certain risks in the event of default or insolvency of the
counterparty including possible delays or restrictions upon the Fund's ability
to dispose of the underlying securities.
3. PURCHASES AND SALES OF SECURITIES | For the year ended September 30, 2003,
purchases and sales of securities (excluding short-term investments and U.S.
Government/agencies Securities) were $3,253,568 and $4,662,592, respectively.
Purchases and sales of U.S. Government/agencies securities (excluding
short-term investments) were $1,735,798 and $2,028,929, respectively.
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. MANAGEMENT FEES | Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the
investment adviser to the Fund. Under the terms of the management agreement,
the Fund pays a management fee at the annual rate of 0.60% as a percentage of
average
11
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2003
daily net assets. Loomis Sayles has contractually agreed, until February 1,
2004, to reduce its advisory fees and/or bear other expenses, to the extent
necessary to limit the total operating expenses of the Fund, to 1.50% of the
Fund's average daily net assets.
For the year ended September 30, 2003, the Fund's gross management fee, waiver
of the management fee and net management fee were $62,042, $62,042 and $0,
respectively. The gross and net management fee ratios as a percentage of
average daily net assets were 0.60% and 0.00%, respectively. For the year ended
September 30, 2003, in addition to the waiver of management fees, Loomis Sayles
reimbursed $80,949 of Fund expenses.
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trusts. Loomis Sayles' general partner is indirectly owned by CDC IXIS
Asset Management North America, L.P. ("CDC IXIS North America"), whose general
partner is indirectly owned by CDC IXIS Asset Management SA ("CDC IXIS"). CDC
IXIS is part of the Caisse des Depots et Consignations Group.
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE | Effective July 1, 2003, Loomis
Sayles assigned its administrative services agreement with the Trust to CDC
IXIS Asset Management Services, Inc. ("CIS"), a wholly owned subsidiary of CDC
IXIS North America. Pursuant to the agreement between each of the Loomis Sayles
Funds Trusts and CIS, each Fund pays CIS a monthly administrative fee at the
annual rate of 0.035% of the Fund's average daily net assets. Prior to July 1,
2003, each Fund paid Loomis Sayles a monthly administrative fee at an annual
rate of 0.035% of the Fund's average daily net assets.
For the year ended September 30, 2003, fees paid to Loomis Sayles and CIS for
accounting and administrative expenses were $3,573 (0.035% of average daily net
assets).
Effective October 1, 2003, the Fund pays CIS its pro rata portion of the
accounting and administrative fee, allocated based on the combined assets of
the CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts, for these services
representing the higher amount based on the following calculations:
(1)Percentage of Average Daily Net Assets
FIRST NEXT OVER
$5 BILLION $5 BILLION $10 BILLION
- ---------- ---------- -----------
0.0675% 0.0625% 0.0500%
or
(2)Each Fund's pro rata portion, based on the combined assets of
the Loomis Sayles Funds Trusts and the CDC Nvest Funds Trusts,
of the annual aggregate minimum fee of $5 million.
C. SERVICE AND DISTRIBUTION FEES | The Fund has adopted a Shareholder Service
and Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act
of 1940. The Fund pays Loomis Sayles Distributors, L.P, ("Loomis Sayles
Distributors"), a subsidiary of Loomis Sayles, a monthly shareholder service
fee at an annual rate of 0.25% of the Fund's average daily net assets and a
monthly distribution fee at an annual rate of 0.50% of the Fund's average daily
net assets.
D. TRUSTEES FEES AND EXPENSES | The Trust pays no compensation to its officers
or to its Trustees who are interested Trustees of Loomis Sayles, Loomis Sayles
Distributors, CDC IXIS North America, CIS or their affiliates. Each independent
Trustee, who is also an independent Trustee of the CDC Nvest Funds Trusts,
receives, in the aggregate, a retainer fee at the annual rate of $45,000 and
meeting attendance fees of $4,500 for each meeting of the Board of Trustees
that he or she attended. Each Committee member receives an additional retainer
fee at the annual rate of $7,000. Furthermore, each Committee chairman receives
an additional retainer fee (beyond the $7,000 fee) at the annual rate of
$5,000. The retainer fees assume four Board or Committee meetings per year.
Each Trustee is compensated $4,500 for each meeting and $1,750 per Committee
meeting that he or she attends in excess of four meetings per year. Trustees
who are not a Trustee of the CDC Nvest Funds Trusts are compensated at the rate
of $5,000 for each meeting of the Board of Trustees that he or she attends and
receives an annual retainer of $20,000. Trustee fees are allocated to the
various CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts based on a
formula that takes into account, among other factors, the relative net assets
of each Fund. Trustees are reimbursed for travel expenses in connection with
attendance at meetings.
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in
the Fund or certain other CDC Nvest Funds Trusts or Loomis Sayles Funds Trusts
on the normal payment date. Deferred amounts remain in the Funds until
distributed in accordance with the Plan.
12
For the period November 6, 2002 through May 7, 2003, the Trust paid each
independent trustee a $20,000 annual retainer fee and a $5,000 fee per in
person meeting. Prior to November 6, 2002, each independent Trustee was
compensated by the Trust on behalf of each Fund at the rate of $1,250 per Fund
per year and was reimbursed for travel expenses in connection with attendance
at meetings.
5. LINE OF CREDIT | The Fund together with certain other funds of the Loomis
Sayles Funds Trusts, participates in a $25 million unsecured line of credit.
Borrowings under the line of credit will be made solely to temporarily finance
the repurchase of capital shares. Interest is charged to each participating
Fund based on its borrowings at a rate per annum equal to the Federal Funds
rate plus 0.50%.
In addition, a commitment fee of 0.09% per annum, payable at the end of each
calendar quarter, is accrued and apportioned among the participating Funds
based on their average daily unused portion of the line of credit. During the
year ended September 30, 2003, the Fund had no borrowings under the agreement.
6. ADDITIONAL TAX INFORMATION | The tax character of distributions paid to
shareholders during the year ended September 30, 2003 were as follows:
Distributions paid from:
Ordinary income $565,865
Long-term capital gains --
--------
Total taxable distributions $565,865
As of September 30, 2003, the components of distributable earnings on a tax
basis were follows:
Undistributed ordinary income $ 29,121
Undistributed long-term capital gains --
------------
Total undistributed earnings 29,121
Capital loss carryforward (1,607,470)
Deferred net capital losses (post October) --
Unrealized Appreciation (Depreciation) 685,039
------------
Total accumulated earnings (losses) $ (893,310)
------------
Capital loss carryforward years of expiration 2009-2011
7. SUBSEQUENT EVENT | Effective November 12, 2003, the Fund will no longer
accept new investments in the Fund by new or existing shareholders.
Effective as of November 7, 2003, the Board of Trustees of the Trust approved a
plan to liquidate the Fund on or about December 15, 2003 (the "Liquidation
Date"). Any shares of the Fund outstanding on the Liquidation Date will be
automatically redeemed on that date. The proceeds of any such redemption will
be the net asset value of such shares after charges, dividend distributions
required to eliminate any Fund-level taxes, expenses and liabilities of the
Fund have been paid or otherwise provided for. At any time prior to the
Liquidation Date, shareholders may redeem their shares of the Fund pursuant to
procedures set forth in the Fund's prospectus.
For U.S. federal income tax purposes, the automatic or elected redemption on
the Liquidation Date will generally be treated like any other redemption of
shares and may result in a gain or loss for U.S. federal income tax purposes. A
gain will result in short- or long-term capital gains for shareholders who hold
their shares as a capital asset depending on how long a shareholder has held
his or her Fund shares. If a shareholder desires to recognize any taxable gain
or loss prior to the Liquidation Date, the shareholder may wish to redeem his
or her shares prior to the Liquidation Date. Before doing so, the shareholder
should consider any applicable sales charge and should consult with his or her
tax advisor for more information on his or her own situation.
The liquidation process will involve effecting portfolio transactions in an
orderly manner with the intent that shareholders remaining in the Fund on the
liquidation date will not unnecessarily bear the majority of the trading costs
associated with the liquidation. This may result in the Fund's portfolio
consisting primarily of cash or cash equivalents for several weeks prior to the
Liquidation Date.
13
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of
Loomis Sayles Managed Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Loomis Sayles Managed Bond Fund, a
series of Loomis Sayles Funds II (the "Fund") at September 30, 2003, and the
results of its operations, the changes in its assets and the financial
highlights for the periods indicated therein, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
As described in Note 7, effective November 7, 2003, the Board of Trustees voted
to liquidate the Fund on or about December 15, 2003.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2003
14
2003 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
CORPORATE DIVIDENDS RECEIVED DEDUCTION | For the fiscal year ended, September
30, 2003, 3.98% of dividends distributed by the Fund qualify for the dividends
received deduction for corporate shareholders.
15
ADDITIONAL INFORMATION
SHAREHOLDER MEETING (UNAUDITED) | At the special meeting of shareholders held
on June 10, 2003, shareholders of Loomis Sayles Funds II (formerly, Loomis
Sayles Funds) voted for the following proposal:
1. ELECTION OF TRUSTEES
FOR WITHHELD*
- -------------------------------------------------
(01) Joseph Alaimo 134,298,551 8,672,577
(02) Graham T. Allison, Jr. 134,590,902 8,380,227
(03) Edward A. Benjamin 134,546,833 8,424,296
(04) Robert J. Blanding 134,572,705 8,398,423
(05) Daniel M. Cain 134,593,263 8,377,866
(06) Paul G. Chenault 134,352,172 8,618,957
(07) Kenneth J. Cowan 134,524,153 8,446,976
(08) Richard Darman 134,552,047 8,419,081
(09) John T. Hailer 134,613,039 8,358,089
(10) Sandra O. Moose 134,612,285 8,358,843
(11) John A. Shane 134,332,421 8,638,708
(12) Peter S. Voss 134,622,604 8,348,525
(13) Pendleton P. White 134,300,598 8,670,530
*Includes Broker Non-Votes (if any).
16
The Fund is 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
Fund's activities, review contractual arrangements with companies that provide
services to the Fund and review the Fund's performance.
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Joseph Alaimo+ (73) Trustee; Chairman, Wayne Hummer Trust 26;
399 Boylston Street Company and Wayne Hummer
Boston, MA 02116 4 years for Loomis Investment Trust None
Sayles Funds
Trusts
Graham T. Allison, Jr. (63) Trustee (2); Douglas Dillon Professor and Director 44;
399 Boylston Street for the Belfer Center of Science and
Boston, MA 02116 19 years for CDC International Affairs, John F. Kennedy Director, Taubman Centers, Inc.;
Nvest Funds School of Government, Harvard Board Member, USEC Inc.
Trusts; Less than 1 University
year for Loomis
Sayles Funds
Trusts
Edward A. Benjamin (65) Trustee (1); Retired; formerly, Partner, Ropes & Gray 44;
399 Boylston Street (law firm) until 1999
Boston, MA 02116 Less than 1 year Director, Coal, Energy
Investments & Management;
Director, Precision Optics
Corporation
(optics manufacturer)
Daniel M. Cain (58) Trustee, President and CEO, Cain Brothers & 44;
452 Fifth Avenue Chairman (1); Company, Incorporated (investment
New York, NY 10018 banking) Trustee, Universal Health Realty
7 years for CDC Income Trust;
Nvest Funds Director, PASC; Director,
Trusts; Less than 1 Sheridan Healthcorp
year for Loomis
Sayles Funds
Trusts
Paul G. Chenault (70) Trustee (2); Retired; formerly Trustee, First Variable 44;
5852 Pebble Beach Way Life (variable life insurance)
San Luis Obispo, CA 93401 Less than 1 year Director, Mailco Office
for CDC Nvest Products, Inc.
Funds Trusts; 4
years for Loomis
Sayles Funds
Trusts
Kenneth J. Cowan (71) Trustee Retired 44;
399 Boylston Street Chairman (2);
Boston, MA 02116 None
28 years for CDC
Nvest Funds
Trusts; Less than 1
year for Loomis
Sayles Funds
Trusts
17
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF TIME NUMBER OF PORTFOLIOS IN FUND
SERVED AND TERM OF PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------------
Richard Darman (60) Trustee (2); Partner, The Carlyle Group 44;
399 Boylston Street 7 years for CDC Nvest (investments); Chairman of the Board of
Boston, MA 02116 Funds Trusts; Less than Directors of AES Corporation Director and Chairman, AES
1 year for Loomis (international power company); Corporation
Sayles Funds Trusts formerly, Professor, John F. Kennedy
School of Government, Harvard
University
Sandra O. Moose (61) Trustee (1); Senior Vice President and Director, The 44;
One Exchange Place Boston Consulting Group, Inc.
Boston, MA 02109 21 years for CDC (management Director, Verizon
Nvest Funds consulting) Communications;
Trusts; Less than 1 year Director, Rohm and Haas
for Loomis Sayles Company
Funds Trusts
John A. Shane (70) Trustee (2); President, Palmer Service Corporation 44;
200 Unicorn Park Drive (venture capital organization)
Woburn, MA 01801 21 years for CDC Director, Gensym Corporation;
Nvest Funds Trusts; Director, Overland Storage,
Less than 1 year for Inc.; Director, ABT Associates
Loomis Sayles Funds Inc.
