UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06241
Loomis Sayles Funds II
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(Exact name of Registrant as specified in charter)
399 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Coleen Downs Dinneen, Esq.
IXIS Asset Management Distributors, L.P.
399 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agent for service)
Registrant's telephone number, including area code: (617) 449-2810
Date of fiscal year end: September 30
Date of reporting period: March 31, 2007
Item 1. Reports to Stockholders.
The Registrant's semi-annual report transmitted to shareholders pursuant to
Rule 30e-1 under the Investment Company Act of 1940 is as follows:
[LOGO] IXIS | ADVISOR FUNDS
Income Funds
Semiannual Report
March 31, 2007
[LOGO]
Loomis Sayles Core Plus Bond Fund
Loomis Sayles High Income Fund
Loomis Sayles Limited Term Government and Agency Fund
Loomis Sayles Massachusetts Tax Free Income Fund
Loomis Sayles Municipal Income Fund
Loomis Sayles Strategic Income Fund
TABLE OF CONTENTS
Management Discussion
and Performance..........Page 1
Portfolio of InvestmentsPage 17
Financial Statements....Page 41
LOOMIS SAYLES CORE PLUS BOND FUND
PORTFOLIO PROFILE
Objective:
Seeks a high level of current income consistent with what the fund considers
reasonable risk
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Strategy:
Invests primarily in U.S. corporate and U.S. government bonds
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Fund Inception:
November 7, 1973
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Managers:
Peter W. Palfrey
Richard G. Raczkowski
Loomis, Sayles & Company, L.P.
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Symbols:
Class A NEFRX
Class B NERBX
Class C NECRX
Class Y NERYX
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What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk;
their value generally rises when prevailing interest rates fall and falls when
rates rise. This fund may invest in lower-rated bonds with higher yields and
increased risks; securities subject to prepayment risk; and foreign market
securities with special risks.
Management Discussion
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At their meeting last fall, the Federal Reserve Board paused in its series of
rate hikes, leaving short-term interests rates unchanged during the six months
ended March 31, 2007. Although the U.S. economic expansion moved forward at a
slower pace than in previous months, corporate profits remained healthy. This,
coupled with investor demand for high income, has had a positive impact on
prices of high-yielding domestic bonds. Security selection within this sector
was principally responsible for Loomis Sayles Core Plus Bond Fund's
out-performance during the fiscal period.
Based on the net asset value of its Class A shares and $0.27 in reinvested
dividends, the fund's total return was 3.51%. This compared favorably with the
2.76% return on the fund's benchmark, the Lehman Aggregate Bond Index, and the
average return on the funds in its Morningstar Intermediate-Term Bond category,
which was also 2.76%. The fund's 30-day SEC yield on March 31, 2007 was 3.95%.
BEST RESULTS CAME FROM DOMESTIC HIGH-YIELD AND NON-DOLLAR ISSUES
Most sectors of the U.S. fixed-income market performed well during the period.
The fund had approximately 10% of its assets in high-yielding, domestic issues,
with substantial holdings in U.S. investment-grade bonds. The fund's portfolio
also includes securities backed by mortgages and other assets and U.S.
government agencies, as well as international and emerging-market securities.
(The benchmark has no foreign holdings.)
We built up the fund's non-dollar allocation modestly during the period,
reflecting economic optimism in the Asian region. A correction in the richly
valued Chinese stock market led to a spike in volatility, and the fund's
holdings in mortgage-backed securities were a slight drag on performance near
the end of the period, reflecting concerns over subprime lending. However, this
volatility proved to be short-lived. Issues backed by commercial mortgages
performed relatively well, as profit risk on commercial space was low, but our
underweight position in these securities compared to the benchmark trimmed the
fund's performance lead in other markets.
SECURITY SELECTION, EMPHASIS ON NON-CYCLICALS HELPED, JAPANESE CURRENCY HURT
Security selection played a key role during the period, as did the fund's
relatively long duration relative to the benchmark. Some holdings rose in value
on speculation that they might be upgraded. Domestic bonds backed by consumer
non-cyclical companies - those whose businesses tend to be less sensitive to
the economic cycle - also benefited results. But bonds denominated in the
Japanese yen lagged as the currency came under pressure early in the period.
Investors had borrowed in the low-yielding yen and invested the proceeds in
higher-yielding currencies. However, interest rates rose in Japan, undercutting
the yield advantage sought in this "carry trade" strategy. The yen subsequently
recovered and we increased portfolio weightings in Japan and other Asian
economies that appear favorably positioned.
OUTLOOK IS FOR CONTINUED FAVORABLE CONDITIONS
We believe the current economic sluggishness in the United States may represent
a pause before activity picks up later in 2007, although we expect the pace to
be more moderate. We are maintaining the portfolio's overall high quality
profile because we believe prospects for gains have diminished among lower
quality tiers, where many issues appear to be overvalued, in our opinion.
Accordingly, we pared back our emphasis on high-yielding corporate bonds
because we think there is now limited potential for further appreciation.
Moreover, the fund's duration is currently longer than the benchmark, making it
more susceptible to interest-rate shifts. Our current strategy is intended to
position the fund advantageously if the economy slows down for a time, causing
interest rates to fall and bond prices to rise. If this occurs, it would reduce
inflationary pressures and make the Fed less inclined to raise short-term
interest rates again.
1
LOOMIS SAYLES CORE PLUS BOND FUND
Investment Results through March 31, 2007
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PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/4/
March 31, 1997 through March 31, 2007
[CHART]
Net Asset Maximum Sales Lehman Aggregate Lehman U.S.
Value/1/ Charge/2/ Bond Index Credit Index
---------- ------------- ---------------- ----------------
3/31/1997 $10,000 $ 9,550 $10,000 $10,000
4/30/1997 10,110 9,655 10,150 10,152
5/31/1997 10,246 9,785 10,246 10,267
6/30/1997 10,427 9,958 10,367 10,412
7/31/1997 10,846 10,358 10,647 10,793
8/31/1997 10,662 10,182 10,556 10,634
9/30/1997 10,874 10,384 10,712 10,820
10/31/1997 10,977 10,483 10,867 10,957
11/30/1997 11,028 10,531 10,917 11,019
12/31/1997 11,141 10,640 11,027 11,135
1/31/1998 11,289 10,781 11,169 11,267
2/28/1998 11,325 10,816 11,160 11,264
3/31/1998 11,396 10,883 11,199 11,305
4/30/1998 11,448 10,933 11,257 11,377
5/31/1998 11,565 11,044 11,364 11,512
6/30/1998 11,608 11,085 11,460 11,597
7/31/1998 11,577 11,056 11,485 11,586
8/31/1998 11,463 10,947 11,671 11,640
9/30/1998 11,905 11,370 11,945 12,017
10/31/1998 11,780 11,250 11,882 11,832
11/30/1998 12,015 11,474 11,949 12,055
12/31/1998 12,034 11,492 11,985 12,090
1/31/1999 12,164 11,617 12,070 12,209
2/28/1999 11,918 11,382 11,860 11,920
3/31/1999 12,083 11,539 11,926 12,004
4/30/1999 12,178 11,630 11,963 12,039
5/31/1999 11,914 11,378 11,858 11,878
6/30/1999 11,838 11,305 11,821 11,816
7/31/1999 11,791 11,261 11,770 11,751
8/31/1999 11,744 11,216 11,764 11,722
9/30/1999 11,943 11,405 11,901 11,850
10/31/1999 11,970 11,432 11,945 11,904
11/30/1999 11,988 11,449 11,944 11,917
12/31/1999 11,994 11,454 11,886 11,854
1/31/2000 11,944 11,406 11,848 11,812
2/29/2000 12,079 11,535 11,991 11,921
3/31/2000 12,244 11,693 12,149 12,023
4/30/2000 12,019 11,478 12,114 11,917
5/31/2000 11,930 11,393 12,108 11,873
6/30/2000 12,292 11,738 12,360 12,171
7/31/2000 12,364 11,808 12,473 12,319
8/31/2000 12,524 11,960 12,653 12,479
9/30/2000 12,542 11,978 12,733 12,545
10/31/2000 12,471 11,910 12,817 12,557
11/30/2000 12,589 12,023 13,027 12,720
12/31/2000 12,881 12,302 13,268 12,966
1/31/2001 13,201 12,607 13,485 13,321
2/28/2001 13,332 12,732 13,603 13,437
3/31/2001 13,348 12,747 13,671 13,521
4/30/2001 13,271 12,674 13,614 13,472
5/31/2001 13,356 12,755 13,696 13,595
6/30/2001 13,360 12,759 13,748 13,664
7/31/2001 13,698 13,082 14,056 14,021
8/31/2001 13,850 13,227 14,217 14,209
9/30/2001 13,792 13,172 14,382 14,188
10/31/2001 14,064 13,431 14,683 14,540
11/30/2001 13,971 13,342 14,481 14,414
12/31/2001 13,815 13,193 14,389 14,315
1/31/2002 13,783 13,163 14,505 14,436
2/28/2002 13,729 13,111 14,646 14,545
3/31/2002 13,579 12,968 14,402 14,277
4/30/2002 13,707 13,090 14,681 14,475
5/31/2002 13,822 13,200 14,806 14,667
6/30/2002 13,489 12,882 14,934 14,691
7/31/2002 13,333 12,733 15,114 14,683
8/31/2002 13,637 13,023 15,370 15,064
9/30/2002 13,682 13,066 15,619 15,350
10/31/2002 13,605 12,993 15,547 15,172
11/30/2002 13,864 13,240 15,543 15,369
12/31/2002 14,207 13,568 15,864 15,822
1/31/2003 14,287 13,644 15,878 15,873
2/28/2003 14,493 13,840 16,098 16,191
3/31/2003 14,535 13,881 16,085 16,202
4/30/2003 14,753 14,089 16,218 16,502
5/31/2003 15,046 14,369 16,520 17,022
6/30/2003 15,070 14,392 16,487 16,981
7/31/2003 14,553 13,899 15,933 16,257
8/31/2003 14,693 14,032 16,039 16,384
9/30/2003 15,116 14,436 16,464 16,956
10/31/2003 15,079 14,400 16,310 16,776
11/30/2003 15,171 14,488 16,349 16,853
12/31/2003 15,416 14,723 16,515 17,040
1/31/2004 15,549 14,849 16,648 17,213
2/29/2004 15,669 14,964 16,828 17,429
3/31/2004 15,786 15,076 16,955 17,597
4/30/2004 15,384 14,691 16,513 17,043
5/31/2004 15,248 14,562 16,447 16,923
6/30/2004 15,341 14,651 16,540 16,995
7/31/2004 15,515 14,816 16,704 17,204
8/31/2004 15,825 15,113 17,023 17,610
9/30/2004 15,915 15,199 17,069 17,709
10/31/2004 16,089 15,365 17,212 17,881
11/30/2004 16,056 15,334 17,075 17,701
12/31/2004 16,202 15,473 17,232 17,933
1/31/2005 16,241 15,510 17,340 18,075
2/28/2005 16,225 15,495 17,238 17,968
3/31/2005 16,014 15,294 17,149 17,745
4/30/2005 16,081 15,358 17,381 17,983
5/31/2005 16,231 15,501 17,569 18,234
6/30/2005 16,338 15,603 17,665 18,379
7/31/2005 16,292 15,559 17,504 18,195
8/31/2005 16,459 15,718 17,729 18,471
9/30/2005 16,301 15,567 17,546 18,195
10/31/2005 16,186 15,458 17,407 17,996
11/30/2005 16,246 15,515 17,484 18,105
12/31/2005 16,380 15,642 17,651 18,284
1/31/2006 16,434 15,694 17,652 18,247
2/28/2006 16,493 15,751 17,710 18,328
3/31/2006 16,371 15,634 17,536 18,070
4/30/2006 16,382 15,645 17,505 18,004
5/31/2006 16,335 15,600 17,486 17,972
6/30/2006 16,348 15,612 17,523 18,000
7/31/2006 16,570 15,824 17,760 18,265
8/31/2006 16,795 16,040 18,032 18,603
9/30/2006 16,958 16,195 18,190 18,811
10/31/2006 17,106 16,336 18,310 18,961
11/30/2006 17,357 16,576 18,523 19,228
12/31/2006 17,253 16,477 18,415 19,063
1/31/2007 17,265 16,488 18,408 19,058
2/28/2007 17,586 16,795 18,692 19,443
3/31/2007 17,551 16,761 18,692 19,350
Average Annual Total Returns -- March 31, 2007/4/
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 11/7/73)
Net Asset Value/1/ 3.51% 7.22% 5.26% 5.78%
With Maximum Sales Charge/2/ -1.15 2.41 4.30 5.29
CLASS B (inception 9/13/93)
Net Asset Value/1/ 3.19 6.43 4.49 5.00
With CDSC/3/ -1.81 1.43 4.16 5.00
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 3.09 6.43 4.48 4.99
With CDSC/3/ 2.09 5.43 4.48 4.99
CLASS Y (Inception 12/30/94)
Net Asset Value/1/ 3.72 7.56 5.66 6.14
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COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman Aggregate Bond Index 2.76% 6.59% 5.35% 6.46%
Lehman U.S. Credit Index 2.87 7.08 6.27 6.82
Morningstar Int.-Term Bond Fund Avg. 2.76 6.17 4.99 5.75
See page 13 for a description of the indexes.
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of any dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com. Class Y shares are available to
certain investors, as described in the prospectus.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/2007 9/30/2006
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Aaa 67.9 56.4
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Aa 2.3 1.5
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A 2.7 1.2
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Baa 10.3 16.6
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Ba 5.4 13.1
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B 3.0 5.0
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Caa 0.8 --
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Not Rated* 4.1 4.7
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Short-term and other 3.5 1.5
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Credit quality is based on ratings from Moody's Investors Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/07 9/30/06
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1 year or less 9.9 6.8
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1-5 years 35.3 39.4
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5-10 years 36.9 38.5
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10+ years 17.9 15.3
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Average Effective Maturity 8.2 years 7.6 years
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Portfolio characteristics will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/5/ Net Expense Ratio/6/
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A 1.08 1.05
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B 1.83 1.80
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C 1.82 1.80
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Y 0.80 0.80
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NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes maximum sales charge of 4.50%.
/3/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C shares performance assumes a 1% CDSC applied when you sell shares
within one year of purchase.
/4/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/5/Before waivers and reimbursements.
/6/After waivers and reimbursements.
2
LOOMIS SAYLES HIGH INCOME FUND
PORTFOLIO PROFILE
Objective:
Seeks high current income plus the opportunity for capital appreciation to
produce a high total return
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Strategy:
Invests primarily in lower-quality fixed-income securities
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Fund Inception:
February 22, 1984
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Managers:
Matthew J. Eagan, CFA
Kathleen C. Gaffney, CFA
Elaine M. Stokes
Loomis, Sayles & Company, L.P.
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Symbols:
Class A NEFHX
Class B NEHBX
Class C NEHCX
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What You Should Know:
Fixed-income securities are subject to credit risk and interest-rate risk;
their value generally rises when prevailing interest rates fall and falls when
rates rise. This fund emphasizes lower-rated, high-yield bonds that may involve
extra risks. It also invests in foreign securities which have special risks,
including political, economic, regulatory and currency risks.
Management Discussion
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Higher-risk, higher-yielding bonds started Loomis Sayles High Income Fund's
fiscal year on a strong note, amid steady economic growth. By early February,
investor demand for higher income and their comfort level with risk had driven
up prices on high-yielding corporate bonds, narrowing the "spread" - the yield
advantage these bonds have over U.S. Treasuries - to their tightest levels in
years. However, a sharp drop in China's stock market in February drew nervous
equity investors to the safer haven of high-quality U.S. Treasury securities.
Spreads widened out again, ending March at about the same levels that prevailed
at the beginning of January, 2007. Meanwhile, concern over the weak U.S.
housing market and softening business spending added to investors' caution,
which increased selling pressure on long-term bonds. The yield curve, a graphic
representation of the difference in yield between short- and long-term bonds,
widened.
For the six months ended March 31, 2007, the fund's total return was 7.55%,
based on the net asset value of Class A shares and $0.20 in reinvested
dividends. The fund's return surpassed both its benchmark, the Lehman High
Yield Composite Index, which returned 6.95% for the period, and the 6.77%
average return on Morningstar's High Yield Bond category. As of March 31, 2007,
the fund's SEC yield was 5.45%.
STRATEGY REFLECTED INVESTORS' RISK TOLERANCE
For the period as a whole, higher-yielding securities outperformed the market.
As corporate earnings improved, investors became less worried about potential
defaults. The supply of new bonds coming to market also dried up. Among the
fund's domestic high-yield bonds, careful research led to strong contributions
from select industrial and utility holdings. Lower-quality bonds within the CCC
and BBB rating categories also aided fund returns, but prices of
longer-maturity CCC issues, which are below investment grade, suffered when
interest rates on higher-quality bonds rose late in the period. The fund's
relatively small position in high-quality, A-rated bonds also trimmed the
fund's lead late in the period.
The portfolio's duration, or price sensitivity to interest rate changes, was
longer than that of the benchmark, and changed relatively little during the
six-month period. Although this relatively aggressive stance hurt results when
interest rates rose, we are comfortable with the fund's positioning and are
researching additional opportunities in longer-maturity bonds.
NON-U.S.-DOLLAR COMMITMENTS PLAYED A KEY ROLE
Successful security selection brought favorable returns on bonds denominated in
several foreign currencies. Emerging market economies continued to thrive on
strong global demand for commodities and reductions in their overall
indebtedness. Holdings in the Brazilian real, Thai baht, Mexican peso and
Malaysian ringgit benefited returns. However, bonds denominated in weaker
currencies, including those of Indonesia, South Korea and Russia, held back
results for the fiscal period. Holdings in the Japanese yen also weakened when
interest rates in Japan rose, obliging investors to repay money they had
borrowed earlier when rates were low. Disappointing sectors included
telecommunications companies and some government-linked issues.
OUTLOOK IS FOR MODERATE GROWTH
We believe the recent slowing in the U.S. economy constitutes a pause, which
should be followed by continued growth in the economy and corporate profits,
although at a slower pace than before. This scenario might ease inflationary
pressures, a development that would reduce pressure on the Fed to resume
raising rates. Worsening conditions in the housing market could disturb other
areas of the economy and could even prompt the Fed to cut short-term interest
rates, although we think this is unlikely. Caution among lending institutions
following recent mortgage defaults might also squeeze credit availability and
cast doubt on the economic re-acceleration that we anticipate. With valuations
of some high-yield securities still very high, in our opinion, return
expectations seem modest. However, we believe our research-intensive approach,
global reach and flexibility to make tactical adjustments may add to returns in
the months ahead.
3
LOOMIS SAYLES HIGH INCOME FUND
Investment Results through March 31, 2007
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PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/4/
March 31, 1997 through March 32, 2007
[CHART]
Net Asset Maximum Sales Lehman High Yield
Value/1/ Charge/2/ Composite Index
--------- ------------- ------------------
3/31/1997 $10,000 $ 9,550 $10,000
4/30/1997 10,056 9,603 10,098
5/31/1997 10,390 9,922 10,322
6/30/1997 10,457 9,987 10,465
7/31/1997 10,743 10,259 10,752
8/31/1997 10,812 10,325 10,728
9/30/1997 11,134 10,633 10,940
10/31/1997 11,037 10,540 10,950
11/30/1997 11,185 10,682 11,055
12/31/1997 11,289 10,781 11,152
1/31/1998 11,458 10,943 11,352
2/28/1998 11,442 10,927 11,419
3/31/1998 11,560 11,040 11,526
4/30/1998 11,622 11,099 11,572
5/31/1998 11,604 11,082 11,612
6/30/1998 11,643 11,119 11,654
7/31/1998 11,626 11,103 11,720
8/31/1998 10,819 10,332 11,073
9/30/1998 10,716 10,234 11,123
10/31/1998 10,491 10,019 10,895
11/30/1998 11,244 10,738 11,347
12/31/1998 11,095 10,596 11,360
1/31/1999 11,345 10,834 11,529
2/28/1999 11,416 10,902 11,461
3/31/1999 11,601 11,079 11,570
4/30/1999 11,850 11,317 11,794
5/31/1999 11,560 11,040 11,635
6/30/1999 11,528 11,009 11,610
7/31/1999 11,482 10,965 11,656
8/31/1999 11,302 10,794 11,528
9/30/1999 11,229 10,724 11,445
10/31/1999 11,330 10,820 11,369
11/30/1999 11,405 10,892 11,501
12/31/1999 11,538 11,019 11,632
1/31/2000 11,410 10,897 11,581
2/29/2000 11,462 10,946 11,604
3/31/2000 11,115 10,615 11,360
4/30/2000 11,109 10,609 11,378
5/31/2000 10,799 10,313 11,261
6/30/2000 11,126 10,625 11,491
7/31/2000 11,192 10,688 11,578
8/31/2000 11,147 10,645 11,658
9/30/2000 10,916 10,425 11,556
10/31/2000 10,371 9,905 11,186
11/30/2000 9,510 9,082 10,743
12/31/2000 9,680 9,244 10,950
1/31/2001 10,804 10,317 11,770
2/28/2001 10,750 10,266 11,927
3/31/2001 10,200 9,741 11,646
4/30/2001 9,887 9,442 11,501
5/31/2001 9,914 9,468 11,708
6/30/2001 9,345 8,924 11,380
7/31/2001 9,529 9,100 11,547
8/31/2001 9,455 9,030 11,684
9/30/2001 8,595 8,208 10,898
10/31/2001 8,500 8,118 11,168
11/30/2001 8,776 8,381 11,575
12/31/2001 8,649 8,259 11,528
1/31/2002 8,702 8,311 11,608
2/28/2002 8,438 8,058 11,446
3/31/2002 8,665 8,275 11,722
4/30/2002 8,594 8,207 11,909
5/31/2002 8,468 8,087 11,843
6/30/2002 7,863 7,509 10,970
7/31/2002 7,333 7,003 10,491
8/31/2002 7,590 7,249 10,790
9/30/2002 7,309 6,980 10,648
10/31/2002 7,305 6,976 10,555
11/30/2002 7,791 7,440 11,209
12/31/2002 7,883 7,529 11,366
1/31/2003 8,050 7,688 11,744
2/28/2003 8,163 7,796 11,889
3/31/2003 8,374 7,997 12,231
4/30/2003 8,858 8,459 12,957
5/31/2003 9,013 8,607 13,091
6/30/2003 9,208 8,793 13,467
7/31/2003 9,024 8,618 13,319
8/31/2003 9,120 8,710 13,472
9/30/2003 9,419 8,995 13,841
10/31/2003 9,620 9,187 14,120
11/30/2003 9,821 9,379 14,334
12/31/2003 10,083 9,629 14,659
1/31/2004 10,239 9,778 14,938
2/29/2004 10,194 9,735 14,901
3/31/2004 10,252 9,791 15,002
4/30/2004 10,018 9,567 14,900
5/31/2004 9,758 9,319 14,648
6/30/2004 9,969 9,520 14,858
7/31/2004 10,050 9,597 15,060
8/31/2004 10,324 9,859 15,355
9/30/2004 10,467 9,996 15,578
10/31/2004 10,699 10,217 15,860
11/30/2004 10,868 10,379 16,051
12/31/2004 11,126 10,626 16,290
1/31/2005 11,163 10,661 16,269
2/28/2005 11,422 10,908 16,508
3/31/2005 11,018 10,522 16,028
4/30/2005 10,793 10,307 15,872
5/31/2005 11,074 10,575 16,154
6/30/2005 11,337 10,827 16,471
7/31/2005 11,515 10,997 16,759
8/31/2005 11,576 11,055 16,791
9/30/2005 11,550 11,030 16,623
10/31/2005 11,406 10,893 16,507
11/30/2005 11,518 11,000 16,593
12/31/2005 11,686 11,160 16,736
1/31/2006 12,035 11,493 17,003
2/28/2006 12,219 11,669 17,116
3/31/2006 12,265 11,713 17,219
4/30/2006 12,336 11,781 17,325
5/31/2006 12,113 11,568 17,323
6/30/2006 12,135 11,589 17,262
7/31/2006 12,251 11,700 17,431
8/31/2006 12,514 11,950 17,714
9/30/2006 12,635 12,066 17,965
10/31/2006 12,903 12,322 18,209
11/30/2006 13,143 12,551 18,515
12/31/2006 13,307 12,708 18,718
1/31/2007 13,425 12,821 18,927
2/28/2007 13,595 12,983 19,192
3/31/2007 13,589 12,978 19,212
Average Annual Total Returns -- March 31, 2007/4/
SINCE
6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION
CLASS A (Inception 2/22/84)
Net Asset Value/1/ 7.55% 10.78% 9.42% 3.12% --
With Maximum Sales Charge/2/ 2.71 5.81 8.40 2.65 --
CLASS B (Inception 9/20/93)
Net Asset Value/1/ 7.07 10.09 8.59 2.36 --
With CDSC/3/ 2.07 5.09 8.30 2.36 --
CLASS C (Inception 3/2/98)
Net Asset Value/1/ 7.28 10.10 8.63 -- 1.14
With CDSC/3/ 6.28 9.10 8.63 -- 1.14
- -----------------------------------------------------------------------------------
SINCE
CLASS C
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/5/
Lehman High Yield Composite Index 6.95% 11.58% 10.39% 6.75% 5.84%
Morningstar High Yield Bond Fund Avg. 6.77 10.15 9.27 5.56 4.25
See page 13 for a description of the indexes.
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com. Performance history includes periods
from a predecessor fund.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/2007 9/30/2006
- ------------------------------------------
Aaa 4.3 8.0
- ------------------------------------------
Aa 3.4 2.5
- ------------------------------------------
A 0.8 0.5
- ------------------------------------------
Baa 6.8 6.8
- ------------------------------------------
Ba 14.7 17.4
- ------------------------------------------
B 31.3 39.4
- ------------------------------------------
Caa 12.8 6.8
- ------------------------------------------
Not Rated* 13.3 13.7
- ------------------------------------------
Short-term and other 12.6 4.9
- ------------------------------------------
Credit quality is based on ratings from Moody's Investors Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/07 9/30/06
- --------------------------------------------------
1 year or less 13.2 4.0
- --------------------------------------------------
1-5 years 22.1 25.9
- --------------------------------------------------
5-10 years 18.8 23.1
- --------------------------------------------------
10+ years 45.9 47.0
- --------------------------------------------------
Average Effective Maturity 11.1 years 12.0 years
- --------------------------------------------------
Portfolio characteristics will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/6/ Net Expense Ratio/7/
- -------------------------------------------------------
A 1.48 1.15
- -------------------------------------------------------
B 2.25 1.90
- -------------------------------------------------------
C 2.23 1.90
- -------------------------------------------------------
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes maximum sales charge of 4.50%.
/3/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C shares performance assumes a 1% CDSC applied when you sell shares
within one year of purchase.
/4/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/5/The since-inception comparative performance figures shown for Class C shares
are calculated from 4/1/98.
/6/Before waivers and reimbursements.
/7/After waivers and reimbursements.
4
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND
PORTFOLIO PROFILE
Objective:
Seeks a high current return consistent with preservation of capital
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities
- --------------------------------------------------------------------------------
Fund Inception:
January 3, 1989
- --------------------------------------------------------------------------------
Managers:
John Hyll
Clifton V. Rowe, CFA
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A NEFLX
Class B NELBX
Class C NECLX
Class Y NELYX
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk;
their value generally rises when prevailing interest rates fall and falls when
rates rise. Securities issued by the U.S. government are guaranteed by the U.S.
government if held to maturity; mutual funds that invest in these securities
are not guaranteed. Securities issued by U.S. government agencies may not be
government guaranteed.
Management Discussion
- --------------------------------------------------------------------------------
After raising the federal funds rate (the interest rate banks charge one
another for overnight loans) repeatedly last year, the Federal Reserve Board
has left rates unchanged since its meetings last fall, resulting in a period of
relative calm for bond prices. Loomis Sayles Limited Term Government and Agency
Fund's total return for the six months ended March 31, 2007 was 2.36% based on
the net asset value of Class A shares and $0.24 in reinvested dividends. The
fund's benchmark, the Lehman 1-5 Year Government Bond Index returned 2.45%,
while the average return on Morningstar's Short Government category was 2.25%.
The fund's 30-day SEC yield was 3.90% as of March 31, 2007.
HIGHER-YIELDING SECURITIES PROVIDE A PERFORMANCE EDGE
Its emphasis on mortgage-backed and asset-backed securities helped keep the
fund in the upper half of its Morningstar category, which is composed of
comparable funds tracked by this mutual fund research company. The fund's
results also put it within a few percentage points of its Lehman benchmark, an
unmanaged list of government bonds maturing in 1-5 years. As they were last
year, U.S. Treasury securities were among the weaker performers during the
fiscal period ended March 31, 2007, largely because these top-quality
securities have lower yields than mortgage-backed securities, reflecting their
lower risk levels. Although there were periods during the past 18 months when
investors chose safety and liquidity over yield, higher income has continued to
provide a performance edge.
Mortgage-backed securities (MBS) provided a significant yield advantage
compared to other alternatives in the intermediate government bond sector. The
relatively calm interest-rate environment reduced investors' desire to
refinance mortgages, which sometimes makes this market volatile. The fund also
benefited from its emphasis on asset-backed securities (ABS), which are backed
by loans or accounts receivable originated by banks or credit card companies.
As was true during the previous fiscal period, the fund's holdings in U.S.
Treasury securities were among its weakest holdings. Although they generated
positive returns, investor demand for Treasury securities was weak relative to
other, higher-yielding issues, which made them unable to keep pace.
CURRENT STRATEGY REFLECTS OUTLOOK FOR RELATIVE CALM AHEAD
We modestly reduced the fund's holdings in what are called "agency MBS" -
mortgage-backed securities issued by government-sponsored entities - although
this remains the fund's most heavily weighted sector. At the same time, we
added to the fund's holdings in AAA-rated non-government-sponsored agency MBS
and ABS securities. Even though the non-agency securities represented in the
fund's portfolio are AAA-rated, they are slightly lower in quality, and
slightly higher in yield, than comparable instruments backed by the U.S.
government.
We also gradually increased the portfolio's duration, beginning in the fourth
quarter of the previous fiscal year. A somewhat longer overall maturity allowed
the fund to benefit from declining interest rates. However, since then the
fund's duration has been similar to that of its benchmark, which is considered
a neutral strategy - neither bullish nor bearish.
Currently, we are not anticipating any major changes in interest rates, and we
do not regard any specific sector of the market as undervalued. Consequently,
our focus is on finding opportunities to add income to the portfolio. In the
relatively stable interest-rate environment we see ahead, we expect the fund's
MBS holdings, with their income advantage over Treasury securities, to be the
greatest contributors to the fund's total return.
5
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND
Investment Results through March 31, 2007
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/4/
March 31, 1997 through March 31, 2007
[CHART]
Lehman 1-5 Year
Net Asset Maximum Sales Government Bond
Value/1/ Charge/2/ Index
--------- ------------- ----------------
3/31/1997 $10,000 $ 9,700 $10,000
4/30/1997 10,088 9,785 10,096
5/31/1997 10,150 9,845 10,169
6/30/1997 10,247 9,940 10,248
7/31/1997 10,416 10,104 10,395
8/31/1997 10,398 10,086 10,383
9/30/1997 10,506 10,191 10,477
10/31/1997 10,624 10,305 10,576
11/30/1997 10,642 10,323 10,596
12/31/1997 10,723 10,401 10,675
1/31/1998 10,879 10,552 10,797
2/28/1998 10,854 10,528 10,796
3/31/1998 10,835 10,510 10,832
4/30/1998 10,877 10,551 10,884
5/31/1998 10,948 10,620 10,950
6/30/1998 11,028 10,697 11,012
7/31/1998 11,042 10,711 11,059
8/31/1998 11,219 10,882 11,229
9/30/1998 11,540 11,194 11,433
10/31/1998 11,428 11,085 11,478
11/30/1998 11,393 11,051 11,452
12/31/1998 11,416 11,074 11,492
1/31/1999 11,478 11,134 11,541
2/28/1999 11,346 11,006 11,444
3/31/1999 11,399 11,057 11,524
4/30/1999 11,432 11,089 11,557
5/31/1999 11,347 11,006 11,519
6/30/1999 11,273 10,935 11,551
7/31/1999 11,219 10,882 11,570
8/31/1999 11,214 10,878 11,598
9/30/1999 11,342 11,002 11,686
10/31/1999 11,364 11,023 11,712
11/30/1999 11,375 11,034 11,728
12/31/1999 11,339 10,999 11,717
1/31/2000 11,290 10,951 11,694
2/29/2000 11,390 11,049 11,782
3/31/2000 11,532 11,186 11,876
4/30/2000 11,495 11,150 11,891
5/31/2000 11,501 11,156 11,930
6/30/2000 11,665 11,315 12,087
7/31/2000 11,723 11,372 12,165
8/31/2000 11,846 11,491 12,276
9/30/2000 11,938 11,580 12,382
10/31/2000 11,981 11,621 12,456
11/30/2000 12,144 11,779 12,599
12/31/2000 12,286 11,917 12,783
1/31/2001 12,442 12,068 12,957
2/28/2001 12,535 12,159 13,055
3/31/2001 12,614 12,236 13,158
4/30/2001 12,589 12,211 13,167
5/31/2001 12,652 12,272 13,232
6/30/2001 12,661 12,281 13,277
7/31/2001 12,896 12,509 13,471
8/31/2001 12,981 12,592 13,572
9/30/2001 13,185 12,789 13,836
10/31/2001 13,383 12,981 14,002
11/30/2001 13,209 12,812 13,910
12/31/2001 13,128 12,734 13,887
1/31/2002 13,198 12,802 13,932
2/28/2002 13,328 12,929 14,022
3/31/2002 13,136 12,742 13,876
4/30/2002 13,377 12,976 14,085
5/31/2002 13,468 13,064 14,163
6/30/2002 13,602 13,194 14,312
7/31/2002 13,797 13,383 14,534
8/31/2002 13,932 13,514 14,637
9/30/2002 14,058 13,636 14,814
10/31/2002 14,089 13,666 14,838
11/30/2002 14,024 13,603 14,757
12/31/2002 14,199 13,773 14,956
1/31/2003 14,192 13,766 14,942
2/28/2003 14,315 13,886 15,050
3/31/2003 14,305 13,876 15,073
4/30/2003 14,330 13,900 15,107
5/31/2003 14,417 13,985 15,241
6/30/2003 14,391 13,959 15,247
7/31/2003 14,092 13,669 15,045
8/31/2003 14,138 13,714 15,052
9/30/2003 14,373 13,942 15,280
10/31/2003 14,272 13,844 15,179
11/30/2003 14,311 13,882 15,172
12/31/2003 14,411 13,979 15,279
1/31/2004 14,473 14,039 15,333
2/29/2004 14,585 14,147 15,447
3/31/2004 14,640 14,201 15,526
4/30/2004 14,376 13,945 15,279
5/31/2004 14,329 13,899 15,246
6/30/2004 14,383 13,952 15,263
7/31/2004 14,464 14,030 15,344
8/31/2004 14,646 14,207 15,510
9/30/2004 14,642 14,203 15,503
10/31/2004 14,718 14,276 15,575
11/30/2004 14,652 14,212 15,463
12/31/2004 14,700 14,259 15,515
1/31/2005 14,721 14,279 15,510
2/28/2005 14,663 14,223 15,448
3/31/2005 14,619 14,181 15,427
4/30/2005 14,748 14,305 15,555
5/31/2005 14,823 14,378 15,642
6/30/2005 14,845 14,400 15,678
7/31/2005 14,779 14,335 15,591
8/31/2005 14,882 14,436 15,724
9/30/2005 14,797 14,353 15,647
10/31/2005 14,732 14,290 15,616
11/30/2005 14,776 14,333 15,674
12/31/2005 14,874 14,428 15,745
1/31/2006 14,880 14,433 15,763
2/28/2006 14,929 14,481 15,769
3/31/2006 14,857 14,411 15,766
4/30/2006 14,865 14,419 15,808
5/31/2006 14,860 14,414 15,821
6/30/2006 14,882 14,436 15,847
7/31/2006 15,030 14,579 15,988
8/31/2006 15,165 14,710 16,128
9/30/2006 15,271 14,813 16,225
10/31/2006 15,338 14,878 16,295
11/30/2006 15,447 14,984 16,397
12/31/2006 15,440 14,976 16,377
1/31/2007 15,452 14,988 16,400
2/28/2007 15,591 15,123 16,560
3/31/2007 15,633 15,164 16,621
Average Annual Total Returns -- March 31, 2007/4/
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 1/3/89)
Net Asset Value/1/ 2.36% 5.22% 3.54% 4.57%
With Maximum Sales Charge/2/ -0.70 2.04 2.91/6/ 4.25/6/
CLASS B (Inception 9/27/93)
Net Asset Value/1/ 2.02 4.47 2.79 3.87
With CDSC/3/ -2.98 -0.53 2.44 3.87
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 2.02 4.47 2.83 3.87
With CDSC/3/ 1.02 3.47 2.83 3.87
CLASS Y (Inception 3/31/94)
Net Asset Value/1/ 2.64 5.54 3.83 4.94
- --------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman 1-5 Yr Gov't Bond Index 2.45% 5.43% 3.68% 5.21%
Morningstar Short Gov't Fund Avg. 2.25 4.88 3.15 4.58
----- ----- ---- ----
See page 13 for a description of the indexes.
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com. Performance history includes periods
from a predecessor fund. Class Y shares are available to certain investors, as
described in the prospectus.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
FUND COMPOSITION 3/31/2007 9/30/2006
- --------------------------------------------------------
Mortgage Related 57.2 65.4
- --------------------------------------------------------
Treasuries 23.1 19.4
- --------------------------------------------------------
Asset Backed Securities 4.2 4.5
- --------------------------------------------------------
Agency 3.3 3.1
- --------------------------------------------------------
Hybrid ARMS 3.0 2.0
- --------------------------------------------------------
Mortgage Backed Securities 1.1 1.1
- --------------------------------------------------------
Collateralized Mortgage Obligation 0.2 --
- --------------------------------------------------------
Government Sponsored -- 2.7
- --------------------------------------------------------
Short Term Investments & Other 7.9 1.8
- --------------------------------------------------------
% of Net Assets as of
EFFECTIVE MATURITY 3/31/07 9/30/06
- --------------------------------------------------
1 year or less 20.3 21.3
- --------------------------------------------------
1-5 years 66.4 59.6
- --------------------------------------------------
5-10 years 13.3 19.1
- --------------------------------------------------
10+ years n/a n/a
- --------------------------------------------------
Average Effective Maturity 3.1 years 3.5 years
- --------------------------------------------------
Portfolio characteristics will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT /PROSPECTUS/
Share Class Gross Expense Ratio/5/ Net Expense Ratio/6/
- -------------------------------------------------------
A 1.09 1.00
- -------------------------------------------------------
B 1.84 1.75
- -------------------------------------------------------
C 1.84 1.75
- -------------------------------------------------------
Y 0.74 0.74
- -------------------------------------------------------
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes maximum sales charge of 3.00%.
/3/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C shares performance assumes a 1% CDSC applied when you sell shares
within one year of purchase.
/4/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/5/Before waivers and reimbursements.
/6/After waivers and reimbursements.
6
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
PORTFOLIO PROFILE
Objective:
Seeks to maintain a high level of current income exempt from federal and
Massachusetts personal income taxes
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in Massachusetts municipal bonds, including general
obligation bonds and issues secured by specific revenue streams
- --------------------------------------------------------------------------------
Inception Date:
March 23, 1984
- --------------------------------------------------------------------------------
Manager:
Robert Payne
Martha A. Strom
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A NEFMX
Class B NEMBX
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk;
their value generally rises when prevailing interest rates fall and falls when
rates rise. This fund concentrates in a single geographic region, which can
affect your fund's performance. Some income may be subject to federal and state
taxes. Realized capital gains are fully taxable. Some investors may be subject
to the Alternative Minimum Tax (AMT). Lower-rated bonds entail higher risks.
Management Discussion
- --------------------------------------------------------------------------------
Municipal bond prices declined somewhat during the closing quarter of 2006.
This, combined with an above-average supply of new issues over the past four
months, caused the municipal market to under-perform investor expectations for
the six months ended March 31, 2007. Long-term municipal bonds were hardest
hit, and since this is a long-term fund, its performance was disappointing,
especially in light of the positive results it achieved previously.
For the six months ended March 31, 2007, the total return on Loomis Sayles
Massachusetts Tax Free Income Fund was 1.58% based on the net asset value of
Class A shares and $0.32 per share in reinvested dividends. The fund's results
were slightly above the 1.42% average return on Morningstar's Muni
Massachusetts category, but slightly behind the 1.93% return on the fund's
nationally diversified benchmark, the Lehman Municipal Bond Index. The fund's
30-day SEC yield at the end of March was 3.59%, equivalent to a taxable yield
of 5.82%, adjusted for the combined maximum federal and Massachusetts income
tax rates of 38.45%.
HIGHER-YIELDS CONTINUE TO HOLD INVESTORS' ATTENTION
Revenue bonds issued for higher education and healthcare institutions
contributed the most to performance. The higher yields available from these two
sectors gave the fund a slight performance edge over its competitors. However,
revenue bonds issued for leasing and transportation companies were the weakest
contributors to performance during the period, largely because the fund was
underweight in these sectors versus the benchmark.
Relative to other states, Massachusetts bonds performed well, primarily because
demand for the bonds has been steady, while the state has issued fewer of them.
To partially offset the dearth of supply in Massachusetts and broaden the
fund's diversification, we invested a small portion of assets in other states.
We have held a small position in New Jersey bonds for the past two years.
Unfortunately, these provided lackluster performance during the period, since
the New Jersey bonds in the portfolio were mostly intermediate-term - an area
of the market that has been less in demand lately. However, the fund continues
to benefit from its investments in municipal bonds issued in Puerto Rico. This
position not only provided additional portfolio diversification, the interest
these bonds pays is not taxable to U.S. investors at either the federal or
state level.
Because of their above-average coupon income, higher-yielding, lower-quality
bonds were in demand during the period. However, municipal bonds with longer
maturities - which had been strong - experienced less demand due to the
above-average supply of new issues.
PORTFOLIO STRATEGY REMAINED STEADY
Our strategy remained essentially unchanged during the period. The fund's
duration (its price sensitivity to changing interest rates) remained stable at
just under seven years, while maturity edged out only slightly. Our strategy is
neither defensive nor aggressive, reflecting our market outlook, which is for
interest rates to continue to fluctuate within a fairly narrow range for the
next few months.
Overall, we look for municipal credit quality trends to remain stable or
improve slightly as the economy continues to grow at a slow, sustainable rate
with low inflation prospects. Long-term, we expect municipal bonds to hold
their own or slightly under-perform the taxable markets, as investors continue
to seek the relative safety and tax-exempt features of this market. Nervousness
over economic headlines may lead to bouts of volatility for interest rates
generally, but we do not anticipate any sustained move as long as economic and
financial conditions remain favorable.
7
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
Investment Results through March 31, 2007
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/4/
March 31, 1997 through March 31, 2007
[CHART]
Net Asset Maximum Sales Lehman Municipal
Value/1/ Charge/2/ Bond Index
--------- ------------- ----------------
3/31/1997 $10,000 $ 9,575 $10,000
4/30/1997 10,081 9,653 10,084
5/31/1997 10,224 9,790 10,236
6/30/1997 10,330 9,891 10,345
7/31/1997 10,625 10,173 10,631
8/31/1997 10,526 10,079 10,531
9/30/1997 10,666 10,213 10,656
10/31/1997 10,718 10,263 10,725
11/30/1997 10,783 10,324 10,788
12/31/1997 10,931 10,467 10,945
1/31/1998 11,020 10,552 11,058
2/28/1998 11,005 10,537 11,062
3/31/1998 10,974 10,507 11,072
4/30/1998 10,935 10,471 11,022
5/31/1998 11,104 10,632 11,196
6/30/1998 11,143 10,669 11,240
7/31/1998 11,149 10,675 11,268
8/31/1998 11,327 10,845 11,442
9/30/1998 11,452 10,966 11,585
10/31/1998 11,405 10,921 11,585
11/30/1998 11,425 10,939 11,625
12/31/1998 11,468 10,981 11,655
1/31/1999 11,600 11,107 11,793
2/28/1999 11,547 11,056 11,742
3/31/1999 11,533 11,043 11,758
4/30/1999 11,567 11,076 11,787
5/31/1999 11,492 11,004 11,719
6/30/1999 11,305 10,824 11,550
7/31/1999 11,344 10,862 11,592
8/31/1999 11,183 10,708 11,500
9/30/1999 11,150 10,676 11,504
10/31/1999 10,994 10,527 11,380
11/30/1999 11,090 10,619 11,501
12/31/1999 10,994 10,527 11,415
1/31/2000 10,904 10,440 11,365
2/29/2000 11,039 10,570 11,497
3/31/2000 11,245 10,768 11,749
4/30/2000 11,195 10,719 11,679
5/31/2000 11,151 10,677 11,618
6/30/2000 11,375 10,892 11,926
7/31/2000 11,520 11,030 12,092
8/31/2000 11,664 11,168 12,279
9/30/2000 11,617 11,123 12,215
10/31/2000 11,711 11,214 12,348
11/30/2000 11,760 11,261 12,441
12/31/2000 12,011 11,500 12,749
1/31/2001 12,053 11,541 12,875
2/28/2001 12,095 11,581 12,916
3/31/2001 12,092 11,578 13,032
4/30/2001 11,967 11,458 12,890
5/31/2001 12,083 11,570 13,029
6/30/2001 12,169 11,652 13,116
7/31/2001 12,354 11,829 13,311
8/31/2001 12,586 12,051 13,530
9/30/2001 12,516 11,984 13,485
10/31/2001 12,632 12,095 13,645
11/30/2001 12,539 12,006 13,530
12/31/2001 12,397 11,870 13,402
1/31/2002 12,466 11,936 13,635
2/28/2002 12,607 12,071 13,799
3/31/2002 12,375 11,849 13,529
4/30/2002 12,602 12,066 13,793
5/31/2002 12,700 12,160 13,877
6/30/2002 12,847 12,301 14,024
7/31/2002 13,010 12,457 14,204
8/31/2002 13,169 12,609 14,375
9/30/2002 13,465 12,893 14,689
10/31/2002 13,220 12,658 14,446
11/30/2002 13,137 12,579 14,386
12/31/2002 13,400 12,830 14,689
1/31/2003 13,372 12,803 14,652
2/28/2003 13,582 13,004 14,857
3/31/2003 13,594 13,016 14,866
4/30/2003 13,681 13,099 14,964
5/31/2003 14,031 13,435 15,315
6/30/2003 13,968 13,374 15,250
7/31/2003 13,362 12,794 14,716
8/31/2003 13,449 12,877 14,826
9/30/2003 13,813 13,226 15,262
10/31/2003 13,791 13,205 15,185
11/30/2003 13,944 13,351 15,343
12/31/2003 14,074 13,476 15,470
1/31/2004 14,169 13,567 15,559
2/29/2004 14,378 13,767 15,793
3/31/2004 14,345 13,735 15,738
4/30/2004 13,959 13,365 15,365
5/31/2004 13,897 13,307 15,309
6/30/2004 13,914 13,323 15,365
7/31/2004 14,113 13,513 15,567
8/31/2004 14,390 13,778 15,879
9/30/2004 14,486 13,870 15,964
10/31/2004 14,616 13,995 16,101
11/30/2004 14,467 13,852 15,968
12/31/2004 14,660 14,037 16,163
1/31/2005 14,836 14,205 16,314
2/28/2005 14,775 14,147 16,260
3/31/2005 14,676 14,052 16,157
4/30/2005 14,941 14,306 16,412
5/31/2005 15,065 14,425 16,528
6/30/2005 15,129 14,486 16,631
7/31/2005 15,030 14,392 16,555
8/31/2005 15,193 14,547 16,723
9/30/2005 15,050 14,410 16,610
10/31/2005 14,933 14,298 16,509
11/30/2005 15,015 14,377 16,588
12/31/2005 15,151 14,507 16,731
1/31/2006 15,169 14,525 16,776
2/28/2006 15,294 14,644 16,889
3/31/2006 15,178 14,533 16,772
4/30/2006 15,191 14,546 16,767
5/31/2006 15,251 14,602 16,841
6/30/2006 15,180 14,535 16,778
7/31/2006 15,352 14,699 16,977
8/31/2006 15,590 14,927 17,229
9/30/2006 15,688 15,021 17,349
10/31/2006 15,795 15,123 17,458
11/30/2006 15,931 15,254 17,604
12/31/2006 15,849 15,176 17,541
1/31/2007 15,786 15,115 17,496
2/28/2007 16,001 15,321 17,727
3/31/2007 15,937 15,259 17,683
Average Annual Returns -- March 31, 2007/4/
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 3/23/84)
Net Asset Value/1/ 1.58% 4.99% 5.20% 4.78%
With Maximum Sales Charge/2/ -2.74 0.53 4.29 4.33
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 1.14 4.21 4.45 4.07
With CDSC/3/ -3.84 -0.79 4.11 4.07
- -------------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman Municipal Bond Index 1.93% 5.43% 5.50% 5.87%
Morningstar Muni Massachusetts Fund Avg. 1.42 4.51 4.67 4.88
Yields as of March 31, 2007
CLASS A CLASS B
SEC 30-Day Yield/5/ 3.59% 3.00%
Taxable Equivalent Yield/6/ 5.82 4.87
See page 13 for a description of the indexes.
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/2007 9/30/2006
- ------------------------------------------
Aaa 34.2 36.8
- ------------------------------------------
Aa 20.4 20.5
- ------------------------------------------
A 18.8 20.3
- ------------------------------------------
Baa 12.1 9.5
- ------------------------------------------
Ba 4.5 4.3
- ------------------------------------------
Not Rated* 8.0 6.0
- ------------------------------------------
Short-term and other 2.0 2.6
- ------------------------------------------
Credit quality is based on ratings from Moody's Investors Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/07 9/30/06
- --------------------------------------------------
1 year or less 1.2 1.9
- --------------------------------------------------
1-5 years 34.6 30.7
- --------------------------------------------------
5-10 years 39.9 49.3
- --------------------------------------------------
10+ years 24.3 18.1
- --------------------------------------------------
Average Effective Maturity 7.5 years 6.9 years
- --------------------------------------------------
Portfolio characteristics will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/7/ Net Expense Ratio/8/
- -------------------------------------------------------
A 1.14 0.95
- -------------------------------------------------------
B 1.89 1.70
- -------------------------------------------------------
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes maximum sales charge of 4.25%.
/3/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
/4/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/5/SEC Yield is based on the fund's net investment income over a 30-day period
and is calculated in accordance with SEC guidelines.
/6/Taxable equivalent yield is based on the maximum combined federal and MA
income tax bracket of 38.45%. A portion of income may be subject to federal,
state and/or alternative minimum tax. Capital gains, if any, are subject to
capital gains tax.
/7/Before waivers and reimbursements.
/8/After waivers and reimbursements.
8
LOOMIS SAYLES MUNICIPAL INCOME FUND
PORTFOLIO PROFILE
Objective:
Seeks as high a level of current income exempt from federal income taxes as is
consistent with reasonable risk and protection of shareholders' capital
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in municipal securities that pay interest exempt from federal
income tax other than the alternative minimum tax
- --------------------------------------------------------------------------------
Fund Inception:
May 9, 1977
- --------------------------------------------------------------------------------
Managers:
Robert Payne
Martha A. Strom
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A NEFTX
Class B NETBX
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk;
their value generally rises when prevailing interest rates fall and falls when
rates rise. Some income may be subject to federal and state taxes. Realized
capital gains are fully taxable. Some investors may be subject to the
Alternative Minimum Tax (AMT). Lower-rated bonds entail higher risks.
Management Discussion
- --------------------------------------------------------------------------------
Last fall the Federal Reserve Board paused in its efforts to rein in the
economy by raising short-term interest rates, but the municipal bond markets
remained volatile. Municipals outperformed Treasuries in the closing three
months of 2006, and a record pace of new issuance in the opening months of 2007
was generally well absorbed by investors. However, municipal securities
generally, and the long-term municipals that are the focus of this fund in
particular, under-performed expectations for the fiscal period.
For the six months ended March 31, 2007, the total return on Loomis Sayles
Municipal Income Fund was 1.63%, based on the net asset value of Class A
shares, $0.14 in reinvested dividends, and $0.03 in reinvested capital gains.
The fund's results were slightly below the 1.93% return on the fund's
benchmark, the Lehman Municipal Bond Index, and equal to the 1.63% average
return on Morningstar's Muni National Long category. The fund's 30-day SEC
yield at the end of March was 3.56%, equivalent to a taxable yield of 5.47%
based on the maximum Federal income tax rate of 35.00%.
MARKET STILL FAVORS HIGHER-YIELDING BONDS
Investors seeking high income helped drive up prices of municipal bonds issued
for healthcare facilities and utilities outperform other types of municipal
bonds. Healthcare and utility bonds tend to offer higher yields than bonds with
higher credit ratings. In general, the fund's best performers were those in the
BBB range - the lowest rung in the investment-grade ladder. They remain in high
demand and we continue to hold them. Transportation and water and sewer bonds
also performed well, but the fund was underweight in these sectors relative to
the benchmark. Although demand for higher-quality, lower-yielding bonds has
been relatively weak, we also continue to hold a portion of assets in these
securities because we believe prices of many high-yield bonds may currently be
overvalued.
From a geographical perspective, New York and Michigan were the best
contributors. New York state municipal bonds were in demand because of their
higher yields, and many of our high-yielding Michigan holdings were issued on
behalf of healthcare companies. Total returns on municipal bonds issued in
Pennsylvania and Texas underperformed expectations because supply exceeded
demand.
FUND'S INVESTMENT STRATEGY IS SLIGHTLY LESS DEFENSIVE
Longer-term bonds have under-performed shorter bonds recently, as investors
focused on relative safety and lower price volatility. This may make some
long-term municipal bonds more attractive from a valuation standpoint. We have
extended duration modestly. Duration is a measure of a bond's price sensitivity
to changing interest rates; a long duration is bullish, a short one is
defensive. Going forward, we will look for opportunities to buy on weakness and
gradually lengthen the portfolio to enhance current income.
OUTLOOK IS FOR RELATIVELY MINOR CHANGES IN BOND RETURNS
Currently we expect bond yields to fluctuate close to their current range, and
we are not looking for major changes in the yield curve. We will continue to
add to the fund's higher-yielding securities as opportunities present
themselves. Long-term, we believe the municipal yield curve should remain
stable, with relatively minor differences between long- and short-term rates,
although the curve in the municipal market is significantly steeper than in the
Treasury market.
Overall, we look for municipal credit quality trends to remain stable or
improve slightly as the economy continues to grow at a slow, sustainable rate
with low inflation prospects. Long-term, we expect municipal bonds to hold
their own or slightly under-perform the taxable markets as investors continue
to be drawn to the relative safety and tax-exempt features of this market.
Nervousness over economic headlines may lead to bouts of volatility for
interest rates generally, but we do not anticipate any sustained move as long
as economic and financial conditions remain favorable.
9
LOOMIS SAYLES MUNICIPAL INCOME FUND
Investment Results through March 31, 2007
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/6/
March 31, 1997 through March 31, 2007
[CHART]
Net Asset Maximum Sales Lehman Municipal
Value/1/ Charge/2/ Bond Index
--------- ---------- ----------------
3/31/1997 $10,000 $ 9,550 $10,000
4/30/1997 10,073 9,620 10,084
5/31/1997 10,187 9,728 10,236
6/30/1997 10,328 9,864 10,345
7/31/1997 10,607 10,130 10,631
8/31/1997 10,544 10,069 10,531
9/30/1997 10,632 10,154 10,656
10/31/1997 10,707 10,225 10,725
11/30/1997 10,740 10,257 10,788
12/31/1997 10,888 10,398 10,945
1/31/1998 11,023 10,527 11,058
2/28/1998 11,099 10,600 11,062
3/31/1998 11,116 10,616 11,072
4/30/1998 11,064 10,566 11,022
5/31/1998 11,183 10,680 11,196
6/30/1998 11,230 10,725 11,240
7/31/1998 11,249 10,743 11,268
8/31/1998 11,399 10,886 11,442
9/30/1998 11,491 10,974 11,585
10/31/1998 11,452 10,937 11,585
11/30/1998 11,500 10,983 11,625
12/31/1998 11,514 10,996 11,655
1/31/1999 11,627 11,103 11,793
2/28/1999 11,602 11,080 11,742
3/31/1999 11,607 11,085 11,758
4/30/1999 11,642 11,118 11,787
5/31/1999 11,601 11,079 11,719
6/30/1999 11,469 10,953 11,550
7/31/1999 11,503 10,985 11,592
8/31/1999 11,386 10,873 11,500
9/30/1999 11,390 10,878 11,504
10/31/1999 11,225 10,720 11,380
11/30/1999 11,331 10,821 11,501
12/31/1999 11,239 10,733 11,415
1/31/2000 11,179 10,676 11,365
2/29/2000 11,303 10,795 11,497
3/31/2000 11,478 10,961 11,749
4/30/2000 11,414 10,901 11,679
5/31/2000 11,382 10,870 11,618
6/30/2000 11,591 11,069 11,926
7/31/2000 11,719 11,192 12,092
8/31/2000 11,881 11,346 12,279
9/30/2000 11,849 11,316 12,215
10/31/2000 11,946 11,409 12,348
11/30/2000 12,027 11,486 12,441
12/31/2000 12,226 11,676 12,749
1/31/2001 12,311 11,757 12,875
2/28/2001 12,331 11,776 12,916
3/31/2001 12,432 11,873 13,032
4/30/2001 12,299 11,746 12,890
5/31/2001 12,416 11,857 13,029
6/30/2001 12,515 11,952 13,116
7/31/2001 12,734 12,161 13,311
8/31/2001 12,937 12,355 13,530
9/30/2001 12,714 12,142 13,485
10/31/2001 12,886 12,306 13,645
11/30/2001 12,747 12,173 13,530
12/31/2001 12,591 12,025 13,402
1/31/2002 12,798 12,222 13,635
2/28/2002 12,971 12,387 13,799
3/31/2002 12,758 12,184 13,529
4/30/2002 12,967 12,384 13,793
5/31/2002 13,033 12,447 13,877
6/30/2002 13,154 12,563 14,024
7/31/2002 13,239 12,643 14,204
8/31/2002 13,342 12,742 14,375
9/30/2002 13,555 12,945 14,689
10/31/2002 13,211 12,617 14,446
11/30/2002 13,190 12,596 14,386
12/31/2002 13,512 12,904 14,689
1/31/2003 13,343 12,742 14,652
2/28/2003 13,539 12,930 14,857
3/31/2003 13,532 12,923 14,866
4/30/2003 13,653 13,038 14,964
5/31/2003 13,993 13,363 15,315
6/30/2003 13,963 13,335 15,250
7/31/2003 13,357 12,756 14,716
8/31/2003 13,498 12,890 14,826
9/30/2003 13,901 13,276 15,262
10/31/2003 13,836 13,213 15,185
11/30/2003 14,014 13,384 15,343
12/31/2003 14,138 13,501 15,470
1/31/2004 14,224 13,584 15,559
2/29/2004 14,444 13,794 15,793
3/31/2004 14,434 13,785 15,738
4/30/2004 14,079 13,446 15,365
5/31/2004 14,048 13,416 15,309
6/30/2004 14,057 13,424 15,365
7/31/2004 14,238 13,597 15,567
8/31/2004 14,496 13,843 15,879
9/30/2004 14,580 13,924 15,964
10/31/2004 14,702 14,041 16,101
11/30/2004 14,571 13,916 15,968
12/31/2004 14,753 14,090 16,163
1/31/2005 14,914 14,243 16,314
2/28/2005 14,841 14,173 16,260
3/31/2005 14,746 14,083 16,157
4/30/2005 15,012 14,336 16,412
5/31/2005 15,123 14,442 16,528
6/30/2005 15,210 14,526 16,631
7/31/2005 15,116 14,436 16,555
8/31/2005 15,304 14,615 16,723
9/30/2005 15,147 14,466 16,610
10/31/2005 15,031 14,354 16,509
11/30/2005 15,118 14,438 16,588
12/31/2005 15,246 14,560 16,731
1/31/2006 15,272 14,585 16,776
2/28/2006 15,404 14,711 16,889
3/31/2006 15,287 14,599 16,772
4/30/2006 15,294 14,606 16,767
5/31/2006 15,343 14,653 16,841
6/30/2006 15,288 14,600 16,778
7/31/2006 15,462 14,767 16,977
8/31/2006 15,742 15,034 17,229
9/30/2006 15,876 15,162 17,349
10/31/2006 15,989 15,269 17,458
11/30/2006 16,144 15,417 17,604
12/31/2006 16,053 15,331 17,541
1/31/2007 15,973 15,254 17,496
2/28/2007 16,216 15,486 17,727
3/31/2007 16,135 15,409 17,683
Average Annual Total Returns -- March 31, 2007/6/
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 5/9/77)
Net Asset Value/1/ 1.63% 5.55% 4.81% 4.90%
With Maximum Sales Charge/2/ -3.00 0.79 3.86 4.42
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 1.25 4.76 4.06 4.05
With CDSC/3/ -3.72 -0.24 3.72 4.05
- -------------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman Municipal Bond Index 1.93% 5.43% 5.50% 5.87%
Morningstar Muni National Long Fund Avg. 1.63 4.86 4.95 5.07
Yields as of March 31, 2007
CLASS A CLASS B
SEC 30-Day Yield/4/ 3.56% 2.97%
Taxable Equivalent Yield/5/ 5.47 4.56
See page 13 for a description of the indexes.
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. Performance history includes performance from
a predecessor fund. For performance current to the most recent month-end, visit
www.ixisadvisorfunds.com.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/2007 9/30/2006
- ------------------------------------------
Aaa 30.6 28.2
- ------------------------------------------
Aa 14.3 13.8
- ------------------------------------------
A 24.1 27.1
- ------------------------------------------
Baa 14.5 14.1
- ------------------------------------------
Ba 3.4 3.3
- ------------------------------------------
Not Rated* 10.9 12.0
- ------------------------------------------
Short-term and other 2.2 1.5
- ------------------------------------------
Credit quality is based on ratings from Moody's Investors Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/07 9/30/06
- --------------------------------------------------
1 year or less 1.0 4.4
- --------------------------------------------------
1-5 years 7.5 3.7
- --------------------------------------------------
5-10 years 72.7 76.0
- --------------------------------------------------
10+ years 18.8 15.9
- --------------------------------------------------
Average Effective Maturity 9.3 years 8.4 years
- --------------------------------------------------
Portfolio characteristics will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/7/ Net Expense Ratio/8/
- -------------------------------------------------------
A 0.99 0.95
- -------------------------------------------------------
B 1.75 1.70
- -------------------------------------------------------
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes maximum sales charge of 4.50%.
/3/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
/4/SEC Yield is based on the fund's net investment income over a 30-day period
and is calculated in accordance with SEC guidelines.
/5/Taxable equivalent yield is based on the maximum federal income tax bracket
of 35%. A portion of income may be subject to federal, state and/or
alternative minimum tax. Capital gains, if any, are subject to capital gains
tax.
/6/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/7/Before waivers and reimbursements.
/8/After waivers and reimbursements.
10
LOOMIS SAYLES STRATEGIC INCOME FUND
PORTFOLIO PROFILE
Objective:
Seeks high current income, with a secondary objective of capital growth
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in income-producing securities in the U.S. and around the
world
- --------------------------------------------------------------------------------
Fund Inception:
May 1, 1995
- --------------------------------------------------------------------------------
Managers:
Daniel J. Fuss, CFA, CIC
Kathleen C. Gaffney, CFA
Associate Managers:
Matthew J. Eagan, CFA
Elaine M. Stokes
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A NEFZX
Class B NEZBX
Class C NECZX
Class Y NEZYX
- --------------------------------------------------------------------------------
What You Should Know:
Fixed-income securities are subject to credit risk and interest rate risk;
their value generally rises when prevailing interest rates fall and falls when
rates rise. Foreign and emerging market securities have special risks, such as
currency fluctuations, differing political and economic conditions, and
different accounting standards. The fund may also invest in lower-rated bonds
that may offer higher yields in return for more risk.
Management Discussion
- --------------------------------------------------------------------------------
Higher-risk, higher-yielding bonds began Loomis Sayles Strategic Income Fund's
fiscal year on a strong note, amid steady economic expansion fueled by growing
corporate profits. By February, investor demand for higher income, and their
comfort level with risk early in the period, had driven up prices on
high-yielding corporate bonds, narrowing the spread - the yield advantage
lower-quality bonds have over U.S. Treasuries - to its narrowest level in
years. However, early in February a sharp drop in China's stock market caused
nervous equity investors to seek the safer haven of high-quality U.S. Treasury
securities. Spreads widened out again and ended March 2007 little changed from
their levels at the beginning of January. Meanwhile, heightened concern over
the weak U.S. housing market and softening business spending prompted many
investors to sell their riskier, long-term bonds. The yield curve, a graphic
representation of the difference in yield between short- and long-term bonds,
widened.
For the six months ended March 31, 2007, the fund provided a total return of
4.87%, based on the net asset value of Class A shares and $0.41 in reinvested
dividends. These results outdistanced the fund's benchmark, the Lehman
Aggregate Bond Index, which returned 2.76% for the period. (Bear in mind that
the fund has a broader reach and greater flexibility than the index.) The fund
also outperformed the 4.49% average return on the funds in Morningstar's
Multisector Bond Category. Its 30-day SEC yield was 5.11% on March 31, 2007.
STRATEGY TRACKED INVESTORS' RISK ACCEPTANCE
Successful security selection and its exposure to stronger markets were the
primary drivers of the fund's results. Early in the period investors favored
riskier sectors, including emerging markets, where favorable economic
conditions brightened expectations. Later in the period we raised the
portfolio's credit quality, so that, by the end of March, investment-grade
issues accounted for nearly 70% of the fund's assets. Non-U.S. dollar issues
were standouts. Our slightly longer duration relative to the fund's benchmark
was a modest negative when interest rates rose and bond prices retreated.
Duration is a measure of a portfolio's sensitivity to changes in interest
rates. A longer duration is more aggressive; a shorter duration is defensive.
STRONG CURRENCIES AND SECTORS BOOSTED RESULTS
About a third of the fund is invested in bonds denominated in currencies
outside the United States, and these were our best performers, with the
exception of Canadian-dollar issues. Investments in strong currencies, as well
as both high-yield and investment-grade issues, drove the fund's superior
results. Strength in Brazil's real, the Mexican peso and the New Zealand dollar
enhanced returns. Results were also positive among high-yield utility bonds and
convertible issues. Careful research led to favorable returns among sovereigns
(debt securities backed by foreign governments), as well as bonds issued by
some consumer companies and firms engaged in telecommunications, media and
technology.
OUTLOOK IS FOR RENEWED MOMENTUM
We believe the current economic slowdown signals a pause in the economic
expansion, but not an end. We expect growth to resume later in the year,
favoring corporate issues. The current period of slackening activity could cool
inflationary fires, however, and lessen pressure on the Federal Reserve Board
to resume raising short-term rates. We also believe the housing slump may ease
in coming months, although a protracted or steepening slowdown could have wider
effects and lead to rate cuts. Lenders are also being more cautious in the wake
of controversies surrounding subprime lending, and any squeeze on credit could
jeopardize the economic re-acceleration that we anticipate.
Valuations on high-yield issues appear to be stretched, in our opinion, and
volatility could return to this market. But economic conditions still favor the
sector, and we believe careful research should enhance returns. We are also
finding attractive valuations among mortgage-backed issues, although we are
mindful of the risks to this sector if subprime turbulence intensifies.
11
LOOMIS SAYLES STRATEGIC INCOME FUND
Investment Results through March 31, 2007
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/4/
March 31, 1997 through March 31, 2007
[CHART]
Lehman
Net Asset Maximum Sales Lehman Aggregate Universal Bond
Value/1/ Charge/2/ Bond Index Index
--------- ------------- ---------------- ---------------
3/31/1997 $10,000 $ 9,550 $10,000 $10,000
4/30/1997 10,064 9,611 10,150 10,151
5/31/1997 10,280 9,818 10,246 10,259
6/30/1997 10,514 10,041 10,367 10,384
7/31/1997 10,987 10,492 10,647 10,667
8/31/1997 10,703 10,222 10,556 10,579
9/30/1997 11,081 10,583 10,712 10,743
10/31/1997 10,849 10,360 10,867 10,845
11/30/1997 10,907 10,416 10,917 10,904
12/31/1997 10,851 10,363 11,027 11,020
1/31/1998 11,028 10,532 11,169 11,159
2/28/1998 11,230 10,725 11,160 11,168
3/31/1998 11,471 10,954 11,199 11,219
4/30/1998 11,474 10,958 11,257 11,276
5/31/1998 11,287 10,779 11,364 11,357
6/30/1998 11,107 10,608 11,460 11,432
7/31/1998 10,969 10,475 11,485 11,460
8/31/1998 9,622 9,189 11,671 11,459
9/30/1998 9,933 9,486 11,945 11,731
10/31/1998 10,041 9,589 11,882 11,682
11/30/1998 10,714 10,232 11,949 11,799
12/31/1998 10,665 10,185 11,985 11,825
1/31/1999 10,850 10,361 12,070 11,904
2/28/1999 10,694 10,213 11,860 11,716
3/31/1999 11,259 10,752 11,926 11,805
4/30/1999 11,981 11,442 11,963 11,875
5/31/1999 11,609 11,087 11,858 11,755
6/30/1999 11,643 11,119 11,821 11,734
7/31/1999 11,414 10,900 11,770 11,686
8/31/1999 11,271 10,764 11,764 11,673
9/30/1999 11,343 10,833 11,901 11,799
10/31/1999 11,439 10,924 11,945 11,849
11/30/1999 11,646 11,121 11,944 11,868
12/31/1999 11,962 11,424 11,886 11,846
1/31/2000 11,851 11,318 11,848 11,805
2/29/2000 12,318 11,764 11,991 11,955
3/31/2000 12,442 11,882 12,149 12,095
4/30/2000 12,087 11,543 12,114 12,057
5/31/2000 11,696 11,170 12,108 12,035
6/30/2000 12,142 11,595 12,360 12,294
7/31/2000 12,249 11,697 12,473 12,413
8/31/2000 12,518 11,955 12,653 12,594
9/30/2000 12,188 11,639 12,733 12,658
10/31/2000 11,692 11,165 12,817 12,709
11/30/2000 11,631 11,107 13,027 12,880
12/31/2000 12,044 11,502 13,268 13,127
1/31/2001 12,427 11,867 13,485 13,384
2/28/2001 12,408 11,850 13,603 13,496
3/31/2001 11,939 11,402 13,671 13,542
4/30/2001 11,744 11,216 13,614 13,481
5/31/2001 12,006 11,466 13,696 13,578
6/30/2001 11,974 11,435 13,748 13,617
7/31/2001 11,982 11,443 14,056 13,885
8/31/2001 12,247 11,696 14,217 14,058
9/30/2001 11,640 11,116 14,382 14,159
10/31/2001 11,914 11,378 14,683 14,444
11/30/2001 12,083 11,540 14,481 14,275
12/31/2001 12,028 11,487 14,389 14,190
1/31/2002 12,165 11,618 14,505 14,309
2/28/2002 12,311 11,757 14,646 14,443
3/31/2002 12,453 11,892 14,402 14,234
4/30/2002 12,754 12,180 14,681 14,505
5/31/2002 13,024 12,438 14,806 14,614
6/30/2002 12,817 12,240 14,934 14,667
7/31/2002 12,513 11,950 15,114 14,792
8/31/2002 12,864 12,285 15,370 15,064
9/30/2002 12,690 12,119 15,619 15,280
10/31/2002 12,943 12,360 15,547 15,228
11/30/2002 13,427 12,823 15,543 15,269
12/31/2002 13,891 13,266 15,864 15,585
1/31/2003 14,282 13,639 15,878 15,628
2/28/2003 14,667 14,007 16,098 15,849
3/31/2003 14,810 14,143 16,085 15,865
4/30/2003 15,660 14,955 16,218 16,052
5/31/2003 16,443 15,703 16,520 16,359
6/30/2003 16,650 15,901 16,487 16,355
7/31/2003 16,197 15,468 15,933 15,829
8/31/2003 16,383 15,646 16,039 15,943
9/30/2003 17,184 16,411 16,464 16,368
10/31/2003 17,573 16,782 16,310 16,251
11/30/2003 18,061 17,248 16,349 16,307
12/31/2003 18,731 17,888 16,515 16,492
1/31/2004 19,065 18,207 16,648 16,635
2/29/2004 19,051 18,194 16,828 16,798
3/31/2004 19,301 18,432 16,955 16,933
4/30/2004 18,500 17,667 16,513 16,500
5/31/2004 18,191 17,372 16,447 16,416
6/30/2004 18,537 17,702 16,540 16,520
7/31/2004 18,716 17,874 16,704 16,695
8/31/2004 19,293 18,425 17,023 17,026
9/30/2004 19,798 18,907 17,069 17,093
10/31/2004 20,268 19,356 17,212 17,249
11/30/2004 20,754 19,820 17,075 17,142
12/31/2004 21,155 20,203 17,232 17,312
1/31/2005 21,000 20,055 17,340 17,412
2/28/2005 21,275 20,318 17,238 17,340
3/31/2005 20,926 19,985 17,149 17,214
4/30/2005 20,761 19,827 17,381 17,423
5/31/2005 20,969 20,025 17,569 17,626
6/30/2005 21,363 20,401 17,665 17,747
7/31/2005 21,549 20,579 17,504 17,619
8/31/2005 21,799 20,818 17,729 17,835
9/30/2005 21,818 20,836 17,546 17,669
10/31/2005 21,602 20,630 17,407 17,527
11/30/2005 21,710 20,733 17,484 17,612
12/31/2005 21,945 20,957 17,651 17,782
1/31/2006 22,502 21,490 17,652 17,808
2/28/2006 22,747 21,724 17,710 17,878
3/31/2006 22,620 21,602 17,536 17,720
4/30/2006 22,962 21,928 17,505 17,698
5/31/2006 22,720 21,698 17,486 17,673
6/30/2006 22,657 21,637 17,523 17,701
7/31/2006 22,992 21,958 17,760 17,944
8/31/2006 23,549 22,489 18,032 18,224
9/30/2006 23,789 22,718 18,190 18,390
10/31/2006 24,227 23,136 18,310 18,525
11/30/2006 24,544 23,439 18,523 18,747
12/31/2006 24,546 23,442 18,415 18,666
1/31/2007 24,593 23,486 18,408 18,671
2/28/2007 25,014 23,888 18,692 18,958
3/31/2007 24,943 23,821 18,692 18,964
Average Annual Returns -- March 31, 2007/4/
SINCE
6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION
CLASS A (Inception 5/1/95)
Net Asset Value/1/ 4.87% 10.30% 14.90% 9.57% --
With Maximum Sales Charge/2/ 0.13 5.34 13.86 9.06 --
CLASS B (Inception 5/1/95)
Net Asset Value/1/ 4.49 9.47 14.06 8.74 --
With CDSC/3/ -0.51 4.47 13.82 8.74 --
CLASS C (Inception 5/1/95)
Net Asset Value/1/ 4.55 9.55 14.08 8.75 --
With CDSC/3/ 3.55 8.55 14.08 8.75 --
CLASS Y (Inception 12/1/99)/5/
Net Asset Value/1/ 5.10 10.62 15.25 -- 11.29%
- ------------------------------------------------------------------------------------
SINCE
CLASS Y
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS INCEPTION/5/
Lehman Aggregate Bond Index 2.76% 6.59% 5.35% 6.46% 6.30%
Lehman U.S. Universal Bond Index 3.12 7.02 5.91 6.61 6.60
Morningstar Multisector Bond Fund Avg. 4.49 7.93 8.75 6.27 6.92
See page 13 for a description of the indexes.
