As filed with the Securities and Exchange Commission on August 30, 1996
Registration Nos. 811-6241 and 33-39133
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 [X]
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 12 [X]
(Check appropriate box or boxes)
LOOMIS SAYLES FUNDS
(Exact name of registrant as specified in charter)
One Financial Center, Boston, MA 02111
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 482-2450
Name and address
of agent for service with a copy to:
- -------------------- ---------------
Daniel J. Fuss Truman S. Casner, Esq.
Loomis, Sayles & Company, Incorporated Ropes & Gray
One Financial Center One International Place
Boston, MA 02111 Boston, MA 02110
----------
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to [X] on September 4, 1996
paragraph (b) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to [ ] on [date] pursuant to
paragraph (a)(2) paragraph (a)(1)
[ ] 75 days after filing pursuant to [ ] on [date] pursuant to
paragraph (a)(2)
<PAGE>
paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
DECLARATION PURSUANT TO RULE 24f-2
----------------------------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite number or amount of its shares of
beneficial interest under the Securities Act of 1933. The Registrant filed a
Rule 24f-2 Notice with respect to the Registrant's fiscal year ended December
31, 1995 on February 29, 1996.
-2-
<PAGE>
LOOMIS SAYLES FUNDS
Cross Reference Sheet
Items required by Form N-1A
PART A
Item No. Registration Statement Caption Caption in Prospectus
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Cover Page; The Trust; Investment
Registrant Objectives and Policies; More
Information About the Funds'
Investments
5. Management of the Fund Cover Page; The Trust; The Funds'
Investment Adviser; Fund Expenses;
Portfolio Transactions; Back Cover
6. Capital Stock and Other The Trust; Shareholder Services;
Securities Dividends, Capital Gain Distributions
and Taxes
7. Purchase of Securities Being How to Purchase Shares; Shareholder
Offered Services
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
-3-
<PAGE>
PART B
Item No. Registration Statement Caption Caption in Prospectus
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Not Applicable
History
13. Investment Objectives Investment Objectives,
and Policies Policies and Restrictions
14. Management of the Fund Management of the Trust
15. Control Persons and Management of the Trust
Principal Holders of
Securities
16. Investment Advisory and Investment Advisory and
Other Services Other Services
17. Brokerage Allocation and Portfolio Transactions
Other Practices and Brokerage
18. Capital Stock and Other How to Redeem Shares
Securities (Prospectus);
Redemptions; Dividends,
Capital Gain
Distributions and Taxes
(Prospectus); Income
Dividends, Capital Gain
Distributions and Tax
Status; Description of
the Trust
19. Purchase, Redemption and How to Purchase Shares
Pricing of Securities (Prospectus); Shareholder
Being Offered Services; How to Redeem
Shares (Prospectus);
Redemptions; Net Asset
Value and Public Offering
Price
-4-
<PAGE>
20. Tax Status Dividends, Capital Gain
Distributions and Taxes
(Prospectus); Income
Dividends, Capital Gain
Distributions and Tax
Status
21. Underwriters Not Applicable
22. Calculations of Not Applicable
Performance Data
23. Financial Statements Financial Statements
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.
-5-
<PAGE>
[LOOMIS SAYLES FUNDS LOGO]
One Financial Center (bullet) Boston, Massachusetts 02111 (bullet)
(617) 482-2450
The Loomis Sayles Funds are a group of eleven no-load mutual funds (the
"Funds"):
Loomis Sayles Growth Fund
Loomis Sayles Growth & Income Fund
Loomis Sayles Small Cap Fund
Loomis Sayles International Equity Fund
Loomis Sayles Worldwide Fund
Loomis Sayles Bond Fund
Loomis Sayles High Yield Fund
Loomis Sayles Global Bond Fund
Loomis Sayles U.S. Government Securities Fund
Loomis Sayles Municipal Bond Fund
Loomis Sayles Short-Term Bond Fund
Each Fund is separately managed and has its own investment objective and
policies. Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the investment
adviser of each Fund.
This Prospectus concisely describes the information that you should know
before investing in any Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated May 1, 1996, as
revised September 4, 1996, is available free of charge; write to Loomis
Sayles Funds, One Financial Center, Boston, Massachusetts 02111 or telephone
800-633-3330. The Statement of Additional Information, which contains more
detailed information about the Funds, has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated by reference into this
Prospectus.
For information about:
(bullet) Establishing an account
(bullet) Account procedures and status
(bullet) Exchanges
(bullet) Shareholder services
Call 800-626-9390
For all other information about the Funds:
Call 800-633-3330
TABLE OF CONTENTS
Page
Summary of Expenses 2
Financial Highlights 4
The Trust 9
Investment Objectives and Policies 9
More Information About the Funds' Investments
and Risk Considerations 11
The Funds' Investment Adviser 14
Fund Expenses 15
Portfolio Transactions 15
How to Purchase Shares 15
Shareholder Services 17
How to Redeem Shares 17
Dividends, Capital Gain Distributions and Taxes 18
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE LOOMIS SAYLES HIGH YIELD FUND WILL NORMALLY INVEST AT LEAST 65% OF ITS
ASSETS IN LOWER- RATED SECURITIES, COMMONLY KNOWN AS "JUNK BONDS" AND MAY
INVEST SUBSTANTIALLY ALL OF ITS ASSETS IN SUCH SECURITIES. INVESTMENTS OF
THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF PRINCIPAL AND NON-PAYMENT
OF INTEREST. INVESTORS SHOULD ASSESS CAREFULLY THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE HIGH YIELD FUND. SEE "MORE INFORMATION ABOUT THE FUNDS'
INVESTMENTS AND RISK CONSIDERATIONS--LOWER RATED FIXED INCOME SECURITIES" AND
"APPENDIX A."
Prospectus May 1, 1996, as revised September 4, 1996
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist you in understanding the
various expenses that, as an investor in a Fund, you will bear indirectly.
Except in the case of the Worldwide and High Yield Funds, the information is
based on expenses for the Funds' fiscal year ended December 31, 1995. The
Worldwide and High Yield Funds did not commence operations until 1996; the
information about each shown below is based on annualized projected expenses
for the period from the Fund's commencement of operations through December
31, 1996. The information below should not be considered a representation of
past or future expenses, as actual expenses may be greater or less than those
shown. Also, the assumed 5% annual return in the Example should not be
considered a representation of investment performance as actual performance
will depend upon actual investment results of securities held in the
particular Fund's portfolio.
<TABLE>
<CAPTION>
Growth & Small International
Growth Income Cap Equity Worldwide
Fund Fund Fund Fund Fund
------ -------- ------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as % of offering price) none none none none none
Maximum Sales Load Imposed on Reinvested Dividends
(as % of offering price) none none none none none
Deferred Sales Load (as % of original purchase price or
redemption proceeds as applicable) none none none none none
12b-1 Fees none none none none none
Redemption Fees1 none none none none none
Exchange Fees none none none none none
Annual Operating Expenses (as a percentage of net assets):
Management Fees .75% .75% 1.00% 1.00% .75%
Other Operating Expenses (after expense reimbursements
where indicated) .33% .45% .25% .45% .25%(2)
Total Operating Expenses (after expense reimbursements
where indicated) 1.08% 1.20% 1.25% 1.45% 1.00%(2)
Example:
You would pay the following expenses on a $1,000 investment
assuming a 5% annual return (with or without a redemption
at the end of each time period):
One Year $ 11 $ 12 $ 13 $ 15 $ 10(3)
Three Years $ 34 $ 38 $ 40 $ 46 $ 32
Five Years $ 60 $ 66 $ 69 $ 79
Ten Years $ 132 $ 145 $ 151 $ 174
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Global U.S. Gov't Municipal
Bond High Yield Bond Securities Bond Short-Term
Fund Fund Fund Fund Fund Bond Fund
----- ---------- ------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as % of offering price) none none none none none none
Maximum Sales Load Imposed on Reinvested Dividends
(as % of offering price) none none none none none none
Deferred Sales Load (as % of original purchase
price or redemption proceeds as applicable) none none none none none none
12b-1 Fees none none none none none none
Redemption Fees1 none 2.00% none none none none
Exchange Fees none none none none none none
Annual Operating Expenses (as a percentage of net
assets):
Management Fees .60% .60% .75% .60% .60% .50%
Other Operating Expenses (after expense
reimbursements where indicated) .19% .15%(2) .75%(2) .40%(2) .40%(2) .50%(2)
Total Operating Expenses (after expense
reimbursements where indicated) .79% .75%(2) 1.50%(2) 1.00%(2) 1.00%(2) 1.00%(2)
Example:
You would pay the following expenses on a $1,000
investment assuming a 5% annual return (with a
redemption at the end of each time period):
One Year $ 8 $28(3) $ 15 $ 10 $ 10 $ 10
Three Years $25 $24 $ 47 $ 32 $ 32 $ 32
Five Years $44 $ 82 $ 55 $ 55 $ 55
Ten Years $98 $179 $122 $122 $122
You would pay the following expenses on a $1,000
investment assuming a 5% annual return (without a
redemption at the end of each time period):
One Year $ 8 $ 8 $ 15 $ 10 $ 10 $ 10
Three Years $25 $24 $ 47 $ 32 $ 32 $ 32
Five Years $44 $ 82 $ 55 $ 55 $ 55
Ten Years $98 $179 $122 $122 $122
</TABLE>
(1) A $5 charge applies to any wire transfer of redemption proceeds from any
Fund. A 2.00% redemption fee applies with respect to shares of the High
Yield Fund redeemed within one (1) year of purchase. Loomis Sayles may,
in its discretion, waive redemption fees on shares of the High Yield Fund
as set forth under the heading "How to Redeem Shares" if it determines
that there are minimal brokerage and transaction costs incurred in
connection with the redemption.
(2) Loomis Sayles has voluntarily agreed, for an indefinite period, to limit
these Funds' total operating expenses to the percentages of net assets
shown above. Without this agreement, Total Operating Expenses for the
fiscal year ended December 31, 1995 would have been 1.69% for the Global
Bond Fund, 1.22% for the U.S. Government Securities Fund, 2.02% for the
Municipal Bond Fund, and 1.03% for the Short-Term Bond Fund, and
estimated annualized Total Operating Expenses for the period through
December 31, 1996 would be 2.55% and 1.94% for the Worldwide and High
Yield Funds, respectively.
(3) Under SEC rules, new funds are required to show expenses for the one- and
three-year periods only.
3
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share of each Fund outstanding throughout the indicated periods)
The information presented below for the six months ended June 30, 1996 is
unaudited. The information presented below for prior periods is included in
financial statements of the Funds that have been audited by Coopers & Lybrand
L.L.P., independent accountants. The following information should be read in
conjunction with the financial statements and the notes thereto contained in
the Funds' 1996 Semiannual Report and 1996 Annual Report, which are incorporated
by reference in the Statement of Additional Information.
<TABLE>
<CAPTION>
Growth Fund
-------------------------------------------------------------
Six
Months
Ended May 16*
June 30, Year Ended Dec. 31, to
1996 ------------------------------------ Dec. 31,
(Unaudited) 1995 1994 1993 1992 1991
-------- ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 15.27 $ 12.50 $ 13.02 $ 12.46 $ 12.01 $ 10.00
------ ---- ---- ---- ---- -------
Income from investment
operations--
Net investment income
(loss) (0.04) (0.00) (0.02) 0.00 (0.04) 0.00
Net realized and unrealized
gain (loss) on
investments 1.90 3.86 (0.45) 1.16 0.49 2.45
------ ---- ---- ---- ---- -------
Total from investment
operations 1.86 3.86 (0.47) 1.16 0.45 2.45
------ ---- ---- ---- ---- -------
Less distributions--
Dividends from net
investment income 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from net
realized capital gains 0.00 (1.09) (0.04) (0.60) 0.00 (0.44)
Distributions from capital 0.00 0.00 (0.01) 0.00 0.00 0.00
------ ---- ---- ---- ---- -------
Total distributions 0.00 (1.09) (0.05) (0.60) 0.00 (0.44)
------ ---- ---- ---- ---- -------
Net asset value, end of
period $ 17.13 $ 15.27 $ 12.50 $ 13.02 $ 12.46 $ 12.01
====== ==== ==== ==== ==== =======
Total return (%) 12.2 30.9 (3.7) 9.3 3.8 24.5
Net assets, end of period
(000) $48,740 $45,011 $36,580 $32,385 $24,451 $16,105
Ratio of operating expenses
to average net assets (%) 1.09** 1.08 1.16 1.20 1.50 1.50**
Ratio of net investment
income to average net
assets (%) (0.48)** (0.29) (0.14) (0.17) (0.45) 0.01**
Portfolio turnover rate (%) 116** 48 46 64 98 69**
Average Commission Rate*** $0.0362 -- -- -- -- --
Without giving effect to
voluntary expense
limitations:
The ratios of operating
expenses to average
net assets would have
been (%) 1.09** 1.08 1.16 1.20 1.51 1.66**
Net investment income per
share would have been $ (0.04) $ 0.00 $ (0.02) $ 0.00 $ (0.04) $ (0.01)
</TABLE>
<TABLE>
<CAPTION>
Growth & Income Fund
-------------------------------------------------------------
Six
Months
Ended May 13*
June 30, Year Ended Dec. 31, to
1996 ------------------------------------ Dec. 31,
(Unaudited) 1995 1994 1993 1992 1991
-------- ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 14.57 $ 11.80 $ 12.49 $ 11.53 $ 10.54 $10.00
------ ---- ---- ---- ---- -------
Income from investment
operations--
Net investment income
(loss) 0.12 0.23 0.15 0.13 0.13 0.12
Net realized and unrealized
gain (loss) on
investments 0.92 3.93 (0.26) 1.24 1.36 0.59
------ ---- ---- ---- ---- -------
Total from investment
operations 1.04 4.16 (0.11) 1.37 1.49 0.71
------ ---- ---- ---- ---- -------
Less distributions--
Dividends from net
investment income 0.00 (0.23) (0.15) (0.12) (0.13) (0.12)
Distributions from net
realized capital gains 0.00 (1.16) (0.43) (0.29) (0.37) (0.05)
Distributions from capital 0.00 0.00 0.00 0.00 0.00 0.00
------ ---- ---- ---- ---- -------
Total distributions 0.00 (1.39) (0.58) (0.41) (0.50) (0.17)
------ ---- ---- ---- ---- -------
Net asset value, end of
period $ 15.61 $ 14.57 $ 11.80 $ 12.49 $ 11.53 $10.54
====== ==== ==== ==== ==== =======
Total return (%) 7.1 35.2 (0.9) 11.9 14.1 7.2
Net assets, end of period
(000) $38,153 $36,465 $25,946 $20,657 $12,279 $7,689
Ratio of operating expenses
to average net assets (%) 1.18** 1.20 1.33 1.50 1.50 1.50**
Ratio of net investment
income to average net
assets (%) 1.51** 1.61 1.28 1.23 1.42 2.09**
Portfolio turnover rate (%) 44** 60 48 53 67 27**
Average Commission Rate*** $0.0549 -- -- -- -- --
Without giving effect to
voluntary expense
limitations:
The ratios of operating
expenses to average
net assets would have
been (%) 1.18** 1.20 1.33 1.56 2.19 2.59**
Net investment income per
share would have been $ 0.12 $ 0.23 $ 0.15 $ 0.12 $ 0.07 $ 0.06
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades
upon which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs, or spreads on shares traded on a principal basis.
4
<PAGE>
<TABLE>
<CAPTION>
Small Cap Fund
-------------------------------------------------------------
Six
Months
Ended May 16*
June 30, Year Ended Dec. 31, to
1996 ------------------------------------ Dec. 31,
(Unaudited) 1995 1994 1993 1992 1991
-------- ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 15.33 $ 12.86 $ 14.13 $ 12.88 $ 12.49 $ 10.00
------ ---- ---- ---- ---- -------
Income from investment
operations--
Net investment income
(loss) 0.04 0.04 (0.04) 0.00 (0.06) (0.01)
Net realized and unrealized
gain (loss) on
investments 2.39 4.06 (1.12) 3.15 1.67 3.03
------ ---- ---- ---- ---- -------
Total from investment
operations 2.43 4.10 (1.16) 3.15 1.61 3.02
------ ---- ---- ---- ---- -------
Less distributions--
Dividends from net
investment income 0.00 (0.04) 0.00 0.00 0.00 0.00
Distributions from net
realized capital gains 0.00 (1.59) (0.11) (1.90) (1.22) (0.53)
Distributions from paid-in
capital 0.00 0.00 0.00 0.00 0.00 0.00
------ ---- ---- ---- ---- -------
Total distributions 0.00 (1.63) (0.11) (1.90) (1.22) (0.53)
------ ---- ---- ---- ---- -------
Net asset value, end of
period $ 17.76 $ 15.33 $ 12.86 $ 14.13 $ 12.88 $ 12.49
====== ==== ==== ==== ==== =======
Total return (%) 15.9 32.1 (8.2) 24.7 13.1 30.5
Net assets, end of period
(000) $107,530 $90,455 $73,126 $67,553 $39,244 $14,581
Ratio of operating expenses
to average net assets (%) 1.22** 1.25 1.27 1.35 1.50 1.50**
Ratio of net investment
income to average net
assets (%) 0.50** 0.29 (0.30) (0.38) (0.79) (0.19)**
Portfolio turnover rate (%) 78** 155 87 106 109 56**
Average Commission Rate*** $ 0.0311 -- -- -- -- --
Without giving effect to
voluntary expense
limitations:
The ratios of operating
expenses to average
net assets would have
been (%) 1.22** 1.25 1.27 1.35 1.66 2.43**
Net investment income per
share would have been $ 0.04 $ 0.04 $ (0.04) $ 0.00 $ (0.07) $ (0.06)
</TABLE>
<TABLE>
<CAPTION>
International Equity Fund
-------------------------------------------------------------
Six
Months
Ended May 10*
June 30, Year Ended Dec. 31, to
1996 ------------------------------------ Dec. 31,
(Unaudited) 1995 1994 1993 1992 1991
-------- ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 11.65 $ 11.61 $ 12.90 $ 9.64 $ 10.27 $10.00
------ ---- ---- ---- ---- -------
Income from investment
operations--
Net investment income
(loss) 0.11 0.14 0.15 0.11 0.10 0.08
Net realized and unrealized
gain (loss) on
investments 0.82 0.87 (0.38) 3.61 (0.62) 0.29
------ ---- ---- ---- ---- -------
Total from investment
operations 0.93 1.01 (0.23) 3.72 (0.52) 0.37
------ ---- ---- ---- ---- -------
Less distributions--
Dividends from net
investment income 0.00 (0.14) (0.14) (0.10) (0.10) (0.08)
Distributions from net
realized capital gains 0.00 (0.83) (0.92) (0.36) (0.01) 0.00
Distributions from paid-in
capital 0.00 0.00 0.00 0.00 0.00 (0.02)
------ ---- ---- ---- ---- -------
Total distributions 0.00 (0.97) (1.06) (0.46) (0.11) (0.10)
------ ---- ---- ---- ---- -------
Net asset value, end of
period $ 12.58 $ 11.65 $ 11.61 $ 12.90 $ 9.64 $10.27
====== ==== ==== ==== ==== =======
Total return (%) 8.0 8.7 (1.8) 38.5 (5.1) 3.7
Net assets, end of period
(000) $85,356 $79,488 $73,189 $56,560 $14,937 $6,916
Ratio of operating expenses
to average net assets (%) 1.50** 1.45 1.46 1.50 1.50 1.50**
Ratio of net investment
income to average net
assets (%) 1.78** 1.16 1.30 1.20 1.64 1.55**
Portfolio turnover rate (%) 162** 133 116 128 101 109**
Average Commission Rate*** $0.0007 -- -- -- -- --
Without giving effect to
voluntary expense
limitations:
The ratios of operating
expenses to average
net assets would have
been (%) 1.50** 1.45 1.46 1.72 2.77 3.66**
Net investment income per
share would have been $ 0.11 $ 0.14 $ 0.15 $ 0.09 $ 0.02 $(0.03)
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades
upon which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs, or spreads on shares traded on a principal basis.
