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.
Natixis 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: September 30, 2007
Item 1. Reports to Stockholders.
The Registrant's annual report transmitted to shareholders pursuant to Rule
30e-1 under the Investment Company Act of 1940 is as follows:
[LOGO]
NATIXIS
FUNDS
INCOME FUNDS
ANNUAL REPORT
September 30, 2007
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
[LOGO]
LS
LOOMIS SAYLES & COMPANY, L.P.
[GRAPHIC]
TABLE OF CONTENTS
Management Discussion and Performance.................................... page 1
Portfolio of Investments................................................ page 20
Financial Statements.................................................... page 45
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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Volatility in the fixed-income markets during the 12 months ended September 30,
2007 reflected concerns over the rising pace of mortgage defaults in the United
States, as well as sliding consumer confidence and the weakness of the U.S.
dollar. The Federal Reserve Board fought the liquidity crunch in stages,
ultimately moving aggressively with a 0.50% cut in short-term interest rates on
September 18, 2007. Treasury yields bounced back up and market conditions began
to stabilize.
For the fiscal year ended September 30, 2007, Loomis Sayles Core Plus Bond
Fund's total return was 5.70% based on the net asset value of Class A shares
and $0.56 in reinvested dividends. The fund outperformed its benchmark, the
Lehman Aggregate Bond Index, which returned 5.14% for the period. The fund also
outperformed the 4.24% average return on the funds in Morningstar's
Intermediate-Term Bond category. The 30-day SEC yield on Class A shares of the
fund on September 30, 2007 was 4.26%.
FUND'S AVERAGE CREDIT QUALITY ROSE DURING FISCAL 2007
Although high-yielding bonds generally underperformed during the fiscal year,
not all issuers were affected equally. Certain high-yielding industrial bonds
performed relatively well, and our research and security selection helped the
fund outperform its benchmark and Morningstar peer group.
However, we gradually trimmed lower-quality and investment-grade positions
during the year and used the proceeds to build the fund's positions in
higher-quality issues. This shift reflected our concern that spreads - the
difference in yield between higher- and lower-quality bonds - were historically
tight and we did not believe this trend was sustainable. The fund's increased
emphasis on quality helped insulate it to some extent when lower-grade bond
prices were retreating, and the fund was able to capture some of the price
increase in U.S. Treasuries that accompanied the Fed's actions.
DURATION STRATEGY LENGTHENED DURING THE PERIOD
At the beginning of the fiscal year last October, the fund's duration was
essentially the same as its benchmark, but we gradually extended duration as
the year progressed. Duration is a measure of a portfolio's sensitivity to
changes in interest rates. A longer duration allows the fund to benefit when
declining interest rates elevate bond prices. Even though long-term interest
rates moved higher early in the period, depressing bond prices, the fund's
longer-term bonds generated higher income and subsequently benefited when
interest rates declined later in the summer.
During the second half of the fiscal year, investors' pursuit of safety
increased demand for shorter-term, less risky securities. This increase in
demand drove prices of short-term bonds up more than long-term bond prices.
Long-term rates, which had moved higher in the first two quarters, ebbed only
fractionally lower in the second half. Since we had maintained the portfolio in
a "barbell" configuration, focusing assets at opposite ends of the maturity
spectrum, the fund participated in both markets, but to a limited extent.
INTERNATIONAL CURRENCIES OUTPERFORMED THE U.S. DOLLAR, TIPS DID WELL
We also added to the fund's position in securities issued in currencies other
than the U.S. dollar. The fund's best-performing holdings were its bonds
denominated in the Norwegian krone. Norway has a strong economy and roughly
half of Western Europe's oil and gas reserves.
TIPS (Treasury Inflation Protected Securities) were another strong area for the
fund. More than other types of Treasury securities, prices of TIPS rise if
inflation expectations rise, and vice versa. The Fed's surprise rate cut in
September, which was intended to alleviate recession concerns, also rekindled
inflation concerns, and the fund's TIPS position was a positive.
OUTLOOK IS FOR ANOTHER FED RATE CUT
While consumer confidence has slipped and retail sales have been softer than
expected, consumers have been resilient. Moreover, the weak dollar and strong
global economic growth may set the stage for higher U.S. exports. The September
rate cut was positively received, and we believe the Fed will continue to do
what is necessary to keep the economy and the financial markets on a stable
course.
1
LOOMIS SAYLES CORE PLUS BOND FUND
Investment Results through September 30, 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/
September 30, 1997 through September 30, 2007
[CHART]
Net Asset Maximum Sales Lehman Aggregate Lehman U.S.
Value/1/ Charge/2/ Bond Index Credit Index
----------- ------------ ----------- ----------
9/30/1997 $10,000 $ 9,550 $10,000 $10,000
10/31/1997 10,095 9,641 10,145 10,127
11/30/1997 10,141 9,685 10,192 10,184
12/31/1997 10,246 9,785 10,294 10,292
1/31/1998 10,382 9,915 10,427 10,414
2/28/1998 10,415 9,947 10,419 10,411
3/31/1998 10,480 10,008 10,455 10,449
4/30/1998 10,528 10,054 10,509 10,515
5/31/1998 10,636 10,157 10,609 10,640
6/30/1998 10,675 10,195 10,699 10,718
7/31/1998 10,647 10,168 10,722 10,708
8/31/1998 10,542 10,067 10,896 10,758
9/30/1998 10,949 10,456 11,151 11,107
10/31/1998 10,834 10,346 11,092 10,936
11/30/1998 11,049 10,552 11,155 11,142
12/31/1998 11,067 10,569 11,189 11,174
1/31/1999 11,186 10,683 11,269 11,285
2/28/1999 10,961 10,467 11,072 11,017
3/31/1999 11,112 10,612 11,133 11,095
4/30/1999 11,200 10,696 11,168 11,127
5/31/1999 10,957 10,463 11,071 10,978
6/30/1999 10,886 10,397 11,035 10,921
7/31/1999 10,844 10,356 10,988 10,861
8/31/1999 10,801 10,315 10,983 10,834
9/30/1999 10,983 10,489 11,110 10,952
10/31/1999 11,008 10,513 11,151 11,002
11/30/1999 11,025 10,529 11,150 11,014
12/31/1999 11,030 10,534 11,097 10,956
1/31/2000 10,984 10,490 11,060 10,917
2/29/2000 11,108 10,608 11,194 11,018
3/31/2000 11,260 10,754 11,342 11,112
4/30/2000 11,053 10,556 11,309 11,015
5/31/2000 10,971 10,478 11,304 10,974
6/30/2000 11,304 10,795 11,539 11,249
7/31/2000 11,371 10,859 11,644 11,385
8/31/2000 11,517 10,999 11,813 11,534
9/30/2000 11,534 11,015 11,887 11,594
10/31/2000 11,469 10,953 11,966 11,606
11/30/2000 11,578 11,057 12,161 11,756
12/31/2000 11,846 11,313 12,387 11,984
1/31/2001 12,140 11,594 12,589 12,312
2/28/2001 12,260 11,709 12,699 12,420
3/31/2001 12,275 11,723 12,763 12,496
4/30/2001 12,205 11,656 12,710 12,451
5/31/2001 12,283 11,730 12,786 12,566
6/30/2001 12,287 11,734 12,835 12,629
7/31/2001 12,598 12,031 13,122 12,959
8/31/2001 12,737 12,164 13,272 13,133
9/30/2001 12,684 12,113 13,427 13,113
10/31/2001 12,934 12,352 13,708 13,439
11/30/2001 12,848 12,270 13,519 13,322
12/31/2001 12,705 12,133 13,433 13,231
1/31/2002 12,675 12,105 13,541 13,343
2/28/2002 12,626 12,058 13,673 13,443
3/31/2002 12,488 11,926 13,445 13,195
4/30/2002 12,606 12,038 13,706 13,379
5/31/2002 12,712 12,140 13,822 13,556
6/30/2002 12,405 11,847 13,942 13,578
7/31/2002 12,261 11,710 14,110 13,571
8/31/2002 12,541 11,977 14,348 13,923
9/30/2002 12,582 12,016 14,581 14,187
10/31/2002 12,512 11,949 14,514 14,023
11/30/2002 12,750 12,176 14,511 14,204
12/31/2002 13,066 12,478 14,810 14,623
1/31/2003 13,139 12,548 14,823 14,671
2/28/2003 13,328 12,728 15,028 14,964
3/31/2003 13,367 12,765 15,016 14,975
4/30/2003 13,567 12,957 15,140 15,252
5/31/2003 13,837 13,215 15,423 15,733
6/30/2003 13,859 13,236 15,392 15,694
7/31/2003 13,384 12,782 14,875 15,025
8/31/2003 13,512 12,904 14,973 15,143
9/30/2003 13,902 13,276 15,370 15,672
10/31/2003 13,867 13,243 15,226 15,505
11/30/2003 13,951 13,324 15,263 15,576
12/31/2003 14,178 13,540 15,418 15,750
1/31/2004 14,299 13,656 15,542 15,909
2/29/2004 14,410 13,761 15,710 16,109
3/31/2004 14,518 13,864 15,828 16,264
4/30/2004 14,147 13,511 15,416 15,752
5/31/2004 14,023 13,392 15,355 15,641
6/30/2004 14,108 13,474 15,441 15,707
7/31/2004 14,268 13,626 15,594 15,901
8/31/2004 14,553 13,898 15,892 16,276
9/30/2004 14,636 13,978 15,935 16,368
10/31/2004 14,796 14,130 16,069 16,526
11/30/2004 14,766 14,102 15,940 16,361
12/31/2004 14,900 14,230 16,087 16,574
1/31/2005 14,936 14,264 16,188 16,706
2/28/2005 14,921 14,250 16,093 16,607
3/31/2005 14,727 14,065 16,010 16,400
4/30/2005 14,789 14,124 16,227 16,620
5/31/2005 14,927 14,255 16,402 16,853
6/30/2005 15,025 14,349 16,492 16,987
7/31/2005 14,983 14,309 16,341 16,816
8/31/2005 15,136 14,455 16,551 17,072
9/30/2005 14,991 14,316 16,380 16,816
10/31/2005 14,886 14,216 16,251 16,633
11/30/2005 14,941 14,269 16,323 16,734
12/31/2005 15,063 14,386 16,478 16,899
1/31/2006 15,113 14,433 16,479 16,865
2/28/2006 15,167 14,485 16,533 16,939
3/31/2006 15,055 14,378 16,371 16,701
4/30/2006 15,066 14,388 16,342 16,640
5/31/2006 15,022 14,346 16,324 16,611
6/30/2006 15,034 14,358 16,359 16,636
7/31/2006 15,239 14,553 16,580 16,881
8/31/2006 15,446 14,751 16,834 17,194
9/30/2006 15,596 14,894 16,982 17,386
10/31/2006 15,731 15,023 17,094 17,524
11/30/2006 15,963 15,244 17,292 17,772
12/31/2006 15,867 15,153 17,192 17,619
1/31/2007 15,878 15,163 17,185 17,615
2/28/2007 16,173 15,445 17,450 17,970
3/31/2007 16,141 15,415 17,450 17,884
4/30/2007 16,238 15,507 17,544 18,013
5/31/2007 16,096 15,372 17,411 17,837
6/30/2007 15,982 15,263 17,360 17,753
7/31/2007 16,084 15,361 17,505 17,814
8/31/2007 16,306 15,573 17,719 17,978
9/30/2007 16,483 15,741 17,854 18,122
Average Annual Total Returns -- September 30, 2007/4/
1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 11/7/73)
Net Asset Value/1/ 5.70% 5.55% 5.12%
With Maximum Sales Charge/2/ 0.95 4.58 4.64
CLASS B (inception 9/13/93)
Net Asset Value/1/ 4.90 4.74 4.35
With CDSC/3/ -0.10 4.40 4.35
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 4.91 4.76 4.34
With CDSC/3/ 3.91 4.76 4.34
CLASS Y (Inception 12/30/94)
Net Asset Value/1/ 6.06 5.88 5.48
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COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Lehman Aggregate Bond Index 5.14% 4.13% 5.97%
Lehman U.S. Credit Index 4.23 5.02 6.13
Morningstar Int.-Term Bond Fund Avg. 4.24 4.08 5.19
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.funds.natixis.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 9/30/07 9/30/06
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Aaa 66.4 56.4
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Aa 1.4 1.5
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A 3.4 1.2
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Baa 13.1 16.6
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Ba 6.4 13.1
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B 3.9 5.0
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Caa 0.8 --
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Not Rated* 1.9 4.7
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Short-term and other 2.7 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 9/30/07 9/30/06
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1 year or less 5.8 6.8
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1-5 years 30.1 39.4
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5-10 years 39.2 38.5
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10+ years 24.9 15.3
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Average Effective Maturity 9.5 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% 1.00%
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B 1.83 1.75
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C 1.82 1.75
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Y 0.80 0.75
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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 reductions and
reimbursements, if any, without which performance would have been lower.
/5/Before reductions and reimbursements.
/6/After reductions and reimbursements. Expense reductions are contractual and
are set to expire on 1/31/08.
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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Bond prices became increasingly volatile during the spring and summer, as fears
spread that defaults in the subprime mortgage market might threaten the
long-running U.S. economic expansion. To shore up sagging confidence, the
Federal Reserve Board cut interest rates by 0.50% in September. Meanwhile, the
U.S. dollar continued to weaken, fueling gains in overseas markets.
For the fiscal year ended September 30, 2007, Loomis Sayles High Income Fund's
total return was 8.10% based on the net asset value of Class A shares and $0.38
in reinvested dividends. For the period, the fund surpassed its benchmark, the
Lehman High Yield Composite Index, which returned 7.54%, and outperformed the
7.08% average return on Morningstar's High Yield Bond category. As of September
30, 2007, the 30-day SEC yield on the fund's Class A shares was 6.19%.
FUND'S FLEXIBILITY AND SHIFT TO HIGHER-QUALITY ISSUES WERE POSITIVE
The fund's ability to invest in securities that are not part of the Lehman
benchmark - including U.S. Treasury securities, bonds denominated in foreign
currencies and equity securities - contributed to its performance edge during
the period. Yield spreads (the difference in yield between higher- and
lower-quality bonds) remained narrow for several months. This meant that
high-yield issues offered relatively little yield advantage over higher-quality
bonds, so we edged the fund upward in quality during the fiscal year.
During the subprime mortgage upheaval, yield spreads widened dramatically,
wiping out earlier gains in high-yield issues as investors moved out of riskier
assets. Results were better among the fund's investment-grade holdings, thanks
to successful selection in bonds with Moody's ratings in the AAA, AA and BBB
categories. Other positive contributors included several foreign bonds and
certain bonds issued by financial companies with below investment-grade
ratings. The fund's best-performing U.S. securities included common and
preferred stocks.
WEAK U.S. DOLLAR BOOSTED OVERSEAS HOLDINGS
Leading contributors among non-U.S. bonds included securities issued by
supranational organizations denominated in Brazil's real and Iceland's krona.
Emerging-market issues that added to returns included those tied to South
Africa's rand, bonds denominated in Mexico's peso and the Malaysian ringgit.
Japan was the only disappointing country, in absolute terms. Securities
domiciled in Canada, Austria and Germany performed well, but fund holdings in
these countries trailed their benchmarks.
INDUSTRIAL, HOUSING, AND LOWER-RATED ISSUES WERE WEAK
The housing meltdown caused sharp declines in the securities of lower-rated
homebuilders and materials suppliers. Basic industry, technology and
communications also suffered as investors worried about general economic
weakness and the possible lack of capital as the credit crisis played itself
out. These holdings detracted from the fund's results. In general, performance
trailed off with each step down the ratings ladder; certain B-rated issues were
the fund's worst performers.
OUTLOOK IS FOR SLOWING GROWTH
While consumer confidence has slipped and retail sales have been softer than
expected, in general consumers were resilient during the fund's fiscal year. We
believe the worst effects of the credit crisis will have been seen by the end
of calendar 2007, although we think additional Fed rate cuts may lie ahead.
Non-residential construction is strong, and the weak dollar is boosting U.S.
export activity.
However, stiff increases in monthly payments as millions of adjustable-rate
mortgages are reset could restrain consumer spending - a large part of the
overall economy - keeping growth moderate and interest rates in check. Lower
rates would favor Treasury securities, but better opportunities may be found in
other parts of the market. Investors have become less risk-averse than they
were this summer, and the depressed mortgage-backed sector may begin to recover.
Investment-grade corporate bonds may mirror the economy if it regains momentum
next year. High-yield bonds also hold potential for good performance in
upcoming quarters, but an excess supply in loans in the wake of leveraged
buyouts must be worked off first.
3
LOOMIS SAYLES HIGH INCOME FUND
Investment Results through September 30, 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/
September 30, 1997 through September 30, 2007
[CHART]
Net Asset Maximum Sales Lehman High Yield
Value/1/ Charge/2/ Composite Index
--------- ------------- ------------------
9/30/1997 $10,000 $ 9,550 $10,000
10/31/1997 9,913 9,467 10,009
11/30/1997 10,046 9,594 10,105
12/31/1997 10,139 9,683 10,193
1/31/1998 10,291 9,828 10,377
2/28/1998 10,277 9,814 10,437
3/31/1998 10,383 9,916 10,535
4/30/1998 10,439 9,969 10,577
5/31/1998 10,422 9,953 10,614
6/30/1998 10,458 9,987 10,652
7/31/1998 10,442 9,972 10,712
8/31/1998 9,717 9,280 10,121
9/30/1998 9,625 9,192 10,167
10/31/1998 9,423 8,999 9,959
11/30/1998 10,099 9,645 10,372
12/31/1998 9,965 9,517 10,383
1/31/1999 10,189 9,731 10,538
2/28/1999 10,253 9,792 10,476
3/31/1999 10,420 9,951 10,575
4/30/1999 10,644 10,165 10,780
5/31/1999 10,383 9,916 10,634
6/30/1999 10,354 9,888 10,612
7/31/1999 10,312 9,848 10,654
8/31/1999 10,151 9,695 10,537
9/30/1999 10,085 9,632 10,461
10/31/1999 10,176 9,718 10,391
11/30/1999 10,243 9,782 10,513
12/31/1999 10,363 9,897 10,632
1/31/2000 10,248 9,787 10,586
2/29/2000 10,294 9,831 10,606
3/31/2000 9,983 9,534 10,383
4/30/2000 9,977 9,528 10,400
5/31/2000 9,699 9,263 10,293
6/30/2000 9,993 9,543 10,503
7/31/2000 10,052 9,600 10,583
8/31/2000 10,012 9,561 10,656
9/30/2000 9,804 9,363 10,562
10/31/2000 9,315 8,896 10,224
11/30/2000 8,541 8,157 9,819
12/31/2000 8,694 8,303 10,009
1/31/2001 9,703 9,267 10,759
2/28/2001 9,655 9,220 10,902
3/31/2001 9,162 8,749 10,645
4/30/2001 8,880 8,481 10,513
5/31/2001 8,904 8,504 10,702
6/30/2001 8,393 8,015 10,402
7/31/2001 8,558 8,173 10,555
8/31/2001 8,493 8,110 10,679
9/30/2001 7,720 7,372 9,962
10/31/2001 7,635 7,291 10,208
11/30/2001 7,882 7,527 10,580
12/31/2001 7,768 7,418 10,537
1/31/2002 7,816 7,464 10,611
2/28/2002 7,578 7,237 10,463
3/31/2002 7,782 7,432 10,714
4/30/2002 7,719 7,371 10,886
5/31/2002 7,606 7,264 10,825
6/30/2002 7,062 6,744 10,027
7/31/2002 6,586 6,290 9,589
8/31/2002 6,817 6,510 9,863
9/30/2002 6,564 6,269 9,733
10/31/2002 6,561 6,266 9,648
11/30/2002 6,997 6,682 10,246
12/31/2002 7,081 6,762 10,389
1/31/2003 7,231 6,905 10,735
2/28/2003 7,332 7,002 10,867
3/31/2003 7,521 7,183 11,180
4/30/2003 7,956 7,598 11,843
5/31/2003 8,095 7,731 11,966
6/30/2003 8,270 7,898 12,310
7/31/2003 8,105 7,741 12,174
8/31/2003 8,191 7,823 12,314
9/30/2003 8,460 8,079 12,651
10/31/2003 8,640 8,251 12,906
11/30/2003 8,821 8,424 13,102
12/31/2003 9,056 8,649 13,399
1/31/2004 9,197 8,783 13,654
2/29/2004 9,156 8,744 13,620
3/31/2004 9,208 8,794 13,713
4/30/2004 8,997 8,593 13,619
5/31/2004 8,764 8,370 13,389
6/30/2004 8,954 8,551 13,581
7/31/2004 9,026 8,620 13,765
8/31/2004 9,273 8,855 14,035
9/30/2004 9,401 8,978 14,239
10/31/2004 9,609 9,177 14,496
11/30/2004 9,761 9,322 14,671
12/31/2004 9,993 9,544 14,890
1/31/2005 10,026 9,575 14,871
2/28/2005 10,259 9,797 15,089
3/31/2005 9,896 9,451 14,650
4/30/2005 9,694 9,258 14,508
5/31/2005 9,946 9,498 14,765
6/30/2005 10,183 9,724 15,055
7/31/2005 10,343 9,877 15,318
8/31/2005 10,397 9,930 15,347
9/30/2005 10,373 9,907 15,194
10/31/2005 10,245 9,784 15,088
11/30/2005 10,345 9,880 15,167
12/31/2005 10,496 10,024 15,297
1/31/2006 10,809 10,323 15,541
2/28/2006 10,974 10,481 15,645
3/31/2006 11,016 10,520 15,739
4/30/2006 11,080 10,581 15,836
5/31/2006 10,880 10,390 15,834
6/30/2006 10,899 10,409 15,778
7/31/2006 11,004 10,509 15,933
8/31/2006 11,239 10,733 16,191
9/30/2006 11,348 10,838 16,420
10/31/2006 11,589 11,067 16,644
11/30/2006 11,804 11,273 16,924
12/31/2006 11,952 11,414 17,109
1/31/2007 12,058 11,516 17,300
2/28/2007 12,210 11,661 17,542
3/31/2007 12,205 11,656 17,561
4/30/2007 12,405 11,847 17,789
5/31/2007 12,487 11,925 17,922
6/30/2007 12,249 11,698 17,600
7/31/2007 11,803 11,272 16,977
8/31/2007 12,033 11,492 17,208
9/30/2007 12,268 11,716 17,659
Average Annual Total Returns -- September 30, 2007/4/
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
CLASS A (Inception 2/22/84)
Net Asset Value/1/ 8.10% 13.32% 2.07% --
With Maximum Sales Charge/2/ 3.23 12.30 1.60 --
CLASS B (Inception 9/20/93)
Net Asset Value/1/ 7.21 12.51 1.32 --
With CDSC/3/ 2.21 12.26 1.32 --
CLASS C (Inception 3/2/98)
Net Asset Value/1/ 7.22 12.46 -- 1.08
With CDSC/3/ 6.22 12.46 -- 1.08
- --------------------------------------------------------------------------
SINCE
CLASS C
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS INCEPTION/5/
Lehman High Yield Composite Index 7.54% 12.65% 5.85% 5.59%
Morningstar High Yield Bond Fund Avg. 7.08 11.24 4.30 4.12
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.funds.natixis.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 9/30/07 9/30/06
- ------------------------------------------
Aaa 15.5 8.0
- ------------------------------------------
Aa 1.9 2.5
- ------------------------------------------
A 0.7 0.5
- ------------------------------------------
Baa 8.9 6.8
- ------------------------------------------
Ba 17.4 17.4
- ------------------------------------------
B 24.9 39.4
- ------------------------------------------
Caa 15.9 6.8
- ------------------------------------------
Not Rated* 11.7 13.7
- ------------------------------------------
Short-term and other 3.1 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 9/30/07 9/30/06
- --------------------------------------------------
1 year or less 4.2 4.0
- --------------------------------------------------
1-5 years 21.9 25.9
- --------------------------------------------------
5-10 years 19.4 23.1
- --------------------------------------------------
10+ years 54.5 47.0
- --------------------------------------------------
Average Effective Maturity 13.8 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 reductions 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 reductions and reimbursements.
/7/After reductions and reimbursements. Expense reductions are contractual and
are set to expire on 1/31/08.
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
- --------------------------------------------------------------------------------
U.S. fixed-income securities provided positive returns for the 12 months ended
September 30, 2007, despite volatility in July and August, when simmering
worries about subprime mortgage lending began to boil over. For the first nine
months of this period, the Federal Reserve Board left rates unchanged, which
led to a relatively calm environment for bond investors. By this summer,
concerns stemming from the high rate of mortgage defaults took hold, affecting
both the stock and bond markets. Not for the first time in history, a "flight
to safety" played itself out until mid September, when the Fed's concern about
recession replaced its inflation fears, prompting them to cut the federal funds
rate to 4.75% from 5.25%. Market conditions began to stabilize as September
drew to a close.
For the fiscal year ended September 30, 2007, Loomis Sayles Limited Term
Government and Agency Fund's total return was 4.46% based on the net asset
value of Class A shares and $0.48 in reinvested dividends. By comparison, the
fund's benchmark, the Lehman 1-5 Year Government Bond Index returned 5.89%,
while the average return on Morningstar's Short Government category was 4.74%.
The 30-day SEC yield on the fund's Class A shares was 4.17% as of September 30,
2007.
YIELD ADVANTAGE OF MORTGAGE-BACKED SECURITIES WAS STRONGLY POSITIVE
The fund's emphasis on mortgage-backed securities (MBS) helped it outperform
its benchmark during the first nine months of the year, primarily because these
securities offer higher yields in return for greater risk. However in the
closing quarter of the fiscal year, growing turmoil in the residential mortgage
market caused MBS to underperform U.S. Treasuries, more than offsetting the
fund's earlier lead. As deteriorating market conditions neared a peak in the
late summer and fall, even MBS issued by government-sponsored entities (GSE
securities) suffered. (While the U.S. government does not guarantee GSE
securities, they are viewed as having very little credit risk.) Privately
issued mortgage securities - including those that were AAA-rated and insured -
were the hardest hit in this market environment. AAA is Moody's Investors
Service highest bond rating.
Relative to its benchmark, the fund was overweight in residential MBS
throughout the year, although holdings also included some U.S. Treasury and
agency securities, and securities backed by commercial mortgages and other
assets. Attractive yields offered by the securities we emphasized benefited the
fund during the first nine months, although they lagged U.S. Treasury bonds in
the closing quarter. Prices of shorter-term securities were first to rise in
response to lower interest rates. Rates on longer-term bonds also declined, but
to a lesser degree.
FUND CAPITALIZED ON LOWER MBS PRICES
We made several opportunistic shifts in the portfolio during the year. As
valuations fell to what we regarded as attractive levels late in the period, we
increased the fund's already substantial weighting in MBS. Notably, price
volatility in the private (non-government sponsored) MBS market, presented
opportunities to invest in some AAA-rated securities with strong credit
protection at historically low prices. We also added to the fund's holdings in
securities backed by commercial mortgages, which have been less volatile than
residential mortgages.
The fund's duration has remained similar to that of its benchmark. Duration is
a measure of a portfolio's price sensitivity to changes in interest rates. A
longer duration is an aggressive strategy; one that basically matches the
benchmark is considered neutral.
U.S. ECONOMY IS EXPECTED TO SLOW
We believe the Fed may cut rates once more before the end of December, although
this is not a foregone conclusion. In the relatively stable interest rate
environment we see ahead, we believe the low valuations of the securities we
selected will attract more investors, contributing to the fund's total return
over time.
5
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND
Investment Results through September 30, 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/
September 30, 1997 through September 30, 2007
[CHART]
Net Asset Maximum Sales Lehman 1-5 Year
Value/1/ Charge/2/ Government Bond Index
--------- ---------- -------------
9/30/1997 $10,000 $ 9,700 $10,000
10/31/1997 10,112 9,809 10,094
11/30/1997 10,129 9,825 10,113
12/31/1997 10,206 9,900 10,189
1/31/1998 10,354 10,044 10,305
2/28/1998 10,330 10,020 10,304
3/31/1998 10,313 10,003 10,339
4/30/1998 10,353 10,042 10,388
5/31/1998 10,420 10,108 10,451
6/30/1998 10,496 10,181 10,510
7/31/1998 10,510 10,195 10,555
8/31/1998 10,678 10,358 10,717
9/30/1998 10,984 10,654 10,912
10/31/1998 10,877 10,551 10,955
11/30/1998 10,843 10,518 10,931
12/31/1998 10,866 10,540 10,968
1/31/1999 10,925 10,597 11,015
2/28/1999 10,799 10,475 10,922
3/31/1999 10,850 10,524 10,999
4/30/1999 10,881 10,555 11,030
5/31/1999 10,800 10,476 10,994
6/30/1999 10,730 10,408 11,025
7/31/1999 10,678 10,358 11,043
8/31/1999 10,674 10,354 11,070
9/30/1999 10,795 10,472 11,153
10/31/1999 10,816 10,491 11,179
11/30/1999 10,827 10,502 11,193
12/31/1999 10,792 10,468 11,183
1/31/2000 10,746 10,423 11,161
2/29/2000 10,841 10,516 11,245
3/31/2000 10,976 10,647 11,334
4/30/2000 10,941 10,612 11,349
5/31/2000 10,946 10,618 11,386
6/30/2000 11,103 10,770 11,536
7/31/2000 11,158 10,823 11,611
8/31/2000 11,275 10,937 11,716
9/30/2000 11,362 11,021 11,818
10/31/2000 11,403 11,061 11,888
11/30/2000 11,558 11,211 12,025
12/31/2000 11,693 11,343 12,200
1/31/2001 11,842 11,487 12,367
2/28/2001 11,931 11,573 12,460
3/31/2001 12,006 11,646 12,559
4/30/2001 11,982 11,622 12,567
5/31/2001 12,042 11,681 12,629
6/30/2001 12,050 11,689 12,672
7/31/2001 12,274 11,906 12,857
8/31/2001 12,355 11,985 12,953
9/30/2001 12,549 12,173 13,206
10/31/2001 12,738 12,355 13,364
11/30/2001 12,572 12,195 13,276
12/31/2001 12,495 12,120 13,255
1/31/2002 12,561 12,185 13,297
2/28/2002 12,686 12,305 13,383
3/31/2002 12,503 12,128 13,244
4/30/2002 12,732 12,350 13,443
5/31/2002 12,819 12,434 13,518
6/30/2002 12,947 12,558 13,660
7/31/2002 13,132 12,738 13,872
8/31/2002 13,261 12,863 13,970
9/30/2002 13,380 12,979 14,139
10/31/2002 13,409 13,007 14,162
11/30/2002 13,348 12,947 14,085
12/31/2002 13,515 13,109 14,274
1/31/2003 13,508 13,103 14,261
2/28/2003 13,625 13,217 14,364
3/31/2003 13,616 13,207 14,386
4/30/2003 13,639 13,230 14,419
5/31/2003 13,722 13,310 14,546
6/30/2003 13,697 13,286 14,552
7/31/2003 13,412 13,010 14,359
8/31/2003 13,457 13,053 14,367
9/30/2003 13,680 13,270 14,584
10/31/2003 13,584 13,177 14,487
11/30/2003 13,621 13,212 14,480
12/31/2003 13,716 13,305 14,583
1/31/2004 13,775 13,362 14,635
2/29/2004 13,881 13,465 14,743
3/31/2004 13,934 13,516 14,818
4/30/2004 13,683 13,273 14,582
5/31/2004 13,638 13,229 14,551
6/30/2004 13,690 13,279 14,567
7/31/2004 13,767 13,354 14,645
8/31/2004 13,940 13,522 14,803
9/30/2004 13,936 13,518 14,797
10/31/2004 14,008 13,588 14,865
11/30/2004 13,945 13,527 14,758
12/31/2004 13,991 13,572 14,808
1/31/2005 14,011 13,591 14,803
2/28/2005 13,956 13,538 14,744
3/31/2005 13,915 13,497 14,724
4/30/2005 14,037 13,616 14,847
5/31/2005 14,109 13,685 14,929
6/30/2005 14,130 13,706 14,964
7/31/2005 14,066 13,644 14,880
8/31/2005 14,165 13,740 15,008
9/30/2005 14,084 13,661 14,934
10/31/2005 14,022 13,601 14,905
11/30/2005 14,064 13,642 14,960
12/31/2005 14,157 13,732 15,027
1/31/2006 14,162 13,738 15,045
2/28/2006 14,209 13,783 15,050
3/31/2006 14,141 13,717 15,047
4/30/2006 14,148 13,724 15,088
5/31/2006 14,144 13,719 15,100
6/30/2006 14,165 13,740 15,125
7/31/2006 14,305 13,876 15,259
8/31/2006 14,434 14,001 15,393
9/30/2006 14,535 14,099 15,485
10/31/2006 14,599 14,161 15,552
11/30/2006 14,703 14,262 15,650
12/31/2006 14,695 14,254 15,630
1/31/2007 14,707 14,266 15,653
2/28/2007 14,839 14,394 15,806
3/31/2007 14,879 14,433 15,864
4/30/2007 14,946 14,498 15,926
5/31/2007 14,906 14,459 15,880
6/30/2007 14,893 14,446 15,934
7/31/2007 14,976 14,527 16,096
8/31/2007 15,087 14,634 16,277
9/30/2007 15,185 14,729 16,397
Average Annual Total Returns -- September 30, 2007/4/
1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 1/3/89)
Net Asset Value/1/ 4.46% 2.56% 4.27%
With Maximum Sales Charge/2/ 1.33 1.94 3.95
CLASS B (Inception 9/27/93)
Net Asset Value/1/ 3.72 1.82 3.56
With CDSC/3/ -1.28 1.47 3.56
CLASS C (Inception 12/30/94)
Net Asset Value/1/ 3.62 1.82 3.55
With CDSC/3/ 2.62 1.82 3.55
CLASS Y (Inception 3/31/94)
Net Asset Value/1/ 4.79 2.81 4.62
- ---------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Lehman 1-5 Yr Gov't Bond Index 5.89% 3.01% 5.07%
Morningstar Short Gov't Fund Avg. 4.74 2.48 4.36
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.funds.natixis.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 9/30/07 9/30/06
- ----------------------------------------------------
Mortgage Related 60.7 65.4
- ----------------------------------------------------
Treasuries 9.3 19.4
- ----------------------------------------------------
Asset-Backed Securities 5.7 4.5
- ----------------------------------------------------
Agency 3.3 3.1
- ----------------------------------------------------
Hybrid ARMs 2.5 2.0
- ----------------------------------------------------
Mortgaged Backed Securities 1.1 1.1
- ----------------------------------------------------
Collateralized Mortgage
Obligation 0.2 --
- ----------------------------------------------------
Government Sponsored -- 2.7
- ----------------------------------------------------
Short Term Investments & Other 17.2 1.8
- ----------------------------------------------------
% of Net Assets as of
EFFECTIVE MATURITY 9/30/07 9/30/06
- --------------------------------------------------
1 year or less 20.9 21.3
- --------------------------------------------------
1-5 years 63.2 59.6
- --------------------------------------------------
5-10 years 15.9 19.1
- --------------------------------------------------
10+ years n/a n/a
- --------------------------------------------------
Average Effective Maturity 3.2 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% 0.95%
- -------------------------------------------------------
B 1.84 1.70
- -------------------------------------------------------
C 1.84 1.70
- -------------------------------------------------------
Y 0.74 0.70
- -------------------------------------------------------
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 reductions and
reimbursements, if any, without which performance would have been lower.
/5/Before reductions and reimbursements.
/6/After reductions and reimbursements. Expense reductions are contractual and
are set to expire on 1/31/08.
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
- --------------------------------------------------------------------------------
All U.S. bonds weathered a difficult period during the 12 months ended
September 30, 2007, as concerns grew about the weakness in the housing market
and the default rate in home mortgages. Consumer spending slowed and negative
sentiment spilled over into other market areas as the crisis deepened this
summer. At the same time, municipal bonds absorbed a record pace of new issues,
creating a supply/demand imbalance. Municipal bonds with shorter maturities
performed in line with U.S. Treasury securities, for the most part, but
longer-term municipal bonds did better. Investors responded positively in
September when the Federal Reserve Board cut the federal funds rate (a
sensitive indicator of general interest rate trends) by 0.50%. Bonds with the
shortest maturities were the first group to respond.
For the fiscal year ended September 30, 2007, Loomis Sayles Massachusetts Tax
Free Income Fund's total return was 1.71% based on the net asset value of Class
A shares and $0.64 per share in reinvested dividends. Primarily because of its
longer maturity, the fund's results lagged the average return of 2.09% for
Morningstar's Muni Massachusetts category and the 3.10% return on the
nationally diversified Lehman Municipal Bond Index. The 30-day SEC yield on the
fund's Class A shares at the end of September was 3.75%, equivalent to a
taxable yield of 6.12%, adjusted for the combined maximum federal and
Massachusetts income tax rate of 38.45%.
INVESTORS SOUGHT SAFETY IN HIGH-QUALITY, SHORT-MATURITY ISSUES
A climate of uncertainty prompted investors to seek higher-quality bonds with
shorter maturities in pursuit of relative safety during most of fiscal 2007.
The fund's emphasis on insured bonds had a positive effect on performance
because of their higher credit quality. Higher education bonds also contributed
positively to performance because many of these bonds have shorter maturities.
However, relative to the Lehman benchmark, this fund was underweight in insured
bonds and bonds on the shorter end of the maturity spectrum. Performance of the
fund's housing-related bonds was slightly negative during the period.
MASSACHUSETTS MUNIS HELD UP BETTER THAN OTHER STATES' BONDS
Relative to other states, Massachusetts municipal bonds fared quite well thanks
to steady demand from the state's retail investors. The fund's holdings in
Puerto Rican municipal bonds, which had underperformed in the recent past, also
turned in solid performance during the fiscal year as demand remained steady.
(Municipal bonds issued in Puerto Rico provide diversification benefits to
single-state portfolios and the interest they pay passes free of income tax to
residents of any U.S. state.)
Some higher-quality Massachusetts general obligations with shorter maturities
had the most positive impact on performance, reflecting heightened investor
demand for relative safety. Municipal bonds issued for a medical center in
Milford, Massachusetts, had the most negative impact on this fund's
performance. These bonds remain in the portfolio because we believe they will
recover in time.
FACED WITH CHANGE, FUND STRATEGY REMAINS STEADY
Market volatility has not changed the fund's long-term strategy. We are
continuing to emphasize industrial revenue bonds because we appreciate the
relatively high, tax-free income they provide and we believe investors will
regain confidence in these issues if the recent turbulence subsides, allowing
prices to rise. In fact, in the course of the fiscal year we lengthened the
fund's maturity to capitalize on lower prices on certain longer-term municipal
bonds.
Near term, we expect bonds to continue to trade in a relatively narrow range,
with spreads - the difference in yield between higher- and lower-quality bonds
- - tightening. Above-average supply should continue to weigh on municipal bond
prices as we head into 2008. Longer-term, we believe high-yield municipals will
recover from their recent decline if investors become more comfortable with
risk and the subprime woes fade into history.
7
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
Investment Results through September 30, 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/
September 30, 1997 through September 30, 2007
[CHART]
Net Asset MaximumSales Lehman Municipal
Value/1/ Charge/2/ Bond Index
---------- ----------- ------------
9/30/1997 $10,000 $9,575 $10,000
10/31/1997 10,049 9,622 10,064
11/30/1997 10,109 9,680 10,124
12/31/1997 10,249 9,813 10,271
1/31/1998 10,332 9,893 10,377
2/28/1998 10,317 9,879 10,380
3/31/1998 10,288 9,851 10,390
4/30/1998 10,252 9,817 10,343
5/31/1998 10,410 9,968 10,506
6/30/1998 10,447 10,003 10,548
7/31/1998 10,453 10,009 10,574
8/31/1998 10,619 10,168 10,738
9/30/1998 10,737 10,281 10,871
10/31/1998 10,693 10,239 10,871
11/30/1998 10,711 10,256 10,909
12/31/1998 10,752 10,295 10,937
1/31/1999 10,876 10,413 11,067
2/28/1999 10,826 10,366 11,019
3/31/1999 10,813 10,353 11,034
4/30/1999 10,845 10,384 11,061
5/31/1999 10,775 10,317 10,997
6/30/1999 10,599 10,148 10,839
7/31/1999 10,636 10,184 10,878
8/31/1999 10,485 10,039 10,791
9/30/1999 10,454 10,009 10,796
10/31/1999 10,307 9,869 10,679
11/30/1999 10,398 9,956 10,792
12/31/1999 10,307 9,869 10,712
1/31/2000 10,223 9,788 10,665
2/29/2000 10,350 9,910 10,789
3/31/2000 10,543 10,095 11,025
4/30/2000 10,496 10,050 10,960
5/31/2000 10,455 10,011 10,903
6/30/2000 10,665 10,212 11,192
7/31/2000 10,800 10,341 11,347
8/31/2000 10,935 10,471 11,522
9/30/2000 10,892 10,429 11,462
10/31/2000 10,980 10,513 11,587
11/30/2000 11,026 10,557 11,675
12/31/2000 11,261 10,782 11,964
1/31/2001 11,300 10,820 12,082
2/28/2001 11,340 10,858 12,120
3/31/2001 11,336 10,855 12,229
4/30/2001 11,220 10,743 12,097
5/31/2001 11,329 10,847 12,227
6/30/2001 11,409 10,924 12,309
7/31/2001 11,582 11,090 12,491
8/31/2001 11,800 11,299 12,697
9/30/2001 11,734 11,235 12,654
10/31/2001 11,843 11,340 12,805
11/30/2001 11,756 11,256 12,697
12/31/2001 11,623 11,129 12,577
1/31/2002 11,688 11,191 12,795
2/28/2002 11,820 11,317 12,949
3/31/2002 11,602 11,109 12,695
4/30/2002 11,815 11,313 12,943
5/31/2002 11,907 11,401 13,022
6/30/2002 12,045 11,533 13,160
7/31/2002 12,198 11,680 13,329
8/31/2002 12,347 11,822 13,489
9/30/2002 12,625 12,088 13,785
10/31/2002 12,395 11,868 13,556
11/30/2002 12,317 11,793 13,500
12/31/2002 12,563 12,029 13,785
1/31/2003 12,537 12,004 13,750
2/28/2003 12,733 12,192 13,942
3/31/2003 12,745 12,203 13,950
4/30/2003 12,826 12,281 14,043
5/31/2003 13,155 12,596 14,371
6/30/2003 13,096 12,539 14,310
7/31/2003 12,527 11,995 13,810
8/31/2003 12,609 12,073 13,913
9/30/2003 12,950 12,400 14,322
10/31/2003 12,930 12,380 14,249
11/30/2003 13,073 12,518 14,398
12/31/2003 13,195 12,634 14,517
1/31/2004 13,285 12,720 14,600
2/29/2004 13,480 12,907 14,820
3/31/2004 13,449 12,877 14,768
4/30/2004 13,087 12,531 14,419
5/31/2004 13,029 12,476 14,366
6/30/2004 13,045 12,491 14,419
7/31/2004 13,232 12,669 14,608
8/31/2004 13,491 12,918 14,901
9/30/2004 13,581 13,004 14,980
10/31/2004 13,704 13,121 15,109
11/30/2004 13,564 12,987 14,985
12/31/2004 13,744 13,160 15,168
1/31/2005 13,909 13,318 15,309
2/28/2005 13,852 13,263 15,258
3/31/2005 13,759 13,175 15,162
4/30/2005 14,008 13,413 15,401
5/31/2005 14,125 13,524 15,510
6/30/2005 14,184 13,581 15,606
7/31/2005 14,092 13,493 15,536
8/31/2005 14,244 13,639 15,693
9/30/2005 14,110 13,510 15,587
10/31/2005 14,000 13,405 15,492
11/30/2005 14,077 13,479 15,567
12/31/2005 14,205 13,601 15,701
1/31/2006 14,222 13,618 15,743
2/28/2006 14,339 13,729 15,849
3/31/2006 14,230 13,625 15,739
4/30/2006 14,243 13,637 15,734
5/31/2006 14,298 13,690 15,804
6/30/2006 14,232 13,627 15,744
7/31/2006 14,393 13,781 15,932
8/31/2006 14,616 13,995 16,168
9/30/2006 14,708 14,083 16,281
10/31/2006 14,808 14,179 16,383
11/30/2006 14,936 14,301 16,519
12/31/2006 14,860 14,228 16,461
1/31/2007 14,800 14,171 16,419
2/28/2007 15,001 14,364 16,635
3/31/2007 14,941 14,306 16,594
4/30/2007 14,980 14,344 16,643
5/31/2007 14,892 14,259 16,570
6/30/2007 14,786 14,158 16,484
7/31/2007 14,879 14,247 16,611
8/31/2007 14,745 14,119 16,540
9/30/2007 14,959 14,323 16,785
Average Annual Returns -- September 30, 2007/4/
1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 3/23/84)
Net Asset Value/1/ 1.71% 3.46% 4.12%
With Maximum Sales Charge/2/ -2.61 2.56 3.67
CLASS B (Inception 9/13/93)
Net Asset Value/1/ 0.94 2.73 3.41
With CDSC/3/ -3.95 2.38 3.41
- ----------------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Lehman Municipal Bond Index 3.10% 4.02% 5.32%
Morningstar Muni Massachusetts Fund Avg. 2.09 3.17 4.37
Yields as of September 30, 2007
CLASS A CLASS B
SEC 30-Day Yield/5/ 3.75% 3.18%
Taxable Equivalent Yield/6/ 6.12 5.20
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.funds.natixis.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 9/30/07 9/30/06
- ------------------------------------------
Aaa 38.7 36.8
- ------------------------------------------
Aa 18.0 20.5
- ------------------------------------------
A 16.1 20.3
- ------------------------------------------
Baa 12.2 9.5
- ------------------------------------------
Ba 4.7 4.3
- ------------------------------------------
Not Rated* 8.4 6.0
- ------------------------------------------
Short-term and other 1.9 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 9/30/07 9/30/06
- --------------------------------------------------
1 year or less 1.0 1.9
- --------------------------------------------------
1-5 years 31.1 30.7
- --------------------------------------------------
5-10 years 40.6 49.3
- --------------------------------------------------
10+ years 27.3 18.1
- --------------------------------------------------
Average Effective Maturity 8.9 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 reductions 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 reductions and reimbursements.
/8/After reductions and reimbursements. Expense reductions are contractual and
are set to expire on 1/31/08.
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
- --------------------------------------------------------------------------------
All U.S. bonds weathered a difficult period during the 12 months ended
September 30, 2007, as concerns grew about weakness in the housing market and
the default rate in home mortgages. Consumer spending slowed and negative
sentiment spilled over into other market areas this summer as the crisis
deepened. At the same time, municipal bonds were also impacted by a record pace
of new issues, which created an imbalance in supply and demand. Municipal bonds
with shorter maturities performed in line with U.S. Treasury securities, for
the most part, but longer-term municipal bonds did better for much of the
fiscal period. However, the markets turned around in September when the Federal
Reserve Board cut the federal funds rate (a sensitive indicator of general
interest rate trends) by 0.50%. Bonds with the shortest maturities were the
first group to respond.
For the fiscal year ended September 30, 2007, the total return on Loomis Sayles
Municipal Income Fund was 1.19%, based on the net asset value of Class A shares
and $0.28 in dividends as well as $0.03 in capital gains reinvested during the
period. The fund lagged its benchmark, the Lehman Municipal Bond Index, which
returned 3.10% for the period, and the 1.86% average return on Morningstar's
Muni National Long category. The 30-day SEC yield on Class A shares of the fund
at the end of September 2007 was 3.75%, equivalent to a taxable yield of 5.78%
based on the maximum federal income tax rate of 35.00%.
AS CONCERNS MOUNTED, INVESTORS SOUGHT SAFETY IN HIGH-QUALITY, SHORT-MATURITY
ISSUES
Demand for higher-quality, shorter-maturity bonds mounted during the fiscal
year, as market turbulence caused investors to emphasize relative safety over
income. Because of their high credit quality, insured and tax-backed municipal
bonds performed well, but the fund was underweight in these issues relative to
the benchmark, which limited the fund's participation.
The fund held a relatively large position in municipal bonds in the resource
recovery industry. These high-yielding issues slipped from favor when investors
retreated to the relative safety of higher-quality bonds. We reduced the fund's
exposure to industrial development and pollution control bonds in an effort to
minimize our exposure to corporate-backed municipal bonds and limit the impact
of flight-to-quality trades.
No geographic area where the fund had significant exposure contributed
negatively to performance. The most positive were New York State bonds, which
fared well as retail investors in that state remained relatively active.
Because investor demand was high, the fund's best-performing securities during
the year were some high-quality bonds issued for an energy facility in
Washington State, which offered a relatively high coupon and shorter maturity.
On the other hand, lower-quality municipal bonds with longer maturity
structures performed poorly, including some bonds issued for a retirement
community in Colorado. Both of these positions remain in the portfolio because
we believe they will do well over time.
VOLATILE BOND PRICES DID NOT IMPACT FUND STRATEGY
Throughout this volatile 12-month period, the fund continued to maintain its
emphasis on revenue bonds - tax-exempt bonds issued by municipalities to
benefit businesses - because we believe investors will regain their confidence
in these issues, ultimately causing their prices to increase.
Near term, we expect bonds to continue to trade in a relatively narrow range,
with spreads - the difference in yield between higher- and lower-quality bonds
- - tightening. Above-average supply should continue to weigh on municipal bond
prices as we head into 2008. Longer-term, we believe high-yield municipals will
recover from their recent price decline if investors become more comfortable
with risk and the subprime woes fade into history.
9
LOOMIS SAYLES MUNICIPAL INCOME FUND
Investment Results through September 30, 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/
September 30, 1997 through September 30, 2007
[CHART]
Net Asset Maximum Sales Lehman Municipal
Value/1/ Charge/2/ Bond Index/3/
----------- ------------ ------------
9/30/1997 $10,000 $ 9,550 $10,000
10/31/1997 10,070 9,617 10,064
11/30/1997 10,101 9,647 10,124
12/31/1997 10,241 9,780 10,271
1/31/1998 10,368 9,901 10,377
2/28/1998 10,439 9,969 10,380
3/31/1998 10,455 9,984 10,390
4/30/1998 10,406 9,937 10,343
5/31/1998 10,518 10,045 10,506
6/30/1998 10,562 10,087 10,548
7/31/1998 10,580 10,104 10,574
8/31/1998 10,721 10,238 10,738
9/30/1998 10,808 10,321 10,871
10/31/1998 10,771 10,286 10,871
11/30/1998 10,816 10,329 10,909
12/31/1998 10,829 10,342 10,937
1/31/1999 10,935 10,443 11,067
2/28/1999 10,912 10,421 11,019
3/31/1999 10,917 10,425 11,034
4/30/1999 10,949 10,457 11,061
5/31/1999 10,911 10,420 10,997
6/30/1999 10,787 10,301 10,839
7/31/1999 10,819 10,332 10,878
8/31/1999 10,709 10,227 10,791
9/30/1999 10,713 10,231 10,796
10/31/1999 10,558 10,083 10,679
11/30/1999 10,657 10,177 10,792
12/31/1999 10,571 10,095 10,712
1/31/2000 10,515 10,041 10,665
2/29/2000 10,631 10,153 10,789
3/31/2000 10,795 10,309 11,025
4/30/2000 10,736 10,253 10,960
5/31/2000 10,706 10,224 10,903
6/30/2000 10,902 10,411 11,192
7/31/2000 11,023 10,527 11,347
8/31/2000 11,175 10,672 11,522
9/30/2000 11,144 10,643 11,462
10/31/2000 11,236 10,730 11,587
11/30/2000 11,312 10,803 11,675
12/31/2000 11,499 10,981 11,964
1/31/2001 11,579 11,058 12,082
2/28/2001 11,598 11,076 12,120
3/31/2001 11,693 11,167 12,229
4/30/2001 11,568 11,047 12,097
5/31/2001 11,678 11,152 12,227
6/30/2001 11,771 11,242 12,309
7/31/2001 11,977 11,438 12,491
8/31/2001 12,168 11,620 12,697
9/30/2001 11,958 11,420 12,654
10/31/2001 12,120 11,574 12,805
11/30/2001 11,989 11,449 12,697
12/31/2001 11,843 11,310 12,577
1/31/2002 12,037 11,495 12,795
2/28/2002 12,199 11,650 12,949
3/31/2002 11,999 11,459 12,695
4/30/2002 12,196 11,647 12,943
5/31/2002 12,258 11,707 13,022
6/30/2002 12,372 11,816 13,160
7/31/2002 12,451 11,891 13,329
8/31/2002 12,549 11,984 13,489
9/30/2002 12,749 12,176 13,785
10/31/2002 12,426 11,866 13,556
11/30/2002 12,406 11,847 13,500
12/31/2002 12,708 12,136 13,785
1/31/2003 12,550 11,985 13,750
2/28/2003 12,734 12,161 13,942
3/31/2003 12,728 12,155 13,950
4/30/2003 12,841 12,263 14,043
5/31/2003 13,161 12,568 14,371
6/30/2003 13,133 12,542 14,310
7/31/2003 12,563 11,998 13,810
8/31/2003 12,695 12,124 13,913
9/30/2003 13,075 12,486 14,322
10/31/2003 13,013 12,427 14,249
11/30/2003 13,181 12,588 14,398
12/31/2003 13,297 12,699 14,517
1/31/2004 13,378 12,776 14,600
2/29/2004 13,585 12,974 14,820
3/31/2004 13,576 12,965 14,768
4/30/2004 13,242 12,646 14,419
5/31/2004 13,213 12,618 14,366
6/30/2004 13,221 12,626 14,419
7/31/2004 13,391 12,789 14,608
8/31/2004 13,634 13,020 14,901
9/30/2004 13,713 13,096 14,980
10/31/2004 13,828 13,206 15,109
11/30/2004 13,705 13,088 14,985
12/31/2004 13,876 13,252 15,168
1/31/2005 14,027 13,396 15,309
2/28/2005 13,959 13,331 15,258
3/31/2005 13,869 13,245 15,162
4/30/2005 14,119 13,484 15,401
5/31/2005 14,223 13,583 15,510
6/30/2005 14,306 13,662 15,606
7/31/2005 14,217 13,577 15,536
8/31/2005 14,394 13,746 15,693
9/30/2005 14,247 13,606 15,587
10/31/2005 14,137 13,501 15,492
11/30/2005 14,219 13,579 15,567
12/31/2005 14,340 13,695 15,701
1/31/2006 14,364 13,718 15,743
2/28/2006 14,488 13,836 15,849
3/31/2006 14,378 13,731 15,739
4/30/2006 14,385 13,738 15,734
5/31/2006 14,431 13,782 15,804
6/30/2006 14,379 13,732 15,744
7/31/2006 14,543 13,888 15,932
8/31/2006 14,806 14,140 16,168
9/30/2006 14,932 14,260 16,281
10/31/2006 15,038 14,361 16,383
11/30/2006 15,184 14,501 16,519
12/31/2006 15,099 14,419 16,461
1/31/2007 15,023 14,347 16,419
2/28/2007 15,252 14,565 16,635
3/31/2007 15,175 14,493 16,594
4/30/2007 15,201 14,517 16,643
5/31/2007 15,105 14,426 16,570
6/30/2007 14,989 14,315 16,484
7/31/2007 15,057 14,379 16,611
8/31/2007 14,838 14,171 16,540
9/30/2007 15,111 14,431 16,785
Average Annual Total Returns -- September 20, 2007/6/
1 YEAR 5 YEARS 10 YEARS
CLASS A (Inception 5/9/77)
Net Asset Value/1/ 1.19% 3.46% 4.21%
With Maximum Sales Charge/2/ -3.42 2.50 3.74
Class B (Inception 9/13/93)
Net Asset Value/1/ 0.44 2.72 3.39
With CDSC/3/ -4.42 2.36 3.39
- ----------------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Lehman Municipal Bond Index 3.10% 4.02% 5.32%
Morningstar Muni National Long Fund Avg. 1.86 3.41 4.41
Yields as of September 30, 2007
CLASS A CLASS B
SEC 30-Day Yield/4/ 3.75% 3.17%
Taxable Equivalent Yield/5/ 5.78 4.89
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.funds.natixis.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 9/30/07 9/30/06
- ------------------------------------------
Aaa 31.2 28.2
- ------------------------------------------
Aa 18.3 13.8
- ------------------------------------------
A 22.5 27.1
- ------------------------------------------
Baa 12.9 14.1
- ------------------------------------------
Ba 3.7 3.3
- ------------------------------------------
Not Rated* 10.2 12.0
- ------------------------------------------
Short-term and other 1.2 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 9/30/07 9/30/06
- --------------------------------------------------
1 year or less 0.2 4.4
- --------------------------------------------------
1-5 years 12.1 3.7
- --------------------------------------------------
5-10 years 58.4 76.0
- --------------------------------------------------
10+ years 29.3 15.9
- --------------------------------------------------
Average Effective Maturity 10.1 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 reductions and
reimbursements, if any, without which performance would have been lower.
/7/Before reductions and reimbursements.
/8/After reductions and reimbursements. Expense reductions are contractual and
are set to expire on 1/31/08.
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
- --------------------------------------------------------------------------------
Following a long run of strong growth, this summer the U.S. economy began to
falter under the weight of the subprime mortgage debacle and fears that lax
mortgage lending practices might spread to other credit arenas. After holding
interest rates steady for several quarters, the Federal Reserve Board cut the
federal funds rate by 0.50% in September in a bid to keep the economy on
course. Overseas, global markets continued to thrive, aided in part by currency
gains against the U.S. dollar.
For the fiscal year ended September 30, 2007, Class A shares of Loomis Sayles
Strategic Income Fund provided a total return of 9.90% at net asset value,
including $0.82 in reinvested dividends. These results were significantly ahead
of the fund's benchmark, the Lehman Aggregate Bond Index, which returned 5.14%
for the period. Bear in mind that the fund has greater investment flexibility
than the benchmark. The fund also outperformed the 6.33% average return on
Morningstar's Multisector Bond category. The 30-day SEC yield on the fund's
Class A shares was 5.27% on September 30, 2007.
FUND BENEFITED FROM POSITIONING STRATEGIES AND SELECTION
Portfolio allocation and security selection drove the fund's performance. The
fund's Latin American holdings were strongest at the beginning of the period,
while Asian currencies lagged until the third quarter of 2007. In the United
States, lower-rated issues outperformed higher-rated bonds early in the period,
but as conditions deteriorated in the credit markets, investors retreated to
higher-quality holdings, preferring safety to income. This switch in sentiment
boosted returns for the fund's AAA-rated bonds, including U.S. Treasury issues.
Overall portfolio quality as of the end of September 2007 was up slightly from
a year ago.
QUALITY STRATEGIES AND NON-DOLLAR HOLDINGS AIDED RETURNS
Timely shifts upward in quality sectors contributed to the fund's strong
performance. Our shift in emphasis from lower- to higher-quality segments
allowed us to avoid some of the price declines in high-yield markets. However,
extreme market weakness in the latter part of the period reduced the favorable
impact of this strategy.
With the global economy steaming ahead, non-dollar holdings added broadly to
the fund's results. Bonds denominated in Brazil's real were the strongest
contributors, thanks to that country's continued economic growth and
speculative buying of its currency. Bonds tied to other Latin American
currencies and the Canadian dollar also benefited the fund, along with some
non-dollar equities and preferred stocks. Asian bonds, which had lagged for
several months, regained some ground in the closing quarter.
CREDIT WOES UNDERCUT HOUSING-RELATED ISSUES
Housing-related issues were the greatest detractors from the fund's
performance, as mortgage defaults increased over the summer. Tighter credit
standards made borrowing more difficult, cutting into sales of new and existing
homes. The weak real estate market also took a toll on the portfolio's holdings
in real estate investment trusts (REITs).
FUND POSITIONED FOR MUTED U.S. GROWTH AND OVERSEAS STRENGTH
We believe the effects of the credit crunch on U.S. markets will be sharpest in
2007's fourth quarter, temporarily decelerating the long-running economic
expansion. We expect real growth (adjusted for inflation) to fall below 2% in
the United States. However, we believe it will pick up again in 2008, albeit at
a slower pace than in recent years. Higher monthly payments on adjustable-rate
mortgages may put a damper on consumer spending, a major economic component.
Moderating growth may also bring declining bond yields and higher prices. If
credit and economic conditions improve, we believe investment-grade corporate
issues will benefit. Investors may also be drawn back to hard-hit
mortgage-backed issues, where we believe attractive valuations are emerging. If
current supply/demand imbalances fade, we believe the outlook for high-yield
bonds should brighten. Consequently, we positioned the fund to benefit from
ongoing strength in the global economy that we see ahead, with nearly one-third
of the fund's assets committed to non-U.S. holdings.
11
LOOMIS SAYLES STRATEGIC INCOME FUND
Investment Results through September 30, 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/
September 30, 1997 through September 30, 2007
[CHART]
Lehman U.S.
Net Asset Maximum Sales Lehman Aggregate Universal Bond
Value/1/ Charge/2/ Bond Index Index
--------- ------------- ---------------- ---------------
9/30/1997 $10,000 $ 9,550 $10,000 $10,000
10/31/1997 9,790 9,349 10,145 10,127
11/30/1997 9,843 9,400 10,192 10,184
12/31/1997 9,793 9,352 10,294 10,292
1/31/1998 9,952 9,504 10,427 10,414
2/28/1998 10,134 9,678 10,419 10,411
3/31/1998 10,351 9,885 10,455 10,449
4/30/1998 10,354 9,888 10,509 10,515
5/31/1998 10,186 9,727 10,609 10,640
6/30/1998 10,024 9,573 10,699 10,718
7/31/1998 9,898 9,453 10,722 10,708
8/31/1998 8,683 8,292 10,896 10,758
9/30/1998 8,964 8,561 11,151 11,107
10/31/1998 9,061 8,653 11,092 10,936
11/30/1998 9,669 9,234 11,155 11,142
12/31/1998 9,625 9,191 11,189 11,174
1/31/1999 9,791 9,350 11,269 11,285
2/28/1999 9,651 9,217 11,072 11,017
3/31/1999 10,161 9,703 11,133 11,095
4/30/1999 10,812 10,325 11,168 11,127
5/31/1999 10,477 10,005 11,071 10,978
6/30/1999 10,507 10,034 11,035 10,921
7/31/1999 10,300 9,837 10,988 10,861
8/31/1999 10,171 9,714 10,983 10,834
9/30/1999 10,236 9,776 11,110 10,952
10/31/1999 10,322 9,858 11,151 11,002
11/30/1999 10,509 10,036 11,150 11,014
12/31/1999 10,795 10,309 11,097 10,956
1/31/2000 10,695 10,213 11,060 10,917
2/29/2000 11,116 10,616 11,194 11,018
3/31/2000 11,228 10,723 11,342 11,112
4/30/2000 10,907 10,416 11,309 11,015
5/31/2000 10,555 10,080 11,304 10,974
6/30/2000 10,957 10,464 11,539 11,249
7/31/2000 11,053 10,556 11,644 11,385
8/31/2000 11,297 10,788 11,813 11,534
9/30/2000 10,998 10,504 11,887 11,594
10/31/2000 10,551 10,076 11,966 11,606
11/30/2000 10,496 10,024 12,161 11,756
12/31/2000 10,869 10,379 12,387 11,984
1/31/2001 11,214 10,710 12,589 12,312
2/28/2001 11,197 10,693 12,699 12,420
3/31/2001 10,774 10,289 12,763 12,496
4/30/2001 10,598 10,122 12,710 12,451
5/31/2001 10,835 10,347 12,786 12,566
6/30/2001 10,806 10,319 12,835 12,629
7/31/2001 10,813 10,327 13,122 12,959
8/31/2001 11,052 10,555 13,272 13,133
9/30/2001 10,504 10,031 13,427 13,113
10/31/2001 10,752 10,268 13,708 13,439
11/30/2001 10,904 10,414 13,519 13,322
12/31/2001 10,854 10,366 13,433 13,231
1/31/2002 10,978 10,484 13,541 13,343
2/28/2002 11,110 10,610 13,673 13,443
3/31/2002 11,238 10,732 13,445 13,195
4/30/2002 11,509 10,992 13,706 13,379
5/31/2002 11,753 11,225 13,822 13,556
6/30/2002 11,567 11,046 13,942 13,578
7/31/2002 11,292 10,784 14,110 13,571
8/31/2002 11,609 11,086 14,348 13,923
9/30/2002 11,452 10,937 14,581 14,187
10/31/2002 11,680 11,154 14,514 14,023
11/30/2002 12,117 11,571 14,511 14,204
12/31/2002 12,536 11,972 14,810 14,623
1/31/2003 12,888 12,308 14,823 14,671
2/28/2003 13,236 12,641 15,028 14,964
3/31/2003 13,365 12,763 15,016 14,975
4/30/2003 14,132 13,496 15,140 15,252
5/31/2003 14,838 14,171 15,423 15,733
6/30/2003 15,025 14,349 15,392 15,694
7/31/2003 14,617 13,959 14,875 15,025
8/31/2003 14,785 14,119 14,973 15,143
9/30/2003 15,508 14,810 15,370 15,672
10/31/2003 15,858 15,144 15,226 15,505
11/30/2003 16,299 15,565 15,263 15,576
12/31/2003 16,904 16,143 15,418 15,750
1/31/2004 17,204 16,430 15,542 15,909
2/29/2004 17,192 16,419 15,710 16,109
3/31/2004 17,418 16,634 15,828 16,264
4/30/2004 16,695 15,944 15,416 15,752
5/31/2004 16,416 15,677 15,355 15,641
6/30/2004 16,728 15,975 15,441 15,707
7/31/2004 16,890 16,130 15,594 15,901
8/31/2004 17,410 16,627 15,892 16,276
9/30/2004 17,867 17,063 15,935 16,368
10/31/2004 18,290 17,467 16,069 16,526
11/30/2004 18,729 17,886 15,940 16,361
12/31/2004 19,090 18,231 16,087 16,574
1/31/2005 18,951 18,098 16,188 16,706
2/28/2005 19,199 18,335 16,093 16,607
3/31/2005 18,884 18,035 16,010 16,400
4/30/2005 18,735 17,892 16,227 16,620
5/31/2005 18,923 18,071 16,402 16,853
6/30/2005 19,278 18,411 16,492 16,987
7/31/2005 19,446 18,571 16,341 16,816
8/31/2005 19,672 18,786 16,551 17,072
9/30/2005 19,689 18,803 16,380 16,816
10/31/2005 19,494 18,617 16,251 16,633
11/30/2005 19,592 18,710 16,323 16,734
12/31/2005 19,804 18,912 16,478 16,899
1/31/2006 20,307 19,393 16,479 16,865
2/28/2006 20,528 19,604 16,533 16,939
3/31/2006 20,413 19,494 16,371 16,701
4/30/2006 20,721 19,789 16,342 16,640
5/31/2006 20,504 19,581 16,324 16,611
6/30/2006 20,446 19,526 16,359 16,636
7/31/2006 20,749 19,815 16,580 16,881
8/31/2006 21,251 20,295 16,834 17,194
9/30/2006 21,468 20,502 16,982 17,386
10/31/2006 21,863 20,879 17,094 17,524
11/30/2006 22,149 21,152 17,292 17,772
12/31/2006 22,151 21,154 17,192 17,619
1/31/2007 22,193 21,195 17,185 17,615
2/28/2007 22,573 21,557 17,450 17,970
3/31/2007 22,510 21,497 17,450 17,884
4/30/2007 22,976 21,942 17,544 18,013
5/31/2007 23,169 22,126 17,411 17,837
6/30/2007 22,939 21,907 17,360 17,753
7/31/2007 22,685 21,664 17,505 17,814
8/31/2007 22,882 21,852 17,719 17,978
9/30/2007 23,591 22,530 17,854 18,122
Average Annual Returns -- September 30, 2007/4/
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
CLASS A (Inception 5/1/95)
Net Asset Value/1/ 9.90% 15.55% 8.96% --
With Maximum Sales Charge/2/ 4.94 14.49 8.45 --
CLASS B (Inception 5/1/95)
Net Asset Value/1/ 9.08 14.68 8.15 --
With CDSC/3/ 4.08 14.45 8.15 --
CLASS C (Inception 5/1/95)
Net Asset Value/1/ 9.08 14.69 8.15 --
With CDSC/3/ 8.08 14.69 8.15 --
CLASS Y (Inception 12/1/99)
Net Asset Value/1/ 10.22 15.87 -- 11.20%
- ---------------------------------------------------------------------------
SINCE
CLASS Y
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS INCEPTION/5/
Lehman Aggregate Bond Index 5.14% 4.13% 5.97% 6.19%
Lehman U.S. Universal Bond Index 5.30 4.85 6.07 6.45
Morningstar Multisector Bond Fund Avg. 6.33 9.05 5.48 6.73
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.funds.natixis.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 9/30/07 9/30/06
- ------------------------------------------
Aaa 32.6 32.1
- ------------------------------------------
Aa 2.7 6.1
- ------------------------------------------
A 6.5 3.5
- ------------------------------------------
Baa 22.7 15.3
- ------------------------------------------
Ba 9.9 9.5
- ------------------------------------------
B 9.5 13.6
- ------------------------------------------
Caa 5.6 3.5
- ------------------------------------------
Not Rated* 7.4 5.6
- ------------------------------------------
Short-term and other 3.1 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 9/30/07 9/30/06
- --------------------------------------------------
1 year or less 10.9 14.5
- --------------------------------------------------
1-5 years 17.6 25.7
- --------------------------------------------------
5-10 years 19.4 18.0
- --------------------------------------------------
10+ years 52.1 41.8
- --------------------------------------------------
Average Effective Maturity 15.6 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 reductions 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 reductions and reimbursements.
/7/After reductions and reimbursements. Expense reductions are contractual and
are set to expire on 1/31/08.
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 Natixis Fund, contact your financial
professional or call Natixis 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 Fund Averages are 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 Natixis Funds at 800-225-5478; on the
funds' website at www.funds.natixis.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, 2007 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 April 1, 2007 through September 30, 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 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,021.20 $5.17
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.95 $5.16
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,016.60 $9.00
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.14 $9.00
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,017.60 $8.95
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.19 $8.95
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,022.60 $3.75
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.36 $3.75
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/reimbursement): 1.02%, 1.78%, 1.77% and 0.74% 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 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,005.10 $5.78
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.30 $5.82
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,001.30 $9.53
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.54 $9.60
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $999.40 $9.52
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.54 $9.60
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/reimbursement): 1.15%, 1.90% and 1.90% 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 4/1/07 9/30/07 4/1/07 - 9/30/07
- -------------------------------------------------------------------------------------------------------------------
CLASS A
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,020.50 $4.91
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.21 $4.91
- -------------------------------------------------------------------------------------------------------------------
CLASS B
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,016.60 $8.75
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.39 $8.74
- -------------------------------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,015.70 $8.69
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.44 $8.69
- -------------------------------------------------------------------------------------------------------------------
CLASS Y
- -------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,020.90 $3.65
- -------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.46 $3.65
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/reimbursement): 0.97%, 1.73%, 1.72% and 0.72% 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 BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
INCOME FUND 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,001.30 $4.77
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.31 $4.81
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $998.10 $8.52
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.55 $8.59
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/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 04/01/07 09/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $995.70 $4.75
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.31 $4.81
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $992.00 $8.49
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.55 $8.59
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/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 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,048.00 $5.29
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.90 $5.22
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,043.90 $9.22
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.04 $9.10
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,043.20 $9.07
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.19 $8.95
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,048.70 $3.90
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.26 $3.85
*Expenses are equal to the Fund's annualized expense ratio: 1.03%, 1.80%, 1.77%
and 0.76% 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
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENTS
The Board of Trustees, including the Independent Trustees, considers matters
bearing on each Fund's advisory agreement (collectively, the "Agreements") at
most of its meetings throughout the year. Once a year, usually in the spring,
the Contract Review and Governance Committee of the Board meets to review the
Agreements to determine whether to recommend that the full Board approve the
continuation of the Agreements, typically for an additional one-year period.
After the Committee has made its recommendation, the full Board, including the
Independent Trustees, determines whether to approve the continuation of the
Agreements.
In connection with these meetings, the Trustees receive materials that the
Funds' investment adviser believes to be reasonably necessary for the Trustees
to evaluate the Agreements. These materials generally include, among other
items, (i) information on the investment performance of the Funds and the
performance of peer groups of funds and the Funds' performance benchmarks,
(ii) information on the Funds' advisory fees and other expenses, including
information comparing the Funds' expenses to those of peer groups of funds and
information about any applicable expense caps and fee "breakpoints,"
(iii) sales and redemption data in respect of the Funds, (iv) information about
the profitability of the Agreements to the Funds' adviser (the "Adviser"), and
(v) information obtained through the completion of a questionnaire by the
Adviser (the Trustees are consulted as to the information requested through
that questionnaire). The Board of Trustees, including the Independent Trustees,
also consider other matters such as (i) the Adviser's financial results and
financial condition, (ii) each Fund's investment objective and strategies and
the size, education and experience of the Adviser's investment staff and its
use of technology, external research and trading cost measurement tools,
(iii) arrangements in respect of the distribution of the Funds' shares,
(iv) the procedures employed to determine the value of the Funds' assets,
(v) the allocation of the Funds' brokerage, if any, including allocations to
brokers affiliated with the Adviser and the use of "soft" commission dollars to
pay Fund expenses and to pay for research and other similar services, (vii) the
resources devoted to, and the record of compliance with, the Funds' investment
policies and restrictions, policies on personal securities transactions and
other compliance policies, and (viii) the general economic outlook with
particular emphasis on the mutual fund industry. Throughout the process, the
Trustees are afforded the opportunity to ask questions of and request
additional materials from the Adviser.
In addition to the materials requested by the Trustees in connection with the
annual consideration of the continuation of the Agreements, the Trustees
receive materials in advance of each regular quarterly meeting of the Board of
Trustees that provide detailed information about each Fund's investment
performance and the fees charged to the Funds for advisory and other services.
This information generally includes, among other things, an internal
performance rating for each Fund based on agreed-upon criteria, graphs showing
performance and fee differentials against each Fund's peer group, performance
ratings provided by a third-party, total return information for various
periods, and third-party performance rankings for various periods comparing a
Fund against its peer group. The portfolio management team for each Fund makes
periodic presentations to the Contract Review and Governance Committee and/or
the full Board of Trustees, and Funds identified as presenting possible
performance concerns may be subject to more frequent board presentations and
reviews. In addition, each quarter the Trustees are provided with detailed
statistical information about each Fund's portfolio.
The Board of Trustees most recently approved the continuation of the Agreements
at their meeting held in June, 2007. The Agreements were continued for a
one-year period for all Funds except Loomis Sayles Strategic Income Fund, whose
Agreement was continued for five months. In considering whether to approve the
continuation of the Agreements, the Board of Trustees, including the
Independent Trustees, did not identify any single factor as determinative.
Matters considered by the Trustees, including the Independent Trustees, in
connection with their approval of the Agreements included the following:
The nature, extent and quality of the services provided to the Funds under the
Agreements. The Trustees considered the nature, extent and quality of the
services provided by the Adviser and its affiliates to the Funds and the
resources dedicated to the Funds by the Adviser and its affiliates, including
recent or planned investments by the Adviser in additional personnel or other
resources. They also took note of the competitive market for talented
personnel, in particular, for personnel who have contributed to the generation
of strong investment performance. They considered the need for the Adviser to
offer competitive compensation in order to attract and retain capable
personnel. In the case of Loomis Sayles Strategic Income Fund, which had
experienced substantial net cash inflows and asset growth in recent periods,
the Trustees also considered the following factors: (1) the additional efforts
required to manage the Fund's portfolio in periods of rapid growth (including
the need to identify additional portfolio securities for investment as the
Fund's assets grow), (2) the additional personnel and other resources needed in
such efforts, (3) the possible effects of such cash inflows on the Fund's
ability to achieve attractive investment returns and (4) the benefits to the
Fund of such net cash inflows and asset growth (including lower expense ratios).
17
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENTS (continued)
The Trustees considered not only the advisory services provided by the Adviser
to the Funds, but also the monitoring and oversight services provided by
Natixis Advisors with respect to the Funds for which Natixis Advisors provides
advisory oversight services. They also considered the administrative services
provided by Natixis Advisors and its affiliates to the Funds.
For each Fund, the Trustees also considered the benefits to shareholders of
investing in a mutual fund that is part of a family of funds offering a variety
of investment disciplines and providing for a variety of fund and shareholder
services.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
nature, extent and quality of services provided supported the renewal of the
Agreements.
Investment performance of the Funds and the Adviser. As noted above, the
Trustees received information about the performance of the Funds over various
time periods, including information which compared the performance of the Funds
to the performance of peer groups of funds and the Funds' respective
performance benchmarks. In addition, the Trustees also reviewed data prepared
by an independent third party which analyzed the performance of the Funds using
a variety of performance metrics, including metrics which also measured the
performance of the Funds on a risk adjusted basis.
With respect to each Fund, the Board concluded that the Fund's performance or
other relevant factors supported the renewal of the Agreements relating to that
Fund.
The Trustees also considered the Adviser's performance and reputation
generally, the Funds' performance as a fund family generally, and the
historical responsiveness of the Adviser to Trustee concerns about performance
and the willingness of the Adviser to take steps intended to improve
performance.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
performance of the Funds and the Adviser supported the renewal of the
Agreements.
The costs of the services to be provided and profits to be realized by the
Adviser and its affiliates from their respective relationships with the Funds.
The Trustees considered the fees charged to the Funds for advisory services as
well as the total expense levels of the Funds. This information included
comparisons (provided both by management and also by an independent third
party) of the Funds' advisory fees and total expense levels to those of their
peer groups and information about the advisory fees charged by the Adviser to
comparable accounts. In considering the fees charged to comparable accounts,
the Trustees considered, among other things, management's representations about
the differences between managing mutual funds as compared to other types of
accounts, including the additional resources required to effectively manage
mutual fund assets. In evaluating each Fund's advisory fees, the Trustees also
took into account the demands, complexity and quality of the investment
management of such Fund. The Trustees considered that over the past several
years, for various Funds in the Natixis Fund Family, management had made
recommendations regarding reductions in advisory fee rates, implementation of
advisory fee breakpoints and the institution of advisory fee waivers and
expense caps. They noted that currently all of the Natixis Funds in this report
have expense caps in place, and they considered the amounts waived or
reimbursed by the Adviser under these caps. The Trustees noted that several
Funds had total expense ratios or advisory fee rates that were above the median
of a peer group of Funds. The Trustees considered the circumstances that
accounted for such relatively higher expenses. The Trustees also noted that
management was proposing reductions to the expense caps for Loomis Sayles Core
Plus Bond Fund and Loomis Sayles Limited Term Government and Agency Fund,
effective July 1, 2007.
The Trustees also considered the compensation directly or indirectly received
by the Adviser and its affiliates from their relationships with the Funds. The
Trustees reviewed information provided by management as to the profitability of
the Adviser's and its affiliates relationships with the Funds, and information
about the allocation of expenses used to calculate profitability. They also
reviewed information provided by management about the effect of distribution
costs and Fund growth on Adviser profitability, including information regarding
resources spent on distribution activities and the increase in net sales for
the family of funds. When reviewing profitability, the Trustees also considered
information about court cases in which adviser profitability was an issue, the
performance of the relevant Funds, the expense levels of the Funds, and whether
the Adviser had implemented breakpoints and/or expense caps with respect to
such Funds.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
advisory fees charged to each of the Funds were fair and reasonable, and that
the costs of these services gen-
18
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENTS (continued)
erally and the related profitability of the Adviser and its affiliates in
respect of their relationships with the Funds supported the renewal of the
Agreements.