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. Performance history includes periods from a
predecessor fund. For performance current to the most recent month-end, visit
www.ixisadvisorfunds.com. Class Y shares are available to certain investors, as
described in the prospectus.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/2007 9/30/2006
- ------------------------------------------
Aaa 36.0 32.1
- ------------------------------------------
Aa 4.9 6.1
- ------------------------------------------
A 3.3 3.5
- ------------------------------------------
Baa 17.1 15.3
- ------------------------------------------
Ba 8.2 9.5
- ------------------------------------------
B 10.9 13.6
- ------------------------------------------
Caa 6.2 3.5
- ------------------------------------------
Not Rated* 6.2 5.6
- ------------------------------------------
Short-term and other 7.2 10.8
- ------------------------------------------
Credit quality is based on ratings from Moody's Investor Service.
* Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
% of Net Assets as of
EFFECTIVE MATURITY 3/31/07 9/30/06
- --------------------------------------------------
1 year or less 8.1 14.5
- --------------------------------------------------
1-5 years 24.2 25.7
- --------------------------------------------------
5-10 years 18.0 18.0
- --------------------------------------------------
10+ years 49.7 41.8
- --------------------------------------------------
Average Effective Maturity 14.5 years 12.7 years
- --------------------------------------------------
Portfolio characteristics will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/6/ Net Expense Ratio/7/
- -------------------------------------------------------
A 1.05 1.05
- -------------------------------------------------------
B 1.80 1.80
- -------------------------------------------------------
C 1.80 1.80
- -------------------------------------------------------
Y 0.78 0.78
- -------------------------------------------------------
NOTES TO CHARTS
/1/Does not include a sales charge.
/2/Includes maximum sales charge of 4.50%.
/3/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C share performance assumes a 1.00% CDSC applied when you sell shares
within one year of purchase.
/4/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/5/The since-inception comparative performance figures shown for Class Y are
calculated from 12/1/99.
/6/Before waivers and reimbursements.
/7/After waivers and reimbursements.
12
ADDITIONAL INFORMATION
The views expressed in this report reflect those of the portfolio managers as
of the dates indicated. The managers' views are subject to change at any time
without notice based on changes in market or other conditions. References to
specific securities or industries should not be regarded as investment advice.
Because the funds are actively managed, there is no assurance that they will
continue to invest in the securities or industries mentioned.
For more complete information on any IXIS Advisor Fund, contact your financial
professional or call IXIS Advisor Funds and ask for a free prospectus, which
contains more complete information including charges and other ongoing
expenses. Investors should consider a fund's objective, risks and expenses
carefully before investing. This and other fund information can be found in the
prospectus. Please read the prospectus carefully before investing.
INDEX/AVERAGE DESCRIPTIONS
Lehman Aggregate Bond Index is an unmanaged index of investment-grade bonds
with one- to ten-year maturities issued by the U.S. government, its agencies
and U.S. corporations.
Lehman High Yield Composite Index is a market-weighted, unmanaged index of
fixed-rate, non-investment grade debt.
Lehman Municipal Bond Index is an unmanaged index of bonds issued by
municipalities and other government entities having maturities of more than one
year.
Lehman 1-5 Year Government Bond Index is an unmanaged, market-weighted index of
bonds issued by the U.S. government and its agencies, with maturities between
one and five years.
Lehman U.S. Credit Index is an unmanaged index that includes all publicly
issued, fixed-rate, nonconvertible, dollar-denominated, SEC-registered, U.S.
investment-grade corporate debt, and foreign debt that meets specific maturity,
liquidity and quality requirements.
Lehman U.S. Universal Bond Index is an unmanaged index representing a blend of
the Lehman Aggregate Bond Index, the High Yield Index, and the Emerging Market
Index, among other indexes.
Morningstar High Yield Bond Fund Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Morningstar, Inc.
Morningstar Intermediate-Term Bond Fund Average is the average performance
without sales charge of funds with similar investment objectives, as calculated
by Morningstar, Inc.
Morningstar Multisector Bond Fund Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Morningstar, Inc.
Morningstar Muni Massachusetts Fund Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Morningstar, Inc.
Morningstar Muni National Long Fund Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Morningstar, Inc.
Morningstar Short Government Fund Average is the average performance without
sales charge of funds with similar investment objectives, as calculated by
Morningstar, Inc.
PROXY VOTING INFORMATION
A description of the funds' proxy voting policies and procedures is available
without charge, upon request, by calling IXIS Advisor Funds at 800-225-5478; on
the funds' website at www.ixisadvisorfunds.com; and on the Securities and
Exchange Commission's (SEC's) website at www.sec.gov. Information regarding how
the funds voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2006 is available from the funds' website and the SEC's
website.
QUARTERLY PORTFOLIO SCHEDULES
The funds file a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q
are available on the SEC's website at www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
13
UNDERSTANDING FUND EXPENSES
As a mutual fund shareholder, you incur different costs: transaction costs,
including sales charges (loads) on purchases, redemption fees and certain
exchange fees and ongoing costs, including management fees, distribution and/or
service fees (12b-1 fees), and other fund expenses. In addition, each fund
assesses a minimum balance fee of $20 on an annual basis for accounts that fall
below the required minimum to establish an account. Certain exemptions may
apply. These costs are described in more detail in the funds' prospectus. The
examples below are intended to help you understand the ongoing costs of
investing in the funds and help you compare these with the ongoing costs of
investing in other mutual funds.
The first line in the table of each Class of fund shares shows the actual
account values and actual fund expenses you would have paid on a $1,000
investment in the fund from October 1, 2006 through March 31, 2007. To estimate
the expenses you paid over the period, simply divide your account value by
$1,000 (for example $8,600 account value divided by $1,000 = 8.60) and multiply
the result by the number in the Expenses Paid During Period column as shown
below for your Class.
The second line in the table of each Class of fund shares provides information
about hypothetical account values and hypothetical expenses based on the fund's
actual expense ratios and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid on your investment for the period. You may use
this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs such as sales charges, redemption fees, or
exchange fees. Therefore, the second line in the table of each fund is useful
in comparing ongoing costs only, and will not help you determine the relative
costs of owning different funds. If transaction costs were included, total
costs would be higher.
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES CORE PLUS BOND FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,035.10 $5.33
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.70 $5.29
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,031.90 $9.12
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.96 $9.05
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,030.90 $9.11
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.96 $9.05
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,037.20 $3.30
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.69 $3.28
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement): 1.05%, 1.80%, 1.80% and 0.65% for Class A, B, C and Y,
respectively, multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half-year, divided
by 365 (to reflect the half-year period).
14
UNDERSTANDING FUND EXPENSES
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES HIGH INCOME FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,075.50 $6.31
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.85 $6.14
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,070.70 $10.17
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.11 $9.90
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,072.80 $10.13
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.16 $9.85
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement): 1.22%, 1.97% and 1.96% for Class A, B and C,
respectively, multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half-year, divided
by 365 (to reflect the half-year period).
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
AGENCY FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- -------------------------------------------------------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,023.60 $5.05
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04
- -------------------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,020.20 $8.81
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.21 $8.80
- -------------------------------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,020.20 $8.81
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.21 $8.80
- -------------------------------------------------------------------------------------------------------------------
CLASS Y
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,026.40 $3.54
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.44 $3.53
- -------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement), if any: 1.00%, 1.75%, 1.75% and 0.70% for Class A, B, C
and Y, respectively, multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half-year, divided
by 365 (to reflect the half-year period).
15
UNDERSTANDING FUND EXPENSES
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- ---------------------------------------------------------------------------------------------------------------------
CLASS A
- ---------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,015.80 $4.77
- ---------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.19 $4.78
- ---------------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,011.40 $8.53
- ---------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.45 $8.55
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement): 0.95% and 1.70% for Class A and B, respectively,
multiplied by the average account value over the period, multiplied by the
number of days in the most recent fiscal half-year, divided by 365 (to reflect
the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES MUNICIPAL INCOME FUND 10/01/06 3/31/07 10/1/06 - 3/31/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,016.30 $4.78
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.19 $4.78
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,012.50 $8.53
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.45 $8.55
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement): 0.95% and 1.70% for Class A and B, respectively,
multiplied by the average account value over the period, multiplied by the
number of days in the most recent fiscal half-year, divided by 365 (to reflect
the half-year period).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES STRATEGIC INCOME FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,048.70 $4.95
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.09 $4.89
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,044.90 $8.77
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.36 $8.65
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,045.50 $8.77
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.36 $8.65
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,051.00 $3.63
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.39 $3.58
*Expenses are equal to the Fund's annualized expense ratio: 0.97%, 1.72%, 1.72%
and 0.71% for Class A, B, C and Y, respectively, multiplied by the average
account value over the period, multiplied by the number of days in the most
recent fiscal half-year, divided by 365 (to reflect the half-year period).
16
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------------------------
Bonds and Notes -- 96.5% of Net Assets
Asset-Backed Securities -- 4.5%
$ 339,407 AmeriCredit Automobile Receivables Trust, Series 2003-D-M,
Class A-4,
2.840%, 8/06/2010 $ 337,000
1,886,744 AmeriCredit Automobile Receivables Trust, Series 2005-CF,
Class A-3,
4.470%, 5/06/2010 1,880,166
512,741 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A2,
3.872%, 3/25/2020 505,695
1,095,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3,
4.615%, 2/25/2035 1,063,896
2,190,000 Countrywide Asset-Backed Certificates, Series 2006-S4, Class A3,
5.804%, 7/25/2034 2,181,691
1,730,000 Ford Credit Auto Owner Trust, Series 2004-A, Class A4,
3.540%, 11/15/2008 1,716,939
1,475,348 Residential Asset Securities Corp., Series 2003-KS10, Class AI4,
4.470%, 3/25/2032 1,456,748
324,025 WFS Financial Owner Trust, Series 2004-4, Class A3,
2.980%, 9/17/2009 321,948
515,000 WFS Financial Owner Trust, Series 2004-4, Class A4,
3.440%, 5/17/2012 505,550
---------------
9,969,633
---------------
Automotive -- 1.5%
1,645,000 Ford Motor Co.,
7.450%, 7/16/2031(b) 1,272,819
1,120,000 Ford Motor Credit Co.,
8.000%, 12/15/2016 1,077,712
105,000,000 Toyota Motor Credit Corp.,
0.750%, 6/09/2008 (JPY) 891,224
---------------
3,241,755
---------------
Banking -- 1.0%
70,000,000 Rabobank Nederland, Series EMTN, 144A,
13.500%, 1/28/2008 (ISK) 1,060,980
1,200,000 State Street Institutional Capital A, Series A, Guaranteed Note, 144A,
7.940%, 12/30/2026 1,252,383
---------------
2,313,363
---------------
Brokerage -- 0.4%
925,000 Goldman Sachs Group, Inc.,
5.300%, 2/14/2012 925,268
---------------
Building Materials -- 0.6%
495,000 Owens Corning, Inc., 144A,
7.000%, 12/01/2036 493,676
900,000 USG Corp., 144A,
6.300%, 11/15/2016 906,371
---------------
1,400,047
---------------
Consumer Cyclical Services -- 0.5%
1,160,000 Western Union Co.,
6.200%, 11/17/2036 1,101,304
---------------
Diversified Manufacturing -- 0.7%
1,650,000 Crane Co.,
6.550%, 11/15/2036 1,645,575
---------------
Electric -- 2.3%
1,455,000 Duke Energy Corp., Senior Note,
4.200%, 10/01/2008 1,432,979
1,325,000 Enersis SA, Chile,
7.375%, 1/15/2014(b) 1,438,142
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------------------------------
Electric -- continued
$ 1,325,000 Ipalco Enterprises, Inc., Senior Secured Note,
8.375%, 11/14/2008 $ 1,368,062
790,000 Southern California Edison Co.,
7.625%, 1/15/2010 840,299
---------------
5,079,482
---------------
Financial Services -- 1.0%
1,050,000 HSBC Finance Corp.,
7.000%, 5/15/2012 1,126,815
1,185,000 Morgan Stanley,
4.000%, 1/15/2010 1,151,753
---------------
2,278,568
---------------
Gaming -- 0.4%
770,000 Harrah's Operating Co., Inc., Senior Note,
7.125%, 6/01/2007 772,888
---------------
Government Guaranteed -- 1.6%
275,000,000 Kreditanstalt fuer Wiederaufbau, Series EMTN,
2.050%, 9/21/2009 (JPY) 2,398,329
1,325,000 Kreditanstalt fuer Wiederaufbau,
4.000%, 2/15/2012 (CHF) 1,162,051
---------------
3,560,380
---------------
Healthcare -- 1.1%
575,000 HCA, Inc.,
7.500%, 12/15/2023 487,900
485,000 Hospira, Inc.,
6.050%, 3/30/2017 484,619
1,250,000 Medco Health Solutions,
7.250%, 8/15/2013 1,351,894
---------------
2,324,413
---------------
Home Construction -- 0.5%
1,050,000 Desarrolladora Homex SAB de CV,
7.500%, 9/28/2015 1,083,600
---------------
Hybrid ARMs -- 0.5%
1,205,738 JPMorgan Mortgage Trust, Series 2006-A7, Class 1A3,
5.936%, 1/25/2037(c) 1,208,434
---------------
Independent Energy -- 0.0%
65,000 Anadarko Petroleum Corp.,
6.450%, 9/15/2036 64,321
---------------
Media Cable -- 1.0%
1,060,000 Cox Communications, Inc.,
6.750%, 3/15/2011 1,114,858
1,085,000 CSC Holdings, Inc., Senior Note, Series B,
7.625%, 4/01/2011 1,112,125
---------------
2,226,983
---------------
Mortgage Backed Securities -- 7.1%
795,000 Banc of America Commercial Mortgage, Inc., Series 2005-6, Class A2,
5.165%, 9/10/2047(c) 796,431
850,000 Banc of America Commercial Mortgage, Inc., Series 2006-1, Class A2,
5.334%, 9/10/2045(c) 855,571
1,245,000 Bear Stearns Commercial Mortgage Securities, Inc.,
Series 2005-PW10, Class A2,
5.270%, 12/11/2040 1,251,315
2,150,000 Bear Stearns Commercial Mortgage Securities, Inc.,
Series 2006-PW12, Class A4,
5.711%, 9/11/2038(c) 2,216,025
See accompanying notes to financial statements.
17
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------------
Mortgage Backed Securities -- continued
$ 710,000 Citigroup/Deutsche Bank Commercial Mortgage Trust,
Series 2006-CD2, Class A2,
5.408%, 1/15/2046 $ 715,599
2,160,000 Commercial Mortgage Pass Through Certificates, Series 2006-C7,
Class A4,
5.962%, 6/10/2046(c) 2,232,928
1,500,000 GS Mortgage Securities Corp. II, Series 2005-GG4, Class A4A,
4.751%, 7/10/2039 1,447,061
1,710,000 LB-UBS Commercial Mortgage Trust, Series 2005-C3, Class A3,
4.647%, 7/15/2030 1,677,491
2,400,000 Morgan Stanley Capital I, Series 2005-T19, Class A4A,
4.890%, 6/12/2047 2,332,498
2,195,000 Wachovia Bank Commercial Mortgage Trust, Series 2005-C20,
Class A2,
4.519%, 7/15/2042 2,153,307
---------------
15,678,226
---------------
Mortgage Related -- 27.5%
2,189,198 FHLMC,
4.000%, 7/01/2019 2,068,846
6,310,898 FHLMC,
4.500%, with various maturities to 2034(d) 6,055,736
12,097,847 FHLMC,
5.000%, with various maturities to 2036(d) 11,755,150
1,528,449 FHLMC,
5.500%, with various maturities to 2018(d) 1,535,032
225,691 FHLMC,
6.000%, 6/01/2035 228,536
140,000,000 FNMA,
1.750%, 3/26/2008 (JPY) 1,200,770
140,000,000 FNMA,
2.125%, 10/09/2007 (JPY) 1,197,417
868,671 FNMA,
4.000%, 6/01/2019 821,105
6,050,165 FNMA,
4.500%, with various maturities to 2035(d) 5,798,763
5,825,188 FNMA,
5.000%, 7/01/2035 5,633,696
7,852,580 FNMA,
5.500%, with various maturities to 2036(d) 7,799,461
5,628,893 FNMA,
6.000%, with various maturities to 2034(d) 5,712,564
4,921,043 FNMA,
6.500%, with various maturities to 2036(d) 5,024,528
267,766 FNMA,
7.000%, with various maturities to 2030(d) 279,721
298,230 FNMA,
7.500%, with various maturities to 2032(d) 312,161
1,157,444 GNMA,
5.500%, 2/20/2034 1,150,486
433,741 GNMA,
6.000%, 1/15/2029 441,066
869,602 GNMA,
6.500%, with various maturities to 2032(d) 894,547
514,551 GNMA,
7.000%, with various maturities to 2029(d) 538,417
153,431 GNMA,
7.500%, with various maturities to 2030(d) 160,316
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------------------
Mortgage Related -- continued
$ 90,172 GNMA,
8.000%, 11/15/2029 $ 95,772
138,469 GNMA,
8.500%, with various maturities to 2023(d) 148,940
23,557 GNMA,
9.000%, with various maturities to 2016(d) 25,235
61,201 GNMA,
11.500%, with various maturities to 2015(d) 68,279
1,800,000 Greenwich Capital Commercial Funding Corp., Series 2005-GG5,
Class A2,
5.117%, 4/10/2037 1,800,568
---------------
60,747,112
---------------
Non-Captive Diversified -- 0.6%
1,180,000 GMAC LLC,
8.000%, 11/01/2031 1,265,130
---------------
Non-Captive Finance -- 2.3%
431,000,000 General Electric Capital Corp., Series EMTN,
0.550%, 10/14/2008 (JPY) 3,641,299
1,665,000 General Electric Capital Corp.,
1.750%, 2/12/2010 (CHF) 1,335,758
---------------
4,977,057
---------------
Paper -- 0.5%
330,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 318,450
755,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 747,450
---------------
1,065,900
---------------
Pharmaceuticals -- 1.2%
2,750,000 Valeant Pharmaceuticals International, Senior Note,
7.000%, 12/15/2011 2,660,625
---------------
Property & Casualty Insurance -- 0.2%
475,000 Willis North America, Inc.,
6.200%, 3/28/2017 476,043
---------------
Real Estate Investment Trusts -- 1.9%
195,000 Colonial Realty, LP, Senior Note,
4.750%, 2/01/2010 192,236
1,350,000 Colonial Realty, LP, Senior Note,
5.500%, 10/01/2015 1,325,734
1,250,000 iStar Financial, Inc., Senior Note,
6.000%, 12/15/2010 1,276,635
1,340,000 Simon Property Group, LP,
6.375%, 11/15/2007 1,347,372
---------------
4,141,977
---------------
Refining -- 0.5%
1,105,000 Premcor Refining Group, Inc. (The),
6.125%, 5/01/2011 1,140,147
---------------
Sovereigns -- 2.6%
18,980,000 Kingdom of Norway,
5.500%, 5/15/2009 (NOK) 3,168,989
2,165,000 Kingdom of Norway,
6.000%, 5/16/2011 (NOK) 374,132
2,145,000 Pemex Project Funding Master Trust,
7.875%, 2/01/2009 2,236,163
---------------
5,779,284
---------------
See accompanying notes to financial statements.
18
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------
Supranational -- 0.7%
$ 120,000,000 Inter-American Development Bank,
1.900%, 7/08/2009 (JPY) $ 1,042,024
68,400,000 International Bank for Reconstruction & Development,
2.000%, 2/18/2008 (JPY) 586,791
---------------
1,628,815
---------------
Technology -- 2.6%
665,000 Corning, Inc.,
6.200%, 3/15/2016 683,337
355,000 Corning, Inc.,
7.250%, 8/15/2036 374,216
565,000 Freescale Semiconductor, Inc., 144A,
10.125%, 12/15/2016(b) 566,413
295,000 Nortel Networks Corp.,
6.875%, 9/01/2023 274,350
920,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 885,500
2,075,000 Pitney Bowes, Inc.,
5.250%, 1/15/2037 2,025,814
978,000 Xerox Corp.,
6.400%, 3/15/2016 1,005,898
---------------
5,815,528
---------------
Treasuries -- 23.9%
296,000,000 Canadian Government,
1.900%, 3/23/2009 (JPY) 2,563,273
8,917,412 U.S. Treasury Bond,
2.375%, 1/15/2025(b)(e) 8,975,232
1,450,000 U.S. Treasury Bond,
4.000%, 2/15/2014(b) 1,398,798
14,291,000 U.S. Treasury Bond,
4.500%, 2/15/2036(b) 13,473,726
715,000 U.S. Treasury Bond,
5.375%, 2/15/2031(b) 762,257
445,000 U.S. Treasury Note,
3.000%, 11/15/2007(b) 439,542
2,075,000 U.S. Treasury Note,
3.375%, 10/15/2009(b) 2,016,479
2,555,000 U.S. Treasury Note,
4.000%, 11/15/2012(b) 2,487,931
1,070,000 U.S. Treasury Note,
4.250%, 8/15/2013(b) 1,051,735
3,350,000 U.S. Treasury Note,
4.375%, 8/15/2012(b) 3,328,932
6,125,000 U.S. Treasury Note,
4.500%, 2/15/2016(b) 6,062,794
8,670,000 U.S. Treasury Note,
4.625%, with various maturities to 2017(b)(f) 8,645,622
1,540,000 U.S. Treasury Note,
5.125%, with various maturities to 2016(b)(f) 1,582,097
---------------
52,788,418
---------------
Wireless -- 1.5%
730,000 Sprint Capital Corp.,
6.125%, 11/15/2008 739,283
1,110,000 Sprint Capital Corp.,
6.875%, 11/15/2028 1,105,434
1,420,000 True Move Co., Ltd., 144A,
10.750%, 12/16/2013 1,444,850
---------------
3,289,567
---------------
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------------------
Wirelines -- 5.8%
$ 1,380,000 Citizens Communications Co., 144A,
7.875%, 1/15/2027 $ 1,411,050
2,760,000 Embarq Corp.,
7.995%, 6/01/2036 2,850,006
3,200,000 LCI International, Inc., Senior Note,
7.250%, 6/15/2007 3,208,000
210,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 197,663
1,240,000 Qwest Corp.,
7.200%, 11/10/2026 1,255,500
850,000 Qwest Corp.,
7.250%, 9/15/2025 876,562
255,000 Qwest Corp.,
7.250%, 10/15/2035 254,362
1,675,000 Qwest Corp.,
7.500%, 6/15/2023(b) 1,702,219
1,055,000 Telefonica Emisones SAU,
6.421%, 6/20/2016 1,101,130
---------------
12,856,492
---------------
Total Bonds and Notes (Identified Cost $213,243,000) 213,506,335
---------------
Shares/
Principal
Amount (++)
- ------------------------------------------------------------------------------------------------
Short-Term Investments -- 27.7%
55,198,804 State Street Securities Lending Quality Trust(g) 55,198,804
$ 5,936,038 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/2007 at 4.250% to be repurchased at
$5,938,141 on 4/2/2007, collateralized by $4,395,000 U.S.
Treasury Bond, 8.875% due 2/15/2019 valued at $6,060,617,
including accrued interest (Note 2f ) 5,936,038
---------------
Total Short-Term Investments (Identified Cost $61,134,842) 61,134,842
---------------
Total Investments -- 124.2%
(Identified Cost $274,377,842)(a) 274,641,177
Other assets less liabilities -- (24.2)% (53,453,843)
---------------
Net Assets -- 100% $ 221,187,334
===============
(++) Principal amount is in U.S. dollars unless otherwise noted.
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales. Amortization of
premium on debt securities is excluded for tax purposes.):
At March 31, 2007, the net unrealized depreciation on investments
based on cost of $274,895,847 for federal income tax purposes
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $ 2,340,102
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (2,594,772)
---------------
Net unrealized depreciation $ (254,670)
===============
See accompanying notes to financial statements.
19
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
(b) All or a portion of this security was on loan at March 31, 2007.
(c) Variable rate security whose interest rate varies with changes in a designated base rate (such as
prime interest rate) on a specified date (such as coupon date or payment date).
(d) The Fund's investment in mortgage related securities of the Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association and Government National Mortgage
Association are interests in separate pools of mortgages. All separate investments in securities of
each issuer which have the same coupon rate have been aggregated for the purpose of
presentation in the schedule of investments.
(e) Treasury Inflation Protected Security (TIPS).
(f) All separate investments in United States Treasury Notes which have the same coupon rate have
been aggregated for the purpose of presentation in the Portfolio of Investments.
(g) Represents investment of securities lending collateral.
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registrations, normally to qualified
institutional buyers. At the period end, the value of these amounted to $7,135,723 or 3.2% of
net assets.
ARM Adjustable Rate Mortgage
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
EMTN Euro Medium Term Note
CHF Swiss Franc
ISK Iceland Krona
JPY Japanese Yen
NOK Norwegian Krone
Holdings at March 31, 2007 as a Percentage of Net Assets (unaudited)
Mortgage Related 27.5%
Treasuries 23.9
Mortgage Backed Securities 7.1
Wirelines 5.8
Asset-Backed Securities 4.5
Technology 2.6
Sovereigns 2.6
Electric 2.3
Non-Captive Finance 2.3
Other, less than 2% each 17.9
See accompanying notes to financial statements.
20
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------
Bonds and Notes -- 82.8% of Net Assets
Airlines -- 0.3%
$ 71,412 Continental Airlines, Inc., Series 1997-4, Class 4B,
6.900%, 1/02/2017 $ 70,877
37,583 Continental Airlines, Inc., Series 1999-1, Class C,
6.954%, 8/02/2009 37,395
---------------
108,272
---------------
Automotive -- 4.3%
420,000 Ford Motor Co.,
6.375%, 2/01/2029(b) 299,250
65,000 Ford Motor Co.,
6.625%, 2/15/2028(b) 46,963
1,220,000 Ford Motor Co.,
6.625%, 10/01/2028 881,450
210,000 Ford Motor Co.,
7.450%, 7/16/2031(b) 162,487
40,000 Ford Motor Co.,
7.500%, 8/01/2026 31,200
430,000 Ford Motor Credit Co.,
5.700%, 1/15/2010(b) 411,627
10,000 General Motors Corp.,
8.375%, 7/15/2033(b) 8,975
---------------
1,841,952
---------------
Banking -- 4.2%
250,000,000 Barclays Financial LLC, 144A,
4.060%, 9/16/2010 (KRW) 251,887
9,000,000 Barclays Financial LLC, Series EMTN, 144A,
4.100%, 3/22/2010 (THB) 260,631
7,000,000 Barclays Financial LLC, 144A,
4.160%, 2/22/2010 (THB) 202,757
400,000,000 Barclays Financial LLC, 144A,
4.470%, 12/04/2011 (KRW) 423,299
500,000 HSBC Bank USA, 144A,
3.310%, 8/25/2010 547,550
1,436,358,000 JPMorgan Chase & Co., 144A,
Zero Coupon, 3/28/2011 (IDR) 109,083
---------------
1,795,207
---------------
Chemicals -- 4.1%
450,000 Borden, Inc.,
7.875%, 2/15/2023 383,625
550,000 Borden, Inc.,
9.200%, 3/15/2021 523,875
130,000 Georgia Gulf Corp., 144A,
10.750%, 10/15/2016(b) 124,800
380,000 Hercules, Inc., Subordinated Note,
6.500%, 6/30/2029 323,000
155,000 Mosaic Co., (The), 144A,
7.375%, 12/01/2014 161,587
155,000 Mosaic Co., (The), 144A,
7.625%, 12/01/2016 163,525
60,000 Mosaic Global Holdings, Inc.,
7.375%, 8/01/2018 59,700
---------------
1,740,112
---------------
Construction Machinery -- 0.3%
120,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note,
7.750%, 12/15/2013(b) 119,100
---------------
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------
Electric -- 2.4%
$ 375,000 Dynegy Holdings, Inc.,
7.125%, 5/15/2018 $ 360,000
180,000 Dynegy Holdings, Inc.,
7.625%, 10/15/2026 174,600
140,000 NGC Corp. Capital Trust I, Series B,
8.316%, 6/01/2027 134,400
60,000 NRG Energy, Inc.,
7.250%, 2/01/2014 61,500
165,000 NRG Energy, Inc.,
7.375%, 2/01/2016 169,537
115,000 NRG Energy, Inc.,
7.375%, 1/15/2017 118,019
20,000 TXU Corp., Series R,
6.550%, 11/15/2034 16,748
---------------
1,034,804
---------------
Financial Other -- 0.7%
300,000 Petrozuata Finance, Inc., 144A,
8.220%, 4/01/2017 301,500
---------------
Food & Beverage -- 0.4%
200,000 Aramark Services, Inc.,
5.000%, 6/01/2012 179,500
---------------
Gaming -- 0.1%
45,000 Harrah's Operating Co., Inc.,
5.750%, 10/01/2017 37,238
---------------
Government Guaranteed -- 2.6%
28,000,000 Kreditanstalt fuer Wiederaufbau,
1.750%, 3/23/2010 (JPY) 243,197
28,000,000 Kreditanstalt fuer Wiederaufbau,
1.850%, 9/20/2010 (JPY) 244,300
70,000,000 Oesterreichische Kontrollbank AG,
1.800%, 3/22/2010 (JPY) 608,852
---------------
1,096,349
---------------
Government Sponsored -- 1.4%
70,000,000 Federal National Mortgage Association,
1.750%, 3/26/2008 (JPY) 600,385
---------------
Healthcare -- 2.7%
70,000 HCA, Inc.,
6.500%, 2/15/2016(b) 59,588
15,000 HCA, Inc.,
7.050%, 12/01/2027 11,899
170,000 HCA, Inc.,
7.500%, 12/15/2023 144,249
480,000 HCA, Inc.,
7.500%, 11/06/2033 409,200
315,000 HCA, Inc.,
7.580%, 9/15/2025 265,886
35,000 HCA, Inc.,
7.690%, 6/15/2025 30,171
40,000 HCA, Inc.,
7.750%, 7/15/2036 33,891
40,000 HCA, Inc.,
8.360%, 4/15/2024 36,432
40,000 Invitrogen Corp.,
1.500%, 2/15/2024 35,650
See accompanying notes to financial statements.
21
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------------
Healthcare -- continued
$ 5,000 Tenet Healthcare Corp.,
6.875%, 11/15/2031 $ 3,950
110,000 Tenet Healthcare Corp.,
9.250%, 2/01/2015 108,900
---------------
1,139,816
---------------
Home Construction -- 3.7%
410,000 Desarrolladora Homex SAB de CV,
7.500%, 9/28/2015 423,120
320,000 K Hovnanian Enterprises, Inc.,
6.250%, 1/15/2015 277,600
210,000 K. Hovnanian Enterprises, Inc., Senior Note,
6.250%, 1/15/2016 180,075
30,000 K. Hovnanian Enterprises, Inc., Senior Note,
6.500%, 1/15/2014 26,850
590,000 KB Home,
7.250%, 6/15/2018 544,880
155,000 Pulte Homes, Inc.,
6.000%, 2/15/2035(b) 138,252
---------------
1,590,777
---------------
Independent Energy -- 1.9%
625,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017 617,187
175,000 Chesapeake Energy Corp.,
6.875%, 11/15/2020 174,125
---------------
791,312
---------------
Industrial Other -- 0.9%
265,000 Incyte Corp., Convertible,
3.500%, 2/15/2011(b) 231,213
140,000 Ranhill Labuan Ltd., 144A,
12.500%, 10/26/2011(b) 138,838
---------------
370,051
---------------
Integrated Energy -- 0.6%
265,000 Cerro Negro Finance, Ltd., 144A,
7.900%, 12/01/2020 265,000
---------------
Media Cable -- 1.3%
550,000 CSC Holdings, Inc., Senior Note,
7.625%, 7/15/2018(b) 555,500
---------------
Media Non-Cable -- 0.4%
175,000 Intelsat Corp.,
6.875%, 1/15/2028 161,438
---------------
Metals & Mining -- 0.5%
195,000 Vale Overseas, Ltd.,
6.875%, 11/21/2036 201,374
---------------
Non-Captive Diversified -- 0.8%
330,000 GMAC LLC, (MTN),
6.750%, 12/01/2014 324,420
---------------
Oil Field Services -- 0.7%
310,000 North American Energy Partners, Inc., Senior Note,
8.750%, 12/01/2011 316,200
---------------
Packaging -- 0.3%
135,000 Owens-Illinois, Inc., Senior Note,
7.800%, 5/15/2018(b) 138,038
---------------
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------------
Paper -- 5.3%
$ 215,000 Abitibi-Consolidated, Inc.,
7.500%, 4/01/2028(b) $ 178,450
250,000 Abitibi-Consolidated, Inc.,
8.500%, 8/01/2029 217,500
685,000 Bowater, Inc.,
6.500%, 6/15/2013(b) 618,212
75,000 Georgia-Pacific Corp.,
7.250%, 6/01/2028 71,625
155,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 149,575
370,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 366,300
170,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 170,850
430,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 455,800
20,000 Jefferson Smurfit Corp.,
7.500%, 6/01/2013(b) 19,400
---------------
2,247,712
---------------
Pharmaceuticals -- 6.1%
440,000 Elan Finance PLC, Senior Note,
7.750%, 11/15/2011 432,300
110,000 Elan Finance PLC, 144A,
8.875%, 12/01/2013 111,788
425,000 Enzon Pharmaceuticals, Inc.,
4.500%, 7/01/2008 413,844
127,000 EPIX Pharmaceuticals, Inc., Senior Note, Convertible,
3.000%, 6/15/2024 108,109
45,000 Human Genome Sciences, Inc., Convertible,
2.250%, 8/15/2012(b) 39,656
360,000 Inhale Therapeutic Systems, Inc., Subordinated Note, Convertible,
3.500%, 10/17/2007 353,250
210,000 Merck & Co., Inc.,
4.750%, 3/01/2015 201,793
345,000 Regeneron Pharmaceuticals, Inc., Subordinated Note, Convertible,
5.500%, 10/17/2008 364,838
190,000 Valeant Pharmaceuticals International, Subordinated Note,
Convertible,
3.000%, 8/16/2010 173,850
450,000 Valeant Pharmaceuticals International, Subordinated Note,
Convertible,
4.000%, 11/15/2013 410,062
---------------
2,609,490
---------------
Pipelines -- 3.6%
915,000 El Paso Corp.,
6.950%, 6/01/2028(b) 940,163
125,000 Kinder Morgan Energy Partners, LP, Senior Note,
5.800%, 3/15/2035(b) 115,291
65,000 Kinder Morgan Finance Co. ULC, Guaranteed Note,
5.700%, 1/05/2016 60,944
440,000 Kinder Morgan Finance Co. ULC, Guaranteed Note,
6.400%, 1/05/2036 393,991
25,000 Kinder Morgan, Inc., Senior Note,
5.150%, 3/01/2015 22,928
---------------
1,533,317
---------------
See accompanying notes to financial statements.
22
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------
Retailers -- 2.3%
$ 250,000 Dillard's, Inc.,
6.625%, 1/15/2018(b) $ 242,812
105,000 Dillard's, Inc.,
7.130%, 8/01/2018 103,294
765,000 Toys R US, Inc.,
7.375%, 10/15/2018(b) 657,900
---------------
1,004,006
---------------
Sovereigns -- 6.4%
44,200(++) Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023 (MXN) 414,281
148,500(++) Mexican Fixed Rate Bonds, Series M-10,
9.000%, 12/20/2012 (MXN) 1,439,225
1,517,320 Republic of Argentina,
2.000%, 9/30/2014 (ARS) 425,214
2,100,000 Republic of South Africa,
13.000%, 8/31/2010 (ZAR) 329,944
3,710,000 Republic of Uruguay,
4.250%, 4/05/2027 (UYU) 155,683
---------------
2,764,347
---------------
Supermarkets -- 3.2%
245,000 Albertson's, Inc.,
6.625%, 6/01/2028 224,312
190,000 Albertson's, Inc.,
7.750%, 6/15/2026 192,418
750,000 Albertson's, Inc., Senior Note,
7.450%, 8/01/2029 737,800
130,000 Albertson's, Inc., Senior Note,
8.000%, 5/01/2031 132,493
25,000 Albertson's, Inc., Senior Note,
8.700%, 5/01/2030 27,047
50,000 American Stores Co.,
8.000%, 6/01/2026 53,621
---------------
1,367,691
---------------
Supranational -- 2.3%
2,700,000 Inter-American Development Bank, Series E, (MTN),
Zero Coupon, 5/11/2009 (BRL) 998,592
---------------
Technology -- 7.1%
270,000 Freescale Semiconductor, Inc., 144A,
10.125%, 12/15/2016(b) 270,675
345,000 JDS Uniphase Corp.,
Zero Coupon, 11/15/2010 316,969
215,000 Kulicke & Soffa Industries, Inc., Convertible,
0.500%, 11/30/2008 195,112
35,000 Kulicke & Soffa Industries, Inc., Convertible,
1.000%, 6/30/2010(b) 33,644
910,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 821,275
266,000 Maxtor Corp., Subordinated Note,
5.750%, 3/01/2012(d) 250,040
300,000 Nortel Networks Corp., Guaranteed Senior Note,
4.250%, 9/01/2008 296,250
500,000 Nortel Networks Corp.,
6.875%, 9/01/2023 465,000
40,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 38,500
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------
Technology -- continued
$ 210,000 Sanmina-SCI Corp.,
8.125%, 3/01/2016(b) $ 197,400
145,000 Unisys Corp., Senior Note,
8.000%, 10/15/2012 145,362
---------------
3,030,227
---------------
Transportation Services -- 2.8%
275,000 APL Ltd., Senior Note,
8.000%, 1/15/2024(d) 255,445
300,000 Overseas Shipholding Group,
Senior Note,
7.500%, 2/15/2024 304,500
295,000 Stena AB, Senior Note,
7.000%, 12/01/2016 292,050
350,000 Stena AB, Senior Note,
7.500%, 11/01/2013 355,250
---------------
1,207,245
---------------
Wireless -- 0.9%
200,000 MetroPCS Wireless, Inc., 144A,
9.250%, 11/01/2014 211,500
165,000 True Move Co., Ltd., 144A,
10.750%, 12/16/2013 167,888
---------------
379,388
---------------
Wirelines -- 8.2%
65,000 Cincinnati Bell Telephone Co.,
6.300%, 12/01/2028 59,475
50,000 Cincinnati Bell, Inc.,
8.375%, 1/15/2014 51,125
95,000 Citizens Communications Co.,
7.000%, 11/01/2025(b) 87,400
405,000 Hanarotelecom, Inc., 144A,
7.000%, 2/01/2012 410,569
435,000 Level 3 Communications, Inc., Convertible,
2.875%, 7/15/2010 486,112
185,000 Level 3 Communications, Inc., Convertible,
6.000%, 3/15/2010(b) 177,600
375,000 Qwest Capital Funding, Inc., Guaranteed Note,
6.875%, 7/15/2028(b) 354,375
1,890,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 1,875,825
---------------
3,502,481
---------------
Total Bonds and Notes (Identified Cost $33,048,906) 35,352,841
---------------
Shares
- ------------------------------------------------------------------------------------
Common Stocks -- 1.6%
Home Construction -- 0.2%
1,775 KB Home(b) 75,739
---------------
Pharmaceuticals -- 1.4%
6,875 Merck & Co., Inc. 303,669
1,717 Teva Pharmaceutical Industries, Ltd., ADR 64,267
8,147 Vertex Pharmaceuticals, Inc.(b)(e) 228,442
---------------
596,378
---------------
Total Common Stocks (Identified Cost $500,137) 672,117
---------------
See accompanying notes to financial statements.
23
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Shares Description Value (+)
- ----------------------------------------------------------------------------------------------------
Preferred Stocks -- 3.7%
Electric -- 1.7%
6,475 AES Trust III, Convertible,
6.750%, 10/15/2029(b) $ 325,304
8,000 CMS Energy Trust I, Convertible,
7.750%, 7/15/2027 399,000
---------------
724,304
---------------
Packaging -- 0.6%
6,500 Owens-Illinois, Inc., Convertible,
4.750%, 12/31/2044 248,950
---------------
Pipelines -- 0.9%
9,500 El Paso Energy Capital Trust I, Convertible,
4.750%, 3/31/2028 380,000
---------------
Technology -- 0.5%
225 Lucent Technologies Capital Trust I, Convertible,
7.750%, 3/15/2017 232,959
---------------
Total Preferred Stocks (Identified Cost $1,411,773) 1,586,213
---------------
Shares
- ----------------------------------------------------------------------------------------------------
Closed-End Investment Companies -- 0.1%
3,835 Morgan Stanley Emerging Markets Debt Fund, Inc.(b) 40,344
2,175 Western Asset High Income Opportunity Fund, Inc. 14,943
---------------
Total Closed-End Investment Companies
(Identified Cost $45,442) 55,287
---------------
Shares/
Principal
Amount (++)
- ----------------------------------------------------------------------------------------------------
Short-Term Investments -- 25.9%
6,398,145 State Street Securities Lending Quality Trust(f) 6,398,145
$ 4,660,066 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/2007 at 4.250% to be repurchased at
$4,661,717 on 4/2/2007, collateralized by $4,800,000 U.S.
Treasury Bill, 4.890% due 5/31/2007 valued at $4,758,000,
including accrued interest (Note 2f) 4,660,066
---------------
Total Short-Term Investments (Identified Cost $11,058,211) 11,058,211
---------------
Total Investments -- 114.1%
(Identified Cost $46,064,469)(a) 48,724,669
Other assets less liabilities -- (14.1)% (6,005,277)
---------------
Net Assets -- 100% $ 42,719,392
===============
(++) Principal amount is in U.S. dollars unless otherwise noted.
(+) See Note 2a of Notes to Financial Statements.
(++) Amount shown represents units.
(a) Federal Tax Information (Amounts exclude certain adjustments made at the end of the
Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales.
Amortization of premium on debt securities is excluded for tax purposes):
At March 31, 2007, the net unrealized appreciation on investments based on cost of
$46,076,087 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $ 3,174,001
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (525,419)
---------------
Net unrealized appreciation $ 2,648,582
===============
(b) All or a portion of this security was on loan at March 31, 2007.
(c) Variable rate security whose interest rate varies with changes in a designated base rate (such as
the prime interest rate) on a specified date (such as coupon date or interest payment date).
(d) Illiquid security. At March 31, 2007, the value of these securities amounted to $505,485 or 1.2%
of net assets.
(e) Non-income producing security.
(f) Represents investment of securities lending collateral.
ADR An American Depositary Receipt is a certificate issued by a custodian bank representing the right
to receive securities of the foreign issuer described. The values of ADRs are significantly
influenced by trading on exchanges not located in the United States.
MTN Medium Term Note
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registrations, normally to qualified
institutional buyers. At the period end, the value of these amounted to $4,122,877 or 9.7% of net
assets.
ARS Argentine Peso
BRL Brazilian Real
IDR Indonesian Rupiah
JPY Japanese Yen
KRW South Korean Won
MXN Mexican Peso
THB Thailand Baht
UYU Uruguayan Peso
ZAR South African Rand
Holdings at March 31, 2007 as a Percentage of Net Assets (unaudited)
Wirelines 8.2%
Technology 7.6
Pharmaceuticals 7.5
Sovereigns 6.4
Paper 5.3
Pipelines 4.5
Automotive 4.3
Banking 4.2
Electric 4.1
Chemicals 4.1
Home Construction 3.9
Supermarkets 3.2
Transportation Services 2.8
Healthcare 2.7
Government Guaranteed 2.6
Retailers 2.3
Supranational 2.3
Other, less than 2% each 12.2
See accompanying notes to financial statements.
24
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND -- PORTFOLIO OF
INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Principal
Amount Description Value (+)
- -------------------------------------------------------------------------------------------------
Bonds and Notes -- 92.1% of Net Assets
Agency -- 3.3%
$ 4,200,000 Federal Home Loan Bank,
3.625%, 11/14/2008(b) $ 4,117,424
---------------
Asset-Backed Securities -- 4.2%
1,035,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3,
4.615%, 2/25/2035 1,005,600
2,200,000 Countrywide Asset-Backed Certificates, Series 2006-S1, Class A2,
5.549%, 8/25/2021 2,194,435
609,256 Residential Funding Mortgage Securities II, Series 2004-HI3,
Class A4,
4.630%, 1/25/2020 603,840
660,000 Residential Funding Mortgage Securities II, Series 2005-HI3,
Class A4,
5.490%, 9/25/2035 654,071
853,476 Residential Funding Mortgage Securities II, Series 2002-HI5,
Class A7,
5.700%, 1/25/2028 857,964
---------------
5,315,910
---------------
Collateralized Mortgage Obligation -- 0.2%
219,593 Federal Home Loan Mortgage Corporation, Series 3145, Class KA,
5.000%, 8/15/2024 218,634
---------------
Hybrid ARMs -- 3.0%
1,550,234 JPMorgan Mortgage Trust, Series 2006-A7, Class 1A3,
5.936%, 1/25/2037(c) 1,553,700
1,945,716 Morgan Stanley Mortgage Loan Trust, Series 2005-3AR, Class 5A,
5.592%, 7/25/2035(c) 1,923,517
261,785 Washington Mutual, Series 2004-AR7, Class A2A,
3.537%, 7/25/2034 261,146
---------------
3,738,363
---------------
Mortgage Backed Securities -- 1.1%
1,400,000 Commercial Mortgage Pass Through Certificates, Series 2006-C7,
Class A4,
5.962%, 6/10/2046(c) 1,447,268
---------------
Mortgage Related -- 57.2%
850,557 FHLMC,
4.500%, 5/01/2034 800,651
7,674,906 FHLMC,
5.000%, with various maturities to 2030(d) 7,590,523
2,662,852 FHLMC,
5.500%, 12/01/2034 2,639,338
7,253,341 FHLMC,
6.000%, with various maturities to 2021(d) 7,374,018
11,945,965 FHLMC,
6.500%, with various maturities to 2034(d) 12,248,617
283,085 FHLMC,
7.000%, 2/01/2016 292,604
48,196 FHLMC,
7.500%, with various maturities to 2026(d) 49,702
27,666 FHLMC,
8.000%, with various maturities to 2015(d) 28,825
6,613 FHLMC,
10.000%, 7/01/2019 7,303
295,192 FHLMC,
11.500%, with various maturities to 2020(d) 320,732
14,503,461 FNMA,
4.000%, with various maturities to 2019(d) 13,720,475
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------------------------
Mortgage Related -- continued
$ 2,910,915 FNMA,
4.500%, with various maturities to 2035(d) $ 2,773,352
2,205,965 FNMA,
5.000%, 6/01/2035 2,133,448
4,787,462 FNMA,
5.500%, with various maturities to 2036(d) 4,756,628
4,853,656 FNMA,
6.000%, with various maturities to 2034(d) 4,927,350
7,932,855 FNMA,
6.500%, with various maturities to 2036(d) 8,109,067
600,000 FNMA,
6.625%, 9/15/2009(b) 624,290
300,775 FNMA,
7.000%, 12/01/2022 315,889
650,460 FNMA,
7.500%, with various maturities to 2032(d) 677,196
119,428 FNMA,
8.000%, with various maturities to 2016(d) 125,125
150,504 GNMA,
6.000%, 12/15/2031 152,911
564,266 GNMA,
6.500%, 5/15/2031 580,669
489,696 GNMA,
7.000%, with various maturities to 2029(d) 512,276
25,338 GNMA,
9.000%, with various maturities to 2009(d) 25,811
5,520 GNMA,
9.500%, 8/15/2009 5,724
9,867 GNMA,
12.500%, with various maturities to 2015(d) 11,019
126,398 GNMA,
16.000%, with various maturities to 2012(d) 144,994
51,411 GNMA,
17.000%, with various maturities to 2011(d) 60,129
985,000 Greenwich Capital Commercial Funding Corp., Series 2005-GG5,
Class A2,
5.117%, 4/10/2037 985,311
---------------
71,993,977
---------------
Treasuries -- 23.1%
13,040,000 U.S. Treasury Note,
3.125%, 5/15/2007(b) 13,008,927
10,815,000 U.S. Treasury Note,
3.125%, 10/15/2008(b) 10,561,096
1,930,000 U.S. Treasury Note,
6.125%, 8/15/2007 1,937,539
4,000,000 U.S. Treasury STRIPS,
Zero Coupon, 11/15/2009 3,558,507
---------------
29,066,069
---------------
Total Bonds and Notes (Identified Cost $116,695,173) 115,897,645
---------------
See accompanying notes to financial statements.
25
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND -- PORTFOLIO OF
INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Shares/
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 30.7%
28,938,786 State Street Securities Lending Quality Trust(e) $ 28,938,786
$ 1,630,055 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/2007 at 4.250% to be repurchased at
$1,630,633 on 4/02/2007, collateralized by $1,680,000 U.S.
Treasury Bill, 4.890% due 5/31/2007 valued at $1,665,300,
including accrued interest (Note 2f ) 1,630,055
$ 8,000,000 U.S Treasury Bill, 5.035%, 4/12/2007(f) 7,987,692
---------------
Total Short-Term Investments (Identified Cost $38,556,533) 38,556,533
---------------
Total Investments -- 122.8%
(Identified Cost $155,251,706)(a) 154,454,178
Other assets less liabilities -- (22.8)% (28,640,867)
---------------
Net Assets -- 100% $ 125,813,311
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information (Amounts exclude certain adjustments made at the end of the
Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales.
Amortization of premium on debt securities is excluded for tax purposes.):
At March 31, 2007, the net unrealized depreciation on investments based on cost of
$155,441,470 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 $ 335,536
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (1,322,828)
---------------
Net unrealized depreciation $ (987,292)
===============
(b) All or a portion of this security was on loan at March 31, 2007.
(c) Variable rate security whose interest rate varies with changes in a designated base rate
(such as prime interest rate) on a specified date (such as coupon date or payment date).
(d) The Fund's investment in mortgage related securities of the Federal Home Loan
Mortgage Corporation, Federal National Mortgage Association and Government National
Mortgage Association are interests in separate pools of mortgages. All separate
investments in securities of each issuer which have the same coupon rate have been
aggregated for the purpose of presentation in the Portfolio of Investments.
(e) Represents investment of securities lending collateral.
(f) Annualized yield at time of purchase.
ARM Adjustable Rate Mortgage
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
STRIPS Separate Trading of Registered Interest and Principal of Securities
Holdings at March 31, 2007 as a Percentage of Net Assets (unaudited)
Mortgage Related 57.2%
Treasuries 23.1
Asset-Backed Securities 4.2
Agency 3.3
Hybrid ARMs 3.0
Other, less than 2% each 1.3
See accompanying notes to financial statements.
26
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Principal
Amount Description Value (+)
- --------------------------------------------------------------------------------
Tax Exempt Obligations -- 98.0% of Net Assets
Martha's Vineyard, MA -- 1.5%
$ 1,000,000 Land Bank Revenue,
5.000%, 5/01/2032 (AMBAC insured) $ 1,043,560
---------------
Massachusetts -- 5.8%
3,500,000 State Refunding Series A,
6.500%, 11/01/2014 (AMBAC insured) 4,134,515
---------------
Massachusetts Bay Transportation Authority -- 3.9%
2,000,000 Sales Tax Revenue Series C,
5.000%, 7/01/2028 2,142,080
630,000 Series A, Unrefunded,
5.250%, 7/01/2030 657,185
---------------
2,799,265
---------------
Massachusetts Development Finance Agency -- 15.6%
1,000,000 Cambridge Street Development Series A,
5.125%, 2/01/2034 (MBIA insured) 1,048,860
1,450,000 Curry College, Series A,
5.000%, 3/01/2036 (ACA insured) 1,488,744
1,000,000 Hampshire College,
5.625%, 10/01/2024 1,064,330
1,000,000 Mount Holyoke College,
5.250%, 7/01/2031 1,051,050
2,000,000 Simmons College Series H,
5.250%, 10/01/2033 (XLCA insured) 2,285,940
2,800,000 Springfield Resource Recovery Series A,
5.625%, 6/01/2019 2,920,680
1,100,000 Visual and Performing Arts,
6.000%, 8/01/2021 1,299,023
---------------
11,158,627
---------------
Massachusetts Health & Educational Facilities
Authority -- 36.1%
1,160,000 Baystate Medical Center Series F,
5.700%, 7/01/2027 1,226,480
2,000,000 Boston University Series S,
5.000%, 10/01/2039 (FGIC insured) 2,083,640
2,200,000 Catholic Health East,
5.500%, 11/15/2032 2,328,084
3,000,000 Harvard University Series N,
6.250%, 4/01/2020 3,692,490
750,000 Milford Regional Medical Center Series E,
5.000%, 7/15/2032 771,187
850,000 Milford Regional Medical Center Series E,
5.000%, 7/15/2037 870,510
2,716,000 Nichols College Series C,
6.000%, 10/01/2017 2,846,477
2,000,000 Partners Healthcare Systems Series B,
5.250%, 7/01/2029 2,069,960
2,500,000 Partners Healthcare Systems Series C,
5.750%, 7/01/2021 2,701,275
1,500,000 Sterling & Francine Clark Series A,
5.000%, 7/01/2036 1,579,290
2,000,000 University of Massachusetts Series C,
5.125%, 10/01/2034 (FGIC insured) 2,111,960
1,000,000 Wellesley College Series F,
5.125%, 7/01/2039 1,029,500
1,315,000 Wheaton College Series E,
5.000%, 7/01/2017 1,391,809
1,030,000 Williams College Series H,
5.000%, 7/01/2017 1,095,106
---------------
25,797,768
---------------
Principal
Amount Description Value (+)
- ----------------------------------------------------------------------------------------
Massachusetts Housing Finance Agency -- 3.2%
$ 2,000,000 Single Family Housing Series 126,
4.700%, 6/01/2038(b) $ 1,973,460
265,000 Single Family Mortgage Series 21,
7.125%, 6/01/2025 265,464
---------------
2,238,924
---------------
Massachusetts Port Authority -- 4.3%
1,750,000 Delta Air Lines, Inc. Project Series A,
5.500%, 1/01/2019 (AMBAC insured) 1,836,660
1,200,000 Series A,
5.000%, 7/01/2033 (MBIA insured) 1,254,168
---------------
3,090,828
---------------
Massachusetts Water Resources Authority -- 6.9%
1,000,000 General Series A,
5.250%, 8/01/2020 (MBIA insured) 1,103,940
3,240,000 Series A,
6.500%, 7/15/2019 (FGIC insured) 3,866,908
---------------
4,970,848
---------------
Michigan Hospital Finance Authority -- 1.5%
1,000,000 Oakwood Obligated Group,
5.500%, 11/01/2017 1,072,790
---------------
New England Education Loan Marketing -- 2.9%
2,000,000 Student Loan Revenue Bond Sub-Issue H,
6.900%, 11/01/2009 2,091,080
---------------
New Jersey Economic Development Authority -- 1.4%
1,000,000 Series A,
5.625%, 6/15/2018 1,032,300
---------------
New Jersey Transportation Trust Fund
Authority -- 1.6%
1,000,000 Series A,
5.500%, 12/15/2023 1,152,220
---------------
Puerto Rico Commonwealth Aqueduct & Sewer
Authority -- 4.7%
3,000,000 Aqueduct & Sewer Authoriry,
6.250%, 7/01/2013 3,371,130
---------------
Puerto Rico Commonwealth Infrastructure Financing
Authority -- 2.2%
1,500,000 Series B,
5.000%, 7/01/2031 1,565,325
---------------
Puerto Rico Public Finance Corp. -- 4.5%
3,000,000 Commonwealth Appropriation Series A,
5.750%, 8/01/2027(b) 3,214,500
---------------
Sullivan County, TN, Health Educational & Housing
Facilities Board Hospital Revenue -- 1.9%
1,315,000 Wellmont Health Systems Project Series C,
5.250%, 9/01/2036 1,376,555
---------------
Total Tax Exempt Obligations (Identified Cost $66,944,690) 70,110,235
---------------
See accompanying notes to financial statements.
27
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND -- PORTFOLIO OF INVESTMENTS
(continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 0.8%
$ 555,594 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/2007 at 4.250% to be repurchased at
$555,791 on 4/02/2007, collateralized by $575,000 U.S.
Treasury Bill, 4.890% due 5/31/2007 valued at $569,969,
including accrued interest (Note 2f )
(Identified Cost $555,594) $ 555,594
---------------
Total Investments -- 98.8%
(Identified Cost $67,500,284)(a) 70,665,829
Other assets less liabilities --1.2% 873,047
---------------
Net Assets -- 100% $ 71,538,876
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax (Amounts exclude certain adjustments made at the end of the Fund's fiscal
year for tax purposes. Such adjustments are primarily due to wash sales. Accretion of
market discount on debt securities and straddle loss deferrals are excluded for tax
purposes.):
At March 31, 2007, the net unrealized appreciation on investments based on cost of
$67,500,271 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $ 3,245,006
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (79,448)
---------------
Net unrealized appreciation $ 3,165,558
===============
(b) Variable rate security whose interest rate varies with changes in a designated base rate
(such as the prime interest rate) on a specified date (such as coupon date or interest
payment date).
ACA American Capital Access
AMBAC American Municipal Bond Assurance Corporation
FGIC Financial Guarantee Insurance Company
MBIA Municipal Bond Investors Assurance Corporation
XLCA XL Capital Assurance
Holdings at March 31, 2007 as a Percentage of Net Assets (unaudited)
Colleges & Universities 29.0%
Hospital 15.9
Water & Sewer 13.8
State Appropriations 11.9
Airport 4.3
Resource Recovery 4.1
Sales Tax 3.9
Insurance 3.2
Single-Family Housing 3.1
Student Loans 2.9
Other, less than 2% each 5.9
See accompanying notes to financial statements.
28
LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Principal
Amount Description Value (+)
- -------------------------------------------------------------------------------------------------
Tax Exempt Obligations -- 97.8% of Net Assets
California -- 7.9%
$ 1,000,000 California Health Facilities Financing Authority
(Catholic Healthcare West),
4.950%, 7/01/2026 $ 1,055,940
1,000,000 California Health Facilities Financing Authority
(Cedar-Sinai Medical Center),
5.000%, 11/15/2027 1,041,130
1,000,000 California State,
5.125%, 6/01/2027 1,043,430
2,655,000 California Statewide Communities Development Authority
(California Endowment),
5.250%, 7/01/2023 2,850,196
1,500,000 California Statewide Communities Development Authority
(Sutter Health), Series A,
5.000%, 11/15/2043 1,552,995
---------------
7,543,691
---------------
Colorado -- 2.7%
2,500,000 Colorado Health Facilities Authority,
5.000%, 12/01/2035 2,535,750
---------------
District of Columbia -- 3.3%
3,000,000 Metropolitan Washington D.C. Airports Authority,
5.125%, 10/01/2029 (FGIC insured) 3,142,350
---------------
Florida -- 1.1%
1,000,000 Jacksonville, FL, Economic Development Community Health Care
Facilities (Mayo Clinic),
5.000%, 11/15/2036 1,041,550
---------------
Guam -- 1.1%
1,000,000 Guam Government Waterworks Authority,
5.875%, 7/01/2035 1,070,230
---------------
Illinois -- 3.3%
1,000,000 Illinois Educational Facility Authority Revenue,
5.000%, 7/01/2033 1,040,120
2,000,000 Metropolitan Pier & Exposition Authority, IL,
5.250%, 6/15/2042 (MBIA insured) 2,115,040
---------------
3,155,160
---------------
Kansas -- 1.0%
1,000,000 University of Kansas Hospital Authority, Health Facilities Revenue,
4.500%, 9/01/2032 985,070
---------------
Louisiana -- 5.4%
4,000,000 DeSoto Parish, LA, Environmental Improvement,
5.000%, 11/01/2018 4,075,600
1,000,000 Ernest N. Morial, New Orleans, LA, Exhibit Hall Authority,
5.000%, 7/15/2033 (AMBAC insured) 1,033,100
---------------
5,108,700
---------------
Massachusetts -- 4.0%
1,500,000 Massachusetts State,
5.000%, 3/01/2019 1,603,950
1,000,000 Massachusetts State Development Finance Agency Revenue
(Simmons College), Series H,
5.250%, 10/01/2033 (XLCA insured) 1,142,970
1,045,000 Massachusetts State Health & Educational Facilities Authority
(Lahey Clinic Medical Center),
4.500%, 8/15/2035 (FGIC insured) 1,031,749
---------------
3,778,669
---------------
Principal
Amount Description Value (+)
- ---------------------------------------------------------------------------------------------
Michigan -- 6.2%
$ 1,500,000 Michigan State Hospital Finance Authority Revenue
(Henry Ford Health System), Series A,
5.000%, 11/15/2038 $ 1,556,760
1,100,000 Michigan State Hospital Finance Authority Revenue
(Oakwood Obligated Group),
5.500%, 11/01/2014 1,185,965
1,000,000 Taylor Brownfield Redevelopment Authority, MI,
5.000%, 5/01/2025 (MBIA insured) 1,055,680
2,000,000 University of Michigan Hospital,
5.250%, 12/01/2020 2,125,360
---------------
5,923,765
---------------
Minnesota -- 3.4%
1,000,000 Chaska Minnesota Electric Revenue,
5.250%, 10/01/2025 1,072,870
2,000,000 Minnesota State Municipal Power Agency,
5.250%, 10/01/2024 2,133,780
---------------
3,206,650
---------------
Mississippi -- 6.9%
2,000,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control,
6.700%, 4/01/2022 2,417,260
2,500,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control,
6.800%, 4/01/2022 3,048,200
1,000,000 Mississippi, Hospital Equipment & Facilities Authority Mortgage
Revenue (Delta Regional Medical Center)
5.000%, 2/01/2035 (MBIA insured) 1,051,460
---------------
6,516,920
---------------
New Jersey -- 5.7%
1,000,000 New Jersey Economic Development Authority,
5.500%, 6/15/2024 1,045,980
1,000,000 New Jersey Economic Development Authority, Cigarette Tax,
5.625%, 6/15/2018 1,032,300
1,000,000 New Jersey Health Care Facilities Financing Authority
(Catholic Health East),
5.375%, 11/15/2033 1,054,080
2,000,000 New Jersey Transportation Trust Fund Authority, Series A,
5.500%, 12/15/2023 2,304,440
---------------
5,436,800
---------------
New York -- 17.6%
1,020,000 New York, NY,
6.000%, 1/15/2020 1,130,946
1,400,000 New York, NY, City Health & Hospital Corp.,
5.000%, 2/15/2020 (FSA insured) 1,461,264
1,000,000 New York, NY, City Industrial Development Agency,
5.500%, 1/01/2024(b) 1,076,030
2,000,000 New York, NY, City Municipal Water Finance Authority, Series C,
5.000%, 6/15/2025 (MBIA insured) 2,119,840
1,000,000 New York, NY, City Municipal Water Finance Authority, Series A,
5.125%, 6/15/2034 (FSA insured) 1,050,350
1,000,000 New York State Dormitory Authority (Rockefeller University),
5.000%, 7/01/2032(b) 1,047,770
2,000,000 New York State Dormitory Authority,
5.500%, 5/15/2013 2,153,440
2,200,000 New York State Dormitory Authority,
5.750%, 7/01/2013 2,382,446
See accompanying notes to financial statements.
29
LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount Description Value (+)
- --------------------------------------------------------------------------------------------
New York -- continued
$ 1,000,000 New York State Housing Finance Agency,
5.250%, 9/15/2019 $ 1,096,740
3,000,000 New York State Municipal Bond Bank Agency, Series C,
5.250%, 6/01/2020 3,207,810
---------------
16,726,636
---------------
North Carolina -- 1.5%
1,300,000 North Carolina Eastern Municipal Power Agency, Series A,
5.500%, 1/01/2012 1,389,167
---------------
Oregon -- 3.0%
1,750,000 Multnomah County, OR, Hospital Facilities Authority
(Providence Health System),
5.250%, 10/01/2012 1,872,920
500,000 Oregon, Western Generation Agency, Wauna Cogeneration Project,
Series A,
5.000%, 1/01/2020 517,350
485,000 Oregon, Western Generation Agency, Wauna Cogeneration Project,
Series A,
5.000%, 1/01/2021 500,767
---------------
2,891,037
---------------
Pennsylvania -- 3.4%
3,000,000 Pennsylvania State Industrial Development Authority,
5.500%, 7/01/2019 (AMBAC insured) 3,270,750
---------------
Puerto Rico -- 3.4%
1,000,000 Puerto Rico Commonwealth Infrastructure Financing Authority,
Series A,
5.500%, 10/01/2040 1,071,330
2,000,000 Puerto Rico Public Finance Corp., Commonwealth Appropriation,
Series A,
5.750%, 8/01/2027(b) 2,143,000
---------------
3,214,330
---------------
South Carolina -- 3.4%
1,100,000 Charleston Educational Excellence Finance Corp.,
5.250%, 12/01/2030 1,173,997
1,155,000 Lexington One School Facilities Corp.,
5.000%, 12/01/2026 1,211,768
800,000 Newberry Investing in Children's Education (Newberry
County School District),
5.250%, 12/01/2022 840,240
---------------
3,226,005
---------------
South Dakota -- 1.4%
1,250,000 South Dakota Health & Educational Facilities Authority
(Sioux Valley Hospital),
5.250%, 11/01/2027 1,319,425
---------------
Tennessee -- 5.1%
2,000,000 Knox County, TN Health Educational & Housing Facilities Board,
Hospital Facilities Revenue, Series A,
Zero Coupon Bond, 1/01/2035 500,020
2,500,000 Tennessee Energy Acquisition Corp., Gas Revenue, Series A,
5.250%, 9/01/2026 2,768,400
1,500,000 Tennessee Housing Development Agency, Series A,
5.200%, 7/01/2023 1,571,865
---------------
4,840,285
---------------
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------------------------------------
Texas -- 4.7%
$ 1,130,000 Conroe, TX, Independent School District,
4.500%, 2/15/2030 $ 1,128,339
2,000,000 Dallas-Fort Worth, TX, International Airport,
5.500%, 11/01/2033 (MBIA insured) 2,133,760
1,260,000 Keller, TX, Independent School District, Series A,
4.500%, 8/15/2031 1,247,060
---------------
4,509,159
---------------
Washington -- 2.3%
2,000,000 Energy Northwest, WA, Electric, Project No. 1, Series A,
5.500%, 7/01/2014 2,209,360
---------------
Total Tax Exempt Obligations (Identified Cost $89,757,508) 93,041,459
---------------
Principal
Amount
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 1.0%
$ 950,906 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/2007 at 4.250% to be repurchased at
$951,243 on 4/02/2007, collateralized by $980,000 U.S.
Treasury Bill, 4.890% due 5/31/2007 valued at $971,425,
including accrued interest (Note 2f )
(Identified Cost $950,906) 950,906
---------------
Total Investments -- 98.8%
(Identified Cost $90,708,414)(a) 93,992,365
Other assets less liabilities --1.2% 1,102,231
---------------
Net Assets -- 100% $ 95,094,596
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales. Accretion of market
discount on debt securities and straddle loss deferrals are excluded
for tax purposes.):
At March 31, 2007, the net unrealized appreciation on
investments based on cost of $90,393,119 for federal income tax
purposes was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $ 3,705,738
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (106,492)
---------------
Net unrealized appreciation $ 3,599,246
===============
(b) Variable rate security whose interest rate varies with changes in a designated base rate
(such as the prime interest rate) on a specified date (such as coupon date or interest
payment date).
AMBAC American Municipal Bond Assurance Corp.
FGIC Financial Guarantee Insurance Company
FSA Financial Security Assurance, Inc.
MBIA Municipal Bond Investors Assurance Corp.
XLCA XL Capital Assurance
See accompanying notes to financial statements.
30
LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Holdings at March 31, 2007 as a Percentage of Net Assets (unaudited)
Corporate Backed/Industrial Revenue/Pollution Control 13.5%
Hospital 11.4
Hospital Obligated Group 8.4
Electric 8.2
Colleges & Universities 6.9
Special Tax 6.6
Airport 5.5
State Appropriation 4.7
Lease 4.5
Water & Sewerage 4.5
Bond Bank/Pooled Loan Program 3.4
Non-Profit 3.0
Gas 2.9
State General Obligation 2.8
Senior Living 2.7
School District 2.5
City & Town 2.3
Other, less than 2% each 4.0
See accompanying notes to financial statements.
31
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------------------------
Bonds and Notes -- 90.7% of Net Assets
Convertible Bonds -- 3.9%
Canada -- 0.1%
$ 8,499,000 Nortel Networks Corp., Guaranteed Senior Note,
4.250%, 9/01/2008 $ 8,392,762
---------------
United States -- 3.8%
12,755,000 Avnet, Inc.,
2.000%, 3/15/2034 15,226,281
32,815,000 Bristol-Myers Squibb Co.,
4.855%, 9/15/2023(b)(c) 33,061,112
200,000 Builders Transport, Inc., Subordinated Note,
6.500%, 5/01/2011(d) --
1,000,000 Builders Transport, Inc., Subordinated Note,
8.000%, 8/15/2005(d) --
750,000 Ciena Corp.,
3.750%, 2/01/2008 735,938
157,000 Dixie Group, Inc., Subordinated Note,
7.000%, 5/15/2012 146,991
14,933,000 Enzon, Inc.,
4.500%, 7/01/2008 14,541,009
5,111,000 EPIX Pharmaceuticals, Inc., Senior Note,
3.000%, 6/15/2024 4,350,739
7,140,000 Human Genome Sciences, Inc.,
2.250%, 8/15/2012 6,292,125
28,760,000 Incyte Corp.,
3.500%, 2/15/2011 25,093,100
4,865,000 Inhale Therapeutic Systems, Inc., Subordinated Note,
3.500%, 10/17/2007 4,773,781
12,005,000 Invitrogen Corp.,
1.500%, 2/15/2024 10,699,456
2,360,000 IVAX Corp., Senior Subordinated Note,
4.500%, 5/15/2008 2,377,700
8,030,000 Kellwood Co., (step to 0.000% on 6/15/2011),
3.500%, 6/15/2034(e) 7,347,450
6,670,000 Kulicke & Soffa Industries, Inc., Subordinated Note,
0.500%, 11/30/2008 6,053,025
3,540,000 Kulicke & Soffa Industries, Inc., Subordinated Note,
1.000%, 6/30/2010 3,402,825
14,893,000 Level 3 Communications, Inc.,
6.000%, 9/15/2009 14,390,361
34,370,000 Level 3 Communications, Inc.,
6.000%, 3/15/2010(c) 32,995,200
6,138,025 Liberty Media LLC,
3.500%, 1/15/2031 6,007,592
4,591,000 Maxtor Corp., Subordinated Note,
5.750%, 3/01/2012(f) 4,315,540
18,491,000 Nektar Therapeutics,
3.250%, 9/28/2012 17,866,929
625,000 Nextel Communications, Inc., Senior Note,
5.250%, 1/15/2010 620,313
500,000 Preston Corp., Subordinated Note,
7.000%, 5/01/2011 470,000
20,000,000 Regeneron Pharmaceuticals, Inc., Subordinated Note,
5.500%, 10/17/2008 21,150,000
311,000 Richardson Electronics, Ltd.,
7.750%, 12/15/2011 308,668
7,716,000 Sinclair Broadcast Group, Inc., (step to 2.000% on 1/15/2011),
4.875%, 7/15/2018(e) 7,590,615
20,555,000 Valeant Pharmaceuticals International, Subordinated Note,
3.000%, 8/16/2010 18,807,825
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------------------------
United States -- continued
$ 24,477,000 Valeant Pharmaceuticals International, Subordinated Note,
4.000%, 11/15/2013(c) $ 22,304,666
23,130,000 Wells Fargo & Co.,
5.110%, 5/01/2033(b)(c) 23,073,100
---------------
304,002,341
---------------
Total Convertible Bonds (Identified Cost $299,802,106) 312,395,103
---------------
Non-Convertible Bonds -- 86.8%
Argentina -- 0.3%
2,405,000 Petrobras Energia SA, Series A, 144A,
8.125%, 7/15/2010 2,531,263
51,531,500 Republic of Argentina,
2.000%, 9/30/2014, (ARS) 14,441,188
8,906,250 Republic of Argentina,
5.475%, 8/03/2012(b) 8,457,375
1,380,120 Republic of Argentina,
8.280%, 12/31/2033(b)(c)(g) 1,603,699
---------------
27,033,525
---------------
Australia -- 0.4%
1,000,000 General Motors Acceptance Corp. of Australia, Ltd., Series E,
(MTN),
6.500%, 8/10/2007, (AUD) 795,418
1,500,000 Qantas Airways, Ltd., 144A,
5.125%, 6/20/2013 1,336,212
31,220,000 Qantas Airways, Ltd., 144A,
6.050%, 4/15/2016 27,211,134
---------------
29,342,764
---------------
Bermuda -- 0.2%
11,855,000 Weatherford International, Ltd.,
6.500%, 8/01/2036 11,853,601
---------------
Brazil -- 2.2%
9,922,000 Republic of Brazil,
8.250%, 1/20/2034(c) 12,452,110
6,000,000 Republic of Brazil,
8.875%, 4/15/2024 7,800,000
43,700,000 Republic of Brazil,
10.250%, 1/10/2028, (BRL) 21,157,477
140,235,000 Republic of Brazil,
12.500%, 1/05/2016, (BRL)(c) 78,356,808
107,840,000 Republic of Brazil,
12.500%, 1/05/2022, (BRL) 61,122,245
---------------
180,888,640
---------------
Canada -- 17.3%
250,000 Abitibi-Consolidated, Inc.,
6.000%, 6/20/2013 212,500
8,125,000 Abitibi-Consolidated, Inc.,
7.400%, 4/01/2018 6,946,875
12,060,000 Abitibi-Consolidated, Inc.,
7.500%, 4/01/2028 10,009,800
2,960,000 Abitibi-Consolidated, Inc.,
8.500%, 8/01/2029 2,575,200
39,846,000 Abitibi-Consolidated, Inc.,
8.850%, 8/01/2030 35,462,940
750,000 Avenor, Inc.,
10.850%, 11/30/2014, (CAD) 705,793
2,795,000 Bombardier, Inc.,
7.350%, 12/22/2026, (CAD) 2,402,804
See accompanying notes to financial statements.
