================================================================================
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: 811-08282
Loomis Sayles Funds I
(Exact name of Registrant as specified in charter)
399 Boylston Street,
Boston, Massachusetts 02116
(Address of principal (Zip code)
executive offices)
Coleen Downs Dinneen, Esq.
IXIS Asset Management Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 449-2810
Date of fiscal year end: September 30
Date of reporting period: September 30, 2006
================================================================================
Item 1. Reports to Stockholders.
The Registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
[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 16
Statements of Assets and Liabilities 37
Statements of Operations 39
Statements of Changes in Net Assets 41
Financial Highlights 45
Notes to Financial Statements 51
ANNUAL REPORT
SEPTEMBER 30, 2006
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
similar securities
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 | $44.1 million
PORTFOLIO REVIEW
The Fund's performance was strong during the first six months of the 2006
fiscal year, primarily due to solid stock selections in the overweight
financials sector and, to a lesser extent, the technology area. Overall, the
stock selection effect was positive for the fiscal year ended September 30,
2006. Fueling the Fund's underperformance versus the Benchmark, the Russell
Midcap Growth Index, was the "allocation effect," or the timing of our over-
and under-weights to the various sectors. In particular, the Fund's performance
was disappointing during the early stages of the market recovery, when many
former laggards in such groups as semiconductors and specialty retail led
results. Our emphasis on energy as commodity prices collapsed and our
underweight in consumer discretionary stocks both detracted from performance.
At the beginning of the period, we focused on a select number of themes,
industries and stocks, where the risk/reward tradeoff still appeared
compelling, and where we expected benefits from macro tailwinds,
company-specific events (such as new product cycles), or both. As the year
unfolded, we also tried to balance our bottom-up stock-picking efforts with the
market's increasing focus on the macro environment. After the Federal Reserve
Board's May 9, 2006 meeting, we increased our weighting in more defensive
holdings, reflecting our concerns that the financial markets were signaling the
Fed had "overdone it" with interest rate hikes and the economy was poised for a
hard landing. We were also concerned that the slowdown in the housing market
might have a negative impact on consumer spending in 2007, and investors were
not sufficiently accounting for this risk. Nevertheless, the third calendar
quarter's strong rally in bonds and the dramatic sell-off in energy sparked a
late-summer stock market rally that extended into what typically is the weakest
period of the year, September and October. Accordingly, we positioned the Fund
to participate in this rally by increasing exposure to consumer discretionary
and technology stocks.
The financial services sector delivered the best performance due to our focus
on capital markets and commercial real estate services companies. Investors
expect the publicly traded stock and futures exchanges, such as the Chicago
Mercantile Exchange, the top-performing financial services holding, to show
increasing levels of profitability as electronic trading becomes more prevalent
and the industry consolidates. Our real estate services companies, notably CB
Richard Ellis Group, benefited from a worldwide cyclical upturn in commercial
leasing and from a secular increase in real estate investments. We sold CB
Richard Ellis at a profit. Technology was a strong contributor in the first and
third calendar quarters of 2006, with solid performance from internet services
company Akamai Technologies, the Fund's best performer, as well as software and
semiconductor companies. The utilities sector also outperformed, thanks in
large part to our position in wireless telecommunication company NII Holdings.
In contrast to 2005, energy was the Fund's worst-performing sector during
fiscal 2006. In particular, the timing of our trades was not effective. The
worst performer among the Fund's consumer staples holdings was Whole Foods
Market, which declined in value after management offered disappointing
guidance. We sold the position. Our holdings in materials contributed
positively in absolute terms, but lagged the Benchmark's materials sector. We
also underweighted this strong sector, creating a negative allocation effect.
1
OUTLOOK
Despite economic data gyrations, energy price volatility and considerable
investor worry, the economy has persevered, as we expected it would. The rate
of earnings and cash flow growth may slow as the full effects of the Federal
Reserve Board's tightening campaign unfold, but we expect both to remain at
healthy levels. Based on these measures, we think the market looks attractive
from a longer-term valuation standpoint. Near term, however, we are hopeful
that increased visibility with respect to inflation, energy prices and Fed
intentions will allow investors' risk appetite to return to more normal levels.
Should this happen in concert with healthy underlying fundamentals, we believe
the market could advance at the higher end of our 5%-10% forecast.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR 5 YEARS INCEPTION
------------------------------------------------
LOOMIS SAYLES AGGRESSIVE GROWTH: INSTITUTIONAL
5.95% 8.45% 9.32%
------------------------------------------------
LOOMIS SAYLES AGGRESSIVE GROWTH: RETAIL
5.69 8.16 9.02
------------------------------------------------
RUSSELL MIDCAP GROWTH INDEX(c)
7.03 12.01 8.10
------------------------------------------------
LIPPER MID-CAP GROWTH FUNDS INDEX(c)
6.27 8.26 6.22
------------------------------------------------
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 2006(a)(b)
[CHART]
Loomis Sayles Lipper Mid-Cap
Aggressive Growth Russell Midcap
Growth Fund Funds Index(c) Growth Index(c)
-------------- -------------- --------------
12/31/1996 $100,000 $100,000 $100,000
1/31/1997 106,200 102,559 104,425
2/28/1997 102,897 95,742 102,125
3/31/1997 96,301 88,460 96,355
4/30/1997 97,399 87,694 98,714
5/31/1997 106,194 99,115 107,560
6/30/1997 107,193 103,291 110,537
7/31/1997 118,094 109,599 121,117
8/31/1997 115,390 109,295 119,935
9/30/1997 125,694 117,120 126,005
10/31/1997 122,891 110,561 119,696
11/30/1997 119,094 108,793 120,954
12/31/1997 122,643 111,341 122,542
1/31/1998 116,241 109,235 120,336
2/28/1998 125,529 118,513 131,650
3/31/1998 129,796 124,650 137,168
4/30/1998 133,210 125,192 139,031
5/31/1998 127,229 117,895 133,312
6/30/1998 133,743 123,318 137,084
7/31/1998 126,909 115,110 131,211
8/31/1998 101,184 90,293 106,169
9/30/1998 112,173 99,709 114,200
10/31/1998 119,756 103,376 122,608
11/30/1998 120,714 111,232 130,879
12/31/1998 136,793 125,581 144,433
1/31/1999 138,120 131,815 148,763
2/28/1999 135,358 121,576 141,488
3/31/1999 173,623 130,243 149,368
4/30/1999 182,478 135,585 156,174
5/31/1999 189,230 135,021 154,165
6/30/1999 214,000 145,904 164,928
7/31/1999 212,331 143,907 159,676
8/31/1999 224,709 143,178 158,017
9/30/1999 222,058 147,358 156,671
10/31/1999 278,017 160,386 168,785
11/30/1999 326,280 180,504 186,265
12/31/1999 407,361 218,156 218,517
1/31/2000 418,767 214,410 218,473
2/29/2000 569,397 268,144 264,402
3/31/2000 517,127 249,271 264,674
4/30/2000 468,207 216,387 238,982
5/31/2000 421,058 196,935 221,561
6/30/2000 480,680 227,537 245,071
7/31/2000 469,240 218,099 229,552
8/31/2000 555,392 246,622 264,171
9/30/2000 550,894 234,769 251,256
10/31/2000 466,717 215,786 234,060
11/30/2000 349,384 170,662 183,197
12/31/2000 384,532 182,963 192,844
1/31/2001 352,770 185,448 203,859
2/28/2001 275,443 157,630 168,598
3/31/2001 235,972 140,906 144,469
4/30/2001 274,412 159,484 168,550
5/31/2001 261,652 160,799 167,757
6/30/2001 253,671 160,171 167,846
7/31/2001 228,355 151,747 156,526
8/31/2001 199,422 141,579 145,181
9/30/2001 158,880 121,159 121,187
10/31/2001 174,339 127,905 133,926
11/30/2001 192,383 138,410 148,344
12/31/2001 194,730 144,414 153,983
1/31/2002 188,051 138,891 148,983
2/28/2002 169,076 131,985 140,537
3/31/2002 183,143 140,305 151,263
4/30/2002 173,528 135,640 143,255
5/31/2002 162,284 131,115 138,980
6/30/2002 146,818 119,334 123,643
7/31/2002 132,166 106,464 111,630
8/31/2002 130,051 105,195 111,242
9/30/2002 125,369 98,659 102,404
10/31/2002 130,409 103,634 110,336
11/30/2002 140,255 109,789 118,972
12/31/2002 123,621 103,299 111,784
1/31/2003 122,100 101,767 110,686
2/28/2003 121,050 100,196 109,724
3/31/2003 121,522 101,629 111,767
4/30/2003 130,661 108,758 119,377
5/31/2003 145,190 117,751 130,863
6/30/2003 145,306 119,594 132,730
7/31/2003 153,037 124,311 137,473
8/31/2003 166,978 130,425 145,044
9/30/2003 160,416 126,049 142,231
10/31/2003 176,121 135,937 153,694
11/30/2003 177,406 139,169 157,806
12/31/2003 173,184 139,883 159,529
1/31/2004 180,094 143,417 164,796
2/29/2004 176,456 145,395 167,561
3/31/2004 180,444 145,360 167,241
4/30/2004 178,098 140,749 162,519
5/31/2004 186,540 143,814 166,354
6/30/2004 193,573 147,273 169,002
7/31/2004 177,177 136,810 157,809
8/31/2004 171,667 134,440 155,864
9/30/2004 181,624 140,191 161,683
10/31/2004 185,601 144,334 167,167
11/30/2004 198,018 152,357 175,800
12/31/2004 206,691 159,511 184,222
1/31/2005 200,780 154,357 179,291
2/28/2005 207,165 156,350 183,831
3/31/2005 199,354 153,235 181,145
4/30/2005 188,230 145,854 173,978
5/31/2005 201,369 154,505 183,942
6/30/2005 206,464 158,041 187,362
7/31/2005 217,716 167,139 198,294
8/31/2005 217,476 166,616 197,083
9/30/2005 224,936 169,525 199,635
10/31/2005 220,684 164,815 193,760
11/30/2005 235,956 173,726 204,271
12/31/2005 238,551 174,788 206,512
1/31/2006 260,689 186,792 218,879
2/28/2006 255,944 185,179 216,185
3/31/2006 268,486 191,357 222,226
4/30/2006 268,969 193,146 223,167
5/31/2006 246,725 182,397 212,663
6/30/2006 252,400 182,476 211,795
7/31/2006 236,297 174,761 204,204
8/31/2006 234,525 177,617 208,909
9/30/2006 238,324 180,159 213,676
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 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 Indices.
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]
Mark F. Burns
Manager since January 2005
MARK F. BURNS, CFA
Manager since January 2005
[PHOTO]
JOHN SLAVIK, CFA
Manager since April 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 2,000 of the 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 | $23.4 million
PORTFOLIO REVIEW
Our bottom-up stock selection process continued to drive the Fund's
performance. In particular, strong stock selections in the consumer
discretionary, financial services and producer durables sectors drove the
Fund's outperformance relative to the Benchmark, the Russell 2000 Growth Index,
for the fiscal year ended September 30, 2006. We continued to focus on
companies that we believe are positioned to grow profits in all economic
environments and to maintain broad portfolio diversification. Throughout the
12-month period, we reduced the Fund's weighting in the healthcare and more
cyclically-oriented sectors, such as energy, and redeployed the proceeds into
the financial services and consumer discretionary sectors.
Among the Fund's consumer-related holdings, our positions in PeopleSupport and
Guess? drove positive results. Strong demand from new and current clients
helped PeopleSupport, an offshore business processing outsourcing company,
report a solid second quarter, with earnings ahead of estimates and revenues up
approximately 60% from the same time period in 2005. Guess? advanced on strong
earnings, sales and profit data. Within the financial services sector, our real
estate-related holdings generally provided positive results. In particular, CB
Richard Ellis Group experienced strong growth and better-than-expected
earnings. The company's performance was broad-based by geography and
product/activity mix, and was largely attributed to a steady leasing market
recovery combined with increased revenue from investment management operations
and continued investment sales strength. We sold the stock at a profit. Jones
Lang LaSalle, a global real estate services company, also experienced growing
profits and revenues and significant growth across all business segments.
Mattson Technology and SBA Communications Corp. were largely responsible for
positive results from the Fund's technology sector. Mattson Technology, a
semiconductor equipment company, rose during the year after investors reacted
positively to continued market share gains by the company and an overall
acceleration in industry bookings. We sold the stock at a profit. SBA
Communications Corp., a mobile phone tower operator, advanced after investors
reacted favorably to the company's agreement to purchase AAT Communications
Corp. to expand across the United States.
Poor stock selections in the healthcare and energy sectors detracted somewhat
from the Fund's performance. Specifically, PharmaNet Development Group
(formerly known as SFBC International) and Neurocrine Biosciences were the
primary detractors in the healthcare sector. PharmaNet, which conducts clinical
research and provides drug development services, fell significantly in November
after a report was published about flaws in the US drug-testing industry.
Neurocrine, which develops therapies for neuron-related disorders, fell after
the FDA did not approve the company's insomnia treatment. We sold both stocks.
Carbo Ceramics and Oil States International were the leading detractors among
the Fund's energy holdings. Carbo Ceramics, a supplier of ceramic products for
the oil and gas industry, fell in July on disappointing earnings and we sold
the position. Oil States fell in sympathy with the declining price of crude oil
and natural gas, but we continue to hold the stock due to attractive business
trends in the company's capital equipment and well site services business lines.
3
OUTLOOK
Despite economic data gyrations, energy price volatility and considerable
investor worry, the economy has persevered, as we expected it would. We believe
the rate of earnings and cash flow growth may slow as the full effects of the
Federal Reserve Board's tightening campaign unfold, but we expect both to
remain at healthy levels. Based on these measures, we think the market looks
attractive from a longer-term valuation standpoint. Near term, however, we are
hopeful that increased visibility with respect to inflation, energy prices and
the Fed's intentions will allow investors' risk appetite to return to more
normal levels. Should this happen in concert with healthy underlying
fundamentals, we believe the market could advance at the higher end of our
5%-10% forecast.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR 5 YEARS INCEPTION
-----------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH: INSTITUTIONAL
8.30% 6.33% 3.11%
-----------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH: RETAIL
8.03 6.07 2.85
-----------------------------------------------
RUSSELL 2000 GROWTH INDEX(c)
5.88 10.15 4.11
-----------------------------------------------
RUSSELL 2000 INDEX(c)
9.92 13.78 8.74
-----------------------------------------------
LIPPER SMALL-CAP GROWTH FUNDS INDEX(c)
4.06 8.94 6.26
-----------------------------------------------
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 2006(a)(b)
[CHART]
Lipper Russell
Loomis Sayles Small-Cap 2000 Russell
Small Cap Growth Funds Growth 2000
Growth Fund Index(c) Index(c) Index(c)
----------- ------------ --------- ---------
12/31/1996 $100,000 $100,000 $100,000 $100,000
1/31/1997 102,600 102,319 102,498 101,998
2/28/1997 94,997 94,931 96,308 99,525
3/31/1997 85,099 88,083 89,512 94,829
4/30/1997 83,499 86,771 88,476 95,093
5/31/1997 97,101 98,809 101,774 105,673
6/30/1997 102,801 104,095 105,225 110,201
7/31/1997 111,097 110,360 110,617 115,329
8/31/1997 112,996 112,113 113,936 117,968
9/30/1997 125,494 121,548 123,028 126,603
10/31/1997 116,697 115,333 115,639 121,041
11/30/1997 115,401 112,727 112,882 120,258
12/31/1997 119,429 111,226 112,945 122,363
1/31/1998 115,523 109,575 111,439 120,432
2/28/1998 128,081 118,434 121,277 129,337
3/31/1998 133,883 123,791 126,364 134,671
4/30/1998 132,089 124,691 127,139 135,416
5/31/1998 121,007 115,867 117,902 128,123
6/30/1998 132,817 119,262 119,107 128,393
7/31/1998 119,734 110,288 109,161 117,999
8/31/1998 92,722 86,200 83,962 95,086
9/30/1998 103,691 90,810 92,475 102,527
10/31/1998 107,808 94,390 97,298 106,709
11/30/1998 121,305 102,066 104,846 112,299
12/31/1998 141,770 112,299 114,334 119,249
1/31/1999 145,881 115,014 119,477 120,833
2/28/1999 136,705 103,947 108,547 111,046
3/31/1999 147,149 108,645 112,413 112,780
4/30/1999 148,518 112,888 122,341 122,886
5/31/1999 145,770 113,503 122,534 124,681
6/30/1999 167,607 124,127 128,989 130,319
7/31/1999 162,645 123,688 125,000 126,743
8/31/1999 167,395 121,954 120,325 122,053
9/30/1999 176,568 126,375 122,646 122,079
10/31/1999 199,239 133,743 125,788 122,574
11/30/1999 220,339 150,618 139,088 129,892
12/31/1999 271,920 180,988 163,603 144,596
1/31/2000 266,971 179,104 162,080 142,274
2/29/2000 363,481 231,579 199,791 165,769
3/31/2000 315,393 213,402 178,789 154,840
4/30/2000 290,067 187,021 160,738 145,522
5/31/2000 250,821 171,731 146,663 137,041
6/30/2000 280,568 201,975 165,609 148,987
7/31/2000 251,782 188,834 151,416 144,193
8/31/2000 293,980 209,143 167,343 155,196
9/30/2000 284,602 198,786 159,030 150,634
10/31/2000 256,740 183,871 146,121 143,910
11/30/2000 190,475 152,559 119,590 129,137
12/31/2000 222,551 166,052 126,908 140,228
1/31/2001 212,470 171,112 137,180 147,529
2/28/2001 165,408 149,206 118,376 137,849
3/31/2001 140,894 134,714 107,613 131,106
4/30/2001 166,734 149,258 120,788 141,362
5/31/2001 162,132 153,303 123,586 144,837
6/30/2001 166,072 157,168 126,956 149,838
7/31/2001 142,639 148,407 116,125 141,727
8/31/2001 126,550 139,621 108,873 137,150
9/30/2001 99,126 117,830 91,306 118,688
10/31/2001 110,575 126,465 100,090 125,633
11/30/2001 118,990 136,265 108,445 135,359
12/31/2001 123,702 144,519 115,196 143,714
1/31/2002 117,752 140,149 111,098 142,219
2/28/2002 103,045 131,668 103,908 138,322
3/31/2002 109,444 142,433 112,939 149,439
4/30/2002 105,405 138,675 110,496 150,801
5/31/2002 100,357 133,112 104,035 144,108
6/30/2002 91,716 123,221 95,213 136,958
7/31/2002 78,692 105,745 80,579 116,273
8/31/2002 77,795 105,592 80,542 115,977
9/30/2002 71,284 99,188 74,724 107,648
10/31/2002 75,889 103,420 78,504 111,099
11/30/2002 80,267 112,083 86,286 121,014
12/31/2002 72,297 104,595 80,336 114,276
1/31/2003 69,940 101,833 78,153 111,114
2/28/2003 69,045 98,659 76,069 107,756
3/31/2003 68,368 100,694 77,221 109,144
4/30/2003 75,554 109,016 84,529 119,492
5/31/2003 83,970 120,133 94,055 132,316
6/30/2003 85,658 124,204 95,867 134,710
7/31/2003 91,611 131,466 103,115 143,139
8/31/2003 98,913 138,438 108,653 149,702
9/30/2003 96,440 135,037 105,903 146,938
10/31/2003 104,415 147,289 115,051 159,278
11/30/2003 107,892 151,211 118,802 164,930
12/31/2003 103,631 151,426 119,334 168,276
1/31/2004 111,040 158,511 125,603 175,587
2/29/2004 106,665 157,915 125,408 177,161
3/31/2004 106,217 156,824 125,994 178,812
4/30/2004 101,618 149,160 119,670 169,696
5/31/2004 104,870 152,272 122,050 172,397
6/30/2004 109,023 156,613 126,111 179,657
7/31/2004 99,025 142,796 114,792 167,560
8/31/2004 94,757 138,170 112,320 166,699
9/30/2004 100,594 146,064 118,531 174,525
10/31/2004 101,942 150,159 121,411 177,960
11/30/2004 107,784 160,674 131,674 193,396
12/31/2004 113,399 167,766 136,406 199,120
1/31/2005 111,494 161,416 130,261 190,812
2/28/2005 113,512 164,605 132,049 194,044
3/31/2005 110,254 159,074 127,096 188,490
4/30/2005 104,532 150,187 119,007 177,695
5/31/2005 111,943 160,140 127,398 189,325
6/30/2005 117,216 165,737 131,517 196,628
7/31/2005 124,847 175,850 140,710 209,085
8/31/2005 123,161 172,813 138,727 205,209
9/30/2005 124,393 173,752 139,826 205,852
10/31/2005 118,783 167,867 134,659 199,461
11/30/2005 125,850 176,867 142,283 209,144
12/31/2005 125,511 176,718 142,071 208,188
1/31/2006 140,446 191,121 155,775 226,857
2/28/2006 138,873 190,374 154,945 226,232
3/31/2006 146,734 198,307 162,475 237,208
4/30/2006 146,616 198,975 162,006 237,169
5/31/2006 137,526 186,594 150,605 223,850
6/30/2006 135,614 185,040 150,696 225,289
7/31/2006 129,105 174,949 142,868 217,959
8/31/2006 133,146 178,473 147,052 224,412
9/30/2006 134,717 180,804 148,048 226,280
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 Indices.
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 which tracks stocks of 2,000 of the smallest US companies
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: 0.89%; Retail: 1.15%; Admin: 1.40%
TOTAL NET ASSETS | $798.8 million
PORTFOLIO REVIEW
In general, small-cap stock fund managers had difficulty keeping pace with the
Russell benchmarks throughout the past several quarters, as typically
underweighted sectors, such as REITs (real estate investment trusts) and
utilities, were exceptionally strong performers. In addition, sharp reversals
from sectors that formerly led the market, including energy and producer
durables, caught many managers off guard. Defying conventional wisdom,
small-cap consumer discretionary stocks performed well during the quarter ended
September 30, 2006, despite fears of higher gasoline and energy prices and a
deteriorating housing market. An additional challenge came from the annual
rebalancing of the Russell indexes at the end of June, which resulted in a
significant reduction in energy and producer durables stocks within the Russell
2000 Value Index, just as those sectors were poised to underperform during the
third quarter.
Many of these factors, along with relatively weak stock selections in the
technology and financial services sectors, negatively influenced the Fund's
return versus its Benchmark, the Russell 2000 Value Index, for the fiscal year
ended September 30, 2006. Nevertheless, our timely reductions in energy and
materials holdings earlier in the year, strong stock selections within the
transportation sector, and a healthy representation in recovering technology
stocks helped performance relative to our peer group.
Our financial services, materials and processing, and technology holdings
contributed positively to the Fund's absolute return. REITs drove performance
in the financials sector, as investors sought exposure to the continued rebound
in commercial real estate and to higher-yielding and defensive investments.
Materials and processing stocks were exceptionally strong early in the period,
as non-residential construction and global infrastructure spending pushed
commodity prices higher. Technology stocks were predictably volatile but
climbed higher during the period.
Energy, healthcare and consumer staples were the Fund's weakest sectors. In
recent months, energy stocks reversed their previous trend of market-leading
appreciation, as natural gas and oil prices declined on concerns about global
economic slowing. Although the healthcare and consumer staples sectors posted
positive returns, these defensive sectors lagged the more cyclical segments of
the market.
We made modest changes in the Fund's sector weightings, with steady reductions
in "late-cycle," or economically sensitive sectors, including materials and
processing, energy, and producer durables, as well as additions to the consumer
discretionary, financial services, and technology sectors. We expect
capital-spending trends to remain solid for the near term, driven by global
infrastructure expansion combined with strong corporate balance sheets and
healthy cash flows across many economic sectors. Nevertheless, we believe
valuations across many industries are not as attractive as they were in
previous quarters. Our exposure to the consumer discretionary sector remains
below average, but it is now closer to the Benchmark weight. Recent declines in
interest rates and lower gasoline and energy prices may remove some pressure on
consumers, but we continue to monitor the housing market as a key risk factor.
5
OUTLOOK
Despite economic data gyrations, energy price volatility and considerable
investor worry, the economy has persevered, as we expected it would. We believe
the rate of earnings and cash flow growth may slow as the full effects of the
Federal Reserve Board's tightening campaign unfold, but we expect both to
remain at healthy levels. Based on these measures, we think the market looks
attractive from a longer-term valuation standpoint. Near term, however, we are
hopeful that increased visibility with respect to inflation, energy prices and
Fed intentions will allow investors' risk appetite to return to more normal
levels. Should this happen in concert with healthy underlying fundamentals, we
believe the market could advance at the higher end of our 5%-10% forecast.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(a)(b)
----------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: INSTITUTIONAL
11.17% 14.34% 12.34% 14.90%
----------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: RETAIL(a)
10.87 14.05 12.06 14.71
----------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: ADMIN(a)
10.59 13.77 11.70 14.35
----------------------------------------------
RUSSELL 2000 VALUE INDEX(c)
14.01 16.96 13.38 14.77
----------------------------------------------
RUSSELL 2000 INDEX(c)
9.92 13.78 9.06 11.40
----------------------------------------------
LIPPER SMALL-CAP CORE FUNDS INDEX(b)(c)
6.96 13.18 9.85 N/A
----------------------------------------------
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 2006(d)(e)
[CHART]
Loomis
Sayles Lipper Small Russell
Small Cap -Cap Core Midcap
Value Fund Funds Index Growth Index Russell 2000 Index
---------- ----------- ------------ ------------------
5/13/1991 $100,000 $100,000 $100,000
5/31/1991 102,200 104,691 104,767
6/30/1991 98,603 99,789 98,661
7/31/1991 106,402 102,381 102,123
8/31/1991 114,499 105,488 105,903
9/30/1991 114,602 105,611 106,733
10/31/1991 116,906 106,811 109,555
11/30/1991 114,007 102,477 104,488
12/31/1991 130,480 $100,000 109,121 112,855
1/31/1992 143,750 106,378 118,250 122,000
2/29/1992 151,800 109,427 123,890 125,558
3/31/1992 143,649 105,725 122,542 121,309
4/30/1992 136,337 102,146 120,845 117,059
5/31/1992 136,541 101,930 124,131 118,615
6/30/1992 124,635 98,333 120,111 113,006
7/31/1992 128,087 101,022 124,636 116,938
8/31/1992 123,912 99,368 122,207 113,638
9/30/1992 125,275 99,851 124,514 116,259
10/31/1992 129,246 103,578 127,420 119,954
11/30/1992 141,576 110,820 135,304 129,133
12/31/1992 147,621 115,026 140,915 133,632
1/31/1993 154,382 118,409 148,392 138,155
2/28/1993 150,832 115,704 148,985 134,964
3/31/1993 157,136 118,864 154,636 139,343
4/30/1993 153,129 114,981 150,920 135,518
5/31/1993 159,668 119,286 155,667 141,515
6/30/1993 160,466 120,206 157,142 142,398
7/31/1993 164,366 121,322 159,840 144,364
8/31/1993 173,192 124,960 166,089 150,600
9/30/1993 181,107 126,979 170,067 154,850
10/31/1993 186,033 129,668 173,958 158,836
11/30/1993 178,927 126,466 169,426 153,608
12/31/1993 184,062 130,135 174,415 158,860
1/31/1994 187,964 133,575 180,640 163,841
2/28/1994 185,107 133,322 180,117 163,248
3/31/1994 174,426 128,136 172,034 154,629
4/30/1994 172,473 127,918 173,729 155,548
5/31/1994 169,868 128,241 173,480 153,802
6/30/1994 165,825 124,078 168,954 148,579
7/31/1994 166,738 125,868 172,076 151,020
8/31/1994 174,558 131,665 178,849 159,435
9/30/1994 174,435 131,900 176,951 158,902
10/31/1994 173,267 132,587 173,713 158,274
11/30/1994 166,371 129,228 166,705 151,882
12/31/1994 168,800 130,347 171,722 155,963
1/31/1995 169,323 131,692 170,880 153,995
2/28/1995 175,893 136,935 177,203 160,401
3/31/1995 180,096 139,835 178,080 163,164
4/30/1995 180,619 142,185 183,375 166,792
5/31/1995 184,303 143,911 187,303 169,659
6/30/1995 189,298 149,643 193,703 178,461
7/31/1995 201,905 157,915 200,770 188,740
8/31/1995 211,617 163,166 206,735 192,645
9/30/1995 215,553 165,959 209,821 196,085
10/31/1995 204,387 160,089 201,441 187,316
11/30/1995 214,239 164,875 209,447 195,186
12/31/1995 222,958 170,421 215,935 200,336
1/31/1996 223,404 171,668 217,368 200,120
2/29/1996 234,619 177,751 220,775 206,358
3/31/1996 240,015 182,202 225,409 210,558
4/30/1996 254,272 194,772 231,559 221,817
5/31/1996 264,748 203,561 237,422 230,558
6/30/1996 258,500 194,317 234,619 221,091
7/31/1996 243,947 178,534 222,146 201,780
8/31/1996 256,168 187,634 231,784 213,495
9/30/1996 264,827 195,523 238,112 221,839
10/31/1996 268,720 191,863 240,873 218,420
11/30/1996 281,565 198,795 253,835 227,419
12/31/1996 290,856 202,304 262,075 233,380
1/31/1997 296,033 206,814 266,104 238,044
2/28/1997 292,185 201,403 268,630 232,272
3/31/1997 285,815 191,245 261,425 221,312
4/30/1997 283,129 191,297 265,269 221,929
5/31/1997 313,905 211,698 286,388 246,618
6/30/1997 328,627 223,668 300,881 257,187
7/31/1997 347,457 237,128 313,510 269,155
8/31/1997 354,719 242,928 318,487 275,313
9/30/1997 375,860 261,159 339,665 295,465
10/31/1997 364,021 250,761 330,430 282,485
11/30/1997 362,674 247,548 334,051 280,658
12/31/1997 366,409 247,282 345,374 285,570
1/31/1998 358,348 243,664 339,125 281,064
2/28/1998 383,720 261,855 359,627 301,846
3/31/1998 400,833 274,198 374,214 314,295
4/30/1998 399,070 276,836 376,063 316,034
5/31/1998 381,950 262,465 362,750 299,014
6/30/1998 377,023 261,524 360,701 299,643
7/31/1998 352,629 242,656 332,448 275,385
8/31/1998 292,224 195,759 280,384 221,911
9/30/1998 306,981 203,993 296,218 239,277
10/31/1998 323,128 212,366 305,014 249,036
11/30/1998 341,417 224,207 313,270 262,084
12/31/1998 362,449 238,290 323,093 278,302
1/31/1999 345,450 236,503 315,760 282,000
2/28/1999 321,061 217,184 294,201 259,160
3/31/1999 321,254 218,170 291,774 263,206
4/30/1999 347,436 232,906 318,410 286,791
5/31/1999 354,419 237,725 328,197 290,980
6/30/1999 370,794 251,463 340,080 304,138
7/31/1999 366,196 250,089 332,009 295,793
8/31/1999 354,001 240,919 319,873 284,846
9/30/1999 346,213 240,732 313,478 284,908
10/31/1999 342,820 242,827 307,205 286,062
11/30/1999 349,951 258,481 308,797 303,142
12/31/1999 363,774 286,363 318,285 337,458
1/31/2000 350,278 280,860 309,962 332,039
2/29/2000 375,043 320,461 328,907 386,870
3/31/2000 396,308 315,903 330,449 361,364
4/30/2000 397,140 298,337 332,405 339,619
5/31/2000 380,142 285,654 327,333 319,825
6/30/2000 392,611 310,851 336,897 347,705
7/31/2000 399,168 301,188 348,122 336,518
8/31/2000 424,116 328,020 363,686 362,194
9/30/2000 417,754 319,591 361,624 351,549
10/31/2000 425,524 309,977 360,340 335,856
11/30/2000 411,865 279,108 353,005 301,380
12/31/2000 448,109 306,218 390,935 327,263
1/31/2001 460,566 317,118 401,726 344,302
2/28/2001 448,776 296,974 401,171 321,711
3/31/2001 432,620 282,934 394,737 305,974
4/30/2001 456,414 305,475 413,008 329,910
5/31/2001 469,741 316,608 423,628 338,019
6/30/2001 488,061 326,398 440,673 349,691
7/31/2001 490,892 318,836 430,791 330,762
8/31/2001 485,198 309,914 429,298 320,079
9/30/2001 433,912 269,307 381,908 276,992
10/31/2001 449,186 285,306 391,883 293,202
11/30/2001 476,541 306,508 420,042 315,901
12/31/2001 510,233 328,037 445,759 335,399
1/31/2002 509,519 324,150 451,676 331,911
2/28/2002 513,900 315,495 454,426 322,814
3/31/2002 543,758 339,737 488,458 348,760
4/30/2002 545,226 341,406 505,653 351,938
5/31/2002 535,194 328,681 488,929 336,318
6/30/2002 517,319 310,271 478,104 319,631
7/31/2002 449,808 268,099 407,068 271,357
8/31/2002 457,140 269,520 405,259 270,666
9/30/2002 422,672 250,441 376,311 251,228
10/31/2002 429,773 259,342 381,972 259,283
11/30/2002 451,304 278,480 412,454 282,423
12/31/2002 442,730 264,951 394,831 266,698
1/31/2003 431,219 257,203 383,714 259,316
2/28/2003 421,904 249,172 370,815 251,481
3/31/2003 423,128 251,276 374,775 254,719
4/30/2003 457,867 272,199 410,373 278,871
5/31/2003 486,483 296,112 452,274 308,797
6/30/2003 496,748 302,929 459,937 314,386
7/31/2003 515,823 318,463 482,874 334,057
8/31/2003 535,373 332,265 501,216 349,373
9/30/2003 521,935 325,049 495,467 342,924
10/31/2003 565,204 350,592 535,868 371,722
11/30/2003 581,651 363,222 556,438 384,913
12/31/2003 595,611 373,322 576,561 392,722
1/31/2004 609,191 385,150 596,497 409,784
2/29/2004 621,009 391,852 608,047 413,458
3/31/2004 631,318 396,101 616,456 417,311
4/30/2004 609,474 382,487 584,576 396,035
5/31/2004 614,228 385,816 591,632 402,338
6/30/2004 641,561 402,286 621,681 419,282
7/31/2004 614,936 381,089 593,102 391,050
8/31/2004 623,730 377,755 598,920 389,041
9/30/2004 646,309 396,540 622,610 407,304
10/31/2004 652,578 403,034 632,282 415,322
11/30/2004 697,214 434,862 688,389 451,346
12/31/2004 725,661 441,891 704,820 464,706
1/31/2005 701,714 429,079 677,555 445,317
2/28/2005 716,450 439,104 691,009 452,860
3/31/2005 706,133 428,047 676,783 439,896
4/30/2005 671,391 404,934 641,872 414,704
5/31/2005 701,402 426,635 681,020 441,846
6/30/2005 727,284 441,175 711,135 458,889
7/31/2005 770,121 467,394 751,599 487,962
8/31/2005 756,798 463,075 734,343 478,915
9/30/2005 762,626 467,493 733,130 480,417
10/31/2005 743,712 453,141 714,716 465,500
11/30/2005 771,527 473,848 743,709 488,098
12/31/2005 770,987 475,286 738,000 485,868
1/31/2006 833,746 511,500 799,026 529,437
2/28/2006 836,497 508,119 798,972 527,979
3/31/2006 870,208 530,500 837,670 553,595
4/30/2006 873,863 534,486 839,910 553,505
5/31/2006 845,724 508,686 805,131 522,420
6/30/2006 848,177 505,230 815,021 525,779
7/31/2006 820,950 488,072 803,718 508,671
8/31/2006 836,548 497,727 827,742 523,731
9/30/2006 847,842 500,052 835,821 528,091
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
current levels of 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 Indices. (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]
Mark Shank
Manager since June 2003
[PHOTO]
DAVID SOWERBY, CFA
Manager since August 2005
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 US federal income tax
FUND INCEPTION DATE | 10/1/95
FUND REGISTRATION DATE | 3/7/97
EXPENSE RATIO | 0.65%
TOTAL NET ASSETS | $9.1 million
PORTFOLIO REVIEW
The Fund outperformed its benchmark, the S&P 500 Index, for the fiscal year
ended September 30, 2006, primarily due to our stock selection efforts, which
focused on high-quality companies with accelerating business models. In
addition, overweights in the industrials and materials sectors helped the Fund
outpace its Benchmark for the period.
We continued to emphasize market sectors in which we believe companies
demonstrate earnings leverage. For example, we increased the Fund's weighting
in technology, where we identified stocks that exhibited attractive valuations
and strong earnings-growth potential in our opinion. We added to existing
positions and established new positions in Corning, Hewlett-Packard, QUALCOMM
and Texas Instruments. We also decreased the Fund's weightings in consumer
discretionary and financials because we were concerned about future earnings
growth for Target, Viacom and Wells Fargo, all three of which were sold.
The financials, industrials and materials sectors had the greatest impact on
the Fund's performance for the period. In the industrials and materials
sectors, the Fund benefited from its emphasis on these areas and from favorable
stock selections. Specific holdings that had the greatest positive impact
included United Technologies, ARAMARK, Dover and Danaher, and materials stocks
Praxair and Ecolab. We sold ARAMARK at a profit. Strong performance from Bear
Stearns, Franklin Resources and Goldman Sachs compensated for our underweight
in financial stocks.
The Fund's healthcare and energy holdings detracted most from performance.
Energy was one of the weakest sectors within the S&P 500 Index for fiscal 2006.
The Fund was approximately equal-weighted in energy, but poor performance from
ConocoPhillips and Devon Energy compounded the decline. We overweighted
healthcare, but poor performance from the Fund's positions in Kinetic Concepts
and Medtronic were primarily responsible for the Fund's underperformance.
Kinetic Concepts was sold.
OUTLOOK
Despite economic data gyrations, energy price volatility and considerable
investor worry, the economy has persevered, as we believed it would. The rate
of earnings and cash flow growth may slow as the full effects of the Federal
Reserve Board's tightening campaign unfold, but we think both should remain at
healthy levels. Based on these measures, we believe the market looks attractive
from a longer-term valuation standpoint. Near term, however, we are hopeful
that increased visibility with respect to inflation, energy prices and Fed
intentions will allow investors' risk appetite to return to more normal levels.
Should this happen in concert with healthy underlying fundamentals, we think
the market could reach the higher end of our 5%-10% forecast.
7
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE SINCE
1 YEAR 5 YEARS 10 YEARS REGISTRATION(a)(b) INCEPTION(a)(b)
----------------------------------------------------------
LOOMIS SAYLES TAX-MANAGED EQUITY: INSTITUTIONAL
11.32% 6.98% 10.33% 9.25% 10.14%
----------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS(c)
11.09 6.64 7.31 6.17 7.39
----------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND
SHARES(c)
7.35 5.85 7.35 6.32 7.37
----------------------------------------------------------
S&P 500 INDEX(c)
10.79 6.97 8.59 7.30 9.61
----------------------------------------------------------
LIPPER LARGE-CAP CORE FUNDS INDEX(c)
9.63 5.75 7.29 6.32 8.22
----------------------------------------------------------
CUMULATIVE PERFORMANCE
REGISTRATION TO SEPTEMBER 30, 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 56,018 47,163 43,986
4/30/2006 56,533 47,797 44,443
5/31/2006 54,984 46,421 43,096
6/30/2006 54,984 46,484 43,132
7/31/2006 55,842 46,771 42,985
8/31/2006 56,931 47,884 44,051
9/30/2006 58,303 49,118 44,982
INCEPTION TO SEPTEMBER 30, 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 69,511 65,837 58,296
4/30/2006 70,150 66,721 58,902
5/31/2006 68,228 64,800 57,118
6/30/2006 68,228 64,888 57,166
7/31/2006 69,293 65,289 56,970
8/31/2006 70,644 66,842 58,383
9/30/2006 72,346 68,564 59,617
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 such
waivers and reimbursements, performance 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 Indices 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, CFA
Manager since July 2005
[PHOTO]
James Carroll
Manager since November 2002
/s/ Warren Koontz
Manager since June 2000
FUND FACTS
SYMBOL | Institutional: LSGIX;
Retail: LSVRX
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, although it may invest in companies of any size
FUND INCEPTION DATE | 5/13/91
COMMENCEMENT OF OPERATIONS OF CLASS | Institutional: 5/13/91;
Retail: 6/30/06
EXPENSE RATIO | Institutional: 0.85%;
Retail: 1.10%
TOTAL NET ASSETS | $71.6 million
PORTFOLIO REVIEW
Our stock selection efforts helped the Fund significantly outperform its
Benchmark, the Russell 1000 Value Index, for the fiscal year ended September
30, 2006. We continued to employ a disciplined, bottom-up stock selection
process designed to identify stocks trading at significant discounts to their
intrinsic value. We believe this strategy may result in attractive long-term
investment returns, as stock prices gravitate toward the value of the
underlying businesses over time. We believe we can find value in every sector,
and our overweights represent our best ideas.
During the fiscal year, we increased the Fund's exposure to utilities by
initiating positions in Embarq, a wire-line spin off from Sprint, and Entergy,
a large, regulated utility in the South that has recovered nicely since last
year's hurricane season. Earlier in the year, we also increased the Fund's
weighting in the healthcare sector, adding Pfizer due to its earnings leverage
and financial flexibility. At the same time, we decreased our energy weighting
as oil and natural gas prices fell in the second half of the year.
Every sector made positive contributions to the Fund's fiscal-year performance.
The strongest performers included the financials, utilities and consumer
discretionary sectors. The Fund's position in JPMorgan Chase & Co. was
primarily responsible for strong performance from the Fund's financial
holdings. In addition to beating the market's earnings expectations, JPMorgan
advanced on a strong investment management pipeline and excellent credit
quality. The utilities sector's largest contributor was BellSouth; the stock
rose sharply following AT&T's takeover offer. Several of the Fund's consumer
discretionary holdings also bolstered performance. Specifically, Office Depot
benefited from cost cutting measures; DIRECTV advanced on strong industry
fundamentals and cash flows; and Federated Department Stores posted solid
returns stemming from its acquisition of May Department Stores.
The energy sector was volatile due to the sharp correction in the price of key
oil and natural gas benchmarks. Relative equity performance shifted in favor of
more defensive sector participants, such as ExxonMobil, which we continue to
hold, and other major, integrated producers. Most oil service and integrated
oil companies also underperformed during the later part of the fiscal year.
Detractors included Halliburton and ConocoPhillips.
OUTLOOK
Despite economic data gyrations, energy price volatility and considerable
investor worry, the economy has persevered, as we expected it would. The rate
of earnings and cash flow growth may slow as the full effects of the Federal
Reserve Board's tightening campaign unfold, but we expect both to remain at
healthy levels. Based on these measures, we think the market looks attractive
from a longer-term valuation standpoint. Near term, however, we
9
are hopeful that increased visibility with respect to inflation, energy prices
and Fed intentions will allow investors' risk appetite to return to more normal
levels. Should this happen in concert with healthy underlying fundamentals, we
believe the market could advance at the higher end of our 5%-10% forecast.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
--------------------------------------------------
LOOMIS SAYLES VALUE: INSTITUTIONAL
18.92% 11.31% 9.38% 11.01%
--------------------------------------------------
LOOMIS SAYLES VALUE: RETAIL(a)
18.61 11.02 9.00 10.41
--------------------------------------------------
RUSSELL 1000 VALUE INDEX(b)
14.62 10.73 11.20 12.75
--------------------------------------------------
LIPPER LARGE-CAP VALUE FUNDS INDEX(b)
12.59 8.01 8.60 10.72
--------------------------------------------------
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 2006(c)(d)
[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
11/30/2002 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 464,128 594,980 453,858
4/30/2006 477,170 610,100 465,137
5/31/2006 466,768 594,689 453,774
6/30/2006 466,301 598,493 454,102
7/31/2006 476,980 613,039 461,048
8/31/2006 485,517 623,299 469,552
9/30/2006 498,529 635,724 480,475
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 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. Performance shown for periods prior to the inception
date of the Retail Class (6/30/06) represents the performance of the
Institutional Class of shares during the periods shown, adjusted to reflect
current levels of 12b-1 fees payable by the respective Classes. (b) See page 11
for a description of the Indices. (c) The mountain chart is based on the Fund's
initial minimum investment of $100,000 for Institutional Class shares. (d)
Cumulative performance is shown for Institutional Class shares. Performance of
the Retail Class would be lower due to higher fees.
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 a market capitalization weighted index of medium
capitalization stocks determined by Russell to be growth stocks as measured by
their price-to-book ratios and 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. A commonly used benchmark of US equity
securities, 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, www.sec.gov. Information about how the Funds voted proxies relating to
portfolio securities during the 12 months ended June 30, 2006 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 April 1,
2006 (or commencement of operations if later) through September 30, 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 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $ 887.60 $4.73
Hypothetical (5% return before expenses) $1,000.00 $1,020.05 $5.06
Retail Class
- ------------
Actual $1,000.00 $ 886.50 $5.91
Hypothetical (5% return before expenses) $1,000.00 $1,018.80 $6.33
*Expenses are equal to the Fund's annualized expense ratio of 1.00% and 1.25% for the Institutional and
Retail Class, respectively, multiplied by the average account value over the period, multiplied by
183/365 (to reflect the half-year period).
LOOMIS SAYLES SMALL CAP GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $ 918.10 $4.81
Hypothetical (5% return before expenses) $1,000.00 $1,020.05 $5.06
Retail Class
- ------------
Actual $1,000.00 $ 917.70 $6.01
Hypothetical (5% return before expenses) $1,000.00 $1,018.80 $6.33
*Expenses are equal to the Fund's annualized expense ratio of 1.00% and 1.25% for the Institutional and
Retail Class, respectively, multiplied by the average account value over the period, multiplied by
183/365 (to reflect the half-year period).
LOOMIS SAYLES SMALL CAP VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $ 974.30 $4.40
Hypothetical (5% return before expenses) $1,000.00 $1,020.61 $4.51
Retail Class
- ------------
Actual $1,000.00 $ 973.10 $5.69
Hypothetical (5% return before expenses) $1,000.00 $1,019.30 $5.82
Admin Class
- -----------
Actual $1,000.00 $ 972.10 $6.92
Hypothetical (5% return before expenses) $1,000.00 $1,018.05 $7.08
*Expenses are equal to the Fund's annualized expense ratio of
0.89%, 1.15% and 1.40% for the Institutional, Retail and Admin
Class, respectively, multiplied by the average account value
over the period, multiplied by 183/365 (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 4/1/06(1) 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,040.90 $3.33
Hypothetical (5% return before expenses) $1,000.00 $1,021.81 $3.29
*Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the half-year period).
LOOMIS SAYLES VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period(1)
Institutional Class 4/1/06(1) 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,074.00 $4.42*
Hypothetical (5% return before expenses) $1,000.00 $1,020.81 $4.31*
Retail Class
- ------------
Actual $1,000.00 $1,068.60 $2.87+
Hypothetical (5% return before expenses) $1,000.00 $1,009.83 $2.79+
/(1)/Retail Class commenced operations on June 30, 2006.
*Expenses are equal to the Fund's annualized expense ratio of 0.85% for the Institutional Class, multiplied by the average account
value over the period, multiplied by 183/365 (to reflect the half-year period).
+Expenses are equal to the Fund's annualized expense ratio of 1.10% for the Retail Class, multiplied by the average account value
over the period, multiplied by 92/365 (to reflect the period from commencement of operations on June 30, 2006).
13
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENTS
The Board of Trustees, including the Independent Trustees, considers matters
bearing on each Fund's advisory agreement (collectively, the "Agreements") at
most of its meetings throughout the year. Once a year, usually in the spring,
the Contract Review and Governance Committee of the Board meets to review the
Agreements to determine whether to recommend that the full Board approve the
continuation of the Agreements for an additional one-year period. After the
Committee has made its recommendation, the full Board, including the
Independent Trustees, determines whether to approve the continuation of the
Agreements.
In connection with these meetings, the Trustees receive materials that the
Funds' investment adviser believes to be reasonably necessary for the Trustees
to evaluate the Agreements. These materials generally include, among other
items, (i) information on the investment performance of the Funds and the
performance of peer groups of funds and the Funds' performance benchmarks, (ii)
information on the Funds' advisory fees and other expenses, including
information comparing the Funds' expenses to those of peer groups of funds and
information about any applicable expense caps and fee "breakpoints," (iii)
sales and redemption data in respect of the Funds, (iv) information about the
profitability of the Agreements to the Funds' adviser (the "Adviser"), and (v)
information obtained through the completion of a questionnaire by the Adviser
(the Trustees are consulted as to the information requested through that
questionnaire). The Board of Trustees, including the Independent Trustees, also
consider other matters such as (i) the Adviser's financial results and
financial condition, (ii) each Fund's investment objective and strategies and
the size, education and experience of the Adviser's investment staff and its
use of technology, external research and trading cost measurement tools, (iii)
arrangements in respect of the distribution of the Funds' shares, (iv) the
procedures employed to determine the value of the Funds' assets, (v) the
allocation of the Funds' brokerage, if any, including allocations to brokers
affiliated with the Adviser and the use of "soft" commission dollars to pay
Fund expenses and to pay for research and other similar services, (vi) the
resources devoted to, and the record of compliance with, the Funds' investment
policies and restrictions, policies on personal securities transactions and
other compliance policies, and (vii) the general economic outlook with
particular emphasis on the mutual fund industry. Throughout the process, the
Trustees are afforded the opportunity to ask questions of and request
additional materials from the Adviser.
The Board of Trustees most recently approved the continuation of the Agreements
at their meeting held in May, 2006. In considering whether to approve the
continuation of the Agreements, the Board of Trustees, including the
Independent Trustees, did not identify any single factor as determinative.
Matters considered by the Trustees, including the Independent Trustees, in
connection with their approval of the Agreements included the following:
The nature, extent and quality of the services provided to the Funds under the
Agreements. The Trustees considered the nature, extent and quality of the
services provided by the Adviser and its affiliates to the Funds and the
resources dedicated to the Funds by the Adviser and its affiliates, including
recent or planned investments by the Adviser in additional personnel or other
resources. They also took note of the competitive market for talented
personnel, in particular, for personnel who have contributed to the generation
of strong investment performance. They also considered the need for the Adviser
to offer competitive compensation in order to attract and retain capable
personnel. They also considered the administrative services provided by the
Adviser's affiliates to the Funds. For each Fund, the Trustees also considered
the benefits to shareholders of investing in a mutual fund that is part of a
family of funds offering a variety of investment disciplines and providing for
a variety of fund and shareholder services. After reviewing these and related
factors, the Trustees concluded, within the context of their overall
conclusions regarding each of the Agreements, that the nature, extent and
quality of services provided supported the renewal of the Agreements.
Investment performance of the Funds and the Adviser. As noted above, the
Trustees received information about the performance of the Funds over various
time periods, including information which compared the performance of the Funds
to the performance of peer groups of funds and the Funds' respective
performance benchmarks. In addition, the Trustees also reviewed data prepared
by an independent third party which analyzed the performance of the Funds using
a variety of performance metrics, including metrics which also measured the
performance of the Funds on a risk adjusted basis.
With respect to each Fund, the Board concluded that the Fund's performance or
other relevant factors supported the renewal of the Agreement relating to that
Fund. In the case of each Fund that had performance that lagged that of a
relevant peer group for certain (although not necessarily all) periods, the
Board concluded that other factors relevant to performance supported renewal of
the Funds' Agreements. These factors varied from Fund to Fund, but included one
or more of the following: (1) that the Fund's performance, although lagging in
certain recent periods, was strong over the longer term; and (2) that the
underperformance was attributable, to a significant extent, to investment
decisions by the Fund's Adviser that were reasonable and consistent with the
Fund's investment objective and policies.
The Trustees also considered the Adviser's performance and reputation
generally, the Funds' performance as a fund family generally, and the
historical responsiveness of the Adviser to Trustee concerns about performance
and the willingness of the Adviser to take steps intended to improve
performance.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
performance of the Funds and the Adviser supported the renewal of the
Agreements.
14
The costs of the services to be provided and profits to be realized by the
Adviser and its affiliates from their respective relationships with the Funds.
The Trustees considered the fees charged to the Funds for advisory services as
well as the total expense levels of the Funds. This information included
comparisons (provided both by management and also by an independent third
party) of the Funds' advisory fees and total expense levels to those of their
peer groups and information about the advisory fees charged by the Adviser to
comparable accounts. In considering the fees charged to comparable accounts,
the Trustees considered, among other things, management's representations about
the differences between managing mutual funds as compared to other types of
accounts, including the additional resources required to effectively manage
mutual fund assets. In evaluating each Fund's advisory fees, the Trustees also
took into account the demands, complexity and quality of the investment
management of such Fund. The Trustees considered that over the past several
years, management had made recommendations regarding the institution of
advisory fee waivers and expense caps. They noted that all of the Loomis Sayles
Funds in this report have expense caps in place, and they considered the
amounts waived or reimbursed by the Adviser under these caps.
The Trustees also considered the compensation directly or indirectly received
by the Adviser and its affiliates from their relationships with the Funds. The
Trustees reviewed information provided by management as to the profitability of
the Adviser's and its affiliates' relationships with the Funds, and information
about the allocation of expenses used to calculate profitability. In this
regard, the Funds, at the request of the Independent Trustees, retained an
independent accounting firm to review the cost allocation methods used by the
Adviser to determine profitability, and engaged in extensive discussions with
the Adviser regarding such methods and Adviser profitability generally. They
also reviewed information provided by management about the effect of
distribution costs and Fund growth on Adviser profitability. When reviewing
profitability, the Trustees also considered information about court cases in
which adviser profitability was an issue, the performance of the relevant
Funds, the expense levels of the Funds, and whether the Adviser had implemented
breakpoints and/or expense caps with respect to such Funds.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
advisory fees charged to each of the Funds were fair and reasonable, and that
the costs of these services generally and the related profitability of the
Adviser and its affiliates in respect of their relationships with the Funds
supported the renewal of the Agreements.
Economies of Scale. The Trustees considered the existence of any economies of
scale in the provision of services by the Adviser and whether those economies
are shared with the Funds through "breakpoints" in its investment advisory fees
(lower fee rates applicable to assets in excess of certain threshold levels) or
other means, such as expense waivers. The Trustees noted that each of the Funds
was subject to an expense waiver or cap. In considering these issues, the
Trustees also took note of the costs of the services provided (both on an
absolute and a relative basis) and the profitability to the Adviser and its
affiliates of their relationships with the Funds, as discussed above.
After reviewing these and related factors, the Trustees considered, within the
context of their overall conclusions regarding each of the Agreements, that the
extent to which economies of scale were shared with the Funds supported the
renewal of the Agreements.
The Trustees also considered other factors, which included but were not limited
to the following:
.. whether each Fund has operated in accordance with its investment objective
and the Fund's record of compliance with its investment restrictions, and
the compliance programs of the Funds and the Adviser. They also considered
the compliance related resources the Adviser and its affiliates were
providing to the Funds.
.. the nature, quality, cost and extent of administrative and shareholder
services performed by the Adviser and its affiliates, both under the
Agreements and under a separate agreement covering administrative services.
.. so-called "fallout benefits" to the Adviser, such as the engagement of
affiliates of the Adviser to provide distribution and brokerage services to
the Funds, and the benefits of research made available to the Adviser by
reason of brokerage commissions generated by the Funds' securities
transactions. The Trustees considered the possible conflicts of interest
associated with these fallout and other benefits, and the reporting,
disclosure and other processes in place to disclose and monitor such
possible conflicts of interest.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees,
concluded that each of the existing advisory agreements should be continued
through June 30, 2007.
15
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES AGGRESSIVE GROWTH FUND
SHARES VALUE (+)
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.9% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 5.2%
Precision Castparts Corp. 20,475 $1,293,201
Rockwell Collins, Inc.(b) 18,450 1,011,798
----------
2,304,999
----------
AIR FREIGHT & LOGISTICS - 2.0%
Expeditors International of Washington, Inc.(b) 19,700 878,226
----------
BEVERAGES - 3.1%
Hansen Natural Corp.(b)(c) 13,750 446,600
Pepsi Bottling Group, Inc. 25,300 898,150
----------
1,344,750
----------
BIOTECHNOLOGY - 2.9%
Amylin Pharmaceuticals, Inc.(b)(c) 9,675 426,377
Celgene Corp.(b)(c) 13,100 567,230
Vertex Pharmaceuticals, Inc.(b)(c) 9,075 305,374
----------
1,298,981
----------
CAPITAL MARKETS - 4.4%
BlackRock, Inc.(b) 7,175 1,069,075
Northern Trust Corp. 15,175 886,675
----------
1,955,750
----------
CHEMICALS - 2.0%
Ecolab, Inc. 21,050 901,361
----------
COMMERCIAL SERVICES & SUPPLIES - 4.1%
Corporate Executive Board Co. 7,525 676,573
Stericycle, Inc.(b)(c) 16,425 1,146,301
----------
1,822,874
----------
DIVERSIFIED CONSUMER SERVICES - 1.1%
Sotheby's 15,175 489,242
----------
DIVERSIFIED FINANCIAL SERVICES - 6.4%
Chicago Mercantile Exchange Holdings, Inc. 2,475 1,183,669
IntercontinentalExchange, Inc.(c) 8,950 671,876
International Securities Exchange Holdings, Inc., Class A 7,000 328,230
Nasdaq Stock Market, Inc.(b)(c) 21,025 635,796
----------
2,819,571
----------
ELECTRICAL EQUIPMENT - 0.9%
Suntech Power Holdings Co., Ltd. ADR(c) 15,325 395,845
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.4%
Mettler-Toledo International, Inc.(c) 16,075 1,063,361
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 4.1%
C.R. Bard, Inc. 10,325 774,375
Hologic, Inc.(c) 9,425 410,176
Intuitive Surgical, Inc.(b)(c) 5,775 608,974
----------
1,793,525
----------
HEALTHCARE PROVIDERS & SERVICES - 4.4%
Express Scripts, Inc.(c) 11,000 830,390
Humana, Inc.(c) 16,525 1,092,137
----------
1,922,527
----------
16
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES AGGRESSIVE GROWTH FUND - CONTINUED
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HOTELS, RESTAURANTS & LEISURE - 3.1%
International Game Technology 16,225 $ 673,338
Wendy's International, Inc. 10,250 686,750
----------
1,360,088
----------
INDEPENDENT POWER PRODUCER & ENERGY - 3.4%
AES Corp.(c) 32,700 666,753
NRG Energy, Inc.(b)(c) 18,600 842,580
----------
1,509,333
----------
INDUSTRIAL CONGLOMERATES - 1.5%
McDermott International, Inc.(c) 16,100 672,980
----------
INTERNET SOFTWARE & SERVICES - 4.8%
Akamai Technologies, Inc.(b)(c) 33,825 1,690,912
WebEx Communications, Inc.(b)(c) 11,425 445,803
----------
2,136,715
----------
IT SERVICES - 3.4%
Cognizant Technology Solutions Corp., Class A(c) 20,300 1,503,418
----------
LIFE SCIENCES TOOLS & SERVICES - 4.4%
Covance, Inc.(c) 13,150 872,897
Pharmaceutical Product Development, Inc. 29,925 1,068,023
----------
1,940,920
----------
OIL, GAS & CONSUMABLE FUELS - 3.5%
Denbury Resources, Inc.(c) 35,425 1,023,783
Southwestern Energy Co.(c) 17,500 522,725
----------
1,546,508
----------
PHARMACEUTICALS - 1.8%
Allergan, Inc. 6,875 774,194
----------
REAL ESTATE - 2.3%
Jones Lang LaSalle, Inc.(b) 11,675 997,979
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.8%
FormFactor, Inc.(c) 14,400 606,672
Linear Technology Corp. 20,575 640,294
----------
1,246,966
----------
SOFTWARE - 5.8%
BEA Systems, Inc.(c) 49,850 757,720
Citrix Systems, Inc.(c) 12,200 441,762
Intuit, Inc.(c) 20,750 665,867
Salesforce.com, Inc.(b)(c) 19,650 705,042
----------
2,570,391
----------
SPECIALTY RETAIL - 8.3%
American Eagle Outfitters, Inc. 19,725 864,547
AnnTaylor Stores Corp.(c) 17,250 722,085
Circuit City Stores, Inc.(b) 16,700 419,337
GameStop Corp., Class A(b)(c) 18,850 872,378
Guess?, Inc.(b)(c) 15,900 771,627
----------
3,649,974
----------
17
SHARES VALUE (+)
- ---------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
WIRELESS TELECOMMUNICATION SERVICES - 7.8%
American Tower Corp., Class A(c) 30,200 $ 1,102,300
Leap Wireless International, Inc.(b)(c) 15,150 734,623
NII Holdings, Inc.(b)(c) 25,625 1,592,850
-------------
3,429,773
-------------
TOTAL COMMON STOCKS
(Identified Cost $37,371,105) 42,330,251
-------------
PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 29.9%
Tri-Party Repurchase Agreement with Fixed
Income Clearing Corporation, dated 9/29/06
at 3.450% to be repurchased at $2,016,580
on 10/02/06 collateralized by $1,645,000
U.S. Treasury Bond, 6.875% due 8/15/25
with a value of $2,076,982, including
accrued interest (Note 2g of Notes to
Financial Statements) $ 2,016,000 2,016,000
-------------
SHARES
- ---------------------------------------------------------------------------------
State Street Securities Lending Quality
Trust(d) 11,173,322 11,173,322
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $13,189,322) 13,189,322
-------------
TOTAL INVESTMENTS - 125.8%
(Identified Cost $50,560,427)(a) 55,519,573
Other assets less liabilities--(25.8)% (11,384,636)
-------------
TOTAL NET ASSETS - 100.0% $ 44,134,937
-------------
+ See Note 2a of Notes to Financial
Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized appreciation on
investments based on cost of $50,561,216 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over tax
cost $ 5,482,512
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost over
value (524,155)
-------------
Net unrealized appreciation $ 4,958,357
-------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Non-income producing security.
(d)Represents investment of security 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 SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Specialty Retail 8.3% Independent Power Producer & Energy 3.4%
Wireless Telecommunication Services 7.8 IT Services 3.4
Diversified Financial Services 6.4 Hotels, Restaurants & Leisure 3.1
Software 5.8 Beverages 3.1
Aerospace & Defense 5.2 Biotechnology 2.9
Internet Software & Services 4.8 Semiconductors & Semiconductor Equipment 2.8
Capital Markets 4.4 Electronic Equipment & Instruments 2.4
Life Sciences Tools & Services 4.4 Real Estate 2.3
Healthcare Providers & Services 4.4 Chemicals 2.0
Commercial Services & Supplies 4.1 Air Freight & Logistics 2.0
Healthcare Equipment & Supplies 4.1 Other, less than 2% each 5.3
Oil, Gas & Consumable Fuels 3.5
See accompanying notes to financial statements.
18
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SMALL CAP GROWTH FUND
SHARES VALUE (+)
- ------------------------------------------------------------------
COMMON STOCKS - 97.3% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 2.0%
Essex Corp.(b)(c) 11,975 $ 208,365
Moog, Inc., Class A(b)(c) 7,575 262,550
----------
470,915
----------
BIOTECHNOLOGY - 4.5%
BioMarin Pharmaceutical, Inc.(b)(c) 12,075 171,827
Cubist Pharmaceuticals, Inc.(b)(c) 6,250 135,875
Digene Corp.(b)(c) 4,000 172,600
Keryx Biopharmaceuticals, Inc.(b)(c) 12,225 144,622
Myogen, Inc.(c) 4,150 145,582
Nuvelo, Inc.(b)(c) 7,925 144,552
Theravance, Inc.(c) 5,350 144,664
----------
1,059,722
----------
CAPITAL MARKETS - 2.4%
Affiliated Managers Group, Inc.(b)(c) 1,250 125,138
GFI Group, Inc.(b)(c) 3,825 211,484
Investment Technology Group, Inc.(c) 4,850 217,037
----------
553,659
----------
COMMERCIAL BANKS - 1.4%
East West Bancorp, Inc.(b) 8,350 330,744
----------
COMMERCIAL SERVICES & SUPPLIES - 13.3%
Advisory Board Co.(b)(c) 7,175 362,481
American Reprographics Co.(b)(c) 7,350 235,641
Corporate Executive Board Co.(b) 2,800 251,748
CRA International, Inc.(b)(c) 5,225 249,024
Huron Consulting Group, Inc.(b)(c) 8,525 334,180
ICT Group, Inc.(b)(c) 10,450 328,861
Kenexa Corp.(b)(c) 8,050 203,021
Mobile Mini, Inc.(b)(c) 9,100 258,531
Navigant Consulting, Inc.(b)(c) 13,375 268,302
On Assignment, Inc.(b)(c) 23,000 225,630
PeopleSupport, Inc.(c) 20,800 384,800
----------
3,102,219
----------
COMMUNICATIONS EQUIPMENT - 3.6%
Foundry Networks, Inc.(b)(c) 20,925 275,164
Oplink Communications, Inc.(b)(c) 11,125 222,277
Redback Networks, Inc.(b)(c) 12,400 172,112
Sonus Networks, Inc.(b)(c) 32,525 171,082
----------
840,635
----------
DIVERSIFIED CONSUMER SERVICES - 2.9%
Bright Horizons Family Solutions, Inc.(b)(c) 2,925 122,060
Sotheby's 8,400 270,816
Steiner Leisure Ltd.(c) 6,575 276,479
----------
669,355
----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 1.1%
Cogent Communications Group, Inc.(b)(c) 21,175 245,418
----------
ENERGY EQUIPMENT & SERVICES - 3.6%
Dril-Quip, Inc.(b)(c) 3,600 243,648
Oil States International, Inc.(c) 7,950 218,625
19
SHARES VALUE (+)
- ----------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ENERGY EQUIPMENT & SERVICES - CONTINUED
Tesco Corp.(c) 8,550 $ 132,440
Universal Compression Holdings, Inc.(b)(c) 4,750 253,887
----------
848,600
----------
HEALTH CARE TECHNOLOGY - 1.8%
Allscripts Healthcare Solutions, Inc.(c) 7,875 176,794
Emageon, Inc.(b)(c) 15,575 242,814
----------
419,608
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 10.1%
American Medical Systems Holdings, Inc.(b)(c) 14,500 267,235
ArthroCare Corp.(b)(c) 5,675 265,930
Conor Medsystems, Inc.(b)(c) 7,075 166,758
Hologic, Inc.(b)(c) 5,375 233,920
Inverness Medical Innovations, Inc.(b)(c) 7,225 251,141
Meridian Bioscience, Inc.(b) 8,450 198,659
NuVasive, Inc.(b)(c) 11,675 234,784
PolyMedica Corp.(b) 7,075 302,881
Spectranetics Corp. (The)(b)(c) 15,225 178,133
Viasys Healthcare, Inc.(c) 9,575 260,823
----------
2,360,264
----------
HEALTHCARE PROVIDERS & SERVICES - 4.9%
AMN Healthcare Services, Inc.(b)(c) 11,425 271,344
HealthExtras, Inc.(b)(c) 9,850 278,853
inVentiv Health, Inc.(c) 11,325 362,740
NovaMed, Inc.(c) 28,700 226,156
----------
1,139,093
----------
HOTELS, RESTAURANTS & LEISURE - 1.7%
McCormick & Schmick's Seafood Restaurants, Inc.(c) 11,850 266,507
Pinnacle Entertainment, Inc.(c) 4,250 119,510
----------
386,017
----------
HOUSEHOLD DURABLES - 0.4%
Lifetime Brands, Inc.(b) 5,600 103,712
----------
INSURANCE - 3.3%
Arch Capital Group Ltd.(c) 5,400 342,846
Argonaut Group, Inc.(b)(c) 5,675 176,095
ProAssurance Corp.(b)(c) 4,950 243,936
----------
762,877
----------
INTERNET & CATALOG RETAIL - 0.8%
Coldwater Creek, Inc.(b)(c) 6,862 197,351
----------
INTERNET SOFTWARE & SERVICES - 3.2%
aQuantive, Inc.(b)(c) 7,650 180,693
j2 Global Communications, Inc.(b)(c) 5,875 159,624
Online Resources Corp.(b)(c) 20,200 247,450
Websense, Inc.(b)(c) 7,750 167,477
----------
755,244
----------
IT SERVICES - 3.0%
Heartland Payment Systems, Inc.(b) 8,625 224,250
Lightbridge, Inc.(c) 17,475 204,807
SRA International, Inc., Class A(b)(c) 9,075 272,795
----------
701,852
----------
20
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SMALL CAP GROWTH FUND - CONTINUED
SHARES VALUE (+)
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
LEISURE EQUIPMENT & PRODUCTS - 0.8%
Smith & Wesson Holding Corp.(b)(c) 13,325 $ 184,951
----------
MACHINERY - 3.4%
American Science & Engineering, Inc.(b)(c) 4,375 212,275
Flow International Corp.(b)(c) 22,850 296,364
RBC Bearings, Inc.(c) 12,193 294,461
----------
803,100
----------
MEDIA - 0.9%
Morningstar, Inc.(b)(c) 5,975 220,478
----------
OIL, GAS & CONSUMABLE FUELS - 2.1%
Arena Resources, Inc.(b)(c) 4,475 143,737
Helix Energy Solutions Group, Inc.(b)(c) 6,000 200,400
Parallel Petroleum Corp.(b)(c) 7,400 148,444
----------
492,581
----------
PHARMACEUTICALS - 0.8%
Santarus, Inc.(b)(c) 25,250 187,355
----------
REAL ESTATE - 2.0%
Jones Lang LaSalle, Inc.(b) 2,700 230,796
Trammell Crow Co.(c) 6,575 240,053
----------
470,849
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 5.0%
ATMI, Inc.(b)(c) 7,525 218,752
Cypress Semiconductor Corp.(b)(c) 10,850 192,805
Netlogic Microsystems, Inc.(b)(c) 7,475 189,641
Tessera Technologies, Inc.(b)(c) 8,925 310,411
Volterra Semiconductor Corp.(b)(c) 15,125 245,781
----------
1,157,390
----------
SOFTWARE - 4.8%
Blackboard, Inc.(b)(c) 8,450 223,925
Informatica Corp.(b)(c) 20,100 273,159
Opsware, Inc.(c) 14,600 131,546
Quest Software, Inc.(b)(c) 14,850 212,058
Ultimate Software Group, Inc.(b)(c) 12,050 283,536
----------
1,124,224
----------
SPECIALTY RETAIL - 2.4%
Dick's Sporting Goods, Inc.(b)(c) 7,450 339,124
Guess?, Inc.(b)(c) 4,500 218,385
----------
557,509
----------
TEXTILES APPAREL & LUXURY GOODS - 5.5%
Carter's, Inc.(b)(c) 4,850 127,992
Movado Group, Inc.(b) 11,125 282,797
Phillips-Van Heusen Corp. 7,975 333,116
Quiksilver, Inc.(b)(c) 28,400 345,060
Under Armour, Inc., Class A(b)(c) 4,825 193,096
----------
1,282,061
----------
THRIFTS & MORTGAGE FINANCE - 1.2%
PFF Bancorp, Inc. 7,775 287,986
----------
21
SHARES VALUE (+)
- ---------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
TRADING COMPANIES & DISTRIBUTORS - 3.3%
Aircastle Ltd.(b) 6,200 $ 180,172
NuCo2, Inc.(b)(c) 12,225 328,853
Williams Scotsman International, Inc.(b)(c) 12,225 261,126
------------
770,151
------------
WIRELESS TELECOMMUNICATION SERVICES - 1.1%
SBA Communications Corp., Class A(b)(c) 11,000 267,630
------------
TOTAL COMMON STOCKS
(Identified Cost $20,471,943) 22,753,550
------------
PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 29.3%
Tri-Party Repurchase Agreement with Fixed
Income Clearing Corporation, dated 9/29/06
at 3.450% to be repurchased at $888,255 on
10/02/06 collateralized by $920,000 U.S.
Treasury Note, 3.375% due 11/15/2008 with a
value of $919,175, including accrued
interest (Note 2g of Notes to Financial
Statements) $ 888,000 888,000
------------
SHARES
- ---------------------------------------------------------------------------------
State Street Securities Lending Quality
Trust(d) 5,968,124 5,968,124
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $6,856,124) 6,856,124
------------
TOTAL INVESTMENTS - 126.6%
(Identified Cost $27,328,067)(a) 29,609,674
Other assets less liabilities--(26.6)% (6,214,047)
------------
TOTAL NET ASSETS - 100.0% $ 23,395,627
------------
+ See Note 2a of Notes to Financial
Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized appreciation on
investments based on cost of $27,340,802 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 $ 2,829,265
Aggregate gross unrealized depreciation for all securities
in which there is an excess of cost over value (560,393)
------------
Net unrealized appreciation $ 2,268,872
------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Non-income producing security.
(d)Represents investment of security lending collateral.
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Commercial Services & Supplies 13.3% Insurance 3.3%
Healthcare Equipment & Supplies 10.1 Internet Software & Services 3.2
Textiles Apparel & Luxury Goods 5.5 IT Services 3.0
Semiconductors & Semiconductor Equipment 5.0 Diversified Consumer Services 2.9
Healthcare Providers & Services 4.9 Specialty Retail 2.4
Software 4.8 Capital Markets 2.4
Biotechnology 4.5 Oil, Gas & Consumable Fuels 2.1
Energy Equipment & Services 3.6 Aerospace & Defense 2.0
Communications Equipment 3.6 Real Estate 2.0
Machinery 3.4 Other, less than 2% each 12.0
Trading Companies & Distributors 3.3
See accompanying notes to financial statements.
