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: 811-06241
Loomis Sayles Funds II
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(Exact name of Registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Coleen Downs Dinneen, Esq.
IXIS Asset Management Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 449-2810
Date of fiscal year end: September 30
Date of reporting period: March 31, 2006
Item 1. Reports to Stockholders.
The Registrant's semi-annual report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 is as follows:
[LOGO]
Income Funds
Semiannual Report
March 31, 2006
[LOGO]
Loomis Sayles Core Plus Bond 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
Portfolio of InvestmentsPage 17
Financial Statements....Page 39
LOOMIS SAYLES CORE PLUS BOND FUND
PORTFOLIO PROFILE
Objective:
Seeks a high level of current income consistent with what the fund considers
reasonable risk.
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Strategy:
Invests primarily in U.S. corporate and U.S. government bonds
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Fund Inception:
November 7, 1973
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Managers:
Peter W. Palfrey
Richard G. Raczkowski
Loomis, Sayles & Company, L.P.
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Symbols:
Class A NEFRX
Class B NERBX
Class C NECRX
Class Y NERYX
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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
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Corporate earnings continued to grow with the U.S. economy as a whole,
improving corporate balance sheets and stimulating demand for high-yield
corporate bonds. Bonds with longer maturities tended to outperform short- and
intermediate-term issues, which remained under pressure as the Federal Reserve
Board continued to raise interest rates in an effort to contain inflation.
For the six months ended March 31, 2006, Loomis Sayles Core Plus Bond Fund's
Class A shares returned 0.42% at net asset value, including $0.38 in dividends
reinvested during the period. The fund's benchmark, the Lehman Aggregate Bond
Index, returned -0.06% for the same period, while Morningstar's
Intermediate-Term Bond category averaged a -0.11% return. At the end of March,
the fund's 30-day SEC yield was 4.42%.
HIGHER-YIELDING BONDS AND LOWER WEIGHTINGS IN TREASURIES WERE POSITIVE
Higher-yielding corporate bonds were the best performers during the period, and
the fund's emphasis on this sector helped it outperform its benchmark. As the
economic recovery advanced, investors bid up prices on lower-quality bonds,
attracted by their income advantage over Treasury issues. The fund's relatively
minor exposure to Treasuries and other top-quality bonds was also a plus, as
rising interest rates and falling bond prices caused these issues to lag.
However, bonds backed by commercial mortgages did well, and the fund's
relatively small position in better-performing government agency issues and
mortgage-backed bonds was a slight negative.
CABLE AND TELECOM WERE STRONG, AUTOS AND SUPERMARKETS RECOVERED
Cable company bonds strengthened as investors raised their estimates of the
value of subscriber accounts. At the same time, the threats of leveraged
buyouts (LBOs) in the industry diminished during the period. Because they are
often financed by heavy borrowing, LBOs add to corporate debt and may erode
companies' credit ratings. Telecommunications issues also moved higher as
yields declined, aiding results of bonds maturing in the 20- to 30-year range.
Bonds of General Motors and Ford recovered from low valuations that reflected
the U.S. auto industry's difficulties. GM's decision to raise needed cash by
selling off part of its GMAC credit division had a positive effect on the
industry as a whole. Supermarket chain Albertson's bonds fell when the company
put itself up for sale. We took advantage of the slump to purchase the bonds
and were rewarded when prices rebounded.
COMPANY-SPECIFIC ISSUES, HOMEBUILDERS AND FEDERAL AGENCIES HURT
Georgia Pacific detracted from the fund's performance after Koch Industries
announced plans for a leveraged buyout of the venerable paper company. AOL Time
Warner bonds also hurt fund performance when financier Carl Icahn took a
position in the stock and pressured management to initiate shareholder friendly
activity that hurt bondholders. Homebuilders also detracted from the fund's
results as rising interest rates began to slow the residential housing market.
RISING INTEREST RATES MAY SLOW ECONOMY
The cumulative effect of the Federal Reserve's interest rate hikes could cause
economic growth to slow later this year, perhaps causing high-yield issues to
back down after their long climb. With that possibility in mind, we may lighten
exposure to this volatile sector and await buying opportunities. Any economic
slowdown might also cause the dollar to weaken and make non-dollar commitments
more attractive.
Over this period, our emphasis was divided between long- and short-maturity
bonds, with less focus on intermediate-term issues. This "barbell" approach was
beneficial as bonds in the 20- to 30-year range outperformed the five- to
ten-year segment. In addition, short-term issues may benefit if the Fed
concludes its tightening cycle. However, we reduced holdings of longer-term
Treasury issues in the belief that continuing economic expansion domestically
and rising rates overseas could push U.S. interest rates higher. The
possibility of higher rates also led us to trim the portfolio's duration,
reducing its sensitivity to changing interest rates.
1
LOOMIS SAYLES CORE PLUS BOND FUND
Investment Results through March 31, 2006
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PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/7/
[CHART]
March 31, 1996 through March 31, 2006
Net Asset Maximum Sales Lehman Aggregate Lehman U.S.
Value/1/ Charge/2/ Bond Index/3/ Credit Index /4/
---------- ------------- ---------------- ----------------
3/31/1996 $10,000 $ 9,550 $10,000 $10,000
4/30/1996 9,916 9,470 9,944 9,917
5/31/1996 9,907 9,461 9,924 9,900
6/30/1996 10,052 9,599 10,057 10,045
7/31/1996 10,077 9,623 10,084 10,064
8/31/1996 10,077 9,623 10,067 10,033
9/30/1996 10,311 9,847 10,243 10,246
10/31/1996 10,573 10,097 10,470 10,526
11/30/1996 10,827 10,340 10,649 10,751
12/31/1996 10,702 10,220 10,550 10,602
1/31/1997 10,762 10,277 10,582 10,617
2/28/1997 10,829 10,342 10,609 10,662
3/31/1997 10,668 10,188 10,491 10,496
4/30/1997 10,785 10,300 10,648 10,655
5/31/1997 10,931 10,439 10,749 10,775
6/30/1997 11,123 10,623 10,876 10,928
7/31/1997 11,571 11,050 11,170 11,328
8/31/1997 11,374 10,862 11,075 11,161
9/30/1997 11,600 11,078 11,238 11,356
10/31/1997 11,710 11,183 11,401 11,500
11/30/1997 11,764 11,235 11,453 11,565
12/31/1997 11,885 11,351 11,569 11,687
1/31/1998 12,044 11,502 11,717 11,826
2/28/1998 12,082 11,538 11,708 11,822
3/31/1998 12,157 11,610 11,749 11,866
4/30/1998 12,213 11,663 11,810 11,941
5/31/1998 12,337 11,782 11,922 12,082
6/30/1998 12,383 11,826 12,023 12,172
7/31/1998 12,351 11,795 12,049 12,160
8/31/1998 12,229 11,678 12,245 12,217
9/30/1998 12,701 12,129 12,531 12,613
10/31/1998 12,567 12,002 12,465 12,418
11/30/1998 12,817 12,241 12,536 12,653
12/31/1998 12,838 12,260 12,574 12,689
1/31/1999 12,977 12,393 12,663 12,815
2/28/1999 12,714 12,142 12,442 12,511
3/31/1999 12,890 12,310 12,511 12,599
4/30/1999 12,992 12,407 12,551 12,636
5/31/1999 12,710 12,138 12,441 12,467
6/30/1999 12,628 12,060 12,401 12,402
7/31/1999 12,579 12,013 12,349 12,333
8/31/1999 12,529 11,965 12,342 12,303
9/30/1999 12,741 12,167 12,486 12,437
10/31/1999 12,770 12,195 12,532 12,494
11/30/1999 12,789 12,214 12,531 12,507
12/31/1999 12,796 12,220 12,470 12,441
1/31/2000 12,742 12,168 12,429 12,397
2/29/2000 12,886 12,306 12,580 12,512
3/31/2000 13,062 12,474 12,745 12,619
4/30/2000 12,822 12,245 12,709 12,508
5/31/2000 12,727 12,154 12,703 12,461
6/30/2000 13,113 12,523 12,967 12,774
7/31/2000 13,190 12,597 13,085 12,929
8/31/2000 13,360 12,759 13,275 13,097
9/30/2000 13,380 12,778 13,358 13,166
10/31/2000 13,304 12,705 13,447 13,179
11/30/2000 13,430 12,826 13,667 13,350
12/31/2000 13,742 13,124 13,920 13,609
1/31/2001 14,083 13,449 14,148 13,982
2/28/2001 14,222 13,582 14,271 14,104
3/31/2001 14,239 13,598 14,343 14,191
4/30/2001 14,158 13,521 14,283 14,140
5/31/2001 14,249 13,607 14,369 14,269
6/30/2001 14,253 13,612 14,423 14,342
7/31/2001 14,614 13,956 14,746 14,716
8/31/2001 14,776 14,111 14,915 14,913
9/30/2001 14,714 14,052 15,089 14,892
10/31/2001 15,004 14,328 15,404 15,261
11/30/2001 14,905 14,234 15,192 15,128
12/31/2001 14,738 14,074 15,096 15,025
1/31/2002 14,704 14,042 15,218 15,152
2/28/2002 14,646 13,987 15,365 15,266
3/31/2002 14,487 13,835 15,110 14,984
4/30/2002 14,623 13,965 15,403 15,193
5/31/2002 14,746 14,082 15,533 15,394
6/30/2002 14,390 13,743 15,668 15,419
7/31/2002 14,223 13,583 15,857 15,411
8/31/2002 14,548 13,893 16,125 15,810
9/30/2002 14,596 13,939 16,386 16,111
10/31/2002 14,514 13,861 16,311 15,924
11/30/2002 14,790 14,124 16,307 16,130
12/31/2002 15,157 14,475 16,644 16,606
1/31/2003 15,241 14,556 16,658 16,660
2/28/2003 15,461 14,765 16,888 16,993
3/31/2003 15,506 14,808 16,875 17,005
4/30/2003 15,738 15,030 17,014 17,320
5/31/2003 16,052 15,329 17,332 17,866
6/30/2003 16,077 15,354 17,297 17,822
7/31/2003 15,526 14,827 16,716 17,062
8/31/2003 15,675 14,969 16,827 17,196
9/30/2003 16,126 15,401 17,272 17,797
10/31/2003 16,086 15,362 17,111 17,607
11/30/2003 16,184 15,456 17,152 17,688
12/31/2003 16,446 15,706 17,327 17,885
1/31/2004 16,588 15,841 17,466 18,066
2/29/2004 16,715 15,963 17,655 18,293
3/31/2004 16,841 16,083 17,787 18,470
4/30/2004 16,411 15,673 17,325 17,888
5/31/2004 16,267 15,535 17,255 17,762
6/30/2004 16,366 15,630 17,353 17,837
7/31/2004 16,551 15,806 17,525 18,057
8/31/2004 16,882 16,122 17,859 18,483
9/30/2004 16,978 16,214 17,907 18,587
10/31/2004 17,163 16,391 18,058 18,767
11/30/2004 17,129 16,358 17,914 18,579
12/31/2004 17,285 16,507 18,078 18,822
1/31/2005 17,326 16,547 18,192 18,971
2/28/2005 17,309 16,530 18,084 18,859
3/31/2005 17,084 16,315 17,992 18,624
4/30/2005 17,156 16,384 18,235 18,874
5/31/2005 17,315 16,536 18,432 19,138
6/30/2005 17,430 16,645 18,533 19,290
7/31/2005 17,381 16,599 18,364 19,097
8/31/2005 17,558 16,768 18,600 19,387
9/30/2005 17,390 16,607 18,408 19,097
10/31/2005 17,268 16,491 18,262 18,888
11/30/2005 17,332 16,552 18,343 19,003
12/31/2005 17,474 16,688 18,517 19,190
1/31/2006 17,532 16,743 18,519 19,151
2/28/2006 17,595 16,803 18,580 19,236
3/31/2006 17,456 16,670 18,398 18,966
Average Annual Total Returns -- March 31, 2006
6 MONTHS/7/ 1 YEAR/7/ 5 YEARS/7/ 10 YEARS/7/
CLASS A (Inception 11/7/73)
Net Asset Value/1/ 0.42% 2.23% 4.16% 5.73%
With Max Sales Charge/2/ -4.11 -2.39 3.21 5.24
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 0.11 1.47 3.42 4.95
With CDSC/5/ -4.75 -3.38 3.09 4.95
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 0.02 1.38 3.40 4.94
With CDSC/5/ -0.95 0.41 3.40 4.94
CLASS Y (Inception 12/30/94)
Net Asset Value/1/ 0.56 2.48 4.56 6.06
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COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman Aggregate Bond Index/3/ -0.06% 2.26% 5.11% 6.29%
Lehman U.S. Credit Index/4/ -0.69 1.84 5.97 6.61
Morningstar Int.-Term Bond Fund Avg./6/ -0.11 1.89 4.56 5.55
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 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.ixisadvisorfunds.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 FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/06 9/30/05
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Aaa 56.4 51.4
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Aa 2.0 0.3
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A 2.4 3.3
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Baa 16.3 22.5
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Ba 12.4 15.8
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B 4.6 2.7
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Not rated* 3.4 2.2
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Short-Term Investments & Other 2.5 1.8
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Credit quality is based on ratings from Moody's Investor Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/06 9/30/05
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1 year or less 10.9 6.0
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1-5 years 38.2 46.1
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5-10 years 36.0 31.8
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10+ years 14.9 16.1
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Average Effective Maturity 7.3 years 6.8 years
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Portfolio characteristics will vary.
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes the maximum sales charge of 4.50%.
/3/Lehman Aggregate Bond Index is an unmanaged index of investment-grade bonds
with one- to ten-year maturities issued by the U.S. government, its agencies
and U.S. corporations.
/4/Lehman U.S. Credit Index is an unmanaged index that includes all publicly
issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, 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, 0%.
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/reimbursements,
without which performance would have been lower.
2
LOOMIS SAYLES HIGH INCOME FUND
PORTFOLIO PROFILE
Objective:
Seeks high current income plus the opportunity for capital appreciation to
produce a high total return
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Strategy:
Invests primarily in lower-quality fixed-income securities
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Fund Inception:
February 22, 1984
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Managers:
Kathleen C. Gaffney
Matthew J. Eagan
Loomis, Sayles & Company, L.P.
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Symbols:
Class A NEFHX
Class B NEHBX
Class C NEHCX
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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
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High-yield bonds performed well during the six months ended March 31, 2006, as
investors continued to pursue high current income. Convertible bonds, which
convey the right to be converted to the issuer's common stocks, also performed
well, as did selected investments denominated in certain foreign currencies.
These factors and good security selection helped Loomis Sayles High Income Fund
outperform its benchmark and place in the upper half of Morningstar's group of
comparable funds. For the fiscal period ended March 31, 2006, the fund's total
return based on the net asset value of Class A shares was 6.20%, including
$0.17 in reinvested dividends. The fund's benchmark, the Lehman High Yield
Composite Index, returned 3.58% for the period, while Morningstar's High Yield
Bond category averaged 3.46%. At the end of March the fund's 30-day SEC yield
was 5.95%.
HIGH-YIELD AND CONVERTIBLE BONDS, AND SELECTED FOREIGN HOLDINGS WERE STRONG
High-yield bonds denominated in U.S. dollars benefited as the expanding
domestic economy bolstered confidence in the business prospects and financial
strength of corporate issuers. Convertible issues also attracted buyers as the
underlying stocks rose in value. Fund performance received added impetus from
investments in Latin American countries where currencies were strong. The
fund's highest-quality domestic bonds were relatively weak.
CONVERTIBLES IN AIRLINES, ELECTRONICS AND DRUGS CONTRIBUTED
The fund's top-performing individual issues included American Airlines
convertible bonds. The price of these issues rebounded along with the carrier's
common stock, as oil prices retreated from post-Katrina highs. The airline
industry in general benefited from a sharp drop in the cost of jet fuel in the
first three months of 2006, and many carriers raised prices while trimming
services, improving profit margins.
The fund's convertible bonds issued by Level 3 Communications also rose with
the underlying equity. Level 3 offers a variety of communications services over
its fiber-optic network. Increased demand for telecommunications products
powered strong profitability forecasts for the company. In addition, bonds of
companies in non-cyclical sectors - those seen as less vulnerable to a possible
slackening of economic growth - did well over the period. For example,
convertible bonds issued by Vertex Pharmaceuticals responded to investor demand
for biotech companies and conventional drug makers.
WEAK SECTORS AND COMPANY-SPECIFIC ISSUES HELD BACK RETURNS
Weakness in some consumer cyclical areas, particularly in the auto parts and
electric power industries, detracted from performance during the period.
Individual issues that hurt performance included bonds issued by troubled
electric power company Calpine, which filed for bankruptcy. We eliminated the
position. IVAX Corporation, a maker of generic and branded pharmaceuticals, and
its parent company, Israel-based Teva Pharmaceuticals, suffered from negative
press and ultimately were hurt by a patent infringement lawsuit filed against
both entities.
OUTLOOK CALLS FOR NEAR-TERM CAUTION
Our strategy has been to continue to seek opportunities in convertible
securities and in bonds denominated in foreign currencies as the global economy
continues to improve. Specifically, we like sovereign bonds issued by
governments in Latin America.
Strategically speaking, the high-yield bond market currently appears to be
fairly valued. Spreads (the difference in yield between higher- and
lower-quality bonds) are narrow, but within our expected range. However, from a
near-term perspective, high-yield bonds appear to be vulnerable to a possible
reversal. Thus, while we see some attractive opportunities in the high-yield
market, we believe caution is warranted. If we see the start of an economic
slowdown or a potential rise in the default rate later this year, we might
shift to an even more cautious position. In the meantime, we continue to focus
our efforts on careful credit research, seeking the potential for improving
credit quality in select names.
3
LOOMIS SAYLES HIGH INCOME FUND
Investment Results through March 31, 2006
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PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/6/
[CHART]
March 31, 1996 through March 31, 2006
Net Asset Maximum Sales Lehman High Yield
Value/1/ Charge/2/ Composite Index/3/
--------- ------------- -----------------
3/31/1996 $10,000 $ 9,550 $10,000
4/30/1996 10,120 9,665 10,022
5/31/1996 10,229 9,769 10,082
6/30/1996 10,295 9,831 10,166
7/31/1996 10,395 9,927 10,213
8/31/1996 10,518 10,045 10,323
9/30/1996 10,842 10,354 10,572
10/31/1996 10,818 10,332 10,653
11/30/1996 11,041 10,544 10,866
12/31/1996 11,228 10,723 10,941
1/31/1997 11,237 10,731 11,041
2/28/1997 11,630 11,107 11,226
3/31/1997 11,475 10,959 11,064
4/30/1997 11,540 11,020 11,172
5/31/1997 11,923 11,386 11,419
6/30/1997 12,000 11,460 11,578
7/31/1997 12,328 11,773 11,896
8/31/1997 12,407 11,849 11,869
9/30/1997 12,777 12,202 12,104
10/31/1997 12,665 12,095 12,115
11/30/1997 12,835 12,258 12,231
12/31/1997 12,955 12,372 12,338
1/31/1998 13,149 12,557 12,560
2/28/1998 13,130 12,540 12,633
3/31/1998 13,266 12,669 12,752
4/30/1998 13,337 12,737 12,802
5/31/1998 13,316 12,717 12,847
6/30/1998 13,361 12,760 12,893
7/31/1998 13,341 12,741 12,966
8/31/1998 12,415 11,857 12,251
9/30/1998 12,297 11,744 12,306
10/31/1998 12,039 11,497 12,054
11/30/1998 12,904 12,323 12,554
12/31/1998 12,732 12,159 12,568
1/31/1999 13,018 12,433 12,755
2/28/1999 13,100 12,511 12,680
3/31/1999 13,313 12,714 12,801
4/30/1999 13,599 12,987 13,049
5/31/1999 13,266 12,669 12,872
6/30/1999 13,229 12,633 12,845
7/31/1999 13,176 12,583 12,896
8/31/1999 12,970 12,386 12,754
9/30/1999 12,886 12,306 12,662
10/31/1999 13,002 12,417 12,578
11/30/1999 13,088 12,499 12,725
12/31/1999 13,241 12,645 12,869
1/31/2000 13,094 12,504 12,813
2/29/2000 13,153 12,561 12,838
3/31/2000 12,755 12,181 12,568
4/30/2000 12,748 12,174 12,588
5/31/2000 12,392 11,834 12,459
6/30/2000 12,768 12,193 12,713
7/31/2000 12,843 12,265 12,810
8/31/2000 12,792 12,216 12,898
9/30/2000 12,527 11,963 12,785
10/31/2000 11,902 11,366 12,375
11/30/2000 10,913 10,422 11,885
12/31/2000 11,108 10,608 12,115
1/31/2001 12,398 11,840 13,022
2/28/2001 12,336 11,781 13,196
3/31/2001 11,705 11,179 12,885
4/30/2001 11,346 10,835 12,725
5/31/2001 11,377 10,865 12,954
6/30/2001 10,724 10,241 12,590
7/31/2001 10,935 10,443 12,776
8/31/2001 10,851 10,362 12,926
9/30/2001 9,863 9,419 12,058
10/31/2001 9,755 9,316 12,356
11/30/2001 10,071 9,618 12,807
12/31/2001 9,925 9,478 12,754
1/31/2002 9,986 9,537 12,843
2/28/2002 9,683 9,247 12,664
3/31/2002 9,943 9,496 12,969
4/30/2002 9,862 9,418 13,176
5/31/2002 9,718 9,280 13,103
6/30/2002 9,023 8,617 12,137
7/31/2002 8,415 8,036 11,607
8/31/2002 8,710 8,318 11,938
9/30/2002 8,387 8,009 11,781
10/31/2002 8,383 8,005 11,678
11/30/2002 8,940 8,538 12,402
12/31/2002 9,047 8,639 12,575
1/31/2003 9,238 8,823 12,994
2/28/2003 9,368 8,946 13,154
3/31/2003 9,609 9,177 13,532
4/30/2003 10,165 9,707 14,335
5/31/2003 10,343 9,877 14,483
6/30/2003 10,566 10,091 14,900
7/31/2003 10,356 9,890 14,736
8/31/2003 10,466 9,995 14,905
9/30/2003 10,809 10,322 15,313
10/31/2003 11,039 10,542 15,622
11/30/2003 11,270 10,763 15,859
12/31/2003 11,571 11,050 16,218
1/31/2004 11,750 11,221 16,527
2/29/2004 11,698 11,172 16,486
3/31/2004 11,765 11,236 16,598
4/30/2004 11,496 10,978 16,485
5/31/2004 11,198 10,694 16,206
6/30/2004 11,440 10,925 16,438
7/31/2004 11,532 11,013 16,662
8/31/2004 11,847 11,314 16,988
9/30/2004 12,012 11,471 17,235
10/31/2004 12,277 11,725 17,546
11/30/2004 12,471 11,910 17,758
12/31/2004 12,768 12,194 18,023
1/31/2005 12,810 12,234 17,999
2/28/2005 13,107 12,518 18,264
3/31/2005 12,643 12,075 17,733
4/30/2005 12,386 11,828 17,560
5/31/2005 12,708 12,136 17,872
6/30/2005 13,010 12,425 18,223
7/31/2005 13,214 12,620 18,541
8/31/2005 13,284 12,687 18,577
9/30/2005 13,254 12,657 18,391
10/31/2005 13,089 12,500 18,263
11/30/2005 13,218 12,623 18,358
12/31/2005 13,411 12,807 18,516
1/31/2006 13,810 13,189 18,811
2/28/2006 14,022 13,391 18,937
3/31/2006 14,077 13,448 19,050
Average Annual Total Returns -- March 31, 2006
SINCE
6 MONTHS/6/ 1 YEAR/6/ 5 YEARS/6/ 10 YEARS/6/ INCEPTION/6/
CLASS A (Inception 2/22/84)
Net Asset Value/1/ 6.20% 11.33% 3.76% 3.48% --
With Maximum Sales Charge/2/ 1.51 6.35 2.81 3.01 --
CLASS B (Inception 9/20/93)
Net Asset Value/1/ 5.80 10.50 2.96 2.72 --
With CDSC/4/ 0.80 5.50 2.67 2.72 --
CLASS C (Inception 3/2/98)
Net Asset Value/1/ 5.80 10.50 2.95 -- 0.09%
With CDSC/4/ 4.80 9.50 2.95 -- 0.09
- --------------------------------------------------------------------------------------------------
SINCE
CLASS C
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/7/
Lehman High Yield Composite Index/3/ 3.58% 7.43% 8.13% 6.66% 5.15%
Morningstar High Yield Bond Fund Avg./5/ 3.46 6.84 6.98 5.44 3.48
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.ixisadvisorfunds.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 FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/06 9/30/05
- ----------------------------------------------------
Aaa 5.4 --
- ----------------------------------------------------
Aa 3.0 0.9
- ----------------------------------------------------
A 0.5 --
- ----------------------------------------------------
Baa 8.7 6.6
- ----------------------------------------------------
Ba 23.2 29.7
- ----------------------------------------------------
B 28.0 23.6
- ----------------------------------------------------
Caa 11.3 16.3
- ----------------------------------------------------
Ca 1.0 0.5
- ----------------------------------------------------
Not rated* 14.7 21.0
- ----------------------------------------------------
Short-Term Investments & Other 4.2 1.4
- ----------------------------------------------------
Credit quality is based on ratings from Moody's Investor Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/06 9/30/05
- --------------------------------------------------
1 year or less 4.3 1.8
- --------------------------------------------------
1-5 years 25.2 24.4
- --------------------------------------------------
5-10 years 26.8 31.2
- --------------------------------------------------
10+ years 43.7 42.6
- --------------------------------------------------
Average Effective Maturity 12.0 years 12.3 years
- --------------------------------------------------
Portfolio characteristics will vary.
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes the maximum sales charge of 4.50%.
/3/Lehman High Yield Composite Index is a market-weighted, unmanaged index of
fixed-rate, non-investment grade debt.
/4/Performance for Class B shares assumes a maximum 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C share performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/5/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/reimbursements,
without which performance would have been lower.
/7/The since-inception comparative performance figures shown for Class C shares
are calculated from 4/1/98.
4
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
- --------------------------------------------------------------------------------
From an income standpoint, Loomis Sayles Limited Term Government and Agency
Fund benefited from its emphasis on mortgage- and asset-backed securities
during the six months ended March 31, 2006. However, this was partially offset
by the fund's relatively long duration, as short- and intermediate-term
interest rates rose more during the period than longer-term rates, depressing
bond prices.
Based on the net asset value of Class A shares and $0.21 per share in dividends
reinvested during the six-month period, the fund provided a total return of
0.40%. This was less than the fund's benchmark, the Lehman 1-5 Year Government
Bond Index, which returned 0.76%, and slightly below the 0.54% average return
on Morningstar's Short Government category. The fund's 30-day SEC yield at the
end of March was 4.20%.
HIGHER INCOME AND "BARBELL" STRUCTURE WERE POSITIVE FACTORS
During the six-month period, the Federal Reserve Board raised the federal funds
rate (the only interest rate the Fed directly controls) four times in
increments of 0.25%, bringing the rate to 4.75%. Rates on longer-term Treasury
securities also rose, but to a lesser degree, further flattening the yield
curve - a description of what happens when the gap between longer- and
shorter-term rates diminishes. This flattening of the yield curve benefited the
fund due to its "barbell" structure, with the fund's assets concentrated at
both the longer and shorter ends of the yield curve. In this way, the fund
balanced higher income on one end with relative price stability on the other.
The fund's emphasis on mortgage-backed securities, which typically offer higher
yields than straight U.S. government bonds, also helped offset some of the
effects of declining bond prices. While the growth in the housing market slowed
as interest rates rose, the pace of the slowdown has been more gradual than
some observers had feared, which reassured investors.
LONGER DURATION OF PORTFOLIO WAS A NEGATIVE
Although our strategies helped cushion the fund as interest rates rose, the
price of fund shares did decline during the period. In fact, declining bond
prices had a somewhat greater impact on this fund than it did on its peer
group, on average, because the fund's duration (which determines its
sensitivity to changes in interest rates) was slightly longer. As interest
rates rose, prices of longer-term securities declined more than shorter-term
securities. Longer-term U.S. Treasuries also lagged other sectors with similar
maturities as a result of their lower income. Prices of U.S. government
instruments, because they are of the highest credit quality, tend to be more
sensitive to changes in interest rates than securities of lesser quality.
Prices of the fund's mortgage-backed bonds with shorter durations also declined
because short-term rates increased more than longer rates.
During the final three months of calendar 2005, we trimmed the fund's
allocation to U.S. Treasuries and increased its mortgage-backed holdings
modestly because valuations of mortgage securities appeared more attractive. We
continued to trim U.S. Treasuries in the first three months of 2006, and
shifted additional assets into AAA-rated, asset-backed securities because of
their yield advantage and our increasingly optimistic outlook.
FUND'S MATURITY STRUCTURE REFLECTS POSITIVE LONG-TERM FORECAST
We continue to maintain a slightly longer-duration portfolio than comparable
funds because we believe interest rates should gradually stabilize, or even
decline slightly, over the balance of the year. We also continue to emphasize
sectors that respond favorably to stabilizing interest rates, such as
mortgage-backed securities.
Our forecast is for the yield curve to remain relatively flat for the balance
of the fund's fiscal year, potentially accompanied by modest overall declines
in interest rates and some increase in bond prices. Consequently, we plan to
maintain the fund's emphasis on mortgage securities and its relatively long
duration structure in an effort to optimize income and allow for potential
price appreciation.
5
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND
Investment Results through March 31, 2006
- --------------------------------------------------------------------------------
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/6/
[CHART]
March 31, 1996 through March 31, 2006
Lehman 1-5 Year
Net Asset Maximum Sales Government Bond
Value/1/ Charge/2/ Index/3/
--------- ------------- ----------------
3/31/1996 $10,000 $ 9,700 $10,000
4/30/1996 9,974 9,675 9,992
5/31/1996 9,940 9,642 9,999
6/30/1996 10,018 9,717 10,085
7/31/1996 10,040 9,738 10,121
8/31/1996 10,036 9,735 10,147
9/30/1996 10,163 9,858 10,257
10/31/1996 10,327 10,017 10,398
11/30/1996 10,456 10,142 10,495
12/31/1996 10,372 10,061 10,469
1/31/1997 10,416 10,103 10,516
2/28/1997 10,429 10,116 10,536
3/31/1997 10,375 10,064 10,505
4/30/1997 10,466 10,152 10,606
5/31/1997 10,530 10,214 10,682
6/30/1997 10,631 10,312 10,765
7/31/1997 10,807 10,482 10,920
8/31/1997 10,788 10,465 10,907
9/30/1997 10,901 10,573 11,006
10/31/1997 11,023 10,692 11,109
11/30/1997 11,041 10,710 11,131
12/31/1997 11,125 10,791 11,214
1/31/1998 11,287 10,948 11,342
2/28/1998 11,261 10,923 11,340
3/31/1998 11,241 10,904 11,379
4/30/1998 11,285 10,947 11,434
5/31/1998 11,359 11,018 11,502
6/30/1998 11,442 11,098 11,568
7/31/1998 11,456 11,113 11,617
8/31/1998 11,640 11,291 11,795
9/30/1998 11,973 11,613 12,010
10/31/1998 11,857 11,501 12,057
11/30/1998 11,820 11,465 12,031
12/31/1998 11,845 11,489 12,072
1/31/1999 11,909 11,551 12,124
2/28/1999 11,772 11,418 12,021
3/31/1999 11,827 11,472 12,105
4/30/1999 11,861 11,505 12,140
5/31/1999 11,772 11,419 12,100
6/30/1999 11,696 11,345 12,134
7/31/1999 11,640 11,290 12,154
8/31/1999 11,635 11,286 12,184
9/30/1999 11,768 11,415 12,276
10/31/1999 11,790 11,436 12,304
11/30/1999 11,802 11,448 12,320
12/31/1999 11,764 11,411 12,308
1/31/2000 11,713 11,362 12,284
2/29/2000 11,818 11,463 12,376
3/31/2000 11,964 11,605 12,475
4/30/2000 11,926 11,568 12,491
5/31/2000 11,932 11,574 12,532
6/30/2000 12,102 11,739 12,696
7/31/2000 12,163 11,798 12,779
8/31/2000 12,291 11,922 12,895
9/30/2000 12,385 12,014 13,007
10/31/2000 12,430 12,057 13,084
11/30/2000 12,599 12,221 13,235
12/31/2000 12,746 12,364 13,428
1/31/2001 12,908 12,521 13,611
2/28/2001 13,005 12,615 13,714
3/31/2001 13,087 12,694 13,822
4/30/2001 13,061 12,669 13,832
5/31/2001 13,126 12,732 13,900
6/30/2001 13,135 12,741 13,947
7/31/2001 13,380 12,978 14,151
8/31/2001 13,468 13,064 14,257
9/30/2001 13,679 13,269 14,535
10/31/2001 13,885 13,468 14,709
11/30/2001 13,704 13,293 14,612
12/31/2001 13,620 13,212 14,588
1/31/2002 13,693 13,282 14,635
2/28/2002 13,828 13,413 14,730
3/31/2002 13,629 13,220 14,577
4/30/2002 13,879 13,462 14,795
5/31/2002 13,973 13,554 14,878
6/30/2002 14,113 13,689 15,034
7/31/2002 14,314 13,885 15,268
8/31/2002 14,455 14,021 15,376
9/30/2002 14,585 14,147 15,562
10/31/2002 14,617 14,178 15,587
11/30/2002 14,550 14,113 15,502
12/31/2002 14,732 14,290 15,711
1/31/2003 14,724 14,282 15,696
2/28/2003 14,852 14,407 15,809
3/31/2003 14,842 14,397 15,833
4/30/2003 14,867 14,421 15,870
5/31/2003 14,958 14,509 16,010
6/30/2003 14,931 14,483 16,016
7/31/2003 14,620 14,182 15,804
8/31/2003 14,669 14,228 15,812
9/30/2003 14,912 14,465 16,051
10/31/2003 14,808 14,363 15,945
11/30/2003 14,848 14,402 15,938
12/31/2003 14,952 14,503 16,050
1/31/2004 15,016 14,565 16,107
2/29/2004 15,131 14,678 16,226
3/31/2004 15,189 14,733 16,309
4/30/2004 14,916 14,468 16,050
5/31/2004 14,866 14,420 16,015
6/30/2004 14,923 14,475 16,033
7/31/2004 15,006 14,556 16,118
8/31/2004 15,195 14,740 16,293
9/30/2004 15,191 14,735 16,286
10/31/2004 15,270 14,812 16,361
11/30/2004 15,201 14,745 16,243
12/31/2004 15,251 14,794 16,298
1/31/2005 15,273 14,815 16,292
2/28/2005 15,213 14,757 16,228
3/31/2005 15,168 14,713 16,206
4/30/2005 15,301 14,842 16,340
5/31/2005 15,379 14,918 16,431
6/30/2005 15,402 14,940 16,469
7/31/2005 15,333 14,873 16,378
8/31/2005 15,440 14,977 16,518
9/30/2005 15,352 14,892 16,437
10/31/2005 15,285 14,826 16,404
11/30/2005 15,330 14,871 16,465
12/31/2005 15,432 14,969 16,539
1/31/2006 15,438 14,975 16,559
2/28/2006 15,489 15,024 16,564
3/31/2006 15,414 14,955 16,561
Average Annual Total Returns -- March 31, 2006
6 MONTHS/6/ 1 YEAR/6/ 5 YEARS/6/ 10 YEARS/6/
CLASS A (Inception 1/3/89)
Net Asset Value/1/ 0.40% 1.62% 3.33% 4.42%
With Maximum Sales Charge/2/ -2.58 -1.40 2.70 4.11
CLASS B (Inception 9/27/93)
Net Asset Value/1/ -0.04 0.79 2.62 3.72
With CDSC/4/ -4.96 -4.12 2.27 3.72
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 0.06 0.89 2.63 3.72
With CDSC/4/ -0.93 -0.09 2.63 3.72
CLASS Y (Inception 3/31/94)
Net Asset Value/1/ 0.59 1.97 3.65 4.78
- ---------------------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman 1-5 Yr Gov't Bond Index/3/ 0.76% 2.19% 3.68% 5.17%
Morningstar Short Gov't Fund Avg./5/ 0.54 1.77 3.12 4.50
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.ixisadvisorfunds.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 FACTS
% of Net Assets as of
FUND COMPOSITION 3/31/06 9/30/05
- ----------------------------------------------------
Mortgage Related 57.2 55.8
- ----------------------------------------------------
Treasuries 29.0 31.0
- ----------------------------------------------------
Government Agencies 7.3 7.7
- ----------------------------------------------------
Asset Backed Securities 6.1 4.3
- ----------------------------------------------------
Short-Term Investments & Other 0.4 1.2
- ----------------------------------------------------
% of Net Assets as of
EFFECTIVE MATURITY 3/31/06 9/30/05
- --------------------------------------------------
1 year or less 26.6 9.3
- --------------------------------------------------
1-5 years 46.9 80.9
- --------------------------------------------------
5-10 years 22.3 5.9
- --------------------------------------------------
10+ years 4.2 3.9
- --------------------------------------------------
Average Effective Maturity 3.8 years 3.5 years
- --------------------------------------------------
Portfolio characteristics will vary.
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes the maximum sales charge of 3.00%.
/3/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 one and five years.
/4/Performance for Class B shares assumes a maximum 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C share performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/5/Morningstar Short Government 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/reimbursements,
without which performance would have been lower.
6
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. Realized capital gains are fully taxable. Some investors may be subject
to the Alternative Minimum Tax (AMT). Lower-rated bonds entail higher risks.
Management Discussion
- --------------------------------------------------------------------------------
Loomis Sayles Massachusetts Tax Free Income Fund's total return was 0.85% for
the six months ended March 31, 2006, based on the net asset value of Class A
shares and $0.31 in dividends reinvested during the period. This was slightly
behind the fund's nationally diversified benchmark, the Lehman Municipal Bond
Index, which returned 0.98%, but above the 0.67% average return on
Morningstar's Muni Massachusetts category. The fund's 30-day SEC yield at the
end of March was 3.71%, equivalent to 6.01% adjusted for the combined maximum
federal and Massachusetts income tax rates of 38.45%.
SUPPLY/DEMAND EQUATION FAVORS MASSACHUSETTS BONDS
The fund is largely composed of Massachusetts bonds, which fared well during
the past six months, in part because demand was greater than supply. The spread
(difference in yields) between higher- and lower-quality bonds continued to
narrow during the period, which was a positive for this fund.
This strength was partially offset by the fund's exposure to municipal bonds
issued in Puerto Rico. Interest on these bonds is not taxable at the state or
federal level, which makes them valuable for diversification purposes. However,
during the fiscal period Puerto Rico's rising debt servicing costs and
budgetary issues that were made public during the period unsettled investors
and led to price declines.
PRE-REFUNDING AND HIGH YIELDS ATTRACT MUNI BOND INVESTORS
The fund's top-performing individual issues included Massachusetts Bay
Transportation Authority bonds, which rose in value when they were pre-refunded
during the period. Pre-refunding occurs when an issuer refinances older,
higher-coupon bonds by issuing new bonds at current, lower interest rates. The
proceeds are then invested in a secure investment - usually U.S. Treasury
securities - effectively raising their perceived credit quality. The new bonds
mature at the original issue's first call date, shortening their maturity.
With the strong economy and interest rates still at low levels, investors are
continuing to bid up prices on higher-yielding issues, and municipal bonds
issued by Massachusetts Development Finance Agency for Mt. Holyoke College
performed well for the fund. Strong demand for high tax-free income also put
bonds issued by Massachusetts Health & Educational Facilities Authority for
Nichols College among the fund's best performers.
Although the price increase that typically occurs when a bond is pre-refunded
is a positive development for bond owners, the new, shorter maturity may
decrease their appeal. In the current interest-rate environment, yields on
bonds with shorter maturities rose more than comparable issues with longer
maturities. As a result, price appreciation on the fund's pre-refunded bonds
was diminished by price declines as interest rates rose. The fund's other
holdings in the middle range of the yield curve were also negatively impacted
by rising interest rates.
In general, our approach recently has been to increase the portfolio's average
maturity slightly and to continue our focus on revenue bonds in search of
higher yield. (Revenue bonds are issued by municipalities but backed by the
credit of the company or institution benefiting from the financing, unlike
general obligation bonds that are issued to pay for municipal projects and
backed by taxpayer receipts.) Although the increase in the fund's maturity
exposes it to greater price volatility, longer-term bonds generate more income.
CURRENT TRENDS IN MUNICIPAL MARKET SEEM POSITIVE
Credit quality trends in the municipal market appear to be stable or improving,
reflecting the strength of the economy in general. We expect municipal bonds to
hold their own or perhaps slightly under-perform the taxable markets if the
Federal Reserve Board begins to scale back on its tightening efforts later in
2006. We will continue to look for attractive opportunities to add to the
fund's income.
7
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
Investment Results through March 31, 2006
- --------------------------------------------------------------------------------
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/5/
[CHART]
March 31, 1996 through March 31, 2006
Net Asset Maximum Sales Lehman Municipal
Value/1/ Charge/2/ Bond Index/3/
--------- ------------- ----------------
3/31/1996 $10,000 $ 9,575 $10,000
4/30/1996 9,971 9,547 9,972
5/31/1996 9,985 9,561 9,968
6/30/1996 10,080 9,651 10,076
7/31/1996 10,155 9,724 10,168
8/31/1996 10,150 9,719 10,165
9/30/1996 10,309 9,871 10,307
10/31/1996 10,417 9,974 10,424
11/30/1996 10,596 10,146 10,615
12/31/1996 10,526 10,079 10,570
1/31/1997 10,545 10,097 10,590
2/28/1997 10,646 10,194 10,687
3/31/1997 10,526 10,079 10,545
4/30/1997 10,611 10,160 10,633
5/31/1997 10,762 10,305 10,793
6/30/1997 10,874 10,412 10,908
7/31/1997 11,184 10,708 11,210
8/31/1997 11,080 10,609 11,105
9/30/1997 11,227 10,750 11,237
10/31/1997 11,282 10,803 11,309
11/30/1997 11,350 10,867 11,376
12/31/1997 11,506 11,017 11,542
1/31/1998 11,600 11,107 11,661
2/28/1998 11,583 11,091 11,664
3/31/1998 11,551 11,060 11,675
4/30/1998 11,511 11,021 11,622
5/31/1998 11,688 11,191 11,806
6/30/1998 11,729 11,230 11,852
7/31/1998 11,736 11,237 11,882
8/31/1998 11,922 11,416 12,066
9/30/1998 12,055 11,542 12,216
10/31/1998 12,005 11,495 12,216
11/30/1998 12,026 11,515 12,259
12/31/1998 12,071 11,558 12,290
1/31/1999 12,210 11,691 12,436
2/28/1999 12,154 11,638 12,381
3/31/1999 12,139 11,624 12,398
4/30/1999 12,176 11,658 12,429
5/31/1999 12,097 11,583 12,357
6/30/1999 11,900 11,394 12,180
7/31/1999 11,941 11,434 12,224
8/31/1999 11,772 11,271 12,126
9/30/1999 11,736 11,238 12,131
10/31/1999 11,572 11,080 12,000
11/30/1999 11,674 11,178 12,127
12/31/1999 11,572 11,080 12,037
1/31/2000 11,477 10,990 11,984
2/29/2000 11,620 11,126 12,124
3/31/2000 11,837 11,334 12,389
4/30/2000 11,784 11,283 12,315
5/31/2000 11,738 11,239 12,251
6/30/2000 11,974 11,465 12,576
7/31/2000 12,126 11,610 12,751
8/31/2000 12,277 11,756 12,947
9/30/2000 12,228 11,709 12,880
10/31/2000 12,327 11,803 13,021
11/30/2000 12,379 11,853 13,119
12/31/2000 12,643 12,105 13,443
1/31/2001 12,687 12,148 13,576
2/28/2001 12,731 12,190 13,619
3/31/2001 12,728 12,187 13,742
4/30/2001 12,597 12,061 13,593
5/31/2001 12,719 12,178 13,739
6/30/2001 12,809 12,265 13,831
7/31/2001 13,004 12,451 14,036
8/31/2001 13,248 12,685 14,267
9/30/2001 13,174 12,614 14,219
10/31/2001 13,296 12,731 14,389
11/30/2001 13,198 12,637 14,267
12/31/2001 13,049 12,494 14,132
1/31/2002 13,122 12,564 14,377
2/28/2002 13,270 12,706 14,551
3/31/2002 13,026 12,473 14,266
4/30/2002 13,265 12,701 14,544
5/31/2002 13,368 12,800 14,633
6/30/2002 13,523 12,948 14,787
7/31/2002 13,695 13,113 14,978
8/31/2002 13,862 13,273 15,158
9/30/2002 14,174 13,571 15,490
10/31/2002 13,916 13,324 15,233
11/30/2002 13,828 13,240 15,170
12/31/2002 14,105 13,505 15,490
1/31/2003 14,075 13,477 15,450
2/28/2003 14,296 13,688 15,666
3/31/2003 14,309 13,701 15,676
4/30/2003 14,400 13,788 15,779
5/31/2003 14,769 14,141 16,149
6/30/2003 14,703 14,078 16,080
7/31/2003 14,065 13,467 15,517
8/31/2003 14,156 13,554 15,633
9/30/2003 14,540 13,922 16,093
10/31/2003 14,516 13,899 16,012
11/30/2003 14,678 14,054 16,179
12/31/2003 14,814 14,184 16,313
1/31/2004 14,915 14,281 16,406
2/29/2004 15,134 14,491 16,653
3/31/2004 15,099 14,457 16,595
4/30/2004 14,693 14,069 16,202
5/31/2004 14,628 14,007 16,143
6/30/2004 14,646 14,023 16,202
7/31/2004 14,855 14,224 16,415
8/31/2004 15,147 14,503 16,744
9/30/2004 15,248 14,600 16,833
10/31/2004 15,385 14,731 16,978
11/30/2004 15,228 14,581 16,838
12/31/2004 15,431 14,775 17,043
1/31/2005 15,616 14,952 17,203
2/28/2005 15,552 14,891 17,146
3/31/2005 15,448 14,791 17,037
4/30/2005 15,727 15,059 17,306
5/31/2005 15,858 15,184 17,428
6/30/2005 15,925 15,248 17,537
7/31/2005 15,821 15,149 17,457
8/31/2005 15,992 15,312 17,634
9/30/2005 15,842 15,168 17,515
10/31/2005 15,718 15,050 17,408
11/30/2005 15,804 15,133 17,492
12/31/2005 15,948 15,270 17,642
1/31/2006 15,967 15,289 17,690
2/28/2006 16,098 15,414 17,809
3/31/2006 15,989 15,313 17,686
Average Annual Total Returns -- March 31, 2006
6 MONTHS/5/ 1 YEAR/5/ 5 YEARS/5/ 10 YEARS/5/
CLASS A (Inception 3/23/84)
Net Asset Value/1/ 0.85% 3.44% 4.66% 4.81%
With Maximum Sales Charge/2/ -3.44 -0.94 3.76 4.35
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 0.48 2.60 3.94 4.11
With CDSC/4/ -4.47 -2.38 3.59 4.11
- ----------------------------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman Municipal Bond Index/3/ 0.98% 3.81% 5.18% 5.87%
Morningstar Muni Massachusetts Fund Avg./6/ 0.67 3.03 4.37 4.98
Yields as of March 31, 2006
CLASS A CLASS B
SEC 30-day Yield/7/ 3.71% 3.13%
Taxable Equivalent Yield/8/ 6.01 5.07
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com.
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
CREDIT QUALITY 3/31/06 9/30/05
- ----------------------------------------------------
Aaa 37.5 36.2
- ----------------------------------------------------
Aa 24.2 27.1
- ----------------------------------------------------
A 19.6 18.8
- ----------------------------------------------------
Baa 12.3 11.8
- ----------------------------------------------------
Not rated* 3.9 3.9
- ----------------------------------------------------
Short-Term Investments & Other 2.5 2.2
- ----------------------------------------------------
Credit quality is based on ratings from Moody's Investor Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/06 9/30/05
- --------------------------------------------------
1 year or less 1.8 1.5
- --------------------------------------------------
1-5 years 18.9 21.3
- --------------------------------------------------
5-10 years 66.2 64.4
- --------------------------------------------------
10+ years 13.1 12.8
- --------------------------------------------------
Average Effective Maturity 7.0 years 7.3 years
- --------------------------------------------------
Portfolio characteristics will vary.
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 bonds issued by
municipalities and other government entities having maturities of more than
one year.
/4/Performance for Class B shares assumes a maximum 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
/5/Fund performance has been increased by expense waivers/reimbursements,
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.
8
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 other than the alternative minimum tax
- --------------------------------------------------------------------------------
Fund Inception:
May 9, 1977
- --------------------------------------------------------------------------------
Managers:
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. Realized
capital gains are fully taxable. Some investors may be subject to the
Alternative Minimum Tax (AMT). Lower-rated bonds entail higher risks.
Management Discussion
- --------------------------------------------------------------------------------
Based on the net asset value of Class A shares and $0.14 in dividends, Loomis
Sayles Municipal Income Fund provided a total return of 0.92% for the first
half of its fiscal year, which ended March 31, 2006. This was slightly behind
the fund's benchmark, the Lehman Municipal Bond Index, which returned 0.98%,
and very close to the 0.93% average return on Morningstar's Muni National Long
category. The fund's 30-day SEC yield at the end of March was 3.77%, equivalent
to 5.79% adjusted for the maximum federal income tax rate of 35.00%.
As interest rates rose during the period, price declines on some of the fund's
shorter maturity bonds detracted from performance, as did its exposure to areas
affected by Hurricane Katrina. However, the fund's insured municipal bonds were
positive contributors, as were revenue bonds issued for healthcare and resource
recovery companies. Individual security selection and demand for
higher-yielding bonds were key factors.
REVENUE BONDS WITH HIGH YIELDS ATTRACTED INVESTORS
High yields on the Texas and Illinois revenue bonds we selected put them in
demand during the period. The fund's New York revenue bonds also performed well
because of strong retail demand, as improving corporate balance sheets
stimulated investor interest. Revenue bonds are issued by municipalities but
backed by the credit of the company or institution benefiting from the
financing, unlike general obligation bonds, which use receipts from taxpayers
to finance municipal projects.
Most of the fund's weaker holdings were in Louisiana and Mississippi, where
concerns about the recovery costs in the wake of last year's devastating storms
and flood damage continue to depress municipal bond prices. The fund's Solid
Waste Disposal and Pollution Control revenue bonds for Weyerhaeuser Project in
Lowndes County, Mississippi were one of its weaker positions during the period.
In general, bonds at the shorter end of the maturity curve declined more than
longer bonds, as interest rates rose during the period. The fund's exposure to
high-yielding municipal bonds issued in Puerto Rico added little to the fund's
performance as a result of rising debt servicing costs and budgetary issues
that were made public.
PRE-REFUNDED BONDS WERE TOP PERFORMERS
The fund's top-performing individual issues included South Carolina bonds
issued for Greenville County School District and Indianapolis, Indiana Public
Improvement Bond Bank bonds. Both of these revenue bonds rose in value when
they were pre-refunded during the period. Pre-refunding occurs when an issuer
refinances an older, higher-coupon bond by issuing new bonds at current, lower
interest rates. The proceeds are then invested in a secure investment - usually
U.S. Treasury securities - effectively raising their perceived credit rating.
The new bonds mature at the original issue's first call date, shortening their
maturity.
Although the price appreciation that typically occurs when a bond is
pre-refunded is a positive development for bond holders, the new, shorter
maturity may decrease their appeal. In the current interest rate environment,
yields on bonds with shorter maturities rose more than comparable issues with
longer maturities. As a result, price appreciation on the fund's pre-refunded
holdings was partially offset by price declines as interest rates rose. We
continue to hold the Greenville School District bonds, but we sold the
Indianapolis issues.
TRENDS IN THE MUNICIPAL MARKETS SEEM FAVORABLE
In general, credit quality trends in the municipal market seem to be stable or
improving, reflecting the health of the economy. We believe this market should
hold its own, or perhaps slightly under-perform the taxable markets if the
Federal Reserve Board begins to scale back on its tightening efforts later in
2006. We will continue to look for attractive opportunities to add to the
fund's income.
9
LOOMIS SAYLES MUNICIPAL INCOME FUND
Investment Results through March 31, 2006
- --------------------------------------------------------------------------------
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/8/
[CHART]
March 31, 1996 through March 31, 2006
Net Asset Maximum Sales Lehman Municipal
Value/1/ Charge/2/ Bond Index/3/
--------- ---------- ----------------
3/31/1996 $10,000 $ 9,550 $10,000
4/30/1996 9,978 9,529 9,972
5/31/1996 9,970 9,521 9,968
6/30/1996 10,084 9,630 10,076
7/31/1996 10,157 9,700 10,168
8/31/1996 10,149 9,692 10,165
9/30/1996 10,320 9,855 10,307
10/31/1996 10,436 9,967 10,424
11/30/1996 10,595 10,118 10,615
12/31/1996 10,563 10,088 10,570
1/31/1997 10,574 10,098 10,590
2/28/1997 10,668 10,188 10,687
3/31/1997 10,532 10,058 10,545
4/30/1997 10,609 10,132 10,633
5/31/1997 10,729 10,246 10,793
6/30/1997 10,878 10,389 10,908
7/31/1997 11,172 10,669 11,210
8/31/1997 11,105 10,605 11,105
9/30/1997 11,198 10,694 11,237
10/31/1997 11,277 10,769 11,309
11/30/1997 11,312 10,803 11,376
12/31/1997 11,468 10,952 11,542
1/31/1998 11,610 11,087 11,661
2/28/1998 11,645 11,121 11,664
3/31/1998 11,662 11,137 11,675
4/30/1998 11,607 11,085 11,622
5/31/1998 11,733 11,205 11,806
6/30/1998 11,782 11,252 11,852
7/31/1998 11,802 11,271 11,882
8/31/1998 11,959 11,421 12,066
9/30/1998 12,056 11,513 12,216
10/31/1998 12,015 11,474 12,216
11/30/1998 12,065 11,522 12,259
12/31/1998 12,080 11,536 12,290
1/31/1999 12,198 11,649 12,436
2/28/1999 12,173 11,625 12,381
3/31/1999 12,177 11,629 12,398
4/30/1999 12,214 11,664 12,429
5/31/1999 12,171 11,623 12,357
6/30/1999 12,032 11,491 12,180
7/31/1999 12,069 11,525 12,224
8/31/1999 11,945 11,408 12,126
9/30/1999 11,950 11,412 12,131
10/31/1999 11,777 11,247 12,000
11/30/1999 11,888 11,353 12,127
12/31/1999 11,746 11,218 12,037
1/31/2000 11,684 11,158 11,984
2/29/2000 11,814 11,282 12,124
3/31/2000 11,996 11,456 12,389
4/30/2000 11,930 11,393 12,315
5/31/2000 11,896 11,361 12,251
6/30/2000 12,114 11,569 12,576
7/31/2000 12,248 11,697 12,751
8/31/2000 12,417 11,859 12,947
9/30/2000 12,384 11,827 12,880
10/31/2000 12,485 11,924 13,021
11/30/2000 12,570 12,005 13,119
12/31/2000 12,778 12,203 13,443
1/31/2001 12,867 12,288 13,576
2/28/2001 12,888 12,308 13,619
3/31/2001 12,993 12,409 13,742
4/30/2001 12,854 12,276 13,593
5/31/2001 12,976 12,393 13,739
6/30/2001 13,080 12,492 13,831
7/31/2001 13,309 12,710 14,036
8/31/2001 13,521 12,912 14,267
9/30/2001 13,288 12,690 14,219
10/31/2001 13,468 12,862 14,389
11/30/2001 13,322 12,723 14,267
12/31/2001 13,160 12,567 14,132
1/31/2002 13,375 12,774 14,377
2/28/2002 13,556 12,946 14,551
3/31/2002 13,334 12,734 14,266
4/30/2002 13,552 12,943 14,544
5/31/2002 13,622 13,009 14,633
6/30/2002 13,748 13,130 14,787
7/31/2002 13,836 13,214 14,978
8/31/2002 13,944 13,317 15,158
9/30/2002 14,167 13,530 15,490
10/31/2002 13,807 13,186 15,233
11/30/2002 13,785 13,165 15,170
12/31/2002 14,122 13,486 15,490
1/31/2003 13,945 13,318 15,450
2/28/2003 14,150 13,513 15,666
3/31/2003 14,143 13,507 15,676
4/30/2003 14,269 13,627 15,779
5/31/2003 14,624 13,966 16,149
6/30/2003 14,593 13,937 16,080
7/31/2003 13,960 13,332 15,517
8/31/2003 14,107 13,472 15,633
9/30/2003 14,528 13,875 16,093
10/31/2003 14,460 13,810 16,012
11/30/2003 14,647 13,988 16,179
12/31/2003 14,776 14,111 16,313
1/31/2004 14,866 14,197 16,406
2/29/2004 15,096 14,417 16,653
3/31/2004 15,086 14,407 16,595
4/30/2004 14,715 14,052 16,202
5/31/2004 14,682 14,021 16,143
6/30/2004 14,691 14,030 16,202
7/31/2004 14,880 14,211 16,415
8/31/2004 15,150 14,468 16,744
9/30/2004 15,238 14,552 16,833
10/31/2004 15,366 14,674 16,978
11/30/2004 15,229 14,544 16,838
12/31/2004 15,419 14,725 17,043
1/31/2005 15,587 14,886 17,203
2/28/2005 15,511 14,813 17,146
3/31/2005 15,412 14,718 17,037
4/30/2005 15,689 14,983 17,306
5/31/2005 15,805 15,094 17,428
6/30/2005 15,897 15,182 17,537
7/31/2005 15,798 15,087 17,457
8/31/2005 15,994 15,274 17,634
9/30/2005 15,831 15,119 17,515
10/31/2005 15,709 15,002 17,408
11/30/2005 15,800 15,089 17,492
12/31/2005 15,935 15,218 17,642
1/31/2006 15,962 15,243 17,690
2/28/2006 16,099 15,375 17,809
3/31/2006 15,978 15,260 17,686
Average Annual Total Returns -- March 31, 2006
6 MONTHS/8/ 1 YEAR/8/ 5 YEARS/8/ 10 YEARS/8/
CLASS A (Inception 5/9/77)
Net Asset Value/1/ 0.92% 3.68% 4.23% 4.80%
With Maximum Sales Charge/2/ -3.59 -0.99 3.27 4.32
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 0.55 2.91 3.48 4.05
With CDSC/4/ -4.40 -2.08 3.13 4.05
- ----------------------------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman Municipal Bond Index/3/ 0.98% 3.81% 5.18% 5.87%
Morningstar Muni National Long Fund Avg./5/ 0.93 3.55 4.51 5.04
Yields as of March 31, 2006
CLASS A CLASS B
SEC 30-day Yield/6/ 3.77% 3.19%
Taxable Equivalent Yield/7/ 5.79 4.90
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.ixisadvisorfunds.com.
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
CREDIT QUALITY 3/31/06 9/30/05
- ----------------------------------------------------
Aaa 29.6 35.8
- ----------------------------------------------------
Aa 12.0 12.8
- ----------------------------------------------------
A 28.7 24.3
- ----------------------------------------------------
Baa 15.3 14.6
- ----------------------------------------------------
Ba 1.0 --
- ----------------------------------------------------
Not rated* 11.4 10.7
- ----------------------------------------------------
Short-Term Investments & Other 2.0 1.8
- ----------------------------------------------------
Credit quality is based on ratings from Moody's Investors Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/06 9/30/05
- --------------------------------------------------
1 year or less 5.0 4.7
- --------------------------------------------------
1-5 years 6.1 6.8
- --------------------------------------------------
5-10 years 74.4 76.6
- --------------------------------------------------
10+ years 14.5 11.9
- --------------------------------------------------
Average Effective Maturity 8.7 years 8.6 years
- --------------------------------------------------
Portfolio characteristics will vary.
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 bonds issued by
municipalities and other government entities having maturities of more than
one year.
/4/Performance for Class B shares assumes a maximum 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
/5/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, if any, are subject to capital gains
tax.
/8/Fund performance has been increased by expense waivers/reimbursements,
without which performance would have been lower.
10
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
- --------------------------------------------------------------------------------
For the first half of its fiscal year, which ended March 31, 2006, Loomis
Sayles Strategic Income Fund's Class A shares provided a total return of 3.67%
at net asset value, including $0.43 in reinvested dividends. The fund's results
were comfortably ahead of its benchmark, the Lehman Aggregate Bond Index, which
returned -0.06% for the period. Bear in mind that the fund has greater
investment flexibility than the benchmark. It also outperformed Morningstar's
Multisector Bond category, which had an average return of 1.20%. The fund's
30-day SEC yield at the end of March was 4.37%.
HIGH-YIELD ISSUES, CONVERTIBLES, AND COUNTRY ALLOCATIONS WERE POSITIVE
High-yielding corporate bonds denominated in U.S. dollars were the top
performers during the period, as investors pursuing attractive yields continued
to be drawn to lower-quality issues. Stronger finances fueled by the ongoing
economic expansion boosted investor confidence, even though spreads (the
difference in yields) between higher- and lower-quality bonds diminished.
Convertible bonds, which convey the right to be converted to the issuer's
common stock, were also strong during the period. At about two-thirds of the
fund's total assets, U.S. bonds dominated the portfolio. Brazilian bonds also
contributed, thanks to improving market conditions and strong exports. Strength
in Mexico's currency boosted the value of the fund's holdings in that country.
TELECOMMUNICATIONS, PHARMACEUTICALS, AND REITS LED SECTORS
Good security selection and a trend toward industry consolidation amid
improving business conditions aided returns. Telecommunications giant Qwest and
Vertex Pharmaceuticals, a biotechnology company, were the fund's top-performing
bonds, both driven by growing corporate profits and strengthening balance
sheets. Another leading contributor was Equity Residential, a real estate
investment trust (REIT) issued by a major developer and operator of rental and
condominium housing.
IN A STRONG BOND MARKET, DISAPPOINTMENTS WERE FEW
Slumping currencies tied to weak export activity and an increasing deficit
caused fund holdings in Australia and New Zealand to fall as these currencies
were devalued. Fund holdings impacted included European Investment Bank bonds
issued in Australian dollars and bonds issued in New Zealand dollars for
General Electric. The price of bonds issued by Calpine also fell when this
California-based power company filed for bankruptcy. Otherwise, the only
negative influences on the fund's results were minor. The fund's position in
mortgage-backed and federal agency securities, which were small relative to the
benchmark, had a slightly negative impact on the fund's results.
FUND'S STRUCTURE ANTICIPATES AN END TO RATE HIKES
We believe economic growth may start to decelerate under the weight of the
Federal Reserve Board's long series of hikes in short-term interest rates. That
scenario could cause rates to stabilize or even fall back a bit, which would be
favorable for bond prices. Renewed strength in housing or upward pressure on
wages and prices could undercut that expectation. Comparatively high interest
rates in the United States will continue to attract capital from investors in
countries where prevailing rates are lower.
At the end of the period, the portfolio's Treasury holdings were concentrated
in shorter-term issues to seek protection against further rate hikes. The other
end of our "barbell" structure emphasized longer-term, high-yield bonds, where
yields are likely to mute the impact of any further rate hikes.
We are cautious toward corporate bonds, given their slim yield advantage over
Treasury issues. High-yield issues, in particular, have recorded an impressive
price rise over the past few years. Nonetheless, as long as profits continue to
grow, we believe opportunities remain in the corporate sector. We may adopt a
wait-and-see approach in the high-yield areas, allowing prices to fall and
yields to rise before adding to the fund's commitments. At about one-sixth of
the portfolio's valuation, oil-rich Canada is our largest commitment outside
the United States. Allocations in the Pacific Rim include Singapore, Thailand
and South Korea; the fund's holdings in Latin America, Brazil and Mexico also
remain important.
11
LOOMIS SAYLES STRATEGIC INCOME FUND
Investment Results through March 31, 2006
- --------------------------------------------------------------------------------
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/7/
[CHART]
March 31, 1996 through March 31, 2006
Lehman
Net Asset Maximum Sales Lehman Aggregate Universal Bond
Value/1/ Charge/2/ Bond Index/3/ Index/4/
--------- ------------- ---------------- ---------------
3/31/1996 $10,000 $ 9,550 $10,000 $10,000
4/30/1996 9,985 9,536 9,944 9,959
5/31/1996 10,144 9,687 9,924 9,945
6/30/1996 10,280 9,817 10,057 10,078
7/31/1996 10,259 9,797 10,084 10,107
8/31/1996 10,448 9,978 10,067 10,104
9/30/1996 10,814 10,327 10,243 10,289
10/31/1996 11,123 10,622 10,470 10,503
11/30/1996 11,574 11,054 10,649 10,689
12/31/1996 11,414 10,900 10,550 10,603
1/31/1997 11,447 10,932 10,582 10,649
2/28/1997 11,628 11,104 10,609 10,686
3/31/1997 11,501 10,983 10,491 10,561
4/30/1997 11,574 11,054 10,648 10,721
5/31/1997 11,823 11,291 10,749 10,835
6/30/1997 12,092 11,547 10,876 10,967
7/31/1997 12,636 12,067 11,170 11,266
8/31/1997 12,310 11,756 11,075 11,174
9/30/1997 12,744 12,171 11,238 11,346
10/31/1997 12,477 11,915 11,401 11,454
11/30/1997 12,544 11,980 11,453 11,517
12/31/1997 12,480 11,918 11,569 11,639
1/31/1998 12,683 12,113 11,717 11,785
2/28/1998 12,916 12,334 11,708 11,794
3/31/1998 13,192 12,598 11,749 11,848
4/30/1998 13,196 12,602 11,810 11,909
5/31/1998 12,981 12,397 11,922 11,995
6/30/1998 12,774 12,200 12,023 12,073
7/31/1998 12,615 12,047 12,049 12,103
8/31/1998 11,066 10,568 12,245 12,102
9/30/1998 11,424 10,910 12,531 12,389
10/31/1998 11,548 11,028 12,465 12,338
11/30/1998 12,322 11,768 12,536 12,461
12/31/1998 12,266 11,714 12,574 12,489
1/31/1999 12,478 11,916 12,663 12,572
2/28/1999 12,299 11,746 12,442 12,373
3/31/1999 12,949 12,366 12,511 12,468
4/30/1999 13,779 13,159 12,551 12,541
5/31/1999 13,352 12,751 12,441 12,415
6/30/1999 13,390 12,788 12,401 12,393
7/31/1999 13,127 12,536 12,349 12,342
8/31/1999 12,963 12,379 12,342 12,329
9/30/1999 13,046 12,459 12,486 12,462
10/31/1999 13,155 12,563 12,532 12,514
11/30/1999 13,393 12,791 12,531 12,535
12/31/1999 13,758 13,138 12,470 12,510
1/31/2000 13,630 13,016 12,429 12,468
2/29/2000 14,167 13,529 12,580 12,627
3/31/2000 14,310 13,666 12,745 12,774
4/30/2000 13,900 13,275 12,709 12,734
5/31/2000 13,451 12,846 12,703 12,711
6/30/2000 13,964 13,336 12,967 12,985
7/31/2000 14,087 13,453 13,085 13,110
8/31/2000 14,397 13,749 13,275 13,301
9/30/2000 14,017 13,386 13,358 13,369
10/31/2000 13,446 12,841 13,447 13,422
11/30/2000 13,376 12,774 13,667 13,603
12/31/2000 13,851 13,228 13,920 13,864
1/31/2001 14,292 13,648 14,148 14,135
2/28/2001 14,270 13,628 14,271 14,254
3/31/2001 13,731 13,113 14,343 14,302
4/30/2001 13,507 12,899 14,283 14,238
5/31/2001 13,808 13,187 14,369 14,341
6/30/2001 13,771 13,151 14,423 14,382
7/31/2001 13,781 13,160 14,746 14,664
8/31/2001 14,085 13,451 14,915 14,847
9/30/2001 13,386 12,784 15,089 14,955
10/31/2001 13,702 13,086 15,404 15,255
11/30/2001 13,897 13,272 15,192 15,076
12/31/2001 13,833 13,211 15,096 14,986
1/31/2002 13,991 13,361 15,218 15,112
2/28/2002 14,159 13,521 15,365 15,253
3/31/2002 14,321 13,677 15,110 15,033
4/30/2002 14,668 14,008 15,403 15,319
5/31/2002 14,979 14,305 15,533 15,435
6/30/2002 14,741 14,077 15,668 15,491
7/31/2002 14,391 13,744 15,857 15,622
8/31/2002 14,794 14,129 16,125 15,910
9/30/2002 14,595 13,938 16,386 16,138
10/31/2002 14,885 14,215 16,311 16,083
11/30/2002 15,442 14,747 16,307 16,126
12/31/2002 15,976 15,257 16,644 16,460
1/31/2003 16,425 15,686 16,658 16,505
2/28/2003 16,868 16,109 16,888 16,740
3/31/2003 17,032 16,266 16,875 16,756
4/30/2003 18,010 17,199 17,014 16,953
5/31/2003 18,910 18,059 17,332 17,277
6/30/2003 19,149 18,287 17,297 17,274
7/31/2003 18,628 17,789 16,716 16,718
8/31/2003 18,842 17,994 16,827 16,838
9/30/2003 19,763 18,874 17,272 17,287
10/31/2003 20,210 19,300 17,111 17,163
11/30/2003 20,772 19,837 17,152 17,222
12/31/2003 21,542 20,573 17,327 17,418
1/31/2004 21,926 20,939 17,466 17,569
2/29/2004 21,910 20,925 17,655 17,742
3/31/2004 22,198 21,199 17,787 17,883
4/30/2004 21,276 20,319 17,325 17,426
5/31/2004 20,921 19,980 17,255 17,337
6/30/2004 21,319 20,359 17,353 17,448
7/31/2004 21,525 20,557 17,525 17,633
8/31/2004 22,188 21,190 17,859 17,982
9/30/2004 22,770 21,745 17,907 18,052
10/31/2004 23,309 22,260 18,058 18,217
11/30/2004 23,869 22,795 17,914 18,104
12/31/2004 24,329 23,235 18,078 18,284
1/31/2005 24,152 23,065 18,192 18,389
2/28/2005 24,468 23,367 18,084 18,314
3/31/2005 24,067 22,984 17,992 18,180
4/30/2005 23,877 22,802 18,235 18,401
5/31/2005 24,115 23,030 18,432 18,616
6/30/2005 24,569 23,463 18,533 18,743
7/31/2005 24,783 23,667 18,364 18,608
8/31/2005 25,070 23,942 18,600 18,836
9/30/2005 25,093 23,963 18,408 18,661
10/31/2005 24,844 23,726 18,262 18,511
11/30/2005 24,968 23,845 18,343 18,601
12/31/2005 25,238 24,102 18,517 18,780
1/31/2006 25,879 24,715 18,519 18,807
2/28/2006 26,161 24,984 18,580 18,882
3/31/2006 25,994 24,828 18,398 18,715
Average Annual Total Returns -- March 31, 2006
SINCE
6 MONTHS 1 YEAR 5 YEARS/7/ 10 YEARS/7/ INCEPTION/7/
CLASS A (Inception 5/1/95)
Net Asset Value/1/ 3.67% 8.08% 13.63% 10.02% --
With Maximum Sales Charge/2/ -1.01 3.20 12.59 9.52 --
CLASS B (Inception 5/1/95)
Net Asset Value/1/ 3.29 7.36 12.77 9.20 --
With CDSC/5/ -1.71 2.36 12.52 9.20 --
CLASS C (Inception 5/1/95)
Net Asset Value/1/ 3.21 7.27 12.77 9.20 --
With CDSC/5/ 2.21 6.27 12.77 9.20 --
CLASS Y (Inception 12/1/99)
Net Asset Value/1/ 3.83 8.49 13.92 -- 11.39%
- ---------------------------------------------------------------------------------------------
SINCE
CLASS Y
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/8/
Lehman Aggregate Bond Index/3/ -0.06% 2.26% 5.11% 6.29% 6.25%
Lehman U.S. Universal Bond Index/4/ 0.29 2.94 5.53 6.47 6.53
Morningstar Multisector Bond Fund Avg./6/ 1.20 4.23 7.46 6.39 6.48
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. Performance history includes periods from a
predecessor fund. For performance current to the most recent month-end, visit
www.ixisadvisorfunds.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 FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/06 9/30/05
- ----------------------------------------------------
Aaa 31.9 35.1
- ----------------------------------------------------
Aa 9.0 9.9
- ----------------------------------------------------
A 2.9 0.5
- ----------------------------------------------------
Baa 8.9 4.0
- ----------------------------------------------------
Ba 10.5 8.7
- ----------------------------------------------------
B 11.3 10.2
- ----------------------------------------------------
Caa 3.3 7.2
- ----------------------------------------------------
Ca 0.5 0.8
- ----------------------------------------------------
C 0.2 0.2
- ----------------------------------------------------
Not rated* 18.9 14.6
- ----------------------------------------------------
Short-Term Investments & Other 2.6 8.8
- ----------------------------------------------------
Credit quality is based on ratings from Moody's Investor Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/06 9/30/05
- --------------------------------------------------
1 year or less 6.1 10.5
- --------------------------------------------------
1-5 years 46.5 48.8
- --------------------------------------------------
5-10 years 15.2 17.7
- --------------------------------------------------
10+ years 32.2 23.0
- --------------------------------------------------
Average Effective Maturity 10.6 years 8.1 years
- --------------------------------------------------
Portfolio characteristics will vary.
