UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-6241
Loomis Sayles Funds II
(Exact name of registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip code)
Coleen Downs Dinneen, Esq.
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) 449-2810
Date of fiscal year end: September 30, 2004
Date of reporting period: September 30, 2004
Item 1. Reports to Stockholders.
The Registrant's annual reports transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 are as follows:
[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 12
Statements of Assets and Liabilities 48
Statements of Operations 50
Statements of Changes in Net Assets 52
Financial Highlights 56
Notes to Financial Statements 62
ANNUAL REPORT
SEPTEMBER 30, 2004
FUND AND MANAGER REVIEW
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
PORTFOLIO REVIEW | The Fund underperformed its benchmark, the Russell Midcap
Growth Index, for the 12 months ended September 30, 2004. The Fund posted solid
gains of over 10% during the 12-month period. These returns compare favorably
to our peers but did not match the gains of the Index. Underperformance was
primarily due to the fact that many of the stocks that had performed well early
in 2003 suffered the most during the market correction last December, as well
as during the challenging final three months of the fiscal year.
For the year as a whole, technology and consumer discretionary stocks had the
greatest positive influence on performance. In both sectors, we invested in
companies that consistently beat expectations and raised guidance. Most of
these winners were primarily dependent on innovative new products and services
rather than on the economy to drive their growth.
Despite some big winners in the biotechnology industry, the Fund's healthcare
holdings were among the biggest detractors to performance. In addition, we
underweighted the financials sector for most of the year and therefore missed
much of the appreciation in that group. The Fund also suffered from poor stock
selections in financials.
Early in the year, our primary focus was on companies leveraged to the cyclical
rebound, including technology and energy companies, as well as on companies
positioned to benefit from continued strength in consumer spending.
Nevertheless, at this point in the economic cycle, with profits starting to
decelerate and the Federal Reserve committed to a measured pace of rate hikes,
we are trying to strike a balance between cyclical industries on the one hand
and more defensive, non-cyclicals and financials on the other. As always, the
fundamentals of individual companies override our top-down inclinations.
OUTLOOK | Near term, earnings growth may be the primary driver of stock
appreciation. Higher-beta names--securities that are more volatile than the
market as a whole--should lead the market, particularly technology, which is
oversold and out of favor. Financials also should benefit in this environment,
especially the asset management companies and asset-sensitive banks.
Longer-term, we are more cautious in the face of rising interest rates and
decelerating profits. In particular, we are long-term bulls on energy, given
the imbalance between supply and demand, and on biotech, where many emerging
companies offer encouraging products. We are long-term bearish on technology,
as we believe the overcapacity of the tech "bubble" still needs to be absorbed.
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 | $50.6 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2004
SINCE
1 YEAR 5 YEARS INCEPTION
-------------------------------------------------------------
LOOMIS SAYLES AGGRESSIVE GROWTH FUND:
INSTITUTIONAL 13.22% -3.94% 8.01%
RETAIL 12.93 -4.22 7.71
LIPPER MID-CAP GROWTH FUNDS INDEX(a) 11.22 -0.99 4.46
RUSSELL MIDCAP GROWTH INDEX(a) 13.68 0.63 6.40
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2004(b)(c)
[CHART]
Loomis Sayles Lipper
Aggressive Mid Cap Russell
Growth Growth Funds Midcap
Fund Index Growth Index
------------- ------------ ------------
12/31/1996 250,000 250,000 250,000
1/31/1997 265,500 256,397 261,061
2/28/1997 257,243 239,354 255,313
3/31/1997 240,754 221,150 240,886
4/30/1997 243,498 219,235 246,786
5/31/1997 265,486 247,788 268,901
6/30/1997 267,982 258,228 276,343
7/31/1997 295,235 273,998 302,793
8/31/1997 288,475 273,237 299,837
9/30/1997 314,235 292,801 315,012
10/31/1997 307,228 276,403 299,240
11/30/1997 297,735 271,981 302,386
12/31/1997 306,607 278,351 306,356
1/31/1998 290,602 273,087 300,840
2/28/1998 313,821 296,284 329,124
3/31/1998 324,491 311,625 342,920
4/30/1998 333,025 312,981 347,577
5/31/1998 318,072 294,737 333,279
6/30/1998 334,358 308,295 342,709
7/31/1998 317,272 287,776 328,029
8/31/1998 252,961 225,733 265,422
9/30/1998 280,433 249,272 285,500
10/31/1998 299,390 258,441 306,521
11/30/1998 301,785 278,080 327,197
12/31/1998 341,983 313,952 361,083
1/31/1999 345,300 329,536 371,908
2/28/1999 338,394 303,940 353,720
3/31/1999 434,058 325,607 373,420
4/30/1999 456,195 338,963 390,435
5/31/1999 473,074 337,552 385,412
6/30/1999 535,000 364,759 412,319
7/31/1999 530,827 359,767 399,191
8/31/1999 561,774 357,945 395,042
9/30/1999 555,145 368,394 391,679
10/31/1999 695,041 400,964 421,963
11/30/1999 815,700 451,259 465,661
12/31/1999 1,018,402 545,390 546,293
1/31/2000 1,046,917 536,026 546,182
2/29/2000 1,423,493 670,359 661,006
3/31/2000 1,292,817 623,177 661,685
4/30/2000 1,170,516 540,968 597,454
5/31/2000 1,052,645 492,337 553,903
6/30/2000 1,201,700 568,843 612,677
7/31/2000 1,173,099 545,247 573,879
8/31/2000 1,388,480 616,555 660,427
9/30/2000 1,377,234 586,921 628,140
10/31/2000 1,166,792 539,463 585,150
11/30/2000 873,461 426,655 457,993
12/31/2000 961,331 457,408 482,109
1/31/2001 881,925 463,620 509,649
2/28/2001 688,607 394,076 421,494
3/31/2001 589,930 352,264 361,172
4/30/2001 686,029 398,709 421,375
5/31/2001 654,129 401,997 419,393
6/30/2001 634,178 400,428 419,614
7/31/2001 570,887 379,366 391,316
8/31/2001 498,556 353,948 362,953
9/30/2001 397,199 302,898 302,968
10/31/2001 435,847 319,762 334,814
11/30/2001 480,957 346,026 370,860
12/31/2001 486,825 361,034 384,958
1/31/2002 470,126 347,226 372,458
2/28/2002 422,691 329,962 351,343
3/31/2002 457,859 350,761 378,158
4/30/2002 433,821 339,101 358,137
5/31/2002 405,709 327,786 347,451
6/30/2002 367,045 298,335 309,107
7/31/2002 330,414 266,160 279,076
8/31/2002 325,128 262,987 278,104
9/30/2002 313,423 246,647 256,009
10/31/2002 326,023 259,085 275,839
11/30/2002 350,637 274,472 297,429
12/31/2002 309,052 258,247 279,459
1/31/2003 305,250 254,417 276,716
2/28/2003 302,625 250,489 274,309
3/31/2003 303,805 254,073 279,417
4/30/2003 326,652 271,896 298,442
5/31/2003 362,975 294,377 327,158
6/30/2003 363,266 298,986 331,824
7/31/2003 382,591 310,778 343,682
8/31/2003 417,445 326,063 362,609
9/30/2003 401,040 315,122 355,578
10/31/2003 440,302 339,841 384,234
11/30/2003 443,516 347,922 394,516
12/31/2003 432,960 349,706 398,822
1/31/2004 450,235 358,542 411,991
2/29/2004 441,141 363,487 418,902
3/31/2004 451,110 363,400 418,102
4/30/2004 432,389 351,872 406,298
5/31/2004 430,314 359,534 415,886
6/30/2004 434,875 368,183 422,505
7/31/2004 440,181 342,024 394,524
8/31/2004 452,418 336,100 389,660
9/30/2004 454,075 350,478 404,208
Data quoted reflects past performance and cannot guarantee future results.
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.
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, in part, because the value of the 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 12 months ended September 30, 2004. Underperformance was
primarily due to the fact that many of the stocks that had performed well early
in 2003 suffered the most during the market correction last December, as well
as during the challenging final three months of the fiscal year. In particular,
poor results from the Fund's healthcare and consumer discretionary holdings led
to underperformance in the third calendar quarter of 2004.
For the year as a whole, technology and consumer discretionary stocks had the
greatest positive influence on performance. In both sectors, we invested in
companies that consistently beat expectations and raised guidance. Most of
these winners were primarily dependent on innovative new products and services
rather than on the economy to drive their growth.
Despite some big winners in the biotechnology industry, the Fund's healthcare
holdings were among the biggest detractors to performance. In addition, we
underweighted the financials sector for most of the year and therefore missed
much of the appreciation in that group. The Fund also suffered from poor stock
selections in financials.
Early in the year, our primary focus was on companies leveraged to the cyclical
rebound, including technology and energy companies, as well as on companies
positioned to benefit from continued strength in consumer spending.
Nevertheless, at this point in the economic cycle, with profits starting to
decelerate and the Federal Reserve committed to a measured pace of rate hikes,
we are trying to strike a balance between cyclical industries on the one hand
and more defensive, non-cyclicals and financials on the other. As always, the
fundamentals of individual companies override our top-down inclinations.
OUTLOOK | Near term, earnings growth may be the primary driver of stock
appreciation. Higher-beta names--securities that are more volatile than the
market as a whole--should lead the market, particularly technology, which is
oversold and out of favor. Financials also should benefit in this environment,
especially the asset management companies and asset-sensitive banks.
Longer-term, we are more cautious in the face of rising interest rates and
decelerating profits. In particular, we are long-term bulls on energy, given
the imbalance between supply and demand, and on biotech, where many emerging
companies offer encouraging products. We are long-term bearish on technology,
as we believe the overcapacity of the tech "bubble" still needs to be absorbed.
The Fund is closed to new investors.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
their equivalents
STRATEGY | Invests at least 80% of its assets in common stock or other equity
securities 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 SEPTEMBER 30, 2004
SINCE
DESCRIPTION 1 YEAR INCEPTION
-----------------------------------------------------
LOOMIS SAYLES MID CAP GROWTH FUND 12.46% -9.98%
LIPPER MID-CAP GROWTH FUNDS INDEX(a) 11.22 -3.22
RUSSELL MIDCAP GROWTH INDEX(a) 13.68 -1.16
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2004(b)
[CHART]
Lipper
Mid-Cap Russell
Loomis Sayles Growth Midcap
Mid Cap Growth Funds Growth
Fund Index Index
-------------- ---------- -----------
2/28/2001 2,500,000 2,500,000 2,500,000
3/31/2001 2,212,500 2,234,746 2,142,213
4/30/2001 2,572,474 2,529,397 2,499,294
5/31/2001 2,460,057 2,550,254 2,487,536
6/30/2001 2,385,025 2,540,300 2,488,846
7/31/2001 2,145,091 2,406,684 2,321,004
8/31/2001 1,882,532 2,245,433 2,152,774
9/30/2001 1,497,554 1,921,570 1,796,985
10/31/2001 1,645,063 2,028,555 1,985,876
11/30/2001 1,820,098 2,195,173 2,199,676
12/31/2001 1,842,667 2,290,384 2,283,291
1/31/2002 1,777,621 2,202,790 2,209,151
2/28/2002 1,595,060 2,093,265 2,083,914
3/31/2002 1,727,609 2,225,216 2,242,963
4/30/2002 1,640,019 2,151,243 2,124,210
5/31/2002 1,535,058 2,079,464 2,060,829
6/30/2002 1,385,083 1,892,628 1,833,400
7/31/2002 1,250,037 1,688,512 1,655,275
8/31/2002 1,230,037 1,668,377 1,649,513
9/30/2002 1,185,017 1,564,722 1,518,462
10/31/2002 1,232,537 1,643,623 1,636,078
11/30/2002 1,327,565 1,741,242 1,764,136
12/31/2002 1,170,116 1,638,309 1,657,550
1/31/2003 1,155,138 1,614,009 1,641,277
2/28/2003 1,145,089 1,589,093 1,627,005
3/31/2003 1,152,646 1,611,832 1,657,302
4/30/2003 1,240,132 1,724,897 1,770,143
5/31/2003 1,377,663 1,867,519 1,940,467
6/30/2003 1,377,663 1,896,753 1,968,141
7/31/2003 1,452,608 1,971,566 2,038,472
8/31/2003 1,590,170 2,068,530 2,150,734
9/30/2003 1,525,132 1,999,120 2,109,033
10/31/2003 1,675,205 2,155,940 2,279,001
11/30/2003 1,685,256 2,207,202 2,339,985
12/31/2003 1,647,675 2,218,524 2,365,525
1/31/2004 1,707,650 2,274,577 2,443,631
2/29/2004 1,677,595 2,305,948 2,484,625
3/31/2004 1,715,173 2,305,398 2,479,877
4/30/2004 1,685,158 2,232,260 2,409,868
5/31/2004 1,757,620 2,280,870 2,466,737
6/30/2004 1,822,652 2,335,736 2,505,992
7/31/2004 1,672,647 2,169,785 2,340,029
8/31/2004 1,625,144 2,132,208 2,311,181
9/30/2004 1,715,000 2,223,417 2,397,468
Data quoted reflects past performance and cannot guarantee future results.
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.
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, in part, because the value of the 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 | The Fund underperformed its benchmark, the Russell 2000
Index, for the 12 months ended September 30, 2004. The Fund's underperformance
was primarily due to weakness in the technology and financial services areas.
Technology proved to be a difficult sector for most of the year. Investors were
skeptical of the sustainability of any rally in technology holdings, especially
in the semiconductor area. Therefore, most rallies were short-lived. In the
financials sector, capital-market-sensitive names, such as Knight Trading Group
and eSpeed, dragged down performance.
The Fund's consumer discretionary sector was the largest positive contributor
to returns. Good stock selection in an array of consumer-related industries
helped performance. In particular, Ask Jeeves and Net Flix surged on strong
demand for their services. The energy sector also posted solid gains, with
every one of the Fund's energy stocks up for the year. Evergreen Resources rose
more than 40% and was our strongest contributor in this sector.
Throughout the year we increased exposure to energy, financials and materials
and processing companies, because many delivered solid results with good future
prospects. We reduced the Fund's technology weighting, as investors worried
about the sustainability in earnings growth for many tech-related industries.
OUTLOOK | The third quarter was difficult, as investors worried about
terrorism, the war in Iraq, increasing energy prices, and the effects of a
tightening Federal Reserve monetary policy. Yet, we remain optimistic on the
market near term. The fourth quarter is generally a seasonally positive period
for equities, and we believe this year should be no different. Nevertheless,
the market may trade within a narrow range until after the election. But as
investors look toward next year, we believe the market may be setting up for a
rally, due to modest valuations in many sectors and reduced expectations for
the market in general.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
other equity securities
STRATEGY | Invests at least 80% of its assets 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 | $30.5 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2004
SINCE
1 YEAR 5 YEARS INCEPTION
---------------------------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH FUND:
INSTITUTIONAL 4.31% -10.64% 0.08%
RETAIL 3.91 -10.90 -0.18
LIPPER SMALL-CAP GROWTH FUNDS INDEX(a) 8.17 2.94 5.01
RUSSELL 2000 INDEX(a) 18.77 7.41 7.45
RUSSELL 2000 GROWTH INDEX(a) 11.92 -0.68 2.22
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2004(b)(c)
[CHART]
Lipper Russell
Small-Cap 2000 Russell
Growth Funds Growth 2000
Value Index Index Index
----- ----- ----- -----
12/31/1996 250,000 250,000 250,000 250,000
1/31/1997 256,500 255,797 256,245 254,996
2/28/1997 237,493 237,326 240,769 248,813
3/31/1997 212,747 220,207 223,779 237,073
4/30/1997 208,747 216,928 221,191 237,734
5/31/1997 242,752 247,023 254,436 264,182
6/30/1997 257,001 260,237 263,063 275,503
7/31/1997 277,741 275,899 276,542 288,323
8/31/1997 282,491 280,282 284,841 294,920
9/30/1997 313,734 303,870 307,571 316,506
10/31/1997 291,741 288,334 289,097 302,603
11/30/1997 288,503 281,817 282,204 300,645
12/31/1997 298,572 278,064 282,363 305,908
1/31/1998 288,809 273,937 278,596 301,080
2/28/1998 320,202 296,085 303,193 323,343
3/31/1998 334,707 309,478 315,911 336,678
4/30/1998 330,222 311,729 317,848 338,541
5/31/1998 302,516 289,667 294,756 320,308
6/30/1998 332,042 298,156 297,767 320,982
7/31/1998 299,336 275,720 272,902 294,997
8/31/1998 231,806 215,500 209,905 237,715
9/30/1998 259,228 227,024 231,187 256,318
10/31/1998 269,520 235,975 243,245 266,771
11/30/1998 303,264 255,166 262,115 280,748
12/31/1998 354,424 280,746 285,834 298,121
1/31/1999 364,702 287,535 298,691 302,083
2/28/1999 341,763 259,868 271,368 277,616
3/31/1999 367,873 271,613 281,033 281,950
4/30/1999 371,295 282,219 305,852 307,215
5/31/1999 364,426 283,757 306,336 311,702
6/30/1999 419,017 310,316 322,473 325,797
7/31/1999 406,614 309,220 312,501 316,858
8/31/1999 418,487 304,885 300,814 305,131
9/30/1999 441,420 315,937 306,616 305,198
10/31/1999 498,098 334,359 314,470 306,434
11/30/1999 550,847 376,545 347,721 324,731
12/31/1999 679,800 452,471 409,007 361,491
1/31/2000 667,428 447,759 405,201 355,685
2/29/2000 908,703 578,948 499,476 414,422
3/31/2000 788,481 533,505 446,973 387,099
4/30/2000 725,166 467,554 401,845 363,805
5/31/2000 627,051 429,327 366,657 342,602
6/30/2000 701,420 504,937 414,022 372,467
7/31/2000 629,454 472,086 378,540 360,483
8/31/2000 734,950 522,857 418,358 387,989
9/30/2000 711,506 496,964 397,574 376,585
10/31/2000 641,849 459,679 365,301 359,775
11/30/2000 476,188 381,396 298,975 322,843
12/31/2000 556,378 415,131 317,270 350,570
1/31/2001 531,174 427,780 342,949 368,822
2/28/2001 413,519 373,014 295,939 344,622
3/31/2001 352,235 336,786 269,033 327,764
4/30/2001 416,835 373,146 301,970 353,405
5/31/2001 405,331 383,257 308,964 362,092
6/30/2001 415,180 392,921 317,390 374,595
7/31/2001 356,598 371,018 290,313 354,318
8/31/2001 316,374 349,053 272,183 342,874
9/30/2001 247,816 294,576 228,265 296,719
10/31/2001 276,439 316,162 250,225 314,083
11/30/2001 297,476 340,661 271,112 338,398
12/31/2001 309,256 361,298 287,991 359,285
1/31/2002 294,380 350,373 277,746 355,548
2/28/2002 257,612 329,170 259,769 345,804
3/31/2002 273,610 356,082 282,348 373,597
4/30/2002 263,514 346,687 276,239 377,002
5/31/2002 250,891 332,779 260,087 360,270
6/30/2002 229,290 308,052 238,032 342,394
7/31/2002 196,731 264,364 201,449 290,682
8/31/2002 194,488 263,980 201,355 289,942
9/30/2002 178,209 247,970 186,811 269,120
10/31/2002 189,722 258,551 196,260 277,749
11/30/2002 200,668 280,207 215,716 302,536
12/31/2002 180,742 261,487 200,840 285,691
1/31/2003 174,850 254,582 195,384 277,784
2/28/2003 172,612 246,649 190,173 269,391
3/31/2003 170,920 251,735 193,052 272,859
4/30/2003 188,884 272,540 211,323 298,731
5/31/2003 209,926 300,331 235,137 330,789
6/30/2003 214,145 310,509 239,668 336,775
7/31/2003 229,028 328,666 257,786 357,847
8/31/2003 247,282 346,094 271,633 374,254
9/30/2003 241,100 337,594 264,757 367,346
10/31/2003 261,039 368,222 287,629 398,194
11/30/2003 269,731 378,027 297,006 412,325
12/31/2003 259,077 378,566 298,334 420,691
1/31/2004 277,601 396,277 314,007 438,968
2/29/2004 266,663 394,788 313,521 442,903
3/31/2004 265,543 392,059 314,986 447,031
4/30/2004 254,045 372,901 299,175 424,239
5/31/2004 262,175 380,679 305,126 430,991
6/30/2004 272,557 391,533 315,278 449,142
7/31/2004 247,563 356,991 286,979 418,900
8/31/2004 236,893 345,426 280,801 416,747
9/30/2004 251,533 365,160 296,328 436,311
Data quoted reflects past performance and cannot guarantee future results.
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
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.
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, in part, because the value of the 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 outperformed its benchmark, the Russell 2000 Index,
for the 12 months ended September 30, 2004. The Fund's outperformance was
fueled by the continued rotation away from the lower-quality stocks in 2003
into attractively-valued, fundamentally sound equities. Our long-standing
investment discipline, which emphasizes undervalued, under-followed or
misunderstood small companies, typically favors higher-quality characteristics,
such as positive earnings and cash flows, superior earnings visibility, and
better balance sheets. As a result, stock selection was positive during the
period in the transportation, consumer staples and consumer discretionary
sectors.
Within the transportation industry, an improving economy increased freight
volumes, and transportation capacity was relatively stable. Our holdings in
trucking (Landstar and Old Dominion) and rail service (Genesee & Wyoming) were
particularly positive. Within staples, grocery supplier Smart & Final, and
cereal and snack manufacturer Ralcorp were solid performers. In consumer
discretionary, contribution was broad based, with Cole National and Fossil Inc.
leading the way.
Although absolute returns in the materials sector were strong, our holdings
were somewhat conservatively positioned during what turned out to be an
exceptional rally driven by higher commodity prices. Within producer durables,
good performance from select industrial and defense-oriented stocks was offset
by weakness in technology-oriented industrials serving the telecommunication
and semiconductor equipment industries. Technology was the weakest sector for
the year, and although our stock selection was favorable, we entered the year
modestly overweight in the sector.
OUTLOOK | With solid earnings growth and relatively flat stock prices this
year, valuation levels look reasonable. Interest rates are low, and corporate
balance sheets appear to be in good shape. We expect continued earnings growth
but at a somewhat slower pace during the next several quarters, as the recovery
matures and higher raw materials and energy prices work their way through the
economy. Long term, the economy should continue to expand, corporate earnings
should grow, inflation should remain tame, and interest rates, although
increasing, should move up in a measured fashion.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
other equity securities
STRATEGY | Invests at least 80% of its assets 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 | $582.4 million
[PHOTO] [PHOTO]
Joseph Gatz Daniel Thelen
JOSEPH GATZ DANIEL THELEN
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2004
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
----------------------------------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE FUND:
INSTITUTIONAL 23.84% 13.30% 14.00% 14.96%
RETAIL(a) 23.51 13.03 13.77 14.79
ADMIN(a) 23.25 12.74 13.37 14.42
LIPPER SMALL-CAP CORE FUNDS INDEX(b)(c) 21.99 10.50 11.64 N/A
RUSSELL 2000 VALUE INDEX(c) 25.66 14.71 13.41 14.60
RUSSELL 2000 INDEX(c) 18.77 7.41 9.87 11.03
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2004(d)(e)
[CHART]
Loomis Sayles Lipper Small
Small Cap -Cap Core Russell 2000 Russell
Value Fund Funds Index Value Index 2000 Index
------------- ------------- ------------ ----------
5/13/1991 $ 250,000 $ 250,000 $ 250,000 $ 250,000
5/31/1991 255,500 250,000 261,728 261,916
6/30/1991 246,500 250,000 249,473 246,653
7/31/1991 266,000 250,000 255,952 255,308
8/31/1991 286,250 250,000 263,720 264,758
9/30/1991 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
1/31/1992 359,360 265,945 295,624 304,999
2/29/1992 379,469 273,568 309,725 313,896
3/31/1992 359,099 264,312 306,355 303,271
4/30/1992 340,817 255,365 302,112 292,646
5/31/1992 341,340 254,825 310,327 296,538
6/30/1992 311,567 245,833 300,278 282,514
7/31/1992 320,185 252,555 311,590 292,344
8/31/1992 309,739 248,421 305,517 284,095
9/30/1992 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
1/31/1993 385,875 296,024 370,979 345,386
2/28/1993 376,994 289,261 372,463 337,409
3/31/1993 392,750 297,159 386,591 348,358
4/30/1993 382,724 287,452 377,301 338,796
5/31/1993 399,053 298,214 389,167 353,787
6/30/1993 401,058 300,514 392,856 355,994
7/31/1993 410,798 303,304 399,600 360,909
8/31/1993 432,856 312,400 415,222 376,501
9/30/1993 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
1/31/1994 469,799 333,938 451,601 409,602
2/28/1994 462,637 333,304 450,293 408,121
3/31/1994 435,940 320,340 430,084 386,573
4/30/1994 431,056 319,794 434,322 388,871
5/31/1994 424,545 320,604 433,699 384,504
6/30/1994 414,452 310,196 422,386 371,448
7/31/1994 416,731 314,670 430,189 377,550
8/31/1994 436,266 329,162 447,122 398,589
9/30/1994 435,940 329,749 442,378 397,254
10/31/1994 433,019 331,467 434,283 395,686
11/30/1994 415,785 323,070 416,763 379,706
12/31/1994 421,856 325,868 429,306 389,907
1/31/1995 423,163 329,229 427,200 384,988
2/28/1995 439,582 342,338 443,008 401,003
3/31/1995 450,088 349,588 445,199 407,909
4/30/1995 451,393 355,463 458,439 416,979
5/31/1995 460,602 359,779 468,257 424,149
6/30/1995 473,084 374,109 484,258 446,152
7/31/1995 504,591 394,788 501,926 471,851
8/31/1995 528,862 407,916 516,837 481,612
9/30/1995 538,699 414,898 524,553 490,213
10/31/1995 510,794 400,223 503,602 468,290
11/30/1995 535,415 412,187 523,618 487,965
12/31/1995 557,206 426,052 539,838 500,839
1/31/1996 558,321 429,170 543,420 500,301
2/29/1996 586,348 444,379 551,937 515,895
3/31/1996 599,834 455,506 563,523 526,396
4/30/1996 635,464 486,931 578,898 554,543
5/31/1996 661,646 508,903 593,556 576,396
6/30/1996 646,031 485,793 586,548 552,727
7/31/1996 609,659 446,334 555,366 504,450
8/31/1996 640,203 469,085 579,461 533,738
9/30/1996 661,842 488,809 595,280 554,597
10/31/1996 671,571 479,658 602,183 546,049
11/30/1996 703,672 496,987 634,587 568,549
12/31/1996 726,893 505,760 655,187 583,449
1/31/1997 739,832 517,036 665,260 595,109
2/28/1997 730,214 503,508 671,575 580,680
3/31/1997 714,296 478,111 653,562 553,280
4/30/1997 707,581 478,242 663,172 554,822
5/31/1997 784,495 529,245 715,970 616,546
6/30/1997 821,288 559,170 752,202 642,968
7/31/1997 868,348 592,820 783,774 672,887
8/31/1997 886,496 607,321 796,217 688,283
9/30/1997 939,332 652,898 849,164 738,661
10/31/1997 909,743 626,902 826,076 706,213
11/30/1997 906,377 618,871 835,128 701,645
12/31/1997 915,712 618,206 863,435 713,926
1/31/1998 895,567 609,161 847,814 702,659
2/28/1998 958,973 654,637 899,067 754,616
3/31/1998 1,001,743 685,496 935,534 785,738
4/30/1998 997,335 692,091 940,158 790,086
5/31/1998 954,549 656,163 906,874 747,534
6/30/1998 942,236 653,811 901,752 749,107
7/31/1998 881,273 606,640 831,121 688,464
8/31/1998 730,311 489,398 700,960 554,778
9/30/1998 767,192 509,982 740,546 598,194
10/31/1998 807,546 530,915 762,535 622,590
11/30/1998 853,253 560,518 783,175 655,209
12/31/1998 905,814 595,725 807,733 695,755
1/31/1999 863,331 591,259 789,399 705,001
2/28/1999 802,380 542,960 735,503 647,899
3/31/1999 802,861 545,426 729,435 658,014
4/30/1999 868,294 582,266 796,024 716,977
5/31/1999 885,747 594,314 820,492 727,450
6/30/1999 926,669 628,657 850,200 760,345
7/31/1999 915,178 625,223 830,023 739,482
8/31/1999 884,702 602,297 799,682 712,114
9/30/1999 865,239 601,830 783,694 712,270
10/31/1999 856,760 607,069 768,013 715,155
11/30/1999 874,580 646,203 771,994 757,856
12/31/1999 909,126 715,909 795,713 843,645
1/31/2000 875,398 702,150 774,905 830,097
2/29/2000 937,288 801,151 822,268 967,176
3/31/2000 990,432 789,758 826,123 903,410
4/30/2000 992,512 745,843 831,013 849,047
5/31/2000 950,033 714,136 818,331 799,563
6/30/2000 981,194 777,128 842,243 869,262
7/31/2000 997,580 752,970 870,306 841,295
8/31/2000 1,059,929 820,051 909,215 905,486
9/30/2000 1,044,030 798,977 904,060 878,874
10/31/2000 1,063,449 774,942 900,851 839,641
11/30/2000 1,029,312 697,771 882,512 753,451
12/31/2000 1,119,891 765,544 977,337 818,159
1/31/2001 1,151,024 792,794 1,004,314 860,755
2/28/2001 1,121,558 742,434 1,002,928 804,277
3/31/2001 1,081,182 707,334 986,842 764,935
4/30/2001 1,140,647 763,688 1,032,519 824,776
5/31/2001 1,173,954 791,519 1,059,070 845,048
6/30/2001 1,219,738 815,994 1,101,681 874,227
7/31/2001 1,226,813 797,090 1,076,976 826,906
8/31/2001 1,212,582 774,784 1,073,245 800,198
9/30/2001 1,084,412 673,267 954,769 692,481
10/31/2001 1,122,583 713,264 979,707 733,006
11/30/2001 1,190,948 766,270 1,050,104 789,753
12/31/2001 1,275,148 820,091 1,114,398 838,499
1/31/2002 1,273,363 810,375 1,129,190 829,778
2/28/2002 1,284,314 788,738 1,136,065 807,036
3/31/2002 1,358,933 849,341 1,221,145 871,899
4/30/2002 1,362,602 853,515 1,264,131 879,845
5/31/2002 1,337,530 821,702 1,222,322 840,796
6/30/2002 1,292,856 775,677 1,195,260 799,078
7/31/2002 1,124,139 670,247 1,017,670 678,393
8/31/2002 1,142,462 673,799 1,013,148 676,665
9/30/2002 1,056,321 626,103 940,778 628,071
10/31/2002 1,074,067 648,354 954,930 648,208
11/30/2002 1,127,877 696,200 1,031,134 706,057
12/31/2002 1,106,448 662,377 987,077 666,744
1/31/2003 1,077,680 643,007 959,285 648,291
2/28/2003 1,054,402 622,929 927,036 628,702
3/31/2003 1,057,460 628,189 936,937 636,798
4/30/2003 1,144,277 680,497 1,025,932 697,177
5/31/2003 1,215,795 740,279 1,130,685 771,993
6/30/2003 1,241,448 757,321 1,149,843 785,964
7/31/2003 1,289,120 796,158 1,207,184 835,142
8/31/2003 1,337,977 830,662 1,253,039 873,432
9/30/2003 1,304,394 812,622 1,238,666 857,310
10/31/2003 1,412,528 876,479 1,339,669 929,304
11/30/2003 1,453,633 908,054 1,391,094 962,283
12/31/2003 1,488,520 933,305 1,441,403 981,806
1/31/2004 1,522,458 962,874 1,491,241 1,024,461
2/29/2004 1,551,994 979,629 1,520,117 1,033,645
3/31/2004 1,577,757 990,251 1,541,139 1,043,278
4/30/2004 1,523,167 956,217 1,461,439 990,088
5/31/2004 1,535,047 964,540 1,479,080 1,005,846
6/30/2004 1,603,357 1,005,716 1,554,201 1,048,206
7/31/2004 1,536,818 952,723 1,482,754 977,627
8/31/2004 1,558,794 944,388 1,497,299 972,602
9/30/2004 1,615,579 991,351 1,556,525 1,018,262
Data quoted reflects past performance and cannot guarantee future results.
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.
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
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.
Value stocks 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 underperformed its benchmark, the Russell 2000
Index, for the 12 months ended September 30, 2004. Our focus on the smaller-cap
names in the Fund's universe of stocks was a negative influence on performance
during the period. Much of the Fund's underperformance for the fiscal year
occurred in the final calendar quarter of 2003 and the first calendar quarter
of 2004, when investors focused on the larger, more liquid stocks in
the benchmark.
The Fund's technology sector suffered the greatest setbacks during the fiscal
year. Early in the period, investors rotated out of volatile sectors, such as
technology. Then, as the year progressed, the sector's fundamentals showed
signs of erosion, putting further downward pressure on technology stocks. In
particular, shares of technology companies Microsemi Corp. and Silicon Storage
Technology Inc. fell as evidence grew that the rebound in tech fundamentals had
peaked. In addition to technology, the healthcare and producer durables sectors
also dragged down Fund performance, primarily due to unfavorable stock
selections.
On the bright side, the consumer discretionary sector offered the greatest
positive contribution to the Fund's one-year performance. Energy also was a
significant positive contributor, largely due to good stock choices and an
overall positive environment for energy holdings. In particular, the Fund
realized strong gains from Quicksilver Resources, an energy exploration and
development company that benefited from strong demand and rising worldwide
energy prices.
OUTLOOK | In the near term, we believe the market has the potential to post
strong gains, as long as the economy regains momentum, the presidential
election goes off without a major incident, and oil prices ease from their
recent peaks. Longer term, we expect average gains for stocks, as the threat of
higher inflation and interest rates may serve to depress earnings multiples.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth from investments in common stocks or
their equivalents
STRATEGY | Invests at least 80% of its assets 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 | $20.8 million
[PHOTO] [PHOTO]
Chris Ely Dave Smith
CHRIS ELY DAVE SMITH
[PHOTO]
Phil Fine
PHIL FINE
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2004
SINCE
FUND NAME 1 YEAR 5 YEARS INCEPTION(a)
-------------------------------------------------------------------
LOOMIS SAYLES SMALL COMPANY GROWTH FUND -5.32% -7.40% -4.17%
LIPPER SMALL-CAP GROWTH FUNDS INDEX(b) 8.17 2.94 4.87
RUSSELL 2000 GROWTH INDEX(b) 11.92 -0.68 -0.58
RUSSELL 2000 INDEX(b) 18.77 7.41 6.69
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 2004(c)
[CHART]
Loomis Sayles
Small Company Lipper Small-Cap Russell 2000 Russell 2000
Growth Fund Growth Funds Index Growth Index Index
------------ ------------------ ------------ ------------
5/7/1999 3,000,000 3,000,000 3,000,000 3,000,000
5/31/1999 2,934,000 3,016,354 3,004,753 3,043,821
6/30/1999 3,396,105 3,298,675 3,163,029 3,181,461
7/31/1999 3,273,166 3,287,027 3,065,220 3,094,164
8/31/1999 3,315,063 3,240,941 2,950,585 2,979,653
9/30/1999 3,501,038 3,358,429 3,007,498 2,980,303
10/31/1999 3,950,921 3,554,247 3,084,532 2,992,374
11/30/1999 4,337,716 4,002,685 3,410,680 3,171,047
12/31/1999 5,330,619 4,809,787 4,011,818 3,530,009
1/31/2000 5,381,793 4,759,699 3,974,482 3,473,322
2/29/2000 7,367,675 6,154,247 4,899,203 4,046,892
3/31/2000 6,416,508 5,671,181 4,384,218 3,780,078
4/30/2000 5,702,351 4,970,115 3,941,564 3,552,611
5/31/2000 5,003,242 4,563,770 3,596,423 3,345,559
6/30/2000 6,154,989 5,367,502 4,061,012 3,637,195
7/31/2000 5,228,048 5,018,298 3,712,981 3,520,175
8/31/2000 6,139,819 5,557,998 4,103,539 3,788,767
9/30/2000 5,932,907 5,282,750 3,899,678 3,677,414
10/31/2000 5,347,923 4,886,405 3,583,124 3,513,254
11/30/2000 4,001,316 4,054,260 2,932,549 3,152,614
12/31/2000 4,508,282 4,412,859 3,111,995 3,423,368
1/31/2001 4,392,419 4,547,319 3,363,881 3,601,600
2/28/2001 3,494,609 3,965,154 2,902,774 3,365,283
3/31/2001 3,123,132 3,580,050 2,638,858 3,200,667
4/30/2001 3,534,136 3,966,561 2,961,925 3,451,054
5/31/2001 3,433,767 4,074,036 3,030,531 3,535,880
6/30/2001 3,436,857 4,176,764 3,113,175 3,657,972
7/31/2001 3,248,174 3,943,935 2,847,589 3,459,969
8/31/2001 3,004,561 3,710,450 2,669,754 3,348,217
9/30/2001 2,456,529 3,131,357 2,238,977 2,897,505
10/31/2001 2,699,971 3,360,816 2,454,374 3,067,068
11/30/2001 2,894,909 3,621,247 2,659,251 3,304,510
12/31/2001 3,050,076 3,840,612 2,824,813 3,508,476
1/31/2002 2,891,777 3,724,480 2,724,318 3,471,984
2/28/2002 2,602,599 3,499,090 2,547,990 3,376,829
3/31/2002 2,846,202 3,785,168 2,769,458 3,648,232
4/30/2002 2,715,277 3,685,299 2,709,539 3,681,480
5/31/2002 2,526,565 3,537,460 2,551,112 3,518,089
6/30/2002 2,392,657 3,274,603 2,334,782 3,343,530
7/31/2002 1,917,715 2,810,198 1,975,945 2,838,554
8/31/2002 1,920,783 2,806,116 1,975,026 2,831,326
9/30/2002 1,756,364 2,635,933 1,832,366 2,627,997
10/31/2002 1,862,975 2,748,407 1,925,048 2,712,256
11/30/2002 1,987,795 2,978,613 2,115,891 2,954,308
12/31/2002 1,826,386 2,779,617 1,969,971 2,789,815
1/31/2003 1,762,462 2,706,216 1,916,453 2,712,601
2/28/2003 1,722,807 2,621,886 1,865,348 2,630,638
3/31/2003 1,731,938 2,675,954 1,893,587 2,664,512
4/30/2003 1,917,602 2,897,118 2,072,796 2,917,154
5/31/2003 2,133,715 3,192,537 2,306,381 3,230,202
6/30/2003 2,215,863 3,300,728 2,350,829 3,288,658
7/31/2003 2,389,365 3,493,734 2,528,543 3,494,430
8/31/2003 2,562,833 3,678,998 2,664,357 3,654,645
9/30/2003 2,517,215 3,588,638 2,596,912 3,587,186
10/31/2003 2,699,965 3,914,219 2,821,256 3,888,427
11/30/2003 2,776,104 4,018,446 2,913,238 4,026,419
12/31/2003 2,669,501 4,024,170 2,926,262 4,108,107
1/31/2004 2,785,091 4,212,446 3,079,989 4,286,587
2/29/2004 2,687,613 4,196,614 3,075,223 4,325,013
3/31/2004 2,644,880 4,167,609 3,089,598 4,365,321
4/30/2004 2,489,625 3,963,959 2,934,506 4,142,759
5/31/2004 2,544,397 4,046,641 2,992,879 4,208,695
6/30/2004 2,626,581 4,162,010 3,092,464 4,385,938
7/31/2004 2,331,353 3,794,833 2,814,885 4,090,619
8/31/2004 2,227,841 3,671,895 2,754,284 4,069,594
9/30/2004 2,383,893 3,881,664 2,906,582 4,260,645
Data quoted reflects past performance and cannot guarantee future results.
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.
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, in part, because the value of the underlying securities is
based on future expectations that may or may not be met.
In mid-September, we implemented some changes to the portfolio's structure. The
volatility that exists in the market today--and we believe is here to stay--led
us to attempt to reduce some of the risks inherent in a relatively concentrated
portfolio. Specifically, we increased the number of holdings from 75 to
approximately 125 and we reduced the sector concentration. Our strategy remains
the same and we are confident this new structure is the best way to better
position the portfolio in the current market environment.
5
FUND AND MANAGER REVIEW
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
PORTFOLIO REVIEW | We positioned the portfolio with stocks we believed would
benefit from an improving economic environment driven by moderate GDP growth
and higher interest rates. Still, the Fund lagged its benchmark, the S&P 500
Index, for the 2 months ended September 30, 2004.
The Fund's holdings in healthcare, energy and consumer staples were positive
contributors to performance. Stock selection was the key in healthcare and
materials while overweighting energy proved advantageous.
In terms of specific holdings, the three stocks that performed best for the
year on a relative basis included Harris Corp., ConocoPhillips and Praxair.
Harris, a provider of products and services for the communication markets, saw
an increase in order flow. ConocoPhillips advanced on higher energy prices.
Praxair, an industrial gas provider, saw a gain in profits due to the expanding
economy.
The Fund's relative performance suffered somewhat from stock selections in the
telecommunication and consumer discretionary sectors. In addition,
overweighting the technology sector hurt performance. In particular, the
sell-off in technology stocks and concerns about slowing top-line growth hurt
Intel and VERITAS Software. We sold VERITAS, but Intel remains a core holding
based on its attractive valuation and long-term market opportunity potential.
OUTLOOK | We continue to believe the U.S. equity market will generate moderate
returns for 2004. Although domestic politics, tensions in the Middle East,
higher oil prices and rising interest rates have weighed on market performance
so far this year, fundamentals continue to improve. In addition, we believe
earnings announcements will continue to be positive.
KEY FUND FACTS
OBJECTIVE | Long-term capital growth
STRATEGY | Invests at least 80% of assets 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 | $5.2 million
[PHOTO] [PHOTO]
Robert Ix Mark A. Shank
ROBERT IX MARK A. SHANK
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2004
SINCE SINCE
FUND NAME 1 YEAR 5 YEARS REGISTRATION(a)(b) INCEPTION(a)(b)
- --------------------------------------------------------------------------------------
LOOMIS SAYLES TAX-MANAGED
EQUITY FUND 13.40% 4.05% 9.05% 10.17%
RETURN AFTER TAXES ON DISTRIBUTIONS 12.87 0.30 5.21 6.84
RETURN AFTER TAXES ON DISTRIBUTIONS
AND SALE OF FUND SHARES 9.06 1.46 5.84 7.16
LIPPER MULTI-CAP CORE FUNDS INDEX(c) 13.97 1.02 6.08 8.32
S&P 500 INDEX(c) 13.87 -1.31 6.22 9.18
CUMULATIVE PERFORMANCE REGISTRATION TO SEPTEMBER 30, 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
04/30/2004 479,877 386,400 389,440
05/31/2004 482,132 391,028 394,784
06/30/2004 494,041 399,684 402,461
07/31/2004 473,637 383,296 389,140
08/31/2004 470,795 383,014 390,714
09/30/2004 481,596 391,205 394,946
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 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 595,589 515,564 553,073
02/29/2004 607,561 523,571 560,760
03/31/2004 604,037 517,628 552,300
04/30/2004 595,580 506,730 543,630
05/31/2004 598,380 512,799 551,090
06/30/2004 613,160 524,150 561,806
07/31/2004 587,836 502,659 543,212
08/31/2004 584,309 502,289 545,409
09/30/2004 597,568 513,030 551,317
Data quoted reflects past performance and cannot guarantee future results.
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
which, performance and rankings would be lower. Returns do not reflect the
deduction of taxes that a shareholder would pay on fund distributions or the
redemption of shares.
(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.
Growth funds involve increased risks, in part, because the value of the
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 | Buoyed by performance in the energy, industrials and
financials sectors, the Fund outperformed its benchmark, the S&P 500 Index,
during the fiscal year ended September 30, 2004. The Fund's energy holdings
benefited from rising oil and natural gas prices. Positive stock-picking helped
propel the Fund's financials sector, as two banks represented in the portfolio
were taken over at prices well above their costs. The Fund's industrials sector
also performed well due to our position in Tyco, which continued to benefit
from strong business growth.
Although no sectors generated negative performance for the year, the consumer
staples and healthcare areas were uninspiring. The consumer staples sector
generally lagged as disappointing performance from a number of bell weather
stocks dragged down the whole group. Healthcare lagged due to our position in
McKesson, which reduced its earnings guidance due to a lack of price increases
from the pharmaceutical companies.
Throughout the fiscal year we favored attractively-valued companies with
economic sensitivity. Given our forecast for rising interest rates, we
underweighted the financials sector. Within the final few months of the year,
we increased the Fund's energy weighting, because we believed oil and natural
gas prices would remain high.
OUTLOOK | In the short term, we believe the market may remain volatile, as
election uncertainty and continued increases in energy prices weigh on the
market. Longer-term, we are confident in the market's potential. Continued
economic growth should promote earnings and dividend growth, which would be
positive for stock prices. However, further increases in interest rates may put
a damper on the stock market, so our forecast is for solid, but not overly
robust returns. The best performance may include energy and other
economically-sensitive areas.
KEY FUND FACTS
OBJECTIVE | Long-term growth of capital and income
STRATEGY | Invests primarily in equity securities, including common stocks,
convertible securities, and warrants; Fund invests primarily in medium- and
large-sized companies
FUND INCEPTION DATE | 5/13/91
EXPENSE RATIO | 0.85%
TOTAL NET ASSETS | $33.6 million
[PHOTO] [PHOTO]
Warren Koontz James Carroll
WARREN KOONTZ JAMES CARROLL
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2004
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
--------------------------------------------------------------------------
LOOMIS SAYLES VALUE FUND 19.38% 3.03% 9.60% 9.85%
LIPPER LARGE-CAP VALUE FUNDS INDEX(b) 16.69 1.35 10.26 10.38
S&P 500 INDEX(b) 13.87 -1.31 11.08 10.68
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 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 860,577 935,257 977,670
04/30/2004 844,571 918,021 962,322
05/31/2004 857,830 924,729 975,528
6/30/2004 874,387 945,085 994,497
7/31/2004 861,708 922,336 961,582
8/31/2004 864,982 929,020 965,472
9/30/2004 879,401 939,998 975,928
Data quoted reflects past performance and cannot guarantee future results.
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.
Value stocks 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 slightly lagged its benchmark, the S&P 500 Index,
for the 12 months ended September 30, 2004.
On the stock side, our higher quality emphasis helped to generate solid
absolute returns for the portfolio. The economically-sensitive sectors were
among our best performers, especially materials, which generated strong
absolute and relative returns. Strong stock selection was particularly helpful
in healthcare, which more than made up for the drag we had in telecommunication
services.
In the bond portfolio, our currency and country strategies were keys to
performance. We positioned the portfolio to take advantage of a weaker U.S.
dollar and invested nearly 75% of the portfolio in non-dollar currencies. In
particular, the portfolio realized double-digit returns from several
currencies, including the euro, U.K. sterling, Canadian dollar, Australian
dollar, New Zealand dollar and Swedish krona. Emerging market positions, which
advanced strongly for the year, dominated our country strategy. The portfolio
realized notable gains from positions in Brazil.
Issue selection in the bond portfolio also enhanced performance. Specifically,
we focused on BBB-rated corporate securities, which were strong out-performers
for the year. Our issue selections also helped offset the negative impact of
our duration strategy. We maintained a shorter duration (sensitivity to
interest rate changes), which cost the portfolio some performance in the
declining yield environment.
OUTLOOK | We continue to believe we will see modest returns in the equity
markets this year. Although domestic political events, tension in the Middle
East, higher oil prices and rising interest rates have weighed on market
performance this year, fundamentals continue to improve and earnings remain
solid. Within the bond portfolio, we continue to favor non-U.S. dollar currency
exposure. We also plan to use corporates and emerging market debt for added
income and exposure to upgrade candidates. Nevertheless, we are not spending
our "quality budget" as aggressively as we would if spreads were wider.
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 | $17.3 million
[PHOTO] [PHOTO]
Daniel Fuss David Rolley
DANIEL FUSS DAVID ROLLEY
[PHOTO] [PHOTO]
Warren Koontz
MARK B. BARIBEAU WARREN KOONTZ
effective 10/1/04 effective 10/1/04
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED SEPTEMBER 30, 2004
SINCE
1 YEAR 5 YEARS INCEPTION(a)
-----------------------------------------------------------------
LOOMIS SAYLES WORLDWIDE FUND 13.24% 11.87% 10.16%
LIPPER GLOBAL FLEXIBLE FUNDS INDEX(b) 12.55 3.23 6.44
S&P 500 INDEX(b) 13.87 -1.31 8.23
CUMULATIVE PERFORMANCE INCEPTION TO SEPTEMBER 30, 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 568,259 426,515 487,221
04/30/2004 557,689 414,215 479,572
05/31/2004 566,445 416,130 486,154
06/30/2004 577,378 421,198 495,607
07/31/2004 569,006 411,174 479,204
08/31/2004 571,168 412,788 481,142
09/30/2004 564,315 422,703 486,353
Data quoted reflects past performance and cannot guarantee future results.
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.
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
ADDITIONAL INFORMATION
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 that 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 SEC's
website at www.sec.gov. Information about how the Funds voted proxies relating
to portfolio securities during the 12 months ended June 30, 2004 is available
on (i) the Funds' website and (ii) the SEC's website.
QUARTERLY PORTFOLIO SCHEDULES
Beginning next quarter, the Funds will file a complete schedule of portfolio
holdings with the SEC for the first and third quarters of each fiscal year on
Form N-Q. The Funds' Forms N-Q will be available on the SEC's website at
www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room
in Washington, DC. Information on the operation of the Public Reference Room
may be obtained by calling 1-800-SEC-0330.
9
UNDERSTANDING YOUR FUND'S EXPENSES
As a mutual fund shareholder you incur two types of costs: (1) transaction
costs, including redemption fees and certain exchange fees; and (2) ongoing
costs, including management fees, distribution fees (12b-1 fees), and other
Fund expenses. These costs are described in more detail in the Fund's
prospectus. The examples below are intended to help you understand the ongoing
costs of investing in the Funds and help you compare these with the ongoing
costs of investing in other mutual funds.
The first line in the table of each Fund shows the actual account values and
actual Fund expenses you would have paid on a $1,000 investment in the Fund
from April 1, 2004 through September 30, 2004. It also shows how much a $1,000
investment would be worth at the close of the period, assuming actual fund
returns and expenses. To estimate the expenses you paid over the period, simply
divide your account value by $1,000 (for example $8,600 account value divided
by $1,000 = 8.6) and multiply the result by the number in the Expenses Paid
During the Period column as shown below for your class.
The second line in the table of each Fund provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratios and an assumed rate of return of 5% per year before
expenses, which is not the Fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid on your investment for the period. You may use
this information to compare the ongoing costs of investing in the Funds and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs. Therefore, the second line in the table is
useful in comparing ongoing costs only, and will not help you determine the
relative costs of owning different funds. If transaction costs were included,
total costs would be higher.
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/04 9/30/04 4/1/04 - 9/30/04
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,006.50 $5.02
Hypothetical (5% return before expenses) $1,000.00 $1,020.00 $5.05
Retail Class
- ------------
Actual $1,000.00 $1,005.30 $6.27
Hypothetical (5% return before expenses) $1,000.00 $1,018.75 $6.31
*Expenses are equal to the Fund's annualized expense ratio of 1.00% and 1.25% for the Institutional and Retail Class,
respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the half-year period).
LOOMIS SAYLES MID CAP GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/04 9/30/04 4/1/04 - 9/30/04
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,000.00 $4.50
Hypothetical (5% return before expenses) $1,000.00 $1,020.50 $4.55
*Expenses are equal to the Fund's annualized expense ratio 0.90%, multiplied by the average account value over the period,
multiplied by 183/366 (to reflect the half-year period).
LOOMIS SAYLES SMALL CAP GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/04 9/30/04 4/1/04 - 9/30/04
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $ 947.10 $4.87
Hypothetical (5% return before expenses) $1,000.00 $1,020.00 $5.05
Retail Class
- ------------
Actual $1,000.00 $ 945.10 $6.08
Hypothetical (5% return before expenses) $1,000.00 $1,018.75 $6.31
*Expenses are equal to the Fund's annualized expense ratio of 1.00% and 1.25% for the Institutional and Retail Class,
respectively, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the half-year period).
10
LOOMIS SAYLES SMALL CAP VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/04 9/30/04 4/1/04 - 9/30/04
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,023.90 $4.55
Hypothetical (5% return before expenses) $1,000.00 $1,020.50 $4.55
Retail Class
- ------------
Actual $1,000.00 $1,022.80 $5.82
Hypothetical (5% return before expenses) $1,000.00 $1,019.25 $5.81
Admin Class
- -----------
Actual $1,000.00 $1,021.30 $7.07
Hypothetical (5% return before expenses) $1,000.00 $1,018.00 $7.06
*Expenses are equal to the Fund's annualized expense ratio of 0.90%, 1.15% and 1.40% for
the Institutional, Retail and Admin Classes, respectively, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the half-year period).
LOOMIS SAYLES SMALL COMPANY GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/04 9/30/04 4/1/04 - 9/30/04
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $ 901.00 $4.28
Hypothetical (5% return before expenses) $1,000.00 $1,020.50 $4.55
*Expenses are equal to the Fund's annualized expense ratio of 0.90%, multiplied by the average account value over the period,
multiplied by 183/366 (to reflect the half-year period).
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/04 9/30/04 4/1/04 - 9/30/04
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $ 989.50 $3.23
Hypothetical (5% return before expenses) $1,000.00 $1,021.75 $3.29
*Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied by the average account value over the period,
multiplied by 183/366 (to reflect the half-year period).
LOOMIS SAYLES VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/04 9/30/04 4/1/04 - 9/30/04
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,021.80 $4.30
Hypothetical (5% return before expenses) $1,000.00 $1,020.75 $4.29
*Expenses are equal to the Fund's annualized expense ratio of 0.85%, multiplied by the average account value over the period,
multiplied by 183/366 (to reflect the half-year period).
LOOMIS SAYLES WORLDWIDE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/04 9/30/04 4/1/04 - 9/30/04
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $ 993.20 $4.98
Hypothetical (5% return before expenses) $1,000.00 $1,020.00 $5.05
*Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied by the average account value over the period,
multiplied by 183/366 (to reflect the half-year period).
11
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
SHARES VALUE (A)
- -----------------------------------------------------------------
COMMON STOCKS - 97.7% OF TOTAL NET ASSETS
BANKS/SAVINGS & LOANS - 2.0%
TCF Financial Corp. 32,850 $ 995,027
----------
BIOTECHNOLOGY - 7.4%
Genzyme Corp.(c) 13,425 730,454
Gilead Sciences, Inc.(c) 23,550 880,299
ImClone Systems, Inc.(c) 6,925 365,986
Martek Biosciences Corp.(c) 9,100 442,624
Onyx Pharmaceuticals, Inc.(c) 9,700 417,197
OSI Pharmaceuticals, Inc.(c) 6,300 387,198
Pharmion Corp.(c) 9,650 498,867
----------
3,722,625
----------
CAPITAL MARKETS - 3.5%
Blackrock, Inc., Class A 14,050 1,032,534
T. Rowe Price Group, Inc. 14,775 752,639
----------
1,785,173
----------
CHEMICALS - 1.1%
Lyondell Chemical Co. 23,650 531,179
----------
COMMERCIAL BANKS - 1.0%
East West Bancorp, Inc. 15,375 516,446
----------
COMMERCIAL SERVICES & SUPPLIES - 4.5%
Corporate Executive Board Co. 16,150 989,026
Iron Mountain, Inc.(c) 38,325 1,297,301
----------
2,286,327
----------
COMMUNICATIONS EQUIPMENT - 5.0%
Juniper Networks, Inc.(c) 32,700 771,720
Research In Motion Ltd.(c) 23,125 1,765,362
----------
2,537,082
----------
COMPUTERS & PERIPHERALS - 4.2%
Apple Computer, Inc.(c) 35,825 1,388,219
Network Appliance, Inc.(c) 32,950 757,850
----------
2,146,069
----------
DIVERSIFIED FINANCIAL SERVICES - 4.2%
Chicago Mercantile Exchange 6,700 1,080,710
Moody's Corp. 14,475 1,060,294
----------
2,141,004
----------
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 1.7%
Cree, Inc.(c) 27,425 837,285
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.9%
FLIR Systems, Inc.(c) 7,925 463,613
----------
ENERGY EQUIPMENT & SERVICES - 2.1%
Smith International, Inc.(c) 17,550 1,065,812
----------
HEALTHCARE - EQUIPMENT & SUPPLIES - 5.5%
Advanced Medical Optics, Inc.(c) 18,900 747,873
Dade Behring Holdings, Inc.(c) 18,275 1,018,246
Fisher Scientific International, Inc.(c) 16,750 977,028
----------
2,743,147
----------
12
SHARES VALUE (A)
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTHCARE PROVIDERS & SERVICES - 3.0%
Covance, Inc.(c) 37,700 $1,506,869
----------
HOME CONSTRUCTION - 4.9%
Pulte Homes, Inc. 20,100 1,233,537
Toll Brothers, Inc.(c) 26,950 1,248,593
----------
2,482,130
----------
HOTELS, RESTAURANTS & LEISURE - 7.8%
Starbucks Corp.(c) 22,025 1,001,256
Starwood Hotels & Resorts Worldwide, Inc. 22,450 1,042,129
Station Casinos, Inc. 23,575 1,156,118
Yum! Brands, Inc. 18,725 761,359
----------
3,960,862
----------
HOUSEHOLD DURABLES - 3.0%
Harman International Industries, Inc. 14,150 1,524,662
----------
INTERNET SOFTWARE & SERVICES - 2.9%
Ask Jeeves, Inc.(c) 16,000 523,360
Yahoo! Inc.(c) 27,825 943,546
----------
1,466,906
----------
IT SERVICES - 2.1%
Cognizant Technology Solutions Corp.(c) 35,500 1,083,105
----------
MEDIA - 2.2%
XM Satellite Radio Holdings, Inc., Class A(c) 36,500 1,132,230
----------
METALS & MINING - 6.3%
Freeport-McMoRan Copper & Gold, Inc., Class B 29,675 1,201,837
Nucor Corp. 12,900 1,178,673
Steel Dynamics, Inc. 20,825 804,262
----------
3,184,772
----------
OFFICE ELECTRONICS - 3.0%
Zebra Technologies Corp., Class A(c) 25,075 1,529,826
----------
OIL & GAS DRILLING EQUIPMENT - 2.0%
Noble Corp.(c) 22,575 1,014,746
----------
OIL & GAS EXPLORATION - 4.2%
EOG Resources, Inc. 16,175 1,065,124
Ultra Petroleum Corp.(c) 21,750 1,066,837
----------
2,131,961
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.5%
Marvell Technology Group Ltd.(c) 28,025 732,293
----------
SOFTWARE - 3.1%
Symantec Corp.(c) 28,150 1,544,872
----------
SPECIALTY RETAIL - 1.5%
PETsMART, Inc. 25,825 733,172
----------
TEXTILES APPAREL & LUXURY GOODS - 1.8%
Coach, Inc.(c) 21,875 927,938
----------
THRIFTS & MORTGAGE FINANCE - 1.4%
Commercial Capital Bancorp, Inc. 30,825 699,419
----------
13
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES AGGRESSIVE GROWTH FUND - CONTINUED
SHARES VALUE (A)
- ------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
TRADING COMPANIES & DISTRIBUTORS - 2.2%
Fastenal Co. 19,200 $ 1,105,920
-----------
WIRELESS TELECOMMUNICATION SERVICES - 1.7%
Nextel Partners, Inc., Class A(c) 52,600 872,108
-----------
TOTAL COMMON STOCKS
(Identified Cost $44,036,477) 49,404,580
-----------
PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 3.3%
Repurchase Agreement with State Street Corp.,
dated 9/30/04 at 0.650% to be repurchased at
$1,651,030 on 10/1/04 collateralized by
$1,175,000 U.S. Treasury Bond, 8.500% due
2/15/20 with a value of $1,684,656 $1,651,000 1,651,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $1,651,000) 1,651,000
-----------
TOTAL INVESTMENTS - 101.0%
(Identified Cost $45,687,477)(b) 51,055,580
Other assets less liabilities--(1.0)% (482,395)
-----------
TOTAL NET ASSETS - 100% $50,573,185
-----------
(a)See Note 2a of Notes to Financial Statements.
(b)Federal Tax Information:
At September 30, 2004, the net
unrealized appreciation on
investments based on cost of
$46,347,575 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 $4,860,172
Aggregate gross unrealized
depreciation for all
investments in which there is
an excess of tax cost over
value (152,167)
----------
Net unrealized appreciation $4,708,005
----------
At September 30, 2004, the Fund had a capital loss carryover of
approximately $108,430,596 of which $87,288,208 expires on September 30,
2010 and $21,142,388 expires on September 30, 2011. These amounts may be
available to offset future realized capital gains, if any, to the extent
provided by regulations.
At September 30, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$498,755 in undistributed ordinary income and $0 in undistributed long-term
gains.
The differences between book and tax distributable earnings are primarily
due to deferred trustees' fees, unrealized gains on passive foreign
investment companies and wash sales.
(c)Non-income producing security.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2004 AS A PERCENTAGE OF NET ASSETS
Hotels, Restaurants & Leisure 7.8% Software 3.1%
Biotechnology 7.4 Office Electronics 3.0
Metals & Mining 6.3 Household Durables 3.0
Healthcare - Equipment & Supplies 5.5 Healthcare Providers & Services 3.0
Communications Equipment 5.0 Internet Software & Services 2.9
Home Construction 4.9 Media 2.2
Commercial Services & Supplies 4.5 Trading Companies & Distributors 2.2
Computers & Peripherals 4.2 IT Services 2.1
Diversified Financial Services 4.2 Energy Equipment & Services 2.1
Oil & Gas Exploration 4.2 Oil & Gas Drilling Equipment 2.0
Capital Markets 3.5 Banks/Savings & Loans 2.0
Other, less than 2% each 12.6
See accompanying notes to financial statements.
14
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES MID CAP GROWTH FUND
SHARES VALUE (A)
- ----------------------------------------------------------------
COMMON STOCKS - 96.9% OF TOTAL NET ASSETS
BANKS/SAVINGS & LOANS - 1.9%
TCF Financial Corp. 5,350 $162,052
---------
BIOTECHNOLOGY - 7.3%
Genzyme Corp.(c) 2,275 123,783
Gilead Sciences, Inc.(c) 3,850 143,913
ImClone Systems, Inc.(c) 1,175 62,099
Martek Biosciences Corp.(c) 1,525 74,176
Onyx Pharmaceuticals, Inc.(c) 1,625 69,891
OSI Pharmaceuticals, Inc.(c) 1,050 64,533
Pharmion Corp.(c) 1,625 84,006
---------
622,401
---------
CAPITAL MARKETS - 3.5%
Blackrock, Inc., Class A 2,375 174,539
T. Rowe Price Group, Inc. 2,475 126,076
---------
300,615
---------
CHEMICALS - 1.1%
Lyondell Chemical Co. 4,000 89,840
---------
COMMERCIAL BANKS - 1.0%
East West Bancorp, Inc. 2,600 87,334
---------
COMMERCIAL SERVICES & SUPPLIES - 4.7%
Corporate Executive Board Co. 2,725 166,879
Iron Mountain, Inc.(c) 6,925 234,411
---------
401,290
---------
COMMUNICATIONS EQUIPMENT - 5.0%
Juniper Networks, Inc.(c) 5,525 130,390
Research In Motion Ltd.(c) 3,875 295,817
---------
426,207
---------
COMPUTERS & PERIPHERALS - 4.2%
Apple Computer, Inc.(c) 5,925 229,594
Network Appliance, Inc.(c) 5,550 127,650
---------
357,244
---------
DIVERSIFIED FINANCIAL SERVICES - 4.6%
Chicago Mercantile Exchange 1,100 177,430
Moody's Corp. 2,975 217,919
---------
395,349
---------
ELECTRONIC COMPONENTS - SEMICONDUCTORS - 1.6%
Cree, Inc.(c) 4,625 141,201
---------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.9%
FLIR Systems, Inc.(c) 1,350 78,975
---------
ENERGY EQUIPMENT & SERVICES - 2.1%
Smith International, Inc.(c) 2,950 179,154
---------
HEALTHCARE - EQUIPMENT & SUPPLIES - 5.7%
Advanced Medical Optics, Inc.(c) 3,450 136,517
Dade Behring Holdings, Inc.(c) 3,075 171,333
Fisher Scientific International, Inc.(c) 3,075 179,365
---------
487,215
---------
15
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES MID CAP GROWTH FUND - CONTINUED
SHARES VALUE (A)
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTHCARE PROVIDERS & SERVICES - 2.8%
Covance, Inc.(c) 5,975 $238,821
---------
HOME CONSTRUCTION - 4.9%
Pulte Homes, Inc. 3,375 207,124
Toll Brothers, Inc.(c) 4,500 208,485
---------
415,609
---------
HOTELS, RESTAURANTS & LEISURE - 8.6%
Starbucks Corp.(c) 3,725 169,338
Starwood Hotels & Resorts Worldwide, Inc. 4,550 211,211
Station Casinos, Inc. 4,175 204,742
Yum! Brands, Inc. 3,750 152,475
---------
737,766
---------
HOUSEHOLD DURABLES - 3.0%
Harman International Industries, Inc. 2,350 253,212
---------
INTERNET SOFTWARE & SERVICES - 1.5%
Ask Jeeves, Inc.(c) 3,925 128,387
---------
IT SERVICES - 2.1%
Cognizant Technology Solutions Corp.(c) 6,000 183,060
---------
MEDIA - 2.2%
XM Satellite Radio Holdings, Inc., Class A(c) 6,125 189,997
---------
METALS & MINING - 6.1%
Freeport-McMoRan Copper & Gold, Inc., Class B 4,875 197,437
Nucor Corp. 2,100 191,877
Steel Dynamics, Inc. 3,500 135,170
---------
524,484
---------
OFFICE ELECTRONICS - 3.0%
Zebra Technologies Corp., Class A(c) 4,250 259,292
---------
OIL & GAS DRILLING EQUIPMENT - 2.0%
Noble Corp.(c) 3,800 170,810
---------
OIL & GAS EXPLORATION - 4.1%
EOG Resources, Inc. 2,650 174,502
Ultra Petroleum Corp.(c) 3,675 180,259
---------
354,761
---------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.4%
Marvell Technology Group Ltd.(c) 4,725 123,464
---------
SOFTWARE - 3.0%
Symantec Corp.(c) 4,750 260,680
---------
SPECIALTY RETAIL - 1.5%
PETsMART, Inc. 4,475 127,045
---------
TEXTILES APPAREL & LUXURY GOODS - 1.8%
Coach, Inc.(c) 3,675 155,894
---------
THRIFTS & MORTGAGE FINANCE - 1.4%
Commercial Capital Bancorp, Inc. 5,175 117,421
---------
TRADING COMPANIES & DISTRIBUTORS - 2.2%
Fastenal Co. 3,200 184,320
---------
16
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES MID CAP GROWTH FUND - CONTINUED
SHARES VALUE (A)
- ---------------------------------------------------------------
COMMON STOCKS - CONTINUED
WIRELESS TELECOMMUNICATION SERVICES - 1.7%
Nextel Partners, Inc., Class A(c) 8,875 $ 147,148
----------
TOTAL COMMON STOCKS
(Identified Cost $7,394,990) 8,301,048
----------
TOTAL INVESTMENTS - 96.9%
(Identified Cost $7,394,990)(b) 8,301,048
Other assets less liabilities--3.1% 268,779
----------
TOTAL NET ASSETS - 100% $8,569,827
----------
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized appreciation on investments based on cost of $7,509,846 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 $816,674
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (25,472)
--------
Net unrealized appreciation $791,202
--------
At September 30, 2004, the Fund had a capital loss carryover of approximately
$4,658,636 of which $2,388,997 expires on September 30, 2010 and $2,269,639
expires on September 30, 2011. These amounts may be available to offset future
realized capital gains, if any, to the extent provided by regulations.
At September 30, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$104,716 in undistributed ordinary income and $0 in undistributed long-term
gains.
The differences between book and tax distributable earnings are primarily due
to deferred trustees' fees, unrealized gains on passive foreign investment
companies and wash sales.
(c) Non-income producing security.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2004 AS A PERCENTAGE OF NET ASSETS
Hotels, Restaurants & Leisure 8.6%
Biotechnology 7.3
Metals & Mining 6.1
Healthcare - Equipment & Supplies 5.7
Communications Equipment 5.0
Home Construction 4.9
Commercial Services & Supplies 4.7
Diversified Financial Services 4.6
Computers & Peripherals 4.2
Oil & Gas Exploration 4.1
Capital Markets 3.5
Software 3.0
Office Electronics 3.0
Household Durables 3.0
Healthcare Providers & Services 2.8
Media 2.2
Trading Companies & Distributors 2.2
IT Services 2.1
Energy Equipment & Services 2.1
Oil & Gas Drilling Equipment 2.0
Other, less than 2% each 15.8
17
See accompanying notes to financial statements.
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL CAP GROWTH FUND
SHARES VALUE (A)
- ---------------------------------------------------------------
COMMON STOCKS - 100.6% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 2.2%
DRS Technologies, Inc.(c) 17,450 $ 653,328
----------
AIR FREIGHT & LOGISTICS - 2.1%
EGL, Inc.(c) 20,850 630,921
----------
BANKS/SAVINGS & LOANS - 2.1%
Silicon Valley Bancshares(c) 17,550 652,333
----------
BIOTECHNOLOGY - 6.9%
Keryx Biopharmaceuticals, Inc.(c) 20,950 234,431
Martek Biosciences Corp.(c) 9,950 483,968
Onyx Pharmaceuticals, Inc.(c) 6,500 279,565
Pharmion Corp.(c) 4,750 245,556
Salix Pharmaceuticals Ltd.(c) 26,087 561,392
Telik, Inc.(c) 12,700 283,210
----------
2,088,122
----------
BUILDING PRODUCTS - 1.7%
Simpson Manufacturing Co., Inc. 8,150 515,080
----------
CAPITAL MARKETS - 2.1%
Affiliated Managers Group, Inc.(c) 12,200 653,188
----------
CHEMICALS - 1.8%
Headwaters, Inc.(c) 17,250 532,335
----------
CHEMICALS - SPECIALTY - 1.2%
Cuno, Inc.(c) 6,300 363,825
----------
COMMERCIAL BANKS - 2.8%
UCBH Holdings, Inc. 9,250 361,397
Wintrust Financial Corp. 8,450 484,016
----------
845,413
----------
COMMERCIAL SERVICES & SUPPLIES - 10.1%
Bright Horizons Family Solutions, Inc.(c) 8,825 479,109
Corporate Executive Board Co. 5,425 332,227
CoStar Group, Inc.(c) 13,500 664,065
Educate, Inc.(c) 30,350 357,827
Heidrick & Struggles International, Inc.(c) 19,775 569,915
Navigant Consulting, Inc.(c) 30,550 670,878
----------
3,074,021
----------
COMMUNICATIONS EQUIPMENT - 3.5%
AudioCodes Ltd.(c) 23,925 301,216
F5 Networks, Inc.(c) 14,850 452,331
Tekelec(c) 18,950 316,086
----------
1,069,633
----------
COMPUTER SERVICES - 1.6%
Sapient Corp.(c) 65,525 499,956
----------
COMPUTERS & PERIPHERALS - 1.1%
Novatel Wireless, Inc.(c) 14,525 341,338
----------
CONSUMER DURABLES & APPAREL - 2.1%
Quiksilver, Inc.(c) 25,600 650,752
----------
DIVERSIFIED FINANCIAL SERVICES - 1.3%
National Financial Partners Corp. 11,425 408,787
----------
18
SHARES VALUE (A)
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.1%
ScanSource, Inc.(c) 5,125 $ 326,975
----------
ENERGY EQUIPMENT & SERVICES - 1.9%
Input/Output, Inc.(c) 55,900 576,329
----------
HEALTHCARE - DRUGS - 1.8%
First Horizon Pharmaceutical Corp.(c) 26,675 533,767
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 8.6%
Advanced Medical Optics, Inc.(c) 16,750 662,797
ArthroCare Corp.(c) 19,325 566,029
Epix Pharmaceuticals, Inc.(c) 19,200 370,752
Given Imaging Ltd.(c) 14,900 572,905
Intuitive Surgical, Inc.(c) 17,950 444,263
----------
2,616,746
----------
HEALTHCARE PROVIDERS & SERVICES - 1.6%
United Surgical Partners International, Inc.(c) 14,350 492,923
----------
HOTELS, RESTAURANTS & LEISURE - 7.2%
Penn National Gaming, Inc.(c) 14,825 598,930
Scientific Games Corp., Class A(c) 37,875 723,412
Shuffle Master, Inc.(c) 10,150 380,219
Sonic Corp.(c) 19,425 497,863
----------
2,200,424
----------
INTERNET SOFTWARE & SERVICES - 2.8%
Akamai Technologies, Inc.(c) 23,100 324,555
Jupitermedia Corp.(c) 28,925 514,865
----------
839,420
----------
IT SERVICES - 3.5%
Anteon International Corp.(c) 14,450 529,592
iPayment Holdings, Inc.(c) 13,650 548,184
----------
1,077,776
----------
LEISURE EQUIPMENT & PRODUCTS - 1.4%
Jakks Pacific, Inc.(c) 18,725 430,675
----------
MACHINERY - 3.8%
Actuant Corp., Class A(c) 14,450 595,485
Ceradyne, Inc.(c) 12,975 569,732
----------
1,165,217
----------
METALS & MINING - 1.8%
Steel Dynamics, Inc. 14,200 548,404
----------
OIL & GAS - 4.3%
Cimarex Energy Co.(c) 10,525 367,743
Denbury Resources, Inc.(c) 23,075 586,105
Unit Corp.(c) 10,525 369,217
----------
1,323,065
----------
PHARMACEUTICALS - 0.9%
Bone Care International, Inc.(c) 10,775 261,833
----------
ROAD & RAIL - 1.6%
Old Dominion Freight Line, Inc.(c) 17,100 492,651
----------
19
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL CAP GROWTH FUND - CONTINUED
SHARES VALUE (A)
- ----------------------------------------------------------------------
COMMON STOCKS - CONTINUED
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.4%
FormFactor, Inc.(c) 28,350 $ 549,139
Tessera Technologies, Inc.(c) 22,175 490,068
-----------
1,039,207
-----------
SOFTWARE - 6.2%
Altiris, Inc.(c) 19,075 603,724
InfoSpace, Inc.(c) 8,300 393,337
JAMDAT Mobile, Inc.(c) 1,325 30,568
Macrovision Corp.(c) 13,050 314,244
RSA Security, Inc.(c) 28,475 549,567
-----------
1,891,440
-----------
SPECIALTY RETAIL - 3.2%
Brookstone, Inc.(c) 18,750 354,187
Guitar Center, Inc.(c) 14,100 610,530
-----------
964,717
-----------
TELECOMMUNICATIONS - WIRELESS - 1.3%
Alamosa Holdings, Inc.(c) 50,625 386,775
-----------
THRIFTS & MORTGAGE FINANCE - 1.6%
BankAtlantic Bancorp, Inc., Class A 27,000 494,640
-----------
TOTAL COMMON STOCKS
(Identified Cost $27,909,044) 30,642,016
-----------
TOTAL INVESTMENTS - 100.6%
(Identified Cost $27,909,044)(b) 30,642,016
Other assets less liabilities--(0.6%) (186,460)
-----------
TOTAL NET ASSETS - 100% $30,455,556
-----------
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized appreciation on investments based on cost of $27,927,215 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 $2,964,660
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (249,859)
----------
Net unrealized appreciation. $2,714,801
----------
At September 30, 2004, the Fund had a capital loss carryover of approximately
$209,546,027 of which $150,262,987 expires on September 30, 2010 and
$59,283,040 expires on September 30, 2011. These amounts may be available to
offset future realized capital gains, if any, to the extent provided by
regulations.