5
<PAGE>
<TABLE>
<CAPTION>
Worldwide
Fund Global Bond Fund
----------- ------------------------------------------------------------
May 1, Six
1996* Months May 10*
to Ended Year Ended Dec. 31, to
June 30, June 30, ----------------------------------- Dec. 31,
1996 1996 1995 1994 1993 1992 1991
----------- -------- ------ ------ ------ ----- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.00 $ 11.39 $ 9.82 $ 11.06 $ 10.32 $11.38 $10.00
--------- ------ ---- ---- ---- --- -------
Income from investment operations--
Net investment income (loss) 0.06 0.39 1.04 0.67 0.54 0.70 0.37
Net realized and unrealized gain (loss) on
investments 0.06 0.26 1.31 (1.63) 0.96 (0.60) 1.31
--------- ------ ---- ---- ---- --- -------
Total from investment operations 0.12 0.65 2.35 (0.96) 1.50 0.10 1.68
--------- ------ ---- ---- ---- --- -------
Less distributions--
Dividends from net investment income 0.00 0.00 (0.78) (0.04) (0.49) (0.77) (0.30)
Distributions in excess of net investment
income 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from net realized capital
gains 0.00 0.00 0.00 0.00 (0.27) (0.39) 0.00
Distributions from capital 0.00 0.00 0.00 (0.24) 0.00 0.00 0.00
--------- ------ ---- ---- ---- --- -------
Total distributions 0.00 0.00 (0.78) (0.28) (0.76) (1.16) (0.30)
--------- ------ ---- ---- ---- --- -------
Net asset value, end of period $ 10.12 $ 12.04 $ 11.39 $ 9.82 $ 11.06 $10.32 $11.38
========= ====== ==== ==== ==== === =======
Total return (%) 1.2 5.7 23.9 (8.7) 14.6 0.8 16.9
Net assets, end of period (000) $ 4,727 $11,633 $10,304 $25,584 $21,378 $9,968 $4,308
Ratio of operating expenses to average net
assets (%) 1.00** 1.50** 1.50 1.30 1.50 1.50 1.50**
Ratio of net investment income to average net
assets (%) 4.66** 6.66** 8.17 7.02 5.54 6.99 6.81**
Portfolio turnover rate (%) 31** 147** 148 153 150 72 137**
Average Commission Rate*** $0.0158
Without giving effect to voluntary expense
limitations:
The ratios of expenses to average net
assets would have been (%) 4.46** 2.35** 1.69 1.30 1.51 2.58 3.99**
Net investment income per share would
have been $ 0.02 $ 0.34 $ 1.02 $ 0.67 $ 0.54 $ 0.59 $ 0.23
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
*** For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades
upon which commissions are charged. This rate generally does not reflect
mark-ups, mark-downs, or spreads on shares traded on a principal basis.
6
<PAGE>
<TABLE>
<CAPTION>
Bond Fund
--------------------------------------------------------------
Six
Months
Ended May 16*
June 30, Year Ended Dec. 31, to
1996 ------------------------------------- Dec. 31,
(Unaudited) 1995 1994 1993 1992 1991
-------- ------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 12.29 $ 10.05 $ 11.37 $ 10.36 $ 10.23 $10.00
------ ----- ---- ---- ---- -------
Income from investment
operations--
Net investment income
(loss) 0.44 0.82 0.83 0.84 0.76 0.52
Net realized and unrealized
gain (loss) on
investments (0.37) 2.32 (1.29) 1.43 0.67 0.36
------ ----- ---- ---- ---- -------
Total from investment
operations 0.07 3.14 (0.46) 2.27 1.43 0.88
------ ----- ---- ---- ---- -------
Less distributions--
Dividends from net
investment income (0.19) (0.82) (0.84) (0.81) (0.76) (0.52)
Distributions in excess of
net investment income 0.00 0.00 (0.02) 0.00 0.00 0.00
Distributions from net
realized capital gains 0.00 (0.08) 0.00 (0.45) (0.54) (0.13)
Distributions from capital 0.00 0.00 0.00 0.00 0.00 0.00
------ ----- ---- ---- ---- -------
Total distributions (0.19) (0.90) (0.86) (1.26) (1.30) (0.65)
------ ----- ---- ---- ---- -------
Net asset value, end of
period $ 12.17 $ 12.29 $ 10.05 $ 11.37 $ 10.36 $10.23
====== ===== ==== ==== ==== =======
Total return (%) 0.6 32.0 (4.1) 22.2 14.3 8.9
Net assets, end of period
(000) $337,258 $255,710 $82,985 $64,222 $18,472 $9,922
Ratio of operating expenses
to average net assets (%) 0.78** 0.79 0.84 0.94 1.00 1.00**
Ratio of net investment
income to average net
assets (%) 7.98** 8.34 7.92 8.26 7.50 8.97**
Portfolio turnover rate (%) 58** 35 87 170 101 126**
Without giving effect to
voluntary expense
limitations:
The ratios of expenses to
average net assets
would have been (%) 0.78** 0.79 0.84 0.94 1.55 1.78**
Net investment income per
share would have been $ 0.44 $ 0.82 $ 0.83 $ 0.84 $ 0.70 $ 0.47
</TABLE>
<TABLE>
<CAPTION>
Municipal Bond Fund
----------------------------------------------------------
Six
Months
Ended May 29*
June 30, Year Ended Dec. 31, to
1996 --------------------------------- Dec. 31,
(Unaudited) 1995 1994 1993 1992 1991
-------- ----- ----- ----- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $11.53 $10.41 $11.54 $10.95 $10.55 $10.00
------ --- --- --- ---- -------
Income from investment
operations--
Net investment income
(loss) 0.26 0.52 0.52 0.51 0.51 0.24
Net realized and unrealized
gain (loss) on
investments (0.43) 1.16 (1.13) 0.74 0.46 0.56
------ --- --- --- ---- -------
Total from investment
operations (0.17) 1.68 (0.61) 1.25 0.97 0.80
------ --- --- --- ---- -------
Less distributions--
Dividends from net
investment income (0.26) (0.52) (0.52) (0.51) (0.51) (0.23)
Distributions in excess of
net investment income 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from net
realized capital gains 0.00 (0.04) 0.00 (0.15) (0.06) (0.02)
Distributions from capital 0.00 0.00 0.00 0.00 0.00 0.00
------ --- --- --- ---- -------
Total distributions (0.26) (0.56) (0.52) (0.66) (0.57) (0.25)
------ --- --- --- ---- -------
Net asset value, end of
period $11.10 $11.53 $10.41 $11.54 $10.95 $10.55
====== === === === ==== =======
Total return (%) (1.5) 16.5 (5.4) 11.6 9.4 8.1
Net assets, end of period
(000) $7,907 $7,961 $7,270 $5,160 $2,200 $ 706
Ratio of operating expenses
to average net assets (%) 1.00** 1.00 1.00 1.00 1.00 1.00**
Ratio of net investment
income to average net
assets (%) 4.62** 4.72 4.79 4.50 4.81 5.03**
Portfolio turnover rate (%) 29** 41 28 36 32 26**
Without giving effect to
voluntary expense
limitations:
The ratios of expenses to
average net assets
would have been (%) 2.53** 2.02 2.37 3.22 7.65 21.58**
Net investment income per
share would have been $ 0.17 $ 0.41 $ 0.37 $ 0.26 $(0.19) $(0.74)
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
7
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Securities Fund
-------------------------------------------------------------
Six
Months
Ended May 21*
June 30, Year Ended Dec. 31, to
1996 ------------------------------------ Dec. 31,
(Unaudited) 1995 1994 1993 1992 1991
-------- ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.64 $ 9.22 $ 10.53 $ 10.45 $ 10.77 $10.00
------ ---- ---- ---- ---- -------
Income from investment
operations--
Net investment income 0.33 0.66 0.64 0.64 0.64 0.40
Net realized and unrealized
gain (loss) on
investments (0.83) 1.42 (1.30) 1.00 0.27 1.11
------ ---- ---- ---- ---- -------
Total from investment
operations (0.50) 2.08 (0.66) 1.64 0.91 1.51
------ ---- ---- ---- ---- -------
Less distributions--
Dividends from net
investment income (0.16) (0.66) (0.65) (0.65) (0.59) (0.40)
Distributions from net
realized capital gains 0.00 0.00 0.00 (0.91) (0.64) (0.34)
------ ---- ---- ---- ---- -------
Total distributions (0.16) (0.66) (0.65) (1.56) (1.23) (0.74)
------ ---- ---- ---- ---- -------
Net asset value, end of
period $ 9.98 $ 10.64 $ 9.22 $ 10.53 $ 10.45 $10.77
====== ==== ==== ==== ==== =======
Total return (%) (4.7) 23.0 (6.3) 15.7 8.8 15.3
Net assets, end of period
(000) $22,212 $19,499 $17,341 $18,317 $10,899 $6,248
Ratio of operating expenses
to average net assets (%) 1.00** 1.00 1.00 1.00 1.00 1.00**
Ratio of net investment
income to average net
assets (%) 6.38** 6.47 6.60 5.95 6.54 7.01**
Portfolio turnover rate (%) 105** 169 242 277 344 273**
Without giving effect to
voluntary expense
limitations:
The ratios of expenses to
average net assets would
have been (%) 1.19** 1.22 1.22 1.29 2.01 2.39**
Net investment income per
share would have been $ 0.32** $ 0.64 $ 0.62 $ 0.61 $ 0.54 $ 0.32
</TABLE>
<TABLE>
<CAPTION>
Short-Term Bond Fund
-------------------------------------------------------
Six
Months
Ended August 3*
June 30, Year Ended December 31, to
1996 -------------------------- December 31,
(Unaudited) 1995 1994 1993 1992
-------- ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 9.81 $ 9.46 $ 9.95 $ 9.87 $10.00
------ ---- ---- ---- -----------
Income from investment
operations--
Net investment income 0.27 0.63 0.66 0.59 0.22
Net realized and unrealized
gain (loss) on
investments (0.18) 0.35 (0.49) 0.08 (0.13)
------ ---- ---- ---- -----------
Total from investment
operations 0.09 0.98 0.17 0.67 0.09
------ ---- ---- ---- -----------
Less distributions--
Dividends from net
investment income (0.27) (0.63) (0.66) (0.59) (0.22)
Distributions from net
realized capital gains 0.00 0.00 0.00 0.00 0.00
------ ---- ---- ---- -----------
Total distributions (0.27) (0.63) (0.66) (0.59) (0.22)
------ ---- ---- ---- -----------
Net asset value, end of
period $ 9.63 $ 9.81 $ 9.46 $ 9.95 $ 9.87
====== ==== ==== ==== ===========
Total return (%) 0.9 10.6 1.8 7.0 0.9
Net assets, end of period
(000) $19,063 $26,039 $19,440 $15,226 $5,121
Ratio of operating expenses
to average net assets (%) 1.00** 1.00 1.00 1.00 1.00**
Ratio of net investment
income to average net
assets (%) 5.59** 6.46 6.88 5.97 5.49**
Portfolio turnover rate (%) 95** 214 34 81 31**
Without giving effect to
voluntary expense
limitations:
The ratios of expenses to
average net assets would
have been (%) 1.12** 1.03 1.33 1.55 3.74**
Net investment income per
share would have been $ 0.26 $ 0.62 $ 0.63 $ 0.54 $ 0.11
</TABLE>
* Commencement of operations.
** Computed on an annualized basis.
NOTE: Further information about each Fund's performance is contained in the
Funds' semiannual and annual reports to shareholders, which may be obtained
without charge.
8
<PAGE>
THE TRUST
Each Fund is a series of Loomis Sayles Funds (the "Trust"). The Trust is a
diversified open-end management investment company organized as a
Massachusetts business trust. The Trust is authorized to issue an unlimited
number of full and fractional shares of beneficial interest in multiple
series. Shares are freely transferable and entitle shareholders to receive
dividends as determined by the Trust's board of trustees and to cast a vote
for each share held at shareholder meetings. The Trust does not generally
hold shareholder meetings and will do so only when required by law.
Shareholders may call meetings to consider removal of the Trust's trustees.
INVESTMENT OBJECTIVES AND POLICIES
Loomis Sayles Growth Fund The Fund's investment objective is long-term growth
of capital.
The Fund seeks to achieve its objective by investing substantially all of
its assets in common stocks or their equivalent. Investments are selected
based on their growth potential; current income is not a consideration. The
Fund may invest in companies with relatively small market capitalization, as
well as in larger companies. The Fund may invest a limited portion of its
assets in securities of foreign issuers.
Loomis Sayles Growth & Income Fund The Fund's investment objective is
long-term growth of capital and income.
The Fund seeks to achieve its objective by investing substantially all of
its assets in common stocks or their equivalent which Loomis Sayles considers
to be undervalued in relation to the issuer's earnings, dividends, assets and
growth prospects. The Fund may invest a limited portion of its assets in
securities of foreign issuers.
Loomis Sayles Small Cap Fund The Fund's investment objective is long-term
capital growth from investments in common stocks or their equivalent.
The Fund seeks to achieve its objective by investing primarily in stocks of
small cap companies with good earnings growth potential that Loomis Sayles
believes are undervalued by the market. The Fund will normally invest at
least 65% of its total assets in companies with market capitalization of less
than $1 billion and may invest up to 35% of its assets in larger companies.
Loomis Sayles seeks to build a core small cap portfolio of solid growth
company stocks, with a smaller emphasis on special situations and turnarounds
(companies that have experienced significant business problems but which
Loomis Sayles believes have favorable prospects for recovery), as well as
unrecognized stocks. The Fund may invest a limited portion of its assets in
securities of foreign issuers. Current income is not a consideration in
selecting the Fund's investments.
Loomis Sayles International Equity Fund The Fund's investment objective is
high total investment return through a combination of capital appreciation
and current income.
The Fund seeks to achieve its objective by investing primarily in equity
securities of companies organized or headquartered outside the United States.
Under normal conditions the Fund will invest at least 65% of its total assets
in equity securities of issuers of at least three countries outside the
United States, and no more than 20% of its assets in issuers headquartered in
any one country. For temporary defensive purposes, the Fund may invest as
much as 100% of its assets in issuers from one or two countries, which may
include the United States.
Loomis Sayles Worldwide Fund The Fund's investment objective is high total
investment return through a combination of capital appreciation and current
income.
The Fund seeks to achieve its objective by investing in U.S. and foreign
equity and debt securities. The allocation of the Fund's assets among the
four sectors of domestic equities, international equities, domestic bonds and
international bonds will be made by Loomis Sayles' Global Asset Allocation
Group. The Fund will normally invest its assets in securities of issuers from
at least three countries, one of which will be the United States. The Fund
may invest less than 35% of its assets in fixed income securities of below
investment grade quality (commonly referred to as "junk bonds"). The Fund may
also invest in collateralized mortgage obligations ("CMOs") and Rule 144A
securities. (See "More Information about the Funds' Investments" below.)
The Fund may engage in options and forward contract transactions to hedge
against changes in the value of securities and the currencies in which they
are denominated.
Loomis Sayles Bond Fund The Fund's investment objective is high total
investment return through a combination of current income and capital
appreciation.
The Fund seeks to achieve its objective by normally investing substantially
all of its assets in debt securities (including convertibles), although up to
20% of its assets may be invested in preferred stocks. At least 65% of the
Fund's total assets will normally be invested in bonds. The Fund may invest
any portion of its assets in securities of Canadian issuers, and a limited
portion of its assets in securities of other foreign issuers. The Fund will
also invest less than 35% of its assets in securities of below investment
grade quality (commonly referred to as "junk bonds").
9
<PAGE>
The Fund may invest in CMOs and Rule 144A securities.
The percentages of the Fund's assets invested during the fiscal year ended
December 31, 1995 in securities assigned to the various rating categories by
Moody's and Standard & Poor's were as follows: "AAA"/"Aaa" 13.2%; "AA"/"Aa"
9.2%; "A"/"A" 10.9%; "BBB"/"Baa" 32.3%; "BB"/"Ba" 12.0%; "B"/"B" 12.7%;
"CCC"/"Caa" 9.7%.
Loomis Sayles High Yield Fund The Fund's investment objective is high total
investment return through a combination of current income and capital
appreciation.
The Fund seeks to attain its objective by normally investing substantially
all of its assets in debt securities, although up to 20% of its assets may be
invested in preferred stocks and up to 10% of its assets may be invested in
common stocks. The Fund may also invest in convertible bonds, when-issued
securities, CMOs and Rule 144A securities. The Fund may invest any portion of
its assets in securities of Canadian issuers and up to 50% of its assets in
the securities of other foreign issuers.
The Fund will normally invest at least 65% of its assets in fixed income
securities of below investment grade quality, which are securities rated
below BBB by Standard & Poor's or below Baa by Moody's, including securities
in the lowest rating categories, and unrated securities that Loomis Sayles
determines to be of comparable quality (commonly referred to as "junk
bonds"). See "More Information about the Funds' Investments--Lower Rated
Fixed Income Securities."
Loomis Sayles Global Bond Fund The Fund's investment objective is high total
investment return through a combination of high current income and capital
appreciation.
The Fund seeks to achieve its objective by investing primarily in
investment grade fixed income obligations (including convertibles and CMOs)
denominated in various currencies, including U.S. dollars, or in
multicurrency units.
Under normal conditions, the Fund will invest at least 65% of its total
assets in bonds of issuers from at least three countries which may include
the United States, and no more than 40% of its assets in issuers
headquartered in any one country. However, up to 100% of the Fund's assets
may be denominated in U.S. dollars. For temporary defensive purposes, the
Fund may invest as much as 100% of its assets in debt securities, rated AAA
by Standard & Poor's or Aaa by Moody's at the time of purchase, of issuers
from one or two countries, which may include the United States.
The Fund may engage in options and forward contract transactions to hedge
against changes in the value of securities and the currencies in which they
are denominated.
Loomis Sayles U.S. Government Securities Fund The Fund's investment
objective is high total investment return through a combination of current
income and capital appreciation.
The Fund seeks to achieve its objective by investing substantially all its
assets in securities issued or guaranteed by the U.S. Government or its
authorities, agencies or instrumentalities ("U.S. Government Securities"),
including CMOs, and in certificates representing undivided interests in the
interest or principal of U.S. Treasury securities. At least 65% of the Fund's
total assets will normally be invested in U.S. Government Securities.
Loomis Sayles Municipal Bond Fund The Fund's investment objective is as high
a level of current income exempt from federal income tax as is consistent
with the preservation of capital.
The Fund seeks to achieve its objective by normally investing
substantially all of its assets in securities the income from which is, in
the opinion of issuer's counsel at the time of issuance, exempt from federal
income tax ("tax exempt securities"). It is a fundamental policy of the Fund
that, during periods of normal market conditions, at least 80% of its net
assets will be invested in tax exempt securities. Normally at least 80% of
its assets will be invested in issues rated A or better, and at least 65% of
its assets will be invested in bonds. All issues will be rated at least BBB
or Baa (or, if unrated, be of equivalent credit quality as determined by
Loomis Sayles) at the time of purchase. Bonds of BBB or Baa quality have some
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade bonds.
Loomis Sayles Short-Term Bond Fund The Fund's investment objective is high
total investment return through a combination of current income and capital
appreciation with relatively low fluctuation in net asset value.
The Fund seeks to achieve its objective by normally investing
substantially all of its assets in debt securities (including convertibles
and CMOs), although up to 20% of its assets may be invested in
non-convertible preferred stock. At least 65% of the Fund's total assets will
normally be invested in bonds with a remaining maturity of 5 years or less.
The Fund may invest a limited portion of its assets in securities of foreign
issuers.
In an effort to minimize fluctuations in market value, the Fund is
expected to maintain an average dollar-weighted maturity of between one and
three years.
10
<PAGE>
ALL FUNDS
Except for each Fund's investment objective, and any investment policies
that are identified as "fundamental," all of the investment policies of each
Fund may be changed without a vote of Fund shareholders.
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS
AND RISK CONSIDERATIONS
Common Stocks and Other Equity Securities Common stocks and similar equity
securities, such as warrants and convertibles, are volatile and more risky
than some other forms of investment. Therefore, the value of your investment
in a Fund that invests in equity securities may sometimes decrease. Equity
securities of companies with relatively small market capitalization may be
more volatile than the securities of larger, more established companies and
than the broad equity market indexes.