32
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------------
Canada -- continued
$ 15,600,000 Bombardier, Inc., 144A,
7.450%, 5/01/2034 $ 14,664,000
361,535,000 Canadian Government,
2.750%, 12/01/2007, (CAD)(c) 310,221,769
14,525,000 Canadian Government,
4.000%, 6/01/2016, (CAD)(c) 12,465,457
319,550,000 Canadian Government,
4.250%, 9/01/2008, (CAD)(c) 277,506,132
436,930,000 Canadian Government,
4.250%, 12/01/2008, (CAD) 379,733,611
10,555,000 Canadian Government,
4.250%, 9/01/2009, (CAD) 9,191,855
11,010,000 Canadian Government,
4.500%, 9/01/2007, (CAD) 9,542,890
35,580,000 Canadian Government,
5.750%, 6/01/2033, (CAD) 38,344,423
24,200,000 Canadian Government,
6.000%, 6/01/2008, (CAD) 21,407,305
7,955,000 Domtar, Inc.,
5.375%, 12/01/2013 7,328,544
335,000 GMAC Canada, Ltd., Series E, (MTN),
6.625%, 12/17/2010, (GBP) 646,045
945,000 GMAC Canada, Ltd.,
7.750%, 9/26/2008, (NZD) 654,809
9,790,000 Kinder Morgan Finance Co. ULC, Guaranteed Note,
5.700%, 1/05/2016 9,179,172
42,635,000 Kinder Morgan Finance Co. ULC, Guaranteed Note,
6.400%, 1/05/2036 38,176,829
9,975,000 Nortel Networks Corp.,
6.875%, 9/01/2023 9,276,750
22,320,000 Nortel Networks, Ltd., 144A,
10.125%, 7/15/2013 24,496,200
22,930,000 North American Energy Partners, Inc., Senior Note,
8.750%, 12/01/2011 23,388,600
5,800,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 5,582,500
36,735,000 Province of British Columbia,
6.000%, 6/09/2008, (CAD) 32,489,395
13,000,000 Province of Manitoba,
4.450%, 12/01/2008, (CAD) 11,315,349
6,685,000 Province of Manitoba,
5.750%, 6/02/2008, (CAD) 5,893,918
6,745,000 Province of Ontario,
3.875%, 3/08/2008, (CAD) 5,820,739
40,020,000 Province of Ontario,
5.700%, 12/01/2008, (CAD) 35,526,113
18,470,000 Province of Saskatchewan,
5.500%, 6/02/2008, (CAD) 16,239,361
2,525,000 Rogers Wireless Communications, Inc., Senior Secured Note,
6.375%, 3/01/2014 2,588,125
8,500,000 Rogers Wireless Communications, Inc., Senior Note,
7.625%, 12/15/2011, (CAD) 8,190,113
10,000,000 Shaw Communications, Inc.,
5.700%, 3/02/2017, (CAD) 8,636,206
29,010,000 Telus Corp.,
4.950%, 3/15/2017, (CAD) 24,698,076
---------------
1,401,520,198
---------------
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------------------------
Cayman Islands -- 0.0%
$ 1,000,000 Enersis SA, Cayman Island,
7.400%, 12/01/2016 $ 1,100,617
---------------
Chile -- 0.2%
4,875,000 Empresa Nacional de Electricidad SA, Chile,
7.875%, 2/01/2027 5,526,232
250,000 Empresa Nacional de Electricidad SA, Chile,
8.350%, 8/01/2013 283,476
1,700,000 Empresa Nacional de Electricidad SA, Chile,
8.625%, 8/01/2015(c) 2,005,959
4,525,000 Enersis SA, Chile,
7.375%, 1/15/2014(c) 4,911,390
---------------
12,727,057
---------------
France -- 0.2%
224,520,000,000 BNP Paribas SA, Series E, (MTN), 144A,
Zero Coupon, 6/13/2011, (IDR) 16,558,651
---------------
India -- 0.1%
6,800,000 ICICI Bank Ltd., 144A,
6.375%, 4/30/2022(b) 6,737,460
---------------
Ireland -- 0.8%
35,410,000 Elan Finance PLC, Senior Note,
7.750%, 11/15/2011 34,790,325
32,520,000 Elan Finance PLC, 144A,
8.875%, 12/01/2013 33,048,450
---------------
67,838,775
---------------
Malaysia -- 0.2%
20,000,000 Ranhill Labuan Ltd., 144A,
12.500%, 10/26/2011(c) 19,834,000
---------------
Mexico -- 3.1%
11,265,000 Desarrolladora Homex SAB de CV,
7.500%, 9/28/2015 11,625,480
3,245,000(++) Mexican Fixed Rate Bonds, Series M-10,
8.000%, 12/17/2015, (MXN) 30,176,817
17,299,000(++) Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023, (MXN) 162,141,149
4,738,000(++) Mexican Fixed Rate Bonds, Series M-10,
9.000%, 12/20/2012, (MXN) 45,919,529
---------------
249,862,975
---------------
Netherlands -- 1.8%
1,800,000 Koninklijke (Royal) KPN NV, Series G, (MTN),
4.000%, 6/22/2015, (EUR) 2,227,925
1,120,000 Koninklijke (Royal) KPN NV, Series E, (MTN),
5.750%, 3/18/2016, (GBP) 2,145,674
8,098,000 Koninklijke (Royal) KPN NV,
8.375%, 10/01/2030 9,167,592
8,580,000,000 Rabobank Nederland, Series E (MTN), 144A,
13.500%, 1/28/2008, (ISK) 130,045,818
---------------
143,587,009
---------------
Norway -- 0.0%
10,000,000 Kingdom of Norway,
5.500%, 5/15/2009, (NOK) 1,669,646
---------------
Philipines -- 0.1%
3,700,000 Philippine Long Distance Telephone Co., Series E, (MTN),
8.350%, 3/06/2017 4,181,000
1,743,000 Quezon Power (Philippines), Ltd., Senior Secured Note,
8.860%, 6/15/2017 1,804,005
---------------
5,985,005
---------------
See accompanying notes to financial statements.
33
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------
Republic of Korea -- 0.1%
$ 5,470,000 Hanarotelecom, Inc., 144A,
7.000%, 2/01/2012 $ 5,545,213
5,000,000 Hynix Semiconductor, Inc., 144A,
9.875%, 7/01/2012(c) 5,575,000
300,000 Samsung Electronics Co., Ltd., 144A,
7.700%, 10/01/2027 318,574
---------------
11,438,787
---------------
Singapore -- 0.0%
1,050,000 SP PowerAssets, Ltd., Series E, (MTN),
3.730%, 10/22/2010, (SGD) 705,819
---------------
South Africa -- 0.6%
320,500,000 Republic of South Africa,
13.000%, 8/31/2010, (ZAR) 50,355,765
---------------
Spain -- 1.5%
113,785,000 Telefonica Emisiones SAU, Guaranteed Note,
7.045%, 6/20/2036 121,509,636
---------------
Supranational -- 2.7%
15,543,570 European Investment Bank, 144A,
Zero Coupon, 9/12/2008, (BRL) 6,447,077
128,250,000 European Investment Bank, Senior Note,
Zero Coupon, 3/10/2021, (AUD) 45,387,517
134,330,000 European Investment Bank, 144A,
4.600%, 1/30/2037, (CAD) 116,204,467
80,000,000 Inter-American Development Bank, Series E, (MTN),
Zero Coupon, 5/11/2009, (BRL) 29,587,924
24,450,000 Inter-American Development Bank, Series E, (MTN),
6.000%, 12/15/2017, (NZD) 16,225,817
12,125,000 Inter-American Development Bank, Series G, (MTN),
6.250%, 6/22/2016, (NZD) 8,198,650
---------------
222,051,452
---------------
Sweden -- 0.4%
207,265,000 Kingdom of Sweden,
6.500%, 5/05/2008, (SEK) 30,575,654
---------------
Thailand -- 0.4%
28,255,000 True Move Co., Ltd., 144A,
10.750%, 12/16/2013 28,749,463
---------------
United Kingdom -- 0.2%
72,717,436,000 JPMorgan Chase Bank, 144A,
Zero Coupon, 10/21/2010, (IDR) 5,798,620
1,000,000 Virgin Media Finance PLC,
9.125%, 8/15/2016 1,055,000
4,570,000 Virgin Media Finance PLC,
9.750%, 4/15/2014, (GBP) 9,510,173
1,605,000 Vodafone Group PLC,
6.150%, 2/27/2037 1,549,436
---------------
17,913,229
---------------
United States -- 53.6%
5,565,000 AES Corp. (The),
8.375%, 3/01/2011, (GBP) 11,334,369
4,020,000 AES Corp. (The), Senior Note,
7.750%, 3/01/2014 4,221,000
1,190,000 Affiliated Computer Services, Inc.,
5.200%, 6/01/2015 1,116,648
13,242,000 Albertson's, Inc.,
6.625%, 6/01/2028 12,123,859
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------
United States -- continued
$ 17,735,000 Albertson's, Inc.,
7.750%, 6/15/2026 $ 17,960,696
69,796,000 Albertson's, Inc., Senior Note,
7.450%, 8/01/2029 68,660,628
4,895,000 Albertson's, Inc., Senior Note,
8.000%, 5/01/2031 4,988,881
1,510,000 Albertson's, Inc., Senior Note,
8.700%, 5/01/2030 1,633,607
4,785,000 Allstate Corp.,
5.950%, 4/01/2036 4,771,702
1,750,000 Altria Group, Inc.,
7.000%, 11/04/2013 1,900,467
825,000 American Airlines, Inc., Series 1999-1, Class B,
7.324%, 10/15/2009 838,406
1,225,697 American Airlines, Inc., Series 93A6,
8.040%, 9/16/2011 1,234,890
6,950,000 Amkor Technology, Inc., Senior Note,
7.125%, 3/15/2011(c) 6,811,000
475,000 Amkor Technology, Inc., Senior Note,
7.750%, 5/15/2013(c) 465,500
980,000 Amkor Technology, Inc., Senior Subordinated Note,
10.500%, 5/01/2009(c) 982,450
37,190,000 Anadarko Petroleum Corp.,
5.950%, 9/15/2016 37,268,322
39,805,000 Anadarko Petroleum Corp.,
6.450%, 9/15/2036 39,388,918
10,503,000 APL Ltd., Senior Note,
8.000%, 1/15/2024(f) 9,756,132
1,585,000 Aramark Services, Inc.,
5.000%, 6/01/2012 1,422,538
4,640,000 Arrow Electronics, Inc.,
6.875%, 6/01/2018 4,850,995
8,000,000 ASIF Global Financing, 144A,
2.380%, 2/26/2009, (SGD) 5,198,083
10,245,000 AT&T, Corp.,
6.500%, 3/15/2029 10,078,826
8,500,000 AT&T, Inc.,
6.150%, 9/15/2034(c) 8,365,734
17,574,841 Atlas Air, Inc., Series 1998-1, Class 1B,
7.680%, 1/02/2014(h) 19,332,325
350,169 Atlas Air, Inc., Series 1999-1, Class A2,
6.880%, 7/02/2009 352,795
12,740,207 Atlas Air, Inc., Series 1999-1, Class B,
7.630%, 1/02/2015(h) 14,109,779
4,744,556 Atlas Air, Inc., Series 1999-1, Class C,
8.770%, 1/02/2011(h) 4,602,219
5,323,737 Atlas Air, Inc., Series 2000-1, Class B,
9.057%, 1/02/2014(h) 6,228,772
6,862,758 Atlas Air, Inc., Series C,
8.010%, 1/02/2010(h) 6,039,227
30,125,000 Avnet, Inc.,
5.875%, 3/15/2014 29,915,450
35,630,000 Avnet, Inc.,
6.000%, 9/01/2015 35,326,789
11,345,000 Avnet, Inc.,
6.625%, 9/15/2016 11,709,878
22,125,000 BAC Capital Trust VI,
5.625%, 3/08/2035 20,555,275
17,310,000,000 Barclays Financial LLC, 144A,
4.060%, 9/16/2010, (KRW) 17,440,635
See accompanying notes to financial statements.
34
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------
United States -- continued
$ 1,006,000,000 Barclays Financial LLC, 144A,
4.160%, 2/22/2010, (THB) $ 29,138,988
21,340,000,000 Barclays Financial LLC, 144A,
4.460%, 9/23/2010, (KRW) 22,623,848
56,650,000,000 Barclays Financial LLC, 144A,
4.470%, 12/04/2011, (KRW) 59,949,766
337,000,000 Barclays Financial LLC, 144A,
5.500%, 11/01/2010, (THB) 10,107,394
529,000,000 Barclays Financial LLC, Series E, (MTN), 144A,
4.100%, 3/22/2010, (THB) 15,319,316
15,195,000 BellSouth Corp.,
6.000%, 11/15/2034(c) 14,637,192
21,174,000 Borden, Inc.,
7.875%, 2/15/2023 18,050,835
6,920,000 Borden, Inc.,
8.375%, 4/15/2016 6,435,600
8,757,000 Borden, Inc.,
9.200%, 3/15/2021 8,341,042
2,685,000 Bowater, Inc.,
6.500%, 6/15/2013(c) 2,423,212
2,840,000 Centex Corp.,
5.250%, 6/15/2015(c) 2,591,545
21,365,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017 21,097,937
22,690,000 Chesapeake Energy Corp.,
6.875%, 11/15/2020 22,576,550
15,325,000 CIGNA Corp.,
6.150%, 11/15/2036 15,186,830
425,000 Cincinnati Bell, Inc.,
8.375%, 1/15/2014 434,563
3,055,000 CIT Group, Inc.,
6.000%, 4/01/2036 2,961,208
2,500,000 CIT Group, Inc., Series E, Senior Note, (MTN),
5.500%, 12/01/2014, (GBP) 4,708,079
18,650,000 Citibank NA, 144A,
15.000%, 7/02/2010, (BRL) 10,294,034
35,260,000 Citizens Communications Co., 144A,
7.875%, 1/15/2027 36,053,350
2,405,000 Colorado Interstate Gas Co.,
5.950%, 3/15/2015 2,420,017
2,670,000 Colorado Interstate Gas Co.,
6.800%, 11/15/2015 2,839,500
41,635,000 Comcast Corp.,
5.650%, 6/15/2035 37,722,642
34,570,000 Comcast Corp.,
6.450%, 3/15/2037 34,609,410
20,175,000 Comcast Corp.,
6.500%, 11/15/2035 20,327,846
6,398,540 Continental Airlines, Inc., Series 1997-4, Class 4B,
6.900%, 1/02/2017 6,350,551
8,655,346 Continental Airlines, Inc., Series 1998-1, Class 1B,
6.748%, 3/15/2017 8,666,165
7,034,243 Continental Airlines, Inc., Series 1999-1, Class B,
6.795%, 8/02/2018 7,029,847
2,426,773 Continental Airlines, Inc., Series 1999-1, Class C,
6.954%, 8/02/2009 2,414,639
4,425,167 Continental Airlines, Inc., Series 1999-2, Class B,
7.566%, 3/15/2020 4,480,482
7,733,554 Continental Airlines, Inc., Series 2000-2, Class B,
8.307%, 4/02/2018 8,062,230
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------
United States -- continued
$ 2,803,874 Continental Airlines, Inc., Series 2001-1, Class B,
7.373%, 12/15/2015 $ 2,817,893
304,984 Continental Airlines, Inc., Series 96-A,
6.940%, 10/15/2013 311,083
2,836,149 Continental Airlines, Inc., Series 971A,
7.461%, 4/01/2015 2,960,230
6,225,000 Corning, Inc.,
5.900%, 3/15/2014 6,367,814
6,220,000 Corning, Inc.,
6.200%, 3/15/2016 6,391,516
650,000 Corning, Inc.,
6.750%, 9/15/2013 698,027
6,150,000 Corning, Inc.,
6.850%, 3/01/2029 6,421,184
4,725,000 Corning, Inc.,
7.250%, 8/15/2036 4,980,764
400,000 CSC Holdings, Inc., Senior Note,
7.875%, 2/15/2018 411,000
250,000 CSC Holdings, Inc., Series B, Senior Note,
8.125%, 7/15/2009 258,750
250,000 CSC Holdings, Inc., Series B, Senior Note,
8.125%, 8/15/2009 258,750
18,600,000 CSX Corp.,
6.000%, 10/01/2036(c) 17,736,886
2,145,000 Cummins, Inc.,
7.125%, 3/01/2028 2,224,440
1,853,000 Cummins, Inc.,
6.750%, 2/15/2027 1,854,809
19,745,000 DCP Midstream LP, 144A,
6.450%, 11/03/2036 20,082,679
8,558,000 Dillard's, Inc.,
6.625%, 1/15/2018(c) 8,311,957
1,500,000 Dillard's, Inc.,
7.750%, 7/15/2026 1,477,500
425,000 Dillard's, Inc.,
7.875%, 1/01/2023 422,344
4,187,000 Dillard's, Inc.,
7.130%, 8/01/2018 4,118,961
3,325,000 Dillard's, Inc., Class A,
7.000%, 12/01/2028 3,025,750
1,935,000 Dole Food Co., Inc.,
8.625%, 5/01/2009 1,930,163
8,180,000 Dominion Resources, Inc., Senior Note, Series B,
5.950%, 6/15/2035 7,949,586
4,335,000 DR Horton, Inc.,
5.625%, 9/15/2014 4,120,244
1,625,000 DR Horton, Inc.,
6.500%, 4/15/2016 1,589,245
16,160,000 DR Horton, Inc., Guaranteed Note,
5.625%, 1/15/2016(c) 14,948,259
43,470,000 DR Horton, Inc., Senior Note,
5.250%, 2/15/2015 39,750,707
11,275,000 Dynegy Holdings, Inc.,
7.125%, 5/15/2018 10,824,000
10,185,000 Dynegy Holdings, Inc.,
7.625%, 10/15/2026 9,879,450
7,455,000 Dynegy Holdings, Inc.,
8.375%, 5/01/2016 7,753,200
3,705,000 Edison Mission Energy Corp., Senior Note,
7.730%, 6/15/2009 3,834,675
See accompanying notes to financial statements.
35
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
United States -- continued
$ 15,685,000 El Paso Corp.,
6.950%, 6/01/2028 $ 16,116,337
1,965,000 El Paso Corp.,
7.000%, 5/15/2011 2,063,250
925,000 El Paso Corp.,
7.750%, 6/15/2010(c) 985,125
750,000 El Paso Corp., Senior Note, (MTN),
7.800%, 8/01/2031 828,750
1,600,000 El Paso Energy Corp.,
6.750%, 5/15/2009(c) 1,638,000
1,000,000 El Paso Energy Corp., (MTN),
7.750%, 1/15/2032(c) 1,105,000
5,330,000 Embarq Corp.,
7.995%, 6/01/2036 5,503,817
5,255,000 Energy Transfer Partners LP,
6.125%, 2/15/2017 5,369,596
3,855,000 Energy Transfer Partners LP,
6.625%, 10/15/2036 3,943,441
7,940,000 Federated Retail Holdings, Inc.,
6.375%, 3/15/2037 7,717,609
5,000,000 FHLMC,
3.220%, 6/20/2007, (SGD) 3,297,815
35,900,000 FNMA,
2.290%, 2/19/2009, (SGD) 23,332,764
17,816,000 Ford Motor Co.,
6.375%, 2/01/2029(c) 12,693,900
1,705,000 Ford Motor Co.,
6.500%, 8/01/2018(c) 1,359,738
500,000 Ford Motor Co.,
6.625%, 2/15/2028(c) 361,250
72,614,000 Ford Motor Co.,
6.625%, 10/01/2028 52,463,615
1,940,000 Ford Motor Co.,
7.125%, 11/15/2025 1,459,850
86,090,000 Ford Motor Co.,
7.450%, 7/16/2031(c) 66,612,137
800,000 Ford Motor Co.,
7.500%, 8/01/2026 624,000
26,070,000 Ford Motor Credit Co.,
5.700%, 1/15/2010 24,956,055
10,685,000 Ford Motor Credit Co.,
7.000%, 10/01/2013(c) 9,932,637
15,465,000 Ford Motor Credit Co.,
7.250%, 10/25/2011 15,030,480
14,595,000 Ford Motor Credit Co.,
8.000%, 12/15/2016 14,043,937
9,905,000 Ford Motor Credit Co.,
8.625%, 11/01/2010 10,108,260
23,605,000 Freescale Semiconductor, Inc., 144A,
10.125%, 12/15/2016(c) 23,664,012
222,777,000 General Electric Capital Corp.,
6.500%, 9/28/2015, (NZD) 149,186,816
30,350,000 General Electric Capital Corp., Series A, (MTN),
6.625%, 2/04/2010, (NZD) 21,016,405
500,000 General Electric Capital Corp., Series E, (MTN),
1.725%, 6/27/2008, (SGD) 324,181
3,100,000 General Electric Capital Corp., Series E, (MTN),
6.125%, 5/17/2012, (GBP) 6,191,661
47,925,000 General Electric Capital Corp., Series E, (MTN),
6.750%, 9/26/2016, (NZD) 33,006,933
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------------
United States -- continued
$ 115,000,000 General Electric Capital Corp., Series G, (MTN),
3.485%, 3/08/2012, (SGD) $ 76,730,617
1,035,000 General Motors Corp.,
8.375%, 7/15/2033(c) 928,913
4,775,000 Georgia Gulf Corp., 144A,
10.750%, 10/15/2016(c) 4,584,000
10,895,000 Georgia-Pacific Corp.,
7.250%, 6/01/2028 10,404,725
10,040,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 9,688,600
41,260,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 40,847,400
9,380,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 9,426,900
11,878,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 12,590,680
6,625,000 GMAC LLC,
6.310%, 7/16/2007(b) 6,624,980
820,000 GMAC LLC,
8.000%, 11/01/2031 879,158
4,650,000 GMAC LLC, (MTN),
6.750%, 12/01/2014 4,571,378
4,360,000 Goodyear Tire & Rubber Co.,
7.000%, 3/15/2028 4,054,800
1,845,000 Goodyear Tire & Rubber Co.,
9.000%, 7/01/2015(c) 2,024,888
2,590,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note,
7.750%, 12/15/2013 2,570,575
5,790,000 GTE Corp.,
6.940%, 4/15/2028 6,106,366
185,000 Hawaiian Telcom Communications, Inc.,
12.500%, 5/01/2015(c) 202,575
18,025,000 HCA, Inc.,
6.500%, 2/15/2016(c) 15,343,781
12,875,000 HCA, Inc.,
7.050%, 12/01/2027 10,213,531
8,742,000 HCA, Inc.,
7.500%, 12/15/2023 7,417,779
17,530,000 HCA, Inc.,
7.500%, 11/06/2033 14,944,325
10,240,000 HCA, Inc.,
7.580%, 9/15/2025 8,643,410
21,372,000 HCA, Inc.,
7.690%, 6/15/2025 18,423,497
4,490,000 HCA, Inc.,
7.750%, 7/15/2036 3,804,260
6,155,000 HCA, Inc.,
8.360%, 4/15/2024 5,606,005
1,000,000 HCA, Inc., Senior Note,
5.750%, 3/15/2014 853,750
10,500,000 Hercules, Inc., Subordinated Note,
6.500%, 6/30/2029 8,925,000
34,205,000 Highwoods Properties, Inc., 144A,
5.850%, 3/15/2017 33,955,611
9,995,000 Hilcorp Energy I LP, 144A,
7.750%, 11/01/2015 9,820,087
11,370,000 Hospira, Inc.,
6.050%, 3/30/2017 11,361,075
66,372,000 HSBC Bank PLC, 144A,
Zero Coupon, 4/18/2012, (MYR) 16,240,264
See accompanying notes to financial statements.
36
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------------
United States -- continued
$ 119,806,078 HSBC Bank USA, 144A,
Zero Coupon, 11/28/2011 $ 78,413,078
16,050,000 HSBC Bank USA, 144A,
3.310%, 8/25/2010 17,576,355
5,310,000 ITC Holdings Corp., 144A,
6.375%, 9/30/2036 5,340,973
640,000 JC Penney Corp., Inc.,
7.125%, 11/15/2023(c) 701,500
3,445,000 Jefferson Smurfit Corp.,
7.500%, 6/01/2013 3,341,650
1,425,000 Joy Global, Inc.,
6.625%, 11/15/2036 1,435,026
109,312,000,000 JPMorgan Chase & Co., 144A
Zero Coupon, 3/28/2011, (IDR) 8,301,615
599,726,100,000 JPMorgan Chase & Co., 144A
Zero Coupon, 3/28/2011, (IDR) 45,545,730
229,157,783,660 JPMorgan Chase & Co., 144A,
Zero Coupon, 4/12/2012, (IDR) 15,782,831
92,000,000 JPMorgan Chase Bank, 144A,
Zero Coupon, 5/17/2010, (BRL) 32,092,742
2,365,000 K N Capital Trust III,
7.630%, 4/15/2028(c) 2,283,275
4,300,000 K N Energy, Inc.,
6.670%, 11/01/2027 3,961,680
6,180,000 K. Hovnanian Enterprises, Inc.,
7.500%, 5/15/2016(c) 5,762,850
2,655,000 K. Hovnanian Enterprises, Inc., Guaranteed Note,
6.375%, 12/15/2014 2,323,125
8,940,000 K. Hovnanian Enterprises, Inc., Senior Note,
6.250%, 1/15/2016 7,666,050
1,750,000 K. Hovnanian Enterprises, Inc., Senior Note,
6.500%, 1/15/2014 1,566,250
10,975,000 KB Home,
7.250%, 6/15/2018 10,135,687
7,515,000 Kellwood Co.,
7.625%, 10/15/2017 6,955,095
1,915,000 Kimball Hill Homes, Inc.,
10.500%, 12/15/2012 1,838,400
11,288,000 Kinder Morgan, Inc., Senior Note,
5.150%, 3/01/2015 10,352,586
1,650,000 Koppers Holdings, Inc., (step to 9.875% on 11/15/2009),
0.000%, 11/15/2014(e) 1,388,063
22,525,000 Lennar Corp., Series A,
6.500%, 4/15/2016(c) 22,148,112
1,600,000 Lennar Corp., Series B, Class A, Guaranteed Note,
5.600%, 5/31/2015 1,504,974
31,295,000 Level 3 Communications, Inc.,
2.875%, 7/15/2010 34,972,162
25,275,000 Level 3 Financing, Inc., 144A,
8.750%, 2/15/2017 25,464,562
36,390,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 32,841,975
2,840,000 Lucent Technologies, Inc.,
6.500%, 1/15/2028 2,563,100
8,310,000 Lyondell Chemical Co.,
8.000%, 9/15/2014 8,704,725
2,660,000 Marsh & McLennan Cos., Inc.,
5.375%, 7/15/2014 2,603,454
11,710,000 Marsh & McLennan Cos., Inc.,
5.750%, 9/15/2015 11,632,363
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------------
United States -- continued
$ 6,905,000 Marsh & McLennan Cos., Inc.,
5.875%, 8/01/2033(c) $ 6,307,020
1,250,000 McDonalds Corp., Series E, (MTN),
3.628%, 10/10/2010, (SGD) 834,920
51,500,000 Merrill Lynch & Co., Inc.,
10.710%, 3/08/2017, (BRL) 25,071,349
5,350,000 Methanex Corp., Senior Note,
6.000%, 8/15/2015 5,122,513
13,405,000 Michigan Tobacco Settlement Finance Authority, Taxable Turbo
Series A,
7.309%, 6/01/2034 13,838,116
1,000,000 MidAmerican Energy Holdings Co,
6.125%, 4/01/2036 997,838
1,153,000 Missouri Pacific Railroad Co.,
5.000%, 1/01/2045 961,039
6,065,000 Mosaic Global Holdings, Inc.,
7.300%, 1/15/2028 5,685,937
2,945,000 Mosaic Global Holdings, Inc.,
7.375%, 8/01/2018 2,930,275
3,346,000 New England Telephone & Telegraph Co.,
7.875%, 11/15/2029 3,761,747
11,140,000 News America, Inc.,
6.200%, 12/15/2034 10,805,243
46,085,000 News America, Inc., 144A,
6.150%, 3/01/2037 43,903,935
4,305,000 Nextel Communications, Inc., Series E,
6.875%, 10/31/2013 4,410,305
25,790,000 Nextel Communications, Inc., Series F,
5.950%, 3/15/2014 25,372,434
31,485,000 NGC Corp. Capital Trust I, Series B,
8.316%, 6/01/2027 30,225,600
2,500,000 NRG Energy, Inc.,
7.250%, 2/01/2014 2,562,500
5,000,000 NRG Energy, Inc.,
7.375%, 2/01/2016 5,137,500
4,530,000 ONEOK Partners LP,
6.650%, 10/01/2036 4,654,290
2,275,000 Owens & Minor, Inc.,
6.350%, 4/15/2016 2,293,575
9,480,000 Owens Corning, Inc., 144A,
6.500%, 12/01/2016 9,682,853
14,200,000 Owens Corning, Inc., 144A,
7.000%, 12/01/2036 14,162,015
225,000 Owens-Illinois, Inc., Senior Note,
7.500%, 5/15/2010 228,375
42,043,000 Owens-Illinois, Inc., Senior Note,
7.800%, 5/15/2018 42,988,967
3,000,000 Pemex Project Funding Master Trust,
8.625%, 12/01/2023 3,735,000
4,350,000 Pemex Project Funding Master Trust,
9.500%, 9/15/2027(c) 5,896,425
1,920,000 Pioneer Natural Resource,
5.875%, 7/15/2016 1,786,518
943,000 Pioneer Natural Resources Co.,
7.200%, 1/15/2028 897,058
20,770,000 Plains All American Pipeline, 144A,
6.125%, 1/15/2017 21,184,341
44,730,000 Plains All American Pipeline, 144A,
6.650%, 1/15/2037 45,472,965
See accompanying notes to financial statements.
37
United States -- continued
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------
United States -- continued
$ 1,948,000 Ply Gem Industries, Inc.,
9.000%, 2/15/2012(c) $ 1,689,890
3,165,000 Pulte Homes, Inc.,
5.200%, 2/15/2015 2,924,235
42,115,000 Pulte Homes, Inc.,
6.000%, 2/15/2035 37,564,390
12,730,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 11,830,715
12,295,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 11,572,669
950,000 Qwest Capital Funding, Inc.,
7.250%, 2/15/2011(c) 972,563
26,205,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 26,008,462
41,730,000 Qwest Capital Funding, Inc., Guaranteed Note,
6.875%, 7/15/2028(c) 39,434,850
2,025,000 Qwest Capital Funding, Inc., Guaranteed Note,
7.000%, 8/03/2009(c) 2,050,313
5,640,000 Qwest Capital Funding, Inc., Guaranteed Note,
7.625%, 8/03/2021 5,668,200
20,420,000 Qwest Corp.,
6.875%, 9/15/2033(c) 19,705,300
2,785,000 Qwest Corp.,
7.250%, 9/15/2025 2,872,031
3,310,000 Sara Lee Corp.,
6.125%, 11/01/2032 3,059,413
6,100,000 SLM Corp.,
6.500%, 6/15/2010, (NZD) 4,198,454
2,550,000 Southern Natural Gas Co.,
7.350%, 2/15/2031 2,820,313
6,326,000 Sprint Capital Corp.,
6.875%, 11/15/2028 6,299,981
11,309,000 Sprint Nextel Corp.,
6.000%, 12/01/2016 11,129,255
4,000,000 St. Paul Travelers Cos., Inc. (The),
6.750%, 6/20/2036 4,403,348
4,035,000 Stanley-Martin Communities LLC,
9.750%, 8/15/2015(c) 3,616,369
1,810,000 Sungard Data Systems, Inc.,
9.125%, 8/15/2013 1,941,225
2,595,000 Sungard Data Systems, Inc.,
10.250%, 8/15/2015 2,831,794
690,000 Tenet Healthcare Corp.,
6.875%, 11/15/2031 545,100
4,480,000 Tenet Healthcare Corp.,
9.250%, 2/01/2015 4,435,200
7,872,000 Tennessee Gas Pipeline Co., Senior Note,
7.000%, 10/15/2028(c) 8,428,283
9,240,000 Time Warner, Inc.,
6.500%, 11/15/2036 9,213,842
11,145,000 Time Warner, Inc.,
6.625%, 5/15/2029 11,278,695
4,795,000 Time Warner, Inc.,
6.950%, 1/15/2028 5,021,051
3,150,000 Time Warner, Inc.,
7.625%, 4/15/2031 3,540,042
2,025,000 Time Warner, Inc.,
7.700%, 5/01/2032 2,295,824
496,687 Tiverton Power Associates, LP, 144A,
9.000%, 7/15/2018(d) 596,025
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------------------
United States -- continued
$ 8,785,000 Toledo Edison Co.,
6.150%, 5/15/2037 $ 8,606,243
4,245,000 Toll Brothers Financial Corp.,
5.150%, 5/15/2015(c) 3,837,947
20,850,000 Toys R Us, Inc.,
7.375%, 10/15/2018 17,931,000
8,355,000 Toys R Us, Inc.,
7.875%, 4/15/2013(c) 7,707,487
1,000,000 Travelers Property Casualty Corp.,
6.375%, 3/15/2033 1,042,286
315,000 TXU Corp.,
5.550%, 11/15/2014 278,989
2,225,000 TXU Corp., Series R,
6.550%, 11/15/2034 1,863,211
385,850,000 U.S. Treasury Bond,
4.500%, 2/15/2036(c) 363,784,010
704,680,000 U.S. Treasury Bond,
5.375%, 2/15/2031(c) 751,255,120
24,880,000 USG Corp., 144A,
6.300%, 11/15/2016 25,056,126
51,815,000 Verizon Global Funding Corp.,
5.850%, 9/15/2035 49,000,254
5,530,000 Verizon Maryland, Inc.,
5.125%, 6/15/2033 4,614,265
12,050,000 Verizon New York, Inc.,
7.375%, 4/01/2032 12,740,549
32,790,000 Viacom, Inc., Class B,
6.875%, 4/30/2036 33,051,795
88,105,000 Western Union Co.,
6.200%, 11/17/2036 83,646,887
600,000 Williams Cos., Inc.,
7.875%, 9/01/2021 660,000
965,000 Williams Cos., Inc., Senior Note,
7.750%, 6/15/2031(c) 1,032,550
8,600,000 Williams Cos., Inc., Series A,
7.500%, 1/15/2031 9,116,000
11,205,000 Willis North America, Inc.,
6.200%, 3/28/2017 11,229,606
10,270,000 Woolworth Corp.,
8.500%, 1/15/2022 10,526,750
18,050,000 Xerox Capital Trust I, Guaranteed Note,
8.000%, 2/01/2027 18,411,000
1,730,000 Xerox Corp., (MTN),
7.200%, 4/01/2016 1,823,505
---------------
4,336,553,633
---------------
Uruguay -- 0.1%
1,595,000 Republic of Uruguay,
7.625%, 3/21/2036(c) 1,758,488
2,949,995 Republic of Uruguay,
7.875%, 1/15/2033(c)(g) 3,340,869
---------------
5,099,357
---------------
Venezuela -- 0.3%
15,930,000 Cerro Negro Finance, Ltd., 144A,
7.900%, 12/01/2020 15,930,000
9,335,000 Petrozuata Finance, Inc., Series B, 144A,
8.220%, 4/01/2017 9,381,668
---------------
25,311,668
---------------
Total Non-Convertible Bonds (Identified Cost $6,772,503,834) 7,026,804,386
---------------
Total Bonds and Notes (Identified Cost $7,072,305,940) 7,339,199,489
---------------
See accompanying notes to financial statements.
38
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Shares Description Value (+)
- -------------------------------------------------------------------------------------
Common Stocks -- 3.2% of Net Assets
Israel -- 0.0%
2,288 Teva Pharmaceutical Industries, Ltd., ADR $ 85,640
---------------
Philippines -- 0.0%
24,316 Philippine Long Distance Telephone Co., Sponsored ADR 1,283,885
---------------
United States -- 3.2%
200,925 Apartment Investment & Management Co., Class A 11,591,363
889,730 Associated Estates Realty Corp., (REIT) 12,536,296
2,238,800 Bristol-Myers Squibb Co. 62,149,088
53,260 Chesapeake Energy Corp.(c) 1,644,669
2,309,175 ConAgra Foods, Inc. 57,521,549
41,343 Corning, Inc.(h) 940,140
182,500 Developers Diversified Realty Corp., (REIT)(c) 11,479,250
282,500 Duke Energy Corp.(c) 5,731,925
460,000 Equity Residential, (REIT)(c) 22,185,800
477,725 KB Home(c) 20,384,526
549,450 Lennar Corp., Class A(c) 23,192,284
117,700 Simon Property Group, Inc., (REIT)(c) 13,094,125
141,250 Spectra Energy Corp.(c) 3,710,624
359,449 Vertex Pharmaceuticals, Inc.(c)(h) 10,078,950
---------------
256,240,589
---------------
Total Common Stocks (Identified Cost $212,606,104) 257,610,114
---------------
Shares
- -------------------------------------------------------------------------------------
Preferred Stocks -- 1.9%
United States -- 1.9%
297,150 AES Trust III, Convertible,
6.750%, 10/15/2029(c) 14,928,816
21,020 Chesapeake Energy Corp.,
4.500%, 12/31/2049(c) 2,098,427
278,685 Chesapeake Energy Corp., Convertible,
5.000%, 12/31/2049(c) 30,306,994
107,725 CMS Energy Trust I, Convertible,
7.750%, 7/15/2027 5,372,784
136,125 El Paso Energy Capital Trust I, Convertible,
4.750%, 3/31/2028 5,445,000
393 Entergy New Orleans, Inc.,
4.750%, 12/31/2045(d) 28,591
42,700 FelCor Lodging Trust, Inc., (REIT) Convertible,
1.950%, 12/31/2049 1,101,233
1,447,000 Ford Motor Co. Capital Trust II, Convertible,
6.500%, 1/15/2032 51,744,720
15,600 Lucent Technologies Capital Trust I, Convertible,
7.750%, 3/15/2017 16,151,850
69,975 Newell Financial Trust I,
5.250%, 12/01/2027 3,420,028
457,900 Owens-Illinois, Inc., Convertible,
4.750%, 12/31/2049 17,537,570
332,275 Six Flags, Inc.,
7.250%, 8/15/2009(c) 7,766,928
9,381 United Rentals Trust I, Convertible,
6.500%, 8/01/2028 459,669
---------------
Total Preferred Stocks (Identified Cost $150,623,120) 156,362,610
---------------
Shares Description Value (+)
- ---------------------------------------------------------------------------------------------------
Closed-End Investment Companies -- 0.3%
110,211 Morgan Stanley Emerging Markets Debt Fund, Inc.(c) $ 1,159,420
1,755,800 Western Asset High Income Opportunity Fund, Inc. 12,062,346
1,368,400 Western Asset Managed High Income Fund, Inc.(c) 9,565,116
---------------
Total Closed-End Investment Companies
(Identified Cost $20,353,073) 22,786,882
---------------
Warrants -- 0.0%
Argentina -- 0.0%
3,603,539(+++) Republic of Argentina, Expiration 12/15/2035
(Identified Cost $165,518) 497,288
---------------
Shares/
Principal
Amount (++)
- ---------------------------------------------------------------------------------------------------
Short-Term Investments -- 24.1% of Net Assets
1,742,998,995 State Street Securities Lending Quality Trust(i) 1,742,998,995
$ 210,596,435 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/2007 at 4.250% to be repurchased at
$210,671,021 on 4/2/2007, collateralized by $39,485,000
U.S. Treasury Bill, 4.890% due 9/27/2007 with a value of
$38,537,360; $2,120,000 U.S Treasury Bond, 8.875% due
2/15/2019 with a value of $2,923,438; $12,985,000 U.S.
Treasury Note, 4.875% due 2/15/2012 with a value of
$13,273,228; $5,000,000 U.S. Treasury Note, 3.625% due
5/15/2013 with a value of $4,826,970; $11,270,000 U.S.
Treasury Note, 3.375% due 12/15/2008 with a value of
$11,129,125; $100,000,000 U.S. Treasury Note, 3.375% due
2/15/2008 with a value of $99,125,000; $435,000 U.S.
Treasury Note, 4.00% due 4/15/2010 with a value of
$436,088; $35,980,000 U.S. Treasury Note, 4.625% due
3/31/2008 with a value of $36,699,600; $7,780,000 U.S.
Treasury Note, 4.750% due 2/15/2010 with a value of
$7,857,800, including accrued interest (Note 2f ) 210,596,435
---------------
Total Short-Term Investments (Identified Cost $1,953,595,430) 1,953,595,430
---------------
Total Investments -- 120.2%
(Identified Cost $9,409,649,185)(a) 9,730,051,813
Other assets less liabilities--(20.2)% (1,633,274,600)
---------------
Net Assets -- 100% $ 8,096,777,213
===============
(++) Principal amount is in U.S. dollars unless otherwise noted.
(++) Amount shown represents units. One unit represents a principal
amount of 100.
(+++) Amount shown represents notional amount.
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales. Amortization of
premium on debt securities is excluded for tax purposes.):
At March 31, 2007, the net unrealized appreciation on
investments based on cost of $9,420,855,663 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 $ 365,554,909
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (56,358,759)
---------------
Net unrealized appreciation $ 309,196,150
===============
See accompanying notes to financial statements.
39
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
(b) Variable rate security whose interest rate varies with changes in a designated base rate (such as
the prime interest rate) on a specified date (such as coupon date or interest payment date).
(c) All or a portion of this security was on loan at March 31, 2007.
(d) Non-income producing security due to default or bankruptcy filing.
(e) Step Bond: Coupon is a fixed rate for an initial period and then resets at a specified date and
rate.
(f) Illiquid security. At March 31, 2007, the value of these securities amounted to $14,071,672 or
0.2% of net assets.
(g) All or a portion of interest payment is paid-in-kind.
(h) Non-income producing security.
(i) Represents investment of security lending collateral.
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registrations, normally to qualified
institutional buyers. At the period end, the value of these amounted to $1,173,461,490 or
14.5% of net assets.
ADR An American Depositary Receipt is a certificate issued by a custodian bank representing the right
to receive securities of the foreign issuer described. The values of ADRs are significantly
influenced by trading on exchanges not located in the United States.
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
MTN Medium Term Note
REIT Real Estate Investment Trusts
ARS Argentine Peso
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
EUR Euro
GBP British Pound
IDR Indonesian Rupiah
ISK Iceland Krona
KRW South Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
SGD Singapore Dollar
THB Thailand Baht
ZAR South African Rand
Holdings at March 31, 2007 as a Percentage of Net Assets (Unaudited)
Treasuries 26.9%
Sovereigns 7.9
Banking 7.3
Wirelines 6.7
Technology 3.7
Non-Captive Finance 3.5
Pharmaceuticals 3.4
Automotive 3.4
Home Construction 2.9
Supranational 2.7
Pipelines 2.7
Independent Energy 2.1
Other, less than 2% each 22.9
See accompanying notes to financial statements.
40
STATEMENTS OF ASSETS AND LIABILITIES
March 31, 2007 (Unaudited)
Limited Term Government
Core Plus Bond Fund High Income Fund and Agency Fund
--------------------- --------------------- -----------------------
--------------------- --------------------- ---------------------
ASSETS
Investments at cost $ 274,377,842 $ 46,064,469 $ 155,251,706
Net unrealized appreciation
(depreciation) 263,335 2,660,200 (797,528)
--------------------- --------------------- ---------------------
Investments at value (a) 274,641,177 48,724,669 154,454,178
Cash -- -- --
Foreign currency at value (identified
cost $34,019, $5,442, $0, $0, $0,
and $0) 34,062 5,661 --
Receivable for Fund shares sold 757,299 342,438 92,724
Receivable for securities sold -- -- --
Dividends and interest receivable 2,210,830 598,078 773,882
Tax reclaims receivable -- -- --
Securities lending income receivable 3,633 1,136 846
Other assets 7,376 1,174 3,947
--------------------- --------------------- ---------------------
TOTAL ASSETS 277,654,377 49,673,156 155,325,577
--------------------- --------------------- ---------------------
LIABILITIES
Collateral on securities loaned, at
value (Note 2) 55,198,804 6,398,145 28,938,786
Payable for securities purchased -- 152,864 --
Payable for Fund shares redeemed 370,057 221,037 125,425
Dividends payable 311,443 75,982 137,961
Management fees payable (Note 4) 96,094 21,370 43,358
Deferred Trustees' fees (Note 4) 221,586 62,321 193,640
Administrative fees payable (Note 4) 10,999 2,209 6,082
Other accounts payable and accrued
expenses 258,060 19,836 67,014
--------------------- --------------------- ---------------------
TOTAL LIABILITIES 56,467,043 6,953,764 29,512,266
--------------------- --------------------- ---------------------
NET ASSETS $ 221,187,334 $ 42,719,392 $ 125,813,311
===================== ===================== =====================
NET ASSETS CONSIST OF:
Paid-in capital $ 242,164,684 $ 121,602,793 $ 153,451,297
Undistributed (overdistributed) net
investment income 249,280 (297,871) (345,156)
Accumulated net realized gain (loss)
on investments and foreign currency
transactions (21,500,476) (81,245,797) (26,495,302)
Net unrealized appreciation
(depreciation) on investments and
foreign currency translations 273,846 2,660,267 (797,528)
--------------------- --------------------- ---------------------
NET ASSETS $ 221,187,334 $ 42,719,392 $ 125,813,311
===================== ===================== =====================
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE:
Class A shares:
Net assets $ 95,893,043 $ 31,830,418 $ 109,356,047
===================== ===================== =====================
Shares of beneficial interest 8,440,867 6,038,661 9,919,781
===================== ===================== =====================
Net asset value and redemption price
per share $ 11.36 $ 5.27 $ 11.02
===================== ===================== =====================
Offering price per share
(100/[100-maximum sales charge] of
net asset value) (Note 1) $ 11.90 $ 5.52 $ 11.36
===================== ===================== =====================
Class B shares: (redemption price per
share is equal to net asset value
less any applicable contingent
deferred sales charge) (Note 1)
Net assets $ 101,658,794 $ 6,250,634 $ 8,076,476
===================== ===================== =====================
Shares of beneficial interest 8,943,083 1,184,384 733,483
===================== ===================== =====================
Net asset value and offering price
per share $ 11.37 $ 5.28 $ 11.01
===================== ===================== =====================
Class C shares: (redemption price per
share is equal to net asset value
less any applicable contingent
deferred sales charge) (Note 1)
Net assets $ 9,085,207 $ 4,638,340 $ 4,421,839
===================== ===================== =====================
Shares of beneficial interest 798,720 879,278 400,947
===================== ===================== =====================
Net asset value and offering price
per share $ 11.37 $ 5.28 $ 11.03
===================== ===================== =====================
Class Y shares:
Net assets $ 14,550,290 $ -- $ 3,958,949
===================== ===================== =====================
Shares of beneficial interest 1,275,171 -- 358,076
===================== ===================== =====================
Net asset value, offering and
redemption price per share $ 11.41 $ -- $ 11.06
===================== ===================== =====================
(a) Including securities on loan with
market values of: $ 53,957,797 $ 6,277,989 $ 28,399,989
===================== ===================== =====================
See accompanying notes to financial statements.
41
Massachusetts Tax Municipal Income Strategic Income
Free Income Fund Fund Fund
--------------------- --------------------- ---------------------
--------------------- ---------------------
$ 67,500,284 $ 90,708,414 $ 9,409,649,185
3,165,545 3,283,951 320,402,628
--------------------- --------------------- ---------------------
70,665,829 93,992,365 9,730,051,813
-- -- 1,371,370
-- -- --
14,285 27,802 79,050,775
-- -- 2,802,553
1,108,390 1,438,760 104,777,218
-- -- 3,865
-- -- 77,745
2,541 2,928 630,140
--------------------- --------------------- ---------------------
71,791,045 95,461,855 9,918,765,479
--------------------- --------------------- ---------------------
-- -- 1,742,998,995
-- -- 50,224,135
72,707 85,226 8,439,575
53,391 85,320 15,436,946
31,241 43,438 3,756,105
71,483 134,236 271,547
3,716 4,774 369,728
19,631 14,265 491,235
--------------------- --------------------- ---------------------
252,169 367,259 1,821,988,266
--------------------- --------------------- ---------------------
$ 71,538,876 $ 95,094,596 $ 8,096,777,213
===================== ===================== =====================
$ 69,800,435 $ 91,350,437 $ 7,797,737,053
17,699 204,138 (382,572)
(1,444,803) 256,070 (21,622,623)
3,165,545 3,283,951 321,045,355
--------------------- --------------------- ---------------------
$ 71,538,876 $ 95,094,596 $ 8,096,777,213
===================== ===================== =====================
$ 69,575,610 $ 90,394,287 $ 4,445,654,306
===================== ===================== =====================
4,189,451 12,050,773 298,285,775
===================== ===================== =====================
$ 16.61 $ 7.50 $ 14.90
===================== ===================== =====================
$ 17.35 $ 7.85 $ 15.60
===================== ===================== =====================
$ 1,963,266 $ 4,700,309 $ 216,309,586
===================== ===================== =====================
118,478 625,905 14,447,466
===================== ===================== =====================
$ 16.57 $ 7.51 $ 14.97
===================== ===================== =====================
$ -- $ -- $ 2,976,546,523
===================== ===================== =====================
-- -- 198,881,878
===================== ===================== =====================
$ -- $ -- $ 14.97
===================== ===================== =====================
$ -- $ -- $ 458,266,798
===================== ===================== =====================
-- -- 30,760,763
===================== ===================== =====================
$ -- $ -- $ 14.90
===================== ===================== =====================
$ -- $ -- $ 1,708,578,357
===================== ===================== =====================
42
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2007 (Unaudited)
Limited Term Government
Core Plus Bond Fund High Income Fund and Agency Fund
--------------------- --------------------- -----------------------
--------------------- --------------------- ---------------------
INVESTMENT INCOME
Dividends $ -- $ 63,031 $ --
Interest 5,828,561 1,558,948 3,171,604
Securities lending income (Note 2) 24,391 4,082 7,045
Less net foreign taxes withheld -- (1,300) --
--------------------- --------------------- ---------------------
5,852,952 1,624,761 3,178,649
--------------------- --------------------- ---------------------
Expenses
Management fees (Note 4) 473,947 124,538 317,466
Service fees - Class A (Note 4) 116,084 38,300 138,196
Service and distribution fees -
Class B (Note 4) 529,876 34,054 44,705
Service and distribution fees -
Class C (Note 4) 38,321 20,309 22,052
Trustees' fees and expenses (Note 4) 8,083 5,192 6,623
Administrative fees (Note 4) 62,090 11,885 35,458
Custodian fees and expenses 16,131 9,441 13,304
Transfer agent fees and expenses -
Class A 124,621 27,877 84,356
Transfer agent fees and expenses -
Class B 142,168 6,205 6,831
Transfer agent fees and expenses -
Class C 10,290 3,692 3,361
Transfer agent fees and expenses -
Class Y 5,157 -- 152
Audit fees 20,062 19,732 21,383
Legal fees 5,192 1,490 3,580
Shareholder reporting expenses 19,547 2,696 11,456
Registration fees 20,203 15,517 20,510
Miscellaneous expenses 4,721 3,635 3,829
--------------------- --------------------- ---------------------
Total expenses 1,596,493 324,563 733,262
Less reimbursement/waiver (Note 4) (43,578) (31,206) (52,930)
--------------------- --------------------- ---------------------
Net expenses 1,552,915 293,357 680,332
--------------------- --------------------- ---------------------
Net investment income 4,300,037 1,331,404 2,498,317
--------------------- --------------------- ---------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain (loss) on:
Investments - net 1,974,105 1,687,407 119,607
Foreign currency transactions - net 1,232 (1,545) --
Change in unrealized appreciation
(depreciation) on:
Investments - net 1,018,313 (53,147) 403,094
Foreign currency translations - net 11,223 (339) --
--------------------- --------------------- ---------------------
Total net realized and unrealized gain
(loss) on investments and foreign
currency transactions 3,004,873 1,632,376 522,701
--------------------- --------------------- ---------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 7,304,910 $ 2,963,780 $ 3,021,018
===================== ===================== =====================
See accompanying notes to financial statements.
43
Massachusetts Tax Municipal Strategic
Free Income Fund Income Fund Income Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
$ -- $ -- $ 8,911,236
1,752,173 2,256,106 194,769,158
-- -- 631,138
-- -- (160,470)
--------------------- --------------------- ---------------------
1,752,173 2,256,106 204,151,062
--------------------- --------------------- ---------------------
217,585 241,772 18,485,826
87,994 114,640 4,466,518
10,665 24,984 988,953
-- -- 11,952,460
5,869 6,044 98,818
20,656 27,338 1,957,264
9,164 9,802 186,752
25,312 27,871 1,303,653
768 1,519 72,664
-- -- 871,206
-- -- 108,059
19,256 17,730 21,075
1,638 2,094 103,231
4,278 1,925 165,350
8,831 11,195 69,393
3,013 3,059 23,700
--------------------- --------------------- ---------------------
415,029 489,973 40,874,922
(62,520) (11,868) --
--------------------- --------------------- ---------------------
352,509 478,105 40,874,922
--------------------- --------------------- ---------------------
1,399,664 1,778,001 163,276,140
--------------------- --------------------- ---------------------
770,856 338,455 22,643,468
-- -- (885,317)
(1,061,299) (524,483) 100,087,391
-- -- 657,735
--------------------- --------------------- ---------------------
(290,443) (186,028) 122,503,277
--------------------- --------------------- ---------------------
$ 1,109,221 $ 1,591,973 $ 285,779,417
===================== ===================== =====================
44
STATEMENTS OF CHANGES IN NET ASSETS
Core Plus Bond Fund
--------------------------------------------
Six Months Ended
March 31, 2007 Year Ended
(unaudited) September 30, 2006
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 4,300,037 $ 9,304,763
Net realized gain (loss) on investments and
foreign currency transactions 1,975,337 (250,058)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations 1,029,536 (1,346,777)
--------------------- ---------------------
Net increase in net assets resulting from
operations 7,304,910 7,707,928
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (2,224,878) (5,268,788)
Class B (2,120,394) (5,666,228)
Class C (151,766) (281,535)
Class Y (338,467) (518,162)
Net realized capital gain
Class A -- --
Class B -- --
--------------------- ---------------------
Total distributions (4,835,505) (11,734,713)
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (NOTE 7) (1,499,024) (28,217,204)
--------------------- ---------------------
Redemption fees
Class A 642 707
Class B 711 886
Class C 55 42
Class Y 93 61
--------------------- ---------------------
1,501 1,696
--------------------- ---------------------
Net increase (decrease) in net assets 971,882 (32,242,293)
--------------------- ---------------------
NET ASSETS
Beginning of the period 220,215,452 252,457,745
--------------------- ---------------------
End of the period $ 221,187,334 $ 220,215,452
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ 249,280 $ 784,748
===================== =====================
High Income Fund
--------------------------------------------
Six Months Ended
March 31, 2007 Year Ended
(unaudited) September 30, 2006
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 1,331,404 $ 2,541,904
Net realized gain (loss) on investments and
foreign currency transactions 1,685,862 588,883
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations (53,486) 285,142
--------------------- ---------------------
Net increase in net assets resulting from
operations 2,963,780 3,415,929
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (1,177,365) (1,818,161)
Class B (232,118) (563,592)
Class C (137,151) (204,085)
Class Y -- --
Net realized capital gain
Class A -- --
Class B -- --
--------------------- ---------------------
Total distributions (1,546,634) (2,585,838)
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (NOTE 7) 1,493,783 (2,428,478)
--------------------- ---------------------
Redemption fees
Class A 272 866
Class B 63 337
Class C 35 116
Class Y -- --
--------------------- ---------------------
370 1,319
--------------------- ---------------------
Net increase (decrease) in net assets 2,911,299 (1,597,068)
--------------------- ---------------------
NET ASSETS
Beginning of the period 39,808,093 41,405,161
--------------------- ---------------------
End of the period $ 42,719,392 $ 39,808,093
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ (297,871) $ (82,641)
===================== =====================
Limited Term Government
and Agency Fund
--------------------------------------------
Six Months Ended
March 31, 2007 Year Ended
(unaudited) September 30, 2006
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 2,498,317 $ 5,075,427
Net realized gain (loss) on investments and
foreign currency transactions 119,607 (845,533)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations 403,094 (145,704)
--------------------- ---------------------
Net increase in net assets resulting from
operations 3,021,018 4,084,190
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (2,387,884) (4,997,550)
Class B (154,655) (381,270)
Class C (76,349) (153,472)
Class Y (72,254) (105,197)
Net realized capital gain
Class A -- --
Class B -- --
--------------------- ---------------------
Total distributions (2,691,142) (5,637,489)
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (NOTE 7) (5,339,757) (32,402,336)
--------------------- ---------------------
Redemption fees
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
Net increase (decrease) in net assets (5,009,881) (33,955,635)
--------------------- ---------------------
NET ASSETS
Beginning of the period 130,823,192 164,778,827
--------------------- ---------------------
End of the period $ 125,813,311 $ 130,823,192
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ (345,156) $ (152,331)
===================== =====================
See accompanying notes to financial statements.
45
Massachusetts Tax Free Income Fund Municipal Income Fund
- -------------------------------------------- --------------------------------------------
Six Months Ended Six Months Ended
March 31, 2007 Year Ended March 31, 2007 Year Ended
(unaudited) September 30, 2006 (unaudited) September 30, 2006
- --------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
$ 1,399,664 $ 2,919,705 $ 1,778,001 $ 3,899,552
770,856 345,282 338,455 1,173,164
(1,061,299) (133,389) (524,483) (395,083)
- --------------------- --------------------- --------------------- ---------------------
1,109,221 3,131,598 1,591,973 4,677,633
- --------------------- --------------------- --------------------- ---------------------
(1,362,014) (2,838,521) (1,678,937) (3,654,019)
(33,214) (86,605) (72,710) (192,325)
-- -- -- --
-- -- -- --
-- -- (425,469) --
-- -- (23,297) --
- --------------------- --------------------- --------------------- ---------------------
(1,395,228) (2,925,126) (2,200,413) (3,846,344)
- --------------------- --------------------- --------------------- ---------------------
(2,998,516) (5,608,072) (2,932,811) (12,060,212)
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
(3,284,523) (5,401,600) (3,541,251) (11,228,923)
- --------------------- --------------------- --------------------- ---------------------
74,823,399 80,224,999 98,635,847 109,864,770
- --------------------- --------------------- --------------------- ---------------------
$ 71,538,876 $ 74,823,399 $ 95,094,596 $ 98,635,847
===================== ===================== ===================== =====================
$ 17,699 $ 13,263 $ 204,138 $ 177,784
===================== ===================== ===================== =====================
Strategic Income Fund
- --------------------------------------------
Six Months Ended
March 31, 2007 Year Ended
(unaudited) September 30, 2006
- --------------------- ---------------------
- --------------------- ---------------------
$ 163,276,140 $ 147,505,882
21,758,151 6,215,522
100,745,126 138,319,873
- --------------------- ---------------------
285,779,417 292,041,277
- --------------------- ---------------------
(97,602,532) (93,282,911)
(4,564,609) (7,447,638)
(54,901,845) (55,187,294)
(10,444,688) (7,523,452)
-- --
-- --
- --------------------- ---------------------
(167,513,674) (163,441,295)
- --------------------- ---------------------
2,932,214,311 2,980,503,923
- --------------------- ---------------------
77,176 110,642
4,195 9,525
51,719 75,367
7,824 9,065
- --------------------- ---------------------
140,914 204,599
- --------------------- ---------------------
3,050,620,968 3,109,308,504
- --------------------- ---------------------
5,046,156,245 1,936,847,741
- --------------------- ---------------------
$ 8,096,777,213 $ 5,046,156,245
===================== =====================
$ (382,572) $ 3,854,962
===================== =====================
46
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
--------------------------------------- ---------------------------
Net asset
value, Dividends
beginning Net Net realized Total from from
of investment and unrealized investment net investment Total Redemption
period income gain (loss) operations income distributions fees (g)
---------- ---------- -------------- ---------- -------------- ------------- ----------
CORE PLUS BOND FUND
Class A
3/31/2007(k) $ 11.23 $ 0.24(c) $ 0.16 $ 0.40 $ (0.27) $ (0.27) $ 0.00
9/30/2006 11.41 0.50(c) (0.07) 0.43 (0.61) (0.61) 0.00
9/30/2005 11.69 0.46(c) (0.18) 0.28 (0.56) (0.56) 0.00
9/30/2004 11.63 0.47(c) 0.13 0.60 (0.54) (0.54) 0.00
9/30/2003(f) 11.28 0.37(c) 0.34 0.71 (0.36) (0.36) -
12/31/2002 11.59 0.63(c) (0.32) 0.31 (0.62) (0.62) -
12/31/2001(d) 11.52 0.73 0.10 0.83 (0.76) (0.76) -
Class B
3/31/2007(k) 11.24 0.20(c) 0.16 0.36 (0.23) (0.23) 0.00
9/30/2006 11.41 0.41(c) (0.05) 0.36 (0.53) (0.53) 0.00
9/30/2005 11.70 0.37(c) (0.18) 0.19 (0.48) (0.48) 0.00
9/30/2004 11.62 0.38(c) 0.14 0.52 (0.44) (0.44) 0.00
9/30/2003(f) 11.28 0.30(c) 0.34 0.64 (0.30) (0.30) -
12/31/2002 11.59 0.55(c) (0.32) 0.23 (0.54) (0.54) -
12/31/2001(d) 11.51 0.64 0.10 0.74 (0.66) (0.66) -
Class C
3/31/2007(k) 11.25 0.20(c) 0.15 0.35 (0.23) (0.23) 0.00
9/30/2006 11.42 0.41(c) (0.05) 0.36 (0.53) (0.53) 0.00
9/30/2005 11.71 0.37(c) (0.18) 0.19 (0.48) (0.48) 0.00
9/30/2004 11.63 0.38(c) 0.14 0.52 (0.44) (0.44) 0.00
9/30/2003(f) 11.29 0.30(c) 0.34 0.64 (0.30) (0.30) -
12/31/2002 11.60 0.55(c) (0.32) 0.23 (0.54) (0.54) -
12/31/2001(d) 11.52 0.65 0.09 0.74 (0.66) (0.66) -
Class Y
3/31/2007(k) 11.29 0.27(c) 0.15 0.42 (0.30) (0.30) 0.00
9/30/2006 11.46 0.51(c) (0.04) 0.47 (0.64) (0.64) 0.00
9/30/2005 11.74 0.49(c) (0.18) 0.31 (0.59) (0.59) 0.00
9/30/2004 11.69 0.50(c) 0.13 0.63 (0.58) (0.58) 0.00
9/30/2003(f) 11.33 0.41(c) 0.35 0.76 (0.40) (0.40) -
12/31/2002 11.63 0.69(c) (0.32) 0.37 (0.67) (0.67) -
12/31/2001(d) 11.54 0.79 0.10 0.89 (0.80) (0.80) -
HIGH INCOME FUND*
Class A
3/31/2007(k) $ 5.09 $ 0.17(c) $ 0.21 $ 0.38 $ (0.20) $ (0.20) $ 0.00
9/30/2006 4.98 0.34(c) 0.11 0.45 (0.34) (0.34) 0.00
9/30/2005 4.82 0.33(c) 0.16 0.49 (0.33) (0.33) 0.00
9/30/2004 4.65 0.33(c) 0.17 0.50 (0.33) (0.33) 0.00
9/30/2003(f) 4.12 0.25(c) 0.53 0.78 (0.25) (0.25) -
12/31/2002 4.94 0.39(c) (0.82) (0.43) (0.39) (0.39) -
12/31/2001(d) 6.21 0.66 (1.25) (0.59) (0.68) (0.68) -
Class B
3/31/2007(k) 5.10 0.15(c) 0.21 0.36 (0.18) (0.18) 0.00
9/30/2006 4.98 0.30(c) 0.12 0.42 (0.30) (0.30) 0.00
9/30/2005 4.83 0.29(c) 0.15 0.44 (0.29) (0.29) 0.00
9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) (0.30) 0.00
9/30/2003(f) 4.12 0.23(c) 0.53 0.76 (0.23) (0.23) -
12/31/2002 4.95 0.36(c) (0.83) (0.47) (0.36) (0.36) -
12/31/2001(d) 6.22 0.62 (1.26) (0.64) (0.63) (0.63) -
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares
and a contingent deferred sales charge for Class B and Class C shares are
not reflected in total return calculations. Periods less than one, if
applicable, are not annualized.
(b)Computed on an annualized basis for periods less than one year.
(c)Per share net investment income has been calculated using the average shares
outstanding during the period.
(d)As required, effective January 1, 2001, the Funds adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
year ended December 31, 2001 for Core Plus Bond Fund was to decrease net
investment income per share by $0.01 for Class A, $0.02 for Class B, and
$0.01 for Class C and to decrease the ratio of net investment income to
average net assets from 6.34% to 6.26% for Class A, 5.57% to 5.49% for Class
B, 5.59% to 5.52% for Class C and 6.75% to 6.68% for Class Y shares. For
High Income Fund, the effect of this change was to decrease net investment
income per share by $0.01 for Class A and Class B and to decrease the ratio
of net investment income to average net assets from 11.39% to 11.31% for
Class A and 10.64% to 10.56% for Class B.
(e)Represents the total expenses prior to advisory fee waiver and/or
reimbursement of a portion of the Fund's expenses, if applicable.
See accompanying notes to financial statements.
47
Ratios to average net assets:
------------------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return period expenses expenses income turnover
period (%) (a) (h) (000's) (%) (b) (i) (%) (b) (e) (%) (b) rate (%)
- ---------- ----------- ----------- ----------- ----------- -------------- ---------
$ 11.36 3.5 $ 95,893 1.05 1.09 4.29 32
11.23 4.0 91,464 1.05 1.08 4.46 91
11.41 2.4 105,111 1.13 1.18 3.93 64
11.69 5.3 120,009 1.19 1.22 4.05 69
11.63 6.4 133,887 1.28 1.28 4.31 61
11.28 2.8 147,647 1.18 1.18 5.65 65
11.59 7.2 173,836 1.09 1.09 6.26 84
11.37 3.2 101,659 1.80 1.84 3.53 32
11.24 3.3 109,782 1.80 1.83 3.72 91
11.41 1.6 132,221 1.88 1.93 3.18 64
11.70 4.6 148,556 1.94 1.97 3.29 69
11.62 5.8 161,317 2.03 2.03 3.55 61
11.28 2.1 141,188 1.93 1.93 4.90 65
11.59 6.5 127,520 1.84 1.84 5.49 84
11.37 3.1 9,085 1.80 1.84 3.52 32
11.25 3.3 6,983 1.80 1.82 3.63 91
11.42 1.6 6,065 1.88 1.93 3.17 64
11.71 4.6 6,162 1.94 1.98 3.30 69
11.63 5.8 7,612 2.03 2.03 3.55 61
11.29 2.1 9,024 1.93 1.93 4.90 65
11.60 6.5 11,470 1.84 1.84 5.52 84
11.41 3.7 14,550 0.65 0.65 4.68 32
11.29 4.3 11,986 0.80(j) 0.80(j) 4.58 91
11.46 2.7 9,060 0.88 0.99 4.18 64
11.74 5.5 10,941 0.94 0.98 4.30 69
11.69 6.9 17,889 0.73 0.73 4.85 61
11.33 3.5 18,346 0.67 0.67 6.15 65
11.63 7.8 17,351 0.67 0.67 6.68 84
$ 5.27 7.6 $ 31,830 1.22 1.37 6.61 18
5.09 9.4 29,069 1.31 1.48 6.70 41
4.98 10.3 25,817 1.58 1.72 6.60 42
4.82 11.1 24,641 1.65 1.65 6.97 51
4.65 19.5 23,809 1.71 1.71 7.62 41
4.12 (8.9) 22,454 1.58 1.58 8.85 114
4.94 (10.7) 33,471 1.47 1.47 11.31 65
5.28 7.1 6,251 1.97 2.11 5.86 18
5.10 8.8 7,283 2.08 2.25 6.00 41
4.98 9.3 12,034 2.33 2.47 5.85 42
4.83 10.5 17,967 2.40 2.40 6.22 51
4.65 18.8 23,405 2.46 2.46 6.89 41
4.12 (9.7) 23,031 2.33 2.33 8.10 114
4.95 (11.3) 34,713 2.22 2.22 10.56 65
(f)For the nine months ended September 30, 2003.
(g)Amount rounds to less than $0.01, if applicable.
(h)Had certain expenses not been reduced during the period, if applicable,
total return would have been lower.
(i)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, if applicable, expenses would have been higher. See
Note 4.
(j)Includes expense recapture of 0.06%. See Note 4.
(k)For the six months ended March 31, 2007 (Unaudited).
* The financial information for periods prior to September 30, 2004 reflects
the financial information for the CDC Nvest High Income Fund's Class A and
Class B shares, which were reorganized into Class A and Class B shares,
respectively, of the Loomis Sayles High Income Fund, effective September 12,
2003. Prior to September 1, 2003, the predecessor Fund was advised by CDC
IXIS Asset Management Advisers, L.P. and subadvised by Loomis, Sayles &
Company, L.P. (the Fund's current adviser) and, prior to September 12, 2003,
had a December 31 fiscal year end. The Fund's current fiscal year end is
September 30.
48
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
--------------------------------------- ---------------------------
Net asset
value, Dividends
beginning Net Net realized Total from from
of investment and unrealized investment net investment Total
period income gain (loss) operations income distributions
---------- ---------- -------------- ---------- -------------- -------------
HIGH INCOME FUND*
Class C
3/31/2007(k) $ 5.09 $ 0.15(c) $ 0.22 $ 0.37 $ (0.18) $ (0.18)
9/30/2006 4.98 0.30(c) 0.11 0.41 (0.30) (0.30)
9/30/2005 4.83 0.29(c) 0.15 0.44 (0.29) (0.29)
9/30/2004 4.65 0.30(c) 0.18 0.48 (0.30) (0.30)
9/30/2003(e) 4.12 0.23(c) 0.53 0.76 (0.23) (0.23)
12/31/2002 4.94 0.36(c) (0.82) (0.46) (0.36) (0.36)
12/31/2001(d) 6.22 0.61 (1.26) (0.65) (0.63) (0.63)
LIMITED TERM GOVERNMENT AND AGENCY FUND**
Class A
3/31/2007(k) $ 11.00 $ 0.22(c) $ 0.04 $ 0.26 $ (0.24) $ (0.24)
9/30/2006 11.09 0.39(c) (0.05) 0.34 (0.43) (0.43)
9/30/2005 11.30 0.28(c) (0.16) 0.12 (0.33) (0.33)
9/30/2004 11.51 0.30(c) (0.09) 0.21 (0.42) (0.42)
9/30/2003(e) 11.73 0.21(c) (0.07) 0.14 (0.36) (0.36)
12/31/2002 11.36 0.42(c) 0.49 0.91 (0.54) (0.54)
12/31/2001(d) 11.16 0.51 0.25 0.76 (0.56) (0.56)
Class B
3/31/2007(k) 10.98 0.18(c) 0.04 0.22 (0.19) (0.19)
9/30/2006 11.07 0.31(c) (0.05) 0.26 (0.35) (0.35)
9/30/2005 11.28 0.20(c) (0.17) 0.03 (0.24) (0.24)
9/30/2004 11.49 0.22(c) (0.09) 0.13 (0.34) (0.34)
9/30/2003(e) 11.71 0.15(c) (0.06) 0.09 (0.31) (0.31)
12/31/2002 11.34 0.35(c) 0.48 0.83 (0.46) (0.46)
12/31/2001(d) 11.14 0.44 0.24 0.68 (0.48) (0.48)
Class C
3/31/2007(k) 10.99 0.18(c) 0.05 0.23 (0.19) (0.19)
9/30/2006 11.08 0.31(c) (0.05) 0.26 (0.35) (0.35)
9/30/2005 11.30 0.20(c) (0.18) 0.02 (0.24) (0.24)
9/30/2004 11.50 0.22(c) (0.08) 0.14 (0.34) (0.34)
9/30/2003(e) 11.72 0.15(c) (0.06) 0.09 (0.31) (0.31)
12/31/2002 11.35 0.35(c) 0.48 0.83 (0.46) (0.46)
12/31/2001(d) 11.15 0.44 0.24 0.68 (0.48) (0.48)
Class Y
3/31/2007(k) 11.03 0.24(c) 0.05 0.29 (0.26) (0.26)
9/30/2006 11.13 0.43(c) (0.06) 0.37 (0.47) (0.47)
9/30/2005 11.34 0.31(c) (0.17) 0.14 (0.35) (0.35)
9/30/2004 11.55 0.32(c) (0.09) 0.23 (0.44) (0.44)
9/30/2003(e) 11.78 0.25(c) (0.08) 0.17 (0.40) (0.40)
12/31/2002 11.41 0.48(c) 0.48 0.96 (0.59) (0.59)
12/31/2001(d) 11.20 0.56 0.26 0.82 (0.61) (0.61)
Redemption
fees (f)
----------
HIGH INCOME FUND*
Class C
3/31/2007(k) $ 0.00
9/30/2006 0.00
9/30/2005 0.00
9/30/2004 0.00
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
LIMITED TERM GOVERNMENT AND AGENCY FUND**
Class A
3/31/2007(k) $ --
9/30/2006 --
9/30/2005 --
9/30/2004 --
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
Class B
3/31/2007(k) --
9/30/2006 --
9/30/2005 --
9/30/2004 --
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
Class C
3/31/2007(k) --
9/30/2006 --
9/30/2005 --
9/30/2004 --
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
Class Y
3/31/2007(k) --
9/30/2006 --
9/30/2005 --
9/30/2004 --
9/30/2003(e) --
12/31/2002 --
12/31/2001(d) --
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares
and a contingent deferred sales charge for Class B and Class C shares are
not reflected in total return calculations. Periods less than one year, if
applicable, are not annualized.
(b)Computed on an annualized basis for periods less than one year.
(c)Per share net investment income has been calculated using the average shares
outstanding during the period.
(d)As required, effective January 1, 2001, the Funds adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
year ended December 31, 2001 for High Income Fund was to decrease net
investment income per share by $0.01 for Class C and to decrease the ratio
of net investment income to average net assets from 10.63% to 10.54% for
Class C. For Limited Term Government and Agency Fund, the effect of this
change was to decrease net investment income per share by $0.04 for Class A,
B, C, and Y and to decrease the ratio of net investment income to average
net assets from 4.88% to 4.52% for Class A, 4.22% to 3.85% for Class B,
4.25% to 3.89% for Class C, and 5.34% to 4.98% for Class Y.
(e)For the nine months ended September 30, 2003.
(f)Amount rounds to less than $0.01, if applicable.
(g)Represents total expenses prior to waiver of a portion of the Class's
transfer agent expenses.
See accompanying notes to financial statements.