At September 30, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of $0
in undistributed ordinary income and $0 in undistributed long-term gains.
The differences between book and tax distributable earnings are primarily due
to deferred trustees' fees and wash sales.
(c) Non-income producing security.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2004 AS A PERCENTAGE OF NET ASSETS
Commercial Services & Supplies 10.1% Semiconductors & Semiconductor Equipment 3.4%
Healthcare Equipment & Supplies 8.6 Specialty Retail 3.2
Hotels, Restaurants & Leisure 7.2 Commercial Banks 2.8
Biotechnology 6.9 Internet Software & Services 2.8
Software 6.2 Aerospace & Defense 2.2
Oil & Gas 4.3 Capital Markets 2.1
Machinery 3.8 Banks/Savings & Loans 2.1
IT Services 3.5 Consumer Durables & Apparel 2.1
Communications Equipment 3.5 Air Freight & Logistics 2.1
Other, less than 2% each 23.7
See accompanying notes to financial statements.
20
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL CAP VALUE FUND
SHARES VALUE (A)
- ---------------------------------------------------------------
COMMON STOCKS - 95.9% OF TOTAL NET ASSETS
ADVERTISING - 0.7%
Catalina Marketing Corp. 173,600 $ 4,006,688
-----------
AEROSPACE & DEFENSE - 2.2%
Allied Defense Group, Inc. (The)(c) 76,175 1,412,285
Moog, Inc., Class A(c) 128,275 4,656,382
United Defense Industries, Inc.(c) 163,525 6,539,365
-----------
12,608,032
-----------
AUTO COMPONENTS - 1.2%
Cooper Tire & Rubber Co. 236,450 4,769,196
Dana Corp. 136,650 2,417,339
-----------
7,186,535
-----------
AUTOMOBILES - 0.3%
Monaco Coach Corp. 86,200 1,866,230
-----------
BIOTECHNOLOGY - 0.5%
Serologicals Corp.(c) 137,075 3,197,960
-----------
BUILDING PRODUCTS - 1.4%
Elk Corp. 154,375 4,285,450
Lennox International, Inc. 270,525 4,041,643
-----------
8,327,093
-----------
CHEMICALS - 3.1%
Cytec Industries, Inc. 122,225 5,982,914
Great Lakes Chemical Corp. 102,250 2,617,600
Millennium Chemicals, Inc.(c) 75,075 1,592,341
Scotts Co., Class A(c) 55,125 3,536,269
Spartech Corp. 172,375 4,326,612
-----------
18,055,736
-----------
COMMERCIAL BANKS - 6.9%
Alabama National BanCorporation 46,875 2,806,406
CVB Financial Corp. 161,672 3,592,352
East West Bancorp, Inc. 135,650 4,556,483
First Midwest Bancorp, Inc. 82,225 2,841,696
IBERIABANK Corp. 62,275 3,594,513
Independent Bank Corp. 182,437 4,925,799
Oriental Financial Group, Inc. 148,875 4,028,558
Signature Bank(c) 121,875 3,260,156
South Financial Group, Inc. 154,775 4,364,655
Texas Regional Bancshares, Inc., Class A 107,175 3,332,071
Wintrust Financial Corp. 46,500 2,663,520
-----------
39,966,209
-----------
COMMERCIAL SERVICES & SUPPLIES - 2.2%
DiamondCluster International, Inc.(c) 164,875 2,011,475
McGrath Rentcorp 13,275 485,201
School Specialty, Inc.(c) 57,800 2,277,898
Waste Connections, Inc.(c) 177,450 5,621,616
WCA Waste Corp.(c) 273,450 2,403,626
-----------
12,799,816
-----------
COMMUNICATIONS EQUIPMENT - 2.3%
Andrew Corp.(c) 71,875 879,750
Aspect Communications Corp.(c) 237,875 2,362,099
21
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (A)
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMMUNICATIONS EQUIPMENT - CONTINUED
Brocade Communications Systems, Inc.(c) 431,525 $ 2,438,116
CommScope, Inc.(c) 170,925 3,691,980
Comtech Telecommunications Corp.(c) 71,075 1,926,132
Foundry Networks, Inc.(c) 203,900 1,935,011
-----------
13,233,088
-----------
COMPUTERS & PERIPHERALS - 1.1%
Eletronics for Imaging, Inc.(c) 138,525 2,249,646
Imation Corp. 116,850 4,158,691
-----------
6,408,337
-----------
CONSTRUCTION & ENGINEERING - 0.8%
Washington Group International, Inc.(c) 134,125 4,643,407
-----------
CONSTRUCTION MATERIALS - 0.7%
Eagle Materials, Inc. 56,975 4,062,317
-----------
CONSUMER DURABLES & APPAREL - 0.3%
Tupperware Corp. 114,375 1,942,088
-----------
CONSUMER FINANCE - 0.5%
Nelnet, Inc., Class A(c) 122,500 2,741,550
-----------
DIVERSIFIED FINANCIAL SERVICES - 1.5%
iShares Russell 2000 Value Index Fund 25,000 4,292,250
National Financial Partners Corp. 127,550 4,563,739
-----------
8,855,989
-----------
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.5%
Commonwealth Telephone Enterprises, Inc.(c) 68,575 2,986,441
-----------
ELECTRIC UTILITIES - 0.8%
Texas Genco Holdings, Inc. 103,625 4,834,106
-----------
ELECTRICAL EQUIPMENT - 1.7%
AMETEK, Inc. 188,200 5,706,224
Artesyn Technologies, Inc.(c) 398,100 3,973,038
-----------
9,679,262
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.4%
Aeroflex, Inc.(c) 152,100 1,607,697
Benchmark Electronics, Inc.(c) 87,000 2,592,600
Excel Technology, Inc.(c) 98,375 2,540,043
Global Imaging System, Inc.(c) 94,600 2,940,168
Rogers Corp.(c) 26,100 1,108,989
ScanSource, Inc.(c) 28,700 1,831,060
Tech Data Corp.(c) 51,025 1,967,014
Varian, Inc.(c) 138,850 5,258,249
-----------
19,845,820
-----------
ENERGY EQUIPMENT & SERVICES - 3.2%
Cal Dive International, Inc.(c) 163,500 5,823,870
Grey Wolf, Inc.(c) 557,625 2,726,786
Hydril Co.(c) 114,500 4,917,775
Input/Output, Inc.(c) 475,000 4,897,250
-----------
18,365,681
-----------
FOOD - PACKAGED & MISCELLANEOUS - 0.2%
Lance, Inc. 86,150 1,391,323
-----------
22
SHARES VALUE (A)
- ------------------------------------------------------------
COMMON STOCKS - CONTINUED
FOOD & STAPLES RETAILING - 1.0%
BJ's Wholesale Club, Inc.(c) 163,175 $ 4,461,204
Smart & Final, Inc.(c) 87,650 1,469,014
-----------
5,930,218
-----------
FOOD PRODUCTS - 1.3%
J & J Snack Foods Corp.(c) 32,000 1,372,160
Ralcorp Holdings, Inc.(c) 176,650 6,377,065
-----------
7,749,225
-----------
GAS UTILITIES - 1.4%
AGL Resources, Inc. 162,450 4,998,586
Southern Union Co. 156,161 3,201,301
-----------
8,199,887
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 1.4%
Analogic Corp. 107,800 4,494,182
Sybron Dental Specialties, Inc.(c) 119,250 3,540,532
-----------
8,034,714
-----------
HEALTHCARE PROVIDERS & SERVICES - 0.8%
Andrx Corp.(c) 151,425 3,385,863
Omnicell, Inc.(c) 106,525 1,408,260
-----------
4,794,123
-----------
HOTELS, RESTAURANTS & LEISURE - 4.0%
CBRL Group, Inc. 144,275 5,205,442
Dover Downs Entertainment, Inc. 171,915 1,769,005
Fairmont Hotels & Resorts, Inc. 138,925 3,795,431
Multimedia Games, Inc.(c) 135,525 2,100,638
O'Charley's, Inc.(c) 72,550 1,182,565
Sonic Corp.(c) 138,112 3,539,811
Steak n Shake Co. (The)(c) 226,525 3,869,047
Sunterra Corp.(c) 208,825 1,990,102
-----------
23,452,041
-----------
INDUSTRIAL CONGLOMERATES - 0.6%
ALLETE, Inc. 60,583 1,968,958
Texas Industries, Inc. 35,625 1,832,550
-----------
3,801,508
-----------
INSURANCE - 5.7%
AmerUs Group Co. 66,150 2,712,150
Delphi Financial Group, Inc. 123,225 4,949,948
Endurance Specialty Holdings Ltd. 146,400 4,706,760
Ohio Casualty Corp.(c) 182,175 3,812,923
Platinum Underwriters Holdings Ltd. 143,300 4,195,824
ProAssurance Corp.(c) 107,375 3,760,273
Protective Life Corp. 123,375 4,849,871
RLI Corp. 108,900 4,089,195
-----------
33,076,944
-----------
INTERNET SOFTWARE & SERVICES - 0.7%
Digitas, Inc.(c) 519,850 4,018,441
-----------
23
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (A)
- ----------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - 1.3%
BISYS Group, Inc.(The)(c) 165,675 $ 2,420,512
Perot Systems Corp., Class A(c) 330,150 5,302,209
-----------
7,722,721
-----------
MACHINERY - 6.7%
Actuant Corp., Class A(c) 162,650 6,702,806
Albany International Corp., Class A 107,925 3,217,244
Barnes Group, Inc. 153,100 4,205,657
CLARCOR, Inc. 129,625 6,179,224
Commercial Vehicle Group Inc.(c) 169,725 2,688,444
ESCO Technologies, Inc.(c) 46,725 3,166,086
IDEX Corp. 164,700 5,593,212
JLG Industries, Inc. 33,775 567,420
Reliance Steel & Aluminum Co. 129,725 5,150,083
Robbins & Myers, Inc. 73,400 1,614,800
-----------
39,084,976
-----------
MANUFACTURING - 1.2%
Federal Signal Corp. 150,225 2,791,181
Harsco Corp. 91,925 4,127,432
-----------
6,918,613
-----------
MEDIA - 5.4%
ADVO, Inc. 126,437 3,911,961
Harte-Hanks, Inc. 181,625 4,542,441
John Wiley & Son, Inc., Class A 133,450 4,263,727
Journal Communications, Inc., Class A 213,300 3,741,282
R.H. Donnelley Corp.(c) 191,400 9,447,504
Saga Communications, Inc., Class A(c) 217,250 3,682,388
Scholastic Corp.(c) 59,825 1,847,994
-----------
31,437,297
-----------
MULTI-UTILITIES & UNREGULATED POWER - 1.2%
Energen Corp. 41,225 2,125,149
ONEOK, Inc. 187,750 4,885,255
-----------
7,010,404
-----------
MULTILINE RETAIL - 0.4%
ShopKo Stores, Inc.(c) 136,250 2,372,113
-----------
OIL & GAS - 1.9%
Energy Partners Ltd.(c) 113,675 1,850,629
Meridian Resource Corp.(c) 210,225 1,856,287
Patina Oil & Gas Corp. 97,300 2,877,161
Stone Energy Corp.(c) 98,675 4,318,018
-----------
10,902,095
-----------
PHARMACEUTICALS - 1.5%
Par Pharmaceutical Cos., Inc.(c) 117,775 4,231,656
Perrigo Co. 232,500 4,777,875
-----------
9,009,531
-----------
REAL ESTATE - 7.8%
American Home Mortgage Investment Corp. 149,700 4,184,115
Bedford Property Investors, Inc. 129,350 3,924,479
CBL & Associates Properties, Inc. 74,750 4,556,013
24
SHARES VALUE (A)
- ---------------------------------------------------------------------
COMMON STOCKS - CONTINUED
REAL ESTATE - CONTINUED
Corporate Office Properties Trust 197,025 $ 5,047,780
First Potomac Realty Trust 145,025 2,996,217
Highland Hospitality Corp. 200,900 2,290,260
LaSalle Hotel Properties 198,550 5,479,980
Levitt Corp., Class A 111,587 2,617,831
Macerich Co. (The) 43,375 2,311,454
Newcastle Investment Corp. 156,475 4,803,782
Ramco-Gershenson Properties Trust 75,400 2,041,832
Saxon Capitol, Inc.(c) 220,325 4,736,987
Strategic Hotel Capital, Inc. 23,175 313,326
-----------
45,304,056
-----------
RETAIL - SPECIALTY - 1.6%
Adesa, Inc.(c) 181,750 2,986,153
Pier 1 Imports, Inc. 165,075 2,984,556
West Marine, Inc.(c) 146,325 3,128,428
-----------
9,099,137
-----------
ROAD & RAIL - 4.0%
AMERCO(c) 77,475 2,937,852
Genesee & Wyoming, Inc., Class A(c) 213,675 5,410,251
Laidlaw International, Inc.(c) 266,700 4,387,215
Landstar System, Inc.(c) 76,900 4,512,492
Marten Transport Ltd(c) 108,075 1,888,070
Old Dominion Freight Line, Inc.(c) 145,050 4,178,891
-----------
23,314,771
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.0%
Cymer, Inc.(c) 52,075 1,492,470
DSP Group, Inc.(c) 196,525 4,136,851
-----------
5,629,321
-----------
SOFTWARE - 1.2%
Datastream Systems, Inc.(c) 169,425 1,096,180
Hyperion Solutions Corp.(c) 63,650 2,163,463
Inet Technologies, Inc.(c) 120,460 1,515,387
MRO Software, Inc.(c) 70,400 704,000
Retek, Inc.(c) 334,275 1,524,294
-----------
7,003,324
-----------
SPECIALTY RETAIL - 1.9%
Cost Plus, Inc.(c) 87,300 3,088,674
Men's Wearhouse, Inc.(c) 172,350 5,006,767
Party City Corp.(c) 196,275 2,898,982
-----------
10,994,423
-----------
TEXTILES APPAREL & LUXURY GOODS - 0.5%
Fossil, Inc.(c) 91,012 2,815,911
-----------
THRIFTS & MORTGAGE FINANCE - 4.8%
Bank Mutual Corp. 463,796 5,565,552
BankAtlantic Bancorp, Inc., Class A 253,325 4,640,914
BankUnited Financial Corp.(c) 193,125 5,629,594
Independence Community Bank Corp. 107,275 4,189,089
Provident Bancorp, Inc. 421,950 4,953,693
Provident Financial Services, Inc. 164,325 2,834,606
-----------
27,813,448
-----------
25
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (A)
- -------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
TRADING COMPANIES & DISTRIBUTORS - 0.7%
Hughes Supply, Inc. 131,150 $ 3,943,681
------------
TRANSPORTATION - 0.0%
Hub Group, Inc., Class A(c) 1,125 41,906
------------
WATER UTILITIES - 0.4%
American States Water Co. 82,650 2,057,985
------------
TOTAL COMMON STOCKS
(Identified Cost $450,536,102) 558,536,522
------------
PRINCIPAL AMOUNT
- -------------------------------------------------------------------------
SHORT TERM INVESTMENTS - 4.0%
COMMERCIAL PAPER - 4.0%
UBS Finance, Inc., 1.350%, 10/01/2004(d) $23,269,000 23,269,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $23,269,000) 23,269,000
------------
TOTAL INVESTMENTS - 99.9%
(Identified Cost $473,805,102)(b) 581,805,522
Other assets less liabilities--0.1% 641,066
------------
TOTAL NET ASSETS - 100% $582,446,588
------------
(a)See Note 2a of Notes to Financial Statements.
(b)Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$474,074,714 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 $116,478,245
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (8,747,437)
------------
Net unrealized appreciation $107,730,808
------------
At September 30, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$23,833,094 in undistributed ordinary income and $33,635,271 in undistributed
long-term gains.
The differences between book and tax distributable earnings are primarily due
to deferred trustees' fees and wash sales.
(c)Non-income producing security.
(d)Interest rate represents annualized yield at time of purchase; not a coupon
rate.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2004 AS A PERCENTAGE OF NET ASSETS
Real Estate 7.8%
Commercial Banks 6.9
Machinery 6.7
Insurance 5.7
Media 5.4
Thrifts & Mortgage Finance 4.8
Hotels, Restaurants & Leisure 4.0
Road & Rail 4.0
Electronic Equipment & Instruments 3.4
Energy Equipment & Services 3.2
Chemicals 3.1
Communications Equipment 2.3
Commercial Services & Supplies 2.2
Aerospace & Defense 2.2
Other, less than 2% each 34.2
See accompanying notes to financial statements.
26
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL COMPANY GROWTH FUND
SHARES VALUE (A)
- ---------------------------------------------------------------
COMMON STOCKS - 98.5% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 1.8%
DRS Technologies, Inc.(c) 4,625 $ 173,160
United Defense Industries, Inc.(c) 5,000 199,950
----------
373,110
----------
AIR FREIGHT & LOGISTICS - 2.1%
EGL, Inc.(c) 7,775 235,272
UTI Worldwide, Inc. 3,625 213,186
----------
448,458
----------
BANKS/SAVINGS & LOANS - 0.8%
Silicon Valley Bancshares(c) 4,625 171,911
----------
BIOTECHNOLOGY - 5.3%
Keryx Biopharmaceuticals, Inc.(c) 8,550 95,675
Lifecell Corp.(c) 15,000 150,000
Martek Biosciences Corp.(c) 4,225 205,504
Onyx Pharmaceuticals, Inc.(c) 3,850 165,588
Pharmion Corp.(c) 2,875 148,626
Salix Pharmaceuticals Ltd.(c) 7,125 153,330
Telik, Inc.(c) 8,650 192,895
----------
1,111,618
----------
BUILDING PRODUCTS - 2.2%
NCI Building Systems, Inc.(c) 4,375 139,562
Simpson Manufacturing Co., Inc. 2,875 181,700
Trex Company, Inc.(c) 2,875 127,305
----------
448,567
----------
BUSINESS SERVICES - 0.9%
Global Payments, Inc. 3,450 184,747
----------
CAPITAL MARKETS - 0.8%
Affiliated Managers Group, Inc.(c) 3,275 175,344
----------
CHEMICALS - 0.8%
Headwaters, Inc.(c) 5,375 165,873
----------
CHEMICALS - SPECIALTY - 0.9%
Cuno, Inc.(c) 3,075 177,581
----------
COMMERCIAL BANKS - 2.3%
East West Bancorp, Inc. 5,000 167,950
UCBH Holdings, Inc. 3,075 120,140
Wintrust Financial Corp. 3,275 187,592
----------
475,682
----------
COMMERCIAL SERVICES - 1.0%
Charles River Associates, Inc.(c) 5,375 205,809
----------
COMMERCIAL SERVICES & SUPPLIES - 9.1%
Bright Horizons Family Solutions, Inc.(c) 2,475 134,368
Corporate Executive Board Co. 2,450 150,038
CoStar Group, Inc.(c) 3,650 179,543
DiamondCluster International, Inc.(c) 15,575 190,015
Educate, Inc.(c) 17,100 201,609
Heidrick & Struggles International, Inc.(c) 6,150 177,243
Jackson Hewitt Tax Service, Inc. 8,275 167,403
Korn/Ferry International(c) 9,050 164,982
27
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL COMPANY GROWTH FUND - CONTINUED
SHARES VALUE (A)
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMMERCIAL SERVICES & SUPPLIES - CONTINUED
Laureate Education, Inc.(c) 4,625 $ 172,142
Navigant Consulting, Inc.(c) 9,225 202,581
Strayer Education, Inc. 1,350 155,264
----------
1,895,188
----------
COMMUNICATIONS EQUIPMENT - 4.5%
Alvarion Ltd.(c) 13,275 171,779
AudioCodes Ltd.(c) 18,075 227,564
F5 Networks, Inc.(c) 7,825 238,349
Sonus Networks, Inc.(c) 29,050 163,552
Tekelec(c) 8,650 144,282
----------
945,526
----------
COMPUTER SERVICES - 0.8%
Sapient Corp.(c) 21,350 162,901
----------
COMPUTERS & PERIPHERALS - 1.7%
Mobility Electronics, Inc.(c) 20,000 164,800
Novatel Wireless, Inc.(c) 8,275 194,462
----------
359,262
----------
CONSUMER DURABLES & APPAREL - 0.7%
Quiksilver, Inc.(c) 5,950 151,249
----------
CONSUMER FINANCE - 0.8%
ACE Cash Express, Inc.(c) 6,725 175,119
----------
DIVERSIFIED FINANCIAL SERVICES - 1.8%
Marlin Business Services, Inc.(c) 10,200 191,352
National Financial Partners Corp. 5,000 178,900
----------
370,252
----------
EDUCATION - 0.8%
Universal Technical Institute, Inc.(c) 5,200 156,936
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.2%
FLIR Systems, Inc.(c) 2,300 134,550
ScanSource, Inc.(c) 1,925 122,815
----------
257,365
----------
ENERGY EQUIPMENT & SERVICES - 2.9%
Atwood Oceanics, Inc.(c) 3,550 168,767
Input/Output, Inc.(c) 16,350 168,568
Maverick Tube Corp.(c) 5,350 164,833
Offshore Logistics, Inc.(c) 3,175 109,284
----------
611,452
----------
FOOD PRODUCTS - 0.8%
Peet's Coffee & Tea, Inc.(c) 7,400 173,086
----------
HEALTHCARE - DRUGS - 0.8%
First Horizon Pharmaceutical Corp.(c) 8,850 177,089
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 6.9%
Advanced Medical Optics, Inc.(c) 4,225 167,183
American Medical Systems Holdings, Inc.(c) 5,200 188,604
Animas Corp.(c) 8,350 134,435
ArthroCare Corp.(c) 6,350 185,991
Digirad Corp.(c) 12,700 132,715
28
SHARES VALUE (A)
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTHCARE EQUIPMENT & SUPPLIES - CONTINUED
Epix Pharmaceuticals, Inc.(c) 7,700 $ 148,687
Given Imaging Ltd.(c) 5,575 214,359
Intuitive Surgical, Inc.(c) 6,350 157,163
Palomar Medical Technologies, Inc.(c) 4,625 101,380
----------
1,430,517
----------
HEALTHCARE PROVIDERS & SERVICES - 6.2%
Chemed Corp. 3,275 182,549
Covance, Inc.(c) 5,200 207,844
Genesis HealthCare Corp.(c) 6,150 187,021
HealthExtras, Inc.(c) 14,800 206,312
TLC Vision Corp.(c) 16,350 143,390
United Surgical Partners International, Inc.(c) 5,775 198,371
VCA Antech, Inc.(c) 7,700 158,851
----------
1,284,338
----------
HOTELS, RESTAURANTS & LEISURE - 4.9%
Applebee's International, Inc. 4,800 121,344
Buffalo Wild Wings, Inc.(c) 5,375 150,715
Penn National Gaming, Inc.(c) 4,050 163,620
Scientific Games Corp., Class A(c) 8,850 169,035
Shuffle Master, Inc.(c) 5,200 194,792
Station Casinos, Inc. 4,425 217,002
----------
1,016,508
----------
INSURANCE - 0.8%
Arch Capital Group Ltd.(c) 4,225 164,522
----------
INTERNET & CATALOG RETAIL - 1.3%
Audible, Inc.(c) 7,000 125,510
Blue Nile, Inc.(c) 4,075 137,246
----------
262,756
----------
INTERNET SOFTWARE & SERVICES - 3.1%
Akamai Technologies, Inc.(c) 7,275 102,214
Ask Jeeves, Inc.(c) 5,375 175,816
Jupitermedia Corp.(c) 10,575 188,235
NetRatings, Inc.(c) 10,375 184,986
----------
651,251
----------
IT SERVICES - 2.5%
Anteon International Corp.(c) 4,800 175,920
iPayment Holdings, Inc.(c) 4,225 169,676
Lionbridge Technologies, Inc.(c) 19,800 170,082
----------
515,678
----------
LEISURE EQUIPMENT & PRODUCTS - 0.8%
Jakks Pacific, Inc.(c) 7,700 177,100
----------
MACHINERY - 3.6%
Actuant Corp., Class A(c) 4,625 190,596
Ceradyne, Inc.(c) 3,850 169,053
ESCO Technologies, Inc.(c) 2,075 140,602
Joy Global, Inc. 2,725 93,686
Middleby Corp. 3,075 161,899
----------
755,836
----------
29
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES SMALL COMPANY GROWTH FUND - CONTINUED
SHARES VALUE (A)
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
MEDIA & ENTERTAINMENT - 0.7%
Entravision Communications Corp.(c) 19,425 $ 147,824
----------
METALS & MINING - 0.9%
Steel Dynamics, Inc. 4,750 183,445
----------
OIL & GAS - 3.8%
Cimarex Energy Co.(c) 5,525 193,043
Denbury Resources, Inc.(c) 4,800 121,920
Quicksilver Resources, Inc.(c) 5,650 184,586
Southwestern Energy Co.(c) 3,075 129,119
Unit Corp.(c) 4,425 155,229
----------
783,897
----------
OIL & GAS EXPLORATION - 1.1%
Range Resources Corp. 6,550 114,559
Ultra Petroleum Corp.(c) 2,500 122,625
----------
237,184
----------
PHARMACEUTICALS - 0.8%
Bone Care International, Inc.(c) 6,725 163,418
----------
REAL ESTATE - 0.9%
Jones Lang LaSalle, Inc.(c) 5,775 190,633
----------
ROAD & RAIL - 0.8%
Old Dominion Freight Line, Inc.(c) 6,143 176,980
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.9%
Cymer, Inc.(c) 5,675 162,646
FormFactor, Inc.(c) 8,650 167,550
Microsemi Corp.(c) 13,475 189,997
Silicon Laboratories, Inc.(c) 2,900 95,961
Tessera Technologies, Inc.(c) 8,450 186,745
----------
802,899
----------
SOFTWARE - 5.6%
Activision, Inc.(c) 11,925 165,400
Altiris, Inc.(c) 4,800 151,920
Epicor Software Corp.(c) 13,650 164,210
InfoSpace, Inc.(c) 3,275 155,202
JAMDAT Mobile, Inc.(c) 825 19,033
Macromedia, Inc.(c) 7,875 158,130
Macrovision Corp.(c) 6,925 166,754
RSA Security, Inc.(c) 9,225 178,042
----------
1,158,691
----------
SPECIALTY RETAIL - 2.1%
Brookstone, Inc.(c) 5,950 112,396
Guitar Center, Inc.(c) 3,450 149,385
PETCO Animal Supplies, Inc.(c) 5,375 175,547
----------
437,328
----------
TELECOMMUNICATIONS - WIRELESS - 0.8%
Alamosa Holdings, Inc.(c) 21,925 167,507
----------
TEXTILES APPAREL & LUXURY GOODS - 0.9%
Fossil, Inc.(c) 5,950 184,093
----------
30
SHARES VALUE (A)
- ----------------------------------------------------------------
COMMON STOCKS - CONTINUED
THRIFTS & MORTGAGE FINANCE - 0.7%
Commercial Capital Bancorp, Inc. 6,225 $ 141,245
-----------
WIRELESS TELECOMMUNICATION SERVICES - 0.6%
Ubiquitel, Inc.(c) 30,775 123,100
-----------
TOTAL COMMON STOCKS
(Identified Cost $18,944,746) 20,530,875
-----------
TOTAL INVESTMENTS - 98.5%
(Identified Cost $18,944,746)(b) 20,530,875
Other assets less liabilities--1.5% 315,466
-----------
TOTAL NET ASSETS - 100% $20,846,341
-----------
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized appreciation on investments based on cost of $19,057,135 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 $1,735,062
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (261,322)
----------
Net unrealized appreciation $1,473,740
----------
At September 30, 2004, the Fund had a capital loss carryover of approximately
$80,531,163 of which $3,585,920 expires on September 30, 2009, $50,230,327
expires on September 30, 2010 and $26,714,916 expires on September 30, 2011.
These amounts may be available to offset future realized capital gains, if
any, to the extent provided by regulations.
At September 30, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of $0
in undistributed ordinary income and $0 in undistributed long-term gains.
The differences between book and tax distributable earnings are primarily due
to deferred trustees' fees and wash sales.
(c) Non-income producing security.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2004 AS A PERCENTAGE OF NET ASSETS
Commercial Services & Supplies 9.1%
Healthcare Equipment & Supplies 6.9
Healthcare Providers & Services 6.2
Software 5.6
Biotechnology 5.3
Hotels, Restaurants & Leisure 4.9
Communications Equipment 4.5
Semiconductors & Semiconductor Equipment 3.9
Oil & Gas 3.8
Machinery 3.6
Internet Software & Services 3.1
Energy Equipment & Services 2.9
IT Services 2.5
Commercial Banks 2.3
Building Products 2.2
Air Freight & Logistics 2.1
Specialty Retail 2.1
Other, less than 2% each 27.5
31
See accompanying notes to financial statements.
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
SHARES VALUE (A)
- ----------------------------------------------------------------
COMMON STOCKS - 100.5% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 2.7%
Northrop Grumman Corp. 2,600 $138,658
---------
AUTOMOBILES - 2.4%
Harley-Davidson, Inc. 2,075 123,338
---------
BEVERAGES - 2.4%
PepsiCo, Inc. 2,575 125,274
---------
BIOTECHNOLOGY - 2.7%
Amgen, Inc.(c) 2,525 143,117
---------
CAPITAL MARKETS - 2.9%
Goldman Sachs Group, Inc. 1,600 149,184
---------
CHEMICALS - 2.1%
Praxair, Inc. 2,500 106,850
---------
COMMERCIAL BANKS - 5.1%
National City Corp. 2,875 111,032
Wells Fargo & Co. 2,625 156,529
---------
267,561
---------
COMMERCIAL SERVICES & SUPPLIES - 1.6%
ARAMARK Corp., Class B 3,525 85,094
---------
COMMUNICATIONS EQUIPMENT - 6.4%
Cisco Systems, Inc.(c) 6,250 113,125
Harris Corp. 2,400 131,856
Nokia Oyj ADR 6,300 86,436
---------
331,417
---------
COMPUTERS & PERIPHERALS - 2.0%
Dell, Inc.(c) 3,000 106,800
---------
DIVERSIFIED FINANCIALS - 2.7%
Citigroup, Inc. 3,175 140,081
---------
DIVERSIFIED TELECOMMUNICATION SERVICES - 3.2%
CenturyTel, Inc. 4,800 164,352
---------
ELECTRIC UTILITIES - 1.9%
Dominion Resources, Inc. 1,525 99,506
---------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.8%
Flextronics International Ltd.(c) 6,900 91,425
---------
ENERGY EQUIPMENT & SERVICES - 1.4%
GlobalSantaFe Corp. 2,400 73,560
---------
HEALTHCARE EQUIPMENT & SUPPLIES - 5.3%
Guidant Corp. 1,350 89,154
Medtronic, Inc. 1,575 81,742
Zimmer Holdings, Inc.(c) 1,300 102,752
---------
273,648
---------
HEALTHCARE PROVIDERS & SERVICES - 2.4%
Caremark Rx, Inc.(c) 3,925 125,875
---------
HOTELS, RESTAURANTS & LEISURE - 3.2%
Carnival Corp. 3,500 165,515
---------
HOUSEHOLD DURABLES - 2.5%
Leggett & Platt, Inc. 4,650 130,665
---------
INDUSTRIAL CONGLOMERATES - 4.6%
3M Co. 1,300 103,961
General Electric Co. 4,100 137,678
---------
241,639
---------
INSURANCE - 6.1%
AFLAC, Inc. 4,250 166,642
American International Group, Inc. 2,200 149,578
---------
316,220
---------
32
SHARES VALUE (A)
- ---------------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - 8.4%
Accenture Ltd., Class A(c) 5,700 $ 154,185
First Data Corp. 3,000 130,500
SunGard Data Systems, Inc.(c) 6,500 154,505
----------
439,190
----------
MACHINERY - 5.8%
Danaher Corp. 2,175 111,534
Dover Corp. 2,875 111,751
Illinois Tool Works, Inc. 825 76,865
----------
300,150
----------
MEDIA - 3.1%
Viacom, Inc., Class B 4,775 160,249
----------
MULTILINE RETAIL - 2.7%
Target Corp. 3,100 140,275
----------
OIL & GAS - 7.1%
ConocoPhillips 1,500 124,275
Devon Energy Corp. 1,650 117,167
Exxon Mobil Corp. 2,650 128,074
----------
369,516
----------
PHARMACEUTICALS - 3.5%
Perrigo Co. 4,750 97,613
Pfizer, Inc. 2,775 84,915
----------
182,528
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 4.5%
DSP Group, Inc.(c) 3,500 73,675
Intel Corp. 3,900 78,234
Maxim Integrated Products, Inc. 1,950 82,466
----------
234,375
----------
TOTAL COMMON STOCKS
(Identified Cost $4,635,845) 5,226,062
----------
TOTAL INVESTMENTS - 100.5%
(Identified Cost $4,635,845)(b) 5,226,062
Other assets less liabilities--(0.5%) (24,023)
----------
TOTAL NET ASSETS - 100% $5,202,039
----------
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized appreciation on investments based on cost of $4,670,005 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 $615,725
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (59,668)
--------
Net unrealized appreciation $556,057
--------
At September 30, 2004, the Fund had a capital loss carryover of approximately
$4,164,003 of which $214,505 expires on September 30, 2009, $2,177,191
expires on September 30, 2010, $1,662,157 expires on September 30, 2011 and
$110,150 expires on September 30, 2012. These amounts may be available to
offset future realized capital gains, if any, to the extent provided by
regulations.
For the year ended September 30, 2004, the Fund has elected to defer $17,838
of capital losses attributable to Post-October losses.
At September 30, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$23,793 in undistributed ordinary income and $0 in undistributed long-term
gains.
The differences between book and tax distributable earnings are primarily due
to deferred trustees' fees and wash sales.
(c) Non-income producing security.
ADR An 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 ADRs are significantly influenced by trading
exchanges not located in the United States.
33
See accompanying notes to financial statements.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2004 AS A PERCENTAGE OF NET ASSETS
IT Services 8.4%
Oil & Gas 7.1
Communications Equipment 6.4
Insurance 6.1
Machinery 5.8
Healthcare Equipment & Supplies 5.3
Commercial Banks 5.1
Industrial Conglomerates 4.6
Semiconductors & Semiconductor Equipment 4.5
Pharmaceuticals 3.5
Hotels, Restaurants & Leisure 3.2
Diversified Telecommunication Services 3.2
Media 3.1
Capital Markets 2.9
Biotechnology 2.7
Multiline Retail 2.7
Diversified Financials 2.7
Aerospace & Defense 2.7
Household Durables 2.5
Healthcare Providers & Services 2.4
Beverages 2.4
Automobiles 2.4
Chemicals 2.1
Computers & Peripherals 2.0
Other, less than 2% each 6.7
34
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES VALUE FUND
SHARES VALUE (A)
- -----------------------------------------------------------------
COMMON STOCKS - 98.7% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 5.2%
Honeywell International, Inc. 17,050 $ 611,413
Northrop Grumman Corp. 13,250 706,622
Raytheon Co. 11,075 420,629
----------
1,738,664
----------
AUTO COMPONENTS - 1.0%
Johnson Controls, Inc. 5,775 328,078
----------
BANKS/SAVINGS & LOANS - 1.8%
Comerica, Inc. 10,475 621,691
----------
BEVERAGES - 0.8%
Anheuser-Busch Cos., Inc. 5,750 287,213
----------
BUILDING PRODUCTS - 1.9%
Masco Corp. 18,650 643,985
----------
CAPITAL MARKETS - 5.8%
J.P. Morgan Chase & Co. 21,700 862,141
Lehman Brothers Holdings, Inc. 7,600 605,872
Merrill Lynch & Co., Inc. 9,750 484,770
----------
1,952,783
----------
CHEMICALS - 2.0%
Praxair, Inc. 15,525 663,538
----------
COMMERCIAL BANKS - 9.3%
Bank of America Corp. 13,850 600,121
PNC Financial Services Group 6,350 343,535
SouthTrust Corp. 14,050 585,323
SunTrust Banks, Inc. 4,625 325,646
U.S. Bancorp 26,050 752,845
Wells Fargo & Co. 8,600 512,818
----------
3,120,288
----------
COMMERCIAL SERVICES & SUPPLIES - 2.0%
Waste Management, Inc. 24,125 659,578
----------
COMMUNICATIONS EQUIPMENT - 1.0%
Motorola, Inc. 18,650 336,446
----------
COMPUTERS & PERIPHERALS - 2.6%
Apple Computer, Inc.(c) 9,150 354,563
Hewlett-Packard Co. 27,475 515,156
----------
869,719
----------
CONSUMER FINANCE - 2.1%
American Express Co. 13,575 698,569
----------
DIVERSIFIED FINANCIALS - 2.5%
Citigroup, Inc. 18,800 829,456
----------
DIVERSIFIED TELECOMMUNICATION SERVICES - 6.6%
BellSouth Corp. 17,775 482,058
CenturyTel, Inc. 16,975 581,224
Citizens Communications Co. 28,425 380,611
Qwest Communications International, Inc.(c) 70,725 235,514
SBC Communications, Inc. 21,225 550,789
----------
2,230,196
----------
35
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES VALUE FUND - CONTINUED
SHARES VALUE (A)
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRIC UTILITIES - 3.3%
Exelon Corp. 18,200 $ 667,758
PG&E Corp.(c) 14,175 430,920
----------
1,098,678
----------
ENERGY - 1.4%
Peabody Energy Corp. 7,900 470,050
----------
ENERGY EQUIPMENT & SERVICES - 3.7%
GlobalSantaFe Corp. 19,800 606,870
Halliburton Co. 18,750 631,687
----------
1,238,557
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 1.6%
Baxter International, Inc. 16,650 535,464
----------
HEALTHCARE PROVIDERS & SERVICES - 4.4%
McKesson Corp. 20,500 525,825
Quest Diagnostics, Inc. 4,200 370,524
Universal Health Services, Inc., Class B 13,250 576,375
----------
1,472,724
----------
HOTELS, RESTAURANTS & LEISURE - 2.1%
McDonald's Corp. 25,250 707,757
----------
INDUSTRIAL CONGLOMERATES - 2.1%
Tyco International Ltd. 22,875 701,347
----------
INSURANCE - 2.2%
Allstate Corp. 15,700 753,443
----------
IT SERVICES - 4.5%
Accenture Ltd., Class A(c) 15,375 415,894
DST Systems, Inc.(c) 8,225 365,766
First Data Corp. 8,225 357,787
SunGard Data Systems, Inc.(c) 15,225 361,898
----------
1,501,345
----------
LEISURE EQUIPMENT & PRODUCTS - 1.1%
Hasbro, Inc. 19,550 367,540
----------
MEDIA - 6.4%
DIRECTV Group, Inc. (The)(c) 24,800 436,232
McGraw-Hill Cos., Inc. 3,525 280,907
News Corp. Ltd., ADR 15,750 493,448
Time Warner, Inc.(c) 31,025 500,743
Tribune Co. 10,425 428,989
----------
2,140,319
----------
MULTI-UTILITIES & UNREGULATED POWER - 1.3%
Constellation Energy Group, Inc. 10,700 426,288
----------
MULTILINE RETAIL - 1.9%
J.C. Penney Co., Inc. (Holding Co.) 17,725 625,338
----------
OIL & GAS - 8.9%
BP Plc ADR 16,675 959,313
ChevronTexaco Corp. 8,550 458,622
ConocoPhillips 5,450 451,533
ExxonMobil Corp. 23,150 1,118,839
----------
2,988,307
----------
36
SHARES VALUE (A)
- --------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
PHARMACEUTICALS - 1.7%
Abbott Laboratories 5,925 $ 250,983
Pfizer, Inc. 11,075 338,895
-----------
589,878
-----------
PROPERTY & CASUALTY INSURANCE - 2.1%
Berkshire Hathaway, Inc., Class B(c) 244 700,524
-----------
REAL ESTATE - 1.6%
Simon Property Group, Inc. 10,000 536,300
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.8%
Lam Research Corp.(c) 12,675 277,329
-----------
TOBACCO - 1.5%
Altria Group, Inc. 10,975 516,264
-----------
THRIFT & MORTGAGE - 1.5%
Sovereign Bancorp, Inc. 22,925 500,224
-----------
TOTAL COMMON STOCKS
(Identified Cost $27,735,792) 33,127,880
-----------
PRINCIPAL AMOUNT
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 1.4%
COMMERCIAL PAPER - 1.4%
UBS Finance, Inc., 1.350%, 10/01/2004(d) $462,000 462,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $462,000) 462,000
-----------
TOTAL INVESTMENTS - 100.1%
(Identified Cost $28,197,792)(b) 33,589,880
Other assets less liabilities--(0.1)% (26,822)
-----------
TOTAL NET ASSETS - 100% $33,563,058
-----------
(a)See Note 2a of Notes to Financial Statements.
(b)Federal Tax Information:
At September 30, 2004, the net unrealized appreciation on investments based on cost of $28,286,455 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
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value
Net unrealized appreciation
At September 30, 2004, the net unrealized appreciation on investments based on cost of $28,286,455 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 $5,853,570
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (550,145)
----------
Net unrealized appreciation $5,303,425
----------
At September 30, 2004, the Fund had a capital loss carryover of approximately
$2,114,368 which expires on September 30, 2011. This amount may be available
to offset future realized capital gains, if any, to the extent provided by
regulations.
At September 30, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$523,980 in undistributed ordinary income and $0 in undistributed long-term
gains.
The differences between book and tax distributable earnings are primarily due
to deferred trustees' fees, distributions from Real Estate Investment Trusts
and wash sales.
(c) Non-income producing security.
(d)Interest rate represents annualized yield at the time of purchase; not a
coupon rate.
ADR An 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 ADRs are significantly influenced by trading on
exchanges not located in the United States.
37
See accompanying notes to financial statements.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2004 AS A PERCENTAGE OF NET ASSETS
Commercial Banks 9.3%
Oil & Gas 8.9
Diversified Telecommunication Services 6.6
Media 6.4
Capital Markets 5.8
Aerospace & Defense 5.2
IT Services 4.5
Healthcare Providers & Services 4.4
Energy Equipment & Services 3.7
Electric Utilities 3.3
Computers & Peripherals 2.6
Diversified Financials 2.5
Insurance 2.2
Hotels, Restaurants & Leisure 2.1
Industrial Conglomerates 2.1
Property & Casualty Insurance 2.1
Consumer Finance 2.1
Chemicals 2.0
Commercial Services & Supplies 2.0
Other, less than 2% each 20.9
38
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES WORLDWIDE FUND
PRINCIPAL AMOUNT VALUE (A)
- ------------------------------------------------------------------------------
BONDS AND NOTES - 37.9% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 37.2%
AUSTRALIA - 0.7%
Queensland Treasury Corp., 8.000%, 9/14/2007 AUD $ 100,000 $ 77,643
South Australia Government Finance Authority,
Zero Coupon Bond, 12/21/2015 AUD 120,000 46,171
---------
123,814
---------
AUSTRIA - 0.0%
Republic of Austria, 6.000%, 2/14/2007 HUF 2,000,000 9,415
---------
BELGIUM - 0.7%
Kingdom of Belgium, 3.750%, 3/28/2009 EUR 25,000 31,737
Kingdom of Belgium, 4.250%, 9/28/2013 EUR 65,000 82,480
---------
114,217
---------
BRAZIL - 1.1%
Republic of Brazil, 8.250%, 1/20/2034 USD 185,000 164,927
Republic of Brazil, C Bond, 8.000%, 4/15/2014 USD 29,319 28,991
---------
193,918
---------
CANADA - 1.2%
Alcan, Inc., 5.500%, 5/02/2006 EUR 25,000 32,316
Canadian Government, 0.700%, 3/20/2006 JPY 4,000,000 36,670
Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, 144A CAD 25,000 19,909
Province of British Columbia, 6.000%, 6/09/2008 CAD 35,000 29,788
Province of Ontario, 5.900%, 3/08/2006 CAD 15,000 12,354
Shaw Communications, Inc.,
7.500%, 11/20/2013 CAD 70,000 58,849
Teck Cominco Ltd., 7.000%, 9/15/2012 USD 15,000 16,514
---------
206,400
---------
CAYMAN ISLAND - 0.5%
Arcel Finance Ltd., 7.048%, 9/01/2011, 144A USD 15,000 15,699
Vale Overseas Ltd., 8.250%, 1/17/2034 USD 75,000 72,938
---------
88,637
---------
CHILE - 0.3%
Empresa Nacional de Electricidad SA,
Series B, 8.500%, 4/01/2009 USD 50,000 56,424
---------
COLOMBIA - 0.2%
Republic of Colombia, 8.125%, 5/21/2024 USD 40,000 36,100
---------
DENMARK - 0.2%
Kingdom of Denmark, 5.000%, 8/15/2005 DKK 225,000 38,392
---------
FRANCE - 0.1%
GIE PSA Tresorerie, 5.875%, 9/27/2011 EUR 15,000 20,585
---------
GERMANY - 1.8%
Eurohypo AG - Europaeische Hypothekenbank der
Deutschen Bank, 4.000%, 2/01/2007 EUR 150,000 191,645
Kreditanstalt Wiederauf, 5.250%, 1/04/2010 EUR 80,000 108,408
Republic of Germany, 3.250%, 4/17/2009 EUR 10,000 12,446
---------
312,499
---------
HONG KONG - 0.1%
Bangkok Bank PLC/Hong Kong,
9.025%, 3/15/2029, 144A USD 15,000 16,794
---------
39
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (A)
- ---------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
IRELAND - 0.2%
Republic of Ireland, 4.600%, 4/18/2016 EUR $ 30,000 $ 38,849
---------
ITALY - 3.2%
Republic of Italy, 0.375%, 10/10/2006 JPY 24,000,000 219,000
Republic of Italy, 4.500%, 3/01/2007 EUR 210,000 271,649
Republic of Italy, 5.000%, 12/15/2004 JPY 6,000,000 55,107
---------
545,756
---------
MEXICO - 1.0%
Government of Mexico, 6.750%, 6/06/2006 JPY 7,000,000 70,076
Innova S de RL, 9.375%, 9/19/2013 USD 25,000 27,188
Mexican Fixed Rate Bonds, 9.000%, 12/20/2012 MXN 1,000,000 83,014
---------
180,278
---------
NETHERLANDS - 1.8%
E. On International Finance Series EMTN,
5.750%, 5/29/2009 EUR 10,000 13,610
GMAC International Finance BV,
8.000%, 3/14/2007 NZD 55,000 37,504
Kingdom of Netherlands, 5.000%, 7/15/2011 EUR 50,000 67,121
Olivetti Finance NV, 6.875%, 1/24/2013 EUR 10,000 14,443
Repsol International Finance BV,
5.750%, 12/04/2006 EUR 100,000 131,398
RWE Finance B.V., 6.125%, 10/26/2012 EUR 25,000 35,274
Telefonica Europe BV, 5.125%, 2/14/2013 EUR 10,000 13,182
---------
312,532
---------
NORWAY - 0.4%
Kingdom of Norway, 6.750%, 1/15/2007 NOK 380,000 61,573
---------
PERU - 0.3%
Republic of Peru, 4.500%, 3/07/2017
(step to 5.000% on 3/07/05)(e) USD 50,000 44,000
---------
SINGAPORE - 0.6%
Government of Singapore, 4.625%, 7/01/2010 SGD 125,000 82,173
Singapore Telecommunications Ltd.,
6.000%, 11/21/2011 EUR 10,000 13,797
---------
95,970
---------
SOUTH AFRICA - 0.4%
Republic of South Africa, 5.250%, 5/16/2013 EUR 50,000 62,716
---------
SUPRANATIONAL - 1.1%
Inter-American Development Bank, Zero Coupon
Bond, 5/11/2009 BRL 700,000 121,906
International Bank for Reconstruction &
Development, 4.750%, 12/20/2004 JPY 7,000,000 64,292
---------
186,198
---------
SWEDEN - 0.6%
Government of Sweden, Series 1045,
5.250%, 3/15/2011 SEK 495,000 72,624
Stena AB, 7.500%, 11/01/2013 USD 25,000 25,031
---------
97,655
---------
UNITED KINGDOM - 0.6%
NGG Finance Plc, 6.125%, 8/23/2011 EUR 10,000 13,876
United Kingdom Treasury, 6.250%, 11/25/2010 GBP 35,000 68,307
WPP Group Plc, 6.000%, 6/18/2008 EUR 20,000 26,927
---------
109,110
---------
40
PRINCIPAL AMOUNT VALUE (A)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
UNITED STATES - 20.1%
AES Corp., 7.750%, 3/01/2014 USD $ 100,000 $103,250
Agco Corp., 6.875%, 4/15/2014 EUR 20,000 24,487
AK Steel Corp., 7.750%, 6/15/2012 USD 100,000 97,750
American Standard, Inc., 8.250%, 6/01/2009 GBP 10,000 19,386
Arrow Electronics, Inc., 6.875%, 7/01/2013 USD 75,000 81,152
ASIF Global Financing XXVII,
2.380%, 2/26/2009, 144A SGD 100,000 58,827
Atlas Air Worldwide Holdings, Inc.,
7.200%, 1/02/2019 USD 88,712 83,438
Bausch & Lomb, Inc., 7.125%, 8/01/2028 USD 95,000 100,451
Borden, Inc., 7.875%, 2/15/2023 USD 150,000 121,500
Bowater, Inc., 6.500%, 6/15/2013 USD 25,000 24,257
Cerro Negro Finance Ltd., 7.900%, 12/01/2020, 144A USD 30,000 29,250
Charter Communications Holdings LLC,
10.000%, 5/15/2011 USD 200,000 154,000
Chesapeake Energy Corp., 6.875%, 1/15/2016 USD 110,000 114,950
Columbia/HCA Healthcare Corp.,
7.050%, 12/01/2027 USD 50,000 48,606
Columbia/HCA Healthcare Corp.,
7.190%, 11/15/2015 USD 50,000 54,137
Continental Airlines, Inc.,
Series 1998-1A, 6.648%, 9/15/2017 USD 42,291 39,586
Continental Airlines, Inc.,
Series 2000-2, 7.487%, 4/02/2012 USD 75,000 73,108
Corning Glass, 8.875%, 3/15/2016 USD 25,000 28,714
Cummins Engine Co., Inc., 7.125%, 3/01/2028 USD 160,000 160,000
Dillard's, Inc., 6.625%, 1/15/2018 USD 50,000 47,750
Dillard's, Inc., 7.000%, 12/01/2028 USD 50,000 47,000
ESI Tractebel Acquisition Corp., Series B,
7.990%, 12/30/2011 USD 22,000 22,715
Federal Home Loan Mortgage Corp.,
5.125%, 1/15/2012 EUR 200,000 266,918
Federal National Mortgage Association,
2.290%, 2/19/2009 SGD 100,000 58,647
Federal National Mortgage Association,
2.375%, 2/15/2007 USD 50,000 49,345
Georgia-Pacific Group, 7.375%, 12/01/2025 USD 50,000 53,250
Georgia-Pacific Group, 7.750%, 11/15/2029 USD 35,000 37,625
Hasbro, Inc., 6.600%, 7/15/2028 USD 50,000 50,250
IMC Global, Inc., 7.375%, 8/01/2018 USD 100,000 105,000
J.C. Penney Co., Inc., 7.125%, 11/15/2023 USD 25,000 26,438
KfW International Finance, Inc., 1.000%, 12/20/2004 JPY 8,000,000 72,909
Lear Corp., 8.125%, 4/01/2008 EUR 50,000 70,292
Lucent Technologies, Inc., 6.450%, 3/15/2029 USD 155,000 125,550
Morgan Stanley, 5.375%, 11/14/2013 GBP 20,000 35,636
Motorola, Inc., 8.000%, 11/01/2011 USD 75,000 90,147
News America Holdings, Inc., 8.625%, 2/07/2014 AUD 50,000 39,024
Pemex Project Funding Master Trust,
7.875%, 2/01/2009 USD 115,000 128,225
Pioneer Natural Resources Co., 7.200%, 1/15/2028 USD 175,000 197,090
Qwest Corp., 6.875%, 9/15/2033 USD 30,000 25,275
Service Corp. International, 6.500%, 3/15/2008 USD 5,000 5,206
Sprint Capital Corp., 6.875%, 11/15/2028 USD 25,000 26,222
US West Capital Funding, Inc., 6.875%, 7/15/2028 USD 200,000 143,500
Williams Cos., Inc., 7.500%, 1/15/2031 USD 100,000 100,500
Woolworth Corp., 8.500%, 1/15/2022 USD 150,000 159,750
41
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (A)
- -------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
UNITED STATES - CONTINUED
Xerox Capital Trust I, 8.000%, 2/01/2027 USD $ 50,000 $ 49,250
Xerox Corp., 7.200%, 4/01/2016 USD 20,000 20,450
----------
3,470,813
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $5,747,646) 6,422,645
----------
CONVERTIBLE BONDS - 0.7%
UNITED STATES - 0.7%
Builders Transportation, Inc.,
8.000%, 8/15/2005(d) USD 95,000 10
Corning, Inc., 3.500%, 11/01/2008 USD 50,000 58,750
Loews Corp., 3.125%, 9/15/2007 USD 70,000 68,512
----------
127,272
----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $192,940) 127,272
----------
TOTAL BONDS AND NOTES
(Identified Cost $5,940,586) 6,549,917
----------
SHARES
- -------------------------------------------------------------------------------
COMMON STOCKS - 55.3% OF TOTAL NET ASSETS
AUSTRALIA - 1.4%
Aristocrat Leisure Ltd. 29,400 165,642
Newcrest Mining Ltd. 6,500 71,807
----------
237,449
----------
AUSTRIA - 1.6%
Erste Bank der oesterreichischen Sparkassen AG 3,600 150,067
Wienerberger AG 3,300 123,952
----------
274,019
----------
BELGIUM - 0.7%
Umicore 1,775 129,648
----------
BERMUDA - 1.3%
Accenture Ltd., Class A(c) 5,750 155,537
Golar LNG Ltd.(c) 4,400 69,360
----------
224,897
----------
CANADA - 1.5%
Canfor Corp.(c) 7,150 90,449
Cott Corp.(c) 2,500 73,165
PetroKazakhstan, Inc., Class A 2,830 96,312
----------
259,926
----------
DENMARK - 0.5%
William Demant Holding A/S(c) 2,100 92,766
----------
FRANCE - 1.2%
Axa 3,900 79,151
Total Fina SA, Class B 600 122,464
----------
201,615
----------
42
SHARES VALUE (A)
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
GERMANY - 1.6%
Bayerische Motoren Werke (BMW) AG 1,800 $ 74,152
SAP AG 500 77,884
Siemens AG 1,600 117,929
----------
269,965
----------
HONG KONG - 0.3%
Esprit Holdings Ltd. 11,500 58,882
----------
INDIA - 0.4%
State Bank of India, GDR, 144A 2,470 61,380
----------
IRELAND - 0.5%
Anglo Irish Bank Corp. Plc 4,921 90,293
----------
ISRAEL - 0.1%
Teva Pharmaceutical Industries Ltd., ADR 592 15,362
----------
ITALY - 0.7%
Eni Spa 5,200 116,640
----------
JAPAN - 8.1%
Advantest Corp. 900 54,148
Chugai Pharmaceutical Co. Ltd. 4,000 57,815
Diamond City Co., Ltd. 2,600 69,291
Diamond City Co., Ltd. (New)(c) 1,300 34,646
GOLDCREST Co. Ltd. 880 51,659
H.I.S. Co. Ltd. 2,500 78,905
Honda Motor Co. Ltd. 2,300 112,143
Mitsubishi Tokyo Financial Group, Inc. 13 108,587
Nippon Thompson Co. Ltd. 10,000 61,332
Nitori Co. 800 45,991
Sammy Corp. 2,300 112,981
SFCG Co. Ltd. 520 102,706
Sumitomo Realty & Development Co. Ltd. 8,000 85,358
Sumitomo Rubber Industries Ltd. 8,000 77,566
T&D Holdings, Inc. 1,600 70,328
Takefuji Corp. 1,040 66,692
TDK Corp., ADR 725 48,619
UFJ Holdings, Inc.(c) 18 79,071
Xebio Co. Ltd. 2,900 80,787
----------
1,398,625
----------
MEXICO - 0.6%
Fomento Economico Mexicano SA de CV, ADR 2,175 96,092
----------
RUSSIA - 0.5%
Gazprom, ADR(c) 2,550 91,290
----------
SCOTLAND - 0.8%
Royal Bank of Scotland Group Plc 4,900 141,867
----------
SINGAPORE - 1.1%
Keppel Corp. Ltd. 16,000 75,214
Singapore Press Holdings Ltd.(c) 43,000 121,218
----------
196,432
----------
SOUTH KOREA - 0.6%
Samsung Electronics 270 107,233
----------
43
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
SHARES VALUE (A)
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED
SWEDEN - 1.2%
SKF AB, Class B 1,100 $ 41,797
Telefonaktiebolaget LM Ericsson, ADR(c) 5,350 167,134
---------
208,931
---------
SWITZERLAND - 2.3%
Roche Holding AG 1,000 103,627
Straumann AG 650 138,255
Synthes, Inc.(c) 1,350 147,402
---------
389,284
---------
TAIWAN - 0.9%
Advanced Semiconductor Engineering, Inc. 89,561 59,610
United Microelectronics Corp., ADR 26,245 88,708
---------
148,318
---------
UNITED KINGDOM - 4.2%
BHP Billiton Plc 11,765 124,141
Burberry Group Plc 16,100 108,830
CSR Plc(c) 16,700 107,484
Pearson Plc 8,300 88,896
Smith & Nephew Plc 9,600 88,486
Standard Chartered Plc 4,200 72,226
Vodafone Group Plc 59,500 142,802
---------
732,865
---------
UNITED STATES - 23.2%
AFLAC, Inc. 4,000 156,840
American International Group, Inc. 2,150 146,178
Amgen, Inc.(c) 2,000 113,360
Caremark Rx, Inc.(c) 4,000 128,280
Carnival Corp. 3,000 141,870
CenturyTel, Inc. 4,500 154,080
Cisco Systems, Inc.(c) 3,750 67,875
Citigroup, Inc. 2,750 121,330
ConocoPhillips 1,500 124,275
Covad Communications Group, Inc.(c) 459 771
Danaher Corp. 2,000 102,560
Dell, Inc.(c) 2,500 89,000
Devon Energy Corp. 1,800 127,818
Dominion Resources, Inc. 750 48,938
Dover Corp. 2,250 87,458
ExxonMobil Corp. 3,000 144,990
First Data Corp. 3,200 139,200
General Electric Co. 2,500 83,950
GlobalSantaFe Corp. 4,000 122,600
Goldman Sachs Group, Inc. 1,200 111,888
Guidant Corp. 1,200 79,248
Harley-Davidson, Inc. 2,000 118,880
Harris Corp. 2,700 148,338
Illinois Tool Works, Inc. 700 65,219
Intel Corp. 1,500 30,090
Leggett & Platt, Inc. 4,500 126,450
Maxim Integrated Products, Inc. 2,250 95,153
Medtronic, Inc. 2,250 116,775
44
SHARES VALUE (A)
- --------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
UNITED STATES - CONTINUED
Northrop Grumman Corp. 2,600 $ 138,658
PepsiCo, Inc. 2,750 133,787
Pfizer, Inc. 2,500 76,500
Praxair, Inc. 2,000 85,480
SunGard Data Systems, Inc.(c) 6,000 142,620
Target Corp. 1,750 79,188
Viacom, Inc., Class B 3,000 100,680
Wells Fargo & Co. 2,250 134,167
Zimmer Holdings, Inc.(c) 1,500 118,560
-----------
4,003,054
-----------
TOTAL COMMON STOCKS
(Identified Cost $8,297,583) 9,546,833
-----------
PREFERRED STOCKS - 1.4% OF TOTAL NET ASSETS
NON-CONVERTIBLE PREFERRED STOCKS - 0.7%
GERMANY - 0.7%
ProSiebenSati Media AG 6,700 123,703
-----------
TOTAL NON-COVERTIBLE PREFERRED STOCKS
(Identified Cost $117,301) 123,703
-----------
CONVERTIBLE PREFERRED STOCKS - 0.7%
PHILIPPINES - 0.7%
Philippine Long Distance Telephone Co., $3.50
GDS 2,500 124,375
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $91,812) 124,375
-----------
TOTAL PREFERRED STOCKS
(Identified Cost $209,113) 248,078
-----------
WARRANTS - 0.0% OF NET ASSETS
CANADA - 0.0%
Anooraq Resources Corp., expiring 06/01/05(c) 11,900 0
-----------
TOTAL WARRANTS
(Identified Cost $0) 0
-----------
PRINCIPAL AMOUNT
- --------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 3.4%
Repurchase Agreement with State Street Corp.,
dated 9/30/04 at 0.650% to be repurchased at
$579,010 on 10/01/04 collateralized by $435,000
U.S. Treasury Bond, 7.625% due 2/15/25 with a
value of $595,542 $579,000 579,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $579,000) 579,000
-----------
TOTAL INVESTMENTS - 98.0%
(Identified Cost $15,026,282)(b) 16,923,828
Other assets less liabilities--2.0% 350,599
-----------
TOTAL NET ASSETS - 100% $17,274,427
-----------
45
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2004
LOOMIS SAYLES WORLDWIDE FUND - CONTINUED
(a)See Note 2a of Notes to Financial Statements.
(b)Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$15,047,525 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 $2,187,128
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (310,825)
----------
Net unrealized appreciation $1,876,303
----------
At September 30, 2004, the Fund had a capital loss carryover of
approximately $2,049,444 of which $1,008,781 expires on September 30, 2010
and $1,040,663 expires on September 30, 2011. These amounts may be available
to offset future realized capital gains, if any, to the extent provided by
regulations.
At September 30, 2004, the components of distributable earnings, excluding
unrealized appreciation/depreciation, disclosed on a tax basis consisted of
$470,328 in undistributed ordinary income and $0 in undistributed long-term
gains.
The differences between book and tax distributable earnings are primarily
due to deferred trustees' fees, premium amortization accruals and wash sales.
(c)Non-income producing security.
(d)Non-income producing security due to default or backruptcy filing.
(e)Step Bond: Coupon is zero or below market rate for an initial period and
then increases at a specified date and rate.
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2004, the total value of these securities amounted to $201,859 or 1.17% of
total net assets.
ADR/GDR/GDS--An American Depositary Receipt (ADR), Global Depositary Receipt
(GDR) or Global Depositary Shares (GDS) 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 GDR's are significantly influenced
by trading on exchanges not located in the United States.
Key to Abbreviations: AUD: Australian Dollar; BRL: Brazilian Real; CAD:
Canadian Dollar; DKK: Danish Krone; EUR: Euro; HUF: Hungarian Forint; GBP:
Great British Pound; JPY: Japanese Yen; MXN: Mexican Peso; NOK: Norwegian
Krone; NZD: New Zealand Dollar; SGD: Singapore Dollar; SEK: Swedish Krona;
USD: United States Dollar.
INDUSTRY HOLDINGS AT SEPTEMBER 30, 2004 AS A PERCENTAGE OF NET ASSETS
Sovereigns 7.5%
Oil & Gas 4.6
Healthcare Equipment & Supplies 3.4
Wireless Telecommunication Services 3.0
Metals & Mining 2.7
Specialty Retail 2.7
Insurance 2.6
IT Services 2.5
Containers & Packaging 2.4
Communications Equipment 2.2
Government Agencies 2.2
Consumer Finance 2.1
Wireless 2.1
Electronics 2.0
Machinery 2.0
Other, less than 2% each 50.6
See accompanying notes to financial statements.
46
THIS PAGE INTENTIONALLY LEFT BLANK
47
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004
AGGRESSIVE MID CAP SMALL CAP
GROWTH FUND GROWTH FUND GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------
ASSETS
Investments at cost $ 45,687,477 $ 7,394,990 $ 27,909,044
Net unrealized appreciation 5,368,103 906,058 2,732,972
--------------- --------------- ---------------
Investments at value 51,055,580 8,301,048 30,642,016
Cash 817 359,892 340,326
Foreign cash at value (identified cost $ 11,020) -- -- --
Receivable for Fund shares sold 38,122 -- 2,695
Receivable for securities sold 138,938 23,156 2,561,224
Dividends and interest receivable 10,430 1,721 3,273
Tax reclaims receivable -- -- --
Receivable from investment adviser 8,666 5,108 13,308
Other -- -- --
--------------- --------------- ---------------
TOTAL ASSETS 51,252,553 8,690,925 33,562,842
--------------- --------------- ---------------
LIABILITIES
Payable for securities purchased 511,313 86,480 385,728
Payable for Fund shares redeemed 82,795 -- 2,645,442
Foreign taxes -- -- --
Management fees payable 30,590 5,149 19,662
Trustees' fees payable 1,677 1,640 1,664
Deferred Trustees' fees 5,244 4,196 4,989
Accounting and administrative fees payable 10,075 1,562 9,262
Service and distribution fees payable 173 -- 99
Transfer agent fees payable 4,242 1,219 4,417
Other accounts payable and accrued expenses 33,259 20,852 36,023
--------------- --------------- ---------------
TOTAL LIABILITIES 679,368 121,098 3,107,286
--------------- --------------- ---------------
NET ASSETS $ 50,573,185 $ 8,569,827 $ 30,455,556
--------------- --------------- ---------------
Net Assets consist of:
Paid in capital $ 153,802,265 $ 12,336,741 $ 237,291,769
Undistributed (overdistributed) net investment income (loss) (126,934) (8,765) (4,989)
Accumulated net realized gain (loss) on investments (108,470,249) (4,664,207) (209,564,196)
Net unrealized appreciation (depreciation) on investments
and foreign currency translations 5,368,103 906,058 2,732,972
--------------- --------------- ---------------
NET ASSETS $ 50,573,185 $ 8,569,827 $ 30,455,556
--------------- --------------- ---------------
NET ASSET VALUE AND OFFERING PRICE
INSTITUTIONAL CLASS
Net assets $ 25,191,189 $ 8,569,827 $ 15,866,663
--------------- --------------- ---------------
Shares of beneficial interest 1,625,450 1,250,012 1,771,713
--------------- --------------- ---------------
Net asset value, offering and redemption price per share $ 15.50 $ 6.86 $ 8.96
--------------- --------------- ---------------
RETAIL CLASS
Net assets $ 25,381,996 -- $ 14,588,893
--------------- --------------- ---------------
Shares of beneficial interest 1,670,054 -- 1,661,545
--------------- --------------- ---------------
Net asset value, offering and redemption price per share $ 15.20 -- $ 8.78
--------------- --------------- ---------------
ADMIN CLASS
Net assets -- -- --
--------------- --------------- ---------------
Shares of beneficial interest -- -- --
--------------- --------------- ---------------
Net asset value, offering and redemption price per share -- -- --
--------------- --------------- ---------------
See accompanying notes to financial statements.
48
SMALL CAP SMALL COMPANY TAX-MANAGED
VALUE FUND GROWTH FUND EQUITY FUND VALUE FUND WORLDWIDE FUND
- -----------------------------------------------------------------------------------------
$ 473,805,102 $ 18,944,746 $ 4,635,845 $ 28,197,792 $ 15,026,282
108,000,420 1,586,129 590,217 5,392,088 1,897,546
- -----------------------------------------------------------------------------------------
581,805,522 20,530,875 5,226,062 33,589,880 16,923,828
1,589 384,079 14,222 736 887
-- -- -- -- 11,198
1,389,967 -- -- -- 259,034
5,255,677 84,648 -- -- 47,976
596,377 1,773 2,354 40,011 128,992
-- -- -- -- 1,181
9,814 1,167 3,837 4,769 10,769
-- -- -- -- 1,050
- -----------------------------------------------------------------------------------------
589,058,946 21,002,542 5,246,475 33,635,396 17,384,915
- -----------------------------------------------------------------------------------------
5,388,214 108,972 12,809 -- 62,670
649,103 -- -- 15,130 --
2,084 -- -- 248 869
353,356 12,554 2,098 13,824 10,292
2,096 1,652 1,636 1,662 1,625
16,686 4,530 4,086 4,880 4,376
102,642 4,707 1,247 7,263 2,790
2,030 -- -- -- --
19,392 1,225 1,572 2,334 1,539
76,755 22,561 20,988 26,997 26,327
- -----------------------------------------------------------------------------------------
6,612,358 156,201 44,436 72,338 110,488
- -----------------------------------------------------------------------------------------
$ 582,446,588 $ 20,846,341 $ 5,202,039 $ 33,563,058 $ 17,274,427
- -----------------------------------------------------------------------------------------
$ 417,264,099 $ 99,908,294 $ 8,808,117 $ 29,854,901 $ 16,980,411
76,941 (4,530) 19,706 519,100 465,952
57,105,128 (80,643,552) (4,216,001) (2,203,031) (2,070,687)
108,000,420 1,586,129 590,217 5,392,088 1,898,751
- -----------------------------------------------------------------------------------------
$ 582,446,588 $ 20,846,341 $ 5,202,039 $ 33,563,058 $ 17,274,427
- -----------------------------------------------------------------------------------------
$ 346,356,022 $ 20,846,341 $ 5,202,039 $ 33,563,058 $ 17,274,427
- -----------------------------------------------------------------------------------------
13,450,078 2,661,967 612,914 2,103,614 1,694,505
- -----------------------------------------------------------------------------------------
$ 25.75 $ 7.83 $ 8.49 $ 15.95 $ 10.19
- -----------------------------------------------------------------------------------------
$ 173,410,804 -- -- -- --
- -----------------------------------------------------------------------------------------
6,767,802 -- -- -- --
- -----------------------------------------------------------------------------------------
$ 25.62 -- -- -- --
- -----------------------------------------------------------------------------------------
$ 62,679,762 -- -- -- --
- -----------------------------------------------------------------------------------------
2,464,777 -- -- -- --
- -----------------------------------------------------------------------------------------
$ 25.43 -- -- -- --
- -----------------------------------------------------------------------------------------
See accompanying notes to financial statements.
49
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
AGGRESSIVE MID CAP SMALL CAP
GROWTH FUND GROWTH FUND GROWTH FUND
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 80,903 $ 13,076 $ 21,368
Interest 5,748 383 3,794
Less foreign taxes withheld -- -- --
------------ ------------ ------------
86,651 13,459 25,162
------------ ------------ ------------
EXPENSES
Management fees 411,607 63,508 333,595
Distribution fees--Retail Class 74,093 -- 54,892
Service and distribution fees--Admin Class -- -- --
Trustees' fees and expenses 11,574 9,178 11,075
Accounting and administrative fees 36,011 5,556 29,186
Custodian 48,105 33,959 50,392
Transfer agent fees-- Institutional Class, Retail Class, Admin Class 43,315 13,348 42,137
Audit and tax services 27,896 23,533 37,661
Registration 27,319 19,760 40,419
Shareholder reporting 21,582 4,389 15,075
Legal 3,506 538 2,647
Miscellaneous 13,524 4,413 13,171
------------ ------------ ------------
Total expenses 718,532 178,182 630,250
Less reimbursement/waiver (95,630) (101,973) (130,564)
------------ ------------ ------------
Net expenses 622,902 76,209 499,686
------------ ------------ ------------
Net investment income (loss) (536,251) (62,750) (474,524)
------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
REALIZED GAIN (LOSS) ON:
Investments--net 11,771,511 1,544,389 12,648,409
Foreign currency transactions--net -- -- --
------------ ------------ ------------
Total net realized gain (loss) on investments and foreign currency
transactions 11,771,511 1,544,389 12,648,409
------------ ------------ ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments--net (4,394,736) (529,308) (8,644,086)
Foreign currency translations--net -- -- --
------------ ------------ ------------
Total net change in unrealized appreciation (depreciation) on
investments and foreign currency translations (4,394,736) (529,308) (8,644,086)
------------ ------------ ------------
Total net realized and unrealized gain (loss) on investments and foreign
currency transactions 7,376,775 1,015,081 4,004,323
------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,840,524 $ 952,331 $ 3,529,799
------------ ------------ ------------
See accompanying notes to financial statements.
50
SMALL CAP SMALL COMPANY TAX-MANAGED
VALUE FUND GROWTH FUND EQUITY FUND VALUE FUND WORLDWIDE FUND
--------------------------------------------------------------------------
$ 5,647,498 $ 14,791 $ 45,543 $ 856,511 $ 132,855
245,986 1,037 60 3,612 411,927
(7,720) -- (157) (4,071) (9,113)
--------------------------------------------------------------------------
5,885,764 15,828 45,446 856,052 535,669
--------------------------------------------------------------------------
4,147,405 175,343 18,372 191,851 113,288
423,988 -- -- -- --
261,292 -- -- -- --
36,942 9,941 8,924 10,706 9,514
362,854 15,341 2,411 25,178 9,912
108,561 41,388 30,972 38,506 82,734
209,183 13,594 17,745 23,908 17,058
46,110 24,623 23,296 25,606 25,172
45,209 19,650 15,240 17,420 19,073
94,577 9,676 2,589 9,567 2,556
35,184 1,621 242 2,366 959
75,979 8,052 4,773 10,552 1,751
--------------------------------------------------------------------------
5,847,284 319,229 124,564 355,660 282,017
(185,229) (108,817) (100,680) (29,514) (130,966)
--------------------------------------------------------------------------
5,662,055 210,412 23,884 326,146 151,051
--------------------------------------------------------------------------
223,709 (194,584) 21,562 529,906 384,618
--------------------------------------------------------------------------
65,900,639 2,281,688 (11,257) 3,827,567 509,475
-- -- -- -- (7,864)
--------------------------------------------------------------------------
65,900,639 2,281,688 (11,257) 3,827,567 501,611
--------------------------------------------------------------------------
46,216,250 (3,170,922) 375,137 2,637,813 773,530
-- -- -- -- (1,462)
--------------------------------------------------------------------------
46,216,250 (3,170,922) 375,137 2,637,813 772,068
--------------------------------------------------------------------------
112,116,889 (889,234) 363,880 6,465,380 1,273,679
--------------------------------------------------------------------------
$112,340,598 $ (1,083,818) $ 385,442 $ 6,995,286 $ 1,658,297
--------------------------------------------------------------------------
See accompanying notes to financial statements.