Debt and Other Fixed Income Securities The Worldwide, Bond, High Yield,
Global Bond, U.S. Government Securities and Municipal Bond Funds may all
invest in fixed income securities of any maturity. Although the Short-Term
Bond Fund expects to maintain an average weighted maturity of less than three
years, individual 14 portfolio holdings may have maturities longer than three
years. Fixed income securities pay a specified rate of interest or dividends,
or a rate that is adjusted periodically by reference to some specified index
or market rate. Fixed income securities include securities issued by federal,
state, local and foreign governments and related agencies, and by a wide
range of private issuers. Because interest rates vary, it is impossible to
predict the income of a Fund that invests in fixed income securities for any
particular period. The net asset value of such a Fund's shares will vary as a
result of changes in the value of the securities in the Fund's portfolio.
Fixed income securities are subject to market and credit risk. Market risk
relates to changes in a security's value as a result of changes in interest
rates generally. In general, the values of fixed income securities increase
when prevailing interest rates fall and decrease when interest rates rise.
Credit risk relates to the ability of the issuer to make payments of
principal and interest.
U.S. Government Securities U.S. Government Securities have different kinds of
government support. For example, some U.S. Government Securities, such as
U.S. Treasury bonds, are supported by the full faith and credit of the United
States, whereas certain other U.S. Government Securities issued or guaranteed
by federal agencies or government-sponsored enterprises are not supported by
the full faith and credit of the United States.
Although U.S. Government Securities generally do not involve the credit
risks associated with other types of fixed income securities, the market
values of U.S. Government Securities do go up and down as interest rates
change. Thus, for example, the value of an investment in a Fund that holds
U.S. Government Securities may fall during times of rising interest rates.
Yields on U.S. Government Securities tend to be lower than those on corporate
securities of comparable maturities.
Some U.S. Government Securities, such as Government National Mortgage
Association Certificates, are known as "mortgage-backed" securities. Interest
and principal payments on the mortgages underlying mortgage-backed U.S.
Government Securities are passed through to the holders of the security. If a
Fund purchases mortgage-backed securities at a discount or a premium, the
Fund will recognize a gain or loss when the payments of principal, through
prepayment or otherwise, are passed through to the Fund and, if the payment
occurs in a period of falling interest rates, the Fund may not be able to
reinvest the payment at as favorable an interest rate. As a result of these
principal prepayment features, mortgage-backed securities are generally more
volatile investments than many other fixed income securities.
In addition to investing directly in U.S. Government Securities, the Funds
may purchase certificates of accrual or similar instruments ("strips")
evidencing undivided ownership interests in interest payments or principal
payments, or both, in U.S. Government Securities. These investment
instruments may be highly volatile. For purposes of its policy of normally
investing at least 65% of its total assets in U.S. Government Securities, the
U.S. Government Securities Fund will not treat a strip as a U.S. Government
Security unless the strip itself is directly issued or guaranteed by the U.S.
Government or an agency, authority or instrumentality thereof.
Tax Exempt Securities Issuers of tax exempt securities may make interest and
principal payments from money raised through a variety of sources, including
(1) the issuer's general taxing power, (2) a specific type of tax such as a
property tax, or (3) a particular facility or project such as a highway. The
ability of an issuer of tax exempt bonds to make these payments could be
affected by litigation, legislation or other political events, or the
bankruptcy of the issuer. The interest on tax exempt securities issued after
August 15, 1986 is retroactively taxable from the date of issuance if the
issuer does not comply with certain requirements concerning the use of bond
proceeds and the application of earnings on bond proceeds.
11
<PAGE>
Lower Rated Fixed Income Securities The Worldwide, Bond, High Yield, Global
Bond, and Short-Term Bond Funds may each invest a portion of its assets in
securities rated below investment grade (that is, below BBB or Baa),
including securities in the lowest rating categories, and comparable unrated
securities (commonly referred to as "junk bonds"). The Worldwide and Bond
Funds each may invest less than 35%, the Global Bond and Short-Term Bond
Funds each may invest up to 20%, and the High Yield Fund will normally invest
at least 65%, of its assets in such securities. For purposes of the foregoing
percentages, a security will be treated as being of investment grade quality
if at the time a Fund acquires it at least one major rating agency has rated
the security in its top four rating categories (even if another such agency
has issued a lower rating), or if the security is unrated but Loomis Sayles
determines it to be of investment grade quality. Lower rated fixed income
securities generally provide higher yields, but are subject to greater credit
and market risk, than higher quality fixed income securities. Lower rated
fixed income securities are considered predominantly speculative with respect
to the ability of the issuer to meet principal and interest payments.
Achievement of the investment objective of a Fund investing in lower rated
fixed income securities may be more dependent on the investment adviser's own
credit analysis than is the case with higher quality bonds. The market for
lower rated fixed income securities may be more severely affected than some
other financial markets by economic recession or substantial interest rate
increases, by changing public perceptions of this market or by legislation
that limits the ability of certain categories of financial institutions to
invest in these securities. In addition, the secondary market may be less
liquid for lower rated fixed income securities. This lack of liquidity at
certain times may affect the values of these securities and may make the
valuation and sale of these securities more difficult. Securities in the
lowest rating categories may be in poor standing or in default. Securities in
the lowest investment grade category (BBB or Baa) have some speculative
characteristics. For more information about the ratings services'
descriptions of the various rating categories, see Appendix A.
Zero Coupon Securities The Worldwide, Bond, High Yield, Global Bond, U.S.
Government Securities, Municipal Bond, and Short-Term Bond Funds may each
invest in "zero coupon" fixed income securities. These securities accrue
interest at a specified rate, but do not pay interest in cash on a current
basis. A Fund investing in zero coupon securities is required to distribute
the income on these securities to Fund shareholders as the income accrues,
even though the Fund is not receiving the income in cash on a current basis.
Thus the Fund may have to sell other investments to obtain cash to make
income distributions. The market value of zero coupon securities is often
more volatile than that of non-zero coupon fixed income securities of
comparable quality and maturity.
Collateralized Mortgage Obligations The Worldwide, Bond, High Yield, Global
Bond, U.S. Government Securities and Short-Term Bond Funds each may invest in
collateralized mortgage obligations ("CMOs"). A CMO is a security backed by a
portfolio of mortgages or mortgage-backed securities held under an indenture.
CMOs may be issued either by U.S. Government instrumentalities or by
non-governmental entities. The issuer's obligation to make interest and
principal payments is secured by the underlying portfolio of mortgages or
mortgage-backed securities. CMOs are issued with a number of classes or
series which have different maturities and which may represent interests in
some or all of the interest or principal on the underlying collateral or a
combination thereof. CMOs of different classes are generally retired in
sequence as the underlying mortgage loans in the mortgage pool are repaid. In
the event of sufficient early prepayments on such mortgages, the class or
series of CMOs first to mature generally will be retired prior to its
maturity. As with other mortgage-backed securities, the early retirement of a
particular class or series of CMOs held by a Fund could involve the loss of
any premium the Fund paid when it acquired the investment and could result in
the Fund's reinvesting the proceeds at a lower interest rate than the retired
CMO paid. Because of the early retirement feature, CMOs may be more volatile
than many other fixed-income investments.
When-Issued Securities Each Fund may purchase securities on a "when-issued"
basis. This means that the Fund will enter into a commitment to buy the
security before the security has been issued. The Fund's payment obligation
and the interest rate on the security are determined when the Fund enters
into the commitment. The security is typically delivered to the Fund 15 to
120 days later. No interest accrues on the security between the time the Fund
enters into the commitment and the time the security is delivered. If the
value of the security being purchased falls between the time a Fund commits
to buy it and the payment date, the Fund may sustain a loss. The risk of this
loss is in addition to the Fund's risk of loss on the securities actually in
its portfolio at the time. In addition, when the Fund buys a security on a
when-issued basis, it is subject to the risk that market rates of interest
will increase before the time the security is delivered, with the result that
the yield on the security delivered to the Fund may be lower than the yield
available
12
<PAGE>
on other, comparable securities at the time of delivery. If a Fund has
outstanding obligations to buy when-issued securities, it will maintain
liquid high-grade assets in a segregated account at its custodian bank in an
amount sufficient to satisfy these obligations.
Rule 144A Securities The Worldwide, Bond and High Yield Funds may invest in
Rule 144A securities, which are privately offered securities that can be
resold only to certain qualified institutional buyers. Rule 144A securities
are treated as illiquid, unless Loomis Sayles has determined, under
guidelines established by the Trust's trustees, that the particular issue of
Rule 144A securities is liquid.
Foreign Securities Each Fund (except the U.S. Government Securities and
Municipal Bond Funds) may invest in securities of issuers organized or
headquartered outside the United States ("foreign securities"). The Growth,
Growth & Income, Small Cap and Short-Term Bond Funds will not purchase a
foreign security if, as a result, the Fund's holdings of foreign securities
would exceed 20% of the Fund's total assets. The Bond Fund may invest any
portion of its assets in securities of Canadian issuers, but will not
purchase other foreign securities if, as a result, the Fund's holding of
non-U.S. and non- Canadian securities would exceed 20% of the Fund's total
assets. The High Yield Fund may invest any portion of its assets in
securities of Canadian issuers and up to 50% of its assets in the securities
of other foreign issuers.
Although investing in foreign securities may increase a Fund's
diversification and reduce portfolio volatility, foreign securities may
present risks not associated with investments in comparable securities of
U.S. issuers. There may be less information publicly available about a
foreign corporate or government issuer than about a U.S. issuer, and foreign
corporate issuers are not generally subject to accounting, auditing and
financial reporting standards and practices comparable to those in the United
States. The securities of some foreign issuers are less liquid and at times
more volatile than securities of comparable U.S. issuers. Foreign brokerage
commissions and securities custody costs are often higher than in the United
States. With respect to certain foreign countries, there is a possibility of
governmental expropriation of assets, confiscatory taxation, political or
financial instability and diplomatic developments that could affect the value
of investments in those countries. A Fund's receipt of interest on foreign
government securities may depend on the availability of tax or other revenues
to satisfy the issuer's obligations.
A Fund's investments in foreign securities may include investments in
countries whose economies or securities markets are not yet highly developed.
Special considerations associated with these investments (in addition to the
considerations regarding foreign investments generally) may include, among
others, greater political uncertainties, an economy's dependence on revenues
from particular commodities or on international aid or development
assistance, currency transfer restrictions, highly limited numbers of
potential buyers for such securities and delays and disruptions in securities
settlement procedures.
Since most foreign securities are denominated in foreign currencies or
traded primarily in securities markets in which settlements are made in
foreign currencies, the value of these investments and the net investment
income available for distribution to shareholders of a Fund investing in
these securities may be affected favorably or unfavorably by changes in
currency exchange rates or exchange control regulations. Changes in the value
relative to the U.S. dollar of a foreign currency in which a Fund's holdings
are denominated will result in a change in the U.S. dollar value of the
Fund's assets and the Fund's income available for distribution.
In addition, although part of a Fund's income may be received or realized
in foreign currencies, the Fund will be required to compute and distribute
its income in U.S. dollars. Therefore, if the value of a currency relative to
the U.S. dollar declines after the Fund's income has been earned in that
currency, translated into U.S. dollars and declared as a dividend, but before
payment of the dividend, the Fund could be required to liquidate portfolio
securities to pay the dividend. Similarly, if the value of a currency
relative to the U.S. dollar declines between the time the Fund accrues
expenses in U.S. dollars and the time such expenses are paid, the amount of
such currency required to be converted into U.S. dollars will be greater than
the equivalent amount in such currency of such expenses at the time they were
incurred.
In determining whether to invest assets of the Growth & Income, Worldwide,
Bond, High Yield and Global Bond Funds in securities of a particular foreign
issuer, Loomis Sayles will consider the likely effects of foreign taxes on
the net yield available to the Fund and its shareholders. Compliance with
foreign tax law may reduce a Fund's net income available for distribution to
shareholders.
Foreign Currency Hedging Transactions Each Fund that invests in foreign
securities may engage in foreign currency exchange transactions, in
connection with the purchase and sale of foreign securities, to protect the
value of specific portfolio positions or in anticipation of changes in
relative values of currencies in which current or future Fund portfolio hold-
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ings are denominated or quoted. For example, to protect against a change in
the foreign currency exchange rate between the date on which a Fund contracts
to purchase or sell a security and the settlement date for the purchase or
sale, or to "lock in" the equivalent of a dividend or interest payment in
another currency, a Fund might purchase or sell a foreign currency on a spot
(that is, cash) basis at the prevailing spot rate. If conditions warrant, the
Funds may also enter into private contracts to purchase or sell foreign
currencies at a future date ("forward contracts"). The Funds might also
purchase exchange-listed and over-the-counter call and put options on foreign
currencies. Over-the-counter currency options are generally less liquid than
exchange-listed options, and will be treated as illiquid assets. The Funds
may not be able to dispose of over-the-counter options readily.
Foreign currency transactions involve costs and may result in losses. In
addition, each Fund's ability to engage in currency hedging transactions may
be limited by tax considerations.
Options For hedging purposes, the International Equity, Worldwide, High Yield
and Global Bond Funds each may buy put or call options on securities that it
holds or intends to buy. A put option gives a Fund the right to sell a
specified security at a specified price on or before the expiration date of
the option. A call option gives the Fund a similar right to buy a security at
a specified price.
For example, if a Fund held a security but wished to protect against the
risk that the security's value would fall below a specified level, the Fund
could buy a put option, giving it the right to sell the security at that
level regardless of whether the market price of the security falls below that
level. Similarly, if the Fund intends to acquire a security with the proceeds
of the scheduled maturity of an investment it already holds, it might buy a
call option to protect itself against a rise in the price of the security it
wishes to acquire. In many cases, the value of an option held by the Fund
will vary inversely with changes in the value of the related security, and
the Fund may "close out" its option position at a gain or loss by entering
into an offsetting transaction in the options market, without exercising the
option. Changes in the value of an option do not always exactly match changes
in the value of the related security, however, nor is the Fund assured that a
liquid market in which to close out an options position will exist at all
times. The Fund pays a price, called a "premium," to acquire an option, and
also may incur costs in closing out an options position. If the Fund does not
exercise or close out an option prior to the expiration date, the option will
expire worthless, and the Fund will realize a loss equal to the premium it
paid to acquire the option.
The options and futures markets of foreign countries are small compared to
those of the United States and consequently are characterized in most cases
by less liquidity than are the U.S. markets. In addition, foreign markets may
be subject to less detailed reporting requirements and regulatory controls
than U.S. markets. Furthermore, investments in options in foreign markets are
subject to many of the same risks as other foreign investments. See "Foreign
Securities" above.
THE FUNDS' INVESTMENT ADVISER
The Funds' investment adviser is Loomis Sayles, One Financial Center,
Boston, Massachusetts 02111. Founded in 1926, Loomis Sayles is one of the
country's oldest and largest investment firms. Loomis Sayles's general
partner is owned by New England Investment Companies, L.P., a publicly-traded
limited partnership whose general partner is a wholly-owned subsidiary of
Metropolitan Life Insurance Company ("Met Life"). The merger is conditioned
upon, among other things, approval by the policyholders of The New England
and Met Life and receipt of certain regulatory approvals.
In addition to selecting and reviewing the Funds' investments, Loomis
Sayles provides executive and other personnel for the management of the
Funds. The Funds' board of trustees supervises Loomis Sayles's conduct of the
affairs of the Funds.
As of August 19, 1996, the Loomis Sayles Employees' Profit Sharing Plan
owned 31% of the Growth Fund, the Loomis-Sayles Funded Pension Plan owned
85% of the Worldwide Fund and 38% of the Global Bond Fund, Loomis, Sayles &
Company, L.P. owned 26% of the U.S. Government Securities Fund, Desert States
UFCW Unions and Employees Pension Fund owned 28% of the Global Bond Fund and
Charles Schwab & Co., Inc. owned of record 42% of the Bond Fund.
Jerome A. Castellini, Vice President of the Trust and of Loomis Sayles,
has served as the portfolio manager of the Growth Fund since its inception in
1991. Jeffrey W. Wardlow, Vice President of the Trust and of Loomis Sayles,
has served as the portfolio manager of the Growth & Income Fund since its
inception in 1991. Jeffrey C. Petherick, Vice President of the Trust and of
Loomis Sayles, has served as a portfolio manager of the Small Cap Fund since
its inception in 1991, and Mary C. Champagne, Vice President of the Trust and
of Loomis Sayles, has served as a portfolio manager of the Small Cap Fund
since 1995. Paul H. Drexler, Vice President of the Trust and of Loomis
Sayles, has served as the portfolio manager of the International Equity Fund
since 1996. Daniel J. Fuss, President of the Trust and Executive Vice
President of Loomis Sayles, has served as the portfolio manager of the Bond
Fund
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since its inception in 1991, as the portfolio manager of the domestic bonds
sector of the Worldwide Fund since that Fund's inception in 1996, and as a
portfolio manager of the High Yield Fund since its inception in 1996.
Kathleen C. Gaffney has served as a portfolio manager of the High Yield Fund
since its inception in 1996. Kent P. Newmark, Vice President of the Trust and
of Loomis Sayles, has served as the portfolio manager of the U.S. Government
Securities Fund since its inception in 1991. Martha F. Hodgman, Vice
President of the Trust and of Loomis Sayles, has served as the portfolio
manager of the Municipal Bond Fund since May 1993. E. John deBeer, Vice
President of the Trust and of Loomis Sayles, has served as the portfolio
manager of the Global Bond Fund since its inception in 1991 and as portfolio
manager of the international bonds sector of the Worldwide Fund since that
Fund's inception in 1996. John Hyll, Vice President of the Trust and of
Loomis Sayles, has served as the portfolio manager of the Short-Term Bond
Fund since its inception in 1992. Quentin P. Faulkner, Vice President of the
Trust and of Loomis Sayles, has served as the portfolio manager of the
domestic equities sector of the Worldwide Fund since that Fund's inception in
1996. Paul H. Drexler, Vice President of the Trust and of Loomis Sayles, has
served as the portfolio manager of the international equities sector of the
Worldwide Fund since that Fund's inception in 1996. Each of the foregoing
except Ms. Champagne and Mr. Drexler, have been employed by Loomis Sayles for
at least five years. Before joining Loomis Sayles in 1993, Ms. Champagne was
a portfolio manager at NBD Bank, and Mr. Drexler was an economist and
portfolio manager at Brown Brothers Harriman & Co.
FUND EXPENSES
Each Fund pays Loomis Sayles a monthly investment advisory fee. This fee
is at the following annual percentage rate of the Fund's average daily net
assets:
Fund Fee Rate
------------------------------------------- ---------
Growth .75%*
Growth & Income .75*
Small Cap 1.00*
International Equity 1.00*
Worldwide .75*
Bond .60
High Yield .60
Global Bond .75*
U.S. Government Securities .60
Municipal Bond .60
Short-Term Bond .50
* Although this fee rate is higher than the advisory fee rate of most mutual
funds in general, some other funds with similar investment objectives have
the same or higher fee rates.
In addition to the investment advisory fee, each Fund pays all expenses
not expressly assumed by Loomis Sayles, including taxes, brokerage
commissions, fees and expenses of registering or qualifying the Fund's shares
under federal and state securities laws, fees of the Fund's custodian,
transfer agent, independent accountants and legal counsel, expenses of
shareholders' and trustees' meetings, expenses of preparing, printing and
mailing prospectuses to existing shareholders and fees of trustees who are
not directors, officers or employees of Loomis Sayles or its affiliated
companies.
Loomis Sayles has voluntarily agreed, for an indefinite period, to reduce
its advisory fees and/or bear other Fund expenses to the extent necessary to
limit Fund total operating expenses to .75% of the average net assets of the
High Yield Fund, to 1.00% of average annual net assets for the Worldwide,
Bond, U.S. Government Securities, Municipal Bond, and Short-Term Bond Funds
and to 1.50% of average annual net assets for each other Fund. Loomis Sayles
may change or terminate these voluntary arrangements at any time, but the
Funds' prospectus would be supplemented to describe the change and such
prospectus supplement would be mailed to shareholders 30 days before
termination of the arrangements.
PORTFOLIO TRANSACTIONS
Portfolio turnover considerations will not limit Loomis Sayles' investment
discretion in managing the Funds' assets. The Funds anticipate that their
portfolio turnover rates will vary significantly from time to time depending
on the volatility of economic and market conditions. High portfolio turnover
may involve higher costs and higher levels of taxable gains. Although it is
not possible to predict the portfolio turnover rate with certainty, Loomis
Sayles does not expect the High Yield Fund's portfolio turnover rate to
exceed 60%.