Economies of Scale. The Trustees considered the existence of any economies of
scale in the provision of services by the Adviser and whether those economies
are shared with the Funds through breakpoints in their investment advisory fees
or other means, such as expense waivers. The Trustees noted that four of the
Natixis Funds in this report had breakpoints in their advisory fees and that of
the remaining Funds, all were subject to expense caps. The Trustees also
considered management's representation that for certain Funds the Funds'
Adviser did not benefit from economies of scale in providing services to the
Funds (because of the investment style of the Fund, the small size of the Fund
or for other reasons) or were capacity constrained with respect to the relevant
investment strategy. For Loomis Sayles Strategic Income Fund, the Trustees
received a report and presentation from management on the effect of recent
growth in net assets of the Fund and the benefits of economies of scale
realized and expected to be realized by the Fund (including decreases in the
Fund's expense ratio resulting from increases in assets). The Trustees
determined to approve the continuation of the Agreement for the Fund for five
months rather than a full year to allow further review of the growth of the
Fund's net assets and the effects of such growth on the Fund and the Adviser.
In considering these issues, the Trustees also took note of the costs of the
services provided (both on an absolute and a relative basis) and the
profitability to the Adviser and its affiliates of their relationships with the
Funds, as discussed above.
After reviewing these and related factors, the Trustees considered, within the
context of their overall conclusions regarding each of the Agreements, that the
extent to which economies of scale were shared with the Funds supported the
renewal of the Agreements.
The Trustees also considered other factors, which included but were not limited
to the following:
.. whether each Fund has operated in accordance with its investment objective
and the Fund's record of compliance with its investment restrictions, and
the compliance programs of the Funds and the Adviser. They also considered
the compliance-related resources the Adviser and its affiliates were
providing to the Funds.
.. the nature, quality, cost and extent of administrative and shareholder
services performed by the Adviser and its affiliates, both under the
Agreements and under separate agreements covering administrative services.
.. so-called "fallout benefits" to the Adviser, such as the engagement of
affiliates of the Adviser to provide distribution, administrative and
brokerage services to the Funds, and the benefits of research made available
to the Adviser by reason of brokerage commissions generated by the Funds'
securities transactions. The Trustees considered the possible conflicts of
interest associated with these fallout and other benefits, and the
reporting, disclosure and other processes in place to disclose and monitor
such possible conflicts of interest.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees,
concluded that the existing Agreement for Loomis Sayles Strategic Income Fund
should be continued through November 30, 2007* and the existing Agreements for
each of the other Funds should be continued through June 30, 2008.
* Subsequent to September 30, 2007, the Board of Trustees approved the
continuation of the existing Agreement for the Loomis Sayles Strategic
Income Fund through June 30, 2008.
19
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------------------
Bonds and Notes -- 97.3% of Net Assets
Asset-Backed Securities -- 3.2%
$ 994,446 AmeriCredit Automobile Receivables Trust, Series 2005-CF,
Class A-3,
4.470%, 5/06/2010 $ 991,257
286,492 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A2,
3.872%, 3/25/2020 274,530
1,095,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3,
4.615%, 2/25/2035 1,013,526
2,190,000 Countrywide Asset-Backed Certificates, Series 2006-S4, Class A3,
5.804%, 7/25/2034(c) 2,160,865
904,544 Ford Credit Auto Owner Trust, Series 2004-A, Class A4,
3.540%, 11/15/2008 902,182
1,186,342 Residential Asset Securities Corp., Series 2003-KS10, Class AI4,
4.470%, 3/25/2032 1,160,899
57,091 WFS Financial Owner Trust, Series 2004-4, Class A3,
2.980%, 9/17/2009 57,007
515,000 WFS Financial Owner Trust, Series 2004-4, Class A4,
3.440%, 5/17/2012 508,372
---------------
7,068,638
---------------
Automotive -- 1.1%
1,645,000 Ford Motor Co.,
7.450%, 7/16/2031(b) 1,291,325
1,120,000 Ford Motor Credit Co. LLC,
8.000%, 12/15/2016 1,047,766
---------------
2,339,091
---------------
Banking -- 0.5%
70,000,000 Rabobank Nederland, Series EMTN, 144A,
13.500%, 1/28/2008 (ISK) 1,128,633
---------------
Brokerage -- 0.4%
925,000 Goldman Sachs Group, Inc.,
5.300%, 2/14/2012 919,375
---------------
Building Materials -- 1.0%
1,125,000 Owens Corning, Inc.,
7.000%, 12/01/2036 1,094,901
1,120,000 USG Corp.,
6.300%, 11/15/2016 1,016,460
---------------
2,111,361
---------------
Diversified Financial Services -- 2.1%
4,560,000 General Electric Cap Corp., Series A (MTN),
5.625%, 9/15/2017 4,558,750
---------------
Diversified Manufacturing -- 0.7%
1,650,000 Crane Co.,
6.550%, 11/15/2036 1,620,394
---------------
Electric -- 2.3%
1,455,000 Duke Energy Corp., Senior Note,
4.200%, 10/01/2008 1,440,241
1,325,000 Enersis SA, Chile,
7.375%, 1/15/2014(b) 1,406,311
1,325,000 Ipalco Enterprises, Inc., Senior Secured Note,
8.375%, 11/14/2008 1,351,500
790,000 Southern California Edison Co.,
7.625%, 1/15/2010 830,168
---------------
5,028,220
---------------
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------------
Financial Services -- 1.0%
$ 1,050,000 HSBC Finance Corp.,
7.000%, 5/15/2012 $ 1,103,945
1,185,000 Morgan Stanley,
4.000%, 1/15/2010 1,157,714
---------------
2,261,659
---------------
Government Guaranteed -- 2.2%
138,000,000 Kreditanstalt fuer Wiederaufbau,
1.850%, 9/20/2010 (JPY) 1,227,122
275,000,000 Kreditanstalt fuer Wiederaufbau, Series EMTN,
2.050%, 9/21/2009 (JPY) 2,439,904
1,325,000 Kreditanstalt fuer Wiederaufbau,
4.000%, 2/15/2012 (CHF) 1,188,256
---------------
4,855,282
---------------
Government Owned -- No Guarantee -- 1.0%
2,145,000 Pemex Project Funding Master Trust,
7.875%, 2/01/2009 2,214,955
---------------
Healthcare -- 1.0%
575,000 HCA, Inc.,
7.500%, 12/15/2023 469,170
485,000 Hospira, Inc.,
6.050%, 3/30/2017 477,110
1,250,000 Medco Health Solutions,
7.250%, 8/15/2013 1,317,107
---------------
2,263,387
---------------
Hybrid ARM -- 0.5%
1,005,173 JPMorgan Mortgage Trust, Series 2006-A7, Class 1A3,
5.921%, 1/25/2037(c) 1,007,032
---------------
Independent Energy -- 0.3%
65,000 Anadarko Petroleum Corp.,
6.450%, 9/15/2036 63,992
290,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017 282,025
385,000 Chesapeake Energy Corp.,
6.875%, 11/15/2020 376,819
---------------
722,836
---------------
Industrial Other -- 0.4%
785,000 Equifax, Inc.,
7.000%, 7/01/2037 786,327
---------------
Media Cable -- 2.5%
2,145,000 Comcast Corp.,
6.950%, 8/15/2037 2,251,413
1,060,000 Cox Communications, Inc.,
6.750%, 3/15/2011 1,106,468
1,085,000 CSC Holdings, Inc., Senior Note, Series B,
7.625%, 4/01/2011 1,087,713
1,228,000 Time Warner Cable, Inc., 144A,
6.550%, 5/01/2037 1,204,645
---------------
5,650,239
---------------
Metals & Mining -- 0.4%
1,005,000 United States Steel Corp.,
6.650%, 6/01/2037 927,168
---------------
Mortgage Backed Securities -- 6.7%
795,000 Banc of America Commercial Mortgage, Inc., Series 2005-6,
Class A2,
5.165%, 9/10/2047(c) 797,110
See accompanying notes to financial statements.
20
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------------------------
Mortgage Backed Securities -- continued
$ 850,000 Banc of America Commercial Mortgage, Inc., Series 2006-1,
Class A2,
5.334%, 9/10/2045(c) $ 854,568
1,305,000 Banc of America Commercial Mortgage, Inc., Series 2007-2,
Class A2,
5.634%, 4/10/2049 1,319,601
1,245,000 Bear Stearns Commercial Mortgage Securities, Inc.,
Series 2005-PW10, Class A2,
5.270%, 12/11/2040 1,251,981
2,150,000 Bear Stearns Commercial Mortgage Securities, Inc.,
Series 2006-PW12, Class A4,
5.711%, 9/11/2038(c) 2,189,708
710,000 Citigroup/Deutsche Bank Commercial Mortgage Trust,
Series 2006-CD2, Class A2,
5.408%, 1/15/2046 714,898
2,160,000 Commercial Mortgage Pass Through Certificates, Series 2006-C7,
Class A4,
5.768%, 6/10/2046(c) 2,206,290
1,500,000 GS Mortgage Securities Corp. II, Series 2005-GG4, Class A4A,
4.751%, 7/10/2039 1,431,550
1,710,000 LB-UBS Commercial Mortgage Trust, Series 2005-C3, Class A3,
4.647%, 7/15/2030 1,678,026
2,400,000 Morgan Stanley Capital I, Series 2005-T19, Class A4A,
4.890%, 6/12/2047 2,310,503
---------------
14,754,235
---------------
Mortgage Related -- 37.7%
2,074,989 FHLMC,
4.000%, 7/01/2019 1,955,854
5,938,218 FHLMC,
4.500%, with various maturities from 2018 to 2034(d) 5,648,173
11,457,680 FHLMC,
5.000%, with various maturities from 2018 to 2037(d) 11,006,747
8,562,869 FHLMC,
5.500%, with various maturities from 2018 to 2037(d) 8,414,572
1,978,543 FHLMC,
5.952%, 11/01/2036(c) 1,992,900
205,805 FHLMC,
6.000%, 6/01/2035 206,781
140,000,000 FNMA,
1.750%, 3/26/2008 (JPY) 1,223,299
825,101 FNMA,
4.000%, 6/01/2019 777,499
5,685,119 FNMA,
4.500%, with various maturities from 2019 to 2035(d) 5,401,928
12,506,784 FNMA,
5.000%, with various maturities from 2035 to 2037(d) 11,938,629
19,172,114 FNMA,
5.500%, with various maturities from 2018 to 2037(d) 18,813,340
4,961,193 FNMA,
6.000%, with various maturities from 2016 to 2036(d) 4,984,439
1,503,701 FNMA,
6.052%, 2/01/2037(c) 1,518,510
4,085,516 FNMA,
6.500%, with various maturities from 2029 to 2036(d) 4,164,528
253,152 FNMA,
7.000%, 10/01/2030(d) 263,803
266,317 FNMA,
7.500%, with various maturities from 2024 to 2032(d) 278,787
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------------
Mortgage Related -- continued
$ 1,063,994 GNMA,
5.500%, 2/20/2034 $ 1,046,630
384,674 GNMA,
6.000%, 1/15/2029 388,465
782,582 GNMA,
6.500%, with various maturities from 2028 to 2032(d) 802,158
450,199 GNMA,
7.000%, with various maturities from 2025 to 2029(d) 472,220
141,171 GNMA,
7.500%, with various maturities from 2025 to 2030(d) 148,318
89,372 GNMA,
8.000%, 11/15/2029 95,038
127,969 GNMA,
8.500%, with various maturities from 2017 to 2023(d) 137,907
22,651 GNMA,
9.000%, with various maturities in 2016(d) 24,286
48,405 GNMA,
11.500%, with various maturities from 2013 to 2015(d) 54,812
1,800,000 Greenwich Capital Commercial Funding Corp., Series 2005-GG5,
Class A2,
5.117%, 4/10/2037 1,803,118
---------------
83,562,741
---------------
Non Captive Consumer -- 0.5%
245,000 SLM Corp., (MTN),
5.050%, 11/14/2014 207,777
420,000 SLM Corp., (MTN),
5.625%, 8/01/2033(b) 323,307
215,000 SLM Corp., Series A, (MTN),
5.000%, 10/01/2013 187,737
280,000 SLM Corp., Series A, (MTN),
5.000%, 4/15/2015 234,840
35,000 SLM Corp., Series A, (MTN),
5.375%, 5/15/2014 30,544
120,000 SLM Corp.,Series A, (MTN),
5.000%, 6/15/2018 95,318
---------------
1,079,523
---------------
Non-Captive Diversified -- 1.1%
1,195,000 GMAC LLC,
6.625%, 5/15/2012 1,115,061
1,320,000 GMAC LLC,
8.000%, 11/01/2031(b) 1,295,028
---------------
2,410,089
---------------
Non-Captive Finance -- 2.8%
431,000,000 General Electric Capital Corp., Series EMTN,
0.550%, 10/14/2008 (JPY) 3,732,006
1,665,000 General Electric Capital Corp.,
1.750%, 2/12/2010 (CHF) 1,379,132
1,315,000 General Electric Capital Corp., Series EMTN,
2.500%, 12/23/2010 (CHF) 1,096,204
---------------
6,207,342
---------------
Oil Field Services -- 0.5%
1,075,000 Weatherford International, Ltd.,
6.500%, 8/01/2036 1,058,366
---------------
Paper -- 1.0%
565,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 525,450
See accompanying notes to financial statements.
21
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------
Paper -- continued
$ 755,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 $ 717,250
735,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 716,625
365,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 365,912
---------------
2,325,237
---------------
Pharmaceuticals -- 1.2%
2,750,000 Valeant Pharmaceuticals International, Senior Note,
7.000%, 12/15/2011 2,695,000
---------------
Property & Casualty Insurance -- 0.2%
475,000 Willis North America, Inc.,
6.200%, 3/28/2017 471,306
---------------
Real Estate Investment Trusts -- 1.8%
195,000 Colonial Realty, LP, Senior Note,
4.750%, 2/01/2010 192,180
1,350,000 Colonial Realty, LP, Senior Note,
5.500%, 10/01/2015 1,268,385
1,250,000 iStar Financial, Inc., Senior Note,
6.000%, 12/15/2010 1,215,201
1,340,000 Simon Property Group, LP,
6.375%, 11/15/2007 1,340,563
---------------
4,016,329
---------------
Retailers -- 0.1%
305,000 J.C. Penney Corp., Inc.,
5.750%, 2/15/2018 292,792
---------------
Sovereigns -- 1.2%
296,000,000 Canadian Government,
1.900%, 3/23/2009 (JPY) 2,609,482
---------------
Technology -- 3.0%
1,040,000 Corning, Inc.,
7.250%, 8/15/2036 1,090,565
1,660,000 Freescale Semiconductor, Inc.,
10.125%, 12/15/2016(b) 1,543,800
295,000 Nortel Networks Corp.,
6.875%, 9/01/2023(b) 238,950
920,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 777,400
2,075,000 Pitney Bowes, Inc.,
5.250%, 1/15/2037 1,990,744
978,000 Xerox Corp.,
6.400%, 3/15/2016 990,097
---------------
6,631,556
---------------
Tobacco -- 0.8%
1,740,000 Reynolds American, Inc.,
7.250%, 6/15/2037 1,818,952
---------------
Treasuries -- 11.5%
15,636,599 U.S. Treasury Bond,
2.375%, 1/15/2025(b)(e) 15,774,639
4,701,000 U.S. Treasury Bond,
4.500%, 2/15/2036(b) 4,456,769
1,790,000 U.S. Treasury Bond,
4.750%, 2/15/2037(b) 1,765,248
1,090,000 U.S. Treasury Bond,
5.000%, 5/15/2037(b) 1,118,101
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------------
Treasuries -- continued
$ 715,000 U.S. Treasury Bond,
5.375%, 2/15/2031(b) $ 765,385
160,000 U.S. Treasury Note,
4.375%, 8/15/2012(b) 161,500
1,405,000 U.S. Treasury Note,
4.625%, 11/15/2016(b) 1,411,916
---------------
25,453,558
---------------
Wireless -- 2.3%
1,925,000 SK Telecom Co., Ltd., 144A,
6.625%, 7/20/2027 1,951,769
730,000 Sprint Capital Corp.,
6.125%, 11/15/2008 735,372
1,110,000 Sprint Capital Corp.,
6.875%, 11/15/2028 1,071,259
1,420,000 True Move Co., Ltd., 144A,
10.750%, 12/16/2013 1,433,632
---------------
5,192,032
---------------
Wirelines -- 4.3%
1,380,000 Citizens Communications Co.,
7.875%, 1/15/2027 1,345,500
2,760,000 Embarq Corp.,
7.995%, 6/01/2036 2,940,761
210,000 Qwest Capital Funding, Inc., Guaranteed Note,
6.500%, 11/15/2018 185,325
1,240,000 Qwest Corp.,
7.200%, 11/10/2026 1,193,500
850,000 Qwest Corp.,
7.250%, 9/15/2025 835,125
255,000 Qwest Corp.,
7.250%, 10/15/2035 245,438
1,675,000 Qwest Corp.,
7.500%, 6/15/2023 1,649,875
1,055,000 Telefonica Emisones SAU,
6.421%, 6/20/2016 1,082,592
---------------
9,478,116
---------------
Total Bonds and Notes (Identified Cost $216,738,844) 215,520,003
---------------
Shares/
Principal
Amount (++)
- ------------------------------------------------------------------------------------------
Short-Term Investments -- 16.5%
31,895,894 State Street Securities Lending Quality Trust(f) 31,895,894
$ 4,778,565 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/07 at 3.750% to be repurchased at
$4,780,058 on 10/1/07, collateralized by $4,765,000 Federal
National Mortgage Association, 6.06% due 6/06/17 valued at
$4,878,169, including accrued interest (Note 2f) 4,778,565
---------------
Total Short-Term Investments (Identified Cost $36,674,459) 36,674,459
---------------
Total Investments -- 113.8%
(Identified Cost $253,413,303)(a) 252,194,462
Other assets less liabilities -- (13.8)% (30,675,896)
---------------
Net Assets -- 100% $ 221,518,566
===============
See accompanying notes to financial statements.
22
LOOMIS SAYLES CORE PLUS BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
(++) Principal amount is in U.S. dollars unless otherwise noted.
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized depreciation on investments based
on a cost of $253,878,746 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 $ 2,102,654
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (3,786,938)
-----------
Net unrealized depreciation $(1,684,284)
===========
(b) All or a portion of this security was on loan to brokers at September 30, 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). The coupon rate
shown represents the rate at period end.
(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) Treasury Inflation Protected Security (TIPS).
(f) 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 $5,718,679 or 2.6% of
net assets.
ARM Adjustable Rate Mortgage
EMTN Euro Medium Term Note
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
GNMA Government National Mortgage Association
MTN Medium Term Note
CHF Swiss Franc
ISK Iceland Krona
JPY Japanese Yen
Holdings at September 30, 2007 as a Percentage of Net Assets (unaudited)
Mortgage Related 37.7%
Treasuries 11.5
Mortgage Backed Securities 6.7
Wirelines 4.3
Asset-Backed Securities 3.2
Technology 3.0
Non-Captive Finance 2.8
Media Cable 2.5
Electric 2.3
Wireless 2.3
Government Guaranteed 2.2
Diversified Financial Services 2.1
Other, less than 2% each 16.7
See accompanying notes to financial statements.
23
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------
Bonds and Notes -- 90.5% of Net Assets
Airlines -- 0.2%
$ 70,525 Continental Airlines, Inc., Series 1997-4, Class 4B,
6.900%, 1/02/2017 $ 66,954
36,768 Continental Airlines, Inc., Series 1999-1, Class C,
6.954%, 8/02/2009 35,941
---------------
102,895
---------------
Automotive -- 3.5%
420,000 Ford Motor Co.,
6.375%, 2/01/2029 308,700
65,000 Ford Motor Co.,
6.625%, 2/15/2028 48,425
1,220,000 Ford Motor Co.,
6.625%, 10/01/2028 908,900
210,000 Ford Motor Co.,
7.450%, 7/16/2031(b) 164,850
40,000 Ford Motor Co.,
7.500%, 8/01/2026 30,100
10,000 General Motors Corp.,
8.375%, 7/15/2033(b) 8,763
---------------
1,469,738
---------------
Banking -- 3.3%
250,000,000 Barclays Financial LLC, 144A,
4.060%, 9/16/2010 (KRW) 269,531
400,000,000 Barclays Financial LLC, 144A,
4.470%, 12/04/2011 (KRW) 432,824
500,000 HSBC Bank USA, 144A,
3.310%, 8/25/2010 553,350
1,436,358,000 JPMorgan Chase & Co., 144A,
Zero Coupon, 3/28/2011 (IDR) 118,034
---------------
1,373,739
---------------
Chemicals -- 3.4%
450,000 Borden, Inc.,
7.875%, 2/15/2023 362,250
550,000 Borden, Inc.,
9.200%, 3/15/2021 467,500
130,000 Georgia Gulf Corp.,
10.750%, 10/15/2016(b) 113,100
380,000 Hercules, Inc., Subordinated Note,
6.500%, 6/30/2029 307,800
155,000 Mosaic Co., (The), 144A,
7.625%, 12/01/2016 165,269
---------------
1,415,919
---------------
Construction Machinery -- 0.3%
120,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note,
7.750%, 12/15/2013(b) 115,200
---------------
Electric -- 3.5%
375,000 Dynegy Holdings, Inc.,
7.125%, 5/15/2018 342,188
180,000 Dynegy Holdings, Inc.,
7.625%, 10/15/2026 162,000
165,000 Dynegy Holdings, Inc., 144A,
7.750%, 6/01/2019 157,781
140,000 NGC Corp. Capital Trust I, Series B,
8.316%, 6/01/2027 129,500
515,000 TXU Corp., Series Q,
6.500%, 11/15/2024 412,772
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------------
Electric -- continued
$ 365,000 TXU Corp., Series R,
6.550%, 11/15/2034 $ 286,256
---------------
1,490,497
---------------
Food & Beverage -- 0.4%
200,000 Aramark Services, Inc.,
5.000%, 6/01/2012 176,500
---------------
Gaming -- 0.1%
45,000 Harrah's Operating Co., Inc.,
5.750%, 10/01/2017 34,425
---------------
Government Guaranteed -- 2.5%
28,000,000 Kreditanstalt fuer Wiederaufbau,
1.850%, 9/20/2010 (JPY) 248,981
1,205,000 Kreditanstalt fuer Wiederaufbau, Series E, (MTN),
8.500%, 7/16/2010 (ZAR) 168,517
70,000,000 Oesterreichische Kontrollbank AG,
1.800%, 3/22/2010 (JPY) 620,260
---------------
1,037,758
---------------
Government Sponsored -- 1.4%
70,000,000 Federal National Mortgage Association,
1.750%, 3/26/2008 (JPY) 611,649
---------------
Healthcare -- 4.1%
5,000 Boston Scientific Corp.,
5.450%, 6/15/2014 4,488
105,000 Boston Scientific Corp.,
6.400%, 6/15/2016 95,812
95,000 Boston Scientific Corp.,
7.000%, 11/15/2035 82,412
220,000 Community Health Systems, Inc., 144A,
8.875%, 7/15/2015 226,050
25,000 HCA, Inc.,
6.375%, 1/15/2015 21,313
205,000 HCA, Inc.,
6.500%, 2/15/2016(b) 174,250
15,000 HCA, Inc.,
7.050%, 12/01/2027 11,360
170,000 HCA, Inc.,
7.500%, 12/15/2023 138,711
700,000 HCA, Inc.,
7.500%, 11/06/2033 563,500
315,000 HCA, Inc.,
7.580%, 9/15/2025 256,700
35,000 HCA, Inc.,
7.690%, 6/15/2025 28,747
40,000 HCA, Inc.,
7.750%, 7/15/2036 32,036
40,000 HCA, Inc.,
8.360%, 4/15/2024 34,779
40,000 Invitrogen Corp.,
1.500%, 2/15/2024 39,150
---------------
1,709,308
---------------
Home Construction -- 4.4%
410,000 Desarrolladora Homex SAB de CV,
7.500%, 9/28/2015 407,950
385,000 K. Hovnanian Enterprises, Inc.,
6.250%, 1/15/2015 292,600
365,000 K. Hovnanian Enterprises, Inc., Senior Note,
6.250%, 1/15/2016 281,050
See accompanying notes to financial statements.
24
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
Home Construction -- continued
$ 30,000 K. Hovnanian Enterprises, Inc., Guaranteed Note,
6.500%, 1/15/2014 $ 23,325
100,000 KB Home, Guaranteed Note,
5.875%, 1/15/2015 85,000
590,000 KB Home, Guaranteed Note,
7.250%, 6/15/2018 513,300
155,000 Pulte Homes, Inc.,
6.000%, 2/15/2035 112,982
180,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 136,786
---------------
1,852,993
---------------
Independent Energy -- 2.7%
625,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017 607,812
175,000 Chesapeake Energy Corp.,
6.875%, 11/15/2020 171,281
10,000 Hilcorp Energy I LP, 144A,
7.750%, 11/01/2015 9,775
65,000 Pioneer Natural Resources Co.,
6.875%, 5/01/2018 61,033
310,000 Pioneer Natural Resources Co.,
7.200%, 1/15/2028 277,087
---------------
1,126,988
---------------
Industrial Other -- 0.3%
140,000 Ranhill Labuan Ltd., 144A,
12.500%, 10/26/2011(b) 138,499
---------------
Media Non-Cable -- 1.1%
175,000 Intelsat Corp.,
6.875%, 1/15/2028 152,250
455,000 Tribune Co.,
5.250%, 8/15/2015(b) 317,107
---------------
469,357
---------------
Metals & Mining -- 2.0%
740,000 Algoma Acquistion Corp., 144A,
9.875%, 6/15/2015 658,600
195,000 Vale Overseas, Ltd.,
6.875%, 11/21/2036 200,902
---------------
859,502
---------------
Non Captive Consumer -- 1.4%
60,000 SLM Corp., (MTN),
5.050%, 11/14/2014 50,884
5,000 SLM Corp., (MTN),
5.625%, 8/01/2033 3,849
20,000 SLM Corp., Series A, (MTN),
5.000%, 10/01/2013 17,464
10,000 SLM Corp., Series A, (MTN),
5.000%, 6/15/2018 7,943
735,000 SLM Corp., Series A, (MTN),
6.500%, 6/15/2010 (NZD) 502,100
---------------
582,240
---------------
Non-Captive Diversified -- 3.5%
1,300,000 General Electric Capital Corp., Series A, (MTN),
2.960%, 5/18/2012 (SGD) 869,590
330,000 GMAC LLC,
6.625%, 5/15/2012 307,925
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------------
Non-Captive Diversified -- continued
$ 330,000 GMAC LLC, (MTN),
6.750%, 12/01/2014 $ 299,104
20,000 GMAC LLC,
8.000%, 11/01/2031 19,622
---------------
1,496,241
---------------
Packaging -- 0.3%
135,000 Owens-Illinois, Inc., Senior Note,
7.800%, 5/15/2018 132,975
---------------
Paper -- 4.7%
195,000 Abitibi-Consolidated, Inc.,
7.500%, 4/01/2028(b) 129,675
250,000 Abitibi-Consolidated, Inc.,
8.500%, 8/01/2029 170,938
685,000 Bowater, Inc.,
6.500%, 6/15/2013 500,050
75,000 Georgia-Pacific Corp.,
7.250%, 6/01/2028 68,625
155,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 144,150
370,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 351,500
170,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 165,750
430,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 431,075
---------------
1,961,763
---------------
Pharmaceuticals -- 5.3%
110,000 Elan Finance PLC,
8.875%, 12/01/2013 108,075
500,000 Elan Finance PLC, Senior Note,
7.750%, 11/15/2011 490,000
127,000 EPIX Pharmaceuticals, Inc., Senior Note,
3.000%, 6/15/2024 98,425
210,000 Human Genome Sciences, Inc.,
2.250%, 8/15/2012 180,600
265,000 Incyte Corp., Convertible
3.500%, 2/15/2011 242,475
69,000 Inhale Therapeutic Systems, Inc., Subordinated Note, Convertible,
3.500%, 10/17/2007 68,137
96,000 Nektar Therapeutics,
3.250%, 9/28/2012 82,320
345,000 Regeneron Pharmaceuticals, Inc., Subordinated Note, Convertible
5.500%, 10/17/2008 351,900
190,000 Valeant Pharmaceuticals International, Subordinated Note,
Convertible
3.000%, 8/16/2010 172,425
505,000 Valeant Pharmaceuticals International, Subordinated Note,
Convertible,
4.000%, 11/15/2013 456,394
---------------
2,250,751
---------------
Pipelines -- 2.1%
415,000 El Paso Corp.,
6.950%, 6/01/2028 385,504
575,000 Kinder Morgan Finance Co. ULC, Guaranteed Note,
6.400%, 1/05/2036 490,011
---------------
875,515
---------------
See accompanying notes to financial statements.
25
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------------
Retailers -- 2.9%
$ 250,000 Dillard's, Inc.,
6.625%, 1/15/2018(b) $ 224,042
105,000 Dillard's, Inc.,
7.130%, 8/01/2018 96,731
30,000 Macys Retail Holdings, Inc.,
6.790%, 7/15/2027 27,472
1,070,000 Toys R Us, Inc.,
7.375%, 10/15/2018 858,675
20,000 Toys R Us, Inc.,
7.875%, 4/15/2013 17,400
---------------
1,224,320
---------------
Sovereigns -- 5.2%
44,200(++) Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023 (MXN) 405,856
148,500(++) Mexican Fixed Rate Bonds, Series M-10,
9.000%, 12/20/2012 (MXN) 1,428,193
1,050,000 Republic of South Africa,
13.000%, 8/31/2010 (ZAR) 167,864
3,911,323 Republic of Uruguay,
4.250%, 4/05/2027 (UYU) 178,420
---------------
2,180,333
---------------
Supermarkets -- 3.1%
190,000 Albertson's, Inc.,
7.750%, 6/15/2026 188,892
750,000 Albertson's, Inc., Senior Note,
7.450%, 8/01/2029 721,953
130,000 Albertson's, Inc., Senior Note,
8.000%, 5/01/2031 131,954
25,000 Albertson's, Inc., Senior Note,
8.700%, 5/01/2030 26,983
245,000 Albertson's, Inc., Series C, (MTN),
6.625%, 6/01/2028 217,298
---------------
1,287,080
---------------
Supranational -- 2.5%
1,900,000 Inter-American Development Bank, Series E, (MTN),
Zero Coupon, 5/11/2009 (BRL) 845,826
13,400,000 Inter-American Development Bank, Series INTL
13.000%, 6/20/2008 (ISK) 215,183
---------------
1,061,009
---------------
Technology -- 5.7%
325,000 Freescale Semiconductor, Inc.,
10.125%, 12/15/2016(b) 302,250
345,000 JDS Uniphase Corp., Convertible,
Zero Coupon, 11/15/2010 324,300
215,000 Kulicke & Soffa Industries, Inc., Convertible,
0.500%, 11/30/2008 199,950
35,000 Kulicke & Soffa Industries, Inc., Convertible,
1.000%, 6/30/2010 31,281
910,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 755,300
266,000 Maxtor Corp., Subordinated Note,
5.750%, 3/01/2012(d) 250,040
500,000 Nortel Networks Corp.,
6.875%, 9/01/2023 405,000
40,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 33,800
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------
Technology -- continued
$ 85,000 Unisys Corp., Senior Note,
8.000%, 10/15/2012 $ 80,538
---------------
2,382,459
---------------
Transportation Services -- 2.8%
275,000 APL Ltd., Senior Note,
8.000%, 1/15/2024(d) 231,000
300,000 Overseas Shipholding Group, Senior Note,
7.500%, 2/15/2024 291,000
295,000 Stena AB, Senior Note,
7.000%, 12/01/2016 293,525
350,000 Stena AB, Senior Note,
7.500%, 11/01/2013 351,750
---------------
1,167,275
---------------
Treasuries -- 7.6%
3,390,000 U.S. Treasury Bond,
4.500%, 2/15/2036(b) 3,213,879
---------------
Wireless -- 0.5%
160,000 ALLTEL Corp.,
7.875%, 7/01/2032 129,638
98,000 Sprint Capital Corp.,
6.875%, 11/15/2028 94,580
---------------
224,218
---------------
Wirelines -- 9.7%
255,000 Bell Canada, Series M-17,
6.100%, 3/16/2035 (CAD) 210,568
5,000 Bell Canada, 144A,
6.550%, 5/01/2029 (CAD) 4,353
65,000 Cincinnati Bell Telephone Co.,
6.300%, 12/01/2028(b) 56,875
50,000 Cincinnati Bell, Inc.,
8.375%, 1/15/2014 49,875
95,000 Citizens Communications Co.,
7.000%, 11/01/2025(b) 76,238
410,000 Embarq Corp.,
7.995%, 6/01/2036 436,852
435,000 Level 3 Communications, Inc., Convertible,
2.875%, 7/15/2010 417,600
350,000 Level 3 Communications, Inc., Convertible,
6.000%, 9/15/2009 332,937
320,000 Level 3 Communications, Inc., Convertible,
6.000%, 3/15/2010 296,800
145,000 Level 3 Financing, Inc.,
8.750%, 2/15/2017 139,925
375,000 Qwest Capital Funding, Inc., Guaranteed Note,
6.875%, 7/15/2028 321,563
1,890,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 1,724,625
---------------
4,068,211
---------------
Total Bonds and Notes (Identified Cost $37,488,143) 38,093,236
---------------
Shares
- ---------------------------------------------------------------------------------
Common Stocks -- 2.5%
Chemicals -- 0.6%
11,695 Hercules, Inc.(b) 245,829
---------------
Home Construction -- 0.1%
1,775 KB Home(b) 44,482
---------------
See accompanying notes to financial statements.
26
LOOMIS SAYLES HIGH INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Shares Description Value (+)
- ---------------------------------------------------------------------------------------------
Pharmaceuticals -- 1.8%
6,875 Merck & Co., Inc. $ 355,369
1,717 Teva Pharmaceutical Industries, Ltd., ADR 76,355
8,147 Vertex Pharmaceuticals, Inc.(b)(e) 312,926
---------------
744,650
---------------
Total Common Stocks (Identified Cost $708,494) 1,034,961
---------------
Shares
- ---------------------------------------------------------------------------------------------
Preferred Stocks -- 3.8%
Electric -- 1.7%
6,475 AES Trust III, Convertible,
6.750%(b) 315,592
8,000 CMS Energy Trust I, Convertible,
7.750% 399,000
---------------
714,592
---------------
Packaging -- 0.7%
6,500 Owens-Illinois, Inc., Convertible,
4.750% 292,500
---------------
Pipelines -- 0.9%
9,500 El Paso Energy Capital Trust I, Convertible,
4.750%(b) 391,305
---------------
Technology -- 0.5%
225 Lucent Technologies Capital Trust I, Convertible,
7.750% 218,250
---------------
Total Preferred Stocks (Identified Cost $1,411,773) 1,616,647
---------------
Shares
- ---------------------------------------------------------------------------------------------
Closed-End Investment Companies -- 0.1%
3,835 Morgan Stanley Emerging Markets Debt Fund, Inc. 36,931
2,175 Western Asset High Income Opportunity Fund, Inc. 14,072
---------------
Total Closed-End Investment Companies
(Identified Cost $45,443) 51,003
---------------
Shares/
Principal
Amount (++)
- ---------------------------------------------------------------------------------------------
Short-Term Investments -- 15.1%
5,572,870 State Street Securities Lending Quality Trust(c) 5,572,870
$ 764,921 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/2007 at 3.750% to be repurchased at
$765,160 on 10/01/2007, collateralized by $765,000 Federal
National Mortgage Association, 6.060% due 06/06/2017 valued
at $783,169, including accrued interest (Note 2f) 764,921
---------------
Total Short-Term Investments (Identified Cost $6,337,791) 6,337,791
---------------
Total Investments -- 112.0%
(Identified Cost $45,991,644)(a) 47,133,638
Other assets less liabilities -- (12.0)% (5,054,758)
---------------
Net Assets -- 100% $ 42,078,880
===============
(++) Principal amount is 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:
At September 30, 2007, the net unrealized appreciation on investments based
on a cost of $46,011,060 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 $ 2,542,170
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (1,419,592)
-----------
Net unrealized appreciation $ 1,122,578
===========
(b) All or a portion of this security was on loan to brokers at September 30, 2007.
(c) Represents investment of securities lending collateral.
(d) Illiquid security. At September 30, 2007, the value of these securities amounted to $481,040 or
1.1% of net assets.
(e) Non-income producing security.
ADR An American Depositary Receipt is a certificate issued by a custodian bank representing the right
to receive securities of the foreign issuer described. The values of ADRs are significantly
influenced by trading 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 $2,734,066 or 6.5% of net
assets.
BRL Brazilian Real
CAD Canadian Dollar
IDR Indonesian Rupiah
ISK Iceland Krona
JPY Japanese Yen
KRW South Korean Won
MXN Mexican Peso
NZD New Zealand Dollar
SGD Singapore Dollar
UYU Uruguayan Peso
ZAR South African Rand
Holdings at September 30, 2007 as a Percentage of Net Assets (unaudited)
Wirelines 9.7%
Treasuries 7.6
Pharmaceuticals 7.1
Technology 6.2
Electric 5.2
Sovereigns 5.2
Paper 4.7
Home Construction 4.5
Healthcare 4.1
Chemicals 4.0
Non-Captive Diversified 3.5
Automotive 3.5
Banking 3.3
Supermarkets 3.1
Pipelines 3.0
Retailers 2.9
Transportation Services 2.8
Independent Energy 2.7
Supranational 2.5
Government Guaranteed 2.5
Metals & Mining 2.0
Other, less than 2% each 6.8
See accompanying notes to financial statements.
27
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND
PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Principal
Amount Description Value (+)
- ----------------------------------------------------------------------------------------------
Bonds and Notes -- 82.8% of Net Assets
Agency -- 3.3%
$ 4,200,000 Federal Home Loan Bank,
3.625%, 11/14/2008(b) $ 4,158,084
---------------
Asset-Backed Securities -- 5.7%
905,000 Americredit Automobiles Receivables Trust, Series 2007-DF,
Class A2A,
5.660%, 1/06/2011 905,990
1,155,000 CNH Equipment Trust, Series 2007-B, Class A2A,
5.460%, 6/15/2010 1,155,000
1,035,000 Countrywide Asset-Backed Certificates, Series 2004-S1, Class A3,
4.615%, 2/25/2035 957,991
2,200,000 Countrywide Asset-Backed Certificates, Series 2006-S1, Class A2,
5.549%, 8/25/2021 2,183,066
375,935 Residential Funding Mortgage Securities II, Series 2004-HI3,
Class A4,
4.630%, 1/25/2020 371,223
660,000 Residential Funding Mortgage Securities II, Series 2005-HI3,
Class A4,
5.490%, 9/25/2035 637,770
853,476 Residential Funding Mortgage Securities II, Series 2002-HI5,
Class A7,
5.700%, 1/25/2028 847,491
---------------
7,058,531
---------------
Collateralized Mortgage Obligation -- 0.2%
198,785 Federal Home Loan Mortgage Corporation, Series 3145, Class KA,
5.000%, 8/15/2024 199,091
---------------
Hybrid ARMs -- 2.5%
1,292,365 JPMorgan Mortgage Trust, Series 2006-A7, Class 1A3,
5.921%, 1/25/2037(c) 1,294,755
1,893,440 Morgan Stanley Mortgage Loan Trust, Series 2005-3AR, Class 5A,
5.587%, 7/25/2035(c) 1,863,259
---------------
3,158,014
---------------
Mortgage Backed Securities -- 1.1%
1,400,000 Commercial Mortgage Pass Through Certificates, Series 2006-C7,
Class A4,
5.768%, 6/10/2046(c) 1,430,003
---------------
Mortgage Related -- 60.7%
815,459 FHLMC,
4.500%, 5/01/2034 757,723
6,950,462 FHLMC,
5.000%, with various maturities from 2019 to 2030(d)(e) 6,847,577
2,492,560 FHLMC,
5.500%, 12/01/2034 2,445,754
6,497,395 FHLMC,
6.000%, with various maturities from 2019 to 2021(d)(e) 6,579,542
10,575,926 FHLMC,
6.500%, with various maturities from 2014 to 2034(e) 10,826,549
244,319 FHLMC,
7.000%, 2/01/2016 253,256
41,406 FHLMC,
7.500%, with various maturities from 2012 to 2026(e) 42,814
21,412 FHLMC,
8.000%, with various maturities from 2010 to 2015(e) 22,485
6,352 FHLMC,
10.000%, 7/01/2019 7,123
250,006 FHLMC,
11.500%, with various maturities from 2014 to 2020(e) 274,258
Principal
Amount Description Value (+)
- ---------------------------------------------------------------------------------------------
Mortgage Related -- continued
$ 13,497,499 FNMA,
4.000%, with various maturities from 2018 to 2019(e) $ 12,741,521
2,765,769 FNMA,
4.500%, with various maturities from 2019 to 2035(e) 2,608,513
2,056,548 FNMA,
5.000%, 6/01/2035 1,964,907
4,507,650 FNMA,
5.500%, with various maturities from 2017 to 2036(e) 4,438,724
4,276,911 FNMA,
6.000%, with various maturities from 2017 to 2034(e) 4,324,383
3,430,167 FNMA,
6.052%, 2/01/2037(c) 3,463,949
6,988,640 FNMA,
6.500%, with various maturities from 2017 to 2036(e) 7,127,746
600,000 FNMA,
6.625%, 9/15/2009(b) 624,805
293,689 FNMA,
7.000%, 12/01/2022 308,198
567,628 FNMA,
7.500%, with various maturities from 2015 to 2032(e) 591,644
101,779 FNMA,
8.000%, with various maturities from 2015 to 2016(e) 106,867
7,000,000 FNMA (TBA),
6.000%, 10/15/2022(g) 7,091,875
135,956 GNMA,
6.000%, 12/15/2031 137,214
510,758 GNMA,
6.500%, 5/15/2031 523,563
438,753 GNMA,
7.000%, with various maturities from 2028 to 2029(e) 459,849
14,855 GNMA,
9.000%, with various maturities from 2008 to 2009(e) 15,086
4,393 GNMA,
9.500%, 8/15/2009 4,547
8,879 GNMA,
12.500%, with various maturities from 2014 to 2015(e) 10,100
110,971 GNMA,
16.000%, with various maturities from 2011 to 2012(e) 128,600
46,996 GNMA,
17.000%, with various maturities in 2011(e) 55,308
985,000 Greenwich Capital Commercial Funding Corp., Series 2005-GG5,
Class A2,
5.117%, 4/10/2037 986,706
---------------
75,771,186
---------------
Treasuries -- 9.3%
7,945,000 U.S. Treasury Note,
3.125%, 10/15/2008(b) 7,872,375
4,000,000 U.S. Treasury STRIPS,
Zero Coupon, 11/15/2009 3,681,748
---------------
11,554,123
---------------
Total Bonds and Notes (Identified Cost $104,281,373) 103,329,032
---------------
See accompanying notes to financial statements.
28
LOOMIS SAYLES LIMITED TERM GOVERNMENT AND AGENCY FUND
PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Shares/
Principal
Amount Description Value (+)
- -------------------------------------------------------------------------------------------------------
Short-Term Investments -- 30.8%
8,886,334 State Street Securities Lending Quality Trust(f) $ 8,886,334
$ 3,800,000 Federal Home Loan Bank Discount Note,
Zero Coupon, 10/11/2007 3,794,867
21,000,000 Federal National Mortgage Association, Discount Note,
Zero Coupon, 11/28/2007 20,847,750
4,942,338 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/2007 at 3.750% to be repurchased at
$4,943,883 on 10/01/2007, collateralized by $4,925,000
Federal National Mortgage Association, 6.060% due 6/06/2017
valued at $5,041,969 including accrued interest (Note 2f) 4,942,338
---------------
Total Short-Term Investments (Identified Cost $38,457,756) 38,471,289
---------------
Total Investments -- 113.6%
(Identified Cost $142,739,129)(a) 141,800,321
Other assets less liabilities -- (13.6)% (17,015,427)
---------------
Net Assets -- 100% $ 124,784,894
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized depreciation on
investments based on a cost of $142,789,416 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 $ 388,306
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (1,377,401)
---------------
Net unrealized depreciation $ (989,095)
===============
(b) All or a portion of this security was on loan to brokers at September 30, 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). The coupon rate shown represents the rate at period end.
(d) All or a portion of this security has been segregated to cover collateral requirements on
TBA obligations.
(e) The Fund's investment in mortgage related securities of the Federal Home Loan
Mortgage Corporation, Federal National Mortgage Association and Government National
Mortgage Association are interests in separate pools of mortgages. All separate
investments in securities of each issuer which have the same coupon rate have been
aggregated for the purpose of presentation in the Portfolio of Investments.
(f) Represents investment of securities lending collateral.
(g) Delayed delivery security (Note 2h)
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
TBA To Be Announced (Note 2h)
Holdings at September 30, 2007 as a Percentage of Net Assets (unaudited)
Mortgage Related 60.7%
Treasuries 9.3
Asset-Backed Securities 5.7
Agency 3.3
Hybrid ARMs 2.5
Other, less than 2% each 1.3
See accompanying notes to financial statements.
29
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Principal
Amount Description Value (+)
- --------------------------------------------------------------------------------
Tax Exempt Obligations -- 98.1% of Net Assets
Commonwealth of Massachusetts -- 9.2%
$ 2,000,000 Consolidated Loan, Series C,
5.250%, 8/01/2022 (FSA insured) $ 2,162,520
3,500,000 State Refunding, Series A,
6.500%, 11/01/2014 (AMBAC insured) 4,114,740
---------------
6,277,260
---------------
Martha's Vineyard, MA -- 1.5%
1,000,000 Land Bank Revenue,
5.000%, 5/01/2032 (AMBAC insured) 1,026,870
---------------
Massachusetts Bay Transportation Authority -- 0.4%
250,000 Series A, Unrefunded,
5.250%, 7/01/2030 257,178
---------------
Massachusetts Development Finance Agency -- 15.8%
1,000,000 Cambridge Street Development, Series A,
5.125%, 2/01/2034 (MBIA insured) 1,032,600
1,450,000 Curry College, Series A,
5.000%, 3/01/2036 (ACA insured) 1,390,536
1,000,000 Hampshire College,
5.625%, 10/01/2024 1,047,320
1,000,000 Mount Holyoke College,
5.250%, 7/01/2031 1,036,320
2,000,000 Simmons College, Series H,
5.250%, 10/01/2033 (XLCA insured) 2,183,700
2,800,000 Springfield Resource Recovery, Series A,
5.625%, 6/01/2019 2,895,508
1,100,000 Visual and Performing Arts,
6.000%, 8/01/2021 1,275,703
---------------
10,861,687
---------------
Massachusetts Health & Educational Facilities
Authority -- 39.0%
1,160,000 Baystate Medical Center, Series F,
5.700%, 7/01/2027 1,201,250
1,500,000 Berklee College of Music, Series A,
5.000%, 10/01/2032 1,537,965
2,000,000 Boston University, Series S,
5.000%, 10/01/2039 (FGIC insured) 2,047,380
1,000,000 Catholic Health East,
5.500%, 11/15/2032 1,088,020
3,000,000 Harvard University, Series N,
6.250%, 4/01/2020 3,622,440
1,000,000 Lahey Clinic Medical Center, Series D,
5.250%, 8/15/2037 1,017,660
750,000 Milford Regional Medical Center, Series E,
5.000%, 7/15/2032 685,342
850,000 Milford Regional Medical Center, Series E,
5.000%, 7/15/2037 763,997
2,716,000 Nichols College, Series C,
6.000%, 10/01/2017 2,775,806
2,000,000 Partners Healthcare Systems, Series B,
5.250%, 7/01/2029 2,041,560
2,500,000 Partners Healthcare Systems, Series C,
5.750%, 7/01/2021 2,643,500
1,500,000 Sterling & Francine Clark, Series A,
5.000%, 7/01/2036 1,548,150
2,000,000 University of Massachusetts, Series C,
5.125%, 10/01/2034 (FGIC insured) 2,076,180
1,000,000 Wellesley College, Series F,
5.125%, 7/01/2039 1,020,910
Principal
Amount Description Value (+)
- -----------------------------------------------------------------------------------------
Massachusetts Health & Educational Facilities
Authority -- continued
$ 1,315,000 Wheaton College, Series E,
5.000%, 7/01/2017 $ 1,384,037
1,030,000 Williams College, Series H,
5.000%, 7/01/2017 1,088,288
---------------
26,542,485
---------------
Massachusetts Housing Finance Agency -- 3.8%
545,000 Series A,
5.200%, 12/01/2037 551,567
2,000,000 Single Family Housing, Series 126,
4.700%, 6/01/2038(b) 1,853,460
230,000 Single Family Mortgage, Series 21,
7.125%, 6/01/2025 230,794
---------------
2,635,821
---------------
Massachusetts Port Authority -- 4.5%
1,750,000 Delta Air Lines, Inc. Project, Series A,
5.500%, 1/01/2019 (AMBAC insured) 1,820,525
1,200,000 Series A,
5.000%, 7/01/2033 (MBIA insured) 1,225,728
---------------
3,046,253
---------------
Massachusetts Water Resources Authority -- 6.8%
1,000,000 General Series A,
5.250%, 8/01/2020 (MBIA insured) 1,089,660
3,000,000 Series A,
6.500%, 7/15/2019 (FGIC insured) 3,536,970
---------------
4,626,630
---------------
Michigan Hospital Finance Authority -- 1.5%
1,000,000 Oakwood Obligated Group,
5.500%, 11/01/2017 1,055,890
---------------
New Jersey Economic Development Authority -- 1.5%
1,000,000 Cigarette Tax,
5.625%, 6/15/2018 1,013,720
---------------
New Jersey Transportation Trust Fund
Authority -- 0.8%
500,000 Series A,
5.500%, 12/15/2023 564,450
---------------
Puerto Rico Commonwealth Aqueduct & Sewer
Authority -- 4.9%
3,000,000 Aqueduct & Sewer Authority,
6.250%, 7/01/2013 3,346,410
---------------
Puerto Rico Commonwealth Infrastructure Financing
Authority -- 2.2%
1,500,000 Series B,
5.000%, 7/01/2031 1,514,700
---------------
Puerto Rico Public Finance Corp. -- 4.7%
3,000,000 Commonwealth Appropriation, Series A,
5.750%, 8/01/2027(b) 3,193,050
---------------
Tarrant County, TX, Cultural Educational Facilities Finance
Corp. -- 1.5%
1,000,000 Buckner Retirement Services, Inc. Project,
5.250%, 11/15/2037 1,008,530
---------------
Total Tax Exempt Obligations (Identified Cost $65,205,944) 66,970,934
---------------
See accompanying notes to financial statements.
30
LOOMIS SAYLES MASSACHUSETTS TAX FREE INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 0.7%
$ 466,986 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/2007 at 3.750% to be repurchased at
$467,132 on 10/01/2007, collateralized by $470,000 Federal
National Mortgage Association, 6.060% due 6/06/2017 valued at
$481,163 including accrued interest (Note 2f)
(Identified Cost $466,986) $ 466,986
---------------
Total Investments -- 98.8%
(Identified Cost $65,672,930)(a) 67,437,920
Other assets less liabilities -- 1.2% 806,732
---------------
Net Assets -- 100% $ 68,244,652
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized appreciation on
investments based on a cost of $65,810,631 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 $ 2,302,850
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (675,561)
---------------
Net unrealized appreciation $ 1,627,289
===============
(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). The coupon rate shown represents the rate at period end.
ACA American Capital Access
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, Inc.
Holdings at September 30, 2007 as a Percentage of Net Assets (unaudited)
College & Universities 32.0%
State Appropriation 14.7
Water & Sewer 13.9
Hospital 13.8
Airport 4.5
Resource Recovery 4.2
Single-Family Housing 3.9
Insurance 3.2
Other, less than 2% each 7.9
See accompanying notes to financial statements.
31
LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Principal
Amount Description Value (+)
- -------------------------------------------------------------------------------------------
Tax Exempt Obligations -- 98.8% of Net Assets
California -- 8.9%
$ 1,000,000 California Health Facilities Financing Authority
(Catholic Healthcare West), Series I,
4.950%, 7/01/2026(b) $ 1,038,830
1,000,000 California Health Facilities Financing Authority
(Cedar-Sinai Medical Center),
5.000%, 11/15/2027 1,010,580
2,655,000 California Statewide Communities Development Authority
(California Endowment),
5.250%, 7/01/2023 2,805,512
1,500,000 California Statewide Communities Development Authority
(Sutter Health), Series A,
5.000%, 11/15/2043 1,510,860
1,200,000 Long Beach California Bond Financing Authority
(Natural Gas Purchase), Series A,
5.500%, 11/15/2027 1,275,492
---------------
7,641,274
---------------
Colorado -- 2.7%
2,500,000 Colorado Health Facilities Authority,
5.000%, 12/01/2035 2,301,750
---------------
District of Columbia -- 3.6%
3,000,000 Metropolitan Washington D.C. Airports Authority,
5.125%, 10/01/2029 (FGIC insured) 3,065,940
---------------
Florida -- 1.2%
1,000,000 Jacksonville, FL, Economic Development Community Health Care
Facilities (Mayo Clinic),
5.000%, 11/15/2036 1,016,750
---------------
Guam -- 1.2%
1,000,000 Guam Government Waterworks Authority,
5.875%, 7/01/2035 1,040,230
---------------
Illinois -- 2.4%
2,000,000 Metropolitan Pier & Exposition Authority, IL,
5.250%, 6/15/2042 (MBIA insured) 2,086,800
---------------
Louisiana -- 5.9%
4,000,000 DeSoto Parish, LA, Environmental Improvement,
5.000%, 11/01/2018 3,962,960
1,000,000 Ernest N. Morial, New Orleans, LA, Exhibit Hall Authority,
5.000%, 7/15/2033 (AMBAC Insured) 1,071,370
---------------
5,034,330
---------------
Massachusetts -- 2.4%
1,000,000 Massachusetts Development Finance Agency
(Simmons College), Series H,
5.250%, 10/01/2033 (XLCA Insured) 1,091,850
1,045,000 Massachusetts State Health & Educational Facilities Authority
(Lahey Clinic Medical Center),
4.500%, 8/15/2035 (FGIC insured) 1,009,512
---------------
2,101,362
---------------
Michigan -- 6.8%
1,500,000 Michigan State Hospital Finance Authority Revenue
(Henry Ford Health System), Series A,
5.000%, 11/15/2038 1,502,100
1,100,000 Michigan State Hospital Finance Authority Revenue
(Oakwood Obligated Group),
5.500%, 11/01/2014 1,168,090
1,000,000 Taylor Brownfield Redevelopment Authority, MI,
5.000%, 5/01/2025 (MBIA insured) 1,042,860
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------------------------------
Michigan -- continued
$ 2,000,000 University of Michigan Hospital,
5.250%, 12/01/2020 $ 2,092,640
---------------
5,805,690
---------------
Minnesota -- 3.7%
1,000,000 Chaska Minnesota Electric Revenue,
5.250%, 10/01/2025 1,056,770
2,000,000 Minnesota State Municipal Power Agency,
5.250%, 10/01/2024 2,105,080
---------------
3,161,850
---------------
Mississippi -- 4.6%
2,500,000 Lowndes County, MS, Solid Waste Disposal & Pollution Control,
6.800%, 4/01/2022 2,900,925
1,000,000 Mississippi, Hospital Equipment & Facilities Authority
(Delta Regional Medical Center),
5.000%, 2/01/2035 (MBIA, FHA insured) 1,018,600
---------------
3,919,525
---------------
New Jersey -- 5.0%
1,000,000 New Jersey Economic Development Authority Revenue,
Cigarette Tax,
5.500%, 6/15/2024 1,022,320
1,000,000 New Jersey Economic Development Authority Revenue,
Cigarette Tax,
5.625%, 6/15/2018 1,013,720
2,000,000 New Jersey Transportation Trust Fund Authority, Series A,
5.500%, 12/15/2023 2,257,800
---------------
4,293,840
---------------
New York -- 16.3%
1,020,000 New York, NY,
6.000%, 1/15/2020 1,115,707
1,000,000 New York, NY, City Health & Hospital Corp.,
5.000%, 2/15/2020 (FSA insured) 1,036,410
1,000,000 New York, NY, City Industrial Development Agency,
5.500%, 1/01/2024(b) 1,061,800
2,000,000 New York, NY, City Municipal Water Finance Authority, Series C,
5.000%, 6/15/2025 (MBIA insured) 2,092,160
1,000,000 New York, NY, City Municipal Water Finance Authority, Series A,
5.125%, 6/15/2034 (FSA insured) 1,034,710
2,000,000 New York State Dormitory Authority,
5.500%, 5/15/2013 2,148,180
2,200,000 New York State Dormitory Authority,
5.750%, 7/01/2013 2,359,588
3,000,000 New York State Municipal Bond Bank Agency, Series C,
5.250%, 6/01/2020 3,174,120
---------------
14,022,675
---------------
North Carolina -- 1.6%
1,300,000 North Carolina Eastern Municipal Power Agency, Series A,
5.500%, 1/01/2012 1,376,388
---------------
Oregon -- 3.2%
1,750,000 Multnomah County, OR, Hospital Facilities Authority (Providence
Health System),
5.250%, 10/01/2012 1,849,767
500,000 Oregon, Western Generation Agency, Wauna Cogeneration Project,
Series A,
5.000%, 1/01/2020 469,405
485,000 Oregon, Western Generation Agency, Wauna Cogeneration Project,
Series A,
5.000%, 1/01/2021 451,554
---------------
2,770,726
---------------
See accompanying notes to financial statements.
32
LOOMIS SAYLES MUNICIPAL INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------------------------------
Pennsylvania -- 3.1%
$ 2,500,000 Pennsylvania State Industrial Development Authority,
5.500%, 7/01/2019 (AMBAC insured) $ 2,698,025
---------------
Puerto Rico -- 3.7%
1,000,000 Puerto Rico Commonwealth Infrastructure Financing Authority,
Series A,
5.500%, 10/01/2040 1,058,950
2,000,000 Puerto Rico Public Finance Corp., Commonwealth Appropriation,
Series A,
5.750%, 8/01/2027(b) 2,128,700
---------------
3,187,650
---------------
South Carolina -- 3.6%
1,100,000 Charleston Educational Excellence Finance Corp.,
5.250%, 12/01/2030 1,141,305
1,155,000 Lexington One School Facilities Corp.,
5.000%, 12/01/2026 1,172,741
800,000 Newberry Investing in Children's Education (Newberry County
School District),
5.250%, 12/01/2022 814,824
---------------
3,128,870
---------------
South Dakota -- 1.5%
1,250,000 South Dakota Health & Educational Facilities Authority (Sioux
Valley Hospital),
5.250%, 11/01/2027 1,279,600
---------------
Tennessee -- 5.3%
2,000,000 Knox County, TN Health Educational & Housing Facilities Board,
Hospital Facilities Revenue, Series A,
Zero Coupon, 1/01/2035 469,600
2,500,000 Tennessee Energy Acquisition Corp., Gas Revenue, Series A,
5.250%, 9/01/2026 2,569,575
1,500,000 Tennessee Housing Development Agency, Series A,
5.200%, 7/01/2023 1,546,020
---------------
4,585,195
---------------
Texas -- 9.5%
1,130,000 Conroe, TX, Independent School District,
4.500%, 2/15/2030 1,100,394
2,000,000 Dallas-Fort Worth, TX, International Airport,
5.500%, 11/01/2033 (MBIA insured) 2,076,160
1,260,000 Keller, TX, Independent School District, Series A,
4.500%, 8/15/2031 1,222,250
1,650,000 SA Energy Acquisition Public Facility Corp., Texas Gas Supply
Revenue,
5.500%, 8/01/2027 1,742,202
1,000,000 Tarrant County, TX, Cultural Educational Facilities Finance Corp.,
Buckner Retirement Services, Inc. Project,
5.250%, 11/15/2037 1,008,530
1,000,000 Tarrant County, TX, Cultural Education Facilities Finance Corp.
Revenue (Texas Health Resources), Series A,
5.000%, 2/15/2036 1,005,890
---------------
8,155,426
---------------
Washington -- 2.6%
2,000,000 Energy Northwest, WA, Electric, Project No. 1, Series A,
5.500%, 7/01/2014 2,208,000
---------------
Total Tax Exempt Obligations (Identified Cost $84,058,799) 84,881,896
---------------
Principal
Amount Description Value (+)
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 1.6%
$ 1,409,095 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/07 at 3.750% to be repurchased at
$1,409,536 on 10/01/07, collateralized by $1,405,000 Federal
National Mortgage Association, 6.060% due 6/06/17 valued at
$1,438,369, including accrued interest (Note 2f)
(Identified Cost $1,409,095) $ 1,409,095
---------------
Total Investments -- 100.4%
(Identified Cost $85,467,894)(a) 86,290,991
Other assets less liabilities -- (0.4)% (349,750)
---------------
Net Assets -- 100% $ 85,941,241
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized appreciation on
investments based on a cost of $85,523,729 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 $ 1,637,898
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (870,636)
---------------
Net unrealized appreciation $ 767,262
===============
(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). The coupon rate shown represents the rate at period end.
AMBAC American Municipal Bond Assurance Corp.
FHA Federal Housing Administration
FGIC Financial Guarantee Insurance Company
FSA Financial Security Assurance, Inc.
MBIA Municipal Bond Investors Assurance Corp.
XLCA XL Capital Assurance, Inc.
Holdings at September 30, 2007 as a Percentage of Net Assets (unaudited)
Corporate Backed/Industrial Revenue/Pollution Control 11.1%
Hospital 9.5
Hospital Obligated Group 9.1
Electric 8.9
Special Tax 6.0
Airport 6.0
College & Universities 5.3
State Appropriation 5.1
Gas 5.0
Lease 4.9
Water & Sewage 4.9
Bond Bank/Pooled Loan Program 3.7
Non-Profit 3.3
School District 2.7
Senior Living 2.7
City & Town 2.5
Health Care -- Services 2.3
Other, less than 2% each 5.8
See accompanying notes to financial statements.
33
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------
Bonds and Notes -- 92.9% of Net Assets
Convertible Bonds -- 3.0%
Canada -- 0.1%
$ 5,385,000 Nortel Networks Corp., 144A,
2.125%, 4/15/2014 $ 4,375,312
3,187,000 Nortel Networks Corp., Guaranteed Senior Note,
4.250%, 9/01/2008(b) 3,127,244
---------------
7,502,556
---------------
United States -- 2.9%
12,755,000 Avnet, Inc.,
2.000%, 3/15/2034 16,358,288
4,395,000 Bristol-Myers Squibb Co.,
5.194%, 9/15/2023(c) 4,411,701
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 744,375
139,000 Dixie Group, Inc., Subordinated Note,
7.000%, 5/15/2012 130,834
11,899,000 Enzon Pharmaceuticals, Inc.,
4.500%, 7/01/2008 11,690,768
5,111,000 EPIX Pharmaceuticals, Inc., Senior Note,
3.000%, 6/15/2024 3,961,025
9,885,000 Host Hotels & Resorts, Inc., 144A,
2.625%, 4/15/2027 8,908,856
26,700,000 Human Genome Sciences, Inc.,
2.250%, 8/15/2012 22,962,000
30,860,000 Incyte Corp.,
3.500%, 2/15/2011(b) 28,236,900
12,005,000 Invitrogen Corp.,
1.500%, 2/15/2024(b) 11,749,894
2,360,000 IVAX Corp., Senior Subordinated Note,
4.500%, 5/15/2008 2,436,700
14,015,000 Kellwood Co., (step to 0.000% on 6/15/2011),
3.500%, 6/15/2034(e) 12,771,169
6,670,000 Kulicke & Soffa Industries, Inc., Subordinated Note,
0.500%, 11/30/2008 6,203,100
3,540,000 Kulicke & Soffa Industries, Inc., Subordinated Note,
1.000%, 6/30/2010 3,163,875
26,488,000 Level 3 Communications, Inc.,
6.000%, 9/15/2009 25,196,710
35,395,000 Level 3 Communications, Inc.,
6.000%, 3/15/2010(b) 32,828,862
6,117,164 Liberty Media LLC,
3.500%, 1/15/2031 5,926,002
4,591,000 Maxtor Corp., Subordinated Note,
5.750%, 3/01/2012(f) 4,315,540
22,401,000 Nektar Therapeutics,
3.250%, 9/28/2012 19,208,857
625,000 Nextel Communications, Inc., Senior Note,
5.250%, 1/15/2010 623,438
500,000 Preston Corp., Subordinated Note,
7.000%, 5/01/2011 483,975
20,000,000 Regeneron Pharmaceuticals, Inc., Subordinated Note,
5.500%, 10/17/2008 20,400,000
311,000 Richardson Electronics Ltd.,
7.750%, 12/15/2011 304,780
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------------
United States -- continued
$ 7,716,000 Sinclair Broadcast Group, Inc., (step to 2.000% on 1/15/2011),
4.875%, 7/15/2018(e) $ 7,281,975
22,735,000 Valeant Pharmaceuticals International, Subordinated Note,
3.000%, 8/16/2010 20,632,012
28,222,000 Valeant Pharmaceuticals International, Subordinated Note,
4.000%, 11/15/2013 25,505,632
12,095,000 Wells Fargo & Co.,
5.106%, 5/01/2033(b)(c) 12,039,363
---------------
308,476,631
---------------
Total Convertible Bonds (Identified Cost $307,957,948) 315,979,187
---------------
Non-Convertible Bonds -- 89.9%
Australia -- 0.7%
1,500,000 Qantas Airways, Ltd., 144A,
5.125%, 6/20/2013 1,457,852
32,710,000 Qantas Airways, Ltd., 144A,
6.050%, 4/15/2016 32,473,016
50,000,000 Queensland Treasury Corp., 144A,
7.125%, 9/18/2017, (NZD) 37,499,479
---------------
71,430,347
---------------
Bermuda -- 0.1%
11,855,000 Weatherford International, Ltd.,
6.500%, 8/01/2036 11,671,568
---------------
Brazil -- 2.0%
9,922,000 Republic of Brazil,
8.250%, 1/20/2034(b) 12,496,759
6,000,000 Republic of Brazil,
8.875%, 4/15/2024(b) 7,725,000
55,200,000 Republic of Brazil,
10.250%, 1/10/2028, (BRL) 30,774,075
140,235,000 Republic of Brazil,
12.500%, 1/05/2016, (BRL)(b) 90,200,254
107,840,000 Republic of Brazil,
12.500%, 1/05/2022, (BRL) 72,163,963
---------------
213,360,051
---------------
Canada -- 16.0%
250,000 Abitibi-Consolidated, Inc.,
6.000%, 6/20/2013 175,000
8,125,000 Abitibi-Consolidated, Inc.,
7.400%, 4/01/2018 5,525,000
12,060,000 Abitibi-Consolidated, Inc.,
7.500%, 4/01/2028(b) 8,019,900
2,960,000 Abitibi-Consolidated, Inc.,
8.500%, 8/01/2029 2,023,900
39,846,000 Abitibi-Consolidated, Inc.,
8.850%, 8/01/2030(b) 27,493,740
9,785,000 Algoma Acquistion Corp., 144A,
9.875%, 6/15/2015 8,708,650
750,000 Avenor, Inc.,
10.850%, 11/30/2014, (CAD) 684,030
4,370,000 Bell Canada, 144A,
6.550%, 5/01/2029, (CAD) 3,804,863
5,925,000 Bell Canada, (MTN),
5.000%, 2/15/2017, (CAD) 4,987,687
7,690,000 Bell Canada, (MTN),
7.300%, 2/23/2032, (CAD) 7,257,121
18,775,000 Bell Canada, Series M-17,
6.100%, 3/16/2035, (CAD) 15,503,603
See accompanying notes to financial statements.
34
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------------
Canada -- continued
$ 2,795,000 Bombardier, Inc.,
7.350%, 12/22/2026, (CAD) $ 2,725,733
15,600,000 Bombardier, Inc., 144A,
7.450%, 5/01/2034(b) 15,444,000
121,095,000 Canada Housing Trust,
4.100%, 12/15/2008, (CAD) 121,334,840
269,440,000 Canadian Government,
2.750%, 12/01/2007, (CAD)(b) 270,212,034
14,525,000 Canadian Government,
4.000%, 6/01/2016, (CAD) 14,276,017
441,205,000 Canadian Government,
4.250%, 9/01/2008, (CAD)(b) 443,666,859
436,930,000 Canadian Government,
4.250%, 12/01/2008, (CAD)(b) 439,337,255
21,565,000 Canadian Government,
4.250%, 9/01/2009, (CAD)(b) 21,733,028
35,580,000 Canadian Government,
5.750%, 6/01/2033, (CAD)(b) 42,854,110
24,200,000 Canadian Government,
6.000%, 6/01/2008, (CAD) 24,600,961
7,955,000 Domtar, Inc.,
5.375%, 12/01/2013 7,278,825
335,000 GMAC Canada, Ltd., Series E, (MTN),
6.625%, 12/17/2010, (GBP) 630,577
945,000 GMAC Canada, Ltd.,
7.750%, 9/26/2008, (NZD) 667,067
9,790,000 Kinder Morgan Finance Co. ULC, Guaranteed Note,
5.700%, 1/05/2016 8,898,552
49,135,000 Kinder Morgan Finance Co. ULC, Guaranteed Note,
6.400%, 1/05/2036 41,872,503
9,975,000 Nortel Networks Corp.,
6.875%, 9/01/2023 8,079,750
22,320,000 Nortel Networks, Ltd., 144A,
10.125%, 7/15/2013 22,961,700
22,930,000 North American Energy Partners, Inc., Senior Note,
8.750%, 12/01/2011 23,159,300
7,365,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 6,223,425
2,525,000 Rogers Wireless Communications, Inc., Senior Secured Note,
6.375%, 3/01/2014 2,550,694
7,430,000 Rogers Wireless Communications, Inc., Senior Note,
7.625%, 12/15/2011, (CAD)(b) 8,053,891
10,000,000 Shaw Communications, Inc.,
5.700%, 3/02/2017, (CAD) 9,449,555
9,170,000 Talisman Energy, Inc.,
5.850%, 2/01/2037 8,176,183
23,515,000 Talisman Energy, Inc.,
6.250%, 2/01/2038 22,152,729
31,690,000 Telus Corp.,
4.950%, 3/15/2017, (CAD) 28,978,675
---------------
1,679,501,757
---------------
Cayman Islands -- 0.0%
555,000 Enersis SA, Cayman Island,
7.400%, 12/01/2016 597,777
---------------
Chile -- 0.1%
4,875,000 Empresa Nacional de Electricidad SA, Chile,
7.875%, 2/01/2027(b) 5,451,381
250,000 Empresa Nacional de Electricidad SA, Chile,
8.350%, 8/01/2013 279,582
---------------
5,730,963
---------------
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------
Finland -- 0.6%
$ 3,680,200,000 Nordic Investment Bank,
13.000%, 9/12/2008, (ISK) $ 59,555,042
---------------
France -- 0.2%
224,520,000,000 BNP Paribas SA, Series E, (MTN), 144A,
Zero Coupon, 6/13/2011, (IDR) 18,111,362
---------------
Germany -- 0.1%
565,300,000 Kreditanstalt fuer Wiederaufbau, Series E, (MTN),
10.000%, 10/27/2008, (ISK) 8,912,247
---------------
India -- 0.1%
9,090,000 ICICI Bank Ltd., 144A,
6.375%, 4/30/2022(c) 8,500,059
---------------
Ireland -- 0.7%
32,520,000 Elan Finance PLC,
8.875%, 12/01/2013 31,950,900
44,765,000 Elan Finance PLC, Senior Note,
7.750%, 11/15/2011 43,869,700
---------------
75,820,600
---------------
Luxembourg -- 0.4%
23,000,000 Telecom Italia Capital,
6.000%, 9/30/2034 21,385,722
19,635,000 Telecom Italia Capital,
6.375%, 11/15/2033 18,949,444
---------------
40,335,166
---------------
Malaysia -- 0.2%
20,000,000 Ranhill Labuan Ltd., 144A,
12.500%, 10/26/2011(b) 19,785,620
---------------
Mexico -- 2.4%
11,265,000 Desarrolladora Homex SAB de CV,
7.500%, 9/28/2015 11,208,675
3,245,000(++) Mexican Fixed Rate Bonds, Series M-10,
8.000%, 12/17/2015, (MXN) 29,823,121
18,127,200(++) Mexican Fixed Rate Bonds, Series M-20,
8.000%, 12/07/2023, (MXN) 166,448,580
4,738,000(++) Mexican Fixed Rate Bonds, Series M-10,
9.000%, 12/20/2012, (MXN) 45,567,522
---------------
253,047,898
---------------
Netherlands -- 1.4%
1,800,000 Koninklijke (Royal) KPN NV, Series G, (MTN),
4.000%, 6/22/2015, (EUR) 2,340,095
1,120,000 Koninklijke (Royal) KPN NV, Series E, (MTN),
5.750%, 3/18/2016, (GBP) 2,191,630
8,098,000 Koninklijke (Royal) KPN NV,
8.375%, 10/01/2030 9,322,758
8,580,000,000 Rabobank Nederland, Series EMTN, 144A,
13.500%, 1/28/2008, (ISK) 138,338,142
---------------
152,192,625
---------------
Norway -- 0.0%
10,000,000 Kingdom of Norway,
5.500%, 5/15/2009, (NOK) 1,873,289
---------------
Philipines -- 0.1%
3,700,000 Philippine Long Distance Telephone Co., Series E, (MTN),
8.350%, 3/06/2017 4,046,690
1,691,125 Quezon Power (Philippines), Ltd., Senior Secured Note,
8.860%, 6/15/2017 1,708,036
---------------
5,754,726
---------------
See accompanying notes to financial statements.
35
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------
Republic of Korea -- 0.1%
$ 5,470,000 Hanarotelecom, Inc., 144A,
7.000%, 2/01/2012 $ 5,278,550
300,000 Samsung Electronics Co., Ltd., 144A,
7.700%, 10/01/2027 339,676
---------------
5,618,226
---------------
Scotland -- 1.7%
169,620,000 Astrazeneca PLC,
6.450%, 9/15/2037(b) 175,873,211
---------------
Singapore -- 0.0%
1,050,000 SP PowerAssets, Ltd., Series E, (MTN),
3.730%, 10/22/2010, (SGD) 724,987
---------------
South Africa -- 0.5%
320,500,000 Republic of South Africa,
13.000%, 8/31/2010, (ZAR)(b) 51,238,689
---------------
Spain -- 1.1%
113,785,000 Telefonica Emisiones SAU, Guaranteed Note,
7.045%, 6/20/2036 121,201,620
---------------
Supranational -- 2.3%
15,543,570 European Investment Bank, 144A,
Zero Coupon, 9/12/2008, (BRL) 7,686,147
128,250,000 European Investment Bank, Senior Note,
Zero Coupon, 3/10/2021, (AUD) 48,999,206
134,330,000 European Investment Bank, 144A,
4.600%, 1/30/2037, (CAD) 128,056,810
80,000,000 Inter-American Development Bank, Series E, (MTN),
Zero Coupon, 5/11/2009, (BRL) 35,613,748
24,450,000 Inter-American Development Bank, Series E, (MTN),
6.000%, 12/15/2017, (NZD) 16,891,507
12,125,000 Inter-American Development Bank, Series G, (MTN),
6.250%, 6/22/2016, (NZD) 8,537,381
---------------
245,784,799
---------------
Sweden -- 0.3%
207,265,000 Kingdom of Sweden,
6.500%, 5/05/2008, (SEK) 32,642,766
---------------
Switzerland -- 0.1%
346,700,000 Eurofima, Series EMTN,
10.000%, 11/03/2008, (ISK) 5,442,838
---------------
Thailand -- 0.3%
28,355,000 True Move Co., Ltd., 144A,
10.750%, 12/16/2013 28,627,208
---------------
United Kingdom -- 0.2%
72,717,436,000 JPMorgan Chase Bank, 144A,
Zero Coupon, 10/21/2010, (IDR) 6,208,614
1,000,000 Virgin Media Finance PLC,
9.125%, 8/15/2016 1,037,500
4,570,000 Virgin Media Finance PLC,
9.750%, 4/15/2014, (GBP) 9,350,211
1,605,000 Vodafone Group PLC,
6.150%, 2/27/2037 1,540,142
---------------
18,136,467
---------------
United States -- 58.2%
5,565,000 AES Corp. (The),
8.375%, 3/01/2011, (GBP) 11,044,400
4,020,000 AES Corp. (The), Senior Note,
7.750%, 3/01/2014(b) 4,080,300
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
United States -- continued
$ 1,190,000 Affiliated Computer Services, Inc.,
5.200%, 6/01/2015 $ 1,050,175
17,735,000 Albertson's, Inc.,
7.750%, 6/15/2026 17,631,552
69,896,000 Albertson's, Inc., Senior Note,
7.450%, 8/01/2029 67,282,169
4,895,000 Albertson's, Inc., Senior Note,
8.000%, 5/01/2031 4,968,587
1,510,000 Albertson's, Inc., Senior Note,
8.700%, 5/01/2030 1,629,784
13,242,000 Albertson's, Inc., Series C, (MTN),
6.625%, 6/01/2028 11,744,714
4,785,000 Allstate Corp.,
5.950%, 4/01/2036 4,564,426
46,570,000 ALLTEL Corp., Senior Note,
7.875%, 7/01/2032 37,732,784
825,000 American Airlines, Inc., Series 1999-1, Class B,
7.324%, 4/15/2011 819,844
995,863 American Airlines, Inc., Series 93A6,
8.040%, 9/16/2011 990,882
6,950,000 Amkor Technology, Inc., Senior Note,
7.125%, 3/15/2011 6,741,500
9,570,000 Amkor Technology, Inc., Senior Note,
7.750%, 5/15/2013 9,235,050
37,190,000 Anadarko Petroleum Corp.,
5.950%, 9/15/2016 36,833,311
45,910,000 Anadarko Petroleum Corp.,
6.450%, 9/15/2036 45,198,349
10,503,000 APL Ltd., Senior Note,
8.000%, 1/15/2024(f) 8,822,520
1,585,000 Aramark Services, Inc.,
5.000%, 6/01/2012 1,398,763
4,640,000 Arrow Electronics, Inc.,
6.875%, 6/01/2018 4,797,022
8,000,000 ASIF Global Financing, 144A,
2.380%, 2/26/2009, (SGD) 5,351,739
10,245,000 AT&T Corp.,
6.500%, 3/15/2029 10,317,842
8,500,000 AT&T, Inc.,
6.150%, 9/15/2034(b) 8,402,632
127,100,000 AT&T, Inc.,
6.500%, 9/01/2037 131,052,429
17,574,841 Atlas Air, Inc., Series 1998-1, Class 1B,
7.680%, 1/02/2014(g) 20,211,067
323,312 Atlas Air, Inc., Series 1999-1, Class A2,
6.880%, 7/02/2009 316,846
12,740,207 Atlas Air, Inc., Series 1999-1, Class B,
7.630%, 1/02/2015(g) 14,651,238
4,744,556 Atlas Air, Inc., Series 1999-1, Class C,
8.770%, 1/02/2011(g) 4,602,219
5,323,737 Atlas Air, Inc., Series 2000-1, Class B,
9.057%, 1/02/2014(g) 6,494,959
6,862,758 Atlas Air, Inc., Series C,
8.010%, 1/02/2010(g) 5,901,972
30,125,000 Avnet, Inc.,
5.875%, 3/15/2014 30,026,341
35,630,000 Avnet, Inc.,
6.000%, 9/01/2015 34,830,106
11,345,000 Avnet, Inc.,
6.625%, 9/15/2016 11,454,865
See accompanying notes to financial statements.