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes the maximum sales charge of 4.50%.
/3/Lehman Aggregate Bond Index is an unmanaged index of investment-grade bonds
with one- to ten-year maturities issued by the U.S. government, its agencies
and U.S. corporations.
/4/Lehman U.S. 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, 0%.
Class C share performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/6/Morningstar Multisector 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/reimbursements,
without which performance would have been lower.
/8/The since-inception comparative performance figures shown for Class Y are
calculated from 12/1/99.
12
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 IXIS Advisor Fund, contact your financial
professional or call IXIS Advisor 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 IXIS Advisor Funds at 800-225-5478; on
the funds' website at www.ixisadvisorfunds.com; and on the Securities and
Exchange Commission's (SEC'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, 2005 is available from the funds' website and the SEC's
website.
QUARTERLY PORTFOLIO SCHEDULES
The funds 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
are 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
13
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 and/or
service 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 October 1, 2005 through March 31, 2006. 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 such as sales charges, redemption fees, or
exchange fees. 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 VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES CORE PLUS BOND FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,004.20 $5.25
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.70 $5.29
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,001.10 $8.98
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.96 $9.05
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,000.20 $8.98
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.96 $9.05
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,005.60 $4.00
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.94 $4.03
*Expenses are equal to the fund's annualized expense ratio (after
waiver/reimbursement): 1.05%, 1.80%, 1.80% and 0.80% 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 365 (to reflect the half-year period).
14
UNDERSTANDING YOUR FUNDS' EXPENSES
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES HIGH INCOME FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,062.00 $7.09
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.05 $6.94
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,058.00 $10.98
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,014.26 $10.75
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,058.00 $10.98
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,014.26 $10.75
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after
waiver/reimbursement): 1.38%, 2.14% and 2.14% 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 365 (to reflect the half-year period).
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
AGENCY FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- -------------------------------------------------------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,004.00 $5.35
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.60 $5.39
- -------------------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $999.60 $9.07
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.86 $9.15
- -------------------------------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,000.60 $9.08
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.86 $9.15
- -------------------------------------------------------------------------------------------------------------------
CLASS Y
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,005.90 $3.85
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.09 $3.88
- -------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after
waiver/reimbursement): 1.07%, 1.82%, 1.82% and 0.77% 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 365 (to reflect the half-year period).
15
UNDERSTANDING YOUR FUNDS' EXPENSES
LOOMIS SAYLES MASSACHUSETTS TAX FREE BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
INCOME FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,008.50 $5.41
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.55 $5.44
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,004.80 $9.15
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.81 $9.20
*Expenses are equal to the fund's annualized expense ratio (after
waiver/reimbursement): 1.08% and 1.83% 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 365 (to reflect
the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES MUNICIPAL INCOME FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,009.20 $5.01
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,005.50 $8.75
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.21 $8.80
*Expenses are equal to the fund's annualized expense ratio (after
waiver/reimbursement): 1.00% and 1.75% 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 365 (to reflect
the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES STRATEGIC INCOME FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,036.70 $5.28
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.75 $5.24
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,032.90 $9.07
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.01 $9.00
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,032.10 $9.07
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.01 $9.00
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,038.30 $4.01
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.99 $3.98
*Expenses are equal to the fund's annualized expense ratio: 1.04%, 1.79%, 1.79%
and 0.79% 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 365 (to reflect the half-year period).
16
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ----------------------------------------------------------------------------------------------
Bonds and Notes -- 97.5% of Net Assets
Agencies -- 1.0%
$ 2,145,000 Pemex Project Funding Master Trust,
7.875%, 2/01/2009 $ 2,254,395
---------------
Asset-Backed Securities -- 6.0%
662,271 AmeriCredit Automobile Receivables Trust, Series 2003-D-M,
Class A-4,
2.840%, 8/06/2010 651,926
2,595,000 AmeriCredit Automobile Receivables Trust, Series 2005-CF,
Class A-3,
4.470%, 5/06/2010 2,566,966
1,783,542 Countrywide Asset-Backed Certificates, Series 2003-5, Class AF4,
4.905%, 8/25/2032 1,776,673
790,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A2,
3.872%, 3/25/2020 775,113
1,095,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3,
4.615%, 2/25/2035 1,054,239
1,730,000 Ford Credit Auto Owner Trust, Series 2004-A, Class A4,
3.540%, 11/15/2008 1,690,680
1,800,000 Greenwich Capital Commercial Funding Corp., Series 2005-GG5,
Class A2,
5.117%, 4/10/2037 1,780,525
1,850,000 Residential Asset Securities Corp., Series 2003-KS10, Class AI4,
4.470%, 3/25/2032 1,826,741
1,000,000 WFS Financial Owner Trust, Series 2004-4, Class A3,
2.980%, 9/17/2009 986,486
515,000 WFS Financial Owner Trust, Series 2004-4, Class A4,
3.440%, 5/17/2012 498,597
---------------
13,607,946
---------------
Automotive -- 3.2%
1,645,000 Ford Motor Co.,
7.450%, 7/16/2031(c) 1,221,413
1,510,000 Ford Motor Credit Co., Global Note,
5.625%, 10/01/2008(c) 1,380,887
655,000 General Motors Acceptance Corp. (MTN),
6.750%, 12/01/2014(c) 589,634
4,240,000 General Motors Acceptance Corp.,
8.000%, 11/01/2031(c) 4,007,233
---------------
7,199,167
---------------
Banking -- 1.1%
430,000 JPMorgan Chase & Co.,
6.750%, 2/01/2011 452,023
715,000 JPMorgan Chase & Co., Global Subordinated Note,
5.750%, 1/02/2013 719,783
1,200,000 State Street Institutional Capital A, Series A,
Guaranteed Note, 144A,
7.940%, 12/30/2026 1,263,080
---------------
2,434,886
---------------
Brokerage -- 1.0%
2,150,000 Goldman Sachs Group, Inc., Senior Note,
6.600%, 1/15/2012 2,254,051
---------------
Chemicals -- 0.2%
600,000 Methanex Corp., Senior Note,
6.000%, 8/15/2015 563,858
---------------
Construction Machinery -- 0.8%
1,600,000 Case New Holland, Inc., Senior Note,
9.250%, 8/01/2011 1,708,000
---------------
Principal
Amount+ Description Value (a)
- -----------------------------------------------------------------------------------
Electric -- 8.0%
$ 1,455,000 Duke Energy Corp., Senior Note,
4.200%, 10/01/2008 $ 1,411,680
2,030,000 Empresa Nacional de Electricidad SA, Chile,
8.350%, 8/01/2013 2,246,759
1,325,000 Enersis SA, Chile,
7.375%, 1/15/2014 1,386,334
431,000,000 General Electric Capital Corp.,
0.550%, 10/14/2008 (JPY) 3,624,589
271,000,000 General Electric Capital Corp. (MTN),
1.400%, 11/02/2006 (JPY) 2,318,729
3,380,000 General Electric Capital Corp. (MTN),
5.450%, 1/15/2013 3,377,458
1,325,000 Ipalco Enterprises, Inc., Senior Secured Note,
8.375%, 11/14/2008 1,384,625
1,710,000 Progress Energy, Inc.,
7.100%, 3/01/2011 1,813,623
590,000 Southern California Edison Co.,
7.625%, 1/15/2010 628,533
---------------
18,192,330
---------------
Financial Services -- 1.0%
1,050,000 HSBC Finance Corp.,
7.000%, 5/15/2012 1,122,312
1,185,000 Morgan Stanley,
4.000%, 1/15/2010 1,125,925
---------------
2,248,237
---------------
Food & Beverage -- 0.8%
1,750,000 Smithfield Foods, Inc.,
7.000%, 8/01/2011 1,741,250
---------------
Gaming -- 0.5%
450,000 Harrah's Operating Co., Inc., Guaranteed Senior Note,
7.500%, 1/15/2009 470,716
770,000 Harrah's Operating Co., Inc., Senior Note,
7.125%, 6/01/2007 783,044
---------------
1,253,760
---------------
Government Agencies -- 4.4%
5,025,000 FHLMC,
2.875%, 12/15/2006 4,947,494
140,000,000 FNMA,
1.750%, 3/26/2008 (JPY) 1,214,032
3,710,000 FNMA,
5.250%, 1/15/2009(c) 3,724,796
---------------
9,886,322
---------------
Healthcare -- 2.5%
1,655,000 Aetna, Inc., Senior Note,
7.875%, 3/01/2011 1,818,019
1,385,000 AmerisourceBergen Corp., Senior Note, 144A,
5.875%, 9/15/2015 1,362,231
575,000 Columbia/HCA, Inc.,
7.500%, 12/15/2023 558,390
1,315,000 WellPoint, Inc.,
3.750%, 12/14/2007 1,280,580
735,000 WellPoint, Inc.,
5.250%, 1/15/2016 708,792
---------------
5,728,012
---------------
See accompanying notes to financial statements.
17
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ------------------------------------------------------------------------------------------
Home Construction -- 1.4%
$ 1,405,000 Desarrolladora Homex SA de CV,
7.500%, 9/28/2015 $ 1,362,850
320,000 Pulte Homes, Inc.,
6.000%, 2/15/2035(c) 278,578
295,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 267,921
1,315,000 Pulte Homes, Inc., Senior Note,
4.875%, 7/15/2009(c) 1,280,004
---------------
3,189,353
---------------
Industrial Other -- 1.3%
2,865,000 Aramark Services, Inc., Guaranteed Note,
7.000%, 7/15/2006 2,877,093
---------------
Insurance -- 0.3%
665,000 St. Paul Travelers Cos., Inc. (The),
5.500%, 12/01/2015 650,498
---------------
Media Cable -- 1.1%
2,000,000 CSC Holdings, Inc., Senior Note,
7.625%, 7/15/2018 1,977,500
515,000 CSC Holdings, Inc., Senior Note,
7.875%, 2/15/2018(c) 515,644
---------------
2,493,144
---------------
Media Non-Cable -- 2.1%
1,060,000 Cox Communications, Inc.,
7.750%, 11/01/2010 1,133,586
540,000 Reed Elsevier Capital, Inc.,
4.625%, 6/15/2012 505,002
2,735,000 Time Warner, Inc.,
7.700%, 5/01/2032 3,007,713
---------------
4,646,301
---------------
Mortgage Backed Securities -- 4.9%
795,000 Banc of America Commercial Mortgage, Inc., Series 2005-6,
Class A2,
5.165%, 9/10/2047 787,061
850,000 Banc of America Commercial Mortgage, Inc., Series 2006-1,
Class A2,
5.334%, 9/10/2045 846,065
1,245,000 Bear Stearns Commercial Mortgage Securities, Inc.,
Series 2005-PW10, Class A2,
5.270%, 12/11/2040 1,237,816
710,000 Citigroup/Deutsche Bank Commercial Mortgage Trust,
Series 2006-CD2, Class A2,
5.408%, 1/15/2046 708,118
1,500,000 GS Mortgage Securities Corp. II, Series 2005-GG4, Class A4A,
4.751%, 7/10/2039 1,413,861
1,710,000 LB-UBS Commercial Mortgage Trust, Series 2005-C3, Class A3,
4.647%, 7/15/2030 1,642,534
2,400,000 Morgan Stanley Capital I, Series 2005-T19, Class A4A,
4.890%, 6/12/2047 2,281,819
2,195,000 Wachovia Bank Commercial Mortgage Trust, Series 2005-C20,
Class A2,
4.519%, 7/15/2042 2,116,332
---------------
11,033,606
---------------
Mortgage Related -- 27.7%
2,467,001 FHLMC,
4.000%, 7/01/2019 2,303,728
7,125,056 FHLMC,
4.500%, with various maturities to 2034(d) 6,731,205
Principal
Amount+ Description Value (a)
- -------------------------------------------------------------------------
Mortgage Related -- continued
$ 2,983,617 FHLMC,
5.000%, 11/01/2018 $ 2,913,671
10,613,930 FHLMC,
5.000%, with various maturities to 2035(d) 10,101,307
2,005,262 FHLMC,
5.500%, with various maturities to 2018(d) 1,992,968
275,532 FHLMC,
6.000%, 6/01/2035 275,850
140,000,000 FNMA,
2.125%, 10/09/2007 (JPY) 1,217,027
968,968 FNMA,
4.000%, 6/01/2019 907,301
6,595,183 FNMA,
4.500%, with various maturities to 2035(d) 6,227,760
1,601,755 FNMA,
5.000%, 5/01/2018 1,564,763
6,581,178 FNMA,
5.000%, 7/01/2035 6,266,919
9,710,599 FNMA,
5.500%, with various maturities to 2035(d) 9,519,230
2,267,946 FNMA,
6.000%, with various maturities to 2034(d) 2,283,901
1,480,960 FNMA,
6.000%, 11/01/2034 1,481,583
3,482,827 FNMA,
6.500%, with various maturities to 2034(d) 3,558,309
331,587 FNMA,
7.000%, with various maturities to 2030(d) 341,918
413,662 FNMA,
7.500%, with various maturities to 2032(d) 432,365
1,385,689 GNMA,
5.500%, 2/20/2034 1,368,723
505,751 GNMA,
6.000%, 1/15/2029 512,528
1,145,640 GNMA,
6.500%, with various maturities to 2032(d) 1,188,409
719,002 GNMA,
7.000%, with various maturities to 2029(d) 750,001
197,986 GNMA,
7.500%, with various maturities to 2030(d) 208,196
91,741 GNMA,
8.000%, 11/15/2029 98,216
193,450 GNMA,
8.500%, with various maturities to 2023(d) 208,653
25,654 GNMA,
9.000%, with various maturities to 2016(d) 27,539
66,922 GNMA,
11.500%, with various maturities to 2015(d) 74,175
---------------
62,556,245
---------------
Oil & Gas -- 0.5%
1,105,000 Premcor Refining Group, Inc. (The),
6.125%, 5/01/2011 1,123,470
---------------
Paper -- 2.2%
1,618,000 Abitibi-Consolidated Finance, LP,
7.875%, 8/01/2009(c) 1,605,865
1,016,000 Abitibi-Consolidated, Inc.,
8.550%, 8/01/2010(c) 1,021,080
1,200,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025(c) 1,152,000
See accompanying notes to financial statements.
18
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ---------------------------------------------------------------------------------------
Paper -- continued
$ 755,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 $ 739,900
480,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 516,000
---------------
5,034,845
---------------
Pharmaceuticals -- 2.9%
1,470,000 Caremark Rx, Inc., Senior Note,
7.375%, 10/01/2006 1,484,569
1,250,000 Medco Health Solutions,
7.250%, 8/15/2013 1,345,890
670,000 Valeant Pharmaceuticals International, Subordinated Note,
3.000%, 8/16/2010 582,063
520,000 Valeant Pharmaceuticals International, Subordinated Note,
4.000%, 11/15/2013 444,600
2,750,000 Valeant Pharmaceuticals International, Senior Note,
7.000%, 12/15/2011 2,722,500
---------------
6,579,622
---------------
Pipelines -- 0.8%
1,639,000 Kinder Morgan Energy Partners, LP,
7.125%, 3/15/2012 1,746,841
---------------
Real Estate Investment Trusts -- 2.8%
195,000 Colonial Realty, LP, Senior Note,
4.750%, 2/01/2010 187,976
1,350,000 Colonial Realty, LP, Senior Note,
5.500%, 10/01/2015 1,292,719
1,180,000 EOP Operating, LP, Guaranteed Note,
4.650%, 10/01/2010 1,128,801
1,250,000 iStar Financial, Inc., Senior Note,
6.000%, 12/15/2010 1,257,981
1,100,000 Reckson Operating Partnership LP,
6.000%, 3/31/2016 1,091,179
1,340,000 Simon Property Group, LP,
6.375%, 11/15/2007 1,359,401
---------------
6,318,057
---------------
Sovereigns -- 1.0%
3,685,000 Kingdom of Norway,
5.500%, 5/15/2009 (NOK) 593,142
13,015,000 Kingdom of Sweden,
4.000%, 12/01/2009 (SEK) 1,709,989
---------------
2,303,131
---------------
Supermarkets -- 2.7%
370,000 Albertson's, Inc.,
7.750%, 6/15/2026 333,534
1,535,000 Albertson's, Inc., Senior Note,
7.450%, 8/01/2029 1,355,483
610,000 Albertson's, Inc., Senior Note,
8.000%, 5/01/2031(c) 567,825
35,000 Albertson's, Inc., Senior Note,
8.700%, 5/01/2030 34,137
270,000 Albertson's, Inc., Series C, (MTN),
6.625%, 6/01/2028 217,553
125,000 American Stores Co.,
8.000%, 6/01/2026 121,100
2,010,000 Delhaize America, Inc.,
9.000%, 4/15/2031 2,324,937
1,015,000 Kroger Co. (The),
7.500%, 4/01/2031 1,115,462
---------------
6,070,031
---------------
Principal
Amount+ Description Value (a)
- ----------------------------------------------------------------------------------
Technology -- 0.5%
$ 665,000 Corning, Inc.,
6.200%, 3/15/2016 $ 664,969
440,000 Xerox Corp.,
6.400%, 3/15/2016 436,700
---------------
1,101,669
---------------
Transportation Services -- 0.1%
195,000 Overseas Shipholding Group, Senior Note,
7.500%, 2/15/2024 194,512
---------------
Treasuries -- 9.8%
1,450,000 U.S. Treasury Bond,
4.000%, 2/15/2014(c) 1,367,192
4,000,000 U.S. Treasury Bond,
5.250%, 2/15/2029(c) 4,107,188
5,015,000 U.S. Treasury Bond,
5.375%, 2/15/2031(c) 5,279,070
4,570,000 U.S. Treasury Note,
4.250%, 10/31/2007(c) 4,528,226
620,000 U.S. Treasury Note,
4.250%, 11/15/2014(c) 592,584
1,205,000 U.S. Treasury Note,
4.375%, 12/15/2010(c) 1,181,982
3,020,000 U.S. Treasury Note,
4.500%, 2/15/2016(c) 2,937,185
2,290,000 U.S. Treasury Note,
2.875%, 11/30/2006(c) 2,260,480
---------------
22,253,907
---------------
Wireless -- 0.3%
730,000 Sprint Capital Corp.,
6.125%, 11/15/2008 742,945
---------------
Wirelines -- 4.6%
1,650,000 GTE Corp.,
7.900%, 2/01/2027 1,725,263
3,200,000 LCI International, Inc., Senior Note,
7.250%, 6/15/2007 3,232,000
210,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 201,863
1,240,000 Qwest Corp.,
7.200%, 11/10/2026(c) 1,247,750
850,000 Qwest Corp.,
7.250%, 9/15/2025 871,250
255,000 Qwest Corp.,
7.250%, 10/15/2035(c) 254,681
1,675,000 Qwest Corp.,
7.500%, 6/15/2023 1,702,219
1,135,000 Sprint Capital Corp.,
6.875%, 11/15/2028 1,171,018
---------------
10,406,044
---------------
Total Bonds and Notes (Identified Cost $224,672,784) 220,393,528
---------------
See accompanying notes to financial statements.
19
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Shares/
Principal
Amount+ Description Value (a)
- ----------------------------------------------------------------------------------------------------
Short-Term Investments -- 18.1%
35,959,987 State Street Navigator Securities Lending Prime Portfolio(e) $ 35,959,987
$ 4,981,107 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/2006 at 2.95% to repurchased at
$4,982,332 on 4/03/2006, collateralized by $3,680,000 U.S.
Treasury Bond, 8.75% due 8/15/2020 valued at $5,084,189 4,981,107
---------------
Total Short-Term Investments (Identified Cost $40,941,094) 40,941,094
---------------
Total Investments -- 115.6%
(Identified Cost $265,613,878)(b) 261,334,622
Other assets less liabilities -- (15.6)% (35,296,668)
---------------
Total Net Assets -- 100% $ 226,037,954
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales. Amortization of
premium on debt securities is excluded for tax purposes.):
At March 31, 2006, the net unrealized depreciation on investments
based on cost of $266,223,449 for federal income tax purposes
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value of tax cost 1,365,526
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (6,254,353)
---------------
Net unrealized depreciation $ (4,888,827)
===============
(c) All or a portion of this security was on loan to brokers at March 31,
2006.
(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 Portfolio of Investments.
(e) Represents investment of securities lending collateral.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
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 $2,625,311 or 1.2% of net assets.
+ Principal amount is in U.S. dollars unless otherwise noted.
JPY Japanese Yen
NOK Norwegian Krone
SEK Swedish Krona
Holdings at March 31, 2006 as a Percentage of Net Assets
Mortgage Related 27.7%
Treasuries 9.8
Electric 8.0
Asset-Backed Securities 6.0
Mortgage Backed Securities 4.9
Wirelines 4.6
Government Agencies 4.4
Automotive 3.2
Pharmaceuticals 2.9
Real Estate Investment Trusts 2.8
Supermarkets 2.7
Healthcare 2.5
Paper 2.2
Media Non-Cable 2.1
Others, less than 2% each 13.7
See accompanying notes to financial statements.
20
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ------------------------------------------------------------------------------------------------
Bonds and Notes -- 89.6% of Net Assets
Airlines -- 2.6%
$ 35,000 AMR Corp., Senior Note,
4.500%, 2/15/2024 $ 49,000
225,000 AMR Corp., Senior Note, Convertible,
4.250%, 9/23/2023 378,844
82,157 Continental Airlines, Inc., Series 1997-4, Class 4B,
6.900%, 1/02/2017 77,185
154,100 Continental Airlines, Inc., Series 1998-1, Class 1B,
6.748%, 3/15/2017 142,547
45,655 Continental Airlines, Inc., Series 1999-1, Class C,
6.954%, 8/02/2009 42,103
148,123 Continental Airlines, Inc., Series 1999-2, Class B,
7.566%, 3/15/2020 140,232
215,952 Continental Airlines, Inc., Series 2002-2, Class B,
8.307%, 4/02/2018 207,810
---------------
1,037,721
---------------
Automotive -- 9.7%
78,000 Delphi Automotive Systems Corp.,
7.125%, 5/01/2029(d)(h)(i) 47,970
420,000 Ford Motor Co.,
6.375%, 2/01/2029 279,300
815,000 Ford Motor Co.,
6.625%, 10/01/2028 546,050
170,000 Ford Motor Co.,
7.450%, 7/16/2031(d) 126,225
905,000 Ford Motor Credit Co.,
5.700%, 1/15/2010(d) 803,118
185,000 Ford Motor Credit Co.,
7.000%, 10/01/2013(d) 165,465
705,000 General Motors Acceptance Corp., (MTN),
6.750%, 12/01/2014(d) 634,645
180,000 General Motors Acceptance Corp., Series E, (MTN),
7.500%, 12/01/2006 (NZD) 107,635
405,000 General Motors Acceptance Corp.,
8.000%, 11/01/2031 382,766
125,000 General Motors Acceptance Corp. of Canada, Ltd., Series E., (MTN),
6.625%, 12/17/2010 (GBP) 197,542
10,000 GMAC International Finance BV,
8.000%, 3/14/2007 (NZD) 6,051
430,000 Goodyear Tire & Rubber Co. (The),
7.857%, 8/15/2011 420,325
110,000 Tenneco Automotive, Inc., Senior Subordinated Note,
8.625%, 11/15/2014(d) 110,000
---------------
3,827,092
---------------
Banking -- 3.5%
9,000,000 Barclays Financial LLC, 144A,
4.100%, 3/22/2010 (THB) 216,718
7,000,000 Barclays Financial LLC, 144A,
4.160%, 2/22/2010 (THB) 168,882
990,000 Citibank NA, 144A,
15.000%, 7/02/2010 (BRL) 498,797
500,000 HSBC Bank USA, 144A,
3.310%, 8/25/2010 506,500
---------------
1,390,897
---------------
Chemicals -- 3.0%
450,000 Borden, Inc.,
7.875%, 2/15/2023 372,375
Principal
Amount+ Description Value (a)
- --------------------------------------------------------------------------------------------
Chemicals -- continued
$ 550,000 Borden, Inc.,
9.200%, 3/15/2021 $ 500,500
380,000 Hercules, Inc., Subordinated Note,
6.500%, 6/30/2029 300,200
---------------
1,173,075
---------------
Construction Machinery -- 1.6%
120,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note,
7.750%, 12/15/2013 112,200
550,000 United Rentals North America, Inc., Senior Subordinated Note,
7.000%, 2/15/2014 529,375
---------------
641,575
---------------
Consumer Products -- 0.3%
125,000 LPG International, Inc., 144A,
7.250%, 12/20/2015 125,475
---------------
Diversified Financial Services -- 0.2%
1,436,358,000 JPMorgan Chase & Co., 144A,
Zero Coupon, 3/28/2011 (IDR) 97,547
---------------
Electric -- 0.6%
40,000 Dynegy Holdings, Inc.,
7.125%, 5/15/2018 36,600
90,000 NGC Corp.,
7.625%, 10/15/2026 82,350
140,000 NGC Corp. Capital Trust, Series B,
8.316%, 6/01/2027 123,200
---------------
242,150
---------------
Environmental -- 0.5%
190,000 Allied Waste North America, Series B, Senior Note,
5.750%, 2/15/2011(d) 180,975
---------------
Financial Services -- 0.7%
250,000 Astoria Depositor Corp., 144A,
8.144%, 5/01/2021 262,500
---------------
Healthcare -- 0.9%
150,000 Columbia/HCA, Inc.,
7.500%, 12/15/2023 145,667
200,000 Columbia/HCA, Inc., (MTN),
7.580%, 9/15/2025 193,642
---------------
339,309
---------------
Home Construction -- 2.4%
300,000 K Hovnanian Enterprises, Inc.,
6.250%, 1/15/2015 274,858
100,000 K Hovnanian Enterprises, Inc., Senior Note,
6.250%, 1/15/2016 90,647
590,000 KB Home,
7.250%, 6/15/2018 580,467
---------------
945,972
---------------
Independent Energy -- 1.2%
70,000 Chesapeake Energy Corp., Senior Note,
6.375%, 6/15/2015 68,863
200,000 Chesapeake Energy Corp., 144A,
6.500%, 8/15/2017 197,500
60,000 NRG Energy, Inc.,
7.250%, 2/01/2014 60,975
165,000 NRG Energy, Inc.,
7.375%, 2/01/2016 168,506
---------------
495,844
---------------
See accompanying notes to financial statements.
21
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- --------------------------------------------------------------------------------
Integrated Energy -- 1.4%
$ 265,000 Cerro Negro Finance, Ltd., 144A,
7.900%, 12/01/2020 $ 259,700
300,000 Petrozuata Finance, Inc., Series B, 144A,
8.220%, 4/01/2017 295,500
---------------
555,200
---------------
Lodging & Gaming -- 0.2%
80,000 Host Marriott, LP, Guaranteed Note, Series O,
6.375%, 3/15/2015(d) 78,700
---------------
Media Cable -- 4.5%
550,000 CSC Holdings, Inc., Senior Note,
7.625%, 7/15/2018(d) 543,813
250,000 NTL Cable PLC,
9.750%, 4/15/2014 (GBP) 456,067
175,000 PanAmSat Corp.,
6.875%, 1/15/2028 155,750
650,000 Rogers Cable, Inc., Senior Note,
5.500%, 3/15/2014 615,875
---------------
1,771,505
---------------
Oil Field Services -- 0.3%
110,000 North American Energy Partners, Inc., Senior Note,
8.750%, 12/01/2011 107,250
---------------
Packaging -- 1.2%
350,000 Owens-Illinois, Inc., Senior Note,
7.500%, 5/15/2010(d) 354,375
135,000 Owens-Illinois, Inc., Senior Note,
7.800%, 5/15/2018 133,988
---------------
488,363
---------------
Paper -- 5.5%
215,000 Abitibi-Consolidated, Inc.,
7.500%, 4/01/2028 178,450
250,000 Abitibi-Consolidated, Inc.,
8.500%, 8/01/2029 218,750
210,000 Advance Agro PCL, 144A,
11.000%, 12/19/2012 218,925
685,000 Bowater, Inc.,
6.500%, 6/15/2013(d) 638,762
75,000 Georgia-Pacific Corp.,
7.250%, 6/01/2028 70,875
120,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 115,200
300,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029(d) 294,000
120,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 121,050
305,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 327,875
---------------
2,183,887
---------------
Pharmaceuticals -- 9.6%
185,000 Bristol-Myers Squibb Co.,
5.750%, 10/01/2011 187,033
85,000 Elan Capital Corp., Ltd., Convertible,
6.500%, 11/10/2008 174,463
440,000 Elan Finance Corp., Senior Note,
7.750%, 11/15/2011 416,900
300,000 Enzon, Inc.,
4.500%, 7/01/2008 279,375
Principal
Amount+ Description Value (a)
- -----------------------------------------------------------------------------------------------
Pharmaceuticals -- continued
$ 127,000 EPIX Pharmaceuticals, Inc., Senior Note, Convertible,
3.000%, 6/15/2024 $ 81,598
50,000 Incyte Corp., Convertible,
3.500%, 2/15/2011 40,875
360,000 Inhale Therapeutic Systems, Inc., Subordinated Note, Convertible,
3.500%, 10/17/2007 351,450
202,000 IVAX Corp., Senior Subordinated Note, Convertible,
4.500%, 5/15/2008 204,525
210,000 Merck & Co., Inc.,
4.750%, 3/01/2015 196,963
250,000 Pharma Services Intermediate Holdings Corp., Senior Note,
Convertible,
0.00% (step to 11.50% on 4/01/2009), 4/01/2014(e) 224,687
345,000 Regeneron Pharmaceuticals, Inc., Subordinated Note, Convertible,
5.500%, 10/17/2008 337,237
190,000 Valeant Pharmaceuticals International, Subordinated Note,
Convertible,
3.000%, 8/16/2010 165,063
445,000 Valeant Pharmaceuticals International, Subordinated Note,
Convertible,
4.000%, 11/15/2013 380,475
310,000 Vertex Pharmaceuticals, Inc., 144A, Convertible,
5.750%, 2/15/2011 765,312
---------------
3,805,956
---------------
Pipelines -- 2.2%
915,000 El Paso CGP, Co., 144A,
6.950%, 6/01/2028 864,675
---------------
Retailers -- 2.0%
250,000 Dillard's, Inc.,
6.625%, 1/15/2018 233,750
765,000 Toys R US, Inc.,
7.375%, 10/15/2018 562,275
---------------
796,025
---------------
Sovereigns -- 7.0%
1,190,000 Republic of Argentina,
2.000%, 9/30/2014 (ARS)(c) 398,276
520,000 Republic of Brazil,
8.250%, 1/20/2034(d) 573,040
4,420,000 United Mexican States,
8.000%, 12/07/2023 (MXN) 380,148
14,850,000 United Mexican States,
9.000%, 12/20/2012 (MXN) 1,406,156
---------------
2,757,620
---------------
Supermarkets -- 2.5%
95,000 Albertson's, Inc.,
7.750%, 6/15/2026 85,637
705,000 Albertson's, Inc., Senior Note,
7.450%, 8/01/2029 622,551
130,000 Albertson's, Inc., Senior Note,
8.000%, 5/01/2031(d) 121,012
25,000 Albertson's, Inc., Senior Note,
8.700%, 5/01/2030 24,384
120,000 Albertson's, Inc., Series C, (MTN),
6.625%, 6/01/2028 96,690
50,000 American Stores Co.,
8.000%, 6/01/2026 48,440
---------------
998,714
---------------
See accompanying notes to financial statements.
22
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- -----------------------------------------------------------------------------------------------
Supranational -- 4.5%
$ 6,000,000 Inter-American Development Bank, Series E, (MTN),
Zero Coupon, 5/11/2009 (BRL) $ 1,788,355
---------------
Technology -- 9.0%
105,000 Amkor Technology, Inc.,
5.000%, 3/15/2007(d) 102,506
125,000 Amkor Technology, Inc., Senior Note,
7.750%, 5/15/2013(d) 115,000
40,000 Ciena Corp., Convertible,
3.750%, 2/01/2008 37,800
225,000 Corning, Inc.,
5.900%, 3/15/2014 222,184
270,000 Corning, Inc.,
6.200%, 3/15/2016 269,987
155,000 Corning, Inc.,
6.850%, 3/01/2029(d) 158,055
215,000 Kulicke & Soffa Industries, Inc., Subordinated Note, Convertible,
0.500%, 11/30/2008 184,362
25,000 Kulicke & Soffa Industries, Inc., Subordinated Note, Convertible,
1.000%, 6/30/2010 23,188
910,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 821,275
293,000 Maxtor Corp., Subordinated Note,
5.750%, 3/01/2012(f) 269,560
300,000 Nortel Networks Corp., Guaranteed Senior Note,
4.250%, 9/01/2008(d) 283,125
425,000 Nortel Networks Corp.,
6.875%, 9/01/2023 388,875
40,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 38,600
210,000 Sanmina-SCI Corp.,
8.125%, 3/01/2016 212,100
100,000 SCI Systems, Inc., Subordinated Note, Convertible,
3.000%, 3/15/2007 96,750
105,000 Unisys Corp.,
6.875%, 3/15/2010(d) 102,113
145,000 Unisys Corp., Senior Note,
8.000%, 10/15/2012 142,463
100,000 Xerox Corp.,
6.400%, 3/15/2016 99,250
---------------
3,567,193
---------------
Transportation Services -- 4.1%
275,000 American President Cos., Ltd., Senior Note,
8.000%, 1/15/2024 272,937
250,000 Bombardier Capital Funding, LP,
6.750%, 5/14/2009 (GBP) 434,350
300,000 Overseas Shipholding Group, Senior Note,
7.500%, 2/15/2024 299,250
295,000 Stena AB, Senior Note,
7.000%, 12/01/2016 277,300
350,000 Stena AB, Senior Note,
7.500%, 11/01/2013 345,625
---------------
1,629,462
---------------
Treasuries -- 0.9%
350,000 U.S. Treasury Note,
4.375%, 12/31/2007(d) 347,211
---------------
Principal
Amount+ Description Value (a)
- ------------------------------------------------------------------------------------
Wireless -- 1.0%
$ 435,000 Level 3 Communications, Inc., Convertible,
2.875%, 7/15/2010 $ 388,781
5,000 Level 3 Communications, Inc., Convertible,
6.000%, 3/15/2010(d) 3,969
20,000 Level 3 Communications, Inc., 144A,
11.500%, 3/01/2010(d) 19,450
---------------
412,200
---------------
Wirelines -- 6.5%
65,000 Cincinnati Bell Telephone Co.,
6.300%, 12/01/2028 59,962
50,000 Cincinnati Bell, Inc.,
8.375%, 1/15/2014(d) 50,813
95,000 Citizens Communications Co.,
7.000%, 11/01/2025 83,837
375,000 Qwest Capital Funding, Inc.,
6.875%, 7/15/2028 360,000
75,000 Qwest Capital Funding, Inc., Guaranteed Note,
7.000%, 8/03/2009(d) 76,125
1,890,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 1,923,075
---------------
2,553,812
---------------
Total Bonds and Notes (Identified Cost $32,627,255) 35,466,260
---------------
Shares
- ------------------------------------------------------------------------------------
Preferred Stocks -- 5.1%
Electric -- 1.7%
6,475 AES Trust III, Convertible,
6.750%, 10/15/2029 302,124
8,000 CMS Energy Trust I, Convertible,
7.750%, 7/15/2027 392,000
---------------
694,124
---------------
Packaging -- 0.6%
6,500 Owens-Illinois, Inc., Convertible,
4.750%, 224,900
---------------
Pipelines -- 1.9%
9,500 El Paso Energy Capital Trust I, Convertible,
4.750%, 3/31/2028 342,000
4,000 Williams Holdings of Delaware, Convertible,
5.500%, 6/01/2033 404,000
---------------
746,000
---------------
Technology -- 0.6%
225 Lucent Technologies Capital Trust I, Convertible,
7.750%, 3/15/2017(d) 225,084
---------------
Wirelines -- 0.3%
3,425 Philippine Long Distance Telephone Co., Sponsored GDR,
Convertible(d) 128,677
---------------
Total Preferred Stocks (Identified Cost $1,736,428) 2,018,785
---------------
Shares
- ------------------------------------------------------------------------------------
Common Stocks -- 1.6%
Investment Companies -- 0.1%
2,175 High Income Opportunity Fund, Inc. 13,485
3,835 Morgan Stanley Emerging Markets Debt Fund, Inc.(d) 39,923
---------------
53,408
---------------
See accompanying notes to financial statements.
23
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Shares Description Value (a)
- ----------------------------------------------------------------------------------------------------
Metals & Mining -- 0.1%
900 Companhia Vale do Rio Doce, ADR $ 43,677
---------------
Pharmaceuticals -- 1.4%
8,800 Bristol-Myers Squibb Co. 216,568
6,875 Merck & Co., Inc. 242,206
1,717 Teva Pharmaceutical Industries, Ltd., Sponsored ADR 70,706
---------------
529,480
---------------
Total Common Stocks (Identified Cost $452,996) 626,565
---------------
Shares/
Principal
Amount+
- ----------------------------------------------------------------------------------------------------
Short-Term Investments -- 17.6%
5,449,209 State Street Navigator Securities Lending Prime Portfolio(g) $ 5,449,209
$ 1,500,778 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/2006 at 2.95% to be repurchased at
$1,501,147 on 4/03/2006, collateralized by $1,110,000 U.S.
Treasury Bond, 8.75% due 8/15/2020 valued at $1,533,546 1,500,778
---------------
Total Short-Term Investments (Identified Cost $6,949,987) 6,949,987
---------------
Total Investments -- 113.9%
(Identified Cost $41,766,666)(b) 45,061,597
Other assets less liabilities--(13.9)% (5,491,752)
---------------
Net Assets -- 100% $ 39,569,845
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information: (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales, return of capital
included in dividends received from the Fund's investments in
REIT's and interest adjustments on defaulted bonds. Amortization
of premium on debt securities is excluded for tax purposes.): At
March 31, 2006, the net unrealized appreciation on investments
based on cost of $41,771,523 for federal income tax purposes
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value of tax cost 3,919,544
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (629,470)
---------------
Net unrealized appreciation $ 3,290,074
===============
(c) Variable rate security whose interest rate varies with changes in a
designated base rate (such as the prime interest rate) on a
specified date (such as coupon date or interest payment date).
(d) All or a portion of this security was on loan to brokers at March 31,
2006.
(e) 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.
(f) Illiquid security. At March 31, 2006, the value of this security
amounted to $269,560 or 0.7% of net assets.
(g) Represents investment of securities lending collateral.
(h) Issuer filed petition under Chapter 11 of the Federal Bankruptcy
Code.
(i) Security is in default of principal and/or interest payments.
+ Principal amount is in U.S. dollars unless otherwise noted.
ADR/GDR An American Depositary Receipt (ADR) or Global Depositary Receipt (GDR) is a certificate
issued by a U.S. 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.
MTN Medium Term Note
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registrations, normally to qualified
institutional buyers. At the period end, the value of these amounted to $4,497,481 or
11.4% of net assets.
ARS Argentine Peso
BRL Brazilian Real
GBP British Pound
IDR Indonesian Rupiah
MXN Mexican Peso
NZD New Zealand Dollar
THB Thailand Baht
Holdings at March 31, 2006 as a Percentage of Net Assets
Pharmaceuticals 11.0%
Automotive 9.7
Technology 9.6
Sovereigns 7.0
Wirelines 6.8
Paper 5.5
Supranational 4.5
Media Cable 4.5
Transportation Services 4.1
Pipelines 4.1
Banking 3.5
Chemicals 3.0
Airlines 2.6
Supermarkets 2.5
Home Construction 2.4
Electric 2.3
Retailers 2.0
Others, less than 2% each 11.2
See accompanying notes to financial statements.
24
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND
PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value (a)
- ------------------------------------------------------------------------------------------------
Bonds and Notes -- 99.6% of Net Assets
Asset-Backed Securities -- 6.1%
$ 1,035,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3,
4.615%, 2/25/2035 $ 996,472
2,200,000 Countrywide Asset-Backed Certificates, Series 2006-S1, Class A2,
5.549%, 4/25/2036 2,197,250
922,369 Residential Asset Mortgage Products, Inc., Series 2003-RZ5,
Class A3,
3.800%, 7/25/2030 917,569
1,195,535 Residential Funding Mortgage Securities II, Series 2004-HI3,
Class A3,
3.810%, 8/25/2017 1,184,353
1,303,405 Residential Funding Mortgage Securities II, Series 2003-HI4,
Class A14,
4.590%, 4/25/2018 1,297,449
670,000 Residential Funding Mortgage Securities II, Series 2004-HI3,
Class A4,
4.630%, 1/25/2020 659,661
660,000 Residential Funding Mortgage Securities II, Series 2005-HI3,
Class A4,
5.490%, 9/25/2035 643,824
853,476 Residential Funding Mortgage Securities II, Inc., Series 2002-HI5,
Class A7, 5.700%, 1/25/2028 857,919
---------------
8,754,497
---------------
Government Agencies -- 7.3%
2,935,000 Federal Farm Credit Bank,
2.375%, 10/02/2006 2,895,650
4,200,000 Federal Home Loan Bank,
3.625%, 11/14/2008(c) 4,052,983
3,000,000 FNMA,
5.500%, 5/02/2006 3,000,951
600,000 FNMA,
6.625%, 9/15/2009 627,673
---------------
10,577,257
---------------
Mortgage Related -- 57.2%
922,360 FHLMC,
4.500%, 5/01/2034 852,958
11,663,732 FHLMC,
5.000%, with various maturities to 2035(d) 11,273,012
3,050,522 FHLMC,
5.500%, 12/01/2034 2,982,959
278,799 FHLMC,
6.000%, 11/01/2019 282,108
15,642,759 FHLMC,
6.500%, with various maturities to 2034(d) 15,963,231
371,406 FHLMC,
7.000%, 2/01/2016 381,937
67,072 FHLMC,
7.500%, with various maturities to 2026(d) 69,866
51,414 FHLMC,
8.000%, with various maturities to 2015(d) 53,677
7,169 FHLMC,
10.000%, 7/01/2019 7,852
392,444 FHLMC,
11.500%, with various maturities to 2020(d) 424,805
16,856,540 FNMA,
4.000%, with various maturities to 2019(d) 15,794,101
3,217,707 FNMA,
4.500%, with various maturities to 2035(d) 3,016,083
Principal
Amount Description Value (a)
- -------------------------------------------------------------------------------------
Mortgage Related -- continued
$ 8,565,078 FNMA,
5.000%, with various maturities to 2035(d) $ 8,156,085
4,852,018 FNMA,
5.500%, with various maturities to 2034(d) 4,760,594
5,862,756 FNMA,
6.000%, with various maturities to 2034(d) 5,922,166
9,053,448 FNMA,
6.500%, with various maturities to 2034(d) 9,241,967
401,393 FNMA,
7.000%, 12/01/2022 417,351
943,256 FNMA,
7.500%, with various maturities to 2032(d) 986,012
158,177 FNMA,
8.000%, with various maturities to 2016(d) 167,988
183,021 GNMA,
6.000%, 12/15/2031 185,307
729,259 GNMA,
6.500%, 5/15/2031 756,659
669,953 GNMA,
7.000%, with various maturities to 2029(d) 698,668
40,478 GNMA,
9.000%, with various maturities to 2009(d) 41,665
13,529 GNMA,
9.500%, 8/15/2009 14,179
609 GNMA,
10.000%, 9/15/2016 670
11,654 GNMA,
12.500%, with various maturities to 2015(d) 12,898
187,345 GNMA,
16.000%, with various maturities to 2012(d) 213,441
78,770 GNMA,
17.000%, with various maturities to 2011(d) 91,081
---------------
82,769,320
---------------
Treasuries -- 29.0%
5,155,000 U.S. Treasury Bond,
7.250%, 5/15/2016(c) 6,096,592
3,830,000 U.S. Treasury Note,
2.375%, 8/15/2006(c) 3,796,637
1,290,000 U.S. Treasury Note,
2.500%, 10/31/2006(c) 1,272,817
3,200,000 U.S. Treasury Note,
2.750%, 7/31/2006(c) 3,179,626
8,095,000 U.S. Treasury Note,
3.000%, 12/31/2006(c) 7,984,009
1,000,000 U.S. Treasury Note,
3.125%, 10/15/2008(c) 959,766
12,765,000 U.S. Treasury Note,
3.375%, 2/28/2007(c) 12,595,468
1,930,000 U.S. Treasury Note,
6.125%, 8/15/2007(c) 1,961,664
750,000 U.S. Treasury Note,
6.625%, 5/15/2007 764,062
4,000,000 U.S. Treasury STRIPS, Zero Coupon,
11/15/2009 3,350,160
---------------
41,960,801
---------------
Total Bonds and Notes (Identified Cost $146,745,510) 144,061,875
---------------
See accompanying notes to financial statements.
25
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND
PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (unaudited)
Shares/
Principal
Amount Description Value (a)
- ----------------------------------------------------------------------------------------------------
Short-Term Investments -- 26.3%
37,732,576 State Street Navigator Securities Lending Prime Portfolio(e) $ 37,732,576
$ 297,608 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 03/31/2006 at 2.950% to be repurchased at
$297,681 on 04/03/2006, collateralized by $325,000 U.S.
Treasury Note, 3.625% due 05/15/2013 valued at $305,153 297,608
---------------
Total Short-Term Investments (Identified Cost $38,030,184) 38,030,184
---------------
Total Investments -- 125.9%
(Identified Cost $184,775,694)(b) 182,092,059
Other assets less liabilities -- (25.9)% (37,491,952)
---------------
Net Assets -- 100% $ 144,600,107
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information: (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales. Amortization of
premium on debt securities is excluded for tax purposes.): At
March 31, 2006, the net unrealized depreciation on investments
based on cost of $185,149,002 for federal income tax purposes
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value of tax cost 247,596
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (3,304,539)
---------------
Net unrealized depreciation $ (3,056,943)
===============
(c) All or a portion of this security was on loan to brokers at March 31,
2006.
(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 Portfolio of Investments.
(e) Represents investment of securities lending collateral.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
STRIPS Separate Trading of Registered Interest and Principal of Securities
Holdings at March 31, 2006 as a Percentage of Net Assets
Mortgage Related 57.2%
Treasuries 29.0
Government Agencies 7.3
Asset-Backed Securities 6.1
See accompanying notes to financial statements.
26
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value (a)
- ---------------------------------------------------------------------------
Tax Exempt Obligations -- 97.5% of Net Assets
Highlands County, FL, Health Facilities Authority -- 1.4%
$ 1,000,000 Adventis Health System,
5.875%, 11/15/2029 $ 1,070,440
---------------
Martha's Vineyard, MA -- 1.4%
1,000,000 Land Bank Revenue,
5.000%, 5/01/2032 (AMBAC insured) 1,031,800
---------------
Massachusetts -- 6.2%
4,000,000 State Refunding Series A,
6.500%, 11/01/2014 (AMBAC insured) 4,706,840
---------------
Massachusetts Bay Transportation Authority -- 4.4%
2,500,000 Series A,
5.000%, 7/01/2032 2,657,950
630,000 Series A, Unrefunded,
5.250%, 7/01/2030 657,638
---------------
3,315,588
---------------
Massachusetts Development Finance Agency -- 17.2%
2,000,000 Cambridge Street Development Series A,
5.125%, 2/01/2034 (MBIA insured) 2,074,680
1,000,000 Hampshire College,
5.625%, 10/01/2024 1,055,540
4,000,000 Mount Holyoke College,
5.250%, 7/01/2031 4,201,160
2,800,000 Refunding Springfield Resource Recovery-A,
5.625%, 6/01/2019 2,921,072
1,100,000 Visual and Performing Arts,
6.000%, 8/01/2021 1,294,590
1,500,000 WGBH Educational Foundation Series A,
5.375%, 1/01/2042 (AMBAC insured) 1,578,015
---------------
13,125,057
---------------
Massachusetts Health & Educational Facilities
Authority -- 34.4%
1,160,000 Baystate Medical Center Series F,
5.700%, 7/01/2027 1,213,070
2,000,000 Boston University,
5.000%, 10/01/2039 2,054,280
2,200,000 Catholic Health East,
5.500%, 11/15/2032 2,300,166
3,000,000 Harvard University Series N,
6.250%, 4/01/2020 3,663,480
2,845,000 Nichols College Series C,
6.000%, 10/01/2017 2,988,416
2,000,000 Partners Healthcare Systems Series B,
5.250%, 7/01/2029 2,078,480
2,500,000 Partners Healthcare Systems Series C,
5.750%, 7/01/2021 2,726,325
1,500,000 Tufts University Series I,
5.250%, 2/15/2030 1,571,880
1,000,000 University of Massachusetts Project Series C,
5.250%, 10/01/2031 (MBIA insured) 1,058,510
2,000,000 University of Massachusetts Series C,
5.125%, 10/01/2034 (FGIC insured) 2,082,220
2,000,000 Wellesley College Series F,
5.125%, 7/01/2039 2,057,500
1,315,000 Wheaton College Series E,
5.000%, 7/01/2017 1,374,491
Principal
Amount Description Value (a)
- ----------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities
Authority -- continued
$ 1,030,000 Williams College Series H,
5.000%, 7/01/2017 $ 1,086,835
---------------
26,255,653
---------------
Massachusetts Housing Finance Agency -- 0.5%
395,000 Single Family Mortgage Series 21,
7.125%, 6/01/2025 395,328
---------------
Massachusetts Port Authority -- 4.0%
1,750,000 Delta Air Lines, Inc. Project Series A,
5.500%, 1/01/2019 (AMBAC insured) 1,818,670
1,200,000 Series A,
5.000%, 7/01/2033 (MBIA insured) 1,228,440
---------------
3,047,110
---------------
Massachusetts Water Resources Authority -- 6.5%
1,000,000 General Series A,
5.250%, 8/01/2020 (MBIA insured) 1,088,130
3,240,000 Series A,
6.500%, 7/15/2019 (FGIC insured) 3,850,837
---------------
4,938,967
---------------
Michigan Hospital Finance Authority -- 2.1%
1,500,000 Oakwood Obligated Group,
5.500%, 11/01/2017 1,600,260
---------------
New England Education Loan Marketing -- 4.1%
3,000,000 Student Loan Revenue Bond Sub-Issue H,
6.900%, 11/01/2009 3,136,350
---------------
New Jersey Economic Development Authority -- 2.2%
1,610,000 Series A,
5.625%, 6/15/2018 1,684,173
---------------
Puerto Rico Commonwealth Aqueduct & Sewer
Authority -- 4.4%
3,000,000 Aqueduct & Sewer Authority,
6.250%, 7/01/2013 3,382,230
---------------
Puerto Rico Public Finance Corp. -- 4.2%
3,000,000 Commonwealth Appropriation Series A,
5.750%, 8/01/2027(c) 3,224,940
---------------
Tennessee Housing Development Agency -- 1.4%
1,000,000 Series A, 5.200%, 7/01/2023 1,034,340
---------------
University of Massachusetts Building Authority -- 3.1%
2,200,000 SR - Series 1,
5.250%, 11/01/2028 (AMBAC insured) 2,341,108
---------------
Total Tax Exempt Obligations (Identified Cost $70,758,694) 74,290,184
---------------
See accompanying notes to financial statements.
27
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value (a)
- --------------------------------------------------------------------------------------------------
Short-Term Investment -- 1.2%
$ 948,123 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/2006 at 2.95% to be repurchased at
$948,356 on 4/03/2006, collateralized by $1,030,000 U.S.
Treasury Bond, 3.625% due 5/15/2013 valued at $967,099
(Identified Cost $948,123) $ 948,123
---------------
Total Investments -- 98.7%
(Identified Cost $71,706,817)(b) 75,238,307
Other assets less liabilities -- 1.3% 961,687
---------------
Net Assets -- 100% $ 76,199,994
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales. Amortization of
premium on debt securities is excluded for tax purposes.):
At March 31, 2006, the net unrealized depreciation on investments
based on cost of $71,706,421 for federal income tax purposes
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value of tax cost 3,638,951
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (107,065)
---------------
Net unrealized appreciation $ 3,531,886
===============
(c) Variable rate security whose interest rate varies with changes in a
designated base rate (such as the prime interest rate) on a
specified date (such as coupon date or interest payment date).
AMBAC American Municipal Bond Assurance Corporation
FGIC Financial Guarantee Insurance Company
MBIA Municipal Bond Investors Assurance Corporation
Holdings at March 31, 2006 as a Percentage of Net Assets
Colleges & Universities 32.1%
Water & Sewerage 10.9
Hospital 10.9
State General Obligation 10.4
Pre-Refunded 8.6
Student Loan 4.1
Airport 4.0
Resource Recovery 3.9
Hospital-Obligated Group 3.5
Redevelopment Agency/Urban Renewal 2.7
Special Tax 2.2
Others, less than 2% each 4.2
See accompanying notes to financial statements.
28
LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value (a)
- ------------------------------------------------------------------------------------------------------
Tax Exempt Obligations -- 97.9% of Net Assets
California -- 7.8%
$ 1,000,000 California Health Facilities Financing Authority, Multiple Obligors,
4.950%, 7/01/2026 $ 1,032,710
1,000,000 California Health Facilities Financing Authority
(Cedar-Sinai Medical Center),
5.000%, 11/15/2027 1,019,840
2,000,000 California State,
5.125%, 6/01/2027 2,060,540
1,000,000 California State Public Works Board (Coalinga State Hospital),
5.000%, 6/01/2010 1,044,110
2,655,000 California Statewide Communities Development Authority,
5.250%, 7/01/2023 2,832,407
---------------
7,989,607
---------------
Colorado -- 2.4%
2,500,000 Colorado Health Facilities Authority,
5.000%, 12/01/2035 2,420,600
---------------
District of Columbia -- 3.0%
3,000,000 Metropolitan Washington D.C. Airports Authority,
5.125%, 10/01/2029 (FGIC insured) 3,098,820
---------------
Florida -- 3.0%
3,000,000 Highlands County, FL, Health Facilities Authority, Multiple Obligors,
5.375%, 11/15/2035 3,102,930
---------------
Guam -- 1.0%
1,000,000 Guam Government Waterworks Authority,
5.875%, 7/01/2035 1,044,190
---------------
Illinois -- 4.0%
1,910,000 Illinois Educational Facility Authority Revenue,
5.000%, 7/01/2033 1,965,944
2,000,000 Metropolitan Pier & Exposition Authority, IL,
5.250%, 6/15/2042 (MBIA insured) 2,103,740
---------------
4,069,684
---------------
Indiana -- 1.0%
1,000,000 Indiana Health & Educational Facilities Financing Authority,
5.000%, 2/15/2039 991,960
---------------
Louisiana -- 4.8%
4,000,000 Desoto Parish, LA, Environmental Improvement,
5.000%, 11/01/2018 3,952,080
1,000,000 Ernest N. Morial, New Orleans, LA, Exhibit Hall Authority,
5.000%, 7/15/2033 1,020,090
---------------
4,972,170
---------------
Massachusetts -- 2.5%
1,500,000 Massachusetts State,
5.000%, 3/01/2019 1,579,215
1,045,000 Massachusetts State Health & Educational Facilities Authority
(Lahey Clinic Medical Center),
4.500%, 8/15/2035 (FGIC insured) 1,003,806
---------------
2,583,021
---------------
Michigan -- 7.2%
2,850,000 Michigan State Hospital Finance Authority, Henry Ford Health
System,
5.500%, 3/01/2014 3,041,805
1,100,000 Michigan State Hospital Finance Authority, Oakwood Obligated
Group,
5.500%, 11/01/2014 1,177,165
1,000,000 Taylor Brownfield Redevelopment Authority, MI,
5.000%, 5/01/2025 (MBIA insured) 1,044,450
Principal
Amount Description Value (a)
- ------------------------------------------------------------------------------------------------
Michigan -- continued
$ 2,000,000 University of Michigan,
5.250%, 12/01/2020 $ 2,106,480
---------------
7,369,900
---------------
Minnesota -- 3.1%
1,000,000 Chaska Minnesota Electric Revenue,
5.250%, 10/01/2025 1,058,990
2,000,000 Minnesota State Municipal Power Agency,
5.250%, 10/01/2024 2,110,640
---------------
3,169,630
---------------
Mississippi -- 5.2%
2,000,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control,
6.700%, 4/01/2022 2,356,640
2,500,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control,
6.800%, 4/01/2022 2,972,975
---------------
5,329,615
---------------
New Jersey -- 3.0%
1,000,000 New Jersey Economic Development Authority,
5.500%, 6/15/2024 1,043,420
1,000,000 New Jersey Economic Development Authority, Series A,
5.625%, 6/15/2018 1,046,070
1,000,000 New Jersey Health Care Facilities Financing Authority, Catholic
Health East,
5.375%, 11/15/2033 1,041,380
---------------
3,130,870
---------------
New York -- 18.7%
1,000,000 New York State Dormitory Authority, Rockefeller University,
5.000%, 7/01/2032 1,033,460
3,000,000 New York State Dormitory Authority,
5.500%, 5/15/2013 3,240,690
2,740,000 New York State Dormitory Authority,
5.750%, 7/01/2013 2,967,365
1,000,000 New York State Housing Finance Agency,
5.250%, 9/15/2019 1,071,680
3,000,000 New York State Municipal Bond Bank Agency,
5.250%, 6/01/2020 3,171,870
1,000,000 New York, NY,
4.250%, 5/15/2019 986,120
1,020,000 New York, NY,
6.000%, 1/15/2020 1,136,148
1,400,000 New York, NY, City Health & Hospital Corp.,
5.000%, 2/15/2020 1,456,112
1,000,000 New York, NY, City Industrial Development Agency,
5.500%, 1/01/2024 1,050,690
2,000,000 New York, NY, City Municipal Water Finance Authority,
5.000%, 6/15/2025 2,092,900
1,000,000 New York, NY, City Municipal Water Finance Authority,
5.125%, 6/15/2034 1,046,040
---------------
19,253,075
---------------
North Carolina -- 1.3%
1,300,000 North Carolina Eastern Municipal Power Agency,
5.500%, 1/01/2012 1,389,401
---------------
Oregon -- 5.7%
1,750,000 Multnomah County, OR, Hospital Facilities Authority,
Providence Health System,
5.250%, 10/01/2012 1,871,870
4,000,000 Western Generation Agency,
7.400%, 1/01/2016(c) 4,015,600
---------------
5,887,470
---------------
See accompanying notes to financial statements.
29
LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value (a)
- ------------------------------------------------------------------------------------------
Pennsylvania -- 4.2%
$ 4,000,000 Pennsylvania State Industrial Development Authority,
5.500%, 7/01/2019 (AMBAC insured) $ 4,368,640
---------------
Puerto Rico -- 3.1%
1,000,000 Puerto Rico Commonwealth Infrastructure Financing Authority,
5.500%, 10/01/2040 1,069,900
2,000,000 Puerto Rico Public Finance Corp., Commonwealth Appropriation
Series A,
5.750%, 8/01/2027(d) 2,149,960
---------------
3,219,860
---------------
South Carolina -- 5.1%
1,100,000 Charleston Educational Excellence Finance Corp.,
5.250%, 12/01/2030 1,151,678
3,000,000 Greenville County, SC, School District,
5.500%, 12/01/2028 3,256,080
800,000 Newberry Investing in Children's Education
(Newberry County School District),
5.250%, 12/01/2022 821,280
---------------
5,229,038
---------------
South Dakota -- 1.3%
1,250,000 South Dakota Health & Educational Facilities Authority,
Sioux Valley Hospital,
5.250%, 11/01/2027 1,292,650
---------------
Tennessee -- 2.3%
795,000 Tennessee Housing Development Agency, Homeownership
Program,
5.150%, 7/01/2022 815,320
1,500,000 Tennessee Housing Development Agency, Series A,
5.200%, 7/01/2023 1,551,510
---------------
2,366,830
---------------
Texas -- 6.1%
2,000,000 Dallas-Fort Worth, TX, International Airport,
5.500%, 11/01/2033 (MBIA insured) 2,111,300
1,000,000 Katy, TX, Independent School District,
5.125%, 2/15/2020 1,052,340
3,000,000 Lewisville, TX, Independent School District,
5.250%, 8/15/2027 3,146,100
---------------
6,309,740
---------------
Washington -- 2.1%
2,000,000 Energy Northwest, WA, Electric, Project No. 1,
5.500%, 7/01/2014 2,193,960
---------------
Total Tax Exempt Obligations (Identified Cost $97,990,770) 100,783,661
---------------
Principal
Amount
- ------------------------------------------------------------------------------------------
Short-Term Investment -- 1.1%
$ 1,064,179 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/2006 at 2.95% to be repurchased at
$1,064,441 on 4/03/2006, collateralized by $1,105,000 U.S.
Treasury Note, 4.00% due 6/15/2009 valued at $1,090,246
(Identified Cost $1,064,179) 1,064,179
---------------
Total Investments -- 99.0% (Identified Cost $99,054,949)(b) 101,847,840
Other assets less liabilities -- 1.0% 1,063,315
---------------
Net Assets -- 100% $ 102,911,155
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information: (Amounts exclude certain adjustments made at the
end of the Fund's fiscal year for tax purposes. Such adjustments are primarily
due to wash sales. Amortization of premium on debt securities is excluded for
tax purposes.):
At March 31, 2006, the net unrealized appreciation on investments based on
cost of $98,704,033 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an
excess of value of tax cost $3,620,239
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (476,432)
----------
Net unrealized appreciation $3,143,807
==========
(c) Illiquid security. At March 31, 2006, the value of this secuity amounted to
$4,015,600 or 3.9% of net assets.
(d) Variable rate security whose interest rate varies with changes in a designated
base rate (such as the prime interest rate) on a specified date (such as coupon
date or interest payment date).
AMBAC American Municipal Bond Assurance Corporation
FGIC Financial Guarantee Insurance Company
MBIA Municipal Bond Investors Assurance Corporation
Holdings at March 31, 2006 as a Percentage of Net Assets
Corporate Backed/Industrial Revenue/Pollution
Control 13.3%
Hospital-Obligated Group 9.2
Colleges & Universities 8.9
Electric 6.6
Special Tax 6.1
State General Obligation 5.6
Hospital 5.5
Airport 5.1
School District 4.1
Water & Sewerage 4.1
Bond Bank/Pooled Loan Program 4.0
Resource Recovery 3.9
Pre-Refunded 3.0
Hospital System Bonds 3.0
Lease 2.9
Non-Profit 2.7
Senior Living 2.3
Single-Family 2.3
City & Town 2.1
Others, less than 2% each 3.2
See accompanying notes to financial statements.
30
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- -----------------------------------------------------------------------------------
Bonds and Notes -- 88.1% of Net Assets
Convertible Bonds -- 7.3%
Canada -- 0.4%
$ 7,234,000 Nortel Networks Corp., Guaranteed Senior Note,
4.250%, 9/01/2008(e) $ 6,827,087
5,300,000 Province of Saskatchewan,
6.000%, 6/01/2006, (CAD) 4,553,185
---------------
11,380,272
---------------
Ireland -- 0.1%
2,045,000 Elan Capital Corp., Ltd.,
6.500%, 11/10/2008 4,197,363
---------------
United Kingdom -- 0.2%
3,270,000 Colt Telecom Group PLC,
2.000%, 4/03/2007, (EUR) 5,052,503
---------------
United States -- 6.6%
4,529,000 Amkor Technology, Inc.,
5.000%, 3/15/2007(e) 4,421,436
3,035,000 AMR Corp., Senior Note,
4.500%, 2/15/2024 4,249,000
32,815,000 Bristol-Myers Squibb Co.,
4.410%, 9/15/2023(e)(f) 32,773,981
200,000 Builders Transport, Inc., Subordinated Note,
6.500%, 5/01/2011(d)(i)(k)(l) --
1,000,000 Builders Transport, Inc., Subordinated Note,
8.000%, 8/15/2005(d)(i)(k)(l) --
7,270,000 Chiron Corp.,
1.625%, 8/01/2033 7,079,162
750,000 Ciena Corp.,
3.750%, 2/01/2008 708,750
3,120,000 Continental Airlines, Inc.,
5.000%, 6/15/2023 4,824,300
176,000 Dixie Group, Inc., Subordinated Note,
7.000%, 5/15/2012 161,920
12,478,000 Enzon, Inc.,
4.500%, 7/01/2008 11,620,137
5,111,000 EPIX Pharmaceuticals, Inc., Senior Note, Convertible,
3.000%, 6/15/2024 3,283,818
2,095,000 Human Genome Sciences Inc,
2.250%, 8/15/2012 1,806,938
3,820,000 Incyte Corp.,
3.500%, 2/15/2011 3,122,850
4,865,000 Inhale Therapeutic Systems, Inc., Subordinated Note,
3.500%, 10/17/2007 4,749,456
1,380,000 Invitrogen Corp.,
1.500%, 2/15/2024 1,200,600
2,360,000 IVAX Corp., Senior Subordinated Note,
4.500%, 5/15/2008 2,389,500
5,105,000 Kellwood Co.,
3.500%, 6/15/2034 4,479,638
5,810,000 Kulicke & Soffa Industries, Inc., Subordinated Note,
0.500%, 11/30/2008 4,982,075
860,000 Kulicke & Soffa Industries, Inc., Subordinated Note,
1.000%, 6/30/2010 797,650
7,330,000 Level 3 Communications, Inc.,
6.000%, 9/15/2009(e) 6,212,175
1,085,000 Level 3 Communications, Inc.,
6.000%, 3/15/2010(e) 861,219
2,335,000 Liberty Media Corp.,
3.500%, 1/15/2031 2,358,350
Principal
Amount+ Description Value (a)
- ---------------------------------------------------------------------------------------
United States -- continued
$ 2,955,000 Maxtor Corp., Subordinated Note,
5.750%, 3/01/2012(d) $ 2,718,600
625,000 Nextel Communications, Inc., Senior Note,
5.250%, 1/15/2010 625,000
500,000 Preston Corp., Subordinated Note,
7.000%, 5/01/2011 463,750
19,685,000 Regeneron Pharmaceuticals, Inc., Subordinated Note,
5.500%, 10/17/2008 19,242,087
311,000 Richardson Electronics, Ltd., 144A,
7.750%, 12/15/2011 286,120
1,950,000 SCI Systems, Inc., Subordinated Note,
3.000%, 3/15/2007 1,886,625
5,756,000 Sinclair Broadcast Group, Inc.,
4.875%, 7/15/2018 5,058,085
19,005,000 Valeant Pharmaceuticals International, Subordinated Note,
3.000%, 8/16/2010(e) 16,510,594
19,305,000 Valeant Pharmaceuticals International, Subordinated Note,
4.000%, 11/15/2013(e) 16,505,775
5,225,000 Vertex Pharmaceuticals, Inc., 144A,
5.750%, 2/15/2011 12,899,219
23,130,000 Wells Fargo & Co.,
4.430%, 5/01/2033(e)(f) 22,991,220
---------------
201,270,030
---------------
Total Convertible Bonds (Identified Cost $204,170,257) 221,900,168
---------------
Non-Convertible Bonds -- 80.8%
Argentina -- 0.9%
2,405,000 Pecom Energia SA, 144A,
8.125%, 7/15/2010 2,489,175
40,415,000 Republic of Argentina,
2.000%, 9/30/2014, (ARS)(f) 13,526,318
3,603,541 Republic of Argentina,
1.000%, 12/15/2035 333,328
11,875,000 Republic of Argentina,
4.889%, 8/03/2012(f) 9,707,813
1,322,506 Republic of Argentina,
8.280%, 12/31/2033(h) 1,299,362
---------------
27,355,996
---------------
Australia -- 0.0%
1,000,000 General Motors Acceptance Corp. of Australia, Ltd.,
6.500%, 8/10/2007, (AUD) 684,534
---------------
Brazil -- 1.2%
19,735,000 Republic of Brazil,
12.500%, 1/05/2016, (BRL) 9,210,882
17,907,000 Republic of Brazil,
8.250%, 1/20/2034(e) 19,733,514
6,000,000 Republic of Brazil,
8.875%, 4/15/2024(e) 6,936,000
---------------
35,880,396
---------------
Canada -- 20.8%
6,605,000 Abitibi-Consolidated, Inc.,
7.500%, 4/01/2028(e) 5,482,150
750,000 Avenor Inc,
10.850%, 11/30/2014, (CAD) 701,289
2,445,000 Bombardier, Inc.,
7.350%, 12/22/2026 1,889,466
6,700,000 Bombardier, Inc., 144A,
7.450%, 5/01/2034 6,013,250
See accompanying notes to financial statements.