Loomis Sayles selects brokers and dealers to execute portfolio
transactions for the Funds. Subject to seeking best price and execution,
Loomis Sayles may allocate these transactions to brokers or dealers whose
customers have invested in the Trust.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of any Fund by submitting a
completed application form and payment to:
Boston Financial Data Services
P.O. Box 8314
Boston, Massachusetts 02266-8314
Attn: Loomis Sayles Funds
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The minimum initial investment in any Fund is $2,500 for regular accounts
and $250 for IRAs and tax qualified retirement plans. Subsequent investments
must be at least $50. See "Shareholder Services" below for further
information about minimum investments in certain other circumstances.
Shares of any Fund may be purchased by (i) cash, (ii) exchanging
securities on deposit with a custodian acceptable to Loomis Sayles or (iii) a
combination of such securities and cash. Purchase of shares of the Fund in
exchange for securities is subject in each case to the determination by
Loomis Sayles that the securities to be exchanged are acceptable for purchase
by the Fund. In all cases Loomis Sayles reserves the right to reject any
securities that are proposed for exchange. Securities accepted by Loomis
Sayles in exchange for Fund shares will be valued in the same manner as the
Fund's assets as described below as of the time of the Fund's next
determination of net asset value after such acceptance. All dividends and
subscription or other rights which are reflected in the market price of
accepted securities at the time of valuation become the property of the Fund
and must be delivered to the Fund upon receipt by the investor from the
issuer. A gain or loss for federal income tax purposes would be realized upon
the exchange by an investor that is subject to federal income taxation,
depending upon the investor's basis in the securities tendered. A shareholder
who wishes to purchase shares by exchanging securities should obtain
instructions by calling (617) 482-2450 and asking for the Loomis Sayles Funds
Shareholder Services Group.
Loomis Sayles will not approve the acceptance of securities in exchange
for shares of any Fund unless (1) Loomis Sayles, in its sole discretion,
believes the securities are appropriate investments for the Fund; (2) the
investor represents and agrees that all securities offered to the Fund can be
resold by the Fund without restriction under the Securities Act of 1933, as
amended (the "Securities Act") or otherwise; and (3) the securities are
eligible to be acquired under the Fund's investment policies and
restrictions. No investor owning 5% or more of the Fund's shares may purchase
additional Fund shares by exchange of securities.
All purchases made by check should be in U.S. dollars and made payable to
the Loomis Sayles Funds or, in the case of a retirement account, the
custodian or trustee. Third party checks will not be accepted. When purchases
are made by check or periodic account investment, redemption will not be
allowed until the investment being redeemed has been in the account for 15
calendar days.
Upon acceptance of your order, Boston Financial Data Services, Inc.
("BFDS"), the shareholder servicing agent for State Street Bank and Trust
Company ("State Street Bank"), opens an account for you, applies the payment
to the purchase of full and fractional Fund shares and mails a statement of
the account confirming the transaction.
After an account has been established, you may send subsequent investments
at any time directly to BFDS at the above address. The remittance must be
accompanied by either the account identification slip detached from a
statement of account or a note containing sufficient information to identify
the account, i.e., the Fund name and your account number or your name and
social security number.
Subsequent investments can also be made by federal funds wire. Instruct
your bank to wire federal funds to State Street Bank and Trust Company, ABA
#011000028. The text of the wire should read as follows: " $ amount, STATE
STREET BOS ATTN Mutual Funds. Credit Fund Name, DDA #9904-622-9, Shareholder
Name, Shareholder Account Number." Your bank may charge you a fee for
transmitting funds by wire.
Each Fund reserves the right to reject any purchase order, including
orders in connection with exchanges, for any reason which the Fund in its
sole discretion deems appropriate. Although the Funds do not anticipate that
they will do so, each Fund reserves the right to suspend or change the terms
of the offering of its shares.
The price you pay will be the per share net asset value next calculated
after a proper investment order is received by the Trust's transfer or other
agent or subagent. Shares of each Fund are sold with no sales charge. The net
asset value of each Fund's shares is calculated once daily as of the close of
regular trading on the New York Stock Exchange on each day the Exchange is
open for trading, by dividing the Fund's net assets by the number of shares
outstanding. Portfolio securities are valued at their market value as more
fully described in the Statement of Additional Information.
Each Fund may accept telephone orders from broker- dealers who have been
previously approved by the Fund. It is the responsibility of such
broker-dealers to promptly forward purchase or redemption orders to the Fund.
Although there is no sales charge levied directly by the Fund, broker-dealers
may charge the investor a transaction-based fee or other fee for their
services at either the time of purchase or the time of redemption. Such
charges may vary among broker-dealers but in all cases will be retained by
the broker-dealer and not remitted to the Fund or Loomis Sayles.
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Loomis Sayles may pay certain broker-dealers whose customers own shares of
the Funds a continuing fee in an amount of up to .25% annually of the value
of Fund shares held for those customers' accounts. These fees are paid by
Loomis Sayles out of its own assets and are not assessed against the
customers' accounts with the Funds.
SHAREHOLDER SERVICES
The Funds offer the following shareholder services, which are more fully
described in the Statement of Additional Information. Explanations and forms
are available from BFDS. Telephone redemption and exchange privileges will be
established automatically when you open your account unless you elect on your
application to decline the privileges. Other privileges must be specifically
elected. A signature guarantee will be required to establish a privilege
after you open your account.
Free Exchange Privilege. Shares of any Fund may be exchanged for shares
of any other Fund or for shares of certain money market funds managed by
New England Funds Management, L.P., an affiliate of Loomis Sayles.
Exchanges may be made by written instructions or by telephone, unless
you elected on your application to decline telephone exchange
privileges. You should not view the exchange privilege as a means for
taking advantage of short-term swings in the market, and the Funds
reserve the right to terminate or limit the privilege of any shareholder
who makes more than 4 exchanges in any calendar year. The Funds may
terminate or change the terms of the exchange privilege at any time, upon
60 days' notice to shareholders. Exchanges of shares of the High Yield
Fund purchased within one year of such exchanges will be subject to a
redemption fee of 2.00% of the amount exchanged. For purposes of
determining whether a redemption fee is payable with respect to shares of
the High Yield Fund purchased by exchange of shares of another Fund, the
one-year period shall be deemed to begin on the date of such purchase by
exchange.
Systematic Withdrawal Plan. If the value of your account is at least
$10,000 you may have periodic cash withdrawals automatically paid to you
or any person you designate.
Automatic Investment Plan. The minimum initial investment for
shareholders establishing an automatic investment plan is $1,000.
Voluntary monthly investments of at least $50 may be made automatically
by pre-authorized withdrawals from your checking account.
Retirement Plans. The Fund's shares may be purchased by all types of
tax-deferred retirement plans. Loomis Sayles makes available retirement
plan forms for IRAs.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to Boston
Financial Data Services, Inc., P.O. Box 8314, Boston, Massachusetts 02266.
Proceeds from a written request may be sent to you in the form of a check. As
described below, if you have selected the telephone redemption service, you
may also redeem your shares by calling BFDS at 800-626-9390. Proceeds
resulting from a telephone redemption request can be wired to your bank
account or sent by check in the name of the registered owners to your record
address.
The written request must include the name of the Fund, your account
number, the exact name(s) in which your shares are registered, and the number
of shares or the dollar amount to be redeemed. All owners of the shares must
sign the request in the exact names in which the shares are registered (this
appears on your confirmation statement) and should indicate any special
capacity in which they are signing (such as trustee or custodian or on behalf
of a partnership, corporation or other entity).
If (1) you are redeeming shares worth more than $50,000, (2) you are
requesting that the proceeds check be made out to someone other than the
registered owners or be sent to an address other than your record address,
(3) your account registration has changed within the last 30 days or (4) you
are instructing us to wire the proceeds to a bank account not designated on
your application, you must have your signature guaranteed by an eligible
guarantor. Eligible guarantors include commercial banks, trust companies,
savings associations, credit unions and brokerage firms that are members of
domestic securities exchanges. Before submitting your redemption request, you
should verify with the guarantor institution that it is an eligible
guarantor. Signature guarantees by notaries public are not acceptable.
If you have requested certificates for your investment, you must enclose
the certificates and a properly completed redemption form or stock power. The
Funds recommend that certificates be sent by registered mail.
When you telephone a redemption request, the proceeds are wired to the
bank account previously chosen by you. A wire fee (currently $5.00) will be
deducted from the proceeds. A telephonic redemption request must be received
by BFDS prior to the close of regular trading on the New York Stock Exchange.
If you telephone your request to BFDS after the Exchange closes or on a day
when the Exchange is not open for business, BFDS cannot accept your request
and a new one will be necessary.
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If you decide to change the bank account to which proceeds are to be
wired, you must send in this change on the Service Options Form with a
signature guarantee. Telephonic redemptions may only be made if your bank is
a member of the Federal Reserve System or has a correspondent bank that is a
member of the System. Unless you indicate otherwise on the account
application, BFDS will be authorized to act upon redemption and exchange
instructions received by telephone from you or any person claiming to act as
your representative who can provide BFDS with your account registration and
address as it appears on the records of State Street Bank and Trust Company
("State Street"). BFDS will employ these or other reasonable procedures to
confirm that instructions communicated by telephone are genuine; the Fund,
State Street, BFDS and Loomis Sayles will not be liable for any losses due to
unauthorized or fraudulent instructions if these or other reasonable
procedures are followed. For information, consult BFDS. In times of heavy
market activity, a shareholder who encounters difficulty in placing a
redemption or exchange order by telephone may wish to place the order by mail
as described above.
The redemption price will be the net asset value per share next determined
after the redemption request and any necessary special documentation are
received by BFDS in proper form, less, in the case of the High Yield Fund, a
redemption fee of 2.00% of the amount redeemed with respect to shares of that
Fund purchased within one (1) year of such redemption. Loomis Sayles, in its
discretion, may waive the 2.00% redemption fee with respect to shares of the
High Yield Fund redeemed within one year of purchase if it determines that
there are minimal brokerage and transaction costs incurred in connection with
the redemption. To the extent that shares are redeemed at a time when other
shares of the Fund are being purchased, Loomis Sayles will treat the
redemption (up to the amount being concurrently purchased) as involving
minimal brokerage and transaction costs and will charge any redemption fee
only with respect to the excess, if any, of the amount of the redemption over
the amount of the concurrent purchase. If there is more than one redemption
at the time a concurrent purchase, each of the redeeming shareholders will
share, pro rata, in the reduction in redemption fee caused by the concurrent
purchase. There is no redemption fee on redemptions in-kind. Redemption fees
will be retained by the Fund and are intended to cover brokerage and other
expenses of the Fund arising out of the redemptions.
Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order.
Telephonic redemption proceeds will normally be wired to your bank on the
first business day following receipt of a proper redemption request. If you
purchased your shares by check and your check was deposited less than fifteen
days prior to the redemption request, the Fund may withhold redemption
proceeds until your check has cleared.
The Fund may suspend the right of redemption and may postpone payment for
more than seven days when the New York Stock Exchange is closed for other
than weekends or holidays, or if permitted by the rules of the SEC when
trading on the Exchange is restricted or during an emergency which makes it
impracticable for the Fund to dispose of its securities or to determine
fairly the value of its net assets, or during any other period permitted by
the SEC for the protection of investors.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
The Growth, Growth & Income, Small Cap, International Equity, Worldwide
and Global Bond Funds declare and pay their net investment income to
shareholders as dividends annually; the Bond, High Yield and U.S. Government
Securities Funds declare and pay dividends quarterly; the Municipal Bond and
Short-Term Bond Funds declare dividends daily and make payments monthly. Each
Fund also distributes all of its net capital gains realized from the sale of
portfolio securities. Any capital gain distributions are normally made
annually in December, but may, to the extent permitted by law, be made more
frequently as deemed advisable by the trustees of the Trust. The Trust's
trustees may change the frequency with which the Funds declare or pay
dividends.
Your dividends and capital gain distributions will automatically be
reinvested in additional shares of the same Fund on the record date unless
you have elected to receive cash.
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended. As such, so long as a Fund
distributes substantially all its net investment income and net capital gains
to its shareholders, the Fund itself does not pay any federal income tax to
the extent such income and gains are so distributed.
Except in the case of income dividends from tax exempt bond interest paid
by the Municipal Bond Fund (see below), your income dividends and short term
capital gain distributions are taxable to you as ordinary income whether
distributed to you in cash or additional shares. Long-term capital gain
distributions from all Funds are taxable as long-term capital gains whether
distributed to you in cash or additional shares and regardless of how long
you have owned shares of the Fund.
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Each Fund (except the Municipal Bond Fund in the case of designated
exempt-interest dividends, as described below) is required to withhold 31% of
any redemption proceeds (including the value of shares exchanged) and all
income dividends and capital gain distributions it pays to you (1) if you do
not provide a correct, certified taxpayer identification number, (2) if the
Fund is notified that you have underreported income in the past, or (3) if
you fail to certify to the Fund that you are not subject to such withholding.
Dividends derived from interest on U.S. Government Securities may be
exempt from state and local taxes. Certain designated dividends from the
Growth, Growth & Income, Small Cap and Worldwide Funds are expected to be
eligible for the dividends-received deduction for corporate shareholders.
State Street Bank will send you and the IRS an annual statement detailing
federal tax information, including information about dividends and
distributions paid to you during the preceding year. Be sure to keep this
statement as a permanent record. A fee may be charged for any duplicate
information that you request.
Municipal Bond Fund Certain designated dividends paid by the Municipal Bond
Fund that are derived from interest on tax exempt bonds ("exempt-interest
dividends") may be excluded from gross income on your federal tax return.
However, if you receive social security or railroad retirement benefits, you
may be taxed on a portion of those benefits as a result of receiving tax
exempt income. Also, tax exempt income may be taken into account for the
federal alternative minimum tax.
Other dividends and short term capital gains, if any, are taxable to you
as ordinary income whether received in cash or additional shares.
Distributions of long-term capital gains are taxable to you as long-term
capital gains whether distributed in cash or additional shares, regardless of
how long you have held your shares.
If at least 95% of the Fund's dividends are designated as exempt-interest
dividends, federal back-up withholding rules do not apply with respect to
such dividends.
The federal exemption for exempt-interest dividends does not result in
exemption from state and local taxes. Distributions of exempt-interest
dividends may be exempt from local and state taxation to the extent they are
derived from the state or locality in which you reside. The Fund will report
annually on a state-by-state basis the source of income the Fund received on
tax exempt bonds that was paid out as dividends during the preceding year.
NOTE: The foregoing summarizes certain tax consequences of investing in the
Funds. Before investing, you should consult your own tax adviser for more
information concerning the federal, state and local tax consequences of
investing in, redeeming or exchanging Fund shares.
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APPENDIX A
DESCRIPTION OF BOND RATINGS ASSIGNED BY
STANDARD & POOR'S AND
MOODY'S INVESTORS SERVICE, INC.
STANDARD & POOR'S
AAA
This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay interest and
repay principal.
AA
Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay interest and repay principal is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to repay principal and pay
interest for bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC
Bonds rated BB, B, CCC and CC are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree
of speculation and CC the highest degree of speculation. While such bonds
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
C
The rating C is reserved for income bonds on which no interest is being
paid.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
A-1
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
MOODY'S INVESTORS SERVICE, INC.
Aaa
Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large, or by an exceptionally
stable, margin, and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa
Bonds that are rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present that make the long-term risks appear somewhat larger than in
Aaa securities.
A
Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present that suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds that are rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and, in fact, have speculative characteristics as well.
A-1
<PAGE>
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often, the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Should no rating be assigned by Moody's, the reason may be one of the
following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.
3. There is lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed in which case the rating is not
published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be
formed; if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1 and B1.
A-2
<PAGE>
INVESTMENT ADVISER
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
TRANSFER AND
DIVIDEND PAYING AGENT
AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company
Boston, Massachusetts 02102
SHAREHOLDER SERVICING AGENT
FOR STATE STREET BANK
AND TRUST COMPANY
Boston Financial Data Services, Inc.
P.O. Box 8314
Boston, Massachusetts 02266
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
[logo]
LOOMIS SAYLES FUNDS((TM))
The Power of A Passion.((TM))
A Family of No Load Funds
PROSPECTUS
AND
APPLICATION
May 1, 1996, as revised
September 4, 1996
One Financial Center
Boston, Massachusetts 02111
(617) 482-2450
<PAGE>
LOOMIS SAYLES FUNDS
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996, as revised September 4, 1996
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information relates to the Loomis Sayles Funds Prospectus dated
May 1, 1996, as revised September 4, 1996, and should be read in conjunction
therewith. A copy of the Prospectus may be obtained from Loomis Sayles Funds,
One Financial Center, Boston, Massachusetts 02111.
<PAGE>
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TABLE OF CONTENTS
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............................
MANAGEMENT OF THE TRUST.....................................................
INVESTMENT ADVISORY AND OTHER SERVICES......................................
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................
DESCRIPTION OF THE TRUST....................................................
HOW TO BUY SHARES...........................................................
NET ASSET VALUE ............................................................
SHAREHOLDER SERVICES........................................................
Open Accounts..........................................................
Systematic Withdrawal Plan.............................................
Exchange Privilege.....................................................
IRAs...................................................................
REDEMPTIONS.................................................................
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS.................
FINANCIAL STATEMENTS........................................................
APPENDIX A DESCRIPTION OF BOND RATINGS......................................
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of each series ("Fund") of Loomis
Sayles Funds (the "Trust"), are summarized in the Prospectus under "Investment
Objectives and Policies" and "More Information About the Funds' Investments."
The investment policies of each Fund set forth in the Prospectus and in this
Statement of Additional Information may be changed by the Funds' adviser,
subject to review and approval by the Trust's board of trustees, without
shareholder approval except that the investment objective of each Fund as set
forth in the Prospectus and any Fund policy explicitly identified as
"fundamental" may not be changed without the approval of the holders of a
majority of the outstanding shares of the relevant Fund (which in the Prospectus
and this Statement of Additional Information means the lesser of (i) 67% of the
shares of that Fund represented at a meeting at which 50% of the outstanding
shares are represented or (ii) more than 50% of the outstanding shares).
In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are policies of each Fund (and
those marked with an asterisk are fundamental policies of each Fund):
Each Fund will not:
(1) Invest in companies for the purpose of exercising control or
management.
*(2) Act as underwriter, except to the extent that, in connection with the
disposition of portfolio securities, it may be deemed to be an underwriter under
certain federal securities laws.
*(3) Invest in oil, gas or other mineral leases, rights or royalty
contracts or in real estate, commodities or commodity contracts. (This
restriction does not prevent any Fund from investing in issuers that invest or
deal in the foregoing types of assets or from purchasing securities that are
secured by real estate.)
*(4) Make loans. (For purposes of this investment restriction, neither (i)
entering into repurchase agreements nor (ii) purchasing bonds, debentures,
commercial paper, corporate notes and similar evidences of indebtedness, which
are a part of an issue to the public, is considered the making of a loan.)
(5) Purchase any security (other than a U.S. Government Security) if, as a
result, more than 5% of the Fund's total assets (taken at current value) would
then be invested in securities of a single issuer. (For purposes of this
restriction, the Municipal Bond Fund treats each state and each separate
political subdivision, agency, authority or instrumentality of such state, each
multistate agency or authority, and each guarantor, if any, of obligations of
any such issuer, as a separate issuer, provided that the assets and revenues of
the issuer are separate from those of the government(s) that created the
subdivision, agency, authority or instrumentality.)
(6) Invest more than 5% of its assets (taken at current value) in
securities of companies which (with predecessor companies) have a record of less
than three years of continuous operations or, in the case of the Municipal Bond
Fund, invest more than 5% of its assets in securities based directly or
indirectly on the credit of a private entity that (including predecessor
businesses or entities) has a record of less than three years of continuous
operations.
<PAGE>
(7) Acquire more than 10% of any class of securities of an issuer (taking
all preferred stock issues as a single class and all debt issues as a single
class) or acquire more than 10% of the outstanding voting securities of an
issuer.