36
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------------
United States -- continued
$ 22,125,000 BAC Capital Trust VI,
5.625%, 3/08/2035 $ 19,763,953
17,310,000,000 Barclays Financial LLC, 144A,
4.060%, 9/16/2010, (KRW) 18,662,344
1,006,000,000 Barclays Financial LLC, 144A,
4.160%, 2/22/2010, (THB) 30,378,677
21,340,000,000 Barclays Financial LLC, 144A,
4.460%, 9/23/2010, (KRW) 23,261,346
56,650,000,000 Barclays Financial LLC, 144A,
4.470%, 12/04/2011, (KRW) 61,298,618
135,000,000 Barclays Financial LLC, Series E, (MTN),, 144A,
4.100%, 3/22/2010, (THB) 4,069,044
15,195,000 BellSouth Corp.,
6.000%, 11/15/2034(b) 14,627,634
23,584,000 Borden, Inc.,
7.875%, 2/15/2023 18,985,120
6,920,000 Borden, Inc.,
8.375%, 4/15/2016 5,882,000
8,757,000 Borden, Inc.,
9.200%, 3/15/2021 7,443,450
2,765,000 Boston Scientific Corp.,
5.450%, 6/15/2014 2,481,588
10,590,000 Boston Scientific Corp.,
6.400%, 6/15/2016 9,663,375
15,755,000 Boston Scientific Corp.,
7.000%, 11/15/2035 13,667,462
2,685,000 Bowater, Inc.,
6.500%, 6/15/2013(b) 1,960,050
71,400,000 Bruce Mansfield Unit 1 2,
6.850%, 6/01/2034 72,646,644
2,840,000 Centex Corp.,
5.250%, 6/15/2015(b) 2,416,056
21,365,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017 20,777,462
22,690,000 Chesapeake Energy Corp.,
6.875%, 11/15/2020 22,207,837
15,325,000 CIGNA Corp.,
6.150%, 11/15/2036 14,490,584
425,000 Cincinnati Bell, Inc.,
8.375%, 1/15/2014 423,938
1,220,000 CIT Group, Inc.,
5.000%, 2/13/2014 1,101,595
2,500,000 CIT Group, Inc., Series E, Senior Note, (MTN),
5.500%, 12/01/2014, (GBP) 4,418,640
3,055,000 CIT Group, Inc.,
6.000%, 4/01/2036 2,702,102
4,545,000 CIT Group, Inc., (MTN),
5.125%, 9/30/2014 4,145,317
4,100,000 CIT Group, Inc., Series E, (MTN),
5.500%, 12/20/2016, (GBP) 7,058,992
18,650,000 Citibank NA, 144A,
15.000%, 7/02/2010, (BRL) 11,587,734
35,260,000 Citizens Communications Co.,
7.875%, 1/15/2027 34,378,500
7,805,000 Clear Channel Communications, Inc.,
4.900%, 5/15/2015 5,878,570
4,165,000 Clear Channel Communications, Inc.,
5.500%, 9/15/2014 3,270,208
10,765,000 Clear Channel Communications, Inc.,
5.500%, 12/15/2016(b) 8,199,442
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------
United States -- continued
$ 2,080,000 Clear Channel Communications, Inc.,
5.750%, 1/15/2013 $ 1,740,920
16,170,000 Cleveland Electric Illuminating Co.,
5.950%, 12/15/2036 15,035,109
2,935,000 Colonial Realty LP,
6.050%, 9/01/2016 2,834,447
2,405,000 Colorado Interstate Gas Co.,
5.950%, 3/15/2015 2,365,390
2,670,000 Colorado Interstate Gas Co.,
6.800%, 11/15/2015 2,764,019
41,635,000 Comcast Corp.,
5.650%, 6/15/2035 37,170,104
34,570,000 Comcast Corp.,
6.450%, 3/15/2037 34,128,576
20,175,000 Comcast Corp.,
6.500%, 11/15/2035 19,921,743
172,500,000 Comcast Corp.,
6.950%, 8/15/2037 181,057,725
6,319,005 Continental Airlines, Inc., Series 1997-4, Class 4B,
6.900%, 1/02/2017 5,999,105
7,466,633 Continental Airlines, Inc., Series 1998-1, Class 1B,
6.748%, 3/15/2017 7,223,967
6,925,049 Continental Airlines, Inc., Series 1999-1, Class B,
6.795%, 8/02/2018 6,453,280
2,374,176 Continental Airlines, Inc., Series 1999-1, Class C,
6.954%, 8/02/2009 2,320,758
4,342,313 Continental Airlines, Inc., Series 1999-2, Class B,
7.566%, 3/15/2020 4,255,467
7,586,247 Continental Airlines, Inc., Series 2000-2, Class B,
8.307%, 10/02/2019 7,567,282
2,803,874 Continental Airlines, Inc., Series 2001-1, Class B,
7.373%, 6/15/2017 2,712,748
300,438 Continental Airlines, Inc., Series 96-A,
6.940%, 10/15/2013 297,433
2,753,368 Continental Airlines, Inc., Series 971A,
7.461%, 4/01/2015 2,724,113
5,625,000 Continental Airlines, Inc., Series A,
5.983%, 4/19/2022 5,450,288
23,710,000 Corn Products International, Inc.,
6.625%, 4/15/2037 23,511,761
6,225,000 Corning, Inc.,
5.900%, 3/15/2014 6,285,793
6,220,000 Corning, Inc.,
6.200%, 3/15/2016 6,350,813
650,000 Corning, Inc.,
6.750%, 9/15/2013 697,596
6,150,000 Corning, Inc.,
6.850%, 3/01/2029 6,260,626
4,725,000 Corning, Inc.,
7.250%, 8/15/2036 4,954,730
400,000 CSC Holdings, Inc., Senior Note,
7.875%, 2/15/2018 388,000
250,000 CSC Holdings, Inc., Series B, Senior Note,
8.125%, 7/15/2009 254,375
250,000 CSC Holdings, Inc., Series B, Senior Note,
8.125%, 8/15/2009 254,375
37,345,000 CSX Corp.,
6.000%, 10/01/2036(b) 34,967,767
5,000,000 CSX Corp.,
6.250%, 3/15/2018 5,026,250
See accompanying notes to financial statements.
37
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
United States -- continued
$ 1,853,000 Cummins, Inc.,
6.750%, 2/15/2027 $ 1,831,129
2,145,000 Cummins, Inc.,
7.125%, 3/01/2028 2,213,936
19,745,000 DCP Midstream LP, 144A,
6.450%, 11/03/2036 18,901,434
8,758,000 Dillard's, Inc.,
6.625%, 1/15/2018(b) 7,848,622
4,187,000 Dillard's, Inc.,
7.130%, 8/01/2018 3,857,274
1,500,000 Dillard's, Inc.,
7.750%, 7/15/2026 1,351,875
425,000 Dillard's, Inc.,
7.875%, 1/01/2023 386,219
3,325,000 Dillard's, Inc., Class A,
7.000%, 12/01/2028 2,763,906
1,935,000 Dole Food Co., Inc.,
8.625%, 5/01/2009 1,939,838
8,180,000 Dominion Resources, Inc., Senior Note, Series B,
5.950%, 6/15/2035 7,666,214
4,335,000 DR Horton, Inc.,
5.625%, 9/15/2014 3,685,292
1,625,000 DR Horton, Inc.,
6.500%, 4/15/2016 1,423,339
16,160,000 DR Horton, Inc., Guaranteed Note,
5.625%, 1/15/2016(b) 13,579,232
43,470,000 DR Horton, Inc., Senior Note,
5.250%, 2/15/2015 36,391,997
11,275,000 Dynegy Holdings, Inc.,
7.125%, 5/15/2018(b) 10,288,437
10,185,000 Dynegy Holdings, Inc.,
7.625%, 10/15/2026 9,166,500
500,000 Dynegy Holdings, Inc., 144A,
7.750%, 6/01/2019 478,125
7,455,000 Dynegy Holdings, Inc.,
8.375%, 5/01/2016 7,492,275
95,200,000 Edison Mission Energy, Senior Note, 144A,,
7.625%, 5/15/2027 91,868,000
15,685,000 El Paso Corp.,
6.950%, 6/01/2028 14,570,189
750,000 El Paso Corp., Senior Note, (MTN),
7.800%, 8/01/2031 761,463
1,000,000 El Paso Energy Corp., (MTN),
7.750%, 1/15/2032 1,015,442
5,330,000 Embarq Corp.,
7.995%, 6/01/2036 5,679,078
5,255,000 Energy Transfer Partners LP,
6.125%, 2/15/2017 5,071,501
11,315,000 Energy Transfer Partners LP,
6.625%, 10/15/2036 10,670,656
13,175,000 Enterprise Products Operating L.P.,
6.300%, 9/15/2017 13,193,010
14,385,000 Equifax, Inc.,
7.000%, 7/01/2037 14,409,311
35,900,000 FNMA,
2.290%, 2/19/2009, (SGD) 24,021,317
17,816,000 Ford Motor Co.,
6.375%, 2/01/2029(b) 13,094,760
1,705,000 Ford Motor Co.,
6.500%, 8/01/2018(b) 1,372,525
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
United States -- continued
$ 500,000 Ford Motor Co.,
6.625%, 2/15/2028 $ 372,500
73,114,000 Ford Motor Co.,
6.625%, 10/01/2028 54,469,930
1,940,000 Ford Motor Co.,
7.125%, 11/15/2025(b) 1,445,300
86,090,000 Ford Motor Co.,
7.450%, 7/16/2031(b) 67,580,650
800,000 Ford Motor Co.,
7.500%, 8/01/2026 602,000
35,237,000 Ford Motor Credit Co. LLC,
5.700%, 1/15/2010 33,136,981
10,685,000 Ford Motor Credit Co. LLC,
7.000%, 10/01/2013 9,656,034
15,465,000 Ford Motor Credit Co. LLC,
7.250%, 10/25/2011 14,492,468
14,595,000 Ford Motor Credit Co. LLC,
8.000%, 12/15/2016(b) 13,653,695
9,905,000 Ford Motor Credit Co. LLC,
8.625%, 11/01/2010 9,819,460
25,255,000 Freescale Semiconductor, Inc.,
10.125%, 12/15/2016(b) 23,487,150
243,057,000 General Electric Capital Corp.,
6.500%, 9/28/2015, (NZD) 169,943,868
30,350,000 General Electric Capital Corp., Series A, (MTN),
6.625%, 2/04/2010, (NZD) 22,202,612
500,000 General Electric Capital Corp., Series E, (MTN),
1.725%, 6/27/2008, (SGD) 334,178
3,100,000 General Electric Capital Corp., Series E, (MTN),
6.125%, 5/17/2012, (GBP)(b) 6,360,214
66,645,000 General Electric Capital Corp., Series E, (MTN),
6.750%, 9/26/2016, (NZD) 47,744,130
60,900,000 General Electric Capital Corp., Series G, (MTN),
2.960%, 5/18/2012, (SGD) 40,736,955
115,000,000 General Electric Capital Corp., Series G, (MTN),
3.485%, 3/08/2012, (SGD) 79,055,978
14,920,000 General Motors Corp.,
8.250%, 7/15/2023(b) 13,055,000
1,035,000 General Motors Corp.,
8.375%, 7/15/2033(b) 906,919
4,775,000 Georgia Gulf Corp.,
10.750%, 10/15/2016(b) 4,154,250
11,520,000 Georgia-Pacific Corp.,
7.250%, 6/01/2028 10,540,800
11,605,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 10,792,650
120,000 Georgia-Pacific Corp.,
7.700%, 6/15/2015 119,400
42,010,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 39,909,500
14,535,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 14,171,625
15,063,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 15,100,657
32,965,000 GMAC LLC,
6.000%, 12/15/2011(b) 30,426,003
11,710,000 GMAC LLC,
6.625%, 5/15/2012 10,926,660
16,806,000 GMAC LLC, (MTN),
6.750%, 12/01/2014 15,232,572
See accompanying notes to financial statements.
38
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------------
United States -- continued
$ 6,585,000 GMAC LLC,
6.875%, 9/15/2011 $ 6,266,707
17,935,000 GMAC LLC,
8.000%, 11/01/2031(b) 17,595,706
4,360,000 Goodyear Tire & Rubber Co.,
7.000%, 3/15/2028 3,684,200
1,427,000 Goodyear Tire & Rubber Co.,
9.000%, 7/01/2015(b) 1,523,323
2,590,000 Great Lakes Dredge & Dock Corp., Senior Subordinated Note,
7.750%, 12/15/2013 2,486,400
5,790,000 GTE Corp.,
6.940%, 4/15/2028 6,017,414
185,000 Hawaiian Telcom Communications, Inc.,
12.500%, 5/01/2015(b) 199,800
8,205,000 HCA, Inc.,
6.375%, 1/15/2015 6,994,762
45,075,000 HCA, Inc.,
6.500%, 2/15/2016(b) 38,313,750
12,875,000 HCA, Inc.,
7.050%, 12/01/2027 9,750,276
9,307,000 HCA, Inc.,
7.500%, 12/15/2023 7,594,019
18,745,000 HCA, Inc.,
7.500%, 11/06/2033 15,089,725
12,040,000 HCA, Inc.,
7.580%, 9/15/2025 9,811,649
27,892,000 HCA, Inc.,
7.690%, 6/15/2025 22,908,620
4,490,000 HCA, Inc.,
7.750%, 7/15/2036 3,596,081
6,155,000 HCA, Inc.,
8.360%, 4/15/2024 5,351,619
1,000,000 HCA, Inc., Senior Note,
5.750%, 3/15/2014 838,750
14,550,000 Hercules, Inc., Subordinated Note,
6.500%, 6/30/2029 11,785,500
35,790,000 Highwoods Properties, Inc.,
5.850%, 3/15/2017 33,915,785
9,995,000 Hilcorp Energy I LP, 144A,
7.750%, 11/01/2015 9,770,112
52,975,000 Home Depot, Inc.,
5.875%, 12/16/2036 45,249,073
11,370,000 Hospira, Inc.,
6.050%, 3/30/2017 11,185,044
66,372,000 HSBC Bank PLC, 144A,
Zero Coupon, 4/18/2012, (MYR) 16,429,870
119,806,078 HSBC Bank USA, 144A,
Zero Coupon, 11/28/2011(c) 83,444,933
16,050,000 HSBC Bank USA, 144A,
3.310%, 8/25/2010 17,762,535
3,940,000 iStar Financial, Inc.,
5.150%, 3/01/2012 3,645,682
5,310,000 ITC Holdings Corp., 144A,
6.375%, 9/30/2036 5,078,760
45,790,000 J.C. Penney Corp., Inc., Senior Note,
6.375%, 10/15/2036 42,844,925
350,000 J.C. Penney Corp., Inc.,
7.125%, 11/15/2023(b) 368,384
3,445,000 Jefferson Smurfit Corp.,
7.500%, 6/01/2013 3,333,038
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------------
United States -- continued
$ 1,425,000 Joy Global, Inc.,
6.625%, 11/15/2036 $ 1,431,286
599,726,100,000 JPMorgan Chase & Co., 144A
Zero Coupon, 3/28/2011, (IDR) 49,283,123
109,312,000,000 JPMorgan Chase & Co., 144A
Zero Coupon, 3/28/2011, (IDR) 8,980,438
229,157,783,660 JPMorgan Chase & Co., 144A,
Zero Coupon, 4/12/2012, (IDR) 17,034,605
149,232,225 JPMorgan Chase & Co., Series E, (MTN), 144A,
1.000%, 6/08/2012, (MYR) 36,393,831
92,000,000 JPMorgan Chase Bank, 144A,
Zero Coupon, 5/17/2010, (BRL) 38,297,698
3,565,000 K N Capital Trust III,
7.630%, 4/15/2028(b) 3,190,843
4,300,000 K N Energy, Inc.,
6.670%, 11/01/2027 3,756,669
2,365,000 K. Hovnanian Enterprises, Inc., Guaranteed Note,
6.250%, 1/15/2015 1,797,400
15,055,000 K. Hovnanian Enterprises, Inc., Senior Note,
6.250%, 1/15/2016(b) 11,592,350
5,080,000 K. Hovnanian Enterprises, Inc., Guaranteed Note,
6.375%, 12/15/2014(b) 3,937,000
2,490,000 K. Hovnanian Enterprises, Inc., Guaranteed Note,
6.500%, 1/15/2014 1,935,975
6,290,000 K. Hovnanian Enterprises, Inc.,
7.500%, 5/15/2016(b) 5,000,550
1,935,000 K. Hovnanian Enterprises, Inc.,
7.750%, 5/15/2013(b) 1,383,525
8,340,000 KB Home, Guaranteed Note,
5.875%, 1/15/2015 7,089,000
2,940,000 KB Home, Guaranteed Note,
6.250%, 6/15/2015 2,510,025
11,315,000 KB Home, Guaranteed Note,
7.250%, 6/15/2018 9,844,050
7,515,000 Kellwood Co.,
7.625%, 10/15/2017 6,575,625
1,915,000 Kimball Hill Homes, Inc.,
10.500%, 12/15/2012(b) 1,321,350
500,000 Kinder Morgan Energy Partners, LP,
5.800%, 3/15/2035 441,548
11,288,000 Kinder Morgan, Inc., Senior Note,
5.150%, 3/01/2015 10,075,161
1,650,000 Koppers Holdings, Inc., (step to 9.875% on 11/15/2009),
Zero Coupon, 11/15/2014(e) 1,410,750
37,705,000 Kraft Foods, Inc.,
6.500%, 8/11/2017 38,947,417
30,680,000 Kraft Foods, Inc.,
7.000%, 8/11/2037 32,185,836
1,600,000 Lennar Corp., Series B, Guaranteed Note,
5.600%, 5/31/2015 1,376,538
23,885,000 Lennar Corp., Series A,
6.500%, 4/15/2016 21,590,655
11,970,000 Lennar Corp., Series B,
5.500%, 9/01/2014 10,444,603
33,965,000 Level 3 Communications, Inc.,
2.875%, 7/15/2010 32,606,400
29,195,000 Level 3 Financing, Inc.,
8.750%, 2/15/2017 28,173,175
8,525,000 Level 3 Financing, Inc.,
9.250%, 11/01/2014 8,397,125
See accompanying notes to financial statements.
39
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------------
United States -- continued
$ 41,535,000 Lowes Cos., Inc.,
6.650%, 9/15/2037 $ 41,964,929
39,875,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 33,096,250
2,840,000 Lucent Technologies, Inc.,
6.500%, 1/15/2028 2,357,200
11,645,000 Macy's Retail Holdings, Inc.,
6.375%, 3/15/2037 10,647,617
2,660,000 Marsh & McLennan Cos., Inc.,
5.375%, 7/15/2014 2,566,836
11,710,000 Marsh & McLennan Cos., Inc.,
5.750%, 9/15/2015(b) 11,309,776
6,905,000 Marsh & McLennan Cos., Inc.,
5.875%, 8/01/2033(b) 5,952,897
1,250,000 McDonalds Corp., Series E, (MTN),
3.628%, 10/10/2010, (SGD) 858,224
51,500,000 Merrill Lynch & Co., Inc.,
10.710%, 3/08/2017, (BRL) 28,834,943
5,350,000 Methanex Corp., Senior Note,
6.000%, 8/15/2015 5,045,729
13,405,000 Michigan Tobacco Settlement Finance Authority, Taxable Turbo
Series A,
7.309%, 6/01/2034 13,229,797
1,000,000 MidAmerican Energy Holdings Co.,
6.125%, 4/01/2036(b) 970,785
40,255,000 Midamerican Energy Holdings Co., 144A,
6.500%, 9/15/2037 40,689,915
1,153,000 Missouri Pacific Railroad Co.,
5.000%, 1/01/2045 795,570
6,465,000 Mosaic Global Holdings, Inc.,
7.300%, 1/15/2028 6,206,400
5,820,000 Mosaic Global Holdings, Inc.,
7.375%, 8/01/2018 5,645,400
7,655,000 Motorola, Inc.,
6.500%, 9/01/2025 7,412,482
3,346,000 New England Telephone & Telegraph Co.,
7.875%, 11/15/2029 3,717,834
54,190,000 News America, Inc.,
6.150%, 3/01/2037 50,536,781
11,140,000 News America, Inc.,
6.200%, 12/15/2034 10,488,265
14,360,000 News America, Inc.,
6.400%, 12/15/2035 13,868,271
4,305,000 Nextel Communications, Inc., Series E,
6.875%, 10/31/2013 4,322,216
25,790,000 Nextel Communications, Inc., Series F,
5.950%, 3/15/2014 24,621,971
31,735,000 NGC Corp. Capital Trust I, Series B,
8.316%, 6/01/2027 29,354,875
48,500,000 Nisource Finance Corp.,
6.400%, 3/15/2018 48,856,135
2,500,000 NRG Energy, Inc.,
7.250%, 2/01/2014 2,506,250
5,000,000 NRG Energy, Inc.,
7.375%, 2/01/2016 5,012,500
4,530,000 ONEOK Partners LP,
6.650%, 10/01/2036 4,468,116
3,260,000 Owens & Minor, Inc.,
6.350%, 4/15/2016 3,307,009
9,480,000 Owens Corning, Inc.,
6.500%, 12/01/2016 9,156,030
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
United States -- continued
$ 14,200,000 Owens Corning, Inc.,
7.000%, 12/01/2036 $ 13,820,079
225,000 Owens-Illinois, Inc., Senior Note,
7.500%, 5/15/2010(b) 226,688
42,043,000 Owens-Illinois, Inc., Senior Note,
7.800%, 5/15/2018 41,412,355
3,000,000 Pemex Project Funding Master Trust,
8.625%, 12/01/2023(b) 3,709,500
4,350,000 Pemex Project Funding Master Trust,
9.500%, 9/15/2027(b) 5,911,650
7,175,000 Pioneer Natural Resources Co.,
5.875%, 7/15/2016 6,442,662
3,898,000 Pioneer Natural Resources Co.,
7.200%, 1/15/2028 3,484,145
20,770,000 Plains All American Pipeline LP,
6.125%, 1/15/2017 20,789,482
44,730,000 Plains All American Pipeline LP,
6.650%, 1/15/2037(b) 44,495,481
1,948,000 Ply Gem Industries, Inc.,
9.000%, 2/15/2012(b) 1,577,880
4,240,000 Pulte Homes, Inc.,
5.200%, 2/15/2015 3,535,401
45,470,000 Pulte Homes, Inc.,
6.000%, 2/15/2035 33,143,901
12,730,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 9,673,794
950,000 Qwest Capital Funding, Inc.,
7.250%, 2/15/2011(b) 954,750
26,205,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 23,912,062
13,170,000 Qwest Capital Funding, Inc., Guaranteed Note,
6.500%, 11/15/2018 11,622,525
42,455,000 Qwest Capital Funding, Inc., Guaranteed Note,
6.875%, 7/15/2028(b) 36,405,162
2,025,000 Qwest Capital Funding, Inc., Guaranteed Note,
7.000%, 8/03/2009(b) 2,035,125
6,455,000 Qwest Capital Funding, Inc., Guaranteed Note,
7.625%, 8/03/2021 6,035,425
20,420,000 Qwest Corp.,
6.875%, 9/15/2033 19,092,700
2,785,000 Qwest Corp.,
7.250%, 9/15/2025(b) 2,736,263
25,230,000 Reliant Energy, Inc., Senior Note,
7.875%, 6/15/2017(b) 25,387,687
18,420,000 Residential Capital LLC,
7.375%, 5/17/2013, (GBP) 28,830,773
46,050,000 Residential Capital LLC,
7.500%, 4/17/2013 37,185,375
11,260,000 Residential Capital LLC,
7.875%, 6/30/2015 9,092,450
15,205,000 Residential Capital LLC, Series E, (MTN),
8.875%, 7/01/2014, (GBP) 24,576,427
52,930,000 Reynolds American, Inc.,
6.750%, 6/15/2017 54,135,481
13,400,000 Reynolds American, Inc.,
7.250%, 6/15/2037(b) 14,008,025
10,480,000 Sara Lee Corp.,
6.125%, 11/01/2032(b) 9,776,174
See accompanying notes to financial statements.
40
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------
United States -- continued
$ 1,200,000 Six Flags, Inc.,
9.625%, 6/01/2014(b) $ 991,500
2,785,000 Six Flags, Inc.,
9.750%, 4/15/2013(b) 2,360,288
10,400,000 SLM Corp., (MTN),
5.050%, 11/14/2014 8,819,907
22,205,000 SLM Corp., Series A, (MTN),
5.000%, 10/01/2013 19,389,317
33,190,000 SLM Corp., Series A, (MTN),
5.000%, 4/15/2015 27,836,951
11,510,000 SLM Corp., Series A, (MTN),
5.000%, 6/15/2018 9,142,566
4,145,000 SLM Corp., Series A, (MTN),
5.375%, 5/15/2014 3,617,300
25,080,000 SLM Corp., Series A, (MTN),
5.625%, 8/01/2033(b) 19,306,032
6,100,000 SLM Corp., Series A, (MTN),
6.500%, 6/15/2010, (NZD) 4,167,086
2,550,000 Southern Natural Gas Co.,
7.350%, 2/15/2031 2,670,350
6,326,000 Sprint Capital Corp.,
6.875%, 11/15/2028 6,105,210
11,309,000 Sprint Nextel Corp.,
6.000%, 12/01/2016 10,862,577
4,035,000 Stanley-Martin Communities LLC,
9.750%, 8/15/2015(b) 3,006,075
1,810,000 Sungard Data Systems, Inc.,
9.125%, 8/15/2013 1,882,400
16,514,000 Tenet Healthcare Corp.,
6.875%, 11/15/2031 12,344,215
4,480,000 Tenet Healthcare Corp.,
9.250%, 2/01/2015(b) 3,953,600
7,872,000 Tennessee Gas Pipeline Co.,
7.000%, 10/15/2028(b) 8,012,869
9,240,000 Time Warner, Inc.,
6.500%, 11/15/2036 8,914,539
11,145,000 Time Warner, Inc.,
6.625%, 5/15/2029 10,914,789
4,795,000 Time Warner, Inc.,
6.950%, 1/15/2028 4,905,851
3,150,000 Time Warner, Inc.,
7.625%, 4/15/2031 3,426,208
2,025,000 Time Warner, Inc.,
7.700%, 5/01/2032 2,223,478
8,785,000 Toledo Edison Co.,
6.150%, 5/15/2037 8,199,559
4,245,000 Toll Brothers Financial Corp.,
5.150%, 5/15/2015(b) 3,635,690
31,625,000 Toys R Us, Inc.,
7.375%, 10/15/2018(b) 25,379,062
8,355,000 Toys R Us, Inc.,
7.875%, 4/15/2013 7,268,850
31,135,000 Travelers Cos., Inc. (The), (MTN),
6.250%, 6/15/2037 30,032,603
4,000,000 Travelers Cos., Inc. (The),
6.750%, 6/20/2036 4,062,136
1,000,000 Travelers Property Casualty Corp.,
6.375%, 3/15/2033 993,776
35,615,000 Tribune Co.,
5.250%, 8/15/2015(b) 24,821,482
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------------
United States -- continued
$ 315,000 TXU Corp.,
5.550%, 11/15/2014 $ 254,051
6,925,000 TXU Corp., Series Q,
6.500%, 11/15/2024 5,550,388
2,225,000 TXU Corp., Series R,
6.550%, 11/15/2034 1,744,985
469,945,000 U.S. Treasury Bond,
4.500%, 2/15/2036(b) 445,529,947
19,965,000 U.S. Treasury Bond,
4.750%, 2/15/2037(b) 19,688,924
516,825,000 U.S. Treasury Bond,
5.375%, 2/15/2031(b) 553,245,141
7,000,000 United States Steel Corp.,
6.050%, 6/01/2017 6,698,440
4,130,000 United States Steel Corp.,
6.650%, 6/01/2037 3,810,152
24,880,000 USG Corp.,
6.300%, 11/15/2016 22,579,944
12,880,000 USG Corp.,
7.750%, 1/15/2018 12,899,964
51,815,000 Verizon Global Funding Corp., Senior Note,
5.850%, 9/15/2035(b) 49,498,040
5,530,000 Verizon Maryland, Inc., Series B,
5.125%, 6/15/2033 4,563,057
12,050,000 Verizon New York, Inc., Series A,
7.375%, 4/01/2032 12,828,852
32,790,000 Viacom, Inc., Senior Note,
6.875%, 4/30/2036 32,653,397
132,865,000 Virginia Tobacco Settlement Financing Corp., Series A-1,
6.706%, 6/01/2046 123,347,880
50,000,000 WellPoint, Inc.,
6.375%, 6/15/2037(b) 49,565,300
101,985,000 Western Union Co.,
6.200%, 11/17/2036 98,256,836
7,300,000 White Pine Hydro LLC,
6.310%, 7/10/2017(f) 7,432,765
10,935,000 White Pine Hydro LLC,
6.960%, 7/10/2037(f) 11,130,212
4,000,000 White Pine Hydro LLC,
7.260%, 7/20/2015(f) 4,099,648
600,000 Williams Cos., Inc.,
7.875%, 9/01/2021 652,500
965,000 Williams Cos., Inc., Senior Note,
7.750%, 6/15/2031 1,014,456
8,600,000 Williams Cos., Inc., Series A,
7.500%, 1/15/2031 8,922,400
11,205,000 Willis North America, Inc.,
6.200%, 3/28/2017 11,117,870
10,270,000 Woolworth Corp.,
8.500%, 1/15/2022 9,807,850
18,050,000 Xerox Capital Trust I, Guaranteed Note,
8.000%, 2/01/2027 18,209,941
1,730,000 Xerox Corp., (MTN),
7.200%, 4/01/2016 1,804,767
8,885,000 XTO Energy, Inc.,
6.750%, 8/01/2037 9,270,876
---------------
6,093,502,631
---------------
Total Non-Convertible Bonds (Identified Cost $9,002,294,070) 9,404,974,539
---------------
Total Bonds and Notes (Identified Cost $9,310,252,018) 9,720,953,726
---------------
See accompanying notes to financial statements.
41
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Shares Description Value (+)
- ----------------------------------------------------------------------------------
Common Stocks -- 2.2% of Net Assets
Israel -- 0.0%
2,288 Teva Pharmaceutical Industries, Ltd., ADR $ 101,747
---------------
United States -- 2.2%
200,925 Apartment Investment & Management Co., Class A(b) 9,067,745
889,730 Associated Estates Realty Corp., (REIT)(b) 11,602,079
2,238,800 Bristol-Myers Squibb Co.(b) 64,522,216
53,260 Chesapeake Energy Corp.(b) 1,877,948
2,309,175 ConAgra Foods, Inc.(b) 60,338,743
41,343 Corning, Inc.(b) 1,019,105
182,500 Developers Diversified Realty Corp., (REIT) 10,196,275
282,500 Duke Energy Corp.(b) 5,279,925
460,000 Equity Residential, (REIT)(b) 19,485,600
477,725 KB Home(b) 11,971,789
549,450 Lennar Corp., Class A(b) 12,445,042
117,700 Simon Property Group, Inc., (REIT)(b) 11,770,000
141,249 Spectra Energy Corp.(b) 3,457,776
359,449 Vertex Pharmaceuticals, Inc.(b)(g) 13,806,436
---------------
236,840,679
---------------
Total Common Stocks (Identified Cost $211,935,348) 236,942,426
---------------
Shares
- ----------------------------------------------------------------------------------
Preferred Stocks -- 1.6%
United States -- 1.6%
302,400 AES Trust III, Convertible,
6.750%(b) 14,738,976
52,020 Chesapeake Energy Corp.,
4.500%(b) 5,241,015
278,685 Chesapeake Energy Corp., Convertible,
5.000%(b) 31,073,378
107,725 CMS Energy Trust I, Convertible,
7.750% 5,372,785
143,875 El Paso Energy Capital Trust I, Convertible,
4.750% 5,926,211
393 Entergy New Orleans, Inc.,
4.750% 29,438
42,700 FelCor Lodging Trust, Inc., (REIT) Convertible,
$1.95 1,001,742
1,447,000 Ford Motor Co. Capital Trust II, Convertible,
6.500% 54,624,250
15,600 Lucent Technologies Capital Trust I, Convertible,
7.750% 15,132,000
81,975 Newell Financial Trust I,
5.250% 3,822,084
469,300 Owens-Illinois, Inc., Convertible,
4.750% 21,118,500
332,275 Six Flags, Inc.,
7.250%(b) 6,954,516
9,381 United Rentals Trust I, Convertible,
6.500% 452,632
---------------
Total Preferred Stocks (Identified Cost $155,205,634) 165,487,527
---------------
Shares Description Value (+)
- ------------------------------------------------------------------------------------------------------
Closed-End Investment Companies -- 0.2%
203,625 BlackRock Senior High Income Fund, Inc. $ 1,142,336
110,211 Morgan Stanley Emerging Markets Debt Fund, Inc. 1,061,332
1,969,750 Western Asset High Income Opportunity Fund, Inc. 12,744,283
1,368,400 Western Asset Managed High Income Fund, Inc.(b) 8,484,080
---------------
Total Closed-End Investment Companies
(Identified Cost $22,753,639) 23,432,031
---------------
Shares/
Principal
Amount (++)
- ------------------------------------------------------------------------------------------------------
Short-Term Investments -- 21.7% of Net Assets
2,135,549,007 State Street Securities Lending Quality Trust(h) 2,135,549,007
$ 132,117,601 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/2007 at 3.750% to be repurchased at
$132,158,888 on 10/1/2007, collateralized by $96,625,000
Federal National Mortgage Association, 5.750% due
3/07/2022 with a value of $95,175,625 and $38,670,000
Federal National Mortgage Association, 6.060% due
6/06/2017 with a value of $39,588,413 including accrued
interest (Note 2f) 132,117,601
---------------
Total Short-Term Investments (Identified Cost $2,267,666,608) 2,267,666,608
---------------
Total Investments -- 118.6%
(Identified Cost $11,967,813,247)(a) 12,414,482,318
Other assets less liabilities -- (18.6)% (1,949,058,963)
---------------
Net Assets -- 100% $10,465,423,355
===============
(++) Principal amount is in U.S. dollars unless otherwise noted.
(+) See Note 2a of Notes to Financial Statements.
(++) Amounts shown represent units. One unit represents a principal
amount of 100.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized appreciation on
investments based on a cost of $11,976,371,468 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 $ 592,285,251
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (154,174,401)
---------------
Net unrealized appreciation $ 438,110,850
===============
(b) All or a portion of this security was on loan to brokers at September 30, 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). The coupon rate shown represents the rate at period end.
(d) Non-income producing security due to default or bankruptcy filing.
(e) Step Bond: Coupon is a fixed rate for an initial period then resets at a specified date
and rate.
(f) Illiquid security. At September 30, 2007, the value of these securities amounted to
$35,800,685 or 0.3% of net assets.
(g) Non-income producing security.
(h) Represents investment of security lending collateral.
See accompanying notes to financial statements.
42
LOOMIS SAYLES STRATEGIC INCOME FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
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 $1,085,588,797 or
10.4% 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.
EMTN Euro Medium Term Note
FNMA Federal National Mortgage Association
MTN Medium Term Note
REIT Real Estate Investment Trust
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 September 30, 2007 as a Percentage of Net Assets (unaudited)
Sovereigns 18.3%
Treasuries 9.7
Banking 6.2
Wirelines 5.9
Pharmaceuticals 4.7
Electric 4.4
Non-Captive Finance 3.1
Supranational 3.0
Automotive 2.8
Technology 2.8
Media Cable 2.8
Healthcare 2.3
Pipelines 2.1
Independent Energy 2.1
Home Construction 2.1
Other, less than 2% each 24.6
See accompanying notes to financial statements.
43
This Page Intentionally Left Blank
44
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 2007
Limited Term Government
Core Plus Bond Fund High Income Fund and Agency Fund
--------------------- --------------------- -----------------------
ASSETS
Investments at cost $ 253,413,303 $ 45,991,644 $ 142,739,129
Net unrealized appreciation
(depreciation) (1,218,841) 1,141,994 (938,808)
--------------------- --------------------- ---------------------
Investments at value(a) 252,194,462 47,133,638 141,800,321
Cash -- -- --
Foreign currency at value (identified
cost $10,602, $5,297, $0, $0, $0,
$10,441,500) 10,665 5,332 --
Receivable for Fund shares sold 459,038 26,662 208,170
Receivable for securities sold -- 13,404 --
Dividends and interest receivable 2,170,057 686,988 569,566
Tax reclaims receivable -- -- --
Securities lending income receivable 8,641 2,829 4,704
--------------------- --------------------- ---------------------
TOTAL ASSETS 254,842,863 47,868,853 142,582,761
--------------------- --------------------- ---------------------
LIABILITIES
Collateral on securities loaned, at
value (Note 2) 31,895,894 5,572,870 8,886,334
Payable for securities purchased 640,343 -- --
Payable for delayed delivery security
purchased (Note 2) -- -- 7,119,219
Payable for Fund shares redeemed 260,784 86,102 1,285,694
Dividends payable -- -- 157,226
Management fees payable (Note 4) 22,058 5,356 44,450
Deferred Trustees' fees (Note 4) 279,432 81,276 244,169
Administrative fees payable (Note 4) 10,214 2,033 5,555
Other accounts payable and accrued
expenses 215,572 42,336 55,220
--------------------- --------------------- ---------------------
TOTAL LIABILITIES 33,324,297 5,789,973 17,797,867
--------------------- --------------------- ---------------------
NET ASSETS $ 221,518,566 $ 42,078,880 $ 124,784,894
===================== ===================== =====================
NET ASSETS CONSIST OF:
Paid-in capital $ 243,520,421 $ 122,213,756 $ 142,955,766
Undistributed (overdistributed) net
investment income 286,929 44,230 (130,422)
Accumulated net realized gain (loss)
on investments and foreign currency
transactions (21,078,017) (81,322,639) (17,101,642)
Net unrealized appreciation
(depreciation) on investments and
foreign currency translations (1,210,767) 1,143,533 (938,808)
--------------------- --------------------- ---------------------
NET ASSETS $ 221,518,566 $ 42,078,880 $ 124,784,894
===================== ===================== =====================
COMPUTATION OF NET ASSET VALUE AND
OFFERING PRICE:
Class A shares:
Net assets $ 105,780,312 $ 32,602,986 $ 108,536,108
===================== ===================== =====================
Shares of beneficial interest 9,353,621 6,367,626 9,868,144
===================== ===================== =====================
Net asset value and redemption price
per share $ 11.31 $ 5.12 $ 11.00
===================== ===================== =====================
Offering price per share
(100/[100-maximum sales charge] of
net asset value) (Note 1) $ 11.84 $ 5.36 $ 11.34
===================== ===================== =====================
Class B shares: (redemption price per
share is equal to net asset value
less any applicable contingent
deferred sales charge) (Note 1)
Net assets $ 87,101,310 $ 4,200,520 $ 6,786,867
===================== ===================== =====================
Shares of beneficial interest 7,698,452 819,262 617,767
===================== ===================== =====================
Net asset value and offering price
per share $ 11.31 $ 5.13 $ 10.99
===================== ===================== =====================
Class C shares: (redemption price per
share is equal to net asset value
less any applicable contingent
deferred sales charge) (Note 1)
Net assets $ 12,690,465 $ 5,275,374 $ 5,260,951
===================== ===================== =====================
Shares of beneficial interest 1,120,972 1,029,474 478,112
===================== ===================== =====================
Net asset value and offering price
per share $ 11.32 $ 5.12 $ 11.00
===================== ===================== =====================
Class Y shares:
Net assets $ 15,946,479 $ -- $ 4,200,968
===================== ===================== =====================
Shares of beneficial interest 1,403,705 -- 380,830
===================== ===================== =====================
Net asset value, offering and
redemption price per share $ 11.36 $ -- $ 11.03
===================== ===================== =====================
(a) Including securities on loan with
market values of: $ 31,264,559 $ 5,465,101 $ 8,731,477
===================== ===================== =====================
See accompanying notes to financial statements.
45
Massachusetts Tax Municipal Income Strategic Income
Free Income Fund Fund Fund
--------------------- --------------------- ---------------------
$ 65,672,930 $ 85,467,894 $ 11,967,813,247
1,764,990 823,097 446,669,071
--------------------- --------------------- ---------------------
67,437,920 86,290,991 12,414,482,318
-- -- 8,663
-- -- 10,770,100
2,720 3,683 67,247,918
-- -- 1,152,300
1,059,746 1,367,316 147,521,117
-- -- 3,180
-- -- 560,097
--------------------- --------------------- ---------------------
68,500,386 87,661,990 12,641,745,693
--------------------- --------------------- ---------------------
-- -- 2,135,549,007
-- 1,270,704 23,276,220
-- -- --
41,191 129,784 10,489,368
53,141 88,267 --
22,083 20,289 4,671,414
92,638 170,624 393,037
3,224 4,357 445,360
43,457 36,724 1,497,932
--------------------- --------------------- ---------------------
255,734 1,720,749 2,176,322,338
--------------------- --------------------- ---------------------
$ 68,244,652 $ 85,941,241 $ 10,465,423,355
===================== ===================== =====================
$ 66,958,010 $ 84,350,902 $ 9,992,363,120
17,656 236,715 26,601,961
(496,004) 530,527 (2,290,496)
1,764,990 823,097 448,748,770
--------------------- --------------------- ---------------------
$ 68,244,652 $ 85,941,241 $ 10,465,423,355
===================== ===================== =====================
$ 66,584,736 $ 82,144,212 $ 5,749,314,842
===================== ===================== =====================
4,081,741 11,202,720 378,740,752
===================== ===================== =====================
$ 16.31 $ 7.33 $ 15.18
===================== ===================== =====================
$ 17.03 $ 7.68 $ 15.90
===================== ===================== =====================
$ 1,659,916 $ 3,797,029 $ 233,418,256
===================== ===================== =====================
101,983 517,191 15,306,640
===================== ===================== =====================
$ 16.28 $ 7.34 $ 15.25
===================== ===================== =====================
$ -- $ -- $ 3,843,822,561
===================== ===================== =====================
-- -- 252,149,852
===================== ===================== =====================
$ -- $ -- $ 15.24
===================== ===================== =====================
$ -- $ -- $ 638,867,696
===================== ===================== =====================
-- -- 42,104,822
===================== ===================== =====================
$ -- $ -- $ 15.17
===================== ===================== =====================
$ -- $ -- $ 2,097,963,205
===================== ===================== =====================
46
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 2007
Limited Term Government
Core Plus Bond Fund High Income Fund and Agency Fund
--------------------- --------------------- -----------------------
INVESTMENT INCOME
Dividends $ -- $ 110,571 $ --
Interest 11,932,113 3,071,037 6,419,896
Securities lending income (Note 2) 69,741 13,570 20,273
Less net foreign taxes withheld -- (253) --
--------------------- --------------------- ---------------------
12,001,854 3,194,925 6,440,169
--------------------- --------------------- ---------------------
Expenses
Management fees (Note 4) 952,707 252,979 629,029
Service fees - Class A (Note 4) 242,355 78,888 273,749
Service and distribution fees -
Class B (Note 4) 1,003,755 60,229 81,324
Service and distribution fees -
Class C (Note 4) 92,871 45,851 46,659
Trustees' fees and expenses (Note 4) 65,307 23,359 56,354
Administrative fees (Note 4) 122,399 23,539 69,276
Custodian fees and expenses 34,344 22,697 27,755
Transfer agent fees and expenses -
Class A (Note 4) 210,244 44,996 125,366
Transfer agent fees and expenses -
Class B (Note 4) 235,267 9,824 10,047
Transfer agent fees and expenses -
Class C (Note 4) 18,049 5,989 5,091
Transfer agent fees and expenses -
Class Y (Note 4) 17,834 -- 268
Audit fees 46,662 46,625 50,312
Legal fees 6,665 2,213 3,599
Shareholder reporting expenses 62,341 11,356 19,169
Registration fees 63,782 44,848 59,091
Miscellaneous expenses 18,214 8,073 11,224
--------------------- --------------------- ---------------------
Total expenses 3,192,796 681,466 1,468,313
Less fee reduction and/or expense
reimbursement (Note 4) (128,194) (103,143) (139,668)
--------------------- --------------------- ---------------------
Net expenses 3,064,602 578,323 1,328,645
--------------------- --------------------- ---------------------
Net investment income 8,937,252 2,616,602 5,111,524
--------------------- --------------------- ---------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain on:
Investments - net 3,043,606 2,070,919 65,262
Foreign currency transactions - net 13,847 234 --
Change in unrealized appreciation
(depreciation) on:
Investments - net (463,863) (1,571,353) 261,814
Foreign currency translations - net 8,786 1,133 --
--------------------- --------------------- ---------------------
Total net realized and unrealized gain
(loss) on investments and foreign
currency transactions 2,602,376 500,933 327,076
--------------------- --------------------- ---------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 11,539,628 $ 3,117,535 $ 5,438,600
===================== ===================== =====================
See accompanying notes to financial statements.
47
Massachusetts Tax Municipal Strategic
Free Income Fund Income Fund Income Fund
--------------------- --------------------- ---------------------
$ -- $ -- $ 19,532,993
3,430,191 4,380,690 484,453,445
-- -- 2,953,743
-- -- (207,865)
--------------------- --------------------- ---------------------
3,430,191 4,380,690 506,732,316
--------------------- --------------------- ---------------------
425,028 468,737 44,720,043
172,258 222,720 10,869,737
19,347 46,593 2,134,858
-- -- 29,151,864
26,207 41,640 254,282
39,395 52,381 4,368,976
19,892 20,868 704,297
44,715 47,076 4,044,313
1,365 2,555 224,489
-- -- 2,690,350
-- -- 358,862
44,963 42,892 54,674
2,164 2,846 258,742
11,812 8,011 1,067,761
20,468 36,748 633,202
9,250 8,998 235,087
--------------------- --------------------- ---------------------
836,864 1,002,065 101,771,537
(149,393) (76,521) --
--------------------- --------------------- ---------------------
687,471 925,544 101,771,537
--------------------- --------------------- ---------------------
2,742,720 3,455,146 404,960,779
--------------------- --------------------- ---------------------
915,434 635,763 69,597,188
-- -- 2,458,019
(2,461,854) (2,985,337) 226,353,834
-- -- 2,094,707
--------------------- --------------------- ---------------------
(1,546,420) (2,349,574) 300,503,748
--------------------- --------------------- ---------------------
$ 1,196,300 $ 1,105,572 $ 705,464,527
===================== ===================== =====================
48
STATEMENTS OF CHANGES IN NET ASSETS
Core Plus Bond Fund
--------------------------------------------
Year Ended Year Ended
September 30, 2007 September 30, 2006
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 8,937,252 $ 9,304,763
Net realized gain (loss) on investments and
foreign currency transactions 3,057,453 (250,058)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations (455,077) (1,346,777)
--------------------- ---------------------
Net increase in net assets resulting from
operations 11,539,628 7,707,928
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (4,791,156) (5,268,788)
Class B (4,164,404) (5,666,228)
Class C (393,045) (281,535)
Class Y (746,123) (518,162)
Net realized capital gain
Class A -- --
Class B -- --
--------------------- ---------------------
Total distributions (10,094,728) (11,734,713)
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (NOTE 8) (150,880) (28,217,204)
--------------------- ---------------------
Redemption fees
Class A 4,164 707
Class B 3,852 886
Class C 451 42
Class Y 627 61
--------------------- ---------------------
9,094 1,696
--------------------- ---------------------
Net increase (decrease) in net assets 1,303,114 (32,242,293)
--------------------- ---------------------
NET ASSETS
Beginning of the year 220,215,452 252,457,745
--------------------- ---------------------
End of the year $ 221,518,566 $ 220,215,452
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ 286,929 $ 784,748
===================== =====================
High Income Fund
--------------------------------------------
Year Ended Year Ended
September 30, 2007 September 30, 2006
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 2,616,602 $ 2,541,904
Net realized gain (loss) on investments and
foreign currency transactions 2,071,153 588,883
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations (1,570,220) 285,142
--------------------- ---------------------
Net increase in net assets resulting from
operations 3,117,535 3,415,929
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (2,276,050) (1,818,161)
Class B (385,580) (563,592)
Class C (290,234) (204,085)
Class Y -- --
Net realized capital gain
Class A -- --
Class B -- --
--------------------- ---------------------
Total distributions (2,951,864) (2,585,838)
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (NOTE 8) 2,103,465 (2,428,478)
--------------------- ---------------------
Redemption fees
Class A 1,239 866
Class B 221 337
Class C 191 116
Class Y -- --
--------------------- ---------------------
1,651 1,319
--------------------- ---------------------
Net increase (decrease) in net assets 2,270,787 (1,597,068)
--------------------- ---------------------
NET ASSETS
Beginning of the year 39,808,093 41,405,161
--------------------- ---------------------
End of the year $ 42,078,880 $ 39,808,093
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ 44,230 $ (82,641)
===================== =====================
Limited Term Government and Agency Fund
--------------------------------------------
Year Ended Year Ended
September 30, 2007 September 30, 2006
--------------------- ---------------------
FROM OPERATIONS:
Net investment income $ 5,111,524 $ 5,075,427
Net realized gain (loss) on investments and
foreign currency transactions 65,262 (845,533)
Net change in unrealized appreciation
(depreciation) on investments and
foreign currency translations 261,814 (145,704)
--------------------- ---------------------
Net increase in net assets resulting from
operations 5,438,600 4,084,190
--------------------- ---------------------
FROM DISTRIBUTIONS TO
SHAREHOLDERS:
Net investment income
Class A (4,778,111) (4,997,550)
Class B (288,517) (381,270)
Class C (166,306) (153,472)
Class Y (164,290) (105,197)
Net realized capital gain
Class A -- --
Class B -- --
--------------------- ---------------------
Total distributions (5,397,224) (5,637,489)
--------------------- ---------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (NOTE 8) (6,079,674) (32,402,336)
--------------------- ---------------------
Redemption fees
Class A -- --
Class B -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
-- --
--------------------- ---------------------
Net increase (decrease) in net assets (6,038,298) (33,955,635)
--------------------- ---------------------
NET ASSETS
Beginning of the year 130,823,192 164,778,827
--------------------- ---------------------
End of the year $ 124,784,894 $ 130,823,192
===================== =====================
UNDISTRIBUTED (OVERDISTRIBUTED)
NET INVESTMENT INCOME (LOSS) $ (130,422) $ (152,331)
===================== =====================
See accompanying notes to financial statements.
49
Massachusetts Tax Free Income Fund Municipal Income Fund
- -------------------------------------------- --------------------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, 2007 September 30, 2006 September 30, 2007 September 30, 2006
- --------------------- --------------------- --------------------- ---------------------
$ 2,742,720 $ 2,919,705 $ 3,455,146 $ 3,899,552
915,434 345,282 635,763 1,173,164
(2,461,854) (133,389) (2,985,337) (395,083)
- --------------------- --------------------- --------------------- ---------------------
1,196,300 3,131,598 1,105,572 4,677,633
- --------------------- --------------------- --------------------- ---------------------
(2,677,791) (2,838,521) (3,282,541) (3,654,019)
(60,488) (86,605) (136,525) (192,325)
-- -- -- --
-- -- -- --
-- -- (425,469) --
-- -- (23,297) --
- --------------------- --------------------- --------------------- ---------------------
(2,738,279) (2,925,126) (3,867,832) (3,846,344)
- --------------------- --------------------- --------------------- ---------------------
(5,036,768) (5,608,072) (9,932,346) (12,060,212)
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
-- -- -- --
-- -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
(6,578,747) (5,401,600) (12,694,606) (11,228,923)
- --------------------- --------------------- --------------------- ---------------------
74,823,399 80,224,999 98,635,847 109,864,770
- --------------------- --------------------- --------------------- ---------------------
$ 68,244,652 $ 74,823,399 $ 85,941,241 $ 98,635,847
===================== ===================== ===================== =====================
$ 17,656 $ 13,263 $ 236,715 $ 177,784
===================== ===================== ===================== =====================
Strategic Income Fund
- --------------------------------------------
Year Ended Year Ended
September 30, 2007 September 30, 2006
- --------------------- ---------------------
$ 404,960,779 $ 147,505,882
72,055,207 6,215,522
228,448,541 138,319,873
- --------------------- ---------------------
705,464,527 292,041,277
- --------------------- ---------------------
(239,664,878) (93,282,911)
(10,008,544) (7,447,638)
(137,066,220) (55,187,294)
(26,439,067) (7,523,452)
-- --
-- --
- --------------------- ---------------------
(413,178,709) (163,441,295)
- --------------------- ---------------------
5,126,647,863 2,980,503,923
- --------------------- ---------------------
182,774 110,642
8,908 9,525
122,627 75,367
19,120 9,065
- --------------------- ---------------------
333,429 204,599
- --------------------- ---------------------
5,419,267,110 3,109,308,504
- --------------------- ---------------------
5,046,156,245 1,936,847,741
- --------------------- ---------------------
$ 10,465,423,355 $ 5,046,156,245
===================== =====================
$ 26,601,961 $ 3,854,962
===================== =====================
50
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 (c) gain (loss) operations income distributions fees (e)
---------- ---------- -------------- ---------- -------------- ------------- ----------
CORE PLUS BOND FUND
Class A
9/30/2007 $ 11.23 $ 0.50 $ 0.14 $ 0.64 $ (0.56) $ (0.56) $ 0.00
9/30/2006 11.41 0.50 (0.07) 0.43 (0.61) (0.61) 0.00
9/30/2005 11.69 0.46 (0.18) 0.28 (0.56) (0.56) 0.00
9/30/2004 11.63 0.47 0.13 0.60 (0.54) (0.54) 0.00
9/30/2003(i) 11.28 0.37 0.34 0.71 (0.36) (0.36) --
12/31/2002 11.59 0.63 (0.32) 0.31 (0.62) (0.62) --
Class B
9/30/2007 11.24 0.41 0.13 0.54 (0.47) (0.47) 0.00
9/30/2006 11.41 0.41 (0.05) 0.36 (0.53) (0.53) 0.00
9/30/2005 11.70 0.37 (0.18) 0.19 (0.48) (0.48) 0.00
9/30/2004 11.62 0.38 0.14 0.52 (0.44) (0.44) 0.00
9/30/2003(i) 11.28 0.30 0.34 0.64 (0.30) (0.30) --
12/31/2002 11.59 0.55 (0.32) 0.23 (0.54) (0.54) --
Class C
9/30/2007 11.25 0.41 0.13 0.54 (0.47) (0.47) 0.00
9/30/2006 11.42 0.41 (0.05) 0.36 (0.53) (0.53) 0.00
9/30/2005 11.71 0.37 (0.18) 0.19 (0.48) (0.48) 0.00
9/30/2004 11.63 0.38 0.14 0.52 (0.44) (0.44) 0.00
9/30/2003(i) 11.29 0.30 0.34 0.64 (0.30) (0.30) --
12/31/2002 11.60 0.55 (0.32) 0.23 (0.54) (0.54) --
Class Y
9/30/2007 11.29 0.54 0.13 0.67 (0.60) (0.60) 0.00
9/30/2006 11.46 0.51 (0.04) 0.47 (0.64) (0.64) 0.00
9/30/2005 11.74 0.49 (0.18) 0.31 (0.59) (0.59) 0.00
9/30/2004 11.69 0.50 0.13 0.63 (0.58) (0.58) 0.00
9/30/2003(i) 11.33 0.41 0.35 0.76 (0.40) (0.40) --
12/31/2002 11.63 0.69 (0.32) 0.37 (0.67) (0.67) --
HIGH INCOME FUND*
Class A
9/30/2007 $ 5.09 $ 0.33 $ 0.08 $ 0.41 $ (0.38) $ (0.38) $ 0.00
9/30/2006 4.98 0.34 0.11 0.45 (0.34) (0.34) 0.00
9/30/2005 4.82 0.33 0.16 0.49 (0.33) (0.33) 0.00
9/30/2004 4.65 0.33 0.17 0.50 (0.33) (0.33) 0.00
9/30/2003(i) 4.12 0.25 0.53 0.78 (0.25) (0.25) --
12/31/2002 4.94 0.39 (0.82) (0.43) (0.39) (0.39) --
Class B
9/30/2007 5.10 0.29 0.07 0.36 (0.33) (0.33) 0.00
9/30/2006 4.98 0.30 0.12 0.42 (0.30) (0.30) 0.00
9/30/2005 4.83 0.29 0.15 0.44 (0.29) (0.29) 0.00
9/30/2004 4.65 0.30 0.18 0.48 (0.30) (0.30) 0.00
9/30/2003(i) 4.12 0.23 0.53 0.76 (0.23) (0.23) --
12/31/2002 4.95 0.36 (0.83) (0.47) (0.36) (0.36) --
(a)A sales charge for Class A and Class C (prior to February 1, 2004) shares
and a contingent deferred sales charge for Class B and Class C shares are
not reflected in total return calculations. Periods of less than one year,
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)Represents the total expenses prior to advisory fee reductions and/or
reimbursement of a portion of the Fund's expenses.
(e)Amount rounds to less than $0.01, if applicable.
(f)Had certain expenses not been reduced during the period, if applicable,
total return would have been lower.
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 turnover
period (%) (a) (f) (000's) (%) (b) (g) (%) (b) (d) (loss) (%) (b) rate (%)
- ---------- ----------- ----------- ----------- ----------- -------------- ---------
$ 11.31 5.7 $ 105,780 1.04 1.09 4.41 69
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
11.31 4.9 87,101 1.79 1.85 3.64 69
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
11.32 4.9 12,690 1.78 1.82 3.66 69
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
11.36 6.1 15,946 0.70 0.75 4.75 69
11.29 4.3 11,986 0.80(h) 0.80(h) 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
$ 5.12 8.1 $ 32,603 1.18 1.43 6.40 41
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
5.13 7.2 4,201 1.94 2.18 5.63 41
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
(g)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or reduce its management fee during the period. Without this
reimbursement/reduction, expenses would have been higher. See Note 4.
(h)Includes expense recapture of 0.06%. See note 4.
(i)For the nine months ended September 30, 2003.
* The financial information for periods prior to September 30, 2004 reflects
the financial information for the CDC Nvest 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.
52
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (Loss) from Investment Operations Less Distributions
--------------------------------------- ---------------------------
Net asset
value,
beginning Net Net realized Total from Dividends from
of investment and unrealized investment net investment Total
period income (c) gain (loss) operations income distributions
---------- ---------- -------------- ---------- -------------- -------------
HIGH INCOME FUND* (continued)
Class C
9/30/2007 $ 5.09 $ 0.29 $ 0.07 $ 0.36 $ (0.33) $ (0.33)
9/30/2006 4.98 0.30 0.11 0.41 (0.30) (0.30)
9/30/2005 4.83 0.29 0.15 0.44 (0.29) (0.29)
9/30/2004 4.65 0.30 0.18 0.48 (0.30) (0.30)
9/30/2003(d) 4.12 0.23 0.53 0.76 (0.23) (0.23)
12/31/2002 4.94 0.36 (0.82) (0.46) (0.36) (0.36)
LIMITED TERM GOVERNMENT AND AGENCY FUND**
Class A
9/30/2007 $ 11.00 $ 0.45 $ 0.03 $ 0.48 $ (0.48) $ (0.48)
9/30/2006 11.09 0.39 (0.05) 0.34 (0.43) (0.43)
9/30/2005 11.30 0.28 (0.16) 0.12 (0.33) (0.33)
9/30/2004 11.51 0.30 (0.09) 0.21 (0.42) (0.42)
9/30/2003(d) 11.73 0.21 (0.07) 0.14 (0.36) (0.36)
12/31/2002 11.36 0.42 0.49 0.91 (0.54) (0.54)
Class B
9/30/2007 10.98 0.37 0.03 0.40 (0.39) (0.39)
9/30/2006 11.07 0.31 (0.05) 0.26 (0.35) (0.35)
9/30/2005 11.28 0.20 (0.17) 0.03 (0.24) (0.24)
9/30/2004 11.49 0.22 (0.09) 0.13 (0.34) (0.34)
9/30/2003(d) 11.71 0.15 (0.06) 0.09 (0.31) (0.31)
12/31/2002 11.34 0.35 0.48 0.83 (0.46) (0.46)
Class C
9/30/2007 10.99 0.37 0.03 0.40 (0.39) (0.39)
9/30/2006 11.08 0.31 (0.05) 0.26 (0.35) (0.35)
9/30/2005 11.30 0.20 (0.18) 0.02 (0.24) (0.24)
9/30/2004 11.50 0.22 (0.08) 0.14 (0.34) (0.34)
9/30/2003(d) 11.72 0.15 (0.06) 0.09 (0.31) (0.31)
12/31/2002 11.35 0.35 0.48 0.83 (0.46) (0.46)
Class Y
9/30/2007 11.03 0.49 0.03 0.52 (0.52) (0.52)
9/30/2006 11.13 0.43 (0.06) 0.37 (0.47) (0.47)
9/30/2005 11.34 0.31 (0.17) 0.14 (0.35) (0.35)
9/30/2004 11.55 0.32 (0.09) 0.23 (0.44) (0.44)
9/30/2003(d) 11.78 0.25 (0.08) 0.17 (0.40) (0.40)
12/31/2002 11.41 0.48 0.48 0.96 (0.59) (0.59)
Redemption
fees (e)
----------
HIGH INCOME FUND* (continued)
Class C
9/30/2007 $ 0.00
9/30/2006 0.00
9/30/2005 0.00
9/30/2004 0.00
9/30/2003(d) --
12/31/2002 --
LIMITED TERM GOVERNMENT AND AGENCY FUND**
Class A
9/30/2007 $ --
9/30/2006 --
9/30/2005 --
9/30/2004 --
9/30/2003(d) --
12/31/2002 --
Class B
9/30/2007 --
9/30/2006 --
9/30/2005 --
9/30/2004 --
9/30/2003(d) --
12/31/2002 --
Class C
9/30/2007 --
9/30/2006 --
9/30/2005 --
9/30/2004 --
9/30/2003(d) --
12/31/2002 --
Class Y
9/30/2007 --
9/30/2006 --
9/30/2005 --
9/30/2004 --
9/30/2003(d) --
12/31/2002 --
(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)Amount rounds to less than $0.01 per share, if applicable.
(f)Represents the total expenses prior to reduction of a portion of the class's
transfer agent expenses.
(g)Had certain expenses not been reduced during the period, if applicable,
total return would have been lower.
(h)Represents total expenses prior to advisory fee reduction and/or
reimbursement of a portion of the Fund's expenses, if applicable.
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) (g) (000's) (%) (b) (i) (%) (b) (h) (%) (b) rate (%)
- ---------- ----------- ----------- ----------- ----------- -------------- ---------
$ 5.12 7.2 $ 5,275 1.93 2.17 5.63 41
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
$ 11.00 4.5 $ 108,536 0.99 1.10 4.13 45
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
10.99 3.7 6,787 1.74 1.85 3.37 45
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
11.00 3.6 5,261 1.74 1.85 3.38 45
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 2.02 2.00 3.01 88
11.03 4.8 4,201 0.71 0.75 4.43 45
11.03 3.4 2,461 0.74 0.74 3.89 50
11.13 1.2 2,533 1.02 1.59(f) 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
(i)The investment advisor agreed to reimburse a portion of the Fund's expenses
and/or reduce its management fee during the period. Without this
reimbursement/reduction, expenses would have been higher. See Note 4.
* The financial information for periods prior to September 30, 2004 reflects
the financial information for the CDC Nvest High Income Fund's Class A and
Class 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.
** 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.
54
FINANCIAL HIGHLIGHTS (continued)
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
period income gain (loss) operations income capital gains
---------- ---------- -------------- ---------- -------------- -------------
MASSACHUSETTS TAX FREE INCOME FUND
Class A
9/30/2007 $ 16.67 $ 0.64(h) $ (0.36) $ 0.28 $ (0.64) $ --
9/30/2006 16.62 0.64 0.05 0.69 (0.64) --
9/30/2005 16.58 0.60 0.04 0.64 (0.60) --
9/30/2004 16.41 0.61 0.17 0.78 (0.61) --
9/30/2003(e) 16.40 0.49 0.01 0.50 (0.49) --
12/31/2002 15.82 0.67 0.59 1.26 (0.68) --
Class B
9/30/2007 16.64 0.52(h) (0.36) 0.16 (0.52) --
9/30/2006 16.58 0.51 0.06 0.57 (0.51) --
9/30/2005 16.54 0.46 0.05 0.51 (0.47) --
9/30/2004 16.37 0.49 0.18 0.67 (0.50) --
9/30/2003(e) 16.36 0.41 0.01 0.42 (0.41) --
12/31/2002 15.78 0.57 0.58 1.15 (0.57) --
MUNICIPAL INCOME FUND
Class A
9/30/2007 $ 7.55 $ 0.28(h) $ (0.19) $ 0.09 $ (0.28) $ (0.03)
9/30/2006 7.48 0.28 0.07 0.35 (0.28) --
9/30/2005 7.47 0.28 0.01 0.29 (0.28) --
9/30/2004 7.41 0.29 0.06 0.35 (0.29) --
9/30/2003(e) 7.43 0.23 (0.02) 0.21 (0.23) --
12/31/2002 7.25 0.34 0.18 0.52 (0.34) --
Class B
9/30/2007 7.56 0.22(h) (0.19) 0.03 (0.22) (0.03)
9/30/2006 7.49 0.23 0.07 0.30 (0.23) --
9/30/2005 7.48 0.22 0.01 0.23 (0.22) --
9/30/2004 7.41 0.24 0.07 0.31 (0.24) --
9/30/2003(e) 7.44 0.19 (0.03) 0.16 (0.19) --
12/31/2002 7.25 0.29 0.19 0.48 (0.29) --
Total
distributions
-------------
MASSACHUSETTS TAX FREE INCOME FUND
Class A
9/30/2007 $ (0.64)
9/30/2006 (0.64)
9/30/2005 (0.60)
9/30/2004 (0.61)
9/30/2003(e) (0.49)
12/31/2002 (0.68)
Class B
9/30/2007 (0.52)
9/30/2006 (0.51)
9/30/2005 (0.47)
9/30/2004 (0.50)
9/30/2003(e) (0.41)
12/31/2002 (0.57)
MUNICIPAL INCOME FUND
Class A
9/30/2007 $ (0.31)
9/30/2006 (0.28)
9/30/2005 (0.28)
9/30/2004 (0.29)
9/30/2003(e) (0.23)
12/31/2002 (0.34)
Class B
9/30/2007 (0.25)
9/30/2006 (0.23)
9/30/2005 (0.22)
9/30/2004 (0.24)
9/30/2003(e) (0.19)
12/31/2002 (0.29)
(a)A sales charge for Class A and a contingent deferred sales charge for Class
B 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)Represents total expenses prior to advisory fee reductions and/or
reimbursement of a portion of the Fund's expenses, if applicable.
(d)Had certain expenses not been reduced during the period, if applicable,
total return would have been lower.
See accompanying notes to financial statements.
55
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) (d) (000's) (%) (b) (f) (%) (b) (c) (%) (b) rate (%)
- ---------- ----------- ----------- ----------- ----------- -------------- ---------
$ 16.31 1.7 $ 66,585 0.95 1.16 3.89 23
16.67 4.2 72,479 1.02 1.14(g) 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
16.28 0.9 1,660 1.70 1.91 3.13 23
16.64 3.5 2,345 1.77 1.89(g) 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
$ 7.33 1.2 $ 82,144 0.95 1.03 3.72 17
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
7.34 0.4 3,797 1.70 1.78 2.97 17
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
(e)For the nine months ended September 30, 2003.
(f)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or reduce its management fee during the period. Without this
reimbursement/reduction, expenses would have been higher. See Note 4.
(g)Includes expense recapture of 0.01%. See Note 4.
(h)Per share net investment income has been calculated using the average shares
outstanding during the period.
56
FINANCIAL HIGHLIGHTS (continued)
For a share outstanding throughout each period.
Income (Loss) from Investment Operations: Less Distributions:
----------------------------------------- ---------------------------
Net asset
value, Dividends
beginning Net Net realized Total from from
of investment and unrealized investment net investment Total Redemption
period income (c) gain (loss) operations income distributions fees (f)
---------- ---------- -------------- ---------- -------------- ------------- ----------
STRATEGIC INCOME FUND*
Class A
9/30/2007 $ 14.60 $ 0.80 $ 0.60 $ 1.40 $ (0.82) $ (0.82) $ 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) --
Class B
9/30/2007 14.66 0.69 0.60 1.29 (0.70) (0.70) 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) --
Class C
9/30/2007 14.65 0.69 0.60 1.29 (0.70) (0.70) 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) --
Class Y
9/30/2007 14.59 0.85 0.59 1.44 (0.86) (0.86) 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) --
(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)Amount rounds to less than $0.01 per share, if applicable.
See accompanying notes to financial statements.
57
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) (e) (000's) (%) (b) (h) (%) (b) (g) (loss) (%) (b) rate (%)
- ---------- ----------- ----------- ----------- ----------- -------------- ---------
$ 15.18 9.9 $5,749,315 1.00 1.00 5.39 22
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
15.25 9.1 233,418 1.76 1.76 4.61 22
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
15.24 9.1 3,843,823 1.75 1.75 4.63 22
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
15.17 10.2 638,868 0.74 0.74 5.67 22
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
(g)Represents the total expenses prior to advisory fee reduction and/or
reimbursement of a portion of the Fund's expenses, if applicable.
(h)The investment adviser agreed to reimburse a portion of the Fund's expenses
and/or reduce its management fee during the period. Without this
reimbursement/reduction, expenses would have been higher. See Note 4.
* The financial information for periods prior to September 30, 2004 reflects
the financial information for CDC Nvest Strategic Income Fund's Class A,
Class B, Class C and Class Y shares, which were reorganized into Class A,
Class B, Class C and Class Y shares, respectively, of Loomis Sayles
Strategic Income Fund, effective September 12, 2003. Prior to September 1,
2003, the predecessor Fund was advised by CDC IXIS Asset Management
Advisers, L.P. and subadvised by Loomis, Sayles & Company, L.P. (the Fund's
current adviser) and, prior to September 12, 2003, had a December 31 fiscal
year end. The Fund's current fiscal year end is September 30.
58
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
1. Organization. Natixis Funds Trust I (formerly IXIS Advisor Funds Trust I),
Natixis Funds Trust II (formerly 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:
Natixis Funds Trust I:
Loomis Sayles Core Plus Bond Fund (the "Core Plus Bond Fund")
Natixis 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. On
June 1, 2007 the Board of Trustees of the Trust approved the termination of
offering of Class B shares. Effective July 30, 2007, no new accounts may be
opened in Class B shares. No additional investments into Class B shares may be
made after October 12, 2007. Existing Class B shareholders may continue to
reinvest dividends into Class B shares and exchange their Class B shares for
Class B shares of other Natixis Funds subject to existing exchange privileges
as described in the Prospectus.
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 (other than short-term obligations
purchased with an original or remaining maturity of sixty days or less) are
generally valued on the basis of evaluated bids 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
59
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
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.
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,
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 (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.
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.
Notwithstanding the projected regulatory implementation date of March 31, 2008
for the Funds, Management has already implemented FIN 48 and has performed an
analysis of the Funds' tax positions taken or that will be taken on federal and
state tax returns that remain subject to examination (tax years ended
September 30, 2004 - 2007) in connection with the adoption of FIN 48 and has
concluded that no provision for income tax is required. Accordingly, there is
no impact on the Funds' net assets at September 30, 2007 or results of
operations for the year then ended. Additionally, Fund Management is not aware
of any events that are reasonably possible to occur in the next twelve months
that would result in the amounts of any unrecognized tax benefits significantly
increasing or decreasing for the Funds.
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.
60
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
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 foreign
currency transactions, premium amortization, paydown gains and losses, expired
capital loss carryforwards, return of capital and capital gains distributions
from REITS and market discount adjustments. 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, wash
sales, premium amortization accruals, dividends payable, straddle loss
deferrals, REIT basis adjustments, TIP discount accretion, defaulted bond
interest, capital loss carryforwards and post-October capital loss deferrals.
Distributions from net investment income and short-term capital gains are
considered to be ordinary income for tax purposes.
The tax characterization of distributions is determined on an annual basis. The
tax character of distributions paid to shareholders during the years ended
September 30, 2007 and 2006 was as follows:
2007 Distributions Paid From:
- - -----------------------------
Exempt
Ordinary Long-Term Interest
Fund Income Capital Gains Dividends Total
- ---- ------ ------------- --------- -----
Core Plus Bond Fund $ 10,094,728 $ -- $ -- $ 10,094,728
High Income Fund 2,951,864 -- -- 2,951,864
Limited Term Government and
Agency Fund 5,397,224 -- -- 5,397,224
Massachusetts Tax Free Income Fund 42,308 -- 2,695,971 2,738,279
Municipal Income Fund 80,874 448,766 3,338,192 3,867,832
Strategic Income Fund 413,178,709 -- -- 413,178,709
2006 Distributions Paid From:
- - -----------------------------
Exempt
Ordinary Long-Term Interest
Fund Income Capital Gains 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
Differences between these amounts and those reported in the Statement of
Changes in Net Assets are primarily attributable to different book and tax
treatment for short-term capital gains.
61
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
As of September 30, 2007, the components of distributable earnings on a tax
basis 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
- - --------- ---- ---- ----------- ---- ----
Undistributed ordinary income/tax
exempt income $ 549,765 $ 126,678 $ 270,973 $ 163,437 $ 495,606 $ 30,372,778
Undistributed long-term capital gains -- -- -- -- 586,361 6,267,725
Capital loss carryforward:
Expires September 30, 2008 -- (11,101,868) (4,165,768) -- -- --
Expires September 30, 2009 -- (43,374,721) (4,128,091) -- -- --
Expires September 30, 2010 (20,430,847) (26,826,634) (663,109) (204,147) -- --
Expires September 30, 2011 -- -- (425,323) -- -- --
Expires September 30, 2012 -- -- (193,904) -- -- --
Expires September 30, 2013 -- -- -- (154,156) -- --
Expires September 30, 2014 (181,728) -- (2,770,324) -- -- --
Expires September 30, 2015 -- -- (4,336,746) -- -- --
------------ ------------ ------------ ---------- ---------- ------------
Total capital loss carryforward (20,612,575) (81,303,223) (16,683,265) (358,303) -- --
Deferred net capital losses (post-October 2006) -- -- (368,090) -- -- --
Unrealized appreciation (depreciation) (1,676,210) 1,124,117 (989,095) 1,627,289 767,262 440,190,549
------------ ------------ ------------ ---------- ---------- ------------
Total accumulated earnings (losses) (21,739,020) (80,052,428) (17,769,477) 1,432,423 1,849,229 476,831,052
============ ============ ============ ========== ========== ============
Capital loss carryforward utilized in the
current year $ 530,108 $ 1,622,295 $ -- $ 915,793 $ -- $ 36,293,441
The Limited Term Government and Agency Fund had carry forward losses expire in
the current year for the amount of $9,755,614.
The Massachusetts Tax Free Income Fund had carry forward losses expire in the
current year for the amount of $804,173.
f. Repurchase Agreements. Each Fund, through its custodian, receives delivery
of the underlying securities collateralizing repurchase agreements. It is each
Fund's policy that the market value of the collateral be at least equal to 102%
of the repurchase price, including interest. The repurchase agreements are
tri-party arrangements whereby the collateral is held at the custodian bank in
a segregated account for the benefit of the Fund and on behalf of the
counterparty. Repurchase agreements could involve certain risks in the event of
default or insolvency of the counterparty including possible delays or
restrictions upon a Fund's ability to dispose of the underlying securities.
g. Securities Lending. 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 value of securities on loan to borrowers and the value of collateral
held by the Funds with respect to such loans at September 30, 2007 were as
follows:
Value of Value of Collateral
Fund Securities on Loan Received
---- ------------------ -------------------
Core Plus Bond Fund $ 31,264,559 $ 31,895,894
High Income Fund 5,465,101 5,572,870
Limited Term Government and Agency Fund 8,731,477 8,886,334
Massachusetts Tax Free Income Fund -- --
Municipal Income Fund -- --
Strategic Income Fund 2,097,963,205 2,135,549,007
62
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
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 Pronouncement. In September, 2006, Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 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 FAS 157 will have on the Funds'
financial statements.
3. Purchases and Sales of Securities. For the year ended September 30, 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 $ 89,574,124 $ 60,855,209 $ 59,782,171 $ 92,079,813
High Income Fund 3,111,384 782,884 15,736,965 15,769,222
Limited Term Government
and Agency Fund 46,669,322 61,905,050 4,928,981 15,496,437
Massachusetts Tax Free
Income Fund -- -- 15,767,975 19,886,246
Municipal Income Fund -- -- 15,807,606 25,492,467
Strategic Income Fund 1,279,563,142 1,012,531,546 5,399,459,879 635,719,750
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%
Natixis Asset Management Advisors, L.P. ("Natixis Advisors") (formerly IXIS
Asset Management Advisors, L.P.), 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 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%
63
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
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 reduce 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 July 1, 2007 to September 30, 2007, the expense limits as a percentage of
average daily net assets under the expense limitation agreements were as
follows:
Expense Limits as a Percentage of
Average Daily Net Assets
- -------------------------------
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Core Plus Bond Fund 1.00% 1.75% 1.75% 0.75%
High Income Fund 1.15% 1.90% 1.90% --
Limited Term Government and Agency Fund 0.95% 1.70% 1.70% 0.70%
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 July 1, 2007, the expense limits as a percentage of average daily net
assets were as follows:
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Core Plus Bond Fund 1.05% 1.80% 1.80% 0.80%
High Income Fund 1.15% 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:
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%
Loomis Sayles and Natixis Advisors have agreed to equally bear the fee
reductions and/or expense reimbursements for the Core Plus Bond Fund and
Massachusetts Tax Free Income Fund.
For the year ended September 30, 2007, the management fees and management fee
reductions for each Fund were as follows:
Percentage of
Average
Gross Reduction of Net Daily Net Assets
Management Management Management ----------------
Fund Fee Fee Fee Gross Net
- ---- --- --- --- ----- ---
Core Plus Bond Fund $ 476,354 $ -- $ 476,354 0.216% 0.216%
High Income Fund 252,979 47,318 205,661 0.600% 0.488%
Limited Term Government and Agency Fund 629,029 44,936 584,093 0.500% 0.464%
Massachusetts Tax Free Income Fund 212,514 51,695 160,819 0.300% 0.227%
Municipal Income Fund 468,737 27,023 441,714 0.500% 0.471%
Strategic Income Fund 44,720,043 -- 44,720,043 0.564% 0.564%
64
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
For the year ended September 30, 2007, the advisory administration fees and fee
reductions for each Fund were as follows:
Percentage of
Gross Reduction of Net Average
Advisory Advisory Advisory Daily Net Assets
Administration Administration Administration ----------------
Fund Fee Fee Fee Gross Net
- ---- --- --- --- ----- ---
Core Plus Bond Fund $476,353 $ -- $476,353 0.216% 0.216%
Massachusetts Tax Free Income Fund 212,514 51,695 160,819 0.300% 0.227%
For the year ended September 30, 2007, in addition to the reduction of
management fees and/or advisory administration fees, expenses have been
reimbursed as follows:
Fund Reimbursement
---- -------------
Core Plus Bond Fund $128,194
High Income Fund 55,825
Limited Term Government and Agency Fund 94,732
Massachusetts Tax Free Income Fund 46,003
Municipal Income Fund 49,498
Loomis Sayles and Natixis Advisors shall be permitted to recover management
fees/advisory administration fees reduced 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 fees/expenses more than one year
after the end of the fiscal year in which the fee was reduced or the expense
borne. The amounts subject to possible reimbursement under the expense
limitation agreements at September 30, 2007 were as follows:
Expenses Subject to Possible Reimbursement
until September 30, 2008
- - -----------------------------------------
Fund Class A Class B Class C Class Y Total
- ---- ------- ------- ------- ------- -----
Core Plus Bond Fund $ 53,063 $63,776 $ 3,785 $7,570 $128,194
High Income Fund 77,322 14,686 11,135 -- 103,143
Limited Term Government and Agency Fund 123,524 9,302 5,322 1,520 139,668
Massachusetts Tax Free Income Fund 145,281 4,112 -- -- 149,393
Municipal Income Fund 72,756 3,765 -- -- 76,521
Certain officers and directors of Loomis Sayles and Natixis Advisors are also
Trustees of the Funds. Loomis Sayles and Natixis Advisors are both limited
partnerships whose sole general partner is indirectly owned by Natixis Global
Asset Management, L.P. ("Natixis US") (formerly IXIS Asset Management US Group,
L.P.), which is part of Natixis Global Asset Management (formerly IXIS Asset
Management Group), an international asset management group based in Paris,
France.
b. Administrative Fees. Natixis Asset Management Advisors, L.P. ("Natixis
Advisors") (formerly IXIS Asset Management Advisors, L.P.) provides certain
administrative services for the Funds and has subcontracted with State Street
Bank to serve as sub-administrator. Natixis Advisors is an indirect
wholly-owned subsidiary of Natixis US. Pursuant to an agreement among Natixis
Funds Trust I, Natixis Funds Trust II, Natixis Funds Trust III (formerly IXIS
Advisors Funds Trust III), Natixis Funds Trust IV (formerly IXIS Advisors Funds
Trust IV), Natixis Cash Management Trust (formerly IXIS Advisor Cash Management
Trust), ("Natixis Funds Trusts"), Loomis Sayles Funds I, Loomis Sayles Funds II
("Loomis Sayles Funds Trusts") and Natixis Advisors (the "Administrative
Service Agreement"), each Fund pays Natixis 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 Natixis Funds Trusts and Loomis Sayles
Funds Trusts, 0.0625% of the next $5 billion, 0.0500% of the next $20 billion
and 0.045% of such assets in excess of $30 billion, subject to an annual
aggregate minimum fee for the Natixis Funds Trusts and Loomis Sayles Funds
Trusts of $5 million, which is reevaluated on an annual basis. Effective
September 17, 2007, pursuant to an amendment to the Administrative Service
Agreement, the Hansberger International Series was added to the Agreement and
pays Natixis advisors monthly its pro rata fees equal to its prorated portion
of the above mentioned fees.