Trusts
Pendleton P. White (72) Trustee (2); Retired 44;
6 Breckenridge Lane
Savannah, GA 31411 22 years for CDC None
Nvest Funds Trusts;
Less than 1 year for
Loomis Sayles
Funds Trusts
INTERESTED TRUSTEES
Robert J. Blanding/3/ (56) President and Chief President, Chairman, Director and 44;
555 California Street Executive Officer Chief Executive Officer, Loomis, Sayles
San Francisco, CA 94104 Loomis Sayles Funds I; & Company, L.P. None
Chief Executive
Officer, Loomis
Sayles Funds II; Trustee
Less than 1 year
John T. Hailer/4 /(42) President and Chief President and Chief Executive Officer, 44;
399 Boylston Street Executive Officer, CDC IXIS Asset Management
Boston, MA 02116 CDC Nvest Funds Distributors, L.P.; formerly, Senior Vice None
Trusts; President, President, Fidelity Investments
Loomis Sayles Funds II,
Executive Vice
President, Loomis
Sayles Funds I; Trustee;
3 years for CDC Nvest
Funds Trusts; Less than
1 year for Loomis
Sayles Funds Trusts
18
POSITION(S)
HELD WITH
FUND/1/, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------
Peter S. Voss/5/ (57) Chairman of Director, President and Chief Executive 44;
399 Boylston Street the Board, Officer, CDC IXIS Asset Management
Boston, MA 02116 Trustee; North America, L.P. Trustee of Harris Associates
Investment Trust/6/
11 years for
CDC Nvest
Funds Trusts;
Less than 1 year
for Loomis
Sayles Funds
Trusts
OFFICERS
Nicholas H. Palmerino (38) Treasurer; Senior Vice President, CDC IXIS Asset Not Applicable;
399 Boylston Street Management Services, Inc.; Senior Vice
Boston, MA 02116 Not Applicable President, CDC IXIS Asset Management None
Advisers, L.P.; formerly, Vice President,
Loomis, Sayles & Company, L.P.
John E. Pelletier (39) Secretary; Senior Vice President, General Counsel, Not Applicable;
399 Boylston Street Secretary and Clerk, CDC IXIS
Boston, MA 02116 Not Applicable Distribution Corporation; Senior Vice None
President, General Counsel, Secretary
and Clerk, CDC IXIS Asset Management
Distributors, L.P.; Senior Vice President,
General Counsel, Secretary and Clerk,
CDC IXIS Asset Management Advisers,
L.P.; Executive Vice President, General
Counsel, Secretary, Clerk and Director,
CDC IXIS Asset Management Services,
Inc.
(1)Member of Audit Committee.
(2)Member of Contract Review and Governance Committee.
+Mr. Alaimo is a Trustee of Loomis Sayles Funds I and Loomis Sayles Funds II,
but not of the CDC Nvest Funds Trusts.
1Except as noted, each Trustee and Officer holds the same positions with CDC
Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC
Nvest Companies Trust I, AEW Real Estate Income Fund, CDC Nvest Cash
Management Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest
Funds Trusts") and Loomis Sayles Funds I and Loomis Sayles Funds II (the
"Loomis Sayles Funds Trusts" and together with the CDC Nvest Funds Trusts, the
"Trusts").
2All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. Messrs. Alaimo and White are expected to
retire by December 31, 2003.
3Mr. 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 & Company,
L.P. ("Loomis Sayles").
4Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution
Corporation; President and Chief Executive Officer of CDC IXIS Asset
Management Distributors, L.P. ("CDC IXIS Distributors").
5Mr. Voss is an "interested person" of the Trusts because he holds the
following positions with entities that may be considered to be affiliated
persons of the Trusts: Director of CDC IXIS Asset Management Services, Inc.;
Director of CDC IXIS Asset Management Distribution Corporation; Director and
Chairman of CDC IXIS Asset Management Associates, Inc.; Director of AEW
Capital Management, Inc; Director of Harris Associates, Inc; Director of
Loomis, Sayles & Company, Inc.; Member of Reich & Tang Asset Management, LLC;
Director of Westpeak Global Advisors, Inc.; Director of Vaughan, Nelson,
Scarborough & McCullough, Inc.; Director, Hansberger Group, Inc.; Member,
Board of Managers, Harris Alternatives L.L.C.; and Director and Member of
Executive Board of CDC IXIS Asset Management.
6As of September 30, 2003, Harris Associates Investment Trust has seven series
that were overseen by its Board of Trustees.
19
[LOGO OF CDC NVEST FUNDS(SM)]
ANNUAL REPORT
SEPTEMBER 30, 2003
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
[LOGO OF LOOMIS SAYLES]
TABLE OF CONTENTS
Management Discussion and Performance .........Page 1
Fund Risks ....................................Page 3
Schedule of Investments .......................Page 4
Financial Statements ..........................Page 8
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
PORTFOLIO PROFILE
- --------------------------------------------------------------------------------
Objective:
High total investment return through a combination of current income and
capital appreciation
Strategy:
Invests primarily in investment-grade, fixed-income securities, although it may
invest up to 10% of assets in lower-rated, fixed-income securities
Fund Inception:
December 31, 1996
Managers:
Daniel Fuss
Steven Kaseta
Loomis, Sayles & Company, L.P.
Symbol:
Class A LIGRX
Class B LGBBX
Class C LGBCX
Class Y LSIIX
Class J LIGJX
Net Asset Value Per Share:
(September 30, 2003)
Class A $ 11.54
Class B 11.53
Class C 11.53
Class Y 11.54
Class J 11.53
MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund significantly outperformed its
benchmark during the fiscal year ended September 30, 2003, primarily as a result
of its positions in high-yielding domestic corporate bonds and its exposure to
sovereign debt (bonds issued by foreign governments) and non-U.S.-dollar
denominated securities. The fund's total return was 20.62% based on the net
asset value of Class A shares and $0.59 in dividends and capital gains of $0.14
per share reinvested during the period. This put the fund well ahead of its
benchmark, Lehman Brothers Government/Credit Index, which had a total return of
6.51%. For the same period, the fund's Morningstar Long-Term Bond peer group had
an average return of 9.80%. The fund's 30-day SEC yield on Class A shares was
4.53% as of the end of September, 2003.
Corporate and Foreign Government Securities Drove the Market
As evidence of an economic recovery began to appear and default rates declined,
cash flowed into high-yield bonds, driving up prices during the period. The
improving economy and strong equity returns also benefited the fund's
convertible securities. Meanwhile, declining global interest rates translated
into strong results for government bonds of both developed nations and emerging
markets. Investments denominated in foreign currencies, which totaled almost 30%
of fund assets on September 30, also benefited from the weakening U.S. dollar.
Telecommunications and Sovereign Bonds Provided Excellent Results
Domestic bonds of telecommunications companies rebounded from distressed levels.
Two of the fund's top-performing bonds were issued by telecommunications
companies. The fund's U.S. West Capital Funding holdings soared in price after
parent company Qwest reduced concerns about its liquidity by selling a
subsidiary that produced yellow pages. Bonds issued by Sprint Capital Corp., one
of the nation's largest long-distance carriers, provided strong returns as the
company improved its balance sheet by refinancing debt and selling its directory
business. The fund's investments in sovereign bonds (bonds issued by foreign
governments) provided a substantial boost to performance, and accounted for 19%
of the fund's total net assets at September 30, 2003. In particular, sovereign
debt issued by emerging economies in Latin America has generated strong returns,
led by Brazil, the largest economy in South America. Investors have been
encouraged by the recent strengthening of the Brazilian economy, the decline in
inflationary pressures, and the fiscal discipline demonstrated by its
government.
U.s. Treasury and Agency Securities, and One Airline's Bonds Detracted
Most bonds in the portfolio performed well during the period. The exceptions
were two American Airline's bonds, which declined in value as that carrier lost
ground to discount competitors. The fund's Treasury position and mortgage-backed
securities issued by Fannie Mae both also declined in value as interest rates
spiked up late in the fiscal period.
Emphasis On Corporate Bonds Continues
Against a backdrop of improving corporate finances and a strengthening economy,
we continue to emphasize corporate bonds. At the same time, we have reduced the
fund's vulnerability to increases in interest rates by trimming duration (a
measure of the fund's price sensitivity to changing interest rates) from 7.56
years to 6.54 years. Based on our outlook for a weak U.S. dollar and global
growth, we will continue to hold securities denominated in other currencies, and
to maintain our position in emerging markets.
1
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
INVESTMENT RESULTS THROUGH SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing Loomis Sayles Investment Grade Bond Fund's performance to a
benchmark index provide you with a general sense of how the fund performed. To
put this information in context, it may be helpful to understand the differences
between the two. The fund's total return for the period shown below appears with
and without sales charges and includes fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES/1/
December 31, 1996 through September 30, 2003
Loomis Sayles Investment Grade Bond Fund
-------------------------------------------
Lipper Lehman
Maximum BBB Rated Government
Month Net Asset Sales Funds Credit
End Value (2) Charge (3) Index Index
---------- ---------- ----------- ------------- ------------
12/31/1996 10,000 9,550 10,000 10,000
01/31/1997 9,950 9,502 10,032 10,012
02/28/1997 10,150 9,693 10,089 10,033
03/31/1997 9,930 9,483 9,933 9,914
04/30/1997 10,131 9,675 10,080 10,059
05/31/1997 10,323 9,859 10,195 10,153
06/30/1997 10,586 10,110 10,347 10,274
07/31/1997 11,272 10,765 10,705 10,589
08/31/1997 10,953 10,460 10,563 10,470
09/30/1997 11,262 10,755 10,749 10,635
10/31/1997 11,428 10,914 10,858 10,805
11/30/1997 11,407 10,894 10,911 10,862
12/31/1997 11,429 10,915 11,029 10,976
01/31/1998 11,537 11,018 11,169 11,131
02/28/1998 11,569 11,048 11,165 11,108
03/31/1998 11,709 11,182 11,222 11,142
04/30/1998 11,755 11,226 11,270 11,198
05/31/1998 11,821 11,289 11,366 11,318
06/30/1998 11,799 11,268 11,450 11,434
07/31/1998 11,652 11,128 11,441 11,443
08/31/1998 11,152 10,650 11,358 11,666
09/30/1998 11,408 10,894 11,592 12,000
10/31/1998 11,294 10,786 11,449 11,915
11/30/1998 11,668 11,143 11,660 11,986
12/31/1998 11,767 11,237 11,689 12,016
01/31/1999 11,955 11,417 11,791 12,101
02/28/1999 11,802 11,271 11,536 11,813
03/31/1999 12,073 11,530 11,665 11,872
04/30/1999 12,358 11,802 11,748 11,901
05/31/1999 12,251 11,699 11,590 11,779
06/30/1999 12,215 11,665 11,529 11,742
07/31/1999 11,998 11,458 11,471 11,709
08/31/1999 11,955 11,417 11,428 11,700
09/30/1999 12,118 11,573 11,526 11,805
10/31/1999 12,115 11,570 11,549 11,836
11/30/1999 12,148 11,602 11,577 11,829
12/31/1999 12,196 11,648 11,558 11,757
01/31/2000 12,196 11,648 11,524 11,754
02/29/2000 12,584 12,017 11,666 11,902
03/31/2000 12,758 12,184 11,774 12,074
04/30/2000 12,428 11,868 11,631 12,015
05/31/2000 12,309 11,755 11,542 12,004
06/30/2000 12,667 12,097 11,834 12,249
07/31/2000 12,819 12,242 11,885 12,379
08/31/2000 13,060 12,473 12,102 12,553
09/30/2000 12,953 12,370 12,136 12,601
10/31/2000 12,848 12,270 12,097 12,680
11/30/2000 13,094 12,504 12,209 12,896
12/31/2000 13,534 12,925 12,465 13,151
01/31/2001 13,760 13,141 12,767 13,372
02/28/2001 13,867 13,243 12,893 13,509
03/31/2001 13,687 13,071 12,885 13,571
04/30/2001 13,478 12,871 12,814 13,470
05/31/2001 13,600 12,988 12,930 13,547
06/30/2001 13,667 13,052 12,945 13,612
07/31/2001 14,014 13,384 13,238 13,951
08/31/2001 14,332 13,687 13,397 14,131
09/30/2001 14,040 13,408 13,283 14,261
10/31/2001 14,652 13,992 13,564 14,622
11/30/2001 14,445 13,795 13,476 14,382
12/31/2001 14,299 13,656 13,394 14,269
01/31/2002 14,398 13,750 13,467 14,374
02/28/2002 14,540 13,886 13,532 14,496
03/31/2002 14,195 13,556 13,354 14,202
04/30/2002 14,604 13,947 13,559 14,477
05/31/2002 14,790 14,124 13,666 14,610
06/30/2002 14,758 14,094 13,602 14,735
07/31/2002 14,476 13,824 13,533 14,912
08/31/2002 14,995 14,321 13,807 15,247
09/30/2002 15,023 14,347 13,931 15,575
10/31/2002 14,933 14,261 13,832 15,426
11/30/2002 15,247 14,561 14,031 15,435
12/31/2002 15,814 15,103 14,358 15,844
01/31/2003 16,084 15,360 14,453 15,843
02/28/2003 16,433 15,694 14,696 16,125
03/31/2003 16,513 15,770 14,721 16,104
04/30/2003 17,078 16,310 15,019 16,277
05/31/2003 17,926 17,119 15,412 16,739
06/30/2003 18,012 17,201 15,432 16,672
07/31/2003 17,152 16,380 14,906 15,973
08/31/2003 17,235 16,459 15,024 16,079
09/30/2003 18,120 17,307 15,486 16,588
AVERAGE ANNUAL TOTAL RETURNS -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
SINCE FUND
1 YEAR/5/ 5 YEARS/5/ INCEPTION/5/
--------- ---------- ------------
CLASS A/1/
Net Asset Value/2/ 20.62% 9.70% 9.21%
With Maximum Sales Charge/3/ 15.21 8.70 8.47
CLASS B/1/
Net Asset Value/2/ 19.48 8.68 8.20
With CDSC/4/ 14.48 8.40 8.20
CLASS C/1/
Net Asset Value/2/ 19.48 8.68 8.20
With Maximum Sales Charge and CDSC/4/ 17.29 8.47 8.04
CLASS Y/1/
Net Asset Value/2/ 20.91 9.95 9.46
CLASS J/1/
Net Asset Value/2/ 20.02 9.25 8.95
With Sales Charge/4/ 15.83 8.48 8.38
SINCE FUND
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS INCEPTION/6/
Lipper BBB Rated Funds Index 11.16% 5.96% 6.69%
Lehman Bros. Gov/Credit Index 6.51 6.69 7.79
Morningstar Long Term Bond Funds Avg. 9.80 6.18 7.10
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of any dividends and capital
gains. Current returns may be higher or lower than those shown. Class Y, the
successor to the fund's Institutional Class, is only available to certain
institutional investors. Class J shares are not offered for sale in the United
States and are not eligible for sale to U.S. investors.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO AS OF SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
CREDIT QUALITY
Aaa Aa A Baa Ca and Not Rated
---- --- --- ---- ----------------
32.1% 7.7% 7.6% 35.1% 17.5%
AVERAGE QUALITY: Aa
Credit quality is based on bond ratings from Moody's Investors Service
EFFECTIVE MATURITY
1 YEAR 1-5 YEARS 5-10 YEARS 10+ YEARS
------ --------- ---------- ---------
1.1% 25.7% 40.1% 33.1%
AVERAGE EFFECTIVE MATURITY: 10.9 YEARS
See page 3 for information on the possible risks associated with an investment
in this fund and descriptions of the fund's indexes.