31
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ------------------------------------------------------------------------------------------------
Canada -- continued
$ 2,800,000 Calpine Canada Energy Finance ULC,
8.750%, 10/15/2007, (CAD)(i)(k) $ 1,294,687
361,535,000 Canadian Government,
2.750%, 12/01/2007, (CAD) 303,381,684
70,540,000 Canadian Government,
4.250%, 9/01/2008, (CAD) 60,691,520
111,010,000 Canadian Government,
4.500%, 9/01/2007, (CAD) 95,690,934
24,200,000 Canadian Government,
6.000%, 6/01/2008 21,573,507
3,100,000 General Electric Capital Corp.,
6.125%, 5/17/2012, (GBP) 5,712,530
335,000 General Motors Acceptance Corp. of Canada, Ltd., Series E., (MTN),
6.625%, 12/17/2010, (GBP) 529,413
945,000 GMAC Canada, Ltd.,
7.750%, 9/26/2008, (NZD) 533,891
6,840,000 Nortel Networks Corp.,
6.875%, 9/01/2023 6,258,600
9,550,000 North American Energy Partners, Inc., Senior Note,
8.750%, 12/01/2011 9,311,250
5,600,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 5,404,000
5,990,000 Province of British Columbia,
5.250%, 12/01/2006, (CAD) 5,168,269
29,235,000 Province of British Columbia,
6.000%, 6/09/2008, (CAD) 26,018,487
13,000,000 Province of Manitoba,
4.450%, 12/01/2008 11,219,951
6,685,000 Province of Manitoba,
5.750%, 6/02/2008, (CAD) 5,916,985
1,525,000 Province of Ontario,
3.500%, 9/08/2006, (CAD) 1,302,789
40,020,000 Province of Ontario,
5.700%, 12/01/2008, (CAD) 35,579,197
18,470,000 Province of Saskatchewan,
5.500%, 6/02/2008, (CAD) 16,267,075
8,500,000 Rogers Wireless Communications, Inc., Senior Note,
7.625%, 12/15/2011, (CAD) 7,833,669
2,525,000 Rogers Wireless Communications, Inc., Senior Secured Note,
6.375%, 3/01/2014 2,518,687
---------------
636,293,280
---------------
Cayman Islands -- 0.2%
1,000,000 Enersis SA, Cayman Island,
7.400%, 12/01/2016 1,052,424
3,905,000 Vale Overseas, Ltd.,
8.250%, 1/17/2034 4,480,987
---------------
5,533,411
---------------
Chile -- 0.4%
4,875,000 Empresa Nacional de Electricidad SA, Chile,
7.875%, 2/01/2027 5,252,959
250,000 Empresa Nacional de Electricidad SA, Chile,
8.350%, 8/01/2013(e) 276,695
1,700,000 Empresa Nacional de Electricidad SA, Chile,
8.625%, 8/01/2015 1,938,877
4,525,000 Enersis SA, Chile,
7.375%, 1/15/2014(e) 4,734,462
---------------
12,202,993
---------------
Principal
Amount+ Description Value (a)
- --------------------------------------------------------------------------------------
Ireland -- 0.9%
$ 28,590,000 Elan Finance Corp., Senior Note,
7.750%, 11/15/2011 $ 27,089,025
---------------
Mexico -- 3.1%
597,900,000 United Mexican States,
8.000%, 12/07/2023, (MXN) 51,423,218
473,800,000 United Mexican States,
9.000%, 12/20/2012, (MXN) 44,864,431
---------------
96,287,649
---------------
Netherlands -- 0.0%
1,330,000 GMAC International Finance BV,
8.000%, 3/14/2007, (NZD) 804,830
---------------
Norway -- 0.2%
10,000,000 Kingdom of Norway,
5.500%, 5/15/2009, (NOK) 1,609,613
22,740,000 Kingdom of Norway,
6.750%, 1/15/2007, (NOK) 3,570,551
---------------
5,180,164
---------------
Philippines -- 0.2%
3,700,000 Philippine Long Distance Telephone Co., (MTN),
8.350%, 3/06/2017 4,037,625
1,820,813 Quezon Power (Philippines), Ltd., Senior Secured Note,
8.860%, 6/15/2017 1,811,708
---------------
5,849,333
---------------
Republic of Korea -- 0.4%
5,470,000 Hanarotelecom, Inc., 144A,
7.000%, 2/01/2012 5,398,589
5,000,000 Hynix Semiconductor, Inc., 144A,
9.875%, 7/01/2012 5,500,000
300,000 Samsung Electronics Co., Ltd., 144A,
7.700%, 10/01/2027 314,855
---------------
11,213,444
---------------
Singapore -- 0.0%
1,050,000 SP PowerAssets, Ltd., Series E (MTN),
3.730%, 10/22/2010, (SGD) 647,466
---------------
South Africa -- 0.1%
11,405,000 Republic of South Africa,
12.500%, 12/21/2006, (ZAR) 1,918,830
---------------
Supranational -- 2.7%
15,543,570 European Investment Bank, 144A,
Zero Coupon, 9/12/2008, (BRL) 5,089,169
128,250,000 European Investment Bank, Senior Note,
Zero Coupon, 3/10/2021, (AUD) 40,103,058
24,450,000 Inter-American Development Bank,
6.000%, 12/15/2017, (NZD) 14,805,544
80,000,000 Inter-American Development Bank, Series E, (MTN),
Zero Coupon, 5/11/2009, (BRL) 23,844,732
---------------
83,842,503
---------------
Sweden -- 0.9%
207,265,000 Kingdom of Sweden,
6.500%, 5/05/2008, (SEK) 28,495,777
---------------
United Kingdom -- 0.4%
72,717,436,000 JPMorgan Chase Bank, 144A,
Zero Coupon, 10/21/2010, (IDR) 5,104,081
4,570,000 NTL Cable PLC,
9.750%, 4/15/2014, (GBP) 8,336,909
---------------
13,440,990
---------------
See accompanying notes to financial statements.
32
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ---------------------------------------------------------------------------------
United States -- 47.3%
$ 1,670,000 Abitibi-Consolidated, Inc.,
7.400%, 4/01/2018 $ 1,419,500
5,565,000 AES Corp. (The),
8.375%, 3/01/2011, (GBP) 9,813,655
4,020,000 AES Corp. (The), Senior Note,
7.750%, 3/01/2014 4,221,000
1,190,000 Affiliated Computer Services, Inc.,
5.200%, 6/01/2015 1,084,399
4,835,000 Albertson's, Inc.,
7.750%, 6/15/2026 4,358,482
26,706,000 Albertson's, Inc., Senior Note,
7.450%, 8/01/2029 23,582,760
4,895,000 Albertson's, Inc., Senior Note,
8.000%, 5/01/2031(e) 4,556,560
1,510,000 Albertson's, Inc., Senior Note,
8.700%, 5/01/2030 1,472,768
5,782,000 Albertson's, Inc., Series C, (MTN),
6.625%, 6/01/2028 4,658,858
1,750,000 Altria Group, Inc.,
7.000%, 11/04/2013 1,881,446
825,000 American Airlines, Inc., Series 1999-1, Class B,
7.324%, 10/15/2009 801,489
1,442,789 American Airlines, Inc., Series 93A6,
8.040%, 9/16/2011 1,281,817
9,853,000 American President Cos., Ltd., Senior Note,
8.000%, 1/15/2024 9,779,102
6,450,000 Amkor Technology, Inc., Senior Note,
7.125%, 3/15/2011(e) 5,934,000
475,000 Amkor Technology, Inc., Senior Note,
7.750%, 5/15/2013 437,000
1,525,000 Amkor Technology, Inc., Senior Subordinated Note,
10.500%, 5/01/2009(e) 1,494,500
8,000,000 ASIF Global Financing, 144A,
2.380%, 2/26/2009, (SGD) 4,764,403
10,155,000 Astoria Depositor Corp., 144A,
8.144%, 5/01/2021 10,662,750
8,500,000 AT&T Inc,
6.150%, 9/15/2034(e) 8,071,880
7,098,951 Atlas Air, Inc., Series 1998-1, Class 1A,
7.380%, 1/02/2018 7,169,941
16,288,877 Atlas Air, Inc., Series 1998-1, Class 1B,
7.680%, 1/02/2014 15,148,655
3,394,653 Atlas Air, Inc., Series 1999-1, Class A1,
7.200%, 1/02/2019 3,428,599
402,328 Atlas Air, Inc., Series 1999-1, Class A2,
6.880%, 7/02/2009 392,269
12,740,207 Atlas Air, Inc., Series 1999-1, Class B,
7.630%, 1/02/2015 11,466,186
1,248,567 Atlas Air, Inc., Series 1999-1, Class C,
8.770%, 1/02/2011 836,540
5,323,737 Atlas Air, Inc., Series 2000-1, Class B,
9.057%, 1/02/2014 5,110,787
6,465,000 Avnet, Inc.,
6.000%, 9/01/2015 6,195,894
17,310,000,000 Barclays Financial LLC, 144A,
4.060%, 9/16/2010, (KRW) 17,220,920
529,000,000 Barclays Financial LLC, 144A,
4.100%, 3/22/2010, (THB) 12,738,184
1,006,000,000 Barclays Financial LLC, 144A,
4.160%, 2/22/2010, (THB) 24,270,801
Principal
Amount+ Description Value (a)
- ------------------------------------------------------------------------------------
United States -- continued
$21,340,000,000 Barclays Financial LLC, 144A,
4.460%, 9/23/2010, (KRW) $ 21,577,209
337,000,000 Barclays Financial LLC, 144A,
5.500%, 11/01/2010, (THB) 8,489,366
800,000 Bausch & Lomb, Inc.,
7.125%, 8/01/2028 820,238
12,475,000 BellSouth Corp,
6.000%, 11/15/2034(e) 11,634,672
16,911,000 Borden, Inc.,
7.875%, 2/15/2023 13,993,852
3,744,000 Borden, Inc.,
8.375%, 4/15/2016 3,444,480
6,532,000 Borden, Inc.,
9.200%, 3/15/2021 5,944,120
1,000,000 Bowater, Inc.,
6.500%, 6/15/2013(e) 932,500
3,560,000 Calpine Corp., Senior Note,
8.625%, 8/15/2010(e)(i)(k) 1,424,000
2,840,000 Centex Corp.,
5.250%, 6/15/2015(e) 2,637,735
355,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017 350,563
425,000 Cincinnati Bell, Inc.,
8.375%, 1/15/2014(e) 431,906
2,500,000 CIT Group, Inc., Series E, Senior Note, (MTN),
5.500%, 12/01/2014, (GBP) 4,369,559
18,650,000 Citibank NA, 144A,
15.000%, 7/02/2010, (BRL) 9,396,532
8,140,000 Columbia/HCA, Inc.,
7.050%, 12/01/2027 7,424,999
500,000 Columbia/HCA, Inc.,
7.500%, 12/15/2023 485,557
1,500,000 Columbia/HCA, Inc., (MTN),
7.580%, 9/15/2025 1,452,312
18,110,000 Comcast Corp.,
5.650%, 6/15/2035 15,783,861
23,175,000 Comcast Corp.,
6.450%, 3/15/2037 22,299,031
20,175,000 Comcast Corp.,
6.500%, 11/15/2035 19,575,722
3,910,660 Continental Airlines, Inc., Series 1997-4, Class 4B,
6.900%, 1/02/2017 3,674,030
1,400,905 Continental Airlines, Inc., Series 1998-1, Class 1B,
6.748%, 3/15/2017 1,295,878
7,256,251 Continental Airlines, Inc., Series 1999-1, Class B,
6.795%, 8/02/2018 6,888,196
2,947,997 Continental Airlines, Inc., Series 1999-1, Class C,
6.954%, 8/02/2009 2,718,653
3,851,193 Continental Airlines, Inc., Series 1999-2, Class B,
7.566%, 3/15/2020 3,646,023
2,380,627 Continental Airlines, Inc., Series 2001-1, Class B,
7.373%, 12/15/2015 2,276,406
8,042,067 Continental Airlines, Inc., Series 2002-2, Class B,
8.307%, 4/02/2018 7,738,844
6,225,000 Corning, Inc.,
5.900%, 3/15/2014(e) 6,147,088
6,220,000 Corning, Inc.,
6.200%, 3/15/2016 6,219,708
650,000 Corning, Inc.,
6.750%, 9/15/2013 677,890
See accompanying notes to financial statements.
33
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ---------------------------------------------------------------------------
United States -- continued
$ 1,000,000 Corning, Inc.,
6.850%, 3/01/2029(e) $ 1,019,712
400,000 CSC Holdings, Inc., Senior Note,
7.875%, 2/15/2018 400,500
250,000 CSC Holdings, Inc., Series B, Senior Note,
8.125%, 7/15/2009 258,438
250,000 CSC Holdings, Inc., Series B, Senior Note,
8.125%, 8/15/2009 258,125
2,145,000 Cummins, Inc.,
7.125%, 3/01/2028 2,187,900
200,000 Delphi Automotive Systems Corp.,
6.550%, 6/15/2006(i)(k) 123,000
3,671,000 Delphi Automotive Systems Corp.,
7.125%, 5/01/2029(e)(i)(k) 2,257,665
7,285,000 Dillard's, Inc.,
6.625%, 1/15/2018(e) 6,811,475
3,050,000 Dillard's, Inc.,
7.000%, 12/01/2028(e) 2,729,750
1,600,000 Dillard's, Inc.,
7.130%, 8/01/2018 1,528,000
1,500,000 Dillard's, Inc.,
7.750%, 7/15/2026 1,425,000
425,000 Dillard's, Inc.,
7.875%, 1/01/2023 411,188
2,570,000 DR Horton Inc, Senior Note,
5.250%, 2/15/2015(e) 2,342,686
7,395,000 Dynegy Holdings Inc, 144A,
8.375%, 5/01/2016 7,358,025
900,000 Dynegy Holdings, Inc.,
7.125%, 5/15/2018 823,500
3,705,000 Edison Mission Energy Corp., Senior Note,
7.730%, 6/15/2009 3,797,625
260,000 El Paso CGP, Co., 144A,
6.375%, 2/01/2009 257,075
14,350,000 El Paso CGP, Co., 144A,
6.950%, 6/01/2028 13,560,750
1,965,000 El Paso Corp.,
7.000%, 5/15/2011(e) 1,972,369
925,000 El Paso Corp., 144A,
7.750%, 6/15/2010 953,906
750,000 El Paso Corp., Senior Note, (MTN),
7.800%, 8/01/2031(e) 753,750
1,600,000 El Paso Energy Corp.,
6.750%, 5/15/2009(e) 1,596,000
1,000,000 El Paso Energy Corp., (MTN),
7.750%, 1/15/2032(e) 1,007,500
5,000,000 FHLMC,
3.220%, 6/20/2007, (SGD) 3,079,704
29,200,000 FNMA,
2.290%, 2/19/2009, (SGD) 17,406,966
6,500,000 FNMA,
2.375%, 2/15/2007 6,349,350
18,726,000 Ford Motor Co.,
6.375%, 2/01/2029 12,452,790
31,929,000 Ford Motor Co.,
6.625%, 10/01/2028 21,392,430
24,955,000 Ford Motor Credit Co.,
5.700%, 1/15/2010(e) 22,145,641
10,685,000 Ford Motor Credit Co.,
7.000%, 10/01/2013(e) 9,556,728
Principal
Amount+ Description Value (a)
- -------------------------------------------------------------------------------------------------
United States -- continued
$ 15,465,000 Ford Motor Credit Co.,
7.250%, 10/25/2011 $ 14,092,187
900,000 Friendly Ice Cream Corp., Guaranteed Senior Note,
8.375%, 6/15/2012(e) 814,500
141,088,000 General Electric Capital Corp.,
6.500%, 9/28/2015, (NZD) 87,584,758
30,350,000 General Electric Capital Corp.,
6.625%, 2/04/2010, (NZD) 18,720,571
500,000 General Electric Capital Corp., Series E, (MTN),
1.725%, 6/27/2008, (SGD) 296,342
6,625,000 General Motors Acceptance Corp.,
5.550%, 7/16/2007(f) 6,433,140
8,000,000 General Motors Acceptance Corp.,
5.620%, 3/20/2007(f) 7,836,632
820,000 General Motors Acceptance Corp.,
8.000%, 11/01/2031(e) 774,984
4,650,000 General Motors Acceptance Corp., (MTN),
6.750%, 12/01/2014(e) 4,185,953
5,321,000 General Motors Acceptance Corp., Series E, (MTN),
7.500%, 12/01/2006, (NZD) 3,181,792
7,030,000 Georgia-Pacific Corp.,
7.250%, 6/01/2028 6,643,350
8,275,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 7,944,000
32,175,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 31,531,500
1,750,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 1,765,313
4,320,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 4,644,000
1,385,000 Goodyear Tire & Rubber Co.,
7.000%, 3/15/2028 1,159,938
1,845,000 Goodyear Tire & Rubber Co.,
9.000%, 7/01/2015(e) 1,872,675
2,590,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note,
7.750%, 12/15/2013(e) 2,421,650
840,000 Hawaiian Telcom Communications, Inc.,
Senior Subordinated Note, 144A,
12.500%, 5/01/2015(e) 831,600
3,125,000 HCA Inc,
7.500%, 11/06/2033 3,059,900
1,000,000 HCA, Inc., Senior Note,
5.750%, 3/15/2014 935,617
6,300,000 Hercules, Inc., Subordinated Note,
6.500%, 6/30/2029 4,977,000
16,050,000 HSBC Bank USA, 144A,
3.310%, 8/25/2010 16,258,650
4,215,000 IMC Global, Inc.,
7.300%, 1/15/2028 3,893,606
2,570,000 IMC Global, Inc.,
7.375%, 8/01/2018 2,595,700
640,000 JC Penney Co., Inc.,
7.125%, 11/15/2023(e) 687,686
92,000,000 JPMorgan Chase Bank, 144A,
Zero Coupon, 5/10/2010, (BRL) 24,322,479
599,726,100,000 JPMorgan Chase & Co., 144A,
Zero Coupon, 3/28/2011, (IDR) 40,729,236
1,500,000 K Hovnanian Enterprises, Inc.,
6.375%, 12/15/2014(e) 1,386,927
See accompanying notes to financial statements.
34
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ------------------------------------------------------------------------------------------
United States -- continued
$ 6,180,000 K Hovnanian Enterprises, Inc.,
7.500%, 5/15/2016 $ 6,092,646
5,335,000 K Hovnanian Enterprises, Inc., Senior Note,
6.250%, 1/15/2016 4,836,039
10,975,000 KB Home,
7.250%, 6/15/2018 10,797,666
810,000 Kellwood Co,
7.625%, 10/15/2017 757,847
1,600,000 Lennar Corp.,
5.600%, 5/31/2015(e) 1,520,494
16,375,000 Level 3 Communications, Inc.,
2.875%, 7/15/2010(e) 14,635,156
380,000 Level 3 Communications, Inc., 144A,
11.500%, 3/01/2010(e) 369,550
12,035,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029(e) 10,861,587
1,250,000 McDonalds Corp., Series E, (MTN),
3.628%, 10/10/2010, (SGD) 763,184
2,675,000 Methanex Corp., Senior Note,
6.000%, 8/15/2015 2,513,869
1,153,000 Missouri Pacific Railroad Co.,
5.000%, 1/01/2045 893,786
1,000,000 Morgan Stanley,
5.375%, 11/14/2013, (GBP) 1,758,105
2,730,000 Nektar Therapeutics, 144A,
3.250%, 9/28/2012 3,156,563
2,145,000 NGC Corp.,
7.625%, 10/15/2026 1,962,675
18,375,000 NGC Corp. Capital Trust, Series B,
8.316%, 6/01/2027 16,170,000
2,500,000 NRG Energy, Inc.,
7.250%, 2/01/2014 2,540,625
5,000,000 NRG Energy, Inc.,
7.375%, 2/01/2016 5,106,250
9,245,000 Owens-Illinois, Inc., Senior Note,
7.800%, 5/15/2018(e) 9,175,662
3,000,000 Pemex Project Funding Master Trust,
8.625%, 12/01/2023(e) 3,525,000
4,350,000 Pemex Project Funding Master Trust,
9.500%, 9/15/2027(e) 5,568,000
2,000,000 Pharma Services Intermediate Holdings Corp., Senior Note,
Convertible,
0.00% (step to 11.50% on 4/01/2009), 4/01/2014(g) 1,797,500
1,920,000 Pioneer Natural Resource,
5.875%, 7/15/2016(e) 1,819,538
3,165,000 Pulte Homes, Inc.,
5.200%, 2/15/2015(e) 2,921,200
2,615,000 Pulte Homes, Inc.,
6.000%, 2/15/2035(e) 2,276,504
1,100,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 999,027
9,110,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 8,756,987
35,040,000 Qwest Capital Funding, Inc.,
6.875%, 7/15/2028(e) 33,638,400
950,000 Qwest Capital Funding, Inc.,
7.250%, 2/15/2011 963,063
2,875,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031(e) 2,925,313
Principal
Amount+ Description Value (a)
- -------------------------------------------------------------------------------------------
United States -- continued
$ 2,025,000 Qwest Capital Funding, Inc., Guaranteed Note,
7.000%, 8/03/2009(e) $ 2,055,375
2,420,000 Qwest Capital Funding, Inc., Guaranteed Note,
7.625%, 8/03/2021 2,462,350
1,350,000 Qwest Corp.,
7.250%, 9/15/2025 1,383,750
6,100,000 SLM Corp.,
6.500%, 6/15/2010, (NZD) 3,749,033
2,595,000 Sungard Data Systems, Inc., 144A,
10.250%, 8/15/2015 2,731,238
1,810,000 Sungard Data Systems, Inc., Senior Note, 144A,
9.125%, 8/15/2013 1,914,075
2,310,000 Telcordia Technologies, Inc., Senior Subordinated Note, 144A,
10.000%, 3/15/2013 2,113,650
242,000 Tennessee Gas Pipeline Co.,
7.000%, 10/15/2028(e) 239,238
10,120,000 Time Warner, Inc.,
6.625%, 5/15/2029 9,946,493
4,755,000 Time Warner, Inc.,
6.950%, 1/15/2028 4,822,835
3,150,000 Time Warner, Inc.,
7.625%, 4/15/2031 3,431,430
2,025,000 Time Warner, Inc.,
7.700%, 5/01/2032 2,226,917
496,687 Tiverton Power Associates, LP, 144A,
9.000%, 7/15/2018(i)(k) 429,634
4,245,000 Toll Brothers Financial Corp.,
5.150%, 5/15/2015(e) 3,841,725
4,000,000 Toys R US, Inc.,
7.375%, 10/15/2018(e) 2,940,000
315,000 TXU Corp.,
5.550%, 11/15/2014(e) 294,650
2,225,000 TXU Corp.,
6.550%, 11/15/2034(e) 2,007,942
81,775,000 U.S. Treasury Note,
2.500%, 5/31/2006(e) 81,490,668
49,730,000 U.S. Treasury Note,
2.625%, 5/15/2008(e) 47,546,555
29,225,000 U.S. Treasury Note,
2.750%, 6/30/2006(e) 29,090,302
50,270,000 U.S. Treasury Note,
3.000%, 2/15/2008(e) 48,626,422
5,245,000 U.S. Treasury Note,
3.500%, 5/31/2007(e) 5,164,479
100,000,000 U.S. Treasury Note,
3.625%, 4/30/2007(e) 98,703,100
25,000,000 U.S. Treasury Note,
3.625%, 6/30/2007(e) 24,623,050
1,545,000 United Rentals North America, Inc., Senior Subordinated Note,
7.000%, 2/15/2014(e) 1,487,063
27,440,000 Verizon Global Funding Corp.,
5.850%, 9/15/2035 24,612,143
2,460,000 Verizon Maryland, Inc.,
5.125%, 6/15/2033 1,938,967
2,500,000 Wal-Mart Stores, Inc.,
4.750%, 1/29/2013, (GBP) 4,310,387
600,000 Williams Cos., Inc.,
7.875%, 9/01/2021 645,000
965,000 Williams Cos., Inc., Senior Note,
7.750%, 6/15/2031(e) 1,022,900
See accompanying notes to financial statements.
35
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount+ Description Value (a)
- ---------------------------------------------------------------------------------------------
United States -- continued
$ 8,600,000 Williams Cos., Inc., Series A,
7.500%, 1/15/2031 $ 8,922,500
2,200,000 Woolworth Corp.,
8.500%, 1/15/2022 2,332,000
15,550,000 Xerox Capital Trust I, Guaranteed Note,
8.000%, 2/01/2027(e) 16,094,250
1,730,000 Xerox Corp., (MTN),
7.200%, 4/01/2016(e) 1,820,825
---------------
1,449,928,491
---------------
Uruguay -- 0.1%
1,600,000 Republic of Uruguay,
7.500%, 3/15/2015(e) 1,664,000
2,906,258 Republic of Uruguay,
7.875%, 1/15/2033(e)(h) 3,022,508
---------------
4,686,508
---------------
Venezuela -- 1.0%
16,535,000 Cerro Negro Finance, Ltd., 144A,
7.900%, 12/01/2020 16,204,300
13,790,000 Petrozuata Finance, Inc., Series B, 144A,
8.220%, 4/01/2017 13,583,150
---------------
29,787,450
---------------
Total Non-Convertible Bonds (Identified Cost $2,420,206,570) 2,477,123,070
---------------
Total Bonds and Notes (Identified Cost $2,624,376,827) 2,699,023,238
---------------
Shares
- ---------------------------------------------------------------------------------------------
Common Stocks -- 7.0%
Brazil -- 0.2%
117,000 Companhia Vale do Rio Doce, ADR 5,678,010
---------------
Israel -- 0.0%
2,288 Teva Pharmaceutical Industries, Ltd., Sponsored ADR 94,220
---------------
United States -- 6.8%
200,925 Apartment Investment & Management Co., Class A 9,423,383
889,730 Associated Estates Realty Corp., (REIT) 10,009,462
2,238,800 Bristol-Myers Squibb Co. 55,096,868
137,000 Camden Property Trust, (REIT) 9,870,850
53,260 Chesapeake Energy Corp.(e) 1,672,897
2,309,175 ConAgra Foods, Inc. 49,554,895
41,343 Corning, Inc.(c) 1,112,540
182,500 Developers Diversified Realty Corp., (REIT) 9,991,875
282,500 Duke Energy Corp. 8,234,875
460,000 Equity Residential Properties Trust, (REIT) 21,523,400
1,755,800 High Income Opportunity Fund, Inc. 10,885,960
79,878 Host Marriott Corp. 1,709,385
1,368,400 Managed High Income Porfolio, Inc. 8,251,452
110,211 Morgan Stanley Emerging Markets Debt Fund, Inc.(e) 1,147,297
117,700 Simon Property Group, Inc., (REIT) 9,903,278
---------------
208,388,417
---------------
Total Common Stocks (Identified Cost $175,479,466) 214,160,647
---------------
Shares
- ---------------------------------------------------------------------------------------------
Preferred Stocks -- 2.3%
Philippines -- 0.3%
267,750 Philippine Long Distance Telephone Co., Sponsored GDR,
Convertible,
Zero Coupon, 12/31/2049(e) 10,059,368
---------------
Shares Description Value (a)
- ------------------------------------------------------------------------------------------------
United States -- 2.0%
158,175 AES Trust III, Convertible,
6.750%, 10/15/2029 $ 7,380,445
107,725 CMS Energy Trust I, Convertible,
7.750%, 7/15/2027 5,278,525
51,500 Cummins Capital Trust I, Convertible,
7.000%, 6/15/2031 5,690,750
58,650 El Paso Energy Capital Trust I,
4.750%, 3/31/2028 2,111,400
393 Entergy New Orleans, Inc.,
4.750%, 12/31/2045(c)(k) 15,057
41,300 Felcor Lodging Trust, Inc., (REIT) Convertible,
1.950%, 12/31/2049(e) 1,032,500
15,600 Lucent Technologies Capital Trust I, Convertible,
7.750%, 3/15/2017(e) 15,605,850
31,750 Newell Financial Trust I,
5.250%, 12/01/2027 1,361,281
429,200 Owens-Illinois, Inc., Convertible,
4.750%, 12/31/2049 14,850,320
800 Pacific Gas & Electric Co., Series G,
4.80% 16,800
267,925 Travelers Property Casualty, Convertible,
4.500%, 4/15/2032(e) 6,427,521
11,000 United Rentals Trust I, Convertible,
6.500%, 8/01/2028(e) 517,000
---------------
60,287,449
---------------
Total Preferred Stocks (Identified Cost $62,323,917) 70,346,817
---------------
Shares/
Principal
Amount+
- ------------------------------------------------------------------------------------------------
Short-Term Investments -- 18.1%
526,836,696 State Street Navigator Securities Lending Prime Portfolio(j) 526,836,696
$ 30,154,360 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/2006 at 2.950% to be repurchased at
$30,161,773 on 4/03/2006, collateralized by $22,265,000 U.S.
Treasury Bond, 8.75% due 8/15/2020 valued at $30,760,723 30,154,360
---------------
Total Short-Term Investments (Identified Cost $556,991,056) 556,991,056
---------------
Total Investments -- 115.5%
(Identified Cost $3,419,171,266)(b) 3,540,521,758
Other assets less liabilities -- (15.5)% (476,348,093)
---------------
Net Assets -- 100% $ 3,064,173,665
===============
(a) See Note 2a of Notes to Financial Statements.
(b) Federal Tax Information (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales, return of capital
included in dividends received from the Fund's investments in
REIT's and interest adjustments on defaulted bonds. Amortization
of premium on debt securities is excluded for tax purposes.):
At March 31, 2006, the net unrealized appreciation on investments
based on cost of $3,425,210,102 for federal income tax purposes
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value of tax cost 160,504,841
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (45,193,185)
---------------
Net unrealized appreciation $ 115,311,656
===============
See accompanying notes to financial statements.
36
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
(c) Non-income producing security.
(d) Illiquid security. At March 31, 2006, the value of these securities amounted to 2,718,600
or 0.1% of net assets.
(e) All or a portion of this security was on loan to brokers at March 31, 2006.
(f) Variable rate security whose interest rate varies with changes in a designated base rate
(such as the prime interest rate) on a specified date (such as coupon date or interest
payment date).
(g) Step Bond: Coupon rate is zero or below market for an initial period and then increases
to a higher coupon rate at a specified date.
(h) All or a portion of interest payment is paid-in-kind.
(i) Security is in default of principal and/or interest payments.
(j) Represents investment of securities lending collateral.
(k) Issuer filed petition under Chapter 11 of the Federal Bankruptcy Code.
(l) Security valued at fair value as determined in good faith by or under the direction of the
Board of Trustees.
+ Principal amount is in U.S. dollars unless otherwise noted.
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 $296,988,504 or
9.7% of net assets.
ADR/GDR An American Depositary Receipt (ADR) or Global Depositary Receipt (GDR) is a certificate
issued by a U.S. 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.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
REITS Real Estate Investment Trusts
ARS Argentine Peso
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
EUR Euro
GBP British Pound
IDR Indonesian Rupiah
KRW South Korean Won
MXN Mexican Peso
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
THB Thailand Baht
ZAR South African Rand
Holdings at March 31, 2006 as a Percentage of Net Assets
Sovereigns 25.6%
Treasuries 10.9
Pharmaceuticals 7.3
Banking 4.7
Automotive 3.8
Non-Captive Diversified 3.7
Technology 3.7
Supranational 2.7
Electric 2.7
Wireless 2.6
Media Cable 2.2
Real Estate Investment Trusts 2.0
Others, less than 2% each 25.5
See accompanying notes to financial statements.
37
This Page Intentionally Left Blank
38
STATEMENTS OF ASSETS & LIABILITIES
March 31, 2006 (Unaudited)
Limited Term
Government and
Core Plus Bond Fund High Income Fund Agency Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
ASSETS
Investments at cost $ 265,613,878 $ 41,766,666 $ 184,775,694
Net unrealized appreciation
(depreciation) (4,279,256) 3,294,931 (2,683,635)
--------------------- --------------------- ---------------------
Investments at value(a) 261,334,622 45,061,597 182,092,059
Cash 31,222 97,619 --
Foreign currency (Identified Cost
$10,500, $0, $0, $0, $0 and
$2,296,013, respectively) 10,405 -- --
Dividends and interest receivable 2,452,393 603,085 924,065
Receivable for Fund shares sold 601,603 49,148 9,913
Receivable for securities sold 2,688,744 333,963 --
Securities lending income receivable 8,791 2,848 2,035
Receivable from investment adviser 41,351 16,064 37,826
--------------------- --------------------- ---------------------
TOTAL ASSETS 267,169,131 46,164,324 183,065,898
--------------------- --------------------- ---------------------
LIABILITIES
Collateral on securities loaned, at
value (Note 2) 35,959,987 5,449,209 37,732,576
Payable for securities purchased 3,570,426 820,997 --
Dividends payable 414,723 96,952 132,787
Payable for Fund shares redeemed 465,144 92,512 229,696
Management fees payable 83,332 20,181 62,150
Deferred Trustees' fees 228,977 58,960 200,010
Administrative fees payable 19,884 2,821 14,102
Other accounts payable and accrued
expenses 388,704 52,847 94,470
--------------------- --------------------- ---------------------
TOTAL LIABILITIES 41,131,177 6,594,479 38,465,791
--------------------- --------------------- ---------------------
NET ASSETS $ 226,037,954 $ 39,569,845 $ 144,600,107
===================== ===================== =====================
NET ASSETS CONSIST OF:
Paid-in capital 252,477,340 119,705,002 174,103,347
Undistributed (overdistributed) net
investment income (418,886) (98,717) (452,801)
Accumulated net realized loss on
investments and foreign currency
transactions (21,742,184) (83,329,535) (26,366,804)
Net unrealized appreciation
(depreciation) on investments and
foreign currency translations (4,278,316) 3,293,095 (2,683,635)
--------------------- --------------------- ---------------------
NET ASSETS $ 226,037,954 $ 39,569,845 $ 144,600,107
===================== ===================== =====================
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE:
Class A shares:
Net assets $ 94,964,638 $ 26,767,248 $ 125,067,979
===================== ===================== =====================
Shares of beneficial interest 8,572,381 5,238,449 11,450,211
===================== ===================== =====================
Net asset value and redemption price
per share $ 11.08 $ 5.11 $ 10.92
===================== ===================== =====================
Offering price per share
(100/[100-maximum sales charge] of
net asset value) $ 11.60 $ 5.35 $ 11.26
===================== ===================== =====================
Class B shares: (redemption price is
equal to net asset value less any
applicable contingent deferred sales
charge)
Net assets $ 117,003,896 $ 9,322,533 $ 12,347,677
===================== ===================== =====================
Shares of beneficial interest 10,554,491 1,823,365 1,132,350
===================== ===================== =====================
Net asset value and offering price
per share $ 11.09 $ 5.11 $ 10.90
===================== ===================== =====================
Class C shares: (redemption price is
equal to net asset value less any
applicable contingent deferred sales
charge)
Net assets $ 5,791,589 $ 3,480,064 $ 4,860,646
===================== ===================== =====================
Shares of beneficial interest 522,086 681,001 445,065
===================== ===================== =====================
Net asset value and offering price
per share $ 11.09 $ 5.11 $ 10.92
===================== ===================== =====================
Class Y shares:
Net assets $ 8,277,831 $ -- $ 2,323,805
===================== ===================== =====================
Shares of beneficial interest 743,970 -- 212,075
===================== ===================== =====================
Net asset value, offering and
redemption price per share $ 11.13 $ -- $ 10.96
===================== ===================== =====================
(a) Including securities on loan with
market values of $ 35,274,100 $ 5,349,582 $ 36,996,242
===================== ===================== =====================
See accompanying notes to financial statements.
39
Massachusetts
Tax Free Municipal Strategic
Income Fund Income Fund Income Fund
--------------------- --------------------- ---------------------
--------------------- ---------------------
$ 71,706,817 $ 99,054,949 $ 3,419,171,266
3,531,490 2,792,891 121,350,492
--------------------- --------------------- ---------------------
75,238,307 101,847,840 3,540,521,758
-- -- 358,836
-- -- 2,302,796
1,254,045 1,640,501 36,047,304
3,217 3,432 41,753,102
-- -- 15,943,811
-- -- 84,955
20,082 20,018 --
--------------------- --------------------- ---------------------
76,515,651 103,511,791 3,637,012,562
--------------------- --------------------- ---------------------
-- -- 526,836,696
-- -- 34,587,340
61,373 103,459 5,539,312
102,106 259,752 3,716,821
39,110 43,936 1,455,876
68,147 136,271 192,015
5,931 8,262 111,856
38,990 48,956 398,981
--------------------- --------------------- ---------------------
315,657 600,636 572,838,897
--------------------- --------------------- ---------------------
$ 76,199,994 $ 102,911,155 $ 3,064,173,665
===================== ===================== =====================
75,169,415 100,422,803 2,993,976,639
18,022 156,822 163,945
(2,518,933) (461,361) (51,142,148)
3,531,490 2,792,891 121,175,229
--------------------- --------------------- ---------------------
$ 76,199,994 $ 102,911,155 $ 3,064,173,665
===================== ===================== =====================
$ 73,295,419 $ 96,463,175 $ 1,633,689,637
===================== ===================== =====================
4,455,650 13,020,890 114,662,664
===================== ===================== =====================
$ 16.45 $ 7.41 $ 14.25
===================== ===================== =====================
$ 17.18 $ 7.76 $ 14.92
===================== ===================== =====================
$ 2,904,575 $ 6,447,980 $ 152,987,890
===================== ===================== =====================
176,966 869,360 10,695,155
===================== ===================== =====================
$ 16.41 $ 7.42 $ 14.30
===================== ===================== =====================
$ -- $ -- $ 1,146,214,643
===================== ===================== =====================
-- -- 80,158,367
===================== ===================== =====================
$ -- $ -- $ 14.30
===================== ===================== =====================
$ -- $ -- $ 131,281,495
===================== ===================== =====================
-- -- 9,214,993
===================== ===================== =====================
$ -- $ -- $ 14.25
===================== ===================== =====================
$ -- $ -- $ 516,322,518
===================== ===================== =====================
40
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2006 (Unaudited)
Limited Term Government
Core Plus Bond Fund High Income Fund and Agency Fund
--------------------- --------------------- -----------------------
--------------------- --------------------- ---------------------
INVESTMENT INCOME
Dividends $ -- $ 68,669 $ --
Interest 6,630,412 1,521,545 3,490,101
Securities lending income 30,552 21,529 13,429
Less net foreign taxes withheld -- (525) --
--------------------- --------------------- ---------------------
6,660,964 1,611,218 3,503,530
--------------------- --------------------- ---------------------
Expenses
Management fees 508,389 118,748 385,655
Service fees - Class A 123,416 32,213 166,157
Service and distribution fees -
Class B 622,862 52,017 67,351
Service and distribution fees -
Class C 29,190 17,043 26,671
Trustees' fees and expenses 44,734 15,580 38,175
Administrative fees 80,049 12,796 52,755
Custodian fees 20,195 10,771 16,156
Transfer agent fees and expenses -
Class A, Class B, Class C 297,886 41,562 98,625
Transfer agent fees and expenses -
Class Y 8,758 -- 633
Audit fees 15,914 16,937 12,474
Legal fees 10,072 1,895 4,787
Registration 31,064 19,940 30,136
Shareholder reporting 59,228 20,701 41,569
Miscellaneous 3,451 4,029 2,721
--------------------- --------------------- ---------------------
Total expenses 1,855,208 364,232 943,865
Less waiver/reimbursement (128,158) (38,317) (50,980)
--------------------- --------------------- ---------------------
Net expenses 1,727,050 325,915 892,885
--------------------- --------------------- ---------------------
Net investment income 4,933,914 1,285,303 2,610,645
--------------------- --------------------- ---------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain (loss) on:
Investments - net 246,107 161,235 (483,469)
Foreign currency transactions - net 183,073 3,793 --
Change in unrealized appreciation
(depreciation) of:
Investments - net (4,864,371) 868,454 (1,628,717)
Foreign currency translations - net (5,032) (3,970) --
--------------------- --------------------- ---------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions (4,440,223) 1,029,512 (2,112,186)
--------------------- --------------------- ---------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 493,691 $ 2,314,815 $ 498,459
===================== ===================== =====================
See accompanying notes to financial statements.
41
Massachusetts Tax Municipal Strategic
Free Income Fund Income Fund Income Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
$ -- $ -- $ 5,807,587
1,886,622 2,532,080 63,413,686
-- -- 703,467
-- -- (47,462)
--------------------- --------------------- ---------------------
1,886,622 2,532,080 69,877,278
--------------------- --------------------- ---------------------
233,031 261,831 7,089,530
93,322 124,337 1,554,184
15,097 34,656 729,893
-- -- 4,583,788
17,822 28,336 85,366
25,305 34,971 710,103
10,771 11,967 101,720
27,187 31,920 1,037,737
-- -- 29,208
13,297 13,222 17,958
3,190 5,185 33,907
9,477 17,565 44,415
13,459 15,206 255,015
2,263 2,341 13,683
--------------------- --------------------- ---------------------
464,221 581,537 16,286,507
(31,940) (25,888) --
--------------------- --------------------- ---------------------
432,281 555,649 16,286,507
--------------------- --------------------- ---------------------
1,454,341 1,976,431 53,590,771
--------------------- --------------------- ---------------------
40,979 361,763 (9,965,984)
-- -- 2,416,653
(828,743) (1,410,626) 39,163,715
-- -- 31,158
--------------------- --------------------- ---------------------
(787,764) (1,048,863) 31,645,542
--------------------- --------------------- ---------------------
$ 666,577 $ 927,568 $ 85,236,313
===================== ===================== =====================
42
STATEMENTS OF CHANGES IN NET ASSETS
Core Plus Bond Fund
--------------------------------------------
Period Ended Year Ended
March 31, 2006 September 30,
(Unaudited) 2005
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 4,933,914 $ 9,537,622
Net realized gain (loss) on investments and
foreign currency transactions 429,180 4,343,339
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations (4,869,403) (8,333,391)
--------------------- ---------------------
Net increase in net assets resulting from
operations 493,691 5,547,570
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (3,330,469) (5,451,945)
Class B (3,703,742) (5,851,384)
Class C (173,879) (254,068)
Class Y (305,017) (529,060)
--------------------- ---------------------
Total distributions (7,513,107) (12,086,457)
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 7) (19,401,843) (26,672,030)
--------------------- ---------------------
Redemption Fees
Class A 611 578
Class B 770 727
Class C 35 32
Class Y 52 53
--------------------- ---------------------
1,468 1,390
--------------------- ---------------------
Net increase (decrease) in net assets (26,419,791) (33,209,527)
--------------------- ---------------------
NET ASSETS
Beginning of period 252,457,745 285,667,272
--------------------- ---------------------
End of period $ 226,037,954 $ 252,457,745
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME $ (418,886) $ 2,160,307
===================== =====================
High Income Fund
--------------------------------------------
Period Ended Year Ended
March 31, 2006 September 30,
(Unaudited) 2005
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 1,285,303 $ 2,727,688
Net realized gain (loss) on investments and
foreign currency transactions 165,028 1,697,305
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations 864,484 (251,326)
--------------------- ---------------------
Net increase in net assets resulting from
operations 2,314,815 4,173,667
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (892,785) (1,635,303)
Class B (321,251) (908,339)
Class C (105,298) (182,735)
Class Y -- --
--------------------- ---------------------
Total distributions (1,319,334) (2,726,377)
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 7) (2,831,581) (5,264,082)
--------------------- ---------------------
Redemption Fees
Class A 499 3,017
Class B 217 1,868
Class C 68 370
Class Y -- --
--------------------- ---------------------
784 5,255
--------------------- ---------------------
Net increase (decrease) in net assets (1,835,316) (3,811,537)
--------------------- ---------------------
NET ASSETS
Beginning of period 41,405,161 45,216,698
--------------------- ---------------------
End of period $ 39,569,845 $ 41,405,161
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME $ (98,717) $ (64,686)
===================== =====================
Limited Term Government and Agency Fund
--------------------------------------------
Period Ended Year Ended
March 31, 2006 September 30,
(Unaudited) 2005
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 2,610,645 $ 3,584,070
Net realized gain (loss) on investments and
foreign currency transactions (483,469) (6,238)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations (1,628,717) (1,789,947)
--------------------- ---------------------
Net increase in net assets resulting from
operations 498,459 1,787,885
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (2,591,218) (3,733,934)
Class B (203,030) (285,636)
Class C (80,658) (135,224)
Class Y (53,956) (65,428)
--------------------- ---------------------
Total distributions (2,928,862) (4,220,222)
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL SHARE
TRANSACTIONS (NOTE 7) (17,748,317) 39,221,920
--------------------- ---------------------
Redemption Fees
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
Net increase (decrease) in net assets (20,178,720) 36,789,583
--------------------- ---------------------
NET ASSETS
Beginning of period 164,778,827 127,989,244
--------------------- ---------------------
End of period $ 144,600,107 $ 164,778,827
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME $ (452,801) $ (134,584)
===================== =====================
See accompanying notes to financial statements.
43
Massachusetts Tax Free Income Fund Municipal Income Fund
- -------------------------------------------- --------------------------------------------
Period Ended Year Ended Period Ended Year Ended
March 31, 2006 September 30, March 31, 2006 September 30,
(Unaudited) 2005 (Unaudited) 2005
- --------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
$ 1,454,341 $ 2,935,764 $ 1,976,431 $ 4,158,144
40,979 447,715 361,763 1,495,771
(828,743) (258,210) (1,410,626) (1,327,773)
- --------------------- --------------------- --------------------- ---------------------
666,577 3,125,269 927,568 4,326,142
- --------------------- --------------------- --------------------- ---------------------
(1,408,416) (2,824,718) (1,857,178) (3,981,690)
(45,558) (111,486) (103,348) (243,518)
-- -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
(1,453,974) (2,936,204) (1,960,526) (4,225,208)
- --------------------- --------------------- --------------------- ---------------------
(3,237,608) (5,825,158) (5,920,657) (11,124,657)
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
(4,025,005) (5,636,093) (6,953,615) (11,023,723)
- --------------------- --------------------- --------------------- ---------------------
80,224,999 85,861,092 109,864,770 120,888,493
- --------------------- --------------------- --------------------- ---------------------
$ 76,199,994 $ 80,224,999 $ 102,911,155 $ 109,864,770
===================== ===================== ===================== =====================
$ 18,022 $ 17,655 $ 156,822 $ 140,917
===================== ===================== ===================== =====================
Strategic Income Fund
- --------------------------------------------
Period Ended Year Ended
March 31, 2006 September 30,
(Unaudited) 2005
- --------------------- ---------------------
- --------------------- ---------------------
$ 53,590,771 $ 54,660,282
(7,549,331) 21,963,471
39,194,873 27,533,778
- --------------------- ---------------------
85,236,313 104,157,531
- --------------------- ---------------------
(37,504,835) (31,992,206)
(3,811,033) (6,262,718)
(23,615,230) (21,270,824)
(2,282,624) (1,531,716)
- --------------------- ---------------------
(67,213,722) (61,057,464)
- --------------------- ---------------------
1,109,254,647 1,154,844,870
- --------------------- ---------------------
25,533 32,202
2,955 6,890
18,676 25,315
1,522 1,499
- --------------------- ---------------------
48,686 65,906
- --------------------- ---------------------
1,127,325,924 1,198,010,843
- --------------------- ---------------------
1,936,847,741 738,836,898
- --------------------- ---------------------
$ 3,064,173,665 $ 1,936,847,741
===================== =====================
$ 163,945 $ 13,786,896
===================== =====================
44
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
--------------------------------------- ---------------------------
Net asset
value, Dividends
beginning Net Net realized Total from from
of investment and unrealized investment net investment Total Redemption
period income gain (loss) operations income distributions fee
---------- ---------- -------------- ---------- -------------- ------------- ----------
CORE PLUS BOND FUND
Class A
3/31/2006(i) $ 11.41 $ 0.26(c) $ (0.21) $ 0.05 $ (0.38) $ (0.38) $ 0.00(g)
9/30/2005 11.69 0.46(c) (0.18) 0.28 (0.56) (0.56) 0.00(g)
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) --
Class B
3/31/2006(i) 11.41 0.21(c) (0.20) 0.01 (0.33) (0.33) 0.00(g)
9/30/2005 11.70 0.37(c) (0.18) 0.19 (0.48) (0.48) 0.00(g)
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) --
Class C
3/31/2006(i) 11.42 0.21(c) (0.21) 0.00 (0.33) (0.33) 0.00(g)
9/30/2005 11.71 0.37(c) (0.18) 0.19 (0.48) (0.48) 0.00(g)
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) --
Class Y
3/31/2006(i) 11.46 0.27(c) (0.21) 0.06 (0.39) (0.39) 0.00(g)
9/30/2005 11.74 0.49(c) (0.18) 0.31 (0.59) (0.59) 0.00(g)
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) --
HIGH INCOME FUND*
Class A
3/31/2006(i) $ 4.98 $ 0.17(c) $ 0.13 $ 0.30 $ (0.17) $ (0.17) $ 0.00(g)
9/30/2005 4.82 0.33(c) 0.16 0.49 (0.33) (0.33) 0.00(g)
9/30/2004 4.65 0.33(c) 0.17 0.50 (0.33) (0.33) 0.00(g)
9/30/2003(f) 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) --
Class B
3/31/2006(i) 4.98 0.15(c) 0.13 0.28 (0.15) (0.15) 0.00(g)
9/30/2005 4.83 0.29(c) 0.15 0.44 (0.29) (0.29) 0.00(g)
9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) (0.30) 0.00(g)
9/30/2003(f) 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) --
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares
and a contingent deferred sales charge for Class B and Class C shares are
not reflected in total return calculations. Periods less than one year are
not annualized.
(b)Computed on an annualized basis for periods less than one year.
(c)Per share net investment income has been calculated using the average shares
outstanding during the period.
(d)As required, effective January 1, 2001, the Funds 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 High
Income Fund, the effect of this change was to decrease net investment income
per share by $.01 for Class A and Class B and to decrease the ratio of net
investment income to average net assets from 11.39% to 11.31% for Class A
and 10.64% to 10.56% for Class B. Per share data and ratios for periods
prior to January 1, 2001 have not been restated to reflect this change in
presentation.
See accompanying notes to financial statements.
45
Ratios to average net assets:
----------------------------------------
Net asset Net assets,
value, Total end of Gross Net Net investment Portfolio
end of return period Expenses Expenses income turnover
period (%) (a) (000's) (%) (b) (%) (b) (%) (b) rate (%)
- ---------- --------- ----------- --------- --------- -------------- ---------
$ 11.08 0.4(h) $ 94,965 1.16(e) 1.05(j) 4.55 42
11.41 2.4(h) 105,111 1.18(e) 1.13(j) 3.93 64
11.69 5.3(h) 120,009 1.22(e) 1.19(j) 4.05 69
11.63 6.4 133,887 1.28 N/A 4.31 61
11.28 2.8 147,647 1.18 N/A 5.65 65
11.59 7.2 173,836 1.09 N/A 6.26 84
11.52 7.4 174,969 1.04 N/A 7.03 83
11.09 0.1(h) 117,004 1.91(e) 1.80(j) 3.80 42
11.41 1.6(h) 132,221 1.93(e) 1.88(j) 3.18 64
11.70 4.6(h) 148,556 1.97(e) 1.94(j) 3.29 69
11.62 5.8 161,317 2.03 N/A 3.55 61
11.28 2.1 141,188 1.93 N/A 4.90 65
11.59 6.5 127,520 1.84 N/A 5.49 84
11.51 6.5 100,353 1.79 N/A 6.28 83
11.09 0.0(h) 5,792 1.91(e) 1.80(j) 3.81 42
11.42 1.6(h) 6,065 1.93(e) 1.88(j) 3.17 64
11.71 4.6(h) 6,162 1.98(e) 1.94(j) 3.30 69
11.63 5.8 7,612 2.03 N/A 3.55 61
11.29 2.1 9,024 1.93 N/A 4.90 65
11.60 6.5 11,470 1.84 N/A 5.52 84
11.52 6.5 12,541 1.79 N/A 6.28 83
11.13 0.6(h) 8,278 0.85(e) 0.80(j) 4.79 42
11.46 2.7(h) 9,060 0.99(e) 0.88(j) 4.18 64
11.74 5.5(h) 10,941 0.98(e) 0.94(j) 4.30 69
11.69 6.9 17,889 0.73 N/A 4.85 61
11.33 3.5 18,346 0.67 N/A 6.15 65
11.63 7.8 17,351 0.67 N/A 6.68 84
11.54 7.6 14,013 0.67 N/A 7.40 83
$ 5.11 6.2(h) $ 26,767 1.58(e) 1.38(j) 6.76 25
4.98 10.3(h) 25,817 1.72(e) 1.58(j) 6.60 42
4.82 11.1 24,641 1.65 N/A 6.97 51
4.65 19.5 23,809 1.71 N/A 7.62 41
4.12 (8.9) 22,454 1.58 N/A 8.85 114
4.94 (10.7) 33,471 1.47 N/A 11.31 65
6.21 (16.1) 46,960 1.36 N/A 11.47 60
5.11 5.8(h) 9,323 2.32(e) 2.14(j) 6.00 25
4.98 9.3(h) 12,034 2.47(e) 2.33(j) 5.85 42
4.83 10.5 17,967 2.40 N/A 6.22 51
4.65 18.8 23,405 2.46 N/A 6.89 41
4.12 (9.7) 23,031 2.33 N/A 8.10 114
4.95 (11.3) 34,713 2.22 N/A 10.56 65
6.22 (16.6) 47,793 2.11 N/A 10.72 60
(e)Represents the total expenses prior to advisory fee waiver and/or
reimbursement of a portion of the Fund's expenses.
(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 return would
have been lower.
(i)For the six months ended March 31, 2006 (unaudited).
(j)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, expenses would have been higher. See Note 4.
* The financial information for periods prior to September 30, 2004 reflects
the financial information for the CDC Nvest High Income Fund's Class A and
Class Bshares, which were reorganized into Class A and Class B 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.
46
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
--------------------------------------- ---------------------------
Net asset
value, Dividends
beginning Net Net realized Total from from
of investment and unrealized investment net investment Total
period income gain (loss) operations income distributions
---------- ---------- -------------- ---------- -------------- -------------
HIGH INCOME FUND* (continued)
Class C
3/31/2006(j) $ 4.98 $ 0.15(c) $ 0.13 $ 0.28 $ (0.15) $ (0.15)
9/30/2005 4.83 0.29(c) 0.15 0.44 (0.29) (0.29)
9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) (0.30)
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)
LIMITED TERM GOVERNMENT AND AGENCY FUND**
Class A
3/31/2006(j) $ 11.09 $ 0.19(c) $ (0.15) $ 0.04 $ (0.21) $ (0.21)
9/30/2005 11.30 0.28(c) (0.16) 0.12 (0.33) (0.33)
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)
Class B
3/31/2006(j) 11.07 0.15(c) (0.15) 0.00 (0.17) (0.17)
9/30/2005 11.28 0.20(c) (0.17) 0.03 (0.24) (0.24)
9/30/2004 11.49 0.22(c) (0.09) 0.13 (0.34) (0.34)
9/30/2003(e) 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)
Class C
3/31/2006(j) 11.08 0.15(c) (0.14) 0.01 (0.17) (0.17)
9/30/2005 11.30 0.20(c) (0.18) 0.02 (0.24) (0.24)
9/30/2004 11.50 0.22(c) (0.08) 0.14 (0.34) (0.34)
9/30/2003(e) 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)
Class Y
3/31/2006(j) 11.13 0.21(c) (0.14) 0.07 (0.24) (0.24)
9/30/2005 11.34 0.31(c) (0.17) 0.14 (0.35) (0.35)
9/30/2004 11.55 0.32(c) (0.09) 0.23 (0.44) (0.44)
9/30/2003(e) 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)
Redemption
fee
----------
HIGH INCOME FUND* (continued)
Class C
3/31/2006(j) $ 0.00(f)
9/30/2005 0.00(f)
9/30/2004 0.00(f)
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
12/31/2000 --
LIMITED TERM GOVERNMENT AND AGENCY FUND**
Class A
3/31/2006(j) $ --
9/30/2005 --
9/30/2004 --
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
12/31/2000 --
Class B
3/31/2006(j) --
9/30/2005 --
9/30/2004 --
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
12/31/2000 --
Class C
3/31/2006(j) --
9/30/2005 --
9/30/2004 --
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
12/31/2000 --
Class Y
3/31/2006(j) --
9/30/2005 --
9/30/2004 --
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
12/31/2000 --
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares
and a contingent deferred sales charge for Class B and Class C shares are
not reflected in total return calculations. Periods less than one year are
not annualized.
(b)Computed on an annualized basis for periods less than one year.
(c)Per share net investment income has been calculated using the average shares
outstanding during the period.
(d)As required, effective January 1, 2001, the Funds 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 High Income Fund was to decrease net
investment income per share by $.01 for Class C and to decrease the ratio of
net investment income to average net assets from 10.63% to 10.54% for Class
C. For Limited Term Government and Agency Fund, the effect of this change
was to decrease net investment income per share by $.04 for Class A, B, C,
and Y and to decrease the ratio of net investment income to average net
assets from 4.88% to 4.52% for Class A, 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. Per share data and ratios
for period prior to January 1, 2001 , have not been restated to reflect this
change in presentation.
(e)For the nine months ended September 30, 2003.
(f)Amounts round to less than $0.01.
(g)Represents total expenses prior to waiver of a portion of the Class's
transfer agent expenses.
See accompanying notes to financial statements.
47
Ratios to average net assets:
----------------------------------------
Net asset Net assets,
value, Total end of Gross Net Net investment Portfolio
end of return period Expenses Expenses income turnover
period (%) (a) (000's) (%) (b) (%) (b) (%) (b) rate (%)
- ---------- --------- ----------- --------- --------- -------------- ---------
$ 5.11 5.8(h) $ 3,480 2.33(i) 2.14(k) 6.01 25
4.98 9.3 (h) 3,554 2.47(i) 2.33(k) 5.82 42
4.83 10.5 2,608 2.40 N/A 6.22 51
4.65 18.8 2,858 2.46 N/A 6.89 41
4.12 (9.5) 2,605 2.33 N/A 8.10 114
4.94 (11.5) 4,153 2.22 N/A 10.54 65
6.22 (16.6) 5,369 2.11 N/A 10.72 60
$ 10.92 0.4(h) $ 125,068 1.14(i) 1.07(k) 3.47 18
11.09 1.1 141,417 1.24 N/A 2.50 93
11.30 1.9 106,701 1.32 N/A 2.60 80
11.51 1.2 117,225 1.37 N/A 2.41 53
11.73 8.2 106,013 1.35 N/A 3.66 88
11.36 6.9 109,189 1.42 N/A 4.52 275
11.16 8.3 118,833 1.40 N/A 6.18 384
10.90 (0.0)(h) 12,348 1.89(i) 1.82(k) 2.71 18
11.07 0.3 15,114 1.99 N/A 1.75 93
11.28 1.2 10,107 2.00 N/A 1.95 80
11.49 0.7 14,637 2.02 N/A 1.77 53
11.71 7.5 16,263 2.00 N/A 3.01 88
11.34 6.2 14,317 2.07 N/A 3.85 275
11.14 7.7 11,884 2.05 N/A 5.53 384
10.92 0.1(h) 4,861 1.89(i) 1.82(k) 2.72 18
11.08 0.2 5,715 1.99 N/A 1.75 93
11.30 1.3 6,949 2.00 N/A 1.94 80
11.50 0.7 8,704 2.02 N/A 1.77 53
11.72 7.5 8,079 2.00 N/A 3.01 88
11.35 6.2 5,851 2.07 N/A 3.89 275
11.15 7.7 6,617 2.05 N/A 5.53 384
10.96 0.6(h) 2,324 0.81(i) 0.77(k) 3.78 18
11.13 1.2(h) 2,533 1.59(g) 1.02(k) 2.77 93
11.34 2.1 4,233 1.13 N/A 2.82 80
11.55 1.5 6,886 0.93 N/A 2.87 53
11.78 8.6 8,529 0.88 N/A 4.14 88
11.41 7.4 3,441 0.95 N/A 4.98 275
11.20 8.8 3,254 0.95 N/A 6.63 384
(h)Had certain expenses not been reduced during the period, total return would
have been lower.
(i)Represents the total expenses prior to advisory fee waiver and/or
reimbursement of a portion of the Fund's expenses.
(j)For the six months ended March 31, 2006 (unaudited).
(k)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, expenses would have been higher. See Note 4.
* The financial information prior to September 30, 2004 reflects the financial
information for the CDC Nvest High Income Fund's Class C shares which were
reorganized into Class C shares 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, Class B, Class C, and Class Y shares which were reorganized
into Class A, 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.
48
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
----------------------------------------- ---------------------------
Net asset
value, Dividends
beginning Net Net realized Total from from
of investment and unrealized investment net investment Total
period income gain (loss) operations income distributions
---------- ---------- -------------- ---------- -------------- -------------
MASSACHUSETTS TAX FREE INCOME FUND
Class A
3/31/2006(g) $ 16.62 $ 0.31 $ (0.17) $ 0.14 $ (0.31) $ (0.31)
9/30/2005 16.58 0.60 0.04 0.64 (0.60) (0.60)
9/30/2004 16.41 0.61 0.17 0.78 (0.61) (0.61)
9/30/2003(f) 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)
Class B
3/31/2006(g) 16.58 0.25 (0.17) 0.08 (0.25) (0.25)
9/30/2005 16.54 0.46 0.05 0.51 (0.47) (0.47)
9/30/2004 16.37 0.49 0.18 0.67 (0.50) (0.50)
9/30/2003(f) 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)
MUNICIPAL INCOME FUND
Class A
3/31/2006(g) $ 7.48 $ 0.14 $ (0.07) $ 0.07 $ (0.14) $ (0.14)
9/30/2005 7.47 0.28 0.01 0.29 (0.28) (0.28)
9/30/2004 7.41 0.29 0.06 0.35 (0.29) (0.29)
9/30/2003(f) 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)
Class B
3/31/2006(g) 7.49 0.11 (0.07) 0.04 (0.11) (0.11)
9/30/2005 7.48 0.22 0.01 0.23 (0.22) (0.22)
9/30/2004 7.41 0.24 0.07 0.31 (0.24) (0.24)
9/30/2003(f) 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)
(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 less
than one year are not annualized.
(b)Computed on an annualized basis for periods less than one year.
(c)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses.
(d)As required, effective January 1, 2001, the Funds 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 Massachusetts Tax Free
Income Fund was to increase the ratio of net investment income to average
net assets from 4.66% to 4.67% for Class A and from 4.02% to 4.03% for Class
B shares. For Municipal Income Fund, the effect of this change was to
increase net investment income per share by $0.01 and to decrease net
realized and unrealized gains and losses per share by $0.01 for Class A
shares and Class B shares and increase the ratio of net investment income to
average net assets from 4.84% to 4.89% for Class A shares and from 4.09% to
4.14% for Class B shares. Per share data and ratios for periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
See accompanying notes to financial statements.
49
Ratios to average net assets:
----------------------------------------
Net asset Net assets,
value, Total end of Gross Net Net investment Portfolio
end of return period Expenses Expenses income turnover
period (%) (a) (000's) (%) (b) (%) (b) (%) (b) rate (%)
- ---------- --------- ----------- --------- --------- -------------- ---------
$ 16.45 0.9(e) $ 73,295 1.17(c) 1.08(h) 3.77 0
16.62 3.9(e) 77,018 1.22(c) 1.22(h) 3.59 5
16.58 4.9 81,427 1.33 N/A 3.74 21
16.41 3.1 86,368 1.38 N/A 3.99 9
16.40 8.1 92,053 1.34 N/A 4.19 33
15.82 3.2(e) 89,376 1.35(c) 1.33(h) 4.67 60
16.06 9.3(e) 91,785 1.39(c) 1.13(h) 5.24 68
16.41 0.5(e) 2,905 1.91(c) 1.83(h) 3.02 0
16.58 3.1(e) 3,207 1.97(c) 1.97(h) 2.84 5
16.54 4.2 4,435 2.00 N/A 3.08 21
16.37 2.6 6,185 2.03 N/A 3.34 9
16.36 7.4 6,742 1.99 N/A 3.54 33
15.78 2.5(e) 8,313 2.00(c) 1.98(h) 4.03 60
16.03 8.6(e) 8,715 2.04(c) 1.78(h) 4.59 68
$ 7.41 0.9(e) $ 96,463 1.04(c) 1.00(h) 3.76 4
7.48 3.9 102,255 1.07 N/A 3.65 29
7.47 4.9 111,801 1.11 N/A 4.00 35
7.41 2.9 126,906 1.10 N/A 4.14 42
7.43 7.3 133,005 1.06 N/A 4.67 33
7.25 3.0 137,852 1.07 N/A 4.89 80
7.39 8.8 142,539 0.95 N/A 5.39 156
7.42 0.6(e) 6,448 1.79(c) 1.75(h) 3.01 4
7.49 3.1 7,610 1.82 N/A 2.90 29
7.48 4.2 9,087 1.86 N/A 3.25 35
7.41 2.2 10,884 1.85 N/A 3.39 42
7.44 6.7 12,326 1.81 N/A 3.92 33
7.25 2.2 14,549 1.82 N/A 4.14 80
7.39 8.0 14,520 1.70 N/A 4.64 156
(e)Had certain expenses not been reduced during the period, total returns would
have been lower.
(f)For the nine months ended September 30, 2003.
(g)For the six months ended March 31, 2006 (unaudited).
(h)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, expenses would have been higher. See Note 4.
50
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
---------------------------------------- ---------------------------
Net asset
value, Dividends
beginning Net Net realized Total from from
of investment and unrealized investment net investment Total Redemption
period income (c) gain (loss) operations income distributions fee
---------- ---------- -------------- ---------- -------------- ------------- ----------
STRATEGIC INCOME FUND*
Class A
3/31/2006(i) $ 14.17 $ 0.34 $ 0.17 $ 0.51 $ (0.43) $ (0.43) $ 0.00(g)
9/30/2005 13.57 0.66 0.70 1.36 (0.76) (0.76) 0.00(g)
9/30/2004 12.57 0.75 1.11 1.86 (0.86) (0.86) 0.00(g)
9/30/2003(d) 10.72 0.57 1.93 2.50 (0.65) (0.65) --
12/31/2002 9.88 0.75 0.72 1.47 (0.63) (0.63) --
12/31/2001(f) 10.80 0.91 (0.92) (0.01) (0.91) (0.91) --
12/31/2000 11.65 0.99 (0.91) 0.08 (0.93) (0.93) --
Class B
3/31/2006(i) 14.22 0.29 0.16 0.45 (0.37) (0.37) 0.00(g)
9/30/2005 13.60 0.56 0.71 1.27 (0.65) (0.65) 0.00(g)
9/30/2004 12.59 0.65 1.10 1.75 (0.74) (0.74) 0.00(g)
9/30/2003(d) 10.71 0.51 1.92 2.43 (0.55) (0.55) --
12/31/2002 9.88 0.67 0.73 1.40 (0.57) (0.57) --
12/31/2001(f) 10.79 0.83 (0.90) (0.07) (0.84) (0.84) --
12/31/2000 11.65 0.90 (0.91) (0.01) (0.85) (0.85) --
Class C
3/31/2006(i) 14.22 0.29 0.16 0.45 (0.37) (0.37) 0.00(g)
9/30/2005 13.60 0.55 0.72 1.27 (0.65) (0.65) 0.00(g)
9/30/2004 12.58 0.64 1.11 1.75 (0.73) (0.73) 0.00(g)
9/30/2003(d) 10.70 0.50 1.93 2.43 (0.55) (0.55) --
12/31/2002 9.87 0.67 0.73 1.40 (0.57) (0.57) --
12/31/2001(f) 10.78 0.83 (0.91) (0.08) (0.83) (0.83) --
12/31/2000 11.64 0.90 (0.91) (0.01) (0.85) (0.85) --
Class Y
3/31/2006(i) 14.17 0.36 0.17 0.53 (0.45) (0.45) 0.00(g)
9/30/2005 13.57 0.70 0.70 1.40 (0.80) (0.80) 0.00(g)
9/30/2004 12.58 0.78 1.11 1.89 (0.90) (0.90) 0.00(g)
9/30/2003(d) 10.74 0.60 1.93 2.53 (0.69) (0.69) --
12/31/2002 9.90 0.80 0.71 1.51 (0.67) (0.67) --
12/31/2001(f) 10.81 0.94 (0.92) 0.02 (0.93) (0.93) --
12/31/2000 11.65 0.96 (0.84) 0.12 (0.96) (0.96) --
(a)A sales charge for Class A and Class C (prior to February 1, 2004) 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.
(b)Computed on an annualized basis for period less than one year.
(c)Per share net investment income has been calculated using the average shares
outstanding during the period.
(d)For the nine months ended September 30, 2003.
(e)Had certain expenses not been reduced during the period, total return would
have been lower.
(f)As required, effective January 1, 2001, the Funds adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. 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, 8.03% to 8.02% for Class B and 8.04% to 8.02% for Class C. Per
share data and ratios 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 Gross Net Net investment Portfolio
end of return period Expenses Expenses income turnover
period (%) (a) (000's) (%) (b) (%) (b) (%) (b) rate (%)
- ---------- --------- ----------- --------- --------- -------------- ---------
$ 14.25 3.7 $1,633,690 1.04 N/A 4.84 7
14.17 10.2 977,198 1.18 N/A 4.71 14
13.57 15.2 343,586 1.23 N/A 5.66 28
12.57 23.7(e) 140,576 1.31(h) 1.28(j) 6.49 27
10.72 15.5 92,303 1.33 N/A 7.38 30
9.88 (0.1) 94,156 1.31 N/A 8.77 10
10.80 0.7 116,986 1.24 N/A 8.73 13
14.30 3.3 152,988 1.79 N/A 4.11 7
14.22 9.5 144,081 1.93 N/A 3.98 14
13.60 14.3 128,714 1.98 N/A 4.91 28
12.59 23.0(e) 118,217 2.06(h) 2.03(j) 5.73 27
10.71 14.6 98,501 2.08 N/A 6.63 30
9.88 (0.8) 102,159 2.06 N/A 8.02 10
10.79 (0.2) 120,200 1.99 N/A 7.98 13
14.30 3.2 1,146,215 1.79 N/A 4.07 7
14.22 9.5 765,200 1.93 N/A 3.93 14
13.60 14.3 255,705 1.98 N/A 4.87 28
12.58 23.0(e) 66,394 2.06(h) 2.03(j) 5.73 27
10.70 14.7 27,727 2.08 N/A 6.63 30
9.87 (0.8) 28,925 2.06 N/A 8.02 10
10.78 (0.2) 37,208 1.99 N/A 7.98 13
14.25 3.8 131,281 0.79 N/A 5.10 7
14.17 10.5 50,369 0.91 N/A 4.98 14
13.57 15.5(e) 10,833 1.08(h) 1.00(j) 5.93 28
12.58 24.0 2,193 0.97 N/A 6.83 27
10.74 15.9 1,039 0.94 N/A 7.77 30
9.90 0.3 445 0.93 N/A 9.10 10
10.81 1.0 335 0.90 N/A 9.07 13
(g)Amount rounds to less than $0.01.
(h)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses.
(i)For the six months ended March 31, 2006 (unaudited).
(j)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, expenses would have been higher. See Note 4.
* The financial information for periods prior to September 30, 2004 reflects
the financial information for CDC Nvest Strategic Income Fund's Class A
Class B, Class C and Class Y shares, which were reorganized into Class A,
Class B, 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.
52
NOTES TO FINANCIAL STATEMENTS
March 31, 2006 (Unaudited)
1. Organization. IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II and
Loomis Sayles Funds II (the "Trusts" and each a "Trust") are each organized as
a Massachusetts business trust. Each Trust is registered under the Investment
Company Act of 1940, as amended ("1940 Act"), 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:
IXIS Advisor Funds Trust I:
Loomis Sayles Core Plus Bond Fund (the "Core Plus Bond Fund")
IXIS Advisor 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")
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. 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
higher ongoing Rule 12b-1 fees 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 higher ongoing Rule 12b-1 fees
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 Rule 12b-1 fees. They are generally intended for institutional
investors with a minimum initial investment of $1,000,000, though some
categories of investors are excepted from the minimum investment amount.
Most expenses of the Trusts can be directly attributed to a Fund. Expenses
which cannot 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, for those Funds that offer Class Y shares, 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 for which market quotations are readily
available (other than short-term obligations with a remaining maturity of less
than sixty days) are generally valued at market price on the basis of
valuations furnished to the Funds by a pricing service authorized by the Board
of Trustees, which 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, including closed-end investment
companies, for which market quotations are readily available are valued at
market price on the basis of valuations furnished to the Funds 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 NOCP, at the most recent bid
quotation on the NASDAQ National Market. Securities traded on foreign exchanges
are valued at the market price on the non-U.S. exchange, unless a Fund believes
that an occurrence after the closing of that exchange will materially affect a
security's value. In that case, the security may be fair valued at the time the
Fund determines its net asset value by or pursuant to procedures approved by
the Board of Trustees. When fair valuing their securities, the Funds may, among
other things, use modeling tools or other processes that may take into account
factors such as securities market activity and/or significant events that occur
after the close of the local market and before the time a Fund's net asset
value is calculated. All other securities and assets are valued at their fair
value as determined in good faith by the Funds' investment adviser, pursuant to
the 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.
53
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
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 non-class specific expenses are allocated on a pro rata
basis to each class based on the relative value of settled shares of each class
to the total for the Fund. 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 for 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, and 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 at the end of the fiscal period, resulting from changes
in exchange rates.