51
STATEMENTS OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ (536,251) $ (471,108)
Net realized gain (loss) on investments and foreign currency transactions 11,771,511 (1,638,969)
Net change in unrealized appreciation (depreciation) on investments and foreign
currency translations (4,394,736) 13,073,722
------------------ ------------------
Increase (decrease) in net assets resulting from operations 6,840,524 10,963,645
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class -- --
Retail Class -- --
------------------ ------------------
Total distributions -- --
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) (12,946,996) 2,847,129
------------------ ------------------
Total increase (decrease) in net assets (6,106,472) 13,810,774
NET ASSETS
Beginning of period 56,679,657 42,868,883
------------------ ------------------
End of period $ 50,573,185 $56,679,657
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (126,934) $ (1,142)
------------------ ------------------
MID CAP GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ (62,750) $ (51,079)
Net realized gain (loss) on investments and foreign currency transactions 1,544,389 (109,243)
Net change in unrealized appreciation (depreciation) on investments and foreign
currency translations (529,308) 1,858,351
------------------ ------------------
Increase (decrease) in net assets resulting from operations 952,331 1,698,029
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class -- --
------------------ ------------------
Total distributions -- --
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) (42,608) 32,706
------------------ ------------------
Total increase (decrease) in net assets 909,723 1,730,735
NET ASSETS
Beginning of period 7,660,104 5,929,369
------------------ ------------------
End of period $8,569,827 $7,660,104
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (8,765) $ (1,142)
------------------ ------------------
See accompanying notes to financial statements.
52
SMALL CAP GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ (474,524) $ (636,880)
Net realized gain (loss) on investments and foreign currency transactions 12,648,409 (3,722,740)
Net change in unrealized appreciation (depreciation) on investments and foreign
currency translations (8,644,086) 18,110,700
------------------ ------------------
Increase (decrease) in net assets resulting from operations 3,529,799 13,751,080
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class -- --
Retail Class -- --
------------------ ------------------
Total distributions -- --
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) (25,938,308) (36,514,836)
------------------ ------------------
REDEMPTION FEES
Institutional Class 63 --
Retail Class 41 --
------------------ ------------------
Total increase (decrease) in net assets (22,408,405) (22,763,756)
NET ASSETS
Beginning of period 52,863,961 75,627,717
------------------ ------------------
End of period $ 30,455,556 $ 52,863,961
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (4,989) $ (1,142)
------------------ ------------------
SMALL CAP VALUE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ 223,709 $ 567,375
Net realized gain (loss) on investments and foreign currency transactions 65,900,639 4,755,610
Net change in unrealized appreciation (depreciation) on investments and foreign
currency translations 46,216,250 79,201,327
------------------ ------------------
Increase (decrease) in net assets resulting from operations 112,340,598 84,524,312
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (755,336) --
Retail Class (73,295) --
Admin Class -- --
CAPITAL GAINS:
Institutional Class (7,446,392) --
Retail Class (3,811,026) --
Admin Class (1,088,512) --
------------------ ------------------
Total distributions (13,174,561) --
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) 15,767,810 37,141,909
------------------ ------------------
REDEMPTION FEES
Institutional Class 2,915 --
Retail Class 1,477 --
Admin Class 486 --
------------------ ------------------
Total increase (decrease) in net assets 114,938,725 121,666,221
NET ASSETS
Beginning of period 467,507,863 345,841,642
------------------ ------------------
End of period $582,446,588 $467,507,863
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 76,941 $ 682,317
------------------ ------------------
See accompanying notes to financial statements.
53
STATEMENTS OF CHANGES IN NET ASSETS
SMALL COMPANY GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ (194,584) $ (216,252)
Net realized gain (loss) on investments and foreign currency transactions 2,281,688 (3,347,715)
Net change in unrealized appreciation (depreciation) on investments and foreign
currency translations (3,170,922) 10,422,651
------------------ ------------------
Increase (decrease) in net assets resulting from operations (1,083,818) 6,858,684
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class -- --
------------------ ------------------
Total distributions -- --
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) (2,300,199) (30,642,707)
------------------ ------------------
Total increase (decrease) in net assets (3,384,017) (23,784,023)
NET ASSETS
Beginning of period 24,230,358 48,014,381
------------------ ------------------
End of period $20,846,341 $ 24,230,358
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (4,530) $ (1,142)
------------------ ------------------
TAX-MANAGED EQUITY FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ 21,562 $ 71,050
Net realized gain (loss) on investments and foreign currency transactions (11,257) (145,271)
Net change in unrealized appreciation (depreciation) on investments and foreign
currency translations 375,137 684,831
------------------ ------------------
Increase (decrease) in net assets resulting from operations 385,442 610,610
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (62,322) (82,181)
------------------ ------------------
Total distributions (62,322) (82,181)
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) 2,388,811 (15,464,446)
------------------ ------------------
Total increase (decrease) in net assets 2,711,931 (14,936,017)
NET ASSETS
Beginning of period 2,490,108 17,426,125
------------------ ------------------
End of period $5,202,039 $ 2,490,108
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 19,706 $ 60,856
------------------ ------------------
See accompanying notes to financial statements.
54
VALUE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ 529,906 $ 448,264
Net realized gain (loss) on investments and foreign currency transactions 3,827,567 (2,165,764)
Net change in unrealized appreciation (depreciation) on investments and foreign
currency translations 2,637,813 8,798,027
------------------ ------------------
Increase (decrease) in net assets resulting from operations 6,995,286 7,080,527
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (456,216) (273,025)
------------------ ------------------
Total distributions (456,216) (273,025)
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) (10,935,484) (1,873,138)
------------------ ------------------
Total increase (decrease) in net assets (4,396,414) 4,934,364
NET ASSETS
Beginning of period 37,959,472 33,025,108
------------------ ------------------
End of period $ 33,563,058 $37,959,472
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 519,100 $ 444,016
------------------ ------------------
WORLDWIDE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income (loss) $ 384,618 $ 363,432
Net realized gain (loss) on investments and foreign currency transactions 501,611 104,771
Net change in unrealized appreciation (depreciation) on investments and foreign
currency translations 772,068 1,826,724
------------------ ------------------
Increase (decrease) in net assets resulting from operations 1,658,297 2,294,927
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (448,271) (284,901)
------------------ ------------------
Total distributions (448,271) (284,901)
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) 5,565,347 148,718
------------------ ------------------
REDEMPTION FEES
Institutional Class -- --
------------------ ------------------
Total increase (decrease) in net assets 6,775,373 2,158,744
NET ASSETS
Beginning of period 10,499,054 8,340,310
------------------ ------------------
End of period $17,274,427 $10,499,054
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 465,952 $ 443,887
------------------ ------------------
See accompanying notes to financial statements.
55
FINANCIAL HIGHLIGHTS
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ----------------------------
Net asset
value, Net Net realized Dividends Distributions
beginning investment and unrealized Total from from from net
of income gain (loss) on investment net investment realized
the period (loss) investments operations income capital gains
- -------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH FUND
INSTITUTIONAL CLASS
9/30/2004 $13.69 $(0.13)(c) $ 1.94 $ 1.81 $-- $ --
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)
RETAIL CLASS
9/30/2004 13.46 (0.16)(c) 1.90 1.74 -- --
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)
MID CAP GROWTH FUND
INSTITUTIONAL CLASS
9/30/2004 $ 6.10 $(0.05)(c) $ 0.81 $ 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.
See accompanying notes to financial statements.
56
RATIOS TO AVERAGE NET ASSETS:
- -------------- ----------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
Total end of the return the period expenses expenses income (loss) turnover
distributions period (%)(a) (000) (%)(b)(d) (%)(d) (%)(d) rate(%)
- ---------------------------------------------------------------------------------------
$ -- $15.50 13.2 $ 25,191 1.00 1.17 (0.84) 284
-- 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
-- 15.20 12.9 25,382 1.25 1.42 (1.10) 284
-- 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
$ -- $ 6.86 12.5 $ 8,570 0.90 2.10 (0.74) 287
-- 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.
57
FINANCIAL HIGHLIGHTS - CONTINUED
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ----------------------------
Net asset
value, Net realized Dividends Distributions
beginning Net and unrealized Total from from from net
of investment gain (loss) on investment net investment realized
the period income (loss) investments operations income capital gains
- -------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
INSTITUTIONAL CLASS
9/30/2004 $ 8.59 $(0.09)(c) $ 0.46 $ 0.37 $ -- $ --
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 -- --
RETAIL CLASS
9/30/2004 8.45 (0.11)(c) 0.44 0.33 -- --
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 -- --
SMALL CAP VALUE FUND
INSTITUTIONAL CLASS
9/30/2004 $21.34 $ 0.04(c) $ 4.97 $ 5.01 $(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)
RETAIL CLASS
9/30/2004 21.25 (0.02)/(c)/ 4.95 4.93 (0.01) (0.55)
9/30/2003 17.25 0.00(c)(d) 4.00 4.00 -- --
9/30/2002 19.85 0.05(c) (0.35) (0.30) (0.06) (2.24)
9/30/2001 20.38 0.11(c) 0.60 0.71 (0.15) (1.09)
9/30/2000 17.28 0.10(c) 3.36 3.46 (0.09) (0.27)
ADMIN CLASS
9/30/2004 21.13 (0.08)(c) 4.93 4.85 -- (0.55)
9/30/2003 17.20 (0.05)(c) 3.98 3.93 -- --
9/30/2002 19.80 0.00(c)(d) (0.35) (0.35) (0.01) (2.24)
9/30/2001 20.34 0.05(c) 0.60 0.65 (0.10) (1.09)
9/30/2000 17.24 0.04(c) 3.37 3.41 (0.04) (0.27)
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods less than one year
are not annualized. (b) The adviser has agreed to reimburse a portion of the
Fund's expenses during the period. Without this reimbursement the Fund's ratio
of operating expenses would have been higher. (c) Per share net investment
income (loss) has been determined on the basis of the weighted average number
of shares outstanding during the period. (d) Amount rounds to less than $0.01
per share.
See accompanying notes to financial statements.
58
RATIOS TO AVERAGE NET ASSETS:
- ------------------------- ---------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
Total Redemption end of return the period Expenses Expenses income (loss) turnover
distributions fee the period (%)(a) (000) (%)(b) (%) (%) rate (%)
- -------------------------------------------------------------------------------------------------
$ -- $0.00(d) $ 8.96 4.3 $ 15,867 1.00 1.31 (0.95) 217
-- -- 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
-- $0.00(d) 8.78 3.9 14,589 1.25 1.52 (1.19) 217
-- -- 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
$(0.60) $0.00(d) $25.75 23.8 $346,356 0.90 0.93 0.16 70
-- -- 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
(0.56) 0.00(d) 25.62 23.5 173,411 1.15 1.18 (0.08) 70
-- -- 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
(0.55) 0.00(d) 25.43 23.3 62,680 1.40 1.43 (0.33) 70
-- -- 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
See accompanying notes to financial statements.
59
FINANCIAL HIGHLIGHTS - CONTINUED
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ----------------------------
Net asset
value, Net realized Dividends Distributions
beginning Net and unrealized Total from from from net
of investment gain (loss) on investment net investment realized
the period income (loss) investments operations income capital gains
- -------------------------------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND
INSTITUTIONAL CLASS
9/30/2004 $ 8.27 $(0.07)(c) $ (0.37) $ (0.44) $ -- $ --
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 -- --
TAX-MANAGED EQUITY FUND
INSTITUTIONAL CLASS
9/30/2004 $ 7.66 $ 0.05(c) $ 0.97 $ 1.02 $(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)
VALUE FUND
INSTITUTIONAL CLASS
9/30/2004 $13.52 $ 0.21(c) $ 2.39 $ 2.60 $(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)
WORLDWIDE FUND
INSTITUTIONAL CLASS
9/30/2004 $ 9.32 $ 0.25(c) $ 0.96 $ 1.21 $(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)
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses. Periods less than one year
are not annualized. (b) The adviser has agreed to reimburse a portion of the
Fund's expenses during the period. Without this reimbursement the Fund's ratio
of operating expenses would have been higher. (c) Per share net investment
income (loss) has been determined on the basis of the weighted average number
of shares outstanding during the period. *As required effective October 1,
2001, the Fund has adopted the provisions of the AICPA Audit and Accounting
Guide, Audits of Investment Companies, and began amortizing premium on debt
securities for financial statement purposes only. For the year ended September
30, 2002, the impact to the Fund's per share net investment income and net
realized and unrealized gain (loss) was less than $0.01. The ratio of net
investment income to average net assets for the Fund decreased from 4.29% to
4.26% on an annualized basis. Per share ratios and supplemental data for
periods prior to October 1, 2001, have not been restated to reflect this change
in presentation.
See accompanying notes to financial statements.
60
RATIOS TO AVERAGE NET ASSETS:
- ------------------------- ---------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
Total Redemption end of return the period Expenses Expenses income turnover
distributions fee the period (%)(a) (000) (%)(b) (%) (loss) (%) rate(%)
- -------------------------------------------------------------------------------------------------
$ -- $-- $ 7.83 (5.3) $ 20,846 0.90 1.37 (0.83) 235
-- -- 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
$(0.19) $-- $ 8.49 13.4 $ 5,202 0.65 3.39 0.59 27
(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
$(0.17) $-- $15.95 19.4 $ 33,563 0.85 0.93 1.38 47
(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
$(0.34) $-- $10.19 13.2 $ 17,274 1.00 1.87 2.55 69
(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
See accompanying notes to financial statements.
61
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
1. ORGANIZATION. Loomis Sayles Funds I and Loomis Sayles Funds II (the "Trusts"
and each a "Trust") are organized as Massachusetts business trusts. Each Trust
is registered under the Investment Company Act of 1940 (the "1940 Act"), as
amended, as an open-end investment management 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 the funds of the Trusts as described below.
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 an NOCP, at the most recent bid quotation on the NASDAQ
National Market. Debt securities for which market quotations are readily
available are generally valued at market value, as reported by pricing services
recommended by the investment adviser's pricing committee and approved by the
Board of Trustees. Such pricing services generally use the most recent bid
prices in the principal market in which such securities are normally traded.
Broker-dealer bid quotations may also be used to value debt and equity
securities where a pricing service does not price a security or where a pricing
service does not provide a reliable price for the security. Short-term
obligations with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available (including restricted securities, if any)
are valued at fair value as determined in good faith by the Fund's investment
adviser using consistently applied procedures under the general supervision of
the Board of Trustees.
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 equity securities, a Fund
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. As of September 30, 2004, approximately 24% of
the market value of investments for the Loomis Sayles Worldwide Fund were fair
valued pursuant to procedures approved by the Board of Trustees.
62
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. 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. Investment income and realized and unrealized gains and losses are
allocated on a pro rata basis to each class based on the relative net assets of
each class to the total net assets of the Fund.
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 September 30, 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 and excise taxes have 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, gains realized from passive foreign investment
companies and redemptions in kind. 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.
63
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2004
G. REPURCHASE AGREEMENTS. Each Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The Fund's adviser is responsible
for determining that the value of the collateral is at all times at least equal
to 102% of the repurchase price, including interest. Repurchase agreements
could involve certain risks in the event of default or insolvency of the
counterparty including possible delays or restrictions upon a Fund's ability to
dispose of the underlying securities.
3. PURCHASES AND SALES OF SECURITIES. For the year ended September 30, 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 $151,447,228 $163,542,961
Mid Cap Growth Fund 23,579,378 23,821,738
Small Cap Growth Fund 93,604,087 121,224,377
Small Cap Value Fund 366,322,435 367,371,432
Small Company Growth Fund 54,052,388 56,314,863
Tax-Managed Equity Fund 3,412,947 974,997
Value Fund 17,778,475 28,896,177
Worldwide Fund 14,095,833 9,377,158
For the year ended September 30, 2004, purchases and sales of U.S.
Government/Agency securities by Worldwide Fund were $534,049 and $471,572,
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 year ended September 30, 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 year ended September 30, 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 $ 411,607 $ 95,630 $ 315,977 0.75% 0.58%
Mid Cap Growth Fund 63,508 63,508 -- 0.75% --
Small Cap Growth Fund 333,595 130,564 203,031 0.75% 0.46%
Small Cap Value Fund 4,147,405 185,229 3,962,176 0.75% 0.72%
Small Company Growth Fund 175,343 108,817 66,526 0.75% 0.28%
Tax-Managed Equity Fund 18,372 18,372 -- 0.50% --
Value Fund 191,851 29,514 162,337 0.50% 0.42%
Worldwide Fund 113,288 113,288 -- 0.75% --
64
For the year ended September 30, 2004, in addition to the waiver of management
fees, expenses have been reimbursed as follows:
FUND AMOUNT
- ---- -------
Mid Cap Growth Fund $38,465
Tax-Managed Equity Fund 82,308
Worldwide Fund 17,678
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 North
America is ultimately owned by three large affiliated French financial services
entities: Caisse des Depots et Consignations ("CDC"), a public sector financial
institution created by the French government in 1816; Caisse Nationale des
Caisses d'Epargne, a financial institution owned by CDC and by affiliated
French savings banks known as the Caisse d'Epargne; and CNP Assurances, a large
French life insurance company.
B. ACCOUNTING AND ADMINISTRATIVE FEES. 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 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 year ended September 30, 2004, fees paid to CIS for accounting and
administrative expense were as follows:
ACCOUNTING AND
FUND ADMINISTRATIVE
- ---- --------------
Aggressive Growth Fund $ 36,011
Mid Cap Growth Fund 5,556
Small Cap Growth Fund 29,186
Small Cap Value Fund 362,854
Small Company Growth Fund 15,341
Tax-Managed Equity Fund 2,411
Value Fund 25,178
Worldwide Fund 9,912
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 Worldwide 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**.
65
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2004
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 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 year ended September 30, 2004, amounts paid to CIS as compensation for
its services as transfer agent were as follows:
FUND TRANSFER AGENT FEE
- ---- ------------------
Aggressive Growth Fund $ 30,000
Mid Cap Growth Fund 12,000
Small Cap Growth Fund 30,000
Small Cap Value Fund 145,305
Small Company Growth Fund 12,000
Tax-Managed Equity Fund 15,000
Value Fund 15,000
Worldwide Fund 15,000
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 up to 0.25% of the average daily net assets attributable to
Admin Class shares to securities dealers or financial intermediaries for
providing personal service and account maintenance for their customers who hold
such shares.
E. TRUSTEES FEES AND EXPENSES The Loomis Sayles Funds Trusts and the 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
66
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 $50,000 and
meeting attendance fees of $5,000 for each meeting of the Board of Trustees
attended. Each committee chairman receives an additional retainer fee at the
annual rate of $7,000. Each committee member receives a meeting attendance fee
of $3,750 per committee meeting attended. In addition, the independent
co-chairmen of the Board split an additional $50,000 annual retainer fee. 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.
Prior to July 1, 2004, the Trust paid each independent trustee a $45,000 annual
retainer and a $4,500 fee per meeting attended. In addition, each committee
member received a retainer fee at the annual rate of $7,000 while each
committee chairman received a $5,000 annual retainer (beyond the $7,000). Each
committee member received a $1,750 fee per meeting attended. The retainer fees
assumed four Board or committee meetings per year.
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 year ended September 30, 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 104
G. REDEMPTION FEES. Effective April 1, 2004 shareholders of Small Cap Growth
Fund, Small Cap Value Fund and Worldwide Fund will be charged a 2% redemption
fee if they redeem, including redeeming by exchange, any class of shares of
these Funds within 60 days of their acquisition (including acquisition by
exchange). The redemption fee is intended to offset the costs to the Funds of
short-term trading, such as portfolio transaction and market impact costs
associated with redemption activity and administrative costs associated with
processing redemptions. The redemption fee is deducted from the shareholder's
redemption or exchange proceeds and is paid to the Fund. The "first-in,
first-out" (FIFO) method is used to determine the holding period of redeemed or
exchanged shares, which means that if shares were acquired on different days,
the shares acquired first will be redeemed or exchanged first for purposes of
determining whether the redemption fee applies. A new holding period begins
with each purchase or exchange. These fees are presented on the Statements of
Changes in Net Assets.
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 year ended, September 30, 2004, the Funds had no
borrowings under the agreement.
67
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2004
6. SHAREHOLDERS. At September 30, 2004, Loomis Sayles owned 256,873 shares,
equating to 41.9% of Tax-Managed Equity Fund shares outstanding. At September
30, 2004, one shareholder owned 1,250,000 shares, equating to 100.0% of Mid Cap
Growth Fund. At September 30, 2004, two affiliated shareholders owned 93,017
shares each, equating to 5.5% each of the Loomis Sayles Worldwide Fund. At
September 30, 2004, the Loomis-Sayles Funded Pension Plan ("Pension Plan") and
the Loomis, Sayles & Company, L.P. 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 256,951 414,196
Small Cap Growth Fund 234,766 440,924
Small Cap Value Fund 347,023 578,425
Value Fund 428,199 433,549
Worldwide Fund 885,919 343,862
7. CAPITAL SHARES. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
AGGRESSIVE GROWTH FUND
Year Ended September 30, 2004 Year Ended September 30, 2003
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 187,450 $ 2,792,212 1,017,143 $ 12,248,463
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (305,139) (4,700,924) (527,813) (5,940,072)
---------- -------------- ------------ --------------
Net change (117,689) $ (1,908,712) 489,330 $ 6,308,391
---------- -------------- ------------ --------------
Shares Amount Shares+ Amount+
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 834,755 $ 12,658,043 1,142,750 $ 13,044,564
Issued in connection with
the reinvestment of distributions -- -- -- --
Issued in Admin Class Conversion -- -- 56,540 631,556
Redeemed (1,602,142) (23,696,327) (1,309,638) (14,596,979)
---------- -------------- ------------ --------------
Net change (767,387) $(11,038,284) (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)
---------- --------------
+On May 21, 2003, the outstanding Admin Class Shares were automatically converted into
Retail Class Shares.
MID CAP GROWTH FUND
Year Ended September 30, 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 (5,911) (42,608) -- --
---------- -------------- ------------ --------------
Net change (5,911) $ (42,608) 5,899 $ 32,706
---------- -------------- ------------ --------------
68
SMALL CAP GROWTH FUND
Year Ended September 30, 2004 Year Ended September 30, 2003
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 561,970 $ 5,208,033 1,897,989 $ 13,566,717
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (1,411,141) (12,951,799) (5,953,993) (39,030,065)
---------- -------------- ------------ --------------
Net change (849,171) $ (7,743,766) (4,056,004) $(25,463,348)
---------- -------------- ------------ --------------
Shares Amount Shares + Amount +
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 876,244 $ 8,100,386 3,879,141 $ 28,642,137
Issued in connection with
the reinvestment of distributions -- -- -- --
Issued in Admin Class conversion -- -- 2,120 14,288
Redeemed (2,807,828) (26,294,928) (5,421,506) (38,664,657)
---------- -------------- ------------ --------------
Net change (1,931,584) $(18,194,542) (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)
---------- --------------
+On May 21, 2003, the outstanding Admin Class Shares were automatically converted into
Retail Class Shares.
SMALL CAP VALUE FUND
Year Ended September 30, 2004 Year Ended September 30, 2003
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 2,569,944 $ 62,664,283 2,271,777 $ 43,519,989
Issued in connection with
the reinvestment of distributions 344,051 7,949,633 -- --
Redeemed (3,052,059) (74,375,223) (2,246,579) (42,192,200)
---------- -------------- ------------ --------------
Net change (138,064) $ (3,761,307) 25,198 $ 1,327,789
---------- -------------- ------------ --------------
Shares Amount Shares Amount
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 2,508,851 $ 60,345,432 3,698,495 $ 69,872,984
Issued in connection with
the reinvestment of distributions 168,096 3,867,490 -- --
Redeemed (2,506,061) (61,304,611) (2,135,122) (40,321,887)
---------- -------------- ------------ --------------
Net change 170,886 $ 2,908,311 1,563,373 $ 29,551,097
---------- -------------- ------------ --------------
Shares Amount Shares Amount
ADMIN CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 1,146,366 $ 27,558,818 1,219,636 $ 22,714,426
Issued in connection with
the reinvestment of distributions 46,216 1,056,963 -- --
Redeemed (498,189) (11,994,975) (882,999) (16,451,403)
---------- -------------- ------------ --------------
Net change 694,393 $ 16,620,806 336,637 $ 6,263,023
---------- -------------- ------------ --------------
69
NOTES TO FINANCIAL STATEMENTS - CONTINUED
FOR THE YEAR ENDED SEPTEMBER 30, 2004
SMALL COMPANY GROWTH FUND
Year Ended September 30, 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 (269,559) (2,300,199) (6,892,544) (40,388,459)
-------- --------------- ------------ --------------
Net change (269,559) $ (2,300,199) (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
Year Ended September 30, 2004 Year Ended September 30, 2003
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ------------ ---------- ------------
Issued from the sale of shares 308,699 $ 2,572,021 324,896 $ 2,267,000
Issued in connection with
the reinvestment of distributions 7,563 62,319 11,807 82,181
Redeemed (28,467) (245,529) (2,580,065) (17,813,627)
-------- --------------- ------------ --------------
Net change 287,795 $ 2,388,811 (2,243,362) $(15,464,446)
-------- --------------- ------------ --------------
VALUE FUND
Year Ended September 30, 2004 Year Ended September 30, 2003
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ------------ ---------- ------------
Issued from the sale of shares 183,031 $ 2,766,965 328,065 $ 4,071,978
Issued in connection with
the reinvestment of distributions 26,133 376,057 18,887 230,605
Redeemed (458,838) (6,884,071) (493,835) (6,175,721)
Redeemed in kind* (455,344) (7,194,435) -- --
-------- --------------- ------------ --------------
Net change (705,018) $(10,935,484) (146,883) $ (1,873,138)
-------- --------------- ------------ --------------
*Redeemed in kind to a shareholder on June 25, 2004.
WORLDWIDE FUND
Year Ended September 30, 2004 Year Ended September 30, 2003
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ------------ ---------- ------------
Issued from the sale of shares 569,127 $ 5,599,341 711,080 $ 5,955,985
Issued in connection with
the reinvestment of distributions 46,883 447,733 36,904 284,901
Redeemed (48,543) (481,727) (728,370) (6,092,168)
-------- --------------- ------------ --------------
Net change 567,467 $ 5,565,347 19,614 $ 148,718
-------- --------------- ------------ --------------
70
8. FUND LIQUIDATION. The Board of Trustees, upon recommendation of Loomis,
Sayles & Company, L.P., has approved a plan to liquidate the Loomis Sayles Mid
Cap Growth Fund at a future date to be determined by the officers of the Fund,
provided that all the outstanding shares held by any unaffiliated shareholders
have been redeemed by such date.
9. ADDITIONAL TAX INFORMATION. The tax character of distributions paid to
shareholders during the years ended September 30, 2004 and 2003 were as follows:
2004 DISTRIBUTIONS PAID FROM: 2003 DISTRIBUTIONS PAID FROM:
- - ------------------------------------ -------------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAINS TOTAL INCOME CAPITAL GAINS TOTAL
- - ---------- ------------- ----------- -------- ------------- --------
Aggressive Growth Fund $ -- $ -- $ -- $ -- $-- $ --
Mid Cap Growth Fund -- -- -- -- -- --
Small Cap Growth Fund -- -- -- -- -- --
Small Cap Value Fund 4,693,734 8,480,827 13,174,561 -- -- --
Small Company Growth Fund -- -- -- -- -- --
Tax-Managed Equity Fund 62,322 -- 62,322 82,181 -- 82,181
Value Fund 456,216 -- 456,216 273,025 -- 273,025
Worldwide Fund 448,271 -- 448,271 284,901 -- 284,901
10. SUBSEQUENT EVENT.
CORPORATE NAME CHANGE. Effective November 1, 2004, the names of the Distributor
and the Administrator and Transfer Agent will change as follows:
OLD NAME NEW NAME
-------- --------
CDC IXIS Asset Management Distributors, L.P. IXIS Asset Management Distributors, L.P.
CDC IXIS Asset Management Services, Inc. IXIS Asset Management Services Company
71
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of
Loomis Sayles Funds I and Loomis Sayles Funds II
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Mid Cap Growth Fund, Loomis Sayles Small Cap Value Fund, and Loomis Sayles
Small Company Growth Fund, each a series of Loomis Sayles Funds I and the
Loomis Sayles Aggressive Growth Fund, Loomis Sayles Small Cap Growth Fund,
Loomis Sayles Tax-Managed Equity Fund, Loomis Sayles Value Fund and Loomis
Sayles Worldwide Fund, each a series of Loomis Sayles Funds II (collectively,
the "Funds"), at September 30, 2004, the results of each of their operations,
the changes in each of their net assets and the financial highlights for each
of the periods indicated therein, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Funds' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
As described in Note 8, the Board of Trustees, upon recommendation of Loomis,
Sayles & Company, L.P., has approved a plan to liquidate the Loomis Sayles Mid
Cap Growth Fund at a future date to be determined by the officers of the Fund,
provided that all the outstanding shares held by any unaffiliated shareholders
have been redeemed by such date.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 16, 2004
72
2004 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS
CORPORATE DIVIDENDS RECEIVED DEDUCTION. For the fiscal year ended September 30,
2004, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
FUND QUALIFYING PERCENTAGE
Small Cap Value Fund 11.94%
Tax-Managed Equity Fund 100.00%
Value Fund 100.00%
Worldwide Fund 4.62%
CAPITAL GAINS DISTRIBUTIONS. Pursuant to Internal Revenue Section 852(b), the
following Funds paid distributions, which have been designated as capital gains
distributions for the fiscal year ended September 30, 2004.
FUND AMOUNT
Small Cap Value Fund $8,480,827
QUALIFIED DIVIDEND INCOME. For the fiscal year ended September 30, 2004, the
Funds will designate up to the maximum amount allowable pursuant to the
Internal Revenue Code, as qualified dividend income eligible for reduced tax
rates. These lower rates range from 5% to 15% depending on an individual's tax
bracket. If the funds pay a distribution during calendar year 2004, complete
information will be reported in conjunction with Form 1099-DIV.
73
TRUSTEE AND OFFICER INFORMATION
The table below provides certain information regarding the Trustees and
officers of Loomis Sayles Funds I and Loomis Sayles Funds II (the "Trusts").
Unless otherwise indicated, the address of all persons below is 399 Boylston
Street, Boston, MA 02116
POSITION(S)
HELD WITH THE
TRUSTS, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME AND AGE TERM OF OFFICE/*/ DURING PAST 5 YEARS/**/ OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. (64) Trustee, Douglas Dillon Professor and Director of 41; Director, Taubman Centers,
Contract the Belfer Center of Science for Inc.; Advisory Board Member,
Review and International Affairs, John F. Kennedy USEC Inc.
Governance School of Government, Harvard
Committee University
Member,
Since 2003
Edward A. Benjamin (66) Trustee, Audit Retired 41; Director, Coal, Energy
Committee Investments & Management,
Member, LLC; Director, Precision Optics
Since 2002 Corporation
Daniel M. Cain (59) Trustee, President and CEO, Cain Brothers & 41; Trustee, Universal Health
Chairman of Company, Incorporated Realty Income Trust; Director,
the Audit Sheridan Healthcorp
Committee,
Since 2003
Co-Chairman
of the Board
since 2004
Paul G. Chenault (70) Trustee, Retired; Trustee, First Variable Life 41; Director, Mailco Office
Contract Products, Inc.
Review and
Governance
Committee
Member,
Since 2000 for
Loomis Sayles
Funds II and
2002 for
Loomis Sayles
Funds I
Kenneth J. Cowan (72) Trustee, Retired 41; None
Chairman of
the Contract
Review and
Governance
Committee,
Since 2003,
Co-Chairman
of the Board
since 2004
74
TRUSTEE AND OFFICER INFORMATION
POSITION(S)
HELD WITH THE
TRUSTS, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME AND AGE TERM OF OFFICE/*/ DURING PAST 5 YEARS/**/ OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------
Richard Darman (61) Trustee, Partner, The Carlyle Group; Chairman of 41; Director and Chairman, AES
Contract the Board of Directors of AES Corporation
Review and Corporation; formerly, Professor, John F.
Governance Kennedy School of Government, Harvard
Committee University
Member,
Since 2003
Sandra O. Moose (62) Trustee, Audit President, Strategic Advisory Services; 41; Director, Verizon
Committee formerly, Senior Vice President and Communications; Director, Rohm
Member, Director, The Boston Consulting Group, and Haas Company; Director,
Since 2003 Inc. AES Corporation
John A. Shane (71) Trustee, President, Palmer Service Corporation 41; Director, Gensym
Contract Corporation; Director, Overland
Review and Storage, Inc.; Director, Abt
Governance Associates Inc.
Committee
Member,
Since 2003
INTERESTED TRUSTEES
Robert J. Blanding/1/ (57) Trustee, Since President, Chairman, Director, and Chief 41; None
555 California Street 2002 President Executive Officer, Loomis Sayles;
San Francisco, CA 94104 and CEO of
Loomis Sayles
Funds I and
Chief Executive
Officer of
Loomis Sayles
Funds II,
Since 2003
John T. Hailer/2/ (43) Trustee, Since President and Chief Executive Officer, 41; None
2003; President CDC IXIS Asset Management
of Loomis Distributors, L.P.; President and Chief
Sayles Funds II Executive Officer - CDC Nvest Funds
Since 2003
Executive Vice
President,
Loomis Sayles
Funds I;
Since 2003
75
TRUSTEE AND OFFICER INFORMATION
POSITION(S)
HELD WITH THE
TRUSTS, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME AND AGE TERM OF OFFICE/*/ DURING PAST 5 YEARS/**/ OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------
OFFICERS
John E. Pelletier (40) Chief President, Director and Chief Executive Not Applicable
Operating Officer, CDC IXIS Asset Management
Officer, Services, Inc.; Executive Vice President,
Since 2004 CDC IXIS Distribution Corporation;
Executive Vice President and Chief
Operating Officer, CDC IXIS Asset
Management Distributors, L.P. and CDC
IXIS Asset Management Advisers, L.P.;
formerly, Senior Vice President, General
Counsel, Secretary and Clerk, CDC IXIS
Distribution Corporation; Executive Vice
President, General Counsel, Secretary and
Clerk, CDC IXIS Asset Management
Distributors, L.P., CDC IXIS Asset
Management Advisers, L.P.; Executive Vice
President, General Counsel, Secretary and
Clerk CDC IXIS Asset Management
Services, Inc.
Coleen Downs Dinneen (43) Secretary, Clerk Senior Vice President, General Counsel, Not Applicable
and Chief Legal Secretary and Clerk, CDC IXIS
Officer, Distribution Corporation, CDC IXIS
Since 2004 Asset Management Distributors, L.P.,
CDC IXIS Asset Management Advisers,
L.P. and CDC IXIS Asset Management
Services, Inc.; formerly, Senior Vice
President, Deputy General Counsel,
Assistant Secretary and Assistant Clerk,
CDC IXIS Asset Management Advisers,
L.P., CDC IXIS Asset Management
Services, Inc. and Vice President Deputy
General Counsel, Assistant Secretary and
Assistant Clerk, CDC IXIS Distribution
Corporation
Michael Kardok (45) Treasurer, Senior Vice President, CDC IXIS Asset Not Applicable
Principal Management Services, Inc.; Senior Vice
Financial and President, CDC IXIS Asset Management
Accounting Advisers, L.P.; formerly, Senior Director
Officer, PFPC, Inc., Division Manager, First Data
Since 2004 Investor Services Group, Inc.
Kristin Vigneaux (35) Chief Chief Compliance Officer for Mutual Not Applicable
Compliance Funds, CDC IXIS Asset Management
Officer, Distributors, L.P., CDC IXIS Asset
Since 2004 Management Advisers, L.P. and CDC
IXIS Asset Management Services, Inc.;
formerly, Vice President CDC IXIS Asset
Management Services, Inc.
Daniel J. Fuss (70) Executive Vice Vice Chairman and Director, Loomis Not Applicable
One Financial Center President, Sayles & Company, L.P.; Prior to 2002,
Boston, MA 02111 Since 2004 President and Trustee of Loomis Sayles
Funds II
76
TRUSTEE AND OFFICER INFORMATION
POSITION(S)
HELD WITH THE
TRUSTS, LENGTH OF NUMBER OF PORTFOLIOS IN FUND
TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN AND
NAME AND AGE TERM OF OFFICE/*/ DURING PAST 5 YEARS/**/ OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------
Frank LoPiccolo (50) Anti-Money President and CEO, CDC IXIS Asset Not Applicable
Laundering Management Services, Inc.
Officer,
Since 2003
*Each Trustee serves for an indefinite term in accordance with its current
By-Laws until the date his or her successor is elected and qualified, or
until he or she sooner dies, retires, is removed or becomes disqualified. At
a meeting held on February 27, 2004, the Trustees voted to suspend the
retirement policy until 2005.
**Previous positions during the past five years with the Distributor or Loomis
Sayles are omitted if not materially different from a trustee's or officer's
current position with such entity. As indicated, each Trustee is also a
trustee of certain other investment companies for which the Distributor acts
as principal underwriter.
1Mr. Blanding is deemed an "interested person" of the Trusts because he holds
the following positions with affiliated persons of the Trusts: President,
Chairman, Director and Chief Executive Officer of Loomis Sayles.
2Mr. Hailer is an "interested person" of the Trusts because he holds the
following positions with affiliated persons of the Trusts: Director and
Executive Vice President of CDC IXIS Asset Management Distribution
Corporation ("CDC IXIS Distribution Corporation"); and President and Chief
Executive Officer of CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS
Advisers").
The Statement of Additional Information includes additional information about
the Trustees of the Trusts and is available without charge, by calling Loomis
Sayles at 800-633-3330.
77
[LOGO] | CDC Nvest Funds(SM)
- --------------------------------------------------------------------------------
Equity Funds
Annual Report
September 30, 2004
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund
[LOGO] Hansberger Global Investors
CDC IXIS International Equity Fund
(formerly Loomis Sayles International Equity Fund)
Loomis Sayles Research Fund
[LOGO] | LOOMIS.SAYLES & COMPANY, L.P.
TABLE OF CONTENTS
Management Discussion
and Performance................Page 1
Schedule of Investments.........Page 10
Financial Statements............Page 17
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Strong stock selection helped Loomis Sayles Growth Fund outdistance both its
bench- mark and its peer group average during the fiscal year ended September
30, 2004. The fund's total return for the period was 12.93%, based on the net
asset value of Class A shares, while the fund's benchmark, the Russell 1000
Growth Index, returned 7.51%, and Morningstar's Large Cap Growth category had an
average return of 7.61%.
Healthcare and financial services selections led performance
Although healthcare and financial services were the fund's strongest sectors
during the fiscal year, stock selection had more impact on the fund's
performance than sector allocation. Two of the fund's strongest healthcare
selections were Zimmer Holdings, the world's largest maker of artificial hips
and knees, and health services company UnitedHealth Group. Among the fund's
financial services holdings, Countrywide Financial continued to prosper and gain
market share in the home mortgage origination business. Moody's Investor
Services, a financial ratings company, was another strong contributor, as an
increase in the number of fixed-income securities being issued stimulated demand
for its services.
After a period of strong performance for our healthcare holdings, we trimmed
some names that we believed had become fully valued. We also reduced the fund's
financial services positions because of the potential risk that higher interest
rates might have on these companies.
Other individual selections that performed well for the fund included eBay and
XTO Energy. Strong revenue growth and expanding profits benefited online
auctioneer eBay, and natural gas producer XTO rose as a result of high volume
growth and rising energy prices.
Semiconductor sector and some individual holdings were negative
Caught with large inventories and slowing demand, semiconductor manufacturers
lost value during the fiscal year.
The poorest performing individual stocks were International Game Technology, a
leading manufacturer of gaming equipment for the casino industry, and Career
Education, which provides adult, post-secondary vocational education programs.
International Game Technology fell after reporting disappointing earnings, while
Career Education became the subject of an SEC investigation into allegations
about improper enrollment records at two schools. We sold both stocks.
Increased emphasis on energy and consumer staples
We used the profits realized on sales of healthcare and financial services
companies to invest in companies in sectors where we believe near-term earnings
growth rates might be more reliable. We expanded the fund's allocation in the
energy sector, where strong demand and rising prices elevated stock prices. We
also added to holdings in consumer staples, where we believe sales growth is
more predictable than it is in other sectors.
Continued focus on earnings growth
Although corporate earnings growth rates may have peaked in the second calendar
quarter, we believe stocks may bounce back from their disappointing
performance this summer, and the market could perform reasonably well in the
final months of 2004. Long term, we also believe that the equity markets have
the opportunity to grow at a more moderate rate. Our policy will be to maintain
our focus on large-cap growth companies that are growing earnings and revenues
at an above-average rate.
1
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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/
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund
Growth of $10,000 Investment in Class A Shares
September 30, 1994 through September 30, 2004
[CHART]
Line chart
Class A Lipper Russell
@ Maximum Large Cap 1000
Month Net Asset Sales Growth Funds Growth
End Value (1) Charge (2) Index Index
- ---------- --------- ---------- ------------ -------
9/30/1994 10,000 9,425 10,000 10,000
10/31/1994 10,391 9,794 10,256 10,235
11/30/1994 9,913 9,343 9,878 9,907
12/31/1994 10,004 9,429 9,955 10,073
1/31/1995 10,124 9,542 10,032 10,288
2/28/1995 10,397 9,799 10,378 10,719
3/31/1995 10,676 10,062 10,673 11,032
4/30/1995 10,812 10,190 10,964 11,273
5/31/1995 11,156 10,514 11,326 11,665
6/30/1995 11,884 11,201 11,905 12,116
7/31/1995 12,444 11,728 12,552 12,619
8/31/1995 12,733 12,000 12,622 12,633
9/30/1995 13,052 12,302 13,091 13,215
10/31/1995 12,940 12,196 13,016 13,225
11/30/1995 13,236 12,475 13,426 13,739
12/31/1995 13,087 12,334 13,431 13,817
1/31/1996 13,078 12,326 13,826 14,279
2/29/1996 13,497 12,721 14,137 14,541
3/31/1996 13,515 12,738 14,144 14,559
4/30/1996 14,295 13,473 14,480 14,942
5/31/1996 14,663 13,820 14,908 15,464
6/30/1996 14,690 13,845 14,773 15,485
7/31/1996 13,360 12,592 13,982 14,578
8/31/1996 13,927 13,126 14,402 14,954
9/30/1996 14,878 14,023 15,404 16,043
10/31/1996 15,485 14,595 15,596 16,140
11/30/1996 16,137 15,209 16,605 17,352
12/31/1996 15,698 14,795 16,192 17,012
1/31/1997 17,076 16,095 17,219 18,205
2/28/1997 16,142 15,214 16,972 18,082
3/31/1997 15,185 14,312 16,102 17,104
4/30/1997 15,045 14,180 16,985 18,239
5/31/1997 16,529 15,578 18,138 19,556
6/30/1997 17,055 16,074 18,898 20,338
7/31/1997 18,782 17,702 20,704 22,137
8/31/1997 18,346 17,291 19,575 20,841
9/30/1997 19,977 18,829 20,656 21,867
10/31/1997 19,760 18,623 19,939 21,059
11/30/1997 19,167 18,065 20,382 21,953
12/31/1997 19,497 18,375 20,660 22,199
1/31/1998 18,691 17,617 21,026 22,863
2/28/1998 20,007 18,857 22,631 24,583
3/31/1998 20,703 19,513 23,684 25,563
4/30/1998 21,291 20,067 24,081 25,916
5/31/1998 20,472 19,295 23,543 25,181
6/30/1998 21,385 20,155 24,890 26,723
7/31/1998 20,224 19,061 24,879 26,546
8/31/1998 16,167 15,237 20,816 22,562
9/30/1998 17,948 16,916 22,330 24,295
10/31/1998 19,172 18,070 23,770 26,248
11/30/1998 19,297 18,187 25,402 28,245
12/31/1998 21,950 20,688 28,195 30,791
1/31/1999 22,629 21,327 30,026 32,599
2/28/1999 21,696 20,449 28,793 31,110
3/31/1999 23,625 22,267 30,430 32,749
4/30/1999 23,944 22,567 30,534 32,791
5/31/1999 23,288 21,949 29,522 31,783
6/30/1999 24,920 23,487 31,575 34,009
7/31/1999 23,819 22,449 30,584 32,928
8/31/1999 24,009 22,629 30,590 33,466
9/30/1999 23,438 22,090 30,280 32,763
10/31/1999 25,240 23,789 32,602 35,237
11/30/1999 26,962 25,412 34,213 37,139
12/31/1999 31,216 29,421 38,012 41,001
1/31/2000 29,996 28,271 36,487 39,079
2/29/2000 33,721 31,782 38,406 40,989
3/31/2000 34,618 32,628 41,101 43,923
4/30/2000 31,859 30,027 37,920 41,833
5/31/2000 29,744 28,034 35,738 39,726
6/30/2000 32,712 30,831 38,101 42,737
7/31/2000 32,415 30,551 37,329 40,956
8/31/2000 35,912 33,847 40,558 44,664
9/30/2000 34,048 32,090 37,465 40,439
10/31/2000 31,495 29,684 35,484 38,525
11/30/2000 26,131 24,629 30,723 32,847
12/31/2000 26,155 24,651 30,532 31,807
1/31/2001 25,422 23,960 31,420 34,005
2/28/2001 22,377 21,090 26,556 28,232
3/31/2001 20,428 19,253 23,797 25,159
4/30/2001 21,964 20,701 26,352 28,341
5/31/2001 21,232 20,012 26,151 27,924
6/30/2001 20,965 19,759 25,398 27,278
7/31/2001 20,038 18,886 24,488 26,596
8/31/2001 18,503 17,439 22,626 24,421
9/30/2001 16,720 15,758 20,351 21,983
10/31/2001 17,653 16,638 21,195 23,136
11/30/2001 19,195 18,092 23,137 25,359
12/31/2001 19,683 18,551 23,244 25,311
1/31/2002 19,642 18,512 22,719 24,864
2/28/2002 18,587 17,518 21,779 23,832
3/31/2002 19,399 18,284 22,655 24,656
4/30/2002 18,790 17,710 21,147 22,644
5/31/2002 18,668 17,594 20,761 22,096
6/30/2002 17,369 16,370 19,070 20,052
7/31/2002 15,908 14,993 17,635 18,950
8/31/2002 15,908 14,993 17,733 19,007
9/30/2002 14,812 13,960 16,015 17,035
10/31/2002 15,908 14,993 17,247 18,598
11/30/2002 16,314 15,376 17,961 19,608
12/31/2002 15,137 14,267 16,710 18,253
1/31/2003 15,016 14,153 16,324 17,810
2/28/2003 14,935 14,076 16,149 17,729
3/31/2003 15,259 14,382 16,452 18,059
4/30/2003 16,233 15,299 17,657 19,394
5/31/2003 17,166 16,179 18,521 20,362
6/30/2003 17,207 16,218 18,675 20,642
7/31/2003 17,939 16,907 19,216 21,156
8/31/2003 18,425 17,365 19,689 21,682
9/30/2003 17,898 16,869 19,270 21,450
10/31/2003 19,602 18,475 20,439 22,655
11/30/2003 19,764 18,628 20,634 22,892
12/31/2003 20,008 18,857 21,215 23,684
1/31/2004 20,454 19,278 21,622 24,167
2/29/2004 20,615 19,430 21,716 24,321
3/31/2004 20,535 19,354 21,473 23,870
4/30/2004 19,886 18,743 20,991 23,592
5/31/2004 20,494 19,316 21,372 24,032
6/30/2004 21,103 19,890 21,677 24,332
7/31/2004 19,643 18,513 20,395 22,957
8/31/2004 19,399 18,284 20,252 22,843
9/30/2004 20,199 19,031 20,726 23,060
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
1 Year/5/ 5 Years/5/ 10 Years/5/
--------- ---------- -----------
Class A/1/
Net Asset Value/2/ 12.93% -2.93% 7.28%
With Maximum Sales Charge/3/ 6.41 -4.06 6.65
Class B/1/
Net Asset Value/2/ 12.02 -3.66 6.54
With CDSC/4/ 7.02 -3.87 6.54
Class C/1/
Net Asset Value/2/ 12.02 -3.66 6.54
With CDSC/4/ 11.02 -3.66 6.54
Class Y/1/
Net Asset Value/2/ 13.19 -2.71 7.48
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------- ---------- -----------
Comparative Performance
Russell 1000 Growth Index 7.51% -6.78% 8.71%
Lipper Large Cap Growth
Funds Index 7.56 -7.30 7.56
Lipper Large Cap Growth
Funds Avg. 7.12 -5.45 7.37
Morningstar Large Cap Growth
Funds Avg. 7.61 -5.20 7.87
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. 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 9/30/04 9/30/03
- ------------------------------------
Common Stocks 98.4 98.0
- ------------------------------------
Other Assets 1.6 2.0
% of Net Assets
as of
-----------------
Ten Largest Holdings 9/30/04 9/30/03
- --------------------------------------------
eBay, Inc. 3.7 1.9
- --------------------------------------------
Microsoft Corp. 3.4 2.0
- --------------------------------------------
Avon Products, Inc. 2.6 --
- --------------------------------------------
Home Depot, Inc. 2.6 2.4
- --------------------------------------------
QUALCOMM, Inc. 2.5 2.1
- --------------------------------------------
Apple Computer, Inc. 2.5 --
- --------------------------------------------
Procter & Gamble Co. 2.5 --
- --------------------------------------------
UnitedHealth Group, Inc. 2.4 3.8
- --------------------------------------------
Zimmer Holdings, Inc. 2.4 3.6
- --------------------------------------------
Johnson & Johnson 2.3 --
% of Net Assets
as of
-----------------
Five Largest Industries 9/30/04 9/30/03
- ---------------------------------------------------
Software 9.1 7.0
- ---------------------------------------------------
Healthcare Equipment & Supplies 8.6 5.1
- ---------------------------------------------------
Communications Equipment 7.0 7.1
- ---------------------------------------------------
Semiconductors & Equipment 4.7 7.8
- ---------------------------------------------------
Specialty Retail 4.7 9.4
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%.
Class C shares performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase. Effective 2/1/04, Class C shares no
longer impose a 1% front-end sales charge.
/5/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
2
- --------------------------------------------------------------------------------
CDC IXIS International Equity Fund
- --------------------------------------------------------------------------------
Portfolio Profile
- --------------------------------------------------------------------------------
Objective:
High total investment return through a combination of capital appreciation and
current income
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in common stocks or other equity securities of large companies
organized or headquartered outside of the United States
- --------------------------------------------------------------------------------
Fund Inception:
May 10, 1991
- --------------------------------------------------------------------------------
Managers:
Trevor Graham
Barry A. Lockhart
Patrick H. Tan
Thomas R.H. Tibbles
Hansberger Global Investors, Inc.
- --------------------------------------------------------------------------------
Symbols:
Class A LIERX
Class B LSIBX
Class C LSICX
Class Y LSIEX
- --------------------------------------------------------------------------------
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.
Management Discussion
- --------------------------------------------------------------------------------
This report covers the fund's fiscal year ended September 30, 2004. Until August
25, 2004, Loomis, Sayles & Company, L.P. was investment advisor to this fund.
Effective August 26, 2004, as approved by the Board of Trustees, IXIS Asset
Management Advisors began serving as the interim investment adviser to the fund
and Hansberger Global Investors became interim subadviser. Under this
arrangement, Hansberger is responsible for the day-to-day investment management
of the fund, subject to the supervision of IXIS Advisors. The fund was also
renamed CDC IXIS International Equity Fund. At a special meeting on January 6,
2005, fund shareholders will be asked to approve new agreements with IXIS
Advisors and Hansberger.
The results discussed in this report are based substantially on the portfolio
constructed by Loomis Sayles. The fund's total return for the 12-month period
was 14.23% based on the net asset value of Class A shares and $0.12 in dividends
reinvested during the period. The fund's benchmark, the MSCI EAFE Index, had a
total return of 22.52% for the same period, while Morningstar's Foreign Large
Growth category averaged 16.64%.
World economic and political events hurt the fund
In absolute terms, the fund's fiscal year results were positive, but its
underperformance of the benchmark and the Morningstar peer group was
disappointing. The fund focused on growth-oriented international stocks of mid-
to large-capitalization companies, and these did not do as well as value stocks
during the period. The fund also featured economically sensitive companies that
declined in price as concerns mounted over the strength of the global economic
recovery. Terrorism added to these concerns, as well as rising interest rates in
the United States and higher worldwide oil prices.
Most of the underperformance in the financial sector reflected the fact that we
were not invested in the strongest stocks. Healthcare and consumer discretionary
selections also proved disappointing. Individual holdings that hurt the
portfolio included Yukos, the Russian oil company, which declined after the
arrest of its CEO and a ruling by the Russian tax court that the company owes
back taxes. State Bank of India was hurt by the transition to a new government
in India and economic concerns. Dutch-based ASML Holding, which supplies
semiconductor equipment, was relatively strong this year, but the sector as a
whole lagged due to concerns of a cyclical decline in earnings.
Good performance came from the materials sector, two banks, and a clothier
The portfolio benefited from its emphasis on the materials sector, including
mining companies, and the fact that it steered clear of semiconductors.
Individual stocks that performed well included Anglo Irish Bank and Erste Bank
(Austria), both of which benefited from economic strength in their respective
regions. Another positive contributor was Esprit Holdings, a Hong Kong-based
clothing designer expanding in Europe and Asia.
Hansberger prepares for slower economic growth worldwide
Since the end of the period, Hansberger has transitioned the portfolio to its
own investment style, while still adhering to the fund's current investment goal
and strategies. In general, Hansberger selects securities based on fundamental
analysis of individual companies. To help control risk, sector diversification
is expected to be similar to the fund's benchmark, with an emphasis on
individual stock selection in an effort to enhance results.
Although its current outlook is for continued growth worldwide, Hansberger
expects to see a generally slower economy than in the past few years. While many
stocks still appear to be attractively valued, Hansberger is concerned that high
energy and commodity prices may rekindle inflation concerns and lead to slower
economic growth. The portfolio it is constructing emphasizes "blue chip"
companies that Hansberger believes have good prospects for consistent growth
even in a slower world economy.
3
- --------------------------------------------------------------------------------
CDC IXIS International Equity Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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/
- --------------------------------------------------------------------------------
CDC IXIS International Equity Fund
Growth of $10,000 Investment in Class A Shares
September 30, 1994 through September 30, 2004
[CHART]
Line chart
Class A Lipper
@ Maximum International MSCI
Month Net Asset Sales Funds EAFE
End Value (1) Charge (2) Index Index
- ---------- --------- ---------- ------------- ------
9/30/1994 10,000 9,425 10,000 10,000
10/31/1994 10,031 9,454 10,198 10,335
11/30/1994 9,737 9,177 9,670 9,841
12/31/1994 9,817 9,252 9,571 9,905
1/31/1995 9,631 9,078 9,045 9,527
2/28/1995 9,902 9,333 9,075 9,502
3/31/1995 10,029 9,452 9,343 10,097
4/30/1995 10,511 9,907 9,630 10,480
5/31/1995 10,850 10,226 9,795 10,357
6/30/1995 10,825 10,202 9,843 10,178
7/31/1995 11,113 10,474 10,416 10,815
8/31/1995 10,623 10,012 10,233 10,405
9/30/1995 10,834 10,211 10,412 10,611
10/31/1995 10,614 10,004 10,250 10,328
11/30/1995 10,521 9,916 10,341 10,618
12/31/1995 10,667 10,053 10,655 11,049
1/31/1996 11,034 10,399 10,927 11,097
2/29/1996 11,144 10,503 11,000 11,137
3/31/1996 11,162 10,520 11,268 11,377
4/30/1996 11,473 10,814 11,631 11,710
5/31/1996 11,427 10,770 11,718 11,497
6/30/1996 11,528 10,865 11,838 11,565
7/31/1996 11,254 10,607 11,360 11,230
8/31/1996 11,464 10,805 11,615 11,257
9/30/1996 11,682 11,010 11,905 11,559
10/31/1996 11,875 11,192 11,920 11,444
11/30/1996 12,388 11,675 12,463 11,902
12/31/1996 12,630 11,904 12,610 11,752
1/31/1997 12,708 11,977 12,676 11,343
2/28/1997 12,611 11,886 12,878 11,531
3/31/1997 12,659 11,931 12,931 11,576
4/30/1997 12,640 11,913 12,853 11,640
5/31/1997 13,244 12,483 13,569 12,401
6/30/1997 13,820 13,026 14,234 13,087
7/31/1997 14,264 13,444 14,719 13,302
8/31/1997 13,010 12,262 13,640 12,311
9/30/1997 13,886 13,087 14,666 13,003
10/31/1997 12,690 11,960 13,577 12,007
11/30/1997 12,408 11,695 13,499 11,887
12/31/1997 12,472 11,754 13,684 11,994
1/31/1998 12,958 12,213 14,007 12,545
2/28/1998 13,776 12,984 14,956 13,353
3/31/1998 14,462 13,630 15,858 13,767
4/30/1998 14,483 13,651 16,198 13,879
5/31/1998 14,097 13,286 16,482 13,815
6/30/1998 13,544 12,765 16,441 13,922
7/31/1998 13,754 12,963 16,796 14,067
8/31/1998 12,185 11,484 14,247 12,327
9/30/1998 11,831 11,151 13,650 11,952
10/31/1998 12,617 11,891 14,652 13,202
11/30/1998 13,225 12,465 15,468 13,881
12/31/1998 13,593 12,811 16,036 14,432
1/31/1999 13,570 12,789 16,509 14,393
2/28/1999 12,947 12,202 16,018 14,053
3/31/1999 13,140 12,384 16,511 14,643
4/30/1999 13,684 12,897 17,020 15,240
5/31/1999 13,253 12,491 16,375 14,458
6/30/1999 13,944 13,143 17,178 15,025
7/31/1999 14,590 13,751 17,551 15,476
8/31/1999 14,896 14,040 17,699 15,535
9/30/1999 15,565 14,670 18,021 15,695
10/31/1999 16,778 15,813 19,035 16,287
11/30/1999 20,585 19,401 21,289 16,856
12/31/1999 25,756 24,275 24,852 18,372
1/31/2000 24,576 23,163 23,732 17,208
2/29/2000 28,970 27,304 26,810 17,674
3/31/2000 26,780 25,240 26,182 18,363
4/30/2000 23,601 22,244 23,874 17,400
5/31/2000 21,770 20,518 22,588 16,978
6/30/2000 22,684 21,380 23,656 17,646
7/31/2000 21,214 19,994 22,937 16,910
8/31/2000 21,876 20,618 23,736 17,060
9/30/2000 20,841 19,643 22,006 16,233
10/31/2000 19,047 17,952 20,881 15,853
11/30/2000 17,824 16,799 19,273 15,262
12/31/2000 18,582 17,513 20,014 15,808
1/31/2001 18,556 17,489 20,381 15,800
2/28/2001 16,850 15,881 18,431 14,617
3/31/2001 15,448 14,560 16,878 13,649
4/30/2001 16,269 15,333 18,147 14,606
5/31/2001 16,054 15,131 17,652 14,102
6/30/2001 15,789 14,881 16,924 13,531
7/31/2001 15,334 14,453 16,266 13,286
8/31/2001 14,893 14,036 15,570 12,952
9/30/2001 13,616 12,833 13,671 11,643
10/31/2001 13,902 13,103 14,256 11,941
11/30/2001 14,075 13,265 14,954 12,382
12/31/2001 14,260 13,441 15,192 12,456
1/31/2002 13,515 12,738 14,519 11,795
2/28/2002 13,644 12,860 14,563 11,878
3/31/2002 14,190 13,374 15,257 12,584
4/30/2002 14,018 13,212 15,213 12,617
5/31/2002 14,191 13,375 15,193 12,788
6/30/2002 13,559 12,780 14,503 12,284
7/31/2002 12,297 11,590 12,918 11,072
8/31/2002 12,269 11,563 12,892 11,050
9/30/2002 11,049 10,414 11,419 9,866
10/31/2002 11,437 10,779 11,946 10,397
11/30/2002 12,011 11,321 12,464 10,870
12/31/2002 11,509 10,847 12,034 10,505
1/31/2003 11,092 10,455 11,479 10,068
2/28/2003 11,064 10,427 11,055 9,837
3/31/2003 10,862 10,238 10,823 9,652
4/30/2003 11,708 11,035 11,822 10,609
5/31/2003 12,454 11,738 12,638 11,261
6/30/2003 12,727 11,995 13,011 11,540
7/31/2003 12,899 12,157 13,385 11,821
8/31/2003 13,344 12,577 13,871 12,109
9/30/2003 13,631 12,847 14,171 12,484
10/31/2003 14,793 13,943 15,196 13,263
11/30/2003 14,922 14,064 15,388 13,560
12/31/2003 15,947 15,030 16,403 14,620
1/31/2004 16,064 15,140 16,774 14,828
2/29/2004 16,398 15,455 17,144 15,172
3/31/2004 16,572 15,619 17,407 15,264
4/30/2004 15,657 14,757 16,709 14,931
5/31/2004 15,671 14,770 16,624 14,977
6/30/2004 16,049 15,126 16,840 15,331
7/31/2004 15,148 14,277 16,176 14,835
8/31/2004 15,104 14,236 16,213 14,904
9/30/2004 15,564 14,667 16,762 15,296
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
1 Year/5/ 5 Years/5/ 10 Years/5/
--------- ---------- -----------
Class A/1/
Net Asset Value/2/ 14.23% 0.01% 4.52%
With Maximum Sales Charge/3/ 7.65 -1.17 3.90
Class B/1/
Net Asset Value/2/ 13.27 -0.87 3.59
With CDSC/4/ 8.27 -1.18 3.59
Class C/1/
Net Asset Value/2/ 13.23 -0.88 3.58
With CDSC/4/ 12.23 -0.88 3.58
Class Y/1/
Net Asset Value/2/ 14.76 0.34 4.78
- --------------------------------------------------------------------------------
Comparative Performance 1 Year 5 Years 10 Years
- ----------------------- --------- ---------- -----------
MSCI EAFE Index 22.52% -0.51% 4.34%
Lipper International
Multi-Cap Growth Funds
Index 18.28 -1.44 5.30
Lipper International
Multi-Cap Growth Funds
Avg. 17.18 -1.01 3.99
Morningstar Foreign Large
Growth Funds Avg. 16.64 -2.41 3.37
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. 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 9/30/04 9/30/03
- ----------------------------------------------------
Common Stocks 95.4 95.4
- ----------------------------------------------------
Preferred Stocks 1.8 0.5
- ----------------------------------------------------
Short Term Investments and Other 2.8 4.1
% of Net Assets
as of
-----------------
Ten Largest Holdings 9/30/04 9/30/03
- -----------------------------------------------------
Roche Holding AG 3.1 1.0
- -----------------------------------------------------
Erste Bank der Sparkassen AG 3.0 1.6
- -----------------------------------------------------
Wienerberger AG 2.6 --
- -----------------------------------------------------
Telefonaktiebolaget LM Ericsson 2.6 --
- -----------------------------------------------------
Synthes, Inc. 2.2 1.1
- -----------------------------------------------------
BP Plc 2.1 1.5
- -----------------------------------------------------
Straumann AG 1.9 --
- -----------------------------------------------------
BHP Billiton Plc 1.9 1.0
- -----------------------------------------------------
Mitsubishi Tokyo Fin. Group, Inc. 1.9 --
- -----------------------------------------------------
ProSiebenSat.1 Media AG (Pfd.) 1.8 --
% of Net Assets
as of
-----------------
Five Largest Countries 9/30/04 9/30/03
- ------------------------------------------
Japan 25.5 23.3
- ------------------------------------------
United Kingdom 13.6 16.2
- ------------------------------------------
Switzerland 9.3 5.4
- ------------------------------------------
Germany 6.3 6.0
- ------------------------------------------
Austria 5.6 1.6
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%.
Class C shares performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase. Effective 2/1/04, Class C shares no
longer impose a 1% front-end sales charge.
/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 stocks of 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. Smallcap stocks are generally
more volatile than the market.
Management Discussion
- --------------------------------------------------------------------------------
During a period when investors showed little patience with companies that failed
to meet earnings targets, the market was quick to reverse course, making good
stock selection a critical ingredient for success. For the fiscal year ended
September 30, 2004, Loomis Sayles Research Fund's total return was 13.21%, based
on the net asset value of Class A shares and $0.02 in dividends reinvested.
During the same period, the benchmark Standard & Poor's 500 Index returned
13.87%, while Morningstar's Large Blend category had an average return of
12.22%.
Healthcare, consumer discretionary, and utilities were positive
Led by such medical service providers as Aetna and UnitedHealth Group, and by
equipment manufacturer Zimmer Holdings, our healthcare selections contributed
substantially to the fund's performance. A diversified group of consumer
discretionary stocks were also strong positives. Top performers in this sector
included casino company Mandalay Resort Group, which rose on news of its
acquisition by MGM Mirage; cruise company Royal Caribbean Cruises; online
auctioneer eBay; and building supplies retailer Home Depot. We sold Mandalay and
eBay on strength. Within the utilities sector, we succeeded by focusing on
companies with above-average earnings and dividend growth rates, which were
trading at a discount. Performance leaders included Exelon Corp and FirstEnergy
Corp.
Other selections that aided performance included mortgage company Countrywide
Financial; Symantec, a leader in antivirus software for the personal computer
market; and Exxon Mobil, which profited from surging oil prices.
Technology, financials, and industrials selections detracted from results
Our technology selections were disappointing. VERITAS Software was hurt by weak
demand for its software and the fact that it was required to restate its
financial reports for three years. Semiconductor leader Intel failed to properly
manage inventory in a weak market. Corning was hurt by disappointing demand for
its semiconductors used in television and computer LCD screens. We liquidated
the fund's positions in all three companies. In financial services, detractors
included Franklin Resources, hurt by a slowdown in mutual fund flows; and J.P.
Morgan Chase, which fell amid concerns about the exposure of its
investment-banking unit to the Enron scandal. We sold both holdings. While the
industrial companies we selected generally posted healthy earnings, the overall
market was disappointed that the group did not meet the high expectations that
had been set.
Adjusting technology and financial positions
We manage Loomis Sayles Research Fund to maintain sector weightings close to
those of the Standard & Poor's 500 Index, seeking to add value by emphasizing
fundamental research and selection within each sector. Rather than de-emphasize
the technology and financial services sectors, where our concerns about
performance potential have been greatest, we adjusted our selections in both
areas. In technology, we concentrated holdings in companies that either have
large market shares or are positioned to gain market share. We also have greater
exposure to consumer-oriented technology companies. In financial services, we
increased the fund's investments in capital markets and banking companies
because of their attractive valuations, while reducing investments in insurance.
A volatile market may present opportunities
Near term, we believe stocks are likely to continue to trade within a narrow
range. Currently, stocks appear reasonably valued, and earnings and cash flow
are growing. However, collective apprehension about oil prices, the
sustainability of the recovery, and the troubled geopolitical backdrop is
holding back any major move in the market. In this environment, individual
stocks can react impulsively to news and rumors. A careful stock picker may be
able to profit from this scenario. We plan to pursue these opportunities,
focusing on what we believe to be attractively valued companies that offer
above-average potential for earnings and cash flow growth.
5
- --------------------------------------------------------------------------------
Loomis sayles research fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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/
- --------------------------------------------------------------------------------
Loomis Sayles Research Fund
Growth of $10,000 Investment in Class A Shares
July 31, 2000 (inception) through September 30, 2004
[CHART]
Line chart
Class A Lipper
@ Maximum Large Cap S&P
Month Net Asset Sales Core Funds 500
End Value (1) Charge (2) 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 10,109 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 7,679 8,613 8,727
3/31/2001 7,646 7,206 8,084 8,174
4/30/2001 8,298 7,820 8,699 8,809
5/31/2001 8,368 7,887 8,748 8,868
6/30/2001 8,227 7,754 8,515 8,652
7/31/2001 7,997 7,537 8,392 8,567
8/31/2001 7,526 7,093 7,898 8,031
9/30/2001 6,865 6,470 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 7,270 7,923 8,052
2/28/2002 7,623 7,185 7,790 7,896
3/31/2002 7,903 7,449 8,055 8,193
4/30/2002 7,582 7,146 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 5,378 5,945 5,870
10/31/2002 6,148 5,794 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 5,994 6,596 6,672
5/31/2003 6,712 6,326 6,916 7,024
6/30/2003 6,803 6,411 6,984 7,114
7/31/2003 6,954 6,554 7,094 7,239
8/31/2003 7,054 6,649 7,232 7,380
9/30/2003 6,934 6,535 7,138 7,302
10/31/2003 7,376 6,952 7,487 7,715
11/30/2003 7,467 7,037 7,550 7,783
12/31/2003 7,760 7,313 7,913 8,191
1/31/2004 7,860 7,408 8,025 8,341
2/29/2004 8,022 7,560 8,120 8,457
3/31/2004 7,951 7,494 7,993 8,330
4/30/2004 7,729 7,285 7,869 8,199
5/31/2004 7,840 7,389 7,949 8,311
6/30/2004 8,031 7,569 8,091 8,473
7/31/2004 7,658 7,218 7,804 8,193
8/31/2004 7,648 7,209 7,809 8,226
9/30/2004 7,848 7,399 7,899 8,315
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
Since Fund
1 Year/6/ Inception/6/
--------- ------------
Class A/1/
Net Asset Value/2/ 13.21% -5.65%
With Maximum Sales Charge/3/ 6.71 -6.98
Class B/1/
Net Asset Value/2/ 12.27 -6.50
With CDSC/4/ 7.27 -6.95
Class C/1/
Net Asset Value/2/ 12.03 -6.55
With CDSC/4/ 11.03 -6.55
Class Y/1/
Net Asset Value/2/ 13.48 -5.39
- --------------------------------------------------------------------------------
Since Fund
Comparative Performance 1 Year Inception/5/
- ----------------------- --------- ------------
S&P 500 Index 13.87% -4.33%
Lipper Large Cap Core Funds
Index 10.66 -5.50
Lipper Large Cap Core Funds
Avg. 10.19 -6.19
Morningstar Large Blend Fund
Avg. 12.22 -4.24
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of dividends and capital gains.
Current returns may be higher or lower than those shown. 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 9/30/04 9/30/03
- ------------------------------------
Common Stocks 99.6 99.5
- ------------------------------------
Other Assets 0.4 0.5
% of Net Assets
as of
-----------------
Ten Largest Holdings 9/30/04 9/30/03
- ------------------------------------------------------
General Electric Co. 4.1 2.4
- ------------------------------------------------------
Exxon Mobil Corp. 3.5 2.2
- ------------------------------------------------------
American International Group, Inc. 3.1 --
- ------------------------------------------------------
Procter & Gamble Co. 3.1 2.2
- ------------------------------------------------------
Citigroup, Inc. 2.9 3.6
- ------------------------------------------------------
U.S. Bancorp 2.4 1.7
- ------------------------------------------------------
Dell, Inc. 2.2 1.6
- ------------------------------------------------------
Home Depot, Inc. 2.1 1.0
- ------------------------------------------------------
Federal Home Loan Mortgage Corp. 2.0 --
- ------------------------------------------------------
Avon Products, Inc. 2.0 1.0
% of Net Assets
as of
-----------------
Five Largest Industries 9/30/04 9/30/03
- ---------------------------------------------------
Industrial Conglomerates 7.1 3.6
- ---------------------------------------------------
Oil & Gas 5.6 4.0
- ---------------------------------------------------
Healthcare Providers & Services 5.1 3.3
- ---------------------------------------------------
Healthcare Equipment & Supplies 4.5 4.6
- ---------------------------------------------------
Capital Markets 4.4 2.2
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%.
Class C shares performance assumes a 1.00% CDSC applied when you sell
shares within one year of purchase. Effective 2/1/04, Class C shares no
longer impose a 1% front-end sales charge.
/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 Nvest Funds 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:
Standard & Poor's 500 ("S&P 500") Stock Index is an unmanaged index of U.S.
common stock performance.
Russell 1000 Growth Index is an unmanaged index measuring the performance of the
largest 1000 U.S. growth companies within the Russell 3000 Index.
Morgan Stanley Capital International (MSCI) Europe Australasia Far East (EAFE)
Index is an unmanaged index of common stocks traded outside the United States.
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.
Lipper Fund Averages are the average performance without sales charges of the
mutual funds in a stated category, as calculated by Lipper, Inc.
Morningstar Funds Averages are the average performance without sales charges of
funds with similar investment objectives, as calculated by Morningstar, Inc.
Proxy Voting Information
A description of the funds' proxy voting policies and procedures is available
without charge, upon request, by calling CDC Nvest Funds at 800-225-5478; on the
funds' website at www.cdcnvestfunds.com; and on the Securities and Exchange
Commission's website at www.sec.gov. Information regarding how the funds voted
proxies relating to portfolio securities during the 12-month period ended June
30, 2004 is available from the funds' website and the SEC's website.
Quarterly Portfolio Schedules
Beginning next quarter, the funds will file a complete schedule of portfolio
holdings with the SEC for the first and third quarters of each fiscal year on
Form N-Q. The funds' Forms N-Q will be available on the SEC's website at
www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------
Understanding Your Funds' Expenses
- --------------------------------------------------------------------------------
As a mutual fund shareholder, you incur different types of costs: transaction
costs, including sales charges (loads) on purchases and contingent deferred
sales charges on redemptions; redemption fees; certain exchange fees; and
minimum account fee charges; and ongoing costs, including management fees,
distribution fees (12b-1 fees), and other fund expenses. In addition, each fund
assesses a minimum balance fee of $20 on an annual basis for accounts that fall
below the required minimum to establish account (certain exceptions may apply).
These costs are described in more detail in the funds' prospectus. The examples
below are intended to help you understand the ongoing costs of investing in the
funds and help you compare these with the ongoing costs of investing in other
mutual funds.
The first line in the table for each Class shows the actual account values and
actual fund expenses you would have paid on a $1,000 investment in the fund from
April 1, 2004 through September 30, 2004. It also shows how much a $1,000
investment would be worth at the close of the period, assuming actual fund
returns and expenses. To estimate the expenses you paid over the period, simply
divide your account value by $1,000 (for example $8,600 account value divided by
$1,000 = 8.6) and multiply the result by the number in the Expenses Paid During
the Period row as shown below for your class.
The second line in the table for each Class provides information about
hypothetical account values and hypothetical expenses based on the fund's actual
expense ratios and an assumed rate of return of 5% per year before expenses,
which is not the fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid on your investment for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs. Therefore, the second line in the table of each
fund is useful in comparing ongoing costs only, and will not help you determine
the relative costs of owning different funds. If transaction costs were
included, total costs would be higher.
- ----------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ----------------------------------------------------------------------------------------------------
Loomis Sayles Growth Fund
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 984.20 $5.46
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.50 $5.55
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 980.20 $9.16
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.75 $9.32
- ----------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 980.20 $9.16
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.75 $9.32
- ----------------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 986.60 $4.22
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.75 $4.29
- ----------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio: 1.10%, 1.85%,
1.85% and 0.85% for Class A, B, C and Y, respectively, multiplied by the
average account value over the period, multiplied by 183/366 (to reflect
the half-year period).