NOTES TO CHARTS
/1/ Returns shown in the chart reflect performance of the fund's Retail Class
shares (inception: 12/31/96), which were converted to Class A shares on
9/12/03. Retail Class shares were not outstanding from December 18, 2000
until January 31, 2002; Institutional Class performance is shown for the
intervening period, adjusted to reflect the higher expenses paid by Class A
shares. The restatement of the fund's performance to reflect Class A
expenses is based on the net expenses of the Class after taking into effect
the fund's current expense cap arrangements. For periods prior to the
inception of Class B and C shares (9/12/03), performance is based on prior
Institutional Class performance, restated to reflect the loads and expenses
of Class B and C shares, respectively. Class Y performance has been
restated to reflect the net expenses of the Institutional Class after
taking into effect the fund's current expense cap arrangements. For periods
prior to the inception of Class J shares (5/24/99), performance is based on
prior Institutional Class performance, restated to reflect the load and
expenses of Class J shares. The growth of $10,000 chart reflects the
performance of Class A shares rather than Class Y shares, because Class A
shares include the highest sales charge. Prior to September 12, 2003, the
fund (except Class J) was offered without a sales charge.
/2/ Does not include a sales charge.
/3/ Includes maximum sales charge of 4.50%.
/4/ Performance for Class B shares assumes a maximum 5.00% contingent deferred
sales charge ("CDSC") applied when you sell shares. Class C share
performance assumes a 1.00% sales charge and a 1.00% CDSC applied when you
sell shares within one year of purchase. Performance for Class J shares
assumes a 3.50% sales charge.
/5/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/6/ The since-inception performance comparisons shown for each Class of fund
shares are calculated from 12/31/96.
2
FUND RISKS AND INDEX DEFINITIONS
The views expressed in this report reflect those of the portfolio managers as of
the dates indicated. The managers' views are subject to change at any time
without notice based on changes in market or other conditions. References to
specific securities or industries should not be regarded as investment advice.
Because the fund is actively managed, there is no assurance that it will
continue to invest in the securities or industries mentioned.
Any mutual fund investment involves risk. The following notes describe some of
the risks of the Loomis Sayles Investment Grade Bond Fund discussed in this
report. These risks may affect the value of your investment. See the fund's
prospectus for details.
THE FUND
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
The fund invests primarily in investment-grade fixed-income securities (those
rated BBB or higher by Standard & Poor's Rating Group or Baa or higher by
Moody's Investors Service), or unrated securities deemed to be of comparable
quality by Loomis Sayles. The fund may also invest up to 10% of its assets in
lower-rated, fixed-income securities. Effective December 17, 2003, the fund may
no longer invest in any equity securities.
THE RISKS
Changes in interest rates can affect the value of fund shares. The value of
fixed-income securities generally goes down when interest rates rise and goes up
when rates decline.
Lower-quality bonds offer higher yields than high-quality bonds in return for
more risks. These risks include a greater risk of default than higher-quality
issues and a greater risk of loss of principal.
Mortgage securities are subject to prepayment risks; when mortgages underlying
the security are prepaid or refinanced, the fund's income stream may change.
Securities issued by Fannie Mae or Freddie Mac are not issued or guaranteed by
the U.S. government.
U.S. government and Treasury securities are guaranteed if held to maturity, but
mutual funds that invest in these securities are not guaranteed. The value of
fund shares will fluctuate and you may have a gain or a loss when you sell your
shares.
U.S. government agency securities issued by Fannie Mae or Freddie Mac are not
guaranteed by the U.S. government.
Foreign and emerging-market securities have special risks, including risks
resulting from political unrest, currency fluctuations and different regulatory
requirements or accounting standards. Emerging markets may be more subject to
these risks than developed markets.
INDEX/AVERAGE DEFINITIONS:
The Lehman Brothers Government/Credit Index is an unmanaged list of publicly
traded bonds, including U.S. government bonds, Treasury securities and corporate
bonds.
Morningstar Long-Term Bond Funds Average is the average performance
without sales charges of funds with similar investment objectives as calculated
by Morningstar, Inc.
Lipper BBB Rated Funds Index is the average performance without sales charges of
funds with similar investment objectives as calculated by Lipper Inc.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
3
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- SCHEDULE OF INVESTMENTS
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- --------------------------------------------------------------------------------
BONDS AND NOTES -- 98.2% OF TOTAL NET ASSETS
NON -- CONVERTIBLE BONDS -- 95.0%
AEROSPACE/DEFENSE -- 1.8%
$ 5,500,000 Raytheon Co., 6.400%, 12/15/18 .................... $ 5,965,900
250,000 Raytheon Co., 7.200%, 8/15/27 ..................... 282,550
145,000 Raytheon Co., 7.375%, 7/15/25 ..................... 155,142
------------
6,403,592
------------
AIRLINES -- 2.3%
640,402 American Airlines, Inc., 6.978%, 4/01/11 .......... 635,518
1,000,000 American Airlines, Inc., Class B, 8.608%, 4/01/11 . 784,161
2,095,103 Continental Airlines, Inc., 6.703%, 12/15/22 ...... 2,036,871
173,368 Continental Airlines, Inc.,
Series 1998-1A, 6.648%, 9/15/17 ................... 165,362
737,765 Continental Airlines, Inc.,
Series 1999-1A, 6.545%, 2/02/19 ................... 722,365
401,103 Continental Airlines, Inc.,
Series 1999-2, 7.256%, 3/15/20 .................... 394,855
1,973,716 Continental Airlines, Inc.,
Series 2000-2, 7.707%, 10/02/22 ................... 1,923,907
650,000 Delta Air Lines, Inc., 8.300%, 12/15/29 ........... 419,250
877,946 US Airways, 6.850%, 1/30/18 ....................... 822,187
------------
7,904,476
------------
ASSET-BACKED SECURITIES -- 0.9%
1,492,366 Community Program Loan Trust,
Series 1987-A, Class A4, 4.500%, 10/01/18 ......... 1,513,968
1,700,000 Community Program Loan Trust,
Series 1987-A, Class A5, 4.500%, 4/01/29 .......... 1,483,671
------------
2,997,639
------------
AUTOMOTIVE -- 4.7%
375,000 Cummins Engine Co., Inc., 7.125%, 3/01/28 ......... 341,719
3,150,000 Delphi Automotive Systems Corp.,
7.125%, 5/01/29 ................................... 3,072,063
2,500,000 Ford Motor Co., 6.375%, 2/01/29 ................... 2,036,220
600,000 Ford Motor Credit Co., 7.250%, 2/22/05 (GBP) ...... 1,017,067
700,000 Ford Motor Credit Co., 7.375%, 10/28/09 ........... 746,132
1,500,000 General Motors Acceptance Corp.,
6.875%, 9/15/11 (GBP) ............................. 1,557,004
3,000,000 General Motors Acceptance Corp.,
7.000%, 12/07/05 (GBP) ............................ 5,123,236
3,050,000 General Motors Acceptance Corp.,
7.500%, 12/01/06 (NZD) ............................ 1,818,832
700,000 General Motors Corp., 6.750%, 5/01/28 ............. 613,898
------------
16,326,171
------------
BANKING -- 0.1%
100,000 Key Bank NA, 6.950%, 2/01/28 ...................... 109,213
250,000 Keycorp Capital III, 7.750%, 7/15/29 .............. 294,548
------------
403,761
------------
CHEMICALS -- 0.1%
500,000 IMC Global, Inc., 7.300%, 1/15/28 ................. 360,000
------------
CONSUMER PRODUCTS -- 0.0%
150,000 Bausch & Lomb, Inc., 7.125%, 8/01/28 .............. 148,500
------------
ELECTRIC -- 5.2%
2,750,000 Constellation Energy Group, Inc.,
4.550%, 6/15/15 ................................... 2,555,762
5,000,000 Empresa Nacional de Electricidad SA (Endesa),
7.875%, 2/01/27 ................................... 4,345,915
1,000,000 Empresa Nacional de Electricidad SA (Endesa),
8.350%, 8/01/13 144A .............................. 1,062,480
500,000 Enersis SA, 6.900%, 12/01/06 ...................... 516,644
4,000,000 Enersis SA, 7.400%, 12/01/16 ...................... 3,759,520
1,500,000 MidAmerican Energy Holdings Co.,
5.875%, 10/01/12 .................................. 1,586,308
47,625 Quezon Power Philippines Co.,
8.860%, 6/15/17 ................................... 40,481
3,950,000 Tenaga Nasional Berhad,
7.500%, 11/01/25 144A ............................. 4,220,998
------------
18,088,108
------------
ELECTRONICS -- 2.2%
500,000 Motorola, Inc., 5.800%, 10/15/08 .................. 530,625
900,000 Motorola, Inc., 6.500%, 11/15/28 .................. 867,375
250,000 Motorola, Inc., 6.750%, 2/01/06 ................... 270,313
625,000 Motorola, Inc., 7.625%, 11/15/10 .................. 712,500
1,625,000 Motorola, Inc., 8.000%, 11/01/11 .................. 1,876,875
3,115,000 Samsung Electronics Co. Ltd.,
7.700%, 10/01/27 144A ............................. 3,414,320
------------
7,672,008
------------
ENTERTAINMENT -- 1.1%
3,840,000 Time Warner, Inc., 6.625%, 5/15/29 ................ 3,905,407
------------
FINANCIAL SERVICES -- 0.2%
950,000 GMAC International Finance BV,
8.000%, 3/14/07 (NZD) ............................. 565,992
------------
FOREIGN AGENCIES -- 0.1%
220,000 Alberta Municipal Funding Corp.,
5.700%, 9/01/11 (CAD) ............................. 174,412
------------
FOREIGN LOCAL GOVERNMENTS -- 8.5%
19,100,000 Kommunekredit, 5.000%, 6/07/06 (NOK) .............. 2,785,528
75,000 New Brunswick FM Project, 6.470%, 11/30/27 (CAD) .. 61,537
39,111 Province of Alberta, 5.930%, 9/16/16 (CAD) ........ 31,308
6,600,000 Province of British Columbia,
Zero Coupon Bond, 6/09/14 (CAD) ................... 2,809,635
2,250,000 Province of British Columbia,
Zero Coupon Bond, 9/05/20 (CAD) ................... 630,020
605,000 Province of British Columbia,
Zero Coupon Bond, 8/19/22 (CAD) ................... 149,238
725,000 Province of British Columbia,
Zero Coupon Bond, 11/19/27 (CAD) .................. 130,955
3,275,000 Province of British Columbia, 6.250%, 12/01/09
(CAD) ............................................ 2,681,386
5,445,000 Province of Manitoba, 5.750%, 6/02/08 (CAD) ....... 4,346,366
25,000 Province of Manitoba, 6.500%, 9/22/17 (CAD)........ 21,089
55,000 Province of Manitoba, 7.750%, 12/22/25 (CAD) ...... 52,059
5,000,000 Province of Manitoba (Certificate of Deposit),
Zero Coupon Bond, 7/22/13 (CAD) .................. 2,227,227
500,000 Province of Nova Scotia, 6.600%, 6/01/27 (CAD) .... 417,178
2,000,000 Province of Ontario,
Zero Coupon Bond, 7/13/22 (CAD) ................... 497,657
1,780,000 Province of Ontario,
Zero Coupon Bond, 6/02/27 (CAD) ................... 340,517
4,050,000 Province of Ontario, 5.900%, 3/08/06 (CAD) ........ 3,186,244
6,600,000 Province of Saskatchewan,
Zero Coupon Bond, 4/10/14 (CAD) ................... 2,835,579
7,500,000 Province of Saskatchewan,
4.750%, 12/01/06 (CAD) ............................ 5,771,422
350,000 Province of Saskatchewan,
5.750%, 3/05/29 (CAD) ............................. 264,975
650,000 Province of Saskatchewan (Certificate of Deposit),
Zero Coupon Bond, 2/04/22 (CAD) ................... 168,056
215,000 Province of Saskatchewan (Certificate of Deposit),
Zero Coupon Bond, 5/30/25 (CAD) ................... 45,442
------------
29,453,418
------------
See accompanying notes to financial statements.