Prior to July 1, 2007, each Fund paid Natixis 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 Natixis 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
Natixis Funds Trusts and Loomis Sayles Funds Trusts of $5 million.
New funds are subject to an annual fee of $50,000 plus $12,500 per class and an
additional $50,000 if managed by multiple subadvisers in their first calendar
year of operations.
65
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
For the year ended September 30, 2007, amounts paid to Natixis Advisors for
administrative fees were as follows:
Administrative
Fund Fees
---- --------------
Core Plus Bond Fund $ 122,399
High Income Fund 23,539
Limited Term Government and Agency Fund 69,276
Massachusetts Tax Free Income Fund 39,395
Municipal Income Fund 52,381
Strategic Income Fund 4,368,976
Effective October 1,2007, State Street Bank has agreed to reduce the fees it
receives from Natixis Advisors for serving as sub-administrator to the Funds.
Also effective October 1,2007, Natixis Advisors has given a binding contractual
undertaking to the Funds to waive the administrative fees paid by the Funds in
an amount equal to the reduction in sub-administrative fees discussed above.
The waiver is in effect through June 30,2008.
c. Service and Distribution Fees. Natixis Distributors, L.P. ("Natixis
Distributors") (formerly IXIS Asset Management Distributor L.P.), a wholly
owned subsidiary of Natixis U.S., has entered into a distribution agreement
with the Trust. Pursuant to this agreement, Natixis Distributors serves as
principal underwriter of each fund.
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 Natixis 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 Natixis 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 Natixis 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 Natixis
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 Natixis 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 Natixis Distributors in
connection with the marketing or sale of Class B and Class C shares.
For the year ended September 30, 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 $ 242,355 $250,938 $ 23,218 $ 752,817 $ 69,653
High Income Fund 78,888 15,057 11,463 45,172 34,388
Limited Term Government and Agency Fund 273,749 20,331 11,665 60,993 34,994
Massachusetts Tax Free Income Fund 172,258 4,836 -- 14,511 --
Municipal Income Fund 222,720 11,648 -- 34,945 --
Strategic Income Fund 10,869,737 533,714 7,287,966 1,601,144 21,863,898
d. Sub-Transfer Agent Fees and Expenses. Natixis Distributors has entered into
agreements with financial intermediaries to provide certain recordkeeping,
processing, shareholder communications and other services to customers of the
intermediaries and have agreed to compensate the intermediaries for providing
those services. Certain services would be provided by the Funds if the shares
of those customers were registered directly with the Funds' transfer agent.
Accordingly, the Funds agreed to pay a portion of the intermediary fees
attributable to shares of the Fund held by the intermediary (which generally
are a percentage of the value of shares held) not exceeding what the Funds
would have paid its transfer agent had each customer's shares been registered
directly with the transfer agent instead of held through the intermediary.
Natixis Distributors pay the remainder of the fees. Listed below are the fees
incurred by the Funds which are included in the transfer agent fees and
expenses in the Statements of Operations.
Sub-Transfer Agent Expense
- - ---------------------------------------
Fund Class A Class B Class C Class Y
- ---- ------- ------- ------- -------
Core Plus Bond Fund $ 148,444 $167,548 $ 12,487 $ 15,807
High Income Fund 5,946 1,314 746 --
Limited Term Government and Agency Fund 8,250 610 354 70
Massachusetts Tax Free Income Fund 2,561 76 -- --
Municipal Income Fund 1,963 105 -- --
Strategic Income Fund 2,045,490 105,299 1,369,976 310,170
66
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
e. Commissions. The Funds have been informed that commissions (including CDSCs)
on Fund shares paid to Natixis Distributors by investors in shares of the Funds
during the year ended September 30, 2007 were as follows:
Fund Commission
---- -----------
Core Plus Bond Fund $ 85,997
High Income Fund 71,235
Limited Term Government and Agency Fund 89,158
Massachusetts Tax Free Income Fund 33,929
Municipal Income Fund 30,374
Strategic Income Fund 12,435,541
f. Trustees Fees and Expenses. The Funds do not pay any compensation directly
to their officers or Trustees who are directors, officers or employees of
Natixis Advisors, Natixis Distributors, Natixis US, 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 Natixis Funds Trusts' the
Loomis Sayles Funds Trusts and the Hansberger International Series (effective
September 12, 2007) 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 Natixis Funds Trusts, the Loomis
Sayles Funds Trusts and the Hansberger International Series on the normal
payment date. Deferred amounts remain in the Funds until distributed in
accordance with the Plan.
g. 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 Natixis Funds Trusts and Loomis Sayles Funds Trusts,
participate in a $75,000,000 committed line of credit provided by State Street
Bank. Interest is charged to each participating fund based on its borrowings at
a rate per annum equal to the Federal Funds rate plus 0.50%. In addition, a
commitment fee of 0.09% per annum, payable at the end of each calendar quarter,
is accrued and apportioned among the participating funds based on their average
daily unused portion of the line of credit. For the year ended September 30,
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.
7. Shareholders. At September 30, 2007, the Loomis Sayles Employees' Profit
Sharing Plan held 32,220 shares of beneficial interest of the Limited Term
Government and Agency Fund. In addition, at September 30, 2007, 1 shareholder
individually owned more than 5% of the Limited Term Government and Agency
Fund's total outstanding shares, representing 8.3% of the Fund and 1
shareholder individually owned more than 5% of the Massachusetts Tax Free
Income Fund's total outstanding shares, representing 5.1% of the Fund.
67
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
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:
Year Ended
September 30, 2007
-----------------------------------
Core Plus Bond Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A
Issued from the sale of shares 2,862,355 $ 32,253,428
Issued in connection with the reinvestment of distributions 327,958 3,693,825
---------------- -----------------
3,190,313 35,947,253
Redeemed (1,977,946) (22,285,053)
---------------- -----------------
Net change 1,212,367 $ 13,662,200
---------------- -----------------
Class B
Issued from the sale of shares 2,199,092 $ 24,806,440
Issued in connection with the reinvestment of distributions 70,968 800,778
---------------- -----------------
2,270,060 25,607,218
Redeemed (4,340,292) (48,938,825)
---------------- -----------------
Net change (2,070,232) $ (23,331,607)
---------------- -----------------
Class C
Issued from the sale of shares 686,381 $ 7,745,373
Issued in connection with the reinvestment of distributions 13,038 146,800
---------------- -----------------
699,419 7,892,173
Redeemed (199,397) (2,240,505)
---------------- -----------------
Net change 500,022 $ 5,651,668
---------------- -----------------
Class Y
Issued from the sale of shares 598,492 $ 6,770,657
Issued in connection with the reinvestment of distributions 36,251 410,202
---------------- -----------------
634,743 7,180,859
Redeemed (293,171) (3,314,000)
---------------- -----------------
Net change 341,572 $ 3,866,859
---------------- -----------------
Increase (decrease) from capital share transactions (16,271) $ (150,880)
================ =================
Year Ended
September 30, 2007
-----------------------------------
High Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A
Issued from the sale of shares 2,247,757 $ 11,689,925
Issued in connection with the reinvestment of distributions 295,946 1,539,928
---------------- -----------------
2,543,703 13,229,853
Redeemed (1,884,840) (9,783,658)
---------------- -----------------
Net change 658,863 $ 3,446,195
---------------- -----------------
Class B
Issued from the sale of shares 106,656 $ 557,060
Issued in connection with the reinvestment of distributions 39,879 208,208
---------------- -----------------
146,535 765,268
Redeemed (756,563) (3,941,404)
---------------- -----------------
Net change (610,028) $ (3,176,136)
---------------- -----------------
Class C
Issued from the sale of shares 479,271 $ 2,499,368
Issued in connection with the reinvestment of distributions 30,663 159,675
---------------- -----------------
509,934 2,659,043
Redeemed (159,243) (825,637)
---------------- -----------------
Net change 350,691 $ 1,833,406
---------------- -----------------
Increase (decrease) from capital share transactions 399,526 $ 2,103,465
================ =================
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)
================ =================
68
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
Year Ended
September 30, 2007
-----------------------------------
Limited Term Government and Agency Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A
Issued from the sale of shares 1,309,019 $ 14,378,605
Issued in connection with the reinvestment of distributions 292,426 3,213,916
---------------- -----------------
1,601,445 17,592,521
Redeemed (2,117,193) (23,272,778)
---------------- -----------------
Net change (515,748) $ (5,680,257)
---------------- -----------------
Class B
Issued from the sale of shares 52,757 $ 579,223
Issued in connection with the reinvestment of distributions 22,869 251,120
---------------- -----------------
75,626 830,343
Redeemed (364,484) (3,999,981)
---------------- -----------------
Net change (288,858) $ (3,169,638)
---------------- -----------------
Class C
Issued from the sale of shares 217,432 $ 2,387,379
Issued in connection with the reinvestment of distributions 9,729 106,924
---------------- -----------------
227,161 2,494,303
Redeemed (133,821) (1,470,673)
---------------- -----------------
Net change 93,340 $ 1,023,630
---------------- -----------------
Class Y
Issued from the sale of shares 217,392 $ 2,396,763
Issued in connection with the reinvestment of distributions 12,038 132,694
---------------- -----------------
229,430 2,529,457
Redeemed (71,670) (782,866)
---------------- -----------------
Net change 157,760 $ 1,746,591
---------------- -----------------
Increase (decrease) from capital share transactions (553,506) $ (6,079,674)
================ =================
Year Ended
September 30, 2007
-----------------------------------
Massachusetts Tax Free Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A
Issued from the sale of shares 138,166 $ 2,283,448
Issued in connection with the reinvestment of distributions 122,828 2,029,190
---------------- -----------------
260,994 4,312,638
Redeemed (526,246) (8,703,580)
---------------- -----------------
Net change (265,252) $ (4,390,942)
---------------- -----------------
Class B
Issued from the sale of shares 5,884 $ 96,247
Issued in connection with the reinvestment of distributions 2,630 43,409
---------------- -----------------
8,514 139,656
Redeemed (47,481) (785,482)
---------------- -----------------
Net change (38,967) $ (645,826)
---------------- -----------------
Increase (decrease) from capital share transactions (304,219) $ (5,036,768)
================ =================
Year Ended
September 30, 2006
-----------------------------------
Limited Term Government and Agency Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A
Issued from the sale of shares 555,196 $ 6,098,078
Issued in connection with the reinvestment of distributions 317,378 3,476,250
---------------- -----------------
872,574 9,565,328
Redeemed (3,237,220) (35,466,514)
---------------- -----------------
Net change (2,364,646) $ (25,901,186)
---------------- -----------------
Class B
Issued from the sale of shares 74,303 $ 814,183
Issued in connection with the reinvestment of distributions 29,021 317,417
---------------- -----------------
103,324 1,132,230
Redeemed (562,347) (6,150,376)
---------------- -----------------
Net change (459,023) $ (5,018,146)
---------------- -----------------
Class C
Issued from the sale of shares 63,287 $ 692,417
Issued in connection with the reinvestment of distributions 8,700 95,297
---------------- -----------------
71,987 787,714
Redeemed (202,763) (2,222,285)
---------------- -----------------
Net change (130,776) $ (1,434,571)
---------------- -----------------
Class Y
Issued from the sale of shares 16,475 $ 181,528
Issued in connection with the reinvestment of distributions 9,128 100,325
---------------- -----------------
25,603 281,853
Redeemed (30,025) (330,286)
---------------- -----------------
Net change (4,422) $ (48,433)
---------------- -----------------
Increase (decrease) from capital share transactions (2,958,867) $ (32,402,336)
================ =================
Year Ended
September 30, 2006
-----------------------------------
Massachusetts Tax Free Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A
Issued from the sale of shares 116,584 $ 1,927,090
Issued in connection with the reinvestment of distributions 128,646 2,122,198
---------------- -----------------
245,230 4,049,288
Redeemed (533,421) (8,795,072)
---------------- -----------------
Net change (288,191) $ (4,745,784)
---------------- -----------------
Class B
Issued from the sale of shares 3,138 $ 51,637
Issued in connection with the reinvestment of distributions 3,663 60,307
---------------- -----------------
6,801 111,944
Redeemed (59,258) (974,232)
---------------- -----------------
Net change (52,457) $ (862,288)
---------------- -----------------
Increase (decrease) from capital share transactions (340,648) $ (5,608,072)
================ =================
69
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
Year Ended
September 30, 2007
-----------------------------------
Municipal Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A
Issued from the sale of shares 441,328 $ 3,284,696
Issued in connection with the reinvestment of distributions 348,809 2,605,901
---------------- -----------------
790,137 5,890,597
Redeemed (1,967,484) (14,568,025)
---------------- -----------------
Net change (1,177,347) $ (8,677,428)
---------------- -----------------
Class B
Issued from the sale of shares 23,490 $ 176,022
Issued in connection with the reinvestment of distributions 13,044 97,685
---------------- -----------------
36,534 273,707
Redeemed (205,834) (1,528,625)
---------------- -----------------
Net change (169,300) $ (1,254,918)
---------------- -----------------
Increase (decrease) from capital share transactions (1,346,647) $ (9,932,346)
================ =================
Year Ended
September 30, 2007
-----------------------------------
Strategic Income Fund Shares Amount
- -------------------------------------------------------------- ---------------- -----------------
Class A
Issued from the sale of shares 227,999,564 $ 3,401,598,542
Issued in connection with the reinvestment of distributions 11,338,684 169,415,802
---------------- -----------------
239,338,248 3,571,014,344
Redeemed (51,264,181) (764,388,527)
---------------- -----------------
Net change 188,074,067 $ 2,806,625,817
---------------- -----------------
Class B
Issued from the sale of shares 5,257,203 $ 78,803,755
Issued in connection with the reinvestment of distributions 304,859 4,574,346
---------------- -----------------
5,562,062 83,378,101
Redeemed (2,532,198) (37,899,012)
---------------- -----------------
Net change 3,029,864 $ 45,479,089
---------------- -----------------
Class C
Issued from the sale of shares 144,314,933 $ 2,160,951,327
Issued in connection with the reinvestment of distributions 3,151,961 47,297,035
---------------- -----------------
147,466,894 2,208,248,362
Redeemed (19,028,982) (284,966,223)
---------------- -----------------
Net change 128,437,912 $ 1,923,282,139
---------------- -----------------
Class Y
Issued from the sale of shares 29,854,706 $ 445,418,950
Issued in connection with the reinvestment of distributions 346,573 5,174,756
---------------- -----------------
30,201,279 450,593,706
Redeemed (6,672,173) (99,332,888)
---------------- -----------------
Net change 23,529,106 $ 351,260,818
---------------- -----------------
Increase (decrease) from capital share transactions 343,070,949 $ 5,126,647,863
================ =================
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
================ =================
70
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of Natixis Funds Trust I (formerly, IXIS Advisor Funds Trust
I), Natixis Funds Trust II (formerly, IXIS Advisor Funds Trust II), and Loomis
Sayles Funds II and Shareholders of Loomis Sayles Core Plus Bond Fund, Loomis
Sayles Massachusetts Tax Free Income Fund, Loomis Sayles High Income Fund,
Loomis Sayles Limited Term Government and Agency Fund, Loomis Sayles Municipal
Income Fund and Loomis Sayles Strategic Income Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Core Plus Bond Fund, a series of Natixis Funds Trust I; the Loomis Sayles
Massachusetts Tax Free Income Fund, a series of Natixis Funds Trust II; and the
Loomis Sayles High Income Fund, Loomis Sayles Limited Term Government and
Agency Fund, Loomis Sayles Municipal Income Fund and Loomis Sayles Strategic
Income Fund, each a series of Loomis Sayles Funds II (collectively, "the
Funds"), at September 30, 2007, and the results of each of their operations,
the changes in each of their net assets and the financial highlights for each
of the periods indicated, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2007
71
2007 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (unaudited)
Corporate Dividends Received Deduction. For the fiscal year ended September 30,
2007, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
Qualifying
Fund Percentage
---- ----------
High Income Fund 3.66%
Strategic Income Fund 3.38%
Capital Gains Distributions. Pursuant to Internal Revenue Section 852(b), the
following Funds paid distributions, which have been designated as capital gains
distributions for the fiscal year ended September 30, 2007.
Fund Amount
---- --------
Municipal Income Fund $448,766
Qualified Dividend Income. For the fiscal year ended September 30, 2007, the
Funds below will designate up to the maximum amount allowable pursuant to the
Internal Revenue Code as qualified dividend income eligible for reduced tax
rates. These lower rates range from 5% to 15% depending on an individual's tax
bracket. If the Funds pay a distribution during calendar year 2007, complete
information will be reported in conjunction with Form 1099-DIV.
Fund
----
High Income Fund
Strategic Income Fund
Tax Exempt Income. For the fiscal year ended September 30, 2007, a percentage
of dividends distributed by the Funds listed below qualify as tax exempt income
for Federal income tax purposes. These percentages are as follows:
Qualifying
Fund Percentage
---- ----------
Massachusetts Tax Free Income Fund 98.45%
Municipal Income Fund 97.63%
72
TRUSTEE AND OFFICER INFORMATION
The tables below provide certain information regarding the Trustees and
officers of Natixis Funds Trust I, Natixis Funds Trust II and Loomis Sayles
Funds II (the "Trusts"). Unless otherwise indicated, the address of all persons
below is 399 Boylston Street, Boston, MA 02116. The Trusts' Statements of
Additional Information include additional information about the Trustees of the
Trusts and are available by calling Loomis Sayles at 800-314-2029.
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Year of Birth Served and Term of Office* During Past 5 Years** and Other Directorships Held
- ---------------------- -------------------------- --------------------- ----------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee, since 1984 Natixis Douglas Dillon Professor and 41;
(1940) Funds Trust I (including Director of the Belfer Center Director, Taubman Centers,
predecessors); since 1995 for Science and International Inc. (real estate investment
for Natixis Funds Trust II; Affairs, John F. Kennedy trust)
since 2003 for Loomis School of Government,
Sayles Funds II Harvard University
Contract Review and
Governance Committee
Member
Charles D. Baker Trustee, since 2005 for President and Chief Executive 41;
(1956) Natixis Funds Trust I, Officer, Harvard Pilgrim None
Natixis Funds Trust II and Health Care (health plan)
Loomis Sayles Funds II
Contract Review and
Governance Committee
Member
Edward A. Benjamin Trustee, since 2003 for Retired 41;
(1938) Natixis Funds Trust I and None
Natixis Funds Trust II;
since 2002 for Loomis
Sayles Funds II
Chairman of the Contract
Review and Governance
Committee
Daniel M. Cain Trustee, since 1996 for President and Chief Executive 41;
(1945) Natixis Funds Trust I and Officer, Cain Brothers & Director, Sheridan
Natixis Funds Trust II; Company, Incorporated Healthcare Inc. (physician
since 2003 for Loomis (investment banking) practice management)
Sayles Funds II Trustee, Lexington Strategic
Asset Corporation (realty
Chairman of the Audit investment trust)
Committee
73
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Year of Birth Served and Term of Office* During Past 5 Years** and Other Directorships Held
- ---------------------- -------------------------- --------------------- ----------------------------
INDEPENDENT TRUSTEES
continued
Richard Darman Trustee, since 1996 for Partner, The Carlyle Group 41;
(1943) Natixis Funds Trust I and (investments); formerly, Director and Chairman of the
Natixis Funds Trust II; Professor, John F. Kennedy Board of Directors, AES
since 2003 for Loomis School of Government, Corporation (international
Sayles Funds II Harvard University power company)
Contract Review and
Governance Committee
Member
Jonathan P. Mason Trustee, since 2007 for Chief Financial Officer, Cabot 41;
(1958) Natixis Funds Trust I, Corp. (specialty chemicals); None
Natixis Funds Trust II and formerly, Vice President and
Loomis Sayles Funds II Treasurer, International Paper
Company; formerly, Chief
Audit Committee Member Financial Officer, Carter Holt
Harvey (forest products)
Sandra O. Moose Chairperson of the Board President, Strategic Advisory 41;
(1942) of Trustees since Services (management Director, Verizon
November 2005 consulting); formerly, Senior Communications; Director,
Vice President and Director, Rohm and Haas Company
Trustee since 1982 for The Boston Consulting Group, (specialty chemicals);
Natixis Funds Trust I Inc. (management consulting) Director, AES Corporation
(including predecessors); (international power
since 1993 for Natixis company)
Funds Trust II; since 2003
for Loomis Sayles Funds II
Ex officio member of the
Audit Committee and
Contract Review and
Governance Committee
Cynthia L. Walker Trustee, since 2005 for Executive Dean for 41;
(1956) Natixis Funds Trust I, Administration (formerly, None
Natixis Funds Trust II and Dean for Finance & CFO),
Loomis Sayles Funds II Harvard Medical School
Audit Committee Member
74
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in
Trusts, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Year of Birth Served and Term of Office* During Past 5 Years** and Other Directorships Held
- ---------------------- -------------------------- --------------------- ----------------------------
INTERESTED TRUSTEES
Robert J. Blanding/1/ Trustee, since 2003 for President, Chairman, Director 41;
(1947) Natixis Funds Trust I and and Chief Executive Officer, None
555 California Street Natixis Funds Trust II Loomis, Sayles & Company,
San Francisco, CA 94104 L.P.; President and Chief
Chief Executive Officer and Executive Officer -- Loomis
Trustee, since 2002 for Sayles Funds I
Loomis Sayles Funds II
John T. Hailer/2/ President, Chief Executive President and Chief Executive 41;
(1960) Officer and Trustee, since Officer, Natixis Asset None
2000 for Natixis Funds Management Advisors, L.P.,
Trust I and Natixis Funds Natixis Distributors, L.P.,
Trust II Natixis Global Associates, Inc.
and Natixis Global Asset
President and Trustee, since Management North America;
2003 for Loomis Sayles President and Chief Executive
Funds II Officer, Natixis Funds Trust
III, Natixis Funds Trust IV,
Natixis Cash Management
Trust and Hansberger
International Series; Executive
Vice President of Loomis
Sayles Funds I
* Each Trustee serves until retirement, resignation or removal from the Board
of Trustees. The current retirement age is 72. The position of Chairperson
of the Board is appointed for a two-year term. Ms. Moose was re-appointed to
serve an additional two-year term as the Chairperson of the Board of
Trustees on September 14, 2007.
** Each person listed above, except as noted, holds the same position(s) with
the Natixis Funds and Loomis Sayles Funds Trusts. Previous positions during
the past five years with Natixis Distributors, L.P. (the "Distributor"),
Natixis Asset Management Advisors, L.P. ("Natixis Advisors") or Loomis,
Sayles & Company, L.P. are omitted if not materially different from a
Trustee's or officer's current position with such entity.
***The Trustees of the Trusts serve as Trustees of a fund complex that includes
all series of Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds
Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis
Sayles Funds I, Loomis Sayles Funds II and Hansberger International Series
(the "Funds' Trusts"). The number of portfolios overseen does not include
AEW Real Estate Income Fund which liquidated on April 13, 2007, or IXIS
Equity Diversified Portfolio, which liquidated on August 3, 2007. The number
of portfolios overseen includes, as of September 14, 2007, the five series
of the Hansberger International Series.
/1/ Mr. Blanding is deemed an "interested person" of the Trusts because he
holds the following positions with affiliated persons of the Trusts:
President, Chairman, Director and Chief Executive Officer of Loomis,
Sayles & Company, L.P.
/2/ Mr. Hailer is deemed an "interested person" of the Trusts because he holds
the following positions with affiliated persons of the Trusts: Chairman of
the Board, President and Chief Executive Officer of Natixis Distribution
Corporation; President and Chief Executive Officer of Natixis Global Asset
Management North America, Natixis Global Associates, Inc., Natixis Asset
Management Advisors, L.P. and the Distributor.
75
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the
Trusts and Term of Office
Name and Year of Birth and Length of Time Served* Principal Occupation(s) During Past 5 Years**
- ---------------------- -------------------------- ---------------------------------------------
OFFICERS OF THE TRUST
Coleen Downs Dinneen Secretary, Clerk and Chief Senior Vice President, General Counsel, Secretary and
(1960) Legal Officer, since 2004 Clerk (formerly, Deputy General Counsel, Assistant
Secretary and Assistant Clerk), Natixis Distribution
Corporation, Natixis Distributors, L.P. and Natixis
Asset Management Advisors, L.P.
Daniel J. Fuss Executive Vice President Vice Chairman and Director, Loomis, Sayles &
(1933) of Loomis Sayles Funds II, Company, L.P.; Executive Vice President of Loomis
One Financial Center since June 2003 Sayles Funds I
Boston, MA 02111
Russell L. Kane Chief Compliance Officer, Chief Compliance Officer for Mutual Funds, Senior
(1969) since May 2006; Assistant Vice President, Deputy General Counsel, Assistant
Secretary since June 2004; Secretary and Assistant Clerk, Natixis Distributors,
Anti-Money Laundering L.P. and Natixis Asset Management Advisors, L.P.;
Officer since April 2007 Vice President, Associate General Counsel, Assistant
Secretary and Assistant Clerk, Natixis Distribution
Corporation; formerly, Senior Counsel, Columbia
Management Group.
Michael C. Kardok Treasurer, Principal Senior Vice President, Natixis Asset Management
(1959) Financial and Accounting Advisors, L.P. and Natixis Distributors, L.P.;
Officer, since October, formerly, Senior Director, PFPC Inc.
2004
Robert Krantz Executive Vice President, Executive Vice President, Natixis Distributors, L.P.
(1964) since September 2007 and Natixis Asset Management Advisors, L.P.
* Each officer of the Trusts serve for an indefinite term in accordance with
the Trusts' current By-laws until the date his or her successor is elected
and qualified, or until he or she sooner dies, retires, is removed or
becomes disqualified.
** Each person listed above, except as noted, holds the same position(s) with
the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Hansberger
International Series. Previous positions during the past five years with the
Distributor, Natixis Advisors or Loomis Sayles are omitted, if not
materially different from a Trustee's or officer's current position with
such entity.
76
[LOGO]
NATIXIS
FUNDS
EQUITY FUNDS
ANNUAL REPORT
September 30, 2007
]
Loomis Sayles Global Markets Fund
Loomis Sayles Growth Fund
Loomis Sayles Research Fund
Loomis Sayles Value Fund
[LOGO]
[GRAPHIC]
TABLE OF CONTENTS
Management Discussion and Performance.................................... page 1
Portfolio of Investments................................................ page 16
Financial Statements.................................................... page 28
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
- --------------------------------------------------------------------------------
Loomis Sayles Global Markets Fund was heavily weighted in equities throughout
the fiscal year ended September 30, 2007. The combined total return on the
fund's equity and income portfolios was 29.05% based on the net asset value of
Class A shares and $0.25 in dividends reinvested during the period. These
results compare favorably with the fund's primary benchmark, the MSCI World
Index (common stocks of companies in developed countries around the world),
which returned 21.68% for the period. The fund's secondary benchmark, Citigroup
World Government Bond Index (government bonds issued in the United States and
other developed countries) returned 8.69%. The average return on Morningstar's
World Allocation category (primarily global equity funds) was 17.89% for the
period.
EQUITIES POWERED PERFORMANCE DURING FISCAL YEAR
All equity sectors made positive contributions for the 12-month period,
although healthcare made the smallest contribution. Information technology and
financial stocks were the top-contributing sectors. Lead holdings in
information technology stocks included Apple and Nintendo. Apple continues to
benefit from the iPhone, which was released at the end of June, and the
introduction of its iTV service. Nintendo shares rose on robust sales of its
Wii and DS game hardware, which allowed the company to revise its profit
forecast upward. Several overseas financial companies also boosted performance,
notably Piraeus Bank, a Greek bank with excellent long-term growth prospects,
particularly in the under-penetrated eastern Mediterranean region.
Precision Castparts was another top-performing stock. Precision benefited from
superior management and strong revenue growth, as this manufacturer of metal
components for aircraft and other uses enjoyed strong revenue growth and
expanded its market share in fasteners.
For the fiscal year, the fund's worst performing stocks were Medco Health
Solutions and High Tech Computer. Shares of Medco, a U.S. pharmacy benefit
manager, declined in price on concerns about prospects for the industry as a
whole, as well as the potential impact of Wal-Mart's discounted drug pricing
program. Shares of Taiwan's High Tech Computer slumped with growth stocks as a
whole during the first half of the fiscal year. Both of these were small
positions and were sold early in the fiscal year, so their overall effect on
the fund's equity performance in fiscal 2007 was minimal.
U.S. BOND MARKETS FACED SUBPRIME MORTGAGE WOES, WEAKER U.S. DOLLAR
On the bond side, international currencies drove performance, including bonds
denominated in the currencies of Brazil, Colombia, Iceland, Australia, Canada
and Norway. The Argentinean peso was our only currency loser. Bonds issued in
Japan, Sweden and the United States were weak.
This summer's credit crunch was concentrated in asset-backed finance
securities, including bonds issued by homebuilders, but the fund had little
direct exposure to these markets. The fund's position in high-yielding bonds
issued by homebuilders suffered, as did securities of some less-liquid markets,
including Argentina. In anticipation of a recovery, we rebalanced the
fixed-income portion of the fund to equally weight the U.S. and global
positions, so that U.S. credit is now a more important element of the fund's
fixed-income strategy. However, the fund remains heavily tilted toward equities.
OUTLOOK CALLS FOR A SLOWER, BUT STILL VITAL, U.S. ECONOMY
Although we expect a slowdown in U.S. consumer spending this winter, we are not
anticipating a recession. After the mid-August lows in stock prices,
fundamentals seem to be winning out, and companies with strong earnings and
cash flow prospects are recovering. At its September 18 meeting, the Federal
Reserve Board eased interest rates by a surprising 0.5%, calming anxieties that
had troubled both the credit and equity markets and helping set the scene for a
good market run in coming months. We expect the best results to come from
stocks of companies that benefit from corporate rather than consumer spending,
and those with substantial international operations and exposure to emerging
markets.
1
LOOMIS SAYLES GLOBAL MARKETS FUND
Investment Results through September 30, 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/
September 30, 1997 through September 30, 2007
[CHART]
Net Maximum
Asset Sales MSCI World Citigroup World
Value/2/ Charge/3/ Index Gov't Bond Index
-------- ---------- ---------- ----------------
9/30/1997 $10,000 $ 9,425 $10,000 $10,000
10/31/1997 9,416 8,875 9,475 10,208
11/30/1997 9,424 8,883 9,644 10,051
12/31/1997 9,206 8,676 9,763 10,021
1/31/1998 9,482 8,937 10,037 10,118
2/28/1998 10,053 9,475 10,718 10,200
3/31/1998 10,145 9,562 11,172 10,099
4/30/1998 10,016 9,441 11,283 10,261
5/31/1998 9,584 9,033 11,143 10,285
6/30/1998 9,178 8,651 11,409 10,300
7/31/1998 9,178 8,651 11,392 10,314
8/31/1998 8,203 7,731 9,875 10,594
9/30/1998 8,185 7,714 10,051 11,158
10/31/1998 8,774 8,269 10,962 11,488
11/30/1998 9,290 8,756 11,615 11,326
12/31/1998 9,450 8,906 12,184 11,554
1/31/1999 9,580 9,029 12,453 11,448
2/28/1999 9,399 8,859 12,123 11,080
3/31/1999 9,690 9,133 12,630 11,108
4/30/1999 10,092 9,512 13,129 11,104
5/31/1999 10,143 9,560 12,651 10,917
6/30/1999 10,374 9,778 13,243 10,725
7/31/1999 10,565 9,958 13,205 10,988
8/31/1999 10,525 9,920 13,184 11,039
9/30/1999 10,445 9,844 13,058 11,211
10/31/1999 10,847 10,223 13,738 11,206
11/30/1999 12,538 11,817 14,127 11,088
12/31/1999 15,141 14,270 15,272 11,061
1/31/2000 14,620 13,780 14,399 10,825
2/29/2000 16,705 15,745 14,440 10,748
3/31/2000 16,444 15,499 15,439 11,081
4/30/2000 15,695 14,792 14,788 10,719
5/31/2000 15,293 14,413 14,416 10,802
6/30/2000 15,793 14,885 14,903 11,064
7/31/2000 15,272 14,394 14,486 10,877
8/31/2000 15,695 14,792 14,959 10,795
9/30/2000 15,260 14,383 14,165 10,774
10/31/2000 14,532 13,697 13,929 10,637
11/30/2000 13,804 13,010 13,085 10,848
12/31/2000 14,429 13,600 13,299 11,237
1/31/2001 14,551 13,714 13,557 11,223
2/28/2001 14,172 13,357 12,413 11,218
3/31/2001 13,523 12,746 11,600 10,895
4/30/2001 13,750 12,960 12,460 10,856
5/31/2001 13,947 13,145 12,306 10,823
6/30/2001 13,841 13,045 11,922 10,724
7/31/2001 13,690 12,903 11,765 10,995
8/31/2001 13,615 12,832 11,202 11,408
9/30/2001 12,980 12,234 10,217 11,492
10/31/2001 13,237 12,476 10,414 11,583
11/30/2001 13,449 12,676 11,031 11,420
12/31/2001 13,499 12,723 11,102 11,126
1/31/2002 13,301 12,536 10,767 10,920
2/28/2002 13,316 12,551 10,675 10,977
3/31/2002 13,564 12,784 11,171 10,946
4/30/2002 13,631 12,847 10,775 11,338
5/31/2002 13,861 13,064 10,800 11,659
6/30/2002 13,548 12,769 10,147 12,222
7/31/2002 12,904 12,162 9,293 12,342
8/31/2002 13,053 12,302 9,312 12,557
9/30/2002 12,524 11,804 8,290 12,694
10/31/2002 12,837 12,099 8,903 12,642
11/30/2002 13,365 12,596 9,385 12,658
12/31/2002 13,428 12,655 8,932 13,295
1/31/2003 13,547 12,768 8,663 13,477
2/28/2003 13,684 12,897 8,514 13,666
3/31/2003 13,700 12,912 8,491 13,708
4/30/2003 14,400 13,572 9,249 13,872
5/31/2003 15,151 14,279 9,782 14,474
6/30/2003 15,270 14,392 9,955 14,240
7/31/2003 15,066 14,199 10,159 13,816
8/31/2003 15,373 14,489 10,381 13,742
9/30/2003 15,988 15,069 10,447 14,521
10/31/2003 16,586 15,632 11,069 14,448
11/30/2003 16,740 15,778 11,240 14,691
12/31/2003 17,565 16,555 11,948 15,277
1/31/2004 17,831 16,805 12,142 15,318
2/29/2004 18,043 17,005 12,350 15,341
3/31/2004 18,220 17,172 12,273 15,562
4/30/2004 17,531 16,523 12,028 14,895
5/31/2004 17,478 16,473 12,137 15,012
6/30/2004 17,849 16,823 12,401 15,044
7/31/2004 17,460 16,456 11,999 14,967
8/31/2004 17,690 16,673 12,057 15,321
9/30/2004 18,062 17,023 12,289 15,537
10/31/2004 18,557 17,490 12,593 15,996
11/30/2004 19,440 18,322 13,260 16,574
12/31/2004 20,000 18,850 13,770 16,858
1/31/2005 19,728 18,593 13,462 16,621
2/28/2005 20,253 19,088 13,895 16,646
3/31/2005 19,692 18,559 13,631 16,423
4/30/2005 19,384 18,270 13,343 16,668
5/31/2005 20,001 18,851 13,591 16,331
6/30/2005 20,345 19,175 13,714 16,189
7/31/2005 21,106 19,892 14,197 16,031
8/31/2005 21,232 20,012 14,310 16,319
9/30/2005 21,468 20,234 14,686 16,007
10/31/2005 21,322 20,096 14,333 15,716
11/30/2005 21,955 20,693 14,818 15,524
12/31/2005 22,414 21,125 15,150 15,699
1/31/2006 23,351 22,008 15,829 15,902
2/28/2006 23,167 21,835 15,813 15,820
3/31/2006 23,278 21,939 16,167 15,635
4/30/2006 23,443 22,095 16,667 16,009
5/31/2006 22,231 20,953 16,112 16,302
6/30/2006 22,140 20,867 16,114 16,131
7/31/2006 22,268 20,988 16,218 16,260
8/31/2006 22,598 21,299 16,648 16,411
9/30/2006 22,928 21,610 16,851 16,364
10/31/2006 23,790 22,422 17,473 16,520
11/30/2006 24,432 23,027 17,910 16,975
12/31/2006 24,835 23,407 18,279 16,659
1/31/2007 25,265 23,812 18,498 16,434
2/28/2007 24,967 23,531 18,410 16,814
3/31/2007 25,566 24,096 18,754 16,851
4/30/2007 26,239 24,730 19,593 17,037
5/31/2007 27,362 25,788 20,161 16,691
6/30/2007 27,304 25,734 20,013 16,592
7/31/2007 27,528 25,945 19,573 17,083
8/31/2007 27,715 26,122 19,567 17,361
9/30/2007 29,586 27,885 20,504 17,787
Average Annual Total Returns -- September 30, 2007/5/
1 YEAR 5 YEARS 10 YEARS
CLASS A/1/
Net Asset Value/2/ 29.05% 18.76% 11.45%
With Maximum Sales Charge/3/ 21.65 17.37 10.80
CLASS C/1/
Net Asset Value/2/ 27.99 17.88 10.63
With CDSC/4/ 26.99 17.88 10.63
CLASS Y/1/
Net Asset Value/2/ 29.36 19.05 11.74
- --------------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
MSCI World Index 21.68% 19.86% 7.44%
Citigroup World Government Bond Index 8.69 6.98 5.93
Morningstar World Allocation Fund Avg. 17.89 16.68 9.72
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.funds.natixis.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 9/30/07 9/30/06
- -----------------------------------------------------------
Common Stocks and Warrants 66.6 65.2
- -----------------------------------------------------------
Bonds & Notes 27.2 31.5
- -----------------------------------------------------------
Short-Term Investments and Other 6.2 3.3
- -----------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 9/30/07 9/30/06
- -----------------------------------------------------------
U.S. Treasury Bond, 4.750%, 2/15/2037 2.7 0.0
- -----------------------------------------------------------
Nintendo Co. Ltd. 2.4 0.0
- -----------------------------------------------------------
ABB Ltd. 2.3 1.5
- -----------------------------------------------------------
U.S. Treasury Bond, 4.500%, 2/15/2036 2.2 0.0
- -----------------------------------------------------------
Apple, Inc. 2.1 1.6
- -----------------------------------------------------------
China Mobile Ltd 2.0 0.9
- -----------------------------------------------------------
Google, Inc. 2.0 1.9
- -----------------------------------------------------------
Bharti Airtel Ltd. 1.8 0.0
- -----------------------------------------------------------
Research In Motion Ltd. 1.8 0.0
- -----------------------------------------------------------
Piraeus Bank S.A 1.8 1.9
- -----------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 9/30/07 9/30/06
- -----------------------------------------------------------
Treasuries 9.3 1.9
- -----------------------------------------------------------
Pharmaceuticals 3.9 5.2
- -----------------------------------------------------------
Capital Markets 3.6 7.7
- -----------------------------------------------------------
Diversified Financial Services 3.6 3.2
- -----------------------------------------------------------
Machinery 3.6 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 9 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 then 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 then 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 reductions and
reimbursements, if any, without which performance would have been lower.
/6/Before reductions and reimbursements.
/7/After reductions and reimbursements. Expense reductions are contractual and
are set to expire 1/31/08.
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
- --------------------------------------------------------------------------------
Equities turned in solid results for the fiscal year ended September 30, 2007,
driven by the persistent expansion of the global and domestic economies and
healthy corporate profit growth. Loomis Sayles Growth Fund returned 20.03%
based on the net asset value of Class A shares. The fund's performance exceeded
the 19.35% return on its benchmark, the Russell 1000 Growth Index, but trailed
the 20.57% average return of funds in Morningstar's Large Growth category.
EMPHASIS ON MATERIALS, STOCK SELECTION BOOSTED PERFORMANCE
Good overall stock selection and the fund's relatively large position in the
materials and processing sector contributed to the fund's positive results.
Among materials and processing holdings, Precision Castparts, Freeport-McMoRan
Copper and Gold, and Monsanto were leaders. A manufacturer of metal components
for aircraft and other uses, Precision enjoyed strong growth in revenue and
expanded its market share in fasteners. Shares of Freeport rose in value as the
company benefited from rising commodity prices and its acquisition of rival
Phelps Dodge. An increase in corn planting enhanced earnings for Monsanto, the
world's largest seed producer, and the company raised its dividend.
TECHNOLOGY AND FINANCE HOLDINGS ALSO CONTRIBUTED
Top technology holdings included Apple and Cisco Systems. Apple continued to
benefit from growing demand in personal computers, laptops and the new iPhone
product line. Shares of Cisco, a leader in information network infrastructure,
rose on solid growth across all its business lines. Internet search leader
Google was another tech-related investment with outstanding results. The fund's
strongest financial companies included Goldman Sachs, CB Richard Ellis and
MasterCard. Investment banker Goldman Sachs exceeded earnings estimates, while
commercial real estate services company CB Richard Ellis gained on improved
leasing and property management revenues. We sold the stock at a profit. Shares
of MasterCard rose after its earnings surpassed analysts' expectations as a
result of broad trends favoring the use of debit and credit cards.
DISAPPOINTMENTS WERE IN DISPARATE SECTORS
Shares of Medco Health Solutions, a U.S. pharmacy benefit manager, declined in
price on concerns about prospects for the industry as a whole, as well as the
potential impact of Wal-Mart's discounted drug pricing program. Retailer Kohl's
experienced greater-than-expected declines in same-store sales. Telecom
equipment company Motorola failed to meet its sales forecasts, while healthcare
products company Johnson & Johnson slid amid concerns about potential side
effects of its anemia drug Procrit, and in response to news that Federal
prosecutors were probing the company's marketing unapproved uses for
prescription drugs. All four positions were eliminated.
In the transportation group, shares of Expeditors International of Washington
fell in price, even though this specialist in logistics planning for
international commerce met its third-quarter earnings forecasts last November.
Investors had expected stronger results. Among utilities holdings, shares of
Comcast also fell when earnings failed to meet Wall Street's expectations. We
sold both positions.
Our principal investment focus throughout the year remained on identifying
large-cap growth companies with strong fundamentals and leadership in their
industries. We reduced the fund's holdings in investment banks, commercial real
estate firms and retail-oriented companies, and added to positions in materials
and processing companies. We also initiated new investments in oil-services
companies.
PROSPECTS GOOD FOR CORPORATIONS WITH STRONG FUNDAMENTALS
We believe the mid-August lows in the major stock market indexes marked an
important turning point. Turmoil in the home building and mortgage markets
stressed investors, but companies with strong earnings and cash flow prospects
were able to recover. Going forward, we believe the Federal Reserve Board's
recent cut in interest rates, combined with strong corporate earnings, have
created a favorable backdrop for stock performance. We expect leadership to
come from stocks of companies that benefit from corporate rather than consumer
spending, and those with significant foreign revenues and exposure to emerging
markets.
3
LOOMIS SAYLES GROWTH FUND
Investment Results through September 30, 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/
September 30, 1997 through September 30, 2007
[CHART]
Net Asset Maximum Sales Russell 1000
Value/2/ Charge/3/ Growth Index
--------- --------- ------------
9/30/1997 $10,000 $ 9,425 $10,000
10/31/1997 9,891 9,322 9,630
11/30/1997 9,594 9,043 10,039
12/31/1997 9,759 9,198 10,152
1/31/1998 9,356 8,818 10,455
2/28/1998 10,015 9,439 11,242
3/31/1998 10,363 9,768 11,690
4/30/1998 10,658 10,045 11,852
5/31/1998 10,247 9,658 11,516
6/30/1998 10,704 10,089 12,221
7/31/1998 10,123 9,541 12,140
8/31/1998 8,092 7,627 10,318
9/30/1998 8,984 8,468 11,111
10/31/1998 9,597 9,045 12,004
11/30/1998 9,659 9,104 12,917
12/31/1998 10,988 10,356 14,081
1/31/1999 11,327 10,676 14,908
2/28/1999 10,860 10,236 14,227
3/31/1999 11,826 11,146 14,976
4/30/1999 11,986 11,296 14,996
5/31/1999 11,657 10,987 14,535
6/30/1999 12,474 11,757 15,553
7/31/1999 11,923 11,237 15,059
8/31/1999 12,018 11,327 15,305
9/30/1999 11,732 11,058 14,983
10/31/1999 12,635 11,908 16,115
11/30/1999 13,496 12,720 16,984
12/31/1999 15,626 14,727 18,750
1/31/2000 15,015 14,152 17,871
2/29/2000 16,880 15,909 18,745
3/31/2000 17,329 16,332 20,087
4/30/2000 15,948 15,031 19,131
5/31/2000 14,889 14,033 18,167
6/30/2000 16,375 15,433 19,544
7/31/2000 16,226 15,293 18,730
8/31/2000 17,976 16,943 20,425
9/30/2000 17,043 16,063 18,493
10/31/2000 15,765 14,859 17,618
11/30/2000 13,080 12,328 15,021
12/31/2000 13,092 12,339 14,546
1/31/2001 12,726 11,994 15,551
2/28/2001 11,201 10,557 12,911
3/31/2001 10,225 9,637 11,506
4/30/2001 10,994 10,362 12,961
5/31/2001 10,628 10,017 12,770
6/30/2001 10,494 9,891 12,474
7/31/2001 10,030 9,454 12,163
8/31/2001 9,262 8,730 11,168
9/30/2001 8,369 7,888 10,053
10/31/2001 8,836 8,328 10,581
11/30/2001 9,609 9,056 11,597
12/31/2001 9,853 9,286 11,575
1/31/2002 9,832 9,267 11,371
2/28/2002 9,304 8,769 10,899
3/31/2002 9,711 9,152 11,276
4/30/2002 9,406 8,865 10,355
5/31/2002 9,344 8,807 10,105
6/30/2002 8,694 8,194 9,170
7/31/2002 7,963 7,505 8,666
8/31/2002 7,963 7,505 8,692
9/30/2002 7,414 6,988 7,790
10/31/2002 7,963 7,505 8,505
11/30/2002 8,166 7,696 8,967
12/31/2002 7,577 7,142 8,348
1/31/2003 7,517 7,084 8,145
2/28/2003 7,476 7,046 8,108
3/31/2003 7,638 7,199 8,258
4/30/2003 8,126 7,658 8,869
5/31/2003 8,593 8,099 9,312
6/30/2003 8,613 8,118 9,440
7/31/2003 8,979 8,463 9,675
8/31/2003 9,223 8,693 9,915
9/30/2003 8,959 8,444 9,809
10/31/2003 9,812 9,248 10,360
11/30/2003 9,893 9,325 10,469
12/31/2003 10,015 9,439 10,831
1/31/2004 10,238 9,650 11,052
2/29/2004 10,319 9,726 11,122
3/31/2004 10,279 9,688 10,916
4/30/2004 9,954 9,382 10,789
5/31/2004 10,259 9,669 10,990
6/30/2004 10,564 9,956 11,127
7/31/2004 9,833 9,267 10,498
8/31/2004 9,711 9,152 10,447
9/30/2004 10,117 9,535 10,546
10/31/2004 10,482 9,879 10,710
11/30/2004 11,153 10,511 11,079
12/31/2004 11,580 10,914 11,513
1/31/2005 11,112 10,473 11,129
2/28/2005 11,274 10,626 11,248
3/31/2005 10,949 10,320 11,043
4/30/2005 10,605 9,995 10,832
5/31/2005 11,295 10,645 11,357
6/30/2005 11,579 10,914 11,315
7/31/2005 12,148 11,450 11,868
8/31/2005 11,945 11,258 11,715
9/30/2005 12,250 11,545 11,769
10/31/2005 12,169 11,469 11,654
11/30/2005 12,758 12,024 12,157
12/31/2005 12,799 12,063 12,119
1/31/2006 13,245 12,484 12,332
2/28/2006 13,022 12,273 12,312
3/31/2006 13,001 12,253 12,494
4/30/2006 12,716 11,985 12,477
5/31/2006 11,700 11,027 12,054
6/30/2006 11,659 10,989 12,007
7/31/2006 11,314 10,663 11,778
8/31/2006 11,457 10,798 12,145
9/30/2006 11,863 11,181 12,479
10/31/2006 12,229 11,525 12,918
11/30/2006 12,391 11,679 13,174
12/31/2006 12,350 11,640 13,219
1/31/2007 12,797 12,062 13,559
2/28/2007 12,330 11,621 13,304
3/31/2007 12,635 11,908 13,376
4/30/2007 12,980 12,233 14,006
5/31/2007 13,529 12,751 14,509
6/30/2007 13,346 12,579 14,293
7/31/2007 13,143 12,388 14,071
8/31/2007 13,306 12,541 14,296
9/30/2007 14,240 13,422 14,894
Average Annual Total Returns -- September 30, 2007/5/
1 YEAR 5 YEARS 10 YEARS
CLASS A/1/
Net Asset Value/2/ 20.03% 13.94% 3.59%
With Maximum Sales Charge/3/ 13.06 12.62 2.98
CLASS B/1/
Net Asset Value/2/ 19.12 13.03 2.80
With CDSC/4/ 14.12 12.79 2.80
CLASS C/1/
Net Asset Value/2/ 19.09 13.07 2.81
With CDSC/4/ 18.09 13.07 2.81
CLASS Y/1/
Net Asset Value/2/ 20.39 14.31 3.87
- ----------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Russell 1000 Growth Index 19.35% 13.84% 4.06%
Morningstar Large Growth Fund Avg. 20.57 14.08 5.03
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.funds.natixis.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 9/30/07 9/30/06
- ------------------------------------------------------
Common Stocks 99.2 98.4
- ------------------------------------------------------
Short-Term Investments and Other 0.8 1.6
- ------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 9/30/07 9/30/06
- ------------------------------------------------------
Apple, Inc. 4.3 3.6
- ------------------------------------------------------
Cisco Systems, Inc. 4.0 1.5
- ------------------------------------------------------
Google, Inc. 4.0 3.9
- ------------------------------------------------------
Precision Castparts Corp. 3.0 2.1
- ------------------------------------------------------
Schlumberger Ltd. 3.0 0.0
- ------------------------------------------------------
Amazon.com, Inc. 3.0 0.0
- ------------------------------------------------------
Hewlett Packard Co. 2.8 0.0
- ------------------------------------------------------
Monsanto Co. 2.7 0.0
- ------------------------------------------------------
MasterCard, Inc., Class A 2.5 0.0
- ------------------------------------------------------
Adobe Systems, Inc. 2.4 0.0
- ------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 9/30/07 9/30/06
- ------------------------------------------------------
Computers & Peripherals 11.8 6.1
- ------------------------------------------------------
Internet Software & Services 6.2 5.6
- ------------------------------------------------------
Software 5.9 5.6
- ------------------------------------------------------
Communications Equipment 5.6 7.4
- ------------------------------------------------------
Diversified Financial Services 5.3 2.5
- ------------------------------------------------------
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 9 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 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. Class Y
performance has been restated to reflect the net expenses of the
Institutional Class after taking into effect the fund's then 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 reductions and
reimbursements, if any, without which performance would have been lower.
/6/Before reductions and reimbursements.
/7/After reductions and reimbursements. Expense reductions are contractual and
are set to expire 1/31/08.
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
- --------------------------------------------------------------------------------
Despite periods of volatility, stocks produced healthy returns for the 12
months ended September 30, 2007, aided by the continuing expansion of the
domestic and global economies and solid corporate profit growth. Class A shares
of Loomis Sayles Research Fund returned 17.98% at net asset value, including
$0.07 in dividends and $1.13 in capital gains reinvested during the period. The
fund outpaced the 16.44% gain in the fund's benchmark, the S&P 500 Index, and
the 16.48% average return of funds in Morningstar's Large Blend category.
CYCLICAL STOCKS DOMINATED RETURNS
Cyclical stocks powered the fund's performance. Many of our strongest
contributors are leading companies in such market areas as capital goods,
commodities, energy and technology- areas that typically lead during economic
expansions. Concerns about potentially tighter oversight by the U.S. Food and
Drug Administration weighed on healthcare stocks, while consumer discretionary
stocks lagged amid worries that slumping home prices could undermine consumer
spending.
ENERGY, INDUSTRIAL AND TECHNOLOGY STOCKS GAINED
Our strongest contributors included commodity-related names like
Freeport-McMoRan Copper & Gold, and capital goods companies like Precision
Castparts. We bought shares of Freeport early in the fiscal year when the
mining company's share price seemed undervalued. The company subsequently
benefited from its acquisition of rival Phelps Dodge and from rising commodity
prices, which enabled it to pay down debt ahead of schedule and raise its
dividend. We sold Freeport in September. Precision, a manufacturer of metal
components for aircraft and other industrial uses, enjoyed strong growth in
revenue and expanded its market share in fasteners. Energy giant ExxonMobil was
the fund's top performer for the period.
Our technology selections also contributed, including Cisco Systems, a leader
in information technology infrastructure; internet search firm Google; and EMC,
an industry force in computerized data storage. We took profits in EMC in
August. In general, our strategy this year has been to invest in specific
companies with strong end markets, coupled with management execution that we
think makes the company more likely to exceed earnings expectations.
EARNINGS, REVENUE PROBLEMS LED TO SOME DISAPPOINTMENTS
Disappointing positions were largely stocks of companies that experienced
earnings weakness or lack of catalysts. Retail chain Kohl's is one example.
Like many department stores, the firm's earnings were pressured by slowing
sales and we sold the position. Other detractors included Merrill Lynch, the
diversified broker and investment banker. The decline in the stock's value
reflected both a spillover of negative sentiment from the subprime lending
market and company-specific issues resulting from recent acquisitions. Time
Warner's performance was undermined by slowing growth in high-speed data
services in its cable division, plus diminished revenue prospects for its AOL
division. Earnings disappointments also led to poor results from Symantec, a
specialist in data security for computer systems; we sold the stock. However,
we believe both Merrill Lynch and Time Warner may return to market favor so
they remain in the portfolio.
INDIVIDUAL STOCK SELECTION WILL GUIDE STRATEGY
Looking forward, we believe the stock market has the potential to deliver good
performance, especially in light of the Federal Reserve Board's recent interest
rate cut, which improved credit market conditions and created a favorable
outlook for corporate earnings. In particular, we think companies that can
benefit from corporate rather than consumer spending, and firms whose earnings
come from outside the United States (especially those with exposure to emerging
markets) should do well. We are less enthusiastic about prospects for companies
more dependent on the U.S. economy in general, and the American consumer in
particular. Consequently, we intend to maintain our emphasis on stock
selection, with sector weightings remaining neutral relative to the fund's
benchmark. Our goal is to seek the best ideas using a bottom-up analysis of
industry and competitive factors, while trying to neutralize risks from
macroeconomic factors.
5
LOOMIS SAYLES RESEARCH FUND
Investment Results through September 30, 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) September 30, 2007
[CHART]
Net Asset Maximum Sales S&P 500
Value/2/ Charge/3/ 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
4/30/2007 11,045 10,410 11,596
5/31/2007 11,444 10,786 12,001
6/30/2007 11,263 10,615 11,801
7/31/2007 10,972 10,341 11,435
8/31/2007 11,117 10,478 11,607
9/30/2007 11,806 11,127 12,041
Average Annual Total Returns -- September 30, 2007/6/
SINCE FUND
1 YEAR 5 YEARS INCEPTION
CLASS A/1/
Net Asset Value/2/ 17.98% 15.65% 2.35%
With Maximum Sales Charge/3/ 11.25 14.28 1.51
CLASS B/1/
Net Asset Value/2/ 17.11 14.74 1.52
With CDSC/4/ 12.11 14.51 1.52
CLASS C/1/
Net Asset Value/2/ 17.17 14.65 1.47
With CDSC/4/ 16.17 14.65 1.47
CLASS Y/1/
Net Asset Value/2/ 18.39 16.05 2.69
- -------------------------------------------------------------
SINCE FUND
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS INCEPTION/5/
S&P 500 Index 16.44% 15.45% 2.63%
Morningstar Large Blend Fund Avg. 16.48 14.72 3.47
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.funds.natixis.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 9/30/07 9/30/06
- --------------------------------------------------------
Common Stocks 99.8 99.7
- --------------------------------------------------------
Short-Term Investments and Other 0.2 0.3
- --------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 9/30/07 9/30/06
- --------------------------------------------------------
ExxonMobil Corp. 3.9 4.6
- --------------------------------------------------------
AT&T, Inc. 3.6 1.1
- --------------------------------------------------------
Cisco Systems, Inc. 2.7 0.0
- --------------------------------------------------------
Coca-Cola Co. 2.4 2.0
- --------------------------------------------------------
American International Group, Inc. 2.4 0.0
- --------------------------------------------------------
Merck & Co., Inc. 2.3 0.6
- --------------------------------------------------------
Bank of America Corp. 2.3 2.9
- --------------------------------------------------------
Apple, Inc. 2.3 2.3
- --------------------------------------------------------
CVS Caremark Corp. 2.2 1.9
- --------------------------------------------------------
American Express Co. 2.0 0.0
- --------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 9/30/07 9/30/06
- --------------------------------------------------------
Oil, Gas & Consumable Fuels 7.0 7.6
- --------------------------------------------------------
Insurance 6.4 5.8
- --------------------------------------------------------
Aerospace & Defense 6.3 6.0
- --------------------------------------------------------
Beverages 5.6 5.5
- --------------------------------------------------------
Pharmaceuticals 5.3 4.3
- --------------------------------------------------------
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 9 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 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. Class Y
performance has been restated to reflect the net expenses of the
Institutional Class after taking into effect the fund's then 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 reductions and
reimbursements, if any, without which performance would have been lower.
/7/Before reductions and reimbursements.
/8/After reductions and reimbursements. Expense reductions are contractual and
are set to expire 1/31/08.
6
LOOMIS SAYLES VALUE FUND
PORTFOLIO PROFILE
Objective:
Long-term growth of capital and income
- --------------------------------------------------------------------------------
Strategy:
Invests primarily in equity securities, including common stocks, convertible
securities, and warrants. The fund invests primarily in medium-sized and
large-sized companies, but may invest in companies of any size
- --------------------------------------------------------------------------------
Fund Inception:
May 13, 1991
- --------------------------------------------------------------------------------
Managers:
Arthur Barry, CFA
James L. Carroll, CFA
Warren N. Koontz, CFA, CIC
Loomis, Sayles & Company, L.P.
- --------------------------------------------------------------------------------
Symbols:
Class A LSVRX
Class B LSVBX
Class C LSCVX
Class Y LSGIX
- --------------------------------------------------------------------------------
What You Should Know:
While the fund offers potential for long-term capital growth, it invests in
value stocks, which can fall out of favor with investors and may underperform
growth stocks during certain market conditions.
Management Discussion
- --------------------------------------------------------------------------------
Stock prices generally rose during the 12 months ended September 30, 2007,
despite a volatile environment. Recession fears triggered a market decline in
February and anxiety over the possible impact of default rates in subprime
mortgages depressed markets this summer. But investors returned to stocks in
the fall as corporate earnings remained vital and the Federal Reserve Board cut
short-term interest rates.
Successful stock selection keyed Loomis Sayles Value Fund's good performance
for the fiscal year ended September 30, 2007. The fund's Class A shares
provided a total return of 16.85% at net asset value including $0.13 in
dividends and $0.91 in capital gains reinvested during the period. (The total
return on Class A shares includes the historical performance of the fund's
Retail Class for the fiscal year ended September 30, 2007, including the period
when Class A shares were not offered by the fund.) The fund surpassed its
benchmark, the Russell 1000 Value Index, which returned 14.45% for the 12-month
period, and came in ahead of the 14.44% average return on the funds in
Morningstar's Large Value category.
ENERGY, INDUSTRIAL AND TELECOM ISSUES LED PERFORMANCE
Rising oil prices favored most energy stocks. Industrials, technology and
utilities were also among the fund's best-performing sectors. Integrated oil
companies like ExxonMobil, which focuses on oil rather than natural gas, not
only benefited as the price of oil rose, its stock price reflected the
company's share buy-back program. Shares of Foster Wheeler, a leading
engineering and construction company, also rose, thanks to positive earnings
trends. We sold the fund's Foster Wheeler holdings on strength. ABB Ltd., which
makes power and automation products, enjoyed strong results in all its business
lines. Among utilities, AT&T continued to reward investors following last
year's acquisition of BellSouth. AT&T is also building its customer base
outside the United States.
BUYOUTS AMONG CONSUMER HOLDINGS FUNDED EXPANSION IN MATERIALS
OSI Restaurants, operators of Outback Steakhouse and other restaurant chains,
and discount retailer Dollar General were targets of attractive buyout offers
and were sold at a profit. We used the proceeds to add to the fund's holdings
in materials companies, including Freeport-McMoRan Copper and Gold. The company
performed well based on improving copper prices, company transformations and
strong cash flow generation. A mid-year dip in oil and natural gas prices
benefited Owens-Illinois, whose glass-making operations are energy-intensive.
MOST DECLINERS REFLECTED STOCK-SPECIFIC DEVELOPMENTS
Revenue shortfalls and the rapid pace of store openings undercut shares of
Office Depot. Rising retail prices and possible over-commitment to private
label products also hurt this office products retailer. Motorola's cell phone
business struggled as the need grew for a successor to its RAZR line of phones.
Lagging sales brought company-wide layoffs earlier in the year. Because we
still believe both stocks are undervalued, both Office Depot and Motorola
remain in the fund. Omnicare, which provides pharmaceutical services to seniors
in nursing homes and other facilities, underperformed as profits weakened and
Medicare reimbursements remained in flux. We sold Omnicare after the stock had
partially recovered from its mid-year low.
POSITIVE OUTLOOK FOR BUSINESS SPENDING AND OVERSEAS MARKETS
In this volatile environment, stocks that did well were generally those with
strong fundamentals and positive earnings outlooks. Going forward, we believe
the best opportunities will be found among companies that rely on business
spending rather than consumer outlays. Earnings from outside the United States
will also take on more importance, particularly if emerging market economies
expand faster than our own.
We continue to focus on individual companies more than broad market or economic
trends. Our bottom-up stock selection process is supported by intensive
research, as we seek companies trading at a discount to what we feel is their
intrinsic value. This approach is designed to help us pursue strong returns
over the long term.
7
LOOMIS SAYLES VALUE FUND
Investment Results through September 30, 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/
July 31, 2000 (inception) through September 30, 2007
[CHART]
S & P 500
Net Asset Value/2/ Maximum Sales Charge/3/ Index
------------------ ----------------------- -----------
9/30/1997 $10,000 $ 9,425 $10,000
10/31/1997 9,628 9,074 9,721
11/30/1997 9,912 9,342 10,150
12/31/1997 9,877 9,309 10,447
1/31/1998 9,899 9,330 10,299
2/28/1998 10,551 9,945 10,992
3/31/1998 10,864 10,239 11,665
4/30/1998 10,952 10,322 11,743
5/31/1998 10,760 10,141 11,568
6/30/1998 10,744 10,126 11,717
7/31/1998 10,262 9,671 11,510
8/31/1998 8,815 8,308 9,797
9/30/1998 9,418 8,876 10,359
10/31/1998 10,212 9,625 11,162
11/30/1998 10,564 9,956 11,682
12/31/1998 10,870 10,245 12,079
1/31/1999 10,840 10,216 12,176
2/28/1999 10,520 9,915 12,004
3/31/1999 10,902 10,275 12,252
4/30/1999 11,684 11,013 13,397
5/31/1999 11,611 10,943 13,250
6/30/1999 11,907 11,222 13,634
7/31/1999 11,464 10,805 13,235
8/31/1999 10,977 10,346 12,744
9/30/1999 10,361 9,765 12,298
10/31/1999 10,750 10,131 13,006
11/30/1999 10,658 10,045 12,905
12/31/1999 10,682 10,067 12,967
1/31/2000 10,215 9,627 12,544
2/29/2000 9,393 8,852 11,612
3/31/2000 10,340 9,746 13,029
4/30/2000 10,299 9,707 12,877
5/31/2000 10,473 9,871 13,013
6/30/2000 10,222 9,634 12,418
7/31/2000 10,173 9,588 12,574
8/31/2000 10,862 10,238 13,273
9/30/2000 10,688 10,074 13,395
10/31/2000 11,086 10,449 13,724
11/30/2000 10,849 10,225 13,214
12/31/2000 11,432 10,775 13,877
1/31/2001 11,580 10,914 13,930
2/28/2001 11,263 10,615 13,543
3/31/2001 10,840 10,217 13,064
4/30/2001 11,362 10,708 13,705
5/31/2001 11,545 10,881 14,013
6/30/2001 11,340 10,688 13,702
7/31/2001 11,248 10,602 13,673
8/31/2001 10,819 10,197 13,125
9/30/2001 9,910 9,340 12,201
10/31/2001 9,973 9,400 12,096
11/30/2001 10,527 9,922 12,799
12/31/2001 10,759 10,140 13,101
1/31/2002 10,657 10,045 13,000
2/28/2002 10,606 9,996 13,021
3/31/2002 10,962 10,331 13,637
4/30/2002 10,686 10,072 13,169
5/31/2002 10,759 10,140 13,235
6/30/2002 9,976 9,402 12,475
7/31/2002 9,134 8,609 11,316
8/31/2002 9,243 8,711 11,401
9/30/2002 8,183 7,713 10,133
10/31/2002 8,764 8,260 10,884
11/30/2002 9,301 8,766 11,570
12/31/2002 8,941 8,427 11,067
1/31/2003 8,729 8,227 10,799
2/28/2003 8,393 7,910 10,511
3/31/2003 8,342 7,862 10,529
4/30/2003 9,021 8,503 11,456
5/31/2003 9,679 9,123 12,195
6/30/2003 9,848 9,281 12,348
7/31/2003 9,899 9,330 12,531
8/31/2003 10,096 9,515 12,727
9/30/2003 9,949 9,377 12,603
10/31/2003 10,439 9,839 13,374
11/30/2003 10,643 10,031 13,555
12/31/2003 11,250 10,603 14,391
1/31/2004 11,398 10,742 14,644
2/29/2004 11,649 10,980 14,958
3/31/2004 11,612 10,944 14,827
4/30/2004 11,390 10,735 14,464
5/31/2004 11,568 10,903 14,612
6/30/2004 11,790 11,112 14,957
7/31/2004 11,612 10,944 14,746
8/31/2004 11,656 10,986 14,956
9/30/2004 11,849 11,167 15,188
10/31/2004 11,974 11,286 15,440
11/30/2004 12,610 11,885 16,221
12/31/2004 12,918 12,175 16,764
1/31/2005 12,776 12,041 16,467
2/28/2005 13,159 12,402 17,012
3/31/2005 12,993 12,246 16,779
4/30/2005 12,760 12,027 16,479
5/31/2005 13,068 12,317 16,875
6/30/2005 13,293 12,528 17,060
7/31/2005 13,886 13,087 17,554
8/31/2005 13,879 13,081 17,477
9/30/2005 14,090 13,280 17,723
10/31/2005 13,857 13,060 17,272
11/30/2005 14,406 13,578 17,840
12/31/2005 14,536 13,700 17,947
1/31/2006 15,139 14,268 18,644
2/28/2006 15,345 14,462 18,758
3/31/2006 15,575 14,679 19,012
4/30/2006 16,011 15,090 19,495
5/31/2006 15,654 14,754 19,002
6/30/2006 15,638 14,739 19,124
7/31/2006 15,996 15,077 19,589
8/31/2006 16,283 15,346 19,917
9/30/2006 16,711 15,750 20,314
10/31/2006 17,331 16,334 20,979
11/30/2006 17,657 16,641 21,458
12/31/2006 18,095 17,054 21,939
1/31/2007 18,419 17,359 22,220
2/28/2007 17,986 16,952 21,873
3/31/2007 18,353 17,297 22,212
4/30/2007 18,986 17,894 23,032
5/31/2007 19,834 18,694 23,863
6/30/2007 19,527 18,404 23,306
7/31/2007 18,754 17,675 22,228
8/31/2007 18,870 17,785 22,477
9/30/2007 19,527 18,404 23,249
Average Annual Total Returns -- September 30, 2007/5/
1 YEAR 5 YEARS 10 YEARS
CLASS A/1/
Net Asset Value/2/ 16.85% 19.00% 6.92%
With Maximum Sales Charge/3/ 10.15 17.60 6.29
CLASS B/1,8/
Net Asset Value/2/ 15.94 17.93 5.69
With CDSC/4/ 10.94 17.73 5.69
CLASS C/1,8/
Net Asset Value/2/ 15.94 17.93 5.69
With CDSC/4/ 14.94 17.93 5.69
CLASS Y/1/
Net Asset Value/2/ 17.25 19.33 7.27
- ---------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Russell 1000 Value Index 14.45% 18.07% 8.80%
Morningstar Large Value Fund Avg. 14.44 16.13 7.30
All returns represent past performance and do not guarantee future results.
Periods of less than one year are not annualized. Share price and return will
vary and you may have a gain or loss when you sell your shares. All results
include reinvestment of dividends and capital gains. Current returns may be
higher or lower than those shown. For performance current to the most recent
month-end, visit www.funds.natixis.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 9/30/07 9/30/06
- --------------------------------------------------------
Common Stocks 96.9 95.0
- --------------------------------------------------------
Short-Term Investments and Other 3.1 5.0
- --------------------------------------------------------
% of Net Assets as of
TEN LARGEST HOLDINGS 9/30/07 9/30/06
- --------------------------------------------------------
AT&T, Inc. 4.5 1.7
- --------------------------------------------------------
ExxonMobil Corp. 3.9 4.1
- --------------------------------------------------------
Bank of America Corp. 2.5 2.7
- --------------------------------------------------------
JP Morgan Chase & Co. 2.4 2.8
- --------------------------------------------------------
Citigroup, Inc. 2.4 2.6
- --------------------------------------------------------
Halliburton Co. 2.3 1.6
- --------------------------------------------------------
Total SA, Sponsored ADR 2.0 0.0
- --------------------------------------------------------
American International Group, Inc. 2.0 2.1
- --------------------------------------------------------
Allstate Corp. 2.0 2.6
- --------------------------------------------------------
Time Warner, Inc. 1.9 2.1
- --------------------------------------------------------
% of Net Assets as of
FIVE LARGEST INDUSTRIES 9/30/07 9/30/06
- --------------------------------------------------------
Oil, Gas & Consumable Fuels 10.4 6.5
- --------------------------------------------------------
Insurance 7.6 7.5
- --------------------------------------------------------
Diversified Financial Services 7.3 9.9
- --------------------------------------------------------
Capital Markets 6.1 8.5
- --------------------------------------------------------
Media 6.1 7.9
- --------------------------------------------------------
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 8.65% 1.10%
- -------------------------------------------------------
B 1.97 1.85
- -------------------------------------------------------
C 1.97 1.85
- -------------------------------------------------------
Y 0.91 0.85
- -------------------------------------------------------
NOTES TO CHARTS
See page 9 for a description of the indexes.
/1/Returns shown in the chart include performance of the fund's Retail Class
shares, which were redesignated to Class A shares on 6/1/07. Performance has
been restated to reflect the current load of Class A shares. For periods
before the inception of Retail Class shares (6/30/06), performance shown for
Class A has been based on the performance of the fund's Institutional Class
shares, adjusted to reflect the higher fees and 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 (6/1/07), 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 then 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 6/1/07, 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 reductions and
reimbursements, if any, without which performance would have been lower.
/6/Before reductions and reimbursements.
/7/After reductions and reimbursements. Expense reductions are contractual and
are set to expire 1/31/08.
/8/Total return from commencement of operations through September 30, 2007 is
listed in the Financial Highlights.
8
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 Natixis Fund, contact your financial
professional or call Natixis 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 that measures the performance
of those Russell 1000 companies with higher price-to-book ratios and higher
forecasted growth values.
Russell 1000 Value Index is an unmanaged index that measures the performance of
those Russell 1000 companies with lower price-to-book ratios and lower
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 Natixis Funds at 800-225-5478; on the
funds' website at www.funds.natixis.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, 2007 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
9
UNDERSTANDING YOUR FUNDS' EXPENSES
As a mutual fund shareholder, you incur different types of costs: transaction
costs, including sales charges (loads) on purchases and contingent deferred
sales charges on redemptions; redemption fees; certain exchange fees; and
minimum account fee charges; and ongoing costs, including management fees,
distribution and/or service fees (12b-1 fees), and other fund expenses. In
addition, each fund assesses a minimum balance fee of $20 on an annual basis
for accounts that fall below the required minimum to establish 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 April 1,
2007 (or commencement of operations if later) through September 30, 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 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,157.30 $6.76
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.80 $6.33
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,152.80 $10.79
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.04 $10.10
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,158.50 $5.41
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.05 $5.06
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/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).
10
UNDERSTANDING FUND EXPENSES
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES GROWTH FUND 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,127.00 $6.13
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.30 $5.82
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,122.30 $9.84
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.79 $9.35
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,122.10 $10.05
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.59 $9.55
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,127.90 $3.63
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.66 $3.45
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/reimbursement): 1.15%, 1.85%, 1.89% and 0.68% 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 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,111.50 $6.62
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.80 $6.33
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,107.80 $10.57
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.04 $10.10
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,108.30 $10.57
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,015.04 $10.10
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,114.30 $4.51
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.81 $4.31
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/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).
11
UNDERSTANDING FUND EXPENSES
BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING PERIOD*
LOOMIS SAYLES VALUE FUND 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,063.90 $5.64
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,019.60 $5.52
- ------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $977.50 $6.06
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,010.44 $6.16
- ------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $977.50 $6.06
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,010.44 $6.16
- ------------------------------------------------------------------------------------------------------------------
CLASS Y
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,066.10 $3.78
- ------------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,021.41 $3.70
- ------------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after advisory
reduction/reimbursement): 1.09%, 1.85%, 1.85% and 0.73% 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, or from
commencement of operations for Classes B and C (6/1/07), divided by 365 (to
reflect the half-year period).
12
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENT
The Board of Trustees, including the Independent Trustees, considers matters
bearing on each Fund's advisory agreement (collectively, the "Agreements") at
most of its meetings throughout the year. Once a year, usually in the spring,
the Contract Review and Governance Committee of the Board meets to review the
Agreements to determine whether to recommend that the full Board approve the
continuation of the Agreements, typically for an additional one-year period.
After the Committee has made its recommendation, the full Board, including the
Independent Trustees, determines whether to approve the continuation of the
Agreements.
In connection with these meetings, the Trustees receive materials that the
Funds' investment adviser believes to be reasonably necessary for the Trustees
to evaluate the Agreements. These materials generally include, among other
items, (i) information on the investment performance of the Funds and the
performance of peer groups of funds and the Funds' performance benchmarks, (ii)
information on the Funds' advisory fees and other expenses, including
information comparing the Funds' expenses to those of peer groups of funds and
information about any applicable expense caps and fee "breakpoints," (iii)
sales and redemption data in respect of the Funds, (iv) information about the
profitability of the Agreements to the Funds' adviser (the "Adviser"), and (v)
information obtained through the completion of a questionnaire by the Adviser
(the Trustees are consulted as to the information requested through that
questionnaire). The Board of Trustees, including the Independent Trustees, also
consider other matters such as (i) the Adviser's financial results and
financial condition, (ii) each Fund's investment objective and strategies and
the size, education and experience of the Adviser's investment staff and its
use of technology, external research and trading cost measurement tools, (iii)
arrangements in respect of the distribution of the Funds' shares, (iv) the
procedures employed to determine the value of the Funds' assets, (v) the
allocation of the Funds' brokerage, if any, including allocations to brokers
affiliated with the Adviser and the use of "soft" commission dollars to pay
Fund expenses and to pay for research and other similar services, (vii) the
resources devoted to, and the record of compliance with, the Funds' investment
policies and restrictions, policies on personal securities transactions and
other compliance policies, and (viii) the general economic outlook with
particular emphasis on the mutual fund industry. Throughout the process, the
Trustees are afforded the opportunity to ask questions of and request
additional materials from the Adviser.
In addition to the materials requested by the Trustees in connection with the
annual consideration of the continuation of the Agreements, the Trustees
receive materials in advance of each regular quarterly meeting of the Board of
Trustees that provide detailed information about each Fund's investment
performance and the fees charged to the Funds for advisory and other services.
This information generally includes, among other things, an internal
performance rating for each Fund based on agreed-upon criteria, graphs showing
performance and fee differentials against each Fund's peer group, performance
ratings provided by a third-party, total return information for various
periods, and third-party performance rankings for various periods comparing a
Fund against its peer group. The portfolio management team for each Fund makes
periodic presentations to the Contract Review and Governance Committee and/or
the full Board of Trustees, and Funds identified as presenting possible
performance concerns may be subject to more frequent board presentations and
reviews. In addition, each quarter the Trustees are provided with detailed
statistical information about each Fund's portfolio.
The Board of Trustees most recently approved the continuation of the Agreements
at their meeting held in June, 2007. In considering whether to approve the
continuation of the Agreements, the Board of Trustees, including the
Independent Trustees, did not identify any single factor as determinative.
Matters considered by the Trustees, including the Independent Trustees, in
connection with their approval of the Agreements included the following:
The nature, extent and quality of the services provided to the Funds under the
Agreements. The Trustees considered the nature, extent and quality of the
services provided by the Adviser and its affiliates to the Funds and the
resources dedicated to the Funds by the Adviser and its affiliates, including
recent or planned investments of the Adviser in additional personnel or other
resources. They also took note of the competitive market for talented
personnel, in particular, for personnel who have contributed to the generation
of strong investment performance. They considered the need for the Adviser to
offer competitive compensation in order to attract and retain capable personnel.
For each Fund, the Trustees also considered the benefits to shareholders of
investing in a mutual fund that is part of a family of funds offering a variety
of investment disciplines and providing for a variety of fund and shareholder
services.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
nature, extent and quality of services provided supported the renewal of the
Agreements.
Investment performance of the Funds and the Adviser. As noted above, the
Trustees received information about the performance of the Funds over various
time periods, including information which compared the performance of the Funds
to the performance of
13
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENT
peer groups of funds and the Funds' respective performance benchmarks. In
addition, the Trustees also reviewed data prepared by an independent third
party which analyzed the performance of the Funds using a variety of
performance metrics, including metrics which also measured the performance of
the Funds on a risk adjusted basis.