49
Ratios to average net assets:
--------------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return period expenses expenses income (loss) turnover
period (%) (a)(h) (000's) (%) (b)(j) (%) (b)(i) (%) (b) rate (%)
- ---------- ---------- ----------- ---------- ---------- -------------- ---------
$ 5.28 7.3 $ 4,638 1.96 2.12 5.84 18
5.09 8.6 3,457 2.07 2.23 5.96 41
4.98 9.3 3,554 2.33 2.47 5.82 42
4.83 10.5 2,608 2.40 2.40 6.22 51
4.65 18.8 2,858 2.46 2.46 6.89 41
4.12 (9.5) 2,605 2.33 2.33 8.10 114
4.94 (11.5) 4,153 2.22 2.22 10.54 65
$ 11.02 2.4 $ 109,356 1.00 1.09 4.01 31
11.00 3.2 114,180 1.04 1.09 3.57 50
11.09 1.1 141,417 1.24 1.24 2.50 93
11.30 1.9 106,701 1.32 1.32 2.60 80
11.51 1.2 117,225 1.37 1.37 2.41 53
11.73 8.2 106,013 1.35 1.35 3.66 88
11.36 6.9 109,189 1.42 1.42 4.52 275
11.01 2.0 8,076 1.75 1.83 3.25 31
10.98 2.4 9,952 1.79 1.84 2.79 50
11.07 0.3 15,114 1.99 1.99 1.75 93
11.28 1.2 10,107 2.00 2.00 1.95 80
11.49 0.7 14,637 2.02 2.02 1.77 53
11.71 7.5 16,263 2.00 2.00 3.01 88
11.34 6.2 14,317 2.07 2.07 3.85 275
11.03 2.0 4,422 1.75 1.84 3.25 31
10.99 2.5 4,230 1.79 1.84 2.81 50
11.08 0.2 5,715 1.99 1.99 1.75 93
11.30 1.3 6,949 2.00 2.00 1.94 80
11.50 0.7 8,704 2.02 2.02 1.77 53
11.72 7.5 8,079 2.00 2.00 3.01 88
11.35 6.2 5,851 2.07 2.07 3.89 275
11.06 2.6 3,959 0.70 0.70 4.33 31
11.03 3.4 2,461 0.74 0.74 3.89 50
11.13 1.2 2,533 1.02 1.59(g) 2.77 93
11.34 2.1 4,233 1.13 1.13 2.82 80
11.55 1.5 6,886 0.93 0.93 2.87 53
11.78 8.6 8,529 0.88 0.88 4.14 88
11.41 7.4 3,441 0.95 0.95 4.98 275
(h)Had certain expenses not been reduced during the period, if applicable,
total return would have been lower.
(i)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses, if applicable.
(j)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, if applicable, expenses would have been higher. See
Note 4.
(k)For the six months ended March 31, 2007 (Unaudited).
* The financial information prior to September 30, 2004 reflects the financial
information for the CDC Nvest High Income Fund's Class C shares which were
reorganized into Class C shares of the Loomis Sayles High Income Fund,
effective September 12, 2003. Prior to September 1, 2003, the predecessor
Fund was advised by CDC IXIS Asset Management Advisers, L.P. and subadvised
by Loomis, Sayles & Company, L.P. (the Fund's current adviser) and, prior to
September 12, 2003, had a December 31 fiscal year end. The Fund's current
fiscal year end is September 30.
** The financial information for periods prior to September 30, 2004 reflects
the financial information for the CDC Nvest Limited Term U.S. Government
Fund's Class A, Class B, Class C, and Class Y shares which were reorganized
into Class A, Class B, Class C, and Class Y shares, respectively, of the
Loomis Sayles Limited Term Government and Agency Fund, effective
September 12, 2003. Prior to September 1, 2003, the predecessor Fund was
advised by CDC IXIS Asset Management Advisers, L.P. and subadvised by
Loomis, Sayles & Company, L.P. (the Fund's current adviser) and, prior to
September 12, 2003, had a December 31 fiscal year end. The Fund's current
fiscal year end is September 30.
50
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations:
-----------------------------------------
Net asset
value, Net
beginning investment Net realized Total from
of income and unrealized investment
period (loss) gain (loss) operations
---------- ---------- -------------- ----------
MASSACHUSETTS TAX FREE INCOME FUND
Class A
3/31/2007(i) $ 16.67 $ 0.32 $ (0.06) $ 0.26
9/30/2006 16.62 0.64 0.05 0.69
9/30/2005 16.58 0.60 0.04 0.64
9/30/2004 16.41 0.61 0.17 0.78
9/30/2003(f) 16.40 0.49 0.01 0.50
12/31/2002 15.82 0.67 0.59 1.26
12/31/2001(d) 16.06 0.75 (0.24) 0.51
Class B
3/31/2007(i) 16.64 0.26 (0.07) 0.19
9/30/2006 16.58 0.51 0.06 0.57
9/30/2005 16.54 0.46 0.05 0.51
9/30/2004 16.37 0.49 0.18 0.67
9/30/2003(f) 16.36 0.41 0.01 0.42
12/31/2002 15.78 0.57 0.58 1.15
12/31/2001(d) 16.03 0.64 (0.24) 0.40
MUNICIPAL INCOME FUND
Class A
3/31/2007(i) $ 7.55 $ 0.14 $ (0.02) $ 0.12
9/30/2006 7.48 0.28 0.07 0.35
9/30/2005 7.47 0.28 0.01 0.29
9/30/2004 7.41 0.29 0.06 0.35
9/30/2003(f) 7.43 0.23 (0.02) 0.21
12/31/2002 7.25 0.34 0.18 0.52
12/31/2001(d) 7.39 0.36 (0.14) 0.22
Class B
3/31/2007(i) 7.56 0.11 (0.02) 0.09
9/30/2006 7.49 0.23 0.07 0.30
9/30/2005 7.48 0.22 0.01 0.23
9/30/2004 7.41 0.24 0.07 0.31
9/30/2003(f) 7.44 0.19 (0.03) 0.16
12/31/2002 7.25 0.29 0.19 0.48
12/31/2001(d) 7.39 0.31 (0.14) 0.17
Less distributions:
-----------------------------------------
Dividends Distributions
from from net
net investment realized Total
income capital gains distributions
-------------- ------------- -------------
MASSACHUSETTS TAX FREE INCOME FUND
Class A
3/31/2007(i) $ (0.32) $ -- $ (0.32)
9/30/2006 (0.64) -- (0.64)
9/30/2005 (0.60) -- (0.60)
9/30/2004 (0.61) -- (0.61)
9/30/2003(f) (0.49) -- (0.49)
12/31/2002 (0.68) -- (0.68)
12/31/2001(d) (0.75) -- (0.75)
Class B
3/31/2007(i) (0.26) -- (0.26)
9/30/2006 (0.51) -- (0.51)
9/30/2005 (0.47) -- (0.47)
9/30/2004 (0.50) -- (0.50)
9/30/2003(f) (0.41) -- (0.41)
12/31/2002 (0.57) -- (0.57)
12/31/2001(d) (0.65) -- (0.65)
MUNICIPAL INCOME FUND
Class A
3/31/2007(i) $ (0.14) $ (0.03) $ (0.17)
9/30/2006 (0.28) -- (0.28)
9/30/2005 (0.28) -- (0.28)
9/30/2004 (0.29) -- (0.29)
9/30/2003(f) (0.23) -- (0.23)
12/31/2002 (0.34) -- (0.34)
12/31/2001(d) (0.36) -- (0.36)
Class B
3/31/2007(i) (0.11) (0.03) (0.14)
9/30/2006 (0.23) -- (0.23)
9/30/2005 (0.22) -- (0.22)
9/30/2004 (0.24) -- (0.24)
9/30/2003(f) (0.19) -- (0.19)
12/31/2002 (0.29) -- (0.29)
12/31/2001(d) (0.31) -- (0.31)
(a)A sales charge for Class A shares and a contingent deferred sales charge for
Class B shares are not reflected in total return calculations. Periods less
than one, if applicable, are not annualized.
(b)Computed on an annualized basis for periods less than one year.
(c)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses, if applicable.
(d)As required, effective January 1, 2001, the Funds adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium and accreting discount on debt securities. The effect of
this change for the year ended December 31, 2001, for Massachusetts Tax Free
Income Fund was to increase the ratio of net investment income to average
net assets from 4.66% to 4.67% for Class A and from 4.02% to 4.03% for Class
B shares. For Municipal Income Fund, the effect of this change was to
increase net investment income per share by $0.01 and to decrease net
realized and unrealized gains and losses per share by $0.01 for Class A
shares and Class B shares and increase the ratio of net investment income to
average net assets from 4.84% to 4.89% for Class A shares and from 4.09% to
4.14% for Class B shares.
See accompanying notes to financial statements.
51
Ratios to average net assets:
----------------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return period expenses expenses income (loss) turnover
period (%) (a) (e) (000's) (%) (b) (g) (%) (b) (c) (%) (b) rate (%)
- ---------- ----------- ----------- ----------- ----------- -------------- ---------
$ 16.61 1.6 $ 69,576 0.95 1.12 3.88 12
16.67 4.2 72,479 1.02 1.14(h) 3.86 8
16.62 3.9 77,018 1.22 1.22 3.59 5
16.58 4.9 81,427 1.33 1.33 3.74 21
16.41 3.1 86,368 1.38 1.38 3.99 9
16.40 8.1 92,053 1.34 1.34 4.19 33
15.82 3.2 89,376 1.33 1.35 4.67 60
16.57 1.1 1,963 1.70 1.87 3.13 12
16.64 3.5 2,345 1.77 1.89(h) 3.10 8
16.58 3.1 3,207 1.97 1.97 2.84 5
16.54 4.2 4,435 2.00 2.00 3.08 21
16.37 2.6 6,185 2.03 2.03 3.34 9
16.36 7.4 6,742 1.99 1.99 3.54 33
15.78 2.5 8,313 1.98 2.00 4.03 60
$ 7.50 1.6 $ 90,394 0.95 0.97 3.72 9
7.55 4.8 93,448 0.97 0.99 3.83 14
7.48 3.9 102,255 1.07 1.07 3.65 29
7.47 4.9 111,801 1.11 1.11 4.00 35
7.41 2.9 126,906 1.10 1.10 4.14 42
7.43 7.3 133,005 1.06 1.06 4.67 33
7.25 3.0 137,852 1.07 1.07 4.89 80
7.51 1.3 4,700 1.70 1.72 2.97 9
7.56 4.0 5,188 1.72 1.75 3.07 14
7.49 3.1 7,610 1.82 1.82 2.90 29
7.48 4.2 9,087 1.86 1.86 3.25 35
7.41 2.2 10,884 1.85 1.85 3.39 42
7.44 6.7 12,326 1.81 1.81 3.92 33
7.25 2.2 14,549 1.82 1.82 4.14 80
(e)Had certain expenses not been reduced during the period, if applicable,
total return would have been lower.
(f)For the nine months ended September 30, 2003.
(g)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, if applicable, expenses would have been higher. See
Note 4.
(h)Includes expense recapture of 0.01%. See Note 4.
(i)For the six months ended March 31, 2007 (Unaudited).
52
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
---------------------------------------- ---------------------------------------
Net asset
value, Net Dividends
beginning investment Net realized Total from from
of income and unrealized investment net investment Total Redemption
period (loss) (c) gain (loss) operations income distributions fees (g)
---------- ---------- -------------- ---------- -------------- ------------- ----------
STRATEGIC INCOME FUND*
Class A
3/31/2007(j) $ 14.60 $ 0.39 $ 0.32 $ 0.71 $ (0.41) $ (0.41) $ 0.00
9/30/2006 14.17 0.71 0.53 1.24 (0.81) (0.81) 0.00
9/30/2005 13.57 0.66 0.70 1.36 (0.76) (0.76) 0.00
9/30/2004 12.57 0.75 1.11 1.86 (0.86) (0.86) 0.00
9/30/2003(d) 10.72 0.57 1.93 2.50 (0.65) (0.65) _
12/31/2002 9.88 0.75 0.72 1.47 (0.63) (0.63) _
12/31/2001(f) 10.80 0.91 (0.92) (0.01) (0.91) (0.91) _
Class B
3/31/2007(j) 14.66 0.34 0.31 0.65 (0.34) (0.34) 0.00
9/30/2006 14.22 0.61 0.52 1.13 (0.69) (0.69) 0.00
9/30/2005 13.60 0.56 0.71 1.27 (0.65) (0.65) 0.00
9/30/2004 12.59 0.65 1.10 1.75 (0.74) (0.74) 0.00
9/30/2003(d) 10.71 0.51 1.92 2.43 (0.55) (0.55) _
12/31/2002 9.88 0.67 0.73 1.40 (0.57) (0.57) _
12/31/2001(f) 10.79 0.83 (0.90) (0.07) (0.84) (0.84) _
Class C
3/31/2007(j) 14.65 0.34 0.32 0.66 (0.34) (0.34) 0.00
9/30/2006 14.22 0.61 0.51 1.12 (0.69) (0.69) 0.00
9/30/2005 13.60 0.55 0.72 1.27 (0.65) (0.65) 0.00
9/30/2004 12.58 0.64 1.11 1.75 (0.73) (0.73) 0.00
9/30/2003(d) 10.70 0.50 1.93 2.43 (0.55) (0.55) _
12/31/2002 9.87 0.67 0.73 1.40 (0.57) (0.57) _
12/31/2001(f) 10.78 0.83 (0.91) (0.08) (0.83) (0.83) _
Class Y
3/31/2007(j) 14.59 0.41 0.33 0.74 (0.43) (0.43) 0.00
9/30/2006 14.17 0.76 0.51 1.27 (0.85) (0.85) 0.00
9/30/2005 13.57 0.70 0.70 1.40 (0.80) (0.80) 0.00
9/30/2004 12.58 0.78 1.11 1.89 (0.90) (0.90) 0.00
9/30/2003(d) 10.74 0.60 1.93 2.53 (0.69) (0.69) _
12/31/2002 9.90 0.80 0.71 1.51 (0.67) (0.67) _
12/31/2001(f) 10.81 0.94 (0.92) 0.02 (0.93) (0.93) _
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares
and a contingent deferred sales charge for Class B and Class C shares are
not reflected in total return calculations. Periods less than one year, if
applicable, are not annualized.
(b)Computed on an annualized basis for periods less than one year.
(c)Per share net investment income has been calculated using the average shares
outstanding during the period.
(d)For the nine months ended September 30, 2003.
(e)Had certain expenses not been reduced during the period, if applicable,
total return would have been lower.
(f)As required, effective January 1, 2001, the Funds adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. There was no effect on net investment
income per share, however, the effect of this change was to decrease the
ratio of net investment income to average net assets from 8.78% to 8.77% for
Class A, 8.03% to 8.02% for Class B and 8.04% to 8.02% for Class C.
See accompanying notes to financial statements.
53
Ratios to average net assets:
--------------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return period expenses expenses income (loss) turnover
period (%) (a) (e) (000's) (%) (b) (i) (%) (b) (h) (%) (b) rate (%)
- --------- ----------- ----------- ----------- ----------- -------------- ---------
$14.90 4.9 $4,445,654 0.97 0.97 5.30 12
14.60 9.0 2,782,887 1.05 1.05 5.01 21
14.17 10.2 977,198 1.18 1.18 4.71 14
13.57 15.2 343,586 1.23 1.23 5.66 28
12.57 23.7 140,576 1.28 1.31 6.49 27
10.72 15.5 92,303 1.33 1.33 7.38 30
9.88 (0.1) 94,156 1.31 1.31 8.77 10
14.97 4.5 216,310 1.72 1.72 4.54 12
14.66 8.2 179,927 1.79 1.79 4.26 21
14.22 9.5 144,081 1.93 1.93 3.98 14
13.60 14.3 128,714 1.98 1.98 4.91 28
12.59 23.0 118,217 2.03 2.06 5.73 27
10.71 14.6 98,501 2.08 2.08 6.63 30
9.88 (0.8) 102,159 2.06 2.06 8.02 10
14.97 4.6 2,976,547 1.72 1.72 4.52 12
14.65 8.1 1,812,278 1.79 1.79 4.24 21
14.22 9.5 765,200 1.93 1.93 3.93 14
13.60 14.3 255,705 1.98 1.98 4.87 28
12.58 23.0 66,394 2.03 2.06 5.73 27
10.70 14.7 27,727 2.08 2.08 6.63 30
9.87 (0.8) 28,925 2.06 2.06 8.02 10
14.90 5.1 458,267 0.71 0.71 5.57 12
14.59 9.3 271,065 0.78 0.78 5.30 21
14.17 10.5 50,369 0.91 0.91 4.98 14
13.57 15.5 10,833 1.00 1.08 5.93 28
12.58 24.0 2,193 0.97 0.97 6.83 27
10.74 15.9 1,039 0.94 0.94 7.77 30
9.90 0.3 445 0.93 0.93 9.10 10
(g)Amount rounds to less than $0.01, if applicable.
(h)Represents total expenses prior to advisory fee waiver and/or reimbursement
of a portion of the Fund's expenses, if applicable.
(i)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, if applicable, expenses would have been higher. See
Note 4.
(j)For the six months ended March 31, 2007 (unaudited).
* The financial information for periods prior to September 30, 2004 reflects
the financial information for CDC Nvest Strategic Income Fund's Class A,
Class B, Class C and Class Y shares, which were reorganized into Class A,
Class B, Class C and Class Y shares, respectively, of Loomis Sayles
Strategic Income Fund, effective September 12, 2003. Prior to September 1,
2003, the predecessor Fund was advised by CDC IXIS Asset Management
Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P. (the Fund's
current adviser) and, prior to September 12, 2003, had a December 31 fiscal
year end. The Fund's current fiscal year end is September 30.
54
NOTES TO FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)
1. Organization. IXIS Advisor Funds Trust I, IXIS Advisor Funds Trust II and
Loomis Sayles Funds II (the "Trusts" and each a "Trust") are each organized as
a Massachusetts business trust. Each Trust is registered under the Investment
Company Act of 1940, as amended ("1940 Act"), as an open-end management
investment company. Each Declaration of Trust permits the Board of Trustees to
authorize the issuance of an unlimited number of shares of the Trust in
multiple series. Information presented in these financial statements pertains
to certain fixed income funds of the Trusts; the financial statements for the
other funds of the Trusts are presented in separate reports. The following
funds (individually, a "Fund" and collectively, the "Funds") are included in
this report:
IXIS Advisor Funds Trust I:
Loomis Sayles Core Plus Bond Fund (the "Core Plus Bond Fund")
IXIS Advisor Funds Trust II:
Loomis Sayles Massachusetts Tax Free Income Fund (the "Massachusetts Tax Free
Income Fund")
Loomis Sayles Funds II:
Loomis Sayles High Income Fund (the "High Income Fund")
Loomis Sayles Limited Term Government and Agency Fund (the "Limited Term
Government and Agency Fund")
Loomis Sayles Municipal Income Fund (the "Municipal Income Fund")
Loomis Sayles Strategic Income Fund (the "Strategic Income Fund")
Core Plus Bond Fund, Limited Term Government and Agency Fund and Strategic
Income Fund each offer Class A, Class B, Class C and Class Y shares. High
Income Fund offers Class A, Class B and Class C shares. Massachusetts Tax Free
Income Fund and Municipal Income Fund each offer Class A and Class B shares.
Class A shares of all Funds except Limited Term Government and Agency Fund and
Massachusetts Tax Free Income Fund are sold with a maximum front-end sales
charge of 4.50%. Class A shares of Limited Term Government and Agency Fund are
sold with a maximum front-end sales charge of 3.00% and Class A shares of
Massachusetts Tax Free Income Fund are sold with a maximum front-end sales
charge of 4.25%. Class B shares do not pay a front-end sales charge, but pay
higher Rule 12b-1 fees than Class A shares for eight years (at which point they
automatically convert to Class A shares), and are subject to a contingent
deferred sales charge ("CDSC") if those shares are redeemed within six years of
purchase. Class C shares do not pay a front-end sales charge, do not convert to
any other Class of shares and pay higher Rule 12b-1 fees than Class A shares
and may be subject to a CDSC of 1.00% if those shares are redeemed within one
year. Class Y shares do not pay a front-end sales charge, a CDSC or Rule 12b-1
fees. They are generally intended for institutional investors with a minimum
initial investment of $100,000, though some categories of investors are
excepted from the minimum investment amount as outlined in the Fund's
prospectus. Prior to March 16, 2007 the minimum initial investment for Class Y
was $1,000,000.
Most expenses of the Trusts can be directly attributed to a fund. Expenses
which cannot 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. Debt securities for which market quotations are readily
available (other than short-term obligations purchased with an original or
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 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 and exchange-traded funds, for which market quotations are
readily available are valued at market value, as reported by pricing services
recommended by the investment adviser 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 Global
Select Market, NASDAQ Global Market and NASDAQ Capital Market are valued at the
NASDAQ Official Closing Price ("NOCP"), or if lacking a NOCP, at the most
recent bid quotation on the applicable NASDAQ 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 purchased with an
original or 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.
55
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
Certain 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.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified, and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of discount and decreased by the amortization of
premium. Investment income is recorded net of foreign taxes withheld when
applicable. In determining net gain or loss on securities sold, the cost of
securities has been determined on an identified cost basis. Investment income
and non-class specific expenses are allocated on a pro rata basis to each Class
based on the relative value of settled shares of each Class to the total for
the Fund. Realized and unrealized gains and losses are allocated on a pro rata
basis to each Class based on the relative net assets of each Class to the total
net assets 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 (except Massachusetts Tax Free Income Fund and Municipal Income Fund)
may purchase investments of foreign issuers. Investing in securities of foreign
issuers involves special risks and considerations not typically associated with
investing in U.S. companies and securities of the U.S. government. These risks
include revaluation of currencies and the risk of appropriation. Moreover, the
markets for securities of many foreign issuers may be less liquid and the
prices of such securities may be more volatile than those of comparable U.S.
companies and the U.S. government.
d. Federal and Foreign Income Taxes. The Trusts treat each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities. Such
taxes are accrued as applicable.
e. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gain distributions are determined 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 paydowns
on mortgage-backed securities, premium amortization and foreign currency
transactions. Permanent book and tax basis differences relating to shareholder
distributions, net investment income, and net realized gains will result in
reclassifications to the capital accounts. Temporary differences between book
and tax distributable earnings are primarily due to deferred Trustees' fees,
defaulted bond income accruals, premium amortization accruals, market
discounts, capital loss carryforwards, post-October capital loss deferrals and
wash sales. Distributions from net investment income and short-term capital
gains are considered to be ordinary income for tax purposes.
56
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
The tax characterization of distributions is determined on an annual basis. The
tax character of distributions paid to shareholders during the year ended
September 30, 2006 was as follows:
2006 Distributions Paid From:
- -----------------------------
Exempt
Ordinary Interest
Fund Income Dividends Total
---- ------ --------- -----
Core Plus Bond Fund $ 11,734,713 $ -- $ 11,734,713
High Income Fund 2,585,838 -- 2,585,838
Limited Term Government and Agency Fund 5,637,489 -- 5,637,489
Massachusetts Tax Free Income Fund 19,311 2,905,815 2,925,126
Municipal Income Fund 52,251 3,794,093 3,846,344
Strategic Income Fund 163,441,295 -- 163,441,295
As of September 30, 2006, capital loss carryforwards and post - October losses
were as follows:
Limited Term
Government Massachusetts Municipal Strategic
Core Plus High Income and Agency Tax Free Income Income
Bond Fund Fund Fund Income Fund Fund Fund
- - ------------ ------------ ------------ ------------- --------- ------------
Capital loss carryforward:
Expires September 30, 2007 $ -- $ -- $ (9,755,614) $ (804,173) $-- $ --
Expires September 30, 2008 -- (12,726,943) (4,165,768) (116,500) -- --
Expires September 30, 2009 -- (43,374,721) (4,128,091) -- -- (7,292,580)
Expires September 30, 2010 (20,960,955) (26,826,634) (663,109) (1,003,440) -- (21,770,312)
Expires September 30, 2011 -- -- (425,323) -- -- (7,096,274)
Expires September 30, 2012 -- -- (193,904) -- -- --
Expires September 30, 2013 -- -- -- (154,156) -- --
Expires September 30, 2014 (181,728) -- (2,770,324) -- -- --
------------ ------------ ------------ ----------- --- ------------
Total Capital loss carryforward (21,142,683) (82,928,298) (22,102,133) (2,078,269) -- (36,159,166)
Deferred net capital losses (post-October) (1,656,378) -- (4,268,354) -- -- --
f. Repurchase Agreements. Each Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The repurchase agreements are
tri-party arrangements whereby the collateral is held at the custodian bank in
a segregated account for the benefit of the Fund and on behalf of the
counterparty. Repurchase agreements could involve certain risks in the event of
default or insolvency of the counterparty including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities.
57
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
g. 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 March 31, 2007 were
as follows:
Market Value of Value of
Securities on Collateral
Fund Loan Received
---- ---- --------
Core Plus Bond Fund $ 53,957,797 $ 55,198,804
High Income Fund 6,277,989 6,398,145
Limited Term Government and Agency Fund 28,399,989 28,938,786
Massachusetts Tax Free Income Fund -- --
Municipal Income Fund -- --
Strategic Income Fund 1,708,578,357 1,742,998,995
h. Delayed Delivery Commitments. Each Fund may purchase or sell securities on a
when-issued or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transaction. The price of the underlying
securities and the date when the securities will be delivered and paid for are
fixed at the time the transaction is negotiated. Losses may arise due to
changes in the market value of the underlying securities or if the counterparty
does not perform under the contract. Collateral consisting of liquid securities
or cash and cash equivalents is maintained in an amount at least equal to these
commitments with the custodian.
i. Indemnifications. Under the 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 the Funds that have not yet occurred. However, based on experience, the
Funds expect the risk of loss to be remote.
j. New Accounting Pronouncements. Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement 109 ("FIN 48") was issued and became 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. Subsequent thereto,
the United States Securities and Exchange Commission ("SEC") indicated that it
would not object if a fund first adopts FIN 48 on the last business day of the
first required financial reporting period for fiscal years beginning after
December 15, 2006. Accordingly, Management is continuing to evaluate the impact
the adoption of FIN 48 may have on the Funds' net assets and results of
operations. In compliance with the recently issued SEC guidance the impact, if
any, will be reflected in the Funds' semiannual financial statements as of
March 31, 2008.
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 six months ended March 31, 2007,
purchases and sales of securities (excluding short-term investments and
including paydowns) were as follows:
U.S. Government and Agency Securities Other Securities
- - ------------------------------------- ----------------
Fund Purchases Sales Purchases Sales
- ---- --------- ----- --------- -----
Core Plus Bond Fund $ 34,506,630 $ 12,383,873 $ 35,703,364 $ 56,826,159
High Income Fund 604,789 782,884 6,632,935 8,295,098
Limited Term Government and Agency Fund 35,951,589 41,201,089 2,869,054 3,898,154
Massachusetts Tax Free Income Fund -- -- 8,898,505 11,233,625
Municipal Income Fund -- -- 8,166,727 11,992,380
Strategic Income Fund 874,120,539 289,621,748 2,709,069,150 434,241,364
58
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Loomis, Sayles & Company, L.P. ("Loomis Sayles") serves as
investment adviser to each Fund. Under the terms of the management agreements,
each Fund pays a management fee at the following annual rates, calculated daily
and payable monthly, based on each Fund's average daily net assets:
Percentage of Average Daily Net Assets
- - -------------------------------------------------
First Next Next Over
Fund $100 million $100 million $1.8 billion $2 billion
- ---- ------------ ------------ ------------ ----------
Core Plus Bond Fund 0.2500% 0.1875% 0.1875% 0.1875%
High Income Fund 0.6000% 0.6000% 0.6000% 0.6000%
Limited Term Government and Agency Fund 0.5000% 0.5000% 0.5000% 0.5000%
Massachusetts Tax Free Income Fund 0.3000% 0.2500% 0.2500% 0.2500%
Municipal Income Fund 0.5000% 0.3750% 0.3750% 0.3750%
Strategic Income Fund 0.6500% 0.6500% 0.6000% 0.5500%
IXIS Asset Management Advisors, L.P. ("IXIS Advisors"), serves as the advisory
administrator to Core Plus Bond Fund and Massachusetts Tax Free Income Fund.
Under the terms of the advisory administration agreements, each Fund pays an
advisory administration fee at the following annual rates, calculated daily and
payable monthly, based on its average daily net assets:
Percentage of
Average
Daily Net Assets
- -------------------------
First Over
Fund $100 million $100 million
---- ------------ ------------
Core Plus Bond Fund 0.2500% 0.1875%
Massachusetts Tax Free Income Fund 0.3000% 0.2500%
Management and advisory administration fees are presented in the Statements of
Operations as management fees.
Loomis Sayles has given binding undertakings to the Funds to defer its
management fees and/or reimburse certain expenses associated with these Funds
to limit their operating expenses. These undertakings are in effect until
January 31, 2008 and will be reevaluated on an annual basis. For the period
from February 1, 2007 to March 31, 2007, the expense limits as a percentage of
average daily net assets under the expense limitation agreements were as
follows:
Expense Limit as a Percentage of
Average Daily Net Assets
- -------------------------------
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Core Plus Bond Fund 1.05% 1.80% 1.80% 0.80%
High Income Fund 1.15% 1.90% 1.90% --
Limited Term Government and Agency Fund 1.00% 1.75% 1.75% 0.75%
Massachusetts Tax Free Income Fund 0.95% 1.70% -- --
Municipal Income Fund 0.95% 1.70% -- --
Strategic Income Fund 1.25% 2.00% 2.00% 1.00%
Prior to February 1, 2007, the expense limits as a percentage of average daily
net assets were as follows:
Expense Limit as a Percentage of
Average Daily Net Assets
- -------------------------------
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Core Plus Bond Fund 1.05% 1.80% 1.80% 0.80%
High Income Fund 1.25% 2.00% 2.00% --
Limited Term Government and Agency Fund 1.00% 1.75% 1.75% 0.75%
Massachusetts Tax Free Income Fund 0.95% 1.70% -- --
Municipal Income Fund 0.95% 1.70% -- --
Strategic Income Fund 1.25% 2.00% 2.00% 1.00%
59
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
Loomis Sayles and IXIS Advisors have agreed to equally bear the fee waivers
and/or expense reimbursements for the Core Plus Bond Fund and Massachusetts Tax
Free Income Fund.
For the six months ended March 31, 2007, the management fees and waivers of
management fees for each Fund were as follows:
Percentage of
Average
Gross Waiver of Net Daily Net Assets
Management Management Management ----------------
Fund Fee Fee Fee Gross Net
- ---- ----------- ---------- ----------- ----- ---
Core Plus Bond Fund $ 236,973 $ -- $ 236,973 0.216% 0.216%
High Income Fund 124,538 -- 124,538 0.600% 0.600%
Limited Term Government and Agency Fund 317,466 -- 317,466 0.500% 0.500%
Massachusetts Tax Free Fund 108,793 18,220 90,573 0.300% 0.250%
Municipal Income Fund 241,772 -- 241,772 0.500% 0.500%
Strategic Income Fund 18,485,826 -- 18,485,826 0.567% 0.567%
For the six months ended March 31, 2007, the advisory administration fees and
waivers for each Fund were as follows:
Percentage of
Gross Waiver of Net Average
Advisory Advisory Advisory Daily Net Assets
Administration Administration Administration ---------------
Fund Fee Fee Fee Gross Net
- ---- -------------- -------------- -------------- ----- ---
Core Plus Bond Fund $236,974 $ -- $236,974 0.216% 0.216%
Massachusetts Tax Free Income Fund 108,792 18,220 90,572 0.300% 0.250%
For the six months ended March 31, 2007, in addition to the waiver of
management fees and/or advisory administration fees, expenses have been
reimbursed as follows:
Fund Reimbursement
---- -------------
Core Plus Bond Fund $43,578
High Income Fund 31,206
Limited Term Government and Agency Fund 52,930
Massachusetts Tax Free Income Fund 26,080
Municipal Income Fund 11,868
Loomis Sayles and IXIS Advisors shall be permitted to recover management
fees/advisory administration fees waived and/or expenses borne under the
expense limitation agreements 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/expenses more than one
year after the end of the fiscal year in which the fee/expense was deferred.
The amounts subject to possible reimbursement under the expense limitation
agreements at March 31, 2007 were as follows:
Expenses Subject to Possible Reimbursement
until September 30, 2007
- - ---------------------------------------
Fund Class A Class B Class C Class Y Total
- ---- ------- ------- ------- ------- -----
Core Plus Bond Fund $31,145 $40,795 $1,089 $-- $73,029
High Income Fund 42,950 15,738 5,404 -- 64,092
Limited Term Government and Agency Fund 61,913 6,019 2,350 -- 70,282
Massachusetts Tax Free Income Fund 88,881 3,276 -- -- 92,157
Municipal Income Fund 18,551 1,493 -- -- 20,044
Expenses Subject to Possible Reimbursement
until September 30, 2008
---------------------------------------
Fund Class A Class B Class C Class Y Total
- ---- ------- ------- ------- ------- -----
Core Plus Bond Fund $19,860 $22,155 $1,563 $-- $43,578
High Income Fund 23,148 4,967 3,091 -- 31,206
Limited Term Government and Agency Fund 47,256 3,784 1,890 -- 52,930
Massachusetts Tax Free Income Fund 60,692 1,828 -- -- 62,520
Municipal Income Fund 11,265 603 -- -- 11,868
60
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
Certain officers and directors of Loomis Sayles and IXIS Advisors are also
Trustees of the Funds. Loomis Sayles and IXIS Advisors are both limited
partnerships whose sole 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 wholly-owned subsidiary of IXIS US Group.
Pursuant to an agreement among IXIS Advisor Funds Trust I, IXIS Advisor Funds
Trust II, IXIS Advisor Funds Trust III, IXIS Advisor Funds Trust IV, IXIS
Advisor Cash management Trust ("IXIS Advisor Funds Trusts"), Loomis Sayles
Funds I, Loomis Sayles Funds II ("Loomis Sayles Funds Trusts") and IXIS
Advisors, each Fund pays IXIS Advisors monthly its pro rata portion of fees
equal to an annual rate of 0.0675% of the first $5 billion of the average daily
net assets of the IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts,
0.0625% of the next $5 billion, and 0.0500% of such assets in excess of $10
billion, subject to an annual aggregate minimum fee for the IXIS Advisor Funds
Trusts and Loomis Sayles Funds Trusts of $5 million, which is reevaluated on an
annual basis.
For the six months ended March 31, 2007, amounts paid to IXIS Advisors for
administrative fees were as follows:
Administrative
Fund Fees
---- ----
Core Plus Bond Fund $ 62,090
High Income Fund 11,885
Limited Term Government and Agency Fund 35,458
Massachusetts Tax Free Income Fund 20,656
Municipal Income Fund 27,338
Strategic Income Fund 1,957,264
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 of the Trusts.
Pursuant to Rule 12b-1 under the 1940 Act, the Trusts have adopted a Service
Plan relating to each Fund's Class A shares (the "Class A Plan") and Service
and Distribution Plans relating to each Fund's Class B and Class C shares (the
"Class B and Class C Plans").
Under the Class A Plan, each Fund pays IXIS Distributors a monthly service fee
at an annual rate not to exceed 0.25% of the average daily net assets
attributable to the Fund's Class A shares, as reimbursement for expenses
incurred by IXIS Distributors in providing personal services to investors in
Class A shares and/or the maintenance of shareholder accounts.
Under the Class B and Class C Plans, each Fund pays IXIS Distributors a monthly
service fee at an annual rate not to exceed 0.25% of the average daily net
assets attributable to the Fund's Class B and Class C shares, as compensation
for services provided and expenses incurred by IXIS Distributors in providing
personal services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts.
Also under the Class B and Class C Plans, each Fund pays IXIS Distributors a
monthly distribution fee at the annual rate of 0.75% of the average daily net
assets attributable to the Fund's Class B and Class C shares, as compensation
for services provided and expenses incurred by IXIS Distributors in connection
with the marketing or sale of Class B and Class C shares.
For the six months ended March 31, 2007, the Funds paid the following service
and distribution fees:
Service Fee Distribution Fee
- - ------------------------------ -------------------
Fund Class A Class B Class C Class B Class C
- ---- ------- ------- ------- ------- -------
Core Plus Bond Fund $ 116,084 $132,468 $ 9,580 $397,408 $ 28,741
High Income Fund 38,300 8,513 5,077 25,541 15,232
Limited Term Government and Agency Fund 138,196 11,176 5,513 33,529 16,539
Massachusetts Tax Free Income Fund 87,994 2,666 -- 7,999 --
Municipal Income Fund 114,640 6,245 -- 18,739 --
Strategic Income Fund 4,466,518 247,238 2,988,114 741,715 8,964,346
61
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
d. Commissions. The Funds have been informed that commissions (including CDSC)
on Fund shares paid to IXIS Distributors by investors in shares of the Funds
during the six months ended March 31, 2007 were as follows:
Fund Commission
---- ----------
Core Plus Bond Fund $ 44,311
High Income Fund 43,345
Limited Term Government and Agency Fund 39,155
Massachusetts Tax Free Income Fund 10,109
Municipal Income Fund 13,245
Strategic Income Fund 6,790,046
e. Trustee Fees and Expenses. 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.
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.
f. Redemption Fees. Shareholders of Class A shares of Core Plus Bond Fund, High
Income Fund and Strategic Income Fund and shareholders of Class Y shares of
Core Plus Bond Fund and Strategic Income Fund are charged a 2% redemption fee
if they redeem, including redeeming by exchange, Class A shares and Class Y
shares within 60 days of their acquisition (including acquisition by exchange).
The redemption fee is intended to offset the costs 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. High Income Fund and Strategic Income Fund, together with
certain other funds of IXIS Advisor Funds Trusts and Loomis Sayles Funds
Trusts, participate in a $75,000,000 committed line of credit provided by State
Street Bank. Interest is charged to each participating fund based on its
borrowings at a rate per annum equal to the Federal Funds rate plus 0.50%. In
addition, a commitment fee of 0.09% per annum, payable at the end of each
calendar quarter, is accrued and apportioned among the participating funds
based on their average daily unused portion of the line of credit. For the six
months ended March 31, 2007, the Funds had no borrowings under this agreement.
6. Concentration of Credit. Massachusetts Tax Free Income Fund primarily
invests in debt obligations issued by the Commonwealth of Massachusetts and its
political subdivisions, agencies and public authorities to obtain funds for
various public purposes. The Fund is more susceptible to factors adversely
affecting issuers of Massachusetts municipal securities than is a comparable
municipal bond fund that is not so concentrated. Uncertain economic and fiscal
conditions may affect the ability of issuers of Massachusetts municipal
securities to meet their financial obligations.
62
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
7. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest, without par value. Transactions in capital shares were as
follows:
Six Months Ended
March 31, 2007
-----------------------------------
Core Plus Bond Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A:
Issued from the sale of shares 1,118,665 $ 12,666,839
Issued in connection with the reinvestment of distributions 152,668 1,731,982
---------------- -----------------
1,271,333 14,398,821
Redeemed (971,720) (11,002,059)
---------------- -----------------
Net Change 299,613 $ 3,396,762
---------------- -----------------
Class B:
Issued from the sale of shares 1,144,948 $ 12,961,741
Issued in connection with the reinvestment of distributions 38,550 437,606
---------------- -----------------
1,183,498 13,399,347
Redeemed (2,009,099) (22,737,373)
---------------- -----------------
Net Change (825,601) $ (9,338,026)
---------------- -----------------
Class C:
Issued from the sale of shares 241,950 $ 2,744,066
Issued in connection with the reinvestment of distributions 4,904 55,700
---------------- -----------------
246,854 2,799,766
Redeemed (69,084) (780,681)
---------------- -----------------
Net Change 177,770 $ 2,019,085
---------------- -----------------
Class Y:
Issued from the sale of shares 331,307 $ 3,764,438
Issued in connection with the reinvestment of distributions 17,309 197,234
---------------- -----------------
348,616 3,961,672
Redeemed (135,578) (1,538,517)
---------------- -----------------
Net Change 213,038 $ 2,423,155
---------------- -----------------
Increase (decrease) from capital share transactions (135,180) $ (1,499,024)
================ =================
Six Months Ended
March 31, 2007
-----------------------------------
High Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A:
Issued from the sale of shares 961,861 $ 5,027,169
Issued in connection with the reinvestment of distributions 149,133 781,972
---------------- -----------------
1,110,994 5,809,141
Redeemed (781,096) (4,085,451)
---------------- -----------------
Net Change 329,898 $ 1,723,690
---------------- -----------------
Class B:
Issued from the sale of shares 87,747 $ 458,795
Issued in connection with the reinvestment of distributions 23,131 121,457
---------------- -----------------
110,878 580,252
Redeemed (355,784) (1,860,654)
---------------- -----------------
Net Change (244,906) $ (1,280,402)
---------------- -----------------
Class C:
Issued from the sale of shares 242,883 $ 1,272,735
Issued in connection with the reinvestment of distributions 14,638 76,873
---------------- -----------------
257,521 1,349,608
Redeemed (57,026) (299,113)
---------------- -----------------
Net Change 200,495 $ 1,050,495
---------------- -----------------
Increase (decrease) from capital share transactions 285,487 $ 1,493,783
================ =================
Year Ended
September 30, 2006
-----------------------------------
Core Plus Bond Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A:
Issued from the sale of shares 1,382,171 $ 15,380,850
Issued in connection with the reinvestment of distributions 372,669 4,153,500
---------------- -----------------
1,754,840 19,534,350
Redeemed (2,825,473) (31,498,913)
---------------- -----------------
Net Change (1,070,633) $ (11,964,563)
---------------- -----------------
Class B:
Issued from the sale of shares 2,443,291 $ 27,246,501
Issued in connection with the reinvestment of distributions 124,023 1,383,392
---------------- -----------------
2,567,314 28,629,893
Redeemed (4,382,113) (48,867,417)
---------------- -----------------
Net Change (1,814,799) $ (20,237,524)
---------------- -----------------
Class C:
Issued from the sale of shares 217,848 $ 2,421,818
Issued in connection with the reinvestment of distributions 13,202 147,350
---------------- -----------------
231,050 2,569,168
Redeemed (141,074) (1,577,745)
---------------- -----------------
Net Change 89,976 $ 991,423
---------------- -----------------
Class Y:
Issued from the sale of shares 531,672 $ 5,901,516
Issued in connection with the reinvestment of distributions 36,711 411,038
---------------- -----------------
568,383 6,312,554
Redeemed (296,854) (3,319,094)
---------------- -----------------
Net Change 271,529 $ 2,993,460
---------------- -----------------
Increase (decrease) from capital share transactions (2,523,927) $ (28,217,204)
================ =================
Year Ended
September 30, 2006
-----------------------------------
High Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A:
Issued from the sale of shares 1,613,908 $ 8,110,484
Issued in connection with the reinvestment of distributions 225,645 1,132,995
---------------- -----------------
1,839,553 9,243,479
Redeemed (1,315,469) (6,579,692)
---------------- -----------------
Net Change 524,084 $ 2,663,787
---------------- -----------------
Class B:
Issued from the sale of shares 139,925 $ 704,223
Issued in connection with the reinvestment of distributions 49,894 250,269
---------------- -----------------
189,819 954,492
Redeemed (1,175,776) (5,886,573)
---------------- -----------------
Net Change (985,957) $ (4,932,081)
---------------- -----------------
Class C:
Issued from the sale of shares 245,364 $ 1,234,623
Issued in connection with the reinvestment of distributions 16,606 83,348
---------------- -----------------
261,970 1,317,971
Redeemed (296,889) (1,478,155)
---------------- -----------------
Net Change (34,919) $ (160,184)
---------------- -----------------
Increase (decrease) from capital share transactions (496,792) $ (2,428,478)
================ =================
63
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
Six Months Ended Year Ended
March 31, 2007 September 30, 2006
----------------------------------- -----------------------------------
Limited Term Government and
Agency Fund Shares Amount Shares Amount
- ------------------------------ ---------------- ----------------- ---------------- -----------------
Class A:
Issued from the sale of
shares 497,060 $ 5,476,695 555,196 $ 6,089,078
Issued in connection with
the reinvestment of
distributions 148,373 1,634,180 317,378 3,476,250
---------------- ----------------- ---------------- -----------------
645,433 7,110,875 872,574 9,565,328
Redeemed (1,109,544) (12,216,793) (3,237,220) (35,466,514)
---------------- ----------------- ---------------- -----------------
Net Change (464,111) $ (5,105,918) (2,364,646) $ 25,901,186)
---------------- ----------------- ---------------- -----------------
Class B:
Issued from the sale of
shares 31,349 $ 344,511 74,303 $ 814,813
Issued in connection with
the reinvestment of
distributions 12,094 133,292 29,021 317,417
---------------- ----------------- ---------------- -----------------
43,443 477,803 103,324 1,132,230
Redeemed (216,585) (2,380,349) (562,347) (6,150,376)
---------------- ----------------- ---------------- -----------------
Net Change (173,142) $ (1,902,546) (459,023) $ (5,018,146)
---------------- ----------------- ---------------- -----------------
Class C:
Issued from the sale of
shares 77,995 $ 858,709 63,287 $ 692,417
Issued in connection with
the reinvestment of
distributions 4,577 50,411 8,700 95,297
---------------- ----------------- ---------------- -----------------
82,572 909,120 71,987 787,714
Redeemed (66,397) (730,598) (202,763) (2,222,285)
---------------- ----------------- ---------------- -----------------
Net Change 16,175 $ 178,522 (130,776) $ (1,434,571)
---------------- ----------------- ---------------- -----------------
Class Y:
Issued from the sale of
shares 130,977 $ 1,445,641 16,475 $ 181,528
Issued in connection with
the reinvestment of
distributions 5,592 61,784 9,128 100,325
---------------- ----------------- ---------------- -----------------
136,569 1,507,425 25,603 281,853
Redeemed (1,563) (17,240) (30,025) (330,286)
---------------- ----------------- ---------------- -----------------
Net Change 135,006 $ 1,490,185 (4,422) $ (48,433)
---------------- ----------------- ---------------- -----------------
Increase (decrease) from
capital share transactions (486,072) $ (5,339,757) (2,958,867) $ (32,402,336)
================ ================= ================ =================
On March 31, 2007, one shareholder of the Limited Term Government
and Agency Fund owned 7.76% of the Fund's total shares
outstanding.
Six Months Ended Year Ended
March 31, 2007 September 30, 2006
----------------------------------- -----------------------------------
Massachusetts Tax Free Income
Fund Shares Amount Shares Amount
- ------------------------------ ---------------- ----------------- ---------------- -----------------
Class A:
Issued from the sale of
shares 39,863 $ 664,792 116,584 $ 1,927,090
Issued in connection with
the reinvestment of
distributions 61,924 1,033,446 128,646 2,122,198
---------------- ----------------- ---------------- -----------------
101,787 1,698,238 245,230 4,049,288
Redeemed (259,329) (4,322,082) (533,421) (8,795,072)
---------------- ----------------- ---------------- -----------------
Net Change (157,542) $ (2,623,844) (288,191) $ (4,745,784)
---------------- ----------------- ---------------- -----------------
Class B:
Issued from the sale of
shares 1,737 $ 28,898 3,138 $ 51,637
Issued in connection with
the reinvestment of
distributions 1,444 24,047 3,663 60,307
---------------- ----------------- ---------------- -----------------
3,181 52,945 6,801 111,944
Redeemed (25,653) (427,617) (59,258) (974,232)
---------------- ----------------- ---------------- -----------------
Net Change (22,472) $ (374,672) (52,457) $ (862,288)
---------------- ----------------- ---------------- -----------------
Increase (decrease) from
capital share transactions (180,014) $ (2,998,516) (340,648) $ (5,608,072)
================ ================= ================ =================
64
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
Six Months Ended
March 31, 2007
-----------------------------------
Municipal Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A:
Issued from the sale of shares 204,175 $ 1,541,640
Issued in connection with the reinvestment of distributions 200,000 1,510,742
---------------- -----------------
404,175 3,052,382
Redeemed (733,469) (5,527,609)
---------------- -----------------
Net Change (329,294) $ (2,475,227)
---------------- -----------------
Class B:
Issued from the sale of shares 14,650 $ 110,871
Issued in connection with the reinvestment of distributions 7,931 60,002
---------------- -----------------
22,581 170,873
Redeemed (83,167) (628,457)
---------------- -----------------
Net Change (60,586) $ (457,584)
---------------- -----------------
Increase (decrease) from capital share transactions (389,880) $ (2,932,811)
================ =================
Six Months Ended
March 31, 2007
-----------------------------------
Strategic Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A:
Issued from the sale of shares 120,795,402 $ 1,794,110,302
Issued in connection with the reinvestment of distributions 4,581,344 68,217,440
---------------- -----------------
125,376,746 1,862,327,742
Redeemed (17,757,656) (263,817,356)
---------------- -----------------
Net Change 107,619,090 $ 1,598,510,386
---------------- -----------------
Class B:
Issued from the sale of shares 3,184,716 $ 47,493,752
Issued in connection with the reinvestment of distributions 140,784 2,104,846
---------------- -----------------
3,325,500 49,598,598
Redeemed (1,154,810) (17,206,663)
---------------- -----------------
Net Change 2,170,690 $ 32,391,935
---------------- -----------------
Class C:
Issued from the sale of shares 80,969,959 $ 1,206,975,597
Issued in connection with the reinvestment of distributions 1,211,846 18,118,364
---------------- -----------------
82,181,805 1,225,093,961
Redeemed (7,011,867) (104,691,092)
---------------- -----------------
Net Change 75,169,938 $ 1,120,402,869
---------------- -----------------
Class Y:
Issued from the sale of shares 14,450,901 $ 214,553,654
Issued in connection with the reinvestment of distributions 132,523 1,972,361
---------------- -----------------
14,583,424 216,526,015
Redeemed (2,398,377) (35,616,894)
---------------- -----------------
Net Change 12,185,047 $ 180,909,121
---------------- -----------------
Increase (decrease) from capital share transactions 197,144,765 $ 2,932,214,311
================ =================
Year Ended
September 30, 2006
-----------------------------------
Municipal Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A:
Issued from the sale of shares 462,407 $ 3,433,795
Issued in connection with the reinvestment of distributions 334,961 2,490,096
---------------- -----------------
797,368 5,923,891
Redeemed (2,091,235) (15,530,757)
---------------- -----------------
Net Change (1,293,867) $ (9,606,866)
---------------- -----------------
Class B:
Issued from the sale of shares 53,879 $ 401,621
Issued in connection with the reinvestment of distributions 15,598 116,046
---------------- -----------------
69,477 517,667
Redeemed (399,386) (2,971,013)
---------------- -----------------
Net Change (329,909) $ (2,453,346)
---------------- -----------------
Increase (decrease) from capital share transactions (1,623,776) $ (12,060,212)
================ =================
Year Ended
September 30, 2006
-----------------------------------
Strategic Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A:
Issued from the sale of shares 138,264,882 $ 1,969,973,470
Issued in connection with the reinvestment of distributions 4,434,461 63,237,389
---------------- -----------------
142,699,343 2,033,210,859
Redeemed (20,978,934) (298,257,925)
---------------- -----------------
Net Change 121,720,409 $ 1,734,952,934
---------------- -----------------
Class B:
Issued from the sale of shares 4,378,474 $ 62,611,798
Issued in connection with the reinvestment of distributions 254,799 3,636,750
---------------- -----------------
4,633,273 66,248,548
Redeemed (2,489,164) (35,488,933)
---------------- -----------------
Net Change 2,144,109 $ 30,759,615
---------------- -----------------
Class C:
Issued from the sale of shares 76,685,324 $ 1,097,132,921
Issued in connection with the reinvestment of distributions 1,024,379 14,656,353
---------------- -----------------
77,709,703 1,111,789,274
Redeemed (7,823,598) (111,619,466)
---------------- -----------------
Net Change 69,886,105 $ 1,000,169,808
---------------- -----------------
Class Y:
Issued from the sale of shares 16,186,079 $ 231,166,734
Issued in connection with the reinvestment of distributions 92,338 1,318,567
---------------- -----------------
16,278,417 232,485,301
Redeemed (1,256,435) (17,863,735)
---------------- -----------------
Net Change 15,021,982 $ 214,621,566
---------------- -----------------
Increase (decrease) from capital share transactions 208,772,605 $ 2,980,503,923
================ =================
65
[LOGO] IXIS | ADVISOR FUNDS
Equity Funds
Semiannual Report
March 31, 2007
[LOGO]
Loomis Sayles Global Markets Fund
Loomis Sayles Growth Fund
Loomis Sayles Research Fund
TABLE OF CONTENTS
Management Discussion
and Performance..........Page 1
Portfolio of InvestmentsPage 10
Financial Statements....Page 20
LOOMIS SAYLES GLOBAL MARKETS FUND
PORTFOLIO PROFILE
Objective:
Seeks high total return through a combination of capital appreciation and
current income
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in equity and fixed-income securities of U.S. and foreign
issuers, including securities of issuers located in emerging markets
- --------------------------------------------------------------------------------
Fund Inception:
May 1, 1996
- --------------------------------------------------------------------------------
Managers:
Mark Baribeau, CFA
Dan Fuss, CFA, CIC
Warren Koontz, CFA, CIC
David Rolley, CFA
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A LGMAX
Class C LGMCX
Class Y LSWWX
- --------------------------------------------------------------------------------
What You Should Know:
Foreign and emerging market securities involve risks not associated with
domestic securities, including fluctuations in currencies, differing political
and economic conditions and accounting standards. Value stocks may fall out of
favor and underperform the overall market during any given period. Growth
stocks can be more sensitive to market movements because their prices are based
in part on future expectations. Fixed-income securities are subject to credit
risk and interest-rate risk; their value generally rises when prevailing
interest rates fall and declines when rates rise. Lower-rated bonds may offer
higher yields in return for more risk.
Management Discussion
- --------------------------------------------------------------------------------
Both the equity and bond portfolios that are part of Loomis Sayles Global
Markets Fund performed well for the six months ended March 31, 2007. Their
combined total return was 11.51% based on the net asset value of Class A shares
and $0.25 in reinvested dividends. For the period, the fund's primary
benchmark, the MSCI World Index (common stocks from developed countries around
the world) returned 11.30%, while its secondary benchmark, Citigroup World
Government Bond Index (government bonds issued in the United States and other
developed countries) returned 2.98%. The average return on Morningstar's World
Allocation category (primarily global equity funds) was 8.63% for the period.
ECONOMIES AROUND THE WORLD APPEAR HEALTHY
Relatively stable interest rates and healthy economic growth worldwide pushed
the capital markets up during the six months ended March 31, 2007. In the
equity portfolio, good stock selection in commercial services and the aerospace
and defense industries contributed to performance. The best performer was
Precision Castparts Corp., a rapidly expanding U.S. industrial company with
strong sales growth in metal components, chiefly from its aerospace division.
On the fixed-income side, some of the smaller currency markets and
below-investment-grade issues influenced performance. Our approach is to focus
on individual securities rather than rely on broad sector analysis. Our top
performers included two U.S. bonds and one issued by a Brazilian food company.
The strongest currencies included Brazil, Columbia and Iceland. Brazil and
Colombia were also the best performing countries, along with Uruguay.
DETRACTORS INCLUDED SOME STOCKS, CURRENCIES AND INDIVIDUAL BONDS
On the equity side, negatives included Medco Health Solutions, a top U.S.
pharmacy benefit manager, and High Tech Computer Co., the world's largest maker
of handsets that use Microsoft Windows operating systems. Shares of Medco
declined in response to several issues squeezing profit potential in that
industry. High Tech Computer fell sharply after Texas Instruments reported that
demand for expensive cell phones was decelerating. We sold both positions.
Underperforming currencies, including the Korean won and the Japanese yen, and
two issues denominated in Canadian dollars, were negatives for the bond
portfolio. Currency losses impacted Canadian bonds, and one U.S. credit company
was a drag on performance.
PORTFOLIO EMPHASIZES EQUITIES, FOCUSES ON INDIVIDUAL STOCKS
Equity securities continue to dominate this fund, with weightings in the 60% to
70% range. Rather than focus on one or two countries, we strive for global
diversity and focus on our best value and growth ideas. Individual stock
selection rather than industry allocation is key.
On the bond side, our duration strategy is to focus on longer-term U.S. bonds,
with a neutral duration strategy in Europe. (Duration is a measure of a bond
portfolio's sensitivity to changes in interest rates. A longer duration is more
bullish; a shorter one is defensive.) We continue to maintain a credit
"barbell," balancing high-quality, lower-yielding securities that tend to be
more stable in price, with lower-quality, higher-yielding securities for
income. As a result, we have significant holdings in the Japanese yen and the
Icelandic krona, which appear undervalued. We reduced defensive positions in
Mexico and South Africa during the period, and added bonds denominated in the
Uruguan peso. We also sold some Australian and New Zealand bonds where we see
rising inflation risks. We like the Asia ex-Japan markets, but we sold Thai
bonds, as an increasingly unpopular government contributed to a slump in local
confidence, eroding the Thai baht.
OVERALL ECONOMIC OUTLOOK IS POSITIVE FOR THE LONGER TERM
Media attention in the United States is likely to remain on oil prices, the
housing market and consumer spending, but we believe the most significant
market driver is likely to be earnings growth. In Europe, we see a strong
potential for another interest rate hike, but in Japan we look for flat
interest-rate policies unless inflation regains momentum.
1
LOOMIS SAYLES GLOBAL MARKETS FUND
Investment Results through March 31, 2007
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/1,5/
March 31, 1997 through March 31, 2007
[CHART]
Net Maximum
Asset Sales MSCI World Citigroup
Value/2/ Charge/3/ Index WGBI Index
--------- ---------- ---------- -----------
3/31/1997 $10,000 $ 9,425 $10,000 $10,000
4/30/1997 10,093 9,513 10,329 9,912
5/31/1997 10,381 9,784 10,968 10,182
6/30/1997 10,501 9,897 11,517 10,303
7/31/1997 11,065 10,429 12,049 10,223
8/31/1997 10,794 10,173 11,245 10,217
9/30/1997 11,225 10,579 11,857 10,434
10/31/1997 10,569 9,961 11,235 10,651
11/30/1997 10,579 9,970 11,436 10,487
12/31/1997 10,333 9,739 11,577 10,456
1/31/1998 10,643 10,031 11,901 10,557
2/28/1998 11,284 10,635 12,708 10,643
3/31/1998 11,388 10,733 13,247 10,538
4/30/1998 11,243 10,597 13,378 10,706
5/31/1998 10,757 10,139 13,213 10,731
6/30/1998 10,302 9,710 13,528 10,747
7/31/1998 10,302 9,710 13,508 10,762
8/31/1998 9,207 8,678 11,709 11,055
9/30/1998 9,187 8,659 11,918 11,642
10/31/1998 9,848 9,282 12,997 11,987
11/30/1998 10,427 9,828 13,772 11,818
12/31/1998 10,607 9,997 14,447 12,056
1/31/1999 10,753 10,135 14,766 11,945
2/28/1999 10,550 9,943 14,375 11,561
3/31/1999 10,877 10,252 14,976 11,591
4/30/1999 11,328 10,677 15,568 11,586
5/31/1999 11,385 10,730 15,001 11,391
6/30/1999 11,645 10,975 15,703 11,191
7/31/1999 11,859 11,177 15,658 11,465
8/31/1999 11,814 11,135 15,633 11,519
9/30/1999 11,724 11,050 15,483 11,698
10/31/1999 12,175 11,475 16,290 11,693
11/30/1999 14,074 13,264 16,750 11,570
12/31/1999 16,995 16,018 18,108 11,542
1/31/2000 16,411 15,467 17,073 11,296
2/29/2000 18,751 17,673 17,122 11,215
3/31/2000 18,458 17,397 18,307 11,562
4/30/2000 17,617 16,604 17,535 11,184
5/31/2000 17,166 16,179 17,093 11,271
6/30/2000 17,727 16,708 17,671 11,545
7/31/2000 17,142 16,156 17,176 11,349
8/31/2000 17,617 16,604 17,737 11,264
9/30/2000 17,129 16,144 16,796 11,242
10/31/2000 16,312 15,374 16,517 11,099
11/30/2000 15,494 14,604 15,516 11,319
12/31/2000 16,196 15,265 15,769 11,725
1/31/2001 16,332 15,393 16,075 11,710
2/28/2001 15,908 14,993 14,719 11,706
3/31/2001 15,179 14,306 13,755 11,368
4/30/2001 15,434 14,547 14,775 11,328
5/31/2001 15,655 14,755 14,591 11,293
6/30/2001 15,536 14,643 14,136 11,190
7/31/2001 15,367 14,483 13,950 11,472
8/31/2001 15,282 14,403 13,283 11,904
9/30/2001 14,570 13,732 12,114 11,991
10/31/2001 14,858 14,004 12,348 12,086
11/30/2001 15,096 14,228 13,080 11,916
12/31/2001 15,152 14,281 13,164 11,609
1/31/2002 14,929 14,071 12,766 11,394
2/28/2002 14,947 14,088 12,658 11,453
3/31/2002 15,225 14,350 13,246 11,422
4/30/2002 15,300 14,420 12,776 11,831
5/31/2002 15,558 14,664 12,806 12,165
6/30/2002 15,207 14,332 12,031 12,753
7/31/2002 14,484 13,652 11,019 12,878
8/31/2002 14,651 13,809 11,042 13,103
9/30/2002 14,058 13,249 9,830 13,246
10/31/2002 14,409 13,581 10,557 13,192
11/30/2002 15,001 14,139 11,129 13,208
12/31/2002 15,072 14,205 10,591 13,872
1/31/2003 15,206 14,332 10,271 14,062
2/28/2003 15,360 14,476 10,096 14,259
3/31/2003 15,378 14,494 10,068 14,303
4/30/2003 16,164 15,234 10,967 14,475
5/31/2003 17,006 16,028 11,599 15,102
6/30/2003 17,140 16,155 11,804 14,858
7/31/2003 16,911 15,938 12,046 14,417
8/31/2003 17,256 16,263 12,309 14,339
9/30/2003 17,946 16,914 12,387 15,151
10/31/2003 18,617 17,546 13,125 15,075
11/30/2003 18,790 17,710 13,328 15,330
12/31/2003 19,716 18,583 14,167 15,941
1/31/2004 20,014 18,863 14,398 15,983
2/29/2004 20,252 19,088 14,644 16,008
3/31/2004 20,451 19,275 14,553 16,238
4/30/2004 19,678 18,546 14,263 15,542
5/31/2004 19,619 18,491 14,391 15,664
6/30/2004 20,035 18,883 14,704 15,698
7/31/2004 19,598 18,471 14,228 15,617
8/31/2004 19,857 18,715 14,296 15,987
9/30/2004 20,274 19,108 14,571 16,212
10/31/2004 20,829 19,631 14,931 16,691
11/30/2004 21,820 20,566 15,722 17,293
12/31/2004 22,449 21,158 16,327 17,590
1/31/2005 22,144 20,870 15,963 17,343
2/28/2005 22,733 21,425 16,476 17,369
3/31/2005 22,103 20,832 16,164 17,137
4/30/2005 21,758 20,507 15,822 17,392
5/31/2005 22,450 21,159 16,115 17,040
6/30/2005 22,836 21,523 16,262 16,892
7/31/2005 23,690 22,328 16,833 16,727
8/31/2005 23,832 22,462 16,968 17,028
9/30/2005 24,097 22,711 17,414 16,702
10/31/2005 23,933 22,557 16,995 16,398
11/30/2005 24,644 23,227 17,570 16,198
12/31/2005 25,159 23,712 17,964 16,381
1/31/2006 26,211 24,703 18,770 16,593
2/28/2006 26,004 24,508 18,749 16,507
3/31/2006 26,128 24,626 19,170 16,315
4/30/2006 26,314 24,801 19,762 16,704
5/31/2006 24,953 23,519 19,105 17,010
6/30/2006 24,851 23,422 19,107 16,832
7/31/2006 24,995 23,558 19,231 16,967
8/31/2006 25,365 23,907 19,740 17,124
9/30/2006 25,736 24,256 19,981 17,075
10/31/2006 26,703 25,168 20,718 17,238
11/30/2006 27,424 25,847 21,236 17,712
12/31/2006 27,877 26,274 21,674 17,383
1/31/2007 28,359 26,728 21,934 17,147
2/28/2007 28,024 26,413 21,829 17,545
3/31/2007 28,697 27,047 22,238 17,583
Average Annual Total Returns -- March 31, 2007/5/
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
CLASS A/1/
Net Asset Value/2/ 11.51% 9.84% 13.51% 11.11%
With Maximum Sales Charge/3/ 5.11 3.55 12.18 10.46
CLASS C/1/
Net Asset Value/2/ 11.03 9.01 12.67 10.28
With CDSC/4/ 10.03 8.01 12.67 10.28
CLASS Y/1/
Net Asset Value/2/ 11.66 10.16 13.79 11.40
- -----------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
MSCI World Index 11.30% 16.00% 10.92% 8.32%
Citigroup World Government Bond Index 2.98 7.78 9.01 5.81
Morningstar World Allocation Fund Avg. 8.63 12.69 12.26 10.24
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com.
Class Y shares, the successor to the fund's Institutional Class, are available
to certain investors, as described in the prospectus.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
FUND COMPOSITION 3/31/07 9/30/06
- ------------------------------------------------------
Common Stocks 66.7 65.2
- ------------------------------------------------------
Bonds & Notes 28.3 31.5
- ------------------------------------------------------
Short-Term Investments and
Other 5.0 3.3
- ------------------------------------------------------
% of Net Assets as of
FIVE LARGEST HOLDINGS 3/31/07 9/30/06
- ------------------------------------------------------
American Movil S. A. B. de C.V.,
Series L 2.2 2.2
- ------------------------------------------------------
ABB Ltd. 2.1 1.5
- ------------------------------------------------------
Piraeus Bank S.A 2.1 1.9
- ------------------------------------------------------
Goldman Sachs Group, Inc. 1.9 1.6
- ------------------------------------------------------
Precision Castparts Corp. 1.8 1.4
- ------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 3/31/07 9/30/06
- ------------------------------------------------------
Sovereigns 7.7 7.4
- ------------------------------------------------------
Capital Markets 7.2 7.7
- ------------------------------------------------------
Communications Equipment 5.6 2.6
- ------------------------------------------------------
Computers & Peripherals 4.7 5.2
- ------------------------------------------------------
Diversified Financial Services 3.8 3.2
- ------------------------------------------------------
Portfolio holdings and asset allocations will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/6/ Net Expense Ratio/7/
- -------------------------------------------------------
A 1.56 1.25
- -------------------------------------------------------
C 2.32 2.00
- -------------------------------------------------------
Y 1.19 1.00
- -------------------------------------------------------
NOTES TO CHARTS
See page 7 for a description of the indexes.
/1/Returns shown in the chart include performance of the fund's Institutional
Class shares, which were redesignated as Class Y shares on 2/1/06. For
periods prior to the inception of Class A and Class C shares (2/1/06), the
prior Institutional Class performance has been restated to reflect the loads
and expenses of Class A and Class C shares, respectively. The restatement of
the fund's performance to reflect Class A expenses is based on the net
expenses of the Class after taking into effect the fund's current expense
cap arrangements. Class Y performance has been restated to reflect the net
expenses of the Institutional Class after taking into effect the fund's
current expense cap arrangements. The growth of $10,000 chart compares the
performance of Class A shares, at net asset value, to the performance of
Class A shares including the maximum sales charge of 5.75%. This chart
reflects the performance of Class A Shares rather than Class Y shares
because Class A shares have the highest sales charge. Prior to 2/1/06, the
fund was offered without a sales charge.
/2/Does not include a sales charge.
/3/Includes the maximum sales charge of 5.75%.
/4/Performance for Class C shares assumes a 1% contingent deferred sales charge
("CDSC") applied when you sell shares within one year of purchase.
/5/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/6/Before waivers and reimbursements.
/7/After waivers and reimbursements.
2
LOOMIS SAYLES GROWTH FUND
PORTFOLIO PROFILE
Objective:
Long-term growth of capital
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in equity securities, including common stocks, convertible
securities, and warrants; focuses on stocks of large-capitalization companies,
but may invest in companies of any size
- --------------------------------------------------------------------------------
Fund Inception:
May 16, 1991
- --------------------------------------------------------------------------------
Managers:
Mark Baribeau, CFA
Pamela Czekanski, CFA
Richard Skaggs, CFA
Loomis, Sayles &
Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A LGRRX
Class B LGRBX
Class C LGRCX
Class Y LSGRX
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks are generally more sensitive to market movements because their
stock prices are based on future expectations. This fund may invest in foreign
securities, which involves risks not associated with domestic securities, such
as currency fluctuations, differing political and economic conditions, and
different accounting standards.
Frequent portfolio turnover may result in increased tax liabilities that will
reduce the fund's overall return.
Management Discussion
- --------------------------------------------------------------------------------
During a sometimes volatile period that ended with moderate, but generally
positive returns, Loomis Sayles Growth Fund Class A shares provided a total
return of 6.51% at net asset value for the six months ended March 31, 2007. The
fund lagged its benchmark, the Russell 1000 Growth Index, which rose 7.19%, and
was slightly below the 6.94% average return on Morningstar's Large Growth
category.
STRONG PERFORMERS INCLUDED CONSUMER STOCKS, FINANCE AND INDUSTRIALS
Among the consumer discretionary stocks we selected, we had outstanding results
from internet search firm Google, which surpassed earnings forecasts and
experienced strong international revenue growth. Luxury retailer Coach also
rose in value when it raised its 2007 earnings guidance following strong
results for the final quarter of 2006. The fund's top-performing financial
services holdings included commercial real estate broker CB Richard Ellis and
investment banker Goldman Sachs. CB Richard Ellis reported powerful gains in
quarterly earnings, and Goldman Sachs reported its most profitable quarter
ever, beating Wall Street's earnings estimates. In the materials and processing
group, industrial manufacturer Precision Castparts Corp. was a leader, with
strong sales growth in metal components, chiefly from its aerospace division,
and improved margins in its forging division. Apple Inc. was another standout,
as its share price climbed on the introduction of its iPhone, the media-playing
cell phone, and other products in its development pipeline.
HEALTHCARE, UTILITIES, TRANSPORTATION AND TWO TECH HOLDINGS DETRACTED
Declines in the transportation sectors were minor compared to healthcare, which
was responsible for virtually all underperformance versus the benchmark.
Disappointing results among the fund's healthcare holdings were largely
attributable to three selections. The stock price of Medco Health Solutions, a
pharmacy benefit manager, declined in response to several issues squeezing the
profit potential of that industry group. Quest Diagnostics fell after the
company announced the loss of a major contract to provide lab services to one
of its competitors. We sold Medco and Quest last fall. We also eliminated the
fund's position in Johnson & Johnson, a diversified health products company
that declined when the Food and Drug Administration required additional
warnings for its anemia drug Procrit.
Among our utilities holdings, the biggest detractor was cable company Comcast,
which fell short of Wall Street's expectations and reported increased capital
expenditures in 2007. In autos and transportation, Expeditors International of
Washington detracted from results. This specialist in planning and managing
international cargo shipments enjoyed increased revenues from some divisions,
but investors were expecting more robust results and we sold the position.
Performance in technology was impacted by BEA Systems, which reported quarterly
results that were slightly below expectations, and Symantec, which fell after
the company reduced 2007 earnings estimates from its data center management
business. We sold both positions.
FUND MADE MINOR ADJUSTMENTS IN POSITIONING
We maintained our long-term focus on fundamentally sound, large-cap growth
companies with leadership products in their competitive markets, but we did
make some minor changes in the portfolio composition. We trimmed the fund's
healthcare services holdings and its exposure to consumer staples, but we
increased the fund's position in Allegheny Technologies and added Monsanto and
Freeport-McMoRan. Allegheny is a specialty steel company that makes parts for
the aerospace industry; Monsanto is an agricultural chemicals company that
produces seeds designed to improve crop yields; and Freeport is a copper and
gold mining company. We also increased the fund's weighting in consumer
discretionary stocks with a diversified group of retailers, internet companies
and hotels.
EQUITY OUTLOOK IS MIXED, WITH MODERATE GROWTH
We anticipate a mix of encouraging and discouraging news in coming months, but
we believe the economy is heading for a "soft landing," moving toward a
sustainable pattern of moderate growth. While investor anxieties may resurface,
we believe U.S. corporate earnings should grow at a healthy rate. Coupled with
sustained investor interest in equities, we believe this environment should
support positive returns in the stock market in 2007.