(8) Invest in the securities of other investment companies, except by
purchases in the open market involving only customary brokers' commissions or in
connection with a merger, consolidation or similar transaction, and only if such
investment would not subject shareholders to duplicate fees and expenses. (Under
the Investment Company Act of 1940 (the "1940 Act") each Fund generally may not:
(a) invest more than 10% of its total assets (taken at current value) in such
securities; (b) own securities of any one investment company having a value in
excess of 5% of the Fund's total assets (taken at current value); or (c) own
more than 3% of the outstanding voting stock of any one investment company.)
(9) Pledge, mortgage, hypothecate or otherwise encumber any of its assets,
except that each Fund may pledge assets having a value not exceeding 10% of its
total assets to secure borrowings permitted by restriction (12) below. (For the
purpose of this restriction, collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to initial
and variation margin are not deemed to be a pledge or other encumbrance of
assets.)
(10) Purchase or retain securities of an issuer if officers and trustees of
the Trust and officers and directors of its investment adviser who individually
own more than 1/2 of 1% of the shares or securities of such issuer together own
more than 5% of such shares or securities.
*(11) Purchase any security (other than U.S. Government Securities) if, as
a result, more than 25% of the Fund's total assets (taken at current value)
would be invested in any one industry (in the utilities category, gas, electric,
water and telephone companies will be considered as being in separate
industries.) Tax-exempt securities issued by governments or political
subdivisions of governments and purchased by the Municipal Bond Fund are not
subject to this restriction, since such issuers are not members of any industry.
*(12) Borrow money in excess of 10% of its total assets (taken at cost) or
5% of its total assets (taken at current value), whichever is lower, nor borrow
any money except as a temporary measure for extraordinary or emergency purposes.
(13) Purchase securities on margin (except such short term credits as are
necessary for clearance of transactions); or make short sales (except where, by
virtue of ownership of other securities, it has the right to obtain, without
payment of additional consideration, securities equivalent in kind and amount to
those sold).
(14) Participate on a joint or joint and several basis in any trading
account in securities. (The "bunching" of orders for the purchase or sale of
portfolio securities with Loomis Sayles or accounts under its management to
reduce brokerage commissions, to average prices among them or to facilitate such
transactions is not considered a trading account in securities for purposes of
this restriction.)
(15) Purchase any illiquid security, including any security that is not
readily marketable, if, as a result, more than 15% of the Fund's net assets
(based on current value) would then be invested in such securities.
-2-
<PAGE>
(16) Write or purchase puts, calls or combinations of both except that (1)
each Fund may acquire warrants or rights to subscribe to securities of companies
issuing such warrants or rights, or of parents or subsidiaries of such
companies, (2) the International Equity, Worldwide, High Yield and Global Bond
Funds each may purchase and sell put and call options on securities and (3) each
Fund may write, purchase and sell put and call options on currencies and may
enter into currency forward contracts.
*(17) Issue senior securities. (For the purpose of this restriction none of
the following is deemed to be a senior security: any pledge or other encumbrance
of assets permitted by restriction (9) above; any borrowing permitted by
restriction (12) above; any collateral arrangements with respect to options,
futures contracts and options on futures contracts and with respect to initial
and variation margin; and the purchase or sale of options, forward contracts,
futures contracts or options on futures contracts.)
Although the Funds have no current intention of investing in repurchase
agreements, they intend, based on the views of the staff of the Securities and
Exchange Commission (the "SEC"), to restrict their investments in repurchase
agreements maturing in more than seven days, together with other investments in
illiquid securities, to the percentage permitted by restriction (15) above.
Although authorized to invest in restricted securities, each Fund, as a
matter of non-fundamental operating policy, currently does not intend to invest
in such securities, except that the Worldwide, Bond and High Yield Funds may
invest in Rule 144A securities (see "Rule 144A Securities" below). As a matter
of non-fundamental operating policy, the Worldwide Fund will not, however,
purchase securities of issuers which it is restricted from selling to the public
without registration under the Securities Act of 1933 if by any reason thereof
the value of its aggregate investment in such securities will exceed 10% of its
total assets. Also, although authorized to make short sales subject to the
condition specified in restriction (13) above, each Fund as a matter of
non-fundamental operating policy currently does not intend to make such short
sales. Each Fund has given undertakings to a state regulatory authority in
connection with the qualification of Fund shares for sale in such state that its
investments in warrants will not exceed 5% of the value of its net assets and
that not more than 2% of its net assets will be invested in warrants which are
not listed on the New York or American Stock Exchanges. Each Fund as a matter of
non-fundamental operating policy has undertaken to a state regulatory authority
in connection with the qualification of Fund shares for sale in such state that
it will not invest any part of its total assets in real estate limited
partnership interests. The Worldwide Fund as a matter of non-fundamental
operating policy has undertaken to a state regulatory authority in connection
with the qualification of Fund shares for sale in such state that any securities
accepted by the Fund in consideration of the issuance of shares of the Fund will
be (a) acquired for investment purposes and not for resale; (b) liquid
securities which are not restricted by law or liquidity of market; and (c) have
a value that is readily ascertainable as evidenced by a listing on the American
Stock Exchange, New York Stock Exchange or National Association of Securities
Dealers Automated Quotation System. If any of the policies and undertakings
described in this paragraph are changed, the Trust will revise its Statement of
Additional Information to reflect any such changes.
U.S. Government Securities
- --------------------------
U.S. Government Securities include direct obligations of the U.S. Treasury,
as well as securities issued or guaranteed by U.S. Government agencies,
authorities and instrumentalities, including, among others, the Government
National Mortgage Association, the Federal Home Loan Mortgage Corporation, the
Federal National Mortgage Association, the Federal Housing Administration, the
Resolution Funding Corporation, the Federal Farm Credit Banks, the Federal Home
Loan Bank, the Tennessee Valley Authority, the Student Loan Marketing
Association and the Small Business Administration. More detailed information
about some of these categories of U.S. Government Securities follows.
[bullet] U.S. Treasury Bills - Direct obligations of the United States
Treasury which are issued in maturities of one year or less. No interest is paid
on Treasury bills; instead, they are issued at a discount and repaid at full
face value when they mature. They are backed by the full faith and credit of the
United States Government.
-3-
<PAGE>
[bullet] U.S. Treasury Notes and Bonds - Direct obligations of the United
States Treasury issued in maturities that vary between one and forty years, with
interest normally payable every six months. They are backed by the full faith
and credit of the United States Government.
[bullet] "Ginnie Maes" - Debt securities issued by a mortgage banker or
other mortgagee which represent an interest in a pool of mortgages insured by
the Federal Housing Administration or the Farmer's Home Administration or
guaranteed by the Veterans Administration. The Government National Mortgage
Association ("GNMA") guarantees the timely payment of principal and interest
when such payments are due, whether or not these amounts are collected by the
issuer of these certificates on the underlying mortgages. An assistant attorney
general of the United States has rendered an opinion that the guarantee by GNMA
is a general obligation of the United States backed by its full faith and
credit. Mortgages included in single family or multi-family residential mortgage
pools backing an issue of Ginnie Maes have a maximum maturity of up to 30 years.
Scheduled payments of principal and interest are made to the registered holders
of Ginnie Maes (such as the Fund) each month. Unscheduled prepayments may be
made by homeowners, or as a result of a default. Prepayments are passed through
to the registered holder of Ginnie Maes along with regular monthly payments of
principal and interest.
[bullet] "Fannie Maes" - The Federal National Mortgage Association ("FNMA")
is a government-sponsored corporation owned entirely by private stockholders
that purchases residential mortgages from a list of approved seller/servicers.
Fannie Maes are pass-through securities issued by FNMA that are guaranteed as to
timely payment of principal and interest by FNMA but are not backed by the full
faith and credit of the United States Government.
[bullet] "Freddie Macs" - The Federal Home Loan Mortgage Corporation
("FHLMC") is a corporate instrumentality of the United States Government.
Freddie Macs are participation certificates issued by FHLMC that represent an
interest in residential mortgages from FHLMC's National Portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal,
but Freddie Macs are not backed by the full faith and credit of the United
States Government.
As described in the Prospectus, U.S. Government Securities generally do not
involve the same credit risks associated with investments in other types of
fixed-income securities, although, as a result, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate fixed-income securities. Like other fixed-income securities, however,
the values of U.S. Government Securities change as interest rates fluctuate.
Fluctuations in the value of portfolio securities will not affect interest
income on existing portfolio securities but will be reflected in the Fund's net
asset value.
When-Issued Securities
- ----------------------
As described in the Prospectus, each Fund may enter into agreements with
banks or broker-dealers for the purchase or sale of securities at an agreed-upon
price on a specified future date. Such agreements might be entered into, for
example, when a Fund that invests in fixed income securities anticipates a
decline in interest rates and is able to obtain a more advantageous yield by
committing currently to purchase securities to be issued later. When a Fund
purchases securities in this manner (i.e. on a when-issued or delayed-delivery
basis), it is required to create a segregated account with the Trust's custodian
and to maintain in that account cash or U.S. Government Securities in an amount
equal to or greater than, on a daily basis, the amount of the Fund's when-issued
or delayed-delivery commitments. Each Fund will make commitments to purchase on
a when-issued or delayed-delivery basis only securities meeting that Fund's
investment criteria. The Fund may take delivery of these securities or, if it is
deemed advisable as a matter of investment strategy, the Fund may sell these
securities before the settlement date. When the time comes to pay for
when-issued or delayed-delivery securities, the Fund will meet its
-4-
<PAGE>
obligations from then available cash flow or the sale of securities, or from the
sale of the when-issued or delayed-delivery securities themselves (which may
have a value greater or less than the Fund's payment obligation).
Convertible Securities
- ----------------------
Convertible securities include corporate bonds, notes or preferred stocks
of U.S. or foreign issuers that can be converted into (that is, exchanged for)
common stocks or other equity securities. Convertible securities also include
other securities, such as warrants, that provide an opportunity for equity
participation. Because convertible securities can be converted into equity
securities, their values will normally vary in some proportion with those of the
underlying equity securities. Convertible securities usually provide a higher
yield than the underlying equity, however, so that the price decline of a
convertible security may sometimes be less substantial than that of the
underlying equity security.
Zero Coupon Bonds
- -----------------
Zero coupon bonds are debt obligations that do not entitle the holder to
any periodic payments of interest either for the entire life of the obligation
or for an initial period after the issuance of the obligations. Such bonds are
issued and traded at a discount from their face amounts. The amount of the
discount varies depending on such factors as the time remaining until maturity
of the bonds, prevailing interest rates, the liquidity of the security and the
perceived credit quality of the issuer. The market prices of zero coupon bonds
generally are more volatile than the market prices of securities that pay
interest periodically and are likely to respond to changes in interest rates to
a greater degree than do non-zero coupon bonds having similar maturities and
credit quality. In order to satisfy a requirement for qualification as a
"regulated investment company" under the Internal Revenue Code (the "Code"),
each Fund must distribute each year at least 90% of its net investment income,
including the original issue discount accrued on zero coupon bonds. Because a
Fund investing in zero coupon bonds will not on a current basis receive cash
payments from the issuer in respect of accrued original issue discount, the Fund
may have to distribute cash obtained from other sources in order to satisfy the
90% distribution requirement under the Code. Such cash might be obtained from
selling other portfolio holdings of the Fund. In some circumstances, such sales
might be necessary in order to satisfy cash distribution requirements even
though investment considerations might otherwise make it undesirable for the
Fund to sell such securities at such time.
Repurchase Agreements
- ---------------------
Each Fund may enter into repurchase agreements, by which the Fund purchases
a security and obtains a simultaneous commitment from the seller (a bank or, to
the extent permitted by the 1940 Act, a recognized securities dealer) to
repurchase the security at an agreed upon price and date (usually seven days or
less from the date of original purchase). The resale price is in excess of the
purchase price and reflects an agreed upon market rate unrelated to the coupon
rate on the purchased security. Such transactions afford the Funds the
opportunity to earn a return on temporarily available cash at minimal market
risk. While the underlying security may be a bill, certificate of indebtedness,
note or bond issued by an agency, authority or instrumentality of the United
States Government, the obligation of the seller is not guaranteed by the U.S.
Government and there is a risk that the seller may fail to repurchase the
underlying security. In such event, the Fund would attempt to exercise rights
with respect to the underlying security, including possible disposition in the
market. However, the Fund may be subject to various delays and risks of loss,
including (a) possible declines in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto, (b) possible
reduced levels of income and lack of income during this period and (c) inability
to enforce rights and the expenses involved in attempted enforcement.
-5-
<PAGE>
Rule 144A Securities
- --------------------
The Worldwide, Bond and High Yield Funds may purchase Rule 144A securities.
These are privately offered securities that can be resold only to certain
qualified institutional buyers. Rule 144A securities are treated as illiquid,
unless Loomis Sayles has determined, under guidelines established by the Trust's
trustees, that the particular issue of Rule 144A securities is liquid. Under the
guidelines, Loomis Sayles considers such factors as: (1) the frequency of trades
and quotes for a security; (2) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades therefor.
Tax Exempt Bonds
- ----------------
Tax exempt bonds include debt obligations issued to obtain funds for
various public purposes, including the construction of a wide range of public
facilities such as bridges, highways, hospitals, housing, mass transportation,
schools, streets, and water and sewer works. Other public purposes for which tax
exempt bonds may be issued include the refunding of outstanding obligations,
obtaining funds for general operating expenses, and obtaining funds to lend to
other public institutions and facilities. In addition, prior to the Tax Reform
Act of 1986, certain debt obligations known as industrial development bonds
could be issued by or on behalf of public authorities to obtain funds to provide
privately operated housing facilities, sports facilities, convention or trade
show facilities, airport, mass transit, port or parking facilities, air or water
pollution control facilities and certain local facilities for water supply, gas,
electricity, or sewage or solid waste disposal. Such obligations are included
within the term tax exempt bonds if the interest paid thereon is, in the opinion
of bond counsel, exempt from federal income tax. Interest on certain industrial
development bonds used to fund the construction, equipment, repair or
improvement of privately operated industrial or commercial facilities may also
be exempt from federal income tax. The Tax Reform Act of 1986 eliminated some
types of tax exempt industrial revenue bonds but retained others under the
general category of "private activity bonds." The interest on so-called "private
activity bonds" is exempt from ordinary federal income taxation but is treated
as a tax preference item in computing a shareholder's alternative minimum tax
liability. The Municipal Bond Fund currently does not intend to invest in
private activity bonds.
The Municipal Bond Fund may not be a desirable investment for "substantial
users" of facilities financed by industrial development bonds or for "related
persons" of substantial users. See "Income Dividends, Capital Gain Distributions
and Tax Status."
The two principal classifications of tax exempt bonds are general
obligation bonds and limited obligation (or revenue) bonds. General obligation
bonds are obligations involving the credit of an issuer possessing taxing power
and are payable from the issuer's general unrestricted revenues and not from any
particular fund or source. The characteristics and method of enforcement of
general obligation bonds vary according to the law applicable to the particular
issuer, and payment may be dependent upon an appropriation by the issuer's
legislative body. Limited obligation bonds are payable only from the revenues
derived from a particular facility or class of facilities, or in some cases from
the proceeds of a special excise or other specific revenue source such as the
user of the facility. Tax exempt industrial development bonds and private
activity bonds are in most cases revenue bonds and generally are not payable
from the unrestricted revenues of the issuer. The credit and quality of such
bonds are usually directly related to the credit standing of the corporate user
of the facilities. Principal and interest on such bonds is the responsibility of
the corporate user (and any guarantor).
Prices and yields on tax exempt bonds are dependent on a variety of
factors, including general money market conditions, the financial condition of
the issuer, general conditions of the tax exempt bond market, the size of a
particular
-6-
<PAGE>
offering, the maturity of the obligation and the rating of the issue. A number
of these factors, including the ratings of particular issues, are subject to
change from time to time. Information about the financial condition of an issuer
of tax exempt bonds may not be as extensive as that made available by
corporations whose securities are publicly traded.
As noted in the Prospectus, obligations of issuers of tax exempt bonds are
subject to the provisions of bankruptcy, insolvency and other laws, such as the
Federal Bankruptcy Reform Act of 1978, affecting the rights and remedies of
creditors. Congress or state legislatures may seek to extend the time for
payment of principal or interest, or both, or to impose other constraints upon
enforcement of such obligations. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of issuers to meet their
obligations for the payment of interest and principal on their tax exempt bonds
may be materially affected, or their obligations may be found to be invalid or
unenforceable. Such litigation or conditions may from time to time have the
effect of introducing uncertainties in the market for tax exempt bonds or
certain segments thereof, or materially affecting the credit risk with respect
to particular bonds. Adverse economic, business, legal or political developments
might affect all or a substantial portion of the Fund's tax exempt bonds in the
same manner.
From time to time the Municipal Bond Fund may have less than 80% of its net
assets invested in tax exempt bonds (1) for defensive purposes when deemed
prudent in the judgment of Loomis Sayles to protect shareholders' capital or (2)
on a temporary basis for liquidity purposes or pending the investment of
proceeds from sales of Fund shares. The ability of the Fund to invest in
securities other than tax exempt bonds is limited by a requirement of the Code
that at least 50% of the Fund's total assets be invested in tax exempt
securities at the end of each calendar quarter. See "Income Dividends, Capital
Gain Distributions and Tax Status."
The Municipal Bond Fund may purchase and sell portfolio investments to take
advantage of changes or anticipated changes in yield relationships, markets or
economic conditions. The Fund may also sell tax exempt bonds due to changes in
the adviser's evaluation of the issuer or cash needs resulting from redemption
requests for Fund shares. The secondary market for tax exempt bonds typically
has been less liquid than that for taxable debt securities, and this may affect
the Fund's ability to sell particular tax exempt bonds, especially in periods
when other investors are attempting to sell the same securities.
Foreign Currency Transactions
- -----------------------------
The Growth, Growth & Income, Small Cap, International Equity, Worldwide,
Bond, High Yield and Global Bond Funds each may invest in securities of foreign
issuers and may enter into forward foreign currency exchange contracts, or buy
or sell options on foreign currencies, in order to protect against uncertainty
in the level of future foreign exchange rates. Since investment in securities of
foreign issuers will usually involve currencies of foreign countries, and since
a Fund may temporarily hold funds in bank deposits in foreign currencies during
the course of investment programs, the value of the assets of a Fund as measured
in United States dollars may be affected by changes in currency exchange rates
and exchange control regulations, and a Fund may incur costs in connection with
conversion between various currencies.
A Fund may enter into forward contracts under two circumstances. First,
when a Fund enters into a contract for the purchase or sale of a security
denominated or traded in a market in which settlement is made in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency involved in the underlying
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date on which the
investment is purchased or sold and the date on which payment is made or
received.
-7-
<PAGE>
Second, when Loomis Sayles believes that the currency of a particular
country may suffer a substantial decline against another currency, it may enter
into a forward contract to sell, for a fixed amount of another currency, the
amount of the first currency approximating the value of some or all of the
Fund's portfolio investments denominated in the first currency. The precise
matching of the forward contract amounts and the value of the securities
involved will not generally be possible since the future value of such
securities in a currency will change as a consequence of market movements in the
value of those investments between the date the forward contract is entered into
and the date it matures.
The Funds generally will not enter into forward contracts with a term of
greater than one year.
Options on foreign currencies are similar to forward contracts, except that
one party to the option (the holder) is not contractually bound to buy or sell
the specified currency. Instead, the holder has discretion whether to "exercise"
the option and thereby require the other party to buy or sell the currency on
the terms specified in the option. Options transactions involve transaction
costs and, like forward contract transactions, involve the risk that the other
party may default on its obligations (if the options are not traded on an
established exchange) and the risk that expected movements in the relative value
of currencies may not occur, resulting in an imperfect hedge or a loss to the
Fund.
The Funds' ability to engage in transactions in currency forward contracts
and options may be limited by tax considerations.
Each Fund, in conjunction with its transactions in forward contracts,
options and futures (including the International Equity, Worldwide and
Global Bond Funds' transactions in options on securities described below), will
maintain in a segregated account with its custodian cash or high grade liquid
assets with a value, marked to market on a daily basis, sufficient to satisfy
the Fund's outstanding obligations under such contracts, options and futures.
Options
- -------
As described in the Prospectus, the International Equity, Worldwide, High
Yield and Global Bond Funds for hedging purposes each may purchase and sell call
and put options on securities it owns or intends to purchase.