With respect to each Fund, the Board concluded that the Fund's performance or
other relevant factors supported the renewal of the Agreement relating to that
Fund. In the case of each Fund that had performance that lagged that of a
relevant peer group for certain (although not necessarily all) periods, the
Board concluded that other factors relevant to performance supported renewal of
the Funds' Agreements. These factors varied from Fund to Fund, but included one
or more of the following: (1) that the Fund's performance, although lagging in
certain recent periods, was strong over the longer term or (2) that the
underperformance was attributable, to a significant extent, to investment
decisions by the Fund's Adviser that were reasonable and consistent with the
Fund's investment objective and policies.
The Trustees also considered the Adviser's performance and reputation
generally, the Funds' performance as a fund family generally, and the
historical responsiveness of the Adviser to Trustee concerns about performance
and the willingness of the Adviser to take steps intended to improve
performance.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
performance of the Funds and the Adviser supported the renewal of the
Agreements.
The costs of the services to be provided and profits to be realized by the
Adviser and its affiliates from their respective relationships with the Funds.
The Trustees considered the fees charged to the Funds for advisory services as
well as the total expense levels of the Funds. This information included
comparisons (provided both by management and also by an independent third
party) of the Funds' advisory fees and total expense levels to those of their
peer groups and information about the advisory fees charged by the Adviser to
comparable accounts. In considering the fees charged to comparable accounts,
the Trustees considered, among other things, management's representations about
the differences between managing mutual funds as compared to other types of
accounts, including the additional resources required to effectively manage
mutual fund assets. In evaluating each Fund's advisory fees, the Trustees also
took into account the demands, complexity and quality of the investment
management of such Fund. The Trustees considered that over the past several
years, for various Funds in the Natixis Funds Family, management had made
recommendations regarding reductions in advisory fee rates, implementation of
advisory fee breakpoints and the institution of advisory fee reductions and
expense caps. They noted that all four of the Natixis Equity Funds in this
report have expense caps in place, and they considered the amount of expenses
reduced or reimbursed by the Adviser under these caps. The Trustees noted that
the Loomis Sayles Global Markets Fund had a total expense ratio that was above
the median of a peer group of funds. The Trustees considered the circumstances
that accounted for such relatively higher expenses. The Trustees noted that the
relatively higher expense ratios for the Loomis Sayles Global Markets Fund
resulted to a significant extent from relatively higher expenses relating to
items other than advisory fees.
The Trustees also considered the compensation directly or indirectly received
by the Adviser and its affiliates from their relationships with the Funds. The
Trustees reviewed information provided by management as to the profitability of
the Adviser's and its affiliates' relationships with the Funds, and information
about the allocation of expenses used to calculate profitability. They also
reviewed information provided by management about the effect of distribution
costs and Fund growth on Adviser profitability, including information regarding
resources spent on distribution activities and the increase in net sales for
the family of funds. When reviewing profitability, the Trustees also considered
information about court cases in which adviser profitability was an issue, the
performance of the relevant Funds, the expense levels of the Funds, and whether
the Adviser had implemented breakpoints and/or expense caps with respect to
such Funds.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
advisory fees charged to each of the Funds were fair and reasonable, and that
the costs of these services generally and the related profitability of the
Adviser and its affiliates in respect of their relationships with the Funds
supported the renewal of the Agreements.
Economies of Scale. The Trustees considered the existence of any economies of
scale in the provision of services by the Adviser and whether those economies
are shared with the Funds through "breakpoints" in their investment advisory
fees or other means, such as expense reductions. The Trustees noted that each
Fund was subject to an expense cap. In considering these issues, the Trustees
also took note of the costs of the services provided (both on an absolute and a
relative basis) and the profitability to the Adviser and its affiliates of
their relationships with the Funds, as discussed above.
14
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENT
After reviewing these and related factors, the Trustees considered, within the
context of their overall conclusions regarding each of the Agreements, that the
extent to which economies of scale were shared with the Funds supported the
renewal of the Agreements.
The Trustees also considered other factors, which included but were not limited
to the following:
.. whether each Fund has operated in accordance with its investment objective
and the Fund's record of compliance with its investment restrictions, and
the compliance programs of the Funds and the Adviser. They also considered
the compliance-related resources the Adviser and its affiliates were
providing to the Funds.
.. the nature, quality, cost and extent of administrative and shareholder
services performed by the Adviser and its affiliates, both under the
Agreements and under separate agreements covering administrative services.
.. so-called "fallout benefits" to the Adviser, such as the engagement of
affiliates of the Adviser to provide distribution, administrative and
brokerage services to the Funds, and the benefits of research made available
to the Adviser by reason of brokerage commissions generated by the Funds'
securities transactions. The Trustees considered the possible conflicts of
interest associated with these fallout and other benefits, and the
reporting, disclosure and other processes in place to disclose and monitor
such possible conflicts of interest.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees,
concluded that each of the existing advisory agreements should be continued
through June 30, 2008.
15
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------------
Bonds and Notes -- 27.2% of Total Net Assets
Non-Convertible Bonds -- 26.2%
Argentina -- 0.3%
$ 678,539 Republic of Argentina,
2.000%, 9/30/2014, (ARS) $ 161,363
68,750 Republic of Argentina,
5.389%, 8/03/2012(b) 61,781
886,009 Republic of Argentina, Discount Note,
5.830%, 12/31/2033, (ARS)(b) 220,754
95,000 Transportadora de Gas del Sur SA,
7.875%, 5/14/2017, 144A 87,732
---------------
531,630
---------------
Austria -- 0.0%
75,000 Sappi Papier Holding AG,
7.500%, 6/15/2032, 144A 67,731
---------------
Brazil -- 0.2%
170,000 Marfrig Overseas Ltd.,
9.625%, 11/16/2016, 144A(c) 175,525
250,000 Republic of Brazil,
10.250%, 1/10/2028, (BRL) 139,375
---------------
314,900
---------------
Canada -- 0.2%
70,000 Canadian Government,
4.250%, 9/01/2009, (CAD) 70,545
105,000 Canadian Government,
4.500%, 6/01/2015, (CAD) 106,948
25,000 Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, (CAD), 144A 24,917
50,000 Nortel Networks Corp.,
6.875%, 9/01/2023 40,500
180,000 Shaw Communications, Inc.,
6.150%, 5/09/2016, (CAD) 177,251
---------------
420,161
---------------
Cayman Island -- 0.1%
100,000 LPG International, Inc.,
7.250%, 12/20/2015(c) 100,550
100,000 Vale Overseas Ltd.,
6.875%, 11/21/2036 103,027
---------------
203,577
---------------
Chile -- 0.1%
100,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
7.875%, 2/01/2027 111,823
---------------
Colombia -- 0.4%
40,000 Republic of Colombia,
8.125%, 5/21/2024(c) 46,600
45,000,000 Republic of Colombia,
9.850%, 6/28/2027, (COP) 22,575
94,000,000 Republic of Colombia,
11.750%, 3/01/2010, (COP) 48,822
1,055,000,000 Republic of Colombia,
12.000%, 10/22/2015, (COP) 589,695
---------------
707,692
---------------
Egypt -- 0.1%
500,000 Republic of Egypt, Series REGS,
8.750%, 7/18/2012, (EGP), 144A 91,723
---------------
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------
France -- 0.3%
$1,665,190,000 BNP Paribas SA, Series EMTN, Zero Coupon,
6/13/2011, (IDR), 144A $ 134,326
75,000 France Telecom SA, Series EMTN,
3.625%, 10/14/2015, (EUR) 96,558
35,000 Lafarge SA, Series EMTN,
4.750%, 3/23/2020, (EUR) 44,593
35,000 Pinault Printemps Redoute SA, Series EMTN,
4.000%, 1/29/2013, (EUR) 46,376
15,000 Veolia Environnement, Series EMTN,
4.000%, 2/12/2016, (EUR) 19,336
25,000 Veolia Environnement, Series EMTN,
5.125%, 5/24/2022, (EUR) 32,903
100,000 Wendel,
4.375%, 8/09/2017, (EUR) 126,833
---------------
500,925
---------------
Germany -- 1.4%
570,000 Bundesrepublik Deutschland, Series 06,
3.750%, 1/04/2017, (EUR) 779,166
335,000 Federal Republic of Germany,
3.750%, 7/04/2013, (EUR) 466,768
285,000 Federal Republic of Germany, Series 150,
4.000%, 4/13/2012, (EUR) 403,620
42,000,000 Kreditanstalt fuer Wiederaufbau,
1.850%, 9/20/2010, (JPY) 373,472
12,000,000 Kreditanstalt fuer Wiederaufbau,
2.050%, 2/16/2026, (JPY) 101,368
70,000 Republic of Germany,
3.250%, 4/17/2009, (EUR) 98,573
165,000 Republic of Germany,
4.000%, 1/04/2037, (EUR) 213,375
---------------
2,436,342
---------------
India -- 0.1%
100,000 ICICI Bank Ltd.,
6.375%, 4/30/2022, 144A(b) 93,510
---------------
Ireland -- 0.2%
10,000,000 Depfa ACS Bank,
0.750%, 9/22/2008, (JPY) 86,886
100,000 Depfa ACS Bank,
4.875%, 5/21/2019, (EUR) 144,429
50,000 Elan Financial Plc,
7.750%, 11/15/2011 49,000
---------------
280,315
---------------
Japan -- 0.5%
20,000,000 Development Bank of Japan,
1.750%, 3/17/2017, (JPY) 173,422
70,000,000 Japan Government,
0.900%, 9/15/2009, (JPY) 609,909
---------------
783,331
---------------
Korea -- 0.2%
150,000 Hanarotelecom, Inc.,
7.000%, 2/01/2012, 144A 144,750
140,000 SK Telecom Co., Ltd.,
6.625%, 7/20/2027, 144A 141,947
---------------
286,697
---------------
See accompanying notes to financial statements.
16
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------
Luxembourg -- 0.0%
$ 10,000 Telecom Italia Capital,
6.000%, 9/30/2034 $ 9,298
10,000 Telecom Italia Capital,
6.375%, 11/15/2033 9,651
---------------
18,949
---------------
Malaysia -- 0.1%
200,000 Ranhill Labuan Ltd.,
12.500%, 10/26/2011, 144A 197,856
---------------
Mexico -- 0.3%
125,000 America Movil SAB de CV,
5.500%, 3/01/2014 123,212
195,000 Axtel SAB de CV,
7.625%, 2/01/2017, 144A 192,075
165,000 Desarrolladora Homex SAB de CV,
7.500%, 9/28/2015 164,175
---------------
479,462
---------------
Netherlands -- 0.2%
50,000 Bite Finance International,
8.230%, 3/15/2014, (EUR), 144A(b) 72,011
100,000 Excelcomindo Finance Co.,
7.125%, 1/18/2013, 144A 100,250
100,000 Majapahit Holding BV,
7.250%, 6/28/2017, 144A 98,000
10,000,000 Rabobank Nederland, Series EMTN,
13.500%, 1/28/2008, (ISK), 144A 161,233
---------------
431,494
---------------
Peru -- 0.2%
266,800 Republic of Peru,
6.438%, 3/07/2017(b) 266,800
---------------
Singapore -- 0.2%
495,000 Government of Singapore,
4.625%, 7/01/2010, (SGD) 355,010
---------------
South Africa -- 0.3%
130,000 Edcon Proprietary Ltd.,
7.980%, 6/15/2014, (EUR), 144A(b) 171,934
285,000 Republic of South Africa,
4.500%, 4/05/2016, (EUR) 383,930
---------------
555,864
---------------
Spain -- 0.1%
100,000 Telefonica Emisiones SAU,
6.221%, 7/03/2017 101,022
---------------
Supranational -- 0.6%
10,000,000 Asia Development Bank,
2.350%, 6/21/2027, (JPY) 88,137
67,000,000 European Investment Bank,
1.250%, 9/20/2012, (JPY) 583,647
20,000,000 European Investment Bank,
1.400%, 6/20/2017, (JPY) 169,836
530,000 European Investment Bank, Series EMTN,
6.500%, 8/12/2014, (PLN) 210,736
3,000,000 Inter-American Development Bank,
13.000%, 6/20/2008, (ISK) 48,175
---------------
1,100,531
---------------
United Kingdom -- 0.7%
60,000 BSKYB Finance UK Plc,
5.750%, 10/20/2017, (GBP) 115,850
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------
United Kingdom -- continued
$1,229,424,500 JPMorgan Chase London, Zero Coupon,
10/21/2010, (IDR), 144A $ 104,968
80,000 Network Rail MTN Finance Plc, Series EMTN,
4.875%, 3/06/2009, (GBP) 162,318
65,000 United Kingdom Treasury,
4.000%, 3/07/2009, (GBP) 131,089
120,000 United Kingdom Treasury,
4.250%, 3/07/2036, (GBP) 231,832
50,000 United Kingdom Treasury,
4.750%, 3/07/2020, (GBP) 100,422
135,000 United Kingdom Treasury,
5.000%, 3/07/2025, (GBP) 281,516
65,000 United Kingdom Treasury,
5.250%, 6/07/2012, (GBP) 134,150
---------------
1,262,145
---------------
United States --19.0%
500,000 Albertson's, Inc.,
7.450%, 8/01/2029 481,302
50,000 Albertson's, Inc., Series MTNC,
6.625%, 6/01/2028(c) 44,346
15,000 Amkor Technology, Inc.,
7.750%, 5/15/2013 14,475
100,000 Anadarko Petroleum Corp.,
5.950%, 9/15/2016 99,041
75,000 Anadarko Petroleum Corp.,
6.450%, 9/15/2036 73,837
75,000 Arrow Electronics, Inc.,
6.875%, 7/01/2013 78,481
100,000 ASIF Global Financing XXVII,
2.380%, 2/26/2009, (SGD), 144A 66,897
325,000 AT&T, Inc.,
6.500%, 9/01/2037 335,107
42,865 Atlas Air, Inc., Series B,
7.680%, 1/02/2014(e) 49,295
145,000 Avnet, Inc.,
6.000%, 9/01/2015 141,745
110,000,000 Barclays Financial LLC,
4.060%, 9/16/2010, (KRW), 144A 118,594
220,000,000 Barclays Financial LLC,
4.460%, 9/23/2010, (KRW), 144A 239,808
349,720,000 Barclays Financial LLC,
4.910%, 3/23/2009, (KRW), 144A(b) 387,550
310,000 Borden, Inc.,
7.875%, 2/15/2023(c) 249,550
410,000 Borden, Inc.,
8.375%, 4/15/2016 348,500
5,000 Boston Scientific Corp.,
5.450%, 6/15/2014 4,488
30,000 Boston Scientific Corp.,
6.400%, 6/15/2016 27,375
60,000 Boston Scientific Corp.,
7.000%, 11/15/2035 52,050
15,000 Chesapeake Energy Corp.,
6.500%, 8/15/2017 14,588
70,000 Chesapeake Energy Corp.,
6.875%, 1/15/2016 70,000
75,000 Chesapeake Energy Corp.,
6.875%, 11/15/2020 73,406
See accompanying notes to financial statements.
17
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------
United States -- continued
$ 10,000 CIT Group, Inc.,
5.125%, 9/30/2014 $ 9,121
120,000 Citi Credit Card Issuance Trust,
5.375%, 4/10/2013, (EUR) 174,342
5,000 Clear Channel Communications, Inc.,
4.900%, 5/15/2015 3,766
390,000 Clear Channel Communications, Inc.,
5.500%, 12/15/2016 297,054
75,000 Clear Channel Communications, Inc.,
5.750%, 1/15/2013 62,774
25,000 Colonial Realty LP,
6.050%, 9/01/2016 24,144
1,000,000 Comcast Corp.,
6.950%, 8/15/2037 1,049,610
178,589 Continental Airlines, Inc., Series 1999-1C,
6.954%, 8/02/2009 174,570
190,000 CSX Corp.,
6.250%, 3/15/2018 190,997
160,000 Cummins, Inc.,
7.125%, 3/01/2028 165,142
50,000 Dillard's, Inc.,
6.625%, 1/15/2018(c) 44,808
50,000 Dillard's, Inc.,
7.000%, 12/01/2028 41,562
18,000 ESI Tractebel Acquisition Corp., Series B,
7.990%, 12/30/2011 18,564
200,000 Federal National Mortgage Association,
2.290%, 2/19/2009, (SGD) 133,823
150,000 Foot Locker, Inc.,
8.500%, 1/15/2022 143,250
10,000 Ford Motor Co.,
6.625%, 2/15/2028 7,450
150,000 Ford Motor Co.,
6.625%, 10/01/2028 111,750
15,000 Ford Motor Co.,
7.125%, 11/15/2025(c) 11,175
195,000 Ford Motor Co.,
7.450%, 7/16/2031(c) 153,075
105,000 Ford Motor Credit Co. LLC,
8.000%, 12/15/2016 98,228
25,000,000 General Electric Capital Corp., Series EMTN,
0.550%, 10/14/2008, (JPY) 216,474
115,000 General Motors Corp.,
8.250%, 7/15/2023 100,625
5,000 General Motors Corp.,
8.375%, 7/15/2033(c) 4,381
35,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029 33,250
460,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 448,500
60,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 60,150
220,000 GMAC LLC,
6.000%, 12/15/2011 203,055
50,000 GMAC LLC,
6.625%, 5/15/2012 46,655
105,000 GMAC LLC,
6.750%, 12/01/2014 95,170
45,000 GMAC LLC,
6.875%, 9/15/2011 42,825
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------------
United States -- continued
$ 40,000 GMAC LLC,
6.875%, 8/28/2012 $ 37,519
125,000 GMAC LLC,
8.000%, 11/01/2031 122,635
150,000 Goldman Sachs Group, Inc.,
5.014%, 5/23/2016, (EUR)(b) 205,161
25,000 GTE Corp.,
6.940%, 4/15/2028 25,982
225,000 HCA, Inc.,
7.050%, 12/01/2027 170,393
50,000 HCA, Inc.,
7.190%, 11/15/2015 43,357
250,000 HCA, Inc.,
7.500%, 11/06/2033 201,250
100,000 HCA, Inc.,
7.580%, 9/15/2025 81,492
260,000 Hilcorp Energy I LP,
7.750%, 11/01/2015, 144A 254,150
890,000 Home Depot, Inc.,
5.875%, 12/16/2036 760,202
960,000 HSBC Bank USA, Zero Coupon,
4/18/2012, (MYR), 144A 237,640
500,000 HSBC Bank USA, Zero Coupon,
5/17/2012, (MYR), 144A 123,184
100,000 HSBC Bank USA,
3.310%, 8/25/2010, 144A 110,670
65,000 J.C. Penney Corp., Inc.,
6.375%, 10/15/2036 60,819
15,000 J.C. Penney Corp., Inc.,
7.125%, 11/15/2023 15,788
780,965 JPMorgan Chase & Co., Series EMTN, Zero Coupon,
6/08/2012, (MYR), 144A 190,457
275,000 K. Hovnanian Enterprises, Inc.,
6.250%, 1/15/2016 211,750
250,000 Kellwood Co.,
7.625%, 10/15/2017 218,750
55,000 Lennar Corp., Series B,
5.600%, 5/31/2015 47,318
55,000 Lennar Corp., Series B,
6.500%, 4/15/2016 49,717
155,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029 128,650
130,000 MBNA Credit Card Master Note Trust,
4.150%, 4/19/2010, (EUR) 182,306
500,000 Merrill Lynch & Co., Inc.,
10.710%, 3/08/2017, (BRL) 279,951
90,000 Midamerican Energy Holdings Co.,
6.500%, 9/15/2037, 144A 90,972
85,000 Morgan Stanley,
5.375%, 11/14/2013, (GBP) 164,504
100,000 Mosaic Global Holdings, Inc.,
7.375%, 8/01/2018 97,000
80,000 News America, Inc.,
6.150%, 3/01/2037 74,607
25,000 News America, Inc.,
6.400%, 12/15/2035 24,144
10,000 Nextel Communications, Inc., Series E,
6.875%, 10/31/2013 10,040
30,000 Nextel Communications, Inc., Series F,
5.950%, 3/15/2014 28,641
See accompanying notes to financial statements.
18
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------
United States -- continued
$ 250,000 NGC Corporation Capital Trust I, Series B,
8.316%, 6/01/2027 $ 231,250
135,000 Northern Telecom Capital Corp.,
7.875%, 6/15/2026 114,075
1,000,000 NRG Energy, Inc.,
7.375%, 2/01/2016 1,002,500
20,000 Owens Corning, Inc.,
6.500%, 12/01/2016 19,317
35,000 Owens Corning, Inc.,
7.000%, 12/01/2036 34,064
40,000 Owens-Illinois, Inc.,
7.800%, 5/15/2018 39,400
50,000 Pulte Homes, Inc.,
5.200%, 2/15/2015 41,691
540,000 Pulte Homes, Inc.,
6.000%, 2/15/2035 393,616
695,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 528,145
140,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 123,550
205,000 Qwest Capital Funding, Inc.,
6.875%, 7/15/2028 175,787
30,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 27,375
45,000 Qwest Corp.,
6.875%, 9/15/2033 42,075
5,000 Qwest Corp.,
7.250%, 9/15/2025 4,913
205,000 Residential Capital LLC,
7.500%, 4/17/2013 165,537
95,000 Residential Capital LLC,
7.875%, 6/30/2015 76,712
80,000 Reynolds American, Inc.,
6.750%, 6/15/2017 81,822
20,000 Reynolds American, Inc.,
7.250%, 6/15/2037 20,908
75,000 Six Flags, Inc.,
9.625%, 6/01/2014(c) 61,969
100,000 Six Flags, Inc.,
9.750%, 4/15/2013(c) 84,750
14,000 Sprint Capital Corp.,
6.875%, 11/15/2028 13,511
26,000 Sprint Nextel Corp.,
6.000%, 12/01/2016 24,974
60,000 Tenet Healthcare Corp.,
6.875%, 11/15/2031 44,850
750,000 Tennessee Gas Pipeline Co.,
7.000%, 10/15/2028(c) 763,421
10,000 Time Warner, Inc.,
6.500%, 11/15/2036 9,648
395,000 Time Warner, Inc.,
6.625%, 5/15/2029 386,841
160,000 Time Warner, Inc.,
6.950%, 1/15/2028 163,699
115,000 Time Warner, Inc.,
7.625%, 4/15/2031 125,084
75,000 Time Warner, Inc.,
7.700%, 5/01/2032 82,351
105,000 Toll Brothers Finance Corp.,
5.150%, 5/15/2015 89,929
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------------------------
United States -- continued
$ 375,000 Toys R Us, Inc.,
7.375%, 10/15/2018 $ 300,937
200,000 Transcontinental Gas Pipe Line Corp.,
6.400%, 4/15/2016 201,000
4,010,000 U.S. Treasury Bonds,
4.500%, 2/15/2036 3,801,668
4,645,000 U.S. Treasury Bonds,
4.750%, 2/15/2037(c) 4,580,769
1,525,000 U.S. Treasury Notes,
4.500%, 4/30/2012(c) 1,543,706
885,000 U.S. Treasury Notes,
4.500%, 2/15/2016(c) 885,138
2,160,000 U.S. Treasury Notes,
4.625%, 11/15/2016(c) 2,170,632
785,000 U.S. Treasury Notes,
4.750%, 2/28/2009(c) 793,279
635,000 U.S. Treasury Notes,
5.000%, 7/31/2008(c) 639,415
50,000 USG Corp.,
6.300%, 11/15/2016 45,378
230,000 USG Corp.,
7.750%, 1/15/2018 230,356
90,000 Verizon Communications,
5.850%, 9/15/2035 85,976
5,000 Verizon Maryland, Inc.,
5.125%, 6/15/2033 4,126
250,000 Verizon New York, Inc., Series B,
7.375%, 4/01/2032 266,159
70,000 Viacom, Inc., Class B,
6.875%, 4/30/2036 69,708
140,000 Virginia Tobacco Settlement Financing Corp., Series A-1,
6.706%, 6/01/2046 129,972
100,000 Williams Cos., Inc.,
7.500%, 1/15/2031 103,750
20,000 Xerox Corp.,
7.200%, 4/01/2016 20,864
---------------
32,232,371
---------------
Uruguay -- 0.4%
14,069,166 Republic of Uruguay,
4.250%, 4/05/2027, (UYU) 641,784
---------------
Total Non-Convertible Bonds
(Identified Cost $43,681,197) 44,473,645
---------------
Convertible Bonds -- 1.0%
United States -- 1.0%
105,000 Bristol-Myers Squibb Co.,
5.194%, 9/15/2023(b) 105,399
95,000 Builders Transportation, Inc.,
8.000%, 8/15/2005(d) --
200,000 Enzon Pharmaceuticals, Inc.,
4.500%, 7/01/2008 196,500
50,000 Kellwood Co., (Step to 0.000% on 6/16/2011),
3.500%, 6/15/2034(f) 45,562
140,000 Level 3 Communications, Inc.,
2.875%, 7/15/2010 134,400
25,000 Level 3 Communications, Inc.,
6.000%, 9/15/2009 23,781
140,000 Level 3 Communications, Inc.,
6.000%, 3/15/2010 129,850
See accompanying notes to financial statements.
19
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------
United States -- continued
$ 500,000 Regeneron Pharmaceuticals, Inc.,
5.500%, 10/17/2008 $ 510,000
500,000 Valeant Pharmaceuticals International,
3.000%, 8/16/2010 453,750
80,000 Valeant Pharmaceuticals International,
4.000%, 11/15/2013 72,300
---------------
Total Convertible Bonds
(Identified Cost $1,732,522) 1,671,542
---------------
Total Bonds and Notes
(Identified Cost $45,413,719) 46,145,187
---------------
Shares
- ----------------------------------------------------------------------
Common Stocks -- 65.6%
Argentina -- 0.8%
24,734 Tenaris SA ADR 1,301,503
---------------
Brazil -- 1.7%
87,003 Companhia Vale do Rio Doce ADR 2,952,012
---------------
Canada -- 3.0%
19,518 Potash Corporation of Saskatchewan, Inc. 2,063,052
30,989 Research In Motion Ltd.(e) 3,053,966
---------------
5,117,018
---------------
China -- 4.1%
263,000 China Mengniu Dairy Co., Ltd. 1,134,894
208,600 China Mobile Ltd. 3,420,099
1,064,748 China Overseas Land & Investment Ltd. 2,438,341
---------------
6,993,334
---------------
Denmark -- 1.3%
17,583 Novo Nordisk AS, Class B 2,126,451
---------------
France -- 0.7%
15,300 Total SA 1,239,809
---------------
Greece -- 1.8%
84,983 Piraeus Bank S.A. 3,030,567
---------------
Hong Kong -- 1.4%
148,400 Esprit Holdings Ltd. 2,351,415
---------------
India -- 1.8%
131,657 Bharti Airtel Ltd.(e) 3,096,137
---------------
Italy -- 1.1%
62,894 Fiat SpA 1,899,891
---------------
Japan -- 4.1%
61,500 Komatsu Ltd.(c) 2,050,164
7,900 Nintendo Co. Ltd.(c) 4,078,803
18,869 Sony Corp., ADR(c) 906,844
---------------
7,035,811
---------------
Mexico -- 1.2%
613,994 America Movil SAB de CV, Series L(c) 1,964,799
---------------
Netherlands -- 1.6%
41,998 Heineken NV(c) 2,755,004
---------------
Singapore -- 2.3%
180,000 Keppel Land Ltd.(c) 1,003,698
328,000 Singapore Exchange Ltd. 2,838,980
---------------
3,842,678
---------------
Spain -- 1.0%
26,124 Industria de Diseno Textil SA 1,765,842
---------------
Shares Description Value (+)
- ------------------------------------------------------------------------------------------------
Sweden -- 1.2%
112,903 Volvo AB, Class B $ 1,959,243
---------------
Switzerland -- 4.6%
148,720 ABB Ltd. 3,898,099
14,474 Julius Baer Holding, Ltd., Registered 1,080,554
25,033 Novartis AG, Registered 1,377,148
14,470 Sonova Holding AG 1,448,654
---------------
7,804,455
---------------
United Kingdom -- 1.7%
196,246 Capita Group PLC 2,901,832
---------------
United States -- 30.2%
34,992 Adobe Systems, Inc.(e) 1,527,751
17,320 Amazon.com, Inc.(c)(e) 1,613,358
23,194 Apple, Inc.(e) 3,561,207
30,344 AT&T, Inc. 1,283,855
20,625 Avery Dennison Corp.(c) 1,176,037
82,056 Cisco Systems, Inc.(e) 2,716,874
3,413 CME Group, Inc. 2,004,626
39,720 CVS Caremark Corp. 1,574,104
13,188 Deere & Co.(c) 1,957,363
12,895 ExxonMobil Corp. 1,193,561
11,554 Foster Wheeler Ltd.(e) 1,516,809
10,247 Franklin Resources, Inc. 1,306,492
11,504 Freeport-McMoRan Copper & Gold, Inc. 1,206,655
53,601 Gilead Sciences, Inc.(e) 2,190,673
5,863 Google, Inc. Class A(e) 3,325,904
29,032 Guess?, Inc.(c) 1,423,439
32,480 Halliburton Co.(c) 1,247,232
37,814 Hewlett-Packard Co. 1,882,759
8,270 IntercontinentalExchange, Inc.(c)(e) 1,256,213
15,815 MasterCard, Inc., Class A(c) 2,340,145
40,123 McDonald's Corp. 2,185,500
34,324 Merck & Co., Inc. 1,774,208
27,301 Monsanto Co. 2,340,788
61,813 NVIDIA Corp.(e) 2,240,103
38,229 Owens-Illinois, Inc.(e) 1,584,592
20,342 Precision Castparts Corp. 3,010,209
13,547 Transocean, Inc.(e) 1,531,488
4,538 VMware, Inc., Class A(c)(e) 385,730
---------------
51,357,675
---------------
Total Common Stocks (Identified Cost $85,547,766) 111,495,476
---------------
Warrants -- 1.0%
Hong Kong -- 0.0%
84,395 China Overseas Land & Investment Ltd., Expiration 8/28/2008,(e) 69,371
---------------
India -- 1.0%
31,773 Bharat Heavy Electricals Ltd., Expiration 09/01/10(e) 1,628,493
---------------
Total Warrants (Identified Cost $1,315,885) 1,697,864
---------------
Principal
Amount (++)
- ------------------------------------------------------------------------------------------------
Short-Term Investments -- 24.8%
$ 12,093,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/07 at 3.750% to be repurchased at
$12,096,779 on 10/1/07 collateralized by $11,865,000 Federal
Home Loan Mortgage Corp., 5.550% due 10/4/16 with a value of
$12,339,600, including accrued interest (Note 2g of Notes to
Financial Statements) 12,093,000
---------------
See accompanying notes to financial statements.
20
LOOMIS SAYLES GLOBAL MARKETS FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Shares Description Value (+)
- -----------------------------------------------------------------------------------------------------
Short-Term Investments -- continued
30,043,432 State Street Securities Lending Quality Trust(g) $ 30,043,432
---------------
Total Short-Term Investments (Identified Cost $42,136,432) 42,136,432
---------------
Total Investments -- 118.6%
(Identified Cost $174,413,802)(a) 201,474,959
Other assets less liabilities -- (18.6)% (31,545,681)
---------------
Total Net Assets -- 100.0% $ 169,929,278
===============
(++) Principal amount stated in U.S. dollars unless otherwise noted.
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized appreciation on
investments based on a cost of $177,881,946 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 $ 24,642,995
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (1,049,982)
---------------
Net unrealized appreciation $ 23,593,013
===============
(b) Variable rate security. Rate as of September 30, 2007 is disclosed.
(c) All or a portion of this security was on loan to brokers at
September 30, 2007.
(d) Non-Income producing security due to default or bankruptcy filing.
(e) Non-income producing security.
(f) Step Bond: Coupon is a fixed rate for an initial period then resets at
a specified date and rate.
(g) 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 September 30, 2007, the total value of these securities amounted
to $3,880,410 or 2.3% 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.
EMTN Euro Medium Term Note
MTNC Medium Term Note Series C
Key to Abbreviations:
ARS Argentine Peso
BRL Brazilian Real
CAD Canadian Dollar
COP Colombian Peso
EGP Egyptian Pound
EUR Euro
GBP British Pound
IDR Indonesian Rupiah
ISK Iceland Krona
JPY Japanese Yen
KRW South Korean Won
MYR Malaysian Ringgit
PLN Polish Zloty
SGD Singapore Dollar
UYU Uruguayan Peso
Holdings at September 30, 2007 as a Percentage of Net Assets (Unaudited)
Treasuries 9.3%
Pharmaceuticals 3.9
Capital Markets 3.6
Diversified Financial Services 3.6
Machinery 3.6
Software 3.5
Communications Equipment 3.4
Specialty Retail 3.2
Computers & Peripherals 3.2
Wireless Telecommunication Services 3.2
Chemicals 3.1
Sovereigns 3.0
Diversified Telecommunications Services 2.7
Metals & Mining 2.5
Energy Equipment & Services 2.4
Commercial Services & Supplies 2.4
Construction & Engineering 2.3
Electrical Equipment 2.3
Internet Software & Services 2.0
Other, less than 2% each 30.6
See accompanying notes to financial statements.
21
LOOMIS SAYLES GROWTH FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Shares Description Value (+)
- --------------------------------------------------------------------
Common Stocks -- 99.2% of Total Net Assets
Aerospace & Defense -- 5.3%
92,734 Boeing Co. $ 9,736,143
84,555 Precision Castparts Corp. 12,512,449
---------------
22,248,592
---------------
Biotechnology -- 2.9%
86,534 Celgene Corp.(b)(c) 6,170,740
146,822 Gilead Sciences, Inc.(c) 6,000,615
---------------
12,171,355
---------------
Capital Markets -- 4.8%
71,316 Franklin Resources, Inc. 9,092,790
31,610 Goldman Sachs Group, Inc. 6,851,151
74,730 T. Rowe Price Group, Inc. 4,161,714
---------------
20,105,655
---------------
Chemicals -- 4.4%
130,827 Monsanto Co. 11,217,107
140,202 Mosaic Co. (The)(c) 7,503,611
---------------
18,720,718
---------------
Communications Equipment -- 5.6%
503,554 Cisco Systems, Inc.(c) 16,672,673
190,388 Juniper Networks, Inc.(c) 6,970,105
---------------
23,642,778
---------------
Computers & Peripherals -- 11.8%
118,935 Apple, Inc.(c) 18,261,280
346,306 Dell, Inc.(c) 9,558,046
484,748 EMC Corp.(c) 10,082,758
239,863 Hewlett-Packard Co. 11,942,779
---------------
49,844,863
---------------
Construction & Engineering -- 2.7%
47,051 Foster Wheeler Ltd.(c) 6,176,855
66,350 Jacobs Engineering Group, Inc.(c) 5,014,733
---------------
11,191,588
---------------
Consumer Finance -- 1.6%
113,959 American Express Co. 6,765,746
---------------
Diversified Financial Services -- 5.3%
16,266 CME Group, Inc. 9,553,835
50,384 IntercontinentalExchange, Inc.(b)(c) 7,653,330
39,895 Nymex Holdings, Inc.(b) 5,193,531
---------------
22,400,696
---------------
Energy Equipment & Services -- 4.7%
49,527 National-Oilwell Varco, Inc.(c) 7,156,651
119,047 Schlumberger Ltd. 12,499,935
---------------
19,656,586
---------------
Food & Staples Retailing -- 2.3%
244,004 CVS Caremark Corp. 9,669,879
---------------
Healthcare Equipment & Supplies -- 2.9%
126,454 St. Jude Medical, Inc.(c) 5,572,828
95,475 Stryker Corp. 6,564,861
---------------
12,137,689
---------------
Hotels, Restaurants & Leisure -- 1.9%
143,815 McDonald's Corp. 7,833,603
---------------
Industrial Conglomerates -- 2.1%
140,622 Textron, Inc. 8,748,095
---------------
Shares Description Value (+)
- -----------------------------------------------------------------------------------------
Internet & Catalog Retail -- 3.0%
133,400 Amazon.com, Inc.(c) $ 12,426,210
---------------
Internet Software & Services -- 6.2%
246,039 eBay, Inc.(c) 9,600,442
29,336 Google, Inc., Class A(c) 16,641,432
---------------
26,241,874
---------------
IT Services -- 2.5%
69,972 MasterCard, Inc., Class A(b) 10,353,757
---------------
Life Science Tools & Services -- 2.2%
159,550 Thermo Fisher Scientific, Inc.(c) 9,209,226
---------------
Machinery -- 2.6%
32,246 Deere & Co. 4,785,951
67,397 Terex Corp.(c) 5,999,681
---------------
10,785,632
---------------
Metals & Mining -- 1.9%
76,937 Freeport-McMoRan Copper & Gold, Inc. 8,069,922
---------------
Oil, Gas & Consumable Fuels -- 2.5%
103,795 Southwestern Energy Co.(c) 4,343,821
100,670 XTO Energy, Inc. 6,225,433
---------------
10,569,254
---------------
Pharmaceuticals -- 4.7%
188,050 Merck & Co., Inc. 9,720,304
321,954 Schering-Plough Corp. 10,183,405
---------------
19,903,709
---------------
Real Estate Management & Development -- 0.8%
32,428 Jones Lang LaSalle, Inc.(b) 3,332,301
---------------
Semiconductors & Semiconductor Equipment -- 3.9%
382,888 Intel Corp. 9,901,484
179,985 NVIDIA Corp.(c) 6,522,656
---------------
16,424,140
---------------
Software -- 5.9%
233,415 Adobe Systems, Inc.(c) 10,190,899
106,337 Autodesk, Inc.(c) 5,313,660
395,280 Oracle Corp.(c) 8,557,812
11,509 VMware, Inc., Class A(b)(c) 978,265
---------------
25,040,636
---------------
Specialty Retail -- 1.2%
103,383 Guess?, Inc.(b) 5,068,868
---------------
Textiles Apparel & Luxury Goods -- 1.9%
168,579 Coach, Inc.(c) 7,968,729
---------------
Wireless Telecommunication Services -- 1.6%
80,441 NII Holdings, Inc.(c) 6,608,228
---------------
Total Common Stocks (Identified Cost $352,924,783) 417,140,329
---------------
Principal
Amount
- -----------------------------------------------------------------------------------------
Short-Term Investments -- 8.2%
$ 4,382,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/07 at 3.750% to be repurchased at
$4,383,369 on 10/1/07 collateralized by $4,370,000 Federal
Home Loan Mortgage Corp., 6.060% due 6/6/17 with a value of
$4,473,788 including accrued interest (Note 2g of Notes to
Financial Statements) 4,382,000
---------------
See accompanying notes to financial statements.
22
LOOMIS SAYLES GROWTH FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Shares Description Value (+)
- --------------------------------------------------------------------------------------------------
Short-Term Investments -- continued
30,163,310 State Street Securities Lending Quality Trust(d) $ 30,163,310
---------------
Total Short-Term Investments (Identified Cost $34,545,310) 34,545,310
---------------
Total Investments -- 107.4%
(Identified Cost $387,470,093)(a) 451,685,639
Other assets less liabilities -- (7.4)% (30,977,746)
---------------
Total Net Assets -- 100.0% $ 420,707,893
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized appreciation on
investments based on a cost of $387,579,641 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 $ 66,258,050
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (2,152,052)
---------------
Net unrealized appreciation $ 64,105,998
===============
(b) All or a portion of this security was on loan to brokers at
September 30, 2007.
(c) Non-income producing security.
(d) Represents investments of security lending collateral.
Holdings at September 30, 2007 as a Percentage of Net Assets (Unaudited)
Computers & Peripherals 11.8%
Internet Software & Services 6.2
Software 5.9
Communications Equipment 5.6
Diversified Financial Services 5.3
Aerospace & Defense 5.3
Capital Markets 4.8
Pharmaceuticals 4.7
Energy Equipment & Services 4.7
Chemicals 4.4
Semiconductors & Semiconductor Equipment 3.9
Internet & Catalog Retail 3.0
Biotechnology 2.9
Healthcare Equipment & Supplies 2.9
Construction & Engineering 2.7
Machinery 2.6
Oil, Gas & Consumable Fuels 2.5
IT Services 2.5
Food & Staples Retailing 2.3
Life Science Tools & Services 2.2
Industrial Conglomerates 2.1
Other, less than 2% each 10.9
See accompanying notes to financial statements.
23
LOOMIS SAYLES RESEARCH FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Shares Description Value (+)
- ----------------------------------------------------------------------------
Common Stocks -- 99.8% of Total Net Assets
Aerospace & Defense -- 6.3%
4,797 Boeing Co.(b) $ 503,637
3,162 Precision Castparts Corp. 467,913
5,706 Rockwell Collins, Inc. 416,766
6,316 United Technologies Corp. 508,312
---------------
1,896,628
---------------
Beverages -- 5.6%
12,814 Coca-Cola Co. 736,421
7,714 Hansen Natural Corp.(b)(c) 437,229
6,924 PepsiCo, Inc. 507,252
---------------
1,680,902
---------------
Biotechnology -- 1.1%
2,106 Cephalon, Inc.(b)(c) 153,864
2,345 Genentech, Inc.(c) 182,957
---------------
336,821
---------------
Capital Markets -- 3.7%
1,848 Goldman Sachs Group, Inc. 400,535
6,828 Merrill Lynch & Co., Inc. 486,700
3,138 State Street Corp.(b) 213,886
---------------
1,101,121
---------------
Chemicals -- 1.1%
6,967 Ecolab, Inc. 328,842
---------------
Commercial Banks -- 3.8%
5,400 PNC Financial Services Group, Inc. 367,740
7,912 U.S. Bancorp(b) 257,378
14,294 Wells Fargo & Co. 509,152
---------------
1,134,270
---------------
Communications Equipment -- 4.4%
24,769 Cisco Systems, Inc.(c) 820,102
10,775 Corning, Inc. 265,604
2,548 Research In Motion Ltd.(c) 251,105
---------------
1,336,811
---------------
Computers & Peripherals -- 4.8%
4,434 Apple, Inc.(c) 680,796
10,446 Dell, Inc.(c) 288,310
9,293 Hewlett-Packard Co. 462,698
---------------
1,431,804
---------------
Construction Materials -- 0.3%
975 Vulcan Materials Co.(b) 86,921
---------------
Consumer Finance -- 2.0%
10,225 American Express Co. 607,058
---------------
Containers & Packaging -- 2.0%
6,278 Owens-Illinois, Inc.(c) 260,223
11,451 Pactiv Corp.(b)(c) 328,186
---------------
588,409
---------------
Diversified Financial Services -- 3.3%
13,602 Bank of America Corp. 683,772
545 CME Group, Inc. 320,106
---------------
1,003,878
---------------
Diversified Telecommunications Services -- 3.6%
25,259 AT&T, Inc. 1,068,708
---------------
Electric Utilities -- 1.6%
2,163 Entergy Corp. 234,231
3,398 Exelon Corp. 256,074
---------------
490,305
---------------
Shares Description Value (+)
- ------------------------------------------------------------------------
Electrical Equipment -- 1.3%
7,155 Emerson Electric Co. $ 380,789
---------------
Energy Equipment & Services -- 4.2%
3,973 Baker Hughes, Inc.(b) 359,040
1,961 GlobalSantaFe Corp.(b) 149,075
6,272 Halliburton Co.(b) 240,845
3,433 Schlumberger Ltd.(b) 360,465
1,496 Transocean, Inc.(c) 169,123
---------------
1,278,548
---------------
Food & Staples Retailing -- 2.2%
16,849 CVS Caremark Corp. 667,726
---------------
Healthcare Equipment & Supplies -- 2.6%
4,166 Becton, Dickinson & Co. 341,820
5,708 Covidien Ltd.(c) 236,882
4,842 St. Jude Medical, Inc.(c) 213,387
---------------
792,089
---------------
Healthcare Insurance -- 1.0%
5,695 Aetna, Inc. 309,068
---------------
Hotels, Restaurants & Leisure -- 3.1%
5,056 International Game Technology 217,914
7,600 McDonald's Corp. 413,972
3,464 MGM MIRAGE(b)(c) 309,820
---------------
941,706
---------------
Household Products -- 1.5%
6,494 Colgate-Palmolive Co. 463,152
---------------
Independent Power Producer & Energy -- 1.9%
2,576 Constellation Energy Group(b) 220,995
8,614 NRG Energy, Inc.(b)(c) 364,286
---------------
585,281
---------------
Industrial Conglomerates -- 1.3%
6,366 Textron, Inc. 396,029
---------------
Insurance -- 6.4%
4,627 ACE Ltd. 280,258
10,746 American International Group, Inc. 726,967
6,566 Chubb Corp. (The) 352,200
5,724 Prudential Financial, Inc.(b) 558,548
---------------
1,917,973
---------------
Internet & Catalog Retail -- 1.3%
4,131 Amazon.com, Inc.(b)(c) 384,803
---------------
Internet Software & Services -- 2.7%
8,038 eBay, Inc.(c) 313,643
891 Google, Inc., Class A(b)(c) 505,437
---------------
819,080
---------------
Life Science Tools & Services -- 1.6%
8,259 Thermo Fisher Scientific, Inc.(c) 476,710
---------------
Machinery -- 2.8%
6,059 Danaher Corp.(b) 501,140
3,539 Eaton Corp. 350,502
---------------
851,642
---------------
Media -- 2.7%
14,060 Time Warner, Inc. 258,142
15,667 Walt Disney Co. (The)(b) 538,788
---------------
796,930
---------------
See accompanying notes to financial statements.
24
LOOMIS SAYLES RESEARCH FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Shares Description Value (+)
- -------------------------------------------------------------------------------------------------
Multiline Retail -- 0.7%
6,856 Macy's, Inc.(b) $ 221,586
---------------
Oil, Gas & Consumable Fuels -- 7.0%
3,790 ConocoPhillips 332,648
716 Devon Energy Corp. 59,571
12,715 ExxonMobil Corp. 1,176,900
4,282 Hess Corp. 284,882
4,258 XTO Energy, Inc. 263,315
---------------
2,117,316
---------------
Pharmaceuticals -- 5.3%
3,913 Abbott Laboratories 209,815
4,246 Barr Pharmaceuticals, Inc.(b)(c) 241,640
13,334 Merck & Co., Inc. 689,234
14,666 Schering-Plough Corp. 463,886
---------------
1,604,575
---------------
Software -- 4.6%
9,224 Intuit, Inc.(b)(c) 279,487
20,412 Microsoft Corp. 601,338
23,216 Oracle Corp.(c) 502,626
---------------
1,383,451
---------------
Specialty Retail -- 1.0%
5,873 Guess?, Inc.(b) 287,953
---------------
Textiles Apparel & Luxury Goods -- 1.0%
4,392 CROCS, Inc.(b)(c) 295,362
---------------
Total Common Stocks (Identified Cost $26,260,522) 30,064,247
---------------
Principal
Amount
- -------------------------------------------------------------------------------------------------
Short-Term Investments -- 21.0%
$ 390,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/2007 at 3.750% to be repurchased at
$390,122 on 10/1/2007 collateralized by $390,000 Federal
National Mortgage Association, 6.060% due 6/6/2017 with a
value of $399,263 including accrued interest ( Note 2g of Notes to
Financial Statements) 390,000
---------------
Shares
- -------------------------------------------------------------------------------------------------
5,926,941 State Street Securities Lending Quality Trust(d) 5,926,941
---------------
Total Short-Term Investments (Identified Cost $6,316,941) 6,316,941
---------------
Total Investments -- 120.8%
(Identified Cost $32,577,463)(a) 36,381,188
Other assets less liabilities -- (20.8)% (6,263,096)
---------------
Total Net Assets -- 100.0% $ 30,118,092
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized appreciation on
investments based on a cost of $32,650,865 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 $ 3,970,898
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (240,575)
---------------
Net unrealized appreciation $ 3,730,323
===============
(b) All or a portion of this security was on loan to brokers at
September 30, 2007.
(c) Non-income producing security.
(d) Represents investments of security lending collateral.
Holdings at September 30, 2007 as a Percentage of Net Assets (Unaudited)
Oil, Gas & Consumable Fuels 7.0%
Insurance 6.4
Aerospace & Defense 6.3
Beverages 5.6
Pharmaceuticals 5.3
Computers & Peripherals 4.8
Software 4.6
Communications Equipment 4.4
Energy Equipment & Services 4.2
Commercial Banks 3.8
Capital Markets 3.7
Diversified Telecommunications Services 3.6
Diversified Financial Services 3.3
Hotels, Restaurants & Leisure 3.1
Machinery 2.8
Internet Software & Services 2.7
Media 2.7
Healthcare Equipment & Supplies 2.6
Food & Staples Retailing 2.2
Consumer Finance 2.0
Containers & Packaging 2.0
Other, less than 2 % each 16.7
See accompanying notes to financial statements.
25
LOOMIS SAYLES VALUE FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Shares Description Value (+)
- ----------------------------------------------------------------------------
Common Stocks -- 96.9% of Total Net Assets
Aerospace & Defense -- 2.9%
45,758 Northrop Grumman Corp. $ 3,569,124
27,300 United Technologies Corp. 2,197,104
---------------
5,766,228
---------------
Apparel -- 1.4%
82,926 Liz Claiborne, Inc.(b) 2,846,850
---------------
Beverages -- 2.7%
117,363 Coca-Cola Enterprises, Inc.(b) 2,842,532
25,112 Molson Coors Brewing Co., Class B 2,502,913
---------------
5,345,445
---------------
Capital Markets -- 6.1%
40,650 Ameriprise Financial, Inc. 2,565,422
79,496 Bank of New York Mellon Corp. 3,508,953
42,094 Merrill Lynch & Co., Inc. 3,000,460
51,161 Morgan Stanley 3,223,143
---------------
12,297,978
---------------
Chemicals -- 2.9%
54,134 E.I. du Pont de Nemours & Co. 2,682,881
37,093 Praxair, Inc. 3,106,910
---------------
5,789,791
---------------
Commercial Banks -- 2.9%
103,444 U.S. Bancorp(b) 3,365,033
68,521 Wells Fargo & Co. 2,440,718
---------------
5,805,751
---------------
Commercial Services & Supplies -- 1.3%
45,892 Avery Dennison Corp.(b) 2,616,762
---------------
Communications Equipment -- 1.3%
143,230 Motorola, Inc. 2,654,052
---------------
Computers & Peripherals -- 3.1%
68,965 Hewlett-Packard Co. 3,433,767
23,878 International Business Machines Corp. 2,812,829
---------------
6,246,596
---------------
Consumer Finance -- 0.5%
52,114 Discover Financial Services(c) 1,083,971
---------------
Containers & Packaging -- 1.5%
75,199 Owens-Illinois, Inc.(c) 3,116,999
---------------
Diversified Financial Services -- 7.3%
99,694 Bank of America Corp. 5,011,617
103,274 Citigroup, Inc. 4,819,798
106,897 JPMorgan Chase & Co. 4,898,021
---------------
14,729,436
---------------
Diversified Telecommunications Services -- 4.5%
211,553 AT&T, Inc. 8,950,807
---------------
Electric Utilities -- 1.5%
38,738 Exelon Corp. 2,919,296
---------------
Electrical Equipment -- 2.7%
125,016 ABB Ltd. ADR 3,279,170
32,116 General Cable Corp.(b)(c) 2,155,626
---------------
5,434,796
---------------
Energy Equipment & Services -- 2.3%
119,953 Halliburton Co. 4,606,195
---------------
Food & Staples Retailing -- 1.2%
53,477 Wal-Mart Stores, Inc. 2,334,271
---------------
Shares Description Value (+)
- -----------------------------------------------------------------------------
Food Products -- 2.6%
117,473 ConAgra Foods, Inc. $ 3,069,569
64,705 Kraft Foods, Inc., Class A 2,232,970
---------------
5,302,539
---------------
Gas Utilities -- 1.3%
50,152 Equitable Resources, Inc.(b) 2,601,384
---------------
Healthcare Equipment & Supplies -- 2.2%
28,166 Beckman Coulter, Inc.(b) 2,077,524
55,707 Covidien Ltd.(c) 2,311,841
---------------
4,389,365
---------------
Healthcare Providers & Services -- 1.1%
46,142 UnitedHealth Group, Inc. 2,234,657
---------------
Hotels, Restaurants & Leisure -- 1.9%
70,425 McDonald's Corp. 3,836,050
---------------
Household Durables -- 1.1%
47,078 Sony Corp., ADR 2,262,569
---------------
Independent Power Producer & Energy -- 1.3%
62,560 NRG Energy, Inc.(b)(c) 2,645,662
---------------
Insurance -- 7.6%
70,318 Allstate Corp. 4,021,487
59,494 American International Group, Inc. 4,024,769
937 Berkshire Hathaway, Inc., Class B(c) 3,703,024
36,523 Prudential Financial, Inc. 3,563,914
---------------
15,313,194
---------------
IT Services -- 0.9%
91,717 Broadridge Financial Solutions, Inc.(b) 1,738,037
---------------
Media -- 6.1%
105,103 Comcast Corp., Class A(b)(c) 2,541,391
113,690 DIRECTV Group, Inc. (The)(c) 2,760,393
139,634 News Corp., Class A 3,070,552
209,717 Time Warner, Inc. 3,850,404
---------------
12,222,740
---------------
Metals & Mining -- 1.3%
24,370 Freeport-McMoRan Copper & Gold, Inc. 2,556,169
---------------
Multi-Utilities & Unregulated Power -- 1.2%
51,895 PG&E Corp. 2,480,581
---------------
Oil, Gas & Consumable Fuels -- 10.4%
84,228 ExxonMobil Corp. 7,796,144
42,599 Hess Corp. 2,834,111
144,509 Spectra Energy Corp. 3,537,580
49,956 Total SA, Sponsored ADR 4,047,935
42,606 XTO Energy, Inc. 2,634,755
---------------
20,850,525
---------------
Pharmaceuticals -- 6.0%
99,321 Bristol-Myers Squibb Co. 2,862,431
52,163 Johnson & Johnson 3,427,109
47,342 Novartis AG, ADR 2,601,917
127,184 Pfizer, Inc. 3,107,105
---------------
11,998,562
---------------
Semiconductors & Semiconductor Equipment -- 1.0%
187,303 Micron Technology, Inc.(b)(c) 2,079,063
---------------
Software -- 1.3%
87,609 Microsoft Corp. 2,580,961
---------------
See accompanying notes to financial statements.
26
LOOMIS SAYLES VALUE FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Shares Description Value (+)
- ----------------------------------------------------------------------------------------------------
Specialty Retail -- 2.2%
146,189 Gap, Inc. (The) $ 2,695,725
84,518 Office Depot, Inc.(c) 1,742,761
---------------
4,438,486
---------------
Tobacco -- 1.3%
37,797 Altria Group, Inc. 2,628,025
---------------
Total Common Stocks (Identified Cost $175,526,780) $ 194,703,793
---------------
Principal
Amount
- ----------------------------------------------------------------------------------------------------
Short-Term Investments -- 12.9%
Commercial Paper -- 3.3%
$ 6,757,000 State Street Boston Corp., 3.250%, 10/01/2007(e) $ 6,757,000
---------------
Shares
- ----------------------------------------------------------------------------------------------------
19,268,119 State Street Securities Lending Quality Trust(d) 19,268,119
---------------
Total Short-Term Investments (Identified Cost $26,025,119) 26,025,119
---------------
Total Investments -- 109.8%
(Identified Cost $201,551,899)(a) 220,728,912
Other assets less liabilities -- (9.8)% (19,728,826)
---------------
Total Net Assets -- 100.0% $ 201,000,086
===============
(+) See Note 2a of Notes to Financial Statements.
(a) Federal Tax Information:
At September 30, 2007, the net unrealized appreciation on
investments based on a cost of $201,566,510 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 $ 22,524,849
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (3,362,447)
---------------
Net unrealized appreciation $ 19,162,402
===============
(b) All or a portion of this security was on loan to brokers at
September 30, 2007.
(c) Non-income producing security.
(d) Represents investments of security lending collateral.
(e) Interest Rate represents annualized yield at time of purchase; not
a coupon rate.
ADR An American Depositary Receipt is a certificate issued by a
custodian bank representing the right to receive securities of
foreign issuer described. The value of ADRs are significantly
influenced by trading or exchanges not located in the United
States.
Holdings at September 30, 2007 as a Percentage of Net Assets (Unaudited)
Oil, Gas & Consumable Fuels 10.4%
Insurance 7.6
Diversified Financial Services 7.3
Capital Markets 6.1
Media 6.1
Pharmaceuticals 6.0
Diversified Telecommunications Services 4.5
Computers & Peripherals 3.1
Commercial Banks 2.9
Chemicals 2.9
Aerospace & Defense 2.9
Electrical Equipment 2.7
Beverages 2.7
Food Products 2.6
Energy Equipment & Services 2.3
Specialty Retail 2.2
Healthcare Equipment & Supplies 2.2
Other, Less than 2% each 22.4
See accompanying notes to financial statements.
27
STATEMENTS OF ASSETS AND LIABILITIES
September 30, 2007
Global Markets Fund
---------------------
---------------------
ASSETS
Investments at cost $ 174,413,802
Net unrealized appreciation 27,061,157
---------------------
Investments at value(a) 201,474,959
Cash 654
Foreign currency at value (identified cost $1,238,082) 1,246,398
Receivable for Fund shares sold 3,834,585
Receivable for securities sold 25,136
Dividends and interest receivable 920,672
Unrealized appreciation on forward foreign currency contracts 12,037
Receivable from investment adviser (Note 4) 16,819
Securities lending income receivable 6,422
Other assets 1,050
---------------------
TOTAL ASSETS 207,538,732
---------------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 30,043,432
Payable for securities purchased 7,272,102
Payable for Fund shares redeemed 13,205
Unrealized depreciation on forward foreign currency contracts 12,407
Management fees payable (Note 4) 93,972
Administrative fees payable (Note 4) 6,778
Deferred Trustees' fees (Note 4) 37,465
Service and distribution fees payable (Note 4) 5,453
Foreign capital gains tax payable 71,379
Other accounts payable and accrued expenses 53,261
---------------------
TOTAL LIABILITIES 37,609,454
---------------------
NET ASSETS 169,929,278
=====================
NET ASSETS CONSIST OF:
Paid-in capital 136,572,238
Undistributed net investment income (loss) 1,691,875
Accumulated net realized gain (loss) on investments and foreign currency transactions 4,664,158
Net unrealized appreciation on investments and foreign currency translations 27,001,007
---------------------
NET ASSETS 169,929,278
=====================
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 28,926,593
=====================
Shares of beneficial interest 1,827,482
=====================
Net asset value and redemption price per share $ 15.83
=====================
Offering price per share (100/94.25 of $15.83, $7.01, $9.77, $23.46) (Note 1) $ 16.80
=====================
Class B shares: (redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge) (Note 1)
Net assets $ --
=====================
Shares of beneficial interest --
=====================
Net asset value and offering price per share $ --
=====================
Class C shares: (redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge) (Note 1)
Net assets $ 60,178,515
=====================
Shares of beneficial interest 3,832,347
=====================
Net asset value and offering price per share $ 15.70
=====================
Class Y shares:
Net assets $ 80,824,170
=====================
Shares of beneficial interest 5,093,902
=====================
Net asset value, offering and redemption price per share $ 15.87
=====================
(a) Including securities on loan with a values of: $ 29,300,107
=====================
Growth Fund
---------------------
---------------------
ASSETS
Investments at cost $ 387,470,093
Net unrealized appreciation 64,215,546
---------------------
Investments at value(a) 451,685,639
Cash 899
Foreign currency at value (identified cost $1,238,082) --
Receivable for Fund shares sold 507,973
Receivable for securities sold --
Dividends and interest receivable 195,311
Unrealized appreciation on forward foreign currency contracts --
Receivable from investment adviser (Note 4) --
Securities lending income receivable 9,064
Other assets --
---------------------
TOTAL ASSETS 452,398,886
---------------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 30,163,310
Payable for securities purchased --
Payable for Fund shares redeemed 1,013,148
Unrealized depreciation on forward foreign currency contracts --
Management fees payable (Note 4) 194,759
Administrative fees payable (Note 4) 17,941
Deferred Trustees' fees (Note 4) 82,034
Service and distribution fees payable (Note 4) 10,296
Foreign capital gains tax payable --
Other accounts payable and accrued expenses 209,505
---------------------
TOTAL LIABILITIES 31,690,993
---------------------
NET ASSETS 420,707,893
=====================
NET ASSETS CONSIST OF:
Paid-in capital 571,776,276
Undistributed net investment income (loss) (82,036)
Accumulated net realized gain (loss) on investments and foreign currency transactions (215,201,893)
Net unrealized appreciation on investments and foreign currency translations 64,215,546
---------------------
NET ASSETS 420,707,893
=====================
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 228,629,318
=====================
Shares of beneficial interest 32,629,855
=====================
Net asset value and redemption price per share $ 7.01
=====================
Offering price per share (100/94.25 of $15.83, $7.01, $9.77, $23.46) (Note 1) $ 7.44
=====================
Class B shares: (redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge) (Note 1)
Net assets $ 28,258,164
=====================
Shares of beneficial interest 4,160,112
=====================
Net asset value and offering price per share $ 6.79
=====================
Class C shares: (redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge) (Note 1)
Net assets $ 39,157,389
=====================
Shares of beneficial interest 5,760,126
=====================
Net asset value and offering price per share $ 6.80
=====================
Class Y shares:
Net assets $ 124,663,022
=====================
Shares of beneficial interest 17,024,100
=====================
Net asset value, offering and redemption price per share $ 7.32
=====================
(a) Including securities on loan with a values of: $ 29,458,686
=====================
Research Fund
---------------------
---------------------
ASSETS
Investments at cost $ 32,577,463
Net unrealized appreciation 3,803,725
---------------------
Investments at value(a) 36,381,188
Cash 6,173
Foreign currency at value (identified cost $1,238,082) --
Receivable for Fund shares sold 8
Receivable for securities sold 458,819
Dividends and interest receivable 21,425
Unrealized appreciation on forward foreign currency contracts --
Receivable from investment adviser (Note 4) 10,262
Securities lending income receivable 1,439
Other assets --
---------------------
TOTAL ASSETS 36,879,314
---------------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 5,926,941
Payable for securities purchased 739,154
Payable for Fund shares redeemed 11,941
Unrealized depreciation on forward foreign currency contracts --
Management fees payable (Note 4) 11,981
Administrative fees payable (Note 4) 1,296
Deferred Trustees' fees (Note 4) 35,087
Service and distribution fees payable (Note 4) 151
Foreign capital gains tax payable --
Other accounts payable and accrued expenses 34,671
---------------------
TOTAL LIABILITIES 6,761,222
---------------------
NET ASSETS 30,118,092
=====================
NET ASSETS CONSIST OF:
Paid-in capital 23,277,201
Undistributed net investment income (loss) 75,445
Accumulated net realized gain (loss) on investments and foreign currency transactions 2,961,721
Net unrealized appreciation on investments and foreign currency translations 3,803,725
---------------------
NET ASSETS 30,118,092
=====================
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 1,198,126
=====================
Shares of beneficial interest 122,599
=====================
Net asset value and redemption price per share $ 9.77
=====================
Offering price per share (100/94.25 of $15.83, $7.01, $9.77, $23.46) (Note 1) $ 10.37
=====================
Class B shares: (redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge) (Note 1)
Net assets $ 355,961
=====================
Shares of beneficial interest 37,231
=====================
Net asset value and offering price per share $ 9.56
=====================
Class C shares: (redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge) (Note 1)
Net assets $ 1,164,140
=====================
Shares of beneficial interest 122,342
=====================
Net asset value and offering price per share $ 9.52
=====================
Class Y shares:
Net assets $ 27,399,865
=====================
Shares of beneficial interest 2,781,723
=====================
Net asset value, offering and redemption price per share $ 9.85
=====================
(a) Including securities on loan with a values of: $ 5,802,703
=====================
Value Fund
---------------------
---------------------
ASSETS
Investments at cost $ 201,551,899
Net unrealized appreciation 19,177,013
---------------------
Investments at value(a) 220,728,912
Cash 1,213
Foreign currency at value (identified cost $1,238,082) --
Receivable for Fund shares sold 1,144,349
Receivable for securities sold 424,333
Dividends and interest receivable 179,110
Unrealized appreciation on forward foreign currency contracts --
Receivable from investment adviser (Note 4) --
Securities lending income receivable 3,317
Other assets --
---------------------
TOTAL ASSETS 222,481,234
---------------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 19,268,119
Payable for securities purchased 1,894,011
Payable for Fund shares redeemed 136,427
Unrealized depreciation on forward foreign currency contracts --
Management fees payable (Note 4) 95,476
Administrative fees payable (Note 4) 8,749
Deferred Trustees' fees (Note 4) 38,131
Service and distribution fees payable (Note 4) 469
Foreign capital gains tax payable --
Other accounts payable and accrued expenses 39,766
---------------------
TOTAL LIABILITIES 21,481,148
---------------------
NET ASSETS 201,000,086
=====================
NET ASSETS CONSIST OF:
Paid-in capital 171,246,526
Undistributed net investment income (loss) 1,350,462
Accumulated net realized gain (loss) on investments and foreign currency transactions 9,226,085
Net unrealized appreciation on investments and foreign currency translations 19,177,013
---------------------
NET ASSETS 201,000,086
=====================
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 17,499,747
=====================
Shares of beneficial interest 745,957
=====================
Net asset value and redemption price per share $ 23.46
=====================
Offering price per share (100/94.25 of $15.83, $7.01, $9.77, $23.46) (Note 1) $ 24.89
=====================
Class B shares: (redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge) (Note 1)
Net assets $ 107,584
=====================
Shares of beneficial interest 4,586
=====================
Net asset value and offering price per share $ 23.46
=====================
Class C shares: (redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge) (Note 1)
Net assets $ 1,390,487
=====================
Shares of beneficial interest 59,278
=====================
Net asset value and offering price per share $ 23.46
=====================
Class Y shares:
Net assets $ 182,002,268
=====================
Shares of beneficial interest 7,732,644
=====================
Net asset value, offering and redemption price per share $ 23.54
=====================
(a) Including securities on loan with a values of: $ 18,656,315
=====================
See accompanying notes to financial statements.
28
STATEMENTS OF OPERATIONS
For the Year Ended September 30, 2007
Global Markets Fund Growth Fund Research Fund
--------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
INVESTMENT INCOME
Dividends $ 885,679 $ 2,262,486 $ 402,920
Interest 2,094,066 223,225 11,248
Securities lending income (Note 2) 53,742 151,500 9,730
Less net foreign taxes withheld (35,692) -- --
--------------------- --------------------- ---------------------
2,997,795 2,637,211 423,898
--------------------- --------------------- ---------------------
Expenses
Management fees (Note 4) 831,832 2,030,197 144,324
Service fees - Class A (Note 4) 36,995 549,385 3,571
Service and distribution fees -
Class B (Note 4) -- 295,599 3,709
Service and distribution fees -
Class C (Note 4) 318,337 395,553 13,108
Trustees' fees and expenses (Note 4) 15,826 30,498 13,495
Administrative fees (Note 4) 61,577 225,262 15,995
Custodian fees and expenses 87,886 43,678 30,871
Transfer agent fees and expenses -
Class A (Note 4) 16,520 562,284 2,824
Transfer agent fees and expenses -
Class B (Note 4) -- 38,971 939
Transfer agent fees and expenses -
Class C (Note 4) 32,525 99,258 3,171
Transfer agent fees and expenses -
Class Y (Note 4) 12,204 50,549 14,947
Audit and tax services fees 48,855 40,081 35,149
Legal fees 2,983 12,440 836
Shareholder reporting expenses 3,337 109,758 3,655
Registration fees 51,833 46,081 54,128
Expense recapture - Class A (Note 4) -- 3,129 --
Expense recapture - Class B (Note 4) -- 25,786 --
Expense recapture - Class Y (Note 4) -- -- --
Miscellaneous expenses 11,506 23,789 5,420
--------------------- --------------------- ---------------------
Total expenses 1,532,216 4,582,298 346,142
Less fee reduction and/or expense
reimbursement (Note 4) (67,774) -- (75,740)
--------------------- --------------------- ---------------------
Net expenses 1,464,442 -- 270,402
--------------------- --------------------- ---------------------
Net investment income (loss) 1,533,353 (1,945,087) 153,496
--------------------- --------------------- ---------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain on:
Investments - net 5,777,921 26,173,209 3,421,566
Foreign currency transactions - net 30,039 -- --
Change in unrealized appreciation
(depreciation) on:
Investments (net of change in
foreign capital gains tax accrual
of $71,379 on Global Markets Fund) 22,311,163 50,265,940 1,282,288
Foreign currency translations - net (88,491) -- --
--------------------- --------------------- ---------------------
Net realized and unrealized gain on
investments and foreign currency
transactions 28,030,632 76,439,149 4,703,854
--------------------- --------------------- ---------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 29,563,985 $ 74,494,062 $ 4,857,350
===================== ===================== =====================
Value Fund
---------------------
---------------------
INVESTMENT INCOME
Dividends $ 2,566,629
Interest 238,332
Securities lending income (Note 2) 9,300
Less net foreign taxes withheld (8,231)
---------------------
2,806,030
---------------------
Expenses
Management fees (Note 4) 732,640
Service fees - Class A (Note 4) 29,696
Service and distribution fees -
Class B (Note 4) 198
Service and distribution fees -
Class C (Note 4) 1,557
Trustees' fees and expenses (Note 4) 16,577
Administrative fees (Note 4) 80,975
Custodian fees and expenses 35,564
Transfer agent fees and expenses -
Class A (Note 4) 15,739
Transfer agent fees and expenses -
Class B (Note 4) 30
Transfer agent fees and expenses -
Class C (Note 4) 296
Transfer agent fees and expenses -
Class Y (Note 4) 30,460
Audit and tax services fees 37,206
Legal fees 3,775
Shareholder reporting expenses 19,304
Registration fees 81,253
Expense recapture - Class A (Note 4) 1,970
Expense recapture - Class B (Note 4) --
Expense recapture - Class Y (Note 4) 12,778
Miscellaneous expenses 8,144
---------------------
Total expenses 1,108,162
Less fee reduction and/or expense
reimbursement (Note 4) (146)
---------------------
Net expenses 1,108,016
---------------------
Net investment income (loss) 1,698,014
---------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gain on:
Investments - net 9,941,092
Foreign currency transactions - net --
Change in unrealized appreciation
(depreciation) on:
Investments (net of change in
foreign capital gains tax accrual
of $71,379 on Global Markets Fund) 8,063,036
Foreign currency translations - net --
---------------------
Net realized and unrealized gain on
investments and foreign currency
transactions 18,004,128
---------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 19,702,142
=====================
See accompanying notes to financial statements.
29
This Page Intentionally Left Blank
30
STATEMENTS OF CHANGES IN NET ASSETS
Global Markets Fund
--------------------------------------------
Year Ended Year Ended
September 30, September 30,
2007 2006
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ 1,533,353 $ 1,093,311
Net realized gain (loss) on investments and foreign currency transactions 5,807,960 1,028,457
Net change in net unrealized appreciation
(depreciation) on investments and foreign currency translations 22,222,672 828,609
--------------------- ---------------------
Net increase (decrease) in net assets resulting from operations 29,563,985 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) 52,772,239 39,428,816
--------------------- ---------------------
Redemption Fees
Class A 743 --
Class C 1,591 --
Class Y 3,115 895
--------------------- ---------------------
Net increase (decrease) in net assets 80,613,504 41,603,718
--------------------- ---------------------
NET ASSETS
Beginning of year 89,315,774 47,712,056
--------------------- ---------------------
End of year $ 169,929,278 $ 89,315,774
===================== =====================
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) $ 1,691,875 $ 1,202,135
===================== =====================
Growth Fund
--------------------------------------------
Year Ended Year Ended
September 30, September 30,
2007 2006
--------------------- ---------------------
--------------------- ---------------------
FROM OPERATIONS:
Net investment income (loss) $ (1,945,087) $ (290,409)
Net realized gain (loss) on investments and foreign currency transactions 26,173,209 (6,416,354)
Net change in net unrealized appreciation
(depreciation) on investments and foreign currency translations 50,265,940 (14,594,029)
--------------------- ---------------------
Net increase (decrease) in net assets resulting from operations 74,494,062 (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) (76,568,270) 233,029,131
--------------------- ---------------------
Redemption Fees
Class A -- --
Class C -- --
Class Y -- --
--------------------- ---------------------
Net increase (decrease) in net assets (2,074,208) 211,728,339
--------------------- ---------------------
NET ASSETS
Beginning of year 422,782,101 211,053,762
--------------------- ---------------------
End of year $ 420,707,893 $ 422,782,101
===================== =====================
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) $ (82,036) $ (58,087)
===================== =====================
See accompanying notes to financial statements.
31
Research Fund Value Fund
- -------------------------------------------- --------------------------------------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
- --------------------- --------------------- --------------------- ---------------------
--------------------- --------------------- ---------------------
$ 153,496 $ 243,112 $ 1,698,014 $ 502,982
3,421,566 2,918,811 9,941,092 4,648,831
1,282,288 (960,150) 8,063,036 2,810,437
- --------------------- --------------------- --------------------- ---------------------
4,857,350 2,201,773 19,702,142 7,962,250
- --------------------- --------------------- --------------------- ---------------------
(9,859) (1,464) (33,688) --
(509) -- -- --
(2,662) (293) -- --
(260,548) (136,217) (673,111) (530,299)
(161,282) (24,273) (226,188) --
(48,393) (11,723) -- --
(147,505) (13,059) -- --
(2,907,435) (1,272,543) (4,162,095) (1,548,378)
- --------------------- --------------------- --------------------- ---------------------
(3,538,193) (1,459,572) (5,095,082) (2,078,677)
- --------------------- --------------------- --------------------- ---------------------
2,841,472 (130,794) 114,779,649 28,475,203
- --------------------- --------------------- --------------------- ---------------------
-- -- -- --
-- -- -- --
-- -- -- --
- --------------------- --------------------- --------------------- ---------------------
4,160,629 611,407 129,386,709 34,358,776
- --------------------- --------------------- --------------------- ---------------------
25,957,463 25,346,056 71,613,377 37,254,601
- --------------------- --------------------- --------------------- ---------------------
$ 30,118,092 $ 25,957,463 $ 201,000,086 $ 71,613,377
===================== ===================== ===================== =====================
$ 75,445 $ 196,320 $ 1,350,462 $ 359,624
===================== ===================== ===================== =====================
32
FINANCIAL HIGHLIGHTS
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 Redemption
the period (loss) (c) gain (loss) operations income capital gains distributions fees (d)
---------- ---------- -------------- ---------- -------------- ------------- ------------- ----------
GLOBAL MARKETS FUND
Class A
9/30/2007 $ 12.49 $ 0.20 $ 3.39 $ 3.59 $ (0.25) $ -- $ (0.25) $ 0.00
9/30/2006* 12.71 0.12 (0.34) (0.22) -- -- -- --
Class C
9/30/2007 12.43 0.10 3.36 3.46 (0.19) -- (0.19) 0.00
9/30/2006* 12.71 0.06 (0.34) (0.28) -- -- -- --
Class Y
9/30/2007 12.51 0.24 3.39 3.63 (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) --
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) --
* 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.
(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.
33
Ratios to average net assets
-----------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return the period expenses expenses income turnover
the period (%) (a) (000's) (%) (b)(f) (%) (f) (%) (f) rate (%)
- ---------- --------- ----------- ---------- --------- -------------- ---------
$ 15.83 29.1(e) $ 28,927 1.25 1.37 1.44 78
12.49 (1.7)(e) 10,438 1.25 1.56 1.52 103
15.70 28.0(e) 60,179 2.00 2.11 0.69 78
12.43 (2.1)(e) 20,228 2.00 2.32 0.78 103
15.87 29.4 80,824 1.00 1.02 1.70 78
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
(b)The adviser has agreed to reduce/reimburse a portion of the Fund's expenses
during the period. Without this reduction/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 C shares are not reflected in total return calculations. Periods less
than one year, if applicable, are not annualized.
(f)Annualized for periods less than one year, if applicable.
34
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
9/30/2007 $ 5.84 $ (0.03) $ 1.20 $ 1.17 $ -- $ -- $ --
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 -- -- --
Class B
9/30/2007 5.70 (0.07) 1.16 1.09 -- -- --
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
9/30/2007 5.71 (0.08) 1.17 1.09 -- -- --
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
9/30/2007 6.08 (0.00) 1.24 1.24 -- -- --
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 -- -- --
* 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 reduce/reimburse a portion of the Fund's expenses
during the period. Without this reduction/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.
See accompanying notes to financial statements.
35
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
the period (%) (a) (000's) (%) (b)(g) (%) (g) (loss) (%) (g) rate (%)
- ---------- --------- ----------- ---------- --------- -------------- ---------
$ 7.01 20.0(e) $ 228,629 1.14(i) 1.14(i) (0.49) 134
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
6.79 19.1(e) 28,258 1.85(i) 1.85(i) (1.20) 134
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
6.80 19.1(e) 39,157 1.88 1.88 (1.23) 134
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
7.32 20.4 124,663 0.67 0.67 (0.02) 134
6.08 (2.9) 121,478 0.80(h) 0.80(h) 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
(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)Annualized for periods less than one year, if applicable.
(h)Includes expense recapture of 0.07%. See Note 4.
(i)Includes expense recapture of 0.001% and 0.08% for Class A and Class B,
respectively. See Note 4.
36
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
9/30/2007 $ 9.42 $ 0.02 $ 1.53 $ 1.55 $ (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)
Class B
9/30/2007 9.25 (0.05) 1.50 1.45 (0.01) (1.13) (1.14)
9/30/2006 9.10 (0.02) 0.63 0.61 -- (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
9/30/2007 9.22 (0.05) 1.50 1.45 (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
9/30/2007 9.49 0.06 1.53 1.59 (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)
* 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 reduce/reimburse a portion of the Fund's expenses
during the period. Without this reduction/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.
See accompanying notes to financial statements.
37
Ratios to average net assets
----------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return the period expenses expenses income turnover
the period (%) (a) (000's) (%) (b)(g) (%) (g) (loss) (%) (g) rate (%)
- ---------- -------- ----------- ---------- --------- -------------- ---------
$ 9.77 18.0(e) $ 1,198 1.25 1.50 0.22 148
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
9.56 17.1(e) 356 2.00 2.31 (0.51) 148
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
9.52 17.2(e) 1,164 2.00 2.29 (0.54) 148
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
9.85 18.4 27,400 0.85 1.11 0.62 148
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
(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)Annualized for periods less than one year, if applicable.
38
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
---------- ------------- -------------- ---------- -------------- ------------- -------------
VALUE FUND
Class A****
9/30/2007 $ 21.04 $ 0.19 $ 3.27 $ 3.46 $ (0.13) $ (0.91) $ (1.04)
9/30/2006* 19.69 0.02 1.33 1.35 -- -- --
Class B
9/30/2007** 24.00 0.00 (0.54) (0.54) -- -- --
Class C
9/30/2007** 24.00 0.01 (0.55) (0.54) -- -- --
Class Y***
9/30/2007 21.05 0.27 3.27 3.54 (0.14) (0.91) (1.05)
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)
* From commencement of Class operations on June 30, 2006 through September 30,
2006.
** From commencement of Class operations on June 1, 2007 through September 30,
2007.
***Prior to the close of business on June 1, 2007, the Fund offered
Institutional Class shares, which were redesignated as Class Y shares on
that date.
****Prior to the close of business on June 1, 2007, the Fund offered Retail
Class shares, which were redesignated as Class A shares on that date.
(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.
See accompanying notes to financial statements.
39
Ratios to average net assets
----------------------------------------
Net asset Net assets,
value, Total end of Net Gross Net investment Portfolio
end of return the period expenses expenses income turnover
the period (%) (a) (000's) (%) (b)(f) (%) (f) (%) (f) rate (%)
- ---------- --------- ----------- ---------- --------- -------------- ---------
$ 23.46 16.9(g) $ 17,500 1.09(e) 1.09(e) 0.79 41
21.04 6.9(g) 466 1.10 8.65 0.42 36
23.46 (2.3)(g) 108 1.85 1.89 0.03 41
23.46 (2.3)(g) 1,390 1.85 1.94 0.10 41
23.54 17.3 182,002 0.72(e) 0.72(e) 1.19 41
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
(b)The adviser has agreed to reduce/reimburse a portion of the Fund's expenses
during the period. Without this reduction/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% and 0.01% for the Class A and Class Y,
respectively. See Note 4.