3
LOOMIS SAYLES GROWTH FUND
Investment Results through March 31, 2007
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/1,5/
March 31, 1997 through March 31, 2007
[CHART]
Net Asset Maximum Sales Russell 1000
Value/2/ Charge/3/ Growth Index
--------- --------- ------------
3/31/1997 $10,000 $ 9,425 $10,000
4/30/1997 9,908 9,338 10,664
5/31/1997 10,885 10,259 11,434
6/30/1997 11,231 10,585 11,891
7/31/1997 12,369 11,658 12,943
8/31/1997 12,082 11,387 12,185
9/30/1997 13,156 12,399 12,785
10/31/1997 13,012 12,264 12,312
11/30/1997 12,622 11,896 12,835
12/31/1997 12,839 12,101 12,979
1/31/1998 12,309 11,601 13,367
2/28/1998 13,176 12,418 14,373
3/31/1998 13,634 12,850 14,946
4/30/1998 14,021 13,215 15,153
5/31/1998 13,481 12,706 14,723
6/30/1998 14,083 13,273 15,624
7/31/1998 13,318 12,552 15,521
8/31/1998 10,646 10,034 13,192
9/30/1998 11,820 11,140 14,205
10/31/1998 12,626 11,900 15,347
11/30/1998 12,708 11,977 16,514
12/31/1998 14,455 13,624 18,003
1/31/1999 14,902 14,045 19,060
2/28/1999 14,288 13,466 18,189
3/31/1999 15,558 14,663 19,147
4/30/1999 15,768 14,861 19,172
5/31/1999 15,336 14,454 18,583
6/30/1999 16,411 15,467 19,884
7/31/1999 15,686 14,784 19,252
8/31/1999 15,811 14,902 19,567
9/30/1999 15,435 14,547 19,156
10/31/1999 16,622 15,666 20,602
11/30/1999 17,755 16,734 21,714
12/31/1999 20,557 19,375 23,972
1/31/2000 19,753 18,618 22,848
2/29/2000 22,207 20,930 23,965
3/31/2000 22,798 21,487 25,681
4/30/2000 20,981 19,774 24,459
5/31/2000 19,587 18,461 23,227
6/30/2000 21,542 20,304 24,987
7/31/2000 21,346 20,119 23,946
8/31/2000 23,650 22,290 26,114
9/30/2000 22,422 21,133 23,644
10/31/2000 20,740 19,548 22,525
11/30/2000 17,208 16,219 19,205
12/31/2000 17,224 16,233 18,597
1/31/2001 16,742 15,779 19,882
2/28/2001 14,736 13,889 16,506
3/31/2001 13,452 12,679 14,710
4/30/2001 14,464 13,632 16,571
5/31/2001 13,982 13,178 16,327
6/30/2001 13,806 13,012 15,949
7/31/2001 13,196 12,437 15,550
8/31/2001 12,185 11,485 14,278
9/30/2001 11,011 10,377 12,853
10/31/2001 11,625 10,956 13,527
11/30/2001 12,641 11,914 14,827
12/31/2001 12,962 12,217 14,799
1/31/2002 12,935 12,191 14,537
2/28/2002 12,240 11,536 13,934
3/31/2002 12,775 12,041 14,416
4/30/2002 12,374 11,662 13,239
5/31/2002 12,294 11,587 12,919
6/30/2002 11,438 10,780 11,724
7/31/2002 10,476 9,874 11,080
8/31/2002 10,476 9,874 11,113
9/30/2002 9,754 9,193 9,960
10/31/2002 10,476 9,874 10,874
11/30/2002 10,743 10,125 11,464
12/31/2002 9,969 9,395 10,672
1/31/2003 9,889 9,320 10,413
2/28/2003 9,835 9,270 10,365
3/31/2003 10,049 9,471 10,558
4/30/2003 10,690 10,075 11,339
5/31/2003 11,305 10,655 11,905
6/30/2003 11,332 10,680 12,069
7/31/2003 11,813 11,134 12,369
8/31/2003 12,133 11,436 12,677
9/30/2003 11,786 11,109 12,541
10/31/2003 12,909 12,166 13,246
11/30/2003 13,016 12,267 13,384
12/31/2003 13,176 12,418 13,847
1/31/2004 13,470 12,695 14,130
2/29/2004 13,576 12,795 14,220
3/31/2004 13,523 12,745 13,956
4/30/2004 13,096 12,343 13,794
5/31/2004 13,496 12,720 14,051
6/30/2004 13,897 13,098 14,226
7/31/2004 12,936 12,192 13,422
8/31/2004 12,775 12,041 13,356
9/30/2004 13,309 12,544 13,483
10/31/2004 13,790 12,997 13,693
11/30/2004 14,672 13,829 14,164
12/31/2004 15,234 14,358 14,720
1/31/2005 14,619 13,778 14,229
2/28/2005 14,832 13,979 14,380
3/31/2005 14,405 13,577 14,118
4/30/2005 13,951 13,149 13,849
5/31/2005 14,859 14,005 14,519
6/30/2005 15,234 14,358 14,466
7/31/2005 15,982 15,063 15,173
8/31/2005 15,715 14,811 14,977
9/30/2005 16,116 15,189 15,046
10/31/2005 16,009 15,089 14,900
11/30/2005 16,784 15,819 15,543
12/31/2005 16,838 15,870 15,494
1/31/2006 17,426 16,424 15,766
2/28/2006 17,131 16,146 15,741
3/31/2006 17,104 16,120 15,974
4/30/2006 16,729 15,767 15,952
5/31/2006 15,392 14,507 15,411
6/30/2006 15,339 14,457 15,350
7/31/2006 14,885 14,029 15,058
8/31/2006 15,072 14,205 15,528
9/30/2006 15,607 14,710 15,955
10/31/2006 16,088 15,163 16,515
11/30/2006 16,302 15,364 16,843
12/31/2006 16,248 15,314 16,900
1/31/2007 16,836 15,868 17,335
2/28/2007 16,222 15,289 17,009
3/31/2007 16,622 15,667 17,101
Average Annual Total Returns -- March 31, 2007/5/
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
CLASS A/1/
Net Asset Value/2/ 6.51% -2.81% 5.41% 5.21%
With Maximum Sales Charge/3/ 0.32 -8.39 4.17 4.59
CLASS B/1/
Net Asset Value/2/ 6.14 -3.66 4.61 4.41
With CDSC/4/ 1.14 -8.48 4.27 4.41
CLASS C/1/
Net Asset Value/2/ 6.13 -3.50 4.64 4.43
With CDSC/4/ 5.13 -4.47 4.64 4.43
CLASS Y/1/
Net Asset Value/2/ 6.74 -2.26 5.74 5.50
- -------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Russell 1000 Growth Index 7.19% 7.06% 3.48% 5.51%
Morningstar Large Growth Fund Avg. 6.94 4.46 3.69 6.26
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com.
Class Y shares, the successor to the fund's Institutional Class, are available
to certain investors, as described in the prospectus.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
FUND COMPOSITION 3/31/07 9/30/06
- -----------------------------------------------------------
Common Stocks 97.5 98.4
- -----------------------------------------------------------
Short-Term Investments and Other 2.5 1.6
- -----------------------------------------------------------
% of Net Assets as of
FIVE LARGEST HOLDINGS 3/31/07 9/30/06
- -----------------------------------------------------------
Google, Inc. 4.1 3.9
- -----------------------------------------------------------
Cisco Systems, Inc. 3.8 1.5
- -----------------------------------------------------------
Apple, Inc. 3.7 3.6
- -----------------------------------------------------------
Goldman Sachs Group, Inc. 3.2 2.7
- -----------------------------------------------------------
International Business Machines Corp. 2.8 0.0
- -----------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 3/31/07 9/30/06
- -----------------------------------------------------------
Computers & Peripherals 10.0 6.1
- -----------------------------------------------------------
Internet Software & Services 8.3 5.6
- -----------------------------------------------------------
Capital Markets 8.3 12.3
- -----------------------------------------------------------
Communications Equipment 7.7 7.4
- -----------------------------------------------------------
Media 6.9 3.7
- -----------------------------------------------------------
Portfolio holdings and asset allocations will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/6/ Net Expense Ratio/7/
- -------------------------------------------------------
A 1.17 1.17
- -------------------------------------------------------
B 2.11 2.00
- -------------------------------------------------------
C 1.95 1.95
- -------------------------------------------------------
Y 0.80 0.80
- -------------------------------------------------------
NOTES TO CHARTS
See page 7 for a description of the indexes.
/1/Returns shown in the chart include performance of the fund's Retail Class
shares, which were converted to Class A shares on 9/12/03. The prior Retail
Class performance has been restated to reflect expenses of Class A shares.
For periods before the inception of Retail Class shares (12/31/96),
performance shown for Class A has been based on the performance of the
fund's Institutional Class shares, adjusted to reflect the higher expenses
paid by Class A shares. The restatement of the fund's performance to reflect
Class A expenses is based on the net expenses of the Class after taking into
effect the fund's current expense cap arrangements. For periods prior to the
inception of Class B and Class C shares (9/12/03), performance is based on
prior Institutional Class performance, restated to reflect the loads and
expenses of Class B and Class C shares, respectively. Class Y performance
has been restated to reflect the net expenses of the Institutional Class
after taking into effect the fund's current expense cap arrangements. The
growth of $10,000 chart compares the performance of Class A shares, at net
asset value, to the performance of Class A shares including the maximum
sales charge of 5.75%. This chart reflects the performance of Class A Shares
rather than Class Y shares because Class A shares have the highest sales
charge. Prior to 9/12/03, the fund was offered without a sales charge.
/2/Does not include a sales charge.
/3/Includes maximum sales charge of 5.75%.
/4/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C shares performance assumes a 1% CDSC applied when you sell shares
within one year of purchase.
/5/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/6/Before waivers and reimbursements.
/7/After waivers and reimbursements.
4
LOOMIS SAYLES RESEARCH FUND
PORTFOLIO PROFILE
Objective:
Long-term growth of capital
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in equity securities, including common stocks, convertible
securities, and warrants; focuses on stocks of large-capitalization companies,
but may invest in companies of any size
- --------------------------------------------------------------------------------
Fund Inception:
July 31, 2000
- --------------------------------------------------------------------------------
Managers:
Maureen G. Depp, CFA
Brian James, CFA
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A LSRRX
Class B LSCBX
Class C LSCCX
Class Y LISRX
- --------------------------------------------------------------------------------
What You Should Know:
Growth stocks are generally more sensitive to market movements than value
stocks. Foreign securities involve risks not associated with domestic
securities, such as currency fluctuations, differing political and economic
conditions, and different accounting standards. Small-cap stocks are generally
more volatile than the market.
Management Discussion
- --------------------------------------------------------------------------------
Domestic stocks provided moderately positive results for the six months ended
March 31, 2007, although returns were spread over a variety of industry groups
and companies. Loomis Sayles Research Fund's core strategy is to rely on
bottom-up analysis of individual companies, viewed in the context of industry
trends and competitive dynamics. Sector weightings tend to be consistent with
the Standard & Poor's 500 Index.
For the six-month period, the fund's Class A shares returned 6.15%, while the
fund's benchmark, Standard & Poor's 500 Index, returned 7.38%. For the same
period, the average return on the funds in Morningstar's Large Blend category
was 7.88%. Most of the fund's underperformance came from its exposure to the
technology sector, notably communications equipment and communications-oriented
semiconductors.
FINANCIALS AND INDUSTRIALS WERE TOP CONTRIBUTORS
Among financial stocks, we emphasized investment firms and asset managers,
which provided a strong boost to results during a period of robust global
activity in the capital markets. Their positive results more than made up for
weak returns from some financial companies exposed to problems in the subprime
mortgage lending industry in the United States. Top individual performers in
this sector included investment banks Goldman Sachs and Bear Stearns, which
performed particularly well as global economic growth increased earnings of
brokerage companies and investment management firms. We sold Bear Stearns at a
profit in November.
Our heavy exposure to aerospace and defense contractors also supported
performance, as many companies reported strong improvements in their revenues
and profits. As defense, airline and aerospace companies worldwide focused on
expansion and modernization, stocks of several holdings active in these fields
appreciated significantly. Our strongest performers included Precision
Castparts Corp., Northrop Grumman Corp., Boeing Corp. and Lockheed Martin.
Other holdings that performed well during the six-month period included
diversified energy giant ExxonMobil, which enjoyed solid growth throughout its
operations, and telecommunications service provider AT&T, which did well
following its acquisition of BellSouth.
FUND'S TECHNOLOGY AND HEALTHCARE STOCKS DETRACTED
Offsetting the fund's gains in other stocks, we experienced disappointing
results from some producers of communications equipment and
communications-oriented semiconductors. Industry conditions in these areas were
challenging in early 2007. Motorola encountered intensified competition in the
handset phone industry and cut sales forecasts; QUALCOMM faced legal challenges
over revenues from use of its operating system for wireless communications
networks; and Texas Instruments cut its financial targets on slowing demand for
its line of semiconductors used in communications systems. Since we continue to
believe in their long-term prospects, all three stocks remain in the portfolio.
The healthcare sector as a whole underperformed the market during the final
three months of 2006, as investors became concerned that pricing of
prescription medications might face challenges that could slow revenue growth
for drug manufacturers. Among the fund's holdings, the share price of pharmacy
benefit manager Medco Health Solutions dropped abruptly in the final quarter of
2006 amid industry-wide concerns about Wal-Mart's drug pricing-policies. We
eliminated the position in November.
STOCK-PICKING SHOULD BE CRUCIAL DURING 2007
We believe the U.S. stock market has the potential to deliver positive returns
for 2007, despite continuing conflicting signals about the health of the
overall economy. While investor anxieties may resurface, we believe U.S.
corporate earnings should grow at a moderate pace. Media attention may continue
to focus on consumer spending, oil prices and the effects of subprime lending
on the housing industry, but we believe corporate earnings will be the main
driver of stock market performance. We think this environment should support
positive returns, although individual stock selection rather than industry
allocation will continue to be crucial.
5
LOOMIS SAYLES RESEARCH FUND
Investment Results through March 31, 2007
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/1,6/
July 31, 2000 (inception) through March 31, 2007
[CHART]
Net Asset Value/2/ Maximum Sales Charge/3/ S&P 500 Index
------------------ ----------------------- -------------
7/31/2000 $10,000 $ 9,425 $10,000
8/31/2000 10,937 10,308 10,621
9/30/2000 10,538 9,932 10,060
10/31/2000 10,109 9,528 10,018
11/30/2000 8,698 8,198 9,228
12/31/2000 9,039 8,519 9,273
1/31/2001 9,149 8,623 9,602
2/28/2001 8,147 7,679 8,727
3/31/2001 7,646 7,206 8,174
4/30/2001 8,298 7,820 8,809
5/31/2001 8,368 7,887 8,868
6/30/2001 8,227 7,754 8,652
7/31/2001 7,997 7,537 8,567
8/31/2001 7,526 7,093 8,031
9/30/2001 6,865 6,470 7,382
10/31/2001 7,105 6,696 7,523
11/30/2001 7,626 7,187 8,100
12/31/2001 7,793 7,345 8,171
1/31/2002 7,713 7,270 8,052
2/28/2002 7,623 7,185 7,896
3/31/2002 7,903 7,449 8,193
4/30/2002 7,582 7,146 7,697
5/31/2002 7,492 7,061 7,640
6/30/2002 7,001 6,598 7,096
7/31/2002 6,429 6,059 6,543
8/31/2002 6,389 6,022 6,586
9/30/2002 5,707 5,378 5,870
10/31/2002 6,148 5,794 6,387
11/30/2002 6,399 6,031 6,762
12/31/2002 6,079 5,729 6,365
1/31/2003 5,938 5,597 6,198
2/28/2003 5,848 5,512 6,105
3/31/2003 5,928 5,587 6,165
4/30/2003 6,360 5,994 6,672
5/31/2003 6,712 6,326 7,024
6/30/2003 6,803 6,411 7,114
7/31/2003 6,954 6,554 7,239
8/31/2003 7,054 6,649 7,380
9/30/2003 6,934 6,535 7,302
10/31/2003 7,376 6,952 7,715
11/30/2003 7,467 7,037 7,783
12/31/2003 7,760 7,313 8,191
1/31/2004 7,860 7,408 8,341
2/29/2004 8,022 7,560 8,457
3/31/2004 7,951 7,494 8,330
4/30/2004 7,729 7,285 8,199
5/31/2004 7,840 7,389 8,311
6/30/2004 8,031 7,569 8,473
7/31/2004 7,658 7,218 8,193
8/31/2004 7,648 7,209 8,226
9/30/2004 7,850 7,399 8,315
10/31/2004 7,921 7,465 8,442
11/30/2004 8,354 7,874 8,783
12/31/2004 8,671 8,172 9,082
1/31/2005 8,560 8,068 8,861
2/28/2005 8,752 8,248 9,047
3/31/2005 8,689 8,189 8,887
4/30/2005 8,417 7,933 8,719
5/31/2005 8,780 8,275 8,996
6/30/2005 8,951 8,436 9,009
7/31/2005 9,273 8,740 9,344
8/31/2005 9,122 8,598 9,259
9/30/2005 9,294 8,759 9,334
10/31/2005 9,102 8,579 9,178
11/30/2005 9,545 8,997 9,525
12/31/2005 9,572 9,022 9,528
1/31/2006 9,870 9,302 9,781
2/28/2006 9,892 9,323 9,807
3/31/2006 9,977 9,403 9,929
4/30/2006 9,966 9,393 10,063
5/31/2006 9,583 9,032 9,773
6/30/2006 9,562 9,012 9,786
7/31/2006 9,604 9,052 9,847
8/31/2006 9,721 9,162 10,081
9/30/2006 10,008 9,432 10,341
10/31/2006 10,305 9,713 10,678
11/30/2006 10,443 9,843 10,881
12/31/2006 10,514 9,910 11,033
1/31/2007 10,743 10,126 11,200
2/28/2007 10,465 9,863 10,981
3/31/2007 10,622 10,011 11,104
Average Annual Total Returns -- March 31, 2007/6/
SINCE FUND
6 MONTHS 1 YEAR 5 YEARS INCEPTION
CLASS A/1/
Net Asset Value/2/ 6.15% 6.49% 6.09% 0.91%
With Maximum Sales Charge/3/ 0.09 0.39 4.85 0.02
CLASS B/1/
Net Asset Value/2/ 5.72 5.72 5.25 0.09
With CDSC/4/ 1.05 1.05 4.92 0.09
CLASS C/1/
Net Asset Value/2/ 5.72 5.72 5.16 0.02
With CDSC/4/ 4.79 4.79 5.16 0.02
CLASS Y/1/
Net Asset Value/2/ 6.25 6.92 6.45 1.23
- ----------------------------------------------------------------------
SINCE FUND
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS INCEPTION/5/
S&P 500 Index 7.38% 11.83% 6.27% 1.58%
Morningstar Large Blend Fund Avg. 7.88 10.25 6.12 2.35
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.ixisadvisorfunds.com.
Class Y shares, the successor to the fund's Institutional Class, are available
to certain investors, as described in the prospectus.
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
PORTFOLIO FACTS
% of Net Assets as of
FUND COMPOSITION 3/31/07 9/30/06
- --------------------------------------------------------
Common Stocks 99.4 99.7
- --------------------------------------------------------
Short-Term Investments and Other 0.6 0.3
- --------------------------------------------------------
% of Net Assets as of
FIVE LARGEST HOLDINGS 3/31/07 9/30/06
- --------------------------------------------------------
ExxonMobil Corp. 4.0 4.6
- --------------------------------------------------------
AT&T, Inc. 3.7 1.1
- --------------------------------------------------------
American International Group, Inc. 2.7 0.0
- --------------------------------------------------------
Bank of America Corp. 2.6 2.9
- --------------------------------------------------------
Proctor & Gamble Co. (The) 2.4 2.6
- --------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 3/31/07 9/30/06
- --------------------------------------------------------
Oil, Gas & Consumable Fuels 7.9 7.6
- --------------------------------------------------------
Insurance 6.7 5.8
- --------------------------------------------------------
Aerospace & Defense 6.1 6.0
- --------------------------------------------------------
Capital Markets 5.7 5.9
- --------------------------------------------------------
Beverages 5.3 5.5
- --------------------------------------------------------
Portfolio holdings and asset allocations will vary.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/7/ Net Expense Ratio/8/
- -------------------------------------------------------
A 1.68 1.25
- -------------------------------------------------------
B 2.33 2.00
- -------------------------------------------------------
C 2.37 2.00
- -------------------------------------------------------
Y 1.26 0.85
- -------------------------------------------------------
NOTES TO CHARTS
See page 7 for a description of the indexes.
/1/Returns shown in the chart include performance of the fund's Retail Class
shares, which were converted to Class A shares on 9/12/03. The prior Retail
Class performance has been restated to reflect expenses of Class A shares.
For periods before the inception of Retail Class shares (11/30/01),
performance shown for Class A has been based on the performance of the
fund's Institutional Class shares, adjusted to reflect the higher expenses
paid by Class A shares. The restatement of the fund's performance to reflect
Class A expenses is based on the net expenses of the Class after taking into
effect the fund's current expense cap arrangements. For periods prior to the
inception of Class B and Class C shares (9/12/03), performance is based on
prior Institutional Class performance, restated to reflect the loads and
expenses of Class B and Class C shares, respectively. Class Y performance
has been restated to reflect the net expenses of the Institutional Class
after taking into effect the fund's current expense cap arrangements. The
growth of $10,000 chart compares the performance of Class A shares, at net
asset value, to the performance of Class A shares including the maximum
sales charge of 5.75%. This chart reflects the performance of Class A Shares
rather than Class Y shares because Class A shares have the highest sales
charge. Prior to 9/12/03, the fund was offered without a sales charge.
/2/Does not include a sales charge.
/3/Includes maximum sales charge of 5.75%.
/4/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C shares performance assumes a 1% CDSC applied when you sell shares
within one year of purchase.
/5/The since-inception performance comparisons shown are calculated from 8/1/00.
/6/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/7/Before waivers and reimbursements.
/8/After waivers and reimbursements.
6
ADDITIONAL INFORMATION
The views expressed in this report reflect those of the portfolio managers as
of the dates indicated. The managers' views are subject to change at any time
without notice based on changes in market or other conditions. References to
specific securities or industries should not be regarded as investment advice.
Because these funds are actively managed, there is no assurance that they will
continue to invest in the securities or industries mentioned.
For more complete information on any IXIS Advisor Fund, contact your financial
professional or call IXIS Advisor Funds and ask for a free prospectus, which
contains more complete information including charges and other ongoing
expenses. Investors should consider a fund's objective, risks and expenses
carefully before investing. This and other fund information can be found in the
prospectus. Please read the prospectus carefully before investing.
INDEX/AVERAGE DESCRIPTIONS:
Citigroup World Government Bond Index ("Citigroup WGBI") is an unmanaged index
that measures the most significant and liquid government bond indices located
around the world with a rating of at least investment grade.
Morgan Stanley Capital International World Index ("MSCI World") is an unmanaged
index that measures global developed market equity performance.
Russell 1000 Growth Index is an unmanaged index measuring the performance of
those Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values.
Standard & Poor's 500 Index ("S&P 500") is an unmanaged index of U.S. common
stock performance.
Morningstar Fund Averages are the average performance without sales charges of
funds with similar investment objectives, as calculated by Morningstar, Inc.
PROXY VOTING INFORMATION
A description of the funds' proxy voting policies and procedures is available
without charge, upon request, by calling IXIS Advisor Funds at 800-225-5478; on
the funds' website at www.ixisadvisorfunds.com; and on the Securities and
Exchange Commission's website at www.sec.gov. Information regarding how the
funds voted proxies relating to portfolio securities during the 12-month period
ended June 30, 2006 is available from the funds' website and the SEC's website.
QUARTERLY PORTFOLIO SCHEDULES
The funds will file a complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The funds' Forms
N-Q are available on the SEC's website at www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
7
UNDERSTANDING FUND EXPENSES
As a mutual fund shareholder, you incur different types of costs: transaction
costs, including sales charges (loads) on purchases and contingent deferred
sales charges on redemptions; redemption fees; certain exchange fees; and
minimum account fee charges; and ongoing costs, including management fees,
distribution and/or service fees (12b-1 fees), and other fund expenses. In
addition, each fund assesses a minimum balance fee of $20 on an annual basis
for accounts that fall below the required minimum to establish an account
(certain exceptions may apply). These costs are described in more detail in the
funds' prospectus. The examples below are intended to help you understand the
ongoing costs of investing in the funds and help you compare these with the
ongoing costs of investing in other mutual funds.
The first line in the table for each Class shows the actual amount of fund
expenses you would have paid on a $1,000 investment in the fund from October 1,
2006 through March 31, 2007. It also shows how much a $1,000 investment would
be worth at the close of the period, assuming actual fund returns and expenses.
To estimate the expenses you paid over the period, simply divide your account
value by $1,000 (for example $8,600 account value divided by $1,000 = 8.6) and
multiply the result by the number in the Expenses Paid During the Period row as
shown below for your class.
The second line in the table for each Class provides information about
hypothetical account values and hypothetical expenses based on the fund's
actual expense ratios and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid on your investment for the period. You may use
this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs. Therefore, the second line in the table of each
fund is useful in comparing ongoing costs only, and will not help you determine
the relative costs of owning different funds. If transaction costs were
included, total costs would be higher.
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES GLOBAL MARKETS FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,115.10 $6.59
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.70 $6.29
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,110.30 $10.52
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,014.96 $10.05
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,116.60 $5.28
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement): 1.25%, 2.00% and 1.00% for Class A, C and Y,
respectively, multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half-year, divided
by 365 (to reflect the half-year period).
8
UNDERSTANDING FUND EXPENSES
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES GROWTH FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,065.10 $5.77
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.35 $5.64
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,061.40 $9.51
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.71 $9.30
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,061.30 $9.61
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.61 $9.40
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,067.40 $3.45
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.59 $3.38
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement): 1.12%, 1.85%, 1.87% and 0.67% for Class A, B, C and Y,
respectively, multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half-year, divided
by 365 (to reflect the half-year).
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES RESEARCH FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,061.50 $6.42
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.70 $6.29
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,057.20 $10.26
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,014.96 $10.05
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,057.20 $10.26
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,014.96 $10.05
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,062.50 $4.37
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.69 $4.28
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement): 1.25%, 2.00%, 2.00% and 0.85% for Class A, B, C and Y,
respectively, multiplied by the average account value over the period,
multiplied by the number of days in the most recent fiscal half-year, divided
by 365 (to reflect the half-year period).
9
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------
Bonds and Notes -- 28.3% of Total Net Assets
Non-Convertible Bonds -- 26.3%
Argentina -- 0.3%
$ 656,655 Republic of Argentina,
2.000%, 9/30/2014, (ARS) $ 184,022
82,500 Republic of Argentina,
5.475%, 8/03/2012(b) 78,342
---------------
262,364
---------------
Austria -- 0.5%
60,000,000 Oesterreichische Kontrollbank AG,
1.800%, 3/22/2010, (JPY) 521,874
---------------
Brazil -- 0.2%
170,000 JBS SA,
10.500%, 8/04/2016, 144A 193,375
---------------
Canada -- 0.8%
10,000 Abitibi-Consolidated, Inc.,
7.400%, 4/01/2018 8,550
15,000 Abitibi-Consolidated, Inc.,
7.500%, 4/01/2028 12,450
30,000 Abitibi-Consolidated, Inc.,
8.850%, 8/01/2030 26,700
195,000 Canadian Government Bond,
5.250%, 6/01/2013, (CAD) 179,832
25,000 Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, (CAD), 144A 21,963
120,000 Government of Quebec,
5.625%, 6/21/2011, (EUR) 168,885
25,000 Kinder Morgan Finance,
5.700%, 1/05/2016 23,440
20,000 Kinder Morgan Finance,
6.400%, 1/05/2036 17,909
50,000 Nortel Networks Corp.,
6.875%, 9/01/2023 46,500
165,000 Rogers Wireless, Inc.,
7.625%, 12/15/2011, (CAD) 158,984
180,000 Shaw Communications, Inc.,
6.150%, 5/09/2016, (CAD) 161,183
---------------
826,396
---------------
Cayman Island -- 0.2%
100,000 LPG International, Inc.,
7.250%, 12/20/2015 103,000
60,000 Vale Overseas Ltd.,
6.875%, 11/21/2036 61,961
---------------
164,961
---------------
Chile -- 0.1%
100,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
7.875%, 2/01/2027(c) 113,359
---------------
Colombia -- 0.6%
40,000 Republic of Colombia,
8.125%, 5/21/2024(c) 46,600
94,000,000 Republic of Colombia,
11.750%, 3/01/2010, (COP) 45,433
1,055,000,000 Republic of Colombia,
12.000%, 10/22/2015, (COP) 554,502
---------------
646,535
---------------
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------
Denmark -- 0.1%
$ 525,000 Kingdom of Denmark,
4.000%, 8/15/2008, (DKK) $ 93,954
---------------
France -- 0.2%
1,665,190,000 BNP Paribas SA, Zero Coupon,
6/13/2011, (IDR), 144A 122,810
75,000 France Telecom SA, Series EMTN,
3.625%, 10/14/2015, (EUR) 92,628
---------------
215,438
---------------
Germany -- 1.5%
825,000 Federal Republic of Germany,
3.750%, 7/04/2013, (EUR) 1,085,126
165,000 Federal Republic of Germany,
4.000%, 1/04/2037, (EUR) 211,431
10,000 Federal Republic of Germany,
5.000%, 1/04/2012, (EUR) 13,918
2,000,000 Kreditanstalt fuer Wiederaufbau,
1.750%, 3/23/2010, (JPY) 17,371
29,000,000 Kreditanstalt fuer Wiederaufbau,
2.050%, 9/21/2009, (JPY) 252,915
---------------
1,580,761
---------------
Indonesia -- 0.1%
125,000 Republic of Indonesia,
6.875%, 3/09/2017, 144A 131,875
---------------
Ireland -- 1.5%
50,000,000 Depfa ACS Bank,
0.750%, 9/22/2008, (JPY) 424,534
100,000 Depfa ACS Bank,
4.875%, 5/21/2019, (EUR) 140,036
50,000 Elan Financial Plc,
7.750%, 11/15/2011 49,125
700,000 Republic of Ireland,
4.600%, 4/18/2016, (EUR) 971,321
---------------
1,585,016
---------------
Japan -- 0.6%
70,000,000 Japan Government,
0.200%, 9/20/2007, (JPY) 592,610
---------------
Korea -- 0.1%
150,000 Hanarotelecom, Inc.,
7.000%, 2/01/2012, 144A 152,062
---------------
Malaysia -- 0.1%
100,000 Ranhill Labuan Ltd.,
12.500%, 10/26/2011, 144A(c) 99,170
---------------
Mexico -- 0.9%
125,000 America Movil SA de CV,
5.500%, 3/01/2014 123,652
1,000,000 America Movil SA de CV,
9.000%, 1/15/2016, (MXN) 97,135
165,000 Desarrolladora Homex SA,
7.500%, 9/28/2015 170,280
10,000(++) Mexican Fixed Rate Bonds,
9.500%, 12/18/2014, (MXN) 100,750
35,000(++) Mexican Fixed Rate Bonds, Series M-10,
8.000%, 12/17/2015, (MXN) 325,482
See accompanying notes to financial statements.
10
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------
Mexico -- continued
$ 10,000(++) Mexican Fixed Rate Bonds, Series MI-10,
9.000%, 12/20/2012, (MXN) $ 96,917
---------------
914,216
---------------
Netherlands -- 0.4%
50,000 Bite Finance International,
7.385%, 3/15/2014, (EUR), 144A(b) 67,794
100,000 Excelcomindo Finance Co.,
7.125%, 1/18/2013, 144A 101,000
90,000 Kingdom of Netherlands,
5.000%, 7/15/2011, (EUR) 124,717
10,000,000 Rabobank Nederland, Series EMTN
13.500%, 1/28/2008, (ISK), 144A 151,569
---------------
445,080
---------------
Norway -- 0.4%
1,560,000 Kingdom of Norway,
5.000%, 5/15/2015, (NOK) 263,141
745,000 Kingdom of Norway,
5.500%, 5/15/2009, (NOK) 124,389
350,000 Kingdom of Norway,
6.000%, 5/16/2011, (NOK) 60,483
---------------
448,013
---------------
Peru -- 0.3%
272,600 Republic of Peru,
6.125%, 3/07/2017(b) 271,918
---------------
Singapore -- 0.3%
495,000 Government of Singapore,
4.625%, 7/01/2010, (SGD) 346,669
---------------
South Africa -- 0.6%
235,000 Republic of South Africa,
4.500%, 4/05/2016, (EUR) 307,113
50,000 Republic of South Africa,
5.250%, 5/16/2013, (EUR) 68,596
1,550,000 Republic of South Africa,
13.000%, 8/31/2010, (ZAR) 243,530
---------------
619,239
---------------
Spain -- 0.1%
100,000 Telefonica Emisones SAU,
6.421%, 6/20/2016 104,372
---------------
Supranational -- 0.7%
370,085 European Investment Bank, Zero Coupon,
9/12/2008, (BRL), 144A 153,502
4,000,000 Inter-American Development Bank,
1.900%, 7/08/2009, (JPY) 34,734
67,000,000 International Bank for Reconstruction & Development,
2.000%, 2/18/2008, (JPY) 574,781
---------------
763,017
---------------
Thailand -- 0.2%
160,000 Advance Agro Public Co., Ltd.,
11.000%, 12/19/2012, 144A(c) 170,800
---------------
United Kingdom -- 0.9%
60,000 BSKYB Finance UK Plc,
5.750%, 10/20/2017, (GBP) 114,444
1,229,424,500 JPMorgan Chase London, Zero Coupon,
10/21/2010, (IDR), 144A 98,037
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------
United Kingdom -- continued
$ 80,000 Network Rail MTN Finance PLC, Series EMTN
4.875%, 3/06/2009, (GBP) $ 155,216
35,000 United Kingdom Treasury,
4.250%, 3/07/2036, (GBP) 66,912
80,000 United Kingdom Treasury,
5.000%, 3/07/2012, (GBP) 155,932
165,000 United Kingdom Treasury,
6.250%, 11/25/2010, (GBP) 334,840
---------------
925,381
---------------
United States -- 14.2%
50,000 Albertson's, Inc.,
6.625%, 6/01/2028(c) 45,778
500,000 Albertson's, Inc.,
7.450%, 8/01/2029 491,866
10,000 American Standard, Inc.,
8.250%, 6/01/2009, (GBP) 20,487
31,000 Amkor Technology, Inc.,
10.500%, 5/01/2009(c) 31,078
100,000 Anadarko Petroleum Corp.,
5.950%, 9/15/2016 100,211
75,000 Anadarko Petroleum Corp.,
6.450%, 9/15/2036 74,216
75,000 Arrow Electronics, Inc.,
6.875%, 7/01/2013 78,861
100,000 ASIF Global Financing XXVII,
2.380%, 2/26/2009, (SGD), 144A 64,976
42,865 Atlas Air, Inc., Series B,
7.680%, 1/02/2014(e) 47,152
145,000 Avnet, Inc.,
6.000%, 9/01/2015 143,766
110,000,000 Barclays Financial LLC,
4.060%, 9/16/2010, (KRW), 144A 110,830
220,000,000 Barclays Financial LLC,
4.460%, 9/23/2010, (KRW), 144A 233,236
349,720,000 Barclays Financial LLC,
4.670%, 3/23/2009, (KRW), 144A(b) 371,730
310,000 Borden, Inc.,
7.875%, 2/15/2023(c) 264,275
410,000 Borden, Inc.,
8.375%, 4/15/2016 381,300
15,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017 14,813
70,000 Chesapeake Energy Corp.,
6.875%, 1/15/2016 70,875
75,000 Chesapeake Energy Corp.,
6.875%, 11/15/2020 74,625
120,000 Citi Credit Card Issuance Trust,
5.375%, 4/10/2013, (EUR) 166,417
182,545 Continental Airlines, Inc., Series 1999-1C,
6.954%, 8/02/2009 181,632
160,000 Cummins, Inc.,
7.125%, 3/01/2028 165,926
50,000 Dillard's, Inc.,
6.625%, 1/15/2018(c) 48,563
50,000 Dillard's, Inc.,
7.000%, 12/01/2028 45,500
19,000 ESI Tractebel Acquisition Corp., Series B,
7.990%, 12/30/2011 19,415
See accompanying notes to financial statements.
11
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------
United States -- continued
$ 200,000 Federal Home Loan Mortgage Corp.,
5.125%, 1/15/2012, (EUR) $ 277,915
30,000,000 Federal National Mortgage Association,
2.125%, 10/09/2007, (JPY) 256,589
200,000 Federal National Mortgage Association,
2.290%, 2/19/2009, (SGD) 129,988
150,000 Foot Locker, Inc.,
8.500%, 1/15/2022 153,750
150,000 Ford Motor Co.,
6.625%, 10/01/2028 108,375
10,000 Ford Motor Co.,
6.625%, 2/15/2028(c) 7,225
15,000 Ford Motor Co.,
7.125%, 11/15/2025 11,288
195,000 Ford Motor Co.,
7.450%, 7/16/2031(c) 150,881
105,000 Ford Motor Credit Co.,
8.000%, 12/15/2016 101,036
25,000,000 General Electric Capital Corp., Series EMTN,
0.550%, 10/14/2008, (JPY) 211,212
5,000 General Motors Corp.,
8.375%, 7/15/2033(c) 4,488
50,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 48,250
35,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 34,650
160,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 160,800
75,000 GMAC LLC,
6.310%, 7/16/2007(b) 75,000
150,000 Goldman Sachs Group, Inc.,
4.185%, 5/23/2016, (EUR)(b) 200,050
25,000 GTE Corp.,
6.940%, 4/15/2028 26,366
225,000 HCA, Inc.,
7.050%, 12/01/2027 178,489
50,000 HCA, Inc.,
7.190%, 11/15/2015 44,103
250,000 HCA, Inc.,
7.500%, 11/06/2033 213,125
100,000 HCA, Inc.,
7.580%, 9/15/2025 84,408
260,000 Hilcorp Energy I LP,
7.750%, 11/01/2015, 144A 255,450
960,000 HSBC Bank USA, Zero Coupon,
4/18/2012, (MYR), 144A 234,898
100,000 HSBC Bank USA,
3.310%, 8/25/2010, 144A 109,510
25,000 J.C. Penney Co., Inc.,
7.125%, 11/15/2023 27,402
275,000 K. Hovnanian Enterprises, Inc.,
6.250%, 1/15/2016 235,812
250,000 Kellwood Co.,
7.625%, 10/15/2017 231,374
10,000 Kinder Morgan, Inc., Senior Note,
5.150%, 3/01/2015 9,171
55,000 Lennar Corp., Series B,
5.600%, 5/31/2015 51,733
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------
United States -- continued
$ 55,000 Lennar Corp., Series B,
6.500%, 4/15/2016 $ 54,080
155,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 139,887
130,000 MBNA Credit Card Master Note Trust,
4.150%, 4/19/2010, (EUR) 172,832
500,000 Merrill Lynch & Co., Inc.,
10.710%, 3/08/2017, (BRL) 243,411
85,000 Morgan Stanley,
5.375%, 11/14/2013, (GBP) 162,407
100,000 Mosaic Global Holdings, Inc.,
7.375%, 8/01/2018 99,500
70,000 News America, Inc.,
6.150%, 3/01/2037, 144A 66,687
10,000 Nextel Communications, Inc., Series E,
6.875%, 10/31/2013 10,245
30,000 Nextel Communications, Inc., Series F,
5.950%, 3/15/2014 29,514
250,000 NGC Corporation Capital Trust I, Series B,
8.316%, 6/01/2027(c) 240,000
135,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 129,937
1,000,000 NRG Energy, Inc.,
7.375%, 2/01/2016 1,027,500
20,000 Owens Corning, Inc.,
6.500%, 12/01/2016, 144A 20,428
35,000 Owens Corning, Inc.,
7.000%, 12/01/2036, 144A 34,906
40,000 Owens-Illinois, Inc.,
7.800%, 5/15/2018 40,900
50,000 Pulte Homes, Inc.,
5.200%, 2/15/2015(c) 46,196
540,000 Pulte Homes, Inc.,
6.000%, 2/15/2035(c) 481,652
695,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 645,903
140,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 131,775
205,000 Qwest Capital Funding, Inc.,
6.875%, 7/15/2028 193,725
30,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 29,775
45,000 Qwest Corp.,
6.875%, 9/15/2033(c) 43,425
5,000 Qwest Corp.,
7.250%, 9/15/2025 5,156
14,000 Sprint Capital Corp.,
6.875%, 11/15/2028 13,942
26,000 Sprint Nextel Corp.,
6.000%, 12/01/2016 25,587
750,000 Tennessee Gas Pipeline Co.,
7.000%, 10/15/2028(c) 802,999
10,000 Time Warner, Inc.,
6.500%, 11/15/2036 9,972
395,000 Time Warner, Inc.,
6.625%, 5/15/2029 399,738
160,000 Time Warner, Inc.,
6.950%, 1/15/2028 167,543
See accompanying notes to financial statements.
12
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------------
United States -- continued
$ 115,000 Time Warner, Inc.,
7.625%, 4/15/2031 $ 129,240
75,000 Time Warner, Inc.,
7.700%, 5/01/2032 85,030
105,000 Toll Brothers Finance Corp.,
5.150%, 5/15/2015(c) 94,932
375,000 Toys R Us, Inc.,
7.375%, 10/15/2018 322,500
200,000 Transcontinental Gas Pipe Line Corp.,
6.400%, 4/15/2016 206,250
183,553 U.S. Treasury Bonds,
2.000%, 1/15/2026(c) 174,447
50,000 U.S. Treasury Bonds,
5.375%, 2/15/2031(c) 53,305
885,000 U.S. Treasury Notes,
4.500%, 2/15/2016(c) 876,012
50,000 USG Corp.,
6.300%, 11/15/2016, 144A 50,354
90,000 Verizon Communications,
5.850%, 9/15/2035 85,111
5,000 Verizon Maryland, Inc.,
5.125%, 6/15/2033 4,172
250,000 Verizon New York, Inc., Series B,
7.375%, 4/01/2032 264,327
70,000 Viacom, Inc., Class B,
6.875%, 4/30/2036 70,559
100,000 Williams Cos., Inc.,
7.500%, 1/15/2031 106,000
20,000 Xerox Corp.,
7.200%, 4/01/2016 21,081
---------------
14,893,808
---------------
Uruguay -- 0.2%
2,420,000 Republic of Uruguay,
4.250%, 4/05/2027, (UYU) 101,551
100,000 Republic of Uruguay,
8.000%, 11/18/2022 113,500
---------------
215,051
---------------
Venezuela -- 0.2%
130,000 Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A 130,000
125,000 Petrozuata Finance, Inc.,
8.220%, 4/01/2017, 144A 125,625
---------------
255,625
---------------
Total Non-Convertible Bonds (Identified Cost $26,725,974) 27,552,939
---------------
Convertible Bonds -- 2.0%
United States -- 2.0%
435,000 Bristol-Myers Squibb Co.,
4.855%, 9/15/2023(b) 438,262
95,000 Builders Transportation, Inc.,
8.000%, 8/15/2005(d) --
250,000 Enzon Pharmaceuticals, Inc.,
4.500%, 7/01/2008 243,438
140,000 Level 3 Communications, Inc.,
2.875%, 7/15/2010 156,450
25,000 Level 3 Communications, Inc.,
6.000%, 9/15/2009 24,156
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------------------
United States -- continued
$ 140,000 Level 3 Communications, Inc.,
6.000%, 3/15/2010 $ 134,400
500,000 Regeneron Pharmaceuticals, Inc.,
5.500%, 10/17/2008 528,750
500,000 Valeant Pharmaceuticals International,
3.000%, 8/16/2010 457,500
80,000 Valeant Pharmaceuticals International,
4.000%, 11/15/2013 72,900
---------------
Total Convertible Bonds (Identified Cost $2,043,385) 2,055,856
---------------
Total Bonds and Notes (Identified Cost $28,769,359) 29,608,795
---------------
Shares
- -------------------------------------------------------------------------------------
Common Stocks -- 66.7%
Argentina -- 0.6%
14,450 Tenaris SA ADR 663,255
---------------
Canada -- 1.0%
7,390 Research In Motion Ltd.(e) 1,008,661
---------------
China -- 1.6%
634,000 China Overseas Land & Investment Ltd. 795,067
10,800 Focus Media Holding Ltd., ADR(e) 847,368
---------------
1,642,435
---------------
Greece -- 2.1%
62,381 Piraeus Bank S.A. 2,162,626
---------------
Hong Kong -- 2.3%
150,600 China Mobile Ltd. 1,355,594
94,500 Esprit Holdings Ltd. 1,103,121
---------------
2,458,715
---------------
India -- 1.7%
101,690 Bharti Airtel Ltd.(e) 1,772,274
---------------
Ireland -- 1.6%
78,442 Anglo Irish Bank Corp., Plc 1,678,296
---------------
Japan -- 5.2%
16,100 IBIDEN Co. Ltd.(c) 831,455
5,400 Nintendo Co. Ltd.(c) 1,566,874
14,400 Sony Corp. ADR 727,056
28,000 Sumitomo Realty & Development Co. Ltd.(c) 1,057,565
19,000 Toyota Motor Corp.(c) 1,216,777
---------------
5,399,727
---------------
Mexico -- 2.2%
934,425 America Movil SA de CV, Series L(c) 2,243,314
---------------
Netherlands -- 3.0%
28,400 Heineken NV 1,484,909
20,500 Randstad Holding NV(c) 1,592,831
---------------
3,077,740
---------------
Singapore -- 2.0%
50,000 DBS Group Holdings Ltd. 703,665
230,000 Keppel Land Ltd.(c) 1,432,171
---------------
2,135,836
---------------
Sweden -- 0.8%
23,275 Telefonaktiebolaget LM Ericsson ADR 863,270
---------------
See accompanying notes to financial statements.
13
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Shares Description Value (+)
- ----------------------------------------------------------------------------------------------
Switzerland -- 7.0%
127,694 ABB Ltd. $ 2,202,670
5,150 Actelion Ltd.(e) 1,200,268
6,615 Julius Baer Holding Ltd. 906,591
2,956 Nobel Biocare Holding AG 1,078,214
13,226 Phonak Holding AG 1,015,442
5,113 Roche Holding AG(c) 908,254
---------------
7,311,439
---------------
United Kingdom -- 3.3%
140,300 Capita Group Plc 1,886,623
143,775 Man Group Plc 1,571,955
---------------
3,458,578
---------------
United States -- 32.3%
26,563 Adobe Systems, Inc.(e) 1,107,677
14,890 Akamai Technologies, Inc.(e) 743,309
13,630 Apple, Inc.(e) 1,266,363
24,926 AT&T, Inc. 982,832
14,705 Bank of America Corp. 750,249
36,250 CB Richard Ellis Group, Inc., Class A(c)(e) 1,239,025
3,031 Chicago Mercantile Exchange Holdings, Inc.(c) 1,613,886
68,075 Cisco Systems, Inc.(e) 1,737,955
37,845 Corning, Inc.(e) 860,595
41,583 CVS/Caremark Corp. 1,419,644
11,775 ExxonMobil Corp. 888,424
6,800 Franklin Resources, Inc. 821,644
17,605 Freeport-McMoRan Copper & Gold, Inc. 1,165,275
8,728 Genentech, Inc.(e) 716,743
11,435 Gilead Sciences, Inc.(e) 874,777
9,500 Goldman Sachs Group, Inc. 1,962,985
4,050 Google, Inc. Class A(e) 1,855,548
23,750 Hewlett-Packard Co. 953,325
7,553 IntercontinentalExchange, Inc.(e) 923,052
13,045 International Business Machines Corp. 1,229,622
10,025 Las Vegas Sands Corp.(c)(e) 868,265
18,250 McDonald's Corp. 822,163
40,041 Network Appliance, Inc.(e) 1,462,297
45,575 News Corp.(c) 1,115,220
7,610 NYSE Group, Inc.(c)(e) 713,438
29,010 Owens-Illinois, Inc.(e) 747,588
18,575 Precision Castparts Corp. 1,932,729
11,400 Prudential Financial, Inc.(c) 1,028,964
31,093 QUALCOMM, Inc. 1,326,427
9,900 Schlumberger Ltd. 684,090
---------------
33,814,111
---------------
Total Common Stocks (Identified Cost $57,635,474) 69,690,277
---------------
Principal
Amount (++)
- ----------------------------------------------------------------------------------------------
Short-Term Investments -- 20.5%
$ 4,560,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/07 at 4.250% to be repurchased at
$4,561,615 on 4/02/07 collateralized by $4,695,000 U.S.
Treasury Bill, 4.890% due 5/31/07 with a value of $4,653,919,
including accrued interest (Note 2g of Notes to Financial
Statements) 4,560,000
---------------
Shares Description Value (+)
- -----------------------------------------------------------------------------------------------------
Short-Term Investments -- continued
16,901,313 State Street Securities Lending Quality Trust(f) $ 16,901,313
---------------
Total Short-Term Investments (Identified Cost $21,461,313) 21,461,313
---------------
Total Investments -- 115.5%
(Identified Cost $107,866,146)(a) 120,760,385
Other assets less liabilities -- (15.5)% (16,174,983)
---------------
Total Net Assets -- 100.0% $ 104,585,402
===============
(++) Principal Amount stated in U.S. Dollars unless otherwise stated.
(+) See Note 2a of Notes to Financial Statements.
(++) Amount shown represents units. One unit represents a principal
amount of 100.
(a) Federal Tax Information (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales, gains realized from
passive foreign investment companies and interest adjustments on
defaulted bonds. Amortization of premium on debt securities is
excluded for tax purposes.):
At March 31, 2007, the net unrealized appreciation on investments
based on a cost of $107,937,471 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 $ 13,686,488
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (863,574)
---------------
Net unrealized appreciation $ 12,822,914
===============
(b) Variable rate security. Rate as of March 31, 2007 is disclosed.
(c) All or a portion of this security was on loan at March 31, 2007.
(d) Non-income producing security due to default or bankruptcy filing.
(e) Non-income producing security.
(f) Represents investments of security lending collateral.
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers. At March 31, 2007, the total value of these securities amounted to
$3,272,587 or 3.13% of total net assets.
ADR An American Depositary Receipt is a certificate issued by a custodian bank representing
the right to receive securities of the foreign issuer described. The values of ADRs are
significantly influenced by trading on exchanges not located in the United States.
See accompanying notes to financial statements.
14
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Key to Abbreviations:
ARS Argentinean Peso
BRL Brazilian Real
CAD Canadian Dollar
COP Colombian Peso
DKK Danish Krone
EUR Euro
GBP British Pound
IDR Indonesian Rupiah
ISK Iceland Krona
JPY Japanese Yen
KRW South Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NOK Norwegian Krone
SGD Singapore Dollar
UYU Uruguayan Peso
ZAR South African Rand
Holdings at March 31, 2007 as a Percentage of Net Assets (Unaudited)
Sovereigns 7.7%
Capital Markets 7.2
Communications Equipment 5.6
Computers & Peripherals 4.7
Diversified Financial Services 3.8
Wireless Telecommunication Services 3.5
Commercial Services & Supplies 3.4
Pharmaceuticals 2.7
Biotechnology 2.6
Diversified Telecommunications Services 2.6
Software 2.6
Internet Software & Services 2.5
Real Estate 2.3
Electrical Equipment 2.1
Healthcare Equipment & Supplies 2.0
Media 2.0
Other, less than 2% each 37.7
See accompanying notes to financial statements.
15
LOOMIS SAYLES GROWTH FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Shares Description Value (+)
- --------------------------------------------------------------------------
Common Stocks -- 97.5% of Total Net Assets
Aerospace & Defense -- 4.1%
63,679 Boeing Co. $ 5,661,700
98,055 Precision Castparts Corp. 10,202,623
---------------
15,864,323
---------------
Beverages -- 1.4%
82,580 PepsiCo, Inc. 5,248,785
---------------
Biotechnology -- 5.4%
107,916 Celgene Corp.(b)(c) 5,661,273
84,403 Genentech, Inc.(c) 6,931,175
108,130 Gilead Sciences, Inc.(c) 8,271,945
---------------
20,864,393
---------------
Capital Markets -- 8.3%
40,084 BlackRock, Inc.(b) 6,265,530
58,955 Goldman Sachs Group, Inc. 12,181,872
112,686 Morgan Stanley 8,875,149
97,172 T. Rowe Price Group, Inc. 4,585,547
---------------
31,908,098
---------------
Chemicals -- 1.0%
69,786 Monsanto Co. 3,835,439
---------------
Commercial Services & Supplies -- 1.1%
88,025 Monster Worldwide, Inc.(c) 4,169,744
---------------
Communications Equipment -- 7.7%
574,435 Cisco Systems, Inc.(c) 14,665,325
243,767 Corning, Inc.(c) 5,543,262
225,653 QUALCOMM, Inc. 9,626,357
---------------
29,834,944
---------------
Computers & Peripherals -- 10.0%
154,712 Apple, Inc.(c) 14,374,292
335,634 EMC Corp.(c) 4,648,531
116,046 International Business Machines Corp. 10,938,496
236,184 Network Appliance, Inc.(c) 8,625,439
---------------
38,586,758
---------------
Diversified Financial Services -- 4.4%
14,398 Chicago Mercantile Exchange Holdings, Inc. 7,666,359
44,527 IntercontinentalExchange, Inc.(c) 5,441,644
39,573 NYSE Group, Inc.(b)(c) 3,709,969
---------------
16,817,972
---------------
Food & Staples Retailing -- 2.6%
296,499 CVS/Caremark Corp.(b) 10,122,476
---------------
Healthcare Equipment & Supplies -- 4.1%
98,893 Baxter International, Inc. 5,208,695
95,541 St. Jude Medical, Inc.(c) 3,593,297
104,054 Stryker Corp. 6,900,861
---------------
15,702,853
---------------
Hotels, Restaurants & Leisure -- 1.7%
75,799 Las Vegas Sands Corp.(c) 6,564,951
---------------
Insurance -- 1.4%
79,059 American International Group, Inc. 5,314,346
---------------
Internet Software & Services -- 8.3%
121,351 Akamai Technologies, Inc.(b)(c) 6,057,842
162,304 eBay, Inc.(c) 5,380,378
34,684 Google, Inc., Class A(c) 15,890,821
149,875 Yahoo!, Inc.(c) 4,689,589
---------------
32,018,630
---------------
Shares Description Value (+)
- -------------------------------------------------------------------------------------------
IT Services -- 4.4%
75,556 Alliance Data Systems Corp.(c) $ 4,655,761
82,923 Cognizant Technology Solutions Corp., Class A(b)(c) 7,319,613
48,191 MasterCard, Inc., Class A(b) 5,119,812
---------------
17,095,186
---------------
Life Science Tools & Services -- 1.4%
115,121 Thermo Fisher Scientific, Inc.(c) 5,381,907
---------------
Media -- 6.9%
305,508 Comcast Corp., Class A(c) 7,927,932
112,567 McGraw-Hill Cos., Inc. (The) 7,078,213
262,701 News Corp., Class A 6,073,647
165,948 Walt Disney Co. (The) 5,713,590
---------------
26,793,382
---------------
Metals & Mining -- 3.5%
54,754 Allegheny Technologies, Inc. 5,841,704
115,827 Freeport-McMoRan Copper & Gold, Inc.(b) 7,666,589
---------------
13,508,293
---------------
Multiline Retail -- 2.4%
56,056 Kohl's Corp.(c) 4,294,450
95,723 Nordstrom, Inc. 5,067,576
---------------
9,362,026
---------------
Oil, Gas & Consumable Fuels -- 1.8%
127,147 XTO Energy, Inc. 6,968,927
---------------
Pharmaceuticals -- 2.6%
177,620 Abbott Laboratories 9,911,196
---------------
Real Estate Management & Development -- 2.5%
287,299 CB Richard Ellis Group, Inc., Class A(c) 9,819,880
---------------
Semiconductors & Semiconductor Equipment -- 1.7%
106,445 MEMC Electronic Materials, Inc.(c) 6,448,438
---------------
Software -- 4.8%
153,301 Adobe Systems, Inc.(c) 6,392,652
263,716 Microsoft Corp. 7,349,765
273,159 Oracle Corp.(c) 4,952,372
---------------
18,694,789
---------------
Specialty Retail -- 0.8%
63,146 Best Buy Co., Inc. 3,076,473
---------------
Textiles Apparel & Luxury Goods -- 3.2%
154,262 Coach, Inc.(c) 7,720,813
51,981 Polo Ralph Lauren Corp. 4,582,125
---------------
12,302,938
---------------
Total Common Stocks (Identified Cost $339,280,130) 376,217,147
---------------
Principal
Amount
- -------------------------------------------------------------------------------------------
Short-Term Investments -- 13.6%
$ 5,844,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/07 at 4.250% to be repurchased at
$5,846,070 on 4/02/07 collateralized by $6,015,000 U.S.
Treasury Bill, 4.880% due 5/31/07 with a value of $5,962,369,
including accrued interest (Note 2g of Notes to Financial
Statements) 5,844,000
---------------
See accompanying notes to financial statements.
16
LOOMIS SAYLES GROWTH FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Shares Description Value (+)
- --------------------------------------------------------------------------------------------------
Short-Term Investments -- continued
46,430,469 State Street Securities Lending Quality Trust(d) $ 46,430,469
---------------
Total Short-Term Investments (Identified Cost $52,274,469) 52,274,469
---------------
Total Investments -- 111.1%
(Identified Cost $391,554,599)(a) 428,491,616
Other assets less liabilities -- (11.1)% (42,798,735)
---------------
Total Net Assets -- 100.0% $ 385,692,881
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information (Amounts exclude certain adjustments
made at the end of the Fund's fiscal year for tax purposes. Such
adjustments are primarily due to wash sales.):
At March 31, 2007, the net unrealized appreciation on investments
based on cost of $391,554,599 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 $ 40,318,131
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (3,381,114)
---------------
Net unrealized appreciation $ 36,937,017
===============
(b) All or a portion of this security was on loan at March 31, 2007.
(c) Non-income producing security.
(d) Represents investments of security lending collateral.
Holdings at March 31, 2007 as a Percentage of Net Assets (Unaudited)
Computers & Peripherals 10.0%
Internet Software & Services 8.3
Capital Markets 8.3
Communications Equipment 7.7
Media 6.9
Biotechnology 5.4
Software 4.8
IT Services 4.4
Diversified Financial Services 4.4
Aerospace & Defense 4.1
Healthcare Equipment & Supplies 4.1
Metals & Mining 3.5
Textiles Apparel & Luxury Goods 3.2
Food & Staples Retailing 2.6
Pharmaceuticals 2.6
Real Estate Management & Development 2.5
Multiline Retail 2.4
Other, Less than 2% each 12.3
See accompanying notes to financial statements.
17
LOOMIS SAYLES RESEARCH FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Shares Description Value (+)
- -------------------------------------------------------------------------------
Common Stocks -- 99.4% of Total Net Assets
Aerospace & Defense -- 6.1%
5,136 Boeing Co. $ 456,642
2,942 Lockheed Martin Corp. 285,433
2,936 Northrop Grumman Corp. 217,910
3,391 Precision Castparts Corp. 352,833
6,762 United Technologies Corp. 439,530
---------------
1,752,348
---------------
Beverages -- 5.3%
12,305 Coca-Cola Co. 590,640
6,484 Hansen Natural Corp.(b)(c) 245,614
10,854 PepsiCo, Inc. 689,880
---------------
1,526,134
---------------
Biotechnology -- 0.9%
3,538 Gilead Sciences, Inc.(c) 270,657
---------------
Capital Markets -- 5.7%
9,258 E*Trade Financial Corp.(b)(c) 196,455
2,724 Goldman Sachs Group, Inc. 562,860
7,308 Merrill Lynch & Co., Inc. 596,844
4,465 State Street Corp. 289,109
---------------
1,645,268
---------------
Chemicals -- 0.8%
3,555 Praxair, Inc. 223,823
---------------
Commercial Banks -- 3.3%
12,351 U.S. Bancorp 431,915
15,296 Wells Fargo & Co. 526,641
---------------
958,556
---------------
Communications Equipment -- 5.1%
25,231 Cisco Systems, Inc.(c) 644,147
5,752 Harris Corp.(b) 293,064
13,276 Motorola, Inc. 234,587
7,022 QUALCOMM, Inc. 299,559
---------------
1,471,357
---------------
Computers & Peripherals -- 4.2%
21,543 EMC Corp.(c) 298,371
16,511 Hewlett-Packard Co. 662,751
7,029 Network Appliance, Inc.(b)(c) 256,699
---------------
1,217,821
---------------
Consumer Finance -- 2.1%
10,942 American Express Co. 617,129
---------------
Diversified Financial Services -- 2.6%
14,554 Bank of America Corp. 742,545
---------------
Diversified Telecommunications Services -- 3.7%
27,027 AT&T, Inc. 1,065,675
---------------
Electric Utilities -- 1.7%
2,320 Entergy Corp.(b) 243,414
3,639 Exelon Corp.(b) 250,036
---------------
493,450
---------------
Electrical Equipment -- 1.1%
7,659 Emerson Electric Co. 330,026
---------------
Energy Equipment & Services -- 2.0%
4,936 Grant Prideco, Inc.(b)(c) 246,010
4,941 Schlumberger Ltd. 341,423
---------------
587,433
---------------
Shares Description Value (+)
- --------------------------------------------------------------------------------
Healthcare Equipment & Supplies -- 4.3%
8,019 Baxter International, Inc. $ 422,361
3,346 C.R. Bard, Inc. 266,040
5,389 Medtronic, Inc. 264,384
3,355 Zimmer Holdings, Inc.(b)(c) 286,551
---------------
1,239,336
---------------
Healthcare Providers & Services -- 1.0%
3,951 Cardinal Health, Inc. 288,226
---------------
Hotels, Restaurants & Leisure -- 0.8%
3,737 Chipotle Mexican Grill, Inc., Class A(b)(c) 232,068
---------------
Household Products -- 4.0%
6,952 Colgate-Palmolive Co. 464,324
11,003 Procter & Gamble Co. (The) 694,950
---------------
1,159,274
---------------
Independent Power Producer & Energy -- 2.0%
2,761 Constellation Energy Group 240,069
4,612 NRG Energy, Inc.(b)(c) 332,248
---------------
572,317
---------------
Industrial Conglomerates -- 2.8%
7,538 General Electric Co. 266,544
2,542 Textron, Inc.(b) 228,271
9,431 Tyco International Ltd. 297,548
---------------
792,363
---------------
Insurance -- 6.7%
4,816 Aflac, Inc. 226,641
11,501 American International Group, Inc. 773,097
7,029 Chubb Corp. (The)(b) 363,188
6,129 Prudential Financial, Inc. 553,204
---------------
1,916,130
---------------
Internet Software & Services -- 1.7%
1,074 Google, Inc. Class A(c) 492,064
---------------
IT Services -- 0.9%
2,990 Cognizant Technology Solutions Corp., Class A(c) 263,927
---------------
Life Science Tools & Services -- 1.3%
7,922 Thermo Fisher Scientific, Inc.(b)(c) 370,354
---------------
Machinery -- 1.1%
3,791 Eaton Corp. 316,776
---------------
Media -- 2.7%
15,902 News Corp., Class A(b) 367,654
20,493 Time Warner, Inc.(b) 404,122
---------------
771,776
---------------
Metals & Mining -- 2.4%
10,383 Freeport-McMoRan Copper & Gold, Inc. 687,251
---------------
Multiline Retail -- 5.1%
7,796 Federated Department Stores, Inc. 351,210
5,298 J.C. Penney Co., Inc.(b) 435,284
4,704 Kohl's Corp.(c) 360,373
6,189 Nordstrom, Inc. 327,646
---------------
1,474,513
---------------
Oil, Gas & Consumable Fuels -- 7.9%
5,563 ConocoPhillips 380,231
15,383 ExxonMobil Corp. 1,160,647
See accompanying notes to financial statements.
18
LOOMIS SAYLES RESEARCH FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Shares Description Value (+)
- ----------------------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels (continued)
7,212 Hess Corp. $ 400,050
6,366 XTO Energy, Inc. 348,921
---------------
2,289,849
---------------
Pharmaceuticals -- 4.6%
10,541 Abbott Laboratories 588,188
6,706 Johnson & Johnson 404,103
12,588 Schering-Plough Corp. 321,120
---------------
1,313,411
---------------
Real Estate Management & Development -- 0.8%
7,029 CB Richard Ellis Group, Inc., Class A(b)(c) 240,251
---------------
Semiconductors & Semiconductor Equipment -- 1.2%
11,384 Texas Instruments, Inc. 342,658
---------------
Software -- 1.6%
24,841 Oracle Corp.(c) 450,367
---------------
Specialty Retail -- 0.9%
14,254 Gap, Inc. (The) 245,311
---------------
Textiles Apparel & Luxury Goods -- 1.0%
2,714 NIKE, Inc., Class B 288,390
---------------
Total Common Stocks (Identified Cost $26,383,514) 28,648,834
---------------
Principal
Amount
- ----------------------------------------------------------------------------------------------------
Short-Term Investments -- 13.9%
$ 322,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 3/30/07 at 4.250% to be repurchased at
$322,114 on 4/02/07 collateralized by $340,000 U.S. Treasury
Bill, 4.890% due 9/27/07 with a value of $331,840, including
accrued interest (Note 2g of Notes to Financial Statements) 322,000
---------------
Shares
- ----------------------------------------------------------------------------------------------------
3,694,617 State Street Securities Lending Quality Trust(d) 3,694,617
---------------
Total Short-Term Investments (Identified Cost $4,016,617) 4,016,617
---------------
Total Investments -- 113.3%
(Identified Cost $30,400,131)(a) 32,665,451
Other assets less liabilities -- (13.3)% (3,846,718)
---------------
Total Net Assets -- 100.0% $ 28,818,733
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information: Information (Amounts exclude certain
adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2007, the net unrealized appreciation on investments
based on cost of $30,400,131 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 $ 2,647,088
Aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value (381,768)
---------------
Net unrealized appreciation $ 2,265,320
===============
(b) All or a portion of this security was on loan at March 31, 2007.
(c) Non-income producing security.
(d) Represents investments of security lending collateral.
Holdings at March 31, 2007 as a Percentage of Net Assets (Unaudited)
Oil, Gas & Consumable Fuels 7.9%
Insurance 6.7
Aerospace & Defense 6.1
Capital Markets 5.7
Beverages 5.3
Multiline Retail 5.1
Communications Equipment 5.1
Pharmaceuticals 4.6
Healthcare Equipment & Supplies 4.3
Computers & Peripherals 4.2
Household Products 4.0
Diversified Telecommunications Services 3.7
Commercial Banks 3.3
Industrial Conglomerates 2.8
Media 2.7
Diversified Financial Services 2.6
Metals & Mining 2.4
Consumer Finance 2.1
Energy Equipment & Services 2.0
Independent Power Producer & Energy 2.0
Other, Less than 2% Each 16.8
See accompanying notes to financial statements.
19
STATEMENTS OF ASSETS & LIABILITIES
March 31, 2007 (Unaudited)
Global Markets Fund Growth Fund Research Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
ASSETS
Investments at cost $ 107,866,146 $ 391,554,599 $ 30,400,131
Net unrealized appreciation 12,894,239 36,937,017 2,265,320
--------------------- --------------------- ---------------------
Investments at value (a) 120,760,385 428,491,616 32,665,451
Cash -- 474 430
Foreign currency at value (identified
cost $274,641) 275,677 -- --
Receivable for Fund shares sold 269,105 567,803 10,091
Receivable for securities sold 320,427 4,887,563 396,505
Dividends and interest receivable 595,578 75,369 26,723
Unrealized appreciation on forward
foreign currency contracts 12,595 -- --
Receivable from investment adviser
(Note 4) 4,169 -- 5,504
Securities lending income receivable 74,326 26,053 957
Other assets 1,050 -- --
--------------------- --------------------- ---------------------
TOTAL ASSETS 122,313,312 434,048,878 33,105,661
--------------------- --------------------- ---------------------
LIABILITIES
Collateral on securities loaned, at
value (Note 2) 16,901,313 46,430,469 3,694,617
Due to custodian 319,867 -- --
Payable for securities purchased 336,096 900,633 421,626
Payable for Fund shares redeemed 35,405 528,929 108,176
Unrealized depreciation on forward
foreign currency contracts 13,121 -- --
Management fees payable (Note 4) 64,164 177,965 12,100
Administrative fees payable (Note 4) 4,775 19,469 1,431
Deferred Trustees' fees (Note 4) 29,716 67,929 28,038
Service and distribution fees payable
(Note 4) 1,758 6,574 119
Other accounts payable and accrued
expenses 21,695 224,029 20,821
--------------------- --------------------- ---------------------
TOTAL LIABILITIES 17,727,910 48,355,997 4,286,928
--------------------- --------------------- ---------------------
NET ASSETS $ 104,585,402 $ 385,692,881 $ 28,818,733
===================== ===================== =====================
NET ASSETS CONSIST OF :
Paid-in capital 90,617,764 586,398,527 25,151,652
Undistributed net investment income
(loss) 97,015 (930,123) 14,555
Accumulated net realized gain (loss)
on investments and foreign currency
transactions 982,956 (236,712,540) 1,387,206
Net unrealized appreciation on
investments and foreign currency
translations 12,887,667 36,937,017 2,265,320
--------------------- --------------------- ---------------------
NET ASSETS $ 104,585,402 $ 385,692,881 $ 28,818,733
===================== ===================== =====================
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE:
Class A shares:
Net assets $ 12,769,899 $ 212,272,952 $ 1,722,506
===================== ===================== =====================
Shares of beneficial interest 934,093 34,128,610 196,008
===================== ===================== =====================
Net asset value and redemption price
per share $ 13.67 $ 6.22 $ 8.79
===================== ===================== =====================
Offering price per share (100/94.25
of $13.67, $6.22, $8.79) (Note 1) $ 14.50 $ 6.60 $ 9.33
===================== ===================== =====================
Class B shares: (redemption price per
share is equal to net asset value
less any applicable contingent
deferred sales charge) (Note 1)
Net assets $ -- $ 28,805,469 $ 376,490
===================== ===================== =====================
Shares of beneficial interest -- 4,760,579 43,638
===================== ===================== =====================
Net asset value and offering price
per share $ -- $ 6.05 $ 8.63
===================== ===================== =====================
Class C shares: (redemption price per
share is equal to net asset value
less any applicable contingent
deferred sales charge) (Note 1)
Net assets $ 29,036,231 $ 38,033,309 $ 1,338,051
===================== ===================== =====================
Shares of beneficial interest 2,132,861 6,279,369 155,766
===================== ===================== =====================
Net asset value and offering price
per share $ 13.61 $ 6.06 $ 8.59
===================== ===================== =====================
Class Y shares:
Net assets $ 62,779,272 $ 106,581,151 $ 25,381,686
===================== ===================== =====================
Shares of beneficial interest 4,586,349 16,434,399 2,870,924
===================== ===================== =====================
Net asset value, offering and
redemption price per share $ 13.69 $ 6.49 $ 8.84
===================== ===================== =====================
(a) Including securities on loan with
a market values of: $ 16,308,805 $ 45,317,005 $ 3,625,400
===================== ===================== =====================
See accompanying notes to financial statements.
20
STATEMENTS OF OPERATIONS
For the Six Months Ended March 31, 2007 (Unaudited)
Global Markets Fund Growth Fund Research Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
INVESTMENT INCOME
Dividends $ 279,247 $ 1,206,214 $ 213,583
Interest 933,269 114,905 6,280
Securities lending income (Note 2) 30,154 117,134 4,465
Less net foreign taxes withheld (7,785) -- --
--------------------- --------------------- ---------------------
1,234,885 1,438,253 224,328
--------------------- --------------------- ---------------------
Expenses
Management fees (Note 4) 357,314 1,032,871 70,614
Service fees - Class A (Note 4) 15,253 276,199 1,790
Service and distribution fees -
Class B (Note 4) -- 154,688 1,992
Service and distribution fees -
Class C (Note 4) 120,165 204,314 6,361
Trustees' fees and expenses (Note 4) 8,009 15,775 6,646
Administrative fees (Note 4) 27,125 117,706 8,041
Custodian fees and expenses 36,594 23,301 12,655
Transfer agent fees and expenses -
Class A 6,153 263,329 1,220
Transfer agent fees and expenses -
Class B -- 22,918 404
Transfer agent fees and expenses -
Class C 10,858 48,744 1,264
Transfer agent fees and expenses -
Class Y 6,478 20,151 5,952
Audit and tax services fees 22,894 18,093 18,655
Legal fees 1,256 5,844 398
Shareholder reporting expenses 6,480 55,117 3,284
Registration fees 18,271 26,232 26,672
Expense recapture - Class A (Note 4) -- 3,129 --
Expense recapture - Class B (Note 4) -- 10,586 --
Miscellaneous expenses 6,472 11,292 3,128
--------------------- --------------------- ---------------------
Total expenses 643,322 2,310,289 169,076
--------------------- --------------------- ---------------------
Less reimbursement/waiver (Note 4) (31,486) -- (36,561)
--------------------- --------------------- ---------------------
Net expenses 611,836 2,310,289 132,515
--------------------- --------------------- ---------------------
Net investment income (loss) 623,049 (872,036) 91,813
--------------------- --------------------- ---------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain on:
Investments - net 1,434,847 4,662,562 1,847,844
Foreign currency transactions - net 7,355 -- --
Change in unrealized appreciation
(depreciation) on:
Investments - (net increase in
foreign capital gains tax accrual
of $13,905 on Global Markets Fund) 8,144,245 22,987,411 (256,117)
Foreign currency translations - net (34,913) -- --
--------------------- --------------------- ---------------------
Net realized and unrealized gain on
investments and foreign currency
transactions 9,551,534 27,649,973 1,591,727
--------------------- --------------------- ---------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 10,174,583 $ 26,777,937 $ 1,683,540
===================== ===================== =====================
See accompanying notes to financial statements.
21
STATEMENTS OF CHANGES IN NET ASSETS
Global Markets Fund
--------------------------------------------
Six Months Ended Year Ended
March 31, 2007 September 30,
(Unaudited) 2006
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 623,049 $ 1,093,311
Net realized gain (loss) on
investments and foreign currency
transactions 1,442,202 1,028,457
Net change in net unrealized
appreciation (depreciation) on
investments and foreign currency
translations 8,109,332 828,609
--------------------- ---------------------
Increase (decrease) in net assets
resulting from operations 10,174,583 2,950,377
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (238,081) --
Class B -- --
Class C (346,135) --
Class Y (1,143,953) (776,370)
Net realized capital gains
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
Total distributions (1,728,169) (776,370)
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 8) 6,819,802 39,428,816
--------------------- ---------------------
Redemption Fees
Class A 1,344 --
Class Y 2,068 895
--------------------- ---------------------
Net increase (decrease) in net assets 15,269,628 41,603,718
--------------------- ---------------------
NET ASSETS
Beginning of period 89,315,774 47,712,056
--------------------- ---------------------
End of period $ 104,585,402 $ 89,315,774
===================== =====================
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS) $ 97,015 $ 1,202,135
===================== =====================
Growth Fund
--------------------------------------------
Six Months Ended Year Ended
March 31, 2007 September 30,
(Unaudited) 2006
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (872,036) $ (290,409)
Net realized gain (loss) on
investments and foreign currency
transactions 4,662,562 (6,416,354)
Net change in net unrealized
appreciation (depreciation) on
investments and foreign currency
translations 22,987,411 (14,594,029)
--------------------- ---------------------
Increase (decrease) in net assets
resulting from operations 26,777,937 (21,300,792)
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
Net realized capital gains
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
Total distributions -- --
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 8) (63,867,157) 233,029,131
--------------------- ---------------------
Redemption Fees
Class A -- --
Class Y -- --
--------------------- ---------------------
Net increase (decrease) in net assets (37,089,220) 211,728,339
--------------------- ---------------------
NET ASSETS
Beginning of period 422,782,101 211,053,762
--------------------- ---------------------
End of period $ 385,692,881 $ 422,782,101
===================== =====================
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS) $ (930,123) $ (58,087)
===================== =====================
Research Fund
--------------------------------------------
Six Months Ended Year Ended
March 31, 2007 September 30,
(Unaudited) 2006
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 91,813 $ 243,112
Net realized gain (loss) on
investments and foreign currency
transactions 1,847,844 2,918,811
Net change in net unrealized
appreciation (depreciation) on
investments and foreign currency
translations (256,117) (960,150)
--------------------- ---------------------
Increase (decrease) in net assets
resulting from operations 1,683,540 2,201,773
--------------------- ---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (9,859) (1,464)
Class B (509) --
Class C (2,662) (293)
Class Y (260,548) (136,217)
Net realized capital gains
Class A (161,282) (24,273)
Class B (48,393) (11,723)
Class C (147,505) (13,059)
Class Y (2,907,435) (1,272,543)
--------------------- ---------------------
Total distributions (3,538,193) (1,459,572)
--------------------- ---------------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS (NOTE 8) 4,715,923 (130,794)
--------------------- ---------------------
Redemption Fees
Class A -- --
Class Y -- --
--------------------- ---------------------
Net increase (decrease) in net assets 2,861,270 611,407
--------------------- ---------------------
NET ASSETS
Beginning of period 25,957,463 25,346,056
--------------------- ---------------------
End of period $ 28,818,733 $ 25,957,463
===================== =====================
UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS) $ 14,555 $ 196,320
===================== =====================
See accompanying notes to financial statements.