The Funds may use foreign currency exchange contracts to facilitate
transactions in foreign-denominated investments. Losses may arise from changes
in the value of the foreign currency or if the counterparties do not perform
under the contracts' terms.
Each Fund (except Massachusetts Tax Free Income Fund and Municipal Income 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. 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 and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gain 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 paydowns on
mortgage-backed securities and foreign currency transactions. Permanent book
and tax basis differences relating to shareholder distributions, net investment
income, and net realized gains will result in reclassifications to the capital
accounts. Temporary differences between book and tax distributable earnings are
primarily due to deferred Trustees' fees, defaulted bond income accruals,
premium amortization accruals, market discounts, capital loss carryforwards,
and wash sales. Distributions from net investment income and short-term capital
gains are considered to be ordinary income for tax purposes.
Tax characterization of distributions is determined on an annual basis. The tax
character of distributions paid to shareholders during the year ended
September 30, 2005 is as follows:
2005 Distributions Paid From:
- -----------------------------
Exempt
Ordinary Interest
Fund Income Dividends Total
---- ------ --------- -----
Core Plus Bond Fund $12,086,457 $ -- $12,086,457
High Income Fund 2,726,377 -- 2,726,377
Limited Term Government and Agency Fund 4,220,222 -- 4,220,222
Massachusetts Tax Free Income Fund 11,120 2,925,084 2,936,204
Municipal Income Fund 105,537 4,119,671 4,225,208
Strategic Income Fund 61,057,464 -- 61,057,464
54
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
As of September 30, 2005, capital loss carryforwards and post-October losses
were as follows:
Limited Term Massachusetts
Core Plus High Government and Tax Free Municipal Strategic
Bond Fund Income Fund Agency Fund Income Fund Income Fund Income Fund
- - --------- ----------- ----------- ----------- ----------- -----------
Capital loss carryforward:
Expires September 30, 2007 $ -- $ -- $ (9,755,614) $(1,149,888) $(564,858) $ --
Expires September 30, 2008 -- (13,289,736) (4,165,768) (116,500) -- --
Expires September 30, 2009 -- (43,374,721) (4,128,091) -- -- (10,758,584)
Expires September 30, 2010 (20,960,955) (26,826,634) (663,109) (1,003,440) -- (21,770,312)
Expires September 30, 2011 -- -- (425,323) -- -- (7,096,274)
Expires September 30, 2012 -- -- (193,904) -- (138,879) --
Expires September 30, 2013 -- -- -- (154,156) -- --
------------ ------------ ------------ ----------- --------- ------------
Total capital loss carryforward (20,960,955) (83,491,091) (19,331,809) (2,423,984) (703,737) (39,625,170)
Deferred net capital losses (post
October) -- -- (5,436,058) -- -- --
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. The repurchase agreements are
tri-party arrangements whereby the collateral is held at the custodian bank in
a segregated account for the benefit of the Fund and on behalf of the
counterparty. 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. Securities Lending. Each Fund has entered into an agreement with State
Street Bank ("SSB"), as an agent of the Funds, to lend securities to certain
designated borrowers. The loans are collateralized with cash or securities in
an amount equal to at least 105% or 102% of the market value of the loaned
international or domestic securities, respectively, when the loan is initiated.
Thereafter, the value of the collateral must remain at 102% of the market value
of loaned securities for U.S. equities and U.S. corporate debt; at least 105%
of the market value of loaned non-U.S. equities; and at least 100% of the
market value of loaned securities for U.S. government and agency securities,
sovereign debt issued by non-U.S. governments and non-U.S. corporate debt. In
the event that the market value of the collateral falls below the required
percentages described above, the borrower will deliver additional collateral on
the next business day. The Funds invest cash collateral in short-term
investments, a portion of the income from which is remitted to the borrowers
and the remainder allocated between the Funds and SSB as lending agent. The
Funds bear the risk of loss with respect to the investment of cash collateral.
The market value of securities on loan to borrowers and the value of collateral
held by the Funds with respect to such loans at March 31, 2006 were as follows:
Market Value of Value of Collateral
Fund Securities on Loan Received
---- ------------------ -------------------
Core Plus Bond Fund $ 35,274,100 $ 35,959,987
High Income Fund 5,349,582 5,449,209
Limited Term Government and Agency Fund 36,996,242 37,732,576
Strategic Income Fund 516,322,518 526,836,696
h. 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.
i. Indemnifications. Under the Funds' organizational documents, their officers
and Trustees are indemnified against certain liability arising out of the
performance of their duties to the Funds. Additionally, in the normal course of
business, the Funds enter into contracts with service providers that contain
general indemnification clauses. The Funds' maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Funds that have not yet occurred. However, based on experience, the
Funds expect the risk of loss to be remote.
55
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
3. Purchases and Sales of Securities. For the six months ended March 31, 2006,
purchases and sales of securities (excluding short-term investments and
including paydowns) were as follows:
U.S. Government/Agency Other Securities
- - ---------------------- ----------------
Fund Purchases Sales Purchases Sales
- ---- --------- ----- --------- -----
Core Plus Bond Fund $50,903,153 $56,710,238 $ 46,895,884 $ 63,506,958
High Income Fund 349,964 23,913 9,392,957 13,745,699
Limited Term Government and Agency Fund 23,948,431 43,491,169 3,719,237 807,872
Massachusetts Tax Free Income Fund -- -- -- 3,117,620
Municipal Income Fund -- -- 4,207,189 10,118,324
Strategic Income Fund 5,780,704 64,265,852 1,240,500,430 102,351,200
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 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 Daily Net Assets
- - -------------------------------------------------
First Next Next Over
Fund $100 million $100 million $1.8 billion $2 billion
- ---- ------------ ------------ ------------ ----------
Core Plus Bond Fund 0.2500% 0.1875% 0.1875% 0.1875%
High Income Fund 0.6000% 0.6000% 0.6000% 0.6000%
Limited Term Government and Agency Fund 0.5000% 0.5000% 0.5000% 0.5000%
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% 0.5500%
IXIS Asset Management Advisors, L.P. ("IXIS Advisors"), serves as the advisory
administrator to Core Plus Bond 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 its average daily net assets:
Percentage of Average Daily Net Assets
- -------------------------------------
First Over
Fund $100 million $100 million
---- ------------ ------------
Core Plus Bond Fund 0.2500% 0.1875%
Massachusetts Tax Free Income Fund 0.3000% 0.2500%
Loomis Sayles has given binding undertakings to the Funds to defer its
management fees and/or reimburse certain expenses associated with these Funds
to limit their operating expenses. These undertakings are in effect until
January 31, 2007 and will be reevaluated on an annual basis. At March 31, 2006,
the expense limits as a percentage of average daily net assets under the
expense limitation agreements were as follows:
Expense Limit as a Percentage of Average Daily Net Assets
- --------------------------------------------------------
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Core Plus Bond Fund 1.05% 1.80% 1.80% 0.80%
High Income Fund 1.25% 2.00% 2.00% --
Limited Term Government and Agency Fund 1.00% 1.75% 1.75% 0.75%
Massachusetts Tax Free Income Fund 0.95% 1.70% -- --
Municipal Income Fund 0.95% 1.70% -- --
Strategic Income Fund 1.25% 2.00% 2.00% 1.00%
56
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
Prior to February 1, 2006, the expense limits as a percentage of average daily
net assets were as follows:
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Core Plus Bond Fund 1.05% 1.80% 1.80% 0.80%
High Income Fund 1.45% 2.20% 2.20% --
Limited Term Government and Agency Fund -- -- -- --
Massachusetts Tax Free Income Fund 1.15% 1.90% -- --
Municipal Income Fund -- -- -- --
Strategic Income Fund 1.25% 2.00% 2.00% 1.00%
Expense limits account for advisory administration fees payable to IXIS
Advisors. Loomis Sayles and IXIS Advisors have agreed to equally bear the fee
waiver and/or expense reimbursement.
For the six months ended March 31, 2006, the 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
- ---- ---------- ---------- ---------- ----- ---
Core Plus Bond Fund $ 254,195 $ -- $ 254,195 0.214% 0.214%
High Income Fund 118,748 -- 118,748 0.600% 0.600%
Limited Term Government and Agency Fund 385,655 -- 385,655 0.500% 0.500%
Massachusetts Tax Free Income Fund 116,516 (2,377) 114,139 0.300% 0.294%
Municipal Income Fund 261,831 -- 261,831 0.492% 0.492%
Strategic Income Fund 7,089,530 -- 7,089,530 0.596% 0.596%
For the six months ended March 31, 2006, the advisory administration fees for
each Fund were as follows:
Percentage of
Waiver of Average
Advisory Advisory Net Advisory Daily Net Assets
Administration Administration Administration ----------------
Fund Fee Fee Fee Gross Net
- ---- -------------- -------------- -------------- ----- ---
Core Plus Bond Fund $254,194 $ -- $254,194 0.214% 0.214%
Massachusetts Tax Free Income Fund 116,515 (2,376) 114,139 0.300% 0.294%
For the six months ended March 31, 2006, in addition to the waiver of
management fees and/or advisory administration fees, expenses have been
reimbursed as follows:
Fund Reimbursement
---- -------------
Core Plus Bond Fund $128,158
High Income Fund 38,317
Limited Term Government and Agency Fund 50,980
Massachusetts Tax Free Income Fund 27,187
Municipal Income Fund 25,888
Loomis Sayles and IXIS Advisors are permitted to recover expenses borne
(whether through reduction of the management fee or otherwise) in later periods
to the extent the Funds' expenses fall below the expense limits, provided,
however, that the Funds are not obligated to pay such deferred fees more than
one year after the end of the fiscal year in which the fee was deferred.
57
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
At March 31, 2006, the amount subject to possible reimbursement under the
expense limitation agreements were as follows:
Expenses Subject Expenses Subject
to Possible to Possible
Reimbursement Reimbursement
until until
Fund September 30, 2006 September 30, 2007
---- ------------------ ------------------
Core Plus Bond Fund $154,449 $128,158
High Income Fund 61,643 38,317
Limited Term Government and Agency Fund -- 50,980
Massachusetts Tax Free Income Fund 3,589 31,940
Municipal Income Fund -- 25,888
Loomis Sayles and IXIS Advisors are wholly-owned subsidiaries of IXIS Asset
Management US Group, L.P. ("IXIS US Group") (formerly IXIS Asset Management
North America, L.P.), which is part of IXIS Asset Management Group, an
international asset management group based in Paris, France. IXIS Asset
Management Group is ultimately owned principally, directly or indirectly by
three large affiliated French financial services entities: the Caisse Nationale
des Caisses d'Epargne, a financial institution owned by CDC (as defined below)
and by French regional savings banks known as the Caisses d'Epargne; the Caisse
des Depots et Consignations ("CDC"), a public sector financial institution
created by the French government in 1816; and CNP Assurances, a large French
life insurance company. Certain officers and directors of Loomis Sayles and
IXIS Advisors are also Trustees of the Funds.
Management and advisory administration fees are presented in the Statements of
Operations as management fees.
b. Administrative Expense. IXIS Advisors provides certain administrative
services to the Funds and has subcontracted with State Street Bank and Trust
Company ("State Street Bank") to serve as subadministrator.
Pursuant to an agreement among IXIS Advisor Funds Trust I, IXIS Advisor Funds
Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV and IXIS
Advisor Cash Management Trust ("IXIS Advisor Funds Trusts"), Loomis Sayles
Funds I, Loomis Sayles Funds II ("Loomis Sayles Funds Trusts") and IXIS
Advisors, each Fund pays IXIS Advisors monthly its pro rata portion of fees
equal to an annual rate of 0.0675% of the first $5 billion of the average daily
net assets of the IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts,
0.0625% of the next $5 billion, and 0.0500% of such assets in excess of $10
billion, subject to an annual aggregate minimum fee for the IXIS Advisor Funds
Trusts and Loomis Sayles Funds Trusts of $5 million.
For the six months ended March 31, 2006, amounts paid to IXIS Advisors for
administrative fees were as follows:
Administrative
Fund Fees
---- --------------
Core Plus Bond Fund $ 80,049
High Income Fund 12,796
Limited Term Government and Agency Fund 52,755
Massachusetts Tax Free Income Fund 25,305
Municipal Income Fund 34,971
Strategic Income Fund 710,103
c. 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 IXIS Asset Management Distributors, L.P.
("IXIS Distributors"), the Fund's distributor (a wholly-owned subsidiary of
IXIS US Group), a monthly service fee at an annual rate not to exceed 0.25% of
the average daily net assets attributable to the Fund's Class A shares, as
reimbursement for expenses incurred by 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 IXIS Distributors a monthly
service fee at an 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 IXIS Distributors in providing
personal services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts.
58
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
Also under the Class B and Class C Plans, each Fund pays 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 IXIS Distributors in connection
with the marketing or sale of Class B and Class C shares.
For the six months ended March 31, 2006, the Funds paid the following service
and distribution fees:
Service Fee Distribution Fee
- - ------------------------------ -------------------
Fund Class A Class B Class C Class B Class C
- ---- ------- ------- ------- ------- -------
Core Plus Bond Fund $ 123,416 $155,716 $ 7,298 $467,146 $ 21,892
High Income Fund 32,213 13,004 4,261 39,013 12,782
Limited Term Government and Agency Fund 166,157 16,838 6,668 50,513 20,003
Massachusetts Tax Free Income Fund 93,322 3,774 -- 11,323 --
Municipal Income Fund 124,337 8,664 -- 25,992 --
Strategic Income Fund 1,554,184 182,473 1,145,947 547,420 3,437,841
d. Commissions. The Funds have been informed that commissions (including CDSC)
on Fund shares paid to IXIS Distributors by investors in shares of the Funds
during the six months ended March 31, 2006 were as follows:
Fund Commission
---- ----------
Core Plus Bond Fund $ 49,634
High Income Fund 21,097
Limited Term Government and Agency Fund 38,358
Massachusetts Tax Free Income Fund 13,735
Municipal Income Fund 33,363
Strategic Income Fund 2,705,704
e. Trustees Fees and Expenses. The Funds do not pay any compensation directly
to its officers or Trustees who are directors, officers or employees of IXIS
Advisors, IXIS Distributors, IXIS US Group, Loomis Sayles or their affiliates.
The Chairperson of the Board receives a retainer fee at the annual rate of
$200,000. The Chairperson does not receive any meeting attendance fees for
Board of Trustees meetings or committee meetings that she attends. Each
independent Trustee (other than the Chairperson) receives, in the aggregate, a
retainer fee at the annual rate of $55,000. Each independent Trustee also
receives a meeting attendance fee of $6,000 for each meeting of the Board of
Trustees that he or she attends in person and $3,000 for each meeting of the
Board of Trustees that he or she attends telephonically. In addition, each
committee chairman receives an additional retainer fee at the annual rate of
$10,000. Each committee member receives $4,000 or $5,000 for each Contract and
Governance or Audit Committee meeting, respectively, that he or she attends in
person and $2,000 or $2,500 for each Contract and Governance or Audit Committee
meeting, respectively, that he or she attends telephonically. These fees are
allocated among the funds in the 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 November 18, 2005, the Trusts had co-chairmen of the Board. Prior to
October 1, 2005, each independent Trustee received, 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 that he or she attended. The
co-chairmen of the Board each received an additional annual retainer of
$25,000. Each committee chairman received an additional retainer fee at the
annual rate of $7,000. Each committee member received $3,750 for each committee
meeting that he or she attended. In addition, during the period October 1, 2005
to November 18, 2005, each co-chairman received an additional one-time payment
of $25,000 as compensation for their services as chairmen.
Prior to January 1, 2006, each committee member was compensated $4,000 for each
Audit Committee meeting that he or she attended in person and $2,000 for each
such meeting he or she attended telephonically.
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 Trusts on the normal payment
date. Deferred amounts remain in the fund until distributed in accordance with
the Plan.
Additionally, the Board of Trustees has approved the use of the Funds' assets
to pay their portion of the annual salary for 2005 of an employee of IXIS
Advisors who supports the Funds' Chief Compliance Officer. For the period from
October 1, 2005 to December 31, 2005, each Fund's portion of such expense was
approximately $575.
59
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
f. Redemption Fees. Shareholders of Class A shares of Core Plus Bond Fund, High
Income Fund and Strategic Income Fund and shareholders of Class Y shares of
Core Plus Bond Fund and Strategic Income Fund will be charged a 2% redemption
fee if they redeem, including redeeming by exchange, Class A shares and Class Y
shares within 60 days of their acquisition (including acquisition by exchange).
The redemption fee is intended to offset the costs of 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 a shareholder acquired shares 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 accounted for as an addition to paid-in
capital and are presented on the Statements of Changes in Net Assets.
5. Line of Credit. High Income Fund and Strategic Income Fund, together with
certain other funds of IXIS Advisor Funds Trusts and Loomis Sayles Funds
Trusts, participate in a $75,000,000 committed line of credit provided by State
Street Bank. Interest is charged to a Fund based on its borrowing at a rate per
annum equal to the Federal Funds rate plus 0.50%. In addition, a Fund is
charged its pro rata portion of a facility fee equal to 0.09% per annum on the
unused portion of the line of credit. There were no borrowings by High Income
Fund and Strategic Income Fund during the six months ended March 31, 2006.
6. Concentration of Credit. Massachusetts Tax Free Income Fund primarily
invests in debt obligations issued by the Commonwealth of Massachusetts and its
political subdivisions, agencies and public authorities to obtain funds for
various public purposes. The Fund is more susceptible to factors adversely
affecting issuers of Massachusetts municipal securities than is a comparable
municipal bond fund that is not so concentrated. Uncertain economic and fiscal
conditions may affect the ability of issuers of Massachusetts municipal
securities to meet their financial obligations. At March 31, 2006, the Fund had
the following concentrations by revenue source in excess of 10% as a percentage
of the Fund's net assets: Colleges and Universities 32.1%. The Fund had
investments in securities of issuers insured by American Municipal Bond
Assurance Corporation (AMBAC), Financial Guaranty Insurance Company (FGIC), and
Municipal Bond Investors Assurance Corporation (MBIA) which aggregated 15.1%,
7.8%, and 7.2% of its net assets, respectively, at March 31, 2006.
At March 31, 2006, Municipal Income Fund had more than 10% of its net assets
invested in the following: New York 18.7%. 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.
7. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest, without par value. Transactions in capital shares were as
follows:
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
------------------------ ------------------------
Core Plus Bond Fund Shares Amount Shares Amount
- --------------------------------------------------------------------- ---------- ------------ ---------- ------------
Class A:
Shares sold 662,874 $ 7,436,747 1,388,801 $ 16,079,888
Shares issued in connection with the reinvestment of distributions 235,172 2,630,947 374,646 4,342,323
---------- ------------ ---------- ------------
898,046 10,067,694 1,763,447 20,422,211
Shares repurchased (1,537,552) (17,271,472) (2,814,749) (32,644,448)
---------- ------------ ---------- ------------
Net increase (decrease) (639,506) $ (7,203,778) (1,051,302) $(12,222,237)
---------- ------------ ---------- ------------
Class B:
Shares sold 1,308,554 $ 14,704,827 3,051,314 $ 35,378,116
Shares issued in connection with the reinvestment of distributions 83,478 934,445 138,384 1,605,875
---------- ------------ ---------- ------------
1,392,032 15,639,272 3,189,698 36,983,991
Shares repurchased (2,421,024) (27,211,613) (4,304,577) (49,860,073)
---------- ------------ ---------- ------------
Net increase (decrease) (1,028,992) $(11,572,341) (1,114,879) $(12,876,082)
---------- ------------ ---------- ------------
Class C:
Shares sold 60,131 $ 675,842 117,915 $ 1,367,189
Shares issued in connection with the reinvestment of distributions 8,524 95,483 12,453 144,537
---------- ------------ ---------- ------------
68,655 771,325 130,368 1,511,726
Shares repurchased (77,543) (873,751) (125,755) (1,458,081)
---------- ------------ ---------- ------------
Net increase (decrease) (8,888) $ (102,426) 4,613 $ 53,645
---------- ------------ ---------- ------------
Class Y:
Shares sold 96,424 $ 1,087,257 294,003 $ 3,417,059
Shares issued in connection with the reinvestment of distributions 23,071 259,271 36,213 421,543
---------- ------------ ---------- ------------
119,495 1,346,528 330,216 3,838,602
Shares repurchased (166,129) (1,869,826) (471,320) (5,465,958)
---------- ------------ ---------- ------------
Net increase (decrease) (46,634) $ (523,298) (141,104) $ (1,627,356)
---------- ------------ ---------- ------------
Increase (decrease) from capital share transactions (1,724,020) $(19,401,843) (2,302,672) $(26,672,030)
========== ============ ========== ============
60
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
7. Capital Shares (continued).
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------------- -----------------------
High Income Fund Shares Amount Shares Amount
- --------------------------------------------------------------------- --------- ----------- ---------- -----------
Class A:
Shares sold 605,420 $ 3,025,519 1,843,627 $ 9,144,401
Shares issued in connection with the reinvestment of distributions 111,875 559,989 201,974 1,002,839
--------- ----------- ---------- -----------
717,295 3,585,508 2,045,601 10,147,240
Shares repurchased (663,525) (3,307,299) (1,968,099) (9,761,214)
--------- ----------- ---------- -----------
Net increase (decrease) 53,770 $ 278,209 77,502 $ 386,026
--------- ----------- ---------- -----------
Class B:
Shares sold 68,839 $ 346,913 127,125 $ 632,910
Shares issued in connection with the reinvestment of distributions 28,231 141,076 79,627 395,537
--------- ----------- ---------- -----------
97,070 487,989 206,752 1,028,447
Shares repurchased (688,952) (3,438,575) (1,513,258) (7,517,536)
--------- ----------- ---------- -----------
Net increase (decrease) (591,882) $(2,950,586) (1,306,506) $(6,489,089)
--------- ----------- ---------- -----------
Class C:
Shares sold 52,832 $ 268,151 304,056 $ 1,494,195
Shares issued in connection with the reinvestment of distributions 8,459 42,305 17,043 84,652
--------- ----------- ---------- -----------
61,291 310,456 321,099 1,578,847
Shares repurchased (93,992) (469,660) (147,783) (739,866)
--------- ----------- ---------- -----------
Net increase (decrease) (32,701) $ (159,204) 173,316 $ 838,981
--------- ----------- ---------- -----------
Increase (decrease) from capital share transactions (570,813) $(2,831,581) (1,055,688) $(5,264,082)
========= =========== ========== ===========
61
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
7. Capital Shares (continued).
Six Months Ended
March 31, 2006
------------------------
Limited Term Government and Agency Fund Shares Amount
- ------------------------------------------------------------------------------------------- ---------- ------------
Class A:
Shares sold 288,967 $ 3,245,859
Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund -- --
Shares issued in connection with the reinvestment of distributions 163,664 1,800,218
---------- ------------
452,631 5,046,077
Shares repurchased (1,750,958) (19,284,230)
---------- ------------
Net increase (decrease) (1,298,327) $(14,238,153)
---------- ------------
Class B:
Shares sold 48,754 $ 536,041
Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund -- --
Shares issued in connection with the reinvestment of distributions 15,322 168,252
---------- ------------
64,076 704,293
Shares repurchased (297,374) (3,269,001)
---------- ------------
Net increase (decrease) (233,298) $ (2,564,708)
---------- ------------
Class C:
Shares sold 33,070 $ 364,582
Shares issued in connection with the reinvestment of distributions 4,694 51,613
---------- ------------
37,764 416,195
Shares repurchased (108,247) (1,192,886)
---------- ------------
Net increase (decrease) (70,483) $ (776,691)
---------- ------------
Class Y:
Shares sold 8,868 $ 98,232
Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund -- --
Shares issued in connection with the reinvestment of distributions 4,709 51,962
---------- ------------
13,577 150,194
Shares repurchased (28,994) (318,959)
---------- ------------
Net increase (decrease) (15,417) $ (168,765)
---------- ------------
Increase (decrease) from capital share transactions (1,617,525) $(17,748,317)
========== ============
Year Ended
September 30, 2005
------------------------
Limited Term Government and Agency Fund Shares Amount
- ------------------------------------------------------------------------------------------- ---------- ------------
Class A:
Shares sold 1,025,368 $ 11,507,822
Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund 4,449,445 49,566,819
Shares issued in connection with the reinvestment of distributions 223,935 2,506,659
---------- ------------
5,698,748 63,581,300
Shares repurchased (2,390,415) (26,770,920)
---------- ------------
Net increase (decrease) 3,308,333 $ 36,810,380
---------- ------------
Class B:
Shares sold 90,600 $ 1,011,141
Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund 834,917 9,275,925
Shares issued in connection with the reinvestment of distributions 20,684 230,974
---------- ------------
946,201 10,518,040
Shares repurchased (476,529) (5,324,127)
---------- ------------
Net increase (decrease) 469,672 $ 5,193,913
---------- ------------
Class C:
Shares sold 67,790 $ 759,450
Shares issued in connection with the reinvestment of distributions 7,387 82,688
---------- ------------
75,177 842,138
Shares repurchased (174,813) (1,960,779)
---------- ------------
Net increase (decrease) (99,636) $ (1,118,641)
---------- ------------
Class Y:
Shares sold 206,094 $ 2,316,707
Shares issued in connection with acquisition of Loomis Sayles Government Securities Fund 356 3,981
Shares issued in connection with the reinvestment of distributions 5,628 63,325
---------- ------------
212,078 2,384,013
Shares repurchased (357,795) (4,047,745)
---------- ------------
Net increase (decrease) (145,717) $ (1,663,732)
---------- ------------
Increase (decrease) from capital share transactions 3,532,652 $ 39,221,920
========== ============
On March 31, 2006, one shareholder owned 7.01% of the Fund's total shares
outstanding.
62
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
7. Capital Shares (continued).
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
----------------------- ------------------------
Massachusetts Tax Free Income Fund Shares Amount Shares Amount
- --------------------------------------------------------------------- ---------- ----------- ---------- ------------
Class A:
Shares sold 73,356 $ 1,214,467 108,967 $ 1,818,083
Shares issued in connection with the reinvestment of distributions 64,113 1,059,300 124,767 2,082,631
---------- ----------- ---------- ------------
137,469 2,273,767 233,734 3,900,714
Shares repurchased (317,003) (5,240,168) (509,747) (8,484,290)
---------- ----------- ---------- ------------
Net increase (decrease) (179,534) $(2,966,401) (276,013) $ (4,583,576)
---------- ----------- ---------- ------------
Class B:
Shares sold 2,432 $ 40,057 3,203 $ 53,537
Shares issued in connection with the reinvestment of distributions 1,993 32,857 4,326 72,024
---------- ----------- ---------- ------------
4,425 72,914 7,529 125,561
Shares repurchased (20,866) (344,121) (82,197) (1,367,143)
---------- ----------- ---------- ------------
Net increase (decrease) (16,441) $ (271,207) (74,668) $ (1,241,582)
---------- ----------- ---------- ------------
Increase (decrease) from capital share transactions (195,975) $(3,237,608) (350,681) $ (5,825,158)
========== =========== ========== ============
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
----------------------- ------------------------
Municipal Income Fund Shares Amount Shares Amount
- --------------------------------------------------------------------- ---------- ----------- ---------- ------------
Class A:
Shares sold 256,330 $ 1,945,444 417,124 $ 3,133,149
Shares issued in connection with the reinvestment of distributions 171,113 1,272,802 359,731 2,701,656
---------- ----------- ---------- ------------
427,443 3,218,246 776,855 5,834,805
Shares repurchased (1,080,487) (8,046,578) (2,060,532) (15,468,783)
---------- ----------- ---------- ------------
Net increase (decrease) (653,044) $(4,828,332) (1,283,677) $ (9,633,978)
---------- ----------- ---------- ------------
Class B:
Shares sold 37,210 $ 278,169 91,090 $ 683,767
Shares issued in connection with the reinvestment of distributions 8,537 63,567 20,236 152,169
---------- ----------- ---------- ------------
45,747 341,736 111,326 835,936
Shares repurchased (192,787) (1,434,061) (309,437) (2,326,615)
---------- ----------- ---------- ------------
Net increase (decrease) (147,040) $(1,092,325) (198,111) $ (1,490,679)
---------- ----------- ---------- ------------
Increase (decrease) from capital share transactions (800,084) $(5,920,657) (1,481,788) $(11,124,657)
========== =========== ========== ============
63
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2006 (Unaudited)
7. Capital Shares (continued).
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
-------------------------- --------------------------
Strategic Income Fund Shares Amount Shares Amount
- --------------------------------------------------------------------- ---------- -------------- ---------- --------------
Class A:
Shares sold 53,471,579 $ 756,636,872 50,308,376 $ 706,576,467
Shares issued in connection with the reinvestment of distributions 1,780,367 25,158,828 1,468,469 20,639,715
---------- -------------- ---------- --------------
55,251,946 781,795,700 51,776,845 727,216,182
Shares repurchased (9,535,558) (134,930,972) (8,154,982) (114,434,654)
---------- -------------- ---------- --------------
Net increase (decrease) 45,716,388 $ 646,864,728 43,621,863 $ 612,781,528
---------- -------------- ---------- --------------
Class B:
Shares sold 1,693,091 $ 24,043,352 3,250,360 $ 45,753,417
Shares issued in connection with the reinvestment of distributions 135,922 1,925,497 252,300 3,556,640
---------- -------------- ---------- --------------
1,829,013 25,968,849 3,502,660 49,310,057
Shares repurchased (1,266,525) (17,945,228) (2,831,055) (39,810,800)
---------- -------------- ---------- --------------
Net increase (decrease) 562,488 $ 8,023,621 671,605 $ 9,499,257
---------- -------------- ---------- --------------
Class C:
Shares sold 29,653,688 $ 421,041,631 37,693,843 $ 531,354,799
Shares issued in connection with the reinvestment of distributions 425,821 6,036,013 386,067 5,441,310
---------- -------------- ---------- --------------
30,079,509 427,077,644 38,079,910 536,796,109
Shares repurchased (3,746,977) (53,157,554) (3,055,156) (42,960,385)
---------- -------------- ---------- --------------
Net increase (decrease) 26,332,532 $ 373,920,090 35,024,754 $ 493,835,724
---------- -------------- ---------- --------------
Class Y:
Shares sold 6,014,573 $ 85,451,868 3,058,044 $ 42,955,389
Shares issued in connection with the reinvestment of distributions 27,203 384,224 30,007 421,552
---------- -------------- ---------- --------------
6,041,776 85,836,092 3,088,051 43,376,941
Shares repurchased (380,517) (5,389,884) (332,834) (4,648,580)
---------- -------------- ---------- --------------
Net increase (decrease) 5,661,259 $ 80,446,208 2,755,217 $ 38,728,361
---------- -------------- ---------- --------------
Increase (decrease) from capital share transactions 78,272,667 $1,109,254,647 82,073,439 $1,154,844,870
========== ============== ========== ==============
64
[LOGO]
Equity Funds
Semiannual Report
March 31, 2006
[LOGO]
Loomis Sayles Global Markets Fund
(formerly Loomis Sayles Worldwide Fund)
Loomis Sayles Growth Fund
Loomis Sayles Research Fund
TABLE OF CONTENTS
Management Discussion
and Performance..........Page 1
Portfolio of InvestmentsPage 10
Financial Statements....Page 19
LOOMIS SAYLES GLOBAL MARKETS FUND
PORTFOLIO PROFILE
Objective:
Seeks high total 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 markets
- --------------------------------------------------------------------------------
Fund Inception:
May 1, 1996
- --------------------------------------------------------------------------------
Managers:
Mark Baribeau
Dan Fuss
Warren Koontz
David Rolley
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A LGMAX
Class C LGMCX
Class Y LSWWX
- --------------------------------------------------------------------------------
What You Should Know:
Foreign and emerging market securities involve risks not associated with
domestic securities, including fluctuations in currencies, differing political
and economic conditions and accounting standards. Value stocks may fall out of
favor and underperform the overall market during any given period. Growth
stocks can be more sensitive to market movements because their prices are based
in part on future expectations. Fixed-income securities are subject to credit
risk and interest-rate risk; their value generally rises when prevailing
interest rates fall and declines when rates rise. Lower-rated bonds may offer
higher yields in return for more risk.
Management Discussion
- --------------------------------------------------------------------------------
Strong returns from its globally diversified portfolio of stocks and bonds
provided an attractive return for shareholders of Loomis Sayles Global Markets
Fund, formerly Loomis Sayles Worldwide Fund. For the six months ended March 31,
2006, the fund's total return was 8.44%, based on the net asset value of the
newly created Class A shares and reinvested during the period. (Please see
Notes to Charts on the next page for an explanation of how Class A shares were
calculated.)
For the period, the MSCI World Index (the fund's benchmark) returned 10.09%.
The six-month return on the Citigroup World Government Bond Index, which
includes government bonds issued in the United States and other developed
countries, was -2.32% for the period, while the average return on Morningstar's
Moderate Allocation category was 5.11%. The total return on the Standard &
Poor's 500 Index, the fund's former benchmark, was 6.38% for the six months
ended March 31, 2006.
JAPANESE AND U.S. STOCKS DROVE EQUITY SELECTIONS
Our equity approach is to maintain a global portfolio composed of our best
value and growth ideas, and to focus on stock selection rather than country or
sector allocation. Having said that, clear leaders emerged during the six
months ended March 31, 2006.
Japanese stocks performed well, as that economy began a long-overdue recovery
in the wake of economic reforms. Among the fund's best-performing stocks were
Yamada Denki, one of Japan's larger consumer electronics retailers; and Orix,
Japan's leading non-bank financial enterprise. Switzerland's ABB Ltd., which
sells power and automation technology to utility companies, also benefited from
the world's need to increase infrastructure in the power industry. Financial
stocks and information technology drove performance in the fund's U.S. equity
holdings, where leading selections included CB Richard Ellis Group, a global
real estate services firm. Despite weakness in the first three months of 2006,
internet search giant Google was a strong contributor to the fund's results.
However, our healthcare selections detracted slightly from performance. These
included Stryker Corporation, a medical technology company, and Cephalon, a
biotech company. Formerly strong contributor Southwestern Energy fell sharply
as a warmer-than-expected winter contributed to a drop in energy prices.
Cephalon, Stryker and Southwestern Energy were sold.
U.S. DOLLAR WAS STRONGEST CURRENCY
Currency returns were dominated by gains in the U.S. dollar portion of the
fund. Non-U.S.-dollar markets were a net negative for the period, chiefly due
to losses in the euro and the yen, both of which lost ground relative to the
U.S. dollar. Small positions in the Brazilian, Indonesian, South Korean and
Thai currencies were also strongly positive. Other strong currencies included
Mexico and the U.K.
HIGH-YIELDING AND CONVERTIBLE U.S. BONDS HEADED FIXED-INCOME SELECTIONS
Fixed-income gains during the period were dominated by specific U.S. high-yield
and convertible securities. Top-performing individual issues included several
convertible bonds issued by Level 3 Communications. (Convertible bonds convey
the right to be exchanged for the issuing company's common stock.) Corning
bonds and our J.P. Morgan Chase note denominated in the Indonesian rupiah
rounded out our top three fixed-income performers. The worst performers in this
section were Calpine Canada, SLM (New Zealand) and News Corp. (Australia). We
have been gradually increasing the duration of the U.S. dollar portfolio by
adding long-term corporate bonds.
ASIA SEEN AS LIKELY LEADER AMONG WORLD ECONOMIES
Global economic growth continues to look upbeat, with Asia leading the pack.
Europe (in particular Germany) is benefiting from rising consumer and business
confidence, while we continue to look for vigorous economic growth in the
United States, at least over the near term. However, investors' current
fixation with predicting the end of the Federal Reserve Board's interest rate
hikes seems to be casting a conservative shadow over the U.S. markets. We see
the potential for further increases in yields in bonds denominated in the euro
and the yen, as well as further rate hikes in the United States, although the
latter may be short-lived relative to the other two key markets, Europe and
Japan.
1
LOOMIS SAYLES GLOBAL MARKETS FUND
Investment Results through March 31, 2006
- --------------------------------------------------------------------------------
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/
May 1, 1996 (inception)/1/ through March 31, 2006
[CHART]
Net Maximum S&P
Asset Sales MSCI World Citigroup 500
Value/2/ Charge/3/ Index WGBI Index
-------- ---------- ---------- --------- ------
5/1/1996 10,000 9,425 10,000 10,000 10,000
5/31/1996 10,089 9,509 10,000 10,000 10,000
6/30/1996 10,118 9,536 10,052 10,079 10,038
7/31/1996 9,774 9,212 9,699 10,272 9,595
8/31/1996 10,011 9,435 9,812 10,312 9,797
9/30/1996 10,335 9,741 10,198 10,354 10,348
10/31/1996 10,531 9,926 10,271 10,547 10,634
11/30/1996 11,034 10,399 10,849 10,686 11,438
12/31/1996 10,910 10,283 10,677 10,600 11,211
1/31/1997 10,910 10,283 10,807 10,317 11,911
2/28/1997 10,920 10,292 10,933 10,239 12,005
3/31/1997 10,899 10,273 10,719 10,162 11,512
4/30/1997 11,001 10,368 11,071 10,072 12,199
5/31/1997 11,314 10,664 11,757 10,346 12,941
6/30/1997 11,445 10,787 12,345 10,470 13,521
7/31/1997 12,060 11,367 12,915 10,388 14,597
8/31/1997 11,765 11,088 12,053 10,382 13,779
9/30/1997 12,234 11,531 12,710 10,603 14,534
10/31/1997 11,520 10,857 12,043 10,823 14,049
11/30/1997 11,530 10,867 12,258 10,657 14,699
12/31/1997 11,262 10,615 12,409 10,625 14,951
1/31/1998 11,600 10,933 12,757 10,728 15,117
2/28/1998 12,299 11,591 13,622 10,815 16,207
3/31/1998 12,412 11,698 14,199 10,708 17,037
4/30/1998 12,254 11,550 14,340 10,879 17,208
5/31/1998 11,725 11,051 14,163 10,905 16,913
6/30/1998 11,229 10,583 14,501 10,921 17,600
7/31/1998 11,229 10,583 14,480 10,935 17,412
8/31/1998 10,035 9,458 12,551 11,233 14,895
9/30/1998 10,013 9,437 12,775 11,831 15,849
10/31/1998 10,734 10,117 13,932 12,181 17,138
11/30/1998 11,365 10,712 14,763 12,009 18,177
12/31/1998 11,561 10,896 15,486 12,251 19,224
1/31/1999 11,720 11,046 15,828 12,138 20,028
2/28/1999 11,499 10,838 15,409 11,748 19,406
3/31/1999 11,855 11,174 16,053 11,778 20,182
4/30/1999 12,347 11,637 16,688 11,773 20,964
5/31/1999 12,409 11,695 16,080 11,575 20,469
6/30/1999 12,692 11,962 16,832 11,372 21,605
7/31/1999 12,925 12,182 16,784 11,651 20,930
8/31/1999 12,876 12,136 16,757 11,705 20,827
9/30/1999 12,778 12,044 16,596 11,887 20,256
10/31/1999 13,270 12,507 17,461 11,881 21,537
11/30/1999 15,339 14,457 17,955 11,757 21,975
12/31/1999 18,524 17,459 19,410 11,728 23,269
1/31/2000 17,886 16,858 18,301 11,478 22,100
2/29/2000 20,437 19,262 18,353 11,396 21,682
3/31/2000 20,118 18,961 19,624 11,749 23,803
4/30/2000 19,201 18,097 18,796 11,365 23,087
5/31/2000 18,709 17,633 18,323 11,454 22,613
6/30/2000 19,321 18,210 18,942 11,731 23,171
7/31/2000 18,683 17,609 18,411 11,533 22,809
8/31/2000 19,201 18,097 19,012 11,446 24,225
9/30/2000 18,669 17,596 18,004 11,423 22,946
10/31/2000 17,779 16,756 17,704 11,278 22,849
11/30/2000 16,888 15,917 16,632 11,502 21,048
12/31/2000 17,653 16,638 16,903 11,915 21,151
1/31/2001 17,801 16,778 17,231 11,899 21,901
2/28/2001 17,338 16,341 15,777 11,895 19,904
3/31/2001 16,544 15,593 14,744 11,552 18,643
4/30/2001 16,822 15,855 15,837 11,511 20,092
5/31/2001 17,063 16,082 15,640 11,476 20,227
6/30/2001 16,933 15,959 15,153 11,371 19,734
7/31/2001 16,749 15,786 14,953 11,658 19,540
8/31/2001 16,656 15,699 14,238 12,096 18,317
9/30/2001 15,880 14,967 12,986 12,185 16,838
10/31/2001 16,195 15,263 13,236 12,281 17,159
11/30/2001 16,454 15,508 14,021 12,108 18,475
12/31/2001 16,515 15,565 14,110 11,797 18,637
1/31/2002 16,272 15,336 13,685 11,578 18,365
2/28/2002 16,291 15,355 13,568 11,638 18,011
3/31/2002 16,594 15,640 14,198 11,606 18,688
4/30/2002 16,676 15,717 13,695 12,022 17,555
5/31/2002 16,958 15,983 13,727 12,362 17,426
6/30/2002 16,574 15,621 12,897 12,959 16,185
7/31/2002 15,787 14,879 11,811 13,086 14,923
8/31/2002 15,969 15,050 11,836 13,314 15,021
9/30/2002 15,322 14,441 10,537 13,460 13,388
10/31/2002 15,705 14,802 11,316 13,405 14,567
11/30/2002 16,350 15,410 11,929 13,421 15,424
12/31/2002 16,427 15,483 11,353 14,096 14,518
1/31/2003 16,573 15,620 11,010 14,289 14,138
2/28/2003 16,741 15,778 10,822 14,490 13,926
3/31/2003 16,761 15,797 10,792 14,534 14,061
4/30/2003 17,617 16,604 11,756 14,708 15,219
5/31/2003 18,535 17,469 12,433 15,346 16,021
6/30/2003 18,682 17,608 12,653 15,098 16,225
7/31/2003 18,431 17,372 12,912 14,649 16,511
8/31/2003 18,807 17,726 13,194 14,570 16,833
9/30/2003 19,560 18,435 13,278 15,396 16,655
10/31/2003 20,291 19,124 14,069 15,319 17,597
11/30/2003 20,480 19,302 14,286 15,577 17,752
12/31/2003 21,490 20,254 15,186 16,198 18,683
1/31/2004 21,814 20,560 15,433 16,241 19,025
2/29/2004 22,074 20,804 15,697 16,266 19,290
3/31/2004 22,290 21,008 15,599 16,500 18,999
4/30/2004 21,447 20,214 15,288 15,793 18,701
5/31/2004 21,383 20,154 15,426 15,917 18,957
6/30/2004 21,836 20,581 15,762 15,951 19,326
7/31/2004 21,360 20,132 15,251 15,870 18,686
8/31/2004 21,642 20,398 15,324 16,245 18,762
9/30/2004 22,097 20,826 15,619 16,474 18,965
10/31/2004 22,702 21,397 16,005 16,961 19,255
11/30/2004 23,783 22,415 16,853 17,573 20,034
12/31/2004 24,468 23,061 17,501 17,875 20,716
1/31/2005 24,135 22,747 17,111 17,624 20,211
2/28/2005 24,777 23,352 17,660 17,649 20,636
3/31/2005 24,091 22,706 17,326 17,414 20,271
4/30/2005 23,715 22,351 16,960 17,672 19,886
5/31/2005 24,469 23,062 17,274 17,315 20,519
6/30/2005 24,890 23,459 17,431 17,165 20,548
7/31/2005 25,821 24,336 18,044 16,997 21,312
8/31/2005 25,976 24,482 18,188 17,303 21,118
9/30/2005 26,264 24,754 18,666 16,972 21,289
10/31/2005 26,085 24,586 18,217 16,663 20,934
11/30/2005 26,860 25,316 18,834 16,460 21,726
12/31/2005 27,422 25,845 19,256 16,646 21,733
1/31/2006 28,568 26,925 20,119 16,861 22,309
2/28/2006 28,342 26,712 20,098 16,774 22,369
3/31/2006 28,467 26,829 20,549 16,578 22,648
Average Annual Total Returns -- March 31, 2006
SINCE FUND
6 MONTHS/6/ 1 YEAR/6/ 5 YEARS/6/ INCEPTION/6/
CLASS A/1/
Net Asset Value/2/ 8.44% 18.21% 11.47% 11.13%
With Maximum Sales Charge/3/ 2.22 11.44 10.15 10.47
CLASS C/1/
Net Asset Value/2/ 8.07 17.36 10.66 10.30
With CDSC/4/ 7.07 16.36 10.66 10.30
Class Y/1/
Net Asset Value/2/ 8.53 18.43 11.75 11.41
- ---------------------------------------------------------------------------------------
SINCE FUND
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS INCEPTION/5/
MSCI World Index 10.09% 18.60% 6.87% 7.54%
Citigroup World Government Bond Index -2.32 -4.80 7.49 5.23
S&P 500 Index 6.38 11.72 3.97 8.87
Morningstar Moderate Allocation Fund Avg. 5.11 10.34 4.88 7.30
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com.
Class Y shares, the successor to the fund's Institutional Class, are available
to certain institutional investors only.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
FUND COMPOSITION 3/31/06 9/30/05
- ----------------------------------------------------------
Common Stocks 66.8 64.3
- ----------------------------------------------------------
Bonds and Notes 28.6 30.1
- ----------------------------------------------------------
Other Assets 4.6 5.6
- ----------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 3/31/06 9/30/05
- ----------------------------------------------------------
Orix Corp. 2.1 1.8
- ----------------------------------------------------------
QUALCOMM, Inc. 2.0 1.4
- ----------------------------------------------------------
America Movil S.A. de C.V., Series L 1.9 1.1
- ----------------------------------------------------------
Corning, Inc. 1.8 0.0
- ----------------------------------------------------------
Legg Mason, Inc. 1.7 1.7
- ----------------------------------------------------------
Piraeus Bank S.A. 1.7 1.5
- ----------------------------------------------------------
Coach, Inc. 1.7 1.3
- ----------------------------------------------------------
Yamada Denki Co., Ltd. 1.7 1.3
- ----------------------------------------------------------
Moody's Corp. 1.7 0.0
- ----------------------------------------------------------
Broadcom Corp. 1.6 0.0
- ----------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 3/31/06 9/30/05
- ----------------------------------------------------------
Capital Markets 7.6 4.8
- ----------------------------------------------------------
Pharmaceuticals 5.5 2.3
- ----------------------------------------------------------
Communications Equipment 5.3 3.1
- ----------------------------------------------------------
Sovereigns 5.2 7.3
- ----------------------------------------------------------
Commercial Banks 4.0 1.8
- ----------------------------------------------------------
Portfolio holdings and asset allocations will vary.
See page 7 for a description of the indexes.
NOTES TO CHARTS
Note: MSCI World Index replaces the S&P 500 Index as the primary broad-based
index and the Citigroup World Government Bond Index is being added as a
secondary index because Loomis Sayles believes these indices better reflect the
global nature of the securities in which the fund may invest.
/1/Returns shown in the chart include performance of the fund's Institutional
Class shares, which were redesignated as Class Y shares on 2/1/06. For
periods prior to the inception of Class A and Class C shares (2/1/06), the
prior Institutional Class performance has been restated to reflect expenses
of Class A and Class C shares, respectively. 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.
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 2/1/06, the fund was offered without a
sales charge.
/2/Does not include a sales charge.
/3/Includes the maximum sales charge for Class A shares of 5.75%.
/4/Performance for Class C shares assumes a 1% contingent deferred sales charge
(CDSC) applied when you sell shares within one year of purchase.
/5/The since-inception comparative performance figures shown are calculated
from 5/1/96.
/6/Fund performance has been increased by expense waivers and/or
reimbursements, without which performance would have been lower.
2
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.
Frequent portfolio turnover may result in increased tax liabilities that will
reduce the fund's overall return.
Management Discussion
- --------------------------------------------------------------------------------
Loomis Sayles Growth Fund takes a long-term approach, focusing on companies
that are proven leaders in their industries. For the six months ended March 31,
2006, this approach led to strong results among finance and technology
selections, but disappointments among some holdings vulnerable to short-term
volatility in prices of energy commodities.
For the six-month period, the fund's Class A shares generated a total return of
6.14% at net asset value, while the benchmark Russell 1000 Growth Index gained
6.16%. The average return on the funds in Morningstar's Large Growth category
was 7.11% for the same period.
GOOGLE, MOODY'S AND APPLE WERE TOP PERFORMERS
Internet search giant Google was the strongest individual stock in the fund's
portfolio during the first half of its fiscal year, despite weakness early in
2006. The company registered strong gains in revenue from increased internet
advertising spending in 2005, although shares slipped in the first quarter of
2006 when Google announced that its earnings were not keeping pace with earlier
expectations. This was the first such announcement since Google went public in
2004.
Among the fund's financial holdings, Moody's Corp. was the leading performer,
with two very strong quarterly earnings reports released in the past six
months. Moody's continued to benefit from brisk growth in its overseas
operations and from its healthy business in structured financing for corporate
customers.
Apple Computer was a leader among the fund's technology holdings, driven by the
extraordinary popularity of its iPod series of products. The company recently
launched several new products in the series, including the Nano, a smaller
version of the iPod, and a new flagship iPod that can play videos as well as
music. Sales of the company's new video service reached $1 million in the first
three weeks after its launch, although iPod sales have experienced some
seasonality.
SOME ENERGY AND UTILITIES COMPANIES PROVED DISAPPOINTING
Energy and utility companies had the most negative impact on results.
Chesapeake Energy and Southwestern Energy, two exploration and production
companies with a focus on natural gas, were the largest detractors from
performance. Both companies' shares declined during the six-month period, as a
warmer-than-expected winter in the Northeast led to reduced demand and the
price of natural gas fell. We sold both positions.
INCREASED FOCUS ON HEALTHCARE AND TECHNOLOGY
We increased the fund's holdings in the healthcare and technology sectors,
where we saw opportunities for accelerating earnings growth and strong
fundamentals. At the same time, we trimmed the fund's exposure to energy
because we were concerned about the recent volatility of commodity prices. We
remain consistent in our overall approach, emphasizing companies that appear to
have strong fundamentals and demonstrated leadership. We also pay close
attention to factors that influence broad economic trends, including
inflationary expectations and shifts in the Federal Reserve Board's policies.
OUTLOOK FOR CONTINUED ECONOMIC EXPANSION
We believe the economy will continue to expand, producing moderate growth in
corporate profits. If our forecast is correct, an improvement in corporate
earnings, combined with attractive stock dividend levels, should result in
positive stock market performance over the intermediate term. However, we also
believe near-term market results will be influenced by investors' fixation with
trying to predict when the Fed will stop raising short-term interest rates.
This fixation on near-term events, and the influence on investor psychology of
the latest published economic statistics, may delay the impact of long-term,
positive fundamental trends. We remain conservative in our expectations for
both economic growth and inflationary pressures.
3
LOOMIS SAYLES GROWTH FUND
Investment Results through March 31, 2006
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/1/
March 31,1996 through March 31, 2006
[CHART]
Net Asset Maximum Sales Russell 1000
Value /2/ Charge/3/ Growth Index
--------- --------- ------------
3/31/1996 $10,000 $ 9,425 $10,000
4/30/1996 10,577 9,969 10,263
5/31/1996 10,850 10,226 10,622
6/30/1996 10,869 10,244 10,636
7/31/1996 9,886 9,317 10,013
8/31/1996 10,305 9,712 10,271
9/30/1996 11,009 10,376 11,019
10/31/1996 11,458 10,799 11,086
11/30/1996 11,940 11,254 11,918
12/31/1996 11,615 10,948 11,685
1/31/1997 12,635 11,909 12,504
2/28/1997 11,944 11,257 12,420
3/31/1997 11,236 10,590 11,748
4/30/1997 11,132 10,492 12,528
5/31/1997 12,230 11,527 13,432
6/30/1997 12,619 11,893 13,969
7/31/1997 13,897 13,098 15,205
8/31/1997 13,575 12,794 14,315
9/30/1997 14,782 13,932 15,019
10/31/1997 14,621 13,780 14,464
11/30/1997 14,182 13,367 15,078
12/31/1997 14,426 13,596 15,247
1/31/1998 13,830 13,035 15,703
2/28/1998 14,804 13,953 16,884
3/31/1998 15,319 14,438 17,558
4/30/1998 15,754 14,848 17,801
5/31/1998 15,148 14,277 17,295
6/30/1998 15,823 14,913 18,355
7/31/1998 14,964 14,103 18,233
8/31/1998 11,962 11,274 15,497
9/30/1998 13,280 12,517 16,687
10/31/1998 14,186 13,370 18,028
11/30/1998 14,278 13,457 19,400
12/31/1998 16,242 15,308 21,149
1/31/1999 16,743 15,781 22,391
2/28/1999 16,054 15,131 21,368
3/31/1999 17,481 16,476 22,493
4/30/1999 17,717 16,698 22,522
5/31/1999 17,231 16,241 21,830
6/30/1999 18,439 17,379 23,359
7/31/1999 17,624 16,611 22,617
8/31/1999 17,765 16,744 22,986
9/30/1999 17,342 16,345 22,503
10/31/1999 18,676 17,602 24,203
11/30/1999 19,950 18,803 25,509
12/31/1999 23,098 21,770 28,162
1/31/2000 22,195 20,919 26,841
2/29/2000 24,951 23,517 28,153
3/31/2000 25,615 24,142 30,168
4/30/2000 23,573 22,218 28,733
5/31/2000 22,008 20,743 27,286
6/30/2000 24,205 22,813 29,354
7/31/2000 23,984 22,605 28,130
8/31/2000 26,572 25,044 30,677
9/30/2000 25,193 23,745 27,775
10/31/2000 23,304 21,964 26,461
11/30/2000 19,335 18,223 22,561
12/31/2000 19,352 18,240 21,847
1/31/2001 18,811 17,729 23,356
2/28/2001 16,557 15,605 19,391
3/31/2001 15,115 14,246 17,281
4/30/2001 16,252 15,317 19,466
5/31/2001 15,710 14,807 19,180
6/30/2001 15,512 14,621 18,736
7/31/2001 14,827 13,974 18,267
8/31/2001 13,691 12,904 16,774
9/30/2001 12,371 11,660 15,099
10/31/2001 13,062 12,311 15,891
11/30/2001 14,203 13,386 17,418
12/31/2001 14,564 13,727 17,385
1/31/2002 14,533 13,698 17,078
2/28/2002 13,753 12,962 16,369
3/31/2002 14,354 13,529 16,935
4/30/2002 13,903 13,104 15,553
5/31/2002 13,813 13,019 15,177
6/30/2002 12,851 12,112 13,773
7/31/2002 11,771 11,094 13,016
8/31/2002 11,771 11,094 13,055
9/30/2002 10,960 10,329 11,700
10/31/2002 11,771 11,094 12,774
11/30/2002 12,071 11,377 13,468
12/31/2002 11,201 10,556 12,537
1/31/2003 11,111 10,472 12,233
2/28/2003 11,051 10,415 12,177
3/31/2003 11,291 10,641 12,404
4/30/2003 12,011 11,320 13,321
5/31/2003 12,702 11,971 13,985
6/30/2003 12,732 12,000 14,178
7/31/2003 13,273 12,510 14,531
8/31/2003 13,633 12,849 14,892
9/30/2003 13,243 12,482 14,733
10/31/2003 14,504 13,670 15,560
11/30/2003 14,624 13,783 15,723
12/31/2003 14,804 13,953 16,267
1/31/2004 15,134 14,264 16,599
2/29/2004 15,254 14,377 16,705
3/31/2004 15,194 14,321 16,395
4/30/2004 14,714 13,868 16,204
5/31/2004 15,164 14,292 16,506
6/30/2004 15,615 14,717 16,713
7/31/2004 14,534 13,699 15,768
8/31/2004 14,354 13,529 15,690
9/30/2004 14,954 14,094 15,839
10/31/2004 15,494 14,603 16,086
11/30/2004 16,485 15,538 16,639
12/31/2004 17,117 16,133 17,292
1/31/2005 16,425 15,481 16,715
2/28/2005 16,665 15,707 16,893
3/31/2005 16,185 15,255 16,585
4/30/2005 15,675 14,774 16,269
5/31/2005 16,696 15,736 17,057
6/30/2005 17,117 16,132 16,994
7/31/2005 17,957 16,924 17,824
8/31/2005 17,657 16,642 17,595
9/30/2005 18,107 17,066 17,676
10/31/2005 17,988 16,954 17,504
11/30/2005 18,858 17,774 18,259
12/31/2005 18,919 17,831 18,202
1/31/2006 19,579 18,453 18,521
2/28/2006 19,248 18,141 18,492
3/31/2006 19,206 18,103 18,765
Average Annual Total Returns -- March 31, 2006
6 MONTHS/5/ 1 YEAR/5/ 5 YEARS/5/ 10 YEARS/5/
CLASS A/1/
Net Asset Value/2/ 6.14% 18.74% 4.92% 6.74%
With Maximum Sales Charge/3/ 0.00 11.89 3.69 6.11
CLASS B/1/
Net Asset Value/2/ 5.72 17.82 4.13 5.96
With CDSC/4/ 0.72 12.82 3.87 5.96
CLASS C/1/
Net Asset Value/2/ 5.72 17.82 4.13 5.96
With CDSC/4/ 4.72 16.82 4.13 5.96
CLASS Y/1/
Net Asset Value/2/ 6.07 19.00 5.17 6.98
- -------------------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Russell 1000 Growth Index 6.16% 13.14% 1.66% 6.50%
Morningstar Large Growth Fund Avg. 7.11 15.28 1.67 6.72
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.ixisadvisorfunds.com.
Class Y shares, the successor to the fund's Institutional Class, are available
to certain institutional investors only.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
FUND COMPOSITION 3/31/06 9/30/05
- ------------------------------------------------------
Common Stocks 98.3 96.3
- ------------------------------------------------------
Short Term Investments and Other 1.7 3.7
- ------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 3/31/06 9/30/05
- ------------------------------------------------------
Apple Computer, Inc. 3.3 2.1
- ------------------------------------------------------
Goldman Sachs Group, Inc. 3.3 1.2
- ------------------------------------------------------
UnitedHealth Group, Inc. 3.3 2.0
- ------------------------------------------------------
QUALCOMM, Inc. 3.2 2.5
- ------------------------------------------------------
Legg Mason, Inc. 3.2 3.5
- ------------------------------------------------------
Lehman Brothers Holdings, Inc. 3.1 2.0
- ------------------------------------------------------
Cisco Systems, Inc. 3.0 0.9
- ------------------------------------------------------
Moody's Corp. 2.9 2.6
- ------------------------------------------------------
Starbucks Corp. 2.9 0.0
- ------------------------------------------------------
Corning, Inc. 2.7 1.4
- ------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 3/31/06 9/30/05
- ------------------------------------------------------
Capital Markets 12.9 13.3
- ------------------------------------------------------
Healthcare Providers & Services 12.5 11.0
- ------------------------------------------------------
Communications Equipment 10.4 7.1
- ------------------------------------------------------
Computers & Peripherals 6.6 4.9
- ------------------------------------------------------
Specialty Retail 5.6 5.0
- ------------------------------------------------------
Portfolio holdings and asset allocations will vary.
See page 7 for a description of the indexes.
NOTES TO CHARTS
/1/Returns shown in the chart include performance of the fund's Retail Class
shares, which were converted to Class A shares on 9/12/03. The prior Retail
Class performance has been restated to reflect expenses of Class A shares.
For periods before the inception of Retail Class shares (12/31/96),
performance shown for Class A has been based on the performance of the
fund's Institutional Class shares, adjusted to reflect the higher expenses
paid by Class A shares. The restatement of the fund's performance to reflect
Class A expenses is based on the net expenses of the Class after taking into
effect the fund's current expense cap arrangements. For periods prior to the
inception of Class B and Class C shares (9/12/03), performance is based on
prior Institutional Class performance, restated to reflect the loads and
expenses of Class B and Class C shares, respectively. Class Y performance
has been restated to reflect the net expenses of the Institutional Class
after taking into effect the fund's current expense cap arrangements. The
growth of $10,000 chart reflects the performance of Class A shares rather
than Class Y shares, because Class A shares include the highest sales
charge. Prior to 9/12/03, the fund was offered without a sales charge.
/2/Does not include a sales charge.
/3/Includes maximum sales charge of 5.75%.
/4/Performance for Class B shares assumes a maximum 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C shares performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/5/Fund performance has been increased by expense waivers and/or
reimbursements, 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
- --------------------------------------------------------------------------------
Managers:
Maureen G. Depp
Brian James
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A LSRRX
Class B LSCBX
Class C LSCCX
Class Y LISRX
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks are generally more sensitive to market movements than value
stocks. Foreign securities involve risks not associated with domestic
securities, such as currency fluctuations, differing political and economic
conditions, and different accounting standards. Small-cap stocks are generally
more volatile than the market.
Management Discussion
- --------------------------------------------------------------------------------
During a generally favorable climate for stock prices, Loomis Sayles Research
Fund outperformed its benchmark and provided above-average results relative to
its peers for the first half of its fiscal year, which ended March 31, 2006.
Class A shares of the fund returned 7.35% at net asset value, while the
benchmark Standard & Poor's 500 Index returned 6.38% and the average return of
funds in Morningstar's Large Blend category was 6.80%.
FINANCIAL SERVICES AND INDUSTRIAL STOCKS LED PERFORMANCE
Stocks selected in the financial services and industrial areas drove results,
while holdings in information technology also contributed. In the financial
sector, we focused on companies we believed were undervalued relative to our
assessment of their true value, which led to several successful selections in
the asset management and capital markets areas. Our de-emphasis on lending
institutions also helped.
Our best performing financial companies included Bear Stearns Co., a major
investment banking and brokerage firm, and CB Richard Ellis Group, a global
real estate services corporation. Our industrial holdings made positive
contributions to performance, reflecting our focus on companies that appear to
be well managed and able to generate healthy cash flows as well as benefit from
opportunities at this stage in the economic cycle. Transocean, the world's
leading offshore drilling contractor, was also a top contributor. Investors
were encouraged by announcements that Transocean had signed several multi-year
drilling contracts.
HEALTHCARE AND SOME ENERGY INVESTMENTS PROVED DISAPPOINTING
Our healthcare and energy selections were less successful. Several of the
portfolio's healthcare stocks, which had performed well in 2005, slumped as
investors became concerned about high valuations and the sustainability of
company growth trends. Mounting concerns about regulatory pressures and
reimbursement issues also hurt some healthcare holdings. One notable
disappointment in this sector was Kinetic Concepts, a manufacturer and
distributor of medical equipment with strong fundamentals. We sold the position
because of the unpredictability of several factors affecting its earnings
outlook.
In the case of our energy holdings, the prices of several stocks declined after
years of strong performance. Some energy companies also were hurt by declining
natural gas prices during the quarter, related to lower-than-expected demand
because of warm weather. Chevron declined because of short-term production
issues related to damage during the hurricane season. Shares of Apple Computer,
an outstanding performer in 2005, also slipped in price during the first three
months of calendar 2006, reflecting weakness in sales of its successful iPod
products. We believe this weakness will prove to be a seasonal phenomenon, but
investors generally seemed uncertain about the impact of Apple's plans to adopt
a new semiconductor architecture for its computers. Both Chevron and Apple were
sold.
STOCK SELECTION RATHER THAN SECTOR DECISIONS DRIVES STRATEGY
In managing this fund, we use a "bottom-up" approach, focusing on each
company's fundamentals within the context of its industry and competitive
dynamics. At the same time, we try to neutralize the impact of macroeconomic
factors that are difficult to predict. Our sector weightings tend to remain
close to those of the benchmark Standard & Poor's 500 Index. This strategy is a
constant over time.
GENERAL MARKET SHOULD PRODUCE MODERATE RETURNS
In general, we believe stocks have the potential to deliver positive returns,
in line with long-term historical averages. Against a backdrop of steady
economic growth, we think corporations should be able to continue to improve
their earnings while paying respectable stock dividends. However, our favorable
outlook is tempered by a recognition that the market often is influenced by
short-term factors that can impede the recognition of long-term trends. We
continue to have a conservative view of the prospects for both economic growth
and inflationary pressures and we look forward to the time when the Federal
Reserve Board is able to shift to a more neutral policy, neither stimulating
nor muting economic expansion.
5
LOOMIS SAYLES RESEARCH FUND
Investment Results through March 31, 2006
- --------------------------------------------------------------------------------
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/
July 31, 2000 (inception) through March 31, 2006
[CHART]
Net Asset Value/2/ Maximum Sales Charge/3/ S&P 500 Index
------------------ ----------------------- -------------
7/31/2000 $10,000 $ 9,425 $10,000
8/31/2000 10,937 10,308 10,621
9/30/2000 10,538 9,932 10,060
10/31/2000 10,109 9,528 10,018
11/30/2000 8,698 8,198 9,228
12/31/2000 9,039 8,519 9,273
1/31/2001 9,149 8,623 9,602
2/28/2001 8,147 7,679 8,727
3/31/2001 7,646 7,206 8,174
4/30/2001 8,298 7,820 8,809
5/31/2001 8,368 7,887 8,868
6/30/2001 8,227 7,754 8,652
7/31/2001 7,997 7,537 8,567
8/31/2001 7,526 7,093 8,031
9/30/2001 6,865 6,470 7,382
10/31/2001 7,105 6,696 7,523
11/30/2001 7,626 7,187 8,100
12/31/2001 7,793 7,345 8,171
1/31/2002 7,713 7,270 8,052
2/28/2002 7,623 7,185 7,896
3/31/2002 7,903 7,449 8,193
4/30/2002 7,582 7,146 7,697
5/31/2002 7,492 7,061 7,640
6/30/2002 7,001 6,598 7,096
7/31/2002 6,429 6,059 6,543
8/31/2002 6,389 6,022 6,586
9/30/2002 5,707 5,378 5,870
10/31/2002 6,148 5,794 6,387
11/30/2002 6,399 6,031 6,762
12/31/2002 6,079 5,729 6,365
1/31/2003 5,938 5,597 6,198
2/28/2003 5,848 5,512 6,105
3/31/2003 5,928 5,587 6,165
4/30/2003 6,360 5,994 6,672
5/31/2003 6,712 6,326 7,024
6/30/2003 6,803 6,411 7,114
7/31/2003 6,954 6,554 7,239
8/31/2003 7,054 6,649 7,380
9/30/2003 6,934 6,535 7,302
10/31/2003 7,376 6,952 7,715
11/30/2003 7,467 7,037 7,783
12/31/2003 7,760 7,313 8,191
1/31/2004 7,860 7,408 8,341
2/29/2004 8,022 7,560 8,457
3/31/2004 7,951 7,494 8,330
4/30/2004 7,729 7,285 8,199
5/31/2004 7,840 7,389 8,311
6/30/2004 8,031 7,569 8,473
7/31/2004 7,658 7,218 8,193
8/31/2004 7,648 7,209 8,226
9/30/2004 7,850 7,399 8,315
10/31/2004 7,921 7,465 8,442
11/30/2004 8,354 7,874 8,783
12/31/2004 8,671 8,172 9,082
1/31/2005 8,560 8,068 8,861
2/28/2005 8,752 8,248 9,047
3/31/2005 8,689 8,189 8,887
4/30/2005 8,417 7,933 8,719
5/31/2005 8,780 8,275 8,996
6/30/2005 8,951 8,436 9,009
7/31/2005 9,273 8,740 9,344
8/31/2005 9,122 8,598 9,259
9/30/2005 9,294 8,759 9,334
10/31/2005 9,102 8,579 9,178
11/30/2005 9,545 8,997 9,525
12/31/2005 9,572 9,022 9,528
1/31/2006 9,870 9,302 9,781
2/28/2006 9,892 9,323 9,807
3/31/2006 9,977 9,405 9,929
Average Annual Total Returns -- March 31, 2006
SINCE FUND
6 MONTHS/6/ 1 YEAR/6/ 5 YEARS/6/ INCEPTION/6/
CLASS A/1/
Net Asset Value/2/ 7.35% 14.82% 5.47% -0.04%
With Maximum Sales Charge/3/ 1.20 8.17 4.21 -1.08
CLASS B/1/
Net Asset Value/2/ 6.90 13.91 4.58 -0.88
With CDSC/4/ 1.90 8.91 4.24 -1.04
CLASS C/1/
Net Asset Value/2/ 6.92 13.81 4.49 -0.95
With CDSC/4/ 5.92 12.81 4.49 -0.95
Class Y/1/
Net Asset Value/2/ 7.45 15.15 5.79 0.26
- -------------------------------------------------------------------------------
SINCE FUND
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS INCEPTION/5/
S&P 500 Index 6.38% 11.72% 3.97% -0.13%
Morningstar Large Blend Fund Avg. 6.80 12.76 3.77 0.58
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.ixisadvisorfunds.com.
Class Y shares, the successor to the fund's Institutional Class, are available
to certain institutional investors only.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
FUND COMPOSITION 3/31/06 9/30/05
- -----------------------------------------------------
Common Stocks 99.5 99.9
- -----------------------------------------------------
Other Assets 0.5 0.1
- -----------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 3/31/06 9/30/05
- -----------------------------------------------------
Hewlett-Packard Co. 3.9 1.3
- -----------------------------------------------------
Exxon Mobil Corp. 3.8 1.4
- -----------------------------------------------------
Lehman Brothers Holdings, Inc. 2.8 2.7
- -----------------------------------------------------
Procter & Gamble Co. 2.8 2.7
- -----------------------------------------------------
Bear Stearns Cos., Inc. 2.7 2.0
- -----------------------------------------------------
PepsiCo, Inc. 2.6 2.2
- -----------------------------------------------------
Goldman Sachs Group, Inc. 2.6 2.4
- -----------------------------------------------------
Coca-Cola Co. 2.5 2.8
- -----------------------------------------------------
QUALCOMM, Inc. 2.4 1.0
- -----------------------------------------------------
UnitedHealth Group, Inc. 2.4 1.7
- -----------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 3/31/06 9/30/05
- -----------------------------------------------------
Capital Markets 13.1 11.3
- -----------------------------------------------------
Healthcare Providers & Services 9.7 6.2
- -----------------------------------------------------
Computers & Peripherals 8.3 1.3
- -----------------------------------------------------
Oil, Gas & Consumable Fuels 6.6 4.3
- -----------------------------------------------------
Communications Equipment 5.8 5.2
- -----------------------------------------------------
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, 0%.
Class C shares performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/5/The since-inception performance comparisons shown are calculated from 8/1/00.
/6/Fund performance has been increased by expense waivers and/or
reimbursements, 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 IXIS Advisor Fund, contact your financial
professional or call IXIS Advisor 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 Index ("S&P 500") is an unmanaged index of U.S. common
stock performance.
Citigroup World Government Bond Index ("Citigroup WGBI") is an unmanaged index
that measures the most significant and liquid government bond indices located
around the world which carry at least an investment grade rating.
Morgan Stanley Capital International World Index ("MSCI World") is an unmanaged
index that measures global developed market equity performance.
Russell 1000 Growth Index is an unmanaged index of the 1,000 largest U.S.
companies within the Russell 3000 Index with higher price-to-book ratios and
higher forecasted growth values.
Morningstar Fund 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 IXIS Advisor Funds at 800-225-5478; on
the funds' website at www.ixisadvisorfunds.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, 2005 is available from the funds' website and the SEC's website.
QUARTERLY PORTFOLIO SCHEDULES
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 are 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 and/or service 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 amount of fund
expenses you would have paid on a $1,000 investment in the fund from October 1,
2005 (or commencement of operations, if later) through March 31, 2006. 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 VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD
LOOMIS SAYLES GLOBAL MARKETS FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- -----------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,084.00 $2.07+
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,006.00 $1.99+
- -----------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,081.00 $3.31+
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,005.00 $3.19+
- -----------------------------------------------------------------------------------------------------------------
CLASS Y
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,085.00 $5.20*
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.00 $5.03*
- -----------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after advisory
waiver and/or reimbursements): 1.00% for Class A and Y, multiplied by the
average account value over the period, multiplied by the number of days in the
most recent fiscal half-year divided by 365 (to reflect the half-year period).