(f)Annualized for periods less than one year, if applicable.
(g)A sales charge for Class A shares and a contingent deferred sales charge for
Class B and Class C shares are not reflected in total return calculations.
Periods less than one year, if applicable, are not annualized.
40
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
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")
Loomis Sayles Value Fund (the "Value Fund")
Each Fund offers Class A, Class C and Class Y shares. Growth Fund, Research
Fund and Value Fund also offer Class B shares. Prior to June 1, 2007, Value
Fund offered Retail Class shares and Institutional Class shares. On June 1,
2007, Retail Class shares were redesignated as Class A shares and Institutional
Class shares were redesignated as Class Y shares of the Fund. In addition, on
June 1, 2007, Value Fund began offering Class B and Class C shares.
On June 1, 2007, the Board of Trustees approved the termination of offering of
Class B shares. Effective July 30, 2007 no new accounts may be opened in Class
B shares. No additional investments into Class B shares may be made after
October 12, 2007. Existing Class B shareholders may continue to reinvest
dividends into Class B shares and exchange their Class B shares for Class B
shares of other Natixis Funds subject to existing exchange privileges as
described in the Prospectus.
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
can not be directly attributed to a fund are generally apportioned based on the
relative net assets of each of the funds in the Trust. Expenses of a fund are
borne pro rata by the holders of each Class of shares, except that each Class
bears expenses unique to that Class (including the Rule 12b-1 service and
distribution fees and transfer agent fees applicable to such class). In
addition, each Class votes as a Class only with respect to its own Rule 12b-1
Plan. Shares of each Class would receive their pro rata share of the net assets
of a fund if the fund were liquidated. The Trustees approve separate dividends
from net investment income on each Class of shares.
2. Significant Accounting Policies. The following is a summary of significant
accounting policies consistently followed by each Fund in the preparation of
its financial statements. The Funds' financial statements are prepared in
accordance with accounting principles generally accepted in the United States
of America which require the use of management estimates that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
a. Security Valuation. Equity securities, 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 Markets 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 (other
than short-term obligations purchased with an original or remaining maturity of
sixty days or less) are generally valued on the basis of evaluated bids
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
41
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
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. At September 30, 2007,
approximately 24% 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 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 prices of such securities may be more volatile than
those of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. Each Fund may enter into forward foreign
currency exchange contracts. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell generally are used to
hedge a Fund's investments against currency fluctuation. Also, a contract to
buy or sell can offset a previous contract. These contracts involve market risk
in excess of the unrealized gain or loss reflected in the Fund's Statement of
Assets and Liabilities. The U.S. dollar value of the currencies a Fund has
committed to buy or sell represents the aggregate exposure to each currency the
Fund has acquired or hedged through currency contracts outstanding at period
end.
All contracts are "marked-to-market" daily at the applicable exchange rates and
any gains or losses are recorded for financial statement purposes as unrealized
until settlement date. Risks may arise upon entering into these contracts from
the potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. At September 30, 2007, the Global Markets Fund had the
following open forward foreign currency exchange contracts:
In Unrealized
Delivery Contracts to Exchange Contracts Appreciation
Date Receive/Deliver for at Value (Depreciation)
- - --------- --------------- -------- --------- --------------
Colombia Peso (buy) 11/6/2007 353,000,000 $161,778 $173,815 $ 12,037
Colombia Peso (sell) 11/6/2007 353,000,000 161,408 173,815 (12,407)
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.
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.
Notwithstanding the projected regulatory implementation date of March 31, 2008
for the Funds, Management has already implemented FIN 48 and has performed an
analysis of the Funds' tax
42
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
positions taken or that will be taken on federal and state tax returns that
remain subject to examinations (tax years ended September 30, 2004 - 2007) in
connection with the adoption of FIN 48 and has concluded that no provision for
income tax is required. Accordingly, there is no impact on the Funds' net
assets at September 30, 2007 or results of operations for the year then ended.
Additionally, Fund Management is not aware of any events that are reasonably
possible to occur in the next twelve months that would result in the amounts of
any unrecognized tax benefits significantly increasing or decreasing for the
Funds.
A Fund may be subject to foreign taxes on income and gains on investments that
are accrued based upon the Fund's understanding of the tax rules and
regulations that exist in the countries in which the Fund invests. Foreign
governments may also impose taxes or other payments on investments with respect
to foreign securities. Such taxes are accrued as applicable.
f. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gain distributions are determined annually in accordance with
federal tax regulations, which may differ from accounting principles generally
accepted in the United States of America. Permanent differences are primarily
due to differing treatments for book and tax purposes of items such as 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 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, 2007 and 2006 was as follows:
2007 Distributions Paid From: 2006 Distributions Paid From:
- - ----------------------------------- ---------------------------------
Ordinary Long-Term Ordinary Long-Term
Fund Income Capital Gains Total Income Capital Gains Total
- ---- ------ ------------- ----- ------ ------------- -----
Global Markets Fund $1,728,169 $ -- $1,728,169 $776,370 $ -- $ 776,370
Growth Fund -- -- -- -- -- --
Research Fund 1,006,557 2,531,636 3,538,193 137,974 1,321,598 1,459,572
Value Fund 958,359 4,136,723 5,095,082 634,233 1,444,444 2,078,677
Differences between these amounts and those reported in the Statements of
Changes in Net Assets are primarily attributable to different book and tax
treatment for short-term capital gains.
As of September 30, 2007, the components of distributable earnings on a tax
basis were as follows:
Global Growth Research Value
Markets Fund Fund Fund Fund
- - ------------ ------------ ---------- ------------
Undistributed ordinary income $ 5,298,612 $ -- $1,516,199 $ 5,289,577
Undistributed long-term capital gains 4,581,299 -- 1,629,456 5,339,712
------------ ------------ ---------- ------------
Total Undistributed earnings 9,879,911 -- 3,145,655 10,629,289
Capital Loss Carryforward:
Expires September 30, 2010 -- (12,659,581)* -- --
Expires September 30, 2011 -- (6,192,314)* -- --
------------ ------------ ---------- ------------
Total Capital Loss Carryforward -- (18,851,895) -- --
Deferred net capital losses (post-October 2006) -- -- -- --
Unrealized appreciation (depreciation) 23,532,878 64,105,998 3,730,323 19,162,402
------------ ------------ ---------- ------------
Total accumulated earnings (losses) 33,412,789 45,254,103 6,875,978 29,791,691
============ ============ ========== ============
Capital loss carryforward utilized in the current year $ 311,587 $ 17,153,261 $ -- $ --
------------ ------------ ---------- ------------
* A significant portion of the Loomis Sayles Growth Fund's carryforward losses
are a result of prior year mergers; under section 382 of the Internal Revenue
Code these amounts have been limited to the amounts reflected above.
43
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
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 value of securities on loan to borrowers and the value of collateral
held by the Funds with respect to such loans at September 30, 2007 were as
follows:
Value of
Securities on Loan Value of Collateral
- ------------------ -------------------
Global Markets Fund $29,300,107 $30,043,432
Growth Fund 29,458,686 30,163,310
Research Fund 5,802,703 5,926,941
Value Fund 18,656,315 19,268,119
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 Pronouncement. In September 30, 2006, Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 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 FAS 157 will have on the Funds'
financial statements.
3. Purchases and Sales of Securities. For the year ended September 30, 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 $113,234,421 $ 81,313,429
Growth Fund 535,307,658 610,466,654
Research Fund 42,118,181 42,626,509
Value Fund 166,283,566 57,573,143
For the year ended September 30, 2007 purchases and sales of U.S.
Government/Agency Securities by the Global Markets Fund were $15,971,232 and
$3,140,878, 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
Fund Daily Net Assets
---- ----------------
Global Markets Fund 0.75%
Growth Fund 0.50%
Research Fund 0.50%
Value Fund 0.50%
44
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
Loomis Sayles has given binding undertakings to the Funds to reduce management
fees and/or reimburse certain expenses associated with the 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 year ended September 30, 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%
Value Fund 1.10% 1.85% 1.85% 0.85%
For the year ended September 30, 2007, the management fees and reduction of
management fees for each Fund were as follows:
Percentage of
Gross Reduction of Net Average
Management Management Management Daily Net Assets
- ---------- ------------ ---------- ---------------
Fund Fee Fee Fee Gross Net
---- --- --- --- ----- ---
Global Markets Fund $ 831,832 $ (9,557) $ 822,275 0.75% 0.74%
Growth Fund 2,030,197 -- 2,030,197 0.50% 0.50%
Research Fund 144,324 (58,611) 85,713 0.50% 0.30%
Value Fund 732,640 -- 732,640 0.50% 0.50%
For the year ended September 30, 2007, in addition to the reduction of
management fees, expenses have been reimbursed as follows:
Expense
Fund Reimbursed
---- ----------
Global Markets Fund $58,217
Growth Fund --
Research Fund 17,129
Value Fund 146
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 reduced fees/expense more than one year after the end
of the fiscal year in which the fee/expense was reduced. The amounts subject to
possible reimbursement under the expense limitation agreements at September 30,
2007 were as follows:
Expenses Subject to Possible Reimbursement until
September 30, 2008
- ------------------------------------------------
Fund Class A Class B Class C Class Y Total
---- ------- ------- ------- ------- -----
Global Markets Fund $17,795 $ -- $34,787 $15,192 $67,774
Growth Fund -- -- -- -- --
Research Fund 3,536 1,134 3,826 67,244 75,740
Value Fund -- 8 138 -- 146
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trust. Loomis Sayles' general partner is indirectly owned by Natixis
Global Asset Management, L.P. ("Natixis US") (formerly IXIS Asset Management
U.S. Group, L.P.), which is part of Natixis Global Asset Management Group
(formerly IXIS Asset Management Group), an international asset management group
based in Paris, France.
b. Administrative Fees. Natixis Asset Management Advisors, L.P. ("Natixis
Advisors") (formerly IXIS Asset Management Advisors, L.P.) provides certain
administrative services for the Funds and has subcontracted with State Street
Bank to serve as sub-administrator. Natixis Advisors is an indirect
wholly-owned subsidiary of Natixis US. Pursuant to an agreement among Natixis
Funds Trust I (formerly IXIS Advisors Funds Trust I), Natixis Funds Trust II
(formerly IXIS Advisors Funds Trust II), Natixis Funds Trust III (formerly IXIS
Advisors Funds Trust III), Natixis Funds Trust IV (formerly IXIS Advisors Funds
Trust IV), Natixis Cash Management Trust (formerly IXIS Advisor Cash Management
45
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
Trust), ("Natixis Funds Trusts"), Loomis Sayles Funds I, Loomis Sayles Funds II
("Loomis Sayles Funds Trusts") and Natixis Advisors (the "Administrative
Service Agreement"), each Fund pays Natixis 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 Natixis Funds Trusts and Loomis Sayles
Funds Trusts, 0.0625% of the next $5 billion, 0.0500% of the next $20 billion
and 0.045% of such asset in excess of $30 billion, subject to an annual
aggregate minimum fee for the Natixis Funds Trusts and Loomis Sayles Funds
Trusts of $5 million, which is reevaluated on an annual basis. Effective
September 17, 2007, pursuant to an amendment to the Administrative Service
Agreement, the Hansberger International Series was added to the Agreement and
pays Natixis Advisors monthly its pro rata fees equal to its prorated portion
of the above mentioned fees.
New funds are subject to an annual fee of $50,000 plus $12,500 per class and an
additional $50,000 if managed by multiple subadvisors in their first calendar
year of operations.
Prior to July 1, 2007, each Fund paid Natixis 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 Natixis 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
Natixis Funds Trusts and Loomis Sayles Funds Trusts of $5 million.
For the year ended September 30, 2007, amounts paid to Natixis Advisors for
administrative fees were as follows:
Administrative
Fund Fees
---- ----
Global Markets Fund $ 61,577
Growth Fund 225,262
Research Fund 15,995
Value Fund 80,975
Effective October 1, 2007, State Street Bank has agreed to reduce the fees it
receives from Natixis Advisors for serving as sub-administrator to the Funds.
Also effective October 1, 2007, Natixis Advisors has given a binding
contractual undertaking to the Funds to waive the administrative fees paid by
the Funds in an amount equal to the reduction in sub-administrative fees
discussed above. The waiver is in effect through June 30, 2008.
c. Service and Distribution Fees. Natixis Distributors, L.P. ("Natixis
Distributors") (formerly IXIS Asset Management Distributor L.P.) a wholly owned
subsidiary of Natixis U.S., has entered into a distribution agreement with The
Trust. Pursuant to this agreement, Natixis 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, Research Fund's and Value
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 Natixis 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 Natixis 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 Natixis
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 Natixis
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 Natixis
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 Natixis
Distributors in connection with the marketing or sale of Class B and Class C
shares.
For the year ended September 30, 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
---- ------- ------- ------- ------- -------
Global Markets Fund $ 36,995 $ -- $79,584 $ -- $238,753
Growth Fund 549,385 73,900 98,888 221,699 296,665
Research Fund 3,571 927 3,277 2,782 9,831
Value Fund 29,696 50 389 148 1,168
46
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
d. Sub-Transfer Agent Fees. Natixis Distributors has entered into agreements
with financial intermediaries to provide certain recordkeeping, processing,
shareholder communications and other services to customers of the
intermediaries and has agreed to compensate the intermediaries for providing
those services. Certain services would be provided by the Funds if the shares
of those customers were registered directly with the Funds' transfer agent.
Accordingly, the Funds agreed to pay a portion of the intermediary fees
attributable to shares of the Fund held by the intermediary (which generally is
a percentage of the value of shares held) not exceeding what the Funds would
have paid its transfer agent had each customer's shares been registered
directly with the transfer agent instead of held through the intermediary.
Natixis Distributors pay the remainder of the fees. Listed below are the fees
incurred by the Funds which are included in the transfer agent fees and
expenses in the Statements of Operations.
Sub-Transfer Agent Fees
--------------------------------
Fund Class A Class B Class C Class Y
---- ------- ------- ------- -------
Global Markets Fund $ 10,581 $ -- $21,270 $10,883
Growth Fund 302,043 22,661 53,198 37,988
Research Fund 1,365 383 1,325 13,980
Value Fund 9,182 18 181 20,366
e. Commissions. The Funds have been informed that commissions (including CDSCs)
on Fund shares paid to Natixis Distributors by investors in shares of the Funds
for the year ended September 30, 2007, were as follows:
Fund Commissions
---- -----------
Global Markets Fund $163,110
Growth Fund 145,183
Research Fund 7,137
Value Fund 14,020
f. Trustees Fees and Expenses. The Funds do not pay any compensation directly
to their officers or Trustees who are directors, officers or employees of
Natixis Advisors, Natixis Distributors, Natixis US, 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 Natixis Funds Trusts, Loomis
Sayles Funds Trusts and the Hansberger International Series (effective
September 12, 2007) 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 Natixis Funds Trusts, Loomis
Sayles Funds Trusts and the Hansberger International Series on the normal
payment date. Deferred amounts remain in the Funds until distributed in
accordance with the Plan.
g. 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 Natixis
Funds Trusts and Loomis Sayles Funds Trusts, participates in a $75,000,000
committed line of credit provided by State Street Bank. Interest is charged to
each participating fund based on its borrowings at a rate per annum equal to
the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.09% per
annum, payable at the end of each calendar quarter, is accrued and apportioned
among the participating funds based on their average daily unused portion of
the line of credit. For the year ended September 30, 2007, the Funds had no
borrowings under this agreement.
47
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
6. Brokerage Commission Recapture. Each Fund has entered into agreements with
certain brokers whereby the brokers will rebate a portion of brokerage
commissions. All amounts rebated by the brokers are returned to the Funds under
such agreements and are included in realized gains in the Statements of
Operations. For the year ended September 30, 2007, amounts rebated under these
agreements were as follows:
Fund Rebates
---- -------
Global Markets Fund $ 7,827
Growth Fund 99,649
Research Fund 9,103
Value Fund 28,779
7. Shareholders. At September 30, 2007, Loomis Sayles Funded 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 910,126 443,794
Growth Fund 1,427,866 2,351,303
Research Fund 1,052,430 713,133
Value Fund 498,461 553,247
At September 30, 2007, two shareholders individually owned more than 5% of the
Research Fund's total outstanding shares, representing, in aggregate, 25.53% of
the Fund.
8. Capital Shares. Each Fund may issue an unlimited number of shares of
beneficial interest, without par value. Transactions in capital shares were as
follows:
Year Ended September 30, 2007
-------------------------------------
Global Markets Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 1,323,460 $ 19,376,888
Issued in connection with the reinvestment of distributions 12,909 170,145
Redeemed (344,626) (4,798,240)
----------------- ------------------
Net change 991,743 $ 14,748,793
----------------- ------------------
Class C
Issued from the sale of shares 2,428,865 $ 34,758,519
Issued in connection with the reinvestment of distributions 6,914 90,915
Redeemed (230,238) (3,164,913)
----------------- ------------------
Net change 2,205,541 $ 31,684,521
----------------- ------------------
Class Y
Issued from the sale of shares 1,157,288 $ 16,511,186
Issued in connection with the reinvestment of distributions 78,467 1,034,975
Redeemed (830,965) (11,207,236)
----------------- ------------------
Net change 404,790 $ 6,338,925
----------------- ------------------
Increase (decrease) from capital share transactions 3,602,074 $ 52,772,239
================= ==================
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
================= ==================
* From commencement of Classes A and C operations on February 1, 2006 through
September 30, 2006.
48
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
8. Capital Shares (continued).
Year Ended September 30, 2007
-------------------------------------
Growth Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 7,089,532 $ 44,698,435
Issued in connection with the reinvestment of distributions -- --
Redeemed (13,109,095) (81,970,028)
----------------- ------------------
Net change (6,019,563) $ (37,271,593)
----------------- ------------------
Class B
Issued from the sale of shares 225,868 $ 1,376,484
Issued in connection with the reinvestment of distributions -- --
Redeemed (1,705,839) (10,426,523)
----------------- ------------------
Net change (1,479,971) $ (9,050,039)
----------------- ------------------
Class C
Issued from the sale of shares 1,278,833 $ 7,816,200
Issued in connection with the reinvestment of distributions -- --
Redeemed (3,124,017) (19,027,646)
----------------- ------------------
Net change (1,845,184) $ (11,211,446)
----------------- ------------------
Class Y
Issued from the sale of shares 3,152,372 $ 20,891,933
Issued in connection with the reinvestment of distributions -- --
Redeemed (6,121,890) (39,927,125)
----------------- ------------------
Net change (2,969,518) $ (19,035,192)
----------------- ------------------
Increase (decrease) from capital share transactions (12,314,236) $ (76,568,270)
================= ==================
Year Ended September 30, 2007
-------------------------------------
Research Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 119,265 $ 1,061,187
Issued in connection with the reinvestment of distributions 5,961 51,978
Redeemed (143,887) (1,318,176)
----------------- ------------------
Net change (18,661) $ (205,011)
----------------- ------------------
Class B
Issued from the sale of shares 13,946 $ 127,879
Issued in connection with the reinvestment of distributions 3,004 25,776
Redeemed (15,550) (137,306)
----------------- ------------------
Net change 1,400 $ 16,349
----------------- ------------------
Class C
Issued from the sale of shares 58,235 $ 506,509
Issued in connection with the reinvestment of distributions 604 5,155
Redeemed (66,416) (595,377)
----------------- ------------------
Net change (7,577) $ (83,713)
----------------- ------------------
Class Y
Issued from the sale of shares 390,426 $ 3,634,934
Issued in connection with the reinvestment of distributions 353,735 3,098,721
Redeemed (396,917) (3,619,808)
----------------- ------------------
Net change 347,244 $ 3,113,847
----------------- ------------------
Increase (decrease) from capital share transactions 322,406 $ 2,841,472
================= ==================
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
================= ==================
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)
================= ==================
49
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
8. Capital Shares (continued).
Year Ended September 30, 2007
-------------------------------------
Value Fund Shares Amount
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 1,007,378 $ 22,480,490
Issued in connection with the reinvestment of distributions 11,954 259,876
Redeemed (295,544) (6,787,734)
----------------- ------------------
Net change 723,788 $ 15,952,632
----------------- ------------------
Class B***
Issued from the sale of shares 4,592 $ 109,794
Issued in connection with the reinvestment of distributions -- --
Redeemed (6) (133)
----------------- ------------------
Net change 4,586 $ 109,661
----------------- ------------------
Class C***
Issued from the sale of shares 61,363 $ 1,408,850
Issued in connection with the reinvestment of distributions -- --
Redeemed (2,085) (48,751)
----------------- ------------------
Net change 59,278 $ 1,360,099
----------------- ------------------
Class Y
Issued from the sale of shares 6,373,521 $ 144,020,544
Issued in connection with the reinvestment of distributions 186,666 4,059,991
Redeemed (2,207,571) (50,723,278)
----------------- ------------------
Net change 4,352,616 $ 97,357,257
----------------- ------------------
Increase (decrease) from capital share transactions 5,140,268 $ 114,779,649
================= ==================
Year Ended September 30, 2006
-------------------------------------
Value Fund Shares Amount**
- -------------------------------------------------------------- ----------------- ------------------
Class A
Issued from the sale of shares 22,169 $ 456,494
Issued in connection with the reinvestment of distributions -- --
Redeemed -- --
----------------- ------------------
Net change 22,169 $ 456,494
----------------- ------------------
Class B***
Issued from the sale of shares -- $ --
Issued in connection with the reinvestment of distributions -- --
Redeemed -- --
----------------- ------------------
Net change -- $ --
----------------- ------------------
Class C***
Issued from the sale of shares -- $ --
Issued in connection with the reinvestment of distributions -- --
Redeemed -- --
----------------- ------------------
Net change -- $ --
----------------- ------------------
Class Y
Issued from the sale of shares 1,543,164 $ 31,129,107
Issued in connection with the reinvestment of distributions 111,464 2,043,141
Redeemed (264,649) (5,153,539)
----------------- ------------------
Net change 1,389,979 $ 28,018,709
----------------- ------------------
Increase (decrease) from capital share transactions 1,412,148 $ 28,475,203
================= ==================
** From commencement of Class A operations on June 30, 2006 through
September 30, 2006.
*** From commencement of Class operations on June 1, 2007 through September 30,
2007.
9. Subsequent Event. On March 9, 2007, the Trustees of Natixis Funds Trust I
approved an agreement and Plan of Reorganization pursuant to which the net
assets of the Natixis Value Fund will be acquired by the Loomis Sayles Value
Fund. This transaction was approved by the shareholders of the Natixis Value
Fund on October 12, 2007 and the merger was completed on October 26, 2007.
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of Loomis Sayles Funds II and Shareholders of Loomis Sayles
Global Markets Fund, Loomis Sayles Growth Fund, Loomis Sayles Research Fund,
and Loomis Sayles Value Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Global Markets Fund, Loomis Sayles Growth Fund, Loomis Sayles Research Fund and
Loomis Sayles Value Fund, each a series of Loomis Sayles Funds II
(collectively, "the Funds"), at September 30, 2007, and the results of each of
their operations, the changes in each of their net assets and the financial
highlights for each of the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2007
51
2007 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (unaudited)
Corporate Dividends Received Deduction. For the fiscal year ended September 30,
2007, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
Qualifying
Fund Percentage
---- ----------
Global Markets Fund 13.75%
Research Fund 47.93%
Value 73.04%
Capital Gains Distributions. Pursuant to Internal Revenue Section 852(b), the
following Funds paid distributions, which have been designated as capital gains
distributions for the fiscal year ended September 30, 2007.
Fund Amount
---- ----------
Research Fund $2,531,636
Value 4,136,723
Qualified Dividend Income. For the fiscal year ended September 30, 2007, the
Funds below will designate up to the maximum amount allowable pursuant to the
Internal Revenue Code as qualified dividend income eligible for reduced tax
rates. These lower rates range from 5% to 15% depending on an individual's tax
bracket. If the Funds pay a distribution during calendar year 2007, complete
information will be reported in conjunction with Form 1099-DIV.
Fund
----
Global Markets Fund
Growth
Research Fund
Value
52
TRUSTEE AND OFFICER INFORMATION
The tables below provide certain information regarding the Trustees and
officers of Loomis Sayles Funds II (the "Trust"). Unless otherwise indicated,
the address of all persons below is 399 Boylston Street, Boston, MA 02116. The
Trust's Statements of Additional Information include additional information
about the Trustees of the Trust and are available by calling Loomis Sayles at
800-343-2029.
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Year of Birth Served and Term of Office* During Past 5 Years** and Other Directorships Held
- ---------------------- -------------------------- --------------------- ----------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee, since 2003 Douglas Dillon Professor and 41;
(1940) Contract Review and Director of the Belfer Center Director, Taubman Centers,
Governance Committee for Science and International Inc. (real estate investment
Member Affairs, John F. Kennedy trust)
School of Government,
Harvard University
Charles D. Baker Trustee, since 2005 President and Chief Executive 41;
(1956) Contract Review and Officer, Harvard Pilgrim None
Governance Committee Health Care (health plan)
Member
Edward A. Benjamin Trustee, since 2002 Retired 41;
(1938) Chairman of the Contract None
Review and Governance
Committee
Daniel M. Cain Trustee, since 2003 President and Chief Executive 41;
(1945) Chairman of the Audit Officer, Cain Brothers & Director, Sheridan
Committee Company, Incorporated Healthcare Inc. (physician
(investment banking) practice management)
Trustee, Lexington Strategic
Asset Corporation (realty
investment trust)
Richard Darman Trustee, since 2003 Partner, The Carlyle Group 41;
(1943) Contract Review and (investments); formerly, Director and Chairman of the
Governance Committee Professor, John F. Kennedy Board of Directors, AES
Member School of Government, Corporation (international
Harvard University power company)
Jonathan P. Mason Trustee, since 2007 Chief Financial Officer, Cabot 41;
(1958) Audit Committee Member Corp. (specialty chemicals); None
formerly, Vice President and
Treasurer, International Paper
Company; formerly, Chief
Financial Officer, Carter Holt
Harvey (forest products)
Sandra O. Moose Chairperson of the Board of President, Strategic Advisory 41;
(1942) Trustees since November Services (management Director, Verizon
2005 consulting); formerly, Senior Communications; Director,
Trustee, since 2003 Vice President and Director, Rohm and Haas Company
Ex officio member of the The Boston Consulting Group, (specialty chemicals);
Audit Committee and Inc. (management consulting) Director, AES Corporation
Contract Review and (international power
Governance Committee company)
53
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Year of Birth Served and Term of Office* During Past 5 Years** and Other Directorships Held
- ---------------------- -------------------------- --------------------- ----------------------------
INDEPENDENT TRUSTEES
continued
Cynthia L. Walker Trustee, since 2005 Executive Dean for 41;
(1956) Audit Committee Member Administration (formerly, None
Dean for Finance & CFO),
Harvard Medical School
INTERESTED TRUSTEES
Robert J. Blanding/1/ Chief Executive Officer and President, Chairman, Director 41;
(1947) Trustee, since 2002 and Chief Executive Officer, None
555 California Street Loomis, Sayles & Company,
San Francisco, CA 94104 L.P.
John T. Hailer/2/ President and Trustee, since President and Chief Executive 41;
(1960) 2003 Officer, Natixis Asset None
Management Advisors, L.P.,
Natixis Distributors, L.P.,
Natixis Global Associates, Inc.
and Natixis Global Asset
Management North America;
President and Chief Executive
Officer, Natixis Funds Trust I,
Natixis Funds Trust II, Natixis
Funds Trust III, Natixis Funds
Trust IV, Natixis Cash
Management Trust, and
Hansberger International
Series; Executive Vice
President of Loomis Sayles
Funds I
* Each Trustee serves until retirement, resignation or removal from the Board
of Trustees. The current retirement age is 72. The position of Chairperson
of the Board is appointed for a two-year term. Ms. Moose was re-appointed to
serve an additional two-year term as the Chairperson of the Board of
Trustees on September 14, 2007.
** Each person listed above, except as noted, holds the same position(s) with
the Natixis Funds, Loomis Sayles Funds Trusts and Hansberger International
Series. Previous positions during the past five years with Natixis
Distributors, L.P. (the "Distributor"), Natixis Asset Management Advisors,
L.P. ("Natixis Advisors") or Loomis, Sayles & Company, L.P. are omitted if
not materially different from a Trustee's or officer's current position with
such entity.
***The Trustees of the Trusts serve as Trustees of a fund complex that includes
all series of Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds
Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis
Sayles Funds I, Loomis Sayles Funds II and Hansberger International Series
(the "Funds' Trusts"). The number of portfolios overseen does not include
AEW Real Estate Income Fund which liquidated on April 13, 2007, or IXIS
Equity Diversified Portfolio, which liquidated on August 3, 2007. The number
of portfolios overseen includes, as of September 14, 2007, the five series
of the Hansberger International Series.
/1/ Mr. Blanding is deemed an "interested person" of the Trusts because he
holds the following positions with affiliated persons of the Trusts:
President, Chairman, Director and Chief Executive Officer of Loomis,
Sayles & Company, L.P.
/2/ Mr. Hailer is deemed an "interested person" of the Trusts because he holds
the following positions with affiliated persons of the Trusts: Chairman of
the Board, President and Chief Executive Officer of Natixis Distribution
Corporation; President and Chief Executive Officer of Natixis Global Asset
Management North America, Natixis Global Associates, Inc., Natixis Asset
Management Advisors, L.P. and the Distributor.
54
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the
Trust, Length of Time Principal Occupation(s)
Name and Year of Birth Served and Term of Office* During Past 5 Years**
- ---------------------- -------------------------- ---------------------
OFFICERS OF THE TRUST
Coleen Downs Dinneen Secretary, Clerk and Chief Senior Vice President, General Counsel, Secretary and Clerk
(1960) Legal Officer, since (formerly, Deputy General Counsel, Assistant Secretary and
September 2004 Assistant Clerk), Natixis Distribution Corporation, Natixis
Distributors, L.P. and Natixis Asset Management Advisors, L.P.
Daniel J. Fuss Executive Vice President, Vice Chairman and Director, Loomis, Sayles & Company, L.P.
(1933) since June 2003
One Financial Center
Boston, MA 02111
Russell L. Kane Chief Compliance Officer, Chief Compliance Officer for Mutual Funds, Senior Vice
(1969) since May 2006; Assistant President, Deputy General Counsel, Assistant Secretary and
Secretary since June 2004; Assistant Clerk, Natixis Distributors, L.P. and Natixis Asset
Anti-Money Laundering Management Advisors, L.P.; Vice President, Associate General
Officer since April 2007 Counsel, Assistant Secretary and Assistant Clerk, Natixis
Distribution Corporation; formerly, Senior Counsel, Columbia
Management Group.
Michael C. Kardok Treasurer, Principal Senior Vice President, Natixis Asset Management Advisors, L.P.
(1959) Financial and Accounting and Natixis Distributors, L.P.; formerly, Senior Director, PFPC
Officer, since October 2004 Inc.
Robert Krantz Executive Vice President, Executive Vice President, Natixis Distributors, L.P. and Natixis
(1964) since September 2007 Asset Management Advisors, L.P.
* Each officer of the Trusts serve for an indefinite term in accordance with
the Trusts' current By-laws until the date his or her successor is elected
and qualified, or until he or she sooner dies, retires, is removed or
becomes disqualified.
** Each person listed above, except as noted, holds the same position(s) with
the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Hansberger
International Series. Previous positions during the past five years with the
Distributor, Natixis Advisors or Loomis Sayles are omitted, if not
materially different from a Trustee's or officer's current position with
such entity.
55
[LOGO] LS LOOMIS SAYLES FUNDS
Loomis Sayles Mid Cap Growth Fund
Loomis Sayles Small Cap Growth Fund
Loomis Sayles Small Cap Value Fund
Loomis Sayles Tax-Managed Equity Fund
TABLE OF CONTENTS
Fund and Manager Review 1
Portfolio of Investments 14
Statements of Assets and Liabilities 31
Statements of Operations 33
Statements of Changes in Net Assets 35
Financial Highlights 37
Notes to Financial Statements 43
ANNUAL REPORT
SEPTEMBER 30, 2007
FUND AND MANAGER REVIEW
LOOMIS SAYLES MID CAP 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 | $54.8 million
PORTFOLIO REVIEW
The Fund significantly outperformed its Benchmark, the Russell Midcap Growth
Index, for the fiscal year ended September 30, 2007. The Portfolio showed
excellent "upside capture,"
posting strong gains during periods of market strength. Furthermore, the Fund
lost relatively little during the spring sell-off and mid-summer correction.
We started the period navigating what we regarded as the market's psychological
transition from risk aversion to risk acceptance, increasing the Fund's
exposure to consumer spending and capital markets themes. We decided to avoid
becoming overly defensive during the mid-summer correction, but to maintain our
positions in those stocks we favored the most. Many of these had been big
winners during the prior advance, making them particularly vulnerable during
the correction. Nevertheless, this strategy served the Fund well, as these
stocks were strong performers when the market resumed its advance in
late August.
Strong stock selection in consumer discretionary, materials and energy drove
the Fund's performance. Within the consumer discretionary sector, several
retail and apparel holdings performed well, including GameStop, Guess? and
Coach, all of which benefited from above-consensus earnings. Overall, the Fund
had limited exposure to domestic consumer spending; many of our big gainers
were either foreign-domiciled holdings or companies leveraged to overseas
consumption.
In materials and processing, our leading stocks were either beneficiaries of
the strong upturn in the commercial aerospace cycle (such as Precision
Castparts and Allegheny Technologies) or leveraged to the secular bull market
in agriculture (Mosaic). Most of our winners in the energy sector were service
stocks with exposure to oil and international operations.
The Fund experienced negative returns from its holdings in consumer staples,
integrated oils, and the autos and transportation sectors. Fortunately, the
Fund had only
small positions in each of these areas. The Fund realized the smallest positive
returns in utilities and producer durables, but returns in these sectors had a
positive impact on relative performance due to strong stock selection.
OUTLOOK
The mid-August lows for the S&P 500 represented an important inflection point
for the market. Negative emotions clouded the market and stressed investors,
but fundamentals won out in the end, and companies with strong earnings and
cash flow prospects recovered strongly.
Since that time, the Federal Reserve Board has eased, credit markets have
improved, and corporate earnings have come through, all of which set up the
market for a good run as 2008 unfolds. We expect the stocks of companies that
benefit from corporate spending, non-US earnings streams and strong
emerging-market economies to perform better than those tied to the US economy
in general and US consumer spending in particular.
1
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2007
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
-----------------------------------------------
LOOMIS SAYLES MID CAP GROWTH: INSTITUTIONAL
36.66% 21.04% 9.99% 11.61%
-----------------------------------------------
LOOMIS SAYLES MID CAP GROWTH: RETAIL
36.31 20.73 9.68 11.31
-----------------------------------------------
RUSSELL MIDCAP GROWTH INDEX(c)
21.22 20.39 7.47 9.26
-----------------------------------------------
LIPPER MID-CAP GROWTH FUNDS INDEX(c)
30.80 19.02 7.24 8.30
-----------------------------------------------
GROSS EXPENSE RATIO (before reductions and
reimbursements)*
--------------------------------------------------------
Institutional: 1.12% Retail: 1.52%
--------------------------------------------------------
NET EXPENSE RATIO (after reductions and reimbursements)*
--------------------------------------------------------
Institutional: 1.00% Retail: 1.25%
--------------------------------------------------------
* As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 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
4/30/2007 280,865 211,573 247,996
5/31/2007 297,099 223,506 258,053
6/30/2007 297,693 222,591 253,579
7/31/2007 298,765 219,706 247,902
8/31/2007 301,244 222,013 249,245
9/30/2007 325,766 235,656 259,024
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 reductions 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 9 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 | $49.0 million
PORTFOLIO REVIEW
The Fund significantly outperformed its Benchmark, the Russell 2000 Growth
Index, for the fiscal year ended September 30, 2007, due to strong stock
selection in the technology, consumer discretionary and healthcare sectors. An
underweight position in the strong-performing materials and processing sector
and poor stock selection in producer durables offset the Fund's relative
performance, but only marginally.
Within the consumer discretionary sector the Fund realized strong performance
from aQuantive, FTI Consulting and Chipotle Mexican Grill Inc. Shares of
aQuantive soared after Microsoft agreed to purchase the digital marketing
services company for an 85% premium. FTI, which provides financial advice to
businesses, advanced on better-than-expected sales in the fourth quarter of
2006. Chipotle shares rose sharply in the second and third quarters of 2007,
after reporting earnings that significantly beat analysts' expectations. We
sold the position at a profit.
In technology, shares of First Solar, a solar-module maker, rose due to a
significant increase in profitability and we sold the stock. Shares of Cogent
Communications, a next-generation Internet protocol service provider, gained on
continued strong demand for bandwidth.
NuVasive Inc. and Meridian Bioscience Inc. were the top contributors from the
healthcare sector. NuVasive, a medical device company, beat earnings estimates
in the third quarter of 2007, while shares of Meridian, a diagnostics company,
rose substantially in the third quarter as the company reaffirmed 2007
full-year guidance and raised guidance for 2008.
We reduced the Fund's exposure to the consumer discretionary sector by trimming
our retail holdings in light of the recent slump in the housing industry and
its effect on consumers. We also scaled back the Fund's position in financial
services by reducing positions related to mortgage financing, banking and real
estate names. We funneled most of the proceeds from these sales into the
technology sector, where fundamentals and valuations remain attractive. We also
increased the Fund's allocation to producer durables and energy, as global
demand remains a strong catalyst for growth in these sectors.
OUTLOOK
The mid-August lows for the S&P 500 represented an important inflection point
for the market. Negative emotions clouded the market and stressed investors,
but fundamentals won out, and companies with strong earnings and cash flow
prospects recovered strongly.
Since that time, the Federal Reserve Board has eased, credit markets have
improved, and corporate earnings have held up well, all of which sets up the
market for a good run as 2008 unfolds.
3
We expect the stocks of companies that benefit from corporate spending, non-US
earnings streams and strong emerging-market economies to perform better than
those tied to the US economy in general and US consumer spending in particular.
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2007
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION
-------------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH: INSTITUTIONAL
32.25% 20.10% 3.57 5.52%
-------------------------------------------------
LOOMIS SAYLES SMALL CAP GROWTH: RETAIL
31.94 19.80 3.30 5.26
-------------------------------------------------
RUSSELL 2000 GROWTH INDEX(c)
18.94 18.70 3.65 5.40
-------------------------------------------------
RUSSELL 2000 INDEX(c)
12.34 18.75 7.22 9.07
-------------------------------------------------
LIPPER SMALL-CAP GROWTH FUNDS INDEX(c)
21.75 17.29 6.12 7.62
-------------------------------------------------
GROSS EXPENSE RATIO (before reductions and reimbursements)*
-------------------------------------------------------------------
Institutional: 1.38% Retail: 1.92%
-------------------------------------------------------------------
NET EXPENSE RATIO (after reductions and reimbursements)*
-------------------------------------------------------------------
Institutional: 1.00% Retail: 1.25%
-------------------------------------------------------------------
* As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 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
4/30/2007 157,172 208,025 169,344 255,735
5/31/2007 166,147 217,572 177,074 266,222
6/30/2007 167,493 217,008 176,054 262,315
7/31/2007 161,882 209,090 166,913 244,374
8/31/2007 167,499 211,877 171,111 249,913
9/30/2007 178,169 220,129 176,082 254,202
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 reductions 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 9 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 | $1,076.6 million
PORTFOLIO REVIEW
The Fund significantly outperformed its Benchmark, the Russell 2000 Value
Index, for the fiscal year ended September 30, 2007. Strong stock selection
combined with mergers and acquisitions activity and our tilt toward companies
and sectors well positioned to benefit from solid global economic growth drove
the Fund's performance. All major sectors produced positive returns for the
period, with notable performance from the financial services stocks we
selected, which avoided major problems related to the subprime mortgage crisis.
Materials and processing and the technology sectors were the strongest
performers for the Fund. Although basic materials stocks were among the best
performers in the small cap universe during the period, our emphasis on such
industrial commodity suppliers as Chaparral Steel, Reliance Steel & Aluminum
and other holdings led to a strong return from this sector. In technology, our
stock selection drove results, with notable performance from CommScope and
Anixter International, which benefited from strong network infrastructure
spending. Also, four of our technology holdings agreed to be merged or acquired
during the year.
Given their small weight in the Portfolio, automotive and transportation,
utilities and consumer staples made the smallest positive contribution. Stock
selection within the transportation sector was modestly disappointing, as
Celadon Group and Marten Transport declined due to slower US economic growth
prospects.
Strong performance in materials and processing stocks led us to take profits in
this sector, reducing the Fund's overweight position. For most of the fiscal
year the Fund was underweight consumer discretionary stocks. This sector
broadly underperformed during the fiscal year, and we selectively added to
positions near the end of the period. Mergers and acquisitions activity also
resulted in modest changes in sector weightings.
Early in the year, we reduced the Fund's financial services holdings--banks in
particular--as we reinforced our conservative stance in light of the flat yield
curve and aggressive lending standards prevailing at the time. We also reduced
the Fund's REIT holdings, as valuations were no longer compelling and mergers
and acquisitions activity in the sector seemed likely to slow.
OUTLOOK
The mid-August lows for the S&P 500 represented an important inflection point
for the market. Negative emotions clouded the market and stressed investors,
but fundamentals won out, and companies with strong earnings and cash flow
prospects recovered strongly.
Since that time, the Federal Reserve Board has eased, credit markets have
improved, and corporate earnings have remained vigorous, all of which sets the
stage for a respectable period for equities as 2008 unfolds. In the near term,
we expect the stocks of companies that benefit from corporate spending, non-US
earnings streams and strong emerging-market economies to perform better than
those tied to the US economy in general and US consumer spending in particular.
5
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SEPTEMBER 30, 2007
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION(a)(b)
------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: INSTITUTIONAL
17.02% 18.61% 10.20 15.03%
------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: RETAIL(a)
16.74 18.31 9.91 14.84
------------------------------------------------
LOOMIS SAYLES SMALL CAP VALUE: ADMIN(a)
16.41 18.01 9.58 14.48
------------------------------------------------
RUSSELL 2000 VALUE INDEX(c)
6.09 18.70 10.07 14.22
------------------------------------------------
RUSSELL 2000 INDEX(c)
12.34 18.75 7.22 11.46
------------------------------------------------
LIPPER SMALL-CAP CORE FUNDS INDEX(b)(c)
15.02 18.09 8.21 N/A
------------------------------------------------
GROSS EXPENSE RATIO (before reductions and reimbursements)*
Institutional: 0.90% Retail: 1.20% Admin: 1.46%
---------------------------------------------------------------------
NET EXPENSE RATIO (after reductions and reimbursements)*
Institutional: 0.90% Retail: 1.15% Admin: 1.40%
---------------------------------------------------------------------
* As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
INCEPTION TO SEPTEMBER 30, 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
4/30/2007 973,827 573,275 934,189 596,834
5/31/2007 1,021,058 598,020 968,442 621,308
6/30/2007 1,005,538 591,969 945,869 612,189
7/31/2007 948,624 560,947 865,363 570,319
8/31/2007 970,727 563,122 882,702 583,245
9/30/2007 992,083 575,141 886,687 593,257
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 reductions 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 9 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 | $6.7 million
PORTFOLIO REVIEW
The Fund outperformed its Benchmark, the S&P 500 Index, for most of the fiscal
year ended September 30, 2007, although in the closing quarter some of our
selections in healthcare and our allocation to short-term reserves hurt its
performance results for the full year.
Sector allocations were positive and added to the Fund's performance.
Specifically, we overweighted industrials, information technology and materials
(three of the five best-performing sectors) and underweighted financials, the
weakest sector in the market during the period. Our weighting in energy was
roughly the same as the Benchmark, and this was the market's best-performing
sector.
During the 12-month period we increased the Fund's weightings in industrials
and information technology, due to their attractive valuations and strong
earnings growth. We invested in industrial stocks, such as Boeing, Joy Global,
Eaton and Terex. In technology we added Broadridge Financial Solutions and
Dell, as well as building our existing position in Corning. In turn, we reduced
the Fund's exposure to healthcare on earnings concerns, selling Caremark,
Medtronic and Perrigo. In addition, we reduced the Fund's positions in
financial stocks exposed to subprime mortgages by selling Bank of America and
Bear Stearns. In the case of Bear Stearns, the firm's relatively large exposure
to the collaterized debt market, including CDOs (Collaterized Debt
Obligations), prompted our sale in May, 2007. We maintained our position in
Goldman Sachs, which remains one of the Fund's largest individual holdings.
Industrials, energy and information technology had the greatest impact on Fund
performance. In addition to our favorable weightings, the Fund benefited from
good stock selection, as Cisco Systems, ConocoPhillips, ExxonMobil and
GlobalSantaFe each appreciated substantially.
The healthcare, consumer discretionary and telecommunication services sectors
had the smallest impact on the Fund's performance. Healthcare was the only
sector that posted a negative total return. Poor stock selection and a slight
overweight contributed to the overall negative effect. Although our consumer
discretionary and telecommunication services stocks posted healthy gains, our
underweights in these sectors diluted the impact.
OUTLOOK
The mid-August lows for the S&P 500 represented an important inflection point
for the market. Negative emotions clouded the market and stressed investors,
but fundamentals won out, and companies with good earnings and cash flow
prospects recovered strongly.
Since that time, the Federal Reserve Board has eased, credit markets have
improved, and corporate earnings have held up well. Taken together, these facts
should set the stage for a favorable run for stock prices as 2008 unfolds. We
expect the stocks of companies that benefit from corporate capital spending,
non-US earnings streams and strong emerging-market economies to perform better
than those tied to the US economy in general and US consumer spending in
particular.
7
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED September 30, 2007
SINCE SINCE
1 YEAR 5 YEARS 10 YEARS REGISTRATION(a)(b) INCEPTION(a)(b)
------------------------------------------------------------------
LOOMIS SAYLES TAX MANAGED EQUITY: INSTITUTIONAL
15.93% 12.55% 9.14% 9.75% 10.61%
------------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS(c)
15.62 12.29 6.16 6.91 8.05
------------------------------------------------------------------
RETURN AFTER TAXES ON DISTRIBUTIONS AND SALE OF FUND SHARES(c)
10.33 10.85 6.18 6.84 7.85
------------------------------------------------------------------
S&P 500 INDEX(c)
16.44 15.45 6.57 8.13 10.16
------------------------------------------------------------------
LIPPER LARGE-CAP CORE FUNDS INDEX(c)
16.34 13.56 5.69 7.23 8.88
------------------------------------------------------------------
GROSS EXPENSE RATIO (before reductions and reimbursements)*
Institutional: 1.64%
------------------------------------------------------------------
NET EXPENSE RATIO (after reductions and reimbursements)*
Institutional: 0.65%
------------------------------------------------------------------
* As stated in the most recent prospectus
CUMULATIVE PERFORMANCE
REGISTRATION TO SEPTEMBER 30, 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
4/30/2007 63,954 55,079 50,294
5/31/2007 65,744 57,001 52,008
6/30/2007 65,455 56,054 51,378
7/31/2007 63,492 54,316 49,932
8/31/2007 64,012 55,130 50,504
9/30/2007 67,590 57,192 52,330
INCEPTION TO SEPTEMBER 30, 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
4/30/2007 79,358 76,887 66,657
5/31/2007 81,581 79,570 68,929
6/30/2007 81,222 78,248 68,094
7/31/2007 78,785 75,822 66,177
8/31/2007 79,431 76,958 66,936
9/30/2007 83,871 79,836 69,356
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 reductions 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
9 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
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.
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 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, 2007 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.
9
The first line in the table of each Fund shows the actual amount of Fund
expenses you would have paid on a $1,000 investment in the Fund from April 1,
2007 through September 30, 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 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,190.40 $5.49
Hypothetical (5% return before expenses) $1,000.00 $1,020.05 $5.06
Retail Class
- ------------
Actual $1,000.00 $1,189.20 $6.86
Hypothetical (5% return before expenses) $1,000.00 $1,018.80 $6.33
*Expenses are equal to the Fund's annualized expense ratio of 1.00% and 1.25%
for the Institutional and Retail Class, respectively, multiplied by the
average account value over the period, multiplied by 183/365 (to reflect the
half-year period).
LOOMIS SAYLES SMALL CAP GROWTH FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,173.80 $5.45
Hypothetical (5% return before expenses) $1,000.00 $1,020.05 $5.06
Retail Class
- ------------
Actual $1,000.00 $1,173.10 $6.81
Hypothetical (5% return before expenses) $1,000.00 $1,018.80 $6.33
*Expenses are equal to the Fund's annualized expense ratio of 1.00% and 1.25%
for the Institutional and Retail Class, respectively, multiplied by the
average account value over the period, multiplied by 183/365 (to reflect the
half-year period).
LOOMIS SAYLES SMALL CAP VALUE FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,040.90 $4.66
Hypothetical (5% return before expenses) $1,000.00 $1,020.51 $4.61
Retail Class
- ------------
Actual $1,000.00 $1,039.70 $5.88
Hypothetical (5% return before expenses) $1,000.00 $1,019.30 $5.82
Admin Class
- -----------
Actual $1,000.00 $1,038.40 $7.15
Hypothetical (5% return before expenses) $1,000.00 $1,018.05 $7.08
*Expenses are equal to the Fund's annualized expense ratio of 0.91%, 1.15% and
1.40% for the Institutional, Retail and Admin Class, respectively, multiplied
by the average account value over the period, multiplied by 183/365 (to
reflect the half-year period).
10
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
Beginning Ending Expenses Paid
Account Value Account Value During Period*
Institutional Class 4/1/07 9/30/07 4/1/07 - 9/30/07
- ------------------- ------------- ------------- ----------------
Actual $1,000.00 $1,089.30 $3.40
Hypothetical (5% return before expenses) $1,000.00 $1,021.81 $3.29
*Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied by the average account value over the period,
multiplied by 183/365 (to reflect the half-year period).
11
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENTS
The Board of Trustees, including the Independent Trustees, considers matters
bearing on each Fund's advisory agreement (collectively, the "Agreements") at
most of its meetings throughout the year. Once a year, usually in the spring,
the Contract Review and Governance Committee of the Board meets to review the
Agreements to determine whether to recommend that the full Board approve the
continuation of the Agreements, typically for an additional one-year period.
After the Committee has made its recommendation, the full Board, including the
Independent Trustees, determines whether to approve the continuation of the
Agreements.
In connection with these meetings, the Trustees receive materials that the
Funds' investment adviser believes to be reasonably necessary for the Trustees
to evaluate the Agreements. These materials generally include, among other
items, (i) information on the investment performance of the Funds and the
performance of peer groups of funds and the Funds' performance benchmarks, (ii)
information on the Funds' advisory fees, and other expenses, including
information comparing the Funds' expenses to those of peer groups of funds and
information about any applicable expense caps and fee "breakpoints," (iii)
sales and redemption data in respect of the Funds, (iv) information about the
profitability of the Agreements to the Funds' adviser (the "Adviser"), and (v)
information obtained through the completion of a questionnaire by the Adviser
(the Trustees are consulted as to the information requested through that
questionnaire). The Board of Trustees, including the Independent Trustees, also
consider other matters such as (i) the Adviser's financial results and
financial condition, (ii) each Fund's investment objective and strategies and
the size, education and experience of the Adviser's respective investment
staffs and their use of technology, external research and trading cost
measurement tools, (iii) arrangements in respect of the distribution of the
Funds' shares, (iv) the procedures employed to determine the value of the
Funds' assets, (v) the allocation of the Funds' brokerage, if any, including
allocations to brokers affiliated with the Adviser and the use of "soft"
commission dollars to pay Fund expenses and to pay for research and other
similar services, (vii) the resources devoted to, and the record of compliance
with, the Funds' investment policies and restrictions, policies on personal
securities transactions and other compliance policies, and (viii) the general
economic outlook with particular emphasis on the mutual fund industry.
Throughout the process, the Trustees are afforded the opportunity to ask
questions of and request additional materials from the Adviser.
In addition to the materials requested by the Trustees in connection with the
annual consideration of the continuation of the Agreements, the Trustees
receive materials in advance of each regular quarterly meeting of the Board of
Trustees that provide detailed information about each Fund's investment
performance and the fees charged to the Funds for advisory and other services.
This information generally includes, among other things, an internal
performance rating for each Fund based on agreed-upon criteria, graphs showing
performance and fee differentials against each Fund's peer group, performance
ratings provided by a third-party, total return information for various
periods, and third-party performance rankings for various periods comparing a
Fund against its peer group. The portfolio management team for each Fund makes
periodic presentations to the Contract Review and Governance Committee and/or
the full Board of Trustees, and Funds identified as presenting possible
performance concerns may be subject to more frequent board presentations and
reviews. In addition each quarter the Trustees are provided with detailed
statistical information about each Fund's portfolio.
The Board of Trustees most recently approved the continuation of the Agreements
at their meeting held in June, 2007. In considering whether to approve the
continuation of the Agreements, the Board of Trustees, including the
Independent Trustees, did not identify any single factor as determinative.
Matters considered by the Trustees, including the Independent Trustees, in
connection with their approval of the Agreements included the following:
The nature, extent and quality of the services provided to the Funds under the
Agreements. The Trustees considered the nature, extent and quality of the
services provided by the Adviser and its affiliates to the Funds and the
resources dedicated to the Funds by the Adviser and its affiliates, including
recent or planned investments by certain of the Adviser in additional personnel
or other resources. They also took note of the competitive market for talented
personnel, in particular, for personnel who have contributed to the generation
of strong investment performance. They considered the need for the Adviser to
offer competitive compensation in order to attract and retain capable
personnel. They also considered the administrative services provided by Adviser
and its affiliates to the Funds.
For each Fund, the Trustees also considered the benefits to shareholders of
investing in a mutual fund that is part of a family of funds offering a variety
of investment disciplines and providing for a variety of fund and shareholder
services.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
nature, extent and quality of services provided supported the renewal of the
Agreements.
Investment performance of the Funds and the Adviser. As noted above, the
Trustees received information about the performance of the Funds over various
time periods, including information which compared the performance of the Funds
to the performance of peer groups of funds and the Funds' respective
performance benchmarks. In addition, the Trustees also reviewed data prepared
by an independent third party which analyzed the performance of the Funds using
a variety of performance metrics, including metrics which also measured the
performance of the Funds on a risk adjusted basis.
With respect to each Fund, the Board concluded that the Fund's performance or
other relevant factors supported the renewal of the Agreement relating to that
Fund. In the case of each Fund that had performance that lagged that of a
relevant peer group for certain (although not necessarily all) periods, the
Board concluded that other factors relevant to performance supported renewal of
the Funds'
12
Agreements. These factors varied from Fund to Fund, but included one or more of
the following: (1) that the Fund's performance, although lagging in certain
recent periods, was strong over the longer term; (2) that the underperformance
was attributable, to a significant extent, to investment decisions by the
Fund's Adviser that were reasonable and consistent with the Fund's investment
objective and policies or (3) that the Fund's Adviser had taken or is taking
steps designed to help improve the Fund's performance.
The Trustees also considered the Adviser's performance and reputation
generally, the Funds' performance as a fund family generally, and the
historical responsiveness of the Adviser to Trustee concerns about performance
and the willingness of the Adviser to take steps intended to improve
performance.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
performance of the Funds and the Adviser supported the renewal of the
Agreements.
The costs of the services to be provided and profits to be realized by the
Adviser and its affiliates from their respective relationships with the Funds.
The Trustees considered the fees charged to the Funds for advisory services as
well as the total expense levels of the Funds. This information included
comparisons (provided both by management and also by an independent third
party) of the Funds' advisory fees and total expense levels to those of their
peer groups and information about the advisory fees charged by the Adviser to
comparable accounts. In considering the fees charged to comparable accounts,
the Trustees considered, among other things, management's representations about
the differences between managing mutual funds as compared to other types of
accounts, including the additional resources required to effectively manage
mutual fund assets. In evaluating each Fund's advisory fees, the Trustees also
took into account the demands, complexity and quality of the investment
management of such Fund. The Trustees considered that over the past several
years, management had made recommendations regarding the institution of
advisory fee reductions and expense caps. They noted that all of the Loomis
Sayles Funds in this report have expense caps in place, and they considered the
amount of expenses reduced or reimbursed by the Adviser under these caps.
The Trustees also considered the compensation directly or indirectly received
by the Adviser and its affiliates from their relationships with the Funds. The
Trustees reviewed information provided by management as to the profitability of
the Adviser and its affiliates' relationships with the Funds, and information
about the allocation of expenses used to calculate profitability. They also
reviewed information provided by management about the effect of distribution
costs and Fund growth on Adviser profitability, including information regarding
resources spent on distribution activities and the increase in net sales for
the family of funds. When reviewing profitability, the Trustees also considered
information about court cases in which adviser profitability was an issue, the
performance of the relevant Funds, the expense levels of the Funds, and whether
the Adviser had implemented breakpoints and/or expense caps with respect to
such Funds.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding each of the Agreements, that the
advisory fees charged to each of the Funds were fair and reasonable, and that
the costs of these services generally and the related profitability of the
Adviser and their affiliates in respect of their relationships with the Funds
supported the renewal of the Agreements.
Economies of Scale. The Trustees considered the existence of any economies of
scale in the provision of services by the Adviser and whether those economies
are shared with the Funds through breakpoints in their investment advisory fees
or other means, such as expense reductions. The Trustees noted that each of the
Funds was subject to an expense waiver or cap. In considering these issues, the
Trustees also took note of the costs of the services provided (both on an
absolute and a relative basis) and the profitability to the Adviser and its
affiliates of their relationships with the Funds, as discussed above.
After reviewing these and related factors, the Trustees considered, within the
context of their overall conclusions regarding each of the Agreements, that the
extent to which economies of scale were shared with the Funds supported the
renewal of the Agreements.
The Trustees also considered other factors, which included but were not limited
to the following:
.. whether each Fund has operated in accordance with its investment objective
and the Fund's record of compliance with its investment restrictions, and
the compliance programs of the Funds and the Adviser. They also considered
the compliance-related resources the Adviser and its affiliates were
providing to the Funds.
.. the nature, quality, cost and extent of administrative and shareholder
services performed by the Adviser and its affiliates, both under the
Agreements and under separate agreements covering administrative services.
.. so-called "fallout benefits" to the Adviser, such as the engagement of
affiliates of the Adviser to provide distribution, administrative and
brokerage services to the Funds, and the benefits of research made available
to the Adviser by reason of brokerage commissions generated by the Funds'
securities transactions. The Trustees considered the possible conflicts of
interest associated with these fallout and other benefits, and the
reporting, disclosure and other processes in place to disclose and monitor
such possible conflicts of interest
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees,
concluded that each of the existing advisory agreements should be continued
through June 30, 2008.
13
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES MID CAP GROWTH FUND
SHARES VALUE (+)
- ---------------------------------------------------------------------------
COMMON STOCKS - 96.8% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 4.8%
BE Aerospace, Inc.(b)(c) 24,802 $1,030,027
Precision Castparts Corp.(b) 10,760 1,592,265
----------
2,622,292
----------
BIOTECHNOLOGY - 2.8%
Amylin Pharmaceuticals, Inc.(b)(c) 12,840 642,000
Celgene Corp.(b)(c) 12,395 883,888
----------
1,525,888
----------
CAPITAL MARKETS - 1.9%
BlackRock, Inc.(b) 5,903 1,023,639
----------
CHEMICALS - 4.8%
CF Industries Holdings, Inc. 14,808 1,124,075
Mosaic Co. (The)(b)(c) 28,531 1,526,979
----------
2,651,054
----------
COMMERCIAL SERVICES & SUPPLIES - 3.2%
Stericycle, Inc.(b)(c) 30,584 1,748,181
----------
COMMUNICATIONS EQUIPMENT - 4.7%
Ciena Corp.(c) 20,175 768,264
Juniper Networks, Inc.(b)(c) 28,410 1,040,090
Riverbed Technology, Inc.(b)(c) 19,051 769,470
----------
2,577,824
----------
CONSTRUCTION & ENGINEERING - 2.9%
Fluor Corp.(b) 5,665 815,647
Foster Wheeler Ltd.(c) 5,990 786,367
----------
1,602,014
----------
DIVERSIFIED CONSUMER SERVICES - 1.4%
New Oriental Education & Technology Group, Inc., ADR(c) 11,449 762,045
----------
DIVERSIFIED FINANCIAL SERVICES - 4.8%
IntercontinentalExchange, Inc.(b)(c) 10,970 1,666,343
Nymex Holdings, Inc.(b) 7,441 968,669
----------
2,635,012
----------
ELECTRICAL EQUIPMENT - 5.1%
First Solar, Inc.(b)(c) 7,571 891,410
Roper Industries, Inc.(b) 16,888 1,106,164
SunPower Corp., Class A(b)(c) 9,538 789,937
----------
2,787,511
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.4%
Mettler-Toledo International, Inc.(c) 13,169 1,343,238
----------
ENERGY EQUIPMENT & SERVICES - 7.6%
Cameron International Corp.(b)(c) 12,758 1,177,436
National-Oilwell Varco, Inc.(b)(c) 11,146 1,610,597
Oceaneering International, Inc.(b)(c) 18,216 1,380,773
----------
4,168,806
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 7.0%
Gen-Probe, Inc.(b)(c) 11,237 748,159
Idexx Laboratories, Inc.(c) 8,757 959,680
Intuitive Surgical, Inc.(c) 6,165 1,417,950
Mindray Medical International Ltd., ADR 16,286 699,484
----------
3,825,273
----------
14
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES MID CAP GROWTH FUND - CONTINUED
SHARES VALUE (+)
- ----------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
HOTELS, RESTAURANTS & LEISURE - 1.7%
Ctrip.com International Ltd., ADR(b) 18,280 $ 946,904
-----------
HOUSEHOLD DURABLES - 2.5%
Garmin Ltd.(b) 11,593 1,384,204
-----------
INDUSTRIAL CONGLOMERATES - 1.5%
McDermott International, Inc.(c) 14,947 808,334
-----------
INTERNET & CATALOG RETAIL - 1.9%
Priceline.com, Inc.(b)(c) 11,555 1,025,506
-----------
INTERNET SOFTWARE & SERVICES - 1.4%
WebMD Health Corp., Class A(b)(c) 14,616 761,494
-----------
LIFE SCIENCE TOOLS & SERVICES - 1.7%
Illumina, Inc.(b)(c) 18,050 936,434
-----------
MACHINERY - 1.7%
AGCO Corp.(b)(c) 18,281 928,126
-----------
MEDIA - 2.7%
Central European Media Enterprises Ltd., Class A(b)(c) 7,407 679,296
Focus Media Holding Ltd., ADR(b)(c) 13,576 787,680
-----------
1,466,976
-----------
OIL, GAS & CONSUMABLE FUELS - 4.0%
Arena Resources, Inc.(b)(c) 8,809 576,990
Range Resources Corp.(b) 20,784 845,077
Southwestern Energy Co.(b)(c) 17,860 747,441
-----------
2,169,508
-----------
PHARMACEUTICALS - 1.7%
Allergan, Inc. 14,409 928,948
-----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 6.4%
Intersil Corp., Class A(b) 24,364 814,489
LDK Solar Co. Ltd., ADR(b)(c) 7,352 506,553
NVIDIA Corp.(c) 38,658 1,400,966
Varian Semiconductor Equipment Associates, Inc.(b) 14,222 761,161
-----------
3,483,169
-----------
SOFTWARE - 2.5%
NAVTEQ(b)(c) 13,240 1,032,323
VMware, Inc., Class A(b)(c) 3,979 338,215
-----------
1,370,538
-----------
SPECIALTY RETAIL - 4.8%
GameStop Corp., Class A(b)(c) 30,313 1,708,138
Guess?, Inc.(b) 18,975 930,344
-----------
2,638,482
-----------
TEXTILES APPAREL & LUXURY GOODS - 1.8%
CROCS, Inc.(b)(c) 14,804 995,569
-----------
WIRELESS TELECOMMUNICATION SERVICES - 7.1%
NII Holdings, Inc.(b)(c) 17,467 1,434,914
Rogers Communications, Inc., Class B 22,350 1,017,595
Vimpel-Communications, ADR 53,994 1,459,998
-----------
3,912,507
-----------
TOTAL COMMON STOCKS
(Identified Cost $40,003,180) 53,029,476
-----------
15
PRINCIPAL AMOUNT VALUE (+)
- -----------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 29.0%
Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/2007 at 3.750% to be repurchased at
$2,089,653 on 10/01/2007 collateralized by $2,085,000 Federal
National Mortgage Association, 6.060% due 6/06/2017 with a value of
$2,134,519, including accrued interest (Note 2g of Notes to Financial
Statements) $ 2,089,000 $ 2,089,000
-------------
SHARES
- -----------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(d) 13,841,374 13,841,374
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $15,930,374) 15,930,374
-------------
TOTAL INVESTMENTS - 125.8%
(Identified Cost $55,933,554)(a) 68,959,850
Other assets less liabilities--(25.8)% (14,163,226)
-------------
TOTAL NET ASSETS - 100.0% $ 54,796,624
-------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information:
At September 30, 2007, the net unrealized appreciation on investments based on a cost
of $55,933,935 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 $ 13,206,686
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (180,771)
-------------
Net unrealized appreciation $ 13,025,915
-------------
(b)All or a portion of this security was on loan to brokers at September 30,
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.
HOLDINGS AT SEPTEMBER 30, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Energy Equipment & Services 7.6%
Wireless Telecommunication Services 7.1
Healthcare Equipment & Supplies 7.0
Semiconductors & Semiconductor Equipment 6.4
Electrical Equipment 5.1
Chemicals 4.8
Specialty Retail 4.8
Diversified Financial Services 4.8
Aerospace & Defense 4.8
Communications Equipment 4.7
Oil, Gas & Consumable Fuels 4.0
Commercial Services & Supplies 3.2
Construction & Engineering 2.9
Biotechnology 2.8
Media 2.7
Household Durables 2.5
Software 2.5
Electronic Equipment & Instruments 2.4
Other, less than 2% each 16.7
See accompanying notes to financial statements.
16
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES SMALL CAP GROWTH FUND
SHARES VALUE (+)
- ------------------------------------------------------------------------------
COMMON STOCKS - 97.0% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 1.9%
American Science & Engineering, Inc.(b) 5,224 $ 327,336
Moog, Inc., Class A(b)(c) 13,932 612,172
----------
939,508
----------
BIOTECHNOLOGY - 4.0%
BioMarin Pharmaceutical, Inc.(b)(c) 15,839 394,391
Indevus Pharmaceuticals, Inc.(b)(c) 44,495 307,460
Metabolix, Inc.(b)(c) 13,748 333,526
Myriad Genetics, Inc.(b)(c) 7,917 412,872
Pharmion Corp.(c) 6,341 292,574
Theravance, Inc.(b)(c) 8,643 225,496
----------
1,966,319
----------
CAPITAL MARKETS - 2.0%
FCStone Group, Inc.(c) 12,285 396,437
GFI Group, Inc.(b)(c) 6,926 596,467
----------
992,904
----------
COMMERCIAL SERVICES & SUPPLIES - 13.5%
Advisory Board Co.(b)(c) 15,320 895,760
DealerTrack Holdings, Inc.(b)(c) 12,475 522,453
FTI Consulting, Inc.(b)(c) 13,819 695,234
Huron Consulting Group, Inc.(b)(c) 7,864 571,084
IHS, Inc., Class A(b)(c) 13,473 761,090
Information Services Group, Inc.(c) 23,911 182,919
Innerworkings, Inc.(b)(c) 30,425 524,223
Interface, Inc., Class A(b) 29,557 533,504
Kenexa Corp.(b)(c) 12,682 390,352
McGrath Rentcorp 15,162 503,985
On Assignment, Inc.(b)(c) 42,216 394,297
Waste Connections, Inc.(b)(c) 20,774 659,782
----------
6,634,683
----------
COMMUNICATIONS EQUIPMENT - 2.6%
Foundry Networks, Inc.(b)(c) 32,855 583,834
Harmonic, Inc.(b)(c) 32,107 340,655
Sonus Networks, Inc.(b)(c) 57,993 353,757
----------
1,278,246
----------
COMPUTERS & PERIPHERALS - 1.0%
Brocade Communications Systems, Inc.(b)(c) 53,996 462,206
----------
DISTRIBUTORS - 1.5%
LKQ Corp.(b)(c) 21,364 743,681
----------
DIVERSIFIED CONSUMER SERVICES - 4.7%
Bright Horizons Family Solutions, Inc.(c) 14,000 599,760
Capella Education Co.(b)(c) 10,454 584,483
DeVry, Inc.(b) 16,635 615,662
New Oriental Education & Technology Group, Inc., ADR(b)(c) 7,397 492,344
----------
2,292,249
----------
DIVERSIFIED FINANCIAL SERVICES - 0.8%
Portfolio Recovery Associates, Inc.(b) 6,946 368,624
----------
17
SHARES VALUE (+)
- ------------------------------------------------------------------
COMMON STOCKS - CONTINUED
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 2.4%
Cbeyond, Inc.(b)(c) 12,161 $ 496,047
Cogent Communications Group, Inc.(c) 13,329 311,099
NTELOS Holdings Corp. 12,974 382,214
----------
1,189,360
----------
ELECTRIC UTILITIES - 1.0%
ITC Holdings Corp.(b) 9,607 476,027
----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.7%
IPG Photonics Corp.(b)(c) 18,224 358,284
----------
ENERGY EQUIPMENT & SERVICES - 3.2%
Exterran Holdings, Inc.(b)(c) 6,862 551,293
T-3 Energy Services, Inc.(c) 17,001 724,923
Tesco Corp.(b)(c) 11,502 312,279
----------
1,588,495
----------
HEALTH CARE TECHNOLOGY - 2.7%
Allscripts Healthcare Solutions, Inc.(b)(c) 14,279 385,961
Phase Forward, Inc.(c) 29,014 580,570
RadNet, Inc.(b)(c) 41,344 362,174
----------
1,328,705
----------
HEALTHCARE EQUIPMENT & SUPPLIES - 8.6%
Conceptus, Inc.(b)(c) 17,204 326,532
Hologic, Inc.(b)(c) 8,486 517,646
Inverness Medical Innovations, Inc.(b)(c) 13,426 742,726
Kyphon, Inc.(b)(c) 6,722 470,540
Masimo Corp.(c) 16,836 432,012
Meridian Bioscience, Inc.(b) 16,903 512,499
NuVasive, Inc.(b)(c) 9,699 348,485
Orthofix International NV(c) 8,380 410,368
PolyMedica Corp. 8,723 458,132
----------
4,218,940
----------
HEALTHCARE PROVIDERS & SERVICES - 4.6%
inVentiv Health, Inc.(b)(c) 19,023 833,588
NovaMed, Inc.(b)(c) 9,547 41,530
Psychiatric Solutions, Inc.(b)(c) 15,530 610,018
Sun Healthcare Group, Inc.(b)(c) 46,155 771,250
----------
2,256,386
----------
HOTELS, RESTAURANTS & LEISURE - 1.4%
Life Time Fitness, Inc.(b)(c) 10,832 664,435
----------
HOUSEHOLD DURABLES - 0.8%
Jarden Corp.(b)(c) 12,732 393,928
----------
INSURANCE - 3.0%
Arch Capital Group Ltd.(b)(c) 7,164 533,073
National Financial Partners Corp.(b) 9,523 504,529
ProAssurance Corp.(b)(c) 7,730 416,415
----------
1,454,017
----------
INTERNET SOFTWARE & SERVICES - 2.9%
Online Resources Corp.(b)(c) 28,003 353,958
VistaPrint Ltd.(b)(c) 15,215 568,584
Vocus, Inc.(b)(c) 17,312 506,203
----------
1,428,745
----------
18
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES SMALL CAP GROWTH FUND - CONTINUED
SHARES VALUE (+)
- -------------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - 0.6%
Syntel, Inc.(b) 7,179 $ 298,503
----------
LEISURE EQUIPMENT & PRODUCTS - 1.1%
Smith & Wesson Holding Corp.(b)(c) 28,666 547,234
----------
LIFE SCIENCES TOOLS AND SERVICES - 0.6%
Exelixis, Inc.(b)(c) 27,935 295,832
----------
MACHINERY - 3.2%
Kadant, Inc.(b)(c) 16,999 475,972
Middleby Corp.(b)(c) 7,300 471,142
RBC Bearings, Inc.(c) 16,038 615,057
----------
1,562,171
----------
MEDIA - 2.9%
Entravision Communications Corp., Class A(b)(c) 40,029 369,067
Knology, Inc.(b)(c) 29,890 500,060
Morningstar, Inc.(b)(c) 8,930 548,302
----------
1,417,429
----------
METALS & MINING - 1.2%
Northwest Pipe Co.(b)(c) 15,916 601,943
----------
OIL, GAS & CONSUMABLE FUELS - 3.7%
Arena Resources, Inc.(b)(c) 5,872 384,616
Carrizo Oil & Gas, Inc.(b)(c) 8,421 377,766
Helix Energy Solutions Group, Inc.(b)(c) 8,061 342,270
Petrohawk Energy Corp.(b)(c) 25,568 419,827
TXCO Resources, Inc.(b)(c) 34,402 308,242
----------
1,832,721
----------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.6%
Jones Lang LaSalle, Inc.(b) 3,024 310,746
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 7.1%
ATMI, Inc.(b)(c) 12,649 376,308
Cavium Network, Inc.(b)(c) 12,605 409,662
Cypress Semiconductor Corp.(c) 21,572 630,118
Monolithic Power Systems, Inc.(c) 19,942 506,527
Netlogic Microsystems, Inc.(b)(c) 17,200 621,092
Tessera Technologies, Inc.(b)(c) 15,630 586,125
Volterra Semiconductor Corp.(b)(c) 28,519 350,213
----------
3,480,045
----------
SOFTWARE - 6.6%
Blackboard, Inc.(b)(c) 12,906 591,611
BladeLogic, Inc.(b)(c) 15,746 403,727
Informatica Corp.(b)(c) 35,170 552,169
Taleo Corp., Class A(b)(c) 21,963 558,080
Tyler Technologies, Inc.(b)(c) 34,453 459,948
Ultimate Software Group, Inc.(b)(c) 18,481 644,987
----------
3,210,522
----------
SPECIALTY RETAIL - 1.0%
Dick's Sporting Goods, Inc.(b)(c) 6,871 461,388
----------
19
SHARES VALUE (+)
- -------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
TEXTILES APPAREL & LUXURY GOODS - 2.7%
Movado Group, Inc.(b) 14,467 $ 461,787
Quiksilver, Inc.(b)(c) 23,968 342,742
Volcom, Inc.(b)(c) 11,780 500,886
-------------
1,305,415
-------------
TRADING COMPANIES & DISTRIBUTORS - 1.0%
Aircastle Ltd.(b) 15,087 504,207
-------------
WIRELESS TELECOMMUNICATION SERVICES - 1.4%
SBA Communications Corp., Class A(b)(c) 18,763 661,959
-------------
TOTAL COMMON STOCKS
(Identified Cost $39,743,843) 47,525,857
-------------
PRINCIPAL AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 33.0%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/28/07 at 3.750% to be
repurchased at $3,603,126 on 10/01/07 collateralized by
$3,590,000 Federal National Mortgage Association, 6.060%
due 6/06/17 with a value of $3,675,263 including accrued
interest (Note 2g of Notes to Financial Statements) $ 3,602,000 3,602,000
-------------
SHARES
- -------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(d) 12,566,782 12,566,782
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $16,168,782) 16,168,782
-------------
TOTAL INVESTMENTS - 130.0%
(Identified Cost $55,912,625)(a) $ 63,694,639
Other assets less liabilities--(30.0)% (14,682,445)
-------------
TOTAL NET ASSETS - 100.0% $ 49,012,194
-------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information: At September 30, 2007, the net unrealized appreciation on investments based on a cost
of $55,932,068 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 $ 8,099,353
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (336,782)
-------------
Net unrealized appreciation $ 7,762,571
-------------
(b)All or a portion of this security was on loan to brokers at September 30,
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.
20
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES SMALL CAP GROWTH FUND - CONTINUED
HOLDING AT SEPTEMBER 30, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Commercial Services & Supplies 13.5%
Healthcare Equipment & Supplies 8.6
Semiconductors & Semiconductor Equipment 7.1
Software 6.6
Diversified Consumer Services 4.7
Healthcare Providers & Services 4.6
Biotechnology 4.0
Oil, Gas & Consumable Fuels 3.7
Energy Equipment & Services 3.2
Machinery 3.2
Insurance 3.0
Internet Software & Services 2.9
Media 2.9
Health Care Technology 2.7
Textiles Apparel & Luxury Goods 2.7
Communications Equipment 2.6
Diversified Telecommunications Services 2.4
Capital Markets 2.0
Other, less than 2% each 16.6
See accompanying notes to financial statements.