22
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
Income (loss) from investment operations Less distributions
--------------------------------------- -----------------------------------------
Net asset
value, Dividends Distributions
beginning Net Net realized Total from from from net
of investment and unrealized investment net investment realized Total Redemption
the period income (c) gain (loss) operations income capital gains distributions fee (d)
---------- ---------- -------------- ---------- -------------- ------------- ------------- ----------
GLOBAL MARKETS FUND
Class A
3/31/2007(f) $ 12.49 $ 0.09 $ 1.34 $ 1.43 $ (0.25) $ -- $ (0.25) $ 0.00
9/30/2006* 12.71 0.12 (0.34) (0.22) -- -- -- --
Class C
3/31/2007(f) 12.43 0.04 1.33 1.37 (0.19) -- (0.19) 0.00
9/30/2006* 12.71 0.06 (0.34) (0.28) -- -- -- --
Class Y
3/31/2007(f) 12.51 0.11 1.34 1.45 (0.27) -- (0.27) 0.00
9/30/2006** 11.84 0.19 0.64 0.83 (0.16) -- (0.16) 0.00
9/30/2005 10.19 0.19 1.73 1.92 (0.27) -- (0.27) 0.00
9/30/2004 9.32 0.25 0.96 1.21 (0.34) -- (0.34) --
9/30/2003 7.53 0.32 1.74 2.06 (0.27) -- (0.27) --
9/30/2002*** 8.48 0.35 (0.55) (0.20) (0.75) -- (0.75) --
* From commencement of Class operations on February 1, 2006 through
September 30, 2006.
** Prior to the close of business on February 1, 2006, the Fund offered
Institutional Class shares, which were redesignated as Class Y shares on
that date.
***As required October 1, 2001, the Fund has adopted the provisions of the
AICPA Audit and Accounting Guide, Audits of Investment Companies, and began
amortizing premium on debt securities and reclassifying paydown gains and
losses to interest income for financial statement purposes only. For the
year ended September 30, 2002, the effect of this change per share to the
Institutional Class 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 Class decreased from
4.29% to 4.26% on an annualized basis.
(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.
See accompanying notes to financial statements.
23
Ratios to average net assets
-----------------------------------
Net asset Net assets,
value, end Total end of Net Gross Net investment Portfolio
of the return the period expenses expenses income turnover
period (%) (a) (000's) (%) (b)(g) (%) (g) (%) (g) rate (%)
- ---------- --------- ----------- ---------- --------- -------------- ---------
$ 13.67 11.5(e) $ 12,770 1.25 1.37 1.34 38
12.49 (1.7)(e) 10,438 1.25 1.56 1.52 103
13.61 11.0(e) 29,036 2.00 2.11 0.59 38
12.43 (2.1)(e) 20,228 2.00 2.32 0.78 103
13.69 11.7 62,779 1.00 1.04 1.60 38
12.51 7.1 58,650 1.00 1.19 1.58 103
11.84 19.1 47,712 1.00 1.46 1.72 78
10.19 13.2 17,274 1.00 1.87 2.55 69
9.32 28.0 10,499 1.00 2.23 3.81 94
7.53 (3.0) 8,340 1.00 2.43 4.26 113
(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, if applicable.
(e)A sales charge for Class A shares and a contingent deferred sales charge for
Class C shares are not reflected in total return calculations. Periods less
than one year, if applicable, are not annualized.
(f)For the six months ended March 31, 2007 (Unaudited).
(g)Annualized for periods less than one year.
24
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations Less distributions
--------------------------------------- ------------------------------------------
Net asset
value, Net Dividends Distributions
beginning investment Net realized Total from from from net
of income and unrealized investment net investment realized Total
the period (loss) (c)(d) gain (loss) operations income capital gains distributions
---------- ------------- -------------- ---------- -------------- ------------- -------------
GROWTH FUND
Class A
3/31/2007(g) $ 5.84 $ (0.01) $ 0.39 $ 0.38 $ -- $ -- $ --
9/30/2006 6.03 (0.00) (0.19) (0.19) -- -- --
9/30/2005 4.98 (0.02) 1.07 1.05 -- -- --
9/30/2004 4.41 (0.03) 0.60 0.57 -- -- --
9/30/2003 3.65 (0.02) 0.78 0.76 -- -- --
9/30/2002 4.12 (0.03) (0.44) (0.47) -- -- --
Class B
3/31/2007(g) 5.70 (0.03) 0.38 0.35 -- -- --
9/30/2006 5.94 (0.05) (0.19) (0.24) -- -- --
9/30/2005 4.94 (0.06) 1.06 1.00 -- -- --
9/30/2004 4.41 (0.07) 0.60 0.53 -- -- --
9/30/2003* 4.54 (0.00) (0.13) (0.13) -- -- --
Class C
3/31/2007(g) 5.71 (0.03) 0.38 0.35 -- -- --
9/30/2006 5.94 (0.04) (0.19) (0.23) -- -- --
9/30/2005 4.94 (0.06) 1.06 1.00 -- -- --
9/30/2004 4.41 (0.06) 0.59 0.53 -- -- --
9/30/2003* 4.54 (0.00) (0.13) (0.13) -- -- --
Class Y
3/31/2007(g) 6.08 0.00 0.41 0.41 -- -- --
9/30/2006 6.26 0.02 (0.20) (0.18) -- -- --
9/30/2005 5.15 (0.00) 1.11 1.11 -- -- --
9/30/2004 4.55 (0.02) 0.62 0.60 -- -- --
9/30/2003 3.75 (0.01) 0.81 0.80 -- -- --
9/30/2002 4.23 (0.02) (0.46) (0.48) -- -- --
* From commencement of Class operations on September 12, 2003 through
September 30, 2003.
(a)Total returns would have been lower had the adviser not reduced its advisory
fees and/or borne other operating expenses, if applicable. 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, if any, 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, if applicable.
(e)A sales charge for Class A shares and a contingent deferred sales charge for
Class B and Class C shares are not reflected in total return calculations.
Periods less than one year, if applicable, are not annualized.
See accompanying notes to financial statements.
25
Ratios to average net assets
---------------------------------------
Net assets,
Net asset Total end of Net Gross Net investment Portfolio
value, end return the period expenses expenses income turnover
of the period (%) (a) (000's) (%) (b)(h) (%) (h) (loss) (%) (h) rate (%)
- ------------- --------- ----------- ---------- --------- -------------- ---------
$ 6.22 6.5(e) $ 212,273 1.12(j) 1.12(j) (0.43) 62
5.84 (3.2)(e) 225,729 1.10 1.17 (0.03) 174
6.03 21.1(e) 51,248 1.10 1.60 (0.38) 164
4.98 12.9(e) 14,072 1.10 1.70 (0.58) 171
4.41 20.8(f) 947 1.10 3.11 (0.45) 201
3.65 (11.4) 456 1.10 5.20 (0.65) 192
6.05 6.1(e) 28,805 1.85(j) 1.85(j) (1.15) 62
5.70 (4.0)(e) 32,160 1.95 2.11 (0.85) 174
5.94 20.2(e) 38,538 1.85 2.33 (1.14) 164
4.94 12.0(e) 12,532 1.85 2.45 (1.33) 171
4.41 (2.9)(f) 2 1.85 7.92 (1.29) 201
6.06 6.1(e) 38,033 1.87 1.87 (1.17) 62
5.71 (3.9)(e) 43,415 1.85 1.95 (0.76) 174
5.94 20.2(e) 25,734 1.85 2.35 (1.10) 164
4.94 12.0(e) 6,826 1.85 2.45 (1.30) 171
4.41 (2.9)(f) 2 1.85 7.92 (1.29) 201
6.49 6.7 106,581 0.67 0.67 0.03 62
6.08 (2.9) 121,478 0.80(i) 0.80(i) 0.31 174
6.26 21.6 95,534 0.85 0.97 (0.05) 164
5.15 13.2 40,165 0.85 1.04 (0.32) 171
4.55 21.3 28,898 0.85 1.18 (0.20) 201
3.75 (11.4) 19,635 0.85 1.32 (0.39) 192
(f)A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods less than one year, if applicable, are not
annualized.
(g)For the six months ended March 31, 2007 (Unaudited).
(h)Annualized for periods less than one year.
(i)Includes expense recapture of 0.07%. See Note 4.
(j)Includes expense recapture of 0.003% and 0.07% for Class A and Class B,
respectively. See Note 4.
26
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (loss) from investment operations Less distributions
--------------------------------------- ---------------------------------------------
Net asset
value, Net Dividends Distributions
beginning investment Net realized Total from from from net
of income and unrealized investment net investment realized Total
the period (loss) (c)(d) gain (loss) operations income (d) capital gains distributions (d)
---------- ------------- -------------- ---------- -------------- ------------- -----------------
RESEARCH FUND
Class A
3/31/2007(g) $ 9.42 $ 0.02 $ 0.55 $ 0.57 $ (0.07) $ (1.13) $ (1.20)
9/30/2006 9.22 0.05 0.64 0.69 (0.03) (0.46) (0.49)
9/30/2005 7.79 0.00 1.43 1.43 (0.00) -- (0.00)
9/30/2004 6.90 0.01 0.90 0.91 (0.02) -- (0.02)
9/30/2003 5.69 0.02 1.20 1.22 (0.01) -- (0.01)
9/30/2002* 7.61 0.01 (1.92) (1.91) (0.01) -- (0.01)
Class B
3/31/2007(g) 9.25 (0.02) 0.54 0.52 (0.01) (1.13) (1.14)
9/30/2006 9.10 (0.02) 0.63 0.61 (0.00) (0.46) (0.46)
9/30/2005 7.73 (0.06) 1.43 1.37 (0.00) -- (0.00)
9/30/2004 6.90 (0.05) 0.90 0.85 (0.02) -- (0.02)
9/30/2003** 7.05 0.00 (0.15) (0.15) -- -- --
Class C
3/31/2007(g) 9.22 (0.02) 0.54 0.52 (0.02) (1.13) (1.15)
9/30/2006 9.08 (0.02) 0.63 0.61 (0.01) (0.46) (0.47)
9/30/2005 7.73 (0.07) 1.42 1.35 (0.00) -- (0.00)
9/30/2004 6.90 (0.05) 0.88 0.83 -- -- --
9/30/2003** 7.05 0.00 (0.15) (0.15) -- -- --
Class Y
3/31/2007(g) 9.49 0.03 0.55 0.58 (0.10) (1.13) (1.23)
9/30/2006 9.27 0.09 0.64 0.73 (0.05) (0.46) (0.51)
9/30/2005 7.82 0.04 1.44 1.48 (0.03) -- (0.03)
9/30/2004 6.92 0.03 0.90 0.93 (0.03) -- (0.03)
9/30/2003 5.71 0.04 1.20 1.24 (0.03) -- (0.03)
9/30/2002 6.85 0.03 (1.16) (1.13) (0.01) -- (0.01)
* From commencement of Class operations on November 30, 2001 through
September 30, 2002.
** From commencement of Class operations on September 12, 2003 through
September 30, 2003.
(a)Total returns would have been lower had the adviser not reduced its advisory
fees and/or borne other operating expenses. Periods less than one year, 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.
See accompanying notes to financial statements.
27
Ratios to average net assets
----------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return the period expenses expenses income (loss) turnover
the period (%) (a) (000's) (%) (b)(h) (%) (h) (%) (h) rate (%)
- ---------- --------- ----------- ---------- --------- -------------- ---------
$ 8.79 6.2(e) $ 1,723 1.25 1.48 0.33 82
9.42 7.7(e) 1,331 1.25 1.68 0.56 143
9.22 18.4(e) 344 1.25 34.73 0.03 133
7.79 13.2(e) 106 1.21 39.85 0.07 151
6.90 21.5(f) 41 1.10 28.75 0.35 138
5.69 (25.2) 17 1.10 213.89 0.22 130
8.63 5.7(e) 376 2.00 2.27 (0.40) 82
9.25 6.9(e) 331 2.00 2.33 (0.19) 143
9.10 17.8(e) 210 2.00 41.40 (0.71) 133
7.73 12.3(e) 57 2.00 40.60 (0.71) 151
6.90 (2.1)(f) 2 2.00 125.11 (0.72) 138
8.59 5.7(e) 1,338 2.00 2.26 (0.42) 82
9.22 6.9(e) 1,198 2.00 2.37 (0.18) 143
9.08 17.5(e) 140 2.00 37.60 (0.76) 133
7.73 12.0(e) 3 2.00 40.60 (0.59) 151
6.90 (2.1)(f) 2 2.00 125.11 (0.72) 138
8.84 6.3 25,382 0.85 1.11 0.74 82
9.49 8.1 23,096 0.85 1.26 0.98 143
9.27 19.0 24,651 0.85 1.31 0.43 133
7.82 13.5 21,721 0.85 1.50 0.44 151
6.92 21.8 21,881 0.85 1.31 0.59 138
5.71 (16.6) 15,889 0.89 1.46 0.36 130
(d)Amount rounds to less than $0.01 per share, if applicable.
(e)A sales charge for Class A shares and a contingent deferred sales charge for
Class B and Class C shares are not reflected in total return calculations.
Periods less than one year, if applicable, are not annualized.
(f)A sales charge for Class A and Class C shares and a contingent deferred
sales charge for Class B and Class C shares are not reflected in total
return calculations. Periods less than one year, if applicable, are not
annualized.
(g)For the six months ended March 31, 2007 (Unaudited).
(h)Annualized for periods less than one year.
28
NOTES TO FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)
1. Organization. Loomis Sayles Funds II (the "Trust") is organized as a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, (the "1940 Act"), as an open-end 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. Information presented in these financial statements pertains
to certain equity funds of the Trust; the financial statements for the
remaining equity funds and the fixed income funds of the Trust are presented in
separate reports. The following funds (individually, a "Fund" and collectively,
the "Funds") are included in this report:
Loomis Sayles Global Markets Fund (the "Global Markets Fund")
Loomis Sayles Growth Fund (the "Growth Fund")
Loomis Sayles Research Fund (the "Research Fund")
Each Fund offers Class A, Class C and Class Y shares. Growth Fund and Research
Fund also offer Class B shares. Class A shares are sold with a maximum
front-end sales charge of 5.75%. Class B shares do not pay a front-end sales
charge, but pay higher Rule 12b-1 fees than Class A shares for eight years (at
which point they automatically convert to Class A shares), and are subject to a
contingent deferred sales charge ("CDSC") if those shares are redeemed within
six years of purchase. Class C shares do not pay a front-end sales charge, do
not convert to any other class of shares and pay higher Rule 12b-1 fees than
Class A shares and may be subject to a CDSC of 1.00% if those shares are
redeemed within one year. Class Y shares do not pay a front-end sales charge, a
CDSC or distribution fees. They are generally intended for institutional
investors with a minimum initial investment of $100,000, though some categories
of investors are excepted from the minimum investment amount as outlined in the
Funds' prospectus. Prior to March 16, 2007, the minimum initial investment for
Class Y shares was $1,000,000.
Most expenses of the Trust can be directly attributed to a fund. Expenses which
cannot be directly attributed to a fund are generally apportioned based on the
relative net assets of each of the funds in the Trust. Expenses of a fund are
borne pro rata by the holders of each Class of shares, except that each Class
bears expenses unique to that Class (including the Rule 12b-1 service and
distribution fees and transfer agent fees applicable to such class). In
addition, each class votes as a Class only with respect to its own Rule 12b-1
Plan. Shares of each Class would receive their pro rata share of the net assets
of a fund if the fund were liquidated. The Trustees approve separate dividends
from net investment income on each Class of shares.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by each Fund in the preparation of
its financial statements. The Funds' financial statements are prepared in
accordance with accounting principles generally accepted in the United States
of America which require the use of management estimates that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
a. Security Valuation. Equity securities, including closed-end investment
companies and exchange-traded funds, for which market quotations are readily
available are valued at market value, as reported by pricing services
recommended by the investment adviser 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 Global
Select Market, NASDAQ Global Market and NASDAQ Capital Market are valued at the
NASDAQ Official Closing Price ("NOCP"), or if lacking a NOCP, at the most
recent bid quotation on the applicable NASDAQ Market. Debt securities for which
market quotations are readily available (other than short-term obligations
purchased with an original or 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 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.
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 purchased with an original or 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. As of March 31, 2007, approximately 30% of the market
value of investments of the Global Markets Fund were fair valued pursuant to
procedures approved by the Board of Trustees.
b. Security Transactions and Related Investment Income. Security transactions
are accounted for on trade date. Dividend income is recorded on ex-dividend
date, or in the case of certain foreign securities, as soon as the Fund is
notified and interest income is recorded on an accrual basis. Interest income
is increased by the accretion of
29
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
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 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 price 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 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 March 31, 2007, the Global Markets Fund had the following
open forward foreign currency contracts:
Local Aggregate Unrealized
Delivery Currency Face Total Appreciation
Date Amount Amount Value (Depreciation)
- - --------- ----------- --------- -------- --------------
Australia Dollar (buy) 6/20/2007 70,000 $ 55,276 $ 56,592 $ 1,316
Australia Dollar (buy) 6/20/2007 155,000 120,234 125,310 5,076
Australia Dollar (sell) 6/20/2007 225,000 174,107 181,901 (7,794)
Columbia Peso (sell) 4/16/2007 688,000,000 306,965 312,292 (5,327)
South Africa Rand (buy) 6/20/2007 900,000 119,066 122,366 3,300
South Africa Rand (sell) 6/20/2007 1,800,000 247,634 244,731 2,903
e. Federal and Foreign Income Taxes. The Trust treats each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
Accordingly, no provision for federal income tax has been made. A Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities. Such
taxes are accrued as applicable.
f. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gain distributions are determined annually in accordance with
federal tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due
to differing treatments for book and tax purposes of items such as net
operating losses, foreign currency transactions, gains realized from passive
foreign investment companies ("PFICs") and premium amortization accruals.
Permanent book and tax basis differences relating to shareholder
30
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
distributions will result in reclassifications to capital accounts. Temporary
differences between book and tax distributable earnings are primarily due to
deferred Trustees' fees, wash sales, unrealized gains on PFICs, premium
amortization accruals and defaulted bond interest. 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 year ended
September 30, 2006 was as follows:
2006 Distributions Paid From:
- - ------------------------------------------------
Ordinary Long-Term
Fund Income Capital Gains Total
- ---- ------ ------------- -----
Global Markets Fund $ 776,370 $ -- $ 776,370
Growth Fund -- -- --
Research Fund 137,974 1,321,598 1,459,572
As of September 30, 2006, capital loss carryforwards and post-October losses were as follows:
Capital loss carryforward: Global Markets Fund Growth Fund Research Fund
- -------------------------- ------------------- ----------- -------------
Expires September 31, 2008 $ -- $ -- $ --
Expires September 31, 2009 -- -- --
Expires September 31, 2010 -- (29,812,842)* --
Expires September 31, 2011 (311,587) (6,192,314)* --
--------- ------------ -----------
Total Capital loss carryforward (311,587) $(36,005,156)* $ --
========= ============ ===========
Deferred net capital losses (post-October
2005) -- $ (7,888,832) $ --
* A significant portion of the Loomis Sayles Growth Fund's losses are a result
of prior year mergers; therefore, these losses have been limited under
Section 382 of the Internal Revenue Code.
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 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 March 31, 2007 were
as follows:
Market Value
of Securities Value of
on Loan Collateral
- ------------- -----------
Global Markets Fund $ 16,308,805 $16,901,313
Growth Fund 45,317,005 46,430,469
Research Fund 3,625,400 3,694,617
31
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
i. 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.
j. New Accounting Pronouncements. Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes--an
Interpretation of FASB Statement 109 ("FIN 48") was issued and became 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. Subsequent thereto,
the United States Securities and Exchange Commission ("SEC") indicated that it
would not object if a fund first adopts FIN 48 on the last business day of the
first required financial reporting period for fiscal years beginning after
December 15, 2006. Accordingly, Management is continuing to evaluate the impact
the adoption of FIN 48 may have on the Funds' net assets and results of
operations. In compliance with the recently issued SEC guidance the impacts, if
any, will be reflected in the Funds' semiannual financial statements as of
March 31, 2008.
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 six months ended March 31, 2007,
purchases and sales of securities (excluding short-term investments and U.S.
Government/Agency Securities and including paydowns) were as follows:
Fund Purchases Sales
---- ------------ ------------
Global Markets Fund $ 38,254,405 $ 34,623,442
Growth Fund 249,647,156 316,980,030
Research Fund 24,246,442 23,060,880
For the six months ended March 31, 2007 purchases and sales of U.S.
Government/Agency Securities by the Global Markets Fund were $225,980 and
$499,860, respectively.
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. Under the terms of the management agreements,
each Fund pays a management fee at the following annual rates, calculated daily
and payable monthly, based on each Fund's average daily net assets:
Percentage of
Average Daily
Fund Net Assets
---- -------------
Global Markets Fund 0.75%
Growth Fund 0.50%
Research Fund 0.50%
Loomis Sayles has given binding undertakings to certain Funds to defer its
management fees and/or reimburse certain expenses associated with these Funds
to limit their operating expenses. These undertakings are in effect until
January 31, 2008 and will be reevaluated on an annual basis. For the six months
ended March 31, 2007, the expense limits as a percentage of average daily net
assets under the expense limitation agreements were as follows:
Expense Limit as a Percentage of
Average Daily Net Assets
- ------------------------------
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Global Markets Fund 1.25% N/A 2.00% 1.00%
Growth Fund 1.25% 2.00% 2.00% 0.85%
Research Fund 1.25% 2.00% 2.00% 0.85%
32
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
For the six months ended March 31, 2007, the management fees and waivers of
management fees for each Fund were as follows:
Percentage of
Average
Gross Waiver of Net Daily Net Assets
- Management Management Management ---------------
Fund Fee Fee Fee Gross Net
---- ---------- ---------- ---------- ----- ---
Global Markets Fund $ 357,314 $ (8,027) $ 349,287 0.75% 0.73%
Growth Fund 1,032,871 -- 1,032,871 0.50% 0.50%
Research Fund 70,614 (30,055) 40,559 0.50% 0.29%
For the six months ended March 31, 2007, in addition to the waiver of
management fees, expenses have been reimbursed as follows:
Expense
Fund Reimbursed
---- ----------
Global Markets Fund $ 23,459
Growth Fund --
Research Fund 6,506
Loomis Sayles shall be permitted to recover expenses it has 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 the
expenses of a class fall below a Class' expense limits, provided, however, that
a Class is not obligated to pay such deferred fees/expenses more than one year
after the end of the fiscal year in which the fee/expense was deferred. At
March 31, 2007, the amounts subject to possible reimbursement under the expense
limitation agreements were as follows:
Expenses Subject to Possible Reimbursement until
September 30, 2007
- ------------------------------------------------
Fund Class A Class B Class C Class Y Total
---- ------- ------- ------- ------- -----
Global Markets Fund $ 12,035 $ -- $24,157 $118,070 $154,262
Growth Fund 106,807 60,484 40,372 -- 207,663
Research Fund 3,935 967 2,498 99,240 106,640
Expenses Subject to Possible Reimbursement until
September 30, 2008
------------------------------------------------
Fund Class A Class B Class C Class Y Total
---- ------- ------- ------- ------- -----
Global Markets Fund $ 7,180 $ -- $12,879 $ 11,427 $ 31,486
Growth Fund -- -- -- -- --
Research Fund 1,666 531 1,659 32,705 36,561
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 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
wholly-owned subsidiary of IXIS US Group. Pursuant to an agreement among IXIS
Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS Advisor Funds Trust
III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash Management Trust ("IXIS
Advisor Funds Trusts"), Loomis Sayles Funds I, Loomis Sayles Funds II ("Loomis
Sayles Funds Trusts") and IXIS Advisors, each Fund pays IXIS Advisors monthly
its pro rata portion of fees equal to an annual rate of 0.0675% of the first $5
billion of the average daily net assets of the IXIS Advisor Funds Trusts and
Loomis Sayles Funds Trusts, 0.0625% of the next $5 billion, and 0.0500% of such
assets in excess of $10 billion, subject to an annual aggregate minimum fee for
the IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts of $5 million,
which is reevaluated on an annual basis.
33
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
For the six months ended March 31, 2007, amounts paid to IXIS Advisors for
administrative fees were as follows:
Administrative
Fund Fees
---- --------------
Global Markets Fund $ 27,125
Growth Fund 117,706
Research Fund 8,041
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 each fund.
Pursuant to Rule 12b-1 under the 1940 Act, the Funds have adopted a Service
Plan relating to each Fund's Class A shares (the "Class A Plan"), Service and
Distribution Plans relating to the Growth Fund's and Research Fund's Class B
shares (the "Class B Plans"), and Service and Distribution Plans relating to
each Fund's Class C shares (the "Class C Plan").
Under the Class A Plan, each Fund pays IXIS Distributors a monthly service fee
at an annual rate not to exceed 0.25% of the average daily net assets
attributable to the Fund's Class A shares, as reimbursement for expenses
incurred by IXIS Distributors in providing personal services to investors in
Class A shares and/or the maintenance of shareholder accounts.
Under the Class B and Class C Plans, each applicable Fund pays IXIS
Distributors a monthly service fee at an annual rate not to exceed 0.25% of the
average daily net assets attributable to the Fund's Class B and Class C shares,
as compensation for services provided and expenses incurred by IXIS
Distributors in providing personal services to investors in Class B and Class C
shares and/or the maintenance of shareholder accounts.
Also under the Class B and Class C Plans, each applicable Fund pays IXIS
Distributors a monthly distribution fee at an annual rate of 0.75% of the
average daily net assets attributable to the Fund's Class B and Class C shares,
as compensation for services provided and expenses incurred by IXIS
Distributors in connection with the marketing or sale of Class B and Class C
shares.
For the six months ended March 31, 2007, the Funds paid the following service
and distribution fees:
Service Fees Distribution Fees
- ------------------------ -----------------
Fund Class A Class B Class C Class B Class C
---- ------- ------- ------- ------- -------
Global Markets Fund $ 15,253 $ -- $30,041 $ -- $ 90,124
Growth Fund 276,199 38,672 51,078 116,016 153,236
Research Fund 1,790 498 1,590 1,494 4,771
d. Commissions. The Funds have been informed that commissions (including CDSCs)
on Fund shares paid to IXIS Distributors by investors in shares of the Funds
for the six months ended March 31, 2007, were as follows:
Fund Commissions
---- -----------
Global Markets Fund $ 43,371
Growth Fund 83,046
Research Fund 4,664
e. Trustees Fees and Expenses. The Funds do not pay any compensation directly
to their officers or Trustees who are directors, officers or employees of 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
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.
34
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
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.
f. Redemption Fees. Shareholders of Class A and Class Y shares of Global
Markets Fund are charged a 2% redemption fee if they redeem, including
redeeming by exchange, such shares within 60 days of their acquisition
(including acquisition by exchange). The redemption fee is intended to offset
the costs to the Fund of short-term trading, such as portfolio transaction and
market impact costs associated with redemption activity and administrative
costs associated with processing redemptions. The redemption fee is deducted
from the shareholder's redemption or exchange proceeds and is paid to the Fund.
The "first-in, first-out" (FIFO) method is used to determine the holding period
of redeemed or exchanged shares, which means that if a shareholder acquired
shares on different days, the shares acquired first will be redeemed or
exchanged first for purposes of determining whether the redemption fee applies.
A new holding period begins with each purchase or exchange. These fees are
accounted for as an addition to paid-in capital and are presented on the
Statements of Changes in Net Assets.
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 six months ended March 31, 2007, 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 six months ended March 31, 2007, amounts rebated under these agreements
were as follows:
Fund Rebates
---- -------
Global Markets Fund $ 5,173
Growth Fund 62,213
Research Fund 6,279
7. Shareholders. At March 31, 2007, Loomis Sayles Funded Pension Plan ("Pension
Plan") and Loomis Sayles Employees' Profit Sharing Retirement Plan held shares
of beneficial interest in the Funds as follows:
Profit Sharing
Fund Pension Plan Retirement Plan
---- ------------ ---------------
Global Markets Fund 910,126 435,017
Growth Fund 1,427,866 2,392,297
Research Fund 1,123,821 727,039
At March 31, 2007, one shareholder individually owned more than 5% of the
Global Markets Fund's total outstanding shares, representing, in aggregate,
22.9% of the Fund; two shareholders individually owned more than 5% of the
Research Fund's total outstanding shares, representing, in aggregate, 24.6% of
the Fund.
35
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
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:
Six Months Ended
March 31, 2007
-------------------------------------
Global Markets Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 258,669 $ 3,411,836
Issued in connection with the reinvestment of distributions 12,909 170,145
Redeemed (173,224) (2,301,369)
----------------- ------------------
Net Change 98,354 $ 1,280,612
----------------- ------------------
Class C
Issued from the sale of shares 610,483 $ 8,126,400
Issued in connection with the reinvestment of distributions 6,914 90,915
Redeemed (111,342) (1,459,457)
----------------- ------------------
Net Change 506,055 $ 6,757,858
----------------- ------------------
Class Y
Issued from the sale of shares 437,243 $ 5,873,180
Issued in connection with the reinvestment of distributions 78,466 1,034,975
Redeemed (618,472) (8,126,823)
----------------- ------------------
Net Change (102,763) $ (1,218,668)
----------------- ------------------
Increase (decrease) from capital share transactions 501,646 $ 6,819,802
================= ==================
Year Ended
September 30, 2006*
-------------------------------------
Global Markets Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 997,302 $ 12,371,308
Issued in connection with the reinvestment of distributions -- --
Redeemed (161,563) (1,961,910)
----------------- ------------------
Net Change 835,739 $ 10,409,398
----------------- ------------------
Class C
Issued from the sale of shares 1,718,496 $ 21,433,099
Issued in connection with the reinvestment of distributions -- --
Redeemed (91,690) (1,110,053)
----------------- ------------------
Net Change 1,626,806 $ 20,323,046
----------------- ------------------
Class Y
Issued from the sale of shares 2,188,284 $ 27,043,724
Issued in connection with the reinvestment of distributions 53,613 656,760
Redeemed (1,582,610) (19,004,112)
----------------- ------------------
Net Change 659,287 $ 8,696,372
----------------- ------------------
Increase (decrease) from capital share transactions 3,121,832 $ 39,428,816
================= ==================
* For Class A and C, from commencement of Class operations on February 1, 2006
through September 30, 2006.
Six Months Ended
March 31, 2007
-------------------------------------
Growth Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 4,289,536 $ 26,330,021
Issued in connection with the reinvestment of distributions -- --
Redeemed (8,810,344) (53,915,345)
----------------- ------------------
Net Change (4,520,808) $ (27,585,324)
----------------- ------------------
Class B
Issued from the sale of shares 149,467 $ 892,206
Issued in connection with the reinvestment of distributions -- --
Redeemed (1,028,971) (6,135,944)
----------------- ------------------
Net Change (879,504) $ (5,243,738)
----------------- ------------------
Class C
Issued from the sale of shares 905,494 $ 5,439,037
Issued in connection with the reinvestment of distributions -- --
Redeemed (2,231,435) (13,348,512)
----------------- ------------------
Net Change (1,325,941) $ (7,909,475)
----------------- ------------------
Class Y
Issued from the sale of shares 1,597,217 $ 10,245,915
Issued in connection with the reinvestment of distributions -- --
Redeemed (5,156,436) (33,374,535)
----------------- ------------------
Net Change (3,559,219) $ (23,128,620)
----------------- ------------------
Increase (decrease) from capital share transactions (10,285,472) $ (63,867,157)
================= ==================
Year Ended
September 30, 2006
-------------------------------------
Growth Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 40,187,712 $ 245,315,502
Issued in connection with the reinvestment of distributions -- --
Redeemed (10,033,651) (60,439,234)
----------------- ------------------
Net Change 30,154,061 $ 184,876,268
----------------- ------------------
Class B
Issued from the sale of shares 848,742 $ 5,201,694
Issued in connection with the reinvestment of distributions -- --
Redeemed (1,694,388) (9,952,368)
----------------- ------------------
Net Change (845,646) $ (4,750,674)
----------------- ------------------
Class C
Issued from the sale of shares 5,001,950 $ 30,681,945
Issued in connection with the reinvestment of distributions -- --
Redeemed (1,726,785) (9,971,161)
----------------- ------------------
Net Change 3,275,165 $ 20,710,784
----------------- ------------------
Class Y
Issued from the sale of shares 8,530,418 $ 55,495,055
Issued in connection with the reinvestment of distributions -- --
Redeemed (3,799,646) (23,302,302)
----------------- ------------------
Net Change 4,730,772 $ 32,192,753
----------------- ------------------
Increase (decrease) from capital share transactions 37,314,352 $ 233,029,131
================= ==================
36
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
Six Months Ended
March 31, 2007
-------------------------------------
Research Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 70,242 $ 617,518
Issued in connection with the reinvestment of distributions 5,961 51,978
Redeemed (21,455) (191,124)
----------------- ------------------
Net Change 54,748 $ 478,372
----------------- ------------------
Class B
Issued from the sale of shares 10,418 $ 95,671
Issued in connection with the reinvestment of distributions 3,004 25,776
Redeemed (5,615) (48,266)
----------------- ------------------
Net Change 7,807 $ 73,181
----------------- ------------------
Class C
Issued from the sale of shares 40,247 $ 344,395
Issued in connection with the reinvestment of distributions 603 5,155
Redeemed (15,003) (126,371)
----------------- ------------------
Net Change 25,847 $ 223,179
----------------- ------------------
Class Y
Issued from the sale of shares 328,617 $ 3,056,008
Issued in connection with the reinvestment of distributions 353,735 3,098,721
Redeemed (245,907) (2,213,538)
----------------- ------------------
Net Change 436,445 $ 3,941,191
----------------- ------------------
Increase (decrease) from capital share transactions 524,847 $ 4,715,923
================= ==================
Year Ended
September 30, 2006
-------------------------------------
Research Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 152,482 $ 1,403,452
Issued in connection with the reinvestment of distributions 2,619 23,856
Redeemed (51,170) (465,833)
----------------- ------------------
Net Change 103,931 $ 961,475
----------------- ------------------
Class B
Issued from the sale of shares 22,642 $ 206,776
Issued in connection with the reinvestment of distributions 646 5,804
Redeemed (10,558) (95,896)
----------------- ------------------
Net Change 12,730 $ 116,684
----------------- ------------------
Class C
Issued from the sale of shares 124,848 $ 1,124,378
Issued in connection with the reinvestment of distributions 183 1,639
Redeemed (10,548) (95,088)
----------------- ------------------
Net Change 114,483 $ 1,030,929
----------------- ------------------
Class Y
Issued from the sale of shares 281,350 $ 2,561,233
Issued in connection with the reinvestment of distributions 153,010 1,398,512
Redeemed (660,327) (6,199,627)
----------------- ------------------
Net Change (225,967) $ (2,239,882)
----------------- ------------------
Increase (decrease) from capital share transactions 5,177 $ (130,794)
================= ==================
37
[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles Mid Cap Growth Fund
(formerly Loomis Sayles Aggressive Growth Fund)
Loomis Sayles Small Cap Growth Fund
Loomis Sayles Small Cap Value Fund
Loomis Sayles Tax-Managed Equity Fund
Loomis Sayles Value Fund
TABLE OF CONTENTS
Fund and Manager Review 1
Portfolio of Investments 14
Statements of Assets and Liabilities 37
Statements of Operations 39
Statements of Changes in Net Assets 41
Financial Highlights 45
Notes to Financial Statements 51
SEMIANNUAL REPORT
MARCH 31, 2007 (Unaudited)
FUND AND MANAGER REVIEW
LOOMIS SAYLES MID CAP GROWTH FUND
(formerly 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 at least 80% of its net assets (plus any borrowings made
for investment purposes) 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
TOTAL NET ASSETS | $45.9 million
PORTFOLIO REVIEW
The Fund outperformed its Benchmark, the Russell Midcap Growth Index, for the
six months ended March 31, 2007, with our stock selections driving results.
Although performance was broad-based, the Fund benefited from strong
performance in several of our larger holdings, including Precision Castparts,
IntercontinentalExchange and Mettler-Toledo International. The Fund owned 17
stocks that gained more than 20% and only one stock that declined more than 20%
for the six-month period.
In the first half of the period, we tried to navigate the market's
psychological transition from risk aversion to risk acceptance by increasing
exposure to consumer spending themes and companies participating in the capital
markets. In the second half of the period, our primary strategy included
bottom-up stock picking, with a focus on companies with international growth
opportunities.
The consumer discretionary, materials and processing, and financial services
sectors had the greatest positive impact on the Fund's performance. Our
underweight in the consumer discretionary sector detracted from relative
performance, but our stock selections in the retail and apparel industries -
including Guess?, Coach and GameStop - were particularly strong. Our holdings
in materials and processing gained more than 44% during the period, led by
Precision Castparts and Allegheny Technologies, which continued to benefit from
the strong upturn in the commercial aerospace industry. Within the financial
services sector, our diversified financials and capital markets stocks
generated strong performance in January 2007, before retreating in February and
March.
The consumer staples, integrated oils, and autos and transportation sectors
were the only sectors with negative returns for the six-month period. Our
exposure to consumer staples consisted of two beverage companies that
underperformed due to moderating volume growth. We sold both holdings in 2006.
Our integrated oils exposure consisted of one stock, Delta Petroleum, which
declined after announcing the delay of a key exploration project. In autos and
transportation, our single holding, Expeditors International, declined after
reporting a second-consecutive earnings disappointment. Delta and Expeditors
were also sold.
OUTLOOK
Near term, we expect an ongoing pattern of encouraging and discouraging
economic news to keep the market in check. Media attention is likely to remain
focused on the ups and downs of oil prices, the subprime mortgage market,
housing trends and consumer spending. But we believe the most important market
driver is likely to be corporate earnings growth, which most market
participants expect to slow to a more "normalized" level as the economy moves
from recovery to a sustainable-growth mode. Although this is a positive factor
for the longer-term health of the market, it may create short-term challenges
for stock forecasting and analysis. As such, the market is likely to climb at
least one wall of worry during the adjustment period.
1
We continue to expect the economy to ease into a "soft landing," and we believe
the market may begin discounting normalized economic growth during the second
half of the year. Although the path may be bumpy, earnings growth of
approximately 5%, coupled with modest P/E expansion, should help generate high
single-digit market gains for the year.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2007
SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS INCEPTION
-----------------------------------------------------------
LOOMIS SAYLES MID CAP GROWTH: INSTITUTIONAL
14.80% 1.90% 8.36% 11.01% 10.32%
-----------------------------------------------------------
LOOMIS SAYLES MID CAP GROWTH: RETAIL
14.63 1.62 8.07 10.70 10.02
-----------------------------------------------------------
RUSSELL MIDCAP GROWTH INDEX(c)
11.18 6.90 9.45 9.44 8.81
-----------------------------------------------------------
LIPPER MID-CAP GROWTH FUNDS INDEX(c)
12.82 6.22 7.70 8.68 7.17
-----------------------------------------------------------
EXPENSE RATIO: GROSS (before waivers and reimbursements)**
Institutional: 1.12% Retail: 1.52%
-----------------------------------------------------------
EXPENSE RATIO: NET (after waivers and reimbursements)**
Institutional: 1.00% Retail: 1.25%
-----------------------------------------------------------
* Not annualized
** As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
INCEPTION TO MARCH 31, 2007(a)(b)
[CHART]
Loomis Sayles Lipper Mid-Cap
Mid Cap 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
10/31/2006 247,332 186,468 221,877
11/30/2006 258,586 194,224 230,584
12/31/2006 255,276 194,057 228,518
1/31/2007 269,955 200,536 236,834
2/28/2007 268,065 199,967 236,323
3/31/2007 273,641 203,259 237,563
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, if any, without which 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. Unlike the Index, 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
TOTAL NET ASSETS | $25.7 million
PORTFOLIO REVIEW
The Fund outperformed both its Benchmarks, the Russell 2000 Growth Index and
the Russell 2000 Index, during the six months ended March 31, 2007, with our
stock selections in the technology and energy sectors driving results.
We continued to seek out small-cap companies with strong underlying
fundamentals, as well as earnings and revenue growth at faster rates than the
market average.
The Portfolio changes we implemented during the period were prompted by
changing market conditions and underlying company fundamentals. Specifically,
we increased the Fund's weighting in producer durables by adding companies
exposed to aircraft leasing and commercial services. We also increased exposure
to healthcare by purchasing stocks of companies in the biopharmaceutical and
medical device industries. In the consumer discretionary sector, we added
positions in casual dining and retail clothing companies. At the same time, we
reduced our exposure to brokers, asset managers and various technology-related
industries.
All Fund sectors posted positive performance during the period. Technology,
consumer discretionary and healthcare made the greatest contributions to
performance, while the producer durables sector posted the smallest return.
Within technology, Cogent Communications and First Solar were the strongest
contributors. Cogent, an Internet protocol service provider, rose due to
continued strong demand for bandwidth. First Solar, a solar-module maker,
advanced after the company's yearly net income rebounded strongly. In the
consumer discretionary sector, apparel maker Phillips-Van Heusen Corp. and
consulting services provider Lightbridge were the top contributors, advancing
on strong earnings and revenue reports. In healthcare, biotech company Myogen
and medical device company Hologic were the leading contributors. Shares of
Myogen appreciated after Gilead Sciences announced it would acquire the company
and we sold the position. Hologic's stock price benefited from a ratings
upgrade and it remains in the Portfolio.
OUTLOOK
Near term, we expect an ongoing pattern of encouraging and discouraging
economic news to keep the market in check. Media attention is likely to remain
focused on the ups and downs of oil prices, the subprime mortgage market,
housing trends and consumer spending. But we believe the most important market
driver is likely to be corporate earnings growth, which most market
participants expect to slow to a more "normalized" level as the economy moves
from recovery to a sustainable-growth mode. Although this is a positive factor
for the longer-term health of the market, it may create short-term challenges
for stock forecasting and analysis. As such, the market is likely to climb at
least one wall of worry during the adjustment period.
3
We continue to expect the economy to ease into a "soft landing," and we believe
the market may begin discounting normalized economic growth during the second
half of the year. Although the path may be bumpy, earnings growth of
approximately 5%, coupled with modest P/E expansion, should help generate high
single-digit market gains for the year.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2007
SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS INCEPTION
-----------------------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH: INSTITUTIONAL
12.67% 3.44% 6.76% 5.96% 4.16%
-----------------------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH: RETAIL
12.47 3.21 6.48 5.70 3.89
-----------------------------------------------------------
RUSSELL 2000 GROWTH INDEX(c)
11.46 1.56 7.88 6.31 5.01
-----------------------------------------------------------
RUSSELL 2000 INDEX(c)
11.02 5.91 10.95 10.23 9.40
-----------------------------------------------------------
LIPPER SMALL-CAP GROWTH FUNDS INDEX(c)
11.83 1.96 7.26 8.66 7.11
-----------------------------------------------------------
EXPENSE RATIO: GROSS (before waivers and reimbursements)**
Institutional: 1.38% Retail: 1.92%
-----------------------------------------------------------
EXPENSE RATIO: NET (after waivers and reimbursements)**
Institutional: 1.00% Retail: 1.25%
-----------------------------------------------------------
* Not annualized
** As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
INCEPTION TO MARCH 31, 2007(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
10/31/2006 141,682 188,972 157,641 239,309
11/30/2006 143,708 195,344 161,415 245,604
12/31/2006 143,478 195,545 161,031 246,426
1/31/2007 148,528 200,474 164,027 250,550
2/28/2007 150,103 200,093 163,508 248,562
3/31/2007 151,784 202,191 165,018 251,223
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, if any, without which 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. Unlike the Index, the Fund may invest in companies of any size
FUND INCEPTION DATE | 5/13/91
COMMENCEMENT OF OPERATIONS OF CLASS | Institutional: 5/13/91;
Retail: 1/2/97; Admin: 1/2/98
TOTAL NET ASSETS | $947.2 million
PORTFOLIO REVIEW
The Fund outperformed both its Benchmarks, the Russell 2000 Value Index and the
Russell 2000 Index, for the six months ended March 31, 2007, with stock
selection and sector weightings making positive contributions to performance.
In addition, our high-quality orientation paid off in the second half of the
period. As market volatility increased, riskier micro-cap stocks and
unprofitable small-company stocks underperformed.
All sectors generated positive returns for the Fund, with the materials and
processing, and consumer discretionary sectors performing especially well and
making the strongest contributions to Fund performance. Returns from these
economically sensitive sectors generally reflected investor perceptions that US
economic growth would slow, but not enough for a recession. In particular,
basic materials companies Chaparral Steel, Reliance Steel and Texas Industries
were strong on continued infrastructure spending trends. In the consumer
discretionary sector, several retail holdings experienced turnarounds as a
result of new operating and merchandising strategies, including Jo-Ann Stores,
CEC Entertainment and Dollar Tree Stores.
Although returns in the financial sector remained positive, financial stocks
were the weakest performers during the period, primarily reflecting problems in
the housing and subprime lending markets, which raised concerns about credit
quality throughout the entire sector. Nevertheless, our high-quality holdings
and underweight position in the sector contributed favorably to the Fund's
relative performance.
Healthcare, autos and transportation made the smallest contributions to Fund
performance for the period ended March 31, 2007 primarily because of their
relatively small weightings within the Portfolio. Energy was also
underweighted, but the decline in oil and gas prices during the fourth quarter
detracted from performance.
The most significant change in sector weightings was a reduction in financial
services. Although profit-taking in the REIT (real estate investment trust)
industry played a small role in this change, our concerns about widening credit
risk and margin pressures caused us to trim the Fund's exposure to banks and
other holdings related to the credit markets. We redeployed the proceeds into
consumer discretionary stocks, where we moved from an underweight position to a
close-to-Benchmark weighting. We also increased exposure to producer durables,
as several new ideas emerged during the period.
OUTLOOK
Near term, we expect an ongoing pattern of encouraging and discouraging
economic news to keep the market in check. Media attention is likely to remain
focused on the ups and downs of oil prices, the subprime mortgage market,
housing trends and consumer spending. But we believe the most important market
driver is likely to be corporate earnings growth, which most market
participants expect to slow to a more "normalized" level, as the economy moves
from recovery to a sustainable-growth mode. Although this is a positive factor
for the
5
longer-term health of the market, it may create short-term challenges for stock
forecasting and analysis. As such, the market is likely to climb at least one
wall of worry during the adjustment period.
We continue to expect the economy to ease into a "soft landing," and we believe
the market may begin discounting normalized economic growth during the second
half of the year. Although the path may be bumpy, earnings growth of
approximately 5%, coupled with modest P/E expansion, should help generate high
single-digit market gains for the year.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2007
SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS INCEPTION(a)(b)
----------------------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: INSTITUTIONAL
12.42% 9.54% 11.88% 12.80% 15.25%
----------------------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: RETAIL(a)
12.28 9.25 11.60 12.50 15.05
----------------------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: ADMIN(a)
12.10 8.97 11.32 12.17 14.69
----------------------------------------------------------------
RUSSELL 2000 VALUE INDEX(c)
10.62 10.38 13.61 13.46 15.00
----------------------------------------------------------------
RUSSELL 2000 INDEX(c)
11.02 5.91 10.95 10.23 11.75
----------------------------------------------------------------
LIPPER SMALL-CAP CORE FUNDS INDEX(b)(c)
11.46 5.06 10.41 11.29 N/A
----------------------------------------------------------------
EXPENSE RATIO: GROSS (before waivers and reimbursements)**
Institutional: 0.90% Retail: 1.20% Admin: 1.46%
----------------------------------------------------------------
EXPENSE RATIO: NET (after waivers and reimbursements)**
Institutional: 0.90% Retail: 1.15% Admin: 1.40%
----------------------------------------------------------------
* Not annualized.
** As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
INCEPTION TO MARCH 31, 2007 (d)(e)
[CHART]
Loomis
Sayles Lipper Small Russell
Small Cap -Cap Core Funds 2000 Value Russell
Value Fund Index(a)(b)(c) Index(a)(c) 2000 Index(a)(c)
---------- -------------- ------------ ----------------
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
10/31/2006 879,042 524,245 878,362 558,498
11/30/2006 904,447 539,530 903,408 573,189
12/31/2006 912,135 540,402 911,278 575,108
1/31/2007 934,208 550,058 924,929 584,732
2/28/2007 938,319 551,294 913,569 580,092
3/31/2007 953,144 557,369 924,595 586,303
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, if any, without which 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
TOTAL NET ASSETS | $5.6 million
PORTFOLIO REVIEW
The Fund underperformed its Benchmark, the S&P 500 Index, during the six months
ended March 31, 2007. Overall, the performance contribution from our stock
selections was positive. However, the Fund's cash position reduced performance
by approximately 47 basis points and the Fund did not hold any utilities
stocks. The utility sector was the second-best performer in the S&P 500 during
the period. This reduced the Fund's performance by approximately 37 basis
points as compared to the Benchmark.
We continued to overweight sectors characterized by companies with strong
earnings growth. Specifically, we focused on high-quality companies with
accelerating business models and special-situation stocks with attractive
valuations.
The financials and consumer discretionary sectors made the greatest
contributions to relative performance. Although the Fund was underweight in
each sector relative to the S&P 500, strong stock selection contributed to
positive returns. For example, in the financials sector, Goldman Sachs
appreciated more than 20%, while Franklin Resources advanced more than 14%. In
the consumer discretionary sector, Marriott advanced 27% and DIRECTV gained
more than 17%.
The Fund experienced positive absolute returns from each sector, but the
materials, information technology and utilities sectors had the most negative
impact on the Fund's relative performance. In the materials sector,
commodity-sensitive stocks were the best performers. However, the Fund did not
have direct exposure to commodities; rather, we preferred to own Ecolab and
Praxair because of their consistent earnings-growth characteristics. In the
information technology sector, negative returns from Texas Instruments,
Motorola, Corning and DSP Group offset positive returns from Cisco,
Hewlett-Packard and QUALCOMM. The Fund continues to hold its positions in Texas
Instruments, Motorola and Corning because of their attractive valuations and
positive long-term earnings prospects. We sold the entire position in DSP Group
because we reduced our earnings growth forecasts for the company. We continued
to avoid utilities because the sector is at the high end of its historic P/E
range and the low end of its dividend-yield range.
OUTLOOK
Near term, we expect an ongoing pattern of encouraging and discouraging
economic news to keep the market in check. Media attention is likely to remain
focused on the ups and downs of oil prices, the subprime mortgage market,
housing trends and consumer spending. But we believe the most important market
driver is likely to be corporate earnings growth, which most market
participants expect to slow to a more "normalized" level, as the economy moves
from recovery to a sustainable-growth mode. Although this is a positive factor
for the longer-term health of the market, it may create short-term challenges
for stock forecasting and analysis. As such, the market is likely to climb at
least one wall of worry during the adjustment period.
We continue to expect the economy to ease into a "soft landing," and we expect
the market to begin discounting normalized economic growth during the second
half of the year. Although the path may be bumpy, earnings
7
growth of approximately 5%, coupled with modest P/E expansion, should help
generate high single-digit market gains for the year.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2007
SINCE SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS REGISTRATION(a)(b) INCEPTION(a)(b)
----------------------------------------------------------------------
LOOMIS SAYLES TAX MANAGED EQUITY: INSTITUTIONAL
6.43% 10.78% 6.08% 9.99% 9.33% 10.28%
----------------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS(c)
6.14 10.48 5.83 6.99 6.36 7.61
----------------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND SHARES(c)
4.17 7.00 5.12 7.00 6.42 7.52
----------------------------------------------------------------------
S&P 500 INDEX(c)
7.38 11.83 6.27 8.20 7.68 9.85
----------------------------------------------------------------------
LIPPER LARGE-CAP CORE FUNDS INDEX(c)
7.34 9.77 5.16 7.27 6.75 8.52
----------------------------------------------------------------------
EXPENSE RATIO: GROSS (before waivers and reimbursements)**
Institutional: 1.64%
----------------------------------------------------------------------
EXPENSE RATIO: NET (after waivers and reimbursements)**
Institutional: 0.65%
----------------------------------------------------------------------
* Not annualized
** As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
REGISTRATION TO MARCH 31, 2007(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
10/31/2006 59,626 50,718 46,480
11/30/2006 60,437 51,682 47,388
12/31/2006 61,416 52,407 47,868
1/31/2007 62,976 53,200 48,645
2/28/2007 61,301 52,160 47,804
3/31/2007 62,049 52,743 48,282
INCEPTION TO MARCH 31, 2007(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
10/31/2006 73,989 70,799 61,602
11/30/2006 74,995 72,145 62,806
12/31/2006 76,210 73,157 63,443
1/31/2007 78,145 74,263 64,471
2/28/2007 76,067 72,811 63,357
3/31/2007 76,995 73,625 63,991
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, if any,
without which 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
TOTAL NET ASSETS | $150.0 million
PORTFOLIO REVIEW
Strong, bottom-up stock selection continued to drive the Fund's performance,
which outpaced the Benchmark, Russell 1000 Value Index, for the six months
ended March 31, 2007.
We decreased the Fund's market-sensitive exposure by reducing the Fund's
weighting in financial services. These stocks had performed well throughout the
last two years, so taking profits seemed prudent. Additionally, we increased
our consumer staples exposure by adding Coca-Cola Enterprises to the Portfolio.
The stock was selling near the bottom of a 10-year valuation range, and given
the low expectations, we believe downside risk is limited. We also believe the
company's new CEO may be the catalyst to move the stock upward.
Most sectors contributed positively to the Fund's six-month return, led by the
consumer discretionary sector. The majority of our holdings in this area
generated double-digit returns, including OSI Restaurant Partners, Dollar
General, DIRECTV and News Corp. Utilities stocks also performed well, due to a
favorable backdrop of low interest rates and slowing economic growth, combined
with growing demand for electricity and the likelihood of strong future
infrastructure investment.
One of the Fund's top-performing utilities stocks, AT&T, continued its run of
solid performance after completing its BellSouth acquisition late in 2006. This
leading US phone company expects double-digit sales growth annually in Asia
throughout the next few years, thanks to robust demand in India and China.
Poor performers were stock-specific, rather than sector-wide. For example, our
position in Motorola detracted from performance. The company's cell phone
business continued to struggle, due to increasing pressure to match the success
of the RAZR line. The company cut sales forecasts, and in January announced
3,500 corporate-wide layoffs. Office Depot also detracted from performance
after announcing weak sales in its technology division.
OUTLOOK
Near term, we expect an ongoing pattern of encouraging and discouraging
economic news to keep the market in check. Media attention is likely to remain
focused on the ups and downs of oil prices, the subprime mortgage market,
housing trends and consumer spending. But we believe the most important market
driver is likely to be corporate earnings growth, which most market
participants expect to slow to a more "normalized" level, as the economy moves
from recovery to a sustainable-growth mode. Although this is a positive factor
for the longer-term health of the market, it may create short-term challenges
for stock forecasting and analysis. As such, the market is likely to climb at
least one wall of worry during the adjustment period.
We continue to expect the economy to ease into a "soft landing," and we believe
the market may begin discounting normalized economic growth during the
9
second half of the year. Although the path may be bumpy, earnings growth of
approximately 5%, coupled with modest P/E expansion, should help generate high
single-digit market gains for the year.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED MARCH 31, 2007
SINCE
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS INCEPTION(a)
------------------------------------------------------------
LOOMIS SAYLES VALUE: INSTITUTIONAL
9.98% 18.11% 11.14% 9.20% 11.31%
------------------------------------------------------------
LOOMIS SAYLES VALUE: RETAIL(a)
9.82 17.83 10.86 8.85 10.72
------------------------------------------------------------
RUSSELL 1000 VALUE INDEX(b)
9.34 16.83 10.25 10.85 12.95
------------------------------------------------------------
LIPPER LARGE-CAP VALUE FUNDS INDEX(b)
7.82 14.14 7.42 8.43 10.89
------------------------------------------------------------
EXPENSE RATIO: GROSS (before waivers and reimbursements)**
Institutional: 0.91% Retail: 8.65%
------------------------------------------------------------
EXPENSE RATIO: NET (after waivers and reimbursements)**
Institutional: 0.85% Retail: 1.10%
------------------------------------------------------------
* Not annualized
** As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
INCEPTION TO MARCH 31, 2007(c)(d)
[CHART]
Russell 1000 Lipper Large-Cap
Loomis Sayles Value Value Funds
Value Fund Index(a)(b) 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
10/31/2006 517,025 656,533 494,784
11/30/2006 526,745 671,521 503,320
12/31/2006 540,124 686,595 514,182
1/31/2007 550,062 695,376 520,793
2/28/2007 537,411 684,535 511,506
3/31/2007 548,320 695,118 518,036
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, if any, without which 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 October 1,
2006 through March 31, 2007. 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 MID CAP GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,148.00 $5.36
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04
Retail Class
- ------------
Actual $1,000.00 $1,146.30 $6.69
Hypothetical (5% return before expenses) $1,000.00 $1,018.70 $6.29
*Expenses are equal to the Fund's annualized expense ratio of 1.00% and 1.25% for the Institutional and Retail Class,
respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the half year period).
LOOMIS SAYLES SMALL CAP GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,126.70 $5.30
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.04
Retail Class
- ------------
Actual $1,000.00 $1,124.70 $6.62
Hypothetical (5% return before expenses) $1,000.00 $1,018.70 $6.29
*Expenses are equal to the Fund's annualized expense ratio of 1.00% and 1.25% for the Institutional and Retail Class,
respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the half-year period).
LOOMIS SAYLES SMALL CAP VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,124.20 $4.61
Hypothetical (5% return before expenses) $1,000.00 $1,020.59 $4.38
Retail Class
- ------------
Actual $1,000.00 $1,122.80 $6.09
Hypothetical (5% return before expenses) $1,000.00 $1,019.20 $5.79
Admin Class
- -----------
Actual $1,000.00 $1,121.00 $7.40
Hypothetical (5% return before expenses) $1,000.00 $1,017.95 $7.04
*Expenses are equal to the Fund's annualized expense ratio of 0.87%, 1.15% and 1.40% for the Institutional, Retail and
Admin Class, respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the half-
year period).
12
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,064.30 $3.35
Hypothetical (5% return before expenses) $1,000.00 $1,021.69 $3.28
*Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied by the average account value over the period,
multiplied by 182/365 (to reflect the half-year period).
LOOMIS SAYLES VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 10/1/06 3/31/07 10/1/06 - 3/31/07
- ------------------- ------------- ------------- -----------------
Actual $1,000.00 $1,099.80 $3.77
Hypothetical (5% return before expenses) $1,000.00 $1,021.34 $3.63
Retail Class
- ------------
Actual $1,000.00 $1,098.20 $5.75
Hypothetical (5% return before expenses) $1,000.00 $1,019.45 $5.54
*Expenses are equal to the Fund's annualized expense ratio of 0.72% and 1.10% for the Institutional and Retail Class,
respectively, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the half-year period).
13
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES MID CAP GROWTH FUND
SHARES VALUE (+)
- ------------------------------------------------------------------------------
COMMON STOCKS - 97.1% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 6.7%
BE Aerospace, Inc.(b) 20,824 $ 660,121
Precision Castparts Corp.(c) 14,723 1,531,928
Rockwell Collins, Inc.(c) 13,425 898,535
----------
3,090,584
----------
BIOTECHNOLOGY - 2.4%
Celgene Corp.(b)(c) 13,100 687,226
Theravance, Inc.(b)(c) 14,219 419,460
----------
1,106,686
----------
CAPITAL MARKETS - 2.7%
GFI Group, Inc.(b)(c) 7,006 476,198
Lazard Ltd., Class A(c) 15,375 771,517
----------
1,247,715
----------
COMMERCIAL SERVICES & SUPPLIES - 5.9%
Corrections Corp. of America(b)(c) 13,100 691,811
Stericycle, Inc.(b)(c) 13,225 1,077,837
TeleTech Holdings, Inc.(b)(c) 26,024 954,821
----------
2,724,469
----------
DIVERSIFIED CONSUMER SERVICES - 2.1%
New Oriental Education & Technology Group, Inc., ADR(b)(c) 11,096 449,721
Sotheby's 11,141 495,552
----------
945,273
----------
DIVERSIFIED FINANCIAL SERVICES - 5.6%
Chicago Mercantile Exchange Holdings, Inc. 2,050 1,091,543
IntercontinentalExchange, Inc.(b) 8,127 993,201
Nymex Holdings, Inc.(b) 3,600 488,736
----------
2,573,480
----------
ELECTRICAL EQUIPMENT - 1.5%
Roper Industries, Inc. 12,870 706,306
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.1%
Mettler-Toledo International, Inc.(b) 16,075 1,439,838
----------
ENERGY EQUIPMENT & SERVICES - 3.7%
Dril-Quip, Inc.(b)(c) 10,450 452,276
Noble Corp. 9,350 735,658
Oceaneering International, Inc.(b)(c) 11,555 486,697
----------
1,674,631
----------
FOOD PRODUCTS - 1.5%
Bunge Ltd. 8,273 680,206
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 2.2%
Hologic, Inc.(b)(c) 17,375 1,001,495
----------
HEALTHCARE PROVIDERS & SERVICES - 2.1%
Psychiatric Solutions, Inc.(b)(c) 23,427 944,342
----------
HOTELS, RESTAURANTS & LEISURE - 3.2%
Ctrip.com International Ltd., ADR(b)(c) 7,100 475,594
Wynn Resorts Ltd.(c) 10,485 994,607
----------
1,470,201
----------
14
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES MID CAP GROWTH FUND - CONTINUED
SHARES VALUE (+)
- -----------------------------------------------------------------------
COMMON STOCKS - CONTINUED
INDEPENDENT POWER PRODUCER & ENERGY - 4.7%
AES Corp.(b) 38,750 $ 833,900
NRG Energy, Inc.(b)(c) 18,600 1,339,944
----------
2,173,844
----------
INDUSTRIAL CONGLOMERATES - 1.5%
McDermott International, Inc.(b) 13,774 674,650
----------
INTERNET SOFTWARE & SERVICES - 4.0%
Akamai Technologies, Inc.(b)(c) 21,025 1,049,568
Equinix, Inc.(b)(c) 9,131 781,888
----------
1,831,456
----------
IT SERVICES - 4.2%
Cognizant Technology Solutions Corp., Class A(b)(c) 14,852 1,310,986
VeriFone Holdings, Inc.(b)(c) 17,315 635,980
----------
1,946,966
----------
MACHINERY - 1.5%
AGCO Corp.(b)(c) 18,281 675,849
----------
MEDIA - 2.5%
Focus Media Holding Ltd., ADR(b) 5,535 434,276
Lamar Advertising Co., Class A(c) 11,656 733,978
----------
1,168,254
----------
METALS & MINING - 4.9%
Allegheny Technologies, Inc.(c) 10,650 1,136,249
Yamana Gold, Inc.(c) 78,062 1,120,970
----------
2,257,219
----------
PHARMACEUTICALS - 1.5%
Shire PLC, ADR(c) 10,997 680,714
----------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 3.4%
CB Richard Ellis Group, Inc., Class A(b)(c) 17,935 613,018
Jones Lang LaSalle, Inc.(c) 9,265 966,154
----------
1,579,172
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.5%
MEMC Electronic Materials, Inc.(b) 18,785 1,137,995
----------
SOFTWARE - 3.6%
Autodesk, Inc.(b) 16,896 635,290
Salesforce.com, Inc.(b)(c) 23,300 997,706
----------
1,632,996
----------
SPECIALTY RETAIL - 4.0%
GameStop Corp., Class A(b)(c) 25,970 845,843
Guess?, Inc.(c) 24,680 999,293
----------
1,845,136
----------
TEXTILES APPAREL & LUXURY GOODS - 3.9%
Coach, Inc.(b)(c) 20,620 1,032,031
Polo Ralph Lauren Corp.(c) 8,775 773,516
----------
1,805,547
----------
15
SHARES VALUE (+)
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
WIRELESS TELECOMMUNICATION SERVICES - 12.2%
American Tower Corp., Class A(b) 18,150 $ 706,942
Leap Wireless International, Inc.(b)(c) 10,567 697,211
Millicom International Cellular SA(b)(c) 16,276 1,275,387
NII Holdings, Inc.(b)(c) 20,420 1,514,756
Rogers Communications, Inc., Class B 22,350 732,186
Vimpel-Communications, ADR(b) 7,299 692,238
-------------
5,618,720
-------------
TOTAL COMMON STOCKS
(Identified Cost $35,925,034) 44,633,744
-------------
PRINCIPAL AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 26.0%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 3/30/07 at 4.250% to be
repurchased at $1,095,388 on 4/02/07 collateralized by
$1,130,000 U.S. Treasury Bill, 4.880% due 5/31/07 with
a value of $1,120,113, including accrued interest (Note
2g of Notes to Financial Statements) $ 1,095,000 1,095,000
-------------
SHARES
- -------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(d) 10,839,584 10,839,584
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $11,934,584) 11,934,584
-------------
TOTAL INVESTMENTS - 123.1%
(Identified Cost $47,859,618)(a) 56,568,328
Other assets less liabilities--(23.1)% (10,626,021)
-------------
TOTAL NET ASSETS - 100.0% $ 45,942,307
-------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2007, the net unrealized appreciation on investments based on cost of $47,859,618 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 $ 8,988,876
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (280,166)
-------------
Net unrealized appreciation $ 8,708,710
-------------
(b)Non-income producing security.
(c)All or a portion of this security was on loan at March 31, 2007.
(d)Represents investments 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 ADRs are significantly influenced by trading on
exchanges not located in the United States.
16
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES MID CAP GROWTH FUND - CONTINUED
HOLDINGS AT MARCH 31, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Wireless Telecommunication Services 12.2%
Aerospace & Defense 6.7
Commercial Services & Supplies 5.9
Diversified Financial Services 5.6
Metals & Mining 4.9
Independent Power Producer & Energy 4.7
IT Services 4.2
Specialty Retail 4.0
Internet Software & Services 4.0
Textiles Apparel & Luxury Goods 3.9
Energy Equipment & Services 3.7
Software 3.6
Real Estate Management & Development 3.4
Hotels, Restaurants & Leisure 3.2
Electronic Equipment & Instruments 3.1
Capital Markets 2.7
Media 2.5
Semiconductors & Semiconductor Equipment 2.5
Biotechnology 2.4
Healthcare Equipment & Supplies 2.2
Diversified Consumer Services 2.1
Healthcare Providers & Services 2.1
Other, less than 2% each 7.5
See accompanying notes to financial statements.
17
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES SMALL CAP GROWTH FUND
SHARES VALUE (+)
- ------------------------------------------------------------------------------
COMMON STOCKS - 97.2% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 1.3%
Moog, Inc., Class A(b)(c) 8,203 $ 341,655
----------
BIOTECHNOLOGY - 3.9%
BioMarin Pharmaceutical, Inc.(b)(c) 9,885 170,615
Indevus Pharmaceuticals, Inc.(b)(c) 23,765 168,019
Metabolix, Inc.(b)(c) 10,210 169,792
Myriad Genetics, Inc.(b)(c) 4,835 166,614
Pharmion Corp.(b)(c) 6,930 182,190
Theravance, Inc.(c) 5,275 155,612
----------
1,012,842
----------
CAPITAL MARKETS - 2.1%
FCStone Group, Inc.(b)(c) 6,325 236,049
GFI Group, Inc.(b)(c) 4,535 308,244
----------
544,293
----------
COMMERCIAL BANKS - 0.7%
East West Bancorp, Inc.(b) 4,905 180,357
----------
COMMERCIAL SERVICES & SUPPLIES - 11.4%
Advisory Board Co.,(b)(c) 8,699 440,343
American Reprographics Co.,(b)(c) 7,890 242,933
CRA International, Inc.(b)(c) 7,028 366,721
FTI Consulting, Inc.(b)(c) 9,321 313,092
Huron Consulting Group, Inc.(b)(c) 3,606 219,389
IHS, Inc., Class A(b)(c) 6,705 275,643
Interface, Inc., Class A 16,625 265,834
Kenexa Corp.(b)(c) 8,955 278,769
On Assignment, Inc.(b)(c) 22,695 281,645
Waste Connections, Inc.(c) 8,610 257,784
----------
2,942,153
----------
COMMUNICATIONS EQUIPMENT - 3.5%
C-COR, Inc.(b)(c) 12,085 167,498
Foundry Networks, Inc.(b)(c) 20,535 278,660
Harmonic, Inc.(b)(c) 22,640 222,325
Sonus Networks, Inc.(b)(c) 28,730 231,851
----------
900,334
----------
COMPUTERS & PERIPHERALS - 1.3%
Brocade Communications Systems, Inc.(b)(c) 33,748 321,281
----------
DIVERSIFIED CONSUMER SERVICES - 5.7%
Bright Horizons Family Solutions, Inc.(b)(c) 6,851 258,625
DeVry, Inc.(b) 10,298 302,246
Laureate Education, Inc.(c) 2,618 154,384
New Oriental Education & Technology Group, Inc., ADR(b)(c) 5,394 218,619
Sotheby's(b) 5,620 249,978
Steiner Leisure Ltd.(c) 6,485 291,695
----------
1,475,547
----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 0.9%
Cogent Communications Group, Inc.(b)(c) 10,001 236,324
----------
ELECTRICAL EQUIPMENT - 0.7%
First Solar, Inc.(c) 3,456 179,747
----------
18
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES SMALL CAP GROWTH FUND - CONTINUED
SHARES VALUE (+)
- ----------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.6%
IPG Photonics Corp.(c) 8,226 $ 157,939
----------
ENERGY EQUIPMENT & SERVICES - 2.4%
Dril-Quip, Inc.(b)(c) 3,440 148,883
Tesco Corp.(c) 7,990 212,134
Universal Compression Holdings, Inc.(b)(c) 3,720 251,770
----------
612,787
----------
HEALTH CARE TECHNOLOGY - 2.8%
Allscripts Healthcare Solutions, Inc.(b)(c) 9,734 260,968
Phase Forward, Inc.(c) 17,375 228,134
Vital Images, Inc.(b)(c) 6,960 231,490
----------
720,592
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 8.1%
Hologic, Inc.(b)(c) 5,300 305,492
Inverness Medical Innovations, Inc.(b)(c) 9,125 399,492
Kyphon, Inc.(c) 5,728 258,562
Meridian Bioscience, Inc. 8,335 231,380
NuVasive, Inc.(b)(c) 12,710 301,862
PolyMedica Corp.(b) 7,618 322,470
Viasys Healthcare, Inc.(c) 7,796 264,986
----------
2,084,244
----------
HEALTHCARE PROVIDERS & SERVICES - 4.6%
inVentiv Health, Inc.(b)(c) 11,175 427,891
NovaMed, Inc.(c) 28,320 183,514
Radiation Therapy Services, Inc.(b)(c) 8,857 271,378
Sun Healthcare Group, Inc.(b)(c) 24,395 301,278
----------
1,184,061
----------
HOTELS, RESTAURANTS & LEISURE - 4.3%
Chipotle Mexican Grill, Inc., Class A(b)(c) 5,230 324,783
Life Time Fitness, Inc.(b)(c) 4,855 249,596
McCormick & Schmick's Seafood Restaurants, Inc.(c) 10,015 268,502
Pinnacle Entertainment, Inc.(c) 9,075 263,810
----------
1,106,691
----------
HOUSEHOLD DURABLES - 1.2%
Jarden Corp.(c) 8,139 311,724
----------
INSURANCE - 3.0%
Arch Capital Group Ltd.(b)(c) 4,365 297,736
Argonaut Group, Inc.(c) 7,205 233,154
ProAssurance Corp.(b)(c) 4,880 249,612
----------
780,502
----------
INTERNET SOFTWARE & SERVICES - 3.8%
aQuantive, Inc.(b)(c) 11,616 324,203
Online Resources Corp.(b)(c) 16,922 194,095
VistaPrint Ltd.(b)(c) 7,310 279,973
Websense, Inc.(b)(c) 7,645 175,758
----------
974,029
----------
IT SERVICES - 2.6%
Lightbridge, Inc.(c) 14,153 248,668
Syntel, Inc. 6,851 237,387
19
SHARES VALUE (+)
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - CONTINUED
Tyler Technologies, Inc.(b)(c) 14,035 $ 178,245
----------
664,300
----------
LEISURE EQUIPMENT & PRODUCTS - 0.9%
Smith & Wesson Holding Corp.(b)(c) 17,660 231,169
----------
LIFE SCIENCES TOOLS AND SERVICES - 0.5%
Exelixis, Inc.(c) 13,641 135,592
----------
MACHINERY - 3.0%
American Science & Engineering, Inc.(b)(c) 2,635 138,785
Middleby Corp.(b)(c) 2,315 305,210
RBC Bearings, Inc.(c) 9,520 318,254
----------
762,249
----------
MEDIA - 2.3%
Knology, Inc.(b)(c) 17,480 276,708
Morningstar, Inc.(b)(c) 5,895 304,418
----------
581,126
----------
METALS & MINING - 1.2%
Northwest Pipe Co.(b)(c) 7,670 305,496
----------
OIL, GAS & CONSUMABLE FUELS - 3.1%
Arena Resources, Inc.(b)(c) 4,220 211,506
Exploration Co. of Delaware, Inc.(b)(c) 16,610 180,218
Helix Energy Solutions Group, Inc.(b)(c) 5,920 220,757
Petrohawk Energy Corp.(b)(c) 13,545 178,388
----------
790,869
----------
PHARMACEUTICALS - 0.8%
Santarus, Inc.(b)(c) 27,675 194,832
----------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 1.0%
Jones Lang LaSalle, Inc. 2,445 254,965
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 5.6%
ATMI, Inc.(b)(c) 7,841 239,699
Cypress Semiconductor Corp.(b)(c) 10,655 197,650
Netlogic Microsystems, Inc.(b)(c) 9,784 260,450
Rudolph Technologies, Inc.(b)(c) 11,840 206,490
Tessera Technologies, Inc.(c) 8,805 349,911
Volterra Semiconductor Corp.(b)(c) 14,925 194,920
----------
1,449,120
----------
SOFTWARE - 5.5%
Blackboard, Inc.(b)(c) 9,300 312,759
Glu Mobile, Inc.(b)(c) 11,401 114,010
Informatica Corp.(b)(c) 19,830 266,317
Opsware, Inc.(b)(c) 32,085 232,616
Quest Software, Inc.(b)(c) 10,385 168,964
Ultimate Software Group, Inc.(b)(c) 11,890 311,399
----------
1,406,065
----------
SPECIALTY RETAIL - 1.1%
Dick's Sporting Goods, Inc.(b)(c) 4,755 277,026
----------
20
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES SMALL CAP GROWTH FUND -- CONTINUED
SHARES VALUE (+)
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
TEXTILES APPAREL & LUXURY GOODS - 3.9%
Movado Group, Inc.(b) 8,968 $ 264,107
Phillips-Van Heusen Corp. 4,585 269,598
Quiksilver, Inc.(b)(c) 19,815 229,854
Volcom, Inc.(c) 6,755 232,102
------------
995,661
------------
THRIFTS & MORTGAGE FINANCE - 0.9%
PFF Bancorp, Inc.(b) 7,670 232,631
------------
TRADING COMPANIES & DISTRIBUTORS - 1.3%
Aircastle Ltd.(b) 9,670 342,125
------------
WIRELESS TELECOMMUNICATION SERVICES - 1.2%
SBA Communications Corp., Class A(b)(c) 10,850 320,618
------------
TOTAL COMMON STOCKS
(Identified Cost $21,127,816) 25,010,946
------------
PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 28.7%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 3/30/07 at 4.250% to be
repurchased at $809,287 on 4/02/07 collateralized by
$850,000 U.S. Treasury Bill, 4.900% due 9/27/07 with
a value of $829,600 including accrued interest
(Note 2g of Notes to Financial Statements) $ 809,000 809,000
------------
SHARES
- ------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(d) 6,576,138 6,576,138
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $7,385,138) $ 7,385,138
------------
TOTAL INVESTMENTS - 125.9%
(Identified Cost $28,512,954)(a) 32,396,084
Other assets less liabilities--(25.9)% (6,657,538)
------------
TOTAL NET ASSETS - 100.0% $ 25,738,546
------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2007, the net unrealized appreciation on investments based on cost of $28,512,954 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of value over tax cost $ 4,229,862
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (346,732)
------------
Net unrealized appreciation $ 3,883,130
------------
(b)All or a portion of this security was on loan at March 31, 2007.