+Expenses are equal to the Fund's annualized expense ratio (after advisory
waiver and/or reimbursements): 1.25% and 2.00% for Class A and C respectively,
multiplied by the average account value over the period, multiplied by 59/365
(to reflect the period from commencement of operations February 1, 2006).
8
UNDERSTANDING YOUR FUNDS' EXPENSES
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES GROWTH FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,061.40 $5.98
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.13 $5.85
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,057.20 $9.73
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.47 $9.53
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,057.20 $9.77
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.43 $9.57
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,060.70 $4.38
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.68 $4.30
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after advisory
waiver and/or reimbursements): 1.16%, 1.90%, 1.91% and 0.85% 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 365 (to reflect the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES RESEARCH FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,074.00 $6.46
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.00 $6.29
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,069.00 $10.32
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.00 $10.05
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,069.00 $10.32
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.00 $10.05
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,075.00 $4.40
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.00 $4.28
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio (after advisory
waiver and/or reimbursements): 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 the number of days in the most recent fiscal half-year divided
by 365 (to reflect the half-year period).
9
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (unaudited)
Principal
Amount Description Value (+)
- -------------------------------------------------------------------------------------
Bonds and Notes -- 28.6% of Total Net Assets
Non-Convertible Bonds -- 26.6%
Argentina -- 0.2%
$ 515,000 Republic of Argentina,
2.000%, 9/30/2014, (ARS) $ 172,363
---------------
Australia -- 0.1%
120,000 South Australia Government Finance Authority,
Zero Coupon, 12/21/2015, (AUD) 50,244
---------------
Austria -- 0.1%
10,000,000 Osterreichsche Kontrollbank AG,
1.800%, 3/22/2010, (JPY) 86,871
---------------
Brazil -- 0.1%
50,000 Republic of Brazil,
8.750%, 2/04/2025(b) 57,250
---------------
Canada -- 0.9%
120,000 Bowater, Inc.,
10.850%, 11/30/2014, (CAD) 112,206
195,000 Canadian Government Bond,
5.250%, 6/01/2013 177,259
25,000 Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, 144A 21,608
120,000 Government of Quebec,
5.625%, 6/21/2011, (EUR) 158,033
50,000 Molson Coors Capital Finance,
5.000%, 9/22/2015, (CAD) 41,569
50,000 Nortel Networks Corp.,
6.875%, 9/01/2023 45,750
25,000 Rogers Wireless, Inc.,
7.625%, 12/15/2011, (CAD) 23,040
70,000 Shaw Communications, Inc.,
6.100%, 11/16/2012 60,287
---------------
639,752
---------------
Cayman Island -- 0.4%
100,000 LPG International, Inc.,
7.250%, 12/20/2015, 144A(b) 100,380
190,000 Vale Overseas Ltd.,
8.250%, 1/17/2034 218,025
---------------
318,405
---------------
Chile -- 0.1%
100,000 Empresa Nacional de Electricidad SA,
7.875%, 2/01/2027 107,753
---------------
Denmark -- 0.1%
525,000 Kingdom of Denmark,
4.000%, 8/15/2008, (DKK) 86,230
---------------
France -- 0.0%
25,000 Dexia Municipal Agency,
5.500%, 4/25/2006, (EUR) 30,337
---------------
Germany -- 1.7%
150,000 Eurohypo AG - Europaeische Hypothekenbank der Deutschen
Bank,
4.000%, 2/01/2007 183,023
115,000 Hypothekenbank in Essen AG,
5.250%, 1/22/2008 143,809
260,000 KFW,
2.500%, 10/11/2010 301,018
Principal
Amount Description Value (+)
- -------------------------------------------------------
Germany -- continued
$ 170,000 Republic of Germany,
3.000%, 4/11/2008 $ 204,773
305,000 Republic of Germany,
3.250%, 4/17/2009 367,673
---------------
1,200,296
---------------
Indonesia -- 0.2%
125,000 Republic of Indonesia,
6.875%, 3/09/2017, 144A 123,125
---------------
Ireland -- 0.5%
30,000,000 Depfa ACS Bank,
0.750%, 9/22/2008, (JPY) 254,439
50,000 Elan Financial Plc,
7.750%, 11/15/2011 47,375
30,000 Republic of Ireland,
4.600%, 4/18/2016, (EUR) 38,800
---------------
340,614
---------------
Japan -- 0.8%
70,000,000 Japan Government,
0.200%, 9/20/2007, (JPY) 592,547
---------------
Korea -- 0.2%
150,000 Hanarotelecom, Inc.,
7.000%, 2/01/2012, 144A 148,042
---------------
Mexico -- 1.1%
125,000 America Movil SA de CV,
5.500%, 3/01/2014 119,799
1,000,000 America Movil SA,
9.000%, 1/15/2016, (MXN) 92,448
100,000 Desarrolladora Homex SA,
7.500%, 9/28/2015 97,000
7,000,000 Government of Mexico,
6.750%, 6/06/2006, (JPY) 60,157
125,000 Innova S de RL,
9.375%, 9/19/2013 140,000
100,000 Mexican Fixed Rate Bonds,
4.250%, 6/16/2015, (EUR) 118,640
1,000,000 Mexican Fixed Rate Bonds,
9.000%, 12/20/2012, (MXN) 94,691
1,000,000 Mexican Fixed Rate Bonds,
9.500%, 12/18/2014 97,677
---------------
820,412
---------------
Netherlands -- 0.5%
100,000 Excelcomindo Finance Co.,
7.125%, 1/18/2013, 144A 99,750
210,000 Kingdom of Netherlands,
5.000%, 7/15/2011, (EUR) 271,665
10,000 Olivetti Finance NV,
6.875%, 1/24/2013 13,815
---------------
385,230
---------------
Norway -- 0.4%
1,600,000 Kingdom of Norway,
5.500%, 5/15/2009, (NOK) 257,538
---------------
Peru -- 0.4%
281,300 Republic of Peru,
5.000%, 3/07/2017(d) 265,125
---------------
See accompanying notes to financial statements.
10
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (unaudited)
Principal
Amount Description Value (+)
- -------------------------------------------------------------------
Singapore -- 0.3%
$ 280,000 Government of Singapore,
4.625%, 7/01/2010, (SGD) $ 182,164
10,000 Singapore Telecommunications Ltd.,
6.000%, 11/21/2011, (EUR) 13,296
---------------
195,460
---------------
South Africa -- 0.3%
110,000 Republic of South Africa,
4.500%, 4/05/2016 132,370
50,000 Republic of South Africa,
5.250%, 5/16/2013 63,768
---------------
196,138
---------------
Supranational -- 0.4%
370,085 European Investment Bank,
Zero Coupon, 9/12/2008, (BRL), 144A 121,171
400,000 Inter-American Development Bank,
Zero Coupon, 5/11/2009 119,224
4,000,000 Inter-American Development Bank,
1.900%, 7/08/2009, (JPY) 34,896
---------------
275,291
---------------
Sweden -- 0.6%
1,575,000 Government of Sweden, Series 1040,
6.500%, 5/05/2008, (SEK) 216,538
495,000 Government of Sweden, Series 1045,
5.250%, 3/15/2011 68,659
125,000 Stena AB,
7.500%, 11/01/2013 123,438
---------------
408,635
---------------
United Kingdom -- 0.4%
1,229,424,500 J.P. Morgan Chase London,
Zero Coupon, 10/21/2010, (IDR), 144A 86,294
35,000 United Kingdom Treasury,
5.000%, 3/07/2025, (GBP) 66,763
70,000 United Kingdom Treasury,
6.250%, 11/25/2010 130,790
10,000 WPP Group Plc,
6.000%, 6/18/2008, (EUR) 12,696
---------------
296,543
---------------
United States -- 16.5%
100,000 AES Corp.,
7.750%, 3/01/2014(b) 105,000
10,000 Agco Corp.,
6.875%, 4/15/2014, (EUR) 12,603
50,000 Albertson's, Inc.,
6.625%, 6/01/2028 40,288
175,000 Albertson's, Inc.,
7.450%, 8/01/2029 154,534
10,000 American Standard, Inc.,
8.250%, 6/01/2009, (GBP) 18,764
50,000 Amkor Technology, Inc.,
10.500%, 5/01/2009(b) 49,000
75,000 Arrow Electronics, Inc.,
6.875%, 7/01/2013 77,874
100,000 ASIF Global Financing XXVII,
2.380%, 2/26/2009, (SGD), 144A 59,555
71,769 Atlas Air Worldwide Holdings, Inc.,
7.200%, 1/02/2019 72,486
Principal
Amount Description Value (+)
- -------------------------------------------------------------------------
United States -- continued
$ 42,865 Atlas Air, Inc., Series B,
7.680%, 1/02/2014 $ 39,865
135,000 Avnet, Inc.,
6.000%, 9/01/2015 129,381
110,000,000 Barclays Financial LLC,
4.060%, 9/16/2010, (KRW), 144A 109,434
4,000,000 Barclays Financial LLC,
4.100%, 3/22/2010, (THB), 144A 96,319
214,220,000 Barclays Financial LLC,
4.140%, 3/23/2009, (KRW), 144A(d) 220,063
4,000,000 Barclays Financial LLC,
4.160%, 2/22/2010, (THB), 144A 96,504
220,000,000 Barclays Financial LLC,
4.460%, 9/23/2010, (KRW), 144A 222,445
95,000 Bausch & Lomb, Inc.,
7.125%, 8/01/2028 97,403
310,000 Borden, Inc.,
7.875%, 2/15/2023 256,525
160,000 Borden, Inc.,
8.375%, 4/15/2016 147,200
5,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017(b) 4,938
70,000 Chesapeake Energy Corp.,
6.875%, 1/15/2016(b) 70,525
35,000 Chesapeake Energy Corp.,
6.875%, 11/15/2020, 144A 35,263
50,000 Columbia/HCA Healthcare Corp.,
7.190%, 11/15/2015 50,994
100,000 Columbia/HCA Healthcare Corp.,
7.580%, 9/15/2025 96,821
221,752 Continental Airlines, Inc., Series 1999-1C,
6.954%, 8/02/2009 204,500
25,000 Corning Glass,
8.875%, 3/15/2016 29,499
160,000 Cummins Engine Co., Inc.,
7.125%, 3/01/2028 163,200
25,000 Delphi Automotive Systems Corp.,
7.125%, 5/01/2029(b)(c) 15,375
50,000 Dillard's, Inc.,
6.625%, 1/15/2018(b) 46,750
50,000 Dillard's, Inc.,
7.000%, 12/01/2028(b) 44,750
21,000 ESI Tractebel Acquisition Corp., Series B,
7.990%, 12/30/2011 21,744
200,000 Federal Home Loan Mortgage Corp.,
5.125%, 1/15/2012 259,010
30,000,000 Federal National Mortgage Association,
2.125%, 10/09/2007 260,791
200,000 Federal National Mortgage Association,
2.290%, 2/19/2009 119,226
50,000 Federal National Mortgage Association,
2.375%, 2/15/2007 48,841
535,000 Ford Motor Credit Co.,
7.250%, 10/25/2011 487,509
25,000,000 General Electric Capital Corp.,
0.550%, 10/14/2008 210,243
75,000 General Motors Acceptance Corp.,
5.550%, 7/16/2007(d) 72,828
350,000 General Motors Acceptance Corp.,
5.620%, 3/20/2007(d) 342,853
See accompanying notes to financial statements.
11
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (unaudited)
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------
United States -- continued
$ 50,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025(b) $ 48,000
35,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029(b) 34,300
160,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 161,400
225,000 HCA, Inc.,
7.050%, 12/01/2027 205,236
100,000 HSBC Bank USA,
3.310%, 8/25/2010, 144A 101,300
100,000 IMC Global, Inc.,
7.375%, 8/01/2018 101,000
25,000 J.C. Penney Co., Inc.,
7.125%, 11/15/2023(b) 26,863
2,000,000 KfW International Finance, Inc.,
1.750%, 3/23/2010 17,341
29,000,000 KfW International Finance, Inc.,
2.050%, 9/21/2009 254,042
55,000 Lennar Corp.,
5.600%, 5/31/2015(b) 52,267
20,000 Level 3 Communications, Inc.,
11.500%, 3/01/2010, 144A(b) 19,450
155,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 139,887
20,000 Morgan Stanley,
5.375%, 11/14/2013 35,162
75,000 Motorola, Inc.,
8.000%, 11/01/2011(b) 83,981
150,000 News America Holdings, Inc.,
8.625%, 2/07/2014(g) 113,983
250,000 NGC Corporation Capital Trust I, Series B,
8.316%, 6/01/2027 220,000
135,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 130,275
1,000,000 NRG Energy, Inc.,
7.375%, 2/01/2016 1,021,250
40,000 Owens-Illinois, Inc.,
7.800%, 5/15/2018 39,700
115,000 Pemex Project Funding Master Trust,
7.875%, 2/01/2009 120,865
50,000 Pulte Homes, Inc.,
5.200%, 2/15/2015(b) 46,149
150,000 Pulte Homes, Inc.,
6.000%, 2/15/2035(b) 130,583
510,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 463,185
90,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 86,512
205,000 Qwest Capital Funding, Inc.,
6.875%, 7/15/2028(b) 196,800
10,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 10,175
30,000 Qwest Corp.,
6.875%, 9/15/2033 28,800
55,000 SLM Corp.,
6.500%, 6/15/2010 33,803
360,000 Time Warner, Inc.,
6.625%, 5/15/2029 353,828
160,000 Time Warner, Inc.,
6.950%, 1/15/2028 162,283
Principal
Amount Description Value (+)
- ---------------------------------------------------------------------------------------
United States -- continued
$ 115,000 Time Warner, Inc.,
7.625%, 4/15/2031 $ 125,274
75,000 Time Warner, Inc.,
7.700%, 5/01/2032 82,478
105,000 Toll Brothers Finance Corp.,
5.150%, 5/15/2015 95,025
375,000 Toys R Us,
7.375%, 10/15/2018 275,625
80,000 U.S. Treasury Bonds,
5.375%, 2/15/2031(b) 84,212
50,000 U.S. Treasury Notes,
3.000%, 2/15/2008(b) 48,365
200,000 U.S. Treasury Notes,
3.250%, 8/15/2008(b) 193,000
1,000,000 U.S. Treasury Notes,
4.000%, 8/31/2007(b) 988,320
300,000 U.S. Treasury Notes,
4.250%, 10/31/2007(b) 297,258
375,000 U.S. Treasury Notes,
4.500%, 2/15/2016(b) 364,717
90,000 Verizon Global Funding Corp.,
5.850%, 9/15/2035 80,725
5,000 Verizon Maryland, Inc.,
5.125%, 6/15/2033 3,941
100,000 Williams Cos., Inc.,
7.500%, 1/15/2031 103,750
150,000 Woolworth Corp.,
8.500%, 1/15/2022 159,000
50,000 Xerox Capital Trust I,
8.000%, 2/01/2027 51,750
20,000 Xerox Corp.,
7.200%, 4/01/2016 21,050
---------------
12,003,813
---------------
Venezuela -- 0.3%
130,000 Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A 127,400
125,000 Petrozuata Finance, Inc.,
8.220%, 4/01/2017, 144A 123,125
---------------
250,525
---------------
Total Non-Convertible Bonds (Identified Cost $19,130,519) 19,308,539
---------------
Principal
Amount
- ---------------------------------------------------------------------------------------
Convertible Bonds -- 2.0%
United States -- 2.0%
435,000 Bristol-Myers Squibb Co.,
4.410%, 9/15/2023(d) 434,456
120,000 Level 3 Communications, Inc.,
2.875%, 7/15/2010(b) 107,250
25,000 Level 3 Communications, Inc.,
6.000%, 9/15/2009(b) 21,187
5,000 Level 3 Communications, Inc.,
6.000%, 3/15/2010 3,969
500,000 Regeneron Pharmaceuticals, Inc.,
5.500%, 10/17/2008 488,750
425,000 Valeant Pharmaceuticals International,
3.000%, 8/16/2010 369,219
80,000 Valeant Pharmaceuticals International,
4.000%, 11/15/2013 68,400
---------------
Total Convertible Bonds (Identified Cost $1,562,112) 1,493,231
---------------
Total Bonds and Notes (Identified Cost $20,692,631) 20,801,770
---------------
See accompanying notes to financial statements.
12
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (unaudited)
Shares Description Value (+)
- -----------------------------------------------------------------------
Common Stocks -- 66.8% of Total Net Assets
Bermuda -- 0.8%
10,988 Marvell Technology Group Ltd.(e) $ 594,451
---------------
Germany -- 1.1%
2,175 Puma AG 823,744
---------------
Greece -- 1.7%
41,425 Piraeus Bank S.A. 1,253,982
---------------
Hong Kong -- 1.1%
145,500 China Mobile Hong Kong Ltd. 765,137
---------------
Ireland -- 1.6%
70,817 Anglo Irish Bank Corp., Plc 1,165,897
---------------
Israel -- 0.8%
14,725 Teva Pharmaceutical Industries Ltd. 606,376
---------------
Japan -- 9.8%
15,475 Honda Motor Co., Ltd.(b) 955,151
75 Mitsubishi UFJ Financial Group, Inc.(b) 1,140,575
25,000 NGK Spark Plug Co., Ltd. 582,534
62,500 Nikko Cordial Corp.(b) 1,035,036
4,800 Orix Corp.(b) 1,490,833
25,000 Sumitomo Realty & Development Co. Ltd. 692,071
10,600 Yamada Denki Co., Ltd. 1,226,131
---------------
7,122,331
---------------
Korea -- 1.7%
925 Samsung Electronics Co. Ltd. 597,236
14,200 Shinhan Financial Group Co., Ltd. 633,254
---------------
1,230,490
---------------
Mexico -- 1.9%
801,025 America Movil S.A. de C.V., Series L 1,371,387
---------------
Switzerland - 5.6%
82,775 ABB Ltd. 1,040,910
9,500 Alcon, Inc. 990,470
6,875 Roche Holding AG(b) 1,021,717
9,125 UBS AG(b) 1,002,824
---------------
4,055,921
---------------
Turkey -- 0.6%
15,380 Finansbank AS(e) 440,082
---------------
United Kingdom -- 2.3%
54,325 BHP Billiton Plc 996,127
72,425 Marks & Spencer Group Plc 699,105
---------------
1,695,232
---------------
United States -- 37.8%
23,625 Adobe Systems, Inc. 824,985
17,625 Aetna, Inc. 866,092
12,975 Apple Computer, Inc.(e) 813,792
14,600 BellSouth Corp. 505,890
27,037 Broadcom Corp., Class A(e) 1,166,917
10,650 Burlington Northern Santa Fe Corp. 887,464
15,900 Caremark Rx, Inc.(e) 781,962
9,500 Caterpillar, Inc. 682,195
13,075 CB Richard Ellis Group, Inc., Class A(e) 1,055,152
725 Chicago Mercantile Exchange Holdings, Inc. 324,438
19,375 Chico's FAS, Inc.(e) 787,400
52,000 Cisco Systems, Inc.(e) 1,126,840
35,825 Coach, Inc.(e) 1,238,828
47,342 Corning, Inc.(e) 1,273,973
7,925 Emerson Electric Co. 662,768
Shares Description Value (+)
- -----------------------------------------------------------------------------------------------------
United States -- continued
5,900 ExxonMobil Corp. $ 359,074
6,050 Genentech, Inc.(e) 511,286
9,925 GlobalSantaFe Corp. 602,944
1,525 Google, Inc., Class A(e) 594,750
25,925 Hewlett-Packard Co. 852,932
11,550 Joy Global, Inc. 690,344
10,025 Legg Mason, Inc. 1,256,433
6,575 Lehman Brothers Holdings, Inc. 950,285
19,500 McDonald's Corp. 670,020
15,425 Monster Worldwide, Inc.(e) 769,091
17,100 Moody's Corp. 1,221,966
8,475 Praxair, Inc. 467,396
9,625 Prudential Financial, Inc. 729,671
28,375 QUALCOMM, Inc. 1,436,059
13,300 St. Jude Medical, Inc.(e) 545,300
17,750 Starbucks Corp.(e) 668,110
13,550 UnitedHealth Group, Inc. 756,903
9,000 Whole Foods Market, Inc. 597,960
11,325 Zimmer Holdings, Inc.(e) 765,570
---------------
27,444,790
---------------
Total Common Stocks (Identified Cost $41,530,519) 48,569,820
---------------
Shares
- -----------------------------------------------------------------------------------------------------
Short-Term Investments -- 17.1% of Total Net Assets
3,532,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/06 at 2.950% to be repurchased at
$3,532,868 on 4/3/06 collateralized by $3,655,000 U.S. Treasury
Notes, 4.000% due 6/15/09 with a value of $3,606,198 (Note 2g) 3,532,000
8,847,360 State Street Navigator Securities Lending Prime Portfolio(f) 8,847,360
---------------
Total Short-Term Investments (Identified Cost $12,379,360) 12,379,360
---------------
Total Investments -- 112.5%
(Identified Cost $74,602,510)(a) 81,750,950
Other assets less liabilities -- (12.5)% (9,066,462)
---------------
Total Net Assets -- 100% $ 72,684,488
===============
+ See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information: (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales. Amortization of
premium on debt securities is excluded for tax purposes.)
At March 31, 2006 the net unrealized appreciation on investments
based on cost of $74,647,275 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 $ 8,081,035
Aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value (977,360)
---------------
Net unrealized appreciation $ 7,103,675
===============
(b) All or a portion of this security was on loan to brokers at March 31, 2006.
(c) Non-income producing security due to default or bankruptcy filing.
(d) Variable rate security. Rate as of March 31, 2006 is disclosed.
(e) Non-income producing security.
(f) Represents investments of securities lending collateral.
(g) Illiquid security.
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 March 31, 2006, the total value of these securities amounted to
$1,911,228 or 2.63% of total net assets.
See accompanying notes to financial statements.
13
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (unaudited)
Key to Abbreviations:
ARS Argentinian Peso
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
DKK Danish Krone
EUR Euro
GBP Great British Pound
IDR Indonesian Rupiah
JPY Japanese Yen
KRW South Korean Won
MXN Mexican Peso
NOK Norwegian Krone
SEK Swedish Krona
SGD Singapore Dollar
THB Thai Baht
Holdings at March 31, 2006 as a Percentage of Net Assets
Capital Markets 7.6%
Pharmaceuticals 5.5
Communications Equipment 5.3
Sovereigns 5.2
Commercial Banks 4.0
Wireless 3.4
Healthcare Providers & Services 3.3
Diversified Financial Services 3.0
Specialty Retail 2.8
Textiles Apparel & Luxury Goods 2.8
Treasuries 2.7
Real Estate 2.4
Computers & Peripherals 2.3
Electrical Equipment 2.3
Consumer Finance 2.1
Electric 2.0
Other, less than 2% each 38.7
See accompanying notes to financial statements.
14
LOOMIS SAYLES GROWTH FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (unaudited)
Shares Description Value (+)
- --------------------------------------------------------------------------
Common Stocks -- 98.3% of Total Net Assets
Beverages -- 2.0%
134,425 PepsiCo, Inc. $ 7,768,421
---------------
Biotechnology -- 5.3%
93,075 Amgen, Inc.(b) 6,771,206
96,225 Genentech, Inc.(b) 8,131,975
87,375 Gilead Sciences, Inc.(b) 5,436,472
---------------
20,339,653
---------------
Capital Markets -- 12.9%
64,325 Franklin Resources, Inc. 6,061,988
79,825 Goldman Sachs Group, Inc. 12,529,332
96,219 Legg Mason, Inc. 12,059,127
81,326 Lehman Brothers Holdings, Inc. 11,754,047
324,425 TD Ameritrade Holding Corp.(b)(c) 6,770,750
---------------
49,175,244
---------------
Commercial Services & Supplies -- 2.1%
159,325 Monster Worldwide, Inc.(b) 7,943,944
---------------
Communications Equipment -- 10.4%
534,225 Cisco Systems, Inc.(b) 11,576,656
377,000 Corning, Inc.(b) 10,145,070
239,775 Motorola, Inc. 5,493,245
244,325 QUALCOMM, Inc. 12,365,288
---------------
39,580,259
---------------
Computers & Peripherals -- 6.6%
202,537 Apple Computer, Inc.(b) 12,703,121
193,600 Hewlett-Packard Co. 6,369,440
174,650 Network Appliance, Inc.(b) 6,292,639
---------------
25,365,200
---------------
Diversified Financial Services -- 4.5%
13,750 Chicago Mercantile Exchange Holdings, Inc. 6,153,125
155,212 Moody's Corp. 11,091,450
---------------
17,244,575
---------------
Electrical Equipment -- 2.2%
99,475 Emerson Electric Co. 8,319,094
---------------
Energy Equipment & Services -- 0.9%
51,975 National Oilwell Varco, Inc.(b) 3,332,637
---------------
Food & Staples Retailing -- 1.8%
106,118 Whole Foods Market, Inc. 7,050,480
---------------
Healthcare Equipment & Supplies -- 4.2%
29,000 Intuitive Surgical, Inc.(b)(c) 3,422,000
159,325 St. Jude Medical, Inc.(b) 6,532,325
88,775 Zimmer Holdings, Inc.(b) 6,001,190
---------------
15,955,515
---------------
Healthcare Providers & Services -- 12.5%
191,050 Aetna, Inc. 9,388,197
185,700 Caremark Rx, Inc.(b) 9,132,726
85,875 DaVita, Inc.(b)(c) 5,170,534
71,150 Express Scripts, Inc.(b) 6,254,085
104,900 Humana, Inc.(b) 5,522,985
222,692 UnitedHealth Group, Inc. 12,439,575
---------------
47,908,102
---------------
Hotels, Restaurants & Leisure -- 2.9%
290,775 Starbucks Corp.(b)(c) 10,944,771
---------------
Insurance -- 2.1%
105,350 Prudential Financial, Inc. 7,986,583
---------------
Shares Description Value (+)
- ------------------------------------------------------------------------------------------
Internet & Catalog Retail -- 2.1%
200,600 eBay, Inc.(b) $ 7,835,436
---------------
Internet Software & Services -- 1.6%
15,955 Google, Inc., Class A(b) 6,222,450
---------------
IT Services -- 1.1%
68,450 Cognizant Technology Solutions Corp.(b) 4,072,091
---------------
Machinery -- 3.4%
99,825 Caterpillar, Inc. 7,168,433
96,225 Joy Global, Inc. 5,751,368
---------------
12,919,801
---------------
Media -- 1.0%
51,350 Getty Images, Inc.(b)(c) 3,845,088
---------------
Multiline Retail -- 1.4%
137,425 Nordstrom, Inc.(c) 5,384,312
---------------
Oil, Gas & Consumable Fuels -- 1.9%
48,100 EOG Resources, Inc. 3,463,200
85,470 XTO Energy, Inc. 3,723,928
---------------
7,187,128
---------------
Real Estate -- 2.2%
105,950 CB Richard Ellis Group, Inc., Class A(b) 8,550,165
---------------
Semiconductors & Semiconductor Equipment -- 4.1%
208,487 Broadcom Corp., Class A(b) 8,998,299
209,100 Texas Instruments, Inc. 6,789,477
---------------
15,787,776
---------------
Software -- 1.1%
115,325 Adobe Systems, Inc. 4,027,149
---------------
Specialty Retail -- 5.6%
199,973 Chico's FAS, Inc.(b) 8,126,903
91,500 Lowe's Cos., Inc. 5,896,260
176,050 The Home Depot, Inc. 7,446,915
---------------
21,470,078
---------------
Textiles Apparel & Luxury Goods -- 2.4%
263,781 Coach, Inc.(b) 9,121,547
---------------
Total Common Stocks (Identified Cost $347,408,325) 375,337,499
---------------
Principal
Amount
- ------------------------------------------------------------------------------------------
Short-Term Investments -- 5.0% of Total Net Assets
$ 10,679,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/06 at 2.950% to be repurchased at
$10,681,625 on 4/03/06 collateralized by $11,605,000 U.S.
Treasury Notes, 3.625% due 5/15/13 with a value of
$10,896,294 (Note 2g) 10,679,000
---------------
Shares
- ------------------------------------------------------------------------------------------
8,634,422 State Street Navigator Securties Lending Prime Portfolio(d) 8,634,422
---------------
Total Short-Term Investments (Identified Cost $19,313,422) 19,313,422
---------------
Total Investments -- 103.3%
(Identified Cost $366,721,747)(a) 394,650,921
Other assets less liabilities -- (3.3)% (12,722,591)
---------------
Total Net Assets -- 100% $ 381,928,330
===============
+ See Note 2a of Notes to Financial Statements.
See accompanying notes to financial statements.
15
LOOMIS SAYLES GROWTH FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (unaudited)
(a) Federal Tax Information: (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales.)
At March 31, 2006, the unrealized appreciation on investments
based on cost of $366,721,747 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 $ 32,364,191
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (4,435,017)
---------------
Net unrealized appreciation $ 27,929,174
===============
(b) Non-income producing security.
(c) All or a portion of this security was on loan to brokers at March 31, 2006.
(d) Represents investments of securities lending collateral.
Holdings at March 31, 2006 as a Percentage of Net Assets
Capital Markets 12.9%
Healthcare Providers & Services 12.5
Communications Equipment 10.4
Computers & Peripherals 6.6
Specialty Retail 5.6
Biotechnology 5.3
Diversified Financial Services 4.5
Healthcare Equipment & Supplies 4.2
Semiconductors & Semiconductor Equipment 4.1
Machinery 3.4
Hotels, Restaurants & Leisure 2.9
Textiles Apparel & Luxury Goods 2.4
Real Estate 2.2
Electrical Equipment 2.2
Insurance 2.1
Commercial Services & Supplies 2.1
Internet & Catalog Retail 2.1
Beverages 2.0
Other, less than 2% each 10.8
See accompanying notes to financial statements.
16
LOOMIS SAYLES RESEARCH FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (Unaudited)
Shares Description Value (+)
- ----------------------------------------------------------------------------
Common Stocks -- 99.5% of Total Net Assets
Aerospace & Defense -- 3.4%
4,475 Northrop Grumman Corp. $ 305,598
10,025 United Technologies Corp. 581,149
---------------
886,747
---------------
Air Freight & Logistics -- 2.0%
6,625 United Parcel Service, Inc., Class B 525,892
---------------
Beverages -- 5.1%
15,700 Coca-Cola Co. 657,359
11,875 PepsiCo, Inc. 686,256
---------------
1,343,615
---------------
Biotechnology -- 0.8%
2,375 Genentech, Inc.(b) 200,711
---------------
Capital Markets -- 13.1%
5,175 Bear Stearns Cos., Inc. 717,773
4,750 Franklin Resources, Inc. 447,640
4,350 Goldman Sachs Group, Inc. 682,776
4,725 Legg Mason, Inc. 592,184
5,200 Lehman Brothers Holdings, Inc. 751,556
12,975 TD Ameritrade Holding Corp.(b) 270,788
---------------
3,462,717
---------------
Chemicals -- 1.6%
2,775 Ecolab, Inc. 106,005
3,550 Praxair, Inc. 195,782
2,550 Rohm & Haas Co. 124,619
---------------
426,406
---------------
Commercial Services & Supplies -- 0.9%
4,775 Monster Worldwide, Inc.(b) 238,082
---------------
Communications Equipment -- 5.8%
16,525 Corning, Inc.(b) 444,688
19,675 Motorola, Inc. 450,754
12,475 QUALCOMM, Inc. 631,360
---------------
1,526,802
---------------
Computers & Peripherals -- 8.3%
15,650 EMC Corp.(b) 213,309
31,350 Hewlett-Packard Co. 1,031,416
11,125 Network Appliance, Inc.(b) 400,834
13,250 Palm, Inc.(b)(c) 306,870
3,975 SanDisk Corp.(b) 228,642
---------------
2,181,071
---------------
Containers & Packaging -- 0.4%
8,250 Smurfit-Stone Container Corp.(b) 111,953
---------------
Diversified Financial Services -- 2.8%
800 Chicago Mercantile Exchange Holdings, Inc. 358,000
5,150 Moody's Corp. 368,019
---------------
726,019
---------------
Diversified Telecommunications Services -- 3.3%
8,925 AT&T, Inc. 241,332
10,750 BellSouth Corp. 372,487
6,800 CenturyTel, Inc. 266,016
---------------
879,835
---------------
Electric Utilities -- 3.1%
7,400 Edison International 304,732
9,650 Exelon Corp. 510,485
---------------
815,217
---------------
Shares Description Value (+)
- ---------------------------------------------------------------------
Electrical Equipment -- 1.0%
3,175 Emerson Electric Co. $ 265,525
---------------
Energy Equipment & Services -- 3.3%
3,775 Halliburton Co. 275,650
7,500 Transocean, Inc.(b) 602,250
---------------
877,900
---------------
Food & Staples Retailing -- 1.4%
11,950 CVS Corp. 356,946
---------------
Healthcare Equipment & Supplies -- 0.6%
3,950 St. Jude Medical, Inc.(b) 161,950
---------------
Healthcare Providers & Services -- 9.7%
11,050 Aetna, Inc. 542,997
9,550 Caremark Rx, Inc.(b) 469,669
6,275 McKesson Corp. 327,116
6,975 Medco Health Solutions, Inc.(b) 399,110
11,125 UnitedHealth Group, Inc. 621,442
2,700 WellPoint, Inc.(b) 209,061
---------------
2,569,395
---------------
Hotels, Restaurants & Leisure -- 1.7%
12,050 Starbucks Corp.(b) 453,562
---------------
Household Products -- 2.8%
12,690 Procter & Gamble Co. 731,219
---------------
Industrial Conglomerates -- 2.5%
12,600 General Electric Co. 438,228
2,500 Textron, Inc. 233,475
---------------
671,703
---------------
Insurance -- 4.3%
16,500 Genworth Financial, Inc. 551,595
7,850 Prudential Financial, Inc. 595,108
---------------
1,146,703
---------------
Media -- 2.2%
2,575 Getty Images, Inc.(b)(c) 192,816
6,550 McGraw-Hill Cos., Inc. 377,411
---------------
570,227
---------------
Metals & Mining -- 1.0%
1,250 Nucor Corp. 130,988
1,725 Phelps Dodge Corp. 138,914
---------------
269,902
---------------
Multiline Retail -- 3.3%
5,350 Federated Department Stores, Inc. 390,550
12,000 Nordstrom, Inc.(c) 470,160
---------------
860,710
---------------
Oil, Gas & Consumable Fuels -- 6.6%
16,400 Exxon Mobil Corp. 998,104
5,750 Occidental Petroleum Corp. 532,738
4,825 XTO Energy, Inc. 210,225
---------------
1,741,067
---------------
Pharmaceuticals -- 0.9%
5,550 Abbott Laboratories 235,709
---------------
Real Estate -- 1.4%
4,700 CB Richard Ellis Group, Inc., Class A(b) 379,290
---------------
Road & Rail -- 1.3%
4,150 Burlington Northern Santa Fe Corp. 345,820
---------------
See accompanying notes to financial statements.
17
LOOMIS SAYLES RESEARCH FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Shares Description Value (+)
- ----------------------------------------------------------------------------------------------------
Semiconductors & Semiconductor Equipment -- 1.1%
8,650 Texas Instruments, Inc. $ 280,866
---------------
Software -- 0.9%
9,550 McAfee, Inc.(b) 232,352
---------------
Specialty Retail -- 2.9%
5,175 Chico's FAS, Inc.(b) 210,312
11,950 Circuit City Stores, Inc. 292,536
6,800 Gap, Inc., (The) 127,024
5,875 TJX Cos, Inc. 145,817
---------------
775,689
---------------
Total Common Stocks (Identified Cost $22,901,809) 26,251,602
---------------
Principal
Amount
- ----------------------------------------------------------------------------------------------------
Short-Term Investments -- 4.2% of Total Net Assets
$ 341,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/06 at 2.95% to be repurchased at
$341,084 on 4/03/06 collateralized by $255,000 U.S. Treasury
Bond, 8.75% due 8/15/20 with a value of $352,301 (Note 2g) 341,000
---------------
Shares
- ----------------------------------------------------------------------------------------------------
762,248 State Street Navigator Securities Lending Prime Portfolio(d) 762,248
---------------
Total Short-Term Investments (Identified Cost $1,103,248) 1,103,248
---------------
Total Investments -- 103.7%
(Identified Cost $24,005,057)(a) 27,354,850
Other assets less liabilities -- (3.7)% (960,725)
---------------
Total Net Assets -- 100% $ 26,394,125
===============
+ See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
(Amounts exclude certain adjustments made at the end of the
Fund's fiscal year for tax purposes. Such adjustments are primarily
due to wash sales.)
At March 31, 2006, the net unrealized appreciation on investments
based on cost of $24,005,057 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 $ 3,491,212
Aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value (141,419)
---------------
Net unrealized appreciation $ 3,349,793
===============
(b) Non-income producing security.
(c) All or a portion of this security was on loan to brokers at March 31, 2006.
(d) Represents investments of securities lending collateral.
Holdings at March 31, 2006 as a Percentage of Net Assets
Capital Markets 13.1%
Healthcare Providers & Services 9.7
Computers & Peripherals 8.3
Oil, Gas & Consumable Fuels 6.6
Communications Equipment 5.8
Beverages 5.1
Insurance 4.3
Aerospace & Defense 3.4
Diversified Telecommunications Services 3.3
Energy Equipment & Services 3.3
Multiline Retail 3.3
Electric Utilities 3.1
Specialty Retail 2.9
Household Products 2.8
Diversified Financial Services 2.8
Industrial Conglomerates 2.5
Media 2.2
Air Freight & Logistics 2.0
Other, Less then 2% each 15.0
See accompanying notes to financial statements.
18
STATEMENTS OF ASSETS & LIABILITIES
March 31, 2006 (Unaudited)
Global Markets Fund Growth Fund Research Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
ASSETS
Investments at cost $ 74,602,510 $ 366,721,747 $ 24,005,057
Net unrealized appreciation 7,148,440 27,929,174 3,349,793
--------------------- --------------------- ---------------------
Investments at value 81,750,950 394,650,921 27,354,850
Cash 941 383 982
Foreign currency at value (identified
cost $19,146) 19,125 -- --
Receivable for Fund shares sold 305,666 2,432,563 34,616
Receivable for securities sold 6,425 1,360,516 197,391
Dividends and interest receivable 378,059 62,004 25,019
Unrealized appreciation on forward
foreign currency contracts 8,142 -- --
Receivable from investment adviser 5,641 2,565 6,639
Securities lending income receivable 1,547 1,461 108
Other 57,121 -- 206
--------------------- --------------------- ---------------------
TOTAL ASSETS 82,533,617 398,510,413 27,619,811
--------------------- --------------------- ---------------------
LIABILITIES
Collateral on securities loaned, at
value (Note 2) 8,847,360 8,634,422 762,248
Payable for Fund shares redeemed 928 740,957 887
Payable for securities purchased 911,801 6,596,409 226,679
Foreign taxes 4,636 -- --
Management fees payable 44,479 222,996 11,159
Deferred Trustees' fees 12,914 38,575 13,063
Trustees' fees payable 7,693 13,614 5,199
Administrative fees payable 6,697 45,863 1,890
Service and distribution fees payable 45 3,504 37
Transfer agent fees payable 12,576 265,668 204,524
Other accounts payable and accrued
expenses -- 20,075 --
--------------------- --------------------- ---------------------
TOTAL LIABILITIES 9,849,129 16,582,083 1,225,686
--------------------- --------------------- ---------------------
NET ASSETS $ 72,684,488 $ 381,928,330 $ 26,394,125
===================== ===================== =====================
NET ASSETS CONSIST OF:
Paid-in capital $ 65,395,242 $ 576,041,798 $ 21,018,650
Undistributed net investment income 206,226 77,786 112,455
Accumulated net realized gain (loss)
on investments (78,672) (222,120,428) 1,913,227
Net unrealized appreciation on
investments 7,161,692 27,929,174 3,349,793
--------------------- --------------------- ---------------------
NET ASSETS $ 72,684,488 $ 381,928,330 $ 26,394,125
===================== ===================== =====================
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE
Class A shares:
Net assets $ 1,329,228 $ 163,522,481 $ 1,195,309
===================== ===================== =====================
Shares of beneficial interest 104,828 25,565,830 127,315
===================== ===================== =====================
Net asset value and redemption price
per share $ 12.68 $ 6.40 $ 9.39
===================== ===================== =====================
Offering price per share (100/94.25
of $12.68, $6.40, $9.39) $ 13.45 $ 6.79 $ 9.96
===================== ===================== =====================
Class B shares: (redemption price is
equal to net asset value less any
applicable contingent deferred sales
charges)
Net assets $ -- $ 39,783,498 $ 330,948
===================== ===================== =====================
Shares of beneficial interest -- 6,340,269 35,781
===================== ===================== =====================
Net asset value and offering price
per share $ -- $ 6.27 $ 9.25
===================== ===================== =====================
Class C shares: (redemption price is
equal to net asset value less any
applicable contingent deferred sales
charges)
Net assets $ 1,343,820 $ 46,660,461 $ 703,467
===================== ===================== =====================
Shares of beneficial interest 106,089 7,434,549 76,282
===================== ===================== =====================
Net asset value and offering price
per share $ 12.67 $ 6.28 $ 9.22
===================== ===================== =====================
Class Y shares:
Net assets $ 70,011,440 $ 131,961,890 $ 24,164,401
===================== ===================== =====================
Shares of beneficial interest 5,520,659 19,861,274 2,561,898
===================== ===================== =====================
Net asset value, offering and
redemption price per share $ 12.68 $ 6.64 $ 9.43
===================== ===================== =====================
Value of securities on loan (Note 2) $ 8,480,321 $ 8,510,964 $ 756,286
===================== ===================== =====================
See accompanying notes to financial statements.
19
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2006 (Unaudited)
Global Markets Fund Growth Fund Research Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
INVESTMENT INCOME
Dividends $ 191,351 $ 1,809,148 $ 276,002
Interest 495,515 98,393 2,938
Securities lending income 8,939 5,861 429
Less net foreign taxes withheld (7,509) -- --
--------------------- --------------------- ---------------------
688,296 1,913,402 279,369
--------------------- --------------------- ---------------------
Expenses
Management fees 219,659 730,080 67,655
Service fees - Class A 318 128,844 857
Service and distribution fees -
Class B -- 197,298 1,293
Service and distribution fees -
Class C 893 176,566 1,957
Trustees' fees and expenses 11,458 20,163 8,600
Administrative 19,365 107,905 6,707
Custodian 15,945 15,965 9,365
Transfer agent fees and expenses -
Class A, Class B, Class C 2,214 335,594 130,721
Transfer agent fees and expenses -
Class Y 17,044 102,828 5,514
Audit and tax services 26,018 14,537 17,630
Registration 8,111 47,431 25,079
Shareholder reporting 2,709 61,285 2,791
Legal 669 4,850 828
Miscellaneous 3,175 9,304 3,408
--------------------- --------------------- ---------------------
Total expenses 327,578 1,952,650 282,405
Less reimbursement/waiver (28,569) (155,609) (162,283)
--------------------- --------------------- ---------------------
Net expenses 299,009 1,797,041 120,122
--------------------- --------------------- ---------------------
Net investment income 389,287 116,361 159,247
--------------------- --------------------- ---------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain (loss) on:
Investments - net 1,146,005 12,838,320 2,028,080
Foreign currency transactions - net (28,859) -- --
Change in unrealized appreciation
(depreciation) on:
Investments - net 3,190,172 (614,461) (131,794)
Foreign currency translations - net 21,794 -- --
--------------------- --------------------- ---------------------
Net realized and unrealized gain on
investments and foreign currency
transactions 4,329,112 12,223,859 1,896,286
--------------------- --------------------- ---------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 4,718,399 $ 12,340,220 $ 2,055,533
===================== ===================== =====================
See accompanying notes to financial statements.
20
STATEMENTS OF CHANGES IN NET ASSETS
Loomis Sayles Global Markets Fund
--------------------------------------------
Six Months Ended Year Ended
March 31, 2006 September 30,
(Unaudited) 2005
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 389,287 $ 405,344
Net realized gain on investments and foreign
currency transactions 1,117,146 1,077,096
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations 3,211,966 2,050,975
--------------------- ---------------------
Increase in net assets resulting from operations 4,718,399 3,533,415
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A -- --
Class B -- --
Class C -- --
Class Y (776,370) (480,214)
Capital gains:
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
Total distributions (776,370) (480,214)
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 9) 21,030,376 27,384,406
--------------------- ---------------------
Redemption Fees
Class Y 27 22
--------------------- ---------------------
Net increase in net assets 24,972,432 30,437,629
--------------------- ---------------------
NET ASSETS
Beginning of period 47,712,056 17,274,427
--------------------- ---------------------
End of period $ 72,684,488 $ 47,712,056
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ 206,226 $ 593,309
===================== =====================
Loomis Sayles Growth Fund
--------------------------------------------
Six Months Ended Year Ended
March 31, 2006 September 30,
(Unaudited) 2005
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 116,361 $ (729,590)
Net realized gain on investments and foreign
currency transactions 12,838,320 4,632,543
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations (614,461) 21,803,498
--------------------- ---------------------
Increase in net assets resulting from operations 12,340,220 25,706,451
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
Capital gains:
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
Total distributions -- --
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 9) 158,534,348 111,752,129
--------------------- ---------------------
Redemption Fees
Class Y -- --
--------------------- ---------------------
Net increase in net assets 170,874,568 137,458,580
--------------------- ---------------------
NET ASSETS
Beginning of period 211,053,762 73,595,182
--------------------- ---------------------
End of period $ 381,928,330 $ 211,053,762
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ 77,786 $ (38,575)
===================== =====================
Loomis Sayles Research Fund
--------------------------------------------
Six Months Ended Year Ended
March 31, 2006 September 30,
(Unaudited) 2005
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 159,247 $ 101,276
Net realized gain on investments and foreign
currency transactions 2,028,080 2,844,052
Net change in unrealized appreciation
(depreciation) on investments and foreign
currency translations (131,794) 1,214,106
--------------------- ---------------------
Increase in net assets resulting from operations 2,055,533 4,159,434
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (1,464) (59)
Class B -- (32)
Class C (293) (13)
Class Y (136,217) (91,263)
Capital gains:
Class A (24,273) --
Class B (11,742) --
Class C (13,059) --
Class Y (1,272,543) --
--------------------- ---------------------
Total distributions (1,459,591) (91,367)
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 9) 452,127 (609,338)
--------------------- ---------------------
Redemption Fees
Class Y -- --
--------------------- ---------------------
Net increase in net assets 1,048,069 3,458,729
--------------------- ---------------------
NET ASSETS
Beginning of period 25,346,056 21,887,327
--------------------- ---------------------
End of period $ 26,394,125 $ 25,346,056
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ 112,455 $ 91,182
===================== =====================
See accompanying notes to financial statements.
21
This Page Intentionally Left Blank
22
FINANCIAL HIGHLIGHTS
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 (loss) investments operations income capital gains distributions fee
---------- ------------- -------------- ---------- -------------- ------------- ------------- ----------
GLOBAL MARKETS FUND
Class A
3/31/2006* $ 10.00 $ 0.02(c) $ 2.66 $ 2.68 $ -- $ -- $ -- $ --
Class C
3/31/2006* 10.00 0.01(c) 2.66 2.67 -- -- -- --
Class Y
3/31/2006(g) 11.84 0.08(c) 0.92 1.00 (0.16) -- (0.16) --
9/30/2005 10.19 0.19(c) 1.73 1.92 (0.27) -- (0.27) 0.00(d)
9/30/2004 9.32 0.25(c) 0.96 1.21 (0.34) -- (0.34) --
9/30/2003 7.53 0.32(c) 1.74 2.06 (0.27) -- (0.27) --
9/30/2002 8.48 0.35(c) (0.55) (0.20) (0.75) -- (0.75) --
9/30/2001 13.93 0.65(c) (2.44) (1.79) (0.35) (3.31) (3.66) --
* From commencement of Class operations on February 1, 2006 through March 31,
2006 (Unaudited).
(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 waiver/reimburse a portion of the Fund's expenses
during the period. Without this waiver/reimbursement the Fund's ratio of
operating expenses would have been higher.
(c)Per share net investment income (loss) has been determined on the basis of
the weighted average number of shares outstanding during the period.
See accompanying notes to financial statements.
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)(f) (%) (f) (%) (f) rate (%)
---------- ------- ----------- ---------- -------- -------------- ---------
$12.68 8.4(e) $ 1,329 1.25 2.26 1.21 41
12.67 8.1(e) 1,344 2.00 3.59 0.60 41
12.68 8.5 70,011 1.00 1.09 1.31 41
11.84 19.1 47,712 1.00 1.46 1.72 78
10.19 13.2 17,274 1.00 1.87 2.55 69
9.32 28.0 10,499 1.00 2.23 3.81 94
7.53 (3.0) 8,340 1.00 2.43 4.26 113
8.48 (15.0) 8,528 1.00 2.58 6.85 160
(d)Amount rounds to less than $0.01 per share.
(e)A sales charge for Class A shares and a contingent deferred sales charge for
Class C shares are not reflected in total return calculations. Periods less
than one year are not annualized.
(f)Annualized for periods less than one year.
(g)For the six months ended March 31, 2006 (Unaudited).
See accompanying notes to financial statements.
24
FINANCIAL HIGHLIGHTS (continued)
Income (loss) from investment operations: Less distributions:
------------------------------------------- -----------------------------------------
Net asset
value, Net realized Dividends Distributions Net asset
beginning Net and unrealized Total from from from net value,
of investment gain (loss) on investment net investment realized Total end of
the period income (loss) investments operations income capital gains distributions the period
---------- ------------- -------------- ---------- -------------- ------------- ------------- ----------
GROWTH FUND
Class A
3/31/2006(h) $ 6.03 $ 0.01(c) $ 0.36 $ 0.37 $ -- $ -- $ -- $ 6.40
9/30/2005 4.98 (0.02)(c) 1.07 1.05 -- -- -- 6.03
9/30/2004 4.41 (0.03)(c) 0.60 0.57 -- -- -- 4.98
9/30/2003 3.65 (0.02)(c) 0.78 0.76 -- -- -- 4.41
9/30/2002 4.12 (0.03)(c) (0.44) (0.47) -- -- -- 3.65
9/30/2001 14.80 (0.04)(c) (7.31) (7.35) -- (3.33) (3.33) 4.12
Class B
3/31/2006(h) 5.94 (0.02)(c) 0.35 0.33 -- -- -- 6.27
9/30/2005 4.94 (0.06)(c) 1.06 1.00 -- -- -- 5.94
9/30/2004 4.41 (0.07)(c) 0.60 0.53 -- -- -- 4.94
9/30/2003* 4.54 --(c)(d) (0.13) (0.13) -- -- -- 4.41
Class C
3/31/2006(h) 5.94 (0.02)(c) 0.36 0.34 -- -- -- 6.28
9/30/2005 4.94 (0.06)(c) 1.06 1.00 -- -- -- 5.94
9/30/2004 4.41 (0.06)(c) 0.59 0.53 -- -- -- 4.94
9/30/2003* 4.54 --(c)(d) (0.13) (0.13) -- -- -- 4.41
Class Y
3/31/2006(h) 6.26 0.01(c) 0.37 0.38 -- -- -- 6.64
9/30/2005 5.15 --(c)(d) 1.11 1.11 -- -- -- 6.26
9/30/2004 4.55 (0.02)(c) 0.62 0.60 -- -- -- 5.15
9/30/2003 3.75 (0.01)(c) 0.81 0.80 -- -- -- 4.55
9/30/2002 4.23 (0.02)(c) (0.46) (0.48) -- -- -- 3.75
9/30/2001 15.00 (0.02)(c) (7.42) (7.44) -- (3.33) (3.33) 4.23
* 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 less than one year are
not annualized.
(b)The adviser has agreed to waiver/reimburse a portion of the Fund's expenses
during the period. Without this waiver/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.
25
Ratios to average net assets:
----------------------------------
Net assets,
Total end of Net Gross Net investment Portfolio
return the period Expenses Expenses income (loss) turnover
(%) (a) (000) (%) (b)(g) (%) (g) (%) (g) rate (%)
--------- ----------- ---------- --------- -------------- ---------
6.1(e) $ 163,522 1.16 1.30 0.17 70
21.1(e) 51,248 1.10 1.60 (0.38) 164
12.9(e) 14,072 1.10 1.70 (0.58) 171
20.8(f) 947 1.10 3.11 (0.45) 201
(11.4) 456 1.10 5.20 (0.65) 192
(50.9) 518 1.10 4.11 (0.42) 281
5.7(e) 39,783 1.90 2.12 (0.65) 70
20.2(e) 38,538 1.85 2.33 (1.14) 164
12.0(e) 12,532 1.85 2.45 (1.33) 171
(2.9)(f) 2 1.85 7.92 (1.29) 201
5.7(e) 46,660 1.91 2.07 (0.60) 70
20.2(e) 25,734 1.85 2.35 (1.10) 164
12.0(e) 6,826 1.85 2.45 (1.30) 171
(2.9)(f) 2 1.85 7.92 (1.29) 201
6.1 131,962 0.85 0.87 0.46 70
21.6 95,534 0.85 0.97 (0.05) 164
13.2 40,165 0.85 1.04 (0.32) 171
21.3 28,898 0.85 1.18 (0.20) 201
(11.4) 19,635 0.85 1.32 (0.39) 192
(50.8) 21,653 0.85 1.24 (0.17) 281
(e)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.
(f)A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods less than one year are not annualized.
(g)Annualized for periods less than one year.
(h)For the six months ended March 31, 2006 (Unaudited).
See accompanying notes to financial statements.
26
FINANCIAL HIGHLIGHTS (continued)
Income (loss) from investment operations: Less distributions:
------------------------------------------- -----------------------------------------
Net asset
value, Net realized Dividends Distributions Net asset
beginning Net and unrealized Total from from from net value,
of investment gain (loss) on investment net investment realized Total end of
the period income (loss) investments operations income capital gains distributions the period
---------- ------------- -------------- ---------- -------------- ------------- ------------- ----------
RESEARCH FUND
Class A
3/31/2006(h) $ 9.22 $ 0.04(c) $ 0.62 $ 0.66 $ (0.03) $ (0.46) $ (0.49) $ 9.39
9/30/2005 7.79 --(c)(d) 1.43 1.43 --(d) -- --(d) 9.22
9/30/2004 6.90 0.01(c) 0.90 0.91 (0.02) -- (0.02) 7.79
9/30/2003 5.69 0.02(c) 1.20 1.22 (0.01) -- (0.01) 6.90
9/30/2002* 7.61 0.01(c) (1.92) (1.91) (0.01) -- (0.01) 5.69
Class B
3/31/2006(h) 9.10 --(c)(d) 0.61 0.61 --(d) (0.46) (0.46) 9.25
9/30/2005 7.73 (0.06)(c) 1.43 1.37 --(d) -- --(d) 9.10
9/30/2004 6.90 (0.05)(c) 0.90 0.85 (0.02) -- (0.02) 7.73
9/30/2003** 7.05 0.00(c)(d) (0.15) (0.15) -- -- -- 6.90
Class C
3/31/2006(h) 9.08 0.02(c) 0.59 0.61 (0.01) (0.46) (0.47) 9.22
9/30/2005 7.73 (0.07)(c) 1.42 1.35 --(d) -- --(d) 9.08
9/30/2004 6.90 (0.05)(c) 0.88 0.83 -- -- -- 7.73
9/30/2003** 7.05 0.00(c)(d) (0.15) (0.15) -- -- -- 6.90
Class Y
3/31/2006(h) 9.27 0.06(c) 0.61 0.67 (0.05) (0.46) (0.51) 9.43
9/30/2005 7.82 0.04(c) 1.44 1.48 (0.03) -- (0.03) 9.27
9/30/2004 6.92 0.03(c) 0.90 0.93 (0.03) -- (0.03) 7.82
9/30/2003 5.71 0.04(c) 1.20 1.24 (0.03) -- (0.03) 6.92
9/30/2002 6.85 0.03(c) (1.16) (1.13) (0.01) -- (0.01) 5.71
9/30/2001 10.54 0.01(c) (3.65) (3.64) -- (0.05) (0.05) 6.85
* 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 less than one year are
not annualized.
(b)The adviser has agreed to waiver/reimburse a portion of the Fund's expenses
during the period. Without this waiver/reimbursement the Fund's ratio of
operating expenses would have been higher.
(c)Per share net investment income (loss) has been determined on the basis of
the weighted average number of shares outstanding during the period.
See accompanying notes to financial statements.
27
Ratios to average net assets:
----------------------------------
Net assets,
Total end of Net Gross Net investment Portfolio
return the period Expenses Expenses income(loss) turnover
(%) (a) (000) (%) (b)(g) (%) (g) (%) (g) rate (%)
--------- ----------- ---------- --------- -------------- ---------
7.4(e) $ 1,195 1.25 20.45 0.93 83
18.4(e) 344 1.25 34.73 0.03 133
13.2(e) 106 1.21 39.85 0.07 151
21.5(f) 41 1.10 28.75 0.35 138
(25.2) 17 1.10 213.89 0.22 130
6.9(e) 331 2.00 24.02 0.09 83
17.8(e) 210 2.00 41.40 (0.71) 133
12.3(e) 57 2.00 40.60 (0.71) 151
(2.1)(f) 2 2.00 125.11 (0.72) 138
6.9(e) 703 2.00 20.87 0.34 83
17.5(e) 140 2.00 37.60 (0.76) 133
12.0(e) 3 2.00 40.60 (0.59) 151
(2.1)(f) 2 2.00 125.11 (0.72) 138
7.5 24,164 0.85 1.09 1.21 83
19.0 24,651 0.85 1.31 0.43 133
13.5 21,721 0.85 1.50 0.44 151
21.8 21,881 0.85 1.31 0.59 138
(16.6) 15,889 0.89 1.46 0.36 130
(34.7) 4,245 1.15 4.26 0.09 171
(d)Amount rounds to less than $0.01 per share.
(e)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.
(f)A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods less than one year are not annualized.
(g)Annualized for periods less than one year.
(h)For the six months ended March 31, 2006 (Unaudited).
See accompanying notes to financial statements.
28
NOTES TO FINANCIAL STATEMENTS
For the Period Ended March 31, 2006 (unaudited)
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, as amended, (the "1940 Act"), 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 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 Global Markets Fund (the "Global Markets Fund"), formerly the
Loomis Sayles Worldwide Fund.
Loomis Sayles Growth Fund (the "Growth Fund")
Loomis Sayles Research Fund (the "Research Fund")
On February 1, 2006, the Loomis Sayles Worldwide Fund changed its name to the
Loomis Sayles Global Markets Fund.
Each Fund offers Class A, Class C and Class Y shares. Growth Fund and Research
Fund also offer Class B 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 higher Rule 12b-1 fees 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 higher Rule 12b-1 fees 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, though some categories of investors
are excepted from the minimum investment amounts.
Most expenses of the Trust can be directly attributed to a Fund. Expenses which
can not be directly attributed to a Fund 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 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 Funds' investment
adviser using consistently applied procedures under the general supervision of
the Board of Trustees. Investments in other open-end investments companies are
valued at the net asset value each day.
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 March 31, 2006, approximately 21% of the
market value of the investments for the Loomis Sayles Global Markets Fund were
fair valued pursuant to procedures approved by the Board of Trustees. Certain
securities held by Loomis Sayles Global Markets Fund were valued on the basis
of a price provided by a principal market maker. The prices provided by the
principal market makers may differ from the value that would be realized if the
securities were sold.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of discount and decreased by the amortization of
premium. 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.
29
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended March 31, 2006 (unaudited)
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 and 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 period, resulting from changes in exchange rates.
The Funds may use foreign currency exchange contracts to facilitate
transactions in foreign-denominated investments. Losses may arise from changes
in the value of the foreign currency or if the counterparties do not perform
under the contracts' terms.
Each Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than
those of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. Each Fund may enter into forward foreign
currency exchange contracts. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell 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. These amounts represent the aggregate exposure to each
currency the Fund has acquired or hedged through currency contracts outstanding
at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At March 31, 2006, the Global Markets Fund had the following
open forward foreign currency exchange contract:
Local Aggregate Unrealized
Delivery Currency Face Total Appreciation
Date Amount Amount Value (Depreciation)
- - ---------- --------- --------- -------- --------------
Australian Dollar (sell) 05/15/2006 115,000 $ 85,439 $ 82,241 $ 3,198
Canadian Dollar (sell) 04/05/2006 204,000 177,157 174,779 2,378
Mexican Peso (sell) 04/26/2006 3,100,000 292,853 283,885 8,968
Mexican Peso (buy) 04/26/2006 1,550,000 141,943 146,068 (4,125)
Mexican Peso (buy) 04/26/2006 1,550,000 141,943 144,220 (2,277)
e. Federal and Foreign Income Taxes. The Trust treats each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities. Such
taxes are accrued as applicable.
f. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gain distributions are determined in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. These differences are primarily due to differing
treatments for book and tax purposes of items such as net operating losses,
foreign currency transactions and losses acquired in mergers. Temporary
differences between book and tax distributable earnings are primarily due to
deferred Trustees' fees and wash sales. 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.
30
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended March 31, 2006 (unaudited)
Tax characterization of distribution is determined on an annual basis. The tax
character of distributions paid to shareholders during the years ended
September 30, 2005 was as follows:
2005 Distributions Paid From:
- -------------------------------
Ordinary Long-Term
Income Capital Gains Total
- ------ ------------- -----
Global Markets Fund $480,214 $-- $480,214
Growth Fund -- -- --
Research Fund 91,367 -- 91,367
As of September 30, 2005, the capital loss carry forwards were as follows:
Capital loss carry forward: Global Markets Fund Growth Fund Research Fund
- --------------------------- ------------------- ------------- -------------
Expires September 30, 2008 $ -- $ (21,713,204) $--
Expires September 30, 2009 (163,859,849) --
Expires September 30, 2010 (130,022) (43,118,629) --
Expires September 30, 2011 (1,040,663) (6,192,314) --
----------- ------------- ---
Total capital loss carry forward (1,170,685) (234,883,996) --
=========== ============= ===
On December 17, 2004 the CDC Nvest Star Growth Fund merged with the Loomis
Sayles Growth Fund. As a result of this merger the Loomis Sayles Growth Fund
acquired $221,659,253 in capital loss carry forwards. In addition to the losses
acquired in mergers, the Loomis Sayles Growth Fund had accumulated capital loss
carry forwards of $13,224,743, resulting in total capital loss carry forwards
of $234,883,996 before limitations. As a significant portion of the Fund's
losses were a result of mergers, they are subject to limitation under Section
382 of the Internal Revenue Code ("IRC"). Specially, due the limitations of IRC
Section 382, $196,240,450 of capital loss carry forwards expired upon
completion of the mergers. Consequently, after limitations, the Loomis Sayles
Growth Fund has total loss carry forwards of $38,643,546, of which $32,451,232
and $6,192,314 expire in 2010 and 2011, respectively.
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. The repurchase agreements
are tri-party arrangements whereby the collateral is held at the custodian bank
in a segregated account for the benefit of the Fund and on behalf of the
counterparty. 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.
h. Securities Lending. The Funds have entered into an agreement with State
Street Bank and Trust Company ("State Street Bank"), as agent of the Funds, to
lend securities to certain designated borrowers. The loans are collateralized
with cash or securities in an amount equal to at least 105% or 102% of the
market value of the loaned international or domestic securities, respectively,
when the loan is initiated. Thereafter, the value of the collateral must remain
at least 102% of the market value of loaned securities for U.S. equities and
U.S. corporate debt; at least 105% of the market value of loaned securities for
non-U.S. equities; and at least 100% of the market value of loaned securities
for U.S. government securities, sovereign debt issued by non-U.S. governments
and non-U.S. corporate debt. In the event that the market value of the
collateral falls below the required percentage described above, the borrower
will deliver additional collateral on the next business day. As with other
extensions of credit, the Funds may bear the risk of loss with respect to the
investment of the collateral. The Funds invest cash collateral in short-term
investments, a portion of the income from which is remitted to the borrowers
and the remainder allocated between the Funds and State Street Bank as lending
agent. The market value of securities on loan to borrowers and the value of
collateral held by the Funds with respect to such loans at March 31, 2006, were
as follows:
Market Value Value of
Fund on Loan Collateral
---- ------------ ----------
Global Markets Fund $8,480,321 $8,847,360
Growth Fund 8,510,964 8,634,422
Research Fund 756,286 762,248
i. Indemnifications. Under the Funds' organizational documents, its officers
and trustees are indemnified against certain liability arising out of the
performance of their duties to the Funds. Additionally, in the normal course of
business, the Funds enter into contracts with service providers that contain
general indemnification clauses. The Funds' maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against Funds that have not yet occurred. However, based on experience, the
Funds expect the risk of loss to be remote.
31
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended March 31, 2006 (unaudited)
3. Purchases and Sales of Securities. For the six months ended March 31, 2006,
purchases and sales of securities (excluding short-term investments) and U.S.
Government/Agency Securities were as follows:
Fund Purchases Sales
---- ------------ ------------
Global Markets Fund $ 42,827,630 $ 22,849,257
Growth Fund 361,021,368 200,932,963
Research Fund 22,074,843 23,021,513
For the six months ended March 31, 2006 purchases and sales of U.S.
Government/Agency Securities by the Global Markets Fund were $966,360 and
$1,417,860, respectively.
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
Fund Daily Net Assets
---- ----------------
Global Markets Fund 0.75%
Growth Fund 0.50%
Research Fund 0.50%
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
January 31, 2007 and will be reevaluated on an annual basis.
Loomis Sayles shall be permitted to recover expenses it has borne (whether
through reduction of its management fee or otherwise) in later periods to the
extent the Funds' expenses fall below the expenses limits, provided, however,
that the Funds are not obligated to pay such deferred fees more than one year
after the end of the fiscal year in which the fee was deferred.
At March 31, 2006, the expense limits as a percentage of average daily net
assets and amounts subject to possible reimbursement under the expense
limitation agreement were as follows:
Expense Limit as a Percentage of Average
Daily Net Assets
- ----------------------------------------
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Global Markets Fund 1.25% N/A 2.00% 1.00%
Growth Fund 1.25% 2.00% 2.00% 0.85%
Research Fund 1.25% 2.00% 2.00% 0.85%
Prior to February 1, 2006, the Growth Fund limited its total operating expenses
on Class A, Class B and Class C to 1.10%, 1.85% and 1.85% of average daily net
assets, respectively.
For the six months ended March 31, 2006, 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
---- ---------- ---------- ---------- ----- -----
Global Markets Fund $219,659 $26,463 $193,196 0.75% 0.64%
Growth Fund 730,080 0 730,080 0.75% 0.75%
Research Fund 67,655 32,678 34,977 0.50% 0.26%
32
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended March 31, 2006 (unaudited)
For the six months ended March 31, 2006, in addition to the waiver of
management fees, expenses have been reimbursed as follows:
Expense
Fund Reimbursed
---- ----------
Global Markets Fund $ 2,106
Growth Fund 155, 609
Research Fund 129,605
At March 31, 2006, the amounts subject to possible reimbursement under the
expense limitation agreement were as follows:
Expenses Subject to Expenses Subject to
Possible Reimbursement Possible Reimbursement
Fund Until September 30, 2006 Until September 30, 2007
---- ------------------------ ------------------------
Global Markets Fund $109,851 $ 28,569
Growth Fund 510,048 155,609
Research Fund 248,008 162,283
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trust. Loomis Sayles' general partner is indirectly owned by IXIS Asset
Management US Group, L.P. ("IXIS US Group") (formerly IXIS Asset Management
North America, L.P.), which is part of IXIS Asset Management Group, an
international asset management group based in Paris, France. IXIS Asset
Management Group is ultimately owned principally, directly or indirectly by
three large affiliated French financial services entities: the Caisse Nationale
des Caisses d'Epargne, a financial institution owned by CDC (as defined below)
and by French regional savings banks known as the Caisses d'Epargne; the Caisse
des Depots et Consignations ("CDC"), a public sector financial institution
created by the French government in 1816; and CNP Assurances, a large French
life insurance company.
b. Administrative Expense. IXIS Asset Management Advisors, L.P. ("IXIS
Advisors"), a wholly owned subsidiary of IXIS US Group, provides certain
administrative services for the Funds and has subcontracted with 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), IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust
II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV and IXIS Cash
Management Trust ("IXIS Advisor Funds Trusts") (collectively, the "Trusts") and
IXIS Advisors, each Fund paid IXIS Advisors 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 IXIS Advisor
Funds Trusts, of the annual aggregate minimum fee of $5 million.
For the six months ended March 31, 2006, fees paid to IXIS Advisors for
administrative fees were as follows:
Administrative
Fund Fee
---- --------------
Global Markets Fund $ 19,365
Growth Fund 107,905
Research Fund 6,707
c. Service and Distribution Fees. The Trust entered into a distribution
agreement with IXIS Asset Management Distributors, L.P. ("IXIS Distributors"),
a wholly owned subsidiary of IXIS US Group. Pursuant to this agreement, IXIS
Distributors serves as principal underwriter of the Funds of the Trust, except
Loomis Sayles Investment Grade Bond Fund, Class J.
33
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended March 31, 2006 (unaudited)
Pursuant to Rule 12b-1 under the 1940 Act, 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 the Growth Fund and Research Fund's Class B
and Class C shares (the "Class B and Class C Plans").
Under the Class A Plan, each Fund pays IXIS Distributors a monthly service fee
at an annual rate not to exceed 0.25% of the average daily net assets
attributable to the Fund's Class A shares, as reimbursement for expenses
incurred by 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 Growth Fund and the Research Fund pay
IXIS Distributors a monthly service fee at an annual rate not to exceed 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 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 Growth Fund and the Research Fund
pay IXIS Distributors a monthly distribution fee at an 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 IXIS
Distributors in connection with the marketing or sale of Class B and Class C
shares.
For the six months ended March 31, 2006 the Funds paid the following service
and distribution fees:
Service Fee Distribution Fee
- ------------------------- ---------------
Fund Class A Class B Class C Class B Class C
---- ------- ------- ------- ------- -------
Global Markets Fund $ 318 N/A $ 670 N/A $ 223
Growth Fund 128,844 147,973 132,424 49,325 44,142
Research Fund 857 970 1,468 323 489
Commissions (including CDSCs) on Fund shares paid to IXIS Distributors by
investors in shares of the Funds for the six months ended March 31, 2006, were
as follows:
Fund Commissions
---- -----------
Global Markets Fund $ 16,952
Growth Fund 240,727
Research Fund 1,591
d. Trustees Fees and Expenses. The Funds do not pay any compensation directly
to its officers or Trustees who are directors, officers or employees of IXIS
Advisors, IXIS Distributors, IXIS US Group, Loomis Sayles or their affiliates.
The Chairperson of the Board receives a retainer fee at the annual rate of
$200,000. The Chairperson does not receive any meeting attendance fees for
Board of Trustees meetings or committee meetings that she attends. Each
independent Trustee (other than the Chairperson) receives, in the aggregate, a
retainer fee at the annual rate of $55,000. Each independent Trustee also
receives a meeting attendance fee of $6,000 for each meeting of the Board of
Trustees that he or she attends in person and $3,000 for each meeting of the
Board of Trustees that he or she attends telephonically. In addition, each
committee chairman receives an additional retainer fee at the annual rate of
$10,000. Each committee member receives $4,000 or $5,000 for each Contract and
Governance or Audit Committee meeting, respectively, that he or she attends in
person and $2,000 or $2,500 for each Contract and Governance or Audit Committee
meeting, respectively, that he or she attends telephonically. These fees are
allocated among the funds in the 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 November 18, 2005, the Trusts had co-chairmen of the Board. Prior to
October 1, 2005, each independent Trustee received, 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 that he or she attended. The
co-chairmen of the Board each received an additional annual retainer of
$25,000. Each committee chairman received an additional retainer fee at the
annual rate of $7,000. Each committee member received $3,750 for each committee
meeting that he or she attended. In addition, during the period October 1, 2005
to November 18, 2005, each co-chairman received an additional one-time payment
of $25,000 as compensation for their services as chairmen.
