UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-6241
Loomis Sayles Funds II
(Exact name of registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip code)
John E. Pelletier, Esq.
CDC IXIS Asset Management Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(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: March 31, 2004
Item 1. Reports to Stockholders.
The Registrant's semi annual reports transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 are as follows:
Loomis Sayles Investment Grade Bond Fund
CDC Nvest Funds Equity Funds
Loomis Sayles Equity Funds
CDC Nvest Funds Fixed Income Funds
[LOGO] CDC NvestFunds(SM)
CDC IXIS Asset Management Distributors
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Semiannual Report
March 31, 2004
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Loomis Sayles Investment Grade Bond Fund
[LOGO] LOOMIS . SAYLES & COMPANY, L.P.
TABLE OF CONTENTS
Management Discussion and Performance ................Page 1
Schedule of Investments ..............................Page 4
Financial Statements .................................Page 8
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Loomis Sayles Investment Grade Bond Fund
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Portfolio Profile
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Objective:
High total investment return through a combination of current income and capital
appreciation
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Strategy:
Invests primarily in investment-grade, fixed-income securities, although it may
invest up to 10% of assets in lower-rated, fixed-income securities
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Fund Inception:
December 31, 1996
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Managers:
Daniel Fuss
Steven Kaseta
Loomis, Sayles & Company, L.P.
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Symbol:
Class A LIGRX
Class B LGBBX
Class C LGBCX
Class Y LSIIX
Class J LIGJX
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What You Should Know:
This fund invests in fixed-income securities that are subject to credit risk,
interest rate risk and liquidity risk. It may also invest in foreign and
emerging market securities, which have special risks, as well as in
mortgage-related securities that are subject to pre-payment risk.
Management Discussion
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An economic resurgence helped improve investor confidence in the credit quality
of corporate bonds, resulting in strong performance for both the
investment-grade and high-yield sectors in late 2003 and early 2004. Conversely,
U.S. Treasury bonds tended to lag corporate bonds during this period of economic
expansion.
For the six months ended March 31, 2004, the Loomis Sayles Investment Grade Bond
Fund produced a total return of 6.79%, based on the net asset value of Class A
shares and $0.33 in dividends and $0.07 in capital gains reinvested during the
period. In comparison, the benchmark Lehman Government/Credit Index returned
3.05% during the same six-month period.
Rising credit quality, declining dollar aided returns
In view of the economic rebound, we emphasized domestic corporate bonds,
including lower-rated, high-yield issues. This focus benefited performance as
lower-rated corporate bonds substantially outdistanced high-grade bonds. We were
concerned that interest rates might rise, and depress prices of government bonds
and longer-maturity issues. As a result, we reduced the fund's exposure to
Treasuries and decreased average duration from 6.58 years at the beginning of
October to 5.67 years at the end of March.
Foreign bonds helped lift performance
Our strategy of diversifying into foreign-denominated securities also
contributed to fund performance as the U.S. dollar weakened against many foreign
currencies. Foreign-denominated, Canadian and supranational bonds accounted for
about 37% of assets at the end of the period, a slight increase from the
beginning of the fiscal year, and emerging market investments totaled almost 10%
of assets. This emerging market allocation allowed the fund to benefit from
rising commodity prices, which helped raise the value of the currencies of many
commodity-exporting nations.
Top performers for the fund during the six-month period were securities issued
by foreign governments or corporations. Bonds of Empresa Nacional de
Electricidad, a Chilean electric utility, were the strongest individual
contributors, helped by improving fundamentals. In addition, the strengthening
of the South African rand and the Canadian dollar in relation to the U.S. dollar
helped the performance of the fund's positions in government bonds of those two
nations. We have maintained the fund's position in the Empresa and the Canadian
government bonds, while reducing holdings in South Africa.
U.S. Treasury securities did not appreciate as much as other, higher-yielding
bonds because their low yield made them less attractive to investors.
Focus remains on improving credit quality
We expect the U.S. economy to continue to strengthen, with moderate improvements
in employment. We also believe continued low inflation should give the Federal
Reserve the freedom to keep short-term interest rates at their present levels
for some time. We plan to continue our emphasis on corporate bonds to take
advantage of the general improvement in credit quality. This also helps reduce
the effects of higher interest rates, which tend to affect Treasury bonds more
strongly than corporate bonds. Within our corporate holdings, we have recently
focused on BBB-rated securities. However, the differences between yields of
bonds of different credit qualities have recently narrowed, and we plan to give
additional focus to investments in higher-quality corporate securities, as well
as bonds that appear to be good candidates for credit ratings upgrades. Research
will continue to drive our investment process.
1
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Loomis Sayles Investment Grade Bond Fund
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Investment Results through March 31, 2004
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Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of $10,000 Investment in Class A Shares/1/
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December 31, 1996 (inception) through March 31, 2004
[CHART]
Line chart
Loomis Sayles Investment Grade Bond Fund
Growth of $10,000 Investment in Class A Shares
December 31, 1996 (inception) through March 31, 2004
Class A Lipper Lehman
@ Maximum BBB Rated Government
Month Net Asset Sales Funds Credit
End Value/1/ Charge/2/ Index Index
- ---------- --------- --------- --------- ----------
12/31/1996 10,000 9,550 10,000 10,000
1/31/1997 9,950 9,502 10,032 10,012
2/28/1997 10,150 9,693 10,089 10,033
3/31/1997 9,930 9,483 9,933 9,914
4/30/1997 10,131 9,675 10,080 10,059
5/31/1997 10,323 9,859 10,195 10,153
6/30/1997 10,586 10,110 10,347 10,274
7/31/1997 11,272 10,765 10,705 10,589
8/31/1997 10,953 10,460 10,563 10,470
9/30/1997 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
1/31/1998 11,537 11,018 11,169 11,131
2/28/1998 11,569 11,048 11,165 11,108
3/31/1998 11,709 11,182 11,222 11,142
4/30/1998 11,755 11,226 11,270 11,198
5/31/1998 11,821 11,289 11,366 11,318
6/30/1998 11,799 11,268 11,450 11,434
7/31/1998 11,652 11,128 11,441 11,443
8/31/1998 11,152 10,650 11,358 11,666
9/30/1998 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
1/31/1999 11,955 11,417 11,791 12,101
2/28/1999 11,802 11,271 11,536 11,813
3/31/1999 12,073 11,530 11,665 11,872
4/30/1999 12,358 11,802 11,748 11,901
5/31/1999 12,251 11,699 11,590 11,779
6/30/1999 12,215 11,665 11,529 11,742
7/31/1999 11,998 11,458 11,471 11,709
8/31/1999 11,955 11,417 11,428 11,700
9/30/1999 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
1/31/2000 12,196 11,648 11,524 11,754
2/29/2000 12,584 12,017 11,666 11,902
3/31/2000 12,758 12,184 11,774 12,074
4/30/2000 12,428 11,868 11,631 12,015
5/31/2000 12,309 11,755 11,542 12,004
6/30/2000 12,667 12,097 11,834 12,249
7/31/2000 12,819 12,242 11,885 12,379
8/31/2000 13,060 12,473 12,102 12,553
9/30/2000 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
1/31/2001 13,760 13,141 12,767 13,372
2/28/2001 13,867 13,243 12,893 13,509
3/31/2001 13,687 13,071 12,885 13,571
4/30/2001 13,478 12,871 12,814 13,470
5/31/2001 13,600 12,988 12,930 13,547
6/30/2001 13,667 13,052 12,945 13,612
7/31/2001 14,014 13,384 13,238 13,951
8/31/2001 14,332 13,687 13,397 14,131
9/30/2001 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
1/31/2002 14,398 13,750 13,467 14,374
2/28/2002 14,540 13,886 13,532 14,496
3/31/2002 14,195 13,556 13,354 14,202
4/30/2002 14,604 13,947 13,559 14,477
5/31/2002 14,790 14,124 13,666 14,610
6/30/2002 14,758 14,094 13,602 14,735
7/31/2002 14,476 13,824 13,533 14,912
8/31/2002 14,995 14,321 13,807 15,247
9/30/2002 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
1/31/2003 16,084 15,360 14,453 15,843
2/28/2003 16,433 15,694 14,696 16,125
3/31/2003 16,513 15,770 14,721 16,104
4/30/2003 17,078 16,310 15,019 16,277
5/31/2003 17,926 17,119 15,412 16,739
6/30/2003 18,012 17,201 15,432 16,672
7/31/2003 17,152 16,380 14,906 15,973
8/31/2003 17,235 16,459 15,024 16,079
9/30/2003 18,120 17,307 15,486 16,588
10/31/2003 18,075 17,261 15,425 16,378
11/30/2003 18,412 17,584 15,531 16,421
12/31/2003 18,872 18,023 15,757 16,583
1/31/2004 19,001 18,146 15,901 16,734
2/29/2004 19,148 18,286 16,041 16,939
3/31/2004 19,351 18,482 16,151 17,094
Average Annual Total Returns -- March 31, 2004
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Since Fund
6 Months/5/ 1 Year/5/ 5 Years/5/ Inception/5/
----------- --------- ---------- ------------
Class A/1/
Net Asset Value/2/ 6.79% 17.19% 9.90% 9.54%
With Maximum Sales Charge/3/ 2.02 11.96 8.89 8.85
Class B/1/
Net Asset Value/2/ 6.26 15.98 8.84 8.52
With CDSC/4/ 1.26 10.98 8.55 8.52
Class C/1/
Net Asset Value/2/ 6.30 16.02 8.85 8.53
With CDSC/4/ 5.30 15.02 8.85 8.53
Class Y/1/
Net Asset Value/2/ 6.90 17.43 10.13 9.79
Class J/1/
Net Asset Value/2/ 6.44 16.60 9.31 8.97
With Sales Charge/4/ 2.70 12.47 8.54 8.43
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Since Fund
Comparative Performance 6 Months 1 Year 5 Years Inception/6/
- ----------------------- -------- ------ ------- ------------
Lipper BBB Rated Funds Index 4.29% 9.71% 6.73% 6.84%
Lehman Gov/Credit Index 3.05 6.15 7.56 7.68
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 March 31, 2004
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[CHART]
Pie chart
Credit Quality
Aaa 42.8%
Aa 7.2%
A 7.5%
Baa 30.6%
Ba 3.8%
B 1.6%
Caa & lower 1.9%
Short term & other 4.6%
*Determined using the higher of the credit ratings assigned to each security by
Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of
comparable quality as determined by Loomis Sayles).
Effective Maturity
[CHART]
Pie chart
1 year or less 36.5%
1-5 years 35.2%
5-10 years 24.7%
10+ years 3.6%
Average Effective Maturity: 8.7 years
See page 3 for descriptions of the fund's indexes.
A large portion of the fund is currently held by a limited number of Japanese
brokerage firms. Economic, regulatory, political or other developments affecting
Japanese investors or brokerage firms could result in a substantial number of
redemptions within a limited period of time. Such redemptions could necessitate
the sale of securities that the fund's adviser would otherwise prefer to hold.
This could result in costs to the fund and its shareholders such as increased
brokerage commissions and other transaction costs, market impact costs and taxes
on realized gains. In addition, the decreased size of the fund would likely
cause its total expense ratio to increase.
Notes to Charts
/1/ Returns shown in the chart include 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 was closed on 12/18/00 and recommenced operations on
1/31/02; 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 9/12/03, 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C shares performance assumes 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 are calculated from
12/31/96.
2
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Additional Information
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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.
For more complete information on any CDC Nvest Fund, contact your financial
professional or call CDC IXIS Asset Management Distributors, L.P. and ask for a
free prospectus, which contains more complete information including charges and
other ongoing expenses. Investors should consider a fund's objective, risks and
expenses carefully before investing. This and other fund information can be
found in the prospectus. Please read the prospectus carefully before investing.
Index/Average Descriptions:
The Lehman Government/Credit Index is an unmanaged list of publicly traded
bonds, including U.S. government bonds, Treasury securities and corporate bonds.
Lipper BBB Rated Funds Index is the average performance without sales charges of
funds with similar investment objectives as calculated by Lipper, Inc.
Proxy Voting Information
A description of the Fund's proxy voting policies and procedures is available
(i) without charge, upon request, by calling CDC Nvest Funds at 800-225-5478;
(ii) on the Fund's web-site at www.cdcnvestfunds.com, and (iii) on the
Securities and Exchange Commission's website at www.sec.gov.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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3
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Loomis Sayles Investment Grade Bond Fund -- Schedule of Investments
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Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
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Bonds and Notes -- 95.5% of Total Net Assets
Non -- Convertible Bonds -- 94.1%
Aerospace/Defense -- 1.6%
$ 5,500,000 Raytheon Co., 6.400%, 12/15/18 $ 6,088,929
250,000 Raytheon Co., 7.200%, 8/15/27 288,214
145,000 Raytheon Co., 7.375%, 7/15/25 153,930
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6,531,073
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Airlines -- 2.0%
542,906 American Airlines, Inc., 6.978%, 4/01/11 554,639
1,000,000 American Airlines, Inc., Class B, 8.608%, 4/01/11 959,606
1,959,138 Continental Airlines, Inc., 6.703%, 12/15/22 1,928,280
809,154 Continental Airlines, Inc., Series 1998-1A, 6.648%, 9/15/17 791,679
717,564 Continental Airlines, Inc., Series 1999-1A, 6.545%, 2/02/19 706,813
394,892 Continental Airlines, Inc., Series 1999-2, 7.256%, 3/15/20 400,934
1,916,044 Continental Airlines, Inc., Series 2000-2, 7.707%, 10/02/22 1,945,371
650,000 Delta Air Lines, Inc., 8.300%, 12/15/29 373,750
655,765 US Airways, 6.850%, 1/30/18 619,171
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8,280,243
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Asset-Backed Securities -- 0.7%
1,353,052 Community Program Loan Trust, Series 1987-A, Class A4,
4.500%, 10/01/18 1,374,098
1,700,000 Community Program Loan Trust, Series 1987-A, Class A5,
4.500%, 4/01/29 1,595,925
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2,970,023
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Automotive -- 4.6%
375,000 Cummins Engine Co., Inc., 7.125%, 3/01/28 371,250
3,150,000 Delphi Automotive Systems Corp., 7.125%, 5/01/29 3,311,299
2,500,000 Ford Motor Co., 6.375%, 2/01/29 2,225,907
600,000 Ford Motor Credit Co., 7.250%, 2/22/05 (GBP) 1,119,967
700,000 Ford Motor Credit Co., 7.375%, 10/28/09 768,351
1,500,000 General Motors Acceptance Corp., 6.875%, 9/15/11 1,627,367
3,000,000 General Motors Acceptance Corp., 7.000%, 12/07/05 (GBP) 5,643,533
3,050,000 General Motors Acceptance Corp., 7.500%, 12/01/06 (NZD) 2,041,487
700,000 General Motors Corp., 6.750%, 5/01/28 686,097
950,000 GMAC International Finance BV, 8.000%, 3/14/07 (NZD) 643,603
------------
18,438,861
------------
Banking -- 0.1%
100,000 Key Bank NA, 6.950%, 2/01/28 114,327
250,000 Keycorp Capital III, 7.750%, 7/15/29 298,131
------------
412,458
------------
Beverages -- 0.4%
1,525,000 Cia Brasileira de Bebidas, 8.750%, 9/15/13 144A 1,673,687
------------
Chemicals -- 0.1%
500,000 IMC Global, Inc., 7.300%, 1/15/28 527,500
------------
Consumer Products -- 0.4%
1,400,000 Bausch & Lomb, Inc., 7.125%, 8/01/28 1,474,735
------------
Electric -- 3.6%
2,750,000 Constellation Energy Group, Inc., 4.550%, 6/15/15 2,610,976
5,000,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
7.875%, 2/1/27 5,202,035
1,000,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
8.350%, 8/1/13 1,128,282
4,000,000 Enersis SA, 7.400%, 12/01/16 4,101,252
1,500,000 MidAmerican Energy Holdings Co., 5.875%, 10/01/12 1,621,217
46,875 Quezon Power Philippines Co., 8.860%, 6/15/17 41,719
------------
14,705,481
------------
Electronics -- 2.0%
$ 500,000 Motorola, Inc., 5.800%, 10/15/08 $ 532,011
900,000 Motorola, Inc., 6.500%, 11/15/28 913,577
250,000 Motorola, Inc., 6.750%, 2/01/06 268,893
625,000 Motorola, Inc., 7.625%, 11/15/10 727,232
1,625,000 Motorola, Inc., 8.000%, 11/01/11 1,941,654
3,115,000 Samsung Electronics Co. Ltd., 7.700%, 10/01/27 144A 3,498,992
------------
7,882,359
------------
Foreign Agencies -- 0.0%
220,000 Alberta Municipal Funding Corp., 5.700%, 9/01/11 (CAD) 181,980
------------
Foreign Local Governments -- 8.0%
19,100,000 Kommunekredit, 5.000%, 6/07/06 (NOK) 2,922,411
74,355 New Brunswick FM Project, 6.470%, 11/30/27 (CAD) 62,962
38,092 Province of Alberta, 5.930%, 9/16/16 (CAD) 31,860
6,600,000 Province of British Columbia, Zero Coupon Bond, 6/09/14 (CAD) 3,078,491
1,025,000 Province of British Columbia, 5.250%, 12/01/06 (CAD) 830,310
175,000 Province of British Columbia, 6.000%, 6/09/08 (CAD) 146,745
3,275,000 Province of British Columbia, 6.250%, 12/01/09 (CAD) 2,798,405
6,510,000 Province of Manitoba, 5.750%, 6/02/08 (CAD) 5,409,448
25,000 Province of Manitoba, 6.500%, 9/22/17 (CAD) 22,003
5,000,000 Province of Manitoba (Certificate of Deposit), Zero Coupon
Bond, 7/22/13 (CAD) 2,421,305
500,000 Province of Nova Scotia, 6.600%, 6/01/27 (CAD) 435,551
700,000 Province of Ontario, 3.500%, 9/08/06 (CAD) 543,571
4,490,000 Province of Ontario, 5.900%, 3/08/06 (CAD) 3,641,952
6,600,000 Province of Saskatchewan, Zero Coupon Bond, 4/10/14 (CAD) 3,087,292
7,500,000 Province of Saskatchewan, 4.750%, 12/01/06 (CAD) 6,003,201
550,000 Province of Saskatchewan, 5.500%, 6/02/08 (CAD) 453,042
1,000,000 South Australia Government Finance Authority, Zero Coupon
Bond, 12/21/15 (AUD) 391,043
------------
32,279,592
------------
Government Agencies -- 16.8%
1,250,000 Federal Home Loan Mortgage Corp., 3.220%, 6/20/07 (SGD) 779,141
5,800,000 Federal Home Loan Mortgage Corp., 4.625%, 2/15/07 (EUR) 7,525,414
9,250,000 Federal Home Loan Mortgage Corp., 5.500%, 9/15/11 10,227,475
7,500,000 Federal Home Loan Mortgage Corp., 5.750%, 1/15/12 8,401,267
700,000 Federal National Mortgage Association, Zero Coupon Bond,
10/29/07 (NZD) 380,756
16,000,000 Federal National Mortgage Association, 2.290%, 2/19/09 (SGD) 9,521,892
2,150,000 Federal National Mortgage Association, 2.375%, 2/15/07 2,159,875
1,000,000 Federal National Mortgage Association, 4.250%, 7/15/07 1,057,406
3,950,000 Federal National Mortgage Association, 5.250%, 1/15/09 4,339,126
1,850,000 Federal National Mortgage Association, 5.375%, 11/15/11 2,030,908
17,450,000 Federal National Mortgage Association, 5.500%, 3/15/11 19,331,372
2,500,000 Federal National Mortgage Association, 6.375%, 8/15/07 (AUD) 1,961,911
------------
67,716,543
------------
Healthcare -- 3.9%
2,625,000 Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 2,630,665
250,000 Columbia/HCA Healthcare Corp., 7.500%, 12/15/23 263,764
620,000 Columbia/HCA Healthcare Corp., 7.580%, 9/15/25 657,443
1,000,000 Columbia/HCA Healthcare Corp., 7.750%, 7/15/36 1,071,073
2,000,000 HCA, Inc., 5.250%, 11/06/08 2,067,312
5,000,000 HCA, Inc., 5.750%, 3/15/14 4,995,915
800,000 HCA, Inc., 6.250%, 2/15/13 833,598
3,250,000 HCA, Inc., 6.300%, 10/01/12 3,406,488
------------
15,926,258
------------
Home Construction -- 0.1%
250,000 Pulte Homes, Inc., 5.250%, 1/15/14 252,106
25,000 Pulte Homes, Inc., 6.375%, 5/15/33 24,916
------------
277,022
------------
See accompanying notes to financial statements. 4
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Loomis Sayles Investment Grade Bond Fund --
Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------------------------
Independent/Energy -- 0.4%
$ 500,000 Devon Financing Corp. LLC, 7.875%, 9/30/31 $ 615,251
1,040,000 Pioneer Natural Resources Co., 7.200%, 1/15/28 1,183,894
------------
1,799,145
------------
Information/Data Technology -- 0.7%
2,500,000 Arrow Electronics, Inc., 6.875%, 7/01/13 2,715,917
------------
Integrated/Energy -- 0.3%
150,000 Cerro Negro Finance Ltd., 7.900%, 12/01/20 144A 128,250
100,000 PDVSA Finance Ltd., 7.400%, 8/15/16 85,750
200,000 PDVSA Finance Ltd., 7.500%, 11/15/28 161,000
200,000 Petrozuata Finance, Inc., 8.220%, 4/01/17 144A 182,000
400,000 Repsol International Finance BV, 5.750%, 12/04/06 (EUR) 527,632
------------
1,084,632
------------
Life Insurance -- 3.3%
11,700,000 ASIF Global Financing XXVII, 2.380%, 2/26/09 144A (SGD) 6,938,795
1,500,000 Provident Companies, Inc., 7.250%, 3/15/28 1,411,521
2,175,000 UnumProvident Corp., 6.750%, 12/15/28 2,011,470
3,000,000 UnumProvident Corp., 7.375%, 6/15/32 2,865,753
------------
13,227,539
------------
Media Cable -- 1.1%
3,750,000 Cox Communications, Inc., Class A, 6.750%, 3/15/11 4,268,055
------------
Media NonCable -- 0.9%
2,500,000 Clear Channel Communications, Inc., 4.250%, 5/15/09 2,553,945
1,000,000 Clear Channel Communications, Inc., 5.750%, 1/15/13 1,059,308
------------
3,613,253
------------
Metals & Mining -- 0.4%
1,500,000 Teck Cominco Ltd., 7.000%, 9/15/12 1,705,753
------------
Mortgage Related -- 0.9%
3,000,000 Bank of America Commercial Mortgage, Inc., 5.460%, 4/11/37 3,273,957
348,186 Federal Home Loan Mortgage Corp., 5.000%, 12/01/31 350,164
105,228 Federal National Mortgage Association, 6.000%, 7/01/29 109,802
------------
3,733,923
------------
Non Captive Consumer -- 0.3%
1,000,000 Capital One Bank, 6.700%, 5/15/08 1,120,284
------------
Non Captive Diversified -- 0.1%
500,000 General Electric Capital Corp., 1.725%, 6/27/08 (SGD) 290,365
Oil Field Services -- 0.6%
250,000 Ensco International, Inc., 6.750%, 11/15/07 281,447
250,000 Ensco International, Inc., 7.200%, 11/15/27 291,921
250,000 Global Marine, Inc., 7.000%, 6/01/28 287,625
665,000 Pecom Energia SA, 8.125%, 7/15/10 144A 681,625
600,000 Transocean Sedco Forex, Inc., 7.375%, 4/15/18 727,381
------------
2,269,999
------------
Paper -- 2.4%
500,000 Boise Cascade Corp., 7.350%, 2/01/16 528,696
1,000,000 Boise Cascade Corp., Series A, 7.450%, 8/10/11 1,056,507
2,225,000 Georgia-Pacific Group, 7.375%, 12/01/25 2,202,750
2,570,000 Georgia-Pacific Group, 7.750%, 11/15/29 2,608,550
400,000 Weyerhaeuser Co., 6.750%, 3/15/12 451,860
500,000 Weyerhaeuser Co., 6.950%, 10/01/27 543,775
1,000,000 Weyerhaeuser Co., 7.125%, 7/15/23 1,111,502
1,000,000 Weyerhaeuser Co., 7.375%, 3/15/32 1,147,770
------------
9,651,410
------------
Pharmaceuticals -- 0.1%
500,000 Schering-Plough Corp., 5.300%, 12/01/13 521,500
------------
Pipelines -- 2.2%
2,425,000 Coastal Corp., 6.950%, 6/01/28 1,800,562
2,200,000 El Paso Corp., 5.750%, 3/14/06 2,504,270
$ 375,000 El Paso Corp., 7.000%, 5/15/11 $ 321,563
1,150,000 El Paso Energy Corp., 6.750%, 5/15/09 1,014,875
1,000,000 KN Capital Trust, 7.630%, 4/15/28 1,152,977
750,000 Southern Natural Gas Co., 7.350%, 2/15/31 720,000
700,000 Tennessee Gas Pipeline Co., 7.000%, 10/15/28 654,500
815,000 Tennessee Gas Pipeline Co., 7.500%, 4/01/17 841,488
------------
9,010,235
------------
Property & Casualty Insurance -- 0.3%
1,000,000 Aon Corp., 7.375%, 12/14/12 1,176,972
Railroads -- 1.1%
5,000,000 Canadian Pacific Railway Ltd., 4.900%, 6/15/10 144A (CAD) 3,882,387
39,000 Missouri Pacific Railroad Co., 4.250%, 1/01/05 39,080
195,000 Missouri Pacific Railroad Co., 4.750%, 1/01/20 156,120
243,000 Missouri Pacific Railroad Co., 4.750%, 1/01/30 191,524
50,000 Missouri Pacific Railroad Co., 5.000%, 1/01/45 37,063
------------
4,306,174
------------
Real Estate Investment Trusts -- 1.7%
1,000,000 EOP Operating LP, 6.750%, 2/15/12 1,141,190
100,000 First Industrial LP, 7.500%, 12/01/17 116,627
150,000 First Industrial LP, 7.600%, 7/15/28 165,560
1,075,000 Highwoods Realty LP, 7.500%, 4/15/18 1,205,433
2,370,000 New Plan Excel Realty Trust, 5.875%, 6/15/07 2,626,816
1,000,000 Spieker Properties, Inc., 7.350%, 12/01/17 1,186,546
200,000 TriNet Corporate Realty Trust, Inc., 7.700%, 7/15/17 221,500
------------
6,663,672
------------
Refining -- 0.0%
100,000 Merey Sweeny LP, 8.850%, 12/18/19 144A 116,822
------------
Restaurants -- 0.2%
1,000,000 McDonald's Corp., 3.627%, 10/10/10 (SGD) 610,505
------------
Retailers -- 0.4%
250,000 J.C. Penney Co., Inc., 6.875%, 10/15/15 275,625
22,000 J.C. Penney Co., Inc., 7.125%, 11/15/23 24,860
150,000 J.C. Penney Co., Inc., 7.650%, 8/15/16 175,125
650,000 J.C. Penney Co., Inc., 7.950%, 4/01/17 768,625
500,000 Lowe's Cos., Inc., 6.500%, 3/15/29 562,987
------------
1,807,222
------------
Sovereigns -- 13.0%
3,925,000 Canadian Government, 3.500%, 6/01/04 (CAD) 2,997,697
16,265,000 Canadian Government, 4.500%, 9/01/07 (CAD) 12,996,384
9,600,000 Canadian Government, 5.500%, 6/01/10 (CAD) 7,981,529
2,825,000 Canadian Government, 6.000%, 9/01/05 (CAD) 2,266,996
5,000,000 Canadian Government, 6.000%, 6/01/08 (CAD) 4,212,672
3,670,000 Petroleos Mexicanos, 8.625%, 12/01/23 144A 4,220,500
2,586,182 PF Export Receivables Master Trust, 6.436%, 6/01/15 144A 2,660,845
1,200,000 Republic of Brazil, 8.250%, 1/20/34 1,020,000
325,000 Republic of Brazil, 8.875%, 4/15/24 297,375
10,000 Republic of Brazil, 10.125%, 5/15/27 10,120
250,000 Republic of Brazil, 11.000%, 8/17/40 267,000
615,703 Republic of Brazil C Bond, 8.000%, 4/15/14 600,310
455,000 Republic of Dominican, 9.040%, 1/23/13 144A 327,600
250,000 Republic of Peru, 4.500%, 3/07/17 (step to 5.000% on
3/07/05) (c) 217,500
500,000 Republic of South Africa, 5.250%, 5/16/13 (EUR) 612,716
200,000 Republic of South Africa, 8.500%, 6/23/17 248,250
150,000 Republic of South Africa, 12.500%, 12/21/06 (ZAR) 25,494
100,000 Republic of Venezuela, 9.250%, 9/15/27 88,900
500,000 SP Powerassets Ltd., 3.730%, 10/22/10 (SGD) 310,143
3,950,000 Tenaga Nasional Berhad, 7.500%, 11/01/25 144A 4,359,011
5 See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund --
Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------------------------
Sovereigns -- continued
$ 2,500,000 United Mexican States, 5.375%, 6/10/13 (EUR) $ 3,096,496
1,500,000 United Mexican States, 7.500%, 1/14/12 1,743,750
750,000 United Mexican States, 8.300%, 8/15/31 881,250
900,000 United Mexican States, 8.375%, 1/14/11 1,090,800
------------
52,533,338
------------
Sovereigns Non Callable -- 6.3%
5,150,000 Government of New Zealand, 6.000%, 11/15/11 (NZD) 3,493,300
55,815,000 Government of Sweden, 5.250%, 3/15/11 (SEK) 8,015,126
9,825,000 Government of Sweden, 6.500%, 5/05/08 (SEK) 1,463,913
15,000,000 Kingdom of Norway, 5.500%, 5/15/09 (NOK) 2,387,362
62,150,000 Kingdom of Norway, 6.750%, 1/15/07 (NOK) 10,012,602
------------
25,372,303
------------
Supranational -- 1.6%
300,000 Eurofima, 6.250%, 12/28/18 (AUD) 236,302
1,500,000 Eurofima, 6.500%, 8/22/11 (AUD) 1,181,895
2,585,000 International Bank for Reconstruction & Development, Zero
Coupon Bond, 8/20/07 (NZD) 1,416,201
1,000,000 International Bank for Reconstruction & Development, 5.500%,
11/3/08 (NZD) 657,958
4,045,000 International Bank for Reconstruction & Development, 8.000%,
5/23/07 (NZD) 2,854,435
------------
6,346,791
------------
Textile -- 0.0%
25,000 Kellwood Co., 7.625%, 10/15/17 27,625
------------
Tobacco -- 0.6%
2,000,000 Altria Group, Inc., 7.000%, 11/04/13 2,204,082
375,000 Loews Corp., 7.000%, 10/15/23 379,649
------------
2,583,731
------------
Transportation Services -- 0.5%
510,214 Atlas Air Worldwide Holdings, Inc., 7.200%, 1/02/19 (d) 478,678
635,513 Atlas Air, Inc., Series A, 7.380%, 1/02/18 (d) 603,280
1,000,000 ERAC USA Finance Co., 6.800%, 2/15/08 144A 1,126,574
------------
2,208,532
------------
Treasuries -- 6.5%
2,150,000 U.S. Treasury Notes, 1.625%, 9/30/05 2,159,742
500,000 U.S. Treasury Notes, 1.625%, 10/31/05 501,992
5,000,000 U.S. Treasury Notes, 1.625%, 2/28/06 5,007,810
12,000,000 U.S. Treasury Notes, 1.875%, 12/31/05 12,083,904
1,000,000 U.S. Treasury Notes, 2.375%, 8/15/06 1,014,727
4,900,000 U.S. Treasury Notes, 5.750%, 8/15/10 5,625,812
------------
26,393,987
------------
Wireless -- 0.9%
1,000,000 America Movil SA de CV, 4.125%, 3/01/09 144A 1,001,951
2,000,000 INTELSAT, 7.625%, 4/15/12 2,312,122
450,000 Nextel Communications, Inc., 9.375%, 11/15/09 489,375
------------
3,803,448
------------
Wirelines -- 3.0%
3,220,000 AT&T Corp., 6.750%, 11/21/06 (EUR) 4,302,064
1,400,000 Philippine Long Distance Telephone Co., 8.350%, 3/06/17 1,274,000
3,400,000 Sprint Capital Corp., 6.875%, 11/15/28 3,530,870
500,000 Sprint Capital Corp., 6.900%, 5/01/19 546,444
1,000,000 Telekom Malaysia Berhad, 7.875%, 8/01/25 144A 1,181,537
250,000 US West Capital Funding, Inc., 6.500%, 11/15/18 198,750
1,650,000 US West Capital Funding, Inc., 6.875%, 7/15/28 1,278,750
------------
12,312,415
------------
Total Non-Convertible Bonds
(Identified Cost $343,756,372) 380,553,362
------------
Convertible Bonds-- 1.4%
Independent/Energy -- 0.6%
$ 500,000 Devon Energy Corp., 4.900%, 8/15/08 $ 513,750
1,750,000 Devon Energy Corp., 4.950%, 8/15/08 1,798,125
------------
2,311,875
------------
Tobacco -- 0.7%
3,040,000 Loews Corp., 3.125%, 9/15/07 3,002,000
------------
Wirelines -- 0.1%
340,000 Telus Corp., 6.750%, 6/15/10 (CAD) 272,031
------------
Total Convertible Bonds
(Identified Cost $5,239,639) 5,585,906
------------
Total Bonds and Notes
(Identified Cost $348,996,011) 386,139,268
------------
Short Term Investment -- 2.4% of Total Net Assets
9,718,000 Repurchase Agreement with State Street Corp., dated 3/31/04
at 0.350% to be repurchased at $9,718,094 on 4/01/04
collateralized by $9,865,000 U.S. Treasury Note, 1.750% due
12/31/04 with a value of $9,914,325 9,718,000
------------
Total Short Term Investment
(Identified Cost $9,718,000) 9,718,000
------------
Total Investments -- 97.9%
(Identified Cost $358,714,011) (b) 395,857,268
Other assets less liabilities -- 2.1% 8,424,039
------------
Net Assets -- 100% $404,281,307
------------
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized appreciation on
investments based on cost of $359,755,278 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 $ 38,839,267
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (2,737,277)
------------
Net unrealized appreciation $ 36,101,990
============
(c) Step Bond: Coupon is zero or below market rate for an initial
period and then increases at a specified date and rate.
(d) Issuer in bankruptcy filing.
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.
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;
SGD: Singapore Dollar; ZAR: South African Rand
See accompanying notes to financial statements. 6
This Page Intentionally Left Blank
7
- --------------------------------------------------------------------------------
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
March 31, 2004 (unaudited)
ASSETS
Investments at value (Identified cost $358,714,011) $395,857,268
Cash 641
Receivable for Fund shares sold 5,680,723
Receivable for securities sold 1,839,686
Interest receivable 5,268,399
Receivable from investment adviser 26,187
------------
TOTAL ASSETS 408,672,904
------------
LIABILITIES
Payable for securities purchased 2,162,708
Payable for Fund shares redeemed 1,920,397
Management fees payable 134,074
Deferred Trustees' fees payable 5,785
Accounting and administrative fees payable 49,480
Service and distribution fees payable 7,927
Transfer agent fees payable 5,821
Other accounts payable and accrued expenses 105,405
------------
TOTAL LIABILITIES 4,391,597
------------
NET ASSETS $404,281,307
============
NET ASSETS CONSIST OF:
Paid in capital $360,727,946
Undistributed net investment income 620,048
Accumulated net realized gain (loss) on investments 5,764,056
Unrealized appreciation (depreciation) on:
Investments 37,143,257
Foreign currency translations 26,000
------------
NET ASSETS $404,281,307
============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 7,603,391
============
Shares of beneficial interest 638,583
============
Net asset value and redemption price per share $ 11.91
============
Offering price per share (100/95.50 of $11.91) $ 12.47
============
Class B shares: (redemption price is equal to net asset value
less any applicable contingent deferred sales charges)
Net assets $ 1,114,613
============
Shares of beneficial interest 93,811
============
Net asset value and offering price per share $ 11.88
============
Class C shares: (redemption price is equal to net asset value
less any applicable contingent deferred sales charges)
Net assets $ 5,337,733
============
Shares of beneficial interest 449,448
============
Net asset value and offering price per share $ 11.88
============
Class Y shares:
Net assets $ 10,353,790
============
Shares of beneficial interest 869,246
============
Net asset value, offering and redemption price per
share $ 11.91
============
Class J shares:
Net assets $379,871,780
============
Shares of beneficial interest 31,939,150
============
Net asset value and redemption price per share $ 11.89
============
Offering price per share (100/96.50 of $11.89) $ 12.32
============
See accompanying notes to financial statements. 8
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
INVESTMENT INCOME
Interest (Net of foreign taxes of $231) $ 9,988,148
-----------
Expenses
Management fees 727,107
Service fees - Class A 4,174
Service and distribution fees - Class B 3,338
Service and distribution fees - Class C 8,440
Service and distribution fees - Class J 1,303,904
Trustees' fees and expenses 12,265
Accounting and administrative fees 119,276
Custodian 77,392
Transfer agent fees and expenses - Class A, Class B, Class C 29,983
Transfer agent fees and expenses - Class Y 4,568
Transfer agent fees and expenses - Class J 7,576
Audit and tax services 24,869
Registration - Class A, Class B, Class C, Class Y 25,032
Registration - Class J 4,308
Shareholder reporting - Class A, Class B, Class C, Class Y 1,194
Shareholder reporting - Class J 79,666
Legal - Class A, Class B, Class C, Class Y 727
Legal - Class J 11,813
Miscellaneous 26,237
-----------
Total expenses 2,471,869
Less reimbursement/waiver (149,169)
-----------
Net expenses 2,322,700
-----------
Net investment income 7,665,448
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net 6,326,565
Foreign currency transactions - net 195,522
Change in unrealized appreciation (depreciation) on:
Investments - net 8,334,316
Foreign currency translations - net (44,033)
-----------
Net realized and unrealized gain
on investments and foreign currency transactions 14,812,370
-----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $22,477,818
===========
9 See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
March 31, 2004 September 30,
(unaudited) 2003
---------------- -------------
FROM OPERATIONS:
Net investment income $ 7,665,448 $ 13,143,561
Net realized gain (loss) on investments and
foreign currency transactions 6,522,087 7,301,351
Net change in unrealized appreciation (depreciation)
of investments and foreign currency translations 8,290,283 26,525,266
------------ ------------
Increase (decrease) in net assets resulting from operations 22,477,818 46,970,178
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (75,098) (14,107)
Class B (14,174) --
Class C (31,159) --
Class Y (297,379) (479,608)
Class J (8,759,177) (12,943,344)
Admin Class* -- (407)
Capital gains:
Class A (13,621) (9,934)
Class B (3,141) --
Class C (4,478) --
Class Y (60,972) (100,475)
Class J (2,012,830) (3,952,008)
------------ ------------
(11,272,029) (17,499,883)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARES TRANSACTIONS 45,889,304 98,715,417
------------ ------------
Total increase (decrease) in net assets 57,095,093 128,185,712
NET ASSETS
Beginning of period 347,186,214 219,000,502
------------ ------------
End of period $404,281,307 $347,186,214
------------ ------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME $ 620,048 $ 2,131,587
============ ============
*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
3/31/2004(m) $11.54 $0.26(d) $ 0.51 $ 0.77 $(0.33) $(0.07) $(0.40)
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
3/31/2004(m) 11.53 0.22(d) 0.49 0.71 (0.29) (0.07) (0.36)
9/30/2003(g) 11.21 0.02(d) 0.30 0.32 -- -- --
Class C
3/31/2004(m) 11.53 0.21(d) 0.50 0.71 (0.29) (0.07) (0.36)
9/30/2003(g) 11.21 0.02(d) 0.30 0.32 -- -- --
Class Y
3/31/2004(m) 11.54 0.29(d) 0.49 0.78 (0.34) (0.07) (0.41)
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
3/31/2004(m) 11.53 0.24(d) 0.49 0.73 (0.30) (0.07) (0.37)
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 returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods of 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 shares 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 for 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 commencement 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.
(m) For the six months ended March 31, 2004 (unaudited).
(n) A sales charge for Class A and Class J shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations.
11 See accompanying notes to financial statements.
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 (%)
- ---------- ------- ----------- ---------- -------- -------------- ---------
$11.91 6.8(n) $ 7,603 0.88 2.08 4.55 12
11.54 20.6(e) 1,128 0.80 4.67 5.21 34
10.23 4.3 11 0.80 191.59 5.85 39
10.14 3.8 2,426 0.80 1.91 6.31 1
9.91 6.9 2,250 0.80 3.01 7.16 23
9.95 6.2 2,561 0.80 3.20 6.60 42
10.27 (0.2) 1,743 0.80 5.25 6.43 48
10.59 14.3 862 0.80 10.95 6.51 112
11.88 6.3(n) 1,115 1.70 2.83 3.76 12
11.53 2.85(e) 160 1.70 7.81 5.83 34
11.88 6.3(n) 5,338 1.70 2.83 3.71 12
11.53 2.85(e) 3 1.70 7.81 4.35 34
11.91 6.9 10,354 0.55 1.03 4.96 12
11.54 20.9 10,230 0.55 1.34 5.58 34
10.23 7.2 7,874 0.55 1.13 6.08 39
10.09 8.6 8,549 0.55 1.36 6.43 15
9.92 7.2 2,905 0.55 3.23 7.35 23
9.96 6.5 2,427 0.55 2.87 6.83 42
11.89 6.4(n) 379,872 1.30 1.35 4.20 12
11.53 20.0(e) 335,666 1.30 1.36 4.79 34
10.22 6.4(e) 211,105 1.30 1.55 5.33 39
10.09 7.9(e) 91,569 1.30 1.71 5.65 15
9.91 6.4(e) 30,264 1.30 2.97 6.59 23
9.95 (1.5)(e) 16,307 1.30 2.16 6.11 42
12
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
1. Organization. Loomis Sayles Funds II (the "Trust") is organized as a
Massachusetts business trust and was organized as such on February 20, 1991. The
Trust is registered under the Investment Company Act of 1940 (the "1940 Act"),
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 "Fund" or 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.
The Fund offers Class A, Class B, Class C, Class Y and Class J 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 do not pay a front end sales charge, 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 generally 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 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.
The Fund may hold securities traded in foreign markets. Foreign securities are
valued at the market price in the foreign market. However, if events occurring
after the close of the foreign market (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 fair valued pursuant to procedures
approved by the Board of Trustees.
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.
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.
13
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
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 Foreign 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 March 31, 2004, there were no open forward foreign 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 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 six months ended March 31, 2004,
purchases and sales of securities (excluding short-term investments and U.S.
Government/Agency securities) were $41,094,811 and $34,963,927, respectively.
Purchases and sales of U.S. Government/Agency securities (excluding short-term
investments) were $33,018,684 and $8,551,713, respectively.
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Loomis, Sayles & Company, L.P. ("Loomis Sayles") serves as
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. For the six months ended March 31,
2004, the management fee for the Fund was as follows:
Management Percentage of Average
Fee Daily Net Assets*
- ---------- ---------------------
$727,107 0.400%
*Annualized
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"). CDC IXIS North
America is ultimately owned by three large affiliated French financial services
firms: Caisse des Depots et Consignations; Caisse Nationale des Caisses
d'Epargne; and CNP Assurances, a leading French life insurance company.
14
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
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 State Street Bank and Trust Company ("State Street Bank"), to
serve as sub-administrator. Pursuant to an agreement among the Loomis Sayles
Funds Trusts (the Trust and Loomis Sayles Funds I), the CDC Nvest Funds Trusts
(CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III,
CDC Nvest Cash Management Trust and 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 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.
For the six months ended March 31, 2004, fees paid to CIS for accounting and
administrative expense were $119,276.
c. Transfer Agent Fees. 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. State Street Bank serves
as transfer and shareholder servicing agent for Class J shares.
Classes A, B and C pay service fees monthly to CIS representing the higher
amount based on the following calculations:
(1) The Fund's pro rata portion of an 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 Class A, Class B and Class C accounts
in Load Fixed Income Funds. Load Fixed Income Funds consist of
the Fund, Loomis Sayles High Income Fund, Loomis Sayles Limited
Term Government and Agency Fund, Loomis Sayles Municipal Income
Fund, Loomis Sayles Strategic Income Fund and all fixed income
funds in the CDC Nvest Funds Trusts.
First Next Over
$1.2 billion $5 billion $6.2 billion
------------ ---------- ------------
0.142% 0.135% 0.130%
Each Class of shares is subject to a monthly Class minimum of
$1,500, allocated based on the combined net assets of Class A,
Class B and Class C.
or
(2) An allocated portion, based on eligible assets, of an annual
aggregate minimum fee for the period January 1, 2004 through
December 31, 2004, of $1,502,993. For the period September 15,
2003 through December 31, 2003, the aggregate minimum fee was
$382,986.
Class Y pays service fees monthly to CIS representing the higher
amount based on the following calculations:
(1) The Fund's pro rata portion of an 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.**
Class Y shares are subject to a monthly Class minimum of $1,250.
or
(2) An allocated portion, based on eligible assets, of an annual
aggregate minimum fee for the period January 1, 2004 through
December 31, 2004, of $650,000. For the period September 15, 2003
through December 31, 2003, the aggregate minimum fee was $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 all Funds with Class Y shares
offered within the Loomis Sayles Funds Trusts and the CDC Nvest
Funds Trusts.
In addition, pursuant to other servicing agreements, each Class, except Class J,
pays service fees to other firms that provide similar services for their own
shareholder accounts.
CIS, BFDS and other firms are also reimbursed by the Fund for out-of-pocket
expenses.
For the six months ended March 31, 2004, amounts paid to CIS as compensation for
its services as transfer agent were $34,500.
15
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
d. Service and Distribution Fees. 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 Investment Grade Bond Fund, Class J. The Fund has
entered into a distribution agreement relating to Class J shares with Loomis
Sayles Distributors, L.P. ("Loomis Sayles Distributors"), a wholly-owned
subsidiary of CDC IXIS North America. Although it was the intent of management
and the Board of Trustees of the Fund that the Distribution Agreement with
respect to Class J shares continue in effect for the annual period beginning
November 1, 2003, it is not clearly evident from the records of the Fund that
the Board of Trustees approved the continuance of the Distribution Agreement.
Accordingly, the Board of Trustees determined to approve the Distribution
Agreement on April 23, 2004 effective immediately and intends to submit for
shareholder approval a proposal to approve the Distribution Agreement for the
period November 1, 2003 through April 23, 2004 and to release the escrowed fees
payable thereunder. If shareholders fail to approve this proposal, front-end
sales charge payments retained by Loomis Sayles Distributors, L.P. for the sale
of the Class J shares of the Fund for the period November 1, 2003 through April
23, 2004, which are currently being held in escrow, will be reversed.
Pursuant to Rule 12b-1 under the 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, 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. Although it was the intent of
management and the Board of Trustees of the Fund that the Rule 12b-1 Plan with
respect to Class J shares continue in effect for the annual period beginning
November 1, 2003, it is not clearly evident from the records of the Fund that
the Board of Trustees approved the continuance of the Class J 12b-1 Plan.
Accordingly, the Board of Trustees intends to submit for shareholder approval a
proposal to approve the Rule 12b-1 Plan for Class J shares, and the lease of
escrowed fees payable thereunder, for the period November 1, 2003 through the
date of shareholder approval. The distribution fees payable by the Fund pursuant
to the Rule 12b-1 Plan with respect to Class J shares are being escrowed pending
shareholder approval. Should the shareholders fail to ratify the Fund's Class J
shares 12b-1 Plan, expenses accrued from November 1, 2003 to the date of the
shareholders' vote would be reversed, which would cause an increase in the net
asset value of the Fund. If such an outcome occurs the Fund would be reimbursed
for any losses resulting from this expense reversal.
For the six months ended March 31, 2004, the Fund paid the following service and
distribution fees:
Service Fee Distribution Fee
- ----------------------------------------- ------------------------------
Class A Class B Class C Class J Class B Class C Class J
- ------- ------- ------- -------- ------- ------- --------
$4,174 $834 $2,110 $434,635 $2,504 $6,330 $869,269
Commissions (including CDSCs) on Fund shares paid to CDC IXIS Distributors by
investors in shares of the Fund for the six months ended March 31, 2004, were $
101,312.
e. Trustees Fees and Expenses. The Loomis Sayles Funds Trusts and CDC Nvest
Funds Trusts do not pay any compensation directly to their officers or Trustees
who are directors, officers or employees of Loomis Sayles, Loomis Sayles
Distributors, CDC IXIS Distributors, CDC IXIS North America, CIS or their
affiliates. Each Trustee who is an independent Trustee of the Loomis Sayles
Funds Trusts and 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 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 Board or Committee meeting in
excess of four per year, at the rate of $4,500 and $1,750, respectively. These
fees are allocated to the various series of the Loomis Sayles Funds Trusts and
the 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
the Fund or certain other series of the Loomis Sayles Funds Trusts or CDC Nvest
Funds Trusts on the normal payment date. Deferred amounts remain in the Fund
until distributed in accordance with the Plan.
f. Publishing Services. CIS performs certain desktop publishing services for the
Fund. Fees for these services are presented in the statement of operations as
part of shareholder reporting. For the six months ended March 31, 2004, the
amount paid to CIS as compensation for these services was $37.
16
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
5. Line of Credit. The Fund together with certain other funds of the Loomis
Sayles Funds Trusts participates in a $25 million committed unsecured revolving
line of credit provided by State Street Bank. 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. For the six months ended March 31,
2004, the Fund had no borrowings under the agreement.
6. Shareholders. At March 31, 2004, the Loomis Sayles Employees' Profit Sharing
Retirement Plan held 178,261 shares of beneficial interest of the Fund.
7. Expense Reductions and Contingent Expense Obligations. Loomis Sayles has
given a binding undertaking to the Fund to defer its management fees and, if
necessary, bear certain expenses associated with the Fund to limit its operating
expenses. This undertaking is in effect until January 31, 2005 and will be
reevaluated on an annual basis. For the six months ended March 31, 2004, in
addition to any waiver of management fees as discussed in Note 4, Class level
expenses in the amount of $149,169 have been reimbursed.
If in the following fiscal year the actual operating expenses of the Fund are
less than the expense limit for the Fund and the Fund had previously received a
deferral or reimbursement, the Fund is required to pay an amount of additional
expense that is the lower of the difference between the actual operating
expenses and the expense limit or the actual amount of fees previously waived or
expenses reimbursed.
At March 31, 2004, 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
- ----------------------------------------------- Expiration Possible Reimbursement
Class A Class B Class C Class Y Class J of Waiver Until September 2005
- ------- ------- ------- ------- ------- ---------------- ----------------------
0.95% 1.70% 1.70% 0.55% 1.30% January 31, 2005 $149,169
For the period October 1, 2003 to January 31, 2004, the expense limit as a
percentage of average daily net assets for Class A was 0.80%.
17
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
8. Capital Shares. The Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
Six Months Ended
March 31, 2004 Year Ended
(unaudited) September 30, 2003
-------------------- ---------------------------
Class A Shares Amount Shares(a)(b) Amount(a)(b)
- ------- ------- ---------- ------------ ------------
Issued from the sale of shares 556,524 $6,553,985 100,705 $1,170,450
Issued in connection with the reinvestment
of distributions 5,970 69,211 2,090 23,643
Issued in Admin Class conversion -- -- 11 123
Redeemed (21,659) (255,193) (6,093) (70,878)
------- ---------- ------- ----------
Net change 540,835 $6,368,003 96,713 $1,123,338
======= ========== ======= ==========
Class B Shares Amount Shares(c) Amount(c)
- ------- ------ -------- --------- ---------
Issued from the sale of shares 80,292 $935,119 13,845 $158,000
Issued in connection with the reinvestment
of distributions 608 7,053 -- --
Redeemed (934) (10,969) -- --
------ -------- ------ --------
Net change 79,966 $931,203 13,845 $158,000
====== ======== ====== ========
Class C Shares Amount Shares(c) Amount(c)
- ------- ------- ---------- --------- ---------
Issued from the sale of shares 469,800 $5,524,339 223 $2,500
Issued in connection with the reinvestment
of distributions 183 2,124 -- --
Redeemed (20,758) (245,810) -- --
------- ---------- --- ------
Net change 449,225 $5,280,653 223 $2,500
======= ========== === ======
Class Y Shares Amount Shares(b) Amount(b)
- ------- -------- ----------- --------- -----------
Issued from the sale of shares 190,464 $ 2,216,467 375,758 $ 4,112,463
Issued in connection with the reinvestment
of distributions 24,780 286,540 42,227 461,655
Redeemed (232,097) (2,654,609) (301,255) (3,257,721)
-------- ----------- -------- -----------
Net change (16,853) $ (151,602) 116,730 $ 1,316,397
======== =========== ======== ===========
Class J Shares Amount Shares Amount
- ------- ---------- ------------ ----------- -------------
Issued from the sale of shares 8,511,100 $ 99,841,877 21,330,400 $ 238,341,332
Issued in connection with the reinvestment
of distributions -- -- -- --
Redeemed (5,682,550) (66,380,830) (12,871,900) (142,214,014)
---------- ------------ ----------- -------------
Net change 2,828,550 $ 33,461,047 8,458,500 $ 96,127,318
========== ============ =========== =============
Admin Class Shares(a) Amount(a)
- ----------- --------- ---------
Issued from the sale of shares -- $ --
Issued in connection with the reinvestment
of distributions 38 407
Redeemed in Admin Class Conversion (11) (123)
Redeemed (1,061) (12,420)
------ --------
Net change (1,034) $(12,136)
====== ========
(a) On May 21, 2003, the outstanding Admin Class Shares were automatically
converted into Retail Class Shares.
(b) On September 12, 2003, Retail Class converted to Class A shares and
Institutional Class converted to Class Y shares.
(c) From September 12, 2003, commencement of Class operations.
18
This Page Intentionally Left Blank
[LOGO] CDC NvestFunds(SM)
CDC IXIS Asset Management Distributors
- --------------------------------------------------------------------------------
Equity Funds
Semiannual Report
March 31, 2004
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund
[LOGO] LOOMIS . SAYLES & COMPANY, L.P.
Loomis Sayles International Equity Fund
Loomis Sayles Research Fund
TABLE OF CONTENTS
Management Discussion and Performance ...............Page 1
Schedule of Investments .............................Page 8
Financial Statements ................................Page 13
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund
- --------------------------------------------------------------------------------
Portfolio Profile
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks are generally more sensitive to market movements because their
stock prices are based on future expectations. This fund may invest in foreign
securities, which involves risks not associated with domestic securities, such
as currency fluctuations, differing political and economic conditions, and
different accounting standards.
Management Discussion
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund delivered a 14.74% total return based on net asset
value of Class A shares for the six months ended March 31, 2004. During the same
period, the benchmark Russell 1000 Growth Index returned 11.28%. The economy
continued to grow during the period, encouraging investor confidence in stocks,
although most of the positive performance in the equity market occurred during
the fourth quarter of 2003, as returns were not as strong in the first quarter
of 2004.
Fund focused on cyclical growth opportunities
We maintained a consistent strategy during the six-month period, focusing on the
stocks of those larger companies with the best opportunities to capitalize on
the global economic recovery. We continue to focus the portfolio on economically
sensitive corporations, which results in large weightings in the financial
services, consumer discretionary and technology sectors. Building on this
foundation, we emphasized healthcare companies that have consistently delivered
double-digit and top- and bottom-line growth over the past few years. We
modestly reduced the fund's technology holdings by cutting back our positions in
the semiconductor and software industries, while adding to holdings in
communications and wireless equipment. We also redirected some assets into the
producer durables sector, including homebuilding, industrial and semiconductor
capital equipment companies.
Healthcare, finance and tech led results
Healthcare, financial services and selected technology companies made the
greatest contribution to performance. Within healthcare, notable contributors
included Zimmer Holdings, a producer of orthopedic implants, and Caremark, a
pharmacy benefit management company enjoying healthy business gains. Countrywide
Financial led performance in the financial services sector, as it took advantage
of the low interest-rate environment that fueled demand for new home mortgages
and refinancings. Wireless equipment company Qualcomm was a top performer,
reflecting strong sales of its CDMA technology, which is used in many wireless
devices. In the consumer discretionary sector, specialty textile maker Coach
reported another strong quarter, as the company continues to profit from a
strong product line-up, expansion into new categories and robust growth in
Japan.
Producer durable sector was a negative
The producer durables sector was negative and the weakest performer within that
group was Applied Materials, a semiconductor equipment company. Although Applied
Materials rose during the period, we purchased it at what proved to be the wrong
time. Other stocks that hurt performance included pharmaceutical company Wyeth
and Internet retailer Amazon.com. Wyeth was hurt by the continuing controversy
over its diet drug fen-phen/Redux, while Amazon.com's stock declined after it
announced disappointing earnings in January. We sold both Wyeth and Amazon.com.
Expectations for continued growth
The portfolio continues to focus on companies across several sectors that we
believe provide the best opportunities to capitalize on either uniquely dynamic
growth opportunities or those companies that can profit from the global economic
expansion. We began the year optimistic about corporate earnings, and signs
point to continuing strength this year. We also believe corporate profit growth
should remain in double-digit territory for the broader market in 2004. The
portfolio continues to feature economically sensitive companies, including
technology, financial services and the consumer discretionary sector. We balance
this with a sizeable weight in healthcare companies whose earnings tend to be
less dependent on the strength of the economy. This strategy has worked well for
us during the market's revival and we expect the same as we look ahead.
1
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Loomis Sayles Growth Fund
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Investment Results through March 31, 2004
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Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
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Growth of a $10,000 Investment in Class A Shares/1/
- --------------------------------------------------------------------------------
[CHART]
Line chart
March 31, 1994 through March 31, 2004
Class A Lipper Russell
@ Maximum Large Cap 1000 S & P
Month Net Asset Sales Growth Funds Growth 500
End Value/2/ Charge/3/ Index Index Index
- ---------- --------- --------- ------------ ------- ------
3/31/1994 10,000 9,425 10,000 10,000 10000
4/30/1994 10,088 9,508 10,049 10,046 10128
5/31/1994 10,112 9,530 10,109 10,198 10294
6/30/1994 9,616 9,063 9,732 9,896 10042
7/31/1994 9,944 9,372 10,011 10,234 10372
8/31/1994 10,280 9,689 10,525 10,804 10797
9/30/1994 10,024 9,448 10,274 10,658 10533
10/31/1994 10,416 9,817 10,537 10,908 10770
11/30/1994 9,936 9,365 10,148 10,559 10378
12/31/1994 10,028 9,451 10,227 10,736 10531
1/31/1995 10,148 9,565 10,307 10,965 10805
2/28/1995 10,421 9,822 10,662 11,425 11226
3/31/1995 10,702 10,086 10,965 11,758 11557
4/30/1995 10,838 10,215 11,264 12,015 11897
5/31/1995 11,183 10,540 11,636 12,433 12373
6/30/1995 11,913 11,228 12,231 12,913 12660
7/31/1995 12,475 11,757 12,896 13,450 13080
8/31/1995 12,764 12,030 12,967 13,465 13113
9/30/1995 13,084 12,332 13,449 14,085 13666
10/31/1995 12,972 12,226 13,373 14,095 13617
11/30/1995 13,269 12,506 13,793 14,643 14215
12/31/1995 13,119 12,365 13,799 14,727 14489
1/31/1996 13,110 12,357 14,205 15,219 14982
2/29/1996 13,532 12,754 14,524 15,498 15121
3/31/1996 13,549 12,770 14,531 15,518 15267
4/30/1996 14,331 13,507 14,877 15,926 15492
5/31/1996 14,701 13,856 15,316 16,482 15891
6/30/1996 14,727 13,880 15,178 16,505 15952
7/31/1996 13,394 12,624 14,365 15,538 15247
8/31/1996 13,961 13,159 14,796 15,939 15569
9/30/1996 14,915 14,057 15,826 17,099 16445
10/31/1996 15,523 14,631 16,023 17,202 16898
11/30/1996 16,176 15,246 17,060 18,494 18176
12/31/1996 15,735 14,830 16,636 18,132 17816
1/31/1997 17,117 16,133 17,690 19,404 18929
2/28/1997 16,180 15,250 17,436 19,272 19077
3/31/1997 15,220 14,345 16,543 18,229 18293
4/30/1997 15,080 14,212 17,451 19,440 19385
5/31/1997 16,566 15,614 18,635 20,843 20565
6/30/1997 17,093 16,110 19,415 21,677 21487
7/31/1997 18,826 17,743 21,271 23,594 23196
8/31/1997 18,390 17,332 20,111 22,213 21897
9/30/1997 20,025 18,874 21,222 23,306 23096
10/31/1997 19,807 18,668 20,485 22,445 22325
11/30/1997 19,213 18,109 20,940 23,398 23358
12/31/1997 19,544 18,420 21,226 23,660 23759
1/31/1998 18,737 17,659 21,602 24,368 24022
2/28/1998 20,056 18,903 23,251 26,201 25755
3/31/1998 20,755 19,561 24,333 27,245 27074
4/30/1998 21,345 20,117 24,741 27,622 27346
5/31/1998 20,522 19,342 24,188 26,838 26876
6/30/1998 21,438 20,205 25,572 28,482 27968
7/31/1998 20,274 19,108 25,560 28,294 27670
8/31/1998 16,206 15,275 21,386 24,047 23670
9/30/1998 17,992 16,957 22,941 25,895 25186
10/31/1998 19,218 18,113 24,421 27,976 27234
11/30/1998 19,342 18,230 26,098 30,104 28885
12/31/1998 22,003 20,737 28,968 32,818 30550
1/31/1999 22,682 21,378 30,848 34,745 31827
2/28/1999 21,748 20,497 29,582 33,158 30838
3/31/1999 23,680 22,319 31,263 34,904 32072
4/30/1999 23,999 22,619 31,370 34,949 33314
5/31/1999 23,341 21,998 30,331 33,875 32527
6/30/1999 24,976 23,540 32,439 36,248 34332
7/31/1999 23,871 22,499 31,421 35,096 33260
8/31/1999 24,063 22,679 31,428 35,669 33096
9/30/1999 23,489 22,139 31,109 34,920 32188
10/31/1999 25,294 23,840 33,494 37,557 34225
11/30/1999 27,018 25,465 35,150 39,583 34921
12/31/1999 31,283 29,485 39,053 43,700 36978
1/31/2000 30,061 28,333 37,486 41,651 35120
2/29/2000 33,796 31,853 39,457 43,687 34455
3/31/2000 34,695 32,700 42,226 46,814 37826
4/30/2000 31,929 30,093 38,959 44,586 36688
5/31/2000 29,808 28,094 36,716 42,341 35935
6/30/2000 32,782 30,897 39,144 45,550 36821
7/31/2000 32,482 30,614 38,351 43,651 36245
8/31/2000 35,986 33,917 41,668 47,604 38497
9/30/2000 34,119 32,157 38,491 43,101 36464
10/31/2000 31,560 29,745 36,455 41,061 36310
11/30/2000 26,184 24,678 31,564 35,009 33447
12/31/2000 26,208 24,701 31,368 33,901 33611
1/31/2001 25,476 24,011 32,281 36,243 34804
2/28/2001 22,423 21,133 27,283 30,090 31630
3/31/2001 20,468 19,292 24,449 26,816 29626
4/30/2001 22,007 20,742 27,074 30,207 31929
5/31/2001 21,275 20,051 26,868 29,762 32143
6/30/2001 21,006 19,798 26,093 29,073 31360
7/31/2001 20,078 18,923 25,158 28,347 31052
8/31/2001 18,539 17,473 23,246 26,029 29108
9/30/2001 16,751 15,788 20,908 23,430 26757
10/31/2001 17,686 16,669 21,776 24,659 27267
11/30/2001 19,231 18,126 23,771 27,028 29359
12/31/2001 19,719 18,585 23,881 26,977 29616
1/31/2002 19,679 18,547 23,341 26,501 29184
2/28/2002 18,621 17,551 22,375 25,401 28621
3/31/2002 19,435 18,317 23,276 26,279 29698
4/30/2002 18,825 17,742 21,726 24,135 27897
5/31/2002 18,703 17,627 21,330 23,551 27692
6/30/2002 17,402 16,401 19,593 21,372 25719
7/31/2002 15,938 15,022 18,118 20,197 23715
8/31/2002 15,938 15,022 18,218 20,258 23870
9/30/2002 14,840 13,987 16,453 18,156 21276
10/31/2002 15,938 15,022 17,720 19,822 23148
11/30/2002 16,345 15,405 18,453 20,898 24511
12/31/2002 15,166 14,294 17,168 19,455 23071
1/31/2003 15,044 14,179 16,772 18,983 22466
2/28/2003 14,962 14,102 16,591 18,896 22129
3/31/2003 15,288 14,408 16,902 19,247 22344
4/30/2003 16,263 15,328 18,140 20,670 24185
5/31/2003 17,198 16,210 19,029 21,702 25459
6/30/2003 17,239 16,248 19,186 22,001 25784
7/31/2003 17,971 16,938 19,743 22,548 26238
8/31/2003 18,459 17,397 20,228 23,109 26750
9/30/2003 17,930 16,899 19,798 22,862 26466
10/31/2003 19,638 18,509 20,999 24,146 27963
11/30/2003 19,801 18,662 21,199 24,399 28209
12/31/2003 20,045 18,892 21,796 25,242 29689
1/31/2004 20,492 19,313 22,214 25,758 30234
2/29/2004 20,654 19,467 22,310 25,922 30654
3/31/2004 20,573 19,395 22,061 25,441 30191
Average Annual Total Returns -- March 31, 2004
6 Months/5/ 1 Year/5/ 5 Years/5/ 10 Years/5/
----------- --------- ---------- -----------
Class A/1/
Net Asset Value/2/ 14.74% 34.57% -2.77% 7.48%
With Maximum Sales Charge/3/ 8.12 26.82 -3.92 6.85
Class B/1/
Net Asset Value/2/ 14.29 33.69 -3.50 6.75
With CDSC/4/ 9.29 28.69 -3.70 6.75
Class C/1/
Net Asset Value/2/ 14.29 33.69 -3.50 6.75
With CDSC/4/ 13.29 32.69 -3.50 6.75
Class Y/1/
Net Asset Value/2/ 14.73 34.54 -2.58 7.65
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Comparative Performance 6 Months 1 Year 5 Years 10 Years
- ----------------------- -------- ------ ------- --------
Russell 1000 Growth Index 11.28% 32.18% -6.13% 9.79%
Lipper Large Cap Growth Funds Index 11.43 30.52 -6.73 8.23
S&P 500 Index 14.08 35.12 -1.20 11.68
Lipper Large Cap Growth Funds Avg. 10.79 29.15 -4.95 8.13
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 3/31/04 9/30/03
- ---------------- ------- -------
Common Stocks 99.3 98.0
Other Assets 0.7 2.0
% of Net Assets
as of
-----------------
Ten Largest Holdings 3/31/04 9/30/03
- -------------------- ------- -------
Cisco Systems, Inc. 4.1 3.6
Zimmer Holdings, Inc. 3.2 3.6
eBay, Inc. 3.2 1.9
Anthem, Inc. 3.0 --
Texas Instruments, Inc. 2.9 --
Coach, Inc. 2.9 2.5
Lehman Brothers Holdings, Inc. 2.7 --
Caremark Rx, Inc. 2.7 2.1
UnitedHealth Group, Inc. 2.6 3.8
Dell, Inc. 2.6 3.0
% of Net Assets
as of
-----------------
Five Largest Industries 3/31/04 9/30/03
- ----------------------- ------- -------
Communications Equipment 9.9 7.1
Semiconductors & Equipment 9.9 7.8
Capital Markets 8.5 9.6
Healthcare Providers & Services 8.3 5.9
Healthcare Equipment & Supplies 7.7 5.1
Portfolio holdings and asset allocations will vary.