8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ----------------------------------------------------------------------------------------------------
CDC IXIS International Equity Fund
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 939.60 $ 7.32
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.45 $ 7.62
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 935.90 $10.89
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,013.75 $11.33
- ----------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 935.90 $10.89
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,013.75 $11.33
- ----------------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 942.00 $ 4.86
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.00 $ 5.05
- ----------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio: 1.51%, 2.25%,
2.25% and 1.00% for Class A, B, C and Y, respectively, multiplied by the
average account value over the period, multiplied by 183/366 (to reflect
the half-year period).
- ----------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ----------------------------------------------------------------------------------------------------
Loomis Sayles Research Fund
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 987.30 $ 6.21
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.75 $ 6.31
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 983.50 $ 9.92
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.00 $10.08
- ----------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 982.20 $ 9.91
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.00 $10.08
- ----------------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 989.90 $ 4.23
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.75 $ 4.29
- ----------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized expense ratio: 1.25%, 2.00%,
2.00% and 0.85% for Class A, B, C and Y, respectively, multiplied by the
average account value over the period, multiplied by 183/366 (to reflect
the half-year period).
9
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Common Stocks -- 98.4% of Total Net Assets
Biotechnology -- 3.1%
25,400 Biogen Idec, Inc. (c) $ 1,553,718
14,232 Genentech, Inc. (c) 746,041
-----------
2,299,759
-----------
Capital Markets -- 2.7%
16,388 Legg Mason, Inc. 872,962
14,000 Lehman Brothers Holdings, Inc. 1,116,080
-----------
1,989,042
-----------
Communications Equipment -- 7.0%
83,406 Cisco Systems, Inc. (c) 1,509,648
43,100 Juniper Networks, Inc. (c) 1,017,160
45,100 Motorola, Inc. 813,604
46,719 QUALCOMM, Inc. 1,823,910
-----------
5,164,322
-----------
Computers & Peripherals -- 4.6%
46,650 Apple Computer, Inc. (c) 1,807,687
44,453 Dell, Inc. (c) 1,582,527
-----------
3,390,214
-----------
Consumer Finance -- 3.3%
21,225 American Express Co. 1,092,239
18,425 Capital One Financial Corp. 1,361,607
-----------
2,453,846
-----------
Diversified Financial Services -- 3.4%
7,950 Chicago Mercantile Exchange 1,282,335
16,194 Moody's Corp. 1,186,211
-----------
2,468,546
-----------
Diversified Financials -- 1.4%
23,300 SLM Corp. 1,039,180
-----------
Food & Drug Retailing -- 2.0%
16,775 Whole Foods Market, Inc. 1,439,127
-----------
HealthcareEquipment & Supplies --8.6%
27,775 Biomet, Inc. 1,302,092
30,650 Johnson & Johnson 1,726,515
19,983 St. Jude Medical, Inc. (c) 1,504,120
22,529 Zimmer Holdings, Inc. (c) 1,780,692
-----------
6,313,419
-----------
Healthcare Providers & Services -- 4.3%
13,675 Aetna, Inc. 1,366,543
24,375 UnitedHealth Group, Inc. 1,797,412
-----------
3,163,955
-----------
Home Construction -- 1.3%
15,200 Pulte Homes, Inc. 932,824
-----------
Hotels, Restaurants & Leisure -- 3.5%
34,650 Starbucks Corp. (c) 1,575,189
21,300 Starwood Hotels & Resorts Worldwide, Inc. 988,746
-----------
2,563,935
-----------
Household Products -- 2.5%
33,375 Procter & Gamble Co. 1,806,255
-----------
Industrial Conglomerates -- 2.8%
10,825 3M Co. 865,675
35,125 General Electric Co. 1,179,498
-----------
2,045,173
-----------
Insurance -- 2.3%
24,925 American International Group, Inc. 1,694,651
-----------
Internet & Catalog Retail -- 3.7%
29,814 eBay, Inc. (c) $ 2,741,099
-----------
Internet Software & Services -- 2.5%
4,175 Google Incorporated, Class A (c) 541,080
37,773 Yahoo! Inc. (c) 1,280,882
-----------
1,821,962
-----------
Machinery -- 2.3%
32,650 Danaher Corp. 1,674,292
-----------
Office Electronics -- 1.4%
16,338 Zebra Technologies Corp., Class A (c) 996,751
-----------
Oil & Gas -- 4.6%
34,225 Apache Corp. 1,715,015
50,956 XTO Energy, Inc. 1,655,051
-----------
3,370,066
-----------
Oil & Gas Exploration -- 2.6%
28,475 Burlington Resources, Inc. 1,161,780
11,850 EOG Resources, Inc. 780,323
-----------
1,942,103
-----------
Personal Products -- 2.6%
43,900 Avon Products, Inc. 1,917,552
-----------
Semiconductors & Semiconductor Equipment -- 4.7%
25,975 Broadcom Corp., Class A (c) 708,858
47,350 Intel Corp. 949,841
22,625 Maxim Integrated Products, Inc. 956,811
41,200 Texas Instruments, Inc. 876,736
-----------
3,492,246
-----------
Software -- 9.1%
20,725 Adobe Systems, Inc. 1,025,266
24,425 Autodesk, Inc. 1,187,788
21,333 Electronic Arts, Inc. (c) 981,105
89,950 Microsoft Corp. 2,487,117
18,375 Symantec Corp. (c) 1,008,420
-----------
6,689,696
-----------
Specialty Retail -- 4.7%
21,025 Chico's FAS, Inc. (c) 719,055
48,575 Home Depot, Inc. 1,904,140
30,250 PETsMART, Inc. 858,797
-----------
3,481,992
-----------
Textiles Apparel & Luxury Goods -- 1.8%
31,445 Coach, Inc. (c) 1,333,897
-----------
Thrifts & Mortgage Finance -- 1.3%
24,499 Countrywide Financial Corp. 965,016
-----------
Trading Companies & Distributors -- 1.3%
16,725 Fastenal Co. 963,360
-----------
Transportation Services -- 1.3%
18,900 Expeditors International of Washington, Inc. 977,130
-----------
Wireless Telecommunication Services -- 1.7%
53,181 Nextel Communications, Inc., Class A (c) 1,267,835
-----------
Total Common Stocks
(Identified Cost $67,005,601) 72,399,245
-----------
See accompanying notes to financial statements.
10
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Short Term Investment -- 1.6% of Total Net Assets
$1,209,000 Repurchase Agreement with State Street Corp.,
dated 9/30/2004 at 0.650% to be repurchased at
$1,209,022 on 10/1/2004 collateralized by $865,000
U.S. Treasury Bond, 8.500% due 2/15/2020 with a
value of $1,240,194. $ 1,209,000
Total Short Term Investments
(Identified Cost $1,209,000) 1,209,000
-----------
Total Investments -- 100.0%
(Identified Cost $68,214,601) (b) 73,608,245
Other assets less liabilities -- 0.0% (13,063)
-----------
Total Net Assets -- 100% $73,595,182
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$68,503,825 for federal income tax purposes was as
follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $ 6,427,893
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (1,323,473)
-----------
Net unrealized appreciation $ 5,104,420
===========
At September 30, 2004, the Fund had a capital loss
carryover of approximately $58,514,515, of which
$3,696,755 expires on September 30, 2008,
$26,085,507 expires on September 30, 2009,
$24,360,259 expires on September 30, 2010 and
$4,371,994 expires on September 30, 2011.
The Fund acquired capital loss carryovers of
$44,043,168 in its November 14, 2003 merger with the
CDC Nvest Large Cap Growth Fund (see Note 9 of Notes
to Financial Statements). Utilization of these
losses is subject to limitations. These amounts may
be available to offset future realized capital
gains, if any, to the extent provided by
regulations.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation disclosed on a tax basis
consisted of $0 in undistributed ordinary income and
$0 in undistributed long-term gains.
The differences between book and tax distributable
earnings are primarily due to deferred trustees'
fees and wash sales.
(c) Non-income producing security.
Industry Holdings at September 30, 2004 as a Percentage of Net Assets
Software 9.1%
Healthcare Equipment & Supplies 8.6
Communications Equipment 7.0
Semiconductors & Semiconductor Equipment 4.7
Specialty Retail 4.7
Computers & Peripherals 4.6
Oil & Gas 4.6
Healthcare Providers & Services 4.3
Internet & Catalog Retail 3.7
Hotels, Restaurants & Leisure 3.5
Diversified Financial Services 3.4
Consumer Finance 3.3
Biotechnology 3.1
Industrial Conglomerates 2.8
Capital Markets 2.7
Oil & Gas Exploration 2.6
Personal Products 2.6
Internet Software & Services 2.5
Household Products 2.5
Insurance 2.3
Machinery 2.3
Food & Drug Retailing 2.0
Other, less than 2% each 11.5
See accompanying notes to financial statements.
11
- --------------------------------------------------------------------------------
CDC IXIS International Equity Fund
Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Common Stocks -- 95.4% of Total Net Assets
Australia -- 1.2%
143,283 AMP Ltd. $ 646,276
-----------
Austria -- 5.6%
38,800 Erste Bank der oesterreichischen Sparkassen AG 1,615,759
37,600 Wienerberger AG 1,410,886
-----------
3,026,645
-----------
Belgium -- 1.3%
9,950 Umicore 726,028
-----------
Brazil -- 1.2%
23,898 Embraer-Empresa Brasileria de Aeronautica SA ADR 630,907
-----------
Canada -- 4.5%
17,279 Encana Corp. 796,862
11,763 PetroKazakhstan, Inc. (c) 398,933
19,061 PetroKazakhstan, Inc., Class A 646,440
7,674 Research In Motion Ltd. (c) 585,833
-----------
2,428,068
-----------
Denmark -- 1.1%
13,600 William Demant Holding A/S (c) 600,170
-----------
France -- 3.7%
27,500 Axa 557,556
4,360 Technip 704,427
3,640 Total Fina SA, Class B 742,202
-----------
2,004,185
-----------
Germany -- 4.5%
13,200 Bayerische Motoren Werke (BMW) AG 543,234
16,100 MAN AG 551,651
12,900 Metro AG 576,345
19,924 SAP AG ADR 776,040
-----------
2,447,270
-----------
Hong Kong -- 1.6%
170,900 Esprit Holdings Ltd. 874,879
-----------
India -- 2.3%
16,200 State Bank of India GDR 144A 402,570
43,364 Wipro Ltd. ADR 819,146
-----------
1,221,716
-----------
Ireland -- 2.2%
32,400 Anglo Irish Bank Corp. Plc 593,891
25,600 CRH Plc 607,184
-----------
1,201,075
-----------
Israel -- 0.4%
7,467 Teva Pharmaceutical Industries Ltd. ADR 193,769
-----------
Italy -- 1.6%
39,500 Eni Spa 885,127
-----------
Japan -- 25.5%
9,000 Advantest Corp. 540,183
8,250 Aiful Corp. 809,239
38,500 Bridgestone Corp. 713,885
52,000 Daiwa House Industry Co. Ltd. 508,183
143,000 Fukuyama Transporting Co. Ltd. 603,780
17,400 Honda Motor Co. Ltd. 846,346
12,100 ITO EN Ltd. 528,761
73,000 Kaneka Corp. 718,038
2,600 Keyence Corp. 546,335
39 Millea Holdings, Inc. 502,519
123 Mitsubishi Tokyo Financial Group, Inc. 1,024,933
55,000 Mitsui Fudosan Co. Ltd. 571,891
7,400 NIDEC Corp. $ 747,996
16,200 Nitto Denko Corp. 745,220
6,510 Orix Corp. 664,842
87,000 Sekisui Chemical Co. Ltd. 599,956
5,930 Takefuji Corp. 379,360
24,800 Toyota Motor Corp. 949,638
17,910 Trend Micro, Inc. 770,252
95 UFJ Holdings, Inc. (c) 416,315
21,000 Xebio Co. Ltd. 583,601
-----------
13,771,273
-----------
Netherlands -- 3.2%
38,263 ASML Holding NV (c) 492,445
33,600 ING Groep NV 847,951
16,600 Koninklijke (Royal) Philips Electronics NV 381,109
-----------
1,721,505
-----------
Norway -- 2.5%
59,100 Smedvig ASA, Class A 771,423
78,600 Telenor ASA 598,637
-----------
1,370,060
-----------
Singapore -- 2.1%
114,900 Keppel Corp. Ltd. 539,907
214,200 Singapore Press Holdings Ltd. (c) 603,581
-----------
1,143,488
-----------
South Korea -- 1.6%
2,230 Samsung Electronics 885,661
-----------
Spain -- 1.2%
35,100 Gestevision Telecinco SA (c) 635,629
-----------
Sweden -- 3.8%
16,410 SKF AB, Class B 623,462
44,960 Telefonaktiebolaget LM Ericsson ADR (c) 1,404,550
-----------
2,028,012
-----------
Switzerland -- 9.3%
3,007 Actelion Ltd. (c) 308,838
9,000 Credit Suisse Group (c) 288,230
3,160 Nobel Biocare Holding AG 491,087
16,050 Roche Holding AG 1,662,417
4,930 Straumann AG 1,048,108
11,100 Synthes, Inc. (c) 1,211,389
-----------
5,010,069
-----------
Taiwan -- 1.4%
22,075 AU Optronics Corp. ADR 276,379
146,152 United Microelectronics Corp. ADR (c) 493,994
-----------
770,373
-----------
United Kingdom -- 13.6%
151,600 ARM Holdings Plc (c) 229,199
99,385 BHP Billiton Plc 1,047,494
118,200 BP Plc 1,130,499
96,700 Burberry Group Plc 652,918
99,118 Kingfisher Plc 553,839
49,200 Pearson Plc 526,355
21,213 Reckitt Benckiser Plc 520,071
33,300 Royal Bank of Scotland Group Plc 963,027
95,900 Smith & Nephew Plc 882,933
338,640 Vodafone Group Plc 811,830
-----------
7,318,165
-----------
Total Common Stocks
(Identified Cost $46,054,397) 51,540,350
-----------
See accompanying notes to financial statements.
12
- --------------------------------------------------------------------------------
CDC IXIS International Equity Fund
Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Preferred Stocks -- 1.8%
Germany -- 1.8%
54,412 ProSiebenSat.1 Media AG $ 1,003,604
-----------
Total Preferred Stocks
(Identified Cost $871,237) 1,003,604
-----------
Principal Amount
Short Term Investment -- 3.0%
$1,612,000 Repurchase Agreement with State Street Corp., dated
9/30/2004 at 0.650% to be repurchased at $1,612,029
on 10/1/2004 collateralized by $1,150,000 U.S.
Treasury Bond, 8.500% due 2/15/2020 with a value of
$1,648,813. 1,612,000
-----------
Total Short Term Investment
(Identified Cost $1,612,000) 1,612,000
-----------
Total Investments -- 100.2%
(Identified Cost $48,537,634) (b) 54,155,954
Other assets less liabilities -- (0.2)% (125,412)
-----------
Total Net Assets -- 100% $54,030,542
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$48,848,484 for federal income tax purposes was
as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $ 6,584,993
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (1,277,523)
-----------
Net unrealized appreciation $ 5,307,470
===========
At September 30, 2004, the Fund had a capital loss
carryover of approximately $29,524,809 of which
$18,908,946 expires on September 30, 2010 and
$10,615,863 expires on September 30, 2011. These
amounts may be available to offset future realized
capital gains, if any to the extent provided by
regulations.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation disclosed on a tax basis
consisted of $422,353 in undistributed ordinary
income and $0 in undistributed long-term gains.
The differences between book and tax distributable
earnings are primarily due to deferred trustees'
fees, unrealized gains on passive foreign investment
companies and wash sales.
(c) Non-income producing security.
ADR/GDR An American Depositary Receipt (ADR) or Global
Depository 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.
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. At
September 30, 2004, the total value of these amounted
to $402,570 or 0.75% of net assets.
Industry Holdings at September 30, 2004 as a Percentage of Net Assets
Commercial Services 9.3%
Healthcare Equipment & Supplies 7.8
Oil & Gas 7.0
Semiconductors & Semiconductor Equipment 4.9
Automobiles 4.3
Specialty Retail 3.7
Communications Equipment 3.7
Pharmaceuticals 3.4
Consumer Finance 3.4
Metals & Mining 3.3
Media 3.3
Insurance 3.2
Real Estate 2.9
Software 2.9
Household Durables 2.7
Energy Equipment & Services 2.7
Chemicals - Major 2.7
Building Products 2.6
Machinery 2.2
Other, less than 2% each 21.2
See accompanying notes to financial statements.
13
- --------------------------------------------------------------------------------
Loomis Sayles Research Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Common Stocks -- 99.6% of Total Net Assets
Aerospace & Defense -- 2.9%
8,650 Honeywell International, Inc. $ 310,189
3,375 United Technologies Corp. 315,157
----------
625,346
----------
Auto Components -- 1.0%
4,000 Johnson Controls, Inc. 227,240
----------
Banks/Savings & Loans -- 0.7%
5,150 TCF Financial Corp. 155,994
----------
Beverages -- 1.6%
6,875 Anheuser-Busch Cos., Inc. 343,406
----------
Biotechnology -- 2.9%
3,175 Biogen Idec, Inc. (c) 194,215
4,625 Genentech, Inc. (c) 242,442
5,300 Gilead Sciences, Inc. (c) 198,114
----------
634,771
----------
Capital Markets -- 4.4%
10,225 Ameritrade Holding Corp. (c) 122,802
4,500 Goldman Sachs Group, Inc. 419,580
5,250 Lehman Brothers Holdings, Inc. 418,530
----------
960,912
----------
Chemicals -- 2.0%
5,975 Dow Chemical Co. 269,951
4,200 Praxair, Inc. 179,508
----------
449,459
----------
Commercial Banks -- 3.7%
6,400 North Fork Bancorporation, Inc. 284,480
18,275 U.S. Bancorp 528,147
----------
812,627
----------
Communications Equipment -- 4.0%
8,900 Cisco Systems, Inc. (c) 161,090
12,600 Juniper Networks, Inc. (c) 297,360
10,500 QUALCOMM, Inc. 409,920
----------
868,370
----------
Computers & Peripherals -- 3.6%
7,975 Apple Computer, Inc. (c) 309,031
13,250 Dell, Inc. (c) 471,700
----------
780,731
----------
Consumer Finance -- 1.8%
5,500 Capital One Financial Corp. 406,450
----------
Diversified Financials -- 2.9%
14,391 Citigroup, Inc. 634,931
----------
Diversified Telecommunication Services -- 3.8%
11,725 BellSouth Corp. 317,982
7,375 CenturyTel, Inc. 252,520
9,775 SBC Communications, Inc. 253,661
----------
824,163
----------
Electric Utilities -- 2.9%
10,575 Exelon Corp. 387,997
8,300 PG&E Corp. (c) 252,320
----------
640,317
----------
Energy Equipment & Services -- 1.2%
7,600 Halliburton Co. 256,044
----------
Food & Drug Retailing -- 1.0%
2,550 Whole Foods Market, Inc. 218,765
----------
Food & Staples Retailing -- 1.3%
6,650 CVS Corp. $ 280,165
----------
Healthcare Drugs -- 1.3%
15,100 Schering-Plough Corp. 287,806
----------
Healthcare Equipment & Supplies -- 4.5%
7,475 Boston Scientific Corp. (c) 296,982
4,175 St. Jude Medical, Inc. (c) 314,252
4,700 Zimmer Holdings, Inc. (c) 371,488
----------
982,722
----------
Healthcare Providers & Services -- 5.1%
3,725 Aetna, Inc. 372,239
10,600 Caremark Rx, Inc. (c) 339,942
5,425 UnitedHealth Group, Inc. 400,040
----------
1,112,221
----------
Hotels, Restaurants & Leisure -- 3.4%
7,450 Carnival Corp. 352,310
3,950 Royal Caribbean Cruises Ltd. 172,220
4,675 Starbucks Corp. (c) 212,526
----------
737,056
----------
Household Products -- 3.1%
12,525 Procter & Gamble Co. 677,853
----------
Industrial Conglomerates -- 7.1%
3,050 3M Co. 243,909
26,875 General Electric Co. 902,462
13,575 Tyco International Ltd. 416,209
----------
1,562,580
----------
Insurance -- 4.4%
10,025 American International Group, Inc. 681,600
1,050 Arch Capital Group Ltd. (c) 40,887
2,300 Everest Re Group Ltd. 170,959
1,225 RenaissanceRe Holdings Ltd. 63,185
----------
956,631
----------
IT Services -- 1.6%
12,650 Accenture Ltd., Class A (c) 342,183
----------
Machinery -- 1.1%
4,825 Danaher Corp. 247,426
----------
Media -- 1.6%
10,575 DIRECTV Group, Inc., (The) (c) 186,014
4,750 Viacom, Inc., Class B 159,410
----------
345,424
----------
Mining -- 1.0%
6,300 CONSOL Energy, Inc. 219,807
----------
Multiline Retail -- 1.8%
6,050 J.C. Penney Co., Inc. (Holding Co.) 213,444
4,850 Nordstrom, Inc. 185,464
----------
398,908
----------
Oil & Gas -- 5.6%
4,800 ChevronTexaco Corp. 257,472
2,400 ConocoPhillips 198,840
16,000 Exxon Mobil Corp. 773,280
----------
1,229,592
----------
Oil & Gas Exploration -- 0.8%
2,675 EOG Resources, Inc. 176,149
----------
Personal Products -- 3.7%
9,800 Avon Products, Inc. 428,064
9,225 Gillette Co, (The) 385,051
----------
813,115
----------
See accompanying notes to financial statements.
14
- --------------------------------------------------------------------------------
Loomis Sayles Research Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment -- 1.8%
5,850 Maxim Integrated Products, Inc. $ 247,397
7,400 Texas Instruments, Inc. 157,472
-----------
404,869
-----------
Software -- 3.9%
5,100 Adobe Systems, Inc. 252,297
24,725 Oracle Corp. (c) 278,898
6,000 Symantec Corp. (c) 329,280
-----------
860,475
-----------
Specialty Retail -- 2.1%
11,625 Home Depot, Inc. 455,700
-----------
Textiles Apparel & Luxury Goods -- 0.9%
4,800 Coach, Inc. (c) 203,616
-----------
Thrifts & Mortgage Finance -- 3.1%
6,272 Countrywide Financial Corp. 247,054
6,575 Federal Home Loan Mortgage Corp. 428,953
-----------
676,007
-----------
Total Common Stocks
(Identified Cost $19,542,350) 21,809,831
-----------
Total Investments -- 99.6%
(Identified Cost $19,542,350) (b) 21,809,831
Other assets less liabilities -- 0.4% 77,496
-----------
Total Net Assets -- 100% $21,887,327
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$19,643,692 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 $ 2,403,754
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (237,615)
-----------
Net unrealized appreciation $ 2,166,139
===========
At September 30, 2004, the Fund had a capital loss
carryover of approximately $1,537,528 which
expires on September 30, 2011. This may be
available to offset future realized capital gains,
if any, to the extent provided by regulations.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation disclosed on a tax basis
consisted of $87,376 in undistributed ordinary
income and $0 in undistributed long-term gains.
The differences between book and tax distributable
earnings are primarily due to deferred trustees'
fees and wash sales.
(c) Non-income producing security.
Industry Holdings at September 30, 2004 as a Percentage of Net Assets
Industrial Conglomerates 7.1%
Oil & Gas 5.6
Healthcare Providers & Services 5.1
Healthcare Equipment & Supplies 4.5
Capital Markets 4.4
Insurance 4.4
Communications Equipment 4.0
Software 3.9
Diversified Telecommunication Services 3.8
Personal Products 3.7
Commercial Banks 3.7
Computers & Peripherals 3.6
Hotels, Restaurants & Leisure 3.4
Household Products 3.1
Thrifts & Mortgage Finance 3.1
Electric Utilities 2.9
Diversified Financials 2.9
Biotechnology 2.9
Aerospace & Defense 2.9
Specialty Retail 2.1
Chemicals 2.0
Other, less than 2% each 20.5
See accompanying notes to financial statements.
15
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Page Intentionally Left Blank
16
- --------------------------------------------------------------------------------
Statements of Assets & Liabilities
- --------------------------------------------------------------------------------
September 30, 2004
Growth International Research
Fund Equity Fund Fund
------------ ------------- -----------
ASSETS
Investments at cost $ 68,214,601 $ 48,537,634 $19,542,350
Net unrealized appreciation 5,393,644 5,618,320 2,267,481
------------ ------------ -----------
Investments at value 73,608,245 54,155,954 21,809,831
Cash 64 582 --
Receivable for Fund shares sold 88,009 9,323 --
Receivable for securities sold -- -- 115,917
Dividends and interest receivable 16,061 86,287 12,981
Tax reclaims receivable -- 24,439 --
Receivable from investment adviser 95,677 26,456 19,017
------------ ------------ -----------
TOTAL ASSETS 73,808,056 54,303,041 21,957,746
------------ ------------ -----------
LIABILITIES
Payable to custodian bank -- -- 4,895
Payable for Fund shares redeemed 29,797 160,426 --
Foreign taxes -- 7,314 --
Management fees payable 93,173 33,203 8,956
Deferred trustees' fees 2,171 5,674 4,524
Trustees' fees payable 10,478 1,694 1,651
Accounting and administrative fees payable 11,513 11,382 3,881
Service and distribution fees payable 630 55 2
Transfer agent fees payable 24,909 10,794 12,659
Other accounts payable and accrued expenses 40,203 41,957 33,851
------------ ------------ -----------
TOTAL LIABILITIES 212,874 272,499 70,419
------------ ------------ -----------
NET ASSETS $ 73,595,182 $ 54,030,542 $21,887,327
============ ============ ===========
NET ASSETS CONSIST OF:
Paid in capital $127,011,622 $ 77,829,701 $21,175,861
Undistributed (overdistributed) net investment income (loss) (6,344) 222,417 82,855
Accumulated net realized gain (loss) on investments (58,803,740) (29,641,396) (1,638,870)
Net unrealized appreciation (depreciation) on investments and
foreign currency translations 5,393,644 5,619,820 2,267,481
------------ ------------ -----------
NET ASSETS $ 73,595,182 $ 54,030,542 $21,887,327
============ ============ ===========
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 14,072,134 $ 4,467,717 $ 106,002
============ ============ ===========
Shares of beneficial interest 2,824,755 416,237 13,608
============ ============ ===========
Net asset value and redemption price per share $ 4.98 $ 10.73 $ 7.79
============ ============ ===========
Offering price per share (100/94.25 of $4.98, $10.73, $7.79) $ 5.28 $ 11.38 $ 8.27
============ ============ ===========
Class B shares: (redemption price is equal to net asset value
less any applicable contingent deferred sales charges)
Net assets $ 12,531,678 $ 870,732 $ 57,107
============ ============ ===========
Shares of beneficial interest 2,536,111 81,735 7,384
============ ============ ===========
Net asset value and offering price per share $ 4.94 $ 10.65 $ 7.73
============ ============ ===========
Class C shares: (redemption price is equal to net asset value
less any applicable contingent deferred sales charges)
Net assets $ 6,825,887 $ 49,352 $ 2,743
============ ============ ===========
Shares of beneficial interest 1,381,212 4,633 355
============ ============ ===========
Net asset value and offering price per share $ 4.94 $ 10.65 $ 7.73
============ ============ ===========
Class Y shares:
Net assets $ 40,165,483 $ 48,642,741 $21,721,475
============ ============ ===========
Shares of beneficial interest 7,796,700 4,470,535 2,777,160
============ ============ ===========
Net asset value, offering and redemption price per share $ 5.15 $ 10.88 $ 7.82
============ ============ ===========
See accompanying notes to financial statements.
17
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
Growth International Research
Fund Equity Fund Fund
---------- ------------- ----------
INVESTMENT INCOME
Dividends $ 333,773 $ 1,283,290 $ 293,602
Interest 4,315 2,064 146
Less foreign taxes withheld -- (143,875) --
---------- ----------- ----------
338,088 1,141,479 293,748
---------- ----------- ----------
Expenses
Management fees 319,228 535,777 113,797
Service fees - Class A 29,677 12,313 234
Service and distribution fees - Class B 113,567 7,843 384
Service and distribution fees - Class C 31,043 440 93
Trustees' fees and expenses 13,094 12,438 9,908
Accounting and administrative 41,894 46,875 14,934
Custodian 49,923 163,649 44,996
Transfer agent fees and expenses - Class A, Class B,
Class C 141,844 54,005 54,603
Transfer agent fees and expenses - Class Y 54,375 49,730 52,698
Audit and tax services 25,128 40,395 32,602
Registration 43,400 55,435 45,216
Shareholder reporting 66,636 29,650 19,953
Legal 3,618 4,747 1,424
Miscellaneous 9,997 14,523 4,984
---------- ----------- ----------
Total expenses 943,424 1,027,820 395,826
Less reimbursement/waiver (226,453) (281,018) (201,483)
---------- ----------- ----------
Net expenses 716,971 746,802 194,343
---------- ----------- ----------
Net investment income (loss) (378,883) 394,677 99,405
---------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net 3,743,920 8,517,553 1,970,659
Foreign currency transactions - net -- (174,829) --
Change in unrealized appreciation (depreciation) on:
Investments - net 1,584,019 (1,127,502) 793,800
Foreign currency translations - net -- (17,929) --
---------- ----------- ----------
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 5,327,939 7,197,293 2,764,459
---------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $4,949,056 $ 7,591,970 $2,863,864
========== =========== ==========
See accompanying notes to financial statements.
18
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Growth Fund
-----------------------------
Year Ended Year Ended
September 30, September 30,
2004 2003
------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ (378,883) $ (52,496)
Net realized gain (loss) on investments and
foreign currency transactions 3,743,920 258,547
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations 1,584,019 4,474,372
----------- -----------
Increase (decrease) in net assets resulting
from operations 4,949,056 4,680,423
----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARE TRANSACTIONS 38,796,156 5,060,671
----------- -----------
Total increase (decrease) in net assets 43,745,212 9,741,094
NET ASSETS
Beginning of the period 29,849,970 20,108,876
----------- -----------
End of the period $73,595,182 $29,849,970
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME (LOSS) $ (6,344) $ (1,142)
=========== ===========
International Equity Fund
-----------------------------
Year Ended Year Ended
September 30, September 30,
2004 2003
------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ 394,677 $ 695,232
Net realized gain (loss) on investments and
foreign currency transactions 8,342,724 (1,795,992)
Net change in unrealized appreciation
(depreciation) on investments
and foreign currency translations (1,145,431) 11,864,259
----------- -----------
Increase (decrease) in net assets resulting
from operations 7,591,970 10,763,499
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (55,560) --
Class B (7,625) --
Class C (435) --
Class Y (784,834) (105,408)
----------- -----------
Total distributions (848,454) (105,408)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARE TRANSACTIONS (9,741,118) (46,296)
----------- -----------
Redemption fees:
Class A 9 --
Class B 2 --
Class C -- --
Class Y 99 --
----------- -----------
Total increase (decrease) in net assets (2,997,492) 10,611,795
NET ASSETS
Beginning of the period 57,028,034 46,416,239
----------- -----------
End of the period $54,030,542 $57,028,034
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME (LOSS) $ 222,417 $ 785,880
=========== ===========
See accompanying notes to financial statements.
19
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Research Fund
-----------------------------
Year Ended Year Ended
September 30, September 30,
2004 2003
------------- -------------
FROM OPERATIONS:
Net investment income (loss) $ 99,405 $ 111,656
Net realized gain (loss) on investments and
foreign currency transactions 1,970,659 (511,134)
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations 793,800 4,009,118
----------- -----------
Increase (decrease) in net assets resulting
from operations 2,863,864 3,609,640
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (179) (66)
Class B (21) --
Class C -- --
Class Y (92,653) (81,513)
----------- -----------
Total distributions (92,853) (81,579)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS DERIVED
FROM CAPITAL SHARE TRANSACTIONS (2,810,514) 2,492,591
----------- -----------
Total increase (decrease) in net assets (39,503) 6,020,652
NET ASSETS
Beginning of the period 21,926,830 15,906,178
----------- -----------
End of the period $21,887,327 $21,926,830
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME (LOSS) $ 82,855 $ 76,148
=========== ===========
See accompanying notes to financial statements.
20
- --------------------------------------------------------------------------------
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
9/30/2004 $ 4.41 $(0.03)(d) $ 0.60 $ 0.57 $-- $ -- $ --
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)
Class B
9/30/2004 4.41 (0.07)(d) 0.60 0.53 -- -- --
9/30/2003* 4.54 0.00(d)(e) (0.13) (0.13) -- -- --
Class C
9/30/2004 4.41 (0.06)(d) 0.59 0.53 -- -- --
9/30/2003* 4.54 0.00(d)(e) (0.13) (0.13) -- -- --
Class Y
9/30/2004 4.55 (0.02)(d) 0.62 0.60 -- -- --
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)
* 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) 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.
(g) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods of less than one year are not annualized.
See accompanying notes to financial statements.
21
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ratios to average net assets:
--------------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return the period expenses expenses income (loss) turnover
the period (%) (a) (000) (%) (b)(c) (%) (c) (%) (c) rate (%)
- ---------- ------- ----------- ---------- -------- -------------- ---------
$ 4.98 12.9(f) $14,072 1.10 1.70 (0.58) 171
4.41 20.8(g) 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
4.94 12.0(f) 12,532 1.85 2.45 (1.33) 171
4.41 (2.9)(g) 2 1.85 7.92 (1.29) 201
4.94 12.0(f) 6,826 1.85 2.45 (1.30) 171
4.41 (2.9)(g) 2 1.85 7.92 (1.29) 201
5.15 13.2 40,165 0.85 1.04 (0.32) 171
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
See accompanying notes to financial statements.
22
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Income (loss) from investment operations:
-------------------------------------------
Net asset
value, Net realized
beginning Net and unrealized Total from
of investment gain (loss) on investment
the period income (loss) investments operations
---------- ------------- -------------- ----------
International Equity Fund
Class A
9/30/2004 $ 9.50 $ 0.02(d) $ 1.33 $ 1.35
9/30/2003 7.70 0.11(d) 1.69 1.80
9/30/2002 9.50 0.02(d) (1.80) (1.78)
9/30/2001 17.31 0.02(d) (5.89) (5.87)
9/30/2000 13.73 (0.05)(d) 4.67 4.62
Class B
9/30/2004 9.50 (0.07)(d) 1.33 1.26
9/30/2003* 9.56 0.00(d)(e) (0.06) (0.06)
Class C
9/30/2004 9.50 (0.07)(d) 1.33 1.26
9/30/2003* 9.56 0.00(d)(e) (0.06) (0.06)
Class Y
9/30/2004 9.60 0.07(d) 1.34 1.41
9/30/2003 7.78 0.12(d) 1.72 1.84
9/30/2002 9.61 0.04(d) (1.83) (1.79)
9/30/2001 17.41 0.05(d) (5.91) (5.86)
9/30/2000 13.79 (0.06)(d) 4.77 4.71
Less distributions:
----------------------------------------------
Dividends Distributions
from from net
net investment realized Total Redemption
income capital gains distributions fee
-------------- ------------- ------------- ----------
International Equity Fund
Class A
9/30/2004 $(0.12) $ -- $(0.12) $0.00(e)
9/30/2003 -- -- -- --
9/30/2002 (0.02) -- (0.02) --
9/30/2001 -- (1.94) (1.94) --
9/30/2000 (0.04) (1.00) (1.04) --
Class B
9/30/2004 (0.11) -- (0.11) 0.00(e)
9/30/2003* -- -- -- --
Class C
9/30/2004 (0.11) -- (0.11) 0.00(e)
9/30/2003* -- -- -- --
Class Y
9/30/2004 (0.13) -- (0.13) 0.00(e)
9/30/2003 (0.02) -- (0.02) --
9/30/2002 (0.04) -- (0.04) --
9/30/2001 -- (1.94) (1.94) --
9/30/2000 (0.09) (1.00) (1.09) --
* 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) 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.
(g) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods of less than one year are not annualized.
See accompanying notes to financial statements.
23
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 (%)
- ---------- ------- ----------- ---------- -------- -------------- ---------
$10.73 14.2(f) $ 4,468 1.44 2.50 0.16 151
9.50 23.4(g) 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
10.65 13.3(f) 871 2.30 3.25 (0.64) 151
9.50 (0.6)(g) 147 2.35 4.44 (0.91) 174
10.65 13.2(f) 49 2.30 3.25 (0.69) 151
9.50 (0.6)(g) 12 2.35 4.44 (0.83) 174
10.88 14.8 48,643 1.00 1.34 0.60 151
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
See accompanying notes to financial statements.
24
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Income (loss) from investment operations: Less distributions:
--------------------------------------------------------- ----------------------------------------------
Net asset
value, Net realized Dividends Distributions
beginning Net and unrealized Total from from from net
of investment gain (loss) on investment net investment realized Total
the period income (loss) investments operations income capital gains distributions
---------- ------------- --------------- ---------- -------------- ------------- -------------
Research Fund
Class A
9/30/2004 $ 6.90 $ 0.01(d) $ 0.90 $ 0.91 $(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
9/30/2004 6.90 (0.05)(d) 0.90 0.85 (0.02) -- (0.02)
9/30/2003*** 7.05 0.00(d)(e) (0.15) (0.15) -- -- --
Class C
9/30/2004 6.90 (0.05)(d) 0.88 0.83 -- -- --
9/30/2003*** 7.05 0.00(d)(e) (0.15) (0.15) -- -- --
Class Y
9/30/2004 6.92 0.03(d) 0.90 0.93 (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 0.00(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) 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.
(g) A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods of less than one year are not annualized.
See accompanying notes to financial statements.
25
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 (%)
- ---------- ------- ----------- ----------- -------- -------------- ---------
$ 7.79 13.2(f) $ 106 1.21 39.85 0.07 151
6.90 21.5(g) 41 1.10 28.75 0.35 138
5.69 (25.2) 17 1.10 213.89 0.22 130
7.73 12.3(f) 57 2.00 40.60 (0.71) 151
6.90 (2.1)(g) 2 2.00 125.11 (0.72) 138
7.73 12.0(f) 3 2.00 40.60 (0.59) 151
6.90 (2.1)(g) 2 2.00 125.11 (0.72) 138
7.82 13.5 21,721 0.85 1.50 0.44 151
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
See accompanying notes to financial statements.
26
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
1. Organization. Loomis Sayles Funds II (the "Trust") is organized as a
Massachusetts business trust. 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")
CDC IXIS International Equity Fund (the "International Equity Fund"), formerly
Loomis Sayles 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 equity securities, a Fund
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. As of September 30, 2004, approximately 78% of
the market value of investments for the CDC IXIS International Equity Fund were
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. 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. Investment income
and realized and unrealized gains and losses are allocated on a pro rata basis
to each Class based on the relative net assets of each Class to the total net
assets of the Fund.
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.
27
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 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 September 30, 2004, there were no open forward currency
contracts.
e. Federal and Foreign Income Taxes. The Trust treats each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income and excise taxes have 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. Permanent differences are primarily due to
differing treatments for book and tax purposes of items such as net operating
losses, foreign currency transactions and gains realized from passive foreign
investment companies. Temporary differences between book and tax distributable
earnings are primarily due to deferred trustees' fees, wash sales and unrealized
gains on passive foreign investment companies. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to capital accounts. Distributions from net investment income
and short-term capital gains are considered to be ordinary income for tax
purposes.
g. Repurchase Agreements. Each Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The Fund's adviser is responsible
for determining that the value of the collateral is at all times at least equal
to 102% of the repurchase price, including interest. Repurchase agreements could
involve certain risks in the event of default or insolvency of the counterparty
including possible delays or restrictions upon a Fund's ability to dispose of
the underlying securities.
3. Purchases and Sales of Securities. For the year ended September 30, 2004,
purchases and sales of securities (excluding short-term investments) were as
follows:
Fund Purchases Sales
- ---- ------------ ------------
Growth Fund $119,755,494 $106,497,227
International Equity Fund 103,109,246 112,629,145
Research Fund 34,005,916 36,775,975
28
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 except the International Equity Fund.
Effective August 26, 2004, CDC IXIS Asset Management Advisers, L.P. ("CDC IXIS
Advisers") serves as investment adviser to the International Equity Fund
pursuant to an interim advisory agreement that expires as of the close of
business on January 21, 2005 (or sooner, if shareholders approve a new advisory
agreement for the Fund with CDC IXIS Advisers at a special shareholder meeting
to be held on January 6, 2005). Prior to August 26, 2004, Loomis Sayles served
as investment adviser to the International Equity Fund. 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 year ended September 30, 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 $319,228 $ 30,232 $288,996 0.50% 0.45%
International Equity Fund 535,777 189,582 346,195 0.75 0.48
Research Fund 113,797 94,358 19,439 0.50 0.09
Effective August 26, 2004, CDC IXIS Advisers entered into a subadvisory
agreement with Hansberger Global Investors, Inc. ("Hansberger") for the
International Equity Fund pursuant to an interim subadvisory agreement that
expires as of the close of business on January 21, 2005 (or sooner, if
shareholders approve a new subadvisory agreement at a special shareholder
meeting to be held on January 6, 2005). Payments to CDC IXIS Advisers are
reduced by payments to the subadviser.
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 Advisers is
a wholly owned subsidiary of 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 year ended September 30, 2004, fees paid to CIS for accounting and
administrative expense were as follows:
Fund Accounting and Administrative
- ---- -----------------------------
Growth Fund $41,894
International Equity Fund 46,875
Research Fund 14,934
29
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 year ended September 30, 2004, amounts paid to CIS as compensation for
its services as transfer agent were as follows:
Fund Transfer Agent Fee
- ---- ------------------
Growth Fund $131,875
International Equity Fund 71,301
Research Fund 69,000
30
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 year ended September 30, 2004, the Funds paid the following service and
distribution fees:
Service Fee Distribution Fee
--------------------------- -----------------
Fund Class A Class B Class C Class B Class C
- ---- ------- ------- ------- ------- -------
Growth Fund $29,677 $28,392 $7,761 $85,175 $23,282
International Equity Fund 12,313 1,961 110 5,882 330
Research Fund 234 96 23 288 70
Commissions (including CDSCs) on Fund shares paid to CDC IXIS Distributors by
investors in shares of the Funds for the year ended September 30, 2004, were as
follows:
Fund Commissions
- ---- -----------
Growth Fund $80,193
International Equity Fund 22,831
Research Fund 2,130
e. Trustees Fees and Expenses. The Loomis Sayles Funds Trusts and the 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 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
$50,000 and meeting attendance fees of $5,000 for each meeting of the Board of
Trustees attended. Each committee chairman receives an additional retainer fee
at the annual rate of $7,000. Each committee member receives a meeting
attendance fee of $3,750 per committee meeting attended. In addition, the
independent co-chairmen of the Board split an additional $50,000 annual retainer
fee. The retainer fees assume four Board or Committee meetings per year. 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.
Prior to July 1, 2004, the Trusts paid each independent trustee a $45,000 annual
retainer and a $4,500 fee per meeting attended. In addition, each committee
member received a retainer fee at the annual rate of $7,000 while each committee
chairman received a $5,000 annual retainer (beyond the $7,000). Each committee
member received a $1,750 fee per meeting attended. The retainer fees assumed
four Board or committee meetings per year.
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
Funds. Fees for these services are presented in the statements of operations as
shareholder reporting. For the year ended September 30, 2004, amounts paid to
CIS as compensation for these services were as follows:
Fund Publishing Services Fees
- ---- ------------------------
Growth Fund $3,333
International Equity Fund 1,516
Research Fund 1,042
31
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
g. Redemption Fees. Shareholders of the Class A shares and Class Y shares of the
International Equity Fund will be charged a 2% redemption fee if they redeem,
including redeeming by exchange, Class A or Class Y shares within 60 days of
their acquisition (including acquisition by exchange). The redemption fee is
intended to offset the costs to the Fund of short-term trading, such as
portfolio transaction and market impact costs associated with redemption
activity and administrative costs associated with processing redemptions. The
redemption fee is deducted from the shareholder's redemption or exchange
proceeds and is paid to the Fund. The "first-in, first-out" (FIFO) method is
used to determine the holding period of redeemed or exchanged shares, which
means that if shares were acquired on different days, the shares acquired first
will be redeemed or exchanged first for purposes of determining whether the
redemption fee applies. A new holding period begins with each purchase or
exchange. These fees are presented on the Statements of Changes in Net Assets.
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 year ended September 30,
2004, the Funds had no borrowings under the agreement.
6. Shareholders. At September 30, 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 2,243,079
International Equity Fund 764,401 516,092
Research Fund 1,594,162 564,781
7. Expense Reductions and Contingent Expense Obligations. Loomis Sayles and CDC
IXIS Advisers (for International Equity Fund) have 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 year ended September 30, 2004, in
addition to any waiver of management fees as discussed in Note 4, certain class
level expenses have been reimbursed as follows: Growth Fund $196,221;
International Equity Fund $91,436; Research Fund $107,125.
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 September 30, 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:
Expenses Subject
to
Possible
Reimbursement
Expiration Until
Expense Limit as a Percentage of September 30,
of Average Daily Net Assets Waiver 2005
-----------------------------------------------------------------------------
Fund Class A Class B Class C Class Y
- ---- ------- ------- ------- -------
Growth Fund 1.10% 1.85% 1.85% 0.85% January 31, 2005 $226,453
International Equity Fund 1.40% 2.15% 2.15% 1.00% January 31, 2005 281,018
Research Fund 1.25% 2.00% 2.00% 0.85% January 31, 2005 201,483
For the period February 1, 2004 to June 30, 2004, the expense limit as a
percentage of average daily net assets for International Equity Fund Class A was
1.60%. Prior to June 30, 2004, the expense limit as a percentage of average
daily net assets for International Equity Fund Class B and Class C were 2.35%
and 2.35%, respectively.
Prior to January 31, 2004, the expense limit 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.
32
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
8. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
Year Ended Year Ended
September 30, 2004 September 30, 2003
----------------------- ---------------------------
Growth Fund Shares Amount Shares(a)(b) Amount(a)(b)
- --------------------------------------------- --------- ----------- ------------ ------------
Class A
- -------
Issued from the sale of shares 871,187 $ 4,321,851 128,533 $ 551,553
Issued in connection with the reinvestment
of distributions -- -- -- --
Issued in connection with merger (Note 9) 2,397,395 11,512,024 -- --
Issued in Admin Class conversion -- -- 17 68
Redeemed (658,386) (3,266,161) (39,038) (165,982)
--------- ----------- ---------- -----------
Net change 2,610,196 $12,567,714 89,512 $ 385,639
========= =========== ========== ===========
Class B Shares Amount Shares(c) Amount(c)
- ------- --------- ----------- ------------ ------------
Issued from the sale of shares 374,023 $ 1,830,522 551 $ 2,500
Issued in connection with the reinvestment
of distributions -- -- -- --
Issued in connection with merger (Note 9) 2,628,461 12,600,689 -- --
Redeemed (466,924) (2,312,177) -- --
--------- ----------- ---------- -----------
Net change 2,535,560 $12,119,034 551 $ 2,500
========= =========== ========== ===========
Class C Shares Amount Shares(c) Amount(c)
- ------- --------- ----------- ------------ ------------
Issued from the sale of shares 1,224,578 $6,071,312 551 $ 2,500
Issued in connection with the reinvestment
of distributions -- -- -- --
Issued in connection with merger (Note 9) 216,384 1,037,340 -- --
Redeemed (60,301) (294,093) -- --
--------- ----------- ---------- -----------
Net change 1,380,661 $ 6,814,559 551 $ 2,500
========= =========== ========== ===========
Class Y Shares Amount Shares(b) Amount(b)
- ------- --------- ----------- ------------ ------------
Issued from the sale of shares 2,199,824 $11,053,935 2,404,099 $ 9,912,442
Issued in connection with the reinvestment
of distributions -- -- -- --
Issued in connection with merger (Note 9) 101,251 501,688 -- --
Redeemed (851,367) (4,260,774) (1,289,295) (5,222,320)
--------- ----------- ---------- -----------
Net change 1,449,708 $ 7,294,849 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.
33
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
8. Capital Shares. (continued)
Year Ended Year Ended
September 30, 2004 September 30, 2003
------------------------- ---------------------------
International Equity Fund Shares Amount Shares(a)(b) Amount(a)(b)
- --------------------------------------------- ---------- ------------ ------------ ------------
Class A
- -------
Issued from the sale of shares 325,170 $ 3,471,606 985,553 $ 8,015,317
Issued in connection with the reinvestment
of distributions 5,002 52,625 -- --
Issued in Admin Class conversion -- -- 592 4,982
Redeemed (257,556) (2,777,940) (816,354) (6,762,492)
---------- ------------ ---------- ------------
Net change 72,616 $ 746,291 169,791 $ 1,257,807
========== ============ ========== ============
Class B Shares Amount Shares(c) Amount(c)
- ------- ---------- ------------ ------------ ------------
Issued from the sale of shares 91,266 $ 957,344 15,469 $ 147,461
Issued in connection with the reinvestment
of distributions 720 7,567 -- --
Redeemed (25,720) (277,547) -- --
---------- ------------ ---------- ------------
Net change 66,266 $ 687,364 15,469 $ 147,461
========== ============ ========== ============
Class C Shares Amount Shares(c) Amount(c)
- ------- ---------- ------------ ------------ ------------
Issued from the sale of shares 5,134 $ 53,604 1,228 $ 11,697
Issued in connection with the reinvestment
of distributions 38 397 -- --
Redeemed (1,767) (18,806) -- --
---------- ------------ ---------- ------------
Net change 3,405 $ 35,195 1,228 $ 11,697
========== ============ ========== ============
Class Y Shares Amount Shares(b) Amount(b)
- ------- ---------- ------------ ------------ ------------
Issued from the sale of shares 1,363,123 $ 14,929,741 4,033,142 $ 34,400,871
Issued in connection with the reinvestment
of distributions 39,791 422,582 8,422 68,472
Redeemed (2,514,497) (26,562,291) (4,126,813) (34,937,516)
---------- ------------ ---------- ------------
Net change (1,111,583) $(11,209,968) (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.
34
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
8. Capital Shares. (continued)
Year Ended Year Ended
September 30, 2004 September 30, 2003
---------------------- -----------------------
Research Fund Shares Amount Shares(a) Amount(a)
- --------------------------------------------- -------- ----------- --------- -----------
Class A
- -------
Issued from the sale of shares 8,336 $ 63,400 2,958 $ 18,168
Issued in connection with the reinvestment
of distributions 24 179 11 66
Redeemed (737) (5,753) -- --
-------- ----------- -------- -----------
Net change 7,623 $ 57,826 2,969 $ 18,234
======== =========== ======== ===========
Class B Shares Amount Shares(b) Amount(b)
- ------- -------- ----------- --------- -----------
Issued from the sale of shares 9,492 $ 73,333 355 $ 2,500
Issued in connection with the reinvestment
of distributions 1 9 -- --
Redeemed (2,464) (19,545) -- --
-------- ----------- -------- -----------
Net change 7,029 $ 53,797 355 $ 2,500
======== =========== ======== ===========
Class C Shares Amount Shares(b) Amount(b)
- ------- -------- ----------- --------- -----------
Issued from the sale of shares 7,226 $ 56,910 355 $ 2,500
Issued in connection with the reinvestment
of distributions -- -- -- --
Redeemed (7,226) (54,626) -- --
-------- ----------- -------- -----------
Net change -- $ 2,284 355 $ 2,500
======== =========== ======== ===========
Class Y Shares Amount Shares(a) Amount(a)
- ------- -------- ----------- --------- -----------
Issued from the sale of shares 527,369 $ 3,948,133 627,487 $ 4,029,763
Issued in connection with the reinvestment
of distributions 12,572 92,653 13,233 81,513
Redeemed (925,801) (6,965,207) (261,319) (1,641,919)
-------- ----------- -------- -----------
Net change (385,860) $(2,924,421) 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.
35
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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; and 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 of $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 $44,043,168 from the Large Cap Growth Fund.
10. Additional Tax Information. The tax character of distributions paid to
shareholders during the years ended September 30, 2004 and 2003 were as follows:
2004 Distributions Paid From 2003 Distributions Paid From
Ordinary Income Ordinary Income
---------------------------- ----------------------------
Growth Fund $ -- $ --
International Equity Fund 848,454 105,408
Research Fund 92,853 81,579
11. Subsequent Event. Effective November 1, 2004, the names of the Distributor,
Adviser of CDC IXIS International Equity Fund and the Administrator and Transfer
Agent will change as follows:
Old Name New Name
- -------- --------
CDC IXIS Asset Management Distributors, L.P. IXIS Asset Management Distributors, L.P.
CDC IXIS Asset Management Advisers, L.P. IXIS Asset Management Advisors, L.P.
CDC IXIS Asset Management Services, Inc. IXIS Asset Management Services Company
36
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Loomis Sayles Funds II
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Loomis Sayles Growth Fund, CDC
IXIS International Equity Fund (formerly Loomis Sayles International Equity
Fund), and Loomis Sayles Research Fund, each a series of Loomis Sayles Funds II
(collectively, the "Funds"), at September 30, 2004, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for each of the periods indicated therein, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2004 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 16, 2004
37
- --------------------------------------------------------------------------------
Additional Information
- --------------------------------------------------------------------------------
2004 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (unaudited)
Corporate Dividends Received Deduction. For the fiscal year ended September 30,
2004, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
Fund Qualifying Percentage
- ---- ---------------------
International Equity Fund 1.08%
Research Fund 100.00%
Foreign Tax Credits. The International Equity Fund has made an election under
Internal Revenue Code Section 853 to pass through foreign taxes paid by the Fund
to its shareholders. For the year ended September 30, 2004, the total amount of
foreign taxes that will be passed through to shareholders and the foreign source
income for information reporting purposes will be $174,022 and $1,273,647,
respectively.
Qualified Dividend Income. For the fiscal year ended September 30, 2004, the
Funds will designate up to the maximum amount allowable pursuant to the Internal
Revenue Code, as qualified dividend income eligible for reduced tax rates. These
lower rates range from 5% to 15% depending on an individual's tax bracket. If
the Funds pay a distribution during calendar year 2004, complete information
will be reported in conjunction with Form 1099-DIV.
38
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
The table below provides certain information regarding the Trustees and Officers
of Loomis Sayles Funds II. Unless otherwise indicated, the address of all
persons below is 399 Boylston Street, Boston, MA 02116.
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- -------------------------- --------------------------------- ----------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. (64) Trustee, Douglas Dillon Professor and 41;
Contract Review and Director for the Belfer Center Director, Taubman Centers,
Governance Committee of Science and International Inc.; Advisory Board Member,
Member, Affairs, John F. Kennedy USEC Inc.
Since 2003 School of Government,
Harvard University
Edward A. Benjamin (66) Trustee, Retired 41;
Audit Committee Member, Director, Coal, Energy
Since 2002 Investments & Management,
LLC; Director, Precision
Optics Corporation
Daniel M. Cain (59) Trustee, President and CEO, Cain 41;
Chairman of the Audit Brothers & Company, Trustee, Universal Health
Committee, Incorporated Realty Income Trust;
Since 2003 Director, Sheridan
Co-Chairman of the Board, Healthcorp
Since 2004
Paul G. Chenault (70) Trustee, Retired; Trustee, First 41;
Contract Review and Variable Life Director, Mailco Office
Governance Committee Products, Inc.
Member,
Since 2000
Kenneth J. Cowan (72) Trustee, Retired 41;
Chairman of the Contract None
Review and Governance
Committee,
Since 2003
Co-Chairman of the Board,
Since 2004
Richard Darman (61) Trustee, Partner, The Carlyle Group; 41;
Contract Review and Chairman of the Board of Director and Chairman, AES
Governance Committee Directors of AES Corporation
Member, Corporation; formerly,
Since 2003 Professor, John F. Kennedy
School of Government,
Harvard University
Sandra O. Moose (62) Trustee, President, Strategic Advisory 41;
Audit Committee Member, Services; formerly, Senior Vice Director, Verizon
Since 2003 President and Director, The Communications; Director,
Boston Consulting Group, Inc. Rohm and Haas Company;
Director, AES Corporation
39
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- -------------------------- --------------------------------- -----------------------------
INDEPENDENT TRUSTEES
continued
John A. Shane (71) Trustee, President, Palmer Service 41;
Contract Review and Corporation Director, Gensym
Governance Committee Corporation; Director,
Member, Overland Storage, Inc.;
Since 2003 Director, Abt Associates Inc.
INTERESTED TRUSTEES
Robert J. Blanding/1/ (57) Trustee, President, Chairman, Director 41;
555 California Street Chief Executive and Chief Executive Officer, None
San Francisco, CA 94104 Officer, Loomis Sayles; President and
Since 2002 CEO - Loomis Sayles Funds I
John T. Hailer/2/ (43) Trustee, President and Chief Executive 41;
President, Officer, CDC IXIS Asset None
Since 2003 Management Distributors, L.P.;
President and Chief Executive
Officer - CDC Nvest Funds;
Executive Vice President - Loomis
Sayles Funds I
OFFICERS
John E. Pelletier (40) Chief Operating Officer President, Director and Chief Not Applicable
Since 2004 Executive Officer, CDC IXIS
Asset Management Services,
Inc.; Executive Vice President,
CDC IXIS Distribution
Corporation; Executive Vice
President and Chief Operating
Officer, CDC IXIS Asset
Management Distributors, L.P.
and CDC IXIS Asset
Management Advisers, L.P.; for-
merly, Senior Vice President,
General Counsel, Secretary and
Clerk, CDC IXIS Distribution
Corporation; Executive Vice
President, General Counsel,
Secretary and Clerk, CDC IXIS
Asset Management
Distributors, L.P., CDC IXIS
Asset Management Advisers,
L.P.; Executive Vice President,
General Counsel, Secretary and
Clerk, CDC IXIS Asset
Management Services, Inc.
40
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- -------------------------- --------------------------------- -----------------------------
OFFICERS
(continued)
Coleen Downs Dinneen (43) Secretary, Clerk and Chief Senior Vice President, General Not Applicable
Legal Officer, Counsel, Secretary and Clerk,
Since 2004 CDC IXIS Distribution
Corporation, CDC IXIS Asset
Management Distributors, L.P.,
CDC IXIS Asset Management
Advisers, L.P. and CDC IXIS
Asset Management Services,
Inc.; formerly, Senior Vice
President, Deputy General
Counsel, Assistant Secretary
and Assistant Clerk, CDC IXIS
Asset Management Advisers,
L.P., CDC IXIS Asset
Management Services, Inc. and
Vice President, Deputy General
Counsel, Assistant Secretary
and Assistant Clerk, CDC IXIS
Distribution Corporation
Michael Kardok (45) Treasurer, Principal Senior Vice President, CDC Not Applicable
Financial Officer, IXIS Asset Management
Since 2004 Services, Inc.; Senior Vice
President, CDC IXIS Asset
Management Advisers, L.P.; for-
merly, Senior Director, PFPC
Inc., Vice President-Division
Manager, First Data Investor
Services Group, Inc.
Kristin Vigneaux (35) Chief Compliance Officer, Chief Compliance Officer Not Applicable
Since 2004 for Mutual Funds, CDC
IXIS Asset Management
Distributors, L.P., CDC
IXIS Asset Management
Advisers, L.P. and CDC
IXIS Asset Management
Services, Inc.; formerly, Vice
President CDC IXIS Asset
Management Services, Inc.
Daniel J. Fuss (70) Executive Vice President, Vice Chairman and Not Applicable
One Financial Center Since 2003 Director, Loomis Sayles &
Boston, MA 02111 Company, L.P.; Executive
Vice President - Loomis Sayles
Funds I; Prior to 2002,
President and Trustee of
Loomis Sayles Funds II
41
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- -------------------------- --------------------------------- -----------------------------
OFFICERS
(continued)
Frank LoPiccolo (50) Anti-Money Laundering President and CEO, CDC Not Applicable
Officer, IXIS Asset Management
Since 2003 Services, Inc.
* All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. At a meeting held on February 27, 2004,
the Trustees voted to suspend the retirement policy until 2005.
** Each person listed above, except as noted, holds the same position(s) with
the CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds
Trust III, CDC Nvest Companies Trust I, CDC Nvest Cash Management Trust and
Loomis Sayles Funds I. Previous positions during the past five years with
the Distributor, CDC IXIS Advisers or Loomis Sayles are omitted if not
materially different from a trustee's or officer's current position with
such entity. As indicated, each Trustee is also a trustee of certain other
investment companies for which the Distributor acts as principal
underwriter.
/1/ Mr. Blanding is deemed an "interested person" of Loomis Sayles Funds II
because he holds the following positions with affiliated persons of Loomis
Sayles Funds II: President, Chairman, Director and Chief Executive Officer
of Loomis Sayles.
/2/ Mr. Hailer is an "interested person" of Loomis Sayles Funds II because he
holds the following positions with affiliated persons of Loomis Sayles
Funds II: Director and Executive Vice President of CDC IXIS Asset
Management Distribution Corporation; and President and Chief Executive
Officer of CDC IXIS Asset Management Advisers, L.P.
The Statement of Additional Information includes additional information
about the Trustees of the Trust and is available, without charge, by
calling CDC Nvest Funds at 800-225-5478.
42
[LOGO] | CDC Nvest Funds(SM)
- --------------------------------------------------------------------------------
Annual Report
September 30, 2004
- --------------------------------------------------------------------------------
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 5
Financial Statements............Page 10
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund
- --------------------------------------------------------------------------------
Portfolio Profile
- --------------------------------------------------------------------------------
Objective:
High total investment return through a combination of current income and capital
appreciation
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in investment-grade, fixed-income securities, although it may
invest up to 10% of assets in lower-rated, fixed-income securities
- --------------------------------------------------------------------------------
Fund Inception:
December 31, 1996
- --------------------------------------------------------------------------------
Managers:
Daniel Fuss
Steven Kaseta
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbol:
Class A LIGRX
Class B LGBBX
Class C LGBCX
Class Y LSIIX
Class J LIGJX
- --------------------------------------------------------------------------------
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 prepayment risk.
Management Discussion
- --------------------------------------------------------------------------------
As the U.S. economy expanded and corporate earnings increased, the credit
quality of both investment grade and high-yield bonds improved, helping lift the
performance of corporate bonds during the 12 months ended September 30, 2004.
At the same time, the currencies of foreign, industrialized nations tended to
appreciate in value relative to the U.S. dollar, adding to returns from non-U.S.
fixed-income securities.
For the fiscal year ended September 30, 2004, Loomis Sayles Investment Grade
Bond Fund had a total return of 8.75%, based on the net asset value of Class A
shares and reinvested distributions of $0.60 in dividends and $0.07 in capital
gains. The fund's benchmark, the Lehman Government/Credit Index, returned 3.33%
for the period, while the funds in Morningstar's Long Term Bond category had an
average return of 4.92%. The fund's 30-day SEC yield was 4.05% at September 30,
2004.
Foreign bonds propelled performance
Investments in foreign securities and in lower-rated, high yielding domestic
corporate bonds drove the fund's performance. We expected the U.S. dollar to
weaken against foreign currencies, so we increased the fund's allocation to
foreign securities during the year. By the end of September, we had invested
just under 20% of assets in bonds issued outside North America, plus about 3% in
supranational bonds issued by international banks, all denominated in foreign
currencies. Bonds denominated in Canadian dollars accounted for another 20% of
the portfolio. This strategy was responsible for most of the fund's
outperformance, as the Canadian dollar and several other foreign currencies
gained in value versus the U.S. dollar during the period. The benchmark contains
no foreign-denominated bonds.
Non-U.S. investments making the greatest contributions included Canadian and
Norwegian government securities, as well as bonds issued by Empresa Nacional de
Electricidad, a Chilean electric utility.
Some high-yield U.S. bonds contributed, poor performers were sold
Further adding to performance was our decision to invest a portion of the fund's
assets in the domestic, high-yield market. As corporate earnings rose, credit
quality improved and high-yield bonds substantially outperformed high-grade
bonds, which were more sensitive to volatile bond prices during the period.
Detracting from performance were corporate bonds issued by Delta Air Lines,
which fell in value on increased risk of bankruptcy. The fund's position in U.S.
Treasury bonds maturing in 2028 also lost value amid fears of rising interest
rates. We eliminated both positions.
During the past 12 months, we also reduced the fund's duration - its sensitivity
to interest-rate changes - as the risk of rising interest rates increased.
Duration at the end of the fiscal year was 5.50 years, compared to 6.54 years at
the start of the period.
Continued focus on high yield
We believe the economy will continue to strengthen, helping improve corporate
credit quality. We believe the Federal Reserve Board will raise short-term
interest rates gradually, but the difference between the yields of short- and
long-term securities will remain steep, by historical standards. In this
environment, we intend to look for opportunities to diversify among securities
of different maturities, favoring those in the two-year and four to five-year
maturity range.
While we continue to prefer corporate bonds to Treasuries, we intend to watch
default trends carefully in the coming months and we are prepared to reduce our
emphasis on high-yield bonds if we see any deterioration in credit trends.
Outside the United States, we believe the best opportunities are in securities
denominated in the euro, and in Canadian, Swedish, New Zealand and Singapore
currencies.
1
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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/
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund
Growth of $10,000 Investment in Class A Shares
December 31, 1996 (inception) through September 30, 2004
[CHART]
Line chart
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 10,130 9,674 10,080 10,059
5/31/1997 10,323 9,858 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 11,427 10,913 10,858 10,805
11/30/1997 11,407 10,894 10,911 10,862
12/31/1997 11,429 10,914 11,029 10,976
1/31/1998 11,536 11,017 11,169 11,131
2/28/1998 11,568 11,048 11,165 11,108
3/31/1998 11,708 11,181 11,222 11,142
4/30/1998 11,754 11,225 11,270 11,198
5/31/1998 11,820 11,288 11,366 11,318
6/30/1998 11,797 11,266 11,450 11,434
7/31/1998 11,650 11,126 11,441 11,443
8/31/1998 11,150 10,648 11,358 11,666
9/30/1998 11,405 10,892 11,592 12,000
10/31/1998 11,291 10,783 11,449 11,915
11/30/1998 11,665 11,140 11,660 11,986
12/31/1998 11,764 11,235 11,689 12,016
1/31/1999 11,952 11,415 11,791 12,101
2/28/1999 11,799 11,268 11,536 11,813
3/31/1999 12,070 11,527 11,665 11,872
4/30/1999 12,354 11,799 11,748 11,901
5/31/1999 12,247 11,696 11,590 11,779
6/30/1999 12,211 11,662 11,529 11,742
7/31/1999 11,994 11,454 11,471 11,709
8/31/1999 11,951 11,413 11,428 11,700
9/30/1999 12,115 11,570 11,526 11,805
10/31/1999 12,112 11,567 11,549 11,836
11/30/1999 12,145 11,598 11,577 11,829
12/31/1999 12,194 11,645 11,558 11,757
1/31/2000 12,194 11,645 11,524 11,754
2/29/2000 12,580 12,014 11,666 11,902
3/31/2000 12,754 12,180 11,774 12,074
4/30/2000 12,423 11,864 11,631 12,015
5/31/2000 12,305 11,752 11,542 12,004
6/30/2000 12,663 12,094 11,834 12,249
7/31/2000 12,814 12,237 11,885 12,379
8/31/2000 13,056 12,469 12,102 12,553
9/30/2000 12,949 12,367 12,136 12,601
10/31/2000 12,844 12,266 12,097 12,680
11/30/2000 13,090 12,501 12,209 12,896
12/31/2000 13,529 12,921 12,465 13,151
1/31/2001 13,755 13,136 12,767 13,372
2/28/2001 13,861 13,238 12,893 13,509
3/31/2001 13,683 13,067 12,885 13,571
4/30/2001 13,473 12,867 12,814 13,470
5/31/2001 13,594 12,983 12,930 13,547
6/30/2001 13,662 13,048 12,945 13,612
7/31/2001 14,009 13,379 13,238 13,951
8/31/2001 14,327 13,683 13,397 14,131
9/30/2001 14,035 13,404 13,283 14,261
10/31/2001 14,647 13,988 13,564 14,622
11/30/2001 14,441 13,791 13,476 14,382
12/31/2001 14,295 13,651 13,394 14,269
1/31/2002 14,393 13,746 13,467 14,374
2/28/2002 14,536 13,882 13,532 14,496
3/31/2002 14,191 13,553 13,354 14,202
4/30/2002 14,600 13,943 13,559 14,477
5/31/2002 14,786 14,120 13,666 14,610
6/30/2002 14,753 14,089 13,602 14,735
7/31/2002 14,471 13,820 13,533 14,912
8/31/2002 14,991 14,316 13,807 15,247
9/30/2002 15,018 14,342 13,931 15,575
10/31/2002 14,928 14,256 13,832 15,426
11/30/2002 15,243 14,557 14,031 15,435
12/31/2002 15,810 15,098 14,358 15,844
1/31/2003 16,078 15,355 14,453 15,843
2/28/2003 16,427 15,688 14,696 16,125
3/31/2003 16,508 15,765 14,721 16,104
4/30/2003 17,072 16,304 15,019 16,277
5/31/2003 17,921 17,114 15,412 16,739
6/30/2003 18,007 17,197 15,432 16,672
7/31/2003 17,148 16,376 14,906 15,973
8/31/2003 17,230 16,455 15,024 16,079
9/30/2003 18,116 17,307 15,486 16,588
10/31/2003 18,071 17,257 15,425 16,378
11/30/2003 18,408 17,580 15,531 16,421
12/31/2003 18,869 18,020 15,757 16,583
1/31/2004 18,997 18,142 15,901 16,734
2/29/2004 19,143 18,282 16,041 16,939
3/31/2004 19,346 18,476 16,151 17,094
4/30/2004 18,588 17,751 15,740 16,569
5/31/2004 18,432 17,602 15,620 16,485
6/30/2004 18,574 17,738 15,712 16,552
7/31/2004 18,796 17,951 15,877 16,727
8/31/2004 19,321 18,451 16,199 17,081
9/30/2004 19,706 18,822 16,300 17,141
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
Since Fund
1 Year/5/ 5 Years/5/ Inception/5/
--------- ---------- ------------
Class A/1/
Net Asset Value/2/ 8.75% 10.21% 9.15%
With Maximum Sales Charge/3/ 3.89 9.20 8.50
Class B/1/
Net Asset Value/2/ 7.92 9.21 8.16
With CDSC/4/ 2.92 8.93 8.16
Class C/1/
Net Asset Value/2/ 7.89 9.20 8.16
With CDSC/4/ 6.89 9.20 8.16
Class Y/1/
Net Asset Value/2/ 9.16 10.49 9.42
Class J/1/
Net Asset Value/2/ 8.29 9.67 8.61
With Sales Charge/4/ 4.48 8.89 8.11
- --------------------------------------------------------------------------------
Since Fund
Comparative Performance 1 Year 5 Years Inception/6/
- ----------------------- ------ ------- ------------
Lipper BBB Rated Funds Index 5.25% 7.18% 6.51%
Lipper BBB Rated Funds Avg. 4.76 7.16 6.41
Lehman Government/Credit Index 3.33 7.74 7.20
Morningstar Long Term Bond Funds Avg. 4.92 7.72 6.85
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of any dividends and capital
gains. Current returns may be higher or lower than those shown. 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 September 30, 2004
- --------------------------------------------------------------------------------
Credit Quality
[CHART]
Pie chart
Aaa 41.9%
Aa 8.5%
A 4.8%
Baa 23.6%
Ba 10.7%
B 1.8%
Caa 1.7%
Not Rated* 4.7%
Short Term & Other 2.3%
Credit quality as determined by Moody's Investor Services.
* Securities that are not rated by Moody's may be rated by another rating agency
or by Loomis Sayles.
Effective Maturity
[CHART]
Pie chart
1 year or less 1.9%
1-5 years 39.0%
5-10 years 37.9%
10+ years 21.2%
Average Effective Maturity: 8.2 years
See page 3 for descriptions of the fund's indexes.
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. Effective 2/1/04, a 1% front end sales
charge was removed from Class C shares.
/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%.
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
- --------------------------------------------------------------------------------
Additional Information
- --------------------------------------------------------------------------------
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.
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 Nvest Funds 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:
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 Average is the average performance without sales charges
of all mutual funds in a stated category, as calculated by Lipper, Inc.
Lipper BBB Rated Funds Index is an equally weighted index typically consisting
of the 30 largest mutual funds within the category, as calculated by Lipper,
Inc.
Morningstar Long Term Bond Funds Average is the average performance without
sales charges of funds with similar investment objectives, as calculated by
Morningstar, Inc.
Proxy Voting Information
A description of the Fund's proxy voting policies and procedures is available
without charge, upon request, by calling CDC Nvest Funds at 800-225-5478; on the
Fund's website at www.cdcnvestfunds.com; and on the Securities and Exchange
Commission's website at www.sec.gov. Information regarding how the Fund voted
proxies relating to portfolio securities during the 12-month period ended June
30, 2004 is available from the Fund's website and the SEC's website.
Quarterly Portfolio Schedules
Beginning next quarter, the Fund will file a complete schedule of portfolio
holdings with the SEC for the first and third quarters of each fiscal year on
Form N-Q. The Fund's Form N-Q will be available on the SEC's website at
www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------
Understanding Your Fund's Expenses
- --------------------------------------------------------------------------------
As a mutual fund shareholder, you incur different costs: transaction costs,
including sales charges (loads) on purchases, and certain exchange fees, and
ongoing costs, including management fees, sales and distribution fees (12b-1
fees), and other fund expenses. In addition, the fund assesses a minimum balance
fee of $20 on an annual basis for accounts that fall below the required minimum
to establish an account (Certain exceptions may apply). These costs are
described in more detail in the fund's prospectus. The examples below are
intended to help you understand the ongoing costs of investing in the fund and
help you compare these with the ongoing costs of investing in other mutual
funds.
The first line in the table shows the actual account values and actual fund
expenses you would have paid on a $1,000 investment in the fund from April 1,
2004 through September 30, 2004. It also shows how much a $1,000 investment
would be worth at the close of the period, assuming actual fund returns and
expenses. To estimate the expenses you paid over the period, simply divide your
account value by $1,000 (for example $8,600 account value divided by $1,000 =
8.6) and multiply the result by the number in the Expenses Paid During the
Period row as shown below for your class.
The second line in the table provides information about hypothetical account
values and hypothetical expenses based on the fund's actual expense ratios and
an assumed rate of return of 5% per year before expenses, which is not the
fund's actual return. The hypothetical account values and expenses may not be
used to estimate the actual ending account balance or expenses you paid on your
investment for the period. You may use this information to compare the ongoing
costs of investing in the fund and other funds. To do so, compare this 5%
hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of the other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs. Therefore, the second line in the table is useful
in comparing ongoing costs only, and will not help you determine the relative
costs of owning different funds. If transaction costs were included, total costs
would be higher.