(c)Non-income producing security.
(d)Represents investments 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 ADRs are significantly influenced by trading on
exchanges not located in the United States.
21
HOLDINGS AT MARCH 31, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Commercial Services & Supplies 11.4%
Healthcare Equipment & Supplies 8.1
Diversified Consumer Services 5.7
Semiconductors & Semiconductor Equipment 5.6
Software 5.5
Healthcare Providers & Services 4.6
Hotels, Restaurants & Leisure 4.3
Biotechnology 3.9
Textiles Apparel & Luxury Goods 3.9
Internet Software & Services 3.8
Communications Equipment 3.5
Oil, Gas & Consumable Fuels 3.1
Insurance 3.0
Machinery 3.0
Health Care Technology 2.8
IT Services 2.6
Energy Equipment & Services 2.4
Media 2.3
Capital Markets 2.1
Other, less than 2% each 15.6
See accompanying notes to financial statements.
22
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND
SHARES VALUE (+)
- ---------------------------------------------------------------
COMMON STOCKS - 94.6% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 2.5%
AAR Corp.(b)(c) 234,645 $ 6,466,816
Moog, Inc., Class A(b)(c) 231,250 9,631,562
Teledyne Technologies, Inc.(c) 197,897 7,409,264
-----------
23,507,642
-----------
AUTO COMPONENTS - 0.5%
Gentex Corp.(b) 270,475 4,395,219
-----------
AUTOMOBILES - 0.4%
Winnebago Industries, Inc.(b) 108,625 3,653,059
-----------
BUILDING PRODUCTS - 1.6%
Armstrong World Industries, Inc.(b)(c) 186,517 9,484,390
Griffon Corp.(b)(c) 220,215 5,450,321
-----------
14,934,711
-----------
CAPITAL MARKETS - 0.9%
Penson Worldwide, Inc.(b)(c) 127,522 3,849,889
Stifel Financial Corp.(b)(c) 97,749 4,330,281
-----------
8,180,170
-----------
CHEMICALS - 2.3%
Cytec Industries, Inc. 131,075 7,371,658
FMC Corp. 64,995 4,902,573
Minerals Technologies, Inc.(b) 74,975 4,660,446
Spartech Corp.(b) 171,900 5,043,546
-----------
21,978,223
-----------
COMMERCIAL BANKS - 6.6%
Alabama National Bancorp(b) 88,525 6,268,455
CVB Financial Corp.(b) 300,752 3,578,948
East West Bancorp, Inc.(b) 181,825 6,685,705
First Charter Corp.(b) 203,825 4,382,238
First Community Bancorp(b) 86,815 4,908,520
First Midwest Bancorp, Inc.(b) 139,770 5,136,547
First State Bancorporation(b) 285,102 6,429,050
IBERIABANK Corp.(b) 92,134 5,128,178
Pennsylvania Commerce Bancorp, Inc.(b)(c) 95,525 2,720,552
PrivateBankcorp, Inc.(b) 85,325 3,119,482
Signature Bank(b)(c) 200,800 6,534,032
Sterling Bancshares, Inc. 349,087 3,902,793
United Community Banks, Inc.(b) 108,200 3,547,878
-----------
62,342,378
-----------
COMMERCIAL SERVICES & SUPPLIES - 4.2%
American Ecology Corp.(b) 195,499 3,755,536
McGrath Rentcorp.(b) 271,200 8,588,904
Navigant Consulting, Inc.(b)(c) 260,088 5,139,339
Rollins, Inc.(b) 457,200 10,520,172
Standard Parking Corp.(c) 140,355 4,964,356
Waste Connections, Inc.(b)(c) 237,938 7,123,849
-----------
40,092,156
-----------
COMMUNICATIONS EQUIPMENT - 3.5%
ADTRAN, Inc.(b) 117,070 2,850,654
Anaren, Inc.(b)(c) 335,700 5,911,677
23
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMMUNICATIONS EQUIPMENT - CONTINUED
CommScope, Inc.(b)(c) 270,031 $11,584,330
Comtech Telecommunications Corp.(b)(c) 64,837 2,511,137
Harris Stratex Networks, Inc., Class A(c) 263,670 5,059,832
Sirenza Microdevices, Inc.(b)(c) 625,048 5,387,914
-----------
33,305,544
-----------
COMPUTERS & PERIPHERALS - 1.3%
Electronics for Imaging, Inc.(b)(c) 268,250 6,290,463
Imation Corp.(b) 154,030 6,219,731
-----------
12,510,194
-----------
CONSTRUCTION & ENGINEERING - 1.6%
Insituform Technologies, Inc., Class A(b)(c) 303,000 6,299,370
Michael Baker Corp.(b)(c) 161,675 3,928,702
Washington Group International, Inc.(c) 75,050 4,984,821
-----------
15,212,893
-----------
CONSTRUCTION MATERIALS - 0.9%
Eagle Materials, Inc.(b) 73,150 3,264,685
Texas Industries, Inc.(b) 75,793 5,724,645
-----------
8,989,330
-----------
CONSUMER FINANCE - 2.9%
Advanta Corp., Class B 255,280 11,191,475
Dollar Financial Corp.(b)(c) 323,970 8,196,441
First Cash Financial Services, Inc.(c) 348,288 7,759,857
-----------
27,147,773
-----------
CONTAINERS & PACKAGING - 0.5%
Rock-Tenn Co., Class A 145,441 4,828,641
-----------
DIVERSIFIED CONSUMER SERVICES - 0.6%
Vertrue, Inc.(b)(c) 119,125 5,731,104
-----------
DIVERSIFIED FINANCIAL SERVICES - 0.8%
Genesis Lease Ltd., ADR(c) 281,175 7,352,726
-----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 0.1%
Iowa Telecommunications Services, Inc.(b) 68,180 1,363,606
-----------
ELECTRIC UTILITIES - 1.4%
ALLETE, Inc.(b) 92,983 4,334,867
ITC Holdings Corp. 111,085 4,808,870
Portland General Electric Co.,(b) 146,425 4,275,610
-----------
13,419,347
-----------
ELECTRICAL EQUIPMENT - 3.2%
General Cable Corp.(b)(c) 195,885 10,466,135
Hubbell, Inc., Class B 136,575 6,588,378
II-VI, Inc.(b)(c) 244,660 8,281,741
Lamson & Sessions Co., (The)(b)(c) 162,125 4,505,454
-----------
29,841,708
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 3.0%
Anixter International, Inc.(b)(c) 119,725 7,894,667
Excel Technology, Inc.(c) 143,194 3,913,492
FARO Technologies, Inc.(c) 42,475 1,226,253
Keithley Instruments, Inc. 251,875 3,851,169
24
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (+)
- ---------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRONIC EQUIPMENT & INSTRUMENTS - CONTINUED
Littelfuse, Inc.(c) 135,975 $ 5,520,585
Rofin-Sinar Technologies, Inc.(b)(c) 72,850 4,311,263
X-Rite, Inc.(b) 166,694 2,158,687
-----------
28,876,116
-----------
ENERGY EQUIPMENT & SERVICES - 1.9%
Dresser-Rand Group, Inc.(b)(c) 187,550 5,712,773
FMC Technologies, Inc.(b)(c) 60,665 4,231,990
Oceaneering International, Inc.(c) 98,521 4,149,705
Universal Compression Holdings, Inc.(b)(c) 63,275 4,282,452
-----------
18,376,920
-----------
FOOD & STAPLES RETAILING - 2.0%
Casey's General Stores, Inc.(b) 168,350 4,210,433
Smart & Final, Inc.(b)(c) 313,075 6,815,643
Winn-Dixie Stores, Inc.(c) 428,125 7,556,406
-----------
18,582,482
-----------
FOOD PRODUCTS - 1.4%
J & J Snack Foods Corp.(b) 148,253 5,854,511
Ralcorp Holdings, Inc.(b)(c) 113,710 7,311,553
-----------
13,166,064
-----------
GAS UTILITIES - 1.2%
UGI Corp. 416,055 11,112,829
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 1.9%
Arrow International, Inc.(b) 173,900 5,592,624
Viasys Healthcare, Inc.(b)(c) 207,057 7,037,868
West Pharmaceutical Services, Inc.(b) 105,598 4,902,915
-----------
17,533,407
-----------
HEALTHCARE PROVIDERS & SERVICES - 0.8%
Healthspring, Inc.(c) 126,889 2,988,236
Option Care, Inc.(b) 363,550 4,835,215
-----------
7,823,451
-----------
HOTELS, RESTAURANTS & LEISURE - 2.9%
Bob Evans Farms, Inc.(b) 186,465 6,889,882
CEC Entertainment, Inc.(c) 246,968 10,259,051
Morton's Restaurant Group, Inc.(b)(c) 224,075 3,986,294
Triarc Cos., Inc., Class B(b) 271,647 4,669,612
Trump Entertainment Resorts, Inc.(b)(c) 98,245 1,775,287
-----------
27,580,126
-----------
HOUSEHOLD DURABLES - 0.3%
Sealy Corp.(b) 173,670 3,035,752
-----------
INDUSTRIAL CONGLOMERATES - 0.2%
Walter Industries, Inc.(b) 71,340 1,765,665
-----------
INSURANCE - 5.9%
American Equity Investment Life Holding Co.,(b) 503,100 6,605,703
Delphi Financial Group, Inc. 191,212 7,692,459
Employers Holdings, Inc.(c) 226,190 4,528,324
First Mercury Financial Corp.(b)(c) 209,350 4,302,143
Midland Co., (The)(b) 113,848 4,829,432
25
SHARES VALUE (+)
- --------------------------------------------------------------
COMMON STOCKS - CONTINUED
INSURANCE - CONTINUED
National Financial Partners Corp.(b) 205,540 $ 9,641,881
Navigators Group, Inc.(c) 121,325 6,086,875
RLI Corp.(b) 126,325 6,939,032
United Fire & Casualty Co.,(b) 160,075 5,623,435
-----------
56,249,284
-----------
IT SERVICES - 2.0%
Perot Systems Corp., Class A(b)(c) 429,675 7,678,292
Wright Express Corp.(c) 375,900 11,401,047
-----------
19,079,339
-----------
LEISURE EQUIPMENT & PRODUCTS - 0.2%
Steinway Musical Instruments, Inc. 64,129 2,069,443
-----------
LIFE SCIENCE TOOLS & SERVICES - 0.4%
PerkinElmer, Inc. 141,365 3,423,860
-----------
MACHINERY - 6.5%
Actuant Corp., Class A(b) 161,270 8,194,129
Albany International Corp., Class A(b) 211,300 7,594,122
Barnes Group, Inc.(b) 289,075 6,651,616
CLARCOR, Inc. 181,504 5,771,827
Commercial Vehicle Group, Inc.(c) 190,475 3,923,785
ESCO Technologies, Inc.(b)(c) 126,354 5,663,186
Harsco Corp. 155,900 6,993,674
L.B. Foster Co., Class A(b)(c) 106,913 2,203,477
Mueller Water Products, Inc., Class A(b) 378,197 5,222,901
Nordson Corp. 99,131 4,605,626
RBC Bearings, Inc.(c) 155,263 5,190,442
-----------
62,014,785
-----------
MEDIA - 4.0%
4Kids Entertainment, Inc.(c) 129,716 2,454,227
Alloy, Inc.(c) 348,650 4,141,962
Harte-Hanks, Inc.(b) 18,536 511,408
Interactive Data Corp. 169,699 4,200,050
John Wiley & Sons, Inc., Class A 208,730 7,881,645
Journal Communications, Inc., Class A(b) 503,015 6,594,527
Live Nation, Inc.(b)(c) 402,570 8,880,694
National CineMedia, Inc.(c) 111,237 2,970,028
-----------
37,634,541
-----------
METALS & MINING - 1.6%
Chaparral Steel Co., 103,608 6,026,877
Haynes International, Inc.(c) 30,803 2,246,463
Reliance Steel & Aluminum Co.(b) 144,625 6,999,850
-----------
15,273,190
-----------
MULTI-UTILITIES - 0.9%
NorthWestern Corp. 232,350 8,232,160
-----------
MULTILINE RETAIL - 0.9%
Dollar Tree Stores, Inc.(c) 231,510 8,852,942
-----------
OIL, GAS & CONSUMABLE FUELS - 2.9%
ATP Oil & Gas Corp.(b)(c) 62,254 2,340,750
Denbury Resources, Inc.(b)(c) 140,075 4,172,834
26
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (+)
- --------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
OIL, GAS & CONSUMABLE FUELS - CONTINUED
Helix Energy Solutions Group, Inc.(b)(c) 263,847 $ 9,838,855
Mariner Energy, Inc.(b)(c) 292,425 5,594,090
Penn Virginia Corp. 81,289 5,966,613
-----------
27,913,142
-----------
PERSONAL PRODUCTS - 0.9%
Alberto-Culver Co., 374,442 8,567,233
-----------
REAL ESTATE - 4.9%
BioMed Realty Trust, Inc. REIT 245,575 6,458,623
CBL & Associates Properties, Inc. REIT(b) 92,885 4,164,963
Corporate Office Properties Trust REIT(b) 128,725 5,880,158
First Potomac Realty Trust REIT(b) 246,850 7,052,505
Health Care REIT, Inc.(b) 86,550 3,799,545
Kite Realty Group Trust REIT(b) 360,775 7,197,461
LaSalle Hotel Properties REIT(b) 172,525 7,998,259
Potlatch Corp. REIT(b) 84,586 3,872,347
-----------
46,423,861
-----------
ROAD & RAIL - 1.5%
Celadon Group, Inc.(b)(c) 210,060 3,508,002
Genesee & Wyoming, Inc., Class A(b)(c) 137,762 3,665,847
Laidlaw International, Inc. 196,115 6,785,579
-----------
13,959,428
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.1%
Diodes, Inc.(b)(c) 102,982 3,588,923
Entegris, Inc.(b)(c) 559,165 5,983,065
Fairchild Semiconductor International, Inc., Class A(b)(c) 140,621 2,351,183
Pericom Semiconductor Corp.(b)(c) 174,390 1,705,534
Verigy Ltd.(b)(c) 251,050 5,892,144
-----------
19,520,849
-----------
SOFTWARE - 3.1%
Hyperion Solutions Corp.(c) 169,955 8,808,768
MapInfo Corp.(b)(c) 257,600 5,185,488
Progress Software Corp.(b)(c) 169,550 5,289,960
Quest Software, Inc.(c) 183,300 2,982,291
Radiant Systems, Inc.(b)(c) 281,601 3,669,261
Sybase, Inc.(c) 131,845 3,333,041
-----------
29,268,809
-----------
SPECIALTY RETAIL - 2.9%
Jo-Ann Stores, Inc.(b)(c) 324,421 8,840,472
Lithia Motors, Inc., Class A(b) 94,875 2,600,524
Pier 1 Imports, Inc.(b) 466,955 3,226,659
Rent-A-Center, Inc.(b)(c) 206,975 5,791,161
Sonic Automotive, Inc., Class A(b) 246,875 7,035,937
-----------
27,494,753
-----------
TEXTILES APPAREL & LUXURY GOODS - 1.6%
Fossil, Inc.(b)(c) 350,621 9,280,938
Hanesbrands, Inc.(b)(c) 187,425 5,508,421
Movado Group, Inc. 22,082 650,315
-----------
15,439,674
-----------
27
SHARES VALUE (+)
- ---------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
TRADING COMPANIES & DISTRIBUTORS - 0.2%
Electro Rent Corp.(b)(c) 112,682 $ 1,622,621
--------------
WATER UTILITIES - 0.7%
American States Water Co.(b) 98,625 3,636,304
Middlesex Water Co. 151,953 2,794,415
--------------
6,430,719
--------------
TOTAL COMMON STOCKS
(Identified Cost $711,469,750) 896,109,869
--------------
EXCHANGE TRADED FUNDS - 1.0%
DIVERSIFIED FINANCIAL SERVICES - 1.0%
iShares Russell 2000 Value Index Fund(b)
(Identified Cost $9,249,436) 114,650 9,284,357
--------------
PRINCIPAL AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 28.9%
COMMERCIAL PAPER - 4.3%
Prudential Funding LLC, 3.750%, 4/02/2007(d) $ 40,873,000 40,868,742
--------------
SHARES
- ---------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(e) 233,154,648 233,154,648
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $274,023,390) 274,023,390
--------------
TOTAL INVESTMENTS - 124.5%
(Identified Cost $994,742,576)(a) 1,179,417,616
Other assets less liabilities--(24.5)% (232,206,472)
--------------
TOTAL NET ASSETS - 100.0% $ 947,211,144
--------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2007, the net unrealized appreciation on investments based on cost of $994,742,576 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 $ 190,228,064
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (5,553,024)
--------------
Net unrealized appreciation $ 184,675,040
--------------
(b)All or a portion of this security was on loan at March 31, 2007.
(c)Non-income producing security
(d)Interest rate represents annualized yield at time of purchase; not a coupon
rate.
(e)Represents investments 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 ADRs are significantly influenced by trading on
exchanges not located in the United States.
REITReal Estate Investment Trust
28
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
HOLDINGS AT MARCH 31, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Commercial Banks 6.6%
Machinery 6.5
Insurance 5.9
Real Estate 4.9
Commercial Services & Supplies 4.2
Media 4.0
Communications Equipment 3.5
Electrical Equipment 3.2
Software 3.1
Electronic Equipment & Instruments 3.0
Oil, Gas & Consumable Fuels 2.9
Hotels, Restaurants & Leisure 2.9
Specialty Retail 2.9
Consumer Finance 2.9
Aerospace & Defense 2.5
Chemicals 2.3
Semiconductors & Semiconductor Equipment 2.1
IT Services 2.0
Food & Staples Retailing 2.0
Other, less than 2% each 28.2
See accompanying notes to financial statements.
29
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
SHARES VALUE (+)
- -----------------------------------------------------------------
COMMON STOCKS - 98.1% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 6.8%
Boeing Co., 1,250 $111,138
Honeywell International, Inc. 2,306 106,214
United Technologies Corp. 2,513 163,345
---------
380,697
---------
BEVERAGES - 3.6%
Molson Coors Brewing Co.,, Class B(b) 1,080 102,189
PepsiCo, Inc. 1,580 100,425
---------
202,614
---------
BIOTECHNOLOGY - 2.0%
Amgen, Inc.(c) 1,982 110,754
---------
CAPITAL MARKETS - 7.8%
Bear Stearns Cos., Inc.(b) 594 89,308
Franklin Resources, Inc. 1,134 137,021
Goldman Sachs Group, Inc. 1,000 206,630
---------
432,959
---------
CHEMICALS - 4.7%
Ecolab, Inc. 2,926 125,818
Praxair, Inc.(b) 2,206 138,890
---------
264,708
---------
COMMERCIAL BANKS - 1.5%
Zions Bancorporation(b) 981 82,914
---------
COMMUNICATIONS EQUIPMENT - 10.7%
Cisco Systems, Inc.(c) 6,023 153,767
Corning, Inc.(b)(c) 2,855 64,923
Harris Corp.(b) 4,115 209,659
Motorola, Inc. 5,800 102,486
QUALCOMM, Inc. 1,502 64,076
---------
594,911
---------
COMPUTERS & PERIPHERALS - 3.0%
Hewlett-Packard Co., 4,115 165,176
---------
DIVERSIFIED FINANCIAL SERVICES - 4.6%
Bank of America Corp. 2,954 150,713
Citigroup, Inc. 2,081 106,839
---------
257,552
---------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 2.7%
AT&T, Inc. 3,851 151,845
---------
ENERGY EQUIPMENT & SERVICES - 1.9%
GlobalSantaFe Corp.(b) 1,727 106,521
---------
HEALTHCARE EQUIPMENT & SUPPLIES - 4.8%
Medtronic, Inc. 3,050 149,633
Zimmer Holdings, Inc.(b)(c) 1,381 117,951
---------
267,584
---------
HEALTHCARE PROVIDERS & SERVICES - 4.8%
Omnicare, Inc.(b) 2,800 111,356
WellPoint, Inc.(b)(c) 1,919 155,631
---------
266,987
---------
30
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES TAX-MANAGED EQUITY FUND - CONTINUED
SHARES VALUE (+)
- -----------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HOTELS, RESTAURANTS & LEISURE - 2.6%
Marriott International, Inc., Class A(b) 3,000 $ 146,880
----------
INDUSTRIAL CONGLOMERATES - 3.1%
Tyco International Ltd.(b) 5,400 170,370
----------
INSURANCE - 5.2%
Aflac, Inc. 2,081 97,932
Allstate Corp. 1,277 76,696
Everest Re Group Ltd. 1,193 114,731
----------
289,359
----------
IT SERVICES - 1.6%
Western Union Co. 4,162 91,356
----------
MACHINERY - 4.9%
Danaher Corp.(b) 2,293 163,835
Dover Corp. 2,224 108,553
----------
272,388
----------
MEDIA - 2.3%
DIRECTV Group, Inc. (The)(b)(c) 5,565 128,385
----------
MULTILINE RETAIL - 1.7%
Federated Department Stores, Inc. 2,063 92,938
----------
OIL, GAS & CONSUMABLE FUELS - 8.2%
ConocoPhillips 2,010 137,384
Devon Energy Corp.(b) 2,188 151,453
ExxonMobil Corp.(b) 2,243 169,234
----------
458,071
----------
PERSONAL PRODUCTS - 0.6%
Alberto-Culver Co. 1,558 35,647
----------
PHARMACEUTICALS - 2.7%
Abbott Laboratories(b) 2,675 149,265
----------
ROAD & RAIL - 2.4%
Burlington Northern Santa Fe Corp.(b) 1,694 136,248
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.0%
Texas Instruments, Inc. 3,755 113,026
----------
SOFTWARE - 1.9%
Microsoft Corp. 3,701 103,147
----------
TOTAL COMMON STOCKS
(Identified Cost $4,208,601) 5,472,302
----------
PRINCIPAL AMOUNT
- -----------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 25.7%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 3/30/07 at 4.250% to be
repurchased at $134,047 on 4/02/07 collateralized by
$140,000 U.S. Treasury Bill, 4.880% due 5/31/07 with
value of $138,775, including accrued interest
(Note 2g of Notes to Financial Statements) $ 134,000 134,000
----------
31
SHARES VALUE (+)
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - CONTINUED
State Street Securities Lending Quality Trust(d) 1,295,532 $ 1,295,532
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $1,429,532) 1,429,532
------------
TOTAL INVESTMENTS - 123.8%
(Identified Cost $5,638,133)(a) 6,901,834
Other Assets Less Liabilities--(23.8)% (1,325,275)
------------
TOTAL NET ASSETS - 100.0% $ 5,576,559
------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2007, the net unrealized appreciation on investments based on cost of $5,638,133 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 $ 1,329,978
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (66,277)
------------
Net unrealized appreciation $ 1,263,701
------------
(b)All or a portion of this security was on loan at March 31, 2007.
(c)Non-income producing security.
(d)Represents investments of security lending collateral.
HOLDINGS AT MARCH 31, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Communications Equipment 10.7%
Oil, Gas & Consumable Fuels 8.2
Capital Markets 7.8
Aerospace & Defense 6.8
Insurance 5.2
Machinery 4.9
Healthcare Equipment & Supplies 4.8
Healthcare Providers & Services 4.8
Chemicals 4.7
Diversified Financial Services 4.6
Beverages 3.6
Industrial Conglomerates 3.1
Computers & Peripherals 3.0
Diversified Telecommunications Services 2.7
Pharmaceuticals 2.7
Hotels, Restaurants & Leisure 2.6
Road & Rail 2.4
Media 2.3
Semiconductors & Semiconductor Equipment 2.0
Biotechnology 2.0
Other, less than 2% each 9.2
See accompanying notes to financial statements.
32
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES VALUE FUND
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - 96.5% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 2.7%
Northrop Grumman Corp. 36,376 $ 2,699,827
United Technologies Corp. 21,705 1,410,825
-----------
4,110,652
-----------
BEVERAGES - 3.3%
Coca-Cola Enterprises, Inc. 93,292 1,889,163
Molson Coors Brewing Co., Class B(b) 32,234 3,049,981
-----------
4,939,144
-----------
CAPITAL MARKETS - 7.7%
Ameriprise Financial, Inc. 32,317 1,846,593
Lehman Brothers Holdings, Inc. 19,857 1,391,380
Mellon Financial Corp. 58,528 2,524,898
Merrill Lynch & Co., Inc. 32,334 2,640,718
Morgan Stanley 40,402 3,182,061
-----------
11,585,650
-----------
CHEMICALS - 2.7%
E.I. du Pont de Nemours & Co. 43,035 2,127,220
Praxair, Inc. 29,488 1,856,564
-----------
3,983,784
-----------
COMMERCIAL BANKS - 3.1%
U.S. Bancorp 82,228 2,875,513
Wells Fargo & Co. 52,254 1,799,105
-----------
4,674,618
-----------
COMMUNICATIONS EQUIPMENT - 2.3%
Avaya, Inc.(c) 126,409 1,492,890
Motorola, Inc. 113,850 2,011,730
-----------
3,504,620
-----------
COMPUTERS & PERIPHERALS - 2.7%
Hewlett-Packard Co., 54,822 2,200,555
International Business Machines Corp. 18,984 1,789,432
-----------
3,989,987
-----------
CONSTRUCTION & ENGINEERING - 1.2%
Foster Wheeler Ltd.(c) 32,133 1,876,246
-----------
CONSUMER FINANCE - 1.1%
American Express Co. 28,354 1,599,165
-----------
CONTAINERS & PACKAGING - 1.4%
Owens-Illinois, Inc.(c) 80,069 2,063,378
-----------
DIVERSIFIED FINANCIAL SERVICES - 9.0%
Bank of America Corp. 71,679 3,657,063
CIT Group, Inc. 34,823 1,842,833
Citigroup, Inc. 74,586 3,829,245
JPMorgan Chase & Co. 84,974 4,111,042
-----------
13,440,183
-----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 4.4%
AT&T, Inc. 168,160 6,630,549
-----------
ELECTRIC UTILITIES - 1.4%
Exelon Corp. 30,797 2,116,062
-----------
33
SHARES VALUE (+)
- ----------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRICAL EQUIPMENT - 1.2%
ABB Ltd. ADR 102,478 $ 1,760,572
-----------
ENERGY EQUIPMENT & SERVICES - 3.0%
BJ Services Co. 80,234 2,238,529
Schlumberger Ltd. 32,234 2,227,369
-----------
4,465,898
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 0.9%
Beckman Coulter, Inc. 22,393 1,430,689
-----------
HEALTHCARE PROVIDERS & SERVICES - 2.5%
Omnicare, Inc.(b) 46,613 1,853,799
UnitedHealth Group, Inc. 35,613 1,886,421
-----------
3,740,220
-----------
HOTELS, RESTAURANTS & LEISURE - 2.9%
McDonald's Corp. 70,269 3,165,618
OSI Restaurant Partners, Inc.(b) 30,685 1,212,058
-----------
4,377,676
-----------
HOUSEHOLD DURABLES - 1.4%
Sony Corp. ADR 42,996 2,170,868
-----------
INDEPENDENT POWER PRODUCER & ENERGY - 1.6%
NRG Energy, Inc.(b)(c) 32,892 2,369,540
-----------
INDUSTRIAL CONGLOMERATES - 1.0%
Tyco International Ltd. 46,974 1,482,030
-----------
INSURANCE - 7.4%
Allstate Corp. 55,900 3,357,354
American International Group, Inc. 44,254 2,974,754
Berkshire Hathaway, Inc., Class B(c) 595 2,165,800
Prudential Financial, Inc. 29,036 2,620,789
-----------
11,118,697
-----------
MEDIA - 6.7%
Comcast Corp., Class A(b)(c) 80,054 2,077,388
DIRECTV Group, Inc. (The)(c) 90,373 2,084,905
News Corp., Class A 112,812 2,608,214
Time Warner, Inc. 162,922 3,212,822
-----------
9,983,329
-----------
METALS & MINING - 1.0%
Freeport-McMoRan Copper & Gold, Inc. 23,718 1,569,894
-----------
MULTILINE RETAIL - 2.4%
Dollar General Corp. 97,838 2,069,274
Federated Department Stores, Inc. 34,307 1,545,530
-----------
3,614,804
-----------
OIL, GAS & CONSUMABLE FUELS - 10.0%
ExxonMobil Corp. 75,977 5,732,465
Hess Corp. 49,749 2,759,577
Occidental Petroleum Corp. 38,338 1,890,447
Spectra Energy Corp. 88,663 2,329,177
XTO Energy, Inc. 41,219 2,259,213
-----------
14,970,879
-----------
34
PORTFOLIO OF INVESTMENTS - AS OF MARCH 31, 2007 (UNAUDITED)
LOOMIS SAYLES VALUE FUND - CONTINUED
SHARES VALUE (+)
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
PHARMACEUTICALS - 5.7%
Abbott Laboratories 29,105 $ 1,624,059
Bristol-Myers Squibb Co. 67,166 1,864,528
Johnson & Johnson 41,470 2,498,982
Pfizer, Inc. 101,098 2,553,736
-------------
8,541,305
-------------
SOFTWARE - 1.3%
Microsoft Corp. 69,642 1,940,922
-------------
SPECIALTY RETAIL - 2.7%
Gap, Inc.(The) 105,587 1,817,152
Office Depot, Inc.(c) 62,531 2,197,340
-------------
4,014,492
-------------
TOBACCO - 1.8%
Altria Group, Inc. 30,048 2,638,515
-------------
TOTAL COMMON STOCKS
(Identified Cost $129,999,879) 144,704,368
-------------
PRINCIPAL AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 10.2%
COMMERCIAL PAPER - 4.8%
Prudential Funding LLC, 3.750%, 4/02/2007(d) $ 7,230,000 7,229,247
-------------
SHARES
- -------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(e) 8,114,902 8,114,902
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $15,344,149) 15,344,149
-------------
TOTAL INVESTMENTS - 106.7%
(Identified Cost $145,344,028)(a) 160,048,517
Other Assets Less Liabilities--(6.7)% (10,030,299)
-------------
TOTAL NET ASSETS - 100.0% $ 150,018,218
-------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information (Amounts exclude certain adjustments made at the end of the Fund's fiscal year for tax
purposes. Such adjustments are primarily due to wash sales.):
At March 31, 2007, the net unrealized appreciation on investments based on cost of $145,344,028 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 $ 15,808,882
Aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value (1,104,393)
-------------
Net unrealized appreciation $ 14,704,489
-------------
(b)All or a portion of this security was on loan at March 31, 2007.
(c)Non-income producing security.
(d)Interest rate represents annualized yield at time of purchase; not a coupon
rate.
(e)Represents investments 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 ADRs are significantly influenced by trading on
exchanges not located in the United States.
35
HOLDINGS AT MARCH 31, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Oil, Gas & Consumable Fuels 10.0%
Diversified Financial Services 9.0
Capital Markets 7.7
Insurance 7.4
Media 6.7
Pharmaceuticals 5.7
Diversified Telecommunications Services 4.4
Beverages 3.3
Commercial Banks 3.1
Energy Equipment & Services 3.0
Hotels, Restaurants & Leisure 2.9
Aerospace & Defense 2.7
Specialty Retail 2.7
Computers & Peripherals 2.7
Chemicals 2.7
Healthcare Providers & Services 2.5
Multiline Retail 2.4
Communications Equipment 2.3
Other, less than 2% each 15.3
See accompanying notes to financial statements.
36
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2007 (UNAUDITED)
MID CAP GROWTH SMALL CAP
FUND GROWTH FUND
- -------------------------------------------------------------------------------------------------------------
ASSETS
Investments at cost $ 47,859,618 $ 28,512,954
Net unrealized appreciation 8,708,710 3,883,130
-------------- --------------
Investments at value 56,568,328 32,396,084
Cash 989 501
Receivable for Fund shares sold 25,055 564
Receivable for securities sold 466,320 197,521
Dividends and interest receivable 4,193 5,437
Receivable from investment adviser (Note 4) -- 3,550
Securities lending income receivable 3,007 1,376
Other assets -- --
-------------- --------------
TOTAL ASSETS 57,067,892 32,605,033
-------------- --------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 10,839,584 6,576,138
Due to custodian -- --
Payable for securities purchased 176,003 223,175
Payable for Fund shares redeemed 34,149 --
Management fees payable (Note 4) 30,462 16,214
Administrative fees payable (Note 4) 2,217 1,153
Deferred Trustees' fees (Note 4) 30,716 28,444
Service and distribution fees payable (Note 4) 560 51
Other accounts payable and accrued expenses 11,894 21,312
-------------- --------------
TOTAL LIABILITIES 11,125,585 6,866,487
-------------- --------------
NET ASSETS $ 45,942,307 $ 25,738,546
-------------- --------------
Net Assets consist of:
Paid-in capital $ 129,953,754 $ 222,746,527
Undistributed (accumulated) net investment income (loss) (81,195) (88,582)
Accumulated net realized gain (loss) on investments and foreign currency
transactions (92,638,974) (200,802,529)
Net unrealized appreciation on investments and foreign currency translations 8,708,722 3,883,130
-------------- --------------
NET ASSETS $ 45,942,307 $ 25,738,546
-------------- --------------
NET ASSET VALUE AND OFFERING PRICE
INSTITUTIONAL CLASS
Net assets $ 19,136,743 $ 22,604,151
-------------- --------------
Shares of beneficial interest 828,225 1,671,708
-------------- --------------
Net asset value, offering and redemption price per share $ 23.11 $ 13.52
-------------- --------------
RETAIL CLASS
Net assets $ 26,805,564 $ 3,134,395
-------------- --------------
Shares of beneficial interest 1,187,443 237,902
-------------- --------------
Net asset value, offering and redemption price per share $ 22.57 $ 13.18
-------------- --------------
ADMIN CLASS
Net assets $ -- $ --
-------------- --------------
Shares of beneficial interest -- --
-------------- --------------
Net asset value, offering and redemption price per share $ -- $ --
-------------- --------------
Value of securities on loan (Note 2) $ 10,739,307 $ 6,437,140
-------------- --------------
See accompanying notes to financial statements.
37
SMALL CAP VALUE TAX-MANAGED
FUND EQUITY FUND VALUE FUND
----------------------------------------------
$ 994,742,576 $ 5,638,133 $ 145,344,028
184,675,040 1,263,701 14,704,489
----------------------------------------------
1,179,417,616 6,901,834 160,048,517
-- 186 1,167
2,561,507 -- 841,434
15,232,377 -- 634,853
747,665 3,919 128,477
60,561 5,164 --
20,879 177 475
-- -- 6,348
----------------------------------------------
1,198,040,605 6,911,280 161,661,271
----------------------------------------------
233,154,648 1,295,532 8,114,902
518,344 -- --
14,071,439 -- 3,341,502
2,295,960 -- 69,878
593,800 2,781 75,247
46,179 322 6,844
91,839 26,265 29,696
7,240 -- 202
50,012 9,821 4,782
----------------------------------------------
250,829,461 1,334,721 11,643,053
----------------------------------------------
$ 947,211,144 $ 5,576,559 $ 150,018,218
----------------------------------------------
$ 723,908,818 $ 7,303,347 $ 130,939,826
356,175 58,082 341,171
38,271,111 (3,048,571) 4,032,732
184,675,040 1,263,701 14,704,489
----------------------------------------------
$ 947,211,144 $ 5,576,559 $ 150,018,218
----------------------------------------------
$ 500,271,032 $ 5,576,559 $ 135,123,518
----------------------------------------------
18,096,925 518,515 6,119,410
----------------------------------------------
$ 27.64 $ 10.75 $ 22.08
----------------------------------------------
$ 366,301,005 $ -- $ 14,894,700
----------------------------------------------
13,354,297 -- 675,509
----------------------------------------------
$ 27.43 $ -- $ 22.05
----------------------------------------------
$ 80,639,107 $ -- $ --
----------------------------------------------
2,976,490 -- --
----------------------------------------------
$ 27.09 $ -- $ --
----------------------------------------------
$ 227,710,633 $ 1,269,374 $ 7,934,195
----------------------------------------------
See accompanying notes to financial statements.
38
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2007 (UNAUDITED)
MID CAP SMALL CAP
GROWTH FUND GROWTH FUND
- -------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 126,523 $ 24,286
Interest 52,910 28,628
Securities lending income (Note 2) 24,285 9,209
Less net foreign taxes withheld (473) --
------------ ------------
203,245 62,123
------------ ------------
EXPENSES
Management fees (Note 4) 169,352 92,757
Distribution fees--Retail Class (Note 4) 33,517 3,745
Service and distribution fees--Admin Class (Note 4) -- --
Trustees' fees and expenses (Note 4) 7,142 6,663
Administrative fees (Note 4) 12,862 7,043
Custodian fees and expenses 8,848 8,667
Transfer agent fees and expenses--Institutional Class 5,318 7,652
Transfer agent fees and expenses--Retail Class 19,780 4,327
Transfer agent fees and expenses--Admin Class -- --
Audit and tax services fees 16,689 15,562
Registration fees 15,494 15,579
Shareholder reporting expenses 5,847 1,758
Legal fees 708 362
Expense recapture--Institutional Class (Note 4) -- --
Expense recapture--Retail Class (Note 4) -- --
Miscellaneous expenses 3,394 2,810
------------ ------------
Total expenses 298,951 166,925
Less reimbursement/waiver (Note 4) (39,821) (39,511)
------------ ------------
Net expenses 259,130 127,414
------------ ------------
Net investment income (loss) (55,885) (65,291)
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
REALIZED GAIN ON:
Investments--net 2,497,254 1,386,976
Foreign currency transactions--net 12 --
------------ ------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments--net 3,749,564 1,601,523
Foreign currency translations--net 12 --
------------ ------------
Net realized and unrealized gain on investments and foreign currency transactions 6,246,842 2,988,499
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,190,957 $ 2,923,208
------------ ------------
*Amount includes $653,450 of net realized gains related to a redemption-in-kind
on October 20, 2006. The amount will not be recognized for Federal Income Tax
purposes.
**Includes a non-recurring special dividend of $1,690,000 or $0.05 per share in
which the source of the dividend has not been determined by the issuer.
See accompanying notes to financial statements.
39
SMALL CAP VALUE TAX-MANAGED
FUND EQUITY FUND VALUE FUND
-------------------------------------------------
$ 6,143,267** $ 94,734 $ 998,953
832,051 7,883 101,676
131,034 727 3,081
-- -- (314)
-------------------------------------------------
7,106,352 103,344 1,103,396
-------------------------------------------------
3,269,830 18,316 278,383
401,294 -- 8,095
189,256 -- --
24,066 6,242 7,519
248,227 2,089 31,631
31,157 6,932 13,419
54,180 1,487 8,864
208,833 -- 3,166
54,593 -- --
17,908 15,416 17,135
31,311 11,450 23,469
48,066 112 4,136
12,218 140 916
-- -- 12,903
-- -- 1,970
20,734 2,221 3,444
-------------------------------------------------
4,611,673 64,405 415,050
(163,765) (40,594) --
-------------------------------------------------
4,447,908 23,811 415,050
-------------------------------------------------
2,658,444 79,533 688,346
-------------------------------------------------
45,290,409 936,976* 4,748,116
-- -- --
-------------------------------------------------
52,082,705 (517,079) 3,590,512
-- -- --
-------------------------------------------------
97,373,114 419,897 8,338,628
-------------------------------------------------
$ 100,031,558 $ 499,430 $ 9,026,974
-------------------------------------------------
See accompanying notes to financial statements.
40
STATEMENTS OF CHANGES IN NET ASSETS
MID CAP GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 2007 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2006
- -----------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (55,885) $ (302,912)
Net realized gain on investments and foreign currency transactions 2,497,266 5,806,076
Net change in net unrealized appreciation (depreciation) on investments and foreign
currency translations 3,749,576 (3,169,570)
---------------- ------------------
Increase in net assets resulting from operations 6,190,957 2,333,594
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class -- --
Retail Class -- --
CAPITAL GAINS:
Institutional Class -- --
Retail Class -- --
---------------- ------------------
Total distributions -- --
---------------- ------------------
DECREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) (4,383,587) (10,159,975)
---------------- ------------------
Total increase (decrease) in net assets 1,807,370 (7,826,381)
NET ASSETS
Beginning of period 44,134,937 51,961,318
---------------- ------------------
End of period $45,942,307 $ 44,134,937
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME/ACCUMULATED NET INVESTMENT LOSS $ (81,195) $ (25,310)
---------------- ------------------
SMALL CAP GROWTH FUND
SIX MONTHS ENDED
MARCH 31, 2007 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2006
- -----------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (65,291) $ (164,347)
Net realized gain on investments 1,386,976 2,479,317
Net change in net unrealized appreciation (depreciation) on investments 1,601,523 (935,346)
---------------- ------------------
Increase in net assets resulting from operations 2,923,208 1,379,624
---------------- ------------------
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) (580,295) 2,617,609
---------------- ------------------
REDEMPTION FEES
Institutional Class 5 18,107
Retail Class 1 3,369
---------------- ------------------
Total increase in net assets 2,342,919 4,018,709
NET ASSETS
Beginning of period 23,395,627 19,376,918
---------------- ------------------
End of period $25,738,546 $23,395,627
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME/ACCUMULATED NET INVESTMENT LOSS $ (88,582) $ (23,291)
---------------- ------------------
See accompanying notes to financial statements.
41
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
SMALL CAP VALUE FUND
SIX MONTHS ENDED
MARCH 31, 2007 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2006
- ------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 2,658,444 $ 2,541,737
Net realized gain on investments 45,290,409 94,104,228
Net change in net unrealized appreciation (depreciation) on investments 52,082,705 (18,494,360)
---------------- ------------------
Increase in net assets resulting from operations 100,031,558 78,151,605
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (2,801,001) (2,173,458)
Retail Class (1,058,622) (748,627)
Admin Class (101,702) (47,377)
CAPITAL GAINS:
Institutional Class (50,563,841) (36,009,634)
Retail Class (32,749,823) (21,502,778)
Admin Class (7,983,100) (6,186,131)
---------------- ------------------
Total distributions (95,258,089) (66,668,005)
---------------- ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) 143,659,696 80,692,685
---------------- ------------------
REDEMPTION FEES
Institutional Class 3,622 17,840
Retail Class 2,485 11,357
Admin Class 584 2,753
---------------- ------------------
Total increase in net assets 148,439,856 92,208,235
NET ASSETS
Beginning of period 798,771,288 706,563,053
---------------- ------------------
End of period $947,211,144 $798,771,288
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 356,175 $ 1,659,056
---------------- ------------------
TAX-MANAGED EQUITY FUND
SIX MONTHS ENDED
MARCH 31, 2007 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2006
- ------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 79,533 $ 66,073
Net realized gain on investments 936,976 210,739
Net change in net unrealized appreciation (depreciation) on investments (517,079) 657,313
---------------- ------------------
Increase in net assets resulting from operations 499,430 934,125
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (75,417) (54,165)
CAPITAL GAINS:
Institutional Class -- --
---------------- ------------------
Total distributions (75,417) (54,165)
---------------- ------------------
DECREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) (3,923,102) (1,034,586)
---------------- ------------------
Total decrease in net assets (3,499,089) (154,626)
NET ASSETS
Beginning of period 9,075,648 9,230,274
---------------- ------------------
End of period $ 5,576,559 $ 9,075,648
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 58,082 $ 53,966
---------------- ------------------
See accompanying notes to financial statements.
42
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
VALUE FUND
SIX MONTHS ENDED
MARCH 31, 2007 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2006
- ------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 688,346 $ 502,982
Net realized gain on investments 4,748,116 4,648,831
Net change in unrealized appreciation (depreciation) on investments 3,590,512 2,810,437
---------------- ------------------
Increase in net assets resulting from operations 9,026,974 7,962,250
---------------- ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class (673,111) (530,299)
Retail Class (33,688) --
CAPITAL GAINS:
Institutional Class (4,162,095) (1,548,378)
Retail Class (226,188) --
---------------- ------------------
Total distributions (5,095,082) (2,078,677)
---------------- ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) 74,472,949 28,475,203
---------------- ------------------
Total increase in net assets 78,404,841 34,358,776
NET ASSETS
Beginning of period 71,613,377 37,254,601
---------------- ------------------
End of period $150,018,218 $71,613,377
---------------- ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 341,171 $ 359,624
---------------- ------------------
See accompanying notes to financial statements.
43
THIS PAGE INTENTIONALLY LEFT BLANK
44
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
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 Total
of the period loss(c) gain (loss) operations income capital gains distributions
- ------------------------------------------------------------------------------------------------------------
MID CAP GROWTH FUND
INSTITUTIONAL CLASS
3/31/2007(e) $20.13 $(0.01) $ 2.99 $ 2.98 $ -- $-- $ --
9/30/2006 19.00 (0.10) 1.23 1.13 -- -- --
9/30/2005 15.50 (0.10) 3.78 3.68 (0.18) -- (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
3/31/2007(e) $19.69 $(0.04) $ 2.92 $ 2.88 $ -- $-- $ --
9/30/2006 18.63 (0.15) 1.21 1.06 -- -- --
9/30/2005 15.20 (0.14) 3.70 3.56 (0.13) -- (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 income (loss) has been determined on the basis of
the weighted average number of shares outstanding during the period.
(d) Annualized for periods less than one year.
(e) For the six months ended March 31, 2007 (Unaudited).
See accompanying notes to financial statements.
45
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------
Net asset Net assets, Net Portfolio
value, Total end of the Net Gross investment turnover
end of return(a) period expenses(b)(d) expenses(d) loss(d) rate
the period (%) (000's) (%) (%) (%) (%)
- --------------------------------------------------------------------------------
$23.11 14.8 $19,137 1.00 1.12 (0.10) 91
20.13 6.0 17,467 1.00 1.12 (0.49) 211
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
$22.57 14.6 $26,806 1.25 1.46 (0.35) 91
19.69 5.7 26,668 1.25 1.52 (0.72) 211
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
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
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 Total
of the period (loss)(c) gain (loss) operations income capital gains distributions
- ------------------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
INSTITUTIONAL CLASS
3/31/2007(g) $12.00 $(0.03) $ 1.55 $ 1.52 $ -- $ -- $ --
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
3/31/2007/(g)/ $11.71 $(0.05) $ 1.52 $ 1.47 $ -- $ -- $ --
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
3/31/2007(g) $27.69 $ 0.11(h) $ 3.17 $ 3.28 $(0.17) $(3.16) $(3.33)
9/30/2006 27.43 0.13 2.70 2.83 (0.15) (2.42) (2.57)
9/30/2005 25.75 0.13 4.22 4.35 (0.02) (2.65) (2.67)
9/30/2004 21.34 0.04 4.97 5.01 (0.05) (0.55) (0.60)
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) (2.35)
RETAIL CLASS
3/31/2007(g) $27.46 $ 0.07(h) $ 3.16 $ 3.23 $(0.10) $(3.16) $(3.26)
9/30/2006 27.23 0.06 2.67 2.73 (0.08) (2.42) (2.50)
9/30/2005 25.62 0.06 4.20 4.26 -- (2.65) (2.65)
9/30/2004 21.25 (0.02) 4.95 4.93 (0.01) (0.55) (0.56)
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) (2.30)
ADMIN CLASS
3/31/2007(g) $27.14 $ 0.03(h) $ 3.12 $ 3.15 $(0.04) $(3.16) $(3.20)
9/30/2006 26.94 (0.01) 2.65 2.64 (0.02) (2.42) (2.44)
9/30/2005 25.43 (0.00)(d) 4.16 4.16 -- (2.65) (2.65)
9/30/2004 21.13 (0.08) 4.93 4.85 -- (0.55) (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) (2.25)
(a) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses, if applicable. 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, if any, 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, if applicable.
(e) Includes expense recapture of 0.02%. See Note 4.
(f) Annualized for periods less than one year.
(g) For the six months ended March 31, 2007 (Unaudited).
(h) Includes a non-recurring special dividend of $1,690,000 or $0.05 per share
in which the source of the dividend has not been determined by the issuer.
See accompanying notes to financial statements.
47
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------
Net asset Net assets, Net Portfolio
value, Total end of Net Gross investment turnover
Redemption end of return(a) the period expenses(b)(f) expenses(f) income (loss)(f) rate
fees/(d)/ the period (%) (000's) (%) (%) (%) (%)
- -------------------------------------------------------------------------------------------------
$0.00 $13.52 12.7 $ 22,604 1.00 1.29 (0.50) 47
0.01 12.00 8.3 20,414 1.00 1.38 (0.69) 100
0.00 11.08 23.7 15,785 1.00 1.70 (0.85) 227
0.00 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
$0.00 $13.18 12.5 $ 3,134 1.25 1.76 (0.75) 47
0.01 11.71 8.0 2,981 1.25 1.92 (0.94) 100
0.00 10.84 23.5 3,592 1.25 1.87 (1.14) 227
0.00 8.78 3.9 14,589 1.25 1.52 (1.19) 217
-- 8.45 35.0 30,345 1.25 1.43 (1.17) 190
-- 6.26 (28.2) 32,135 1.25 1.33 (1.15) 162
$0.00 $27.64 12.4 $500,271 0.87 0.87 0.76 28
0.00 27.69 11.2 442,714 0.89(e) 0.89(e) 0.47 62
0.00 27.43 18.0 403,110 0.90 0.93 0.48 59
0.00 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
-- 17.28 (2.6) 234,370 0.94 0.96 0.48 86
$0.00 $27.43 12.3 $366,301 1.15 1.23 0.48 28
0.00 27.46 10.9 291,690 1.15 1.20 0.21 62
0.00 27.23 17.7 235,948 1.15 1.20 0.24 59
0.00 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
-- 17.25 (2.8) 86,816 1.19 1.20 0.22 86
$0.00 $27.09 12.1 $ 80,639 1.40 1.49 0.20 28
0.00 27.14 10.6 64,367 1.40 1.46 (0.04) 62
0.00 26.94 17.4 67,505 1.40 1.43 (0.01) 59
0.00 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
-- 17.20 (3.0) 24,655 1.44 1.53 (0.01) 86
See accompanying notes to financial statements.
48
FINANCIAL HIGHLIGHTS -- CONTINUED
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
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 Total
of the period income(c) gain (loss) operations income capital gains distributions
- ----------------------------------------------------------------------------------------------------------------
TAX-MANAGED EQUITY FUND
INSTITUTIONAL CLASS
3/31/2007(e) $10.18 $0.11 $ 0.54 $ 0.65 $(0.08) $ -- $(0.08)
9/30/2006 9.20 0.07 0.97 1.04 (0.06) -- (0.06)
9/30/2005 8.49 0.05 0.69 0.74 (0.03) -- (0.03)
9/30/2004 7.66 0.05 0.97 1.02 (0.19) -- (0.19)
9/30/2003 6.78 0.06 0.85 0.91 (0.03) -- (0.03)
9/30/2002 7.67 0.06 (0.81) (0.75) (0.14) -- (0.14)
VALUE FUND
INSTITUTIONAL CLASS
3/31/2007(e) $21.05 $0.14 $ 1.95 $ 2.09 $(0.15) $(0.91) $(1.06)
9/30/2006 18.72 0.22 3.17 3.39 (0.27) (0.79) (1.06)
9/30/2005 15.95 0.20 2.83 3.03 (0.26) -- (0.26)
9/30/2004 13.52 0.21 2.39 2.60 (0.17) -- (0.17)
9/30/2003 11.17 0.15 2.29 2.44 (0.09) -- (0.09)
9/30/2002 13.90 0.13 (2.42) (2.29) (0.16) (0.28) (0.44)
RETAIL CLASS
3/31/2007(e) $21.04 $0.09 $ 1.97 $ 2.06 $(0.14) $(0.91) $(1.05)
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, if applicable. 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, if any, the Fund's ratio
of operating expenses would have been higher.
(c) Per share net investment income (loss) has been determined on the basis of
the weighted average number of shares outstanding during the period.
(d) Annualized for periods less than one year.
(e) For the six months ended March 31, 2007 (Unaudited).
(f) Includes expense recapture of 0.02%. and 0.06% for the Institutional Class
and the Retail Class, respectively. See Note 4.
See accompanying notes to financial statements.
49
RATIOS TO AVERAGE NET ASSETS
--------------------------------------
Net asset Net assets, Net Portfolio
value, Total end of Net Gross investment turnover
end of return(a) the period expenses(b)(d) expenses(d) income(d) rate
the period (%) (000's) (%) (%) (%) (%)
- --------------------------------------------------------------------------------
$10.75 6.4 $ 5,577 0.65 1.76 2.17 16
10.18 11.3 9,076 0.65 1.64 0.71 40
9.20 8.7 9,230 0.65 2.02 0.59 38
8.49 13.4 5,202 0.65 3.39 0.59 27
7.66 13.5 2,490 0.65 1.82 0.81 200
6.78 (10.1) 17,426 0.65 1.14 0.72 188
$22.08 10.0 $135,124 0.72(f) 0.72(f) 1.26 19
21.05 18.9 71,147 0.85 0.91 1.13 36
18.72 19.2 37,255 0.85 0.92 1.13 34
15.95 19.4 33,563 0.85 0.93 1.38 47
13.52 22.0 37,959 0.85 0.92 1.23 56
11.17 (17.2) 33,025 0.85 0.90 0.90 66
$22.05 9.8 $ 14,895 1.10(f) 1.10(f) 0.80 19
21.04 6.9 466 1.10 8.65 0.42 36
See accompanying notes to financial statements.
50
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2007 (UNAUDITED)
1. ORGANIZATION. Loomis Sayles Funds I and Loomis Sayles Funds II (the "Trusts"
and each a "Trust") are each organized as a Massachusetts business trust. Each
Trust is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end 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 Mid Cap Growth Fund (the "Mid Cap Growth Fund"), formerly the
Loomis Sayles 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")
On February 1, 2007, the Loomis Sayles Aggressive Growth Fund changed its name
to the Loomis Sayles Mid Cap Growth Fund.
Each Fund offers Institutional Class Shares. Mid Cap 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 cannot 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 and exchange-traded funds, for which market quotations are readily
available are valued at market value, as reported by pricing services
recommended by the investment adviser 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 Global
Select Market, NASDAQ Global Market and NASDAQ Capital Market are valued at the
NASDAQ Official Closing Price ("NOCP"), or if lacking a NOCP, at the most
recent bid quotation on the applicable NASDAQ Market. Debt securities for which
market quotations are readily available (other than short term obligations
purchased with an original or 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 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 purchased with an original or 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
51
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.
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 recharacterization of distributions received
from Real Estate Investment Trusts (REITs) into the following categories:
ordinary income, long-term and short-term capital gains, and return of capital.
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 price 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 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 March 31, 2007, 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.
52
-----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2007 (UNAUDITED)
-----------------------------------------------------------------------------
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 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 year ended
September 30, 2006 was as follows:
2006 DISTRIBUTIONS PAID FROM:
------------------------------------
ORDINARY LONG-TERM
FUND INCOME CAPITAL GAINS TOTAL
---- ---------- ------------- -----------
Mid Cap Growth Fund $ -- $ -- $ --
Small Cap Growth Fund -- -- --
Small Cap Value Fund 8,314,591 58,353,414 66,668,005
Tax-Managed Equity Fund 54,165 -- 54,165
Value Fund 634,233 1,444,444 2,078,677
As of September 30, 2006, the capital loss carryforwards were as follows:
MID CAP SMALL CAP SMALL CAP TAX-MANAGED
CAPITAL LOSS CARRYFORWARD GROWTH FUND GROWTH FUND VALUE FUND EQUITY FUND VALUE FUND
- ------------------------- ------------ ------------- ---------- ----------- ----------
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) $--
------------ ------------- ---------- ----------- ----------
-----------------------------------------------------------------------------
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 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 March 31, 2007 were
as follows:
MARKET VALUE
OF SECURITIES VALUE OF
FUND ON LOAN COLLATERAL
- ---- ------------- ------------
Mid Cap Growth Fund $ 10,739,307 $ 10,839,584
Small Cap Growth Fund 6,437,140 6,576,138
Small Cap Value Fund 227,710,633 233,154,648
Tax-Managed Equity Fund 1,269,374 1,295,532
Value Fund 7,934,195 8,114,902
53
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. Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes--an
Interpretation of FASB Statement 109 ("FIN 48") was issued and became 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. Subsequent thereto,
the United States Securities and Exchange Commission ("SEC") indicated that it
would not object if a fund first adopts FIN 48 on the last business day of the
first required financial reporting period for fiscal years beginning after
December 15, 2006. Accordingly, Management is continuing to evaluate the impact
the adoption of FIN 48 may have on the Funds' net assets and results of
operations. In compliance with the recently issued SEC guidance the impacts, if
any, will be reflected in the Funds' semiannual financial statements as of
March 31, 2008.
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 six months ended March 31, 2007,
purchases and sales of securities (excluding short-term investments) were as
follows:
FUND PURCHASES SALES
- ---- ------------ ------------
Mid Cap Growth Fund $ 40,399,843 $ 44,334,488
Small Cap Growth Fund 11,279,444 12,000,434
Small Cap Value Fund 263,501,638 236,230,469
Tax-Managed Equity Fund 1,108,148 4,772,277
Value Fund 88,932,166 20,563,665
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 six months ended March 31, 2007, provide for fees at the
following annual percentage rates of each Fund's average daily net assets:
PERCENTAGE OF
AVERAGE DAILY
FUND NET ASSETS
- ---- -------------
Mid Cap 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%
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, 2008 and will be reevaluated on an annual basis. For the six months
ended March 31, 2007, 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
- ---- ------------------- ------------ -----------
Mid Cap 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% --
54
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2007 (UNAUDITED)
For the six months ended March 31, 2007, 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
---- ---------- ---------- ---------- ----- -----
Mid Cap Growth Fund $ 169,352 $14,813 $ 154,539 0.75% 0.68%
Small Cap Growth Fund 92,757 27,598 65,159 0.75% 0.53%
Small Cap Value Fund 3,269,830 -- 3,269,830 0.75% 0.75%
Tax-Managed Equity Fund 18,316 -- 18,316 0.50% 0.50%
Value Fund 278,383 -- 278,383 0.50% 0.50%
For the six months ended March 31, 2007, in addition to the waiver of
management fees, expenses have been reimbursed as follows:
EXPENSES
FUND REIMBURSED
- ---- ----------
Mid Cap Growth Fund $ 25,008
Small Cap Growth Fund 11,913
Small Cap Value Fund 163,765
Tax-Managed Equity Fund 40,594
Value 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/expenses more than one year after the
end of the fiscal year in which the fee/expenses was deferred. At March 31,
2007, the amounts subject to possible reimbursement under the expense
limitation agreements were as follows:
EXPENSES SUBJECT TO POSSIBLE REIMBURSEMENT UNTIL
SEPTEMBER 30, 2007
-----------------------------------------------------
FUND INSTITUTIONAL CLASS RETAIL CLASS ADMIN CLASS TOTAL
---- ------------------- ------------ ----------- --------
Mid Cap 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
EXPENSES SUBJECT TO POSSIBLE REIMBURSEMENT UNTIL
SEPTEMBER 30, 2008
-----------------------------------------------------
FUND INSTITUTIONAL CLASS RETAIL CLASS ADMIN CLASS TOTAL
---- ------------------- ------------ ----------- --------
Mid Cap Growth Fund $11,296 $ 28,525 $ -- $ 39,821
Small Cap Growth Fund 31,849 7,662 -- 39,511
Small Cap Value Fund -- 127,973 35,792 163,765
Tax-Managed Equity Fund 40,594 -- -- 40,594
Value Fund -- -- -- --
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"), which is part of IXIS Asset
Management Group, an international asset management group based in Paris,
France.
B. ADMINISTRATIVE FEES. IXIS Asset Management Advisors, L.P. ("IXIS Advisors")
a wholly-owned subsidiary of IXIS US Group, provides certain administrative
services for the Funds and has subcontracted with State Street Bank to serve as
sub-administrator. 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,
55
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 six months ended March 31, 2007, amounts paid to IXIS Advisors for
administrative fees were as follows:
FUND ADMINISTRATIVE FEES
- ---- -------------------
Mid Cap Growth Fund $ 12,862
Small Cap Growth Fund 7,043
Small Cap Value Fund 248,227
Tax-Managed Equity Fund 2,089
Value Fund 31,631
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, Mid Cap 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 administrative 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 six months ended March 31, 2007, the Funds paid the following service
and distributions fees:
SERVICE FEES DISTRIBUTION FEES
------------ ------------------------
FUND ADMIN CLASS RETAIL CLASS ADMIN CLASS
---- ------------ ------------ -----------
Mid Cap Growth Fund $ -- $ 33,517 $ --
Small Cap Growth Fund -- 3,745 --
Small Cap Value Fund 94,628 401,294 94,628
Tax-Managed Equity Fund -- -- --
Value Fund -- 8,095 --
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
Loomis Sayles Funds Trusts based on a formula that takes into account, among
other factors, the relative net assets of each fund. Trustees are reimbursed
for travel expenses in connection with attendance at meetings.
A deferred compensation plan (the "Plan") is available to the Trustees on a
voluntary basis. Each participating Trustee will receive an amount equal to the
value that such deferred compensation would have been had it been invested in a
designated fund or certain other funds of the 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.
56
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2007 (UNAUDITED)
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 six months ended March 31, 2007, 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 six months ended March 31, 2007, amounts rebated under
these agreements were as follows:
FUND REBATES
- ---- -------
Mid Cap Growth Fund $ 7,590
Small Cap Growth Fund 1,401
Small Cap Value Fund 16,218
Tax-Managed Equity Fund --
Value Fund 21,053
7. SHAREHOLDERS. At March 31, 2007, 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
- ---- ------------ ---------------
Mid Cap Growth Fund 319,727 320,091
Small Cap Growth Fund 364,448 351,845
Small Cap Value Fund 373,666 701,767
Value Fund 498,461 577,391
At March 31, 2007, two shareholders individually owned more than 5% of the Mid
Cap Growth Fund's total outstanding shares, representing, in aggregate, 20.0%
of the Fund: two shareholders individually owned more than 5% of the Small Cap
Growth Fund's total outstanding shares, representing, in aggregate, 20.0% of
the Fund; one shareholder individually owned more than 5% of the Small Cap
Value Fund's outstanding shares, representing, in aggregate 5.1% of the Fund:
three shareholders individually owned more than 5% of the Tax-Managed Equity
Fund's total outstanding shares, representing, in aggregate, 20.9% of the Fund;
and one shareholder individually owned more than 5% of the Value Fund's total
outstanding shares, representing, in aggregate, 8.2% of the Fund.
57
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:
MID CAP GROWTH FUND
Six Months Ended March 31, 2007 Year Ended September 30, 2006
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ----------- -------- ------------
Issued from the sale of shares 30,370 $ 669,756 113,035 $ 2,403,816
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (69,785) (1,545,512) (622,265) (12,061,960)
-------- --------------- ----------- ---------------
Net Change (39,415) $ (875,756) (509,230) $ (9,658,144)
-------- --------------- ----------- ---------------
RETAIL CLASS
Issued from the sale of shares 145,850 $ 3,155,019 466,779 $ 9,602,643
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (312,562) (6,662,850) (497,710) (10,104,474)
-------- --------------- ----------- ---------------
Net Change (166,712) $(3,507,831) (30,931) $ (501,831)
-------- --------------- ----------- ---------------
Increase (decrease) from capital
share transactions (206,127) $(4,383,587) (540,161) $(10,159,975)
-------- --------------- ----------- ---------------
SMALL CAP GROWTH FUND
Six Months Ended March 31, 2007 Year Ended September 30, 2006
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS -------- ----------- -------- ------------
Issued from the sale of shares 66,580 $ 863,380 514,581 $ 6,313,604
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (95,545) (1,236,714) (238,173) (2,861,514)
-------- --------------- ----------- ---------------
Net Change (28,965) $ (373,334) 276,408 $ 3,452,090
-------- --------------- ----------- ---------------
RETAIL CLASS
Issued from the sale of shares 49,568 $ 632,566 118,067 $ 1,415,130
Issued in connection with the
reinvestment of distributions -- -- -- --
Redeemed (66,260) (839,527) (194,917) (2,249,611)
-------- --------------- ----------- ---------------
Net Change (16,692) $ (206,961) (76,850) $ (834,481)
-------- --------------- ----------- ---------------
Increase (decrease) from capital
share transactions (45,657) $ (580,295) 199,558 $ 2,617,609
-------- --------------- ----------- ---------------
58
NOTES TO FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 2007 (UNAUDITED)
SMALL CAP VALUE FUND
Six Months Ended March 31, 2007 Year Ended September 30, 2006
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 1,817,313 $ 50,577,316 2,676,286 $ 73,004,753
Issued in connection with the
reinvestment of distributions 1,908,337 50,494,585 1,409,958 35,671,938
Redeemed (1,618,730) (44,938,501) (2,792,941) (76,314,037)
---------- --------------- ------------ --------------
Net Change 2,106,920 $ 56,133,400 1,293,303 $ 32,362,654
---------- --------------- ------------ --------------
RETAIL CLASS
Issued from the sale of shares 4,353,771 $119,240,061 4,178,708 $113,429,036
Issued in connection with the
reinvestment of distributions 1,279,692 33,617,502 879,102 22,100,621
Redeemed (2,899,639) (81,194,117) (3,102,060) (83,870,790)
---------- --------------- ------------ --------------
Net Change 2,733,824 $ 71,663,446 1,955,750 $ 51,658,867
---------- --------------- ------------ --------------
ADMIN CLASS
Issued from the sale of shares 850,148 $ 22,948,399 834,549 $ 22,351,432
Issued in connection with the
reinvestment of distributions 292,721 7,599,048 237,129 5,902,138
Redeemed (538,178) (14,684,597) (1,206,021) (31,582,406)
---------- --------------- ------------ --------------
Net Change 604,691 $ 15,862,850 (134,343) $ (3,328,836)
---------- --------------- ------------ --------------
Increase (decrease) from capital
share transactions 5,445,435 $143,659,696 3,114,710 $ 80,692,685
---------- --------------- ------------ --------------
TAX-MANAGED EQUITY FUND
Six Months Ended March 31, 2007 Year Ended September 30, 2006
------------------------------ ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------ ---------- ------------
Issued from the sale of shares 73,901 $ 769,991 110,105 $ 1,042,547
Issued in connection with
the reinvestment of distributions 6,824 70,495 4,870 45,436
Redemptions-in-kind* (261,354) (2,702,405)
Redeemed (192,511) (2,061,183) (226,157) (2,122,569)
---------- --------------- ------------ --------------
Increase (decrease) from capital
share transactions (373,140) $ (3,923,102) (111,182) $ (1,034,586)
---------- --------------- ------------ --------------
*On October 20, 2006, IXIS US Group liquidated its position of 261,534 shares. This was
accomplished through a redemption-in-kind which included $2,453,150 of securities and
$249,255 in cash.
59
VALUE FUND
Six Months Ended March 31, 2007 Year Ended September 30, 2006/(a)/
------------------------------ ---------------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS --------- ------------ --------- -----------
Issued from the sale of shares 3,428,762 $ 75,499,076 1,543,164 $31,129,107
Issued in connection with
the reinvestment of distributions 186,666 4,059,991 111,464 2,043,141
Redeemed (876,046) (19,421,740) (264,649) (5,153,539)
--------- --------------- --------------- ----------------
Net Change 2,739,382 60,137,327 1,389,979 $28,018,709
--------- --------------- --------------- ----------------
RETAIL CLASS
Issued from the sale of shares 700,897 $ 15,382,918 22,169 $ 456,494
Issued in connection with
the reinvestment of distributions 11,954 259,876 -- --
Redeemed (59,511) (1,307,172) -- --
--------- --------------- --------------- ----------------
Net Change 653,340 $ 14,335,622 22,169 $ 456,494
--------- --------------- --------------- ----------------
Increase (decrease) from capital
share transactions 3,392,722 $ 74,472,949 1,412,148 $28,475,203
--------- --------------- --------------- ----------------
(a)For Retail Class, from June 30, 2006, commencement of operations.
9. SUBSEQUENT EVENT. On or about June 1, 2007, any outstanding Retail Class
shares and Institutional Class shares of the Loomis Sayles Value Fund will be
redesignated as Class A shares and Class Y shares of the Fund, respectively.
Expenses relating to these classes of shares will not change as a result of the
redesignations. Also on such date, Class B shares and Class C shares will be
added to the Fund.
60
[LOGO]
Semiannual Report
March 31, 2007
[LOGO]
Loomis Sayles Investment Grade Bond Fund
TABLE OF CONTENTS
Management Discussion
and Performance.........Page 1
Portfolio of InvestmentsPage 5
Financial Statements...Page 11
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
PORTFOLIO PROFILE
Objective:
High total investment return through a combination of current income and
capital appreciation
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in investment-grade, fixed-income securities, although it may
invest up to 10% of its assets in lower quality fixed-income securities. The
fund may invest any portion of its assets in securities of Canadian issuers and
up to 20% in other foreign securities, including emerging markets.
- --------------------------------------------------------------------------------
Fund Inception:
December 31, 1996
- --------------------------------------------------------------------------------
Managers:
Daniel Fuss, CFA, CIC
Steven Kaseta, CFA
Associate Managers:
Matthew J. Eagan, CFA
Kathleen Gaffney, CFA
Elaine Stokes
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A LIGRX
Class B LGBBX
Class C LGBCX
Class Y LSIIX
Class J LIGJX
- --------------------------------------------------------------------------------
What You Should Know:
This fund invests in fixed-income securities that are subject to credit risk,
interest rate risk and liquidity risk. It may also invest in foreign and
emerging market securities, which have special risks, as well as in
mortgage-related securities that are subject to prepayment risk.
Management Discussion
- --------------------------------------------------------------------------------
After relative calm in the last three months of 2006, U.S. corporate bonds
became more volatile. Rising concerns about subprime mortgages and slowdowns in
the housing market, combined with softer-than-expected business spending
levels, caused a shift in the U.S. fixed-income markets in the first quarter of
2007. Moreover, turmoil in global equity markets that started in February
spilled over into U.S. Treasuries, increasing demand for the relative safety of
top-quality U.S. issues. Of the major markets for government-secured bonds,
U.S. Treasuries were the best performers, although this was diluted by the
weakness of the U.S. dollar.
For the six months ended March 31, 2007, Loomis Sayles Investment Grade Bond
Fund outdistanced both its benchmark and its Morningstar peers. The fund's
Class A shares provided a total return of 3.76% at net asset value,
outperforming the Lehman U.S. Government/Credit Index, which rose by 2.52%. For
the same period, the average return on the funds in Morningstar's
Intermediate-Term Bond category was 2.76%.
FOREIGN INVESTMENTS WERE POSITIVE, EXCEPT FOR CANADA
Securities denominated in foreign currencies accounted for more than 30% of the
fund's total net assets at March 31, 2007. For the fiscal period, the fund
benefited most from several overseas markets, including Thailand, New Zealand
and South Africa - all markets whose currencies appreciated in value relative
to the U.S. dollar. Security selection was also a positive in Mexico, Brazil
and Indonesia. These pluses were partially offset by our weighting in Canadian
issues, which accounted for nearly 16% of total net assets at the end of March.
Lower-than-expected economic growth, combined with declining prices of oil and
other commodities, led to weakness in the Canadian bond market.
HIGH-YIELD U.S. CORPORATE BONDS ALSO BOOSTED RETURNS
Early in the period, brisk demand for high-yielding domestic securities
outstripped supply and led to price appreciation of several holdings. Good
performers included healthcare, natural gas, basic products issues and an
airline bond. Our emphasis on the communications sector and our longer duration
strategy also benefited the fund. The convertible bonds we selected, which
convey the right to be converted to common stocks, were also a positive, but
the fund's emphasis on transportation detracted from results.
SHIFTS IN FUND'S DURATION STRATEGY CONTRIBUTED TO PERFORMANCE
Duration is a measure of a fund's sensitivity to interest-rate changes. A
longer duration strategy is more aggressive, and a shorter one is defensive. By
the end of March 2007, the fund's duration was just under eight years, compared
to about five years for the fund's benchmark. Much of the fund's duration
positioning came from its corporate holdings, where successful security
selection produced generous income early in the period. In mid-January we
further extended duration by adding some longer-term U.S. Treasuries. At that
time, the yield advantage corporate bonds usually have over government bonds
had narrowed to the tightest spread in years, as nervous investors sought safe
havens for a time. Credit spreads widened again in March, ending the period
where they had been in January. U.S. Treasury and agency securities accounted
for about 20% of the fund's assets at the end of March.
SLOW ECONOMIC GROWTH EXPECTED TO CONTAIN INFLATIONARY PRESSURES
We believe the fixed-income markets have the potential to generate modest
returns in 2007. We expect economic growth to remain slow, although it may pick
up somewhat during the second half of the year. We think inflationary pressures
are likely to remain moderate, and we expect the Federal Reserve Board to leave
interest rates unchanged, at least in the near future. The markets may exhibit
some near-term volatility, and we remain concerned about high valuations in the
high-yield bond market. Overall, however, we believe the economy is nearing the
end of a mid-cycle correction - a period that historically has favored
investment-grade and higher-quality securities.
1
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
Investment Results through March 31, 2007
- --------------------------------------------------------------------------------
PERFORMANCE IN PERSPECTIVE
The charts comparing the fund's performance to an index provide you with a
general sense of how it performed. The fund's total return for the period shown
below appears with and without sales charges and includes fund expenses and
fees. An index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the
results. It is not possible to invest directly in an index. Investors would
incur transaction costs and other expenses if they purchased the securities
necessary to match the index.