See page 7 for a description of the indexes.
Notes to Charts
/1/ Returns shown in the chart include 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. 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 9/12/03, 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C shares performance assumes 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
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Loomis Sayles International Equity Fund
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Portfolio Profile
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Objective:
High total investment return through a combination of capital appreciation and
current income
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Strategy:
Invests primarily in common stocks or other equity securities of large companies
organized or headquartered outside of the United States
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Fund Inception:
May 10, 1991
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Managers:
Eswar Menon
Alexander Muromcew
John Tribolet
Loomis, Sayles & Company, L.P.
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Symbols:
Class A LIERX
Class B LSIBX
Class C LSICX
Class Y LSIEX
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What You Should Know:
Foreign and emerging market securities have specific risks. These risks may
include political, economic, regulatory, and currency risk. Emerging markets may
be more subject to these risks than developed markets. Growth stocks are
generally more sensitive to market movements because their stock prices are
based on future expectations.
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Management Discussion
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Loomis Sayles International Equity Fund's total return for the six months ended
March 31, 2004 was 21.57%, based on the net asset value of Class A shares. Its
emphasis on quality growth companies kept the fund's performance in line with
its benchmark, the MSCI EAFE Index, which had a total return of 22.27% for the
period.
Economic and political backdrop was volatile
International equity markets continued their recovery over the past six months,
as conflicting economic news and difficult political events roiled the markets.
Investor concerns about the economic recovery were heightened by sluggish
employment gains in the U.S. and weakened consumer confidence late in the first
quarter of 2004. Worries about possible inflation and interest rate increases
added to concerns about the near-term future of the markets. Spurring concern
was the U.S. dollar's continued slide versus the major currencies and commodity
and oil price increases that reached new highs. Terrorist attacks on the
European continent and increased military difficulties in Iraq and Afghanistan
added to investor uncertainty.
World stock markets generally performed well
Despite these negatives, many companies reported double-digit earnings growth
and revised their forecasts upward. The best performing regions of the world
were in Asia and emerging-market countries. From a capitalization perspective,
small-cap companies performed better, as is traditional in the early stages of
an economic recovery. Value companies outperformed, as investors moved money
into stocks that had been beaten down during the past three years.
Energy, materials and telecom holdings were positive
The fund's positive six-month results reflect investments in quality growth
companies that are experiencing increasing revenues and earnings thanks to the
economic recovery. Individual stocks that performed well included oil producers
Gazprom (Russia) and PetroKazakhstan (Canada), chemical company Kaneka (Japan),
mining companies Anglo American (South Africa), BHP Billiton (U.K.), and
Companhia Vale do Rio Doce (Brazil), as well as the Norwegian telecomm company
Telenor.
Consumer discretionary, industrials and information technology sectors hurt
Specific holdings in these sectors are BMW and Nissan - the German and Japanese
manufacturers of automobiles - media stocks Fuji Television (Japan) and M6
Metropole Television (France). Irish airline Ryanair declined from its former
leadership position. A relatively underweight position in Sweden's Ericsson also
held the fund back, as this information technology company was among the
formerly downtrodden growth companies that returned to favor during the period.
For the past six months, the portfolio has been underweight in Japan, but we
have been slowly increasing this position as the economy improved. However, the
Japanese companies we selected are active exporters, which suffered as the
weakening dollar relative to the yen has made exports to the U.S. more
expensive. The portfolio's emphasis on Japan is now equal to the benchmark, and
it has a greater weighting in Asia. We have downplayed continental Europe and
increased exposure to emerging markets in India, Mexico, Brazil and Russia.
Global outlook seems strongest in U.S., Asia and emerging markets
All indications are that economic growth is taking hold in the U.S., driving
better growth overseas. Continental Europe continues to lag other regions.
However, Northern and Eastern Europe are benefiting from the reforms and
opportunities in Russia. We expect the markets to be volatile going forward as
concerns over the war on terrorism and the prospect of inflation continue, but
we are optimistic for the year as a whole.
3
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Loomis Sayles International Equity Fund
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Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares/1/
- --------------------------------------------------------------------------------
March 31, 1994 through March 31, 2004
[CHART]
Line chart
Class A Lipper
@ Maximum International MSCI
Month Net Asset Sales Funds EAFE
End Value/2/ Charge/3/ Index Index
- ---------- --------- --------- ------------- ------
3/31/1994 10,000 9,425 10,000 10,000
4/30/1994 10,101 9,520 10,265 10,427
5/31/1994 9,946 9,374 10,249 10,369
6/30/1994 9,837 9,272 10,088 10,518
7/31/1994 10,108 9,527 10,399 10,621
8/31/1994 10,155 9,571 10,758 10,875
9/30/1994 10,000 9,425 10,480 10,535
10/31/1994 10,031 9,454 10,667 10,888
11/30/1994 9,737 9,177 10,170 10,367
12/31/1994 9,816 9,252 10,034 10,435
1/31/1995 9,630 9,077 9,536 10,036
2/28/1995 9,901 9,332 9,534 10,010
3/31/1995 10,028 9,451 9,785 10,637
4/30/1995 10,510 9,905 10,144 11,040
5/31/1995 10,848 10,224 10,244 10,911
6/30/1995 10,823 10,200 10,283 10,723
7/31/1995 11,110 10,471 10,848 11,393
8/31/1995 10,620 10,009 10,665 10,961
9/30/1995 10,831 10,208 10,843 11,178
10/31/1995 10,611 10,001 10,618 10,881
11/30/1995 10,518 9,913 10,728 11,186
12/31/1995 10,664 10,051 11,040 11,640
1/31/1996 11,030 10,396 11,300 11,690
2/29/1996 11,140 10,500 11,349 11,733
3/31/1996 11,159 10,517 11,526 11,985
4/30/1996 11,470 10,811 11,902 12,336
5/31/1996 11,424 10,767 11,888 12,112
6/30/1996 11,525 10,862 11,997 12,183
7/31/1996 11,250 10,603 11,592 11,830
8/31/1996 11,461 10,802 11,743 11,859
9/30/1996 11,678 11,007 12,006 12,177
10/31/1996 11,871 11,188 11,958 12,056
11/30/1996 12,384 11,672 12,521 12,539
12/31/1996 12,627 11,901 12,632 12,380
1/31/1997 12,703 11,973 12,649 11,950
2/28/1997 12,607 11,883 12,877 12,148
3/31/1997 12,655 11,928 12,945 12,195
4/30/1997 12,636 11,910 13,002 12,263
5/31/1997 13,241 12,479 13,735 13,064
6/30/1997 13,816 13,022 14,394 13,787
7/31/1997 14,261 13,441 14,856 14,013
8/31/1997 13,007 12,259 13,785 12,970
9/30/1997 13,881 13,083 14,670 13,699
10/31/1997 12,686 11,956 13,556 12,649
11/30/1997 12,404 11,691 13,443 12,523
12/31/1997 12,467 11,750 13,548 12,635
1/31/1998 12,953 12,208 13,876 13,216
2/28/1998 13,771 12,979 14,757 14,067
3/31/1998 14,456 13,625 15,558 14,503
4/30/1998 14,478 13,646 15,797 14,621
5/31/1998 14,091 13,281 15,828 14,554
6/30/1998 13,539 12,760 15,690 14,667
7/31/1998 13,749 12,958 15,931 14,819
8/31/1998 12,179 11,479 13,639 12,986
9/30/1998 11,826 11,146 13,215 12,592
10/31/1998 12,610 11,885 14,186 13,908
11/30/1998 13,218 12,458 14,897 14,624
12/31/1998 13,586 12,805 15,263 15,204
1/31/1999 13,563 12,783 15,356 15,163
2/28/1999 12,940 12,196 14,961 14,805
3/31/1999 13,133 12,378 15,459 15,426
4/30/1999 13,677 12,890 16,179 16,055
5/31/1999 13,246 12,484 15,578 15,232
6/30/1999 13,937 13,136 16,317 15,829
7/31/1999 14,583 13,745 16,681 16,303
8/31/1999 14,889 14,033 16,813 16,366
9/30/1999 15,558 14,663 16,867 16,535
10/31/1999 16,770 15,806 17,456 17,158
11/30/1999 20,576 19,393 18,736 17,757
12/31/1999 25,745 24,265 21,038 19,355
1/31/2000 24,566 23,153 19,807 18,128
2/29/2000 28,959 27,294 21,114 18,620
3/31/2000 26,768 25,229 21,168 19,345
4/30/2000 23,591 22,234 19,825 18,331
5/31/2000 21,761 20,510 19,281 17,886
6/30/2000 22,676 21,372 20,173 18,590
7/31/2000 21,208 19,988 19,519 17,814
8/31/2000 21,870 20,612 19,849 17,973
9/30/2000 20,835 19,637 18,693 17,101
10/31/2000 19,041 17,946 18,058 16,701
11/30/2000 17,819 16,795 17,296 16,078
12/31/2000 18,577 17,509 17,942 16,653
1/31/2001 18,552 17,485 18,047 16,645
2/28/2001 16,847 15,878 16,781 15,399
3/31/2001 15,445 14,557 15,601 14,379
4/30/2001 16,266 15,331 16,550 15,388
5/31/2001 16,051 15,128 16,149 14,857
6/30/2001 15,786 14,878 15,693 14,255
7/31/2001 15,331 14,450 15,285 13,996
8/31/2001 14,889 14,033 14,979 13,645
9/30/2001 13,614 12,831 13,347 12,266
10/31/2001 13,900 13,101 13,708 12,579
11/30/2001 14,072 13,263 14,220 13,044
12/31/2001 14,257 13,437 14,474 13,122
1/31/2002 13,511 12,734 13,889 12,426
2/28/2002 13,640 12,856 14,084 12,513
3/31/2002 14,185 13,369 14,829 13,257
4/30/2002 14,013 13,207 14,933 13,292
5/31/2002 14,185 13,369 15,147 13,472
6/30/2002 13,554 12,775 14,549 12,941
7/31/2002 12,292 11,585 13,096 11,665
8/31/2002 12,263 11,558 13,107 11,641
9/30/2002 11,044 10,409 11,695 10,394
10/31/2002 11,431 10,774 12,302 10,953
11/30/2002 12,005 11,315 12,885 11,451
12/31/2002 11,503 10,842 12,472 11,067
1/31/2003 11,087 10,449 12,015 10,606
2/28/2003 11,058 10,422 11,660 10,364
3/31/2003 10,858 10,233 11,374 10,168
4/30/2003 11,704 11,031 12,500 11,176
5/31/2003 12,450 11,734 13,303 11,864
6/30/2003 12,722 11,991 13,617 12,157
7/31/2003 12,894 12,153 13,999 12,453
8/31/2003 13,339 12,572 14,403 12,756
9/30/2003 13,626 12,842 14,692 13,152
10/31/2003 14,787 13,937 15,568 13,973
11/30/2003 14,917 14,059 15,881 14,285
12/31/2003 15,941 15,025 16,962 15,402
1/31/2004 16,057 15,134 17,326 15,621
2/29/2004 16,391 15,449 17,722 15,984
3/31/2004 16,565 15,610 17,809 16,080
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
6 Months/5/ 1 Year/5/ 5 Years/5/ 10 Years/5/
----------- --------- ---------- -----------
Class A/1/
Net Asset Value/2/ 21.57% 52.57% 4.75% 5.18%
With Maximum Sales Charge/3/ 14.58 43.83 3.52 4.55
Class B/1/
Net Asset Value/2/ 21.03 51.09 3.79 4.23
With CDSC/4/ 16.03 46.09 3.46 4.23
Class C/1/
Net Asset Value/2/ 20.99 51.04 3.78 4.23
With CDSC/4/ 19.99 50.04 3.78 4.23
Class Y/1/
Net Asset Value/2/ 21.83 52.89 5.06 5.40
- --------------------------------------------------------------------------------
Comparative Performance 6 Months 1 Year 5 Years 10 Years
- ----------------------- -------- ------ ------- --------
MSCI EAFE Index 22.27% 58.15% 0.83% 4.86%
Lipper International Funds Index 21.21 56.57 2.87 5.94
Lipper International Funds Avg. 20.77 53.63 1.76 5.10
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 3/31/04 9/30/03
- --------------------------------------------------------------------------------
Common Stocks 97.9 95.4
Preferred Stocks 1.0 0.5
Short Term Investments
and Other 1.1 4.1
% of Net Assets
as of
------------------
Ten Largest Holdings 3/31/04 9/30/03
- --------------------------------------------------------------------------------
Roche Holding AG 2.2 1.0
Erste Bank der Sparkassen AG 1.8 1.6
Samsung Electronics 1.8 1.0
Synthes-Stratec, Inc. 1.6 1.1
Wienerberger AG 1.6 --
Vodafone Group Plc 1.4 1.9
MAN AG 1.4 1.1
Mitsubishi Tokyo Financial, Inc. 1.4 --
Smith & Nephew Plc 1.3 1.5
Embraer-Empresa Aeronautica 1.3 0.8
% of Net Assets
as of
------------------
Five Largest Countries 3/31/04 9/30/03
- --------------------------------------------------------------------------------
Japan 23.2 23.3
United Kingdom 13.2 16.2
Switzerland 8.5 5.4
Germany 7.1 6.0
Canada 4.6 3.9
Portfolio holdings and asset allocations will vary.
See page 7 for a description of the indexes.
Notes to Charts
/1/ Returns shown in the chart include 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. 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 9/12/03, 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C shares performance assumes 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
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks are generally more sensitive to market movements than value
stocks. Foreign securities involve risks not associated with domestic
securities, such as currency fluctuations, differing political and economic
conditions, and different accounting standards. Small-cap stocks are generally
more volatile than the market.
- --------------------------------------------------------------------------------
Management Discussion
- --------------------------------------------------------------------------------
Loomis Sayles Research Fund's emphasis on fundamental research and stock
selection served it well during the six months ended March 31, 2004, a period of
shifting trends in the stock market. For the first half of the fiscal year, the
fund's Class A shares had a total return of 14.66%, based on net asset value.
During the same period, the benchmark Standard & Poor's 500 Index returned
14.08%.
Healthcare, consumer discretionary, financial selections aided performance
Healthcare was the top-performing sector during the period, as selections in
medical device companies, which we had favored, and medical service providers
appreciated sharply. Device companies such as Guidant, St. Jude Medical, Zimmer
Holdings and Boston Scientific all posted strong gains, as did service
providers, such as health plan manager Aetna and pharmacy benefit manager
Caremark. Our decision to de-emphasize large pharmaceutical companies also
helped during a period when their growth rates continued to lag other sectors.
In the consumer discretionary sector, several travel-related companies boosted
fund performance, including Mandalay Resort Group and Royal Caribbean Cruises
Ltd. Within the financial services industry, Countrywide Financial was the top
performer, as the company continued to benefit from low interest rates that
aided the home mortgage and refinancing business. Among individual holdings,
Tyco International, a diversified industrial company, was a notable contributor
to performance as its restructuring program progressed. Consistent with our
style, we kept sector weightings close to those of the S&P 500 and sought to add
value through stock selection rather than sector emphasis.
Tech stocks were disappointing
After strong performance during most of 2003, the fund's technology holdings
proved to be the most significant detractors. Such tech stocks as semiconductor
equipment company Applied Materials, a recent addition to the portfolio, fell in
December as investors sold their position to take profits. Other selections that
underperformed during the period included software company VERITAS, which had to
restate its earnings, and semiconductor leader Intel, which fell victim to
excess inventories of personal computer notebooks. However, we continued to like
the prospects of both companies and retained them in the portfolio.
Our telecommunications selections also detracted from performance. CenturyTel
suffered the greatest loss when it had to lower its earnings estimate. However,
we believe the stock continues to offer attractive total return potential and
continued to hold it at the end of the period. Our lack of exposure to pure
wireless service providers also proved to be a detriment during a period in
which speculation about mergers helped push valuations up. At this time, we
believe regional bell operating companies offer better opportunities than
wireless service providers.
Potential for strong equity performance persists
Although 2004 got off to a somewhat rocky start, we believe virtually all the
elements remain in place for strong equity markets, including low inflation,
reasonable stock valuations, rising earnings and cash flows, and low interest
rates. In addition, the weak U.S. dollar gives support to the earnings of
large-cap companies with global operations by making their products more
competitive. Even the sluggish job market has shown signs of turning around, as
evidenced by the Department of Labor's report that 308,000 new jobs were created
in March. Having said that, we suspect stock prices may remain volatile as the
presidential election season generates more heat. We believe individual stock
selection, rather than investment style or sector weightings, should be the most
important factor in performance. Overall, we have positioned the portfolio to
benefit from a strengthening economy across all sectors.
5
- --------------------------------------------------------------------------------
Loomis Sayles Research Fund
- --------------------------------------------------------------------------------
Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares1
- --------------------------------------------------------------------------------
July 31, 2000 through March 31, 2004
[CHART]
Line Chart
Class A 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 6,534 7,138 7,302
10/31/2003 7,375 6,951 7,487 7,715
11/30/2003 7,465 7,036 7,550 7,783
12/31/2003 7,758 7,312 7,913 8,191
1/31/2004 7,859 7,407 8,025 8,341
2/29/2004 8,020 7,559 8,120 8,457
3/31/2004 7,949 7,493 7,993 8,330
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
Since Fund
6 Months/6/ 1 Year/6/ Inception/6/
----------- --------- ------------
Class A/1/
Net Asset Value/2/ 14.66% 34.09% -6.07%
With Maximum Sales Charge/3/ 8.08 26.38 -7.57
Class B/1/
Net Asset Value/2/ 14.15 32.83 -6.93
With CDSC/4/ 9.15 27.83 -7.69
Class C/1/
Net Asset Value/2/ 14.06 32.72 -6.96
With CDSC/4/ 13.06 31.72 -6.96
Class Y/1/
Net Asset Value/2/ 14.64 34.46 -5.84
- --------------------------------------------------------------------------------
Since Fund
Comparative Performance 6 Months 1 Year Inception/5/
- ----------------------- -------- ------ ------------
S&P 500 Index 14.08% 35.12% -4.86%
Lipper Large Cap Core Funds Index 11.97 30.10 -5.93
Lipper Large Cap Core Funds Avg. 12.38 31.22 -7.07
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
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 3/31/04 9/30/03
- --------------------------------------------------------------------------------
Common Stocks 99.3 99.5
- --------------------------------------------------------------------------------
Other Assets 0.7 0.5
% of Net Assets
as of
-----------------
Ten Largest Holdings 3/31/04 9/30/03
- --------------------------------------------------------------------------------
Citigroup, Inc. 3.9 3.6
- --------------------------------------------------------------------------------
Bank of America Corp. 2.9 2.7
- --------------------------------------------------------------------------------
Exxon Mobil Corp. 2.8 2.2
- --------------------------------------------------------------------------------
Cisco Systems, Inc. 2.7 2.3
- --------------------------------------------------------------------------------
Intel Corp. 2.6 1.0
- --------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 2.5 2.7
- --------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. 2.4 1.3
- --------------------------------------------------------------------------------
MBNA Corp. 2.4 2.5
- --------------------------------------------------------------------------------
3M Co. 2.3 --
- --------------------------------------------------------------------------------
General Electric Co. 2.2 2.4
% of Net Assets
as of
-----------------
Five Largest Industries 3/31/04 9/30/03
- --------------------------------------------------------------------------------
Capital Markets 8.6 2.2
- --------------------------------------------------------------------------------
Semiconductors & Equipment 7.6 4.1
- --------------------------------------------------------------------------------
Healthcare Equipment & Supplies 6.3 4.6
- --------------------------------------------------------------------------------
Industrial Conglomerates 6.3 3.6
- --------------------------------------------------------------------------------
Oil & Gas 4.8 4.0
Portfolio holdings and asset allocations will vary.
See page 7 for a description of the indexes.
Notes to Charts
/1/ Returns shown in the chart include 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. 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 9/12/03, 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C shares performance assumes 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
- --------------------------------------------------------------------------------
Additional Information
- --------------------------------------------------------------------------------
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.
For more complete information on any CDC Nvest Fund, contact your financial
professional or call CDC IXIS Asset Management Distributors, L.P. and ask for a
free prospectus, which contains more complete information including charges and
other ongoing expenses. Investors should consider a fund's objective, risks and
expenses carefully before investing. This and other fund information can be
found in the prospectus. Please read the prospectus carefully before investing.
Index/Average Descriptions:
The Standard & Poor's 500 ("S&P 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 Lipper Fund Averages consist of all mutual funds in a stated category,
without sales charges, calculated by Lipper, Inc.
Proxy Voting Information
A description of the Funds' proxy voting policies and procedures is available
(i) without charge, upon request, by calling CDC Nvest Funds at 800-225-5478;
(ii) on the Funds' website at www.cdcnvestfunds.com, and (iii) on the Securities
and Exchange Commission's website at www.sec.gov.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Shares Description Value (a)
- -------------------------------------------------------------------------------
Common Stocks -- 99.3% of Total Net Assets
Biotechnology -- 4.2%
15,350 Biogen Idec, Inc. (c) $ 853,460
13,091 Genentech, Inc. (c) 1,385,290
11,725 Gilead Sciences, Inc. (c) 653,903
-----------
2,892,653
-----------
Capital Markets -- 8.5%
15,306 Goldman Sachs Group, Inc. 1,597,181
22,850 J.P. Morgan Chase & Co. 958,558
15,400 Legg Mason, Inc. 1,428,812
22,368 Lehman Brothers Holdings, Inc. 1,853,636
-----------
5,838,187
-----------
Communications Equipment -- 9.9%
120,156 Cisco Systems, Inc. (c) 2,826,069
69,125 Juniper Networks, Inc. (c) 1,797,941
46,900 Motorola, Inc. 825,440
20,797 QUALCOMM, Inc. 1,381,337
-----------
6,830,787
-----------
Computers & Peripherals -- 3.8%
53,753 Dell, Inc. (c) 1,807,176
62,280 EMC Corp. (c) 847,631
-----------
2,654,807
-----------
Consumer Finance -- 5.0%
16,706 American Express Co. 866,206
15,950 Capital One Financial Corp. 1,203,108
50,590 MBNA Corp. 1,397,802
-----------
3,467,116
-----------
Diversified Financial Services -- 2.5%
24,594 Moody's Corp. 1,741,255
-----------
Electronic Equipment & Instruments -- 1.1%
24,100 Agilent Technologies, Inc. (c) 762,283
-----------
Healthcare Equipment & Supplies -- 7.7%
10,775 Guidant Corp. 682,812
18,708 St. Jude Medical, Inc. (c) 1,348,847
11,733 Stryker Corp. 1,038,722
30,154 Zimmer Holdings, Inc. (c) 2,224,762
-----------
5,295,143
-----------
Healthcare Providers & Services -- 8.3%
22,550 Anthem, Inc. (c) 2,043,932
55,017 Caremark Rx, Inc. (c) 1,829,315
28,225 UnitedHealth Group, Inc. 1,818,819
-----------
5,692,066
-----------
Home Construction -- 1.0%
12,775 Pulte Homes, Inc. 710,290
-----------
Hotels Restaurants & Leisure -- 2.8%
25,300 International Game Technology 1,137,488
13,300 Mandalay Resort Group 761,558
-----------
1,899,046
-----------
Household Products -- 1.5%
10,125 Procter & Gamble Co. 1,061,910
-----------
Industrial Conglomerates -- 2.4%
54,300 General Electric Co. 1,657,236
-----------
Insurance -- 1.1%
18,875 Fidelity National Financial, Inc. 747,450
-----------
Internet & Catalog Retail -- 3.2%
31,614 eBay, Inc. (c) 2,191,799
-----------
Internet Software & Services -- 1.5%
21,424 Yahoo! Inc. (c) $ 1,040,992
-----------
Machinery -- 2.1%
15,275 Danaher Corp. 1,426,227
-----------
Multiline Retail -- 1.2%
20,400 Nordstrom, Inc. 813,960
-----------
Oil & Gas -- 2.6%
70,031 XTO Energy, Inc. 1,767,589
-----------
Pharmaceuticals -- 2.4%
13,325 Forest Laboratories, Inc. (c) 954,336
19,619 Pfizer, Inc. 687,646
-----------
1,641,982
-----------
Semiconductors & Semiconductor Equipment-- 9.9%
64,723 Applied Materials, Inc. (c) 1,383,778
21,025 Broadcom Corp., Class A (c) 823,549
59,116 Intel Corp. 1,607,955
68,361 Texas Instruments, Inc. 1,997,509
25,975 Xilinx, Inc. (c) 987,050
-----------
6,799,841
-----------
Software -- 4.9%
33,800 Adobe Systems, Inc. 1,332,734
19,958 Electronic Arts, Inc. (c) 1,076,934
20,425 Symantec Corp. (c) 945,677
-----------
3,355,345
-----------
Specialty Retail -- 4.7%
25,396 Bed Bath & Beyond, Inc. (c) 1,060,537
25,696 Best Buy Co., Inc. 1,328,997
15,767 Lowe's Cos., Inc. 885,002
-----------
3,274,536
-----------
Textiles Apparel & Luxury Goods -- 2.8%
47,970 Coach, Inc. (c) 1,966,290
-----------
Thrifts & Mortgage Finance -- 1.6%
11,875 Countrywide Financial Corp. 1,138,812
-----------
Wireless Telecommunication
Services -- 2.6%
72,056 Nextel Communications, Inc., Class A (c) 1,781,945
-----------
Total Common Stocks
(Identified Cost $61,816,280) 68,449,547
-----------
Total Investments -- 99.3%
(Identified Cost $61,816,280) (b) 68,449,547
Other assets less liabilities 491,770
-----------
Total Net Assets -- 100% $68,941,317
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized
appreciation on investments based on
cost of $61,816,280 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 $ 7,296,769
Aggregate gross unrealized
depreciation for all investments
in which there is an excess of tax
cost over value (663,502)
-----------
Net unrealized appreciation $ 6,633,267
===========
At September 30, 2003, the Fund had a
capital loss carryover of
approximately $58,480,246 which
expires between September 30, 2008 and
2011. These amounts are subject to
limitations and may be available to
offset future realized capital gains,
if any,to the extent provided by
regulations.
See Note 9 of Notes to Financial
Statements.
(c) Non-income producing security.
See accompanying notes to financial statements. 8
- --------------------------------------------------------------------------------
Loomis Sayles International Equity Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Shares Description Value (a)
- -------------------------------------------------------------------------------
Common Stocks -- 97.9% of Total Net Assets
Australia -- 2.2%
140,362 AMP Ltd. $ 603,316
19,726 Macquarie Bank Ltd. 539,141
251,680 Southcorp Ltd. (c) 610,856
-----------
1,753,313
-----------
Austria -- 3.4%
9,875 Erste Bank der oesterreichischen
Sparkassen AG 1,479,805
38,600 Wienerberger AG 1,282,218
-----------
2,762,023
-----------
Belgium -- 1.0%
13,450 Umicore 820,946
-----------
Bermuda -- 1.3%
67,400 Golar LNG Ltd. (c) 1,023,367
-----------
Brazil -- 2.3%
14,800 Companhia Vale do Rio Doce ADR (c) 812,520
32,998 Embraer-Empresa Brasileria de
Aeronautica SA ADR 1,059,236
-----------
1,871,756
-----------
Canada -- 4.6%
23,150 Angiotech Pharmaceuticals, Inc. (c) 565,091
44,100 Celestica, Inc. (c) 723,240
23,479 Encana Corp. 1,015,933
69,600 Nortel Networks Corp. (c) 413,424
20,286 NOVA Chemicals Corp. 509,724
11,763 PetroKazakhstan, Inc. 331,302
6,932 PetroKazakhstan, Inc., Class A 195,238
-----------
3,753,952
-----------
Denmark -- 0.8%
17,300 William Demant Holding A/S (c) 616,558
-----------
Finland -- 1.1%
45,450 Nokia Oyj ADR 921,726
-----------
France -- 3.3%
16,400 Axa 343,693
20,300 M6 Metropole Television 609,155
26,150 STMicroelectronics NV (c) 617,084
4,400 Technip 595,108
2,830 Total Fina SA, Class B 520,860
-----------
2,685,900
-----------
Germany -- 6.1%
17,900 Bayerische Motoren Werke (BMW) AG 728,361
3,700 Deutsche Bank AG 307,843
36,900 Hochtief AG 1,037,965
32,000 MAN AG 1,143,357
17,500 Metro AG 752,144
6,320 Rhoen-Klinikum AG 316,262
13,550 SAP AG ADR 532,651
2,900 Stada Arzneimittel AG 147,506
-----------
4,966,089
-----------
Hong Kong -- 1.9%
224,400 Esprit Holdings Ltd. 937,819
988,000 Giordano International Ltd. 617,559
-----------
1,555,378
-----------
Hungary -- 1.1%
45,200 OTP Bank (c) 857,024
-----------
India -- 1.7%
21,400 State Bank of India GDR 834,600
11,925 Wipro Ltd. ADR 502,519
-----------
1,337,119
-----------
Ireland -- 1.7%
44,100 Anglo Irish Bank Corp. Plc 705,396
34,700 CRH Plc 708,335
-----------
1,413,731
-----------
Israel -- 1.2%
14,759 Teva Pharmaceutical Industries Ltd. ADR 935,868
-----------
Italy -- 0.7%
54,000 Mediaset Spa 599,720
-----------
Japan -- 23.2%
7,450 Aiful Corp. 763,927
35,000 Ajinomoto Co., Inc. 416,722
71,000 Daiwa House Industry Co. Ltd. 905,342
58,400 Isetan Co. Ltd. 888,713
8,700 JAFCO Co. Ltd. 850,890
98,000 Kaneka Corp. 982,798
3,210 Keyence Corp. 782,196
44 Millea Holdings, Inc. 685,084
80,000 Mitsubishi Corp. 945,572
113 Mitsubishi Tokyo Financial Group, Inc. 1,121,212
67,000 Mitsui Fudosan Co. Ltd. 842,195
154,000 Nishimatsu Construction Co. Ltd. 634,342
10,800 Nitto Denko Corp. 594,105
468 NTT DoCoMo, Inc. 1,037,310
7,150 Orix Corp. 793,144
167,000 Shinko Securities Co. Ltd. 689,409
567,000 Sumitomo Metal Industries Ltd. 757,089
44,400 Suzuki Motor Corp. 690,747
6,100 TDK Corp. 465,751
38,775 THK Co. Ltd. 766,022
13,200 Tokyo Electron Ltd. 882,485
52,000 Tokyu Corp. 325,512
28,500 Xebio Co. Ltd. 820,995
15,700 Yamada Denki Co. Ltd. 613,997
38,000 Yokogawa Electric Corp. 564,230
-----------
18,819,789
-----------
Mexico -- 0.8%
15,700 America Movil SA de CV, Series L, ADR 606,805
-----------
Netherlands -- 3.4%
40,300 Aegon NV 517,238
45,765 ASML Holding NV (c) 838,872
25,200 ING Groep NV 554,102
27,900 Koninklijke (Royal) Philips
Electronics NV 810,412
-----------
2,720,624
-----------
New Zealand -- 0.6%
60,100 Fisher & Paykel Healthcare Corp. Ltd. 477,650
-----------
Norway -- 1.8%
80,300 Smedvig ASA, Class A 742,817
106,800 Telenor ASA 740,630
-----------
1,483,447
-----------
Portugal -- 0.7%
117,100 Media Capital, SGPS, SA (c) 604,570
-----------
Russia -- 1.0%
21,425 Gazprom ADR, 144A (c) 809,865
-----------
9 See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Loomis Sayles International Equity Fund
Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Shares Description Value (a)
- --------------------------------------------------------------------------------
Singapore -- 0.8%
156,000 Keppel Corp. Ltd. $ 679,948
-----------
South Africa -- 1.0%
35,400 Anglo American Plc 846,717
-----------
South Korea -- 3.6%
13,000 Hyundai Motor Co. Ltd. 593,577
15,765 Interflex Co. Ltd. 366,010
3,230 Samsung DSI Co. Ltd. 473,561
2,930 Samsung Electronics 1,462,527
-----------
2,895,675
-----------
Sweden -- 3.0%
23,000 Atlas Copco AB, Class A 818,584
22,200 SKF AB, Class B 805,481
30,025 Telefonaktiebolaget LM Ericsson ADR (c) 833,194
-----------
2,457,259
-----------
Switzerland -- 8.5%
1,400 Basilea Pharmaceutica AG (c) 106,885
23,800 Credit Suisse Group (c) 826,247
2,900 Nobel Biocare Holding AG 398,397
18,400 Novartis AG 783,676
18,400 Roche Holding AG 1,799,959
5,200 Straumann AG 900,139
1,250 Synthes-Stratec, Inc. 1,282,744
10,100 UBS AG 751,498
-----------
6,849,545
-----------
Taiwan -- 1.0%
152,965 United Microelectronics Corp. ADR (c) 795,418
-----------
Thailand -- 0.5%
66,400 Siam Cement Public Co. Ltd. 423,219
-----------
United Kingdom -- 13.2%
53,400 Barclays Plc 471,878
88,685 BHP Billiton Plc 810,959
123,200 BP Plc 1,035,883
228,500 Colt Telecom Group Plc (c) 391,263
64,100 Exel Plc 831,778
55,700 HBOS Plc 758,202
64,700 HSBC Holdings Plc 963,506
134,618 Kingfisher Plc 716,213
32,300 Reckitt Benckiser Plc 800,308
109,600 Smith & Nephew Plc 1,082,136
82,405 Unilever Plc 819,438
491,840 Vodafone Group Plc 1,166,001
64,400 Xstrata Plc 859,277
-----------
10,706,842
-----------
United States -- 0.4%
13,100 Accenture Ltd., Class A (c) 324,880
-----------
Total Common Stocks
(Identified Cost $65,072,395) 79,376,723
-----------
Preferred Stocks -- 1.0%
Germany -- 1.0%
40,100 ProSiebenSat.1 Media AG 795,981
-----------
Total Preferred Stocks
(Identified Cost $565,300) 795,981
-----------
Total Investments -- 98.9%
(Identified Cost $65,637,695) (b) 80,172,704
Other assets less liabilities 901,654
-----------
Total Net Assets -- 100% $81,074,358
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized appreciation on
investments based on cost of $65,637,695 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 $15,214,987
Aggregate gross unrealized depreciation for
all investments in which there is an excess of tax
cost overvalue (679,978)
-----------
Net unrealized appreciation $14,535,009
===========
At September 30, 2003, the Fund had a capital loss carryover of
approximately $37,149,904 which expires between September 30, 2009 and
September 30, 2011. These amounts may be available to offset future
realized capital gains, if any, to the extent provided by regulations.
(c) Non-income producing security.
144A Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transaction exempt from
registration, normally to qualified institutional buyers.
ADR/GDR An American Depositary Receipt (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 on
exchanges not located in the United States.
Industry Holdings at March 31, 2004 as a Percentage of Net Assets
Diversified Financial Services 10.4%
Wireless Telecommunication Services 10.3
Specialty Retail 9.6
Oil & Gas 9.0
Containers & Packaging 8.8
Consumer Finance 8.4
Metals & Mining 5.0
Real Estate 2.9
Multiline Retail 2.7
Diversified Telecommunication Services 2.7
Communications Equipment 2.7
Capital Markets 2.2
Pharmaceuticals 2.1
Semiconductors & Semiconducductor Equipment 2.0
Other 20.1
See accompanying notes to financial statements. 10
- --------------------------------------------------------------------------------
Loomis Sayles Research Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments of March 31, 2004 (unaudited)
Shares Description Value (a)
- --------------------------------------------------------------------------------
Common Stocks -- 99.3% of Total Net Assets
Auto Components -- 1.5%
1,725 BorgWarner, Inc. $ 146,332
3,100 Johnson Controls, Inc. 183,365
----------
329,697
----------
Beverages -- 2.8%
7,075 Anheuser-Busch Cos., Inc. 360,825
11,825 Coca-Cola Enterprises, Inc. 285,810
----------
646,635
----------
Biotechnology -- 3.0%
4,275 Amgen, Inc. (c) 248,677
3,300 Biogen Idec, Inc. (c) 183,480
2,375 Genentech, Inc. (c) 251,322
----------
683,479
----------
Capital Markets -- 8.6%
10,525 Ameritrade Holding Corp. (c) 162,085
3,975 Franklin Resources, Inc. 221,328
8,675 J.P. Morgan Chase & Co. 363,916
6,700 Lehman Brothers Holdings, Inc. 555,229
10,350 Mellon Financial Corp. 323,852
5,675 Merrill Lynch & Co., Inc. 338,003
----------
1,964,413
----------
Chemicals -- 1.8%
6,150 Dow Chemical Co. 247,722
4,325 Praxair, Inc. 160,544
----------
408,266
----------
Commercial Banks -- 2.9%
8,175 Bank of America Corp. 662,012
----------
Communications Equipment -- 4.4%
26,325 Cisco Systems, Inc. (c) 619,164
18,250 Corning, Inc. (c) 204,035
6,900 Juniper Networks, Inc. (c) 179,469
----------
1,002,668
----------
Consumer Finance -- 2.4%
19,475 MBNA Corp. 538,094
----------
Containers & Packaging -- 0.8%
10,425 Smurfit-Stone Container Corp. (c) 183,376
----------
Diversified Financial Services -- 3.9%
17,216 Citigroup, Inc. 890,067
----------
Diversified Telecommunication Services -- 3.5%
12,125 BellSouth Corp. 335,741
7,600 CenturyTel, Inc. 208,924
10,075 SBC Communications, Inc. 247,241
----------
791,906
----------
Electric Utilities -- 2.9%
6,325 Exelon Corp. 435,603
5,825 FirstEnergy Corp. 227,641
----------
663,244
----------
Energy Equipment & Services -- 1.0%
7,825 Halliburton Co. 237,802
Food & Staples Retailing -- 4.7%
6,825 CVS Corp. 240,923
6,425 SYSCO Corp. 250,896
9,700 Wal-Mart Stores, Inc. 578,993
----------
1,070,812
----------
Healthcare Equipment & Supplies -- 6.3%
7,700 Boston Scientific Corp. (c) $ 326,326
7,100 Guidant Corp. 449,927
4,300 St. Jude Medical, Inc. (c) 310,030
4,825 Zimmer Holdings, Inc. (c) 355,988
----------
1,442,271
----------
Healthcare Providers & Services -- 4.5%
3,350 Aetna, Inc. 300,562
10,950 Caremark Rx, Inc. (c) 364,087
5,600 UnitedHealth Group, Inc. 360,864
----------
1,025,513
----------
Hotels Restaurants & Leisure -- 4.6%
6,400 Carnival Corp. 287,424
6,275 Mandalay Resort Group 359,307
9,075 Royal Caribbean Cruises Ltd. 400,207
----------
1,046,938
----------
Household Products -- 2.1%
4,650 Procter & Gamble Co. 487,692
Industrial Conglomerates -- 6.3%
6,400 3M Co. 523,968
16,425 General Electric Co. 501,291
14,025 Tyco International Ltd. 401,816
----------
1,427,075
----------
Insurance -- 1.7%
9,175 Ace Ltd. 391,406
----------
Internet & Catalog Retail -- 1.2%
3,875 eBay, Inc. (c) 268,654
----------
IT Services -- 0.8%
7,575 Accenture Ltd., Class A (c) 187,860
----------
Machinery -- 4.3%
2,475 Danaher Corp. 231,091
5,375 Dover Corp. 208,389
5,700 Ingersoll-Rand Co., Class A 385,605
2,775 Parker Hannifin Corp. 156,787
----------
981,872
----------
Multiline Retail -- 0.9%
5,000 Nordstrom, Inc. 199,500
----------
Oil & Gas -- 4.8%
3,025 ChevronTexaco Corp. 265,534
2,475 ConocoPhillips 172,780
15,525 Exxon Mobil Corp. 645,685
----------
1,083,999
----------
Personal Products -- 1.0%
2,900 Avon Products, Inc. 220,023
----------
Semiconductors & Semiconductor Equipment -- 7.6%
13,850 Applied Materials, Inc. (c) 296,113
10,650 Cypress Semiconductor Corp. (c) 218,005
21,550 Intel Corp. 586,160
11,550 Texas Instruments, Inc. 337,491
7,850 Xilinx, Inc. (c) 298,300
----------
1,736,069
----------
Software -- 4.1%
5,275 Adobe Systems, Inc. 207,993
5,050 Mercury Interactive Corp. (c) 226,240
18,725 Oracle Corp. (c) 224,887
10,025 VERITAS Software Corp. (c) 269,773
----------
928,893
----------
11 See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Loomis Sayles Research Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Shares Description Value (a)
- -------------------------------------------------------------------------------
Textiles Apparel & Luxury Goods -- 3.3%
4,925 Coach, Inc. (c) $ 201,876
6,350 Jones Apparel Group, Inc. 229,553
4,150 NIKE, Inc., Class B 323,160
-----------
754,589
-----------
Thrifts & Mortgage Finance -- 1.6%
3,691 Countrywide Financial Corp. 353,967
-----------
Total Common Stocks
(Identified Cost $20,107,805) 22,608,792
-----------
Total Investments -- 99.3%
(Identified Cost $20,107,805) (b) 22,608,792
Other assets less liabilities 148,068
-----------
Total Net Assets -- 100% $22,756,860
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized appreciation
on investments based on cost of $20,107,805 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 $ 2,923,670
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (422,683)
-----------
Net unrealized appreciation $ 2,500,987
===========
At September 30, 2003, the Fund had a capital loss carryover
of approximately $3,176,474 which expires between September
30, 2009 and September 30, 2011. These amounts may be
available to offset future realized capital gains, if any, to
the extent provided by regulations.
(c) Non-income producing security.
See accompanying notes to financial statements. 12
- --------------------------------------------------------------------------------
Statements of Assets & Liabilities
- --------------------------------------------------------------------------------
March 31, 2004 (unaudited)
Growth International Research
Fund Equity Fund Fund
------------ ------------- ------------
ASSETS
Investments at cost $ 61,816,280 $ 65,637,695 $20,107,805
Net unrealized appreciation 6,633,267 14,535,009 2,500,987
------------ ------------ -----------
Investments at value 68,449,547 80,172,704 22,608,792
Cash 450,113 998,449 233,544
Foreign cash at value (identified cost $25,274) -- 25,550 --
Receivable for Fund shares sold 141,818 1,038 179
Receivable for securities sold -- 2,863,598 246,012
Dividends and interest receivable 25,486 277,824 13,324
Tax reclaims receivable -- 23,909 --
Receivable from investment adviser 92,306 28,538 17,389
------------ ------------ -----------
TOTAL ASSETS 69,159,270 84,391,610 23,119,240
------------ ------------ -----------
LIABILITIES
Payable for securities purchased -- 3,157,081 329,695
Payable for Fund shares redeemed 60,579 13,607 --
Foreign taxes -- 51,133 --
Management fees payable 92,453 50,317 9,778
Deferred Trustees' fees payable 7,678 2,716 2,228
Accounting and administrative fees payable 7,421 8,849 2,766
Service and distribution fees payable 543 62 2
Transfer agent fees payable 26,087 8,284 6,801
Other accounts payable and accrued expenses 23,192 25,203 11,110
------------ ------------ -----------
TOTAL LIABILITIES 217,953 3,317,252 362,380
------------ ------------ -----------
NET ASSETS $ 68,941,317 $ 81,074,358 $22,756,860
============ ============ ===========
NET ASSETS CONSIST OF:
Paid in capital $ 76,480,176 $ 99,438,931 $21,793,255
Undistributed (overdistributed) net investment income (loss) (168,447) 16,040 39,302
Accumulated net realized gain (loss) on investments (14,003,679) (32,880,619) (1,576,684)
Unrealized appreciation (depreciation) on:
Investments* 6,633,267 14,508,062 2,500,987
Foreign currency translations -- (8,056) --
------------ ------------ -----------
NET ASSETS $ 68,941,317 $ 81,074,358 $22,756,860
============ ============ ===========
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 13,959,631 $ 5,506,129 $ 111,293
============ ============ ===========
Shares of beneficial interest 2,760,062 481,986 14,111
============ ============ ===========
Net asset value and redemption price per share $ 5.06 $ 11.42 $ 7.89
============ ============ ===========
Offering price per share (100/94.25 of $5.06, $11.42, $7.89) $ 5.37 $ 12.12 $ 8.37
============ ============ ===========
Class B shares: (redemption price is equal to net asset value
less any applicable contingent deferred sales charges)
Net assets $ 13,529,854 $ 871,647 $ 46,448
============ ============ ===========
Shares of beneficial interest 2,686,884 76,618 5,912
============ ============ ===========
Net asset value and offering price per share $ 5.04 $ 11.38 $ 7.86
============ ============ ===========
Class C shares: (redemption price is equal to net asset value
less any applicable contingent deferred sales charges)
Net assets $ 2,602,854 $ 49,772 $ 59,641
============ ============ ===========
Shares of beneficial interest 516,908 4,375 7,580
============ ============ ===========
Net asset value and offering price per share $ 5.04 $ 11.38 $ 7.87
============ ============ ===========
Class Y shares:
Net assets $ 38,848,978 $ 74,646,810 $22,539,478
============ ============ ===========
Shares of beneficial interest 7,437,331 6,464,852 2,851,828
============ ============ ===========
Net asset value, offering and redemption price per share $ 5.22 $ 11.55 $ 7.90
============ ============ ===========
*Net of capital gain taxes accrued of $26,947 for the International Equity Fund.
13 See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
Growth International Research
Fund Equity Fund Fund
---------- ------------- ----------
INVESTMENT INCOME
Dividends * $ 142,593 $ 443,374 $ 156,184
Interest 1,492 1,973 --
---------- ----------- ----------
144,085 445,347 156,184
---------- ----------- ----------
Expenses
Management fees 142,610 264,449 58,768
Service fees - Class A 12,628 6,124 99
Service and distribution fees - Class B 49,840 3,462 116
Service and distribution fees - Class C 6,488 206 13
Trustees' fees and expenses 4,761 4,382 3,126
Accounting and administrative fees 18,715 23,137 7,712
Custodian 27,825 82,664 25,755
Transfer agent fees and expenses - Class A, Class B, 58,776 27,966 27,024
Class C
Transfer agent fees and expenses - Class Y 21,964 19,692 12,466
Audit and tax services 14,843 16,601 15,231
Registration 19,997 30,739 16,679
Shareholder reporting 7,393 9,272 4,063
Legal 1,239 1,509 464
Miscellaneous 4,702 6,711 3,241
---------- ----------- ----------
Total expenses 391,781 496,914 174,757
Less reimbursement/waiver (80,391) (130,182) (74,579)
---------- ----------- ----------
Net expenses 311,390 366,732 100,178
---------- ----------- ----------
Net investment income (loss) (167,305) 78,615 56,006
---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net 3,356,355 5,333,873 2,032,690
Foreign currency transactions - net -- (120,686) --
Change in unrealized appreciation (depreciation) on:
Investments - net 3,906,066 7,762,240 1,027,306
Foreign currency translations - net -- (27,485) --
---------- ----------- ----------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 7,262,421 12,947,942 3,059,996
---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $7,095,116 $13,026,557 $3,116,002
========== =========== ==========
* Net of foreign taxes withheld of $44,552 for International Equity Fund.
See accompanying notes to financial statements. 14
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Growth Fund
--------------------------------
Six Months Ended Year Ended
March 31, 2004 September 30,
(unaudited) 2003
---------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ (167,305) $ (52,496)
Net realized gain (loss) on investments 3,356,355 258,547
Net change in unrealized appreciation
(depreciation) of investments 3,906,066 4,474,372
----------- -----------
Increase (decrease) in net assets
resulting from operations 7,095,116 4,680,423
----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARE TRANSACTIONS 31,996,231 5,060,671
----------- -----------
Total increase (decrease) in net assets 39,091,347 9,741,094
NET ASSETS
Beginning of the period 29,849,970 20,108,876
----------- -----------
End of the period $68,941,317 $29,849,970
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME (LOSS) $ (168,447) $ (1,142)
=========== ===========
International Equity Fund
--------------------------------
Six Months Ended Year Ended
March 31, 2004 September 30,
(unaudited) 2003
---------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ 78,615 $ 695,232
Net realized gain (loss) on investments and
foreign currency transactions 5,213,187 (1,795,992)
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency translations 7,734,755 11,864,259
----------- -----------
Increase (decrease) in net assets resulting
from operations 13,026,557 10,763,499
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (55,560) --
Class B (7,625) --
Class C (436) --
Class Y (784,834) (105,408)
----------- -----------
(848,455) (105,408)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARE TRANSACTIONS 11,868,222 (46,296)
----------- -----------
Total increase (decrease) in net assets 24,046,324 10,611,795
NET ASSETS
Beginning of the period 57,028,034 46,416,239
----------- -----------
End of the period $81,074,358 $57,028,034
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME (LOSS) $ 16,040 $ 785,880
=========== ===========
15 See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Research Fund
--------------------------------
Six Months Ended Year Ended
March 31, 2004 September 30,
(unaudited) 2003
---------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ 56,006 $ 111,656
Net realized gain (loss) on investments 2,032,690 (511,134)
Net change in unrealized appreciation
(depreciation) of investments 1,027,306 4,009,118
----------- -----------
Increase (decrease) in net assets
resulting from operations 3,116,002 3,609,640
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (179) (66)
Class B (21) --
Class Y (92,652) (81,513)
----------- -----------
(92,852) (81,579)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARE TRANSACTIONS (2,193,120) 2,492,591
----------- -----------
Total increase (decrease) in net assets 830,030 6,020,652
NET ASSETS
Beginning of the period 21,926,830 15,906,178
----------- -----------
End of the period $22,756,860 $21,926,830
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME (LOSS) $ 39,302 $ 76,148
=========== ===========
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 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
---------- ------------- -------------- ---------- -------------- ------------- -------------
Growth Fund
Class A
3/31/2004(f) $ 4.41 $(0.02)(d) $ 0.67 $ 0.65 $-- $ -- $ --
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
3/31/2004(f) 4.41 (0.03)(d) 0.66 0.63 -- -- --
9/30/2003* 4.54 --(d)(e) (0.13) (0.13) -- -- --
Class C
3/31/2004(f) 4.41 (0.03)(d) 0.66 0.63 -- -- --
9/30/2003* 4.54 --(d)(e) (0.13) (0.13) -- -- --
Class Y
3/31/2004(f) 4.55 (0.01)(d) 0.68 0.67 -- -- --
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) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods of 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.
(f) For the six months ended, March 31, 2004 (unaudited).
(g) A sales charge for Class A shares and a contingent deferred sales charge
for Class B and Class C shares are not reflected in total return
calculations.
(h) 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.
17 See accompanying notes to financial statements.
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 (%)
- ---------- ------- ----------- ----------- -------- ------------- ---------
$ 5.06 14.7(g) $13,960 1.10 1.65 (0.61) 93
4.41 20.8(h) 947 1.10 3.11 (0.45) 201
3.65 (11.4) 456 1.10 5.20 (0.65) 192
4.12 (50.9) 518 1.10 4.11 (0.42) 281
14.80 45.3 1,028 1.10 3.29 (0.61) 203
11.06 30.6 649 1.10 4.43 (0.65) 164
5.04 14.3(g) 13,530 1.85 2.40 (1.36) 93
4.41 (2.9)(h) 2 1.85 7.92 (1.29) 201
5.04 14.3(g) 2,603 1.85 2.40 (1.36) 93
4.41 (2.9)(h) 2 1.85 7.92 (1.29) 201
5.22 14.7 38,849 0.85 0.97 (0.33) 93
4.55 21.3 28,898 0.85 1.18 (0.20) 201
3.75 (11.4) 19,635 0.85 1.32 (0.39) 192
4.23 (50.8) 21,653 0.85 1.24 (0.17) 281
15.00 45.6 45,328 0.85 1.01 (0.36) 203
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
3/31/2004(f) $ 9.50 $(0.01)(d) $ 2.05 $ 2.04 $(0.12) $ -- $(0.12)
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
3/31/2004(f) 9.50 (0.05)(d) 2.04 1.99 (0.11) -- (0.11)
9/30/2003* 9.56 --(d)(e) (0.06) (0.06) -- -- --
Class C
3/31/2004(f) 9.50 (0.06)(d) 2.05 1.99 (0.11) -- (0.11)
9/30/2003* 9.56 --(d)(e) (0.06) (0.06) -- -- --
Class Y
3/31/2004(f) 9.60 0.01(d) 2.07 2.08 (0.13) -- (0.13)
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) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods of 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.
(f) For the six months ended, March 31, 2004 (unaudited).
(g) A sales charge for Class A shares and a contingent deferred sales charge
for Class B and Class C shares are not reflected in total return
calculations.
(h) 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.
19 See accompanying notes to financial statements.
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 (%)
- ---------- ------- ----------- ---------- -------- -------------- ---------
$11.42 21.6(g) $ 5,506 1.38 2.49 (0.10) 69
9.50 23.4(h) 3,264 1.25 2.15 1.33 174
7.70 (18.8) 1,338 1.25 2.69 0.19 135
9.50 (34.7) 2,793 1.25 1.99 0.13 207
17.31 33.9 5,588 1.25 1.67 (0.26) 226
13.73 31.6 261 1.25 12.33 0.29 207
11.38 21.0(g) 872 2.35 3.24 (0.99) 69
9.50 (0.6)(h) 147 2.35 4.44 (0.91) 174
11.38 21.0(g) 50 2.35 3.24 (1.03) 69
9.50 (0.6)(h) 12 2.35 4.44 (0.83) 174
11.55 21.8 74,647 1.00 1.31 0.26 69
9.60 23.7 53,605 1.00 1.38 1.47 174
7.78 (18.7) 44,101 1.00 1.43 0.47 135
9.61 (34.5) 54,080 1.00 1.35 0.34 207
17.41 34.4 107,792 1.00 1.15 (0.32) 226
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 Total
of investment gain (loss) on investment net investment realized distributions
the period income (loss) investments operations income capital gains
---------- ------------- -------------- ---------- -------------- ------------- -------------
Research Fund
Class A
3/31/2004(f) $ 6.90 $ 0.01(d) $ 1.00 $ 1.01 $(0.02) $ -- $(0.02)
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
3/31/2004(f) 6.90 (0.02)(d) 1.00 0.98 (0.02) -- (0.02)
9/30/2003*** 7.05 --(d)(e) (0.15) (0.15) -- -- --
Class C
3/31/2004(f) 6.90 (0.02)(d) 0.99 0.97 -- -- --
9/30/2003*** 7.05 --(d)(e) (0.15) (0.15) -- -- --
Class Y
3/31/2004(f) 6.92 0.02(d) 0.99 1.01 (0.03) -- (0.03)
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) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods of 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.
(f) For the six months ended, March 31, 2004 (unaudited).
(g) A sales charge for Class A shares and a contingent deferred sales charge
for Class B and Class C shares are not reflected in total return
calculations.
(h) 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.
21 See accompanying notes to financial statements.
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 (%)
- ---------- ------ ----------- --------- -------- -------------- ---------
$ 7.89 14.7(g) $ 111 1.17 52.89 0.16 83
6.90 21.5(h) 41 1.10 28.75 0.35 138
5.69 (25.2) 17 1.10 213.89 0.22 130
7.86 14.2(g) 46 2.00 53.64 (0.59) 83
6.90 (2.1)(h) 2 2.00 125.11 (0.72) 138
7.87 14.1(g) 60 2.00 53.64 (0.53) 83
6.90 (2.1)(h) 2 2.00 125.11 (0.72) 138
7.90 14.6 22,539 0.85 1.26 0.48 83
6.92 21.8 21,881 0.85 1.31 0.59 138
5.71 (16.6) 15,889 0.89 1.46 0.36 130
6.85 (34.7) 4,245 1.15 4.26 0.09 171
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 Six Months Ended March 31, 2004 (unaudited)
1. Organization. Loomis Sayles Funds II (the "Trust") is organized as a
Massachusetts business trust and was organized as such on December 23, 1993. The
Trust is registered under the Investment Company Act of 1940 (the "1940 Act"),
as amended, as an open-end investment management 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 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")
Each Fund offers Class A, Class B, Class C and Class Y shares. 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 do not
pay a front end sales charge, 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 generally 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) 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. 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. Securities traded on the
NASDAQ National Market are valued at the NASDAQ Official Closing Price ("NOCP"),
or if lacking a 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.
The Funds may hold securities traded in foreign markets. Foreign securities are
valued at the market price in the foreign market. However, if events occurring
after the close of the foreign market (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 fair valued pursuant to procedures
approved by the Board of Trustees. When fair valuing its securities, the Funds
may, among other things, use modeling tools or other processes that may take
into account factors such as securities market activity and/or significant
events that occur after the close of the foreign market and before the Fund
calculates its net asset value.
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. 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 Six Months Ended March 31, 2004 (unaudited)
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.
The Funds 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.
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 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 Foreign 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 March 31, 2004, there were no open forward foreign 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 six months ended March 31, 2004,
purchases and sales of securities (excluding short-term investments) were as
follows:
Fund Purchases Sales
- ---- ----------- -----------
Growth Fund $60,180,898 $51,724,392
International Equity Fund 59,720,318 47,374,506
Research Fund 19,243,268 21,509,820
25
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Loomis, Sayles & Company, L.P. ("Loomis Sayles") serves as
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%
For the six months ended March 31, 2004, the management fees and waivers of
management fees 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 $142,610 $ -- $142,610 0.50% 0.50%
International Equity Fund 264,449 86,971 177,478 0.75% 0.50%
Research Fund 58,768 35,137 23,631 0.50% 0.20%
*Annualized
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"). CDC IXIS North
America is ultimately owned by three large affiliated French financial services
firms: Caisse des Depots et Consignations; Caisse Nationale des Caisses
d'Epargne; and CNP Assurances, a leading French life insurance company.
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 State Street Bank and Trust Company ("State Street Bank"), to
serve as sub-administrator. Pursuant to an agreement among the Loomis Sayles
Funds Trusts (the Trust and Loomis Sayles Funds I), the CDC Nvest Funds Trusts
(CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III,
CDC Nvest Cash Management Trust and 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 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.
For the six months ended March 31, 2004, fees paid to CIS for accounting and
administrative expense were as follows:
Fund Accounting and Administrative
- ---- -----------------------------
Growth Fund $18,715
International Equity Fund 23,137
Research Fund 7,712
26
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
c. Transfer Agent Fees. CIS serves as transfer and shareholder servicing agent
for the Funds and has subcontracted with Boston Financial Data Services ("BFDS")
to serve as sub-transfer agent.
Classes A, B and C pay service fees monthly to CIS representing the higher
amount based on the following calculations:
(1) The Fund's pro rata portion of an 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 Class A, Class B and Class C accounts
in Load Equity Funds. Load Equity Funds consist of Growth Fund,
International Equity Fund, Research Fund and all equity funds in
the CDC Nvest Funds Trusts.
First Next Over
$5.7 billion $5 billion $10.7 billion
------------ ---------- -------------
0.184% 0.180% 0.175%
Each Class of shares is subject to a monthly Class minimum of
$1,500, allocated based on the combined net assets of Class A,
Class B and Class C.
or
(2) An allocated portion, based on eligible assets, of an annual
aggregate minimum fee for the period January 1, 2004 through
December 31, 2004, of $8,406,916. For the period September 15,
2003 through December 31, 2003, the aggregate minimum fee was
$2,439,168.
Class Y pays service fees monthly to CIS representing the higher
amount based on the following calculations:
(1) The Fund's pro rata portion of an 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** .
Class Y shares are subject to a monthly Class minimum of $1,250.
or
(2) An allocated portion, based on eligible assets of an annual
aggregate minimum fee for the period January 1, 2004 through
December 31, 2004, of $650,000. For the period September 15, 2003
through December 31, 2003, the aggregate minimum fee was $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 all Funds with Class Y shares
offered within Loomis Sayles Funds Trusts and CDC Nvest Funds Trusts.
In addition, pursuant to other servicing agreements, each Class pays 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 six months ended March 31, 2004, amounts paid to CIS as compensation for
its services as transfer agent were as follows:
Fund Transfer Agent Fee
- ---- ------------------
Growth Fund $61,764
International Equity Fund 35,446
Research Fund 34,500
27
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
d. Service and Distribution Fees. 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 Investment Grade Bond Fund, Class J.
Pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"), the Funds 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 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 each 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 each 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.
For the six months ended March 31, 2004 the Fund paid the following service and
distribution fees:
Service Fee Distribution Fee
--------------------------- -----------------
Fund Class A Class B Class C Class B Class C
- ---- ------- ------- ------- ------- -------
Growth Fund $12,628 $12,460 $1,622 $37,380 $4,866
International Equity Fund 6,124 865 51 2,597 155
Research Fund 99 29 3 87 10
Commissions (including CDSCs) on Fund shares paid to CDC IXIS Distributors by
investors in shares of the Funds for the six months ended March 31, 2004, were
as follows:
Fund Commissions
- ---- -----------
Growth Fund $45,117
International Equity Fund 17,403
Research Fund 1,853
e. Trustees Fees and Expenses. The Loomis Sayles Funds Trusts and the CDC Nvest
Funds Trusts do not pay any compensation directly to its officers or Trustees
who are directors, officers or employees of Loomis Sayles, CDC IXIS
Distributors, CDC IXIS North America, CIS or their affiliates. Each Trustee who
is an independent Trustee of Loomis Sayles Funds Trusts and 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
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 Board or Committee meeting in excess of four per year, at the rate of
$4,500 and $1,750, respectively. These fees are allocated to the various series
of the Loomis Sayles Funds Trusts and the 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 series of the Loomis Sayles Funds Trusts or CDC
Nvest Funds Trusts on the normal payment date. Deferred amounts remain in the
Fund 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 six months ended March 31, 2004, the amount paid
to CIS as compensation for these services were as follows:
Fund Publishing Services Fees
- ---- ------------------------
Growth Fund $2,390
International Equity Fund 510
Research Fund 194
28
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
5. Line of Credit. Each Fund, together with certain other Funds of the Loomis
Sayles Funds Trusts, participate in a $25 million committed unsecured revolving
line of credit provided by State Street Bank. 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. For the six months ended March 31,
2004, the Funds had no borrowings under the agreement.