An option entitles the holder to receive (in the case of a call option) or
to sell (in the case of a put option) a particular security at a specified
exercise price. An "American style" option allows exercise of the option at any
time during the term of the option. A "European style" option allows an option
to be exercised only at the end of its term. Options may be traded on or off an
established securities exchange.
If the holder of an option wishes to terminate its position, it may seek to
effect a closing sale transaction by selling an option identical to the option
previously purchased. The effect of the purchase is that the previous option
position will be canceled. A Fund will realize a profit from closing out an
option if the price received for selling the offsetting position is more than
the premium paid to purchase the option; the Fund will realize a loss from
closing out an option transaction if the price received for selling the
offsetting option is less than the premium paid to purchase the option.
The use of options involves risks. One risk arises because of the imperfect
correlation between movements in the price of options and movements in the price
of the securities that are the subject of the hedge. The Fund's hedging
strategies will not be fully effective if such imperfect correlation occurs.
-8-
<PAGE>
Price movement correlation may be distorted by illiquidity in the options
markets and the participation of speculators in such markets. If an insufficient
number of contracts are traded, commercial users may not deal in options because
they do not want to assume the risk that they may not be able to close out their
positions within a reasonable amount of time. In such instances, options market
prices may be driven by different forces than those driving the market in the
underlying securities, and price spreads between these markets may widen. The
participation of speculators in the market enhances its liquidity. Nonetheless,
the trading activities of speculators in the options markets may create
temporary price distortions unrelated to the market in the underlying
securities.
An exchange-traded option may be closed out only on an exchange which
generally provides a liquid secondary market for an option of the same series.
If a liquid secondary market for an exchange-traded option does not exist, it
might not be possible to effect a closing transaction with respect to a
particular option, with the result that the Fund would have to exercise the
option in order to accomplish the desired hedge. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or the Options Clearing Corporation
or other clearing organization may not at all times be adequate to handle
current trading volume; or (vi) one or more exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options on that exchange that had
been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
The successful use of options depends in part on the ability of Loomis
Sayles to forecast correctly the direction and extent of interest rate, stock
price or currency value movements within a given time frame. To the extent
interest rates, stock prices or currency values move in a direction opposite to
that anticipated, the Fund may realize a loss on the hedging transaction that is
not fully or partially offset by an increase in the value of portfolio
securities. In addition, whether or not interest rates or the relevant stock
price or relevant currency values move during the period that the Fund holds
options positions, the Fund will pay the cost of taking those positions (i.e.,
brokerage costs). As a result of these factors, the Fund's total return for such
period may be less than if it had not engaged in the hedging transaction.
An over-the-counter option (an option not traded on an established
exchange) may be closed out only with the other party to the original option
transaction. While the Fund will seek to enter into over-the-counter options
only with dealers who agree to or are expected to be capable of entering into
closing transactions with the Fund, there can be no assurance that the Fund will
be able to liquidate an over-the-counter option at a favorable price at any time
prior to its expiration. Accordingly, the Fund might have to exercise an
over-the-counter option it holds in order to achieve the intended hedge.
Over-the-counter options are not subject to the protections afforded purchasers
of listed options by the Options Clearing Corporation or other clearing
organization.
The staff of the SEC has taken the position that over-the-counter options
should be treated as illiquid securities for purposes of each Fund's investment
restriction prohibiting it from investing more than 15% of its net assets in
illiquid securities. The Funds intend to comply with this position.
-9-
<PAGE>
Income earned by a Fund from its hedging activities will be treated as
capital gain and, if not offset by net recognized capital losses incurred by the
Fund, will be distributed to shareholders in taxable distributions. Although
gain from options transactions may hedge against a decline in the value of a
Fund's portfolio securities, that gain, to the extent not offset by losses, will
be distributed in light of certain tax considerations and will constitute a
distribution of that portion of the value preserved against decline.
-10-
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
- --------------------------------------------------------------------------------
The trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
EARL W. FOELL -- Trustee. 43 Black Horse Lane, Cohasset, Massachusetts. Retired;
formerly Editor in-Chief, World Monitor Magazine and Editor-in-Chief, The
Christian Science Monitor.
RICHARD S. HOLWAY -- Trustee. 1314 Seaspray Lane, Sanibel, Florida. Retired;
formerly, Vice President, Loomis Sayles. Director, Sandwich Cooperative Bank.
TERRY R. LAUTENBACH -- Trustee. Shennamere Road, Darien, Connecticut. Retired;
formerly Senior Vice President, International Business Machines Corporation.
Director, Air Products and Chemicals, Inc., Melville Corp., and Varian
Associates, Inc.
MICHAEL T. MURRAY -- Trustee. 404 N. Western Ave., Lake Forest, Illinois.
Retired; formerly, Vice President, Loomis Sayles.
DANIEL J. FUSS -- President and Trustee. Executive Vice President and Director,
Loomis Sayles.
SHEILA M. BARRY -- Secretary. Assistant General Counsel and Vice President,
Loomis Sayles. Formerly, Senior Counsel and Vice President, New England Funds,
L.P.
ROBERT J. BLANDING -- Executive Vice President. 465 First Street West, Sonoma,
California. President, Chairman, Director and Chief Executive Officer, Loomis
Sayles.
JEROME A. CASTELLINI -- Vice President. Three 1st National Plaza, Chicago,
Illinois. Vice President and Director, Loomis Sayles.
MARY C. CHAMPAGNE -- Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles; formerly, portfolio manager, NBD Bank.
E. JOHN deBEER -- Vice President. Vice President, Loomis Sayles.
PAUL H. DREXLER -- Vice President. Vice President, Loomis Sayles; formerly Vice
President, Brown Brothers Harriman & Co.
WILLIAM H. EIGEN, JR. -- Vice President. Vice President, Loomis Sayles; formerly
Vice President, INVESCO Funds Group and Vice President, The Travelers Corp.
QUENTIN P. FAULKNER -- Vice President. Vice President, Loomis Sayles.
MARTHA F. HODGMAN -- Vice President. Vice President, Loomis Sayles.
-11-
<PAGE>
MARK W. HOLLAND -- Treasurer. Vice President -- Finance and Administration and
Director, Loomis Sayles.
JOHN HYLL -- Vice President. 35 North Lake Avenue, Pasadena, California. Vice
President, Loomis Sayles.
FRANK E. JEDLICKA -- Vice President. Vice President, Loomis Sayles.
JEFFREY L. MEADE -- Vice President. Chief Operating Officer and Director, Loomis
Sayles.
KENT P. NEWMARK -- Vice President. 555 California Street, San Francisco,
California. Vice President, Loomis Sayles.
JEFFREY C. PETHERICK. -- Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
SANDRA P. TICHENOR -- Vice President. 465 First Street West, Sonoma, California.
General Counsel and Vice President, Loomis Sayles. Formerly, Partner, Heller,
Ehrmeyr, White & McAuliffe.
JEFFREY W. WARDLOW -- Vice President. 1533 N. Woodward, Bloomfield Hills,
Michigan. Vice President, Loomis Sayles.
JOHN F. YEAGER -- Vice President. Vice President, Loomis Sayles; formerly Vice
President -- Marketing, INVESCO Funds Group and Assistant Comptroller, INVESCO
Capital Management.
Previous positions during the past five years with Loomis Sayles are
omitted, if not materially different.
Except as indicated above, the address of each trustee and officer of the
Trust affiliated with Loomis Sayles is One Financial Center, Boston,
Massachusetts. The Trust pays no compensation to its officers or to the trustees
listed above who are directors, officers or employees of Loomis Sayles. Each
trustee who is not a director, officer or employee of Loomis Sayles is
compensated at the rate of $12,500 per annum.
Compensation Table
for the year ended December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Total
Pension or Estimated Compensation
Aggregate Retirement Benefits Annual From Trust and
Name of Person, Compensation Accrued as Part of Benefits Upon Fund Complex*
Position from Trust Fund Expenses Retirement Paid to Trustee
=============================================================================================
<S> <C> <C> <C> <C>
Earl W. Foell, $12,500 N/A N/A $12,500
Trustee
Richard S. Holoway, $12,500 N/A N/A $12,500
Trustee
Terry R. Lautenbach, $12,500 N/A N/A $12,500
Trustee
Michael T. Murray, $12,500 N/A N/A $12,500
Trustee
</TABLE>
-12-
<PAGE>
No Trustee receives any compensation from any mutual funds affiliated with
Loomis Sayles, other than the Trust.
As of August 19, 1996 the officers and trustees of the Trust owned
beneficially shares of each Fund as follows: 52,142.106 shares of the Growth
Fund, 51,469.970 shares of the Growth & Income Fund, 221,450.160 shares of the
Small Cap Fund, 102,132.493 shares of the International Equity Fund, 66,800.994
shares of the Worldwide Fund, 445,441.163 shares of the Bond Fund, 95,077.617
shares of the Global Bond Fund, 42,394.730 shares of the U.S. Government
Securities Fund, 84,974.021 shares of the Municipal Bond Fund, and 2,787.181
shares of the Short-Term Bond Fund. These amounts include shares held by the
Loomis Sayles Employees' Profit Sharing Plan (the "Profit Sharing Plan") for the
accounts of officers and trustees of the Trust, but exclude all other holdings
of the Profit Sharing Plan and the Loomis-Sayles Funded Pension Plan (the
"Pension Plan"). As of August 19, 1996, the Pension Plan and the Profit Sharing
Plan, respectively, owned the following percentages of the outstanding shares of
the indicated funds: 12% and 31% of the Growth Fund, 15% and 20% of the Growth &
Income Fund, 8% and 6% of the International Equity Fund, 38% and 12% of the
Global Bond Fund, 85% and 14% of the Worldwide Fund, and 21% and 8% of the U.S.
Government Securities Fund. As of August 19, 1996, the Profit Sharing Plan also
owned 11% of the Small Cap Fund and 11% of the Short-Term Bond Fund and Loomis,
Sayles & Company owned 26% of the U.S. Government Securities Fund. These amounts
include shares of the Profit Sharing Plan held for the accounts of employees and
former employees of Loomis Sayles who are trustees or officers of the Trust. The
trustee of the Pension Plan is Shawmut Bank of Boston, NA. The Pension Plan's
Advisory Committee, which is composed of the same individuals listed below as
trustees of the Profit Sharing Plan, has the sole voting and investment power
with respect to the Pension Plan's shares. The trustees of the Profit Sharing
Plan are E. John deBeer, Quentin P. Faulkner, Sandra P. Tichenor, Larry K. Shaw,
Kathleen C. Gaffney, Mark W. Holland, and Patrick P. Hurley, all of whom are
officers and employees of Loomis Sayles and (except for Messrs. Hurley and Shaw
and Ms. Gaffney) trustees or officers of the Trust. Plan participants are
entitled to exercise investment and voting power over shares owned of record by
the Profit Sharing Plan. Shares not voted by participants are voted in the same
proportion as the shares voted by the voting participants. The address for the
Profit Sharing Plan and the Pension Plan is One Financial Center, Boston,
Massachusetts. At the date of this Statement of Additional Information, no
officer or trustee owns more than 5% of the outstanding shares of any Fund.
Percentage of
Shareholder Address Shares Held
- ----------- ------- -----------
Loomis Sayles Growth Fund
- -------------------------
Grosse Pointe Woods Employee 20025 Mack Plaza 10%
Retirement System Grosse Point Woods, MI 48236-2343
Loomis Sayles Growth & Income Fund
- ----------------------------------
Loomis-Sayles' Funded Pension Plan One Financial Center 15%
Boston, MA 02111-2602
Asbestos Workers Local c/o Loomis, Sayles & Company 7%
#84 Pension Fund 1533 North Woodward, Suite 300
Bloomfield Hills, MI 48304-2864
Loomis, Sayles & Company Employees' One Financial Center 20%
Profit Sharing Retirement Plan Boston, MA 02111-2602
Loomis Sayles Small Cap Fund
- ----------------------------
Loomis, Sayles & Company Employees' One Financial Center 11%
Profit Sharing Retirement Plan Boston, MA 02111-2602
-13-
<PAGE>
Loomis Sayles Worldwide Fund
- ----------------------------
Loomis-Sayles' Funded Pension Plan One Financial Center 85%
Boston, MA 02111-2602
Loomis, Sayles & Company Employees' One Financial Center 14%
Profit Sharing Retirement Plan Boston, MA 02111-2602
Loomis Sayles Bond Fund
- -----------------------
Donaldson Lufkin Jenrette P.O. Box 2052 5%
Pershing Division Jersey City, NJ 07303-2052
Charles Schwab & Co., Inc. 101 Montgomery Street 6%
San Francisco, CA 94104-4122
Charles Schwab & Co., Inc. 101 Montgomery Street 36%
San Francisco, CA 94104-4122
Loomis Sayles Global Bond Fund
- ------------------------------
Desert States UFCW Unions and P.O. Box 9800 28%
Employers Pension Fund Calabasas, CA 91372-0800
Loomis, Sayles & Company Employees' One Financial Center 12%
Profit Sharing Retirement Plan Boston, MA 02111-2602
Loomis-Sayles' Funded Pension Plan One Financial Center 38%
Boston, MA 02111-2602
Loomis Sayles U.S. Government Securities Fund
- ---------------------------------------------
Loomis, Sayles & Company, L.P. One Financial Center 26%
Boston, MA 02111-2602
Loomis-Sayles' Funded Pension Plan One Financial Center 21%
Boston, MA 02111-2602
-14-
<PAGE>
Loomis Sayles Municipal Bond Fund
- ----------------------------------
Elinor J. Roussea Trust dtd 10/14/88 1071 North Renaud 5%
Grosse Point Woods, MI 48236-1727
John W. George Jr. Trust uad 12/6/90 590 Renaud 5%
Grosse Pointe, MI 48236-1779
Sally B. Searle Kinship Capital 400 Skokie Blvd., Suite 675 14%
Northbrook, IL 60062-7906
Loomis Sayles Short-Term Bond Fund
- ----------------------------------
Charles Schwab & Co., Inc. 101 Montgomery Street 9%
San Francisco, CA 94104-4122
Plumbers & Pipefitters Reg. c/o Loomis, Sayles & Company 9%
Welfare Fund 1533 North Woodward, Suite 300
Bloomfield Hills, MI 48304-2864
Plumbers & Pipefitters Local #189 1230 Kinnear Road 11%
Retirement Savings Columbus, OH 43212-1154
Loomis, Sayles & Company Employees' One Financial Center 11%
Profit Sharing Retirement Plan Boston, MA 02111-2602
-15-
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
Advisory Agreements. Loomis Sayles serves as investment adviser under a
separate advisory agreement relating to each of the Growth, Growth & Income,
Small Cap, Bond, Global Bond, U.S. Government Securities and Municipal Bond
Funds, each dated April 23, 1991, the Short-Term Bond Fund, dated July 31, 1992,
the International Equity Fund, dated September 14, 1992, the Worldwide Fund,
dated May 1, 1996, and the High Yield Fund dated August 30, 1996. Under each
advisory agreement, Loomis Sayles manages the investment and reinvestment of the
assets of the relevant Fund and generally administers its affairs, subject to
supervision by the board of trustees of the Trust. Loomis Sayles furnishes, at
its own expense, all necessary office space, facilities and equipment, services
of executive and other personnel of the Fund and certain administrative
services. For these services, the advisory agreements provide that each Fund
shall pay Loomis Sayles a monthly investment advisory fee at the following
annual percentage rates of the particular Fund's average daily net assets:
Fund Fee Rate
---- --------
Growth .75%
Growth & Income .75
Small Cap 1.00
International Equity 1.00
Worldwide .75
Bond .60
High Yield .60
Global Bond .75
U.S. Government Securities .60
Municipal Bond .60
Short-Term Bond .50
-16-
<PAGE>
During the periods shown below, Loomis Sayles received the following amount
of investment advisory fees from each Fund (before voluntary fee reductions and
expense assumptions) and bore the following amounts of fee reductions and
expense assumptions for each Fund:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
12/31/93 12/31/94 12/31/95
- -------------------------------------------------------------------------------------------
Fee Waivers Fee Waivers Fee Waivers
Advisory and Expense Advisory and Expense Advisory and Expense
Fund Fees Assumptions Fees Assumptions Fees Assumptions
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Growth $219,374 $0 $248,311 $0 $319,009 $0
- -------------------------------------------------------------------------------------------
Growth & 126,150 9,278 188,066 0 243,025 0
Income
- -------------------------------------------------------------------------------------------
Small Cap 510,844 0 790,607 0 839,470 0
- -------------------------------------------------------------------------------------------
International 342,180 74,582 670,041 0 781,765 0
Equity
- -------------------------------------------------------------------------------------------
Worldwide* N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------
Bond 258,919 0 511,925 0 917,444 0
- -------------------------------------------------------------------------------------------
High Yield* N/A N/A N/A N/A N/A N/A
- -------------------------------------------------------------------------------------------
Global Bond 124,151 923 196,543 0 106,447 26,849
- -------------------------------------------------------------------------------------------
U.S.
Government 92,507 44,697 106,524 39,088 107,664 39,836
Securities
- -------------------------------------------------------------------------------------------
Municipal 23,685 87,687 36,708 83,642 45,872 77,750
Bond
- -------------------------------------------------------------------------------------------
Short-Term 61,066 67,014 81,344 53,010 124,536 6,383
Bond
- -------------------------------------------------------------------------------------------
</TABLE>
*The Worldwide and High Yield Funds had not commenced operations on December 31,
1995.
The Trust pays the compensation of its trustees who are not directors,
officers or employees of Loomis Sayles or its affiliates (other than registered
investment companies); registration, filing and other fees in connection with
requirements of regulatory authorities; all charges and expenses of its
custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Funds; the expenses of
meetings of the shareholders and trustees of the Trust; the charges and expenses
of the Trust's legal counsel; interest on any borrowings by the Funds; the cost
of services, including services of counsel, required in connection with the
preparation of, and the cost of printing, the Trust's registration statements
and prospectuses, including amendments and revisions thereto, annual, semiannual
and other periodic reports of the Trust, and notices and proxy solicitation
material furnished to shareholders or regulatory authorities, to the extent that
any such materials relate to the Trust or its shareholders; and the Trust's
expenses of bookkeeping, accounting, auditing and financial reporting, including
related clerical expenses.
Under each advisory agreement, if the total ordinary business expenses of a
Fund or the Trust as a whole for any fiscal year exceed the lowest applicable
limitation (based on percentage of average net assets or income) prescribed by
any state in which the shares of the Fund or the Trust are qualified for sale,
Loomis Sayles shall pay such excess. At present, the most restrictive state
annual expense limitation is 2 1/2% of a Fund's average annual net assets up to
$30,000,000, 2% of the next $70,000,000 of such assets and 1/2% of such assets
in excess of $100,000,000. Loomis Sayles will not be required to reduce its fee
or pay such expenses
-17-
<PAGE>
to an extent or under circumstances which would result in any Fund's inability
to qualify as a regulated investment company under the Code. The term "expenses"
is defined in the advisory agreements or in relevant state regulations and
excludes brokerage commissions, taxes, interest, distribution-related expenses
and extraordinary expenses.
As described in the Prospectus, Loomis Sayles has agreed to certain
additional, voluntary arrangements to limit Fund expenses. These arrangements
may be modified or terminated by Loomis Sayles at any time.
Each advisory agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the
relevant Fund and (ii) by vote of a majority of the Trustees who are not
"interested persons" of the Trust, as that term is defined in the 1940 Act, cast
in person at a meeting called for the purpose of voting on such approval. Any
amendment to an advisory agreement must be approved by vote of a majority of the
outstanding voting securities of the relevant Fund and by vote of a majority of
the Trustees who are not such interested persons, cast in person at a meeting
called for the purpose of voting on such approval. Each agreement may be
terminated without penalty by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the relevant Fund, upon sixty
days' written notice, or by Loomis Sayles upon ninety days' written notice, and
each terminates automatically in the event of its assignment. In addition, each
agreement will automatically terminate if the Trust or the Fund shall at any
time be required by Loomis Sayles to eliminate all reference to the words
"Loomis" and "Sayles" in the name of the Trust or the Fund, unless the
continuance of the agreement after such change of name is approved by a majority
of the outstanding voting securities of the relevant Fund and by a majority of
the Trustees who are not interested persons of the Trust or Loomis Sayles.