4
LOOMIS SAYLES INVESTMENT GRADE BOND FUND --
SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- --------------------------------------------------------------------------------
GOVERNMENT AGENCIES -- 16.9%
$ 9,300,000 Federal Home Loan Mortgage Corp.,
4.625%, 2/15/07 (EUR) ............................. $ 11,387,426
9,250,000 Federal Home Loan Mortgage Corp.,
5.500%, 9/15/11 ................................... 10,128,102
7,500,000 Federal Home Loan Mortgage Corp.,
5.750%, 1/15/12 ................................... 8,327,460
700,000 Federal National Mortgage Association,
Zero Coupon Bond, 10/29/07 (NZD) .................. 328,543
1,000,000 Federal National Mortgage Association,
4.250%, 7/15/07 ................................... 1,057,608
3,950,000 Federal National Mortgage Association,
5.250%, 1/15/09 ................................... 4,323,808
1,850,000 Federal National Mortgage Association,
5.375%, 11/15/11 .................................. 2,008,950
17,450,000 Federal National Mortgage Association,
5.500%, 3/15/11 ................................... 19,161,077
2,500,000 Federal National Mortgage Association,
6.375%, 8/15/07 (AUD) ............................. 1,783,694
------------
58,506,668
------------
HEALTHCARE -- 2.5%
2,625,000 Columbia/HCA Healthcare Corp.,
7.050%, 12/01/27 .................................. 2,544,856
250,000 Columbia/HCA Healthcare Corp.,
7.500%, 12/15/23 .................................. 253,610
620,000 Columbia/HCA Healthcare Corp.,
7.580%, 9/15/25 ................................... 635,412
1,000,000 Columbia/HCA Healthcare Corp.,
7.750%, 7/15/36 ................................... 1,043,022
800,000 HCA, Inc., 6.250%, 2/15/13 ........................ 811,242
3,250,000 HCA, Inc., 6.300%, 10/01/12 ....................... 3,312,478
------------
8,600,620
------------
HOME CONSTRUCTION -- 0.1%
250,000 Pulte Homes, Inc., 6.250%, 2/15/13 ................ 268,201
25,000 Pulte Homes, Inc., 6.375%, 5/15/33 ................ 23,988
------------
292,189
------------
INDEPENDENT/ENERGY -- 0.5%
500,000 Devon Financing Corp. LLC, 7.875%, 9/30/31 ........ 612,171
1,040,000 Pioneer Natural Resources Co., 7.200%, 1/15/28 .... 1,097,200
------------
1,709,371
------------
INFORMATION/DATA TECHNOLOGY -- 0.7%
2,500,000 Arrow Electronics, Inc., 6.875%, 7/01/13 .......... 2,523,440
------------
INTEGRATED/ENERGY -- 0.3%
150,000 Cerro Negro Finance Ltd.,
7.900%, 12/01/20 144A ............................. 117,000
100,000 PDVSA Finance Ltd., 7.400%, 8/15/16 ............... 77,500
200,000 PDVSA Finance Ltd., 7.500%, 11/15/28 .............. 150,000
200,000 Petrozuata Finance, Inc., 8.220%, 4/01/17 144A .... 171,000
400,000 Repsol International Finance Bv, 5.750%, 12/04/06
(EUR) ............................................. 498,925
------------
1,014,425
------------
LIFE INSURANCE -- 1.9%
1,500,000 Provident Companies, Inc., 7.250%, 3/15/28 ........ 1,486,863
2,175,000 UnumProvident Corp., 6.750%, 12/15/28 ............. 2,153,250
3,000,000 UnumProvident Corp., 7.375%, 6/15/32 .............. 3,000,000
------------
6,640,113
------------
MEDIA CABLE -- 1.4%
3,750,000 Cox Communications, Inc. Class A, 6.750%, 3/15/11 . 4,256,250
500,000 Cox Communications, Inc. Class A, 6.800%, 8/01/28 . 541,042
------------
4,797,292
------------
MEDIA NONCABLE -- 1.0%
2,500,000 Clear Channel Communications, Inc.,
4.250%, 5/15/09 ................................... 2,529,563
1,000,000 Clear Channel Communications, Inc.,
5.750%, 1/15/13 ................................... 1,061,176
------------
3,590,739
------------
METALS & MINING -- 0.5%
1,500,000 Teck Cominco Ltd., 7.000%, 9/15/12 ................ 1,577,210
------------
MORTGAGE RELATED -- 1.1%
3,000,000 Bank of America Commercial Mortgage, Inc.,
5.460%, 4/11/37 ................................... 3,223,200
362,280 Federal Home Loan Mortgage Corp.,
5.000%, 12/01/31 .................................. 362,446
138,070 Federal National Mortgage Association,
6.000%, 7/01/29 ................................... 142,842
------------
3,728,488
------------
NON CAPTIVE CONSUMER -- 0.3%
1,000,000 Capital One Bank, 6.700%, 5/15/08 ................. 1,105,367
------------
OIL FIELD SERVICES -- 0.9%
250,000 Ensco International, Inc., 6.750%, 11/15/07 ....... 279,645
250,000 Ensco International, Inc., 7.200%, 11/15/27 ....... 283,200
250,000 Global Marine, Inc., 7.000%, 6/01/28 .............. 282,292
665,000 Pecom Energia SA, 8.125%, 7/15/10 144A ............ 626,763
600,000 Transocean Sedco Forex, Inc., 7.375%, 4/15/18 ..... 715,827
750,000 Transocean Sedco Forex, Inc., 7.500%, 4/15/31 ..... 876,844
------------
3,064,571
------------
PAPER -- 2.6%
500,000 Boise Cascade Corp., 7.350%, 2/01/16 .............. 514,640
1,000,000 Boise Cascade Corp., Series A, 7.450%, 8/10/11 .... 1,036,446
2,225,000 Georgia-Pacific Group, 7.375%, 12/01/25 ........... 1,969,125
2,570,000 Georgia-Pacific Group, 7.750%, 11/15/29 ........... 2,329,062
400,000 Weyerhaeuser Co., 6.750%, 3/15/12 ................. 444,995
500,000 Weyerhaeuser Co., 6.950%, 10/01/27 ................ 530,939
1,000,000 Weyerhaeuser Co., 7.125%, 7/15/23 ................. 1,066,574
1,000,000 Weyerhaeuser Co., 7.375%, 3/15/32 ................. 1,116,323
------------
9,008,104
------------
PIPELINES -- 2.4%
2,425,000 Coastal Corp., 6.950%, 6/01/28 .................... 1,655,063
2,200,000 El Paso Corp., 5.750%, 3/14/06 .................... 2,229,714
375,000 El Paso Corp., 7.000%, 5/15/11 .................... 309,375
1,150,000 El Paso Energy Corp., 6.750%, 5/15/09 ............. 960,250
1,000,000 KN Capital Trust, 7.630%, 4/15/28 ................. 1,106,426
750,000 Southern Natural Gas Co., 7.350%, 2/15/31 ......... 690,000
700,000 Tennessee Gas Pipeline Co., 7.000%, 10/15/28 ...... 607,250
815,000 Tennessee Gas Pipeline Co., 7.500%, 4/01/17 ....... 778,325
------------
8,336,403
------------
PROPERTY & CASUALTY INSURANCE -- 0.3%
1,000,000 Aon Corp., 7.375%, 12/14/12 ....................... 1,158,990
------------
RAILROADS -- 1.2%
5,000,000 Canadian Pacific Railway Ltd., 4.900%, 6/15/10
(CAD) ............................................. 3,691,787
39,000 Missouri Pacific Railroad Co., 4.250%, 1/01/05 .... 40,006
195,000 Missouri Pacific Railroad Co., 4.750%, 1/01/20 .... 153,668
208,000 Missouri Pacific Railroad Co., 4.750%, 1/01/30 .... 161,233
50,000 Missouri Pacific Railroad Co., 5.000%, 1/01/45 .... 34,125
------------
4,080,819
------------
REAL ESTATE INVESTMENT TRUSTS -- 1.9%
1,000,000 EOP Operating LP, 6.750%, 2/15/12 ................. 1,121,527
100,000 First Industrial LP, 7.500%, 12/01/17 ............. 114,245
150,000 First Industrial LP, 7.600%, 7/15/28 .............. 160,204
See accompanying notes to financial statements.
5
LOOMIS SAYLES INVESTMENT GRADE BOND FUND --
SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
PRINCIPAL
AMOUNT DESCRIPTION VALUE (a)
- --------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS -- CONTINUED
$ 1,075,000 Highwoods Realty LP, 7.500%, 4/15/18 .............. $ 1,109,735
2,370,000 New Plan Excel Realty Trust, 5.875%, 6/15/07 ...... 2,580,003
75,000 Security Capital Industrial Trust, 7.625%,
7/01/17 ........................................... 88,700
1,000,000 Spieker Properties, Inc., 7.350%, 12/01/17 ........ 1,171,564
200,000 TriNet Corporate Realty Trust, Inc., 7.700%,
7/15/17 ........................................... 197,000
------------
6,542,978
------------
REFINING -- 0.0%
100,000 Merey Sweeny LP, 8.850%, 12/18/19 144A ............ 111,707
------------
RETAILERS -- 2.2%
250,000 J.C. Penney Co., Inc., 6.875%, 10/15/15 ........... 246,250
150,000 J.C. Penney Co., Inc., 7.650%, 8/15/16 ............ 156,750
650,000 J.C. Penney Co., Inc., 7.950%, 4/01/17 ............ 685,750
213,000 J.C. Penney Co., Inc., 8.250%, 8/15/22 ............ 219,390
500,000 Lowe's Cos., Inc., 6.500%, 3/15/29 ................ 547,332
4,800,000 Sears Roebuck Acceptance Corp.,
6.500%, 12/01/28 .................................. 4,944,475
95,000 Sears Roebuck Acceptance Corp.,
6.700%, 4/15/12 ................................... 107,751
740,000 Sears Roebuck Acceptance Corp., 6.750%, 8/15/11 ... 840,547
------------
7,748,245
------------
SOVEREIGNS -- 19.0%
3,925,000 Canadian Government, 3.500%, 6/01/04 (CAD). ....... 2,922,953
11,000,000 Canadian Government, 4.500%, 9/01/07 (CAD). ....... 8,428,190
9,600,000 Canadian Government, 5.500%, 6/01/10 (CAD). ....... 7,641,055
2,825,000 Canadian Government, 6.000%, 9/01/05 (CAD). ....... 2,211,650
5,150,000 Government of New Zealand, 6.000%, 11/15/11 (NZD) . 3,106,106
55,815,000 Government of Sweden, 5.250%, 3/15/11 (SEK) ....... 7,656,872
62,150,000 Kingdom of Norway, 6.750%, 1/15/07 (NOK) .......... 9,617,255
3,670,000 Petroleos Mexicanos, 8.625%, 12/01/23 144A ........ 4,046,175
2,728,727 PF Export Receivables Master Trust,
6.436%, 6/01/15 144A .............................. 2,729,055
10,000 Republic of Brazil, 10.125%, 5/15/27 .............. 8,940
250,000 Republic of Brazil, 11.000%, 8/17/40 .............. 236,250
1,847,113 Republic of Brazil C Bond, 8.000%, 4/15/14 ........ 1,697,127
250,000 Republic of Peru, 4.500%, 3/07/17
(step to 5.000% on 3/07/05) (b) ................... 218,125
500,000 Republic of South Africa, 5.250%, 5/16/13 (EUR) ... 567,913
200,000 Republic of South Africa, 8.500%, 6/23/17 ......... 240,000
48,625,000 Republic of South Africa, 10.000%, 2/28/08 (ZAR) .. 7,318,361
150,000 Republic of South Africa, 12.500%, 12/21/06 (ZAR) . 23,564
1,725,000 Republic of South Africa, 13.000%, 8/31/10 (ZAR) .. 294,687
100,000 Republic of Venezuela, 9.250%, 9/15/27 ............ 77,400
1,000,000 South Australia Government Finance Authority,
Zero Coupon Bond, 12/21/15 (AUD) .................. 350,957
2,500,000 United Mexican States, 5.375%, 6/10/13 (EUR).. .... 2,852,671
1,500,000 United Mexican States, 7.500%, 1/14/12 ............ 1,696,500
750,000 United Mexican States, 8.300%, 8/15/31 ............ 851,625
900,000 United Mexican States, 8.375%, 1/14/11 ............ 1,071,000
------------
65,864,431
------------
SUPRANATIONAL -- 1.7%
2,431,270 Eagle Bonds One, 9.956%, 7/31/12 (ZAR) ............ 340,158
8,280,000 European Bank for Reconstruction & Development,
Zero Coupon Bond, 2/10/28 (AUD) ................... 1,323,436
2,585,000 International Bank for Reconstruction &
Development, Zero Coupon Bond, 8/20/07 (NZD) ...... 1,225,434
1,000,000 International Bank for Reconstruction &
Development, 5.500%, 11/03/08 (NZD) ............... 582,309
4,045,000 International Bank for Reconstruction &
Development, 8.000%, 5/23/07 (NZD) ................ 2,561,152
------------
6,032,489
------------
TEXTILE -- 0.0%
25,000 Kellwood Co., 7.625%, 10/15/17 .................... 25,375
------------
TOBACCO -- 0.1%
375,000 Loews Corp., 7.000%, 10/15/23 ..................... 378,581
------------
TRANSPORTATION SERVICES -- 0.6%
510,214 Atlas Air Worldwide Holdings, Inc., 7.200%,
1/02/19 ........................................... 477,516
635,513 Atlas Air, Inc., Series A, 7.380%, 1/02/18 ........ 594,751
1,000,000 ERAC USA Finance Co., 6.800%, 2/15/08 144A ........ 1,123,549
------------
2,195,816
------------
TREASURIES -- 2.9%
3,215,000 U.S. Treasury Bonds, 5.250%, 11/15/28 ............. 3,330,791
1,100,000 U.S. Treasury Bonds, 5.500%, 8/15/28 .............. 1,178,289
4,900,000 U.S. Treasury Notes, 5.750%, 8/15/10 .............. 5,609,927
------------
10,119,007
------------
WIRELESS -- 1.1%
1,025,000 AT&T Wireless Services, Inc., 8.125%, 5/01/12 ..... 1,217,007
2,000,000 INTELSAT, 7.625%, 4/15/12 ......................... 2,201,902
450,000 Nextel Communications, Inc., 9.375%, 11/15/09 ..... 488,250
------------
3,907,159
------------
WIRELINES -- 3.7%
3,220,000 AT&T Corp., 6.500%, 11/21/06 (EUR) ................ 4,041,852
1,400,000 Philippine Long Distance Telephone Co.,
8.350%, 3/06/17 (c) ............................... 1,215,838
1,045,000 Sprint Capital Corp., 6.125%, 11/15/08 ............ 1,128,117
3,400,000 Sprint Capital Corp., 6.875%, 11/15/28 ............ 3,315,616
500,000 Sprint Capital Corp., 6.900%, 5/01/19 ............. 512,611
1,000,000 Telekom Malaysia Berhad, 7.875%, 8/01/25 144A (c) . 1,116,308
250,000 US West Capital Funding, Inc., 6.500%, 11/15/18 ... 196,250
1,650,000 US West Capital Funding, Inc., 6.875%, 7/15/28 .... 1,303,500
------------
12,830,092
------------
Total Non-Convertible Bonds
(Identified Cost $301,499,810) .................... 329,894,173
------------
CONVERTIBLE BONDS -- 3.2%
ELECTRONICS -- 1.7%
5,650,000 Analog Devices, Inc., 4.750%, 10/01/05 ............ 5,748,875
------------
INDEPENDENT/ENERGY -- 0.7%
500,000 Devon Energy Corp., 4.900%, 8/15/08 ............... 508,750
1,750,000 Devon Energy Corp., 4.950%, 8/15/08 ............... 1,780,625
------------
2,289,375
------------
INDUSTRIAL OTHER -- 0.0%
23,000 MascoTech, Inc., 4.500%, 12/15/03 ................. 22,540
------------
TOBACCO -- 0.8%
3,040,000 Loews Corp., 3.125%, 9/15/07 ...................... 2,800,600
------------
WIRELINES -- 0.0%
90,000 Telus Corp., 6.750%, 6/15/10 (CAD) ................ 68,290
------------
Total Convertible Bonds
(Identified Cost $10,517,757) ..................... 10,929,680
------------
Total Bonds and Notes
(Identified Cost $312,017,567) .................... 340,823,853
------------
See accompanying notes to financial statements.