- ----------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ----------------------------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,018.30 $4.79
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.25 $4.80
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,015.60 $8.57
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.50 $8.57
- ----------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,014.90 $8.56
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.50 $8.57
- ----------------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,021.10 $2.78
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.25 $2.78
- ----------------------------------------------------------------------------------------------------
Class J
- ----------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,017.30 $6.56
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.50 $6.56
- ----------------------------------------------------------------------------------------------------
* Expenses are equal to the fund's annualized expense ratio of 0.95%, 1.70%,
1.70%, 0.55% and 1.30% for Class A, B, C, Y and J, respectively, multiplied
by the average account value over the period, multiplied by 183/366 (to
reflect the half-year period).
4
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 97.7% of Total Net Assets
Non -- Convertible Bonds -- 96.1%
Aerospace/Defense -- 1.6%
5,500,000 Raytheon Co.,
6.400%, 12/15/18 $ 5,989,445
145,000 Raytheon Co.,
7.375%, 7/15/2025 150,968
-----------
6,140,413
-----------
Airlines -- 2.1%
540,840 American Airlines, Inc.,
6.978%, 4/01/2011 534,340
1,000,000 American Airlines, Inc., Class B,
8.608%, 4/01/2011 847,890
1,952,441 Continental Airlines, Inc.,
6.703%, 12/15/2022 1,819,527
803,530 Continental Airlines, Inc., Series 1998-1A,
6.648%, 9/15/2017 752,135
1,138,303 Continental Airlines, Inc., Series 1999-1A,
6.545%, 2/02/2019 1,098,559
379,029 Continental Airlines, Inc., Series 1999-2,
7.256%, 3/15/2020 374,106
1,866,419 Continental Airlines, Inc., Series 2000-2,
7.707%, 10/02/2022 1,813,627
645,906 US Airways,
6.850%, 7/30/2019 590,202
-----------
7,830,386
-----------
Asset-Backed Securities -- 0.8%
1,219,629 Community Program Loan Trust, Series 1987-A,
Class A4,
4.500%, 10/01/2018 1,248,689
1,700,000 Community Program Loan Trust, Series 1987-A,
Class A5,
4.500%, 4/01/2029 1,601,462
-----------
2,850,151
-----------
Automotive -- 4.8%
375,000 Cummins Engine Co., Inc.,
7.125%, 3/01/2028 375,000
3,150,000 Delphi Automotive Systems Corp.,
7.125%, 5/01/2029 3,108,433
2,500,000 Ford Motor Co.,
6.375%, 2/01/2029 2,197,292
600,000 Ford Motor Credit Co.,
7.250%, 2/22/2005, (GBP) 1,093,463
700,000 Ford Motor Credit Co.,
7.375%, 10/28/2009 766,734
1,500,000 General Motors Acceptance Corp.,
6.875%, 9/15/2011 1,573,534
3,000,000 General Motors Acceptance Corp.,
7.000%, 12/07/2005, (GBP) 5,536,341
3,050,000 General Motors Acceptance Corp.,
7.500%, 12/01/2006, (NZD) 2,038,890
700,000 General Motors Corp.,
6.750%, 5/01/2028 656,938
950,000 GMAC International Finance BV,
8.000%, 3/14/2007, (NZD) 647,799
-----------
17,994,424
-----------
Banking -- 0.1%
250,000 J.P. Morgan Chase & Co.,
4.000%, 2/01/2008 253,794
100,000 Key Bank NA,
6.950%, 2/01/2028 113,284
-----------
367,078
-----------
Beverages -- 0.5%
1,525,000 Cia Brasileira de Bebidas,
8.750%, 9/15/2013 $ 1,723,250
-----------
Brokerage -- 0.3%
1,000,000 Morgan Stanley,
3.625%, 4/01/2008 1,002,106
-----------
Chemicals -- 0.1%
480,000 IMC Global, Inc.,
7.300%, 1/15/2028 484,800
-----------
Consumer Products -- 0.4%
1,400,000 Bausch & Lomb, Inc.,
7.125%, 8/01/2028 1,480,326
-----------
Electric -- 4.0%
2,750,000 Constellation Energy Group, Inc.,
4.550%, 6/15/2015 2,589,716
5,500,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
7.875%, 2/01/2027 5,606,238
1,000,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
8.350%, 8/01/2013 1,116,255
4,000,000 Enersis SA,
7.400%, 12/01/2016 4,189,432
1,500,000 MidAmerican Energy Holdings Co.,
5.875%, 10/01/2012 1,583,644
46,125 Quezon Power Philippines Co.,
8.860%, 6/15/2017 41,513
-----------
15,126,798
-----------
Electronics -- 1.8%
500,000 Motorola, Inc.,
5.800%, 10/15/2008 532,977
625,000 Motorola, Inc.,
7.625%, 11/15/2010 731,392
1,625,000 Motorola, Inc.,
8.000%, 11/01/2011 1,953,188
3,115,000 Samsung Electronics Co. Ltd.,
7.700%, 10/01/2027, 144A 3,493,114
-----------
6,710,671
-----------
Foreign Agencies -- 0.0%
220,000 Alberta Municipal Funding Corp.,
5.700%, 9/01/2011, (CAD) 185,429
-----------
Foreign Local Governments -- 9.7%
19,100,000 Kommunekredit,
5.000%, 6/07/2006, (NOK) 2,956,087
37,042 Province of Alberta,
5.930%, 9/16/2016, (CAD) 31,361
4,525,000 Province of British Columbia,
5.250%, 12/01/2006, (CAD) 3,729,281
5,175,000 Province of British Columbia,
6.000%, 6/09/2008, (CAD) 4,404,404
3,275,000 Province of British Columbia,
6.250%, 12/01/2009, (CAD) 2,835,900
6,510,000 Province of Manitoba,
5.750%, 6/02/2008, (CAD) 5,495,228
5,000,000 Province of Manitoba (Certificate of Deposit),
Zero Coupon Bond, 7/22/2013, (CAD) 2,549,986
500,000 Province of Nova Scotia,
6.600%, 6/01/2027, (CAD) 447,793
700,000 Province of Ontario,
3.500%, 9/08/2006, (CAD) 557,502
4,490,000 Province of Ontario,
5.900%, 3/08/2006, (CAD) 3,697,835
See accompanying notes to financial statements.
5
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Foreign Local Governments -- continued
6,600,000 Province of Saskatchewan,
Zero Coupon Bond, 4/10/2014, (CAD) $ 3,224,282
7,500,000 Province of Saskatchewan,
4.750%, 12/01/2006, (CAD) 6,119,741
550,000 Province of Saskatchewan,
5.500%, 6/02/2008, (CAD) 460,559
-----------
36,509,959
-----------
Government Agencies -- 17.1%
1,250,000 Federal Home Loan Mortgage Corp.,
3.220%, 6/20/2007, (SGD) 765,143
5,800,000 Federal Home Loan Mortgage Corp.,
4.625%, 2/15/2007, (EUR) 7,499,285
9,250,000 Federal Home Loan Mortgage Corp.,
5.500%, 9/15/2011 9,962,046
7,500,000 Federal Home Loan Mortgage Corp.,
5.750%, 1/15/2012 8,183,828
700,000 Federal National Mortgage Association,
Zero Coupon Bond, 10/29/2007, (NZD) 387,747
16,000,000 Federal National Mortgage Association,
2.290%, 2/19/2009, (SGD) 9,383,562
2,150,000 Federal National Mortgage Association,
2.375%, 2/15/2007 2,121,811
1,000,000 Federal National Mortgage Association,
4.250%, 7/15/2007 1,029,363
3,950,000 Federal National Mortgage Association,
5.250%, 1/15/2009 4,207,003
1,850,000 Federal National Mortgage Association,
5.375%, 11/15/2011 1,974,477
17,450,000 Federal National Mortgage Association,
5.500%, 3/15/2011 18,786,967
-----------
64,301,232
-----------
Healthcare -- 4.2%
2,625,000 Columbia/HCA Healthcare Corp.,
7.050%, 12/01/2027 2,551,833
250,000 Columbia/HCA Healthcare Corp.,
7.500%, 12/15/2023 256,384
620,000 Columbia/HCA Healthcare Corp.,
7.580%, 9/15/2025 646,617
1,000,000 Columbia/HCA Healthcare Corp.,
7.750%, 7/15/2036 1,044,951
2,000,000 HCA, Inc.,
5.250%, 11/06/2008 2,047,842
5,000,000 HCA, Inc.,
5.750%, 3/15/2014 4,956,765
800,000 HCA, Inc.,
6.250%, 2/15/2013 824,583
3,250,000 HCA, Inc.,
6.300%, 10/01/2012 3,369,499
-----------
15,698,474
-----------
Home Construction -- 0.1%
250,000 Pulte Homes, Inc.,
5.250%, 1/15/2014 248,922
25,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 24,578
-----------
273,500
-----------
Independent/Energy -- 0.5%
500,000 Devon Financing Corp. LLC,
7.875%, 9/30/2031 613,653
1,040,000 Pioneer Natural Resources Co.,
7.200%, 1/15/2028 $ 1,171,279
-----------
1,784,932
-----------
Information/Data Technology -- 0.7%
2,500,000 Arrow Electronics, Inc.,
6.875%, 7/01/2013 2,705,058
-----------
Integrated/Energy -- 0.1%
150,000 Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A 146,250
200,000 Petrozuata Finance, Inc.,
8.220%, 4/01/2017, 144A 197,000
-----------
343,250
-----------
Life Insurance -- 1.8%
11,700,000 ASIF Global Financing XXVII,
2.380%, 2/26/2009, (SGD), 144A 6,882,801
-----------
Media Cable -- 1.2%
3,750,000 Cox Communications, Inc.,
6.750%, 3/15/2011, Class A 4,013,565
350,000 NTL Cable Plc,
9.750%, 4/15/2014, (GBP), 144A 630,941
-----------
4,644,506
-----------
Media Non-Cable -- 0.9%
2,500,000 Clear Channel Communications, Inc.,
4.250%, 5/15/2009 2,477,208
1,000,000 Clear Channel Communications, Inc.,
5.750%, 1/15/2013 1,027,118
-----------
3,504,326
-----------
Metals & Mining -- 0.4%
1,500,000 Teck Cominco Ltd.,
7.000%, 9/15/2012 1,651,388
-----------
Mortgage Related -- 1.0%
3,000,000 Bank of America Commercial Mortgage, Inc.,
5.460%, 4/11/2037 3,192,932
296,972 Federal Home Loan Mortgage Corp.,
5.000%, 12/01/2031 295,268
82,645 Federal National Mortgage Association,
6.000%, 7/01/2029 85,774
-----------
3,573,974
-----------
Non-Captive Consumer -- 0.3%
1,000,000 Capital One Bank,
6.700%, 5/15/2008 1,096,049
-----------
Non-Captive Diversified -- 0.1%
500,000 General Electric Capital Corp., Series EMTN,
1.725%, 6/27/2008, (SGD) 288,846
-----------
Oil Field Services -- 0.4%
250,000 Ensco International, Inc.,
6.750%, 11/15/2007 271,443
665,000 Pecom Energia SA,
8.125%, 7/15/2010, 144A 663,337
600,000 Transocean Sedco Forex, Inc.,
7.375%, 4/15/2018 711,326
-----------
1,646,106
-----------
See accompanying notes to financial statements.
6
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Paper -- 2.4%
500,000 Boise Cascade Corp.,
7.350%, 2/01/2016 $ 588,297
1,000,000 Boise Cascade Corp., Series A,
7.450%, 8/10/2011 1,149,549
2,225,000 Georgia-Pacific Group,
7.375%, 12/01/2025 2,369,625
2,570,000 Georgia-Pacific Group,
7.750%, 11/15/2029 2,762,750
750,000 International Paper Co.,
4.000%, 4/01/2010 732,825
400,000 Weyerhaeuser Co.,
6.750%, 3/15/2012 448,554
1,000,000 Weyerhaeuser Co.,
7.125%, 7/15/2023 1,106,636
-----------
9,158,236
-----------
Pharmaceuticals -- 0.1%
500,000 Schering-Plough Corp.,
5.300%, 12/01/2013 517,443
-----------
Pipelines -- 2.0%
2,425,000 Coastal Corp.,
6.950%, 6/01/2028 1,952,125
700,000 El Paso Corp.,
5.750%, 3/14/2006, (EUR) 864,662
375,000 El Paso Corp.,
7.000%, 5/15/2011 361,875
1,150,000 El Paso Energy Corp.,
6.750%, 5/15/2009 1,144,250
1,000,000 KN Capital Trust,
7.630%, 4/15/2028 1,097,841
750,000 Southern Natural Gas Co.,
7.350%, 2/15/2031 740,625
700,000 Tennessee Gas Pipeline Co.,
7.000%, 10/15/2028 665,000
815,000 Tennessee Gas Pipeline Co.,
7.500%, 4/01/2017 845,563
-----------
7,671,941
-----------
Property & Casualty Insurance -- 0.3%
1,000,000 Aon Corp.,
7.375%, 12/14/2012 1,150,066
-----------
Railroads -- 1.2%
5,000,000 Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, (CAD), 144A 3,981,877
195,000 Missouri Pacific Railroad Co.,
4.750%, 1/01/2020 164,025
243,000 Missouri Pacific Railroad Co.,
4.750%, 1/01/2030 189,102
281,000 Missouri Pacific Railroad Co.,
5.000%, 1/01/2045 203,023
-----------
4,538,027
-----------
Real Estate Investment Trusts -- 1.7%
1,000,000 EOP Operating LP,
6.750%, 2/15/2012 1,108,132
100,000 First Industrial LP,
7.500%, 12/01/2017 114,072
150,000 First Industrial LP,
7.600%, 7/15/2028 166,234
1,075,000 Highwoods Realty LP,
7.500%, 4/15/2018 1,134,759
2,370,000 New Plan Excel Realty Trust,
5.875%, 6/15/2007 $ 2,510,807
1,000,000 Spieker Properties, Inc.,
7.350%, 12/01/2017 1,156,192
200,000 TriNet Corporate Realty Trust, Inc.,
7.700%, 7/15/2017 226,770
-----------
6,416,966
-----------
Refining -- 0.0%
98,750 Merey Sweeny LP,
8.850%, 12/18/2019, 144A 118,135
-----------
Restaurants -- 0.2%
1,000,000 McDonald's Corp.,
3.627%, 10/10/2010, (SGD) 606,018
-----------
Retailers -- 0.5%
250,000 J.C. Penney Co., Inc.,
6.875%, 10/15/2015 266,250
22,000 J.C. Penney Co., Inc.,
7.125%, 11/15/2023 23,265
150,000 J.C. Penney Co., Inc.,
7.650%, 8/15/2016 170,250
650,000 J.C. Penney Co., Inc.,
7.950%, 4/01/2017 750,750
500,000 Lowe's Cos., Inc.,
6.500%, 3/15/2029 553,095
-----------
1,763,610
-----------
Sovereigns -- 17.0%
10,900,000 Canadian Government,
4.250%, 9/01/2008, (CAD) 8,786,566
16,265,000 Canadian Government,
4.500%, 9/01/2007, (CAD) 13,243,040
9,600,000 Canadian Government,
5.500%, 6/01/2010, (CAD) 8,117,952
2,825,000 Canadian Government,
6.000%, 9/01/2005, (CAD) 2,304,027
5,000,000 Canadian Government, Series WH31,
6.000%, 6/01/2008, (CAD) 4,270,135
100,000,000 Mexican Fixed Rate Bonds,
9.000%, 12/20/2012, (MXN) 8,301,423
3,670,000 Petroleos Mexicanos,
8.625%, 12/01/2023, 144A 4,147,100
2,443,636 PF Export Receivables Master Trust,
6.436%, 6/01/2015, 144A 2,452,067
1,500,000 Republic of Brazil,
8.250%, 1/20/2034 1,337,250
325,000 Republic of Brazil,
8.875%, 4/15/2024 311,350
10,000 Republic of Brazil,
10.125%, 5/15/2027 10,600
250,000 Republic of Brazil,
11.000%, 8/17/2040 280,250
586,384 Republic of Brazil C Bond,
8.000%, 4/15/2014 579,816
455,000 Republic of Dominican,
9.040%, 1/23/2013, 144A 352,625
250,000 Republic of Peru,
4.500%, 3/07/2017 (step to 5.000% on 3/07/05) (d) 220,000
500,000 Republic of South Africa,
5.250%, 5/16/2013, (EUR) 627,156
200,000 Republic of South Africa,
8.500%, 6/23/2017 243,000
See accompanying notes to financial statements.
7
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Sovereigns -- continued
150,000 Republic of South Africa,
12.500%, 12/21/2006, (ZAR) $ 25,007
100,000 Republic of Venezuela,
9.250%, 9/15/2027 98,550
500,000 SP Powerassets Ltd.,
3.730%, 10/22/2010, (SGD) 308,230
3,950,000 Tenaga Nasional Berhad,
7.500%, 11/01/2025 144A 4,438,240
1,500,000 United Mexican States,
7.500%, 1/14/2012 1,690,500
750,000 United Mexican States,
8.300%, 8/15/2031 853,125
900,000 United Mexican States,
8.375%, 1/14/2011 1,055,250
------------
64,053,259
------------
Sovereigns Non-Callable -- 6.9%
5,150,000 Government of New Zealand,
6.000%, 11/15/2011, (NZD) 3,457,075
29,310,000 Government of Sweden, Series 1040,
6.500%, 5/05/2008, (SEK) 4,426,147
55,815,000 Government of Sweden, Series 1045,
5.250%, 3/15/2011, (SEK) 8,188,937
15,000,000 Kingdom of Norway,
5.500%, 5/15/2009, (NOK) 2,416,985
44,930,000 Kingdom of Norway,
6.750%, 1/15/2007, (NOK) 7,280,242
------------
25,769,386
------------
Supranational -- 3.2%
22,000,000 Inter-American Development Bank,
Zero Coupon Bond, 5/11/2009, (BRL) 3,831,340
2,585,000 International Bank for Reconstruction &
Development,
Zero Coupon Bond, 8/20/2007, (NZD) 1,458,171
6,000,000 International Bank for Reconstruction &
Development,
5.500%, 11/03/2008, (NZD) 3,958,463
4,045,000 International Bank for Reconstruction &
Development,
8.000%, 5/23/2007, (NZD) 2,829,195
------------
12,077,169
------------
Textile -- 0.0%
25,000 Kellwood Co.,
7.625%, 10/15/2017 27,490
------------
Tobacco -- 0.7%
2,000,000 Altria Group, Inc.,
7.000%, 11/04/2013 2,086,726
375,000 Loews Corp.,
7.000%, 10/15/2023 380,604
------------
2,467,330
------------
Transportation Services -- 0.6%
510,094 Atlas Air Worldwide Holdings, Inc.,
7.200%, 1/02/2019 (c) 479,766
635,513 Atlas Air, Inc., Series A,
7.380%, 1/02/2018 (c) 598,278
1,000,000 ERAC USA Finance Co.,
6.800%, 2/15/2008, 144A 1,094,160
------------
2,172,204
------------
Treasuries -- 1.9%
500,000 U.S. Treasury Notes,
1.625%, 10/31/2005 496,875
1,000,000 U.S. Treasury Notes,
2.375%, 8/15/2006 996,797
4,900,000 U.S. Treasury Notes,
5.750%, 8/15/2010 $ 5,462,544
------------
6,956,216
------------
Wireless -- 0.3%
1,000,000 America Movil SA de CV,
4.125%, 3/01/2009, 144A 974,992
------------
Wirelines -- 2.1%
1,400,000 Philippine Long Distance Telephone Co.,
8.350%, 3/06/2017 1,309,000
3,400,000 Sprint Capital Corp.,
6.875%, 11/15/2028 3,566,236
500,000 Sprint Capital Corp.,
6.900%, 5/01/2019 547,419
1,000,000 Telekom Malaysia Berhad,
7.875%, 8/01/2025, 144A 1,202,091
250,000 US West Capital Funding, Inc.,
6.500%, 11/15/2018 182,500
1,650,000 US West Capital Funding, Inc.,
6.875%, 7/15/2028 1,183,875
------------
7,991,121
------------
Total Non-Convertible Bonds
(Identified Cost $331,015,221) 361,229,842
------------
Convertible Bonds -- 1.6%
Independent/Energy -- 0.6%
500,000 Devon Energy Corp.,
4.900%, 8/15/2008 541,875
1,750,000 Devon Energy Corp.,
4.950%, 8/15/2008 1,896,562
------------
2,438,437
------------
Tobacco -- 0.8%
3,040,000 Loews Corp.,
3.125%, 9/15/2007 2,975,400
------------
Wirelines -- 0.2%
840,000 Telus Corp.,
6.750%, 6/15/2010, (CAD) 696,197
------------
Total Convertible Bonds
(Identified Cost $5,667,855) 6,110,034
------------
Total Bonds and Notes
(Identified Cost $336,683,076) 367,339,876
------------
See accompanying notes to financial statements.
8
- --------------------------------------------------------------------------------
Loomis Sayles Investment Grade Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Short Term Investment -- 0.6% of Total Net Assets
$ 2,242,000 Repurchase Agreement with State Street Corp.,
dated 9/30/04 at 0.650% to be repurchased at
$2,242,040 on 10/01/04 collateralized by
$1,675,000 U.S. Treasury Note, 7.625% due 2/15/25
with a value of $2,293,181 $ 2,242,000
------------
Total Short Term Investment
(Identified Cost $2,242,000) 2,242,000
------------
Total Investments -- 98.3%
(Identified Cost $338,925,076)(b) 369,581,876
Other assets less liabilities -- 1.7% 6,325,449
------------
Total Net Assets-- 100% $375,907,325
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$340,761,935 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 $ 32,874,952
Aggregate gross unrealized depreciation for all
securities in which there is an excess of tax
cost over value (4,055,011)
------------
Net unrealized appreciation $ 28,819,941
============
At September 30, 2004, the components of distributable earnings,
excluding unrealized appreciation/depreciation, disclosed on a
tax basis consisted of $7,804,825 in undistributed ordinary
income and $4,351,185 in undistributed long-term gains.
The differences between book and tax distributable earnings are
primarily due to premium amortization accruals, deferred
trustees' fees and corporate action cost basis adjustments.
(c) Non-income producing security due to default of bankruptcy filing.
(d) Step Bond: Coupon is zero or below market rate for an initial
period and then increases at a specified date and rate.
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. At September 30, 2004, the total value of
these securities amounted to $30,774,730 or 8.2% of net assets.
Key to Abbreviations: BRL: Brazilian Real; CAD: Canadian Dollar;
EUR: Euro; GBP: Great British Pound; MXN: Mexican Peso; NOK:
Norwegian Krone; NZD: New Zealand Dollar; SEK: Swedish Krona;
SGD: Singapore Dollar; ZAR: South African Rand
Industry Holdings at September 30, 2004 as a Percentage of Net Assets
Government Agencies 17.1%
Sovereigns 17.0
Foreign Local Governments 9.7
Sovereigns Non-Callable 6.9
Automotive 4.8
Healthcare 4.2
Electric 4.0
Supranational 3.2
Paper 2.4
Wirelines 2.3
Airlines 2.1
Pipelines 2.0
Other, less than 2% each 22.0
See accompanying notes to financial statements.
9
- --------------------------------------------------------------------------------
Statement of Assets & Liabilities
- --------------------------------------------------------------------------------
September 30, 2004
ASSETS
Investments at cost $338,925,076
Net unrealized appreciation 30,656,800
------------
Investments at value 369,581,876
Cash 809,226
Receivable for Fund shares sold 1,807,919
Receivable for securities sold 509,693
Interest receivable 5,843,735
Receivable from investment adviser 11,473
------------
TOTAL ASSETS 378,563,922
------------
LIABILITIES
Payable for Fund shares redeemed 2,300,414
Management fees payable 157,045
Trustees' fees payable 1,957
Deferred Trustees' fees 12,758
Transfer agent fees payable 10,310
Accounting and administrative fees payable 70,775
Service and distribution fees payable 7,397
Other accounts payable and accrued expenses 95,941
------------
TOTAL LIABILITIES 2,656,597
------------
NET ASSETS $375,907,325
============
NET ASSETS CONSIST OF:
Paid in capital $334,867,349
Undistributed net investment income 7,593,506
Accumulated net realized gain on investments 2,712,887
Net unrealized appreciation on investments and foreign
currency translations 30,733,583
------------
NET ASSETS $375,907,325
============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 9,505,502
============
Shares of beneficial interest 802,786
============
Net asset value and redemption price per share $ 11.84
============
Offering price per share (100/95.50 of $11.84) $ 12.40
============
Class B shares: (redemption price is equal to net asset value
less any applicable contingent deferred sales charges)
Net assets $ 1,796,614
============
Shares of beneficial interest 152,050
============
Net asset value and offering price per share $ 11.82
============
Class C shares: (redemption price is equal to net asset value
less any applicable contingent deferred sales charges)
Net assets $ 9,191,041
============
Shares of beneficial interest 778,361
============
Net asset value and offering price per share $ 11.81
============
Class Y shares:
Net assets $ 12,543,257
============
Shares of beneficial interest 1,058,602
============
Net asset value, offering and redemption price per share $ 11.85
============
Class J shares:
Net assets $342,870,911
============
Shares of beneficial interest 28,983,360
============
Net asset value and redemption price per share $ 11.83
============
Offering price per share (100/96.50 of $11.83) $ 12.26
============
See accompanying notes to financial statements.
10
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
INVESTMENT INCOME
Interest $20,534,484
Less foreign taxes withheld (1,089)
-----------
20,533,395
-----------
Expenses
Management fees 1,506,744
Service fees - Class A 14,567
Service and distribution fees - Class B 10,253
Service and distribution fees - Class C 44,550
Service and distribution fees - Class J 2,659,907
Trustees' fees and expenses 28,056
Accounting and administrative 247,170
Custodian 172,750
Transfer agent fees - Class A, Class B, Class C 56,606
Transfer agent fees Class - Y 22,284
Transfer agent fees Class - J 11,214
Audit and tax services 105,452
Registration - Class A, Class B, Class C, Class Y 52,100
Registration - Class J 185
Shareholder reporting - Class A, Class B, Class C, Class Y 20,150
Shareholder reporting - Class J 4,597
Legal - Class A, Class B, Class C, Class Y 1,435
Legal - Class J 42,957
Miscellaneous 55,544
-----------
Total expenses 5,056,521
Less reimbursement/waiver (239,663)
-----------
Net expenses 4,816,858
-----------
Net investment income 15,716,537
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain on:
Investments - net 10,932,411
Foreign currency transactions - net 233,845
Change in unrealized appreciation on:
Investments - net 1,847,859
Foreign currency translations - net 6,750
-----------
Net realized and unrealized gain on investments and foreign
currency transactions 13,020,865
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $28,737,402
===========
See accompanying notes to financial statements.
11
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Ended Year Ended
September 30, September 30,
2004 2003
------------- -------------
FROM OPERATIONS:
Net investment income $ 15,716,537 $ 13,143,561
Net realized gain on investments and
foreign currency transactions 11,166,256 7,301,351
Net change in unrealized appreciation (depreciation)
on investments and foreign currency translations 1,854,609 26,525,266
------------ ------------
Increase in net assets resulting from operations 28,737,402 46,970,178
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (271,806) (14,107)
Class B (42,016) --
Class C (175,999) --
Class Y (583,747) (479,608)
Class J (16,876,388) (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)
------------ ------------
Total distributions (20,044,998) (17,499,883)
------------ ------------
INCREASE IN NET ASSETS DERIVED
FROM CAPITAL SHARES TRANSACTIONS 20,028,707 98,715,417
------------ ------------
Total increase in net assets 28,721,111 128,185,712
NET ASSETS
Beginning of period 347,186,214 219,000,502
------------ ------------
End of period $375,907,325 $347,186,214
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME $ 7,593,506 $ 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.
12
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Income (loss) from investment operations: Less distributions:
----------------------------------------- ----------------------------------------------
Net asset
value, Net realized Dividends Distributions
beginning Net and unrealized Total from from from net
of investment gain (loss) on investment net investment realized Total
the period income investments operations income capital gains distributions
---------- ---------- -------------- ---------- -------------- ------------- -------------
Class A
9/30/2004 $11.54 $0.52(d) $ 0.45 $ 0.97 $(0.60) $(0.07) $(0.67)
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(j) 10.59 0.48 (0.49) (0.01) (0.31) -- (0.31)
Class B
9/30/2004 11.53 0.43(d) 0.45 0.88 (0.52) (0.07) (0.59)
9/30/2003(g) 11.21 0.02(d) 0.30 0.32 -- -- --
Class C
9/30/2004 11.53 0.43(d) 0.45 0.88 (0.53) (0.07) (0.60)
9/30/2003(g) 11.21 0.02(d) 0.30 0.32 -- -- --
Class Y
9/30/2004 11.54 0.57(d) 0.45 1.02 (0.64) (0.07) (0.71)
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)
Class J
9/30/2004 11.53 0.48(d) 0.44 0.92 (0.55) (0.07) (0.62)
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)
(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) For the nine months ended September 30, 1998.
(k) 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.
See accompanying notes to financial statements.
13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Ratios to average net assets:
--------------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return the period expenses expenses Income turnover
the period (%) (a) (000) (%) (b)(c) (%) (c) (%) (c) rate (%)
- ---------- ------- ----------- ---------- -------- -------------- ---------
$11.84 8.8(k) $ 9,506 0.93 1.67 4.52 29
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
11.82 7.9(k) 1,797 1.70 2.42 3.77 29
11.53 2.85(e) 160 1.70 7.81 5.83 34
11.81 7.9(k) 9,191 1.70 2.42 3.74 29
11.53 2.85(e) 3 1.70 7.81 4.35 34
11.85 9.2 12,543 0.55 1.08 4.92 29
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
11.83 8.3(k) 342,871 1.30 1.33 4.15 29
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
14
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
1. Organization. Loomis Sayles Funds II (the "Trust") is organized as a
Massachusetts business trust. 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 Board of Trustees to
authorize the issuance of 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, 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. Investment income
and realized and unrealized gains and losses are allocated on a pro rata basis
to each Class based on the relative net assets of each Class to the total net
assets of the Fund.
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.
15
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
The Fund may purchase investments of foreign issuers. Investing in securities of
foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than those
of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell generally are
used to hedge the Fund's investments against currency fluctuation. Also, a
contract to buy or sell can offset a previous contract. These contracts involve
market risk in excess of the unrealized gain or loss reflected in the Fund's
Statement of Assets and Liabilities. The U.S. dollar value of the currencies the
Fund has committed to buy or sell (if any) is shown in the portfolio composition
under the caption "Forward Currency Contracts Outstanding." These amounts
represent the aggregate exposure to each currency the Fund has acquired or
hedged through currency contracts outstanding at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At September 30, 2004, there were no open forward currency
contracts.
e. Federal and Foreign Income Taxes. The Trust treats the Fund as a separate
entity for federal income tax purposes. The Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income and excise taxes have 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. Permanent differences are primarily due to
differing treatments for book and tax purposes of items such as foreign currency
transactions, distributions from real estate investment trusts and premium
amortization accruals. Temporary differences between book and tax distributable
earnings are primarily due to premium amortization accruals, deferred trustees'
fees and corporate action basis adjustments. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to capital accounts. Distributions from net investment income
and short-term capital gains are considered to be ordinary income for tax
purposes.
g. Repurchase Agreements. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The Fund's adviser is responsible
for determining that the value of the collateral is at all times at least equal
to 102% of the repurchase price, including interest. Repurchase agreements could
involve certain risks in the event of default or insolvency of the counterparty
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying securities.
3. Purchases and Sales of Securities. For the year ended September 30, 2004,
purchases and sales of securities (excluding short-term investments and U.S.
Government/Agency securities) were $86,502,824 and $74,177,876, respectively.
Purchases and sales of U.S. Government/Agency securities (excluding short-term
investments) were $33,018,684 and $29,492,108, 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 year ended September 30,
2004, the management fee and waiver of management fee for the Fund was as
follows:
Percentage of Average
Gross Waiver of Net Daily Net Assets
Management Management Management ---------------------
Fee Fee Fee Gross Net
- ---------- ---------- ---------- ----- ----
$1,506,744 $43,823 $1,462,921 0.40% 0.39%
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
entities: Caisse des Depots et Consignations, a public sector financial
institution created by the French government in 1816; Caisse Nationale des
Caisses d'Epargne, a financial institution owned by CDC and by affiliated French
savings banks known as the Caisse d'Epargne; and CNP Assurances, a large French
life insurance company.
16
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 year ended September 30, 2004, fees paid to CIS for accounting and
administrative expense were $247,170.
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
$5 billion $5 billion $10 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 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 Funds for out-of-pocket
expenses. For the year ended September 30, 2004, amounts paid to CIS as
compensation for its services as transfer agent were $69,000.
17
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 was not clearly evident from the records of the Fund that
the Board of Trustees approved the continuance of such agreement. Accordingly,
the Board of Trustees determined to approve the Distribution Agreement on April
23, 2004, effective immediately, and submitted 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. The
shareholders approved the Distribution Agreement and the release of the escrowed
fees on August 5, 2004.
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 compensation 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 submitted for shareholder approval a proposal
to approve the Rule 12b-1 Plan for Class J shares, and the release 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 were escrowed pending shareholder
approval which was received on August 5, 2004.
For the year ended September 30, 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
- ------- ------- ------- -------- ------- ------- ----------
$14,567 $2,563 $11,137 $886,636 $7,690 $33,413 $1,773,271
Commissions (including CDSCs) on Fund shares paid to CDC IXIS Distributors by
investors in Class A, B and C shares of the Fund were $141,404 and commissions
paid to Loomis Sayles Distributors by investors in Class J shares of the Fund
were $753,201 for the year ended September 30, 2004.
e. Trustees Fees and Expenses. The Loomis Sayles Funds Trusts and the 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 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
$50,000 and meeting attendance fees of $5,000 for each meeting of the Board of
Trustees attended. Each committee chairman receives an additional retainer fee
at the annual rate of $7,000. Each committee member receives a meeting
attendance fee of $3,750 per committee meeting that he or she attends. In
addition, the independent co-chairmen of the Board split an additional $50,000
annual retainer fee. The retainer fees assume four Board or Committee meetings
per year. 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.
Prior to July 1, 2004, the Trust paid each independent trustee a $45,000 annual
retainer and a $4,500 fee per meeting attended. In addition, each committee
member received a retainer fee at the annual rate of $7,000 while each committee
chairman received a $5,000 annual retainer (beyond the $7,000). Each committee
member received a $1,750 fee per meeting attended. The retainer fees assume four
Board or committee meetings per year.
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 year ended September 30, 2004, the amount
paid to CIS as compensation for these services was $3,483.
18
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 year ended September 30,
2004, the Fund had no borrowings under the agreement.
6. Shareholders. At September 30 2004, the Loomis Sayles Employees' Profit
Sharing Retirement Plan held 186,363 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 year ended September 30, 2004, in
addition to any waiver of management fees as discussed in Note 4, certain Class
level expenses in the amount of $195,840 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 September 30, 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:
Expenses Subject to
Expense Limit as a Percentage Expiration Possible Reimbursement
of Average Daily Net Assets of Waiver Until September 2005
- ----------------------------------------------- ---------------- ----------------------
Class A Class B Class C Class Y Class J
- ------- ------- ------- ------- -------
0.95% 1.70% 1.70% 0.55% 1.30% January 31, 2005 $239,663
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%.
8. Additional Tax Information. The tax character of distributions paid to
shareholders during the years ended September 30, 2004 and 2003 were as follows:
2004 2003
----------- -----------
Distributions paid from:
Ordinary income $17,982,737 $14,641,811
Long-term capital gains 2,062,261 2,858,072
----------- -----------
Total taxable distributions $20,044,998 $17,499,883
9. Subsequent Event. Effective November 1, 2004, the names of the Distributor
and the Administrator and Transfer Agent will change as follows:
Old Name New Name
-------- --------
CDC IXIS Asset Management Distributors, L.P. IXIS Asset Management Distributors, L.P.
CDC IXIS Asset Management Services, Inc. IXIS Asset Management Services Company
19
- --------------------------------------------------------------------------------
Notes To Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
10. Capital Shares. The Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
Year Ended Year Ended
September 30, 2004 September 30, 2003
--------------------------- ----------------------------
Shares Amount Shares(a)(b) Amount(a)(b)
----------- ------------- ------------ -------------
Class A
- -------
Issued from the sale of shares 845,179 $ 9,901,942 100,705 $ 1,170,450
Issued in connection with the reinvestment
of distributions 18,301 210,238 2,090 23,643
Issued in Admin Class conversion -- -- 11 123
Redeemed (158,442) (1,832,451) (6,093) (70,878)
----------- ------------- ----------- -------------
Net change 705,038 $ 8,279,729 96,713 $ 1,123,338
=========== ============= =========== =============
Class B Shares Amount Shares(c) Amount(c)
- ------- ----------- ------------- ------------ -------------
Issued from the sale of shares 149,404 $ 1,701,993 13,845 $ 158,000
Issued in connection with the reinvestment
of distributions 1,756 20,158 -- --
Redeemed (12,955) (148,655) -- --
----------- ------------- ----------- -------------
Net change 138,205 $ 1,573,496 13,845 $ 158,000
=========== ============= =========== =============
Class C Shares Amount Shares(c) Amount(c)
- ------- ----------- ------------- ------------ -------------
Issued from the sale of shares 844,455 $ 9,807,856 223 $ 2,500
Issued in connection with the reinvestment
of distributions 754 8,655 -- --
Redeemed (67,071) (768,164) -- --
----------- ------------- ----------- -------------
Net change 778,138 $ 9,048,347 223 $ 2,500
=========== ============= =========== =============
Class Y Shares Amount Shares(b) Amount(b)
- ------- ----------- ------------- ------------ -------------
Issued from the sale of shares 482,697 $ 5,495,572 375,758 $ 4,112,463
Issued in connection with the reinvestment
of distributions 45,115 519,122 42,227 461,655
Redeemed (355,309) (4,043,025) (301,255) (3,257,721)
----------- ------------- ----------- -------------
Net change 172,503 $ 1,971,669 116,730 $ 1,316,397
=========== ============= =========== =============
Class J Shares Amount Shares Amount
- ------- ----------- ------------- ------------ -------------
Issued from the sale of shares 12,912,010 $ 149,860,044 21,330,400 $ 238,341,332
Issued in connection with the reinvestment
of distributions -- -- -- --
Redeemed (13,039,250) (150,704,578) (12,871,900) (142,214,014)
----------- ------------- ----------- -------------
Net change (127,240) $ (844,534) 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.
20
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
Investment Grade Bond Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Loomis Sayles Investment Grade
Bond Fund, a series of Loomis Sayles Funds II (hereinafter referred to as the
"Fund"), at September 30, 2004, the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated therein,
in conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
September 30, 2004 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 16, 2004
21
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
The table below provides certain information regarding the Trustees and Officers
of Loomis Sayles Funds II. Unless otherwise indicated, the address of all
persons below is 399 Boylston Street, Boston, MA 02116.
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- --------------------------- -------------------------------- ----------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. (64) Trustee, Douglas Dillon Professor and 41;
Contract Review and Director for the Belfer Center Director, Taubman Centers,
Governance Committee of Science and International Inc.; Advisory Board Member,
Member, Affairs, John F. Kennedy USEC Inc.
Since 2003 School of Government,
Harvard University
Edward A. Benjamin (66) Trustee, Retired 41;
Audit Committee Member, Director, Coal, Energy
Since 2002 Investments & Management,
LLC; Director, Precision
Optics Corporation
Daniel M. Cain (59) Trustee, President and CEO, Cain 41;
Chairman of the Audit Brothers & Company, Trustee, Universal Health
Committee, Incorporated Realty Income Trust;
Since 2003 Director, Sheridan
Co-Chairman of the Board, Healthcorp
Since 2004
Paul G. Chenault (70) Trustee, Retired; Trustee, First 41;
Contract Review and Variable Life Director, Mailco Office
Governance Committee Products, Inc.
Member,
Since 2000
Kenneth J. Cowan (72) Trustee, Retired 41;
Chairman of the Contract None
Review and Governance
Committee,
Since 2003
Co-Chairman of the Board,
Since 2004
Richard Darman (61) Trustee, Partner, The Carlyle Group; 41;
Contract Review and Chairman of the Board of Director and Chairman, AES
Governance Committee Directors of AES Corporation
Member, Corporation; formerly,
Since 2003 Professor, John F. Kennedy
School of Government,
Harvard University
Sandra O. Moose (62) Trustee, President, Strategic Advisory 41;
Audit Committee Member, Services; formerly, Senior Vice Director, Verizon
Since 2003 President and Director, The Communications; Director,
Boston Consulting Group, Inc. Rohm and Haas Company;
Director, AES Corporation
22
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- --------------------------- -------------------------------- ----------------------------
INDEPENDENT TRUSTEES
continued
John A. Shane (71) Trustee, President, Palmer Service 41;
Contract Review and Corporation Director, Gensym
Governance Committee Corporation; Director,
Member, Overland Storage, Inc.;
Since 2003 Director, Abt Associates
Inc.
INTERESTED TRUSTEES
Robert J. Blanding/1/ (57) Trustee, President, Chairman, Director 41;
555 California Street Chief Executive and Chief Executive Officer, None
San Francisco, CA 94104 Officer, Loomis Sayles; President and
Since 2002 CEO - Loomis Sayles Funds I
John T. Hailer/2/ (43) Trustee, President and Chief Executive 41;
President, Officer, CDC IXIS Asset None
Since 2003 Management Distributors, L.P.;
President and Chief Executive
Officer - CDC Nvest Funds;
Executive Vice President -
Loomis Sayles Funds I
OFFICERS
John E. Pelletier (40) Chief Operating Officer President, Director and Chief Not Applicable
Since 2004 Executive Officer, CDC IXIS
Asset Management Services,
Inc.; Executive Vice President,
CDC IXIS Distribution
Corporation; Executive Vice
President and Chief Operating
Officer, CDC IXIS Asset
Management Distributors, L.P.
and CDC IXIS Asset
Management Advisers, L.P.; for-
merly, Senior Vice President,
General Counsel, Secretary and
Clerk, CDC IXIS Distribution
Corporation; Executive Vice
President, General Counsel,
Secretary and Clerk, CDC IXIS
Asset Management
Distributors, L.P., CDC IXIS
Asset Management Advisers,
L.P.; Executive Vice President,
General Counsel, Secretary and
Clerk, CDC IXIS Asset
Management Services, Inc.
23
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- --------------------------- -------------------------------- ----------------------------
OFFICERS
(continued)
Coleen Downs Dinneen (43) Secretary, Clerk and Chief Senior Vice President, General Not Applicable
Legal Officer, Counsel, Secretary and Clerk,
Since 2004 CDC IXIS Distribution
Corporation, CDC IXIS Asset
Management Distributors, L.P.,
CDC IXIS Asset Management
Advisers, L.P. and CDC IXIS
Asset Management Services,
Inc.; formerly, Senior Vice
President, Deputy General
Counsel, Assistant Secretary
and Assistant Clerk, CDC IXIS
Asset Management Advisers,
L.P., CDC IXIS Asset
Management Services, Inc. and
Vice President, Deputy General
Counsel, Assistant Secretary
and Assistant Clerk, CDC IXIS
Distribution Corporation
Michael Kardok (45) Treasurer, Principal Senior Vice President, CDC Not Applicable
Financial Officer, IXIS Asset Management
Since 2004 Services, Inc.; Senior Vice
President, CDC IXIS Asset
Management Advisers, L.P.;
formerly, Senior Director,
PFPC Inc., Vice
President-Division Manager,
First Data Investor Services
Group, Inc.
Kristin Vigneaux (35) Chief Compliance Officer, Chief Compliance Officer for Not Applicable
Since 2004 Mutual Funds, CDC IXIS Asset
Management Distributors, L.P.,
CDC IXIS Asset Management
Advisers, L.P. and CDC IXIS
Asset Management Services,
Inc.; formerly, Vice President
CDC IXIS Asset Management
Services, Inc.
Daniel J. Fuss (70) Executive Vice President, Vice Chairman and Director, Not Applicable
One Financial Center Since 2003 Loomis Sayles & Company, L.P.;
Boston, MA 02111 Executive Vice President -
Loomis Sayles Funds I; Prior
to 2002, President and Trustee
of Loomis Sayles Funds II
24
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- --------------------------- -------------------------------- ----------------------------
OFFICERS
(continued)
Frank LoPiccolo (50) Anti-Money Laundering President and CEO, CDC Not Applicable
Officer, IXIS Asset Management
Since 2003 Services, Inc.
* All Trustees serve until retirement, resignation or removal from the Board.
The current retirement age is 72. At a meeting held on February 27, 2004,
the Trustees voted to suspend the retirement policy until 2005.
** Each person listed above, except as noted, holds the same position(s) with
the CDC Nvest Funds Trust I, CDC Nvest Funds Trust II, CDC Nvest Funds
Trust III, CDC Nvest Companies Trust I, CDC Nvest Cash Management Trust and
Loomis Sayles Funds I. Previous positions during the past five years with
the Distributor, CDC IXIS Advisers or Loomis Sayles are omitted if not
materially different from a trustee's or officer's current position with
such entity. As indicated, each Trustee is also a trustee of certain other
investment companies for which the Distributor acts as principal
underwriter.
/1/ Mr. Blanding is deemed an "interested person" of Loomis Sayles Funds II
because he holds the following positions with affiliated persons of Loomis
Sayles Funds II: President, Chairman, Director and Chief Executive Officer
of Loomis Sayles.
/2/ Mr. Hailer is an "interested person" of Loomis Sayles Funds II because he
holds the following positions with affiliated persons of Loomis Sayles
Funds II: Director and Executive Vice President of CDC IXIS Asset
Management Distribution Corporation; and President and Chief Executive
Officer of CDC IXIS Asset Management Advisers, L.P.
The Statement of Additional Information includes additional information
about the Trustees of the Trust and is available, without charge, by
calling CDC Nvest Funds at 800-225-5478.
25
- --------------------------------------------------------------------------------
Additional Information
- --------------------------------------------------------------------------------
2004 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (unaudited)
Capital Gains Distributions. Pursuant to Internal Revenue Section 852(b), the
Fund paid distributions of $2,062,261, which have been designated as capital
gains distributions for the fiscal year ended September 30, 2004.
Shareholder Meeting (unaudited). At a special meeting of shareholders held on
August 5, 2004 (the "Meeting"), shareholders of the Loomis Sayles Investment
Grade Bond Fund (the "Fund") Class J shares voted for the following proposals:
1. Approval of a Distribution Agreement between the Loomis Sayles Funds Trust II
(the "Trust"), on behalf of the Class J Shares of the Fund, and Loomis Sayles
Distributors, L.P. for the period from November 1, 2003 through April 23, 2004,
as well as the release of escrowed fees payable thereunder.
Voted For Voted Against Abstained Votes Total Votes
- ---------- ------------- --------------- -----------
15,450,191 62,000 660,400 16,172,591
2. Approval of a Service and Distribution Plan relating to Class J shares of the
Fund, as well as the release of escrowed fees payable thereunder.
Voted For Voted Against Abstained Votes Total Votes
- ---------- ------------- --------------- -----------
15,484,291 57,200 657,800 16,199,291
26
[LOGO] | CDC NvestFunds(SM)
- --------------------------------------------------------------------------------
Income Funds
Annual Report
September 30, 2004
- --------------------------------------------------------------------------------
[LOGO] | LOOMIS . SAYLES & COMPANY, L.P.
Loomis Sayles Core Plus Bond Fund
Loomis Sayles Government Securities Fund
Loomis Sayles High Income Fund
Loomis Sayles Limited Term Government and Agency 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 20
Financial Statements......Page 43
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Even though the Federal Reserve Bank began raising short-term interest rates
early in the summer, bonds in general turned in a positive total return for the
12 months ended September 30, 2004. Longer-term and higher-yielding bonds
performed particularly well, and mortgage-backed government agency securities
did better than U.S. Treasuries.
For the fiscal year ended September 30, 2004, the total return of Loomis Sayles
Core Plus Bond Fund's Class A shares at net asset value was 5.28%, including
$0.54 in dividends reinvested during the period. The fund's benchmark, the
Lehman Aggregate Bond Index, returned 3.68% for the same period, while
Morningstar's Intermediate-Term Bond category averaged a 3.29% return. At the
end of September 2004, the fund's SEC yield was 3.69%.
A period of strong overall performance
Successful security selection and our emphasis on corporate issues were primary
reasons for the fund's good performance. Corporate bonds generally benefited
from expanding earnings and improved creditworthiness tied to stronger balance
sheets. High-yield issues were the largest contributor to fund results, with
investment grade issues not far behind. Non-dollar holdings also boosted
returns, as the U.S. budget and trade deficits kept the dollar weak. U.S.
Treasury and agency issues, as well as securities backed by mortgages or other
assets, added lesser amounts to fund returns.
Wireline and chemical issues led returns
LCI International, a division of Qwest Communications, was among the wireline
companies that performed well, as its profits and finances improved. Bonds
issued by IMC Global, a major producer of agricultural chemicals, rose following
the announcement of a proposed merger, and IMC benefited further from a
worldwide increase in agricultural activity.
The improving economy fed solid performance by bonds of cable, media, and
automobile companies. These sectors had fallen sharply during the weak credit
market period of two years ago. Other areas, including brokerage and retail
companies, made smaller overall contributions.
Negatives were few and minor
The broadly positive tone of bond markets left few issues behind. The
highest-quality securities - U.S. Treasuries, agencies, and asset-backed
securities - were the weakest performers, but they were still positive. None of
the fund's holdings showed a significant decline over this period, with only a
handful of laggards. Goldman Sachs and Philip Morris were unchanged, while Dow
Chemical recorded a modest decline. We have since sold Dow because its valuation
appeared high. We are holding Philip Morris despite negative press regarding
tobacco litigation.
Prospect for rising interest rates warrants defensive strategy shifts
With the economy still in recovery, further interest rate increases seem likely.
For that reason, we took steps in recent months to reduce the portfolio's
sensitivity to interest rate changes. We kept Treasury obligations underweighted
compared to the benchmark because they are highly sensitive to changes in
interest rates. Altogether, approximately 15% of the fund was in government
obligations at the end of the period. Those assets could easily be redeployed
into corporate and mortgage-backed securities as opportunities appear.
Since prices of lower-quality, higher-yielding bonds are tied more closely to
issuers' fortunes than to interest rates, our emphasis remains on corporate
bonds, with a particular focus on lower-tier, investment-grade and better
quality high-yield issues. In another defensive measure, we cut exposure to
non-dollar-denominated holdings to around 6% of the portfolio, in part by
reducing holdings in Australia. However, we are maintaining commitments to
securities denominated in Canadian and Singapore dollars and the euro because,
unless there are unforeseen reductions in the U.S. trade and budget deficits, we
believe the U.S. dollar should stay weak.
1
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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.
Loomis Sayles Core Plus Bond Fund
Growth of $10,000 Investment in Class A Shares
September 30, 1994 through September 30, 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)
- ---------- --------- ---------- --------- ---------
9/30/1994 10,000 9,550 10000 10,000
10/31/1994 9,973 9,524 9991 9,977
11/30/1994 9,946 9,498 9969 9,961
12/31/1994 9,998 9,548 10038 10,043
1/31/1995 10,166 9,708 10236 10,256
2/28/1995 10,500 10,028 10480 10,552
3/31/1995 10,503 10,031 10544 10,638
4/30/1995 10,710 10,228 10691 10,817
5/31/1995 11,183 10,679 11105 11,327
6/30/1995 11,282 10,774 11186 11,429
7/31/1995 11,221 10,716 11162 11,379
8/31/1995 11,420 10,906 11296 11,562
9/30/1995 11,563 11,042 11406 11,699
10/31/1995 11,716 11,189 11554 11,851
11/30/1995 11,899 11,364 11728 12,078
12/31/1995 12,072 11,528 11892 12,277
1/31/1996 12,122 11,577 11971 12,356
2/29/1996 11,859 11,326 11763 12,063
3/31/1996 11,800 11,269 11681 11,960
4/30/1996 11,701 11,174 11616 11,861
5/31/1996 11,690 11,164 11592 11,840
6/30/1996 11,861 11,327 11748 12,014
7/31/1996 11,891 11,356 11780 12,037
8/31/1996 11,891 11,356 11760 12,000
9/30/1996 12,167 11,619 11965 12,254
10/31/1996 12,476 11,914 12230 12,589
11/30/1996 12,776 12,201 12440 12,858
12/31/1996 12,628 12,060 12324 12,680
1/31/1997 12,699 12,127 12362 12,698
2/28/1997 12,779 12,204 12392 12,751
3/31/1997 12,588 12,022 12255 12,553
4/30/1997 12,727 12,154 12439 12,743
5/31/1997 12,899 12,318 12556 12,887
6/30/1997 13,126 12,535 12705 13,070
7/31/1997 13,653 13,039 13048 13,548
8/31/1997 13,421 12,817 12936 13,348
9/30/1997 13,688 13,072 13127 13,582
10/31/1997 13,818 13,196 13318 13,754
11/30/1997 13,882 13,257 13379 13,832
12/31/1997 14,025 13,394 13514 13,978
1/31/1998 14,211 13,572 13687 14,144
2/28/1998 14,257 13,615 13677 14,139
3/31/1998 14,345 13,700 13724 14,192
4/30/1998 14,411 13,763 13796 14,281
5/31/1998 14,558 13,903 13926 14,451
6/30/1998 14,612 13,955 14044 14,558
7/31/1998 14,574 13,918 14074 14,544
8/31/1998 14,430 13,780 14303 14,612
9/30/1998 14,987 14,312 14638 15,085
10/31/1998 14,829 14,162 14561 14,853
11/30/1998 15,125 14,444 14644 15,132
12/31/1998 15,149 14,467 14688 15,176
1/31/1999 15,312 14,623 14792 15,326
2/28/1999 15,003 14,328 14534 14,963
3/31/1999 15,210 14,526 14615 15,069
4/30/1999 15,330 14,640 14661 15,113
5/31/1999 14,998 14,323 14533 14,911
6/30/1999 14,902 14,231 14486 14,833
7/31/1999 14,844 14,176 14425 14,751
8/31/1999 14,784 14,119 14417 14,715
9/30/1999 15,034 14,357 14585 14,875
10/31/1999 15,069 14,390 14639 14,943
11/30/1999 15,091 14,412 14637 14,959
12/31/1999 15,099 14,419 14567 14,880
1/31/2000 15,035 14,359 14519 14,827
2/29/2000 15,205 14,521 14695 14,965
3/31/2000 15,414 14,720 14888 15,092
4/30/2000 15,130 14,449 14846 14,960
5/31/2000 15,018 14,342 14839 14,904
6/30/2000 15,473 14,777 15148 15,278
7/31/2000 15,564 14,864 15285 15,463
8/31/2000 15,765 15,056 15507 15,665
9/30/2000 15,789 15,078 15604 15,747
10/31/2000 15,699 14,992 15707 15,763
11/30/2000 15,848 15,135 15964 15,967
12/31/2000 16,216 15,486 16260 16,277
1/31/2001 16,618 15,870 16526 16,722
2/28/2001 16,782 16,027 16670 16,868
3/31/2001 16,802 16,046 16754 16,972
4/30/2001 16,707 15,955 16684 16,911
5/31/2001 16,813 16,057 16785 17,066
6/30/2001 16,819 16,062 16848 17,153
7/31/2001 17,244 16,468 17225 17,601
8/31/2001 17,435 16,651 17422 17,837
9/30/2001 17,362 16,581 17625 17,810
10/31/2001 17,704 16,908 17994 18,252
11/30/2001 17,587 16,796 17746 18,094
12/31/2001 17,390 16,608 17633 17,970
1/31/2002 17,350 16,570 17776 18,122
2/28/2002 17,283 16,505 17948 18,258
3/31/2002 17,094 16,325 17650 17,921
4/30/2002 17,255 16,479 17992 18,171
5/31/2002 17,400 16,617 18145 18,411
6/30/2002 16,981 16,217 18302 18,441
7/31/2002 16,784 16,028 18523 18,432
8/31/2002 17,166 16,394 18836 18,909
9/30/2002 17,223 16,448 19141 19,268
10/31/2002 17,127 16,356 19053 19,045
11/30/2002 17,452 16,667 19048 19,292
12/31/2002 17,885 17,080 19442 19,861
1/31/2003 17,985 17,176 19458 19,925
2/28/2003 18,244 17,423 19728 20,324
3/31/2003 18,297 17,473 19712 20,338
4/30/2003 18,571 17,736 19875 20,715
5/31/2003 18,941 18,088 20246 21,368
6/30/2003 18,971 18,117 20205 21,316
7/31/2003 18,320 17,496 19526 20,407
8/31/2003 18,496 17,664 19656 20,566
9/30/2003 19,029 18,173 20176 21,285
10/31/2003 18,981 18,127 19988 21,058
11/30/2003 19,097 18,238 20036 21,155
12/31/2003 19,407 18,533 20240 21,391
1/31/2004 19,573 18,693 20403 21,607
2/29/2004 19,724 18,837 20623 21,878
3/31/2004 19,872 18,978 20778 22,090
4/30/2004 19,365 18,494 20237 21,394
5/31/2004 19,195 18,331 20156 21,244
6/30/2004 19,312 18,443 20270 21,333
7/31/2004 19,530 18,651 20471 21,596
8/31/2004 19,921 19,024 20862 22,106
9/30/2004 20,028 19,135 20918 22,230
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
Since
1 Year/7/ 5 Years/7/ 10 Years/7/ Inception/7/
--------- ---------- ----------- ------------
Class A (Inception 11/7/73)
Net Asset Value/1/ 5.28% 5.91% 7.19% --
With Maximum Sales Charge/2/ 0.52 4.94 6.70 --
Class B (Inception 9/13/93)
Net Asset Value/1/ 4.55 5.13 6.40 --
With CDSC/5/ -0.45 4.80 6.40 --
Class C (Inception 12/30/94)
Net Asset Value/1/ 4.55 5.13 -- 6.45%
With CDSC5 3.55 5.13 -- 6.45
Class Y (Inception 12/30/94)
Net Asset Value/1/ 5.50 6.35 -- 7.69
- --------------------------------------------------------------------------------
Since
Class C & Y
Comparative Performance 1 Year 5 Years 10 Years Inception/8/
- ----------------------- ------ ------- -------- ------------
Lehman Aggregate Bond Index/3/ 3.68% 7.48% 7.66% 7.82%
Lehman U.S. Credit Index/4/ 4.44 8.37 8.32 8.49
Morningstar Int. Term Bond Fund Avg./6/ 3.29 6.59 6.82 6.96
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 September 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Credit Quality
- --------------------------------------------------------------------------------
[CHART]
Pie chart
Aaa 46.3%
Aa 0.6%
A 4.9%
Baa 23.5%
Ba 16.3%
B 4.0%
Caa 1.0%
Short-Term & Other 3.4%
Credit quality is based on bond ratings from Moody's Investor Services, Inc.
- --------------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------------
[CHART]
Pie chart
1 year or less 3.4%
1-5 years 53.2%
5-10 years 32.4%
10+ years 11.0%
Average Effective Maturity: 6.3 years
- --------------------------------------------------------------------------------
Notes to Charts
/1/ Does not include a sales charge. Effective 2/1/04, a 1% front end sales
charge was removed from Class C shares.
/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,
U.S. investment-grade corporate debt, and foreign debt that meets specific
maturity, liquidity and quality requirements.
/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%.
Class C share performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/6/ Morningstar Intermediate Term Bond Fund Average is the average performance
without sales charges of funds with similar investment objectives, as
calculated by Morningstar, Inc.
/7/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/8/ The since-inception comparative performance figures shown for 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
- --------------------------------------------------------------------------------
Loomis Sayles Government Securities Fund provided a total return of 2.77% during
the fiscal year ended September 30, 2004, based on the net asset value of Class
A shares and $0.44 in dividends reinvested during the period. The fund's
benchmark, the Lehman U.S. Long Government Index, outperformed the fund for the
period, returning 5.06%, while the fund's Morningstar category, the Long
Government Average, returned 2.75%. The fund's 30-day SEC yield was 2.35% at the
end of September, 2004.
The fund underperformed its benchmark primarily because of its relatively short
duration during the period. Duration is a measure of the fund's sensitivity to
changing bond prices; a shorter duration normally shelters net assets from price
declines when interest rates rise. However, as the Federal Reserve Board's three
rate hikes raised the federal funds rate (the only rate the Fed directly
controls) from 1.00% to 1.75%, long-term interest rates actually fell, lifting
prices of long-term bonds. The result of rising short-term rates and falling
long rates was a flattening of the yield curve, as the difference between short-
and long-term interest rates narrowed. Long-term bonds outperformed shorter
issues.
The longer the bond, the better the results in this 12-month period
Since this fund's investment universe is composed of bonds issued or guaranteed
by the U.S. government or its agencies, selecting securities is a matter of
strategy. Within this universe, we seek a high level of current income
consistent with safety of principal. The primary risks to principal faced by a
fund of this high quality are inflation and market risks - declines in bond
prices that occur when interest rates rise. The best performers in the fund's
universe during most of the year were long-term U.S. Treasury securities and
Treasury Inflation-Protected Securities, called TIPS. TIPS are Treasury
securities whose coupon payments are adjusted for inflation. Of the securities
in the fund's portfolio, the best results came from Treasury securities and TIPS
with long maturities - dates ranging from 2029 to 2033. TIPS also performed well
as demand for these issues was heightened by inflation expectations. The fund's
weakest performers during the reporting period were Treasuries and government
agency obligations with maturities in the one- to two-year range.
The lower-coupon, 30-year, mortgage-backed securities we selected were
attractive because of their valuations and long duration. As falling interest
rates on home mortgages triggered concerns about refinancing, mortgage-backed
securities in general lagged U.S. Treasuries. However, the securities we
selected offer a yield advantage over Treasuries - and are deemed to be riskier
- - because they are backed by government agencies rather than the U.S. government
itself. We also purchased and sold TIPS at intervals during the year as their
valuations shifted.
Outlook for rising interest rates across the board
The yield curve flattened considerably during the reporting period, and
typically when this occurs, interest rates rise across the board. However, this
past year the increase was primarily in the short- to intermediate- area of the
yield curve. In light of this, and our forecast for the Federal Reserve to
continue to raise the federal funds rate, we will look for an opportunity to
further reduce the fund's duration and possibly shift to what is known as a
"barbell" configuration. This is a strategy in which portfolio maturities are
concentrated in both the long and the short end of the spectrum, allowing us to
reach for higher income at one end, and balance it with some measure of price
stability at the other. We may also add to the fund's mortgage holdings,
especially if volatility remains moderate and the Fed continues its "measured"
path of interest-rate increases.
3
- --------------------------------------------------------------------------------
Loomis Sayles Government Securities Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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.
Loomis Sayles Government Securities Fund
Growth of $10,000 Investment in Class A Shares
September 30, 1994 through September 30, 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)
- ---------- --------- ---------- ---------- ---------
9/30/1994 10,000 9,550 10,000 10000
10/31/1994 9,999 9,549 9,992 9963
11/30/1994 9,941 9,494 9,974 10026
12/31/1994 9,965 9,516 10,035 10179
1/31/1995 10,119 9,664 10,222 10443
2/28/1995 10,351 9,885 10,442 10742
3/31/1995 10,418 9,950 10,507 10835
4/30/1995 10,526 10,052 10,644 11027
5/31/1995 11,101 10,602 11,074 11877
6/30/1995 11,170 10,668 11,159 12016
7/31/1995 11,062 10,564 11,118 11821
8/31/1995 11,181 10,678 11,248 12086
9/30/1995 11,321 10,812 11,357 12311
10/31/1995 11,534 11,015 11,530 12654
11/30/1995 11,759 11,230 11,709 12978
12/31/1995 11,961 11,423 11,875 13325
1/31/1996 12,008 11,467 11,948 13321
2/29/1996 11,714 11,186 11,705 12675
3/31/1996 11,582 11,061 11,607 12425
4/30/1996 11,492 10,975 11,533 12216
5/31/1996 11,432 10,918 11,514 12152
6/30/1996 11,550 11,030 11,662 12414
7/31/1996 11,571 11,050 11,691 12420
8/31/1996 11,497 10,979 11,665 12263
9/30/1996 11,699 11,173 11,859 12605
10/31/1996 11,975 11,436 12,119 13101
11/30/1996 12,221 11,671 12,330 13541
12/31/1996 12,056 11,513 12,204 13213
1/31/1997 12,070 11,527 12,218 13119
2/28/1997 12,077 11,534 12,235 13126
3/31/1997 11,916 11,379 12,105 12791
4/30/1997 12,062 11,519 12,280 13102
5/31/1997 12,165 11,617 12,386 13250
6/30/1997 12,335 11,780 12,525 13507
7/31/1997 12,853 12,275 12,880 14301
8/31/1997 12,564 11,998 12,753 13906
9/30/1997 12,793 12,217 12,945 14284
10/31/1997 13,045 12,458 13,169 14764
11/30/1997 13,138 12,547 13,236 14962
12/31/1997 13,301 12,703 13,375 15212
1/31/1998 13,489 12,882 13,575 15517
2/28/1998 13,426 12,821 13,538 15408
3/31/1998 13,416 12,812 13,576 15441
4/30/1998 13,456 12,851 13,637 15499
5/31/1998 13,626 13,013 13,777 15795
6/30/1998 13,832 13,209 13,934 16162
7/31/1998 13,805 13,184 13,956 16092
8/31/1998 14,231 13,590 14,319 16804
9/30/1998 14,622 13,964 14,705 17408
10/31/1998 14,439 13,789 14,655 17133
11/30/1998 14,520 13,867 14,660 17283
12/31/1998 14,500 13,847 14,692 17251
1/31/1999 14,640 13,982 14,778 17409
2/28/1999 14,077 13,443 14,426 16570
3/31/1999 14,110 13,476 14,483 16523
4/30/1999 14,157 13,520 14,516 16542
5/31/1999 13,967 13,339 14,388 16288
6/30/1999 13,804 13,183 14,359 16110
7/31/1999 13,702 13,085 14,338 16023
8/31/1999 13,599 12,987 14,338 15966
9/30/1999 13,776 13,156 14,454 16078
10/31/1999 13,766 13,147 14,478 16088
11/30/1999 13,706 13,089 14,458 15983
12/31/1999 13,567 12,957 14,364 15745
1/31/2000 13,581 12,970 14,384 15960
2/29/2000 13,820 13,198 14,589 16427
3/31/2000 14,124 13,488 14,845 16960
4/30/2000 14,009 13,379 14,804 16819
5/31/2000 13,960 13,332 14,813 16749
6/30/2000 14,203 13,564 15,078 17127
7/31/2000 14,337 13,692 15,224 17418
8/31/2000 14,588 13,931 15,449 17822
9/30/2000 14,531 13,877 15,493 17630
10/31/2000 14,663 14,003 15,641 17911
11/30/2000 14,999 14,324 15,948 18473
12/31/2000 15,318 14,629 16,266 18940
1/31/2001 15,422 14,728 16,430 18990
2/28/2001 15,618 14,915 16,617 19301
3/31/2001 15,629 14,926 16,675 19203
4/30/2001 15,404 14,711 16,505 18692
5/31/2001 15,457 14,761 16,559 18715
6/30/2001 15,483 14,786 16,636 18867
7/31/2001 15,944 15,227 17,035 19568
8/31/2001 16,121 15,396 17,247 19983
9/30/2001 16,337 15,602 17,547 20137
10/31/2001 16,896 16,136 18,000 21160
11/30/2001 16,316 15,582 17,596 20143
12/31/2001 16,075 15,352 17,443 19762
1/31/2002 16,232 15,502 17,556 20006
2/28/2002 16,429 15,690 17,718 20243
3/31/2002 15,969 15,250 17,332 19433
4/30/2002 16,410 15,671 17,745 20175
5/31/2002 16,523 15,779 17,852 20240
6/30/2002 16,767 16,013 18,101 20611
7/31/2002 17,166 16,394 18,499 21249
8/31/2002 17,651 16,856 18,865 22190
9/30/2002 18,113 17,298 19,308 23103
10/31/2002 17,856 17,052 19,153 22438
11/30/2002 17,668 16,873 18,988 22199
12/31/2002 18,220 17,400 19,448 23120
1/31/2003 18,178 17,360 19,399 23041
2/28/2003 18,592 17,755 19,712 23750
3/31/2003 18,428 17,599 19,656 23463
4/30/2003 18,515 17,682 19,747 23703
5/31/2003 19,208 18,343 20,259 25054
6/30/2003 19,000 18,145 20,153 24659
7/31/2003 17,750 16,951 19,320 22399
8/31/2003 17,963 17,155 19,428 22791
9/30/2003 18,712 17,870 19,993 23997
10/31/2003 18,263 17,441 19,708 23327
11/30/2003 18,321 17,497 19,731 23435
12/31/2003 18,488 17,656 19,906 23723
1/31/2004 18,684 17,843 20,071 24142
2/29/2004 18,925 18,073 20,311 24626
3/31/2004 19,092 18,232 20,490 24995
4/30/2004 18,162 17,345 19,873 23597
5/31/2004 18,258 17,436 19,800 23469
6/30/2004 18,380 17,553 19,880 23692
7/31/2004 18,614 17,776 20,065 24102
8/31/2004 19,157 18,295 20,456 25003
9/30/2004 19,230 18,367 20,498 25212
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
------ ------- --------
Class A (Inception 9/16/85)
Net Asset Value/1/ 2.77% 6.90% 6.76%
With Maximum Sales Charge/2/ -1.85 5.92 6.27
Class B (Inception 9/23/93)
Net Asset Value/1/ 1.92 6.10 5.96
With CDSC/6/ -3.02 5.79 5.96
Class Y (Inception 3/31/94)
Net Asset Value/1/ 2.52 7.14 7.01
- --------------------------------------------------------------------------------
Comparative Performance 1 Year 5 Years 10 Years
- ----------------------- ------ ------- --------
Lehman U.S. Government Bond Index/3/ 2.53% 7.24% 7.44%
Lehman U.S. Long Government Bond Index/4/ 5.06 9.41 9.69
Morningstar Long Government Fund Avg./5/ 2.75 8.47 8.22
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 September 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio Mix
- --------------------------------------------------------------------------------
[CHART]
Pie chart
Treasuries 82.4%
Mortgage-Backed 15.6%
Government Agencies 1.0%
Short Term & Other 1.0%
- --------------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------------
[CHART]
Pie chart
1 year or less 7.2%
1-5 years 4.1%
5-10 years 17.5%
10+ years 71.2%
Average Effective Maturity: 12.2 years
- --------------------------------------------------------------------------------
Notes to Charts
/1/ Does not include a sales charge.
/2/ Includes the maximum sales charge of 4.50%.
/3/ Lehman U.S. Government Bond Index is an unmanaged index of U.S. Treasury
and U.S. Government Agency securities.
/4/ Lehman U.S. Long Government Bond Index is an unmanaged index of U.S.
Treasury and U.S. government agency securities with a maturity of 10 years
or more.
/5/ Morningstar Long Government Fund Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Morningstar, Inc.
/6/ 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%.
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
- --------------------------------------------------------------------------------
High-yield bonds extended their run of favorable returns over the past 12
months, but gains were more modest than in previous years. Emerging market
issues gained thanks to improving conditions in many developing nations, and
selected convertible securities also moved higher.
For the fiscal year ended September 30, 2004, the total return on Loomis Sayles
High Income Fund's Class A shares was 11.14% at net asset value, including $0.33
in reinvested dividends. The fund's benchmark, the Lehman High Yield Composite
Index, returned 12.55% for the same period, while Morningstar's High Yield Bond
category averaged 11.15%. As of September 30, 2004, the fund's SEC yield was
5.54%.
Despite the lag, emerging markets and convertibles contributed
The fund lagged its benchmark because we had reduced the fund's allocation to
high-yielding securities in order to increase exposure to non-dollar-denominated
debt and other securities. While performance for these two sectors was positive
during the period, it was not as strong as higher-yielding securities. However,
the weak U.S. dollar also heightened the value of bonds denominated in stronger
currencies. The fund's commitment to emerging markets - as well as stable global
economic conditions and healthy economies in several countries - was a positive.
Convertible bonds, which can be converted into common stock of the issuing
company under specified conditions, were also productive for the fund.
Technology and utility companies rebounded after a period of poor results, and
successful selection among certain high-yield issues aided returns.
Basic industries and energy issues added to returns
Companies in basic industries benefited from the expansion of the U.S. economy
and continued global growth. Worldwide demand for chemicals, paper and metals
has increased, creating higher prices for industrial commodities and better
earnings for materials producers. Dana Corporation, a manufacturer of automobile
and truck parts, used proceeds from the sale of a division to pay down debt and
strengthen its balance sheet. Increased vehicle production and aggressive cost
cutting boosted the company's credit standing. Fast-rising energy prices lifted
the bonds of Coastal Corp., a subsidiary of energy conglomerate El Paso
Corporation. Investors also rewarded Coastal's plan to address problems within
its exploration and production division.
Airlines and oil services held back returns
The U.S airline industry has been buffeted by the rising cost of jet fuel, weak
fare structures and costly labor agreements. Delta Airlines has seen its
once-solid financial position erode significantly; debt levels are high and cash
generation has lagged. With Delta facing a risk of bankruptcy, we eliminated the
fund's position. Bonds of Trico Marine, which services oil company rigs in the
Gulf of Mexico and the North Sea, fell on concerns about the company's ability
to weather its financial difficulties. We eliminated the position.
Forecast for strength in high-yield and non-dollar denominated issues
Economic conditions continue to improve for high-yield issuers and investors
still have a healthy appetite for yield. Demand also appears sufficient to
absorb new issues coming to market. Consequently, we believe lower-rated issues
will perform satisfactorily in upcoming quarters, although security selection
will be key in a market that has risen substantially in the last few years. With
no reason to believe the dollar will strengthen, we intend to seek opportunities
to increase exposure to non-dollar-denominated issues, including those in
emerging markets. In sector terms, we expect to cut exposure to consumer
cyclical areas, as U.S. consumers feel the pinch of high energy costs and
sluggish job creation.
5
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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.