22
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SMALL CAP VALUE FUND
SHARES VALUE (+)
- -----------------------------------------------------------------
COMMON STOCKS - 96.8% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 1.0%
Moog, Inc., Class A(c) 231,250 $ 8,015,125
-----------
AUTO COMPONENTS - 0.4%
Gentex Corp.(b) 230,275 3,272,208
-----------
AUTOMOBILES - 0.4%
Winnebago Industries, Inc.(b) 108,625 3,408,653
-----------
BUILDING PRODUCTS - 1.2%
Griffon Corp.(b)(c) 288,400 6,884,108
Lennox International, Inc. 104,600 2,395,340
-----------
9,279,448
-----------
CAPITAL MARKETS - 0.3%
Stifel Financial Corp.(b)(c) 76,975 2,443,187
-----------
CHEMICALS - 3.3%
Cytec Industries, Inc. 129,550 7,201,684
FMC Corp. 72,825 4,665,898
MacDermid, Inc. 145,275 4,738,871
Minerals Technologies, Inc.(b) 74,975 4,003,665
Spartech Corp.(b) 211,225 5,654,493
-----------
26,264,611
-----------
COMMERCIAL BANKS - 10.7%
Alabama National Bancorp(b) 88,525 6,041,831
Capital Corporation of the West(b) 68,825 2,134,952
Centerstate Banks of Florida, Inc.(b) 179,875 3,615,488
Community Bancorp(b)(c) 108,700 3,316,437
CVB Financial Corp.(b) 273,411 4,038,280
East West Bancorp, Inc.(b) 181,825 7,202,088
First Charter Corp. 192,800 4,638,768
First Midwest Bancorp, Inc.(b) 195,525 7,408,442
First State Bancorporation(b) 217,002 5,635,542
IBERIABANK Corp.(b) 96,869 5,909,009
Independent Bank Corp.(b) 120,671 2,929,898
Midwest Banc Holdings, Inc.(b) 103,550 2,528,691
Pennsylvania Commerce Bancorp, Inc.(b)(c) 95,525 2,507,531
PrivateBankcorp, Inc.(b) 123,325 5,638,419
Seacoast Banking Corp. of Florida(b) 156,525 4,727,055
Signature Bank(b)(c) 200,800 6,210,744
Sterling Bancshares, Inc. 180,900 3,663,225
Texas Regional Bancshares, Inc., Class A(b) 112,117 4,310,899
United Community Banks, Inc.(b) 105,100 3,158,255
-----------
85,615,554
-----------
COMMERCIAL SERVICES & SUPPLIES - 3.8%
Adesa, Inc. 92,500 2,137,675
American Ecology Corp.(b) 163,450 3,226,503
McGrath Rentcorp.(b) 271,200 6,942,720
Navigant Consulting, Inc.(b)(c) 164,700 3,303,882
Rollins, Inc.(b) 371,475 7,841,837
Standard Parking Corp.(c) 32,775 1,028,479
Waste Connections, Inc.(b)(c) 158,625 6,013,474
-----------
30,494,570
-----------
23
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMMUNICATIONS EQUIPMENT - 3.9%
ADTRAN, Inc. 342,375 $ 8,162,220
Anaren, Inc.(b)(c) 149,800 3,156,286
CommScope, Inc.(b)(c) 323,375 10,626,103
Comtech Telecommunications Corp.(b)(c) 131,925 4,416,849
Stratex Networks, Inc.(c) 403,594 1,791,957
Tekelec(b)(c) 203,375 2,635,740
-----------
30,789,155
-----------
COMPUTERS & PERIPHERALS - 1.7%
Electronics for Imaging, Inc.(b)(c) 245,300 5,612,464
Hutchinson Technology, Inc.(b)(c) 94,075 1,978,397
Imation Corp.(b) 99,850 4,008,978
Komag, Inc.(b)(c) 64,775 2,070,209
-----------
13,670,048
-----------
CONSTRUCTION & ENGINEERING - 1.8%
Insituform Technologies, Inc., Class A(b)(c) 303,000 7,356,840
Michael Baker Corp.(b)(c) 116,175 2,365,323
Washington Group International, Inc.(b)(c) 75,050 4,417,443
-----------
14,139,606
-----------
CONSTRUCTION MATERIALS - 0.9%
Eagle Materials, Inc.(b) 57,500 1,936,600
Texas Industries, Inc.(b) 99,425 5,176,065
-----------
7,112,665
-----------
CONSUMER FINANCE - 3.2%
Advanta Corp., Class B(b) 255,280 9,419,832
Dollar Financial Corp.(c) 278,975 6,087,235
First Cash Financial Services, Inc.(b)(c) 298,650 6,149,203
United PanAm Financial Corp.(c) 227,875 3,527,505
-----------
25,183,775
-----------
CONTAINERS & PACKAGING - 0.7%
Rock-Tenn Co., Class A(b) 296,250 5,865,750
-----------
DIVERSIFIED CONSUMER SERVICES - 0.8%
Regis Corp.(b) 59,200 2,122,320
Vertrue, Inc.(b)(c) 113,500 4,462,820
-----------
6,585,140
-----------
DIVERSIFIED FINANCIAL SERVICES - 0.2%
Medallion Financial Corp.(b) 125,500 1,384,265
-----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 0.9%
Commonwealth Telephone Enterprises, Inc.(b) 69,925 2,883,008
Iowa Telecommunications Services, Inc.(b) 233,000 4,611,070
-----------
7,494,078
-----------
ELECTRIC UTILITIES - 1.0%
ALLETE, Inc.(b) 47,958 2,083,775
ITC Holdings Corp.(b) 76,975 2,401,620
Portland General Electric Co.(b) 146,425 3,574,234
-----------
8,059,629
-----------
24
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (+)
- ----------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRICAL EQUIPMENT - 2.5%
General Cable Corp.(b)(c) 234,125 $ 8,945,916
II-VI, Inc.(b)(c) 294,500 7,338,940
Lamson & Sessions Co. (The)(b)(c) 162,125 3,861,818
-----------
20,146,674
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.8%
Anixter International, Inc.(b) 136,975 7,734,978
Daktronics, Inc.(b) 82,775 1,712,615
Excel Technology, Inc.(b)(c) 133,550 3,951,745
Keithley Instruments, Inc. 251,875 3,211,406
Rofin-Sinar Technologies, Inc.(b)(c) 90,825 5,519,435
-----------
22,130,179
-----------
ENERGY EQUIPMENT & SERVICES - 0.9%
FMC Technologies, Inc.(c) 76,925 4,130,872
Universal Compression Holdings, Inc.(b)(c) 63,275 3,382,049
-----------
7,512,921
-----------
FOOD & STAPLES RETAILING - 1.2%
Casey's General Stores, Inc. 168,350 3,749,154
Smart & Final, Inc.(b)(c) 334,625 5,712,049
-----------
9,461,203
-----------
FOOD PRODUCTS - 1.0%
J & J Snack Foods Corp.(b) 117,607 3,657,578
Ralcorp Holdings, Inc.(c) 91,075 4,392,547
-----------
8,050,125
-----------
GAS UTILITIES - 2.1%
ONEOK, Inc. 95,725 3,617,448
UGI Corp.(b) 549,500 13,435,275
-----------
17,052,723
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 2.3%
Arrow International, Inc.(b) 156,175 4,967,927
Intermagnetics General Corp.(b)(c) 217,912 5,894,519
Symmetry Medical, Inc.(b)(c) 170,925 2,579,258
West Pharmaceutical Services, Inc. 118,125 4,638,769
-----------
18,080,473
-----------
HEALTHCARE PROVIDERS & SERVICES - 1.0%
Healthspring, Inc.(c) 223,425 4,300,931
Option Care, Inc.(b) 248,125 3,322,394
-----------
7,623,325
-----------
HOTELS, RESTAURANTS & LEISURE - 2.6%
Bob Evans Farms, Inc.(b) 196,175 5,940,179
CEC Entertainment, Inc.(c) 248,275 7,823,145
Morton's Restaurant Group, Inc.(b)(c) 224,075 3,452,996
Trump Entertainment Resorts, Inc.(b)(c) 210,650 3,572,624
-----------
20,788,944
-----------
HOUSEHOLD DURABLES - 0.4%
Sealy Corp. 272,025 3,552,647
-----------
25
SHARES VALUE (+)
- --------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
INSURANCE - 6.4%
American Equity Investment Life Holding Co.(b) 473,050 $ 5,804,323
AmerUs Group Co. 60,525 4,116,305
Delphi Financial Group, Inc.(b) 219,512 8,754,139
Midland Co. (The)(b) 81,718 3,540,024
National Financial Partners Corp.(b) 188,575 7,737,232
Navigators Group, Inc.(b)(c) 121,325 5,824,813
Protective Life Corp. 86,350 3,950,513
RLI Corp.(b) 126,325 6,416,047
United Fire & Casualty Co.(b) 160,075 5,010,347
-----------
51,153,743
-----------
INTERNET & CATALOG RETAIL - 0.0%
FTD Group, Inc.(b)(c) 13,400 207,030
-----------
INTERNET SOFTWARE & SERVICES - 0.5%
Digitas, Inc.(b)(c) 421,900 4,058,678
-----------
IT SERVICES - 1.8%
Perot Systems Corp., Class A(b)(c) 411,625 5,676,309
Wright Express Corp.(c) 375,900 9,044,154
-----------
14,720,463
-----------
LIFE SCIENCES TOOLS & SERVICES - 0.3%
Charles River Laboratories International, Inc.(b)(c) 46,450 2,016,395
-----------
MACHINERY - 5.4%
Actuant Corp., Class A(b) 138,100 6,918,810
Albany International Corp., Class A(b) 207,175 6,592,308
Barnes Group, Inc.(b) 354,475 6,224,581
Commercial Vehicle Group, Inc.(b)(c) 190,475 3,668,549
ESCO Technologies, Inc.(b)(c) 34,350 1,581,474
Harsco Corp. 77,950 6,052,817
IDEX Corp.(b) 62,500 2,690,625
Nordson Corp.(b) 72,175 2,876,896
RBC Bearings, Inc.(b)(c) 264,483 6,387,264
-----------
42,993,324
-----------
MARINE - 0.5%
American Commercial Lines, Inc.(b)(c) 66,250 3,938,562
-----------
MEDIA - 4.1%
Alloy, Inc.(b)(c) 348,650 4,117,556
Harte-Hanks, Inc. 248,025 6,535,459
John Wiley & Sons, Inc., Class A 281,900 10,151,219
Journal Communications, Inc.(b) 357,550 4,029,589
Live Nation, Inc.(b)(c) 394,650 8,058,753
-----------
32,892,576
-----------
METALS & MINING - 1.2%
Chaparral Steel Co.(c) 146,075 4,975,314
Reliance Steel & Aluminum Co. 144,625 4,648,248
-----------
9,623,562
-----------
MULTI-UTILITIES & UNREGULATED POWER - 1.0%
NorthWestern Corp.(b) 232,350 8,127,603
-----------
26
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (+)
- -----------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
MULTILINE RETAIL - 0.7%
Big Lots, Inc.(b)(c) 101,825 $ 2,017,153
Dollar Tree Stores, Inc.(b)(c) 122,275 3,785,634
-----------
5,802,787
-----------
OIL, GAS & CONSUMABLE FUELS - 3.1%
Alpha Natural Resources, Inc.(b)(c) 290,850 4,583,796
ATP Oil & Gas Corp.(b)(c) 102,100 3,771,574
Denbury Resources, Inc.(c) 209,300 6,048,770
Helix Energy Solutions Group, Inc.(b)(c) 183,497 6,128,800
Mariner Energy, Inc.(b)(c) 206,425 3,792,027
-----------
24,324,967
-----------
PHARMACEUTICALS - 0.3%
Perrigo Co. 129,275 2,193,797
-----------
REAL ESTATE - 6.7%
BioMed Realty Trust, Inc. REIT 245,575 7,450,746
CBL & Associates Properties, Inc. REIT(b) 139,800 5,859,018
Corporate Office Properties Trust REIT(b) 174,975 7,831,881
First Potomac Realty Trust REIT(b) 246,850 7,459,807
Kite Realty Group Trust REIT(b) 360,775 6,147,606
LaSalle Hotel Properties REIT(b) 172,525 7,477,233
Newcastle Investment Corp. REIT(b) 169,325 4,641,198
Potlatch Corp.(b) 84,586 3,138,141
Windrose Medical Properties Trust REIT(b) 191,950 3,393,676
-----------
53,399,306
-----------
ROAD & RAIL - 1.9%
Genesee & Wyoming, Inc., Class A(b)(c) 137,762 3,198,834
Laidlaw International, Inc. 248,875 6,801,754
Landstar System, Inc.(b) 65,150 2,781,905
Marten Transport Ltd.(b)(c) 117,950 2,015,765
-----------
14,798,258
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.2%
Diodes, Inc.(b)(c) 101,175 4,367,725
DSP Group, Inc.(c) 177,850 4,063,872
Entegris, Inc.(b)(c) 599,225 6,537,545
Fairchild Semiconductor International, Inc., Class A(c) 318,275 5,951,742
Integrated Device Technology, Inc.(c) 288,500 4,633,310
-----------
25,554,194
-----------
SOFTWARE - 1.9%
Hyperion Solutions Corp.(c) 206,187 7,109,328
MapInfo Corp.(b)(c) 257,600 3,305,008
Progress Software Corp.(c) 102,750 2,671,500
Quest Software, Inc.(b)(c) 158,300 2,260,524
-----------
15,346,360
-----------
SPECIALTY RETAIL - 2.3%
Jo-Ann Stores, Inc.(b)(c) 271,925 4,546,586
Pier 1 Imports, Inc.(b) 222,150 1,648,353
Rent-A-Center, Inc.(c) 254,525 7,455,037
Sonic Automotive, Inc.(b) 218,775 5,051,515
-----------
18,701,491
-----------
27
SHARES VALUE (+)
- -----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
TEXTILES APPAREL & LUXURY GOODS - 1.6%
Fossil, Inc.(b)(c) 397,500 $ 8,562,150
Hanesbrands, Inc.(b)(c) 187,425 4,218,937
--------------
12,781,087
--------------
TRADING COMPANIES & DISTRIBUTORS - 0.4%
Electro Rent Corp.(b)(c) 168,532 2,866,729
--------------
WATER UTILITIES - 0.5%
American States Water Co.(b) 98,625 3,772,406
--------------
TOTAL COMMON STOCKS
(Identified Cost $640,455,511) 772,749,999
--------------
EXCHANGE TRADED FUNDS - 1.0%
iShares Russell 2000 Value Index Fund(b) 109,650 8,086,688
--------------
TOTAL EXCHANGE TRADED FUNDS
(Identified Cost $7,788,841) 8,086,688
--------------
PRINCIPAL AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 29.4%
COMMERCIAL PAPER - 3.7%
New Center Asset Trust, 3.75%, 10/02/2006(d) $ 29,569,000 29,565,920
--------------
SHARES
- -----------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(e) 205,404,052 205,404,052
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $234,969,972) 234,969,972
--------------
TOTAL INVESTMENTS - 127.2%
(Identified Cost $883,214,324)(a) 1,015,806,659
Other assets less liabilities--(27.2)% (217,035,371)
--------------
TOTAL NET ASSETS - 100.0% $ 798,771,288
--------------
+ See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized appreciation on investments based on cost of
$883,475,427 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of
value over tax cost $ 145,491,816
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax
cost over value (13,160,584)
--------------
Net unrealized appreciation $ 132,331,232
--------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Non-income producing security.
(d)Interest rate represents annualized yield at time of purchase; not a coupon
rate.
(e)Represents investment of security lending collateral.
REITReal Estate Investment Trust.
28
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Commercial Banks 10.7% Consumer Finance 3.2%
Real Estate 6.7 Oil, Gas & Consumable Fuels 3.1
Insurance 6.4 Electronic Equipment & Instruments 2.8
Machinery 5.4 Hotels, Restaurants & Leisure 2.6
Media 4.1 Electrical Equipment 2.5
Communications Equipment 3.9 Specialty Retail 2.3
Commercial Services & Supplies 3.8 Healthcare Equipment & Supplies 2.3
Chemicals 3.3 Gas Utilities 2.1
Semiconductors & Semiconductor Equipment 3.2 Other, less than 2% each 29.4
See accompanying notes to financial statements.
29
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
SHARES VALUE (+)
- -----------------------------------------------------------------
COMMON STOCKS - 95.9% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 4.9%
Honeywell International, Inc. 4,025 $164,623
United Technologies Corp. 4,450 281,907
---------
446,530
---------
BEVERAGES - 3.0%
Molson Coors Brewing Co., Class B(b) 2,050 141,245
PepsiCo, Inc. 2,050 133,783
---------
275,028
---------
BIOTECHNOLOGY - 2.6%
Amgen, Inc.(c) 3,300 236,049
---------
CAPITAL MARKETS - 7.5%
Bear Stearns Cos., Inc.(b) 1,100 154,110
Franklin Resources, Inc. 2,125 224,719
Goldman Sachs Group, Inc. 1,800 304,506
---------
683,335
---------
CHEMICALS - 5.1%
Ecolab, Inc.(b) 5,300 226,946
Praxair, Inc.(b) 4,025 238,119
---------
465,065
---------
COMMERCIAL BANKS - 1.6%
Zions Bancorporation 1,775 141,663
---------
COMMUNICATIONS EQUIPMENT - 9.1%
Cisco Systems, Inc.(c) 13,675 314,525
Corning, Inc.(c) 6,725 164,157
Harris Corp. 5,250 233,572
QUALCOMM, Inc. 3,050 110,868
---------
823,122
---------
COMPUTERS & PERIPHERALS - 3.0%
Hewlett-Packard Co. 7,500 275,175
---------
DIVERSIFIED FINANCIAL SERVICES - 4.3%
Bank of America Corp. 5,200 278,564
Citigroup, Inc. 2,225 110,516
---------
389,080
---------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 2.2%
AT&T, Inc.(b) 6,200 201,872
---------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.8%
Flextronics International, Ltd.(c) 12,750 161,160
---------
ENERGY EQUIPMENT & SERVICES - 1.9%
GlobalSantaFe Corp.(b) 3,500 174,965
---------
FOOD & STAPLES RETAILING - 1.5%
CVS Corp. 4,200 134,904
---------
HEALTHCARE EQUIPMENT & SUPPLIES - 3.5%
Medtronic, Inc. 4,225 196,209
Zimmer Holdings, Inc.(b)(c) 1,775 119,812
---------
316,021
---------
30
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES TAX-MANAGED EQUITY FUND - CONTINUED
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HEALTHCARE PROVIDERS & SERVICES - 4.8%
Caremark Rx, Inc.(b) 3,075 $ 174,260
WellPoint, Inc.(c) 3,350 258,118
----------
432,378
----------
HOTELS, RESTAURANTS & LEISURE - 2.2%
Marriott International, Inc., Class A 5,125 198,030
----------
INSURANCE - 5.6%
AFLAC, Inc. 3,575 163,592
Allstate Corp. 2,600 163,098
Everest Re Group Ltd. 1,825 177,992
----------
504,682
----------
IT SERVICES - 0.9%
First Data Corp.(b) 2,025 85,050
----------
MACHINERY - 5.0%
Danaher Corp.(b) 3,800 260,946
Dover Corp. 4,050 192,132
----------
453,078
----------
MEDIA - 3.1%
DIRECTV Group, Inc. (The)(b)(c) 14,525 285,852
----------
MULTILINE RETAIL - 1.7%
Federated Department Stores, Inc.(b) 3,550 153,396
----------
OIL, GAS & CONSUMABLE FUELS - 7.7%
ConocoPhillips 3,200 190,496
Devon Energy Corp. 4,000 252,600
ExxonMobil Corp. 3,800 254,980
----------
698,076
----------
PERSONAL PRODUCTS - 1.6%
Alberto-Culver Co. 2,850 144,182
----------
PHARMACEUTICALS - 3.6%
Abbott Laboratories 4,675 227,018
Perrigo Co.(b) 5,950 100,971
----------
327,989
----------
ROAD & RAIL - 2.3%
Burlington Northern Santa Fe Corp.(b) 2,900 212,976
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 3.4%
DSP Group, Inc.(c) 3,675 83,974
Texas Instruments, Inc. 6,725 223,606
----------
307,580
----------
SOFTWARE - 2.0%
Microsoft Corp. 6,650 181,744
----------
TOTAL COMMON STOCKS
(Identified Cost $6,933,410) 8,708,982
----------
31
SHARES VALUE (+)
- ---------------------------------------------------------------------------------------------------------------------------------
WARRANTS - 0.1%
AEROSPACE & DEFENSE - 0.1%
Raytheon Co.(c) 533 $ 7,606
------------
TOTAL WARRANTS
(Identified Cost $2,398) 7,606
------------
PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 29.4%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/29/06 at 3.450% to be
repurchased at $402,116 on 10/02/06 collateralized by
$415,000 U.S. Treasury Note, 3.875% due 5/15/2009
with a value of $419,459, including accrued interest
(Note 2g of Notes to Financial Statements) $ 402,000 402,000
------------
SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(d) 2,266,006 2,266,006
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $2,668,006) 2,668,006
TOTAL INVESTMENTS - 125.4%
(Identified Cost $9,603,814)(a) 11,384,594
Other assets less liabilities--(25.4)% (2,308,946)
------------
TOTAL NET ASSETS - 100.0% $ 9,075,648
------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized appreciation on investments based on cost of $9,609,922 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 $ 1,817,370
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (42,698)
------------
Net unrealized appreciation $ 1,774,672
------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Non-income producing security.
(d)Represents investment of securities lending collateral.
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Communications Equipment 9.1% Semiconductors & Semiconductor Equipment 3.4%
Oil, Gas & Consumable Fuels 7.7 Media 3.1
Capital Markets 7.5 Computers & Peripherals 3.0
Insurance 5.6 Beverages 3.0
Chemicals 5.1 Biotechnology 2.6
Aerospace & Defense 5.0 Road & Rail 2.3
Machinery 5.0 Diversified Telecommunications Services 2.2
Healthcare Providers & Services 4.8 Hotels, Restaurants & Leisure 2.2
Diversified Financial Services 4.3 Software 2.0
Pharmaceuticals 3.6 Other, less than 2% each 11.0
Healthcare Equipment & Supplies 3.5
See accompanying notes to financial statements.
32
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES VALUE FUND
SHARES VALUE (+)
- ------------------------------------------------------------------
COMMON STOCKS - 95.0% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 2.7%
Northrop Grumman Corp. 18,475 $1,257,594
United Technologies Corp. 11,000 696,850
----------
1,954,444
----------
BEVERAGES - 1.5%
Molson Coors Brewing Co., Class B 15,125 1,042,113
----------
CAPITAL MARKETS - 8.5%
Ameriprise Financial, Inc. 16,435 770,802
Lehman Brothers Holdings, Inc. 17,550 1,296,243
Mellon Financial Corp. 29,625 1,158,337
Merrill Lynch & Co., Inc. 16,450 1,286,719
Morgan Stanley 21,800 1,589,438
----------
6,101,539
----------
CHEMICALS - 3.0%
E.I. du Pont de Nemours & Co. 22,000 942,480
Praxair, Inc. 20,625 1,220,175
----------
2,162,655
----------
COMMERCIAL BANKS - 3.3%
U.S. Bancorp(b) 41,550 1,380,291
Wells Fargo & Co. 26,475 957,865
----------
2,338,156
----------
COMMERCIAL SERVICES & SUPPLIES - 0.9%
ARAMARK Corp., Class B(b) 19,075 626,805
----------
COMMUNICATIONS EQUIPMENT - 2.7%
Avaya, Inc.(c) 63,775 729,586
Motorola, Inc. 47,725 1,193,125
----------
1,922,711
----------
COMPUTERS & PERIPHERALS - 1.9%
Hewlett-Packard Co. 37,025 1,358,447
----------
CONSTRUCTION & ENGINEERING - 1.7%
Chicago Bridge & Iron Co. NV 27,125 652,627
Foster Wheeler Ltd.(c) 15,300 590,427
----------
1,243,054
----------
CONSUMER FINANCE - 1.1%
American Express Co. 14,400 807,552
----------
DIVERSIFIED FINANCIAL SERVICES - 9.9%
Bank of America Corp. 36,275 1,943,252
CIT Group, Inc. 24,875 1,209,671
Citigroup, Inc. 37,725 1,873,801
JPMorgan Chase & Co. 42,975 2,018,106
----------
7,044,830
----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 5.4%
AT&T, Inc. 37,625 1,225,070
BellSouth Corp. 44,050 1,883,137
Embarq Corp.(b) 16,050 776,339
----------
3,884,546
----------
33
SHARES VALUE (+)
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRIC UTILITIES - 3.4%
Entergy Corp. 18,200 $1,423,786
Exelon Corp. 17,075 1,033,720
----------
2,457,506
----------
ELECTRICAL EQUIPMENT - 1.0%
ABB Ltd. ADR 52,825 696,234
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.0%
Flextronics International, Ltd.(c) 57,975 732,804
----------
ENERGY EQUIPMENT & SERVICES - 3.3%
Halliburton Co. 39,950 1,136,578
Schlumberger Ltd. 19,375 1,201,831
----------
2,338,409
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 2.2%
Baxter International, Inc. 20,500 931,930
Beckman Coulter, Inc.(b) 11,400 656,184
----------
1,588,114
----------
HOTELS, RESTAURANTS & LEISURE - 3.1%
McDonald's Corp. 37,400 1,463,088
OSI Restaurant Partners, Inc.(b) 23,750 753,112
----------
2,216,200
----------
INDEPENDENT POWER PRODUCER & ENERGY - 1.2%
NRG Energy, Inc.(b)(c) 19,525 884,483
----------
INDUSTRIAL CONGLOMERATES - 1.6%
Tyco International Ltd. 41,325 1,156,687
----------
INSURANCE - 7.5%
Allstate Corp. 29,225 1,833,284
American International Group, Inc. 22,400 1,484,224
Berkshire Hathaway, Inc., Class B(c) 295 936,330
Prudential Financial, Inc. 14,700 1,120,875
----------
5,374,713
----------
MEDIA - 7.9%
Comcast Corp., Class A(b)(c) 31,075 1,145,114
DIRECTV Group, Inc. (The)(b)(c) 60,325 1,187,196
EchoStar Communications Corp., Class A(c) 21,100 690,814
News Corp., Class A 56,925 1,118,576
Time Warner, Inc.(b) 82,205 1,498,597
----------
5,640,297
----------
MULTILINE RETAIL - 1.5%
Federated Department Stores, Inc. 23,800 1,028,398
----------
OIL, GAS & CONSUMABLE FUELS - 6.5%
ExxonMobil Corp. 44,125 2,960,787
Occidental Petroleum Corp. 19,450 935,739
XTO Energy, Inc. 18,350 773,086
----------
4,669,612
----------
PHARMACEUTICALS - 6.3%
Abbott Laboratories 22,575 1,096,242
Bristol-Myers Squibb Co. 30,350 756,322
34
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES VALUE FUND - CONTINUED
SHARES VALUE (+)
- --------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
PHARMACEUTICALS - CONTINUED
Johnson & Johnson 21,025 $ 1,365,364
Pfizer, Inc. 46,090 1,307,112
------------
4,525,040
------------
SOFTWARE - 1.4%
Microsoft Corp. 35,225 962,699
------------
SPECIALTY RETAIL - 2.9%
Gap, Inc. (The) 46,975 890,176
Office Depot, Inc.(c) 30,325 1,203,903
------------
2,094,079
------------
TOBACCO - 1.6%
Altria Group, Inc. 15,300 1,171,215
------------
TOTAL COMMON STOCKS
(Identified Cost $56,909,365) 68,023,342
------------
PRINCIPAL AMOUNT
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 18.0%
COMMERCIAL PAPER - 8.5%
New Center Asset Trust, 3.75%, 10/02/06(d) $ 6,096,000 6,095,365
------------
SHARES
- --------------------------------------------------------------------------------
State Street Securities Lending Quality
Trust(e) 6,824,407 6,824,407
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $12,919,772) 12,919,772
------------
TOTAL INVESTMENTS - 113.0%
(Identified Cost $69,829,137)(a) 80,943,114
Other assets less liabilities--(13.0)% (9,329,737)
------------
TOTAL NET ASSETS - 100.0% $ 71,613,377
------------
+ See Note 2a of Notes to Financial
Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized appreciation on
investments based on cost of $69,864,600 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 $ 11,382,199
Aggregate gross unrealized depreciation for all securities
in which there is an excess of tax cost over value (303,685)
------------
Net unrealized appreciation $ 11,078,514
------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Non-income producing security.
(d)Interest rate represents annualized yield at time of purchase; not a coupon
rate.
(e)Represents investment of security 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.
35
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Diversified Financial Services 9.9% Commercial Banks 3.3%
Capital Markets 8.5 Hotels, Restaurants & Leisure 3.1
Media 7.9 Chemicals 3.0
Insurance 7.5 Specialty Retail 2.9
Oil, Gas & Consumable Fuels 6.5 Aerospace & Defense 2.7
Pharmaceuticals 6.3 Communications Equipment 2.7
Diversified Telecommunication Services 5.4 Healthcare Equipment & Supplies 2.2
Electric Utilities 3.4 Other, less than 2% each 16.4
Energy Equipment & Services 3.3
See accompanying notes to financial statements.
36
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2006
AGGRESSIVE GROWTH SMALL CAP GROWTH
FUND FUND
- -------------------------------------------------------------------------------------------------
ASSETS
Investments at cost $ 50,560,427 $ 27,328,067
Net unrealized appreciation 4,959,146 2,281,607
---------------- ----------------
Investments at value 55,519,573 29,609,674
Cash 898 194
Receivable for Fund shares sold 38,181 656
Receivable for securities sold 1,206,511 43,366
Dividends and interest receivable 11,316 170
Tax reclaims receivable -- --
Receivable from investment adviser (Note 4) 5,250 4,919
Securities lending income receivable 638 1,188
---------------- ----------------
TOTAL ASSETS 56,782,367 29,660,167
---------------- ----------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 11,173,322 5,968,124
Payable for securities purchased 1,220,267 211,311
Payable for Fund shares redeemed 161,748 7,301
Management fees payable (Note 4) 27,005 14,361
Administrative fees payable (Note 4) 2,063 994
Deferred Trustees' fees (Note 4) 25,310 23,292
Service and distribution fees payable (Note 4) 370 41
Other accounts payable and accrued expenses 37,345 39,116
---------------- ----------------
TOTAL LIABILITIES 12,647,430 6,264,540
---------------- ----------------
NET ASSETS $ 44,134,937 $ 23,395,627
---------------- ----------------
Net Assets consist of:
Paid-in capital $ 134,337,341 $ 223,326,816
Undistributed (accumulated) net investment income (loss) (25,310) (23,291)
Accumulated net realized gain (loss) on investments (95,136,240) (202,189,505)
Net unrealized appreciation on investments 4,959,146 2,281,607
---------------- ----------------
NET ASSETS $ 44,134,937 $ 23,395,627
---------------- ----------------
NET ASSET VALUE AND OFFERING PRICE
INSTITUTIONAL CLASS
Net assets $ 17,467,018 $ 20,414,154
---------------- ----------------
Shares of beneficial interest 867,640 1,700,673
---------------- ----------------
Net asset value, offering and redemption price per share $ 20.13 $ 12.00
---------------- ----------------
RETAIL CLASS
Net assets $ 26,667,919 $ 2,981,473
---------------- ----------------
Shares of beneficial interest 1,354,155 254,594
---------------- ----------------
Net asset value, offering and redemption price per share $ 19.69 $ 11.71
---------------- ----------------
ADMIN CLASS
Net assets $ -- $ --
---------------- ----------------
Shares of beneficial interest -- --
---------------- ----------------
Net asset value, offering and redemption price per share $ -- $ --
---------------- ----------------
Value of securities on loan (Note 2) $ 10,834,515 $ 5,767,493
---------------- ----------------
See accompanying notes to financial statements.
37
SMALL CAP TAX-MANAGED
VALUE FUND EQUITY FUND VALUE FUND
---------------------------------------------------
$ 883,214,324 $ 9,603,814 $ 69,829,137
132,592,335 1,780,780 11,113,977
---------------- ---------------- ----------------
1,015,806,659 11,384,594 80,943,114
600 766 1,018
2,001,103 -- 260,042
6,130,221 -- 373,568
1,002,873 4,786 53,302
-- -- 78
-- 6,221 1,459
16,612 53 130
---------------------------------------------------
1,024,958,068 11,396,420 81,632,711
---------------------------------------------------
205,404,052 2,266,006 6,824,407
4,032,580 -- 3,101,721
15,933,125 -- --
589,875 3,666 25,548
38,336 417 2,845
77,454 21,365 24,119
6,014 -- 6
105,344 29,318 40,688
---------------------------------------------------
226,186,780 2,320,772 10,019,334
---------------------------------------------------
$ 798,771,288 $ 9,075,648 $ 71,613,377
---------------------------------------------------
$ 580,242,431 $ 11,226,449 $ 56,466,877
1,659,056 53,966 359,624
84,277,466 (3,985,547) 3,672,899
132,592,335 1,780,780 11,113,977
---------------------------------------------------
$ 798,771,288 $ 9,075,648 $ 71,613,377
---------------------------------------------------
$ 442,713,613 $ 9,075,648 $ 71,146,891
---------------------------------------------------
15,990,005 891,655 3,380,028
---------------------------------------------------
$ 27.69 $ 10.18 $ 21.05
---------------------------------------------------
$ 291,690,361 $ -- $ 466,486
---------------------------------------------------
10,620,473 -- 22,169
---------------------------------------------------
$ 27.46 $ -- $ 21.04
---------------------------------------------------
$ 64,367,314 $ -- $ --
---------------------------------------------------
2,371,799 -- --
---------------------------------------------------
$ 27.14 $ -- $ --
---------------------------------------------------
$ 198,439,289 $ 2,222,079 $ 6,672,959
---------------------------------------------------
See accompanying notes to financial statements.
38
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
AGGRESSIVE SMALL CAP
GROWTH FUND GROWTH FUND
- ---------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 181,978 $ 30,359
Interest 37,996 27,918
Securities lending income (Note 2) 30,276 11,339
Less net foreign taxes withheld (209) --
-------------- --------------
250,041 69,616
-------------- --------------
EXPENSES
Management fees (Note 4) 360,159 168,944
Distribution fees--Retail Class (Note 4) 72,783 8,704
Service and distribution fees--Admin Class (Note 4) -- --
Trustees' fees and expenses (Note 4) 16,874 15,269
Administrative fees (Note 4) 22,806 7,008
Custodian fees and expenses 15,461 15,204
Transfer agent fees and expenses--Institutional Class 12,175 22,163
Transfer agent fees and expenses--Retail Class 61,145 13,703
Transfer agent fees and expenses--Admin Class -- --
Audit and tax services fees 35,967 34,377
Registration fees 34,645 28,248
Shareholder reporting expenses 10,580 8,698
Legal fees 2,458 724
Expense recapture--Institutional Class (Note 4) -- --
Miscellaneous expenses 8,333 6,739
-------------- --------------
Total expenses 653,386 329,781
Less reimbursement/waiver (Note 4) (100,433) (95,818)
-------------- --------------
Net expenses 552,953 233,963
-------------- --------------
Net investment income (loss) (302,912) (164,347)
-------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
REALIZED GAIN ON:
Investments--net 5,806,076 2,479,317
-------------- --------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments--net (3,169,570) (935,346)
-------------- --------------
Net realized and unrealized gain on investments 2,636,506 1,543,971
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,333,594 $ 1,379,624
-------------- --------------
See accompanying notes to financial statements.
39
SMALL CAP TAX-MANAGED
VALUE FUND EQUITY FUND VALUE FUND
-----------------------------------------------
$ 9,061,893 $ 123,055 $ 813,238
1,198,181 3,020 67,244
193,470 182 2,227
(740) -- (1,229)
-----------------------------------------------
10,452,804 126,257 881,480
-----------------------------------------------
5,772,364 46,295 222,326
678,990 -- 65
331,716 -- --
56,860 14,492 16,419
404,043 4,625 21,947
59,597 12,831 17,258
76,262 2,606 23,920
259,217 -- 1,964
71,463 -- --
30,922 30,662 33,025
77,107 27,892 42,688
90,488 5,384 16,058
40,078 535 2,203
97,106 -- --
39,504 6,214 7,962
-----------------------------------------------
8,085,717 151,536 405,835
(174,650) (91,352) (27,337)
-----------------------------------------------
7,911,067 60,184 378,498
-----------------------------------------------
2,541,737 66,073 502,982
-----------------------------------------------
94,104,228 210,739 4,648,831
-----------------------------------------------
(18,494,360) 657,313 2,810,437
-----------------------------------------------
75,609,868 868,052 7,459,268
-----------------------------------------------
$ 78,151,605 $ 934,125 $ 7,962,250
-----------------------------------------------
See accompanying notes to financial statements.
40
STATEMENTS OF CHANGES IN NET ASSETS
AGGRESSIVE GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (302,912) $ (372,012)
Net realized gain on investments 5,806,076 8,280,912
Net change in unrealized appreciation (depreciation) on investments (3,169,570) 2,760,613
------------------ ------------------
Increase in net assets resulting from operations 2,333,594 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) (10,159,975) (8,782,602)
------------------ ------------------
REDEMPTION FEES
Institutional Class -- --
Retail Class -- --
------------------ ------------------
Total increase (decrease) in net assets (7,826,381) 1,388,133
NET ASSETS
Beginning of year 51,961,318 50,573,185
------------------ ------------------
End of year $ 44,134,937 $51,961,318
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME/ACCUMULATED NET INVESTMENT LOSS $ (25,310) $ (14,661)
------------------ ------------------
SMALL CAP GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (164,347) $ (209,903)
Net realized gain on investments 2,479,317 4,895,374
Net change in unrealized appreciation (depreciation) on investments (935,346) 483,981
------------------ ------------------
Increase in net assets resulting from operations 1,379,624 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) 2,617,609 (16,249,525)
------------------ ------------------
REDEMPTION FEES
Institutional Class 18,107 1,091
Retail Class 3,369 344
------------------ ------------------
Total increase (decrease) in net assets 4,018,709 (11,078,638)
NET ASSETS
Beginning of year 19,376,918 30,455,556
------------------ ------------------
End of year $23,395,627 $ 19,376,918
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME/ACCUMULATED NET INVESTMENT LOSS $ (23,291) $ (13,569)
------------------ ------------------
See accompanying notes to financial statements.
41
SMALL CAP VALUE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 2,541,737 $ 2,280,117
Net realized gain on investments 94,104,228 58,138,015
Net change in unrealized appreciation (depreciation) on investments (18,494,360) 43,086,275
------------------ ------------------
Increase in net assets resulting from operations 78,151,605 103,504,407
------------------ ------------------
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 (36,009,634) (36,097,787)
Retail Class (21,502,778) (18,456,167)
Admin Class (6,186,131) (6,757,571)
------------------ ------------------
Total distributions (66,668,005) (61,641,639)
------------------ ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) 80,692,685 82,243,991
------------------ ------------------
REDEMPTION FEES
Institutional Class 17,840 5,541
Retail Class 11,357 3,209
Admin Class 2,753 956
------------------ ------------------
Total increase in net assets 92,208,235 124,116,465
NET ASSETS
Beginning of year 706,563,053 582,446,588
------------------ ------------------
End of year $798,771,288 $706,563,053
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 1,659,056 $ 2,086,781
------------------ ------------------
TAX-MANAGED EQUITY FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 66,073 $ 46,163
Net realized gain on investments 210,739 19,715
Net change in unrealized appreciation (depreciation) on investments 657,313 533,250
------------------ ------------------
Increase in net assets resulting from operations 934,125 599,128
------------------ ------------------
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) (1,034,586) 3,452,918
------------------ ------------------
REDEMPTION FEES
Institutional Class -- --
------------------ ------------------
Total increase (decrease) in net assets (154,626) 4,028,235
NET ASSETS
Beginning of year 9,230,274 5,202,039
------------------ ------------------
End of year $ 9,075,648 $9,230,274
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 53,966 $ 42,058
------------------ ------------------
See accompanying notes to financial statements.
42
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
VALUE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 502,982 $ 397,776
Net realized gain on investments 4,648,831 2,769,664
Net change in unrealized appreciation (depreciation) on investments 2,810,437 2,911,452
------------------ ------------------
Increase in net assets resulting from operations 7,962,250 6,078,892
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (530,299) (524,122)
Retail Class -- --
CAPITAL GAINS:
Institutional Class (1,548,378) --
Retail Class -- --
------------------ ------------------
Total distributions (2,078,677) (524,122)
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) 28,475,203 (1,863,227)
------------------ ------------------
REDEMPTION FEES
Institutional Class -- --
Retail Class -- --
------------------ ------------------
Total increase in net assets 34,358,776 3,691,543
NET ASSETS
Beginning of year 37,254,601 33,563,058
------------------ ------------------
End of year $71,613,377 $37,254,601
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 359,624 $ 388,984
------------------ ------------------
See accompanying notes to financial statements.
43
THIS PAGE INTENTIONALLY LEFT BLANK
44
FINANCIAL HIGHLIGHTS
See accompanying notes to financial statements.
45
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------------------- ----------------------------
Net asset Dividends Distributions
value, Net Net realized Total from from from net
beginning investment and unrealized investment net investment realized
of the period loss(c) gain (loss) operations income capital gains
- ---------------------------------------------------------------------------------------------------------
AGGRESSIVE GROWTH FUND
INSTITUTIONAL CLASS
9/30/2006 $19.00 $(0.10) $ 1.23 $ 1.13 $ -- $ --
9/30/2005 15.50 (0.10) 3.78 3.68 (0.18) --
9/30/2004 13.69 (0.13) 1.94 1.81 -- --
9/30/2003 10.70 (0.10) 3.09 2.99 -- --
9/30/2002 13.56 (0.13) (2.73) (2.86) -- --
RETAIL CLASS
9/30/2006 $18.63 $(0.15) $ 1.21 $ 1.06 $ -- $ --
9/30/2005 15.20 (0.14) 3.70 3.56 (0.13) --
9/30/2004 13.46 (0.16) 1.90 1.74 -- --
9/30/2003 10.55 (0.13) 3.04 2.91 -- --
9/30/2002 13.41 (0.16) (2.70) (2.86) -- --
(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, if applicable, 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 loss has been determined on the basis of the
weighted average number of shares outstanding during the period.
RATIOS TO AVERAGE NET ASSETS
- -------------- ----------------------------------
Net asset Net assets, Portfolio
value, Total end of Net Gross Net turnover
Total Redemption end of return the period expenses expenses investment loss rate
distributions fee the period %(a) (000's) %(b) % % %
- --------------------------------------------------------------------------------------------------
$ -- $-- $20.13 6.0 $17,467 1.00 1.12 (0.49) 211
(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
$ -- $-- $19.69 5.7 $26,668 1.25 1.52 (0.72) 211
(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
See accompanying notes to financial statements.
46
FINANCIAL HIGHLIGHTS - CONTINUED
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------------------- ----------------------------
Net asset Net Dividends Distributions
value, investment Net realized Total from from from net
beginning income and unrealized investment net investment realized
of the period (loss)(c) gain (loss) operations income capital gains
- ---------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
INSTITUTIONAL CLASS
9/30/2006 $11.08 $(0.08) $ 0.99 $ 0.91 $ -- $ --
9/30/2005 8.96 (0.08) 2.20 2.12 -- --
9/30/2004 8.59 (0.09) 0.46 0.37 -- --
9/30/2003 6.35 (0.06) 2.30 2.24 -- --
9/30/2002 8.83 (0.08) (2.40) (2.48) -- --
RETAIL CLASS
9/30/2006 $10.84 $(0.11) $ 0.97 $ 0.86 $ -- $ --
9/30/2005 8.78 (0.11) 2.17 2.06 -- --
9/30/2004 8.45 (0.11) 0.44 0.33 -- --
9/30/2003 6.26 (0.08) 2.27 2.19 -- --
9/30/2002 8.72 (0.10) (2.36) (2.46) -- --
SMALL CAP VALUE FUND
INSTITUTIONAL CLASS
9/30/2006 $27.43 $ 0.13 $ 2.70 $ 2.83 $(0.15) $(2.42)
9/30/2005 25.75 0.13 4.22 4.35 (0.02) (2.65)
9/30/2004 21.34 0.04 4.97 5.01 (0.05) (0.55)
9/30/2003 17.28 0.05 4.01 4.06 -- --
9/30/2002 19.89 0.10 (0.36) (0.26) (0.11) (2.24)
RETAIL CLASS
9/30/2006 $27.23 $ 0.06 $ 2.67 $ 2.73 $(0.08) $(2.42)
9/30/2005 25.62 0.06 4.20 4.26 -- (2.65)
9/30/2004 21.25 (0.02) 4.95 4.93 (0.01) (0.55)
9/30/2003 17.25 (0.00)(d) 4.00 4.00 -- --
9/30/2002 19.85 0.05 (0.35) (0.30) (0.06) (2.24)
ADMIN CLASS
9/30/2006 $26.94 $(0.01) $ 2.65 $ 2.64 $(0.02) $(2.42)
9/30/2005 25.43 (0.00)(d) 4.16 4.16 -- (2.65)
9/30/2004 21.13 (0.08) 4.93 4.85 -- (0.55)
9/30/2003 17.20 (0.05) 3.98 3.93 -- --
9/30/2002 19.80 (0.00)(d) (0.35) (0.35) (0.01) (2.24)
(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, if applicable, 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) Includes expense recapture of 0.02%. See Note 4 of Notes to Financial
Statements.
See accompanying notes to financial statements.
47
See accompanying notes to financial statements.
48
RATIOS TO AVERAGE NET ASSETS
- -------------- ----------------------------------
Net asset Net assets, Net Portfolio
value, Total end of Net Gross investment turnover
Total Redemption end of return the period expenses expenses income (loss) rate
distributions fee the period %(a) (000's) %(b) % % %
- --------------------------------------------------------------------------------------------------
$ -- $0.01 $12.00 8.3 $ 20,414 1.00 1.38 (0.69) 100
-- 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
$ -- $0.01 $11.71 8.0 $ 2,981 1.25 1.92 (0.94) 100
-- 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
$(2.57) $0.00(d) $27.69 11.2 $442,714 0.89(e) 0.89(e) 0.47 62
(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
$(2.50) $0.00(d) $27.46 10.9 $291,690 1.15 1.20 0.21 62
(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
$(2.44) $0.00(d) $27.14 10.6 $ 64,367 1.40 1.46 (0.04) 62
(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
FINANCIAL HIGHLIGHTS - CONTINUED
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------------------- ----------------------------
Net asset Dividends Distributions
value, Net Net realized Total from from from net
beginning investment and unrealized investment net investment realized
of the period income(c) gain (loss) operations income capital gains
- ---------------------------------------------------------------------------------------------------------
TAX-MANAGED EQUITY FUND
INSTITUTIONAL CLASS
9/30/2006 $ 9.20 $0.07 $ 0.97 $ 1.04 $(0.06) $ --
9/30/2005 8.49 0.05 0.69 0.74 (0.03) --
9/30/2004 7.66 0.05 0.97 1.02 (0.19) --
9/30/2003 6.78 0.06 0.85 0.91 (0.03) --
9/30/2002 7.67 0.06 (0.81) (0.75) (0.14) --
VALUE FUND
INSTITUTIONAL CLASS
9/30/2006 $18.72 $0.22 $ 3.17 $ 3.39 $(0.27) $(0.79)
9/30/2005 15.95 0.20 2.83 3.03 (0.26) --
9/30/2004 13.52 0.21 2.39 2.60 (0.17) --
9/30/2003 11.17 0.15 2.29 2.44 (0.09) --
9/30/2002 13.90 0.13 (2.42) (2.29) (0.16) (0.28)
RETAIL CLASS
9/30/2006* $19.69 $0.02 $ 1.33 $ 1.35 $ -- $ --
* From commencement of Class operations on June 30, 2006, through September 30,
2006.
(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, if applicable, 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 has been determined on the basis of the
weighted average number of shares outstanding during the period.
(d) Annualized for periods less than one year.
See accompanying notes to financial statements.
49
See accompanying notes to financial statements.
50
RATIOS TO AVERAGE NET ASSETS
- -------------- -------------------------------
Net asset Net assets, Net Portfolio
value, Total end of the Net Gross investment turnover
Total Redemption end of the return period expenses expenses income rate
distributions fee period %(a) (000's) %(b) % % %
- -----------------------------------------------------------------------------------------------
$(0.06) $-- $10.18 11.3 $ 9,076 0.65 1.64 0.71 40
(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
$(1.06) $-- $21.05 18.9 $71,147 0.85 0.91 1.13 36
(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
$ -- $-- $21.04 6.9 $ 466 1.10(d) 8.65(d) 0.42(d) 36
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
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 management investment 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. 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 of the Trusts are
presented in separate reports. The following funds (individually, a "Fund" and
collectively, the "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, Small Cap Value Fund and 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). 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, including closed-end investment
companies, 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 sixty days or less) are generally
valued at market price on the basis of valuations furnished to the Funds by a
pricing service recommended by the investment adviser's pricing committee and
approved 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.
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 sixty days or less are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available 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 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 securities, the Funds may,
among other things, use modeling tools or other processes that may take into
account factors such as securities market activity and/or significant events
that occur after the close of the foreign market and before the Funds calculate
their net asset values.
51
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified, and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of discount and decreased by the amortization of
premium. Investment income is recorded net of foreign taxes withheld when
applicable. The Funds estimate the components of distributions received from
Real Estate Investment Trusts (REITs). In determining net gain or loss on
securities sold, the cost of securities has been determined on an identified
cost basis. Investment income, non-class specific expenses and realized and
unrealized gains and losses are allocated on a pro rata basis to each class
based on the relative net assets of each class to the total net assets of the
Fund.
C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates
from fluctuations arising from changes in market prices of the investment
securities. Such changes are included with the net realized and unrealized gain
or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions 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.
Each Fund may use foreign currency exchange contracts to facilitate
transactions in foreign-denominated investments. Losses may arise from changes
in the value of the foreign currency or if the counterparties do not perform
under the contracts' terms.
Each Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than
those of comparable U.S. companies and the U.S. government.
D. FORWARD FOREIGN CURRENCY CONTRACTS. Each Fund may enter into forward foreign
currency exchange contracts. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell generally are used to
hedge a Fund's investments against currency fluctuation. Also, a contract to
buy or sell can offset a previous contract. These contracts involve market risk
in excess of the unrealized gain or loss reflected in the Fund's Statement of
Assets and Liabilities. The U.S. dollar value of the currencies 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 U.S. dollar. At September 30, 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 annually 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 REITs and net operating losses. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to
52
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
capital accounts. Temporary differences between book and tax distributable
earnings are primarily due to deferred Trustees' fees and wash sales.
Distributions from net investment income and short-term capital gains are
considered to be ordinary income for tax purposes.
The tax characterization of distributions is determined on an annual basis. The
tax character of distributions paid to shareholders during the years ended
September 30, 2006 and 2005 was as follows:
2006 DISTRIBUTIONS PAID FROM: 2005 DISTRIBUTIONS PAID FROM:
---------------------------------- -----------------------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAINS TOTAL INCOME GAINS TOTAL
---------- ----------- ----------- ----------- ----------- -----------
Aggressive Growth Fund $ -- $ -- $ -- $ 498,778 $ -- $ 498,778
Small Cap Growth Fund -- -- -- -- -- --
Small Cap Value Fund 8,314,591 58,353,414 66,668,005 24,071,753 37,569,886 61,641,639
Tax-Managed Equity
Fund 54,165 -- 54,165 23,811 -- 23,811
Value Fund 634,233 1,444,444 2,078,677 524,122 -- 524,122
Differences between these amounts and those reported in the Statements of
Changes in Net Assets are primarily attributable to different book and tax
treatment for short-term capital gains.
As of September 30, 2006, the components of distributable earnings on a tax
basis were as follows:
AGGRESSIVE SMALL CAP SMALL CAP TAX-MANAGED
GROWTH FUND GROWTH FUND VALUE FUND EQUITY FUND VALUE FUND
------------ ------------- ------------ ----------- -----------
Undistributed ordinary income $ -- $ -- $ 17,071,954 $ 75,331 $ 605,349
Undistributed long-term capital
gains -- -- 69,203,123 -- 3,486,756
------------ ------------- ------------ ----------- -----------
Total undistributed earnings -- -- 86,275,077 75,331 4,092,105
Capital loss carryforward:
Expires September 30, 2009 -- -- -- (12,547) --
Expires September 30, 2010 (73,993,065) (142,893,730) -- (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 (95,135,453) (202,176,770) -- (3,979,440) --
Deferred net capital losses
(post October 2005) -- -- -- -- --
Unrealized appreciation 4,958,357 2,268,872 132,331,232 1,774,672 11,078,514
------------ ------------- ------------ ----------- -----------
Total accumulated earnings
(losses) $(90,177,096) $(199,907,898) $218,606,309 $(2,129,437) $15,170,619
------------ ------------- ------------ ----------- -----------
Capital loss carryforward utilized
in the current year $ 5,800,947 $ 2,487,588 $ -- $ 201,958 $ --
------------ ------------- ------------ ----------- -----------
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 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
53
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
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 September 30, 2006 were as follows:
MARKET VALUE
OF SECURITIES VALUE OF
FUND ON LOAN COLLATERAL
- ---- ------------- ------------
Aggressive Growth Fund $ 10,834,515 $ 11,173,322
Small Cap Growth Fund 5,767,493 5,968,124
Small Cap Value Fund 198,439,289 205,404,052
Tax-Managed Equity Fund 2,222,079 2,266,006
Value Fund 6,672,959 6,824,407
I. INDEMNIFICATIONS. Under the Trusts' 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 Funds that have not yet occurred. However, based on experience, the
Funds expect the risk of loss to be remote.
J. NEW ACCOUNTING PRONOUNCEMENTS. In July, 2006, Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes--an
Interpretation of FASB Statement 109 ("FIN 48") was issued and is effective for
fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold
for financial statement recognition, measurement and disclosure of a tax
position taken or expected to be taken on a tax return. Management is currently
evaluating the impact, if any, the adoption of FIN 48 will have on each Fund's
net assets and results of operations.
In addition, in September, 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements ("SFAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact, if any,
the adoption of SFAS 157 will have on the Funds' financial statements.
3. PURCHASES AND SALES OF SECURITIES. For the year ended September 30, 2006,
purchases and sales of securities (excluding short-term investments) were as
follows:
FUND PURCHASES SALES
- ---- ------------ ------------
Aggressive Growth Fund $ 99,337,705 $111,091,278
Small Cap Growth Fund 23,891,744 21,691,400
Small Cap Value Fund 479,569,042 455,285,420
Tax-Managed Equity Fund 3,677,308 5,043,106
Value Fund 40,530,129 15,798,698
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES. Loomis, Sayles & Company, L.P. ("Loomis Sayles") serves as
investment adviser to each Fund. Separate management agreements for each Fund
in effect for the year ended September 30, 2006, provide for fees at the
following annual percentage rates of each Fund's average daily net assets:
MANAGEMENT
FUND FEES
- ---- ----------
Aggressive Growth Fund 0.75%
Small Cap Growth Fund 0.75%
Small Cap Value Fund 0.75%
Tax-Managed Equity Fund 0.50%
Value Fund 0.50%
54
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
Loomis Sayles has given binding undertakings to certain 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. For the year ended
September 30, 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 INSTITUTIONAL CLASS RETAIL CLASS ADMIN CLASS
---- ------------------- ------------ -----------
Aggressive Growth Fund 1.00% 1.25% --
Small Cap Growth Fund 1.00% 1.25% --
Small Cap Value Fund 0.90% 1.15% 1.40%
Tax-Managed Equity Fund 0.65% -- --
Value Fund 0.85% 1.10% --
For the year ended September 30, 2006, the management fees and waivers of
management fees 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 $ 360,159 $ 27,550 $ 332,609 0.75% 0.69%
Small Cap Growth Fund 168,944 62,772 106,172 0.75% 0.47%
Small Cap Value Fund 5,772,364 -- 5,772,364 0.75% 0.75%
Tax-Managed Equity Fund 46,295 -- 46,295 0.50% 0.50%
Value Fund 222,326 12,894 209,432 0.50% 0.47%
For the year ended September 30, 2006, in addition to the waiver of management
fees, expenses have been reimbursed as follows:
EXPENSES
FUND REIMBURSED
- ---- ----------
Aggressive Growth Fund $ 72,883
Small Cap Growth Fund 33,046
Small Cap Value Fund 174,650
Tax-Managed Equity Fund 91,352
Value Fund 14,443
Loomis Sayles shall be permitted to recover expenses borne under the expense
limitation agreements (whether through a reduction of its management fee or
otherwise) on a Class by Class basis in later periods to the extent a Class'
expenses fall below a Class' expense limits, provided, however, that a Class 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. The amounts subject to possible
reimbursement under the expense limitation agreements at September 30, 2006
were as follows:
EXPENSES SUBJECT TO POSSIBLE REIMBURSEMENT UNTIL
SEPTEMBER 30, 2007
------------------------------------------------------
FUND INSTITUTIONAL CLASS RETAIL CLASS ADMIN CLASS TOTAL
- ---- ------------------- ------------ ----------- ---------
Aggressive Growth Fund $ 22,586 $ 77,847 $ -- $ 100,433
Small Cap Growth Fund 72,414 23,404 -- 95,818
Small Cap Value Fund -- 134,548 40,102 174,650
Tax-Managed Equity Fund 91,352 -- -- 91,352
Value Fund 25,367 1,970 -- 27,337
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.
55
B. ADMINISTRATIVE FEES. IXIS Asset Management Advisors, L.P. ("IXIS Advisors")
provides certain administrative services for the Funds and has subcontracted
with State Street Bank to serve as sub-administrator. IXIS Advisors is a
limited partnership whose sole general partner, IXIS Asset Management
Distribution Corporation, is an indirect wholly-owned subsidiary of IXIS US
Group. Pursuant to an agreement among the Trusts, IXIS Advisor Funds Trust I,
IXIS Advisor Funds Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds
Trust IV, IXIS Advisor Cash Management Trust ("IXIS Advisor 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 Trusts and IXIS Advisor 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 Trusts and IXIS Advisor Funds Trusts
of $5 million, which is reevaluated on an annual basis.
For the year ended September 30, 2006, amounts paid to IXIS Advisors for
administrative fees were as follows:
FUND ADMINISTRATIVE FEES
- ---- -------------------
Aggressive Growth Fund $ 22,806
Small Cap Growth Fund 7,008
Small Cap Value Fund 404,043
Tax-Managed Equity Fund 4,625
Value Fund 21,947
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 funds.
Pursuant to Rule 12b-1 under the 1940 Act, Aggressive Growth Fund, Small Cap
Growth Fund, Small Cap Value Fund and Value Fund have adopted Distribution
Plans relating to their Retail Class shares (the "Retail Class Plan") and Small
Cap Value Fund has adopted a separate Distribution Plan relating to its 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 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.
For the year ended September 30, 2006, the Funds paid the following service and
distributions fees:
SERVICE FEES DISTRIBUTION FEES
------------ ------------------------
FUND ADMIN CLASS RETAIL CLASS ADMIN CLASS
- ---- ------------ ------------ -----------
Aggressive Growth Fund $ -- $ 72,783 $ --
Small Cap Growth Fund -- 8,704 --
Small Cap Value Fund 165,858 678,990 165,858
Tax-Managed Equity Fund -- -- --
Value Fund -- 65 --
D. TRUSTEES FEES AND EXPENSES. The Funds do not pay any compensation directly
to their 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 Contract Review and Governance Committee member is compensated
$4,000 for each Committee meeting that he or she attends in person and $2,000
for each meeting that he or she attends telephonically. Each Audit Committee
member is compensated $5,000 for each Committee meeting that he or she attends
in person and $2,500 for each meeting that he or she attends telephonically.
These fees are allocated among the funds in the IXIS Advisor Funds Trusts and
56
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
the Loomis Sayles Funds Trusts based on a formula that takes into account,
among other factors, the relative net assets of each fund. Trustees are
reimbursed for travel expenses in connection with attendance at meetings.
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.
Prior to November 18, 2005, the Trusts had co-chairmen of the Board who each
received an annual retainer of $25,000. 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.
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 IXIS Advisor Funds Trusts and the
Loomis Sayles Funds 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 of IXIS
Advisors who supported 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.
E. REDEMPTION FEES. Shareholders of Small Cap Growth Fund and Small Cap Value
Fund are charged a 2% redemption fee if they redeem, including redeeming by
exchange, any class of shares of such 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 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. Each Fund, together with certain other funds of IXIS Advisor
Funds Trusts and Loomis Sayles Funds Trusts, participates in a $75,000,000
committed line of credit provided by State Street Bank. Interest is charged to
each participating fund based on its borrowings at a rate per annum equal to
the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.09% per
annum, payable at the end of each calendar quarter, is accrued and apportioned
among the participating funds based on their average daily unused portion of
the line of credit. For the year ended September 30, 2006, the Funds had no
borrowings 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 year ended September 30, 2006, amounts rebated under these
agreements were as follows:
FUND REBATES
- ---- --------
Aggressive Growth Fund $ 21,790
Small Cap Growth Fund 4,975
Small Cap Value Fund 137,046
Tax-Managed Equity Fund 870
Value Fund 1,252
7. SHAREHOLDERS. At September 30, 2006, IXIS US Group owned 259,319 shares,
equating to 29.1% of Tax-Managed Equity Fund's shares outstanding. At
September 30, 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 319,727 357,978
Small Cap Growth Fund 364,448 350,076
Small Cap Value Fund 331,894 623,346
Value Fund 494,545 479,617
57
At September 30, 2006, two shareholders individually owned more than 5% of the
Small Cap Growth Fund's total outstanding shares, representing, in aggregate,
19.4% of the Fund; three shareholders individually owned more than 5% of the
Tax-Managed Equity Fund's total outstanding shares, representing, in aggregate,
42.4% of the Fund; and one shareholder individually owned more than 5% of the
Value Fund's total outstanding shares, representing, in aggregate, 16.5% 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
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ------------ ---------- ------------
Issued from the sale of shares 113,035 $ 2,403,816 53,494 $ 915,359
Issued in connection with
the reinvestment of distributions -- -- 16,185 277,892
Redeemed (622,265) (12,061,960) (318,259) (5,344,666)
-------- --------------- ------------ --------------
Net change (509,230) $ (9,658,144) (248,580) $ (4,151,415)
-------- --------------- ------------ --------------
Shares Amount Shares Amount
RETAIL CLASS -------- ------------ ---------- ------------
Issued from the sale of shares 466,779 $ 9,602,643 318,102 $ 5,337,862
Issued in connection with
the reinvestment of distributions -- -- 12,860 216,942
Redeemed (497,710) (10,104,474) (615,930) (10,185,991)
-------- --------------- ------------ --------------
Net change (30,931) $ (501,831) (284,968) $ (4,631,187)
-------- --------------- ------------ --------------
Increase (decrease) from capital
share transactions (540,161) $(10,159,975) (533,548) $ (8,782,602)
-------- --------------- ------------ --------------
SMALL CAP GROWTH FUND
Year Ended September 30 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ------------ ---------- ------------
Issued from the sale of shares 514,581 $ 6,313,604 113,316 $ 1,131,916
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (238,173) (2,861,514) (460,764) (4,575,642)
-------- --------------- ------------ --------------
Net change 276,408 $ 3,452,090 (347,448) $ (3,443,726)
-------- --------------- ------------ --------------
Shares Amount Shares Amount
RETAIL CLASS -------- ------------ ---------- ------------
Issued from the sale of shares 118,067 $ 1,415,130 216,852 $ 2,124,356
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (194,917) (2,249,611) (1,546,953) (14,930,155)
-------- --------------- ------------ --------------
Net change (76,850) $ (834,481) (1,330,101) $(12,805,799)
-------- --------------- ------------ --------------
Increase (decrease) from
capital share transactions 199,558 $ 2,617,609 (1,677,549) $(16,249,525)
-------- --------------- ------------ --------------
58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
SMALL CAP VALUE FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 2,676,286 $ 73,004,753 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 (2,792,941) (76,314,037) (3,747,820) (95,533,263)
---------- -------------- ------------ --------------
Net change 1,293,303 $ 32,362,654 1,246,624 $ 32,915,615
---------- -------------- ------------ --------------
Shares Amount Shares Amount
RETAIL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 4,178,708 $113,429,036 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 (3,102,060) (83,870,790) (2,145,167) (55,041,964)
---------- -------------- ------------ --------------
Net change 1,955,750 $ 51,658,867 1,896,921 $ 48,428,692
---------- -------------- ------------ --------------
Shares Amount Shares Amount
ADMIN CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 834,549 $ 22,351,432 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 (1,206,021) (31,582,406) (1,230,767) (31,333,743)
---------- -------------- ------------ --------------
Net change (134,343) $ (3,328,836) 41,365 $ 899,684
---------- -------------- ------------ --------------
Increase (decrease) from
capital share transactions 3,114,710 $ 80,692,685 3,184,910 $ 82,243,991
---------- -------------- ------------ --------------
TAX-MANAGED EQUITY FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 110,105 $ 1,042,547 421,995 $ 3,741,887
Issued in connection with
the reinvestment of distributions 4,870 45,436 2,601 23,491
Redeemed (226,157) (2,122,569) (34,673) (312,460)
---------- -------------- ------------ --------------
Increase (decrease) from
capital share transactions (111,182) $ (1,034,586) 389,923 $ 3,452,918
---------- -------------- ------------ --------------
59
VALUE FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS --------- ----------- -------- -----------
Issued from the sale of shares 1,543,164 $31,129,107 141,305 $ 2,428,427
Issued in connection with
the reinvestment of distributions 111,464 2,043,141 30,355 515,434
Redeemed (264,649) (5,153,539) (285,225) (4,807,088)
--------- -------------- ------------ --------------
Net change 1,389,979 $28,018,709 (113,565) $(1,863,227)
--------- -------------- ------------ --------------
Period Ended September 30, 2006 (a)
----------------------------
Shares Amount
RETAIL CLASS --------- -----------
Issued from the sale of shares 22,169 $ 456,494
Issued in connection with
the reinvestment of distributions -- --
Redeemed -- --
--------- --------------
Net change 22,169 $ 456,494
--------- --------------
Increase (decrease) from
capital share transactions 1,412,148 $28,475,203
--------- --------------
(a) From June 30, 2006, commencement of operations.
9. SUBSEQUENT EVENT. On October 20, 2006, IXIS US Group liquidated its position
of 261,354 shares in the Tax-Managed Equity Fund (27.8% of the total shares
outstanding of the Fund). This was accomplished through a
redemption-in-kind which included $2,453,150 of securities and $249,255 in
cash. Because the Trust's Board of Trustees has adopted procedures for any
redemption-in-kind in which the redeeming shareholder is an affiliated person,
IXIS US Group received its redemption proceeds through a pro rata, in-kind
distribution of portfolio investments consistent with these redemption-in-kind
procedures. Specifically, these procedures provide that a redemption-in-kind
shall be effected at the affiliated shareholder's proportionate share of the
Fund's current net assets and are designed so that such redemptions will not
favor the affiliated shareholder to the detriment of any other shareholder. As
a result, the Tax-Managed Equity Fund avoided having to sell significant
portfolio assets to raise cash to meet the affiliated shareholder's
request--thus limiting the potential adverse effect on the Tax-Managed Equity
Fund's net asset value per share.
60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of Loomis Sayles Funds I and Loomis Sayles Funds II and
Shareholders of Loomis Sayles Small Cap Value Fund, Loomis Sayles Aggressive
Growth Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles Tax-Managed
Equity Fund and Loomis Sayles Value Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Small Cap Value Fund, a series of Loomis Sayles Funds I and the Loomis Sayles
Aggressive Growth Fund, Loomis Sayles Small Cap Growth Fund, Loomis Sayles
Tax-Managed Equity Fund and Loomis Sayles Value Fund, each a series of Loomis
Sayles Funds II (collectively, "the Funds"), at September 30, 2006, and the
results of each of their operations, the changes in each of their net assets
and the financial highlights for each of the periods indicated, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 22, 2006
61
2006 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
CORPORATE DIVIDENDS RECEIVED DEDUCTION. For the fiscal year ended September 30,
2006, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
FUND QUALIFYING PERCENTAGE
- ---- ---------------------
Small Cap Value Fund 76.31%
Tax-Managed Equity Fund 100.00%
Value Fund 96.79%
CAPITAL GAINS DISTRIBUTIONS. Pursuant to Internal Revenue Section 852(b), the
following Funds paid distributions, which have been designated as capital gains
distributions for the fiscal year ended September 30, 2006.
FUND AMOUNT
- ---- --------
Small Cap Value Fund $58,353,414
Value Fund 1,444,444
QUALIFIED DIVIDEND INCOME. For the fiscal year ended September 30, 2006, the
Funds below will designate up to the maximum amount allowable pursuant to the
Internal Revenue Code as qualified dividend income eligible for reduced tax
rates. These lower rates range from 5% to 15% depending on an individual's tax
bracket. If the Funds pay a distribution during calendar year 2006, complete
information will be reported in conjunction with Form 1099-DIV.
FUND
- ----
Small Cap Value Fund
Tax-Managed Equity Fund
Value Fund
62
TRUSTEE AND OFFICER INFORMATION
The tables below provide certain information regarding the Trustees and
officers of Loomis Sayles Funds I and Loomis Sayles Funds II (the "Trusts").
Unless otherwise indicated, the address of all persons below is 399 Boylston
Street, Boston, MA 02116. The Trust's Statements of Additional Information
include additional information about the Trustees of the Trusts and are
available by calling Loomis Sayles at 800-343-2029.
POSITION(S)
HELD WITH
THE TRUSTS, LENGTH NUMBER OF PORTFOLIOS IN FUND
OF TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN*** AND
NAME AND DATE OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS** OTHER DIRECTORSHIPS HELD
- -------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee since 2003 Douglas Dillon Professor and Director of 38; Director, Taubman Centers,
(3/23/40) Contract Review the Belfer Center for Science and Inc. (real estate investment trust)
and Governance International Affairs, John F. Kennedy
Committee Member School of Government,
Harvard University
Charles D. Baker Trustee since 2005 President and Chief Executive Officer, 38; None
(11/13/56) Contract Review Harvard Pilgrim Health Care (health plan)
and Governance
Committee Member
Edward A. Benjamin Trustee since 2002 Retired 38; Director, Precision Optics
(5/30/38) Chairman of the Corporation (optics manufacturer)
Contract Review
and Governance
Committee
Daniel M. Cain Trustee since 2003 President and Chief Executive Officer, 38; Director, Sheridan Healthcare
(2/24/45) Chairman of the Cain Brothers & Company, Incorporated Inc. (physician practice
Audit Committee (investment banking) management)
Paul G. Chenault+ Trustee since 2002 Retired; Trustee, First Variable Life 38; Director, Mailco Office
(9/12/33) for Loomis Sayles (variable life insurance) Products, Inc. (mailing
Trust I; since 2000 equipment)
for Loomis Sayles
Funds II
Contract Review
and Governance
Committee Member
Kenneth J. Cowan+ Trustee since 2003 Retired 38; None
(4/5/32) Contract Review
and Governance
Committee Member
Richard Darman Trustee since 2003 Partner, The Carlyle Group (investments); 38; Director and Chairman of
(5/10/43) Contract Review formerly, Professor, John F. Kennedy Board of Directors, AES
and Governance School of Government, Harvard Corporation (international power
Committee Member University company)
Sandra O. Moose Trustee since 2003; President, Strategic Advisory Services 38; Director, Verizon
(2/17/42) Chairperson of the (management consulting); formerly, Communications;
Board of Trustees Senior Vice President and Director, The Director, Rohm and Haas
since Boston Consulting Group, Inc. Company (specialty chemicals);
November 2005 (management consulting) Director, AES Corporation
Ex officio member of (international power company)
the Audit
Committee and
Contract Review
and Governance
Committee
63
POSITION(S)
HELD WITH
THE TRUSTS, LENGTH NUMBER OF PORTFOLIOS IN FUND
OF TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN*** AND
NAME AND DATE OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS** OTHER DIRECTORSHIPS HELD
- -------------------------------------------------------------------------------------------------------------------------
John A. Shane+ Trustee since 2003; President, Palmer Service Corporation 38; Director, Gensym Corporation
(2/22/33) Audit Committee (venture capital organization) (software and technology service
Member provider); Director and Chairman
of the Board, Abt Associates Inc.
(research and consulting firm)
Cynthia L. Walker Trustee since 2005; Executive Dean for Administration 38; None
(7/25/56) Audit Committee (formerly, Dean for Finance and CFO),
Member Harvard Medical School
INTERESTED TRUSTEES
Robert J. Blanding/1/ President, Chief President, Chairman, Director, and Chief 38; None
(4/14/47) Executive Officer Executive Officer, Loomis, Sayles &
555 California Street and Trustee since Company, L.P.; President and Chief
San Francisco, CA 94104 2002 for Loomis Executive Officer for Loomis Sayles
Sayles Funds I; Funds I; Chief Executive Officer for
Chief Executive Loomis Sayles Funds II
Officer and Trustee
since 2002 for
Loomis Sayles
Funds II
John T. Hailer/2/ Executive Vice President and Chief Executive Officer, 38; None
(11/23/60) President and IXIS Asset Management Advisors, L.P.,
Trustee since 2003 IXIS Asset Management Distributors, L.P.
for Loomis Sayles and IXIS Asset Management Global
Funds I; President Associates, L.P.; Executive Vice President,
and Trustee since Loomis Sayles Funds I; President and
2003 for Loomis Chief Executive Officer, AEW Real Estate
Sayles Funds II Income Fund, IXIS Advisor Cash
Management Trust, IXIS Advisor Funds
Trust I, IXIS Advisor Funds Trust II, IXIS
Advisor Funds Trust III and IXIS Advisor
Funds Trust IV
* Each Trustee serves until retirement, resignation or removal from the Board
of Trustees. The current retirement age is 72, but the retirement policy was
suspended for the calendar year 2005. At a meeting held on August 26, 2005,
the Trustees voted to lift the suspension of the retirement policy and to
designate 2006 as a transition period so that any Trustees who are currently
age 72 or older or who reach age 72 during the remainder of 2006 will not be
required to retire until the end of calendar year 2006. The position of
Chairperson of the Board is appointed for a two-year term.
**Each person listed above, except as noted, holds the same position(s) with
the Trusts. Previous positions during the past five years with IXIS Asset
Management Distributors, L.P. (the "Distributor"), IXIS Asset Management
Advisors, L.P. ("IXIS Advisors") or Loomis, Sayles & Company, L.P. are
omitted if not materially different from a Trustee's or officer's current
position with such entity.
***The Trustees of the Trusts serve as trustees of a fund complex that includes
all series of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS
Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash
Management Trust, AEW Real Estate Income Fund, Loomis Sayles Funds I and
Loomis Sayles Funds II (together the "IXIS Advisor Funds and Loomis Sayles
Funds Trusts").
+ Effective December 31, 2006, Messrs. Chenault, Cowan and Shane will be
retiring as members of the IXIS Advisor Funds and Loomis Sayles Funds Trusts
Board of Trustees.
1 Mr. Blanding is deemed an "interested person" of the Trust because he holds
the following positions with affiliated persons of the Trust: President,
Chairman, Director and Chief Executive Officer of Loomis Sayles.
2 Mr. Hailer is deemed an "interested person" of the Trust because he holds the
following positions with affiliated persons of the Trust: Director and
Executive Vice President of IXIS Asset Management Distribution Corporation;
and President and Chief Executive Officer of IXIS Asset Management Global
Associates, L.P., IXIS Asset Management Advisors and the IXIS Asset
Management Distributors, L.P.
64
POSITION(S)
HELD WITH TERM OF OFFICE AND PRINCIPAL OCCUPATION(S)
NAME AND DATE OF BIRTH THE TRUSTS LENGTH OF TIME SERVED* DURING PAST 5 YEARS**
- ------------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE TRUSTS
Coleen Downs Dinneen Secretary, Clerk and Since September 2004 Senior Vice President, General Counsel, Secretary
(12/16/60) Chief Legal Officer and Clerk (formerly, Deputy General Counsel,
Assistant Secretary and Assistant Clerk), IXIS
Asset Management Distribution Corporation,
IXIS Asset Management Distributors, L.P. and
IXIS Asset Management Advisors, L.P.
Daniel J. Fuss Executive Vice Since June 2003 Vice Chairman and Director, Loomis, Sayles &
(9/27/33) President Company, L.P.; Prior to 2002, President and
One Financial Center Trustee of Loomis Sayles Funds II
Boston, MA 02111
Russell L. Kane Chief Compliance Chief Compliance Officer, Chief Compliance Officer for Mutual Funds,
(7/23/69) Officer; Assistant since May 2006; Assistant Vice President, Associate General Counsel,
Secretary Secretary since June 2004 Assistant Secretary and Assistant Clerk, IXIS
Asset Management Distribution Corporation,
IXIS Asset Management Distributors, L.P. and
IXIS Asset Management Advisors, L.P.; formerly,
Senior Counsel, Columbia Management Group.
Michael C. Kardok Treasurer, Principal Since October 2004 Senior Vice President, IXIS Asset Management
(7/17/59) Financial and Advisors, L.P. and IXIS Asset Management
Accounting Officer Distributors, L.P.; formerly, Senior Director,
PFPC Inc; formerly, Vice President - Division
Manager, First Data Investor Services, Inc.
Max J. Mahoney Anti-Money Since August 2005 Vice President, Deputy General Counsel,
(5/1/62) Laundering Officer Assistant Secretary and Assistant Clerk, IXIS
and Assistant Asset Management Distribution Corporation.
Secretary Senior Vice President, Deputy General Counsel,
Assistant Secretary, Assistant Clerk and Chief
Compliance Officer--Investment Adviser, IXIS
Asset Management Distributors, L.P. and IXIS
Asset Management Advisors, L.P.; formerly,
Senior Counsel, MetLife, Inc.; formerly, Associate
Counsel, LPL Financial Services, Inc.
John E. Pelletier Chief Operating Since September 2004 Executive Vice President and Chief Operating
(6/24/64) Officer Officer (formerly, Senior Vice President, General
Counsel, Secretary and Clerk), IXIS Asset
Management Distribution Corporation, IXIS
Asset Management Distributors, L.P. and IXIS
Asset Management Advisors, L.P.; Executive Vice
President, Chief Operating Officer and Director
(formerly, President, Chief Operating Officer and
Director), IXIS Asset Management Services
Company.
* Each officer of the Trusts serves for an indefinite term in accordance with
their current By-laws until the date his or her successor is elected and
qualified, or until he or she sooner dies, retires, is removed or becomes
disqualified.
**Each person listed above, except as noted, holds the same position(s) with
the IXIS Advisor Funds and Loomis Sayles Funds Trusts. Previous positions
during the past five years with the Distributor, IXIS Advisors or Loomis
Sayles are omitted, if not materially different from a trustee's or officer's
current position with such entity.