6. Shareholders. At March 31, 2004, Loomis Sayles Funded Pension Plan ("Pension
Plan") and Loomis Sayles Employees' Profit Sharing Retirement Plan held shares
of beneficial interest in the Funds as follows:
Profit Sharing
Fund Pension Plan Retirement Plan
- ---- ------------ ---------------
Growth Fund 1,303,117 2,436,658
International Equity Fund 764,401 578,233
Research Fund 1,633,636 599,252
7. Expense Reductions and Contingent Expense Obligations. Loomis Sayles has
given binding undertakings to the Funds to defer its management fees and, if
necessary, bear certain expenses associated with the Funds to limit their
operating expenses. These undertakings are in effect until the dates indicated
below and will be reevaluated on an annual basis. For the six months ended March
31, 2004, and in addition to any waiver of management fees as discussed in Note
4, class level expenses have been reimbursed as follows: Growth Fund $80,391;
International Equity Fund $43,211; Research Fund $39,442.
If in the following fiscal year the actual operating expenses of a Fund are less
than the expense limit for that Fund and that Fund had previously received a
deferral or reimbursement, the Fund is required to pay an amount of additional
expense that is the lower of the difference between the actual operating
expenses and the expense limit or the actual amount of fees previously waived or
expenses reimbursed.
At March 31, 2004, the expense limits as a percentage of average daily net
assets and amount subject to possible reimbursement under the expense limitation
agreements were as follows:
Expenses Subject Expenses Subject
to to
Possible Possible
Reimbursement Reimbursement
Expiration Until Until
Expense Limit as a Percentage of September 30, September 30,
of Average Daily Net Assets Waiver 2004 2005
------------------------------------- ---------------- ---------------- ----------------
Fund Class A Class B Class C Class Y
- ---- ------- ------- ------- -------
Growth Fund 1.10% 1.85% 1.85% 0.85% January 31, 2005 $ 5,176 $ 80,391
International Equity
Fund 1.60% 2.35% 2.35% 1.00% January 31, 2005 16,695 130,182
Research Fund 1.25% 2.00% 2.00% 0.85% January 31, 2005 8,076 74,579
Prior to January 31, 2004, the expense limits as a percentage of average daily
net assets for International Equity Fund Class A and Research Fund Class A were
1.25% and 1.10%, respectively.
29
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
8. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
Six Months Ended
March 31, 2004 Year Ended
(unaudited) September 30, 2003
----------------------- ---------------------------
Growth Fund Shares Amount Shares(a)(b) Amount(a)(b)
- --------------------------------------------- --------- ----------- ------------ ------------
Class A
Issued from the sale of shares 467,265 $ 2,318,220 128,533 $ 551,553
Issued in connection with merger 2,397,395 6,965,540 -- --
Issued in connection with the reinvestment
of distributions -- -- -- --
Issued in Admin Class conversion -- -- 17 68
Redeemed (319,157) (1,580,694) (39,038) (165,982)
--------- ----------- ------- ---------
Net change 2,545,503 $ 7,703,066 89,512 $ 385,639
========= =========== ======= =========
Class B Shares Amount Shares(c) Amount(c)
--------- ----------- --------- ---------
Issued from the sale of shares 248,483 $ 1,214,291 551 $2,500
Issued in connection with merger 2,628,461 15,422,213 -- --
Issued in connection with the reinvestment
of distributions -- -- -- --
Redeemed (190,611) (943,270) -- --
--------- ----------- --- ------
Net change 2,686,333 $15,693,234 551 $2,500
========= =========== === ======
Class C Shares Amount Shares(c) Amount(c)
------- ---------- --------- ---------
Issued from the sale of shares 323,107 $1,612,656 551 $2,500
Issued in connection with merger 216,384 1,684,970 -- --
Issued in connection with the reinvestment
of distributions -- -- -- --
Redeemed (23,134) (114,657) -- --
------- ---------- --- ------
Net change 516,357 $3,182,969 551 $2,500
======= ========== === ======
Class Y Shares Amount Shares(b) Amount(b)
--------- ----------- ---------- -----------
Issued from the sale of shares 1,512,672 $ 7,535,441 2,404,099 $ 9,912,442
Issued in connection with merger 101,251 496,593 -- --
Issued in connection with the reinvestment
of distributions -- -- -- --
Redeemed (523,584) (2,615,072) (1,289,295) (5,222,320)
--------- ----------- ---------- -----------
Net change 1,090,339 $ 5,416,962 1,114,804 $ 4,690,122
========= =========== ========== ===========
Admin Class Shares(a) Amount(a)
--------- ---------
Issued from the sale of shares 1,236 $ 4,691
Issued in connection with the reinvestment
of distributions -- --
Redeemed in Admin Class Conversion (17) (68)
Redeemed (6,274) (24,713)
------ --------
Net change (5,055) $(20,090)
====== ========
(a) On May 21, 2003, the outstanding Admin Class Shares were automatically
converted into Retail Class Shares.
(b) On September 12, 2003, Retail Class converted to Class A shares and
Institutional Class converted to Class Y shares.
(c) From September 12, 2003, commencement of Class operations.
30
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
8. Capital Shares.(continued)
Six Months Ended
March 31, 2004 Year Ended
(unaudited) September 30, 2003
----------------------- ---------------------------
International Equity Fund Shares Amount Shares(a)(b) Amount(a)(b)
- ------------------------- --------- ----------- ------------ ------------
Class A
Issued from the sale of shares 289,304 $ 3,073,286 985,553 $ 8,015,317
Issued in connection with the reinvestment
of distributions 5,002 52,625 -- --
Issued in Admin Class conversion 592 4,982
Redeemed (155,941) (1,692,580) (816,354) (6,762,492)
--------- ----------- ------- -----------
Net change 138,365 $ 1,433,331 169,791 $ 1,257,807
========= =========== ======= ===========
Class B Shares Amount Shares(c) Amount(c)
------- --------- --------- ---------
Issued from the sale of shares 71,729 $ 750,216 15,469 $147,461
Issued in connection with the reinvestment
of distributions 720 7,567 -- --
Redeemed (11,300) (123,834) -- --
------ --------- ------ --------
Net change 61,149 $ 633,949 15,469 $147,461
====== ========= ====== ========
Class C Shares Amount Shares(c) Amount(c)
------ ------- --------- ---------
Issued from the sale of shares 3,691 $38,433 1,228 $11,697
Issued in connection with the reinvestment
of distributions 38 397 -- --
Redeemed (582) (6,331) -- --
----- ------- ----- -------
Net change 3,147 $32,499 1,228 $11,697
===== ======= ===== =======
Class Y Shares Amount Shares(b) Amount(b)
--------- ----------- ---------- ------------
Issued from the sale of shares 1,222,445 $13,405,064 4,033,142 $ 34,400,871
Issued in connection with the reinvestment
of distributions 39,791 422,582 8,422 68,472
Redeemed (379,502) (4,059,203) (4,126,813) (34,937,516)
--------- ----------- ---------- ------------
Net change 882,734 $ 9,768,443 (85,249) $ (468,173)
========= =========== ========== ============
Admin Class Shares(a) Amount(a)
--------- -----------
Issued from the sale of shares 66,246 $ 490,612
Issued in connection with the reinvestment
of distributions -- --
Redeemed in Admin Class Conversion (592) (4,982)
Redeemed (192,744) (1,480,718)
------- -----------
Net change (127,090) $ (995,088)
======= ===========
(a) On May 21, 2003, the outstanding Admin Class Shares were automatically
converted into Retail Class Shares.
(b) On September 12, 2003, Retail Class converted to Class A shares and
Institutional Class converted to Class Y shares.
(c) From September 12, 2003, commencement of Class operations.
31
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
8. Capital Shares.(continued)
Six Months Ended
March 31, 2004 Year Ended
(unaudited) September 30, 2003
------------------ ---------------------
Research Fund Shares Amount Shares(a) Amount(a)
- ------------- -------- ------- --------- ---------
Class A
Issued from the sale of shares 8,109 $61,633 2,958 $18,168
Issued in connection with the reinvestment
of distributions 24 179 11 66
Redeemed (7) (52) -- --
----- ------- ----- -------
Net change 8,126 $61,760 2,969 $18,234
===== ======= ===== =======
Class B Shares Amount Shares(b) Amount(b)
------ ------- --------- ---------
Issued from the sale of shares 5,556 $42,971 355 $2,500
Issued in connection with the reinvestment
of distributions 1 9 -- --
Redeemed -- (755) -- --
------ ------- --- ------
Net change 5,557 $42,225 355 $2,500
====== ======= === ======
Class C Shares Amount Shares(b) Amount(b)
------ ------- --------- ---------
Issued from the sale of shares 7,225 $56,938 355 $2,500
Issued in connection with the reinvestment
of distributions -- -- -- --
Redeemed -- -- -- --
----- ------- --- ------
Net change 7,225 $56,938 355 $2,500
===== ======= === ======
Class Y Shares Amount Shares(a) Amount(a)
-------- ----------- --------- -----------
Issued from the sale of shares 509,841 $ 3,810,067 627,487 $ 4,029,763
Issued in connection with the reinvestment
of distributions 12,572 92,652 13,233 81,513
Redeemed (833,605) (6,256,762) (261,319) (1,641,919)
------- ----------- ------- -----------
Net change (311,192) $(2,354,043) 379,401 $ 2,469,357
======= =========== ======= ===========
(a) On September 12, 2003, Retail Class converted to Class A shares and
Institutional Class converted to Class Y shares.
(b) From September 12, 2003, commencement of Class operations.
32
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
9. Acquisition of Assets. After the close of business on November 14, 2003,
Growth Fund acquired all assets and liabilities of CDC Nvest Large Cap Growth
Fund ("Large Cap Growth Fund"), pursuant to a plan of reorganization approved by
Large Cap Growth Fund shareholders on November 11, 2003. The acquisition was
accomplished by a tax-free exchange of 2,397,395 Class A shares of the Growth
Fund for 1,072,307 shares of the Large Cap Growth Fund Class A, 2,628,461 Class
B shares of the Growth Fund for 1,206,169 shares of the Large Cap Growth Fund
Class B, 216,384 Class C shares of the Growth Fund for 99,268 shares of the
Large Cap Growth Fund Class C, 101,251 Class Y shares of the Growth Fund for
46,248 shares of the Large Cap Growth Fund Class Y. Large Cap Growth Fund net
assets at that date $25,651,741, including $1,082,424 of net unrealized
appreciation, were combined with those of the Growth Fund. The aggregate net
assets of the Growth Fund immediately before the acquisition were $32,638,783.
The combined net assets of the Growth Fund immediately following the acquisition
were $58,290,524. The Growth Fund acquired capital loss carryovers, subject to
limitations, of $41,153,499 from the Large Cap Growth Fund.
33
[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles Aggressive Growth Fund
Loomis Sayles Mid Cap Growth Fund
Loomis Sayles Small Cap Growth Fund
Loomis Sayles Small Cap Value Fund
Loomis Sayles Small Company Growth Fund
Loomis Sayles Tax-Managed Equity Fund
Loomis Sayles Value Fund
Loomis Sayles Worldwide Fund
TABLE OF CONTENTS
Fund and Manager Review 1
Portfolio of Investments 10
Statements of Assets and Liabilities 42
Statements of Operations 44
Statements of Changes in Net Assets 46
Financial Highlights 50
Notes to Financial Statements 56
SEMI-ANNUAL REPORT
MARCH 31, 2004 (Unaudited)
FUND AND MANAGER REVIEW
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
PORTFOLIO REVIEW | The Fund under-performed its benchmark, the Russell Midcap
Growth Index, for the six-month period ended March 31, 2004. The Fund tended to
outperform on days when the market rose but lagged during the corrections. This
was due to the Fund's high beta and the Fund's concentrated holdings and
overweight in technology. Reducing this large "downside capture" remains our
single-highest priority.
For the period, the Fund's consumer discretionary, technology, and healthcare
sectors made the greatest contributions to absolute performance, but they
underperformed their respective sectors in the index. Unfortunately, the Fund
did not hold several stocks that were both significantly represented in the
benchmark and strong performers, particularly in the healthcare and consumer
discretionary sectors. The Fund owned some stocks that were on the smaller side
of the mid-cap range (especially in the technology sector), and these stocks
underperformed during market corrections.
We continue to look for companies expected to show superior growth in earnings
and revenues, either because of new products or their inherent operating
leverage. We believe monetary and fiscal policy may remain supportive of
economic expansion. As a result, we've been focusing on companies leveraged to
a cyclical rebound, including technology and energy companies, and businesses
that should benefit from continued strength in consumer spending. Recently, we
have been reducing our exposure to some of the most cyclically-leveraged
industries, such as semiconductors and semi capital equipment, because it
appears these stocks now may be discounting peak earnings. We have also been
adding more names in healthcare, particularly in the biotechnology industry,
where we are finding companies with exciting news from clinical trials and
imminent product launches.
OUTLOOK | We believe the cyclical bull market remains intact and expect
positive returns from the market during 2004. We believe 2005 could be a more
challenging year for the market, as its likely the Fed will begin to raise
rates back to more normal levels, and the impact of tax cuts and other stimuli
will likely abate.
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 | $52.1 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MARCH 31, 2004
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEPTION
- -----------------------------------------------------------------------------
LOOMIS SAYLES AGGRESSIVE GROWTH FUND:
INSTITUTIONAL 12.49% 48.51% 0.77% 8.49%
RETAIL 12.33 48.09 0.48 8.18
LIPPER MID-CAP GROWTH FUNDS INDEX(a) 15.32 43.03 2.22 5.29
RUSSELL MIDCAP GROWTH INDEX(a) 17.58 49.63 2.29 7.35
CUMULATIVE PERFORMANCE INCEPTION TO MARCH 31, 2004(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
10/31/2003 440,306 339,841 384,234
11/30/2003 443,528 347,922 394,516
12/31/2003 432,982 349,706 398,822
01/31/2004 450,266 358,542 411,991
02/29/2004 441,185 363,487 418,902
03/31/2004 451,145 363,400 418,102
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. For performance
current to the most recent month-end, please visit the Loomis Sayles website.
Current performance may be higher or lower than quoted.
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) See page 9 for a description of the indexes. (b) Cumulative performance is
shown for the Institutional Class of shares. Performance of the Retail Class of
shares would be lower due to higher fees. (c) The mountain chart is based on
the initial investment minimum of $250,000 for the Institutional Class. * Not
annualized.
Small- and mid-cap stocks may be more volatile than larger, more established
companies. The secondary market for these stocks may be less liquid, which
could 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. Foreign countries may have
different accounting standards than those of the U.S. 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.
1
FUND AND MANAGER REVIEW
LOOMIS SAYLES MID CAP GROWTH FUND
PORTFOLIO REVIEW | The Fund underperformed its benchmark, the Russell Midcap
Growth Index, for the six-month period ended March 31, 2004. The Fund tended to
outperform on days when the market rose but lagged during the corrections. This
was due to the Fund's high beta and the Fund's concentrated holdings and
overweight in technology, relative to the benchmark. Reducing this large
"downside capture" remains our single-highest priority.
For the period, the Fund's consumer discretionary, technology, and healthcare
sectors made the greatest contributions to absolute performance, but they
under-performed their respective sectors in the index. Unfortunately, the Fund
did not hold several stocks that were both significantly represented in the
benchmark and strong performers, particularly in the healthcare and consumer
discretionary sectors. The Fund owned some stocks that were on the smaller side
of the mid-cap range (especially in the technology sector), and these stocks
underperformed during market corrections.
We continue to look for companies expected to show superior growth in earnings
and revenues, either because of new products or their inherent operating
leverage. We believe monetary and fiscal policy may remain supportive of
economic expansion. As a result, we've been focusing on companies leveraged to
a cyclical rebound, including technology and energy companies, and businesses
that should benefit from continued strength in consumer spending. Recently, we
have been reducing our exposure to some of the most cyclically-leveraged
industries and groups, such as semi-conductors and semi capital equipment,
because it appears these stocks now may be discounting peak earnings. We have
also been adding more names in healthcare, particularly in the biotechnology
industry, where we are finding companies with exciting news from clinical
trials and imminent product launches.
OUTLOOK | We believe the cyclical bull market remains intact and expect
positive returns from the market during 2004. We believe 2005 could be a more
challenging year for the market, as the Fed begins to raise rates back to more
normal levels, and the impact of tax cuts and other stimuli begins to abate.
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 | $8.6 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MARCH 31, 2004
SINCE
DESCRIPTION 6 MONTHS* 1 YEAR INCEPTION
---------------------------------------------------------------
LOOMIS SAYLES MID CAP GROWTH FUND 12.46% 48.81% -11.50%
LIPPER MID-CAP GROWTH FUNDS INDEX(a) 15.32 43.03 -2.59
RUSSELL MIDCAP GROWTH INDEX(a) 17.58 49.63 -0.26
CUMULATIVE PERFORMANCE INCEPTION TO MARCH 31, 2004(b)
[CHART]
Lipper
Mid-Cap Russell
Loomis Sayles Growth Midcap
Mid Cap 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
10/31/2003 1,675,000 2,155,940 2,279,001
11/30/2003 1,685,000 2,207,202 2,339,985
12/31/2003 1,647,500 2,218,524 2,365,525
01/31/2004 1,707,500 2,274,577 2,443,631
02/29/2004 1,677,500 2,305,948 2,484,625
03/31/2004 1,715,000 2,305,398 2,479,877
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. For performance
current to the most recent month-end, please visit the Loomis Sayles website.
Current performance may be higher or lower than quoted.
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) See page 9 for a description of the indexes. (b) The mountain chart is
based on the Fund's minimum initial investment of $2,500,000. * Not annualized.
Small- and mid-cap stocks may be more volatile than larger, more established
companies. The secondary market for these stocks may be less liquid, which
could 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. Foreign countries may have
different accounting standards than those of the U.S. 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.
2
FUND AND MANAGER REVIEW
LOOMIS SAYLES SMALL CAP GROWTH FUND
PORTFOLIO REVIEW | Although all but one of the sectors the Fund invested in
generated positive returns for the six-month period ended March 31, 2004, the
Fund underperformed its benchmark, the Russell 2000 Growth Index. Only the
Fund's consumer discretionary sector contributed to positive relative
performance compared to the index. Underperformance in the Fund's technology,
financial services and healthcare sectors accounted for the bulk of the Fund's
performance shortfall relative to the benchmark.
In terms of absolute performance, the Fund realized the best results from
stocks in the consumer discretionary, healthcare and technology sectors. Strong
results from names such as Ask Jeeves and Netflix powered gains in the consumer
discretionary sector. The healthcare sector also had big movers for the period,
including Impax Laboratories and Esperion Therapeutics. The technology sector
had big contributors, such as F5 Networks, but it also had negative performers,
as investors took profits after realizing large gains in early 2003 and in
January, 2004.
The Fund's auto and transportation group generated negative performance due to
poor results from AirTran Holdings, which suffered from higher fuel prices and
a generally weak revenue environment. Some of the Fund's semiconductor
holdings, such as Sigmatel and Varian Semi, also generated negative
performance. We trimmed or eliminated many of our holdings in the semiconductor
industry because we believe peak earnings growth for this industry already may
have occurred.
OUTLOOK | The Fund remains positioned for an expanding economy, with
over-weights in the consumer discretionary and technology areas. We also have
started to increase our exposure to healthcare companies, particularly in the
biotechnology industry. The Fund remains underweighted in the financial
services sector, because we have not found many names in this area that meet
our long-term growth criteria.
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 | $39.3 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MARCH 31, 2004
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEPTION
-------------------------------------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH FUND:
INSTITUTIONAL 10.13% 55.34% -6.31% 0.84%
RETAIL 9.94 55.09 -6.56 0.59
LIPPER SMALL-CAP GROWTH FUNDS INDEX(a) 16.13 55.74 7.62 6.40
RUSSELL 2000 GROWTH INDEX(a) 18.97 63.16 2.31 3.24
RUSSELL 2000 INDEX(a) 21.69 63.83 9.66 8.35
CUMULATIVE PERFORMANCE INCEPTION TO MARCH 31, 2004 (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
10/31/2003 261,078 368,222 287,629 398,194
11/30/2003 269,781 378,027 297,006 412,325
12/31/2003 259,113 378,566 298,334 420,691
01/31/2004 277,641 396,277 314,007 438,968
02/29/2004 266,693 394,788 313,521 442,903
03/31/2004 265,570 392,059 314,986 447,031
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. For performance
current to the most recent month-end, please visit the Loomis Sayles website.
Current performance may be higher or lower than quoted.
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) See page 9 for a description of the indexes. (b) Cumulative performance is
shown for the Institutional Class of shares. Performance of the Retail Class of
shares would be lower due to higher fees. (c) The mountain chart is based on
the initial investment minimum of $250,000 for the Institutional Class. * Not
annualized.
Small- and mid-cap stocks may be more volatile than larger, more established
companies. The secondary market for these stocks may be less liquid, which
could 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. Foreign countries may have
different accounting standards than those of the U.S. 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.
3
FUND AND MANAGER REVIEW
LOOMIS SAYLES SMALL CAP VALUE FUND
PORTFOLIO REVIEW | The Fund lagged its benchmark, the Russell 2000 Index, for
the six-month period ended March 31, 2004. In late 2003 and early 2004, the
best-performing small-cap stocks were higher risk in nature. These stocks
included the smallest market caps, companies with weaker balance sheets, and
companies generating losses from operations. Our long-standing investment
discipline, which emphasizes undervalued, under-followed or misunderstood small
companies, typically favors positive earnings and cash flows, superior earnings
visibility and better balance sheets. Although this discipline did not match
the market's preference early in the period, a significant rotation back to
higher-quality stocks occurred in February and March, resulting in improving
relative performance for the Fund.
All the Fund's sectors advanced during the period. The Fund's strongest
performing sectors included energy, auto and transportation, and healthcare.
Energy stocks benefited from continued price increases for oil and natural gas.
The auto and transportation sector was strong due to appreciation from
economically-sensitive end markets such as recreational vehicles, railroads and
trucking. Healthcare's strength was driven by individual stocks, such as Andrx
and Perrigo, and medical technology company Serologicals.
Due to their defensive characteristics and limited economic sensitivity, the
Fund's utilities and consumer staples holdings, though up for the period, could
not keep up with the market. Technology also lagged, as investors took profits
following an extraordinary run in previous quarters.
OUTLOOK | We maintain a positive short-term outlook, with our enthusiasm
tempered somewhat by the strong first-quarter returns for small-cap stocks. We
expect near-term economic news to be positive and earnings expectations to move
higher. We are cautious on the second half of 2004. In our view, continued
economic growth and early signs of inflation may be followed by a period of
rising interest rates, which ultimately may affect growth and valuations. In
addition, we are concerned that current stock valuations are based on
substantial gains in corporate profits and may be vulnerable to disappointments
as the year progresses.
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 | $579.9 million
[PHOTO] [PHOTO]
Joseph Gatz Daniel Thelen
JOSEPH GATZ DANIEL THELEN
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MARCH 31, 2004
SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
- -----------------------------------------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE FUND:
INSTITUTIONAL 20.95% 49.19% 14.47% 13.73% 15.37%
RETAIL(a) 20.76 48.76 14.19 13.51 15.20
ADMIN(a) 20.68 48.43 13.90 13.12 14.82
LIPPER SMALL-CAP CORE FUNDS
INDEX(b)(c) 21.86 57.64 12.67 11.95 N/A
RUSSELL 2000 VALUE INDEX(c) 24.42 64.49 16.14 13.61 15.12
RUSSELL 2000 INDEX(c) 21.69 63.83 9.66 10.44 11.70
CUMULATIVE PERFORMANCE INCEPTION TO MARCH 31, 2004(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
10/31/2003 1,412,826 876,479 1,339,669 929,304
11/30/2003 1,453,939 908,054 1,391,094 962,283
12/31/2003 1,488,772 933,305 1,441,403 981,806
01/31/2004 1,522,651 962,874 1,491,241 1,024,461
02/29/2004 1,552,137 979,629 1,520,117 1,033,645
03/31/2004 1,577,934 990,251 1,541,139 1,043,278
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. For performance
current to the most recent month-end, please visit the Loomis Sayles website.
Current performance may be higher or lower than quoted.
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 (12/31/96) and Admin Class (1/02/98) 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. (b) The Lipper Small-Cap Core
Funds Index performance data is not available prior to January 1, 1992. (c) See
page 9 for a description of the indexes. (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 higher fees and expenses. (e) The
mountain chart is based on the initial investment minimum of $250,000 for the
Institutional Class. * Not annualized.
Value stocks present the risk that they may fall out of favor with investors
and underperform the overall equity market during any given period. Small- and
mid-cap stocks may be more volatile than larger, more established companies.
The secondary market for these stocks may be less liquid, which could 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. Foreign countries may have different accounting
standards than those of the U.S.
4
FUND AND MANAGER REVIEW
LOOMIS SAYLES SMALL COMPANY GROWTH FUND
PORTFOLIO REVIEW | The Fund under-performed its benchmark, the Russell 2000
Growth Index, for the six months ended March 31, 2004. The investment approach
that had produced strong gains in the prior six-month period ran into
headwinds, despite solid evidence of rebounding revenue and profit growth
across a number of industries and sectors. In retrospect, many of the stocks in
the Fund had reached valuations that fully discounted near-term results and
thus were vulnerable to profit-taking and swings in investor sentiment.
Consumer discretionary stocks, responding to strong revenue and earnings
growth, offered the greatest positive contribution to performance in the
period. The healthcare, energy and technology sectors contributed to the Fund's
positive return for the period, although their impact was relatively small.
The most significant detractor to the Fund's return was the producer durables
sector. Most holdings in this sector provide capital equipment for the
production of semiconductors and have seen a strong upswing in demand. The
stocks sold off however, as investors grew concerned that this demand could not
be sustained. We eliminated most of the Fund's exposure to the industry. The
auto and transportation area also detracted slightly from the Fund's return,
with the shortfall almost entirely due to the decline of AirTran Holdings, a
leading discount air carrier. Concerns about rising fuel prices and a more
competitive environment caused this stock to fall.
OUTLOOK | We are taking steps that we believe should enhance the Fund's
performance during bouts of market volatility, without changing the Fund's
character. Although we are optimistic for stocks in the coming months, we must
prepare for increased short-term volatility caused by unexpected events at home
and abroad.
We will continue to focus on what we believe to be fundamentally strong
small-cap companies, but we plan to broaden our universe beyond the consumer
discretionary, healthcare and technology sectors. This should offer some
incremental downside protection in times of market stress. We also plan to be
more aggressive sellers, by eliminating holdings that are failing to perform
and by taking profits more aggressively. We will continue to view market
corrections as opportunities to add to existing positions or establish new
positions in stocks with compelling fundamentals at attractive valuations.
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 | $23.7 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MARCH 31, 2004
SINCE
FUND NAME 6 MONTHS* 1 YEAR INCEPTION(a)
---------------------------------------------------------------------
LOOMIS SAYLES SMALL COMPANY GROWTH FUND 5.08% 52.72% -2.53%
LIPPER SMALL-CAP GROWTH FUNDS INDEX(b) 16.13 55.74 6.91
RUSSELL 2000 GROWTH INDEX(b) 18.97 63.16 0.60
RUSSELL 2000 INDEX(b) 21.69 63.83 7.93
CUMULATIVE PERFORMANCE INCEPTION TO MARCH 31, 2004(c)
[CHART]
Loomis Sayles
Small Company Lipper Small-Cap Russell 2000 Russell 2000
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
10/31/2003 2,700,528 3,914,219 2,821,256 3,888,427
11/30/2003 2,776,642 4,018,446 2,913,238 4,026,419
12/31/2003 2,670,082 4,024,170 2,926,262 4,108,107
01/31/2004 2,785,776 4,212,446 3,079,989 4,286,587
02/29/2004 2,688,350 4,196,614 3,075,223 4,325,013
03/31/2004 2,645,726 4,167,609 3,089,598 4,365,321
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. For performance
current to the most recent month-end, please visit the Loomis Sayles website.
Current performance may be higher or lower than quoted.
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. (b) See page 9 for a description of the indexes.
(c) The mountain chart is based on the Fund's minimum initial investment of
$3,000,000. * Not annualized.
Small- and mid-cap stocks may be more volatile than larger, more established
companies. The secondary market for these stocks may be less liquid, which
could 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. Foreign countries may have
different accounting standards than those of the U.S. 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.
5
FUND AND MANAGER REVIEW
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
PORTFOLIO REVIEW | We continued to position the Fund to take advantage of an
economic recovery by adding to positions with more cyclical leverage (energy,
materials, industrials) and focusing on high-quality companies during the
six-month period ended March 31, 2004. This proved to be prudent because
high-quality companies positioned for an improving economy showed strong
performance during the period.
Positive contributions from our sector allocations and specific security
selections helped the Fund outperform its benchmark, the S&P 500 Index, for the
six months. In particular, solid stock selection in the technology (NVIDIA),
financials (New York Community Bank) and healthcare (Caremark Rx) sectors
combined with a technology overweight and a healthcare underweight helped
generate the out-performance.
The Fund's consumer discretionary and telecommunication holdings had a negative
impact on performance during the period. Within the consumer discretionary
sector, Kohl's was a weak performer due to mediocre consumer holiday spending
and concerns about a management transition. In the telecom sector, our lone
holding, Century Tel, Inc., declined in value because of downward earnings
revisions.
OUTLOOK | Low interest rates, productivity enhancements, fiscal stimulus, tax
cuts and improving economic growth should continue to drive strong earnings and
cash flow throughout the next few quarters. Longer-term, we believe stocks
appear attractive versus other asset classes. Looking ahead, high-quality
companies that offer a combination of earnings growth, solid free cash flow and
an attractive yield may offer long-term investors competitive returns.
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 | $3.9 million
[PHOTO] [PHOTO]
Robert Ix Mark A. Shank
ROBERT IX MARK A. SHANK
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MARCH 31, 2004
SINCE SINCE
FUND NAME 6 MONTHS* 1 YEAR 5 YEARS REGISTRATION(a)(b) INCEPTION(a)(b)
- ---------------------------------------------------------------------------------------
LOOMIS SAYLES TAX-MANAGED
EQUITY FUND 14.60% 29.67% 4.90% 9.88% 10.94%
RETURN AFTER TAXES
ON DISTRIBUTION 14.07 29.07 1.12 5.75 7.39
RETURN AFTER TAXES
ON DISTRIBUTION AND
SALE OF FUND SHARES 9.84 19.68 2.17 6.39 7.71
LIPPER MULTI-CAP CORE FUNDS
INDEX(c) 14.99 39.21 1.43 6.66 8.94
S&P 500 INDEX(c) 14.08 35.12 -1.20 6.70 9.77
CUMULATIVE PERFORMANCE REGISTRATION TO MARCH 31, 2004(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 424,686 343,263 346,831
10/31/2003 443,537 363,706 366,451
11/30/2003 447,418 369,385 369,675
12/31/2003 467,972 384,112 389,063
01/31/2004 479,884 393,136 396,204
02/29/2004 489,527 399,242 401,711
03/31/2004 486,701 394,711 395,651
CUMULATIVE PERFORMANCE INCEPTION TO MARCH 31, 2004(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
10/31/2003 550,356 476,968 511,540
11/30/2003 555,171 484,415 516,041
12/31/2003 580,676 503,729 543,104
01/31/2004 595,456 515,564 553,073
02/29/2004 607,422 523,571 560,760
03/31/2004 603,903 517,628 552,300
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. For performance
current to the most recent month-end, please visit the Loomis Sayles website.
Current performance may be higher or lower than quoted.
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 under the Securities Act of
1933 on March 7, 1997. In accordance with 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) Index performance 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. (c) See page
9 for a description of the indexes and disclosure related to after tax
returns. (d) The mountain chart is based on the Fund's minimum initial
investment of $250,000. * Not annualized.
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.
6
FUND AND MANAGER REVIEW
LOOMIS SAYLES VALUE FUND
PORTFOLIO REVIEW | The Fund outperformed its benchmark, the S&P 500 Index, for
the six-month period ended March 31, 2004. Our stock selections within the
consumer discretionary and industrials sectors were the major contributors to
out-performance. In addition, performance among stocks in these sectors
benefited from a strong economic environment.
J.C. Penney, Tyco and Simon Property Group were the leading performers. J.C.
Penney benefited from a rebound in sales and the potential sale of its Eckerd
Drug Store division. Tyco serves cyclical markets, which are showing signs of a
rebound. Simon Property is a REIT (real estate investment trust), which has
been sought after by investors for its high dividend yield and dividend growth
prospects.
The Fund's financial and healthcare sectors had the greatest negative relative
impact on performance for the period. Unfavorable stock selections within the
financials sector led to poor relative performance for that segment. We
maintained an underweight in the healthcare sector and healthcare lagged the
overall market. The Fund's poorest-performing individual holdings--McKesson,
Universal Health Services and Abbott Labs--are all healthcare stocks. McKesson
has been involved in aggressive bidding for new business, which has raised
profit concerns among investors. Universal Health Services has been hit with
increased costs due to patient payment issues. Abbott Labs moderately reduced
its earning guidance, which caused the stock price to fall. Although the
healthcare sector is struggling at present, we believe the long-term outlook
remains bright.
OUTLOOK | We continue to favor higher-quality stocks. Given the broad rally
during the past 12 months, it has become more difficult to find attractive
values in the market. We believe the stock market, as measured by the S&P 500
Index, is near the mid-point of its potential return range for 2004, leading us
to believe that returns may be positive but they may moderate from current
levels.
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 | $41.0 million
[PHOTO] [PHOTO]
Warren Koontz James Carroll
WARREN KOONTZ JAMES CARROLL
[PHOTO]
Jeffrey Wardlow
JEFFREY WARDLOW
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED MARCH 31, 2004
SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
-----------------------------------------------------------------------
LOOMIS SAYLES VALUE FUND 16.83% 39.54% 1.58% 9.83% 10.07%
LIPPER LARGE-CAP
VALUE FUNDS INDEX(b) 16.11 37.82 1.22 10.70 10.75
S&P 500 INDEX(b) 14.08 35.12 -1.20 11.68 11.14
CUMULATIVE PERFORMANCE INCEPTION TO MARCH 31, 2004(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
10/31/2003 773,149 849,965 905,517
11/30/2003 788,405 860,420 913,484
12/31/2003 833,639 913,198 961,391
01/31/2004 844,666 927,032 979,037
02/29/2004 863,412 946,582 992,645
03/31/2004 860,655 935,257 977,670
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. For performance
current to the most recent month-end, please visit the Loomis Sayles website.
Current performance may be higher or lower than quoted.
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) 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. (b) See page 9 for a description of the indexes.
(c) The mountain chart is based on the Fund's minimum initial investment of
$250,000. * Not annualized.
Value stocks present the risk that they may fall out of favor with investors
and underperform the overall equity market during any given period. Foreign
investments involve special risks including greater economic, political and
currency fluctuation risks, which may be even greater in emerging markets.
Foreign countries may have different accounting standards than those of the U.S.
7
FUND AND MANAGER REVIEW
LOOMIS SAYLES WORLDWIDE FUND
PORTFOLIO REVIEW | The Fund under-performed its benchmark, the S&P 500 Index,
during the six-month period ended March 31, 2004, primarily due to
underperformance in the Fund's bond portfolio. The Fund's stock portfolio
outperformed, but not enough to offset the bond portfolio's underperformance.
Our bond market strategy became more cautious as the period advanced and we
sought to reduce risk on several fronts. We reduced the bond portfolio's
duration, reflecting our expectation for higher interest rates. We also
increased the portfolio's overall quality rating by scaling back corporate bond
exposure. We worked toward moving the portfolio's currency composition closer
to that of the benchmark. We increased exposure to the yen, the Singapore
dollar and the sterling. Nevertheless, the portfolio was under-weighted in the
yen, which was a negative influence on relative performance, because of its
strong performance. The bond portfolio also was under-weighted in the U.S.
dollar, and it was over-weighted in the outperforming Australian dollar, U.K.
sterling, euro, Norwegian krone and Danish krone.
Out-performance in the international stock portfolio was due to investments in
quality growth companies that exhibited increasing revenues and earnings,
including those in the financials, materials, energy and consumer staples
sectors. On the other hand, investments in the consumer discretionary,
industrials and information technology sectors detracted from performance. In
addition, an underweight in Japan and exposure to export-related Japanese
companies hurt performance. The weakening U.S. dollar relative to the yen made
exports to the U.S. more expensive, and export-related businesses suffered.
Nevertheless, as economic and company-related news has improved, we have slowly
increased exposure to Japan.
OUTLOOK | From a stock perspective, earnings are growing the fastest in the
U.S., Asia and the emerging markets. All indications point to economic growth
taking hold in the U.S. On the bond front, we believe several non-dollar
markets may generate relative out-performance, including Canada, where
policymakers recently reduced interest rates; Australia, New Zealand and the
United Kingdom, where the monetary policy authorities have been tightening for
some time; and euro nations, where there is little evidence that inflation may
be bottoming.
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 U.S. 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 | $16.8 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 MARCH 31, 2004
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEPTION(a)
---------------------------------------------------------------------------
LOOMIS SAYLES WORLDWIDE FUND 14.02% 33.17% 13.73% 10.93%
LIPPER GLOBAL FLEXIBLE FUNDS INDEX(b) 13.57 33.87 4.72 6.98
S&P 500 INDEX(b) 14.08 35.12 -1.20 8.79
CUMULATIVE PERFORMANCE INCEPTION TO MARCH 31, 2004(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
10/31/2003 517,030 389,936 451,263
11/30/2003 521,842 396,191 455,234
12/31/2003 547,702 409,462 479,108
01/31/2004 556,008 418,719 487,902
02/29/2004 562,654 424,606 494,684
03/31/2004 568,192 426,515 487,221
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. For performance
current to the most recent month-end, please visit the Loomis Sayles website.
Current performance may be higher or lower than quoted.
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) 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. (b) See page 9 for a description of the
indexes. (c) The mountain chart is based on the Fund's minimum initial
investment of $250,000. * Not annualized.
Foreign investments involve special risks including greater economic, political
and currency fluctuation risks, which may be even greater in emerging markets.
Foreign countries may have different accounting standards than those of the U.S.
8
DISCLOSURE
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 Core Funds Index is an equally weighted index of typically the
30 largest mutual funds within the small-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.
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 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.
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.
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.
PROXY VOTING INFORMATION
A description of the Funds' proxy voting policies and procedures is available
(i) without charge, upon request, by calling Loomis Sayles at 800-633-3330;
(ii) on the Funds' website, www.loomissayles.com, and (iii) on the Securities
and Exchange Commission's website at www.sec.gov.
9
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
SHARES VALUE +
- -------------------------------------------------------------------
COMMON STOCKS - 99.7% OF NET ASSETS
BIOTECHNOLOGY - 11.1%
Amylin Pharmaceuticals, Inc.* 21,375 $ 506,374
Celgene Corp.* 10,600 505,090
Gen-Probe, Inc.* 27,175 907,917
ImClone Systems, Inc.* 17,125 870,977
Invitrogen Corp.* 13,950 1,000,075
Millennium Pharmaceuticals, Inc.* 32,600 550,940
OSI Pharmaceuticals, Inc.* 13,425 515,520
QLT, Inc.* 15,325 391,401
Telik, Inc.* 20,500 550,220
-----------
5,798,514
-----------
CAPITAL MARKETS - 2.5%
Ameritrade Holding Corp.* 83,875 1,291,675
-----------
COMMERCIAL SERVICES & SUPPLIES - 4.2%
Apollo Group, Inc.-University of Phoenix Online* 12,791 1,113,073
Monster Worldwide, Inc.* 40,325 1,056,515
-----------
2,169,588
-----------
COMMUNICATIONS EQUIPMENT - 6.0%
Juniper Networks, Inc.* 60,575 1,575,556
Polycom, Inc.* 47,150 1,000,994
Research In Motion Ltd.* 5,825 543,531
-----------
3,120,081
-----------
COMPUTERS & PERIPHERALS - 2.1%
Network Appliance, Inc.* 50,900 1,091,805
-----------
ENERGY EQUIPMENT & SERVICES - 4.0%
Patterson-UTI Energy, Inc.* 36,100 1,278,301
Smith International, Inc.* 15,075 806,663
-----------
2,084,964
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 5.3%
Kinetic Concepts, Inc.* 11,575 519,139
St. Jude Medical, Inc.* 13,925 1,003,993
Zimmer Holdings, Inc.* 16,725 1,233,970
-----------
2,757,102
-----------
HEALTHCARE PROVIDERS & SERVICES - 3.6%
Caremark Rx, Inc.* 37,400 1,243,550
eResearch Technology, Inc.* 22,700 636,735
-----------
1,880,285
-----------
HOTELS RESTAURANTS & LEISURE - 4.3%
International Game Technology 25,225 1,134,116
Station Casinos, Inc. 25,225 1,114,188
-----------
2,248,304
-----------
INSURANCE - 2.0%
Everest Re Group Ltd. 12,375 1,057,320
-----------
INTERNET & CATALOG RETAIL - 2.6%
Amazon.com, Inc.* 17,975 777,958
Netflix, Inc.* 16,325 557,009
-----------
1,334,967
-----------
10
SHARES VALUE +
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
INTERNET SOFTWARE & SERVICES - 5.3%
Akamai Technologies, Inc.* 55,025 $ 723,029
Ask Jeeves, Inc.* 36,825 1,315,757
SINA Corp.* 19,275 729,173
-----------
2,767,959
-----------
IT SERVICES - 2.3%
Cognizant Technology Solutions Corp.* 27,150 1,228,538
-----------
MEDIA - 4.4%
Getty Images, Inc.* 20,125 1,086,348
XM Satellite Radio Holdings, Inc., Class A* 42,400 1,187,200
-----------
2,273,548
-----------
METALS & MINING - 1.6%
Freeport-McMoRan Copper & Gold, Inc., Class B 21,300 832,617
-----------
OIL & GAS - 2.1%
XTO Energy, Inc. 43,000 1,085,320
-----------
PHARMACEUTICALS - 5.8%
Eon Labs, Inc.* 15,725 1,054,833
Medicis Pharmaceutical Corp., Class A 28,850 1,154,000
MGI Pharma, Inc.* 13,375 819,352
-----------
3,028,185
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.7%
Broadcom Corp., Class A* 36,225 1,418,933
Cypress Semiconductor Corp.* 38,050 778,884
Silicon Laboratories, Inc.* 14,475 765,438
Xilinx, Inc.* 27,200 1,033,600
-----------
3,996,855
-----------
SOFTWARE - 14.4%
Activision, Inc.* 73,463 1,162,177
Autodesk, Inc. 39,425 1,246,618
Cognos, Inc.* 24,800 770,288
Electronic Arts, Inc.* 20,375 1,099,435
Red Hat, Inc.* 68,100 1,556,766
Symantec Corp.* 36,200 1,676,060
-----------
7,511,344
-----------
SPECIALTY RETAIL - 3.1%
Advance Auto Parts, Inc.* 19,475 792,048
Hot Topic, Inc.* 30,400 804,080
-----------
1,596,128
-----------
TEXTILES APPAREL & LUXURY GOODS - 1.9%
Coach, Inc.* 23,675 970,438
-----------
THRIFTS & MORTGAGE FINANCE - 1.9%
New York Community Bancorp, Inc. 29,275 1,003,547
-----------
WIRELESS TELECOMMUNICATION SERVICES - 1.5%
Nextel Partners, Inc., Class A* 60,625 767,513
-----------
TOTAL COMMON STOCKS
(Identified Cost $43,549,806) 51,896,597
-----------
11
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES AGGRESSIVE GROWTH FUND - CONTINUED
VALUE +
- -------------------------------------------------------------
TOTAL INVESTMENTS - 99.7%
(Identified Cost $43,549,806)@ $51,896,597
Cash and Other Assets, Less Liabilities--0.3% 176,082
-----------
NET ASSETS - 100% $52,072,679
-----------
+See Note 2.
*Non-income producing security.
@At March 31, 2004, the net unrealized appreciation on investments based on
cost of $43,549,806 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 $9,179,677
and $832,886, respectively, resulting in net unrealized appreciation of
$8,346,791.
At September 30, 2003, the fund had a capital loss carryover of approximately
$119,831,301 which expires between September 30, 2009 and September 30, 2011.
This may be available to offset future realized capital gains if any, to the
extent provided by regulations.
See accompanying notes to financial statements.
12
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES MID CAP GROWTH FUND
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - 99.2% OF NET ASSETS
BIOTECHNOLOGY - 11.1%
Amylin Pharmaceuticals, Inc.* 3,525 $ 83,507
Celgene Corp.* 1,750 83,387
Gen-Probe, Inc.* 4,700 157,027
ImClone Systems, Inc.* 2,800 142,408
Invitrogen Corp.* 2,500 179,225
Millennium Pharmaceuticals, Inc.* 4,500 76,050
OSI Pharmaceuticals, Inc.* 2,225 85,440
QLT, Inc.* 2,525 64,489
Telik, Inc.* 3,175 85,217
----------
956,750
----------
CAPITAL MARKETS - 2.4%
Ameritrade Holding Corp.* 13,225 203,665
----------
COMMERCIAL SERVICES & SUPPLIES - 4.6%
Apollo Group, Inc.-University of Phoenix Online* 2,566 223,293
Monster Worldwide, Inc.* 6,650 174,230
----------
397,523
----------
COMMUNICATIONS EQUIPMENT - 5.9%
Juniper Networks, Inc.* 9,925 258,149
Polycom, Inc.* 7,675 162,940
Research In Motion Ltd.* 950 88,645
----------
509,734
----------
COMPUTERS & PERIPHERALS - 2.0%
Network Appliance, Inc.* 8,175 175,354
----------
ENERGY EQUIPMENT & SERVICES - 3.9%
Patterson-UTI Energy, Inc.* 5,700 201,837
Smith International, Inc.* 2,475 132,437
----------
334,274
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 5.7%
Kinetic Concepts, Inc.* 1,825 81,851
St. Jude Medical, Inc.* 2,525 182,053
Zimmer Holdings, Inc.* 3,050 225,029
----------
488,933
----------
HEALTHCARE PROVIDERS & SERVICES - 3.6%
Caremark Rx, Inc.* 6,175 205,319
eResearch Technology, Inc.* 3,650 102,382
----------
307,701
----------
HOTELS RESTAURANTS & LEISURE - 4.3%
International Game Technology 4,150 186,584
Station Casinos, Inc. 4,175 184,410
----------
370,994
----------
INSURANCE - 2.0%
Everest Re Group Ltd. 1,975 168,744
----------
INTERNET & CATALOG RETAIL - 2.4%
Amazon.com, Inc.* 2,750 119,020
Netflix, Inc.* 2,675 91,271
----------
210,291
----------
13
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES MID CAP GROWTH FUND - CONTINUED
SHARES VALUE +
- -----------------------------------------------------------------
COMMON STOCKS - CONTINUED
INTERNET SOFTWARE & SERVICES - 4.8%
Akamai Technologies, Inc.* 9,075 $ 119,245
Ask Jeeves, Inc.* 6,100 217,953
SINA Corp.* 2,100 79,443
----------
416,641
----------
IT SERVICES - 2.3%
Cognizant Technology Solutions Corp.* 4,350 196,838
----------
MEDIA - 4.6%
Getty Images, Inc.* 3,950 213,221
XM Satellite Radio Holdings, Inc., Class A* 6,550 183,400
----------
396,621
----------
METALS & MINING - 1.6%
Freeport-McMoRan Copper & Gold, Inc., Class B 3,425 133,883
----------
OIL & GAS - 2.0%
XTO Energy, Inc. 6,813 171,948
----------
PHARMACEUTICALS - 5.8%
Eon Labs, Inc.* 2,575 172,731
Medicis Pharmaceutical Corp., Class A 4,750 190,000
MGI Pharma, Inc.* 2,200 134,772
----------
497,503
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.6%
Broadcom Corp., Class A* 5,925 232,082
Cypress Semiconductor Corp.* 6,275 128,449
Silicon Laboratories, Inc.* 2,375 125,590
Xilinx, Inc.* 4,500 171,000
----------
657,121
----------
SOFTWARE - 14.4%
Activision, Inc.* 12,975 205,264
Autodesk, Inc. 6,475 204,740
Cognos, Inc.* 4,100 127,346
Electronic Arts, Inc.* 3,350 180,766
Red Hat, Inc.* 10,950 250,317
Symantec Corp.* 5,950 275,485
----------
1,243,918
----------
SPECIALTY RETAIL - 3.0%
Advance Auto Parts, Inc.* 3,250 132,177
Hot Topic, Inc.* 4,950 130,928
----------
263,105
----------
TEXTILES APPAREL & LUXURY GOODS - 1.8%
Coach, Inc.* 3,725 152,688
----------
THRIFTS & MORTGAGE FINANCE - 2.0%
New York Community Bancorp, Inc. 5,025 172,257
----------
14
SHARES VALUE +
- -----------------------------------------------------------------
COMMON STOCKS - CONTINUED
WIRELESS TELECOMMUNICATION SERVICES - 1.4%
Nextel Partners, Inc., Class A* 9,575 $ 121,220
----------
TOTAL COMMON STOCKS
(Identified Cost $7,101,205) 8,547,706
----------
TOTAL INVESTMENTS - 99.2%
(Identified Cost $7,101,205)@ 8,547,706
Cash and Other Assets, Less Liabilities--0.8% 71,940
----------
NET ASSETS - 100% $8,619,646
----------
+See Note 2.
*Non-income producing security.
@At March 31, 2004, the net unrealized appreciation on investments based on
cost of $7,101,205 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 $1,577,325
and $130,824, respectively, resulting in net unrealized appreciation of
$1,446,501.
At September 30, 2003, the fund had a capital loss carryover of approximately
$6,153,377 which expires between September 30, 2010 and September 30, 2011.
This may be available to offset future realized capital gains if any, to the
extent provided by regulations.
See accompanying notes to financial statements.
15
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES SMALL CAP GROWTH FUND
SHARES VALUE +
- ----------------------------------------------------------------
COMMON STOCKS - 99.8% OF NET ASSETS
BIOTECHNOLOGY - 8.4%
Connetics Corp.* 34,050 $ 754,888
Dendreon Corp.* 29,875 397,337
Onyx Pharmaceuticals, Inc.* 10,750 434,945
OSI Pharmaceuticals, Inc.* 10,825 415,680
QLT, Inc.* 7,500 191,550
Salix Pharmaceuticals Ltd.* 5,475 158,885
Telik, Inc.* 16,950 454,938
Vicuron Phamaceuticals, Inc.* 21,625 491,969
-----------
3,300,192
-----------
CAPITAL MARKETS - 3.7%
Affiliated Managers Group, Inc.* 13,800 753,204
Knight Trading Group, Inc.* 56,400 714,024
-----------
1,467,228
-----------
COMMERCIAL BANKS - 1.4%
UCBH Holdings, Inc. 14,150 566,566
-----------
COMMERCIAL SERVICES & SUPPLIES - 8.5%
Corporate Executive Board Co. 8,425 395,975
CoStar Group, Inc.* 19,700 726,733
Monster Worldwide, Inc.* 20,225 529,895
Navigant Consulting, Inc.* 27,000 546,210
Resources Connection, Inc.* 10,075 444,499
Strayer Education, Inc. 5,975 698,896
-----------
3,342,208
-----------
COMMUNICATIONS EQUIPMENT - 5.6%
AudioCodes Ltd.* 42,525 493,290
F5 Networks, Inc.* 19,550 661,768
Harmonic, Inc.* 40,000 386,000
Tekelec* 38,900 645,351
-----------
2,186,409
-----------
CONSUMER DURABLES & APPAREL - 1.5%
Quiksilver, Inc.* 27,125 592,681
-----------
DIVERSIFIED FINANCIAL SERVICES - 2.7%
eSPEED, Inc., Class A* 32,950 690,632
National Financial Partners Corp. 11,825 381,356
-----------
1,071,988
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.4%
Plexus Corp.* 31,700 563,943
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 5.4%
Epix Medical, Inc.* 25,025 519,269
Kyphon, Inc.* 25,500 609,705
Nektar Therapeutics* 18,725 404,085
Wright Medical Group, Inc.* 18,750 575,625
-----------
2,108,684
-----------
HEALTHCARE PROVIDERS & SERVICES - 3.3%
eResearch Technology, Inc.* 27,775 779,089
United Surgical Partners International, Inc.* 15,200 515,888
-----------
1,294,977
-----------
16
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HOTELS RESTAURANTS & LEISURE - 3.8%
Alliance Gaming Corp.* 18,250 $ 586,373
Multimedia Games, Inc.* 35,925 888,784
-----------
1,475,157
-----------
INTERNET & CATALOG RETAIL - 1.1%
Netflix, Inc.* 12,475 425,647
-----------
INTERNET SOFTWARE & SERVICES - 11.5%
Akamai Technologies, Inc.* 73,625 967,432
Ask Jeeves, Inc.* 27,750 991,507
Autobytel, Inc.* 46,400 612,480
Opsware, Inc.* 50,575 382,347
SkillSoft Plc* 68,025 877,523
SonicWALL, Inc.* 79,250 706,910
-----------
4,538,199
-----------
IT SERVICES - 1.0%
Lionbridge Technologies, Inc.* 41,425 403,065
-----------
MEDIA - 3.2%
Harris Interactive, Inc.* 50,600 426,558
XM Satellite Radio Holdings, Inc., Class A* 29,050 813,400
-----------
1,239,958
-----------
OIL & GAS - 3.2%
Evergreen Resources, Inc.* 19,650 674,978
Unit Corp.* 21,800 597,756
-----------
1,272,734
-----------
PHARMACEUTICALS - 5.7%
AtheroGenics, Inc.* 14,225 325,326
Impax Laboratories, Inc.* 35,875 802,523
Ligand Pharmaceuticals, Inc., Class B* 21,900 440,190
MGI Pharma, Inc.* 10,750 658,545
-----------
2,226,584
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 8.4%
Cypress Semiconductor Corp.* 27,700 567,019
FormFactor, Inc.* 26,750 559,877
Microsemi Corp.* 58,075 794,466
Mindspeed Technologies, Inc.* 77,400 505,422
Sigmatel, Inc.* 20,075 450,684
Tessera Technologies, Inc.* 23,825 435,998
-----------
3,313,466
-----------
SOFTWARE - 10.1%
Activision, Inc.* 60,138 951,375
Altiris, Inc.* 14,000 391,160
InfoSpace, Inc.* 20,975 815,298
Macromedia, Inc.* 29,650 595,076
RSA Security, Inc.* 32,000 601,280
Secure Computing Corp.* 37,225 608,629
-----------
3,962,818
-----------
17
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES SMALL CAP GROWTH FUND - CONTINUED
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
SPECIALTY RETAIL - 9.9%
Aeropostale, Inc.* 17,975 $ 651,774
Finish Line, Inc., Class A* 19,775 731,279
Hot Topic, Inc.* 25,300 669,185
Sylvan Learning Systems, Inc.* 18,075 634,613
The Sports Authority, Inc.* 13,600 545,088
Tractor Supply Co.* 16,800 650,496
-----------
3,882,435
-----------
TOTAL COMMON STOCKS
(Identified Cost $34,855,943) 39,234,939
-----------
TOTAL INVESTMENTS - 99.8%
(Identified Cost $34,855,943)@ 39,234,939
Cash and Other Assets, Less Liabilities--0.2% 71,935
-----------
NET ASSETS - 100% $39,306,874
-----------
+See Note 2.
*Non-income producing security.
@At March 31, 2004, the net unrealized appreciation on investments based on
cost of $34,855,943 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 $5,679,903
and $1,300,907, respectively, resulting in net unrealized appreciation of
$4,378,996.
At September 30, 2003, the fund had a capital loss carryover of approximately
$222,154,056 which expires between September 30, 2009 and September 30, 2011.
This may be available to offset realized capital gains if any, to the extent
provided by regulations.
See accompanying notes to financial statements.
18
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND
SHARES VALUE +
- -------------------------------------------------------------
COMMON STOCKS - 96.0% OF NET ASSETS
AEROSPACE & DEFENSE - 1.7%
Moog, Inc., Class A* 93,675 $ 3,196,191
The Allied Defense Group, Inc.* 76,175 1,467,892
United Defense Industries, Inc.* 163,525 5,198,460
------------
9,862,543
------------
AIRLINES - 0.3%
AMR Corp.* 133,900 1,704,547
------------
AUTO COMPONENTS - 1.5%
Cooper Tire & Rubber Co. 236,450 4,764,467
Dana Corp. 187,500 3,723,750
------------
8,488,217
------------
AUTOMOBILES - 0.8%
Monaco Coach Corp. 175,525 4,704,070
------------
BIOTECHNOLOGY - 0.6%
Serologicals Corp.* 157,275 3,208,410
------------
BUILDING PRODUCTS - 1.7%
Elk Corp. 165,825 4,492,199
Lennox International, Inc. 275,000 5,101,250
------------
9,593,449
------------
CHEMICALS - 2.0%
Cytec Industries, Inc. 41,700 1,483,269
Ferro Corp. 79,000 2,065,850
Millennium Chemicals, Inc.* 131,475 1,964,237
Scotts Co., Class A* 45,350 2,909,202
Spartech Corp. 135,125 3,364,612
------------
11,787,170
------------
COMMERCIAL BANKS - 5.5%
CVB Financial Corp. 161,672 3,356,311
East West Bancorp, Inc. 98,125 5,495,000
First Midwest Bancorp, Inc. 158,675 5,417,164
Independent Bank Corp. 145,962 4,066,501
Oriental Financial Group, Inc. 97,475 3,104,579
South Financial Group, Inc. 154,775 4,579,792
Texas Regional Bancshares, Inc., Class A 71,450 3,040,198
Wintrust Financial Corp. 56,425 2,743,948
------------
31,803,493
------------
COMMERCIAL SERVICES & SUPPLIES - 1.6%
Arbitron, Inc.* 65,950 2,655,147
School Specialty, Inc.* 57,800 2,055,946
Waste Connections, Inc.* 118,300 4,708,340
------------
9,419,433
------------
COMMUNICATIONS EQUIPMENT - 2.3%
Andrew Corp.* 358,725 6,277,688
CommScope, Inc.* 159,425 2,654,426
Inter-Tel, Inc. 144,700 4,349,682
------------
13,281,796
------------
19
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMPUTERS & PERIPHERALS - 1.9%
Advanced Digital Information Corp.* 291,550 $ 3,317,839
Eletronics for Imaging, Inc.* 193,800 4,761,666
Imation Corp. 76,750 2,887,335
------------
10,966,840
------------
CONSTRUCTION & ENGINEERING - 0.7%
Washington Group International, Inc.* 111,550 4,083,846
------------
CONSTRUCTION MATERIALS - 0.5%
Eagle Materials, Inc. 50,250 2,957,213
------------
CONSUMER DURABLES & APPAREL - 0.3%
Tupperware Corp. 94,375 1,680,819
------------
CONSUMER FINANCE - 0.5%
Nelnet, Inc., Class A* 122,500 3,111,500
------------
DIVERSIFIED FINANCIAL SERVICES - 1.4%
iShares Russell 2000 Value Index Fund 25,000 4,278,750
National Financial Partners Corp. 127,550 4,113,488
------------
8,392,238
------------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.5%
Commonwealth Telephone Enterprises, Inc.* 68,575 2,812,261
------------
ELECTRIC UTILITIES - 1.1%
Black Hills Corp. 76,750 2,446,022
Texas Genco Holdings, Inc. 103,625 3,704,594
------------
6,150,616
------------
ELECTRICAL EQUIPMENT - 2.6%
American Power Conversion Corp. 189,875 4,369,024
AMETEK, Inc. 188,200 4,825,448
C&D Technologies, Inc. 127,050 2,123,006
Intermagnetics General Corp.* 136,775 3,624,537
------------
14,942,015
------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 5.0%
Aeroflex, Inc.* 113,325 1,525,355
Excel Technology, Inc.* 71,525 2,249,461
Global Imaging System, Inc.* 133,000 4,418,260
Orbotech Ltd.* 96,325 2,316,616
Park Electrochemical Corp. 170,225 4,306,693
ScanSource, Inc.* 52,900 2,536,026
Tech Data Corp.* 83,350 3,412,349
Tektronix, Inc. 85,800 2,806,518
Varian, Inc.* 138,850 5,577,604
------------
29,148,882
------------
ENERGY EQUIPMENT & SERVICES - 2.5%
Cal Dive International, Inc.* 163,500 4,223,205
Grey Wolf, Inc.* 732,825 3,033,896
Hydril Co.* 152,575 3,997,465
Input/Output, Inc.* 413,575 3,205,206
------------
14,459,772
------------
FOOD & STAPLES RETAILING - 0.6%
BJ's Wholesale Club, Inc.* 148,175 3,771,054
------------
20
SHARES VALUE +
- -----------------------------------------------------------
COMMON STOCKS - CONTINUED
FOOD PRODUCTS - 1.3%
J & J Snack Foods Corp.* 32,000 $ 1,445,760
Ralcorp Holdings, Inc.* 202,500 6,162,075
------------
7,607,835
------------
GAS UTILITIES - 1.8%
AGL Resources, Inc. 162,450 4,714,299
New Jersey Resources Corp. 73,050 2,761,290
Southern Union Co.* 148,725 2,818,339
------------
10,293,928
------------
HEALTHCARE EQUIPMENT & SUPPLIES - 3.0%
Analogic Corp. 107,800 4,903,822
Dade Behring Holdings, Inc.* 108,400 4,821,632
Viasys Healthcare, Inc.* 180,450 4,081,779
Zoll Medical Corp.* 88,325 3,531,233
------------
17,338,466
------------
HEALTHCARE PROVIDERS & SERVICES - 0.7%
Andrx Corp.* 151,425 4,118,760
------------
HOTELS RESTAURANTS & LEISURE - 3.2%
CEC Entertainment, Inc.* 46,875 1,626,563
Dover Downs Entertainment, Inc. 171,565 1,837,461
Fairmont Hotels & Resorts, Inc. 197,150 4,958,322
O'Charley's, Inc.* 188,175 3,434,194
Sonic Corp.* 48,850 1,674,578
Sunterra Corp.* 160,050 2,167,077
The Steak n Shake Co.* 154,300 2,970,275
------------
18,668,470
------------
HOUSEHOLD DURABLES - 1.7%
Blyth, Inc. 69,275 2,263,214
Furniture Brands International, Inc. 142,750 4,596,550
Standard Pacific Corp. 46,375 2,782,500
------------
9,642,264
------------
INDUSTRIAL CONGLOMERATES - 1.2%
Allete, Inc. 181,750 6,377,607
Texas Industries, Inc.* 15,525 561,229
------------
6,938,836
------------
INSURANCE - 6.1%
American Financial Group, Inc. 108,450 3,235,064
AmerUs Group Co. 41,000 1,654,350
Delphi Financial Group, Inc. 123,225 5,177,914
Endurance Specialty Holdings Ltd. 146,400 5,203,056
Ohio Casualty Corp.* 182,175 3,641,678
Platinum Underwriters Holdings Ltd. 143,300 4,592,765
ProAssurance Corp.* 94,150 3,295,250
Protective Life Corp. 123,375 4,620,394
RLI Corp. 108,900 4,203,540
------------
35,624,011
------------
21
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE +
- ---------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - 1.7%
Caci International, Inc., Class A* 78,650 $ 3,381,950
Perot Systems Corp., Class A* 327,225 4,352,092
The BISYS Group, Inc.* 117,925 1,976,423
------------
9,710,465
------------
MACHINERY - 5.6%
Actuant Corp., Class A* 162,650 6,380,759
Albany International Corp., Class A 89,450 2,405,311
Barnes Group, Inc. 92,975 2,593,073
CLARCOR, Inc. 118,775 5,243,916
ESCO Technologies, Inc.* 90,100 4,155,412
IDEX Corp. 109,800 4,774,104
Reliance Steel & Aluminum Co. 154,475 5,429,796
Robbins & Myers, Inc. 73,400 1,581,770
------------
32,564,141
------------
MANUFACTURING - 0.6%
Federal Signal Corp. 118,775 2,357,684
Harsco Corp. 22,650 1,030,575
------------
3,388,259
------------
MEDIA - 6.6%
A.H. Belo Corp., Series A 177,425 4,925,318
ADVO, Inc. 122,587 3,949,753
Entercom Communications Corp.* 71,950 3,257,177
Harte-Hanks, Inc. 181,625 4,253,657
John Wiley & Son, Inc., Class A 145,700 4,360,801
Journal Communications, Inc., Class A 218,825 4,376,500
R.H. Donnelley Corp.* 174,675 8,157,322
Regent Communications, Inc.* 186,825 1,216,231
Saga Communications, Inc., Class A* 217,250 4,051,713
------------
38,548,472
------------
METALS & MINING - 0.2%
Allegheny Technologies, Inc. 84,325 1,020,333
------------
MULTI-UTILITIES & UNREGULATED POWER - 1.0%
Energen Corp. 41,225 1,700,531
ONEOK, Inc. 187,750 4,233,763
------------
5,934,294
------------
MULTILINE RETAIL - 0.2%
ShopKo Stores, Inc.* 91,175 1,332,979
------------
OIL & GAS - 1.6%
Evergreen Resources, Inc.* 71,975 2,472,341
Patina Oil & Gas Corp. 97,300 2,554,125
Stone Energy Corp.* 86,500 4,278,290
------------
9,304,756
------------
PHARMACEUTICALS - 1.5%
Perrigo Co. 274,175 5,497,209
Pharmaceutical Resources, Inc.* 61,175 3,478,410
------------
8,975,619
------------
22
SHARES VALUE +
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
REAL ESTATE - 7.2%
American Home Mortgage Investment Corp. 149,700 $ 4,311,360
Bedford Property Investors, Inc. 146,250 4,456,238
CBL & Associates Properties, Inc. 74,750 4,585,165
Corporate Office Properties Trust 170,850 4,271,250
Highland Hospitality Corp.* 200,900 2,354,548
LaSalle Hotel Properties 198,550 4,685,780
Levitt Corp., Class A 111,587 2,733,882
Newcastle Investment Corp. 156,475 5,273,207
Ramco-Gershenson Properties Trust 139,300 3,928,260
The Macerich Co. 98,375 5,302,412
------------
41,902,102
------------
ROAD & RAIL - 2.5%
Genesee & Wyoming, Inc., Class A* 213,675 5,277,772
Landstar System, Inc.* 116,050 4,751,087
Old Dominion Freight Line, Inc.* 126,250 4,254,625
------------
14,283,484
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.7%
Cohu, Inc. 119,425 2,227,276
DSP Group, Inc.* 154,800 3,983,004
FEI Co.* 74,700 1,632,195
Semtech Corp.* 92,800 2,118,624
------------
9,961,099
------------
SOFTWARE - 2.3%
Actuate Corp.* 218,225 704,867
Ascential Software Corp.* 111,725 2,449,012
Aspen Technology, Inc.* 317,775 2,596,222
Inet Technologies, Inc.* 238,850 2,964,128
MSC. Software Corp.* 220,550 1,943,045
Witness Systems, Inc.* 196,525 2,539,103
------------
13,196,377
------------
SPECIALTY RETAIL - 1.3%
Men's Wearhouse, Inc.* 149,975 3,984,836
Party City Corp.* 226,450 3,371,840
------------
7,356,676
------------
TEXTILES APPAREL & LUXURY GOODS - 0.5%
Fossil, Inc.* 86,075 2,870,601
------------
THRIFTS & MORTGAGE FINANCE - 5.1%
Bank Mutual Corp. 274,796 3,074,967
BankAtlantic Bancorp, Inc., Class A 204,550 3,469,168
BankUnited Financial Corp.* 193,125 5,735,812
First Niagara Financial Group, Inc. 225,598 3,079,413
Independence Community Bank Corp. 92,375 3,764,281
MAF Bancorp, Inc. 56,775 2,467,442
Provident Bancorp, Inc. 378,150 4,481,078
Provident Financial Services, Inc. 198,325 3,706,694
------------
29,778,855
------------
23
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE +
- -----------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
TRADING COMPANIES & DISTRIBUTORS - 0.8%
Hughes Supply, Inc. 83,450 $ 4,372,780
------------
WATER UTILITIES - 1.0%
American States Water Co. 81,900 1,998,360
Aqua America, Inc. 184,687 4,004,014
------------
6,002,374
------------
TOTAL COMMON STOCKS
(Identified Cost $440,645,677) 557,066,420
------------
FACE AMOUNT
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 4.2% OF NET ASSETS
COMMERCIAL PAPER - 4.2%
UBS Finance, Inc., 0.870%, 4/01/04 $ 24,254,000 24,254,000
------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $24,254,000) 24,254,000
------------
TOTAL INVESTMENTS - 100.2%
(Identified Cost $464,899,677)@ 581,320,420
Liabilities, Less Cash and Other Assets--(0.2%) (1,382,500)
------------
NET ASSETS - 100% $579,937,920
------------
+See Note 2.