Loomis Sayles High Income Fund
Growth of $10,000 Investment in Class A Shares
September 30, 1994 through September 30, 2004
[CHART]
Line chart
Class A Lehman
@ Maximum High Yield
Month Net Asset Sales Composite
End Value (1) Charge (2) Index
- ---------- --------- ---------- ----------
9/30/1994 10,000 9,550 10,000
10/31/1994 9,984 9,535 10,024
11/30/1994 9,826 9,384 9,897
12/31/1994 9,852 9,408 9,970
1/31/1995 9,924 9,477 10,105
2/28/1995 10,181 9,723 10,452
3/31/1995 10,247 9,786 10,564
4/30/1995 10,450 9,980 10,833
5/31/1995 10,643 10,164 11,137
6/30/1995 10,630 10,152 11,208
7/31/1995 10,813 10,327 11,349
8/31/1995 10,821 10,334 11,385
9/30/1995 10,876 10,387 11,525
10/31/1995 10,919 10,428 11,596
11/30/1995 10,939 10,447 11,698
12/31/1995 11,013 10,518 11,882
1/31/1996 11,215 10,710 12,091
2/29/1996 11,292 10,784 12,101
3/31/1996 11,271 10,764 12,092
4/30/1996 11,406 10,893 12,119
5/31/1996 11,529 11,011 12,192
6/30/1996 11,603 11,081 12,293
7/31/1996 11,716 11,189 12,350
8/31/1996 11,855 11,322 12,483
9/30/1996 12,220 11,670 12,784
10/31/1996 12,193 11,645 12,883
11/30/1996 12,445 11,885 13,139
12/31/1996 12,655 12,085 13,231
1/31/1997 12,665 12,095 13,352
2/28/1997 13,108 12,518 13,575
3/31/1997 12,934 12,352 13,379
4/30/1997 13,006 12,421 13,509
5/31/1997 13,438 12,834 13,809
6/30/1997 13,526 12,917 14,000
7/31/1997 13,895 13,270 14,385
8/31/1997 13,984 13,354 14,352
9/30/1997 14,400 13,752 14,637
10/31/1997 14,275 13,633 14,650
11/30/1997 14,466 13,815 14,790
12/31/1997 14,601 13,944 14,919
1/31/1998 14,820 14,153 15,188
2/28/1998 14,799 14,133 15,277
3/31/1998 14,952 14,279 15,420
4/30/1998 15,032 14,356 15,481
5/31/1998 15,008 14,333 15,535
6/30/1998 15,059 14,382 15,591
7/31/1998 15,037 14,360 15,679
8/31/1998 13,993 13,364 14,814
9/30/1998 13,860 13,237 14,881
10/31/1998 13,569 12,959 14,576
11/30/1998 14,544 13,889 15,181
12/31/1998 14,350 13,704 15,198
1/31/1999 14,673 14,013 15,424
2/28/1999 14,765 14,101 15,333
3/31/1999 15,005 14,329 15,479
4/30/1999 15,327 14,638 15,779
5/31/1999 14,952 14,279 15,565
6/30/1999 14,910 14,239 15,532
7/31/1999 14,850 14,182 15,594
8/31/1999 14,619 13,961 15,422
9/30/1999 14,524 13,870 15,311
10/31/1999 14,654 13,995 15,209
11/30/1999 14,751 14,087 15,387
12/31/1999 14,924 14,252 15,561
1/31/2000 14,758 14,094 15,494
2/29/2000 14,824 14,157 15,524
3/31/2000 14,377 13,730 15,198
4/30/2000 14,368 13,721 15,222
5/31/2000 13,967 13,339 15,066
6/30/2000 14,390 13,743 15,373
7/31/2000 14,475 13,824 15,490
8/31/2000 14,417 13,769 15,596
9/30/2000 14,119 13,484 15,460
10/31/2000 13,414 12,811 14,965
11/30/2000 12,300 11,746 14,372
12/31/2000 12,520 11,956 14,650
1/31/2001 13,973 13,345 15,747
2/28/2001 13,903 13,278 15,957
3/31/2001 13,193 12,599 15,581
4/30/2001 12,788 12,213 15,387
5/31/2001 12,822 12,245 15,664
6/30/2001 12,086 11,543 15,225
7/31/2001 12,325 11,770 15,449
8/31/2001 12,230 11,679 15,631
9/30/2001 11,117 10,617 14,581
10/31/2001 10,995 10,500 14,941
11/30/2001 11,351 10,840 15,486
12/31/2001 11,186 10,683 15,423
1/31/2002 11,255 10,749 15,530
2/28/2002 10,913 10,422 15,314
3/31/2002 11,207 10,703 15,682
4/30/2002 11,115 10,615 15,933
5/31/2002 10,953 10,460 15,845
6/30/2002 10,170 9,712 14,676
7/31/2002 9,484 9,057 14,035
8/31/2002 9,817 9,375 14,436
9/30/2002 9,453 9,027 14,246
10/31/2002 9,448 9,023 14,122
11/30/2002 10,076 9,623 14,996
12/31/2002 10,196 9,738 15,206
1/31/2003 10,412 9,944 15,712
2/28/2003 10,558 10,083 15,906
3/31/2003 10,831 10,343 16,364
4/30/2003 11,457 10,941 17,334
5/31/2003 11,657 11,133 17,514
6/30/2003 11,909 11,373 18,017
7/31/2003 11,672 11,147 17,819
8/31/2003 11,796 11,265 18,024
9/30/2003 12,183 11,634 18,517
10/31/2003 12,442 11,882 18,891
11/30/2003 12,702 12,131 19,177
12/31/2003 13,041 12,454 19,611
1/31/2004 13,243 12,647 19,986
2/29/2004 13,185 12,592 19,935
3/31/2004 13,260 12,664 20,071
4/30/2004 12,957 12,374 19,934
5/31/2004 12,621 12,053 19,597
6/30/2004 12,894 12,313 19,878
7/31/2004 12,998 12,413 20,148
8/31/2004 13,353 12,752 20,543
9/30/2004 13,537 12,923 20,841
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
Since
1 Year 5 Years 10 Years/6/ Inception/6/
------ ------- ----------- ------------
Class A (Inception 2/22/84)
Net Asset Value/1/ 11.14% -1.39% 3.07% --
With Maximum Sales Charge/2/ 6.12 -2.29 2.60 --
Class B (Inception 9/20/93)
Net Asset Value/1/ 10.54 -2.09 2.35 --
With CDSC/4/ 5.54 -2.34 2.35 --
Class C (Inception 3/2/98)
Net Asset Value/1/ 10.54 -2.09 -- -2.08%
With CDSC/4/ 9.54 -2.09 -- -2.08
- --------------------------------------------------------------------------------
Since
Class C
Comparative Performance 1 Year 5 Years 10 Years Inception/7/
- ----------------------- ------ ------- -------- ------------
Lehman High Yield Composite Index/3/ 12.55% 6.36% 7.62% 4.74%
Morningstar High Yield Bond Fund Avg./5/ 11.15 4.40 5.74 2.55
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 September 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Credit Quality
- --------------------------------------------------------------------------------
[CHART]
Pie chart
Aaa 2.3%
Baa 2.4%
Ba 36.8%
B 31.1%
Caa 13.1%
Ca 1.1%
Not Rated* 9.8%
Short Term & Other 3.4%
Credit quality is based on bond ratings from Moody's Investor Services Inc.
*Securities that are not rated by Moody's may be rated by another rating agency
or by Loomis Sayles.
- --------------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------------
[CHART]
Pie chart
1 year or less 2.7%
1-5 years 24.2%
5-10 years 38.3%
10+ years 34.8%
Average Effective Maturity: 11.2 years
- --------------------------------------------------------------------------------
Notes to Charts
/1/ Does not include a sales charge. Effective 2/1/04, a 1% front end sales
charge was removed from Class C shares.
/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%.
Class C share performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/5/ Morningstar High Yield Bond Fund Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Morningstar, Inc.
/6/ 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
- --------------------------------------------------------------------------------
Loomis Sayles Limited Term Government and Agency Fund provided a total return of
1.87% during the fiscal year ended September 30, 2004, based on the net asset
value of Class A shares and $0.42 in dividends reinvested. The fund's benchmark,
the Lehman Intermediate Government Bond Index, had a slight edge over the fund
for the period, returning 1.91%, while the average return on the fund's
category, Morningstar's Short Government, was 1.15%. For the same period, the
Lehman 1-5 Year Government Bond Index returned 1.46%. The fund's 30-day SEC
yield was 2.51% at the end of September, 2004.
Yield curve flattens, giving advantage to higher-yielding securities
Between June and September of 2004, the Federal Reserve Board raised the federal
funds rate (the only rate the Fed directly controls) from 1.00% to 1.75%, in a
series of three highly publicized moves. Although yields on short-term Treasury
bills rose along with the federal funds rate, the strength of the economy and
the low inflation rate seemed to ease investor concerns about the future. As a
result, long-term interest rates actually fell during the period. On the
long-end of the yield curve, falling interest rates meant rising prices, while
rising rates hurt prices in the short-term market.
Even though long- and short-term interest rates converged during the period -
flattening the yield curve - securities with more distant maturity dates
continue to offer investors a yield advantage because longer timelines mean
higher risk. Mortgage-backed securities also typically offer higher coupons than
Treasury securities because they are regarded as higher risk. The fund was able
to outperform its Morningstar category for the fiscal year because it had a
slightly longer duration and relatively high income from the mortgage-backed and
agency securities in the portfolio.
Outlook for a stronger economy and moderate increases in interest rates
We expect the Fed to continue to raise interest rates through the end of the
calendar year, maintaining what has been described as a measured pace. However,
we are less convinced than we were of the need for continued Fed tightening in
2005. We believe the Fed may pause once the federal funds rate reaches 2%. If
data suggests that what Fed Chairman Alan Greenspan described as an economic
"soft patch" is decisively past, yields could rise again.
Given the fact that interest rates at the short end of the yield curve have
risen, we believe the opportunities to extend duration to earn additional income
currently outweigh our concerns. We plan to continue to look for opportunities
in intermediate-term securities because we believe they will provide the best
price return for the fund and its shareholders. Although they continue to
account for a major portion of assets, we have reduced the fund's position in
mortgage-backed securities. We believe they will perform well in a moderately
rising interest-rate environment, but the sector as a whole no longer has the
attractive valuations it had one year ago.
7
- --------------------------------------------------------------------------------
Loomis Sayles Limited Term Government and Agency Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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.
Loomis Sayles Limited Term U.S. Government Fund
Growth of $10,000 Investment in Class A Shares
September 30, 1994 through September 30, 2004
[CHART]
Line chart
Class A Lehman
@ Maximum Intermediate Lehman 1-5 Yr.
Month Net Asset Sales Gov't Bond Gov't Bond
End Value(1) Charge(2) Index(3) Index
- ---------- --------- --------- ------------ --------------
9/30/1994 10,000 9,700 10,000 10000
10/31/1994 10,000 9,700 10,002 10013
11/30/1994 9,966 9,667 9,957 9962
12/31/1994 9,973 9,674 9,990 9984
1/31/1995 10,107 9,803 10,153 10136
2/28/1995 10,250 9,943 10,348 10308
3/31/1995 10,279 9,970 10,405 10365
4/30/1995 10,381 10,069 10,526 10471
5/31/1995 10,671 10,351 10,823 10711
6/30/1995 10,718 10,397 10,892 10774
7/31/1995 10,713 10,391 10,897 10798
8/31/1995 10,807 10,483 10,987 10873
9/30/1995 10,874 10,548 11,060 10934
10/31/1995 11,024 10,693 11,182 11039
11/30/1995 11,156 10,822 11,318 11153
12/31/1995 11,274 10,935 11,430 11249
1/31/1996 11,336 10,996 11,526 11349
2/29/1996 11,200 10,864 11,404 11273
3/31/1996 11,129 10,795 11,352 11239
4/30/1996 11,100 10,767 11,319 11230
5/31/1996 11,062 10,730 11,313 11237
6/30/1996 11,149 10,814 11,428 11335
7/31/1996 11,173 10,838 11,464 11375
8/31/1996 11,169 10,834 11,477 11404
9/30/1996 11,311 10,971 11,625 11528
10/31/1996 11,493 11,148 11,816 11686
11/30/1996 11,636 11,287 11,958 11795
12/31/1996 11,543 11,197 11,894 11766
1/31/1997 11,592 11,244 11,940 11819
2/28/1997 11,607 11,259 11,959 11842
3/31/1997 11,546 11,200 11,891 11806
4/30/1997 11,648 11,299 12,025 11920
5/31/1997 11,719 11,367 12,119 12006
6/30/1997 11,832 11,477 12,222 12098
7/31/1997 12,027 11,666 12,448 12272
8/31/1997 12,006 11,646 12,400 12258
9/30/1997 12,131 11,767 12,535 12370
10/31/1997 12,267 11,899 12,681 12486
11/30/1997 12,288 11,919 12,709 12510
12/31/1997 12,381 12,010 12,812 12603
1/31/1998 12,561 12,184 12,980 12748
2/28/1998 12,532 12,156 12,966 12745
3/31/1998 12,511 12,135 13,006 12789
4/30/1998 12,559 12,183 13,068 12850
5/31/1998 12,641 12,262 13,158 12927
6/30/1998 12,733 12,351 13,247 13001
7/31/1998 12,750 12,367 13,298 13056
8/31/1998 12,954 12,565 13,549 13257
9/30/1998 13,324 12,925 13,865 13498
10/31/1998 13,195 12,799 13,888 13551
11/30/1998 13,154 12,760 13,846 13521
12/31/1998 13,182 12,786 13,900 13567
1/31/1999 13,253 12,855 13,962 13626
2/28/1999 13,101 12,708 13,770 13511
3/31/1999 13,162 12,767 13,861 13605
4/30/1999 13,200 12,804 13,899 13644
5/31/1999 13,101 12,708 13,814 13599
6/30/1999 13,016 12,626 13,834 13637
7/31/1999 12,954 12,565 13,836 13660
8/31/1999 12,949 12,560 13,855 13693
9/30/1999 13,096 12,703 13,974 13796
10/31/1999 13,121 12,727 14,002 13828
11/30/1999 13,134 12,740 14,011 13846
12/31/1999 13,092 12,699 13,967 13833
1/31/2000 13,036 12,645 13,920 13805
2/29/2000 13,152 12,757 14,036 13910
3/31/2000 13,315 12,916 14,196 14020
4/30/2000 13,272 12,874 14,190 14038
5/31/2000 13,279 12,881 14,228 14085
6/30/2000 13,469 13,065 14,454 14269
7/31/2000 13,536 13,130 14,550 14362
8/31/2000 13,678 13,268 14,713 14493
9/30/2000 13,784 13,370 14,842 14619
10/31/2000 13,833 13,418 14,943 14705
11/30/2000 14,021 13,601 15,163 14875
12/31/2000 14,185 13,760 15,430 15091
1/31/2001 14,366 13,935 15,635 15297
2/28/2001 14,473 14,039 15,779 15413
3/31/2001 14,565 14,128 15,893 15535
4/30/2001 14,535 14,099 15,843 15545
5/31/2001 14,608 14,170 15,909 15622
6/30/2001 14,618 14,180 15,960 15675
7/31/2001 14,890 14,444 16,257 15904
8/31/2001 14,989 14,539 16,402 16023
9/30/2001 15,224 14,767 16,752 16335
10/31/2001 15,452 14,989 17,013 16531
11/30/2001 15,251 14,794 16,810 16422
12/31/2001 15,158 14,704 16,729 16396
1/31/2002 15,239 14,781 16,801 16448
2/28/2002 15,389 14,928 16,940 16555
3/31/2002 15,168 14,713 16,685 16383
4/30/2002 15,445 14,982 16,997 16628
5/31/2002 15,550 15,084 17,116 16721
6/30/2002 15,706 15,235 17,329 16897
7/31/2002 15,931 15,453 17,656 17159
8/31/2002 16,087 15,604 17,858 17281
9/30/2002 16,231 15,745 18,165 17490
10/31/2002 16,267 15,779 18,152 17518
11/30/2002 16,192 15,707 18,009 17422
12/31/2002 16,395 15,903 18,341 17657
1/31/2003 16,387 15,895 18,301 17640
2/28/2003 16,529 16,033 18,507 17768
3/31/2003 16,518 16,022 18,511 17795
4/30/2003 16,546 16,049 18,563 17836
5/31/2003 16,647 16,147 18,855 17993
6/30/2003 16,617 16,118 18,824 18001
7/31/2003 16,271 15,783 18,367 17762
8/31/2003 16,325 15,835 18,400 17771
9/30/2003 16,596 16,098 18,799 18040
10/31/2003 16,479 15,985 18,615 17920
11/30/2003 16,524 16,028 18,616 17912
12/31/2003 16,640 16,140 18,761 18038
1/31/2004 16,711 16,210 18,863 18103
2/29/2004 16,840 16,335 19,042 18237
3/31/2004 16,904 16,397 19,175 18330
4/30/2004 16,600 16,102 18,746 18038
5/31/2004 16,545 16,048 18,686 17999
6/30/2004 16,608 16,109 18,734 18019
7/31/2004 16,701 16,200 18,869 18115
8/31/2004 16,911 16,404 19,150 18311
9/30/2004 16,903 16,399 19,157 18303
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
Since
1 Year 5 Years 10 Years Inception
------ ------- -------- ---------
Class A (Inception 1/3/89)
Net Asset Value/1/ 1.87% 5.24% 5.39% --
With Maximum Sales Charge/2/ -1.22 4.61 5.07 --
Class B (Inception 9/27/93)
Net Asset Value/1/ 1.18 4.56 4.70 --
With CDSC/5/ -3.73 4.23 4.70 --
Class C (Inception 12/30/94)
Net Asset Value/1/ 1.27 4.58 -- 4.79%
With CDSC/5/ 0.29 4.58 -- 4.79
Class Y (Inception 3/31/94)
Net Asset Value/1/ 2.07 5.64 5.77 --
- --------------------------------------------------------------------------------
Since
Class C
Comparative Performance 1 Year 5 Years 10 Years Inception/7/
- ----------------------- ------ ------- -------- ------------
Lehman Int. Gov't. Bond Index/3/ 1.91% 6.51% 6.72% 6.91%
Lehman 1-5 Yr. Gov't Bond Index/4/ 1.46 5.82 6.23 6.41
Morningstar Short Gov't Fund Avg./6/ 1.15 5.00 5.49 5.63
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 September 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portfolio Mix
- --------------------------------------------------------------------------------
[CHART]
Pie chart
Mortgage-Backed 50.0%
Treasuries 30.7%
Government Agencies 13.8%
Asset-Backed Securities 4.8%
Short-Term & Other 0.7%
- --------------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------------
[CHART]
Pie chart
1 year or less 8.4%
1-5 years 61.4%
5-10 years 30.2%
Average Effective Maturity: 3.7 years
- --------------------------------------------------------------------------------
Notes to Charts
/1/ Does not include a sales charge. Effective 2/1/04, a 1% front end sales
charge was removed from Class C shares.
/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/ Lehman 1-5 Year Government Bond Index is an unmanaged, market-weighted
index of bonds issued by the U.S. government and its agencies, with
maturities between 1 and 5 years.
/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%.
Class C share performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/6/ Morningstar Short Government Fund Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Morningstar, Inc.
/7/ 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
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund provided a total return of
4.88% based on the net asset value of Class A shares and $0.61 in dividends
reinvested during the fiscal year ended September 30, 2004. For the same period,
the fund's benchmark, Lehman Municipal Bond Index, returned 4.60%, while the
average return on Morningstar's Muni Massachusetts category was 3.68%. The
fund's emphasis on longer-term bonds and on some of the better performing
sectors - healthcare and higher education - helped keep it slightly ahead of its
nationally diversified benchmark, and allowed it to outperform its Massachusetts
peer group.
The fund's 30-day SEC yield at the end of September 2004 was 2.97%, equivalent
to 4.82% adjusted for the combined maximum federal and Massachusetts income tax
rates of 38.45%.
Higher education and healthcare bonds performed well
Demand for the higher yields found in the healthcare and higher education
sectors was the driving force behind their positive price performance. Specific
bonds that performed well include Massachusetts Health & Educational Facilities
Authority for Nichols College, which received a boost when the school's bond
rating was upgraded. The superior performance of Massachusetts Development
Finance Agency for Mount Holyoke College was largely attributable to its longer
maturity. We continue to hold both the Nichols and Mount Holyoke bonds. However,
we sold bonds issued by Massachusetts Development Finance Agency for Concord
Assabet Family Services. Concord Assabet has been in the portfolio for some
time; we decided to take advantage of the price rise in these formerly
distressed securities and eliminated the position. Relatively high yields from
several of the fund's healthcare bonds also contributed to the fund's positive
results, as did some of its longer-term bonds in the transportation sector. In
general, higher education and healthcare remain the two most promising sectors
in Massachusetts.
Tax-backed bonds, housing, and one healthcare bond underperformed
Sectors with the most negative impact on fund performance included state General
Obligation bonds (GOs) and the leases and housing sectors. GOs are backed by
receipts from taxpayers and, like the lease sector, they are generally of higher
credit quality and offer lower yields. Demand for higher-quality, lower-yielding
issues has been relatively weak, so price performance has been relatively
anemic. The housing sector was weak as refinancings continued during the year,
making the bonds less attractive.
Specific bonds that performed poorly included Massachusetts Development Finance
Agency for Alliance Health, which experienced operating difficulties. We sold
the bonds. Massachusetts Industrial Finance Agency for Briscoe Housing Assisted
Living bonds hurt the fund when they were called well ahead of the scheduled
maturity date. Massachusetts Housing Finance Agency, Single-Family Housing bonds
suffered with the sector as a whole.
Short rates rose as long rates fell during the past 12 months
Surprisingly, as the Federal Reserve Board raised the federal funds rate (the
only interest rate it directly controls), yields on long-term bonds have
actually fallen. Meanwhile, the economy has continued to grow with relatively
low inflation, supporting lower yields on long bonds. Although we expect
interest rates to continue to rise, we believe the Fed will be able to keep up
its "measured" pace. However, even a gradual increase in rates is likely to have
a negative impact on bond prices. Consequently, we have shortened the average
maturity of the portfolio, trimming exposure to longer maturity bonds.
Looking ahead, we believe the credit markets will stabilize as investors become
more comfortable with the measured pace at which interest rates are expected to
rise. We also believe the municipal markets will be less volatile than other
markets in the gradually rising environment for interest rates that we
anticipate.
9
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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.
Loomis Sayles Massachusetts Tax Free Income Fund
Growth of $10,000 Investment in Class A Shares
September 30, 1994 through September 30, 2004
[CHART]
Line chart
Class A Lehman
@ Maximum Municipal
Month Net Asset Sales Bond
End Value (1) Charge (2) Index (3)
- ---------- --------- ---------- ---------
9/30/1994 10,000 9,575 10,000
10/31/1994 9,759 9,344 9,822
11/30/1994 9,523 9,118 9,645
12/31/1994 9,795 9,379 9,857
1/31/1995 10,129 9,699 10,139
2/28/1995 10,459 10,015 10,434
3/31/1995 10,535 10,087 10,554
4/30/1995 10,552 10,103 10,566
5/31/1995 10,885 10,422 10,903
6/30/1995 10,716 10,261 10,808
7/31/1995 10,791 10,333 10,910
8/31/1995 10,920 10,456 11,049
9/30/1995 10,995 10,528 11,118
10/31/1995 11,180 10,705 11,280
11/30/1995 11,399 10,914 11,467
12/31/1995 11,543 11,052 11,577
1/31/1996 11,579 11,087 11,665
2/29/1996 11,464 10,976 11,586
3/31/1996 11,320 10,839 11,438
4/30/1996 11,288 10,808 11,406
5/31/1996 11,303 10,823 11,401
6/30/1996 11,411 10,926 11,526
7/31/1996 11,496 11,008 11,630
8/31/1996 11,491 11,002 11,627
9/30/1996 11,670 11,174 11,790
10/31/1996 11,792 11,291 11,923
11/30/1996 11,995 11,485 12,141
12/31/1996 11,916 11,410 12,090
1/31/1997 11,937 11,430 12,113
2/28/1997 12,052 11,540 12,224
3/31/1997 11,916 11,409 12,061
4/30/1997 12,012 11,502 12,162
5/31/1997 12,183 11,665 12,345
6/30/1997 12,310 11,787 12,477
7/31/1997 12,660 12,122 12,822
8/31/1997 12,543 12,010 12,702
9/30/1997 12,710 12,169 12,853
10/31/1997 12,772 12,229 12,936
11/30/1997 12,848 12,302 13,012
12/31/1997 13,026 12,472 13,202
1/31/1998 13,131 12,573 13,338
2/28/1998 13,113 12,556 13,342
3/31/1998 13,076 12,520 13,354
4/30/1998 13,030 12,477 13,293
5/31/1998 13,231 12,669 13,504
6/30/1998 13,277 12,713 13,557
7/31/1998 13,285 12,721 13,591
8/31/1998 13,497 12,923 13,801
9/30/1998 13,646 13,066 13,973
10/31/1998 13,590 13,013 13,973
11/30/1998 13,614 13,035 14,022
12/31/1998 13,665 13,085 14,057
1/31/1999 13,822 13,235 14,224
2/28/1999 13,759 13,174 14,162
3/31/1999 13,742 13,158 14,181
4/30/1999 13,784 13,198 14,217
5/31/1999 13,694 13,112 14,135
6/30/1999 13,471 12,898 13,931
7/31/1999 13,518 12,943 13,982
8/31/1999 13,326 12,760 13,870
9/30/1999 13,286 12,721 13,876
10/31/1999 13,100 12,543 13,725
11/30/1999 13,215 12,654 13,871
12/31/1999 13,100 12,544 13,768
1/31/2000 12,993 12,441 13,708
2/29/2000 13,154 12,595 13,867
3/31/2000 13,400 12,830 14,170
4/30/2000 13,340 12,773 14,086
5/31/2000 13,288 12,723 14,013
6/30/2000 13,555 12,979 14,384
7/31/2000 13,727 13,143 14,585
8/31/2000 13,898 13,308 14,809
9/30/2000 13,843 13,255 14,732
10/31/2000 13,955 13,362 14,893
11/30/2000 14,014 13,418 15,006
12/31/2000 14,312 13,704 15,377
1/31/2001 14,362 13,752 15,529
2/28/2001 14,412 13,800 15,578
3/31/2001 14,408 13,796 15,718
4/30/2001 14,260 13,654 15,547
5/31/2001 14,398 13,786 15,715
6/30/2001 14,500 13,884 15,820
7/31/2001 14,721 14,095 16,054
8/31/2001 14,997 14,360 16,319
9/30/2001 14,913 14,280 16,264
10/31/2001 15,052 14,412 16,458
11/30/2001 14,941 14,306 16,319
12/31/2001 14,772 14,144 16,165
1/31/2002 14,855 14,223 16,445
2/28/2002 15,023 14,384 16,643
3/31/2002 14,746 14,119 16,317
4/30/2002 15,016 14,378 16,636
5/31/2002 15,133 14,490 16,737
6/30/2002 15,309 14,658 16,914
7/31/2002 15,503 14,844 17,132
8/31/2002 15,692 15,025 17,338
9/30/2002 16,045 15,363 17,717
10/31/2002 15,753 15,084 17,424
11/30/2002 15,654 14,989 17,351
12/31/2002 15,967 15,288 17,717
1/31/2003 15,934 15,256 17,672
2/28/2003 16,184 15,496 17,919
3/31/2003 16,198 15,510 17,930
4/30/2003 16,302 15,609 18,049
5/31/2003 16,719 16,009 18,471
6/30/2003 16,644 15,937 18,393
7/31/2003 15,922 15,245 17,749
8/31/2003 16,025 15,344 17,881
9/30/2003 16,459 15,760 18,407
10/31/2003 16,433 15,735 18,315
11/30/2003 16,615 15,909 18,505
12/31/2003 16,770 16,057 18,659
1/31/2004 16,884 16,166 18,766
2/29/2004 17,132 16,404 19,048
3/31/2004 17,093 16,366 18,982
4/30/2004 16,633 15,926 18,532
5/31/2004 16,560 15,856 18,465
6/30/2004 16,580 15,875 18,532
7/31/2004 16,817 16,102 18,776
8/31/2004 17,146 16,418 19,152
9/30/2004 17,273 16,543 19,254
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
1 Year 5 Years/5/ 10 Years/5/
------ ---------- -----------
Class A (Inception 3/23/84)
Net Asset Value/1/ 4.88% 5.39% 5.62%
With Maximum Sales Charge/2/ 0.41 4.47 5.16
Class B (Inception 9/13/93)
Net Asset Value/1/ 4.18 4.69 4.93
With CDSC/4/ -0.82 4.36 4.93
- --------------------------------------------------------------------------------
Comparative Performance 1 Year 5 Years 10 Years
- ----------------------- ------ ------- --------
Lehman Municipal Bond Index/3/ 4.60% 6.77% 6.77%
Morningstar Muni Massachusetts 3.68 5.84 5.70
Fund Avg./6/
- --------------------------------------------------------------------------------
Yields as of September 30, 2004
- --------------------------------------------------------------------------------
Class A Class B
------- -------
SEC 30-day yield/7/ 2.97% 2.34%
Taxable equivalent yield/8/ 4.82 3.80
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 September 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Credit Quality
- --------------------------------------------------------------------------------
[Chart]
Pie chart
Aaa 33.2%
Aa 25.7%
A 22.7%
Baa 9.3%
Not Rated* 6.2%
Short-Term & Other 2.9%
- --------------------------------------------------------------------------------
Credit quality is based on bond ratings from Moody's Investor Services, Inc.
*Securities that are not rated by Moody's may be rated by another rating agency
or by Loomis Sayles.
Effective Maturity
- --------------------------------------------------------------------------------
1 year or less 2.3%
1-5 years 6.0%
5-10 years 71.5%
10+ years 20.2%
Average effective maturity: 8.0 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 index of municipal bonds.
/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%.
/5/ Fund performance has been increased by expense waivers, without which
performance would have been lower.
/6/ Morningstar Muni Massachusetts Fund Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Morningstar, 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 Treasury securities and high-quality corporate
bonds during the past 12 months, as demand for their attractive, after-tax
yields remained solid. Since interest rates in general were low by historical
standards, higher-yielding municipal bonds were in especially strong demand.
Loomis Sayles Municipal Income Fund provided a total return of 4.88%, based on
the net asset value of Class A shares and $0.29 in dividends reinvested during
the fiscal year ended September 30, 2004. This was slightly above both its
benchmark, the Lehman Municipal Bond Index, which returned 4.60% for the period,
and the average performance of the Morningstar Municipal National Long category,
which returned 4.06%.
The fund's 30-day SEC yield at the end of September 2004 was 3.07%, equivalent
to 4.72% adjusted for the maximum federal income tax rate of 35.00%.
Strongest performers were healthcare and resource recovery bonds
The fund's portfolio included industrial development bonds (IDBs) and resource
recovery bonds. IDBs are issued by municipalities for the benefit of local
companies and backed by revenues from the corporations that benefit from the
financing. Bonds that contributed most to the fund's performance included the
University of Michigan for University Hospital, and Western Generation Agency,
Oregon, for Wauna Cogeneration Project. Both of these experienced strong demand
during the period. Houston Texas Water & Sewer System bonds also got a lift in
price when the bonds were pre-refunded to their 2010 call date. This means that
the bonds are now secured by U.S. government securities (the highest credit
quality), with payment due in 2010, much earlier than their original maturity
date of 2023.
Tobacco settlement bonds were among weakest performers
Bonds having the most negative performance included state appropriation-backed
tobacco bonds, such as the fund's Golden State Tobacco Securitization
Corporation, California Tobacco Settlement Enhanced Asset-Backed revenue bonds.
Payments from these bonds are secured by income promised to the state of
California through legal settlements from tobacco companies, as well as by an
appropriation from the state in case tobacco revenues prove insufficient to
service the debt. Despite this appropriation, these bonds were affected by
negative press and we sold them to avoid price volatility.
Massachusetts Housing Finance Agency, Single-Family Housing bonds also had a
tough year, as refinancings increased the likelihood that the bonds would be
called away, which reduced their attractiveness. We continue to hold these bonds
because the housing sector tends to perform relatively well in a rising interest
rate environment. However, litigation risks prompted us to eliminate the fund's
position in Lehigh County, Pennsylvania, General Purpose Authority for Saint
Luke's Hospital.
Short rates rose as long rates fell during the past 12 months
Surprisingly, as the Federal Reserve Board raised the federal funds rate (the
only rate the Fed directly controls), yields on long-term bonds have actually
fallen. Meanwhile, the economy has continued to grow with relatively low
inflation, easing concerns about sharply rising rates and supporting lower
yields on long bonds. Although we expect interest rates to continue to rise, we
believe the Fed will be able to keep the pace "measured." However, even a
gradual increase in rates is likely to have a negative impact on bond prices.
Consequently, we have shortened the average maturity of the portfolio, trimming
exposure to longer maturity bonds.
Looking ahead, we believe the credit markets will stabilize as investors become
more comfortable with the graduated pace at which interest rates are expected to
rise. We also believe the municipal markets will be less volatile than other
fixed-income markets.
11
- --------------------------------------------------------------------------------
Loomis Sayles Municipal Income Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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.
Loomis Sayles Municipal Income Fund
Growth of $10,000 Investment in Class A Shares
September 30, 1994 through September 30, 2004
[CHART]
Line chart
Class A Lehman
@ Maximum Municipal
Month Net Asset Sales Bond
End Value (1) Charge (2) Index (3)
- ---------- --------- ---------- ---------
9/30/1994 10,000 9,550 10,000
10/31/1994 9,780 9,340 9,822
11/30/1994 9,489 9,062 9,645
12/31/1994 9,738 9,300 9,857
1/31/1995 10,078 9,624 10,139
2/28/1995 10,428 9,958 10,434
3/31/1995 10,562 10,087 10,554
4/30/1995 10,582 10,106 10,566
5/31/1995 10,878 10,388 10,903
6/30/1995 10,738 10,255 10,808
7/31/1995 10,832 10,344 10,910
8/31/1995 10,911 10,420 11,049
9/30/1995 10,990 10,496 11,118
10/31/1995 11,144 10,643 11,280
11/30/1995 11,329 10,819 11,467
12/31/1995 11,417 10,903 11,577
1/31/1996 11,507 10,989 11,665
2/29/1996 11,438 10,923 11,586
3/31/1996 11,307 10,798 11,438
4/30/1996 11,282 10,775 11,406
5/31/1996 11,273 10,766 11,401
6/30/1996 11,402 10,889 11,526
7/31/1996 11,485 10,968 11,630
8/31/1996 11,476 10,960 11,627
9/30/1996 11,669 11,144 11,790
10/31/1996 11,801 11,270 11,923
11/30/1996 11,980 11,441 12,141
12/31/1996 11,944 11,407 12,090
1/31/1997 11,956 11,418 12,113
2/28/1997 12,062 11,520 12,224
3/31/1997 11,909 11,373 12,061
4/30/1997 11,996 11,456 12,162
5/31/1997 12,132 11,586 12,345
6/30/1997 12,300 11,747 12,477
7/31/1997 12,632 12,064 12,822
8/31/1997 12,557 11,992 12,702
9/30/1997 12,662 12,092 12,853
10/31/1997 12,751 12,177 12,936
11/30/1997 12,790 12,215 13,012
12/31/1997 12,967 12,383 13,202
1/31/1998 13,128 12,537 13,338
2/28/1998 13,167 12,574 13,342
3/31/1998 13,187 12,593 13,354
4/30/1998 13,125 12,534 13,293
5/31/1998 13,266 12,669 13,504
6/30/1998 13,322 12,723 13,557
7/31/1998 13,345 12,744 13,591
8/31/1998 13,522 12,914 13,801
9/30/1998 13,632 13,018 13,973
10/31/1998 13,585 12,974 13,973
11/30/1998 13,643 13,029 14,022
12/31/1998 13,659 13,044 14,057
1/31/1999 13,793 13,172 14,224
2/28/1999 13,764 13,144 14,162
3/31/1999 13,769 13,150 14,181
4/30/1999 13,811 13,189 14,217
5/31/1999 13,762 13,143 14,135
6/30/1999 13,605 12,993 13,931
7/31/1999 13,646 13,032 13,982
8/31/1999 13,507 12,899 13,870
9/30/1999 13,512 12,904 13,876
10/31/1999 13,316 12,717 13,725
11/30/1999 13,442 12,837 13,871
12/31/1999 13,282 12,684 13,768
1/31/2000 13,211 12,617 13,708
2/29/2000 13,358 12,757 13,867
3/31/2000 13,564 12,953 14,170
4/30/2000 13,489 12,882 14,086
5/31/2000 13,451 12,846 14,013
6/30/2000 13,697 13,081 14,384
7/31/2000 13,849 13,226 14,585
8/31/2000 14,041 13,409 14,809
9/30/2000 14,003 13,373 14,732
10/31/2000 14,118 13,482 14,893
11/30/2000 14,214 13,574 15,006
12/31/2000 14,448 13,798 15,377
1/31/2001 14,549 13,894 15,529
2/28/2001 14,572 13,917 15,578
3/31/2001 14,692 14,031 15,718
4/30/2001 14,535 13,881 15,547
5/31/2001 14,673 14,013 15,715
6/30/2001 14,790 14,125 15,820
7/31/2001 15,049 14,372 16,054
8/31/2001 15,288 14,600 16,319
9/30/2001 15,025 14,349 16,264
10/31/2001 15,228 14,543 16,458
11/30/2001 15,064 14,386 16,319
12/31/2001 14,880 14,210 16,165
1/31/2002 15,124 14,443 16,445
2/28/2002 15,328 14,638 16,643
3/31/2002 15,077 14,398 16,317
4/30/2002 15,324 14,634 16,636
5/31/2002 15,402 14,709 16,737
6/30/2002 15,545 14,846 16,914
7/31/2002 15,645 14,941 17,132
8/31/2002 15,767 15,057 17,338
9/30/2002 16,019 15,298 17,717
10/31/2002 15,612 14,910 17,424
11/30/2002 15,587 14,886 17,351
12/31/2002 15,968 15,249 17,717
1/31/2003 15,768 15,059 17,672
2/28/2003 16,000 15,280 17,919
3/31/2003 15,992 15,272 17,930
4/30/2003 16,134 15,408 18,049
5/31/2003 16,536 15,792 18,471
6/30/2003 16,501 15,759 18,393
7/31/2003 15,785 15,075 17,749
8/31/2003 15,951 15,233 17,881
9/30/2003 16,428 15,689 18,407
10/31/2003 16,351 15,615 18,315
11/30/2003 16,561 15,816 18,505
12/31/2003 16,707 15,955 18,659
1/31/2004 16,809 16,053 18,766
2/29/2004 17,070 16,302 19,048
3/31/2004 17,058 16,290 18,982
4/30/2004 16,638 15,889 18,532
5/31/2004 16,601 15,854 18,465
6/30/2004 16,611 15,864 18,532
7/31/2004 16,826 16,069 18,776
8/31/2004 17,130 16,359 19,152
9/30/2004 17,226 16,443 19,254
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
------ ------- --------
Class A (Inception 5/9/77)
Net Asset Value/1/ 4.88% 4.97% 5.59%
With Maximum Sales Charge/2/ 0.15 4.01 5.10
Class B (Inception 9/13/93)
Net Asset Value/1/ 4.24 4.22 4.82
With CDSC/4/ -0.76 3.88 4.82
- --------------------------------------------------------------------------------
Comparative Performance 1 Year 5 Years 10 Years
- ----------------------- ------ ------- --------
Lehman Municipal Bond Index/3/ 4.60% 6.77% 6.77%
Morningstar Muni National Long
Fund Avg./5/ 4.06 5.76 5.84
Yields as of September 30, 2004
- --------------------------------------------------------------------------------
Class A Class B
------- -------
SEC 30-day yield/6/ 3.07% 2.47%
Taxable equivalent yield/7/ 4.72 3.80
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 September 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Credit Quality
- --------------------------------------------------------------------------------
[CHART]
Pie chart
Aaa 31.8%
Aa 9.1%
A 23.9%
Baa 21.0%
Not Rated* 12.1%
Short Term & Other 2.1%
- --------------------------------------------------------------------------------
Credit quality is based on bond ratings from Moody's Investor Services, Inc.
*Securities that are not rated by Moody's may be rated by another rating agency
or by Loomis Sayles.
Effective Maturity
- --------------------------------------------------------------------------------
[CHART]
Pie chart
1 year or less 12.2%
1-5 years 15.9%
5-10 years 62.9%
10+ years 9.0%
Average effective maturity: 7.2 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 index of municipal bonds.
/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%.
/5/ Morningstar Muni National Long Fund Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Morningstar, 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
- --------------------------------------------------------------------------------
Robust returns from high-yielding U.S. and international bonds helped Loomis
Sayles Strategic Income Fund deliver impressive results. The fund's total return
was 15.21% for the fiscal year ended September 30, 2004, based on the net asset
value of Class A shares and $0.86 in reinvested dividends. These results far
outdistanced the fund's benchmark, the Lehman Aggregate Bond Index, which
returned 3.68% for the period, and Morningstar's Multisector Bond category,
which averaged 7.17%. The fund's SEC yield at the end of September was 4.27%.
High-yield bonds and overseas holdings were performance drivers
Solid earnings growth in an expanding economy and the search for better yields
pushed prices of corporate bonds higher, including high-yield bonds. The
improving economy also contributed to lower default rates and bolstered the
credit standing of lower-rated, higher-yielding bonds. A weak U.S. dollar
provided momentum for fund holdings denominated in stronger foreign currencies.
Bonds denominated in Canadian dollars, which accounted for about 16% of the
portfolio at the end of the period, were key contributors to performance. Record
budget and trade deficits have been weakening the U.S. dollar since late 2003.
Meanwhile, the Canadian dollar has appreciated significantly. Canada's economy
continued to expand while the U.S. economy was going through what Federal
Reserve Board Chairman Alan Greenspan described as a "soft patch." Rising prices
for oil, an important export product, gave further impetus to Canada's currency.
Energy, emerging market and wireline issues aided results
Oil prices rose as global demand ran up against tight supplies. Record oil
prices also rewarded the fund's commitment to emerging market securities, which
represented about 10% of the portfolio. Bonds in Venezuela and Mexico, nations
whose governments rely heavily on revenue from oil taxes, benefited from higher
prices. Cerro Negro, a heavy oil project nearing completion in Venezuela, was
recently placed under review for a possible upgrade by Moody's. Increased
production and higher oil prices enabled Cerro Negro to reduce debt in 2004.
Natural gas pipeline issues also gained, thanks to higher energy prices and
consolidation within the industry.
Philippine Long Distance Telephone and Colt Telecom were leaders in the wireline
sector. Philippine Long Distance has enjoyed rapid expansion of subscriber
rolls, while Colt reduced its debt burden by buying back some convertible issues
that the fund held.
Brazilian issues and Imc Global were outstanding performers
Brazil's economy continues to rebound following the election of President Lula
da Silva in 2002, and the Central Bank recently raised its growth outlook. The
real, Brazil's currency, has appreciated dramatically against the dollar,
boosting bonds of the Federal Republic of Brazil. At IMC Global, a major
producer of agricultural chemicals, strong product demand and a firm pricing
environment led to good financial results. We reduced this commitment during the
period because of its high valuation.
The Dominican Republic and airlines disappointed
Despite pledges of timely interest payment, fears of default dragged down the
bonds of the Dominican Republic. High debt, high labor costs and expensive fuel
brought heavy losses to the U.S. airline industry, leaving it severely weakened
financially. We sold Delta Airlines bonds near the end of the period, as the
likelihood of bankruptcy grew.
Positioned for higher rates
We expect further interest-rate hikes by the Federal Reserve Board and have been
emphasizing fixed-income sectors that are less vulnerable to rising rates. As a
result, we continue to focus on corporate and high-yield bonds while downplaying
Treasury and agency issues. We believe careful selection among lower-rated
issues offers additional return potential, though not at the levels we have
seen. We are also seeking attractive opportunities in selected overseas markets
to increase exposure to their strong currencies.
13
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund
- --------------------------------------------------------------------------------
Investment Results through September 30, 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.
Loomis Sayles Strategic Income Fund
Growth of $10,000 Investment in Class A Shares
May 1, 1995 (inception) through September 30, 2004
[Chart]
Line Chart
Class A Lehman Lehman
@ Maximum Aggregate Aggregate
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 10,354 9,888 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 10,994 10,499 10593 10,630
3/31/1996 11,072 10,574 10519 10,564
4/30/1996 11,056 10,558 10460 10,521
5/31/1996 11,231 10,726 10438 10,506
6/30/1996 11,382 10,870 10579 10,647
7/31/1996 11,359 10,848 10608 10,677
8/31/1996 11,568 11,048 10590 10,674
9/30/1996 11,973 11,434 10774 10,869
10/31/1996 12,315 11,761 11013 11,095
11/30/1996 12,815 12,239 11202 11,292
12/31/1996 12,637 12,069 11098 11,201
1/31/1997 12,674 12,104 11132 11,249
2/28/1997 12,874 12,295 11159 11,289
3/31/1997 12,734 12,161 11036 11,157
4/30/1997 12,815 12,239 11201 11,326
5/31/1997 13,091 12,502 11307 11,446
6/30/1997 13,388 12,786 11441 11,585
7/31/1997 13,990 13,361 11749 11,902
8/31/1997 13,630 13,016 11649 11,804
9/30/1997 14,111 13,476 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 14,606 13,949 12358 12,517
4/30/1998 14,611 13,953 12423 12,581
5/31/1998 14,373 13,726 12541 12,672
6/30/1998 14,144 13,508 12647 12,755
7/31/1998 13,967 13,339 12674 12,786
8/31/1998 12,252 11,701 12880 12,785
9/30/1998 12,649 12,080 13182 13,088
10/31/1998 12,786 12,210 13112 13,034
11/30/1998 13,644 13,030 13186 13,164
12/31/1998 13,581 12,970 13226 13,194
1/31/1999 13,816 13,194 13320 13,282
2/28/1999 13,618 13,005 13088 13,071
3/31/1999 14,337 13,692 13160 13,171
4/30/1999 15,256 14,570 13202 13,249
5/31/1999 14,783 14,118 13086 13,115
6/30/1999 14,826 14,159 13045 13,092
7/31/1999 14,534 13,880 12989 13,039
8/31/1999 14,352 13,707 12983 13,024
9/30/1999 14,444 13,794 13133 13,165
10/31/1999 14,566 13,910 13182 13,220
11/30/1999 14,829 14,162 13181 13,242
12/31/1999 15,233 14,547 13117 13,216
1/31/2000 15,091 14,412 13074 13,172
2/29/2000 15,686 14,980 13232 13,339
3/31/2000 15,844 15,131 13407 13,495
4/30/2000 15,391 14,698 13368 13,452
5/31/2000 14,894 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 15,520 14,821 14051 14,123
10/31/2000 14,888 14,218 14144 14,180
11/30/2000 14,810 14,144 14376 14,371
12/31/2000 15,336 14,646 14642 14,646
1/31/2001 15,824 15,112 14882 14,933
2/28/2001 15,800 15,089 15011 15,058
3/31/2001 15,203 14,519 15087 15,109
4/30/2001 14,955 14,282 15024 15,042
5/31/2001 15,289 14,601 15115 15,150
6/30/2001 15,247 14,561 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 14,822 14,155 15872 15,798
10/31/2001 15,171 14,489 16204 16,116
11/30/2001 15,387 14,695 15980 15,927
12/31/2001 15,316 14,627 15879 15,832
1/31/2002 15,491 14,794 16007 15,965
2/28/2002 15,677 14,971 16162 16,114
3/31/2002 15,857 15,143 15894 15,881
4/30/2002 16,241 15,510 16202 16,184
5/31/2002 16,585 15,839 16339 16,306
6/30/2002 16,321 15,587 16481 16,365
7/31/2002 15,934 15,217 16680 16,504
8/31/2002 16,381 15,643 16961 16,808
9/30/2002 16,159 15,432 17236 17,049
10/31/2002 16,481 15,739 17157 16,990
11/30/2002 17,097 16,328 17153 17,036
12/31/2002 17,689 16,893 17507 17,389
1/31/2003 18,186 17,368 17522 17,436
2/28/2003 18,677 17,837 17765 17,684
3/31/2003 18,858 18,010 17751 17,701
4/30/2003 19,941 19,043 17897 17,910
5/31/2003 20,938 19,996 18231 18,252
6/30/2003 21,202 20,247 18195 18,248
7/31/2003 20,625 19,697 17583 17,661
8/31/2003 20,862 19,923 17700 17,787
9/30/2003 21,882 20,898 18168 18,262
10/31/2003 22,377 21,370 17999 18,131
11/30/2003 22,999 21,964 18042 18,194
12/31/2003 23,852 22,779 18226 18,401
1/31/2004 24,277 23,184 18372 18,560
2/29/2004 24,260 23,168 18571 18,743
3/31/2004 24,577 23,471 18710 18,892
4/30/2004 23,557 22,497 18223 18,409
5/31/2004 23,164 22,122 18150 18,316
6/30/2004 23,604 22,542 18253 18,432
7/31/2004 23,833 22,761 18434 18,628
8/31/2004 24,567 23,462 18786 18,997
9/30/2004 25,197 24,061 18837 19,071
Average Annual Total Returns -- September 30, 2004
- --------------------------------------------------------------------------------
Since
1 Year/7/ 5 Years/7/ Inception/7/
--------- ---------- ------------
Class A (Inception 5/1/95)
Net Asset Value/1/ 15.21% 11.78% 10.31%
With Maximum Sales Charge/2/ 10.05 10.76 9.77
Class B (Inception 5/1/95)
Net Asset Value/1/ 14.27 10.93 9.47
With CDSC/5/ 9.27 10.67 9.47
Class C (Inception 5/1/95)
Net Asset Value/1/ 14.27 10.94 9.45
With CDSC/5/ 13.27 10.94 9.45
Class Y (Inception 12/1/99)
Net Asset Value/1/ 15.47 -- 11.95
- --------------------------------------------------------------------------------
Since
Class A, Since
B and C Class Y
Comparative Performance 1 Year 5 Years Inception/8/ Inception/8/
- ----------------------- ------ ------- ------------ ------------
Lehman Aggregate Bond Index/3/ 3.68% 7.48% 7.02% 7.92%
Lehman U.S. Universal Bond Index/4/ 4.43 7.69 7.16 8.03
Morningstar Multi-Sector Bond
Fund Avg./6/ 7.17 6.73 6.65 5.98
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
prede-cessor fund. 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 September 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Credit Quality
- --------------------------------------------------------------------------------
[CHART]
Pie chart
Aaa 21.4%
Aa 8.8%
A 0.4%
Baa 4.1%
Ba 11.9%
B 22.8%
Caa 8.6%
Ca 1.4%
Not Rated* 8.9%
Short Term & Other 11.7%
Credit quality is based on bond ratings from Moody's Investor Services, Inc.
*Securities that are not rated by Moody's may be rated by another rating agency
or by Loomis Sayles.
- --------------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------------
[CHART]
Pie chart
1 year or less 10.1%
1-5 years 34.6%
5-10 years 19.2%
10+ years 36.1%
Average Effective Maturity: 11.3 years
- --------------------------------------------------------------------------------
Notes to Charts
/1/ Does not include a sales charge. Effective 2/1/04, a 1% front end sales
charge was removed from Class C shares.
/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. 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, among other 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%.
Class C share performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/6/ Morningstar Multi-Sector Bond Fund Average is the average performance
without sales charge of funds with similar investment objectives, as
calculated by Morningstar, Inc.
/7/ Fund performance has been increased by expense waivers, 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 the 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 Nvest Funds 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.
Proxy Voting Information
A description of the funds' proxy voting policies and procedures is available
without charge, upon request, by calling CDC Nvest Funds at 800-225-5478; on the
funds' website at www.cdcnvestfunds.com; and on the Securities and Exchange
Commission's website at www.sec.gov. Information regarding how the funds voted
proxies relating to portfolio securities during the 12-month period ended June
30, 2004 is available from the funds' website and the SEC's website.
Quarterly Portfolio Schedules
Beginning next quarter, the funds will file a complete schedule of portfolio
holdings with the SEC for the first and third quarters of each fiscal year on
Form N-Q. The funds' Forms N-Q will be available on the SEC's website at
www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in
Washington, DC. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
Understanding Your Funds' Expenses
- --------------------------------------------------------------------------------
As a mutual fund shareholder, you incur different costs: transaction costs,
including sales charges (loads) on purchases, redemption fees and certain
exchange fees and ongoing costs, including management fees, distribution fees
(12b-1 fees), and other fund expenses. In addition, each fund assesses a minimum
balance fee of $20 on an annual basis for accounts that fall below the required
minimum to establish an account. Certain exemptions may apply. These costs are
described in more detail in the funds' prospectus. The examples below are
intended to help you understand the ongoing costs of investing in the funds and
help you compare these with the ongoing costs of investing in other mutual
funds.
The first line in the table of each Class of fund shares shows the actual
account values and actual fund expenses you would have paid on a $1,000
investment in the fund from April 1, 2004 through September 30, 2004. It also
shows how much a $1,000 investment would be worth at the close of the period,
assuming actual fund returns and expenses. To estimate the expenses you paid
over the period, simply divide your account value by $1,000 (for example $8,600
account value divided by $1,000 = $8.60) and multiply the result by the number
in the Expenses Paid During Period column as shown below for your Class.
The second line in the table of each Class of fund shares provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratios and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account values
and expenses may not be used to estimate the actual ending account balance or
expenses you paid on your investment for the period. You may use this
information to compare the ongoing costs of investing in the fund and other
funds. To do so, compare this 5% hypothetical example with the 5% hypothetical
examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs. Therefore, the second line in the table of each
fund is useful in comparing ongoing costs only, and will not help you determine
the relative costs of owning different funds. If transaction costs were
included, total costs would be higher.
- ----------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ----------------------------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,008.20 $5.87
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.15 $5.91
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,004.90 $9.62
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.40 $9.67
- ----------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,004.90 $9.62
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.40 $9.67
- ----------------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,009.30 $4.57
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.45 $4.60
- ----------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.17%, 1.92%, 1.92%
and 0.91% for Class A, B, C and Y, respectively, multiplied by the average
account value over the period, multiplied by the number of days in the most
recent fiscal half-year divided by 366 (to reflect the half-year period).
16
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ----------------------------------------------------------------------------------------------------
Loomis Sayles Government Securities Fund
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,007.30 $ 6.77
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.25 $ 6.81
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,002.70 $10.51
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.50 $10.58
- ----------------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,006.20 $ 7.82
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,017.20 $ 7.87
- ----------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.35%, 2.10%, and
1.56% for Class A, B, and Y, respectively, multiplied by the average account
value over the period, multiplied by the number of days in the most recent
fiscal half-year divided by 366 (to reflect the half-year period).
- ----------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ----------------------------------------------------------------------------------------------------
Loomis Sayles High Income Fund
- ----------------------------------------------------------------------------------------------------
Class A
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,021.00 $ 8.54
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,016.55 $ 8.52
- ----------------------------------------------------------------------------------------------------
Class B
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,019.30 $12.37
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,012.75 $12.33
- ----------------------------------------------------------------------------------------------------
Class C
- ----------------------------------------------------------------------------------------------------
Actual $1,000 $1,019.30 $12.37
- ----------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,012.75 $12.33
- ----------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.69%, 2.45%, and
2.45% for Class A, B, and C, respectively, multiplied by the average account
value over the period, multiplied by the number of days in the most recent
fiscal half-year divided by 366 (to reflect the half-year period).
17
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ---------------------------------------------------------------------------------------------------------
Loomis Sayles Limited Term Govt and Agcy Fund
- ---------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,000.10 $ 6.55
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.45 $ 6.61
- ---------------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $ 996.60 $10.03
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.95 $10.13
- ---------------------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $ 996.60 $10.03
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,014.95 $10.13
- ---------------------------------------------------------------------------------------------------------
Class Y
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,000.60 $ 5.85
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.15 $ 5.91
- ---------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.31%, 2.01%, 2.01%
and 1.17% for Class A, B, C and Y, respectively, multiplied by the average
account value over the period, multiplied by the number of days in the most
recent fiscal half-year divided by 366 (to reflect the half-year period).
- ---------------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ---------------------------------------------------------------------------------------------------------
Loomis Sayles MA Tax Free Income Fund
- ---------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,009.80 $ 6.53
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.50 $ 6.56
- ---------------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,006.30 $10.03
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.00 $10.08
- ---------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.30%, and 2.00% for
Class A and B, respectively, multiplied by the average account value over the
period, multiplied by the number of days in the most recent fiscal half-year
divided by 366 (to reflect the half-year period).
18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ---------------------------------------------------------------------------------------------------------
Loomis Sayles Municipal Income Fund
- ---------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,010.00 $5.58
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.45 $5.60
- ---------------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,007.60 $9.34
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.70 $9.37
- ---------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.11%, and 1.86% for
Class A and B, respectively, multiplied by the average account value over the
period, multiplied by the number of days in the most recent fiscal half-year
divided by 366 (to reflect the half-year period).
- ---------------------------------------------------------------------------------------------------------
Beginning Account Ending Account Expenses Paid During
Value Value Period*
4/1/04 9/30/04 4/1/04 - 9/30/04
- ---------------------------------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund
- ---------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,025.70 $ 6.23
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.85 $ 6.21
- ---------------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,021.10 $10.00
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.10 $ 9.97
- ---------------------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,021.90 $10.01
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,015.10 $ 9.97
- ---------------------------------------------------------------------------------------------------------
Class Y
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $1,026.50 $ 5.07
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.00 $ 5.05
- ---------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 1.23%, 1.98%, 1.98%
and 1.00% for Class A, B, C and Y, respectively, multiplied by the average
account value over the period, multiplied by the number of days in the most
recent fiscal half-year divided by 366 (to reflect the half-year period).
19
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 96.0% of Total Net Assets
Aerospace & Defense -- 0.6%
$ 1,400,000 Northrop Grumman Corp., Note
7.125%, 2/15/2011 $ 1,609,248
-----------
Asset Backed Securities -- 6.3%
2,000,000 American Express Credit Account Master Trust, Series
2003-4, Class A
1.690%, 1/15/2009 1,963,090
690,000 AmeriCredit Automobile Receivables Trust, Series
2003-D-M, Class A-4
2.840%, 8/06/2010 687,019
3,755,000 BMW Vehicle Owner Trust, Series 2004-A, Class A4
3.320%, 2/25/2009 3,767,161
3,675,000 Citibank Credit Card Issuance Trust, Series 2003-A2,
Class A2
2.700%, 1/15/2008 3,677,862
762,936 Connecticut RRB Special Purpose Trust Connecticut
Light & Power, Series 2001-1, Class A2
5.360%, 3/30/2007 772,424
3,430,000 Countrywide Asset-Backed Certificates, Series
2003-5, Class AF4
4.905%, 8/25/2032 3,505,410
1,730,000 Ford Credit Auto Owner Trust, Series 2004-A,
Class A4
3.540%, 11/15/2008 1,741,954
1,850,000 Residential Asset Securities Corp., Series
2003-KS10, Class AI4
4.470%, 3/25/2032 1,861,265
-----------
17,976,185
-----------
Automotive -- 3.5%
1,510,000 Ford Motor Credit Co., Global Note
5.625%, 10/01/2008 (c) 1,561,361
715,000 General Motors Acceptance Corp., Note
8.000%, 11/01/2031 740,019
4,325,000 General Motors Corp., Senior Note
8.375%, 7/15/2033 4,592,164
2,880,000 Navistar International Corp., Senior Subordinated
Note
9.375%, 6/01/2006 3,088,800
-----------
9,982,344
-----------
Banking -- 1.6%
830,000 Bank of America Corp., Senior Note
5.875%, 2/15/2009 898,595
1,400,000 Chevy Chase Bank FSB, Subordinated Note
6.875%, 12/01/2013 1,414,000
715,000 JPMorgan Chase & Co., Global Subordinated Note
5.750%, 1/02/2013 761,313
1,200,000 State Street Institutional Capital A, Series A,
Guaranteed Note, 144A
7.940%, 12/30/2026 1,367,404
-----------
4,441,312
-----------
Beverage -- 1.2%
3,125,000 Cia Brasileira de Bebidas, Guaranteed Note
8.750%, 9/15/2013 3,531,250
-----------
Brokerage -- 1.7%
675,000 Goldman Sachs Group, Inc., Senior Note
6.600%, 1/15/2012 753,817
3,815,000 Lehman Brothers Holdings, Inc., Note
7.000%, 2/01/2008 4,210,150
-----------
4,963,967
-----------
Chemicals -- 3.1%
475,000 Eastman Chemical Co., Note
3.250%, 6/15/2008 464,657
$ 2,930,000 Eastman Chemical Co., Note
6.300%, 11/15/2018 $ 3,136,914
1,470,000 ICI Wilmington, Inc., Guaranteed Note
5.625%, 12/01/2013 1,510,628
3,045,000 IMC Global, Inc., Senior Note
10.875%, 6/01/2008 3,692,062
-----------
8,804,261
-----------
Construction Machinery -- 0.6%
1,600,000 Case New Holland, Inc., Senior Note, 144A
9.250%, 8/01/2011 1,792,000
-----------
Consumer Cyclical Services -- 0.3%
770,000 Service Corp. International, US, Senior Note, 144A
6.750%, 4/01/2016 770,000
-----------
Consumer Products -- 0.5%
1,375,000 Jostens IH Corp., Senior Subordinated Note, 144A
7.625%, 10/01/2012 1,381,875
-----------
Electric -- 3.6%
950,000 Centerpoint Energy, Inc., Series B, Senior Note
5.875%, 6/01/2008 991,724
1,455,000 Duke Energy Corp., Senior Note
4.200%, 10/01/2008 1,469,904
2,030,000 Empresa Nacional de Electricidad SA, Chile, Note
8.350%, 8/01/2013 2,265,998
2,150,000 FirstEnergy Corp., Note, Series B
6.450%, 11/15/2011 2,345,370
1,325,000 Ipalco Enterprises, Inc., Senior Secured Note
8.375%, 11/14/2008 1,477,375
1,450,000 Southern California Edison Co., Note
7.625%, 1/15/2010 1,682,919
-----------
10,233,290
-----------
Environmental -- 0.8%
1,250,000 Allied Waste North America, Inc., Senior Note
8.500%, 12/01/2008 1,356,250
1,015,000 Allied Waste North America, Senior Note
6.500%, 11/15/2010 (c) 1,004,850
-----------
2,361,100
-----------
Food and Beverage -- 0.5%
788,000 Dean Foods Co., Senior Note
6.900%, 10/15/2017 807,700
702,000 Dean Foods Co., Senior Note
8.150%, 8/01/2007 763,425
-----------
1,571,125
-----------
Gaming -- 0.2%
450,000 Harrah's Operating Co., Inc., Guaranteed Senior Note
7.500%, 1/15/2009 503,442
185,000 Harrah's Operating Co., Inc., Senior Note
7.125%, 6/01/2007 200,727
-----------
704,169
-----------
Government Agencies -- 7.0%
10,400,000 FHLMC
2.875%, 12/15/2006 (c) 10,389,371
2,750,000 FHLMC
3.220%, 6/20/2007 (SGD) 1,682,615
6,600,000 FNMA
2.290%, 2/19/2009 (SGD) 3,869,111
See accompanying notes to financial statements.
20
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Government Agencies -- continued
$ 3,710,000 FNMA
5.250%, 1/15/2009 $ 3,951,387
-----------
19,892,484
-----------
Healthcare -- 1.1%
3,050,000 HCA, Inc., Note
6.950%, 5/01/2012 3,293,277
-----------
Home Construction -- 0.5%
1,315,000 Pulte Homes, Inc., Senior Note
4.875%, 7/15/2009 1,345,120
-----------
Independent Energy -- 0.5%
1,295,000 Pioneer Natural Resources Co., Senior Note
6.500%, 1/15/2008 1,403,766
-----------
Industrial Other -- 1.1%
2,865,000 Aramark Services, Inc., Guaranteed Note
7.000%, 7/15/2006 3,043,561
-----------
Media - Broadcasting & Publishing -- 0.5%
1,290,000 Time Warner, Inc., Note
7.700%, 5/01/2032 1,500,008
-----------
Media Cable -- 3.3%
2,000,000 CSC Holdings, Inc., Senior Note
7.625%, 7/15/2018 2,040,000
515,000 CSC Holdings, Inc., Senior Note
7.875%, 2/15/2018 531,737
4,000,000 Shaw Communications, Inc., Senior Note
7.400%, 10/17/2007 (CAD) 3,340,599
2,785,000 TeleCommunications, Inc., Note
9.800%, 2/01/2012 3,550,998
-----------
9,463,334
-----------
Media Non Cable -- 0.5%
1,435,000 Clear Channel Communications, Inc., Global Note
4.250%, 5/15/2009 1,421,917
-----------
Metals and Mining -- 0.5%
1,500,000 International Steel Group, Inc., Note, 144A
6.500%, 4/15/2014 1,500,000
-----------
Mortgage Related -- 21.4%
2,965,002 FHLMC
4.000%, 7/01/2019 2,896,053
5,647,854 FHLMC
4.500%, 8/01/2018 5,642,596
10,550,826 FHLMC
5.000%, with various maturities to 2034(d) 10,563,736
2,591,427 FHLMC
5.500%, with various maturities to 2018(d) 2,680,818
5,589,139 FNMA
4.500%, with various maturities to 2034(d) 5,391,981
3,721,483 FNMA
5.000%, with various maturities to 2034(d) 3,746,922
9,105,368 FNMA
5.500%, with various maturities to 2034(d) 9,295,662
2,507,481 FNMA
6.000%, with various maturities to 2033(d) 2,631,033
6,939,849 FNMA
6.500%, with various maturities to 2034(d) 7,285,698
694,114 FNMA
7.000%, with various maturities to 2030(d) 736,695
758,404 FNMA
7.500%, with various maturities to 2032(d) 812,991
$ 1,650,000 FNMA (TBA)
6.000%, 11/01/2034 $ 1,700,015
1,935,152 GNMA
5.500%, 2/20/2034 1,968,110
814,838 GNMA
6.000%, with various maturities to 2032(d) 847,887
2,660,039 GNMA
6.500%, with various maturities to 2032(d) 2,810,863
1,077,322 GNMA
7.000%, with various maturities to 2029(d) 1,151,611
297,282 GNMA
7.500%, with various maturities to 2030(d) 321,096
121,076 GNMA
8.000%, 11/15/2029 132,236
315,130 GNMA
8.500%, with various maturities to 2023(d) 348,996
30,666 GNMA
9.000%, with various maturities to 2016(d) 34,461
85,261 GNMA
11.500%, with various maturities to 2015(d) 97,411
-----------
61,096,871
-----------
Non Captive Consumer Financial -- 1.4%
1,305,000 Capital One Bank
6.500%, 6/13/2013 1,427,051
1,380,000 Countrywide Home Loans, Inc., Note, (MTN)
5.500%, 8/01/2006 1,439,322
982,000 Household Finance Corp., Note
5.750%, 1/30/2007 1,037,958
-----------
3,904,331
-----------
Non Captive Diversified Financial -- 0.5%
500,000 General Electric Capital Corp., Series E, Note,
(MTN)
1.725%, 6/27/2008 (SGD) 288,726
1,080,000 International Lease Finance Corp., Global Note
5.625%, 6/01/2007 1,140,941
-----------
1,429,667
-----------
Oil & Gas -- 0.7%
1,750,000 Transocean Sedco Forex, Inc., Note
6.625%, 4/15/2011 1,954,206
-----------
Paper -- 4.5%
3,165,000 Abitibi-Consolidated Finance, LP, Note
7.875%, 8/01/2009 3,299,512
1,495,000 Abitibi-Consolidated, Inc., Note
8.550%, 8/01/2010 1,603,387
3,130,000 Boise Cascade Corp., Senior Note
6.500%, 11/01/2010 3,489,950
1,200,000 Georgia-Pacific Corp., Note
7.375%, 12/01/2025 1,278,000
480,000 Georgia-Pacific Corp., Note
8.875%, 5/15/2031 582,000
2,705,000 International Paper Co., Note
4.000%, 4/01/2010 2,643,055
-----------
12,895,904
-----------
Pharmaceuticals -- 1.0%
2,750,000 Valeant Pharmaceuticals International, Senior Note
7.000%, 12/15/2011 2,784,375
-----------
See accompanying notes to financial statements.
21
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Pipelines -- 1.2%
$ 520,000 Enterprise Products Operating, LP, Senior Note
4.625%, 10/15/2009 $ 524,319
2,464,000 Kinder Morgan Energy Partners, LP, Note
7.125%, 3/15/2012(c) 2,806,755
------------
3,331,074
------------
Railroads -- 1.2%
1,155,000 CSX Corp., Note
4.875%, 11/01/2009 1,187,684
2,350,000 Union Pacific Corp., Senior Note
5.375%, 5/01/2014 2,370,024
------------
3,557,708
------------
Real Estate Investment Trusts -- 1.0%
1,250,000 iStar Financial, Inc., Senior Note
6.000%, 12/15/2010 1,300,592
1,340,000 Simon Property Group, LP, Note
6.375%, 11/15/2007 1,449,213
------------
2,749,805
------------
Refining -- 0.7%
1,775,000 Premcor Refining Group (The), Inc., Senior Note
7.500%, 6/15/2015 1,908,125
------------
Restaurants -- 0.1%
292,000 Domino's, Inc., Senior Subordinated Note
8.250%, 7/01/2011 316,090
------------
Sovereigns -- 4.0%
4,785,000 Canada Government
5.500%, 6/01/2010 (CAD) 4,040,684
3,000,000 Pemex Finance, Ltd., Series 1998, Class 18NT
9.150%, 11/15/2018 3,677,970
3,265,000 Pemex Project Funding Master Trust, Note
7.875%, 2/01/2009 3,640,475
------------
11,359,129
------------
Supermarkets -- 2.7%
1,365,000 Couche-Tard US, LP/Couche-Tard Finance Corp.,
Senior Subordinated Note
7.500%, 12/15/2013 1,453,725
2,155,000 Delhaize America, Inc., Note
8.125%, 4/15/2011 2,461,062
560,000 Delhaize America, Inc., Note
9.000%, 4/15/2031 673,875
2,720,000 Fred Meyer, Inc., Note
7.450%, 3/01/2008 3,038,039
------------
7,626,701
------------
Supranationals -- 1.0%
2,160,000 Inter-American Development Bank, Note
5.500%, 3/30/2010 (EUR) 2,957,310
------------
Telecommunications -- 0.3%
730,000 Sprint Capital Corp., Note
6.125%, 11/15/2008 787,946
------------
Tobacco -- 1.1%
1,495,000 Altria Group, Inc., Note
7.000%, 11/04/2013 1,559,828
1,550,000 Philip Morris Cos., Inc., Note
7.750%, 1/15/2027 1,637,271
------------
3,197,099
------------
Transportation Services -- 0.3%
$1,015,000 Overseas Shipholding Group, Senior Note
7.500%, 2/15/2024 $ 985,819
------------
Treasuries -- 8.5%
2,803,503 U.S. Treasury Inflation Indexed Note
2.000%, 7/15/2014 2,865,707
6,405,000 U.S. Treasury Note
1.875%, 12/31/2005 (e) 6,372,226
3,495,000 U.S. Treasury Note
2.750%, 7/31/2006 3,508,106
2,800,000 U.S. Treasury Note
3.250%, 8/15/2007 2,830,954
8,510,000 U.S. Treasury Note
3.500%, 11/15/2006 8,659,257
------------
24,236,250
------------
Wirelines -- 4.9%
1,095,000 AT&T Corp., Senior Note
8.750%, 11/15/2031 1,193,550
1,650,000 GTE Corp., Note
7.900%, 2/01/2027 1,810,858
3,200,000 LCI International, Inc., Senior Note
7.250%, 6/15/2007 2,904,000
1,240,000 Qwest Corp., Note
7.200%, 11/10/2026 1,081,900
670,000 Qwest Corp., Note
7.250%, 9/15/2025 603,000
3,600,000 Sprint Capital Corp., Note
6.875%, 11/15/2028 3,776,015
1,045,000 TELUS Corp., Note
8.000%, 6/01/2011 1,224,467
1,675,000 U.S. West Communications, Inc., Note
7.500%, 6/15/2023 1,524,250
------------
14,118,040
------------
Total Bonds and Notes (Identified Cost $265,278,317) 274,182,043
------------
Principal
Amount
- --------------------------------------------------------------------------------
Short Term Investments -- 7.5%
10,720,637 Repurchase Agreement with Investors Bank & Trust
Co. dated 9/30/2004 at 1.27% to be repurchased at
$10,721,015 on 10/01/2004, collateralized by
$11,713,198 Federal Home Loan Mortgage Bond,
4.009%, due 4/01/2004 valued at $11,256,668 10,720,637
1,166,676 Bank of America, 1.875%, due 10/19/2004(g) 1,166,676
188,289 Bank of Montreal, 1.76%, due 10/25/2004(g) 188,289
280,003 Bank of Nova Scotia, 1.75%, due 10/21/2004(g) 280,003
583,338 Bank of Nova Scotia, 1.76%, due 11/12/2004(g) 583,338
665,005 BGI Institutional Money Market Fund(g) 665,005
583,338 BNP Paribas, 1.80%, due 11/23/2004(g) 583,338
350,003 Falcon Asset Securitization Corp, 1.612%, due 350,003
10/01/2004(g)
116,668 Fortis Bank, 1.69%, due 10/14/2004(g) 116,668
348,397 Greyhawk Funding, 1.772%, due 10/19/2004(g) 348,397
378,417 Merrill Lynch Premier Institutional Fund(g) 378,417
933,341 Merrimac Cash Fund-Premium Class(g) 933,341
933,341 Royal Bank of Canada, 1.78%, due 11/10/2004(g) 933,341
350,003 Royal Bank of Scotland, 1.60%, due 10/15/2004(g) 350,003
350,003 Royal Bank of Scotland, 1.65%, due 10/29/2004(g) 350,003
See accompanying notes to financial statements.
22
- --------------------------------------------------------------------------------
Loomis Sayles Core Plus Bond Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Short Term Investments -- continued
$ 35,000 Royal Bank of Scotland, 1.67%, due 11/02/2004(g) $ 35,000
781,673 Royal Bank of Scotland, 1.88%, due 12/23/2004(g) 781,673
114,988 Sheffield Receivables Corp, 1.622%, due 114,988
10/04/2004(g)
350,003 Sheffield Receivables Corp, 1.773%, due 350,003
10/20/2004(g)
233,335 Toronto Dominion Bank, 1.70%, due 11/08/2004(g) 233,335
1,705,000 U.S. Treasury Bills, 1.635%, due 12/09/2004(f) 1,698,417
350,003 Wells Fargo, 1.60%, due 10/04/2004(g) 350,003
------------
Total Short Term Investments (Identified Cost
$21,510,878) 21,510,878
------------
Total Investments -- 103.5%
(Identified Cost $286,789,195)(b) 295,692,921
Other assets less liabilities (10,025,649)
------------
Total Net Assets -- 100% $285,667,272
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized appreciation on
investments based on cost of $287,786,671 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 $ 9,462,672
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (1,556,422)
-----------
Net unrealized appreciation $ 7,906,250
===========
At September 30, 2004, the Fund had a capital loss carryover of
approximately $23,293,740 of which $1,530,375 expires on September
30, 2008 and $21,763,365 expires on September 30, 2010. These
amounts may be available to offset future realized capital gains,
if any, to the extent provided by regulations.
At September 30, 2004, the components of distributable earnings,
excluding unrealized appreciation/depreciation, disclosed on a tax
basis consisted of $2,986,290 in undistributed ordinary income and
$0 in undistributed long-term gains.
(c) All or a portion of this security was on loan to brokers at
September 30, 2004.
(d) 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.
(e) All or a portion of this security has been segregated to cover
collateral requirements on TBA obligations
(f) Rate is yield to maturity.