65
[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles Bond Fund
Loomis Sayles Fixed Income Fund
Loomis Sayles Global Bond Fund
Loomis Sayles Inflation Protected Securities Fund
Loomis Sayles Institutional High Income Fund
Loomis Sayles Intermediate Duration Fixed Income Fund
Loomis Sayles Investment Grade Fixed Income Fund
TABLE OF CONTENTS
Fund and Manager Reviews 1
Portfolio of Investments 20
Statements of Assets and Liabilities 77
Statements of Operations 79
Statements of Changes in Net Assets 81
Financial Highlights 85
Notes to Financial Statements 91
ANNUAL REPORT
SEPTEMBER 30, 2006
FUND AND MANAGER REVIEW
LOOMIS SAYLES BOND FUND
[PHOTO]
Daniel Fuss
Manager since May 1991
[PHOTO]
Kathleen Gaffney
Manager since November 1997
Manager since November 1997
FUND FACTS
SYMBOL | Institutional: LSBDX;
Retail: LSBRX; Admin: LBFAX
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 35% of assets in lower rated fixed-income
securities and up to 20% of its assets in preferred stocks. The Fund may
invest any portion of its assets in Canadian securities and up to 20% of
assets in other foreign securities, including emerging markets securities.
FUND INCEPTION DATE | 5/16/91
COMMENCEMENT OF OPERATIONS OF CLASS | Institutional: 5/16/91; Retail: 1/2/97;
Admin: 1/2/98
EXPENSE RATIO | Institutional: 0.75%; Retail: 1.00%; Admin: 1.25%
TOTAL NET ASSETS | $7,082.2 million
PORTFOLIO REVIEW
Throughout the fiscal year ended September 30, 2006, market fundamentals
remained sound and the bond market generally compensated investors willing to
accept risk. Once again, the Fund's exposure to high yield and foreign markets
and foreign currencies--securities not in its Benchmark--helped the Fund
significantly outperform the Lehman US Government/Credit Index for the 2006
fiscal year.
Healthy balance sheets enabled corporate bonds to provide strong returns, but a
few leveraged buyouts (LBOs) provided some hiccups. High yield sectors
performed well as default rates continued to remain low, in defiance of
investors' expectations. Although spreads remained tight for much of the fiscal
year, investors benefited from the extra interest inherent in lower grade
bonds. Emerging market securities also provided attractive returns, primarily
as a result of improving country fundamentals.
Our security selections in the airlines, auto and communication sectors
performed well, while healthcare holdings were laggards. Within the Fund's
convertible holdings, we took advantage of specific issue strength in the
pharmaceuticals and communication industries.
We also maintained a large position in foreign-denominated securities. Led by
the commodity-rich exporting nations of Canada, Mexico and Brazil, these issues
provided key performance advantages throughout the year. Other positive
performers for the Fund included issues denominated in the British pound
sterling, Singapore dollar and Thai baht. Laggards included bonds denominated
in the South African rand and New Zealand dollar. With looming risks of a
weaker US dollar, the Fund remains positioned to take advantage of positive
outlooks and favorable fundamentals among investments denominated in other
currencies.
During the period, we moved the Fund's duration from slightly shorter than the
Benchmark to approximately 1.5 years longer. The Federal Reserve Board's
decision to pause its tightening campaign in August and September, combined
with mixed concerns regarding a US economic slowdown, prompted a rally in the
fixed income markets. Our longer duration helped the Fund take greater
advantage of the rally.
OUTLOOK
As the slowdown in the housing market and declines in the prices of energy and
other commodities help reduce inflation pressures, we believe the Fed can
afford to wait and see if its 425 basis points of tightening (to date) is
sufficient to keep inflation at bay. In such an environment, we believe
investors will continue to find high yield bonds attractive. Our greatest
concern for investment grade corporate bonds is the rising threat from
shareholder-friendly events, including LBOs. We believe corporate bonds still
can outperform Treasurys, but security selection will be key. Investment grade
corporate spreads have fluctuated within a narrow range for more than a year,
and we do not foresee a near-term catalyst that would knock them out of that
range. Demand remains robust, as corporations continue to generate solid
earnings.
1
We have a similar outlook for high yield bonds. Like the investment grade
corporate sector, the high yield segment faces issue-specific risks from LBOs.
In addition, high yield bonds have been trading at spreads of approximately
300-350 basis points, and we expect them to remain range bound. Given our
outlook for stable monetary policy, solid earnings growth and low default
rates, we believe high yield bonds are fairly valued.
We anticipate modest performance from global bonds. After finishing the fiscal
year on a strong note, emerging market securities should offer lower, yet still
favorable returns. We believe cyclical and structural concerns should lead to
some weakness for the US dollar. As such, foreign currency exposure should grow
increasingly important to portfolio returns.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
-------------------------------------
LOOMIS SAYLES BOND: INSTITUTIONAL
9.00% 13.56% 9.87% 11.26%
-------------------------------------
LOOMIS SAYLES BOND: RETAIL(c)
8.79 13.29 9.60 10.99
-------------------------------------
LOOMIS SAYLES BOND: ADMIN(c)
8.51 13.01 9.24 10.48
-------------------------------------
LEHMAN US GOVERNMENT/CREDIT INDEX(d)
3.33 4.96 6.47 7.09
-------------------------------------
LIPPER BBB-RATED FUNDS INDEX(d)
4.20 5.77 6.19 7.08
-------------------------------------
CUMULATIVE PERFORMANCE(e)
INCEPTION TO SEPTEMBER 30, 2006(b)
[CHART]
Loomis Sayles Lipper BBB Lehman US Government/
Bond Fund Rated Funds Index Credit Index
------------- ----------------- ---------------------
5/16/1991 $100,000 $100,000 $100,000
5/31/1991 99,600 100,000 100,000
6/30/1991 98,096 99,747 99,892
7/31/1991 100,499 100,836 101,145
8/31/1991 104,600 103,268 103,476
9/30/1991 104,799 105,513 105,637
10/31/1991 107,712 106,479 106,581
11/30/1991 106,592 107,336 107,643
12/31/1991 108,873 111,368 111,274
1/31/1992 110,571 110,015 109,624
2/29/1992 113,335 110,624 110,206
3/31/1992 112,485 110,252 109,604
4/30/1992 114,094 110,825 110,257
5/31/1992 117,460 113,076 112,397
6/30/1992 117,894 114,733 114,044
7/31/1992 121,714 117,888 116,961
8/31/1992 122,822 118,972 118,005
9/30/1992 123,485 120,412 119,616
10/31/1992 122,053 118,295 117,791
11/30/1992 123,297 118,435 117,696
12/31/1992 124,419 120,402 119,710
1/31/1993 128,737 123,029 122,315
2/28/1993 131,260 125,931 124,854
3/31/1993 133,898 126,710 125,277
4/30/1993 135,934 127,660 126,241
5/31/1993 138,122 127,964 126,174
6/30/1993 141,050 130,840 129,038
7/31/1993 144,478 132,058 129,862
8/31/1993 147,079 135,135 132,844
9/30/1993 147,329 135,527 133,306
10/31/1993 149,553 136,467 133,851
11/30/1993 150,181 134,898 132,338
12/31/1993 152,044 135,806 132,916
1/31/1994 158,065 138,160 134,917
2/28/1994 155,393 135,150 131,982
3/31/1994 149,784 131,299 128,754
4/30/1994 146,428 129,715 127,688
5/31/1994 145,887 129,384 127,452
6/30/1994 145,478 128,847 127,153
7/31/1994 147,689 131,052 129,695
8/31/1994 149,905 131,568 129,748
9/30/1994 148,106 129,751 127,783
10/31/1994 147,425 129,338 127,641
11/30/1994 145,449 128,992 127,413
12/31/1994 145,871 129,637 128,253
1/31/1995 148,920 131,728 130,715
2/28/1995 153,268 134,738 133,746
3/31/1995 156,609 135,796 134,643
4/30/1995 162,326 138,238 136,522
5/31/1995 171,026 144,200 142,244
6/30/1995 173,386 145,289 143,380
7/31/1995 172,901 144,949 142,828
8/31/1995 176,497 147,081 144,655
9/30/1995 180,839 148,805 146,124
10/31/1995 182,629 150,787 148,270
11/30/1995 188,108 153,260 150,711
12/31/1995 192,472 155,790 152,932
1/31/1996 196,380 157,049 153,884
2/29/1996 190,429 153,745 150,619
3/31/1996 190,582 152,611 149,354
4/30/1996 189,038 151,637 148,329
5/31/1996 191,098 151,533 148,079
6/30/1996 193,640 153,269 150,056
7/31/1996 193,543 153,649 150,406
8/31/1996 195,169 153,573 150,036
9/30/1996 201,239 156,646 152,704
10/31/1996 207,960 160,406 156,268
11/30/1996 216,050 163,983 159,145
12/31/1996 212,269 162,396 157,371
1/31/1997 212,099 162,912 157,558
2/28/1997 215,196 163,841 157,890
3/31/1997 211,774 161,312 156,014
4/30/1997 214,527 163,695 158,296
5/31/1997 219,247 165,569 159,773
6/30/1997 224,136 168,038 161,690
7/31/1997 235,656 173,848 166,637
8/31/1997 230,496 171,545 164,767
9/30/1997 237,964 174,563 167,357
10/31/1997 237,155 176,336 170,038
11/30/1997 238,411 177,198 170,933
12/31/1997 239,198 179,099 172,727
1/31/1998 242,188 181,384 175,162
2/28/1998 244,804 181,318 174,806
3/31/1998 248,354 182,238 175,345
4/30/1998 249,297 183,019 176,226
5/31/1998 249,297 184,584 178,120
6/30/1998 249,497 185,938 179,932
7/31/1998 246,827 185,794 180,075
8/31/1998 229,105 184,443 183,594
9/30/1998 237,009 188,246 188,844
10/31/1998 236,322 185,924 187,510
11/30/1998 250,761 189,362 188,627
12/31/1998 250,460 189,832 189,090
1/31/1999 255,068 191,484 190,433
2/28/1999 250,452 187,341 185,907
3/31/1999 259,468 189,429 186,830
4/30/1999 268,420 190,787 187,294
5/31/1999 262,219 188,213 185,360
6/30/1999 260,515 187,225 184,782
7/31/1999 256,555 186,280 184,271
8/31/1999 254,169 185,591 184,123
9/30/1999 255,033 187,186 185,783
10/31/1999 255,237 187,553 186,265
11/30/1999 257,687 188,007 186,161
12/31/1999 261,759 187,704 185,028
1/31/2000 261,314 187,153 184,977
2/29/2000 269,258 189,455 187,296
3/31/2000 272,893 191,201 190,002
4/30/2000 265,525 188,881 189,076
5/31/2000 261,834 187,444 188,905
6/30/2000 270,160 192,187 192,762
7/31/2000 271,322 193,011 194,803
8/31/2000 277,454 196,532 197,553
9/30/2000 272,265 197,091 198,297
10/31/2000 265,187 196,454 199,540
11/30/2000 263,993 198,276 202,952
12/31/2000 273,180 202,427 206,957
1/31/2001 281,075 207,324 210,429
2/28/2001 281,806 209,372 212,600
3/31/2001 274,366 209,241 213,576
4/30/2001 271,074 208,094 211,975
5/31/2001 274,598 209,971 213,194
6/30/2001 272,895 210,216 214,217
7/31/2001 277,289 214,984 219,555
8/31/2001 282,696 217,562 222,374
9/30/2001 273,056 215,703 224,419
10/31/2001 279,882 220,277 230,114
11/30/2001 282,261 218,851 226,337
12/31/2001 280,427 217,514 224,553
1/31/2002 282,586 218,704 226,203
2/28/2002 284,197 219,749 228,123
3/31/2002 284,026 216,868 223,495
4/30/2002 291,411 220,186 227,824
5/31/2002 296,889 221,927 229,927
6/30/2002 293,267 220,884 231,882
7/31/2002 284,616 219,778 234,675
8/31/2002 295,773 224,220 239,936
9/30/2002 293,614 226,240 245,097
10/31/2002 297,607 224,625 242,755
11/30/2002 307,279 227,862 242,898
12/31/2002 317,880 233,167 249,334
1/31/2003 327,417 234,712 249,326
2/28/2003 335,799 238,662 253,768
3/31/2003 339,526 239,070 253,437
4/30/2003 355,110 243,895 256,146
5/31/2003 372,475 250,282 263,425
6/30/2003 377,168 250,607 262,371
7/31/2003 362,836 242,067 251,372
8/31/2003 366,428 243,978 253,030
9/30/2003 384,456 251,492 261,045
10/31/2003 389,300 250,496 257,741
11/30/2003 398,410 252,217 258,425
12/31/2003 410,601 255,893 260,974
1/31/2004 414,625 258,222 263,345
2/29/2004 415,869 260,503 266,566
3/31/2004 420,069 262,293 269,013
4/30/2004 404,485 255,610 260,754
5/31/2004 399,510 253,667 259,419
6/30/2004 405,263 255,164 260,487
7/31/2004 410,004 257,831 263,238
8/31/2004 421,730 263,069 268,809
9/30/2004 432,358 264,699 269,749
10/31/2004 441,654 267,315 272,086
11/30/2004 450,663 266,428 269,058
12/31/2004 457,018 269,463 271,918
1/31/2005 454,367 270,891 273,809
2/28/2005 459,320 270,453 272,005
3/31/2005 452,659 267,414 270,089
4/30/2005 450,985 269,597 274,139
5/31/2005 455,991 272,404 277,577
6/30/2005 463,651 274,707 279,391
7/31/2005 465,691 273,435 276,246
8/31/2005 471,792 276,832 280,370
9/30/2005 472,877 274,069 276,702
10/31/2005 468,432 271,697 274,334
11/30/2005 471,149 272,813 275,740
12/31/2005 476,190 275,489 278,360
1/31/2006 486,714 276,495 277,851
2/28/2006 492,700 277,767 278,602
3/31/2006 488,414 274,728 275,541
4/30/2006 495,887 274,550 274,678
5/31/2006 492,316 273,887 274,525
6/30/2006 490,987 273,924 275,156
7/31/2006 497,812 277,715 278,738
8/31/2006 510,755 282,785 283,146
9/30/2006 515,352 285,574 285,917
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) Inception date of the Institutional, Retail and Admin Classes of shares are
May 16, 1991, December 31, 1996 and January 2, 1998, respectively. (b) The
mountain chart is based on the initial minimum investment of $100,000 for the
Institutional Class. (c) Performance shown for periods prior to the inception
date of the Retail Class and the Admin Class represents the performance of the
Institutional Class during the periods shown, adjusted to reflect the current
levels of 12b-1 fees payable by the respective classes of shares. (d) See page
15 for a description of the indices. 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. (e)
Cumulative performance is shown for the Institutional Class of shares.
Performance of the Retail and Admin Classes would be lower, due to higher fees.
WHAT YOU SHOULD KNOW
High-yield securities are subject to a high degree of market and credit risk.
The secondary market for these securities may lack liquidity which may
adversely affect the value of the fund. Foreign investments involve special
risks, including greater economic, political and currency fluctuation risks,
which may be even greater in emerging markets. Foreign countries may have
different accounting standards than those of the US. Securities issued by US
government agencies are not issued, and may not be guaranteed by the
US government.
2
FUND AND MANAGER REVIEW
LOOMIS SAYLES FIXED INCOME FUND
[PHOTO]
Daniel Fuss
Manager since January 1995
FUND FACTS
SYMBOL | LSFIX
OBJECTIVE | High total investment return through a combination of current
income and capital appreciation
STRATEGY | Invests primarily in fixed- income securities, may invest up to 35%
of its assets in lower-rated fixed-income securities and up to 20% of its
assets in preferred stocks. The Fund may invest any portion of its assets in
Canadian securities and up to 20% of assets in other foreign securities,
including emerging markets securities.
FUND INCEPTION DATE | 1/17/95
FUND REGISTRATION DATE | 3/7/97
EXPENSE RATIO | 0.60%
TOTAL NET ASSETS | $456.0 million
PORTFOLIO REVIEW
A resilient economy and strong corporate profits were hallmarks of the fiscal
year ended September 30, 2006. Recently, declining energy prices helped subdue
inflation fears, while a deteriorating housing market raised concerns of a
broader economic slowdown. After raising the federal funds rate at 17
consecutive meetings, the Federal Reserve Board paused in August and September,
reducing concerns that the Fed might tighten the economy into a recession. All
major bond market benchmarks generated positive returns, with the bulk of the
gains coming in the third quarter of calendar 2006. Overall, the riskier
segments offered the best returns, as fundamentals remained sound. Our exposure
to below investment grade securities and foreign currencies--areas not
represented in the Benchmark--combined with overweights in the foreign
developed and emerging markets, helped the Fund significantly outperform its
Benchmark, the Lehman US Government/Credit Index, for the 2006 fiscal year.
The Fund generated positive performance across the quality range, with higher
quality sectors benefiting from a longer duration strategy. During the year, we
moved the Fund's duration from neutral to approximately 1.5 years longer than
the Benchmark. By shifting from shorter to longer duration Treasurys and
corporate bonds we took advantage of the recent market rally and significantly
boosted the Fund's return.
Successful security selections, combined with investors' robust risk appetite
and low default trends, helped the Fund realize gains in the high yield sector.
In particular, our holdings in the media and auto industries, and in companies
involved in merger and acquisition activity, helped performance. On the
downside, a few individual names involved in specific credit events caused
minor setbacks for the Fund's strong returns. For example, certain healthcare
bonds declined on news of leveraged buyouts (LBOs).
Fund holdings denominated in foreign currencies performed well, particularly
those of commodity-rich exporters Canada and Brazil. We maintained a sizable
position in Canadian-dollar-denominated securities, gaining significant
performance from those of shorter
duration. These securities benefited from quality fundamentals and a positive
outlook, given the strong global demand for natural resources. Although Mexico
struggled with political uncertainty early in the period, the country remained
a positive contributor to the Fund. Returns from Singapore, Korea and Thailand
reflected strong economic expansion in the Pacific Rim. New Zealand and
Australian holdings were relatively flat, while South African securities were
negative contributors as their currencies weakened.
The Fund also benefited from several strong names within its convertible
holdings, another market area that is not part of the Fund's Benchmark. These
holdings were among the Fund's best individual performers.
OUTLOOK
In our opinion, the economy is experiencing a typical mid-cycle slowdown, which
should keep monetary policy stable for the foreseeable future. However, the
market appears to be pricing in a Fed easing for the first half of 2007. If the
economy gains traction, as we believe it may, yields are vulnerable to a modest
increase.
Investment grade corporate spreads have fluctuated within a narrow range for
more than a year, and we do not foresee a near-term catalyst that will knock
them out of that range. Demand remains robust for the bonds, as corporations
continue to generate solid earnings. Our greatest concern for investment grade
corporate securities is the rising threat from shareholder-friendly events,
including LBOs.
3
We believe corporate bonds may outperform Treasurys, but security selection
will be key.
We have a similar outlook for spreads in the high yield sector. Based on our
outlook for stable monetary policy, solid earnings growth and low default
rates, we believe high yield bonds are fairly valued. Although the emerging
markets have weathered a few country-specific bumps, the general trend remains
positive. Because we believe the US dollar is overdue for some weakness,
foreign currency exposure should grow increasingly important to Fund returns.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE SINCE
1 YEAR 5 YEARS 10 YEARS REGISTRATION(a) INCEPTION(a)
----------------------------------------------------
LOOMIS SAYLES FIXED INCOME: INSTITUTIONAL
8.06% 13.41% 9.78% 9.47% 10.95%
----------------------------------------------------
LEHMAN US GOVERNMENT/CREDIT INDEX(b)
3.33 4.96 6.47 6.39 6.94
----------------------------------------------------
LIPPER BBB-RATED FUNDS INDEX(b)
4.20 5.77 6.19 5.97 6.86
----------------------------------------------------
CUMULATIVE PERFORMANCE
REGISTRATION TO SEPTEMBER 30, 2006(c)
[CHART]
Loomis Sayles Fixed Lipper BBB Rated Lehman Government
Income Fund Funds Index Credit Index
----------- ----------- ------------
3/7/1997 $3,000,000 $3,000,000 $3,000,000
3/31/1997 2,973,000 2,953,678 2,964,347
4/30/1997 3,004,811 2,997,311 3,007,699
5/31/1997 3,078,128 3,031,640 3,035,766
6/30/1997 3,144,308 3,076,838 3,072,204
7/31/1997 3,287,689 3,183,224 3,166,196
8/31/1997 3,222,921 3,141,058 3,130,654
9/30/1997 3,317,675 3,196,312 3,179,874
10/31/1997 3,325,306 3,228,775 3,230,813
11/30/1997 3,350,246 3,244,554 3,247,817
12/31/1997 3,351,921 3,279,365 3,281,901
1/31/1998 3,391,809 3,321,218 3,328,168
2/28/1998 3,420,978 3,320,000 3,321,403
3/31/1998 3,471,609 3,336,851 3,331,643
4/30/1998 3,484,801 3,351,142 3,348,386
5/31/1998 3,487,589 3,379,801 3,384,376
6/30/1998 3,490,379 3,404,600 3,418,796
7/31/1998 3,460,012 3,401,952 3,421,524
8/31/1998 3,224,385 3,377,229 3,488,383
9/30/1998 3,336,917 3,446,853 3,588,130
10/31/1998 3,302,213 3,404,340 3,562,792
11/30/1998 3,478,881 3,467,282 3,584,019
12/31/1998 3,476,098 3,475,903 3,592,802
1/31/1999 3,534,496 3,506,149 3,618,327
2/28/1999 3,464,513 3,430,289 3,532,333
3/31/1999 3,578,496 3,468,512 3,549,861
4/30/1999 3,689,429 3,493,388 3,558,681
5/31/1999 3,607,524 3,446,257 3,521,944
6/30/1999 3,586,961 3,428,157 3,510,956
7/31/1999 3,534,233 3,410,857 3,501,240
8/31/1999 3,504,898 3,398,236 3,498,437
9/30/1999 3,531,185 3,427,440 3,529,979
10/31/1999 3,540,013 3,434,173 3,539,135
11/30/1999 3,563,377 3,442,484 3,537,154
12/31/1999 3,606,138 3,436,926 3,515,628
1/31/2000 3,593,516 3,426,846 3,514,656
2/29/2000 3,703,119 3,468,999 3,558,718
3/31/2000 3,743,853 3,500,964 3,610,143
4/30/2000 3,643,518 3,458,490 3,592,540
5/31/2000 3,587,043 3,432,181 3,589,289
6/30/2000 3,699,676 3,519,026 3,662,576
7/31/2000 3,718,545 3,534,106 3,701,369
8/31/2000 3,793,659 3,598,576 3,753,616
9/30/2000 3,740,548 3,608,822 3,767,742
10/31/2000 3,646,660 3,597,158 3,791,362
11/30/2000 3,627,698 3,630,502 3,856,203
12/31/2000 3,744,147 3,706,526 3,932,293
1/31/2001 3,879,685 3,796,186 3,998,256
2/28/2001 3,886,280 3,833,677 4,039,515
3/31/2001 3,794,953 3,831,290 4,058,052
4/30/2001 3,750,931 3,810,278 4,027,631
5/31/2001 3,818,823 3,844,647 4,050,802
6/30/2001 3,802,020 3,849,140 4,070,235
7/31/2001 3,876,540 3,936,445 4,171,664
8/31/2001 3,947,480 3,983,648 4,225,219
9/30/2001 3,801,818 3,949,606 4,264,086
10/31/2001 3,903,327 4,033,352 4,372,280
11/30/2001 3,950,557 4,007,245 4,300,525
12/31/2001 3,920,138 3,982,774 4,266,628
1/31/2002 3,946,011 4,004,551 4,297,983
2/28/2002 3,961,006 4,023,698 4,334,459
3/31/2002 3,975,661 3,970,945 4,246,521
4/30/2002 4,090,558 4,031,699 4,328,778
5/31/2002 4,146,190 4,063,576 4,368,729
6/30/2002 4,083,168 4,044,471 4,405,877
7/31/2002 3,972,105 4,024,217 4,458,946
8/31/2002 4,116,690 4,105,564 4,558,918
9/30/2002 4,057,410 4,142,537 4,656,983
10/31/2002 4,087,029 4,112,979 4,612,473
11/30/2002 4,235,388 4,172,245 4,615,201
12/31/2002 4,371,767 4,269,378 4,737,483
1/31/2003 4,492,428 4,297,661 4,737,334
2/28/2003 4,605,188 4,369,988 4,821,721
3/31/2003 4,653,543 4,377,472 4,815,442
4/30/2003 4,903,438 4,465,808 4,866,904
5/31/2003 5,169,204 4,582,770 5,005,220
6/30/2003 5,237,955 4,588,720 4,985,188
7/31/2003 5,028,436 4,432,351 4,776,201
8/31/2003 5,084,755 4,467,340 4,807,706
9/30/2003 5,334,416 4,604,916 4,959,999
10/31/2003 5,386,694 4,586,679 4,897,214
11/30/2003 5,519,745 4,618,189 4,910,219
12/31/2003 5,689,753 4,685,504 4,958,654
1/31/2004 5,736,978 4,728,143 5,003,688
2/29/2004 5,762,795 4,769,917 5,064,904
3/31/2004 5,823,304 4,802,695 5,111,395
4/30/2004 5,577,560 4,680,325 4,954,468
5/31/2004 5,517,323 4,644,737 4,929,092
6/30/2004 5,598,979 4,672,147 4,949,386
7/31/2004 5,672,326 4,720,979 5,001,670
8/31/2004 5,844,765 4,816,889 5,107,509
9/30/2004 6,004,327 4,846,745 5,125,373
10/31/2004 6,142,426 4,894,639 5,169,771
11/30/2004 6,276,331 4,878,393 5,112,255
12/31/2004 6,385,539 4,933,968 5,166,595
1/31/2005 6,356,804 4,960,128 5,202,510
2/28/2005 6,437,536 4,952,106 5,168,239
3/31/2005 6,313,935 4,896,450 5,131,838
4/30/2005 6,294,993 4,936,423 5,208,788
5/31/2005 6,385,641 4,987,831 5,274,115
6/30/2005 6,494,836 5,029,999 5,308,573
7/31/2005 6,523,413 5,006,710 5,248,814
8/31/2005 6,608,869 5,068,901 5,327,184
9/30/2005 6,599,617 5,018,312 5,257,485
10/31/2005 6,537,581 4,974,872 5,212,488
11/30/2005 6,575,499 4,995,309 5,239,210
12/31/2005 6,648,487 5,044,315 5,288,990
1/31/2006 6,782,121 5,062,727 5,279,310
2/28/2006 6,864,185 5,086,025 5,293,587
3/31/2006 6,812,704 5,030,373 5,235,435
4/30/2006 6,905,356 5,027,115 5,219,029
5/31/2006 6,818,349 5,014,979 5,216,114
6/30/2006 6,802,667 5,015,652 5,228,110
7/31/2006 6,879,537 5,085,072 5,296,166
8/31/2006 7,059,093 5,177,896 5,379,917
9/30/2006 7,131,095 5,228,980 5,432,575
INCEPTION TO SEPTEMBER 30, 2006(c)
[CHART]
Loomis Sayles Fixed Lipper BBB Rated Lehman Government
Income Fund Funds CV Credit Index
----------- -------- ------------
1/17/1995 $3,000,000 $3,000,000 $3,000,000
1/31/1995 3,027,000 3,000,000 3,000,000
2/28/1995 3,096,016 3,068,543 3,069,564
3/31/1995 3,149,886 3,092,644 3,090,149
4/30/1995 3,242,808 3,148,254 3,133,259
5/31/1995 3,413,704 3,284,046 3,264,577
6/30/1995 3,464,568 3,308,853 3,290,669
7/31/1995 3,461,450 3,301,093 3,277,984
8/31/1995 3,530,333 3,349,649 3,319,921
9/30/1995 3,629,182 3,388,917 3,353,642
10/31/1995 3,641,158 3,434,063 3,402,892
11/30/1995 3,731,095 3,490,379 3,458,913
12/31/1995 3,806,090 3,547,988 3,509,879
1/31/1996 3,897,817 3,576,674 3,531,727
2/29/1996 3,787,119 3,501,430 3,456,792
3/31/1996 3,768,183 3,475,600 3,427,765
4/30/1996 3,733,516 3,453,413 3,404,246
5/31/1996 3,768,238 3,451,048 3,398,513
6/30/1996 3,815,717 3,490,593 3,443,881
7/31/1996 3,809,231 3,499,241 3,451,916
8/31/1996 3,859,894 3,497,505 3,443,430
9/30/1996 3,979,936 3,567,498 3,504,642
10/31/1996 4,106,896 3,653,128 3,586,439
11/30/1996 4,262,548 3,734,576 3,652,482
12/31/1996 4,195,199 3,698,449 3,611,764
1/31/1997 4,209,043 3,710,200 3,616,053
2/28/1997 4,267,970 3,731,364 3,623,682
3/31/1997 4,219,315 3,673,749 3,580,616
4/30/1997 4,264,462 3,728,019 3,632,981
5/31/1997 4,368,515 3,770,718 3,666,882
6/30/1997 4,462,438 3,826,934 3,710,896
7/31/1997 4,665,925 3,959,255 3,824,428
8/31/1997 4,574,006 3,906,810 3,781,498
9/30/1997 4,708,482 3,975,534 3,840,950
10/31/1997 4,719,312 4,015,911 3,902,478
11/30/1997 4,754,706 4,035,537 3,923,018
12/31/1997 4,757,084 4,078,834 3,964,187
1/31/1998 4,813,693 4,130,891 4,020,073
2/28/1998 4,855,091 4,129,376 4,011,902
3/31/1998 4,926,946 4,150,335 4,024,271
4/30/1998 4,945,669 4,168,110 4,044,495
5/31/1998 4,949,625 4,203,756 4,087,967
6/30/1998 4,953,585 4,234,601 4,129,542
7/31/1998 4,910,489 4,231,308 4,132,838
8/31/1998 4,576,084 4,200,557 4,213,597
9/30/1998 4,735,790 4,287,155 4,334,081
10/31/1998 4,686,537 4,234,277 4,303,474
11/30/1998 4,937,267 4,312,564 4,329,115
12/31/1998 4,933,317 4,323,287 4,339,723
1/31/1999 5,016,197 4,360,906 4,370,555
2/28/1999 4,916,876 4,266,552 4,266,684
3/31/1999 5,078,642 4,314,095 4,287,855
4/30/1999 5,236,079 4,345,035 4,298,509
5/31/1999 5,119,839 4,286,414 4,254,134
6/30/1999 5,090,655 4,263,900 4,240,863
7/31/1999 5,015,823 4,242,383 4,229,126
8/31/1999 4,974,191 4,226,685 4,225,740
9/30/1999 5,011,498 4,263,008 4,263,840
10/31/1999 5,024,027 4,271,382 4,274,900
11/30/1999 5,057,185 4,281,720 4,272,508
12/31/1999 5,117,871 4,274,806 4,246,506
1/31/2000 5,099,959 4,262,269 4,245,332
2/29/2000 5,255,508 4,314,699 4,298,555
3/31/2000 5,313,318 4,354,457 4,360,670
4/30/2000 5,170,921 4,301,627 4,339,408
5/31/2000 5,090,772 4,268,904 4,335,481
6/30/2000 5,250,622 4,376,922 4,424,004
7/31/2000 5,277,400 4,395,678 4,470,862
8/31/2000 5,384,004 4,475,865 4,533,970
9/30/2000 5,308,628 4,488,608 4,551,034
10/31/2000 5,175,381 4,474,101 4,579,563
11/30/2000 5,148,469 4,515,574 4,657,885
12/31/2000 5,313,735 4,610,131 4,749,794
1/31/2001 5,506,092 4,721,649 4,829,469
2/28/2001 5,515,453 4,768,280 4,879,306
3/31/2001 5,385,840 4,765,312 4,901,696
4/30/2001 5,323,364 4,739,177 4,864,951
5/31/2001 5,419,717 4,781,924 4,892,939
6/30/2001 5,395,870 4,787,513 4,916,413
7/31/2001 5,501,629 4,896,102 5,038,928
8/31/2001 5,602,309 4,954,812 5,103,617
9/30/2001 5,395,584 4,912,471 5,150,564
10/31/2001 5,539,646 5,016,634 5,281,250
11/30/2001 5,606,676 4,984,162 5,194,578
12/31/2001 5,563,504 4,953,725 5,153,634
1/31/2002 5,600,223 4,980,811 5,191,508
2/28/2002 5,621,504 5,004,626 5,235,566
3/31/2002 5,642,304 4,939,012 5,129,347
4/30/2002 5,805,366 5,014,577 5,228,705
5/31/2002 5,884,319 5,054,226 5,276,962
6/30/2002 5,794,878 5,030,464 5,321,833
7/31/2002 5,637,257 5,005,272 5,385,934
8/31/2002 5,842,453 5,106,450 5,506,689
9/30/2002 5,758,322 5,152,437 5,625,142
10/31/2002 5,800,357 5,115,672 5,571,378
11/30/2002 6,010,910 5,189,387 5,574,673
12/31/2002 6,204,462 5,310,199 5,722,378
1/31/2003 6,375,705 5,345,378 5,722,197
2/28/2003 6,535,735 5,435,337 5,824,128
3/31/2003 6,604,360 5,444,646 5,816,544
4/30/2003 6,959,014 5,554,517 5,878,704
5/31/2003 7,336,193 5,699,993 6,045,775
6/30/2003 7,433,764 5,707,393 6,021,579
7/31/2003 7,136,414 5,512,903 5,769,145
8/31/2003 7,216,342 5,556,422 5,807,199
9/30/2003 7,570,664 5,727,537 5,991,153
10/31/2003 7,644,857 5,704,854 5,915,314
11/30/2003 7,833,684 5,744,045 5,931,024
12/31/2003 8,074,962 5,827,772 5,989,528
1/31/2004 8,141,984 5,880,805 6,043,924
2/29/2004 8,178,623 5,932,764 6,117,866
3/31/2004 8,264,499 5,973,533 6,174,023
4/30/2004 7,915,737 5,821,330 5,984,472
5/31/2004 7,830,247 5,777,066 5,953,820
6/30/2004 7,946,134 5,811,159 5,978,332
7/31/2004 8,050,229 5,871,895 6,041,486
8/31/2004 8,294,956 5,991,186 6,169,328
9/30/2004 8,521,408 6,028,321 6,190,906
10/31/2004 8,717,400 6,087,891 6,244,534
11/30/2004 8,907,440 6,067,684 6,175,061
12/31/2004 9,062,429 6,136,807 6,240,697
1/31/2005 9,021,648 6,169,346 6,284,079
2/28/2005 9,136,223 6,159,368 6,242,684
3/31/2005 8,960,808 6,090,143 6,198,715
4/30/2005 8,933,925 6,139,862 6,291,663
5/31/2005 9,062,574 6,203,802 6,370,571
6/30/2005 9,217,544 6,256,250 6,412,192
7/31/2005 9,258,101 6,227,284 6,340,010
8/31/2005 9,379,382 6,304,636 6,434,672
9/30/2005 9,366,251 6,241,714 6,350,482
10/31/2005 9,278,208 6,187,683 6,296,131
11/30/2005 9,332,022 6,213,103 6,328,408
12/31/2005 9,435,607 6,274,055 6,388,537
1/31/2006 9,625,263 6,296,956 6,376,845
2/28/2006 9,741,729 6,325,933 6,394,089
3/31/2006 9,668,666 6,256,714 6,323,848
4/30/2006 9,800,160 6,252,662 6,304,030
5/31/2006 9,676,678 6,237,567 6,300,509
6/30/2006 9,654,421 6,238,405 6,315,000
7/31/2006 9,763,516 6,324,749 6,397,203
8/31/2006 10,018,344 6,440,202 6,498,366
9/30/2006 10,120,531 6,503,740 6,561,971
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) Shares of the Fund were registered for offer and sale 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 long-term shareholders. Since index performance data is not
available coincident with the Fund's inception and registration dates,
comparative performance is presented from the month end closest to the Fund's
inception and registration dates. (b) See page 15 for a description of the
indices. (c) The mountain chart is based on the Fund's minimum initial
investment of $3,000,000.
WHAT YOU SHOULD KNOW
High yield securities are subject to a high degree of market and credit risk.
The secondary market for these securities may lack liquidity which may
adversely affect the value of the Fund. Foreign investments involve special
risks, including greater economic, political and currency fluctuation risks,
which may be even greater in emerging markets. Foreign countries may have
different accounting standards than those of the US. Securities issued by US
government agencies are not issued, and may not be guaranteed by the US
government.
4
FUND AND MANAGER REVIEW
LOOMIS SAYLES GLOBAL BOND FUND
[PHOTO]
Ken Buntrock
Manager since September 2000
[PHOTO]
David Rolley
Manager since September 2000
Manager since September 2000
FUND FACTS
SYMBOL | Institutional: LSGBX;
Retail: LSGLX
OBJECTIVE | High total investment return through a combination of high current
income and capital appreciation
STRATEGY | Invests primarily in investment-grade fixed-income securities
worldwide, although it may invest up to 20% of assets in lower-rated
fixed-income securities
FUND INCEPTION DATE | 5/10/91
COMMENCEMENT OF OPERATIONS OF CLASS | Institutional: 5/10/91; Retail: 1/2/97
EXPENSE RATIO | Institutional: 0.74%; Retail: 1.00%
TOTAL NET ASSETS | $1,184.7 million
PORTFOLIO REVIEW
The Fund's holdings in emerging market bonds denominated in hard and local
currencies were the top-performing bonds during the 2006 fiscal year. In
particular, currency-linked notes issued by US and British commercial banks
showed strong positive returns from currency and local market perspectives. In
addition, our overweight position in the corporate bond sector helped the Fund
outperform its Benchmark, the Lehman Global Aggregate Bond Index, for the
fiscal year ended September 30, 2006.
Our country strategy generated mixed results. The Fund's overweight in hedged
Australian and New Zealand currency bonds produced positive results, but
underperformed the US dollar segment as hedging costs eroded healthy local bond
market returns. On the other hand, our positions in bonds denominated in the
Brazilian real and Indonesian rupiah produced double-digit returns.
Our strategy of overweighting non-yen Asian currencies also paid off, as these
currencies appreciated during the fiscal year. Positive performers included
holdings denominated in the Swedish krona and the Canadian dollar. Our South
African-rand-denominated bonds and our overweight to bonds denominated in the
Japanese yen hurt the Fund's performance from a currency perspective.
The high yield corporate bond market posted healthy returns for the fiscal
year, while returns for the investment grade corporate bond market were more
muted, particularly during the first three months of the period. The Fund
maintained an overweight position in corporate bonds.
We realized performance advantages from the defensive duration strategy we
pursued throughout the first six to nine months of the fiscal year, when most
major bond markets sold off. As yields started to peak, we extended duration,
particularly in securities denominated in US dollars. But we failed to extend
duration enough in other markets to take full advantage of declining yields
throughout all major markets in the final three months of the fiscal year. This
offset some of the strong returns we garnered in the first nine months.
Currency-linked notes in the Indonesian rupiah and Brazilian real issued by
JPMorgan Chase and the Inter-American Development Bank were the Fund's top
performers, followed by high yield bonds issued by Albertson's and Qwest. The
Fund's worst performers included bonds issued by automobile parts supplier Lear
Corp., which was sold, and paper and building materials company Georgia
Pacific, which was acquired by Koch Industries.
OUTLOOK
For the US economy, we expect a couple of quarters of soft real growth but no
recession. We think the Federal Reserve Board will continue to keep short term
interest rates at their present levels for a time and that US bonds may
continue to fluctuate within a narrow range, but signs of a
deeper-than-expected slump could push 10-year Treasurys below 4.50%. Outside
the United States, we expect at least two more rate hikes from the European
Central Bank (ECB), which should help keep the euro near its recent highs
versus the US dollar. In Japan we are more optimistic, as exports and corporate
profitability appear robust, and wage bonuses should be more generous than in
past years. We expect another rate hike from the Bank of Japan by early 2007.
In this environment, we are retaining a close-to-neutral US dollar duration and
maintaining an underweight to US dollars, due to the outlook for weaker US
economic growth. The yen bond market appears uninspiring, and we are keeping
the Fund's yen duration short. We are also
5
maintaining overweights in non-Japan Asian currencies, because we believe lower
oil prices may help these markets outperform in 2007. We believe the recent
euro bond rally was overdone in light of anticipated rate hikes from the ECB.
Therefore, we remain modestly underweight in euro duration. The Fund remains
overweight in Scandinavian bonds, including Norwegian securities, which
recently declined on falling oil prices. Overall, we have not been aggressive
buyers of credit. The slowdown in the United States may prove to be greater
than we expect, and we believe weaker growth could cause credit spreads to
widen.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
------------------------------------------
LOOMIS SAYLES GLOBAL BOND: INSTITUTIONAL
4.32% 10.53% 7.60% 8.47%
------------------------------------------
LOOMIS SAYLES GLOBAL BOND: RETAIL(b)
4.03 10.25 7.35 8.30
------------------------------------------
LEHMAN GLOBAL AGGREGATE BOND INDEX(c)
3.22 6.90 5.62 6.99
------------------------------------------
LIPPER GLOBAL INCOME FUNDS INDEX(c)
3.58 6.97 5.28 6.23
------------------------------------------
CUMULATIVE PERFORMANCE(d)
INCEPTION TO SEPTEMBER 30, 2006(e)
[CHART]
Lipper Global
Loomis Sayles Income Funds Lehman Global
Global Bond Fund Index Aggregate Bond Index
---------------- --------------- --------------------
5/10/1991 $100,000 $100,000 $100,000
5/31/1991 100,000 100,426 100,310
6/30/1991 95,600 98,704 99,487
7/31/1991 98,602 100,213 101,363
8/31/1991 100,002 101,681 103,443
9/30/1991 105,302 104,978 106,842
10/31/1991 105,808 106,110 108,116
11/30/1991 108,220 106,224 109,444
12/31/1991 116,878 109,866 114,233
1/31/1992 112,670 108,045 112,462
2/29/1992 111,746 108,545 112,462
3/31/1992 111,131 107,963 111,498
4/30/1992 112,154 108,783 112,223
5/31/1992 116,046 111,063 115,401
6/30/1992 120,455 112,728 118,030
7/31/1992 123,515 114,671 120,455
8/31/1992 122,230 115,409 123,013
9/30/1992 118,466 114,040 123,447
10/31/1992 119,958 113,867 120,676
11/30/1992 117,319 112,719 119,534
12/31/1992 117,859 113,736 120,853
1/31/1993 118,083 115,253 122,933
2/28/1993 120,598 117,902 124,872
3/31/1993 123,565 119,108 126,226
4/30/1993 127,346 120,559 128,040
5/31/1993 128,161 121,880 128,908
6/30/1993 123,880 123,446 129,572
7/31/1993 122,493 124,881 129,616
8/31/1993 128,997 127,874 132,917
9/30/1993 131,900 127,784 134,068
10/31/1993 134,221 129,506 134,201
11/30/1993 132,932 128,662 133,006
12/31/1993 135,073 131,507 134,245
1/31/1994 137,639 133,123 135,838
2/28/1994 133,606 128,645 134,130
3/31/1994 130,066 124,643 132,501
4/30/1994 129,220 123,676 132,183
5/31/1994 126,377 122,782 131,439
6/30/1994 121,916 121,732 132,324
7/31/1994 122,672 122,716 134,245
8/31/1994 122,169 122,741 134,086
9/30/1994 121,546 123,069 133,873
10/31/1994 121,923 124,266 135,281
11/30/1994 123,435 123,725 133,926
12/31/1994 123,311 122,035 134,555
1/31/1995 122,559 122,208 137,369
2/28/1995 122,314 123,922 140,759
3/31/1995 119,672 127,136 145,468
4/30/1995 125,069 130,203 147,743
5/31/1995 132,598 134,509 152,292
6/30/1995 131,087 134,402 153,337
7/31/1995 134,600 135,419 154,054
8/31/1995 138,988 134,927 152,177
9/30/1995 141,754 137,182 155,001
10/31/1995 143,384 138,445 156,851
11/30/1995 149,406 140,815 158,718
12/31/1995 152,768 143,694 161,011
1/31/1996 156,388 145,375 160,391
2/29/1996 153,167 142,833 158,931
3/31/1996 153,978 142,948 158,444
4/30/1996 156,935 144,171 157,709
5/31/1996 157,876 144,585 157,860
6/30/1996 161,492 145,992 159,719
7/31/1996 161,217 147,487 161,799
8/31/1996 162,958 148,830 162,117
9/30/1996 167,896 151,658 163,887
10/31/1996 171,942 154,729 167,472
11/30/1996 177,341 158,494 170,092
12/31/1996 175,710 158,096 168,915
1/31/1997 173,584 156,745 166,189
2/28/1997 176,431 156,861 165,410
3/31/1997 174,860 154,912 163,861
4/30/1997 174,003 155,358 164,233
5/31/1997 177,988 157,586 167,145
6/30/1997 181,975 159,501 168,950
7/31/1997 183,959 160,841 169,729
8/31/1997 181,825 160,023 169,340
9/30/1997 185,516 163,431 172,774
10/31/1997 182,956 163,264 175,916
11/30/1997 182,388 163,275 174,960
12/31/1997 179,762 163,811 175,305
1/31/1998 183,717 165,024 176,969
2/28/1998 187,207 166,441 177,943
3/31/1998 185,073 167,142 177,483
4/30/1998 187,498 168,470 179,687
5/31/1998 186,898 168,270 180,944
6/30/1998 183,104 167,764 181,289
7/31/1998 184,770 168,495 182,360
8/31/1998 173,832 162,447 186,183
9/30/1998 181,272 169,109 194,999
10/31/1998 191,604 170,551 197,495
11/30/1998 199,498 172,352 196,300
12/31/1998 198,780 174,179 199,336
1/31/1999 202,716 174,549 198,548
2/28/1999 199,918 170,072 192,645
3/31/1999 206,496 171,431 192,901
4/30/1999 214,549 172,987 192,707
5/31/1999 209,293 169,531 189,901
6/30/1999 206,990 167,934 187,148
7/31/1999 207,984 168,528 190,025
8/31/1999 205,530 168,178 189,724
9/30/1999 207,009 169,696 192,061
10/31/1999 206,181 169,468 191,768
11/30/1999 204,718 168,594 189,671
12/31/1999 206,376 169,398 189,025
1/31/2000 201,154 166,621 185,794
2/29/2000 202,241 168,007 185,449
3/31/2000 204,587 170,016 189,157
4/30/2000 197,385 166,790 184,537
5/31/2000 197,918 166,721 185,387
6/30/2000 203,143 170,366 190,087
7/31/2000 200,990 169,846 188,193
8/31/2000 198,839 169,747 187,361
9/30/2000 196,672 169,505 187,892
10/31/2000 190,555 167,818 186,369
11/30/2000 194,024 170,258 189,573
12/31/2000 205,684 176,470 195,026
1/31/2001 208,934 178,260 195,964
2/28/2001 208,746 177,987 196,291
3/31/2001 203,778 175,955 192,264
4/30/2001 203,207 175,109 192,034
5/31/2001 199,773 175,328 192,397
6/30/2001 202,250 175,406 191,043
7/31/2001 206,841 178,066 195,424
8/31/2001 216,025 181,854 201,310
9/30/2001 211,813 181,159 202,868
10/31/2001 217,362 184,763 204,700
11/30/2001 218,884 182,776 202,319
12/31/2001 216,213 180,877 198,097
1/31/2002 214,311 180,525 196,318
2/28/2002 216,797 181,215 197,637
3/31/2002 217,360 180,102 196,468
4/30/2002 225,011 183,907 202,284
5/31/2002 230,929 186,449 206,815
6/30/2002 237,418 189,334 214,020
7/31/2002 234,546 189,097 215,941
8/31/2002 239,706 192,356 219,464
9/30/2002 242,390 194,075 221,889
10/31/2002 242,584 193,810 221,260
11/30/2002 247,557 194,927 221,836
12/31/2002 260,306 202,003 230,829
1/31/2003 267,517 204,540 233,422
2/28/2003 271,717 207,683 236,440
3/31/2003 273,320 208,409 237,033
4/30/2003 281,547 212,257 240,078
5/31/2003 296,976 220,093 248,610
6/30/2003 294,570 218,591 245,911
7/31/2003 283,347 212,175 238,750
8/31/2003 281,534 211,791 238,201
9/30/2003 299,158 220,744 249,646
10/31/2003 296,944 219,425 248,256
11/30/2003 303,744 221,700 251,496
12/31/2003 315,560 228,690 259,710
1/31/2004 316,380 229,796 260,674
2/29/2004 319,924 230,860 262,020
3/31/2004 322,227 233,494 264,923
4/30/2004 310,337 225,765 255,240
5/31/2004 311,578 226,032 256,506
6/30/2004 311,796 226,610 257,240
7/31/2004 312,825 227,240 257,187
8/31/2004 320,333 231,694 262,816
9/30/2004 324,914 234,170 265,914
10/31/2004 333,037 239,015 272,287
11/30/2004 342,228 244,599 279,501
12/31/2004 346,438 248,141 283,785
1/31/2005 342,142 246,359 280,802
2/28/2005 343,853 247,253 281,333
3/31/2005 338,489 244,262 277,934
4/30/2005 342,347 246,847 281,563
5/31/2005 337,623 245,636 277,793
6/30/2005 336,543 245,769 276,553
7/31/2005 335,264 244,235 274,332
8/31/2005 340,427 247,865 278,846
9/30/2005 334,844 245,000 274,411
10/31/2005 330,323 241,785 270,322
11/30/2005 327,516 239,735 268,410
12/31/2005 331,413 243,390 271,057
1/31/2006 336,848 246,944 274,473
2/28/2006 336,410 245,801 273,500
3/31/2006 334,358 244,480 270,791
4/30/2006 342,048 249,387 275,916
5/31/2006 343,861 250,464 279,474
6/30/2006 341,833 248,671 277,253
7/31/2006 346,140 251,724 280,014
8/31/2006 349,324 253,868 283,254
9/30/2006 349,324 253,764 283,236
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) 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) Performance shown for periods
prior to the inception date of the Retail Class (12/31/96) represents the
performance of the Institutional Class during the periods shown, adjusted to
reflect the current levels of 12b-1 fees payable by the respective Classes of
shares. (c) See page 15 for a description of the indices. (d) Performance is
shown for the Institutional Class. Performance of the Retail Class would be
lower due to higher fees. (e) The mountain chart is based on the Institutional
Class minimum initial investment of $100,000.
WHAT YOU SHOULD KNOW
High yield securities are subject to a high degree of market and credit risk.
The secondary market for these securities may lack liquidity, which
may adversely affect the value of these securities and that of the Fund.
Foreign investments involve special risks, including greater economic,
political and currency fluctuation risks, which may be even greater in emerging
markets. Foreign countries may have different accounting standards than those
of the US Securities issued by US government agencies are not issued, and may
not be guaranteed by the US government.
6
FUND AND MANAGER REVIEW
LOOMIS SAYLES INFLATION PROTECTED SECURITIES FUND
[PHOTO]
John Hyll
Manager since January 2003
Manager since January 2003
[PHOTO]
Cliff Rowe
Manager since January 2003
Manager since January 2003
FUND FACTS
SYMBOL | LSGSX
OBJECTIVE | High total investment return through a combination of current
income and capital appreciation
STRATEGY | Invests primarily in inflation-protected securities with emphasis
on debt securities issued by the US Treasury
FUND INCEPTION DATE | 5/21/91
EXPENSE RATIO | 0.40%
TOTAL NET ASSETS | $9.1 million
PORTFOLIO REVIEW
Real yields continued to rise during the Fund's fiscal year ended September 30,
2006, as the Federal Reserve Board's six tightening moves pushed the federal
funds target from 3.75% to 5.25%. The real yield on 10-year TIPS (Treasury
Inflation-Protected Securities) ended the period at 2.27%, 51 basis points
higher than at the beginning of the period. The real yield curve flattened
during the year, as five-year TIPS increased in yield by 91 basis points and
yields on 30-year TIPS increased by 32 basis points. Most of the flattening
occurred early in the period, when the market was anticipating the Fed would
end its tightening activity either at its June 29 or August 8 meeting. In fact,
the Fed did hold interest rates steady at 5.25% in August and September.
The concern in the TIPS market was whether inflation was under control,
particularly in the short term, as oil prices continued to increase rapidly.
These concerns led to the flattening of the real yield curve.
The Fund slightly underperformed its Benchmark, the Lehman US Treasury
Inflation Protected Securities Index, for the 2006 fiscal year, primarily due
to the Fund's longer duration. The Fund's duration strategy hurt relative
performance during the first three quarters of the fiscal year, when interest
rates were on the rise, but it benefited the Fund significantly during the
final quarter when interest rates retreated and we further extended the Fund's
duration. Unfortunately, the decline in interest rates in the fourth quarter
was not enough to offset the impact of rising rates during the first three
fiscal quarters.
The Fund held approximately 4% of its assets in investment grade bonds during
the period. This exposure contributed positively to performance, as quality
spreads tightened. The Fund also had a small position in bonds denominated in
foreign currencies, with the largest weighting--2.4%--in Japanese yen. We
expected support for the yen to develop when Japan ended its policy of
quantitative easing. Nevertheless, the interest rate differential between US
and Japanese government securities remained wide (in favor of the US), and the
strength we expected for the yen did not develop.
OUTLOOK
The recent inversion of the yield curve suggests that bondholders are
pessimistic about the economy. Many investors seem to expect the Fed to ease in
the first half of 2007. We disagree with that view. Instead, we believe the
current slowdown is a mid-cycle correction. Our forecast calls for real GDP
growth to rebound to approximately 3% or higher in 2007.
With the recent moderation in inflationary pressures, we believe the Fed can
afford to "wait and see" if the 425 basis points of tightening in the pipeline
are sufficient to keep inflation at bay. In contrast to a steady federal funds
rate, yields on long term bonds may be vulnerable to an increase. We believe
yields were pushed too low recently by economic pessimism and plunging oil
prices. If our outlook proves correct, and economic growth rebounds to 3% while
inflation remains near 2.3%, we believe the 10-year Treasury yield should move
higher, perhaps closer to 4.75% or 5.00%.
7
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
-------------------------------------------------------------
LOOMIS SAYLES INFLATION PROTECTED SECURITIES: INSTITUTIONAL
1.48% 4.66% 6.76% 7.70%
-------------------------------------------------------------
LEHMAN US TREASURY INFLATION PROTECTED SECURITIES INDEX(b)
1.91 7.25 N/A N/A
-------------------------------------------------------------
LIPPER TREASURY INFLATION PROTECTED SECURITIES INDEX(b)
1.42 N/A N/A N/A
-------------------------------------------------------------
INCEPTION TO SEPTEMBER 30, 2006(c)
[CHART]
Loomis Lehman Lipper
Sayles US Treasury Treasury Inflation
Inflation Inflation Protected
Protected Protected Securities
Securities Securities Funds
Fund/(1)/ Index/(1)/ Index/(2)/
---------------- ------------ ------------------
5/21/1991 $100,000 $100,000 $100,000
5/31/1991 100,300 100,000 100,000
6/30/1991 99,999 99,860 99,860
7/31/1991 101,499 101,048 101,048
8/31/1991 104,300 103,393 103,393
9/30/1991 107,200 105,564 105,564
10/31/1991 108,015 106,493 106,493
11/30/1991 109,127 107,558 107,558
12/31/1991 115,282 111,226 111,226
1/31/1992 111,316 109,490 109,490
2/29/1992 112,919 109,918 109,918
3/31/1992 111,417 109,276 109,276
4/30/1992 110,883 109,963 109,963
5/31/1992 114,254 111,993 111,993
6/30/1992 116,207 113,597 113,597
7/31/1992 120,670 116,461 116,461
8/31/1992 121,780 117,546 117,546
9/30/1992 124,325 119,209 119,209
10/31/1992 121,329 117,489 117,489
11/30/1992 121,778 117,284 117,284
12/31/1992 125,358 119,259 119,259
1/31/1993 128,241 121,794 121,794
2/28/1993 132,435 124,233 124,233
3/31/1993 132,554 124,648 124,648
4/30/1993 133,601 125,607 125,607
5/31/1993 133,841 125,469 125,469
6/30/1993 138,713 128,252 128,252
7/31/1993 140,822 129,035 129,035
8/31/1993 145,891 131,915 131,915
9/30/1993 146,387 132,421 132,421
10/31/1993 146,622 132,920 132,920
11/30/1993 144,496 131,463 131,463
12/31/1993 145,074 131,972 131,972
1/31/1994 148,787 133,777 133,777
2/28/1994 143,550 130,944 130,944
3/31/1994 137,492 128,001 128,001
4/30/1994 135,251 126,993 126,993
5/31/1994 134,413 126,831 126,831
6/30/1994 133,714 126,538 126,538
7/31/1994 137,712 128,865 128,865
8/31/1994 137,574 128,889 128,889
9/30/1994 133,584 127,073 127,073
10/31/1994 132,890 126,979 126,979
11/30/1994 133,474 126,745 126,745
12/31/1994 136,010 127,518 127,518
1/31/1995 139,547 129,890 129,890
2/28/1995 142,645 132,687 132,687
3/31/1995 143,672 133,519 133,519
4/30/1995 145,597 135,263 135,263
5/31/1995 152,950 140,718 140,718
6/30/1995 154,143 141,798 141,798
7/31/1995 153,495 141,277 141,277
8/31/1995 156,534 142,937 142,937
9/30/1995 158,820 144,313 144,313
10/31/1995 161,123 146,510 146,510
11/30/1995 164,055 148,795 148,795
12/31/1995 167,303 150,904 150,904
1/31/1996 167,454 151,831 151,831
2/29/1996 161,643 148,737 148,737
3/31/1996 159,445 147,495 147,495
4/30/1996 157,420 146,554 146,554
5/31/1996 156,617 146,308 146,308
6/30/1996 159,499 148,197 148,197
7/31/1996 159,882 148,563 148,563
8/31/1996 157,931 148,231 148,231
9/30/1996 162,322 150,691 150,691
10/31/1996 168,230 154,006 154,006
11/30/1996 172,856 156,686 156,686
12/31/1996 169,520 155,086 155,086
1/31/1997 169,012 155,258 155,258
2/28/1997 169,012 155,472 155,472
3/31/1997 165,310 153,826 153,826
4/30/1997 169,394 156,046 156,046
5/31/1997 171,274 157,392 157,392
6/30/1997 174,014 159,159 159,159
7/31/1997 182,106 163,677 163,677
8/31/1997 178,974 162,058 162,058
9/30/1997 182,965 164,495 164,495
10/31/1997 186,624 167,341 167,341
11/30/1997 188,733 168,198 168,198
12/31/1997 191,073 169,956 169,956
1/31/1998 193,939 172,499 172,499
2/28/1998 193,222 172,031 172,031
3/31/1998 193,570 172,519 172,519
4/30/1998 194,808 173,295 173,295
5/31/1998 197,166 175,074 175,074
6/30/1998 199,512 177,066 177,066
7/31/1998 199,791 177,339 177,339
8/31/1998 204,386 181,953 181,953
9/30/1998 209,333 186,857 186,857
10/31/1998 207,742 186,220 186,220
11/30/1998 209,217 186,283 186,283
12/31/1998 208,777 186,699 186,699
1/31/1999 210,656 187,784 187,784
2/28/1999 204,631 183,318 183,318
3/31/1999 204,631 184,037 184,037
4/30/1999 205,696 184,454 184,454
5/31/1999 203,207 182,837 182,837
6/30/1999 201,296 182,464 182,464
7/31/1999 200,230 182,199 182,199
8/31/1999 199,649 182,197 182,197
9/30/1999 201,985 183,677 183,677
10/31/1999 202,712 183,971 183,971
11/30/1999 201,719 183,718 183,718
12/31/1999 199,439 182,529 182,529
1/31/2000 200,436 182,784 182,784
2/29/2000 205,247 185,386 185,386
3/31/2000 210,850 188,640 188,640
4/30/2000 209,901 188,118 188,118
5/31/2000 209,083 188,239 188,239
6/30/2000 213,975 191,596 191,596
7/31/2000 216,115 193,452 193,452
8/31/2000 220,481 196,312 196,312
9/30/2000 220,282 196,871 196,871
10/31/2000 223,410 198,755 198,755
11/30/2000 229,509 202,663 202,663
12/31/2000 234,650 206,703 206,703
1/31/2001 235,706 208,783 208,783
2/28/2001 238,700 211,158 211,158
3/31/2001 237,769 211,898 211,898
4/30/2001 233,227 209,735 209,735
5/31/2001 233,880 210,427 210,427
6/30/2001 234,933 211,396 211,396
7/31/2001 242,380 216,472 216,472
8/31/2001 245,458 219,159 219,159
9/30/2001 248,625 222,974 222,974
10/31/2001 258,843 228,727 228,727
11/30/2001 249,059 223,595 223,595
12/31/2001 245,622 221,651 221,651
1/31/2002 248,324 223,086 223,086
2/28/2002 251,701 225,145 225,145
3/31/2002 245,308 220,248 220,248
4/30/2002 252,152 225,496 225,496
5/31/2002 254,421 226,848 226,848
6/30/2002 257,958 230,022 230,022
7/31/2002 263,968 235,073 235,073
8/31/2002 271,834 239,731 239,731
9/30/2002 279,473 245,351 245,351
10/31/2002 275,504 243,379 243,379
11/30/2002 273,108 241,284 241,284
12/31/2002 280,509 247,130 247,130
1/31/2003 280,761 246,510 246,510
2/28/2003 287,106 250,487 250,487
3/31/2003 285,269 249,773 249,773
4/30/2003 285,526 250,930 250,930
5/31/2003 293,692 257,443 257,443
6/30/2003 291,930 256,095 256,095
7/31/2003 278,734 245,509 245,509
8/31/2003 281,717 246,883 246,883
9/30/2003 291,464 254,059 254,059
10/31/2003 285,926 250,443 250,443
11/30/2003 286,498 250,731 250,731
12/31/2003 288,905 252,953 252,953
1/31/2004 291,534 255,047 255,047
2/29/2004 295,207 258,102 258,102
3/31/2004 297,303 260,374 260,374
4/30/2004 284,846 252,539 252,539
5/31/2004 286,441 251,605 251,605
6/30/2004 287,873 252,626 252,626
7/31/2004 290,810 254,979 254,979
8/31/2004 297,498 259,945 259,945
9/30/2004 298,242 260,473 260,473
10/31/2004 300,151 262,547 262,547
11/30/2004 297,179 259,427 259,427
12/31/2004 301,578 261,748 261,748
1/31/2005 301,578 261,768 261,879
2/28/2005 300,221 260,650 260,753
3/31/2005 299,800 260,883 261,092
4/30/2005 304,477 265,865 265,843
5/31/2005 306,943 267,693 267,970
6/30/2005 308,233 268,832 269,015
7/31/2005 302,345 263,188 263,474
8/31/2005 308,816 269,262 269,665
9/30/2005 307,611 268,885 268,883
10/31/2005 303,366 265,449 265,119
11/30/2005 303,639 265,909 265,172
12/31/2005 307,617 269,180 268,884
1/31/2006 307,617 269,154 269,207
2/28/2006 308,478 269,025 269,207
3/31/2006 301,013 263,123 262,531
4/30/2006 300,140 262,901 262,005
5/31/2006 300,140 263,675 262,634
6/30/2006 300,530 264,421 263,081
7/31/2006 305,008 268,723 267,685
8/31/2006 310,681 273,383 272,610
9/30/2006 312,141 273,832 272,719
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.
For illustrative purposes, the chart above reflects the growth of a
hypothetical investment of $100,000 in the Fund, since its inception. For
illustrative purposes, the chart above also reflects the growth of a
hypothetical investment in the former primary benchmark of the Fund, the Lehman
US Government Bond Index (the "Former Benchmark"), compared to the performance
of the Fund from the Fund's inception date and through December 31, 2004. On
December 15, 2004, in connection with a change of the Fund's investment
objective, the Fund changed its primary benchmark from the Former Benchmark to
the Lehman US Treasury Inflation Protected Securities Index (the "New
Benchmark"). Since index performance data is not available coincident with the
date of the Fund's strategy change, comparative data for the Fund's New
Benchmark begins on December 31, 2004. For illustrative purposes, the chart
above reflects the growth of a hypothetical investment in the New Benchmark,
compared to the performance of the Fund, from December 31, 2004, through
September 30, 2006. The chart above also compares the performance of the Fund
to the Lipper Treasury Inflation Protected Securities Fund Index from December
31, 2004 and through September 30, 2006. The performance of the New Benchmark
and of the Lipper Treasury Inflation Protected Securities Fund Index was linked
to the performance of the Former Benchmark as of December 31, 2004.
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) Since index performance data is not available coincident with the Fund's
inception date, comparative performance is presented from the month end closest
to the Fund's inception date. (b) See page 15 for a description of the indices.
Return data is not available for the Lehman US Treasury Inflation Protected
Securities Index prior to March 1, 1997. Similarly, return data is not
available for the Lipper Treasury Inflation Protected Securities Funds Index
prior to July 1, 2003. (c) The mountain chart is based on the Fund's minimum
initial investment of $100,000.
WHAT YOU SHOULD KNOW
Securities issued by US government agencies are not insured, and may not be
guaranteed by the US government.
Effective December 15, 2004, the Fund's name and investment strategy changed.
The Fund's strategy emphasizes inflation-protected debt securities issued by
the US Treasury (TIPS). The principal value of the types of securities are
periodically adjusted according to the rate of inflation and repayment of the
original bonds is guaranteed by the US government.
CUMULATIVE PERFORMANCE
8
FUND AND MANAGER REVIEW
LOOMIS SAYLES INSTITUTIONAL HIGH INCOME FUND
[PHOTO]
Daniel Fuss
Manager since June 1996
FUND FACTS
SYMBOL | LSHIX
OBJECTIVE | High total investment return through a combination of current
income and capital appreciation
STRATEGY | Invests in primarily lower-rated fixed-income securities and other
securities that are expected to produce a relatively high level of income,
(including income-producing preferred and common stocks).
The Fund may invest any portion of its assets in Canadian securities and up to
20% of assets in other foreign securities, including emerging markets
securities.
FUND INCEPTION DATE | 6/5/96
FUND REGISTRATION DATE | 3/7/97
EXPENSE RATIO | 0.75%
TOTAL NET ASSETS | $141.3 million
PORTFOLIO REVIEW
A resilient economy and strong corporate profits were hallmarks of the fiscal
year ended September 30, 2006. Recently, declining energy prices helped subdue
inflation fears, while a deteriorating housing market raised concerns of a
broader economic slowdown. After raising the federal funds rate at 17
consecutive meetings, the Federal Reserve Board paused in August and September,
reducing concerns that the Fed might tighten the economy into a recession. All
major bond market benchmarks generated positive returns, with the bulk of the
gains coming in the third quarter of calendar 2006. Overall, the riskier
segments offered the best returns, as fundamentals remained sound.
High yield provided strong returns, as default rates continued to remain low,
in defiance of forecasts. Although spreads remained in a tight range for much
of the year, investors benefited from the extra yield inherent in the bonds.
Emerging markets also provided strong returns, as improving country
fundamentals gave reason for investors to overlook a few country-specific
events.
We reduced exposure to bonds with ratings of CCC and below and increased
exposure to the BB, B and non-rated quality segments. Our favorable security
selections within these areas helped the Fund outperform its Benchmark, the
Lehman High Yield Index, for the fiscal year ended September 30, 2006. Although
leveraged buyouts (LBOs) negatively affected specific issues, their effects
were overwhelmed by the performance of other sectors of the bond market. Fund
securities with AAA and AA ratings (mostly denominated in shorter duration,
foreign currency bonds) added to relative performance, while A-rated issues
were a slight drag.
Convertible securities, preferred issues and a small allocation to equities
contributed positively to the Fund's strong return. Overall, emerging market
securities and investment grade, non-US-dollar bonds provided attractive
returns and proved to be an important out-of-Benchmark strategy. On an
industry-specific level, securities in the consumer cyclicals, capital goods,
technology, transportation and banking sectors buoyed returns. Despite a
slowdown in the housing market, a small allocation to REITs (Real Estate
Investment Trusts) performed extremely well. Investment grade and high yield
issues in utility-related industries provided positive returns, but lagged the
Benchmark for the fiscal year.
Overall, bonds issued in foreign currencies substantially enhanced the Fund's
relative performance. In particular, shorter-duration positions in
Brazilian-real-denominated issues provided a boost for returns, driven by
increasing global demand for commodities from this resource-rich country.
Investments in high quality, shorter duration issues domiciled in Southeast
Asia performed well, with Fund holdings denominated in the Indonesian rupiah
and Thai baht leading the way. Bonds denominated in the British pound sterling
also benefited performance. The South African rand's depreciation relative to
the US dollar was a performance detractor, as was the New Zealand dollar.
Although we remain bullish on Canada's country fundamentals, the bonds we held
in the portfolio stymied returns for the year.
OUTLOOK
We believe the economy is experiencing a typical mid-cycle slowdown, which
should keep monetary policy stable for the foreseeable future. However, the
market appears to be pricing in a Fed easing for the first half of 2007. If the
economy gains traction, as we believe it may, yields are vulnerable to a modest
increase.