6
LOOMIS SAYLES INVESTMENT GRADE BOND FUND --
SCHEDULE OF INVESTMENTS (continued)
Investments as of September 30, 2003
SHARES DESCRIPTION VALUE (a)
- --------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.0% OF NET ASSETS
NON-CONVERTIBLE PREFERRED STOCKS -- 0.0%
UTILITIES -- ELECTRIC -- 0.0%
500 Pacific Gas & Electric Co., Series C,
5.000% (d) ..................................... $ 11,600
100 Pacific Gas & Electric Co., Series H,
4.500% (d) ..................................... 2,225
-------------
13,825
-------------
Total Non-Convertible Preferred Stocks
(Identified Cost $11,170) ...................... 13,825
-------------
Total Preferred Stocks
(Identified Cost $11,170) ...................... 13,825
-------------
Total Investments -- 98.2%
(Identified Cost $312,028,737) (c) ............. 340,837,678
Cash and Other Assets, Less Liabilities -- 1.8%. 6,348,536
-------------
Net Assets -- 100% ............................. $ 347,186,214
=============
(a) See Note 2a of Notes to Financial Statements.
(b) Step Bond: Coupon is zero or below market rate
for an initial period and then increases at a
specified date and rate.
(c) Federal Tax Information:
At September 30, 2003,the net unrealized
appreciation on investments based on cost of
$ 312,460,323 for federal income tax purposes was
as follows:
Aggregate gross unrealized appreciation for all
securities in which there is an excess of value
over tax cost and aggregate gross unrealized
depreciation for all securities in which there is
an excess of tax cost over value were
$ 31,692,885 and $ 3,315,530, respectively,
resulting in net unrealized appreciation of
$ 28,377,355.
(d) Non-income producing security due to default of
bankruptcy filing.
Key to Abbreviations: AUD: Australian Dollar;
CAD: Canadian Dollar; EUR: Euro; GBP: Great
British Pound; NOK: Norwegian Krone; NZD:
New Zealand Dollar; SEK: Swedish Krona; USD:
United States Dollar; ZAR: South African Rand
144A Securities exempt from registration under Rule
144A of the Securities Act of 1933. These
securities may be resold in transactions exempt
from registration, normally to qualified
institutional buyers.
See accompanying notes to financial statements.
7
STATEMENT OF ASSETS & LIABILITIES
For the Year Ended September 30, 2003
ASSETS
Investments at value (Indentified cost $312,028,737) ........ $ 340,837,678
Cash ........................................................ 752,090
Receivable for Fund shares sold ............................. 1,002,682
Receivable for securities sold .............................. 552,957
Dividends and interest receivable ........................... 6,171,651
--------------
TOTAL ASSETS ............................................ 349,317,058
--------------
LIABILITIES
Payable for securities purchased ............................ 783,544
Payable for Fund shares redeemed ............................ 1,109,637
Management fees payable ..................................... 134,672
Trustees' fees payable ...................................... 4,011
Deferred Trustees' fees ..................................... 1,142
Administrative fees payable ................................. 11,005
Service and distribution fees payable ....................... 6,873
Transfer agent fees payable ................................. 30,909
Other accounts payable and accrued expenses ................. 49,051
--------------
TOTAL LIABILITIES ....................................... 2,130,844
--------------
NET ASSETS .................................................... $ 347,186,214
==============
NET ASSETS CONSIST OF:
Capital paid in ............................................. $ 314,838,642
Undistributed net investment income ......................... 2,131,587
Accumulated net realized gain (loss) ........................ 1,337,011
Unrealized appreciation (depreciation) on:
Investments, net ........................................ 28,808,941
Foreign currency translations, net ...................... 70,033
--------------
NET ASSETS .................................................... $ 347,186,214
==============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
CLASS A SHARES:
Net assets .............................................. $ 1,128,007
==============
Shares of beneficial interest ........................... 97,748
==============
Net asset value and redemption price per share .......... $ 11.54
==============
Offering price per share ................................ $ 12.08
==============
CLASS B SHARES: (redemption price is equal to net asset
value less any applicable contingent deferred sales
charges)
Net assets .............................................. $ 159,637
==============
Shares of beneficial interest ........................... 13,845
==============
Net asset value and redemption price per share .............. $ 11.53
==============
CLASS C SHARES: (redemption price is equal to net asset
value less any applicable contingent deferred sales
charges)
Net assets .............................................. $ 2,571
==============
Shares of beneficial interest ........................... 223
==============
Net asset value per share ............................... $ 11.53
==============
Offering price per share ................................ $ 11.65
==============
CLASS Y SHARES:
Net assets .............................................. $ 10,229,726
==============
Shares of beneficial interest ........................... 886,099
==============
Net asset value, offering and redemption price per
share .................................................. $ 11.54
==============
CLASS J SHARES:
Net assets .............................................. $ 335,666,273
==============
Shares of beneficial interest ........................... 29,110,600
==============
Net asset value and redemption price per share .......... $ 11.53
==============
Offering price per share ................................ $ 11.95
==============
See accompanying notes to financial statements.
8
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2003
INVESTMENT INCOME
Dividends (Net of foreign taxes of $12,384) ................. $ 449,891
Interest .................................................... 16,180,110
--------------
Total income ................................................ 16,630,001
--------------
Expenses
Management fees ........................................... 1,092,528
Service and distribution fees-Class A ..................... 743
Service and distribution fees-Class B ..................... 20
Service and distribution fees-Class C ..................... 1
12b-1 fees-Class J ........................................ 1,322,275
12b-1 fees-Admin Class .................................... 18
Shareholder service fees-Class J .......................... 661,138
Shareholder service fees-Admin Class ...................... 18
Trustees' fees and expenses ............................... 9,869
Administrative fees ....................................... 95,594
Custodian and accounting fees ............................. 200,789
Transfer agent fees - Class A ............................. 10,104
Transfer agent fees - Class B ............................. 116
Transfer agent fees - Class C ............................. 6
Transfer agent fees - Class Y ............................. 20,683
Transfer agent fees - Class J ............................. 11,636
Transfer agent fees - Admin Class ......................... 6,466
Audit and Tax fees ........................................ 97,830
Registration fees ......................................... 46,112
Printing fees ............................................. 131,368
Legal fees ................................................ 18,396
Other expenses ............................................ 10,941
--------------
Total expenses .............................................. 3,736,651
Less expenses waived and reimbursed by the investment
adviser .................................................. (250,211)
--------------
Net expenses ................................................ 3,486,440
--------------
Net investment income ....................................... 13,143,561
--------------
NET REALIZED GAIN (LOSS) ON:
Investments ................................................. 7,050,462
Foreign currency transactions ............................... 250,889
--------------
Total net realized gain (loss) .............................. 7,301,351
--------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments, net ............................................ 26,487,027
Foreign currency translations, net .......................... 38,239
--------------
Total net change in unrealized appreciation (depreciation) .. 26,525,266
--------------
Total net realized gain (loss) and change in unrealized
appreciation (depreciation) ................................ 33,826,617
--------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ......... $ 46,970,178
==============
See accompanying notes to financial statements.
9
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002
------------- -------------
FROM OPERATIONS:
Net investment income .............................. $ 13,143,561 $ 8,390,429
Net realized gain (loss) ........................... 7,301,351 (330,754)
Net change in unrealized appreciation (depreciation) 26,525,266 2,156,053
------------- -------------
Increase (decrease) in net assets resulting from
operations ........................................ 46,970,178 10,215,728
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A ............................................ (14,107) (385)
Class Y ............................................ (479,608) (428,470)
Class J ............................................ (12,943,344) (7,046,653)
Admin Class* (407) (371)
Capital gains:
Class A ............................................ (9,934) --
Class Y ............................................ (100,475) (17,492)
Class J ............................................ (3,952,008) (218,434)
------------- -------------
(17,499,883) (7,711,805)
INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARES TRANSACTIONS .................... 98,715,417 116,377,819
------------- -------------
Total increase (decrease) in net assets ............ 128,185,712 118,881,742
NET ASSETS
Beginning of period ................................ 219,000,502 100,118,760
------------- -------------
End of period ...................................... $ 347,186,214 $ 219,000,502
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME .................. $ 2,131,587 $ 998,322
============= =============
*On May 21, 2003, all outstanding Admin Class shares were automatically
converted into Retail Class shares
See accompanying notes to financial statements.
10
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ -------------------------------------------
NET ASSET
VALUE, NET REALIZED DIVIDENDS DISTRIBUTIONS
BEGINNING NET AND UNREALIZED TOTAL FROM FROM FROM NET
OF INVESTMENT GAIN (LOSS) ON INVESTMENT NET INVESTMENT REALIZED TOTAL
THE PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
---------- ---------- -------------- ---------- ------------- ------------- -------------
CLASS A
9/30/2003 $ 10.23 $ 0.58(d) $ 1.46 $ 2.04 $ (0.59) $ (0.14) $ (0.73)
9/30/2002(f)(h) 10.18 0.39(d) 0.04 0.43 (0.38) -- (0.38)
12/18/2000(i) 9.91 0.13(d) 0.24 0.37 (0.14) -- (0.14)
9/30/2000 9.95 0.71(d) (0.05) 0.66 (0.70) -- (0.70)
9/30/1999 10.27 0.64 (0.03) 0.61 (0.67) (0.26) (0.93)
9/30/1998(k) 10.59 0.48 (0.49) (0.01) (0.31) -- (0.31)
12/31/1997(l) 10.00 0.62(d) 0.78 1.40 (0.69) (0.12) (0.81)
CLASS B
9/30/2003(g) 11.21 0.02(d) 0.30 0.32 -- -- --
CLASS C
9/30/2003(g) 11.21 0.02(d) 0.30 0.32 -- -- --
CLASS Y
9/30/2003 10.23 0.61(d) 1.46 2.07 (0.62) (0.14) (0.76)
9/30/2002(f) 10.09 0.62(d) 0.09 0.71 (0.55) (0.02) (0.57)
9/30/2001 9.92 0.65(d) 0.18 0.83 (0.66) -- (0.66)
9/30/2000 9.96 0.73(d) (0.05) 0.68 (0.72) -- (0.72)
9/30/1999 10.28 0.76 (0.12) 0.64 (0.70) (0.26) (0.96)
CLASS J
9/30/2003 10.22 0.52(d) 1.47 1.99 (0.54) (0.14) (0.68)
9/30/2002(f) 10.09 0.54(d) 0.09 0.63 (0.48) (0.02) (0.50)
9/30/2001 9.91 0.57(d) 0.19 0.76 (0.58) -- (0.58)
9/30/2000 9.95 0.65(d) (0.04) 0.61 (0.65) -- (0.65)
9/30/1999(j) 10.29 0.21 (0.36) (0.15) (0.19) -- (0.19)
(a) Total return would have been lower had the adviser not reduced its advisory
fees and/or borne other operating expenses. Periods less than one year are
not annualized.