(g) Represents investments of securities lending collateral.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
TBA To Be Announced (see Note 2g of Notes to
Financial Statements)
144A Securities exempt from registration under Rule Act of 1933. 144A
of the Securities 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
$6,811,279 or 2.4% of net assets.
CAD Canadian Dollar
EUR Euro
SGD Singapore Dollar
Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited)
Mortgage Related 21.4%
Treasuries 8.5
Short Term Investments 7.5
Government Agencies 7.0
Asset Backed Securities 6.3
Wirelines 4.9
Paper 4.5
Sovereigns 4.0
Electric 3.6
Automotive 3.5
Media Cable 3.3
Chemicals 3.1
Supermarkets 2.7
Other, less than 2% each 23.2
See accompanying notes to financial statements.
23
- --------------------------------------------------------------------------------
Loomis Sayles Government Securities Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 99.0% of Total Net Assets
Government Agencies -- 1.0%
$ 600,000 FNMA
6.625%, 9/15/2009 $ 675,966
-----------
Mortgage Related -- 15.6%
4,267,148 FNMA
4.500%, 9/01/2033 4,119,963
4,244,966 FNMA
5.500%, with various maturities to 2034(c) 4,310,477
280,108 FNMA
6.500%, 11/01/2031 294,015
204,322 FNMA
7.500%, 12/01/2030 218,994
1,378,410 GNMA
6.500%, 5/15/2031 1,456,303
12,139 GNMA
8.500%, 2/15/2006 12,650
80,983 GNMA
9.000%, with various maturities to 2009(c) 87,389
33,202 GNMA
9.500%, 8/15/2009 36,444
2,260 GNMA
10.000%, 9/15/2016 2,532
4,053 GNMA
12.500%, 6/15/2014 4,674
-----------
10,543,441
-----------
Treasuries -- 82.4%
3,005,000 U.S. Treasury Bond
5.250%, 2/15/2029(d) 3,128,369
13,000,000 U.S. Treasury Bond
7.250%, 5/15/2016 16,364,764
10,000,000 U.S. Treasury Bond
8.750%, 5/15/2017 14,108,980
13,665,828 U.S. Treasury Inflation Indexed Bond
2.375%, 1/15/2025 14,236,486
4,615,000 U.S. Treasury Note
1.625%, 9/30/2005 4,589,581
4,000,000 U.S. Treasury STRIPS
Zero Coupon, 11/15/2014 3,324,336
-----------
55,752,516
-----------
Total Bonds and Notes (Identified Cost
$63,218,493) 66,971,923
-----------
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Short Term Investments -- 1.3%
$ 218,192 Repurchase Agreement with Investors Bank &
Trust Co. dated 9/30/2004 at 1.27% to be
repurchased at $218,200 on 10/01/2004,
collateralized by $224,863 Federal National
Mortgage Association Bond, 4.449% due 1/01/2033
valued at $229,102 $ 218,192
83,633 Bank of America, 1.875%, due 10/19/2004(e) 83,633
13,498 Bank of Montreal, 1.76%, due 10/25/2004(e) 13,498
20,072 Bank of Nova Scotia, 1.75%, due 10/21/2004(e) 20,072
41,817 Bank of Nova Scotia, 1.76%, due 11/12/2004(e) 41,817
47,671 BGI Institutional Money Market Fund(e) 47,671
41,817 BNP Paribas, 1.80%, due 11/23/2004(e) 41,817
25,090 Falcon Asset Securitization Corp, 1.612%, due 25,090
10/01/2004(e)
8,363 Fortis Bank, 1.69%, due 10/14/2004(e) 8,363
24,975 Greyhawk Funding, 1.772%, due 10/19/2004(e) 24,975
27,127 Merrill Lynch Premier Institutional Fund(e) 27,127
$ 66,907 Merrimac Cash Fund-Premium Class(e) $ 66,907
66,907 Royal Bank of Canada, 1.78%, due 11/10/2004(e) 66,907
25,090 Royal Bank of Scotland, 1.60%, due 10/15/2004(e) 25,090
25,090 Royal Bank of Scotland, 1.65%, due 10/29/2004(e) 25,090
2,509 Royal Bank of Scotland, 1.67%, due 11/02/2004(e) 2,509
56,034 Royal Bank of Scotland, 1.88%, due 12/23/2004(e) 56,034
8,243 Sheffield Receivables Corp, 1.622%, due 8,243
10/04/2004(e)
25,090 Sheffield Receivables Corp, 1.773%, due 25,090
10/20/2004(e)
16,727 Toronto Dominion Bank, 1.70%, due 11/08/2004(e) 16,727
25,090 Wells Fargo, 1.60%, due 10/04/2004(e) 25,090
-----------
Total Short Term Investments (Identified Cost
$869,942) 869,942
-----------
Total Investments -- 100.3%
(Identified Cost $64,088,435)(b) 67,841,865
Other assets less liabilities (190,692)
-----------
Total Net Assets -- 100% $67,651,173
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$64,999,184 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 $ 2,922,795
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (80,114)
-----------
Net unrealized appreciation $ 2,842,681
===========
At September 30, 2004, the Fund had a capital loss
carryover of approximately $6,350,787 of which
$5,687,678 expires on September 30, 2007 and
$663,109 expires on September 30, 2008. These
amounts may be available to offset future realized
capital gains, if any, to the extent provided by
regulations.
For the year ended September 30, 2004, the Fund has
elected to defer $680,774 of capital losses
attributable to Post-October losses.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation, disclosed on a tax basis
consisted of $83,740 in undistributed ordinary
income and $0 in undistributed long-term gains.
(c) The Fund's investment in mortgage related
securities of the Federal National Mortgage
Association and the Government National Mortgage
Association are interests in separate pools of
mortgages. All separate investments in securities
of 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 September 30, 2004.
(e) Represents investments of securities lending
collateral.
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
STRIPS Separate Trading of Registered Interest and
Principal of Securities
Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited)
Treasuries 82.4%
Mortgage Related 15.6
Other, less than 2% each 2.3
See accompanying notes to financial statements.
24
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 93.5% of Total Net Assets
Aerospace & Defense -- 0.6%
$ 250,000 TD Funding Corp., Senior Subordinated Note
8.375%, 7/15/2011 $ 267,500
----------
Airlines -- 2.5%
169,164 Continental Airlines, Inc., Series 1998-1, Class 1A
6.648%, 9/15/2017 158,344
170,379 Continental Airlines, Inc., Series 1998-1, Class 1B
6.748%, 3/15/2017 131,057
61,917 Continental Airlines, Inc., Series 1999-1, Class C
6.954%, 8/02/2009 47,119
111,776 Continental Airlines, Inc., Series 1999-2, Class B
7.566%, 3/15/2020 86,447
870,000 Northwest Airlines Corp., Senior Note
8.875%, 6/01/2006(c) 730,800
----------
1,153,767
----------
Automotive -- 2.7%
600,000 Cummins, Inc., Note
7.125%, 3/01/2028 600,000
500,000 Dana Corp., Note
9.000%, 8/15/2011 603,750
----------
1,203,750
----------
Building Materials -- 0.3%
110,000 Jacuzzi Brands, Inc., Senior Note
9.625%, 7/01/2010 121,550
----------
Chemicals -- 1.9%
585,000 Ethyl Corp., Senior Note
8.875%, 5/01/2010 631,800
200,000 Nalco Co., Senior Subordinated Note
8.875%, 11/15/2013(c) 215,000
----------
846,800
----------
Construction Machinery -- 2.0%
350,000 Case Credit Corp., Note
6.750%, 10/21/2007(c) 358,750
100,000 Case New Holland, Inc., Senior Note, 144A
9.250%, 8/01/2011 112,000
80,000 Great Lakes Dredge & Dock Corp., Senior
Subordinated Note
7.750%, 12/15/2013 69,200
400,000 United Rentals North America, Inc., Senior
Subordinated Note
7.000%, 2/15/2014(c) 355,000
----------
894,950
----------
Consumer Products -- 0.5%
90,000 Jostens IH Corp., Senior Subordinated Note, 144A
7.625%, 10/01/2012 90,450
120,000 Rayovac Corp., Senior Subordinated Note
8.500%, 10/01/2013 130,200
----------
220,650
----------
Electric -- 7.3%
590,000 AES Corp. (The), Senior Note
7.750%, 3/01/2014 609,175
450,000 AES Corp. (The), Senior Note
8.875%, 2/15/2011(c) 500,625
100,000 Allegheny Energy Supply Co. LLC, Note
7.800%, 3/15/2011 108,250
200,000 Empresa Nacional de Electricidad SA, Chile, Note
7.875%, 2/01/2027 203,863
250,000 Empresa Nacional de Electricidad SA, Chile, Note
8.350%, 8/01/2013 279,064
$ 525,000 Enersis SA, Cayman Island, Note
7.400%, 12/01/2016 (yankee) $ 549,863
140,000 Enersis SA, Chile, Note
7.375%, 1/15/2014 146,736
229,000 ESI Tractebel Acquisition Corp., Series B7,
Secured Note
7.990%, 12/30/2011 236,442
275,162 Salton SEA Funding Corp., Series C, Senior
Secured Note
7.840%, 5/30/2010 292,779
48,112 Salton SEA Funding Corp., Series E, Senior Note
8.300%, 5/30/2011 53,164
125,000 TECO Energy, Inc., Note
7.000%, 5/01/2012 130,937
200,000 TECO Energy, Inc., Note
7.200%, 5/01/2011 213,000
----------
3,323,898
----------
Electric Utilities -- 2.0%
200,000 Calpine Corp., Senior Note
7.875%, 4/01/2008(c) 135,000
560,000 Calpine Corp., Senior Secured Note, 144A
8.750%, 7/15/2013(c) 422,800
350,000 Edison Mission Energy Corp., Senior Note
7.730%, 6/15/2009 367,500
----------
925,300
----------
Electronics -- 5.7%
125,000 Amkor Technology, Inc., Note
5.000%, 3/15/2007(c) 104,375
125,000 Amkor Technology, Inc., Senior Note
7.750%, 5/15/2013(c) 102,500
225,000 Corning, Inc., Note
5.900%, 3/15/2014 219,921
270,000 Corning, Inc., Note
6.200%, 3/15/2016 265,245
225,000 Corning, Inc., Note
6.750%, 9/15/2013 234,501
155,000 Corning, Inc., Note
6.850%, 3/01/2029 143,926
910,000 Lucent Technologies, Inc., Note
6.450%, 3/15/2029 737,100
300,000 Nortel Networks Corp., Guaranteed Senior Note
4.250%, 9/01/2008(c) 289,500
425,000 Nortel Networks Corp., Note
6.875%, 9/01/2023(c) 388,875
100,000 Northern Telecom Capital Corp., Note
7.875%, 6/15/2026 96,500
----------
2,582,443
----------
Environmental -- 1.1%
75,000 Allied Waste North America, Inc., Senior Note
8.500%, 12/01/2008 81,376
35,000 Allied Waste North America, Senior Note
6.500%, 11/15/2010(c) 34,650
400,000 Allied Waste North America, Series B, Senior Note
5.750%, 2/15/2011 380,000
----------
496,026
----------
Food and Beverage -- 3.3%
600,000 Bavaria SA, Senior Note, 144A
8.875%, 11/01/2010 633,750
See accompanying notes to financial statements.
25
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Food and Beverage -- continued
$ 450,000 Borden Chemical, Inc., Note
7.875%, 2/15/2023 $ 364,500
550,000 Borden Chemical, Inc., Note
9.200%, 3/15/2021 508,750
----------
1,507,000
----------
Foreign Local Governments -- 3.0%
16,250,000 United Mexican States
9.000%, 12/20/2012 (MXN) 1,348,981
----------
Gaming -- 1.8%
450,000 Harrah's Operating Co., Inc., Guaranteed
Senior Note
5.375%, 12/15/2013 448,832
405,000 MGM Mirage, Senior Note
5.875%, 2/27/2014 389,812
----------
838,644
----------
Healthcare -- 1.1%
150,000 Columbia/HCA Healthcare Corp., Note
7.500%, 12/15/2023 153,830
200,000 Columbia/HCA Healthcare Corp., Note, (MTN)
7.580%, 9/15/2025 208,586
150,000 Invitrogen Corp., Senior Note, Convertible
1.500%, 2/15/2024(c) 132,562
----------
494,978
----------
Home Construction -- 1.1%
150,000 K Hovnanian Enterprises, Inc., Guaranteed
Senior Note
6.500%, 1/15/2014 153,375
300,000 K Hovnanian Enterprises, Inc., Senior Note
8.000%, 4/01/2012 332,250
----------
485,625
----------
Independent Energy -- 1.4%
270,000 Chesapeake Energy Corp., Senior Note
6.875%, 1/15/2016 282,150
100,000 Chesapeake Energy Corp., Senior Note
7.500%, 9/15/2013 109,500
215,000 Swift Energy Co., Senior Subordinated Note
9.375%, 5/01/2012 240,800
----------
632,450
----------
Information/Data Technology -- 2.0%
315,000 Maxtor Corp., Subordinated Note
5.750%, 3/01/2012(f) 277,200
325,000 Xerox Capital Trust I, Guaranteed Note
8.000%, 2/01/2027 320,125
300,000 Xerox Corp., Note, (MTN)
7.200%, 4/01/2016 306,750
----------
904,075
----------
Integrated Energy -- 1.2%
265,000 Cerro Negro Finance, Ltd., Note, 144A
7.900%, 12/01/2020 258,375
300,000 Petrozuata Finance, Inc., Note, Series B,
144A
8.220%, 4/01/2017 295,500
----------
553,875
----------
Lodging -- 1.3%
300,000 La Quinta Inns, Inc., (MTN), (FRN)
7.330%, 4/01/2008 309,000
250,000 Royal Caribbean Cruises, Ltd., Senior Note
7.500%, 10/15/2027 260,000
----------
569,000
----------
Media Cable -- 5.4%
$ 500,000 Charter Communications Holdings, Inc.,
Senior Note
9.625%, 11/15/2009 $ 393,750
150,000 Charter Communications Holdings, Inc.,
Senior Note
10.000%, 5/15/2011 115,500
950,000 CSC Holdings, Inc., Senior Note
7.625%, 7/15/2018 969,000
200,000 Innova S de RL
9.375%, 9/19/2013 217,500
250,000 NTL CABLE PLC, Note, 144A
9.750%, 4/15/2014 (GBP) 450,325
175,000 PanAmSat Corp., Note
6.875%, 1/15/2028 147,875
150,000 Rogers Communications, Inc., Note
2.000%, 11/26/2005 144,187
----------
2,438,137
----------
Media Non Cable -- 0.6%
250,000 Dex Media, Inc., Note
8.000%, 11/15/2013 262,500
----------
Metals and Mining -- 2.8%
420,000 AK Steel Corp., Guaranteed Senior Note
7.750%, 6/15/2012(c) 410,550
150,000 Glencore Funding LLC, Guaranteed Note, 144A
6.000%, 4/15/2014 145,477
500,000 Ispat Inland ULC, Senior Secured Note
9.750%, 4/01/2014 551,250
175,000 Vale Overseas, Ltd., Note
8.250%, 1/17/2034 170,187
----------
1,277,464
----------
Other -- 0.6%
250,000 Corrections Corp. of America, Senior Note
7.500%, 5/01/2011 264,062
----------
Packaging -- 2.1%
300,000 Owens-Brockway, Guaranteed Senior Secured
Note
7.750%, 5/15/2011 319,500
350,000 Owens-Illinois, Inc., Senior Note
7.500%, 5/15/2010(c) 357,875
135,000 Owens-Illinois, Inc., Senior Note
7.800%, 5/15/2018 130,950
125,000 Solo Cup Co., Senior Subordinated Note
8.500%, 2/15/2014(c) 123,125
----------
931,450
----------
Paper -- 6.4%
220,000 Abitibi-Consolidated, Inc., Note
7.500%, 4/01/2028 191,950
250,000 Abitibi-Consolidated, Inc., Note
8.500%, 8/01/2029 238,750
100,000 Arcel Finance, Ltd., Note, 144A
6.361%, 5/01/2012 100,943
200,000 Arcel Finance, Ltd., Note, 144A
7.048%, 9/01/2011 209,323
200,000 Boise Cascade Corp., Note, (MTN)
7.450%, 8/10/2011 229,910
685,000 Bowater, Inc., Note
6.500%, 6/15/2013(c) 664,655
165,000 Georgia-Pacific Corp., Note
7.250%, 6/01/2028 170,775
See accompanying notes to financial statements.
26
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Paper -- continued
$ 200,000 Georgia-Pacific Corp., Note
7.375%, 12/01/2025 $ 213,000
300,000 Georgia-Pacific Corp., Note
9.500%, 12/01/2011(c) 371,250
350,000 Pope & Talbot, Inc., Senior Note
8.375%, 6/01/2013 365,750
145,000 Tembec Industries, Inc., Senior Note
7.750%, 3/15/2012 145,725
-----------
2,902,031
-----------
Pharmaceuticals -- 2.6%
300,000 Inhale Therapeutic Systems, Inc., Subordinated
Note
3.500%, 10/17/2007 280,125
187,000 IVAX Corp., Senior Subordinated Note,
Convertible
4.500%, 5/15/2008 185,130
250,000 Pharma Services Intermediate Holding Corp.,
Senior Note, 144A
0/11.500%, 4/01/2014(d) 157,500
200,000 Quintiles Transnational Corp., Senior
Subordinated Note
10.000%, 10/01/2013 212,000
310,000 Vertex Pharmaceuticals, Inc., Note, 144A
5.750%, 2/15/2011 325,887
-----------
1,160,642
-----------
Pipelines -- 4.5%
700,000 Coastal Corp., Note
6.500%, 6/01/2008 682,500
175,000 Tennessee Gas Pipeline Co., Note
7.000%, 10/15/2028 166,250
165,000 Williams Cos., Inc., Note
7.875%, 9/01/2021 183,150
982,000 Williams Cos., Inc., Series A, Note
7.500%, 1/15/2031 986,910
-----------
2,018,810
-----------
Railroads -- 0.6%
265,000 Grupo Transportacion Ferroviaria Mexicana SA
de CV,
Senior Note (yankee)
0/11.750%, 6/15/2009(d) 267,650
-----------
Real Estate Investment Trusts -- 3.2%
830,000 Crescent Real Estate Equities, LP, Senior
Subordinated Note
9.250%, 4/15/2009 894,325
300,000 FelCor Lodging, LP, Senior Note
9.000%, 6/01/2011 330,000
200,000 Trinet Corporate Realty Trust, Note
7.700%, 7/15/2017 226,770
-----------
1,451,095
-----------
Refining -- 3.0%
325,000 Citgo Petroleum Corp., Senior Note
11.375%, 2/01/2011 382,687
225,000 Premcor Refining Group (The), Inc., Senior Note
6.750%, 2/01/2011 239,625
700,000 Premcor Refining Group (The), Inc., Senior Note
7.500%, 6/15/2015 752,500
-----------
1,374,812
-----------
Retailers -- 4.3%
250,000 Dillard's Department Stores, Inc., Note
6.625%, 1/15/2018 238,750
800,000 Dillard's, Inc., Note
7.750%, 7/15/2026 792,000
225,000 Rite Aid Corp., Note
6.875%, 8/15/2013 196,875
$ 335,000 Toys R US, Inc., Note
7.375%, 10/15/2018 $ 310,713
400,000 Woolworth Corp., Note
8.500%, 1/15/2022 426,000
-----------
1,964,338
-----------
Sovereigns -- 1.3%
345,000 Republic of Brazil
8.250%, 1/20/2034 307,568
175,000 Republic of Colombia
8.125%, 5/21/2024 157,938
125,000 Republic of Peru (FRN)
4.500%, 3/07/2017 110,938
-----------
576,444
-----------
Supranationals -- 2.3%
6,000,000 Inter-American Development Bank, Series E,
Note, (MTN)
Zero Coupon, 5/11/2009 (BRL)(f) 1,043,816
-----------
Technology -- 1.3%
75,000 Kulicke & Soffa Industries, Inc., Subordinated
Note, Convertible
0.500%, 11/30/2008(c) 52,688
500,000 Xerox Corp., Senior Note
6.875%, 8/15/2011 522,500
-----------
575,188
-----------
Telephone Systems -- 0.6%
375,000 U.S. West Capital Funding, Inc., Note
6.875%, 7/15/2028(c) 269,063
-----------
Transportation Services -- 2.9%
275,000 American President Cos., Ltd., Senior Note
8.000%, 1/15/2024 283,250
136,181 Atlas Air, Inc., Series 1998-1, Class 1A
7.380%, 1/02/2018 128,202
133,068 Atlas Air, Inc., Series 1999-1, Class A1
7.200%, 1/02/2019 125,156
129,929 Atlas Air, Inc., Series 2000-1, Class A
8.707%, 1/02/2019 127,857
300,000 Overseas Shipholding Group, Senior Note
7.500%, 2/15/2024 291,375
350,000 Stena AB, Senior Note
7.500%, 11/01/2013 350,438
-----------
1,306,278
-----------
Wireless -- 0.3%
150,000 Rogers Wireless Communications, Inc., Senior
Secured Note
6.375%, 3/01/2014 138,000
-----------
Wirelines -- 5.9%
200,000 AT&T Corp., Senior Note
8.750%, 11/15/2031 218,000
150,000 Philippine Long Distance Telephone Co., Note,
(MTN)
8.350%, 3/06/2017 140,250
700,000 Philippine Long Distance Telephone Co., Note,
(MTN)
10.500%, 4/15/2009 794,500
75,000 Qwest Capital Funding, Inc., Guaranteed Note
7.000%, 8/03/2009 (c) 68,625
1,890,000 Qwest Capital Funding, Inc., Note
7.750%, 2/15/2031 1,445,850
-----------
2,667,225
-----------
Total Bonds and Notes (Identified Cost 42,260,267
$39,739,081)
See accompanying notes to financial statements.
27
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Shares Description Value (a)
- --------------------------------------------------------------------------------
Preferred Stocks -- 2.9%
Electric -- 0.8%
8,000 CMS Energy Trust I Preferred, Convertible,
7.75%, 7/15/2027 $ 357,000
-----------
Packaging -- 0.2%
3,000 Owens-Illinois, Inc. Preferred, Convertible,
4.75%, 12/31/2049(c) 104,550
-----------
Pipelines -- 1.3%
8,000 Williams Holdings of Delaware Preferred,
Convertible, 5.50%, 6/01/2033(c) 566,000
-----------
Technology -- 0.4%
175 Lucent Technologies Capital Trust I Preferred,
Convertible, 7.75%, 3/15/2017 194,294
-----------
Wirelines -- 0.2%
2,000 Philippine Long Distance Telephone Co. Preferred,
Sponsored GDR, Convertible, $24.80, 12/31/2049 99,800
-----------
Total Preferred Stocks (Identified Cost $1,172,782) 1,321,644
-----------
Shares
- --------------------------------------------------------------------------------
Common Stocks -- 0.2%
Investment Companies -- 0.2%
2,175 High Income Opportunity Fund, Inc. 14,855
3,835 Morgan Stanley Emerging Markets Debt Fund, Inc. 35,129
1,000 PIMCO Strategic Global Government Fund, Inc. 11,900
2,025 Senior High Income Portfolio, Inc. 12,109
1,000 Templeton Emerging Markets Income Fund, Inc.(c) 12,900
-----------
Total Common Stocks (Identified Cost $77,646) 86,893
-----------
Principal
Amount
- --------------------------------------------------------------------------------
Short Term Investments -- 17.4%
$1,463,063 Repurchase Agreement with Investors Bank & Trust
Co. dated 9/30/2004 at 1.27% to be repurchased at
$1,463,115 on 10/01/2004, collateralized by
$1,489,377 Federal National Mortgage Association
Bond, 4.142%, due 12/01/2030 valued at $1,536,226 1,463,063
820,498 Bank of America, 1.875%, due 10/19/2004(e) 820,498
132,420 Bank of Montreal, 1.76%, due 10/25/2004(e) 132,420
196,920 Bank of Nova Scotia, 1.75%, due 10/21/2004(e) 196,920
410,249 Bank of Nova Scotia, 1.76%, due 11/12/2004(e) 410,249
467,684 BGI Institutional Money Market Fund(e) 467,684
410,249 BNP Paribas, 1.80%, due 11/23/2004(e) 410,249
246,149 Falcon Asset Securitization Corp, 1.612%, due
10/01/2004(e) 246,149
82,050 Fortis Bank, 1.69%, due 10/14/2004(e) 82,050
245,019 Greyhawk Funding, 1.772%, due 10/19/2004(e) 245,019
266,133 Merrill Lynch Premier Institutional Fund(e) 266,133
656,399 Merrimac Cash Fund-Premium Class(e) 656,399
656,399 Royal Bank of Canada, 1.78%, due 11/10/2004(e) 656,399
246,149 Royal Bank of Scotland, 1.60%, due 10/15/2004(e) 246,149
246,149 Royal Bank of Scotland, 1.65%, due 10/29/2004(e) 246,149
24,615 Royal Bank of Scotland, 1.67%, due 11/02/2004(e) 24,615
549,734 Royal Bank of Scotland, 1.88%, due 12/23/2004(e) 549,734
80,869 Sheffield Receivables Corp, 1.622%,
due 10/04/2004(e) 80,869
246,149 Sheffield Receivables Corp, 1.773%,
due 10/20/2004(e) 246,149
164,100 Toronto Dominion Bank, 1.70%, due 11/08/2004(e) 164,100
246,149 Wells Fargo, 1.60%, due 10/04/2004(e) 246,149
-----------
Total Short Term Investments (Identified Cost
$7,857,146) 7,857,146
-----------
Total Investments -- 114.0%
(Identified Cost $48,846,655)(b) $51,525,950
Other assets less liabilities (6,309,252)
-----------
Total Net Assets -- 100% $45,216,698
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$48,853,595 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 $ 3,146,690
Aggregate gross unrealized depreciation for all
investments in which there is an excess of
tax cost over value (474,335)
-----------
Net unrealized appreciation $ 2,672,355
===========
At September 30, 2004, the Fund had a capital loss
carryover of approximately $85,140,904 of which
$14,939,549 expires on September 30, 2008,
$43,374,721 expires on September 30, 2009 and
$26,826,634 expires on September 30, 2010. These
amounts may be available to offset future realized
capital gains, if any, to the extent provided by
regulations.
For the year ended September 30, 2004, the Fund has
elected to defer $0 of capital losses and $522 of
foreign currency losses attributable to Post-October
losses.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation, disclosed on a tax basis
consisted of $30,075 in undistributed ordinary
income and $0 in undistributed long-term gains.
(c) All or a portion of this security was on loan to
brokers at September 30, 2004.
(d) 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.
(e) Represents investments of securities lending
collateral.
(f) Illiquid security. At September 30, 2004, the value
of these securities amounted to $1,321,016 or 2.9%
of net assets.
FRN Floating Rate Note
GDR Global Depositary Receipt
MTN Medium Term Note
yankee U.S. dollar denominated security issued by
a non-U.S. company.
144A Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registrations, normally to
qualified institutional buyers. At the period end, the value of
these amounted to $3,202,330 or 7.1% of net assets.
BRL Brazilian Real
GBP British Pound
MXN Mexican Peso
See accompanying notes to financial statements.
28
- --------------------------------------------------------------------------------
Loomis Sayles High Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited)
Short Term Investments 17.4%
Electric 7.3
Paper 6.4
Wirelines 5.9
Electronics 5.7
Media Cable 5.4
Pipelines 4.5
Retailers 4.3
Food & Beverage 3.3
Real Estate Investment Trusts 3.2
Foreign Local Governments 3.0
Refining 3.0
Transportation Services 2.9
Metals and Mining 2.8
Automotive 2.7
Pharmaceuticals 2.6
Airlines 2.5
Supranationals 2.3
Packaging 2.1
Electric Utilities 2.0
Information/Data Technology 2.0
Construction Machinery 2.0
Other, less than 2% each 20.7
See accompanying notes to financial statements.
29
- --------------------------------------------------------------------------------
Loomis Sayles Limited Term Government and Agency Fund
Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 99.3% of Total Net Assets
Asset-Backed -- 4.8%
$ 2,240,000 Residential Asset Mortgage Products, Inc.,
Series 2003-RZ5,
Class A3
3.800%, 7/25/2030 $ 2,205,889
1,376,000 Residential Funding Mortgage Securities II,
Series 2003-HI4,
Class AI4
4.590%, 4/25/2018 1,390,678
1,900,000 Residential Funding Mortgage Securities II,
Series 2004-HI3,
Class A3
3.810%, 12/25/2016 1,896,734
670,000 Residential Funding Mortgage Securities II,
Series 2004-HI3,
Class A4
4.630%, 3/25/2019 669,477
------------
6,162,778
------------
Government Agencies -- 13.8%
2,935,000 Federal Farm Credit Bank
2.375%, 10/02/2006 2,906,275
6,200,000 Federal Home Loan Bank
3.625%, 11/14/2008 6,226,176
5,000,000 FHLMC
5.750%, 4/15/2008 5,399,950
3,000,000 FNMA
5.500%, 5/02/2006 3,131,991
------------
17,664,392
------------
Mortgage Related -- 50.0%
8,133,609 FHLMC
4.000%, with various maturities to 2019(c) 7,944,468
994,554 FHLMC
4.500%, 5/01/2034 959,081
623,302 FHLMC
7.000%, 2/01/2016 661,130
118,480 FHLMC
7.500%, with various maturities to 2026(c) 126,056
103,911 FHLMC
8.000%, with various maturities to 2015(c) 107,809
7,625 FHLMC
10.000%, 7/01/2019 8,557
733,530 FHLMC
11.500%, with various maturities to 2020(c) 825,693
8,978,017 FNMA
4.000%, with various maturities to 2019(c) 8,771,295
8,132,814 FNMA
4.500%, with various maturities to 2034(c) 7,846,741
6,904,241 FNMA
5.500%, with various maturities to 2033(c) 7,121,218
14,081,345 FNMA
6.000%, with various maturities to 2033(c) 14,739,561
9,289,853 FNMA
6.500%, with various maturities to 2034(c) 9,764,691
585,902 FNMA
7.000%, 12/01/2022 631,372
1,908,154 FNMA
7.500%, with various maturities to 2032(c) 2,040,238
279,419 FNMA
8.000%, with various maturities to 2016(c) 298,452
284,180 GNMA
6.000%, 12/15/2031 295,259
1,341,086 GNMA
7.000%, with various maturities to 2031(c) 1,431,924
Mortgage Related -- continued
$ 25,106 GNMA
12.500%, with various maturities to 2015(c) $ 29,016
268,892 GNMA
16.000%, with various maturities to 2012(c) 318,103
92,419 GNMA
17.000%, with various maturities to 2011(c) 110,763
------------
64,031,427
------------
Treasuries -- 30.7%
6,100,000 U.S. Treasury Note
1.625%, 2/28/2006 6,037,811
4,300,000 U.S. Treasury Note
1.875%, 12/31/2005 4,277,997
10,200,000 U.S. Treasury Note
2.000%, 8/31/2005(d) 10,184,465
1,290,000 U.S. Treasury Note
2.250%, 2/15/2007(d) 1,276,243
5,330,000 U.S. Treasury Note
2.375%, 8/15/2006 5,312,928
2,500,000 U.S. Treasury Note
3.125%, 10/15/2008 2,496,290
4,250,000 U.S. Treasury Note
3.375%, 11/15/2008(d) 4,280,048
4,180,000 U.S. Treasury Note
6.125%, 8/15/2007(d) 4,554,729
750,000 U.S. Treasury Note
6.625%, 5/15/2007(d) 822,392
------------
39,242,903
------------
Total Bonds and Notes (Identified Cost
$126,604,258) 127,101,500
------------
Principal
Amount
- --------------------------------------------------------------------------------
Short Term Investments -- 15.9%
462,787 Repurchase Agreement with Investors Bank & Trust Co.
dated 9/30/2004 at 1.27% to be repurchased at $462,803
on 10/01/2004, collateralized by $488,325 Country
Wide Home Loan, 2.29% due 5/25/2034 valued at $485,926 462,787
2,556,513 Bank of America, 1.875%, due 10/19/2004(e) 2,556,513
412,594 Bank of Montreal, 1.76%, due 10/25/2004(e) 412,594
613,563 Bank of Nova Scotia, 1.75%, due 10/21/2004(e) 613,563
1,278,256 Bank of Nova Scotia, 1.76%, due 11/12/2004(e) 1,278,256
1,457,212 BGI Institutional Money Market Fund(e) 1,457,212
1,278,256 BNP Paribas, 1.80%, due 11/23/2004(e) 1,278,256
766,954 Falcon Asset Securitization Corp, 1.612%, due
10/01/2004(e) 766,954
255,651 Fortis Bank, 1.69%, due 10/14/2004(e) 255,651
763,434 Greyhawk Funding, 1.772%, due 10/19/2004(e) 763,434
829,218 Merrill Lynch Premier Institutional Fund(e) 829,218
2,045,210 Merrimac Cash Fund-Premium Class(e) 2,045,210
2,045,210 Royal Bank of Canada, 1.78%, due 11/10/2004(e) 2,045,210
766,954 Royal Bank of Scotland, 1.60%, due 10/15/2004(e) 766,954
766,954 Royal Bank of Scotland, 1.65%, due 10/29/2004(e) 766,954
76,695 Royal Bank of Scotland, 1.67%, due 11/02/2004(e) 76,695
1,712,864 Royal Bank of Scotland, 1.88%, due 12/23/2004(e) 1,712,864
251,970 Sheffield Receivables Corp, 1.622%, due 10/04/2004(e) 251,970
766,954 Sheffield Receivables Corp, 1.773%, due 10/20/2004(e) 766,954
511,303 Toronto Dominion Bank, 1.70%, due 11/08/2004(e) 511,303
766,954 Wells Fargo, 1.60%, due 10/04/2004(e) 766,954
----------
Total Short Term Investments (Identified Cost
$20,385,506) 20,385,506
----------
See accompanying notes to financial statements.
30
- --------------------------------------------------------------------------------
Loomis Sayles Limited Term Government and Agency Fund
Schedule of Investments(continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Total Investments -- 115.2%
(Identified Cost $146,989,764)(b) $147,487,006
Other assets less liabilities (19,497,762)
------------
Total Net Assets -- 100% $127,989,244
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$147,204,499 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 $ 800,316
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (517,809)
---------
Net unrealized appreciation $ 282,507
=========
At September 30, 2004, the Fund had a capital loss
carryover of approximately $18,142,649 of which
$2,731,339 expires on September 30, 2005,
$10,626,315 expires on September 30, 2007,
$4,165,768 expires on September 30, 2008, $425,323
expires on September 30, 2011 and $193,904 expires
on September 30, 2012. These amounts may be
available to offset future realized capital gains,
if any, to the extent provided by regulations.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation, disclosed on a tax basis
consisted of $42,280 in undistributed ordinary
income and $0 in undistributed long-term gains.
For the year ended September 30, 2004, the Fund has
elected to defer $1,140,873 of capital losses
attributable to Post-October losses.
(c) The Fund's investment in mortgage related securities
of the Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association and Government
National Mortgage Association are interests in
separate pools of mortgages. All separate
investments in securities of each issuer which have
the same coupon rate have been aggregated for the
purpose of presentation in the schedule of
investments.
(d) All or a portion of this security was on loan to
brokers at September 30, 2004.
(e) Represents investments of securities lending
collateral.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited)
Mortgage Related 50.0%
Treasures 30.7
Short Term Investments 15.9
Government Agencies 13.8
Asset Backed Securities 4.8
See accompanying notes to financial statements.
31
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund
Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Tax Exempt Obligations -- 97.1% of Total Net Assets
Broward County, FL, Resource Recovery -- 1.2%
$1,000,000 Wheelabrator South Broward,
5.000%, 12/01/2007 $ 1,070,970
-----------
Highlands County, FL, Health Facilities
Authority -- 1.2%
1,000,000 Adventis Health System,
5.875%, 11/15/2029 1,070,410
-----------
Martha's Vineyard, MA -- 1.2%
1,000,000 Land Bank Revenue,
5.000%, 5/01/2032, (AMBAC insured) 1,020,390
-----------
Massachusetts -- 5.8%
4,000,000 State Refunding Series A,
6.500%, 11/01/2014, (AMBAC insured) 4,979,120
-----------
Massachusetts Bay Transportation Authority -- 6.6%
3,000,000 Assessment Series A,
5.250%, 7/01/2030 3,155,220
2,500,000 Series A,
5.000%, 7/01/2032 2,540,025
-----------
5,695,245
-----------
Massachusetts Development Finance Agency -- 15.3%
2,000,000 Cambridge Street Development Series A,
5.125%, 2/01/2034, (MBIA insured) 2,057,000
1,000,000 Hampshire College,
5.625%, 10/01/2024 1,049,020
4,000,000 Mount Holyoke College,
5.250%, 7/01/2031 4,167,440
2,800,000 Refunding Springfield Resource Recovery-A,
5.625%, 6/01/2019 2,933,084
1,100,000 Visual and Performing Arts,
6.000%, 8/01/2021 1,326,754
1,500,000 WGBH Educational Foundation Series A,
5.375%, 1/01/2042, (AMBAC insured) 1,583,490
-----------
13,116,788
-----------
Massachusetts Health & Educational
Facilities Authority -- 34.4%
1,160,000 Baystate Medical Center Series F,
5.700%, 7/01/2027 1,207,015
2,000,000 Boston University,
5.000%, 10/01/2039 2,036,900
2,200,000 Catholic Health East,
5.500%, 11/15/2032 2,234,518
3,000,000 Dana Farber Series G-1,
6.250%, 12/01/2022 3,209,970
3,000,000 Harvard Univerity Series N,
6.250%, 4/01/2020 3,758,040
2,925,000 Nichols College Series C,
6.000%, 10/01/2017 3,039,426
2,000,000 Partners Healthcare Systems Series B,
5.250%, 7/01/2029 2,039,400
2,500,000 Partners Healthcare Systems Series C,
5.750%, 7/01/2021 2,734,800
1,500,000 Tufts University Series I,
5.250%, 2/15/2030 1,558,830
1,000,000 University of Massachusetts Project Series C,
5.250%, 10/01/2031, (MBIA insured) 1,046,560
2,000,000 University of Massachusetts Series C,
5.125%, 10/01/2034, (FGIC insured) 2,061,620
2,000,000 Wellesley College Series F,
5.125%, 7/01/2039 2,047,120
1,315,000 Wheaton College Series E,
5.000%, 7/01/2017 1,412,994
1,030,000 Williams College Series H,
5.000%, 7/01/2017 1,118,240
-----------
29,505,433
-----------
Massachusetts Housing Finance Agency -- 3.2%
665,000 Single Family Mortgage Series 21,
7.125%, 6/01/2025 665,884
2,000,000 Single Family Mortgage Series A,
4.600%, 12/01/2015 2,066,940
-----------
2,732,824
-----------
Massachusetts Port Authority -- 3.5%
1,750,000 Delta Air Lines, Inc. Project Series A,
5.500%, 1/01/2019, (AMBAC insured) 1,838,218
1,200,000 Series A,
5.000%, 7/01/2033, (MBIA insured) 1,215,384
-----------
3,053,602
-----------
Massachusetts Water Resources Authority -- 7.1%
2,000,000 General Series B,
5.125%, 8/01/2027, (MBIA insured) 2,078,880
3,240,000 Series A,
6.500%, 7/15/2019, (FGIC insured) 3,999,391
-----------
6,078,271
-----------
Michigan Hospital Finance Authority -- 1.9%
1,500,000 Oakwood Obligated Group,
5.500%, 11/01/2017 1,613,430
-----------
New England Education Loan Marketing -- 4.0%
3,000,000 Student Loan Revenue Bond Sub-Issue H,
6.900%, 11/01/2009 3,399,330
-----------
Puerto Rico Commonwealth Aqueduct & Sewer Authority
-- 5.1%
3,000,000 Aqueduct & Sewer Authority,
6.250%, 7/01/2013 3,585,120
655,000 Aqueduct & Sewer Authority,
10.250%, 7/01/2009 793,120
-----------
4,378,240
-----------
Puerto Rico Public Finance Corporation -- 3.9%
3,000,000 Commonwealth Appropriation Series A,
5.750%, 8/01/2027 3,377,160
-----------
University of Massachusetts Building Authority
-- 2.7%
2,200,000 SR - Series 1,
5.250%, 11/01/2028, (AMBAC insured) 2,305,600
-----------
Total Tax Exempt Obligations
(Cost $78,778,370) 83,396,813
-----------
See accompanying notes to financial statements.
32
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund
Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Short Term Investment -- 1.5% of Total Net Assets
$1,278,177 Repurchase Agreement with Investors Bank & Trust Co.
dated 9/30/2004 at 1.27% to be repurchased at
$1,278,223 on 10/1/2004, collateralized by
$1,313,528 Federal National Mortgage Association
Bond, 5.06%, due 4/01/2032 valued at $1,342,086 $ 1,278,177
-----------
Total Short Term Investment
(Cost $1,278,177) 1,278,177
-----------
Total Investments -- 98.6%
(Identified Cost $80,056,547)(b) 84,674,990
Other assets less liabilities 1,186,102
-----------
Total Net Assets -- 100.0% $85,861,092
===========
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$80,193,029 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 $ 4,675,533
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (193,572)
----------
Net unrealized appreciation $4,481,961
==========
At September 30, 2004, the Fund had a capital loss
carryover of approximately $2,269,828 of which
$1,149,888 expires on September 30, 2007, $116,500
expires on September 30, 2008 and $1,003,440 expires
on September 30, 2010.
These amounts may be available to offset future
realized capital gains, if any, to the extent
provided by regulations.
For the year ended September 30, 2004, the Fund has
elected to defer $601,844 of capital losses due to
post-October losses.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation, disclosed on a tax basis
consisted of $127,003 in undistributed ordinary
income and $0 in undistributed long-term gains.
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Company
MBIA Municipal Bond Investors Assurance Corp.
Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited)
College 17.3%
University 14.0
Water 12.2
Financial 8.2
Hospital 7.5
Student Loan 4.0
State General Obligation 3.9
Special Assesment 3.7
Pooled Funds 3.4
Hospital System Bonds 3.2
Revenue 3.1
Mass Transit 3.0
Health 2.6
Housing - Multifamily 2.4
Airport 2.1
Other, less than 2% each 8.0
See accompanying notes to financial statements.
33
- --------------------------------------------------------------------------------
Loomis Sayles Municipal Income Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Tax Exempt Obligations -- 97.8% of Total Net Assets
Arizona -- 0.8%
$1,000,000 Maricopa County, AZ, Pollution Control Corp.,
Public Service Co. of New Mexico,
4.000%, 1/01/2038 $ 1,001,340
-----------
California -- 10.6%
1,000,000 California Health Facilities Financing Authority,
Multiple Obligors,
4.950%, 7/01/2026 1,042,670
2,000,000 California State,
5.125%, 6/01/2027 2,039,740
1,000,000 California State Economic Recovery,
5.000%, 7/01/2023 1,089,040
5,000,000 California State Public Works Board, Coalinga
State Hospital,
5.000%, 6/01/2010 5,442,250
3,000,000 Sacramento, CA, Power Authority,
6.000%, 7/01/2022 3,165,000
-----------
12,778,700
-----------
Colorado -- 1.8%
2,000,000 Denver, CO, City & County Airport,
5.250%, 11/15/2023, (MBIA insured) 2,112,300
-----------
District of Columbia -- 4.1%
1,700,000 District of Columbia,
5.500%, 6/01/2014 1,880,336
3,000,000 Metropolitan Washington D.C. Airports Authority,
5.125%, 10/01/2029, (FGIC insured) 3,053,580
-----------
4,933,916
-----------
Florida -- 7.5%
1,000,000 Broward County, FL, Resource Recovery,
Wheelabrator South Broward,
5.000%, 12/01/2007 1,070,970
1,750,000 Coral Gables, FL, Health Facilities Authority,
Multiple Obligors,
5.000%, 8/15/2034 1,898,102
3,000,000 Escambia County, FL, Pollution Control,
6.900%, 8/01/2022 3,077,700
3,000,000 Highlands County, FL, Health Facilities
Authority, Multiple Obligors,
5.375%, 11/15/2035 3,033,780
-----------
9,080,552
-----------
Illinois -- 6.5%
1,000,000 Chicago, IL, Skyway Toll Bridge,
5.375%, 1/01/2011 1,083,850
2,000,000 Illinois Educational Facilities Authority,
University of Chicago,
5.000%, 7/01/2033 2,027,060
1,500,000 Illinois State,
5.400%, 12/01/2020, (MBIA insured) 1,645,065
3,000,000 Metropolitan Pier & Exposition Authority, IL,
5.250%, 6/15/2042, (MBIA insured) 3,114,870
-----------
7,870,845
-----------
Indiana -- 3.5%
320,000 Indiana Transportation Finance Authority,
5.750%, 12/01/2025 363,184
1,680,000 Indiana Transportation Finance Authority,
5.750%, 12/01/2025 1,782,026
2,000,000 Indianapolis, IN, Local Public Improvement Bond
Bank,
5.250%, 7/01/2033, (MBIA insured) 2,075,920
-----------
4,221,130
-----------
Massachusetts -- 0.6%
765,000 Massachusetts State Housing Finance Agency,
6.600%, 12/01/2026 781,409
-----------
Michigan-- 6.2%
$1,000,000 Michigan State Comprehensive Transportation,
5.250%, 5/15/2022 $ 1,072,570
2,850,000 Michigan State Hospital Finance Authority, Henry
Ford Health System,
5.500%, 3/01/2014 3,089,628
1,100,000 Michigan State Hospital Finance Authority,
Oakwood Obligated Group,
5.500%, 11/01/2014 1,197,747
2,000,000 University of Michigan,
5.250%, 12/01/2020 2,094,660
-----------
7,454,605
-----------
Minnesota -- 1.7%
2,000,000 Minnesota State Municipal Power Agency,
5.250%, 10/01/2024 2,105,580
-----------
Mississippi -- 4.4%
2,000,000 Lowndes County, MS, Solid Waste Disposal &
Pollution Control,
6.700%, 4/01/2022 2,349,500
2,500,000 Lowndes County, MS, Solid Waste Disposal &
Pollution Control,
6.800%, 4/01/2022 2,965,450
-----------
5,314,950
-----------
New Jersey -- 0.8%
1,000,000 New Jersey Health Care Facilities Financing
Authority,
Catholic Health East,
5.375%, 11/15/2033 1,022,110
-----------
New York-- 13.4%
3,000,000 New York State Dormitory Authority,
5.500%, 5/15/2013 3,414,960
2,740,000 New York State Dormitory Authority,
5.750%, 7/01/2013 3,163,631
3,000,000 New York State Municipal Bond Bank Agency,
5.250%, 6/01/2020 3,224,940
2,000,000 New York, NY,
4.250%, 5/15/2019 2,040,200
2,000,000 New York, NY,
6.000%, 1/15/2020 2,282,940
1,000,000 Port Authority, NY/NJ,
7.000%, 10/01/2007 1,036,840
1,000,000 Triborough Bridge & Tunnel Authority,
5.000%, 1/01/2032 1,012,620
-----------
16,176,131
-----------
North Carolina -- 1.2%
1,300,000 North Carolina Eastern Municipal Power Agency,
5.500%, 1/01/2012 1,427,517
-----------
Oregon -- 5.0%
1,750,000 Multnomah County, OR, Hospital Facilities
Authority,
Providence Health System,
5.250%, 10/01/2012 1,941,608
4,000,000 Western Generation Agency(c)
7.400%, 1/01/2016 4,110,560
-----------
6,052,168
-----------
Pennsylvania -- 9.7%
3,000,000 Pennsylvania Economic Development Financing
Authority,
6.600%, 1/01/2019 3,035,790
3,000,000 Pennsylvania Economic Development Financing
Authority, Sun Co., Inc.,
7.600%, 12/01/2024 3,084,240
5,000,000 Pennsylvania State Industrial Development
Authority,
5.500%, 7/01/2019, (AMBAC insured) 5,596,100
-----------
11,716,130
-----------
See accompanying notes to financial statements.
34
- --------------------------------------------------------------------------------
Loomis Sayles Municipal Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Tax Exempt Obligations -- (continued)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Puerto Rico-- 2.8%
$1,000,000 Puerto Rico Commonwealth Infrastructure
Financing Authority,
5.500%, 10/01/2040 $ 1,078,050
2,000,000 Puerto Rico Public Finance Corp.,
5.750%, 8/01/2027 2,251,440
------------
3,329,490
------------
South Carolina-- 2.6%
3,000,000 Greenville County, SC, School District,
5.500%, 12/01/2028 3,156,780
------------
South Dakota -- 1.0%
1,250,000 South Dakota Health & Educational Facilities
Authority,
Sioux Valley Hospital,
5.250%, 11/01/2027 1,259,088
------------
Tennessee -- 2.1%
2,500,000 Maury County, TN, Industrial Development Board,
Saturn Corp./General Motors Corp.,
6.500%, 9/01/2024 2,568,425
------------
Texas -- 9.6%
4,000,000 Dallas-Fort Worth, TX, International Airport,
5.500%, 11/01/2033 4,198,840
1,975,000 El Paso, TX,
5.875%, 8/15/2017 2,157,885
1,000,000 Houston, TX, Water & Sewer System,
5.250%, 12/01/2010, (FGIC insured) 1,127,960
1,000,000 Katy, TX, Independent School District,
5.125%, 2/15/2020 1,061,960
3,000,000 Lewisville, TX, Independent School District,
5.250%, 8/15/2027 3,101,490
------------
11,648,135
------------
Washington -- 1.9%
2,000,000 Energy Northwest, WA, Electric, Project No. 1,
5.500%, 7/01/2014 2,289,520
------------
Total Tax Exempt Obligations
(Identified Cost $112,769,531) 118,300,821
------------
Short Term Investment -- 0.8% of Total Net Assets
954,346 Repurchase Agreement with Investors Bank & Trust Co.
dated 9/30/2004 at 1.27% to be repurchased at
$954,379 on 10/1/2004, collateralized by $981,122
Federal Home Loan Mortagage Bond, 5.52%, due on
8/1/2032 valued at 1,002,063 954,346
------------
Total Short Term Investment
(Cost $954,346) 954,346
------------
Total Investments -- 98.6%
(Identified Cost $113,723,877)(b) 119,255,167
Other assets less liabilities 1,633,326
-------------
Total Net Assets-- 100.0% $120,888,493
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$114,084,613 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 $ 5,231,670
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (61,116)
------------
Net unrealized appreciation $ 5,170,554
============
(c) Illiquid security. At September 30, 2004, the value
of these securities amounted to $4,110,560 or 3.4%
of net assets.
At September 30, 2004, the Fund had a capital loss
carryover of approximately $1,839,271 of which
$1,700,392 expires on September 30, 2007 and
$138,879 expires on September 30, 2012. These
amounts may be available to offset future realized
capital gains, if any, to the extent provided by
regulations.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation, disclosed on a tax basis
consisted of $355,327 in undistributed ordinary
income and $0 in undistributed long-term gains.
For the year ended September 30, 2004, the Fund has
elected to defer $57,748 of capital losses due to
post-October losses.
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Company
MBIA Municipal Bond Investors Assurance Corp.
Holdings By Revenue Source at September 30, 2004 (unaudited)
% of Net Assets
---------------
University 8.9%
Solid Waste Disposal 6.9
Improvement 6.1
Insured 6.0
Various Purpose 5.8
Electric 5.6
Pooled Funds 4.7
Financial 4.6
State Lease 4.5
Revenue 4.4
Hospital 3.5
Paper/Forest Products 3.4
City and Town 3.3
Municipal Bond Bank 2.7
Water 2.6
Public Power/Utility 2.6
Development 2.6
Hospital System Bonds 2.6
Mining 2.5
Other, less than 2% each 15.3
See accompanying notes to financial statements.
35
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Bonds and Notes -- 84.0% of Total Net Assets
Convertible Bonds -- 4.2%
Canada -- 1.0%
$ 5,750,000 Nortel Networks Corp., Guaranteed Senior Note
4.250%, 9/01/2008(c) $ 5,548,750
1,500,000 Rogers Communications, Inc., Note
2.000%, 11/26/2005 1,441,875
433,000 TELUS Corp., Note
6.750%, 6/15/2010, (CAD) 358,376
------------
7,349,001
------------
United Kingdom -- 1.3%
3,575,000 Colt Telecom Group PLC, Note
2.000%, 12/16/2006, (EUR) 5,185,545
3,270,000 Colt Telecom Group PLC, Note
2.000%, 4/03/2007, (EUR) 4,753,298
------------
9,938,843
------------
United States -- 1.9%
1,819,000 Amkor Technology, Inc., Note
5.000%, 3/15/2007(c) 1,518,865
200,000 Builders Transportation, Inc., Subordinated Note
6.500%, 5/01/2011(d)(e)(f)(g)(h) 20
1,000,000 Builders Transportation, Inc., Subordinated Note
8.000%, 8/15/2005(d)(e)(f)(g)(h) 100
400,000 Corning, Inc., Senior Note
3.500%, 11/01/2008 470,000
194,000 Dixie Group, Inc., Subordinated Note
7.000%, 5/15/2012 173,145
2,400,000 Inhale Therapeutic Systems, Inc.,
Subordinated Note
3.500%, 10/17/2007 2,241,000
745,000 Kulicke & Soffa Industries, Inc.,
Subordinated Note, Convertible
0.500%, 11/30/2008(c) 523,362
2,822,000 Maxtor Corp., Subordinated Note
5.750%, 3/01/2012(h) 2,483,360
625,000 Nextel Communications, Inc., Senior Note
5.250%, 1/15/2010(c) 622,656
500,000 Preston Corp., Subordinated Note
7.000%, 5/01/2011 450,000
355,000 Richardson Electronics, Ltd., Subordinated Note
7.250%, 12/15/2006 355,000
4,750,000 Vertex Pharmaceuticals, Inc., Note, 144A
5.750%, 2/15/2011 4,993,437
------------
13,830,945
------------
Total Convertible Bonds
(Identified Cost $26,937,128) 31,118,789
------------
Non-Convertible Bonds -- 79.8%
Argentina -- 0.4%
3,500,000 Argentine Republic
8.875%, 3/01/2029(g) 797,825
2,405,000 Pecom Energia SA, Note, 144A
8.125%, 7/15/2010 2,398,987
------------
3,196,812
------------
Brazil -- 2.2%
134,867 Republic of Brazil
8.000%, 4/15/2014 133,357
5,055,000 Republic of Brazil
8.250%, 1/20/2034 4,506,532
6,000,000 Republic of Brazil
8.875%, 4/15/2024 5,748,000
$ 5,808,000 Republic of Brazil
10.125%, 5/15/2027 $ 6,156,480
------------
16,544,369
------------
Canada -- 15.7%
2,000,000 Calpine Canada Energy Finance ULC, Note
8.750%, 10/15/2007, (CAD) 1,108,823
14,000,000 Canadian Government
4.250%, 9/01/2008, (CAD) 11,269,856
7,210,000 Canadian Government
4.500%, 9/01/2007, (CAD) 5,862,279
13,540,000 Canadian Government
6.000%, 9/01/2005, (CAD) 11,027,711
18,000,000 Canadian Government
6.000%, 6/01/2008, (CAD) 15,351,180
3,550,000 Nortel Networks Corp., Note
6.875%, 9/01/2023(c) 3,248,250
5,990,000 Province of British Columbia
5.250%, 12/01/2006, (CAD) 4,929,818
4,240,000 Province of British Columbia
6.000%, 6/09/2008, (CAD) 3,603,631
13,000,000 Province of Manitoba
4.450%, 12/01/2008, (CAD) 10,468,676
6,685,000 Province of Manitoba
5.750%, 6/02/2008, (CAD) 5,635,128
1,525,000 Province of Ontario
3.500%, 9/08/2006, (CAD) 1,212,874
17,000,000 Province of Ontario
5.700%, 12/01/2008, (CAD) 14,319,262
6,240,000 Province of Ontario
5.900%, 3/08/2006, (CAD) 5,131,963
2,525,000 Rogers Wireless Communications, Inc., Senior
Secured Note
6.375%, 3/01/2014 2,323,000
8,500,000 Saskatchewan Province
Zero Coupon, 4/10/2014, (CAD) 4,146,729
18,470,000 Saskatchewan Province
5.500%, 6/02/2008, (CAD) 15,444,963
850,000 Tembec Industries, Inc., Senior Note
7.750%, 3/15/2012 854,250
------------
115,938,393
------------
Cayman Islands -- 0.7%
1,000,000 Enersis SA, Cayman Island, Note, (yankee)
7.400%, 12/01/2016 1,047,358
3,905,000 Vale Overseas, Ltd., Note
8.250%, 1/17/2034 3,797,612
------------
4,844,970
------------
Chile -- 1.6%
4,875,000 Empresa Nacional de Electricidad SA, Chile, Note
7.875%, 2/01/2027 4,969,165
250,000 Empresa Nacional de Electricidad SA, Chile, Note
8.350%, 8/01/2013 279,064
1,700,000 Empresa Nacional de Electricidad SA, Chile, Note
8.625%, 8/01/2015 1,943,280
4,525,000 Enersis SA, Chile, Note
7.375%, 1/15/2014 4,742,720
------------
11,934,229
------------
See accompanying notes to financial statements.
36
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Dominican Republic -- 0.4%
$ 3,390,000 Dominican Republic, 144A
9.040%, 1/23/2013 $ 2,627,250
-----------
Hong Kong -- 0.7%
4,505,000 Bangkok Bank Public Co., Hong Kong, Note, 144A
9.025%, 3/15/2029 5,043,780
-----------
Malaysia -- 0.8%
5,200,000 Tenaga Nasional Berhad, Note, 144A
7.500%, 11/01/2025 5,842,746
-----------
Mexico -- 4.7%
3,905,000 Grupo Transportacion Ferroviaria Mexicana SA de
CV,
Senior Note, (yankee)
0/11.750%, 6/15/2009(i) 3,944,050
4,350,000 Petroleos Mexicanos, Global Guaranteed Note,
(yankee)
9.500%, 9/15/2027 5,298,300
3,000,000 Petroleos Mexicanos, Note, 144A, (MTN), (FRN),
(yankee)
8.625%, 12/01/2023 3,390,000
269,200,000 United Mexican States
9.000%, 12/20/2012, (MXN) 22,347,430
-----------
34,979,780
-----------
Norway -- 0.7%
10,000,000 Kingdom of Norway
5.500%, 5/15/2009, (NOK) 1,610,457
22,740,000 Kingdom of Norway
6.750%, 1/15/2007, (NOK) 3,682,468
-----------
5,292,925
-----------
Philippines -- 1.1%
3,100,000 Bangko Sentral Ng Pilipinas, Note, (yankee)
8.600%, 6/15/2027 2,666,000
3,700,000 Philippine Long Distance Telephone Co., Note, (MTN)
8.350%, 3/06/2017 3,459,500
1,914,188 Quezon Power (Philippines) Ltd., Senior Secured
Note, (yankee)
8.860%, 6/15/2017 1,722,769
-----------
7,848,269
-----------
Republic of Korea -- 0.0%
300,000 Samsung Electronics Co., Ltd., 144A
7.700%, 10/01/2027 336,415
-----------
Singapore -- 0.1%
1,050,000 SP PowerAssets, Ltd., Series E, Note, (MTN)
3.730%, 10/22/2010, (SGD) 647,015
-----------
South Africa -- 0.3%
11,405,000 Republic of South Africa
12.500%, 12/21/2006, (ZAR) 1,897,325
-----------
Supranational -- 3.6%
80,000,000 Inter-American Development Bank, Series E,
Note, (MTN)
Zero Coupon, 5/11/2009, (BRL)(h) 13,917,540
22,300,000 International Bank for Reconstruction &
Development, Note, (MTN)
Zero Coupon, 8/20/2007, (NZD) 12,530,061
-----------
26,447,601
-----------
Sweden -- 2.7%
132,265,000 Kingdom of Sweden
6.500%, 5/05/2008, (SEK) 19,984,039
-----------
United Kingdom -- 0.9%
500,000 NTL CABLE PLC, Note, 144A
8.750%, 4/15/2014(c) 541,250
3,605,000 NTL CABLE PLC, Note, 144A
9.750%, 4/15/2014, (GBP) 6,493,680
-----------
7,034,930
-----------
United States -- 39.1%
$ 5,565,000 AES Corp. (The), Note
8.375%, 3/01/2011, (GBP) $10,175,344
4,020,000 AES Corp. (The), Senior Note
7.750%, 3/01/2014 4,150,650
1,875,000 AES Corp. (The), Senior Subordinated Note
8.875%, 11/01/2027 1,802,344
6,540,000 AK Steel Corp., Guaranteed Senior Note
7.750%, 6/15/2012(c) 6,392,850
1,750,000 Altria Group, Inc., Note
7.000%, 11/04/2013 1,825,885
750,000 American Airlines, Inc., Series 1999-1,
Class A2
7.024%, 10/15/2009 737,007
9,853,000 American President Cos., Ltd., Senior Note
8.000%, 1/15/2024 10,148,590
1,000,000 Amkor Technology, Inc., Senior Note
7.125%, 3/15/2011 820,000
475,000 Amkor Technology, Inc., Senior Note
7.750%, 5/15/2013(c) 389,500
500,000 Amkor Technology, Inc., Senior
Subordinated Note
10.500%, 5/01/2009(c) 425,000
8,000,000 ASIF Global Financing, Note, 144A
2.380%, 2/26/2009, (SGD) 4,704,234
788,702 Atlas Air Inc.
9.057%, 1/02/2014 589,271
7,063,273 Atlas Air, Inc., Series 1998-1, Class 1A
7.380%, 1/02/2018 6,649,436
9,258,941 Atlas Air, Inc., Series 1998-1, Class 1B
7.680%, 1/02/2014 6,624,680
4,036,395 Atlas Air, Inc., Series 1999-1, Class A1
7.200%, 1/02/2019 3,796,406
499,597 Atlas Air, Inc., Series 1999-1, Class A2
6.880%, 7/02/2009 466,327
3,456,920 Atlas Air, Inc., Series 1999-1, Class B
7.630%, 1/02/2015 2,453,152
866,194 Atlas Air, Inc., Series 2000-1, Class A
8.707%, 1/02/2019 852,378
800,000 Bausch & Lomb, Inc., Note
7.125%, 8/01/2028 845,901
500,000 Boise Cascade Corp., Note, (MTN)
7.450%, 8/10/2011 574,774
6,964,000 Borden Chemical, Inc., Note
7.875%, 2/15/2023 5,640,840
1,850,000 Borden Chemical, Inc., Note
9.200%, 3/15/2021 1,711,250
2,099,000 Borden, Inc., Note
8.375%, 4/15/2016 1,857,615
500,000 Bowater, Inc., Note
6.500%, 6/15/2013(c) 485,149
1,155,000 Calpine Corp., Senior Note
7.750%, 4/15/2009(c) 739,200
900,000 Calpine Corp., Senior Note
7.875%, 4/01/2008(c) 607,500
900,000 Calpine Corp., Senior Note
8.500%, 2/15/2011(c) 576,000
2,075,000 Calpine Corp., Senior Secured Note, 144A
8.750%, 7/15/2013(c) 1,566,625
10,660,000 Charter Communications Holdings, Inc.,
Senior Note
9.625%, 11/15/2009 8,394,750
See accompanying notes to financial statements.
37
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
United States -- continued
$ 400,000 Charter Communications Holdings, Inc.,
Senior Note
10.000%, 4/01/2009 $ 324,000
1,725,000 Charter Communications Holdings, Inc.,
Senior Note
10.000%, 5/15/2011 1,328,250
5,350,000 Coastal Corp., Note
6.950%, 6/01/2028 4,306,750
3,320,000 Columbia/HCA Healthcare Corp., Note
7.050%, 12/01/2027 3,227,462
500,000 Columbia/HCA Healthcare Corp., Note
7.500%, 12/15/2023 512,767
500,000 Columbia/HCA Healthcare Corp., Note, (MTN)
7.580%, 9/15/2025 521,465
250,000 Continental Airlines, Inc., Senior Note
8.000%, 12/15/2005(c) 228,750
1,239,119 Continental Airlines, Inc., Series 1997-4,
Class 4A
6.900%, 1/02/2018 1,193,073
2,348,414 Continental Airlines, Inc., Series 1997-4,
Class 4B
6.900%, 1/02/2017 1,871,236
774,448 Continental Airlines, Inc., Series 1998-1,
Class 1B
6.748%, 3/15/2017 595,714
1,686,375 Continental Airlines, Inc., Series 1999-1,
Class A
6.545%, 2/02/2019 1,627,495
459,958 Continental Airlines, Inc., Series 1999-1,
Class C
6.954%, 8/02/2009 350,025
2,056,686 Continental Airlines, Inc., Series 1999-2,
Class B
7.566%, 3/15/2020 1,590,634
598,749 Continental Airlines, Inc., Series 2001-1,
Class A1
6.703%, 6/15/2021 557,988
341,694 Continental Airlines, Inc., Series 2001-1,
Class B
7.373%, 12/15/2015 268,008
6,225,000 Corning, Inc., Note
5.900%, 3/15/2014 6,084,483
6,220,000 Corning, Inc., Note
6.200%, 3/15/2016 6,110,466
650,000 Corning, Inc., Note
6.750%, 9/15/2013 677,446
1,000,000 Corning, Inc., Note
6.850%, 3/01/2029 928,553
350,000 Corning, Inc., Note, (MTN)
8.300%, 4/04/2025 364,648
400,000 CSC Holdings, Inc., Senior Note
7.875%, 2/15/2018 413,000
250,000 CSC Holdings, Inc., Series B, Senior Note
8.125%, 7/15/2009 265,625
250,000 CSC Holdings, Inc., Series B, Senior Note
8.125%, 8/15/2009 265,625
2,145,000 Cummins, Inc., Note
7.125%, 3/01/2028 2,145,000
145,000 Dana Corp., Note
9.000%, 8/15/2011, (EUR) 216,178
7,285,000 Dillard's Department Stores, Inc., Note
6.625%, 1/15/2018 6,957,175
425,000 Dillard's Department Stores, Inc., Note
7.875%, 1/01/2023 431,375
850,000 Dillard's, Inc., Note
7.000%, 12/01/2028 799,000
1,600,000 Dillard's, Inc., Note
7.130%, 8/01/2018 1,580,000
1,500,000 Dillard's, Inc., Note
7.750%, 7/15/2026 1,485,000
$ 3,705,000 Edison Mission Energy Corp., Senior Note
7.730%, 6/15/2009 $ 3,890,250
840,000 EL Paso Corp., Note
5.750%, 3/14/2006, (EUR) 1,034,223
900,000 EL Paso Corp., Note
7.000%, 5/15/2011(c) 868,500
750,000 EL Paso Corp., Senior Note, (MTN)
7.800%, 8/01/2031 658,125
400,000 EL Paso Energy Corp., Note, (MTN), (FRN)
7.750%, 1/15/2032(c) 349,000
4,000,000 FHLMC
3.220%, 6/20/2007, (SGD) 2,447,440
7,000,000 FHLMC
4.625%, 2/15/2007, (EUR) 9,046,490
1,000,000 First Industrial, LP, Note
7.600%, 7/15/2028 1,108,228
34,000,000 FNMA
Zero coupon, 10/29/2007, (NZD) 18,759,886
28,200,000 FNMA
2.290%, 2/19/2009, (SGD) 16,531,655
6,500,000 FNMA
2.375%, 2/15/2007(c) 6,414,778
150,000 Ford Motor Co., Note
6.625%, 10/01/2028 135,797
125,000 Ford Motor Credit Co., Note
7.250%, 2/22/2005, (GBP) 227,629
500,000 General Electric Capital Corp., Series E,
Note, (MTN)
1.725%, 6/27/2008, (SGD) 288,726
950,000 Georgia-Pacific Corp., Note
7.250%, 6/01/2028 983,250
3,200,000 Georgia-Pacific Corp., Note
7.375%, 12/01/2025 3,408,000
3,775,000 Georgia-Pacific Corp., Note
7.750%, 11/15/2029 4,058,125
100,000 Great Lakes Dredge & Dock Corp., Senior
Subordinated Note
7.750%, 12/15/2013 86,500
250,000 Hasbro, Inc., Note
6.600%, 7/15/2028 251,250
1,000,000 HCA, Inc., Senior Note
5.750%, 3/15/2014 991,353
3,140,000 IMC Global, Inc., Note
7.300%, 1/15/2028 3,171,400
1,880,000 IMC Global, Inc., Note
7.375%, 8/01/2018 1,974,000
640,000 JC Penney Co., Inc., Note
7.125%, 11/15/2023 676,800
900,000 JC Penney Co., Inc., Note
7.650%, 8/15/2016 1,021,500
350,000 JC Penney Co., Inc., Note
7.950%, 4/01/2017 404,250
250,000 JC Penney Co., Inc., Note, (MTN), (FRN)
6.875%, 10/15/2015 266,250
11,285,000 Lucent Technologies, Inc., Note
6.450%, 3/15/2029 9,140,850
1,250,000 McDonald's Corp., Series E, Note, (MTN)
3.6275%, 10/10/2010, (SGD) 757,207
881,000 Missouri Pacific Railroad Co., Note
5.000%, 1/01/2045 636,522
1,485,000
See accompanying notes to financial statements.
38
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
United States -- continued
$ 125,000 Motorola, Inc., Note
6.500%, 11/15/2028 $ 129,794
3,175,000 Northern Telecom Capital Corp., Note
7.875%, 6/15/2026 3,063,875
4,840,000 Owens-Illinois, Inc., Senior Note
7.800%, 5/15/2018 4,694,800
2,000,000 Pharma Services Intermediate Holding Corp.,
Senior Note, 144A
0/11.500%, 4/01/2014(i) 1,260,000
310,000 Phillips-Van Heusen Corp., Note
7.750%, 11/15/2023 310,000
250,000 Pioneer Natural Resources Co., Senior Note
7.200%, 1/15/2028 281,558
1,900,000 Qwest Capital Funding, Inc., Guaranteed Note
7.000%, 8/03/2009(c) 1,738,500
2,420,000 Qwest Capital Funding, Inc., Guaranteed Note
7.625%, 8/03/2021 1,893,650
600,000 Qwest Capital Funding, Inc., Note
6.500%, 11/15/2018 438,000
825,000 Qwest Capital Funding, Inc., Note
7.250%, 2/15/2011(c) 736,313
1,700,000 Qwest Capital Funding, Inc., Note
7.750%, 2/15/2031 1,300,500
250,000 Qwest Capital Funding, Inc., Note
7.900%, 8/15/2010(c) 230,625
350,000 Qwest Corp., Note
7.250%, 9/15/2025 315,000
229,302 Salton SEA Funding Corp., Series C, Senior
Secured Note
7.840%, 5/30/2010 243,982
750,000 Southern Natural Gas Co., Note
7.350%, 2/15/2031 740,625
250,000 Sprint Capital Corp., Note
6.875%, 11/15/2028 262,223
2,600,000 Tennessee Gas Pipeline Co., Note
7.000%, 10/15/2028 2,470,000
650,000 Tennessee Gas Pipeline Co., Note
7.500%, 4/01/2017 674,375
496,687 Tiverton Power Associates, LP, Note, 144A
9.000%, 7/15/2018 362,582
5,000,000 U.S. Treasury Note
1.625%, 2/28/2006 4,949,025
18,250,000 U.S. West Capital Funding, Inc., Note
6.875%, 7/15/2028(c) 13,094,375
245,000 United Rentals North America, Inc., Senior
Subordinated Note
7.000%, 2/15/2014(c) 217,438
600,000 Williams Cos., Inc., Note
7.875%, 9/01/2021 666,000
965,000 Williams Cos., Inc., Senior Note
7.750%, 6/15/2031 979,475
8,600,000 Williams Cos., Inc., Series A, Note
7.500%, 1/15/2031 8,643,000
1,000,000 Woolworth Corp., Note
8.500%, 1/15/2022 1,065,000
13,550,000 Xerox Capital Trust I, Guaranteed Note
8.000%, 2/01/2027 13,346,750
1,730,000 Xerox Corp., Note, (MTN)
7.200%, 4/01/2016 1,768,925
------------
288,694,223
------------
Uruguay -- 0.4%
1,600,000 Republic of Uruguay
7.500%, 3/15/2015 1,416,000
$ 2,248,066 Republic of Uruguay
7.875%, 1/15/2033 $ 1,809,693
------------
3,225,693
------------
Venezuela -- 3.7%
16,235,000 Cerro Negro Finance, Ltd., Note, 144A
7.900%, 12/01/2020 15,829,125
8,155,000 Petrozuata Finance, Inc., Note, Series B,
144A
8.220%, 4/01/2017 8,032,675
3,640,000 Republic of Venezuela
9.250%, 9/15/2027 3,587,220
------------
27,449,020
------------
Total Non-Convertible Bonds
(Identified Cost $552,197,319) 589,809,784
------------
Total Bonds and Notes
(Identified Cost $579,134,447) 620,928,573
------------
Shares
- --------------------------------------------------------------------------------
Preferred Stocks -- 4.2% of Total Net Assets
Philippines -- 1.1%
156,314 Philippine Long Distance Telephone Co.,
Sponsored GDR,
Convertible, $24.80, 12/31/2049 7,800,069
------------
United States -- 3.1%
10,000 Chesapeake Energy Corp., Convertible 801,250
51,500 Cummins Capital Trust I, Convertible(c) 4,190,812
10,000 El Paso Tennessee Pipeline Co. Class A 455,625
24,550 Host Marriott Finance Trust (REIT), 1,288,875
Convertible
3,300 La Quinta Corp. 83,655
7,400 Lucent Technologies Capital Trust I,
Convertible, 7.75%,
3/15/2017 8,215,850
15,000 Newell Financial Trust I, Convertible 652,500
147,550 Owens-Illinois, Inc., Convertible, 4.75%, 5,142,117
12/31/2049(c)
500 Pacific Gas & Electric Co. 10,625
31,875 Pacific Gas & Electric Co. 817,594
800 Pacific Gas & Electric Co. 16,176
600 Pacific Gas & Electric Co. Class E 12,642
9,500 Southern California Edison Co. 963,954
10,000 United Rentals Trust I, Convertible 380,000
------------
23,031,675
------------
Total Preferred Stocks
(Identified Cost $25,125,752) 30,831,744
------------
Common Stocks -- 3.1%
United States -- 3.1%
162,900 Associated Estates Realty Corp. (REIT) 1,627,371
1,440 Covad Communications Group, Inc. 2,419
182,500 Developers Diversified Realty Corp. (REIT) 7,144,875
282,500 Duke Energy Corp.(c) 6,466,425
26,300 High Income Opportunity Fund, Inc. 179,629
47,136 Morgan Stanley Emerging Markets Debt Fund, 431,766
Inc.
12,175 PIMCO Strategic Global Government Fund, Inc. 144,882
24,650 Senior High Income Portfolio, Inc. 147,407
117,700 Simon Property Group, Inc. (REIT) 6,312,251
12,050 Templeton Emerging Markets Income Fund, 155,445
Inc.(c)
Total Common Stocks
(Identified Cost $15,965,586) 22,612,470
------------
See accompanying notes to financial statements.