Investment grade corporate spreads have fluctuated within a narrow range for
more than a year, and we do not foresee a near-term catalyst that will knock
them out of that range. Demand remains robust for the bonds, as corporations
continue to generate solid earnings. We believe corporate bonds may outperform
Treasurys, but
9
security selection will be key. We have a similar outlook for spreads in the
high yield sector. Based on our outlook for stable monetary policy, solid
earnings growth and low default rates, we think high yield bonds are currently
fairly valued. Our greatest concern for investment grade corporate and high
yield securities is the rising threat from shareholder-friendly events,
including LBOs. Although the emerging markets have weathered a few
country-specific bumps, the general trend remains positive. Because we believe
the US dollar is overdue for some weakness, foreign currency exposure should
grow increasingly important to Fund returns.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE SINCE
1 YEAR 5 YEARS 10 YEARS REGISTRATION(a) INCEPTION(a)
-------------------------------------------------------
LOOMIS SAYLES INSTITUTIONAL HIGH INCOME: INSTITUTIONAL
11.56% 15.78% 8.35% 8.41% 8.47%
-------------------------------------------------------
LEHMAN HIGH YIELD INDEX(b)
8.07 10.51 6.52 6.14 6.79
-------------------------------------------------------
LIPPER HIGH CURRENT YIELD FUNDS INDEX(b)
6.75 9.29 4.96 4.52 5.27
-------------------------------------------------------
CUMULATIVE PERFORMANCE
REGISTRATION TO SEPTEMBER 30, 2006(c)
[CHART]
Loomis Sayles
Institutional High Lehman High Lipper High Current
Income Fund Yield Index/(a)(b)/ Yield Funds Index/(a)(b)/
------------------ ------------------ ------------------------
3/7/1997 3,000,000 3,000,000 3,000,000
3/31/1997 2,961,300 2,935,019 2,956,675
4/30/1997 3,000,093 2,960,015 2,985,600
5/31/1997 3,089,196 3,038,341 3,051,777
6/30/1997 3,148,508 3,090,391 3,094,100
7/31/1997 3,305,934 3,172,824 3,179,060
8/31/1997 3,302,958 3,180,038 3,171,860
9/30/1997 3,404,029 3,257,060 3,234,719
10/31/1997 3,302,929 3,244,290 3,237,599
11/30/1997 3,317,792 3,267,845 3,268,527
12/31/1997 3,287,601 3,306,367 3,297,202
1/31/1998 3,333,298 3,370,604 3,356,554
2/28/1998 3,398,631 3,402,372 3,376,213
3/31/1998 3,506,707 3,451,685 3,407,893
4/30/1998 3,496,889 3,462,458 3,421,354
5/31/1998 3,401,773 3,458,631 3,433,249
6/30/1998 3,323,192 3,464,701 3,445,583
7/31/1998 3,282,649 3,488,336 3,465,180
8/31/1998 2,784,015 3,222,514 3,273,974
9/30/1998 2,777,333 3,203,193 3,288,812
10/31/1998 2,774,000 3,130,474 3,221,383
11/30/1998 3,041,414 3,314,300 3,355,052
12/31/1998 2,995,185 3,303,951 3,358,746
1/31/1999 3,068,567 3,363,790 3,408,645
2/28/1999 3,049,235 3,350,254 3,388,547
3/31/1999 3,191,939 3,409,321 3,420,853
4/30/1999 3,392,712 3,497,486 3,487,155
5/31/1999 3,296,359 3,431,058 3,439,949
6/30/1999 3,346,463 3,431,561 3,432,623
7/31/1999 3,319,357 3,432,623 3,446,397
8/31/1999 3,249,982 3,397,795 3,408,331
9/30/1999 3,242,183 3,371,317 3,383,789
10/31/1999 3,319,346 3,361,592 3,361,313
11/30/1999 3,396,687 3,420,818 3,400,568
12/31/1999 3,474,132 3,461,999 3,439,072
1/31/2000 3,461,277 3,444,984 3,424,234
2/29/2000 3,568,577 3,469,424 3,430,870
3/31/2000 3,572,859 3,409,362 3,358,746
4/30/2000 3,538,560 3,394,490 3,364,130
5/31/2000 3,457,173 3,334,061 3,329,633
6/30/2000 3,555,702 3,395,777 3,397,437
7/31/2000 3,551,436 3,401,865 3,423,357
8/31/2000 3,671,474 3,419,649 3,446,773
9/30/2000 3,572,711 3,369,326 3,416,658
10/31/2000 3,414,083 3,254,168 3,307,219
11/30/2000 3,182,608 3,072,498 3,176,242
12/31/2000 3,275,222 3,125,800 3,237,598
1/31/2001 3,553,616 3,333,190 3,480,143
2/28/2001 3,548,641 3,343,728 3,526,473
3/31/2001 3,404,566 3,232,797 3,443,454
4/30/2001 3,337,496 3,190,415 3,400,568
5/31/2001 3,399,907 3,224,914 3,461,799
6/30/2001 3,323,069 3,129,947 3,364,693
7/31/2001 3,327,722 3,148,290 3,414,216
8/31/2001 3,351,681 3,162,241 3,454,473
9/30/2001 3,121,086 2,938,954 3,222,322
10/31/2001 3,159,475 3,006,177 3,302,022
11/30/2001 3,289,013 3,101,659 3,422,480
12/31/2001 3,282,435 3,093,281 3,408,519
1/31/2002 3,282,435 3,100,728 3,432,247
2/28/2002 3,176,085 3,045,930 3,384,352
3/31/2002 3,310,433 3,106,216 3,465,805
4/30/2002 3,366,379 3,138,694 3,521,213
5/31/2002 3,332,715 3,107,195 3,501,680
6/30/2002 3,131,086 2,932,255 3,243,483
7/31/2002 2,996,763 2,836,135 3,101,801
8/31/2002 3,058,496 2,884,966 3,190,266
9/30/2002 2,932,792 2,844,823 3,148,381
10/31/2002 2,957,134 2,826,824 3,120,896
11/30/2002 3,213,222 2,989,777 3,314,230
12/31/2002 3,275,879 3,018,826 3,360,560
1/31/2003 3,440,001 3,085,588 3,472,441
2/28/2003 3,502,953 3,126,937 3,515,265
3/31/2003 3,616,449 3,204,996 3,616,378
4/30/2003 3,900,340 3,362,352 3,830,936
5/31/2003 4,045,433 3,402,342 3,870,505
6/30/2003 4,159,109 3,494,011 3,981,822
7/31/2003 4,108,784 3,467,076 3,938,059
8/31/2003 4,153,159 3,513,632 3,983,325
9/30/2003 4,361,647 3,598,950 4,092,200
10/31/2003 4,512,997 3,679,708 4,174,843
11/30/2003 4,645,679 3,722,340 4,238,140
12/31/2003 4,848,695 3,814,498 4,334,119
1/31/2004 4,951,487 3,875,711 4,416,824
2/29/2004 4,924,254 3,868,130 4,405,743
3/31/2004 4,979,406 3,882,885 4,435,669
4/30/2004 4,821,559 3,874,065 4,405,492
5/31/2004 4,690,894 3,814,199 4,330,863
6/30/2004 4,821,301 3,867,564 4,392,971
7/31/2004 4,869,514 3,898,393 4,452,699
8/31/2004 5,013,652 3,962,011 4,540,038
9/30/2004 5,152,845 4,017,006 4,605,964
10/31/2004 5,262,601 4,088,474 4,689,171
11/30/2004 5,386,272 4,146,505 4,745,706
12/31/2004 5,538,165 4,209,046 4,816,454
1/31/2005 5,530,965 4,198,679 4,810,193
2/28/2005 5,650,434 4,262,841 4,880,940
3/31/2005 5,463,969 4,149,770 4,739,007
4/30/2005 5,396,763 4,101,283 4,692,802
5/31/2005 5,508,476 4,167,006 4,776,134
6/30/2005 5,672,628 4,234,057 4,869,858
7/31/2005 5,777,005 4,299,810 4,955,005
8/31/2005 5,814,555 4,320,236 4,964,459
9/30/2005 5,822,114 4,292,187 4,914,936
10/31/2005 5,755,160 4,256,801 4,880,627
11/30/2005 5,792,568 4,295,587 4,906,108
12/31/2005 5,895,097 4,335,208 4,948,244
1/31/2006 6,111,447 4,391,116 5,027,193
2/28/2006 6,263,622 4,427,929 5,060,751
3/31/2006 6,255,479 4,446,041 5,091,053
4/30/2006 6,311,778 4,471,661 5,122,420
5/31/2006 6,207,634 4,461,883 5,121,731
6/30/2006 6,183,424 4,436,988 5,103,763
7/31/2006 6,263,809 4,470,848 5,153,724
8/31/2006 6,392,217 4,531,739 5,237,306
9/30/2006 6,496,410 4,581,835 5,311,560
INCEPTION TO SEPTEMBER 30, 2006(c)
[CHART]
Loomis Sayles Lehman High Lipper High
Institutional High Yield Current Yield
Income Fund Index/(a)(b)/ Funds Index/(a)(b)/
------------------ ------------- -------------------
6/5/1996 3,000,000 3,000,000 3,000,000
6/30/1996 3,009,000 3,001,875 3,024,817
7/31/1996 2,990,946 3,015,534 3,038,898
8/31/1996 3,032,819 3,064,208 3,071,731
9/30/1996 3,113,796 3,144,098 3,145,762
10/31/1996 3,131,856 3,159,086 3,169,951
11/30/1996 3,221,740 3,213,523 3,233,107
12/31/1996 3,228,828 3,253,122 3,255,623
1/31/1997 3,244,649 3,285,381 3,285,389
2/28/1997 3,219,341 3,340,543 3,340,250
3/31/1997 3,165,256 3,268,186 3,292,011
4/30/1997 3,206,721 3,296,019 3,324,217
5/31/1997 3,301,960 3,383,236 3,397,899
6/30/1997 3,365,358 3,441,195 3,445,023
7/31/1997 3,533,626 3,532,985 3,539,618
8/31/1997 3,530,445 3,541,018 3,531,601
9/30/1997 3,638,477 3,626,784 3,601,589
10/31/1997 3,530,414 3,612,564 3,604,796
11/30/1997 3,546,301 3,638,792 3,639,232
12/31/1997 3,514,030 3,681,687 3,671,159
1/31/1998 3,562,875 3,753,216 3,737,243
2/28/1998 3,632,707 3,788,591 3,759,132
3/31/1998 3,748,227 3,843,501 3,794,405
4/30/1998 3,737,732 3,855,496 3,809,392
5/31/1998 3,636,066 3,851,235 3,822,637
6/30/1998 3,552,073 3,857,994 3,836,370
7/31/1998 3,508,737 3,884,313 3,858,189
8/31/1998 2,975,760 3,588,316 3,645,297
9/30/1998 2,968,618 3,566,802 3,661,818
10/31/1998 2,965,056 3,485,828 3,586,741
11/30/1998 3,250,887 3,690,521 3,735,570
12/31/1998 3,201,474 3,678,996 3,739,683
1/31/1999 3,279,910 3,745,628 3,795,241
2/28/1999 3,259,247 3,730,556 3,772,865
3/31/1999 3,411,779 3,796,327 3,808,835
4/30/1999 3,626,380 3,894,501 3,882,657
5/31/1999 3,523,391 3,820,533 3,830,096
6/30/1999 3,576,947 3,821,093 3,821,940
7/31/1999 3,547,973 3,822,275 3,837,276
8/31/1999 3,473,821 3,783,494 3,794,893
9/30/1999 3,465,484 3,754,010 3,767,567
10/31/1999 3,547,962 3,743,181 3,742,542
11/30/1999 3,630,630 3,809,130 3,786,249
12/31/1999 3,713,408 3,854,985 3,829,120
1/31/2000 3,699,668 3,836,039 3,812,599
2/29/2000 3,814,358 3,863,253 3,819,988
3/31/2000 3,818,935 3,796,373 3,739,684
4/30/2000 3,782,274 3,779,813 3,745,679
5/31/2000 3,695,281 3,712,525 3,707,269
6/30/2000 3,800,597 3,781,245 3,782,764
7/31/2000 3,796,036 3,788,025 3,811,623
8/31/2000 3,924,342 3,807,828 3,837,695
9/30/2000 3,818,777 3,751,792 3,804,165
10/31/2000 3,649,224 3,623,562 3,682,313
11/30/2000 3,401,806 3,421,271 3,536,482
12/31/2000 3,500,799 3,480,622 3,604,797
1/31/2001 3,798,367 3,711,555 3,874,850
2/28/2001 3,793,049 3,723,289 3,926,434
3/31/2001 3,639,051 3,599,766 3,834,000
4/30/2001 3,567,362 3,552,572 3,786,249
5/31/2001 3,634,072 3,590,988 3,854,425
6/30/2001 3,551,942 3,485,241 3,746,306
7/31/2001 3,556,914 3,505,666 3,801,446
8/31/2001 3,582,524 3,521,201 3,846,269
9/30/2001 3,336,046 3,272,568 3,587,788
10/31/2001 3,377,080 3,347,421 3,676,528
11/30/2001 3,515,540 3,453,742 3,810,648
12/31/2001 3,508,509 3,444,413 3,795,103
1/31/2002 3,508,509 3,452,705 3,821,522
2/28/2002 3,394,833 3,391,687 3,768,195
3/31/2002 3,538,435 3,458,816 3,858,886
4/30/2002 3,598,234 3,494,981 3,920,579
5/31/2002 3,562,252 3,459,907 3,898,830
6/30/2002 3,346,736 3,265,108 3,611,349
7/31/2002 3,203,161 3,158,077 3,453,598
8/31/2002 3,269,146 3,212,452 3,552,097
9/30/2002 3,134,784 3,167,752 3,505,461
10/31/2002 3,160,803 3,147,709 3,474,859
11/30/2002 3,434,528 3,329,160 3,690,121
12/31/2002 3,501,501 3,361,506 3,741,705
1/31/2003 3,676,927 3,435,847 3,866,276
2/28/2003 3,744,214 3,481,889 3,913,957
3/31/2003 3,865,527 3,568,810 4,026,537
4/30/2003 4,168,971 3,744,027 4,265,430
5/31/2003 4,324,057 3,788,557 4,309,486
6/30/2003 4,445,562 3,890,632 4,433,429
7/31/2003 4,391,771 3,860,639 4,384,703
8/31/2003 4,439,202 3,912,480 4,435,102
9/30/2003 4,662,050 4,007,482 4,556,326
10/31/2003 4,823,823 4,097,408 4,648,342
11/30/2003 4,965,644 4,144,879 4,718,818
12/31/2003 5,182,642 4,247,498 4,825,682
1/31/2004 5,292,514 4,315,660 4,917,768
2/29/2004 5,263,406 4,307,219 4,905,429
3/31/2004 5,322,356 4,323,648 4,938,750
4/30/2004 5,153,637 4,313,828 4,905,150
5/31/2004 5,013,974 4,247,166 4,822,057
6/30/2004 5,153,362 4,306,588 4,891,209
7/31/2004 5,204,896 4,340,917 4,957,711
8/31/2004 5,358,961 4,411,757 5,054,955
9/30/2004 5,508,102 4,472,995 5,128,359
10/31/2004 5,625,425 4,552,576 5,221,002
11/30/2004 5,757,622 4,617,194 5,283,950
12/31/2004 5,919,987 4,686,834 5,362,721
1/31/2005 5,912,291 4,675,290 5,355,750
2/28/2005 6,039,996 4,746,735 5,434,522
3/31/2005 5,840,487 4,620,829 5,276,491
4/30/2005 5,768,649 4,566,838 5,225,046
5/31/2005 5,888,060 4,640,022 5,317,829
6/30/2005 6,063,524 4,714,684 5,422,183
7/31/2005 6,175,093 4,787,901 5,516,988
8/31/2005 6,215,231 4,810,646 5,527,514
9/30/2005 6,223,311 4,779,413 5,472,374
10/31/2005 6,151,743 4,740,010 5,434,173
11/30/2005 6,191,729 4,783,199 5,462,545
12/31/2005 6,301,323 4,827,317 5,509,459
1/31/2006 6,532,581 4,889,572 5,597,362
2/28/2006 6,695,243 4,930,564 5,634,726
3/31/2006 6,686,539 4,950,732 5,668,465
4/30/2006 6,746,718 4,979,259 5,703,389
5/31/2006 6,635,397 4,968,372 5,702,622
6/30/2006 6,609,519 4,940,651 5,682,616
7/31/2006 6,695,443 4,978,354 5,738,244
8/31/2006 6,832,699 5,046,157 5,831,305
9/30/2006 6,944,072 5,101,940 5,913,980
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) Shares of the Fund were registered for offer and sale 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 long-term shareholders. Since index performance data is not
available coincident with the Fund's inception and registration dates,
comparative performance is presented from the month end closest to the Fund's
inception and registration dates. (b) See page 15 for a description of the
indices. (c) The mountain chart is based on the Fund's minimum initial
investment of $3,000,000.
WHAT YOU SHOULD KNOW
High yield securities are subject to a high degree of market and credit risk.
The secondary market for these securities may lack liquidity which may
adversely affect the value of the Fund. Foreign investments involve special
risks, including greater economic, political and currency fluctuation risks,
which may be even greater in emerging markets. Foreign countries may have
different accounting standards than those of the US. Securities issued by US
government agencies are not issued, and may not be guaranteed by the US
government.
10
FUND AND MANAGER REVIEW
LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND
[PHOTO]
Neil Burke
Manager since December 2005
[PHOTO]
Cliff Rowe
Manager since January 2003
Manager since December 2005
FUND FACTS
SYMBOL | LSDIX
OBJECTIVE | Above-average total return through a combination of current income
and capital appreciation
STRATEGY | Invests only in investment-grade fixed-income securities. The
Fund's weighted average duration generally is two to five years
FUND INCEPTION DATE | 1/28/98
EXPENSE RATIO | 0.40%
TOTAL NET ASSETS | $41.9 million
[PHOTO]
Richard Raczkowski
Manager since December 2005
PORTFOLIO REVIEW
Throughout the fiscal year, the Fund remained primarily invested in US
investment grade bonds, with modest allocations to securitized products and
Treasurys, and a small position in high yield bonds. US corporate bonds,
particularly those in the industrials sector, offered the strongest results on
a total return basis for the fiscal year ended September 30, 2006. The Fund's
average duration to this particular sector remained shorter than that of its
Benchmark during the period as yields rose across the curve. For fiscal 2006,
this strategy contributed to the Fund's outperformance compared to the Lehman
US Government/Credit Intermediate Index.
In addition, strong security selections within the US investment grade sector,
particularly within the financial services and industrials sectors, helped the
Fund outperform. For example, the Fund's position in a major automaker's
financing affiliate was the largest contributor to performance. The parent
company's recent troubles have yet to affect the finance company. The affiliate
generally is considered the safer play, and the market believes if the parent
company continues to struggle, the finance affiliate may go up for sale.
Our allocation to securities backed by 30-year mortgages contributed positively
to relative performance during the year. Within this sector, we maintained a
shorter average duration than the Benchmark, which held back performance in a
rallying market.
The Fund remained overweight in securities with BBB quality ratings and
underweighted in securities with AAA
ratings. Our overweight of approximately 20% to BBB- rated credits contributed
positively to Fund performance.
Throughout the 12-month period we slightly extended the portfolio's overall
duration, moving it from 2.88 to 3.33 years. By the end of fiscal 2006, the
Fund's duration was 0.2 years shorter than that of the Benchmark. Similarly, we
lengthened the Fund's average maturity, from 3.62 to 4.14 years.
OUTLOOK
The recent inversion of the yield curve suggests that bondholders are
pessimistic about the economy. Futures contracts currently indicate the market
expects the Federal Reserve Board to ease during the first half of 2007. We do
not agree. We believe the federal funds target should remain at its current
5.25% throughout much of 2007. We believe the economy is experiencing a typical
mid-cycle slowdown and it may gain traction as we move into 2007. If it does,
market yields may be vulnerable to a modest increase.
Investment grade corporate spreads have fluctuated within a narrow range for
more than a year, and we do not foresee a near-term catalyst that will knock
them out of that range. Demand remains robust for the bonds, as corporations
continue to generate solid earnings. Our greatest concern for investment grade
corporate securities is the rising threat from shareholder-friendly events,
including leveraged buyouts (LBOs). We believe corporate bonds may outperform
Treasurys, but security selection will be key.
11
We have a similar outlook for spreads in the high yield sector. Although the
Fund's overall quality remains high, we are optimistic about high yield.
However, we do not see many attractive entry points, as spreads remain at
historically tight levels. Based on our outlook for a stable monetary policy,
solid corporate earnings growth and low default rates, we believe high yield
bonds are fairly valued. Although the emerging markets have weathered a few
country-specific bumps, the general trend remains positive. Because we believe
the US dollar is overdue for some weakness, foreign currency exposure should
grow increasingly important to Fund returns.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR 5 YEARS INCEPTION(a)
---------------------------------------------------------
LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND:
INSTITUTIONAL
3.82% 4.07% 5.24%
---------------------------------------------------------
LEHMAN US GOV'T/CREDIT INTERMEDIATE INDEX(b)
3.55 4.34 5.52
---------------------------------------------------------
LIPPER INTERMEDIATE INVESTMENT GRADE DEBT FUNDS INDEX(b)
3.52 4.67 5.44
---------------------------------------------------------
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 2006(c)
[CHART]
Loomis Sayles Lipper
Intermediate Duration Intermediate Lehman US
Fixed Income Fund/(1) Investment Grade Government/Credit
Debt Funds Index Intermediate Index
----------------- ---------------------- ------------------
1/28/1998 $2,000,000 $2,000,000 $2,000,000
1/31/1998 2,008,000 2,000,000 2,000,000
2/28/1998 2,008,000 1,997,109 1,998,476
3/31/1998 2,016,032 2,004,485 2,004,896
4/30/1998 2,024,096 2,013,850 2,014,941
5/31/1998 2,036,241 2,032,011 2,029,721
6/30/1998 2,042,349 2,048,200 2,042,676
7/31/1998 2,050,519 2,052,391 2,049,881
8/31/1998 2,030,014 2,080,194 2,082,096
9/30/1998 2,038,134 2,126,828 2,134,402
10/31/1998 2,042,210 2,109,620 2,132,300
11/30/1998 2,060,998 2,120,139 2,132,139
12/31/1998 2,064,296 2,129,212 2,140,706
1/31/1999 2,083,494 2,142,422 2,152,461
2/28/1999 2,064,326 2,104,181 2,120,823
3/31/1999 2,092,194 2,120,746 2,136,642
4/30/1999 2,115,836 2,127,865 2,143,200
5/31/1999 2,085,579 2,106,194 2,126,712
6/30/1999 2,092,253 2,099,075 2,128,190
7/31/1999 2,087,860 2,091,677 2,126,319
8/31/1999 2,083,475 2,089,448 2,127,936
9/30/1999 2,112,019 2,112,442 2,147,796
10/31/1999 2,118,777 2,115,656 2,153,338
11/30/1999 2,130,007 2,118,141 2,155,994
12/31/1999 2,132,350 2,108,404 2,148,950
1/31/2000 2,125,526 2,100,909 2,141,099
2/29/2000 2,145,931 2,123,716 2,158,742
3/31/2000 2,166,532 2,149,930 2,181,257
4/30/2000 2,155,049 2,136,614 2,176,315
5/31/2000 2,145,783 2,132,737 2,179,710
6/30/2000 2,192,132 2,177,898 2,218,160
7/31/2000 2,213,176 2,196,489 2,235,041
8/31/2000 2,234,201 2,226,945 2,261,437
9/30/2000 2,257,660 2,241,699 2,282,013
10/31/2000 2,255,177 2,249,600 2,292,405
11/30/2000 2,279,082 2,285,400 2,323,557
12/31/2000 2,320,789 2,331,570 2,366,372
1/31/2001 2,373,935 2,372,538 2,405,214
2/28/2001 2,395,775 2,395,339 2,427,938
3/31/2001 2,417,577 2,404,648 2,446,551
4/30/2001 2,419,994 2,391,713 2,440,085
5/31/2001 2,447,098 2,406,442 2,453,825
6/30/2001 2,454,440 2,415,292 2,462,993
7/31/2001 2,496,656 2,473,884 2,514,144
8/31/2001 2,526,616 2,501,127 2,539,293
9/30/2001 2,551,629 2,520,379 2,576,334
10/31/2001 2,584,545 2,571,754 2,619,056
11/30/2001 2,579,635 2,539,460 2,592,822
12/31/2001 2,554,870 2,523,138 2,578,458
1/31/2002 2,557,425 2,541,344 2,591,852
2/28/2002 2,559,983 2,565,908 2,612,451
3/31/2002 2,534,127 2,521,383 2,572,731
4/30/2002 2,547,051 2,566,865 2,615,246
5/31/2002 2,573,285 2,587,935 2,641,364
6/30/2002 2,541,634 2,586,266 2,664,203
7/31/2002 2,515,455 2,596,536 2,695,748
8/31/2002 2,576,329 2,646,576 2,735,907
9/30/2002 2,578,133 2,675,453 2,784,887
10/31/2002 2,570,140 2,665,193 2,773,964
11/30/2002 2,605,094 2,677,862 2,771,586
12/31/2002 2,660,322 2,732,357 2,832,067
1/31/2003 2,671,230 2,740,900 2,831,928
2/28/2003 2,717,709 2,779,984 2,871,787
3/31/2003 2,726,134 2,780,258 2,874,766
4/30/2003 2,767,571 2,812,755 2,896,727
5/31/2003 2,828,458 2,865,211 2,954,922
6/30/2003 2,839,489 2,864,516 2,952,959
7/31/2003 2,766,798 2,767,930 2,872,734
8/31/2003 2,775,375 2,788,989 2,879,523
9/30/2003 2,854,196 2,863,977 2,952,382
10/31/2003 2,837,356 2,843,761 2,924,578
11/30/2003 2,845,868 2,851,270 2,928,550
12/31/2003 2,880,303 2,880,270 2,954,137
1/31/2004 2,903,345 2,903,172 2,973,535
2/29/2004 2,931,798 2,931,372 3,003,879
3/31/2004 2,957,891 2,952,490 3,027,250
4/30/2004 2,882,761 2,881,549 2,955,453
5/31/2004 2,865,752 2,867,417 2,942,036
6/30/2004 2,880,368 2,880,781 2,950,858
7/31/2004 2,907,443 2,907,821 2,975,752
8/31/2004 2,951,346 2,960,185 3,025,425
9/30/2004 2,956,658 2,967,931 3,030,690
10/31/2004 2,974,694 2,991,323 3,051,105
11/30/2004 2,957,738 2,972,626 3,023,301
12/31/2004 2,976,963 3,003,543 3,043,992
1/31/2005 2,981,131 3,019,767 3,049,881
2/28/2005 2,967,716 3,006,963 3,033,138
3/31/2005 2,947,546 2,989,169 3,017,481
4/30/2005 2,971,421 3,025,948 3,052,006
5/31/2005 2,992,221 3,057,721 3,079,394
6/30/2005 3,003,891 3,075,655 3,092,372
7/31/2005 2,990,073 3,051,632 3,066,693
8/31/2005 3,016,086 3,089,820 3,102,556
9/30/2005 3,000,101 3,058,483 3,076,253
10/31/2005 2,986,901 3,033,294 3,059,395
11/30/2005 2,998,550 3,044,398 3,072,720
12/31/2005 3,015,342 3,072,114 3,092,049
1/31/2006 3,020,166 3,076,023 3,091,587
2/28/2006 3,025,602 3,085,100 3,093,827
3/31/2006 3,011,987 3,055,280 3,080,156
4/30/2006 3,014,397 3,051,041 3,081,819
5/31/2006 3,013,794 3,047,721 3,082,004
6/30/2006 3,016,506 3,050,982 3,086,669
7/31/2006 3,051,799 3,093,310 3,121,285
8/31/2006 3,087,200 3,139,811 3,160,451
9/30/2006 3,114,985 3,166,088 3,185,369
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) Since index performance data is not available coincident with the Fund's
inception date, comparative performance is presented from the month end closest
to the Fund's inception date. (b) See page 15 for a description of the indices.
(c) The mountain chart is based on the Fund's minimum initial investment of
$2,000,000.
WHAT YOU SHOULD KNOW
If the credit rating of a security held by the Fund falls below investment
grade, the Fund may continue to hold it if Loomis Sayles believes the
investment is appropriate. The secondary market for securities that fall below
investment grade may lack liquidity and such securities may incur greater risk
of default, which may adversely affect the value of the Fund. Foreign
investments involve special risks, including greater economic, political and
currency fluctuation risks, which may be even greater in emerging markets.
Foreign countries may have different accounting standards than those of the US.
Securities issued by US government agencies are not issued, and may not be
guaranteed by the US government.
12
FUND AND MANAGER REVIEW
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND
[PHOTO]
Daniel Fuss
Manager since July 1994
[PHOTO]
Steven Kaseta
Manager since November 2002
Manager since February 2002
[PHOTO]
Kathleen Gaffney
Manager since November 1997
Associate Manager since September 2006
[PHOTO]
Associate Manager since September 2006
[PHOTO]
Associate Manager since September 2006
FUND FACTS
SYMBOL | LSIGX
OBJECTIVE | Above-average total investment return through a combination of
current income and capital appreciation
STRATEGY | Invests in primarily investment-grade fixed-income securities,
although it may invest up to 10% of its assets in lower rated fixed-income
securities and up to 10% of its assets in preferred stocks. The Fund may
invest any portion of its assets in securities of Canadian issuers and up to
20% of assets in securities of other foreign issuers, including emerging
markets.
FUND INCEPTION DATE | 7/1/94
FUND REGISTRATION DATE | 3/7/97
EXPENSE RATIO | 0.55%
TOTAL NET ASSETS | $173.5 million
PORTFOLIO REVIEW
A resilient economy and strong corporate profits were hallmarks of the fiscal
year ended September 30, 2006. Recently, declining energy prices helped subdue
inflation fears, while a deteriorating housing market raised concerns of a
broader economic slowdown. After raising the federal funds rate at 17
consecutive meetings, the Federal Reserve Board paused in August and September,
reducing concerns that the Fed might tighten the economy into a recession. All
major bond market benchmarks generated positive returns, with the bulk of the
gains coming in the third quarter of calendar 2006. Overall, the riskier
segments offered the best returns, as fundamentals remained sound. Our emphasis
on foreign developed and emerging markets and a modest position in below
investment grade securities--areas not represented in the Lehman US
Government/Credit Index--helped the Fund significantly outperform its Benchmark
for the 2006 fiscal year.
The Fund generated positive performance across the quality spectrum, with
higher-quality sectors benefiting from a longer duration strategy. Throughout
the year, we moved the Fund's duration from neutral to approximately 1.5 years
longer than the Benchmark. By shifting from shorter- to longer-duration
Treasurys and corporate bonds, we took advantage of the recent market rally and
significantly boosted the Fund's return.
Fund holdings denominated in foreign currencies, particularly those of
commodity-rich exporters Canada and Brazil, contributed to strong performance.
We maintained a sizable position in Canadian-dollar-denominated
securities, gaining significant performance from those with shorter durations.
These securities benefited from quality fundamentals and a positive outlook,
given the strong global demand for natural resources. Although Mexico struggled
with political uncertainty early in the period, the country remained a positive
contributor to the Fund's performance. Positive returns from Singapore, Korea
and Thailand reflected strong economic expansion in the Pacific Rim. New
Zealand and Australian holdings were relatively flat, while South Africa's weak
currency caused the securities to perform poorly.
Successful security selections, combined with investors' robust risk appetite
and low default trends, helped the Fund realize gains in the high yield sector.
In particular, our holdings in the media and auto industries, and in companies
involved in mergers and acquisitions, helped performance. On the downside, a
few individual names involved in specific credit events resulted in minor
setbacks for the Fund. Certain healthcare bonds, for example, suffered on news
of leveraged buyouts (LBOs).
The Fund's best individual performers included several strong names in the
convertible bond sector, another area that is not part of the Benchmark.
OUTLOOK
We believe the economy is experiencing a typical mid-cycle slowdown, which
should keep monetary policy stable for the foreseeable future. However, the
market appears to be pricing in a Fed easing for the first half of 2007. If the
economy gains traction, as we believe it may, yields may be vulnerable to a
modest increase.
Investment grade corporate spreads have fluctuated within a narrow range for
more than a year, and we do not
13
foresee a near-term catalyst that will knock them out of that range. Demand
remains robust for the bonds, as corporations continue to generate solid
earnings. Our greatest concern for investment grade corporate securities is the
rising threat from shareholder-friendly events, including LBOs. We believe
corporate bonds may outperform Treasurys, but security selection will be key.
We have a similar outlook for spreads in the high yield sector. Based on our
outlook for a stable monetary policy, solid earnings growth and low default
rates, we believe high yield bonds are fairly valued. Although the emerging
markets have weathered a few country-specific bumps, the general trend remains
positive. Because we believe the US dollar is overdue for some weakness,
foreign currency exposure should grow increasingly important to Fund returns.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE SINCE
1 YEAR 5 YEARS 10 YEARS REGISTRATION(a) INCEPTION(a)
------------------------------------------------------------
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME: INSTITUTIONAL
6.81% 11.53% 9.54% 9.28% 10.46%
------------------------------------------------------------
LEHMAN US GOVERNMENT/CREDIT INDEX(b)
3.33 4.96 6.47 6.39 6.84
------------------------------------------------------------
LIPPER BBB-RATED FUNDS INDEX(b)
4.20 5.77 6.19 5.97 6.71
------------------------------------------------------------
CUMULATIVE PERFORMANCE
REGISTRATION TO SEPTEMBER 30, 2006(c)
[CHART]
Loomis Sayles
Investment Grade Lehman US Lipper
Fixed Income Government/Credit BBB-Rated
Fund Index Funds Index
------------- ----------- --------------
3/7/1997 $3,000,000 $3,000,000 $3,000,000
3/31/1997 2,951,400 2,953,678 2,964,347
4/30/1997 2,995,081 2,997,311 3,007,699
5/31/1997 3,044,500 3,031,640 3,035,766
6/30/1997 3,101,736 3,076,838 3,072,204
7/31/1997 3,259,925 3,183,224 3,166,196
8/31/1997 3,167,343 3,141,058 3,130,654
9/30/1997 3,252,544 3,196,312 3,179,874
10/31/1997 3,282,143 3,228,775 3,230,813
11/30/1997 3,287,394 3,244,554 3,247,817
12/31/1997 3,303,502 3,279,365 3,281,901
1/31/1998 3,339,510 3,321,218 3,328,168
2/28/1998 3,358,879 3,320,000 3,321,403
3/31/1998 3,394,820 3,336,851 3,331,643
4/30/1998 3,402,967 3,351,142 3,348,386
5/31/1998 3,425,427 3,379,801 3,384,376
6/30/1998 3,428,167 3,404,600 3,418,796
7/31/1998 3,384,972 3,401,952 3,421,524
8/31/1998 3,207,261 3,377,229 3,488,383
9/30/1998 3,302,196 3,446,853 3,588,130
10/31/1998 3,273,467 3,404,340 3,562,792
11/30/1998 3,392,948 3,467,282 3,584,019
12/31/1998 3,413,306 3,475,903 3,592,802
1/31/1999 3,479,183 3,506,149 3,618,327
2/28/1999 3,425,256 3,430,289 3,532,333
3/31/1999 3,512,600 3,468,512 3,549,861
4/30/1999 3,597,605 3,493,388 3,558,681
5/31/1999 3,530,329 3,446,257 3,521,944
6/30/1999 3,495,379 3,428,157 3,510,956
7/31/1999 3,447,143 3,410,857 3,501,240
8/31/1999 3,433,010 3,398,236 3,498,437
9/30/1999 3,459,444 3,427,440 3,529,979
10/31/1999 3,448,719 3,434,173 3,539,135
11/30/1999 3,472,171 3,442,484 3,537,154
12/31/1999 3,497,865 3,436,926 3,515,628
1/31/2000 3,496,116 3,426,846 3,514,656
2/29/2000 3,597,853 3,468,999 3,558,718
3/31/2000 3,651,461 3,500,964 3,610,143
4/30/2000 3,561,270 3,458,490 3,592,540
5/31/2000 3,536,697 3,432,181 3,589,289
6/30/2000 3,637,847 3,519,026 3,662,576
7/31/2000 3,682,956 3,534,106 3,701,369
8/31/2000 3,754,773 3,598,576 3,753,616
9/30/2000 3,726,237 3,608,822 3,767,742
10/31/2000 3,660,283 3,597,158 3,791,362
11/30/2000 3,716,651 3,630,502 3,856,203
12/31/2000 3,813,656 3,706,526 3,932,293
1/31/2001 3,902,133 3,796,186 3,998,256
2/28/2001 3,942,325 3,833,677 4,039,515
3/31/2001 3,901,719 3,831,290 4,058,052
4/30/2001 3,889,623 3,810,278 4,027,631
5/31/2001 3,947,968 3,844,647 4,050,802
6/30/2001 3,963,365 3,849,140 4,070,235
7/31/2001 4,065,619 3,936,445 4,171,664
8/31/2001 4,172,139 3,983,648 4,225,219
9/30/2001 4,061,994 3,949,606 4,264,086
10/31/2001 4,195,228 4,033,352 4,372,280
11/30/2001 4,197,745 4,007,245 4,300,525
12/31/2001 4,165,002 3,982,774 4,266,628
1/31/2002 4,202,487 4,004,551 4,297,983
2/28/2002 4,232,325 4,023,698 4,334,459
3/31/2002 4,202,276 3,970,945 4,246,521
4/30/2002 4,330,865 4,031,699 4,328,778
5/31/2002 4,429,609 4,063,576 4,368,729
6/30/2002 4,433,153 4,044,471 4,405,877
7/31/2002 4,348,923 4,024,217 4,458,946
8/31/2002 4,464,169 4,105,564 4,558,918
9/30/2002 4,483,365 4,142,537 4,656,983
10/31/2002 4,413,873 4,112,979 4,612,473
11/30/2002 4,530,841 4,172,245 4,615,201
12/31/2002 4,687,608 4,269,378 4,737,483
1/31/2003 4,783,704 4,297,661 4,737,334
2/28/2003 4,916,691 4,369,988 4,821,721
3/31/2003 4,921,116 4,377,472 4,815,442
4/30/2003 5,140,105 4,465,808 4,866,904
5/31/2003 5,465,474 4,582,770 5,005,220
6/30/2003 5,510,291 4,588,720 4,985,188
7/31/2003 5,222,654 4,432,351 4,776,201
8/31/2003 5,268,091 4,467,340 4,807,706
9/30/2003 5,549,407 4,604,916 4,959,999
10/31/2003 5,561,615 4,586,679 4,897,214
11/30/2003 5,703,437 4,618,189 4,910,219
12/31/2003 5,850,585 4,685,504 4,958,654
1/31/2004 5,892,124 4,728,143 5,003,688
2/29/2004 5,955,170 4,769,917 5,064,904
3/31/2004 6,025,441 4,802,695 5,111,395
4/30/2004 5,775,385 4,680,325 4,954,468
5/31/2004 5,747,663 4,644,737 4,929,092
6/30/2004 5,808,589 4,672,147 4,949,386
7/31/2004 5,879,454 4,720,979 5,001,670
8/31/2004 6,042,902 4,816,889 5,107,509
9/30/2004 6,168,595 4,846,745 5,125,373
10/31/2004 6,282,097 4,894,639 5,169,771
11/30/2004 6,372,559 4,878,393 5,112,255
12/31/2004 6,451,579 4,933,968 5,166,595
1/31/2005 6,425,127 4,960,128 5,202,510
2/28/2005 6,460,465 4,952,106 5,168,239
3/31/2005 6,393,358 4,896,450 5,131,838
4/30/2005 6,388,883 4,936,423 5,208,788
5/31/2005 6,402,938 4,987,831 5,274,115
6/30/2005 6,461,845 5,029,999 5,308,573
7/31/2005 6,462,491 5,006,710 5,248,814
8/31/2005 6,561,368 5,068,901 5,327,184
9/30/2005 6,565,960 5,018,312 5,257,485
10/31/2005 6,517,372 4,974,872 5,212,488
11/30/2005 6,536,273 4,995,309 5,239,210
12/31/2005 6,568,300 5,044,315 5,288,990
1/31/2006 6,678,648 5,062,727 5,279,310
2/28/2006 6,700,020 5,086,025 5,293,587
3/31/2006 6,620,959 5,030,373 5,235,435
4/30/2006 6,736,826 5,027,115 5,219,029
5/31/2006 6,697,079 5,014,979 5,216,114
6/30/2006 6,689,042 5,015,652 5,228,110
7/31/2006 6,787,371 5,085,072 5,296,166
8/31/2006 6,969,273 5,177,896 5,379,917
9/30/2006 7,013,876 5,228,980 5,432,575
INCEPTION TO SEPTEMBER 30, 2006(c)
[CHART]
Loomis Sayles
Investment
Grade Fixed Lipper BBB-Rated Lehman Govt./Credit
Income Fund Funds Index Index
------------- ------------------- -------------------
7/1/1994 $3,000,000 $3,000,000 $3,000,000
7/31/1994 3,036,000 3,051,324 3,059,957
8/31/1994 3,093,077 3,063,344 3,061,210
9/30/1994 3,023,483 3,021,035 3,014,850
10/31/1994 2,996,271 3,011,419 3,011,509
11/30/1994 2,974,698 3,003,366 3,006,126
12/31/1994 2,992,249 3,018,390 3,025,941
1/31/1995 3,045,810 3,067,070 3,084,042
2/28/1995 3,171,907 3,137,145 3,155,555
3/31/1995 3,225,829 3,161,786 3,176,716
4/30/1995 3,315,184 3,218,639 3,221,034
5/31/1995 3,485,253 3,357,467 3,356,031
6/30/1995 3,546,594 3,382,828 3,382,854
7/31/1995 3,523,541 3,374,895 3,369,814
8/31/1995 3,589,079 3,424,537 3,412,926
9/30/1995 3,680,959 3,464,682 3,447,591
10/31/1995 3,730,652 3,510,838 3,498,221
11/30/1995 3,826,903 3,568,413 3,555,811
12/31/1995 3,896,935 3,627,309 3,608,204
1/31/1996 3,964,352 3,656,637 3,630,665
2/29/1996 3,872,776 3,579,711 3,553,630
3/31/1996 3,872,776 3,553,303 3,523,791
4/30/1996 3,841,794 3,530,620 3,499,613
5/31/1996 3,862,155 3,528,202 3,493,719
6/30/1996 3,921,246 3,568,631 3,540,358
7/31/1996 3,931,833 3,577,472 3,548,618
8/31/1996 3,955,818 3,575,697 3,539,893
9/30/1996 4,079,239 3,647,255 3,602,821
10/31/1996 4,249,751 3,734,800 3,686,909
11/30/1996 4,399,343 3,818,069 3,754,802
12/31/1996 4,321,474 3,781,134 3,712,943
1/31/1997 4,314,560 3,793,148 3,717,352
2/28/1997 4,358,568 3,814,785 3,725,195
3/31/1997 4,269,654 3,755,882 3,680,923
4/30/1997 4,332,844 3,811,365 3,734,754
5/31/1997 4,404,336 3,855,019 3,769,606
6/30/1997 4,487,138 3,912,492 3,814,852
7/31/1997 4,715,982 4,047,771 3,931,565
8/31/1997 4,582,048 3,994,153 3,887,432
9/30/1997 4,705,305 4,064,414 3,948,549
10/31/1997 4,748,123 4,105,694 4,011,802
11/30/1997 4,755,720 4,125,758 4,032,917
12/31/1997 4,779,024 4,170,023 4,075,239
1/31/1998 4,831,115 4,223,244 4,132,691
2/28/1998 4,859,135 4,221,695 4,124,291
3/31/1998 4,911,128 4,243,123 4,137,007
4/30/1998 4,922,915 4,261,294 4,157,797
5/31/1998 4,955,406 4,297,737 4,202,487
6/30/1998 4,959,370 4,329,272 4,245,227
7/31/1998 4,896,882 4,325,905 4,248,615
8/31/1998 4,639,796 4,294,467 4,331,636
9/30/1998 4,777,134 4,383,000 4,455,495
10/31/1998 4,735,573 4,328,941 4,424,032
11/30/1998 4,908,421 4,408,978 4,450,391
12/31/1998 4,937,872 4,419,940 4,461,296
1/31/1999 5,033,173 4,458,400 4,492,992
2/28/1999 4,955,159 4,361,937 4,386,210
3/31/1999 5,081,515 4,410,543 4,407,975
4/30/1999 5,204,488 4,442,175 4,418,927
5/31/1999 5,107,164 4,382,243 4,373,309
6/30/1999 5,056,603 4,359,227 4,359,666
7/31/1999 4,986,822 4,337,228 4,347,600
8/31/1999 4,966,376 4,321,180 4,344,120
9/30/1999 5,004,617 4,358,314 4,383,287
10/31/1999 4,989,103 4,366,876 4,394,656
11/30/1999 5,023,028 4,377,445 4,392,197
12/31/1999 5,060,199 4,370,377 4,365,467
1/31/2000 5,057,669 4,357,560 4,364,260
2/29/2000 5,204,847 4,411,161 4,418,974
3/31/2000 5,282,399 4,451,808 4,482,829
4/30/2000 5,151,924 4,397,798 4,460,972
5/31/2000 5,116,376 4,364,343 4,456,934
6/30/2000 5,262,704 4,474,775 4,547,938
7/31/2000 5,327,962 4,493,951 4,596,108
8/31/2000 5,431,857 4,575,930 4,660,984
9/30/2000 5,390,575 4,588,958 4,678,526
10/31/2000 5,295,161 4,574,126 4,707,855
11/30/2000 5,376,707 4,616,527 4,788,370
12/31/2000 5,517,039 4,713,198 4,882,854
1/31/2001 5,645,034 4,827,209 4,964,762
2/28/2001 5,703,178 4,874,883 5,015,995
3/31/2001 5,644,435 4,871,848 5,039,012
4/30/2001 5,626,938 4,845,129 5,001,237
5/31/2001 5,711,342 4,888,832 5,030,009
6/30/2001 5,733,616 4,894,546 5,054,141
7/31/2001 5,881,543 5,005,563 5,180,088
8/31/2001 6,035,640 5,065,585 5,246,589
9/30/2001 5,876,299 5,022,297 5,294,852
10/31/2001 6,069,041 5,128,789 5,429,199
11/30/2001 6,072,683 5,095,591 5,340,098
12/31/2001 6,025,316 5,064,474 5,298,007
1/31/2002 6,079,544 5,092,165 5,336,942
2/28/2002 6,122,709 5,116,512 5,382,235
3/31/2002 6,079,237 5,049,431 5,273,041
4/30/2002 6,265,262 5,126,686 5,375,182
5/31/2002 6,408,110 5,167,222 5,424,790
6/30/2002 6,413,236 5,142,928 5,470,918
7/31/2002 6,291,385 5,117,173 5,536,816
8/31/2002 6,458,107 5,220,613 5,660,953
9/30/2002 6,485,877 5,267,628 5,782,724
10/31/2002 6,385,345 5,230,042 5,727,454
11/30/2002 6,554,557 5,305,405 5,730,842
12/31/2002 6,781,345 5,428,918 5,882,684
1/31/2003 6,920,362 5,464,883 5,882,499
2/28/2003 7,112,748 5,556,853 5,987,285
3/31/2003 7,119,150 5,566,370 5,979,488
4/30/2003 7,435,952 5,678,697 6,043,390
5/31/2003 7,906,648 5,827,426 6,215,141
6/30/2003 7,971,482 5,834,991 6,190,267
7/31/2003 7,555,371 5,636,153 5,930,762
8/31/2003 7,621,103 5,680,645 5,969,882
9/30/2003 8,028,070 5,855,587 6,158,989
10/31/2003 8,045,731 5,832,396 6,081,026
11/30/2003 8,250,897 5,872,464 6,097,176
12/31/2003 8,463,771 5,958,062 6,157,319
1/31/2004 8,523,863 6,012,281 6,213,239
2/29/2004 8,615,069 6,065,401 6,289,253
3/31/2004 8,716,727 6,107,081 6,346,983
4/30/2004 8,354,982 5,951,476 6,152,121
5/31/2004 8,314,878 5,906,222 6,120,611
6/30/2004 8,403,016 5,941,077 6,145,810
7/31/2004 8,505,533 6,003,171 6,210,733
8/31/2004 8,741,987 6,125,129 6,342,157
9/30/2004 8,923,820 6,163,094 6,364,339
10/31/2004 9,088,018 6,223,996 6,419,470
11/30/2004 9,218,886 6,203,338 6,348,051
12/31/2004 9,333,200 6,274,006 6,415,526
1/31/2005 9,294,934 6,307,272 6,460,122
2/28/2005 9,346,056 6,297,071 6,417,567
3/31/2005 9,249,720 6,226,299 6,372,367
4/30/2005 9,243,245 6,277,129 6,467,918
5/31/2005 9,263,580 6,342,498 6,549,037
6/30/2005 9,348,805 6,396,119 6,591,824
7/31/2005 9,349,740 6,366,505 6,517,620
8/31/2005 9,492,791 6,445,587 6,614,934
9/30/2005 9,499,436 6,381,258 6,528,386
10/31/2005 9,429,140 6,326,019 6,472,512
11/30/2005 9,456,485 6,352,008 6,505,693
12/31/2005 9,502,822 6,414,323 6,567,506
1/31/2006 9,662,469 6,437,736 6,555,487
2/28/2006 9,693,389 6,467,360 6,573,214
3/31/2006 9,579,007 6,396,593 6,501,006
4/30/2006 9,746,640 6,392,451 6,480,633
5/31/2006 9,689,134 6,377,019 6,477,014
6/30/2006 9,677,507 6,377,875 6,491,910
7/31/2006 9,819,767 6,466,149 6,576,417
8/31/2006 10,082,936 6,584,184 6,680,414
9/30/2006 10,147,467 6,649,141 6,745,801
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) Shares of the Fund were registered for offer and sale 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 long-term shareholders. Since index performance data is not
available coincident with the Fund's inception and registration dates,
comparative performance is presented from the month end closest to the Fund's
inception and registration dates. (b) See page 15 for a description of the
indices. (c) The mountain chart is based on the Fund's minimum initial
investment of $3,000,000.
WHAT YOU SHOULD KNOW
High yield securities are subject to a high degree of market and credit risk.
The secondary market for these securities may lack liquidity which may
adversely affect the value of the Fund. Foreign investments involve special
risks, including greater economic, political and currency fluctuation risks,
which may be even greater in emerging markets. Foreign countries may have
different accounting standards than those of the US. Securities issued by US
government agencies are not issued, and may not be guaranteed by the US
government.
14
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 BBB-Rated Funds Index is an equally weighted index of typically the 30
largest mutual funds within the corporate debt funds BBB-rated investment
objective.
Lipper Global Income Funds Index is an equally weighted index of typically the
30 largest mutual funds within the global income funds investment objective.
Lipper High Current Yield Funds Index is an equally weighted unmanaged index of
typically the 30 largest mutual funds within the high current yield funds
investment objective.
Lipper Intermediate Investment Grade Debt Funds Index is an equally weighted
unmanaged index of the 30 largest mutual funds within the intermediate
investment grade debt funds investment objectives.
Lipper Treasury Inflation Protected Securities Funds Index is an equally
weighted index of typically the 30 largest mutual funds within the treasury
inflation protected securities funds investment objective.
Source: Lipper, Inc.
Lehman US Government/Credit Index includes treasuries (public obligations of
the U.S. Treasury that have remaining maturities of more than one year) and
agencies (publicly issued debt of U.S. Government agencies, quasi-federal
corporations, and corporate or foreign debt guaranteed by the U.S. Government)
as well as other publicly issued investment grade corporate and foreign
debentures that meet specified maturity, liquidity, and quality requirements.
Lehman US Government/Credit Intermediate Index includes securities which have a
remaining maturity of 1-10 years and includes Treasuries (public obligations of
the U.S. Treasury that have remaining maturities of more than one year) and
agencies (publicly issued debt of U.S. Government agencies, quasi-federal
corporations, and corporate or foreign debt guaranteed by the U.S. Government),
as well as other publicly issued investment grade corporate and non-corporate
debentures that meet specified maturity, liquidity, and quality requirements.
Lehman Global Aggregate Bond Index covers the most liquid portion of the global
investment grade fixed-rate bond market, including government, credit and
collateralized securities.
Lehman High Yield Index covers the universe of fixed rate, non-investment grade
debt. Pay-in-kind bonds, Eurobonds, and debt issues from countries designated
as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded,
but Canadian and global bonds (SEC registered) of issuers in non-emerging
market countries are included. Original issue zeroes, step-up coupon
structures, and 144As are also included.
Lehman US Treasury Inflation Protected Securities Index measures the
performance of the inflation protected securities issued by the U.S. Treasury.
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, www.sec.gov. Information about how the Funds voted proxies relating to
portfolio securities during the 12 months ended June 30, 2006 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
1-800-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
each Fund's prospectus. The examples below are intended to help you understand
the ongoing costs of investing in the Funds and help you compare these with the
ongoing costs of investing in other mutual funds.
The first line in the table for each Class of shares shows the actual amount of
Fund expenses you would have paid on a $1,000 investment in the Fund from April
1, 2006 through September 30, 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 Period
column as shown below for your Class.
The second line in the table for 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.
15
LOOMIS SAYLES BOND FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,055.20 $3.84
Hypothetical (5% return before expenses) $1,000.00 $1,021.31 $3.80
Retail Class
- ------------
Actual $1,000.00 $1,054.20 $5.15
Hypothetical (5% return before expenses) $1,000.00 $1,020.05 $5.07
Admin Class
- -----------
Actual $1,000.00 $1,052.90 $6.43
Hypothetical (5% return before expenses) $1,000.00 $1,018.80 $6.33
*Expenses are equal to the Fund's annualized expense ratio of 0.75%, 1.00% and 1.25% for the Institutional, Retail and Admin
Class, respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the half-year
period).
LOOMIS SAYLES FIXED INCOME FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,046.70 $3.03
Hypothetical (5% return before expenses) $1,000.00 $1,022.11 $2.99
*Expenses are equal to the Fund's annualized expense ratio of 0.59%, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the half-year period).
LOOMIS SAYLES GLOBAL BOND FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,044.70 $3.79
Hypothetical (5% return before expenses) $1,000.00 $1,021.36 $3.75
Retail Class
- ------------
Actual $1,000.00 $1,043.70 $5.12
Hypothetical (5% return before expenses) $1,000.00 $1,020.05 $5.07
*Expenses are equal to the Fund's annualized expense ratio of 0.74% and 1.00% for the Institutional and Retail Class,
respectively, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the half-year period).
LOOMIS SAYLES INFLATION PROTECTED SECURITIES FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,037.00 $2.04
Hypothetical (5% return before expenses) $1,000.00 $1,023.06 $2.03
*Expenses are equal to the Fund's annualized expense ratio of 0.40%, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the half-year period).
LOOMIS SAYLES INSTITUTIONAL HIGH INCOME FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,038.40 $3.83
Hypothetical (5% return before expenses) $1,000.00 $1,021.31 $3.80
*Expenses are equal to the Fund's annualized expense ratio of 0.75%, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the half-year period).
16
LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,034.20 $2.04
Hypothetical (5% return before expenses) $1,000.00 $1,023.06 $2.03
*Expenses are equal to the Fund's annualized expense ratio of 0.40%, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the half-year period).
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,059.20 $2.84
Hypothetical (5% return before expenses) $1,000.00 $1,022.31 $2.79
*Expenses are equal to the Fund's annualized expense ratio of 0.55%, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the half-year period).
17
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENTS
The Board of Trustees, including the Independent Trustees, considers matters
bearing on each Fund's advisory agreement (collectively, the "Agreements") at
most of its meetings throughout the year. Once a year, usually in the spring,
the Contract Review and Governance Committee of the Board meets to review the
Agreements to determine whether to recommend that the full Board approve the
continuation of the Agreements for an additional one-year period. After the
Committee has made its recommendation, the full Board, including the
Independent Trustees, determines whether to approve the continuation of the
Agreements.
In connection with these meetings, the Trustees receive materials that the
Funds' investment adviser believes to be reasonably necessary for the Trustees
to evaluate the Agreements. These materials generally include, among other
items, (i) information on the investment performance of the Funds and the
performance of peer groups of funds and the Funds' performance benchmarks, (ii)
information on the Funds' advisory fees and other expenses, including
information comparing the Funds' expenses to those of peer groups of funds and
information about any applicable expense caps and fee "breakpoints," (iii)
sales and redemption data in respect of the Funds, (iv) information about the
profitability of the Agreements to the Funds' adviser (the "Adviser"), and (v)
information obtained through the completion of a questionnaire by the Adviser
(the Trustees are consulted as to the information requested through that
questionnaire). The Board of Trustees, including the Independent Trustees, also
consider other matters such as (i) the Adviser's financial results and
financial condition, (ii) each Fund's investment objective and strategies and
the size, education and experience of the Adviser's investment staff and its
use of technology, external research and trading cost measurement tools, (iii)
arrangements in respect of the distribution of the Funds' shares, (iv) the
procedures employed to determine the value of the Funds' assets, (v) the
allocation of the Funds' brokerage, if any, including allocations to brokers
affiliated with the Adviser and the use of "soft" commission dollars to pay
Fund expenses and to pay for research and other similar services, (vi) the
resources devoted to, and the record of compliance with, the Funds' investment
policies and restrictions, policies on personal securities transactions and
other compliance policies, and (vii) the general economic outlook with
particular emphasis on the mutual fund industry. Throughout the process, the
Trustees are afforded the opportunity to ask questions of and request
additional materials from the Adviser.
The Board of Trustees most recently approved the continuation of the Agreements
at their meeting held in May, 2006. In considering whether to approve the
continuation of the Agreements, the Board of Trustees, including the
Independent Trustees, did not identify any single factor as determinative.
Matters considered by the Trustees, including the Independent Trustees, in
connection with their approval of the Agreements included the following:
The nature, extent and quality of the services provided to the Funds under the
Agreements. The Trustees considered the nature, extent and quality of the
services provided by the Adviser and its affiliates to the Funds and the
resources dedicated to the Funds by the Adviser and its affiliates, including
recent or planned investments by the Adviser in additional personnel or other
resources. They also took note of the competitive market for talented
personnel, in particular, for personnel who have contributed to the generation
of strong investment performance. They also considered the need for the Adviser
to offer competitive compensation in order to attract and retain capable
personnel. They also considered the administrative services provided by the
Adviser's affiliates to the Funds. For each Fund, the Trustees also considered
the benefits to shareholders of investing in a mutual fund that is part of a
family of funds offering a variety of investment disciplines and providing for
a variety of fund and shareholder services. After reviewing these and related
factors, the Trustees concluded, within the context of their overall
conclusions regarding each of the Agreements, that the nature, extent and
quality of services provided supported the renewal of the Agreements.
Investment performance of the Funds and the Adviser. As noted above, the
Trustees received information about the performance of the Funds over various
time periods, including information which compared the performance of the Funds
to the performance of peer groups of funds and the Funds' respective
performance benchmarks. In addition, the Trustees also reviewed data prepared
by an independent third party which analyzed the performance of the Funds using
a variety of performance metrics, including metrics which also measured the
performance of the Funds on a risk adjusted basis.
With respect to each Fund, the Board concluded that the Fund's performance or
other relevant factors supported the renewal of the Agreement relating to that
Fund. In the case of each Fund that had performance that lagged that of a
relevant peer group for certain (although not necessarily all) periods, the
Board concluded that other factors relevant to performance supported renewal of
the Funds' Agreements. These factors varied from Fund to Fund, but included one
or more of the following: (1) that the Fund's performance, although lagging in
certain recent periods, was strong over the longer term; (2) that the
underperformance was attributable, to a significant extent, to investment
decisions by the Fund's Adviser that were reasonable and consistent with the
Fund's investment objective and policies; and (3) that the Fund's Adviser had
taken or is taking steps designed to help improve the Fund's investment
performance.
The Trustees also considered the Adviser's performance and reputation
generally, the Funds' performance as a fund family generally, and the
historical responsiveness of the Adviser to Trustee concerns about performance
and the willingness of the Adviser to take steps intended to improve
performance.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
performance of the Funds and the Adviser supported the renewal of the
Agreements.
18
The costs of the services to be provided and profits to be realized by the
Adviser and its affiliates from their respective relationships with the Funds.
The Trustees considered the fees charged to the Funds for advisory services as
well as the total expense levels of the Funds. This information included
comparisons (provided both by management and also by an independent third
party) of the Funds' advisory fees and total expense levels to those of their
peer groups and information about the advisory fees charged by the Adviser to
comparable accounts. In considering the fees charged to comparable accounts,
the Trustees considered, among other things, management's representations about
the differences between managing mutual funds as compared to other types of
accounts, including the additional resources required to effectively manage
mutual fund assets. In evaluating each Fund's advisory fees, the Trustees also
took into account the demands, complexity and quality of the investment
management of such Fund. The Trustees considered that over the past several
years, management had made recommendations regarding the implementation of
advisory fee breakpoints and the institution of advisory fee waivers and
expense caps. They noted that currently all of the Loomis Sayles Funds in this
report have expense caps in place, and they considered the amounts waived or
reimbursed by the Adviser under these caps. The Trustees noted that several
Funds had total expense ratios or advisory fee rates that were above the median
of a peer group of Funds. The Trustees considered the circumstances that
accounted for such relatively higher expenses.
The Trustees also considered the compensation directly or indirectly received
by the Adviser and its affiliates from their relationships with the Funds. The
Trustees reviewed information provided by management as to the profitability of
the Adviser's and its affiliates' relationships with the Funds, and information
about the allocation of expenses used to calculate profitability. In this
regard, the Funds, at the request of the Independent Trustees, retained an
independent accounting firm to review the cost allocation methods used by the
Adviser to determine profitability, and engaged in extensive discussions with
the Adviser regarding such methods and Adviser profitability generally. They
also reviewed information provided by management about the effect of
distribution costs and Fund growth on Adviser profitability. When reviewing
profitability, the Trustees also considered information about court cases in
which adviser profitability was an issue, the performance of the relevant
Funds, the expense levels of the Funds, and whether the Adviser had implemented
breakpoints and/or expense caps with respect to such Funds.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
advisory fees charged to each of the Funds were fair and reasonable, and that
the costs of these services generally and the related profitability of the
Adviser and its affiliates in respect of their relationships with the Funds
supported the renewal of the Agreements.
Economies of Scale. The Trustees considered the existence of any economies of
scale in the provision of services by the Adviser and whether those economies
are shared with the Funds through "breakpoints" in its investment advisory fees
(lower fee rates applicable to assets in excess of certain threshold levels) or
other means, such as expense waivers. The Trustees noted that two of the Loomis
Sayles Funds in this report had breakpoints in their advisory fees and the
remaining Funds were subject to expense caps. The Trustees also considered
management's representation that for certain Funds the Funds' Adviser did not
benefit from economies of scale in providing services to the Funds (because of
the investment style of the Fund, the small size of the Fund or for other
reasons) or were capacity constrained with respect to the relevant investment
strategy. In considering these issues, the Trustees also took note of the costs
of the services provided (both on an absolute and a relative basis) and the
profitability to the Adviser and its affiliates of their relationships with the
Funds, as discussed above.
After reviewing these and related factors, the Trustees considered, within the
context of their overall conclusions regarding each of the Agreements, that the
extent to which economies of scale were shared with the Funds supported the
renewal of the Agreements.
The Trustees also considered other factors, which included but were not limited
to the following:
.. whether each Fund has operated in accordance with its investment objective
and the Fund's record of compliance with its investment restrictions, and
the compliance programs of the Funds and the Adviser. They also considered
the compliance related resources the Adviser and its affiliates were
providing to the Funds.
.. the nature, quality, cost and extent of administrative and shareholder
services performed by the Adviser and its affiliates, both under the
Agreements and under a separate agreement covering administrative services.
.. so-called "fallout benefits" to the Adviser, such as the engagement of
affiliates of the Adviser to provide distribution and brokerage services to
the Funds, and the benefits of research made available to the Adviser by
reason of brokerage commissions generated by the Funds' securities
transactions. The Trustees considered the possible conflicts of interest
associated with these fallout and other benefits, and the reporting,
disclosure and other processes in place to disclose and monitor such
possible conflicts of interest.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees,
concluded that each of the existing advisory agreements should be continued
through June 30, 2007.