(b) The adviser has agreed to reimburse a portion of the Fund's expenses during
the period. Without this reimbursement the Fund's ratio of operating
expenses would have been higher.
(c) Annualized for periods less than one year.
(d) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
(e) A sales charge for Class A, Class C and Class J and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations.
(f) As required, effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide, Audits of Investment Companies,
and began amortizing premium on debt securities for financial statement
purposes only. For the year ended September 30, 2002, the effect of this
change per share for Class A, Class Y and Class J net investment income and
net realized and unrealized gain (loss) was less than $0.01. The ratio of
net investment income to average net assets for Class A, Class Y and Class
J decreased from 5.88% to 5.85%, 6.10% to 6.08%, and 5.35% to 5.33%,
respectively, on an annualized basis. Per share ratios and supplemental
data for periods prior to October 1, 2001, have not been restated to
reflect this change in presentation.
(g) From commencement of class operations on September 12, 2003 through
September 30, 2003.
(h) From recommencement of class operations on January 31, 2002 through
September 30, 2002.
(i) For the period from October 1, 2000 through December 18, 2000. Class A,
formerly Retail Class shares, of the Fund were converted into Class Y,
formerly Institutional Class shares, on December 18, 2000.
(j) From commencement of class operations on May 24, 1999 through September 30,
1999.
(k) For the nine months ended September 30, 1998.
(l) From commencement of class operations on January 2, 1997 through December
31, 1997.
See accompanying notes to financial statements.
11
RATIOS TO AVERAGE NET ASSETS:
-------------------------------------
NET ASSET NET ASSETS,
VALUE, TOTAL END OF NET GROSS NET INVESTMENT PORTFOLIO
END OF RETURN THE PERIOD EXPENSES EXPENSES INCOME TURNOVER
THE PERIOD (%) (a) (000) (%)(b)(c) (%)(c) (%)(LOSS) (c) RATE (%)
---------- -------- ----------- --------- -------- -------------- ---------
CLASS A
9/30/2003 $ 11.54 20.6(e) $ 1,128 0.80 4.67 5.21 34
9/30/2002(f)(h) 10.23 4.3 11 0.80 191.59 5.85 39
12/18/2000(i) 10.14 3.8 2,426 0.80 1.91 6.31 1
9/30/2000 9.91 6.9 2,250 0.80 3.01 7.16 23
9/30/1999 9.95 6.2 2,561 0.80 3.20 6.60 42
9/30/1998(k) 10.27 (0.2) 1,743 0.80 5.25 6.43 48
12/31/1997(l) 10.59 14.3 862 0.80 10.95 6.51 112
CLASS B
9/30/2003(g) 11.53 2.85(e) 160 1.70 7.81 5.83 34
CLASS C
9/30/2003(g) 11.53 2.85(e) 3 1.70 7.81 4.35 34
CLASS Y
9/30/2003 11.54 20.9 10,230 0.55 1.34 5.58 34
9/30/2002(f) 10.23 7.2 7,874 0.55 1.13 6.08 39
9/30/2001 10.09 8.6 8,549 0.55 1.36 6.43 15
9/30/2000 9.92 7.2 2,905 0.55 3.23 7.35 23
9/30/1999 9.96 6.5 2,427 0.55 2.87 6.83 42
CLASS J
9/30/2003 11.53 20.0(e) 335,666 1.30 1.36 4.79 34
9/30/2002(f) 10.22 6.4(e) 211,105 1.30 1.55 5.33 39
9/30/2001 10.09 7.9(e) 91,569 1.30 1.71 5.65 15
9/30/2000 9.91 6.4(e) 30,264 1.30 2.97 6.59 23
9/30/1999(j) 9.95 (1.5)(e) 16,307 1.30 2.16 6.11 42
12
NOTES TO FINANCIAL STATEMENTS
For the Year Ended September 30, 2003
1. Organization. Loomis Sayles Funds II (formerly Loomis Sayles Funds) (the
"Trust") is organized as a Massachusetts business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Declaration of Trust permits the Trustees to issue an
unlimited number of shares of the Trust in multiple series (individually, a
"Fund" and collectively, the "Funds"). Information presented in these financial
statements pertains to Loomis Sayles Investment Grade Bond Fund (the "Investment
Grade Bond Fund"). The financial statements for the remaining fixed income funds
and the equity funds of the Trust are presented in separate reports.
On February 5, 3003, the Board of Trustees approved the closing of the Admin
Class of shares of the Fund. On May 21, 2003, all outstanding Admin Class shares
were converted into Retail Class shares having the same aggregate net asset
value as the shares converted.
On May 14, 2003, shareholders of Loomis Sayles Funds I and on June 10, 2003
shareholders of Loomis Sayles Funds II (together, Loomis Sayles Funds I and
Loomis Sayles Funds II comprise the "Loomis Sayles Funds Trusts") approved new
Trustees for the Loomis Sayles Funds Trusts in connection with the integration
of the CDC Nvest Funds Trusts I, II, III, CDC Nvest Companies Trust I, CDC Nvest
Cash Management Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC
Nvest Funds Trusts") and Loomis Sayles Funds Trusts. This approval resulted in a
combined Board of Trustees for the Loomis Sayles Funds Trusts and CDC Nvest
Funds Trusts.
On June 12, 2003, the Trustees of the Trust adopted a load class structure for
Investment Grade Bond Fund authorizing the Fund to offer Class A, Class B, Class
C, Class Y and Class J shares. On September 12, 2003 outstanding Retail Class
shares converted into Class A shares and outstanding Institutional Class shares
converted into Class Y shares. Class A shares are sold with a maximum front end
sales charge of 4.50%. Class B shares do not pay a front end sales charge, but
pay a higher ongoing distribution fee than Class A shares for eight years (at
which point they automatically convert to Class A shares), and are subject to a
contingent deferred sales charge ("CDSC") if those shares are redeemed within
six years of purchase. Class C shares are sold with a maximum front end sales
charge of 1.00%, do not convert to any other class of shares and pay a higher
ongoing distribution fee than Class A shares and may be subject to a CDSC of
1.00% if those shares are redeemed within one year. Class Y shares do not pay a
front end sales charge, a CDSC or distribution fees. Class Y shares are intended
for institutional investors with a minimum initial investment of $1,000,000.
Class J shares are only offered to non-U.S. investors and are sold with a
maximum front end sales charge of 3.50%.
Most expenses of the Trust can be directly attributed to a Fund. Expenses which
can not be directly attributed are apportioned based on the relative net assets
of each of the Funds in the Trust. Expenses of a Fund are borne pro rata by the
holders of each class of shares, except that each class bears expenses unique to
that class (including the Rule 12b-1 service and distribution fees and transfer
agent fees applicable to such class). In addition, each class votes as a class
only with respect to its own Rule 12b-1 Plan. Shares of each class would receive
their pro rata share of the net assets of a Fund, if the Fund were liquidated.
The Trustees approve separate dividends from net investment income on each class
of shares.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by the Fund in preparation of its
financial statements. The Fund's financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America
which require the use of management estimates that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
a. Security Valuation. Debt securities for which market quotations are readily
available are generally valued at market value, as reported by pricing services
recommended by the adviser's pricing committee and approved by the Board of
Trustees. Such pricing services generally use the most recent bid prices in the
principal market in which such securities are normally traded. 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. Equity securities for which market quotations
are readily available are valued at market value, as reported by the adviser's
pricing services recommended by the adviser's pricing committee and approved by
the Board of Trustees. Such pricing services generally use the security's last
sale price on the exchange or market where primarily traded or, if there is no
reported sale during the day, the closing bid price. Effective April 14, 2003,
securities traded on the NASDAQ National Market are valued at the NASDAQ
Official Closing Price ("NOCP"), or if lacking an NOCP, at the most recent bid
quotation on the NASDAQ National Market. Short-term obligations with a remaining
maturity of 60 days or less are valued at amortized cost, which approximates
market value. Securities for which market quotations are not readily available
(including restricted securities, if any) are valued at fair value as determined
in good faith by the Fund's investment adviser using consistently applied
procedures under the general supervision of the Board of Trustees. If events
occurring after the close of the principal market in which securities are traded
(but before the close of regular trading on the New York Stock Exchange) are
believed to materially affect the value of those securities, such securities are
valued at their fair value taking such events into account.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified, and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of discount and decreased by the amortization of
premium. Investment income is recorded net of foreign taxes withheld when
applicable. In determining net gain or loss on securities sold, the cost of
securities has been determined on an identified cost basis.
c. Foreign Currency Translation. The books and records of the Fund are
maintained in U.S. dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than U.S. dollars are translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates from
fluctuations arising from changes in market prices of the investment securities.
Such changes are included with the net realized and unrealized gain or loss on
investments.
13
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
Net realized foreign exchange gains or losses arise from: sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities, other than investment securities, at the end of the
fiscal periods, resulting from changes in exchange rates.
The Fund uses foreign currency exchange contracts to facilitate transactions in
foreign-denominated investments. Losses may arise from changes in the value of
the foreign currency or if the counterparties do not perform under the
contracts' terms.
The Fund may purchase investments of foreign issuers. Investing in securities of
foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than those
of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell generally are
used to hedge the Fund's investments against currency fluctuation. Also, a
contract to buy or sell can offset a previous contract. These contracts involve
market risk in excess of the unrealized gain or loss reflected in the Fund's
Statement of Assets and Liabilities. The U.S. dollar value of the currencies the
Fund has committed to buy or sell (if any) is shown in the portfolio composition
under the caption "Forward Currency Contracts Outstanding." These amounts
represent the aggregate exposure to each currency the Fund has acquired or
hedged through currency contracts outstanding at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At September 30, 2003, there were no open forward currency
contracts.
e. Federal and Foreign Income Taxes. The Trust treats the Fund as a separate
entity for federal income tax purposes. The Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. The Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities, such
taxes are accrued as applicable.
f. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gains distributions are determined in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences are primarily due to differing
treatments for book and tax purposes of items such as distributions from real
estate investment trusts, net operating losses, non-deductible expenses, foreign
currency transactions and gains realized from passive foreign investment
companies. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to capital accounts.
Distributions from net investment income and short-term capital gains are
considered to be ordinary income for tax purposes.
g. Repurchase Agreements. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The Fund's adviser is responsible
for determining that the value of the collateral is at all times at least equal
to 102% of the repurchase price, including interest. Repurchase agreements could
involve certain risks in the event of default or insolvency of the counterparty
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying securities.
3. Purchases and Sales of Securities. For the year ended September 30, 2003,
purchases and sales of securities (excluding short-term investments and U.S.
government securities) were $119,558,537 and $64,166,495, respectively.
Purchases and sales of U.S. government securities (excluding short-term
investments) were $66,943,854 and $24,324,544, respectively.
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the
investment adviser to the Fund. Under the terms of the management agreement, the
Fund pays a management fee at the annual rate of 0.40% of average daily net
assets, calculated daily and payable monthly.
Loomis Sayles has given a binding undertaking to the Fund, until February 1,
2004, to waive its management fee and, if necessary, to bear certain expenses of
the Fund to limit its total operating expenses to the following annual rates as
a percentage of average daily net assets: 0.80%, 1.70%, 1.70%, 0.55% and 1.30%
for Class A, Class B, Class C, Class Y and Class J, respectively. Provided
however, that the Fund is not obligated to pay any such deferred fees more than
one year after the fiscal year in which the fees were deferred. This undertaking
will be reevaluated on an annual basis.
For the year ended September 30, 2003, management fee and waiver for the Fund
were as follows:
Percentage of Average
Gross Waiver of Net Daily Net Assets
Management Management Management ---------------------
Fee Fee Fee Gross Net
----------- ---------- ----------- --------- ---------
$ 1,092,528 $ 6,771 $ 1,085,757 0.40% 0.40%
In addition to the waiver of management fees, $243,440 of Class level expenses
have been reimbursed.
14
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
Certain officers and employees of Loomis Sayles are also officers or Trustees of
the Trust. Loomis Sayles' general partner is indirectly owned by CDC IXIS Asset
Management North America, L.P. (CDC IXIS North America), whose general partner
is indirectly owned by CDC IXIS Asset Management SA ("CDC IXIS"). CDC IXIS is
part of the Caisse des Depots et Consignations Group.
b. Accounting and Administrative Expense. Effective July 1, 2003, Loomis Sayles
assigned its administrative services agreement with the Trust to CDC IXIS Asset
Management Services, Inc. ("CIS"), a wholly owned subsidiary of CDC IXIS North
America. Pursuant to the agreement between each of the Loomis Sayles Funds
Trusts and CIS, each Fund pays CIS a monthly administrative fee at the annual
rate of 0.035% of the Fund's average daily net assets. Prior to July 1, 2003,
the Fund paid Loomis Sayles a monthly administrative fee at an annual rate of
0.035% of each Fund's average daily net assets.
For the year ended September 30, 2003, fees paid to Loomis Sayles and CIS for
accounting and administrative expenses were $95,594, equating to 0.035% of
average daily net assets.