*Non-income producing security.
@At March 31, 2004, the net unrealized appreciation on investments based on
cost of $464,899,677 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
$120,858,910 and $4,438,167, respectively, resulting in net unrealized
appreciation of $116,420,743.
See accompanying notes to financial statements.
24
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES SMALL COMPANY GROWTH FUND
SHARES VALUE +
- ---------------------------------------------------------------
COMMON STOCKS - 99.9% OF NET ASSETS
BIOTECHNOLOGY - 6.1%
ARIAD Pharmaceuticals, Inc.* 17,250 $ 163,185
Connetics Corp.* 20,550 455,593
Dendreon Corp.* 17,875 237,738
Onyx Pharmaceuticals, Inc.* 6,625 268,047
Salix Pharmaceuticals Ltd.* 3,275 95,041
Telik, Inc.* 8,725 234,179
-----------
1,453,783
-----------
COMMERCIAL BANKS - 3.2%
East West Bancorp, Inc. 4,625 259,000
UCBH Holdings, Inc. 12,425 497,497
-----------
756,497
-----------
COMMERCIAL SERVICES & SUPPLIES - 8.5%
Corporate Executive Board Co. 2,825 132,775
CoStar Group, Inc.* 12,550 462,969
DiamondCluster International, Inc., Class A* 44,175 427,614
Navigant Consulting, Inc.* 15,200 307,496
Resources Connection, Inc.* 6,050 266,920
Strayer Education, Inc. 3,575 418,168
-----------
2,015,942
-----------
COMMUNICATIONS EQUIPMENT - 10.1%
Anaren, Inc.* 18,950 299,031
AudioCodes Ltd.* 25,450 295,220
F5 Networks, Inc.* 11,700 396,045
Harmonic, Inc.* 31,575 304,699
NMS Communications Corp.* 29,450 210,862
Performance Technologies, Inc.* 30,775 519,789
SpectraLink Corp. 20,925 356,353
-----------
2,381,999
-----------
COMPUTERS & PERIPHERALS - 1.4%
Mobility Electronics, Inc.* 37,325 339,620
-----------
CONSUMER FINANCE - 1.7%
ACE Cash Express, Inc.* 13,400 404,010
-----------
DIVERSIFIED FINANCIAL SERVICES - 2.1%
Marlin Business Services, Inc.* 15,400 259,182
National Financial Partners Corp. 7,150 230,588
-----------
489,770
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.6%
Plexus Corp.* 18,900 336,231
Zygo Corp.* 18,575 290,327
-----------
626,558
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 4.6%
Epix Medical, Inc.* 14,500 300,875
Kyphon, Inc.* 15,000 358,650
Wright Medical Group, Inc.* 14,200 435,940
-----------
1,095,465
-----------
25
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES SMALL COMPANY GROWTH FUND - CONTINUED
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTHCARE PROVIDERS & SERVICES - 6.6%
eResearch Technology, Inc.* 16,725 $ 469,136
HealthExtras, Inc.* 41,950 481,586
Psychiatric Solutions, Inc.* 20,425 382,969
United Surgical Partners International, Inc.* 6,900 234,186
-----------
1,567,877
-----------
HOTELS RESTAURANTS & LEISURE - 4.7%
Multimedia Games, Inc.* 22,275 551,084
WMS Industries, Inc.* 18,425 571,175
-----------
1,122,259
-----------
INTERNET SOFTWARE & SERVICES - 13.1%
Ask Jeeves, Inc.* 16,625 594,011
Autobytel, Inc.* 27,700 365,640
Bankrate, Inc.* 15,175 302,134
eCollege.com* 28,275 590,382
Marimba, Inc.* 23,000 135,470
SkillSoft Plc* 49,675 640,808
SonicWALL, Inc.* 53,475 476,997
-----------
3,105,442
-----------
MEDIA - 1.3%
Harris Interactive, Inc.* 36,175 304,955
-----------
OIL & GAS - 2.4%
Quicksilver Resources, Inc.* 14,375 557,175
-----------
PHARMACEUTICALS - 2.8%
AtheroGenics, Inc.* 8,850 202,400
Impax Laboratories, Inc.* 20,500 458,585
-----------
660,985
-----------
ROAD & RAIL - 1.9%
Old Dominion Freight Line, Inc.* 13,062 440,189
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.0%
FormFactor, Inc.* 17,000 355,810
Microsemi Corp.* 34,150 467,172
Mindspeed Technologies, Inc.* 45,500 297,115
Sigmatel, Inc.* 12,775 286,799
Tessera Technologies, Inc.* 14,125 258,487
-----------
1,665,383
-----------
SOFTWARE - 12.6%
Altiris, Inc.* 11,800 329,692
BakBone Software, Inc.* 60,325 162,878
Concord Communications, Inc.* 23,100 332,871
E.piphany, Inc.* 39,650 286,273
Embarcadero Technologies, Inc.* 36,500 468,660
InfoSpace, Inc.* 14,300 555,841
RSA Security, Inc.* 26,150 491,358
Secure Computing Corp.* 22,300 364,605
-----------
2,992,178
-----------
SPECIALTY RETAIL - 7.2%
Finish Line, Inc., Class A* 12,425 459,477
Select Comfort Corp.* 18,375 506,966
26
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
SPECIALTY RETAIL - CONTINUED
The Sports Authority, Inc.* 10,475 $ 419,838
Tractor Supply Co.* 8,550 331,056
-----------
1,717,337
-----------
TOTAL COMMON STOCKS
(Identified Cost $20,156,242) 23,697,424
-----------
TOTAL INVESTMENTS - 99.9%
(Identified Cost $20,156,242)@ 23,697,424
Cash and Other Assets, Less Liabilities--0.1% 23,454
-----------
NET ASSETS - 100% $23,720,878
-----------
+See Note 2.
*Non-income producing security.
@At March 31, 2004, the net unrealized appreciation on investments based on
cost of $20,156,242 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 $4,190,536
and $649,354, respectively, resulting in net unrealized appreciation of
$3,541,182.
At September 30, 2003, the fund had a capital loss carryover of approximately
$82,709,199 which expires between September 30, 2009 and September 30, 2011.
This may be available to offset realized capital gains if any, to the extent
provided by regulations.
See accompanying notes to financial statements.
27
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
SHARES VALUE +
- -------------------------------------------------------------
COMMON STOCKS - 97.5% OF NET ASSETS
AEROSPACE & DEFENSE - 2.1%
Northrop Grumman Corp. 825 $ 81,197
--------
AUTOMOBILES - 2.2%
Harley-Davidson, Inc. 1,625 86,677
--------
BEVERAGES - 5.6%
Anheuser-Busch Cos., Inc. 1,125 57,375
Coca-Cola Enterprises, Inc. 2,500 60,425
PepsiCo, Inc. 1,900 102,315
--------
220,115
--------
BIOTECHNOLOGY - 1.7%
Amgen, Inc.* 1,150 66,896
--------
BUILDING PRODUCTS - 1.6%
Masco Corp. 2,000 60,880
--------
CAPITAL MARKETS - 2.6%
Goldman Sachs Group, Inc. 975 101,741
--------
CHEMICALS - 2.5%
Praxair, Inc. 2,675 99,296
--------
COMMERCIAL BANKS - 4.4%
National City Corp. 1,625 57,818
Wells Fargo & Co. 1,975 111,923
--------
169,741
--------
COMMERCIAL SERVICES & SUPPLIES - 1.4%
ARAMARK Corp., Class B 1,950 53,450
--------
COMMUNICATIONS EQUIPMENT - 6.1%
Cisco Systems, Inc.* 4,325 101,724
Harris Corp. 1,625 78,666
Nokia Oyj ADR 2,925 59,319
--------
239,709
--------
COMPUTERS & PERIPHERALS - 1.4%
Dell, Inc.* 1,675 56,314
--------
CONTAINERS & PACKAGING - 1.1%
Smurfit-Stone Container Corp.* 2,500 43,975
--------
DIVERSIFIED FINANCIAL SERVICES - 2.9%
Citigroup, Inc. 2,150 111,155
--------
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.3%
CenturyTel, Inc. 3,250 89,342
--------
ELECTRIC UTILITIES - 2.1%
Dominion Resources, Inc. 1,300 83,590
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.2%
Flextronics International Ltd.* 5,000 86,100
--------
ENERGY EQUIPMENT & SERVICES - 1.1%
GlobalSantaFe Corp. 1,550 43,044
--------
HEALTHCARE EQUIPMENT & SUPPLIES - 3.1%
Guidant Corp. 900 57,033
Medtronic, Inc. 1,325 63,269
--------
120,302
--------
28
SHARES VALUE +
- ---------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTHCARE PROVIDERS & SERVICES - 3.0%
Cardinal Health, Inc. 600 $ 41,340
Caremark Rx, Inc.* 2,225 73,981
--------
115,321
--------
HOTELS RESTAURANTS & LEISURE - 3.5%
Brinker International, Inc.* 1,450 54,998
Carnival Corp. 1,800 80,838
--------
135,836
--------
HOUSEHOLD DURABLES - 2.1%
Leggett & Platt, Inc. 3,450 81,799
--------
INDUSTRIAL CONGLOMERATES - 3.9%
3M Co. 750 61,402
General Electric Co. 2,975 90,797
--------
152,199
--------
INSURANCE - 5.4%
AFLAC, Inc. 2,725 109,381
American International Group, Inc. 1,425 101,674
--------
211,055
--------
IT SERVICES - 5.9%
Affiliated Computer Services, Inc., Class A* 1,450 75,255
First Data Corp. 2,225 93,806
SunGard Data Systems, Inc.* 2,175 59,595
--------
228,656
--------
MACHINERY - 5.2%
Danaher Corp. 825 77,030
Dover Corp. 1,700 65,909
Illinois Tool Works, Inc. 775 61,403
--------
204,342
--------
MEDIA - 2.1%
Viacom, Inc., Class B 2,050 80,381
--------
MULTILINE RETAIL - 2.7%
Target Corp. 2,300 103,592
--------
OIL & GAS - 6.4%
ConocoPhillips 1,225 85,517
Devon Energy Corp. 1,325 77,049
Exxon Mobil Corp. 2,125 88,379
--------
250,945
--------
PAPER & FOREST PRODUCTS - 1.7%
International Paper Co. 1,600 67,616
--------
PHARMACEUTICALS - 2.5%
Pfizer, Inc. 2,775 97,264
--------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.4%
Intel Corp. 2,000 54,400
Maxim Integrated Products, Inc. 1,625 76,521
--------
130,921
--------
29
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES TAX-MANAGED EQUITY FUND - CONTINUED
SHARES VALUE +
- -----------------------------------------------------------------
COMMON STOCKS - CONTINUED
SOFTWARE - 1.4%
VERITAS Software Corp.* 2,000 $ 53,820
----------
THRIFTS & MORTGAGE FINANCE - 1.9%
New York Community Bancorp, Inc. 2,158 73,976
----------
TOTAL COMMON STOCKS
(Identified Cost $3,248,579) 3,801,247
----------
TOTAL INVESTMENTS - 97.5%
(Identified Cost $3,248,579)@ 3,801,247
Cash and Other Assets, Less Liabilities--2.5% 99,314
----------
NET ASSETS - 100% $3,900,561
----------
+See Note 2.
*Non-income producing security.
@At March 31, 2004, the net unrealized appreciation on investments based on
cost of $3,248,579 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 $579,442
and $26,774, respectively, resulting in net unrealized appreciation of
$552,668.
At September 30, 2003, the fund had a capital loss carryover of approximately
$4,053,853 which expires between September 30, 2009 and September 30, 2011.
This may be available to offset realized capital gains if any, to the extent
provided by regulations.
ADR-American Depositary Receipt is a certificate issued by a custodian bank
representing the right to receive securities of the foreign issuer
described. The values of ADR's are significantly influenced by trading on
exchanges not located in the United States.
See accompanying notes to financial statements.
30
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES VALUE FUND
SHARES VALUE +
- ---------------------------------------------------------------
COMMON STOCKS - 99.3% OF NET ASSETS
AEROSPACE & DEFENSE - 5.1%
Honeywell International, Inc. 23,000 $ 778,550
Northrop Grumman Corp. 9,300 915,306
Raytheon Co. 13,375 419,172
----------
2,113,028
----------
BEVERAGES - 0.9%
Anheuser-Busch Cos., Inc. 6,950 354,450
----------
BUILDING PRODUCTS - 1.7%
Masco Corp. 22,550 686,422
----------
CAPITAL MARKETS - 6.0%
J.P. Morgan Chase & Co. 26,250 1,101,187
Lehman Brothers Holdings, Inc. 9,500 787,265
Mellon Financial Corp. 18,975 593,728
----------
2,482,180
----------
CHEMICALS - 2.0%
Praxair, Inc. 22,400 831,488
----------
COMMERCIAL BANKS - 9.7%
Bank of America Corp. 11,000 890,780
Charter One Financial, Inc. 12,400 438,464
PNC Financial Services Group 7,700 426,734
SouthTrust Corp. 12,000 397,920
SunTrust Banks, Inc. 5,575 388,633
U.S. Bancorp 28,950 800,468
Wells Fargo & Co. 10,900 617,703
----------
3,960,702
----------
COMMERCIAL SERVICES & SUPPLIES - 2.1%
Waste Management, Inc. 29,175 880,501
----------
COMMUNICATIONS EQUIPMENT - 1.0%
Motorola, Inc. 23,550 414,480
----------
COMPUTERS & PERIPHERALS - 3.1%
Apple Computer, Inc.* 17,575 475,404
Hewlett-Packard Co. 34,175 780,557
----------
1,255,961
----------
CONSUMER FINANCE - 2.1%
American Express Co. 16,375 849,044
----------
DIVERSIFIED FINANCIAL SERVICES - 3.0%
Citigroup, Inc. 23,700 1,225,290
----------
DIVERSIFIED TELECOMMUNICATION SERVICES - 7.6%
BellSouth Corp. 22,475 622,333
CenturyTel, Inc. 29,975 824,013
Citizens Communications Co.* 50,800 657,352
Qwest Communications International, Inc.* 85,475 368,397
SBC Communications, Inc. 25,625 628,837
----------
3,100,932
----------
31
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES VALUE FUND - CONTINUED
SHARES VALUE +
- ------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRIC UTILITIES - 3.8%
Exelon Corp. 11,500 $ 792,005
FirstEnergy Corp. 20,100 785,508
----------
1,577,513
----------
ENERGY EQUIPMENT & SERVICES - 2.4%
GlobalSantaFe Corp. 16,825 467,230
Halliburton Co. 17,050 518,150
----------
985,380
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 1.5%
Baxter International, Inc. 20,100 620,889
----------
HEALTHCARE PROVIDERS & SERVICES - 4.3%
McKesson Corp. 19,000 571,710
Quest Diagnostics, Inc. 5,100 422,433
Universal Health Services, Inc. Class B 16,950 780,886
----------
1,775,029
----------
HOTELS RESTAURANTS & LEISURE - 2.2%
McDonald's Corp. 31,500 899,955
----------
INDUSTRIAL CONGLOMERATES - 2.0%
Tyco International Ltd. 28,625 820,106
----------
INSURANCE - 3.1%
Allstate Corp. 19,500 886,470
XL Capital Ltd., Class A 5,300 403,012
----------
1,289,482
----------
IT SERVICES - 4.2%
Accenture Ltd., Class A* 13,675 339,140
DST Systems, Inc.* 9,925 450,099
First Data Corp. 9,925 418,438
SunGard Data Systems, Inc.* 18,375 503,475
----------
1,711,152
----------
LEISURE EQUIPMENT & PRODUCTS - 1.6%
Hasbro, Inc. 29,650 644,888
----------
MEDIA - 7.3%
Knight-Ridder, Inc. 4,575 335,119
McGraw-Hill Cos., Inc. 4,275 325,499
News Corp. Ltd. ADR* 19,050 604,075
The DIRECTV Group, Inc.* 30,000 461,400
Time Warner, Inc.* 37,475 631,828
Tribune Co. 12,575 634,283
----------
2,992,204
----------
MULTI-UTILITIES & UNREGULATED POWER - 1.3%
Constellation Energy Group, Inc. 12,950 517,353
----------
MULTILINE RETAIL - 1.6%
J.C. Penney Co., Inc. (Holding Co.) 18,725 651,255
----------
OIL & GAS - 7.7%
BP Plc ADR 20,125 1,030,400
ChevronTexaco Corp. 5,175 454,262
ConocoPhillips 6,600 460,746
Exxon Mobil Corp. 29,400 1,222,746
----------
3,168,154
----------
32
SHARES VALUE +
- -----------------------------------------------------------------------
COMMON STOCKS - CONTINUED
PAPER & FOREST PRODUCTS - 1.0%
International Paper Co. 9,700 $ 409,922
-----------
PHARMACEUTICALS - 3.0%
Abbott Laboratories 11,300 464,430
Pfizer, Inc. 21,825 764,966
-----------
1,229,396
-----------
PROPERTY & CASUALTY INSURANCE - 2.3%
Berkshire Hathaway, Inc., Class B* 304 945,747
-----------
REAL ESTATE - 1.7%
Simon Property Group, Inc. 12,100 707,124
-----------
SPECIALTY RETAIL - 2.0%
Gap, Inc. 18,000 394,560
TJX Companies, Inc. 17,875 439,010
-----------
833,570
-----------
TOBACCO - 2.0%
Altria Group, Inc. 15,075 820,834
-----------
TOTAL COMMON STOCKS
(Identified Cost $34,110,519) 40,754,431
-----------
FACE AMOUNT
- -----------------------------------------------------------------------
SHORT-TERM INVESTMENT - 0.7% OF NET ASSETS
COMMERCIAL PAPER - 0.7%
UBS Finance, Inc., 0.870%, 4/01/04 $293,000 293,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $293,000) 293,000
-----------
TOTAL INVESTMENTS - 100.0%
(Identified Cost $34,403,519)@ 41,047,431
Cash and Other Assets, Less Liabilities--0.0% 396
-----------
NET ASSETS - 100% $41,047,827
-----------
+See Note 2.
*Non-income producing security.
@At March 31, 2004, the net unrealized appreciation on investments based on
cost of $34,403,519 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 $6,831,728
and $187,816, respectively, resulting in net unrealized appreciation of
$6,643,912.
At September 30, 2003, the fund had a capital loss carryover of approximately
$3,179,432 which expires between September 30, 2010 and September 30, 2011.
This may be available to offset realized capital gains if any, to the extent
provided by regulations.
ADR-American Depositary Receipt is a certificate issued by a custodian bank
representing the right to receive securities of the foreign issuer
described. The values of ADR's are significantly influenced by trading on
exchanges not located in the United States.
See accompanying notes to financial statements.
33
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES WORLDWIDE FUND
FACE AMOUNT VALUE +
- ----------------------------------------------------------------------------
BONDS AND NOTES - 39.1% OF NET ASSETS
NON-CONVERTIBLE BONDS - 38.1%
AUSTRALIA - 0.8%
Queensland Treasury Corp., 8.000%, 9/14/07 AUD 100,000 $ 82,609
South Australia Government Finance Authority,
Zero Coupon Bond, 12/21/15 120,000 46,925
--------
129,534
--------
AUSTRIA - 0.0%
Republic of Austria, 6.000%, 2/14/07 HUF 2,000,000 9,246
--------
BELGIUM - 0.6%
Kingdom of Belgium, 3.750%, 3/28/09 EUR 15,000 18,981
Kingdom of Belgium, 4.250%, 9/28/13 65,000 81,813
--------
100,794
--------
BRAZIL - 0.7%
Republic of Brazil, 8.250%, 1/20/34 USD 135,000 114,750
--------
CANADA - 1.2%
Alcan, Inc., 5.500%, 5/02/06 EUR 25,000 32,476
Canadian Government, 0.700%, 3/20/06 JPY 4,000,000 38,700
Canadian Pacific Railway Ltd., 4.900%, 6/15/10 144A CAD 25,000 19,412
Methanex Corp., 7.750%, 8/15/05 USD 15,000 15,825
Province of British Columbia, 6.000%, 6/09/08 CAD 35,000 29,349
Province of Ontario, 5.900%, 3/08/06 15,000 12,167
Shaw Comunications, Inc., 7.500%, 11/20/13 70,000 56,779
--------
204,708
--------
CAYMAN ISLAND - 0.5%
Arcel Finance Ltd., 7.048%, 9/01/11 144A USD 15,000 15,900
Vale Overseas Ltd., 8.250%, 1/17/34 75,000 68,625
--------
84,525
--------
CHILE - 0.3%
Empresa Nacional de Electricidad SA, Series B,
8.500%, 4/1/2009 50,000 57,063
--------
COLOMBIA - 0.1%
Republic of Colombia, 8.125%, 5/21/24 25,000 23,687
--------
DENMARK - 0.2%
Kingdom of Denmark, 5.000%, 8/15/05 DKK 225,000 38,566
--------
ECUADOR - 0.1%
Republic of Ecuador, 7.000%, 8/15/30 144A USD 25,000 22,125
--------
GERMANY - 1.8%
Eurohypo AG - Europaeische Hypothekenbank der
Deutschen Bank, 4.000%, 2/01/07 EUR 150,000 191,620
Kreditanstalt Wiederauf, 5.250%, 1/04/10 80,000 108,225
--------
299,845
--------
IRELAND - 0.4%
Republic of Ireland, 4.600%, 4/18/16 50,000 63,800
--------
ITALY - 3.3%
Republic of Italy, 0.375%, 10/10/06 JPY 24,000,000 230,204
Republic of Italy, 4.500%, 3/01/07 EUR 210,000 272,341
Republic of Italy, 5.000%, 12/15/04 JPY 6,000,000 59,497
--------
562,042
--------
34
FACE AMOUNT VALUE +
- ------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
MEXICO - 0.9%
Innova S de RL, 9.375%, 9/19/13 USD 25,000 $ 27,125
Petroleos Mexicanos, 8.625%, 12/01/23 144A 115,000 132,250
--------
159,375
--------
NETHERLANDS - 1.2%
GMAC International Finance BV, 8.000%, 3/14/07 NZD 55,000 37,261
Olivetti Finance NV, 6.875%, 1/24/13 EUR 10,000 14,177
Repsol International Finance BV, 5.750%, 12/04/06 100,000 131,908
Telefonica Europe BV, 5.125%, 2/14/13 EUR 10,000 12,878
--------
196,224
--------
NORWAY - 0.4%
Kingdom of Norway, 6.750%, 1/15/07 NOK 380,000 61,219
--------
PERU - 0.3%
Republic of Peru, 4.500%, 3/07/17 (step to 5.000% on
3/07/05)# USD 50,000 43,500
--------
SINGAPORE - 0.7%
Flextronics International Ltd., 9.750%, 7/01/10 EUR 10,000 13,598
Goverment of Singapore, 2.250%, 7/01/13 SGD 150,000 83,760
Singapore Telecommunications Ltd., 6.000%, 11/21/11 EUR 10,000 13,699
--------
111,057
--------
SOUTH AFRICA - 0.4%
Republic of South Africa, 5.250%, 5/16/13 50,000 61,272
--------
SUPRANATIONAL - 0.5%
Corporacion Andina De Fomento, 6.875%, 3/15/12 USD 10,000 11,480
International Bank for Reconstruction & Development,
4.750%, 12/20/2004 JPY 7,000,000 69,326
--------
80,806
--------
SWEDEN - 0.6%
Government of Sweden, 5.250%, 3/15/11 SEK 495,000 71,083
Stena AB, 7.500%, 11/01/13 USD 25,000 26,125
--------
97,208
--------
UNITED KINGDOM - 0.4%
National Grid Group Finance Plc, 6.125%, 8/23/11 EUR 10,000 13,676
United Kingdom Treasury, 6.250%, 11/25/10 GBP 10,000 20,085
WPP Group Plc, 6.000%, 6/18/08 EUR 20,000 26,902
--------
60,663
--------
UNITED STATES - 22.7%
American Standard, Inc., 8.250%, 6/01/09 GBP 10,000 19,820
Arrow Electronics, Inc., 6.875%, 7/01/13 USD 75,000 81,478
ASIF Global Financing XXVII, 2.380%, 2/26/09 144A SGD 100,000 59,306
AT&T Corp., 6.750%, 11/21/06 EUR 10,000 13,360
Atlas Air Worldwide Holdings, Inc., 7.200%, 1/02/19++ USD 88,733 83,248
Bausch & Lomb, Inc., 7.125%, 8/01/28 95,000 100,071
Borden, Inc., 7.875%, 2/15/23 150,000 142,500
Bowater, Inc., 6.500%, 6/15/13 25,000 24,469
Charter Communications Holdings LLC,
10.000%, 5/15/11 200,000 166,000
35
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
FACE AMOUNT VALUE +
- -------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
UNITED STATES - CONTINUED
Chesapeake Energy Corp., 6.875%, 1/15/16 144A USD 55,000 $ 57,750
Chesapeake Energy Corp., 7.750%, 1/15/15 50,000 55,375
CITGO Petroleum Corp., 11.375%, 2/01/11 25,000 29,188
Columbia/HCA Healthcare Corp., 7.050%, 12/01/27 50,000 50,108
Columbia/HCA Healthcare Corp., 7.190%, 11/15/15 50,000 55,096
Continental Airlines, Inc., Series 1998-1A,
6.648%, 9/15/17 42,587 41,667
Continental Airlines, Inc., Series 2000-2,
7.487%, 4/02/12 75,000 76,481
Corning Glass, 8.875%, 3/15/16 25,000 29,559
Cummins Engine Co., Inc., 7.125%, 3/01/28 110,000 108,900
Dana Corp., 9.000%, 8/15/11 25,000 35,734
Dillard's, Inc., 6.625%, 1/15/18 50,000 49,125
Dillard's, Inc., 7.000%, 12/01/28 50,000 47,000
ESI Tractebel Acquisition Corp., Series B,
7.990%, 12/30/11 23,000 23,805
Federal Home Loan Mortgage Corp., 5.125%, 1/15/12 EUR 200,000 265,558
Federal National Mortgage Association,
2.290%, 2/19/09 SGD 100,000 59,512
Federal National Mortgage Association,
2.375%, 2/15/07 USD 100,000 100,459
Ford Motor Credit Co., 7.250%, 2/22/05 GBP 15,000 27,999
Fort James Corp., 4.750%, 6/29/04 EUR 50,000 61,530
Freeport McMoran Resources, Inc., 7.000%, 2/15/08 USD 50,000 52,500
General Motors Acceptance Corp., 7.000%, 12/07/05 GBP 10,000 18,812
Georgia-Pacific Group, 7.375%, 12/01/25 USD 50,000 49,500
Georgia-Pacific Group, 7.750%, 11/15/29 35,000 35,525
Gruma SA de CV, 7.625%, 10/15/07 30,000 33,225
Hasbro, Inc., 6.600%, 7/15/28 50,000 51,375
IMC Global, Inc., 7.375%, 8/01/18 100,000 106,500
J.C. Penney Co., Inc., 7.125%, 11/15/23 25,000 28,250
KfW International Finance, Inc., 1.000%, 12/20/04 JPY 8,000,000 77,182
Lear Corp., 8.125%, 4/01/08 EUR 50,000 70,144
Lucent Technologies, Inc., 5.500%, 11/15/08 USD 105,000 101,587
Morgan Stanley, 5.375%, 11/14/13 GBP 20,000 36,314
Motorola, Inc., 8.000%, 11/01/11 USD 75,000 89,615
National Rural Utilities Cooperative Finance Corp.,
4.125%, 2/24/2006 EUR 25,000 31,536
News America Holdings, Inc., 8.625%, 2/07/14 AUD 50,000 40,644
Pioneer Natural Resources Co., 7.200%, 1/15/28 USD 175,000 199,213
Qwest Corp., 6.875%, 9/15/33 30,000 26,550
Sprint Capital Corp., 6.875%, 11/15/28 25,000 25,962
Teck Cominco Ltd., 7.000%, 9/15/12 15,000 17,058
Trico Marine Services, Inc., 8.875%, 5/15/12 100,000 52,000
U.S. Treasury Notes, 1.625%, 2/28/06 375,000 375,586
US West Capital Funding, Inc., 6.875%, 7/15/28 200,000 155,000
Williams Cos., Inc., 7.500%, 1/15/31 100,000 96,500
Woolworth Corp., 8.500%, 1/15/22 150,000 168,187
Xerox Corp., 7.200%, 4/01/16 20,000 20,800
----------
3,824,663
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $5,575,311) 6,406,672
----------
36
FACE AMOUNT VALUE +
- -----------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
CONVERTIBLE BONDS - 1.0%
CANADA - 0.1%
Nortel Networks Corp., 4.250%, 9/01/08 USD 15,000 $ 15,244
----------
UNITED STATES - 0.9%
Builders Transportation, Inc., 8.000%, 8/15/05^** 95,000 10
Corning, Inc., 3.500%, 11/01/08 50,000 64,062
Human Genome Sciences, Inc., 3.750%, 3/15/07 25,000 24,156
Loews Corp., 3.125%, 9/15/07 70,000 69,125
----------
157,353
----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $219,892) 172,597
----------
TOTAL BONDS AND NOTES
(Identified Cost $5,795,203) 6,579,269
----------
SHARES
- -----------------------------------------------------------------------------
COMMON STOCKS - 55.4% OF NET ASSETS
AUSTRALIA - 1.7%
AMP Ltd. 16,800 72,438
BHP Steel Ltd. 15,640 75,453
Minara Resources Ltd.* 32,691 72,244
Newcrest Mining Ltd. 6,500 63,689
----------
283,824
----------
AUSTRIA - 1.5%
Erste Bank der oesterreichischen Sparkassen AG 900 135,016
Wienerberger AG 3,300 109,740
----------
244,756
----------
BELGIUM - 0.6%
Umicore 1,775 108,459
----------
BERMUDA - 1.0%
Golar LNG Ltd.* 4,400 66,818
Noble Group Ltd. 17,000 48,324
Ocean Grand Holdings Ltd. 160,000 56,357
----------
171,499
----------
BRAZIL - 0.7%
Embraer-Empresa Brasileria de Aeronautica SA ADR 3,457 110,970
----------
CANADA - 1.6%
Angiotech Pharmaceuticals, Inc.* 2,888 70,420
Anooraq Resources Corp.* 23,800 62,567
NOVA Chemicals Corp. 2,093 52,502
PetroKazakhstan, Inc., Class A* 2,830 79,573
----------
265,062
----------
CHINA - 0.2%
China Shipping Development Co. Ltd., Class H 60,000 41,155
----------
FINLAND - 0.9%
Nokia Oyj ADR 7,875 159,705
----------
37
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
SHARES VALUE +
- ------------------------------------------------------------
COMMON STOCKS - CONTINUED
FRANCE - 0.7%
Axa 3,900 $ 81,822
Total Fina SA, Class B 200 36,850
----------
118,672
----------
GERMANY - 1.6%
Bayerische Motoren Werke (BMW) AG 1,800 73,323
Hochtief AG 2,300 64,768
MAN AG 1,600 57,231
SAP AG 500 79,413
----------
274,735
----------
HONG KONG - 2.0%
Esprit Holdings Ltd. 21,000 87,762
Giordano International Ltd. 106,000 66,255
Kerry Properties Ltd. 41,500 67,327
Norstar Founders Group Ltd.* 144,000 50,778
Shanghai Industrial Holdings Ltd. 27,000 60,087
----------
332,209
----------
INDIA - 0.6%
State Bank of India GDR 2,470 96,330
----------
IRELAND - 0.5%
Anglo Irish Bank Corp. Plc 4,921 78,800
----------
ISRAEL - 0.9%
Taro Pharmaceutical Industries Ltd.* 1,550 89,884
Teva Pharmaceutical Industries Ltd. ADR 875 55,484
----------
145,368
----------
ITALY - 0.3%
Mediaset Spa 5,100 56,702
----------
JAPAN - 7.5%
CHUGAI PHARMACEUTICAL Co. Ltd. 4,000 63,669
DIAMOND CITY Co. Ltd. 2,300 77,716
GOLDCREST Co. Ltd. 880 54,925
Ichiyoshi Securitiess Co. Ltd. 11,000 77,087
Isetan Co. Ltd. 5,400 82,097
JAFCO Co. Ltd. 700 68,397
JGC Corp. 6,000 66,131
KAPPA CREATE Co. Ltd. 500 57,131
NITTO DENKO Corp. 900 49,461
NTT DoCoMo, Inc. 31 68,645
OTSUKA KAGU Ltd. 1,400 53,355
Resona Holdings, Inc.* 43,000 71,894
SAMMY Corp. 2,300 88,523
SFCG Co. Ltd. 400 80,580
Sumitomo Metal Industries Ltd. 57,000 76,037
Sumitomo Realty & Development Co. Ltd. 4,000 51,929
TDK Corp. ADR 725 54,933
Tokyo Electron Ltd. 1,100 73,470
XEBIO Co. Ltd. 900 25,901
YAMADA DENKI Co. Ltd. 600 23,442
----------
1,265,323
----------
38
SHARES VALUE +
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
MEXICO - 0.6%
Fomento Economico Mexicano SA de CV ADR 2,175 $107,162
--------
NETHERLANDS - 0.2%
Aegon NV 2,600 33,407
--------
RUSSIA - 0.6%
Gazprom ADR 2,550 96,390
--------
SINGAPORE - 0.9%
Flextronics International Ltd.* 5,000 86,100
Keppel Corp. Ltd. 16,000 69,738
--------
155,838
--------
SOUTH KOREA - 0.7%
Daewoo Shipbuilding & Marin Engineering Co. Ltd. 5,320 56,691
Samsung Electronics 130 65,086
--------
121,777
--------
SWEDEN - 0.9%
Atlas Copco AB, Class A 1,100 39,186
SKF AB, Class B 1,100 39,949
Telefonaktiebolaget LM Ericsson ADR* 2,475 68,681
--------
147,816
--------
SWITZERLAND - 2.4%
Basilea Pharmaceutica AG* 100 7,642
Credit Suisse Group* 3,150 109,460
Roche Holding AG 1,000 97,917
Straumann AG 600 103,961
Synthes-Stratec, Inc. 75 77,037
--------
396,017
--------
TAIWAN - 0.8%
Advanced Semiconductor Engineering, Inc.* 84,700 90,354
United Microelectronics Corp. ADR* 9,575 49,790
--------
140,144
--------
UNITED KINGDOM - 2.9%
Barclays Plc 3,800 33,639
BHP Billiton Plc 9,365 85,790
Colt Telecom Group Plc* 19,800 33,965
CSR Plc* 2,600 11,361
Exel Plc 6,000 77,997
Smith & Nephew Plc 9,600 94,956
Standard Chartered Plc 4,200 70,701
Vodafone Group Plc 31,400 74,573
--------
482,982
--------
UNITED STATES - 23.1%
Affiliated Computer Services, Inc., Class A* 1,750 90,825
AFLAC, Inc. 3,000 120,420
American International Group, Inc. 1,500 107,025
Amgen, Inc.* 1,500 87,255
Anheuser-Busch Cos., Inc. 2,000 102,000
Brinker International, Inc.* 2,000 75,860
Cardinal Health, Inc. 750 51,675
Caremark Rx, Inc.* 2,500 83,125
39
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2004 (UNAUDITED)
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
SHARES VALUE +
- ----------------------------------------------------------------------
COMMON STOCKS - CONTINUED
UNITED STATES - CONTINUED
Carnival Corp. 2,250 $ 101,047
CenturyTel, Inc. 4,500 123,705
Cisco Systems, Inc.* 3,500 82,320
Citigroup, Inc. 1,750 90,475
Coca-Cola Enterprises, Inc. 2,750 66,468
ConocoPhillips 1,250 87,262
Danaher Corp. 1,000 93,370
Dell, Inc.* 2,000 67,240
Devon Energy Corp. 1,800 104,670
Dominion Resources, Inc. 750 48,225
Dover Corp. 2,000 77,540
Exxon Mobil Corp. 2,500 103,975
First Data Corp. 2,750 115,940
General Electric Co. 2,500 76,300
GlobalSantaFe Corp. 2,750 76,368
Goldman Sachs Group, Inc. 1,200 125,220
Guidant Corp. 900 57,033
Harley-Davidson, Inc. 1,500 80,010
Harris Corp. 2,000 96,820
Illinois Tool Works, Inc. 1,000 79,230
International Paper Co. 2,000 84,520
Leggett & Platt, Inc. 3,250 77,058
Masco Corp. 2,000 60,880
Maxim Integrated Products, Inc. 1,750 82,408
Medtronic, Inc. 1,800 85,950
National City Corp. 3,000 106,740
New York Community Bancorp, Inc. 2,133 73,119
Northrop Grumman Corp. 1,000 98,420
PepsiCo, Inc. 2,250 121,162
Pfizer, Inc. 2,500 87,625
Praxair, Inc. 2,500 92,800
Smurfit-Stone Container Corp.* 4,000 70,360
SunGard Data Systems, Inc.* 2,200 60,280
Target Corp. 1,500 67,560
VERITAS Software Corp.* 2,000 53,820
Viacom, Inc., Class B 2,250 88,222
Wells Fargo & Co. 2,000 113,340
----------
3,895,667
----------
TOTAL COMMON STOCKS
(Identified Cost $7,882,225) 9,330,769
----------
CONVERTIBLE PREFERRED STOCKS - 0.7% OF NET ASSETS
PHILIPPINES - 0.7%
Philippine Long Distance Telephone Co., $3.50 GDS 2,500 115,000
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $91,812) 115,000
----------
40
SHARES VALUE +
- --------------------------------------------------------------------
WARRANTS - 0.0% OF NET ASSETS
CANADA - 0.0%
Anooraq Resources Corp., expiring 6/01/05 11,900 $ 0
-----------
TOTAL WARRANTS
(Identified Cost $0) 0
-----------
TOTAL INVESTMENTS - 95.2%
(Identified Cost $13,769,240)@ 16,025,038
Cash and Other Assets, Less Liabilities--4.8% 801,588
-----------
NET ASSETS - 100% $16,826,626
-----------
+ 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.
ADR/GDS/GDR--AnAmerican Depositary Receipt (ADR) or Global Depositary Shares
(GDS) 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 ADR's or GDS's or
GDR's are significantly influenced by trading on exchanges not
located in the United States.
# 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 backruptcy filing.
++ Issuer in backruptcy filing.
** Security valued at fair value as determined in good faith under the
direction of the Board of Trustees.
* Non-income producing security.
@ At March 31, 2004, the net unrealized appreciation on investments based on
cost of $13,777,920 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
$2,502,351 and $255,233, respectively, resulting in net unrealized
appreciation of $2,247,118.
At September 30, 2003, the fund had a capital loss carryover of
approximately $2,482,954 which expires between September 30, 2009 and
September 30, 2011. This may be available to offset realized capital gains
if any, to the extent provided by regulations.
Key to Abbreviations: AUD: Australian Dollar; CAD: Canadian Dollar; DKK:
Danish Krone; EUR: Euro; HUF: Hungarian Forint; GBP: Great British Pound;
JPY: Japanese Yen; NOK: Norwegian Krone; NZD: New Zealand Dollar; SGD:
Singapore Dollar; SEK: Swedish Krona; USD: United States Dollar.
Industry Holdings at March 31, 2004 as a Percentage of Net Assets
Sovereigns 6.9%
Oil & Gas 4.2
Consumer Finance 3.9
Containers & Packaging 3.4
Metals & Mining 3.2
Specialty Retail 3.1
Diversified Financial Services 3.0
Government Agencies 2.5
Beverages 2.4
Communications Equipment 2.4
Treasuries 2.2
Wireless Telecommunication Services 2.2
Insurance 2.0
Other 53.8
See accompanying notes to financial statements.
41
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
AGGRESSIVE MID CAP
GROWTH FUND GROWTH FUND
- -------------------------------------------------------------------------------------------
ASSETS
Investments at value $ 51,896,597 $ 8,547,706
Cash 389,339 119,543
Receivable for:
Fund shares sold 34,993 --
Securities sold 1,200,698 191,472
Dividends and interest 2,334 381
Foreign tax reclaim -- --
Due from the adviser 11,850 10,548
-------------- --------------
53,535,811 8,869,650
-------------- --------------
LIABILITIES
Payable for:
Securities purchased 1,378,163 233,833
Fund Shares redeemed 16,299 --
Foreign taxes -- --
Accrued expenses:
Management fees 32,421 5,338
Deferred Trustees' fees 2,549 2,072
Transfer agent fees and expenses 5,703 1,291
Accounting and administrative fees 7,495 1,115
12b-1 fees 181 --
Other 20,321 6,355
-------------- --------------
1,463,132 250,004
-------------- --------------
NET ASSETS $ 52,072,679 $ 8,619,646
-------------- --------------
Net Assets consist of:
Capital paid in $ 155,570,575 $ 12,379,271
Undistributed net investment income (loss) (307,069) (36,356)
Accumulated net realized gain (loss) (111,537,618) (5,169,770)
Unrealized appreciation (depreciation) on:
Investments 8,346,791 1,446,501
Foreign currency translations -- --
-------------- --------------
NET ASSETS $ 52,072,679 $ 8,619,646
-------------- --------------
INSTITUTIONAL CLASS
Net assets $ 25,678,984 $ 8,619,646
Shares of beneficial interest outstanding, no par value 1,667,737 1,255,911
Net asset value and redemption price $ 15.40 $ 6.86
RETAIL CLASS
Net assets $ 26,393,695 --
Shares of beneficial interest outstanding, no par value 1,745,639 --
Net asset value and redemption price $ 15.12 --
ADMIN CLASS
Net assets -- --
Shares of beneficial interest outstanding, no par value -- --
Net asset value and redemption price -- --
Identified cost of investments $ 43,549,806 $ 7,101,205
See accompanying notes to financial statements.
42
SMALL CAP SMALL CAP SMALL COMPANY TAX-MANAGED
GROWTH FUND VALUE FUND GROWTH FUND EQUITY FUND VALUE FUND WORLDWIDE FUND
- ----------------------------------------------------------------------------------------------
$ 39,234,939 $ 581,320,420 $ 23,697,424 $ 3,801,247 $ 41,047,431 $ 16,025,038
424,172 1,399 459,421 101,133 189 738,179
2,357 1,704,029 -- -- 874 171
682,938 5,351,093 199,770 -- -- 60,194
566 520,936 497 2,794 40,252 120,079
-- -- -- -- -- 946
14,456 25,650 12,334 10,215 2,828 11,310
- ----------------------------------------------------------------------------------------------
40,359,428 588,923,527 24,369,446 3,915,389 41,091,574 16,955,917
- ----------------------------------------------------------------------------------------------
983,932 7,742,607 620,625 -- -- 100,591
14,768 690,626 -- -- -- --
-- 1,365 -- 167 332 1,783
24,735 363,353 15,015 1,601 17,303 10,310
2,520 7,642 2,240 2,017 2,395 2,134
2,074 21,841 1,352 1,807 2,587 1,525
7,947 71,834 3,804 924 5,852 1,856
106 1,991 -- -- -- --
16,472 84,348 5,532 8,312 15,278 11,092
- ----------------------------------------------------------------------------------------------
1,052,554 8,985,607 648,568 14,828 43,747 129,291
- ----------------------------------------------------------------------------------------------
$ 39,306,874 $ 579,937,920 $ 23,720,878 $ 3,900,561 $ 41,047,827 $ 16,826,626
- ----------------------------------------------------------------------------------------------
$ 244,634,261 $ 428,018,437 $ 100,599,490 $ 7,527,196 $ 37,052,327 $ 16,439,701
(285,068) 229,634 (103,844) 7,582 260,949 176,093
(209,421,315) 35,269,106 (80,315,950) (4,186,885) (2,909,361) (2,045,618)
4,378,996 116,420,743 3,541,182 552,668 6,643,912 2,255,798
-- -- -- -- -- 652
- ----------------------------------------------------------------------------------------------
$ 39,306,874 $ 579,937,920 $ 23,720,878 $ 3,900,561 $ 41,047,827 $ 16,826,626
- ----------------------------------------------------------------------------------------------
$ 23,839,829 $ 342,875,931 $ 23,720,878 $ 3,900,561 $ 41,047,827 $ 16,826,626
2,519,949 13,634,289 2,729,171 454,564 2,629,425 1,640,781
$ 9.46 $ 25.15 $ 8.69 $ 8.58 $ 15.61 $ 10.26
$ 15,467,045 $ 182,145,827 -- -- -- --
1,665,571 7,270,447 -- -- -- --
$ 9.29 $ 25.05 -- -- -- --
-- $ 54,916,162 -- -- -- --
-- 2,205,806 -- -- -- --
-- $ 24.90 -- -- -- --
$ 34,855,943 $ 464,899,677 $ 20,156,242 $ 3,248,579 $ 34,403,519 $ 13,769,240
See accompanying notes to financial statements.
43
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
AGGRESSIVE MID CAP SMALL CAP
GROWTH FUND GROWTH FUND GROWTH FUND
- -------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends* $ 16,262 $ 2,458 $ 11,026
Interest 3,573 95 8,307
------------ ------------ ------------
Total Income 19,835 2,553 19,333
------------ ------------ ------------
EXPENSES
Management fees 214,637 31,472 200,076
12b-1 fees (Retail Class) 39,579 -- 36,490
12b-1 fees (Admin Class) -- -- --
Shareholder service fees (Admin Class) -- -- --
Trustees' fees and expenses 4,026 2,725 3,963
Accounting and administrative fees 18,779 2,754 17,504
Custodian 23,817 17,361 25,380
Transfer agent fees and expenses 23,582 6,793 19,595
Audit and tax services 14,845 11,568 16,815
Registration 15,278 10,786 24,282
Shareholder reporting 5,313 3,694 6,552
Legal 1,424 162 1,092
Miscellaneous 6,184 1,656 5,960
------------ ------------ ------------
Total expenses 367,464 88,971 357,709
Less expenses waived and reimbursed
by the investment adviser (41,702) (51,204) (54,450)
------------ ------------ ------------
Net expenses 325,762 37,767 303,259
------------ ------------ ------------
Net investment income (loss) (305,927) (35,214) (283,926)
------------ ------------ ------------
NET REALIZED GAIN (LOSS) ON:
Investments 8,293,683 983,699 12,791,290
Foreign currency transactions -- -- --
------------ ------------ ------------
Total net realized gain (loss) 8,293,683 983,699 12,791,290
------------ ------------ ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments (1,416,048) 11,135 (6,998,062)
Foreign currency translations -- -- --
------------ ------------ ------------
Total net change in unrealized appreciation (depreciation) (1,416,048) 11,135 (6,998,062)
------------ ------------ ------------
Total net realized gain (loss) and change in
unrealized appreciation (depreciation) 6,877,635 994,834 5,793,228
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 6,571,708 $ 959,620 $ 5,509,302
------------ ------------ ------------
*Net of foreign withholding taxes of $2,548, $167, $2,153 and $2,735 for the
Small Cap Value Fund, Tax-Managed Equity Fund, Value Fund and Worldwide Fund,
respectively.
See accompanying notes to financial statements.
44
SMALL CAP SMALL COMPANY TAX-MANAGED
VALUE FUND GROWTH FUND EQUITY FUND VALUE FUND WORLDWIDE FUND
--------------------------------------------------------------------------
$ 2,942,253 $ 9,364 $ 18,720 $ 441,685 $ 50,584
205,554 434 13 1,801 198,581
--------------------------------------------------------------------------
3,147,807 9,798 18,733 443,486 249,165
--------------------------------------------------------------------------
2,034,382 93,750 7,450 100,198 51,516
210,316 -- -- -- --
60,142 -- -- -- --
60,142 -- -- -- --
17,170 3,170 2,579 3,563 2,874
177,987 8,202 978 13,150 4,507
51,075 21,271 14,920 19,581 38,798
108,488 7,054 9,096 13,367 8,583
19,058 11,593 11,182 13,009 12,407
28,225 7,893 7,820 9,422 7,835
52,162 11,018 1,924 4,586 1,336
11,156 1,070 121 958 315
34,890 2,824 1,456 4,711 680
--------------------------------------------------------------------------
2,865,193 167,845 57,526 182,545 128,851
(93,335) (55,345) (47,841) (12,208) (60,163)
--------------------------------------------------------------------------
2,771,858 112,500 9,685 170,337 68,688
--------------------------------------------------------------------------
375,949 (102,702) 9,048 273,149 180,477
--------------------------------------------------------------------------
44,065,071 2,609,290 18,249 2,012,547 441,187
-- -- -- -- (225)
--------------------------------------------------------------------------
44,065,071 2,609,290 18,249 2,012,547 440,962
--------------------------------------------------------------------------
54,636,573 (1,215,869) 337,588 3,889,637 1,131,782
-- -- -- -- (2,015)
--------------------------------------------------------------------------
54,636,573 (1,215,869) 337,588 3,889,637 1,129,767
--------------------------------------------------------------------------
98,701,644 1,393,421 355,837 5,902,184 1,570,729
--------------------------------------------------------------------------
$ 99,077,593 $ 1,290,719 $ 364,885 $ 6,175,333 $ 1,751,206
--------------------------------------------------------------------------
See accompanying notes to financial statements.
45
STATEMENTS OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
- ----------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (305,927) $ (471,108)
Net realized gain (loss) on investments 8,293,683 (1,638,969)
Change in unrealized appreciation
(depreciation) on investments (1,416,048) 13,073,722
---------------- ------------------
Increase (decrease) in net assets from
operations 6,571,708 10,963,645
---------------- ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets
derived from capital share transactions (11,178,686) 2,847,129
---------------- ------------------
Total increase (decrease) in net assets (4,606,978) 13,810,774
NET ASSETS
Beginning of the period 56,679,657 42,868,883
---------------- ------------------
End of the period $ 52,072,679 $56,679,657
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS)
End of the period $ (307,069) $ (1,142)
---------------- ------------------
MID CAP GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (35,214) $ (51,079)
Net realized gain (loss) on investments 983,699 (109,243)
Change in unrealized appreciation (depreciation) on investments 11,135 1,858,351
---------------- ------------------
Increase (decrease) in net assets from operations 959,620 1,698,029
---------------- ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions (78) 32,706
---------------- ------------------
Total increase (decrease) in net assets 959,542 1,730,735
NET ASSETS
Beginning of the period 7,660,104 5,929,369
---------------- ------------------
End of the period $8,619,646 $7,660,104
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ (36,356) $ (1,142)
---------------- ------------------
See accompanying notes to financial statements.
46
SMALL CAP GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (283,926) $ (636,880)
Net realized gain (loss) on investments 12,791,290 (3,722,740)
Change in unrealized appreciation (depreciation) on investments (6,998,062) 18,110,700
---------------- ------------------
Increase (decrease) in net assets from operations 5,509,302 13,751,080
---------------- ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions (19,066,389) (36,514,836)
---------------- ------------------
Total increase (decrease) in net assets (13,557,087) (22,763,756)
NET ASSETS
Beginning of the period 52,863,961 75,627,717
---------------- ------------------
End of the period $ 39,306,874 $ 52,863,961
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ (285,068) $ (1,142)
---------------- ------------------
SMALL CAP VALUE FUND
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 375,949 $ 567,375
Net realized gain (loss) on investments 44,065,071 4,755,610
Change in unrealized appreciation (depreciation) on investments 54,636,573 79,201,327
---------------- ------------------
Increase (decrease) in net assets from operations 99,077,593 84,524,312
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income (755,337) --
Net realized gain on investments (7,446,392) --
RETAIL CLASS
Net investment income (73,295) --
Net realized gain on investments (3,811,026) --
ADMIN CLASS
Net investment income -- --
Net realized gain on investments (1,088,512) --
---------------- ------------------
Total distributions (13,174,562) --
---------------- ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions 26,527,026 37,141,909
---------------- ------------------
Total increase (decrease) in net assets 112,430,057 121,666,221
NET ASSETS
Beginning of the period 467,507,863 345,841,642
---------------- ------------------
End of the period $579,937,920 $467,507,863
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ 229,634 $ 682,317
---------------- ------------------
See accompanying notes to financial statements.
47
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
SMALL COMPANY GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ (102,702) $ (216,252)
Net realized gain (loss) on investments 2,609,290 (3,347,715)
Change in unrealized appreciation (depreciation) on investments (1,215,869) 10,422,651
---------------- ------------------
Increase (decrease) in net assets from operations 1,290,719 6,858,684
---------------- ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions (1,800,199) (30,642,707)
---------------- ------------------
Total increase (decrease) in net assets (509,480) (23,784,023)
NET ASSETS
Beginning of the period 24,230,358 48,014,381
---------------- ------------------
End of the period $23,720,878 $ 24,230,358
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ (103,844) $ (1,142)
---------------- ------------------
TAX-MANAGED EQUITY FUND
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 9,048 $ 71,050
Net realized gain (loss) on investments 18,249 (145,271)
Change in unrealized appreciation (depreciation) on investments 337,588 684,831
---------------- ------------------
Increase (decrease) in net assets from operations 364,885 610,610
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (62,322) (82,181)
---------------- ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions 1,107,890 (15,464,446)
---------------- ------------------
Total increase (decrease) in net assets 1,410,453 (14,936,017)
NET ASSETS
Beginning of the period 2,490,108 17,426,125
---------------- ------------------
End of the period $3,900,561 $ 2,490,108
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ 7,582 $ 60,856
---------------- ------------------
See accompanying notes to financial statements.
48
VALUE FUND
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 273,149 $ 448,264
Net realized gain (loss) on investments 2,012,547 (2,165,764)
Change in unrealized appreciation (depreciation) on investments 3,889,637 8,798,027
---------------- ------------------
Increase (decrease) in net assets from operations 6,175,333 7,080,527
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income (456,216) (273,025)
---------------- ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions (2,630,762) (1,873,138)
---------------- ------------------
Total increase (decrease) in net assets 3,088,355 4,934,364
NET ASSETS
Beginning of the period 37,959,472 33,025,108
---------------- ------------------
End of the period $41,047,827 $37,959,472
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ 260,949 $ 444,016
---------------- ------------------
WORLDWIDE FUND
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income (loss) $ 180,477 $ 363,432
Net realized gain (loss) on investments 440,962 104,771
Change in unrealized appreciation (depreciation) on investments 1,129,767 1,826,724
---------------- ------------------
Increase (decrease) in net assets from operations 1,751,206 2,294,927
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income (448,271) (284,901)
---------------- ------------------
FROM CAPITAL SHARES TRANSACTIONS
Increase (decrease) in net assets derived from capital share transactions 5,024,637 148,718
---------------- ------------------
Total increase (decrease) in net assets 6,327,572 2,158,744
NET ASSETS
Beginning of the period 10,499,054 8,340,310
---------------- ------------------
End of the period $16,826,626 $10,499,054
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period $ 176,093 $ 443,887
---------------- ------------------
See accompanying notes to financial statements.
49
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
3/31/2004(e) $13.69 $(0.07)(c) $ 1.78 $ 1.71 $ -- $ --
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
3/31/2004(e) 13.46 (0.09)(c) 1.75 1.66 -- --
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)
MID CAP GROWTH FUND
INSTITUTIONAL CLASS
3/31/2004(e) $ 6.10 $(0.03)(c) $ 0.79 $ 0.76 $ -- $ --
9/30/2003 4.74 (0.04)(c) 1.40 1.36 -- --
9/30/2002 5.99 (0.05)(c) (1.20) (1.25) -- --
9/30/2001* 10.00 (0.03)(c) (3.98) (4.01) -- --
* From commencement of Fund operations on February 28, 2001 through September
30, 2001. (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) Annualized for
periods less than one year. (e) For the six months ended March 31, 2004
(unaudited).
See accompanying notes to financial statements.
50
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)(d) expenses(d) income (loss)(d) rate
- ---------------------------------------------------------------------------------------------------
$ -- $15.40 12.5% $ 25,679 1.00% 1.14% (0.93)% 134%
-- 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
-- 15.12 12.3 26,394 1.25 1.39 (1.18) 134
-- 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
$ -- $ 6.86 12.5% $ 8,620 0.90% 2.12% (0.84)% 132%
-- 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
See accompanying notes to financial statements.
51
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
- ------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
INSTITUTIONAL CLASS
3/31/2004(e) $ 8.59 $(0.04)(c) $ 0.91 $ 0.87 $ -- $ --
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
3/31/2004(e) 8.45 (0.05)(c) 0.89 0.84 -- --
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 -- --
SMALL CAP VALUE FUND
INSTITUTIONAL CLASS
3/31/2004(e) $21.34 $ 0.03(c) $ 4.38 $ 4.41 $(0.05) $(0.55)
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
3/31/2004(e) 21.25 0.00(c)(f) 4.36 4.36 (0.01) (0.55)
9/30/2003 17.25 0.00(c)(f) 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
3/31/2004(e) 21.13 (0.03)(c) 4.35 4.32 -- (0.55)
9/30/2003 17.20 (0.05)(c) 3.98 3.93 -- 0.00
9/30/2002 19.80 0.00(c)(f) (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) Annualized for periods less than
one year. (e) For the six months ended March 31, 2004 (Unaudited). (f) Amount
is less than $0.01 per share.
See accompanying notes to financial statements.
52
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)(d) expenses(d) income (loss)(d) rate
- ---------------------------------------------------------------------------------------------------
$ -- $ 9.46 10.1% $ 23,840 1.00% 1.20% (0.93)% 110%
-- 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
-- 9.29 9.9 15,467 1.25 1.45 (1.18) 110
-- 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
$(0.60) $25.15 21.0% $342,876 0.90% 0.93% 0.26% 40%
-- 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
(0.56) 25.05 20.8 182,146 1.15 1.18 0.01 40
-- 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
(0.55) 24.90 20.7 54,916 1.40 1.43 (0.24) 40
-- 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.
53
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
- -----------------------------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND
INSTITUTIONAL CLASS
3/31/2004(e) $ 8.27 $(0.04)(c) $ 0.46 $ 0.42 $ -- $ --
9/30/2003 5.77 (0.05)(c) 2.55 2.50 -- --
9/30/2002 8.07 (0.07)(c) (2.23) (2.30) -- --
9/30/2001 19.78 (0.07)(c) (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
INSTITUTIONAL CLASS
3/31/2004(e) $ 7.66 $ 0.03(c) $ 1.08 $ 1.11 $(0.19) $ --
9/30/2003 6.78 0.06(c) 0.85 0.91 (0.03) --
9/30/2002 7.67 0.06(c) (0.81) (0.75) (0.14) --
9/30/2001 11.16 0.12(c) (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)
VALUE FUND
INSTITUTIONAL CLASS
3/31/2004(e) $13.52 $ 0.10(c) $ 2.16 $ 2.26 $(0.17) $ --
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
INSTITUTIONAL CLASS
3/31/2004(e) $ 9.32 $ 0.13(c) $ 1.15 $ 1.28 $(0.34) $ --
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)
* 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) Per share net investment
income (loss) has been determined on the basis of the weighted average number
of shares outstanding during the period. (d) Annualized for periods less than
one year. (e) For the six months ended March 31, 2004 (Unaudited) + 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.
54
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)(d) expenses(d) income (loss)(d) rate
- ---------------------------------------------------------------------------------------------------
$ -- $ 8.69 5.1% $ 23,721 0.90% 1.34% (0.82)% 89%
-- 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
$(0.19) $ 8.58 14.6% $ 3,901 0.65% 3.86% 0.61% 7%
(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
$(0.17) $15.61 16.8% $ 41,048 0.85% 0.91% 1.36% 34%
(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
$(0.34) $10.26 14.0% $ 16,827 1.00% 1.88% 2.63% 33%
(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.