19
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES BOND FUND
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------
BONDS AND NOTES - 93.8% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 87.7%
AEROSPACE & DEFENSE - 0.3%
Bombardier, Inc., 7.350%, 12/22/2026 CAD 5,185,000 $ 4,209,696
Bombardier, Inc., 7.450%, 5/01/2034, 144A(b) USD 15,700,000 13,521,625
-----------
17,731,321
-----------
AGENCIES - 0.1%
Pemex Project Funding Master Trust,
8.625%, 2/01/2022 1,580,000 1,897,580
Pemex Project Funding Master Trust,
8.625%, 12/01/2023(b) 6,485,000 7,798,213
-----------
9,695,793
-----------
AIRLINES - 0.6%
American Airlines, Inc., 7.324%, 10/15/2009 1,255,000 1,223,625
American Airlines, Inc., Series 93A6,
8.040%, 9/16/2011 2,771,141 2,688,007
Continental Airlines, Inc., Series 1997-4B,
6.900%, 1/02/2017 3,606,680 3,458,599
Continental Airlines, Inc., Series 1998-1, Class B,
6.748%, 3/15/2017 4,036,646 3,935,730
Continental Airlines, Inc., Series 1999-1B,
6.795%, 8/02/2018 4,916,733 4,784,245
Continental Airlines, Inc., Series 1999-1C,
6.954%, 8/02/2009 6,168,114 5,905,969
Continental Airlines, Inc., Series 1999-2, Class B,
7.566%, 3/15/2020 4,788,087 4,776,117
Continental Airlines, Inc., Series 2000-2, Class B,
8.307%, 4/02/2018 7,495,695 7,270,824
Continental Airlines, Inc., Series 2001-1B,
7.373%, 12/15/2015 4,465,997 4,421,337
Continental Airlines, Inc., Series 96-A, Class B,
6.940%, 10/15/2013 497,914 497,530
Continental Airlines, Inc., Series 971-A, Class B,
7.461%, 4/01/2015 4,528,170 4,528,170
-----------
43,490,153
-----------
AUTOMOTIVE - 2.2%
Cummins Engine Co., Inc., 7.125%, 3/01/2028 3,000,000 3,071,271
Ford Motor Co., 6.375%, 2/01/2029(b) 1,195,000 873,844
Ford Motor Co., 6.625%, 10/01/2028(b) 8,180,000 6,104,325
Ford Motor Credit Co., 5.700%, 1/15/2010 35,210,000 32,528,653
Ford Motor Credit Co., 7.000%, 10/01/2013(b) 13,075,000 12,131,482
Ford Motor Credit Co., 7.250%, 10/25/2011 18,760,000 17,692,106
Ford Motor Credit Co., 7.375%, 10/28/2009 500,000 485,902
Ford Motor Credit Co., 8.625%, 11/01/2010 29,010,000 28,899,501
GMAC Australia, 6.500%, 8/10/2007 AUD 450,000 324,265
GMAC Canada Ltd., 6.625%, 12/17/2010 GBP 500,000 916,282
GMAC International Finance BV,
8.000%, 3/14/2007 NZD 1,147,000 743,894
GMAC LLC, 5.625%, 5/15/2009 USD 2,040,000 1,989,349
GMAC LLC, 6.243%, 3/20/2007(b)(e) 26,650,000 26,560,030
GMAC LLC, 6.375%, 12/07/2007 GBP 500,000 930,324
GMAC LLC, 6.457%, 7/16/2007(e) USD 7,500,000 7,457,857
GMAC LLC, 6.750%, 12/01/2014(b) 6,045,000 5,901,461
20
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES BOND FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
AUTOMOTIVE - CONTINUED
GMAC LLC, 6.875%, 8/28/2012 USD 200,000 $ 197,960
GMAC LLC, 7.500%, 12/01/2006 NZD 1,100,000 713,912
GMAC LLC, 8.000%, 11/01/2031(b) USD 1,065,000 1,113,544
Goodyear Tire & Rubber Co., 7.000%, 3/15/2028 3,866,000 3,237,775
Goodyear Tire & Rubber Co., 9.000%, 7/01/2015(b) 3,460,000 3,511,900
------------
155,385,637
------------
BANKING - 6.8%
BAC Capital Trust VI, 5.625%, 3/08/2035(b) 35,170,000 32,613,704
Barclays Financial LLC, 4.060%, 9/16/2010, 144A KRW 38,370,000,000 40,245,416
Barclays Financial LLC, 4.100%, 3/22/2010, 144A THB 917,000,000 23,267,120
Barclays Financial LLC, 4.160%, 2/22/2010, 144A 2,816,000,000 71,663,508
Barclays Financial LLC, 4.460%, 9/23/2010, 144A KRW 48,070,000,000 50,927,530
Barclays Financial LLC, 5.500%, 11/01/2010, 144A THB 364,000,000 9,647,429
BNP Paribas SA, Zero Coupon Bond,
6/13/2011, 144A IDR 255,728,280,000 17,739,504
European Investment Bank, Zero Coupon Bond,
3/10/2021(e) AUD 148,280,000 49,230,359
HSBC Bank USA, 3.310%, 8/25/2010, 144A USD 41,250,000 41,547,000
JPMorgan Chase & Co., Zero Coupon Bond,
5/17/2010(e), 144A BRL 241,667,000 69,942,607
JPMorgan Chase & Co., Zero Coupon Bond,
3/28/2011, 144A IDR 699,525,000,000 49,432,948
JPMorgan Chase & Co., Zero Coupon Bond,
3/28/2011, 144A 248,433,920,000 17,555,943
JPMorgan Chase London, Zero Coupon Bond,
10/21/2010, 144A 152,206,784,000 11,193,790
------------
485,006,858
------------
CHEMICALS - 1.0%
Borden, Inc., 7.875%, 2/15/2023 USD 27,674,000 22,692,680
Borden, Inc., 8.375%, 4/15/2016 2,165,000 1,948,500
Borden, Inc., 9.200%, 3/15/2021 10,695,000 9,946,350
Hercules, Inc., 6.500%, 6/30/2029 12,299,000 9,916,069
IMC Global, Inc., 6.875%, 7/15/2007(b) 3,695,000 3,704,237
IMC Global, Inc., 7.300%, 1/15/2028 6,635,000 5,772,450
IMC Global, Inc., 7.375%, 8/01/2018 7,525,000 6,913,594
Methanex Corp., 6.000%, 8/15/2015 8,780,000 8,405,480
------------
69,299,360
------------
CONSTRUCTION MACHINERY - 0.1%
Great Lakes Dredge & Dock Corp.,
7.750%, 12/15/2013(b) 3,590,000 3,338,700
United Rentals North America, Inc.,
7.000%, 2/15/2014(b) 2,250,000 2,115,000
------------
5,453,700
------------
ELECTRIC - 1.5%
AES Corp., 7.750%, 3/01/2014(b) 4,875,000 5,070,000
AES Corp., 8.375%, 3/01/2011 GBP 1,990,000 3,800,497
AES Corp., 8.875%, 2/15/2011 USD 315,000 337,050
Commonwealth Edison Co., 4.750%, 12/01/2011(d) 403,000 388,754
21
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
ELECTRIC - CONTINUED
Dominion Resources, Inc., 5.950%, 6/15/2035(b) USD 13,040,000 $ 12,661,749
Dynegy Holdings, Inc., 7.125%, 5/15/2018 4,295,000 3,929,925
Dynegy Holdings, Inc., 7.625%, 10/15/2026 6,435,000 5,871,937
Dynegy Holdings, Inc., 8.375%, 5/01/2016 2,000,000 2,035,000
Edison Mission Energy, 7.730%, 6/15/2009 1,835,000 1,885,463
Empresa Nacional de Electricidad SA
(Endesa-Chile), 7.875%, 2/01/2027(b) 11,581,000 12,836,010
Enersis SA, 7.375%, 1/15/2014(b) 3,435,000 3,651,010
Enersis SA, 7.400%, 12/01/2016 7,650,000 8,200,448
MidAmerican Energy Holdings Co.,
6.125%, 4/01/2036, 144A 6,540,000 6,610,652
NGC Corporation Capital Trust I, Series B,
8.316%, 6/01/2027 21,125,000 19,223,750
Power Receivables Finance LLC,
6.290%, 1/01/2012, 144A 2,795,675 2,820,473
Quezon Power Philippines Co.,
8.860%, 6/15/2017 6,772,500 6,806,362
Salton Sea Funding Corp., Series E,
8.300%, 5/30/2011 1,738,929 1,838,968
Salton Sea Funding Corp., Series F,
7.475%, 11/30/2018 221,341 232,941
Southern California Edison Co.,
7.625%, 1/15/2010 2,000,000 2,137,050
Texas-New Mexico Power Co.,
6.250%, 1/15/2009 1,000,000 1,016,744
TXU Corp., Series P, 5.550%, 11/15/2014(b) 320,000 302,329
TXU Corp., Series R, 6.550%, 11/15/2034(b) 2,810,000 2,646,666
------------
104,303,778
------------
ENTERTAINMENT - 1.4%
Time Warner, Inc., 6.625%, 5/15/2029 21,780,000 21,775,383
Time Warner, Inc., 6.950%, 1/15/2028 8,805,000 9,075,807
Time Warner, Inc., 7.625%, 4/15/2031 5,885,000 6,500,983
Time Warner, Inc., 7.700%, 5/01/2032 3,785,000 4,226,853
Viacom, Inc., Class B, 6.875%, 4/30/2036, 144A 55,225,000 54,594,772
------------
96,173,798
------------
FOREIGN LOCAL GOVERNMENTS - 3.8%
Ontario Hydro, Zero Coupon Bond, 11/27/2020 CAD 1,507,000 706,103
Province of Alberta, 5.930%, 9/16/2016 22,158,117 21,362,189
Province of British Columbia, 5.250%, 12/01/2006 26,460,000 23,709,486
Province of British Columbia, 6.000%, 6/09/2008 66,745,000 61,546,324
Province of Manitoba, 4.450%, 12/01/2008 1,640,000 1,479,030
Province of Manitoba, 5.750%, 6/02/2008 74,125,000 68,076,294
Province of Ontario, 3.875%, 3/08/2008 70,975,000 63,282,205
Province of Ontario, 5.700%, 12/01/2008(b) 33,755,000 31,223,413
Province of Saskatchewan, 5.500%, 6/02/2008 775,000 708,985
------------
272,094,029
------------
HEALTHCARE - 1.2%
HCA, Inc., 5.750%, 3/15/2014 USD 2,750,000 2,158,750
HCA, Inc., 6.250%, 2/15/2013 3,000,000 2,505,000
HCA, Inc., 6.300%, 10/01/2012 2,500,000 2,115,625
22
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES BOND FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
HEALTHCARE - CONTINUED
HCA, Inc., 6.500%, 2/15/2016 USD 4,430,000 $ 3,544,000
HCA, Inc., 7.050%, 12/01/2027 23,030,000 16,526,673
HCA, Inc., 7.190%, 11/15/2015 4,500,000 3,746,650
HCA, Inc., 7.500%, 12/15/2023 13,565,000 10,518,315
HCA, Inc., 7.500%, 11/06/2033 8,795,000 6,860,100
HCA, Inc., 7.580%, 9/15/2025 8,395,000 6,470,463
HCA, Inc., 7.690%, 6/15/2025 31,455,000 24,554,748
HCA, Inc., 7.750%, 7/15/2036 5,386,000 4,171,511
Owens & Minor, Inc., 6.350%, 4/15/2016 3,770,000 3,802,034
Tenet Healthcare Corp., 9.250%, 2/01/2015 560,000 539,000
------------
87,512,869
------------
HOME CONSTRUCTION - 3.1%
Centex Corp., 5.250%, 6/15/2015(b) 5,110,000 4,773,879
DR. Horton, Inc., 5.250%, 2/15/2015(b) 53,730,000 49,055,383
DR. Horton, Inc., 5.625%, 9/15/2014 7,235,000 6,821,209
DR. Horton, Inc., 5.625%, 1/15/2016(b) 26,345,000 24,476,850
DR. Horton, Inc., 6.500%, 4/15/2016(b) 1,975,000 1,937,933
K. Hovnanian Enterprises, Inc.,
6.250%, 1/15/2016(b) 5,300,000 4,664,000
K. Hovnanian Enterprises, Inc.,
6.375%, 12/15/2014(b) 1,534,000 1,372,930
K. Hovnanian Enterprises, Inc., 6.500%,
1/15/2014 2,750,000 2,516,250
K. Hovnanian Enterprises, Inc.,
7.500%, 5/15/2016(b) 1,500,000 1,400,625
Lennar Corp., 6.500%, 4/15/2016, 144A(b) 39,675,000 39,889,086
Lennar Corp., Series B, Class A,
5.600%, 5/31/2015 3,995,000 3,799,233
Pulte Homes, Inc., 5.200%, 2/15/2015(b) 5,360,000 5,019,227
Pulte Homes, Inc., 6.000%, 2/15/2035(b) 57,810,000 52,122,247
Pulte Homes, Inc., 6.375%, 5/15/2033 15,220,000 14,242,100
Toll Brothers Finance Corp.,
5.150%, 5/15/2015(b) 7,935,000 7,053,287
------------
219,144,239
------------
INDEPENDENT/ENERGY - 1.4%
Anadarko Petroleum Corp., 5.950%, 9/15/2016 53,650,000 54,291,010
Anadarko Petroleum Corp., 6.450%, 9/15/2036(b) 39,605,000 40,453,695
Chesapeake Energy Corp., 6.500%, 8/15/2017 1,470,000 1,378,125
Pioneer Natural Resource Co., 5.875%, 7/15/2016 4,720,000 4,419,846
XTO Energy, Inc., 6.100%, 4/01/2036(b) 2,165,000 2,141,614
------------
102,684,290
------------
INTEGRATED/ENERGY - 0.8%
Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A 38,955,000 36,130,763
Petrozuata Finance, Inc.,
8.220%, 4/01/2017, 144A 17,708,000 17,265,300
------------
53,396,063
------------
LIFE INSURANCE - 1.2%
ASIF Global Financing XXVII,
2.380%, 2/26/2009, 144A SGD 38,400,000 23,502,516
Mutual of Omaha Insurance Co.,
6.800%, 6/15/2036, 144A USD 57,985,000 61,283,825
------------
84,786,341
------------
23
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
MEDIA CABLE - 2.4%
Comcast Corp., 5.500%, 3/15/2011 USD 3,000,000 $ 3,015,264
Comcast Corp., 5.650%, 6/15/2035(b) 60,520,000 54,907,375
Comcast Corp., 6.450%, 3/15/2037 61,395,000 61,424,654
Comcast Corp., 6.500%, 11/15/2035 37,670,000 37,932,372
CSC Holdings, Inc., 7.875%, 2/15/2018 1,550,000 1,608,125
NTL Cable Plc, 9.125%, 8/15/2016 500,000 516,250
NTL Cable Plc, 9.750%, 4/15/2014 GBP 6,005,000 11,580,769
------------
170,984,809
------------
MEDIA NON-CABLE - 0.2%
News America, Inc., 6.200%, 12/15/2034 USD 3,955,000 3,777,527
News America, Inc., 6.400%, 12/15/2035 8,080,000 7,924,315
------------
11,701,842
------------
METALS & MINING - 0.0%
Alcan, Inc., 5.750%, 6/01/2035 2,605,000 2,468,532
------------
MORTGAGE RELATED - 1.5%
Federal Home Loan Mortgage Corp.,
3.220%, 6/20/2007 SGD 9,250,000 5,805,383
Federal Home Loan Mortgage Corp.,
5.000%, 12/01/2031 USD 406,870 392,738
Federal National Mortgage Association,
2.290%, 2/19/2009 SGD 145,900,000 89,335,445
Federal National Mortgage Association,
5.375%, 11/15/2011 USD 7,700,000 7,865,096
Federal National Mortgage Association,
5.500%, 3/15/2011(b) 5,000,000 5,117,660
------------
108,516,322
------------
NON-CAPTIVE CONSUMER - 0.0%
SLM Corp., 6.500%, 6/15/2010 NZD 1,010,000 647,185
------------
NON-CAPTIVE DIVERSIFIED - 2.6%
CIT Group, Inc., 6.000%, 4/01/2036 500,000 486,858
General Electric Capital Corp., 1.725%, 6/27/2008 SGD 4,250,000 2,595,204
General Electric Capital Corp., 6.500%, 9/28/2015 NZD 240,358,000 153,364,315
General Electric Capital Corp., Series EMTN,
6.750%, 9/26/2016 40,575,000 26,677,402
------------
183,123,779
------------
OIL FIELD SERVICES - 0.2%
North America Energy Partners, Inc.,
8.750%, 12/01/2011(b) USD 8,160,000 8,139,600
Pecom Energia SA, 8.125%, 7/15/2010, 144A 5,640,000 5,865,600
------------
14,005,200
------------
PACKAGING - 0.3%
Owens-Illinois, Inc., 7.800%, 5/15/2018(b) 21,397,000 20,327,150
------------
PAPER - 2.5%
Abitibi-Consolidated, Inc., 7.400%, 4/01/2018 3,000,000 2,460,000
Abitibi-Consolidated, Inc., 7.500%, 4/01/2028 7,220,000 5,703,800
Bowater, Inc., 6.500%, 6/15/2013(b) 3,880,000 3,443,500
Bowater, Inc., 10.850%, 11/30/2014 CAD 450,000 424,737
Georgia-Pacific Corp., 7.375%, 12/01/2025 USD 29,662,000 28,030,590
Georgia-Pacific Corp., 7.750%, 11/15/2029 78,125,000 75,000,000
Georgia-Pacific Corp., 8.000%, 1/15/2024 11,440,000 11,268,400
Georgia-Pacific Corp., 8.875%, 5/15/2031 19,399,000 20,174,960
24
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES BOND FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
PAPER - CONTINUED
Georgia-Pacific Corp., (Timber Group),
7.250%, 6/01/2028 USD 24,310,000 $ 22,729,850
International Paper Co., 4.250%, 1/15/2009 2,000,000 1,954,286
Jefferson Smurfit Corp., 7.500%, 6/01/2013 4,140,000 3,819,150
------------
175,009,273
------------
PHARMACEUTICALS - 0.6%
Elan Financial Plc, 7.750%, 11/15/2011(b) 45,681,000 44,481,874
------------
PIPELINES - 1.7%
Colorado Interstate Gas Co., 5.950%, 3/15/2015 2,725,000 2,605,975
El Paso Corp., 6.375%, 2/01/2009(b) 3,810,000 3,800,475
El Paso Corp., 6.750%, 5/15/2009(b) 8,350,000 8,391,750
El Paso Corp., 6.950%, 6/01/2028 11,099,000 10,433,060
El Paso Corp., 7.000%, 5/15/2011 2,115,000 2,128,219
El Paso Corp., 7.750%, 6/15/2010 5,190,000 5,371,650
El Paso Corp., 7.750%, 1/15/2032(b) 1,500,000 1,537,500
El Paso Corp., 7.800%, 8/01/2031(b) 1,000,000 1,025,000
Kinder Morgan Finance, 5.700%, 1/05/2016 14,160,000 13,071,322
Kinder Morgan Finance, 6.400%, 1/05/2036(b) 33,589,000 30,077,136
Kinder Morgan, Inc., 5.150%, 3/01/2015(b) 16,530,000 14,852,899
Kinder Morgan, Inc., 6.670%, 11/01/2027 6,720,000 6,057,502
Southern Natural Gas Co., 7.350%, 2/15/2031 4,695,000 4,865,072
Tennessee Gas Pipeline Co., 7.000%, 10/15/2028 2,055,000 2,046,706
Williams Cos., Inc., 7.500%, 1/15/2031 13,985,000 13,810,187
------------
120,074,453
------------
PROPERTY & CASUALTY INSURANCE - 0.7%
Allstate Corp., 5.950%, 4/01/2036 7,745,000 7,739,408
Marsh & McLennan, Inc., 5.875%, 8/01/2033(b) 37,102,000 33,953,116
St. Paul Travelers Co., Inc., 6.750%, 6/20/2036 6,850,000 7,380,074
Travelers Property Casualty Corp.,
6.375%, 3/15/2033 1,000,000 1,018,634
------------
50,091,232
------------
RAILROADS - 0.1%
Missouri Pacific Railroad Co., 5.000%, 1/01/2045 7,804,000 6,248,335
------------
REAL ESTATE INVESTMENT TRUSTS - 0.2%
Highwoods Realty LP, 7.500%, 4/15/2018 5,640,000 6,221,969
iStar Financial, Inc., Series REGS,
5.700%, 3/01/2014 5,855,000 5,820,906
------------
12,042,875
------------
RESTAURANTS - 0.0%
McDonald's Corp., 3.628%, 10/10/2010 SGD 3,750,000 2,359,448
------------
RETAILERS - 0.7%
Dillard's, Inc., 6.625%, 1/15/2018(b) USD 1,920,000 1,828,800
Dillard's, Inc., 7.000%, 12/01/2028 4,255,000 3,888,006
Dillard's, Inc., 7.750%, 7/15/2026 7,182,000 6,912,675
Dillard's, Inc., 7.750%, 5/15/2027 1,000,000 965,000
Foot Locker, Inc., 8.500%, 1/15/2022 14,009,000 13,238,505
J.C. Penney Co., Inc., 7.125%, 11/15/2023(b) 3,386,000 3,747,354
Kellwood Co., 7.625%, 10/15/2017 11,070,000 10,285,757
Toys R Us, 7.375%, 10/15/2018 8,310,000 6,014,363
------------
46,880,460
------------
25
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
SOVEREIGNS - 18.3%
Canadian Government, 2.750%, 12/01/2007 CAD 366,130,000 $ 322,973,992
Canadian Government, 4.250%, 9/01/2008(b) 221,710,000 199,524,124
Canadian Government, 4.250%, 9/01/2009 15,795,000 14,263,758
Canadian Government, 4.500%, 9/01/2007(b) 197,930,000 177,769,561
Canadian Government, Series WH31,
6.000%, 6/01/2008(b) 58,550,000 54,089,671
Mexican Fixed Rate Bonds, Series M-10,
8.000%, 12/17/2015 MXN 458,500,000 40,920,520
Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023 1,150,900,000 99,952,640
Mexican Fixed Rate Bonds, Series MI-10,
9.000%, 12/20/2012 1,050,000,000 99,279,152
PF Export Receivables Master Trust,
6.436%, 6/01/2015, 144A USD 2,118,191 2,139,373
Republic of Argentina, Zero Coupon Bond,
12/15/2035(e) 1,029,581 102,340
Republic of Argentina, 2.418%, 9/30/2014(e) ARS 91,624,200 30,211,883
Republic of Argentina, 5.590%, 8/03/2012(e) USD 20,063,750 15,884,140
Republic of Argentina, 8.280%, 12/31/2033(b)(f) 386,001 371,526
Republic of Brazil, 8.250%, 1/20/2034(b) 44,490,000 51,163,500
Republic of Brazil, 8.875%, 4/15/2024 32,625,000 39,231,563
Republic of Brazil, 12.500%, 1/05/2016(b) BRL 17,305,000 7,988,729
Republic of Brazil, 12.500%, 1/05/2022 114,735,000 51,821,509
Republic of Peru, 5.000%, 3/07/2017(e) USD 2,952,000 2,900,340
Republic of South Africa, 12.500%, 12/21/2006 ZAR 5,690,000 735,801
Republic of South Africa, 13.000%, 8/31/2010 500,585,000 73,409,493
Republic of Uruguay, 7.625%, 3/21/2036 USD 4,360,000 4,349,100
Republic of Uruguay, 7.875%, 1/15/2033(b)(f) 5,240,613 5,424,034
SP Powerassets Ltd., 3.730%, 10/22/2010 SGD 1,000,000 635,022
--------------
1,295,141,771
--------------
SUPERMARKETS - 1.8%
Albertson's, Inc., 6.625%, 6/01/2028 USD 16,155,000 13,860,360
Albertson's, Inc., 7.450%, 8/01/2029 88,220,000 81,714,657
Albertson's, Inc., 7.750%, 6/15/2026 17,600,000 16,720,862
Albertson's, Inc., 8.000%, 5/01/2031(b) 9,680,000 9,410,054
Albertson's, Inc., 8.700%, 5/01/2030 2,995,000 3,019,850
--------------
124,725,783
--------------
SUPRANATIONAL - 3.2%
European Investment Bank, Zero Coupon Bond,
9/12/2008, 144A BRL 10,732,465 3,843,000
Inter-American Development Bank, Series EMTN,
Zero Coupon Bond, 5/11/2009 297,000,000 94,934,002
Inter-American Development Bank, Series EMTN,
6.000%, 12/15/2017 NZD 184,525,000 117,102,184
Inter-American Development Bank, Series
GMTN, 6.250%, 6/22/2016 17,875,000 11,537,722
--------------
227,416,908
--------------
TECHNOLOGY - 3.3%
Affiliated Computer Services, Inc.,
5.200%, 6/01/2015 USD 115,000 106,088
Amkor Technology, Inc., 7.125%, 3/15/2011(b) 8,785,000 8,082,200
Amkor Technology, Inc., 10.500%, 5/01/2009 1,680,000 1,688,400
26
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES BOND FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
TECHNOLOGY - CONTINUED
Arrow Electronics, Inc., 6.875%, 7/01/2013 USD 17,380,000 $ 18,208,366
Avnet, Inc., 6.000%, 9/01/2015(b) 34,395,000 33,560,302
Avnet, Inc., 6.625%, 9/15/2016 7,580,000 7,714,750
Corning, Inc., 5.900%, 3/15/2014 9,330,000 9,515,732
Corning, Inc., 6.200%, 3/15/2016 5,155,000 5,273,060
Corning, Inc., 6.750%, 9/15/2013 13,600,000 14,538,658
Corning, Inc., 6.850%, 3/01/2029 3,095,000 3,240,406
Corning, Inc., 7.250%, 8/15/2036 3,715,000 3,956,590
Hynix Semiconductor, Inc.,
9.875%, 7/01/2012, 144A(b) 6,585,000 7,177,650
Lucent Technologies, Inc., 6.450%, 3/15/2029 54,995,000 48,945,550
Lucent Technologies, Inc., 6.500%, 1/15/2028 750,000 667,500
Nortel Networks Corp., 6.875%, 9/01/2023 12,432,000 10,256,400
Nortel Networks Ltd., 10.125%, 7/15/2013, 144A 17,805,000 18,784,275
Northern Telecom Capital Corp.,
7.875%, 6/15/2026 5,945,000 5,172,150
Samsung Electronics Co. Ltd.,
7.700%, 10/01/2027, 144A 5,400,000 5,796,392
Sungard Data Systems, Inc., 9.125%, 8/15/2013 1,790,000 1,852,650
SunGard Data Systems, Inc.,
10.250%, 8/15/2015(b) 2,570,000 2,647,100
Xerox Capital Trust I, 8.000%, 2/01/2027 25,440,000 25,948,800
Xerox Corp., 7.200%, 4/01/2016 615,000 645,750
------------
233,778,769
------------
TOBACCO - 0.2%
Altria Group, Inc., 7.000%, 11/04/2013 11,000,000 11,993,564
------------
TOBACCO SETTLEMENT REVENUE - 0.3%
Michigan Tobacco Settlement Finance Authority,
7.309%, 6/01/2034 21,965,000 22,722,353
------------
TRANSPORTATION SERVICES - 1.5%
American President Cos., Ltd.,
8.000%, 1/15/2024(d) 19,219,000 17,297,100
Atlas Air, Inc., Series 1999-1, Class A1,
7.200%, 1/02/2019 1,233,534 1,224,282
Atlas Air, Inc., Series 1999-1A, 6.880%, 7/02/2009 1,354,626 1,313,987
Atlas Air, Inc., Series 1999-1B,
7.630%, 1/02/2015(g) 18,164,300 18,890,872
Atlas Air, Inc., Series 1999-1C,
8.770%, 1/02/2011(g) 15,689,997 13,571,847
Atlas Air, Inc., Series 2000-1,
9.702%, 1/02/2008(g) 201,720 170,453
Atlas Air, Inc., Series 2000-1, Class B,
9.057%, 1/02/2014(g) 9,260,147 10,278,764
Atlas Air, Inc., Series B, 7.680%, 1/02/2014(g) 39,925,752 41,922,039
Atlas Air, Inc., Series C, 8.010%, 1/02/2010(g) 3,529,749 2,841,448
------------
107,510,792
------------
TREASURIES - 11.8%
U.S. Treasury Bonds, 5.375%, 2/15/2031(b) 430,825,000 465,324,604
U.S. Treasury Notes, 3.250%, 8/15/2007(b) 189,180,000 186,431,026
U.S. Treasury Notes, 3.875%, 7/31/2007(b) 185,820,000 184,179,581
------------
835,935,211
------------
27
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
WIRELESS - 3.0%
Rogers Wireless, Inc., 6.375%, 3/01/2014 USD 1,895,000 $ 1,887,893
Rogers Wireless, Inc., 7.625%, 12/15/2011 CAD 28,500,000 27,601,208
Telefonica Emisiones SAU, 7.045%, 6/20/2036 USD 174,550,000 184,207,328
--------------
213,696,429
--------------
WIRELINES - 5.1%
AT&T Corp., 6.500%, 3/15/2029 15,231,000 15,025,153
AT&T, Inc., 6.150%, 9/15/2034 14,755,000 14,284,507
BellSouth Corp., 6.000%, 11/15/2034(b) 26,970,000 25,315,741
Embarq Corp., 7.995%, 6/01/2036 8,735,000 9,249,518
GTE Corp., 6.940%, 4/15/2028 11,700,000 12,117,819
Koninklijke (Royal) KPN NV, Series EMTN,
5.750%, 3/18/2016 GBP 1,600,000 2,963,503
Koninklijke (Royal) KPN NV, Series GMTN,
4.000%, 6/22/2015 EUR 2,750,000 3,260,688
Level 3 Communications, Inc.,
11.500%, 3/01/2010(b) USD 905,000 929,887
New England Telephone & Telegraph,
7.875%, 11/15/2029 2,740,000 2,973,862
Philippine Long Distance Telephone Co.,
8.350%, 3/06/2017 13,019,000 14,223,257
Philippine Long Distance Telephone Co.,
11.375%, 5/15/2012 925,000 1,128,500
Qwest Capital Funding, Inc.,
6.375%, 7/15/2008(b) 919,000 920,149
Qwest Capital Funding, Inc., 6.500%, 11/15/2018 25,595,000 23,163,475
Qwest Capital Funding, Inc.,
6.875%, 7/15/2028(b) 61,170,000 54,747,150
Qwest Capital Funding, Inc.,
7.000%, 8/03/2009(b) 4,995,000 5,019,975
Qwest Capital Funding, Inc.,
7.250%, 2/15/2011(b) 1,820,000 1,820,000
Qwest Capital Funding, Inc.,
7.625%, 8/03/2021(b) 9,275,000 8,985,156
Qwest Capital Funding, Inc., 7.750%, 2/15/2031 31,595,000 30,489,175
Qwest Corp., 6.875%, 9/15/2033(b) 20,490,000 18,697,125
Qwest Corp., 7.250%, 9/15/2025 8,825,000 8,549,219
Verizon Communications, 5.850%, 9/15/2035(b) 87,716,000 82,642,419
Verizon Maryland, Inc., 5.125%, 6/15/2033 6,570,000 5,328,211
Verizon New York, Inc., Class B,
7.375%, 4/01/2032(b) 17,475,000 18,214,821
--------------
360,049,310
--------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $5,873,987,285) 6,208,091,888
--------------
CONVERTIBLE BONDS - 6.1%
BANKING - 0.6%
Wells Fargo & Co., 5.239%, 5/01/2033(e) 42,240,000 42,675,072
--------------
HEALTHCARE - 0.1%
CONMED Corp., 2.500%, 11/15/2024 2,760,000 2,390,850
Invitrogen Corp., 1.500%, 2/15/2024 2,700,000 2,342,250
--------------
4,733,100
--------------
28
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES BOND FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- --------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
INDEPENDENT/ENERGY - 0.1%
Devon Energy Corp., 4.900%, 8/15/2008 USD 1,400,000 $ 1,758,750
Devon Energy Corp., 4.950%, 8/15/2008 2,600,000 3,266,250
------------
5,025,000
------------
MEDIA NON-CABLE - 0.1%
Liberty Media Corporation, 3.500%, 1/15/2031 4,780,000 5,275,925
Sinclair Broadcast Group, Inc.,
(Step to 2.000% on 1/15/2011),
4.875%, 7/15/2018(i) 4,048,000 3,597,660
------------
8,873,585
------------
PHARMACEUTICALS - 3.3%
Bristol-Myers Squibb Co.,
4.890%, 9/15/2023(b)(e) 62,700,000 62,812,860
Elan Capital Corp., 6.500%, 11/10/2008 2,390,000 5,093,688
Enzon Pharmaceuticals, Inc., 4.500%, 7/01/2008 26,865,000 25,790,400
Epix Pharmaceuticals, Inc., 3.000%, 6/15/2024 7,122,000 4,558,080
Human Genome Sciences, Inc.,
2.250%, 8/15/2012(b) 9,560,000 8,819,100
Incyte Corp., 3.500%, 2/15/2011 15,006,000 11,385,803
IVAX Corp., 4.500%, 5/15/2008 2,875,000 2,885,781
Nektar Therapeutics, 3.250%, 9/28/2012, 144A 4,230,000 4,134,825
Nektar Therapeutics, 3.250%, 9/28/2012 570,000 557,175
Nektar Therapeutics, 3.500%, 10/17/2007 8,625,000 8,366,250
Regeneron Pharmaceuticals, Inc.,
5.500%, 10/17/2008 38,828,000 38,245,580
Valeant Pharmaceuticals International,
3.000%, 8/16/2010 34,125,000 32,248,125
Valeant Pharmaceuticals International,
4.000%, 11/15/2013(b) 20,804,000 19,529,755
Vertex Pharmaceuticals, Inc.,
5.750%, 2/15/2011, 144A 5,745,000 12,998,062
------------
237,425,484
------------
TECHNOLOGY - 1.0%
Amkor Technology, Inc., 5.000%, 3/15/2007(b) 10,210,000 9,597,400
Avnet, Inc., 2.000%, 3/15/2034(b) 17,405,000 16,578,262
Ciena Corp., 3.750%, 2/01/2008 1,250,000 1,206,250
Kulicke & Soffa Industries, Inc.,
0.500%, 11/30/2008 10,920,000 9,527,700
Kulicke & Soffa Industries, Inc.,
1.000%, 6/30/2010 5,465,000 5,150,762
Maxtor Corp., 5.750%, 3/01/2012(d) 11,256,000 10,355,520
Nortel Networks Corp., 4.250%, 9/01/2008 15,980,000 15,260,900
Richardson Electric Ltd.,
7.750%, 12/15/2011, 144A 395,000 356,488
SCI Systems, Inc., 3.000%, 3/15/2007 2,750,000 2,695,000
------------
70,728,282
------------
TEXTILE - 0.1%
Dixie Yarns, Inc., 7.000%, 5/15/2012 186,000 176,467
Kellwood Co., (Step to 0.000% on 6/16/2011),
3.500%, 6/15/2034(i) 6,805,000 6,090,475
------------
6,266,942
------------
29
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
TRANSPORTATION SERVICES - 0.0%
Builders Transportation, Inc.,
8.000%, 8/15/2005(c) USD 1,000,000 $ --
Preston Corp., 7.000%, 5/01/2011 750,000 690,000
--------------
690,000
--------------
WIRELESS - 0.0%
Nextel Communications, Inc., 5.250%, 1/15/2010 3,505,000 3,448,044
--------------
WIRELINES - 0.8%
Level 3 Communications, Inc., 2.875%, 7/15/2010 35,315,000 35,624,006
Level 3 Communications, Inc., 6.000%, 9/15/2009 19,665,000 17,673,919
Level 3 Communications, Inc.,
6.000%, 3/15/2010(b) 885,000 777,694
--------------
54,075,619
--------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $403,593,889) 433,941,128
--------------
TOTAL BONDS AND NOTES
(Identified Cost $6,277,581,174) 6,642,033,016
--------------
SHARES
- ------------------------------------------------------------------------------------
COMMON STOCKS - 0.9%
BIOTECHNOLOGY - 0.3%
Vertex Pharmaceuticals, Inc.(b)(g) 494,542 16,641,338
--------------
COMMUNICATIONS EQUIPMENT - 0.2%
Corning, Inc.(g) 630,490 15,390,261
--------------
WIRELINES - 0.4%
Philippine Long Distance Telephone Co., ADR(b) 691,761 30,133,109
--------------
TOTAL COMMON STOCKS
(Identified Cost $25,370,183) 62,164,708
--------------
PREFERRED STOCKS - 1.6%
CONVERTIBLE PREFERRED STOCKS - 1.5%
CONSTRUCTION MACHINERY - 0.0%
United Rentals Trust, 6.500% 13,883 649,030
--------------
CONSUMER PRODUCTS - 0.1%
Newell Financial Trust I, 5.250% 199,622 9,132,707
--------------
ELECTRIC - 0.1%
AES Trust III, 6.750%(b) 141,300 6,909,570
--------------
ELECTRIC UTILITIES - 0.1%
CMS Energy Trust I, 7.750% 207,375 10,342,828
--------------
HOTELS, RESTAURANTS & LEISURE - 0.1%
Six Flags, Inc., 7.250%(b) 410,725 8,748,443
--------------
INSURANCE - 0.3%
Travelers Property Casualty Corp., 4.500%(b) 723,525 17,813,185
--------------
30
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES BOND FUND - CONTINUED
SHARES VALUE (+)
- ----------------------------------------------------------------------------
PREFERRED STOCKS - CONTINUED
LODGING - 0.0%
Felcor Lodging Trust, Inc., Series A, 1.950%(b) 51,100 $ 1,272,901
------------
PACKAGING - 0.3%
Owens-Illinois, Inc., 4.750% 602,115 21,104,131
------------
PIPELINES - 0.1%
El Paso Energy Capital Trust I, 4.750% 125,500 4,672,365
Williams Cos., Inc., 5.500% 25,000 2,815,625
------------
7,487,990
------------
TECHNOLOGY - 0.4%
Lucent Technologies Capital Trust, 7.750% 24,695 25,235,203
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $102,398,919) 108,695,988
------------
NON-CONVERTIBLE PREFERRED STOCKS - 0.1%
ELECTRIC - 0.1%
Connecticut Light & Power Co., 1.900% 2,925 97,439
Entergy Arkansas, Inc., 4.320% 100 7,903
Entergy Mississippi, Inc., Zero Coupon 5,000 410,156
Entergy New Orleans, Inc., 4.360%(c) 665 30,258
Entergy New Orleans, Inc., 4.750%(c) 200 9,400
MDU Resources Group, Inc., 5.100% 2,140 213,666
Public Service Co., 4.000% 360 25,695
Southern California Edison Co., 4.780%(b) 50,100 1,054,605
Xcel Energy, Inc., 3.600% 1,100 77,000
------------
1,926,122
------------
PIPELINES - 0.0%
KN Capital Trust III, 7.630% 825,000 772,584
------------
TOTAL NON-CONVERTIBLE PREFERRED STOCKS
(Identified Cost $2,191,978) 2,698,706
------------
TOTAL PREFERRED STOCKS
(Identified Cost $104,590,897) 111,394,694
------------
CLOSED END INVESTMENT COMPANIES - 0.3%
High Income Opportunity Fund, Inc. 2,217,450 14,125,157
Managed High Income Portfolio, Inc. 1,369,100 8,529,493
Morgan Stanley Emerging Markets Debt Fund, Inc.(b) 356,954 3,608,804
------------
26,263,454
------------
TOTAL CLOSED END INVESTMENT COMPANIES
(Identified Cost $26,086,939) 26,263,454
------------
31
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 23.5%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/29/06 at 3.450% to be
repurchased at $149,136,865 on 10/02/06 collateralized
by $104,700,000 U.S. Treasury Bond, 8.750% due
8/15/20 with a value of $148,356,458 and $4,115,000
U.S. Treasury Bond, 6.125% due 11/15/27 with a value
of $4,997,937, including accrued interest (Note 2h) $ 149,094,000 $ 149,094,000
----------------
SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(h) 1,517,816,403 1,517,816,403
----------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $1,666,910,403) 1,666,910,403
----------------
TOTAL INVESTMENTS - 120.1%
(Identified Cost $8,100,539,596)(a) 8,508,766,275
Other assets less liabilities--(20.1)% (1,426,571,230)
----------------
TOTAL NET ASSETS - 100.0% $ 7,082,195,045
----------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized appreciation on investments based on cost of $8,116,929,212 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 $ 432,544,411
Aggregate gross unrealized depreciation for all securities in which there is an excess of cost over value (40,707,348)
----------------
Net unrealized appreciation $ 391,837,063
----------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Non-income producing security due to default or bankruptcy filing.
(d)Illiquid security.
(e)Variable rate security. Rate as of September 30, 2006 is disclosed.
(f)Payment-in-Kind security.
(g)Non-income producing security.
(h)Represents investment of security lending collateral.
(i)Step Bond: Coupon is at or above market rate for an initial period then
decreases at a specified date and rate.
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2006, the total value of these securities amounted to $719,877,472 or
10.16% of total net assets.
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.
Key to Abbreviations: ARS: Argentinean 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; NZD: New
Zealand Dollar; SGD: Singapore Dollar; THB: Thailand Baht; USD: United
States Dollar; ZAR: South African Rand.
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Sovereigns 18.3%
Treasuries 11.8
Banking 7.4
Wirelines 6.3
Technology 4.3
Pharmaceuticals 3.9
Foreign Local Governments 3.8
Supranational 3.2
Home Construction 3.1
Wireless 3.0
Non-Captive Diversified 2.6
Paper 2.5
Media Cable 2.4
Automotive 2.2
Other, less than 2% each 21.8
See accompanying notes to financial statements.
32
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES FIXED INCOME FUND
PRINCIPAL AMOUNT VALUE (+)
- --------------------------------------------------------------------------------
BONDS AND NOTES - 92.1% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 87.2%
AEROSPACE & DEFENSE - 0.0%
Bombardier, Inc., 7.450%, 5/01/2034, 144A USD 175,000 $ 150,719
-----------
AGENCIES - 0.6%
Pemex Project Funding Master Trust,
5.750%, 12/15/2015 175,000 170,975
Pemex Project Funding Master Trust,
8.625%, 2/01/2022 250,000 300,250
Pemex Project Funding Master Trust,
8.625%, 12/01/2023 1,400,000 1,683,500
Pemex Project Funding Master Trust,
9.250%, 3/30/2018 400,000 493,600
-----------
2,648,325
-----------
AIRLINES - 0.1%
American Airlines, Inc., 7.324% , 10/15/2009 250,000 243,750
American Airlines, Inc., Series 93A6,
8.040%, 9/16/2011 42,633 41,354
Continental Airlines, Inc., Series 2000-2,
8.307%, 4/02/2018 129,571 125,684
Continental Airlines, Inc., Series 2001-1B,
7.373%, 12/15/2015 242,420 239,996
-----------
650,784
-----------
ASSET-BACKED SECURITIES - 0.1%
Community Program Loan Trust, Series 1987-A,
Class A5, 4.500%, 4/01/2029 725,000 680,851
-----------
AUTOMOTIVE - 2.4%
Cummins Engine Co., Inc., 7.125%, 3/01/2028 2,400,000 2,457,017
DaimlerChrysler NA Holding Corp.,
6.500%, 11/15/2013 200,000 205,094
Ford Credit Auto Owner Trust,
4.380%, 1/15/2010 105,000 103,774
Ford Credit Auto Owner Trust, Series 2004-A,
Class A4, 3.540%, 11/15/2008 95,000 93,545
Ford Motor Co., 6.375%, 2/01/2029(c) 730,000 533,812
Ford Motor Co., 6.625%, 10/01/2028(c) 1,650,000 1,231,312
Ford Motor Credit Co., 5.700%, 1/15/2010 55,000 50,812
Ford Motor Credit Co., 7.000%, 10/01/2013(c) 110,000 102,062
GMAC LLC, 5.625%, 5/15/2009 1,500,000 1,462,756
GMAC LLC, 6.243%, 3/20/2007(b) 2,750,000 2,740,716
GMAC LLC, 6.375%, 12/07/2007 GBP 300,000 558,195
GMAC LLC, 6.457%, 7/16/2007(b) USD 500,000 497,191
GMAC LLC, 6.875%, 8/28/2012 200,000 197,960
GMAC LLC, 7.500%, 12/01/2006 NZD 100,000 64,901
GMAC International Finance BV,
8.000%, 3/14/2007 264,000 171,219
Goodyear Tire & Rubber Co., 7.000%, 3/15/2028 USD 375,000 314,063
-----------
10,784,429
-----------
BANKING - 6.4%
BAC Capital Trust VI, 5.625%, 3/08/2035 2,385,000 2,211,649
Bank of America Corp., 5.875%, 2/15/2009 205,000 208,484
Barclays Financial LLC, 4.060%, 9/16/2010, 144A KRW 2,340,000,000 2,454,372
33
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
BANKING - CONTINUED
Barclays Financial LLC, 4.100%, 3/22/2010, 144A THB 192,000,000 $ 4,871,633
Barclays Financial LLC, 4.160%, 2/22/2010, 144A 175,000,000 4,453,520
Barclays Financial LLC, 5.500%, 11/01/2010, 144A 16,000,000 424,063
BNP Paribas SA, Zero Coupon Bond,
6/13/2011, 144A IDR 18,710,000,000 1,297,886
HSBC Bank USA, 3.310%, 8/25/2010, 144A USD 5,000,000 5,036,000
JPMorgan Chase & Co., Zero Coupon Bond,
5/17/2010, 144A BRL 16,585,000 4,799,986
JPMorgan Chase & Co., Zero Coupon Bond,
3/28/2011, 144A IDR 13,692,036,000 967,567
JPMorgan Chase & Co., Zero Coupon Bond,
3/28/2011, 144A 17,920,000,000 1,266,343
JPMorgan Chase London, Zero Coupon Bond,
10/21/2010, 144A 18,824,303,000 1,384,401
-----------
29,375,904
-----------
CHEMICALS - 1.4%
Borden, Inc., 7.875%, 2/15/2023 USD 2,740,000 2,246,800
Borden, Inc., 9.200%, 3/15/2021 865,000 804,450
ICI Wilmington, Inc., 5.625%, 12/01/2013 115,000 113,339
Lubrizol Corp., 5.500%, 10/01/2014 365,000 356,027
Lubrizol Corp., 6.500%, 10/01/2034 1,170,000 1,179,042
Methanex Corp., 6.000%, 8/15/2015 1,525,000 1,459,950
-----------
6,159,608
-----------
CONSTRUCTION MACHINERY - 0.0%
United Rentals North America, Inc.,
7.000%, 2/15/2014(c) 150,000 141,000
-----------
ELECTRIC - 3.3%
AES Corp., 7.750%, 3/01/2014 730,000 759,200
AES Corp., 9.375%, 9/15/2010 100,000 108,000
Calenergy Co., Inc., 7.630%, 10/15/2007 245,000 250,229
Calpine Corp., 8.500%, 7/15/2010, 144A(d) 215,000 216,344
Carolina Power & Light Co., 6.500%, 7/15/2012 65,000 68,375
Consolidated Edison Co. of N.Y.,
5.625%, 7/01/2012 110,000 111,669
Dominion Resources, Inc., 5.000%, 3/15/2013(c) 100,000 96,457
Dominion Resources, Inc., 5.700%, 9/17/2012 160,000 160,964
Duke Energy Corp., 4.200%, 10/01/2008 85,000 83,224
Dynegy Holdings, Inc., 7.125%, 5/15/2018 380,000 347,700
Dynegy Holdings, Inc., 7.625%, 10/15/2026 810,000 739,125
Empresa Nacional de Electricidad SA (Endesa-
Chile), 7.875%, 2/01/2027 1,589,000 1,761,197
Empresa Nacional de Electricidad SA (Endesa-
Chile), 8.350%, 8/01/2013 500,000 560,996
Enersis SA, 7.375%, 1/15/2014(c) 275,000 292,293
Enersis SA, 7.400%, 12/01/2016 4,000,000 4,287,816
NGC Corporation Capital Trust I, Series B,
8.316%, 6/01/2027 695,000 632,450
Power Receivables Finance LLC,
6.290%, 1/01/2012, 144A 1,173,011 1,183,415
Quezon Power Philippines Co., 8.860%, 6/15/2017 1,565,200 1,573,026
34
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES FIXED INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
ELECTRIC - CONTINUED
Tiverton Power Associates Ltd.,
9.000%, 7/15/2018, 144A(d) USD 456,952 $ 436,389
TXU Corp., Series P, 5.550%, 11/15/2014 170,000 160,612
TXU Corp., Series R, 6.550%, 11/15/2034 1,155,000 1,087,865
-----------
14,917,346
-----------
ENTERTAINMENT - 2.2%
Time Warner, Inc., 6.625%, 5/15/2029 2,065,000 2,064,562
Time Warner, Inc., 6.950%, 1/15/2028 875,000 901,912
Time Warner, Inc., 7.625%, 4/15/2031 730,000 806,409
Time Warner, Inc., 7.700%, 5/01/2032 1,155,000 1,289,832
Viacom, Inc., Class B, 6.875%, 4/30/2036, 144A 4,880,000 4,824,310
-----------
9,887,025
-----------
FINANCIAL OTHER - 0.1%
Berkshire Hathaway Finance, 4.200%, 12/15/2010 650,000 628,015
-----------
FOREIGN LOCAL GOVERNMENTS - 12.1%
Province of Alberta, 5.930%, 9/16/2016 CAD 1,111,047 1,071,138
Province of British Columbia, Zero Coupon Bond,
8/23/2013 11,700,000 7,899,371
Province of British Columbia, 5.250%, 12/01/2006 1,615,000 1,447,121
Province of British Columbia, 6.000%, 6/09/2008 1,000,000 922,112
Province of British Columbia, 6.250%, 12/01/2009 7,025,000 6,689,824
Province of Manitoba, 5.750%, 6/02/2008 14,515,000 13,330,555
Province of Ontario, 3.875%, 3/08/2008 970,000 864,864
Province of Ontario, 5.700%, 12/01/2008 18,145,000 16,784,145
Province of Saskatchewan, 5.500%, 6/02/2008 6,960,000 6,367,147
-----------
55,376,277
-----------
HEALTHCARE - 1.8%
HCA, Inc., 6.250%, 2/15/2013 USD 1,000,000 835,000
HCA, Inc., 6.500%, 2/15/2016 130,000 104,000
HCA, Inc., 7.050%, 12/01/2027 3,495,000 2,508,064
HCA, Inc., 7.500%, 12/15/2023 345,000 267,513
HCA, Inc., 7.500%, 11/06/2033 1,130,000 881,400
HCA, Inc., 7.580%, 9/15/2025 2,675,000 2,061,762
HCA, Inc., 7.690%, 6/15/2025 1,770,000 1,381,717
HCA, Inc., 7.750%, 7/15/2036 105,000 81,324
-----------
8,120,780
-----------
HOME CONSTRUCTION - 1.7%
K. Hovnanian Enterprises, Inc.,
6.250%, 1/15/2016(c) 90,000 79,200
Lennar Corp., 5.600%, 5/31/2015 500,000 475,498
Pulte Homes, Inc., 5.200%, 2/15/2015(c) 1,305,000 1,222,032
Pulte Homes, Inc., 6.000%, 2/15/2035(c) 3,920,000 3,534,323
Pulte Homes, Inc., 6.375%, 5/15/2033 1,960,000 1,834,068
Toll Brothers Finance Corp., 5.150%, 5/15/2015(c) 565,000 502,219
-----------
7,647,340
-----------
INDEPENDENT/ENERGY - 1.7%
Anadarko Petroleum Corp., 5.950%, 9/15/2016 3,495,000 3,536,758
Anadarko Petroleum Corp., 6.450%, 9/15/2036 2,580,000 2,635,287
Chesapeake Energy Corp., 6.500%, 8/15/2017 255,000 239,063
Chesapeake Energy Corp., 6.875%, 1/15/2016 200,000 195,500
35
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
INDEPENDENT/ENERGY - CONTINUED
Chesapeake Energy Corp., 6.875%, 11/15/2020 USD 110,000 $ 103,950
Pioneer Natural Resource Co., 5.875%, 7/15/2016 435,000 407,337
Progress Energy, Inc., 7.100%, 3/01/2011 45,000 48,237
XTO Energy, Inc., 4.900%, 2/01/2014 220,000 209,350
XTO Energy, Inc., 5.300%, 6/30/2015 70,000 67,900
XTO Energy, Inc., 6.100%, 4/01/2036 155,000 153,326
-----------
7,596,708
-----------
INTEGRATED/ENERGY - 1.3%
Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A 4,650,000 4,312,875
Conoco Funding Co., 6.350%, 10/15/2011 175,000 184,048
Petrozuata Finance, Inc., 8.220%, 4/01/2017, 144A 1,425,000 1,389,375
-----------
5,886,298
-----------
LIFE INSURANCE - 2.3%
ASIF Global Financing XXVII,
2.380%, 2/26/2009, 144A SGD 17,000,000 10,404,760
-----------
LODGING - 0.0%
Host Marriott LP, Series 0, 6.375%, 3/15/2015 USD 150,000 145,500
-----------
MEDIA CABLE - 2.2%
Comcast Corp., 5.650%, 6/15/2035 2,285,000 2,073,089
Comcast Corp., 6.450%, 3/15/2037 2,715,000 2,716,311
Comcast Corp., 6.500%, 11/15/2035 3,240,000 3,262,567
Cox Communications, Inc., 4.625%, 1/15/2010 85,000 82,680
CSC Holdings, Inc., 7.250%, 4/15/2012, 144A 200,000 199,250
CSC Holdings, Inc., 7.625%, 4/01/2011 50,000 51,313
CSC Holdings, Inc., 7.875%, 2/15/2018 170,000 176,375
NTL Cable Plc, 9.125%, 8/15/2016 400,000 413,000
NTL Cable Plc, 9.750%, 4/15/2014 GBP 250,000 482,130
Rogers Cable, Inc., 5.500%, 3/15/2014 USD 150,000 141,000
TCI Communications, Inc., 7.875%, 2/15/2026 550,000 619,462
-----------
10,217,177
-----------
MEDIA NON-CABLE - 0.0%
Clear Channel Communications, Inc.,
4.250%, 5/15/2009 85,000 82,147
-----------
METALS & MINING - 0.0%
Alcoa, Inc., 6.000%, 1/15/2012 200,000 205,947
-----------
MORTGAGE RELATED - 0.2%
Federal Home Loan Mortgage Corp.,
3.220%, 6/20/2007 SGD 1,500,000 941,413
GS Mortgage Securities Corporation II, Series
2005-GG4, Class A4A, 4.751%, 7/10/2039 USD 95,000 91,308
LB UBS Commercial Mortgage Trust, Series 2005
C3, Class A3, 4.647%, 7/15/2030 105,000 102,509
-----------
1,135,230
-----------
NON-CAPTIVE CONSUMER - 0.1%
American General Finance Corp., Series MTNG,
5.375%, 9/01/2009 165,000 165,784
Household Finance Corp., 6.500%, 11/15/2008 60,000 61,506
-----------
227,290
-----------
36
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES FIXED INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
NON-CAPTIVE DIVERSIFIED - 1.9%
CIT Group, Inc., 6.000%, 4/01/2036 USD 830,000 $ 808,183
General Electric Capital Corp., 1.725%, 6/27/2008 SGD 250,000 152,659
General Electric Capital Corp., 3.500%, 5/01/2008 150,000 146,301
General Electric Capital Corp., 6.000%, 6/15/2012 245,000 254,555
General Electric Capital Corp., 6.500%, 9/28/2015 NZD 9,210,000 5,876,590
General Electric Capital Corp., 6.750%, 9/26/2016 1,345,000 884,316
General Electric Capital Corp., Series MTNA,
4.750%, 9/15/2014(c) USD 400,000 386,760
-----------
8,509,364
-----------
OIL FIELD SERVICES - 0.3%
Pecom Energia SA, 8.125%, 7/15/2010, 144A 1,472,000 1,530,880
-----------
PACKAGING - 0.4%
Owens-Illinois, Inc., 7.800%, 5/15/2018 2,000,000 1,900,000
-----------
PAPER - 2.6%
Abitibi-Consolidated, Inc., 7.500%, 4/01/2028 650,000 513,500
Georgia-Pacific Corp., 7.375%, 12/01/2025 3,000,000 2,835,000
Georgia-Pacific Corp., 7.750%, 11/15/2029 6,005,000 5,764,800
Georgia-Pacific Corp., (Timber Group),
7.250%, 6/01/2028 2,000,000 1,870,000
International Paper Co., 4.000%, 4/01/2010 150,000 143,904
International Paper Co., 4.250%, 1/15/2009 700,000 684,000
Jefferson Smurfit Corp., 7.500%, 6/01/2013 280,000 258,300
-----------
12,069,504
-----------
PHARMACEUTICALS - 0.2%
Elan Financial Plc, 7.750%, 11/15/2011 970,000 944,538
Schering-Plough Corp., 5.550%, 12/01/2013 75,000 75,244
-----------
1,019,782
-----------
PIPELINES - 2.3%
El Paso Corp., 6.375%, 2/01/2009 1,575,000 1,571,063
El Paso Corp., 6.750%, 5/15/2009(c) 2,150,000 2,160,750
El Paso Corp., 6.950%, 6/01/2028 925,000 869,500
El Paso Corp., 7.000%, 5/15/2011 3,195,000 3,214,969
El Paso Corp., 7.750%, 6/15/2010 875,000 905,625
El Paso Corp., 7.800%, 8/01/2031(c) 250,000 256,250
Kinder Morgan Energy Partners,
5.000%, 12/15/2013 150,000 142,464
Kinder Morgan Finance, 6.400%, 1/05/2036 5,000 4,477
Kinder Morgan, Inc., 5.150%, 3/01/2015 305,000 274,055
Kinder Morgan, Inc., 6.500%, 9/01/2012 110,000 110,090
Williams Cos., Inc., 7.500%, 1/15/2031 1,000,000 987,500
-----------
10,496,743
-----------
PROPERTY & CASUALTY INSURANCE - 1.4%
Allstate Corp., 5.950%, 4/01/2036 540,000 539,610
Axis Capital Holdings Ltd., 5.750%, 12/01/2014 80,000 78,803
St. Paul Travelers Cos, Inc., 6.750%, 6/20/2036 3,995,000 4,304,145
Travelers Property Casualty Corp., Class A,
6.375%, 3/15/2033 1,400,000 1,426,088
-----------
6,348,646
-----------
37
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
RAILROADS - 0.1%
Missouri Pacific Railroad Co., 5.000%, 1/01/2045 USD 500,000 $ 400,329
-----------
REAL ESTATE INVESTMENT TRUSTS - 0.8%
Colonial Realty LP, 4.750%, 2/01/2010 15,000 14,613
EOP Operating LP, 4.650%, 10/01/2010 210,000 203,745
EOP Operating LP, 7.250%, 2/15/2018 2,000,000 2,232,380
Highwoods Realty LP, 7.500%, 4/15/2018 475,000 524,013
Simon Property Group LP, 6.375%, 11/15/2007 75,000 75,648
Spieker Properties, Inc., 7.350%, 12/01/2017 500,000 559,015
-----------
3,609,414
-----------
REFINING - 0.1%
Valero Energy Corp., 4.750%, 4/01/2014(c) 445,000 420,539
-----------
RESTAURANTS - 0.1%
McDonald's Corp., 3.628%, 10/10/2010 SGD 1,000,000 629,186
-----------
RETAILERS - 0.8%
Dillard's, Inc., 7.750%, 7/15/2026 USD 1,025,000 986,563
Foot Locker, Inc., 8.500%, 1/15/2022 1,100,000 1,039,500
J.C. Penney Co., Inc., 7.125%, 11/15/2023 1,045,000 1,156,522
Toys R Us, 7.375%, 10/15/2018 380,000 275,025
-----------
3,457,610
-----------
SOVEREIGNS - 14.0%
Canadian Government, 4.250%, 9/01/2008 CAD 6,235,000 5,611,082
Canadian Government, 4.500%, 9/01/2007 16,520,000 14,837,332
Canadian Government, Series WH31,
6.000%, 6/01/2008 800,000 739,056
Government of Sweden, 4.000%, 12/01/2009 SEK 1,370,000 189,661
Mexican Fixed Rate Bonds, 8.000%, 12/07/2023 MXN 30,500,000 2,648,845
Mexican Fixed Rate Bonds, 9.000%, 12/20/2012 101,500,000 1,115,609
Mexican Fixed Rate Bonds, Series M-10,
8.000%, 12/17/2015 12,500,000 9,596,985
PF Export Receivables Master Trust,
6.436%, 6/01/2015, 144A USD 1,765,159 1,782,811
Republic of Argentina, Zero Coupon Bond,
12/15/2035(b) 1,544,372 153,511
Republic of Argentina, 2.418%, 9/30/2014(b) ARS 5,645,000 1,861,364
Republic of Argentina, 5.590%, 8/03/2012(b) USD 2,117,500 1,676,390
Republic of Argentina, 8.280%, 12/31/2033(c) 579,002 557,290
Republic of Brazil, 8.250%, 1/20/2034(c) 13,186,000 15,163,900
Republic of Brazil, 11.000%, 8/17/2040(c) 575,000 748,937
Republic of Brazil, 12.500%, 1/05/2022 BRL 625,000 282,289
Republic of South Africa, 12.500%, 12/21/2006 ZAR 3,020,000 390,530
Republic of South Africa, 13.000%, 8/31/2010 34,225,000 5,019,008
Republic of Uruguay, 7.875%, 1/15/2033(e) USD 1,521,929 1,575,196
-----------
63,949,796
-----------
SUPERMARKETS - 2.0%
Albertson's, Inc., 6.625%, 6/01/2028 1,245,000 1,068,161
Albertson's, Inc., 7.450%, 8/01/2029 6,515,000 6,034,584
Albertson's, Inc., 7.750%, 6/15/2026 1,470,000 1,396,572
Albertson's, Inc., 8.000%, 5/01/2031 565,000 549,244
Albertson's, Inc., 8.700%, 5/01/2030 5,000 5,042
American Stores Co., 8.000%, 6/01/2026 25,000 25,328
Kroger Co., 4.950%, 1/15/2015 90,000 84,567
-----------
9,163,498
-----------
38
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES FIXED INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- --------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
SUPRANATIONAL - 4.9%
Inter-American Development Bank, Series EMTN,
Zero Coupon Bond, 5/11/2009 BRL 30,000,000 $ 9,589,293
Inter-American Development Bank, Series EMTN,
6.000%, 12/15/2017 NZD 19,735,000 12,524,111
-----------
22,113,404
-----------
TECHNOLOGY - 2.3%
Amkor Technology, Inc., 7.125%, 3/15/2011(c) USD 725,000 667,000
Arrow Electronics, Inc., 6.875%, 7/01/2013 3,500,000 3,666,817
Avnet, Inc., 6.000%, 9/01/2015 1,100,000 1,073,305
Corning, Inc., 6.200%, 3/15/2016 250,000 255,726
Corning, Inc., 6.850%, 3/01/2029 450,000 471,142
Corning, Inc., 7.250%, 8/15/2036 1,175,000 1,251,411
Lucent Technologies, Inc., 6.450%, 3/15/2029 250,000 222,500
Nortel Networks Corp., 6.875%, 9/01/2023 575,000 474,375
Nortel Networks Ltd., 10.125%, 7/15/2013, 144A 1,000,000 1,055,000
Northern Telecom Capital Corp.,
7.875%, 6/15/2026 150,000 130,500
Samsung Electronics Co. Ltd.,
7.700%, 10/01/2027, 144A 1,158,000 1,243,004
-----------
10,510,780
-----------
TEXTILE - 0.7%
Kellwood Co., 7.625%, 10/15/2017 3,250,000 3,019,757
-----------
TOBACCO SETTLEMENT REVENUE - 0.6%
Michigan Tobacco Settlement Finance Authority,
7.309%, 6/01/2034 2,540,000 2,627,579
-----------
TRANSPORTATION SERVICES - 1.3%
American President Cos., Ltd.,
8.000%, 1/15/2024(f) 2,500,000 2,250,000
Atlas Air, Inc., Series 1999-1B,
7.630%, 1/02/2015(h) 1,326,184 1,379,231
Atlas Air, Inc., Series 2000-1, Class B,
9.057%, 1/02/2014(h) 394,351 437,729
Atlas Air, Inc., Series B, 7.680%, 1/02/2014(h) 1,500,291 1,575,306
-----------
5,642,266
-----------
TREASURIES - 3.2%
U.S. Treasury Bonds, 5.250%, 11/15/2028(c) 260,000 274,869
U.S. Treasury Bonds, 5.375%, 2/15/2031(c) 13,450,000 14,527,049
-----------
14,801,918
-----------
WIRELESS - 2.7%
Sprint Capital Corp., 6.125%, 11/15/2008 65,000 65,952
Sprint Capital Corp., 6.875%, 11/15/2028 175,000 177,356
Telefonica Emisiones SAU, 7.045%, 6/20/2036 11,330,000 11,956,855
-----------
12,200,163
-----------
WIRELINES - 4.5%
Embarq Corp., 7.082%, 6/01/2016 235,000 239,723
Embarq Corp., 7.995%, 6/01/2036 200,000 211,781
Level 3 Communications, Inc.,
11.500%, 3/01/2010(c) 105,000 107,888
Philippine Long Distance Telephone Co.,
8.350%, 3/06/2017 3,914,000 4,276,045
39
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
WIRELINES - CONTINUED
Qwest Capital Funding, Inc., 6.500%, 11/15/2018 USD 3,305,000 $ 2,991,025
Qwest Capital Funding, Inc., 6.875%, 7/15/2028 7,575,000 6,779,625
Qwest Capital Funding, Inc., 7.000%, 8/03/2009(c) 850,000 854,250
Qwest Capital Funding, Inc., 7.250%, 2/15/2011 25,000 25,000
Qwest Capital Funding, Inc., 7.625%, 8/03/2021 350,000 339,062
Qwest Capital Funding, Inc., 7.750%, 2/15/2031 775,000 747,875
Verizon Communications, 5.850%, 9/15/2035 3,975,000 3,745,082
Verizon New Jersey, Inc., 5.875%, 1/17/2012 80,000 80,808
------------
20,398,164
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $370,776,597) 397,888,782
------------
CONVERTIBLE BONDS - 4.9%
HEALTHCARE - 0.1%
Invitrogen Corp., 1.500%, 2/15/2024 300,000 260,250
------------
INDEPENDENT/ENERGY - 0.9%
Devon Energy Corp., 4.900%, 8/15/2008 1,300,000 1,633,125
Devon Energy Corp., 4.950%, 8/15/2008 1,900,000 2,386,875
------------
4,020,000
------------
MEDIA CABLE - 0.1%
COX Communications, Inc., 4.625%, 6/01/2013 430,000 399,687
------------
MEDIA NON-CABLE - 0.1%
Sinclair Broadcast Group, Inc., (Step to
2.000% on 1/16/2011), 4.875%, 7/15/2018(g) 500,000 444,375
------------
PHARMACEUTICALS - 1.5%
Bristol-Myers Squibb Co., 4.890%, 9/15/2023(b) 605,000 606,089
Enzon Pharmaceuticals, Inc., 4.500%, 7/01/2008 2,255,000 2,164,800
Epix Pharmaceuticals, Inc., 3.000%, 6/15/2024 250,000 160,000
Incyte Corp., 3.500%, 2/15/2011 165,000 125,194
Nektar Therapeutics, 3.250%, 9/28/2012, 144A 275,000 268,813
Nektar Therapeutics, 3.250%, 9/28/2012 425,000 415,437
Nektar Therapeutics, 3.500%, 10/17/2007 465,000 451,050
Regeneron Pharmaceuticals, Inc.,
5.500%, 10/17/2008 1,200,000 1,182,000
Valeant Pharmaceuticals International,
3.000%, 8/16/2010 885,000 836,325
Valeant Pharmaceuticals International,
4.000%, 11/15/2013 510,000 478,762
------------
6,688,470
------------
TECHNOLOGY - 0.9%
Amkor Technology, Inc., 5.000%, 3/15/2007(c) 815,000 766,100
Avnet, Inc., 2.000%, 3/15/2034 1,180,000 1,123,950
Kulicke & Soffa Industries, Inc., 0.500%, 11/30/2008 335,000 292,287
Kulicke & Soffa Industries, Inc., 1.000%, 6/30/2010 380,000 358,150
Maxtor Corp., 5.750%, 3/01/2012(f) 491,000 451,720
Nortel Networks Corp., 4.250%, 9/01/2008 700,000 668,500
Richardson Electric Ltd., 7.750%, 12/15/2011, 144A 263,000 237,358
SCI Systems, Inc., 3.000%, 3/15/2007 200,000 196,000
------------
4,094,065
------------
40
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES FIXED INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- -------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
TEXTILE - 0.0%
Dixie Yarns, Inc., 7.000%, 5/15/2012 USD 96,000 $ 91,080
Kellwood Co., (Step to 0.000% on 6/16/2011),
3.500%, 6/15/2034(g) 100,000 89,500
------------
180,580
------------
WIRELINES - 1.3%
Level 3 Communications, Inc., 2.875%, 7/15/2010 3,870,000 3,903,862
Level 3 Communications, Inc., 6.000%, 9/15/2009 2,435,000 2,188,456
Level 3 Communications, Inc., 6.000%, 3/15/2010(c) 125,000 109,844
------------
6,202,162
------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $19,870,925) 22,289,589
------------
TOTAL BONDS AND NOTES
(Identified Cost $390,647,522) 420,178,371
------------
SHARES
- -------------------------------------------------------------------------------------
COMMON STOCKS - 1.8%
COMMUNICATIONS EQUIPMENT - 1.1%
Corning, Inc.(h) 205,167 5,008,127
------------
WIRELINES - 0.7%
Philippine Long Distance Telephone Co., ADR(c) 73,615 3,206,669
------------
TOTAL COMMON STOCKS
(Identified Cost $2,891,118) 8,214,796
------------
PREFERRED STOCKS - 1.8%
NON-CONVERTIBLE PREFERRED STOCKS - 0.2%
ELECTRIC - 0.2%
Entergy New Orleans, Inc., 4.360%(d) 90 4,095
Entergy New Orleans, Inc., 4.750%(d) 2,876 135,172
MDU Resources Group, Inc., 5.100% 500 49,922
Public Service Electric & Gas Co., 4.180%(c) 1,950 155,513
Union Electric Co., 4.500% 4,670 382,940
Xcel Energy, Inc., 4.110% 100 7,895
------------
735,537
------------
PIPELINES - 0.0%
KN Capital Trust III, 7.630% 80,000 74,917
------------
TOTAL NON-CONVERTIBLE PREFERRED STOCKS
(Identified Cost $664,767) 810,454
------------
CONVERTIBLE PREFERRED STOCKS - 1.6%
CONSTRUCTION MACHINERY - 0.0%
United Rentals Trust, 6.500% 2,147 100,372
------------
CONSUMER PRODUCTS - 0.2%
Newell Financial Trust I, 5.250% 25,075 1,147,181
------------
ELECTRIC - 0.1%
AES Trust III, 6.750% 10,000 489,000
------------
41
SHARES VALUE (+)
- ---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - CONTINUED
INSURANCE - 0.7%
Travelers Property Casualty, 4.500% 122,900 $ 3,025,798
-------------
LODGING - 0.0%
Felcor Lodging, Series A, 1.950%(c) 2,500 62,275
-------------
PACKAGING - 0.1%
Owens-Illinois, Inc., 4.750% 10,250 359,263
-------------
PIPELINES - 0.2%
El Paso Energy Capital Trust I, 4.750% 20,200 752,046
-------------
TECHNOLOGY - 0.3%
Lucent Technologies Capital Trust, 7.750% 1,500 1,532,813
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $6,723,369) 7,468,748
-------------
TOTAL PREFERRED STOCKS
(Identified Cost $7,388,136) 8,279,202
-------------
PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 10.3%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/29/06 at 3.450% to be
repurchased at $13,956,011 on 10/02/06 collateralized by
$11,355,000 U.S. Treasury Bond, 6.875% due 8/15/25
with value of $14,334,715, including accrued interest
(Note 2h) $ 13,952,000 13,952,000
-------------
SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(i) 32,882,111 32,882,111
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $46,834,111) 46,834,111
-------------
TOTAL INVESTMENTS - 106.0%
(Identified Cost $447,760,887)(a) 483,506,480
Other assets less liabilities--(6.0)% (27,495,214)
-------------
TOTAL NET ASSETS - 100.0% $ 456,011,266
-------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
September 30, 2006, the net unrealized appreciation on investments based on cost of $449,436,113 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 $ 39,319,723
Aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value (5,249,356)
-------------
Net unrealized appreciation $ 34,070,367
-------------
(b)Variable rate security. Rate as of September 30, 2006 is disclosed.
(c)All or a portion of this security was on loan to brokers at September 30,
2006.
(d)Non-income producing security due to default or bankruptcy filing.
(e)Payment-in-Kind security.
(f)Illiquid security.
(g)Step Bond: Coupon is at or above market rate for an initial period and then
decreases at a specified date and rate.
(h)Non-income producing security.
(i)Represents investments of security lending collateral.
42
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES FIXED INCOME FUND - CONTINUED
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2006, the total value of these securities amounted to $56,191,074 or 12.32%
of total net assets.
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. Key to abbreviations: ARS:
Argentinean Peso; BRL: Brazilian Real; CAD: Canadian Dollar; GBP: British
Pound; IDR: Indonesian Rupiah; KRW: South Korean Won; MXN: Mexican Peso;
NZD: New Zealand Dollar; SEK: Swedish Krona; SGD: Singapore Dollar; THB:
Thailand Baht; USD: United States Dollar; ZAR: South African Rand
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Sovereigns 14.0%
Foreign Local Governments 12.1
Wirelines 6.5
Banking 6.4
Supranational 4.9
Electric 3.6
Technology 3.5
Treasuries 3.2
Wireless 2.7
Independent/Energy 2.6
Paper 2.6
Pipelines 2.5
Automotive 2.4
Life Insurance 2.3
Media Cable 2.3
Entertainment 2.2
Supermarkets 2.0
Other, less than 2% each 19.9
See accompanying notes to financial statements.
43
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES GLOBAL BOND FUND
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------
BONDS AND NOTES - 95.6% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 95.6%
ARGENTINA - 0.6%
Republic of Argentina, 2.418%, 9/30/2014 ARS 20,000,000 $ 6,594,739
-----------
AUSTRALIA - 0.4%
Telestra Corp., Ltd., 7.250%, 11/15/2012 AUD 6,850,000 5,262,782
-----------
AUSTRIA - 1.9%
Oesterreichische Kontrollbank AG,
1.800%, 3/22/2010 JPY 2,530,000,000 22,075,286
-----------
BELGIUM - 4.9%
Kingdom of Belgium, 3.750%, 3/28/2009 EUR 25,295,000 32,185,874
Kingdom of Belgium, 5.500%, 9/28/2017 17,665,000 25,872,806
-----------
58,058,680
-----------
BRAZIL - 0.3%
Cia Brasileira de Bebidas, 8.750%, 9/15/2013 USD 2,500,000 2,881,250
JBS SA, 10.500%, 8/04/2016, 144A 1,170,000 1,184,625
-----------
4,065,875
-----------
CANADA - 2.0%
Bowater, Inc., 10.850%, 11/30/2014 CAD 2,965,000 2,798,546
Kinder Morgan Finance, 5.700%, 1/05/2016 USD 1,410,000 1,301,594
Kinder Morgan Finance, 6.400%, 1/05/2036 1,145,000 1,025,286
Province of Ontario, 6.250%, 12/03/2008 NZD 8,160,000 5,236,706
Province of Quebec, 1.600%, 5/09/2013 JPY 1,223,000,000 10,450,575
Rogers Cable, Inc., 5.500%, 3/15/2014 USD 2,980,000 2,801,200
-----------
23,613,907
-----------
CAYMAN ISLAND - 0.6%
LPG International, Inc., 7.250%, 12/20/2015 3,010,000 2,972,375
Vale Overseas Ltd., 8.250%, 1/17/2034 3,760,000 4,267,600
-----------
7,239,975
-----------
CHILE - 0.3%
Empresa Nacional de Electricidad SA
(Endesa-Chile), 7.875%, 2/01/2027 3,735,000 4,139,755
-----------
COLOMBIA - 0.6%
Republic of Colombia, 7.375%, 1/27/2017 1,430,000 1,490,775
Republic of Colombia, 11.750%, 3/01/2010 COP 3,090,000,000 1,381,923
Republic of Colombia, 12.000%, 10/22/2015(c) 9,545,000,000 4,591,949
-----------
7,464,647
-----------
FINLAND - 0.6%
Republic of Finland, 5.000%, 7/04/2007 EUR 5,225,000 6,692,483
-----------
FRANCE - 1.2%
France Telecom SA, Series EMTN,
3.625%, 10/14/2015 4,755,000 5,627,137
Thales SA, Series EMTN, 4.375%, 7/22/2011 1,900,000 2,438,919
Veolia Environnement, Series EMTN,
4.000%, 2/12/2016 4,610,000 5,626,797
-----------
13,692,853
-----------
GERMANY - 9.0%
Bertelsmann AG, Series EMTN,
3.625%, 10/06/2015 1,880,000 2,202,373
44
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES GLOBAL BOND FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
GERMANY - CONTINUED
Hypothekenbank in Essen AG,
5.250%, 1/22/2008 EUR 5,555,000 $ 7,181,007
KFW, 2.500%, 10/11/2010 15,925,000 19,341,452
Munchener Hypothekenbank eG,
5.000%, 1/16/2012 31,180,000 41,849,004
Republic of Germany, 3.000%, 4/11/2008 2,500,000 3,144,100
Republic of Germany, 3.250%, 4/17/2009 19,615,000 24,676,817
Republic of Germany, 4.000%, 1/04/2037 6,740,000 8,694,946
------------
107,089,699
------------
INDONESIA - 0.5%
Republic of Indonesia,
6.875%, 3/09/2017, 144A USD 5,240,000 5,371,000
------------
IRELAND - 5.8%
Depfa ACS Bank, 0.750%, 9/22/2008 JPY 4,450,000,000 37,757,850
Republic of Ireland, 4.600%, 4/18/2016 EUR 23,160,000 31,430,866
------------
69,188,716
------------
JAPAN - 3.6%
Japan Government, 0.200%, 9/20/2007 JPY 5,101,000,000 43,085,302
------------
KOREA - 0.1%
Hanarotelecom, Inc., 7.000%, 2/01/2012, 144A USD 1,610,000 1,581,825
------------
MEXICO - 2.9%
America Movil SA, 9.000%, 1/15/2016 MXN 45,000,000 4,171,730
America Movil SA de CV, 4.125%, 3/01/2009 USD 3,455,000 3,351,395
Desarrolladora Homex SA, 7.500%, 9/28/2015 8,210,000 8,045,800
Mexican Fixed Rate Bonds, Series M-10,
8.000%, 12/17/2015 MXN 138,450,000 12,356,480
Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023 15,500,000 1,346,134
Mexican Fixed Rate Bonds, Series MI-10,
9.000%, 12/20/2012 49,910,000 4,719,069
------------
33,990,608
------------
NETHERLANDS - 1.8%
Excelcomindo Finance Co.,
7.125%, 1/18/2013, 144A USD 900,000 893,250
Kingdom of Netherlands, 5.500%, 1/15/2028 EUR 12,995,000 20,193,191
------------
21,086,441
------------
NORWAY - 1.9%
Kingdom of Norway, 5.500%, 5/15/2009 NOK 115,805,000 18,418,293
Kingdom of Norway, 6.000%, 5/16/2011 25,730,000 4,270,949
------------
22,689,242
------------
POLAND - 0.9%
Republic of Poland, Series 2RG,
1.020%, 6/09/2009 JPY 1,200,000,000 10,143,492
------------
SINGAPORE - 1.2%
Government of Singapore, 4.625%, 7/01/2010 SGD 18,515,000 12,300,733
SP Powerassets Ltd., 3.730%, 10/22/2010 2,340,000 1,485,950
------------
13,786,683
------------
45
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
SOUTH AFRICA - 1.7%
Republic of South Africa, 4.500%, 4/05/2016 EUR 8,215,000 $10,154,527
Republic of South Africa, 5.250%, 5/16/2013 800,000 1,048,424
Republic of South Africa, 13.000%, 8/31/2010 ZAR 64,540,000 9,464,624
-----------
20,667,575
-----------
SPAIN - 3.3%
Government of Spain, 3.600%, 1/31/2009 EUR 24,415,000 30,956,672
Telefonica Emisones SAU, 6.421%, 6/20/2016 USD 7,675,000 7,896,247
-----------
38,852,919
-----------
SUPRANATIONAL - 0.8%
European Investment Bank,
Zero Coupon Bond, 3/10/2021 AUD 15,230,000 5,056,504
Inter-American Development Bank, Series
EMTN, Zero Coupon Bond, 5/11/2009 BRL 13,000,000 4,155,360
-----------
9,211,864
-----------
SWEDEN - 3.1%
Government of Sweden,
Series 1040, 6.500%, 5/05/2008(c) SEK 30,170,000 4,314,617
Government of Sweden,
Series 1045, 5.250%, 3/15/2011(c) 184,365,000 26,876,787
Stena AB, 7.000%, 12/01/2016 USD 2,705,000 2,549,463
Stena AB, 7.500%, 11/01/2013 2,855,000 2,805,037
-----------
36,545,904
-----------
UNITED KINGDOM - 5.4%
Bank of England Euro Note, 3.000%, 1/27/2009 EUR 1,580,000 1,976,152
BSKYB Finance UK Plc, 5.750%, 10/20/2017(c) GBP 5,040,000 9,321,350
JPMorgan Chase London,
Zero Coupon Bond, 10/21/2010, 144A IDR 75,579,375,000 5,558,357
Permanent Finance Plc, 5.100%, 6/10/2009(b) EUR 3,531,000 4,517,758
Scottish Power UK Plc, Series EMTN,
6.625%, 1/14/2010 GBP 1,905,000 3,697,684
Standard Chartered Bank, 6.750%, 4/27/2009 800,000 1,546,163
United Kingdom Treasury, 4.250%, 3/07/2036 2,140,000 4,111,809
United Kingdom Treasury, 5.000%, 3/07/2012 7,820,000 14,871,658
United Kingdom Treasury, 5.000%, 3/07/2025 9,100,000 18,476,721
-----------
64,077,652
-----------
UNITED STATES - 39.5%
Albertson's, Inc., 6.625%, 6/01/2028(c) USD 906,000 777,313
Albertson's, Inc., 7.450%, 8/01/2029 3,909,000 3,620,750
Albertson's, Inc., 7.750%, 6/15/2026 925,000 878,795
Albertson's, Inc., 8.000%, 5/01/2031(c) 905,000 879,762
Albertson's, Inc., 8.700%, 5/01/2030 220,000 221,825
American Standard, Inc., 8.250%, 6/01/2009 GBP 325,000 642,877
American Stores Co., 8.000%, 6/01/2026 USD 720,000 729,454
ASIF Global Financing XXVII,
2.380%, 2/26/2009, 144A SGD 16,300,000 9,976,329
Barclays Financial LLC,
4.060%, 9/16/2010, 144A KRW 6,820,000,000 7,153,342
Barclays Financial LLC,
4.100%, 3/22/2010, 144A THB 183,000,000 4,643,275
46
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES GLOBAL BOND FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- -------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
UNITED STATES - CONTINUED
Barclays Financial LLC,
4.160%, 2/22/2010, 144A THB 183,000,000 $ 4,657,110
Barclays Financial LLC,
4.420%, 3/23/2009, 144A(b) KRW 4,844,220,000 5,118,107
Barclays Financial LLC,
4.460%, 9/23/2010, 144A 3,250,000,000 3,443,197
Barclays Financial LLC,
5.500%, 11/01/2010, 144A THB 62,000,000 1,643,243
Chesapeake Energy Corp., 6.500%, 8/15/2017 USD 240,000 225,000
CIT Group, Inc., 5.500%, 12/01/2014 GBP 2,835,000 5,291,770
Citi Credit Card Issuance Trust,
5.375%, 4/10/2013 EUR 4,163,000 5,587,626
Citibank NA (New York),
15.000%, 7/02/2010, 144A BRL 1,260,000 629,658
Comcast Corp., 6.450%, 3/15/2037 USD 5,610,000 5,612,710
Corning, Inc., 5.900%, 3/15/2014 1,675,000 1,708,344
Corning, Inc., 6.200%, 3/15/2016 3,180,000 3,252,828
Corning, Inc., 6.750%, 9/15/2013 400,000 427,608
Couche-Tard US/Finance, 7.500%, 12/15/2013 3,775,000 3,831,625
DaimlerChrysler NA Holding,
4.875%, 6/15/2010 3,285,000 3,191,716
Dominion Resources, Inc., 5.000%, 3/15/2013(c) 10,285,000 9,920,602
Federal Home Loan Mortgage Corp.,
3.220%, 6/20/2007 SGD 4,750,000 2,981,143
Federal Home Loan Mortgage Corp.,
4.000%, 12/01/2019 USD 182,251 172,243
Federal Home Loan Mortgage Corp.,
4.000%, 2/01/2020 272,139 257,195
Federal Home Loan Mortgage Corp.,
4.000%, 9/01/2020 1,173,410 1,106,167
Federal Home Loan Mortgage Corp.,
4.500%, 9/01/2020 5,398,173 5,202,204
Federal Home Loan Mortgage Corp.,
4.500%, 4/01/2035 5,720,958 5,357,985
Federal Home Loan Mortgage Corp.,
5.000%, 4/01/2020 4,087,491 4,016,736
Federal Home Loan Mortgage Corp.,
5.000%, 7/01/2035 24,645,627 23,716,269
Federal Home Loan Mortgage Corp.,
6.000%, 5/01/2018 842,737 854,917
Federal Home Loan Mortgage Corp.,
6.000%, 10/01/2020 1,351,321 1,371,032
Federal Home Loan Mortgage Corp.,
6.500%, 8/01/2035 1,009,329 1,028,218
Federal Home Loan Mortgage Corp.,
6.500%, 10/01/2035 1,254,988 1,278,475
Federal National Mortgage Association,
1.750%, 3/26/2008 JPY 2,310,000,000 19,895,236
Federal National Mortgage Association,
2.290%, 2/19/2009 SGD 16,200,000 9,919,357
Federal National Mortgage Association,
4.500%, 6/01/2019 USD 5,511,609 5,325,239
Federal National Mortgage Association,
4.500%, 9/01/2035 2,261,483 2,113,591
47
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
UNITED STATES - CONTINUED
Federal National Mortgage Association,
5.000%, 10/01/2019 USD 1,899,407 $ 1,869,028
Federal National Mortgage Association,
5.000%, 10/01/2019 495,597 487,670
Federal National Mortgage Association,
5.000%, 4/01/2020 480,816 472,601
Federal National Mortgage Association,
5.000%, 6/01/2020 870,230 855,362
Federal National Mortgage Association,
5.000%, 7/01/2035 4,907,403 4,718,551
Federal National Mortgage Association,
5.000%, 9/01/2035 11,353,145 10,916,241
Federal National Mortgage Association,
5.500%, 11/01/2016 642,451 644,283
Federal National Mortgage Association,
5.500%, 9/01/2020 984,626 985,432
Federal National Mortgage Association,
5.500%, 11/01/2034 1,719,732 1,697,543
Federal National Mortgage Association,
5.500%, 6/01/2035 8,458,337 8,337,289
Federal National Mortgage Association,
5.500%, 9/01/2035 4,622,346 4,556,195
Federal National Mortgage Association,
5.500%, 12/01/2035(d) 22,339,634 22,019,928
Federal National Mortgage Association,
6.000%, 6/01/2017 1,781,932 1,799,064
Federal National Mortgage Association,
6.000%, 11/01/2017 1,106,868 1,124,106
Federal National Mortgage Association,
6.000%, 9/01/2021 3,033,000 3,079,541
Federal National Mortgage Association,
6.000%, 11/01/2034 3,146,266 3,165,603
Federal National Mortgage Association,
6.000%, 4/01/2035 3,818,924 3,842,395
Federal National Mortgage Association,
6.000%, 5/01/2035 3,920,329 3,939,405
Federal National Mortgage Association,
6.500%, 3/01/2033 2,197,049 2,247,624
Federal National Mortgage Association,
6.500%, 6/01/2035 602,834 613,995
Federal National Mortgage Association,
6.500%, 7/01/2035 272,584 277,631
Federal National Mortgage Association,
6.500%, 10/01/2035 1,980,006 2,018,420
Ford Motor Credit Co., 5.700%, 1/15/2010 8,130,000 7,510,876
General Electric Capital Corp.,
0.550%, 10/14/2008 JPY 560,000,000 4,720,479
General Electric Capital Corp.,
0.750%, 2/05/2009 1,365,000,000 11,529,902
General Electric Capital Corp., Series EMTN,
1.725%, 6/27/2008 SGD 2,250,000 1,373,932
Georgia-Pacific Corp., 7.250%, 6/01/2028 USD 4,540,000 4,244,900
Goldman Sachs Group, Inc.,
3.594%, 5/23/2016(b) EUR 8,500,000 10,698,067
48
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES GLOBAL BOND FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- --------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
UNITED STATES - CONTINUED
Government National Mortgage Association,
5.500%, 11/20/2034 USD 641,859 $ 636,100
Government National Mortgage Association,
5.500%, 2/20/2036 1,767,280 1,749,958
Government National Mortgage Association,
6.000%, 10/20/2035 1,214,950 1,227,208
Greenwich Capital Commercial Funding Corp.,
Series 2005-GG5, Class A2,
5.117%, 4/10/2037 11,075,000 11,056,462
Harrah's Operating Co., Inc.,
5.750%, 10/01/2017 2,017,000 1,844,661
HCA, Inc., 6.300%, 10/01/2012 5,500,000 4,654,375
HSBC Bank USA, 3.310%, 8/25/2010, 144A 11,760,000 11,844,672
JPMorgan Chase & Co., Zero Coupon Bond,
5/17/2010, 144A BRL 3,895,000 1,127,280
K. Hovnanian Enterprises, Inc.,
6.250%, 1/15/2016(c) USD 3,020,000 2,657,600
Kinder Morgan, Inc., 5.150%, 3/01/2015 835,000 750,283
Kreditanstalt Fuer Wiederaufbau,
1.750%, 3/23/2010 JPY 677,000,000 5,897,376
Kreditanstalt Fuer Wiederaufbau,
2.050%, 9/21/2009(c) 2,671,000,000 23,408,226
Lucent Technologies, Inc., 6.450%, 3/15/2029 USD 6,540,000 5,820,600
Merrill Lynch/Countrywide Commercial
Mortgage Trust, Series 2006-1, Class A2,
5.439%, 2/12/2039 5,755,000 5,806,459
Morgan Stanley, 5.375%, 11/14/2013 GBP 2,010,000 3,775,626
News America Holdings, Inc.,
8.625%, 2/07/2014(e) AUD 1,690,000 1,316,390
Owens & Minor, Inc., 6.350%, 4/15/2016 USD 4,490,000 4,528,152
Pemex Project Funding Master Trust,
7.875%, 2/01/2009 5,600,000 5,863,200
Phillips-Van Heusen Corp.,
7.250%, 2/15/2011(c) 4,595,000 4,640,950
Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 855,000 773,775
Qwest Capital Funding, Inc.,
6.875%, 7/15/2028(c) 250,000 223,750
Qwest Capital Funding, Inc.,
7.250%, 2/15/2011(c) 1,035,000 1,035,000
Qwest Capital Funding, Inc., 7.750%, 2/15/2031 1,340,000 1,293,100
Qwest Corp., 6.875%, 9/15/2033(c) 1,815,000 1,656,187
Qwest Corp., 7.250%, 9/15/2025 150,000 145,312
Qwest Corp., 7.500%, 10/01/2014, 144A 800,000 826,000
Qwest Corp., 7.875%, 9/01/2011 2,390,000 2,509,500
Simon Property Group LP, 4.875%, 3/18/2010 5,850,000 5,762,554
Smithfield Foods, Inc., 7.000%, 8/01/2011 5,075,000 5,113,062
Time Warner, Inc., 6.625%, 5/15/2029 7,255,000 7,253,461
Time Warner, Inc., 6.950%, 1/15/2028 2,055,000 2,118,204
U.S. Treasury Bond, 4.875%, 8/15/2016 34,000,000 34,642,804
U.S. Treasury Note, 5.000%, 7/31/2008(d) 12,640,000 12,699,256
Xerox Corp., 6.400%, 3/15/2016 5,162,000 5,136,190
------------
468,200,669
------------
URUGUAY - 0.4%
Republic of Uruguay, 8.000%, 11/18/2022 4,575,000 4,826,625
------------
49
PRINCIPAL AMOUNT VALUE (+)
- -------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
VENEZUELA - 0.3%
Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A USD 1,555,000 $ 1,442,262
Petrozuata Finance, Inc.,
8.220%, 4/01/2017, 144A 2,470,000 2,408,250
--------------
3,850,512
--------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $1,137,837,554) 1,133,147,710
--------------
TOTAL BONDS AND NOTES
(Identified Cost $1,137,837,554) 1,133,147,710
--------------
SHARES
- -------------------------------------------------------------------------------------
PREFERRED STOCKS - 0.0%
NON-CONVERTIBLE PREFERRED STOCKS - 0.0%
UNITED STATES - 0.0%
KN Capital Trust III, 7.630%, 4/15/2028
(Identified Cost $78,368) 85,000 79,600
--------------
PRINCIPAL AMOUNT
- -------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 9.0%
Tri-Party Repurchase Agreement with Fixed
Income Clearing Corporation, dated 9/29/06 at
3.450% to be repurchased at $38,680,117 on
10/02/06 collateralized by $4,310,000 U.S.
Treasury Bond, 6.875% due 8/15/25 with a value
of $5,441,818; $220,000 U.S. Treasury Bond,
6.500% due 11/15/26 with a value of $276,596;
$33,890,000 U.S. Treasury Note, 3.875% due
5/15/09 with a value of $34,254,143; and
$15,000 U.S. Treasury Note, 4.500% due
11/15/10 with a value of $15,463 including
accrued interest (Note 2h) $ 38,669,000 38,669,000
--------------
SHARES
- -------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(f) 67,380,689 67,380,689
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $106,049,689) 106,049,689
--------------
TOTAL INVESTMENTS - 104.6%
(Identified Cost $1,243,965,611)(a) 1,239,276,999
Other assets less liabilities--(4.6)% (54,588,940)
--------------
TOTAL NET ASSETS - 100.0% $1,184,688,059
--------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized depreciation on investments based on cost of $1,250,623,843 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 $ 13,87
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (25,221
-------------
Net unrealized depreciation $(11,346,844)
-------------
50
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES GLOBAL BOND FUND - CONTINUED
(b)Variable rate security. Rate as of September 30, 2006 is disclosed.
(c)All or a portion of this security was on loan to brokers at September 30,
2006.
(d)All or a portion of this security pledged as collateral for open futures
contracts.
(e)Illiquid security.
(f)Represents investments of security lending collateral.
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2006, the total value of these securities amounted to $69,501,783 or 5.87%
of total net assets.