21
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES SMALL CAP VALUE FUND
SHARES VALUE (+)
- ---------------------------------------------------------------
COMMON STOCKS - 92.5% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 3.2%
AAR Corp.(b)(c) 273,301 $ 8,291,952
Argon ST, Inc.(b)(c) 106,969 2,117,986
Moog, Inc., Class A(b)(c) 250,546 11,008,991
Teledyne Technologies, Inc.(c) 237,458 12,677,883
-----------
34,096,812
-----------
AUTO COMPONENTS - 0.6%
Gentex Corp. 293,044 6,282,863
-----------
AUTOMOBILES - 0.3%
Winnebago Industries, Inc.(b) 117,687 2,810,366
-----------
BUILDING PRODUCTS - 0.8%
Armstrong World Industries, Inc.(c) 202,079 8,202,387
-----------
CAPITAL MARKETS - 0.9%
JMP Group, Inc.(b) 349,813 3,281,246
Stifel Financial Corp.(b)(c) 105,904 6,125,487
-----------
9,406,733
-----------
CHEMICALS - 2.5%
Cytec Industries, Inc. 142,011 9,712,132
FMC Corp. 140,832 7,326,081
Minerals Technologies, Inc.(b) 85,073 5,699,891
Scotts Miracle-Gro Co., Class A 99,484 4,252,941
-----------
26,991,045
-----------
COMMERCIAL BANKS - 7.2%
CVB Financial Corp.(b) 325,846 3,812,398
East West Bancorp, Inc.(b) 196,995 7,083,940
First Community Bancorp(b) 126,481 6,919,776
First Midwest Bancorp, Inc.(b) 189,069 6,458,597
First State Bancorporation(b) 405,914 7,972,151
Hancock Holding Co.(b) 135,124 5,415,770
IBERIABANK Corp.(b) 149,863 7,890,287
Pennsylvania Commerce Bancorp, Inc.(b)(c) 103,495 3,260,092
Prosperity Bancshares, Inc.(b) 220,059 7,297,156
Signature Bank(b)(c) 238,646 8,407,499
Sterling Bancshares, Inc.(b) 709,709 8,097,780
United Community Banks, Inc.(b) 199,904 4,901,646
-----------
77,517,092
-----------
COMMERCIAL SERVICES & SUPPLIES - 4.4%
American Ecology Corp.(b) 211,811 4,488,275
Angelica Corp. 15,086 297,345
McGrath Rentcorp(b) 328,737 10,927,218
Rollins, Inc.(b) 539,089 14,388,285
Standard Parking Corp.(c) 236,434 9,407,709
Waste Connections, Inc.(c) 257,791 8,187,442
-----------
47,696,274
-----------
COMMUNICATIONS EQUIPMENT - 2.9%
ADTRAN, Inc.(b) 126,838 2,921,079
Anaren, Inc.(b)(c) 359,272 5,065,735
CommScope, Inc.(b)(c) 136,749 6,870,270
22
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
COMMUNICATIONS EQUIPMENT - CONTINUED
Harris Stratex Networks, Inc., Class A(b)(c) 393,146 $ 6,868,261
Sirenza Microdevices, Inc.(b)(c) 554,164 9,581,495
-----------
31,306,840
-----------
COMPUTERS & PERIPHERALS - 0.9%
Electronics for Imaging, Inc.(c) 270,458 7,264,502
Imation Corp.(b) 80,666 1,978,737
-----------
9,243,239
-----------
CONSTRUCTION & ENGINEERING - 0.4%
Michael Baker Corp.(c) 87,666 4,296,511
-----------
CONSTRUCTION MATERIALS - 0.6%
Texas Industries, Inc.(b) 82,115 6,446,027
-----------
CONSUMER FINANCE - 2.6%
Advanta Corp., Class B 444,870 12,198,335
Dollar Financial Corp.(b)(c) 302,094 8,618,742
First Cash Financial Services, Inc.(b)(c) 327,775 7,676,491
-----------
28,493,568
-----------
CONTAINERS & PACKAGING - 1.0%
Greif, Inc. 84,101 5,103,249
Rock-Tenn Co., Class A 188,006 5,433,373
-----------
10,536,622
-----------
DIVERSIFIED CONSUMER SERVICES - 0.6%
INVESTools, Inc.(b)(c) 412,322 4,984,973
Jackson Hewitt Tax Service, Inc. 49,042 1,371,214
-----------
6,356,187
-----------
DIVERSIFIED FINANCIAL SERVICES - 0.7%
Genesis Lease Ltd., ADR 304,637 7,579,369
-----------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 0.4%
Iowa Telecommunications Services, Inc.(b) 73,868 1,466,280
SureWest Communications(b) 130,882 3,273,359
-----------
4,739,639
-----------
ELECTRIC UTILITIES - 1.6%
ALLETE, Inc.(b) 152,398 6,821,334
ITC Holdings Corp. 120,353 5,963,491
Portland General Electric Co. 158,641 4,410,220
-----------
17,195,045
-----------
ELECTRICAL EQUIPMENT - 3.7%
Acuity Brands, Inc. 92,567 4,672,782
General Cable Corp.(b)(c) 193,358 12,978,189
Hubbell, Inc., Class B 147,971 8,452,104
II-VI, Inc.(b)(c) 272,260 9,401,138
Lamson & Sessions Co. (The)(c) 153,471 4,137,578
-----------
39,641,791
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 4.4%
Agilysys, Inc. 304,799 5,151,103
Anixter International, Inc.(b)(c) 100,328 8,272,044
Excel Technology, Inc.(c) 184,297 4,598,210
Ingram Micro, Inc.(c) 276,810 5,428,244
KEMET Corp.(b)(c) 726,426 5,339,231
23
SHARES VALUE (+)
- --------------------------------------------------------------------
COMMON STOCKS - CONTINUED
ELECTRONIC EQUIPMENT & INSTRUMENTS - CONTINUED
Littelfuse, Inc.(c) 307,383 $10,970,499
Rofin-Sinar Technologies, Inc.(c) 78,926 5,541,395
X-Rite, Inc.(b) 180,601 2,607,878
-----------
47,908,604
-----------
ENERGY EQUIPMENT & SERVICES - 2.6%
Dresser-Rand Group, Inc.(c) 203,198 8,678,586
Exterran Holdings, Inc.(c) 75,638 6,076,757
Oceaneering International, Inc.(c) 123,141 9,334,088
TETRA Technologies, Inc.(b)(c) 181,899 3,845,345
-----------
27,934,776
-----------
FOOD & STAPLES RETAILING - 1.7%
Casey's General Stores, Inc. 182,396 5,052,369
Spartan Stores, Inc.(b) 320,001 7,209,622
Winn-Dixie Stores, Inc.(b)(c) 319,169 5,974,844
-----------
18,236,835
-----------
FOOD PRODUCTS - 1.3%
J & J Snack Foods Corp. 163,413 5,690,041
Ralcorp Holdings, Inc.(c) 142,987 7,981,534
-----------
13,671,575
-----------
GAS UTILITIES - 1.1%
UGI Corp. 450,772 11,711,057
-----------
HEALTHCARE EQUIPMENT & SUPPLIES - 1.3%
Arrow International, Inc.(b) 142,107 6,464,448
West Pharmaceutical Services, Inc.(b) 191,376 7,972,724
-----------
14,437,172
-----------
HEALTHCARE PROVIDERS & SERVICES - 1.3%
CorVel Corp.(c) 204,411 4,725,982
Healthspring, Inc.(b)(c) 179,383 3,497,969
inVentiv Health, Inc.(c) 121,879 5,340,738
-----------
13,564,689
-----------
HOTELS, RESTAURANTS & LEISURE - 2.0%
Ambassadors International, Inc.(b) 163,293 4,005,577
Bob Evans Farms, Inc.(b) 209,530 6,323,616
CEC Entertainment, Inc.(c) 142,955 3,841,201
Cosi, Inc.(b)(c) 694,781 2,403,942
Morton's Restaurant Group, Inc.(b)(c) 132,704 2,109,994
Triarc Cos., Inc., Class B(b) 200,777 2,511,720
-----------
21,196,050
-----------
INDUSTRIAL CONGLOMERATES - 0.2%
Walter Industries, Inc.(b) 77,292 2,079,155
-----------
INSURANCE - 5.8%
American Equity Investment Life Holding Co.(b) 545,081 5,805,113
Delphi Financial Group, Inc. 207,167 8,373,690
Employers Holdings, Inc.(b) 245,063 5,050,748
First Mercury Financial Corp.(c) 226,818 4,878,855
Midland Co. (The)(b) 122,262 6,719,519
National Financial Partners Corp.(b) 253,756 13,443,993
Navigators Group, Inc.(c) 131,447 7,131,000
RLI Corp.(b) 118,611 6,727,616
United Fire & Casualty Co.(b) 103,419 4,042,649
-----------
62,173,183
-----------
24
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
SHARES VALUE (+)
- ----------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - 2.9%
Broadridge Financial Solutions, Inc. 473,810 $ 8,978,700
Perot Systems Corp., Class A(c) 465,528 7,872,078
Wright Express Corp.(c) 407,266 14,861,136
-----------
31,711,914
-----------
LEISURE EQUIPMENT & PRODUCTS - 0.5%
Steinway Musical Instruments, Inc. 163,932 4,855,666
-----------
LIFE SCIENCE TOOLS & SERVICES - 0.6%
PerkinElmer, Inc. 210,609 6,151,889
-----------
MACHINERY - 5.0%
Actuant Corp., Class A(b) 131,265 8,528,287
Barnes Group, Inc.(b) 147,604 4,711,520
CLARCOR, Inc.(b) 95,224 3,257,613
Commercial Vehicle Group, Inc.(b)(c) 206,368 2,647,701
ESCO Technologies, Inc.(b)(c) 79,940 2,657,206
Harsco Corp. 168,908 10,011,177
Mueller Water Products, Inc., Class A(b) 409,755 5,076,865
Nordson Corp. 107,402 5,392,654
RBC Bearings, Inc.(c) 141,429 5,423,802
Wabtec Corp. 176,190 6,600,077
-----------
54,306,902
-----------
MEDIA - 3.6%
Alloy, Inc.(c) 201,559 1,892,639
Interactive Data Corp. 251,125 7,081,725
John Wiley & Sons, Inc., Class A 290,926 13,071,305
Journal Communications, Inc., Class A(b) 313,298 2,970,065
Live Nation, Inc.(b)(c) 371,220 7,888,425
National CineMedia, Inc.(b) 128,596 2,880,551
PRIMEDIA, Inc.(b) 210,984 2,962,215
-----------
38,746,925
-----------
METALS & MINING - 1.1%
Haynes International, Inc.(b)(c) 36,233 3,093,211
Reliance Steel & Aluminum Co.(b) 156,692 8,859,366
-----------
11,952,577
-----------
MULTI-UTILITIES & UNREGULATED POWER - 0.4%
NorthWestern Corp.(b) 167,516 4,551,410
-----------
MULTILINE RETAIL - 1.3%
Dollar Tree Stores, Inc.(c) 339,013 13,743,587
-----------
OIL, GAS & CONSUMABLE FUELS - 3.5%
ATP Oil & Gas Corp.(b)(c) 98,611 4,637,675
Denbury Resources, Inc.(c) 151,762 6,782,244
Helix Energy Solutions Group, Inc.(b)(c) 285,862 12,137,701
Mariner Energy, Inc.(b)(c) 280,723 5,813,773
Penn Virginia Corp. 195,166 8,583,401
-----------
37,954,794
-----------
PERSONAL PRODUCTS - 1.0%
Alberto-Culver Co. 454,085 11,256,767
-----------
PHARMACEUTICALS - 1.2%
Perrigo Co. 226,301 4,831,526
Sciele Pharma, Inc.(c) 307,730 8,007,135
-----------
12,838,661
-----------
25
SHARES VALUE (+)
- -------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
REAL ESTATE - 3.1%
Corporate Office Properties Trust REIT(b) 181,602 $ 7,560,091
Health Care REIT, Inc.(b) 123,992 5,485,406
Kite Realty Group Trust REIT 382,486 7,190,737
LaSalle Hotel Properties REIT(b) 182,907 7,696,727
Potlatch Corp. REIT 126,676 5,704,220
------------
33,637,181
------------
RETAILERS - 0.4%
Borders Group, Inc. 330,616 4,407,111
------------
ROAD & RAIL - 0.6%
Celadon Group, Inc.(b)(c) 227,587 2,678,699
Genesee & Wyoming, Inc., Class A(b)(c) 149,255 4,304,514
------------
6,983,213
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.2%
Cohu, Inc.(b) 227,949 4,274,044
Diodes, Inc.(b)(c) 183,123 5,878,248
Fairchild Semiconductor International, Inc., Class A(c) 285,240 5,328,283
Pericom Semiconductor Corp.(c) 141,519 1,658,603
Verigy Ltd.(c) 266,400 6,582,744
------------
23,721,922
------------
SOFTWARE - 3.5%
Epicor Software Corp.(b)(c) 473,589 6,521,321
Intervoice, Inc.(c) 488,483 4,586,855
Parametric Technology Corp.(c) 205,972 3,588,032
Progress Software Corp.(c) 231,622 7,018,147
Quest Software, Inc.(b)(c) 322,603 5,535,867
Radiant Systems, Inc.(b)(c) 335,663 5,313,545
Sybase, Inc.(c) 239,014 5,528,394
------------
38,092,161
------------
SPECIALTY RETAIL - 1.8%
Jo-Ann Stores, Inc.(b)(c) 281,729 5,944,482
Sally Beauty Holdings, Inc.(b)(c) 715,737 6,047,978
Sonic Automotive, Inc., Class A(b) 307,175 7,353,769
------------
19,346,229
------------
TEXTILES APPAREL & LUXURY GOODS - 2.1%
Fossil, Inc.(c) 315,059 11,770,604
Hanesbrands, Inc.(c) 374,045 10,495,703
------------
22,266,307
------------
WATER UTILITIES - 0.7%
American States Water Co.(b) 106,044 4,135,716
Middlesex Water Co. 179,689 3,396,122
------------
7,531,838
------------
TOTAL COMMON STOCKS
(Identified Cost $827,940,058) 995,808,560
------------
EXCHANGE TRADED FUND - 1.8%
DIVERSIFIED FINANCIAL SERVICES - 1.8%
iShares Russell 2000 Value Index Fund(b)
(Identified Cost $20,275,540) 253,664 19,456,029
------------
26
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES SMALL CAP VALUE FUND - CONTINUED
PRINCIPAL AMOUNT VALUE (+)
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 30.9%
COMMERCIAL PAPER - 6.0%
State Street Boston Corp., 3.250%, 10/1/2007(d) $ 64,079,000 $ 64,079,000
--------------
SHARES
- ------------------------------------------------------------------------------------------------------------------------------
State Street Securities Lending Quality Trust(e) 268,273,696 268,273,696
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $332,352,696) 332,352,696
--------------
TOTAL INVESTMENTS - 125.2%
(Identified Cost $1,180,568,294)(a) 1,347,617,285
Other assets less liabilities--(25.2)% (271,003,371)
--------------
TOTAL NET ASSETS - 100.0% $1,076,613,914
--------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information: At September 30, 2007, the net unrealized appreciation on investments based on a
cost of $1,180,734,336 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 $ 191,569,8
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (24,686,94
--------------
Net unrealized appreciation $ 166,882,949
--------------
(b)All or a portion of this security was on loan to brokers at September 30,
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
HOLDING AT SEPTEMBER 30, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Commercial Banks 7.2%
Insurance 5.8
Machinery 5.0
Electronic Equipment & Instruments 4.4
Commercial Services & Supplies 4.4
Electrical Equipment 3.7
Media 3.6
Software 3.5
Oil, Gas & Consumable Fuels 3.5
Aerospace & Defense 3.2
Real Estate 3.1
IT Services 2.9
Communications Equipment 2.9
Consumer Finance 2.6
Energy Equipment & Services 2.6
Diversified Financial Services 2.5
Chemicals 2.5
Semiconductors & Semiconductor Equipment 2.2
Textiles Apparel & Luxury Goods 2.1
Hotels, Restaurants & Leisure 2.0
Other, less than 2% each 24.6
See accompanying notes to financial statements.
27
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES TAX-MANAGED EQUITY FUND
SHARES VALUE (+)
- -----------------------------------------------------------------
COMMON STOCKS - 96.7% OF TOTAL NET ASSETS
AEROSPACE & DEFENSE - 6.4%
Boeing Co. 1,925 $202,106
United Technologies Corp. 2,813 226,390
---------
428,496
---------
BEVERAGES - 2.0%
PepsiCo, Inc. 1,780 130,403
---------
CAPITAL MARKETS - 8.0%
Franklin Resources, Inc.(b) 1,334 170,085
Goldman Sachs Group, Inc. 1,100 238,414
State Street Corp. 1,850 126,096
---------
534,595
---------
CHEMICALS - 4.3%
Ecolab, Inc.(b) 3,226 152,266
Praxair, Inc. 1,630 136,529
---------
288,795
---------
COMMERCIAL BANKS - 1.1%
Zions Bancorporation(b) 1,081 74,232
---------
COMMUNICATIONS EQUIPMENT - 10.3%
Cisco Systems, Inc.(c) 6,623 219,288
Corning, Inc.(b)(c) 6,155 151,721
Harris Corp. 2,165 125,115
Motorola, Inc. 6,400 118,592
QUALCOMM, Inc. 1,702 71,926
---------
686,642
---------
COMPUTERS & PERIPHERALS - 4.8%
Dell, Inc.(b)(c) 3,500 96,600
Hewlett-Packard Co. 4,515 224,802
---------
321,402
---------
DIVERSIFIED FINANCIAL SERVICES - 1.7%
Citigroup, Inc. 2,381 111,121
---------
DIVERSIFIED TELECOMMUNICATIONS SERVICES - 2.8%
AT&T, Inc. 4,351 184,091
---------
ENERGY EQUIPMENT & SERVICES - 2.2%
GlobalSantaFe Corp. 1,927 146,491
---------
HEALTHCARE EQUIPMENT & SUPPLIES - 3.7%
Covidien Ltd.(c) 3,100 128,650
Zimmer Holdings, Inc.(c) 1,481 119,946
---------
248,596
---------
HEALTHCARE PROVIDERS & SERVICES - 2.5%
WellPoint, Inc.(c) 2,119 167,232
---------
HOTELS, RESTAURANTS & LEISURE - 2.2%
Marriott International, Inc., Class A 3,300 143,451
---------
INSURANCE - 6.1%
Aflac, Inc.(b) 2,281 130,108
Allstate Corp.(b) 2,352 134,511
Everest Re Group Ltd.(b) 1,293 142,540
---------
407,159
---------
28
PORTFOLIO OF INVESTMENTS - AS OF SEPTEMBER 30, 2007
LOOMIS SAYLES TAX-MANAGED EQUITY FUND - CONTINUED
SHARES VALUE (+)
- -----------------------------------------------------------------------------------------
COMMON STOCKS - CONTINUED
IT SERVICES - 3.4%
Broadridge Financial Solutions, Inc.(b) 6,800 $ 128,860
Western Union Co.(b) 4,562 95,665
----------
224,525
----------
MACHINERY - 9.9%
Danaher Corp.(b) 2,493 206,196
Dover Corp. 2,524 128,598
Eaton Corp.(b) 1,100 108,944
Joy Global, Inc.(b) 1,900 96,634
Terex Corp.(b)(c) 1,350 120,177
----------
660,549
----------
MEDIA - 2.2%
DIRECTV Group, Inc. (The)(b)(c) 6,165 149,686
----------
MULTILINE RETAIL - 1.1%
Macy's, Inc.(b) 2,263 73,140
----------
OIL, GAS & CONSUMABLE FUELS - 9.5%
ConocoPhillips 2,310 202,749
Devon Energy Corp. 2,488 207,001
ExxonMobil Corp.(b) 2,443 226,124
----------
635,874
----------
PERSONAL PRODUCTS - 1.7%
Alberto-Culver Co.(b) 4,540 112,547
----------
PHARMACEUTICALS - 4.3%
Abbott Laboratories(b) 2,975 159,520
Novartis AG, ADR 2,300 126,408
----------
285,928
----------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 2.3%
Texas Instruments, Inc.(b) 4,155 152,031
----------
SOFTWARE - 2.8%
Microsoft Corp. 6,401 188,574
----------
SPECIALTY RETAIL - 1.4%
Gap, Inc. (The)(b) 5,150 94,966
----------
TOTAL COMMON STOCKS
(Identified Cost $4,911,060) 6,450,526
----------
PRINCIPAL AMOUNT
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 25.3%
Tri-Party Repurchase Agreement with Fixed Income
Clearing Corporation, dated 9/28/07 at 3.750% to be
repurchased at $268,084 on 10/01/07 collateralized by
$270,000 Federal Home Loan Mortgage Corp., 6.625% due
8/28/22 with value of $273,713, including accrued interest
(Note 2g of Notes to Financial Statements) $ 268,000 268,000
----------
29
SHARES VALUE (+)
- ------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - CONTINUED
State Street Securities Lending Quality Trust(d) 1,416,943 $ 1,416,943
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $1,684,943) 1,684,943
------------
TOTAL INVESTMENTS - 122.0%
(Identified Cost $6,596,003)(a) 8,135,469
Other assets less liabilities--(22.0)% (1,465,357)
------------
TOTAL NET ASSETS - 100.0% $ 6,670,112
------------
(+)See Note 2a of Notes to Financial Statements.
(a)Federal Tax Information: At September 30, 2007, the net unrealized appreciation on investments based on a cost
of $6,598,957 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 $ 1,581,865
Aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over value (45,353)
------------
Net unrealized appreciation $ 1,536,512
------------
(b)All or a portion of this security was on loan to brokers at September 30,
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.
HOLDINGS AT SEPTEMBER 30, 2007 AS A PERCENTAGE OF NET ASSETS (UNAUDITED)
Communications Equipment 10.3%
Machinery 9.9
Oil, Gas & Consumable Fuels 9.5
Capital Markets 8.0
Aerospace & Defense 6.4
Insurance 6.1
Computers & Peripherals 4.8
Chemicals 4.3
Pharmaceuticals 4.3
Healthcare Equipment & Supplies 3.7
IT Services 3.4
Software 2.8
Diversified Telecommunications Services 2.8
Healthcare Providers & Services 2.5
Semiconductors & Semiconductor Equipment 2.3
Media 2.2
Energy Equipment & Services 2.2
Hotels, Restaurants & Leisure 2.2
Beverages 2.0
Other, less than 2% each 7.0
See accompanying notes to financial statements.
30
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2007
MID CAP GROWTH SMALL CAP
FUND GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Investments at cost $ 55,933,554 $ 55,912,625
Net unrealized appreciation 13,026,296 7,782,014
--------------- ----------------
Investments at value 68,959,850 63,694,639
Cash 863 922
Receivable for Fund shares sold 248,857 318,852
Receivable for securities sold 426,156 242,728
Dividends and interest receivable 5,796 12,499
Receivable from investment adviser (Note 4) 4,541 2,784
Securities lending income receivable 4,989 4,541
--------------- ----------------
TOTAL ASSETS 69,651,052 64,276,965
--------------- ----------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 13,841,374 12,566,782
Payable for securities purchased 880,502 2,602,305
Payable for Fund shares redeemed 28,016 2,386
Management fees payable (Note 4) 31,578 28,010
Administrative fees payable (Note 4) 2,277 2,020
Deferred Trustees' fees (Note 4) 38,169 35,572
Service and distribution fees payable (Note 4) 818 436
Other accounts payable and accrued expenses 31,694 27,260
--------------- ----------------
TOTAL LIABILITIES 14,854,428 15,264,771
--------------- ----------------
NET ASSETS $ 54,796,624 $ 49,012,194
--------------- ----------------
Net Assets consist of:
Paid-in capital $ 129,929,402 $ 240,092,477
Undistributed (accumulated) net investment income (loss) (38,169) (35,571)
Accumulated net realized gain (loss) on investments and foreign currency
transactions (88,121,014) (198,826,726)
Net unrealized appreciation on investments and foreign currency translations 13,026,405 7,782,014
--------------- ----------------
NET ASSETS $ 54,796,624 $ 49,012,194
--------------- ----------------
NET ASSET VALUE AND OFFERING PRICE
INSTITUTIONAL CLASS
Net assets $ 24,142,724 $ 28,087,779
--------------- ----------------
Shares of beneficial interest 877,540 1,770,040
--------------- ----------------
Net asset value, offering and redemption price per share $ 27.51 $ 15.87
--------------- ----------------
RETAIL CLASS
Net assets $ 30,653,900 $ 20,924,415
--------------- ----------------
Shares of beneficial interest 1,141,886 1,354,569
--------------- ----------------
Net asset value, offering and redemption price per share $ 26.84 $ 15.45
--------------- ----------------
ADMIN CLASS
Net assets $ -- $ --
--------------- ----------------
Shares of beneficial interest -- --
--------------- ----------------
Net asset value, offering and redemption price per share $ -- $ --
--------------- ----------------
Value of securities on loan (Note 2) $ 13,563,407 $ 12,170,425
--------------- ----------------
See accompanying notes to financial statements.
31
SMALL CAP VALUE TAX-MANAGED
FUND EQUITY FUND
----------------------------------
$ 1,180,568,294 $ 6,596,003
167,048,991 1,539,466
----------------------------------
1,347,617,285 8,135,469
508 1,486
2,769,573 --
1,563,740 --
845,066 3,150
96,161 8,378
86,562 372
----------------------------------
1,352,978,895 8,148,855
----------------------------------
268,273,696 1,416,943
6,084,969 --
1,008,979 110
648,431 2,675
46,764 289
112,438 32,950
12,793 --
176,911 25,776
----------------------------------
276,364,981 1,478,743
----------------------------------
$ 1,076,613,914 $ 6,670,112
----------------------------------
$ 815,327,902 $ 8,535,072
334,317 81,300
93,902,704 (3,485,726)
167,048,991 1,539,466
----------------------------------
$ 1,076,613,914 $ 6,670,112
----------------------------------
$ 534,775,505 $ 6,670,112
----------------------------------
18,585,095 569,645
----------------------------------
$ 28.77 $ 11.71
----------------------------------
$ 465,055,220 $ --
----------------------------------
16,308,421 --
----------------------------------
$ 28.52 $ --
----------------------------------
$ 76,783,189 $ --
----------------------------------
2,729,631 --
----------------------------------
$ 28.13 $ --
----------------------------------
$ 259,064,000 $ 1,386,696
----------------------------------
See accompanying notes to financial statements.
32
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2007
MID CAP GROWTH SMALL CAP
FUND GROWTH FUND
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 133,374 $ 67,633
Interest 50,697 52,467
Securities lending income (Note 2) 36,263 21,298
Other income (Note 2) 33,437 13,069
Less net foreign taxes withheld (3,325) --
-------------- --------------
250,446 154,467
-------------- --------------
EXPENSES
Management fees (Note 4) 353,105 213,916
Distribution fees--Retail Class (Note 4) 67,913 12,629
Service and distribution fees--Admin Class (Note 4) -- --
Trustees' fees and expenses (Note 4) 14,435 13,583
Administrative fees (Note 4) 26,121 15,890
Custodian fees and expenses 18,487 18,027
Transfer agent fees and expenses--Institutional Class (Note 4) 10,111 14,322
Transfer agent fees and expenses--Retail Class (Note 4) 35,393 5,273
Transfer agent fees and expenses--Admin Class (Note 4) -- --
Audit and tax services fees 35,877 33,250
Registration fees 35,425 30,351
Shareholder reporting expenses 5,557 785
Legal fees 1,202 713
Miscellaneous expenses 5,523 4,777
-------------- --------------
Total expenses 609,149 363,516
Less fee reduction and/or expense reimbursement (Note 4) (70,620) (65,674)
-------------- --------------
Net expenses 538,529 297,842
-------------- --------------
Net investment income (loss) (288,083) (143,375)
-------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
REALIZED GAIN ON:
Investments--net 7,015,226 3,362,779
Foreign currency transactions--net 20 --
-------------- --------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON:
Investments--net 8,067,150 5,500,407
Foreign currency translations--net 109 --
-------------- --------------
Net realized and unrealized gain on investments and foreign currency transactions 15,082,505 8,863,186
-------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 14,794,422 $ 8,719,811
-------------- --------------
*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 and $51,450 for Small
Cap Value Fund and Tax-Managed Equity Fund, respectively, for which the
source of the dividend has not been determined by the issuer.
See accompanying notes to financial statements.
33
SMALL CAP VALUE TAX-MANAGED
FUND EQUITY FUND
----------------------------------
$ 10,312,981** $ 129,166**
1,757,812 15,996
372,968 1,764
45,497 --
(913) --
----------------------------------
12,488,345 146,926
----------------------------------
7,150,945 33,981
932,610 --
390,830 --
48,325 12,636
528,193 3,784
72,777 15,736
197,673 4,372
507,128 --
164,278 --
38,547 30,883
88,035 24,253
125,629 1,158
24,907 183
32,761 3,790
----------------------------------
10,302,638 130,776
(450,879) (86,601)
----------------------------------
9,851,759 44,175
----------------------------------
2,636,586 102,751
----------------------------------
100,922,002 1,153,272*
-- --
----------------------------------
34,456,656 (241,314)
-- --
----------------------------------
135,378,658 911,958
----------------------------------
$ 138,015,244 $ 1,014,709
----------------------------------
See accompanying notes to financial statements.
34
STATEMENTS OF CHANGES IN NET ASSETS
MID CAP GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
- -------------------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (288,083) $ (302,912)
Net realized gain on investments and foreign currency transactions 7,015,246 5,806,076
Net change in net unrealized appreciation (depreciation) on investments and foreign
currency translations 8,067,259 (3,169,570)
------------------ ------------------
Increase in net assets resulting from operations 14,794,422 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) (4,132,735) (10,159,975)
------------------ ------------------
Total increase (decrease) in net assets 10,661,687 (7,826,381)
NET ASSETS
Beginning of year 44,134,937 51,961,318
------------------ ------------------
End of year $54,796,624 $ 44,134,937
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME/ACCUMULATED NET INVESTMENT LOSS $ (38,169) $ (25,310)
------------------ ------------------
SMALL CAP GROWTH FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment loss $ (143,375) $ (164,347)
Net realized gain on investments 3,362,779 2,479,317
Net change in net unrealized appreciation (depreciation) on investments 5,500,407 (935,346)
------------------ ------------------
Increase in net assets resulting from operations 8,719,811 1,379,624
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
NET INVESTMENT INCOME:
Institutional Class -- --
Retail Class -- --
CAPITAL GAINS:
Institutional Class -- --
Retail Class -- --
------------------ ------------------
TOTAL DISTRIBUTIONS -- --
------------------ ------------------
INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARES TRANSACTIONS (NOTE 8) 16,896,224 2,617,609
------------------ ------------------
REDEMPTION FEES
Institutional Class 346 18,107
Retail Class 186 3,369
------------------ ------------------
Total increase in net assets 25,616,567 4,018,709
NET ASSETS
Beginning of year 23,395,627 19,376,918
------------------ ------------------
End of year $49,012,194 $23,395,627
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME/ACCUMULATED NET INVESTMENT LOSS $ (35,571) $ (23,291)
------------------ ------------------
See accompanying notes to financial statements.
35
STATEMENTS OF CHANGES IN NET ASSETS - CONTINUED
SMALL CAP VALUE FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 2,636,586 $ 2,541,737
Net realized gain on investments 100,922,002 94,104,228
Net change in net unrealized appreciation (depreciation) on investments 34,456,656 (18,494,360)
------------------ ------------------
Increase in net assets resulting from operations 138,015,244 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 (50,563,842) (36,009,634)
Retail Class (32,749,822) (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) 235,053,214 80,692,685
------------------ ------------------
REDEMPTION FEES
Institutional Class 16,563 17,840
Retail Class 13,201 11,357
Admin Class 2,493 2,753
------------------ ------------------
Total increase in net assets 277,842,626 92,208,235
NET ASSETS
Beginning of year 798,771,288 706,563,053
------------------ ------------------
End of year $1,076,613,914 $798,771,288
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 334,317 $ 1,659,056
------------------ ------------------
TAX-MANAGED EQUITY FUND
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------------------------------------
FROM OPERATIONS:
Net investment income $ 102,751 $ 66,073
Net realized gain on investments 1,153,272 210,739
Net change in net unrealized appreciation (depreciation) on investments (241,314) 657,313
------------------ ------------------
Increase in net assets resulting from operations 1,014,709 934,125
------------------ ------------------
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) (3,344,828) (1,034,586)
------------------ ------------------
Total decrease in net assets (2,405,536) (154,626)
NET ASSETS
Beginning of year 9,075,648 9,230,274
------------------ ------------------
End of year $ 6,670,112 $ 9,075,648
------------------ ------------------
UNDISTRIBUTED NET INVESTMENT INCOME $ 81,300 $ 53,966
------------------ ------------------
See accompanying notes to financial statements.
36
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
of the period loss/(c)/ gain (loss) operations income capital gains
- --------------------------------------------------------------------------------------------------
MID CAP GROWTH FUND
INSTITUTIONAL CLASS
9/30/2007 $20.13 $(0.11)/(d)/ $7.49 $7.38 $ -- $--
9/30/2006 19.00 (0.10) 1.23 1.13 -- --
9/30/2005 15.50 (0.10) 3.78 3.68 (0.18) --
9/30/2004 13.69 (0.13) 1.94 1.81 -- --
9/30/2003 10.70 (0.10) 3.09 2.99 -- --
RETAIL CLASS
9/30/2007 $19.69 $(0.16)/(d)/ $7.31 $7.15 $ -- $--
9/30/2006 18.63 (0.15) 1.21 1.06 -- --
9/30/2005 15.20 (0.14) 3.70 3.56 (0.13) --
9/30/2004 13.46 (0.16) 1.90 1.74 -- --
9/30/2003 10.55 (0.13) 3.04 2.91 -- --
(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 reduce/reimburse a portion of the Fund's expenses
during the period. Without this reduction/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) Includes a non-recurring payment of $0.02 per share. See Note 2.
See accompanying notes to financial statements.
37
RATIOS TO AVERAGE NET ASSETS
- -------------- ------------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total end of Total the period Net Gross investment turnover
distributions the period return (%)/(a)/ (000's) expenses (%)/(b)/ expenses (%) loss (%) rate (%)
- --------------------------------------------------------------------------------------------------------
$ -- $27.51 36.7 $24,143 1.00 1.10 (0.47) 194
-- 20.13 6.0 17,467 1.00 1.12 (0.49) 211
(0.18) 19.00 23.9 26,159 1.00 1.21 (0.60) 280
-- 15.50 13.2 25,191 1.00 1.17 (0.84) 284
-- 13.69 27.9 23,866 1.00 1.23 (0.88) 248
$ -- $26.84 36.3 $30,654 1.25 1.43 (0.71) 194
-- 19.69 5.7 26,668 1.25 1.52 (0.72) 211
(0.13) 18.63 23.6 25,802 1.25 1.50 (0.85) 280
-- 15.20 12.9 25,382 1.25 1.42 (1.10) 284
-- 13.46 27.6 32,813 1.25 1.47 (1.13) 248
See accompanying notes to financial statements.
38
FINANCIAL HIGHLIGHTS - CONTINUED
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
of the period (loss)/(c)(d)/ gain (loss) operations income capital gains
- -------------------------------------------------------------------------------------------------------------
SMALL CAP GROWTH FUND
INSTITUTIONAL CLASS
9/30/2007 $12.00 $(0.06)/(f)/ $3.93 $3.87 $ -- $ --
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 -- --
RETAIL CLASS
9/30/2007 $11.71 $(0.09)/(f)/ $3.83 $3.74 $ -- $ --
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 -- --
SMALL CAP VALUE FUND
INSTITUTIONAL CLASS
9/30/2007 $27.69 $ 0.12/(f)(g)/ $4.29 $4.41 $(0.17) $(3.16)
9/30/2006 27.43 0.13 2.70 2.83 (0.15) (2.42)
9/30/2005 25.75 0.13 4.22 4.35 (0.02) (2.65)
9/30/2004 21.34 0.04 4.97 5.01 (0.05) (0.55)
9/30/2003 17.28 0.05 4.01 4.06 -- --
RETAIL CLASS
9/30/2007 $27.46 $ 0.04/(f)(g)/ $4.28 $4.32 $(0.10) $(3.16)
9/30/2006 27.23 0.06 2.67 2.73 (0.08) (2.42)
9/30/2005 25.62 0.06 4.20 4.26 -- (2.65)
9/30/2004 21.25 (0.02) 4.95 4.93 (0.01) (0.55)
9/30/2003 17.25 (0.00) 4.00 4.00 -- --
ADMIN CLASS
9/30/2007 $27.14 $(0.03)/(f)(g)/ $4.22 $4.19 $(0.04) $(3.16)
9/30/2006 26.94 (0.01) 2.65 2.64 (0.02) (2.42)
9/30/2005 25.43 (0.00) 4.16 4.16 -- (2.65)
9/30/2004 21.13 (0.08) 4.93 4.85 -- (0.55)
9/30/2003 17.20 (0.05) 3.98 3.93 -- --
(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 reduce/reimburse a portion of the Fund's expenses
during the period. Without this reduction/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) Includes a non-recurring payment of $0.01 per share and $0.00 per share for
Small Cap Growth Fund and Small Cap Value Fund, respectively. See Note 2.
(g) Includes a non-recurring special dividend of $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
RATIOS TO AVERAGE NET ASSETS
- ---------------- --------------------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total Redemption end of Total the period Net Gross investment turnover
distributions fees/(d)/ the period return (%)/(a)/ (000's) expenses (%)/(b)/ expenses (%) income (loss) (%) rate (%)
- -----------------------------------------------------------------------------------------------------------------------------
$ -- $0.00 $15.87 32.3 $ 28,088 1.00 1.23 (0.47) 83
-- 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
$ -- $0.00 $15.45 31.9 $ 20,924 1.25 1.50 (0.66) 83
-- 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
$(3.33) $0.00 $28.77 17.0 $534,776 0.89 0.89 0.43 57
(2.57) 0.00 27.69 11.2 442,714 0.89/(e)/ 0.89/(e)/ 0.47 62
(2.67) 0.00 27.43 18.0 403,110 0.90 0.93 0.48 59
(0.60) 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
$(3.26) $0.00 $28.52 16.7 $465,055 1.15 1.24 0.15 57
(2.50) 0.00 27.46 10.9 291,690 1.15 1.20 0.21 62
(2.65) 0.00 27.23 17.7 235,948 1.15 1.20 0.24 59
(0.56) 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
$(3.20) $0.00 $28.13 16.4 $ 76,783 1.40 1.56 (0.10) 57
(2.44) 0.00 27.14 10.6 64,367 1.40 1.46 (0.04) 62
(2.65) 0.00 26.94 17.4 67,505 1.40 1.43 (0.01) 59
(0.55) 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
See accompanying notes to financial statements.
40
FINANCIAL HIGHLIGHTS - CONTINUED
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
of the period (loss)/(c)/ gain (loss) operations income capital gains
- ---------------------------------------------------------------------------------------------------------
TAX-MANAGED EQUITY FUND
INSTITUTIONAL CLASS
9/30/2007 $10.18 $0.16/(d)/ $1.45 $1.61 $(0.08) $--
9/30/2006 9.20 0.07 0.97 1.04 (0.06) --
9/30/2005 8.49 0.05 0.69 0.74 (0.03) --
9/30/2004 7.66 0.05 0.97 1.02 (0.19) --
9/30/2003 6.78 0.06 0.85 0.91 (0.03) --
(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 reduce/reimburse a portion of the Fund's expenses
during the period. Without this reduction/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) Includes a non-recurring special dividend of $0.08 per share in which the
source of the dividend has not been determined by the issuer.
See accompanying notes to financial statements.
41
RATIOS TO AVERAGE NET ASSETS
- ---------------- -----------------------------------------------
Net asset Net assets,
value, end of Net Portfolio
Total end of Total the period Net Gross investment turnover
distributions the period return (%)(a) (000's) expenses (%)(b) expenses (%) income (loss) (%) rate (%)
- -------------------------------------------------------------------------------------------------------------
$(0.08) $11.71 15.9 $6,670 0.65 1.92 1.51 45
(0.06) 10.18 11.3 9,076 0.65 1.64 0.71 40
(0.03) 9.20 8.7 9,230 0.65 2.02 0.59 38
(0.19) 8.49 13.4 5,202 0.65 3.39 0.59 27
(0.03) 7.66 13.5 2,490 0.65 1.82 0.81 200
See accompanying notes to financial statements.
42
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2007
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")
Effective 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 and Small Cap Value Fund also offer Retail Class Shares. In
addition, Small Cap Value Fund offers Admin Class Shares.
Most expenses of the Trusts can be directly attributed to a fund. Expenses
which 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 (other
than short term obligations purchased with an original or remaining maturity of
sixty days or less) are generally valued on the basis of evaluated bids
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 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.
43
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 September 30, 2007, there were no open forward currency
contracts.
E. FEDERAL AND FOREIGN INCOME TAXES. The Trust treats each Fund as a separate
entity for federal income tax purposes. Each Fund intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies, and to distribute to its shareholders substantially all of its net
investment income and any net realized capital gains, at least annually.
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 year 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.
Notwithstanding the projected regulatory implementation date of March 31, 2008
for the Funds, Management already implemented FIN 48 and has performed an
analysis of the Funds' tax positions taken or that will be taken on federal and
state tax returns that remain subject to examination (tax years ended
September 30, 2004--2007) in connection with the adoption of FIN 48 and has
concluded that no provision for income tax is
44
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2007
required. Accordingly, there is no impact on the Funds' net assets at
September 30, 2007 or results of operations for the year then ended.
Additionally, Fund Management is not aware of any events that are reasonably
possible to occur in the next twelve months that would result in the amounts of
any unrecognized tax benefits significantly increasing or decreasing for the
Funds.
A Fund may be subject to foreign taxes on income and gains on investments that
are accrued based upon the Fund's understanding of the tax rules and
regulations that exist in the countries in which the Fund invests. Foreign
governments may also impose taxes or other payments on investments with respect
to foreign securities. Such taxes are accrued as applicable.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gain distributions are determined annually in accordance with
federal tax regulations, which may differ from accounting principles generally
accepted in the United States of America. Permanent differences are primarily
due to differing treatments for book and tax purposes of items such as
distributions from REITs, net operating losses and redemption in kind
transactions. 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 years ended
September 30, 2007 and 2006 was as follows:
2007 DISTRIBUTIONS PAID FROM: 2006 DISTRIBUTIONS PAID FROM:
------------------------------------- ------------------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
FUND INCOME CAPITAL GAINS TOTAL INCOME CAPITAL GAINS TOTAL
- ---- ----------- ------------- ----------- ---------- ------------- -----------
Mid Cap Growth Fund $ -- $ -- $ -- $ -- $ -- $ --
Small Cap Growth Fund -- -- -- -- -- --
Small Cap Value Fund 19,298,487 75,959,602 95,258,089 8,314,591 58,353,414 66,668,005
Tax-Managed Equity Fund 75,417 -- 75,417 54,165 -- 54,165
Differences between these amounts and those reported in the Statements of
Changes in Net Assets are primarily attributable to different book and tax
treatment for short-term capital gains.
As of September 30, 2007, the components of distributable earnings on a tax
basis were as follows:
MID CAP SMALL CAP SMALL CAP TAX-MANAGED
GROWTH FUND GROWTH FUND VALUE FUND EQUITY FUND
------------ ------------- ------------ -----------
Undistributed ordinary income $ -- $ -- $ 15,021,803 $ 114,251
Undistributed long-term
capital gains -- -- 79,493,698 --
------------ ------------- ------------ -----------
Total undistributed earnings -- -- 94,515,501 114,251
Capital Loss Carryforward:
Expires September 30, 2010 (66,978,246) (139,524,244) -- (1,693,070)
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 (88,120,634) (198,807,284) -- (3,482,772)
Deferred net capital losses
(post-October 2006) -- -- -- --
Unrealized appreciation
(depreciation) 13,026,024 7,762,571 166,882,949 1,536,512
------------ ------------- ------------ -----------
Total accumulated earnings
(losses) $(75,094,610) $(191,044,713) $261,398,450 $(1,832,009)
------------ ------------- ------------ -----------
Capital loss carryforward
utilized in the current year $ 7,014,819 $ 3,369,487 $ -- $ 496,668
------------ ------------- ------------ -----------
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
45
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 value of securities on loan to borrowers and the value of collateral
held by the Funds with respect to such loans at September 30, 2007 were as
follows:
VALUE OF VALUE OF
SECURITIES ON LOAN COLLATERAL
- - ------------------ ------------
Mid Cap Growth Fund $ 13,563,407 $ 13,841,374
Small Cap Growth Fund 12,170,425 12,566,782
Small Cap Value Fund 259,064,000 268,273,696
Tax-Managed Equity Fund 1,386,696 1,416,943
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. OTHER INCOME. As a result of an SEC proceeding against an unaffiliated hedge
fund, its adviser and other individuals, the Loomis Sayles Mid Cap Growth Fund,
Loomis Sayles Small Cap Growth Fund and Loomis Sayles Small Cap Value Fund
received settlement payments from a fund created to compensate those parties
that may have been harmed by the actions identified in the settlement
proceedings. These payments have been included in Other Income in the Statement
of Operations.
K. NEW ACCOUNTING PRONOUNCEMENT. In September, 2006, Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 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 FAS 157 will have on the Funds'
financial statements.
3. PURCHASES AND SALES OF SECURITIES. For the year ended September 30, 2007,
purchases and sales of securities (excluding short-term investments) were as
follows:
FUND PURCHASES SALES
- ---- ------------ ------------
Mid Cap Growth Fund $ 89,128,337 $ 93,448,690
Small Cap Growth Fund 34,252,553 23,330,360
Small Cap Value Fund 614,153,090 514,061,749
Tax-Managed Equity Fund/(a)/ 2,907,363 6,080,535
(a)Tax-Managed Equity Fund had a redemption-in-kind on October 20, 2006. The value of the securities is included in
the sales.
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
- ---- -------------
Mid Cap Growth Fund 0.75%
Small Cap Growth Fund 0.75%
Small Cap Value Fund 0.75%
Tax-Managed Equity Fund 0.50%
46
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2007
Loomis Sayles has given binding undertakings to the Funds to reduce management
fees and/or reimburse certain expenses associated with the 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 year ended September 30, 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% -- --
For the year ended September 30, 2007, the management fees and reduction of
management fees for each Fund were as follows:
PERCENTAGE OF
GROSS REDUCTION OF NET AVERAGE DAILY NET ASSETS
- - MANAGEMENT MANAGEMENT MANAGEMENT ------------------------
FUND FEE FEE FEE GROSS NET
- ---- ---------- ------------ ---------- ----- -----
Mid Cap Growth Fund $ 353,105 $ 25,246 $ 327,859 0.75% 0.70%
Small Cap Growth Fund 213,916 47,316 166,600 0.75% 0.58%
Small Cap Value Fund 7,150,945 -- 7,150,945 0.75% 0.75%
Tax-Managed Equity Fund 33,981 -- 33,981 0.50% 0.50%
For the year ended September 30, 2007, in addition to the reduction of
management fees, expenses have been reimbursed as follows:
EXPENSES
FUND REIMBURSED
- ---- ----------
Mid Cap Growth Fund $ 45,374
Small Cap Growth Fund 18,358
Small Cap Value Fund 450,879
Tax-Managed Equity Fund 86,601
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 the
expenses of a Class fall below a Class' expense limits, provided, however, that
a Class is not obligated to pay such reduced fees/expenses more than one year
after the end of the fiscal year in which the fee/expense was reduced. The
amounts subject to possible reimbursement under the expense limitation
agreements at September 30, 2007 were as follows:
EXPENSES SUBJECT TO POSSIBLE REIMBURSEMENT UNTIL
SEPTEMBER 30, 2008
-----------------------------------------------------
FUND INSTITUTIONAL CLASS RETAIL CLASS ADMIN CLASS TOTAL
- ---- ------------------- ------------ ----------- --------
Mid Cap Growth Fund $ 20,701 $ 49,919 $ -- $ 70,620
Small Cap Growth Fund 53,263 12,411 -- 65,674
Small Cap Value Fund -- 325,613 125,266 450,879
Tax-Managed Equity Fund 86,601 -- -- 86,601
Loomis Sayles reimbursed the Mid Cap Growth Fund $12,483 for losses incurred in
connection with a trading error.
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trust. Loomis Sayles' general partner is indirectly owned by Natixis
Global Asset Management, L.P. ("Natixis US") (formerly IXIS Asset Management
U.S. Group, L.P.), which is part of Natixis Global Asset Management (formerly
IXIS Asset Management), an international asset management group based in Paris,
France.
B. ADMINISTRATIVE FEES. Natixis Asset Management Advisors, L.P. ("Natixis
Advisors") (formerly IXIS Asset Management Advisors, L.P.) provides certain
administrative services for the Funds and has subcontracted with State Street
Bank to serve as sub-administrator. Natixis Advisors is an indirect
wholly-owned subsidiary of Natixis US. Pursuant to an agreement among Natixis
Funds Trust I (formerly IXIS Advisors Funds Trust I), Natixis Funds Trust II
(formerly IXIS Advisors Funds Trust II), Natixis Funds Trust III (formerly IXIS
Advisors Funds Trust III), Natixis Funds Trust IV (formerly IXIS Advisors Funds
Trust IV), Natixis
47
Cash Management Trust (formerly IXIS Advisor Cash Management Trust), ("Natixis
Funds Trusts"), Loomis Sayles Funds I, Loomis Sayles Funds II ("Loomis Sayles
Funds Trusts") and Natixis Advisors (the "Administrative Service Agreement"),
each Fund pays Natixis 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 Natixis Funds Trusts and Loomis Sayles Funds Trusts, 0.0625% of
the next $5 billion, 0.0500% of the next $20 billion and 0.045% of such assets
in excess of $30 billion, subject to an annual aggregate minimum fee for the
Natixis Funds Trusts and Loomis Sayles Funds Trusts of $5 million, which is
reevaluated on an annual basis. Effective September 17, 2007, pursuant to an
amendment to the Administrative Service Agreements the Hansberger International
Series was added to the Agreement and pays Natixis Advisors monthly its pro
rata fees equal to its prorated portion of the above mentioned fees.
New funds are subject to an annual fee of $50,000 plus $12,500 per class and an
additional $50,000 if managed by multiple subadvisors in their first calendar
year of operations.
Prior to July 1, 2007, each Fund paid Natixis 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 Natixis 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
Natixis Funds Trusts and Loomis Sayles Funds Trusts of $5 million.
For the year ended September 30, 2007, amounts paid to Natixis Advisors for
administrative fees were as follows:
ADMINISTRATIVE
FUND FEES
- ---- --------------
Mid Cap Growth Fund $ 26,121
Small Cap Growth Fund 15,890
Small Cap Value Fund 528,193
Tax-Managed Equity Fund 3,784
Effective October 1, 2007, State Street Bank has agreed to reduce the fees it
receives from Natixis Advisors for serving as sub-administrator to the Funds.
Also effective October 1, 2007, Natixis Advisors has given a binding
contractual undertaking to the Funds to waive the administrative fees paid by
the Funds in an amount equal to the reduction in sub-administrative fees
discussed above. The waiver is in effect through June 30, 2008.
C. SERVICE AND DISTRIBUTION FEES. Natixis Distributors, L.P. ("Natixis
Distributors"), (formerly IXIS Asset Management Distributors, L.P.), a wholly
owned subsidiary of Natixis U.S, has entered into a distribution agreement with
the Trust. Pursuant to this agreement, Natixis Distributors serves as principal
underwriter of each fund.
Pursuant to Rule 12b-1 under the 1940 Act, Mid Cap Growth Fund, Small Cap
Growth Fund and Small Cap 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 Natixis
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 Natixis
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 an 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 year ended September 30, 2007, the Funds paid the following service and
distribution fees:
SERVICE FEES DISTRIBUTION FEES
------------ ------------------------
FUND ADMIN CLASS RETAIL CLASS ADMIN CLASS
- ---- ------------ ------------ -----------
Mid Cap Growth Fund $ -- $ 67,913 $ --
Small Cap Growth Fund -- 12,629 --
Small Cap Value Fund 195,415 932,610 195,415
Tax-Managed Equity Fund -- -- --
D. SUB-TRANSFER AGENT FEES. Natixis Distributors has entered into agreements
with financial intermediaries to provide certain recordkeeping, processing,
shareholder communications and other services to customers of the
intermediaries and has agreed to compensate the intermediaries for providing
those services. Certain services would be provided by the Funds if the shares
of those customers were registered directly with the Funds' transfer agent.
Accordingly, the Funds agreed to pay a portion of the
48
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2007
intermediary fees attributable to shares of the Fund held by the intermediary
(which generally is a percentage of the value of shares held) not exceeding
what the Funds would have paid its transfer agent had each customer's shares
been registered directly with the transfer agent instead of held through the
intermediary. Natixis Distributors pay the remainder of the fees. Listed below
are the fees incurred by the Funds which are included in the transfer agent
fees and expenses in the Statements of Operations.
SUB - TRANSFER AGENT FEES
--------------------------------------------
FUND INSTITUTIONAL CLASS RETAIL CLASS ADMIN CLASS
- ---- ------------------- ------------ -----------
Mid Cap Growth Fund $ 6,201 $ 29,693 $ --
Small Cap Growth Fund 8,938 2,633 --
Small Cap Value Fund 164,708 459,281 157,906
Tax-Managed Equity Fund 126 -- --
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
Natixis Advisors, Natixis Distributors, Natixis US, 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 Natixis Funds Trusts, the
Loomis Sayles Funds Trusts and the Hansberger International Series (effective
September 12, 2007) 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 Natixis Funds Trusts, the Loomis
Sayles Funds Trusts and the Hansberger International Series on the normal
payment date. Deferred amounts remain in the Funds until distributed in
accordance with the Plan.
F. 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 Natixis
Funds Trusts and Loomis Sayles Funds Trusts, participates in a $75,000,000
committed line of credit provided by State Street Bank. Interest is charged to
each participating fund based on its borrowings at a rate per annum equal to
the Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.09% per
annum, payable at the end of each calendar quarter, is accrued and apportioned
among the participating funds based on their average daily unused portion of
the line of credit. For the year ended September 30, 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 year ended September 30, 2007, amounts rebated under these
agreements were as follows:
FUND REBATES
- ---- -------
Mid Cap Growth Fund $10,425
Small Cap Growth Fund 3,522
Small Cap Value Fund 55,156
Tax-Managed Equity Fund 446
49
7. SHAREHOLDERS. At September 30, 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 340,019 298,886
Small Cap Growth Fund 398,392 346,588
Small Cap Value Fund 349,568 692,309
Tax-Managed Equity Fund -- --
At September 30, 2007, one shareholder individually owned more than 5% of the
Small Cap Growth Fund's total outstanding shares, representing, in aggregate,
9.0% of the Fund; and four shareholders individually owned more than 5% of the
Tax-Managed Equity Fund's total outstanding shares, representing, in aggregate,
25.7% of the Fund;
8. CAPITAL SHARES. Each Fund may issue an unlimited number of shares of
beneficial interest, without par value. Transactions in capital shares were as
follows:
MID CAP GROWTH FUND
Year Ended September 30, 2007 Year Ended September 30, 2006
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS --------- ------------ ----------- ------------
Issued from the sale of shares 122,987 $ 2,932,877 113,035 $ 2,403,816
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (113,087) (2,616,811) (622,265) (12,061,960)
--------- -------------- ------------- -------------
Net change 9,900 $ 316,066 (509,230) $ (9,658,144)
--------- -------------- ------------- -------------
Shares Amount Shares Amount
RETAIL CLASS --------- ------------ ----------- ------------
Issued from the sale of shares 404,396 $ 9,618,611 466,779 $ 9,602,643
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (616,665) (14,067,412) (497,710) (10,104,474)
--------- -------------- ------------- -------------
Net change (212,269) $ (4,448,801) (30,931) $ (501,831)
--------- -------------- ------------- -------------
Increase (decrease) from
capital share transactions (202,369) $ (4,132,735) (540,161) $(10,159,975)
--------- -------------- ------------- -------------
SMALL CAP GROWTH FUND
Year Ended September 30, 2007 Year Ended September 30, 2006
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS --------- ------------ ----------- ------------
Issued from the sale of shares 227,764 $ 3,236,460 514,581 $ 6,313,604
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (158,397) (2,160,742) (238,173) (2,861,514)
--------- -------------- ------------- -------------
Net change 69,367 $ 1,075,718 276,408 $ 3,452,090
--------- -------------- ------------- -------------
Shares Amount Shares Amount
RETAIL CLASS --------- ------------ ----------- ------------
Issued from the sale of shares 1,247,066 $ 17,800,763 118,067 $ 1,415,130
Issued in connection with
the reinvestment of distributions -- -- -- --
Redeemed (147,091) (1,980,257) (194,917) (2,249,611)
--------- -------------- ------------- -------------
Net change 1,099,975 $ 15,820,506 (76,850) $ (834,481)
--------- -------------- ------------- -------------
Increase (decrease) from
capital share transactions 1,169,342 $ 16,896,224 199,558 $ 2,617,609
--------- -------------- ------------- -------------
50
NOTES TO FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER 30, 2007
SMALL CAP VALUE FUND
Year Ended September 30, 2007 Year Ended September 30, 2006
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------- ----------- ------------
Issued from the sale of shares 3,665,690 $ 103,476,796 2,676,286 $ 73,004,753
Issued in connection with
the reinvestment of distributions 1,908,336 50,494,585 1,409,958 35,671,938
Redeemed (2,978,936) (83,598,708) (2,792,941) (76,314,037)
---------- -------------- ------------- -------------
Net change 2,595,090 $ 70,372,673 1,293,303 $ 32,362,654
---------- -------------- ------------- -------------
Shares Amount Shares Amount
RETAIL CLASS ---------- ------------- ----------- ------------
Issued from the sale of shares 9,567,844 $ 267,672,472 4,178,708 $113,429,036
Issued in connection with
the reinvestment of distributions 1,279,692 33,617,503 879,102 22,100,621
Redeemed (5,159,588) (145,568,951) (3,102,060) (83,870,790)
---------- -------------- ------------- -------------
Net change 5,687,948 $ 155,721,024 1,955,750 $ 51,658,867
---------- -------------- ------------- -------------
Shares Amount Shares Amount
ADMIN CLASS ---------- ------------- ----------- ------------
Issued from the sale of shares 1,317,587 $ 35,992,658 834,549 $ 22,351,432
Issued in connection with
the reinvestment of distributions 292,721 7,599,049 237,129 5,902,138
Redeemed (1,252,476) (34,632,190) (1,206,021) (31,582,406)
---------- -------------- ------------- -------------
Net change 357,832 $ 8,959,517 (134,343) $ (3,328,836)
---------- -------------- ------------- -------------
Increase (decrease) from
capital share transactions 8,640,870 $ 235,053,214 3,114,710 $ 80,692,685
---------- -------------- ------------- -------------
TAX-MANAGED EQUITY FUND
Year Ended September 30, 2007 Year Ended September 30, 2006
---------------------------- ----------------------------
Shares Amount Shares Amount
INSTITUTIONAL CLASS ---------- ------------- ----------- ------------
Issued from the sale of shares 136,117 $ 1,473,501 110,105 $ 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 (203,597) (2,186,419) (226,157) (2,122,569)
---------- -------------- ------------- -------------
Increase (decrease) from
capital share transactions (322,010) $ (3,344,828) (111,182) $ (1,034,586)
---------- -------------- ------------- -------------
*On October 20, 2006, Natixis US liquidated its position of 261,354 shares. This was
accomplished through a redemption-in-kind which included $2,453,150 of securities and
$249,255 in cash.
51
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of Loomis Sayles Funds I and Loomis Sayles Funds II and
Shareholders of Loomis Sayles Small Cap Value Fund, Loomis Sayles Mid Cap
Growth Fund (formerly Loomis Sayles Aggressive Growth Fund), Loomis Sayles
Small Cap Growth Fund and Loomis Sayles Tax-Managed Equity Fund:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Loomis Sayles
Small Cap Value Fund, a series of Loomis Sayles Funds I and the Loomis Sayles
Mid Cap Growth Fund, Loomis Sayles Small Cap Growth Fund and Loomis Sayles
Tax-Managed Equity Fund, each a series of Loomis Sayles Funds II (collectively,
"the Funds"), at September 30, 2007, and the results of each of their
operations, the changes in each of their net assets and the financial
highlights for each of the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2007
52
2007 U.S. TAX DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
CORPORATE DIVIDENDS RECEIVED DEDUCTION. For the fiscal year ended September 30,
2007, a percentage of dividends distributed by the Funds listed below qualify
for the dividends received deduction for corporate shareholders. These
percentages are as follows:
QUALIFYING
FUND PERCENTAGE
- ---- ----------
Small Cap Value Fund 33.97%
Tax-Managed Equity Fund 99.98%
CAPITAL GAINS DISTRIBUTIONS. Pursuant to Internal Revenue Section 852(b), the
following Fund paid distributions, which have been designated as capital gains
distributions for the fiscal year ended September 30, 2007.
FUND AMOUNT
- ---- -----------
Small Cap Value Fund $75,959,602
QUALIFIED DIVIDEND INCOME. For the fiscal year ended September 30, 2007, the
Funds below will designate up to the maximum amount allowable pursuant to the
Internal Revenue Code as qualified dividend income eligible for reduced tax
rates. These lower rates range from 5% to 15% depending on an individual's tax
bracket. If the Funds pay a distribution during calendar year 2007, complete
information will be reported in conjunction with Form 1099-DIV.
FUND
- ---- - -
Small Cap Value Fund
Tax-Managed Equity Fund
53
TRUSTEE AND OFFICER INFORMATION
The tables below provide certain information regarding the Trustees and
officers of Loomis Sayles Funds I and Loomis Sayles Funds II (the "Trusts").
Unless otherwise indicated, the address of all persons below is 399 Boylston
Street, Boston, MA 02116. The Trusts' Statements of Additional Information
include additional information about the Trustees of the Trusts and are
available by calling Loomis Sayles at 800-343-2029.
POSITION(S)
HELD WITH
THE TRUSTS, LENGTH NUMBER OF PORTFOLIOS IN FUND
OF TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN*** AND
NAME AND YEAR OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS** OTHER DIRECTORSHIPS HELD
- -------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee, since 2003 Douglas Dillon Professor and Director of 41;
(1940) Contract Review the Belfer Center for Science and Director, Taubman Centers, Inc.
and Governance International Affairs, John F. Kennedy (real estate investment trust)
Committee Member School of Government, Harvard
University
Charles D. Baker Trustee, since 2005 President and Chief Executive Officer, 41;
(1956) Contract Review Harvard Pilgrim Health Care (health plan) None
and Governance
Committee Member
Edward A. Benjamin Trustee, since 2002 Retired 41;
(1938) Chairman of the None
Contract Review
and Governance
Committee
Daniel M. Cain Trustee, since 2003 President and Chief Executive Officer, 41;
(1945) Chairman of the Cain Brothers & Company, Incorporated Director, Sheridan Healthcare
Audit Committee (investment banking) Inc. (physician practice
management) Trustee, Lexington
Strategic Asset Corporation (realty
investment trust)
Richard Darman Trustee, since 2003 Partner, The Carlyle Group (investments); 41;
(1943) Contract Review formerly, Professor, John F. Kennedy Director and Chairman of the
and Governance School of Government, Harvard Board of Directors, AES
Committee Member University Corporation (international power
company)
Jonathan P. Mason Trustee, since 2007 Chief Financial Officer, Cabot Corp. 41;
(1958) Audit Committee (specialty chemicals); formerly, Vice None
Member President and Treasurer, International
Paper Company; formerly, Chief Financial
Officer, Carter Holt Harvey (forest
products)
Sandra O. Moose Chairperson of the President, Strategic Advisory Services 41;
(1942) Board of Trustees (management consulting); formerly, Director, Verizon
since November Senior Vice President and Director, The Communications; Director, Rohm
2005 Boston Consulting Group, Inc. and Haas Company (specialty
Trustee, since 2003 (management consulting) chemicals); Director, AES
Ex officio member of Corporation (international power
the Audit company)
Committee and
Contract Review
and Governance
Committee
Cynthia L. Walker Trustee, since 2005 Executive Dean for Administration 41;
(1956) Audit Committee (formerly, Dean for Finance & CFO), None
Member Harvard Medical School
54
POSITION(S)
HELD WITH
THE TRUSTS, LENGTH NUMBER OF PORTFOLIOS IN FUND
OF TIME SERVED AND PRINCIPAL OCCUPATION(S) COMPLEX OVERSEEN*** AND
NAME AND YEAR OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS** OTHER DIRECTORSHIPS HELD
- -------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
Robert J. Blanding/1/ President, Chief President, Chairman, Director and Chief 41;
(1947) Executive Officer Executive Officer, Loomis, Sayles & None
555 California Street and Trustee, since Company, L.P.;
San Francisco, CA 94104 2002 for Loomis
Sayles Funds I;
Chief Executive
Officer and Trustee
since 2002 for
Loomis Sayles
Funds II
John T. Hailer/2/ Executive Vice President and Chief Executive Officer, 41;
(1960) President and Natixis Asset Management Advisors, L.P., None
Trustee, since 2003 Natixis Distributors, L.P., Natixis Global
for Loomis Sayles Associates, Inc. and Natixis Global Asset
Funds I; President Management North America; President
and Trustee, since and Chief Executive Officer, Natixis
2003 for Loomis Funds Trust I, Natixis Funds Trust II,
Sayles Funds II Natixis Funds Trust III, Natixis Funds
Trust IV, Natixis Cash Management
Trust, and Hansberger International
Series;
* Each Trustee serves until retirement, resignation or removal from the Board
of Trustees. The current retirement age is 72. The position of Chairperson of
the Board is appointed for a two-year term. Ms. Moose was re-appointed to
serve an additional two-year term as the Chairperson of the Board of Trustees
on September 14, 2007.
**Each person listed above, except as noted, holds the same position(s) with
the Natixis Funds, Loomis Sayles Funds Trusts and Hansberger International
Series. Previous positions during the past five years with Natixis
Distributors, L.P. (the "Distributor"), Natixis Asset Management Advisors,
L.P. ("Natixis Advisors") or Loomis, Sayles & Company, L.P. are omitted if
not materially different from a Trustee's or officer's current position with
such entity.
***The Trustees of the Trusts serve as Trustees of a fund complex that includes
all series of Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds
Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis
Sayles Funds I, Loomis Sayles Funds II and Hansberger International Series
(the "Funds' Trusts"). The number of portfolios overseen does not include
AEW Real Estate Income Fund which liquidated on April 13, 2007, or IXIS
Equity Diversified Portfolio, which liquidated on August 3, 2007. The number
of portfolios overseen includes, as of September 14, 2007, the five series
of the Hansberger International Series.
1 Mr. Blanding is deemed an "interested person" of the Trusts because he holds
the following positions with affiliated persons of the Trusts: President,
Chairman, Director and Chief Executive Officer of Loomis, Sayles & Company,
L.P.
2 Mr. Hailer is deemed an "interested person" of the Trusts because he holds
the following positions with affiliated persons of the Trusts: Chairman of
the Board, President and Chief Executive Officer of Natixis Distribution
Corporation; President and Chief Executive Officer of Natixis Global Asset
Management North America, Natixis Global Associates, Inc., Natixis Asset
Management Advisors, L.P. and the Distributor.
55
POSITION(S)
HELD WITH
THE TRUSTS, LENGTH
OF TIME SERVED AND PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH TERM OF OFFICE* DURING PAST 5 YEARS**
- ----------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE TRUST
Coleen Downs Dinneen Secretary, Clerk and Senior Vice President, General Counsel, Secretary and Clerk (formerly,
(1960) Chief Legal Officer, Deputy General Counsel, Assistant Secretary and Assistant Clerk), Natixis
since September Distribution Corporation, Natixis Distributors, L.P. and Natixis Asset
2004 Management Advisors, L.P.
Daniel J. Fuss Executive Vice Vice Chairman and Director, Loomis, Sayles & Company, L.P.
(1933) President, since
One Financial Center June 2003
Boston, MA 02111
Russell L. Kane Chief Compliance Chief Compliance Officer for Mutual Funds, Senior Vice President, Deputy
(1969) Officer, since May General Counsel, Assistant Secretary and Assistant Clerk, Natixis
2006; Assistant Distributors, L.P. and Natixis Asset Management Advisors, L.P.; Vice
Secretary since June President, Associate General Counsel, Assistant Secretary and Assistant
2004; Anti-Money Clerk, Natixis Distribution Corporation; formerly, Senior Counsel,
Laundering Officer Columbia Management Group.
since April 2007
Michael C. Kardok Treasurer, Principal Senior Vice President, Natixis Asset Management Advisors, L.P. and Natixis
(1959) Financial and Distributors, L.P.; formerly, Senior Director, PFPC Inc.
Accounting Officer,
since October 2004
Robert Krantz Executive Vice Executive Vice President, Natixis Distributors, L.P. and Natixis Asset
(1964) President, since Management Advisors, L.P.
September 2007
* Each officer of the Trusts serve for an indefinite term in accordance with
the Trusts' current By-laws until the date his or her successor is elected
and qualified, or until he or she sooner dies, retires, is removed or becomes
disqualified.
**Each person listed above, except as noted, holds the same position(s) with
the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Hansberger
International Series. Previous positions during the past five years with the
Distributor, Natixis Advisors or Loomis Sayles are omitted, if not materially
different from a Trustee's or officer's current position with such entity.
56
[LOGO]
NATIXIS
FUNDS
ANNUAL REPORT
September 30, 2007
Loomis Sayles Investment Grade Bond Fund
[LOGO] LOOMIS SAYLES & COMPANY, L.P.
[GRAPHIC]
TABLE OF CONTENTS
Management Discussion and Performance.................................... page 1
Portfolio of Investments..................................................page 7
Financial Statements.................................................... page 15
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
- --------------------------------------------------------------------------------
U.S. fixed-income securities provided positive returns for the 12 months ended
September 30, 2007, despite volatility in July and early August, when concerns
about defaults in subprime mortgages began to spread into other markets. The
Federal Reserve Board fought the liquidity crunch in stages, ultimately cutting
the federal funds rate from 5.25% to 4.75%, which restored market stability in
the closing weeks of September.
For the fiscal year ended September 30, 2007, Loomis Sayles Investment Grade
Bond Fund returned 9.14% based on the net asset value of Class A shares and
$0.62 in reinvested dividends. For the same period, the fund's benchmark, the
Lehman U.S. Government/Credit Index, returned 5.08%, and the average return of
funds in Morningstar's Intermediate-Term Bond category was 4.24%. The fund's
30-day SEC yield on Class A shares was 4.98% at the end of September 2007.
LONG DURATION WAS POSITIVE FOR PERFORMANCE
Several factors helped the fund outperform its benchmark and peer group. The
fund maintained a long duration throughout the fiscal year, emphasizing
long-maturity Treasuries and fixed-income securities rated AAA by Moody's
Investor Services. Even though the fund was underweight in U.S. Treasuries
relative to the benchmark, the securities the fund held had a longer duration,
amplifying their positive results. Similarly, the fund's position in
high-quality (AAA-rated) corporate bonds was less than the benchmark, but the
fund's holdings were about three years longer in duration, contributing to the
fund's performance lead.
Duration is a measure of a portfolio's price sensitivity to changes in interest
rates. A longer duration is a more aggressive strategy. We started the fiscal
year last October with a duration about 120% longer than the Lehman benchmark
and ended the period at 170% longer, or 8.7 years versus 5.1 for the benchmark.
This benefited the fund as interest rates generally trended lower.
OVERALL QUALITY AND SELECTION CONTRIBUTED TO RESULTS
As the fiscal year progressed, we rotated toward higher-quality investments,
adopting a more defensive positioning with respect to credit risk. We increased
the fund's Treasury allocation and reduced exposure to high-yield corporate
bonds as price volatility in the bond market escalated and investors sought
safe havens. This shift in emphasis boosted the fund's total return, as did
good selection of both high-yield and investment-grade bonds. The average
credit quality of portfolio securities at the end of the period was A1. Our
most helpful sector strategy was to underweight financial issues and
mortgage-backed securities.
FOREIGN CURRENCIES WERE POSITIVE, U.S. AGENCIES DETRACTED
The lion's share of the fund's strong performance during the fiscal year can be
attributed to non-dollar issues, which are not part of the benchmark. The
largest foreign contributor from a currency standpoint was the Canadian dollar,
followed by the fund's holdings in bonds denominated in the Brazilian real.
Both of these currencies gained on the dollar during the year, as both
countries benefited from rising commodities prices.
U.S. agency securities performed well during fiscal 2007, but the fund had only
a small position in these bonds relative to the Lehman benchmark. The fund was
also overweight in investment-grade industrial and utility bonds, which
generated only modest returns.
U.S. ECONOMY EXPECTED TO SLOW
As 2008 begins to unfold, we expect the bond market to react to a deceleration
of U.S. economic growth. We believe the credit crunch will hit the economy
hardest in the closing quarter of 2007, slowing real (inflation-adjusted)
growth. Declining interest rates should boost returns on Treasuries, which
constitute the most interest-rate sensitive sector in the market.
We also believe some sectors that underperformed during the recent investor
flight to quality may generate improved performance. For example, in the wake
of their recent price declines, we think mortgage-backed securities are
undervalued. We are anticipating improving conditions in that sector,
particularly if the economy avoids recession and corporate profit growth
continues at a healthy, albeit slower pace.
1
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
Investment Results through September 30, 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]
September 30, 1997 through September 30, 2007
Maximum Lehman
Net Asset Sales U.S. Government/
Value/2/ Charge/3/ Credit Index
-------- --------- ---------------
9/30/1997 $10,000 $ 9,550 $10,000
10/31/1997 10,147 9,690 10,160
11/30/1997 10,129 9,673 10,214
12/31/1997 10,148 9,691 10,321
1/31/1998 10,243 9,782 10,466
2/28/1998 10,272 9,810 10,445
3/31/1998 10,396 9,929 10,477
4/30/1998 10,437 9,967 10,530
5/31/1998 10,495 10,023 10,643
6/30/1998 10,475 10,004 10,751
7/31/1998 10,344 9,879 10,760
8/31/1998 9,901 9,455 10,970
9/30/1998 10,127 9,672 11,284
10/31/1998 10,026 9,575 11,204
11/30/1998 10,358 9,892 11,271
12/31/1998 10,446 9,976 11,299
1/31/1999 10,613 10,136 11,379
2/28/1999 10,477 10,006 11,108
3/31/1999 10,717 10,235 11,164
4/30/1999 10,970 10,477 11,191
5/31/1999 10,875 10,385 11,076
6/30/1999 10,843 10,355 11,041
7/31/1999 10,650 10,171 11,011
8/31/1999 10,612 10,134 11,002
9/30/1999 10,757 10,273 11,101
10/31/1999 10,755 10,271 11,130
11/30/1999 10,784 10,299 11,124
12/31/1999 10,827 10,340 11,056
1/31/2000 10,827 10,340 11,053
2/29/2000 11,170 10,668 11,191
3/31/2000 11,325 10,815 11,353
4/30/2000 11,031 10,535 11,298
5/31/2000 10,927 10,435 11,288
6/30/2000 11,244 10,738 11,518
7/31/2000 11,378 10,866 11,640
8/31/2000 11,593 11,072 11,804
9/30/2000 11,498 10,981 11,849
10/31/2000 11,405 10,892 11,923
11/30/2000 11,623 11,100 12,127
12/31/2000 12,014 11,473 12,366
1/31/2001 12,214 11,665 12,574
2/28/2001 12,308 11,754 12,703
3/31/2001 12,149 11,603 12,762
4/30/2001 11,964 11,425 12,666
5/31/2001 12,071 11,528 12,739
6/30/2001 12,132 11,586 12,800
7/31/2001 12,440 11,880 13,119
8/31/2001 12,722 12,150 13,287
9/30/2001 12,463 11,902 13,410
10/31/2001 13,006 12,421 13,750
11/30/2001 12,823 12,246 13,524
12/31/2001 12,693 12,122 13,418
1/31/2002 12,781 12,205 13,516
2/28/2002 12,907 12,326 13,631
3/31/2002 12,601 12,034 13,354
4/30/2002 12,964 12,381 13,613
5/31/2002 13,129 12,538 13,739
6/30/2002 13,100 12,510 13,856
7/31/2002 12,850 12,271 14,022
8/31/2002 13,311 12,712 14,337
9/30/2002 13,335 12,735 14,645
10/31/2002 13,255 12,658 14,505
11/30/2002 13,535 12,926 14,514
12/31/2002 14,038 13,406 14,898
1/31/2003 14,277 13,634 14,898
2/28/2003 14,587 13,930 15,163
3/31/2003 14,658 13,998 15,144
4/30/2003 15,159 14,477 15,305
5/31/2003 15,913 15,197 15,740
6/30/2003 15,989 15,270 15,677
7/31/2003 15,226 14,541 15,020
8/31/2003 15,300 14,611 15,119
9/30/2003 16,086 15,362 15,598
10/31/2003 16,046 15,324 15,401
11/30/2003 16,346 15,610 15,442
12/31/2003 16,754 16,001 15,594
1/31/2004 16,868 16,109 15,735
2/29/2004 16,998 16,233 15,928
3/31/2004 17,178 16,405 16,074
4/30/2004 16,505 15,762 15,581
5/31/2004 16,366 15,630 15,501
6/30/2004 16,492 15,750 15,565
7/31/2004 16,690 15,939 15,729
8/31/2004 17,156 16,384 16,062
9/30/2004 17,492 16,705 16,118
10/31/2004 17,861 17,058 16,258
11/30/2004 18,115 17,300 16,077
12/31/2004 18,336 17,511 16,248
1/31/2005 18,228 17,408 16,361
2/28/2005 18,346 17,521 16,253
3/31/2005 18,132 17,316 16,138
4/30/2005 18,153 17,336 16,380
5/31/2005 18,237 17,416 16,586
6/30/2005 18,436 17,606 16,694
7/31/2005 18,391 17,564 16,506
8/31/2005 18,715 17,873 16,753
9/30/2005 18,689 17,848 16,534
10/31/2005 18,502 17,669 16,392
11/30/2005 18,585 17,749 16,476
12/31/2005 18,715 17,873 16,633
1/31/2006 19,019 18,163 16,602
2/28/2006 19,097 18,237 16,647
3/31/2006 18,814 17,967 16,464
4/30/2006 19,111 18,251 16,413
5/31/2006 19,004 18,149 16,404
6/30/2006 18,964 18,111 16,441
7/31/2006 19,163 18,301 16,655
8/31/2006 19,608 18,726 16,919
9/30/2006 19,743 18,855 17,084
10/31/2006 20,035 19,134 17,192
11/30/2006 20,314 19,400 17,393
12/31/2006 20,162 19,254 17,261
1/31/2007 20,125 19,220 17,247
2/28/2007 20,584 19,658 17,544
3/31/2007 20,485 19,564 17,514
4/30/2007 20,836 19,898 17,617
5/31/2007 20,884 19,944 17,465
6/30/2007 20,765 19,830 17,428
7/31/2007 20,866 19,927 17,602
8/31/2007 21,098 20,149 17,827
9/30/2007 21,549 20,580 17,952
Average Annual Returns -- September 30, 2007/4/
1 YEAR 5 YEARS 10 YEARS
CLASS A/1/
Net Asset Value/2/ 9.14% 10.07% 7.98%
With Maximum Sales Charge/3/ 4.28 9.07 7.48
CLASS B/1/
Net Asset Value/2/ 8.17 9.14 7.03
With CDSC/5/ 3.17 8.85 7.03
CLASS C/1/
Net Asset Value/2/ 8.28 9.16 7.04
With CDSC/5/ 7.28 9.16 7.04
CLASS Y/1/
Net Asset Value/2/ 9.32 10.40 8.27
CLASS J/1/
Net Asset Value/2/ 8.52 9.57 7.46
With Sales Charge/5/ 4.73 8.79 7.08
- --------------------------------------------------------------------
COMPARATIVE PERFORMANCE 1 YEAR 5 YEARS 10 YEARS
Lehman U.S. Government/Credit Index 5.08% 4.16% 6.03%
Morningstar Intermediate-Term Bond Fund Avg. 4.24 4.08 5.19
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.funds.natixis.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 9/30/2007 9/30/2006
- ------------------------------------------
Aaa 40.4 27.4
- ------------------------------------------
Aa 2.0 13.0
- ------------------------------------------
A 7.6 9.1
- ------------------------------------------
Baa 37.1 30.1
- ------------------------------------------
Ba 3.9 9.1
- ------------------------------------------
B 1.2 2.8
- ------------------------------------------
Caa 1.8 0.0
- ------------------------------------------
Not Rated* 3.4 5.1
- ------------------------------------------
Short-term and other 2.6 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 reductions 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 reductions and reimbursements.
/7/After reductions and reimbursements. Expense reductions are contractual and
are set to expire on 1/31/08.
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 Natixis Fund, contact your financial
professional or call Natixis 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 Natixis Funds at 800-225-5478; on the
fund's website at www.funds.natixis.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, 2007 is available from the fund's website and the SEC's website.
QUARTERLY PORTFOLIO SCHEDULES
The fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q
are available on the SEC's website at www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
3
UNDERSTANDING YOUR FUND'S EXPENSES
As a mutual fund shareholder, you incur different types of costs: transaction
costs, including sales charges (loads) on purchases and contingent deferred
sales charges on redemptions; redemption fees; certain exchange fees; and
minimum account fee charges; and ongoing costs, including management fees,
distribution fees (12b-1 fees) and/or service fees, and other fund expenses. In
addition, the fund assesses a minimum balance fee of $20 on an annual basis for
accounts that fall below the required minimum to establish an account (certain
exceptions may apply). These costs are described in more detail in the fund's
prospectus. The examples below are intended to help you understand the ongoing
costs of investing in the fund and help you compare these with the ongoing
costs of investing in other mutual funds.
The first line in the table for each Class shows the actual amount of fund
expenses you would have paid on a $1,000 investment in the fund from April 1,
2007 through September 30, 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 4/1/07 9/30/07 4/1/07 - 9/30/07
- -----------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,051.90 $4.27
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,020.91 $4.20
- -----------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,046.70 $8.72
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,016.55 $8.59
- -----------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,047.80 $8.11
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,017.15 $7.99
- -----------------------------------------------------------------------------------------------------------------
CLASS Y
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,052.40 $2.83
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,022.31 $2.79
- -----------------------------------------------------------------------------------------------------------------
CLASS J
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,048.50 $6.47
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000.00 $1,018.75 $6.38
- -----------------------------------------------------------------------------------------------------------------
*Expenses are equal to the Fund's annualized expense ratio (after
reduction/reimbursement): 0.83%, 1.70%,1.58%, 0.55% and 1.26% 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
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENT
The Board of Trustees, including the Independent Trustees, considers matters
bearing on the Fund's advisory agreement (the "Agreement") at most of its
meetings throughout the year. Once a year, usually in the spring, the Contract
Review and Governance Committee of the Board meets to review the Agreement to
determine whether to recommend that the full Board approve the continuation of
the Agreement, for an additional one-year period. After the Committee has made
its recommendation, the full Board, including the Independent Trustees,
determines whether to approve the continuation of the Agreement.