Prior to January 1, 2006, each committee member was compensated $4,000 for each
Audit Committee meeting that he or she attended in person and $2,000 for each
such meeting he or she attended telephonically.
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 Trusts on the normal payment
date. Deferred amounts remain in the fund until distributed in accordance with
the Plan.
34
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended March 31, 2006 (unaudited)
Additionally, the Board of Trustees has approved the use of the Funds' assets
to pay their portion of the annual salary for 2005 of an employee of IXIS
Advisors who supports the Funds' Chief Compliance Officer. For the period from
October 1st through December 31, 2005, each Fund's portion of such expense was
approximately $575.
e. Redemption Fees. Shareholders of Class A shares of Global Market Fund are
charged a 2% redemption fee if they redeem, including redeeming by exchange,
Class A 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 a shareholder acquired shares 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 accounted for as
an addition to paid-in capital and are presented on the Statements of Changes
in Net Assets. Prior to February 1, 2006, shareholders of Class Y shares of
Global Markets Fund were charged a 2% redemption fee.
5. Line of Credit. Each Fund, together with certain other Funds of the Loomis
Sayles Funds Trusts and IXIS Advisor Funds Trusts, participate in a $75 million
committed line of credit provided by State Street Bank. Borrowings under the
line of credit are to be made solely to temporarily finance the repurchase of
capital shares. Interest is charged to each participating Fund based on its
borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In
addition, a commitment fee of 0.09% per annum, payable at the end of each
calendar quarter, is accrued and apportioned among the participating Funds
based on their average daily unused portion of the line of credit. For the six
months ended March 31, 2006, the Funds had no borrowing under this agreement.
6. Brokerage Commission Recapture. Each Fund has entered into agreements with
certain brokers whereby the brokers will rebate a portion of brokerage
commissions. All amounts rebated by the brokers are returned to the Funds under
such agreements and are included in realized gains in the Statements of
Operations. For the six months ended March 31, 2006, amounts rebated under
these agreements were as follows:
Fund Rebates
---- -------
Global Markets Fund $ 2,746
Growth Fund 58,651
Research Fund 8,669
7. Shareholders. At March 31, 2006, 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
---- ------------ ---------------
Global Markets Fund 891,975 348,845
Growth Fund 1,566,568 2,564,124
Research Fund 1,130,171 666,041
35
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended March 31, 2006 (unaudited)
8. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest. Transactions in capital shares were as follows:
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
---------------------- ----------------------
Global Markets Fund Shares Amount Shares Amount
- -------------------------------------------------------------- --------- ----------- --------- -----------
Class A*
Issued from the sale of shares 105,016 $ 1,323,533 -- $ --
Issued in connection with the reinvestment of distributions -- -- --
Redeemed (188) (2,340) -- --
--------- ----------- --------- -----------
Net change 104,828 $ 1,321,193 -- $ --
========= =========== ========= ===========
Class C*
Issued from the sale of shares 106,089 $ 1,331,755 -- $ --
Issued in connection with the reinvestment of distributions -- -- -- --
Redeemed -- -- -- --
--------- ----------- --------- -----------
Net change 106,089 $ 1,331,755 -- $ --
========= =========== ========= ===========
Class Y
Issued from the sale of shares 1,551,764 $19,133,445 2,600,338 $30,275,197
Issued in connection with the reinvestment of distributions 53,613 656,760 42,385 458,186
Redeemed (114,543) (1,412,777) (307,403) (3,348,977)
--------- ----------- --------- -----------
Net change 1,490,834 $18,377,428 2,335,320 $27,384,406
========= =========== ========= ===========
* From commencement of Class operations on February 2, 2006 through March 31,
2006.
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
------------------------ ------------------------
Growth Fund Shares Amount Shares Amount
- -------------------------------------------------------------- ---------- ------------ ---------- ------------
Class A
Issued from the sale of shares 18,952,684 $121,474,541 2,891,752 $ 16,226,988
Issued in connection with the reinvestment of distributions -- -- -- --
Issued in connection with Merger (Note 9) -- -- 4,629,768 25,972,996
Redeemed (1,882,211) (11,888,868) (1,850,918) (10,329,710)
---------- ------------ ---------- ------------
Net change 17,070,473 $109,585,673 5,670,602 $ 31,870,274
========== ============ ========== ============
Class B
Issued from the sale of shares 604,867 $ 3,766,501 417,659 $ 2,291,627
Issued in connection with the reinvestment of distributions -- -- -- --
Issued in connection with Merger (Note 9) -- -- 4,956,246 27,556,727
Redeemed (750,327) (4,602,036) (1,424,287) (7,852,340)
---------- ------------ ---------- ------------
Net change (145,460) $ (835,535) 3,949,618 $ 21,996,014
========== ============ ========== ============
Class C
Issued from the sale of shares 3,529,737 $ 22,029,208 3,050,164 $ 16,889,388
Issued in connection with the reinvestment of distributions -- -- -- --
Issued in connection with Merger (Note 9) -- -- 636,031 3,536,331
Redeemed (425,333) (2,655,428) (737,262) (4,155,230)
---------- ------------ ---------- ------------
Net change 3,104,404 $ 19,373,780 2,948,933 $ 16,270,489
========== ============ ========== ============
Class Y
Issued from the sale of shares 5,259,539 $ 34,767,600 11,677,737 $ 65,052,505
Issued in connection with the reinvestment of distributions -- -- -- --
Issued in connection with Merger (Note 9) -- -- -- --
Redeemed (661,111) (4,357,170) (4,211,591) (23,437,153)
---------- ------------ ---------- ------------
Net change 4,598,428 $ 30,410,430 7,466,146 $ 41,615,352
========== ============ ========== ============
36
NOTES TO FINANCIAL STATEMENTS (continued)
For the Period Ended March 31, 2006 (unaudited)
Six Months Ended Year Ended
March 31, 2006 September 30, 2005
--------------------- ---------------------
Research Fund Shares Amount Shares Amount
- -------------------------------------------------------------- -------- ----------- -------- -----------
Class A
Issued from the sale of shares 94,103 $ 871,143 24,722 $ 218,280
Issued in connection with the reinvestment of distributions 2,619 23,856 7 59
Redeemed (6,736) (62,659) (1,008) (8,728)
-------- ----------- -------- -----------
Net change 89,986 $ 832,340 23,721 $ 209,611
======== =========== ======== ===========
Class B
Issued from the sale of shares 20,006 $ 182,842 27,651 $ 232,970
Issued in connection with the reinvestment of distributions 646 5,804 3 26
Redeemed (7,972) (73,450) (11,937) (99,081)
-------- ----------- -------- -----------
Net change 12,680 $ 115,196 15,717 $ 133,915
======== =========== ======== ===========
Class C
Issued from the sale of shares 66,647 $ 604,001 20,933 $ 181,888
Issued in connection with the reinvestment of distributions 183 1,639 1 12
Redeemed (5,984) (54,464) (5,853) (49,291)
-------- ----------- -------- -----------
Net change 60,846 $ 551,176 15,081 $ 132,609
======== =========== ======== ===========
Class Y
Issued from the sale of shares 216,621 $ 1,977,139 828,044 $ 7,048,438
Issued in connection with the reinvestment of distributions 153,010 1,398,512 10,737 91,263
Redeemed (468,179) (4,422,236) (955,495) (8,225,174)
-------- ----------- -------- -----------
Net change (98,548) $(1,046,585) (116,714) $(1,085,473)
======== =========== ======== ===========
9. Acquisition of Assets. After the close of business on December 17, 2004,
Growth Fund acquired all assets and liabilities of CDC Nvest Star Growth Fund
("Star Growth Fund"), pursuant to a plan of reorganization approved by Large
Cap Growth Fund shareholders on December 17, 2004. The acquisition was
accomplished by a tax-free exchange of 4,629,768 Class A shares of the Growth
Fund for 3,026,518 shares of the Star Growth Fund Class A, 4,956,246 Class B
shares of the Growth Fund for 3,333,608 shares of the Star Growth Fund Class B
and 636,031 Class C shares of the Growth Fund for 427,538 shares of the Star
Growth Fund Class C. Star Growth Fund net assets at that date of $57,066,054,
including $1,346,493 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 $89,294,106. The combined net assets of the Growth
Fund immediately following the acquisition were $146,360,160. The Growth Fund
acquired capital loss carryovers, subject to limitations, of $178,831,978 from
the Star Growth Fund.
37
[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles Aggressive Growth Fund
Loomis Sayles Small Cap Growth Fund
Loomis Sayles Small Cap Value Fund
Loomis Sayles Tax-Managed Equity Fund
Loomis Sayles Value Fund
TABLE OF CONTENTS
Fund and Manager Review 1
Portfolio of Investments 14
Statements of Assets and Liabilities 33
Statements of Operations 35
Statements of Changes in Net Assets 37
Financial Highlights 41
Notes to Financial Statements 47
SEMIANNUAL REPORT
MARCH 31, 2006 (Unaudited)
FUND AND MANAGER REVIEW
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
[PHOTO]
Phil Fine
Manager since February 1999
Manager since February 1999
FUND FACTS
SYMBOL | Institutional: LSAIX;
Retail: LAGRX
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 initial
public offering) 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 | $53.1 million
PORTFOLIO REVIEW
The Fund generated a strong return for the six-month period ended March 31,
2006, significantly outpacing its Benchmark, the Russell Midcap Growth Index.
Our stock selections in the financial services sector, which was overweighted
relative to the Benchmark, accounted for the majority of the Fund's
outperformance. In mid-October we began taking profits in some of the Fund's
energy holdings, moving from a significant overweight to a close-to-neutral
position. We used those profits to increase our holdings in the financial
services sector. This swap helped performance, because the energy sector was
weak during the period, while many of the Fund's financials stocks were strong.
Although our financial services holdings are a diverse group, our primary
exposure is to the capital markets sector (Moody's Corporation, Chicago
Mercantile Exchange, IntercontinentalExchange) and to commercial real estate
services companies (CB Richard Ellis Group). We believe the capital markets
names we selected may show increasing profitability as electronic trading
becomes more prevalent and the industry consolidates. We also think the real
estate services companies we selected should benefit from a worldwide cyclical
upturn in commercial leasing and from a secular increase in real estate
investing. Given the relatively flat yield curve, we avoided investing in banks.
Performance in the Fund's technology sector was broad-based, but driven
primarily by company-specific fundamentals, with no broad theme or industry
exposure leading the sector's outperformance. In particular, the Fund held
strong performers in the semiconductor industry (Broadcom), Internet services
(Akamai Technology) and communications equipment (F5 Networks).
The Fund's healthcare sector also displayed broad strength during the period,
with solid performance from biotech, health services and medical device
companies. However, the two common themes were cost containment and therapeutic
innovation.
Our strategy is to invest in companies that we believe will show superior
earnings growth, either because of company-specific events (e.g., a new product
cycle) or because of increased operating leverage as the economic cycle
unfolds. In addition, we have attempted to focus on a select number of
high-confidence companies, industries, and sectors that we believe are
undergoing a major transformation. Our biggest sector overweight remains
financial services; in particular, we continue to focus on the demutualization
of the stock and derivatives exchanges, which we think is an excellent example
of transformational change.
Two sectors--energy and materials and processing--had an overall negative
impact on Fund performance during the period. In the energy sector, stock
selection added value, but our trading around the core positions generated
mixed results. For example, in the fourth calendar quarter of 2005 we reduced
the Fund's emphasis on energy, moved to a neutral weighting, and locked in
attractive gains. In January 2006 we moved back to an overweighted position
just in time to participate in the sector's correction. Materials stocks also
weakened during the period, following their strong performance in the third
calendar quarter of 2005. Again, we did not time our buys and sells
particularly well.
The consumer discretionary segment remains the Fund's largest sector
underweight. The headwinds to consumer spending--including rising interest
rates, high energy prices and declining mortgage equity withdrawals--are well
known and already discounted in share prices to some extent. Therefore, despite
some near-term concerns, we continue to seek out attractive companies in this
sector.
1
OUTLOOK
The economy continues to grow at a healthy pace, and it seems poised to deliver
significant potential earnings growth. This level of earnings, combined with
dividend distributions, may keep the market in good shape. However, in the
short run, investors' fixation with predicting the end of the rate-hike cycle
casts a conservative blanket on the market. Daily and monthly economic data
take on tremendous influence, making it difficult for stocks to gain traction.
We remain conservative on both economic growth and inflation prospects, and
look forward to a more neutral Federal Reserve policy.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2006
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEPTION
----------------------------------------------
LOOMIS SAYLES AGGRESSIVE GROWTH: INSTITUTIONAL
19.37% 34.68% 2.61% 11.27%
----------------------------------------------
LOOMIS SAYLES AGGRESSIVE GROWTH: RETAIL
19.22 34.28 2.35 10.97
----------------------------------------------
RUSSELL MIDCAP GROWTH INDEX(c)
11.32 22.68 8.99 9.02
----------------------------------------------
LIPPER MID-CAP GROWTH FUNDS INDEX(c)
12.88 24.88 6.31 7.27
----------------------------------------------
* Not annualized
CUMULATIVE PERFORMANCE
INCEPTION TO MARCH 31, 2006(a)(b)
[CHART]
Loomis Sayles Lipper Mid-Cap
Aggressive Russell Midcap Growth
Growth Fund Growth Index(c) Funds Index(c)
-------------- -------------- --------------
12/31/1996 $100,000 $100,000 $100,000
1/31/1997 106,200 104,425 102,559
2/28/1997 102,897 102,125 95,742
3/31/1997 96,301 96,355 88,460
4/30/1997 97,399 98,714 87,694
5/31/1997 106,194 107,560 99,115
6/30/1997 107,193 110,537 103,291
7/31/1997 118,094 121,117 109,599
8/31/1997 115,390 119,935 109,295
9/30/1997 125,694 126,005 117,120
10/31/1997 122,891 119,696 110,561
11/30/1997 119,094 120,954 108,793
12/31/1997 122,643 122,542 111,341
1/31/1998 116,241 120,336 109,235
2/28/1998 125,529 131,650 118,513
3/31/1998 129,796 137,168 124,650
4/30/1998 133,210 139,031 125,192
5/31/1998 127,229 133,312 117,895
6/30/1998 133,743 137,084 123,318
7/31/1998 126,909 131,211 115,110
8/31/1998 101,184 106,169 90,293
9/30/1998 112,173 114,200 99,709
10/31/1998 119,756 122,608 103,376
11/30/1998 120,714 130,879 111,232
12/31/1998 136,793 144,433 125,581
1/31/1999 138,120 148,763 131,815
2/28/1999 135,358 141,488 121,576
3/31/1999 173,623 149,368 130,243
4/30/1999 182,478 156,174 135,585
5/31/1999 189,230 154,165 135,021
6/30/1999 214,000 164,928 145,904
7/31/1999 212,331 159,676 143,907
8/31/1999 224,709 158,017 143,178
9/30/1999 222,058 156,671 147,358
10/31/1999 278,017 168,785 160,386
11/30/1999 326,280 186,265 180,504
12/31/1999 407,361 218,517 218,156
1/31/2000 418,767 218,473 214,410
2/29/2000 569,397 264,402 268,144
3/31/2000 517,127 264,674 249,271
4/30/2000 468,207 238,982 216,387
5/31/2000 421,058 221,561 196,935
6/30/2000 480,680 245,071 227,537
7/31/2000 469,240 229,552 218,099
8/31/2000 555,392 264,171 246,622
9/30/2000 550,894 251,256 234,769
10/31/2000 466,717 234,060 215,786
11/30/2000 349,384 183,197 170,662
12/31/2000 384,532 192,844 182,963
1/31/2001 352,770 203,859 185,448
2/28/2001 275,443 168,598 157,630
3/31/2001 235,972 144,469 140,906
4/30/2001 274,412 168,550 159,484
5/31/2001 261,652 167,757 160,799
6/30/2001 253,671 167,846 160,171
7/31/2001 228,355 156,526 151,747
8/31/2001 199,422 145,181 141,579
9/30/2001 158,880 121,187 121,159
10/31/2001 174,339 133,926 127,905
11/30/2001 192,383 148,344 138,410
12/31/2001 194,730 153,983 144,414
1/31/2002 188,051 148,983 138,891
2/28/2002 169,076 140,537 131,985
3/31/2002 183,143 151,263 140,305
4/30/2002 173,528 143,255 135,640
5/31/2002 162,284 138,980 131,115
6/30/2002 146,818 123,643 119,334
7/31/2002 132,166 111,630 106,464
8/31/2002 130,051 111,242 105,195
9/30/2002 125,369 102,404 98,659
10/31/2002 130,409 110,336 103,634
11/30/2002 140,255 118,972 109,789
12/31/2002 123,621 111,784 103,299
1/31/2003 122,100 110,686 101,767
2/28/2003 121,050 109,724 100,196
3/31/2003 121,522 111,767 101,629
4/30/2003 130,661 119,377 108,758
5/31/2003 145,190 130,863 117,751
6/30/2003 145,306 132,730 119,594
7/31/2003 153,037 137,473 124,311
8/31/2003 166,978 145,044 130,425
9/30/2003 160,416 142,231 126,049
10/31/2003 176,121 153,694 135,937
11/30/2003 177,406 157,806 139,169
12/31/2003 173,184 159,529 139,883
1/31/2004 180,094 164,796 143,417
2/29/2004 176,456 167,561 145,395
3/31/2004 180,444 167,241 145,360
4/30/2004 178,098 162,519 140,749
5/31/2004 186,540 166,354 143,814
6/30/2004 193,573 169,002 147,273
7/31/2004 177,177 157,809 136,810
8/31/2004 171,667 155,864 134,440
9/30/2004 181,624 161,683 140,191
10/31/2004 185,601 167,167 144,334
11/30/2004 198,018 175,800 152,357
12/31/2004 206,691 184,222 159,511
1/31/2005 200,780 179,291 154,357
2/28/2005 207,165 183,831 156,350
3/31/2005 199,354 181,145 153,235
4/30/2005 188,230 173,978 145,854
5/31/2005 201,369 183,942 154,505
6/30/2005 206,464 187,362 158,041
7/31/2005 217,716 198,294 167,139
8/31/2005 217,476 197,083 166,616
9/30/2005 224,936 199,635 169,525
10/31/2005 220,684 193,760 164,815
11/30/2005 235,956 204,271 173,726
12/31/2005 238,551 206,512 174,788
1/31/2006 260,689 218,879 186,792
2/28/2006 255,944 216,185 185,179
3/31/2006 268,511 222,226 191,357
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 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 and reimbursements,
performance would be lower.
(a) Cumulative performance is shown for the Institutional Class of shares.
Performance of the Retail Class of shares would be lower due to higher fees.
(b) The mountain chart is based on the initial investment minimum of $100,000
for the Institutional Class. (c) See page 11 for a description of the indexes.
WHAT YOU SHOULD KNOW
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 US standards. 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
[PHOTO]
JOHN SLAVIK
Manager since April 2005
[PHOTO]
Mark F. Burns
Manager since January 2005
MARK F. BURNS
Manager since January 2005
FUND FACTS
SYMBOL | Institutional: LSSIX;
Retail: LCGRX
OBJECTIVE | Long-term capital growth from investments in common stocks or
other equity securities
STRATEGY | Invests at least 80% of its net assets (plus any borrowings made
for investment purposes) in equity securities of companies with market
capitalizations that fall within the capitalization range of the Russell 2000
Index, an index that tracks stocks of the 2,000 smallest US 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 | $26.4 million
PORTFOLIO REVIEW
Favorable stock selection across most sectors enabled the Fund to outperform
its Benchmark, the Russell 2000 Growth Index, for the six months ended March
31, 2006. Leading sectors included technology, financials and consumer
discretionary--areas in which our stock selections drove performance. These
sectors were home to the top three performers for the period. Although we
generally build the Fund's sector positions from the bottom up, the Fund's
weightings in technology and financials increased during the six-month period,
while healthcare and producer durables decreased.
We took profits in financial holding CB Richard Ellis Group, a commercial real
estate broker and the Fund's top performer for the six months ended March 31,
2006. The company is benefiting from the commercial real estate cycle, which is
still in a relatively early stage. In addition, the company's market-share
gains and operating leverage have helped it post strong earnings and generate
solid cash flow.
Apparel company Guess, a consumer discretionary holding, also was among the
leading performers for the six-month period. The company posted strong earnings
growth due to the brand's re-emergence and to several management initiatives
that have improved profitability. Technology holding Redback Networks, a
communications equipment manufacturer, also was among the Fund's top three
contributors to performance. The company increased its customer base with
several large telecommunication companies that needed to upgrade their data and
video-services networks.
The utilities sector was the only area showing a negative absolute contribution
to the Fund's six-month return. The lone utilities stock owned by the Fund
during the period was Alamosa Holdings, a Sprint wireless service affiliate,
which we sold. Although the stock increased significantly since we purchased
it, it did give back a small part of these gains during the fourth quarter of
2005.
Among individual holdings, Hudson Highland, SFBC and Universal American were
the Fund's worst performers during the six-month period, and we sold each
stock. Due to some customer concentration issues, the market has drastically
reduced its earnings outlook for Hudson Highland, a staffing company. These
earnings revisions severely weighed on the stock. SFBC, a clinical staffing
company serving the pharmaceuticals industry, suffered stock setbacks when it
announced a declining backlog. A federal investigation into one of the
company's facilities also weakened the stock. Universal American, an insurance
company we owned for its exposure to Medicare Part D, struggled when earnings
faltered due to another business line.
OUTLOOK
Looking ahead, we believe the market has the potential to deliver returns in
line with earnings growth. The economy continues to grow at a healthy rate,
which may allow for brisk earnings growth. We think selected smaller companies
have the potential to experience even faster
3
growth. This level of earnings, combined with dividend payments, may keep the
market vital. In the near term, though, investors' fixation with predicting the
end of the interest-rate-hike cycle may increase market volatility. With
shorter-than-usual time horizons, investors are basing decisions on daily and
monthly economic data. We remain conservative toward economic growth and
inflation prospects, and we look forward to a more neutral Federal Reserve
policy.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2006
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEPTION
---------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH: INSTITUTIONAL
17.96% 33.10% 0.82% 4.24%
---------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH: RETAIL
17.71 32.64 0.56 3.97
---------------------------------------------
RUSSELL 2000 INDEX(c)
15.23 25.85 12.59 9.79
---------------------------------------------
RUSSELL 2000 GROWTH INDEX(c)
16.20 27.84 8.59 5.39
---------------------------------------------
LIPPER SMALL-CAP GROWTH FUNDS INDEX(c)
14.13 24.66 8.04 7.68
---------------------------------------------
* Not annualized
CUMULATIVE PERFORMANCE
INCEPTION TO MARCH 31, 2006(a)(b)
[CHART]
Russell Lipper
Loomis Sayles 2000 Russell Small-Cap
Small Cap Growth 2000 Growth Funds
Growth Fund Index(c) Index(c) Index(c)
----------- --------- --------- ------------
12/31/1996 $100,000 $100,000 $100,000 $100,000
1/31/1997 102,600 102,498 101,998 102,319
2/28/1997 94,997 96,308 99,525 94,931
3/31/1997 85,099 89,512 94,829 88,083
4/30/1997 83,499 88,476 95,093 86,771
5/31/1997 97,101 101,774 105,673 98,809
6/30/1997 102,801 105,225 110,201 104,095
7/31/1997 111,097 110,617 115,329 110,360
8/31/1997 112,996 113,936 117,968 112,113
9/30/1997 125,494 123,028 126,603 121,548
10/31/1997 116,697 115,639 121,041 115,333
11/30/1997 115,401 112,882 120,258 112,727
12/31/1997 119,429 112,945 122,363 111,226
1/31/1998 115,523 111,439 120,432 109,575
2/28/1998 128,081 121,277 129,337 118,434
3/31/1998 133,88 126,364 134,671 123,791
4/30/1998 132,089 127,139 135,416 124,691
5/31/1998 121,007 117,902 128,123 115,867
6/30/1998 132,817 119,107 128,393 119,262
7/31/1998 119,734 109,161 117,999 110,288
8/31/1998 92,722 83,962 95,086 86,200
9/30/1998 103,691 92,475 102,527 90,810
10/31/1998 107,808 97,298 106,709 94,390
11/30/1998 121,305 104,846 112,299 102,066
12/31/1998 141,770 114,334 119,249 112,299
1/31/1999 145,881 119,477 120,833 115,014
2/28/1999 136,705 108,547 111,046 103,947
3/31/1999 147,149 112,413 112,780 108,645
4/30/1999 148,518 122,341 122,886 112,888
5/31/1999 145,770 122,534 124,681 113,503
6/30/1999 167,607 128,989 130,319 124,127
7/31/1999 162,645 125,000 126,743 123,688
8/31/1999 167,395 120,325 122,053 121,954
9/30/1999 176,568 122,646 122,079 126,375
10/31/1999 199,239 125,788 122,574 133,743
11/30/1999 220,339 139,088 129,892 150,618
12/31/1999 271,920 163,603 144,596 180,988
1/31/2000 266,971 162,080 142,274 179,104
2/29/2000 363,481 199,791 165,769 231,579
3/31/2000 315,393 178,789 154,840 213,402
4/30/2000 290,067 160,738 145,522 187,021
5/31/2000 250,821 146,663 137,041 171,731
6/30/2000 280,568 165,609 148,987 201,975
7/31/2000 251,782 151,416 144,193 188,834
8/31/2000 293,980 167,343 155,196 209,143
9/30/2000 284,602 159,030 150,634 198,786
10/31/2000 256,740 146,121 143,910 183,871
11/30/2000 190,475 119,590 129,137 152,559
12/31/2000 222,551 126,908 140,228 166,052
1/31/2001 212,470 137,180 147,529 171,112
2/28/2001 165,408 118,376 137,849 149,206
3/31/2001 140,894 107,613 131,106 134,714
4/30/2001 166,734 120,788 141,362 149,258
5/31/2001 162,132 123,586 144,837 153,303
6/30/2001 166,072 126,956 149,838 157,168
7/31/2001 142,639 116,125 141,727 148,407
8/31/2001 126,550 108,873 137,150 139,621
9/30/2001 99,126 91,306 118,688 117,830
10/31/2001 110,575 100,090 125,633 126,465
11/30/2001 118,990 108,445 135,359 136,265
12/31/2001 123,702 115,196 143,714 144,519
1/31/2002 117,752 111,098 142,219 140,149
2/28/2002 103,045 103,908 138,322 131,668
3/31/2002 109,444 112,939 149,439 142,433
4/30/2002 105,405 110,496 150,801 138,675
5/31/2002 100,357 104,035 144,108 133,112
6/30/2002 91,716 95,213 136,958 123,221
7/31/2002 78,692 80,579 116,273 105,745
8/31/2002 77,795 80,542 115,977 105,592
9/30/2002 71,284 74,724 107,648 99,188
10/31/2002 75,889 78,504 111,099 103,420
11/30/2002 80,267 86,286 121,014 112,083
12/31/2002 72,297 80,336 114,276 104,595
1/31/2003 69,940 78,153 111,114 101,833
2/28/2003 69,045 76,069 107,756 98,659
3/31/2003 68,368 77,221 109,144 100,694
4/30/2003 75,554 84,529 119,492 109,016
5/31/2003 83,970 94,055 132,316 120,133
6/30/2003 85,658 95,867 134,710 124,204
7/31/2003 91,611 103,115 143,139 131,466
8/31/2003 98,913 108,653 149,702 138,438
9/30/2003 96,440 105,903 146,938 135,037
10/31/2003 104,415 115,051 159,278 147,289
11/30/2003 107,892 118,802 164,930 151,211
12/31/2003 103,631 119,334 168,276 151,426
1/31/2004 111,040 125,603 175,587 158,511
2/29/2004 106,665 125,408 177,161 157,915
3/31/2004 106,217 125,994 178,812 156,824
4/30/2004 101,618 119,670 169,696 149,160
5/31/2004 104,870 122,050 172,397 152,272
6/30/2004 109,023 126,111 179,657 156,613
7/31/2004 99,025 114,792 167,560 142,796
8/31/2004 94,757 112,320 166,699 138,170
9/30/2004 100,594 118,531 174,525 146,064
10/31/2004 101,942 121,411 177,960 150,159
11/30/2004 107,784 131,674 193,396 160,674
12/31/2004 113,399 136,406 199,120 167,766
1/31/2005 111,494 130,261 190,812 161,416
2/28/2005 113,512 132,049 194,044 164,605
3/31/2005 110,254 127,096 188,490 159,074
4/30/2005 104,532 119,007 177,695 150,187
5/31/2005 111,943 127,398 189,325 160,140
6/30/2005 117,216 131,517 196,628 165,737
7/31/2005 124,847 140,710 209,085 175,850
8/31/2005 123,161 138,727 205,209 172,813
9/30/2005 124,393 139,826 205,852 173,752
10/31/2005 118,783 134,659 199,461 167,867
11/30/2005 125,850 142,283 209,144 176,867
12/31/2005 125,511 142,071 208,188 176,718
1/31/2006 140,446 155,775 226,857 191,121
2/28/2006 138,873 154,945 226,232 190,374
3/31/2006 146,765 162,475 237,208 198,307
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 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 and reimbursements,
performance would be lower.
(a) Cumulative performance is shown for the Institutional Class of shares.
Performance of the Retail Class would be lower due to higher fees. (b) The
mountain chart is based on the initial investment minimum of $100,000 for the
Institutional Class. (c) See page 11 for a description of the indexes.
WHAT YOU SHOULD KNOW
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 US standards. 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.
4
FUND AND MANAGER REVIEW
LOOMIS SAYLES SMALL CAP VALUE FUND
/s/ Joseph Katz
Manager since January 2000
[PHOTO]
Daniel Thelen
Manager since April 2000
Manager since April 2000
FUND FACTS
SYMBOL | Institutional: LSSCX;
Retail: LSCRX; Admin: LSVAX
OBJECTIVE | Long-term capital growth from investments in common stocks or
other equity securities
STRATEGY | Invests at least 80% of its net assets (plus any borrowings made
for investment purposes) in equity securities of companies with market
capitalizations that fall within the capitalization range of the Russell 2000
Index
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 | $814.3 million
PORTFOLIO REVIEW
The Fund posted solid performance for the six-month period ended March 31,
2006, maintaining pace with its Benchmark, the Russell 2000 Value Index, in a
market climate that strongly favored small-cap stocks. All sectors except
utilities generated positive returns for the Fund. Our sector allocations were
positive influences on relative performance, while stock selection was a slight
negative. In particular, our technology and consumer discretionary stocks
generally lagged the Benchmark. But good stock selection within the energy,
basic materials and financial services sectors largely offset the negative
influence of the laggards.
Within financial services, we found strength in the credit card processing,
consumer finance, and real estate investment trust (REIT) areas, as opposed to
more traditional banks and insurance companies. For example, Wright Express
Corp., which provides payment processing and information management services
for vehicle fleets, and Advanta Corp., an issuer of business credit cards, were
the Fund's top financial services holdings.
Many basic materials companies continued to benefit from their ability to pass
through higher costs of raw materials to end customers. A healthy commercial
construction market also helped these companies. Chaparral Steel, a
manufacturer of structural steel products and steel bars, was the Fund's top
performer. Although the company has no formal Wall Street coverage yet, it has
delivered very strong earnings during its short history as an independent
entity. (Texas Industries spun it off in July 2005.) Chaparral clearly has
benefited from the strong commercial construction environment and the ability
to raise prices, as the steel supply remains relatively tight.
The Fund's second-best performer was Live Nation, another recent spin-off. We
added this producer and promoter of music concerts and theatrical shows shortly
after Clear Channel Entertainment made it a separate entity. The overhang of
stock caused by the spin-off resulted in a large number of shares available at
an attractive valuation, and we were able to build a position before the stock
rose sharply in the first calendar quarter of 2006. Live Nation has announced a
number of initiatives to create shareholder value, including monetizing certain
real estate assets and increasing the company's presence in ticket and
concession sales.
The Fund's utility stocks were marginally negative as a result of volatile
prices in the natural gas market, which impacted a few of the Fund's holdings.
Other lagging sectors included consumer staples and healthcare, as investors
preferred more economically sensitive companies and sectors during the period.
Two of the Fund's strongest performers for the first nine months of 2005
reversed course late in the calendar year, leading to disappointing six-month
performance. In addition to suffering from the overall weakness in energy
stocks, Energy Partners Ltd., an oil and natural gas exploration and production
company, declined due to a modest shortfall in some of its exploration efforts
and a delay in production growth stemming from the 2005 hurricane season.
Hudson Highland Group, a professional staffing and executive recruiting firm,
surprised investors with a late-December reduction in its fourth-quarter
earnings forecast, after raising its forecast for the year in late October. We
reduced the fund's position in Energy Partners and eliminated the position in
Hudson Highland.
OUTLOOK
The economy continues to grow at a healthy pace, and it seems poised to deliver
potentially solid earnings growth. We believe this level of earnings, combined
with dividend distributions, may keep the market vital. In the short run,
though, investors' fixation with predicting the end of the
5
rate-hike cycle casts a conservative blanket on the market. Daily and monthly
economic data take on tremendous influence, making it difficult for stocks to
gain traction. We remain conservative on both economic growth and inflation
prospects, and look forward to a more neutral Federal Reserve policy.
We will continue to emphasize companies that appear to be positioned for strong
performance as the economic cycle matures. We believe capital spending trends
should improve, driven by strong corporate balance sheets and healthy cash flow
across some economic sectors. Therefore, we have increased the Fund's position
in the producer durables sector and decreased exposure to consumer
discretionary stocks, given the headwinds of higher energy prices and a
diminishing stimulus from mortgage-refinance activity. After realizing solid
gains from many basic materials companies, we have also trimmed these holdings
because relative return prospects seem less attractive.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2006
SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
----------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: INSTITUTIONAL
14.10% 23.22% 15.00% 13.75% 15.64%
----------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: RETAIL(a)
13.94 22.88 14.71 13.47 15.46
----------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: ADMIN(a)
13.77 22.55 14.43 13.11 15.09
----------------------------------------------
RUSSELL 2000 VALUE INDEX(c)
14.26 23.77 16.24 14.03 15.31
----------------------------------------------
RUSSELL 2000 INDEX(c)
15.23 25.85 12.59 10.15 12.16
----------------------------------------------
LIPPER SMALL-CAP CORE FUNDS INDEX(b)(c)
13.48 23.93 13.40 11.28 N/A
----------------------------------------------
* Not annualized
CUMULATIVE PERFORMANCE
INCEPTION TO MARCH 31, 2006(d)(e)
[CHART]
Loomis Sayles Russell 2000 Lipper Small-Cap
Small Cap Value Russell 2000 Core Funds
Value Fund Index(a)(c) Index(a)(c) Index(a)(b)(c)
---------- ----------- ------------- -----------------
5/91 $100,000 $100,000 $100,000
5/91 102,200 104,691 104,767
6/91 98,603 99,789 98,661
7/91 106,402 102,381 102,123
8/91 114,499 105,488 105,903
9/91 114,602 105,611 106,733
10/91 116,906 106,811 109,555
11/91 114,007 102,477 104,488
12/91 130,480 109,121 112,855 $100,000
1/92 143,750 118,250 122,000 106,378
2/92 151,800 123,890 125,558 109,427
3/92 143,649 122,542 121,309 105,725
4/92 136,337 120,845 117,059 102,146
5/92 136,541 124,131 118,615 101,930
6/92 124,635 120,111 113,006 98,333
7/92 128,087 124,636 116,938 101,022
8/92 123,912 122,207 113,638 99,368
9/92 125,275 124,514 116,259 99,851
10/92 129,246 127,420 119,954 103,578
11/92 141,576 135,304 129,133 110,820
12/92 147,621 140,915 133,632 115,026
1/93 154,382 148,392 138,155 118,409
2/93 150,832 148,985 134,964 115,704
3/93 157,136 154,636 139,343 118,864
4/93 153,129 150,920 135,518 114,981
5/93 159,668 155,667 141,515 119,286
6/93 160,466 157,142 142,398 120,206
7/93 164,366 159,840 144,364 121,322
8/93 173,192 166,089 150,600 124,960
9/93 181,107 170,067 154,850 126,979
10/93 186,033 173,958 158,836 129,668
11/93 178,927 169,426 153,608 126,466
12/93 184,062 174,415 158,860 130,135
1/94 187,964 180,640 163,841 133,575
2/94 185,107 180,117 163,248 133,322
3/94 174,426 172,034 154,629 128,136
4/94 172,473 173,729 155,548 127,918
5/94 169,868 173,480 153,802 128,241
6/94 165,825 168,954 148,579 124,078
7/94 166,738 172,076 151,020 125,868
8/94 174,558 178,849 159,435 131,665
9/94 174,435 176,951 158,902 131,900
10/94 173,267 173,713 158,274 132,587
11/94 166,371 166,705 151,882 129,228
12/94 168,800 171,722 155,963 130,347
1/95 169,323 170,880 153,995 131,692
2/95 175,893 177,203 160,401 136,935
3/95 180,096 178,080 163,164 139,835
4/95 180,619 183,375 166,792 142,185
5/95 184,303 187,303 169,659 143,911
6/95 189,298 193,703 178,461 149,643
7/95 201,905 200,770 188,740 157,915
8/95 211,617 206,735 192,645 163,166
9/95 215,553 209,821 196,085 165,959
10/95 204,387 201,441 187,316 160,089
11/95 214,239 209,447 195,186 164,875
12/95 222,958 215,935 200,336 170,421
1/96 223,404 217,368 200,120 171,668
2/96 234,619 220,775 206,358 177,751
3/96 240,015 225,409 210,558 182,202
4/96 254,272 231,559 221,817 194,772
5/96 264,748 237,422 230,558 203,561
6/96 258,500 234,619 221,091 194,317
7/96 243,947 222,146 201,780 178,534
8/96 256,168 231,784 213,495 187,634
9/96 264,827 238,112 221,839 195,523
10/96 268,720 240,873 218,420 191,863
11/96 281,565 253,835 227,419 198,795
12/96 290,856 262,075 233,380 202,304
1/97 296,033 266,104 238,044 206,814
2/97 292,185 268,630 232,272 201,403
3/97 285,815 261,425 221,312 191,245
4/97 283,129 265,269 221,929 191,297
5/97 313,905 286,388 246,618 211,698
6/97 328,627 300,881 257,187 223,668
7/97 347,457 313,510 269,155 237,128
8/97 354,719 318,487 275,313 242,928
9/97 375,860 339,665 295,465 261,159
10/97 364,021 330,430 282,485 250,761
11/97 362,674 334,051 280,658 247,548
12/97 366,409 345,374 285,570 247,282
1/98 358,348 339,125 281,064 243,664
2/98 383,720 359,627 301,846 261,855
3/98 400,833 374,214 314,295 274,198
4/98 399,070 376,063 316,034 276,836
5/98 381,950 362,750 299,014 262,465
6/98 377,023 360,701 299,643 261,524
7/98 352,629 332,448 275,385 242,656
8/98 292,224 280,384 221,911 195,759
9/98 306,981 296,218 239,277 203,993
10/98 323,128 305,014 249,036 212,366
11/98 341,417 313,270 262,084 224,207
12/98 362,449 323,093 278,302 238,290
1/99 345,450 315,760 282,000 236,503
2/99 321,061 294,201 259,160 217,184
3/99 321,254 291,774 263,206 218,170
4/99 347,436 318,410 286,791 232,906
5/99 354,419 328,197 290,980 237,725
6/99 370,794 340,080 304,138 251,463
7/99 366,196 332,009 295,793 250,089
8/99 354,001 319,873 284,846 240,919
9/99 346,213 313,478 284,908 240,732
10/99 342,820 307,205 286,062 242,827
11/99 349,951 308,797 303,142 258,481
12/99 363,774 318,285 337,458 286,363
1/00 350,278 309,962 332,039 280,860
2/00 375,043 328,907 386,870 320,461
3/00 396,308 330,449 361,364 315,903
4/00 397,140 332,405 339,619 298,337
5/00 380,142 327,333 319,825 285,654
6/00 392,611 336,897 347,705 310,851
7/00 399,168 348,122 336,518 301,188
8/00 424,116 363,686 362,194 328,020
9/00 417,754 361,624 351,549 319,591
10/00 425,524 360,340 335,856 309,977
11/00 411,865 353,005 301,380 279,108
12/00 448,109 390,935 327,263 306,218
1/01 460,566 401,726 344,302 317,118
2/01 448,776 401,171 321,711 296,974
3/01 432,620 394,737 305,974 282,934
4/01 456,414 413,008 329,910 305,475
5/01 469,741 423,628 338,019 316,608
6/01 488,061 440,673 349,691 326,398
7/01 490,892 430,791 330,762 318,836
8/01 485,198 429,298 320,079 309,914
9/01 433,912 381,908 276,992 269,307
10/01 449,186 391,883 293,202 285,306
11/01 476,541 420,042 315,901 306,508
12/01 510,233 445,759 335,399 328,037
1/02 509,519 451,676 331,911 324,150
2/02 513,900 454,426 322,814 315,495
3/02 543,758 488,458 348,760 339,737
4/02 545,226 505,653 351,938 341,406
5/02 535,194 488,929 336,318 328,681
6/02 517,319 478,104 319,631 310,271
7/02 449,808 407,068 271,357 268,099
8/02 457,140 405,259 270,666 269,520
9/02 422,672 376,311 251,228 250,441
10/02 429,773 381,972 259,283 259,342
11/02 451,304 412,454 282,423 278,480
12/02 442,730 394,831 266,698 264,951
1/03 431,219 383,714 259,316 257,203
2/03 421,904 370,815 251,481 249,172
3/03 423,128 374,775 254,719 251,276
4/03 457,867 410,373 278,871 272,199
5/03 486,483 452,274 308,797 296,112
6/03 496,748 459,937 314,386 302,929
7/03 515,823 482,874 334,057 318,463
8/03 535,373 501,216 349,373 332,265
9/03 521,935 495,467 342,924 325,049
10/03 565,204 535,868 371,722 350,592
11/03 581,651 556,438 384,913 363,222
12/03 595,611 576,561 392,722 373,322
1/04 609,191 596,497 409,784 385,150
2/04 621,009 608,047 413,458 391,852
3/04 631,318 616,456 417,311 396,101
4/04 609,474 584,576 396,035 382,487
5/04 614,228 591,632 402,338 385,816
6/04 641,561 621,681 419,282 402,286
7/04 614,936 593,102 391,050 381,089
8/04 623,730 598,920 389,041 377,755
9/04 646,309 622,610 407,304 396,540
10/04 652,578 632,282 415,322 403,034
11/04 697,214 688,389 451,346 434,862
12/04 725,661 704,820 464,706 441,891
1/05 701,714 677,555 445,317 429,079
2/05 716,450 691,009 452,860 439,104
3/05 706,133 676,783 439,896 428,047
4/05 671,391 641,872 414,704 404,934
5/05 701,402 681,020 441,846 426,635
6/05 727,284 711,135 458,889 441,175
7/05 770,121 751,599 487,962 467,394
8/05 756,798 734,343 478,915 463,075
9/05 762,626 733,130 480,417 467,493
10/05 743,712 714,716 465,500 453,141
11/05 771,527 743,709 488,098 473,848
12/05 770,987 738,000 485,868 475,286
1/06 833,746 799,026 529,437 511,500
2/06 836,497 798,972 527,979 508,119
3/06 869,993 837,670 553,595 530,500
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 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 and reimbursements,
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
11 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 $100,000 for the Institutional Class.
WHAT YOU SHOULD KNOW
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 US
standards.
6
FUND AND MANAGER REVIEW
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
[PHOTO]
DAVID SOWERBY
Manager since August 2005
[PHOTO]
Mark Shank
Manager since June 2003
FUND FACTS
SYMBOL | LSCGX
OBJECTIVE | Long-term capital growth
STRATEGY | Invests at least 80% of net assets (plus any borrowings made for
investment purposes) 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 | $9.6 million
PORTFOLIO REVIEW
The Fund posted solid absolute and relative performance for the six-month
period ended March 31, 2006. Strong stock selection in the industrials and
technology sectors, along with our emphasis on materials (the best performing
sector in absolute terms) accounted for the majority of the Fund's
outperformance relative to its Benchmark, the Standard & Poor's 500 Index. Our
strategy has been to overweight economically sensitive sectors of the market
where we believe companies still have earnings leverage. Within these sectors,
we focused on high-quality companies with accelerating business models.
From an industry perspective, the financial and industrial sectors had the
greatest positive impact on Fund performance, due to their large portfolio
weightings and strong returns from the stocks we selected. The Fund's largest
sectors included financial and industrial companies. Global investment services
holding Goldman Sachs Group made the greatest contribution to performance. The
company reported higher-than-expected earnings, primarily stemming from strong
capital markets activity. We increased the Fund's weighting in the financials
sector by adding to existing positions and establishing a new position in
property casualty reinsurer Everest Re Group, Ltd.
Within the industrials sector, energy services company GlobalSantaFe and
Burlington Northern Santa Fe, a major railroad company, made the second- and
third-greatest contributions to performance, respectively. Global SantaFe
increased its future earnings estimates based on increased prices for its
products and services. Burlington Northern benefited from better-than-expected
earnings and continued economic growth.
The technology sector also made strong contributions to the Fund's performance,
with Cisco Systems and Harris Corp. realizing attractive six-month gains.
The healthcare sector had the largest negative impact on the Fund's
performance, primarily due to weak results from Kinetic Concepts and Guidant.
Kinetic Concepts, which was among the greatest detractors to Fund performance,
declined on competitive pressures. The Fund's energy sector also performed
poorly for the period. In particular, the stock price of natural gas producer
Devon Energy fell during the six-month period, along with natural gas prices.
Other individual stocks that hurt performance included chip maker Intel, which
declined in price on weaker-than-expected earnings, largely due to the
company's loss of market share to rival Advanced Micro Devices. We sold Intel
in January.
OUTLOOK
We believe the economy should continue to grow at a healthy pace, and it seems
poised to deliver potentially strong earnings growth. In our view, this level
of earnings, combined with dividend distributions, should keep the market
strong. However, in the short run, investors' fixation with predicting the end
of the rate-hike cycle casts a conservative blanket on the market. Daily and
monthly economic data take on tremendous influence, making it difficult for
stocks to gain traction. We remain conservative on both economic growth and
inflation prospects, and look forward to a more neutral Federal Reserve policy.
7
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2006
SINCE SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS REGISTRATION(a)(b) INCEPTION(a)(b)
--------------------------------------------------------------------
LOOMIS SAYLES TAX-MANAGED EQUITY: INSTITUTIONAL
6.95% 10.18% 4.11% 10.53% 9.30% 10.23%
--------------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS (c)
6.72 9.95 3.79 7.51 6.05 7.34
--------------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND SHARES(c)
4.51 6.61 3.35 7.56 6.28 7.38
--------------------------------------------------------------------
S&P 500 INDEX(c)
6.38 11.72 3.97 8.95 7.24 9.66
--------------------------------------------------------------------
LIPPER LARGE-CAP CORE FUNDS INDEX(c)
7.20 12.69 3.15 7.77 6.42 8.40
--------------------------------------------------------------------
* Not annualized
CUMULATIVE PERFORMANCE
REGISTRATION TO MARCH 31, 2006(d)
[CHART]
Loomis Sayles Tax- Lipper Large-Cap
Managed Equity Fund S&P 500 Index(b)(c) Core Funds Index(b)(c)
------------------- ------------------ ----------------------
3/7/1997 $25,000 $25,000 $25,000
3/31/1997 23,940 23,973 23,930
4/30/1997 25,001 25,404 25,255
5/31/1997 26,041 26,951 26,788
6/30/1997 26,468 28,158 27,950
7/31/1997 28,508 30,399 30,157
8/31/1997 27,225 28,696 28,623
9/30/1997 28,184 30,267 30,096
10/31/1997 27,268 29,256 29,168
11/30/1997 27,390 30,611 30,121
12/31/1997 27,062 31,136 30,668
1/31/1998 27,503 31,481 30,971
2/28/1998 29,533 33,751 33,166
3/31/1998 31,012 35,480 34,806
4/30/1998 31,629 35,837 35,159
5/31/1998 30,725 35,221 34,559
6/30/1998 31,674 36,651 36,200
7/31/1998 31,918 36,261 35,908
8/31/1998 27,261 31,018 30,534
9/30/1998 29,998 33,005 32,051
10/31/1998 31,255 35,690 34,455
11/30/1998 32,755 37,853 36,505
12/31/1998 36,322 40,035 38,928
1/31/1999 37,525 41,709 40,290
2/28/1999 36,264 40,412 39,045
3/31/1999 38,316 42,029 40,616
4/30/1999 39,431 43,657 41,704
5/31/1999 38,844 42,626 40,598
6/30/1999 41,396 44,992 42,863
7/31/1999 41,189 43,587 41,606
8/31/1999 40,691 43,371 41,181
9/30/1999 39,486 42,182 40,065
10/31/1999 40,015 44,852 42,520
11/30/1999 40,279 45,763 43,563
12/31/1999 43,063 48,459 46,461
1/31/2000 41,775 46,024 44,582
2/29/2000 43,993 45,153 44,568
3/31/2000 48,296 49,570 48,443
4/30/2000 48,296 48,079 46,861
5/31/2000 48,962 47,092 45,667
6/30/2000 48,252 48,253 47,339
7/31/2000 47,321 47,499 46,601
8/31/2000 51,045 50,449 49,816
9/30/2000 49,494 47,786 47,163
10/31/2000 49,449 47,584 46,617
11/30/2000 48,208 43,832 42,517
12/31/2000 50,556 44,047 43,037
1/31/2001 48,442 45,609 44,256
2/28/2001 47,304 41,451 40,138
3/31/2001 45,785 38,825 37,674
4/30/2001 47,411 41,842 40,537
5/31/2001 47,790 42,122 40,765
6/30/2001 45,998 41,097 39,682
7/31/2001 45,510 40,692 39,107
8/31/2001 43,667 38,145 36,804
9/30/2001 41,606 35,065 34,011
10/31/2001 42,309 35,733 34,812
11/30/2001 43,828 38,474 37,093
12/31/2001 44,648 38,811 37,514
1/31/2002 44,259 38,245 36,922
2/28/2002 44,096 37,507 36,303
3/31/2002 46,195 38,918 37,539
4/30/2002 45,423 36,559 35,576
5/31/2002 45,201 36,289 35,317
6/30/2002 42,773 33,704 32,878
7/31/2002 39,903 31,078 30,434
8/31/2002 39,740 31,281 30,685
9/30/2002 37,423 27,881 27,705
10/31/2002 38,804 30,335 29,857
11/30/2002 39,964 32,121 31,191
12/31/2002 38,873 30,234 29,548
1/31/2003 37,652 29,442 28,772
2/28/2003 37,430 29,000 28,391
3/31/2003 37,542 29,282 28,630
4/30/2003 39,926 31,694 30,740
5/31/2003 41,867 33,363 32,229
6/30/2003 41,921 33,789 32,548
7/31/2003 42,642 34,385 33,061
8/31/2003 43,474 35,055 33,700
9/30/2003 42,474 34,683 33,264
10/31/2003 44,360 36,645 34,892
11/30/2003 44,750 36,968 35,185
12/31/2003 46,804 38,906 36,877
1/31/2004 47,998 39,620 37,398
2/29/2004 48,962 40,171 37,840
3/31/2004 48,678 39,565 37,247
4/30/2004 47,997 38,944 36,668
5/31/2004 48,222 39,478 37,041
6/30/2004 49,414 40,246 37,704
7/31/2004 47,373 38,914 36,369
8/31/2004 47,089 39,071 36,392
9/30/2004 48,167 39,495 36,809
10/31/2004 48,282 40,098 37,307
11/30/2004 50,325 41,720 38,723
12/31/2004 51,351 43,140 39,934
1/31/2005 51,069 42,089 39,031
2/28/2005 51,810 42,974 39,759
3/31/2005 50,841 42,213 39,031
4/30/2005 49,417 41,413 38,162
5/31/2005 50,727 42,730 39,397
6/30/2005 50,498 42,791 39,532
7/31/2005 52,493 44,382 40,938
8/31/2005 51,811 43,977 40,563
9/30/2005 52,381 44,334 41,032
10/31/2005 51,296 43,595 40,540
11/30/2005 52,948 45,243 42,093
12/31/2005 53,213 45,259 42,217
1/31/2006 54,703 46,457 43,399
2/28/2006 55,217 46,584 43,205
3/31/2006 56,006 47,163 43,986
INCEPTION TO MARCH 31, 2006(d)
[CHART]
Loomis Sayles Tax- Lipper Large-Cap
Managed Equity Fund S&P 500 Index(b)(c) Core Funds Index(b)(c)
------------------- ------------------- ---------------------
10/1/1995 $25,000 $25,000 $25,000
10/31/1995 24,500 24,911 24,884
11/30/1995 25,100 26,004 25,856
12/31/1995 25,105 26,505 26,247
1/31/1996 25,080 27,407 27,019
2/29/1996 25,532 27,661 27,348
3/31/1996 25,532 27,928 27,597
4/30/1996 26,109 28,339 27,998
5/31/1996 26,511 29,070 28,557
6/30/1996 26,336 29,181 28,598
7/31/1996 24,882 27,892 27,430
8/31/1996 25,708 28,480 28,053
9/30/1996 27,060 30,083 29,507
10/31/1996 27,712 30,913 30,094
11/30/1996 29,716 33,250 32,045
12/31/1996 29,024 32,591 31,454
1/31/1997 30,843 34,627 33,174
2/28/1997 30,591 34,898 33,134
3/31/1997 29,707 33,464 31,715
4/30/1997 31,022 35,462 33,472
5/31/1997 32,313 37,621 35,503
6/30/1997 32,843 39,307 37,043
7/31/1997 35,375 42,434 39,969
8/31/1997 33,783 40,057 37,935
9/30/1997 34,972 42,251 39,888
10/31/1997 33,836 40,840 38,658
11/30/1997 33,988 42,730 39,921
12/31/1997 33,580 43,464 40,646
1/31/1998 34,128 43,945 41,047
2/28/1998 36,646 47,114 43,957
3/31/1998 38,482 49,527 46,131
4/30/1998 39,248 50,025 46,598
5/31/1998 38,126 49,165 45,802
6/30/1998 39,304 51,162 47,978
7/31/1998 39,606 50,618 47,591
8/31/1998 33,828 43,299 40,468
9/30/1998 37,224 46,073 42,479
10/31/1998 38,784 49,821 45,666
11/30/1998 40,645 52,841 48,381
12/31/1998 45,072 55,885 51,594
1/31/1999 46,563 58,222 53,398
2/28/1999 44,999 56,413 51,749
3/31/1999 47,546 58,670 53,831
4/30/1999 48,929 60,942 55,273
5/31/1999 48,200 59,503 53,807
6/30/1999 51,367 62,805 56,809
7/31/1999 51,110 60,844 55,142
8/31/1999 50,492 60,543 54,580
9/30/1999 48,997 58,883 53,101
10/31/1999 49,654 62,609 56,354
11/30/1999 49,982 63,882 57,737
12/31/1999 53,435 67,645 61,577
1/31/2000 51,838 64,246 59,087
2/29/2000 54,590 63,030 59,068
3/31/2000 59,929 69,196 64,204
4/30/2000 59,929 67,114 62,108
5/31/2000 60,756 65,737 60,526
6/30/2000 59,875 67,358 62,741
7/31/2000 58,720 66,305 61,763
8/31/2000 63,341 70,423 66,024
9/30/2000 61,415 66,705 62,508
10/31/2000 61,360 66,423 61,784
11/30/2000 59,820 61,187 56,350
12/31/2000 62,733 61,486 57,040
1/31/2001 60,111 63,667 58,655
2/28/2001 58,698 57,862 53,196
3/31/2001 56,814 54,197 49,931
4/30/2001 58,831 58,408 53,725
5/31/2001 59,302 58,800 54,028
6/30/2001 57,078 57,368 52,593
7/31/2001 56,473 56,804 51,831
8/31/2001 54,186 53,248 48,779
9/30/2001 51,628 48,948 45,077
10/31/2001 52,500 49,881 46,139
11/30/2001 54,385 53,707 49,161
12/31/2001 55,402 54,178 49,719
1/31/2002 54,920 53,387 48,935
2/28/2002 54,717 52,358 48,115
3/31/2002 57,322 54,327 49,752
4/30/2002 56,364 51,033 47,150
5/31/2002 56,088 50,657 46,807
6/30/2002 53,076 47,049 43,575
7/31/2002 49,515 43,382 40,336
8/31/2002 49,312 43,666 40,668
9/30/2002 46,437 38,920 36,719
10/31/2002 48,150 42,346 39,572
11/30/2002 49,590 44,838 41,338
12/31/2002 48,236 42,204 39,162
1/31/2003 46,722 41,099 38,134
2/28/2003 46,446 40,482 37,628
3/31/2003 46,585 40,875 37,945
4/30/2003 49,544 44,242 40,741
5/31/2003 51,951 46,573 42,715
6/30/2003 52,019 47,167 43,137
7/31/2003 52,914 47,999 43,817
8/31/2003 53,945 48,935 44,665
9/30/2003 52,705 48,415 44,087
10/31/2003 55,045 51,154 46,244
11/30/2003 55,529 51,604 46,633
12/31/2003 58,078 54,310 48,876
1/31/2004 59,559 55,307 49,566
2/29/2004 60,756 56,076 50,151
3/31/2004 60,404 55,230 49,366
4/30/2004 59,558 54,363 48,599
5/31/2004 59,838 55,109 49,093
6/30/2004 61,316 56,181 49,971
7/31/2004 58,784 54,321 48,201
8/31/2004 58,431 54,541 48,233
9/30/2004 59,769 55,132 48,785
10/31/2004 59,912 55,974 49,445
11/30/2004 62,447 58,239 51,322
12/31/2004 63,721 60,220 52,926
1/31/2005 63,370 58,753 51,730
2/28/2005 64,289 59,989 52,695
3/31/2005 63,087 58,927 51,730
4/30/2005 61,320 57,809 50,578
5/31/2005 62,945 59,649 52,215
6/30/2005 62,662 59,733 52,394
7/31/2005 65,137 61,955 54,257
8/31/2005 64,291 61,389 53,760
9/30/2005 64,998 61,887 54,382
10/31/2005 63,652 60,855 53,730
11/30/2005 65,702 63,157 55,788
12/31/2005 66,030 63,178 55,952
1/31/2006 67,879 64,851 57,519
2/28/2006 68,517 65,027 57,262
3/31/2006 69,493 65,837 58,296
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. Except as indicated in the
table above, returns do not reflect the taxes that a shareholder would pay on
fund distributions or the redemption of shares.
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 Distributions or even the Return Before Taxes.
(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
11 for a description of the indexes and disclosure related to after-tax
returns. (d) The mountain chart is based on the Fund's initial minimum
investment of $25,000.
WHAT YOU SHOULD KNOW
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.
8
FUND AND MANAGER REVIEW
LOOMIS SAYLES VALUE FUND
[PHOTO]
ARTHUR BARRY
Manager since July 2005
[PHOTO]
James Carroll
Manager since November 2002
/s/ Warren Koontz
Manager since June 2000
FUND FACTS
SYMBOL | LSGIX
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 | $41.7 million
PORTFOLIO REVIEW
The Fund significantly outpaced its benchmark, the Russell 1000 Value Index,
for the six months ended March 31, 2006. Throughout the period, we maintained
our disciplined, bottom-up approach to stock selection, which resulted in solid
performance.
Financials and industrials were the Fund's best-performing sectors during the
period. Market-sensitive names, including Lehman Brothers and Merrill Lynch,
generated strong results. These companies benefited from merger-and-acquisition
activity and from better-than-expected earnings reports.
Our well-diversified industrials sector exhibited broad-based strength, with
most holdings making positive contributions to performance. In particular, we
focused on companies we believed to be well managed, with strong cash
generation and good exposure to this late phase of the economic cycle. ABB Ltd.
was the Fund's top performer, benefiting from the power industry's need for
increased infrastructure. Burlington Northern Santa Fe was the Fund's
second-best individual performer, advancing on the company's consistently
positive track record, coupled with a positive outlook for the transportation
markets in 2006.
Other individual stocks that performed well for the Fund included two energy
companies, GlobalSantaFe and Occidental Petroleum, and two consumer companies,
Office Depot and TJX. In addition, BellSouth Corp. gained on the announcement
of its merger with AT&T. The combined company will create the largest US
telecommunication provider in many regions. Economies of scale should also help
the new company benefit from local synergies and potentially enjoy increased
purchasing power.
Utilities was the only market sector that detracted from the Fund's relative
performance. Recently, rising interest rates and falling commodities prices
took a toll on utilities stocks.
Fundamentals for the energy sector remain favorable, in our opinion, but some
profit-taking seemed to be warranted, so we trimmed the Fund's energy
weighting. Conoco, Exxon Mobil and Chevron all had a slightly negative impact
on Fund performance and we eliminated Conoco and Chevron. These integrated
energy stocks underperformed the broader benchmarks throughout the six-month
period, as aggressive investors continued to rotate into more leveraged parts
of the sector, including oil services and independent producers. The market has
become increasingly sensitized to the possibility that high commodity prices
might lead to moderating demand. This has led to weakness in the leveraged
companies. Currently, we believe stocks of selected integrated energy companies
are attractively priced, and the companies are returning substantial cash flow
to shareholders while offering defensive potential if oil and gas prices recede.
9
OUTLOOK
The economy continues to grow at a healthy pace, and it seems poised for solid
earnings growth. Especially if this is combined with rising dividend
distributions, we believe the market should be in good shape. In the short run,
though, investors' fixation with predicting the end of the rate-hike cycle
casts a conservative blanket on the market. Daily and monthly economic data
take on tremendous influence, making it difficult for stocks to gain traction.
We remain conservative on both economic growth and inflation prospects, and
look forward to a more neutral Federal Reserve policy.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2006
SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
----------------------------------------------
LOOMIS SAYLES VALUE: INSTITUTIONAL
10.73% 20.17% 7.80% 9.21% 10.87%
----------------------------------------------
RUSSELL 1000 VALUE INDEX(b)
7.27 13.31 7.79 10.97 12.70
----------------------------------------------
LIPPER LARGE-CAP VALUE FUNDS INDEX(b)
6.35 11.87 4.83 8.70 10.67
----------------------------------------------
* Not annualized
CUMULATIVE PERFORMANCE
INCEPTION TO MARCH 31, 2006(c)
[CHART]
Russell 1000 Lipper Large-Cap
Loomis Sayles Value Value Funds
Value Fund Index(a)(b)(d) Index(a)(b)
------------- -------------- -----------------
5/13/1991 $100,000 $100,000 $100,000
5/31/1991 105,500 103,721 104,178
6/30/1991 99,497 99,351 98,936
7/31/1991 102,800 103,502 103,543
8/31/1991 105,298 105,371 106,080
9/30/1991 102,497 104,581 105,274
10/31/1991 102,897 106,319 107,264
11/30/1991 96,199 100,860 102,764
12/31/1991 107,156 109,312 113,886
1/31/1992 110,617 109,496 113,049
2/29/1992 112,951 112,182 115,088
3/31/1992 110,308 110,549 112,511
4/30/1992 112,845 115,324 114,580
5/31/1992 113,048 115,886 115,467
6/30/1992 110,606 115,175 112,930
7/31/1992 115,075 119,370 117,320
8/31/1992 111,714 115,701 114,916
9/30/1992 112,530 117,299 116,271
10/31/1992 113,543 117,404 117,054
11/30/1992 119,844 121,257 121,870
12/31/1992 122,241 124,162 123,741
1/31/1993 124,992 127,760 125,160
2/28/1993 126,154 132,219 126,382
3/31/1993 128,488 136,124 130,055
4/30/1993 125,096 134,378 127,630
5/31/1993 127,848 137,081 131,080
6/30/1993 127,746 140,118 131,672
7/31/1993 126,788 141,662 131,283
8/31/1993 131,872 146,779 136,593
9/30/1993 131,133 147,025 137,084
10/31/1993 133,992 146,902 139,445
11/30/1993 132,089 143,848 137,227
12/31/1993 136,752 146,595 140,156
1/31/1994 142,003 152,106 144,725
2/28/1994 140,583 146,919 141,245
3/31/1994 134,777 141,443 135,380
4/30/1994 137,513 144,155 137,064
5/31/1994 139,040 145,822 139,042
6/30/1994 134,771 142,329 135,692
7/31/1994 139,475 146,761 139,650
8/31/1994 145,611 150,983 145,312
9/30/1994 140,573 145,980 141,527
10/31/1994 140,348 148,017 143,846
11/30/1994 133,780 142,048 138,841
12/31/1994 135,533 143,698 140,414
1/31/1995 138,406 148,122 142,943
2/28/1995 145,990 153,985 148,258
3/31/1995 149,903 157,372 151,734
4/30/1995 155,524 162,349 156,145
5/31/1995 162,181 169,168 161,933
6/30/1995 163,332 171,460 165,446
7/31/1995 169,653 177,429 170,676
8/31/1995 170,569 179,936 171,713
9/30/1995 175,959 186,443 177,881
10/31/1995 171,596 184,592 176,458
11/30/1995 179,403 193,941 184,102
12/31/1995 183,278 198,815 187,091
1/31/1996 188,685 205,010 192,845
2/29/1996 190,327 206,560 195,012
3/31/1996 192,344 210,072 197,121
4/30/1996 192,344 210,880 199,801
5/31/1996 195,999 213,517 203,502
6/30/1996 196,371 213,691 203,620
7/31/1996 189,203 205,615 195,633
8/31/1996 193,725 211,496 200,717
9/30/1996 203,373 219,903 210,552
10/31/1996 208,925 228,405 214,999
11/30/1996 223,508 244,968 230,400
12/31/1996 222,077 241,842 226,502
1/31/1997 233,759 253,566 237,933
2/28/1997 235,325 257,292 239,840
3/31/1997 227,347 248,041 230,675
4/30/1997 235,327 258,462 240,938
5/31/1997 249,565 272,900 254,822
6/30/1997 261,818 284,607 265,456
7/31/1997 284,675 306,019 285,462
8/31/1997 275,679 295,116 273,249
9/30/1997 289,739 312,953 287,234
10/31/1997 279,019 304,209 278,568
11/30/1997 287,278 317,659 287,704
12/31/1997 286,962 326,932 290,996
1/31/1998 287,622 322,306 291,413
2/28/1998 306,662 344,004 310,584
3/31/1998 315,923 365,045 324,387
4/30/1998 318,514 367,486 327,685
5/31/1998 312,972 362,037 322,110
6/30/1998 312,471 366,677 328,135
7/31/1998 298,472 360,206 322,445
8/31/1998 256,507 306,601 278,440
9/30/1998 274,078 324,199 291,822
10/31/1998 297,347 349,311 315,192
11/30/1998 307,605 365,585 331,279
12/31/1998 317,172 378,028 344,076
1/31/1999 316,442 381,047 349,796
2/28/1999 307,107 375,669 341,785
3/31/1999 318,286 383,443 352,161
4/30/1999 341,171 419,257 372,913
5/31/1999 339,158 414,648 366,547
6/30/1999 347,773 426,687 382,705
7/31/1999 334,940 414,195 371,840
8/31/1999 320,839 398,823 365,064
9/30/1999 302,904 384,885 351,561
10/31/1999 314,263 407,038 368,492
11/30/1999 312,283 403,855 369,777
12/31/1999 312,970 405,805 381,164
1/31/2000 299,481 392,566 365,052
2/29/2000 275,403 363,400 349,700
3/31/2000 303,218 407,740 381,722
4/30/2000 301,975 402,995 377,472
5/31/2000 307,169 407,244 377,754
6/30/2000 299,920 388,631 373,583
7/31/2000 298,660 393,498 371,895
8/31/2000 318,790 415,393 393,420
9/30/2000 313,817 419,197 387,209
10/31/2000 325,648 429,494 390,302
11/30/2000 318,581 413,552 373,573
12/31/2000 335,976 434,271 388,615
1/31/2001 340,377 435,941 391,848
2/28/2001 331,153 423,819 372,962
3/31/2001 318,768 408,842 358,467
4/30/2001 334,100 428,893 378,777
5/31/2001 339,546 438,527 384,873
6/30/2001 333,672 428,801 374,414
7/31/2001 330,936 427,889 371,863
8/31/2001 318,559 410,750 354,446
9/30/2001 291,705 381,841 326,785
10/31/2001 293,805 378,555 328,915
11/30/2001 310,082 400,562 350,014
12/31/2001 316,996 409,997 355,289
1/31/2002 314,175 406,838 348,734
2/28/2002 312,667 407,491 346,804
3/31/2002 323,266 426,770 362,115
4/30/2002 315,282 412,133 346,679
5/31/2002 317,457 414,199 347,146
6/30/2002 294,315 390,417 322,938
7/31/2002 269,651 354,124 295,042
8/31/2002 272,887 356,798 297,028
9/30/2002 241,532 317,126 262,697
10/31/2002 258,826 340,621 281,973
1/30/2002 274,821 362,079 299,650
12/31/2002 264,076 346,352 285,380
1/31/2003 257,976 337,968 278,585
2/28/2003 247,940 328,958 271,616
3/31/2003 246,626 329,504 271,441
4/30/2003 266,677 358,508 294,358
5/31/2003 286,278 381,650 312,476
6/30/2003 291,288 386,422 316,052
7/31/2003 292,802 392,176 320,454
8/31/2003 298,688 398,287 325,869
9/30/2003 294,536 394,401 322,209
10/31/2003 309,145 418,538 339,986
11/30/2003 315,235 424,216 344,168
12/31/2003 333,330 450,364 365,279
1/31/2004 337,729 458,283 370,813
2/29/2004 345,227 468,105 378,633
3/31/2004 344,122 464,008 374,103
4/30/2004 337,722 452,668 367,208
5/31/2004 343,024 457,284 369,891
6/30/2004 349,644 468,089 378,034
7/31/2004 344,574 461,496 368,935
8/31/2004 345,884 468,059 371,608
9/30/2004 351,625 475,314 375,999
10/31/2004 355,388 483,215 380,005
11/30/2004 374,330 507,646 396,504
12/31/2004 383,726 524,645 409,095
1/31/2005 379,466 515,333 401,162
2/28/2005 390,888 532,411 412,419
3/31/2005 386,198 525,106 405,716
4/30/2005 379,246 515,701 397,685
5/31/2005 388,424 528,116 406,985
6/30/2005 395,377 533,898 411,112
7/31/2005 413,050 549,345 424,509
8/31/2005 412,843 546,955 422,672
9/30/2005 419,119 554,635 426,748
10/31/2005 412,413 540,548 417,847
11/30/2005 428,744 558,318 432,221
12/31/2005 432,860 561,653 434,709
1/31/2006 450,867 583,466 447,397
2/28/2006 457,044 587,028 448,197
3/31/2006 464,262 594,980 453,858
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 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 and reimbursements,
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 11 for a description of the indexes.
(c) The mountain chart is based on the Fund's minimum initial investment of
$100,000.
WHAT YOU SHOULD KNOW
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 US standards.
10
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 Large-Cap Core Funds Index is an equally weighted index of typically the
30 largest mutual funds within the large-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.
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 1000 Value Index is an index comprised of those Russell 1000 companies
with lower price-to-book ratios and lower forecasted growth values.
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 is an index comprised 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
without charge, upon request, (i) 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, 2005 is available
on (i) the Funds' website and (ii) the SEC's website.
QUARTERLY PORTFOLIO SCHEDULES
The Funds 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
are 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 800-SEC-0330.
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 and/or service fees (12b-1
fees), and other Fund expenses. 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.