Growth of a $10,000 Investment in Class A Shares/1,4/
[CHART]
March 31, 1997 through March 31, 2007
Lehman
Net Asset Maximum U.S. Government/
Value (2) Sales Charge (3) Credit Index
--------- ---------------- -----------------
3/31/1997 $10,000 $9,550 $10,000
4/30/1997 10,202 9,743 10,146
5/31/1997 10,396 9,928 10,241
6/30/1997 10,661 10,181 10,364
7/31/1997 11,352 10,841 10,681
8/31/1997 11,031 10,534 10,561
9/30/1997 11,342 10,831 10,727
10/31/1997 11,508 10,990 10,899
11/30/1997 11,488 10,971 10,956
12/31/1997 11,509 10,991 11,071
1/31/1998 11,618 11,095 11,227
2/28/1998 11,650 11,126 11,205
3/31/1998 11,791 11,260 11,239
4/30/1998 11,837 11,304 11,296
5/31/1998 11,903 11,368 11,417
6/30/1998 11,881 11,346 11,533
7/31/1998 11,732 11,204 11,542
8/31/1998 11,229 10,724 11,768
9/30/1998 11,486 10,969 12,104
10/31/1998 11,371 10,859 12,019
11/30/1998 11,748 11,219 12,090
12/31/1998 11,847 11,314 12,120
1/31/1999 12,037 11,495 12,206
2/28/1999 11,883 11,348 11,916
3/31/1999 12,155 11,608 11,975
4/30/1999 12,442 11,882 12,005
5/31/1999 12,334 11,779 11,881
6/30/1999 12,298 11,744 11,844
7/31/1999 12,079 11,535 11,811
8/31/1999 12,036 11,494 11,802
9/30/1999 12,200 11,651 11,908
10/31/1999 12,198 11,649 11,939
11/30/1999 12,231 11,680 11,932
12/31/1999 12,280 11,727 11,860
1/31/2000 12,280 11,727 11,856
2/29/2000 12,669 12,099 12,005
3/31/2000 12,844 12,266 12,179
4/30/2000 12,511 11,948 12,119
5/31/2000 12,392 11,835 12,108
6/30/2000 12,753 12,179 12,355
7/31/2000 12,905 12,324 12,486
8/31/2000 13,149 12,557 12,663
9/30/2000 13,041 12,454 12,710
10/31/2000 12,935 12,353 12,790
11/30/2000 13,182 12,589 13,009
12/31/2000 13,625 13,012 13,265
1/31/2001 13,853 13,229 13,488
2/28/2001 13,959 13,331 13,627
3/31/2001 13,779 13,159 13,690
4/30/2001 13,569 12,958 13,587
5/31/2001 13,691 13,075 13,665
6/30/2001 13,759 13,140 13,731
7/31/2001 14,109 13,474 14,073
8/31/2001 14,429 13,780 14,253
9/30/2001 14,134 13,498 14,385
10/31/2001 14,751 14,087 14,750
11/30/2001 14,543 13,888 14,507
12/31/2001 14,396 13,748 14,393
1/31/2002 14,495 13,843 14,499
2/28/2002 14,639 13,980 14,622
3/31/2002 14,292 13,649 14,325
4/30/2002 14,703 14,042 14,603
5/31/2002 14,890 14,220 14,738
6/30/2002 14,857 14,189 14,863
7/31/2002 14,574 13,918 15,042
8/31/2002 15,097 14,417 15,379
9/30/2002 15,124 14,443 15,710
10/31/2002 15,033 14,357 15,560
11/30/2002 15,350 14,660 15,569
12/31/2002 15,921 15,205 15,982
1/31/2003 16,192 15,463 15,981
2/28/2003 16,543 15,799 16,266
3/31/2003 16,625 15,876 16,245
4/30/2003 17,193 16,419 16,418
5/31/2003 18,048 17,235 16,885
6/30/2003 18,134 17,318 16,817
7/31/2003 17,269 16,492 16,112
8/31/2003 17,352 16,571 16,218
9/30/2003 18,244 17,423 16,732
10/31/2003 18,198 17,379 16,520
11/30/2003 18,539 17,704 16,564
12/31/2003 19,002 18,147 16,728
1/31/2004 19,131 18,270 16,880
2/29/2004 19,279 18,411 17,086
3/31/2004 19,483 18,606 17,243
4/30/2004 18,719 17,877 16,714
5/31/2004 18,562 17,727 16,628
6/30/2004 18,705 17,863 16,696
7/31/2004 18,929 18,078 16,873
8/31/2004 19,458 18,582 17,230
9/30/2004 19,839 18,946 17,290
10/31/2004 20,258 19,346 17,440
11/30/2004 20,545 19,621 17,246
12/31/2004 20,796 19,860 17,429
1/31/2005 20,673 19,743 17,550
2/28/2005 20,808 19,871 17,435
3/31/2005 20,564 19,639 17,312
4/30/2005 20,589 19,662 17,571
5/31/2005 20,683 19,753 17,792
6/30/2005 20,909 19,968 17,908
7/31/2005 20,859 19,920 17,706
8/31/2005 21,226 20,271 17,971
9/30/2005 21,196 20,242 17,736
10/31/2005 20,984 20,040 17,584
11/30/2005 21,079 20,130 17,674
12/31/2005 21,226 20,271 17,842
1/31/2006 21,570 20,599 17,809
2/28/2006 21,658 20,684 17,858
3/31/2006 21,338 20,378 17,661
4/30/2006 21,675 20,700 17,606
5/31/2006 21,554 20,584 17,596
6/30/2006 21,508 20,541 17,637
7/31/2006 21,734 20,756 17,866
8/31/2006 22,239 21,238 18,149
9/30/2006 22,392 21,384 18,326
10/31/2006 22,723 21,701 18,442
11/30/2006 23,039 22,002 18,658
12/31/2006 22,866 21,837 18,516
1/31/2007 22,825 21,798 18,501
2/28/2007 23,346 22,295 18,820
3/31/2007 23,234 22,188 18,787
Average Annual Returns -- March 31, 2007/4/
6 MONTHS 1 YEAR 5 YEARS 10 YEARS
CLASS A/1/
Net Asset Value/2/ 3.76% 8.89% 10.20% 8.80%
With Maximum Sales Charge/3/ -0.87 4.01 9.19 8.30
CLASS B/1/
Net Asset Value/2/ 3.34 8.04 9.28 7.84
With CDSC/5/ -1.66 3.04 9.00 7.84
CLASS C/1/
Net Asset Value/2/ 3.34 8.07 9.29 7.84
With CDSC/5/ 2.34 7.07 9.29 7.84
CLASS Y/1/
Net Asset Value/2/ 3.88 9.31 10.55 9.09
CLASS J/1/
Net Asset Value/2/ 3.50 8.49 9.72 8.27
With Sales Charge/5/ -0.12 4.70 8.94 7.89
- -----------------------------------------------------------------------------
COMPARATIVE PERFORMANCE 6 MONTHS 1 YEAR 5 YEARS 10 YEARS
Lehman U.S. Government/Credit Index 2.52 6.38 5.57 6.51
Morningstar Intermediate-Term Bond Fund Avg. 2.76 6.17 4.99 5.75
See page 3 for a description of the index/average.
All returns represent past performance and do not guarantee future results.
Share price and return will vary and you may have a gain or loss when you sell
your shares. All results include reinvestment of any dividends and capital
gains. Current returns may be higher or lower than those shown. For performance
current to the most recent month-end, visit www.ixisadvisorfunds.com. Class Y,
the successor to the fund's Institutional Class, is only available to certain
investors as described in the prospectus. Class J shares are not offered for
sale in the United States and are not eligible for sale to U.S. investors.
PORTFOLIO FACTS
% of Net Assets as of
CREDIT QUALITY 3/31/2007 9/30/2006
- ----------------------------------------
Aaa 35.9 27.4
- ----------------------------------------
Aa 6.5 13.0
- ----------------------------------------
A 6.6 9.1
- ----------------------------------------
Baa 31.2 30.1
- ----------------------------------------
Ba 4.6 9.1
- ----------------------------------------
B 1.8 2.8
- ----------------------------------------
Caa 2.7 0.0
- ----------------------------------------
Not rated* 4.0 5.1
- ----------------------------------------
Short-term & other 6.7 3.4
- ----------------------------------------
Credit Quality is based on ratings from Moody's Investors Service.
*Securities that are not rated by Moody's may be rated by another rating
agency or by Loomis Sayles.
EXPENSE RATIOS AS STATED IN THE MOST RECENT PROSPECTUS
Share Class Gross Expense Ratio/6/ Net Expense Ratio/7/
- -------------------------------------------------------
A 0.92 0.92
- -------------------------------------------------------
B 1.89 1.70
- -------------------------------------------------------
C 1.70 1.70
- -------------------------------------------------------
Y 0.63 0.55
- -------------------------------------------------------
J 1.30 1.30
- -------------------------------------------------------
NOTES TO CHARTS
The table and graph do not reflect taxes shareholders might owe on any fund
distributions or when they redeem their shares.
/1/Returns shown in the chart include performance of the fund's Retail Class
shares (inception: 12/31/96), which were converted to Class A shares on
9/12/03. Retail Class was closed on 12/18/00 and recommenced operations on
1/31/02; Institutional Class performance is shown for the intervening period,
adjusted to reflect the higher expenses paid by Class A shares. The
restatement of the fund's performance to reflect Class A expenses is based on
the net expenses of the Class after taking into effect the fund's then
current expense cap arrangements. For periods prior to the inception of Class
B and Class C shares (9/12/03), performance is based on prior Institutional
Class performance, restated to reflect the loads and expenses of Class B and
Class C shares, respectively. Institutional Class became the Class Y on
9/12/03. Class Y performance has been restated to reflect the net expenses of
the Institutional Class after taking into effect Class Y's then current
expense cap arrangements. For periods prior to the inception of Class J
Shares (5/24/99), performance is based on prior Institutional Class
performance, restated to reflect the load and expenses of Class J shares. The
growth of $10,000 chart compares the performance of Class A shares at net
asset value, to the performance of Class A shares including the maximum sales
charge of 4.50%. This chart reflects the performance of Class A shares rather
than Class Y shares because Class A shares have the highest sales charge.
Prior to 9/12/03, the fund (except Class J) was offered without a sales
charge.
/2/Does not include a sales charge.
/3/Includes maximum sales charge of 4.50%.
/4/Fund performance has been increased by expense waivers and reimbursements,
if any, without which performance would have been lower.
/5/Performance for Class B shares assumes a maximum of 5% contingent deferred
sales charge ("CDSC") applied when you sell shares, which declines annually
between years 1-6 according to the following schedule: 5, 4, 3, 3, 2, 1, 0%.
Class C shares performance assumes a 1% CDSC applied when you sell shares
within one year of purchase. Performance for Class J assumes a 3.50% sales
charge.
/6/Before waivers and reimbursements.
/7/After waivers and reimbursements.
2
ADDITIONAL INFORMATION
The views expressed in this report reflect those of the portfolio managers as
of the dates indicated. The managers' views are subject to change at any time
without notice based on changes in market or other conditions. References to
specific securities or industries should not be regarded as investment advice.
Because the fund is actively managed, there is no assurance that it will
continue to invest in the securities, countries or industries mentioned.
For more complete information on any IXIS Advisor Fund, contact your financial
professional or call IXIS Advisor Funds and ask for a free prospectus, which
contains more complete information including charges and other ongoing
expenses. Investors should consider a fund's objective, risks and expenses
carefully before investing. This and other fund information can be found in the
prospectus. Please read the prospectus carefully before investing.
INDEX/AVERAGE DESCRIPTIONS:
Lehman U.S. Government/Credit Index is an unmanaged
index of publicly traded bonds, including U.S. government bonds, U.S.
Treasury securities and corporate bonds.
Morningstar Intermediate-Term Bond Fund Average is the average performance
without sales charges of funds with similar investment objectives, as
calculated by Morningstar, Inc.
PROXY VOTING INFORMATION
A description of the fund's proxy voting policies and procedures is available
without charge, upon request, by calling IXIS Advisor Funds at 800-225-5478; on
the fund's website at www.ixisadvisorfunds.com; and on the Securities and
Exchange Commission's (SEC's) website at www.sec.gov. Information regarding how
the fund voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2006 is available from the fund's website and the SEC's
website.
QUARTERLY PORTFOLIO SCHEDULES
The fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q
are available on the SEC's website at www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
3
UNDERSTANDING FUND EXPENSES
As a mutual fund shareholder, you incur different types of costs: transaction
costs, including sales charges (loads) on purchases and contingent deferred
sales charges on redemptions; redemption fees; certain exchange fees; and
minimum account fee charges; and ongoing costs, including management fees,
distribution fees (12b-1 fees) and/or service fees, and other fund expenses. In
addition, the fund assesses a minimum balance fee of $20 on an annual basis for
accounts that fall below the required minimum to establish an account (certain
exceptions may apply). These costs are described in more detail in the fund's
prospectus. The examples below are intended to help you understand the ongoing
costs of investing in the fund and help you compare these with the ongoing
costs of investing in other mutual funds.
The first line in the table for each Class shows the actual amount of fund
expenses you would have paid on a $1,000 investment in the fund from October 1,
2006 through March 31, 2007. It also shows how much a $1,000 investment would
be worth at the close of the period, assuming actual fund returns and expenses.
To estimate the expenses you paid over the period, simply divide your account
value by $1,000 (for example $8,600 account value divided by $1,000 = 8.6) and
multiply the result by the number in the Expenses Paid During the Period row as
shown below for your class.
The second line in the table for each Class provides information about
hypothetical account values and hypothetical expenses based on the fund's
actual expense ratios and an assumed rate of return of 5% per year before
expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid on your investment for the period. You may use
this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown reflect ongoing costs only, and do not
include any transaction costs. Therefore, the second line in the table of the
fund is useful in comparing ongoing costs only, and will not help you determine
the relative costs of owning different funds. If transaction costs were
included, total costs would be higher.
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSE PAID DURING PERIOD*
LOOMIS SAYLES INVESTMENT GRADE BOND FUND 10/1/06 3/31/07 10/1/06 - 3/31/07
- -----------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,037.60 $4.11
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.89 $4.08
- -----------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,033.40 $8.62
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.45 $8.55
- -----------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,033.40 $7.86
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.20 $7.80
- -----------------------------------------------------------------------------------------------------------------
CLASS Y
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,038.80 $2.80
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.19 $2.77
- -----------------------------------------------------------------------------------------------------------------
CLASS J
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,035.00 $6.54
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.50 $6.49
- -----------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after
waiver/reimbursement): 0.81%, 1.70%, 1.55%, 0.55% and 1.29% for Class A, B, C,
Y and J, respectively, multiplied by the average account value over the
period, multiplied by the number of days in the most recent fiscal half-year,
divided by the number of days in the most recent fiscal half-year, divided by
365 (to reflect the half-year period).
4
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------
Bonds and Notes -- 93.2% of Net Assets
Non-Convertible Bonds -- 91.1%
Airlines -- 0.7%
$ 8,115,000 Qantas Airways Ltd.,
6.050%, 4/15/2016, 144A $ 7,072,977
---------------
Asset-Backed Securities -- 0.2%
726,569 Community Program Loan Trust, Series
1987-A, Class A4,
4.500%, 10/01/2018 716,873
1,700,000 Community Program Loan Trust, Series
1987-A, Class A5,
4.500%, 4/01/2029 1,606,970
---------------
2,323,843
---------------
Automotive -- 1.6%
1,389,000 Cummins, Inc.,
6.750%, 2/15/2027 1,390,356
665,000 Cummins, Inc.,
7.125%, 3/01/2028 689,628
1,990,000 Ford Motor Co.,
6.375%, 2/01/2029 1,417,875
130,000 Ford Motor Co.,
6.500%, 8/01/2018(b) 103,675
260,000 Ford Motor Co.,
6.625%, 2/15/2028(b) 187,850
5,185,000 Ford Motor Co.,
6.625%, 10/01/2028 3,746,163
8,730,000 Ford Motor Co.,
7.450%, 7/16/2031(b) 6,754,838
245,000 Ford Motor Co.,
7.500%, 8/01/2026 191,100
700,000 Ford Motor Credit Co.,
7.375%, 10/28/2009 698,713
1,540,000 Ford Motor Credit Co.,
8.000%, 12/15/2016 1,481,854
110,000 General Motors Corp.,
8.375%, 7/15/2033(b) 98,725
---------------
16,760,777
---------------
Banking -- 5.1%
2,595,000 BAC Capital Trust VI,
5.625%, 3/08/2035 2,410,890
2,120,000,000 Barclays Financial LLC,
4.060%, 9/16/2010, (KRW), 144A 2,135,999
140,000,000 Barclays Financial LLC,
4.160%, 2/22/2010, (THB), 144A 4,055,127
3,000,000,000 Barclays Financial LLC,
4.460%, 9/23/2010, (KRW), 144A 3,180,485
144,000,000 Barclays Financial LLC, Series EMTN,
4.100%, 3/22/2010, (THB), 144A 4,170,097
16,371,250,000 BNP Paribas SA, Series EMTN,
Zero Coupon, 6/13/2011, (IDR), 144A 1,207,402
1,500,000 CIT Group, Inc.,
5.500%, 12/01/2014, (GBP) 2,824,848
9,860,000 Citibank NA,
15.000%, 7/02/2010, (BRL), 144A 5,442,315
20,360,000 HSBC Bank USA,
Zero Coupon, 4/18/2012, (MYR), 144A 4,981,796
4,500,000 HSBC Bank USA,
3.310%, 8/25/2010, 144A 4,927,950
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------------------
Banking -- continued
$ 700,000 ICICI Bank Ltd.,
6.375%, 4/30/2022, 144A(c) $ 693,562
18,000,000 JPMorgan Chase & Co.,
Zero Coupon, 5/17/2010, (BRL), 144A 6,279,015
22,683,264,000 JPMorgan Chase & Co.,
Zero Coupon, 3/28/2011, (IDR), 144A 1,722,663
17,920,000,000 JPMorgan Chase & Co.,
Zero Coupon, 3/28/2011, (IDR), 144A 1,360,920
68,827,366,920 JPMorgan Chase & Co.,
Zero Coupon, 4/12/2012, (IDR), 144A 4,740,361
24,124,936,500 JPMorgan Chase London,
Zero Coupon, 10/21/2010, (IDR), 144A 1,923,766
100,000 Keybank NA,
6.950%, 2/01/2028 109,351
90,000,000 Rabobank Nederland, Series EMTN,
13.500%, 1/28/2008, (ISK), 144A 1,364,117
---------------
53,530,664
---------------
Beverages -- 0.2%
1,525,000 Cia Brasileira de Bebidas,
8.750%, 9/15/2013 1,769,000
---------------
Brokerage -- 0.5%
10,000,000 Merrill Lynch & Co., Inc.,
10.710%, 3/08/2017, (BRL) 4,868,223
---------------
Building Materials -- 1.3%
10,000,000 Masco Corp.,
5.850%, 3/15/2017 9,837,050
970,000 Owens Corning, Inc.,
6.500%, 12/01/2016, 144A 990,756
1,450,000 Owens Corning, Inc.,
7.000%, 12/01/2036, 144A 1,446,121
1,060,000 USG Corp.,
6.300%, 11/15/2016, 144A 1,067,504
---------------
13,341,431
---------------
Chemicals -- 0.8%
6,305,000 Lubrizol Corp.,
6.500%, 10/01/2034 6,288,922
2,400,000 Methanex Corp.,
6.000%, 8/15/2015 2,297,950
---------------
8,586,872
---------------
Consumer Cyclical Services -- 0.9%
9,585,000 Western Union Co.,
6.200%, 11/17/2036 9,099,999
---------------
Electric -- 2.1%
895,000 Commonwealth Edison Co.,
4.700%, 4/15/2015 819,016
1,700,000 Commonwealth Edison Co.,
5.875%, 2/01/2033 1,577,484
2,750,000 Constellation Energy Group, Inc.,
4.550%, 6/15/2015(b) 2,528,026
960,000 Dominion Resources, Inc.,
5.950%, 6/15/2035 932,959
5,500,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
7.875%, 2/01/2027 6,234,723
1,000,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
8.350%, 8/01/2013 1,133,905
1,905,000 ITC Holdings Corp.,
5.875%, 9/30/2016, 144A 1,915,297
See accompanying notes to financial statements.
5
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------
Electric -- continued
$ 2,830,000 ITC Holdings Corp.,
6.375%, 9/30/2036, 144A $ 2,846,507
1,500,000 MidAmerican Energy Holdings Co.,
5.875%, 10/01/2012 1,544,292
1,000,000 MidAmerican Energy Holdings Co.,
6.125%, 4/01/2036 997,838
42,000 Quezon Power Philippines Co.,
8.860%, 6/15/2017 43,470
500,000 SP Powerassets Ltd.,
3.730%, 10/22/2010, (SGD) 336,104
1,795,000 Toledo Edison Co.,
6.150%, 5/15/2037 1,758,475
---------------
22,668,096
---------------
Entertainment -- 0.7%
565,000 Time Warner, Inc.,
6.500%, 11/15/2036 563,400
1,805,000 Time Warner, Inc.,
6.625%, 5/15/2029 1,826,653
755,000 Time Warner, Inc.,
6.950%, 1/15/2028 790,593
505,000 Time Warner, Inc.,
7.625%, 4/15/2031 567,531
330,000 Time Warner, Inc.,
7.700%, 5/01/2032 374,134
3,590,000 Viacom, Inc., Class B,
6.875%, 4/30/2036 3,618,663
---------------
7,740,974
---------------
Financial Other -- 0.0%
195,000 Petrozuata Finance, Inc.,
8.220%, 4/01/2017, 144A 195,975
---------------
Foreign Agency -- 0.0%
220,000 Alberta Municipal Funding Corp.,
5.700%, 9/01/2011, (CAD) 201,502
---------------
Foreign Local Governments -- 4.4%
31,300 Province of Alberta,
5.930%, 9/16/2016, (CAD) 29,096
29,645,000 Province of British Columbia,
6.000%, 6/09/2008, (CAD) 26,218,813
3,275,000 Province of British Columbia,
6.250%, 12/01/2009, (CAD) 2,988,037
3,285,000 Province of Manitoba,
4.450%, 12/01/2008, (CAD) 2,859,302
6,510,000 Province of Manitoba,
5.750%, 6/02/2008, (CAD) 5,739,627
500,000 Province of Nova Scotia,
6.600%, 6/01/2027, (CAD) 544,266
4,810,000 Province of Ontario,
3.875%, 3/08/2008, (CAD) 4,150,890
4,320,000 Province of Ontario,
5.700%, 12/01/2008, (CAD) 3,834,903
550,000 Province of Saskatchewan,
5.500%, 6/02/2008, (CAD) 483,576
---------------
46,848,510
---------------
Government Owned -- No Guarantee -- 0.4%
3,670,000 Pemex Project Funding Master Trust,
8.625%, 12/01/2023(b) 4,569,150
---------------
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------
Government Sponsored -- 0.3%
$ 3,000,000 Federal Home Loan Mortgage Corp.,
5.750%, 1/15/2012(b) $ 3,114,108
---------------
Healthcare -- 1.4%
5,000,000 HCA, Inc.,
5.750%, 3/15/2014 4,268,750
800,000 HCA, Inc.,
6.250%, 2/15/2013 727,000
3,250,000 HCA, Inc.,
6.300%, 10/01/2012(b) 3,038,750
2,625,000 HCA, Inc.,
7.050%, 12/01/2027 2,082,370
250,000 HCA, Inc.,
7.500%, 12/15/2023 212,131
250,000 HCA, Inc.,
7.500%, 11/06/2033 213,125
620,000 HCA, Inc.,
7.580%, 9/15/2025 523,331
1,000,000 HCA, Inc.,
7.750%, 7/15/2036 847,274
2,865,000 Hospira, Inc.,
6.050%, 3/30/2017 2,862,751
---------------
14,775,482
---------------
Healthcare Insurance -- 0.5%
5,455,000 CIGNA Corp.,
6.150%, 11/15/2036 5,405,818
---------------
Home Construction -- 2.6%
850,000 Centex Corp.,
5.250%, 6/15/2015(b) 775,639
3,685,000 D.R. Horton, Inc.,
5.250%, 2/15/2015 3,369,711
2,050,000 Desarrolladora Homex SAB de CV,
7.500%, 9/28/2015 2,115,600
2,605,000 Lennar Corp., Series B,
5.600%, 5/31/2015 2,450,287
1,870,000 Lennar Corp., Series B,
6.500%, 4/15/2016 1,838,711
2,630,000 Pulte Homes, Inc.,
5.200%, 2/15/2015(b) 2,429,933
250,000 Pulte Homes, Inc.,
5.250%, 1/15/2014 236,252
9,165,000 Pulte Homes, Inc.,
6.000%, 2/15/2035 8,174,703
3,510,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 3,262,043
3,605,000 Toll Brothers Finance Corp.,
5.150%, 5/15/2015 3,259,317
---------------
27,912,196
---------------
Independent Energy -- 1.9%
4,020,000 Anadarko Petroleum Corp.,
5.950%, 9/15/2016 4,028,466
4,865,000 Anadarko Petroleum Corp.,
6.450%, 9/15/2036 4,814,146
10,875,000 Apache Corp.,
6.000%, 1/15/2037 10,829,260
500,000 Devon Financing Corp. LLC,
7.875%, 9/30/2031 592,688
See accompanying notes to financial statements.
6
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------------
Independent Energy -- continued
$ 160,000 XTO Energy, Inc.,
6.100%, 4/01/2036 $ 154,934
---------------
20,419,494
---------------
Integrated Energy -- 0.2%
145,000 Cerro Negro Finance Ltd.,
7.900%, 12/01/2020, 144A 145,000
1,864,011 PF Export Receivables Master Trust,
6.436%, 6/01/2015, 144A 1,901,291
---------------
2,046,291
---------------
Life Insurance -- 1.4%
15,400,000 ASIF Global Financing XXVII,
2.380%, 2/26/2009, (SGD), 144A 10,006,310
4,260,000 Mutual of Omaha Insurance Co.,
6.800%, 6/15/2036, 144A 4,590,278
---------------
14,596,588
---------------
Local Authorities -- 0.3%
2,730,000 Michigan Tobacco Settlement Finance Authority,
7.309%, 6/01/2034 2,818,206
---------------
Media Cable -- 2.2%
15,156,000 Comcast Corp.,
5.650%, 6/15/2035 13,731,821
2,255,000 Comcast Corp.,
6.450%, 3/15/2037 2,257,571
2,825,000 Comcast Corp.,
6.500%, 11/15/2035 2,846,402
3,750,000 Cox Communications, Inc., Class A,
6.750%, 3/15/2011 3,944,074
350,000 Virgin Media Finance Plc,
9.750%, 4/15/2014, (GBP) 728,350
---------------
23,508,218
---------------
Media Non-Cable -- 1.6%
2,500,000 Clear Channel Communications, Inc.,
4.250%, 5/15/2009 2,423,423
1,000,000 Clear Channel Communications, Inc.,
5.750%, 1/15/2013 937,671
5,165,000 News America, Inc.,
6.150%, 3/01/2037, 144A 4,920,556
4,095,000 News America, Inc.,
6.200%, 12/15/2034 3,971,945
4,930,000 News America, Inc.,
6.400%, 12/15/2035 4,903,748
---------------
17,157,343
---------------
Metals & Mining -- 0.4%
1,500,000 Teck Cominco Ltd.,
7.000%, 9/15/2012 1,611,241
2,885,000 Vale Overseas Ltd.,
6.875%, 11/21/2036 2,979,302
---------------
4,590,543
---------------
Mortgage Related -- 0.9%
3,000,000 Bank of America-First Union NB Commercial Mortgage,
Series 2001-3, Class A2,
5.464%, 4/11/2037 3,034,083
2,198,735 CS First Boston Mortgage Securities Corp., Series 2005-7,
Class 3A1,
5.000%, 8/25/2020 2,187,922
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------
Mortgage Related -- continued
$ 7,000,000 Federal Home Loan Mortgage Corp.,
3.220%, 6/20/2007, (SGD) $ 4,616,941
201,086 Federal Home Loan Mortgage Corp.,
5.000%, 12/01/2031 194,932
44,062 Federal National Mortgage Association,
6.000%, 7/01/2029 44,734
---------------
10,078,612
---------------
Non-Captive Consumer -- 0.3%
5,150,000 SLM Corp.,
6.500%, 6/15/2010, (NZD) 3,544,597
---------------
Non-Captive Diversified -- 0.4%
2,370,000 CIT Group, Inc.,
6.000%, 4/01/2036 2,297,239
1,000,000 GMAC Australia,
6.500%, 8/10/2007, (AUD) 795,418
1,500,000 GMAC LLC,
6.875%, 9/15/2011 1,501,453
---------------
4,594,110
---------------
Non-Captive Finance -- 1.8%
9,160,000 General Electric Capital Corp.,
6.500%, 9/28/2015, (NZD) 6,134,166
4,200,000 General Electric Capital Corp.,
6.625%, 2/04/2010, (NZD) 2,908,366
1,285,000 General Electric Capital Corp., Series EMTN,
6.750%, 9/26/2016, (NZD) 885,006
13,400,000 General Electric Capital Corp., Series GMTN,
3.485%, 3/08/2012, (SGD) 8,940,785
---------------
18,868,323
---------------
Oil Field Services -- 0.5%
665,000 Petrobras Energia SA, Series I,
8.125%, 7/15/2010, 144A 699,913
600,000 Transocean Sedco Forex, Inc.,
7.375%, 4/15/2018 669,895
3,840,000 Weatherford International Ltd.,
6.500%, 8/01/2036 3,839,547
---------------
5,209,355
---------------
Paper -- 0.8%
1,395,000 Bowater, Inc.,
6.500%, 6/15/2013(b) 1,258,987
575,000 Georgia-Pacific Corp.,
7.250%, 6/01/2028 549,125
2,265,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 2,185,725
140,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 138,600
815,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 819,075
2,280,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 2,416,800
750,000 International Paper Co.,
4.000%, 4/01/2010 724,339
300,000 International Paper Co.,
5.250%, 4/01/2016 284,337
---------------
8,376,988
---------------
See accompanying notes to financial statements.
7
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------
Pharmaceuticals -- 0.0%
$ 500,000 Schering-Plough Corp.,
5.550%, 12/01/2013 $ 509,423
---------------
Pipelines -- 2.6%
3,685,000 Colorado Interstate Gas Co.,
5.950%, 3/15/2015 3,708,009
125,000 Colorado Interstate Gas Co.,
6.800%, 11/15/2015 132,935
2,010,000 DCP Midstream LP,
6.450%, 11/03/2036, 144A 2,044,375
70,000 El Paso Corp.,
6.375%, 2/01/2009 71,138
2,470,000 El Paso Corp.,
6.950%, 6/01/2028 2,537,925
935,000 El Paso Corp.,
7.000%, 5/15/2011 981,750
250,000 El Paso Corp.,
7.750%, 6/15/2010 266,250
540,000 Energy Transfer Partners LP,
6.125%, 2/15/2017 551,776
395,000 Energy Transfer Partners LP,
6.625%, 10/15/2036 404,062
310,000 Kinder Morgan Finance,
5.700%, 1/05/2016 290,658
130,000 Kinder Morgan Finance,
6.400%, 1/05/2036 116,407
320,000 Kinder Morgan, Inc., Senior Note,
5.150%, 3/01/2015 293,482
2,500,000 ONEOK Partners LP,
6.650%, 10/01/2036 2,568,593
2,130,000 Plains All American Pipeline LP,
6.125%, 1/15/2017, 144A 2,172,491
4,595,000 Plains All American Pipeline LP,
6.650%, 1/15/2037, 144A 4,671,323
4,215,000 Southern Natural Gas Co.,
5.900%, 4/01/2017, 144A 4,214,971
2,415,000 Tennessee Gas Pipeline Co.,
7.000%, 10/15/2028 2,585,658
---------------
27,611,803
---------------
Property & Casualty Insurance -- 1.9%
3,460,000 Marsh & McLennan Cos., Inc.,
5.375%, 7/15/2014 3,386,447
2,590,000 Marsh & McLennan Cos., Inc.,
5.750%, 9/15/2015 2,572,828
6,740,000 Marsh & McLennan Cos., Inc.,
5.875%, 8/01/2033(b) 6,156,309
2,830,000 Travelers Property Casualty Corp.,
6.375%, 3/15/2033 2,949,670
4,830,000 Willis North America, Inc.,
6.200%, 3/28/2017 4,840,607
---------------
19,905,861
---------------
Railroads -- 0.6%
5,000,000 Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, (CAD), 144A 4,392,551
1,080,000 CSX Corp.,
6.000%, 10/01/2036 1,029,884
195,000 Missouri Pacific Railroad Co.,
4.750%, 1/01/2020 177,818
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------
Railroads -- continued
$ 243,000 Missouri Pacific Railroad Co.,
4.750%, 1/01/2030 $ 212,778
351,000 Missouri Pacific Railroad Co.,
5.000%, 1/01/2045 292,563
-----------
6,105,594
-----------
Real Estate Investment Trusts -- 0.9%
4,000,000 Colonial Realty LP,
4.800%, 4/01/2011 3,903,560
625,000 Colonial Realty LP,
5.500%, 10/01/2015 613,766
2,105,000 Highwoods Properties, Inc.,
5.850%, 3/15/2017, 144A 2,089,652
2,195,000 Highwoods Properties, Inc.,
7.500%, 4/15/2018 2,465,025
234,000 iStar Financial, Inc., Series REGS,
5.700%, 3/01/2014 232,731
-----------
9,304,734
-----------
Restaurants -- 0.1%
1,000,000 McDonald's Corp.,
3.628%, 10/10/2010, (SGD) 667,936
-----------
Retailers - 1.0%
10,580,000 Federated Retail Holdings, Inc.,
6.375%, 3/15/2037 10,283,665
22,000 J.C. Penney Co., Inc.,
7.125%, 11/15/2023 24,114
-----------
10,307,779
-----------
Sovereigns -- 5.1%
3,038,000(++) Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023, (MXN) 28,474,757
770,000(++) Mexican Fixed Rate Bonds, Series MI-10,
9.000%, 12/20/2012, (MXN) 7,462,650
325,000 Republic of Brazil,
8.875%, 4/15/2024 422,500
16,955,000 Republic of Brazil,
10.250%, 1/10/2028, (BRL) 8,208,811
250,000 Republic of Brazil,
11.000%, 8/17/2040(b) 337,250
6,285,000 Republic of Brazil,
12.500%, 1/05/2022, (BRL) 3,562,252
235,000 Republic of Peru,
6.125%, 3/07/2017(c) 234,412
500,000 Republic of South Africa,
5.250%, 5/16/2013, (EUR) 685,959
26,245,000 Republic of South Africa,
13.000%, 8/31/2010, (ZAR) 4,123,517
-----------
53,512,108
-----------
Supermarkets -- 0.3%
1,000,000 Albertson's, Inc.,
6.625%, 6/01/2028 915,561
1,900,000 Albertson's, Inc.,
7.450%, 8/01/2029 1,869,093
-----------
2,784,654
-----------
Supranational -- 2.9%
15,500,000 European Investment Bank,
4.600%, 1/30/2037, (CAD), 144A 13,408,541
See accompanying notes to financial statements.
8
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
Supranational -- continued
$ 22,000,000 Inter-American Development Bank, Series EMTN,
Zero Coupon, 5/11/2009, (BRL) $ 8,136,679
13,265,000 Inter-American Development Bank, Series EMTN,
6.000%, 12/15/2017, (NZD) 8,803,086
---------------
30,348,306
---------------
Technology -- 3.5%
2,500,000 Arrow Electronics, Inc.,
6.875%, 7/01/2013 2,628,710
2,000,000 Arrow Electronics, Inc.,
6.875%, 6/01/2018 2,090,946
9,000,000 Avnet, Inc.,
5.875%, 3/15/2014 8,937,396
6,230,000 Avnet, Inc.,
6.000%, 9/01/2015 6,176,983
1,540,000 Avnet, Inc.,
6.625%, 9/15/2016 1,589,529
260,000 Corning, Inc.,
6.850%, 3/01/2029 271,465
6,650,000 Corning, Inc.,
7.250%, 8/15/2036 7,009,964
2,965,000 Intuit, Inc.,
5.750%, 3/15/2017 2,925,171
1,625,000 Motorola, Inc.,
8.000%, 11/01/2011 1,792,148
3,115,000 Samsung Electronics Co. Ltd.,
7.700%, 10/01/2027, 144A 3,307,862
---------------
36,730,174
---------------
Textile -- 0.0%
25,000 Kellwood Co.,
7.625%, 10/15/2017 23,137
---------------
Tobacco -- 0.2%
2,000,000 Altria Group, Inc.,
7.000%, 11/04/2013 2,171,962
---------------
Transportation Services -- 0.1%
1,000,000 ERAC USA Finance Co.,
6.800%, 2/15/2008, 144A 1,007,530
---------------
Treasuries -- 27.1%
4,250,000 Canadian Government,
4.000%, 6/01/2016, (CAD) 3,647,380
31,545,000 Canadian Government,
4.250%, 9/01/2008, (CAD) 27,394,558
5,600,000 Canadian Government,
4.250%, 12/01/2008, (CAD) 4,866,931
38,265,000 Canadian Government,
4.500%, 9/01/2007, (CAD) 33,166,094
9,600,000 Canadian Government,
5.500%, 6/01/2010, (CAD) 8,678,666
3,430,000 Canadian Government,
5.750%, 6/01/2033, (CAD) 3,696,497
5,000,000 Canadian Government, Series WH31,
6.000%, 6/01/2008, (CAD) 4,422,997
21,000,000 U.S. Treasury Bond,
4.500%, 2/15/2036(b) 19,799,052
136,940,000 U.S. Treasury Bond,
5.375%, 2/15/2031(b) 145,990,912
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------------------------
Treasuries -- continued
$ 34,000,000 U.S. Treasury Note,
4.875%, 1/31/2009(b) $ 34,134,130
---------------
285,797,217
---------------
Wireless -- 2.9%
1,000,000 America Movil SA de CV,
4.125%, 3/01/2009 980,527
1,750,000 Motorola, Inc.,
5.220%, 10/01/2097 1,354,096
35,000 Nextel Communications, Inc., Series E,
6.875%, 10/31/2013 35,856
13,965,000 Nextel Communications, Inc., Series F,
5.950%, 3/15/2014 13,738,892
1,400,000 Philippine Long Distance Telephone Co., Series EMTN,
8.350%, 3/06/2017 1,582,000
52,000 Sprint Capital Corp.,
6.875%, 11/15/2028 51,786
93,000 Sprint Nextel Corp.,
6.000%, 12/01/2016 91,522
12,805,000 Vodafone Group Plc,
6.150%, 2/27/2037 12,361,704
---------------
30,196,383
---------------
Wirelines -- 5.5%
6,625,000 AT&T Corp.,
6.500%, 3/15/2029 6,517,542
1,205,000 AT&T, Inc.,
6.150%, 9/15/2034 1,185,966
8,125,000 BellSouth Corp.,
6.000%, 11/15/2034(b) 7,826,731
350,000 GTE Corp.,
6.940%, 4/15/2028 369,124
1,625,000 Koninklijke (Royal) KPN NV,
8.375%, 10/01/2030 1,839,632
620,000 New England Telephone & Telegraph,
7.875%, 11/15/2029 697,036
530,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 498,863
2,785,000 Qwest Capital Funding, Inc.,
6.875%, 7/15/2028 2,631,825
1,440,000 Qwest Capital Funding, Inc.,
7.625%, 8/03/2021 1,447,200
1,110,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 1,101,675
90,000 Qwest Corp.,
6.875%, 9/15/2033(b) 86,850
10,520,000 Telefonica Emisiones SAU,
7.045%, 6/20/2036 11,234,182
1,000,000 Telekom Malaysia Berhad,
7.875%, 8/01/2025, 144A 1,197,703
13,835,000 Telus Corp.,
4.950%, 3/15/2017, (CAD) 11,778,624
7,175,000 Verizon Communications,
5.850%, 9/15/2035 6,785,232
2,484,000 Verizon Maryland, Inc.,
5.125%, 6/15/2033 2,072,665
1,330,000 Verizon New York, Inc., Series B,
7.375%, 4/01/2032 1,406,218
---------------
58,677,068
---------------
Total Non-Convertible Bonds (Identified Cost $934,718,741) 962,255,934
---------------
See accompanying notes to financial statements.
9
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of March 31, 2007 (Unaudited)
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------------------------
Convertible Bonds -- 2.1%
Banking -- 0.7%
$ 7,185,000 Wells Fargo & Co.,
5.110%, 5/01/2033(c) $ 7,167,325
--------------
Independent Energy -- 0.3%
500,000 Devon Energy Corp.,
4.900%, 8/15/2008 696,875
1,750,000 Devon Energy Corp.,
4.950%, 8/15/2008 2,439,062
--------------
3,135,937
--------------
Media Non-Cable -- 0.1%
544,300 Liberty Media LLC,
3.500%, 1/15/2031 532,733
--------------
Pharmaceuticals -- 0.6%
5,920,000 Bristol-Myers Squibb Co.,
4.855%, 9/15/2023(c) 5,964,400
360,000 Watson Pharmaceuticals, Inc.,
1.750%, 3/15/2023 335,700
--------------
6,300,100
--------------
Technology -- 0.1%
710,000 Avnet, Inc.,
2.000%, 3/15/2034 847,563
--------------
Wirelines -- 0.3%
205,000 Level 3 Communications, Inc.,
6.000%, 9/15/2009 198,081
3,740,000 Level 3 Communications, Inc.,
6.000%, 3/15/2010 3,590,400
--------------
3,788,481
--------------
Total Convertible Bonds (Identified Cost $20,541,664) 21,772,139
--------------
Total Bonds and Notes (Identified Cost $955,260,405) 984,028,073
--------------
Shares/
Principal
Amount
- ---------------------------------------------------------------------------------------------------
Short-Term Investments -- 26.9%
229,655,894 State Street Securities Lending Quality Trust(d) 229,655,894
$ 54,776,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation,, dated 3/30/07 at 4.250% to be repurchased at
$54,795,400 on 4/02/07 collateralized by $56,365,000 U.S.
Treasury Bill, 4.890% due 5/31/07 with a value of $55,871,806,
including accrued interest (Note 2g) 54,776,000
--------------
Total Short-Term Investments (Identified Cost $284,431,894) 284,431,894
--------------
Total Investments -- 120.1%
(Identified Cost $1,239,692,299)(a) 1,268,459,967
Other assets less liabilities -- (20.1)% (212,700,856)
--------------
Net Assets -- 100.0% $1,055,759,111
==============
(++) Principal amount stated in U.S. dollars unless otherwise noted.
(+) See Note 2a of Notes to Financial Statements.
(++) Amount shown represents units. One unit represents a principal amount of 100.
(a) Federal Tax Information (Amounts exclude certain adjustments made at the end of the
Fund's fiscal year for tax purposes. Such adjustments are primarily due to wash sales.
Amortization of premium on debt securities is excluded for tax purposes.):
At March 31, 2007, the net unrealized appreciation on investments based on cost of
$1,242,333,209 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 $34,121,293
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (7,994,535)
-----------
Net unrealized appreciation $26,126,758
===========
(b) All or a portion of this security was on loan at March 31, 2007.
(c) Variable rate security whose interest rate varies with changes in a designated base rate (such as
the prime interest rate) on a specified date (such as coupon date or interest payment date).
(d) Represents investment of security lending collateral.
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers. At March 31, 2007, the total value of these securities amounted to
$124,491,059 or 11.79% of total net assets.
AUD Australian Dollar
BRL Brazilian Real
CAD Canadian Dollar
EUR Euro
GBP British Pound
IDR Indonesian Rupiah
ISK Iceland Krona
KRW South Korean Won
MXN Mexican Peso
MYR Malaysian Ringgit
NZD New Zealand Dollar
SGD Singapore Dollar
THB Thailand Baht
ZAR South African Rand
Holdings at March 31, 2007 as a Percentage of Net Assets (Unaudited)
Treasuries 27.1%
Wirelines 5.8
Banking 5.8
Sovereigns 5.1
Foreign Local Governments 4.4
Technology 3.6
Supranational 2.9
Wireless 2.9
Home Construction 2.6
Pipelines 2.6
Independent Energy 2.2
Media Cable 2.2
Electric 2.1
Other, less than 2% each 23.9
Currency Exposure at March 31, 2007 as a Percentage of Net Assets (Unaudited)
United States Dollar 62.7%
Canadian Dollar 15.4
Brazilian Real 3.5
Mexican Peso 3.4
Singapore Dollar 2.3
New Zealand Dollar 2.1
Other, less than 2% each 3.8
See accompanying notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2007 (Unaudited)
ASSETS
Investments at cost $1,239,692,299
Net unrealized appreciation 28,767,668
--------------
Investments at value (a) 1,268,459,967
Cash 294,133
Foreign currency at value (identified cost $211,516) 212,662
Receivable for Fund shares sold 18,290,372
Receivable for securities sold 10,195
Interest receivable 11,137,917
Securities lending income receivable 7,541
--------------
TOTAL ASSETS 1,298,412,787
--------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 229,655,894
Payable for securities purchased 11,132,665
Payable for Fund shares redeemed 1,264,077
Management fees payable (Note 4) 345,058
Administrative fees payable (Note 4) 47,989
Deferred Trustees' fees (Note 4) 66,123
Service and distribution fees payable (Note 4) 28,534
Other accounts payable and accrued expenses 113,336
--------------
TOTAL LIABILITIES 242,653,676
--------------
NET ASSETS $1,055,759,111
==============
NET ASSETS CONSIST OF:
Paid-in capital $1,025,966,653
Undistributed net investment income 3,258,270
Accumulated net realized loss on investments and
foreign currency transactions (2,279,341)
Net unrealized appreciation on investments and
foreign currency translations 28,813,529
--------------
NET ASSETS $1,055,759,111
==============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 387,606,604
==============
Shares of beneficial interest 33,927,791
==============
Net asset value and redemption price per share $ 11.42
==============
Offering price per share (100/95.50 of $11.42)
(Note 1) $ 11.96
==============
Class B shares: (redemption price per share is equal
to net asset value less any applicable contingent
deferred sales charge) (Note 1)
Net assets $ 10,955,896
==============
Shares of beneficial interest 962,838
==============
Net asset value and offering price per share $ 11.38
==============
Class C shares: (redemption price per share is equal
to net asset value less any applicable contingent
deferred sales charge) (Note 1)
Net assets $ 274,894,076
==============
Shares of beneficial interest 24,189,637
==============
Net asset value and offering price per share (Note
1) $ 11.36
==============
Class Y shares:
Net assets $ 193,492,482
==============
Shares of beneficial interest 16,933,257
==============
Net asset value, offering and redemption price per
share $ 11.43
==============
Class J shares:
Net assets $ 188,810,053
==============
Shares of beneficial interest 16,549,810
==============
Net asset value and redemption price per share $ 11.41
==============
Offering price per share (100/96.50 of $11.41)
(Note 1) $ 11.82
==============
(a) Including securities on loan with market values of: $ 224,600,721
==============
See accompanying notes to financial statements.
11
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 2007 (Unaudited)
INVESTMENT INCOME
Interest $21,362,953
Securities lending income (Note 2) 40,868
Less net foreign taxes withheld (4,375)
-----------
21,399,446
-----------
Expenses
Management fees (Note 4) 1,473,849
Service fees - Class A (Note 4) 315,725
Service and distribution fees - Class B (Note 4) 39,439
Service and distribution fees - Class C (Note 4) 765,634
Service and distribution fees - Class J (Note 4) 749,754
Trustees' fees and expenses (Note 4) 17,188
Administrative fees (Note 4) 209,333
Custodian fees and expenses 34,507
Transfer agent fees and expenses - Class A 64,099
Transfer agent fees and expenses - Class B 1,900
Transfer agent fees and expenses - Class C 34,638
Transfer agent fees and expenses - Class Y 12,101
Transfer agent fees and expenses - Class J 4,887
Audit fees 22,806
Legal fees - Class A 1,596
Legal fees - Class B 75
Legal fees - Class C 919
Legal fees - Class Y 981
Legal fees - Class J 12,961
Shareholder reporting expenses - Class A 10,241
Shareholder reporting expenses - Class B 1,099
Shareholder reporting expenses - Class C 5,707
Shareholder reporting expenses - Class Y 4,658
Shareholder reporting expenses - Class J 44,191
Registration fees - Class A 20,930
Registration fees - Class B 5,537
Registration fees - Class C 11,724
Registration fees - Class Y 14,432
Registration fees - Class J 1,576
Expense recapture - Class B (Note 4) 38
Expense recapture - Class Y (Note 4) 10,289
Miscellaneous expenses 13,267
-----------
Total expenses 3,906,081
-----------
Net investment income 17,493,365
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net 2,838,059
Foreign currency transactions - net (18,835)
Change in unrealized appreciation (depreciation) on:
Investments - net 3,546,919
Foreign currency translations - net 32,554
-----------
Net realized and unrealized gain on investments and foreign currency transactions 6,398,697
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,892,062
===========
See accompanying notes to financial statements.
12
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended
March 31, 2007
(Unaudited)
---------------------
---------------------
FROM OPERATIONS:
Net investment income $ 17,493,365
Net realized gain on investments and foreign currency transactions 2,819,224
Net change in unrealized appreciation on investments and foreign currency translations 3,579,473
---------------------
Net increase in net assets resulting from operations 23,892,062
---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (7,340,419)
Class B (200,867)
Class C (3,869,149)
Class Y (3,705,199)
Class J (5,704,488)
Capital gains:
Class A --
Class B --
Class C --
Class Y --
Class J --
---------------------
Total distributions (20,820,122)
---------------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 7) 520,802,175
---------------------
Net increase in net assets 523,874,115
---------------------
NET ASSETS
Beginning of period 531,884,996
---------------------
End of period $ 1,055,759,111
=====================
UNDISTRIBUTED NET INVESTMENT INCOME $ 3,258,270
=====================
Year Ended
September 30, 2006
---------------------
---------------------
FROM OPERATIONS:
Net investment income $ 18,123,742
Net realized gain on investments and foreign currency transactions 4,085,391
Net change in unrealized appreciation on investments and foreign currency translations 1,788,111
---------------------
Net increase in net assets resulting from operations 23,997,244
---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A (4,862,695)
Class B (236,234)
Class C (2,545,779)
Class Y (2,385,934)
Class J (16,362,403)
Capital gains:
Class A (1,094,552)
Class B (72,697)
Class C (662,167)
Class Y (499,013)
Class J (5,341,430)
---------------------
Total distributions (34,062,904)
---------------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 7) 130,917,651
---------------------
Net increase in net assets 120,851,991
---------------------
NET ASSETS
Beginning of period 411,033,005
---------------------
End of period $ 531,884,996
=====================
UNDISTRIBUTED NET INVESTMENT INCOME $ 6,585,027
=====================
See accompanying notes to financial statements.
13
This Page Intentionally Left Blank
14
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
Income (loss) from investment operations: Less distributions:
----------------------------------------- -----------------------------------------
Net asset
value, Dividends Distributions
beginning Net Net realized Total from from from net
of investment and unrealized investment net investment realized Total
the period income (d) gain (loss) operations income capital gains distributions
---------- ---------- -------------- ---------- -------------- ------------- -------------
Class A
3/31/2007(k) $ 11.35 $ 0.28 $ 0.14 $ 0.42 $ (0.35) $ -- $ (0.35)
9/30/2006 11.71 0.51 0.10 0.61 (0.75) (0.22) (0.97)
9/30/2005 11.84 0.49 0.29 0.78 (0.74) (0.17) (0.91)
9/30/2004 11.54 0.52 0.45 0.97 (0.60) (0.07) (0.67)
9/30/2003 10.23 0.58 1.46 2.04 (0.59) (0.14) (0.73)
9/30/2002(f)(h) 10.18 0.39 0.04 0.43 (0.38) -- (0.38)
Class B
3/31/2007(k) 11.31 0.23 0.14 0.37 (0.30) -- (0.30)
9/30/2006 11.67 0.42 0.10 0.52 (0.66) (0.22) (0.88)
9/30/2005 11.82 0.41 0.27 0.68 (0.66) (0.17) (0.83)
9/30/2004 11.53 0.43 0.45 0.88 (0.52) (0.07) (0.59)
9/30/2003(g) 11.21 0.02 0.30 0.32 -- -- --
Class C
3/31/2007(k) 11.30 0.24 0.13 0.37 (0.31) -- (0.31)
9/30/2006 11.66 0.42 0.11 0.53 (0.67) (0.22) (0.89)
9/30/2005 11.81 0.40 0.28 0.68 (0.66) (0.17) (0.83)
9/30/2004 11.53 0.43 0.45 0.88 (0.53) (0.07) (0.60)
9/30/2003(g) 11.21 0.02 0.30 0.32 -- -- --
Class Y
3/31/2007(k) 11.36 0.30 0.13 0.43 (0.36) -- (0.36)
9/30/2006 11.71 0.55 0.11 0.66 (0.79) (0.22) (1.01)
9/30/2005 11.85 0.54 0.28 0.82 (0.79) (0.17) (0.96)
9/30/2004 11.54 0.57 0.45 1.02 (0.64) (0.07) (0.71)
9/30/2003 10.23 0.61 1.46 2.07 (0.62) (0.14) (0.76)
9/30/2002(f) 10.09 0.62 0.09 0.71 (0.55) (0.02) (0.57)
Class J
3/31/2007(k) 11.34 0.26 0.13 0.39 (0.32) -- (0.32)
9/30/2006 11.69 0.46 0.11 0.57 (0.70) (0.22) (0.92)
9/30/2005 11.83 0.46 0.27 0.73 (0.70) (0.17) (0.87)
9/30/2004 11.53 0.48 0.44 0.92 (0.55) (0.07) (0.62)
9/30/2003 10.22 0.52 1.47 1.99 (0.54) (0.14) (0.68)
9/30/2002(f) 10.09 0.54 0.09 0.63 (0.48) (0.02) (0.50)
(a)Had certain expenses not been reduced during the period, if applicable,
total return would have been lower.
(b)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or waive its management fee during the period. Without this
reimbursement/waiver, if applicable, expenses would have been higher. See
Note 4.
(c)Annualized for periods less than one year.
(d)Per share net investment income has been calculated using the average shares
outstanding during the period.
(e)A sales charge for Class A, Class C (prior to February 1, 2004) and Class J
and a contingent deferred sales charge for Class B and Class C shares are
not reflected in total return calculations. Periods less than one year, if
applicable, are not annualized.
See accompanying notes to financials.
15
Ratios to average net assets:
----------------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return the period Expenses Expenses income turnover
the period (%) (a)(e) (000's) (%) (b)(c) (%) (c) (%) (c) rate (%)
- ---------- ---------- ----------- ---------- --------- -------------- ---------
$ 11.42 3.8 $ 387,607 0.81 0.81 5.00 21
11.35 5.6 152,054 0.92(i) 0.92(i) 4.59 35
11.71 6.8 39,168 0.95 1.14 4.21 28
11.84 8.8 9,506 0.93 1.67 4.52 29
11.54 20.6 1,128 0.80 4.67 5.21 34
10.23 4.3 11 0.80 191.59 5.85 39
11.38 3.3 10,956 1.70(j) 1.70(j) 4.11 21
11.31 4.8 5,525 1.70 1.89 3.75 35
11.67 5.9 3,443 1.70 2.18 3.47 28
11.82 7.9 1,797 1.70 2.42 3.77 29
11.53 2.9 160 1.70 7.81 5.83 34
11.36 3.3 274,894 1.55 1.55 4.27 21
11.30 4.9 82,863 1.70(i) 1.70(i) 3.79 35
11.66 5.9 27,992 1.70 1.97 3.45 28
11.81 7.9 9,191 1.70 2.42 3.74 29
11.53 2.9 3 1.70 7.81 4.35 34
11.43 3.9 193,492 0.55(j) 0.55(j) 5.27 21
11.36 6.1 76,548 0.55 0.63 4.94 35
11.71 7.1 26,012 0.55 0.82 4.61 28
11.85 9.2 12,543 0.55 1.08 4.92 29
11.54 20.9 10,230 0.55 1.34 5.58 34
10.23 7.2 7,874 0.55 1.13 6.08 39
11.41 3.5 188,810 1.29 1.29 4.49 21
11.34 5.3 214,894 1.30(i) 1.30(i) 4.09 35
11.69 6.4 314,418 1.30 1.35 3.89 28
11.83 8.3 342,871 1.30 1.33 4.15 29
11.53 20.0 335,666 1.30 1.36 4.79 34
10.22 6.4 211,105 1.30 1.55 5.33 39
(f)As required effective October 1, 2001, the Fund adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies, and began
amortizing premium on debt securities and reclassifying paydown gains and
losses to interest income for financial statement purposes only. For the
year ended September 30, 2002, the effect of this change per share for
Class A, Class Y, and Class J net investment income and net realized and
unrealized gain (loss) was less than $0.01. The ratio of net investment
income to average net assets for Class A, Class Y and Class J decreased from
5.88% to 5.85%, 6.10% to 6.08%, and 5.35% to 5.33%, respectively, on an
annualized basis.
(g)From commencement of Class operations on September 12, 2003 through
September 30, 2003.
(h)From commencement of Class operations on January 31, 2002 through
September 30, 2002.
(i)Includes expense recapture of 0.06%, 0.09%, and 0.03% for Class A, Class C,
and Class J, respectively. See Note 4
(j)Includes expense recapture of less than 0.01% and 0.02% for Class B and
Class Y, respectively. See Note 4
(k)For the six months ended March 31, 2007 (Unaudited).
16
NOTES TO FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)
1. Organization. Loomis Sayles Funds II (the "Trust") is organized as a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end 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. Information presented in these financial statements pertains
to Loomis Sayles Investment Grade Bond Fund (the "Fund" or the "Investment
Grade Bond Fund"); the financial statements for the remaining fixed income
funds and equity funds of the Trust are presented in separate reports.
The Fund offers Class A, Class B, Class C, Class Y and Class J shares. Class A
shares are sold with a maximum front-end sales charge of 4.50%. Class B shares
do not pay a front-end sales charge, but pay higher Rule 12b-1 fees than
Class A shares for eight years (at which point they automatically convert to
Class A shares) and are subject to a contingent deferred sales charge ("CDSC")
if those shares are redeemed within six years of purchase. Class C shares do
not pay a front-end sales charge, do not convert to any other Class of shares,
pay higher Rule 12b-1 fees than Class A shares and may be subject to a CDSC of
1.00% if those shares are redeemed within one year. Class Y shares do not pay a
front-end sales charge, a CDSC or distribution fees. The minimum initial
investment for Class Y shares is $100,000, though some categories of investors
are excepted from the minimum investment amount as outlined in the Fund's
prospectus. Prior to March 16, 2007 the minimum initial investment for Class Y
shares was $1,000,000. Class J shares are only offered to non-U.S. investors
and are sold with a maximum front-end sales charge of 3.50%.
Most expenses of the Trust can be directly attributed to a fund. Expenses which
cannot 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 the Fund are
borne pro rata by the holders of each Class of shares, except that each Class
bears expenses unique to that Class (including the Rule 12b-1 service and
distribution fees, registration, legal, shareholder reporting and transfer
agent fees applicable to such class). In addition, each Class votes as a Class
only with respect to its own Rule 12b-1 Plan. Shares of each Class would
receive their pro rata share of the net assets of the Fund if the Fund were
liquidated. The Trustees approve separate dividends from net investment income
on each Class of shares.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The Fund's financial statements are prepared in
accordance with accounting principles generally accepted in the United States
of America which require the use of management estimates that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
a. Security Valuation. Debt securities for which market quotations are readily
available (other than short-term obligations purchased with an original or
remaining maturity of sixty days or less) are generally valued at market price
on the basis of valuations furnished to the Fund by a pricing service
recommended by the investment adviser 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 and exchange-traded funds, for which market quotations are
readily available are valued at market value, as reported by pricing services
recommended by the investment adviser 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 Global
Select Market, NASDAQ Global Market and NASDAQ Capital Market are valued at the
NASDAQ Official Closing Price ("NOCP"), or if lacking a NOCP, at the most
recent bid quotation on the applicable NASDAQ 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 Fund 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 purchased with an
original or 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 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. 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 Fund are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
17
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates
from fluctuations arising from changes in market prices of the investment
securities. Such changes are included with the net realized and unrealized gain
or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities, other than investment securities, at the end of the
fiscal period, resulting from changes in exchange rates.
The Fund may use foreign currency exchange contracts to facilitate transactions
in foreign-denominated investments. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the price of such securities may be more volatile than those
of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. The Fund may enter into forward foreign
currency contracts. Contracts to buy are generally used to acquire exposure to
foreign currencies, while contracts to sell are generally used to hedge the
Fund's investments against currency fluctuation. Also, a contract to buy or
sell can offset a previous contract. These contracts involve market risk in
excess of the unrealized gain or loss reflected in the Fund's Statement of
Assets and Liabilities. The U.S. dollar value of the currencies the Fund has
committed to buy or sell 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 March 31, 2007, there were no open forward currency
contracts.
e. Federal and Foreign Income Taxes. The Trust treats the Fund as a separate
entity for federal income tax purposes. The Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains at least annually.
Accordingly, no provision for federal income tax has been made. The Fund may be
subject to foreign taxes on income and gains on investments that are accrued
based upon the Fund's understanding of the tax rules and regulations that exist
in the countries in which the Fund invests. Foreign governments may also impose
taxes or other payments on investments with respect to foreign securities. Such
taxes are accrued as applicable.
f. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital 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 foreign
currency transactions and premium amortization accruals. 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 premium amortization accruals,
deferred Trustees' fees and corporate action adjustments. Distributions from
net investment income and short-term capital gains are considered to be
ordinary income for tax purposes.
The tax characterization of distributions is determined on an annual basis. The
tax character of distributions paid to shareholders during the year ended
September 30, 2006 was as follows:
2006 Distributions Paid From:
-------------------------------------
Ordinary Long-Term
Income Capital Gains Total
------ ------------- -----
$26,394,301 $7,668,603 $34,062,904
As of September 30, 2006, capital loss carryforwards and post-October losses
were as follows:
Capital loss carryforward:
Expires September 30, 2014 $ 215,200
Deferred net capital losses (post-October 2005) $1,723,678
g. Repurchase Agreements. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The repurchase agreements are
tri-party arrangements whereby the collateral is held at the custodian bank in
a segregated account for the benefit of the Fund and on behalf of the
counterparty. Repurchase agreements could involve certain risks in the event of
default or insolvency of the counterparty including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
18
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
h. Securities Lending. The Fund has entered into an agreement with State Street
Bank and Trust Company ("State Street Bank"), as agent of the Fund, to lend
securities to certain designated borrowers. The loans are collateralized with
cash or securities in an amount equal to at least 105% or 102% of the market
value of the loaned international or domestic securities, respectively, when
the loan is initiated. Thereafter, the value of the collateral must remain 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 Fund may bear the risk of loss with respect to the
investment of the collateral. The Fund invests cash collateral in short-term
investments, a portion of the income from which is remitted to the borrowers
and the remainder allocated between the Fund and State Street Bank as lending
agent. The market value of securities on loan to borrowers and the value of
collateral held by the Fund with respect to such loans at March 31, 2007 were
$224,600,721 and $229,655,894, respectively.
i. 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 Fund. Additionally, in the normal course of
business, the Fund enters into contracts with service providers that contain
general indemnification clauses. The Fund's maximum exposure under these
arrangements is unknown as this would involve future claims that may be made
against the Fund that have not yet occurred. However, based on experience, the
Fund expects the risk of loss to be remote.
j. New Accounting Pronouncements. Financial Accounting Standards Board (FASB)
Interpretation No. 48, Accounting for Uncertainty in Income Taxes--an
Interpretation of FASB Statement 109 ("FIN 48") was issued and became 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. Subsequent thereto,
the United States Securities and Exchange Commission ("SEC") indicated that it
would not object if a fund first adopts FIN 48 on the last business day of the
first required financial reporting period for fiscal years beginning after
December 15, 2006. Accordingly, Management is continuing to evaluate the impact
the adoption of FIN 48 may have on the Fund's net assets and results of
operations. In compliance with the recently issued SEC guidance the impacts, if
any, will be reflected in the Fund's semiannual financial statements as of
March 31, 2008.
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 Fund's financial statements.
3. Purchases and Sales of Securities. For the six months ended March 31, 2007,
purchases and sales of securities (excluding short-term investments and U.S.
Government/Agency Securities and including paydowns) were $349,839,304 and
$36,718,274, respectively. Purchases and sales of U.S. Government/Agency
Securities (excluding short-term investments and including paydowns) were
$262,752,036 and $112,632,203, respectively.
4. Management Fees and Other Transactions with Affiliates.
a. Management Fees. Loomis, Sayles & Company, L.P. ("Loomis Sayles") serves as
investment adviser to the Fund. Under the terms of the management agreement,
the Fund pays a management fee at the annual rate of 0.40% of average daily net
assets, calculated daily and payable monthly.
Loomis Sayles has given a binding undertaking to the Fund to defer its
management fees and/or reimburse certain expenses associated with the Fund to
limit its operating expenses. This undertaking is in effect until January 31,
2008 and will be reevaluated on an annual basis. For the six months ended
March 31, 2007, the expense limits as a percentage of average daily net assets
under the expense limitation agreement were as follows:
Expense Limit as a Percentage of
Average Daily Net Assets
- ---------------------------------------
Class A Class B Class C Class Y Class J
- ------- ------- ------- ------- -------
0.95% 1.70% 1.70% 0.55% 1.30%
For the six months ended March 31, 2007, the management fees for the Fund were
$1,473,849 (0.40% of average daily net assets).
Loomis Sayles shall be permitted to recover expenses it has borne under the
expense limitation agreements (whether through reduction of the management fees
or otherwise) on a Class by Class basis in later periods to the extent the
expenses of a Class fall below a class expense limits, provided, however, that
the Class is not obligated to pay such deferred fees/expenses more than one
year after the end of the fiscal year in which the fee/expense was deferred. At
March 31, 2007, the expenses subject to possible reimbursement under the
expense limitation agreement were as follows:
Expense Subject
to Possible Reimbursement
Class until September 30, 2007
- ----- -------------------------
A $ --
B 8,037
C --
Y 30,868
J --
-------
Total $38,905
-------
19
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
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 Asset Management Advisors, L.P. ("IXIS Advisors")
provides certain administrative services for the Fund and has subcontracted
with State Street Bank to serve as sub-administrator. IXIS Advisors is a
wholly-owned subsidiary of IXIS US Group. Pursuant to an agreement among IXIS
Advisor Funds Trust I, IXIS Advisor Funds Trust II, IXIS Advisor Funds Trust
III, IXIS Advisor Funds Trust IV, IXIS Advisor Cash Management Trust ("IXIS
Advisor Funds Trusts"), Loomis Sayles Funds I and the Trust ("Loomis Sayles
Funds Trusts") and IXIS Advisors, each Fund pays IXIS Advisors monthly its pro
rata portion of fees equal to an annual rate of 0.0675% of the first $5 billion
of the average daily net assets of the IXIS Advisor Funds Trusts and Loomis
Sayles Funds Trusts, 0.0625% of the next $5 billion, and 0.0500% of such assets
in excess of $10 billion, subject to an annual aggregate minimum fee for the
IXIS Advisor Funds Trusts and Loomis Sayles Funds Trusts of $5 million, which
is reevaluated on an annual basis.
For the six months ended March 31, 2007, amounts paid to IXIS Advisors for
administrative fees were $209,333.
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 Fund, except Class J shares
of the Fund. The Fund has entered into a distribution agreement relating to
Class J shares with Loomis Sayles Distributors, L.P. ("Loomis Sayles
Distributors"), a wholly-owned subsidiary of IXIS US Group.
Pursuant to Rule 12b-1 under the 1940 Act, the Fund has adopted a Service Plan
relating to the Fund's Class A shares (the "Class A Plan") and Service and
Distribution Plans relating to the Fund's Class B and Class C shares (the
"Class B and Class C Plans").
Under the Class A Plan, the Fund pays IXIS Distributors a monthly service fee
at an annual rate not to exceed 0.25% of the average daily net assets
attributable to the Fund's Class A shares, as reimbursement for expenses
incurred by IXIS Distributors in providing personal services to investors in
Class A shares and/or the maintenance of shareholder accounts.
Under the Class B and Class C Plans, the Fund pays IXIS Distributors a monthly
service fee at an annual rate of 0.25% of the average daily net assets
attributable to the Fund's Class B and Class C shares, as compensation for
services provided and expenses incurred by IXIS Distributors in providing
personal services to investors in Class B and Class C shares and/or the
maintenance of shareholder accounts.
Also under the Class B and Class C Plans, the Fund pays IXIS Distributors a
monthly distribution fee at an annual rate of 0.75% of the average daily net
assets attributable to the Fund's Class B and Class C shares, as compensation
for services provided and expenses incurred by IXIS Distributors in connection
with the marketing or sale of Class B and Class C shares.
Class J shares are subject to a monthly shareholder service fee at an annual
rate of 0.25% and a monthly distribution fee, at an annual rate of 0.50% of the
average daily net assets attributable to the Fund's Class J shares, both
payable to Loomis Sayles Distributors, pursuant to a shareholder service and
distribution plan adopted under Rule 12b-1.
For the six months ended March 31, 2007 the Fund paid the following service and
distribution fees:
Service Fees Distribution Fees
---------------------------------- -------------------------
Class A Class B Class C Class J Class B Class C Class J
------- ------- ------- ------- ------- ------- -------
$315,725 $9,860 $191,409 $249,917 $29,579 $574,225 $499,837
d. Commissions. The Fund has been informed that commissions (including CDSCs)
on Fund shares paid to IXIS Distributors by investors in Class A, Class B and
Class C shares of the Fund were $1,176,184 and commissions paid to Loomis
Sayles Distributors by investors in Class J shares of the Fund were $24,602 for
the six months ended March 31, 2007.
e. Trustees Fees and Expenses. The Fund does not pay any compensation directly
to its officers or Trustees who are directors, officers or employees of IXIS
Advisors, IXIS Distributors, IXIS US Group, Loomis Sayles or their affiliates.
The Chairperson of the Board receives a retainer fee at the annual rate of
$200,000. The Chairperson does not receive any meeting attendance fees for
Board of Trustees meetings or committee meetings that she attends. Each
Independent Trustee (other than the Chairperson) receives, in the aggregate, a
retainer fee at the annual rate of $55,000. Each Independent Trustee also
receives a meeting attendance fee of $6,000 for each meeting of the Board of
Trustees that he or she attends in person and $3,000 for each meeting of the
Board of Trustees that he or she attends telephonically. In addition, each
committee chairman receives an additional retainer fee at the annual rate of
$10,000. Each 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
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.
20
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 2007 (Unaudited)
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 Fund until distributed in accordance with the Plan.
5. Line of Credit. The 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 six months ended March 31, 2007, the Fund had no
borrowings under this agreement.
6. Shareholders. At March 31, 2007, the Loomis Sayles Employees' Profit Sharing
Retirement Plan held 163,109 shares of beneficial interest of Class Y shares.
7. Capital Shares. The Fund may issue an unlimited number of shares of
beneficial interest, without par value. Transactions in capital shares were as
follows:
Six Months Ended
March 31, 2007
-----------------------------------
Shares Amount
---------------- -----------------
Class A
Issued from the sale of shares 21,761,012 $ 248,736,712
Issued in connection with the reinvestment of distributions 439,848 5,004,962
Redeemed (1,666,570) (18,994,363)
---------------- -----------------
Net Change 20,534,290 $ 234,747,311
---------------- -----------------
Class B
Issued from the sale of shares 509,533 $ 5,791,884
Issued in connection with the reinvestment of distributions 9,733 110,442
Redeemed (44,826) (509,610)
---------------- -----------------
Net Change 474,440 $ 5,392,716
---------------- -----------------
Class C
Issued from the sale of shares 17,330,329 $ 197,018,294
Issued in connection with the reinvestment of distributions 117,217 1,327,911
Redeemed (591,151) (6,704,224)
---------------- -----------------
Net Change 16,856,395 $ 191,641,981
---------------- -----------------
Class Y
Issued from the sale of shares 10,822,396 $ 123,521,237
Issued in connection with the reinvestment of distributions 184,591 2,101,034
Redeemed (814,456) (9,308,166)
---------------- -----------------
Net Change 10,192,531 $ 116,314,105
---------------- -----------------
Class J
Issued from the sale of shares 430,200 $ 4,914,963
Issued in connection with the reinvestment of distributions -- --
Redeemed (2,834,420) (32,208,901)
---------------- -----------------
Net Change (2,404,220) $ (27,293,938)
---------------- -----------------
Increase (decrease) from capital share transactions 45,653,436 $ 520,802,175
================ =================
Year Ended
September 30, 2006
-----------------------------------
Shares Amount
---------------- -----------------
Class A
Issued from the sale of shares 11,230,945 $ 126,226,876
Issued in connection with the reinvestment of distributions 352,275 3,935,430
Redeemed (1,535,143) (17,175,742)
---------------- -----------------
Net Change 10,048,077 $ 112,986,564
---------------- -----------------
Class B
Issued from the sale of shares 240,949 $ 2,698,624
Issued in connection with the reinvestment of distributions 16,025 178,511
Redeemed (63,654) (714,457)
---------------- -----------------
Net Change 193,320 $ 2,162,678
---------------- -----------------
Class C
Issued from the sale of shares 5,470,170 $ 61,111,182
Issued in connection with the reinvestment of distributions 70,352 782,300
Redeemed (607,944) (6,782,002)
---------------- -----------------
Net Change 4,932,578 $ 55,111,480
---------------- -----------------
Class Y
Issued from the sale of shares 5,065,197 $ 56,470,540
Issued in connection with the reinvestment of distributions 181,821 2,031,990
Redeemed (727,813) (8,198,573)
---------------- -----------------
Net Change 4,519,205 $ 50,303,957
---------------- -----------------
Class J
Issued from the sale of shares 1,154,600 $ 12,921,601
Issued in connection with the reinvestment of distributions -- --
Redeemed (9,098,390) (102,568,629)
---------------- -----------------
Net Change (7,943,790) $ (89,647,028)
---------------- -----------------
Increase (decrease) from capital share transactions 11,749,390 $ 130,917,651
================ =================
21
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included as part of the Report to Shareholders filed as Item 1 herewith.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Securities Holders.
There were no material changes to the procedures by which shareholders may
recommend nominees to the Trust's Board of Trustees.
Item 11. Controls and Procedures.
The Registrant's principal executive officer and principal financial officer
have concluded that the Registrant's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the
Registrant in this Form N-CSR was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There was no change in the Registrant's internal control over financial
reporting that occurred during the Registrant's last fiscal quarter of the
period covered by the report that has materially affected, or is reasonably
likely to materially affect, the Registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a) (1) Not applicable.
(a) (2) Certifications of Principal Executive Officer and Principal
Financial Officer pursuant to Rule 30a-2(a) under the Investment
Company Act of 1940 (17 CFR 270.30a-2(a)), filed herewith as
Exhibits (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 II
By: /s/ Robert J. Blanding
-----------------------------
Name: Robert J. Blanding
Title: Chief Executive Officer
Date: May 22, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
By: /s/ Robert J. Blanding
-----------------------------
Name: Robert J. Blanding
Title: Chief Executive Officer
Date: May 22, 2007
By: /s/ Michael C. Kardok
-----------------------------
Name: Michael C. Kardok
Title: Treasurer
Date: May 22, 2007