55
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
1. ORGANIZATION | Loomis Sayles Funds I and Loomis Sayles Funds II (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
(the "1940 Act"), 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"). Shares of Loomis Sayles Tax-Managed Equity Fund
were first registered under the Securities Act of 1933 (the "1933 Act")
effective March 7, 1997 (subsequent to its commencement of investment
operations). Information presented in these financial statements pertains to
certain 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 Mid Cap Growth Fund (the "Mid Cap Growth Fund")
Loomis Sayles Small Cap Value Fund (the "Small Cap Value Fund")
Loomis Sayles Small Company Growth Fund (the "Small Company Growth 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 Tax-Managed Equity Fund (the "Tax-Managed Equity Fund")
Loomis Sayles Value Fund (the "Value Fund")
Loomis Sayles Worldwide Fund (the "Worldwide Fund")
Each Fund offers Institutional Class shares. Aggressive Growth Fund, Small Cap
Growth Fund and Small Cap Value Fund also offer Retail Class shares. In
addition, Small Cap Value Fund offers Admin Class shares.
Most expenses of the Trusts can be directly attributed to a Fund. Expenses
which can not be directly attributed are generally 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. Securities traded on the
NASDAQ National Market are valued at the NASDAQ Official Closing Price
("NOCP"), or if lacking a 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.
The Funds may hold securities traded in foreign markets. Foreign securities are
valued at the market price in the foreign market. However, if events occurring
after the close of the foreign market (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 fair valued pursuant to procedures
approved by the Board of Trustees. When fair valuing its securities, the Funds
may, among other things, use modeling tools or other processes that may take
into account factors such as securities market activity and/or significant
events that occur after the close of the foreign market and before the Fund
calculates its net asset value.
56
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.
Each 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.
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 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 March 31, 2004, there were no open forward foreign 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, 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.
57
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
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 six months ended March 31, 2004,
purchases and sales of securities (excluding short-term investments and U.S.
Government/Agency securities) were as follows:
Fund Purchases Sales
- ---- ------------ ------------
Aggressive Growth Fund $ 73,912,951 $ 83,018,731
Mid Cap Growth Fund 10,807,481 10,782,948
Small Cap Growth Fund 55,567,390 76,397,095
Small Cap Value Fund 215,557,389 205,164,488
Small Company Growth Fund 21,722,745 23,105,026
Tax-Managed Equity Fund 1,219,690 198,514
Value Fund 13,413,750 16,240,653
Worldwide Fund 7,991,582 4,303,989
For the six months ended March 31, 2004, purchases and sales of U.S.
Government/Agency securities by Worldwide Fund were $534,942 and $50,592,
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 for the six months ended March 31, 2004, provide for fees
at the following annual percentage rates of each Fund's average daily net
assets. Loomis Sayles has contractually agreed, until January 31, 2005, 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
Management --------------------------------
Fund Fees Institutional Retail Admin
- ---- ---------- ------------- ------ -----
Aggressive Growth Fund 0.75% 1.00% 1.25% --
Mid Cap Growth Fund 0.75% 0.90% -- --
Small Cap Growth Fund 0.75% 1.00% 1.25% --
Small Cap Value Fund 0.75% 0.90% 1.15% 1.40%
Small Company Growth Fund 0.75% 0.90% -- --
Tax-Managed Equity Fund 0.50% 0.65% -- --
Value Fund 0.50% 0.85% -- --
Worldwide Fund 0.75% 1.00% -- --
For the six months ended March 31, 2004, the management fees and waivers for
each Fund were as follows:
Percentage of
Gross Waiver of Net Average Daily Net Assets*
Management Management Management ------------------------
Fund Fee Fee Fee Gross Net
- ---- ---------- ---------- ---------- ----- ----
Aggressive Growth Fund $ 214,637 $ 41,702 $ 172,935 0.75% 0.60%
Mid Cap Growth Fund 31,472 31,472 -- 0.75% --
Small Cap Growth Fund 200,076 54,450 145,626 0.75% 0.55%
Small Cap Value Fund 2,034,382 93,335 1,941,047 0.75% 0.72%
Small Company Growth Fund 93,750 55,345 38,405 0.75% 0.31%
Tax-Managed Equity Fund 7,450 7,450 -- 0.50% --
Value Fund 100,198 12,208 87,990 0.50% 0.44%
Worldwide Fund 51,516 51,516 -- 0.75% --
* Annualized
58
For the six months ended March 31, 2004, in addition to the waiver of
management fees, expenses have been reimbursed as follows:
Fund Amount
- ---- -------
Mid Cap Growth Fund $19,732
Tax-Managed Equity Fund 40,391
Worldwide Fund 8,647
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"). CDC IXIS Asset
Management North America is ultimately owned by three large affiliated French
financial services firms: Caisse des Depots et Consignations; Caisse Nationale
des Caisses d'Epargne; and CNP Assurances, a leading French life insurance
company.
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 State Street Bank and Trust Company ("State Street Bank"),
to serve as sub-administrator. Pursuant to an agreement among the Trusts, the
CDC Nvest Funds Trusts (CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC
Nvest Funds Trust III, CDC Nvest Cash Management Trust and 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 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 Trusts and the CDC Nvest Funds Trusts, of the
annual aggregate minimum fee of $5 million.
For the six months ended March 31, 2004, fees paid to CIS for accounting and
administrative expense were as follows:
Accounting and
Fund Administrative
- ---- --------------
Aggressive Growth Fund $ 18,779
Mid Cap Growth Fund 2,754
Small Cap Growth Fund 17,504
Small Cap Value Fund 177,987
Small Company Growth Fund 8,202
Tax-Managed Equity 978
Value Fund 13,150
Worldwide Fund 4,507
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.
Aggressive Growth Fund, Small Cap Growth Fund, Small Cap Value Fund,
Tax-Managed Equity Fund, Value Fund and Wordwide Fund pay service fees to CIS
monthly representing the higher amount based on the following calculations:
(1)Each Fund's pro rata portion of an annual aggregate fee
determined by applying an annual fee rate of 0.026% of 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**.
59
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
Each Class of shares is subject to a monthly Class minimum of
$1,250 allocated based on the combined net assets of
Institutional Class, Retail Class and Admin Class, as
applicable.
or
(2)An allocated portion, based on eligible assets, of an annual
aggregate minimum fee for the period January 1, 2004 through
December 31, 2004, of $650,000. For the period September 15,
2003 through December 31, 2003, the aggregate minimum fee was
$190,547.
*No Load Retail Funds consist of Aggressive Growth Fund, Small Cap Growth Fund,
Small Cap Value Fund, Tax-Managed Equity Fund, Value Fund, Worldwide Fund,
Loomis Sayles Bond Fund and Loomis Sayles Global Bond Fund.
**Load Funds--Class Y consist of all Funds with Class Y shares offered within
the Trusts and the CDC Nvest Funds Trusts.
Mid Cap Growth Fund and Small Company Growth Fund pay service fees monthly to
CIS 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*.
Each Fund is subject to a monthly minimum fee of $1,000.
or
(2)An allocated portion, based on eligible assets, of an aggregate
minimum fee for the period January 1, 2004 through December 31,
2004, of $100,000. For the period September 15, 2003 through
December 31, 2003, the aggregate minimum fee was $29,315.
*Institutional Funds consist of Mid Cap Growth Fund, Small Company Growth Fund,
Loomis Sayles Benchmark Core Bond Fund, Loomis Sayles Core Plus 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.
CIS, BFDS and other firms are also reimbursed by the Funds for out-of-pocket
expenses.
For the six months ended March 31, 2004, amounts paid to CIS as compensation
for its services as transfer agent were as follows:
Fund Transfer Agent Fee
- ---- ------------------
Aggressive Growth Fund $15,000
Mid Cap Growth Fund 6,000
Small Cap Growth Fund 15,000
Small Cap Value Fund 71,855
Small Company Growth Fund 6,000
Tax-Managed Equity 7,500
Value Fund 7,500
Worldwide Fund 7,500
D. SERVICE AND DISTRIBUTION FEES | The Trusts have 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 Investment Grade Bond
Fund--Class J.
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 Small Cap
Value Fund has adopted 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 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 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 Loomis Sayles Funds Trusts and CDC Nvest
Funds Trusts do not pay any compensation directly to their officers or Trustees
who are directors, officers or employees of Loomis Sayles, CDC IXIS
Distributors, CDC IXIS
60
North America, CIS or their affiliates. Each Trustee who is an independent
Trustee of Loomis Sayles Funds Trusts and 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 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 Board
or Committee meeting in excess of four per year, at the rate of $4,500 and
$1,750, respectively. These fees are allocated to the various series of the
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 series of the Trusts or CDC Nvest Funds Trusts
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 six months ended March 31, 2004,
amounts paid to CIS as compensation for these services were as follows:
Publishing
Fund Services Fee
- ---- ------------
Aggressive Growth Fund $ 37
Mid Cap Growth Fund 42
Small Cap Growth Fund 37
Small Cap Value Fund 42
Small Company Growth Fund 42
Tax-Managed Equity Fund 96
Value Fund 37
Worldwide Fund 37
5. LINE OF CREDIT | Each Fund, except Mid Cap Growth Fund and Small Company
Growth Fund, together with certain other Funds of the Trusts, participate in a
$25 million committed unsecured revolving line of credit provided by State
Street Bank. 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. For the six months ended, March 31, 2004, the Funds had no
borrowings under the agreement.
6. SHAREHOLDERS | At March 31, 2004, Loomis Sayles owned 256,870 shares,
equating to 56.5% of Tax-Managed Equity Fund shares outstanding. At March 31,
2004, the Loomis Sayles Funded Pension Plan ("Pension Plan") and the Loomis
Sayles Employees' Profit Sharing Retirement Plan held shares of beneficial
interest in the Funds as follows:
Profit Sharing
Fund Pension Plan Retirement Plan
- ---- ------------ ---------------
Aggressive Growth Fund 187,842 440,386
Small Cap Growth Fund 234,766 492,732
Small Cap Value Fund 433,474 613,133
Value Fund 428,199 413,216
Worldwide Fund 885,919 335,600
61
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
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
Six Months Ended March 31, 2004 Year Ended September 30, 2003
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 85,574 $ 1,292,216 1,017,143 $ 12,248,463
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (160,976) (2,399,633) (527,813) (5,940,072)
------------- --------------- ------------ --------------
Net change (75,402) $ (1,107,417) 489,330 $ 6,308,391
------------- --------------- ------------ --------------
Shares Amount Shares+ Amount+
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 332,589 $ 4,924,823 1,142,750 $ 13,044,564
Issued in connection with
the reinvestment of distributions -- -- -- --
Issued in Admin Class Conversion -- -- 56,540 631,556
Redeemed (1,024,391) (14,996,092) (1,309,638) (14,596,979)
------------- --------------- ------------ --------------
Net change (691,802) $(10,071,269) (110,348) $ (920,859)
------------- --------------- ------------ --------------
Shares+ Amount+
ADMIN CLASS ---------- ------------
Issued from the sale of shares 29,865 $ 315,554
Issued in connection with
the reinvestment of distributions -- --
Redeemed (216,812) (2,224,401)
Redeemed in Admin Class Conversion (56,892) (631,556)
------------ --------------
Net change (243,839) $ (2,540,403)
------------ --------------
+OnMay 21, 2003, the outstanding Admin Class Shares were automatically
converted into Retail Class Shares.
MID CAP GROWTH FUND
Six Months Ended March 31, 2004 Year Ended September 30, 2003
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares -- $ -- 5,899 $ 32,706
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (12) (78) -- --
------------- --------------- ------------ --------------
Net change (12) $ (78) 5,899 $ 32,706
------------- --------------- ------------ --------------
SMALL CAP GROWTH FUND
Six Months Ended March 31, 2004 Year Ended September 30, 2003
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 264,451 $ 2,521,616 1,897,989 $ 13,566,717
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (365,386) (3,441,395) (5,953,993) (39,030,065)
------------- --------------- ------------ --------------
Net change (100,935) $ (919,779) (4,056,004) $(25,463,348)
------------- --------------- ------------ --------------
Shares Amount Shares+ Amount+
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 664,991 $ 6,220,402 3,879,141 $ 28,642,137
Issued in connection with
the reinvestment of distributions -- -- -- --
Issued in Admin Class Conversion -- -- 2,120 14,288
Redeemed (2,592,549) (24,367,012) (5,421,506) (38,664,657)
------------- --------------- ------------ --------------
Net change (1,927,558) $(18,146,610) (1,540,245) $(10,008,232)
------------- --------------- ------------ --------------
Shares+ Amount+
ADMIN CLASS ---------- ------------
Issued from the sale of shares 46,488 $ 301,256
Issued in connection with
the reinvestment of distributions -- --
Redeemed (217,093) (1,330,224)
Redeemed in Admin Class Conversion (2,135) (14,288)
------------ --------------
Net change (172,740) $ (1,043,256)
------------ --------------
+OnMay 21, 2003, the outstanding Admin Class Shares were automatically
converted into Retail Class Shares.
62
SMALL CAP VALUE FUND
Six Months Ended March 31, 2004 Year Ended September 30, 2003
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 1,273,856 $ 30,501,008 2,271,777 $ 43,519,989
Issued in connection with
the reinvestment of distributions 344,051 7,949,633 -- --
Redeemed (1,571,760) (37,591,112) (2,246,579) (42,192,200)
------------- --------------- ------------ --------------
Net change 46,147 $ 859,529 25,198 $ 1,327,789
------------- --------------- ------------ --------------
Shares Amount Shares Amount
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 1,547,330 $ 36,598,921 3,698,495 $ 69,872,984
Issued in connection with
the reinvestment of distributions 168,095 3,867,490 -- --
Redeemed (1,041,894) (24,992,718) (2,135,122) (40,321,887)
------------- --------------- ------------ --------------
Net change 673,531 $ 15,473,693 1,563,373 $ 29,551,097
------------- --------------- ------------ --------------
Shares Amount Shares Amount
ADMIN CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 614,565 $ 14,466,820 1,219,636 $ 22,714,426
Issued in connection with
the reinvestment of distributions 46,216 1,056,962 -- --
Redeemed (225,359) (5,329,978) (882,999) (16,451,403)
------------- --------------- ------------ --------------
Net change 435,422 $ 10,193,804 336,637 $ 6,263,023
------------- --------------- ------------ --------------
SMALL COMPANY GROWTH FUND
Six Months Ended March 31, 2004 Year Ended September 30, 2003
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares -- $ -- 662,784 $ 4,750,079
Issued from subscriptions-in-kind+ -- -- 839,609 4,995,673
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (202,355) (1,800,199) (6,892,544) (40,388,459)
------------- --------------- ------------ --------------
Net change (202,355) $ (1,800,199) (5,390,151) $(30,642,707)
------------- --------------- ------------ --------------
+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
Six Months Ended March 31, 2004 Year Ended September 30, 2003
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 121,891 $ 1,045,647 324,896 $ 2,267,000
Issued in connection with
the reinvestment of distributions 7,563 62,319 11,807 82,181
Redeemed (9) (76) (2,580,065) (17,813,627)
------------- --------------- ------------ --------------
Net change 129,445 $ 1,107,890 (2,243,362) $(15,464,446)
------------- --------------- ------------ --------------
63
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
VALUE FUND
Six Months Ended March 31, 2004 Year Ended September 30, 2003
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ----------- -------- -----------
Issued from the sale of shares 100,164 $ 1,479,034 328,065 $ 4,071,978
Issued in connection with
the reinvestment of distributions 26,133 376,057 18,887 230,605
Redeemed (305,504) (4,485,853) (493,835) (6,175,721)
------------- --------------- ------------ --------------
Net change (179,207) $(2,630,762) (146,883) $(1,873,138)
------------- --------------- ------------ --------------
WORLDWIDE FUND
Six Months Ended March 31, 2004 Year Ended September 30, 2003
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ----------- -------- -----------
Issued from the sale of shares 491,682 $ 4,824,306 711,080 $ 5,955,985
Issued in connection with
the reinvestment of distributions 46,883 447,733 36,904 284,901
Redeemed (24,822) (247,402) (728,370) (6,092,168)
------------- --------------- ------------ --------------
Net change 513,743 $ 5,024,637 19,614 $ 148,718
------------- --------------- ------------ --------------
64
[LOGO] CDC NvestFunds(SM)
CDC IXIS Asset Management Distributors
- --------------------------------------------------------------------------------
Income Funds
Semiannual Report
March 31, 2004
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund
[LOGO] LOOMIS . SAYLES & COMPANY, L.P.
Loomis Sayles Government Securities Fund
Loomis Sayles High Income Fund
Loomis Sayles Limited Term Government and Agency Fund
(formerly Loomis Sayles Limited Term U.S. Government Fund)
Loomis Sayles Massachusetts Tax Free Income Fund
Loomis Sayles Municipal Income Fund
Loomis Sayles Strategic Income Fund
TABLE OF CONTENTS
Management Discussion and Performance....Page 1
Schedule of Investments.................Page 16
Financial Statements....................Page 37
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk; their
value generally rises when prevailing interest rates fall and falls when rates
rise. This fund may invest in lower-rated bonds with higher yields and increased
risks; securities subject to prepayment risk; and foreign market securities with
special risks.
Management Discussion
- --------------------------------------------------------------------------------
Better business conditions arising from the ongoing expansion of the U.S.
economy helped companies strengthen their finances. These improvements and the
brighter outlook for profits drew investors to corporate issues over the past
six months in their quest for better returns. As a result, corporate bond prices
generally moved higher.
For the six months ended March 31, 2004, the total return on Class A shares at
net asset value of Loomis Sayles Core Plus Bond Fund was 4.42%, including $0.31
per share in reinvested dividends. The fund's benchmark, Lehman Aggregate Bond
Index, returned 2.98% for the same period. The Fund's 30-day SEC yield at the
end of March 2004 was 3.30%.
Corporate holdings drove positive returns
The economic recovery led us to emphasize corporate bonds, an approach that was
key to the fund's strong performance during the period. Investment-grade issues
were the leading contributor. High-yield was close behind, following a sharp
rally in the fourth quarter of 2003; BB-rated bonds performed particularly well
late in this year's first quarter. A lesser, but important contribution came
from mortgage-backed securities. Our strategy of downplaying U.S. Treasury and
agency bonds was also beneficial, as these assets delivered relatively low
returns.
Chemical, telecom and cable issues aided performance
IMC Global, a leading producer of fertilizers and animal feeds, benefited from
growth in world agriculture and rising grain prices. Higher prices for grain
encourage farmers to plant more acreage, creating incremental demand for IMC's
products. IMC also announced plans to merge its fertilizer business with
Cargill. A rebound in telecommunications companies helped push bonds of AT&T,
LCI International and others higher. Securities of cable operators Comcast and
CSC Holdings also rose. We sold Comcast on this strength. AT&T Wireless climbed
sharply on news of its pending acquisition by Cingular Corp.
Non-dollar holdings played an important role
We took advantage of the weakness in the U.S. dollar with our holdings of
non-dollar-denominated bonds, which contributed to the fund's results. Bonds of
the Federal National Mortgage Association (FNMA) denominated in Australian
dollars were the fund's best performer, as the Australian dollar continued its
recent strength.
Weak results in scattered sectors
With many corporate sectors performing well, restaurants, real estate investment
trusts and home builders had only modest returns. Poor investment timing and
security selection held the fund back in these sectors, as weakness in 2004
offset gains of last year's fourth quarter. Citizens Communications, a New York
local telephone company; publisher News America Holdings; and Dow Chemical
lagged the market following gains last year and have been sold.
Focus remains on credit quality and the dollar
The recovery still appears to be underway, and we remain optimistic about the
improving credit quality of U.S. corporate bonds in the months ahead. Many
corporate sectors have risen substantially, so current yield may become a
greater focus for the fund. We also may adjust our non-dollar commitments by
paring back exposure to Canadian dollar-and euro-denominated issues in favor of
potentially better prospects among Asian currencies, including Singapore's
dollar. Continued growth in the U.S. Gross Domestic Product will probably lead
to higher short-term interest rates as the Federal Reserve Board moves to
relieve inflationary pressures, perhaps in the post-election period. March's
dramatic increase in job creation affirms our expectation that rates are likely
to head higher.
1
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund
- --------------------------------------------------------------------------------
Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
March 31, 1994 through March 31, 2004
[CHART]
Line chart
Class A Lehman Lehman
@ Maximum Aggregate US
Month Net Asset Sales Bond Credit
End Value (1) Charge (2) Index (3) Index (4)
- ---------- --------- ---------- --------- ---------
3/31/1994 10,000 9,550 10000 10,000
4/30/1994 9,897 9,451 9920 9,904
5/31/1994 9,845 9,402 9919 9,867
6/30/1994 9,784 9,343 9897 9,843
7/31/1994 9,968 9,519 10093 10,092
8/31/1994 10,020 9,570 10106 10,103
9/30/1994 9,914 9,468 9957 9,915
10/31/1994 9,888 9,443 9948 9,892
11/30/1994 9,861 9,417 9926 9,876
12/31/1994 9,912 9,466 9995 9,957
1/31/1995 10,079 9,625 10193 10,169
2/28/1995 10,410 9,942 10435 10,462
3/31/1995 10,413 9,945 10499 10,547
4/30/1995 10,618 10,140 10646 10,725
5/31/1995 11,086 10,587 11058 11,230
6/30/1995 11,185 10,682 11139 11,332
7/31/1995 11,125 10,624 11114 11,282
8/31/1995 11,322 10,813 11248 11,463
9/30/1995 11,464 10,948 11357 11,599
10/31/1995 11,617 11,094 11505 11,750
11/30/1995 11,798 11,267 11677 11,975
12/31/1995 11,970 11,431 11841 12,172
1/31/1996 12,020 11,479 11920 12,251
2/29/1996 11,759 11,230 11713 11,960
3/31/1996 11,701 11,174 11631 11,858
4/30/1996 11,602 11,080 11566 11,760
5/31/1996 11,592 11,071 11542 11,739
6/30/1996 11,762 11,232 11697 11,911
7/31/1996 11,792 11,261 11729 11,934
8/31/1996 11,792 11,261 11710 11,898
9/30/1996 12,066 11,523 11914 12,150
10/31/1996 12,372 11,815 12178 12,482
11/30/1996 12,670 12,099 12386 12,748
12/31/1996 12,522 11,959 12271 12,572
1/31/1997 12,592 12,025 12309 12,590
2/28/1997 12,671 12,101 12339 12,643
3/31/1997 12,482 11,920 12203 12,446
4/30/1997 12,619 12,051 12385 12,634
5/31/1997 12,789 12,214 12502 12,777
6/30/1997 13,014 12,428 12651 12,958
7/31/1997 13,538 12,928 12992 13,433
8/31/1997 13,307 12,708 12881 13,234
9/30/1997 13,571 12,961 13071 13,466
10/31/1997 13,700 13,084 13261 13,637
11/30/1997 13,763 13,144 13322 13,713
12/31/1997 13,906 13,280 13456 13,859
1/31/1998 14,090 13,456 13629 14,023
2/28/1998 14,136 13,500 13618 14,019
3/31/1998 14,223 13,583 13665 14,070
4/30/1998 14,288 13,645 13736 14,159
5/31/1998 14,434 13,784 13867 14,327
6/30/1998 14,488 13,836 13984 14,433
7/31/1998 14,450 13,799 14014 14,420
8/31/1998 14,306 13,663 14242 14,487
9/30/1998 14,859 14,191 14576 14,957
10/31/1998 14,703 14,041 14499 14,726
11/30/1998 14,995 14,320 14581 15,003
12/31/1998 15,018 14,342 14625 15,047
1/31/1999 15,180 14,497 14729 15,196
2/28/1999 14,873 14,204 14472 14,835
3/31/1999 15,078 14,400 14552 14,940
4/30/1999 15,198 14,514 14598 14,984
5/31/1999 14,867 14,198 14470 14,783
6/30/1999 14,772 14,107 14424 14,706
7/31/1999 14,714 14,052 14363 14,625
8/31/1999 14,655 13,996 14356 14,589
9/30/1999 14,903 14,233 14522 14,748
10/31/1999 14,938 14,266 14576 14,815
11/30/1999 14,960 14,287 14575 14,831
12/31/1999 14,967 14,294 14505 14,753
1/31/2000 14,905 14,234 14457 14,701
2/29/2000 15,073 14,394 14632 14,837
3/31/2000 15,279 14,591 14825 14,963
4/30/2000 14,997 14,322 14782 14,832
5/31/2000 14,887 14,217 14775 14,777
6/30/2000 15,338 14,647 15083 15,148
7/31/2000 15,428 14,734 15220 15,331
8/31/2000 15,627 14,923 15440 15,531
9/30/2000 15,650 14,946 15537 15,613
10/31/2000 15,561 14,861 15640 15,628
11/30/2000 15,708 15,002 15896 15,830
12/31/2000 16,074 15,350 16191 16,138
1/31/2001 16,472 15,731 16456 16,579
2/28/2001 16,635 15,887 16599 16,724
3/31/2001 16,656 15,906 16682 16,827
4/30/2001 16,562 15,816 16613 16,767
5/31/2001 16,667 15,917 16713 16,921
6/30/2001 16,671 15,921 16776 17,006
7/31/2001 17,093 16,324 17151 17,450
8/31/2001 17,283 16,505 17348 17,684
9/30/2001 17,211 16,436 17550 17,658
10/31/2001 17,549 16,760 17917 18,097
11/30/2001 17,433 16,649 17670 17,939
12/31/2001 17,238 16,463 17558 17,816
1/31/2002 17,199 16,425 17700 17,967
2/28/2002 17,133 16,362 17872 18,103
3/31/2002 16,945 16,183 17574 17,768
4/30/2002 17,104 16,335 17915 18,016
5/31/2002 17,248 16,471 18067 18,254
6/30/2002 16,832 16,075 18224 18,284
7/31/2002 16,637 15,889 18444 18,274
8/31/2002 17,016 16,251 18755 18,748
9/30/2002 17,073 16,304 19059 19,104
10/31/2002 16,976 16,212 18972 18,883
11/30/2002 17,299 16,521 18967 19,127
12/31/2002 17,728 16,930 19359 19,691
1/31/2003 17,827 17,025 19375 19,755
2/28/2003 18,085 17,271 19643 20,150
3/31/2003 18,136 17,320 19628 20,165
4/30/2003 18,408 17,580 19790 20,538
5/31/2003 18,774 17,929 20159 21,186
6/30/2003 18,804 17,958 20119 21,134
7/31/2003 18,159 17,342 19443 20,232
8/31/2003 18,333 17,508 19572 20,391
9/30/2003 18,861 18,012 20090 21,103
10/31/2003 18,813 17,967 19902 20,878
11/30/2003 18,928 18,076 19950 20,974
12/31/2003 19,234 18,368 20153 21,208
1/31/2004 19,398 18,525 20315 21,422
2/29/2004 19,548 18,668 20535 21,692
3/31/2004 19,694 18,802 20689 21,901
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
Since
6 Months 1 Year 5 Years 10 Years Inception
-------- ------ ------- -------- ---------
Class A (Inception 11/7/73)
Net Asset Value/1/ 4.42% 8.59% 5.49% 7.01% --
With Maximum Sales Charge/2/ -0.30 3.69 4.51 6.52 --
Class B (Inception 9/13/93)
Net Asset Value/1/ 4.05 7.75 4.73 6.22 --
With CDSC/5/ -0.95 2.75 4.40 6.22 --
Class C (Inception 12/30/94)
Net Asset Value/1/ 4.05 7.75 4.70 -- 6.75%
With CDSC/5/ 3.05 6.75 4.70 -- 6.75
Class Y (Inception 12/30/94)
Net Asset Value/1/ 4.52 8.97 5.93 -- 8.01
- --------------------------------------------------------------------------------
Since
Class C & Y
Comparative Performance 6 Months 1 Year 5 Years 10 Years Inception/7/
- ----------------------- -------- ------ ------- -------- ------------
Lehman Aggregate Bond Index/3/ 2.98% 5.40% 7.29% 7.54% 8.18%
Lehman U.S. Credit Index/4/ 3.78 8.61 7.95 8.16 8.90
Lipper Int. Investment Grade Debt Avg./6/ 2.79 5.43 6.45 6.71 7.31
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com. Class Y shares 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 as of March 31, 2004
- --------------------------------------------------------------------------------
Credit Quality*
[CHART]
Pie chart
Aaa 43.4%
Aa 2.7%
A 6.4%
Baa 24.7%
Ba 16.5%
B 2.2%
Caa 0.9%
Short term & other 3.2%
* Determined using the higher of the credit ratings assigned to each security by
Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of
comparable quality as determined by Loomis Sayles).
Effective Maturity
[CHART]
Pie chart
Average Effective Maturity: 6.9 years
1year or less 3.2%
1-5 years 54.9%
5-10 years 29.1%
10+ years 12.8%
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman 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 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase.
/6/ 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.
/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
12/31/94.
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 or
its agencies
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk; their
value generally rises when prevailing interest rates fall and falls when rates
rise. The fund also invests in real estate-related securities that are subject
to prepayment risks, and U.S. government bonds that are guaranteed by the U.S.
government; mutual funds that invest in these securities are not guaranteed.
Management Discussion
- --------------------------------------------------------------------------------
Interest rates trended irregularly down during the six months ended March 31,
2004, causing prices of longer-term bonds to rise to a greater degree than
shorter-term issues. High-quality government bonds also did not fare as well as
corporate bonds, as investors sought higher returns from lower quality bonds.
For the first half of its fiscal year, Class A shares of Loomis Sayles
Government Securities Fund provided a return of 2.02% at net asset value,
including $0.22 in reinvested dividends. The Lehman Government Bond Index
returned 2.49%, and the fund's new benchmark, the Lehman Long Government Bond
Index, returned 4.16%. The benchmark was changed during the period because we
believe the new index is more representative of the types of securities in which
the fund may invest. Its higher weighting in mortgage-backed securities and
shorter duration relative to its benchmarks were primarily responsible for the
fund's underperformance. The fund's 30-day SEC yield at the end of March was
2.66%.
Fund's duration was trimmed in response to interest rate forecast
U.S. Treasury bonds maturing in 10 or more years were the best-performing sector
within your fund's universe of government securities. As rates fell, Treasuries
with longer maturities rose in value, reflecting investors' need for higher
current income.
Although interest rates declined during the six-month period, we trimmed the
fund's duration to approximately 7.5 years at the end of March from 8.6 years,
in anticipation of rate increases in the future. Duration measures a fund's
price sensitivity to changing interest rates. When interest rates decline, a
long duration is typically a benefit, but it becomes a drawback when rising
rates send bond prices lower. A shorter duration also gives the fund greater
flexibility to invest in higher-yielding bonds as issues reach maturity.
Mortgage-backed holdings were disappointing
The fund's mortgage-backed securities lagged longer duration U.S. Treasuries as
interest rates continued to fall, triggering fears that mortgage holders would
refinance. Nonetheless, the fund continued to maintain its emphasis on
mortgage-backed securities. Although they are regarded as riskier than
Treasuries securities, they are backed by U.S. agencies and generally offer
higher yields. In a declining interest-rate environment, however, prepayment
concerns are typical, which can result in their underperformance relative to
longer duration U.S. Treasuries.
Prices of some of our higher-coupon mortgage securities held up relatively well.
Even though the market was concerned about prepayments, these higher-coupon
mortgages were part of smaller pools and most prepayments had already occurred.
For the most part, however, we traded out of higher-coupon mortgages in exchange
for lower-coupon mortgages to enhance prepayment stability.
Economic expansion may lead to higher interest rates
We believe continued economic expansion will eventually lead to rising rates and
falling bond prices. However, the opportunities to extend duration and earn
additional income outweigh our concern for rising rates. In this environment, we
believe income will be the key to performance. As a result, we are maintaining
an emphasis on mortgage-backed securities because of their income advantage.
We expect the difference in yields between long- and short-term bonds to lessen
somewhat - "flattening" the yield curve - as the economy continues to improve.
However, the yield curve is likely to remain steep, historically speaking.
Should signs begin to point to a flatter yield curve, we may implement a barbell
maturity structure. A barbell structure allows us to reach for income on one end
of the curve and provide some principal preservation on the opposite end.
3
- --------------------------------------------------------------------------------
Loomis Sayles Government Securities Fund
- --------------------------------------------------------------------------------
Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
March 31, 1994 through March 31, 2004
[CHART]
Line chart
Class A Lehman Lehman
@ Maximum Government Long
Month Net Asset Sales Bond Govt Bond
End Value (1) Charge (2) Index (3) Index (4)
- ---------- --------- ---------- ---------- ---------
3/31/1994 10,000 9,550 10,000 10000
4/30/1994 9,923 9,477 9,921 9881
5/31/1994 9,918 9,472 9,909 9813
6/30/1994 9,804 9,363 9,886 9717
7/31/1994 9,935 9,488 10,068 10049
8/31/1994 9,938 9,491 10,070 9972
9/30/1994 9,800 9,359 9,928 9657
10/31/1994 9,799 9,358 9,920 9621
11/30/1994 9,743 9,304 9,902 9682
12/31/1994 9,767 9,327 9,962 9829
1/31/1995 9,918 9,472 10,148 10085
2/28/1995 10,145 9,689 10,366 10373
3/31/1995 10,212 9,752 10,431 10463
4/30/1995 10,316 9,852 10,567 10648
5/31/1995 10,881 10,391 10,994 11470
6/30/1995 10,948 10,456 11,078 11603
7/31/1995 10,842 10,354 11,037 11415
8/31/1995 10,959 10,465 11,167 11671
9/30/1995 11,095 10,596 11,275 11888
10/31/1995 11,304 10,796 11,446 12219
11/30/1995 11,524 11,006 11,625 12533
12/31/1995 11,723 11,195 11,789 12867
1/31/1996 11,768 11,238 11,862 12864
2/29/1996 11,479 10,963 11,620 12239
3/31/1996 11,351 10,840 11,523 11998
4/30/1996 11,262 10,755 11,450 11796
5/31/1996 11,203 10,699 11,430 11735
6/30/1996 11,319 10,809 11,578 11988
7/31/1996 11,339 10,829 11,606 11994
8/31/1996 11,267 10,760 11,581 11842
9/30/1996 11,465 10,949 11,773 12172
10/31/1996 11,735 11,207 12,032 12651
11/30/1996 11,975 11,436 12,241 13076
12/31/1996 11,814 11,282 12,116 12759
1/31/1997 11,828 11,295 12,130 12668
2/28/1997 11,835 11,302 12,146 12676
3/31/1997 11,676 11,151 12,018 12352
4/30/1997 11,819 11,287 12,191 12653
5/31/1997 11,920 11,383 12,296 12795
6/30/1997 12,086 11,542 12,434 13043
7/31/1997 12,594 12,027 12,787 13810
8/31/1997 12,310 11,756 12,661 13429
9/30/1997 12,534 11,970 12,851 13794
10/31/1997 12,781 12,206 13,074 14257
11/30/1997 12,874 12,294 13,140 14448
12/31/1997 13,033 12,446 13,278 14689
1/31/1998 13,216 12,622 13,476 14984
2/28/1998 13,154 12,562 13,440 14879
3/31/1998 13,146 12,554 13,478 14910
4/30/1998 13,186 12,592 13,539 14967
5/31/1998 13,352 12,751 13,678 15253
6/30/1998 13,554 12,944 13,833 15607
7/31/1998 13,528 12,919 13,855 15539
8/31/1998 13,944 13,317 14,215 16227
9/30/1998 14,327 13,683 14,598 16810
10/31/1998 14,148 13,511 14,548 16545
11/30/1998 14,228 13,587 14,553 16689
12/31/1998 14,208 13,569 14,586 16659
1/31/1999 14,347 13,701 14,671 16811
2/28/1999 13,794 13,173 14,322 16001
3/31/1999 13,827 13,205 14,378 15955
4/30/1999 13,873 13,248 14,411 15974
5/31/1999 13,687 13,071 14,284 15729
6/30/1999 13,527 12,918 14,255 15557
7/31/1999 13,427 12,823 14,234 15473
8/31/1999 13,327 12,727 14,234 15418
9/30/1999 13,500 12,892 14,350 15526
10/31/1999 13,491 12,884 14,373 15536
11/30/1999 13,431 12,827 14,353 15435
12/31/1999 13,296 12,698 14,260 15205
1/31/2000 13,310 12,711 14,280 15412
2/29/2000 13,544 12,934 14,483 15863
3/31/2000 13,842 13,219 14,738 16378
4/30/2000 13,729 13,111 14,697 16241
5/31/2000 13,680 13,065 14,706 16173
6/30/2000 13,918 13,291 14,969 16539
7/31/2000 14,049 13,416 15,113 16820
8/31/2000 14,295 13,652 15,337 17210
9/30/2000 14,239 13,598 15,381 17024
10/31/2000 14,368 13,721 15,528 17296
11/30/2000 14,697 14,036 15,833 17839
12/31/2000 15,011 14,335 16,149 18289
1/31/2001 15,112 14,432 16,311 18337
2/28/2001 15,303 14,615 16,497 18639
3/31/2001 15,315 14,626 16,555 18544
4/30/2001 15,093 14,414 16,386 18050
5/31/2001 15,145 14,464 16,440 18072
6/30/2001 15,170 14,488 16,515 18219
7/31/2001 15,622 14,919 16,912 18896
8/31/2001 15,796 15,085 17,122 19297
9/30/2001 16,007 15,287 17,420 19445
10/31/2001 16,555 15,810 17,869 20434
11/30/2001 15,986 15,267 17,468 19452
12/31/2001 15,750 15,041 17,316 19084
1/31/2002 15,905 15,189 17,429 19319
2/28/2002 16,098 15,374 17,590 19548
3/31/2002 15,647 14,943 17,207 18765
4/30/2002 16,079 15,356 17,617 19482
5/31/2002 16,190 15,462 17,723 19545
6/30/2002 16,430 15,691 17,970 19904
7/31/2002 16,821 16,064 18,365 20519
8/31/2002 17,296 16,517 18,729 21428
9/30/2002 17,748 16,950 19,168 22309
10/31/2002 17,496 16,709 19,014 21668
11/30/2002 17,313 16,534 18,850 21437
12/31/2002 17,853 17,050 19,307 22326
1/31/2003 17,813 17,011 19,259 22250
2/28/2003 18,218 17,399 19,569 22935
3/31/2003 18,059 17,246 19,513 22657
4/30/2003 18,144 17,327 19,604 22889
5/31/2003 18,823 17,976 20,113 24193
6/30/2003 18,619 17,781 20,007 23812
7/31/2003 17,394 16,611 19,180 21629
8/31/2003 17,603 16,811 19,288 22008
9/30/2003 18,338 17,513 19,848 23173
10/31/2003 17,897 17,092 19,566 22526
11/30/2003 17,954 17,146 19,588 22630
12/31/2003 18,118 17,303 19,762 22909
1/31/2004 18,310 17,486 19,926 23313
2/29/2004 18,547 17,712 20,164 23780
3/31/2004 18,708 17,863 20,342 24137
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
6 Months 1 Year 5 Years 10 Years
-------- ------ ------- --------
Class A (Inception 9/16/85)
Net Asset Value/1/ 2.02% 3.60% 6.23% 6.46%
With Maximum Sales Charge/2/ -2.57 -1.04 5.26 5.97
Class B (Inception 9/23/93)
Net Asset Value/1/ 1.65 2.91 5.46 5.69
With CDSC/6/ -3.35 -2.08 5.14 5.69
Class Y (Inception 3/31/94)
Net Asset Value/1/ 1.88 3.58 6.52 6.76
- --------------------------------------------------------------------------------
Comparative Performance 6 Months 1 Year 5 Years 10 Years
- ----------------------- -------- ------ ------- --------
Lehman Government Bond Index/3/ 2.49% 4.24% 7.19% 7.36%
Lehman Long Government Index/4/ 4.16 6.53 8.63 9.21
Lipper General Government Funds Avg./5/ 2.11 2.98 5.94 6.27
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com. Performance history includes periods
from a predecessor fund. Class Y shares 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 as of March 31, 2004
- --------------------------------------------------------------------------------
Portfolio Mix
[CHART]
Pie chart
Treasuries 81.4%
Mortgage-backed 15.5%
Government agencies 0.9%
Short-term & other 2.2%
Effective Maturity
[CHART]
Pie chart
1 year or less 1.3%
1-5 years 16.9%
5-10 years 17.2%
10+ years 64.5%
Average Effective Maturity: 11.6 years
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman Government Bond Index is an unmanaged index of public debt of the
U.S. Treasury, government agencies, and their obligations.
/4/ Lehman Long Government Bond Index is an unmanaged index of U.S. Treasury
public debt and their obligations with a maturity of 10 years or more.
/5/ Lipper General Government Funds Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Lipper Inc.
/6/ Performance for Class B shares assumes a maximum 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%.
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
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk; their
value generally rises when prevailing interest rates fall and falls when rates
rise. This fund emphasizes lower-rated, high-yield bonds that may involve extra
risks. It also invests in foreign securities which have special risks, including
political, economic, regulatory and currency risks.
Management Discussion
- --------------------------------------------------------------------------------
Gathering strength in the U.S. economy helped boost corporate profits,
increasing investor demand for corporate bonds across all rating categories,
especially high-yield issues. However, after spectacular performance last year,
gains for high-yield bonds were more modest during the first quarter of 2004.
For the six months ended March 31, 2004, the total return on Loomis Sayles High
Income Fund's Class A shares at net asset value was 8.85%, including $0.17 per
share in reinvested dividends. The fund's benchmark, the Lehman High Yield
Composite Index, returned 8.39% for the same period. At the end of March 2004,
the fund's 30-day SEC yield was 5.55%.
Improving credit quality, good security selection, aided returns
Successful security selection within high-yield bond sectors was the primary
driver of the fund's solid results. Our strategy of structuring the portfolio to
take advantage of improvements in credit quality was particularly beneficial
during this period. The economic recovery allowed many bond issuers in the lower
rating categories to shore up their balance sheets. The lowest default rates in
several years also helped boost demand for high-yield issues. Convertible bonds
- - those that can be converted into common stock under specified conditions -
aided performance, as did holdings in international and emerging markets.
Technology, telecom and chemicals among strongest sectors
Technology was one of the fund's best-performing sectors, with domestic and
overseas issuers in wire telephony and chemical companies also making important
contributions. Steadily improving business conditions and competitive pressures
encouraged corporations to invest in new technology and upgrade existing systems
after years of deferral. In telecommunications, bonds and convertibles of
network specialist Lucent Technology benefited from restructuring and cost
reduction efforts, an improving earnings outlook and a ratings upgrade by
Standard & Poor's. Lucent also won a major fiber-optic contract with Verizon.
London-based Colt Telecom, which operates fiber-optic networks in Europe,
continued to increase revenues and reduce capital outlays. We sold the fund's
Colt holdings when valuations reached our target. Bonds of Philippine Long
Distance Telephone also contributed. In chemicals, fertilizer giant IMC Global
is benefiting from growth in world agriculture, as well as from its announced
plans to merge with Cargill.
Oil services and airlines hurt
Bonds of Trico Marine Services fell in the wake of disappointing earnings tied
to reduced offshore drilling activity and weak demand in the North Sea and Gulf
of Mexico. Delta Airline's bonds fell after a ratings downgrade by Standard &
Poor's. We took advantage of price declines to add to both positions during the
period.
Positioned for a changing environment
We believe that economic growth will continue, further benefiting lower-rated
issues. In fact, we think high-income bonds may offer some of the best returns
in 2004, based on extra income and the potential for cyclical gains. However, we
also expect interest rates to rise at some point as the economy continues to
expand, and rising rates are a potential negative for bond prices. To try to
mitigate that risk, we have been selling BBB-rated bonds because they are more
sensitive to changes in rates than are bonds of lower-rated issuers. As part of
that strategy, we are adding to longer maturity holdings in BB-rated issues to
capture favorable current yields and because their prices are affected more by
their issuers' earnings and credit quality than by interest-rate trends. Our
research-driven investment selection process is key to seeking attractive values
among high-yield issuers whose fundamentals may improve in the months ahead,
including some that may have potential for ratings upgrades.
5
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund
- --------------------------------------------------------------------------------
Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
March 31, 1994 through March 31, 2004
[CHART]
Line chart
Class A Lehman
@ Maximum High Yield
Month Net Asset Sales Composite
End Value (1) Charge (2) Index
- ---------- --------- ---------- ----------
3/31/1994 10,000 9,550 10,000
4/30/1994 9,837 9,395 9,931
5/31/1994 9,878 9,434 9,937
6/30/1994 9,919 9,473 9,967
7/31/1994 9,857 9,414 10,052
8/31/1994 9,815 9,374 10,123
9/30/1994 9,836 9,394 10,124
10/31/1994 9,820 9,378 10,148
11/30/1994 9,665 9,230 10,020
12/31/1994 9,690 9,254 10,094
1/31/1995 9,761 9,322 10,230
2/28/1995 10,014 9,563 10,581
3/31/1995 10,079 9,625 10,695
4/30/1995 10,278 9,816 10,967
5/31/1995 10,468 9,997 11,275
6/30/1995 10,455 9,985 11,346
7/31/1995 10,635 10,156 11,490
8/31/1995 10,642 10,163 11,525
9/30/1995 10,696 10,215 11,667
10/31/1995 10,739 10,256 11,739
11/30/1995 10,759 10,275 11,843
12/31/1995 10,832 10,344 12,029
1/31/1996 11,030 10,533 12,240
2/29/1996 11,106 10,606 12,250
3/31/1996 11,084 10,585 12,242
4/30/1996 11,217 10,712 12,269
5/31/1996 11,338 10,828 12,343
6/30/1996 11,410 10,897 12,445
7/31/1996 11,521 11,002 12,503
8/31/1996 11,657 11,133 12,638
9/30/1996 12,016 11,475 12,942
10/31/1996 11,990 11,451 13,042
11/30/1996 12,237 11,687 13,302
12/31/1996 12,443 11,883 13,394
1/31/1997 12,453 11,892 13,517
2/28/1997 12,889 12,309 13,742
3/31/1997 12,718 12,146 13,544
4/30/1997 12,789 12,214 13,676
5/31/1997 13,214 12,620 13,980
6/30/1997 13,300 12,701 14,173
7/31/1997 13,663 13,048 14,563
8/31/1997 13,750 13,131 14,530
9/30/1997 14,160 13,522 14,818
10/31/1997 14,036 13,404 14,831
11/30/1997 14,224 13,584 14,972
12/31/1997 14,357 13,711 15,104
1/31/1998 14,572 13,916 15,376
2/28/1998 14,552 13,897 15,466
3/31/1998 14,702 14,041 15,611
4/30/1998 14,782 14,117 15,673
5/31/1998 14,758 14,094 15,727
6/30/1998 14,809 14,143 15,784
7/31/1998 14,786 14,121 15,873
8/31/1998 13,761 13,141 14,997
9/30/1998 13,630 13,017 15,065
10/31/1998 13,345 12,744 14,757
11/30/1998 14,303 13,660 15,369
12/31/1998 14,112 13,477 15,386
1/31/1999 14,430 13,781 15,614
2/28/1999 14,522 13,868 15,522
3/31/1999 14,756 14,092 15,670
4/30/1999 15,074 14,396 15,974
5/31/1999 14,704 14,043 15,758
6/30/1999 14,663 14,003 15,724
7/31/1999 14,604 13,947 15,787
8/31/1999 14,377 13,730 15,613
9/30/1999 14,283 13,640 15,500
10/31/1999 14,412 13,763 15,398
11/30/1999 14,507 13,854 15,577
12/31/1999 14,677 14,017 15,754
1/31/2000 14,515 13,861 15,686
2/29/2000 14,580 13,924 15,716
3/31/2000 14,140 13,503 15,386
4/30/2000 14,131 13,495 15,410
5/31/2000 13,737 13,119 15,252
6/30/2000 14,153 13,516 15,563
7/31/2000 14,237 13,597 15,682
8/31/2000 14,181 13,543 15,789
9/30/2000 13,887 13,262 15,651
10/31/2000 13,195 12,601 15,150
11/30/2000 12,099 11,554 14,550
12/31/2000 12,316 11,761 14,831
1/31/2001 13,746 13,127 15,942
2/28/2001 13,677 13,061 16,154
3/31/2001 12,978 12,394 15,774
4/30/2001 12,579 12,013 15,577
5/31/2001 12,613 12,045 15,858
6/30/2001 11,889 11,354 15,413
7/31/2001 12,123 11,578 15,640
8/31/2001 12,030 11,489 15,824
9/30/2001 10,936 10,444 14,761
10/31/2001 10,815 10,328 15,126
11/30/2001 11,166 10,663 15,678
12/31/2001 11,004 10,509 15,614
1/31/2002 11,072 10,574 15,722
2/28/2002 10,735 10,252 15,503
3/31/2002 11,024 10,528 15,876
4/30/2002 10,934 10,442 16,130
5/31/2002 10,775 10,290 16,040
6/30/2002 10,004 9,554 14,858
7/31/2002 9,330 8,910 14,209
8/31/2002 9,657 9,223 14,614
9/30/2002 9,298 8,880 14,422
10/31/2002 9,294 8,875 14,296
11/30/2002 9,912 9,466 15,182
12/31/2002 10,029 9,578 15,394
1/31/2003 10,242 9,781 15,907
2/28/2003 10,385 9,918 16,103
3/31/2003 10,653 10,174 16,566
4/30/2003 11,269 10,762 17,549
5/31/2003 11,465 10,949 17,730
6/30/2003 11,713 11,186 18,240
7/31/2003 11,480 10,964 18,039
8/31/2003 11,603 11,081 18,247
9/30/2003 11,983 11,444 18,746
10/31/2003 12,238 11,688 19,124
11/30/2003 12,494 11,932 19,414
12/31/2003 12,828 12,251 19,854
1/31/2004 13,027 12,441 20,233
2/29/2004 12,970 12,387 20,182
3/31/2004 13,041 12,459 20,319
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
Since
6 Months 1 Year 5 Years 10 Years/6/ Inception/6/
-------- ------ ------- ----------- ------------
Class A (Inception 2/22/84)
Net Asset Value/1/ 8.85% 22.44% -2.44% 2.69% --
With Maximum Sales Charge/2/ 3.93 16.99 -3.34 2.22 --
Class B (Inception 9/20/93)
Net Asset Value/1/ 8.45 21.25 -3.17 1.96 --
With CDSC/7/ 3.45 16.25 -3.42 1.96 --
Class C (Inception 3/2/98)
Net Asset Value/1/ 8.45 21.25 -3.17 -- -2.55%
With CDSC/7/ 7.45 20.25 -3.17 -- -2.55
- --------------------------------------------------------------------------------------------------
Since
Class C
Comparative Performance 6 Months 1 Year 5 Years 10 Years Inception/7/
- ----------------------- -------- ------ ------- -------- ------------
Lehman High Yield Composite Index/3/ 8.39% 22.66% 5.33% 7.35% 4.49%
Lipper High Current Yield Funds Avg./5/ 7.56 19.71 3.47 5.29 2.23
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com. Performance history includes periods
from a predecessor fund.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
Portfolio as of March 31, 2004
- --------------------------------------------------------------------------------
Credit Quality*
[CHART]
Pie chart
Baa 4.8%
Ba 47.1%
B 32.4%
Caa 13.1%
Short term & other 2.6%
*Determined using the higher of the credit ratings assigned to each security by
Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of
comparable quality as determined by Loomis Sayles).
Effective Maturity
[CHART]
Pie chart
1 year or less 3.7%
1-5 years 30.9%
5-10 years 32.5%
10+ years 32.9%
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase.
/5/ Lipper High Current Yield Funds Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Lipper Inc.
/6/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/7/ The since-inception comparative performance figures shown for Class C
shares are calculated from 3/31/98.
6
- --------------------------------------------------------------------------------
Loomis Sayles Limited Term Government and Agency 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
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk; their
value generally rises when prevailing interest rates fall and falls when rates
rise. Securities, issued by the U.S. government are guaranteed by the U.S.
government if held to maturity; mutual funds that invest in these securities are
not guaranteed. Securities issued by U.S. government agencies may not be
government guaranteed.
Management Discussion
- --------------------------------------------------------------------------------
Interest rates trended irregularly down during the six-months ended March 31,
2004. This was most evident on the longer end of the yield curve, causing prices
of longer-term securities to rise. Although longer-term bonds benefited the most
from falling rates, the fund's intermediate-term issues - those with three- to
five-year maturities - also contributed to price gains.
For the first half of its fiscal year, Loomis Sayles Limited Term Government and
Agency Fund delivered a total return of 1.86% for Class A shares at net asset
value, including $0.23 in reinvested dividends. The fund's benchmark, the Lehman
Intermediate Government Bond Index, had a slight lead on the fund with a return
of 2.00%. As of March 31, 2004, the fund's 30-day SEC yield on Class A shares
was 2.45%.
Fund focused on yields from mortgage-backed securities
Yields on U.S. Treasuries and other top-quality securities remained at
historically low levels throughout the period. As a result, investors turned to
government agency and mortgage-backed securities for some additional income.
Despite generally declining interest rates throughout the six-month period,
mortgage-backed securities enjoyed a yield advantage relative to other
government sectors as well as modest price appreciation due to diminishing
prepayment concerns.
The fund continued to emphasize mortgage-backed holdings, including FNMAs
(Federal National Mortgage Association, "Fannie Maes"), because they offer a
higher yield than government securities, although they are regarded as higher
risk. Together with FNMAs, GNMAs (Government National Mortgage Association,
"Ginnie Maes," which are backed by the U.S. government) accounted for a
substantial portion of the portfolio during the period. Toward the end of the
period these securities began to weaken as concern mounted that the Federal
Reserve Board might raise interest rates, so we began to trim the fund's
holdings. However, the fund continues to emphasize mortgage securities because
of their potential for higher returns over the long term.
Treasuries were underweighted
We maintained the fund's underweighted position in U.S. Treasury securities
during the period, which worked to the fund's advantage because their meager
yields could not keep up with Agency bonds and mortgage-backed securities. The
fund also maintained a slightly longer duration than its peer group. As interest
rates filtered down, longer-term securities benefited more than shorter-term
issues.
Outlook is for rising interest rates
Looking ahead, we believe continued economic expansion will eventually lead to
rising rates and falling bond prices. Current interest rate levels are still
extremely low by historic standards. However, the opportunities to extend
duration and earn additional income outweigh our concern for rising rates. In
this environment, we believe income will be the key to performance. As a result,
we are maintaining an emphasis on mortgage-backed securities because of their
income advantage.
In addition, we expect the difference in yields between long- and short-term
bonds to lessen somewhat - "flattening" the yield curve - as the economy
continues to improve and the possibility of interest rate hikes becomes greater.
However, the yield curve is likely to remain steep, historically speaking.
Should signs begin to point to a flatter yield curve, we may implement a barbell
maturity structure. A barbell structure focuses on bonds at opposite ends of the
maturity spectrum to reach a specific duration target, allowing us to reach for
income on one end of the curve and provide some principal preservation on the
opposite end.
7
- --------------------------------------------------------------------------------
Loomis Sayles Limited Term Government and Agency Fund
- --------------------------------------------------------------------------------
Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
[CHART]
Line chart
March 31, 1994 through March 31, 2004
Class A Lehman
@ Maximum Intermediate
Month Net Asset Sales Gov't Bond
End Value (1) Charge (2) Index (3)
- ---------- --------- ---------- ------------
3/31/1994 10,000 9,700 10,000
4/30/1994 9,942 9,644 9,935
5/31/1994 9,942 9,644 9,942
6/30/1994 9,934 9,636 9,944
7/31/1994 10,018 9,717 10,075
8/31/1994 10,043 9,742 10,104
9/30/1994 9,967 9,668 10,021
10/31/1994 9,967 9,668 10,023
11/30/1994 9,932 9,634 9,978
12/31/1994 9,939 9,641 10,011
1/31/1995 10,072 9,770 10,174
2/28/1995 10,215 9,908 10,370
3/31/1995 10,243 9,936 10,427
4/30/1995 10,344 10,034 10,548
5/31/1995 10,634 10,315 10,845
6/30/1995 10,680 10,360 10,914
7/31/1995 10,675 10,355 10,920
8/31/1995 10,768 10,445 11,010
9/30/1995 10,836 10,510 11,084
10/31/1995 10,985 10,655 11,205
11/30/1995 11,117 10,783 11,342
12/31/1995 11,233 10,896 11,454
1/31/1996 11,295 10,956 11,550
2/29/1996 11,160 10,825 11,428
3/31/1996 11,089 10,757 11,376
4/30/1996 11,061 10,729 11,343
5/31/1996 11,023 10,692 11,337
6/30/1996 11,109 10,776 11,452
7/31/1996 11,133 10,799 11,487
8/31/1996 11,128 10,795 11,501
9/30/1996 11,270 10,932 11,649
10/31/1996 11,451 11,107 11,840
11/30/1996 11,594 11,246 11,983
12/31/1996 11,501 11,156 11,919
1/31/1997 11,549 11,203 11,964
2/28/1997 11,564 11,217 11,984
3/31/1997 11,504 11,159 11,916
4/30/1997 11,605 11,257 12,050
5/31/1997 11,676 11,326 12,144
6/30/1997 11,788 11,435 12,248
7/31/1997 11,983 11,624 12,474
8/31/1997 11,963 11,604 12,426
9/30/1997 12,087 11,725 12,561
10/31/1997 12,223 11,856 12,707
11/30/1997 12,244 11,876 12,735
12/31/1997 12,336 11,966 12,839
1/31/1998 12,516 12,140 13,007
2/28/1998 12,487 12,112 12,993
3/31/1998 12,466 12,092 13,033
4/30/1998 12,514 12,139 13,096
5/31/1998 12,595 12,217 13,186
6/30/1998 12,687 12,307 13,274
7/31/1998 12,704 12,323 13,325
8/31/1998 12,907 12,519 13,577
9/30/1998 13,275 12,877 13,894
10/31/1998 13,147 12,752 13,917
11/30/1998 13,107 12,714 13,875
12/31/1998 13,134 12,740 13,929
1/31/1999 13,204 12,808 13,991
2/28/1999 13,053 12,661 13,799
3/31/1999 13,114 12,720 13,890
4/30/1999 13,152 12,758 13,928
5/31/1999 13,054 12,663 13,842
6/30/1999 12,969 12,580 13,863
7/31/1999 12,907 12,520 13,865
8/31/1999 12,902 12,515 13,884
9/30/1999 13,049 12,658 14,003
10/31/1999 13,074 12,682 14,031
11/30/1999 13,087 12,694 14,041
12/31/1999 13,046 12,654 13,996
1/31/2000 12,989 12,600 13,949
2/29/2000 13,104 12,711 14,065
3/31/2000 13,266 12,868 14,225
4/30/2000 13,224 12,827 14,220
5/31/2000 13,230 12,833 14,258
6/30/2000 13,419 13,016 14,484
7/31/2000 13,486 13,082 14,580
8/31/2000 13,628 13,219 14,744
9/30/2000 13,733 13,321 14,873
10/31/2000 13,783 13,369 14,975
11/30/2000 13,970 13,551 15,194
12/31/2000 14,133 13,709 15,462
1/31/2001 14,313 13,883 15,668
2/28/2001 14,420 13,987 15,812
3/31/2001 14,511 14,075 15,927
4/30/2001 14,482 14,047 15,876
5/31/2001 14,554 14,117 15,942
6/30/2001 14,564 14,128 15,993
7/31/2001 14,836 14,391 16,291
8/31/2001 14,934 14,486 16,436
9/30/2001 15,168 14,713 16,787
10/31/2001 15,395 14,933 17,049
11/30/2001 15,195 14,739 16,845
12/31/2001 15,103 14,650 16,764
1/31/2002 15,184 14,728 16,836
2/28/2002 15,335 14,875 16,975
3/31/2002 15,114 14,661 16,720
4/30/2002 15,391 14,929 17,032
5/31/2002 15,495 15,030 17,151
6/30/2002 15,651 15,181 17,366
7/31/2002 15,875 15,399 17,693
8/31/2002 16,031 15,550 17,895
9/30/2002 16,176 15,690 18,202
10/31/2002 16,211 15,724 18,190
11/30/2002 16,136 15,652 18,046
12/31/2002 16,337 15,847 18,380
1/31/2003 16,329 15,839 18,339
2/28/2003 16,471 15,977 18,546
3/31/2003 16,460 15,966 18,550
4/30/2003 16,488 15,993 18,602
5/31/2003 16,589 16,091 18,894
6/30/2003 16,559 16,063 18,863
7/31/2003 16,214 15,728 18,405
8/31/2003 16,268 15,780 18,438
9/30/2003 16,539 16,042 18,838
10/31/2003 16,423 15,930 18,653
11/30/2003 16,467 15,973 18,655
12/31/2003 16,582 16,084 18,800
1/31/2004 16,654 16,154 18,902
2/29/2004 16,782 16,279 19,082
3/31/2004 16,860 16,360 19,215
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
Since
6 Months 1 Year 5 Years 10 Years Inception
-------- ------ ------- -------- ---------
Class A (Inception 1/3/89)
Net Asset Value/1/ 1.86% 2.35% 5.14% 5.35% --
With Maximum Sales Charge/2/ -1.23 -0.71 4.49 5.04 --
Class B (Inception 9/27/93)
Net Asset Value/1/ 1.53 1.68 4.45 4.67 --
With CDSC/4/ -3.46 -3.23 4.11 4.67 --
Class C (Inception 12/30/94)
Net Asset Value/1/ 1.62 1.77 4.46 -- 5.10%
With CDSC/4/ 0.62 0.79 4.46 -- 5.10
Class Y (Inception 3/31/94)
Net Asset Value/1/ 2.00 2.76 5.56 5.76 --
- --------------------------------------------------------------------------------
Since
Class C
Comparative Performance 6 Months 1 Year 5 Years 10 Years Inception/6/
- ----------------------- -------- ------ ------- -------- ------------
Lehman Int. Govt. Bond
Index/3/ 2.00% 3.58% 6.71% 6.75% 7.30%
Lipper Short Int. U.S. Govt.
Funds Avg./5/ 1.53 2.35 5.57 5.79 6.30
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com. Performance history includes periods
from a predecessor fund. Class Y shares 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 as of March 31, 2004
- --------------------------------------------------------------------------------
Portfolio Mix
[CHART]
Pie chart
Mortgage-backed 54.0%
Government agencies 25.2%
Treasuries 12.1%
Asset-backed securities 4.0%
Supranational 3.3%
Short-term and other 1.4%
Effective Maturity
[CHART]
Pie chart
1 year or less 1.0%
1-5 years 79.1%
5-10 years 19.9%
Average Effective Maturity: 4 years
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 3.00%.
/3/ Lehman 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%. Class C share performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase.
/5/ 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.
/6/ The since-inception comparative performance figures shown for Class C
shares are calculated from 12/31/94.
8
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk; their
value generally rises when prevailing interest rates fall and falls when rates
rise. This fund concentrates in a single geographic region, which can affect
your fund's performance. Some income may be subject to federal and state taxes.
Capital gains are fully taxable.
Management Discussion
- --------------------------------------------------------------------------------
Municipal bonds outperformed both Treasuries and corporate bonds during the six
months ended March 31, 2004. Investor demand for municipal bonds was fairly
steady throughout most of the period until interest rates dropped so low that
investors found the market less attractive. Long-term bonds and lower-quality,
higher-yielding bonds performed better than lower-yielding issues, as investors
reached for as much yield as possible. This benefited prices on the lower end of
the quality spectrum, narrowing the price difference between lower- and
higher-quality issues. Diminished supply also helped boost municipal bond prices
during the period.
Loomis Sayles Massachusetts Tax Free Income Fund's total return for the six
months ended March 31, 2004, was 3.86% based on the net asset value of Class A
Shares and $0.32 in dividends reinvested during the period, while the Lehman
Municipal Bond Index returned 3.12%.
As of March 31, 2004, the fund's 30-day SEC yield on Class A shares was 3.08% -
equivalent to a taxable yield of 5.01% based on the 38.45% combined maximum
federal and state income tax rates.
Healthcare and Higher Education Were Top-performing Sectors
The fund's emphasis on revenue bonds - backed by fees generated by institutions
rather than by tax receipts - contributed to the fund's positive performance.
Many of these bonds had performed poorly in the past, but low interest rates and
improving economic numbers encouraged investors to seek higher yields. Examples
of strong performers in the fund's portfolio include municipal bonds issued on
behalf of the Massachusetts State Development Finance Agency for Concord Assabet
Family Services, which we sold; Massachusetts State Health & Educational
Facilities for Nichols College; and Massachusetts State Development Finance
Agency for Mount Holyoke College.
Housing and Lease-backed Sectors Were Lackluster Performers
The fund's performance in these sectors was weaker, largely due to early calls
in the housing sector as well as some specific credit problems. Examples in the
portfolio include Massachusetts State Housing Finance Agency Single Family
Housing bonds, which experienced early calls, limiting any upward price
movements. Declining profits have troubled Massachusetts State Health &
Educational Facilities Authority for Milton Hospital, although management is
responding by improving operations and reducing expenses. Massachusetts State
Development Finance Agency Lease revenue bonds issued for University Visual &
Performing Arts Project experienced a rating downgrade when doubts arose about
the state's commitment to continue funding non-essential programs.