11
The first line in the table of each Fund shows the actual amount of Fund
expenses you would have paid on a $1,000 investment in the Fund from October 1,
2005 through March 31, 2006. 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 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,193.70 $5.47
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04
Retail Class
- ------------
Actual $1,000.00 $1,192.20 $6.83
Hypothetical (5% return before expenses) $1,000.00 $1,018.70 $6.29
*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 182/365 (to reflect the half-year period).
LOOMIS SAYLES SMALL CAP GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,179.60 $5.43
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04
Retail Class
- ------------
Actual $1,000.00 $1,177.10 $6.78
Hypothetical (5% return before expenses) $1,000.00 $1,018.70 $6.29
*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 182/365 (to reflect the half-year period).
LOOMIS SAYLES SMALL CAP VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,141.00 $4.80
Hypothetical (5% return before expenses) $1,000.00 $1,020.45 $4.53
Retail Class
- ------------
Actual $1,000.00 $1,139.40 $6.13
Hypothetical (5% return before expenses) $1,000.00 $1,019.20 $5.79
Admin Class
- -----------
Actual $1,000.00 $1,137.70 $7.46
Hypothetical (5% return before expenses) $1,000.00 $1,017.95 $7.04
*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 182/365 (to reflect the
half-year period).
12
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,069.50 $3.35
Hypothetical (5% return before expenses) $1,000.00 $1,021.69 $3.28
*Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the half-year period).
LOOMIS SAYLES VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,107.30 $4.46
Hypothetical (5% return before expenses) $1,000.00 $1,020.69 $4.28
*Expenses are equal to the Fund's annualized expense ratio of 0.85%, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the half-year period).
13
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
SHARES VALUE (+)
- ----------------------------------------------------------------
COMMON STOCKS - 96.5% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 2.3%
Precision Castparts Corp. 20,475 $1,216,215
----------
AIR FREIGHT & LOGISTICS - 4.7%
C.H. Robinson Worldwide, Inc. 23,875 1,172,024
Expeditors International of Washington, Inc. 15,375 1,328,246
----------
2,500,270
----------
BIOTECHNOLOGY - 3.7%
Celgene Corp.(b) 21,600 955,152
Neurocrine Biosciences, Inc.(b) 8,050 519,547
Vertex Pharmaceuticals, Inc.(b) 13,575 496,709
----------
1,971,408
----------
CAPITAL MARKETS - 6.6%
Affiliated Managers Group, Inc.(b)(c) 13,225 1,409,917
Greenhill & Co., Inc.(c) 12,650 836,292
Investment Technology Group, Inc.(b) 25,075 1,248,735
----------
3,494,944
----------
COMMERCIAL SERVICES & SUPPLIES - 6.6%
Corporate Executive Board Co. 12,875 1,299,087
Monster Worldwide, Inc.(b) 22,675 1,130,576
Stericycle, Inc.(b) 15,750 1,065,015
----------
3,494,678
----------
COMMUNICATIONS EQUIPMENT - 1.8%
F5 Networks, Inc.(b) 13,300 964,117
----------
COMPUTERS & PERIPHERALS - 1.5%
Network Appliance, Inc.(b) 21,700 781,851
----------
DIVERSIFIED FINANCIAL SERVICES - 11.3%
CBOT Holdings, Inc.(b)(c) 4,425 528,345
Chicago Mercantile Exchange Holdings, Inc. 3,525 1,577,437
IntercontinentalExchange, Inc.(b) 12,800 883,840
Moody's Corp. 20,250 1,447,065
Nasdaq Stock Market, Inc.(b) 18,575 743,743
NYSE Group, Inc.(b)(c) 10,150 804,388
----------
5,984,818
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.7%
Broadcom Corp., Class A(b) 21,975 948,441
Mettler-Toledo International, Inc.(b) 16,725 1,009,186
----------
1,957,627
----------
ENERGY EQUIPMENT & SERVICES - 3.3%
Dril-Quip, Inc.(b)(c) 8,950 634,108
GlobalSantaFe Corp. 18,375 1,116,281
----------
1,750,389
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 3.6%
Conor Medsystems, Inc.(b)(c) 18,150 533,610
Hologic, Inc.(b) 10,525 582,559
Intuitive Surgical, Inc.(b)(c) 6,725 793,550
----------
1,909,719
----------
14
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES AGGRESSIVE GROWTH FUND - CONTINUED
SHARES VALUE (+)
- ------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTHCARE PROVIDERS & SERVICES - 5.4%
Express Scripts, Inc.(b) 11,275 $ 991,072
Health Net, Inc.(b) 18,225 926,195
Humana, Inc.(b) 18,350 966,127
-----------
2,883,394
-----------
INTERNET & CATALOG RETAIL - 2.2%
Coldwater Creek, Inc.(b)(c) 41,475 1,153,005
-----------
INTERNET SOFTWARE & SERVICES - 3.1%
Akamai Technologies, Inc.(b)(c) 49,875 1,640,389
-----------
IT SERVICES - 2.3%
Cognizant Technology Solutions Corp.(b) 20,300 1,207,647
-----------
MACHINERY - 4.8%
JLG Industries, Inc. 34,400 1,059,176
Joy Global, Inc. 24,850 1,485,284
-----------
2,544,460
-----------
OIL, GAS & CONSUMABLE FUELS - 6.1%
Denbury Resources, Inc.(b) 26,725 846,381
Peabody Energy Corp. 16,600 836,806
Southwestern Energy Co.(b) 22,850 735,541
Ultra Petroleum Corp.(b) 13,300 828,723
-----------
3,247,451
-----------
REAL ESTATE - 4.8%
CB Richard Ellis Group, Inc., Class A(b) 21,525 1,737,067
Jones Lang LaSalle, Inc. 10,675 817,065
-----------
2,554,132
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.2%
MEMC Electronic Materials, Inc.(b) 23,925 883,311
Microsemi Corp.(b)(c) 29,050 845,646
-----------
1,728,957
-----------
SOFTWARE - 1.6%
Salesforce.com, Inc.(b)(c) 23,300 846,489
-----------
SPECIALTY RETAIL - 1.4%
Circuit City Stores, Inc. 29,500 722,160
-----------
TEXTILES APPAREL & LUXURY GOODS - 4.3%
Carter's, Inc.(b)(c) 15,075 1,017,412
Coach, Inc.(b) 20,850 720,993
Gildan Activewear, Inc.(b) 12,125 576,180
-----------
2,314,585
-----------
WIRELESS TELECOMMUNICATION SERVICES - 8.2%
American Tower Corp., Class A(b) 34,500 1,046,040
Hutchison Telecommunications International, Ltd., ADR(b) 20,700 537,579
Leap Wireless International, Inc.(b) 18,250 795,518
NII Holdings, Inc., Class B(b)(c) 33,950 2,002,031
-----------
4,381,168
-----------
TOTAL COMMON STOCKS
(Identified Cost $39,059,179) 51,249,873
-----------
15
PRINCIPAL AMOUNT VALUE (+)
- -------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 26.0%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 3/31/06 at 2.950% to be
repurchased at $1,712,421 on 4/03/06 collateralized by
$1,265,000 US Treasury Bond, 8.750% due 8/15/20 with
a value of $1,747,690 (Note 2g of Notes to Financial
Statements) $ 1,712,000 $ 1,712,000
-------------
SHARES
- -------------------------------------------------------------------------------------------------------------------------------
State Street Navigator Securities Lending Prime Portfolio(d) 12,115,232 12,115,232
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $13,827,232) 13,827,232
-------------
TOTAL INVESTMENTS - 122.5%
(Identified Cost $52,886,411)(a) 65,077,105
Other assets less liabilities--(22.5)% (11,971,778)
-------------
TOTAL NET ASSETS - 100% $ 53,105,327
-------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2006, the unrealized appreciation on investments based on cost of $52,886,411 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 $ 12,349,808
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (159,114)
-------------
Net unrealized appreciation $ 12,190,694
-------------
(b)Non-income producing security.
(c)All or a portion of this security was on loan to brokers at March 31, 2006.
(d)Represents investment of securities lending collateral.
ADRAn American Depositary Receipt is a certificate issued by a custodian bank
representing the right to receive securities of the foreign issuer
described. The values of ADR's are significantly influenced by trading on
exchanges not located in the United States.
HOLDINGS AT MARCH 31, 2006 AS A PERCENTAGE OF NET ASSETS
Diversified Financial Services 11.3% Biotechnology 3.7%
Wireless Telecommunication Services 8.2 Electronic Equipment & Instruments 3.7
Capital Markets 6.6 Healthcare Equipment & Supplies 3.6
Commercial Services & Supplies 6.6 Energy Equipment & Services 3.3
Oil, Gas & Consumable Fuels 6.1 Semiconductors & Semiconductor Equipment 3.2
Healthcare Providers & Services 5.4 Internet Software & Services 3.1
Real Estate 4.8 Aerospace & Defense 2.3
Machinery 4.8 IT Services 2.3
Air Freight & Logistics 4.7 Internet & Catalog Retail 2.2
Textiles Apparel & Luxury Goods 4.3 Other, less than 2% each 6.3
See accompanying notes to financial statements.
16
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES SMALL CAP GROWTH FUND
SHARES VALUE (+)
- -----------------------------------------------------------------------
COMMON STOCKS - 97.9% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 1.0%
Essex Corp.(b)(c) 12,450 $ 274,149
----------
BIOTECHNOLOGY - 4.7%
BioMarin Pharmaceutical, Inc.(c) 9,775 131,180
Cubist Pharmaceuticals, Inc.(b)(c) 5,675 130,355
Keryx Biopharmaceuticals, Inc.(b)(c) 8,425 161,002
Nektar Therapeutics(b)(c) 6,525 132,979
Neurocrine Biosciences, Inc.(b)(c) 2,150 138,761
Nuvelo, Inc.(c) 12,700 226,314
Theravance, Inc.(b)(c) 5,550 155,622
United Therapeutics Corp.(b)(c) 2,650 175,642
----------
1,251,855
----------
CAPITAL MARKETS - 3.2%
Affiliated Managers Group, Inc.(b)(c) 2,300 245,203
GFI Group, Inc.(b)(c) 4,775 247,870
Investment Technology Group, Inc.(c) 7,025 349,845
----------
842,918
----------
CHEMICALS - 1.0%
Scotts Miracle-Gro Co., Class A 5,625 257,400
----------
COMMERCIAL BANKS - 1.1%
East West Bancorp, Inc.(b) 7,550 291,053
----------
COMMERCIAL SERVICES & SUPPLIES - 9.1%
Advisory Board Co.(b)(c) 6,675 372,265
American Reprographics Co.(b)(c) 9,700 336,493
Corporate Executive Board Co. 2,900 292,610
CRA International, Inc.(b)(c) 6,725 331,273
Labor Ready, Inc.(c) 10,525 252,074
Mobile Mini, Inc.(c) 10,825 334,709
On Assignment, Inc.(c) 19,625 215,482
PeopleSupport, Inc.(c) 27,475 269,255
----------
2,404,161
----------
COMMUNICATIONS EQUIPMENT - 3.8%
Exfo Electro-Optical Engineering, Inc.(b)(c) 16,700 131,429
Foundry Networks, Inc.(c) 19,000 345,040
Oplink Communications, Inc.(b)(c) 11,575 200,711
Redback Networks, Inc.(b)(c) 14,525 315,047
----------
992,227
----------
COMPUTERS & PERIPHERALS - 0.6%
Advanced Digital Information Corp.(c) 17,725 155,626
----------
DIVERSIFIED CONSUMER SERVICES - 4.6%
Bright Horizons Family Solutions, Inc.(b)(c) 8,425 326,300
Laureate Education, Inc.(c) 6,425 342,967
Sotheby's Holdings, Inc.(c) 10,825 314,358
Steiner Leisure Ltd.(c) 5,900 238,950
----------
1,222,575
----------
DIVERSIFIED FINANCIAL SERVICES - 0.7%
International Securities Exchange, Inc. 4,125 171,806
----------
17
SHARES VALUE (+)
- --------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ENERGY EQUIPMENT & SERVICES - 7.1%
Allis-Chalmers Energy, Inc.(b)(c) 10,575 $ 144,137
Carbo Ceramics, Inc.(b) 4,525 257,518
Dril-Quip, Inc.(b)(c) 3,750 265,687
Helix Energy Solutions Group, Inc.(b)(c) 5,275 199,923
Natural Gas Services Group, Inc.(b)(c) 11,150 199,362
Oil States International, Inc.(b)(c) 8,275 304,934
Unit Corp.(c) 4,400 245,300
Universal Compression Holdings, Inc.(c) 5,150 260,950
----------
1,877,811
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 6.6%
American Medical Systems Holdings, Inc.(c) 11,175 251,437
ArthroCare Corp.(b)(c) 5,900 282,138
Conor Medsystems, Inc.(b)(c) 4,900 144,060
ev3, Inc.(b)(c) 12,825 227,131
Meridian Bioscience, Inc.(b) 6,425 173,347
NuVasive, Inc.(b)(c) 10,425 196,511
Symmetry Medical, Inc.(b)(c) 9,550 202,555
Viasys Healthcare, Inc.(c) 8,950 269,216
----------
1,746,395
----------
HEALTHCARE PROVIDERS & SERVICES - 7.4%
Chemed Corp.(b) 6,675 396,094
Computer Programs & Systems, Inc.(b) 5,275 263,750
Emageon, Inc.(c) 7,750 131,673
HealthExtras, Inc.(c) 6,800 240,040
Matria Healthcare, Inc.(b)(c) 6,937 263,329
NovaMed, Inc.(c) 24,650 175,015
United Surgical Partners International, Inc.(b)(c) 5,537 196,065
Ventiv Health, Inc.(b)(c) 8,825 293,166
----------
1,959,132
----------
HOTELS, RESTAURANTS & LEISURE - 2.1%
McCormick & Schmick's Seafood Restaurants, Inc.(c) 12,325 313,918
Pinnacle Entertainment, Inc.(b)(c) 8,725 245,783
----------
559,701
----------
HOUSEHOLD DURABLES - 1.2%
Lifetime Brands, Inc.(b) 11,175 315,023
----------
INSURANCE - 2.9%
Arch Capital Group Ltd.(c) 5,025 290,143
Argonaut Group, Inc.(b)(c) 5,900 209,745
ProAssurance Corp.(b)(c) 5,150 267,800
----------
767,688
----------
INTERNET & CATALOG RETAIL - 1.2%
Coldwater Creek, Inc.(b)(c) 11,262 313,084
----------
INTERNET SOFTWARE & SERVICES - 6.3%
Akamai Technologies, Inc.(b)(c) 8,825 290,254
aQuantive, Inc.(b)(c) 11,050 260,117
Digital Insight Corp.(b)(c) 10,050 365,820
j2 Global Communications, Inc.(b)(c) 5,150 242,050
Online Resources Corp.(b)(c) 21,000 273,000
Websense, Inc.(b)(c) 8,050 222,019
----------
1,653,260
----------
18
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES SMALL CAP GROWTH FUND - CONTINUED
SHARES VALUE (+)
- -----------------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - 3.8%
Anteon International Corp.(c) 3,650 $ 199,144
Heartland Payment Systems, Inc.(b)(c) 11,225 278,043
Lightbridge, Inc.(c) 14,975 166,223
SRA International, Inc., Class A(b)(c) 9,425 355,605
----------
999,015
----------
MACHINERY - 4.2%
American Science & Engineering, Inc.(b)(c) 2,950 275,530
Bucyrus International, Inc., Class A 7,725 372,268
Flow International Corp.(b)(c) 18,100 238,377
Freightcar America, Inc.(b) 3,400 216,240
----------
1,102,415
----------
MEDIA - 0.6%
Morningstar, Inc.(b)(c) 3,650 163,411
----------
OIL, GAS & CONSUMABLE FUELS - 1.2%
Range Resources Corp.(b) 11,262 307,565
----------
PHARMACEUTICALS - 1.7%
Adams Respiratory Therapeutics, Inc.(c) 6,425 255,522
Santarus, Inc.(b)(c) 26,250 196,088
----------
451,610
----------
REAL ESTATE - 2.6%
Jones Lang LaSalle, Inc.(b) 4,525 346,344
Trammell Crow Co.(c) 9,200 328,072
----------
674,416
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 5.2%
ATMI, Inc.(b)(c) 8,175 246,885
Microsemi Corp.(b)(c) 8,950 260,534
Netlogic Microsystems, Inc.(b)(c) 5,150 212,232
PMC-Sierra, Inc.(b)(c) 24,650 302,948
Power Integrations, Inc.(b)(c) 6,800 168,504
Tessera Technologies, Inc.(c) 5,900 189,272
----------
1,380,375
----------
SOFTWARE - 5.3%
Blackboard, Inc.(b)(c) 7,950 225,860
Informatica Corp.(b)(c) 22,400 348,320
Quest Software, Inc.(b)(c) 15,450 258,015
SPSS, Inc.(c) 7,575 239,824
Ultimate Software Group, Inc.(b)(c) 13,100 338,635
----------
1,410,654
----------
SPECIALTY RETAIL - 2.2%
Guess?, Inc.(b)(c) 4,675 182,839
Guitar Center, Inc.(b)(c) 3,650 174,105
Zumiez, Inc.(b)(c) 3,750 229,125
----------
586,069
----------
TEXTILES APPAREL & LUXURY GOODS - 2.4%
Carter's, Inc.(c) 4,525 305,392
Phillips-Van Heusen Corp. 8,300 317,143
----------
622,535
----------
19
SHARES VALUE (+)
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
THRIFTS & MORTGAGE FINANCE - 1.8%
FirstFed Financial Corp.(b)(c) 4,675 $ 279,612
PFF Bancorp, Inc. 5,800 195,518
------------
475,130
------------
TRADING COMPANIES & DISTRIBUTORS - 1.3%
NuCo2, Inc.(b)(c) 11,175 354,695
------------
WIRELESS TELECOMMUNICATION SERVICES - 1.0%
SBA Communications Corp.(b)(c) 11,450 268,045
------------
TOTAL COMMON STOCKS
(Identified Cost $20,632,445) 25,851,799
------------
PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 25.9%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 3/31/06 at 2.950% to be
repurchased at $579,142 on 4/03/06 collateralized by
$600,000 US Treasury Note, 4.000% due 6/15/2009
with a value of $591,989 (Note 2g of Notes to
Financial Statements) $ 579,000 579,000
------------
SHARES
- ------------------------------------------------------------------------------------------------------------------------------
State Street Navigator Securities Lending Prime Portfolio(d) 6,265,097 6,265,097
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $6,844,097) 6,844,097
------------
TOTAL INVESTMENTS - 123.8%
(Identified Cost $27,476,542)(a) 32,695,896
Other assets less liabilities--(23.8)% (6,277,078)
------------
TOTAL NET ASSETS - 100% $ 26,418,818
------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2006, the net unrealized appreciation on investments based on cost of $27,476,542 for
federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all securities in which there is an excess of value over cost $ 5,330,932
Aggregate gross unrealized depreciation for all securities in which there is an excess of cost over value (111,578)
------------
Net unrealized appreciation $ 5,219,354
------------
(b)All or a portion of this security was on loan to brokers at March 31, 2006.
(c)Non-income producing security.
(d)Represents investment of securities lending collateral.
HOLDINGS AT MARCH 31, 2006 AS A PERCENTAGE OF NET ASSETS
Commercial Services & Supplies 9.1% IT Services 3.8%
Healthcare Providers & Services 7.4 Communications Equipment 3.8
Energy Equipment & Services 7.1 Capital Markets 3.2
Healthcare Equipment & Supplies 6.6 Insurance 2.9
Internet Software & Services 6.3 Real Estate 2.6
Software 5.3 Textiles Apparel & Luxury Goods 2.4
Semiconductors & Semiconductor Equipment 5.2 Specialty Retail 2.2
Biotechnology 4.7 Hotels, Restaurants & Leisure 2.1
Diversified Consumer Services 4.6 Other, less than 2% each 14.4
Machinery 4.2
See accompanying notes to financial statements.
20
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND
SHARES VALUE (+)
- ---------------------------------------------------------------
COMMON STOCKS - 93.9% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 1.0%
Ladish Co., Inc.(b)(c) 106,825 $ 3,094,720
Moog, Inc., Class A(c) 140,750 4,995,218
-----------
8,089,938
-----------
AUTOMOBILES - 0.3%
Winnebago Industries, Inc.(b) 89,500 2,715,430
-----------
BUILDING PRODUCTS - 1.1%
Griffon Corp.(b)(c) 246,750 6,129,270
Lennox International, Inc.(b) 101,875 3,041,988
-----------
9,171,258
-----------
CHEMICALS - 2.3%
Cytec Industries, Inc. 126,175 7,571,762
FMC Corp. 53,600 3,322,128
MacDermid, Inc.(b) 40,450 1,300,467
Minerals Technologies, Inc. 25,075 1,464,631
Spartech Corp. 205,675 4,936,200
-----------
18,595,188
-----------
COMMERCIAL BANKS - 9.9%
Alabama National Bancorp(b) 69,650 4,764,060
Capital Corporation of the West(b) 67,050 2,462,076
Centerstate Banks of Florida, Inc.(b) 87,575 3,222,760
Community Bancorp(b)(c) 105,875 3,278,949
CVB Financial Corp.(b) 266,236 4,552,636
East West Bancorp, Inc. 177,050 6,825,277
First Midwest Bancorp, Inc. 190,400 6,962,928
First State Bancorporation(b) 80,900 2,148,704
IBERIABANK Corp.(b) 114,819 6,495,311
Independent Bank Corp.(b) 201,875 5,743,347
Midwest Banc Holdings, Inc.(b) 140,975 3,656,891
Pennsylvania Commerce Bancorp, Inc.(b)(c) 93,050 2,805,458
PrivateBankcorp, Inc.(b) 155,025 6,431,987
Seacoast Banking Corp. of Florida(b) 93,875 2,732,701
Signature Bank(b)(c) 195,550 6,372,974
Texas Regional Bancshares, Inc., Class A 165,193 4,871,527
Wintrust Financial Corp.(b) 123,925 7,208,717
-----------
80,536,303
-----------
COMMERCIAL SERVICES & SUPPLIES - 2.9%
Adesa, Inc. 143,850 3,846,549
American Ecology Corp.(b) 75,150 1,531,557
McGrath Rentcorp.(b) 195,550 5,878,233
Navigant Consulting, Inc.(b)(c) 276,950 5,912,882
Waste Connections, Inc.(b)(c) 154,475 6,149,650
-----------
23,318,871
-----------
COMMUNICATIONS EQUIPMENT - 3.2%
ADTRAN, Inc. 210,650 5,514,817
Anaren, Inc.(c) 204,750 3,986,482
CommScope, Inc.(b)(c) 311,725 8,899,749
Polycom, Inc.(c) 164,075 3,557,146
SafeNet, Inc.(b)(c) 96,025 2,542,742
Tekelec(b)(c) 130,375 1,803,086
-----------
26,304,022
-----------
21
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMPUTERS & PERIPHERALS - 2.4%
Avid Technology, Inc.(b)(c) 93,825 $ 4,077,634
Electronics for Imaging, Inc.(b)(c) 220,875 6,177,874
Hutchinson Technology, Inc.(b)(c) 73,700 2,223,529
Imation Corp. 99,450 4,267,399
McDATA Corp., Class A(b)(c) 654,075 3,021,827
-----------
19,768,263
-----------
CONSTRUCTION & ENGINEERING - 1.6%
Insituform Technologies, Inc., Class A(b)(c) 144,950 3,855,670
Michael Baker Corp.(b)(c) 54,125 1,533,361
Washington Group International, Inc.(b) 125,625 7,209,619
-----------
12,598,650
-----------
CONSTRUCTION MATERIALS - 1.2%
Eagle Materials, Inc.(b) 56,025 3,572,154
Texas Industries, Inc.(b) 96,825 5,856,944
-----------
9,429,098
-----------
CONSUMER FINANCE - 2.6%
Advanta Corp., Class B(b) 260,980 9,622,333
First Cash Financial Services, Inc.(b)(c) 290,800 5,813,092
United PanAm Financial Corp.(c) 174,125 5,380,462
-----------
20,815,887
-----------
DIVERSIFIED CONSUMER SERVICES - 0.4%
Vertrue, Inc.(b)(c) 83,025 3,470,445
-----------
DIVERSIFIED FINANCIAL SERVICES - 0.9%
iShares Russell 2000 Value Index Fund(b) 100,700 7,526,318
-----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 0.8%
Commonwealth Telephone Enterprises, Inc.(b) 68,100 2,346,045
Iowa Telecommunications Services, Inc.(b) 226,875 4,328,775
-----------
6,674,820
-----------
ELECTRIC UTILITIES - 0.5%
ALLETE, Inc.(b) 50,658 2,360,663
Otter Tail Corp.(b) 57,725 1,656,130
-----------
4,016,793
-----------
ELECTRICAL EQUIPMENT - 2.1%
AMETEK, Inc. 169,525 7,621,844
General Cable Corp.(c) 179,625 5,448,026
II-VI, Inc.(b)(c) 236,275 4,274,215
-----------
17,344,085
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.8%
Anixter International, Inc.(b) 121,000 5,781,380
Cognex Corp. 113,425 3,361,917
Excel Technology, Inc.(b)(c) 170,325 5,019,478
Keithley Instruments, Inc.(b) 206,275 3,168,384
Rofin-Sinar Technologies, Inc.(b)(c) 105,025 5,685,003
-----------
23,016,162
-----------
ENERGY EQUIPMENT & SERVICES - 2.6%
Carbo Ceramics, Inc.(b) 77,175 4,392,029
FMC Technologies, Inc.(c) 165,300 8,466,666
22
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ENERGY EQUIPMENT & SERVICES - CONTINUED
Helix Energy Solutions Group, Inc.(b)(c) 122,200 $ 4,631,380
Universal Compression Holdings, Inc.(c) 65,425 3,315,085
-----------
20,805,160
-----------
FOOD & STAPLES RETAILING - 1.1%
Casey's General Stores, Inc. 149,025 3,408,202
Smart & Final, Inc.(b)(c) 325,850 5,340,681
-----------
8,748,883
-----------
FOOD PRODUCTS - 0.7%
J & J Snack Foods Corp.(b) 106,732 3,585,128
Ralcorp Holdings, Inc.(b)(c) 60,200 2,290,610
-----------
5,875,738
-----------
GAS UTILITIES - 1.9%
ONEOK, Inc. 132,100 4,260,225
UGI Corp. 535,050 11,273,504
-----------
15,533,729
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 2.4%
Arrow International, Inc.(b) 121,900 3,982,473
Intermagnetics General Corp.(b)(c) 156,038 3,908,739
Sybron Dental Specialties, Inc.(c) 114,525 4,723,011
Symmetry Medical, Inc.(b)(c) 142,775 3,028,258
West Pharmaceutical Services, Inc.(b) 115,050 3,994,536
-----------
19,637,017
-----------
HEALTHCARE PROVIDERS & SERVICES - 0.5%
Healthspring, Inc.(c) 219,200 4,079,312
-----------
HOTELS, RESTAURANTS & LEISURE - 3.3%
Bob Evans Farms, Inc.(b) 191,050 5,676,095
CEC Entertainment, Inc.(b)(c) 80,125 2,693,803
Fairmont Hotels & Resorts, Inc.(b) 82,225 3,675,457
Morton's Restaurant Group, Inc.(b)(c) 136,150 2,366,287
Steak n Shake Co.(b)(c) 129,850 2,739,835
Sunterra Corp.(b)(c) 354,000 5,055,120
Trump Entertainment Resorts, Inc.(b)(c) 254,950 4,721,674
-----------
26,928,271
-----------
INSURANCE - 6.6%
American Equity Investment Life Holding Co.(b) 460,625 6,605,362
AmerUs Group Co.(b) 58,950 3,551,148
Delphi Financial Group, Inc.(b) 142,500 7,357,275
Endurance Specialty Holdings Ltd. 120,000 3,906,000
KMG America Corp.(b)(c) 314,075 2,688,482
Midland Co. (The)(b) 33,368 1,167,213
National Financial Partners Corp. 130,275 7,363,143
Navigators Group, Inc.(c)(b)(c) 118,150 5,860,240
Ohio Casualty Corp. 193,675 6,139,498
Protective Life Corp. 59,950 2,981,913
RLI Corp.(b) 102,700 5,884,710
-----------
53,504,984
-----------
INTERNET & CATALOG RETAIL - 0.2%
FTD Group, Inc.(b)(c) 167,375 1,621,864
-----------
23
SHARES VALUE (+)
- ----------------------------------------------------------------
COMMON STOCKS - CONTINUED
INTERNET SOFTWARE & SERVICES - 0.6%
Digitas, Inc.(b)(c) 333,100 $ 4,796,640
-----------
IT SERVICES - 1.9%
Perot Systems Corp., Class A(b)(c) 357,225 5,558,421
Wright Express Corp.(b)(c) 366,050 10,267,702
-----------
15,826,123
-----------
MACHINERY - 8.2%
Actuant Corp., Class A(b) 156,125 9,557,972
Albany International Corp., Class A(b) 201,750 7,684,657
Barnes Group, Inc.(b) 148,125 5,999,063
CLARCOR, Inc.(b) 162,150 5,772,540
Commercial Vehicle Group, Inc.(b)(c) 185,475 3,562,975
ESCO Technologies, Inc.(b)(c) 55,350 2,803,478
Greenbrier Cos., Inc.(b) 97,800 3,916,890
Harsco Corp. 75,925 6,272,923
IDEX Corp. 173,575 9,055,408
Lincoln Electric Holdings, Inc.(b) 52,375 2,827,726
Nordson Corp. 100,375 5,004,698
RBC Bearings, Inc.(b)(c) 218,900 4,487,450
-----------
66,945,780
-----------
MARINE - 0.9%
American Commercial Lines, Inc.(b)(c) 155,300 7,330,160
-----------
MEDIA - 4.1%
Harte-Hanks, Inc. 257,125 7,032,368
John Wiley & Sons, Inc., Class A 87,700 3,319,445
Live Nation, Inc.(c) 397,000 7,876,480
R.H. Donnelley Corp.(b)(c) 112,525 6,552,331
Scholastic Corp.(b)(c) 73,075 1,955,487
Thomas Nelson, Inc.(b) 131,675 3,851,494
Valassis Communications, Inc.(c) 108,000 3,171,960
-----------
33,759,565
-----------
METALS & MINING - 2.2%
AMCOL International Corp.(b) 88,825 2,558,160
Century Alum Co.(b)(c) 32,800 1,392,360
Chaparral Steel Co.(b)(c) 143,725 9,330,627
Reliance Steel & Aluminum Co. 45,400 4,263,968
-----------
17,545,115
-----------
MULTI-UTILITIES & UNREGULATED POWER - 0.9%
NorthWestern Corp. 226,275 7,046,204
-----------
MULTILINE RETAIL - 0.9%
Big Lots, Inc.(b)(c) 244,425 3,412,173
Dollar Tree Stores, Inc.(c) 154,575 4,277,090
-----------
7,689,263
-----------
OIL, GAS & CONSUMABLE FUELS - 2.7%
Alpha Natural Resources, Inc.(b)(c) 163,275 3,778,184
ATP Oil & Gas Corp.(b)(c) 90,125 3,957,389
Denbury Resources, Inc.(c) 189,500 6,001,465
Energy Partners Ltd.(b)(c) 185,450 4,372,911
Remington Oil & Gas Corp.(b)(c) 90,025 3,890,880
-----------
22,000,829
-----------
24
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (+)
- -------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
PHARMACEUTICALS - 0.4%
Perrigo Co. 198,225 $ 3,233,050
------------
REAL ESTATE - 5.7%
BioMed Realty Trust, Inc. REIT 239,150 7,088,406
CBL & Associates Properties, Inc. REIT(b) 136,150 5,779,568
Corporate Office Properties Trust REIT 170,375 7,792,952
First Potomac Realty Trust REIT 240,375 6,790,594
Kite Reality Group Trust REIT 351,300 5,603,235
LaSalle Hotel Properties REIT 168,000 6,888,000
Newcastle Investment Corp. REIT(b) 164,900 3,944,408
Potlatch Corp.(b) 59,850 2,563,974
------------
46,451,137
------------
ROAD & RAIL - 2.6%
Genesee & Wyoming, Inc., Class A(b)(c) 210,638 6,462,358
Laidlaw International, Inc. 309,400 8,415,680
Landstar System, Inc. 75,950 3,350,914
Marten Transport Ltd.(b)(c) 170,850 3,090,677
------------
21,319,629
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.0%
Diodes, Inc.(b)(c) 116,150 4,820,225
DSP Group, Inc.(b)(c) 211,350 6,131,263
Entegris, Inc.(b)(c) 426,550 4,538,492
Fairchild Semiconductor International, Inc., Class A(c) 288,100 5,494,067
Integrated Device Technology, Inc.(c) 207,550 3,084,193
------------
24,068,240
------------
SOFTWARE - 1.9%
Hyperion Solutions Corp.(c) 141,837 4,623,886
MapInfo Corp.(b)(c) 178,550 2,503,271
Progress Software Corp.(c) 139,075 4,045,692
Quest Software, Inc.(c) 268,350 4,481,445
------------
15,654,294
------------
SPECIALTY RETAIL - 1.3%
Charlotte Russe Holding, Inc.(b)(c) 109,475 2,342,765
Men's Wearhouse, Inc. 86,174 3,097,094
Rent-A-Center, Inc.(c) 187,775 4,805,162
------------
10,245,021
------------
TEXTILES APPAREL & LUXURY GOODS - 0.6%
Fossil, Inc.(b)(c) 133,050 2,472,069
Unifirst Corp/MA(b) 70,225 2,332,875
------------
4,804,944
------------
TRADING COMPANIES & DISTRIBUTORS - 0.3%
Electro Rent Corp.(b)(c) 143,900 2,446,300
------------
WATER UTILITIES - 0.4%
American States Water Co.(b) 96,050 3,588,428
------------
TOTAL COMMON STOCKS
(Identified Cost $567,740,383) 764,877,211
------------
25
PRINCIPAL AMOUNT VALUE (+)
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 29.2%
COMMERCIAL PAPER - 4.6%
Citigroup, Inc., 3.300%, 4/03/2006(d) $ 37,185,000 $ 37,178,183
--------------
SHARES
- --------------------------------------------------------------------------------------------------------------------------------
State Street Navigator Securities Lending Prime Portfolio(e) 200,515,426 200,515,426
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $237,693,609) 237,693,609
--------------
TOTAL INVESTMENTS - 123.1%
(Identified Cost $805,433,992)(a) 1,002,570,820
Other assets less liabilities--(23.1)% (188,267,512)
--------------
TOTAL NET ASSETS - 100% $ 814,303,308
--------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2006, the net unrealized appreciation on investments based on cost of $805,433,992 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 $ 201,103,725
Aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value (3,966,897)
--------------
Net unrealized appreciation $ 197,136,828
--------------
(b)All or a portion of this security was on loan to brokers at March 31, 2006.
(c)Non-income producing security.
(d)Interest rate represents annualized yield at time of purchase; not a coupon
rate.
(e)Represents investment of securities lending collateral.
REITReal Estate Investment Trust.
HOLDINGS AT MARCH 31, 2006 AS A PERCENTAGE OF NET ASSETS
Commercial Banks 9.9% Oil, Gas & Consumable Fuels 2.7%
Machinery 8.2 Road & Rail 2.6
Insurance 6.6 Consumer Finance 2.6
Real Estate 5.7 Energy Equipment & Services 2.6
Media 4.1 Computers & Peripherals 2.4
Hotels, Restaurants & Leisure 3.3 Healthcare Equipment & Supplies 2.4
Communications Equipment 3.2 Chemicals 2.3
Semiconductors & Semiconductor Equipment 3.0 Metals & Mining 2.2
Commercial Services & Supplies 2.9 Electrical Equipment 2.1
Electronic Equipment & Instruments 2.8 Other, less than 2% each 22.3
See accompanying notes to financial statements.
26
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
SHARES VALUE (+)
- ---------------------------------------------------------------------
COMMON STOCKS - 99.8% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 5.0%
Honeywell International, Inc. 4,500 $192,465
United Technologies Corp. 4,925 285,502
---------
477,967
---------
BEVERAGES - 4.9%
Molson Coors Brewing Co., Class B 2,275 156,110
PepsiCo, Inc. 5,325 307,732
---------
463,842
---------
BIOTECHNOLOGY - 2.8%
Amgen, Inc.(b) 3,675 267,356
---------
CAPITAL MARKETS - 8.3%
Bear Stearns Cos., Inc. 1,775 246,192
Franklin Resources, Inc. 2,375 223,820
Goldman Sachs Group, Inc. 2,075 325,692
---------
795,704
---------
CHEMICALS - 5.3%
Ecolab, Inc. 6,025 230,155
Praxair, Inc. 5,050 278,507
---------
508,662
---------
COMMERCIAL BANKS - 6.0%
Bank of America Corp. 4,300 195,822
Wells Fargo & Co. 3,225 205,980
Zions Bancorporation 2,075 171,665
---------
573,467
---------
COMMERCIAL SERVICES & SUPPLIES - 1.8%
ARAMARK Corp., Class B 5,700 168,378
---------
COMMUNICATIONS EQUIPMENT - 9.3%
Cisco Systems, Inc.(b) 15,250 330,467
Corning, Inc.(b) 5,800 156,078
Harris Corp. 5,250 248,273
QUALCOMM, Inc. 3,075 155,626
---------
890,444
---------
DIVERSIFIED FINANCIAL SERVICES - 2.1%
Citigroup, Inc. 4,225 199,547
---------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 1.8%
AT&T, Inc. 6,200 167,648
---------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.5%
Flextronics International, Ltd.(b) 14,175 146,711
---------
ENERGY EQUIPMENT & SERVICES - 2.5%
GlobalSantaFe Corp. 4,000 243,000
---------
HEALTHCARE EQUIPMENT & SUPPLIES - 4.4%
Kinetic Concepts, Inc.(b) 2,650 109,100
Medtronic, Inc. 3,725 189,044
Zimmer Holdings, Inc.(b) 1,775 119,990
---------
418,134
---------
27
SHARES VALUE (+)
- ---------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTHCARE PROVIDERS & SERVICES - 4.7%
Caremark Rx, Inc.(b) 3,200 $ 157,376
WellPoint, Inc.(b) 3,750 290,363
----------
447,739
----------
HOTELS, RESTAURANTS & LEISURE - 1.9%
Marriott International, Inc., Class A 2,675 183,505
----------
INSURANCE - 4.7%
AFLAC, Inc. 4,000 180,520
Allstate Corp. 2,700 140,697
Everest Re Group Ltd. 1,425 133,052
----------
454,269
----------
IT SERVICES - 1.0%
First Data Corp. 2,025 94,811
----------
MACHINERY - 4.9%
Danaher Corp. 3,800 241,490
Dover Corp. 4,625 224,590
----------
466,080
----------
MEDIA - 3.4%
DIRECTV Group, Inc. (The)(b) 11,850 194,340
Viacom, Inc., Class B(b) 3,412 132,386
----------
326,726
----------
MULTILINE RETAIL - 3.5%
Federated Department Stores, Inc. 2,000 146,000
Target Corp. 3,675 191,137
----------
337,137
----------
OIL, GAS & CONSUMABLE FUELS - 7.7%
ConocoPhillips 3,200 202,080
Devon Energy Corp. 4,475 273,736
Exxon Mobil Corp. 4,225 257,133
----------
732,949
----------
PERSONAL PRODUCTS - 1.6%
Alberto-Culver Co. 3,425 151,488
----------
PHARMACEUTICALS - 3.4%
Abbott Laboratories 5,125 217,659
Perrigo Co. 6,625 108,054
----------
325,713
----------
ROAD & RAIL - 2.5%
Burlington Northern Santa Fe Corp. 2,900 241,657
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.7%
DSP Group, Inc.(b) 3,675 106,612
Texas Instruments, Inc. 4,600 149,362
----------
255,974
----------
SOFTWARE - 2.1%
Microsoft Corp. 7,400 201,354
----------
TOTAL COMMON STOCKS
(Identified Cost $7,960,141) 9,540,262
----------
28
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES TAX-MANAGED EQUITY FUND - CONTINUED
VALUE (+)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.8%
(Identified Cost $7,960,141)(a) $9,540,262
Other assets less liabilities--0.2% 18,524
----------
TOTAL NET ASSETS - 100% $9,558,786
----------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2006, the unrealized appreciation on investments based on cost of $7,960,141 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 $1,727,016
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (146,895)
----------
Net unrealized appreciation $1,580,121
----------
(b)Non-income producing security.
HOLDINGS AT MARCH 31, 2006 AS A PERCENTAGE OF NET ASSETS
Communications Equipment 9.3% Multiline Retail 3.5%
Capital Markets 8.3 Media 3.4
Oil, Gas & Consumable Fuels 7.7 Pharmaceuticals 3.4
Commercial Banks 6.0 Biotechnology 2.8
Chemicals 5.3 Semiconductors & Semiconductor Equipment 2.7
Aerospace & Defense 5.0 Energy Equipment & Services 2.5
Machinery 4.9 Road & Rail 2.5
Beverages 4.9 Software 2.1
Insurance 4.7 Diversified Financial Services 2.1
Healthcare Providers & Services 4.7 Other, less than 2% each 9.6
Healthcare Equipment & Supplies 4.4
See accompanying notes to financial statements.
29
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES VALUE FUND
SHARES VALUE (+)
- ------------------------------------------------------------------
COMMON STOCKS - 94.9% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 5.6%
Honeywell International, Inc. 17,050 $ 729,229
Northrop Grumman Corp. 12,250 836,552
United Technologies Corp. 13,025 755,059
----------
2,320,840
----------
BEVERAGES - 1.3%
Molson Coors Brewing Co., Class B(b) 7,750 531,805
----------
CAPITAL MARKETS - 8.6%
Ameriprise Financial, Inc. 10,910 491,605
Lehman Brothers Holdings, Inc. 5,825 841,887
Mellon Financial Corp. 13,650 485,940
Merrill Lynch & Co., Inc. 10,925 860,453
Morgan Stanley 14,450 907,749
----------
3,587,634
----------
CHEMICALS - 1.8%
Praxair, Inc. 13,675 754,176
----------
COMMERCIAL BANKS - 6.5%
Bank of America Corp. 16,825 766,211
US Bancorp 26,050 794,525
Wachovia Corp. 12,504 700,849
Wells Fargo & Co. 7,200 459,864
----------
2,721,449
----------
COMMERCIAL SERVICES & SUPPLIES - 1.3%
ARAMARK Corp., Class B 19,100 564,214
----------
COMMUNICATIONS EQUIPMENT - 2.9%
Avaya, Inc.(c) 42,225 477,142
Motorola, Inc. 31,625 724,529
----------
1,201,671
----------
COMPUTERS & PERIPHERALS - 1.7%
Hewlett-Packard Co. 21,925 721,333
----------
CONSTRUCTION & ENGINEERING - 1.0%
Chicago Bridge & Iron Co. NV(b) 16,700 400,800
----------
CONSUMER FINANCE - 1.4%
American Express Co. 11,050 580,678
----------
DIVERSIFIED FINANCIAL SERVICES - 7.2%
CIT Group, Inc. 16,475 881,742
Citigroup, Inc. 21,100 996,553
J.P. Morgan Chase & Co. 26,775 1,114,911
----------
2,993,206
----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 4.6%
AT&T, Inc. 29,175 788,892
BellSouth Corp. 32,250 1,117,462
----------
1,906,354
----------
ELECTRIC UTILITIES - 3.2%
Entergy Corp. 10,925 753,169
Exelon Corp. 11,325 599,093
----------
1,352,262
----------
30
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2006 (UNAUDITED)
LOOMIS SAYLES VALUE FUND - CONTINUED
SHARES VALUE (+)
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRICAL EQUIPMENT - 2.1%
ABB Ltd. ADR(b)(c) 68,875 $ 864,381
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.0%
Flextronics International, Ltd.(c) 38,400 397,440
----------
ENERGY EQUIPMENT & SERVICES - 4.2%
GlobalSantaFe Corp. 14,075 855,056
Halliburton Co. 12,325 899,972
----------
1,755,028
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 1.7%
Baxter International, Inc. 7,550 293,015
Beckman Coulter, Inc. 7,575 413,368
----------
706,383
----------
HEALTHCARE PROVIDERS & SERVICES - 1.3%
Quest Diagnostics, Inc. 10,775 552,758
----------
HOTELS, RESTAURANTS & LEISURE - 1.8%
McDonald's Corp. 22,450 771,382
----------
INDEPENDENT POWER PRODUCER & ENERGY - 1.0%
NRG Energy, Inc.(c) 9,350 422,807
----------
INDUSTRIAL CONGLOMERATES - 1.5%
Tyco International Ltd. 22,875 614,880
----------
INSURANCE - 6.4%
Allstate Corp. 15,975 832,457
American International Group, Inc. 12,250 809,603
Berkshire Hathaway, Inc., Class B(c) 144 433,728
Prudential Financial, Inc. 7,925 600,794
----------
2,676,582
----------
MEDIA - 8.2%
Comcast Corp.(c) 20,675 540,858
DIRECTV Group, Inc. (The)(b)(c) 51,900 851,160
McGraw-Hill Cos., Inc. 10,875 626,617
News Corp., Class A 37,250 618,723
Time Warner, Inc. 45,950 771,500
----------
3,408,858
----------
MULTILINE RETAIL - 1.5%
Federated Department Stores, Inc. 8,450 616,850
----------
OIL, GAS & CONSUMABLE FUELS - 6.3%
Exxon Mobil Corp. 26,350 1,603,661
Occidental Petroleum Corp. 6,450 597,592
XTO Energy, Inc. 9,550 416,094
----------
2,617,347
----------
PHARMACEUTICALS - 2.8%
Abbott Laboratories 11,700 496,899
Pfizer, Inc. 27,000 672,840
----------
1,169,739
----------
REAL ESTATE - 1.1%
Simon Property Group, Inc. REIT 5,650 475,391
----------
31
SHARES VALUE (+)
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ROAD & RAIL - 2.1%
Burlington Northern Santa Fe Corp. 10,550 $ 879,132
------------
SPECIALTY RETAIL - 3.3%
Office Depot, Inc.(c) 20,100 748,524
TJX Cos, Inc. 25,475 632,289
------------
1,380,813
------------
TOBACCO - 1.5%
Altria Group, Inc. 8,925 632,425
------------
TOTAL COMMON STOCKS
(Identified Cost $29,884,962) 39,578,618
------------
PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 11.1%
COMMERCIAL PAPER - 5.0%
Citigroup, Inc., 3.300%, 4/03/06(d) $ 2,087,000 2,086,618
------------
SHARES
- ------------------------------------------------------------------------------------------------------------------------------
State Street Navigator Securities Lending Prime Portfolio(e) 2,530,770 2,530,770
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $4,617,388) 4,617,388
------------
TOTAL INVESTMENTS - 106.0%
(Identified Cost $34,502,350)(a) 44,196,006
Other assets less liabilities--(6.0)% (2,501,909)
------------
TOTAL NET ASSETS - 100% $ 41,694,097
------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2006, the net unrealized appreciation on investments based on cost of $34,502,350 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 $ 9,907,123
Aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value (213,467)
------------
Net unrealized appreciation $ 9,693,656
------------
(b)All or a portion of this security was on loan to brokers at March 31, 2006.
(c)Non-income producing security.
(d)Interest rate represents annualized yield at time of purchase; not a coupon
rate.
(e)Represents investment of securities lending collateral.
ADRAn American Depositary Receipt (ADR) is a certificate issued by a custodian
bank representing the right to receive securities of the foreign issuer
described. The values of ADR's are significantly influenced by trading on
exchanges not located in the United States.
REITReal Estate Investment Trust.
HOLDINGS AT MARCH 31, 2006 AS A PERCENTAGE OF NET ASSETS
Capital Markets 8.6% Energy Equipment & Services 4.2%
Media 8.2 Specialty Retail 3.3
Diversified Financial Services 7.2 Electric Utilities 3.2
Commercial Banks 6.5 Communications Equipment 2.9
Insurance 6.4 Pharmaceuticals 2.8
Oil, Gas & Consumable Fuels 6.3 Road & Rail 2.1
Aerospace & Defense 5.6 Electrical Equipment 2.1
Diversified Telecommunications Services 4.6 Other, less than 2% each 20.9
See accompanying notes to financial statements.
32
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2006 (UNAUDITED)
AGGRESSIVE SMALL CAP
GROWTH FUND GROWTH FUND
- ---------------------------------------------------------------------------------------------
ASSETS
Investments at cost $ 52,886,411 $ 27,476,542
Net unrealized appreciation 12,190,694 5,219,354
-------------- --------------
Investments at value 65,077,105 32,695,896
Cash 434 681
Receivable for Fund shares sold 39,928 3,503
Receivable for securities sold 1,222,798 589,496
Dividends and interest receivable 8,442 47
Receivable from investment adviser 12,077 11,679
Securities lending income receivable 5,693 544
-------------- --------------
TOTAL ASSETS 66,366,477 33,301,846
-------------- --------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 12,115,232 6,265,097
Payable for securities purchased 1,046,130 535,664
Payable for Fund shares redeemed 11,666 9,026
Management fees payable 32,750 16,002
Deferred Trustees' fees 14,661 13,569
Administrative fees payable 5,902 5,531
Trustees' fees payable 8,553 7,475
Service and distribution fees payable 226 28
Other accounts payable and accrued expenses 26,030 30,636
-------------- --------------
TOTAL LIABILITIES 13,261,150 6,883,028
-------------- --------------
NET ASSETS $ 53,105,327 $ 26,418,818
-------------- --------------
Net Assets consist of:
Paid-in capital $ 137,623,741 $ 224,286,109
Undistributed (overdistributed) net investment income (loss) (156,924) (92,937)
Accumulated net realized gain (loss) on investments (96,552,184) (202,993,708)
Net unrealized appreciation on investments 12,190,694 5,219,354
-------------- --------------
NET ASSETS $ 53,105,327 $ 26,418,818
-------------- --------------
NET ASSET VALUE AND OFFERING PRICE
INSTITUTIONAL CLASS
Net assets $ 19,960,685 $ 22,347,646
-------------- --------------
Shares of beneficial interest 880,492 1,710,230
-------------- --------------
Net asset value, offering and redemption price per share $ 22.67 $ 13.07
-------------- --------------
RETAIL CLASS
Net assets $ 33,144,642 $ 4,071,172
-------------- --------------
Shares of beneficial interest 1,492,969 318,949
-------------- --------------
Net asset value, offering and redemption price per share $ 22.20 $ 12.76
-------------- --------------
ADMIN CLASS
Net assets -- --
-------------- --------------
Shares of beneficial interest -- --
-------------- --------------
Net asset value, offering and redemption price per share -- --
-------------- --------------
Value of securities on loan (Note 2) $ 12,029,531 $ 6,169,083
-------------- --------------
See accompanying notes to financial statements.
33
SMALL CAP TAX-MANAGED
VALUE FUND EQUITY FUND VALUE FUND
-------------------------------------------
$ 805,433,992 $ 7,960,141 $ 34,502,350
197,136,828 1,580,121 9,693,656
-------------------------------------------
1,002,570,820 9,540,262 44,196,006
6,143,472 61,057 675
4,756,525 -- 66,339
1,717,043 223,268 514,262
1,724,714 5,941 39,726
-- 10,615 2,974
13,739 -- 168
-------------------------------------------
1,016,926,313 9,841,143 44,820,150
-------------------------------------------
200,515,426 -- 2,530,770
313,285 256,985 550,149
1,005,665 -- --
504,808 4,025 17,406
44,355 12,086 13,781
79,272 919 4,678
26,375 7,086 7,969
2,860 -- --
130,959 1,256 1,300
-------------------------------------------
202,623,005 282,357 3,126,053
-------------------------------------------
$ 814,303,308 $ 9,558,786 $ 41,694,097
-------------------------------------------
$ 574,211,234 $ 12,022,168 $ 30,552,949
1,349,660 22,894 94,201
41,605,586 (4,066,397) 1,353,291
197,136,828 1,580,121 9,693,656
-------------------------------------------
$ 814,303,308 $ 9,558,786 $ 41,694,097
-------------------------------------------
$ 459,739,932 $ 9,558,786 $ 41,694,097
-------------------------------------------
16,178,576 977,717 2,127,488
-------------------------------------------
$ 28.42 $ 9.78 $ 19.60
-------------------------------------------
$ 286,476,921 -- --
-------------------------------------------
10,150,437 -- --
-------------------------------------------
$ 28.22 -- --
-------------------------------------------
$ 68,086,455 -- --
-------------------------------------------
2,438,372 -- --
-------------------------------------------
$ 27.92 -- --
-------------------------------------------
$ 196,745,513 $ -- $ 2,461,946
-------------------------------------------
See accompanying notes to financial statements.
34
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2006 (UNAUDITED)
AGGRESSIVE SMALL CAP
GROWTH FUND GROWTH FUND
- -------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 107,989 $ 15,523
Interest 13,315 8,713
Securities lending income 15,235 4,635
Less net foreign taxes withheld -- --
------------ ------------
136,539 28,871
------------ ------------
EXPENSES
Management fees 182,094 77,882
Distribution fees--Retail Class 36,053 4,396
Service and distribution fees--Admin Class -- --
Trustees' fees and expenses 12,221 10,787
Administrative fees 12,160 4,240
Custodian 8,930 8,712
Transfer agent fees--Institutional Class, Retail Class, Admin Class 43,086 19,132
Audit and tax services 15,847 17,022
Registration 14,590 16,535
Shareholder reporting 11,040 8,614
Legal 1,823 890
Expense recapture (Note 4) -- --
Miscellaneous 3,919 3,302
------------ ------------
Total expenses 341,763 171,512
Less reimbursement/waiver (62,961) (63,273)
------------ ------------
Net expenses 278,802 108,239
------------ ------------
Net investment income (loss) (142,263) (79,368)
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN ON:
Investments--net 4,392,639 1,675,114
------------ ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments--net 4,061,978 2,002,401
------------ ------------
Net realized and unrealized gain on investments 8,454,617 3,677,515
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,312,354 $ 3,598,147
------------ ------------
See accompanying notes to financial statements.
35
SMALL CAP TAX-MANAGED
VALUE FUND EQUITY FUND VALUE FUND
-------------------------------------------
$ 5,478,023 $ 64,892 $ 379,026
453,826 256 19,432
91,376 3 921
(740) -- (58)
-------------------------------------------
6,022,485 65,151 399,321
-------------------------------------------
2,761,265 23,193 96,393
311,974 -- --
165,590 -- --
38,134 10,268 11,497
207,494 2,354 9,873
27,114 6,395 7,667
234,835 696 13,040
16,376 12,323 14,249
27,370 10,096 7,208
58,956 2,941 5,264
21,390 242 1,226
35,456 -- --
16,258 3,112 3,469
-------------------------------------------
3,922,212 71,620 169,886
(132,068) (41,470) (6,081)
-------------------------------------------
3,790,144 30,150 163,805
-------------------------------------------
2,232,341 35,001 235,516
-------------------------------------------
51,432,347 129,889 2,331,266
-------------------------------------------
46,050,133 456,654 1,390,116
-------------------------------------------
97,482,480 586,543 3,721,382
-------------------------------------------
$ 99,714,821 $ 621,544 $ 3,956,898
-------------------------------------------
See accompanying notes to financial statements.
36
STATEMENTS OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 2006 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2005
- ------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (142,263) $ (372,012)
Net realized gain on investments 4,392,639 8,280,912
Net change in unrealized appreciation (depreciation) on investments 4,061,978 2,760,613
---------------- ------------------
Increase in net assets resulting from operations 8,312,354 10,669,513
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class -- (280,790)
Retail Class -- (217,988)
CAPITAL GAINS:
Institutional Class -- --
Retail Class -- --
---------------- ------------------
Total Distributions -- (498,778)
---------------- ------------------
DECREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) (7,168,345) (8,782,602)
---------------- ------------------
REDEMPTION FEES
Institutional Class -- --
Retail Class -- --
---------------- ------------------
Total increase in net assets 1,144,009 1,388,133
---------------- ------------------
NET ASSETS
Beginning of period 51,961,318 50,573,185
---------------- ------------------
End of period $53,105,327 $51,961,318
---------------- ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (156,924) $ (14,661)
---------------- ------------------
SMALL CAP GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 2006 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2005
- -----------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (79,368) $ (209,903)
Net realized gain on investments 1,675,114 4,895,374
Net change in unrealized appreciation (depreciation) on investments 2,002,401 483,981
---------------- ------------------
Increase in net assets resulting from operations 3,598,147 5,169,452
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class -- --
Retail Class -- --
CAPITAL GAINS:
Institutional Class -- --
Retail Class -- --
---------------- ------------------
Total Distributions -- --
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) 3,443,479 (16,249,525)
---------------- ------------------
REDEMPTION FEES
Institutional Class 230 1,091
Retail Class 44 344
---------------- ------------------
Total increase (decrease) in net assets 7,041,900 (11,078,638)
---------------- ------------------
NET ASSETS
Beginning of period 19,376,918 30,455,556
---------------- ------------------
End of period $26,418,818 $ 19,376,918
---------------- ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ (92,937) $ (13,569)
---------------- ------------------
See accompanying notes to financial statements.
37
SMALL CAP VALUE FUND
SIX MONTHS ENDED
MARCH 31, 2006 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2005
- ------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 2,232,341 $ 2,280,117
Net realized gain on investments 51,432,347 58,138,015
Net change in unrealized appreciation (depreciation) on investments 46,050,133 43,086,275
---------------- ------------------
Increase in net assets resulting from operations 99,714,821 103,504,407
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (2,173,458) (330,114)
Retail Class (748,627) --
Admin Class (47,377) --
CAPITAL GAINS:
Institutional Class (36,009,633) (36,097,787)
Retail Class (21,502,778) (18,456,167)
Admin Class (6,186,131) (6,757,571)
---------------- ------------------
Total Distributions (66,668,004) (61,641,639)
---------------- ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) 74,684,439 82,243,991
---------------- ------------------
REDEMPTION FEES
Institutional Class 5,137 5,541
Retail Class 3,053 3,209
Admin Class 809 956
---------------- ------------------
Total increase in net assets 107,740,255 124,116,465
---------------- ------------------
NET ASSETS
Beginning of period 706,563,053 582,446,588
---------------- ------------------
End of period $814,303,308 $706,563,053
---------------- ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 1,349,660 $ 2,086,781
---------------- ------------------
TAX-MANAGED EQUITY FUND
SIX MONTHS ENDED
MARCH 31, 2006 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2005
- -----------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 35,001 $ 46,163
Net realized gain on investments 129,889 19,715
Net change in unrealized appreciation (depreciation) on investments 456,654 533,250
---------------- ------------------
Increase in net assets resulting from operations 621,544 599,128
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (54,165) (23,811)
CAPITAL GAINS:
Institutional Class -- --
---------------- ------------------
Total Distributions (54,165) (23,811)
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) (238,867) 3,452,918
---------------- ------------------
REDEMPTION FEES
Institutional Class -- --
---------------- ------------------
Total increase in net assets 328,512 4,028,235
NET ASSETS
Beginning of period 9,230,274 5,202,039
---------------- ------------------
End of period $9,558,786 $9,230,274
---------------- ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 22,894 $ 42,058
---------------- ------------------
See accompanying notes to financial statements.
38
STATEMENTS OF CHANGES IN NET ASSETS
VALUE FUND
SIX MONTHS ENDED
MARCH 31, 2006 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2005
- -----------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 235,516 $ 397,776
Net realized gain on investments 2,331,266 2,769,664
Net change in unrealized appreciation (depreciation) on investments 1,390,116 2,911,452
---------------- ------------------
Increase in net assets resulting from operations 3,956,898 6,078,892
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (530,299) (524,122)
CAPITAL GAINS:
Institutional Class (1,548,378) --
---------------- ------------------
Total Distributions (2,078,677) (524,122)
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) 2,561,275 (1,863,227)
---------------- ------------------
REDEMPTION FEES
Institutional Class -- --
---------------- ------------------
Total increase in net assets 4,439,496 3,691,543
---------------- ------------------
NET ASSETS
Beginning of period 37,254,601 33,563,058
---------------- ------------------
End of period $41,694,097 $37,254,601
---------------- ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 94,201 $ 388,984
---------------- ------------------
See accompanying notes to financial statements.
39
THIS PAGE INTENTIONALLY LEFT BLANK
40
FINANCIAL HIGHLIGHTS
INCOME (LOSS) FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ----------------------------
Net asset
value, Net realized Dividends Distributions
beginning Net and unrealized Total from from from net
of the investment gain (loss) on investment net investment realized
period income (loss) investments operations income capital gains
- ------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH FUND
INSTITUTIONAL CLASS
3/31/2006(e) $19.00 $(0.05)(c) $ 3.72 $ 3.67 $ -- $ --
9/30/2005 15.50 (0.10)(c) 3.78 3.68 (0.18) --
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)
RETAIL CLASS
3/31/2006(e) $18.63 $(0.07)(c) $ 3.64 $ 3.57 $ -- $ --
9/30/2005 15.20 (0.14)(c) 3.70 3.56 (0.13) --
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)
(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 waive/reimburse a portion of the Fund's expenses
during the period. Without this waiver/reimbursement the Fund's ratio of
operating expenses would have been higher.
(c) Per share net investment income (loss) has been determined on the basis of
the weighted average number of shares outstanding during the period.
(d) Annualized for periods less than one year.
(e) For the six months ended March 31, 2006 (Unaudited).
See accompanying notes to financial statements.
41
See accompanying notes to financial statements.
42
RATIOS TO AVERAGE NET ASSETS:
- --------------- --------------------------------------------------
Net asset Net assets,
value, Total end of Net Portfolio
Total Redemption end of the return the period Net Gross investment turnover
distributions fee period %(a) (000) Expenses %(b)(d) Expenses %(d) income (loss) %(d) rate %
- -------------------------------------------------------------------------------------------------------------------
$ -- $-- $22.67 19.4 $19,961 1.00 1.16 (0.45) 95
(0.18) -- 19.00 23.9 26,159 1.00 1.21 (0.60) 280
-- -- 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
$ -- $-- $22.20 19.2 $33,145 1.25 1.58 (0.68) 95
(0.13) -- 18.63 23.6 25,802 1.25 1.50 (0.85) 280
-- -- 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
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 the investment gain (loss) on investment net investment realized
period income (loss) investments operations income capital gains
- -----------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
INSTITUTIONAL CLASS
3/31/2006(f) $11.08 $(0.04)(c) $ 2.03 $ 1.99 $ -- $ --
9/30/2005 8.96 (0.08)(c) 2.20 2.12 -- --
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)
RETAIL CLASS
3/31/2006(f) $10.84 $(0.06)(c) $ 1.98 $ 1.92 $ -- $ --
9/30/2005 8.78 (0.11)(c) 2.17 2.06 -- --
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)
SMALL CAP VALUE FUND
INSTITUTIONAL CLASS
3/31/2006(f) $27.43 $ 0.10(c) $ 3.46 $ 3.56 $(0.15) $(2.42)
9/30/2005 25.75 0.13(c) 4.22 4.35 (0.02) (2.65)
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)
RETAIL CLASS
3/31/2006(f) $27.23 $ 0.07(c) $ 3.42 $ 3.49 $(0.08) $(2.42)
9/30/2005 25.62 0.06(c) 4.20 4.26 -- (2.65)
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)
ADMIN CLASS
3/31/2006(f) $26.94 $ 0.03(c) $ 3.39 $ 3.42 $(0.02) $(2.42)
9/30/2005 25.43 (0.00)(c)(d) 4.16 4.16 -- (2.65)
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)
(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 waive/reimburse a portion of the Fund's expenses
during the period. Without this waiver/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.
(e) Annualized for periods less than one year.
(f) For the six months ended March 31, 2006 (Unaudited).
(g) Includes expense recapture of 0.02%. See Note 4 of Notes to Financial
Statements.
See accompanying notes to financial statements.
43
RATIOS TO AVERAGE NET ASSETS:
- -------------- ----------------------------------
Net asset Net assets, Net
value, Total end of Net Gross investment Portfolio
Total Redemption end of the return the period Expenses Expenses income(loss) turnover
distributions fee period %(a) (000) %(b)(e) %(e) %(e) rate %
- --------------------------------------------------------------------------------------------------
$ -- $0.00(d) $13.07 18.0 $ 22,348 1.00 1.57 (0.72) 53
-- 0.00(d) 11.08 23.7 15,785 1.00 1.70 (0.85) 227
-- 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
$ -- $0.00(d) $12.76 17.7 $ 4,071 1.25 2.07 (0.98) 53
-- 0.00(d) 10.84 23.5 3,592 1.25 1.87 (1.14) 227
-- 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
$(2.57) $0.00(d) $28.42 14.1 $459,740 0.90 0.90/(g)/ 0.74 33
(2.67) 0.00(d) 27.43 18.0 403,110 0.90 0.93 0.48 59
(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
$(2.50) $0.00(d) $28.22 13.9 $286,477 1.15 1.20 0.49 33
(2.65) 0.00(d) 27.23 17.7 235,948 1.15 1.20 0.24 59
(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
$(2.44) $0.00(d) $27.92 13.8 $ 68,086 1.40 1.62 0.23 33
(2.65) 0.00(d) 26.94 17.4 67,505 1.40 1.43 (0.01) 59
(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
See accompanying notes to financial statements.
44
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 the investment gain (loss) on investment net investment realized
period income investments operations income capital gains
- ------------------------------------------------------------------------------------------------------
TAX-MANAGED EQUITY FUND
INSTITUTIONAL CLASS
3/31/2006(e) $ 9.20 $0.04(c) $ 0.60 $ 0.64 $(0.06) $ --
9/30/2005 8.49 0.05(c) 0.69 0.74 (0.03) --
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)
VALUE FUND
INSTITUTIONAL CLASS
3/31/2006(e) $18.72 $0.12(c) $ 1.82 $ 1.94 $(0.27) $(0.79)
9/30/2005 15.95 0.20(c) 2.83 3.03 (0.26) --
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) --
(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 waive/reimburse a portion of the Fund's expenses
during the period. Without this waiver/reimbursement the Fund's ratio of
operating expenses would have been higher.
(c) Per share net investment income (loss) has been determined on the basis of
the weighted average number of shares outstanding during the period.
(d) Annualized for periods less than one year.
(e) For the six months ended March 31, 2006 (Unaudited).
See accompanying notes to financial statements.
45
RATIOS TO AVERAGE NET ASSETS:
- -------------- -------------------------------------------
Net asset Net assets,
value, end of the Net Portfolio
Total Redemption end of the Total period Net Gross investment turnover
distributions fee period return %(a) (000) Expenses %(b)(d) Expenses %(d) income %(d) rate %
- ----------------------------------------------------------------------------------------------------------------
$(0.06) $-- $ 9.78 7.0 $ 9,559 0.65 1.54 0.75 31
(0.03) -- 9.20 8.7 9,230 0.65 2.02 0.59 38
(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
$(1.06) $-- $19.60 10.7 $41,694 0.85 0.88 1.22 19
(0.26) -- 18.72 19.2 37,255 0.85 0.92 1.13 34
(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
See accompanying notes to financial statements.
46
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 (UNAUDITED)
1. ORGANIZATION. Loomis Sayles Funds I and Loomis Sayles Funds II (the "Trusts"
and each a "Trust") are each organized as a Massachusetts business trust. Each
Trust is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end investment management company. Each Declaration of
Trust permits the Board of Trustees to authorize the issuance of an unlimited
number of shares of the Trusts in multiple series (individually, a "Fund" and
collectively, the "Funds"). Shares of Loomis Sayles Tax-Managed Equity Fund
were first registered under the Securities Act of 1933 (the "1933 Act")
effective March 7, 1997 (subsequent to its commencement of investment
operations). Information presented in these financial statements pertains to
certain equity funds of the Trusts; the financial statements for the remaining
equity funds and the fixed income funds are presented in separate reports. The
following Funds are included in this report:
LOOMIS SAYLES FUNDS I:
Loomis Sayles Small Cap Value Fund (the "Small Cap Value Fund")
LOOMIS SAYLES FUNDS II:
Loomis Sayles Aggressive Growth Fund (the "Aggressive Growth Fund")
Loomis Sayles Small Cap Growth Fund (the "Small Cap Growth Fund")
Loomis Sayles Tax-Managed Equity Fund (the "Tax-Managed Equity Fund")
Loomis Sayles Value Fund (the "Value 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 to a Fund 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. 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 (other than short-term obligations with a remaining maturity of less
than 60 days) 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 Funds' investment
adviser using consistently applied procedures under the general supervision of
the Board of Trustees. Investments in other open-end investment companies are
valued at the net asset value each day.
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.
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
47
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 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 US dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than US dollars are translated
into US 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 and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Funds' books
and the US 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 period, 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 US companies and securities of the US 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
US companies and the US 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 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 US dollar value of the currencies a Fund has
committed to buy or sell represents 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 US dollar. At March 31, 2006, there were no open forward currency contracts.
E. FEDERAL AND FOREIGN INCOME TAXES. The Trusts treat each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities. Such
taxes are accrued as applicable.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gain 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 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.
48
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2006 (UNAUDITED)
The tax characterization of distributions is determined on an annual basis. The
tax character of distributions paid to shareholders during the year ended
September 30, 2005 was as follows:
2005 DISTRIBUTIONS PAID FROM:
-------------------------------------
ORDINARY LONG-TERM
INCOME CAPITAL GAINS TOTAL
----------- ------------- -----------
Aggressive Growth Fund $ 498,778 $ -- $ 498,778
Small Cap Growth Fund -- -- --
Small Cap Value Fund 24,071,753 37,569,886 61,641,639
Tax-Managed Equity Fund 23,811 -- 23,811
Value Fund 524,122 -- 524,122
As of September 30, 2005, the capital loss carryforwards were as follows:
AGGRESSIVE SMALL CAP SMALL CAP TAX-MANAGED
CAPITAL LOSS CARRYFORWARD GROWTH FUND GROWTH FUND VALUE FUND EQUITY FUND VALUE FUND
- ------------------------- ------------- ------------- ---------- ----------- ----------
Expires September 30, 2009 $ -- $ -- $-- $ (214,505) $--
Expires September 30, 2010 (79,794,012) (145,381,318) -- (2,177,191) --
Expires September 30, 2011 (21,142,388) (59,283,040) -- (1,662,157) --
Expires September 30, 2012 -- -- -- (110,150) --
Expires September 30, 2013 -- -- -- (17,395) --
------------- ------------- ---------- ----------- ----------
Total capital loss carryforward $(100,936,400) $(204,664,358) $-- $(4,181,398) $--
------------- ------------- ---------- ----------- ----------
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 repurchase agreements are
tri-party arrangements whereby the collateral is held at the custodian bank in
a segregated account for the benefit of the Fund and on behalf of the
counterparty. 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.
H. SECURITIES LENDING. The Funds have entered into an agreement with State
Street Bank and Trust Company ("State Street Bank"), as agent of the Funds, to
lend securities to certain designated borrowers. The loans are collateralized
with cash or securities in an amount equal to at least 105% or 102% of the
market value of the loaned international equity or domestic securities,
respectively, when the loan is initiated. Thereafter, the value of the
collateral must remain at 102% of the market value of loaned securities for US
equities and US corporate debt; at least 105% of the market value of loaned
securities for non-US equities; and at least 100% of the market value of loaned
securities for US government and agency securities, sovereign debt issued by
non-US governments and non-US corporate debt. In the event that the market
value of the collateral falls below the required percentages described above,
the borrower will deliver additional collateral on the next business day. As
with other extensions of credit, the Funds may bear the risk of loss with
respect to the investment of the collateral. The Funds invest cash collateral
in short-term investments, a portion of the income from which is remitted to
the borrowers and the remainder allocated between the Funds and State Street
Bank as lending agent. The market value of securities on loan to borrowers and
the value of collateral held by the Funds with respect to such loans at
March 31, 2006, were as follows:
MARKET VALUE VALUE OF
FUND ON LOAN COLLATERAL
- ---- ------------ ------------
Aggressive Growth Fund $ 12,029,531 $ 12,115,232
Small Cap Growth Fund 6,169,083 6,265,097
Small Cap Value Fund 196,745,513 200,515,426
Tax-Managed Fund -- --
Value Fund 2,461,946 2,530,770
I. INDEMNIFICATIONS. Under the Funds' organizational documents, its officers
and Trustees are indemnified against certain liability arising out of the
performance of their duties to the Funds. Additionally, in the normal course of
business, the Funds enter into contracts with service providers that contain
general indemnification clauses. The Funds' maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against Funds that have not yet occurred. However, based on experience, the
Funds expect the risk of loss to be remote.