Effective October 1, 2003, the Fund pays CIS it's pro rata portion of the
accounting and administrative fees allocated on the combined assets of the CDC
Nvest Funds Trusts and Loomis Sayles Funds Trusts for these services
representing the higher amount based on the following calculations:
(1) Percentage of Average Daily Net Assets
--------------------------------------
First Next Over
$5 billion $5 billion $10 billion
----------- ----------- ------------
0.0675% 0.0625% 0.0500%
or
(2) Each Fund's pro rata portion, based on the combined assets of the
Loomis Sayles Funds Trusts and the CDC Nvest Funds Trusts, of the
annual aggregate minimum fee of $5 million.
c. Transfer Agent Fees. Effective February 3, 2003, CIS serves as transfer and
shareholder servicing agent for the Fund (except Class J shares) and has
subcontracted with Boston Financial Data Services ("BFDS") to serve as
sub-transfer agent. Prior to February 3, 2003, BFDS served as transfer and
shareholder servicing agent for the Fund (except Class J shares). For the fiscal
year ended September 30, 2003, State Street Bank & Trust served as transfer and
shareholder servicing agent for Class J.
Effective September 15, 2003 through December 31, 2003, Classes A, B and C pay
service fees monthly representing the higher amount based on the following
calculations:
(1) Annual aggregate fee determined by applying an annual fee rate (see
schedule below) to the eligible average daily net assets. Eligible
assets are the average daily net assets of all accounts which are
classified under the agreement as Load* Fixed Income funds offered
within the CDC Nvest Funds Trusts and the Loomis Sayles Funds
Trusts.
First Next Over
$1.2 billion $5 billion $6.2 billion
------------ ---------- ------------
0.142% 0.135% 0.130%
Class A, Class B and Class C shares are subject to a
monthly class minimum of $1,500
or
(2) An allocated portion, based on eligible assets for the period
September 15, 2003 through December 31, 2003, of an annual aggregate
minimum fee of $382,986.
*Load Fixed Income Funds consist of Investment Grade Bond Fund, Loomis
Sayles High Income Fund, Loomis Sayles Limited Term U.S. Government
Fund, Loomis Sayles Municipal Income Fund and Loomis Sayles Strategic
Income Fund and all Fixed Income funds within the CDC Nvest Funds
Trusts.
Effective September 15, 2003, Class Y pays service fees monthly representing the
higher amount based on the following calculations:
(1) Annual aggregate fee determined by applying an annual fee rate of
0.026% to the eligible average daily net assets. Eligible assets
are the average daily net assets of all accounts in no-load Retail*
Funds and load** Funds Class Y for which there are exchange
privileges among the Funds.
Each class is subject to a monthly minimum of $1,250.
or
(2) An allocated portion, based on eligible assets for the period
September 15, 2003 through December 31, 2003, of an aggregate minimum
fee of $190,547.
* No load retail funds consist of Loomis Sayles Aggressive Growth Fund,
Loomis Sayles Bond Fund, Loomis Sayles Global Bond Fund, Loomis Sayles
Small Cap Growth Fund, Loomis Sayles Small Cap Value Fund, Loomis Sayles
Tax-Managed Equity Fund, Loomis Sayles Value Fund and Loomis Sayles
Worldwide Fund.
**Load Funds Class Y consist of Investment Grade Bond Fund, Loomis
Sayles Growth Fund, Loomis Sayles High Income Fund, Loomis Sayles
International Equity Fund, Loomis Sayles Limited Term U.S. Government
Fund, Loomis Sayles Municipal Income Fund, Loomis Sayles Research Fund,
Loomis Sayles Strategic Income Fund and all funds with Class Y in the
CDC Nvest Funds Trusts.
15
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
For the period from February 3, 2003 to September 14, 2003, the Fund paid to CIS
the greater of: $15,000 or 0.026% of average daily net assets, subject however
to the minimum aggregate fee calculated as follows: If the aggregate fees for
the Trust's funds payable did not equal or exceed $54,167 in any single month,
the Funds would pay the minimum aggregate fee of $54,167 ($650,000 annually).
Any such amount required to achieve the minimum aggregate fee would be allocated
to all of the Trust's funds based on the percentage of net assets each Fund
represents of the total assets.
For the period from February 3, through September 30, 2003, the amount paid to
CIS as compensation for its services as transfer agent was $7,425.
d. Service and Distribution Fees. Effective July 1, 2003 the Trust entered into
a distribution agreement with CDC IXIS Asset Management Distributors, L.P. ("CDC
IXIS Distributors"), a wholly owned subsidiary of CDC IXIS North America.
Pursuant to this agreement, CDC IXIS Distributors serves as principal
underwriter of the Funds of the Trust, except Loomis Sayles Managed Bond Fund
and Investment Grade Bond Fund, Class J. Prior to July 1, 2003 Loomis Sayles
Distributors, L.P. acted as distributor of the Fund. For the fiscal year ended
September 30, 2003, Loomis Sayles Distributors, L.P. acted as distributor for
Investment Grade Bond Fund, Class J.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940 Act ("Rule
12b-1"), the Fund has adopted a Service Plan relating to the Fund's Class A
shares (the "Class A Plan") and Service and Distribution Plans relating to the
Fund's Class B and Class C shares (the "Class B and Class C Plans").
Under the Class A Plan, the Fund pays CDC IXIS Distributors a monthly service
fee at the annual rate of 0.25% of the average daily net assets attributable to
the Fund's Class A shares, as reimbursement for expenses incurred by CDC IXIS
Distributors in providing personal services to investors in Class A shares
and/or the maintenance of shareholder accounts.
Under the Class B and Class C Plans, the Fund pays CDC IXIS Distributors a
monthly service fee at the annual rate of 0.25% of the average daily net assets
attributable to the Fund's Class B and Class C shares, as compensation for
services provided and expenses incurred by CDC IXIS Distributors in providing
personal services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts.
Also under the Class B and Class C Plans, the Fund pays CDC IXIS Distributors a
monthly distribution fee at the annual rate of 0.75% of the average daily net
assets attributable to the Fund's Class B and Class C shares, as compensation
for services provided and expenses incurred by CDC IXIS Distributors in
connections with the marketing or sale of Class B and Class C shares.
Class J shares are subject to a monthly shareholder service fee at an annual
rate of 0.25% and a monthly distribution fee payable to Loomis Sayles
Distributors, L.P., at an annual rate of 0.50% of the average daily net assets
attributable to the Fund's Class J shares, pursuant to a shareholder service and
distribution plan adopted under Rule 12b-1.
For the year ended September 30, 2003, the Fund paid the following service and
distribution fees:
Service Fee
- -----------------------------------------------------
Class A Class B Class C Class J Admin Class
- ------- ------- ------- --------- -----------
(formerly Retail Class)
$ 576 $ 5 $ 1 $ 661,138 $ 18
Distribution Fee
- ------------------------------------------------------
Class A Class B Class C Class J Admin Class
- ------- ------- ------- ----------- -----------
(formerly Retail Class)
$ 167 $ 15 $ -- $ 1,322,275 $ 18
Commissions (including contingent deferred sales charges) on Fund shares paid to
CDC IXIS Distributors by investors in shares of the Fund for the period from
July 1, 2003 through September 30, 2003 were $ 223.
Prior to July 1, 2003 in the case of Class A shares (formerly, Retail Class) and
May 21, 2003 in the case of the former Admin Class shares, the Fund was subject
to distribution fees payable to Loomis Sayles Distributors, L.P. at an annual
rate of 0.25% of the respective Class' average daily net assets, pursuant to
distribution plans adopted in accordance with Rule 12b-1. Admin Class shares
were permitted to pay a shareholder service fee at an annual rate of up to 0.25%
of the average daily net assets attributable to Admin Class shares to securities
dealers or financial intermediaries for providing personal service and account
maintenance for their customers who hold such shares.
e. Trustees Fees and Expenses. The Trust pays no compensation to its officers or
to its Trustees who are interested Trustees of Loomis Sayles, Loomis Sayles
Distributors L.P., CDC IXIS Distributors, CDC IXIS North America, CIS or their
affiliates. Each independent Trustee, who is also an independent Trustee of the
CDC Nvest Funds Trusts, receives, in the aggregate, a retainer fee at the annual
rate of $45,000 and meeting attendance fees of $4,500 for each meeting of the
Board of Trustees that he or she attended. Each Committee member receives an
additional retainer fee at the annual rate of $7,000. Furthermore, each
Committee chairman receives an additional retainer fee (beyond the $7,000 fee)
at the annual rate of $5,000. The retainer fees assume four Board or Committee
meetings per year. Each Trustee is compensated $4,500 for each meeting and
$1,750 per Committee meeting that he or she attends in excess of four meetings
per year. Trustees who are not a Trustee of the CDC Nvest Funds Trusts are
compensated at the rate of $5,000 for each meeting of the Board of Trustees that
he or she attends and receives an annual retainer of $20,000. Trustee fees are
allocated to the various CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts
based on a formula that takes into account, among other factors, the relative
net assets of each Fund. Trustees are reimbursed for travel expenses in
connection with attendance at meetings.
16
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in
the Fund or certain other CDC Nvest Funds Trusts or Loomis Sayles Funds Trusts
on the normal payment date. Deferred amounts remain in the Funds until
distributed in accordance with the Plan.
For the period from November 6, 2002 through May 7, 2003, the Trust paid each
independent trustee a $20,000 annual retainer fee and a $5,000 fee per in person
meeting. Prior to November 6, 2002, each independent Trustee was compensated by
the Trust on behalf of each Fund at the rate of $1,250 per year and was
reimbursed for travel expenses in connection with attendance at meetings.
5. Line of Credit. The Fund together with certain other funds of the Loomis
Sayles Funds Trusts participates in a $25 million unsecured line of credit.
Borrowings under the line of credit will be made solely to temporarily finance
the repurchase of capital shares. Interest is charged to each participating Fund
based on its borrowings at a rate per annum equal to the Federal Funds rate plus
0.50%.
In addition, a commitment fee of 0.09% per annum, payable at the end of each
calendar quarter, is accrued and apportioned among the participating Funds based
on their average daily unused portion of the line of credit. During the year
ended September 30, 2003, the Fund had no borrowings under the agreement.
6. Shareholders. At September 30, 2003, the Loomis, Sayles & Company, L.P.
Employees' Profit Sharing Retirement Plan and Loomis Sayles Employees' Money
Purchase Pension Plan held 216,720 shares of beneficial interest of the Fund.
7. Contingent Expense Obligation.
Effective September 12, 2003 Loomis Sayles has entered into an arrangement that
provides that it shall be permitted to recover expenses it has borne (subsequent
to September 12, 2003) in later periods to the extent that the Fund's expenses
fall below the annual rates set forth in Note 4a.
If in the fiscal year following a deferral or reimbursement of expenses by the
adviser the actual operating expenses of the Fund are less than the expense
limit for the Fund, the Fund is required to pay an amount of additional expense
that is the lower of the difference between the actual expenses and the expense
limit or the actual amount of fees previously waived or expenses reimbursed. At
September 30, 2003, the amount subject to possible reimbursement by the Fund
under the expense limitation agreement was $0.
17
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
8. Capital Shares. The Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
---------------------------- ---------------------------
CLASS A (formerly Retail Class Shares)(b)(e) SHARES AMOUNT SHARES (a) AMOUNT (a)
----------- -------------- ----------- -------------
Issued from the sale of shares ...................... 100,705 $ 1,170,450 997 $ 10,150
Issued in connection with the reinvestment
of distributions ................................... 2,090 23,643 38 384
Issued in Admin Class conversion .................... 11 123 -- --
Redeemed ............................................ (6,093) (70,878) -- --
----------- -------------- ----------- -------------
Net change .......................................... 96,713 $ 1,123,338 1,035 $ 10,534
=========== ============== =========== =============
CLASS B (c) SHARES AMOUNT
----------- --------------
Issued from the sale of shares ...................... 13,845 $ 158,000
Issued in connection with the reinvestment
of distributions .................................. -- --
Redeemed ............................................ -- --
----------- --------------
Net change .......................................... 13,845 $ 158,000
=========== ==============
CLASS C (c) SHARES AMOUNT
----------- --------------
Issued from the sale of shares ...................... 223 $ 2,500
Issued in connection with the reinvestment
of distributions ................................... -- --
Redeemed ............................................ -- --
----------- --------------
Net change .......................................... 223 $ 2,500
=========== ==============
CLASS Y (formerly Institutional Class Shares)(e) SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
Issued from the sale of shares ...................... 375,758 $ 4,112,463 329,810 $ 3,350,200
Issued in connection with the reinvestment
of distributions ................................... 42,227 461,655 35,162 357,845
Redeemed ............................................ (301,255) (3,257,721) (442,686) (4,512,810)
----------- -------------- ----------- -------------
Net change .......................................... 116,730 $ 1,316,397 (77,714) $ (804,765)
=========== ============== =========== =============
CLASS J SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
Issued from the sale of shares ...................... 21,330,400 $ 238,341,332 13,456,100 $ 136,298,059
Issued in connection with the reinvestment
of distributions ................................... -- -- -- --
Redeemed ............................................ (12,871,900) (142,214,014) (1,882,500) (19,136,530)
----------- -------------- ----------- -------------
Net change .......................................... 8,458,500 $ 96,127,318 11,573,600 $ 117,161,529
=========== ============== =========== =============
ADMIN CLASS SHARES (b) SHARES AMOUNT SHARES(d) AMOUNT(d)
----------- -------------- ----------- -------------
Issued from the sale of shares ...................... -- $ -- 997 $ 10,150
Issued in connection with the reinvestment
of distributions ................................... 38 407 37 371
Redeemed ............................................ (1,061) (12,420) -- --
Redeemed in Admin Class Conversion .................. (11) (123) -- --
----------- -------------- ----------- -------------
Net change .......................................... (1,034) $ (12,136) 1,034 $ 10,521
=========== ============== =========== =============
(a) The Class was liquidated on December 18, 2000 and recommenced operations
on January 31, 2002.