Fund is Positioned for a Rising Interest Rate Environment
The fund's longer average maturity structure helped performance during the
six-month period, as bonds with longer maturities outperformed shorter-term
issues. We continue to emphasize yield, most notably in the healthcare sector.
However, when interest rates rise, bond prices decline, so the fund also
continues to emphasize bonds selling at a premium to their par value. These
issues have a tendency to experience less price erosion in a rising interest
rate environment. Although we expect some near-term price weakness in
municipals versus Treasury issues, ultimately we expect the tax-exempt market
to perform well.
9
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund
- --------------------------------------------------------------------------------
Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
March 31, 1994 through March 31, 2004
[CHART]
Line chart
Class A Lehman
@ Maximum Municipal
Month Net Asset Sales Bond
End Value (1) Charge (2) Index (3)
- ---------- --------- ---------- ---------
3/31/1994 10,000 9,575 10,000
4/30/1994 10,027 9,601 10,085
5/31/1994 10,120 9,690 10,172
6/30/1994 10,030 9,604 10,110
7/31/1994 10,226 9,791 10,295
8/31/1994 10,247 9,811 10,331
9/30/1994 10,076 9,648 10,180
10/31/1994 9,833 9,415 9,999
11/30/1994 9,596 9,188 9,818
12/31/1994 9,870 9,450 10,034
1/31/1995 10,206 9,772 10,321
2/28/1995 10,539 10,091 10,621
3/31/1995 10,615 10,164 10,743
4/30/1995 10,631 10,179 10,756
5/31/1995 10,967 10,501 11,099
6/30/1995 10,797 10,338 11,002
7/31/1995 10,873 10,410 11,106
8/31/1995 11,002 10,535 11,247
9/30/1995 11,079 10,608 11,318
10/31/1995 11,264 10,786 11,483
11/30/1995 11,485 10,997 11,673
12/31/1995 11,630 11,136 11,785
1/31/1996 11,667 11,171 11,874
2/29/1996 11,551 11,060 11,794
3/31/1996 11,407 10,922 11,644
4/30/1996 11,374 10,890 11,611
5/31/1996 11,389 10,905 11,606
6/30/1996 11,497 11,008 11,733
7/31/1996 11,584 11,091 11,839
8/31/1996 11,578 11,086 11,836
9/30/1996 11,759 11,259 12,001
10/31/1996 11,883 11,377 12,137
11/30/1996 12,086 11,573 12,359
12/31/1996 12,007 11,496 12,307
1/31/1997 12,028 11,517 12,331
2/28/1997 12,143 11,627 12,444
3/31/1997 12,006 11,495 12,278
4/30/1997 12,103 11,589 12,381
5/31/1997 12,275 11,754 12,567
6/30/1997 12,403 11,876 12,701
7/31/1997 12,756 12,214 13,053
8/31/1997 12,638 12,101 12,930
9/30/1997 12,806 12,262 13,084
10/31/1997 12,868 12,322 13,168
11/30/1997 12,946 12,396 13,245
12/31/1997 13,125 12,567 13,439
1/31/1998 13,231 12,669 13,577
2/28/1998 13,213 12,651 13,581
3/31/1998 13,176 12,616 13,593
4/30/1998 13,129 12,571 13,532
5/31/1998 13,332 12,765 13,746
6/30/1998 13,379 12,810 13,800
7/31/1998 13,386 12,817 13,835
8/31/1998 13,599 13,021 14,049
9/30/1998 13,750 13,165 14,224
10/31/1998 13,694 13,112 14,224
11/30/1998 13,718 13,135 14,273
12/31/1998 13,770 13,185 14,309
1/31/1999 13,928 13,336 14,479
2/28/1999 13,865 13,275 14,416
3/31/1999 13,848 13,260 14,436
4/30/1999 13,889 13,299 14,472
5/31/1999 13,799 13,213 14,388
6/30/1999 13,575 12,998 14,181
7/31/1999 13,623 13,044 14,233
8/31/1999 13,430 12,859 14,119
9/30/1999 13,389 12,820 14,125
10/31/1999 13,203 12,641 13,972
11/30/1999 13,319 12,753 14,120
12/31/1999 13,203 12,642 14,015
1/31/2000 13,095 12,538 13,954
2/29/2000 13,258 12,694 14,116
3/31/2000 13,506 12,932 14,425
4/30/2000 13,445 12,874 14,339
5/31/2000 13,392 12,823 14,265
6/30/2000 13,662 13,081 14,643
7/31/2000 13,836 13,248 14,847
8/31/2000 14,009 13,413 15,075
9/30/2000 13,953 13,360 14,997
10/31/2000 14,065 13,468 15,161
11/30/2000 14,125 13,525 15,275
12/31/2000 14,425 13,812 15,653
1/31/2001 14,475 13,860 15,808
2/28/2001 14,526 13,909 15,858
3/31/2001 14,522 13,905 16,000
4/30/2001 14,372 13,761 15,827
5/31/2001 14,512 13,895 15,997
6/30/2001 14,615 13,994 16,104
7/31/2001 14,837 14,207 16,343
8/31/2001 15,116 14,473 16,612
9/30/2001 15,032 14,393 16,556
10/31/2001 15,172 14,527 16,753
11/30/2001 15,060 14,420 16,612
12/31/2001 14,889 14,257 16,455
1/31/2002 14,972 14,336 16,740
2/28/2002 15,142 14,498 16,942
3/31/2002 14,864 14,232 16,610
4/30/2002 15,136 14,493 16,935
5/31/2002 15,254 14,606 17,038
6/30/2002 15,432 14,776 17,218
7/31/2002 15,628 14,964 17,439
8/31/2002 15,819 15,147 17,649
9/30/2002 16,176 15,488 18,035
10/31/2002 15,881 15,206 17,736
11/30/2002 15,781 15,110 17,663
12/31/2002 16,097 15,413 18,035
1/31/2003 16,063 15,381 17,990
2/28/2003 16,316 15,623 18,241
3/31/2003 16,331 15,636 18,252
4/30/2003 16,435 15,736 18,373
5/31/2003 16,855 16,139 18,803
6/30/2003 16,779 16,066 18,723
7/31/2003 16,051 15,369 18,068
8/31/2003 16,156 15,469 18,203
9/30/2003 16,594 15,889 18,738
10/31/2003 16,568 15,864 18,643
11/30/2003 16,752 16,040 18,838
12/31/2003 16,908 16,190 18,994
1/31/2004 17,023 16,300 19,102
2/29/2004 17,273 16,539 19,390
3/31/2004 17,234 16,501 19,322
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
6 Months 1 Year 5 Years/5/ 10 Years/5/
-------- ------ ---------- -----------
Class A (Inception 3/23/84)
Net Asset Value/1/ 3.86% 5.53% 4.47% 5.59%
With Maximum Sales Charge/2/ -0.57 1.05 3.57 5.14
Class B (Inception 9/13/93)
Net Asset Value/1/ 3.52 4.85 3.80 4.90
With CDSC/4/ -1.48 -0.15 3.46 4.90
- --------------------------------------------------------------------------------
Comparative Performance 6 Months 1 Year 5 Years 10 Years
-------- ------ ------- --------
Lehman Municipal Bond Index/3/ 3.12% 5.86% 6.00% 6.81%
Lipper MA Municipal Debt Funds Avg./6/ 2.85 5.11 4.91 5.93
Yields as of March 31, 2004
- --------------------------------------------------------------------------------
Class A Class B
------- -------
SEC 30-day yield/7/ 3.08% 2.56%
Taxable equivalent yield/8/ 5.01 4.17
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. For performance current to the most recent
month-end, visit www.cdcnvestfunds.com.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
Portfolio as of March 31, 2004
- --------------------------------------------------------------------------------
Credit Quality*
[CHART]
Pie chart
Aaa 50.3%
Aa 16.6%
A 22.8%
Baa 6.8%
B 2.2%
Short term & other 1.3%
*Determined using the higher of the credit ratings assigned to each security by
Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of
comparable quality as determined by Loomis Sayles).
Effective Maturity
[CHART]
Pie chart
1 yeear or less 4.2%
1-5 years 6.9%
5-10 years 65.7%
10+ years 23.2%
Average effective maturity: 8.7 years
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.25%.
/3/ Lehman 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%.
/5/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/6/ Lipper Massachusetts 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 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.
10
- --------------------------------------------------------------------------------
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 that pay interest 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
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk; their
value generally rises when prevailing interest rates fall and falls when rates
rise. Some income may be subject to federal and state taxes. Capital gains are
fully taxable. Investors may be subject to the Alternative Minimum Tax (AMT).
Lower-rated bonds offer higher risks.
Management Discussion
- --------------------------------------------------------------------------------
Municipal bonds outperformed both Treasuries and corporate bonds during the six
months ended March 31, 2004. Investor demand for municipal bonds was fairly
steady throughout most of the period until interest rates dropped so low that
investors found the market less attractive. Long-term bonds and lower-quality,
higher-yielding bonds performed better than lower-yielding issues, as investors
reached for as much yield as possible. This benefited prices on the lower end of
the quality spectrum, narrowing the price difference between lower- and
higher-quality issues. Diminished supply also helped boost municipal bond prices
during the period.
Largely because of its emphasis on longer-term bonds and favorable sector
weightings, Loomis Sayles Municipal Income Fund outperformed its benchmark for
the semiannual period. The fund's total return for the six months ended March
31, 2004 was 3.84%, based on the net asset value of Class A Shares and $0.15 in
dividends reinvested during the period, while the Lehman Municipal Bond Index
returned 3.12%.
As of March 31, 2004, the fund's 30-day SEC yield on Class A shares was 3.26%
- - equivalent to a taxable yield of 5.03% based on the 35.0% maximum federal
income tax rate.
Corporate-backed tax-exempts and healthcare were top-performing sectors
As low interest rates and positive economic numbers encouraged investors to
scour the market for higher yield, the fund's emphasis on revenue bonds - backed
by fees generated by institutions rather than by tax receipts - was primarily
responsible for its positive performance. Recently many of these bonds had been
lackluster performers, but they finally got their due during the period.
Examples in the fund's portfolio include municipal bonds issued on behalf of the
Michigan Hospital Finance Authority and Lehigh County Pennsylvania General
Purpose Authority for Saint Luke's Hospital. Lowndes County Mississippi Solid
Waste Disposal and Pollution Control Revenue bonds for Weyerhaeuser Project also
performed well due to their ties with the corporate market.
Housing and electric utilities were lackluster performers
Massachusetts State Housing Finance Agency Single Family housing bonds are still
experiencing early calls resulting from prepayments, limiting any upward price
movements. California State Dept of Water Resource Power Supply and North
Carolina Eastern Municipal Power Agency Power System bonds were also relatively
poor performers, largely due to their shorter maturity structure.
Fund is positioned for a rising interest rate environment
The fund's longer average maturity structure helped performance during the
six-month period, as bonds with longer maturities outperformed shorter-term
issues. We continue to emphasize yield, most notably in the healthcare sector.
However, when interest rates rise, bond prices decline, so the fund also
continues to emphasize bonds selling at a premium to their par value. These
issues have a tendency to experience less price erosion in a rising interest
rate environment. Although we expect some near-term price weakness in
municipals versus Treasury issues, ultimately we believe the tax-exempt market
will perform well.
11
- --------------------------------------------------------------------------------
Loomis Sayles Municipal Income Fund
- --------------------------------------------------------------------------------
Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
March 31, 1994 through March 31, 2004
[CHART]
Line chart
Class A Lehman
@ Maximum Municipal
Month Net Asset Sales Bond
End Value (1) Charge (2) Index (3)
- ---------- --------- ---------- ---------
3/31/1994 10,000 9,550 10,000
4/30/1994 10,035 9,583 10,085
5/31/1994 10,136 9,680 10,172
6/30/1994 10,070 9,617 10,110
7/31/1994 10,256 9,795 10,295
8/31/1994 10,288 9,825 10,331
9/30/1994 10,109 9,654 10,180
10/31/1994 9,887 9,442 9,999
11/30/1994 9,593 9,161 9,818
12/31/1994 9,845 9,402 10,034
1/31/1995 10,189 9,730 10,321
2/28/1995 10,542 10,068 10,621
3/31/1995 10,678 10,198 10,743
4/30/1995 10,699 10,217 10,756
5/31/1995 10,997 10,503 11,099
6/30/1995 10,856 10,368 11,002
7/31/1995 10,951 10,458 11,106
8/31/1995 11,031 10,535 11,247
9/30/1995 11,111 10,611 11,318
10/31/1995 11,267 10,760 11,483
11/30/1995 11,454 10,938 11,673
12/31/1995 11,541 11,022 11,785
1/31/1996 11,633 11,109 11,874
2/29/1996 11,562 11,042 11,794
3/31/1996 11,431 10,916 11,644
4/30/1996 11,406 10,893 11,611
5/31/1996 11,397 10,884 11,606
6/30/1996 11,527 11,009 11,733
7/31/1996 11,612 11,089 11,839
8/31/1996 11,602 11,080 11,836
9/30/1996 11,797 11,266 12,001
10/31/1996 11,930 11,393 12,137
11/30/1996 12,111 11,566 12,359
12/31/1996 12,075 11,532 12,307
1/31/1997 12,088 11,544 12,331
2/28/1997 12,195 11,646 12,444
3/31/1997 12,040 11,498 12,278
4/30/1997 12,128 11,582 12,381
5/31/1997 12,265 11,713 12,567
6/30/1997 12,435 11,876 12,701
7/31/1997 12,771 12,197 13,053
8/31/1997 12,695 12,124 12,930
9/30/1997 12,801 12,225 13,084
10/31/1997 12,892 12,311 13,168
11/30/1997 12,932 12,350 13,245
12/31/1997 13,111 12,521 13,439
1/31/1998 13,273 12,676 13,577
2/28/1998 13,313 12,714 13,581
3/31/1998 13,334 12,734 13,593
4/30/1998 13,271 12,673 13,532
5/31/1998 13,413 12,810 13,746
6/30/1998 13,470 12,864 13,800
7/31/1998 13,493 12,886 13,835
8/31/1998 13,672 13,057 14,049
9/30/1998 13,782 13,162 14,224
10/31/1998 13,735 13,117 14,224
11/30/1998 13,793 13,173 14,273
12/31/1998 13,809 13,188 14,309
1/31/1999 13,945 13,317 14,479
2/28/1999 13,916 13,290 14,416
3/31/1999 13,922 13,295 14,436
4/30/1999 13,963 13,335 14,472
5/31/1999 13,914 13,288 14,388
6/30/1999 13,756 13,137 14,181
7/31/1999 13,798 13,177 14,233
8/31/1999 13,657 13,042 14,119
9/30/1999 13,662 13,048 14,125
10/31/1999 13,465 12,859 13,972
11/30/1999 13,591 12,979 14,120
12/31/1999 13,429 12,824 14,015
1/31/2000 13,357 12,756 13,954
2/29/2000 13,505 12,897 14,116
3/31/2000 13,712 13,095 14,425
4/30/2000 13,637 13,023 14,339
5/31/2000 13,599 12,987 14,265
6/30/2000 13,847 13,224 14,643
7/31/2000 14,000 13,370 14,847
8/31/2000 14,193 13,554 15,075
9/30/2000 14,154 13,517 14,997
10/31/2000 14,271 13,629 15,161
11/30/2000 14,369 13,722 15,275
12/31/2000 14,605 13,948 15,653
1/31/2001 14,707 14,045 15,808
2/28/2001 14,730 14,067 15,858
3/31/2001 14,851 14,183 16,000
4/30/2001 14,693 14,032 15,827
5/31/2001 14,833 14,165 15,997
6/30/2001 14,952 14,279 16,104
7/31/2001 15,214 14,529 16,343
8/31/2001 15,456 14,760 16,612
9/30/2001 15,190 14,506 16,556
10/31/2001 15,395 14,702 16,753
11/30/2001 15,229 14,544 16,612
12/31/2001 15,043 14,366 16,455
1/31/2002 15,290 14,601 16,740
2/28/2002 15,496 14,799 16,942
3/31/2002 15,242 14,556 16,610
4/30/2002 15,491 14,794 16,935
5/31/2002 15,571 14,870 17,038
6/30/2002 15,716 15,008 17,218
7/31/2002 15,817 15,105 17,439
8/31/2002 15,939 15,222 17,649
9/30/2002 16,194 15,465 18,035
10/31/2002 15,783 15,073 17,736
11/30/2002 15,757 15,048 17,663
12/31/2002 16,142 15,416 18,035
1/31/2003 15,940 15,222 17,990
2/28/2003 16,173 15,446 18,241
3/31/2003 16,165 15,438 18,252
4/30/2003 16,308 15,575 18,373
5/31/2003 16,715 15,963 18,803
6/30/2003 16,680 15,930 18,723
7/31/2003 15,957 15,239 18,068
8/31/2003 16,124 15,399 18,203
9/30/2003 16,607 15,859 18,738
10/31/2003 16,528 15,784 18,643
11/30/2003 16,742 15,989 18,838
12/31/2003 16,889 16,129 18,994
1/31/2004 16,992 16,227 19,102
2/29/2004 17,255 16,479 19,390
3/31/2004 17,242 16,470 19,322
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
6 Months 1 Year 5 Years 10 Years
-------- ------ ------- --------
Class A (Inception 5/9/77)
Net Asset Value/1/ 3.84% 6.67% 4.37% 5.60%
With Maximum Sales Charge/2/ -0.85 1.83 3.43 5.12
Class B (Inception 9/13/93)
Net Asset Value/1/ 3.45 5.73 3.60 4.82
With CDSC/4/ -1.55 0.73 3.26 4.82
- --------------------------------------------------------------------------------
Comparative Performance 6 Months 1 Year 5 Years 10 Years
- ----------------------- -------- ------ ------- --------
Lehman Municipal Bond Index/3/ 3.12% 5.86% 6.00% 6.81%
Lipper General Municipal Debt Funds Avg./5/ 2.82 5.46 4.70 5.74
Yields as of March 31, 2004
- --------------------------------------------------------------------------------
Class A Class B
------- -------
SEC 30-day yield/6/ 3.26% 2.66%
Taxable equivalent yield/7/ 5.03 4.11
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. Performance history includes performance from
a predecessor fund. For performance current to the most recent month-end, visit
www.cdcnvestfunds.com.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
Portfolio as of March 31, 2004
- --------------------------------------------------------------------------------
Credit Quality*
[CHART]
Pie chart
Aaa 35.0%
Aa 25.5%
A 9.7%
Baa 21.1%
Ba 3.1%
Not rated 1.0%
Short term & other 4.6%
*Determined using the higher of the credit ratings assigned to each security by
Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of
comparable quality as determined by Loomis Sayles).
Effective Maturity
[CHART]
Pie chart
1 year or less 14.1%
1-5 years 11.2%
5-10 years 68.0%
10+ years 6.7%
Average effective maturity: 7.3 years
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman 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% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%.
/5/ Lipper General Municipal Debt Funds Average is the average performance
without sales charges of funds with similar investment objectives as
calculated by Lipper Inc.
/6/ SEC yield is based on the fund's net investment income over a 30-day period
and is calculated in accordance with SEC guidelines.
/7/ 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.
12
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk; their
value generally rises when prevailing interest rates fall and falls when rates
rise. Foreign and emerging market securities have special risks, such as
currency fluctuations, differing political and economic conditions, and
different accounting standards. The fund may also invest in lower-rated bonds
that may offer higher yields in return for more risk.
Management Discussion
- --------------------------------------------------------------------------------
High-yielding U.S. corporate bonds, convertible securities and international
issues proved to be a powerful combination of investment tools for Loomis Sayles
Strategic Income Fund. The fund's total return was 12.32% for the six months
ended March 31, 2004, based on the net asset value of Class A shares and $0.47
in reinvested dividends. By contrast, the total return on the fund's benchmark,
the Lehman Aggregate Bond Index, was 2.98% for the period. The fund has more
flexibility than the benchmark in pursuit of superior returns. The fund's SEC
yield at the end of March was 4.49%.
High-yield bonds and convertibles keyed fund's strong performance
Positive momentum for corporate profits and the brightening economic outlook led
yield-conscious investors to a wide range of corporate bonds. One result was
continuing gains among lower-rated, high-yielding issues, which also benefited
from improving credit quality.
A successful strategy during this period was the use of convertible bonds -
securities convertible into common stock under specified conditions - as a way
of gaining exposure to high-yielding CCC-rated credits. Convertibles represented
about 12% of the portfolio at the end of March. Network specialist Lucent
Technologies had been one of the companies hit hardest by the technology
downturn. Lucent's convertible bonds rose during this period, reflecting a flow
of good corporate news that included a large contract award from Verizon and a
ratings upgrade from Standard & Poor's. Bonds of IMC Global, a leading producer
of agricultural products and animal feed, have had a strong run based on growth
in world agriculture, as well as from its announced plans to merge with Cargill.
Higher grain prices also worked in IMC's favor, because high grain prices
encourage farming.
International holdings also contributed
Large trade imbalances, the burgeoning federal deficit and the weakness in the
U.S. dollar benefited bonds denominated in other, stronger currencies.
Convertibles of London-based Colt Telecom gained on revenue growth, reduced
outlays and strength in the euro. In addition, Latin American issues rose thanks
to better investor sentiment and attractive yields. Improving economic
conditions led to significant appreciation in Brazilian bonds, and we took some
profits. Government issues in Venezuela and Ecuador also recorded gains. Our
emphasis on Canadian issues was also beneficial. U.S. economic expansion brought
spillover benefits to Canada's economy, boosting holdings of bonds issued by
Canada's provincial governments; exports to the U.S. represent the bulk of
Canada's economic output. Overall, international and emerging market issues made
up a lion's share of the portfolio at the end of the period.
The Dominican Republic and oil services were negatives
Among the disappointments encountered over this period, an economic slump and
falling currency drove down bonds of the Dominican Republic. And Trico Marine
suffered due to sluggish offshore drilling activity and weak demand in the North
Sea and Gulf of Mexico. We took advantage of price weakness to add to the fund's
holdings in both.
Adjusting to meet changing conditions
As the economic expansion continues, interest rate hikes seem more likely. For
that reason we are reducing the fund's duration - its sensitivity to interest
rate changes. We have also taken profits in bonds that have risen based on the
improved credit quality of their issuers. In addition, we added to the fund's
government holdings, notably in Norway, Sweden and Singapore. A favorable
currency outlook enhances potential in these countries. As always, our security
selections will continue to be the result of intensive research.
13
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund
- --------------------------------------------------------------------------------
Investment Results through March 31, 2004
- --------------------------------------------------------------------------------
Performance in Perspective
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An 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. Investors would incur
transaction costs and other expenses if they purchased the securities necessary
to match the index.
Growth of a $10,000 Investment in Class A Shares
- --------------------------------------------------------------------------------
May 1, 1995 through March 31, 2004
[CHART]
Line chart
Class A Lehman Lehman
@ Maximum Aggregate Universal
Month Net Asset Sales Bond Bond
End Value /1/ Charge /2/ Index /3/ Index /4/
- ---------- --------- ---------- --------- ---------
5/1/1995 10,000 9,550 10000 10,000
5/31/1995 10,014 9,563 10000 10,000
6/30/1995 10,017 9,566 10073 10,073
7/31/1995 10,096 9,642 10051 10,058
8/31/1995 10,192 9,733 10172 10,176
9/30/1995 10,410 9,942 10271 10,280
10/31/1995 10,355 9,889 10405 10,407
11/30/1995 10,647 10,168 10561 10,564
12/31/1995 11,038 10,541 10709 10,724
1/31/1996 11,302 10,793 10780 10,817
2/29/1996 10,995 10,500 10593 10,630
3/31/1996 11,073 10,575 10519 10,564
4/30/1996 11,057 10,559 10460 10,521
5/31/1996 11,232 10,727 10438 10,506
6/30/1996 11,383 10,871 10579 10,647
7/31/1996 11,360 10,849 10608 10,677
8/31/1996 11,569 11,048 10590 10,674
9/30/1996 11,974 11,435 10774 10,869
10/31/1996 12,316 11,761 11013 11,095
11/30/1996 12,816 12,239 11202 11,292
12/31/1996 12,638 12,069 11098 11,201
1/31/1997 12,674 12,104 11132 11,249
2/28/1997 12,875 12,295 11159 11,289
3/31/1997 12,735 12,162 11036 11,157
4/30/1997 12,816 12,239 11201 11,326
5/31/1997 13,091 12,502 11307 11,446
6/30/1997 13,388 12,785 11441 11,585
7/31/1997 13,990 13,361 11749 11,902
8/31/1997 13,629 13,016 11649 11,804
9/30/1997 14,110 13,475 11821 11,986
10/31/1997 13,814 13,193 11992 12,100
11/30/1997 13,889 13,264 12048 12,166
12/31/1997 13,818 13,196 12169 12,296
1/31/1998 14,043 13,411 12325 12,450
2/28/1998 14,300 13,657 12316 12,460
3/31/1998 14,607 13,949 12358 12,517
4/30/1998 14,611 13,953 12423 12,581
5/31/1998 14,372 13,726 12541 12,672
6/30/1998 14,143 13,507 12647 12,755
7/31/1998 13,966 13,338 12674 12,786
8/31/1998 12,252 11,700 12880 12,785
9/30/1998 12,648 12,079 13182 13,088
10/31/1998 12,785 12,209 13112 13,034
11/30/1998 13,642 13,028 13186 13,164
12/31/1998 13,579 12,968 13226 13,194
1/31/1999 13,814 13,192 13320 13,282
2/28/1999 13,617 13,004 13088 13,071
3/31/1999 14,336 13,691 13160 13,171
4/30/1999 15,255 14,569 13202 13,249
5/31/1999 14,782 14,117 13086 13,115
6/30/1999 14,825 14,158 13045 13,092
7/31/1999 14,532 13,879 12989 13,039
8/31/1999 14,351 13,705 12983 13,024
9/30/1999 14,443 13,793 13133 13,165
10/31/1999 14,564 13,909 13182 13,220
11/30/1999 14,828 14,160 13181 13,242
12/31/1999 15,231 14,546 13117 13,216
1/31/2000 15,090 14,411 13074 13,172
2/29/2000 15,684 14,978 13232 13,339
3/31/2000 15,843 15,130 13407 13,495
4/30/2000 15,390 14,697 13368 13,452
5/31/2000 14,893 14,223 13362 13,428
6/30/2000 15,461 14,765 13640 13,717
7/31/2000 15,597 14,895 13764 13,850
8/31/2000 15,940 15,223 13964 14,052
9/30/2000 15,519 14,820 14051 14,123
10/31/2000 14,887 14,217 14144 14,180
11/30/2000 14,810 14,143 14376 14,371
12/31/2000 15,335 14,645 14642 14,646
1/31/2001 15,822 15,110 14882 14,933
2/28/2001 15,798 15,087 15011 15,058
3/31/2001 15,201 14,517 15087 15,109
4/30/2001 14,953 14,280 15024 15,042
5/31/2001 15,288 14,600 15115 15,150
6/30/2001 15,246 14,560 15172 15,193
7/31/2001 15,258 14,571 15511 15,492
8/31/2001 15,595 14,893 15689 15,685
9/30/2001 14,821 14,154 15872 15,798
10/31/2001 15,170 14,487 16204 16,116
11/30/2001 15,385 14,693 15980 15,927
12/31/2001 15,314 14,625 15879 15,832
1/31/2002 15,488 14,791 16007 15,965
2/28/2002 15,674 14,968 16162 16,114
3/31/2002 15,854 15,141 15894 15,881
4/30/2002 16,237 15,507 16202 16,184
5/31/2002 16,581 15,835 16339 16,306
6/30/2002 16,317 15,583 16481 16,365
7/31/2002 15,931 15,214 16680 16,504
8/31/2002 16,376 15,639 16961 16,808
9/30/2002 16,155 15,428 17236 17,049
10/31/2002 16,476 15,735 17157 16,990
11/30/2002 17,093 16,324 17153 17,036
12/31/2002 17,683 16,888 17507 17,389
1/31/2003 18,181 17,362 17522 17,436
2/28/2003 18,672 17,832 17765 17,684
3/31/2003 18,852 18,004 17751 17,701
4/30/2003 19,934 19,037 17897 17,910
5/31/2003 20,931 19,989 18231 18,252
6/30/2003 21,196 20,242 18195 18,248
7/31/2003 20,618 19,690 17583 17,661
8/31/2003 20,855 19,916 17700 17,787
9/30/2003 21,874 20,890 18168 18,262
10/31/2003 22,369 21,363 17999 18,131
11/30/2003 22,991 21,956 18042 18,194
12/31/2003 23,844 22,771 18226 18,401
1/31/2004 24,269 23,177 18372 18,560
2/29/2004 24,252 23,161 18571 18,743
3/31/2004 24,565 23,458 18710 18,892
Average Annual Total Returns -- March 31, 2004
- --------------------------------------------------------------------------------
Since
6 Months/7/ 1 Year/7/ 5 Years/7/ Inception/7/
----------- --------- ---------- ------------
Class A (Inception 5/1/95)
Net Asset Value/1/ 12.32% 30.33% 11.37% 10.60%
With Maximum Sales Charge/2/ 7.29 24.48 10.36 10.03
Class B (Inception 5/1/95)
Net Asset Value/1/ 11.83 29.32 10.54 9.76
With CDSC/5/ 6.83 24.32 10.27 9.76
Class C (Inception 5/1/95)
Net Asset Value/1/ 11.82 29.34 10.54 9.73
With CDSC/5/ 10.82 28.34 10.54 9.73
Class Y (Inception 12/1/99)
Net Asset Value/1/ 12.41 30.65 -- 12.73
- --------------------------------------------------------------------------------
Since
Class A, Since
B and C Class Y
Comparative Performance 6 Months 1 Year 5 Years Inception/8/ Inception/8/
- ----------------------- -------- ------ ------- ------------ ------------
Lehman Aggregate Bond
Index/3/ 2.98% 5.40% 7.29% 7.35% 8.72%
Lehman Universal Bond
Index/4/ 3.45 6.73 7.48 7.47 8.77
Lipper Multi-Sector Income
Funds Avg./6/ 5.75 13.87 6.07 6.86 6.87
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. 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. Performance history includes periods from a
predecessor fund. For performance current to the most recent month-end, visit
www.cdcnvestfunds.com. Class A performance history includes periods from a
predecessor fund. Class Y shares 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 as of March 31, 2004
- --------------------------------------------------------------------------------
Credit Quality*
[CHART]
Pie Chart
Aaa 26.5%
Aa 9.5%
A 3.6%
Baa 6.3%
Ba 25.1%
B 7.0%
Caa 1.5%
Not rated 7.7%
Short-term & other
*Determined using the higher of the credit ratings assigned to each security by
Moody's Investors Service, Inc. and Standard & Poor's (or, if unrated, of
comparable quality as determined by Loomis Sayles).
Effective Maturity
[CHART]
Pie Chart
1 year or less 7.0%
1-5 years 41.8%
5-10 years 11.9%
10+ years 39.3%
Average Effective Maturity: 11.8 years
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman 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 Universal Bond Index is an unmanaged index representing a blend of
the Lehman Aggregate Bond Index, the High Yield Index, and the Emerging
Market Indexes.
/5/ Performance for Class B shares assumes a maximum 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1,
0%.
/6/ Lipper Multi-Sector Income Funds Average is the average performance without
sales charges of funds with similar investment objectives, as calculated by
Lipper Inc.
/7/ 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.
/8/ 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.
14
- --------------------------------------------------------------------------------
Additional Information
- --------------------------------------------------------------------------------
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.
For more complete information on any CDC Nvest Fund, contact your financial
professional or call CDC IXIS Asset Management Distributors, L.P. and ask for a
free prospectus, which contains more complete information including charges and
other ongoing expenses. Investors should read the prospectus and consider a
fund's objective, risks and expenses carefully before investing.
Proxy Voting Information
A description of the Funds' proxy voting policies and procedures is available
(i) without charge, upon request, by calling CDC Nvest Funds at 800-225-5478;
(ii) on the Funds' website www.cdcnvestfunds.com, and (iii) on the Securities
and Exchange Commission's website at www.sec.gov.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 96.9% of Total Net Assets
Aerospace & Defense --1.6%
$ 1,400,000 Northrop Grumman Corp.
7.125%, 2/15/2011 $ 1,654,815
2,905,000 Raytheon Co.
6.150%, 11/01/2008 3,229,703
-----------
4,884,518
-----------
Asset-Backed -- 4.2%
2,000,000 American Express Credit Account Master Trust
1.690%, 1/15/2009 1,988,266
690,000 AmeriCredit Automobile Receivables Trust, Series
2003-D-M,
Class A-4
2.840%, 8/06/2010 698,557
3,675,000 Citibank Credit Card Issuance Trust
2.700%, 1/15/2008 3,734,970
981,766 Connecticut RRB Special Purpose Trust
5.360%, 3/30/2007 1,007,620
3,430,000 Countrywide Asset Backed Securities, Series 2003-5,
Class Af43
4.905%, 8/25/2032 3,552,633
1,850,000 Residential Asset Securities Corp., Series
2003-KS10,
Class A14
4.470%, 3/25/2032 1,907,046
-----------
12,889,092
-----------
Automotive -- 3.9%
1,785,000 Ford Motor Co.
7.450%, 7/16/2031 1,782,631
1,510,000 Ford Motor Credit Co., Global Note
5.625%, 10/01/2008 (c) 1,558,509
715,000 General Motors Acceptance Corp.
8.000%, 11/01/2031 791,401
4,325,000 General Motors Corp.
8.375%, 7/15/2033 4,906,111
2,880,000 Navistar International Corp., Senior Subordinated
Note
9.375%, 6/01/2006 3,189,600
-----------
12,228,252
-----------
Banking -- 3.5%
830,000 Bank of America Corp.
5.875%, 2/15/2009 926,171
2,550,000 Capital One Bank
6.500%, 6/13/2013 2,773,915
1,400,000 Chevy Chase Bank FSB, Senior Note
6.875%, 12/01/2013 1,438,500
1,435,000 Citigroup, Inc.
5.000%, 3/06/2007 1,539,843
1,420,000 J.P. Morgan Chase & Co.
5.750%, 1/02/2013 1,543,432
1,200,000 State Street Institutional Capital A, 144A
7.940%, 12/30/2026 1,391,388
1,205,000 Wells Fargo & Co.
3.500%, 4/04/2008 (c) 1,234,721
-----------
10,847,970
-----------
Beverages -- 0.5%
1,350,000 Cia Brasileira de Bebidas, Guaranteed Note, 144A
8.750%, 9/15/2013 1,481,625
-----------
Brokerage -- 1.4%
3,815,000 Lehman Brothers Holdings, Inc.
7.000%, 2/01/2008 4,373,409
-----------
Chemicals -- 2.9%
$ 3,455,000 Eastman Chemical Co.
6.300%, 11/15/2018 $ 3,726,217
1,470,000 ICI Wilmington, Inc.
5.625%, 12/01/2013 1,534,987
3,045,000 IMC Global, Inc.
10.875%, 6/01/2008 3,669,225
-----------
8,930,429
-----------
Construction Machinery -- 0.6%
1,600,000 Case New Holland, Inc., 144A
9.250%, 8/01/2011 1,808,000
-----------
Consumer Goods & Services -- 0.3%
770,000 Service Corp. International, US, Senior Note, 144A
6.750%, 4/01/2016 772,406
-----------
Electric -- 4.7%
2,240,000 Centerpoint Energy, Inc., Series B, Senior Note
5.875%, 6/01/2008 2,326,932
2,030,000 Empresa Nacional de Electricidad SA
8.350%, 8/01/2013 2,290,412
2,150,000 FirstEnergy Corp., Series B
6.450%, 11/15/2011 2,353,887
1,325,000 IPALCO Enterprises, Inc.
0/8.375%, 11/14/2008 (d) 1,470,750
4,485,000 Pacific Gas & Electric Co.
6.050%, 3/01/2034 4,536,331
1,450,000 Southern California Edison Co.
7.625%, 1/15/2010 1,724,649
-----------
14,702,961
-----------
Electronics -- 0.4%
1,225,000 Avnet, Inc.
8.000%, 11/15/2006 (c) 1,347,500
-----------
Entertainment -- 0.5%
1,290,000 AOL Time Warner, Inc.
7.700%, 5/01/2032 1,524,970
-----------
Environmental -- 0.8%
1,250,000 Allied Waste North America, Inc., Series B
8.500%, 12/01/2008 1,400,000
1,015,000 Allied Waste North America, Senior Note, 144A
6.500%, 11/15/2010 1,036,569
-----------
2,436,569
-----------
Food and Beverage -- 1.2%
788,000 Dean Foods Co.
6.900%, 10/15/2017 827,400
702,000 Dean Foods Co.
8.150%, 8/01/2007 782,730
290,000 Smithfield Foods, Inc.
8.000%, 10/15/2009 324,075
1,655,000 Smithfield Foods, Inc., Senior Note, Series B
7.750%, 5/15/2013 1,820,500
-----------
3,754,705
-----------
Foreign Governments -- 0.6%
2,375,000 Canadian Government
5.750%, 9/01/2006 (CAD) 1,945,163
-----------
Government Agencies -- 9.0%
10,400,000 Federal Home Loan Mortgage Corp.
2.875%, 12/15/2006 10,603,570
2,750,000 Federal Home Loan Mortgage Corp.
3.220%, 6/20/2007 (SGD) 1,714,110
See accompanying notes to financial statements.
16
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Government Agencies -- continued
$ 6,600,000 Federal National Mortgage Association
2.290%, 2/19/2009 (SGD) $ 3,927,781
3,710,000 Federal National Mortgage Association
5.250%, 1/15/2009 4,075,483
7,695,000 United States Treasury Notes
1.875%, 12/31/2005 (c) 7,748,803
-----------
28,069,747
-----------
Healthcare -- 1.1%
3,050,000 HCA, Inc.
6.950%, 5/01/2012 3,326,702
-----------
Home Construction -- 0.4%
1,315,000 DR Horton, Inc., Senior Note
5.000%, 1/15/2009 1,361,025
-----------
Industrial - Other -- 1.0%
2,865,000 Aramark Services, Inc.
7.000%, 7/15/2006 3,144,690
-----------
Information/Data Technology -- 0.6%
1,700,000 Xerox Corp.
7.125%, 6/15/2010 1,802,000
-----------
Integrated Energy -- 2.4%
3,000,000 Pemex Finance, Ltd.
9.150%, 11/15/2018 3,778,350
3,265,000 Pemex Project Funding Master Trust
0/7.875%, 2/01/2009 (d) 3,762,912
-----------
7,541,262
-----------
Media Cable -- 3.1%
2,000,000 CSC Holdings, Inc.
7.625%, 7/15/2018 2,110,000
515,000 CSC Holdings, Inc.
7.875%, 2/15/2018 552,337
4,000,000 Shaw Communications, Inc., Class B, 144A
7.400%, 10/17/2007 (CAD) 3,264,683
2,785,000 TCI Communications, Inc.
9.800%, 2/01/2012 3,696,876
-----------
9,623,896
-----------
Media Non - Cable -- 1.1%
2,480,000 Clear Channel Communications, Inc.
4.250%, 5/15/2009 2,533,513
800,000 Dex Media West LLC/Dex Media West Finance Co., 144A
9.875%, 8/15/2013 888,000
-----------
3,421,513
-----------
Mortgage Related -- 21.0%
6,091,169 Federal Home Loan Mortgage Corp.
4.500%, 8/01/2018 6,177,786
7,944,354 Federal Home Loan Mortgage Corp.
5.000%, with various maturities to 2018 (e) 8,176,679
2,786,482 Federal Home Loan Mortgage Corp.
5.500%, with various maturities to 2018 (e) 2,906,222
8,101,155 Federal National Mortgage Association
4.500%, with various maturities to 2033 (e) 7,925,507
2,319,560 Federal National Mortgage Association
5.000%, 5/01/2018 2,386,875
7,116,513 Federal National Mortgage Association
5.500%, with various maturities to 2033 (e) 7,351,330
5,212,553 Federal National Mortgage Association
6.000%, with various maturities to 2033 (e) 5,467,685
7,481,330 Federal National Mortgage Association
6.500%, with various maturities to 2033 (e) 7,860,595
1,015,902 Federal National Mortgage Association
7.000%, with various maturities to 2030 (e) 1,078,115
1,071,698 Federal National Mortgage Association
7.500%, with various maturities to 2032 (e) 1,148,953
2,038,692 Government National Mortgage Association
5.500%, 2/20/2034 2,096,353
5,285,141 Government National Mortgage Association
6.000%, with various maturities to 2032 (e) 5,525,139
4,004,199 Government National Mortgage Association
6.500%, with various maturities to 2032 (e) 4,229,413
1,482,820 Government National Mortgage Association
7.000%, with various maturities to 2029 (e) 1,584,004
401,742 Government National Mortgage Association
7.500%, with various maturities to 2030 (e) 433,276
183,978 Government National Mortgage Association
8.000%, 11/15/2029 201,150
378,188 Government National Mortgage Association
8.500%, with various maturities to 2023 (e) 419,913
32,498 Government National Mortgage Association
9.000%, with various maturities to 2016 (e) 36,368
92,606 Government National Mortgage Association
11.500%, with various maturities to 2015 (e) 106,477
-----------
65,111,840
-----------
Non - Captive Consumer Financial -- 0.8%
1,340,000 Goldman Sachs Group, Inc.
6.600%, 1/15/2012 1,535,722
982,000 Household Finance Corp.
5.750%, 1/30/2007 1,069,530
-----------
2,605,252
-----------
Non - Captive Diversified Financial -- 1.1%
500,000 General Electric Capital Corp., Series E, Medium
Term Note
1.725%, 6/27/2008 (SGD) 290,365
2,895,000 International Lease Finance Corp.
5.625%, 6/01/2007 3,157,278
-----------
3,447,643
-----------
Oil Field Services -- 1.2%
1,480,000 Halliburton Co., Senior Note, 144A
5.500%, 10/15/2010 1,567,524
1,750,000 Transocean, Inc.
6.625%, 4/15/2011 2,000,955
-----------
3,568,479
-----------
Paper -- 4.4%
3,165,000 Abitibi-Consolidated Finance LP
7.875%, 8/01/2009 3,367,513
1,495,000 Abitibi-Consolidated, Inc.
8.550%, 8/01/2010 1,634,213
3,130,000 Boise Cascade Corp., Senior Note
6.500%, 11/01/2010 3,355,958
1,970,000 Georgia-Pacific Corp.
7.500%, 5/15/2006 2,117,750
480,000 Georgia-Pacific Corp.
8.875%, 5/15/2031 537,600
2,705,000 International Paper Co.
4.000%, 4/01/2010 2,697,732
-----------
13,710,766
-----------
See accompanying notes to financial statements.
17
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Pharmaceuticals -- 1.4%
$ 2,750,000 Valeant Pharmaceuticals International, Senior Note,
144A
7.000%, 12/15/2011 $ 2,839,375
1,470,000 Wyeth Corp.
5.500%, 3/15/2013 1,542,983
------------
4,382,358
------------
Pipelines -- 0.9%
2,464,000 Kinder Morgan Energy Partners LP
7.125%, 3/15/2012 2,880,044
------------
Railroads -- 0.4%
1,155,000 CSX Corp.
4.875%, 11/01/2009 1,215,786
------------
Real Estate Investment Trusts -- 0.4%
1,250,000 iStar Financial, Inc., Senior Note
6.000%, 12/15/2010 1,312,500
------------
Refining -- 0.9%
2,550,000 Premcor Refining Group (The), Inc.
7.500%, 6/15/2015 2,805,000
------------
Restaurants -- 0.1%
400,000 Domino's, Inc., Senior Subordinated Note
8.250%, 7/01/2011 431,000
------------
Retailers -- 0.7%
1,982,000 J.C. Penney Co., Inc.
9.750%, 6/15/2021 2,046,415
------------
Sovereigns -- 1.3%
4,785,000 Canadian Government
5.500%, 6/01/2010 (CAD) 3,980,492
------------
Supermarkets -- 2.5%
1,365,000 Couche-Tard US LP / Couche-Tard Finance Corp.,
Senior Subordinated Note, 144A
7.500%, 12/15/2013 1,460,550
2,155,000 Delhaize America, Inc.
8.125%, 4/15/2011 2,478,250
560,000 Delhaize America, Inc.
9.000%, 4/15/2031 668,500
2,720,000 Fred Meyer, Inc.
7.450%, 3/01/2008 3,146,744
------------
7,754,044
------------
Supranational -- 1.2%
2,610,000 Inter-American Development Bank
5.500%, 3/30/2010 (EUR) 3,563,154
------------
Tobacco -- 1.1%
1,495,000 Altria Group, Inc., Note
7.000%, 11/04/2013 1,647,551
1,550,000 Philip Morris Cos., Inc.
7.750%, 1/15/2027 1,727,627
------------
3,375,178
------------
Transportation Services -- 0.3%
1,015,000 Overseas Shipholding Group, Senior Note
7.500%, 2/15/2024 1,027,687
------------
Treasuries -- 4.2%
10,675,000 United States Treasury Notes
3.500%, 11/15/2006 (c) 11,126,606
1,540,000 United States Treasury Notes
6.125%, 8/15/2007 1,738,035
------------
12,864,641
------------
U.S. Government Agencies -- 2.0%
7,845,000 Federal National Mortgage Association,
Euro Medium Term Note
6.375%, 8/15/2007 (AUD) 6,137,969
------------
Wireless -- 0.6%
1,345,000 AT&T Wireless Services, Inc.
8.750%, 3/01/2031 1,744,469
------------
Wirelines -- 4.6%
1,095,000 AT&T Corp.
0/8.750%, 11/15/2031 (d) 1,291,626
3,200,000 LCI International, Inc.
7.250%, 6/15/2007 2,928,000
1,240,000 Qwest Corp.
7.200%, 11/10/2026 1,140,800
670,000 Qwest Corp.
7.250%, 9/15/2025 623,100
1,675,000 Qwest Corp.
7.500%, 6/15/2023 1,566,125
3,600,000 Sprint Capital Corp.
6.875%, 11/15/2028 3,738,568
1,045,000 Telus Corp.
8.000%, 6/01/2011 1,258,817
1,650,000 Verizon Communications, Inc.
7.900%, 2/01/2027 1,859,764
------------
14,406,800
------------
Total Bonds and Notes (Identified Cost $285,268,518) 300,589,921
------------
Short Term Investments -- 10.1%
5,286,414 Repurchase Agreement with Investors Bank & Trust Co.
dated 3/31/2004 at 0.76% to be repurchased at
$5,286,526 on 4/01/2004, collateralized by
$5,349,630 Federal National Mortgage Association
Bond, 5.617%, due 12/01/2031 valued at $5,550,734 5,286,414
945,667 Bank of Montreal, 1.01%, due 4/20/2004(f) 945,667
2,558,134 Bank of Nova Scotia, 1.01%, due 4/05/2004(f) 2,558,134
3,979,320 BGI Prime Money Market Fund(f) 3,979,320
568,474 BNP Paribas, 1.01%, due 4/16/2004(f) 568,474
568,474 Citigroup, 1.03%, due 6/14/2004(f) 568,474
568,474 Credit Agricole Indosuez, 1.02%, due 4/19/2004(f) 568,474
1,534,880 Credit Agricole Indosuez, 1.03%, due 4/12/2004(f) 1,534,880
568,474 Den Danske Bank, 1.01%, due 4/20/2004(f) 568,474
3,410,845 Fleet National Bank, 1.063%, due 7/21/2004(f) 3,410,845
170,542 Harris Trust & Savings Bank, 1.015%,
due 4/30/2004(f) 170,542
1,421,185 Keybank, 0.98%, due 4/01/2004(f) 1,421,185
1,044,085 Merrill Lynch Premier Institional Fund(f) 1,044,085
3,979,319 Merrimac Cash Fund-Premium Class(f) 3,979,319
852,711 Prefco, 1.031%, due 4/26/2004(f) 852,711
852,711 Sheffield Receivables Corp, 1.031%,
due 4/30/2004(f) 852,711
284,237 Svenska Handlesbanken, 1.01%, due 4/23/2004(f) 284,237
2,842,371 Wells Fargo, 1.02%, due 4/05/2004(f) 2,842,371
------------
Total Short Term Investments (Identified Cost
$31,436,317) 31,436,317
------------
Total Investments -- 107.0%
(Identified Cost $316,704,835) (b) 332,026,238
Other assets less liabilities (21,642,335)
------------
Total Net Assets -- 100% $310,383,903
============
See accompanying notes to financial statements.
18
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
(a) See Note 2a of Notes to Financial
Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized
appreciation on investments based on cost of
$317,511,170 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 $ 15,324,992
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value (809,924)
------------
Net unrealized appreciation $ 14,515,068
============
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.
(c) All or a portion of this security was on
loan to brokers at March 31, 2004.
(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 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 each 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
$16,510,120 or 5.3% of net assets.
AUD - Australian Dollar
CAD - Canadian Dollar
EUR - Euro
SGD - Singapore Dollar
See accompanying notes to financial statements.
19
- --------------------------------------------------------------------------------
Loomis Sayles Government Securities Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 97.8% of Total Net Assets
Government Agencies -- 0.9%
$ 600,000 Federal National Mortgage Association
6.625%, 9/15/2009 $ 699,924
------------
Mortgage Related -- 15.5%
4,416,159 Federal Home Loan Mortgage Corp.
4.500%, 8/01/2033 4,319,642
4,475,075 Federal National Mortgage Association
5.500%, with various maturities to 2034 (c) 4,587,637
373,323 Federal National Mortgage Association
6.500%, 11/01/2031 392,233
246,388 Federal National Mortgage Association
7.500%, 12/01/2030 264,101
1,908,655 Government National Mortgage Association
6.500%, 5/15/2031 2,015,873
20,447 Government National Mortgage Association
8.500%, 2/15/2006 21,533
94,913 Government National Mortgage Association
9.000%, with various maturities to 2009 (c) 103,580
36,549 Government National Mortgage Association
9.500%, 8/15/2009 40,363
16,977 Government National Mortgage Association
10.000%, with various maturities to 2016 (c) 19,138
4,167 Government National Mortgage Association
12.500%, 6/15/2014 4,844
------------
11,768,944
------------
Treasuries -- 81.4%
9,485,000 United States Treasury Bonds
5.250%, 11/15/2028 10,014,083
13,000,000 United States Treasury Bonds
7.250%, 5/15/2016 (d) 16,784,222
15,000,000 United States Treasury Bonds
8.750%, with various maturities to 2020 (c) 21,921,870
4,000,000 United States Treasury Bonds,
Zero Coupon, 11/15/2014 3,344,288
9,905,000 United States Treasury Note
1.625%, 9/30/2005 (d) 9,949,876
------------
62,014,339
------------
Total Bonds and Notes (Identified Cost $70,168,235) 74,483,207
------------
Short Term Investments -- 31.6%
871,450 Bank of Montreal, 1.01%, due 4/20/2004(e) 871,450
2,357,366 Bank of Nova Scotia, 1.01%, due 4/05/2004(e) 2,357,366
3,667,015 BGI Prime Money Market Fund(e) 3,667,015
523,859 BNP Paribas, 1.01%, due 4/16/2004(e) 523,859
523,859 Citigroup, 1.03%, due 6/14/2004(e) 523,859
523,859 Credit Agricole Indosuez, 1.02%, due 4/19/2004(e) 523,859
1,414,420 Credit Agricole Indosuez, 1.03%, due 4/12/2004(e) 1,414,420
523,859 Den Danske Bank, 1.01%, due 4/20/2004(e) 523,859
3,143,155 Fleet National Bank, 1.063%, due 7/21/2004(e) 3,143,155
157,158 Harris Trust & Savings Bank, 1.015%, due
4/30/2004(e) 157,158
1,309,648 Keybank, 0.98%, due 4/01/2004(e) 1,309,648
962,144 Merrill Lynch Premier Institional Fund(e) 962,144
3,667,012 Merrimac Cash Fund-Premium Class(e) 3,667,012
785,789 Prefco, 1.031%, due 4/26/2004(e) 785,789
785,789 Sheffield Receivables Corp, 1.031%, due 4/30/2004(e) 785,789
261,930 Svenska Handlesbanken, 1.01%, due 4/23/2004(e) 261,930
2,619,296 Wells Fargo, 1.02%, due 4/05/2004(e) 2,619,296
------------
Total Short Term Investments
(Identified Cost $24,097,608) 24,097,608
------------
Total Investments -- 129.4%
(Identified Cost $94,265,843)(b) $ 98,580,815
Other assets less liabilities (22,388,762)
------------
Total Net Assets -- 100% $ 76,192,053
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized appreciation on
investments based on cost of $95,185,255 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 $ 3,578,998
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (183,438)
------------
Net unrealized appreciation $ 3,395,560
============
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.
(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 each 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
March 31, 2004.
(e) Represents investments of securities lending collateral.
See accompanying notes to financial statements.
20
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 95.0% of Total Net Assets
Aerospace & Defense -- 0.5%
$ 250,000 TD Funding Corp., Senior Subordinated Note
8.375%, 7/15/2011 $ 265,000
----------
Airlines -- 4.3%
170,348 Continental Airlines, Inc.
6.648%, 9/15/2017 166,669
225,000 Continental Airlines, Inc., Class C-2
7.434%, 9/15/2004 222,191
170,379 Continental Airlines, Inc., Series 1998-1, Class 1B
6.748%, 3/15/2017 141,268
61,917 Continental Airlines, Inc., Series 1999-1, Class C
6.954%, 8/02/2009 53,564
112,225 Continental Airlines, Inc., Series 1999-2, Class B
7.566%, 3/15/2020 96,580
1,215,000 Delta Air Lines, Inc.
8.300%, 12/15/2029 698,625
800,000 Northwest Airlines, Inc.
7.625%, 3/15/2005 (c) 780,000
----------
2,158,897
----------
Automotive -- 3.8%
600,000 Cummins, Inc.
7.125%, 3/01/2028 594,000
1,000,000 Dana Corp.
9.000%, 8/15/2011 1,202,500
100,000 General Motors Corp.
8.375%, 7/15/2033 113,436
----------
1,909,936
----------
Beverages -- 1.3%
600,000 Bavaria SA, Senior Note, 144A
8.875%, 11/01/2010 637,500
----------
Building Materials -- 0.2%
110,000 Jacuzzi Brands, Inc., Senior Note
9.625%, 7/01/2010 121,550
----------
Chemicals -- 6.9%
615,000 Equistar Chemicals LP
6.500%, 2/15/2006 627,300
585,000 Ethyl Corp.
8.875%, 5/01/2010 631,800
1,000,000 Huntsman International LLC
10.125%, 7/01/2009 (c) 1,017,500
100,000 IMC Global, Inc.
7.300%, 1/15/2028 105,500
750,000 IMC Global, Inc.
11.250%, 6/01/2011 888,750
200,000 Nalco Co., Senior Subordinated Note, 144A
8.875%, 11/15/2013 (c) 208,500
----------
3,479,350
----------
Construction Machinery -- 0.9%
350,000 Case Credit Corp.
6.750%, 10/21/2007 355,250
100,000 Case New Holland, Inc., 144A
9.250%, 8/01/2011 113,000
----------
468,250
----------
Consumer Products -- 1.5%
600,000 Hasbro, Inc.
6.600%, 7/15/2028 616,500
$120,000 Rayovac Corp., Senior Subordinated Note
8.500%, 10/01/2013 $ 129,300
----------
745,800
----------
Electric -- 7.1%
540,000 AES Corp. (The)
7.750%, 3/01/2014 540,675
450,000 AES Corp. (The)
8.875%, 2/15/2011 (c) 480,375
200,000 Calpine Corp.
7.875%, 4/01/2008 145,750
560,000 Calpine Corp., 144A
8.750%, 7/15/2013 (c) 512,400
200,000 Empresa Nacional de Electricidad SA
7.875%, 2/01/2027 208,081
250,000 Empresa Nacional de Electricidad SA
8.350%, 8/01/2013 282,070
525,000 Enersis SA
7.400%, 12/01/2016 (yankee) 538,289
140,000 Enersis SA,Chile, 144A
7.375%, 1/15/2014 145,145
235,000 ESI Tractebel Acquisition Corp.
7.990%, 12/30/2011 243,225
280,130 Salton Sea Funding Corp.
7.840%, 5/30/2010 305,342
49,987 Salton Sea Funding Corp.
8.300%, 5/30/2011 56,360
125,000 TECO Energy, Inc.
7.000%, 5/01/2012 131,875
----------
3,589,587
----------
Electronics -- 4.0%
125,000 Corning, Inc.
5.900%, 3/15/2014 123,750
225,000 Corning, Inc.
6.750%, 9/15/2013 236,376
470,000 LSI Logic Corp.
4.000%, 11/01/2006 461,187
785,000 Lucent Technologies, Inc.
6.450%, 3/15/2029 663,325
300,000 Nortel Networks Corp.
4.250%, 9/01/2008 304,875
150,000 Northern Telecom Capital Corp.
6.875%, 9/01/2023 143,250
100,000 Northern Telecom Capital
7.875%, 6/15/2026 (c) 102,500
----------
2,035,263
----------
Entertainment -- 0.9%
415,000 Six Flags, Inc.
8.875%, 2/01/2010 428,487
----------
Environmental -- 1.0%
400,000 Allied Waste North America, Inc., Senior Note,
144A
5.750%, 2/15/2011 387,000
75,000 Allied Waste North America, Inc., Series B
8.500%, 12/01/2008 84,000
35,000 Allied Waste North America, Senior Note, 144A
6.500%, 11/15/2010 35,744
----------
506,744
----------
See accompanying notes to financial statements.
21
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Food and Beverage -- 2.0%
$350,000 Borden Chemical, Inc.
7.875%, 2/15/2023 $ 332,500
550,000 Borden Chemical, Inc.
9.200%, 3/15/2021 577,500
100,000 Borden Chemical, Inc.
9.250%, 6/15/2019 101,000
----------
1,011,000
----------
Gaming -- 0.8%
405,000 MGM Mirage, Senior Note, 144A
5.875%, 2/27/2014 404,494
----------
Healthcare -- 0.7%
150,000 HCA, Inc.
7.500%, 12/15/2023 158,258
200,000 HCA, Inc., Medium Term Note
7.580%, 9/15/2025 212,078
----------
370,336
----------
Home Construction -- 1.6%
475,000 DR Horton, Inc., Senior Note
5.000%, 1/15/2009 491,625
300,000 K. Hovnanian Enterprises, Inc.
8.000%, 4/01/2012 333,750
----------
825,375
----------
Independent Energy -- 1.0%
100,000 Chesapeake Energy Corp.
7.500%, 9/15/2013 110,500
170,000 Chesapeake Energy Corp., Senior Note, 144A
6.875%, 1/15/2016 (c) 178,500
215,000 Swift Energy Co.
9.375%, 5/01/2012 239,725
----------
528,725
----------
Information/Data Technology -- 1.6%
180,000 Maxtor Corp.
5.750%, 3/01/2012 158,400
100,000 Xerox Capital Trust I
8.000%, 2/01/2027 98,250
200,000 Xerox Corp.
7.625%, 6/15/2013 213,000
300,000 Xerox Corp., Medium Term Note
7.200%, 4/01/2016 312,000
----------
781,650
----------
Integrated Energy -- 3.0%
265,000 Cerro Negro Finance, Ltd., 144A
7.900%, 12/01/2020 226,575
275,000 Grant Prideco Escrow Corp.
9.000%, 12/15/2009 310,063
125,000 PDVSA Finance, Ltd.
6.800%, 11/15/2008 122,500
200,000 PDVSA Finance, Ltd.
7.400%, 8/15/2016 (yankee) 171,500
500,000 PDVSA Finance, Ltd.
9.375%, 11/15/2007 525,000
200,000 Petrozuata Finance, Inc., 144A
8.220%, 4/01/2017 182,000
----------
1,537,638
----------
Life Insurance -- 0.8%
200,000 Provident Cos., Inc.
7.250%, 3/15/2028 (c) 188,203
$200,000 UnumProvident Corp.
7.375%, 6/15/2032 $ 191,050
----------
379,253
----------
Lodging -- 5.3%
300,000 FelCor Lodging LP
0/9.000%, 6/01/2011 (d) 321,750
750,000 Host Marriott LP
9.250%, 10/01/2007 840,000
851,000 La Quinta Corp.
7.000%, 8/15/2007 897,805
300,000 La Quinta Inns, Inc. Medium Term Note
7.330%, 4/01/2008 310,125
300,000 Royal Caribbean Cruises, Ltd.
7.500%, 10/15/2027 304,500
----------
2,674,180
----------
Media Cable -- 3.7%
500,000 Charter Communications Holdings LLC
9.625%, 11/15/2009 422,500
150,000 Charter Communications Holdings, Inc., Senior Note
10.000%, 5/15/2011 124,500
900,000 CSC Holdings, Inc.
7.875%, 12/15/2007 967,500
200,000 Innova S de RL
9.375%, 9/19/2013 217,000
150,000 Rogers Communications, Inc.
2.000%, 11/26/2005 141,750
----------
1,873,250
----------
Media Non - Cable -- 0.5%
250,000 Dex Media, Inc., 144A
8.000%, 11/15/2013 248,125
----------
Metals & Mining -- 1.3%
500,000 Ispat Inland ULC, 144A
9.750%, 4/01/2014 520,000
175,000 Vale Overseas, Ltd.
8.250%, 1/17/2034 160,125
----------
680,125
----------
Oil Field Services -- 0.8%
820,000 Trico Marine Services, Inc.
8.875%, 5/15/2012 (c) 426,400
----------
Other -- 0.5%
250,000 Corrections Corp. of America
7.500%, 5/01/2011 263,438
----------
Packaging -- 1.4%
300,000 Owens-Illinois Glass Container, North America
7.750%, 5/15/2011 313,500
350,000 Owens-Illinois, Inc., Senior Note
7.500%, 5/15/2010 (c) 335,125
75,000 Owens-Illinois, Inc., Senior Note
7.800%, 5/15/2018 69,375
----------
718,000
----------
Paper -- 6.8%
220,000 Abitibi-Consolidated, Inc.
7.500%, 4/01/2028 201,170
250,000 Abitibi-Consolidated, Inc.
8.500%, 8/01/2029 245,442
200,000 Arcel Finance, Ltd., 144A
7.048%, 9/01/2011 212,000
See accompanying notes to financial statements.
22
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Paper -- continued
$ 385,000 Boise Cascade Corp.
7.350%, 2/01/2016 $ 407,096
200,000 Boise Cascade Corp., Series A, Medium Term Note
7.450%, 8/10/2011 211,301
685,000 Bowater, Inc.
6.500%, 6/15/2013 670,444
165,000 Georgia-Pacific Corp.
7.250%, 6/01/2028 161,700
200,000 Georgia-Pacific Corp.
7.375%, 12/01/2025 198,000
500,000 Georgia-Pacific Corp.
9.500%, 12/01/2011 (c) 602,500
350,000 Pope & Talbot, Inc.
8.375%, 6/01/2013 364,000
145,000 Tembec Industries, Inc.
7.750%, 3/15/2012 139,925
-----------
3,413,578
-----------
Pharmaceuticals -- 2.9%
385,000 Human Genome Sciences, Inc.
3.750%, 3/15/2007 372,006
187,000 IVAX Corp.
4.500%, 5/15/2008 189,104
300,000 Nektar Therapeutics
3.500%, 10/17/2007 292,125
250,000 Pharma Services Intermediate Holding Corp., Senior
Note, 144A
Zero Coupon, 4/01/2014(d)(f) 143,125
200,000 Quintiles Transnational Corp., 144A
10.000%, 10/01/2013 208,000
260,000 Vertex Pharmaceuticals, Inc., 144A
5.750%, 2/15/2011 247,325
-----------
1,451,685
-----------
Pipelines -- 3.8%
700,000 Coastal Corp.
6.500%, 6/01/2008 (c) 598,500
175,000 Tennessee Gas Pipeline Co.
7.000%, 10/15/2028 163,625
175,000 Williams Cos. (The), Inc.
7.125%, 9/01/2011 (c) 183,750
455,000 Williams Cos. (The), Inc.
7.500%, 1/15/2031 439,075
50,000 Williams Cos. (The), Inc.
7.875%, 9/01/2021 50,625
440,000 Williams Holdings of Delaware
6.500%, 12/01/2008 457,050
-----------
1,892,625
-----------
Railroads -- 0.6%
300,000 Grupo Transportacion Ferroviaria Mexicana SA de CV
0/11.750%, 6/15/2009 (yankee)(d) 301,500
-----------
Real Estate Investment Trusts -- 2.6%
1,000,000 Crescent Real Estate Equities LP
9.250%, 4/15/2009 1,112,500
200,000 TriNet Corporate Realty Trust, Inc.