49
3. PURCHASES AND SALES OF SECURITIES. For the six months ended March 31, 2006,
purchases and sales of securities (excluding short-term investments and US
Government/Agency Securities) were as follows:
FUND PURCHASES SALES
- ---- ------------ ------------
Aggressive Growth Fund $ 45,939,509 $ 54,602,191
Small Cap Growth Fund 13,997,043 10,848,162
Small Cap Value Fund 231,948,097 238,009,238
Tax-Managed Equity Fund 2,865,488 3,139,643
Value Fund 7,191,724 7,182,146
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 Fund. Separate management agreements for each
Fund in effect for the six months ended March 31, 2006, 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, 2007, 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% --
Small Cap Growth Fund 0.75% 1.00% 1.25% --
Small Cap Value Fund 0.75% 0.90% 1.15% 1.40%
Tax-Managed Equity Fund 0.50% 0.65% -- --
Value Fund 0.50% 0.85% -- --
For the six months ended March 31, 2006, 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 $ 182,094 $39,332 $ 142,762 0.75% 0.59%
Small Cap Growth Fund 77,882 58,754 19,128 0.75% 0.18%
Small Cap Value Fund 2,761,265 0 2,761,265 0.75% 0.75%
Tax-Managed Equity Fund 23,193 23,193 -- 0.50% 0.00%
Value Fund 96,393 6,081 90,312 0.50% 0.47%
For the six months ended March 31, 2006, in addition to the waiver of
management fees, expenses have been reimbursed as follows:
EXPENSES
FUND REIMBURSED
- ---- ----------
Aggressive Growth Fund $ 23,629
Small Cap Growth Fund 4,519
Small Cap Value Fund 132,068
Tax-Managed Equity Fund 18,277
Value Fund --
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 date indicated above and will be reevaluated on an annual basis.
Loomis Sayles is permitted to recover expenses it has borne under the expense
limitation agreement (whether through reduction of its management fees or
otherwise) in later periods to the extent the Funds' expenses fall below the
expense limits, provided, however, that the Funds are not obligated to pay such
deferred fees more than one year after the end of the fiscal year in which the
fee was deferred.
50
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2006 (UNAUDITED)
At March 31, 2006, the amounts subject to possible reimbursement under the
expense limitation agreements were as follows:
EXPENSES SUBJECT TO EXPENSES SUBJECT TO
POSSIBLE POSSIBLE
REIMBURSEMENT UNTIL REIMBURSEMENT UNTIL
FUND SEPTEMBER 30, 2006 SEPTEMBER 30, 2007
- ---- ------------------- -------------------
Aggressive Growth Fund $116,730 $ 62,961
Small Cap Growth Fund 151,644 63,273
Small Cap Value Fund 189,817 132,068
Tax-Managed Fund 106,971 41,470
Value Fund 26,275 6,081
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trusts. Loomis Sayles' general partner is indirectly owned by IXIS Asset
Management US Group, L.P. ("IXIS US Group") (formerly IXIS Asset Management
North America L.P.) which is part of IXIS Asset Management Group, an
international asset management group based in Paris, France. IXIS Asset
Management Group is ultimately owned principally, directly or indirectly by
three large affiliated French financial services entities: the Caisse Nationale
des Caisses d'Epargne, a financial institution owned by CDC (as defined below)
and by French regional savings banks known as the Caisses d'Epargne; the Caisse
des Depots et Consignations ("CDC"), a public sector financial institution
created by the French government in 1816; and CNP Assurances, a large French
life insurance company.
B. ADMINISTRATIVE FEES. IXIS Asset Management Advisors, L.P. ("IXIS Advisors")
provides certain administrative services to the Funds and has subcontracted
with State Street Bank to serve as sub-administrator.
Pursuant to the agreement between the Trusts, IXIS Advisor Funds Trust I, IXIS
Advisor Funds Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust
IV and IXIS Cash Management Trust ("IXIS Advisor Funds Trusts")(collectively,
the "Trusts") and IXIS Advisors, each Fund paid IXIS Advisors 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 IXIS Advisors Funds Trusts, of the
annual aggregate minimum fee of $5 million.
For the six months ended March 31, 2006, fees paid to IXIS Advisors for
administrative fees were as follows:
ADMINISTRATIVE
FUND FEES
- ---- --------------
Aggressive Growth Fund $ 12,160
Small Cap Growth Fund 4,240
Small Cap Value Fund 207,494
Tax-Managed Equity Fund 2,354
Value Fund 9,873
C. SERVICE AND DISTRIBUTION FEES. The Trusts have entered into a distribution
agreement with IXIS Asset Management Distributors, L.P. ("IXIS Distributors"),
a wholly owned subsidiary of IXIS US Group. Pursuant to this agreement, 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 IXIS
Distributors a monthly distribution fee at an annual rate not to exceed 0.25%
of the average daily net assets attributable to the Fund's Retail Class and
Admin Class Shares, as
51
reimbursement for expenses incurred by 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 not to exceed
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.
D. TRUSTEES FEES AND EXPENSES. The Funds do not pay any compensation directly
to its officers or Trustees who are directors, officers or employees of IXIS
Advisors, IXIS Distributors, IXIS US Group, Loomis Sayles or their affiliates.
The Chairperson of the Board receives a retainer fee at the annual rate of
$200,000. The Chairperson does not receive any meeting attendance fees for
Board of Trustees meetings or committee meetings that she attends. Each
independent Trustee (other than the Chairperson) receives, in the aggregate, a
retainer fee at the annual rate of $55,000. Each independent Trustee also
receives a meeting attendance fee of $6,000 for each meeting of the Board of
Trustees that he or she attends in person and $3,000 for each meeting of the
Board of Trustees that he or she attends telephonically. In addition, each
committee chairman receives an additional retainer fee at the annual rate of
$10,000. Each committee member receives $4,000 or $5,000 for each Contract and
Governance or Audit Committee meeting, respectively, that he or she attends in
person and $2,000 or $2,500 for each Contract and Governance or Audit Committee
meeting, respectively, that he or she attends telephonically. These fees are
allocated among the funds in the 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 November 18, 2005, the Trusts had co-chairmen of the Board. Prior to
October 1, 2005, each independent Trustee received, 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 that he or she attended. The
co-chairmen of the Board each received an additional annual retainer of
$25,000. Each committee chairman received an additional retainer fee at the
annual rate of $7,000. Each committee member received $3,750 for each committee
meeting that he or she attended. In addition, during the period October 1, 2005
to November 18, 2005, each co-chairman received an additional one-time payment
of $25,000 as compensation for their services as chairmen.
Prior to January 1, 2006, each committee member was compensated $4,000 for each
Audit Committee meeting that he or she attended in person and $2,000 for such
meeting he or she attended telephonically.
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 Trusts on the normal payment
date. Deferred amounts remain in the Funds until distributed in accordance with
the Plan.
Additionally, the Board of Trustees has approved the use of the Funds' assets
to pay their portion of the annual salary for 2005 of an employee at IXIS
Advisors who supports the Funds' Chief Compliance Officer. For the period
October 1, 2005 through December 31, 2005, each Fund's portion of such expense
was approximately $575.
E. REDEMPTION FEES. Shareholders of Small Cap Growth Fund and Small Cap Value
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
accounted for as an addition to paid-in capital and are presented on the
Statements of Changes in Net Assets.
5. LINE OF CREDIT. Each Fund, together with certain other Funds of the Trusts,
participates in a $75 million committed line of credit provided by State Street
Bank. Advances under the line are taken primarily for emergency purposes.
Interest is charged to a Fund based on its borrowings at a rate per annum equal
to the Federal Funds rate plus 0.50%. In addition, a Fund is charged its pro
rata portion of a facility fee equal to 0.09% per annum on the unused portion
of the line of credit. For the period ended March 31, 2006, the Funds had no
borrowing under this agreement.
6. BROKERAGE COMMISSION RECAPTURE. Each Fund has entered into agreements with
certain brokers whereby the brokers will rebate a portion of brokerage
commissions. All amounts rebated by the brokers are returned to the Funds under
such agreements and are
52
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2006 (UNAUDITED)
included in realized gains in the Statements of Operations. For the six months
ended March 31, 2006, amounts rebated under these agreements were as follows:
FUND REBATES
- ---- -------
Aggressive Growth Fund $12,847
Small Cap Growth Fund 1,925
Small Cap Value Fund 48,650
Tax-Managed Equity 870
7. SHAREHOLDERS. At March 31, 2006, Loomis Sayles owned 259,319 shares,
equating to 26.5% of Tax-Managed Equity Fund shares outstanding. At March 31,
2006, the Loomis Sayles Funded Pension Plan ("Pension Plan") and the Loomis
Sayles Employees' Profit Sharing Retirement Plan held shares of beneficial
interest in the Funds as follows:
PROFIT SHARING
FUND PENSION PLAN RETIREMENT PLAN
- ---- ------------ ---------------
Aggressive Growth Fund 319,727 352,762
Small Cap Growth Fund 364,448 371,388
Small Cap Value Fund 368,767 601,497
Value Fund 494,545 432,883
At March 31, 2006, one shareholder owned 10.1% of the Loomis Sayles Aggressive
Growth Fund's total outstanding shares; one shareholder owned 13.8% of the
Loomis Sayles Small Cap Growth Fund's total outstanding shares; four
shareholders individually owned more than 5% of the Loomis Sayles Tax-Managed
Equity Fund's total outstanding shares, representing, in aggregate, 46.7% of
the Fund; and two shareholders individually owned more than 5% of the Loomis
Sayles Value Fund's total outstanding shares, representing, in aggregate, 11.5%
of the Fund.
8. CAPITAL SHARES. Each Fund may issue an unlimited number of shares of
beneficial interest without par value. Transactions in capital shares were as
follows:
AGGRESSIVE GROWTH FUND
Six Months Ended March 31, 2006 Year Ended September 30, 2005
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS --------- ------------ -------- ------------
Issued from the sale of shares 81,568 $ 1,751,152 53,494 $ 915,359
Issued in connection with
the reinvestment of distributions -- -- 16,185 277,892
Redeemed (577,946) (11,129,383) (318,259) (5,344,666)
--------- --------------- ----------- ---------------
Net change (496,378) $ (9,378,231) (248,580) $ (4,151,415)
--------- --------------- ----------- ---------------
Shares Amount Shares Amount
RETAIL CLASS --------- ------------ -------- ------------
Issued from the sale of shares 291,330 $ 5,926,147 318,102 $ 5,337,862
Issued in connection with
the reinvestment of distributions -- -- 12,860 216,942
Redeemed (183,447) (3,716,261) (615,930) (10,185,991)
--------- --------------- ----------- ---------------
Net change 107,883 $ 2,209,886 (284,968) $ (4,631,187)
--------- --------------- ----------- ---------------
SMALL CAP GROWTH FUND
Six Months Ended March 31, 2006 Year Ended September 30, 2005
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS --------- ------------ -------- ------------
Issued from the sale of shares 344,690 $ 4,202,342 113,316 $ 1,131,916
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (58,725) (651,991) (460,764) (4,575,642)
--------- --------------- ----------- ---------------
Net change 285,965 $ 3,550,351 (347,448) $ (3,443,726)
--------- --------------- ----------- ---------------
53
SMALL CAP GROWTH FUND -- CONTINUED
Six Months Ended March 31, 2006 Year Ended September 30, 2005
------------------------------ ----------------------------
Shares Amount Shares Amount
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 72,340 $ 850,880 216,852 $ 2,124,356
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (84,835) (957,752) (1,546,953) (14,930,155)
---------- --------------- ------------ --------------
Net change (12,495) $ (106,872) (1,330,101) $(12,805,799)
---------- --------------- ------------ --------------
SMALL CAP VALUE FUND
Six Months Ended March 31, 2006 Year Ended September 30, 2005
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 1,507,884 $ 40,879,056 3,605,383 $ 93,881,608
Issued in connection with
the reinvestment of distributions 1,409,958 35,671,938 1,389,061 34,567,270
Redeemed (1,435,968) (38,986,849) (3,747,820) (95,533,263)
---------- --------------- ------------ --------------
Net change 1,481,874 $ 37,564,145 1,246,624 $ 32,915,615
---------- --------------- ------------ --------------
Shares Amount Shares Amount
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 1,894,555 $ 51,003,598 3,302,664 $ 85,184,696
Issued in connection with
the reinvestment of distributions 879,102 22,100,621 739,424 18,285,960
Redeemed (1,287,943) (34,441,129) (2,145,167) (55,041,964)
---------- --------------- ------------ --------------
Net change 1,485,714 $ 38,663,090 1,896,921 $ 48,428,692
---------- --------------- ------------ --------------
Shares Amount Shares Amount
ADMIN CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 418,040 $ 11,101,009 1,009,094 $ 25,783,740
Issued in connection with
the reinvestment of distributions 237,129 5,902,138 263,038 6,449,687
Redeemed (722,939) (18,545,943) (1,230,767) (31,333,743)
---------- --------------- ------------ --------------
Net change (67,770) $ (1,542,796) 41,365 $ 899,684
---------- --------------- ------------ --------------
TAX-MANAGED EQUITY FUND
Six Months Ended March 31, 2006 Year Ended September 30, 2005
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 61,521 $ 576,097 421,995 $ 3,741,887
Issued in connection with
the reinvestment of distributions 4,870 45,436 2,601 23,491
Redeemed (91,511) (860,400) (34,673) (312,460)
---------- --------------- ------------ --------------
Net change (25,120) $ (238,867) 389,923 $ 3,452,918
---------- --------------- ------------ --------------
VALUE FUND
Six Months Ended March 31, 2006 Year Ended September 30, 2005
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 114,143 $ 2,196,322 141,305 $ 2,428,427
Issued in connection with
the reinvestment of distributions 111,464 2,043,141 30,355 515,434
Redeemed (88,168) (1,678,188) (285,225) (4,807,088)
---------- --------------- ------------ --------------
Net change 137,439 $ 2,561,275 (113,565) $ (1,863,227)
---------- --------------- ------------ --------------
54
[LOGO]
Semiannual Report
March 31, 2006
[LOGO]
Loomis Sayles Investment Grade Bond Fund
TABLE OF CONTENTS
Management Discussion
and Performance.........Page 1
Portfolio of InvestmentsPage 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 its assets in lower-rated, fixed-income securities and up
to 20% in foreign or emerging market securities
- --------------------------------------------------------------------------------
Fund Inception:
December 31, 1996
- --------------------------------------------------------------------------------
Managers:
Daniel Fuss
Steven Kaseta
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
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
- --------------------------------------------------------------------------------
During the six months ended March 31, 2006, foreign bonds and domestic
corporate issues outperformed higher-quality government securities. Although
Loomis Sayles Investment Grade Bond Fund's investments in U.S. agency
securities offset strong performance from other holdings, the fund still
outperformed its benchmark and an average of comparable funds tracked by
Morningstar during the period.
Class A shares of the fund returned 0.66% at net asset value, with $0.13 in
dividends reinvested during the first half of its fiscal year. For the same
period, the fund's benchmark, Lehman U.S. Government/Credit Index, returned
- -0.42%, while the average return on the funds in Morningstar's Long-Term Bond
category was -1.08%. The fund's 30-day SEC yield was 4.63% at March 31, 2006.
SELECTED FOREIGN BONDS WERE THE BEST PERFORMERS
Foreign bonds were the strongest contributors to the fund's performance during
the six-month period, led by Brazilian, Indonesian and Thai issues. In the
United States, both the investment-grade and high-yield corporate bonds we
selected aided performance. For these sectors, yield spreads (the difference in
yield between higher- and lower-quality bonds) remained tight, driven by
investor demand in the wake of healthy corporate profit growth and upbeat
economic news.
Canadian issues represented the fund's largest foreign concentration at the end
of March 2006, with smaller allocations in Latin American and Pacific Rim
countries, including Brazil, Mexico, Australia, Thailand, South Korea and
Singapore.
DOMESTIC CORPORATE BONDS ALSO SUPPORTED RESULTS
The fund's holdings in domestic corporate bonds were also positive, as an
expanding economy lifted corporate profits and improved many companies' balance
sheets. High-yield securities were the top performers. Selected
telecommunications issues performed well, due in part to ongoing industry
consolidation and economic growth. Automotive securities bounced back from low
price levels at the end of 2005, and some of the fund's airline holdings were
helped by profitable government contracts.
High-yield corporate bonds accounted for less than 20% of the fund's total
assets at March 31, 2006, down slightly since the beginning of the fiscal
period. We also trimmed investments in U.S. Treasuries, while adding to
investment-grade corporate bonds and initiating a small position in convertible
securities.
SOME FOREIGN INVESTMENTS AND LONG MATURITY U.S. GOVERNMENT AGENCIES HURT
Despite generally strong results from foreign issues, bonds denominated in New
Zealand dollars proved disappointing. The market's increased attention to New
Zealand's rising budget deficits depressed prices of these holdings.
Although U.S. government agency securities performed well, some of the fund's
government agency holdings detracted from results. Government securities with
short duration characteristics declined in price in response to rising interest
rates.
FEDERAL RESERVE EXPECTED TO MOVE CLOSER TO "NEUTRAL"
We believe the Federal Reserve Board, having raised the influential fed funds
rate from 1.00% in June of 2004 to 4.75% by the end of March 2006, may raise
rates to 5.00% before pausing to assess the effects of the tightening. This
would represent a "neutral" policy, with rates neither stimulating nor
suppressing economic growth. If inflation picks up, it could prompt further
rate hikes, but our current forecast is for inflation to remain relatively
stable. Based on our outlook, during the past six months we modestly increased
the fund's duration (its sensitivity to interest rates) in search of higher
returns. However, the fund is still more defensively positioned than its Lehman
benchmark.
While the current backdrop of economic growth and rising corporate profits
would seem to favor high-yield bonds, their valuations are relatively high.
Consequently, we believe this may be a good time to lighten positions in
lower-grade corporate issues, reserving our option to move back into
higher-yielding securities if yield spreads widen again. Emerging-market debt
may be less vulnerable to a correction than domestic high-yield bonds because
of improving credit quality and healthy money flows in developing economies.
1
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
Investment Results through March 31, 2006
- --------------------------------------------------------------------------------
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/
[CHART]
December 31, 1996 (inception) through March 31, 2005
Lehman
Net Asset Maximum Lipper BBB U.S.
Government/
Value (2) Sales Charge (3) Rated Funds Index Credit 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 19,700 18,813 16,300 17,141
10/31/2004 20,115 19,210 16,461 17,289
11/30/2004 20,401 19,483 16,406 17,097
12/31/2004 20,650 19,721 16,593 17,279
1/31/2005 20,528 19,604 16,681 17,399
2/28/2005 20,661 19,732 16,654 17,284
3/31/2005 20,420 19,501 16,467 17,163
4/30/2005 20,444 19,524 16,601 17,420
5/31/2005 20,538 19,614 16,774 17,638
6/30/2005 20,762 19,828 16,916 17,754
7/31/2005 20,712 19,780 16,838 17,554
8/31/2005 21,077 20,128 17,047 17,816
9/30/2005 21,052 20,107 16,877 17,583
10/31/2005 20,837 19,899 16,730 17,432
11/30/2005 20,931 19,989 16,799 17,522
12/31/2005 21,077 20,129 16,964 17,688
1/31/2006 21,418 20,455 17,026 17,656
2/28/2006 21,506 20,539 17,104 17,704
3/31/2006 21,191 20,240 16,917 17,509
Average Annual Total Returns -- March 31, 2006
SINCE FUND
6 MONTHS/4/ 1 YEAR/4/ 5 YEARS/4/ INCEPTION/4/
CLASS A/1/
Net Asset Value/2/ 0.66% 3.75% 9.14% 8.46%
With Maximum Sales Charge/3/ -3.86 -0.94 8.13 7.92
CLASS B/1/
Net Asset Value/2/ 0.27 2.98 8.19 7.49
With CDSC/5/ -4.46 -1.80 7.89 7.49
CLASS C/1/
Net Asset Value/2/ 0.29 2.92 8.19 7.49
With CDSC/5/ -0.66 1.97 8.19 7.49
CLASS Y/1/
Net Asset Value/2/ 0.83 4.13 9.44 8.74
CLASS J/1/
Net Asset Value/2/ 0.45 3.34 8.62 7.93
With Sales Charge/5/ -3.04 -0.28 7.85 7.51
- ---------------------------------------------------------------------------------
SINCE FUND
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS INCEPTION/6/
Lehman U.S. Government/Credit Index -0.42% 2.02% 5.23% 6.24%
Morningstar Long-Term Bond Fund
Avg. -1.08 1.55 6.32 6.42
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.ixisadvisorfunds.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.
Portfolio Facts
% of Net Assets as of
CREDIT QUALITY 3/31/06 9/30/05
- ----------------------------------------
A 6.2 3.1
- ----------------------------------------
Aa 16.5 13.5
- ----------------------------------------
Aaa 29.4 43.3
- ----------------------------------------
B 1.1 0.7
- ----------------------------------------
Ba 9.1 9.2
- ----------------------------------------
Baa 26.4 16.8
- ----------------------------------------
Caa 0.9 1.6
- ----------------------------------------
Not rated* 8.0 8.3
- ----------------------------------------
Short term & other 2.4 3.0
- ----------------------------------------
Credit Quality is based on ratings from Moody's Investors Service.
*Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/06 9/30/05
- --------------------------------------------------
1 year or less 7.7 11.8
- --------------------------------------------------
1-5 years 49.7 48.4
- --------------------------------------------------
5-10 years 20.2 26.3
- --------------------------------------------------
10+ years 22.4 13.5
- --------------------------------------------------
Average Effective Maturity 7.6 years 5.7 years
- --------------------------------------------------
Portfolio characteristics will vary.
See page 3 for descriptions of the index.
NOTES TO CHARTS
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
/1/Returns shown in the chart include performance of the fund's Retail Class
shares (inception: 12/31/96), which were converted to Class A shares on
9/12/03. Retail Class was closed on 12/18/00 and recommenced operations on
1/31/02; Institutional Class performance is shown for the intervening period,
adjusted to reflect the higher expenses paid by Class A shares. The
restatement of the fund's performance to reflect Class A expenses is based on
the net expenses of the Class after taking into effect the fund's current
expense cap arrangements. For periods prior to the inception of Class B and C
shares (9/12/03), performance is based on prior Institutional Class
performance, restated to reflect the loads and expenses of Class B and C
shares, respectively. Class Y performance has been restated to reflect the
net expenses of the Institutional Class after taking into effect the fund's
current expense cap arrangements. For periods prior to the inception of Class
J shares (5/24/99), performance is based on prior Institutional Class
performance, restated to reflect the load and expenses of Class J shares. The
growth of $10,000 chart reflects the performance of Class A shares rather
than Class Y shares, because Class A shares include the highest sales charge.
Prior to 9/12/03, the fund (except Class J) was offered without a sales
charge.
/2/Does not include a sales charge.
/3/Includes maximum sales charge of 4.50%.
/4/Fund performance has been increased by expense waivers/reimbursements,
without which performance would have been lower.
/5/Performance for Class B shares assumes a maximum 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C 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.
/6/The since-inception performance comparisons shown are calculated from 1/1/97.
2
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 fund is actively managed, there is no assurance that it will
continue to invest in the securities, countries or industries mentioned.
For more complete information on any IXIS Advisor Fund, contact your financial
professional or call IXIS Advisor 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 U.S. Government/Credit Index is an unmanaged
index of publicly traded bonds, including U.S. government bonds, U.S.
Treasury securities and corporate bonds.
Morningstar Long-Term Bond Fund 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 IXIS Advisor Funds at 800-225-5478; on
the fund's website at www.ixisadvisorfunds.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, 2005 is available from the fund's website and the SEC's website.
QUARTERLY PORTFOLIO SCHEDULES
The fund files 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 Forms N-Q
are 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 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/or service 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 for each Class shows the actual amount of fund
expenses you would have paid on a $1,000 investment in the fund from October 1,
2005 through March 31, 2006. 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 the
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 VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES INVESTMENT GRADE BOND FUND 10/1/05 3/31/06 10/1/05 - 3/31/06
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,006.60 $4.74
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.21 $4.77
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,002.70 $8.48
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.45 $8.54
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,002.90 $8.48
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.47 $8.54
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,008.30 $2.75
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.19 $2.77
- ------------------------------------------------------------------------------------------------------------------
CLASS J
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,004.50 $6.49
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.46 $6.53
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the fund's annualized expense ratio: 0.95%, 1.70%,
1.70%, 1.30% and 0.55% for Class A, B, C, J and Y, respectively, multiplied by
the average account value over the period, multiplied by 182/365 (to reflect
the half-year period).
4
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value (+)
- --------------------------------------------------------------------------------------
Bonds and Notes -- 97.7% of Total Net Assets
Non-Convertible Bonds -- 91.9%
Agencies -- 1.1%
$ 3,670,000 Pemex Project Funding Master Trust,
8.625%, 12/01/2023(d) $ 4,312,250
---------------
Airlines -- 2.0%
8,115,000 Qantas Airways Ltd.,
6.050%, 4/15/2016, 144A 8,043,174
---------------
Asset-Backed Securities -- 0.6%
888,213 Community Program Loan Trust, Series 1987-A, Class A4,
4.500%, 10/01/2018 869,861
1,700,000 Community Program Loan Trust, Series 1987-A, Class A5,
4.500%, 4/01/2029 1,544,114
---------------
2,413,975
---------------
Automotive -- 1.8%
375,000 Cummins Engine Co., Inc.,
7.125%, 3/01/2028 382,500
1,040,000 Delphi Automotive Systems Corp.,
7.125%, 5/01/2029(c)(d) 639,600
2,090,000 Ford Motor Co.,
6.375%, 2/01/2029 1,389,850
700,000 Ford Motor Credit Co.,
7.375%, 10/28/2009 658,093
1,500,000 General Motors Acceptance Corp.,
6.875%, 9/15/2011 1,398,119
3,050,000 General Motors Acceptance Corp.,
7.500%, 12/01/2006, (NZD) 1,823,805
1,000,000 GMAC Australia,
6.500%, 8/10/2007, (AUD) 684,534
950,000 GMAC International Finance BV,
8.000%, 3/14/2007, (NZD) 574,878
---------------
7,551,379
---------------
Banking -- 7.9%
2,120,000,000 Barclays Financial LLC,
4.060%, 9/16/2010, (KRW), 144A 2,109,090
144,000,000 Barclays Financial LLC,
4.100%, 3/22/2010, (THB), 144A 3,467,483
140,000,000 Barclays Financial LLC,
4.160%, 2/22/2010, (THB), 144A 3,377,646
3,000,000,000 Barclays Financial LLC,
4.460%, 9/23/2010, (KRW), 144A 3,033,347
1,500,000 CIT Group, Inc.,
5.500%, 12/01/2014, (GBP) 2,621,735
9,860,000 Citibank NA,
15.000%, 7/02/2010, (BRL), 144A 4,967,818
4,500,000 HSBC Bank USA,
3.310%, 8/25/2010, 144A 4,558,500
22,683,264,000 J.P. Morgan Chase & Co., Zero Coupon Bond,
3/28/2011, (IDR), 144A 1,540,490
18,000,000 J.P. Morgan Chase & Co., Zero Coupon Bond,
1/01/2025(b), (BRL), 144A 4,758,746
250,000 J.P. Morgan Chase & Co.,
4.000%, 2/01/2008 244,481
24,124,936,500 J.P. Morgan Chase London, Zero Coupon Bond,
10/21/2010, (IDR), 144A 1,693,344
100,000 Key Bank NA,
6.950%, 2/01/2028 109,060
---------------
32,481,740
---------------
Principal
Amount Description Value (+)
- ---------------------------------------------------------------------------------
Beverages -- 0.4%
$ 1,525,000 Cia Brasileira de Bebidas,
8.750%, 9/15/2013 $ 1,753,750
---------------
Brokerage -- 0.2%
1,000,000 Morgan Stanley,
3.625%, 4/01/2008 969,278
---------------
Consumer Products -- 0.4%
1,400,000 Bausch & Lomb, Inc.,
7.125%, 8/01/2028 1,435,417
---------------
Electric -- 3.3%
895,000 Commonwealth Edison Co.,
4.700%, 4/15/2015 829,994
1,700,000 Commonwealth Edison Co.,
5.875%, 2/01/2033 1,616,975
2,750,000 Constellation Energy Group, Inc.,
4.550%, 6/15/2015 2,501,609
5,500,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
7.875%, 2/01/2027(d) 5,926,415
1,000,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
8.350%, 8/01/2013 1,106,778
1,500,000 MidAmerican Energy Holdings Co.,
5.875%, 10/01/2012 1,513,898
43,875 Quezon Power Philippines Co.,
8.860%, 6/15/2017 43,656
---------------
13,539,325
---------------
Entertainment -- 0.8%
1,640,000 Time Warner, Inc.,
6.625%, 5/15/2029 1,611,882
750,000 Time Warner, Inc.,
6.950%, 1/15/2028 760,700
505,000 Time Warner, Inc.,
7.625%, 4/15/2031 550,118
330,000 Time Warner, Inc.,
7.700%, 5/01/2032 362,905
---------------
3,285,605
---------------
Foreign Agency -- 0.0%
220,000 Alberta Municipal Funding Corp.,
5.700%, 9/01/2011, (CAD) 199,787
---------------
Foreign Local Governments -- 9.4%
19,100,000 KommuneKredit,
5.000%, 6/07/2006, (NOK) 2,923,979
33,694 Province of Alberta,
5.930%, 9/16/2016, (CAD) 30,978
4,525,000 Province of British Columbia,
5.250%, 12/01/2006, (CAD) 3,904,244
5,175,000 Province of British Columbia,
6.000%, 6/09/2008, (CAD) 4,605,633
3,275,000 Province of British Columbia,
6.250%, 12/01/2009, (CAD) 2,993,729
3,285,000 Province of Manitoba,
4.450%, 12/01/2008, (CAD) 2,835,195
6,510,000 Province of Manitoba,
5.750%, 6/02/2008, (CAD) 5,762,090
500,000 Province of Nova Scotia,
6.600%, 6/01/2027, (CAD) 531,789
700,000 Province of Ontario,
3.500%, 9/08/2006, (CAD) 598,002
4,320,000 Province of Ontario,
5.700%, 12/01/2008, (CAD) 3,840,633
See accompanying notes to financial statements.
5
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value (+)
- ----------------------------------------------------------------------
Foreign Local Governments -- continued
$ 7,500,000 Province of Saskatchewan,
4.750%, 12/01/2006, (CAD) $ 6,449,865
550,000 Province of Saskatchewan,
5.500%, 6/02/2008, (CAD) 484,401
4,110,000 Province of Saskatchewan,
6.000%, 6/01/2006, (CAD) 3,530,866
---------------
38,491,404
---------------
Government Agencies -- 11.6%
1,250,000 Federal Home Loan Mortgage Corp.,
3.220%, 6/20/2007, (SGD) 769,926
215,033 Federal Home Loan Mortgage Corp.,
5.000%, 12/01/2031 204,841
9,250,000 Federal Home Loan Mortgage Corp.,
5.500%, 9/15/2011(d) 9,393,449
7,500,000 Federal Home Loan Mortgage Corp.,
5.750%, 1/15/2012(d) 7,712,190
16,000,000 Federal National Mortgage Association,
2.290%, 2/19/2009, (SGD) 9,538,063
1,850,000 Federal National Mortgage Association,
5.375%, 11/15/2011(d) 1,867,048
17,450,000 Federal National Mortgage Association,
5.500%, 3/15/2011(d) 17,699,151
51,568 Federal National Mortgage Association,
6.000%, 7/01/2029 51,695
---------------
47,236,363
---------------
Government Owned -- No Guarantee -- 0.8%
5,150,000 SLM Corp.,
6.500%, 6/15/2010, (NZD) 3,165,167
---------------
Healthcare -- 3.1%
250,000 Columbia/HCA Healthcare Corp.,
7.500%, 12/15/2023 242,778
620,000 Columbia/HCA Healthcare Corp.,
7.580%, 9/15/2025 600,289
1,000,000 Columbia/HCA Healthcare Corp.,
7.750%, 7/15/2036 976,807
5,000,000 HCA, Inc.,
5.750%, 3/15/2014 4,678,085
800,000 HCA, Inc.,
6.250%, 2/15/2013 776,023
3,250,000 HCA, Inc.,
6.300%, 10/01/2012 3,172,140
2,625,000 HCA, Inc.,
7.050%, 12/01/2027 2,394,425
---------------
12,840,547
---------------
Home Construction -- 4.0%
850,000 Centex Corp.,
5.250%, 6/15/2015 789,463
2,605,000 Lennar Corp.,
5.600%, 5/31/2015 2,475,555
2,630,000 Pulte Homes, Inc.,
5.200%, 2/15/2015(d) 2,427,411
250,000 Pulte Homes, Inc.,
5.250%, 1/15/2014 233,594
5,660,000 Pulte Homes, Inc.,
6.000%, 2/15/2035(d) 4,927,347
2,420,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 2,197,859
Principal
Amount Description Value (+)
- --------------------------------------------------------------------------
Home Construction -- continued
$ 3,605,000 Toll Brothers Finance Corp.,
5.150%, 5/15/2015 $ 3,262,525
---------------
16,313,754
---------------
Independent/Energy -- 0.1%
500,000 Devon Financing Corp. LLC,
7.875%, 9/30/2031 603,637
---------------
Integrated/Energy -- 0.1%
150,000 Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A 147,000
200,000 Petrozuata Finance, Inc.,
8.220%, 4/01/2017, 144A 197,000
---------------
344,000
---------------
Life Insurance -- 1.7%
11,700,000 ASIF Global Financing XXVII,
2.380%, 2/26/2009, (SGD), 144A 6,967,939
---------------
Media Cable -- 3.6%
5,985,000 Comcast Corp.,
5.650%, 6/15/2035 5,216,257
2,255,000 Comcast Corp.,
6.450%, 3/15/2037 2,169,766
2,825,000 Comcast Corp.,
6.500%, 11/15/2035 2,741,086
3,750,000 Cox Communications, Inc., Class A,
6.750%, 3/15/2011 3,846,101
350,000 NTL Cable Plc,
9.750%, 4/15/2014, (GBP) 638,494
---------------
14,611,704
---------------
Media Non-Cable -- 0.8%
2,500,000 Clear Channel Communications, Inc.,
4.250%, 5/15/2009(d) 2,380,425
1,000,000 Clear Channel Communications, Inc.,
5.750%, 1/15/2013 951,832
---------------
3,332,257
---------------
Metals & Mining -- 0.4%
1,500,000 Teck Cominco Ltd.,
7.000%, 9/15/2012 1,592,929
---------------
Mortgage Related -- 0.7%
3,000,000 Bank of America Commercial Mortgage, Inc.,
5.464%, 4/11/2037 3,003,138
---------------
Non-Captive Consumer -- 0.3%
1,000,000 Capital One Bank,
6.700%, 5/15/2008 1,025,837
---------------
Non-Captive Diversified -- 0.8%
500,000 General Electric Capital Corp., Series EMTN,
1.725%, 6/27/2008, (SGD) 296,341
615,000 General Electric Capital Corp.,
6.500%, 9/28/2015, (NZD) 381,780
4,200,000 General Electric Capital Corp.,
6.625%, 2/04/2010, (NZD) 2,590,656
---------------
3,268,777
---------------
Oil Field Services -- 0.4%
250,000 Ensco International, Inc.,
6.750%, 11/15/2007 255,064
665,000 Pecom Energia SA,
8.125%, 7/15/2010, 144A 688,275
See accompanying notes to financial statements.
6
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value (+)
- -------------------------------------------------------------------
Oil Field Services -- continued
$ 600,000 Transocean Sedco Forex, Inc.,
7.375%, 4/15/2018 $ 675,380
---------------
1,618,719
---------------
Paper -- 1.1%
2,225,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 2,136,000
750,000 International Paper Co.,
4.000%, 4/01/2010 702,023
300,000 International Paper Co.,
5.250%, 4/01/2016 276,906
145,000 Weyerhaeuser Co.,
6.750%, 3/15/2012 150,947
1,000,000 Weyerhaeuser Co.,
7.125%, 7/15/2023 1,027,459
---------------
4,293,335
---------------
Pharmaceuticals -- 0.1%
500,000 Schering-Plough Corp.,
5.550%, 12/01/2013 494,686
---------------
Pipelines -- 0.9%
70,000 El Paso Corp.,
6.375%, 2/01/2009, 144A 69,213
2,425,000 El Paso Corp.,
6.950%, 6/01/2028, 144A 2,291,625
935,000 El Paso Corp.,
7.000%, 5/15/2011(d) 938,506
250,000 El Paso Corp.,
7.750%, 6/15/2010, 144A 257,812
---------------
3,557,156
---------------
Railroads -- 1.2%
5,000,000 Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, (CAD), 144A 4,321,660
195,000 Missouri Pacific Railroad Co.,
4.750%, 1/01/2020(d) 160,084
243,000 Missouri Pacific Railroad Co.,
4.750%, 1/01/2030 187,091
351,000 Missouri Pacific Railroad Co.,
5.000%, 1/01/2045 272,089
---------------
4,940,924
---------------
Real Estate Investment Trusts -- 2.2%
4,000,000 Colonial Reality LP,
4.800%, 4/01/2011 3,793,948
625,000 Colonial Reality LP,
5.500%, 10/01/2015 598,481
1,000,000 EOP Operating LP,
6.750%, 2/15/2012 1,042,317
2,195,000 Highwoods Realty LP,
7.500%, 4/15/2018 2,353,095
234,000 iStar Financial, Inc., Series REGS,
5.700%, 3/01/2014 228,194
1,000,000 Spieker Properties, Inc.,
7.350%, 12/01/2017 1,091,689
---------------
9,107,724
---------------
Restaurants -- 0.2%
1,000,000 McDonald's Corp.,
3.627%, 10/10/2010, (SGD) 610,547
---------------
Principal
Amount Description Value (+)
- ---------------------------------------------------------------------------
Retailers -- 0.0%
$ 22,000 J.C. Penney Co., Inc.,
7.125%, 11/15/2023(d) $ 23,639
---------------
Sovereigns -- 18.3%
13,725,000 Canadian Government,
4.250%, 9/01/2008, (CAD) 11,808,777
16,265,000 Canadian Government,
4.500%, 9/01/2007, (CAD) 14,020,476
9,600,000 Canadian Government,
5.500%, 6/01/2010, (CAD) 8,637,904
5,000,000 Canadian Government, Series WH31,
6.000%, 6/01/2008, (CAD) 4,457,336
14,310,000 Government of Sweden, Series 1040,
6.500%, 5/05/2008, (SEK) 1,967,407
55,815,000 Government of Sweden, Series 1045,
5.250%, 3/15/2011, (SEK) 7,741,792
15,000,000 Kingdom of Norway,
5.500%, 5/15/2009, (NOK) 2,414,419
44,930,000 Kingdom of Norway,
6.750%, 1/15/2007, (NOK) 7,054,742
42,500,000 Mexican Fixed Rate Bonds,
8.000%, 12/07/2023, (MXN) 3,655,271
77,000,000 Mexican Fixed Rate Bonds,
9.000%, 12/20/2012, (MXN) 7,291,180
2,089,946 PF Export Receivables Master Trust,
6.436%, 6/01/2015, 144A 2,048,147
1,515,000 Republic of Brazil,
8.250%, 1/20/2034(d) 1,669,530
325,000 Republic of Brazil,
8.875%, 4/15/2024 375,700
250,000 Republic of Brazil,
11.000%, 8/17/2040(d) 320,750
242,500 Republic of Peru,
5.000%, 3/07/2017(b) 228,556
500,000 Republic of South Africa,
5.250%, 5/16/2013, (EUR) 637,675
150,000 Republic of South Africa,
12.500%, 12/21/2006, (ZAR) 25,237
500,000 SP Powerassets Ltd.,
3.730%, 10/22/2010, (SGD) 308,317
---------------
74,663,216
---------------
Supranational -- 3.6%
22,000,000 Inter-American Development Bank, Zero Coupon,
5/11/2009, (BRL) 6,557,301
13,265,000 Inter-American Development Bank, Series EMTN,
6.000%, 12/15/2017, (NZD) 8,032,538
---------------
14,589,839
---------------
Technology -- 2.5%
2,500,000 Arrow Electronics, Inc.,
6.875%, 7/01/2013 2,595,805
2,680,000 Avnet, Inc.,
6.000%, 9/01/2015 2,568,445
99,000 Motorola, Inc.,
7.625%, 11/15/2010 107,979
1,625,000 Motorola, Inc.,
8.000%, 11/01/2011(d) 1,819,589
3,115,000 Samsung Electronics Co. Ltd.,
7.700%, 10/01/2027, 144A 3,269,242
---------------
10,361,060
---------------
See accompanying notes to financial statements.
7
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
Principal
Amount Description Value(+)
- ----------------------------------------------------------------------------------------
Textile -- 0.0%
$ 25,000 Kellwood Co.,
7.625%, 10/15/2017 $ 23,390
---------------
Tobacco -- 0.5%
2,000,000 Altria Group, Inc.,
7.000%, 11/04/2013 2,150,224
---------------
Transportation Services -- 0.5%
412,669 Atlas Air Worldwide Holdings, Inc.,
7.200%, 1/02/2019 416,796
510,716 Atlas Air, Inc., Series A,
7.380%, 1/02/2018 515,823
1,000,000 ERAC USA Finance Co.,
6.800%, 2/15/2008 , 144A 1,021,810
---------------
1,954,429
---------------
Treasuries -- 1.6%
3,265,000 U.S. Treasury Notes,
2.625%, 5/15/2008(d) 3,121,647
3,450,000 U.S. Treasury Notes,
4.375%, 5/15/2007(d) 3,431,401
---------------
6,553,048
---------------
Wireless -- 0.2%
1,000,000 America Movil SA de CV,
4.125%, 3/01/2009 961,268
---------------
Wirelines -- 2.7%
1,205,000 AT&T, Inc.,
6.150%, 9/15/2034 1,144,308
1,790,000 BellSouth Corp.,
6.000%, 11/15/2034 1,669,424
1,400,000 Philippine Long Distance Telephone Co.,
8.350%, 3/06/2017 1,527,750
250,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 240,312
1,650,000 Qwest Capital Funding, Inc.,
6.875%, 7/15/2028 1,584,000
1,000,000 Telekom Malaysia Berhad,
7.875%, 8/01/2025, 144A 1,186,738
4,150,000 Verizon Global Funding Corp.,
5.850%, 9/15/2035 3,722,318
30,000 Verizon Maryland, Inc.,
5.125%, 6/15/2033 23,647
---------------
11,098,497
---------------
Total Non-Convertible Bonds (Identified Cost $361,624,246) 375,784,834
---------------
Principal
Amount
- ----------------------------------------------------------------------------------------
Convertible Bonds -- 5.8%
Banking -- 1.8%
7,185,000 Wells Fargo & Co.,
4.430%, 5/01/2033(b) 7,141,890
---------------
Independent/Energy -- 0.6%
500,000 Devon Energy Corp.,
4.900%, 8/15/2008 580,000
1,750,000 Devon Energy Corp.,
4.950%, 8/15/2008 2,030,000
---------------
2,610,000
---------------
Principal
Amount Description Value(+)
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals -- 3.4%
$ 5,920,000 Bristol-Myers Squibb Co.,
4.410%, 9/15/2023(b) $ 5,912,600
7,685,000 Chiron Corp.,
1.625%, 8/01/2033 7,483,269
360,000 Watson Pharmaceuticals, Inc.,
1.750%, 3/15/2023 331,200
---------------
13,727,069
---------------
Total Convertible Bonds (Identified Cost $22,724,727) 23,478,959
---------------
Total Bonds and Notes (Identified Cost $384,348,973) 399,263,793
---------------
- ----------------------------------------------------------------------------------------------------
Short-Term Investments -- 16.9% of Total Net Assets
10,797,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/31/06 at 2.950% to be repurchased at
$10,799,654 on 4/03/06 collateralized by $7,975,000 U.S.
Treasury Bond, 8.750% due 8/15/20 with value of $11,018,045
(Note 2g of Notes to Financial Statements) 10,797,000
---------------
Shares
- ----------------------------------------------------------------------------------------------------
58,431,214 State Street Navigator Securities Lending Prime Portfolio(e) 58,431,214
---------------
Total Short-Term Investments
(Identified Cost $69,228,214) 69,228,214
---------------
Total Investments --114.6%
(Identified Cost $453,577,187)(a) 468,492,007
Other assets less liabilities -- (14.6)% (59,538,586)
---------------
Total Net Assets -- 100% $ 408,953,421
===============
+ See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information (Amounts exclude certain adjustments
made at the Fund's fiscal year for tax purposes. Such adjustments
are primarily due to wash sales. Amortization of premium on debt
securities is excluded for tax purposes.):
At March 31, 2006, the net unrealized appreciation on investments
based on cost of $455,434,770 for federal tax purposes was as
follows:
Aggregate gross unrealized appreciation for all securities in which
there is an excess of value over tax cost $ 23,786,475
Aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value (10,729,238)
---------------
Net unrealized appreciation $ 13,057,237
===============
(b) Variable rate security. Rate as of March 31, 2006 is disclosed.
(c) Non-income producing security due to default or bankruptcy filing.
(d) All or a portion of this security was on loan to brokers at March 31, 2006.
(e) Represents investments of securities lending collateral.
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At March 31, 2006, the total value of these securities
amounted to $60,016,099 or 14.68% of total net assets.
Key to Abbreviations:
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
EUR Euro
GBP Great British Pound
IDR Indonesian Rupiah
See accompanying notes to financial statements.
8
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2006 (Unaudited)
KRW South Korean Won
MXN Mexican Peso
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
THB Thai Baht
ZAR South African Rand
Holdings at March 31, 2006 as a Percentage of Net Assets
Sovereigns 18.3%
Government Agencies 11.6
Banking 9.7
Foreign Local Governments 9.4
Home Construction 4.0
Media Cable 3.6
Supranational 3.6
Pharmaceuticals 3.5
Electric 3.3
Healthcare 3.1
Wirelines 2.7
Technology 2.5
Real Estate Investment Trusts 2.2
Airlines 2.0
Others, less than 2% each 18.2
See accompanying notes to financial statements.
9
STATEMENT OF ASSETS & LIABILITIES
March 31, 2006 (Unaudited)
ASSETS
Investments at cost $453,577,187
Net unrealized appreciation 14,914,820
-------------
Investments at value 468,492,007
Cash 320
Receivable for Fund shares sold 1,745,556
Receivable for securities sold 3,034,342
Interest receivable 4,979,904
Securities lending income receivable 6,439
-------------
TOTAL ASSETS 478,258,568
-------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 58,431,214
Payable for Fund shares redeemed 625,248
Payable for securities purchased 9,702,442
Management fees payable 171,481
Deferred Trustees' fees 32,775
Trustees' fees payable 18,577
Administrative fees payable 38,616
Service and distribution fees payable 7,042
Other accounts payable and accrued expenses 277,752
-------------
TOTAL LIABILITIES 69,305,147
-------------
NET ASSETS $ 408,953,421
=============
NET ASSETS CONSIST OF:
Paid-in capital $ 393,994,268
Undistributed net investment income 2,263,557
Accumulated net realized loss on investments (2,182,429)
Net unrealized appreciation on investments and foreign currency translations 14,878,025
-------------
NET ASSETS $ 408,953,421
=============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 81,403,414
=============
Shares of beneficial interest 7,343,536
=============
Net asset value and redemption price per share $11.09
=============
Offering price per share (100/95.50 of $11.09) $11.61
=============
Class B shares: (redemption price is equal to net asset value less any
applicable contingent deferred sales charges)
Net assets $ 4,100,818
=============
Shares of beneficial interest 371,193
=============
Net asset value and offering price per share $11.05
=============
Class C shares: (redemption price is equal to net asset value less any
applicable contingent deferred sales charges)
Net assets $ 47,925,984
=============
Shares of beneficial interest 4,342,398
=============
Net asset value and redemption price per share $11.04
=============
Class Y shares:
Net assets $ 29,440,189
=============
Shares of beneficial interest 2,654,757
=============
Net asset value, offering and redemption price per share $11.09
=============
Class J shares:
Net assets $ 246,083,016
=============
Shares of beneficial interest 22,229,130
=============
Net asset value and offering price per share $11.07
=============
Offering price per share (100/96.50 of $11.07) $11.47
=============
Value of securities on loan (Note 2) $ 57,230,693
=============
See accompanying notes to financial statements.
10
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 2006 (Unaudited)
INVESTMENT INCOME
Interest $12,157,064
Securities lending income 63,587
-----------
12,220,651
-----------
Expenses
Management fees 802,691
Service fees - Class A 73,778
Service and distribution fees - Class B 18,849
Service and distribution fees - Class C 176,749
Service and distribution fees - Class J 1,039,161
Trustees' fees and expenses 26,390
Administrative 102,979
Custodian 35,080
Transfer agent fees - Class A, Class B, Class C 101,621
Transfer agent fees - Class Y 4,714
Transfer agent fees - Class J 3,209
Audit and tax services 26,581
Registration - Class A, Class B, Class C, Class Y 27,906
Registration - Class J 2,685
Shareholder reporting - Class A, Class B, Class C, Class Y 9,402
Shareholder reporting - Class J 56,574
Legal - Class A, Class B, Class C, Class Y 1,754
Legal - Class J 12,253
Miscellaneous 10,707
-----------
Total expenses 2,533,083
Less reimbursement/waiver (51,229)
-----------
Net expenses 2,481,854
-----------
Net investment income 9,738,797
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net (731,451)
Foreign currency transactions - net 1,245,077
Change in unrealized appreciation (depreciation) on:
Investments - net (8,531,407)
Foreign currency translations - net (36,513)
-----------
Net realized and unrealized loss on investments and foreign currency transactions (8,054,294)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,684,503
===========
See accompanying notes to financial statements.
11
STATEMENTS OF CHANGES IN NET ASSETS
Period Ended
March 31, 2006
(Unaudited)
--------------
FROM OPERATIONS:
Net investment income $ 9,738,797
Net realized gain on investments and foreign currency transactions 513,626
Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (8,567,920)
------------
Increase in net assets resulting from operations 1,684,503
------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (2,342,394)
Class B (141,045)
Class C (1,292,751)
Class Y (1,115,044)
Class J (10,950,433)
Capital gains:
Class A (1,094,553)
Class B (72,697)
Class C (662,167)
Class Y (499,013)
Class J (5,341,431)
------------
Total distributions (23,511,528)
------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 7) 19,747,441
------------
Total increase (decrease) in net assets (2,079,584)
NET ASSETS
Beginning of period 411,033,005
------------
End of period $408,953,421
============
UNDISTRIBUTED NET INVESTMENT INCOME $ 2,263,557
============
Year Ended
September 30,
2005
-------------
FROM OPERATIONS:
Net investment income $ 15,198,692
Net realized gain on investments and foreign currency transactions 15,963,185
Net change in unrealized appreciation (depreciation) on investments and foreign currency translations (7,287,638)
------------
Increase in net assets resulting from operations 23,874,239
------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (1,380,960)
Class B (143,680)
Class C (807,975)
Class Y (1,072,660)
Class J (19,375,156)
Capital gains:
Class A (312,527)
Class B (35,217)
Class C (164,210)
Class Y (200,515)
Class J (4,635,137)
------------
Total distributions (28,128,037)
------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 7) 39,379,478
------------
Total increase (decrease) in net assets 35,125,680
NET ASSETS
Beginning of period 375,907,325
------------
End of period $411,033,005
============
UNDISTRIBUTED NET INVESTMENT INCOME $ 8,366,427
============
See accompanying notes to financial statements.
12
FINANCIAL HIGHLIGHTS
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 (d) investments operations income capital gains distributions
---------- ---------- -------------- ---------- -------------- ------------- -------------
Class A
3/31/2006(k) $ 11.71 $ 0.30 $ (0.23) $ 0.07 $ (0.47) $ (0.22) $ (0.69)
9/30/2005 11.84 0.49 0.29 0.78 (0.74) (0.17) (0.91)
9/30/2004 11.54 0.52 0.45 0.97 (0.60) (0.07) (0.67)
9/30/2003 10.23 0.58 1.46 2.04 (0.59) (0.14) (0.73)
9/30/2002(f)(h) 10.18 0.39 0.04 0.43 (0.38) -- (0.38)
12/18/2001(i) 9.91 0.13 0.24 0.37 (0.14) -- (0.14)
Class B
3/31/2006(k) 11.67 0.25 (0.22) 0.03 (0.43) (0.22) (0.65)
9/30/2005 11.82 0.41 0.27 0.68 (0.66) (0.17) (0.83)
9/30/2004 11.53 0.43 0.45 0.88 (0.52) (0.07) (0.59)
9/30/2003(g) 11.21 0.02 0.30 0.32 -- -- --
Class C
3/31/2006(k) 11.66 0.25 (0.22) 0.03 (0.43) (0.22) (0.65)
9/30/2005 11.81 0.40 0.28 0.68 (0.66) (0.17) (0.83)
9/30/2004 11.53 0.43 0.45 0.88 (0.53) (0.07) (0.60)
9/30/2003(g) 11.21 0.02 0.30 0.32 -- -- --
Class Y
3/31/2006(k) 11.71 0.32 (0.23) 0.09 (0.49) (0.22) (0.71)
9/30/2005 11.85 0.54 0.28 0.82 (0.79) (0.17) (0.96)
9/30/2004 11.54 0.57 0.45 1.02 (0.64) (0.07) (0.71)
9/30/2003 10.23 0.61 1.46 2.07 (0.62) (0.14) (0.76)
9/30/2002(f) 10.09 0.62 0.09 0.71 (0.55) (0.02) (0.57)
9/30/2001 9.92 0.65 0.18 0.83 (0.66) -- (0.66)
Class J
3/31/2006(k) 11.69 0.27 (0.22) 0.05 (0.45) (0.22) (0.67)
9/30/2005 11.83 0.46 0.27 0.73 (0.70) (0.17) (0.87)
9/30/2004 11.53 0.48 0.44 0.92 (0.55) (0.07) (0.62)
9/30/2003 10.22 0.52 1.47 1.99 (0.54) (0.14) (0.68)
9/30/2002(f) 10.09 0.54 0.09 0.63 (0.48) (0.02) (0.50)
9/30/2001 9.91 0.57 0.19 0.76 (0.58) -- (0.58)
(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 and/or
waive its management fee during the period. Without this waiver and/or
reimbursement the Fund's ratio of operating expenses would have been higher.
(c)Annualized basis for periods less than one year.
(d)Per share net investment income has been calculated using the average shares
outstanding during the period.
(e)A sales charge for Class A, Class C and Class J and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations.
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 (%)
- ---------- --------- ----------- ---------- --------- -------------- ---------
$ 11.09 0.7(j) $ 81,403 0.95 1.00 5.20 16
11.71 6.8(j) 39,168 0.95 1.14 4.21 28
11.84 8.8(j) 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
11.05 0.3(j) 4,101 1.70 2.13 4.43 16
11.67 5.9(j) 3,443 1.70 2.18 3.47 28
11.82 7.9(j) 1,797 1.70 2.42 3.77 29
11.53 2.9(e) 160 1.70 7.81 5.83 34
11.04 0.3(j) 47,926 1.70 1.76 4.48 16
11.66 5.9(j) 27,992 1.70 1.97 3.45 28
11.81 7.9(j) 9,191 1.70 2.42 3.74 29
11.53 2.9(e) 3 1.70 7.81 4.35 34
11.09 0.8(j) 29,440 0.55 0.62 5.56 16
11.71 7.1(j) 26,012 0.55 0.82 4.61 28
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
11.07 0.5(j) 246,083 1.30 1.30 4.75 16
11.69 6.4(j) 314,418 1.30 1.35 3.89 28
11.83 8.3(j) 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
(f)As required effective October 1, 2001, the Fund has adopted the provisions
of the AICPA Audit and Accounting Guide, Audits of Investment Companies, and
began amortizing premium on debt securities and reclassifying paydown gains
and losses to interest income 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)A sales charge for Class A and Class J and a contingent deferred sales
charge for Class B and Class C shares are not reflected in total return
calculations.
(k)For the six months ended March 31, 2006 (Unaudited).
14
NOTES TO FINANCIAL STATEMENTS
For the Six Months Ended March 31, 2006 (Unaudited)
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 as amended, (the "1940 Act"), 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 higher ongoing Rule 12b-1 fees
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 higher ongoing Rule 12b-1 fees 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, though some categories of investors are excepted from
the minimum investment amounts. 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 to a fund 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 registration, legal and shareholder reporting 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 (other than short-term obligations with a remaining maturity of less
than sixty days) are generally valued at market price, 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 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. Investments in other open-end investment companies are valued at
their net asset value each day.
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 and 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 period, resulting from changes in exchange rates.
15
NOTES TO FINANCIAL STATEMENTS (continued)
For the Six Months Ended March 31, 2006 (Unaudited)
The Fund may use foreign currency exchange contracts to facilitate transactions
in foreign-denominated investments. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than
those of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. The Fund may use 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. These amounts represent the aggregate exposure to each
currency the Fund has acquired or hedged through currency contracts outstanding
at period end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At March 31, 2006, there were no open forward currency
contracts.
e. Federal and Foreign Income Taxes. The Trust treats the Fund as a separate
entity for federal income tax purposes. The Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains at least annually.
Accordingly, no provision for federal income tax has been made. The Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities. Such
taxes are accrued as applicable.
f. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gains distributions are determined in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. Permanent differences are primarily due to
differing treatments for book and tax purposes of items such as foreign
currency transactions and premium amortization accruals. Permanent book and tax
differences relating to shareholder distributions will result in
reclassifications to capital accounts. Temporary differences between book and
tax distributable earnings are primarily due to premium amortization accruals,
deferred trustees' fees and corporate action adjustments. Distributions from
net investment income and short-term capital gains are considered to be
ordinary income for tax purposes.
Tax characterization of distributions is determined on an annual basis. The tax
character of distributions paid to shareholders during the year ended
September 30, 2005 was as follows:
2005 Distributions Paid From:
-------------------------------------
Ordinary Long-Term
Income Capital Gains Total
-------- ------------- -----
$22,981,935 $5,146,102 $28,128,037
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. The repurchase agreements
are tri-party arrangements whereby the collateral is held at the custodian bank
in a segregated account for the benefit of the Fund and on behalf of the
counterparty. 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.
h. Securities Lending. The Fund has entered into an agreement with State Street
Bank and Trust Company ("State Street Bank"), as agent of the Fund, to lend
securities to certain designated borrowers. The loans are collateralized with
cash or securities in an amount equal to at least 105% or 102% of the market
value of the loaned international or domestic securities, respectively, when
the loan is initiated. Thereafter, the value of the collateral must remain not
less than 102% of the market value of loaned securities for U.S. equities and
U.S. corporate debt; not less than 105% of the market value of loaned
securities for non-U.S. equities and not less than 100% of the market value of
loaned securities for U.S. government and agency securities, sovereign debt
issued by non-U.S. governments and non-U.S. corporate debt. In the event that
the market value of the collateral falls below the required percentages
described above, the borrower will deliver additional collateral on the next
business day. As with other extensions of credit, the Fund may bear the risk of
loss with respect to the investment of the collateral. The Fund invests cash
collateral in short-term investments, a portion of the income from which is
remitted to the borrowers and the remainder allocated between the Fund and
State Street Bank as lending agent. The market value of securities on loan to
borrowers and the value of collateral held by the Fund with respect to such
loans at March 31, 2006 were $57,230,693 and $58,431,214, respectively.
i. Indemnifications. Under the Fund's organizational documents, its officers
and trustees are indemnified against certain liability arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's
16
NOTES TO FINANCIAL STATEMENTS (continued)
For the Six Months Ended March 31, 2006 (Unaudited)
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against the Fund that have not yet occurred.
However, based on experience, the Fund expects the risk of loss to be remote.
3. Purchases and Sales of Securities. For the six months ended March 31, 2006,
purchases and sales of securities (excluding short-term investments and U.S.
government/agency securities) were $76,426,189 and $64,892,728, respectively.
Purchases and sales of U.S. government/agency securities (excluding short-term
investments) were $0 and $42,618,197 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.
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, 2007 and will be reevaluated on an annual basis. At March 31, 2006,
the expense limits as percentage of average daily net assets under expense
limitation agreements were as follows:
Expense Limit as a Percentage of Average Daily Net Assets
---------------------------------------------------------
Class A Class B Class C Class Y Class J
------- ------- ------- ------- -------
0.95% 1.70% 1.70% 0.55% 1.30%
For the six months ended March 31, 2006, the 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
---------- ---------- ---------- ----- ---
$802,691 -- $802,691 0.40% 0.40%
For the six months ended March 31, 2006, in addition to the waiver of
management fees, expenses have been reimbursed for the Fund in the amount of
$51,229.
Loomis Sayles is permitted to recover expenses it has borne under the expense
limitation agreement (whether through reduction of its management fees or
otherwise) in later periods to the extent the Funds' expenses fall below the
expense limits, provided, however that the Fund is not obligated to pay such
deferred fees more than one year after the end of the fiscal year in which the
fee was deferred.
At March 31, 2006, the amount subject to possible reimbursement under the
expense limitation agreement was as follows:
Expenses Subject
to Possible
Reimbursement
until September 30, 2007
------------------------
$51,229
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trust. Loomis Sayles' general partner is indirectly owned by IXIS Asset
Management US Group, L.P. ("IXIS US Group") (formerly IXIS Asset Management
North America, L.P.), which is part of IXIS Asset Management Group, an
international asset management group based in Paris, France. IXIS Asset
Management Group is ultimately owned principally, directly or indirectly by
three large affiliated French financial services entities; the Caisse Nationale
des Caisses d'Epargne, a financial institution owned by CDC (as defined below)
and by French regional savings banks known as the Caisses d'Epargne; the Caisse
des Depois et Consignations ("CDC"), a public sector financial institution
created by the French government in 1816; and CNP Assurances, a large French
life insurance company.
b. Administrative Fees. IXIS Asset Management Advisors, L.P. ("IXIS Advisors")
provides certain administrative services to the Fund and has subcontracted with
State Street Bank, to serve as sub-administrator.
17
NOTES TO FINANCIAL STATEMENTS (continued)
For the Six Months Ended March 31, 2006 (Unaudited)
Pursuant to an agreement among the Loomis Sayles Funds Trusts (the Trust and
Loomis Sayles Funds I), IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust
II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV and IXIS Advisor
Cash Management Trust ("IXIS Advisor Funds Trusts") (collectively, the
"Trusts") and IXIS Advisors, each Fund pays 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 IXIS Advisor
Funds Trusts, of the annual aggregate minimum fee of $5 million.
For the six months ended March 31, 2006, fees paid to IXIS Advisors for
administrative fees were $102,979.
c. Service and Distribution Fees. The Trust entered into a distribution
agreement with IXIS Asset Management Distributors, L.P. ("IXIS Distributors"),
a wholly owned subsidiary of IXIS US Group. Pursuant to this agreement, 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 IXIS US Group.
Pursuant to Rule 12b-1 under the 1940 Act, 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 IXIS Distributors a monthly service fee
at an annual rate not to exceed 0.25% of the average daily net assets
attributable to the Fund's Class A shares, as reimbursement for expenses
incurred by 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 IXIS Distributors a monthly
service fee at an annual rate not to exceed 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 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 IXIS Distributors a
monthly distribution fee at an 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 IXIS Distributors in connection
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 not to exceed 0.25% and a monthly distribution fee payable to Loomis
Sayles Distributors, at an annual rate not to exceed 0.50% of the average daily
net assets attributable to the Fund's Class J shares, pursuant to a shareholder
service and distribution plan adopted under Rule 12b-1.
For the six months ended March 31, 2006, 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
------- ------- ------- ------- ------- ------- -------
$73,778 $14,137 $132,562 $779,371 $4,712 $44,187 $259,790
Commissions (including CDSCs) on Fund shares paid to IXIS Distributors by
investors in Class B and C shares of the Fund were $187,175 and commissions
paid to Loomis Sayles Distributors by investors in Class J shares of the Fund
were $19,537 for the six months ended March 31, 2006.
d. Trustees Fees and Expenses. The Fund does not pay any compensation directly
to its officers or Trustees who are directors, officers or employees of IXIS
Advisors, IXIS Distributors, IXIS US Group, Loomis Sayles or their affiliates.
The Chairperson of the Board receives a retainer fee at the annual rate of
$200,000. The Chairperson does not receive any meeting attendance fees for
Board of Trustees meetings or committee meetings that she attends. Each
independent Trustee (other than the Chairperson) receives, in the aggregate, a
retainer fee at the annual rate of $55,000. Each independent Trustee also
receives a meeting attendance fee of $6,000 for each meeting of the Board of
Trustees that he or she attends in person and $3,000 for each meeting of the
Board of Trustees that he or she attends telephonically. In addition, each
committee chairman receives an additional retainer fee at the annual rate of
$10,000. Each committee member receives $4,000 or $5,000 for each contract and
governance or audit committee meeting, respectively, that he or she attends in
person and $2,000 or $2,500 for each contract and governance or audit committee
meeting, respectively, that he or she attends
18
NOTES TO FINANCIAL STATEMENTS (continued)
For the Six Months Ended March 31, 2006 (Unaudited)
telephonically. These fees are allocated among the funds in the 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 November 18, 2005, the Trusts had co-chairmen of the Board. Prior to
October 1, 2005, each independent Trustee received, 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 that he or she attended. The
co-chairmen of the Board each received an additional annual retainer of
$25,000. Each committee chairman received an additional retainer fee at the
annual rate of $7,000. Each committee member received $3,750 for each committee
meeting that he or she attended. In addition, during the period October 1, 2005
to November 18, 2005, each co-chairman received an additional one-time payment
of $25,000 as compensation for their services as chairman.
Prior to January 1, 2006, each committee member was compensated $4,000 for each
Audit Committee meeting that he or she attended in person and $2,000 for such
meeting he or she attended telephonically.
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 on the normal payment
date. Deferred amounts remain in the fund until distributed in accordance with
the Plan.
Additionally, the Board of Trustees has approved the use of each Funds' assets
to pay their portion of the annual salary for 2005 of an employee at IXIS
Advisors who supports the Funds' Chief Compliance Officer. For the period from
October 1st through December 31, 2005, each Fund's portion of such expense was
approximately $575.
5. Line of Credit. The Fund, together with certain other funds of the Loomis
Sayles Funds and IXIS Advisor Funds Trusts, participates in a $75 million
committed line of credit provided by State Street Bank. Advances under the line
are taken primarily for temporary or emergency purposes. Interest is charged to
the Fund based on its borrowings at a rate per annum equal to the Federal Funds
rate plus 0.50%. In addition, the Fund is charged its pro rata portion of a
facility fee equal to of 0.09% per annum on the unused portion of the line of
credit. For the six months ended March 31, 2006, the Fund had no borrowing
under this agreement.
6. Shareholders. At March 31, 2006, the Loomis Sayles Employees' Profit Sharing
Retirement Plan held 137,855 shares of beneficial interest of Class Y shares,
equating to 5.2% of the Class and 0.4% of the Fund.
7. Capital Shares. The Fund may issue an unlimited number of shares of
beneficial interest without par value. Transactions in capital shares were as
follows:
Six Months Ended
March 31, 2006
-----------------------------------
Shares Amount
---------------- -----------------
Class A
Issued from the sale of shares 4,287,815 $ 48,657,048
Issued in connection with the reinvestment of distributions 201,676 2,261,198
Redeemed (491,379) (5,568,252)
---------------- -----------------
Net change 3,998,112 $ 45,349,994
================ =================
Class B
Issued from the sale of shares 100,051 $ 1,134,531
Issued in connection with the reinvestment of distributions 11,158 124,587
Redeemed (35,094) (396,795)
---------------- -----------------
Net change 76,115 $ 862,323
================ =================
Class C
Issued from the sale of shares 2,076,294 $ 23,390,555
Issued in connection with the reinvestment of distributions 44,254 493,182
Redeemed (178,814) (2,017,953)
---------------- -----------------
Net change 1,941,734 $ 21,865,784
================ =================
Class Y
Issued from the sale of shares 676,626 $ 7,659,525
Issued in connection with the reinvestment of distributions 107,367 1,204,427
Redeemed (350,757) (3,998,425)
---------------- -----------------
Net change 433,236 $ 4,865,527
================ =================
Class J
Issued from the sale of shares 342,300 $ 3,891,811
Issued in connection with the reinvestment of distributions -- --
Redeemed (5,010,990) (57,087,998)
---------------- -----------------
Net change (4,668,690) $ (53,196,187)
================ =================
Year Ended
September 30, 2005
-----------------------------------
Shares Amount
---------------- -----------------
Class A
Issued from the sale of shares 3,673,755 $ 43,260,058
Issued in connection with the reinvestment of distributions 117,060 1,374,999
Redeemed (1,248,177) (14,457,682)
---------------- -----------------
Net change 2,542,638 $ 30,177,375
================ =================
Class B
Issued from the sale of shares 178,693 $ 2,100,081
Issued in connection with the reinvestment of distributions 9,317 109,318
Redeemed (44,982) (526,800)
---------------- -----------------
Net change 143,028 $ 1,682,599
================ =================
Class C
Issued from the sale of shares 1,772,891 $ 20,667,457
Issued in connection with the reinvestment of distributions 12,470 145,879
Redeemed (163,058) (1,894,867)
---------------- -----------------
Net change 1,622,303 $ 18,918,469
================ =================
Class Y
Issued from the sale of shares 1,856,725 $ 21,663,391
Issued in connection with the reinvestment of distributions 91,507 1,075,420
Redeemed (785,313) (9,152,896)
---------------- -----------------
Net change 1,162,919 $ 13,585,915
================ =================
Class J
Issued from the sale of shares 9,384,600 $ 110,412,999
Issued in connection with the reinvestment of distributions -- --
Redeemed (11,470,140) (135,397,879)
---------------- -----------------
Net change (2,085,540) $ (24,984,880)
================ =================
19
Item 2. Code of Ethics.
Not applicable
Item 3. Audit Committee Financial Expert.
Not applicable
Item 4. Principal Accountant Fees and Services.
Not applicable
Item 5. Audit Committee of Listed Registrants.
Not applicable
Item 6. Schedule of Investments.
Included as part of the Report to Shareholders filed as Item 1 herewith.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers.
Not applicable
Item 10. Submission of Matters to a Vote of Securities Holders.
There were no material changes to the procedures by which shareholders may
recommend nominees to the Trust's Board of Trustees.
Item 11. Controls and Procedures.
The Registrant's principal executive officer and principal financial officer
have concluded that the Registrant's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the
Registrant 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 changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's last fiscal quarter of the
period covered by the report that has materially affected, or is reasonably
likely to materially affect, the Registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a) (1) Not applicable
(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), as herewith as exhibit (a)(2)(1)
and a(2)(2), respectively
(a) (3) Not applicable.
(b) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Section 906 of Sarbanes-Oxley Act of2002 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: Chief Executive Officer
Date: May 24, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
By: /s/ Robert J. Blanding
-----------------------------
Name: Robert J. Blanding
Title: Chief Executive Officer
Date: May 24, 2006
By: /s/ Michael C. Kardok
-----------------------------
Name: Michael C. Kardok
Title: Treasurer
Date: May 24, 2006