(b) On May 21, 2003, all outstanding Admin Class shares were automatically
converted into Retail Class shares.
(c) From September 12, 2003, commencement of class operations.
(d) The Class commenced operations on January 31, 2002.
(e) On September 12, 2003, Retail Class converted to Class A Shares and
Institutional Class converted to Class Y Shares.
18
NOTES TO FINANCIAL STATEMENTS (continued)
For the Year Ended September 30, 2003
9. Additional Tax Information. The tax character of distributions paid to
shareholders during the year ended September 30, 2003 were as follows:
Distributions paid from:
Ordinary income $ 14,641,811
Long-term capital gains 2,858,072
-------------
Total taxable distributions $ 17,499,883
=============
As of September 30, 2003, the components of distributable earnings on a tax
basis were follows:
Undistributed ordinary income $ 2,132,729
Undistributed long-term capital gains 1,793,220
-------------
Total undistributed earnings 3,925,949
Unrealized Appreciation(Depreciation) 28,421,623
-------------
Total accumulated earnings (losses) $ 32,347,572
=============
19
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of Loomis Sayles
Investment Grade Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Loomis Sayles Investment Grade
Bond Fund, a series of Loomis Sayles Funds II (hereinafter referred to as the
"Fund") at September 30, 2003, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated therein,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2003
20
2003 U.S. TAX DISTRIBUTION TO SHAREHOLDERS (UNAUDITED)
Corporate Dividends Received Deduction. For the fiscal year ended, September 30,
2003, 1.67% of dividends distributed by the Fund qualify for the dividends
received deduction for corporate shareholders.
Capital Gains Distributions. Pursuant to Internal Revenue Section 852(b), the
Fund paid distributions of $2,858,072, which have been designated as capital
gains distributions for the fiscal year ended September 30, 2003.
21
TRUSTEES' INFORMATION
The Funds 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.
POSITION(s) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(s) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ---------------------------- ------------------------------ ----------------------------
INDEPENDENT TRUSTEES
Joseph Alaimo+ (73) Trustee; Chairman, Wayne Hummer 26;
399 Boylston Street 4 years for Loomis Sayles Trust Company and Wayne None
Boston, MA 02116 Funds Trusts Hummer Investment Trust
Graham T. Allison, Jr. (63) Trustee (2); Douglas Dillon Professor and 44;
399 Boylston Street 19 years for CDC Nvest Director for the Belfer Center Director, Taubman Centers,
Boston, MA 02116 Funds Trusts; Less than 1 of Science and International Inc.; Board Member, USEC
year for Loomis Sayles Funds Affairs, John F. Kennedy Inc.
Trusts School of Government,
Harvard University
Edward A. Benjamin (65) Trustee (1) Retired; formerly, Partner, 44;
399 Boylston Street Less than 1 year Ropes & Gray (law firm) Director, Coal, Energy
Boston, MA 02116 until 1999 Investments &
Management; Director,
Precision Optics Corporation
(optics manufacturer)
Daniel M. Cain (58) Trustee, President and CEO, Cain 44;
452 Fifth Avenue Chairman (1); Brothers & Company, Trustee, Universal Health
New York, NY 10018 7 years for CDC Nvest Funds Incorporated (investment Realty Income Trust;
Trusts; Less than 1 year for banking) Director, PASC; Director,
Loomis Sayles Funds Trusts Sheridan Healthcorp
Paul G. Chenault (69) Trustee (2) Retired; Formerly, Trustee, 44;
5852 Pebble Beach Way Less than 1 year for CDC First Variable Life (variable Director, Mailco Office
San Luis Obispo, CA 93401 Nvest Funds Trusts; 4 years life insurance) Products, Inc.
for Loomis Sayles Funds
Trusts
Kenneth J. Cowan (71) Trustee Retired 44;
399 Boylston Street Chairman (2); None
Boston, MA 02116 28 years for CDC Nvest Funds
Trusts; Less than 1 year for
Loomis Sayles Funds Trusts
Trustee (2);
7 years
Richard Darman (60) Trustee (2); Partner, The Carlyle Group Director and Chairman, AES
399 Boylston Street 7 years for CDC Nvest Funds (investments); Chairman of Corporation
Boston, MA 02116 Trusts; Less than 1 year for the Board of Directors of AES
Loomis Sayles Funds Trusts Corporation (international
power company); formerly,
Professor, John F. Kennedy
School of Government,
Harvard University
22
TRUSTEES' INFORMATION
POSITION(s) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(s) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ---------------------------- ------------------------------ ----------------------------
INDEPENDENT TRUSTEES
(continued)
Sandra O. Moose (61) Trustee (1); Senior Vice President and 44;
One Exchange Place 21 years for CDC Nvest Director, The Boston Director, Verizon
Boston, MA 02109 Funds Trusts; Less than 1 Consulting Group, Inc. Communications
year for Loomis Sayles (management consulting) Director, Rohm and Haas
Funds Trusts Company
John A. Shane (70) Trustee (2); President, Palmer Service 44;
200 Unicorn Park Drive 21 years for CDC Nvest Corporation (venture capital Director, Gensym
Woburn, MA 01801 Funds Trusts; Less than 1 organization) Corporation; Director,
year for Loomis Sayles Overland Storage, Inc.
Funds Trusts Director, Abt Associates
Pendleton P. White (72) Trustee (2); Retired 44;
6 Breckenridge Lane 22 years for CDC Nvest None
Savannah, GA 31411 Funds Trusts; Less than 1
year for Loomis Sayles
Funds Trusts
INTERESTED TRUSTEES
Robert J. Blanding/3/ (56) CEO, Loomis Sayles Funds President, Chairman, 44;
555 California Street II, Trustee Director, and Chief None
San Francisco, CA 94104 Less than 1 year Executive Officer, Loomis
Sayles & Company, L.P.;
President and CEO - Loomis
Sayles Funds I
John T. Hailer/4/ (42) President and Chief Executive President and Chief 44;
399 Boylston Street Officer - CDC Nvest Funds Executive Officer, CDC IXIS None
Boston, MA 02116 Trusts, President - Loomis Asset Management
Sayles Funds II, Trustee; Distributors, L.P.; Executive
3 years for CDC Nvest Funds Vice President - Loomis
Trusts; Less than 1 year for Sayles Funds I; formerly,
Loomis Sayles Funds Trusts Senior Vice President,
Fidelity Investments
Peter S. Voss/5/ (56) Chairman of the Board, Director, President and Chief 44;
399 Boylston Street Trustee; Executive Officer, CDC IXIS Trustee of Harris Associates
Boston, MA 02116 11 years for CDC Nvest Asset Management North Investment Trust/6/
Funds Trusts; Less than 1 America, L.P.
year for Loomis Sayles Funds
Trusts
23
TRUSTEES' INFORMATION
POSITION(s) HELD WITH NUMBER OF PORTFOLIOS IN
FUNDS/1/, LENGTH OF TIME PRINCIPAL OCCUPATION(s) FUND COMPLEX OVERSEEN AND
NAME, AGE AND ADDRESS SERVED AND TERM OF OFFICE/2/ DURING PAST 5 YEARS OTHER DIRECTORSHIPS HELD
- --------------------------- ---------------------------- ------------------------------ ----------------------------
OFFICERS
Nicholas H. Palmerino (38) Treasurer; Senior Vice President, CDC Not Applicable;
399 Boylston Street Not Applicable IXIS Asset Management None
Boston, MA 02116 Services, Inc.; Senior Vice
President, CDC IXIS Asset
Management Advisers, L.P.;
formerly, Vice President,
Loomis, Sayles & Company,
L.P.
John E. Pelletier (39) Secretary; Senior Vice President, Not Applicable;
399 Boylston Street Not Applicable General Counsel, Secretary None
Boston, MA 02116 and Clerk, CDC IXIS
Distribution Corporation;
Senior Vice President,
General Counsel, Secretary
and Clerk, CDC IXIS Asset
Management Distributors,
L.P.; Senior Vice President,
General Counsel, Secretary
and Clerk, CDC IXIS Asset
Management Advisers, L.P.;
Executive Vice President,
General Counsel, Secretary,
Clerk and Director, CDC
IXIS Asset Management
Services, Inc
(1) Member of Audit Committee.
(2) Member of Contract Review and Governance Committee.
+Mr. Alaimo is a Trustee of Loomis Sayles Funds I and Loomis Sayles Funds II,
but not of the CDC Nvest Funds Trusts.
/1/Except as noted, each Trustee and Officer holds the same positions with CDC
Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III, CDC
Nvest Companies Trust I, AEW Real Estate Income Fund, CDC Nvest Cash Management
Trust and CDC Nvest Tax Exempt Money Market Trust (the "CDC Nvest Funds Trusts")
and Loomis Sayles Funds I and Loomis Sayles Funds II (the "Loomis Sayles Funds
Trusts" and together with the CDC Nvest Funds Trusts, the "Trusts").
/2/All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. Messrs. Alaimo and White are expected to
retire by December 31, 2003.
/3/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 & Company, L.P.
("Loomis Sayles").
/4/Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution Corporation;
President and Chief Executive Officer of CDC IXIS Asset Management Distributors,
L.P. ("CDC IXIS Distributors").
/5/Mr. Voss is an "interested person" of the Trusts because he holds the
following positions with entities that may be considered to be affiliated
persons of the Trusts: Director of CDC IXIS Asset Management Services, Inc.;
Director of CDC IXIS Asset Management Distribution Corporation; Director and
Chairman of CDC IXIS Asset Management Associates, Inc.; Director of AEW Capital
Management, Inc; Director of Harris Associates, Inc; Director of Loomis, Sayles
& Company, Inc.; Member of Reich & Tang Asset Management, LLC; Director of
Westpeak Global Advisors, Inc.; Director of Vaughan, Nelson, Scarborough &
McCullough, Inc.; Director, Hansberger Group, Inc.; Member, Board of Managers,
Harris Alternatives L.L.C.; and Director and Member of Executive Board of CDC
IXIS Asset Management.
/6/As of September 30, 2003, Harris Associates Investment Trust has seven series
that were overseen by its Board of Trustees.
24
ADDITIONAL INFORMATION
1. ELECTION OF TRUSTEES
Shareholder Meeting (unaudited). At the special meeting of shareholders held on
June 10, 2003, shareholders of Loomis Sayles Funds II (formerly, Loomis Sayles
Funds) voted for the following proposal:
For Withheld*
----------- --------------
(01) Joseph Alaimo 134,298,551 8,672,577
(02) Graham T. Allison, Jr. 134,590,902 8,380,227
(03) Edward A. Benjamin 134,546,833 8,424,296
(04) Robert J. Blanding 134,572,705 8,398,423
(05) Daniel M. Cain 134,593,263 8,377,866
(06) Paul G. Chenault 134,352,172 8,618,957
(07) Kenneth J. Cowan 134,524,153 8,446,976
(08) Richard Darman 134,552,047 8,419,081
(09) John T. Hailer 134,613,039 8,358,089
(10) Sandra O. Moose 134,612,285 8,358,843
(11) John A. Shane 134,332,421 8,638,708
(12) Peter S. Voss 134,622,604 8,348,525
(13) Pendleton P. White 134,300,598 8,670,530
* Includes Broker Non-Votes (if any).
Initial Class Purchase on September 4, 2003 CDC IXIS Asset Management
Distributors, L.P. (the "Distributor"), purchased one share of the Class A,
Class B and Class C of the Loomis Sayles Investment Grade Bond Fund (the
"Fund"), a series of Loomis Sayles Funds II at a net asset value of $9.75 per
share.
Consent of Sole Shareholder On September 4, 2003, the Distributor, as sole
shareholder of Class A, Class B, and Class C shares of the Funds adopted the
following resolution:
1. Approval of the proposed terms of the Rule 12b-1 Plans
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26
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27
Item 2. Code of Ethics.
The Trust has adopted a code of Ethics that applies to the Trust's principal
executive officer, principal financial officer and persons performing similar
functions.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Trust have established an audit committee and
determined that all committee members qualify as financial experts. The
committee members are Ms. Sandra O. Moose, Messrs. Edward A. Benjamin and Daniel
M. Cain. Each of these individuals is also Independent Trustee of the Trust.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved.]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved.]
Item 9. Controls and Procedures
The Trust's principal executive officer and principal financial officer have
concluded that the Trust's disclosure controls and procedures are sufficient to
ensure that information required to be disclosed by the Trust in this Form N-CSR
was recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, based
upon such officers' evaluation of these controls and procedures as of a date
within 90 days of the filing date of the report.
There were no significant changes or corrective actions with regard to
significant deficiencies or material weaknesses in the Trust's internal controls
or in other factors that could significantly affect the Trust's internal
controls subsequent to the date of their evaluation.
Item 10. Exhibits.
(a) Code of Ethics.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Loomis Sayles Funds II
By: /s/ JOHN HAILER
----------------------------
Name: John Hailer
Title: President
Date: November 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ JOHN HAILER
----------------------------
Name: John Hailer
Title: President
Date: November 21, 2003
By: /s/ NICHOLAS H. PALMERINO
----------------------------
Name: Nicholas H. Palmerino
Title: Treasurer
Date: November 21, 2003
EXHIBIT INDEX
(a) Code of Ethics
(b)(1) Certifications of principal executive officer and principal financial
officer as required by Rule 30a-2 under the Investment Company Act of
1940
(b)(2) Certifications of principal executive officer and principal financial
officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.