7.700%, 7/15/2017 221,500
-----------
1,334,000
-----------
Refining -- 2.8%
325,000 Citgo Petroleum Corp., Senior Note
11.375%, 2/01/2011 379,438
700,000 Premcor Refining Group (The), Inc.
7.500%, 6/15/2015 770,000
225,000 Premcor Refining Group (The), Inc., Senior Note
6.750%, 2/01/2011 244,688
-----------
1,394,126
-----------
Restaurants -- 0.3%
125,000 Domino's, Inc., Senior Subordinated Note
8.250%, 7/01/2011 134,688
-----------
Retailers -- 4.5%
250,000 Dillard's, Inc.
6.625%, 1/15/2018 245,625
800,000 Dillard's, Inc.
7.750%, 7/15/2026 816,000
800,000 Foot Locker, Inc.
8.500%, 1/15/2022 897,000
335,000 Toys R US, Inc.
7.375%, 10/15/2018 328,300
-----------
2,286,925
-----------
Sovereigns -- 3.2%
200,000 Dominican Republic, 144A
9.040%, 1/23/2013 144,000
345,000 Republic of Brazil
8.250%, 1/20/2034 (c) 293,250
1,000,000 Republic of Brazil
9.375%, 4/07/2008 (c) 1,065,000
125,000 Republic of Peru
4.500%, 3/07/2017 110,000
-----------
1,612,250
-----------
Textile -- 1.9%
905,000 Phillips Van-Heusen Corp.
7.750%, 11/15/2023 936,675
-----------
Transportation Services -- 2.6%
275,000 APL, Ltd.
8.000%, 1/15/2024 259,875
136,181 Atlas Air, Inc., Series 1998-1, Class 1A
7.380%, 1/02/2018 129,274
133,099 Atlas Air, Inc., Series 1999-1, Class 1A
7.200%, 1/02/2019 124,873
129,929 Atlas Air, Inc., Series 2000-1, Class A
8.707%, 1/02/2019 124,290
300,000 Overseas Shipholding Group, Senior Note
7.500%, 2/15/2024 303,750
350,000 Stena AB, Senior Note
7.500%, 11/01/2013 365,750
-----------
1,307,812
-----------
Wirelines -- 5.6%
150,000 Philippine Long Distance Telephone Co.
8.350%, 3/06/2017 136,500
700,000 Philippine Long Distance Telephone Co.
10.500%, 4/15/2009 770,000
375,000 Qwest Capital Funding, Inc.
6.875%, 7/15/2028 290,626
75,000 Qwest Capital Funding, Inc.
7.000%, 8/03/2009 (c) 65,813
1,890,000 Qwest Capital Funding, Inc.
7.750%, 2/15/2031 1,549,800
-----------
2,812,739
-----------
Total Bonds and Notes (Identified Cost $44,257,556) 47,946,956
-----------
See accompanying notes to financial statements.
23
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Shares Description Value (a)
- ------------------------------------------------------------------------------------
Preferred Stocks -- 2.5%
Electric -- 0.7%
8,000 CMS Energy Trust I, 7.75%, 7/15/2027 $ 360,000
----------
Electronics -- 0.4%
175 Lucent Technologies Capital Trust I, 7.75%, 3/15/2017 220,710
----------
Entertainment -- 0.2%
3,000 Six Flags, Inc., 7.25%, 8/15/2009 72,450
----------
Pipelines -- 1.0%
8,000 Williams Cos., Inc., 5.50%, 6/01/2033(c) 510,000
----------
Wirelines -- 0.2%
2,000 Philippine Long Distance Telephone Co. (GDR), $14.00,
12/31/2049 92,000
----------
Total Preferred Stocks (Identified Cost $1,134,032) 1,255,160
----------
Principal
Amount
- ------------------------------------------------------------------------------------
Short Term Investments -- 15.0%
$ 464,304 Repurchase Agreement with Investors Bank & Trust Co.
dated 3/31/2004 at 0.76% to be repurchased at $464,314
on 4/01/2004, collateralized by $474,997 Federal National
Mortgage Bond, 3.230%, due 3/25/2022 valued at $487,520 464,304
257,254 Bank of Montreal, 1.01%, due 4/20/2004(e) 257,254
695,900 Bank of Nova Scotia, 1.01%, due 4/05/2004(e) 695,900
1,082,509 BGI Prime Money Market Fund(e) 1,082,509
154,644 BNP Paribas, 1.01%, due 4/16/2004(e) 154,644
154,644 Citigroup, 1.03%, due 6/14/2004(e) 154,644
154,644 Credit Agricole Indosuez, 1.02%, due 4/19/2004(e) 154,644
417,540 Credit Agricole Indosuez, 1.03%, due 4/12/2004(e) 417,540
154,644 Den Danske Bank, 1.01%, due 4/20/2004(e) 154,644
927,867 Fleet National Bank, 1.063%, due 7/21/2004(e) 927,867
46,394 Harris Trust & Savings Bank, 1.015%, due 4/30/2004(e) 46,394
386,611 Keybank, 0.98%, due 4/01/2004(e) 386,611
284,027 Merrill Lynch Premier Institional Fund(e) 284,027
1,082,510 Merrimac Cash Fund-Premium Class(e) 1,082,510
231,967 Prefco, 1.031%, due 4/26/2004(e) 231,967
231,967 Sheffield Receivables Corp, 1.031%, due 4/30/2004(e) 231,967
77,322 Svenska Handlesbanken, 1.01%, due 4/23/2004(e) 77,322
773,222 Wells Fargo, 1.02%, due 4/05/2004(e) 773,222
-----------
Total Short Term Investments (Identified Cost $7,577,970) 7,577,970
-----------
Total Investments -- 112.5%
(Identified Cost $52,969,558) (b) 56,780,086
Other assets less liabilities (6,290,236)
-----------
Total Net Assets -- 100% $50,489,850
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized appreciation on
investments based on cost of $52,977,808 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 $ 4,651,778
Aggregate gross unrealized depreciation for all
investments in which there is an excessof tax cost
over value (865,500)
-----------
Net unrealized appreciation $ 3,786,278
===========
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.
(c) All or a portion of this security was on loan to brokers
at March 31, 2004.
(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.
(f) 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.
GDR Global Depositary 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 $4,753,433 or 9.4% of
net assets.
See accompanying notes to financial statements.
24
- --------------------------------------------------------------------------------
Loomis Sayles Limited Term Government and Agency Fund
Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------------------
Bonds and Notes -- 98.6% of Total Net Assets
Asset-Backed -- 4.0%
$ 2,240,000 Residential Asset Mortgage Products, Inc.,Series
2003-RZ5, Class A3
3.800%, 7/25/2030 $ 2,232,484
1,675,000 Residential Funding Mortgage Securities II
5.420%, 2/25/2016 1,729,044
1,376,000 Residential Funding Mortgage Securities II, Series
2003-HI4, Class A4
4.590%, 4/25/2018 1,422,449
------------
5,383,977
------------
Government Agencies -- 13.4%
2,935,000 Federal Farm Credit Bank
2.375%, 10/02/2006 2,956,511
6,200,000 Federal Home Loan Bank
3.625%, 11/14/2008 6,379,738
5,000,000 Federal Home Loan Mortgage Corp.
5.750%, 4/15/2008 5,574,660
3,000,000 Federal National Mortgage Association
5.500%, 5/02/2006 3,223,344
------------
18,134,253
------------
Mortgage Related -- 54.0%
2,611,778 Federal Home Loan Mortgage Corp.
5.000%, 5/01/2018 2,688,157
726,611 Federal Home Loan Mortgage Corp.
7.000%, 2/01/2016 776,844
150,106 Federal Home Loan Mortgage Corp.
7.500%, with various maturities to 2026 (c) 160,658
137,807 Federal Home Loan Mortgage Corp.
8.000%, with various maturities to 2015 (c) 143,835
9,131 Federal Home Loan Mortgage Corp.
10.000%, 7/01/2019 10,269
922,614 Federal Home Loan Mortgage Corp.
11.500%, with various maturities to 2020 (c) 1,048,208
9,335,909 Federal National Mortgage Association
4.000%, with various maturities to 2019 (c) 9,279,438
4,087,970 Federal National Mortgage Association
4.500%, 11/01/2033 3,999,335
19,824,378 Federal National Mortgage Association
5.500%, with various maturities to 2033 (c) 20,578,785
16,526,151 Federal National Mortgage Association
6.000%, with various maturities to 2033 (c) 17,375,516
2,329,846 Federal National Mortgage Association
6.500%, with various maturities to 2032 (c) 2,466,654
712,695 Federal National Mortgage Association
7.000%, 12/01/2022 766,761
2,707,409 Federal National Mortgage Association
7.500%, with various maturities to 2032 (c) 2,901,395
364,242 Federal National Mortgage Association
8.000%, with various maturities to 2016 (c) 391,708
2,817,246 Government National Mortgage Association
5.500%, 7/20/2033 2,896,726
339,225 Government National Mortgage Association
6.000%, 12/15/2031 354,672
4,775,415 Government National Mortgage Association
6.500%, with various maturities to 2033 (c) 5,028,510
1,831,064 Government National Mortgage Association
7.000%, with various maturities to 2031 (c) 1,952,946
26,001 Government National Mortgage Association
12.500%, with various maturities to 2015 (c) 30,288
284,450 Government National Mortgage Association
16.000%, with various maturities to 2012 (c) 340,717
96,230 Government National Mortgage Association
17.000%, with various maturities to 2011 (c) 116,788
------------
73,308,210
------------
Supranational -- 3.3%
3,210,000 Inter-American Development Bank Bonds
12.250%, 12/15/2008 4,514,713
------------
Treasuries -- 23.9%
10,400,000 United States Treasury Notes
2.000%, 8/31/2005 10,503,189
1,290,000 United States Treasury Notes
2.250%, 2/15/2007 1,300,986
7,125,000 United States Treasury Notes
3.125%, with various maturities to 2008 (c) (d) 7,275,716
4,750,000 United States Treasury Notes
3.375%, 11/15/2008 (d) 4,894,357
3,800,000 United States Treasury Notes
5.000%, 8/15/2011 (d) 4,187,273
3,750,000 United States Treasury Notes
6.625%, 5/15/2007 4,266,945
------------
32,428,466
------------
Total Bonds and Notes (Identified Cost $131,443,925) 133,769,619
------------
Short Term Investments -- 9.2%
1,364,747 Repurchase Agreement with Investors Bank & Trust Co.
dated 3/31/2004 at 0.76% to be repurchased at $1,364,776
on 4/01/2004, collateralized by $1,388,959 Federal Home
Loan Mortgage Corporation, 3.732%, due 1/01/2021 valued
at $1,433,116 1,364,747
398,950 Bank of Montreal, 1.01%, due 4/20/2004 (e) 398,950
1,079,204 Bank of Nova Scotia, 1.01%, due 4/05/2004 (e) 1,079,204
1,678,763 BGI Prime Money Market Fund (e) 1,678,763
239,823 BNP Paribas, 1.01%, due 4/16/2004 (e) 239,823
239,823 Citigroup, 1.03%, due 6/14/2004 (e) 239,823
239,823 Credit Agricole Indosuez, 1.02%, due 4/19/2004 (e) 239,823
647,523 Credit Agricole Indosuez, 1.03%, due 4/12/2004 (e) 647,523
239,823 Den Danske Bank, 1.01%, due 4/20/2004 (e) 239,823
1,438,939 Fleet National Bank, 1.063%, due 7/21/2004 (e) 1,438,939
71,947 Harris Trust & Savings Bank, 1.015%, due 4/30/2004 (e) 71,947
599,558 Keybank, 0.98%, due 4/01/2004 (e) 599,558
440,470 Merrill Lynch Premier Institional Fund (e) 440,470
1,678,762 Merrimac Cash Fund-Premium Class (e) 1,678,762
359,735 Prefco, 1.031%, due 4/26/2004 (e) 359,735
359,735 Sheffield Receivables Corp, 1.031%, due 4/30/2004 (e) 359,735
119,912 Svenska Handlesbanken, 1.01%, due 4/23/2004(e) 119,912
1,199,116 Wells Fargo, 1.02%, due 4/05/2004 (e) 1,199,116
------------
Total Short Term Investments (Identified Cost
$12,396,653) 12,396,653
------------
Total Investments -- 107.8%
(Identified Cost $143,840,578) (b) 146,166,272
Other assets less liabilities (10,522,291)
------------
Total Net Assets -- 100% $135,643,981
============
See accompanying notes to financial statements.
25
- --------------------------------------------------------------------------------
Loomis Sayles Limited Term Government and Agency Fund
Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net
unrealized appreciation on investments based on
cost of $144,494,978 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 $1,811,411
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (140,117)
----------
Net unrealized appreciation $1,671,294
==========
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.
(c) The Fund's investment in mortgage related
securities of the Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association
and the Government National Mortgage Association
are interests in separate pools of mortgages. All
separate investments in securities of each issuer
and for United States Treasury Notes 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 March 31, 2004.
(e) Represents investments of securities lending
collateral.
See accompanying notes to financial statements.
26
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund
Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Tax Exempt Obligations -- 95.8% of Total Net Assets
Highlands County, FL, Health Facilities
Authority -- 1.2%
$1,000,000 Adventis Health System,
5.875%, 11/15/2029 $ 1,061,210
-----------
Martha's Vineyard, MA -- 1.1%
1,000,000 Land Bank Revenue,
5.000%, 5/01/2032, (AMBAC insured) 1,036,380
-----------
Massachusetts Bay Transportation Authority -- 6.3%
3,000,000 Assessment Series A,
5.250%, 7/01/2030 3,157,260
2,500,000 Series A,
5.000%, 7/01/2032 2,580,225
-----------
5,737,485
-----------
Massachusetts State -- 5.6%
4,000,000 State Refunding Series A,
6.500%, 11/01/2014, (AMBAC insured) 5,023,440
-----------
Massachusetts State Development Finance
Agency -- 16.3%
2,500,000 Cambridge Street Development Series A,
5.125%, 2/01/2034, (MBIA insured) 2,602,125
2,000,000 Health Care Facility Alliance,
7.100%, 7/01/2032 1,963,560
4,000,000 Mount Holyoke College,
5.250%, 7/01/2031 4,203,560
2,800,000 Refunding Springfield Resource Recovery-A,
5.625%, 6/01/2019 2,941,708
1,100,000 Visual and Performing Arts,
6.000%, 8/01/2021 1,325,313
1,610,000 WGBH Educational Foundation Series A,
5.375%, 1/01/2042, (AMBAC insured) 1,715,922
-----------
14,752,188
-----------
Massachusetts State Health &
Educational Facilities Authority -- 37.4%
1,160,000 Baystate Medical Center Series F,
5.700%, 7/01/2027 1,213,685
3,000,000 Boston University,
5.000%, 10/01/2039 3,115,470
2,200,000 Catholic Health East,
5.500%, 11/15/2032 2,236,652
3,000,000 Dana Farber Series G-1,
6.250%, 12/01/2022 3,179,550
3,000,000 Harvard Univerity Series N,
6.250%, 4/01/2020 3,759,390
1,200,000 Harvard University Series F,
5.125%, 7/15/2037 1,255,692
1,550,000 Milford-Whitinsville Regional Corp.,
5.250%, 7/15/2018 1,505,019
1,500,000 Milton Hospital Series C,
5.500%, 7/01/2016 1,557,840
3,000,000 Nichols College Series C,
6.000%, 10/01/2017 3,132,210
2,000,000 Partners Healthcare Systems Series B,
5.250%, 7/01/2029 2,045,640
2,500,000 Partners Healthcare Systems Series C,
5.750%, 7/01/2021 2,707,750
1,500,000 Tufts University Series I,
5.250%, 2/15/2030 1,573,755
1,000,000 University of Massachusetts Project Series C,
5.250%, 10/01/2031, (MBIA insured) 1,059,140
2,000,000 University of Massachusetts Series C,
5.125%, 10/01/2034, (FGIC insured) 2,087,760
$2,265,000 Wellesley College Series F,
5.125%, 7/01/2039 $ 2,350,753
1,000,000 Williams College Series H,
5.000%, 7/01/2033 1,035,370
-----------
33,815,676
-----------
Massachusetts State Housing Finance Agency -- 1.2%
1,110,000 Single Family Mortgage Series 21,
7.125%, 6/01/2025 1,111,687
-----------
Massachusetts State Port Authority -- 3.4%
1,750,000 Delta Air Lines, Inc. Project Series A,
5.500%, 1/01/2019, (AMBAC insured) 1,851,605
1,200,000 Series A,
5.000%, 7/01/2033, (MBIA insured) 1,241,532
-----------
3,093,137
-----------
Massachusetts State Turnpike Authority -- 3.3%
2,950,000 Metropolitan Highway System, Capital Appreciation
Senior Series A,
5.000%, 1/01/2037, (MBIA insured) 3,009,679
-----------
Massachusetts State Water Resources Authority -- 6.8%
2,000,000 General Series B,
5.125%, 8/01/2027, (MBIA insured) 2,098,000
3,240,000 Series A,
6.500%, 7/15/2019, (FGIC insured) 4,017,794
-----------
6,115,794
-----------
Michigan State Hospital Finance Authority -- 1.8%
1,500,000 Oakwood Obligated Group,
5.500%, 11/01/2017 1,605,780
-----------
New England Education Loan Marketing -- 3.8%
3,000,000 Student Loan Revenue Bond Sub-Issue H,
6.900%, 11/01/2009 3,458,730
-----------
Puerto Rico Commonwealth Aqueduct &
Sewer Authority -- 5.0%
3,000,000 Aqueduct & Sewer Authority,
6.250%, 7/01/2013 3,618,810
695,000 Aqueduct & Sewer Authority,
10.250%, 7/01/2009 862,891
-----------
4,481,701
-----------
University of Massachusetts Building Authority -- 2.6%
2,200,000 SR - Series 1,
5.250%, 11/01/2028, (AMBAC insured) 2,338,446
-----------
Total Tax Exempt Obligations
(Cost $81,567,026) 86,641,333
-----------
See accompanying notes to financial statements.
27
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Short Term Investment -- 2.9% of Total Net Assets
$2,650,803 Repurchase Agreement with Investors Bank & Trust Co.
dated 3/31/2004 at 0.76% to be repurchased at
$2,650,859 on 4/01/2004, collateralized by $2,774,873
Federal National Mortgage Association Bond, 1.49%,
due 5/15/2032 valued at $2,783,569 $ 2,650,803
-----------
Total Short Term Investment
(Cost $2,650,803) 2,650,803
-----------
Total Investments -- 98.7%
(Identified Cost $84,217,829) (b) 89,292,136
Other assets less liabilities 1,156,472
-----------
Total Net Assets -- 100.0% $90,448,608
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized appreciation on
investments based on cost of $84,215,824 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 $5,225,577
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (149,265)
----------
Net unrealized appreciation $5,076,312
==========
At September 30, 2003, the Fund had a capital loss
carryover of approximately $2,539,647 of which
$1,419,707 expires on September 30, 2007, $116,500
expires on September 30, 2008 and $1,003,440 expires
on September 30, 2010. This may be available to
offset future realized capital gains, if any, to the
extent provided by regulations.
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Company
MBIA Municipal Bond Investors Assurance Corp.
Holdings By Revenue Source at March 31, 2004 (unaudited)
% of Net Assets
---------------
University 14.8
College 11.9
Water 11.7
Financial 8.4
Hospital 7.1
Revenue 4.6
Health 4.2
Student Loan 3.8
Special Assessment 3.5
Miscellaneous 3.4
Turnpike 3.3
Pooled Funds 3.3
Hospital System Bonds 3.0
Financial Services 2.9
Mass Transit 2.9
Nursing Home 2.2
Airport 2.1
Other, less than 2% each 5.6
See accompanying notes to financial statements.
28
- --------------------------------------------------------------------------------
Loomis Sayles Municipal Income Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Tax Exempt Obligations -- 95.4% of Total Net Assets
California -- 4.4%
$2,000,000 California State,
5.125%, 6/01/2027 $ 2,019,440
100,000 Golden State Tobacco Securitization Corp.,
5.750%, 6/01/2021 104,635
250,000 Golden State Tobacco Securitization Corp.,
5.750%, 6/01/2022 261,105
250,000 Golden State Tobacco Securitization Corp.,
5.750%, 6/01/2023 260,050
3,000,000 Sacramento, CA, Power Authority,
6.000%, 7/01/2022 3,179,970
-----------
5,825,200
-----------
Colorado -- 1.6%
2,000,000 Denver, CO, City & County Airport,
5.250%, 11/15/2023, (MBIA insured) 2,134,620
-----------
District of Columbia -- 4.1%
5,280,000 Metropolitan Washington D.C. Airports Authority,
5.125%, 10/01/2029, (FGIC insured) 5,451,758
-----------
Florida -- 6.2%
3,000,000 Escambia County, FL, Pollution Control,
6.900%, 8/01/2022 3,099,720
5,000,000 Highlands County, FL, Health Facilities Authority,
Multiple Obligors,
5.375%, 11/15/2035 5,086,850
-----------
8,186,570
-----------
Illinois -- 9.6%
1,000,000 Chicago, IL, Skyway Toll Bridge,
5.375%, 1/01/2011 1,103,030
2,780,000 Illinois Educational Facilities Authority,
University of Chicago,
5.000%, 7/01/2033 2,871,962
3,000,000 Illinois Educational Facilities Authority,
University of Chicago,
5.125%, 7/01/2038 3,087,810
1,750,000 Illinois State,
5.400%, 12/01/2020, (MBIA insured) 1,922,900
3,500,000 Metropolitan Pier & Exposition Authority,
5.250%, 6/15/2042, (MBIA insured) 3,677,800
-----------
12,663,502
-----------
Indiana -- 5.6%
2,000,000 Indiana Transportation Finance Authority,
5.375%, 12/01/2025 2,123,060
5,000,000 Indianapolis, IN, Local Public Improvement Bond Bank,
5.250%, 7/01/2033, (MBIA insured) 5,245,650
-----------
7,368,710
Massachusetts -- 2.3%
900,000 Massachusetts Housing Finance Agency,
6.600%, 12/01/2026 923,985
2,000,000 Massachusetts Turnpike Authority,
5.000%, 1/01/2039, (AMBAC insured) 2,052,540
-----------
2,976,525
-----------
Michigan -- 7.3%
2,850,000 Michigan Hospital Finance Authority, Henry Ford
Health System,
5.500%, 3/01/2014 3,115,677
1,100,000 Michigan State Hospital Finance Authority, Oakwood
Obligated Group,
5.500%, 11/01/2014 1,210,792
5,000,000 University of Michigan,
5.250%, 12/01/2020 5,228,000
-----------
9,554,469
-----------
Mississippi -- 4.0%
$2,000,000 Lowndes County, MS, Solid Waste Disposal & Pollution
Control,
6.700%, 4/01/2022 $ 2,345,380
2,500,000 Lowndes County, MS, Solid Waste Disposal & Pollution
Control,
6.800%, 4/01/2022 2,960,725
-----------
5,306,105
-----------
New Jersey -- 0.8%
1,000,000 New Jersey Health Care Facilities Financing Authority,
Catholic Health East, 5.375%, 11/15/2033 1,026,950
-----------
New York -- 11.7%
2,000,000 New York City, NY,
6.000%, 1/15/2020 2,264,080
3,000,000 New York Dormitory Authority,
5.500%, 5/15/2013 3,445,620
2,740,000 New York Dormitory Authority,
5.750%, 7/01/2013 3,181,880
1,300,000 Port Authority of New York & New Jersey,
7.000%, 10/01/2007 1,348,243
5,000,000 Triborough Bridge & Tunnel Authority,
5.000%, 1/01/2032 5,151,950
-----------
15,391,773
-----------
North Carolina -- 1.1%
1,300,000 North Carolina Eastern Municipal Power Agency,
5.500%, 1/01/2012 1,436,084
-----------
Oregon -- 3.1%
4,000,000 Western Generation Agency,
7.400%, 1/01/2016 4,094,120
-----------
Pennsylvania -- 11.5%
3,300,000 Lehigh County, PA, General Purpose Authority,
Saint Luke's Hospital of Bethlehem, 5.250%, 8/15/2023 3,313,365
3,000,000 Pennsylvania Economic Development Financing
Authority,
6.600%, 1/01/2019 3,048,720
3,000,000 Pennsylvania Economic Development Financing
Authority,
7.600%, 12/01/2024 3,161,640
5,000,000 Pennsylvania Industrial Development Authority,
5.500%, 7/01/2019, (AMBAC insured) 5,592,650
-----------
15,116,375
-----------
Puerto Rico -- 0.9%
1,000,000 Puerto Rico Infrastructure Financing Authority,
5.500%, 10/01/2040 1,112,690
-----------
South Carolina -- 2.4%
3,000,000 Greenville County, SC, School District,
5.500%, 12/01/2028 3,202,860
-----------
Tennessee -- 2.0%
2,500,000 Maury County, TN, Industrial Development Board,
Pollution Control,
6.500%, 9/01/2024 2,569,150
Texas -- 10.9%
4,275,000 Dallas-Fort Worth, TX, International Airport,
5.500%, 11/01/2033 4,554,457
1,900,000 Denton County, TX,
5.125%, 7/15/2026 1,964,467
3,000,000 Houston, TX, Water & Sewer System,
5.250%, 12/01/2023, (FGIC insured) 3,154,200
1,435,000 Katy, TX, Independent School District,
5.125%, 2/15/2020 1,537,100
3,000,000 Lewisville, TX, Independent School District,
5.250%, 8/15/2027 3,154,950
-----------
14,365,174
-----------
See accompanying notes to financial statements.
29
- --------------------------------------------------------------------------------
Loomis Sayles Municipal Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Tax Exempt Obligations -- (continued)
Principal
Amount Description Value (a)
- ---------------------------------------------------------------------------------
Washington -- 5.9%
$2,000,000 Energy Northwest,
5.500%, 7/01/2014 $ 2,300,040
3,000,000 Grant County, WA, Public Utility District No. 2,
Wanapum Hydroelectric,
5.000%, 1/01/2035, (MBIA insured) 3,081,600
2,250,000 Port of Seattle, WA,
5.000%, 4/01/2031, (FGIC insured) 2,315,138
------------
7,696,778
------------
Total Tax Exempt Obligations
(Identified Cost $118,205,927) 125,479,413
------------
Short Term Investment -- 1.0% of Total Net Assets
1,392,790 Repurchase Agreement with Investors Bank & Trust Co.
dated 3/31/2004 at 0.76% to be repurchased at
$1,392,819 on 4/01/2004, collateralized by $1,450,224
Federal Home Loan Mortgage Bond, 5.00%, due 5/01/2033
valued at $1,462,430 1,392,790
------------
Total Short Term Investment
(Cost $1,392,790) 1,392,790
------------
Total Investments -- 96.4%
(Identified Cost $119,598,717) (b) 126,872,203
Other assets less liabilities 4,676,886
------------
Total Net Assets-- 100.0% $131,549,089
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized appreciation on
investments based on cost of $119,229,938 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 $ 7,727,292
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (85,027)
------------
Net unrealized appreciation $ 7,642,265
============
At September 30, 2003, the Fund had a capital loss
carryover of approximately $1,700,392 of which
$1,700,392 expires on September 30, 2007. This may
be available to offset future realized capital
gains, if any, to the extent provided by
regulations.
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Company
MBIA Municipal Bond Investors Assurance Corp.
Holdings By Revenue Source at March 31, 2004 (unaudited)
% of Net Assets
---------------
University 13.5
Various Purpose 10.3
Improvement 7.5
Solid Waste Disposal 6.4
Water 6.4
Revenue 5.3
Airport 5.1
Pooled Funds 4.3
Financial 4.3
Insured 4.1
Paper/Forest Products 3.1
Electric 2.8
Development 2.8
Hospital 2.5
Public Power/Utility 2.4
Hospital System Bonds 2.4
Public Utility District 2.3
Mining 2.3
Other, less than 2% each 7.6
See accompanying notes to financial statements.
30
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value(a)
- -------------------------------------------------------------------------------
Bonds and Notes -- 85.4% of Total Net Assets
Convertible Bonds -- 6.0%
Canada -- 1.3%
$ 5,750,000 Nortel Networks Corp.
4.250%, 9/01/2008 $ 5,843,437
1,500,000 Rogers Communications, Inc.
2.000%, 11/26/2005 1,417,500
315,000 TELUS Corp.
6.750%, 6/15/2010, (CAD) 252,288
-----------
7,513,225
-----------
Netherlands -- 0.3%
1,550,000 Infineon Technologies Holding BV
4.250%, 2/06/2007, (EUR) 1,874,528
-----------
United Kingdom -- 2.3%
500,000 COLT Telecom Group PLC
2.000%, 3/29/2006, (EUR) 676,142
4,075,000 COLT Telecom Group PLC
2.000%, 12/16/2006, (EUR) 5,685,897
4,885,000 COLT Telecom Group PLC
2.000%, 4/03/2007, (EUR) 6,883,661
-----------
13,245,700
-----------
United States -- 2.1%
475,000 Amkor Technology, Inc.
5.000%, 3/15/2007(c) 456,594
200,000 Builders Transportation, Inc.
6.500%, 5/01/2011(d) (e) (f) 20
1,000,000 Builders Transportation, Inc.
8.000%, 8/15/2005(d) (e) (f) 100
400,000 Corning, Inc.
3.500%, 11/01/2008 512,500
213,000 Dixie Group, Inc.
7.000%, 5/15/2012 183,180
1,600,000 Human Genome Sciences, Inc.
3.750%, 3/15/2007 1,546,000
500,000 Lam Research Corp.
4.000%, 6/01/2006(c) 502,500
1,165,000 Loews Corp.
3.125%, 9/15/2007 1,150,437
65,000 LSI Logic Corp.
4.000%, 11/01/2006 63,781
2,422,000 Maxtor Corp.
5.750%, 3/01/2012 2,131,360
2,400,000 Nektar Therapeutics
3.500%, 10/17/2007 2,337,000
800,000 Nextel Communications, Inc.
5.250%, 1/15/2010 804,000
355,000 Richardson Electronics, Ltd.
7.250%, 12/15/2006 351,450
1,750,000 Vertex Pharmaceuticals, Inc., 144A
5.750%, 2/15/2011 1,664,687
500,000 Preston Corp.
7.000%, 5/01/2011 450,000
----------
12,153,609
-----------
Total Convertible Bonds
(Identified Cost $27,953,118) 34,787,062
-----------
Non-Convertible Bonds-- 79.4%
Argentina -- 0.6%
$ 2,405,000 Pecom Energia SA, 144A
8.125%, 7/15/2010 $ 2,465,125
3,500,000 Republic of Argentina
8.875%, 3/01/2029(d) 796,250
-----------
3,261,375
-----------
Brazil -- 3.2%
1,927,153 Republic of Brazil
8.000%, 4/15/2014(g) 1,878,974
4,855,000 Republic of Brazil
8.250%, 1/20/2034(c) 4,126,750
7,600,000 Republic of Brazil
8.875%, 4/15/2024 6,954,000
5,808,000 Republic of Brazil
10.125%, 5/15/2027 5,877,696
-----------
18,837,420
-----------
Canada -- 14.6%
5,990,000 British Columbia Province
5.250%, 12/01/2006, (CAD) 4,856,239
4,240,000 British Columbia Province
6.000%, 6/09/2008, (CAD) 3,557,428
8,100,000 Canadian Government
3.500%, 6/01/2004, (CAD) 6,192,453
7,210,000 Canadian Government
4.500%, 9/01/2007, (CAD) 5,766,790
13,540,000 Canadian Government
6.000%, 9/01/2005, (CAD) 10,874,035
18,000,000 Canadian Government
6.000%, 6/01/2008, (CAD) 15,176,293
6,685,000 Manitoba Province
5.750%, 6/02/2008, (CAD) 5,511,092
495,697 New Brunswick FM Project, Inc.
6.470%, 11/30/2027, (CAD)(h) 420,178
1,750,000 Nortel Networks Corp.
6.875%, 9/01/2023 1,671,250
17,000,000 Ontario Province, Medium Term Note
5.700%, 12/01/2008, (CAD) 14,146,827
1,525,000 Ontario Province, Medium Term Note
3.500%, 9/08/2006, (CAD) 1,185,580
6,240,000 Ontario Province
5.900%, 3/08/2006, (CAD) 5,065,776
2,720,000 Saskatchewan Province
5.500%, 6/02/2008, (CAD) 2,241,355
3,750,000 Saskatchewan Province
5.750%, 3/05/2029, (CAD) 2,974,514
8,500,000 Saskatchewan Province,
Zero Coupon, 4/10/2014, (CAD) 3,980,153
850,000 Tembec Industries, Inc.
7.750%, 3/15/2012 820,250
-----------
84,440,213
-----------
Cayman Islands -- 0.8%
1,000,000 Enersis SA, (yankee)
7.400%, 12/01/2016 1,025,313
1,405,000 PDVSA Finance, Ltd., (yankee)
7.400%, 8/15/2016 1,204,787
250,000 PDVSA Finance, Ltd.
9.375%, 11/15/2007 262,500
See accompanying notes to financial statements.
31
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value(a)
- --------------------------------------------------------------------------------
Cayman Islands -- continued
$ 2,650,000 Vale Overseas, Ltd.
8.250%, 1/17/2034 $ 2,424,750
-----------
4,917,350
-----------
Chile -- 0.8%
2,125,000 Empresa Nacional de Electricidad SA
7.875%, 2/01/2027 2,210,865
250,000 Empresa Nacional de Electricidad SA
8.350%, 8/01/2013 282,070
2,250,000 Enersis SA,Chile, 144A
7.375%, 1/15/2014 2,332,681
-----------
4,825,616
-----------
Dominican Republic -- 0.4%
3,390,000 Dominican Republic, 144A
9.040%, 1/23/2013 2,440,800
-----------
Ecuador -- 0.6%
4,225,000 Republic of Ecuador, 144A
0/7.000%, 8/15/2030(c) (h) 3,739,125
-----------
Hong Kong -- 0.9%
4,505,000 Bangkok Bank PCL, 144A
9.025%, 3/15/2029 5,182,633
-----------
Malaysia -- 1.3%
1,750,000 Telekom Malaysia Berhad, 144A
7.875%, 8/01/2025 2,067,690
5,200,000 Tenaga Nasional Berhad, 144A
7.500%, 11/01/2025(c) 5,738,444
-----------
7,806,134
-----------
Mexico -- 2.5%
4,395,000 Grupo Transportacion Ferroviaria Mexicana SA de CV,
(yankee)
0/11.750%, 6/15/2009(h) 4,416,975
1,000,000 Petroleos Mexicanos, (yankee)
9.250%, 3/30/2018 1,227,500
4,350,000 Petroleos Mexicanos, (yankee)
9.500%, 9/15/2027(c) 5,415,750
3,000,000 Petroleos Mexicanos, 144A, (yankee)
8.625%, 12/01/2023 3,450,000
-----------
14,510,225
-----------
Norway -- 3.1%
10,000,000 Kingdom of Norway
5.500%, 5/15/2009, (NOK) 1,592,400
100,575,000 Kingdom of Norway
6.750%, 1/15/2007, (NOK) 16,213,543
-----------
17,805,943
-----------
Philippines -- 1.1%
3,100,000 Bangko Sentral Ng Philipinas, (yankee)
8.600%, 6/15/2027 2,790,000
1,850,000 Philippine Long Distance Telephone Co.
8.350%, 3/06/2017 1,683,500
1,945,313 Quezon Power (Philippines), Ltd., (yankee)
8.860%, 6/15/2017 1,731,328
-----------
6,204,828
-----------
Republic of Korea -- 0.1%
300,000 Samsung Electronics Co., Ltd., 144A
7.700%, 10/01/2027 336,982
-----------
Singapore -- 0.1%
1,050,000 SP PowerAssets, Ltd., Series E, Medium Term Note
3.730%, 10/22/2010, (SGD) 651,300
-----------
South Africa -- 0.4%
$ 11,405,000 Republic of South Africa
12.500%, 12/21/2006, (ZAR) $ 1,931,138
1,470,000 Republic of South Africa
13.500%, 9/15/2015, (ZAR) 292,543
-----------
2,223,681
-----------
Supranational -- 2.1%
22,300,000 International Bank for Reconstruction & Development,
Euro Medium Term Note,
Zero Coupon, 8/20/2007, (NZD) 12,187,835
Sweden -- 1.2%
46,000,000 Kingdom of Sweden
6.500%, 5/05/2008, (SEK) 6,850,986
-----------
United Kingdom -- 0.1%
500,000 Xerox Capital (Europe) PLC
5.250%, 12/03/2004, (EUR) 620,822
-----------
United States -- 42.0%
2,395,000 AES Corp. (The)
7.750%, 3/01/2014 2,397,994
4,210,000 AES Corp. (The)
8.375%, 3/01/2011, (GBP) 7,516,254
1,625,000 AES Corp. (The)
8.875%, 11/01/2027 1,576,250
1,750,000 Altria Group, Inc., Note
7.000%, 11/04/2013 1,928,572
750,000 American Airlines, Inc.
7.024%, 10/15/2009 761,425
9,823,000 APL, Ltd.
8.000%, 1/15/2024 9,282,735
8,000,000 ASIF Global Financing, 144A
2.380%, 2/26/2009, (SGD) 4,744,475
2,829,121 Atlas Air, Inc.
7.680%, 1/02/2014 1,694,248
5,701,460 Atlas Air, Inc., Series 1998-1, Class 1A
7.380%, 1/02/2018(e) 5,412,282
4,037,346 Atlas Air, Inc., Series 1999-1, Class 1A
7.200%, 1/02/2019(e) 3,787,799
500,000 Atlas Air, Inc., Series 1999-1, Class A2
6.880%, 7/02/2009(e) 461,224
1,918,546 Atlas Air, Inc., Series 1999-1, Class B
7.630%, 1/02/2015(e) 1,112,027
866,194 Atlas Air, Inc., Series 2000-1, Class A
8.707%, 1/02/2019(e) 828,601
800,000 Bausch & Lomb, Inc.
7.125%, 8/01/2028 842,706
500,000 Boise Cascade Corp., Series A, Medium Term Note
7.450%, 8/10/2011 528,253
5,614,000 Borden Chemical, Inc.
7.875%, 2/15/2023 5,333,300
1,850,000 Borden Chemical, Inc.
9.200%, 3/15/2021 1,942,500
1,155,000 Calpine Corp.
7.750%, 4/15/2009(c) 820,050
900,000 Calpine Corp.
7.875%, 4/01/2008(c) 655,875
900,000 Calpine Corp.
8.500%, 2/15/2011 661,500
2,075,000 Calpine Corp., 144A
8.750%, 7/15/2013(c) 1,898,625
See accompanying notes to financial statements.
32
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value(a)
- --------------------------------------------------------------------------------
United States -- continued
$ 5,250,000 Charter Communications Holdings LLC
9.625%, 11/15/2009 $ 4,436,250
400,000 Charter Communications Holdings LLC
10.000%, 4/01/2009 342,000
1,725,000 Charter Communications Holdings, Inc., Senior Note
10.000%, 5/15/2011 1,431,750
1,600,000 Coastal Corp.
6.950%, 6/01/2028 1,188,000
250,000 Continental Airlines, Inc.
8.000%, 12/15/2005(c) 232,500
600,802 Continental Airlines, Inc., Class A-1
6.703%, 6/15/2021 591,339
2,210,000 Continental Airlines, Inc., Class C-2
7.434%, 9/15/2004 2,182,409
1,249,292 Continental Airlines, Inc., Series 1997-4, Class 4A
6.900%, 1/02/2018 1,245,720
774,448 Continental Airlines, Inc., Series 1998-1, Class 1B
6.748%, 3/15/2017 642,126
459,958 Continental Airlines, Inc., Series 1999-1, Class C
6.954%, 8/02/2009 397,905
2,064,947 Continental Airlines, Inc., Series 1999-2, Class B
7.566%, 3/15/2020 1,777,063
725,000 Corning, Inc.
5.900%, 3/15/2014 717,750
500,000 Corning, Inc.
6.200%, 3/15/2016 496,250
650,000 Corning, Inc.
6.750%, 9/15/2013 682,865
1,000,000 Corning, Inc.
6.850%, 3/01/2029 929,523
250,000 Corning, Inc.
7.000%, 3/15/2007 250,312
350,000 Corning, Inc., Medium Term Note
8.300%, 4/04/2025 367,360
400,000 CSC Holdings, Inc.
7.875%, 2/15/2018 429,000
250,000 CSC Holdings, Inc.
8.125%, 7/15/2009 268,750
250,000 CSC Holdings, Inc.
8.125%, 8/15/2009 268,750
1,495,000 Cummins, Inc.
7.125%, 3/01/2028 1,480,050
125,000 Dana Corp.
7.000%, 3/15/2028 124,688
1,000,000 Dana Corp.
7.000%, 3/01/2029 997,500
250,000 Dana Corp.
9.000%, 8/15/2011, (EUR) 358,048
4,275,000 Delta Air Lines, Inc.
8.300%, 12/15/2029 2,458,125
250,000 Delta Air Lines, Inc.
10.125%, 5/15/2010 170,000
425,000 Dillard's Department Stores, Inc.
7.875%, 1/01/2023 442,000
5,415,000 Dillard's, Inc.
6.625%, 1/15/2018 5,320,238
550,000 Dillard's, Inc.
7.000%, 12/01/2028 517,000
$ 1,450,000 Dillard's, Inc.
7.130%, 8/01/2018 $ 1,439,125
1,500,000 Dillard's, Inc.
7.750%, 7/15/2026 1,530,000
3,015,000 El Paso Corp.
5.750%, 3/14/2006, (EUR) 3,428,504
400,000 EL Paso Energy Corp., Medium Term Note
7.750%, 1/15/2032(c) 321,000
2,500,000 Federal Home Loan Mortgage Corp.
3.220%, 6/20/2007, (SGD) 1,558,282
7,000,000 Federal Home Loan Mortgage Corp.
4.625%, 2/15/2007, (EUR) 9,073,173
25,000,000 Federal National Mortgage Association
2.290%, 2/19/2009, (SGD) 14,877,957
10,000,000 Federal National Mortgage Association
2.375%, 2/15/2007 10,046,875
34,000,000 Federal National Mortgage Association,
Zero Coupon, 10/29/2007, (NZD) 18,449,512
1,000,000 First Industrial LP
7.600%, 7/15/2028 1,103,736
1,000,000 Foot Locker, Inc.
8.500%, 1/15/2022 1,121,250
150,000 Ford Motor Co.
6.625%, 10/01/2028 137,887
250,000 Ford Motor Credit Co.
6.875%, 2/01/2006 265,907
125,000 Ford Motor Credit Co.
7.250%, 2/22/2005, (GBP) 232,922
900,000 Freeport McMoran Resource Partners, Inc., Senior Note
7.000%, 2/15/2008 945,000
500,000 General Electric Capital Corp., Series E, Medium Term
Note
1.725%, 6/27/2008, (SGD) 290,365
950,000 Georgia-Pacific Corp.
7.250%, 6/01/2028 931,000
3,200,000 Georgia-Pacific Corp.
7.375%, 12/01/2025 3,168,000
2,850,000 Georgia-Pacific Corp.
7.750%, 11/15/2029 2,892,750
250,000 Hasbro, Inc.
6.600%, 7/15/2028 256,875
820,000 HCA, Inc.
7.050%, 12/01/2027 821,770
500,000 HCA, Inc.
7.500%, 12/15/2023 527,528
500,000 HCA, Inc., Medium Term Note
7.580%, 9/15/2025 530,196
1,000,000 HCA, Inc., Senior Note
5.750%, 3/15/2014 999,183
147,000 HMH Properties, Inc., Senior Note, Series B
7.875%, 8/01/2008 152,696
1,515,000 IMC Global, Inc.
6.875%, 7/15/2007(c) 1,590,750
3,800,000 IMC Global, Inc.
7.300%, 1/15/2028 4,009,000
1,555,000 IMC Global, Inc.
7.375%, 8/01/2018 1,656,075
640,000 J.C. Penney Co., Inc.
7.125%, 11/15/2023 23,200
See accompanying notes to financial statements.
33
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
United States -- continued
$ 900,000 J.C. Penney Co., Inc.
7.650%, 8/15/2016 $ 1,050,750
350,000 J.C. Penney Co., Inc.
7.950%, 4/01/2017 413,875
250,000 J.C. Penney Co., Inc.
8.125%, 4/01/2027 281,250
250,000 J.C. Penney Co., Inc. Medium Term Note
6.875%, 10/15/2015 275,625
500,000 La Quinta Properties, Inc., Senior Note
8.875%, 3/15/2011 565,000
770,000 Lucent Technologies, Inc.
5.500%, 11/15/2008(c) 744,975
8,935,000 Lucent Technologies, Inc.
6.450%, 3/15/2029 7,550,075
500,000 McDonald's Corp., Medium Term Note
3.628%, 10/10/2010, (SGD) 305,253
66,000 Missouri Pacific Railroad Co.
4.250%, 1/01/2005 66,136
881,000 Missouri Pacific Railroad Co.
5.000%, 1/01/2045 653,041
125,000 Motorola, Inc.
6.500%, 11/15/2028 126,886
750,000 Nextel Communications, Inc.
9.375%, 11/15/2009 815,625
1,400,000 Nextel Communications, Inc.
9.500%, 2/01/2011 1,596,000
2,700,000 Northern Telecom Capital
7.875%, 6/15/2026 2,767,500
400,000 Owens-Illinois, Inc., Senior Note
7.800%, 5/15/2018 370,000
2,000,000 Pharma Services Intermediate Holding Corp., Senior
Note, 144A Zero Coupon, 4/01/2014(h) 1,145,000
1,000,000 Phillips Van-Heusen Corp.
7.750%, 11/15/2023 1,035,000
250,000 Pioneer Natural Resources Co.
7.200%, 1/15/2028 284,590
1,000,000 Provident Cos., Inc.
7.250%, 3/15/2028(c) 941,014
600,000 Qwest Capital Funding, Inc.
6.500%, 11/15/2018 477,000
10,430,000 Qwest Capital Funding, Inc.
6.875%, 7/15/2028 8,083,250
1,300,000 Qwest Capital Funding, Inc.
7.000%, 8/03/2009(c) 1,140,750
1,420,000 Qwest Capital Funding, Inc.
7.625%, 8/03/2021(c) 1,192,800
1,700,000 Qwest Capital Funding, Inc.
7.750%, 2/15/2031 1,394,000
250,000 Qwest Capital Funding, Inc.
7.900%, 8/15/2010(c) 225,000
750,000 Qwest Corp.
5.625%, 11/15/2008 748,125
290,000 Qwest Corp.
6.875%, 9/15/2033 256,650
350,000 Qwest Corp.
7.250%, 9/15/2025 325,500
500,000 Qwest Corp.
7.500%, 6/15/2023 467,500
233,442 Salton Sea Funding Corp.
7.840%, 5/30/2010 254,451
500,000 Southern California Edison Co.
6.375%, 1/15/2006 535,905
750,000 Southern California Edison Co.
6.650%, 4/01/2029 813,004
600,000 Southern California Edison Co.
7.625%, 1/15/2010 713,648
250,000 Sprint Capital Corp.
6.875%, 11/15/2028 259,623
650,000 Tennessee Gas Pipeline
7.500%, 4/01/2017 671,125
2,100,000 Tennessee Gas Pipeline Co.
7.000%, 10/15/2028 1,963,500
500,000 Tiverton Power Associates LP/Rumford Power
Associates LP, 144A
9.000%, 7/15/2018 387,500
3,550,000 Trico Marine Services, Inc.
8.875%, 5/15/2012(c) 1,846,000
5,000,000 United States Treasury Notes
1.625%, 2/28/2006(c) 5,007,810
15,000,000 United States Treasury Notes
1.875%, 12/31/2005(c) 15,104,880
300,000 UnumProvident Corp.
7.375%, 6/15/2032 286,575
500,000 Williams Cos. (The), Inc.
7.125%, 9/01/2011(c) 525,000
4,900,000 Williams Cos. (The), Inc.
7.500%, 1/15/2031 4,728,500
600,000 Williams Cos. (The), Inc.
7.875%, 9/01/2021 607,500
1,250,000 Williams Holdings of Delaware
6.500%, 12/01/2008 1,298,438
5,500,000 Xerox Capital Trust I
8.000%, 2/01/2027 5,403,750
155,000 Xerox Corp., Medium Term Note
7.200%, 4/01/2016 161,200
------------
243,879,063
------------
Uruguay -- 0.5%
1,600,000 Republic of Uruguay
7.500%, 3/15/2015 1,380,000
2,203,988 Republic of Uruguay
7.875%, 1/15/2033 1,652,991
------------
3,032,991
------------
Venezuela -- 3.0%
190,000 Cerro Negro Finance, Ltd., 144A
7.330%, 12/01/2009 188,100
11,800,000 Cerro Negro Finance, Ltd., 144A
7.900%, 12/01/2020 10,089,000
4,355,000 Petrozuata Finance, Inc., 144A
8.220%, 4/01/2017 3,963,050
3,640,000 Republic of Venezuela
9.250%, 9/15/2027 3,235,962
------------
17,476,112
------------
Total Non-Convertible Bonds
(Identified Cost $423,775,339) 461,231,434
------------
Total Bonds and Notes
(Identified Cost $451,728,457) 496,018,496
------------
See accompanying notes to financial statements.
34
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004 (unaudited)
Shares Description Value (a)
- -------------------------------------------------------------------------------
Preferred Stocks -- 4.6% of Total Net Assets
Philippines -- 0.9%
117,850 Philippine Long Distance Telephone Co. (GDR), $14.00, $ 5,421,100
12/31/2049 -----------
United States -- 3.7%
5,000 Chesapeake Energy Corp. 442,500
51,500 Cummins Capital Trust I 3,572,813
24,550 Host Marriott Financial Trust 1,285,806
38,486 International Paper Capital Trust 1,919,489
5,910 La Quinta Properties 151,828
7,400 Lucent Technologies Capital Trust I, 7.75%, 3/15/2017 9,332,880
15,000 Newell Financial Trust I 699,375
51,900 Owens-Illinois, Inc. (c) 1,764,600
33,750 Pacific Gas and Electric Co.(d)(e) 1,032,750
800 Pacific Gas and Electric Co.(d)(e) 19,520
500 Pacific Gas and Electric Co., Series D(d)(e) 12,800
600 Pacific Gas and Electric Co., Series E(d)(e) 15,408
9,500 Southern California Edison Co. 1,001,360
-----------
21,251,129
-----------
Total Preferred Stocks (Identified Cost $20,779,415) 26,672,229
-----------
Common Stocks -- 3.6%
United States -- 3.6%
162,900 Associated Estates Realty Corp., 1,493,793
182,500 Developers Diversified Realty Corp. (REIT) 7,373,000
216,500 Duke Energy Corp.(c) 4,892,900
117,700 Simon Property Group, Inc. 6,878,388
-----------
Total Common Stocks (Identified Cost $13,620,869) 20,638,081
-----------
Principal
Amount
- -------------------------------------------------------------------------------
Short Term Investments -- 14.2%
$36,260,798 Repurchase Agreement with Investors Bank & Trust
Co. dated 3/31/2004 at 0.76% to be repurchased at
$36,261,564 on 4/01/2004, collateralized by
$2,667,015 Federal National Mortgage Association
Bond, 7.000%, due 3/01/2031 valued at $2,755,195
and $35,152,295 Federal National Mortgage Bond,
1.590%, due 3/25/2033 valued at $35,318,843 36,260,798
1,662,692 Bank of Montreal, 1.01%, due 4/20/2004(i) 1,662,692
4,497,764 Bank of Nova Scotia, 1.01%, due 4/05/2004(i) 4,497,764
6,996,520 BGI Prime Money Market Fund(i) 6,996,520
999,503 BNP Paribas, 1.01%, due 4/16/2004(i) 999,503
999,503 Citigroup, 1.03%, due 6/14/2004(i) 999,503
999,503 Credit Agricole Indosuez, 1.02%, due 4/19/2004(i) 999,503
2,698,659 Credit Agricole Indosuez, 1.03%, due 4/12/2004(i) 2,698,659
999,503 Den Danske Bank, 1.01%, due 4/20/2004(i) 999,503
5,997,019 Fleet National Bank, 1.063%, due 7/21/2004(i) 5,997,019
299,851 Harris Trust & Savings Bank, 1.015%, due 4/30/2004
(i) 299,851
2,498,758 Keybank, 0.98%, due 4/01/2004(i) 2,498,758
1,835,733 Merrill Lynch Premier Institional Fund(i) 1,835,733
6,996,522 Merrimac Cash Fund-Premium Class(i) 6,996,522
1,499,255 Prefco, 1.031%, due 4/26/2004(i) 1,499,255
1,499,255 Sheffield Receivables Corp, 1.031%, due
4/30/2004(i) 1,499,255
499,752 Svenska Handlesbanken, 1.01%, due 4/23/2004(i) 499,752
4,997,516 Wells Fargo, 1.02%, due 4/05/2004(i) 4,997,516
------------
Total Short Term Investments (Identified Cost
$82,238,106) 82,238,106
------------
Total Investments -- 107.8%
(Identified Cost $568,366,847)(b) $625,566,912
Other assets less liabilities (45,506,481)
------------
Total Net Assets -- 100% $580,060,431
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At March 31, 2004, the net unrealized appreciation
on investments based on cost of $568,976,473 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 $ 65,821,320
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (9,230,881)
------------
Net unrealized appreciation $ 56,590,439
============
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.
(c) All or a portion of this security was on loan to
brokers at March 31, 2004.
(d) Non-income producing security.
(e) Issuer filed petition under Chapter 11 of the
Federal Bankruptcy Code.
(f) Security valued at fair value as determined in
good faith by or under the direction of the Board
of Directors.
(g) Pay in kind securities.
(h) 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.
(i) Represents investments of securities lending
collateral.
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 on exchanges not located in
the United States.
REIT Real Estate Investment Trust
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 $51,833,917 or 8.9% of net
assets.
CAD - Canadian Dollar
EUR - Euro
GBP - British Pound
NOK - Norwegian Krone
NZD - New Zealand Dollar
SEK - Swedish Krona
SGD - Singapore Dollar
ZAR - South African Rand
See accompanying notes to financial statements.
35
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of March 31, 2004(unaudited)
Holdings at March 31, 2004 (unaudited)
% of Net Assets
---------------
Sovereigns 18.7
Financial Services 14.0
Government Agencies 12.9
Foreign Local Governments 7.6
Wirelines 6.1
Electronics 5.7
Electric 5.6
Transportation Services 4.0
Integrated Energy 2.6
Pipelines 2.5
Retailers 2.5
Supranationals 2.1
Other, less than 2% each 23.5
See accompanying notes to financial statements.
36
- --------------------------------------------------------------------------------
Statements of Assets & Liabilities
- --------------------------------------------------------------------------------
March 31, 2004 (unaudited)
Core Plus Bond Government High Income
Fund Securities Fund Fund
-------------- --------------- ------------
ASSETS
Investments at cost $316,704,835 $ 94,265,843 $ 52,969,558
Net unrealized appreciation 15,321,403 4,314,972 3,810,528
------------ ------------ ------------
Investments at value 332,026,238 98,580,815 56,780,086
Cash -- -- --
Foreign cash at value (identified cost $174,442 and
$12,152, respectively) 176,473 -- --
Receivable for Fund shares sold 573,550 18,094 25,376
Receivable for securities sold 6,335,007 1,004,537 89,316
Dividends and interest receivable 3,802,771 988,307 994,695
Tax reclaims receivable -- -- 144
Securities lending income receivable 3,043 902 2,108
------------ ------------ ------------
TOTAL ASSETS 342,917,082 100,592,655 57,891,725
------------ ------------ ------------
LIABILITIES
Collateral on securities loaned, at value 26,149,903 24,097,608 7,113,666
Payable for securities purchased 5,100,555 -- --
Payable for Fund shares redeemed 418,806 121,321 67,733
Payable to custodian bank -- 3,837 --
Dividends payable 378,221 26,298 120,889
Management fees payable 109,389 36,068 30,272
Deferred Trustees' fees 150,335 78,463 32,112
Transfer agent fees payable 164,967 10,735 10,170
Accounting and administrative fees payable 17,147 4,268 2,815
Other accounts payable and accrued expenses 43,856 22,004 24,218
------------ ------------ ------------
TOTAL LIABILITIES 32,533,179 24,400,602 7,401,875
------------ ------------ ------------
NET ASSETS $310,383,903 $ 76,192,053 $ 50,489,850
------------ ------------ ------------
NET ASSETS CONSIST OF:
Paid in capital $319,244,058 $ 81,007,186 $132,278,247
Undistributed (overdistributed) net investment income (loss) (233,061) (110,559) (116,057)
Accumulated net realized gain (loss) on investments (23,962,245) (9,019,546) (85,482,868)
Net unrealized appreciation (depreciation) of investments 15,335,151 4,314,972 3,810,528
------------ ------------ ------------
NET ASSETS $310,383,903 $ 76,192,053 $ 50,489,850
------------ ------------ ------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $128,827,816 $ 61,094,298 $ 26,194,717
============ ============ ============
Shares of beneficial interest 10,890,253 5,042,934 5,359,231
============ ============ ============
Net asset value and redemption price per share $ 11.83 $ 12.11 $ 4.89
============ ============ ============
Offering price per share (100/[100-maximum sales charge]
of net asset value) $ 12.39 $ 12.68 $ 5.12
============ ============ ============
Class B shares: (redemption price is equal to net asset
value less any applicable contingent deferred
sales charges)
Net assets $157,640,073 $ 12,365,399 $ 21,424,861
============ ============ ============
Shares of beneficial interest 13,314,140 1,020,463 4,380,820
============ ============ ============
Net asset value and offering price per share $ 11.84 $ 12.12 $ 4.89
============ ============ ============
Class C shares: (redemption price is equal to net
asset value less any applicable contingent deferred
sales charges)
Net assets $ 7,156,826 $ -- $ 2,870,272
============ ============ ============
Shares of beneficial interest 604,123 -- 587,119
============ ============ ============
Net asset value and offering price per share $ 11.85 $ -- $ 4.89
============ ============ ============
Class Y shares:
Net assets $ 16,759,188 $ 2,732,356 $ --
============ ============ ============
Shares of beneficial interest 1,411,225 226,096 --
============ ============ ============
Net asset value, offering and redemption price per share $ 11.88 $ 12.08 $ --
============ ============ ============
See accompanying notes to financial statements.
37
Massachusetts
Limited Term Government Tax Free Income Municipal Income Strategic Income
and Agency Fund Fund Fund Fund
- ----------------------- --------------- ---------------- ----------------
$143,840,578 $84,217,829 $119,598,717 $568,366,847
2,325,694 5,074,307 7,273,486 57,200,065
------------ ----------- ------------ ------------
146,166,272 89,292,136 126,872,203 625,566,912
-- -- 3,099,353 62,969
-- -- -- 12,293
11,501 8,712 2,924 7,814,983
12,242 -- -- 203,416
1,059,401 1,377,541 2,016,089 7,492,280
-- -- -- 8,132
1,584 -- -- 5,179
------------ ----------- ----------- ------------
147,251,000 90,678,389 131,990,569 641,166,164
------------ ----------- ----------- ------------
11,031,906 -- -- 45,977,308
-- -- -- 13,089,569
278,491 35,770 110,926 478,365
-- -- -- --
123,725 73,802 136,807 1,017,387
65,988 46,300 52,801 288,965
48,910 37,187 87,323 69,085
22,150 13,718 18,659 105,059
7,534 5,022 7,326 30,158
28,315 17,982 27,638 49,837
------------ ----------- ------------ ------------
11,607,019 229,781 441,480 61,105,733
------------ ----------- ------------ ------------
$135,643,981 $90,448,608 $131,549,089 $580,060,431
============ =========== ============ ============
$157,822,557 $88,006,485 $126,893,290 $573,716,048
(1,043,062) 1,827 138,086 (313,308)
(23,461,208) (2,634,011) (2,755,773) (50,543,796)
2,325,694 5,074,307 7,273,486 57,201,487
------------ ----------- ------------ ------------
$135,643,981 $90,448,608 $131,549,089 $580,060,431
------------ ----------- ------------ ------------
$111,303,081 $85,306,725 $121,464,523 $263,005,072
============ =========== ============ ============
9,683,333 5,103,412 16,119,958 19,299,574
============ =========== ============ ============
$ 11.49 $ 16.72 $ 7.54 $ 13.63
============ =========== ============ ============
$ 11.85 $ 17.46 $ 7.90 $ 14.27
============ =========== ============ ============
$ 11,260,549 $ 5,141,883 $ 10,084,566 $131,664,496
============ =========== ============ ============
981,615 308,298 1,337,281 9,634,493
============ =========== ============ ============
$ 11.47 $ 16.68 $ 7.54 $ 13.67
============ =========== ============ ============
$ 7,604,014 $ -- $ -- $178,636,137
============ =========== ============ ============
661,972 -- -- 13,077,202
============ =========== ============ ============
$ 11.49 $ -- $ -- $ 13.66
============ =========== ============ ============
$ 5,476,337 $ -- $ -- $ 6,754,726
============ =========== ============ ============
474,843 -- -- 495,443
============ =========== ============ ============
$ 11.53 $ -- $ -- $ 13.63
============ =========== ============ ============
38
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
Core Plus Bond Government High Income Limited Term Government
Fund Securities Fund Fund and Agency Fund
-------------- --------------- ----------- -----------------------
INVESTMENT INCOME
Dividends $ -- $ -- $ 20,868 $ --
Interest 8,269,329 1,874,118 2,171,377 2,861,201
Securities lending income 13,185 10,457 11,474 3,292
Less net foreign taxes withheld -- -- (824) --
----------- ---------- ---------- ----------
8,282,514 1,884,575 2,202,895 2,864,493
----------- ---------- ---------- ----------
Expenses
Management fees 651,583 218,927 181,057 401,495
Service and distribution fees - Class A 161,718 79,563 32,413 199,719
Service and distribution fees - Class B 798,616 65,922 114,413 63,691
Service and distribution fees - Class C 36,463 -- 14,585 40,236
Trustees' fees and expenses 34,351 18,048 9,471 14,090
Accounting and administrative 103,003 26,228 16,949 46,287
Custodian 67,317 27,148 29,869 36,810
Transfer agent fees - Class A, Class B, Class C 539,164 72,354 63,152 131,428
Transfer agent fees - Class Y 31,380 7,742 -- 8,950
Audit and tax services 15,828 12,329 16,691 12,352
Legal 7,635 1,784 1,268 4,169
Shareholder reporting 19,610 8,506 9,135 7,174
Registration 25,029 15,509 19,431 25,801
Miscellaneous 14,814 5,786 4,451 7,041
----------- ---------- ---------- ----------
Total expenses 2,506,511 559,846 512,885 999,243
Less reimbursement/waiver -- -- -- --
----------- ---------- ---------- ----------
Net expenses 2,506,511 559,846 512,885 999,243
----------- ---------- ---------- ----------
Net investment income 5,776,003 1,324,729 1,690,010 1,865,250
----------- ---------- ---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on:
Investments - net 6,998,985 (4,095) 1,814,823 892,814
Foreign currency transactions - net 78,432 -- -- --
Change in unrealized appreciation (depreciation) of:
Investments - net 49,298 37,460 740,699 (215,228)
Foreign currency transactions - net 6,428 -- -- --
----------- ---------- ---------- ----------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 7,133,143 33,365 2,555,522 677,586
----------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $12,909,146 $1,358,094 $4,245,532 $2,542,836
=========== ========== ========== ==========
See accompanying notes to financial statements.