39
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------
Short Term Investments -- 13.5%
$60,761,860 Repurchase Agreement with Investors Bank & Trust
Co. dated 9/30/2004 at 1.27% to be repurchased at
$60,764,003 on 10/01/2004, collateralized by
$62,882,562 Government National Mortgage
Association Bond and Federal National Mortgage
Association Bond, 4.00% due 5/20/2034 and 4.12%
due 2/01/2033, respectively, aggregately valued
at $63,799,953 $ 60,761,860
5,010,303 Bank of America, 1.875%, due 10/19/2004(j) 5,010,303
808,610 Bank of Montreal, 1.76%, due 10/25/2004(j) 808,610
1,202,473 Bank of Nova Scotia, 1.75%, due 10/21/2004(j) 1,202,473
2,505,152 Bank of Nova Scotia, 1.76%, due 11/12/2004(j) 2,505,152
2,855,873 BGI Institutional Money Market Fund(j) 2,855,873
2,505,152 BNP Paribas, 1.80%, due 11/23/2004(j) 2,505,152
1,503,091 Falcon Asset Securitization Corp, 1.612%,
due 10/01/2004(j) 1,503,091
501,030 Fortis Bank, 1.69%, due 10/14/2004(j) 501,030
1,496,193 Greyhawk Funding, 1.772%, due 10/19/2004(j) 1,496,193
1,625,118 Merrill Lynch Premier Institutional Fund(j) 1,625,118
4,008,243 Merrimac Cash Fund-Premium Class(j) 4,008,243
4,008,243 Royal Bank of Canada, 1.78%, due 11/10/2004(j) 4,008,243
1,503,091 Royal Bank of Scotland, 1.60%, due 10/15/2004(j) 1,503,091
1,503,091 Royal Bank of Scotland, 1.65%, due 10/29/2004(j) 1,503,091
150,309 Royal Bank of Scotland, 1.67%, due 11/02/2004(j) 150,309
3,356,903 Royal Bank of Scotland, 1.88%, due 12/23/2004(j) 3,356,903
493,816 Sheffield Receivables Corp, 1.622%,
due 10/04/2004(j) 493,816
1,503,091 Sheffield Receivables Corp, 1.773%,
due 10/20/2004(j) 1,503,091
1,002,061 Toronto Dominion Bank, 1.70%, due 11/08/2004(j) 1,002,061
1,503,091 Wells Fargo, 1.60%, due 10/04/2004(j) 1,503,091
------------
Total Short Term Investments (Identified Cost
$99,806,794) 99,806,794
------------
Total Investments -- 104.8%
(Identified Cost $720,032,579)(b) 774,179,581
Other assets less liabilities (35,342,683)
------------
Total Net Assets -- 100% $738,836,898
============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information:
At September 30, 2004, the net unrealized
appreciation on investments based on cost of
$719,991,217 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 $ 64,525,627
Aggregate gross unrealized depreciation for all
investments in which there is an excess of
tax cost over value (10,337,263)
------------
Net unrealized appreciation $ 54,188,364
============
At September 30, 2004, the Fund had a capital loss
carryover of approximately $49,383,086 of which
$3,167,856 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
$7,096,274 expires on September 30, 2011. These
amounts may be available to offset future realized
capital gains, if any, to the extent provided by
regulations.
At September 30, 2004, the components of
distributable earnings, excluding unrealized
appreciation/depreciation, disclosed on a tax
basis consisted of $6,368,311 in undistributed
ordinary income and $0 in undistributed long-term
gains.
(c) All or a portion of this security was on loan to
brokers at September 30, 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 Trustees.
(g) Security is in default of principal and interest
payment.
(h) Illiquid security. At September 30, 2004, the
value of these securities amounted to $16,401,020
or 2.2% of net assets.
(i) 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.
(j) 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.
FRN Floating Rate Note
MTN Medium Term Note
REIT Real Estate Investment Trust
yankee U.S. dollar denominated security issued by a non-U.S. company.
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 $63,422,786 or 8.6% of net assets.
BRL Brazilian Real
CAD Canadian Dollar
EUR Euro
GBP British Pound
MXN Mexican Peso
NOK Norwegian Krone
NZD New Zealand Dollars
SEK Swedish Krona
SGD Singapore Dollar
ZAR South African Rand
See accompanying notes to financial statements.
40
- --------------------------------------------------------------------------------
Loomis Sayles Strategic Income Fund -- Schedule of Investments (continued)
- --------------------------------------------------------------------------------
Investments as of September 30, 2004
Holdings at September 30, 2004 as a Percentage of Net Assets (unaudited)
Sovereigns 14.8%
Foreign Local Governments 11.9
Repurchase Agreement 8.2
Government Agencies 7.1
Electric 5.5
Financial Services 5.3
Electronics 5.1
Transportation Services 4.3
Wirelines 3.8
Supranationals 3.6
Integrated Energy 3.2
Pipelines 3.0
Media Cable 2.6
Information/Data Technology 2.3
Real Estate Investment Trusts 2.2
Electric Utilities 2.0
Retailers 2.0
Other, less than 2% each 17.9
See accompanying notes to financial statements.
41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Page Intentionally Left Blank
42
- --------------------------------------------------------------------------------
Statements of Assets & Liabilities
- --------------------------------------------------------------------------------
September 30, 2004
Core Plus Bond Government High Income
Fund Securities Fund Fund
-------------- --------------- ------------
ASSETS
Investments at cost $286,789,195 $64,088,435 $ 48,846,655
Net unrealized appreciation 8,903,726 3,753,430 2,679,295
------------ ----------- ------------
Investments at value 295,692,921 67,841,865 51,525,950
Receivable for Fund shares sold 655,430 3,910 55,698
Receivable for securities sold 2,882,289 -- 54,167
Dividends and interest receivable 3,459,793 823,586 850,292
Tax reclaims receivable -- -- 144
Receivable from investment adviser 24,079 -- --
Securities lending income receivable 2,993 1,042 3,327
Prepaid expense 2,249 532 349
------------ ----------- ------------
TOTAL ASSETS 302,719,754 68,670,935 52,489,927
------------ ----------- ------------
LIABILITIES
Collateral on securities loaned, at value 9,091,824 651,750 6,394,083
Payable for securities purchased 6,431,826 -- 555,545
Payable for Fund shares redeemed 517,487 167,473 91,859
Dividends payable 370,639 16,166 104,965
Management fees payable 98,191 30,760 22,147
Deferred Trustees' fees 155,067 80,811 34,427
Transfer agent fees payable 268,126 17,157 14,772
Accounting and administrative fees payable 31,580 7,451 4,897
Deferred expense payable -- -- --
Other accounts payable and accrued expenses 87,742 48,194 50,534
------------ ----------- ------------
TOTAL LIABILITIES 17,052,482 1,019,762 7,273,229
------------ ----------- ------------
NET ASSETS $285,667,272 $67,651,173 $ 45,216,698
============ =========== ============
NET ASSETS CONSIST OF:
Paid in capital $298,548,352 $71,852,760 $127,794,625
Undistributed (overdistributed) net investment income 2,485,658 (12,707) (110,020)
Accumulated net realized gain (loss) on investments (24,291,216) (7,942,310) (85,147,844)
Net unrealized appreciation (depreciation) of investments 8,924,478 3,753,430 2,679,937
------------ ----------- ------------
NET ASSETS $285,667,272 $67,651,173 $ 45,216,698
============ =========== ============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $120,008,636 $54,704,267 $ 24,641,380
============ =========== ============
Shares of beneficial interest 10,263,189 4,571,299 5,107,177
============ =========== ============
Net asset value and redemption price per share $ 11.69 $ 11.97 $ 4.82
============ =========== ============
Offering price per share (100/[100-maximum sales charge]
of net asset value) $ 12.24 $ 12.53 $ 5.05
============ =========== ============
Class B shares: (redemption price is equal to net asset
value less any applicable contingent deferred sales charges)
Net assets $148,556,449 $10,689,247 $ 17,967,471
============ =========== ============
Shares of beneficial interest 12,698,362 893,053 3,721,753
============ =========== ============
Net asset value and offering price per share $ 11.70 $ 11.97 $ 4.83
============ =========== ============
Class C shares: (redemption price is equal to net asset
value less any applicable contingent deferred sales charges)
Net assets $ 6,161,549 $ -- $ 2,607,847
============ =========== ============
Shares of beneficial interest 526,361 -- 540,386
============ =========== ============
Net asset value and offering price per share $ 11.71 $ -- $ 4.83
============ =========== ============
Class Y shares:
Net assets $ 10,940,638 $ 2,257,659 $ --
============ =========== ============
Shares of beneficial interest 931,708 189,140 --
============ =========== ============
Net asset value, offering and redemption price per share $ 11.74 $ 11.94 $ --
============ =========== ============
See accompanying notes to financial statements.
43
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Massachusetts
Limited Term Government Tax Free Income Municipal Income Strategic Income
and Agency Fund Fund Fund Fund
- ----------------------- --------------- ---------------- ----------------
$146,989,764 $80,056,547 $113,723,877 $720,032,579
497,242 4,618,443 5,531,290 54,147,002
------------ ----------- ------------ ------------
147,487,006 84,674,990 119,255,167 774,179,581
21,741 3,328 46,299 8,314,944
64,260 75,000 300,000 819,467
846,380 1,387,929 1,814,240 10,070,799
-- -- -- 11,264
-- -- -- --
4,257 -- -- 17,156
1,011 659 943 4,728
------------ ----------- ------------ ------------
148,424,655 86,141,906 121,416,649 793,417,939
------------ ----------- ------------ ------------
19,922,719 -- -- 39,044,934
-- -- -- 11,383,883
211,180 69,833 192,359 2,014,731
100,247 68,115 118,844 1,290,336
59,988 42,147 47,524 352,992
52,210 39,975 90,297 78,127
26,698 13,819 19,185 116,188
14,181 9,237 13,207 67,718
-- -- -- 69,643
48,188 37,688 46,740 162,489
------------ ----------- ------------ ------------
20,435,411 280,814 528,156 54,581,041
------------ ----------- ------------ ------------
$127,989,244 $85,861,092 $120,888,493 $738,836,898
============ =========== ============ ============
$147,102,339 $84,232,180 $117,468,117 $729,762,530
(110,117) 18,623 146,840 5,317,888
(19,500,220) (3,008,154) (2,257,754) (50,690,098)
497,242 4,618,443 5,531,290 54,446,578
------------ ----------- ------------ ------------
$127,989,244 $85,861,092 $120,888,493 $738,836,898
============ =========== ============ ============
$106,701,169 $81,426,508 $111,801,197 $343,585,555
============ =========== ============ ============
9,440,205 4,911,197 14,957,611 25,324,413
============ =========== ============ ============
$ 11.30 $ 16.58 $ 7.47 $ 13.57
============ =========== ============ ============
$ 11.65 $ 17.32 $ 7.82 $ 14.21
============ =========== ============ ============
$ 10,106,991 $ 4,434,584 $ 9,087,296 $128,714,162
============ =========== ============ ============
895,976 268,075 1,214,511 9,461,062
============ =========== ============ ============
$ 11.28 $ 16.54 $ 7.48 $ 13.60
============ =========== ============ ============
$ 6,948,569 $ -- $ -- $255,704,540
============ =========== ============ ============
615,184 -- -- 18,801,081
============ =========== ============ ============
$ 11.30 $ -- $ -- $ 13.60
============ =========== ============ ============
$ 4,232,515 $ -- $ -- $ 10,832,641
============ =========== ============ ============
373,209 -- -- 798,517
============ =========== ============ ============
$ 11.34 $ -- $ -- $ 13.57
============ =========== ============ ============
44
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
Core Plus Bond Government High Income Limited Term Government
Fund Securities Fund Fund and Agency Fund
-------------- --------------- ----------- -----------------------
INVESTMENT INCOME
Dividends $ -- $ -- $ 72,343 $ --
Interest 15,836,566 3,277,228 4,113,790 5,323,114
Securities lending income 22,911 19,185 21,672 11,603
Less net foreign taxes withheld -- -- (1,441) --
------------ ----------- ----------- -----------
15,859,477 3,296,413 4,206,364 5,334,717
------------ ----------- ----------- -----------
Expenses
Management fees 1,260,438 410,046 330,146 773,694
Service and distribution fees - Class A 312,845 149,737 62,823 361,411
Service and distribution fees - Class B 1,547,638 121,316 208,830 116,983
Service and distribution fees - Class C 68,011 -- 27,615 76,233
Trustees' fees and expenses 45,752 25,336 16,355 22,937
Accounting and administrative 198,429 48,897 31,916 88,981
Custodian 106,109 48,834 58,185 68,532
Transfer agent fees - Class A, Class B, Class C 1,058,776 150,534 125,499 257,277
Transfer agent fees - Class Y 61,698 15,657 -- 17,747
Audit and tax services 31,655 24,657 33,384 24,705
Legal 15,075 3,418 10,766 7,774
Shareholder reporting 62,254 28,325 24,660 23,605
Registration 58,250 34,939 38,640 49,716
Deferred expense reimbursement -- -- -- --
Miscellaneous 30,420 12,090 13,829 26,532
------------ ----------- ----------- -----------
Total expenses 4,857,350 1,073,786 982,648 1,916,127
Less reimbursement/waiver (74,236) -- -- --
------------ ----------- ----------- -----------
Net expenses 4,783,114 1,073,786 982,648 1,916,127
------------ ----------- ----------- -----------
Net investment income 11,076,363 2,222,627 3,223,716 3,418,590
------------ ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net 9,433,192 (202,144) 2,160,899 1,021,149
Foreign currency transactions - net 92,695 -- (522) --
Change in unrealized appreciation (depreciation) of:
Investments - net (6,368,379) (524,082) (390,534) (2,043,680)
Foreign currency transactions - net 13,432 -- 642 --
------------ ----------- ----------- -----------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions 3,170,940 (726,226) 1,770,485 (1,022,531)
------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $ 14,247,303 $ 1,496,401 $ 4,994,201 $ 2,396,059
============ =========== =========== ===========
See accompanying notes to financial statements.
45
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Massachusetts
Tax Free Income Municipal Income Strategic Income
Fund Fund Fund
- --------------- ---------------- ----------------
$ -- $ -- $ 2,920,500
4,485,864 6,560,082 33,362,961
-- -- 75,284
-- -- (71,553)
---------- ---------- -----------
4,485,864 6,560,082 36,287,192
---------- ---------- -----------
530,148 606,254 3,264,555
271,068 295,653 590,762
51,109 100,731 1,251,818
-- -- 1,593,979
19,184 29,497 45,798
57,745 84,045 337,400
43,498 48,057 189,045
153,499 214,273 909,550
-- -- 18,916
24,818 26,174 37,414
4,564 7,848 27,004
27,132 23,515 93,502
18,400 37,835 129,744
-- -- 69,643
10,723 22,887 63,220
---------- ---------- -----------
1,211,888 1,496,769 8,622,350
-- -- (5,434)
---------- ---------- -----------
1,211,888 1,496,769 8,616,916
---------- ---------- -----------
3,273,976 5,063,313 27,670,276
---------- ---------- -----------
(325,070) (199,243) 15,214,149
-- -- 190,679
1,181,062 1,189,663 21,827,031
-- -- 157,892
---------- ---------- -----------
855,992 990,420 37,389,751
---------- ---------- -----------
$4,129,968 $6,053,733 65,060,027
========== ========== ===========
46
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Core Plus Bond Government
Fund Securities Fund
-------------------------------------------- --------------------------------------------
For the Period For the Period
January 1, 2003 January 1, 2003
Year Ended through Year Ended Year Ended through Year Ended
September 30, September 30, December 31, September 30, September 30, December 31,
2004 2003 2002 2004 2003 2002
------------- --------------- ------------ ------------- --------------- ------------
FROM OPERATIONS:
Net investment income $ 11,076,363 $ 9,527,954 $ 17,087,741 $ 2,222,627 $ 2,088,839 $ 3,478,800
Net realized gain (loss) on
investments and foreign
currency transactions 9,525,887 3,864,683 (18,724,816) (202,144) 2,186,050 1,754,365
Net change in unrealized
appreciation (depreciation)
of investments (6,354,947) 5,549,963 9,019,633 (524,082) (1,862,032) 6,101,934
------------ ------------ ------------ ------------ ------------ ------------
Increase (decrease) in net
assets resulting from
operations 14,247,303 18,942,600 7,382,558 1,496,401 2,412,857 11,335,099
------------ ------------ ------------ ------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (5,832,828) (4,447,575) (8,791,213) (2,240,003) (2,185,576) (3,186,452)
Class B (5,866,726) (4,047,373) (6,316,934) (363,180) (410,467) (530,909)
Class C (259,130) (220,936) (498,081) -- -- --
Class Y (806,864) (668,802) (1,050,339) (90,354) (133,483) (289,414)
------------ ------------ ------------ ------------ ------------ ------------
(12,765,548) (9,384,686) (16,656,567) (2,693,537) (2,729,526) (4,006,775)
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE
TRANSACTIONS (36,519,835) (5,058,236) (4,698,171) (18,071,441) (12,801,156) 4,088,509
------------ ------------ ------------ ------------ ------------ ------------
Redemption Fees
Class A 164 -- -- -- -- --
Class B 204 -- -- -- -- --
Class C 7 -- -- -- -- --
Class Y 17 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
392 -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total increase (decrease) in net
assets (35,037,688) 4,499,678 (13,972,180) (19,268,577) (13,117,825) 11,416,833
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS
Beginning of period 320,704,960 316,205,282 330,177,462 86,919,750 100,037,575 88,620,742
------------ ------------ ------------ ------------ ------------ ------------
End of period $285,667,272 $320,704,960 $316,205,282 $ 67,651,173 $ 86,919,750 $100,037,575
============ ============ ============ ============ ============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET
INVESTMENT INCOME $ 2,485,658 $ 1,397,403 $ 127,794 $ (12,707) $ (18,577) $ (16,246)
============ ============ ============ ============ ============ ============
See accompanying notes to financial statements.
47
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Limited Term
High Income Government
Fund and Agency Fund
- -------------------------------------------- --------------------------------------------
For the Period For the Period
January 1, 2003 January 1, 2003
Year Ended through Year Ended Year Ended through Year Ended
September 30, September 30, December 31, September 30, September 30, December 31,
2004 2003 2002 2004 2003 2002
- ------------- --------------- ------------ ------------- --------------- ------------
$ 3,223,716 $ 2,691,980 $ 4,914,959 $ 3,418,590 $ 2,567,365 $ 4,880,802
2,160,377 1,766,058 (20,594,051) 1,021,149 1,309,685 2,104,690
(389,892) 4,199,027 9,402,597 (2,043,680) (2,298,347) 3,563,852
- ----------- ----------- ------------ ------------ ------------ ------------
4,994,201 8,657,065 (6,276,495) 2,396,059 1,578,703 10,549,344
- ----------- ----------- ------------ ------------ ------------ ------------
(1,756,090) (1,358,749) (2,389,509) (4,112,174) (3,580,991) (4,982,529)
(1,304,202) (1,211,401) (2,310,655) (358,642) (420,988) (580,172)
(172,398) (138,738) (257,610) (232,332) (230,278) (272,616)
-- -- -- (214,192) (261,630) (402,890)
- ----------- ----------- ------------ ------------ ------------ ------------
(3,232,690) (2,708,888) (4,957,774) (4,917,340) (4,493,887) (6,238,207)
- ----------- ----------- ------------ ------------ ------------ ------------
(6,616,858) (3,967,380) (13,012,003) (16,942,090) 11,483,457 1,774,899
- ----------- ----------- ------------ ------------ ------------ ------------
146 -- -- -- -- --
110 -- -- -- -- --
16 -- -- -- -- --
-- -- -- -- -- --
- ----------- ----------- ------------ ------------ ------------ ------------
272 -- -- -- -- --
- ----------- ----------- ------------ ------------ ------------ ------------
(4,855,075) 1,980,797 (24,246,272) (19,463,371) 8,568,273 6,086,036
- ----------- ----------- ------------ ------------ ------------ ------------
50,071,773 48,090,976 72,337,248 147,452,615 138,884,342 132,798,306
- ----------- ----------- ------------ ------------ ------------ ------------
$45,216,698 $50,071,773 $ 48,090,976 $127,989,244 $147,452,615 $138,884,342
=========== =========== ============ ============ ============ ============
$ (110,020) $ (111,575) $ (128,268) $ (110,117) $ (122,089) $ (116,800)
=========== =========== ============ ============ ============ ============
48
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
Massachusetts Municipal Income
Tax Free Income Fund Fund
-------------------------------------------- --------------------------------------------
For the Period For the Period
January 1, 2003 January 1, 2003
Year Ended through Year Ended Year Ended through Year Ended
September 30, September 30, December 31, September 30, September 30, December 31,
2004 2003 2002 2004 2003 2002
------------- --------------- ------------ ------------- --------------- ------------
FROM OPERATIONS:
Net investment income $ 3,273,976 $ 2,789,342 $ 4,082,640 $ 5,063,313 $ 4,304,402 $ 6,897,727
Net realized gain (loss) on
investments and foreign
currency transactions (325,070) 877,919 (916,633) (199,243) 1,148,331 2,710,093
Net change in unrealized
appreciation (depreciation)
of investments 1,181,062 (851,243) 4,433,497 1,189,663 (1,633,204) 872,708
----------- ----------- ----------- ------------ ------------ ------------
Increase (decrease) in net
assets resulting from
operations 4,129,968 2,816,018 7,599,504 6,053,733 3,819,529 10,480,528
----------- ----------- ----------- ------------ ------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (3,115,670) (2,628,195) (3,827,503) (4,693,919) (4,027,619) (6,303,086)
Class B (157,408) (161,498) (276,899) (324,812) (290,127) (507,956)
Class C -- -- -- -- -- --
Class Y -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------
(3,273,078) (2,789,693) (4,104,402) (5,018,731) (4,317,746) (6,811,042)
----------- ----------- ----------- ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE
TRANSACTIONS (7,548,538) (6,268,959) (2,388,573) (17,936,186) (7,043,056) (10,738,646)
----------- ----------- ----------- ------------ ------------ ------------
Redemption Fees
Class A -- -- -- -- -- --
Class B -- -- -- -- -- --
Class C -- -- -- -- -- --
Class Y -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------
-- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------
Total increase (decrease) in net
assets (6,691,648) (6,242,634) 1,106,529 (16,901,184) (7,541,273) (7,069,160)
----------- ----------- ----------- ------------ ------------ ------------
NET ASSETS
Beginning of period 92,552,740 98,795,374 97,688,845 137,789,677 145,330,950 152,400,110
----------- ----------- ----------- ------------ ------------ ------------
End of period $85,861,092 $92,552,740 $98,795,374 $120,888,493 $137,789,677 $145,330,950
=========== =========== =========== ============ ============ ============
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME $ 18,623 $ 19,469 $ 19,970 $ 146,840 $ 147,016 $ 146,768
=========== =========== =========== ============ ============ ============
See accompanying notes to financial statements.
49
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Strategic Income
Fund
- ---------------------------------------------
For the Period
January 1, 2003
Year Ended through Year Ended
September 30, September 30, December 31,
2004 2003 2002
- ------------- --------------- ------------
$ 27,670,276 $ 12,189,949 $ 15,106,370
15,404,828 (4,553,646) (21,248,207)
21,984,923 47,707,584 36,560,725
------------ ------------ ------------
65,060,027 55,343,887 30,418,888
------------ ------------ ------------
(14,995,915) (6,332,331) (5,702,309)
(6,962,890) (5,143,216) (5,565,705)
(8,540,977) (2,069,124) (1,567,724)
(428,194) (95,199) (42,564)
------------ ------------ ------------
(30,927,976) (13,639,870) (12,878,302)
------------ ------------ ------------
377,319,844 66,108,057 (23,656,108)
------------ ------------ ------------
1,885 -- --
817 -- --
1,391 -- --
65 -- --
------------ ------------ ------------
4,158 -- --
------------ ------------ ------------
411,456,053 107,812,074 (6,115,522)
------------ ------------ ------------
327,380,845 219,568,771 225,684,293
------------ ------------ ------------
$738,836,898 $327,380,845 $219,568,771
============ ============ ============
$ 5,317,888 $ 2,204,718 $ 3,205,477
============ ============ ============
50
- --------------------------------------------------------------------------------
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 Redemption
the period income investments operations income capital gains distributions fee
---------- ---------- -------------- ---------- -------------- ------------- ------------- ----------
Core Plus Bond Fund
Class A
9/30/2004 $11.63 $0.47(c) $ 0.13 $ 0.60 $(0.54) $ -- $(0.54) $0.00(g)
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) --
Class B
9/30/2004 11.62 0.38(c) 0.14 0.52 (0.44) -- (0.44) 0.00(g)
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) --
Class C
9/30/2004 11.63 0.38(c) 0.14 0.52 (0.44) -- (0.44) 0.00(g)
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) --
Class Y
9/30/2004 11.69 0.50(c) 0.13 0.63 (0.58) -- (0.58) 0.00(g)
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) --
Government
Securities Fund
Class A
9/30/2004 $12.09 $0.37(c) $(0.05) $ 0.32 $(0.44) $ -- $(0.44) --
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) --
Class B
9/30/2004 12.10 0.28(c) (0.06) 0.22 (0.35) -- (0.35) --
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) --
(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 for
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 Class B and to decrease the ratio of net investment income to average
net assets from 4.85% to 4.46% for Class A and 4.10% to 3.71% for Class B.
Per share, ratios and supplemental data for periods prior to January 1,
2001 have not been restated to reflect this change in presentation.
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 (%)
- ---------- ------ ----------- -------- -------------- ---------
$11.69 5.3(h) $120,009 1.19(i) 4.05 69
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
11.70 4.6(h) 148,556 1.94(i) 3.29 69
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
11.71 4.6(h) 6,162 1.94(i) 3.30 69
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
11.74 5.5(h) 10,941 0.94(i) 4.30 69
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
$11.97 2.8 $ 54,704 1.31 3.11 107
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
11.97 1.9 10,689 2.06 2.36 107
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
(e) Amount is less than one tenth of one percent.
(f) For the nine months ended September 30, 2003.
(g) Amount rounds to less than $0.01.
(h) Had certain expenses not been reduced during the period, total returns
would have been lower.
(i) 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.
52
- --------------------------------------------------------------------------------
Financial Highlights (continued)
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
Income (loss) from investment
operations: Less distributions:
----------------------------------- ---------------------------------------
Net
realized
Net asset and Dividends Distribution
value unrealized from from net
beginning Net gain (loss) Total from net realized
of investment on investment investment capital Total Redemption
the period income investments operations income gains distributions fee
---------- ---------- ----------- ---------- ---------- ------------ ------------- ----------
Government Securities Fund
(continued)
Class Y
9/30/2004 $12.07 $0.35(c) $(0.06) $ 0.29 $(0.42) $-- $(0.42) $ --
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) --
High Income Fund*
Class A
9/30/2004 $ 4.65 $0.33(c) $ 0.17 $ 0.50 $(0.33) $-- $(0.33) $0.00(f)
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) --
Class B
9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) -- (0.30) 0.00(f)
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) --
Class C
9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) -- (0.30) 0.00(f)
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) --
Limited Term Government
and Agency Fund**
Class A
9/30/2004 $11.51 $0.30(c) $(0.09) $ 0.21 $(0.42) $-- $(0.42) $ --
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) --
(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.
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 (%)
- ---------- ------- ----------- -------- -------------- ---------
$11.94 2.5 $ 2,258 1.47 2.94 107
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
$ 4.82 11.1 $ 24,641 1.65 6.97 51
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
4.83 10.5 17,967 2.40 6.22 51
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
4.83 10.5 2,608 2.40 6.22 51
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
$11.30 1.9 $106,701 1.32 2.60 80
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
(e) For the nine months ended September 30, 2003.
(f) Amount rounds to less than $0.01.
* The financial information for periods prior to September 30, 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 September 30, 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.
54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Redemption
the period income investments operations income capital gains distributions fee
---------- ---------- -------------- ---------- -------------- ------------- ------------- ----------
Limited Term Government and Agency Fund* (Continued)
Class B
9/30/2004 $11.49 $0.22(c) $(0.09) $ 0.13 $(0.34) $ -- $(0.34) $--
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) --
Class C
9/30/2004 11.50 0.22(c) (0.08) 0.14 (0.34) -- (0.34) --
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) --
Class Y
9/30/2004 11.55 0.32(c) (0.09) 0.23 (0.44) -- (0.44) --
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) --
Massachusetts Tax Free Income Fund
Class A
9/30/2004 $16.41 $0.61 $ 0.17 $ 0.78 $(0.61) $ -- $(0.61) $--
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) --
Class B
9/30/2004 16.37 0.49 0.18 0.67 (0.50) -- (0.50) --
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) --
(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 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.
55
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 (%)
- ---------- ------- ----------- -------- -------------- ---------
$11.28 1.2 $10,107 2.00 1.95 80
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
11.30 1.3 6,949 2.00 1.94 80
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
11.34 2.1 4,233 1.13 2.82 80
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
$16.58 4.9 $81,427 1.33 3.74 21
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
16.54 4.2 4,435 2.00 3.08 21
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
(g) For the nine months ended September 30, 2003.
* The financial information for periods prior to September 30, 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.
56
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 Redemption
the period income investments operations income capital gains distributions fee
---------- ---------- -------------- ---------- -------------- ------------- ------------- ----------
Municipal Income Fund
Class A
9/30/2004 $ 7.41 $0.29 $ 0.06 $ 0.35 $(0.29) $ -- $(0.29) $ --
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) --
Class B
9/30/2004 7.41 0.24 0.07 0.31 (0.24) -- (0.24) --
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) --
Strategic Income Fund*
Class A
9/30/2004 $12.57 $0.75(c) $ 1.11 $ 1.86 $(0.86) $ -- $(0.86) 0.00(h)
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) --
Class B
9/30/2004 12.59 0.65(c) 1.10 1.75 (0.74) -- (0.74) 0.00(h)
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) --
(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 periods less than one year.
(c) Per share net investment income has been calculated using the average
shares outstanding during the period.
(d) As required, effective January 1, 2001, the Funds have adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began 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.
57
Ratios to averagenet 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 (%)
- ---------- ------- ----------- -------- -------------- ---------
$ 7.47 4.9 $111,801 1.11 4.00 35
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
7.48 4.2 9,087 1.86 3.25 35
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
$13.57 15.2 $343,586 1.23 5.66 28
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
13.60 14.3 128,714 1.98 4.91 28
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
(g) For the nine months ended September 30, 2003.
(h) Amount rounds to less than $0.01.
* The financial information for periods prior to September 30, 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.
58
- --------------------------------------------------------------------------------
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 Redemption
the period income investments operations income capital gains distributions fee
---------- ---------- -------------- ---------- -------------- ------------- ------------- ----------
Strategic Income
Fund*
(CONTINUED)
Class C
9/30/2004 $12.58 $0.64(c) $ 1.11 $ 1.75 $(0.73) $ -- $(0.73) $0.00(j)
9/30/2003(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) --
Class Y
9/30/2004 12.58 0.78(c) 1.11 1.89 (0.90) -- (0.90) 0.00(j)
9/30/2003(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 periods less than one year.
(c) Per share net investment income has been calculated using the average
shares outstanding during the period.
(d) As required, effective January 1, 2001, the 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.
(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) Amount rounds to less than $0.01.
* The financial information for periods prior to September 30, 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 end
is September 30.
See accompanying notes to financial statements.
59
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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(%)
- ---------- ------- ----------- -------- -------------- ---------
$13.60 14.3 $255,705 1.98 4.87 28
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
13.57 15.5(e) 10,833 1.00(f) 5.93 28
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
60
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES TO
FINANCIAL STATEMENTS
61
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 Board of Trustees to authorize the issuance of 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, 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 Fund by a pricing service, which has been authorized
by the Trustees. The pricing service determines valuations for normal,
institutional size trading units of such securities using market information,
transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders. Short-term
obligations with a remaining maturity of less than sixty days are stated at
amortized cost, which approximates market value. 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, pursuant to procedures approved by the Board
of Trustees.
Certain securities held by High Income Fund and 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.
62
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 thereafter 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. Investment
income and realized and unrealized gains and losses are allocated on a pro rata
basis to each Class based on the relative net assets of each Class to the total
net assets of the Fund.
c. Foreign Currency Translation. The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than U.S. dollars are translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates from
fluctuations arising from changes in market prices of the investment securities.
Such changes are included with the net realized and unrealized gain or loss on
investments.
Net realized foreign exchange gains or losses arise from: sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities at the end of the fiscal periods, resulting from changes
in exchange rates.
d. Federal and Foreign Income Taxes. The Trusts treat each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities, such
taxes are accrued as applicable.
e. Dividends and Distributions to Shareholders. Dividends are declared daily to
shareholders of record and are paid monthly. The timing and characterization of
certain income and capital gains distributions are determined in accordance with
federal tax regulations which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments for book and tax purposes of items such as market
discounts, premium amortization, wash sales, 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.
g. Delayed Delivery Commitments. Each Fund may purchase or sell securities on a
when-issued or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. Losses may arise due to changes
in the market value of the underlying securities or if the counterparty does not
perform under the contract. Collateral consisting of liquid securities or cash
and cash equivalents is maintained in an amount at least equal to these
commitments with the custodian. For Core Plus Bond Fund, see the Schedule of
Investments for open forward commitments as of September 30, 2004.
3. Purchases and Sales of Securities. For the year ended September 30, 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 $96,334,205 $122,512,018 $107,622,880 $114,908,562
Government Securities Fund 78,779,567 95,299,249 -- --
High Income Fund -- -- 24,211,963 31,154,543
Limited Term Government
and Agency Fund 98,222,502 113,393,846 8,649,227 10,443,926
Massachusetts Tax Free
Income Fund -- -- 18,052,741 23,123,151
Municipal Income Fund -- -- 42,089,637 56,867,233
Strategic Income Fund 51,144,489 20,802,842 405,170,204 120,899,994
63
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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 0.6000% 0.6000% 0.6000% 0.6000%
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%
Prior to July 1, 2004, the management fee for High Income Fund was 0.7000% on
the first $200 million of the Fund's average daily net assets and 0.6500% on
such assets in excess of $200 million.
For the year ended September 30, 2004, the management fees for each Fund were as
follows:
Gross Percentage of
Management Average
Fund Fee Daily Net Assets
- ---- ---------- ----------------
Core Plus Bond Fund $ 630,219 0.208%
Government Securities Fund 205,023 0.275%
High Income Fund 330,146 0.677%
Limited Term U.S. Government
and Agency Fund 773,694 0.570%
Massachusetts Tax Free
Income Fund 265,074 0.300%
Municipal Income Fund 606,254 0.472%
Strategic Income Fund 3,264,555 0.619%
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 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%
Massachusetts Tax Free
Income Fund 0.3000% 0.2500% 0.2500% 0.2500%
64
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
For the year ended September 30, 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 $630,219 0.208%
Government Securities Fund 205,023 0.275%
Massachusetts Tax Free
Income Fund 265,074 0.300%
Loomis Sayles and CDC IXIS Advisers are wholly-owned subsidiaries of 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. 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.
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 year ended September 30, 2004, fees paid to CIS for accounting and
administrative expense were as follows:
Accounting
And
Fund Administrative
- ---- --------------
Core Plus Bond Fund $198,429
Government Securities Fund 48,897
High Income Fund 31,916
Limited Term Government
and Agency Fund 88,981
Massachusetts Tax Free
Income Fund 57,745
Municipal Income Fund 84,045
Strategic Income Fund 337,400
65
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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
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**.
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 Sayles 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 year ended September 30, 2004, amounts paid to CIS as
compensation for its services as transfer agent were as follows:
Transfer Agent
Fund Fee
- ---- --------------
Core Plus Bond Fund $283,969
Government Securities Fund 117,852
High Income Fund 79,510
Limited Term Government
and Agency Fund 207,827
Massachusetts Tax Free Income Fund 134,784
Municipal Income Fund 184,026
Strategic Income Fund 597,529
66
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
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, prior to July 1, 2004, Limited Term Government and
Agency Fund and Massachusetts Tax Free Income Fund each paid 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 year ended September 30, 2004, the Funds paid the following service and
distribution fees:
Service Fee Distribution Fee
------------------------------ ---------------------------------
Fund Class A Class B Class C Class A Class B Class C
- ---- -------- -------- -------- ------- ---------- ----------
Core Plus Bond Fund $312,845 $386,910 $ 17,003 $ -- $1,160,728 $ 51,008
Government Securities Fund 149,737 30,329 -- -- 90,987 --
High Income Fund 62,823 52,208 6,904 -- 156,622 20,711
Limited Term Government
and Agency Fund 277,422 29,246 19,058 83,989 87,737 57,175
Mass Tax Free Income Fund 208,117 12,777 -- 62,951 38,332 --
Municipal Income Fund 295,653 25,183 -- -- 75,548 --
Strategic Income Fund 590,762 312,955 398,495 -- 938,863 1,195,484
Commissions (including CDSC) on Fund shares paid to CDC IXIS Distributors by
investors in shares of the Funds during the year ended September 30, 2004 were
as follows:
Fund
- ----
Core Plus Bond Fund $ 274,880
Government Securities Fund 86,747
High Income Fund 74,606
Limited Term Government
and Agency Fund 121,912
Massachusetts Tax Free
Income Fund 50,696
Municipal Income Fund 80,914
Strategic Income Fund 1,908,906
e. Trustees Fees and Expenses. The CDC Nvest Funds Trusts and the Loomis Sayles
Funds Trusts do not pay any compensation directly to their officers or Trustees
who are directors, officers or employees of CDC IXIS Advisers, CDC IXIS
Distributors, CDC IXIS North America, CIS or their affiliates. Each Trustee who
is an independent Trustee of the CDC Nvest Funds Trusts and the Loomis Sayles
Funds Trusts receives, in the aggregate, a retainer fee at the annual rate of
$50,000 and meeting attendance fees of $5,000 for each meeting of the Board of
Trustees attended. Each committee chairman receives an additional retainer fee
at the annual rate of $7,000. Each committee member receives a meeting
attendance fee of $3,750 per committee meeting attended. In addition, the
independent co-chairmen of the Board split an additional $50,000 annual retainer
fee. 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.
67
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
Prior to July 1, 2004, the Trust paid each independent trustee a $45,000 annual
retainer and a $4,500 fee per meeting attended. In addition, each committee
member received a retainer fee at the annual rate of $7,000 while each committee
chairman received a $5,000 annual retainer (beyond the $7,000). Each committee
member received a $1,750 fee per meeting attended. The retainer fees assumed
four Board or committee meetings per year.
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. Redemption Fees. Shareholders of Class A shares and Class Y shares of Core
Plus Bond Fund and Strategic Income Fund and shareholders of Class A shares of
High Income Fund will be charged a 2% redemption fee if they redeem, including
redeeming by exchange, Class A or Class Y shares within 60 days of their
acquisition (including acquisition by exchange). The redemption fee is intended
to offset the costs to the Funds of short-term trading, such as portfolio
transaction and market impact costs associated with redemption activity and
administrative costs associated with processing redemptions. The redemption fee
is deducted from the shareholder's redemption or exchange proceeds and is paid
to the Fund. The "first-in, first-out" (FIFO) method is used to determine the
holding period of redeemed or exchanged shares, which means that if shares were
acquired on different days, the shares acquired first will be redeemed or
exchanged first for purposes of determining whether the redemption fee applies.
A new holding period begins with each purchase or exchange. These fees are
presented on the Statements of Changes in Net Assets.
g. 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 year ended September 30, 2004, amounts paid to
CIS as compensation for these services were as follows:
Publishing Services
Fund Fees
- ---- -------------------
Core Plus Bond Fund $2,085
Government Securities Fund 1,939
High Income Fund 2,774
Limited Term Government and Agency Fund 2,602
Massachusetts Tax Free Income Fund 2,042
Municipal Income Fund 2,597
Strategic Income Fund 2,737
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 year ended
September 30, 2004.
6. Security Lending. Each Fund has entered into an agreement with IBT, as an
agent of the Funds, to lend securities to certain designated borrowers. The
loans are collateralized at all times with cash or securities with a market
value at least equal to the market value of the securities on loan. The Funds
receive fees for lending their securities. The market value of securities on
loan to borrowers and the value of collateral held by the Funds with respect to
such loans at September 30, 2004, were as follows:
Market Value of Value of Collateral
Fund Securities on Loan Received
- ---- ------------------ -------------------
Core Plus Bond Fund $ 8,884,679 $ 9,091,824
Government Securities Fund 631,383 651,750
High Income Fund 6,225,067 6,394,083
Limited Term Government and
Agency Fund 19,528,021 19,922,719
Strategic Income Fund 37,834,180 39,044,934
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 year ended September
30, 2004, certain class level expenses have been reimbursed as follows: Core
Plus Bond Fund $74,236 and Strategic Income Fund $5,434.
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 and the actual amount or the actual amount of fees previously
waived or expenses reimbursed. For the year ended September 30, 2004, the
Strategic Income Fund reimbursed $69,643.
68
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
At September 30, 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 to Possible
------------------------------------- Expiration Reimbursement
Fund Class A Class B Class C Class Y of Waiver until September 30, 2005
- ---- ------- ------- ------- ------- ---------------- ------------------------
Core Plus Bond Fund 1.15% 1.90% 1.90% 0.90% January 31, 2005 $74,236
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 5,434
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 September 30, 2004, the Fund
had the following concentrations by revenue source in excess of 10% as a
percentage of the Fund's net assets: College 17.3%, University 14.0% and Water
12.2%. The Fund had investments in securities of issuers insured by American
Municipal Bond assurance Corporation (AMBAC), Municipal Bond Investors Assurance
Corporation (MBIA) and Financial Guaranty Insurance Company (FGIC) which
aggregated to 13.7%, 7.5%, and 7.1% of its net assets, respectively, at
September 30, 2004.
At September 30, 2004, Municipal Income Fund had more than 10% of its net assets
invested in: California 10.6% and New York 13.4%. 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.
9. Subsequent Event. Effective November 1, 2004, the names of the Distributor,
Advisory Administrator, Administrator and Transfer Agent will change as follows:
Old Name New Name
-------- --------
CDC IXIS Asset Management Distributors, L.P. IXIS Asset Management Distributors, L.P.
CDC IXIS Asset Management Advisers L.P. IXIS Asset Management Advisors L.P.
CDC IXIS Asset Management Services, Inc. IXIS Asset Management Services Company
69
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
9. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
For the Period
January 1, 2003
Year Ended through Year Ended
September 30, 2004 September 30, 2003 December 31, 2002
------------------------- ------------------------- -------------------------
Core Plus Bond Fund Shares Amount Shares Amount Shares Amount
- ------------------------------------------ ---------- ------------ ---------- ------------ ---------- ------------
Class A
Shares sold 1,605,711 $ 18,625,859 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 399,777 4,638,774 315,868 3,625,104 630,044 7,028,137
---------- ------------ ---------- ------------ ---------- ------------
2,005,488 23,264,633 2,524,749 29,018,392 3,391,075 37,975,999
Shares repurchased (3,251,762) (37,683,812) (4,103,015) (47,055,063) (5,298,328) (59,054,703)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (1,246,274) $(14,419,179) (1,578,266) $(18,036,671) (1,907,253) $(21,078,704)
---------- ------------ ---------- ------------ ---------- ------------
Class B
Shares sold 3,593,650 $ 41,729,759 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 162,394 1,885,405 138,840 1,592,822 309,169 3,449,629
---------- ------------ ---------- ------------ ---------- ------------
3,756,044 43,615,164 4,683,290 53,714,303 5,422,285 60,597,501
Shares repurchased (4,934,717) (57,311,673) (3,322,658) (38,077,677) (3,908,528) (43,564,808)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (1,178,673) $(13,696,509) 1,360,632 $ 15,636,626 1,513,757 $ 17,032,693
---------- ------------ ---------- ------------ ---------- ------------
Class C
Shares sold 94,805 $ 1,102,148 59,911 $ 688,486 138,295 $ 1,555,372
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 13,177 153,074 11,703 134,339 26,871 299,976
---------- ------------ ---------- ------------ ---------- ------------
107,982 1,255,222 71,614 822,825 165,166 1,855,348
Shares repurchased (236,056) (2,722,618) (216,706) (2,481,482) (354,452) (3,952,429)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (128,074) $ (1,467,396) (145,092) $ (1,658,657) (189,286) $ (2,097,081)
---------- ------------ ---------- ------------ ---------- ------------
Class Y
Shares sold 330,962 $ 3,859,687 360,783 $ 4,157,868 411,293 $ 4,623,829
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 59,164 689,033 51,037 588,550 80,315 898,601
---------- ------------ ---------- ------------ ---------- ------------
390,126 4,548,720 411,820 4,746,418 491,608 5,522,430
Shares repurchased (989,193) (11,485,471) (500,546) (5,745,952) (363,731) (4,077,509)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (599,067) $ (6,936,751) (88,726) $ (999,534) 127,877 $ 1,444,921
---------- ------------ ---------- ------------ ---------- ------------
Increase (decrease) derived from
capital shares transactions (3,152,088) $(36,519,835) (451,452) $ (5,058,236) (454,905) $ (4,698,171)
========== ============ ========== ============ ========== ============
70
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
9. Capital Shares (continued).
For the Period
January 1, 2003
Year Ended through Year Ended
September 30, 2004 September 30, 2003 December 31, 2002
------------------------- ------------------------- -------------------------
Government Securities Fund Shares Amount Shares Amount Shares Amount
- ------------------------------------------ ---------- ------------ ---------- ------------ ---------- ------------
Class A
Shares sold 307,625 $ 3,620,219 679,447 $ 8,249,719 1,163,096 $ 13,583,368
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 166,014 1,955,470 159,984 1,935,187 243,169 2,819,415
---------- ------------ ---------- ------------ ---------- ------------
473,639 5,575,689 839,431 10,184,906 1,406,265 16,402,783
Shares repurchased (1,599,820) (18,841,760) (1,441,491) (17,423,672) (1,419,343) (16,327,594)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (1,126,181) $(13,266,071) (602,060) $ (7,238,766) (13,078) $ 75,189
---------- ------------ ---------- ------------ ---------- ------------
Class B
Shares sold 128,122 $ 1,502,341 320,801 $ 3,882,546 712,314 $ 8,363,857
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 25,440 299,768 28,512 345,321 36,766 427,149
---------- ------------ ---------- ------------ ---------- ------------
153,562 1,802,109 349,313 4,227,867 749,080 8,791,006
Shares repurchased (508,872) (5,979,197) (493,758) (5,918,693) (541,866) (6,269,688)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (355,310) $ (4,177,088) (144,445) $ (1,690,826) 207,214 $ 2,521,318
---------- ------------ ---------- ------------ ---------- ------------
Class Y
Shares sold 28,283 $ 332,592 33,551 $ 404,508 220,420 $ 2,524,097
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 7,684 90,336 11,024 133,483 24,957 289,414
---------- ------------ ---------- ------------ ---------- ------------
35,967 422,928 44,575 537,991 245,377 2,813,511
Shares repurchased (90,187) (1,051,210) (364,336) (4,409,555) (114,051) (1,321,509)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (54,220) $ (628,282) (319,761) $ (3,871,564) 131,326 $ 1,492,002
---------- ------------ ---------- ------------ ---------- ------------
Increase (decrease) derived from
capital shares transactions (1,535,711) $(18,071,441) (1,066,266) $(12,801,156) 325,462 $ 4,088,509
========== ============ ========== ============ ========== ============
71
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
9. Capital Shares (continued).
For the Period
January 1, 2003
Year Ended through Year Ended
September 30, 2004 September 30, 2003 December 31, 2002
------------------------ ------------------------- -------------------------
High Income Fund Shares Amount Shares Amount Shares Amount
- ---------------- ---------- ----------- ---------- ------------ ---------- ------------
Class A
Shares sold 1,288,493 $ 6,184,887 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 229,520 1,097,920 178,526 792,126 317,560 1,396,013
---------- ----------- ---------- ------------ ---------- ------------
1,518,013 7,282,807 6,966,367 31,786,842 2,339,172 10,293,221
Shares repurchased (1,529,706) (7,301,820) (7,296,772) (33,271,653) (3,663,855) (16,220,139)
---------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) (11,693) $ (19,013) (330,405) $ (1,484,811) (1,324,683) $ (5,926,918)
---------- ----------- ---------- ------------ ---------- ------------
Class B
Shares sold 226,956 $ 1,090,578 662,229 $ 2,976,263 1,040,581 $ 4,725,693
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 117,713 563,684 105,383 467,995 201,776 889,901
---------- ----------- ---------- ------------ ---------- ------------
344,669 1,654,262 767,612 3,444,258 1,242,357 5,615,594
Shares repurchased (1,651,156) (7,900,417) (1,323,884) (5,858,921) (2,675,203) (11,769,699)
---------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) (1,306,487) $(6,246,155) (556,272) $ (2,414,663) (1,432,846) $ (6,154,105)
---------- ----------- ---------- ------------ ---------- ------------
Class C
Shares sold 84,117 $ 402,199 69,446 $ 305,018 90,003 $ 403,036
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 16,780 80,318 13,856 61,635 26,503 116,430
---------- ----------- ---------- ------------ ---------- ------------
100,897 482,517 83,302 366,653 116,506 519,466
Shares repurchased (174,710) (834,207) (101,125) (434,559) (324,456) (1,450,446)
---------- ----------- ---------- ------------ ---------- ------------
Net increase (decrease) (73,813) $ (351,690) (17,823) $ (67,906) (207,950) $ (930,980)
---------- ----------- ---------- ------------ ---------- ------------
Increase (decrease) derived from
capital shares transactions (1,391,993) $(6,616,858) (904,500) $ (3,967,380) (2,965,479) $(13,012,003)
========== =========== ========== ============ ========== ============
72
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
9. Capital Shares (continued).
For the Period
January 1, 2003
Year Ended through Year Ended
September 30, 2004 September 30, 2003 December 31, 2002
------------------------- ------------------------- -------------------------
Limited Term Government and Agency Fund Shares Amount Shares Amount Shares Amount
- --------------------------------------- ---------- ------------ ---------- ------------ ---------- ------------
Class A
Shares sold 1,157,697 $ 13,126,606 3,639,344 $ 42,294,961 2,338,561 $ 26,950,560
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 239,161 2,713,978 217,806 2,527,837 348,652 4,025,182
---------- ------------ ---------- ------------ ---------- ------------
1,396,858 15,840,584 3,857,150 44,822,798 2,687,213 30,975,742
Shares repurchased (2,142,804) (24,327,014) (2,708,272) (31,326,172) (3,260,141) (37,525,210)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (745,946) $ (8,486,430) 1,148,878 $ 13,496,626 (572,928) $ (6,549,468)
---------- ------------ ---------- ------------ ---------- ------------
Class B
Shares sold 134,092 $ 1,517,724 328,497 $ 3,816,554 706,265 $ 8,186,137
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 25,006 283,349 27,583 319,597 40,792 470,419
---------- ------------ ---------- ------------ ---------- ------------
159,098 1,801,073 356,080 4,136,151 747,057 8,656,556
Shares repurchased (537,206) (6,100,694) (470,730) (5,449,483) (620,421) (7,125,410)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (378,108) $ (4,299,621) (114,650) $ (1,313,332) 126,636 $ 1,531,146
---------- ------------ ---------- ------------ ---------- ------------
Class C
Shares sold 106,715 $ 1,211,584 257,384 $ 2,997,797 570,784 $ 6,611,629
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 12,725 144,384 13,512 156,679 17,765 205,133
---------- ------------ ---------- ------------ ---------- ------------
119,440 1,355,968 270,896 3,154,476 588,549 6,816,762
Shares repurchased (260,938) (2,968,972) (203,605) (2,359,426) (414,627) (4,814,349)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (141,498) $ (1,613,004) 67,291 $ 795,050 173,922 $ 2,002,413
---------- ------------ ---------- ------------ ---------- ------------
Class Y
Shares sold 57,198 $ 653,419 194,812 $ 2,266,581 987,271 $ 11,289,831
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 18,709 213,178 21,540 250,898 34,738 402,928
---------- ------------ ---------- ------------ ---------- ------------
75,907 866,597 216,352 2,517,479 1,022,009 11,692,759
Shares repurchased (298,779) (3,409,632) (344,269) (4,012,366) (599,695) (6,901,951)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (222,872) $ (2,543,035) (127,917) $ (1,494,887) 422,314 $ 4,790,808
---------- ------------ ---------- ------------ ---------- ------------
Increase (decrease) derived from
capital shares transactions (1,488,424) $(16,942,090) 973,602 $ 11,483,457 149,944 $ 1,774,899
========== ============ ========== ============ ========== ============
73
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
9. Capital Shares (continued).
For the Period
January 1, 2003
Year Ended through Year Ended
September 30, 2004 September 30, 2003 December 31, 2002
---------------------- ---------------------- -----------------------
Massachusetts Tax Free Income Fund Shares Amount Shares Amount Shares Amount
- ---------------------------------- -------- ----------- -------- ----------- -------- ------------
Class A
Shares sold 92,298 $ 1,517,739 119,001 $ 1,949,577 456,052 $ 7,320,365
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 138,812 2,281,926 115,722 1,900,796 166,936 2,687,820
-------- ----------- -------- ----------- -------- ------------
231,110 3,799,665 234,723 3,850,373 622,988 10,008,185
Shares repurchased (583,207) (9,546,927) (584,421) (9,550,818) (659,550) (10,569,788)
-------- ----------- -------- ----------- -------- ------------
Net increase (decrease) (352,097) $(5,747,262) (349,698) $(5,700,445) (36,562) $ (561,603)
-------- ----------- -------- ----------- -------- ------------
Class B
Shares sold 6,385 $ 104,899 22,230 $ 363,317 40,852 $ 652,539
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 5,985 98,181 5,690 93,253 9,320 149,611
-------- ----------- -------- ----------- -------- ------------
12,370 203,080 27,920 456,570 50,172 802,150
Shares repurchased (122,073) (2,004,356) (62,206) (1,025,084) (164,730) (2,629,120)
-------- ----------- -------- ----------- -------- ------------
Net increase (decrease) (109,703) $(1,801,276) (34,286) $ (568,514) (114,558) $ (1,826,970)
-------- ----------- -------- ----------- -------- ------------
Increase(decrease) derived from capital
shares transactions (461,800) $(7,548,538) (383,984) $(6,268,959) (151,120) $ (2,388,573)
======== =========== ======== =========== ======== ============
For the Period
January 1, 2003
Year Ended through Year Ended
September 30, 2004 September 30, 2003 December 31, 2002
------------------------- ------------------------- -------------------------
Municipal Income Fund Shares Amount Shares Amount Shares Amount
- --------------------- ---------- ------------ ---------- ------------ ---------- ------------
Class A
Shares sold 562,771 $ 4,169,045 1,680,532 $ 12,281,784 1,667,649 $ 12,274,988
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 431,284 3,197,822 374,960 2,761,288 576,440 4,253,748
---------- ------------ ---------- ------------ ---------- ------------
994,055 7,366,867 2,055,492 15,043,072 2,244,089 16,528,736
Shares repurchased (3,170,451) (23,420,778) (2,814,362) (20,686,975) (3,360,408) (24,705,392)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (2,176,396) $(16,053,911) (758,870) $ (5,643,903) (1,116,319) $ (8,176,656)
---------- ------------ ---------- ------------ ---------- ------------
Class B
Shares sold
Shares issued in connection with the 128,884 $ 956,534 176,974 $ 1,299,640 360,545 $ 2,668,323
reinvestment of:
Dividends from net investment income 27,197 201,837 21,918 161,634 37,421 276,214
---------- ------------ ---------- ------------ ---------- ------------
156,081 1,158,371 198,892 1,461,274 397,966 2,944,537
Shares repurchased (409,784) (3,040,646) (387,486) (2,860,427) (746,990) (5,506,527)
---------- ------------ ---------- ------------ ---------- ------------
Net increase (decrease) (253,703) $ (1,882,275) (188,594) $ (1,399,153) (349,024) $ (2,561,990)
---------- ------------ ---------- ------------ ---------- ------------
Increase(decrease) derived from capital
shares transactions (2,430,099) $(17,936,186) (947,464) $ (7,043,056) (1,465,343) $(10,738,646)
========== ============ ========== ============ ========== ============
74
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
For the Year Ended September 30, 2004
9. Capital Shares (continued).
For the Period
January 1, 2003
Year Ended through Year Ended
September 30, 2004 September 30, 2003 December 31, 2002
-------------------------- --------------------------- -------------------------
Strategic Income Fund Shares Amount Shares Amount Shares Amount
- --------------------- ---------- ------------- ----------- ------------- ---------- ------------
Class A
Shares sold 18,605,688 $ 246,707,247 4,379,870 $ 52,212,398 1,233,640 $ 12,489,877
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 769,347 10,148,557 371,875 4,481,650 428,477 4,343,680
---------- ------------- ----------- ------------- ---------- ------------
19,375,035 256,855,804 4,751,745 56,694,048 1,662,117 16,833,557
Shares repurchased (5,231,023) (68,866,251) (2,180,800) (25,669,234) (2,583,795) (26,064,953)
---------- ------------- ----------- ------------- ---------- ------------
Net increase (decrease) 14,144,012 $ 187,989,553 2,570,945 $ 31,024,814 (921,678) $ (9,231,396)
---------- ------------- ----------- ------------- ---------- ------------
Class B
Shares sold 2,393,606 $ 31,720,078 11,291,589 $ 137,976,336 996,177 $ 10,066,847
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 330,396 4,369,393 268,978 3,224,645 364,119 3,688,894
---------- ------------- ----------- ------------- ---------- ------------
2,724,002 36,089,471 11,560,567 141,200,981 1,360,296 13,755,741
Shares repurchased (2,654,105) (34,998,138) (11,369,542) (139,122,966) (2,502,784) (25,285,670)
---------- ------------- ----------- ------------- ---------- ------------
Net increase (decrease) 69,897 $ 1,091,333 191,025 $ 2,078,015 (1,142,488) $(11,529,929)
---------- ------------- ----------- ------------- ---------- ------------
Class C
Shares sold 14,515,841 $ 193,058,623 3,238,168 $ 38,652,520 331,088 $ 3,346,746
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 242,679 3,207,880 96,560 1,163,101 101,770 1,030,223
---------- ------------- ----------- ------------- ---------- ------------
14,758,520 196,266,503 3,334,728 39,815,621 432,858 4,376,969
Shares repurchased (1,236,758) (16,245,858) (647,304) (7,733,899) (771,825) (7,794,721)
---------- ------------- ----------- ------------- ---------- ------------
Net increase (decrease) 13,521,762 $ 180,020,645 2,687,424 $ 32,081,722 (338,967) $ (3,417,752)
---------- ------------- ----------- ------------- ---------- ------------
Class Y
Shares sold 850,431 $ 11,206,980 110,719 $ 1,316,510 68,699 $ 692,601
Shares issued in connection with the
reinvestment of:
Dividends from net investment income 14,335 188,666 7,237 87,673 4,144 42,230
---------- ------------- ----------- ------------- ---------- ------------
864,766 11,395,646 117,956 1,404,183 72,843 734,831
Shares repurchased (240,560) (3,177,333) (40,357) (480,677) (21,066) (211,862)
---------- ------------- ----------- ------------- ---------- ------------
Net increase (decrease) 624,206 $ 8,218,313 77,599 $ 923,506 51,777 $ 522,969
---------- ------------- ----------- ------------- ---------- ------------
Increase (decrease) derived from capital
shares transactions 28,359,877 $ 377,319,844 5,526,993 $ 66,108,057 (2,351,356) $(23,656,108)
========== ============= =========== ============= ========== ============
75
- --------------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of CDC Nvest Funds Trust I, CDC Nvest Funds
Trust II, and Loomis Sayles Funds II:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Loomis Sayles Core Plus Bond
Fund and Loomis Sayles Government Securities Fund, each a series of CDC Nvest
Funds Trust I, the Loomis Sayles Massachusetts Tax Free Income Fund, a series of
CDC Nvest Funds Trust II, and the Loomis Sayles High Income Fund, Loomis Sayles
Limited Term U.S. Government and Agency Fund (formerly Loomis Sayles Limited
Term U.S. Government Fund), Loomis Sayles Municipal Income Fund, and the Loomis
Sayles Strategic Income Fund, each a series of Loomis Sayles Funds II
(collectively, the "Funds"), at September 30, 2004, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for the periods indicated, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 16, 2004
76
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
The table below provides certain information regarding the Trustees and officers
of CDC Nvest Funds Trust I, CDC Nvest Funds Trust II and Loomis Sayles Funds II.
Unless otherwise indicated, the address of all persons below is 399 Boylston
Street, Boston, MA 02116.
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships Held
- --------------------------- -------------------------- --------------------------------- ----------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. (64) Trustee, Douglas Dillon Professor and 41;
Contract Review and Director for the Belfer Center Director, Taubman Centers,
Governance Committee of Science and International Inc.; Advisory Board Member,
Member; Affairs, John F. Kennedy USEC Inc.
Since 1984 for CDC Nvest School of Government,
Funds Trust I, 1995 for Harvard University
CDC Nvest Funds Trust II,
2003 for Loomis Sayles
Funds II
Edward A. Benjamin (66) Trustee, Retired 41;
Audit Committee Member, Director, Coal, Energy
Since 2003 for CDC Nvest Investments & Management,
Funds Trust I and CDC LLC; Director, Precision
Nvest Funds Trust II, 2002 Optics Corporation
for Loomis Sayles Funds II
Daniel M. Cain (59) Trustee, President and CEO, Cain 41;
Chairman of the Audit Brothers & Company, Trustee, Universal Health
Committee, Incorporated Realty Income Trust;
Since 1996 for CDC Nvest Director, Sheridan
Funds I and CDC Nvest Healthcorp
Funds II, 2003 for Loomis
Sayles Funds II;
Co-Chairman of the Board
since 2004
Paul G. Chenault (71) Trustee, Retired; Trustee, First 41;
Contract Review and Variable Life Director, Mailco Office
Governance Committee Products, Inc.
Member,
Since 2003 for CDC Nvest
Funds Trust I and CDC
Nvest Funds Trust II, 2000
for Loomis Sayles Funds II
Kenneth J. Cowan (72) Trustee, Retired 41;
Chairman of the Contract None
Review and Governance
Committee,
Since 1993 for CDC Nvest
Funds Trust I, 1975 for
CDC Nvest Funds Trust II,
2003 for Loomis Sayles
Funds II;
Co-Chairman of the Board
Since 2004
77
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen and
Name and Age Served and Term of Office* During Past 5 Years** Other Directorships held
- --------------------------- -------------------------- --------------------------------- -----------------------------
INDEPENDENT TRUSTEES
continued
Richard Darman (61) Trustee Partner, The Carlyle Group; 41;
Contract Review and Chairman of the Board of Director and Chairman,
Governance Committee Directors of AES AES Corporation
Member, Corporation; formerly,
Since 1996 for CDC Nvest Professor, John F. Kennedy
Funds Trust I and CDC School of Government,
Nvest Funds Trust II, 2003 Harvard University
for Loomis Sayles Funds II
Sandra O. Moose (62) Trustee President, Strategic Advisory 41
Audit Committee Member; Services; formerly, Senior Director, Verizon
Since 1982 for CDC Nvest Vice President and Director, Communications;
Funds Trust I, 1993 for The Boston Consulting Director, Rohm and Haas
CDC Nvest Funds Trust II, Group, Inc. Company;
2003 Loomis Sayles Director, AES Corporation
Funds II
John A. Shane (71) Trustee President, Palmer Service 41
Contract Review and Corporation Director, Gensym
Governance Committee Corporation; Director,
Member, Overland Storage, Inc.;
Since 1993 for CDC Nvest Director, Abt Associates Inc.
Funds Trust I, 1982 for
CDC Nvest Funds Trust II,
2003 for Loomis Sayles
Funds II
INTERESTED TRUSTEES
Robert J. Blanding/1/ (57) Chief Executive Officer, President, Chairman, 41;
555 California Street Loomis Sayles Funds II and Director, and Chief Executive None
San Francisco, CA 94104 Trustee, Officer, Loomis Sayles &
Since 2003 for CDC Nvest Company, L.P.; President and
Funds Trust I and CDC CEO - Loomis Sayles Funds
Nvest Funds Trust II, 2002 I
for Loomis Sayles Funds II
John T. Hailer/2/ (43) President and Trustee; President and Chief Executive 41;
Since 2000 for CDC Nvest Officer, CDC IXIS Asset None
Funds Trust I and CDC Management Distributors,
Nvest Funds Trust II, 2003 L.P.; President and Chief
for Loomis Sayles Funds II Executive Officer - CDC
Nvest Funds; Executive Vice
President, Loomis Sayles
Funds I
78
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with Number of Portfolios in
the Trust and Length of Principal Occupation(s) Fund Complex Overseen and
Name and Age Time Served* During Past 5 Years** Other Directorships held
- --------------------------- -------------------------- --------------------------------- ----------------------------
OFFICERS
John E. Pelletier (40) Chief Operating Officer President, Director and Chief Not Applicable
Since 2004 Executive Officer, CDC IXIS
Asset Management Services,
Inc.; Executive Vice
President, CDC IXIS
Distribution Corporation;
Executive Vice President and
Chief Operating Officer,
CDC IXIS Asset
Management Distributors,
L.P. and CDC IXIS Asset
Management Advisers, L.P.;
formerly, Senior Vice
President, General Counsel,
Secretary and Clerk, CDC
IXIS Distribution
Corporation; Executive Vice
President, General Counsel,
Secretary and Clerk, CDC
IXIS Asset Management
Distributors, L.P., CDC IXIS
Asset Management Advisers,
L.P.; Executive Vice
President, General Counsel,
Secretary and Clerk, CDC
IXIS Asset Management
Services, Inc.
Coleen Downs Dinneen (43) Secretary, Clerk and Chief Senior Vice President, Not Applicable
Legal Officer General Counsel, Secretary
Since 2004 and Clerk, CDC IXIS
Distribution Corporation,
CDC IXIS Asset
Management Distributors,
L.P., CDC IXIS Asset
Management Advisers, L.P.
and CDC IXIS Asset
Management Services, Inc.;
formerly, Senior Vice
President, Deputy General
Counsel, Assistant Secretary
and Assistant Clerk, CDC
IXIS Asset Management
Advisers, L.P., CDC IXIS
Asset Management Services,
Inc. and Vice President
Deputy General Counsel,
Assistant Secretary and
Assistant Clerk, CDC IXIS
Distribution Corporation
79
- --------------------------------------------------------------------------------
Trustee and Officer Information
- --------------------------------------------------------------------------------
Position(s) Held with Number of Portfolios in
the Trusts, Length of Principal Occupation(s) Fund Complex Overseen and
Name and Age of Time Served* During Past 5 Years** Other Directorships held
- --------------------------- -------------------------- --------------------------------- -----------------------------
OFFICERS
continued
Michael Kardok (45) Treasurer, Principal Senior Vice President, CDC Not Applicable
Financial and Accounting IXIS Asset Management
Officer Services, Inc.; Senior Vice
Since 2004 President, CDC IXIS Asset
Management Advisers, L.P.;
formerly, Senior Director,
PFPC Inc; Vice President -
Division Manager, First Data
Investor Services, Inc.
Kristin Vigneaux (35) Chief Compliance Officer Chief Compliance Officer Not Applicable
Since 2004 for Mutual Funds, CDC
IXIS Asset Management
Distributors, L.P., CDC
IXIS Asset Management
Advisers, L.P. and CDC
IXIS Asset Management
Services, Inc.; formerly, Vice
President CDC IXIS Asset
Management Services, Inc.
Daniel J. Fuss (71) Executive Vice President Vice Chairman and Not Applicable
One Financial Center Since 2003 Director, Loomis Sayles &
Boston, MA 02111 Company, L.P.; Prior to
2002, President and Trustee
of Loomis Sayles Funds II
Frank LoPiccolo (51) Anti-Money Laundering President and CEO, CDC Not Applicable
Officer IXIS Asset Management
Since 2003 Services, Inc.
* Each Trustee serves for an indefinite term in accordance with its current
By-Laws until the date his or her successor is elected and qualified, or
until he or she sooner dies, retires, is removed or becomes disqualified.
At a meeting held on February 27, 2004, the Trustees voted to suspend the
retirement policy until 2005.
** Previous positions during the past five years with the Distributor, CDC
IXIS Advisers or Loomis Sayles are omitted if not materially different from
a trustee's or officer's current position with such entity. As indicated,
each Trustee is also a trustee of certain other investment companies for
which the Distributor acts as principal underwriter.
/1/ Mr. Blanding is deemed an "interested person" of Loomis Sayles Funds II
because he holds the following positions with affiliated persons of Loomis
Sayles Funds II: President, Chairman, Director and Chief Executive Officer
of Loomis Sayles.
/2/ Mr. Hailer is an "interested person" of Loomis Sayles Funds II because he
holds the following positions with affiliated persons of Loomis Sayles
Funds II: Director and Executive Vice President of CDC IXIS Asset
Management Distribution Corporation ("CDC IXIS Distribution Corporation");
and President and Chief Executive Officer of CDC IXIS Asset Management
Advisers, L.P. ("CDC IXIS Advisers").
The statement of additional information includes additional information about
the Trustees of the Trusts and is available, without charge, by calling CDC
Nvest Funds at 800-225-5478.
80
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. Ms.
Sandra O. Moose, and Messrs. Edward A. Benjamin and Daniel M. Cain, all members
of the audit committee, have been designated as financial experts. Each of these
individuals is also an Independent Trustee of the Trust.
Item 4. Principal Accountant Fees and Services.
Fees paid to Principal Accountant by the Fund. The table below sets forth fees
billed by the principal accountant, PricewaterhouseCoopers LLP, for the past two
fiscal years for professional services rendered in connection with a) the audit
of the Trust's annual financial statements and services provided in connection
with regulatory filings; b) audit-related services (including services that are
reasonably related to the performance of the audit of the registrant's financial
statements and but not reported under "Audit Fees"); c) tax compliance, tax
advice and tax planning and d) all other fees billed for professional services
rendered by the principal accountant to the Trust, other than the services
provided reported as a part of (a) through (c) of this Item.
Audit-related
Audit fees fees/1/ Tax fees/2/ All other fees
- ----------------------------------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004 2003 2004
- ----------------------------------------------------------------------------------------------------
Loomis Sayles Funds II $395,450 $345,500 48,600 40,000 $100,534 $74,515 -- --
- ----------------------------------------------------------------------------------------------------
Aggregate fees billed to the Trust for non-audit services for 2003 and 2004 were
$149,134 and $114,515, respectively.
Fees paid to Principal Accountant By Adviser and Control Affiliates. The
following table sets forth the non-audit services provided by the Trust's
principal accountant to CDC IXIS Asset Management Advisers, L.P. and entities
controlling, controlled by or under common control with CDC IXIS Asset
Management Advisers, L.P. that provide ongoing services to the Trust ("Control
Affiliates") for the last two fiscal years.
Audit-related fees/1/ Tax fees All other fees
- ----------------------------------------------------------------------------
2003 2004 2003 2004 2003 2004
- ----------------------------------------------------------------------------
Control Affiliates $65,000 $73,600 -- -- $45,000 $54,400
- ----------------------------------------------------------------------------
[1. The audit related fees consist of performing a SAS 70 internal examination
of the Trust's transfer agent and a review of 12b-1 payments made to a Trust
affiliate]
Aggregate fees billed to Control Affiliates for non-audit services during 2003
and 2004 were $45,000 and $54,400, respectively
None of the services described above were approved pursuant to (c)(7)(i)(C) of
Regulation S-X.
Audit Committee Pre Approval Policies.
Annually, the Trust's Audit Committee reviews the audit, audit-related, tax
and other non-audit services together with the projected fees, for services
proposed to be rendered to the Trust and/or other entities for which
pre-approval is required during the upcoming year. Any subsequent revisions to
already pre-approved services or fees (including fee increases) and requests for
pre-approval of new services would be presented for consideration quarterly as
needed.
If, in the opinion of management, a proposed engagement by the Trust's
independent accountants
needs to commence before the next regularly scheduled Audit Committee meeting,
any member of the Audit Committee who is an independent Board member is
authorized to pre-approve the engagement, but only for engagements to provide
audit, audit related and tax services. This approval is subject to review of the
full Audit committee at its next quarterly meeting. All other engagements
require the approval of all the members of the audit committee.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included as part of the Report to Shareholders filed as Item 1 herewith.
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
Companies and Affiliated Purchasers.
Not Applicable.
Item 9. Submission of Matters to a Vote of Securities Holders.
The following represents new procedures by which shareholders may recommend
nominees to the registrant's Board of Trustees:
Shareholders that wish to nominate a candidate to the Board (the
"Nominating Shareholder") must submit any such recommendation in writing to the
following address: Attention of the Board of Trustees, c/o Secretary of the
Funds, IXIS Asset Management Services Advisors Group, 399 Boylston Street,
Boston, MA 02116; or by email to secretaryofthefunds@ixisag.com (the
"Shareholder Recommendation"). The Shareholder Recommendation must contain
sufficient background information concerning the candidate to enable a proper
judgment to be made as to the candidate's qualifications, which may include (i)
the nominee's knowledge of the mutual fund industry; (ii) any experience
possessed by the nominee as a director or senior officer of other public
companies; (iii) the nominee's educational background; (iv) the nominee's
reputation for high ethical standards and personal and professional integrity;
(v) any specific financial, technical or other expertise possessed by the
nominee, and the extent to which such expertise would complement the Board's
existing mix of skills and qualifications; (vi) the nominee's perceived ability
to contribute to the ongoing functions of the Board, including the nominee's
ability and commitment to attend meetings regularly and work collaboratively
with other members of the Board; (vii) the nominee's ability to qualify as an
Independent Trustee for purposes of applicable regulations; and (viii) such
other factors as the appropriate Board Committee may request in light of the
existing composition of the Board and any anticipated vacancies or other
transitions. The Shareholder Recommendation must be received in a timely manner
(and in any event no later than the date specified for receipt of shareholder
proposals in any applicable proxy statement with respect to a Fund). A
Shareholder Recommendation shall be kept on file and considered by the Board for
six (6) months from the date of receipt, after which the Shareholder
Recommendation shall be considered stale and discarded.
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) (1) Code of Ethics filed herewith as Exhibit (a)(1).
(a) (2) 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), are filed herewith as
exhibit (a)(2)(1) and (a)(2)(2)
(a) (3) Not applicable.
(b) Certification of Principal Executive Officer and Principal
Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act
of 2002 are filed herewith as Exhibit (b)
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: President & Chief Executive
Officer
Date: November 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: President & Chief Executive
Officer
Date: November 19, 2004
By: /s/ MICHAEL KARDOK
------------------------------------
Name: Michael Kardok
Title: Treasurer, Principal Financial
and Accounting Officer
Date: November 19, 2004