In connection with these meetings, the Trustees receive materials that the
Fund's investment adviser believes to be reasonably necessary for the Trustees
to evaluate the Agreement. These materials generally include, among other
items, (i) information on the investment performance of the Fund and the
performance of peer groups of funds and the Fund's performance benchmark,
(ii) information on the Fund's advisory fees and other expenses, including
information comparing the Fund's expenses to those of a peer group of funds and
information about any applicable expense caps and fee "breakpoints,"
(iii) sales and redemption data in respect of the Fund, (iv) information about
the profitability of the Agreement to the Fund's adviser (the "Adviser"), and
(v) information obtained through the completion of a questionnaire by the
Adviser (the Trustees are consulted as to the information requested through
that questionnaire). The Board of Trustees, including the Independent Trustees,
also consider other matters such as (i) the Adviser's financial results and
financial condition, (ii) the Fund's investment objective and strategies and
the size, education and experience of the Adviser's investment staff and its
use of technology, external research and trading cost measurement tools,
(iii) arrangements in respect of the distribution of the Fund's shares,
(iv) the procedures employed to determine the value of the Fund's assets,
(v) the allocation of the Fund's brokerage, if any, including allocations to
brokers affiliated with the Adviser and the use of "soft" commission dollars to
pay Fund expenses and to pay for research and other similar services, (vi) the
resources devoted to, and the record of compliance with, the Fund's investment
policies and restrictions, policies on personal securities transactions and
other compliance policies, and (vii) the general economic outlook with
particular emphasis on the mutual fund industry. Throughout the process, the
Trustees are afforded the opportunity to ask questions of and request
additional materials from the Adviser.
In addition to the materials requested by the Trustees in connection with the
annual consideration of the continuation of the Agreement, the Trustees receive
materials in advance of each regular quarterly meeting of the Board of Trustees
that provide detailed information about the Fund's investment performance and
the fees charged to the Fund for advisory and other services. This information
generally includes, among other things, an internal performance rating for the
Fund based on agreed-upon criteria, graphs showing performance and fee
differentials against the Fund's peer group, performance ratings provided by a
third-party, total return information for various periods, and third-party
performance rankings for various periods comparing the Fund against its peer
group. The portfolio management team for the Fund makes periodic presentations
to the Contract Review and Governance Committee and/or the full Board of
Trustees, and if the Fund is identified as presenting possible performance
concerns may be subject to more frequent board presentations and reviews. In
addition, each quarter the Trustees are provided with detailed statistical
information about the Fund's portfolio.
The Board of Trustees most recently approved the continuation of the Agreement
at their meeting held in June, 2007. The Agreement was continued for a one-year
period for the Fund. In considering whether to approve the continuation of the
Agreement, the Board of Trustees, including the Independent Trustees, did not
identify any single factor as determinative. Matters considered by the
Trustees, including the Independent Trustees, in connection with their approval
of the Agreement included the following:
The nature, extent and quality of the services provided to the Fund under the
Agreement. The Trustees considered the nature, extent and quality of the
services provided by the Adviser and its affiliates to the Fund and the
resources dedicated to the Fund by the Adviser and its affiliates, including
recent or planned investments by the Adviser in additional personnel or other
resources. They also took note of the competitive market for talented
personnel, in particular, for personnel who have contributed to the generation
of strong investment performance. They considered the need for the Adviser to
offer competitive compensation in order to attract and retain capable
personnel. They also considered the administrative services provided by the
Adviser and its affiliates to the Fund. The Trustees also considered the
benefits to shareholders of investing in a mutual fund that is part of a family
of funds offering a variety of investment disciplines and providing for a
variety of fund and shareholder services.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding the Agreement, that the nature,
extent and quality of services provided supported the renewal of the Agreement.
Investment performance of the Fund and the Adviser. As noted above, the
Trustees received information about the performance of the Fund over various
time periods, including information which compared the performance of the Fund
to the performance of a peer group of funds and the Fund's performance
benchmark. In addition, the Trustees also reviewed data prepared by an
independent third party which analyzed the performance of the Fund using a
variety of performance metrics, including metrics which also measured the
performance of the Fund on a risk adjusted basis.
5
BOARD APPROVAL OF THE EXISTING ADVISORY AGREEMENT
With respect to the Fund, the Board concluded that the Fund's performance or
other relevant factors supported the renewal of the Agreement. The Trustees
also considered the Adviser's performance and reputation generally, the Fund's
performance of the fund family generally, and the historical responsiveness of
the Adviser to Trustee concerns about performance and the willingness of the
Adviser to take steps intended to improve performance.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding the Agreement, that the
performance of the Fund and the Adviser supported the renewal of the Agreement.
The costs of the services to be provided and profits to be realized by the
Adviser and its affiliates from their respective relationships with the Fund.
The Trustees considered the fees charged to the Fund for advisory services as
well as the total expense levels of the Fund. This information included
comparisons (provided both by management and also by an independent third
party) of the Fund's advisory fees and total expense levels to those of their
peer groups and information about the advisory fees charged by the Adviser to
comparable accounts. In considering the fees charged to comparable accounts,
the Trustees considered, among other things, management's representations about
the differences between managing mutual funds as compared to other types of
accounts, including the additional resources required to effectively manage
mutual fund assets. In evaluating the Fund's advisory fees, the Trustees also
took into account the demands, complexity and quality of the investment
management of the Fund. The Trustees considered that over the past several
years, management had made recommendations regarding reductions in advisory fee
rates, implementation of advisory fee breakpoints and the institution of
advisory fee waivers and expense caps. They noted that the Fund currently has
an expense cap in place, and they considered the amounts waived or reimbursed
by the Adviser under the cap.
The Trustees also considered the compensation directly or indirectly received
by the Adviser and its affiliates from their relationships with the Fund. The
Trustees reviewed information provided by management as to the profitability of
the Adviser's and its affiliates' relationships with the Fund, and information
about the allocation of expenses used to calculate profitability. They also
reviewed information provided by management about the effect of distribution
costs and Fund growth on Adviser profitability, including information regarding
resources spent on distribution activities and the increase in net sales for
the family of funds. When reviewing profitability, the Trustees also considered
information about court cases in which adviser profitability was an issue, the
performance of the Fund, the expense levels of the Fund, and whether the
Adviser had implemented breakpoints and/or expense caps with respect to such
Fund.
After reviewing these and related factors, the Trustees concluded, within the
context of their overall conclusions regarding the Agreement, that the advisory
fees charged to the Fund was fair and reasonable, and that the costs of these
services generally and the related profitability of the Adviser and its
affiliates in respect of their relationships with the Fund supported the
renewal of the Agreements.
Economies of Scale. The Trustees considered the existence of any economies of
scale in the provision of services by the Adviser and whether those economies
are shared with the Fund through breakpoints in their investment advisory fees
or other means, such as expense waivers. The Trustees noted that the Fund was
subject to an expense cap. In considering these issues, the Trustees also took
note of the costs of the services provided (both on an absolute and a relative
basis) and the profitability to the Adviser and its affiliates of their
relationships with the Fund, as discussed above.
After reviewing these and related factors, the Trustees considered, within the
context of their overall conclusions regarding the Agreement, that the extent
to which economies of scale were shared with the Fund supported the renewal of
the Agreement.
The Trustees also considered other factors, which included but were not limited
to the following:
.. whether the Fund has operated in accordance with its investment objective
and the Fund's record of compliance with its investment restrictions, and
the compliance programs of the Fund and the Adviser. They also considered
the compliance-related resources the Adviser and its affiliates were
providing to the Fund.
.. the nature, quality, cost and extent of administrative and shareholder
services performed by the Adviser and its affiliates, both under the
Agreement and under separate agreements covering administrative services.
.. so-called "fallout benefits" to the Adviser, such as the engagement of
affiliates of the Adviser to provide distribution, administrative and
brokerage services to the Fund, and the benefits of research made available
to the Adviser by reason of brokerage commissions generated by the Fund's
securities transactions. The Trustees considered the possible conflicts of
interest associated with these fallout and other benefits, and the
reporting, disclosure and other processes in place to disclose and monitor
such possible conflicts of interest
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees,
concluded that the existing advisory agreement should be continued through
June 30, 2008.
6
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------
Bonds and Notes -- 90.1% of Net Assets
Non-Convertible Bonds -- 89.4%
Airlines -- 1.9%
$ 13,435,000 Continental Airlines, Inc., Series A,
5.983%, 4/19/2022 $ 13,017,709
8,115,000 Qantas Airways Ltd.,
6.050%, 4/15/2016, 144A 8,056,207
18,385,000 United Air Lines, Inc., Series 2007-1,
6.636%, 7/02/2022 17,833,450
---------------
38,907,366
---------------
Asset-Backed Securities -- 0.1%
649,647 Community Program Loan Trust, Series 1987-A, Class A4,
4.500%, 10/01/2018 643,272
1,700,000 Community Program Loan Trust, Series 1987-A, Class A5,
4.500%, 4/01/2029 1,595,761
---------------
2,239,033
---------------
Automotive -- 1.5%
10,665,000 Cummins, Inc.,
5.650%, 3/01/2098 8,047,617
1,389,000 Cummins, Inc.,
6.750%, 2/15/2027 1,372,606
665,000 Cummins, Inc.,
7.125%, 3/01/2028(b) 686,372
1,990,000 Ford Motor Co.,
6.375%, 2/01/2029(b) 1,462,650
130,000 Ford Motor Co.,
6.500%, 8/01/2018(b) 104,650
260,000 Ford Motor Co.,
6.625%, 2/15/2028 193,700
5,185,000 Ford Motor Co.,
6.625%, 10/01/2028(b) 3,862,825
8,730,000 Ford Motor Co.,
7.450%, 7/16/2031(b) 6,853,050
245,000 Ford Motor Co.,
7.500%, 8/01/2026 184,362
1,985,000 Ford Motor Credit Co.,
5.700%, 1/15/2010 1,866,700
700,000 Ford Motor Credit Co.,
7.375%, 10/28/2009 686,390
1,540,000 Ford Motor Credit Co.,
8.000%, 12/15/2016 1,440,678
5,315,000 General Motors Corp.,
8.250%, 7/15/2023 4,650,625
110,000 General Motors Corp.,
8.375%, 7/15/2033(b) 96,387
---------------
31,508,612
---------------
Banking -- 3.4%
2,595,000 BAC Capital Trust VI,
5.625%, 3/08/2035 2,318,077
2,120,000,000 Barclays Financial LLC,
4.060%, 9/16/2010, (KRW), 144A 2,285,625
140,000,000 Barclays Financial LLC,
4.160%, 2/22/2010, (THB), 144A 4,227,649
3,000,000,000 Barclays Financial LLC,
4.460%, 9/23/2010, (KRW), 144A 3,270,105
34,000,000 Barclays Financial LLC, Series EMTN,
4.100%, 3/22/2010, (THB), 144A 1,024,796
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
Banking -- continued
$ 16,371,250,000 BNP Paribas SA, Series EMTN,
Zero Coupon, 6/13/2011, (IDR), 144A $ 1,320,620
1,500,000 CIT Group, Inc.,
5.500%, 12/01/2014, (GBP) 2,651,184
9,860,000 Citibank NA,
15.000%, 7/02/2010, (BRL), 144A 6,126,277
20,360,000 HSBC Bank USA,
Zero Coupon, 4/18/2012, (MYR), 144A 5,039,959
28,000,000 HSBC Bank USA,
Zero Coupon, 5/17/2012, (MYR), 144A 6,898,312
4,500,000 HSBC Bank USA,
3.310%, 8/25/2010, 144A 4,980,150
700,000 ICICI Bank Ltd.,
6.375%, 4/30/2022, 144A(c) 654,570
22,683,264,000 JPMorgan Chase & Co.,
Zero Coupon, 3/28/2011, (IDR), 144A 1,864,021
17,920,000,000 JPMorgan Chase & Co.,
Zero Coupon, 3/28/2011, (IDR), 144A 1,472,203
68,827,366,920 JPMorgan Chase & Co.,
Zero Coupon, 4/12/2012, (IDR), 144A 5,116,331
18,000,000 JPMorgan Chase & Co.,
Zero Coupon, 5/17/2010, (BRL), 144A 7,493,028
21,255,830 JPMorgan Chase & Co., Series EMTN,
Zero Coupon, 6/08/2012, (MYR), 144A 5,183,740
24,124,936,500 JPMorgan Chase London,
Zero Coupon, 10/21/2010, (IDR), 144A 2,059,787
100,000 Keybank NA,
6.950%, 2/01/2028(b) 105,760
329,700,000 Kreditanstalt fuer Wiederaufbau, Series EMTN,
10.000%, 10/27/2008, (ISK) 5,197,891
90,000,000 Rabobank Nederland, Series EMTN,
13.500%, 1/28/2008, (ISK), 144A 1,451,099
---------------
70,741,184
---------------
Beverages -- 0.1%
1,525,000 Cia Brasileira de Bebidas,
8.750%, 9/15/2013 1,748,031
---------------
Brokerage -- 0.3%
10,000,000 Merrill Lynch & Co., Inc.,
10.710%, 3/08/2017, (BRL) 5,599,018
---------------
Building Materials -- 1.3%
10,000,000 Masco Corp.,
5.850%, 3/15/2017(b) 9,648,340
970,000 Owens Corning, Inc.,
6.500%, 12/01/2016 936,851
15,358,000 Owens Corning, Inc.,
7.000%, 12/01/2036 14,947,097
1,060,000 USG Corp.,
6.300%, 11/15/2016 962,007
---------------
26,494,295
---------------
Chemicals -- 0.4%
6,305,000 Lubrizol Corp.,
6.500%, 10/01/2034 6,156,202
2,400,000 Methanex Corp.,
6.000%, 8/15/2015 2,263,505
---------------
8,419,707
---------------
Construction Machinery -- 0.3%
6,935,000 Toro Co.,
6.625%, 5/01/2037 6,921,074
---------------
See accompanying notes to financial statements.
7
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------------
Consumer Cyclical Services -- 0.5%
$ 10,015,000 Western Union Co.,
6.200%, 11/17/2036(b) $ 9,648,892
---------------
Distributors -- 0.2%
3,865,000 ONEOK, Inc.,
6.000%, 6/15/2035 3,553,929
---------------
Electric -- 4.4%
11,360,000 Bruce Mansfield Unit,
6.850%, 6/01/2034 11,558,346
10,595,000 Cleveland Electric Illuminating Co. (The),
5.950%, 12/15/2036 9,851,390
895,000 Commonwealth Edison Co.,
4.700%, 4/15/2015 828,923
1,700,000 Commonwealth Edison Co.,
5.875%, 2/01/2033 1,591,069
2,750,000 Constellation Energy Group, Inc.,
4.550%, 6/15/2015(b) 2,494,256
960,000 Dominion Resources, Inc.,
5.950%, 6/15/2035 899,702
5,500,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
7.875%, 2/01/2027 6,150,276
1,000,000 Empresa Nacional de Electricidad SA (Endesa-Chile),
8.350%, 8/01/2013 1,118,329
1,905,000 ITC Holdings Corp.,
5.875%, 9/30/2016, 144A 1,891,360
2,830,000 ITC Holdings Corp.,
6.375%, 9/30/2036, 144A 2,706,759
10,665,000 Mackinaw Power LLC,
6.296%, 10/31/2023, 144A 11,064,084
1,500,000 MidAmerican Energy Holdings Co.,
5.875%, 10/01/2012 1,523,160
1,000,000 MidAmerican Energy Holdings Co.,
6.125%, 4/01/2036(b) 970,785
7,185,000 Midamerican Energy Holdings Co.,
6.500%, 9/15/2037, 144A 7,262,627
27,500,000 Nisource Finance Corp.,
6.400%, 3/15/2018 27,701,932
40,750 Quezon Power Philippines Co.,
8.860%, 6/15/2017 41,158
500,000 SP Powerassets Ltd.,
3.730%, 10/22/2010, (SGD) 345,232
1,795,000 Toledo Edison Co.,
6.150%, 5/15/2037(b) 1,675,379
1,075,000 White Pine Hydro LLC,
6.310%, 7/10/2017(e) 1,094,551
1,600,000 White Pine Hydro LLC,
6.960%, 7/10/2037(e) 1,628,563
---------------
92,397,881
---------------
Entertainment -- 0.5%
3,565,000 Time Warner, Inc.,
6.500%, 11/15/2036(b) 3,439,430
1,805,000 Time Warner, Inc.,
6.625%, 5/15/2029(b) 1,767,716
755,000 Time Warner, Inc.,
6.950%, 1/15/2028 772,454
505,000 Time Warner, Inc.,
7.625%, 4/15/2031 549,281
330,000 Time Warner, Inc.,
7.700%, 5/01/2032 362,345
3,590,000 Viacom, Inc., Class B,
6.875%, 4/30/2036 3,575,044
---------------
10,466,270
---------------
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------------
Food & Beverage -- 2.3%
$ 6,845,000 Anheuser-Busch Cos, Inc.,
5.950%, 1/15/2033 $ 6,669,768
8,760,000 Anheuser-Busch Cos, Inc.,
6.450%, 9/01/2037(b) 9,104,338
6,080,000 Corn Products International, Inc.,
6.625%, 4/15/2037 6,029,165
9,925,000 Kraft Foods, Inc.,
6.500%, 8/11/2017 10,252,039
7,895,000 Kraft Foods, Inc.,
6.500%, 11/01/2031(b) 7,762,522
8,080,000 Kraft Foods, Inc.,
7.000%, 8/11/2037(b) 8,476,582
---------------
48,294,414
---------------
Foreign Agency -- 0.0%
220,000 Alberta Municipal Funding Corp.,
5.700%, 9/01/2011, (CAD) 231,221
---------------
Foreign Local Governments -- 0.0%
31,300 Province of Alberta,
5.930%, 9/16/2016, (CAD) 33,339
500,000 Province of Nova Scotia,
6.600%, 6/01/2027, (CAD) 607,239
---------------
640,578
---------------
Government Guaranteed -- 2.2%
45,000,000 Canada Housing Trust,
4.100%, 12/15/2008, (CAD) 45,089,127
---------------
Government Owned -- No Guarantee -- 0.2%
3,670,000 Pemex Project Funding Master Trust,
8.625%, 12/01/2023 4,537,955
---------------
Government Sponsored -- 0.5%
15,000,000 Queensland Treasury Corp.,
7.125%, 9/18/2017, (NZD), 144A 11,249,844
---------------
Healthcare -- 2.2%
5,000,000 HCA, Inc.,
5.750%, 3/15/2014 4,193,750
800,000 HCA, Inc.,
6.250%, 2/15/2013(b) 708,000
3,250,000 HCA, Inc.,
6.300%, 10/01/2012 2,920,938
1,510,000 HCA, Inc.,
6.375%, 1/15/2015 1,287,275
2,640,000 HCA, Inc.,
6.500%, 2/15/2016(b) 2,244,000
2,625,000 HCA, Inc.,
7.050%, 12/01/2027 1,987,920
395,000 HCA, Inc.,
7.500%, 12/15/2023 322,299
250,000 HCA, Inc.,
7.500%, 11/06/2033 201,250
1,060,000 HCA, Inc.,
7.580%, 9/15/2025 863,816
1,265,000 HCA, Inc.,
7.690%, 6/15/2025 1,038,986
1,000,000 HCA, Inc.,
7.750%, 7/15/2036 800,909
2,865,000 Hospira, Inc.,
6.050%, 3/30/2017 2,818,395
530,000 Owens & Minor, Inc.,
6.350%, 4/15/2016 537,643
See accompanying notes to financial statements.
8
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- --------------------------------------------------------------------
Healthcare -- continued
$ 27,070,000 WellPoint, Inc.,
6.375%, 6/15/2037(b) $ 26,834,653
---------------
46,759,834
---------------
Healthcare Insurance -- 0.2%
5,455,000 CIGNA Corp.,
6.150%, 11/15/2036 5,157,986
---------------
Home Construction -- 1.2%
850,000 Centex Corp.,
5.250%, 6/15/2015(b) 723,115
3,685,000 D.R. Horton, Inc.,
5.250%, 2/15/2015 3,084,990
2,050,000 Desarrolladora Homex SAB de CV,
7.500%, 9/28/2015(b) 2,039,750
2,605,000 Lennar Corp., Series B,
5.600%, 5/31/2015(b) 2,241,175
1,870,000 Lennar Corp., Series B,
6.500%, 4/15/2016(b) 1,690,372
2,945,000 Pulte Homes, Inc.,
5.200%, 2/15/2015 2,455,603
250,000 Pulte Homes, Inc.,
5.250%, 1/15/2014 208,053
9,165,000 Pulte Homes, Inc.,
6.000%, 2/15/2035 6,680,533
3,510,000 Pulte Homes, Inc.,
6.375%, 5/15/2033 2,667,323
3,605,000 Toll Brothers Finance Corp.,
5.150%, 5/15/2015(b) 3,087,553
---------------
24,878,467
---------------
Independent Energy -- 1.9%
4,020,000 Anadarko Petroleum Corp.,
5.950%, 9/15/2016(b) 3,981,444
13,905,000 Anadarko Petroleum Corp.,
6.450%, 9/15/2036 13,689,459
10,875,000 Apache Corp.,
6.000%, 1/15/2037 10,468,188
500,000 Devon Financing Corp. LLC,
7.875%, 9/30/2031 590,499
1,625,000 Talisman Energy, Inc.,
5.850%, 2/01/2037 1,448,887
3,405,000 Talisman Energy, Inc.,
6.250%, 2/01/2038 3,207,742
160,000 XTO Energy, Inc.,
6.100%, 4/01/2036(b) 154,761
6,230,000 XTO Energy, Inc.,
6.750%, 8/01/2037 6,500,569
---------------
40,041,549
---------------
Industrial Other -- 0.1%
2,495,000 Equifax, Inc.,
7.000%, 7/01/2037 2,499,217
---------------
Integrated Energy -- 0.1%
1,751,044 PF Export Receivables Master Trust,
6.436%, 6/01/2015, 144A 1,765,665
---------------
Life Insurance -- 0.7%
15,400,000 ASIF Global Financing XXVII,
2.380%, 2/26/2009, (SGD), 144A 10,302,097
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------
Life Insurance -- continued
$ 4,260,000 Mutual of Omaha Insurance Co.,
6.800%, 6/15/2036, 144A $ 4,286,284
---------------
14,588,381
---------------
Local Authorities -- 0.7%
2,730,000 Michigan Tobacco Settlement Finance Authority,
7.309%, 6/01/2034 2,694,319
13,640,000 Virginia Tobacco Settlement Financing Corp.,
6.706%, 6/01/2046 12,662,967
---------------
15,357,286
---------------
Media Cable -- 2.9%
15,156,000 Comcast Corp.,
5.650%, 6/15/2035 13,530,686
2,255,000 Comcast Corp.,
6.450%, 3/15/2037 2,226,206
4,610,000 Comcast Corp.,
6.500%, 11/15/2035(b) 4,552,131
34,000,000 Comcast Corp.,
6.950%, 8/15/2037 35,686,740
3,750,000 Cox Communications, Inc., Class A,
6.750%, 3/15/2011 3,914,392
350,000 Virgin Media Finance Plc,
9.750%, 4/15/2014, (GBP) 716,099
---------------
60,626,254
---------------
Media Non-Cable -- 1.3%
2,500,000 Clear Channel Communications, Inc.,
4.250%, 5/15/2009 2,382,965
1,000,000 Clear Channel Communications, Inc.,
5.750%, 1/15/2013 836,981
7,700,000 News America, Inc.,
6.150%, 3/01/2037(b) 7,180,905
4,095,000 News America, Inc.,
6.200%, 12/15/2034(b) 3,855,426
9,760,000 News America, Inc.,
6.400%, 12/15/2035 9,425,788
1,140,000 R.H. Donnelley Corp., Series A-1,
6.875%, 1/15/2013 1,077,300
330,000 R.H. Donnelley Corp., Series A-2,
6.875%, 1/15/2013 311,850
1,535,000 RH Donnelley Corp., Series A-3,
8.875%, 1/15/2016 1,563,781
---------------
26,634,996
---------------
Metals & Mining -- 0.9%
12,775,000 Newmont Mining Corp.,
5.875%, 4/01/2035 11,255,823
1,500,000 Teck Cominco Ltd.,
7.000%, 9/15/2012 1,608,552
1,985,000 United States Steel Corp.,
6.050%, 6/01/2017 1,899,486
1,140,000 United States Steel Corp.,
6.650%, 6/01/2037 1,051,713
3,735,000 Vale Overseas Ltd.,
6.875%, 11/21/2036(b) 3,848,047
---------------
19,663,621
---------------
Mortgage Related -- 0.3%
3,000,000 Bank of America-First Union NB Commercial Mortgage,
Series 2001-3, Class A2,
5.464%, 4/11/2037 3,038,416
See accompanying notes to financial statements.
9
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------------------
Mortgage Related -- continued
$ 2,134,189 CS First Boston Mortgage Securities Corp., Series 2005-7,
Class 3A1,
5.000%, 8/25/2020 $ 2,094,822
193,836 Federal Home Loan Mortgage Corp.,
5.000%, 12/01/2031 186,091
40,848 Federal National Mortgage Association,
6.000%, 7/01/2029 41,203
---------------
5,360,532
---------------
Non-Captive Consumer -- 1.0%
3,550,000 Residential Capital LLC,
6.375%, 5/17/2013, (GBP) 5,556,419
5,475,000 Residential Capital LLC,
6.500%, 4/17/2013 4,421,062
385,000 Residential Capital LLC,
6.875%, 6/30/2015(c) 310,887
2,690,000 Residential Capital LLC, Series EMTN,
8.875%, 7/01/2014, (GBP) 4,347,951
5,150,000 SLM Corp.,
6.500%, 6/15/2010, (NZD) 3,518,114
1,270,000 SLM Corp., Series A, MTN,
5.000%, 4/15/2015 1,065,168
840,000 SLM Corp., Series A, MTN,
5.000%, 6/15/2018 667,225
240,000 SLM Corp., Series A, MTN,
5.375%, 5/15/2014 209,446
490,000 SLM Corp., Series A, MTN,
5.625%, 8/01/2033(b) 377,191
---------------
20,473,463
---------------
Non-Captive Diversified -- 0.3%
450,000 CIT Group, Inc.,
5.000%, 2/13/2014(b) 406,326
780,000 CIT Group, Inc.,
5.125%, 9/30/2014 711,408
2,370,000 CIT Group, Inc.,
6.000%, 4/01/2036 2,096,230
450,000 CIT Group, Inc., Series EMTN,
5.500%, 12/20/2016, (GBP) 774,767
1,500,000 GMAC LLC,
6.875%, 9/15/2011 1,427,496
---------------
5,416,227
---------------
Non-Captive Finance -- 1.8%
21,120,000 General Electric Capital Corp.,
6.500%, 9/28/2015, (NZD) 14,766,966
4,200,000 General Electric Capital Corp.,
6.625%, 2/04/2010, (NZD) 3,072,520
12,325,000 General Electric Capital Corp., Series EMTN,
6.750%, 9/26/2016, (NZD) 8,829,566
4,000,000 General Electric Capital Corp., Series GMTN,
2.960%, 5/18/2012, (SGD) 2,675,662
13,400,000 General Electric Capital Corp., Series GMTN,
3.485%, 3/08/2012, (SGD) 9,211,740
---------------
38,556,454
---------------
Oil Field Services -- 0.2%
600,000 Transocean Sedco Forex, Inc.,
7.375%, 4/15/2018 660,841
3,840,000 Weatherford International Ltd.,
6.500%, 8/01/2036 3,780,584
---------------
4,441,425
---------------
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------
Paper -- 0.4%
$ 1,395,000 Bowater, Inc.,
6.500%, 6/15/2013 $ 1,018,350
575,000 Georgia-Pacific Corp.,
7.250%, 6/01/2028 526,125
2,460,000 Georgia-Pacific Corp.,
7.375%, 12/01/2025 2,287,800
285,000 Georgia-Pacific Corp.,
7.750%, 11/15/2029(b) 270,750
1,340,000 Georgia-Pacific Corp.,
8.000%, 1/15/2024 1,306,500
2,280,000 Georgia-Pacific Corp.,
8.875%, 5/15/2031 2,285,700
750,000 International Paper Co.,
4.000%, 4/01/2010 727,677
300,000 International Paper Co.,
5.250%, 4/01/2016 283,668
---------------
8,706,570
---------------
Pharmaceuticals -- 2.5%
20,830,000 Astrazeneca Plc,
6.450%, 9/15/2037 21,597,919
28,670,000 Johnson & Johnson,
5.950%, 8/15/2037 29,398,562
500,000 Schering-Plough Corp.,
5.550%, 12/01/2013 496,643
---------------
51,493,124
---------------
Pipelines -- 3.0%
3,685,000 Colorado Interstate Gas Co.,
5.950%, 3/15/2015 3,624,308
125,000 Colorado Interstate Gas Co.,
6.800%, 11/15/2015 129,402
2,010,000 DCP Midstream LP,
6.450%, 11/03/2036, 144A 1,924,127
2,470,000 El Paso Corp.,
6.950%, 6/01/2028 2,294,445
540,000 Energy Transfer Partners LP,
6.125%, 2/15/2017 521,144
1,605,000 Energy Transfer Partners LP,
6.625%, 10/15/2036 1,513,602
9,455,000 Enterprise Products Operating L.P.,
6.300%, 9/15/2017 9,467,925
4,390,000 Kinder Morgan Energy Partners, L.P.,
5.800%, 3/15/2035 3,876,791
310,000 Kinder Morgan Finance,
5.700%, 1/05/2016 281,772
130,000 Kinder Morgan Finance,
6.400%, 1/05/2036 110,785
320,000 Kinder Morgan, Inc., Senior Note,
5.150%, 3/01/2015 285,618
4,665,000 ONEOK Partners LP,
6.650%, 10/01/2036 4,601,271
2,130,000 Plains All American Pipeline LP,
6.125%, 1/15/2017 2,131,998
4,595,000 Plains All American Pipeline LP,
6.650%, 1/15/2037(b) 4,570,908
4,215,000 Southern Natural Gas Co.,
5.900%, 4/01/2017, 144A 4,102,017
2,415,000 Tennessee Gas Pipeline Co.,
7.000%, 10/15/2028(b) 2,458,216
See accompanying notes to financial statements.
10
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ----------------------------------------------------------------------
Pipelines -- continued
$ 20,000,000 Texas Eastern Transmission LP,
6.000%, 9/15/2017, 144A $ 19,928,400
---------------
61,822,729
---------------
Property & Casualty Insurance -- 2.3%
3,460,000 Marsh & McLennan Cos., Inc.,
5.375%, 7/15/2014 3,338,817
12,652,000 Marsh & McLennan Cos., Inc.,
5.750%, 9/15/2015(b) 12,219,580
9,845,000 Marsh & McLennan Cos., Inc.,
5.875%, 8/01/2033(b) 8,487,512
15,875,000 Travelers Cos., Inc.,
6.250%, 6/15/2037 15,312,914
2,830,000 Travelers Property Casualty Corp.,
6.375%, 3/15/2033 2,812,386
4,830,000 Willis North America, Inc.,
6.200%, 3/28/2017 4,792,442
---------------
46,963,651
---------------
Railroads -- 2.0%
5,000,000 Canadian Pacific Railway Ltd.,
4.900%, 6/15/2010, (CAD), 144A 4,983,411
7,465,000 Canadian Pacific Railway Ltd.,
5.950%, 5/15/2037 6,892,867
10,105,000 CSX Corp.,
6.000%, 10/01/2036(b) 9,461,756
18,555,000 CSX Corp.,
6.250%, 3/15/2018 18,652,414
195,000 Missouri Pacific Railroad Co.,
4.750%, 1/01/2020 157,950
243,000 Missouri Pacific Railroad Co.,
4.750%, 1/01/2030 177,390
351,000 Missouri Pacific Railroad Co.,
5.000%, 1/01/2045 242,190
1,700,000 Union Pacific Corp.,
5.375%, 6/01/2033(b) 1,456,404
---------------
42,024,382
---------------
Real Estate Investment Trusts -- 2.5%
4,000,000 Colonial Realty LP,
4.800%, 4/01/2011 3,866,364
625,000 Colonial Realty LP,
5.500%, 10/01/2015(b) 587,215
525,000 Colonial Realty LP,
6.050%, 9/01/2016 507,014
20,000,000 Duke Realty LP,
6.500%, 1/15/2018 19,784,680
5,000,000 Equity One, Inc.,
6.000%, 9/15/2017, 144A 4,746,020
10,500,000 First Industrial LP,
5.950%, 5/15/2017 10,144,722
2,390,000 Highwoods Properties, Inc.,
5.850%, 3/15/2017 2,264,843
2,195,000 Highwoods Properties, Inc.,
7.500%, 4/15/2018 2,334,310
765,000 iStar Financial, Inc.,
5.150%, 3/01/2012 707,854
234,000 iStar Financial, Inc., Series REGS,
5.700%, 3/01/2014(b) 214,944
7,075,000 Realty Income Corp.,
6.750%, 8/15/2019 7,086,306
---------------
52,244,272
---------------
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------
Restaurants -- 0.0%
$ 1,000,000 McDonald's Corp.,
3.628%, 10/10/2010, (SGD) $ 686,579
---------------
Retailers -- 1.8%
12,665,000 Home Depot, Inc.,
5.875%, 12/16/2036 10,817,924
10,320,000 J.C. Penney Corp., Inc.,
6.375%, 10/15/2036 9,656,248
12,000 J.C. Penney Corp., Inc.,
7.125%, 11/15/2023(b) 12,630
7,575,000 Lowes Cos., Inc.,
6.650%, 9/15/2037(b) 7,653,409
10,580,000 Macy's Retail Holdings, Inc.,
6.375%, 3/15/2037 9,673,834
---------------
37,814,045
---------------
Sovereigns -- 10.1%
4,250,000 Canadian Government,
4.000%, 6/01/2016, (CAD) 4,177,148
83,940,000 Canadian Government,
4.250%, 9/01/2008, (CAD) 84,408,373
5,600,000 Canadian Government,
4.250%, 12/01/2008, (CAD) 5,630,853
38,265,000 Canadian Government,
4.250%, 9/01/2009, (CAD) 38,563,149
9,600,000 Canadian Government,
5.500%, 6/01/2010, (CAD) 9,976,896
3,430,000 Canadian Government,
5.750%, 6/01/2033, (CAD) 4,131,242
5,000,000 Canadian Government, Series WH31,
6.000%, 6/01/2008, (CAD) 5,082,843
3,291,600(++) Mexican Fixed Rate Bonds, Series M 20,
8.000%, 12/07/2023, (MXN) 30,224,312
770,000(++) Mexican Fixed Rate Bonds, Series MI-10,
9.000%, 12/20/2012, (MXN) 7,405,444
325,000 Republic of Brazil,
8.875%, 4/15/2024(b) 418,438
22,205,000 Republic of Brazil,
10.250%, 1/10/2028, (BRL) 12,379,318
250,000 Republic of Brazil,
11.000%, 8/17/2040(b) 334,375
6,285,000 Republic of Brazil,
12.500%, 1/05/2022, (BRL) 4,205,772
230,000 Republic of Peru,
6.438%, 3/07/2017(c) 230,000
26,245,000 Republic of South Africa,
13.000%, 8/31/2010, (ZAR) 4,195,817
---------------
211,363,980
---------------
Supermarkets -- 0.8%
1,000,000 Albertson's, Inc.,
6.625%, 6/01/2028 886,929
1,900,000 Albertson's, Inc.,
7.450%, 8/01/2029 1,828,948
3,340,000 Kroger Co.,
6.400%, 8/15/2017 3,405,718
11,100,000 Safeway, Inc.,
6.350%, 8/15/2017 11,277,855
---------------
17,399,450
---------------
See accompanying notes to financial statements.
11
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ------------------------------------------------------------------------------
Supranational -- 2.5%
$ 57,000,000 Eurofima, Series EMTN,
10.000%, 11/03/2008, (ISK) $ 894,842
15,500,000 European Investment Bank,
4.600%, 1/30/2037, (CAD), 144A 14,776,152
22,000,000 Inter-American Development Bank, Series EMTN,
Zero Coupon, 5/11/2009, (BRL) 9,793,781
13,265,000 Inter-American Development Bank, Series EMTN,
6.000%, 12/15/2017, (NZD) 9,164,247
1,023,800,000 Nordic Invest Bank,
13.000%, 9/12/2008, (ISK) 16,567,701
---------------
51,196,723
---------------
Technology -- 2.1%
2,500,000 Arrow Electronics, Inc.,
6.875%, 7/01/2013 2,616,028
2,000,000 Arrow Electronics, Inc.,
6.875%, 6/01/2018 2,067,682
9,000,000 Avnet, Inc.,
5.875%, 3/15/2014 8,970,525
6,230,000 Avnet, Inc.,
6.000%, 9/01/2015 6,090,136
1,540,000 Avnet, Inc.,
6.625%, 9/15/2016 1,554,913
260,000 Corning, Inc.,
6.850%, 3/01/2029 264,677
6,650,000 Corning, Inc.,
7.250%, 8/15/2036 6,973,323
1,365,000 Freescale Semiconductor, Inc.,
10.125%, 12/15/2016(b) 1,269,450
2,965,000 Intuit, Inc.,
5.750%, 3/15/2017 2,829,787
4,700,000 Lucent Technologies, Inc.,
6.450%, 3/15/2029(b) 3,901,000
1,750,000 Motorola, Inc.,
5.220%, 10/01/2097(b) 1,259,405
1,000,000 Motorola, Inc.,
6.500%, 9/01/2025 968,319
1,625,000 Motorola, Inc.,
8.000%, 11/01/2011 1,773,532
3,115,000 Samsung Electronics Co. Ltd.,
7.700%, 10/01/2027, 144A 3,526,971
---------------
44,065,748
---------------
Textile -- 0.0%
25,000 Kellwood Co.,
7.625%, 10/15/2017 21,875
---------------
Tobacco -- 0.5%
8,305,000 Reynolds American, Inc.,
6.750%, 6/15/2017(b) 8,494,146
2,035,000 Reynolds American, Inc.,
7.250%, 6/15/2037 2,127,338
---------------
10,621,484
---------------
Transportation Services -- 0.1%
1,000,000 ERAC USA Finance Co.,
6.800%, 2/15/2008, 144A 1,002,653
---------------
Treasuries -- 17.3%
82,695,000 U.S. Treasury Bonds,
4.500%, 2/15/2036(b) 78,398,747
183,730,000 U.S. Treasury Bonds,
4.750%, 2/15/2037(b) 181,189,382
Principal
Amount (++) Description Value (+)
- -------------------------------------------------------------------------------------
Treasuries -- continued
$ 94,585,000 U.S. Treasury Bonds,
5.375%, 2/15/2031(b) $ 101,250,310
---------------
360,838,439
---------------
Wireless -- 1.6%
1,000,000 America Movil SAB de CV,
4.125%, 3/01/2009 986,048
35,000 Nextel Communications, Inc., Series E,
6.875%, 10/31/2013 35,140
13,965,000 Nextel Communications, Inc., Series F,
5.950%, 3/15/2014 13,332,525
1,400,000 Philippine Long Distance Telephone Co., Series EMTN,
8.350%, 3/06/2017 1,531,180
52,000 Sprint Capital Corp.,
6.875%, 11/15/2028 50,185
93,000 Sprint Nextel Corp.,
6.000%, 12/01/2016 89,329
5,345,000 Vodafone Group Plc,
5.000%, 9/15/2015(b) 5,043,355
12,805,000 Vodafone Group Plc,
6.150%, 2/27/2037 12,287,550
---------------
33,355,312
---------------
Wirelines -- 4.0%
6,625,000 AT&T Corp.,
6.500%, 3/15/2029 6,672,104
1,205,000 AT&T, Inc.,
6.150%, 9/15/2034 1,191,197
14,830,000 AT&T, Inc.,
6.500%, 9/01/2037 15,291,168
1,590,000 Bell Canada,
5.000%, 2/15/2017, (CAD) 1,338,468
270,000 Bell Canada,
7.300%, 2/23/2032, (CAD) 254,801
335,000 Bell Canada, Series M-17,
6.100%, 3/16/2035, (CAD) 276,629
8,125,000 BellSouth Corp.,
6.000%, 11/15/2034(b) 7,821,621
350,000 GTE Corp.,
6.940%, 4/15/2028 363,747
1,625,000 Koninklijke (Royal) KPN NV,
8.375%, 10/01/2030 1,870,768
500,000 Level 3 Financing, Inc.,
9.250%, 11/01/2014(b) 492,500
620,000 New England Telephone & Telegraph,
7.875%, 11/15/2029 688,899
555,000 Qwest Capital Funding, Inc.,
6.500%, 11/15/2018 489,787
2,785,000 Qwest Capital Funding, Inc.,
6.875%, 7/15/2028(b) 2,388,137
1,440,000 Qwest Capital Funding, Inc.,
7.625%, 8/03/2021 1,346,400
1,110,000 Qwest Capital Funding, Inc.,
7.750%, 2/15/2031 1,012,875
90,000 Qwest Corp.,
6.875%, 9/15/2033(b) 84,150
2,905,000 Telecom Italia Capital,
6.000%, 9/30/2034(b) 2,701,110
2,850,000 Telecom Italia Capital,
6.375%, 11/15/2033 2,750,492
10,520,000 Telefonica Emisiones SAU,
7.045%, 6/20/2036(b) 11,205,704
See accompanying notes to financial statements.
12
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Principal
Amount (++) Description Value (+)
- ---------------------------------------------------------------------------------------------------
Wirelines -- continued
$ 1,000,000 Telekom Malaysia Berhad,
7.875%, 8/01/2025, 144A $ 1,163,817
14,445,000 Telus Corp.,
4.950%, 3/15/2017, (CAD) 13,209,119
7,175,000 Verizon Communications,
5.850%, 9/15/2035 6,854,163
2,484,000 Verizon Maryland, Inc.,
5.125%, 6/15/2033(b) 2,049,663
1,330,000 Verizon New York, Inc., Series B,
7.375%, 4/01/2032 1,415,965
---------------
82,933,284
---------------
Total Non-Convertible Bonds (Identified Cost $1,806,706,154) 1,865,464,088
---------------
Convertible Bonds -- 0.7%
Banking -- 0.2%
3,755,000 Wells Fargo & Co.,
5.106%, 5/01/2033(b)(c) 3,737,727
---------------
Independent Energy -- 0.2%
500,000 Devon Energy Corp.,
4.900%, 8/15/2008 873,125
1,750,000 Devon Energy Corp.,
4.950%, 8/15/2008(b) 3,055,938
---------------
3,929,063
---------------
Media Non-Cable -- 0.0%
542,450 Liberty Media LLC,
3.500%, 1/15/2031 525,498
---------------
Pharmaceuticals -- 0.1%
1,455,000 Bristol-Myers Squibb Co.,
5.194%, 9/15/2023(c) 1,460,529
360,000 Watson Pharmaceuticals, Inc.,
1.750%, 3/15/2023 349,650
---------------
1,810,179
---------------
Technology -- 0.0%
710,000 Avnet, Inc.,
2.000%, 3/15/2034 910,575
---------------
Wirelines -- 0.2%
205,000 Level 3 Communications, Inc.,
6.000%, 9/15/2009 195,006
3,740,000 Level 3 Communications, Inc.,
6.000%, 3/15/2010 3,468,850
---------------
3,663,856
---------------
Total Convertible Bonds (Identified Cost $12,750,958) 14,576,898
---------------
Total Bonds and Notes (Identified Cost $1,819,457,112) 1,880,040,986
---------------
Shares/
Principal
Amount (++) Description Value (+)
- -----------------------------------------------------------------------------------------------------
Short-Term Investments -- 28.7%
444,743,899 State Street Securities Lending Quality Trust(d) $ 444,743,899
$ 155,516,000 Tri-Party Repurchase Agreement with Fixed Income Clearing
Corporation, dated 9/28/07 at 3.750% to be repurchased at
$155,564,599 on 10/01/07 collateralized by $154,950,000
Federal National Mortgage Association, 6.060% due 6/06/17
with a value of $158,630,063 including accrued interest
(Note 2g) 155,516,000
---------------
Total Short-Term Investments (Identified Cost $600,259,899) 600,259,899
---------------
Total Investments -- 118.8%
(Identified Cost $2,419,717,011)(a) 2,480,300,885
Other assets less liabilities -- (18.8)% (393,223,312)
---------------
Net Assets -- 100.0% $ 2,087,077,573
===============
(++) 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:
At September 30, 2007, the net unrealized appreciation on investments based on a
cost of $2,421,014,737 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 $ 78,054,174
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (18,768,026)
---------------
Net unrealized appreciation $ 59,286,148
===============
(b) All or a portion of this security was on loan to brokers at September 30, 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). The coupon rate shown represents the rate at period end.
(d) Represents investments of security lending collateral.
(e) Illiquid Security. At September 30, 2007 the value of these securities amounted to
$2,723,114 or 0.1% of total net assets.
144A Securities exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers. At September 30, 2007, the total value of these
securities amounted to $175,206,767 or 8.4% of net assets.
EMTN Euro Medium Term Note
GMTN Global Medium Term Note
MTN Medium Term Note
BRL Brazilian Real
CAD Canadian Dollar
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
See accompanying notes to financial statements.
13
LOOMIS SAYLES INVESTMENT GRADE BOND FUND -- PORTFOLIO OF INVESTMENTS (continued)
Investments as of September 30, 2007
Holdings at September 30, 2007 as a Percentage of Net Assets (Unaudited)
Treasuries 17.3%
Sovereigns 10.1
Electric 4.4
Wirelines 4.2
Banking 3.6
Pipelines 3.0
Media Cable 2.9
Pharmaceuticals 2.6
Real Estate Investment Trusts 2.5
Supranational 2.5
Food & Beverage 2.3
Property & Casualty Insurance 2.3
Healthcare 2.2
Government Guaranteed 2.2
Technology 2.1
Independent Energy 2.1
Railroads 2.0
Other, less than 2% each 21.8
Currency Exposure at September 30, 2007 as a Percentage of Net Assets
(Unaudited)
United States Dollar 67.5%
Canadian Dollar 11.1
New Zealand Dollar 2.4
Brazilian Real 2.2
Other, less than 2% each 6.9
See accompanying notes to financial statements.
14
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2007
ASSETS
Investments at cost $2,419,717,011
Net unrealized appreciation 60,583,874
--------------
Investments at value (a) 2,480,300,885
Cash 326,560
Foreign currency at value (identified cost $800,466) 835,375
Receivable for Fund shares sold 36,311,768
Receivable for securities sold 386,385
Interest receivable 22,180,920
Securities lending income receivable 110,439
--------------
TOTAL ASSETS 2,540,452,332
--------------
LIABILITIES
Collateral on securities loaned, at value (Note 2) 444,743,899
Payable for securities purchased 3,529,169
Payable for Fund shares redeemed 3,955,042
Management fees payable (Note 4) 639,570
Administrative fees payable (Note 4) 86,120
Deferred Trustees' fees (Note 4) 88,429
Service and distribution fees payable (Note 4) 78,654
Other accounts payable and accrued expenses 253,876
--------------
TOTAL LIABILITIES 453,374,759
--------------
NET ASSETS $2,087,077,573
==============
NET ASSETS CONSIST OF :
Paid-in capital $2,008,638,899
Undistributed net investment income 21,428,235
Accumulated net realized loss on investments and foreign
currency transactions (3,763,789)
Net unrealized appreciation on investments and foreign
currency translations 60,774,228
--------------
NET ASSETS $2,087,077,573
==============
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE:
Class A shares:
Net assets $ 834,736,157
==============
Shares of beneficial interest 71,170,153
==============
Net asset value and redemption price per share $ 11.73
==============
Offering price per share (100/95.5 of 11.73) (Note 1) $ 12.28
==============
Class B shares: (redemption price per share is equal to
net asset value less any applicable contingent deferred
sales charge) (Note 1)
Net assets $ 17,082,141
==============
Shares of beneficial interest 1,462,575
==============
Net asset value and offering price per share $ 11.68
==============
Class C shares: (redemption price per share is equal to
net asset value less any applicable contingent deferred
sales charge) (Note 1)
Net assets $ 605,933,634
==============
Shares of beneficial interest 51,959,975
==============
Net asset value and offering price per share (Note 1) $ 11.66
==============
Class Y shares:
Net assets $ 448,873,063
==============
Shares of beneficial interest 38,258,299
==============
Net asset value, offering and redemption price per share $ 11.73
==============
Class J Shares:
Net assets $ 180,452,578
==============
Shares of beneficial interest 15,403,700
==============
Net asset value and redemption price per share $ 11.71
==============
Offering price per share (100/96.50 of $11.71) (Note 1) $ 12.13
==============
(a) Including securities on loan with a market values of: $ 437,221,297
==============
See accompanying notes to financial statements.
15
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2007
INVESTMENT INCOME
Interest $ 65,354,306
Securities lending income (Note 2) 460,627
Less net foreign taxes withheld (20,629)
------------
65,794,304
------------
Expenses
Management fees (Note 4) 4,482,250
Service fees - Class A (Note 4) 1,029,135
Service and distribution fees - Class B (Note 4) 113,065
Service and distribution fees - Class C (Note 4) 2,896,303
Service and distribution fees - Class J (Note 4) 1,436,011
Trustees' fees and expenses (Note 4) 45,094
Administrative fees (Note 4) 617,404
Custodian fees and expenses 114,767
Transfer agent fees and expenses - Class A 280,938
Transfer agent fees and expenses - Class B 8,438
Transfer agent fees and expenses - Class C 193,483
Transfer agent fees and expenses - Class Y 93,687
Transfer agent fees and expenses - Class J 8,942
Audit fees 41,865
Legal fees - Class A 9,780
Legal fees - Class B 300
Legal fees - Class C 6,232
Legal fees - Class Y 5,256
Legal fees - Class J 19,114
Shareholder reporting expenses - Class A 47,160
Shareholder reporting expenses - Class B 5,128
Shareholder reporting expenses - Class C 39,510
Shareholder reporting expenses - Class Y 14,495
Shareholder reporting expenses - Class J 68,289
Registration fees - Class A 71,723
Registration fees - Class B 12,416
Registration fees - Class C 43,507
Registration fees - Class Y 44,043
Registration fees - Class J 2,108
Expense recapture - Class Y (Note 4) 3,559
Miscellaneous expenses 25,476
------------
Total expenses 11,779,478
Less fee reduction and/or expense reimbursement (Note 4) (830)
------------
Net expenses 11,778,648
------------
Net investment income 54,015,656
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
Realized gain on:
Investments - net 15,353,844
Foreign currency transactions - net 343,011
Change in unrealized appreciation on:
Investments - net 35,363,125
Foreign currency translations - net 177,047
------------
Net realized and unrealized gain on investments and foreign currency transactions 51,237,027
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $105,252,683
============
See accompanying notes to financial statements.
16
STATEMENT OF CHANGES IN NET ASSETS
Year Ended
September 30,
2007
---------------------
---------------------
FROM OPERATIONS:
Net investment income $ 54,015,656
Net realized gain on investments and foreign currency transactions 15,696,855
Net change in unrealized appreciation on investments and foreign currency translations 35,540,172
---------------------
Net increase in net assets resulting from operations 105,252,683
---------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class A (20,224,906)
Class B (482,009)
Class C (12,175,921)
Class Y (11,008,683)
Class J (9,643,008)
Capital gains
Class A --
Class B --
Class C --
Class Y --
Class J --
---------------------
Total distributions (53,534,527)
---------------------
INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (NOTE 7) 1,503,474,421
---------------------
Net increase in net assets 1,555,192,577
---------------------
NET ASSETS
Beginning of year 531,884,996
---------------------
End of year $ 2,087,077,573
=====================
UNDISTRIBUTED NET INVESTMENT INCOME $ 21,428,235
=====================
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 year 411,033,005
---------------------
End of year $ 531,884,996
=====================
UNDISTRIBUTED NET INVESTMENT INCOME $ 6,585,027
=====================
See accompanying notes to financial statements.
17
This Page Intentionally Left Blank
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
9/30/2007 $ 11.35 $ 0.58 $ 0.42 $ 1.00 $ (0.62) $ -- $ (0.62)
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)
Class B
9/30/2007 11.31 0.47 0.43 0.90 (0.53) -- (0.53)
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(f) 11.21 0.02 0.30 0.32 -- -- --
Class C
9/30/2007 11.30 0.49 0.42 0.91 (0.55) -- (0.55)
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(f) 11.21 0.02 0.30 0.32 -- -- --
Class Y
9/30/2007 11.36 0.61 0.41 1.02 (0.65) -- (0.65)
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)
Class J
9/30/2007 11.34 0.52 0.42 0.94 (0.57) -- (0.57)
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)
(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 reduce its management fee during the period. Without this
reimbursement/fee reduction, if applicable, expenses would have been higher.
See Note 4.
(c)Annualized for the periods less than one year, if applicable.
(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.
(f)From commencement of Class operations on September 12, 2003 through
September 30, 2003.
(g)Includes expense recapture of 0.06%, 0.09% and 0.03% for Class A, Class C
and Class J, respectively. See Note 4.
(h)Includes expense recapture of less than 0.01% for Class Y. See Note 4.
See accompanying notes to financial statements.
19
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 (%)
- ---------- ---------- ----------- ---------- --------- -------------- ---------
$ 11.73 9.1 $ 834,736 0.83 0.83 5.05 35
11.35 5.6 152,054 0.92(g) 0.92(g) 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
11.68 8.2 17,082 1.70 1.71 4.16 35
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
11.66 8.3 605,934 1.57 1.57 4.30 35
11.30 4.9 82,863 1.70(g) 1.70(g) 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
11.73 9.3 448,873 0.55(h) 0.55(h) 5.33 35
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
11.71 8.5 180,453 1.28 1.28 4.57 35
11.34 5.3 214,894 1.30(g) 1.30(g) 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
20
NOTES TO FINANCIAL STATEMENTS
September 30, 2007
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 the equity funds of the Trust are presented in separate reports.
The Fund offers Class A, Class B, Class C, Class Y and Class J shares. On
June 1, 2007, the Board of Trustees of the Natixis Funds (formerly IXIS Advisor
Funds) approved the termination of offering of Class B shares. Effective
July 30, 2007, no new accounts may be opened in Class B shares. No additional
investments into Class B shares may be made after October 12, 2007. Existing
Class B shareholders may continue to reinvest dividends into Class B shares and
exchange their Class B shares for Class B shares of other Natixis Funds subject
to existing exchange privileges as described in the Prospectus.
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
can not be directly attributed to a fund are generally apportioned based on the
relative net assets of each of the funds in the Trust. Expenses of 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 (other than short-term obligations
purchased with an original or remaining maturity of sixty days or less) are
generally valued on the basis of evaluated bids 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.
21
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
c. Foreign Currency Translation. The books and records of the Fund are
maintained in U.S. dollars. The value of securities, currencies and other
assets and liabilities denominated in currencies other than U.S. dollars are
translated into U.S. dollars based upon foreign exchange rates prevailing at
the end of the period. Purchases and sales of investment securities, income and
expenses are translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates
from fluctuations arising from changes in market prices of the investment
securities. Such changes are included with the net realized and unrealized gain
or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign
currency, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the amounts of
dividends, interest and foreign withholding taxes recorded on the Fund's books
and the U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the value of
assets and liabilities, other than investment securities, at the end of the
fiscal period, resulting from changes in exchange rates.
The Fund may use foreign currency exchange contracts to facilitate transactions
in foreign-denominated investments. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
The Fund may purchase investments of foreign issuers. Investing in securities
of foreign issuers involves special risks and considerations not typically
associated with investing in U.S. companies and securities of the U.S.
government. These risks include revaluation of currencies and the risk of
appropriation. Moreover, the markets for securities of many foreign issuers may
be less liquid and the prices of such securities may be more volatile than
those of comparable U.S. companies and the U.S. government.
d. Forward Foreign Currency Contracts. The Fund may 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 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 September 30, 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.
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.
Notwithstanding the projected regulatory implementation date of March 31, 2008
for the Fund, Management has already implemented FIN 48 and has performed an
analysis of the Fund's tax positions taken or that will be taken on federal and
state tax returns that remain subject to examinations (tax years ended
September 30, 2004-2007) in connection with the adoption of FIN 48 and has
concluded that no provision for income tax is required. Accordingly, there is
no impact on the Fund's net assets at September 30, 2007 or results of
operations for the year then ended. Additionally, Fund Management is not aware
of any events that are reasonably possible to occur in the next twelve months
that would result in the amounts of any unrecognized tax benefits significantly
increasing or decreasing for the Fund.
The Fund may be subject to foreign taxes on income and gains on investments
that are accrued based upon the Fund's understanding of the tax rules and
regulations that exist in the countries in which the Fund invests. Foreign
governments may also impose taxes or other payments on investments with respect
to foreign securities. Such taxes are accrued as applicable.
f. Dividends and Distributions to Shareholders. Dividends and distributions are
recorded on ex-dividend date. The timing and characterization of certain income
and capital gains distributions are determined 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, capital loss carryforwards, post-October loss
deferrals and wash sales. Distributions from net investment income and
short-term capital gains are considered to be ordinary income for tax purposes.
22
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
The tax characterization of distributions is determined on an annual basis. The
tax character of distributions paid to shareholders during the years ended
September 30, 2007 and 2006 was as follows:
2007 Distributions Paid From: 2006 Distributions Paid From:
------------------------------------- -------------------------------------
Ordinary Long-Term Ordinary Long-Term
Income Capital Gains Total Income Capital Gains Total
----------- ------------- ----------- ----------- ------------- -----------
$53,534,527 $-- $53,534,527 $26,394,301 $7,668,603 $34,062,904
Differences between these amounts and those reported in the Statement of
Changes in Net Assets are primarily attributable to different book and tax
treatment for short-term capital gains.
As of September 30, 2007, the components of distributable earnings on a tax
basis were as follows:
Undistributed ordinary income $21,516,666
Capital Loss Carryforward:
Expires September 30, 2014 (215,200)
Expires September 30, 2015 (1,753,185)
-----------
Total capital loss carryforward (1,968,385)
Deferred net capital losses (post-October 2006) (497,678)
Unrealized appreciation 59,476,502
-----------
Total accumulated earnings $78,527,105
===========
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.
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 value of securities on loan to borrowers and the value of collateral
held by the Fund with respect to such loans at September 30, 2007 were
$437,221,297 and $444,743,899, 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 Pronouncement. In September, 2006, Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 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 FAS 157 will have on the Fund's
financial statements.
3. Purchases and Sales of Securities. For the year ended September 30, 2007,
purchases and sales of securities (excluding short-term investments and U.S.
Government/Agency Securities and including paydowns) were $1,162,678,540 and
$125,269,952, respectively. Purchases and sales of U.S. Government/Agency
Securities (excluding short-term investments and including paydowns) were
$521,700,187 and $246,155,485, 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.
23
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
Loomis Sayles has given a binding undertaking to the Fund to reduce 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 year ended
September 30, 2007, the expense limits as a percentage of average daily net
assets under the expense limitation agreement were as follows:
Expense Limits 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 year ended September 30, 2007, the management fees for the Fund were
$4,482,250 (0.40% of average daily net assets).
For the year ended September 30, 2007, expenses have been reimbursed to the
Fund in the amount of $830.
Loomis Sayles shall be permitted to recover expenses 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
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 reduced. The
amounts subject to possible reimbursement under the expense limitation
agreements at September 30, 2007 were as follows:
Expenses Subject
to Possible Reimbursement
Class until September 30, 2008
- ----- -------------------------
A $ --
B 830
C --
Y --
J --
----
Total $830
----
Certain officers and employees of Loomis Sayles are also officers or Trustees
of the Trust. Loomis Sayles' general partner is indirectly owned by Natixis
Global Asset Management, L.P. ("Natixis US") (formerly IXIS Asset Management US
Group, L.P.), which is part of Natixis Global Asset Management (formerly IXIS
Asset Management Group), an international asset management group based in
Paris, France.
b. Administrative Fees. Natixis Asset Management Advisors, ("Natixis Advisors")
(formerly IXIS Asset Management Advisors, L.P.) provides certain administrative
services for the Fund and has subcontracted with State Street Bank to serve as
sub-administrator. Natixis Advisors is a wholly-owned subsidiary of Natixis US.
Pursuant to an agreement among Natixis Funds Trust I (formerly IXIS Advisors
Funds Trust I), Natixis Funds Trust II (formerly IXIS Advisors Funds Trust II),
Natixis Funds Trust III (formerly IXIS Advisors Funds Trust III), Natixis Funds
Trust IV (formerly IXIS Advisors Funds Trust IV), Natixis Cash Management Trust
(formerly IXIS Advisor Cash Management Trust), ("Natixis Funds Trusts"), Loomis
Sayles Funds I and the Trust ("Loomis Sayles Funds Trusts") and Natixis
Advisors (the "Administrative Service Agreement"), each Fund pays Natixis
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 Natixis
Funds Trusts and Loomis Sayles Funds Trusts, 0.0625% of the next $5 billion,
0.0500% of the next $20 billion and 0.045% of such assets in excess of $30
billion, subject to an annual aggregate minimum fee for the Natixis Funds
Trusts and Loomis Sayles Funds Trusts of $5 million. Effective September 17,
2007, pursuant to an amendment to the Administrative Service Agreement, the
Hansberger International Series were added to the Agreement and pays Natixis
Advisors monthly its prorated portion of the above mentioned fees.
Prior to July 1, 2007, each Fund paid Natixis 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 Natixis 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
Natixis Funds Trusts and Loomis Sayles Funds Trusts of $5 million, which is
reevaluated on an annual basis.
For the year ended September 30, 2007, amounts paid to Natixis Advisors for
administrative fees were $617,404.
Effective October 1, 2007, State Street Bank has agreed to reduce the fees it
receives from Natixis Advisors for serving as sub-administrator to the Fund.
Also effective October 1, 2007, Natixis Advisors has given a binding
contractual undertaking to the Fund to waive the administrative fees paid by
the Fund in an amount equal to the reduction in sub-administrative fees
discussed above. The waiver is in effect through June 30, 2008.
c. Service and Distribution Fees. Natixis Distributors, L.P. ("Natixis
Distributors") (formerly IXIS Asset Management Distributors, L.P.), a
wholly-owned subsidiary of Natixis US, has entered into a distribution
agreement with the Trust. Pursuant to this agreement, Natixis 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 Natixis US.
24
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
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 Natixis 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 Natixis 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 Natixis 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 Natixis 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 Natixis 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 Natixis 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 year ended September 30, 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
------- ------- ------- ------- ------- ------- -------
$1,029,135 $28,266 $724,076 $478,670 $84,799 $2,172,227 $957,341
d. Sub-Transfer Agent Fee. Natixis Distributors has entered into agreements
with financial intermediaries to provide certain recordkeeping, processing,
shareholder communications and other services to customers of the
intermediaries and has agreed to compensate the intermediaries for providing
those services. Certain services would be provided by the Fund if the shares of
those customers were registered directly with the Fund's transfer agent.
Accordingly, the Fund agreed to pay a portion of the intermediary fees
attributable to shares of the Fund held by intermediaries (which generally are
a percentage of the value of shares sold) not exceeding what the Fund would
have paid its transfer agent had each customer's shares been registered
directly with the transfer agent instead of held through the intermediary. The
Distributor pays the remainder of the fees. Listed below are the fees incurred
by the Fund which are reflected in the transfer agent fees and expenses in the
Statement of Operations.
Class A Class B Class C Class Y Class J
------- ------- ------- ------- -------
$164,752 $4,925 $115,247 $84,580 --
e. Commissions. The Fund has been informed that commissions (including CDSCs)
on Fund shares paid to Natixis Distributors by investors in Class A, B and C
shares of the Fund were $3,038,154 and commissions paid to Loomis Sayles
Distributors by investors in Class J shares of the Fund were $31,502 for the
year ended September 30, 2007.
f. Trustees Fees and Expenses. The Fund does not pay any compensation directly
to its officers or Trustees who are directors, officers or employees of Natixis
Advisors, Natixis Distributors, Natixis US, 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 Natixis Funds Trusts, the
Loomis Sayles Funds Trusts and the Hansberger International Series (effective
September 12, 2007) 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 Natixis Funds Trusts, the Loomis
Sayles Funds Trusts and the Hansberger International Series 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 Natixis Funds
Trusts and Loomis Sayles Funds Trusts, participates in a $75,000,000 committed
line of credit provided by State Street Bank. Interest is charged to each
participating fund based on its borrowings at a rate per annum equal to the
Federal Funds rate plus 0.50%. In addition, a commitment fee of 0.09% per
annum, payable at the end of each calendar quarter, is accrued and apportioned
among the participating funds based on their average daily unused portion of
the line of credit. For the year ended September 30, 2007, the Fund had no
borrowings under this agreement.
25
NOTES TO FINANCIAL STATEMENTS (continued)
September 30, 2007
6. Shareholders. At September 30, 2007, the Loomis Sayles Employees' Profit
Sharing Retirement Plan held 216,298 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:
Year Ended
September 30, 2007
-----------------------------------
Shares Amount
---------------- -----------------
Class A
Issued from the sale of shares 62,683,448 $ 718,750,421
Issued in connection with the reinvestment of distributions 1,215,478 13,890,899
Redeemed (6,122,274) (70,007,079)
---------------- -----------------
Net change 57,776,652 $ 662,634,241
---------------- -----------------
Class B
Issued from the sale of shares 1,066,683 $ 12,151,938
Issued in connection with the reinvestment of distributions 21,567 245,601
Redeemed (114,073) (1,298,212)
---------------- -----------------
Net change 974,177 $ 11,099,327
---------------- -----------------
Class C
Issued from the sale of shares 46,067,893 $ 525,272,541
Issued in connection with the reinvestment of distributions 406,871 4,631,767
Redeemed (1,848,031) (21,049,506)
---------------- -----------------
Net change 44,626,733 $ 508,854,802
---------------- -----------------
Class Y
Issued from the sale of shares 34,163,364 $ 391,585,504
Issued in connection with the reinvestment of distributions 578,308 6,613,133
Redeemed (3,224,099) (36,901,729)
---------------- -----------------
Net change 31,517,573 $ 361,296,908
---------------- -----------------
Class J
Issued from the sale of shares 550,000 $ 6,284,374
Issued in connection with the reinvestment of distributions -- --
Redeemed (4,100,330) (46,695,231)
---------------- -----------------
Net change (3,550,330) $ (40,410,857)
---------------- -----------------
Increase (decrease) from capital share transactions 131,344,805 $ 1,503,474,421
================ =================
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
================ =================
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of Loomis Sayles Funds II and Shareholders of Loomis Sayles
Investment Grade Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Loomis Sayles Investment Grade
Bond Fund, a series of Loomis Sayles Funds II (the "Fund"), at September 30,
2007, and the results of its operations, the changes in its net assets and the
financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at September 30, 2007 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 21, 2007
27
TRUSTEE AND OFFICER INFORMATION
The tables below provide certain information regarding the Trustees and
officers of Loomis Sayles Funds II (the "Trust"). Unless otherwise indicated,
the address of all persons below is 399 Boylston Street, Boston, MA 02116. The
Trust's Statement of Additional Information includes additional information
about the Trustees of the Trust and is available by calling Loomis Sayles at
800-343-2029.
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Year of Birth Served and Term of Office* During Past 5 Years** and Other Directorships Held
- ---------------------- -------------------------- --------------------- ----------------------------
INDEPENDENT TRUSTEES
Graham T. Allison, Jr. Trustee, Douglas Dillon Professor and 41;
(1940) since 2003 Director of the Belfer Center Director, Taubman Centers,
Contract Review and for Science and International Inc. (real estate investment
Governance Committee Affairs, John F. Kennedy trust)
Member School of Government,
Harvard University
Charles D. Baker Trustee, President and Chief Executive 41;
(1956) since 2005 Officer, Harvard Pilgrim None
Contract Review and Health Care (health plan)
Governance Committee
Member
Edward A. Benjamin Trustee, Retired 41;
(1938) since 2002 None
Chairman of the Contract
Review and Governance
Committee
Daniel M. Cain Trustee, President and Chief Executive 41;
(1945) since 2003 Officer, Cain Brothers & Director, Sheridan
Chairman of the Audit Company, Incorporated Healthcare Inc. (physician
Committee (investment banking) practice management)
Trustee, Lexington Strategic
Asset Corporation (realty
investment trust)
Richard Darman Trustee, Partner, The Carlyle Group 41;
(1943) since 2003 (investments); formerly, Director and Chairman of the
Contract Review and Professor, John F. Kennedy Board of Directors, AES
Governance Committee School of Government, Corporation (international
Member Harvard University power company)
Jonathan P. Mason Trustee, Chief Financial Officer, Cabot 41;
(1958) since 2007 Corp. (specialty chemicals); None
Audit Committee Member formerly, Vice President and
Treasurer, International Paper
Company; formerly, Chief
Financial Officer, Carter Holt
Harvey (forest products)
Sandra O. Moose Chairperson of the Board President, Strategic Advisory 41;
(1942) of Trustees since Services (management Director, Verizon
November 2005 consulting); formerly, Senior Communications; Director,
Trustee, Vice President and Director, Rohm and Haas Company
since 2003 The Boston Consulting Group, (specialty chemicals);
Ex officio member of the Inc. (management consulting) Director, AES Corporation
Audit Committee and (international power
Contract Review and company)
Governance Committee
28
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the Number of Portfolios in
Trust, Length of Time Principal Occupation(s) Fund Complex Overseen***
Name and Year of Birth Served and Term of Office* During Past 5 Years** and Other Directorships Held
- ---------------------- -------------------------- --------------------- ----------------------------
INDEPENDENT TRUSTEES
continued
Cynthia L. Walker Trustee, Executive Dean for 41;
(1956) since 2005 Administration (formerly, None
Audit Committee Member Dean for Finance & CFO),
Harvard Medical School
INTERESTED TRUSTEES
Robert J. Blanding/1/ Chief Executive Officer and President, Chairman, Director 41;
(1947) Trustee, and Chief Executive Officer, None
555 California Street since 2002 Loomis, Sayles & Company,
San Francisco, CA 94104 L.P.
John T. Hailer/2/ President and Trustee, President and Chief Executive 41;
(1960) since 2003 Officer, Natixis Asset None
Management Advisors, L.P.,
Natixis Distributors, L.P. ,
Natixis Global Associates, Inc.
and Natixis Global Asset
Management North America;
President and Chief Executive
Officer, Natixis Funds Trust I,
Natixis Funds Trust II, Natixis
Funds Trust III, Natixis Funds
Trust IV, Natixis Cash
Management Trust, and
Hansberger International
Series; Executive Vice
President of Loomis Sayles
Funds I
* Each Trustee serves until retirement, resignation or removal from the Board
of Trustees. The current retirement age is 72. The position of Chairperson
of the Board is appointed for a two-year term. Ms. Moose was re-appointed to
serve an additional two-year term as the Chairperson of the Board of
Trustees on September 14, 2007.
** Each person listed above, except as noted, holds the same position(s) with
the Natixis Funds, Loomis Sayles Funds Trusts and Hansberger International
Series. Previous positions during the past five years with Natixis
Distributors, L.P. (the "Distributor"), Natixis Asset Management Advisors,
L.P. ("Natixis Advisors") or Loomis, Sayles & Company, L.P. are omitted if
not materially different from a Trustee's or officer's current position with
such entity.
***The Trustees of the Trusts serve as Trustees of a fund complex that includes
all series of Natixis Funds Trust I, Natixis Funds Trust II, Natixis Funds
Trust III, Natixis Funds Trust IV, Natixis Cash Management Trust, Loomis
Sayles Funds I, Loomis Sayles Funds II and Hansberger International Series
(the "Funds' Trusts"). The number of portfolios overseen does not include
AEW Real Estate Income Fund which liquidated on April 13, 2007, or IXIS
Equity Diversified Portfolio, which liquidated on August 3, 2007. The number
of portfolios overseen includes, as of September 14, 2007, the five series
of the Hansberger International Series.
/1/ Mr. Blanding is deemed an "interested person" of the Trusts because he
holds the following positions with affiliated persons of the Trusts:
President, Chairman, Director and Chief Executive Officer of Loomis,
Sayles & Company, L.P.
/2/ Mr. Hailer is deemed an "interested person" of the Trusts because he holds
the following positions with affiliated persons of the Trusts: Chairman of
the Board, President and Chief Executive Officer of Natixis Distribution
Corporation; President and Chief Executive Officer of Natixis Global Asset
Management North America, Natixis Global Associates, Inc., Natixis Asset
Management Advisors, L.P. and the Distributor.
29
TRUSTEE AND OFFICER INFORMATION
Position(s) Held with the
Trust Length of Time
Name and Year of Birth Served and Term of Office* Principal Occupation(s) During Past 5 Years**
- ---------------------- -------------------------- ---------------------------------------------
OFFICERS OF THE TRUST
Coleen Downs Dinneen Secretary, Clerk and Senior Vice President, General Counsel, Secretary
(1960) Chief Legal Officer, and Clerk (formerly, Deputy General Counsel,
since September 2004 Assistant Secretary and Assistant Clerk), Natixis
Distribution Corporation, Natixis Distributors, L.P.
and Natixis Asset Management Advisors, L.P.
Daniel J. Fuss Executive Vice President, Vice Chairman and Director, Loomis, Sayles &
(1933) since June 2003 Company, L.P.
One Financial Center
Boston, MA 02111
Russell L. Kane Chief Compliance Officer, Chief Compliance Officer for Mutual Funds, Senior
(1969) since May 2006; Vice President, Deputy General Counsel, Assistant
Assistant Secretary since Secretary and Assistant Clerk, Natixis Distributors,
June 2004; L.P. and Natixis Asset Management Advisors, L.P.;
Anti-Money Laundering Officer Vice President, Associate General Counsel,
since April 2007 Assistant Secretary and Assistant Clerk, Natixis
Distribution Corporation; formerly, Senior
Counsel, Columbia Management Group.
Michael C. Kardok Treasurer, Principal Financial Senior Vice President, Natixis Asset Management
(1959) and Accounting Officer, Advisors, L.P. and Natixis Distributors, L.P.;
since October 2004 formerly, Senior Director, PFPC Inc.
Robert Krantz Executive Vice President Executive Vice President, Natixis Distributors, L.P.
(1964) and Natixis Asset Management Advisors, L.P.
* Each officer of the Trusts serves for an indefinite term in accordance with
the Trusts' current By-laws until the date his or her successor is elected
and qualified, or until he or she sooner dies, retires, is removed or
becomes disqualified.
** Each person listed above, except as noted, holds the same position(s) with
the Natixis Funds Trusts, Loomis Sayles Funds Trusts and Hansberger
International Series. Previous positions during the past five years with the
Distributor, Natixis Advisors or Loomis Sayles are omitted, if not
materially different from a Trustee's or officer's current position with
such entity.
30
Item 2. Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant's
principal executive officer, principal financial officer and persons performing
similar functions.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Registrant has established an audit committee.
Ms. Cynthia L. Walker, Mr. Daniel M. Cain and Mr. Jonathan P. Mason are members
of the audit committee and have been designated as "audit committee financial
experts" by the Board of Trustees. Each of these individuals is also an
Independent Trustee of the Registrant.
Item 4. Principal Accountant Fees and Services.
Fees billed by the Principal Accountant for services rendered to the Registrant.
The table below sets forth fees billed by the principal accountant,
PricewaterhouseCoopers LLP, for the past two fiscal years for professional
services rendered in connection with a) the audit of the Registrant's annual
financial statements and services provided in connection with regulatory
filings; b) audit-related services (including services that are reasonably
related to the performance of the audit of the Registrant's financial
statements and but not reported under "Audit Fees"); c) tax compliance, tax
advice and tax planning and d) all other fees billed for professional services
rendered by the principal accountant to the Registrant, other than the services
provided reported as a part of (a) through (c) of this Item.
Audit fees Audit-related fees/1/ Tax fees/2/ All other fees/3/
----------------- --------------------- --------------- -----------------
2006 2007 2006 2007 2006 2007 2006 2007
-------- -------- ----------- --------- ------- ------- ---------- ----
Loomis Sayles Funds II $351,270 $468,651 $13,873 $4,000 $80,200 $97,567 $50,402 $--
- --------
1. Audit-related fees consist of the performance of agreed-upon procedures
related to the Registrant's deferred compensation plan and a change in the
Trust's custodian (2006) and review of 485b filing for Loomis Sayles Value
Fund in relation to new classes of shares offered (2007).
2. The tax fees consist of review of year-end shareholder reporting and a
review of the Registrant's tax returns (2006 and 2007).
3. All other fees consist of filing and translation services with respect to
Japanese shareholders in Loomis Sayles Investment Grade Bond Fund and a
review of income and expense allocation methods in conjunction with the
annual renewal of the management contract.
Aggregate fees billed to the Registrant for non-audit services during 2006 and
2007 were $144,475 and $101,567, respectively.
Fees billed by the Principal Accountant for services rendered to the Adviser
and Control Affiliates.
The following table sets forth the non-audit services provided by the
Registrant's principal accountant to Loomis, Sayles & Company, L.P. and
entities controlling, controlled by or under common control with Loomis,
Sayles & Company, L.P. that provide ongoing services to the Registrant
("Control Affiliates") for the last two fiscal years.
Audit-related fees Tax fees All other fees
------------------ --------- --------------
2006 2007 2006 2007 2006 2007
--------- ------- ---- ---- ------- ----
Control Affiliates $17,250 $12,000 $-- $-- $45,800 $--
Aggregate fees billed to Control Affiliates for non-audit services during 2006
and 2007 were $63,050 and $12,000, respectively.
None of the audit-related, tax and other services provided by the Registrant's
principal accountant were approved by the Audit Committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Audit Committee Pre Approval Policies.
Annually, the Registrant's Audit Committee reviews the audit, audit-related,
tax and other non-audit services together with the projected fees, for services
proposed to be rendered to the Trust and/or other entities for which
pre-approval is required during the upcoming year. Any subsequent revisions to
already pre-approved services or fees (including fee increases) and requests
for pre-approval of new services would be presented for consideration quarterly
as needed.
If, in the opinion of management, a proposed engagement by the Registrant's
independent accountants needs to commence before the next regularly scheduled
Audit Committee meeting, any member of the Audit Committee who is an
independent Board member is authorized to pre-approve the engagement, but only
for engagements to provide audit, audit related and tax services. This approval
is subject to review of the full Audit Committee at its next quarterly meeting.
All other engagements require the approval of all the members of the Audit
Committee.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
Included as part of the Report to Shareholders filed as Item 1 herewith.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Securities Holders.
There were no material changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Trustees.
Item 11. Controls and Procedures.
The Registrant's principal executive officer and principal financial officer
have concluded that the Registrant's disclosure controls and procedures are
sufficient to ensure that information required to be disclosed by the
Registrant in this Form N-CSR was recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms, based upon such officers' evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report.
There were no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's last fiscal quarter of the
period covered by the report that has materially affected, or is reasonably
likely to materially affect, the Registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a) (1) Code of Ethics required by Item 2 hereof, filed herewith as exhibit
(a)(1).
(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) Certification of Principal Executive Officer and Principal Financial
Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002 are
filed herewith as Exhibit (b).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Loomis Sayles Funds II
By: /s/ Robert J. Blanding
------------------------------
Name: Robert J. Blanding
Title: Chief Executive Officer
Date: November 28, 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: November 28, 2007
By: /s/ Michael C. Kardok
------------------------------
Name: Michael C. Kardok
Title: Treasurer
Date: November 28, 2007