Each advisory agreement provides that Loomis Sayles shall not be subject to
any liability in connection with the performance of its services thereunder in
the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
Loomis Sayles acts as investment adviser or subadviser to New England Value
Fund, New England Capital Growth Fund, New England Strategic Income Fund, New
England Star Advisers Fund and New England Balanced Fund, which are series of
New England Funds Trust I, a registered open-end management investment company,
New England Equity Income Fund, a series of New England Funds Trust III, a
registered open-end management investment company, and to the Balanced Series,
the Avanti Growth Series and the Small Cap Series of New England Zenith Fund,
which is also a registered open-end management investment company. Loomis Sayles
also provides investment advice to numerous other corporate and fiduciary
clients.
Loomis Sayles's sole general partner is Loomis Sayles & Company, Inc.,
which is a wholly-owned subsidiary of New England Investment Companies, L.P.
("NEIC"). NEIC's sole general partner is New England Investment Companies, Inc.,
which is a wholly-owned subsidiary of The New England. The New England and
Metropolitan Life Insurance Company ("Met Life") have entered into an agreement
to merge, with Met Life to be the survivor of the merger.
The merger of The New England into Met Life is expected to constitute an
"assignment" of the existing investment advisory agreements between the Funds
and their investment adviser. Under the 1940 Act, an "assignment" will result in
the automatic termination of the investment advisory agreements, effective at
the time of the merger. Shareholders of the Funds have approved new investment
advisory agreements with Loomis Sayles with the same terms as the current
advisory agreements to take effect in the event that the current advisory
agreements are terminated by operation of the 1940 Act in connection with the
merger.
Certain officers and trustees of the Trust also serve as officers,
directors and trustees of other investment companies and clients advised by
Loomis Sayles. The other investment companies and clients sometimes invest in
securities in which the Funds also invest. If a Fund and such other investment
companies or clients desire to buy or sell the same portfolio securities at the
same time, purchases and sales may be allocated, to the extent practicable, on a
pro rata basis in proportion to the amounts desired to be purchased or sold for
each. It is recognized that in some cases the practices described in this
paragraph could have a detrimental effect on the price or amount of the
securities which a Fund purchases or sells. In other cases, however, it is
believed that these practices may benefit the Funds. It is the opinion of the
trustees that the desirability of retaining Loomis Sayles as adviser for the
Funds outweighs the disadvantages, if any, which might result from these
practices.
-18-
<PAGE>
Custodial Arrangements. State Street Bank and Trust Company ("State Street
Bank"), Boston, Massachusetts 02102, is the Trust's custodian. As such, State
Street Bank holds in safekeeping certificated securities and cash belonging to
the Funds and, in such capacity, is the registered owner of securities held in
book entry form belonging to the Funds. Upon instruction, State Street Bank
receives and delivers cash and securities of the Funds in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities. State Street Bank also maintains certain
accounts and records of the Funds and calculates the total net asset value,
total net income and net asset value per share of each Fund on a daily basis.
Independent Accountants. The Fund's independent accountants are Coopers &
Lybrand L.L.P., One Post Office Square, Boston, Massachusetts conducts an annual
audit of the Trust's financial statements, assists in the preparation of the
Funds' federal and state income tax returns and consults with the Funds as to
matters of accounting and federal and state income taxation. The information
under the caption "Financial Highlights" included in the Prospectus has been so
included, and the financial statements incorporated by reference herein from the
Fund's 1995 Annual Report have been so incorporated, in reliance on the reports
of Coopers & Lybrand, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Funds Other Than the International Equity and Worldwide Funds. In placing
orders for the purchase and sale of portfolio securities for each Fund other
than the International Equity and Worldwide Funds, Loomis Sayles always seeks
the best price and execution. Transactions in unlisted securities are carried
out through broker-dealers who make the primary market for such securities
unless, in the judgment of Loomis Sayles, a more favorable price can be obtained
by carrying out such transactions through other brokers or dealers.
Loomis Sayles selects only brokers or dealers which it believes are
financially responsible, will provide efficient and effective services in
executing, clearing and settling an order and will charge commission rates
which, when combined with the quality of the foregoing services, will produce
best price and execution for the transaction. This does not necessarily mean
that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates.
Loomis Sayles will use its best efforts to obtain information as to the general
level of commission rates being charged by the brokerage community from time to
time and will evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such evaluation, all
factors affecting liquidity and execution of the order, as well as the amount of
the capital commitment by the broker in connection with the order, are taken
into account. The Funds will not pay a broker a commission at a higher rate than
otherwise available for the same transaction in recognition of the value of
research services provided by the broker or in recognition of the value of any
other services provided by the broker which do not contribute to the best price
and execution of the transaction.
Receipt of research services from brokers may sometimes be a factor in
selecting a broker which Loomis Sayles believes will provide best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists. Although it
is not possible to assign an exact dollar value to these services, they may, to
the extent used, tend to reduce Loomis Sayles's expenses. Such services may be
used by Loomis Sayles in
-19-
<PAGE>
servicing other client accounts and in some cases may not be used with respect
to the Funds. Receipt of services or products other than research from brokers
is not a factor in the selection of brokers. Consistent with the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., and subject to
seeking best price and execution, Loomis Sayles may, however, consider purchases
of shares of the Trust by customers of broker-dealers as a factor in the
selection of broker-dealers to execute the Trust's securities transactions.
International Equity and Worldwide Funds. In placing orders for the
purchase and sale of securities for the International Equity and Worldwide
Funds, Loomis Sayles follows the same policies as for the other Funds, except
that Loomis Sayles may cause the International Equity and Worldwide Funds to pay
a broker-dealer that provides brokerage and research services to Loomis Sayles
an amount of commission for effecting a securities transaction for those Funds
in excess of the amount another broker-dealer would have charged for effecting
that transaction. Loomis Sayles must determine in good faith that such greater
commission is reasonable in relation to the value of the brokerage and research
services provided by the executing broker-dealer viewed in terms of that
particular transaction or Loomis Sayles's overall responsibilities to the Trust
and its other clients. Loomis Sayles's authority to cause the International
Equity and Worldwide Funds to pay such greater commissions is also subject to
such policies as the Trustees of the Trust may adopt from time to time.
The following three tables set forth, for the fiscal years ended December
31, 1993, December 31, 1994 and December 31, 1995, respectively, (1) the
aggregate dollar amount of brokerage commissions paid on portfolio transactions
during such period, (2) the dollar amount of transactions on which brokerage
commissions were paid during such period that were directed to brokers providing
research services ("directed transactions") and (3) the dollar amount of
commissions paid on directed transactions during such period. Funds not listed
in a table did not pay brokerage commissions during the relevant period.
-20-
<PAGE>
Fiscal Year Ended December 31, 1993
(1) (2) (3)
Aggregate Directed Commissions
Brokerage Trans- on Directed
Fund Commissions actions Transactions
Growth $ 55,531 $ 42,446,050 $ 55,531
Growth & Income $ 37,310 $ 23,193,564 $ 37,310
Small Cap $144,907 $110,080,231 $144,907
International Equity $469,853 $111,972,892 $469,853
Fiscal Year Ended December 31, 1994
(1) (2) (3)
Aggregate Directed Commissions
Brokerage Trans- on Directed
Fund Commissions actions Transactions
Growth $ 44,867 $ 35,606,334 $ 44,867
Growth & Income $ 50,131 $ 28,909,781 $ 50,131
Small Cap $179,677 $130,509,692 $179,677
International Equity $712,614 $158,862,963 $712,614
Fiscal Year Ended December 31, 1995
(1) (2) (3)
Aggregate Directed Commissions
Brokerage Trans- on Directed
Fund Commissions actions Transactions
Growth $ 49,657 $ 43,318,381 $ 49,657
Growth & Income $ 55,978 $ 13,062,283 $ 20,980
Small Cap $584,643 $ 8,919,867 $ 21,655
International Equity $824,038 $198,137,121 $ 824,038
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DESCRIPTION OF THE TRUST
- --------------------------------------------------------------------------------
The Trust, registered with the SEC as a diversified open-end management
investment company, is organized as a Massachusetts business trust under the
laws of Massachusetts by an Agreement and Declaration of Trust (the "Declaration
of Trust") dated February 20, 1991.
The Declaration of Trust currently permits the trustees to issue an
unlimited number of full and fractional shares of each series. Each share of
each Fund represents an equal proportionate interest in such Fund with each
other share of that Fund and is entitled to a proportionate interest in the
dividends and distributions from that Fund. The shares of each Fund do not have
any preemptive rights. Upon termination of any Fund, whether pursuant to
liquidation of the Trust or otherwise, shareholders of that Fund are entitled to
share pro rata in the net assets of that Fund available for distribution to
shareholders. The Declaration of Trust also permits the trustees to charge
shareholders directly for custodial, transfer agency and servicing expenses.
The assets received by each Fund for the issue or sale of its shares and
all income, earnings, profits, losses and proceeds therefrom, subject only to
the rights of creditors, are allocated to, and constitute the underlying assets
of, that Fund. The underlying assets are segregated and are charged with the
expenses with respect to that Fund and with a share of the general expenses of
the Trust. Any general expenses of the Trust that are not readily identifiable
as belonging to a particular Fund are allocated by or under the direction of the
trustees in such manner as the trustees determine to be fair and equitable.
While the expenses of the Trust are allocated to the separate books of account
of each Fund, certain expenses may be legally chargeable against the assets of
all Funds.
The Declaration of Trust also permits the trustees, without shareholder
approval, to subdivide any series of shares or Fund into various sub-series of
shares with such dividend preferences and other rights as the trustees may
designate. While the trustees have no current intention to exercise this power,
it is intended to allow them to provide for an equitable allocation of the
impact of any future regulatory requirements which might affect various classes
of shareholders differently, or to permit shares of a series to be distributed
through more than one distribution channel, with the costs of the particular
means of distribution (or costs of related services) to be borne by the
shareholders who purchase through that means of distribution. The trustees may
also, without shareholder approval, establish one or more additional separate
portfolios for investments in the Trust or merge two or more existing
portfolios. Shareholders' investments in such an additional or merged portfolio
would be evidenced by a separate series of shares (i.e., a new "Fund").
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or any Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of each Fund affected. The
Declaration of Trust further provides that the trustees may also terminate the
Trust or any Fund upon written notice to the shareholders. As a matter of
policy, however, the trustees will not terminate the Trust or any Fund without
submitting the matter to a vote of the shareholders of the Trust or the relevant
Fund.
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<PAGE>
Voting Rights
- -------------
As summarized in the Prospectus, shareholders are entitled to one vote for
each full share held (with fractional votes for each fractional share held) and
may vote (to the extent provided in the Declaration of Trust) on the election of
trustees and the termination of the Trust and on other matters submitted to the
vote of shareholders.
The Declaration of Trust provides that on any matter submitted to a vote of
all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or sub-series unless the rights of a particular
series or sub-series would be adversely affected by the vote, in which case a
separate vote of that series or sub-series shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect that a
class shall be deemed to be affected by a matter unless it is clear that the
interests of each class in the matter are substantially identical or that the
matter does not affect any interest of such class. On matters affecting an
individual series, only shareholders of that series are entitled to vote.
Consistent with the current position of the SEC, shareholders of all series vote
together, irrespective of series, on the election of trustees and the selection
of the Trust's independent accountants, but shareholders of each series vote
separately on other matters requiring shareholder approval, such as certain
changes in investment policies of that series or the approval of the investment
advisory agreement relating to that series.
There will normally be no meetings of shareholders for the purpose of
electing trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of trustees at such time as
less than a majority of the trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the board of trustees,
less than two-thirds of the trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for that purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by the holders of shares having a net asset value
constituting 1% of the outstanding shares stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to provide a list of shareholders or to disseminate
appropriate materials (at the expense of the requesting shareholders).
Except as set forth above, the trustees shall continue to hold office and
may appoint successor trustees. Voting rights are not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust, except
(i) to change the Trust's name or to cure technical problems in the Declaration
of Trust and (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value).
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund of which they are
shareholders. However, the Declaration of Trust disclaims shareholder liability
for acts or obligations of each Fund and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the trustees. The Declaration of Trust provides for indemnification
out of Fund property for all loss and expense of
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<PAGE>
any shareholder held personally liable for the obligations of the Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is considered remote since it is limited to circumstances in which the
disclaimer is inoperative and the Fund itself would be unable to meet its
obligations.
The Declaration of Trust further provides that the trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a trustee against any liability to which the
trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in or not opposed to the best interests of the Trust. No officer
or trustee may be indemnified against any liability to the Trust or the Trust's
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
- --------------------------------------------------------------------------------
The procedures for purchasing shares of the Funds are summarized in the
Prospectus under "How to Purchase Shares."
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NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value of the shares of each Fund is determined by dividing
that Fund's total net assets (the excess of its assets over its liabilities) by
the total number of shares of the Fund outstanding and rounding to the nearest
cent. Such determination is made as of the close of regular trading on the New
York Stock Exchange on each day on which that Exchange is open for unrestricted
trading, and no less frequently than once daily on each day during which there
is sufficient trading in a Fund's portfolio securities that the value of that
Fund's shares might be materially affected. During the 12 months following the
date of this Statement of Additional Information, the New York Stock Exchange is
expected to be closed on the following weekdays: Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, Christmas Day, New Year's Day, Presidents' Day and
Good Friday. Equity securities listed on an established securities exchange or
on the Nasdaq National Market System are normally valued at their last sale
price on the exchange where primarily traded or, if there is no reported sale
during the day, and in the case of over-the-counter securities not so listed, at
the last bid price. Long-term debt securities are valued by a pricing service,
which determines valuations of normal institutional-size trading units of
long-term debt securities. Such valuations are determined using methods based on
market transactions for comparable securities and on various relationships
between securities which are generally recognized by institutional traders.
Other securities for which current market quotations are not readily available
(including restricted securities, if any) and all other assets are taken at fair
value as determined in good faith by the board of trustees, although the actual
calculations may be made by persons acting pursuant to the direction of the
board.
Generally, trading in foreign securities markets is substantially completed each
day at various times prior to the close of regular trading on the New York Stock
Exchange. Occasionally, events affecting the value of foreign fixed income
securities and of equity securities of non-U.S. issuers not traded on a U.S.
exchange may occur between the completion of substantial trading of such
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<PAGE>
securities for the day and the close of regular trading on the New York Stock
Exchange, which events will not be reflected in the computation of the Fund's
net asset value. If events materially affecting the value of any Fund's
portfolio securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or in accordance with
procedures approved by the trustees.
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SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Open Accounts
- -------------
A shareholder's investment in any Fund is automatically credited to an open
account maintained for the shareholder by Boston Financial Data Services, Inc.
("BFDS"), the shareholder servicing agent for State Street Bank. Certificates
representing shares are issued only upon written request to BFDS but are not
issued for fractional shares. Following each transaction in the account, a
shareholder will receive an account statement disclosing the current balance of
shares owned and the details of recent transactions in the account. After the
close of each fiscal year State Street Bank will send each shareholder a
statement providing federal tax information on dividends and distributions paid
to the shareholder during the year. This should be retained as a permanent
record. Shareholders will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional shares
and, by making the issuance and delivery of certificates representing shares
unnecessary, eliminates the problems of handling and safekeeping certificates,
and the cost and inconvenience of replacing lost, stolen, mutilated or destroyed
certificates.
The costs of maintaining the open account system are borne by the Trust,
and no direct charges are made to shareholders. Although the Trust has no
present intention of making such direct charges to shareholders, it reserves the
right to do so. Shareholders will receive prior notice before any such charges
are made.
Systematic Withdrawal Plan
- --------------------------
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of a shareholder provided that the account has a value of at least
$10,000 at the time the plan is established.
Payments will be made either to the shareholder or to any other person
designated by the shareholder. If payments are issued to an individual other
than the registered owner(s), a signature guarantee will be required on the Plan
application. All shares in an account that is subject to a Systematic Withdrawal
Plan must be held in an open account rather than in certificated form. Income
dividends and capital gain distributions will be reinvested at the net asset
value determined as of the close of regular trading on the New York Stock
Exchange on the record date for the dividend or distribution.
Since withdrawal payments represent proceeds from liquidation of shares, the
shareholder should recognize that withdrawals may reduce and possibly exhaust
the value of the account, particularly in the event of a decline in net asset
value. Accordingly, the shareholder should consider whether a Systematic
Withdrawal Plan and the specified amounts to be withdrawn are appropriate in the
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<PAGE>
circumstances. The Fund makes no recommendations or representations in this
regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a plan. See "Redemptions" and "Income Dividends,
Capital Gain Distributions and Tax Status" below for certain information as to
federal income taxes.
Exchange Privilege
- ------------------
Shareholders may redeem their shares of any Fund and have the proceeds
applied on the same day to purchase shares of any other Fund or of New England
Cash Management Trust or New England Tax Exempt Money Market Trust. Exchanges of
shares of the High Yield Fund purchased within one year of such exchanges will
be subject to a redemption fee of 2.00% of the amount exchanged. For purposes of
determining whether a redemption fee is payable with respect to shares of the
High Yield Fund purchased by exchange of shares of another fund, the one-year
period shall be deemed to begin on the date of such purchase by exchange. The
value of shares exchanged must be at least $1,000 and all exchanges are subject
to the minimum investment requirement of the fund into which the exchange is
being made. This option is summarized in the Prospectus under "Shareholder
Services--Free Exchange Privilege."
Exchanges may be effected by (1) making a telephone request by calling
800-633-3330, provided that a special authorization form is on file with BFDS,
or (2) sending a written exchange request to BFDS accompanied by an account
application for the appropriate fund. The Trust reserves the right to modify
this exchange privilege without prior notice.
An exchange constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a capital gain or loss.
IRAs
- ----
Under "Shareholder Services--Retirement Plans" the Prospectus refers to
IRAs established under a prototype plan made available by Loomis Sayles. These
plans may be funded with shares of any Fund, although it is expected that shares
of the Municipal Bond Fund would ordinarily not be an appropriate investment for
these plans.
All income dividends and capital gain distributions of plan participants
must be reinvested. Plan documents and further information can be obtained from
Loomis Sayles.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
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REDEMPTIONS
- --------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be guaranteed
by commercial banks, trust companies, savings associations, credit unions or
brokerage firms that are members of domestic securities exchanges. Signature
guarantees by notaries public are not acceptable. However, as noted in the
Prospectus, a signature guarantee will not be required if the proceeds of the
redemption do not exceed $10,000 and the proceeds check is made payable to the
registered owner(s) and mailed to the record address.
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<PAGE>
If a shareholder selects the telephone redemption service in the manner
described in the next paragraph, Fund shares may be redeemed by making a
telephone call directly to BFDS at 800-626-9390. When a telephonic redemption
request is received, the proceeds are wired to the bank account previously
chosen by the shareholder and a nominal wire fee (currently $5.00) is deducted.
Telephonic redemption requests must be received by BFDS prior to the close of
regular trading on the New York Stock Exchange on a day when the Exchange is
open for business. Requests made after that time or on a day when the New York
Stock Exchange is not open for business cannot be accepted by BFDS and a new
request will be necessary.
In order to redeem shares by telephone, a shareholder must either select
this service when completing the Fund application or must do so subsequently on
the Service Options Form available from BFDS. When selecting the service, a
shareholder must designate a bank account to which the redemption proceeds
should be wired. Any change in the bank account so designated must be made by
furnishing to BFDS a completed Service Options Form with a signature guarantee.
Whenever the Service Options Form is used, the shareholder's signature must be
guaranteed as described above. Telephone redemptions may only be made if an
investor's bank is a member of the Federal Reserve System or has a correspondent
bank that is a member of the System. If the account is with a savings bank, it
must have only one correspondent bank that is a member of the System. The Trust,
BFDS and State Street Bank are not responsible for the authenticity of
withdrawal instructions received by telephone.
The redemption price will be the net asset value per share next determined
after the redemption request and any necessary special documentation are
received by BFDS in proper form, less, in the case of the High Yield Fund, a
redemption fee of 2.00% of the amount redeemed with respect to shares of that
Fund purchased within one (1) year of such redemption, if applicable. Proceeds
resulting from a written redemption request will normally be mailed to you
within seven days after receipt of your request in good order. Telephonic
redemption proceeds will normally be wired on the first business day following
receipt of a proper redemption request. In those cases where you have recently
purchased your shares by check and your check was received less than fifteen
days prior to the redemption request, the Fund may withhold redemption proceeds
until your check has cleared.