Key to Abbreviations: ARS: Argentinean Peso; AUD: Australian Dollar; BRL:
Brazilian Real; CAD: Canadian Dollar; COP: Colombian Peso; EUR: Euro; GBP:
British Pound; IDR: Indonesian Rupiah; JPY: Japanese Yen; KRW: South Korean
Won; MXN: Mexican Peso; NOK: Norwegian Krone; NZD: New Zealand Dollar; SEK:
Swedish Krona; SGD: Singapore Dollar; THB: Thailand Bhat; USD: United States
Dollar; ZAR: South African Rand
At September 30, 2006, open futures contracts sold were as follows:
AGGREGATED
EXPIRATION FACE UNREALIZED
FUTURES DATE CONTRACTS VALUE ($) MARKET VALUE ($) DEPRECIATION ($)
- ------------------------------------------------------------------------------------
U.S. Treasury Bond 12/19/2006 99 10,949,380 11,128,219 (178,839)
- ------------------------------------------------------------------------------------
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Sovereigns 39.7%
Government Agencies 12.8
Banking 9.6
Treasuries 4.0
Financial Other 3.2
Wireless 3.1
Mortgage Related 2.3
Other, less than 2% each 20.9
See accompanying notes to financial statements.
51
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INFLATION PROTECTED SECURITIES FUND
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - 99.2% OF TOTAL NET ASSETS
ABS HOME EQUITY - 0.9%
Residential Capital Corp., 6.875%, 6/30/2015 USD 75,000 $ 77,905
---------
AUTOMOTIVE - 0.5%
Ford Motor Co., 7.450%, 7/16/2031 35,000 27,038
Toyota Motor Credit Corp., 0.750%, 6/09/2008 JPY 2,000,000 16,958
---------
43,996
---------
FOOD & BEVERAGE - 0.8%
Dean Foods Co., 6.900%, 10/15/2017 USD 75,000 73,125
---------
GAMING - 0.9%
Mandalay Resort Group, 6.375%, 12/15/2011 10,000 9,775
MGM MIRAGE, 5.875%, 2/27/2014 80,000 74,100
---------
83,875
---------
HEALTHCARE - 0.7%
AmerisourceBergen Corp., 5.875%, 9/15/2015 10,000 9,804
HCA, Inc., 7.750%, 7/15/2036 75,000 58,088
---------
67,892
---------
INDEPENDENT/ENERGY - 2.0%
Anadarko Petroleum Corp., 6.450%, 9/15/2036 45,000 45,964
Chesapeake Energy Corp., 6.500%, 8/15/2017 80,000 75,000
XTO Energy, Inc., 6.100%, 4/01/2036 65,000 64,298
---------
185,262
---------
NON-CAPTIVE DIVERSIFIED - 1.5%
General Electric Capital Corp., 1.000%, 3/21/2012 JPY 3,000,000 24,777
General Electric Capital Corp., 0.550%, 10/14/2008 13,000,000 109,583
---------
134,360
---------
PAPER - 0.8%
Georgia-Pacific Corp., 7.700%, 6/15/2015 USD 70,000 69,650
---------
PIPELINES - 1.7%
Colorado Interstate Gas Co., 5.950%, 3/15/2015 10,000 9,563
El Paso Corp., 6.950%, 6/01/2028 10,000 9,400
El Paso Corp., 7.420%, 2/15/2037 25,000 24,000
Kinder Morgan Energy Partners,
5.800%, 3/15/2035 5,000 4,549
Kinder Morgan Finance, 6.400%, 1/05/2036 45,000 40,295
Kinder Morgan Finance, 5.700%, 1/05/2016 20,000 18,462
Kinder Morgan, Inc., 5.150%, 3/01/2015 15,000 13,478
Kinder Morgan, Inc., 6.670%, 11/01/2027 5,000 4,507
Southern Natural Gas Co., 7.350%, 2/15/2031 30,000 31,087
---------
155,341
---------
SOVEREIGNS - 2.2%
Government of Sweden, 4.000%, 12/01/2009 SEK 175,000 24,227
Kingdom of Norway, 6.000%, 5/16/2011 NOK 85,000 14,109
Kingdom of Norway, 5.500%, 5/15/2009 195,000 31,014
Kreditanstalt Fuer Wiederaufbau,
1.750%, 3/23/2010 JPY 5,000,000 43,555
Oesterreichische Kontrollbank AG,
1.800%, 3/22/2010 1,000,000 8,726
Republic of Argentina, 2.418%, 9/30/2014 ARS 130,000 42,866
52
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INFLATION PROTECTED SECURITIES FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
SOVEREIGNS - CONTINUED
Republic of Austria, 3.750%, 2/03/2009 JPY 1,000,000 $ 9,065
Republic of Germany, 3.250%, 4/17/2009 EUR 20,000 25,161
----------
198,723
----------
SUPERMARKETS - 1.1%
Albertson's, Inc., 6.625%, 6/01/2028 USD 5,000 4,290
Albertson's, Inc., 7.450%, 8/01/2029 40,000 37,050
Albertson's, Inc., 7.750%, 6/15/2026 20,000 19,001
Albertson's, Inc., 8.000%, 5/01/2031 25,000 24,303
Albertson's, Inc., 8.700%, 5/01/2030 5,000 5,042
American Stores Co., 8.000%, 6/01/2026 10,000 10,131
----------
99,817
----------
TECHNOLOGY - 0.8%
Sungard Data Systems, Inc., 9.125%, 8/15/2013 10,000 10,350
Xerox Corp., 6.400%, 3/15/2016 62,000 61,690
----------
72,040
----------
TREASURIES - 81.8%
U.S. Treasury Bonds, 2.000%, 1/15/2026(b) 287,056 275,304
U.S. Treasury Bonds, 2.375%, 1/15/2025(b) 555,937 564,885
U.S. Treasury Bonds, 2.500%, 7/15/2016(b) 55,416 56,525
U.S. Treasury Bonds, 3.375%, 4/15/2032(b) 1,169,297 1,451,893
U.S. Treasury Notes, 0.875%, 4/15/2010(b) 682,041 646,313
U.S. Treasury Notes, 1.625%, 1/15/2015(b) 463,558 440,923
U.S. Treasury Notes, 1.875%, 7/15/2013(b) 465,314 453,263
U.S. Treasury Notes, 1.875%, 7/15/2015(b) 502,138 486,210
U.S. Treasury Notes, 2.000%, 1/15/2014(b) 567,139 556,305
U.S. Treasury Notes, 2.000%, 7/15/2014(b) 512,758 502,543
U.S. Treasury Notes, 2.000%, 1/15/2016(b) 246,048 240,396
U.S. Treasury Notes, 3.000%, 7/15/2012(b) 492,290 510,770
U.S. Treasury Notes, 3.375%, 1/15/2012(b) 143,244 150,775
U.S. Treasury Notes, 3.500%, 1/15/2011(b) 298,126 312,263
U.S. Treasury Notes, 3.625%, 1/15/2008(b) 44,083 44,436
U.S. Treasury Notes, 3.875%, 1/15/2009(b) 322,590 331,852
U.S. Treasury Notes, 4.250%, 1/15/2010(b) 290,263 306,999
U.S. Treasury STRIPS, Principal Only,
Zero Coupon, 2/15/2019(b) 125,000 69,267
----------
7,400,922
----------
WIRELINES - 2.6%
AT&T Corp., 8.000%, 11/15/2031 150,000 183,338
Qwest Corp., 7.250%, 9/15/2025 25,000 24,219
Qwest Corp., 7.500%, 6/15/2023 25,000 24,750
----------
232,307
----------
WIRELESS - 0.9%
Rogers Wireless, Inc., 6.375%, 3/01/2014 80,000 79,700
----------
TOTAL BONDS AND NOTES
(Identified Cost $9,259,381) 8,974,915
----------
53
SHARES VALUE (+)
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 25.3%
State Street Securities Lending Quality Trust(c) 2,293,321 $ 2,293,321
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $2,293,321) 2,293,321
------------
TOTAL INVESTMENTS - 124.5%
(Identified Cost $11,552,702)(a) 11,268,236
Other assets less liabilities--(24.5)% (2,215,675)
------------
TOTAL NET ASSETS - 100.0% $ 9,052,561
------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the unrealized depreciation on investments based on cost of $11,636,236 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 $ 27,377
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (395,377)
------------
Net unrealized depreciation $ (368,000)
------------
(b)All or a portion of this security was on loan to brokers at September 30, 2006.
(c)Represents investments of security lending collateral.
STRIPS: Separate Trading of Registered Interest and Principal of Securities
Key to Abbreviations: ARS: Argentinean Peso; EUR: Euro; JPY: Japanese Yen; NOK: Norwegian Krone;
SEK: Swedish Krona; USD: United States Dollar
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Treasuries 81.8%
Wirelines 2.6
Sovereigns 2.2
Independent/Energy 2.0
Other, less than 2% each 10.6
See accompanying notes to financial statements.
54
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INSTITUTIONAL HIGH INCOME FUND
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------------
BONDS AND NOTES - 88.6% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 77.5%
AEROSPACE & DEFENSE - 1.3%
Bombardier, Inc., 7.350%, 12/22/2026 CAD 600,000 $ 487,139
Bombardier, Inc., 7.450%, 5/01/2034, 144A USD 1,500,000 1,291,875
----------
1,779,014
----------
AIRLINES - 0.4%
American Airlines, Inc., Series 93A6,
8.040%, 9/16/2011 42,633 41,354
Continental Airlines, Inc., Series 2000-2, Class B,
8.307%, 4/02/2018 349,842 339,347
Continental Airlines, Inc., Series 2001-1B,
7.373%, 12/15/2015 215,105 212,954
----------
593,655
----------
AUTOMOTIVE - 3.7%
Cummins Engine Co., Inc., 7.125%, 3/01/2028 350,000 358,315
Ford Motor Co., 6.375%, 2/01/2029(b) 475,000 347,344
Ford Motor Credit Co., 5.700%, 1/15/2010 1,425,000 1,316,482
Ford Motor Credit Co., 7.000%, 10/01/2013(b) 1,415,000 1,312,891
GMAC Canada Ltd., 6.625%, 12/17/2010 GBP 25,000 45,814
GMAC International Finance BV,
8.000%, 3/14/2007 NZD 1,250,000 810,696
GMAC LLC, 6.750%, 12/01/2014(b) USD 195,000 190,369
GMAC LLC, 7.500%, 12/01/2006 NZD 250,000 162,253
GMAC LLC, 8.000%, 11/01/2031 USD 35,000 36,595
Goodyear Tire & Rubber Co., 7.000%, 3/15/2028 700,000 586,250
----------
5,167,009
----------
BANKING - 4.9%
Barclays Financial LLC, 4.100%, 3/22/2010, 144A THB 52,000,000 1,319,401
Barclays Financial LLC, 4.160%, 2/22/2010, 144A 50,000,000 1,272,434
Barclays Financial LLC, 4.460%, 9/23/2010, 144A KRW 520,000,000 550,911
Barclays Financial LLC, 5.500%,
11/01/2010, 144A THB 15,000,000 397,559
BNP Paribas SA, Zero Coupon Bond,
6/13/2011, 144A IDR 10,477,600,000 726,816
HSBC Bank USA, 3.310%, 8/25/2010, 144A USD 500,000 503,600
JPMorgan Chase & Co., Zero Coupon Bond,
5/17/2010, 144A BRL 2,200,000 636,718
JPMorgan Chase & Co., Zero Coupon Bond,
3/28/2011, 144A IDR 6,846,018,000 483,784
JPMorgan Chase & Co., Zero Coupon Bond,
3/28/2011, 144A 5,376,000,000 379,903
JPMorgan Chase London, Zero Coupon Bond,
10/21/2010, 144A 9,533,078,500 701,094
----------
6,972,220
----------
CHEMICALS - 4.8%
Borden, Inc., 7.875%, 2/15/2023 USD 1,224,000 1,003,680
Borden, Inc., 9.200%, 3/15/2021 2,541,000 2,363,130
Georgia Gulf Corp., 10.750%, 10/15/2016, 144A 110,000 108,350
Hercules, Inc., 6.500%, 6/30/2029 918,000 740,137
IMC Global, Inc., 7.300%, 1/15/2028 1,405,000 1,222,350
IMC Global, Inc., 7.375%, 8/01/2018 400,000 367,500
Koppers Holdings, Inc., (Step to 9.875% on
11/15/2009), 0.000%, 11/15/2014(c) 1,270,000 933,450
----------
6,738,597
----------
55
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
CONSTRUCTION MACHINERY - 1.0%
Great Lakes Dredge & Dock Corp.,
7.750%, 12/15/2013 USD 300,000 $ 279,000
United Rentals North America, Inc.,
7.000%, 2/15/2014(b) 1,190,000 1,118,600
----------
1,397,600
----------
ELECTRIC - 3.8%
AES Corp., 7.750%, 3/01/2014 1,185,000 1,232,400
AES Corp., 8.375%, 3/01/2011 GBP 405,000 773,468
Dynegy Holdings, Inc., 7.125%, 5/15/2018 USD 100,000 91,500
Dynegy Holdings, Inc., 7.625%, 10/15/2026 220,000 200,750
Dynegy Holdings, Inc., 8.375%, 5/01/2016 250,000 254,375
NGC Corporation Capital Trust I, Series B,
8.316%, 6/01/2027 1,585,000 1,442,350
NRG Energy, Inc., 7.375%, 2/01/2016 575,000 571,407
Quezon Power Philippines Co.,
8.860%, 6/15/2017 430,000 432,150
TXU Corp., Series P, 5.550%, 11/15/2014 45,000 42,515
TXU Corp., Series R, 6.550%, 11/15/2034 300,000 282,562
----------
5,323,477
----------
HEALTHCARE - 1.7%
HCA, Inc., 7.050%, 12/01/2027 750,000 538,211
HCA, Inc., 7.500%, 12/15/2023 170,000 131,818
HCA, Inc., 7.500%, 11/06/2033 1,120,000 873,600
HCA, Inc., 7.580%, 9/15/2025 110,000 84,783
HCA, Inc., 7.690%, 6/15/2025 370,000 288,833
HCA, Inc., Series MTN, 7.750%, 7/15/2036 155,000 120,049
Tenet Healthcare Corp., 6.875%, 11/15/2031(b) 270,000 211,613
Tenet Healthcare Corp., 9.250%, 2/01/2015 215,000 206,938
----------
2,455,845
----------
HOME CONSTRUCTION - 2.5%
K. Hovnanian Enterprises, Inc., 6.250%, 1/15/2015 120,000 106,350
K. Hovnanian Enterprises, Inc.,
6.250%, 1/15/2016(b) 1,123,000 988,240
K. Hovnanian Enterprises, Inc.,
6.375%, 12/15/2014(b) 310,000 277,450
K. Hovnanian Enterprises, Inc., 6.500%, 1/15/2014 272,000 248,880
K. Hovnanian Enterprises, Inc.,
7.500%, 5/15/2016(b) 750,000 700,312
KB Home, 7.250%, 6/15/2018 1,260,000 1,207,898
----------
3,529,130
----------
INDEPENDENT/ENERGY - 0.0%
Chesapeake Energy Corp., 6.500% , 8/15/2017 65,000 60,938
----------
INTEGRATED/ENERGY - 1.9%
Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A 1,450,000 1,344,875
Petrozuata Finance, Inc.,
8.220%, 4/01/2017, 144A 1,435,000 1,399,125
----------
2,744,000
----------
56
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INSTITUTIONAL HIGH INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
LIFE INSURANCE - 1.6%
ASIF Global Financing XXVII,
2.380%, 2/26/2009, 144A SGD 3,700,000 $2,264,565
----------
MEDIA CABLE - 1.4%
NTL Cable PLC, 9.125%, 8/15/2016 USD 685,000 707,262
NTL Cable Plc, 9.750%, 4/15/2014 GBP 650,000 1,253,539
----------
1,960,801
----------
NON-CAPTIVE CONSUMER - 0.7%
SLM Corp., 6.500%, 6/15/2010 NZD 1,575,000 1,009,224
----------
NON-CAPTIVE DIVERSIFIED - 1.5%
General Electric Capital Corp., 6.500%, 9/28/2015 3,035,000 1,936,531
General Electric Capital Corp.,
Series EMTN, 6.750%, 9/26/2016 250,000 164,371
----------
2,100,902
----------
OIL FIELD SERVICES - 1.4%
North America Energy Partners, Inc.,
8.750%, 12/01/2011 USD 2,015,000 2,009,963
----------
PACKAGING - 1.1%
Owens-Illinois, Inc., 7.800%, 5/15/2018 1,555,000 1,477,250
----------
PAPER - 3.5%
Abitibi-Consolidated, Inc., 5.250%, 6/20/2008(b) 200,000 192,000
Abitibi-Consolidated, Inc., 6.000%, 6/20/2013 250,000 203,125
Abitibi-Consolidated, Inc., 7.500%, 4/01/2028 125,000 98,750
Bowater, Inc., 6.500%, 6/15/2013(b) 250,000 221,875
Domtar, Inc., 5.375%, 12/01/2013 640,000 547,200
Georgia-Pacific Corp., 7.375%, 12/01/2025 105,000 99,225
Georgia-Pacific Corp., 7.750%, 11/15/2029 655,000 628,800
Georgia-Pacific Corp., 8.000%, 1/15/2024 70,000 68,950
Georgia-Pacific Corp., 8.875%, 5/15/2031 615,000 639,600
Georgia-Pacific Corp., (Timber Group),
7.250%, 6/01/2028 1,160,000 1,084,600
Jefferson Smurfit Corp., 7.500%, 6/01/2013 1,310,000 1,208,475
----------
4,992,600
----------
PHARMACEUTICALS - 1.3%
Elan Financial Plc, 7.750%, 11/15/2011 1,940,000 1,889,075
----------
PIPELINES - 5.1%
Colorado Interstate Gas Co., 5.950%, 3/15/2015 70,000 66,943
El Paso Corp., 6.375%, 2/01/2009 320,000 319,200
El Paso Corp., 6.750%, 5/15/2009(b) 465,000 467,325
El Paso Corp., 7.000%, 5/15/2011 285,000 286,781
El Paso Corp., 7.750%, 6/15/2010 300,000 310,500
El Paso Corp., 7.800%, 8/01/2031(b) 500,000 512,500
Kinder Morgan, Inc., 5.150%, 3/01/2015 50,000 44,927
Southern Natural Gas Co., 7.350%, 2/15/2031 95,000 98,441
Tennessee Gas Pipeline Co.,
7.000%, 10/15/2028(b) 830,000 826,650
Transcontinental Gas Pipe Line Corp.,
6.400%, 4/15/2016, 144A 1,000,000 988,750
Williams Cos., Inc., 7.500%, 1/15/2031 3,375,000 3,332,813
----------
7,254,830
----------
RAILROADS - 0.2%
Missouri Pacific Railroad Co., 4.750%, 1/01/2020 30,000 26,198
Missouri Pacific Railroad Co., 5.000%, 1/01/2045 314,000 251,407
----------
277,605
----------
57
PRINCIPAL AMOUNT VALUE (+)
- --------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
RETAILERS - 3.8%
Dillard's, Inc., 6.625%, 1/15/2018 USD 500,000 $ 476,250
Dillard's, Inc., 7.000%, 12/01/2028 350,000 319,813
Dillard's, Inc., 7.130%, 8/01/2018 500,000 490,000
Dillard's, Inc., 7.750%, 7/15/2026 1,500,000 1,443,750
Foot Locker, Inc., 8.500%, 1/15/2022 1,579,000 1,492,155
Kellwood Co., 7.625%, 10/15/2017 500,000 464,578
Toys R Us, 7.375%, 10/15/2018 930,000 673,087
-----------
5,359,633
-----------
SOVEREIGNS - 9.3%
Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023 MXN 9,500,000 825,050
Mexican Fixed Rate Bonds, Series MI-10,
9.000%, 12/20/2012 36,500,000 3,451,133
Republic of Argentina, Zero Coupon Bond,
12/15/2035(e) USD 720,705 71,638
Republic of Argentina, 5.590%, 8/03/2012(e) 170,625 135,082
Republic of Argentina, 8.280%, 12/31/2033(b)(f) 270,201 260,068
Republic of Brazil, 8.250%, 1/20/2034(b)(f) 3,325,000 3,823,750
Republic of Brazil, 10.250%, 6/17/2013 700,000 854,700
Republic of Peru, 5.000%, 3/07/2017(e) 264,000 259,380
Republic of South Africa, 12.500%, 12/21/2006 ZAR 455,000 58,838
Republic of South Africa, 13.000%, 8/31/2010 8,190,000 1,201,042
Republic of Uruguay, 7.625%, 3/21/2036 USD 1,150,000 1,147,125
Republic of Uruguay, 7.875%, 1/15/2033(f) 1,068,097 1,105,480
-----------
13,193,286
-----------
SUPERMARKETS - 1.5%
Albertson's, Inc., 6.625%, 6/01/2028 240,000 205,911
Albertson's, Inc., 7.450%, 8/01/2029 1,210,000 1,120,775
Albertson's, Inc., 8.000%, 5/01/2031 480,000 466,614
Albertson's, Inc., 8.700%, 5/01/2030 180,000 181,493
American Stores Co., 8.000%, 6/01/2026 110,000 111,444
-----------
2,086,237
-----------
SUPRANATIONAL - 2.5%
Inter-American Development Bank, Series EMTN,
Zero Coupon Bond, 5/11/2009 BRL 11,000,000 3,516,074
-----------
TECHNOLOGY - 8.2%
Affiliated Computer Services, Inc.,
5.200%, 6/01/2015 USD 100,000 92,250
Amkor Technology, Inc., 7.125%, 3/15/2011(b) 350,000 322,000
Amkor Technology, Inc., 7.750%, 5/15/2013 775,000 711,062
Amkor Technology, Inc., 10.500%, 5/01/2009 99,000 99,495
Corning, Inc., 6.850%, 3/01/2029 701,000 733,934
Hynix Semiconductor, Inc., 9.875%,
7/01/2012, 144A(b) 250,000 272,500
Lucent Technologies, Inc., 6.450%, 3/15/2029 4,115,000 3,662,350
Nortel Networks Corp., 6.875%, 9/01/2023 1,000,000 825,000
Nortel Networks Ltd., 10.125%, 7/15/2013, 144A 600,000 633,000
Northern Telecom Capital Corp.,
7.875%, 6/15/2026 1,975,000 1,718,250
Xerox Corp., 6.400%, 3/15/2016 2,500,000 2,487,500
-----------
11,557,341
-----------
58
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INSTITUTIONAL HIGH INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- -------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
TRANSPORTATION SERVICES - 4.3%
American President Cos., Ltd.,
8.000%, 1/15/2024(g) USD 2,685,000 $ 2,416,500
Atlas Air, Inc., Series 1999-1, Class A1,
7.200%, 1/02/2019 252,085 250,194
Atlas Air, Inc., Series 1999-1B,
7.630%, 1/02/2015(h) 397,855 413,769
Atlas Air, Inc., Series 1999-1C,
8.770%, 1/02/2011(h) 399,542 345,604
Atlas Air, Inc., Series 2000-1,
9.702%, 1/02/2008(h) 40,344 34,091
Atlas Air, Inc., Series B, 7.680%, 1/02/2014(h) 2,207,572 2,317,950
Atlas Air, Inc., Series C, 8.010%, 1/02/2010(h) 289,324 232,906
------------
6,011,014
------------
WIRELINES - 4.1%
Hawaiian Telcom Communications, Inc.,
12.500%, 5/01/2015 50,000 52,500
Level 3 Communications, Inc.,
11.500%, 3/01/2010(b) 5,000 5,138
Philippine Long Distance Telephone Co.,
8.350%, 3/06/2017 1,100,000 1,201,750
Qwest Capital Funding, Inc., 6.500%, 11/15/2018 964,000 872,420
Qwest Capital Funding, Inc.,
6.875%, 7/15/2028(b) 800,000 716,000
Qwest Capital Funding, Inc.,
7.000%, 8/03/2009(b) 400,000 402,000
Qwest Capital Funding, Inc.,
7.250%, 2/15/2011(b) 400,000 400,000
Qwest Capital Funding, Inc., 7.625%, 8/03/2021 290,000 280,937
Qwest Capital Funding, Inc., 7.750%, 2/15/2031 1,550,000 1,495,750
Qwest Communications International, Inc.,
Series B, 7.250%, 11/01/2008 25,000 25,000
Qwest Corp., 6.875%, 9/15/2033(b) 190,000 173,375
Qwest Corp., 7.250%, 9/15/2025 15,000 14,531
Qwest Corp., 7.250%, 10/15/2035 225,000 213,188
------------
5,852,589
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $100,527,992) 109,574,474
------------
CONVERTIBLE BONDS - 11.1%
HEALTHCARE - 0.2%
CONMED Corp., 2.500%, 11/15/2024 225,000 194,906
Invitrogen Corp., 1.500%, 2/15/2024 150,000 130,125
------------
325,031
------------
MEDIA NON-CABLE - 0.1%
Sinclair Broadcast Group, Inc., (Step to 2.000% on
1/15/2011), 4.875%, 7/15/2018(c) 155,000 137,756
------------
PHARMACEUTICALS - 5.9%
Enzon Pharmaceuticals, Inc., 4.500%, 7/01/2008 1,005,000 964,800
Epix Pharmaceuticals, Inc., 3.000%, 6/15/2024 230,000 147,200
Human Genome Sciences, Inc., 2.250%, 8/15/2012 200,000 184,500
Incyte Corp., 3.500%, 2/15/2011 1,100,000 834,625
59
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
PHARMACEUTICALS - CONTINUED
IVAX Corp., 4.500%, 5/15/2008 USD 55,000 $ 55,206
Nektar Therapeutics, 3.250%, 9/28/2012, 144A 350,000 342,125
Nektar Therapeutics, 3.500%, 10/17/2007 940,000 911,800
Regeneron Pharmaceuticals, Inc.,
5.500%, 10/17/2008 1,600,000 1,576,000
Valeant Pharmaceuticals International,
3.000%, 8/16/2010 1,230,000 1,162,350
Valeant Pharmaceuticals International,
4.000%, 11/15/2013 965,000 905,894
Vertex Pharmaceuticals, Inc.,
5.750%, 2/15/2011, 144A 540,000 1,221,750
------------
8,306,250
------------
TECHNOLOGY - 2.8%
Amkor Technology, Inc., 5.000%, 3/15/2007(b) 900,000 846,000
Kulicke & Soffa Industries, Inc.,
0.500%, 11/30/2008 595,000 519,137
Kulicke & Soffa Industries, Inc.,
1.000%, 6/30/2010 350,000 329,875
Maxtor Corp., 5.750%, 3/01/2012(g) 1,792,000 1,648,640
Nortel Networks Corp., 4.250%, 9/01/2008 425,000 405,875
Richardson Electric Ltd., 7.750%,
12/15/2011, 144A 132,000 119,130
------------
3,868,657
------------
TEXTILE - 0.4%
Dixie Yarns, Inc., 7.000%, 5/15/2012 25,000 23,719
Kellwood Co.,(Step to 0.000% on 6/16/2011),
3.500%, 6/15/2034(b)(c) 600,000 537,000
------------
560,719
------------
TRANSPORTATION SERVICES - 0.0%
Builders Transportation, Inc.,
8.000%, 8/15/2005(d) 75,000 --
------------
WIRELINES - 1.7%
Level 3 Communications, Inc., 2.875%, 7/15/2010 1,900,000 1,916,625
Level 3 Communications, Inc.,
6.000%, 9/15/2009(b) 445,000 399,944
Level 3 Communications, Inc.,
6.000%, 3/15/2010(b) 105,000 92,269
------------
2,408,838
------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $14,088,800) 15,607,251
------------
TOTAL BONDS AND NOTES
(Identified Cost $114,616,792) 125,181,725
------------
SHARES
- ----------------------------------------------------------------------------------
COMMON STOCKS - 6.3%
BIOTECHNOLOGY - 1.1%
Vertex Pharmaceuticals, Inc.(h) 46,443 1,562,807
------------
60
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INSTITUTIONAL HIGH INCOME FUND - CONTINUED
SHARES VALUE (+)
- --------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMMUNICATION EQUIPMENT - 1.2%
Corning, Inc.(h) 69,766 $1,702,988
----------
FOOD - 0.1%
ConAgra Foods, Inc. 3,100 75,888
----------
HOME CONSTRUCTION - 0.2%
KB Home(b) 6,775 296,745
----------
REAL ESTATE INVESTMENT TRUSTS - 0.8%
Apartment Investment & Management Co. 4,275 232,603
Associated Estates Realty Corp.(b) 32,565 503,780
Developers Diversified Realty Corp. 7,125 397,290
----------
1,133,673
----------
WIRELINES - 2.9%
Philippine Long Distance Telephone Co., ADR(b) 95,514 4,160,590
----------
TOTAL COMMON STOCKS
(Identified Cost $3,633,202) 8,932,691
----------
PREFERRED STOCKS - 3.3%
CONVERTIBLE PREFERRED STOCKS - 3.3%
CONSTRUCTION MACHINERY - 0.2%
United Rentals Trust, 6.500% 5,367 250,907
----------
ELECTRIC - 0.6%
AES Trust III, 6.750% 15,975 781,178
----------
ELECTRIC UTILITIES - 0.1%
CMS Energy Trust I, 7.750% 4,150 206,981
----------
HOTELS, RESTAURANTS & LEISURE - 0.6%
Six Flags, Inc., 7.250%(b) 38,950 829,635
----------
LODGING - 0.0%
Felcor Lodging Trust, Inc., Series A, 1.950%(b) 1,100 27,401
----------
PACKAGING - 1.0%
Owens-Illinois, Inc., 4.750% 40,800 1,430,040
----------
PIPELINES - 0.1%
El Paso Energy Capital Trust I, 4.750% 2,500 93,075
----------
TECHNOLOGY - 0.7%
Lucent Technologies Capital Trust, 7.750% 1,000 1,021,875
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $4,308,758) 4,641,092
----------
NON-CONVERTIBLE PREFERRED STOCKS - 0.0%
KN Capital Trust III, 7.630% (Identified Cost $9,220) 10,000 9,364
----------
TOTAL PREFERRED STOCKS
(Identified Cost $4,317,978) 4,650,456
----------
CLOSED END INVESTMENT COMPANIES - 0.8%
High Income Opportunity Fund, Inc. 90,125 574,096
Managed High Income Portfolio, Inc.(b) 93,550 582,818
----------
TOTAL CLOSED END INVESTMENT COMPANIES
(Identified Cost $1,101,609) 1,156,914
----------
61
PRINCIPAL AMOUNT
- -----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 11.8%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/29/06 at 3.450% to be
repurchased at $2,571,739 on 10/02/06 collateralized by
$2,095,000 U.S. Treasury Bond, 6.875% due 8/15/25
with a value of $2,645,152, including accrued interest
(Note 2h) $ 2,571,000
SHARES
- -----------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(i) 14,103,418
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $16,674,418)
TOTAL INVESTMENTS - 110.8%
(Identified Cost $140,343,999)(a)
Other assets less liabilities--(10.8)%
TOTAL NET ASSETS - 100.0%
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized appreciation on investments based on cost of $140,483,412 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
Aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value
Net unrealized appreciation
VALUE (+)
- -------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 11.8%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/29/06 at 3.450% to be
repurchased at $2,571,739 on 10/02/06 collateralized by
$2,095,000 U.S. Treasury Bond, 6.875% due 8/15/25
with a value of $2,645,152, including accrued interest
(Note 2h) $ 2,571,000
-------------
- -------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(i) 14,103,418
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $16,674,418) 16,674,418
-------------
TOTAL INVESTMENTS - 110.8%
(Identified Cost $140,343,999)(a) 156,596,204
Other assets less liabilities--(10.8)% (15,278,438)
-------------
TOTAL NET ASSETS - 100.0% $ 141,317,766
-------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the net unrealized appreciation on investments based on cost of $140,483,412 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 $ 17,694,154
Aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value (1,581,362)
-------------
Net unrealized appreciation $ 16,112,792
-------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Step Bond: Coupon is a fixed rate for an initial period and then resets at a
specific date and rate.
(d)Non-income producing security due to default or bankruptcy filing
(e)Variable rate security. Rate as of September 30, 2006 is disclosed.
(f)Payment-in-Kind security.
(g)Illiquid security.
(h)Non-income producing security.
(i)Represents investment of security lending collateral.
Key to Abbreviations: BRL: Brazilian Real; CAD: Canadian Dollar; GBP:
British Pound; IDR: Indonesian Rupiah; KRW: South Korean Won; MXN: Mexican
Peso; NZD: New Zealand Dollar; SGD: Singapore Dollar; THB: Thailand Baht;
USD: United States Dollar; ZAR: South African Rand
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2006, the total value of these securities amounted to $16,958,265 or 12.00%
of total net assets.
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 SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Technology 11.7%
Sovereigns 9.3
Wirelines 8.7
Pharmaceuticals 7.2
Pipelines 5.2
Banking 4.9
Chemicals 4.8
Electric 4.4
Transportation Services 4.3
Retailers 3.8
Automotive 3.7
Paper 3.5
Home Construction 2.7
Supranational 2.5
Packaging 2.1
Other, less than 2% each 20.2
See accompanying notes to financial statements.
62
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------
BONDS AND NOTES - 97.4% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 97.4%
AGENCIES - 1.0%
Pemex Project Funding Master Trust,
6.125%, 8/15/2008 USD 400,000 $ 402,400
----------
ASSET-BACKED SECURITIES - 2.6%
Countrywide Asset Backed Certificates,
Series 2004-S1, Class A2, 3.872%, 3/25/2020 269,390 265,157
Countrywide Asset Backed Certificates,
Series 2004-S1, Class A3, 4.615%, 2/25/2035 135,000 130,641
Countrywide Asset-Backed Certificates,
Series 2006-S1, Class A2, 5.549%, 8/25/2021 410,000 409,288
Navistar Financial Corp. Owner Trust,
Series 2004-B, Class A4, 3.530%, 10/15/2012 280,000 271,591
----------
1,076,677
----------
AUTOMOTIVE - 6.4%
Americredit Automobile Receivables Trust,
Series 2004-DF, Class A4, 3.430%, 7/06/2011 130,000 126,691
Capital Auto Receivables Asset Trust, Series 2004-2,
Class A3, 3.580%, 1/15/2009 365,000 359,643
Capital Auto Receivables Asset Trust, Series 2004-2,
Class A4, 3.750%, 7/15/2009 25,000 24,512
DaimlerChrysler Auto Trust, Series 2004-C,
Class A4, 3.280%, 12/08/2009 250,000 244,295
Ford Credit Auto Owner Trust, 4.380%, 1/15/2010 355,000 350,855
Ford Motor Credit Co., 7.000%, 10/01/2013(b) 235,000 218,042
Honda Auto Receivables Owner Trust,
Series 2004-3, Class A4, 3.280%, 2/18/2010 285,000 277,664
USAA Auto Owner Trust, Series 2004-3, Class A4,
3.530%, 6/15/2011 415,000 406,083
USAA Auto Owner Trust, Series 2006-1, Class A3,
5.010%, 9/15/2010 175,000 174,805
WFS Financial Owner Trust, Series 2004-2,
Class A4, 3.540%, 11/21/2011 500,000 492,302
----------
2,674,892
----------
BANKING - 5.2%
Bank of America Corp., 6.250%, 4/01/2008 435,000 441,282
Capital One Bank, 5.125%, 2/15/2014 310,000 302,607
Citigroup, Inc., 3.500%, 2/01/2008 115,000 112,542
Citigroup/Deutsche Bank Commercial Mortgage,
Series 2006-CD2, Class A2, 5.408%, 1/15/2046 140,000 141,138
HSBC Finance Corp., 4.750%, 4/15/2010(b) 525,000 518,014
JPMorgan Chase & Co., 5.600%, 6/01/2011 465,000 472,819
Wachovia Corp., 4.375%, 6/01/2010 210,000 205,009
----------
2,193,411
----------
BROKERAGE - 1.9%
Goldman Sachs Group, Inc., 4.500%, 6/15/2010 300,000 293,138
Merrill Lynch & Co., Inc., Series C,
4.250%, 2/08/2010 215,000 208,837
Morgan Stanley, 5.300%, 3/01/2013 310,000 309,523
----------
811,498
----------
63
PRINCIPAL AMOUNT VALUE (+)
- -------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
BUILDING MATERIALS - 0.5%
American Standard, Inc., 7.625%, 2/15/2010(b) USD 190,000 $ 200,485
----------
CONSTRUCTION MACHINERY - 0.6%
Caterpillar Financial Services Corp.,
3.100%, 5/15/2007 235,000 231,757
----------
CREDIT CARD - 0.3%
Chase Issuance Trust, 3.220%, 6/15/2010 110,000 107,819
----------
ELECTRIC - 3.2%
Dominion Resources, Inc., 4.125%, 2/15/2008 300,000 295,215
Duke Energy Co., 5.625%, 11/30/2012 300,000 304,270
Exelon Generation Co., LLC, 6.950%, 6/15/2011 300,000 318,027
FirstEnergy Corp., Series B, 6.450%, 11/15/2011 400,000 417,270
----------
1,334,782
----------
ENTERTAINMENT - 1.0%
Time Warner, Inc., 6.150%, 5/01/2007 400,000 401,568
----------
FOOD & BEVERAGE - 0.7%
HJ Heinz Finance Co., 6.000%, 3/15/2012(b) 100,000 101,754
Kraft Food, Inc., 5.250%, 6/01/2007 200,000 199,666
----------
301,420
----------
HEALTHCARE - 3.0%
Aetna, Inc., 7.875%, 3/01/2011 350,000 383,922
Boston Scientific Corp., 6.000%, 6/15/2011 205,000 206,224
HCA, Inc., 5.250%, 11/06/2008 400,000 395,000
Wellpoint, Inc., 3.750%, 12/14/2007 185,000 181,414
Wellpoint, Inc., 5.250%, 1/15/2016 95,000 93,081
----------
1,259,641
----------
HOME CONSTRUCTION - 0.5%
D.R. Horton, Inc., 5.375%, 6/15/2012 215,000 205,326
----------
INDEPENDENT/ENERGY - 1.6%
Anadarko Petroleum Corp., 5.950%, 9/15/2016 205,000 207,449
XTO Energy, Inc., 4.900%, 2/01/2014 500,000 475,795
----------
683,244
----------
INDUSTRIAL OTHER - 0.6%
IDEX Corp., 6.875%, 2/15/2008 250,000 252,408
----------
INTEGRATED/ENERGY - 0.6%
Phillips Petroleum Co., 6.375%, 3/30/2009 250,000 257,008
----------
MEDIA CABLE - 1.0%
Comcast Cable Communications,
7.125%, 6/15/2013 190,000 204,844
Cox Communications, Inc., 5.450%, 12/15/2014 215,000 207,680
----------
412,524
----------
MEDIA NON-CABLE - 1.7%
News America, Inc., 6.625%, 1/09/2008 400,000 406,396
Walt Disney Co., 5.700%, 7/15/2011 305,000 310,711
----------
717,107
----------
64
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
MORTGAGE RELATED - 27.7%
Banc of America Commercial Mortgage, Inc.,
Series 2006-2, Class A4, 5.741%, 5/10/2045(c) USD 200,000 $ 207,076
Federal Home Loan Mortgage Corp.,
4.593%, 1/01/2035(c)(e) 842,728 845,529
Federal Home Loan Mortgage Corp.,
5.000%, 8/15/2024 778,779 773,476
Federal Home Loan Mortgage Corp.,
5.500%, 3/01/2013 19,286 19,365
Federal Home Loan Mortgage Corp.,
6.000%, 11/01/2012 31,650 31,902
Federal Home Loan Mortgage Corp.,
6.000%, 6/01/2035 373,132 375,853
Federal National Mortgage Association,
5.000%, 1/01/2019 433,809 427,460
Federal National Mortgage Association,
5.000%, 2/01/2019 649,912 639,517
Federal National Mortgage Association,
5.000%, 12/01/2019 1,792,750 1,764,077
Federal National Mortgage Association,
5.000%, 4/01/2020 1,103,351 1,084,500
Federal National Mortgage Association,
5.500%, 1/01/2017 76,915 77,135
Federal National Mortgage Association,
5.500%, 1/01/2017 89,252 89,450
Federal National Mortgage Association,
5.500%, 2/01/2017 46,505 46,637
Federal National Mortgage Association,
5.500%, 8/01/2017 1,029,398 1,031,684
Federal National Mortgage Association,
5.500%, 9/01/2017 227,795 228,301
Federal National Mortgage Association,
5.500%, 1/01/2020 1,644,231 1,645,576
Federal National Mortgage Association,
5.500%, 3/01/2020 772,378 772,305
GS Mortgage Securities Corporation II,
Series 2005-GG4, Class A4A, 4.751%, 7/10/2039 205,000 197,033
JPMorgan Chase Commercial Mortgage Securities
Corp., Series 2006-LDP7, Class A2,
6.052%, 4/15/2045(c) 365,000 376,037
LB UBS Commercial Mortgage Trust,
Series 2005-C3, Class A3, 4.647%, 7/15/2030 230,000 224,545
Merrill Lynch/Countrywide Commercial Mortgage
Trust, Series 2006-2, Class A4,
5.910%, 6/12/2046(c) 210,000 219,606
Morgan Stanley Capital I, Series 2005-T19,
Class A4A, 4.890%, 6/12/2047 330,000 319,957
Morgan Stanley Capital I, Series 2006-T23,
Class A2, 5.741%, 8/12/2041(c) 205,000 210,237
Nomura Asset Securities Corp., 6.280%, 3/15/2030 2,732 2,731
-----------
11,609,989
-----------
NON-CAPTIVE CONSUMER - 2.0%
American General Finance Corp.,
2.750%, 6/15/2008 350,000 336,043
Residential Capital Corp., 6.375%, 6/30/2010 500,000 505,889
-----------
841,932
-----------
65
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
NON-CAPTIVE DIVERSIFIED - 3.0%
CIT Group, Inc., 3.375%, 4/01/2009(b) USD 450,000 $ 431,231
General Electric Capital Corp., 2.800%, 1/15/2007 150,000 148,968
General Electric Capital Corp., 3.500%, 8/15/2007 250,000 246,454
International Lease Finance Corp.,
5.750%, 6/15/2011(b) 405,000 412,490
----------
1,239,143
----------
PHARMACEUTICALS - 0.4%
Caremark RX, Inc., 7.375%, 10/01/2006 180,000 180,000
----------
PIPELINES - 0.5%
Kinder Morgan, Inc., 6.500%, 9/01/2012 210,000 210,172
----------
RAILROADS - 1.7%
Burlington Northern Santa Fe Corp.,
6.125%, 3/15/2009 205,000 209,086
CSX Corp., 6.750%, 3/15/2011 195,000 205,749
Union Pacific Corp., 3.875%, 2/15/2009 300,000 290,964
----------
705,799
----------
REAL ESTATE INVESTMENT TRUSTS - 4.2%
American Health Properties, Inc.,
7.500%, 1/15/2007 275,000 276,617
Colonial Realty LP, 4.750%, 2/01/2010 55,000 53,580
EOP Operating LP, 4.650%, 10/01/2010 320,000 310,469
iStar Financial, Inc., 5.150%, 3/01/2012 350,000 341,463
ProLogis Trust, 5.500%, 4/01/2012 400,000 399,139
Simon Property Group LP, 3.750%, 1/30/2009 400,000 386,174
----------
1,767,442
----------
RETAILERS - 1.3%
CVS Corp., 5.750%, 8/15/2011 200,000 202,603
J.C. Penney Co., Inc., 7.600%, 4/01/2007(b) 350,000 353,514
----------
556,117
----------
SOVEREIGNS - 0.9%
United Mexican States, 4.625%, 10/08/2008 400,000 394,600
----------
SUPERMARKETS - 1.1%
Kroger Co., 6.200%, 6/15/2012 345,000 353,664
Kroger Co., 6.750%, 4/15/2012 115,000 120,884
----------
474,548
----------
TECHNOLOGY - 1.8%
Arrow Electronics, Inc., 7.000%, 1/15/2007 350,000 351,290
Corning, Inc., 6.200%, 3/15/2016 45,000 46,031
Jabil Circuit, Inc., 5.875%, 7/15/2010 350,000 353,154
----------
750,475
----------
TRANSPORTATION SERVICES - 1.0%
ERAC USA Finance Co.,
6.800%, 2/15/2008, 144A 200,000 202,836
ERAC USA Finance Co.,
7.350%, 6/15/2008, 144A 200,000 206,282
----------
409,118
----------
66
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INTERMEDIATE DURATION FIXED INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
TREASURIES - 14.8%
U.S. Treasury Notes, 2.625%, 5/15/2008 USD 1,175,000 $ 1,136,537
U.S. Treasury Notes, 3.000%, 11/15/2007 420,000 411,469
U.S. Treasury Notes, 3.875%, 2/15/2013 1,315,000 1,263,068
U.S. Treasury Notes, 4.000%, 2/15/2015 995,000 952,441
U.S. Treasury Notes, 4.500%, 11/15/2015 2,445,000 2,421,313
------------
6,184,828
------------
WIRELESS - 0.2%
New Cingular Wireless Services, Inc.,
7.500%, 5/01/2007(b) 100,000 101,162
------------
WIRELINES - 4.4%
AT&T, Inc., 5.100%, 9/15/2014 170,000 164,253
AT&T, Inc., 5.300%, 11/15/2010 280,000 279,176
Embarq Corp., 7.995%, 6/01/2036 205,000 217,075
Qwest Corp., 5.625%, 11/15/2008 110,000 109,175
Sprint Capital Corp., 6.375%, 5/01/2009 830,000 850,029
Verizon Virginia, Inc., 4.625%, 3/15/2013 225,000 209,415
------------
1,829,123
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $41,082,770) 40,778,415
------------
TOTAL BONDS AND NOTES
(Identified Cost $41,082,770) 40,778,415
------------
SHORT-TERM INVESTMENTS - 6.9%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/29/06 at 3.450% to
be repurchased at $641,184 on 10/02/06
collateralized by $535,000 U.S. Treasury Bond,
6.500% due 11/15/26 with value of $672,631,
including accrued interest (Note 2h) 641,000 641,000
------------
SHARES
- ------------------------------------------------------------------------------------------------------------------------------
States Street Securities Lending Quality Trust(d) 2,237,268 2,237,268
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $2,878,268) 2,878,268
------------
TOTAL INVESTMENTS - 104.3%
(Identified Cost $43,961,038)(a) 43,656,683
Other assets less liabilities--(4.3)% (1,805,505)
------------
TOTAL NET ASSETS - 100.0% $ 41,851,178
------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the unrealized depreciation on investments based on cost of $44,136,253 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 $ 209,671
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (689,241)
------------
Net unrealized depreciation $ (479,570)
------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Variable rate security. Rate as of September 30, 2006 is disclosed.
(d)Represents investment of security lending collateral.
67
(e)Delayed Delivery.
Key to Abbreviations: USD: United States Dollar
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2006, the total value of these securities amounted to $409,118 or 0.98% of
total net assets.
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Mortgage Related 27.7%
Treasuries 14.8
Automotive 6.4
Banking 5.2
Wirelines 4.4
Real Estate Investment Trusts 4.2
Electric 3.2
Healthcare 3.0
Non-Captive Diversified 3.0
Asset-Backed Securities 2.6
Non-Captive Consumer 2.0
Other, less than 2% each 20.9
See accompanying notes to financial statements.
68
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------------
BONDS AND NOTES - 96.5% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 92.3%
AGENCIES - 0.3%
Pemex Project Funding Master Trust,
8.625%, 2/01/2022 USD 500,000 $ 600,500
-----------
AIRLINES - 2.0%
Qantas Airways Ltd., 6.050%, 4/15/2016, 144A 3,455,000 3,472,289
-----------
ASSET-BACKED SECURITIES - 1.4%
Community Program Loan Trust, Series 1987-A,
Class A5, 4.500%, 4/01/2029 2,500,000 2,347,763
-----------
AUTOMOTIVE - 2.8%
Ford Motor Co., 6.375%, 2/01/2029(c) 2,665,000 1,948,781
Ford Motor Credit Co., 7.375%, 10/28/2009 150,000 145,771
GMAC Australia, 6.500%, 8/10/2007 AUD 450,000 324,265
GMAC LLC, 5.625%, 5/15/2009 USD 2,500,000 2,437,927
-----------
4,856,744
-----------
BANKING - 9.6%
BAC Capital Trust VI, 5.625%, 3/08/2035 1,045,000 969,045
Barclays Financial LLC, 4.060%, 9/16/2010, 144A KRW 940,000,000 985,945
Barclays Financial LLC, 4.100%, 3/22/2010, 144A THB 71,000,000 1,801,489
Barclays Financial LLC, 4.160%, 2/22/2010, 144A 70,000,000 1,781,408
Barclays Financial LLC, 4.460%, 9/23/2010, 144A KRW 1,950,000,000 2,065,918
BNP Paribas SA, Zero Coupon Bond, 6/13/2011, 144A IDR 7,484,000,000 519,154
Citibank NA, 15.000%, 7/02/2010, 144A BRL 4,000,000 1,998,915
FleetBoston Financial Corp., 7.375%, 12/01/2009 USD 175,000 186,302
HSBC Bank USA, 3.310%, 8/25/2010, 144A 2,000,000 2,014,400
JPMorgan Chase & Co., Zero Coupon Bond,
5/17/2010, 144A BRL 8,035,000 2,325,468
JPMorgan Chase & Co., Zero Coupon Bond,
3/28/2011, 144A IDR 8,972,574,000 634,060
JPMorgan Chase & Co., Zero Coupon Bond,
3/28/2011, 144A 5,376,000,000 379,903
JPMorgan Chase London, Zero Coupon Bond,
10/21/2010, 144A 9,533,078,500 701,094
Wachovia Corp., 3.500%, 8/15/2008 USD 150,000 145,565
Wells Fargo & Co., 6.375%, 8/01/2011 175,000 183,865
-----------
16,692,531
-----------
BEVERAGES - 0.7%
Cia Brasileira de Bebidas, 8.750%, 9/15/2013 1,025,000 1,181,313
-----------
CHEMICALS - 1.5%
Lubrizol Corp., 6.500%, 10/01/2034 1,680,000 1,692,983
Methanex Corp., 6.000%, 8/15/2015 980,000 938,197
-----------
2,631,180
-----------
ELECTRIC - 2.1%
Commonwealth Edison Co., 4.700%, 4/15/2015 555,000 518,510
Commonwealth Edison Co., 4.750%, 12/01/2011(d) 61,000 58,844
Commonwealth Edison Co., 5.875%, 2/01/2033 1,180,000 1,153,465
Dominion Resources, Inc., 5.950%, 6/15/2035 385,000 373,832
Empresa Nacional de Electricidad SA
(Endesa-Chile), 7.875%, 2/01/2027 1,000,000 1,108,368
MidAmerican Energy Holdings Co.,
6.125%, 4/01/2036, 144A 445,000 449,807
-----------
3,662,826
-----------
69
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
ENTERTAINMENT - 1.7%
Time Warner, Inc., 6.625%, 5/15/2029 USD 870,000 $ 869,816
Time Warner, Inc., 6.950%, 1/15/2028 375,000 386,533
Time Warner, Inc., 7.625%, 4/15/2031 245,000 270,644
Time Warner, Inc., 7.700%, 5/01/2032 160,000 178,678
Viacom, Inc., Class B, 6.875%, 4/30/2036, 144A 1,325,000 1,309,879
-----------
3,015,550
-----------
FOREIGN LOCAL GOVERNMENTS - 11.7%
Province of Alberta, 5.000%, 12/16/2008 CAD 2,000,000 1,825,149
Province of Alberta, 5.930%, 9/16/2016 505,375 487,222
Province of British Columbia, 5.250%, 12/01/2006 600,000 537,630
Province of British Columbia, 6.000%, 6/09/2008 3,175,000 2,927,703
Province of British Columbia, 6.250%, 12/01/2009 290,000 276,163
Province of Manitoba, 5.750%, 6/02/2008 5,575,000 5,120,072
Province of Ontario, 3.875%, 3/08/2008 6,800,000 6,062,966
Province of Ontario, 5.700%, 12/01/2008 3,390,000 3,135,754
-----------
20,372,659
-----------
GOVERNMENT AGENCIES - 0.2%
Federal National Mortgage Association,
5.000%, 2/01/2018 USD 157,370 155,169
Federal National Mortgage Association,
5.500%, 9/01/2016 116,584 116,916
Federal National Mortgage Association,
6.000%, 10/01/2028 31,204 31,525
Federal National Mortgage Association,
6.500%, 2/01/2011 10,311 10,445
-----------
314,055
-----------
HEALTHCARE - 0.7%
HCA, Inc., 5.750%, 3/15/2014 1,000,000 785,000
HCA, Inc., 6.250%, 2/15/2013 150,000 125,250
HCA, Inc., 7.050%, 12/01/2027 100,000 71,762
HCA, Inc., 7.750%, 7/15/2036 250,000 193,627
-----------
1,175,639
-----------
HOME CONSTRUCTION - 5.4%
Centex Corp., 5.250%, 6/15/2015 380,000 355,005
Lennar Corp., 5.600%, 5/31/2015 1,250,000 1,188,746
Lennar Corp., 6.500%, 4/15/2016, 144A 770,000 774,155
Pulte Homes, Inc., 5.200%, 2/15/2015(c) 1,265,000 1,184,575
Pulte Homes, Inc., 6.000%, 2/15/2035(c) 3,340,000 3,011,387
Pulte Homes, Inc., 6.375%, 5/15/2033 1,455,000 1,361,515
Toll Brothers Finance Corp., 5.150%, 5/15/2015(c) 1,725,000 1,533,323
-----------
9,408,706
-----------
INDEPENDENT/ENERGY - 1.4%
Anadarko Petroleum Corp., 5.950%, 9/15/2016 1,365,000 1,381,309
Anadarko Petroleum Corp., 6.450%, 9/15/2036 1,005,000 1,026,536
XTO Energy, Inc., 6.100%, 4/01/2036 65,000 64,298
-----------
2,472,143
-----------
INTEGRATED/ENERGY - 0.7%
Cerro Negro Finance Ltd., 7.900%, 12/01/2020, 144A 500,000 463,750
Petrozuata Finance, Inc., 8.220%, 4/01/2017, 144A 700,000 682,500
-----------
1,146,250
-----------
70
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
MEDIA CABLE - 2.6%
Comcast Corp., 5.650%, 6/15/2035 USD 1,980,000 $1,796,375
Comcast Corp., 6.450%, 3/15/2037 1,265,000 1,265,611
Comcast Corp., 6.500%, 11/15/2035 1,420,000 1,429,890
----------
4,491,876
----------
MEDIA NON-CABLE - 1.8%
Clear Channel Communications, Inc.,
5.750%, 1/15/2013 250,000 240,267
News America, Inc., 6.200%, 12/15/2034 950,000 907,371
News America, Inc., 6.400%, 12/15/2035 1,980,000 1,941,849
----------
3,089,487
----------
METALS & MINING - 0.1%
Alcan, Inc., 5.750%, 6/01/2035 75,000 71,071
Teck Cominco Ltd., 7.000%, 9/15/2012 100,000 106,719
----------
177,790
----------
MORTGAGE RELATED - 0.2%
CS First Boston Mortgage Securities Corp.,
Series 2005-7, Class 3A1, 5.000%, 8/25/2020 427,696 424,242
----------
NON-CAPTIVE CONSUMER - 0.4%
SLM Corp., 6.500%, 6/15/2010 NZD 970,000 621,554
----------
NON-CAPTIVE DIVERSIFIED - 2.7%
CIT Group, Inc., 6.000%, 4/01/2036 925,000 900,686
General Electric Capital Corp., 6.500%, 9/28/2015 5,535,000 3,531,696
General Electric Capital Corp., Series EMTN,
6.750%, 9/26/2016 400,000 262,994
----------
4,695,376
----------
OIL FIELD SERVICES - 0.2%
Pecom Energia SA, 8.125%, 7/15/2010, 144A USD 332,000 345,280
----------
PAPER - 1.6%
Georgia-Pacific Corp., (Timber Group),
7.250%, 6/01/2028 1,500,000 1,402,500
International Paper Co., 4.000%, 4/01/2010 500,000 479,679
International Paper Co., 4.250%, 1/15/2009 1,000,000 977,143
----------
2,859,322
----------
PIPELINES - 1.1%
El Paso Corp., 6.375%, 2/01/2009 125,000 124,688
El Paso Corp., 6.750%, 5/15/2009(c) 250,000 251,250
El Paso Corp., 6.950%, 6/01/2028 350,000 329,000
El Paso Corp., 7.000%, 5/15/2011 1,125,000 1,132,031
----------
1,836,969
----------
PROPERTY & CASUALTY INSURANCE - 1.4%
Allstate Corp., 5.950%, 4/01/2036 470,000 469,661
Marsh & McLennan, Inc., 5.875%, 8/01/2033 1,890,000 1,729,594
Progressive Corp., 7.000%, 10/01/2013 150,000 162,286
----------
2,361,541
----------
RAILROADS - 0.6%
Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, 144A CAD 1,000,000 912,378
Missouri Pacific Railroad Co., 5.000%, 1/01/2045 USD 190,000 152,125
----------
1,064,503
----------
71
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
REAL ESTATE INVESTMENT TRUSTS - 2.0%
Colonial Realty LP, 4.800%, 4/01/2011 USD 1,840,000 $ 1,768,814
Colonial Realty LP, 5.500%, 10/01/2015 290,000 282,573
EOP Operating LP, 6.750%, 2/15/2012 250,000 262,478
Highwoods Realty LP, 7.500%, 4/15/2018 1,075,000 1,185,925
-----------
3,499,790
-----------
RETAILERS - 0.7%
Kellwood Co., 7.625%, 10/15/2017 1,000,000 929,156
Target Corp., 5.875%, 3/01/2012 150,000 154,641
Wal-Mart Stores, Inc., 6.875%, 8/10/2009 200,000 209,446
-----------
1,293,243
-----------
SOVEREIGNS - 13.1%
Canadian Government, 4.250%, 9/01/2008 CAD 10,470,000 9,422,298
Canadian Government, 4.500%, 9/01/2007 4,070,000 3,655,444
Canadian Government, Series WH31,
6.000%, 6/01/2008 2,050,000 1,893,831
Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023 MXN 14,000,000 1,215,863
Mexican Fixed Rate Bonds, Series MI-10,
9.000%, 12/20/2012 46,000,000 4,349,372
Republic of South Africa, 12.500%, 12/21/2006 ZAR 5,840,000 755,198
Republic of South Africa, 13.000%, 8/31/2010 10,135,000 1,486,272
-----------
22,778,278
-----------
SUPRANATIONAL - 5.4%
Inter-American Development Bank, Series EMTN,
Zero Coupon Bond, 5/11/2009 BRL 9,000,000 2,876,788
Inter-American Development Bank, Series EMTN,
6.000%, 12/15/2017 NZD 10,200,000 6,473,065
-----------
9,349,853
-----------
TECHNOLOGY - 2.3%
Avnet, Inc., 6.000%, 9/01/2015 USD 1,600,000 1,561,171
Avnet, Inc., 6.625%, 9/15/2016 105,000 106,867
Corning, Inc., 7.250%, 8/15/2036 1,565,000 1,666,774
Hewlett-Packard Co., 3.625%, 3/15/2008 150,000 146,498
Samsung Electronics Co. Ltd.,
7.700%, 10/01/2027, 144A 500,000 536,703
-----------
4,018,013
-----------
TOBACCO SETTLEMENT REVENUE - 0.7%
Michigan Tobacco Settlement Finance Authority,
7.309%, 6/01/2034 1,110,000 1,148,273
-----------
TRANSPORTATION SERVICES - 2.2%
American President Cos., Ltd., 8.000%, 1/15/2024(d) 100,000 90,000
Atlas Air, Inc., Series 1999-1, Class A1,
7.200%, 1/02/2019 53,778 53,375
Atlas Air, Inc., Series B, 7.680%, 1/02/2014(b) 3,429,237 3,600,699
-----------
3,744,074
-----------
TREASURIES - 2.4%
U.S. Treasury Bonds, 5.375%, 2/15/2031(c) 3,915,000 4,228,505
-----------
72
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
WIRELESS - 3.2%
America Movil SA de CV, 4.125%, 3/01/2009 USD 500,000 $ 485,006
Motorola, Inc., 5.220%, 10/01/2097 1,000,000 796,786
Telefonica Emisiones SAU, 7.045%, 6/20/2036 4,075,000 4,300,458
------------
5,582,250
------------
WIRELINES - 5.4%
AT&T Corp., 6.500%, 3/15/2029 1,310,000 1,292,295
AT&T, Inc., 6.150%, 9/15/2034 545,000 527,622
BellSouth Corp., 6.000%, 11/15/2034(c) 1,875,000 1,759,993
GTE Corp., 6.940%, 4/15/2028 50,000 51,786
New England Telephone & Telegraph,
7.875%, 11/15/2029 570,000 618,650
Qwest Capital Funding, Inc., 6.500%, 11/15/2018 500,000 452,500
Verizon Communications, 5.850%, 9/15/2035 3,715,000 3,500,121
Verizon Maryland, Inc., 5.125%, 6/15/2033 115,000 93,264
Verizon New York, Inc., Class B,
7.375%, 4/01/2032 965,000 1,005,854
------------
9,302,085
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $153,883,724) 160,262,452
------------
CONVERTIBLE BONDS - 4.2%
BANKING - 1.7%
Wells Fargo & Co., 5.239%, 5/01/2033(c)(e) 2,960,000 2,990,488
------------
INDEPENDENT/ENERGY - 0.5%
Devon Energy Corp., 4.900%, 8/15/2008 200,000 251,250
Devon Energy Corp., 4.950%, 8/15/2008 500,000 628,125
------------
879,375
------------
PHARMACEUTICALS - 1.7%
Bristol-Myers Squibb Co., 4.890%, 9/15/2023(e) 2,800,000 2,805,040
Watson Pharmaceuticals, Inc., 1.750%, 3/15/2023 125,000 114,375
------------
2,919,415
------------
TECHNOLOGY - 0.3%
Avnet, Inc., 2.000%, 3/15/2034 385,000 366,712
Maxtor Corp., 5.750%, 3/01/2012(d) 65,000 59,800
Richardson Electric Ltd.,
7.750%, 12/15/2011, 144A(c) 44,000 39,710
------------
466,222
------------
TRANSPORTATION SERVICES - 0.0%
Builders Transportation, Inc.,
6.500%, 5/01/2011(b) 129,000 --
------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $7,079,297) 7,255,500
------------
TOTAL BONDS AND NOTES
(Identified Cost $160,963,021) 167,517,952
------------
73
SHARES VALUE (+)
- --------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - 1.8%
NON-CONVERTIBLE PREFERRED STOCKS - 0.2%
ELECTRIC - 0.2%
Connecticut Light & Power Co., 2.200% 263 $ 10,792
MDU Resources Group, Inc., 5.100% 500 49,922
Public Service Electric & Gas Co., 4.080%(c) 400 31,400
San Diego Gas & Electric Co., 4.500% 100 1,710
Union Electric Co., 4.500%(c) 3,160 259,120
-------------
352,944
-------------
TOTAL NON-CONVERTIBLE PREFERRED STOCKS
(Identified Cost $238,297) 352,944
-------------
CONVERTIBLE PREFERRED STOCKS - 1.6%
CONSUMER PRODUCTS - 0.9%
Newell Financial Trust I, 5.250%, 12/01/2027 33,050 1,512,037
-------------
INSURANCE - 0.7%
Travelers Property Casualty Corp.,
4.500%, 4/15/2032(c) 52,700 1,297,473
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $2,487,518) 2,809,510
-------------
TOTAL PREFERRED STOCKS
(Identified Cost $2,725,815) 3,162,454
-------------
PRINCIPAL AMOUNT
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 9.2%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/29/06 at 3.450% to be
repurchased at $174,050 on 10/02/06 collateralized by
$180,000 U.S. Treasury Note, 4.000% due 6/15/09 with
a value of $181,403 including accrued interest (Note 2h) $ 174,000 174,000
-------------
SHARES
- --------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(f) 15,717,150 15,717,150
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $15,891,150) 15,891,150
-------------
TOTAL INVESTMENTS - 107.5%
(Identified Cost $179,579,986)(a) 186,571,556
Other assets less liabilities--(7.5)% (13,022,247)
-------------
TOTAL NET ASSETS - 100.0% $ 173,549,309
-------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2006, the unrealized appreciation on investments based on cost of $180,297,218 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $ 9,191,180
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (2,916,842)
-------------
Net unrealized appreciation $ 6,274,338
-------------
74
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES INVESTMENT GRADE FIXED INCOME FUND - CONTINUED
(b)Non-income producing security.
(c)All or a portion of this security was on loan to brokers at September 30,
2006.
(d)Illiquid security.
(e)Variable rate security. Rate as of September 30, 2006 is disclosed.
(f)Represents investment of security lending collateral.
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2006, the total value of these securities amounted to $24,194,205 or 13.94%
of total net assets. Key Abbreviations: AUD: Australian Dollar; BRL:
Brazilian Real; CAD: Canadian dollar; IDR: Indonesian Rupiah; KRW: South
Korean Won; MXN: Mexican Peso; NZD: New Zealand Dollar; THB: Thai Baht;
USD: United States Dollar; ZAR: South African Rand.
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Sovereigns 13.1%
Foreign Local Governments 11.7
Banking 11.3
Home Construction 5.4
Supranational 5.4
Wirelines 5.4
Wireless 3.2
Automotive 2.8
Non-Captive Diversified 2.7
Media Cable 2.6
Technology 2.6
Treasuries 2.4
Electric 2.3
Transportation Services 2.2
Airlines 2.0
Real Estate Investment Trusts 2.0
Other, less than 2% each 21.2
See accompanying notes to financial statements.
75
THIS PAGE INTENTIONALLY LEFT BLANK
76
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2006
BOND FUND FIXED INCOME
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Investments at cost $ 8,100,539,596 $ 447,760,887
Net unrealized appreciation (depreciation) 408,226,679 35,745,593
---------------- ----------------
Investments at value 8,508,766,275 483,506,480
Cash 954 707
Foreign currency at value (identified cost $6,186,661, $341,259, $16,106,837,
$453, $64,489, $0 and $170,314) 6,175,641 340,405
Receivable for Fund shares sold 46,882,278 --
Receivable for securities sold 2,186,275 232,924
Receivable for forward foreign currency exchange contracts -- --
Dividends and interest receivable 81,824,109 5,885,697
Receivable from investment adviser (Note 4) -- --
Securities lending income receivable 70,153 2,089
---------------- ----------------
TOTAL ASSETS 8,645,905,685 489,968,302
---------------- ----------------
LIABILITIES
Due to custodian bank -- --
Collateral on securities loaned, at value (Note 2) 1,517,816,403 32,882,111
Payable for securities purchased 34,932,286 753,282
Payable for delayed delivery security purchased -- --
Payable for Fund shares redeemed 5,116,339 --
Payable for forward foreign currency exchange contracts -- --
Foreign taxes payable 52,444 2,419
Management fees payable (Note 4) 4,171,789 194,261
Administrative fees payable (Note 4) 318,946 21,864
Deferred Trustees' fees (Note 4) 336,630 56,048
Service and distribution fees payable (Note 4) 33,262 --
Other accounts payable and accrued expenses 932,541 47,051
---------------- ----------------
TOTAL LIABILITIES 1,563,710,640 33,957,036
---------------- ----------------
NET ASSETS $ 7,082,195,045 $ 456,011,266
---------------- ----------------
Net Assets consist of:
Paid-in capital $ 6,749,412,280 $ 407,165,958
Undistributed net investment income 17,229,120 22,438,449
Accumulated net realized loss on investments, futures contracts and foreign
currency transactions (92,722,762) (9,343,991)
Net unrealized appreciation (depreciation) on investments, futures contracts
and foreign currency translations 408,276,407 35,750,850
---------------- ----------------
NET ASSETS $ 7,082,195,045 $ 456,011,266
---------------- ----------------
NET ASSET VALUE AND OFFERING PRICE
INSTITUTIONAL CLASS
Net assets $ 4,742,621,888 $ 456,011,266
---------------- ----------------
Shares of beneficial interest 335,631,097 32,822,912
---------------- ----------------
Net asset value, offering and redemption price per share $ 14.13 $ 13.89
---------------- ----------------
RETAIL CLASS
Net assets $ 2,232,631,718 $ --
---------------- ----------------
Shares of beneficial interest 158,396,191 --
---------------- ----------------
Net asset value, offering and redemption price per share $ 14.10 $ --
---------------- ----------------
ADMIN CLASS
Net assets $ 106,941,439 $ --
---------------- ----------------
Shares of beneficial interest 7,601,257 --
---------------- ----------------
Net asset value, offering and redemption price per share $ 14.07 $ --
---------------- ----------------
Value of securities on loan (Note 2) $ 1,486,484,877 $ 32,187,796
---------------- ----------------
See accompanying notes to financial statements.
77
GLOBAL INFLATION PROTECTED INSTITUTIONAL HIGH INTERMEDIATE DURATION INVESTMENT GRADE
BOND FUND SECURITIES FUND INCOME FUND FIXED INCOME FUND FIXED INCOME FUND
- ----------------------------------------------------------------------------------------------------
$ 1,243,965,611 $ 11,552,702 $ 140,343,999 $ 43,961,038 $ 179,579,986
(4,688,612) (284,466) 16,252,205 (304,355) 6,991,570
- ----------------------------------------------------------------------------------------------------
1,239,276,999 11,268,236 156,596,204 43,656,683 186,571,556
576 49,403 842 358 --
16,117,015 447 64,391 -- 169,901
4,154,633 -- 126 -- --
12,970,221 -- 300,795 1,528,002 1,553,261
1,909,558 -- -- -- --
14,718,176 72,531 2,039,495 435,831 2,263,932
-- 9,334 2,890 7,420 --
2,742 21 1,630 111 903
- ----------------------------------------------------------------------------------------------------
1,289,149,920 11,399,972 159,006,373 45,628,405 190,559,553
- ----------------------------------------------------------------------------------------------------
-- -- -- -- 466,326
67,380,689 2,293,321 14,103,418 2,237,268 15,717,150
34,584,411 -- 170,127 627,757 681,795
-- -- -- 845,529 --
1,240,365 -- 3,260,300 -- --
2,354 -- 2,536 -- --
333,957 -- -- -- --
634,662 1,848 73,505 8,494 62,711
55,673 417 6,960 1,949 8,235
97,337 21,538 29,922 24,019 36,089
7,405 -- -- -- --
125,008 30,287 41,839 32,211 37,938
- ----------------------------------------------------------------------------------------------------
104,461,861 2,347,411 17,688,607 3,777,227 17,010,244
- ----------------------------------------------------------------------------------------------------
$ 1,184,688,059 $ 9,052,561 $ 141,317,766 $ 41,851,178 $ 173,549,309
- ----------------------------------------------------------------------------------------------------
$ 1,174,823,411 $ 9,586,022 $ 123,447,181 $ 42,752,441 $ 165,838,093
24,926,673 1,827 6,221,803 12,821 2,569,939
(11,875,771) (250,814) (4,605,279) (609,729) (1,852,591)
(3,186,254) (284,474) 16,254,061 (304,355) 6,993,868
- ----------------------------------------------------------------------------------------------------
$ 1,184,688,059 $ 9,052,561 $ 141,317,766 $ 41,851,178 $ 173,549,309
- ----------------------------------------------------------------------------------------------------
$ 643,991,085 $ 9,052,561 $ 141,317,766 $ 41,851,178 $ 173,549,309
- ----------------------------------------------------------------------------------------------------
41,745,870 879,058 17,427,721 4,407,137 13,743,672
- ----------------------------------------------------------------------------------------------------
$ 15.43 $ 10.30 $ 8.11 $ 9.50 $ 12.63
- ----------------------------------------------------------------------------------------------------
$ 540,696,974 $ -- $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------
35,372,777 -- -- -- --
- ----------------------------------------------------------------------------------------------------
$ 15.29 $ -- $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------
$ -- $ -- $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------
-- -- -- -- --
- ----------------------------------------------------------------------------------------------------
$ -- $ -- $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------
$ 65,529,709 $ 2,248,319 $ 13,800,502 $ 2,191,355 $ 15,367,796
- ----------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
78
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
BOND FUND FIXED INCOME
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 9,915,928 $ 615,896
Interest 300,455,735 26,031,215
Securities lending income (Note 2) 1,733,910 183,610
Less foreign taxes withheld (326,762) (28,130)
------------- -------------
311,778,811 26,802,591
------------- -------------
EXPENSES
Management fees (Note 4) 29,144,506 2,205,077
Distribution fees--Retail Class (Note 4) 3,290,050 --
Service and distribution fees--Admin Class (Note 4) 424,314 --
Trustees' fees and expenses (Note 4) 297,155 39,069
Administrative fees (Note 4) 2,866,243 217,268
Custodian fees and expenses 424,563 50,772
Transfer agent fees and expenses--Institutional Class 2,112,549 1,691
Transfer agent fees and expenses--Retail Class 1,285,153 --
Transfer agent fees and expenses--Admin Class 106,845 --
Audit and tax services fees 46,458 36,937
Registration fees 570,896 29,878
Shareholder reporting expenses 838,160 7,065
Legal fees 249,996 24,224
Expense recapture--Institutional Class (Note 4) 1,142,416 11,427
Miscellaneous expenses 210,114 24,777
------------- -------------
Total expenses 43,009,418 2,648,185
Less reimbursement (Note 4) (171,399) --
------------- -------------
Net expenses 42,838,019 2,648,185
------------- -------------
Net investment income 268,940,792 24,154,406
------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS
REALIZED GAIN (LOSS) ON:
Investments--net 18,024,550 5,701,265
Futures contracts -- --
Foreign currency transactions--net 525,144 68,677
Net increase from payments by affiliates and net losses realized on the disposal of
investments in violation of restrictions (Note 4) -- --
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments--net 191,026,492 5,963,492
Futures contracts -- --
Foreign currency translations--net (74,576) (2,227)
------------- -------------
Net realized and unrealized gain (loss) on investments, futures contracts and foreign
currency transactions 209,501,610 11,731,207
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 478,442,402 $ 35,885,613
------------- -------------
See accompanying notes to financial statements.
79
GLOBAL INFLATION PROTECTED INSTITUTIONAL HIGH INTERMEDIATE DURATION INVESTMENT GRADE
BOND FUND SECURITIES FUND INCOME FUND FIXED INCOME FUND FIXED INCOME FUND
- --------------------------------------------------------------------------------------------------
$ -- $ -- $ 671,542 $ -- $ 164,958
42,827,218 491,350 8,503,626 2,003,674 9,325,413
68,502 861 80,387 6,031 61,334
(1,599) -- (39,934) -- --
- --------------------------------------------------------------------------------------------------
42,894,121 492,211 9,215,621 2,009,705 9,551,705
- --------------------------------------------------------------------------------------------------
6,438,776 22,966 773,560 102,941 715,291
1,309,923 -- -- -- --
-- -- -- -- --
76,041 14,503 21,275 16,353 24,289
614,648 4,097 67,242 20,081 89,261
134,629 15,686 27,801 16,293 30,435
41,095 20,649 22,234 13,459 9,312
658,248 -- -- -- --
-- -- -- -- --
47,604 34,444 40,956 37,348 38,689
146,575 30,653 37,263 34,885 41,653
162,575 4,935 7,746 5,353 5,131
54,515 598 6,037 2,191 10,730
144,847 -- -- -- 5,860
66,295 6,340 10,046 7,393 12,875
- --------------------------------------------------------------------------------------------------
9,895,771 154,871 1,014,160 256,297 983,526
(458,257) (118,124) (47,210) (91,592) --
- --------------------------------------------------------------------------------------------------
9,437,514 36,747 966,950 164,705 983,526
- --------------------------------------------------------------------------------------------------
33,456,607 455,464 8,248,671 1,845,000 8,568,179
- --------------------------------------------------------------------------------------------------
(11,005,629) (80,468) 3,800,804 (187,125) 2,181,816
(83,882) -- -- -- --
(593,847) 22 (12,854) -- (110,343)
-- -- -- -- --
16,709,250 (256,033) 1,878,590 (140,970) 1,015,797
(178,839) -- -- -- --
2,781,426 (8) 3,546 -- (6,503)
- --------------------------------------------------------------------------------------------------
7,628,479 (336,487) 5,670,086 (328,095) 3,080,767
- --------------------------------------------------------------------------------------------------
$ 41,085,086 $ 118,977 $ 13,918,757 $ 1,516,905 $ 11,648,946
- --------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
80
STATEMENTS OF CHANGES IN NET ASSETS
BOND FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 268,940,792 $ 163,658,920
Net realized gain on investments and foreign currency transactions 18,549,694 111,642,704
Net change in unrealized appreciation (depreciation) on investments and
foreign currency translations 190,951,916 13,364,096
------------------ ------------------
Increase in net assets resulting from operations 478,442,402 288,665,720
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (242,336,221) (185,828,139)
Retail Class (82,817,491) (27,896,741)
Admin Class (4,947,996) (2,760,379)
CAPITAL GAINS:
Institutional Class -- --
Retail Class -- --
Admin Class -- --
------------------ ------------------
Total distributions (330,101,708) (216,485,259)
------------------ ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) 2,857,652,889 1,335,356,980
------------------ ------------------
REDEMPTION FEES
Institutional Class 396,422 232,638
Retail Class 142,390 33,866
Admin Class 8,867 3,601
------------------ ------------------
Total increase in net assets 3,006,541,262 1,407,807,546
NET ASSETS
Beginning of year 4,075,653,783 2,667,846,237
------------------ ------------------
End of year $7,082,195,045 $4,075,653,783
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 17,229,120 $ 48,782,645
------------------ ------------------
FIXED INCOME
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 24,154,406 $ 21,290,666
Net realized gain on investments and foreign currency transactions 5,769,942 21,678,907
Net change in unrealized appreciation (depreciation) on investments and
foreign currency translations 5,961,265 (6,599,020)
------------------ ------------------
Increase in net assets resulting from operations 35,885,613 36,370,553
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (33,031,701) (34,745,920)
CAPITAL GAINS:
Institutional Class -- --
------------------ ------------------
Total distributions (33,031,701) (34,745,920)
------------------ ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) 8,605,294 84,275,729
------------------ ------------------
Total increase in net assets 11,459,206 85,900,362
NET ASSETS
Beginning of year 444,552,060 358,651,698
------------------ ------------------
End of year $456,011,266 $444,552,060
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 22,438,449 $ 26,730,195
------------------ ------------------
See accompanying notes to financial statements.