39
Massachusetts
Tax Free Income Municipal Income Strategic Income
Fund Fund Fund
- --------------- ---------------- ----------------
$ -- $ -- $ 1,185,400
2,342,077 3,431,782 13,603,497
-- -- 31,680
-- -- (21,965)
---------- ---------- -----------
2,342,077 3,431,782 14,798,612
========== ========== ===========
272,755 312,522 1,358,500
149,454 153,428 239,659
27,578 53,012 632,732
-- -- 569,819
11,249 20,814 25,281
29,837 43,850 141,497
24,035 27,880 86,517
78,483 110,589 400,657
-- -- 8,647
12,709 13,086 18,708
2,441 4,258 10,929
11,985 11,824 27,886
9,425 18,528 37,493
4,994 4,906 13,597
---------- ---------- -----------
634,945 774,697 3,571,922
-- -- (4,547)
---------- ---------- -----------
634,945 774,697 3,567,375
---------- ---------- -----------
1,707,132 2,657,085 11,231,237
---------- ---------- -----------
50,817 (652,504) 8,820,061
-- -- 360,200
1,636,926 2,931,859 24,880,094
-- -- (140,262)
---------- ---------- -----------
1,687,743 2,279,355 33,920,093
---------- ---------- -----------
$3,394,875 $4,936,440 $45,151,330
========== ========== ===========
40
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Core Plus Bond
Fund
-----------------------------------------------
For the Period
Six Months January 1, 2003
Ended through Year Ended
March 31, 2004 September 30, December 31,
(unaudited) 2003 2002
-------------- --------------- ------------
FROM OPERATIONS:
Net investment income $ 5,776,003 $ 9,527,954 $ 17,087,741
Net realized gain (loss) on investments
and foreign currency transactions 7,077,417 3,864,683 (18,724,816)
Net change in unrealized appreciation (depreciation)
of investments 55,726 5,549,963 9,019,633
------------ ------------ ------------
Increase (decrease) in net assets resulting from
operations 12,909,146 18,942,600 7,382,558
------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (3,397,516) (4,447,575) (8,791,213)
Class B (3,353,433) (4,047,373) (6,316,934)
Class C (153,246) (220,936) (498,081)
Class Y (502,272) (668,802) (1,050,339)
------------ ------------ ------------
(7,406,467) (9,384,686) (16,656,567)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS (15,823,736) (5,058,236) (4,698,171)
------------ ------------ ------------
Total increase (decrease) in net assets (10,321,057) 4,499,678 (13,972,180)
NET ASSETS
Beginning of period 320,704,960 316,205,282 330,177,462
------------ ------------ ------------
End of period $310,383,903 $320,704,960 $316,205,282
============ ============ ============
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ (233,061) $ 1,397,403 $ 127,794
============ ============ ============
Government
Securities Fund
-----------------------------------------------
For the Period
Six Months January 1, 2003
Ended through Year Ended
March 31, 2004 September 30, December 31,
(unaudited) 2003 2002
-------------- --------------- ------------
FROM OPERATIONS:
Net investment income $ 1,324,729 $ 2,088,839 $ 3,478,800
Net realized gain (loss) on investments
and foreign currency transactions (4,095) 2,186,050 1,754,365
Net change in unrealized appreciation (depreciation)
of investments 37,460 (1,862,032) 6,101,934
------------ ------------- ------------
Increase (decrease) in net assets resulting from
operations 1,358,094 2,412,857 11,335,099
------------ ------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (1,173,329) (2,185,576) (3,186,452)
Class B (193,917) (410,467) (530,909)
Class C -- -- --
Class Y (49,465) (133,483) (289,414)
------------ ------------- ------------
(1,416,711) (2,729,526) (4,006,775)
------------ ------------- ------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS (10,669,080) (12,801,156) 4,088,509
------------ ------------- ------------
Total increase (decrease) in net assets (10,727,697) (13,117,825) 11,416,833
NET ASSETS
Beginning of period 86,919,750 100,037,575 88,620,742
------------ ------------- ------------
End of period $ 76,192,053 $ 86,919,750 $100,037,575
============ ============= ============
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ (110,559) $ (18,577) $ (16,246)
============ ============= ============
See accompanying notes to financial statements.
41
High Income Limited Term Government
Fund and Agency Fund
- ----------------------------------------------- -----------------------------------------------
For the Period For the Period
Six Months January 1, 2003 Six Months January 1, 2003
Ended through Year Ended Ended through Year Ended
March 31, 2004 September 30, December 31, March 31, 2004 September 30, December 31,
(unaudited) 2003 2002 (unaudited) 2003 2002
- -------------- --------------- ------------ -------------- --------------- ------------
$ 1,690,010 $ 2,691,980 $ 4,914,959 $ 1,865,250 $ 2,567,365 $ 4,880,802
1,814,823 1,766,058 (20,594,051) 892,814 1,309,685 2,104,690
740,699 4,199,027 9,402,597 (215,228) (2,298,347) 3,563,852
----------- ----------- ------------ ------------ ------------ ------------
4,245,532 8,657,065 (6,276,495) 2,542,836 1,578,703 10,549,344
----------- ----------- ------------ ------------ ------------ ------------
(897,007) (1,358,749) (2,389,509) (2,304,387) (3,580,991) (4,982,529)
(707,376) (1,211,401) (2,310,655) (216,512) (420,988) (580,172)
(90,109) (138,738) (257,610) (136,644) (230,278) (272,616)
-- -- -- (128,680) (261,630) (402,890)
----------- ----------- ------------ ------------ ------------ ------------
(1,694,492) (2,708,888) (4,957,774) (2,786,223) (4,493,887) (6,238,207)
----------- ----------- ------------ ------------ ------------ ------------
(2,132,963) (3,967,380) (13,012,003) (11,565,247) 11,483,457 1,774,899
----------- ----------- ------------ ------------ ------------ ------------
418,077 1,980,797 (24,246,272) (11,808,634) 8,568,273 6,086,036
50,071,773 48,090,976 72,337,248 147,452,615 138,884,342 132,798,306
----------- ----------- ------------ ------------ ------------ ------------
$50,489,850 $50,071,773 $ 48,090,976 $135,643,981 $147,452,615 $138,884,342
=========== =========== ============ ============ ============ ============
$ (116,057) $ (111,575) $ (128,268) $ (1,043,062) $ (122,089) $ (116,800)
=========== =========== ============ ============ ============ ============
42
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Massachusetts
Tax Free Income Fund
-----------------------------------------------
For the Period
Six Months January 1, 2003
Ended through Year Ended
March 31, 2004 September 30, December 31,
(unaudited) 2003 2002
-------------- --------------- ------------
FROM OPERATIONS:
Net investment income $ 1,707,132 $ 2,789,342 $ 4,082,640
Net realized gain (loss) on investments and
foreign currency transactions 50,817 877,919 (916,633)
Net change in unrealized appreciation (depreciation)
of investments 1,636,926 (851,243) 4,433,497
----------- ----------- -----------
Increase in net assets resulting from operations 3,394,875 2,816,018 7,599,504
----------- ----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (1,636,754) (2,628,195) (3,827,503)
Class B (88,020) (161,498) (276,899)
Class C -- -- --
Class Y -- -- --
----------- ----------- -----------
(1,724,774) (2,789,693) (4,104,402)
----------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS (3,774,233) (6,268,959) (2,388,573)
----------- ----------- -----------
Total increase (decrease) in net assets (2,104,132) (6,242,634) 1,106,529
NET ASSETS
Beginning of period 92,552,740 98,795,374 97,688,845
----------- ----------- -----------
End of period $90,448,608 $92,552,740 $98,795,374
=========== =========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ 1,827 $ 19,469 $ 19,970
=========== =========== ===========
Municipal Income
Fund
-----------------------------------------------
For the Period
Six Months January 1, 2003
Ended through Year Ended
March 31, 2004 September 30, December 31,
(unaudited) 2003 2002
-------------- --------------- ------------
FROM OPERATIONS:
Net investment income $ 2,657,085 $ 4,304,402 $ 6,897,727
Net realized gain (loss) on investments and
foreign currency transactions (652,504) 1,148,331 2,710,093
Net change in unrealized appreciation (depreciation)
of investments 2,931,859 (1,633,204) 872,708
------------ ------------ ------------
Increase in net assets resulting from operations 4,936,440 3,819,529 10,480,528
------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (2,490,556) (4,027,619) (6,303,086)
Class B (175,459) (290,127) (507,956)
Class C -- -- --
Class Y -- -- --
------------ ------------ ------------
(2,666,015) (4,317,746) (6,811,042)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS (8,511,013) (7,043,056) (10,738,646)
------------ ------------ ------------
Total increase (decrease) in net assets (6,240,588) (7,541,273) (7,069,160)
NET ASSETS
Beginning of period 137,789,677 145,330,950 152,400,110
------------ ------------ ------------
End of period $131,549,089 $137,789,677 $145,330,950
============ ============ ============
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ 138,086 $ 147,016 $ 146,7685
============ ============ ============
See accompanying notes to financial statements.
43
Strategic Income
Fund
- -----------------------------------------------
For the Period
Six Months January 1, 2003
Ended through Year Ended
March 31, 2004 September 30, December 31,
(unaudited) 2003 2002
- -------------- --------------- ------------
$ 11,231,237 $ 12,189,949 $ 15,106,370
9,180,261 (4,553,646) (21,248,207)
24,739,832 47,707,584 36,560,725
------------ ------------ ------------
45,151,330 55,343,887 30,418,888
------------ ------------ ------------
(6,632,317) (6,332,331) (5,702,309)
(3,736,562) (5,143,216) (5,565,705)
(3,240,398) (2,069,124) (1,567,724)
(139,986) (95,199) (42,564)
------------ ------------ ------------
(13,749,263) (13,639,870) (12,878,302)
------------ ------------ ------------
221,277,519 66,108,057 (23,656,108)
------------ ------------ ------------
252,679,586 107,812,074 (6,115,522)
327,380,845 219,568,771 225,684,293
------------ ------------ ------------
$580,060,431 $327,380,845 $219,568,771
============ ============ ============
$ (313,308) $ 2,204,718 $ 3,205,477
============ ============ ============
44
- --------------------------------------------------------------------------------
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
3/31/2004(g) $11.63 $0.24(c) $ 0.27 $ 0.51 $(0.31) $ -- $(0.31)
9/30/2003(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
3/31/2004(g) 11.62 0.19(c) 0.28 0.47 (0.25) -- (0.25)
9/30/2003(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
3/31/2004(g) 11.63 0.19(c) 0.28 0.47 (0.25) -- (0.25)
9/30/2003(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
3/31/2004(g) 11.69 0.25(c) 0.27 0.52 (0.33) -- (0.33)
9/30/2003(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
3/31/2004(g) $12.09 $0.21(c) $ 0.03 $ 0.24 $(0.22) $ -- $(0.22)
9/30/2003(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
3/31/2004(g) 12.10 0.16(c) 0.03 0.19 (0.17) -- (0.17)
9/30/2003(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)
(a) A sales charge for Class A 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 (loss) 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 Class B,
and $.01 for Class C 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 shares.
For the Government Securities Fund, the effect of this change was to
decrease net investment income per share by $.05 for Class A and $.04 for
both Class B and Class Y 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.
See accompanying notes to financial statements.
45
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
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) (%)(b) (%)(b) rate(%)
- ---------- ------ ----------- -------- -------------- ---------
$11.83 4.4 $128,828 1.21 4.06 47
11.63 6.4 133,887 1.28 4.31 61
11.28 2.8 147,647 1.18 5.65 65
11.59 7.2 173,836 1.09 6.26 84
11.52 7.4 174,969 1.04 7.03 83
11.51 (0.3) 213,769 0.97 6.87 63
12.36 8.0 221,799 1.01 6.44 65
11.84 4.1 157,640 1.96 3.31 47
11.62 5.8 161,317 2.03 3.55 61
11.28 2.1 141,188 1.93 4.90 65
11.59 6.5 127,520 1.84 5.49 84
11.51 6.5 100,353 1.79 6.28 83
11.51 (1.1) 89,213 1.72 6.12 63
12.36 7.2 64,240 1.76 5.69 65
11.85 4.1 7,157 1.96 3.32 47
11.63 5.8 7,612 2.03 3.55 61
11.29 2.1 9,024 1.93 4.90 65
11.60 6.5 11,470 1.84 5.52 84
11.52 6.5 12,541 1.79 6.28 83
11.52 (1.1) 14,872 1.72 6.12 63
12.37 7.2 8,969 1.76 5.69 65
11.88 4.5 16,759 0.95 4.32 47
11.69 6.9 17,889 0.73 4.85 61
11.33 3.5 18,346 0.67 6.15 65
11.63 7.8 17,351 0.67 6.68 84
11.54 7.6 14,013 0.67 7.40 83
11.54 (0.0)(e) 10,320 0.72 7.12 63
12.38 8.2 9,289 0.76 6.69 65
$12.11 2.0 $ 61,094 1.28 3.46 36
12.09 2.7 68,882 1.33 3.03 41
12.12 13.4 76,338 1.25 3.90 52
11.18 4.9 70,551 1.39 4.46 317
11.18 12.9 70,909 1.41 5.69 622
10.47 (6.4) 84,904 1.36 6.00 313
11.90 9.0 103,032 1.38 5.80 106
12.12 1.7 12,365 2.03 2.71 36
12.10 2.2 15,101 2.08 2.29 41
12.12 12.6 16,878 2.00 3.15 52
11.17 4.1 13,249 2.14 3.71 317
11.18 12.1 10,343 2.16 4.94 622
10.47 (7.1) 9,430 2.11 5.25 313
11.90 8.2 9,657 2.13 5.05 106
(e) Amount is less than one tenth of one percent.
(f) For the nine months ended September 30, 2003.
(g) For the six months ended March 31, 2004 (unaudited).
46
- --------------------------------------------------------------------------------
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
3/31/2004(f) $12.07 $0.20(c) $ 0.02 $0.22 $(0.21) $-- $(0.21)
9/30/2003(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
3/31/2004(f) 4.65 $0.17(c) $ 0.24 $0.41 $(0.17) -- $(0.17)
9/30/2003(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
3/31/2004(f) 4.65 0.15(c) 0.24 0.39 (0.15) -- (0.15)
9/30/2003(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
3/31/2004(f) 4.65 0.15(c) 0.24 0.39 (0.15) -- (0.15)
9/30/2003(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 Government and
Agency Fund**
Class A
3/31/2004(f) $11.51 $0.16(c) $ 0.05 $0.21 $(0.23) -- $(0.23)
9/30/2003(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)
(a) A sales charge for Class A 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 (loss) 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 the Government Securities Fund,
was to decrease net investment income per share by $.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. For High Income Fund, the effect of this change
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 Government and Agency
Fund, the effect of the change was to decrease net investment income per
share by $.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.
See accompanying notes to financial statements.
47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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) (%)(b) (%)(b) rate(%)
- ---------- ------ ----------- -------- -------------- ---------
$12.08 1.9 $ 2,732 1.40 3.34 36
12.07 2.9 2,936 0.96 3.40 41
12.11 13.7 6,822 0.87 4.28 52
11.17 5.3 4,821 1.00 4.85 317
11.17 13.5 4,593 1.01 6.09 622
10.44 (6.3) 2,754 1.11 6.25 313
11.88 9.3 3,404 1.13 6.05 106
$ 4.89 8.9 $ 26,195 1.61 6.90 26
4.65 19.5 23,809 1.71 7.62 41
4.12 (8.9) 22,454 1.58 8.85 114
4.94 (10.7) 33,471 1.47 11.31 65
6.21 (16.1) 46,960 1.36 11.47 60
8.30 4.0 74,589 1.28 10.22 89
8.86 (1.8) 73,023 1.32 9.81 75
4.89 8.5 21,425 2.36 6.16 26
4.65 18.8 23,405 2.46 6.89 41
4.12 (9.7) 23,031 2.33 8.10 114
4.95 (11.3) 34,713 2.22 10.56 65
6.22 (16.6) 47,793 2.11 10.72 60
8.30 3.3 70,218 2.03 9.47 89
8.85 (2.5) 60,322 2.07 9.06 75
4.89 8.5 2,870 2.36 6.15 26
4.65 18.8 2,858 2.46 6.89 41
4.12 (9.5) 2,605 2.33 8.10 114
4.94 (11.5) 4,153 2.22 10.54 65
6.22 (16.6) 5,369 2.11 10.72 60
8.30 3.3 9,138 2.03 9.47 89
8.85 (4.1) 7,732 2.07 9.06 75
$11.49 1.9 $111,303 1.33 2.73 46
11.51 1.2 117,225 1.37 2.41 53
11.73 8.2 106,013 1.35 3.66 88
11.36 6.9 109,189 1.42 4.52 275
11.16 8.3 118,833 1.40 6.18 384
10.97 (0.7) 149,756 1.33 5.91 400
11.70 6.5 194,032 1.31 5.81 1,376
(e) For the nine months ended September 30, 2003.
(f) For the six months ended March 31, 2004 (unaudited).
* The financial information for periods prior to March 31, 2004 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 Asset Management 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 periods prior to March 31, 2004 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 Government and Agency Fund, effective September 12,
2003. Prior to September 1, 2003, the predecessor Fund was advised by CDC
IXIS Asset Management 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.
48
- --------------------------------------------------------------------------------
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 Government and Agency Fund* (Continued)
Class B
3/31/2004(h) $11.49 $0.12(c) $ 0.05 $ 0.17 $(0.19) $ -- $(0.19)
9/30/2003(g) 11.71 0.15(c) (0.06) 0.09 (0.31) -- (0.31)
12/31/2002 11.34 0.35(c) 0.48 0.83 (0.46) -- (0.46)
12/31/2001(d) 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
3/31/2004(h) 11.50 0.12(c) 0.06 0.18 (0.19) -- (0.19)
9/30/2003(g) 11.72 0.15(c) (0.06) 0.09 (0.31) -- (0.31)
12/31/2002 11.35 0.35(c) 0.48 0.83 (0.46) -- (0.46)
12/31/2001(d) 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
3/31/2004(h) 11.55 0.17(c) 0.06 0.23 (0.25) -- (0.25)
9/30/2003(g) 11.78 0.25(c) (0.08) 0.17 (0.40) -- (0.40)
12/31/2002 11.41 0.48(c) 0.48 0.96 (0.59) -- (0.59)
12/31/2001(d) 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)
Massachusetts Tax Free Income Fund
Class A
3/31/2004(h) $16.41 $0.31 $ 0.32 $ 0.63 $(0.32) $ -- $(0.32)
9/30/2003(g) 16.40 0.49 0.01 0.50 (0.49) -- (0.49)
12/31/2002 15.82 0.67 0.59 1.26 (0.68) -- (0.68)
12/31/2001(d) 16.06 0.75 (0.24) 0.51 (0.75) -- (0.75)
12/31/2000 15.48 0.82 0.57 1.39 (0.81) -- (0.81)
12/31/1999 17.02 0.82 (1.50) (0.68) (0.83) (0.03) (0.86)
12/31/1998 17.13 0.86 (0.04) 0.82 (0.85) (0.08) (0.93)
Class B
3/31/2004(h) 16.37 0.26 0.31 0.57 (0.26) -- (0.26)
9/30/2003(g) 16.36 0.41 0.01 0.42 (0.41) -- (0.41)
12/31/2002 15.78 0.57 0.58 1.15 (0.57) -- (0.57)
12/31/2001(d) 16.03 0.64 (0.24) 0.40 (0.65) -- (0.65)
12/31/2000 15.45 0.71 0.58 1.29 (0.71) -- (0.71)
12/31/1999 16.98 0.71 (1.49) (0.78) (0.72) (0.03) (0.75)
12/31/1998 17.09 0.74 (0.03) 0.71 (0.74) (0.08) (0.82)
(a) A sales charge for Class A shares and a contingent deferred sales charge
for Class B and Class C shares are not reflected in total return
calculations.
(b) Computed on an annualized basis for periods less than one year
(c) Per share net investment income (loss) 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 and accreting discount on debt securities. The
effect of this change for the year ended December 31, 2001, for Limited
Term Government and Agency Fund, was to decrease net investment income per
share by $.04 for Class B, C and 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
Massachusetts Tax Free Income Fund, the effect of this change was to
increase the ratio of net investment income to average net assets from
4.66% to 4.67% for Class A and from 4.02% to 4.03% 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) Had certain expenses not been reduced during the period, total returns
would have been lower.
(f) 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.
See accompanying notes to financial statements.
49
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) (%) (b) (%) (b) rate(%)
- ---------- ------- ----------- -------- -------------- ---------
$11.47 1.5 $ 11,261 1.98 2.09 46
11.49 0.7 14,637 2.02 1.77 53
11.71 7.5 16,263 2.00 3.01 88
11.34 6.2 14,317 2.07 3.85 275
11.14 7.7 11,884 2.05 5.53 384
10.95 (1.4) 14,601 1.98 5.26 400
11.69 5.9 18,116 1.96 5.16 1,376
11.49 1.6 7,604 1.98 2.09 46
11.50 0.7 8,704 2.02 1.77 53
11.72 7.5 8,079 2.00 3.01 88
11.35 6.2 5,851 2.07 3.89 275
11.15 7.7 6,617 2.05 5.53 384
10.96 (1.4) 9,054 1.98 5.26 400
11.70 5.9 13,962 1.96 5.16 1,376
11.53 2.0 5,476 1.09 2.98 46
11.55 1.5 6,886 0.93 2.87 53
11.78 8.6 8,529 0.88 4.14 88
11.41 7.4 3,441 0.95 4.98 275
11.20 8.8 3,254 0.95 6.63 384
11.00 (0.3) 7,086 0.98 6.26 400
11.73 6.9 8,345 0.96 6.16 1,351
$16.72 3.9 $ 85,307 1.36 3.79 9
16.41 3.1 86,368 1.38 3.99 9
16.40 8.1 92,053 1.34 4.19 33
15.82 3.2(e) 89,376 1.35(f) 4.67 60
16.06 9.3(e) 91,785 1.13(f) 5.24 68
15.48 (4.1)(e) 97,270 1.00(f) 5.02 73
17.02 4.9(e) 113,910 1.00(f) 4.93 125
16.68 3.5 5,142 2.01 3.17 9
16.37 2.6 6,185 2.03 3.34 9
16.36 7.4 6,742 1.99 3.54 33
15.78 2.5(e) 8,313 2.00(f) 4.03 60
16.03 8.6(e) 8,715 1.78(f) 4.59 68
15.45 (4.7)(e) 8,874 1.65(f) 4.37 73
16.98 4.2(e) 9,026 1.65(f) 4.28 125
(g) For the nine months ended September 30, 2003.
(h) For the six months ended March 31, 2004 (unaudited).
* The financial information for periods prior to March 31, 2004 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 Government and Agency Fund, effective September 12, 2003. Prior to
September 1, 2003, the predecessor Fund was advised by CDC IXIS Asset
Management 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.
50
- --------------------------------------------------------------------------------
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
---------- ---------- -------------- ---------- -------------- ------------- -------------
Municipal Income Fund
Class A
3/31/2004(h) $ 7.41 $0.15 $ 0.13 $ 0.28 $(0.15) $ -- $(0.15)
9/30/2003(g) 7.43 0.23 (0.02) 0.21 (0.23) -- (0.23)
12/31/2002 7.25 0.34 0.18 0.52 (0.34) -- (0.34)
12/31/2001 (d) 7.39 0.36 (0.14) 0.22 (0.36) -- (0.36)
12/31/2000 7.17 0.40 0.21 0.61 (0.39) -- (0.39)
12/31/1999 7.76 0.39 (0.59) (0.20) (0.39) -- (0.39)
12/31/1998 7.75 0.39 0.01 0.40 (0.39) -- (0.39)
Class B
3/31/2004(h) 7.41 0.12 0.13 0.25 (0.12) -- (0.12)
9/30/2003(g) 7.44 0.19 (0.03) 0.16 (0.19) -- (0.19)
12/31/2002 7.25 0.29 0.19 0.48 (0.29) -- (0.29)
12/31/2001 (d) 7.39 0.31 (0.14) 0.17 (0.31) -- (0.31)
12/31/2000 7.17 0.35 0.21 0.56 (0.34) -- (0.34)
12/31/1999 7.76 0.33 (0.59) (0.26) (0.33) -- (0.33)
12/31/1998 7.75 0.33 0.01 0.34 (0.33) -- (0.33)
Strategic Income Fund*
Class A
3/31/2004(h) $12.57 $0.37(c) $ 1.16 $ 1.53 $(0.47) $ -- $(0.47)
9/30/2003(g) 10.72 0.57(c) 1.93 2.50 (0.65) -- (0.65)
12/31/2002 9.88 0.75(c) 0.72 1.47 (0.63) -- (0.63)
12/31/2001(d) 10.80 0.91(c) (0.92) (0.01) (0.91) -- (0.91)
12/31/2000 11.65 0.99(c) (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
3/31/2004(h) 12.59 0.32(c) 1.15 1.47 (0.39) -- (0.39)
9/30/2003(g) 10.71 0.51(c) 1.92 2.43 (0.55) -- (0.55)
12/31/2002 9.88 0.67(c) 0.73 1.40 (0.57) -- (0.57)
12/31/2001(d) 10.79 0.83(c) (0.90) (0.07) (0.84) -- (0.84)
12/31/2000 11.65 0.90(c) (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)
(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. Periods
of less than one year are not annualized.
(b) Computed on an annualized basis for period 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 accreting discount and amortizing premium on debt securities. The
effect of this change for the year ended December 31, 2001, for Municipal
Income Fund, 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 to 4.14% for Class B shares. 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% and 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.
(e) Had certain expenses not been reduced during the period, total returns
would have been lower.
(f) 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.
See accompanying notes to financial statements.
51
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) (%) (b) (%) (b) rate (%)
- ---------- ------- ----------- -------- -------------- ---------
$ 7.54 3.8 $121,465 1.10 4.05 10
7.41 2.9 126,906 1.10 4.14 42
7.43 7.3 133,005 1.06 4.67 33
7.25 3.0 137,852 1.07 4.89 80
7.39 8.8 142,539 0.95 5.39 156
7.17 (2.8) 152,829 0.93 5.13 137
7.76 5.3 172,643 0.93 5.03 26
7.54 3.5 10,085 1.85 3.30 10
7.41 2.2 10,884 1.85 3.39 42
7.44 6.7 12,326 1.81 3.92 33
7.25 2.2 14,549 1.82 4.14 80
7.39 8.0 14,520 1.70 4.64 156
7.17 (3.5) 15,644 1.68 4.38 137
7.76 4.5 15,878 1.68 4.28 26
$13.63 12.3(e) $263,005 1.22(f) 5.56 13
12.57 23.7(e) 140,576 1.28(f) 6.49 27
10.72 15.5 92,303 1.33 7.38 30
9.88 (0.1) 94,156 1.31 8.77 10
10.80 0.7 116,986 1.24 8.73 13
11.65 12.2 124,869 1.21 9.09 19
11.37 (1.7) 127,306 1.19 8.33 33
13.67 11.8(e) 131,664 1.97(f) 4.81 13
12.59 23.0(e) 118,217 2.03(f) 5.73 27
10.71 14.6 98,501 2.08 6.63 30
9.88 (0.8) 102,159 2.06 8.02 10
10.79 (0.2) 120,200 1.99 7.98 13
11.65 11.3 127,723 1.96 8.34 19
11.37 (2.5) 134,049 1.94 7.58 33
(g) For the nine months ended September 30, 2003.
(h) For the six months ended March 31, 2004 (unaudited).
* The financial information for periods prior to March 31, 2004 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 Asset Management 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.
52
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Income (loss) from
investment operations: Less distributions:
--------------------------------------- ------------------------------------------
Net asset Net realized
value, and Dividends Distributions
beginning Net unrealized Total from from net from net
of the investment gain (loss)on investment investment realized Total
period income investments operations income capital gains distributions
--------- ---------- ------------- ---------- ---------- ------------- -------------
Strategic Income Fund*
(continued)
Class C
03/31/2004(j) $12.58 $0.32(c) $1.15 $ 1.47 $(0.39) $ -- $(0.39)
09/30/2003(i) 10.70 0.50(c) 1.93 2.43 (0.55) -- (0.55)
12/31/2002 9.87 0.67(c) 0.73 1.40 (0.57) -- (0.57)
12/31/2001(d) 10.78 0.83(c) (0.91) (0.08) (0.83) -- (0.83)
12/31/2000 11.64 0.90(c) (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
03/31/2004(j) 12.58 0.39(c) 1.15 1.54 (0.49) -- (0.49)
09/30/2003(i) 10.74 0.60(c) 1.93 2.53 (0.69) -- (0.69)
12/31/2002 9.90 0.80(c) 0.71 1.51 (0.67) -- (0.67)
12/31/2001(d) 10.81 0.94(c) (0.92) 0.02 (0.93) -- (0.93)
12/31/2000 11.65 0.96(c) (0.84) 0.12 (0.96) -- (0.96)
12/31/1999(h) 11.45 0.86 (0.56) 0.30 (0.10) -- (0.10)
(a) A contingent deferred sales charge for Class C shares is not reflected in
total return calculations. Periods of less than one year are not
annualized.
(b) Computed on an annualized basis for period 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 Fund has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. For the year ended December 31,
2001, 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 8.04% 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.
(e) Had certain expenses not been reduced during the period, total returns
would have been lower.
(f) 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.
* The financial information for periods prior to March 31, 2004 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 Asset Management 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 is
September 30.
(g) Amount is less than $500.
(h) For the period December 1, 1999 (inception) through December 31, 1999.
(i) For the nine months ended September 30, 2003.
(j) For the six months ended March 31, 2004 (unaudited).
See accompanying notes to financial statements.
53
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) (%)(b) (%)(b) rate(%)
- ---------- ------- ----------- -------- -------------- ---------
$13.66 11.8(e) $178,636 1.97(f) 4.81 13
12.58 23.0(e) 66,394 2.03(f) 5.73 27
10.70 14.7 27,727 2.08 6.63 30
9.87 (0.8) 28,925 2.06 8.02 10
10.78 (0.2) 37,208 1.99 7.98 13
11.64 11.3 40,265 1.96 8.34 19
11.36 (2.5) 45,457 1.94 7.58 33
13.63 12.4(e) 6,755 1.00(f) 5.79 13
12.58 24.0(e) 2,193 0.97(f) 6.83 27
10.74 15.9 1,039 0.94 7.77 30
9.90 0.3 445 0.93 9.10 10
10.81 1.0 335 0.90 9.07 13
11.65 2.7 -(g) 0.96 9.34 19
54
NOTES TO
FINANCIAL STATEMENTS
55
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
1. Organization. CDC Nvest Funds Trust I, 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 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 fixed income funds of the Trusts, the financial statements of the other
Funds of the Trusts are presented in separate reports. The following Funds are
included in this report.
CDC Nvest Funds Trust I:
Loomis Sayles Core Plus Bond Fund (the "Core Plus Bond Fund")
Loomis Sayles Government Securities Fund (the "Government Securities Fund")
CDC Nvest Funds Trust II:
Loomis Sayles Massachusetts Tax Free Income Fund (the "Massachusetts Tax Free
Income Fund")
Loomis Sayles Funds II:
Loomis Sayles High Income Fund (the "High Income Fund")
Loomis Sayles Limited Term Government and Agency Fund (the "Limited Term
Government and Agency Fund"), formerly Loomis Sayles Limited Term U.S.
Government Fund
Loomis Sayles Municipal Income Fund (the "Municipal Income Fund")
Loomis Sayles Strategic Income Fund (the "Strategic Income Fund")
Core Plus Bond Fund, Limited Term Government and Agency 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. Massachusetts Tax Free Income Fund
and Municipal Income Fund each offer Class A and Class B shares. Class A shares
of all Funds except Limited Term Government and Agency Fund and Massachusetts
Tax Free Income Fund are sold with a maximum front end sales charge of 4.50%.
Class A shares of Limited Term Government and Agency Fund are sold with a
maximum front end sales charge of 3.00% and Class A shares of Massachusetts Tax
Free Income Fund are sold with a maximum front end sales charge of 4.25%. 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 do not pay a front end sales charge, 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 generally 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.
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 Funds 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. 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, if no sale was reported and in the case of over-the-counter
securities not so listed, the last reported bid price. Securities traded on the
NASDAQ National Market are valued at the NASDAQ Official Closing Price ("NOCP"),
or if lacking a NOCP, at the most recent bid quotation on the NASDAQ National
Market. 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.
When fair valuing certain securities the Funds may, among other things, use
modeling tools or other processes that may take into account factors such as
securities market activity and/or significant events that occur after the close
of the foreign market and before the Fund calculates its net asset value.
56
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
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 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 market
discounts, capital loss carryforwards, 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.
3. Purchases and Sales of Securities. For the six months ended March 31, 2004,
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 $59,982,600 $80,899,640 $ 82,038,484 $72,533,011
Government Securities Fund 28,027,482 37,992,981 -- --
High Income Fund -- -- 13,036,525 15,157,317
Limited Term Government
and Agency Fund 57,202,660 71,425,840 6,079,673 4,440,733
Massachusetts Tax Free Income Fund -- -- 8,220,173 10,959,611
Municipal Income Fund -- -- 13,208,229 22,211,093
Strategic Income Fund 48,373,086 2,503,027 193,951,604 50,338,737
57
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
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. 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 Over
Fund $100 million $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%
High Income Fund 0.7000% 0.7000% 0.6500% 0.6500%
Limited Term Government and Agency Fund 0.5700% 0.5700% 0.5450% 0.5200%
Massachusetts Tax Free Income Fund 0.3000% 0.2500% 0.2500% 0.2500%
Municipal Income Fund 0.5000% 0.3750% 0.3750% 0.3750%
Strategic Income Fund 0.6500% 0.6500% 0.6000% 0.6000%
For the six months ended March 31, 2004, the management fees for each Fund were
as follows:
Gross Percentage of
Management Average
Fund Fee Daily Net Assets*
- --------------------------------------- ---------- -----------------
Core Plus Bond Fund $ 325,792 0.207%
Government Securities Fund 109,464 0.275%
High Income Fund 181,057 0.700%
Limited Term Government and Agency Fund 401,495 0.570%
Massachusetts Tax Free Income Fund 136,378 0.300%
Municipal Income Fund 312,522 0.469%
Strategic Income Fund 1,358,500 0.623%
*Annualized
CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS Advisers") serves as the
advisory administrator to Core Plus Bond Fund, Government Securities Fund and
Massachusetts Tax Free Income Fund. Under the terms of the advisory
administration agreements, 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:
Percentage of Average Daily Net Assets
---------------------------------------------------------
First Next Next Next
Fund $100 million $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%
Massachusetts Tax Free Income Fund 0.3000% 0.2500% 0.2500% 0.2500%
For the six months ended March 31, 2004, the advisory administration fees for
each Fund were as follows:
Advisory Percentage of
Administration Average
Fund Fee Daily Net Assets*
- ---------------------------------- -------------- -----------------
Core Plus Bond Fund $325,791 0.207%
Government Securities Fund 109,463 0.275%
Massachusetts Tax Free Income Fund 136,377 0.300%
*Annualized
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.
Management and advisory administration fees are presented in the statement of
operations as management fees.
58
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
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 among the CDC Nvest Funds Trusts
(CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds Trust III,
CDC Nvest Cash Management Trust and CDC Nvest Companies Trust I), the Loomis
Sayles Funds Trusts (Loomis Sayles Funds I and Loomis Sayles Funds II) 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
---------- ---------- -----------
0.0675% 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.
For the six months ended March 31, 2004, fees paid to CIS for accounting and
administrative expense were as follows:
Accounting
And
Fund Administrative
- ---------------------------------- --------------
Core Plus Bond Fund $103,003
Government Securities Fund 26,228
High Income Fund 16,949
Limited Term Government and
Agency Fund 46,287
Massachusetts Tax Free Income Fund 29,837
Municipal Income Fund 43,850
Strategic Income Fund 141,497
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. Classes A, B and C pay service fees monthly to CIS
representing the higher amount based on the following calculations:
(1) Each Fund's pro rata portion of an 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 Class A, Class B and Class C accounts in Load Bond Funds.
Load Bond Funds consist of all bond funds in the CDC Nvest Funds
Trusts, High Income Fund, Limited Term Government and Agency Fund,
Municipal Income Fund, Strategic 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%
Each Class of shares is subject to a monthly class minimum of $1,500,
allocated based on the combined assets of Class A, Class B and Class
C.
or
(2) An allocated portion, based on eligible assets, of an annual aggregate
minimum fee of $1,502,993. For the period September 15, 2003 through
December 31, 2003, the aggregate minimum fee was $382,986.
Class Y pays service fees monthly representing the higher amount based on the
following calculations:
(1) The Fund's pro rata portion of an annual aggregate fee determined by
applying an annual 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**.
59
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
Class Y shares are subject to a monthly class minimum of $1,250.
or
(2) An allocated portion, based on eligible assets of an annual
aggregate minimum fee of $650,000. For the period September 15,
2003 through December 31, 2003, the aggregate minimum fee was
$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 Syles Value Fund and Loomis Sayles Worldwide Fund.
** Load Funds - Class Y consist of all Funds with Class Y shares offered within
the CDC Nvest Funds Trusts and Loomis Sayles Funds Trusts.
In addition, pursuant to other servicing agreements, each class pays service
fees to other firms that provide similar services for their own shareholder
accounts.
CIS and BFDS and other firms are also reimbursed by the Funds for out-of-pocket
expenses. For the six months ended March 31, 2004, amounts paid to CIS as
compensation for its services as transfer agent were as follows:
Transfer Agent
Fund Fee
- --------------------------------------- --------------
Core Plus Bond Fund $148,884
Government Securities Fund 61,682
High Income Fund 41,660
Limited Term Government and Agency Fund 106,227
Massachusetts Tax Free Income Fund 68,926
Municipal Income Fund 95,071
Strategic Income Fund 265,591
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 Government and Agency Fund and
Massachusetts Tax Free Income Fund each pay CDC IXIS Distributors a monthly
distribution fee at the annual rate of 0.10% of the average daily net assets
attributable to each Fund's Class A shares as reimbursement for expenses
incurred by CDC IXIS Distributors in connection with the marketing or sale of
each 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 six months ended March 31, 2004, 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 $161,718 $199,654 $ 9,116 $ -- $598,962 $ 27,347
Government Securities Fund 79,563 16,481 -- -- 49,441 --
High Income Fund 32,413 28,603 3,646 -- 85,810 10,939
Limited Term Government and
Agency Fund 142,656 15,923 10,059 57,063 47,768 30,177
Massachusetts Tax Free Income Fund 106,753 6,895 -- 42,701 20,683 --
Municipal Income Fund 153,428 13,253 -- -- 39,759 --
Strategic Income Fund 239,659 158,183 142,455 -- 474,549 427,364
60
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
Commissions (including CDSCs) on Fund shares paid to CDC IXIS Distributors by
investors in shares of the Funds during the six months ended March 31, 2004 were
as follows:
Fund
- ---------------------------------------
Core Plus Bond Fund $ 162,360
Government Securities Fund 44,954
High Income Fund 44,559
Limited Term Government and Agency Fund 86,452
Massachusetts Tax Free Income Fund 33,612
Municipal Income Fund 36,800
Strategic Income Fund 1,060,117
e. Trustees Fees and Expenses. The CDC Nvest Funds Trusts and Loomis Sayles
Funds Trusts 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 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 Board
or Committee meeting in excess of four per year, at the rate of $4,500 and
$1,750, respectively. These fees are allocated to the various series of the 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.
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 March 31, 2004, amounts paid to CIS
as compensation for these services were as follows:
Publishing Services
Fund Fees
- --------------------------------------- -------------------
Core Plus Bond Fund $1,106
Government Securities Fund 1,055
High Income Fund 1,823
Limited Term Government and Agency Fund 1,718
Massachusetts Tax Free Income Fund 1,151
Municipal Income Fund 1,706
Strategic Income Fund 1,786
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 six months
ended March 31, 2004.
6. Security Lending. Each Fund has 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
March 31, 2004, were as follows:
Market Value of Value of Collateral
Fund Securities on Loan Received
- --------------------------------------- ------------------ -------------------
Core Plus Bond Fund $25,580,689 $26,149,903
Government Securities Fund 23,539,747 24,097,608
High Income Fund 6,930,719 7,113,666
Limited Term Government and Agency Fund 10,715,818 11,031,906
Strategic Income 44,971,355 45,977,308
61
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
7. Expense Reductions and Contingent Expense Obligations. Loomis Sayles has
given binding undertakings to certain Funds to defer its management fees and, if
necessary, bear certain expenses associated with these Funds to limit their
operating expenses. These undertakings are in effect until the dates indicated
below and will be reevaluated on an annual basis. For the six months ended March
31, 2004, certain class level expenses have been reimbursed as follows:
Strategic Income Fund $4,547.
If in the following fiscal year the actual operating expenses of a Fund that
previously received a deferral or reimbursement are less than the expense limit
for that Fund, the Fund is required to pay an amount of additional expense that
is the lower of the difference between the actual operating expenses and the
expense limit or the actual amount of fees previously waived or expenses
reimbursed.
At March 31, 2004, 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 Expenses Subject
of Average Daily Net Assets Expiration to Possible
-------------------------------------
Fund Class A Class B Class C Class Y of Waiver Reimbursement
- ---------------------------------- ------- ------- ------- ------- ---------------- ----------------
Massachusetts Tax Free Income Fund 1.40% 2.05% -- -- January 31, 2005 $ --
Strategic Income Fund 1.25% 2.00% 2.00% 1.00% January 31, 2005 74,190
For Strategic Income Fund, $69,643 of expenses deferred in fiscal 2003 is
subject to possible reimbursement until September 30, 2004 and an additional
$4,547 of expenses deferred in fiscal 2004 is subject to possible reimbursement
until September 30, 2005.
8. 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 March 31, 2004, the Fund had
the following concentrations by revenue source in excess of 10% as a percentage
of the Fund's net assets: University 14.8%, College 11.9% and Water 11.7%. The
Fund had investments in securities of issuers insured by Municipal Bond
Investors Assurance Corporation (MBIA), American Municipal Bond assurance
Corporation (AMBAC) and Financial Guaranty Insurance Company (FGIC) which
aggregated to 11.1%, 13.2% and 6.8% of its net assets, respectively, at March
31, 2004.
At March 31, 2004, Municipal Income Fund had the following concentrations by
revenue source in excess of 10% as a percentage of the Fund's net assets:
University 13.5% and Various Purpose 10.3%. The Fund also had more than 10% of
its net assets invested in: New York 11.7%, Pennsylvania 11.5% and Texas 10.9%.
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.
62
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
9. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
Six Months For the Period
Ended January 1, 2003
March 31, 2004 through Year Ended
(unaudited) September 30, 2003 December 31, 2002
------------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
---------- ------------ ---------- ------------ ---------- ------------
Core Plus Bond Fund
Class A
Shares sold 854,428 $ 10,008,141 2,208,881 $ 25,393,288 2,761,031 $ 30,947,862
Shares Issued in connection with the
reinvestment of:
Dividends from net investment income 234,625 2,738,930 315,868 3,625,104 630,044 7,028,137
---------- ------------ ---------- ------------ ---------- ------------
1,089,053 12,747,071 2,524,749 29,018,392 3,391,075 37,975,999
Shares repurchased (1,708,263) (19,945,172) (4,103,015) (47,055,063) (5,298,328) (59,054,703)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (619,210) $ (7,198,101) (1,578,266) $(18,036,671) (1,907,253) $(21,078,704)
---------- ------------ ---------- ------------ ---------- ------------
Class B
Shares sold 2,030,108 $ 23,740,033 4,544,450 $ 52,121,481 5,113,116 $ 57,147,872
Shares Issued in connection with the
reinvestment of:
Dividends from net investment income 95,632 1,116,930 138,840 1,592,822 309,169 3,449,629
---------- ------------ ---------- ------------ ---------- ------------
2,125,740 24,856,963 4,683,290 53,714,303 5,422,285 60,597,501
Shares repurchased (2,688,635) (31,474,276) (3,322,658) (38,077,677) (3,908,528) (43,564,808)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (562,895) $ (6,617,313) 1,360,632 $ 15,636,626 1,513,757 $ 17,032,693
---------- ------------ ---------- ------------ ---------- ------------
Class C
Shares sold 46,756 $ 547,801 59,911 $ 688,486 138,295 $ 1,555,372
Shares Issued in connection with the
reinvestment of:
Dividends from net investment income 7,737 90,427 11,703 134,339 26,871 299,976
---------- ------------ ---------- ------------ ---------- ------------
54,493 638,228 71,614 822,825 165,166 1,855,348
Shares repurchased (104,805) (1,223,728) (216,706) (2,481,482) (354,452) (3,952,429)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (50,312) $ (585,500) (145,092) $ (1,658,657) (189,286) $ (2,097,081)
---------- ------------ ---------- ------------ ---------- ------------
Class Y
Shares sold 199,221 $ 2,335,107 360,783 $ 4,157,868 411,293 $ 4,623,829
Shares Issued in connection with the
reinvestment of:
Dividends from net investment income 37,138 435,200 51,037 588,550 80,315 898,601
---------- ------------ ---------- ------------ ---------- ------------
236,359 2,770,307 411,820 4,746,418 491,608 5,522,430
Shares repurchased (355,909) (4,193,129) (500,546) (5,745,952) (363,731) (4,077,509)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (119,550) $ (1,422,822) (88,726) $ (999,534) 127,877 $ 1,444,921
---------- ------------ ---------- ------------ ---------- ------------
Increase (decrease) derived from
capital shares transactions (1,351,967) $(15,823,736) (451,452) $ (5,058,236) (454,905) $ (4,698,171)
========== ============ ========== ============ ========== ============
63
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
9. Capital Shares (continued).
Six Months For the Period
Ended January 1, 2003
March 31, 2004 through Year Ended
(unaudited) September 30, 2003 December 31, 2002
----------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
-------- ------------ ---------- ------------ ---------- ------------
Government Securities Fund
Class A
Shares sold 196,750 $ 2,336,613 679,447 $ 8,249,719 1,163,096 $ 13,583,368
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 85,897 1,021,549 159,984 1,935,187 243,169 2,819,415
-------- ------------ ---------- ------------ ---------- ------------
282,647 3,358,162 839,431 10,184,906 1,406,265 16,402,783
Shares repurchased (937,193) (11,121,792) (1,441,491) (17,423,672) (1,419,343) (16,327,594)
-------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (654,546) $ (7,763,630) (602,060) $ (7,238,766) (13,078) $ 75,189
-------- ------------ ---------- ------------ ---------- ------------
Class B
Shares sold 56,505 $ 671,574 320,801 $ 3,882,546 712,314 $ 8,363,857
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 13,467 160,238 28,512 345,321 36,766 427,149
-------- ------------ ---------- ------------ ---------- ------------
69,972 831,812 349,313 4,227,867 749,080 8,791,006
Shares repurchased (297,872) (3,533,813) (493,758) (5,918,693) (541,866) (6,269,688)
-------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (227,900) $ (2,702,001) (144,445) $ (1,690,826) 207,214 $ 2,521,318
-------- ------------ ---------- ------------ ---------- ------------
Class Y
Shares sold 9,926 $ 118,322 33,551 $ 404,508 220,420 $ 2,524,097
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 4,167 49,465 11,024 133,483 24,957 289,414
-------- ------------ ---------- ------------ ---------- ------------
14,093 167,787 44,575 537,991 245,377 2,813,511
Shares repurchased (31,357) (371,236) (364,336) (4,409,555) (114,051) (1,321,509)
-------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (17,264) $ (203,449) (319,761) $ (3,871,564) 131,326 $ 1,492,002
-------- ------------ ---------- ------------ ---------- ------------
Increase (decrease) derived from
capital shares transactions (899,710) $(10,669,080) (1,066,266) $(12,801,156) 325,462 $ 4,088,509
======== ============ ========== ============ ========== ============
64
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
9. Capital Shares (continued).
Six Months For the Period
Ended January 1, 2003
March 31, 2004 through Year Ended
(unaudited) September 30, 2003 December 31, 2002
---------------------- ------------------------- -------------------------
Shares Amount Shares Amount Shares Amount
-------- ----------- ---------- ------------ ---------- ------------
High Income Fund
Class A
Shares sold 832,202 $ 4,014,165 6,787,841 $ 30,994,716 2,021,612 $ 8,897,208
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 115,452 560,117 178,526 792,126 317,560 1,396,013
-------- ----------- ---------- ------------ ---------- ------------
947,654 4,574,282 6,966,367 31,786,842 2,339,172 10,293,221
Shares repurchased (707,293) (3,435,727) (7,296,772) (33,271,653) (3,663,855) (16,220,139)
-------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) 240,361 $ 1,138,555 (330,405) $ (1,484,811) (1,324,683) $ (5,926,918)
-------- ----------- ---------- ------------ ---------- ------------
Class B
Shares sold 170,148 $ 821,153 662,229 $ 2,976,263 1,040,581 $ 4,725,693
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 64,184 311,303 105,383 467,995 201,776 889,901
-------- ----------- ---------- ------------ ---------- ------------
234,332 1,132,456 767,612 3,444,258 1,242,357 5,615,594
Shares repurchased (881,752) (4,271,943) (1,323,884) (5,858,921) (2,675,203) (11,769,699)
-------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) (647,420) $(3,139,487) (556,272) $ (2,414,663) (1,432,846) $ (6,154,105)
-------- ----------- ---------- ------------ ---------- ------------
Class C
Shares sold 49,541 $ 237,568 69,446 $ 305,018 90,003 $ 403,036
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 8,807 42,726 13,856 61,635 26,503 116,430
-------- ----------- ---------- ------------ ---------- ------------
58,348 280,294 83,302 366,653 116,506 519,466
Shares repurchased (85,428) (412,325) (101,125) (434,559) (324,456) (1,450,446)
-------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) (27,080) $ (132,031) (17,823) $ (67,906) (207,950) $ (930,980)
-------- ----------- ---------- ------------ ---------- ------------
Increase(decrease) derived from
capital shares transactions (434,139) $(2,132,963) (904,500) $ (3,967,380) (2,965,479) $(13,012,003)
======== =========== ========== ============ ========== ============
65
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
9. Capital Shares (continued).
Six Months For the Period
Ended January 1, 2003
March 31, 2004 through
(unaudited) September 30, 2003
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Limited Term Government and Agency Fund
Class A
Shares sold 593,003 $ 6,774,385 3,639,344 $ 42,294,961
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 135,050 1,543,592 217,806 2,527,837
---------- ------------ ---------- ------------
728,053 8,317,977 3,857,150 44,822,798
Shares repurchased (1,230,871) (14,072,144) (2,708,272) (31,326,172)
---------- ------------ ---------- ------------
Net increase (decrease) (502,818) $ (5,754,167) 1,148,878 $ 13,496,626
---------- ------------ ---------- ------------
Class B
Shares sold 66,966 $ 764,604 328,497 $ 3,816,554
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 14,897 169,922 27,583 319,597
---------- ------------ ---------- ------------
81,863 934,526 356,080 4,136,151
Shares repurchased (374,332) (4,272,751) (470,730) (5,449,483)
---------- ------------ ---------- ------------
Net increase (decrease) (292,469) $ (3,338,225) (114,650) $ (1,313,332)
---------- ------------ ---------- ------------
Class C
Shares sold 68,358 $ 782,155 257,384 $ 2,997,797
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 7,654 87,416 13,512 156,679
---------- ------------ ---------- ------------
76,012 869,571 270,896 3,154,476
Shares repurchased (170,722) (1,952,268) (203,605) (2,359,426)
---------- ------------ ---------- ------------
Net increase (decrease) (94,710) $ (1,082,697) 67,291 $ 795,050
---------- ------------ ---------- ------------
Class Y
Shares sold 43,501 $ 499,132 194,812 $ 2,266,581
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 11,208 128,568 21,540 250,898
---------- ------------ ---------- ------------
54,709 627,700 216,352 2,517,479
Shares repurchased (175,947) (2,017,858) (344,269) (4,012,366)
---------- ------------ ---------- ------------
Net increase (decrease) (121,238) $ (1,390,158) (127,917) $ (1,494,887)
---------- ------------ ---------- ------------
Increase (decrease) derived from capital shares transactions (1,011,235) $(11,565,247) 973,602 $ 11,483,457
========== ============ ========== ============
Year Ended
December 31, 2002
-------------------------
Shares Amount
---------- ------------
Limited Term Government and Agency Fund
Class A
Shares sold 2,338,561 $ 26,950,560
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 348,652 4,025,182
---------- ------------
2,687,213 30,975,742
Shares repurchased (3,260,141) (37,525,210)
---------- ------------
Net increase (decrease) (572,928) $ (6,549,468)
---------- ------------
Class B
Shares sold 706,265 $ 8,186,137
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 40,792 470,419
---------- ------------
747,057 8,656,556
Shares repurchased (620,421) (7,125,410)
---------- ------------
Net increase (decrease) 126,636 $ 1,531,146
---------- ------------
Class C
Shares sold 570,784 $ 6,611,629
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 17,765 205,133
---------- ------------
588,549 6,816,762
Shares repurchased (414,627) (4,814,349)
---------- ------------
Net increase (decrease) 173,922 $ 2,002,413
---------- ------------
Class Y
Shares sold 987,271 $ 11,289,831
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 34,738 402,928
---------- ------------
1,022,009 11,692,759
Shares repurchased (599,695) (6,901,951)
---------- ------------
Net increase (decrease) 422,314 $ 4,790,808
---------- ------------
Increase (decrease) derived from capital shares transactions 149,944 $ 1,774,899
========== ============
66
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
9. Capital Shares (continued).
Six Months For the Period
Ended January 1, 2003
March 31, 2004 through Year Ended
(unaudited) September 30, 2003 December 31, 2002
--------------------- --------------------- ----------------------
Shares Amount Shares Amount Shares Amount
-------- ----------- -------- ----------- -------- ------------
Massachusetts Tax Free Income Fund
Class A
Shares sold 59,012 $ 977,577 119,001 $ 1,949,577 456,052 $ 7,320,365
Shares issued in connection with the reinvestment of:
Dividends from net investment income 72,270 1,198,227 115,722 1,900,796 166,936 2,687,820
-------- ----------- -------- ----------- -------- ------------
131,282 2,175,804 234,723 3,850,373 622,988 10,008,185
Shares repurchased (291,164) (4,804,645) (584,421) (9,550,818) (659,550) (10,569,788)
-------- ----------- -------- ----------- -------- ------------
Net increase (decrease) (159,882) $(2,628,841) (349,698) $(5,700,445) (36,562) $ (561,603)
-------- ----------- -------- ----------- -------- ------------
Class B
Shares sold 5,410 $ 89,574 22,230 $ 363,317 40,852 $ 652,539
Shares issued in connection with the reinvestment of:
Dividends from net investment income 3,321 54,922 5,690 93,253 9,320 149,611
-------- ----------- -------- ----------- -------- ------------
8,731 144,496 27,920 456,570 50,172 802,150
Shares repurchased (78,211) (1,289,888) (62,206) (1,025,084) (164,730) (2,629,120)
-------- ----------- -------- ----------- -------- ------------
Net increase (decrease) (69,480) $(1,145,392) (34,286) $ (568,514) (114,558) $ (1,826,970)
-------- ----------- -------- ----------- -------- ------------
Increase(decrease) derived from capital shares
transactions (229,362) $(3,774,233) (383,984) $(6,268,959) (151,120) $ (2,388,573)
======== =========== ======== =========== ======== ============
Six Months For the Period
Ended January 1, 2003
March 31, 2004 through
(unaudited) September 30, 2003
------------------------- -------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Municipal Income Fund
Class A
Shares sold 336,302 $ 2,498,539 1,680,532 $ 12,281,784
Shares issued in connection with the reinvestment of:
Dividends from net investment income 228,338 1,705,365 374,960 2,761,288
---------- ------------ ---------- ------------
564,640 4,203,904 2,055,492 15,043,072
Shares repurchased (1,578,689) (11,730,445) (2,814,362) (20,686,975)
---------- ------------ ---------- ------------
Net increase (decrease) (1,014,049) $ (7,526,541) (758,870) $ (5,643,903)
---------- ------------ ---------- ------------
Class B
Shares sold 49,429 $ 368,747 176,974 $ 1,299,640
Shares issued in connection with the reinvestment of:
Dividends from net investment income 14,430 107,812 21,918 161,634
---------- ------------ ---------- ------------
63,859 476,559 198,892 1,461,274
Shares repurchased (194,792) (1,461,031) (387,486) (2,860,427)
---------- ------------ ---------- ------------
Net increase (decrease) (130,933) $ (984,472) (188,594) $ (1,399,153)
---------- ------------ ---------- ------------
Increase(decrease) derived from capital shares
transactions (1,144,982) $ (8,511,013) (947,464) $ (7,043,056)
========== ============ ========== ============
Year Ended
December 31, 2002
-------------------------
Shares Amount
---------- ------------
Municipal Income Fund
Class A
Shares sold 1,667,649 $ 12,274,988
Shares issued in connection with the reinvestment of:
Dividends from net investment income 576,440 4,253,748
---------- ------------
2,244,089 16,528,736
Shares repurchased (3,360,408) (24,705,392)
---------- ------------
Net increase (decrease) (1,116,319) $ (8,176,656)
---------- ------------
Class B
Shares sold 360,545 $ 2,668,323
Shares issued in connection with the reinvestment of:
Dividends from net investment income 37,421 276,214
---------- ------------
397,966 2,944,537
Shares repurchased (746,990) (5,506,527)
---------- ------------
Net increase (decrease) (349,024) $ (2,561,990)
---------- ------------
Increase(decrease) derived from capital shares
transactions (1,465,343) $(10,738,646)
========== ============
67
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Six Months Ended March 31, 2004 (unaudited)
9. Capital Shares (continued).
Six Months For the Period
Ended January 1, 2003
March 31, 2004 through
(unaudited) September 30, 2003
------------------------- ---------------------------
Shares Amount Shares Amount
---------- ------------ ----------- -------------
Strategic Income Fund
Class A
Shares sold 9,191,598 $123,565,698 4,379,870 $ 52,212,398
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 345,631 4,611,227 371,875 4,481,650
---------- ------------ ----------- -------------
9,537,229 128,176,925 4,751,745 56,694,048
Shares repurchased (1,418,056) (19,024,246) (2,180,800) (25,669,234)
---------- ------------ ----------- -------------
Net increase (decrease) 8,119,173 $109,152,679 2,570,945 $ 31,024,814
---------- ------------ ----------- -------------
Class B
Shares sold 1,364,510 $ 18,183,777 11,291,589 $ 137,976,336
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 177,975 2,374,933 268,978 3,224,645
---------- ------------ ----------- -------------
1,542,485 20,558,710 11,560,567 141,200,981
Shares repurchased (1,299,157) (17,315,601) (11,369,542) (139,122,966)
---------- ------------ ----------- -------------
Net increase (decrease) 243,328 $ 3,243,109 191,025 $ 2,078,015
---------- ------------ ----------- -------------
Class C
Shares sold 8,069,494 $108,221,496 3,238,168 $ 38,652,520
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 109,750 1,467,872 96,560 1,163,101
---------- ------------ ----------- -------------
8,179,244 109,689,368 3,334,728 39,815,621
Shares repurchased (381,361) (5,116,714) (647,304) (7,733,899)
---------- ------------ ----------- -------------
Net increase (decrease) 7,797,883 $104,572,654 2,687,424 $ 32,081,722
---------- ------------ ----------- -------------
Class Y
Shares sold 383,251 $ 5,122,553 110,719 $ 1,316,510
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 5,715 76,027 7,237 87,673
---------- ------------ ----------- -------------
388,966 5,198,580 117,956 1,404,183
Shares repurchased (67,834) (889,503) (40,357) (480,677)
---------- ------------ ----------- -------------
Net increase (decrease) 321,132 $ 4,309,077 77,599 $ 923,506
---------- ------------ ----------- -------------
Increase (decrease) derived from capital shares transactions 16,481,516 $221,277,519 5,526,993 $ 66,108,057
========== ============ =========== =============
Year Ended
December 31, 2002
-------------------------
Shares Amount
---------- ------------
Strategic Income Fund
Class A
Shares sold 1,233,640 $ 12,489,877
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 428,477 4,343,680
---------- ------------
1,662,117 16,833,557
Shares repurchased (2,583,795) (26,064,953)
---------- ------------
Net increase (decrease) (921,678) $ (9,231,396)
---------- ------------
Class B
Shares sold 996,177 $ 10,066,847
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 364,119 3,688,894
---------- ------------
1,360,296 13,755,741
Shares repurchased (2,502,784) (25,285,670)
---------- ------------
Net increase (decrease) (1,142,488) $(11,529,929)
---------- ------------
Class C
Shares sold 331,088 $ 3,346,746
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 101,770 1,030,223
---------- ------------
432,858 4,376,969
Shares repurchased (771,825) (7,794,721)
---------- ------------
Net increase (decrease) (338,967) $ (3,417,752)
---------- ------------
Class Y
Shares sold 68,699 $ 692,601
Shares Issued in connection with the reinvestment of:
Dividends from net investment income 4,144 42,230
---------- ------------
72,843 734,831
Shares repurchased (21,066) (211,862)
---------- ------------
Net increase (decrease) 51,777 $ 522,969
---------- ------------
Increase (decrease) derived from capital shares transactions (2,351,356) $(23,656,108)
========== ============
68
Supplement
LOOMIS SAYLES GOVERNMENT SECURITIES FUND
Supplement dated May 1, 2004 to CDC Nvest Income Funds Classes A, B and C
Prospectus and CDC Nvest
Income Funds Class Y Prospectus, each dated February 1, 2004,
each as may be supplemented from time to time (the "Prospectuses")
Within the section entitled "Evaluating the Fund's Past Performance", the
following text replaces the introductory text and Average Annual Total Returns
table for the Loomis Sayles Government Securities Fund.
The table below shows how the average annual total returns for each class of the
Fund (before and after taxes for Class A) for the one-year, five-year and
ten-year periods (or since inception if shorter) compare to those of the Lehman
Brothers Long Term Government Bond Index ("Lehman Long Term Gov't Bond Index"),
an unmanaged index which is made up of the securities in the Lehman Brothers
Government Bond Index ("Lehman Gov't Bond Index") that have a maturity of 10
years or more. They are also compared to the Lehman Gov't Bond Index, an
unmanaged index of public debt of the U.S. Treasury, government agencies and
their obligations. You may not invest directly in an index. The Fund's total
returns reflect, on a class by class basis, its expenses and the maximum sales
charges that you may be required to pay when you buy or redeem the Fund's
shares. Class A total returns have also been calculated to reflect return after
taxes on distributions only and also return after taxes on distributions and
sales of Fund shares. The Lehman Long Term Gov't Bond Index and Lehman Gov't
Bond Index returns have not been adjusted for ongoing management, distribution
and operating expenses and sales charges applicable to mutual fund investments.
- ------------------------------------------------------------------------------------------------------
Since Class Y
Average Annual Total Returns Inception
(for the periods ended December 31, 2003) Past 1 Year Past 5 Years Past 10 Years (3/31/94)
- ------------------------------------------------------------------------------------------------------
Class A - Return Before Taxes -3.08% 4.02% 5.30% --
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions* -4.39% 2.04% 3.04% --
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions &
- ------------------------------------------------------------------------------------------------------
Sales of Fund Shares* -2.00% 2.16% 3.06% --
- ------------------------------------------------------------------------------------------------------
Class B - Return Before Taxes -4.08% 3.88% 5.00% --
- ------------------------------------------------------------------------------------------------------
Class Y - Return Before Taxes 1.64% 5.30% -- 6.60%
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions* 0.18% 3.18% -- 4.19%
- ------------------------------------------------------------------------------------------------------
Return After Taxes on Distributions &
- ------------------------------------------------------------------------------------------------------
Sales of Fund Shares* 1.07% 3.17% -- 4.11%
- ------------------------------------------------------------------------------------------------------
Lehman Long Term Gov't Bond Index** 2.61% 6.58% 7.96% 8.87%
- ------------------------------------------------------------------------------------------------------
Lehman Gov't Bond Index**+ 2.36% 6.26% 6.72% 7.24%
- ------------------------------------------------------------------------------------------------------
*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 Fund shares through tax-deferred arrangements, such as
401(k) plans, qualified plans, education savings accounts such as 529 plans or
individual retirement accounts. The returns are shown for only one class of the
Fund. After-tax returns for the other classes of the Fund will vary. In some
cases the after-tax returns may exceed the return before taxes due to an assumed
tax benefit from any losses on a sale of fund shares at the end of the
measurement period.
**The returns of the Index do not reflect the effect of taxes.
+ The Lehman Long Term Gov't Bond Index replaced the Lehman Gov't Bond Index as
the Fund's comparative index because Loomis Sayles believes that the new index
is more representative of the types of securities in which the Fund may invest.
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 has 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. Schedule of Investments.
Included as part of the report to shareholders filed under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable
Item 10. 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 11. Exhibits.
(a) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to 30a-2 under the Investment Company Act of 1940 (17 CFR
270.30a-2), as herewith as exhibits (a)(1)(i) and (a)(1)(ii).
(b) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 are filed
herewith as Exhibit (b)(2)
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/ ROBERT J. BLANDING
-----------------------------------
Name: Robert J. Blanding
Title: Chief Executive Officer
Date: May 19, 2004
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/ ROBERT J. BLANDING
-----------------------------------
Name: Robert J. Blanding
Title: Chief Executive Officer
Date: May 19, 2004
By: /s/ NICHOLAS H. PALMERINO
-----------------------------------
Name: Nicholas H. Palmerino
Title: Treasurer
Date: May 19, 2004