81
GLOBAL BOND FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- ----------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 33,456,607 $ 28,293,504
Net realized gain (loss) on investments, futures contracts and foreign currency
transactions (11,683,358) 23,550,483
Net change in unrealized appreciation (depreciation) on investments, futures contracts
and foreign currency translations 19,311,837 (40,855,655)
------------------ ------------------
Increase in net assets resulting from operations 41,085,086 10,988,332
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (22,779,969) (10,875,668)
Retail Class (22,148,980) (13,960,467)
CAPITAL GAINS:
Institutional Class (2,587,016) (1,047,126)
Retail Class (2,698,275) (1,522,631)
------------------ ------------------
Total distributions (50,214,240) (27,405,892)
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) (59,590,823) 568,046,723
------------------ ------------------
REDEMPTION FEES
Institutional Class 106,778 38,270
Retail Class 99,149 52,568
------------------ ------------------
Total increase (decrease) in net assets (68,514,050) 551,720,001
NET ASSETS
Beginning of year 1,253,202,109 701,482,108
------------------ ------------------
End of year $1,184,688,059 $1,253,202,109
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 24,926,673 $ 42,333,501
------------------ ------------------
INFLATION PROTECTED SECURITIES FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- ---------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 455,464 $ 348,376
Net realized gain (loss) on investments and foreign currency transactions (80,446) 137,435
Net change in unrealized appreciation (depreciation) on investments and
foreign currency translations (256,041) (181,784)
------------------ ------------------
Increase in net assets resulting from operations 118,977 304,027
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (542,456) (434,112)
CAPITAL GAINS:
Institutional Class (46,504) --
------------------ ------------------
Total distributions (588,960) (434,112)
------------------ ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) 224,383 2,038,235
------------------ ------------------
Total increase (decrease) in net assets (245,600) 1,908,150
NET ASSETS
Beginning of year 9,298,161 7,390,011
------------------ ------------------
End of year $9,052,561 $9,298,161
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 1,827 $ (3,886)
------------------ ------------------
See accompanying notes to financial statements.
82
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
INSTITUTIONAL HIGH INCOME FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 8,248,671 $ 7,149,447
Net realized gain on investments and foreign currency transactions 3,787,950 3,314,309
Net change in unrealized appreciation (depreciation) on investments and
foreign currency translations 1,882,136 1,631,263
------------------ ------------------
Increase in net assets resulting from operations 13,918,757 12,095,019
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (7,577,634) (8,125,448)
CAPITAL GAINS:
Institutional Class -- --
------------------ ------------------
Total distributions (7,577,634) (8,125,448)
------------------ ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) 24,443,690 9,454,547
------------------ ------------------
Total increase in net assets 30,784,813 13,424,118
NET ASSETS
Beginning of year 110,532,953 97,108,835
------------------ ------------------
End of year $141,317,766 $110,532,953
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 6,221,803 $ 5,141,642
------------------ ------------------
INTERMEDIATE DURATION FIXED INCOME FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 1,845,000 $ 1,497,504
Net realized gain (loss) on investments (187,125) 40,234
Net change in unrealized appreciation (depreciation) on investments (140,970) (990,010)
------------------ ------------------
Increase in net assets resulting from operations 1,516,905 547,728
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (1,971,781) (1,687,919)
CAPITAL GAINS:
Institutional Class -- (64,658)
------------------ ------------------
Total distributions (1,971,781) (1,752,577)
------------------ ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) 1,677,966 10,781,467
------------------ ------------------
Total increase in net assets 1,223,090 9,576,618
NET ASSETS
Beginning of year 40,628,088 31,051,470
------------------ ------------------
End of year $41,851,178 $40,628,088
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 12,821 $ 13,423
------------------ ------------------
See accompanying notes to financial statements.
83
INVESTMENT GRADE FIXED INCOME FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 8,568,179 $ 7,854,412
Net realized gain on investments and foreign currency transactions 2,071,473 12,564,717
Net change in unrealized appreciation (depreciation) on investments and
foreign currency translations 1,009,294 (9,149,099)
------------------ ------------------
Increase in net assets resulting from operations 11,648,946 11,270,030
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (13,102,305) (11,342,082)
CAPITAL GAINS:
Institutional Class (7,899,080) (3,607,797)
------------------ ------------------
Total distributions (21,001,385) (14,949,879)
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 7) (3,846,894) 13,334,331
------------------ ------------------
Total increase (decrease) in net assets (13,199,333) 9,654,482
NET ASSETS
Beginning of year 186,748,642 177,094,160
------------------ ------------------
End of year $173,549,309 $186,748,642
------------------ ------------------
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT INCOME (LOSS) $ 2,569,939 $ (3,919,889)
------------------ ------------------
See accompanying notes to financial statements.
84
FINANCIAL HIGHLIGHTS
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------------ ----------------------------
Net asset Dividends Distributions
value, Net Net realized Total from from from net
beginning investment and unrealized investment net investment realized
of the period income/(c)/ gain (loss) operations income capital gains
- ----------------------------------------------------------------------------------------------------------
BOND FUND
INSTITUTIONAL CLASS
9/30/2006 $13.81 $0.72 $0.47 $1.19 $(0.87) $--
9/30/2005 13.46 0.67 0.57 1.24 (0.89) --
9/30/2004 12.66 0.72 0.82 1.54 (0.74) --
9/30/2003 10.33 0.78 2.34 3.12 (0.79) --
9/30/2002+ 10.39 0.82 (0.06) 0.76 (0.82) --
RETAIL CLASS
9/30/2006 $13.78 $0.69 $0.47 $1.16 $(0.84) $--
9/30/2005 13.44 0.64 0.57 1.21 (0.87) --
9/30/2004 12.65 0.69 0.82 1.51 (0.72) --
9/30/2003 10.33 0.75 2.34 3.09 (0.77) --
9/30/2002+ 10.39 0.79 (0.05) 0.74 (0.80) --
ADMIN CLASS
9/30/2006 $13.75 $0.65 $0.48 $1.13 $(0.81) $--
9/30/2005 13.42 0.60 0.56 1.16 (0.83) --
9/30/2004 12.64 0.65 0.82 1.47 (0.69) --
9/30/2003 10.32 0.72 2.34 3.06 (0.74) --
9/30/2002+ 10.38 0.76 (0.05) 0.71 (0.77) --
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(b) The adviser has agreed to reimburse a portion of the Fund's expenses during
the period. Without this reimbursement the Fund's ratio of operating expenses
would have been higher.
(c) Per share net investment income (loss) has been determined on the basis of
the weighted average number of shares outstanding during the period.
(d) Amount rounds to less than $0.01 per share.
(e) Includes expense recapture of 0.03%. See Note 4
+ As required October 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities 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 to the
Institutional, Retail and Admin Classes per share net investment income and net
realized and unrealized gain (loss) was less than $0.01. The ratio of net
investment income to average net assets for the Institutional, Retail and Admin
Classes decreased from 7.77% to 7.76%, 7.53% to 7.51%, 7.24% to 7.22%,
respectively, on an annualized basis.
See accompanying notes to financial statements.
85
RATIOS TO AVERAGE NET ASSETS
- ------------------------- -----------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total Redemption end of Total the period Net Gross investment turnover
distributions fees the period return %(a) (000's) expenses %(b) expenses % income (loss) % rate %
- --------------------------------------------------------------------------------------------------------------
$(0.87) $0.00(d) $14.13 9.0 $4,742,622 0.75(e) 0.75(e) 5.20 26
(0.89) 0.00(d) 13.81 9.5 3,303,997 0.75 0.79 4.91 22
(0.74) 0.00(d) 13.46 12.5 2,365,199 0.75 0.79 5.48 42
(0.79) -- 12.66 30.9 1,730,165 0.75 0.78 6.64 35
(0.82) -- 10.33 7.5 1,172,286 0.75 0.79 7.76 22
$(0.84) $0.00(d) $14.10 8.8 $2,232,632 1.00 1.01 4.99 26
(0.87) 0.00(d) 13.78 9.2 707,394 1.00 1.05 4.64 22
(0.72) 0.00(d) 13.44 12.2 275,349 1.00 1.04 5.24 42
(0.77) -- 12.65 30.6 143,932 1.00 1.07 6.35 35
(0.80) -- 10.33 7.3 61,845 1.00 1.14 7.51 22
$(0.81) $0.00(d) $14.07 8.5 $ 106,941 1.25 1.29 4.71 26
(0.83) 0.00(d) 13.75 8.9 64,263 1.25 1.31 4.39 22
(0.69) 0.00(d) 13.42 11.9 27,299 1.25 1.29 4.99 42
(0.74) -- 12.64 30.4 12,061 1.25 1.40 6.13 35
(0.77) -- 10.32 7.0 6,383 1.25 1.68 7.22 22
See accompanying notes to financial statements.
86
FINANCIAL HIGHLIGHTS - CONTINUED
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------------------- ----------------------------
Net asset Dividends Distributions
value, Net Net realized Total from from from net
beginning investment and unrealized investment net investment realized
of the period income(c) gain (loss) operations income capital gains
- ---------------------------------------------------------------------------------------------------------
FIXED INCOME FUND
INSTITUTIONAL CLASS
9/30/2006 $13.88 $0.74 $0.30 $1.04 $(1.03) $ --
9/30/2005 13.93 0.75 0.58 1.33 (1.38) --
9/30/2004 13.24 0.82 0.79 1.61 (0.92) --
9/30/2003 10.95 0.84 2.40 3.24 (0.95) --
9/30/2002+ 11.23 0.87 (0.15) 0.72 (1.00) --
GLOBAL BOND FUND
INSTITUTIONAL CLASS
9/30/2006 $15.57 $0.48 $0.16 $0.64 $(0.70) $(0.08)
9/30/2005 15.59 0.44 0.05 0.49 (0.46) (0.05)
9/30/2004 14.93 0.48 0.78 1.26 (0.60) --
9/30/2003 12.68 0.62 2.25 2.87 (0.62) --
9/30/2002++ 11.08 0.68 0.92 1.60 -- --
RETAIL CLASS
9/30/2006 $15.43 $0.44 $0.15 $0.59 $(0.65) $(0.08)
9/30/2005 15.46 0.40 0.05 0.45 (0.43) (0.05)
9/30/2004 14.83 0.43 0.79 1.22 (0.59) --
9/30/2003 12.62 0.58 2.24 2.82 (0.61) --
9/30/2002++ 11.06 0.65 0.91 1.56 -- --
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(b) The adviser has agreed to reimburse a portion of the Fund's expense during
the period. Without this reimbursement the Fund's ratio of 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) Includes expense recapture of 0.00% and 0.03% for Fixed Income Fund and
Global Bond Fund, respectively. See Note 4.
+ As required effective October 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities for financial statement purposes only.
For the year ended September 30, 2002, the effect of this change per share to
the Funds's net investment income and net realized and unrealized gain (loss)
was less than $0.01. The ratio of net investment income to average net assets
for the Fund remained unchanged.
++ As required effective October 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities 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 to the Institutional and
Retail Classes was a decrease to net investment income by $0.01 and $0.01 per
share, respectively, and increase to net realized and unrealized gain (loss) on
investments by $0.01 and $0.01 per share, respectively and a decrease to the
ratio of net investment income to average net assets from 5.89% to 5.78% and
5.63% to 5.53%, respectively, on an annualized basis.
See accompanying notes to financial statements.
87
RATIOS TO AVERAGE NET ASSETS
- ------------------------- -----------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total Redemption end of Total the period Net Gross investment turnover
distributions fees the period return %(a) (000's) expenses %(b) expenses % income (loss) % rate %
- --------------------------------------------------------------------------------------------------------------
$(1.03) $ -- $13.89 8.1 $456,011 0.60(e) 0.60(e) 5.48 40
(1.38) -- 13.88 9.9 444,552 0.65 0.65 5.47 34
(0.92) -- 13.93 12.6 358,652 0.65 0.66 6.17 35
(0.95) -- 13.24 31.5 412,521 0.65 0.67 7.03 33
(1.00) -- 10.95 6.7 372,141 0.65 0.70 7.87 21
$(0.78) $0.00(d) $15.43 4.3 $643,991 0.74(e) 0.74(e) 3.21 77
(0.51) 0.00(d) 15.57 3.1 553,704 0.75 0.80 2.75 63
(0.60) 0.00(d) 15.59 8.6 287,830 0.80 0.85 3.15 61
(0.62) -- 14.93 23.4 83,325 0.90 0.94 4.50 107
-- -- 12.68 14.4 44,810 0.90 1.07 5.78 65
$(0.73) $0.00(d) $15.29 4.0 $540,697 1.00 1.09 2.93 77
(0.48) 0.00(d) 15.43 2.8 699,498 1.00 1.09 2.57 63
(0.59) 0.00(d) 15.46 8.4 413,652 1.04 1.10 2.88 61
(0.61) -- 14.83 23.1 55,487 1.15 1.21 4.13 107
-- -- 12.62 14.1 12,103 1.15 1.47 5.53 65
See accompanying notes to financial statements.
88
FINANCIAL HIGHLIGHTS - CONTINUED
INCOME (LOSS) FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
----------------------------------------- ----------------------------
Net asset Dividends Distributions
value, Net Net realized Total from from from net
beginning investment and unrealized investment net investment realized
of the period income(c) gain (loss) operations income capital gains
- ---------------------------------------------------------------------------------------------------------
INFLATION PROTECTED SECURITIES FUND
INSTITUTIONAL CLASS
9/30/2006 $10.84 $0.52 $(0.38) $0.14 $(0.63) $(0.05)
9/30/2005 11.02 0.42 (0.08) 0.34 (0.52) --
9/30/2004 11.60 0.37 (0.12) 0.25 (0.54) (0.29)
9/30/2003 11.94 0.43 0.05 0.48 (0.53) (0.29)
9/30/2002++++ 11.19 0.51 0.83 1.34 (0.59) --
INSTITUTIONAL HIGH INCOME FUND
INSTITUTIONAL CLASS
9/30/2006 $7.80 $0.50 $0.34 $0.84 $(0.53) $ --
9/30/2005 7.50 0.55 0.39 0.94 (0.64) --
9/30/2004 6.91 0.55 0.66 1.21 (0.62) --
9/30/2003 4.81 0.59 1.69 2.28 (0.18) --
9/30/2002+ 6.50 0.68 (0.96) (0.28) (1.41) --
INTERMEDIATE DURATION FIXED INCOME FUND
INSTITUTIONAL CLASS
9/30/2006 $9.60 $0.42 $(0.07) $0.35 $(0.45) $ --
9/30/2005 9.92 0.40 (0.25) 0.15 (0.45) (0.02)
9/30/2004 10.10 0.45 (0.10) 0.35 (0.53) --
9/30/2003 9.62 0.51 0.49 1.00 (0.52) --
9/30/2002++ 10.13 0.60 (0.50) 0.10 (0.60) (0.01)
INVESTMENT GRADE FIXED INCOME FUND
INSTITUTIONAL CLASS
9/30/2006 $13.28 $0.60 $0.22 $0.82 $(0.92) $(0.55)
9/30/2005 13.54 0.57 0.27 0.84 (0.83) (0.27)
9/30/2004 13.38 0.67 0.75 1.42 (0.88) (0.38)
9/30/2003 11.56 0.77 1.87 2.64 (0.78) (0.04)
9/30/2002+++ 11.16 0.77 0.35 1.12 (0.66) (0.06)
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(b) The adviser has agreed to reimburse a portion of the Fund's expense during
the period. Without this reimbursement the Fund's ratio of 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) Includes expense recapture of 0.00%. See Note 4
(f) Effective July 1, 2005, the Intermediate Duration Fixed Income Fund and the
Inflation Protected Securities Fund decreased their net expense limitations to
0.40% and 0.45%, respectively, from 0.45% and 0.50%, respectively.
+ As required effective October 1, 2001, the Fund adopted the provisions of the
AICPA Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities 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 to the Fund's net
investment income and net realized and unrealized gain (loss) was less than
$.01 per share. The ratio of net investment income to average net assets for
the Fund increased from 11.60% to 11.61% on an annualized basis.
++ As required effective October 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities 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 to the Fund was a
decrease to net investment income by $0.01 per share and an increase to net
realized and unrealized gain (loss) on investment by $0.01 per share. The ratio
of net investment income to average net assets for the Fund decreased from
6.23% to 6.13% on an annualized basis.
+++ As required effective October 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities 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 to the Fund's net
investment income and net realized and unrealized gain (loss) was less than
$0.01 per share. The ratio of net investment income to average net assets for
the Fund decreased from 6.77% to 6.76% on an annualized basis.
++++ As required effective October 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities and reclassifying paydown gains and
losses to interest income for financial statement purposes only. For the year
ended September 30, 2002, the effect of of this change to the Fund was a
decrease to net investment income by $0.06 per share and an increase to net
realized and unrealized gain (loss) on investment by $0.06 per share. The ratio
of net investment income to average net assets for the Fund decreased from
5.12% to 4.58% on an annualized basis.
See accompanying notes to financial statements.
89
RATIOS TO AVERAGE NET ASSETS
- ------------------------- -----------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total Redemption end of Total the period Net Gross investment turnover
distributions fees the period return %(a) (000's) expenses %(b) expenses % income (loss) % rate %
- --------------------------------------------------------------------------------------------------------------
$(0.68) $ -- $10.30 1.5 $ 9,053 0.40 1.69 4.96 41
(0.52) -- 10.84 3.1 9,298 0.49(f) 1.54 3.81 141
(0.83) -- 11.02 2.3 7,390 0.50 1.73 3.33 99
(0.82) -- 11.60 4.3 9,549 0.50 1.28 3.68 60
(0.59) -- 11.94 12.4 13,492 0.50 1.16 4.58 101
$(0.53) $ -- $ 8.11 11.6 $141,318 0.75 0.79 6.40 23
(0.64) -- 7.80 13.0 110,533 0.75 0.82 7.24 22
(0.62) -- 7.50 18.1 97,109 0.75 0.88 7.66 59
(0.18) 0.00(d) 6.91 48.7 86,141 0.75 0.91 10.01 53
(1.41) -- 4.81 (6.0) 57,055 0.75 1.10 11.61 32
$(0.45) $ -- $ 9.50 3.8 $ 41,851 0.40 0.62 4.48 62
(0.47) -- 9.60 1.5 40,628 0.44(f) 0.68 4.10 50
(0.53) -- 9.92 3.6 31,051 0.45 0.76 4.48 48
(0.52) -- 10.10 10.7 37,103 0.45 0.74 5.15 63
(0.61) -- 9.62 1.0 40,734 0.45 0.83 6.13 24
$(1.47) $ -- $12.63 6.8 $173,549 0.55(e) 0.55(e) 4.79 50
(1.10) -- 13.28 6.4 186,749 0.55 0.58 4.28 42
(1.26) -- 13.54 11.1 177,094 0.55 0.60 5.03 34
(0.82) -- 13.38 23.8 142,271 0.55 0.62 6.22 32
(0.72) -- 11.56 10.4 136,042 0.55 0.64 6.76 20
See accompanying notes to financial statements.
90
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
1. ORGANIZATION. Loomis Sayles Funds I (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 management
investment 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. Shares of certain funds in the Trust were first registered
under the Securities Act of 1933 (the "1933 Act") effective March 7, 1997
(subsequent to their commencement of investment operations). Information
presented in these financial statements pertains to the fixed income funds of
the Trust; the financial statements for the equity funds of the Trust are
presented in a separate report. The following funds (individually, a "Fund" and
collectively, the "Funds") are included in this report:
Loomis Sayles Bond Fund (the "Bond Fund")
Loomis Sayles Fixed Income Fund (the "Fixed Income Fund")
Loomis Sayles Global Bond Fund (the "Global Bond Fund")
Loomis Sayles Inflation Protected Securities Fund (the "Inflation Protected
Securities Fund")
Loomis Sayles Institutional High Income Fund (the "Institutional High Income
Fund")
Loomis Sayles Intermediate Duration Fixed Income Fund (the "Intermediate
Duration Fixed Income Fund")
Loomis Sayles Investment Grade Fixed Income Fund (the "Investment Grade Fixed
Income Fund")
Each Fund offers Institutional Class Shares. Bond Fund and Global Bond Fund
also offer Retail Class Shares. In addition, Bond Fund offers Admin Class
Shares.
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. Debt securities for which market quotations are readily
available (other than short-term obligations with a remaining maturity of sixty
days or less) are generally valued at market price on the basis of valuations
furnished to the Funds by a pricing service recommended by the investment
adviser's pricing committee and approved 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. Equity securities, including closed-end
investment companies, 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.
Broker-dealer bid quotations may also be used to value debt and equity
securities where a pricing service does not price a security or where a pricing
service does not provide a reliable price for the security. In instances where
broker-dealer bid quotations are not available, certain securities held by the
Funds may be valued on the basis of a price provided by a principal market
maker. The prices provided by the principal market makers may differ from the
value that would be realized if the securities were sold. Futures contracts are
priced at their most recent settlement price. Short-term obligations with a
remaining maturity of sixty days or less are valued at amortized cost, which
approximates market value. Securities for which market quotations are not
readily available 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 their 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 securities, the Funds may,
among other things, use modeling tools or other processes that may take into
account factors such as securities market activity and/or significant events
that occur after the close of the foreign market and before the Funds calculate
their net asset values.
91
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,
non-class specific expenses 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 net assets of the Fund.
C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates
from fluctuations arising from changes in market prices of the investment
securities. Such changes are included with the net realized and unrealized gain
or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions 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.
Certain 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 that may invest in foreign
investments may enter into forward foreign currency exchange contracts.
Contracts to buy generally are used to acquire exposure to foreign currencies,
while contracts to sell generally are used to hedge a Fund's investments
against currency fluctuation. Also, a contract to buy or sell may offset a
previous contract. These contracts involve market risk in excess of the
unrealized gain or loss reflected in the Fund's Statement of Assets and
Liabilities. The U.S. dollar value of the currencies 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 U.S. dollar. At September 30, 2006, the Global Bond Fund had the following
open forward foreign currency exchange contracts:
LOCAL AGGREGATE UNREALIZED
DELIVERY CURRENCY FACE TOTAL APPRECIATION
DATE AMOUNT AMOUNT VALUE (DEPRECIATION)
- - ---------- ----------- ----------- ----------- --------------
Australian Dollar (sell) 11/10/2006 12,425,000 $ 9,443,000 $ 9,263,952 $ 179,048
Australian Dollar (sell) 11/24/2006 4,020,000 3,063,602 2,996,426 67,176
Canadian Dollar (sell) 11/20/2006 5,535,000 4,968,359 4,959,641 8,718
Canadian Dollar (buy) 11/20/2006 1,770,000 1,592,328 1,586,010 (6,318)
Euro Currency (sell) 10/05/2006 8,620,000 11,101,353 10,940,125 161,228
Mexican Peso (sell) 12/18/2006 260,520,000 23,625,646 23,606,997 18,649
New Zealand Dollar (sell) 11/10/2006 8,340,000 5,186,813 5,439,215 (252,402)
South African Rand (sell) 11/13/2006 77,420,000 11,388,510 9,917,749 1,470,761
South African Rand (buy) 11/13/2006 23,580,000 3,095,910 3,020,673 (75,237)
South African Rand (buy) 11/13/2006 23,580,000 3,016,695 3,020,673 3,978
92
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
E. FUTURES CONTRACTS. The Funds may enter into futures contracts. A futures
contract is an agreement between two parties to buy and sell a particular
commodity, instrument or index (e.g., an interest-bearing security) for a
specified price on a specified future date.
When a Fund enters into a futures contract, it is required to deposit with (or
for the benefit of) its broker as "initial margin" an amount of cash or
short-term high-quality securities. As the value of the contract changes, the
value of the futures contract position increases or declines. At the end of
each trading day, the amount of such increase or decline is received or paid,
respectively, by and to the holders of these positions. The amount received or
paid is known as "variation margin." Realized gain or loss on a futures
position is equal to the net variation margin received or paid over the time
the position is held, plus or minus the amount received or paid when the
position is closed, minus brokerage commissions. When a Fund enters into a
futures contract certain risks may arise such as illiquidity in the futures
market, which may limit the Fund's ability to close out a futures contract
prior to settlement date, and unanticipated movements in the value of
securities or interest rates.
At September 30, 2006, the Global Bond Fund had the following short futures
contracts open:
NUMBER NOTIONAL MARKET
EXPIRATION OF VALUE OF VALUE OF UNREALIZED
DATE CONTRACTS CONTRACTS CONTRACTS DEPRECIATION
---------- --------- ----------- ----------- ------------
US Treasury Bond Dec. 2006 12/19/2006 99 $10,949,379 $11,128,218 $(178,839)
F. 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.
G. 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 annually 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
redemptions in-kind, foreign currency transactions, defaulted bond interest,
premium amortization accruals, distributions from real estate investment trusts
and reclassification of paydown gains and losses. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to capital accounts. Temporary differences between book and
tax distributable earnings are primarily due to deferred Trustees' fees,
premium amortization accruals, corporate action adjustments, mark-to-market on
forward currency contracts, futures contracts and wash sales. Distributions
from net investment income and short-term capital gains are considered to be
ordinary income for tax purposes.
The tax characterization of distributions is determined on an annual basis. The
tax character of distributions paid to shareholders during the years ended
September 30, 2006 and 2005 was as follows:
2006 DISTRIBUTIONS PAID FROM: 2005 DISTRIBUTIONS PAID FROM:
------------------------------------ - ------------------------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAINS TOTAL INCOME GAINS TOTAL
------------ ---------- ------------ - ------------ ---------- ------------
Bond Fund $330,101,708 $ -- $330,101,708 $216,485,259 $ -- $216,485,259
Fixed Income Fund 33,031,701 -- 33,031,701 34,745,920 -- 34,745,920
Global Bond Fund 46,895,795 3,318,445 50,214,240 25,353,794 2,052,098 27,405,892
Inflation Protected
Securities Fund 576,077 12,883 588,960 434,112 -- 434,112
Institutional High
Income Fund 7,577,634 -- 7,577,634 8,125,448 -- 8,125,448
Intermediate Duration Fixed
Income Fund 1,971,781 -- 1,971,781 1,688,139 64,438 1,752,577
Investment Grade Fixed
Income Fund 13,102,727 7,898,658 21,001,385 11,463,633 3,486,246 14,949,879
Differences between these amounts and those reported in the Statements of
Changes in Net Assets are primarily attributable to different book and tax
treatment for short-term capital gains.
93
As of September 30, 2006, the components of distributable earnings on a tax
basis were as follows:
INTERMEDIATE INVESTMENT
INFLATION DURATION GRADE
PROTECTED INSTITUTIONAL FIXED FIXED
FIXED GLOBAL BOND SECURITIES HIGH INCOME INCOME
BOND FUND INCOME FUND FUND FUND INCOME FUND FUND FUND
------------ ----------- ------------ ---------- ------------- ------------ ----------
Undistributed ordinary income $ 27,810,813 $22,992,778 $ 26,599,610 $ 23,367 $ 6,630,251 $ 36,839 $3,208,146
Capital loss carryforward:
Expires September 30, 2011 (73,307,059) (7,668,632) -- -- (4,371,496) -- --
Expires September 30, 2012 -- -- -- -- -- -- --
Expires September 30, 2013 -- -- -- -- -- (3,797) --
Expires September 30, 2014 (343,252) -- (1,046,616) (22,173) -- (186,919) (309,092)
------------ ----------- ------------ ---------- ------------- ------------ ----------
Total capital loss carryforward (73,650,311) (7,668,632) (1,046,616) (22,173) (4,371,496) (190,716) (309,092)
Deferred net capital losses
(post October 2005) (2,131,587) -- (4,349,762) (145,108) -- (243,798) (826,548)
Unrealized appreciation
(depreciation) 391,893,064 34,075,668 (11,241,247) (368,008) 16,114,646 (479,570) 6,276,634
------------ ----------- ------------ ---------- ------------- ------------ ----------
Total accumulated earnings
(losses) $343,921,979 $49,399,814 $ 9,961,985 $(511,922) $18,373,401 $(877,245) $8,349,140
------------ ----------- ------------ ---------- ------------- ------------ ----------
Capital loss carryfoward utilized
in the current year $ -- $ 1,489,570 $ -- $ -- $ 3,575,513 $ -- $ --
------------ ----------- ------------ ---------- ------------- ------------ ----------
H. 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.
I. 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.
J. 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 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 September 30, 2006
were as follows:
MARKET VALUE OF
FUND SECURITIES ON LOAN VALUE OF COLLATERAL
- ---- ------------------ -------------------
Bond Fund $1,486,484,877 $1,517,816,403
Fixed Income Fund 32,187,796 32,882,111
Global Bond Fund 65,529,709 67,380,689
Inflation Protected Securities Fund 2,248,319 2,293,321
Institutional High Income Fund 13,800,502 14,103,418
Intermediate Duration Fixed Income Fund 2,191,355 2,237,268
Investment Grade Fixed Income Fund 15,367,796 15,717,150
94
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
K. INDEMNIFICATIONS. Under the Trust's 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.
L. NEW ACCOUNTING PRONOUNCEMENTS. In July, 2006, Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement 109 ("FIN 48") was issued and is effective for
fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold
for financial statement recognition, measurement and disclosure of a tax
position taken or expected to be taken on a tax return. Management is currently
evaluating the impact, if any, the adoption of FIN 48 will have on each Fund's
net assets and results of operations.
In addition, in September, 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements ("SFAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact, if any,
the adoption of SFAS 157 will have on the Funds' financial statements.
3. PURCHASES AND SALES OF SECURITIES. For the year ended September 30, 2006,
purchases and sales of securities (excluding short-term investments and
including paydowns) were as follows:
U.S. GOVERNMENT/AGENCY SECURITIES OTHER SECURITIES
--------------------------------- - ---------------------------
FUND PURCHASES SALES PURCHASES SALES
- ---- ------------ ------------ - -------------- ------------
Bond Fund $964,294,704 $950,975,583 $3,224,249,075 $378,563,843
Fixed Income Fund 32,128,634 83,598,932 158,715,208 85,652,000
Global Bond Fund 82,829,284 132,269,321 718,152,932 710,759,728
Inflation Protected Securities Fund 2,387,463 3,179,566 1,273,226 613,567
Institutional High Income Fund -- 81,765 56,147,397 28,269,777
Intermediate Duration Fixed Income Fund 15,576,635 15,445,525 11,383,084 9,605,783
Investment Grade Fixed Income Fund 10,142,912 59,067,389 76,178,928 41,239,965
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES. Loomis, Sayles & Company, L.P. ("Loomis Sayles") serves as
investment adviser to each Fund. Separate management agreements for each Fund
in effect for the year ended September 30, 2006, provided for fees at the
following annual percentage rates of each Fund's average daily net assets:
PERCENTAGE OF AVERAGE DAILY NET ASSETS
--------------------------------------
FIRST NEXT OVER
FUND $1 BILLION $2 BILLION $3 BILLION
- ---- ---------- ---------- ----------
Bond Fund 0.60% 0.60% 0.50%
Fixed Income Fund 0.50% 0.50% 0.50%
Global Bond Fund 0.60% 0.50% 0.50%
Inflation Protected Securities Fund 0.25% 0.25% 0.25%
Institutional High Income Fund 0.60% 0.60% 0.60%
Intermediate Duration Fixed Income Fund 0.25% 0.25% 0.25%
Investment Grade Fixed Income Fund 0.40% 0.40% 0.40%
95
Loomis Sayles has given binding undertakings to certain 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. For the year ended
September 30, 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
----------------------------------------
INSTITUTIONAL RETAIL ADMIN
FUND CLASS CLASS CLASS
- ---- ------------- ------ -----
Bond Fund 0.75% 1.00% 1.25%
Fixed Income Fund 0.65% -- --
Global Bond Fund 0.75% 1.00% --
Inflation Protected Securities Fund 0.40% -- --
Institutional High Income Fund 0.75% -- --
Intermediate Duration Fixed Income Fund 0.40% -- --
Investment Grade Fixed Income Fund 0.55% -- --
For the year ended September 30, 2006, the management fees for each Fund were
as follows:
PERCENTAGE OF
MANAGEMENT AVERAGE DAILY NET
FUND FEE ASSETS
---- ----------- -----------------
Bond Fund $29,144,506 0.56%
Fixed Income Fund 2,205,077 0.50%
Global Bond Fund 6,438,776 0.59%
Inflation Protected Securities 22,966 0.25%
Institutional High Income Fund 773,560 0.60%
Intermediate Duration Fixed Income Fund 102,941 0.25%
Investment Grade Fixed Income Fund 715,291 0.40%
For the year ended September 30, 2006, expenses were reimbursed as follows:
EXPENSES
FUND REIMBURSED
- ---- ----------
Bond Fund $171,399
Fixed Income Fund --
Global Bond Fund 458,257
Inflation Protected Securities Fund 118,124
Institutional High Income Fund 47,210
Intermediate Duration Fixed Income Fund 91,592
Investment Grade Fixed Income Fund --
Loomis Sayles shall be permitted to recover expenses borne under the expense
limitation agreements (whether through a reduction of its management fee or
otherwise) on a Class by Class basis in later periods to the extent a Class'
expenses fall below a Class' expense limits, provided, however, that a Class 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. The amounts subject to possible
reimbursement under the expense limitation agreements at September 30, 2006
were as follows:
EXPENSES SUBJECT TO POSSIBLE REIMBURSEMENT UNTIL
SEPTEMBER 30, 2007
- - ------------------------------------------------
INSTITUTIONAL RETAIL ADMIN
FUND CLASS CLASS CLASS TOTAL
- ---- ------------- -------- ------- --------
Bond Fund $ -- $138,933 $32,466 $171,399
Fixed Income Fund -- -- -- --
Global Bond Fund -- 458,257 -- 458,257
Inflation Protected Securities Fund 118,124 -- -- 118,124
Institutional High Income Fund 47,210 -- -- 47,210
Intermediate Duration Fixed Income Fund 91,592 -- -- 91,592
Investment Grade Fixed Income Fund -- -- -- --
96
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
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.
Bond Fund purchased two securities which were held at September 30, 2005, and
whose aggregated market positions, upon acquisition, exceeded a 1940 Act
limitation. The excess positions of those securities were subsequently sold and
the Fund's adviser reimbursed the Fund $378,780 for losses incurred in
connection with the disposition of these securities.
B. ADMINISTRATIVE FEES. IXIS Asset Management Advisors, L.P. ("IXIS Advisors")
provides certain administrative services for the Funds and has subcontracted
with State Street Bank to serve as sub-administrator. IXIS Advisors is a
limited partnership whose sole general partner, IXIS Asset Management
Distribution Corporation, is an indirect wholly-owned subsidiary of IXIS US
Group. Pursuant to an agreement among the Loomis Sayles Funds Trusts (the Trust
and Loomis Sayles Funds II), IXIS Advisor Funds Trust I, IXIS Advisor Funds
Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS
Advisor Cash Management Trust ("IXIS Advisor 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, which is reevaluated on an annual basis.
For the year ended September 30, 2006, amounts paid to IXIS Advisors for
administrative fees were as follows:
ADMINISTRATIVE
FUND FEES
- ---- --------------
Bond Fund $ 2,866,243
Fixed Income Fund 217,268
Global Bond Fund 614,648
Inflation Protected Securities Fund 4,097
Institutional High Income Fund 67,242
Intermediate Duration Fixed Income Fund 20,081
Investment Grade Fixed Income Fund 89,261
C. SERVICE AND DISTRIBUTION FEES. The Trust has 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.
Pursuant to Rule 12b-1 under the 1940 Act, Bond Fund and Global Bond Fund have
adopted Distribution Plans relating to each Fund's Retail Class shares (the
"Retail Class Plan") and Bond Fund has adopted a separate Distribution Plan
relating to its 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 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 Bond 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.
97
For the year ended September 30, 2006, the Funds paid the following service and
distribution fees:
SERVICE FEES DISTRIBUTION FEES
--------------- -------------------
ADMIN RETAIL ADMIN RETAIL
FUND CLASS CLASS CLASS CLASS
---- -------- ------ -------- ----------
Bond Fund $212,157 $ -- $212,157 $3,290,050
Fixed Income Fund -- -- -- --
Global Bond Fund -- -- -- 1,309,923
Inflation Protected Securities Fund -- -- -- --
Institutional High Income Fund -- -- -- --
Intermediate Duration Fixed Income Fund -- -- -- --
Investment Grade Fixed Income Fund -- -- -- --
D. TRUSTEES FEES AND EXPENSES. The Funds do not pay any compensation directly
to their 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 Contract Review and Governance Committee member is compensated
$4,000 for each Committee meeting that he or she attends in person and $2,000
for each meeting that he or she attends telephonically. Each Audit Committee
member is compensated $5,000 for each Committee meeting that he or she attends
in person and $2,500 for each meeting that he or she attends telephonically.
These fees are allocated among the funds in the IXIS Advisor Funds Trusts and
the Loomis Sayles Funds Trusts based on a formula that takes into account,
among other factors, the relative net assets of each fund. Trustees are
reimbursed for travel expenses in connection with attendance at meetings.
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.
Prior to November 18, 2005, the Trusts had co-chairmen of the Board who each
received an annual retainer of $25,000. 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.
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 IXIS Advisor Funds Trusts and the
Loomis Sayles Funds 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 of IXIS
Advisors who supported 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.
E. REDEMPTION FEES. Shareholders of the Bond Fund and Global Bond Fund are
charged a 2% redemption fee if they redeem, including redeeming by exchange,
any class of shares of the Bond Fund or the Global Bond Fund 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 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. Bond Fund, Global Bond Fund and Inflation Protected
Securities 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 each participating
fund based on its borrowings at a rate per annum equal to the Federal
98
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
Funds rate plus 0.50%. In addition, a commitment fee of 0.09% per annum,
payable at the end of each calendar quarter, is accrued and apportioned among
the participating funds based on their average daily unused portion of the line
of credit. For the year ended September 30, 2006, the Funds had no borrowings
under this agreement.
6. SHAREHOLDERS. At September 30, 2006, the Loomis Sayles Funded Pension Plan
and Trust ("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
- ---- ------------ ---------------
Bond Fund $1,039,625 $ 1,308,239
Global Bond Fund 682,121 395,329
Inflation Protected Securities Fund -- 188,235
Institutional High Income Fund 308,633 675,460
Intermediate Duration Fixed Income Fund -- 67,565
At September 30, 2006, Loomis Sayles owned 121,766 shares, equating to 13.9% of
Inflation Protected Securities Fund's shares outstanding. In addition, 2
individuals affiliated with Institutional High Income Fund held approximately
14.9% of the Fund's total outstanding shares.
At September 30, 2006, 7 shareholders individually owned more than 5% of the
Fixed Income Fund's total outstanding shares, representing, in aggregate, 52.7%
of the Fund; 2 shareholders individually owned more than 5% of the Inflation
Protected Securities Fund's total outstanding shares, representing, in
aggregate, 21.7% of the Fund; 7 shareholders individually owned more than 5% of
the Institutional High Income Fund's total outstanding shares, representing, in
aggregate, 51.9% of the Fund; 6 shareholders individually owned more than 5% of
the Intermediate Duration Fixed Income Fund's total outstanding shares,
representing, in aggregate, 88.3% of the Fund; and 5 shareholders owned 53.9%
of the Investment Grade Fixed Income Fund's total outstanding shares.
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:
BOND FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
--------------------------- ---------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ----------- -------------- ----------- --------------
Issued from the sale of shares 124,324,173 $1,723,847,626 91,412,221 $1,257,934,435
Issued in connection with the
reinvestment of distributions 14,777,290 202,241,438 11,561,959 158,018,772
Redeemed (42,801,587) (590,742,045) (39,402,964) (541,014,444)
----------- -------------- ----------- --------------
Net change 96,299,876 $1,335,347,019 63,571,216 $ 874,938,763
----------- -------------- ----------- --------------
Shares Amount Shares Amount
RETAIL CLASS ----------- -------------- ----------- --------------
Issued from the sale of shares 120,986,616 $1,674,795,064 35,692,125 $ 490,508,671
Issued in connection with the
reinvestment of distributions 5,352,666 73,333,873 1,745,321 23,833,032
Redeemed (19,287,542) (266,078,434) (6,581,827) (90,157,251)
----------- -------------- ----------- --------------
Net change 107,051,740 $1,482,050,503 30,855,619 $ 424,184,452
----------- -------------- ----------- --------------
Shares Amount Shares Amount
ADMIN CLASS ----------- -------------- ----------- --------------
Issued from the sale of shares 4,053,358 $ 55,793,877 3,478,648 $ 47,747,890
Issued in connection with the
reinvestment of distributions 294,915 4,019,633 152,572 2,079,871
Redeemed (1,419,674) (19,558,143) (993,193) (13,593,996)
----------- -------------- ----------- --------------
Net change 2,928,599 $ 40,255,367 2,638,027 $ 36,233,765
----------- -------------- ----------- --------------
Increase (decrease) from capital
share transactions 206,280,215 $2,857,652,889 97,064,862 $1,335,356,980
----------- -------------- ----------- --------------
99
FIXED INCOME FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------- ---------- ------------
Issued from the sale of shares 4,908,821 $ 66,059,413 4,870,508 $ 65,628,272
Issued in connection with the
reinvestment of distributions 2,493,634 32,243,962 2,602,690 34,745,909
Issued from subscriptions-in-kind* 2,146,473 28,354,906 2,073,596 28,905,923
Redeemed (8,747,919) (118,052,987) (3,270,866) (45,004,375)
---------- -------------- ------------ --------------
Increase (decrease) from capital
share transactions 801,009 $ 8,605,294 6,275,928 $ 84,275,729
---------- -------------- ------------ --------------
*Issued in exchange for portfolio securities contributed to the Fund in-kind by
such shareholders on June 14, 2006 and September 1, 2005. Contribution
includes $28,069,734 of cash and securities and $285,172 in receivables on
June 14, 2006; and $28,641,780 of securities and $264,143 in receivables on
September 1, 2005. The securities contributed on both dates were part of a
portfolio that was previously managed by Loomis Sayles.
GLOBAL BOND FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ----------- ------------- ----------- -------------
Issued from the sale of shares 15,469,596 $ 232,491,055 19,500,004 $ 310,767,699
Issued in connection with the
reinvestment of distributions 1,389,221 20,449,336 627,540 10,021,422
Issued from subscriptions-in-kind* -- -- 1,155,839 18,435,637
Redeemed (10,673,864) (161,309,038) (4,185,435) (65,939,216)
----------- -------------- ------------ --------------
Net change 6,184,953 $ 91,631,353 17,097,948 $ 273,285,542
----------- -------------- ------------ --------------
Shares Amount Shares Amount
RETAIL CLASS ----------- ------------- ----------- -------------
Issued from the sale of shares 16,020,803 $ 239,884,611 28,840,330 $ 455,133,214
Issued in connection with the
reinvestment of distributions 1,598,052 23,363,526 907,874 14,388,945
Redeemed (27,592,428) (414,470,313) (11,155,213) (174,760,978)
----------- -------------- ------------ --------------
Net change (9,973,573) $(151,222,176) 18,592,991 $ 294,761,181
----------- -------------- ------------ --------------
Increase (decrease) from capital
share transactions (3,788,620) $ (59,590,823) 35,690,939 $ 568,046,723
----------- -------------- ------------ --------------
*Issued in exchange for portfolio securities contributed to the Fund in-kind by
such shareholders on September 1, 2005. Contribution includes $18,222,555 of
securities and $213,082 in receivables. The securities contributed on both
dates were part of a portfolio that was previously managed by Loomis Sayles.
INFLATION PROTECTED SECURITIES FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ----------- -------- -----------
Issued from the sale of shares 168,093 $ 1,763,299 459,666 $ 5,048,080
Issued in connection with the
reinvestment of distributions 53,052 544,582 36,320 397,083
Redeemed (199,765) (2,083,498) (309,076) (3,406,928)
-------- -------------- ------------ --------------
Increase (decrease) from capital
share transactions 21,380 $ 224,383 186,910 $ 2,038,235
-------- -------------- ------------ --------------
100
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
INSTITUTIONAL HIGH INCOME FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 4,899,474 $ 38,208,619 3,042,553 $ 23,344,866
Issued in connection with the
reinvestment of distributions 829,984 6,050,584 790,982 5,853,273
Redeemed (2,471,889) (19,815,513) (2,604,281) (19,743,592)
---------- -------------- ------------ --------------
Increase (decrease) from capital
share transactions 3,257,569 $ 24,443,690 1,229,254 $ 9,454,547
---------- -------------- ------------ --------------
INTERMEDIATE DURATION FIXED INCOME FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 322,858 $ 3,067,955 1,175,599 $ 11,509,900
Issued in connection with the
reinvestment of distributions 147,945 1,396,328 128,411 1,250,698
Redeemed (295,102) (2,786,317) (202,398) (1,979,131)
---------- -------------- ------------ --------------
Increase (decrease) from capital
share transactions 175,701 $ 1,677,966 1,101,612 $ 10,781,467
---------- -------------- ------------ --------------
INVESTMENT GRADE FIXED INCOME FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 1,855,093 $ 23,251,618 1,765,601 $ 23,512,683
Issued in connection with the
reinvestment of distributions 1,528,355 18,884,641 978,295 13,091,992
Redeemed (3,699,328) (45,983,153) (1,762,704) (23,270,344)
---------- -------------- ------------ --------------
Increase (decrease) from capital
share transactions (315,880) $ (3,846,894) 981,192 $ 13,334,331
---------- -------------- ------------ --------------
101
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of Loomis Sayles Funds I and Shareholders of Loomis Sayles Bond
Fund, Loomis Sayles Fixed Income Fund, Loomis Sayles Global Bond Fund, Loomis
Sayles Inflation Protected Securities Fund, Loomis Sayles Institutional High
Income Fund, Loomis Sayles Intermediate Duration Fixed Income Fund and Loomis
Sayles Investment Grade Fixed Income Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Bond Fund, Loomis Sayles Fixed Income Fund, Loomis Sayles Global Bond Fund,
Loomis Sayles Inflation Protected Securities Fund, Loomis Sayles Institutional
High Income Fund, Loomis Sayles Intermediate Duration Fixed Income Fund and
Loomis Sayles Investment Grade Fixed Income Fund, each a series of Loomis
Sayles Funds I (collectively, "the Funds"), at September 30, 2006, and the
results of each of their operations, the changes in each of their net assets
and the financial highlights for each of the periods indicated, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 2006 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 22, 2006
102
2006 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
CORPORATE DIVIDENDS RECEIVED DEDUCTION. For the fiscal year ended September 30,
2006, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
FUND QUALIFYING PERCENTAGE
Bond Fund 2.58%
Fixed Income Fund 1.35%
Institutional High Income Fund 4.73%
Investment Grade Fixed Income Fund 1.27%
CAPITAL GAINS DISTRIBUTIONS. Pursuant to Internal Revenue Section 852(b), the
following Funds paid distributions, which have been designated as capital gains
distributions for the fiscal year ended September 30, 2006.
FUND AMOUNT
Global Bond Fund $3,318,445
Inflation Protected Securities Fund 12,883
Investment Grade Fixed Income Fund 7,898,658
QUALIFIED DIVIDEND INCOME. For the fiscal year ended September 30, 2006, the
Funds below will designate up to the maximum amount allowable pursuant to the
Internal Revenue Code as qualified dividend income eligible for reduced tax
rates. These lower rates range from 5% to 15% depending on an individual's tax
bracket. If the Funds pay a distribution during calendar year 2006, complete
information will be reported in conjunction with Form 1099-DIV.
FUND
Bond Fund
Fixed Income Fund
Institutional High Income Fund
Investment Grade Fixed Income Fund
103
TRUSTEE AND OFFICER INFORMATION
The tables below provide certain information regarding the Trustees and
officers of Loomis Sayles Funds I (the "Trust"). Unless otherwise indicated,
the address of all persons below is 399 Boylston Street, Boston, MA 02116. The
Trust's Statements of Additional Information include additional information
about the Trustees of the Trust and are available by calling Loomis Sayles at
800-343-2029.
POSITION(S)
HELD WITH
THE TRUST, LENGTH NUMBER OF PORTFOLIOS IN FUND
OF TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN*** AND
NAME AND DATE OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS** OTHER DIRECTORSHIPS HELD
- -------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee, since 2003 Douglas Dillon Professor and Director of 38; Director, Taubman Centers,
(3/23/40) Contract Review the Belfer Center for Science and Inc. (real estate investment trust)
and Governance International Affairs, John F. Kennedy
Committee Member School of Government, Harvard
University
Charles D. Baker Trustee, since 2005 President and Chief Executive Officer, 38; None
(11/13/56) Contract Review Harvard Pilgrim Health Care (health plan)
and Governance
Committee Member
Edward A. Benjamin Trustee, since 2002 Retired 38; Director, Precision Optics
(5/30/38) Chairman of the Corporation (optics manufacturer)
Contract Review
and Governance
Committee
Daniel M. Cain Trustee, since 2003 President and Chief Executive Officer, 38; Director, Sheridan Healthcare
(2/24/45) Chairman of the Cain Brothers & Company, Incorporated Inc. (physician practice
Audit Committee (investment banking) management)
Paul G. Chenault+ Trustee, since 2002 Retired; Trustee, First Variable Life 38; Director, Mailco Office
(9/12/33) Contract Review (variable life insurance) Products, Inc. (mailing
and Governance equipment)
Committee Member
Kenneth J. Cowan+ Trustee, since 2003 Retired 38; None
(4/5/32) Contract Review
and Governance
Committee Member
Richard Darman Trustee, since 2003 Partner, The Carlyle Group (investments); 38; Director and Chairman of
(5/10/43) Contract Review formerly, Professor, John F. Kennedy Board of Directors, AES
and Governance School of Government, Harvard Corporation (international power
Committee Member University company)
Sandra O. Moose Trustee, since 2003; President, Strategic Advisory Services 38; Director, Verizon
(2/17/42) Chairperson of the (management consulting); formerly, Communications; Director, Rohm
Board of Trustees Senior Vice President and Director, The and Haas Company (specialty
since November Boston Consulting Group, Inc. chemicals); Director, AES
2005; Ex officio (management consulting) Corporation (international power
member of the company)
Audit Committee
and Contract
Review and
Governance
Committee
104
POSITION(S)
HELD WITH
THE TRUST, LENGTH NUMBER OF PORTFOLIOS IN FUND
OF TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN*** AND
NAME AND DATE OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS** OTHER DIRECTORSHIPS HELD
- --------------------------------------------------------------------------------------------------------------------------
John A. Shane+ Trustee, since 2003; President, Palmer Service Corporation 38; Director, Gensym Corporation
(2/22/33) Audit Committee (venture capital organization) (software and technology service
Member provider); Director and Chairman
of the Board, Abt Associates Inc.
(research and consulting firm)
Cynthia L. Walker Trustee, since 2005; Executive Dean for Administration 38; None
(7/25/56) Audit Committee (formerly, Dean for Finance and CFO),
Member Harvard Medical School
INTERESTED TRUSTEES
Robert J. Blanding/1/ Trustee, President President, Chairman, Director, and Chief 38; None
(4/14/47) and Chief Executive Executive Officer, Loomis, Sayles &
555 California Street Officer since 2002 Company, L.P.; President and Chief
San Francisco, CA 94104 Executive Officer for Loomis Sayles Funds
I; Chief Executive Officer for Loomis
Sayles Funds II
John T. Hailer/2/ Trustee and President and Chief Executive Officer, 38; None
(11/23/60) Executive Vice IXIS Asset Management Advisors, L.P.,
President since 2003 IXIS Asset Management Distributors, L.P.
and IXIS Asset Management Global
Associates, L.P.; Executive Vice President,
Loomis Sayles Funds I; President and
Chief Executive Officer, AEW Real Estate
Income Fund, IXIS Advisor Cash
Management Trust, IXIS Advisor Funds
Trust I, IXIS Advisor Funds Trust II, IXIS
Advisor Funds Trust III and IXIS Advisor
Funds Trust IV
* Each Trustee serves until retirement, resignation or removal from the Board
of Trustees. The current retirement age is 72, but the retirement policy was
suspended for the calendar year 2005. At a meeting held on August 26, 2005,
the trustees voted to lift the suspension of the retirement policy and to
designate 2006 as a transition period so that any trustees who are currently
age 72 or older or who reach age 72 during the remainder of 2006 will not be
required to retire until the end of calendar year 2006. The position of
Chairperson of the Board is appointed for a two-year term.
**Each person listed above, except as noted, holds the same position(s) with
the Trust. Previous positions during the past five years with IXIS Asset
Management Distributors, L.P. (the "Distributor"), IXIS Asset Management
Advisors, L.P. ("IXIS Advisors") or Loomis, Sayles & Company, L.P. are
omitted if not materially different from a trustee's or officer's current
position with such entity.
***The trustees of the Trust serve as trustees of a fund complex that includes
all series of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS
Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash
Management Trust, AEW Real Estate Income Fund, Loomis Sayles Funds I and
Loomis Sayles Funds II (together the "IXIS Advisor Funds and Loomis Sayles
Funds Trusts").
+ Effective December 31, 2006, Messrs. Chenault, Cowan and Shane will be
retiring as members of the IXIS Advisor Funds and Loomis Sayles Funds Trusts
Board of Trustees.
1 Mr. Blanding is deemed an "interested person" of the Trust because he holds
the following positions with affiliated persons of the Trust: President,
Chairman, Director and Chief Executive Officer of Loomis Sayles.
2 Mr. Hailer is deemed an "interested person" of the Trust because he holds the
following positions with affiliated persons of the Trust: Director and
Executive Vice President of IXIS Asset Management Distribution Corporation
and President and Chief Executive Officer of IXIS Asset Management Global
Associates, L.P., IXIS Asset Management Advisors and IXIS Asset Management
Distributors, L.P.
105
TRUSTEE AND OFFICER INFORMATION
POSITION(S)
HELD WITH
THE TRUST TERM
OF OFFICE AND PRINCIPAL OCCUPATION(S)
NAME AND DATE OF BIRTH LENGTH OF TIME SERVED* DURING PAST 5 YEARS**
- -------------------------------------------------------------------------------------------------------------
OFFICERS OF THE TRUSTS
Coleen Downs Dinneen Secretary, Clerk and Chief Legal Officer Senior Vice President, General Counsel,
(12/16/60) Since September 2004 Secretary and Clerk (formerly, Deputy
General Counsel, Assistant Secretary and
Assistant Clerk), IXIS Asset Management
Distribution Corporation, IXIS Asset
Management Distributors, L.P. and IXIS
Asset Management Advisors, L.P.
Daniel J. Fuss Executive Vice President Vice Chairman and Director, Loomis, Sayles
(9/27/33) Since June 2003 & Company, L.P.; Prior to 2002, President
One Financial Center and Trustee of Loomis Sayles Funds II
Boston, MA 02111
Russell L. Kane Chief Compliance Officer, Chief Compliance Officer for Mutual Funds,
(7/23/69) Since May 2006; Vice President, Associate General Counsel,
Assistant Secretary Assistant Secretary and Assistant Clerk, IXIS
Since June 2004 Asset Management Distribution Corporation,
IXIS Asset Management Distributors, L.P.
and IXIS Asset Management Advisors, L.P.;
formerly, Senior Counsel, Columbia
Management Group.
Michael C. Kardok Treasurer, Principal Financial and Senior Vice President, IXIS Asset
(7/17/59) Accounting Officer Management Advisors, L.P. and IXIS Asset
Since October 2004 Management Distributors, L.P.; formerly,
Senior Director, PFPC Inc; formerly, Vice
President--Division Manager, First Data
Investor Services, Inc.
Max J. Mahoney Anti-Money Laundering Officer Vice President, Deputy General Counsel,
(5/1/62) and Assistant Secretary Assistant Secretary and Assistant Clerk, IXIS
Since August 2005 Asset Management Distribution Corporation.
Senior Vice President, Deputy General
Counsel, Assistant Secretary, Assistant Clerk
and Chief Compliance Officer - Investment
Adviser, IXIS Asset Management
Distributors, L.P. and IXIS Asset
Management Advisors, L.P.; formerly, Senior
Counsel, MetLife, Inc.; formerly, Associate
Counsel, LPL Financial Services, Inc.
John E. Pelletier Chief Operating Officer Executive Vice President and Chief
(6/24/64) Since September 2004 Operating Officer (formerly, Senior Vice
President, General Counsel, Secretary and
Clerk), IXIS Asset Management
Distribution Corporation, IXIS Asset
Management Distributors, L.P. and IXIS
Asset Management Advisors, L.P.; Executive
Vice President, Chief Operating Officer and
Director (formerly, President, Chief
Operating Officer and Director), IXIS Asset
Management Services Company.
*Each officer of the Trust serves for an indefinite term in accordance with
their current By-laws until the date his or her successor is elected and
qualified, or until he or she sooner dies, retires, is removed or becomes
disqualified.
**Each person listed above, except as noted, holds the same position(s) with
the IXIS Advisor Funds and Loomis Sayles Funds Trusts. Previous positions
during the past five years with the Distributor, IXIS Advisors or Loomis
Sayles are omitted, if not materially different from a trustee's or officer's
current position with such entity.
106
[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles High Income Opportunities Fund
Loomis Sayles Securitized Asset Fund
TABLE OF CONTENTS
Fund and Manager Review 1
Portfolio of Investments 8
Statements of Assets and Liabilities 20
Statements of Operations 21
Statements of Changes in Net Assets 22
Financial Highlights 23
Notes to Financial Statements 25
ANNUAL REPORT
SEPTEMBER 30, 2006
FUND AND MANAGER REVIEW
LOOMIS SAYLES HIGH INCOME OPPORTUNITIES FUND
[ PHOTO]
Matthew Eagan
MATTHEW EAGAN, CFA
Manager Since April 2004
[PHOTO]
Kathleen Gaffney
KATHLEEN GAFFNEY, CFA
Manager Since April 2004
[PHOTO]
Daniel Fuss
DAN FUSS, CFA, CIC
Manager Since April 2004
[PHOTO]
ELAINE STOKES, CFA
Manager Since April 2004
KEY FUND FACTS
SYMBOL | LSIOX
OBJECTIVE | High current income. Capital appreciation is the Fund's secondary
objective.
STRATEGY | Invests substantially all of its assets, and may invest up to 100%
of its assets, in high income securities. High income securities are
fixed-income securities that Loomis Sayles believes have the potential to
generate relatively high levels of current income.
FUND INCEPTION DATE | 4/01/04
COMMENCEMENT OF OPERATIONS OF CLASS | Institutional: 4/13/04
EXPENSE RATIO | 0.00%*
TOTAL NET ASSETS | $42.8 million
*All fees are paid by investors indirectly through separately negotiated
advisory relationships with the Fund's Advisor or through "wrap fee" programs
sponsored by broker dealers and investment advisers that may be affiliated or
unaffiliated with the Fund, Loomis Sayles or IXIS Asset Management Advisors,
L.P.
PORTFOLIO REVIEW
A resilient economy and strong corporate profits were hallmarks of the fiscal
year ended September 30, 2006. Recently, declining energy prices helped subdue
inflation fears, while a deteriorating housing market raised concerns of a
broader economic slowdown. After raising the federal funds rate at 17
consecutive meetings, the Federal Reserve Board paused in August and September,
reducing concerns that the Fed might tighten the economy into a recession. All
major bond market benchmarks generated positive returns, with the bulk of the
gains coming in the third quarter of calendar 2006. Overall, the riskier
segments offered the best returns, as fundamentals remained sound.
High yield provided strong returns, as default rates remained low, in defiance
of forecasts. Although spreads remained in a tight range for much of the year,
investors benefited from the extra yield inherent in the bonds. Emerging
markets also provided strong returns, as improving country fundamentals gave
reason for investors to overlook a few country-specific events.
High yield securities accounted for approximately 85% of the Fund's assets. For
the fiscal year ended September 30, 2006, disappointing security selections
within the high yield sector accounted for much of the Fund's underperformance
relative to its Benchmark, the Lehman High Yield Index. In terms of quality,
our high yield bonds with B quality ratings generated the best performance,
while bonds rated BB and below detracted from overall results. The
best-performing industries for the Fund included airlines, autos, media/cable,
telecommunication and supermarkets. The healthcare sector, on the other hand,
hurt the Fund's overall performance.
The Fund's allocations to US-dollar-denominated emerging market debt and
convertible securities made the
greatest positive contributions to performance during the 12-month period. Our
strong issue selections within the convertibles sector, particularly in the
telecommunication and pharmaceutical industries, bolstered the Fund's
performance. Emerging markets also contributed positively to performance,
thanks to a combination of strong global economic growth and improving
credit quality.
Throughout the fiscal year, we maintained a significantly longer duration than
the Benchmark--6.2 years versus 4.5 years. Although such a strategy generally
is favorable when interest rates are falling, it resulted from positions in
longer-maturity corporate and high yield securities that underperformed the
Benchmark.
OUTLOOK
We believe the economy is experiencing a typical mid-cycle slowdown, which
should keep monetary policy stable for the foreseeable future. However, the
market appears to be pricing in a Fed easing for the first half of 2007. If the
economy gains traction, as we believe it may, yields are vulnerable to a modest
increase.
Investment grade corporate spreads have remained in a narrow range for more
than a year, and we do not foresee a near-term catalyst that will knock them
out of that
1
range. Demand remains robust for the bonds, as corporations continue to
generate solid earnings. We believe corporate bonds may outperform Treasurys,
but security selection will be key. We have a similar outlook for spreads in
the high yield sector. Based on our outlook for stable monetary policy, solid
earnings growth and low default rates, we believe high yield bonds are fairly
valued. Our greatest concern for investment grade corporate and high yield
securities is the rising threat from shareholder-friendly events, including
leveraged buyouts. Although emerging markets have weathered a few
country-specific bumps, the general trend remains positive. Because we believe
the US dollar is overdue for some weakness, foreign currency exposure should
grow increasingly important to Fund returns.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
1 YEAR INCEPTION(a)
----------------------------------------------
LOOMIS SAYLES HIGH INCOME OPPORTUNITIES FUND
6.64% 8.96%
----------------------------------------------
LEHMAN HIGH YIELD INDEX(b)
8.07 7.47
----------------------------------------------
LIPPER HIGH CURRENT YIELD FUNDS INDEX(b)
6.75 6.84
----------------------------------------------
CUMULATIVE PERFORMANCE
INCEPTION TO September 30, 2006
[CHART]
Loomis Sayles Lipper High
High Income Lehman High Current Yield
Opportunities Fund Yield Index/(a)//(b)/ Funds Index/(a)//(b)/
------------------ --------------------- ---------------------
4/13/2004 $10,000 $10,000 $10,000
4/30/2004 9,850 9,977 9,932
5/31/2004 9,681 9,823 9,764
6/30/2004 9,901 9,961 9,904
7/31/2004 10,071 10,040 10,038
8/31/2004 10,389 10,204 10,235
9/30/2004 10,590 10,345 10,384
10/31/2004 10,852 10,529 10,572
11/30/2004 10,992 10,679 10,699
12/31/2004 11,273 10,840 10,858
1/31/2005 11,305 10,813 10,844
2/28/2005 11,580 10,979 11,004
3/31/2005 11,107 10,687 10,684
4/30/2005 10,942 10,562 10,580
5/31/2005 11,206 10,732 10,768
6/30/2005 11,461 10,904 10,979
7/31/2005 11,640 11,074 11,171
8/31/2005 11,685 11,126 11,192
9/30/2005 11,594 11,054 11,080
10/31/2005 11,449 10,963 11,003
11/30/2005 11,483 11,063 11,061
12/31/2005 11,619 11,165 11,156
1/31/2006 11,800 11,309 11,334
2/28/2006 11,983 11,404 11,409
3/31/2006 12,000 11,450 11,478
4/30/2006 12,019 11,516 11,548
5/31/2006 11,914 11,491 11,547
6/30/2006 11,821 11,427 11,506
7/31/2006 11,928 11,514 11,619
8/31/2006 12,168 11,671 11,807
9/30/2006 12,360 11,800 11,975
Data quoted reflects past performance and cannot guarantee future results.
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. Periods of less than one year are
not annualized. Index performance data is not available coincident with the
Fund's inception date.
(a) Since Index performance data is not available coincident with the Fund's
inception date, the beginning value of the index is the value of the month-end
closest to the Fund's inception date. (b) See page 5 for a description of the
Indices.
WHAT YOU SHOULD KNOW
High yield securities are subject to a high degree of market and credit risk.
The secondary market for these securities may lack liquidity, which may
adversely affect the value of the Fund. Securities issued by US government
agencies are not issued by, and may not be guaranteed by the US government.
2
FUND AND MANAGER REVIEW
LOOMIS SAYLES SECURITIZED ASSET FUND
[PHOTO]
Cliff Rowe
CLIFTON ROWE, CFA
Manager since March 2006
[PHOTO]
Hu Fan
FAN HU, CFA
Manager since March 2006
KEY FUND FACTS
SYMBOL | LSSAX
OBJECTIVE | High current income consistent with capital preservation.
STRATEGY | Invest at least 80% of its net assets (plus any borrowings made for
investment purposes) in a diversified portfolio of securitized assets, such as
mortgage-backed and other asset-backed securities.
FUND INCEPTION DATE | 3/2/06
COMMENCEMENT OF OPERATIONS OF CLASS | Institutional: 3/2/06
EXPENSE RATIO | 0.00%*
TOTAL NET ASSETS | $71.0 million
*All fees are paid by investors indirectly through separately negotiated
advisory relationships with the Fund's Advisor or through "wrap fee" programs
sponsored by broker dealers and investment advisers that may be affiliated or
unaffiliated with the Fund, Loomis Sayles or IXIS Asset Management Advisors,
L.P.
The Fund, which launched on March 2, 2006, seeks to generate current income
consistent with capital preservation. The Fund's portfolio managers collaborate
with a team of in-house analysts to identify attractive total return
investments in the securitized asset sector. Our bottom-up security selection
process is the primary driver of the portfolio's structure and performance.
This process may result in allocations to non-Benchmark sectors, including US
Treasury and agency securities. We build a Fund consistent with the analysts'
ideas, Benchmark characteristics and prospectus guidelines. The resulting
portfolio is designed to seek superior long-term performance relative to the
securitized asset indices and AAA-quality benchmarks. The following commentary
covers the period from March 2, 2006, the Fund's inception date, through
September 30, 2006.
PORTFOLIO REVIEW
The Fund's performance was on par with its Benchmark, the Lehman Securitized
Index, during the period from March 2, 2006 (the Fund's inception) to September
30, 2006. As the period unfolded, economic reports of diminishing inflation
pressures and softness in the housing market prompted the Federal Reserve Board
to suspend its tightening campaign. Short-term interest rates increased during
the period, as the Fed boosted rates by 150 basis points before pausing. On the
other hand, rates on intermediate-term securities (two to 10 years) actually
declined when the market began to anticipate a slowing economy. Mortgages and
other securitized products outperformed, due to their significant income
advantage and modest relative price appreciation.
Securitized bonds with the least prepayment risk were the best performers early
in the period, when interest rates rose and duration extension fears grew. In
particular, mortgage securities backed by 15-year amortizing loans performed
relatively well because they generally experience minimal slowdowns in return
of principal when interest rates rise. Commercial mortgage-backed securities
(CMBS) also performed relatively well because they include prepayment penalties
and other measures that mitigate a borrower's ability to retire principal
early. We increased the Fund's exposure to CMBS, due to our favorable short-
and long-term views for this sector. CMBS also offer attractive yield
advantages, predictable cash flows and AAA credit ratings. We expect them to
provide principal appreciation over time, as the market begins to recognize the
value in this sector.
Asset-backed securities (ABS) may have prepayment protection similar to CMBS,
and the loans backing these bonds also have lower prepayment risk. Moreover,
they tend to have relatively small balances compared to mortgage loans, which
makes borrowers less inclined to refinance in response to interest rate moves.
Mortgages issued by GNMA were among the worst performers. GNMA securities
benefit from their explicit government guarantee, which makes them command a
premium price over other mortgage-backed securities. However, in the face of
waning demand, particularly from foreign investors, prices on GNMA securities
fell. We viewed this as an opportunity to add to our GNMA holdings at
attractive prices. In addition, mortgage securities backed by 30-year
amortizing loans underperformed shorter-maturity securities. Rising interest
rates throughout much of the period led to concerns of slowing mortgage
principal prepayments. Investors penalize the price of mortgage-backed
securities in this environment, particularly longer-term mortgages, because a
slower rate of return of principal is disadvantageous when interest rates are
rising.
3
OUTLOOK
In our opinion, interest rates could edge up slightly from their current
levels. We do not expect the Fed to significantly increase interest rates, but
we are not ruling out the possibility of an additional 25-basis-point rate hike
in the federal funds target. Given this relatively benign interest rate
outlook, we are focusing on identifying income opportunities rather than
looking for significant prospects for capital appreciation.
In particular, the Fund remains overweight in mortgage securities backed by
loans with relatively long amortization periods. Such securities usually are
subject to greater refinancing risk, and therefore offer a higher yield. But in
a period of relatively stable interest rates, which we believe we are entering,
refinancing risks tend to diminish and investors benefit from the income
advantages inherent in these securities.
The Fund has invested in some non-agency sectors. We are particularly
interested in pools or structured deals that offer better prepayment protection
than their agency counterparts by virtue of their specific collateral
attributes. At the expense of some liquidity, these securities are often
offered at a discount to agency coupon equivalents and may have better yields
and less prepayment risk. We will continue to look for attractive opportunities
in these sectors.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2006
SINCE
INCEPTION*(a)
----------------------------------------
LOOMIS SAYLES SECURITIZED ASSET FUND
3.28%
----------------------------------------
LEHMAN SECURITIZED INDEX(b)
2.84
----------------------------------------
LIPPER US MORTGAGE FUNDS INDEX(b)
2.76
----------------------------------------
* Not annualized
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 2006
[CHART]
Lipper
U S Mortgage
Loomis Sayles Fund Funds Securitized
Securitized Asset Fund Index Index/(a)//(b)/
--------- ------- ------------
3/2/2006 $10,000 $10,000 $10,000
3/31/2006 9,970 9,935 9,919
4/30/2006 9,983 9,930 9,921
5/31/2006 9,963 9,916 9,903
6/30/2006 9,970 9,936 9,921
7/31/2006 10,118 10,063 10,062
8/31/2006 10,247 10,193 10,209
9/30/2006 10,328 10,276 10,284
Data quoted reflects past performance and cannot guarantee future results.
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. Periods of less than one year are
not annualized.
(a) Since Index performance data is not available coincident with the Fund's
inception date, the beginning value of the index is the value of the month-end
closest to the Fund's inception date. (b) See page 5 for a description of the
Indices.
WHAT YOU SHOULD KNOW
High yield securities are subject to a high degree of market and credit risk.
The secondary market for these securities may lack liquidity, which may
adversely affect the value of the Fund. Securities issued by US government
agencies are not issued by, and may not be guaranteed by the US government.
4
ADDITIONAL INFORMATION
INDEX DEFINITIONS
Lipper High Current Yield Funds Index is an equally weighted, unmanaged index
of typically the 30 largest mutual funds within the high current yield funds
investment objective.
Lipper US Mortgage Funds Index is an equally weighted, unmanaged index of
typically the 30 largest mutual funds within the US mortgage funds investment
objective.
Source: Lipper, Inc.
Lehman High Yield Index covers the universe of fixed rate, non-investment grade
debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from countries
designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are
excluded, but Canadian and global bonds (SEC registered) of issuers in
non-emerging market countries are included. Original issue zeroes, step-up
coupon structures, and 144-As are also included.
Lehman Securitized Index is an unmanaged index of asset-backed securities,
collateralized mortgage-backed securities (ERISA eligible) and fixed rate
mortgage-backed securities.
Returns are adjusted for the reinvestment of capital gains distributions and
income dividends. Indices are unmanaged and do not have expenses that affect
results, unlike most mutual funds. It is not possible to invest directly in an
index.
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 period ended June 30, 2006 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
is 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 FUND EXPENSES
Typically, mutual fund shareholders incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchases, redemption fees and
certain exchange fees; and (2) ongoing costs, including management fees,
distribution fees (12b-1 fees), and other fund expenses. However, the Funds are
unlike other mutual funds; they do not charge any fees or expenses.
You should be aware that shares in the Funds are available only to
institutional investment advisory clients of Loomis, Sayles & Company, L.P. and
IXIS Asset Management Advisors, L.P. ("IXIS Advisors") and to participants in
"wrap-fee" programs sponsored by broker dealers and investment advisers that
may be affiliated or unaffiliated with the Funds, Loomis Sayles or IXIS
Advisors. The institutional investment advisory clients of Loomis Sayles and
IXIS Advisors pay Loomis Sayles or IXIS Advisors a fee for their investment
advisory services, while participants in "wrap fee" programs pay a "wrap" fee
to the program's sponsor. The "wrap fee" program sponsors, in turn, pay a fee
to IXIS Advisors. "Wrap fee" program participants should read carefully the
wrap fee brochure provided to them by their program's sponsor and the fees paid
by such sponsor to IXIS Advisors. Shareholders pay no additional fees or
expenses to purchase shares of the Funds. However, shareholders will indirectly
pay a proportionate share of those costs, such as brokerage commissions, taxes
and extraordinary expenses, that are borne by the Funds through a reduction in
each Fund's net asset value.
The first line in each Fund's table below shows the actual amount of Fund
expenses ($0) you would have paid on a $1,000 investment in the Fund from April
1, 2006 through September 30, 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.
The second line in each Fund's table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio (0%) 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 the other funds.
LOOMIS SAYLES HIGH INCOME OPPORTUNITIES FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06*
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,030.00 $0.00
Hypothetical (5% return before expenses) $1,000.00 $1,025.07 $0.00
*Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied by the average account
value over the period, multiplied by 183/365 (to reflect the half-year period).
LOOMIS SAYLES SECURITIZED ASSET FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period
Institutional Class 4/1/06 9/30/06 4/1/06 - 9/30/06*
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,035.90 $0.00
Hypothetical (5% return before expenses) $1,000.00 $1,025.07 $0.00
*Expenses are equal to the Fund's annualized expense ratio of 0.00% for the Institutional Class, multiplied
by the average account value over the period, multiplied by 183/365 (to reflect the half-year period.)
5
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENTS
The Board of Trustees, including the Independent Trustees, considers matters
bearing on each Fund's advisory agreement at most of its meetings throughout
the year. Once a year, usually in the spring, the Contract Review and
Governance Committee of the Board meets to review the advisory agreements to
determine whether to recommend that the full Board approve the continuation of
the advisory agreements for an additional one-year period. After the Committee
has made its recommendation, the full Board, including the Independent
Trustees, determines whether to approve the continuation of the advisory
agreements.
In connection with these meetings, the Trustees receive materials that the
Funds' investment adviser believes to be reasonably necessary for the Trustees
to evaluate the advisory agreements. These materials generally include, among
other items, (i) information on the investment performance of the Funds and the
performance of peer groups of funds and the Funds' performance benchmarks, (ii)
information on the Funds' advisory fees, and other expenses, including
information comparing the Funds' expenses to those of peer groups of funds and
information about any applicable expense caps and fee "breakpoints," (iii)
sales and redemption data in respect of the Funds, (iv) information about the
profitability of the advisory agreements to the Funds' adviser (the "Adviser"),
and (v) information obtained through the completion of a questionnaire by the
Adviser (the Trustees are consulted as to the information requested through
that questionnaire). The Board of Trustees, including the Independent Trustees,
also consider other matters such as (i) the Adviser's financial results and
financial condition, (ii) each Fund's investment objective and strategies and
the size, education and experience of the Adviser's investment staff and its
use of technology, external research and trading cost measurement tools, (iii)
arrangements in respect of the distribution of the Fund's shares, (iv) the
procedures employed to determine the value of the Funds' assets, (v) the
allocation of the Funds' brokerage, if any, including allocations to brokers
affiliated with the Adviser and the use of "soft" commission dollars to pay
Fund expenses and to pay for research and other similar services, (vi) the
resources devoted to, and the record of compliance with, the Funds' investment
policies and restrictions, policies on personal securities transactions and
other compliance policies, and (vii) the general economic outlook with
particular emphasis on the mutual fund industry. Throughout the process, the
Trustees are afforded the opportunity to ask questions of and request
additional materials from the Adviser.
The Board of Trustees most recently approved the continuation of the advisory
agreement for Loomis Sayles High Income Opportunities Fund (the "Agreement") at
their meeting held in May, 2006. The advisory agreement for the Loomis Sayles
Securitized Asset Fund has an initial two-year term and its continuation will
be considered by the Board of Trustees in 2007. In considering whether to
approve the continuation of the Agreement, the Board of Trustees, including the
Independent Trustees, did not identify any single factor as determinative.
Matters considered by the Trustees, including the Independent Trustees, in
connection with their approval of the Agreement included the following:
The nature, extent and quality of the services provided to the Fund under the
Agreement. The Trustees considered the nature, extent and quality of the
services provided by the Adviser and its affiliates to the Fund and the
resources dedicated to the Fund by the Adviser and its affiliates, including
recent or planned investments by the Adviser in additional personnel or other
resources. They also took note of the competitive market for talented
personnel, in particular, for personnel who have contributed to the generation
of strong investment performance. They also considered the need for the Adviser
to offer competitive compensation in order to attract and retain capable
personnel. They also considered the administrative services provided by the
Adviser's affiliates to the Fund. The Trustees also considered the benefits to
shareholders of investing in a mutual fund that is part of a family of funds
offering a variety of investment disciplines and providing for a variety of
fund and shareholder services. After reviewing these and related factors, the
Trustees concluded, within the context of their overall conclusions regarding
the Agreement, that the nature, extent and quality of services provided
supported the renewal of the Agreement.
Investment performance of the Fund and the Adviser. As noted above, the
Trustees received information about the performance of the Fund over various
time periods, including information which compared the performance of the Fund
to the performance of a peer group of funds and the Fund's performance
benchmarks. In addition, the Trustees also reviewed data prepared by an
independent third party which analyzed the performance of the Fund using a
variety of performance metrics, including metrics which also measured the
performance of the Fund on a risk adjusted basis.
The Trustees also considered the Adviser's performance and reputation
generally, the performance of the fund family generally, and the historical
responsiveness of the Adviser to Trustee concerns about performance and the
willingness of the Adviser to take steps intended to improve performance.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding the Agreement, that the
performance of the Fund and the Adviser supported the renewal of the Agreement.
The costs of the services to be provided and profits to be realized by the
Adviser and its affiliates from their respective relationships with the Fund.
Under the terms of the Agreements, Loomis Sayles does not charge the Fund an
investment advisory fee or any other fee for services or for bearing expenses.
Although the Fund does not compensate Loomis Sayles directly for services under
the Agreement, Loomis Sayles will typically receive an advisory fee from the
sponsors of "wrap programs", who in turn charge the programs' participants. The
Trustees considered the fees received by Loomis Sayles from sponsors as well as
the total expense levels of the Fund. This information included comparisons of
the Fund's advisory fees and total expense levels to those of their peer group
and
6
information about the advisory fees charged by the Adviser to comparable
accounts. In considering the fees charged to comparable accounts, the Trustees
considered, among other things, management's representations about the
differences between managing mutual funds as compared to other types of
accounts, including the additional resources required to effectively manage
mutual fund assets. In evaluating the Fund's fees, the Trustees also took into
account the demands, complexity and quality of the investment management of the
Fund.
The Trustees also considered the compensation directly or indirectly received
by the Adviser and its affiliates from their relationships with the Fund. The
Trustees reviewed information provided by management as to the profitability of
the Adviser's and its affiliates' relationships with the Fund, and information
about the allocation of expenses used to calculate profitability. The Fund, at
the request of the Independent Trustees, retained an independent accounting
firm to review the cost allocation methods used by the Adviser to determine
profitability, and engaged in extensive discussions with the Adviser regarding
such methods and Adviser profitability generally. They also reviewed
information provided by management about the effect of distribution costs and
Fund growth on Adviser profitability. When reviewing profitability, the
Trustees also considered information about court cases in which adviser
profitability was an issue, the performance of the relevant Funds, and the
expense levels of the Funds.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding the Agreement, that the advisory
fees of 0% charged to the Fund were fair and reasonable, and that the costs of
these services generally and the related profitability of the Adviser and its
affiliates in respect of their relationships with the Fund supported the
renewal of the Agreements.
Economies of Scale. The Trustees noted that because the Adviser bears most of
the Fund's expenses, economies of scale were not relevant for this Fund.
The Trustees also considered other factors, which included but were not limited
to the following:
.. whether the Fund has operated in accordance with its investment objective
and the Fund's record of compliance with its investment restrictions, and
the compliance programs of the Fund and the Adviser. They also considered
the compliance related resources the Adviser and its affiliates were
providing to the Fund.
.. the nature, quality, cost and extent of administrative and shareholder
services performed by the Adviser and its affiliates, both under the
Agreement and under a separate agreement covering administrative services.
.. so-called "fallout benefits" to the Adviser, such as the engagement of
affiliates of the Adviser to provide distribution and brokerage services to
the Fund, and the benefits of research made available to the Adviser by
reason of brokerage commissions generated by the Fund's securities
transactions. The Trustees considered the possible conflicts of interest
associated with these fallout and other benefits, and the reporting,
disclosure and other processes in place to disclose and monitor such
possible conflicts of interest.
.. that investors will indirectly pay a proportionate share of the costs, such
as brokerage commissions, taxes and extraordinary expenses that are borne by
the Fund through a reduction in net asset value.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees,
concluded that the existing advisory agreement should be continued through June
30, 2007.
7
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES HIGH INCOME OPPORTUNITIES FUND
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------------
BONDS AND NOTES - 88.9% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 83.3%
AEROSPACE & DEFENSE - 2.0%
Bombardier, Inc., 7.450%, 5/01/2034, 144A $ 985,000 $ 848,331
----------
AIRLINES - 0.8%
American Airlines, Inc., Series 93A6, 8.040%, 9/16/2011 138,557 134,400
Continental Airlines, Inc., Series 1997-4B, 6.900%, 1/02/2017 110,912 106,358
Continental Airlines, Inc., Series 2000-2, Class B,
8.307%, 4/02/2018 16,196 15,711
Continental Airlines, Inc., Series 2001-1B, 7.373%, 12/15/2015 88,774 87,886
----------
344,355
----------
AUTOMOTIVE - 6.9%
Cummins Engine Co., Inc., 7.125%, 3/01/2028 150,000 153,563
Ford Motor Co., 6.625%, 10/01/2028(b) 260,000 194,025
Ford Motor Co., 7.450%, 7/16/2031(b) 200,000 154,500
Ford Motor Credit Co., 5.700%, 1/15/2010 865,000 799,128
Ford Motor Credit Co., 7.000%, 10/01/2013(b) 200,000 185,568
Ford Motor Credit Co., 7.250%, 10/25/2011 105,000 99,023
GMAC LLC, 6.750%, 12/01/2014(b) 455,000 444,196
GMAC LLC, 6.875%, 9/15/2011 150,000 149,205
GMAC LLC, 8.000%, 11/01/2031 495,000 517,563
Goodyear Tire & Rubber Co., 7.000%, 3/15/2028 320,000 268,000
Tenneco Automotive, Inc., 8.625%, 11/15/2014 10,000 9,875
----------
2,974,646
----------
BUILDING MATERIALS - 0.2%
Texas Industries, Inc., 7.250%, 7/15/2013 70,000 70,000
----------
CHEMICALS - 4.6%
Borden, Inc., 7.875%, 2/15/2023 175,000 143,500
Borden, Inc., 8.375%, 4/15/2016 175,000 157,500
Borden, Inc., 9.200%, 3/15/2021 170,000 158,100
Chemtura Corp., 6.875%, 6/01/2016 175,000 172,594
Georgia Gulf Corp., 10.750%, 10/15/2016, 144A 65,000 64,025
Hercules, Inc., 6.500%, 6/30/2029 520,000 419,250
IMC Global, Inc., 7.300%, 1/15/2028 50,000 43,500
LPG International, Inc., 7.250%, 12/20/2015 100,000 98,750
Lyondell Chemical Co., 8.000%, 9/15/2014 285,000 288,562
Methanex Corp., 6.000%, 8/15/2015 150,000 143,602
Nalco Finance Holdings, Inc., Zero Coupon Bond, (step to
9.000% on 2/1/2009), 2/01/2014(c) 43,000 33,755
Polyone Corp., 8.875%, 5/01/2012 80,000 80,800
PQ Corp., 7.500%, 2/15/2013 160,000 152,000
----------
1,955,938
----------
CONSTRUCTION MACHINERY - 0.5%
Case Credit Corp., 6.750%, 10/21/2007 100,000 100,250
Great Lakes Dredge & Dock Corp., 7.750%, 12/15/2013 35,000 32,550
United Rentals North America, Inc., 7.000%, 2/15/2014 75,000 70,500
----------
203,300
----------
CONSUMER CYCLICAL SERVICES - 0.1%
Alderwoods Group, Inc., 7.750%, 9/15/2012 25,000 26,938
----------
8
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES HIGH INCOME OPPORTUNITIES FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
CONSUMER NON-CYCLICAL SERVICES - 0.1%
Jostens IH Corp., 7.625%, 10/01/2012 $ 25,000 $ 25,125
----------
CONSUMER PRODUCTS - 0.9%
Church & Dwight Co., Inc., 6.000%, 12/15/2012 130,000 124,475
Spectrum Brands Inc., 7.375%, 2/01/2015 315,000 252,000
----------
376,475
----------
ELECTRIC - 5.9%
AES Corp., 7.750%, 3/01/2014 160,000 166,400
Allegheny Energy Supply Co., LLC, 7.800%, 3/15/2011 40,000 42,700
Allegheny Generating Co., 6.875%, 9/01/2023 100,000 97,000
Dynegy Holdings, Inc., 7.125%, 5/15/2018 195,000 178,425
Dynegy Holdings, Inc., 7.625%, 10/15/2026 25,000 22,813
Dynegy Holdings, Inc., 8.375%, 5/01/2016 280,000 284,900
Edison Mission Energy, 7.730%, 6/15/2009 210,000 215,775
Edison Mission Energy, 7.750%, 6/15/2016, 144A 515,000 521,437
Empresa Nacional de Electricidad SA (Endesa-Chile),
7.875%, 2/01/2027 45,000 49,877
Enersis SA, 7.375%, 1/15/2014 50,000 53,144
Enersis SA, 7.400%, 12/01/2016 175,000 187,592
NGC Corporation Capital Trust I, Series B, 8.316%, 6/01/2027 360,000 327,600
NRG Energy, Inc., 7.250%, 2/01/2014 45,000 44,663
NRG Energy, Inc., 7.375%, 2/01/2016 220,000 218,625
TECO Energy, Inc., 7.200%, 5/01/2011 125,000 130,312
----------
2,541,263
----------
FOOD & BEVERAGE - 2.2%
Constellation Brands, Inc., Class A, 7.250%, 9/01/2016 290,000 293,263
Dole Foods Co., Inc., 8.625%, 5/01/2009 100,000 97,750
JBS SA, 10.500%, 8/04/2016, 144A 110,000 111,375
Smithfield Foods, Inc., 7.000%, 8/01/2011 425,000 428,187
----------
930,575
----------
GAMING - 1.1%
MGM Mirage, Inc., 6.875%, 4/01/2016(b) 500,000 482,500
----------
HEALTHCARE - 4.1%
Accellent, Inc., 10.500%, 12/01/2013 125,000 130,000
Davita, Inc., 7.250%, 3/15/2015 155,000 152,288
HCA, Inc., 6.500%, 2/15/2016 5,000 4,000
HCA, Inc., 7.050%, 12/01/2027 430,000 308,574
HCA, Inc., 7.500%, 12/15/2023 20,000 15,508
HCA, Inc., 7.500%, 11/06/2033 585,000 456,300
HCA, Inc. Series MTN, 7.580%, 9/15/2025 185,000 142,589
HCA, Inc., 7.690%, 6/15/2025 35,000 27,322
HCA, Inc., Series MTN, 7.750%, 7/15/2036 15,000 11,618
IASIS Healthcare, 8.750%, 6/15/2014 320,000 309,600
National Mentor Holdings, Inc., 11.250%, 7/01/2014, 144A 175,000 182,000
----------
1,739,799
----------
HOME CONSTRUCTION - 5.6%
Centex Corp., 5.250%, 6/15/2015 75,000 70,067
D. R. Horton, Inc., 5.625%, 1/15/2016(b) 300,000 278,727
Desarrolladora Homex SA, 7.500%, 9/28/2015 595,000 583,100
K. Hovnanian Enterprises, Inc., 6.250%, 1/15/2016(b) 430,000 378,400
K. Hovnanian Enterprises, Inc., 6.375%, 12/15/2014 90,000 80,550
9
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
HOME CONSTRUCTION - CONTINUED
K. Hovnanian Enterprises, Inc., 6.500%, 1/15/2014 $ 115,000 $ 105,225
KB Home, 5.875%, 1/15/2015 40,000 36,077
KB Home, 7.250%, 6/15/2018 280,000 268,422
Lennar Corp., Series B, Class A, 5.600%, 5/31/2015 150,000 142,650
Pulte Homes, Inc., 6.000%, 2/15/2035 475,000 428,266
Toll Brothers Finance Corp., 5.150%, 5/15/2015 40,000 35,555
----------
2,407,039
----------
INDEPENDENT/ENERGY - 2.2%
Chesapeake Energy Corp., 6.500%, 8/15/2017 540,000 506,250
Chesapeake Energy Corp., 6.875%, 1/15/2016 100,000 97,750
Chesapeake Energy Corp., 6.875%, 11/15/2020 320,000 302,400
Swift Energy Co., 7.625%, 7/15/2011 20,000 20,075
----------
926,475
----------
INTEGRATED/ENERGY - 0.4%
Cerro Negro Finance Ltd., 7.900%, 12/01/2020, 144A 90,000 83,475
Petrozuata Finance, Inc., 8.220%, 4/01/2017, 144A 95,000 92,625
----------
176,100
----------
LODGING - 1.3%
Host Marriott LP, Series M, 7.000%, 8/15/2012 175,000 176,969
Host Marriott LP, Series O, 6.375%, 3/15/2015 50,000 48,500
Royal Caribbean Cruises Ltd., 7.250%, 6/15/2016 315,000 318,378
----------
543,847
----------
MEDIA CABLE - 3.8%
Charter Communications Operating LLC/CAP, 8.000%, 4/30/2012,
144A 170,000 171,275
Comcast Corp., 5.650%, 6/15/2035 80,000 72,581
CSC Holdings, Inc., 7.250%, 4/15/2012, 144A 215,000 214,194
CSC Holdings, Inc., 7.875%, 2/15/2018 310,000 321,625
NTL Cable PLC, 8.750%, 4/15/2014 30,000 31,125
NTL Cable PLC, 9.125%, 8/15/2016 175,000 180,687
PanAmSat Corp., 6.875%, 1/15/2028 235,000 206,800
Rogers Cable, Inc., 5.500%, 3/15/2014 455,000 427,700
----------
1,625,987
----------
MEDIA NON-CABLE - 2.4%
Dex Media, Inc., 8.000%, 11/15/2013 30,000 29,775
Echostar DBS Corp., 7.125%, 2/01/2016, 144A 275,000 265,719
R.H. Donnelley Corp., Series A-1, 6.875%, 1/15/2013 480,000 438,000
R.H. Donnelley Corp., Series A-2, 6.875%, 1/15/2013 325,000 296,562
----------
1,030,056
----------
METALS & MINING - 0.3%
International Steel Group, Inc., 6.500%, 4/15/2014 75,000 74,062
Novelis, Inc., 7.250%, 2/15/2015, 144A 70,000 66,500
----------
140,562
----------
OIL FIELD SERVICES - 2.8%
Basic Energy Services, 7.125%, 4/15/2016, 144A 250,000 241,250
Chart Industries, Inc., 9.125%, 10/15/2015, 144A 130,000 134,550
Grant Prideco, Inc., 6.125%, 8/15/2015 155,000 148,025
Hilcorp Energy I /Hilcorp., 9.000%, 6/01/2016 144A 185,000 191,012
North America Energy Partners, Inc., 8.750%, 12/01/2011 350,000 349,125
10
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES HIGH INCOME OPPORTUNITIES FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
OIL FIELD SERVICES - CONTINUED
Pecom Energia SA, 8.125%, 7/15/2010, 144A $ 40,000 $ 41,600
Pride International, Inc., 7.375%, 7/15/2014 85,000 87,550
----------
1,193,112
----------
PACKAGING - 1.8%
Owens-Illinois, Inc., 7.800%, 5/15/2018(b) 825,000 783,750
----------
PAPER - 3.3%
Abitibi-Consolidated, Inc., 6.000%, 6/20/2013 75,000 60,938
Abitibi-Consolidated, Inc., 7.500%, 4/01/2028 220,000 173,800
Boise Cascade LLC, 8.382%, 10/15/2012(d) 20,000 20,100
Bowater, Inc., 6.500%, 6/15/2013(b) 435,000 386,062
Domtar, Inc., 5.375%, 12/01/2013 250,000 213,750
Georgia-Pacific Corp., 7.375%, 12/01/2025 275,000 259,875
Georgia-Pacific Corp., 7.750%, 11/15/2029 140,000 134,400
Georgia-Pacific Corp., 8.000%, 1/15/2024 50,000 49,250
Georgia-Pacific Corp., 8.875%, 5/15/2031 85,000 88,400
Georgia-Pacific Corp., (Timber Group), 7.250%, 6/01/2028 35,000 32,725
----------
1,419,300
----------
PHARMACEUTICALS - 0.7%
Elan Financial Plc, 7.750%, 11/15/2011 300,000 292,125
----------
PIPELINES - 4.0%
El Paso Corp., 6.375%, 2/01/2009 240,000 239,400
El Paso Corp., 6.950%, 6/01/2028 250,000 235,000
Kinder Morgan Energy Partners, 5.800%, 3/15/2035 60,000 54,583
Kinder Morgan Finance, 5.700%, 1/05/2016 130,000 120,005
Kinder Morgan Finance, 6.400%, 1/05/2036(b) 325,000 291,020
Kinder Morgan, Inc., 5.150%, 3/01/2015 225,000 202,172
Kinder Morgan, Inc., 6.670%, 11/01/2027 100,000 90,141
Tennessee Gas Pipeline Co., 7.000%, 10/15/2028 150,000 149,395
Williams Cos., Inc., 7.500%, 1/15/2031 235,000 232,063
Williams Cos., Inc., 7.750%, 6/15/2031 85,000 85,000
----------
1,698,779
----------
REAL ESTATE INVESTMENT TRUSTS - 0.7%
Rouse Co. LP/TRC Co-Issuer, 6.750%, 5/01/2013, 144A 325,000 324,789
----------
RETAILERS - 1.7%
Dillard's, Inc., 6.625%, 1/15/2018 155,000 147,637
Dillard's, Inc., 7.130%, 8/01/2018 25,000 24,500
Dillard's, Inc., 7.875%, 1/01/2023 75,000 73,875
Foot Locker, Inc., 8.500%, 1/15/2022 280,000 264,600
GSC Holdings Corp., 8.000%, 10/01/2012(b) 215,000 221,450
----------
732,062
----------
SOVEREIGNS - 0.6%
Republic of Brazil, 8.250%, 1/20/2034(b) 235,000 270,250
----------
SUPERMARKETS - 2.7%
Albertson's, Inc., 6.625%, 6/01/2028 55,000 47,188
Albertson's, Inc., 7.450%, 8/01/2029 1,025,000 949,417
Albertson's, Inc., 7.750%, 6/15/2026 20,000 19,001
Albertson's, Inc., 8.000%, 5/01/2031 30,000 29,163
American Stores Co., 8.000%, 6/01/2026 70,000 70,919
11
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
SUPERMARKETS - CONTINUED
Couche-Tard US/Finance, 7.500%, 12/15/2013 $ 40,000 $ 40,600
-----------
1,156,288
-----------
TECHNOLOGY - 9.0%
Activant Solutions, Inc., 9.500%, 5/01/2016, 144A 90,000 83,250
Amkor Technology, Inc., 7.750%, 5/15/2013 40,000 36,700
Amkor Technology, Inc., 10.500%, 5/01/2009 24,000 24,120
Hynix Semiconductor, Inc., 9.875%, 7/01/2012, 144A(b) 50,000 54,500
Lucent Technologies, Inc., 6.450%, 3/15/2029 890,000 792,100
Lucent Technologies, Inc., 6.500%, 1/15/2028 115,000 102,350
Nortel Networks Corp., 6.875%, 9/01/2023 125,000 103,125
Nortel Networks Ltd., 10.125%, 7/15/2013, 144A 370,000 390,350
Northern Telecom Capital Corp., 7.875%, 6/15/2026 660,000 574,200
SunGard Data Systems, Inc., 10.250%, 8/15/2015 185,000 190,550
Unisys Corp, 6.875%, 3/15/2010 435,000 411,075
Unisys Corp, 8.000%, 10/15/2012 25,000 23,375
Xerox Corp., 6.400%, 3/15/2016 1,080,000 1,074,600
-----------
3,860,295
-----------
TRANSPORTATION SERVICES - 1.6%
American President Cos., Ltd., 8.000%, 1/15/2024(e) 100,000 90,000
Atlas Air, Inc., Series 1999-1, Class A1, 7.200%, 1/02/2019 16,806 16,680
Atlas Air, Inc., Series A, 7.380%, 1/02/2018 34,062 33,892
Atlas Air, Inc., Series B, 7.680%, 1/02/2014(f) 34,292 36,007
Overseas Shipholding Group, 7.500%, 2/15/2024 155,000 151,125
Stena AB, 7.000%, 12/01/2016 330,000 311,025
Stena AB, 7.500%, 11/01/2013 45,000 44,212
-----------
682,941
-----------
TREASURIES - 2.8%
U.S. Treasury Note, 3.000%, 12/31/2006(b) 1,200,000 1,193,860
-----------
WIRELESS TELECOMMUNICATION SERVICES - 1.0%
Rogers Wireless, Inc., 6.375%, 3/01/2014 400,000 398,500
Rogers Wireless, Inc., 7.250%, 12/15/2012 50,000 52,312
-----------
450,812
-----------
WIRELINES - 5.2%
Cincinnati Bell Telephone Co., 6.300%, 12/01/2028 185,000 160,025
Cincinnati Bell, Inc., 8.375%, 1/15/2014(b) 150,000 151,500
Citizens Communications Co., 7.000%, 11/01/2025 15,000 12,938
Citizens Communications Co., 9.000%, 8/15/2031 20,000 21,450
Embarq Corp., 7.995%, 6/01/2036 350,000 370,616
Hanarotelecom, Inc., 7.000%, 2/01/2012, 144A 405,000 397,912
L-3 Communications Corp., Series B, 6.375%, 10/15/2015 25,000 24,312
Philippine Long Distance Telephone Co., 8.350%, 3/06/2017 150,000 163,875
Qwest Capital Funding, Inc., 6.500%, 11/15/2018 410,000 371,050
Qwest Capital Funding, Inc., 6.875%, 7/15/2028 125,000 111,875
Qwest Capital Funding, Inc., 7.625%, 8/03/2021 200,000 193,750
Qwest Capital Funding, Inc., 7.750%, 2/15/2031 130,000 125,450
Qwest Corp., 6.875%, 9/15/2033 150,000 136,875
Qwest Corp., 7.250%, 9/15/2025 10,000 9,688
-----------
2,251,316
-----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $35,487,694) 35,678,990
-----------
12
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES HIGH INCOME OPPORTUNITIES FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ---------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
CONVERTIBLE BONDS - 5.6%
MEDIA NON-CABLE - 0.4%
Sinclair Broadcast Group, Inc., 4.875%, (step to
2.000% on 1/15/2011), 7/15/2018(c) $ 190,000 $ 168,863
-----------
PHARMACEUTICALS - 2.3%
Enzon Pharmaceuticals, Inc., 4.500%, 7/01/2008 165,000 158,400
Epix Pharmaceuticals, Inc., 3.000%, 6/15/2024 45,000 28,800
Human Genome Sciences, Inc., 2.250%, 8/15/2012(b) 225,000 207,562
Incyte Corp., 3.500%, 2/15/2011 180,000 136,575
Nektar Therapeutics, 3.250%, 9/28/2012 75,000 73,313
Regeneron Pharmaceuticals, Inc., 5.500%, 10/17/2008 160,000 157,600
Valeant Pharmaceuticals International, 3.000%, 8/16/2010 85,000 80,325
Valeant Pharmaceuticals International, 4.000%, 11/15/2013 160,000 150,200
-----------
992,775
-----------
TECHNOLOGY - 1.9%
Amkor Technology, Inc., 5.000%, 3/15/2007(b) 80,000 75,200
Ciena Corp., 3.750%, 2/01/2008 55,000 53,075
JDS Uniphase Corp., Zero Coupon Bond, 11/15/2010(b) 160,000 145,400
Kulicke & Soffa Industries, Inc., 0.500%, 11/30/2008 50,000 43,625
Kulicke & Soffa Industries, Inc., 1.000%, 6/30/2010 45,000 42,412
Maxtor Corp., 5.750%, 3/01/2012(e) 147,000 135,240
Nortel Networks Corp., 4.250%, 9/01/2008 365,000 348,575
-----------
843,527
-----------
WIRELINES - 1.0%
Level 3 Communications, Inc., 2.875%, 7/15/2010 265,000 267,318
Level 3 Communications, Inc., 6.000%, 9/15/2009 105,000 94,369
Level 3 Communications, Inc., 6.000%, 3/15/2010(b) 65,000 57,119
-----------
418,806
-----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $2,347,414) 2,423,971
-----------
TOTAL BONDS AND NOTES
(Identified Cost $37,835,108) 38,102,961
-----------
SHARES
- ---------------------------------------------------------------------------------------
COMMON STOCKS - 0.3%
WIRELINES - 0.3%
Philippine Long Distance Telephone Co., ADR 2,314 100,798
-----------
TOTAL COMMON STOCKS
(Identified Cost $63,472) 100,798
-----------
PREFERRED STOCKS - 1.3%
CONVERTIBLE PREFERRED STOCKS - 1.3%
CONSUMER PRODUCTS - 0.2%
Newell Financial Trust I, 5.250% 1,675 76,631
-----------
ELECTRIC - 0.4%
AES Trust III, 6.750% 3,975 194,377
-----------
13
SHARES VALUE (+)
- -------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS - CONTINUED
HOTELS, RESTAURANTS & LEISURE - 0.1%
Six Flags, Inc., 7.250% 1,975 $ 42,068
------------
PIPELINES - 0.6%
El Paso Energy Capital Trust I, 4.750% 6,600 245,718
------------
NON-CONVERTIBLE PREFERRED STOCKS - 0.0%
PIPELINES - 0.0%
KN Capital Trust III, 7.630% 5,000 4,682
------------
TOTAL PREFERRED STOCKS
(Identified Cost $541,402) 563,476
------------
PRINCIPAL AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 19.3%
Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/29/06 at 3.450% to be repurchased at
$3,364,967 on 10/02/06 collateralized by $3,450,000 U.S. Treasury
Note, 3.875% due 5/15/09 with a value of $3,487,070 including
accrued interest (Note 2g) $ 3,364,000 3,364,000
------------
SHARES
- -------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(g) 4,913,838 4,913,838
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $8,277,838) 8,277,838
------------
TOTAL INVESTMENTS - 109.8%
(Identified Cost $46,717,820)(a) 47,045,073
Other assets less liabilities--(9.8)% (4,198,486)
------------
TOTAL NET ASSETS - 100.0% $ 42,846,587
------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information: At September 30, 2006, the net unrealized appreciation on investments based on cost of
$46,723,968 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 $ 1,014,583
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (693,478)
------------
Net unrealized appreciation $ 321,105
------------
(b)All or a portion of this security was on loan to brokers at September 30,
2006.
(c)Step Bond: Coupon is zero or below market rate for an initial period and
then increases at a specified date and rate.
(d)Variable rate security. Rate as of September 30, 2006 is disclosed.
(e)Illiquid security.
(f)Non-income producing security.
(g)Represents investment of security lending collateral.
144ASecurities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2006, the total value of these securities amounted to $4,480,169 or 10.5%
of total net assets.
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.
14
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES HIGH INCOME OPPORTUNITIES FUND - CONTINUED
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Technology 10.9%
Automotive 6.9
Wirelines 6.5
Electric 6.3
Home Construction 5.6
Pipelines 4.6
Chemicals 4.6
Healthcare 4.1
Media Cable 3.8
Paper 3.3
Pharmaceuticals 3.0
Media Non-Cable 2.8
Treasuries 2.8
Oil Field Services 2.8
Supermarkets 2.7
Food & Beverage 2.2
Independent Energy 2.2
Aerospace & Defense 2.0
Other, less than 2% each 13.4
See accompanying notes to financial statements.
15
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SECURITIZED ASSET FUND
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------------------
BONDS AND NOTES - 99.6% OF TOTAL NET ASSETS
NON-CONVERTIBLE BONDS - 99.6%
ASSET-BACKED SECURITIES - 4.0%
Chase Issuance Trust, Series 2005-A9, Class A9,
5.350%, 11/15/2011(b) $ 500,000 $ 500,283
CNH Equipment Trust, Series 2004-A, Class A4B,
3.480%, 9/15/2011 170,000 165,871
Countrywide Alternative Loan Trust, Series 2006-15CB, Class A1,
6.500%, 6/25/2036 758,796 765,915
Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3,
4.615%, 2/25/2035 420,000 406,438
Countrywide Asset-Backed Certificates, Series 2006-S1, Class A2,
5.549%, 8/25/2021 200,000 199,653
Countrywide Asset-Backed Certificates, Series 2006-S3, Class A3,
6.287%, 6/25/2021 660,000 673,221
Residential Asset Mortgage Products, Inc., Series 2004-RZ1,
Class AI5, 4.070%, 7/25/2032 150,000 146,160
----------
2,857,541
----------
AUTO LOAN - 0.1%
Nissan Auto Receivables Owner Trust, Series 2005-A, Class A4,
3.820%, 7/15/2010 100,000 98,041
----------
HYBRID ARMS - 0.9%
Wachovia Bank Commercial Mortgage Trust, Series 2005-C16,
Class A2, 4.380%, 10/15/2041 100,000 97,839
Wells Fargo Mortgage Backed Securities Trust, Series 2005-AR16,
Class 3A2, 4.996%, 10/25/2035(b)(c) 520,560 516,602
----------
614,441
----------
MORTGAGE RELATED - 94.6%
Banc of America Commercial Mortgage, Inc., Series 2005-6,
Class A2, 5.165%, 9/10/2047 120,000 120,002
Banc of America Commercial Mortgage, Inc., Series 2005-6,
Class A4, 5.182%, 9/10/2047(b) 189,000 187,848
Banc of America Commercial Mortgage, Inc., Series 2006-4,
Class A2, 5.522%, 7/10/2046 460,000 466,074
Bank of America-First Union NB Commercial Mortgage,
Series 2001-3, Class A2, 5.464%, 4/11/2037 430,000 434,288
Bear Stearns Commercial Mortgage Securities, Series 2001-TOP2,
Class A2, 6.480%, 2/15/2035 175,000 183,466
Bear Stearns Commercial Mortgage Securities, Series 2005-T18,
Class A2, 4.556%, 2/13/2042 171,000 168,255
Citigroup/Deutsche Bank Commercial Mortgage, Series 2006-CD2,
Class A2, 5.408%, 1/15/2046 367,000 369,982
Commercial Mortgage Pass Through Certificates, Series 2006-C7,
Class A4, 5.769%, 6/10/2046(b) 250,000 258,977
CS First Boston Mortgage Securities Corp., Series 2005-7, Class 3A1,
5.000%, 8/25/2020 414,865 411,515
Federal Home Loan Mortgage Corp., 4.500%, 8/01/2020 97,323 93,790
Federal Home Loan Mortgage Corp., 4.500%, 3/01/2021 120,517 116,094
Federal Home Loan Mortgage Corp., 4.500%, 3/01/2021 195,309 188,433
Federal Home Loan Mortgage Corp., 4.500%, 10/01/2035 293,416 274,313
Federal Home Loan Mortgage Corp., 4.500%, 11/01/2035 128,932 120,538
Federal Home Loan Mortgage Corp., 4.585%, 1/01/2035(b)(e) 1,270,780 1,275,005
Federal Home Loan Mortgage Corp., 5.000%, 7/01/2020 81,723 80,391
Federal Home Loan Mortgage Corp., 5.000%, 10/01/2020 482,346 473,997
16
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SECURITIZED ASSET FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
MORTGAGE RELATED - CONTINUED
Federal Home Loan Mortgage Corp., 5.000%, 7/01/2035 $ 770,176 $ 741,134
Federal Home Loan Mortgage Corp., 5.000%, 9/01/2035 965,049 928,658
Federal Home Loan Mortgage Corp., 5.000%, 12/01/2035 196,170 188,773
Federal Home Loan Mortgage Corp., 5.000%, 2/01/2036 748,156 719,944
Federal Home Loan Mortgage Corp., 5.000%, 2/01/2036 495,340 476,661
Federal Home Loan Mortgage Corp., 5.000%, 3/01/2036 498,830 479,775
Federal Home Loan Mortgage Corp., 5.000%, 3/01/2036 397,492 382,308
Federal Home Loan Mortgage Corp., 5.000%, 3/01/2036 103,414 99,463
Federal Home Loan Mortgage Corp., 5.000%, 4/01/2036 293,631 282,414
Federal Home Loan Mortgage Corp., 5.000%, 4/01/2036(c) 201,120 193,437
Federal Home Loan Mortgage Corp., 5.000%, 5/01/2036 1,492,026 1,435,030
Federal Home Loan Mortgage Corp., 5.000%, 5/01/2036 494,247 475,367
Federal Home Loan Mortgage Corp., 5.000%, 6/01/2036 746,823 718,294
Federal Home Loan Mortgage Corp., 5.000%, 7/01/2036(c) 1,246,514 1,198,896
Federal Home Loan Mortgage Corp., 5.500%, 5/01/2035 568,627 561,049
Federal Home Loan Mortgage Corp., 5.500%, 4/01/2036 193,586 190,933
Federal Home Loan Mortgage Corp., 5.500%, 7/01/2036(c) 996,333 982,677
Federal Home Loan Mortgage Corp., 6.000%, 9/01/2036 5,000,000 5,026,185
Federal Home Loan Mortgage Corp., 6.500%, 7/01/2021 1,000,100 1,017,593
Federal Home Loan Mortgage Corp., 6.500%, 4/01/2036 277,768 282,955
Federal Home Loan Mortgage Corp. (TBA), 5.000%, 2/01/2034(e) 1,500,000 1,441,875
Federal Home Loan Mortgage Corp. (TBA), 5.500%, 2/01/2034(e) 565,000 557,055
Federal Home Loan Mortgage Corp. (TBA), 6.000%, 6/01/2016(e) 1,415,000 1,434,456
Federal National Mortgage Association, 4.500%, 7/01/2020(e) 1,258,548 1,215,992
Federal National Mortgage Association, 4.500%, 3/01/2021 800,000 771,888
Federal National Mortgage Association, 4.500%, 4/01/2021 193,584 186,781
Federal National Mortgage Association, 4.500%, 10/01/2035 980,474 916,354
Federal National Mortgage Association, 4.500%, 12/01/2035 99,351 92,854
Federal National Mortgage Association, 5.000%, 11/01/2020 97,962 96,288
Federal National Mortgage Association, 5.000%, 9/01/2036 195,000 187,406
Federal National Mortgage Association, 5.500%, 5/01/2035 190,250 187,527
Federal National Mortgage Association, 5.500%, 12/01/2035 290,159 286,007
Federal National Mortgage Association, 5.500%, 2/01/2036 200,712 197,749
Federal National Mortgage Association, 5.500%, 4/01/2036 495,791 488,472
Federal National Mortgage Association, 5.500%, 4/01/2036 489,099 481,878
Federal National Mortgage Association, 5.500%, 4/01/2036 486,492 479,530
Federal National Mortgage Association, 5.500%, 4/01/2036 195,140 192,259
Federal National Mortgage Association, 5.500%, 4/01/2036 97,341 95,904
Federal National Mortgage Association, 5.500%, 5/01/2036 749,213 738,153
Federal National Mortgage Association, 5.500%, 5/01/2036 746,068 735,054
Federal National Mortgage Association, 5.500%, 5/01/2036 492,234 484,967
Federal National Mortgage Association, 5.500%, 6/01/2036(c) 1,736,140 1,710,510
Federal National Mortgage Association, 5.500%, 6/01/2036 989,508 974,900
Federal National Mortgage Association, 5.500%, 6/01/2036 739,274 728,360
Federal National Mortgage Association, 5.500%, 7/01/2036 499,047 491,679
Federal National Mortgage Association, 5.500%, 8/01/2036(c) 998,654 983,911
Federal National Mortgage Association, 5.500%, 8/01/2036 800,079 788,268
Federal National Mortgage Association, 5.500%, 8/01/2036 744,102 733,117
Federal National Mortgage Association, 5.500%, 9/01/2036(c) 2,000,000 1,970,474
Federal National Mortgage Association, 6.000%, 10/01/2034 102,444 103,073
Federal National Mortgage Association, 6.000%, 3/01/2036 111,059 111,571
Federal National Mortgage Association, 6.000%, 4/01/2036 397,973 399,808
Federal National Mortgage Association, 6.000%, 4/01/2036 248,593 249,739
Federal National Mortgage Association, 6.000%, 4/01/2036 189,155 190,028
17
PRINCIPAL AMOUNT VALUE (+)
- ----------------------------------------------------------------------------------------------
BONDS AND NOTES - CONTINUED
MORTGAGE RELATED - CONTINUED
Federal National Mortgage Association, 6.000%, 6/01/2036 $ 498,034 $ 500,331
Federal National Mortgage Association, 6.000%, 7/01/2036(c) 1,478,394 1,485,213
Federal National Mortgage Association, 6.000%, 9/01/2036(c) 1,423,852 1,430,419
Federal National Mortgage Association, 6.000%, 9/01/2036 1,000,000 1,004,612
Federal National Mortgage Association, 6.500%, 7/01/2020(e) 68,360 69,332
Federal National Mortgage Association, 6.500%, 4/01/2036 686,797 699,408
Federal National Mortgage Association, 6.500%, 5/01/2036(c) 1,222,202 1,244,644
Federal National Mortgage Association, 6.500%, 7/01/2036 479,083 487,880
Federal National Mortgage Association, 6.500%, 8/01/2036 499,201 508,368
Federal National Mortgage Association (TBA),
5.000%, 12/01/2033(e) 3,000,000 2,882,814
Federal National Mortgage Association (TBA),
5.500%, 11/01/2033(e) 3,000,000 2,955,000
Federal National Mortgage Association (TBA),
7.000%, 10/01/2030(e) 416,000 427,180
Government National Mortgage Association, 4.500%, 5/15/2036(c) 1,500,000 1,416,854
Government National Mortgage Association, 5.500%, 12/15/2035 458,377 455,363
Government National Mortgage Association, 5.500%, 3/15/2036 119,224 118,427
Government National Mortgage Association, 6.000%, 6/15/2036 247,390 250,424
Government National Mortgage Association, 6.000%, 7/15/2036 499,521 505,646
Government National Mortgage Association, 6.500%, 9/15/2036 1,450,000 1,487,266
Greenwich Capital Commercial Funding Corp., Series 2005-GG5,
Class A2, 5.117%, 4/10/2037 120,000 119,799
GS Mortgage Securities Corp. II, Series 2004-GG2, Class A6,
5.396%, 8/10/2038 125,000 125,371
GS Mortgage Securities Corp. II, Series 2006-GG6, Class A2,
5.506%, 4/10/2038 500,000 505,951
JPMorgan Chase Commercial Mortgage Securities Corp. Series 2001-
CIBC, Class A3, 6.260%, 3/15/2033 190,000 196,854
JPMorgan Chase Commercial Mortgage Securities Corp., Series
2006-LDP7, Class A2, 5.861%, 4/15/2045(b) 450,000 463,608
LB UBS Commercial Mortgage Trust, Series 2005-C3, Class A3,
4.647%, 7/15/2030 275,000 268,478
Merrill Lynch/Countrywide Commercial Mortgage Trust, Series
2006-1, Class A4, 5.435%, 2/12/2039(b) 1,000,000 1,012,823
Merrill Lynch/Countrywide Commercial Mortgage Trust, Series
2006-2, Class A4, 5.910%, 6/12/2046(b) 250,000 261,435
Merrill Lynch/Countrywide Commercial Mortgage Trust, Series
2006-3, Class A4, 5.414%, 7/12/2046 1,000,000 1,002,695
Morgan Stanley Capital I, Series 2005-T19, Class A4A,
4.890%, 6/12/2047 87,000 84,352
Morgan Stanley Capital I, Series 2006-T23, Class A2,
5.741%, 8/12/2041(b) 200,000 205,109
Morgan Stanley Mortgage Loan Trust, Series 2005-3AR, Class 5A,
5.588%, 7/25/2035(b)(c) 1,029,635 1,015,153
Residential Accredit Loans, Inc., Series 2006-QS13, Class 2A1,
5.750%, 9/25/2021 1,000,000 1,000,313
Washington Mutual, Series 2004-AR7, Class A2A,
3.537%, 7/25/2034 630,071 626,983
-----------
67,126,506
-----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $69,986,142) 70,696,529
-----------
TOTAL BONDS AND NOTES
(Identified Cost $69,986,142) 70,696,529
-----------
18
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2006
LOOMIS SAYLES SECURITIZED ASSET FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- --------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 16.5%
Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/29/06 at 3.450% to be repurchased at
$2,006,577 on 10/02/06 collateralized by $1,920,000 U.S. Treasury
Note, 6.500% due 2/15/2010 with a value of $2,063,270 including
accrued interest (Note 2g) $ 2,006,000 $ 2,006,000
-------------
U.S. Treasury Bill, 4.670%, 10/12/2006(c)(d) 8,225,000 8,215,122
U.S. Treasury Bill, 4.761%, 11/09/2006(d) 1,500,000 1,492,732
-------------
9,707,854
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $11,711,412) 11,713,854
-------------
TOTAL INVESTMENTS - 116.1%
(Identified Cost $81,697,554)(a) 82,410,383
Other assets less liabilities--(16.1)% (11,417,362)
-------------
TOTAL NET ASSETS - 100.0% $ 70,993,021
-------------
+See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information: At September 30, 2006, the net unrealized appreciation on investments based on cost of
$81,697,554 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 $ 717,290
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (4,461)
-------------
Net unrealized appreciation $ 712,829
-------------
(b)Variable rate security. Rate as of September 30, 2006 is disclosed.
(c)All or a portion of this security has been segregated to cover requirements
on TBA and delayed delivery obligations.
(d)Interest rate represents annualized yield at time of purchase; not a coupon
rate.
(e)Delayed delivery.
ARMAdjustable Rate Mortgage.
TBATo Be Announced (see Note 2h of Notes to Financial Statements).
HOLDINGS AT SEPTEMBER 30, 2006 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Mortgage Related 94.6%
Asset-Backed Securities 4.0
Other, less than 2% each 1.0
19
See accompanying notes to financial statements.
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2006
HIGH INCOME SECURITIZED
OPPORTUNITIES FUND ASSET FUND
- -------------------------------------------------------------------------------------------
ASSETS
Investments at cost $ 46,717,820 $ 81,697,554
Net unrealized appreciation 327,253 712,829
------------- -------------
Investments at value 47,045,073 82,410,383
Cash 502 768
Receivable for Fund shares sold 281,725 --
Receivable for securities sold 7,404 --
Receivable for delayed delivery securities sold -- 3,844,557
Dividends and interest receivable 694,111 292,060
Tax reclaims receivable 242 --
Securities lending income receivable 370 --
------------- -------------
TOTAL ASSETS 48,029,427 86,547,768
------------- -------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 4,913,838 --
Payable for securities purchased 269,002 1,012,656
Payable for delayed delivery securities purchased -- 14,542,091
------------- -------------
TOTAL LIABILITIES 5,182,840 15,554,747
------------- -------------
NET ASSETS $ 42,846,587 $ 70,993,021
------------- -------------
Net Assets consist of:
Paid-in capital $ 42,266,618 $ 69,960,758
Undistributed net investment income 255,934 285,822
Accumulated net realized gain (loss) on investments (3,218) 33,612
Net unrealized appreciation on investments 327,253 712,829
------------- -------------
NET ASSETS $ 42,846,587 $ 70,993,021
------------- -------------
NET ASSET VALUE AND OFFERING PRICE
INSTITUTIONAL CLASS
Net assets $ 42,846,587 $ 70,993,021
------------- -------------
Shares of beneficial interest 4,122,495 7,007,038
------------- -------------
Net asset value, offering and redemption price per share $ 10.39 $ 10.13
------------- -------------
Value of securities on loan (Note 2) $ 4,814,583 $ --
------------- -------------
See accompanying notes to financial statements.
20
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
HIGH INCOME SECURITIZED
OPPORTUNITIES FUND ASSET FUND(a)
- ------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 21,149 $ --
Interest 1,873,296 954,110
Securities lending income (Note 2) 9,872 --
Less net foreign taxes withheld (2,740) --
------------ -------------
Net investment income 1,901,577 954,110
------------ -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain on investments--net 3,534 33,612
Change in unrealized appreciation (depreciation) on investments--net 17,145 712,829
------------ -------------
Net realized and unrealized gain on investments 20,679 746,441
------------ -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,922,256 $ 1,700,551
------------ -------------
(a)For the period March 2, 2006 (commencement of operations) through
September 30, 2006.
See accompanying notes to financial statements.
21
STATEMENTS OF CHANGES IN NET ASSETS
HIGH INCOME OPPORTUNITIES FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2006 SEPTEMBER 30, 2005
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 1,901,577 $ 747,172
Net realized gain on investments 3,534 75,440
Net change in unrealized appreciation (depreciation) on investments 17,145 53,214
------------------ ------------------
Increase in net assets resulting from operations 1,922,256 875,826
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (1,734,248) (722,198)
CAPITAL GAINS:
Institutional Class (69,731) --
------------------ ------------------
Total distributions (1,803,979) (722,198)
------------------ ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 6) 29,613,370 3,882,443
------------------ ------------------
Total increase in net assets 29,731,647 4,036,071
NET ASSETS
Beginning of year 13,114,940 9,078,869
------------------ ------------------
End of year $42,846,587 $13,114,940
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 255,934 $ 80,795
------------------ ------------------
SECURITIZED ASSET FUND
FOR THE PERIOD FROM
MARCH 2, 2006*
THROUGH
SEPTEMBER 30, 2006
- ---------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 954,110
Net realized gain on investments 33,612
Net change in unrealized appreciation (depreciation) on investments 712,829
-------------------
Increase in net assets resulting from operations 1,700,551
-------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (668,288)
CAPITAL GAINS:
Institutional Class --
-------------------
Total distributions (668,288)
-------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 6) 69,960,758
-------------------
Total increase in net assets 70,993,021
-------------------
NET ASSETS
Beginning of period --
-------------------
End of period $70,993,021
-------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 285,822
-------------------
* Commencement of operations.
See accompanying notes to financial statements.
22
FINANCIAL HIGHLIGHTS
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- ----------------------------
Net asset Dividends Distributions
value, Net Net realized Total from from from net
beginning investment and unrealized investment net investment realized
of the period income/(e)/ gain (loss) operations income capital gains
- -----------------------------------------------------------------------------------------------
HIGH INCOME OPPORTUNITIES FUND
INSTITUTIONAL CLASS
9/30/2006 $10.50 $0.76 $(0.10) $0.66 $(0.73) $(0.04)
9/30/2005 10.32 0.78 0.17 0.95 (0.77) --
9/30/2004(a) 10.00 0.33 0.25 0.58 (0.26) --
SECURITIZED ASSET FUND
INSTITUTIONAL CLASS
9/30/2006(f) $10.00 $0.30 $ 0.02 $0.32 $(0.19) $ --
(a) For the period April 13, 2004 (commencement of operations) through
September 30, 2004.
(b) Periods less than one year, if applicable, are not annualized.
(c) Loomis Sayles has agreed to pay, without reimbursement from the Fund, all
expenses associated with the operating of the Fund.
(d) Annualized for periods less than one year.
(e) Per share net investment income has been calculated using the average
shares outstanding during the period.
(f) For the period March 2, 2006 (commencement of operations) through
September 30, 2006.
See accompanying notes to financial statements.
23
24
RATIOS TO AVERAGE NET ASSETS
- -------------- ----------------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total end of Total the period Net Gross investment turnover
distributions the period return %/(b)/ (000's) expenses %/(c)/ expenses %/(c)/ income %/(d)/ rate %
- ----------------------------------------------------------------------------------------------------------
$(0.77) $10.39 6.6 $42,847 -- -- 7.36 26
(0.77) 10.50 9.5 13,115 -- -- 7.40 22
(0.26) 10.32 5.9 9,079 -- -- 7.03 45
$(0.19) $10.13 3.3 $70,993 -- -- 3.02 169
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
1. ORGANIZATION. Loomis Sayles Funds I (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 management
investment 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. The following funds (individually, a "Fund" and collectively,
the "Funds") are included in this report:
Loomis Sayles High Income Opportunities Fund (the "High Income Opportunities
Fund")
Loomis Sayles Securitized Asset Fund (the "Securitized Asset Fund")
Each Fund offers Institutional Class Shares. The Funds' shares are offered
exclusively to investors in "wrap fee" programs approved by IXIS Asset
Management Advisors, L.P. ("IXIS Advisors"), and/or Loomis Sayles & Company,
L.P. ("Loomis Sayles") and to institutional advisory clients of IXIS Advisors
or Loomis Sayles that, in each case, meet the Funds' policies as established by
Loomis Sayles. The financial statements of the other Funds of the Trust are
presented in separate reports.
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. Each 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 sixty
days or less) are generally valued at market price on the basis of valuations
furnished to the Funds by a pricing service recommended by the investment
adviser's pricing committee and approved 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. Equity securities, including closed-end
investment companies, 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.
Broker-dealer bid quotations may also be used to value debt and equity
securities where a pricing service does not price a security or where a pricing
service does not provide a reliable price for the security. In instances where
broker-dealer bid quotations are not available, certain securities held by the
Funds may be valued on the basis of a price provided by a principal market
maker. The prices provided by the principal market makers may differ from the
value that would be realized if the securities were sold. Short-term
obligations with a remaining maturity of sixty days or less are valued at
amortized cost, which approximates market value. Securities for which market
quotations are not readily available 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 their net asset value each
day.
The High Income Opportunities 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. When
fair valuing securities, the 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 as the Fund is
notified, and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of discount and decreased by the amortization of
premium. Investment income is recorded net of foreign taxes withheld when
applicable. In determining net gain or loss on securities sold, the cost of
securities has been determined on an identified cost basis.
C. FOREIGN CURRENCY TRANSLATION. The books and records of the Funds are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
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
25
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 High Income
Opportunities 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.
The High Income Opportunities 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 High Income Opportunities 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 High Income Opportunities Fund may
enter into forward foreign currency exchange contracts. Contracts to buy are
generally used to acquire exposure to foreign currencies, while contracts to
sell generally are used to hedge the Fund's investments against currency
fluctuation. Also, a contract to buy or sell can offset a previous contract.
These contracts involve market risk in excess of the unrealized gain or loss
reflected in the Fund's Statement of Assets and Liabilities. The U.S. dollar
value of the currencies 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 U.S. dollar. At September 30, 2006, there were no open foreign forward
currency contracts.
E. FEDERAL AND FOREIGN INCOME TAXES. The Trust treats each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains at least annually.
Accordingly, no provision for federal income tax has been made. The High Income
Opportunities 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 annually 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 premium
amortization and distribution redesignations. Permanent book and tax basis
differences relating to shareholder distributions will result in
reclassifications to capital accounts. Temporary differences between book and
tax distributable earnings are primarily due to wash sales, defaulted bond
income accruals and premium amortization accruals. Distributions from net
investment income and short-term capital gains are considered to be ordinary
income for tax purposes.
The tax characterization of distributions is determined on an annual basis. The
tax character of distributions paid to shareholders during the years ended
September 30, 2006 and 2005 was as follows:
2006 DISTRIBUTIONS PAID FROM: 2005 DISTRIBUTIONS PAID FROM:
------------------------------- - ---------------------------
LONG-TERM LONG-TERM
ORDINARY CAPITAL ORDINARY CAPITAL
INCOME GAINS TOTAL INCOME GAINS TOTAL
---------- --------- ---------- - -------- --------- --------
High Income Opportunities Fund $1,776,220 $27,759 $1,803,979 $722,198 $-- $722,198
Securitized Asset Fund 668,288 -- 668,288 -- -- --
26
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
Differences between these amounts and those reported in the Statements of
Changes in Net Assets are primarily attributable to different book and tax
treatment for short-term capital gains.
As of September 30, 2006, the components of distributable earnings on a tax
basis were as follows:
HIGH INCOME SECURITIZED
OPPORTUNITIES FUND ASSET FUND
------------------ -----------
Undistributed ordinary income $ 261,415 $ 319,435
Undistributed long-term capital gains 1,625 --
----------------- -----------
Total undistributed earnings 263,040 319,435
Unrealized appreciation 321,105 712,829
----------------- -----------
Total accumulated earnings $ 584,145 $1,032,264
----------------- -----------
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. 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. 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 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 September 30, 2006
were as follows:
MARKET VALUE
FUND ON LOAN VALUE OF COLLATERAL
- ---- ------------ -------------------
High Income Opportunities Fund $4,814,583 $4,913,838
Securitized Asset Fund -- --
J. INDEMNIFICATIONS. Under the Trust's 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 the Funds that have not yet occurred. However, based on experience the
Funds expect the risk of loss to be remote.
K. NEW ACCOUNTING PRONOUNCEMENTS. In July, 2006, Financial Accounting Standards
Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement 109 ("FIN 48") was issued and is effective for
fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold
for financial statement recognition, measurement and disclosure of a tax
position taken or expected to be taken on a tax return. Management is currently
evaluating the impact, if any, the adoption of FIN 48 will have on each Fund's
net assets and results of operations.
27
In addition, in September, 2006, Statement of Financial Accounting Standards
No. 157, Fair Value Measurements ("SFAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact, if any,
the adoption of SFAS 157 will have on the Funds' financial statements.
3. PURCHASES AND SALES OF SECURITIES. For the year ended September 30, 2006,
purchases and sales of securities (excluding short-term investments and
including paydowns) were as follows:
U.S. GOVERNMENT/AGENCY SECURITIES OTHER SECURITIES
----------------------------------- - ----------------------
FUND PURCHASES SALES PURCHASES SALES
- ---- ------------ ----------- - ----------- ----------
High Income Opportunities Fund $ 1,344,863 $ 1,341,056 $30,207,696 $4,662,480
Securitized Asset Fund 117,554,945 59,856,336 13,056,223 --
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
A. MANAGEMENT FEES. Loomis Sayles has agreed to pay, without reimbursement from
the Funds or the Trust, the following expenses of the Funds: compensation to
Trustees of the Trust who are not "interested persons" (as defined in the 1940
Act) of the Trust; registration, filing and other fees in connection with
requirements of regulatory authorities; the charges and expenses of any entity
appointed by the Funds for custodial, paying agent, shareholder servicing and
plan agent services; charges and expenses of the independent registered public
accounting firm retained by the Funds; charges and expenses of any transfer
agents and registrars appointed by the Funds; any cost of certificates
representing shares of the Funds; legal fees and expenses in connection with
the day-to-day affairs of the Funds, including registering and qualifying its
shares with Federal and State regulatory authorities; expenses of meetings of
shareholders and Trustees of the Trust; the costs of services, including
services of counsel, required in connection with the preparation of the Funds'
registration statements and prospectuses, including amendments and revisions
thereto, annual, semi-annual and other periodic reports of the Funds, and
notices and proxy solicitation material furnished to shareholders of the Funds
or regulatory authorities, and any costs of printing or mailing these items;
and the Funds' expenses of bookkeeping, accounting, auditing and financial
reporting, including related clerical expenses.
Loomis Sayles serves as investment adviser to each Fund. Under the terms of
each management agreement, Loomis Sayles does not charge the Funds an
investment advisory fee, also known as a management fee, or any other fee for
those services or for bearing those expenses. Although the Funds do not
compensate Loomis Sayles directly for services under the advisory agreement,
Loomis Sayles will typically receive an advisory fee from the sponsors of "wrap
programs," who in turn charge the programs' participants.
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.
B. ADMINISTRATIVE FEES. IXIS Advisors provides certain administrative services
for the Funds and has subcontracted with State Street Bank to serve as
sub-administrator. IXIS Advisors is a limited partnership whose sole general
partner, IXIS Asset Management Distribution Corporation, is an indirect
wholly-owned subsidiary of IXIS US Group. Loomis Sayles has agreed to pay,
without reimbursement from the Trust or Funds, fees to IXIS Advisors for
services to the Funds under each agreement.
C. SERVICE AND DISTRIBUTION FEES. The Trust has 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. The Distributor
currently is not paid a fee for serving as Distributor for the Funds. Loomis
Sayles has agreed to reimburse the Distributor to the extent the Distributor
incurs expenses in connection with any redemption of Fund shares.
D. TRUSTEES FEES AND EXPENSES. The Funds do not pay any compensation directly
to their 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 Contract Review and Governance Committee member is compensated
$4,000 for each Committee meeting that he or she attends in person and $2,000
for each meeting that he or she attends telephonically. Each
28
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2006
Audit Committee member is compensated $5,000 for each Committee meeting that he
or she attends in person and $2,500 for each meeting that he or she attends
telephonically. These fees are allocated among the funds in the IXIS Advisor
Funds Trusts and the Loomis Sayles Funds Trusts based on a formula that takes
into account, among other factors, the relative net assets of each fund.
Trustees are reimbursed for travel expenses in connection with attendance at
meetings. Loomis Sayles has agreed to reimburse the Trustees for the Funds' pro
rata portion of its Trustees fees.
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. Loomis Sayles has agreed to
reimburse the Trustees for the Funds' pro rata portion of its Trustees fees.
Prior to November 18, 2005, the Trusts had co-chairmen of the Board who
received an annual retainer of $25,000. 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.
Loomis Sayles has agreed to reimburse the Trustees for the Funds' pro rata
portion of its Trustees fees.
5. LINE OF CREDIT. The Funds, 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
each participating fund based on its borrowings at a rate per annum equal to
the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.09% per
annum, payable at the end of each calendar quarter, is accrued and apportioned
among the participating funds based on their average daily unused portion of
the line of credit. For the year ended September 30, 2006, the Funds had no
borrowings under this agreement. Loomis Sayles has agreed to pay, without
reimbursement from the Trust or Funds, such fees to State Street Bank.
6. CAPITAL SHARES. Each Fund may issue an unlimited number of shares of
beneficial interest, without par value. Transactions in capital shares were as
follows:
HIGH INCOME OPPORTUNITIES FUND
Year Ended September 30, 2006 Year Ended September 30, 2005
----------------------------- -----------------------------
Shares Amount Shares Amount
--------- ------------ -------- ----------
Issued from the sale of shares 3,150,530 $ 32,478,052 332,020 $3,491,555
Issued in connection with the
reinvestment of distributions 127,172 1,303,920 66,024 693,068
Redeemed (404,485) (4,168,602) (28,419) (302,180)
--------- --------------- ------------- ---------------
Increase (decrease) from capital
share transactions 2,873,217 $ 29,613,370 369,625 $3,882,443
--------- --------------- ------------- ---------------
SECURITIZED ASSET FUND
Period Ended
September 30, 2006(a)
-----------------------------
Shares Amount
--------- ------------
Issued from the sale of shares 7,252,782 $ 72,413,630
Issued in connection with the
reinvestment of distributions 7,749 76,785
Redeemed (253,493) (2,529,657)
--------- ---------------
Increase (decrease) from capital
share transactions 7,007,038 $ 69,960,758
--------- ---------------
(a)From March 2, 2006, commencement of operations.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of Loomis Sayles Funds I and Shareholders of Loomis Sayles High
Income Opportunities Fund and Loomis Sayles Securitized Asset Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
High Income Opportunities Fund and Loomis Sayles Securitized Asset Fund, each a
series of Loomis Sayles Funds I (collectively, "the Funds"), at September 30,
2006, and the results of each of their operations, the changes in each of their
net assets and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at September 30, 2006 by correspondence with the custodian and
brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 22, 2006
30
2006 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
CORPORATE DIVIDENDS RECEIVED DEDUCTION. For the fiscal year ended September 30,
2006, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
FUND QUALIFYING PERCENTAGE
- ---- ---------------------
High Income Opportunities Fund 0.76%
CAPITAL GAINS DISTRIBUTIONS. Pursuant to Internal Revenue Section 852(b), the
following Funds paid distributions, which have been designated as capital gains
distributions for the fiscal year ended September 30, 2006.
FUND AMOUNT
- ---- -------
High Income Opportunities Fund $27,759
QUALIFIED DIVIDEND INCOME. For the fiscal year ended September 30, 2006, the
Funds below will designate up to the maximum amount allowable pursuant to the
Internal Revenue Code as qualified dividend income eligible for reduced tax
rates. These lower rates range from 5% to 15% depending on an individual's tax
bracket. If the Funds pay a distribution during calendar year 2006, complete
information will be reported in conjunction with Form 1099-DIV.
FUND
---- -
High Income Opportunities Fund
31
TRUSTEE AND OFFICER INFORMATION
The tables below provide certain information regarding the Trustees and
officers of Loomis Sayles Funds I (the "Trust"). Unless otherwise indicated,
the address of all persons below is 399 Boylston Street, Boston, MA 02116. The
Trust's Statements of Additional Information include additional information
about the Trustees of the Trust and are available by calling Loomis Sayles at
800-343-2029.
POSITION(S)
HELD WITH
THE TRUST, LENGTH NUMBER OF PORTFOLIOS IN FUND
OF TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN*** AND
NAME AND DATE OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS** OTHER DIRECTORSHIPS HELD
- ----------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee since 2003 Douglas Dillon Professor and Director of 38
(3/23/40) Contract Review the Belfer Center for Science and Director, Taubman Centers, Inc.
and Governance International Affairs, John F. Kennedy (real estate investment trust)
Committee Member School of Government, Harvard
University
Charles D. Baker Trustee since 2005 President and Chief Executive Officer, 38
(11/13/56) Contract Review Harvard Pilgrim Health Care (health plan) None
and Governance
Committee Member
Edward A. Benjamin Trustee since 2002 Retired 38
(5/30/38) Chairman of the Director, Precision Optics
Contract Review Corporation (optics manufacturer)
and Governance
Committee
Daniel M. Cain Trustee since 2003 President and Chief Executive Officer, 38
(2/24/45) Chairman of the Cain Brothers & Company, Incorporated Director, Sheridan Healthcare Inc.
Audit Committee (investment banking) (physician practice management)
Paul G. Chenault+ Trustee since 2002 Retired; Trustee, First Variable Life 38
(9/12/33) Contract Review (variable life insurance) Director, Mailco Office Products,
and Governance Inc. (mailing equipment)
Committee Member
Kenneth J. Cowan+ Trustee since 2003 Retired 38
(4/5/32) Contract Review None
and Governance
Committee Member
Richard Darman Trustee since 2003 Partner, The Carlyle Group (investments); 38
(5/10/43) Contract Review formerly, Professor, John F. Kennedy Director and Chairman of Board
and Governance School of Government, Harvard of Directors, AES Corporation
Committee Member University (international power company)
Sandra O. Moose Trustee since 2003 President, Strategic Advisory Services 38
(2/17/42) Chairperson of the (management consulting); formerly, Director, Verizon
Board of Trustees Senior Vice President and Director, The Communications;
since November Boston Consulting Group, Inc. Director, Rohm and Haas
2005 Ex officio (management consulting) Company (specialty chemicals);
member of the Director, AES Corporation
Audit Committee (international power company)
and Contract
Review and
Governance
Committee
32
POSITION(S)
HELD WITH
THE TRUST, LENGTH NUMBER OF PORTFOLIOS IN FUND
OF TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN*** AND
NAME AND DATE OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS** OTHER DIRECTORSHIPS HELD
- -----------------------------------------------------------------------------------------------------------------------
John A. Shane+ Trustee since 2003 President, Palmer Service Corporation 38
(2/22/33) Audit Committee (venture capital organization) Director, Gensym Corporation
Member (software and technology service
provider);
Director and Chairman of the
Board, Abt Associates Inc.
(research and consulting firm)
Cynthia L. Walker Trustee since 2005 Executive Dean for Administration 38
(7/25/56) Audit Committee (formerly, Dean for Finance and CFO), None
Member Harvard Medical School
INTERESTED TRUSTEES
Robert J. Blanding/1/ President, Chief President, Chairman, Director, and Chief 38
(4/14/47) Executive Officer Executive Officer, Loomis, Sayles & None
555 California Street and Trustee since Company, L.P.; President and Chief
San Francisco, CA 94104 2002 for Loomis Executive Officer for Loomis Sayles Funds
Sayles Funds I I; Chief Executive Officer for Loomis
Sayles Funds II
John T. Hailer/2/ Executive Vice President and Chief Executive Officer, 38
(11/23/60) President and IXIS Asset Management Advisors, L.P., None
Trustee since 2003 IXIS Asset Management Distributors, L.P.
for Loomis Sayles and IXIS Asset Management Global
Funds I Associates, L.P.; Executive Vice President,
Loomis Sayles Funds I; President and
Chief Executive Officer, AEW Real Estate
Income Fund, IXIS Advisor Cash
Management Trust, IXIS Advisor Funds I,
IXIS Advisor Funds Trust II, IXIS Advisor
Funds Trust III and IXIS Advisor Funds
Trust IV
* Each Trustee serves until retirement, resignation or removal from the Board
of Trustees. The current retirement age is 72, but the retirement policy was
suspended for the calendar year 2005. At a meeting held on August 26, 2005,
the Trustees voted to lift the suspension of the retirement policy and to
designate 2006 as a transition period so that any Trustees who are currently
age 72 or older or who reach age 72 during the remainder of 2006 will not be
required to retire until the end of calendar year 2006. The position of
Chairperson of the Board is appointed for a two-year term.
** Each person listed above, except as noted, holds the same position(s) with
the Trust. Previous positions during the past five years with IXIS Asset
Management Distributors, L.P. (the "Distributor"), IXIS Asset Management
Advisors, L.P. ("IXIS Advisors") or Loomis, Sayles & Company, L.P. are
omitted if not materially different from a Trustee's or officer's current
position with such entity.
***The Trustees of the Trust serve as trustees of a fund complex that includes
all series of IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS
Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash
Management Trust, AEW Real Estate Income Fund, Loomis Sayles Funds I and
Loomis Sayles Funds II (together the "IXIS Advisor Funds and Loomis Sayles
Funds Trusts").
+- EffectiveDecember 31, 2006, Messrs. Chenault, Cowan and Shane will be
retiring as members of the IXIS Advisor Funds and Loomis Sayles
Funds Trusts Board of Trustees.
1 Mr. Blanding is deemed an "interested person" of the Trust because he holds
the following positions with affiliated persons of the Trust: President,
Chairman, Director and Chief Executive Officer of Loomis Sayles.
2 Mr. Hailer is deemed an "interested person" of the Trust because he holds
the following positions with affiliated persons of the Trust: Director and
Executive Vice President of IXIS Asset Management Distribution Corporation
("IXIS Distribution Corporation"); and President and Chief Executive Officer
of IXIS Asset Management Global Associates, L.P., IXIS Asset Management
Advisors and IXIS Asset Management Distributors L.P.
33
TRUSTEE AND OFFICER INFORMATION
POSITION(S) HELD WITH THE TRUST TERM OF PRINCIPAL OCCUPATION(S)
NAME AND DATE OF BIRTH OFFICE AND LENGTH OF TIME SERVED* DURING PAST 5 YEARS**
- -----------------------------------------------------------------------------------------------------------
OFFICERS OF THE TRUST
Coleen Downs Dinneen Secretary, Clerk and Chief Legal Officer Senior Vice President, General Counsel,
(12/16/60) Since September 2004 Secretary and Clerk (formerly, Deputy
General Counsel, Assistant Secretary and
Assistant Clerk), IXIS Asset Management
Distribution Corporation, IXIS Asset
Management Distributors, L.P. and IXIS
Asset Management Advisors, L.P.
Daniel J. Fuss Executive Vice President Vice Chairman and Director, Loomis,
(9/27/33) Since June 2003 Sayles & Company, L.P.; Prior to 2002,
One Financial Center President and Trustee of Loomis Sayles
Boston, MA 02111 Funds II
Russell L. Kane Chief Compliance Officer, Chief Compliance Officer for Mutual
(7/23/69) Since May 2006; Assistant Secretary Funds, Vice President, Associate General
Since June 2004 Counsel, Assistant Secretary and Assistant
Clerk, IXIS Asset Management
Distribution Corporation, IXIS Asset
Management Distributors, L.P. and IXIS
Asset Management Advisors, L.P.;
formerly, Senior Counsel, Columbia
Management Group.
Michael C. Kardok Treasurer, Principal Financial and Senior Vice President, IXIS Asset
(7/17/59) Accounting Officer Management Advisors, L.P. and IXIS
Since October 2004 Asset Management Distributors, L.P.;
formerly, Senior Director, PFPC Inc;
formerly, Vice President-Division
Manager, First Data Investor Services, Inc.
Max J. Mahoney Anti-Money Laundering Officer and Vice President, Deputy General Counsel,
(5/1/62) Assistant Secretary Assistant Secretary and Assistant Clerk,
Since August 2005 IXIS Asset Management Distribution
Corporation. Senior Vice President,
Deputy General Counsel, Assistant
Secretary, Assistant Clerk and Chief
Compliance Officer-Investment Adviser,
IXIS Asset Management Distributors, L.P.
and IXIS Asset Management Advisors,
L.P.; formerly, Senior Counsel, MetLife,
Inc.; formerly, Associate Counsel, LPL
Financial Services, Inc.
John E. Pelletier Chief Operating Officer Executive Vice President and Chief
(6/24/64) Since September 2004 Operating Officer (formerly, Senior Vice
President, General Counsel, Secretary and
Clerk), IXIS Asset Management
Distribution Corporation, IXIS Asset
Management Distributors, L.P. and IXIS
Asset Management Advisors, L.P.;
Executive Vice President, Chief Operating
Officer and Director (formerly, President,
Chief Operating Officer and Director),
IXIS Asset Management Services
Company.
* Each officer of the Trust serves for an indefinite term in accordance with
their current By-laws until the date his or her successor is elected and
qualified, or until he or she sooner dies, retires, is removed or becomes
disqualified.
**Each person listed above, except as noted, holds the same position(s) with
the IXIS Advisor Funds and Loomis Sayles Funds Trusts. Previous positions
during the past five years with the Distributor, IXIS Advisors or Loomis
Sayles are omitted, if not materially different from a trustee's or officer's
current position with such entity.
34
Item 2. Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant's
principal executive officer, principal financial officer and persons performing
similar functions.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Registrant has established an audit committee.
Ms. Cynthia L. Walker, Mr. Daniel M. Cain and Mr. John A. Shane are members of
the audit committee and have been designated as "audit committee financial
experts" by the Board of Trustees. Each of these individuals is also an
Independent Trustee of the Registrant.
Item 4. Principal Accountant Fees and Services.
Fees paid to Principal Accountant by the Fund.
The table below sets forth fees billed by the principal accountant,
PricewaterhouseCoopers LLP, for the past two fiscal years for professional
services rendered in connection with a) the audit of the Registrant's annual
financial statements and services provided in connection with regulatory
filings; b) audit-related services (including services that are reasonably
related to the performance of the audit of the Registrant's financial
statements and but not reported under "Audit Fees"); c) tax compliance, tax
advice and tax planning and d) all other fees billed for professional services
rendered by the principal accountant to the Registrant, other than the services
provided reported as a part of (a) through (c) of this Item.
Audit fees Audit-related fees Tax fees/1/ All other fees
----------------- ------------------ --------------- --------------
2005 2006 2005 2006 2005 2006 2005 2006
-------- -------- ---- ------ ------- ------- ---- -------
Loomis Sayles Funds I.... $219,880 $229,600 -- $5,832 $10,714 $12,320 -- $22,043
1. The tax fees consist of a review of year-end shareholder reporting (2005,
2006).
Aggregate fees billed to the Registrant for non-audit services during 2005 and
2006 were $10,714 and $40,195, respectively.
Fees paid to Principal Accountant By Adviser and Control Affiliates.
The following table sets forth the non-audit services provided by the Trust's
principal accountant to Loomis, Sayles & Company, L.P. and entities
controlling, controlled by or under common control with Loomis, Sayles &
Company, L.P. that provide ongoing services to the Trust ("Control Affiliates")
for the last two fiscal years.
Audit-related fees Tax fees All other fees
------------------ ---------------- ---------------
2005 2006 2005 2006 2005 2006
------- ------- ------- -------- ------- -------
Control Affiliates... $97,600 $17,250 $76,740 $146,490 $69,450 $97,115
Aggregate fees billed to Control Affiliates for non-audit services during 2005
and 2006 were $243,790 and $260,855, respectively.
None of the audit-related, tax and other services provided by the Registrant's
principal accountant were approved by the Audit Committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Audit Committee Pre Approval Policies.
Annually, the Registrant's Audit Committee reviews the audit, audit-related,
tax and other non-audit services together with the projected fees, for services
proposed to be rendered to the Trust and/or other entities for which
pre-approval is required during the upcoming year. Any subsequent revisions to
already pre-approved services or fees (including fee increases) and requests
for pre-approval of new services would be presented for consideration quarterly
as needed.
If, in the opinion of management, a proposed engagement by the Registrant's
independent accountants needs to commence before the next regularly scheduled
Audit Committee meeting, any member of the Audit Committee who is an
independent Board member is authorized to pre-approve the engagement, but only
for engagements to provide audit, audit related and tax services. This approval
is subject to review of the full Audit Committee at its next quarterly meeting.
All other engagements require the approval of all the members of the Audit
Committee.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included as part of the Report to Shareholders filed as Item 1 herewith.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. 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 Registrant'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) Code of Ethics required by Item 2 hereof, filed herewith as exhibit
(a)(1).
(b) (2) Certifications of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 30a-2(a) 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 of 2002 are
filed herewith as exhibit (b).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Loomis Sayles Funds I
By: /s/ Robert J. Blanding
------------------------------
Name: Robert J. Blanding
Title: President and Chief Executive
Officer
Date: November 28, 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: President and Chief Executive
Officer
Date: November 28, 2006
By: /s/ Michael C. Kardok
------------------------------
Name: Michael C. Kardok
Title: Treasurer
Date: November 28, 2006