Each Fund will normally redeem shares for cash; however, each Fund reserves
the right to pay the redemption price wholly or partly in kind if the board of
trustees of the Trust determines it to be advisable in the interest of the
remaining shareholders. If portfolio securities are distributed in lieu of cash,
the shareholder will normally incur brokerage commissions upon subsequent
disposition of any such securities. However, the Trust has elected to be
governed by Rule 18f-1 under the 1940 Act pursuant to which the Trust is
obligated to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset value of the
Trust at the beginning of such period.
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss. See "Income Dividends, Capital Gain Distributions and Tax Status."
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<PAGE>
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INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
- --------------------------------------------------------------------------------
As described in the Prospectus under "Dividends, Capital Gain Distributions
and Taxes" it is the policy of each Fund to pay its shareholders, as dividends,
substantially all net investment income and to distribute annually all net
realized capital gains, if any, after offsetting any capital loss carryovers.
Income dividends and capital gain distributions are payable in full and
fractional shares of the particular Fund based upon the net asset value
determined as of the close of regular trading on the New York Stock Exchange on
the record date for each dividend or distribution. Shareholders, however, may
elect to receive their income dividends or capital gain distributions, or both,
in cash. The election may be made at any time by submitting a written request
directly to BFDS. In order for a change to be in effect for any dividend or
distribution, it must be received by BFDS on or before the record date for such
dividend or distribution.
As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
Each Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Code. In order so to qualify, the Fund must, among
other things, (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, gains from the sale
of securities or foreign currencies, or other income (including but not limited
to gains from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies; (ii) derive less
than 30% of its gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute at least 90% of its
dividend, interest and certain other taxable income each year; and (iv) at the
end of each fiscal quarter maintain at least 50% of the value of its total
assets in cash, government securities, securities of other regulated investment
companies, and other securities of issuers which represent, with respect to each
issuer, no more than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and with no more than 25% of its
assets invested in the securities (other than those of the U.S. government or
other regulated investment companies) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades and businesses. To the extent it qualifies for treatment as a
regulated investment company, the Fund will not be subject to federal income tax
on income paid to its shareholders in the form of dividends or capital gain
distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of
each Fund's "required distribution" over its actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 (or December 31, if
the Fund so elects) plus undistributed amounts from prior years. Each Fund
intends to make distributions sufficient to avoid imposition of the excise tax.
Distributions declared by a Fund during October, November or December to
shareholders of record on a date in any such month and paid by the Fund during
the following January will be treated for federal tax purposes as paid by the
Fund and received by shareholders on December 31 of the year in which declared.
Shareholders of each Fund will be subject to federal income taxes on
distributions made by the Fund (other than "exempt-interest dividends" paid by
the Municipal Bond Fund, as described in the Prospectus) whether received in
cash or additional shares of the Fund. Distributions by each Fund of net income
and short-term capital gains, if any, will be taxable to shareholders as
ordinary income. Distributions of long-term capital gains, if any, will be
taxable to shareholders as long-term capital
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<PAGE>
gains, without regard to how long a shareholder has held shares of the Fund. A
loss on the sale of shares held for 12 months or less will be treated as a
long-term capital loss to the extent of any long-term capital gain dividend paid
to the shareholder with respect to such shares.
Dividends and distributions on Fund shares received shortly after their
purchase, although in effect a return of capital, are subject to federal income
taxes.
The International Equity, Worldwide and Global Bond Funds each may be
eligible to make an election under Section 853 of the Code so that its
shareholders will be able to claim a credit or deduction on their income tax
returns for, and will be required to treat as part of the amounts distributed to
them, their pro rata portion of qualified taxes paid by the relevant Fund to
foreign countries. The ability of shareholders of the Fund to claim a foreign
tax credit is subject to certain limitations imposed by Section 904 of the Code,
which in general limit the amount of foreign tax that may be used to reduce a
shareholder's U.S. tax liability to that amount of U.S. tax which would be
imposed on the amount and type of income in respect of which the foreign tax was
paid. A shareholder who for U.S. income tax purposes claims a foreign tax credit
in respect of Fund distributions may not claim a deduction for foreign taxes
paid by the Fund, regardless of whether the shareholder itemizes deductions.
Also, under Section 63 of the Code, no deduction for foreign taxes may be
claimed by shareholders who do not itemize deductions on their federal income
tax returns. It should also be noted that a tax-exempt shareholder, like other
shareholders, will be required to treat as part of the amounts distributed to it
a pro rata portion of the income taxes paid by the Fund to foreign countries.
However, that income will generally be exempt from United States taxation by
virtue of such shareholder's tax-exempt status and such a shareholder will not
be entitled to either a tax credit or a deduction with respect to such income.
The International Equity, Worldwide and Global Bond Funds will notify
shareholders each year of the amount of dividends and distributions and the
shareholder's pro rata share of qualified taxes paid by each such Fund to
foreign countries.
Each Fund's transactions, if any, in foreign currencies are likely to
result in a difference between the Fund's book income and taxable income. This
difference may cause a portion of the Fund's income distributions to constitute
a return of capital for tax purposes or require the Fund to make distributions
exceeding book income to avoid excise tax liability and to qualify as a
regulated investment company.
Each Fund may limit its investments in certain "passive foreign investment
companies" in order to avoid certain taxes that arise as a result of such
investments.
Redemptions and exchanges of each Fund's shares are taxable events and,
accordingly, shareholders may realize gains and losses on these transactions. If
shares have been held for more than one year, gain or loss realized will be
long-term capital gain or loss, provided the shareholder holds the shares as a
capital asset. However, if a shareholder sells Fund shares at a loss within six
months after purchasing the shares, the loss will be treated as a long-term
capital loss to the extent of any long-term capital gain distributions received
by the shareholder. Furthermore, no loss will be allowed on the sale of Fund
shares to the extent the shareholder acquired other shares of the same Fund
within 30 days prior to the sale of the loss shares or 30 days after such sale.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action.
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<PAGE>
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state or local taxes.
The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax (or a
reduced rate of withholding provided by treaty).
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The financial statements of each Fund included in the Trust's Annual and
Semiannual Reports are incorporated by reference to such Reports.
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<PAGE>
- --------------------------------------------------------------------------------
CALCULATION OF YIELD AND TOTAL RETURN
- --------------------------------------------------------------------------------
Yield. Yield with respect to a Fund will be computed by dividing such
Fund's net investment income for a recent 30-day period by the maximum offering
price (reduced by any undeclared earned income expected to be paid shortly as a
dividend) on the last trading day of that period. Net investment income will
reflect amortization of any market value premium or discount of fixed income
securities (except for obligations backed by mortgages or other assets) and may
include recognition of a pro rata portion of the stated dividend rate of
dividend paying portfolio securities. The Funds' yields will vary from time to
time depending upon market conditions, the composition of the Funds' portfolios
and operating expenses of the Trust allocated to each Fund. These factors, and
possible differences in the methods used in calculating yield, should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Funds' shares and to the
relative risks associated with the investment objectives and policies of the
Funds.
At any time in the future, yields may be higher or lower than past
yields and there can be no assurance that any historical results will continue.
Investors in the Funds are specifically advised that the net asset value
per share of each Fund may vary, just as yields for each Fund may vary. An
investor's focus on yield to the exclusion of the consideration of the value of
shares of that Fund may result in the investor's misunderstanding the total
return he or she may derive from that Fund.
Total Return. Total Return with respect to a Fund is a measure of the
change in value of an investment in such Fund over the period covered, and
assumes any dividends or capital gains distributions are reinvested immediately,
rather than paid to the investor in cash. The formula for total return used
herein includes four steps: (1) adding to the total number of shares purchased
through a hypothetical $1,000 investment in the Fund all additional shares which
would have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the total number of shares owned at the end of the period by the net
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asset value per share on the last trading day of the period; (3) assuming
redemption at the end of the period; and (4) dividing the resulting account
value by the initial $1,000 investment.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
Yield and Total Return. Each Fund may from time to time include its
total return information in advertisements or in information furnished to
present or prospective shareholders. Each of the Bond, Global Bond, U.S.
Government Securities, Municipal Bond and Short-Term Bond Funds may from time to
time include the yield and/or total return of its shares in advertisements or
information furnished to present or prospective shareholders. Each Fund may from
time to time include in advertisements or information furnished to present or
prospective shareholders (i) the ranking of performance figures relative to such
figures for groups of mutual funds categorized by Lipper Analytical Services,
Inc. or Micropal, Inc. as having similar investment objectives, (ii) the rating
assigned to the Fund by Morningstar, Inc. based on the Fund's risk-adjusted
performance relative to other mutual funds in its broad investment class, and/or
(iii) the ranking of performance figures relative to such figures for mutual
funds in its general investment category as determined by CDA/Weisenberger's
Management Results.
Lipper Analytical Services, Inc. distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated by
Lipper, generally reflecting changes in net asset value adjusted for
reinvestment of capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a variety of performance
periods, including year-to-date, 1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset category.
Micropal, Inc. distributes mutual fund rankings weekly and monthly. The
rankings are based upon performance calculated by Micropal, generally reflecting
changes in net asset value that can be adjusted for the reinvestment of capital
gains and dividends. If deemed appropriate by the user, performance can also
reflect deductions for sales charges. Micropal rankings cover a variety of
performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.
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<PAGE>
Morningstar, Inc. distributes mutual fund ratings twice a month. The
ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar, Inc. Morningstar ratings cover a variety of performance periods,
including 1-year, 3-year, 5-year, 10-year and overall performance. The
performance factor for the overall rating is a weighted-average return
performance (if available) reflecting deduction of expenses and sales charges.
Performance is adjusted using quantitative techniques to reflect the risk
profile of the fund. The ratings are derived from a purely quantitative system
that does not utilize the subjective criteria customarily employed by rating
agencies such as Standard & Poor's and Moody's Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings and
is distributed monthly. The rankings are based entirely on total return
calculated by Weisenberger for periods such as year-to-date, 1-year, 3-year,
5-year and 10-year. Mutual funds are ranked in general categories (e.g.,
international bond, international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of sales charges or fees.
Performance information may also be used to compare the performance of
the Fund to certain widely acknowledged standards or indices for stock and bond
market performance, such as those listed below.
Consumer Price Index. The Consumer Price Index, published by the U.S.
Bureau of Labor Statistics, is a statistical measure of changes, over time, in
the prices of goods and services in major expenditure groups.
Dow Jones Industrial Average. The Dow Jones Industrial Average is a
market value-weighted and unmanaged index of 30 large industrial stocks traded
on the New York Stock Exchange.
Lehman Brothers Government/Corporate Bond Index. The Lehman Brothers
Government/Corporate Bond Index is an index of publicly issued U.S. Treasury
obligations, debt obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible, investment-grade
corporate debt securities and U.S. dollar-denominated, SEC-registered
non-convertible debt issued by foreign governmental entities or international
agencies used as a general measure of the performance of fixed-income
securities.
Lehman Brothers 1-3 Year Government Index. The Index contains fixed rate
debt issues of the U.S. government or its agencies rated investment grade or
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higher with at least one year maturity and an outstanding par value of at least
$100 million for U.S. government issues.
Lehman Brothers Government Bond Index. The Lehman Brothers Government
Bond Index is composed of all publicly issued, nonconvertible, domestic debt of
the U.S. government or any of its agencies, quasi-federal corporations, or
corporate debt guaranteed by the U.S. government.
Lehman Brothers Municipal Bond Index. The Lehman Brothers Municipal Bond
Index is computed from the prices of approximately 21,000 bonds consisting of
roughly 30% revenue bonds, 30% government obligation bonds, 27% insured bonds
and 13% prerefunded bonds.
MSCI-EAFE Index. The MSCI-EAFE Index contains over 1000 stocks from 20
different countries with Japan (approximately 50%), United Kingdom, France and
Germany being the most heavily weighted.
MSCI-EAFE ex-Japan Index (the "EASE Index"). The MSCI-EAFE ex-Japan
Index consists of all stocks contained in the MSCI-EAFE Index, other than stocks
from Japan.
Merrill Lynch Government/Corporate Index. The Merrill Lynch Government/
Corporate Index is a composite of approximately 4,900 U.S. government and
corporate debt issues with at least $25 million outstanding, greater than one
year maturity, and credit ratings of investment grade or higher.
Merrill Lynch High Yield Index. The Merrill Lynch High Yield Index
includes over 750 issues and represents public debt greater than $10 million
(original issuance rated BBB/BB and below).
Russell 2000 Index. The Russell 2000 Index is comprised of the 2000
smallest of the 3000 largest U.S.-domiciled corporations, ranked by market
capitalization.
Salomon Brothers World Government Bond Index. The Salomon Brothers World
Government Bond Index includes a broad range of institutionally-traded
fixed-rate government securities issued by the national governments of the nine
countries whose securities are most actively traded. The index generally
excludes floating- or variable-rate bonds, securities aimed principally at
non-institutional investors (such as U.S. Savings Bonds) and private-placement
type securities.
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<PAGE>
Standard & Poor's/Barra Growth Index. The Standard & Poor's/Barra Growth
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the highest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.
Standard & Poor's/Barra Value Index. The Standard & Poor's/Barra Value
Index is constructed by ranking the securities in the S&P 500 by price-to-book
ratio and including the securities with the lowest price-to-book ratios that
represent approximately half of the market capitalization of the S&P 500.
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"). The
S&P 500 is a market value-weighted and unmanaged index showing the changes in
the aggregate market value of 500 stocks relative to the base period 1941-43.
The S&P 500 is composed almost entirely of common stocks of companies listed on
the New York Stock Exchange, although the common stocks of a few companies
listed on the American Stock Exchange or traded over-the-counter are included.
The 500 companies represented include 400 industrial, 60 transportation and 40
financial services concerns. The S&P 500 represents about 80% of the market
value of all issues traded on the New York Stock Exchange. The S&P 500 is the
most common index for the overall U.S. stock market.
From time to time, articles about the Funds regarding performance,
rankings and other characteristics of the Funds may appear in publications
including, but not limited to, the publications included in Appendix A. In
particular, some or all of these publications may publish their own rankings or
performance reviews of mutual funds, including the Funds. References to or
reprints of such articles may be used in the Funds' promotional literature.
References to articles regarding personnel of the Loomis Sayles who have
portfolio management responsibility may also be used in the Funds' promotional
literature. For additional information about the Funds' advertising and
promotional literature, see Appendix B.
- --------------------------------------------------------------------------------
PERFORMANCE DATA
- --------------------------------------------------------------------------------
The manner in which total return and yield of the Funds will be
calculated for public use is described above. The following table summarizes the
calculation of total return and yield for the Funds, where applicable, (i) for
the one-year period ended December 31, 1995, (ii) for the three-year period
ended December 31, 1995 and (iii) since the commencement of operations (May,
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<PAGE>
1991 for all Funds other than the Short-Term Bond and Worldwide Funds, August,
1992 for the Short-Term Bond Fund, and May, 1996 for the Worldwide Fund) through
December 31, 1995.
PERFORMANCE DATA*
Average
Average Annual
Annual Total
Average Total Return
Annual Return for from the
Total Return the Commencement
for the Three-Year of
Current SEC One-Year Period Period Operations**
Yield ended ended through
FUND at 12/31/95 12/31/95 12/31/95 12/31/95
Growth N/A 30.91% 11.30% 13.26%
Growth & Income N/A 35.23% 14.46% 13.96%
Small Cap N/A 32.09% 14.73% 18.86%
International Equity N/A 8.73% 13.96% 8.43%
Worldwide N/A N/A N/A N/A
Bond 8.02% 31.96% 15.66% 15.19%
Global Bond 6.91% 23.91% 9.04% 9.54%
U.S. Government
Securities 6.37% 23.03% 10.10% 11.80%
Municipal Bond 4.43% 16.50% 7.14% 8.49%
Short-Term Bond 5.54% 10.62% 6.39% 5.90%
*Performance would have been lower if a portion of the management fee had not
been waived by Loomis Sayles. In the absence of this limitation, actual yield
and total return would have been as follows: Growth, 13.24% for the period since
commencement of operations; Growth & Income, 14.45% and 13.78% for the
three-year period and the period since commencement of operations, respectively;
Small Cap, 18.80% for the period since commencement of operations; International
Equity, 13.90% and 7.96% for the three-year period and the period since
commencement of operations, respectively; Bond, 15.07% for the period since
commencement of operations; Global Bond, 6.72% (yield), and 23.72%, 8.98% and
9.11% for the one-year period, the three-year period and the period since
commencement of operations, respectively; U.S. Government Securities, 6.15%
(yield), and 22.81%, 9.90% and 11.43% for the one-year period, the three-year
period and the period since commencement of operations, respectively; Municipal
Bond, 3.41% (yield), and 15.48%, 5.79% and 4.42% for the one-year period, the
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<PAGE>
three-year period and the period since commencement of operations, respectively;
and Short-Term Bond, 5.51% (yield), and 10.59%, 6.12% and 5.35% for the one-year
period, the three-year period and the period since commencement of operations,
respectively.
**Inception dates of the Growth, Growth & Income, Small Cap, International
Equity, Worldwide, Bond, Global Bond, U.S. Government Securities, Municipal Bond
and Short-Term Bond Funds are May 16, 1991, May 13, 1991, May 16, 1991, May 10,
1991, May 1, 1996, May 16, 1991, May 10, 1991, May 21, 1991, May 29, 1991 and
August 3, 1992, respectively.
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates
Adam Smith's Money World
America On Line
Anchorage Daily News
Atlanta Constitution
Atlanta Journal
Arizona Republic
Austin American Statesman
Baltimore Sun
Bank Investment Marketing
Barron's
Bergen County Record (NJ)
Bloomberg Business News
Bond Buyer
Boston Business Journal
Boston Globe
Boston Herald
Broker World
Business Radio Network
Business Week
CBS and affiliates
CDA Investment Technologies
CFO
Changing Times
Chicago Sun Times
Chicago Tribune
Christian Science Monitor
Christian Science Monitor News Service
Cincinnati Enquirer
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<PAGE>
Cincinnati Post
CNBC
CNN
Columbus Dispatch
CompuServe
Dallas Morning News
Dallas Times-Herald
Denver Post
Des Moines Register
Detroit Free Press
Donoghues Money Fund Report
Dorman, Dan (syndicated column)
Dow Jones News Service E
conomist
FACS of the Week
Fee Adviser F
inancial News Network
Financial Planning
Financial Planning on Wall Street
Financial Research Corp.
Financial Services Week
Financial World
Fitch Insights
Forbes
Fort Worth Star-Telegram
Fortune
Fox Network and affiliates
Fund Action
Fund Decoder
Global Finance
(the) Guarantor
Hartford Courant
Houston Chronicle
INC
Indianapolis Star
Individual Investor
Institutional Investor
International Herald Tribune
Internet
Investment Advisor
Investment Company Institute
Investment Dealers Digest
Investment Profiles
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<PAGE>
Investment Vision
Investor's Daily
IRA Reporter
Journal of Commerce
Kansas City Star
KCMO (Kansas City)
KOA-AM (Denver)
LA Times
Leckey, Andrew (syndicated column)
Life Association News
Lifetime Channel
Miami Herald
Milwaukee Sentinel
Money Magazine
Money Maker
Money Management Letter
Morningstar
Mutual Fund Market News
Mutual Funds Magazine
National Public Radio
National Underwriter
NBC and affiliates
New England Business
New England Cable News
New Orleans Times-Picayune
New York Daily News
New York Times
Newark Star Ledger
Newsday
Newsweek
Nightly Business Report
Orange County Register
Orlando Sentinel
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
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<PAGE>
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UP
US News and World Report
USA Today
USA TV Network
Value Line
Wall Street Journal
Wall Street Letter
Wall Street Week
Washington Post
WBZ
WBZ-TV
WCVB-TV
WEEI
WHDH
Worcester Telegram
World Wide Web
Worth Magazine
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<PAGE>
WRKO
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Loomis Sayles Funds' advertising and promotional material may include, but is
not limited to, discussions of the following information:
[box] Loomis Sayles Funds' participation in wrap fee and no transaction
fee programs
[box] Characteristics of Loomis Sayles including the number and locations of
its offices, its investment practices and clients
[box] Specific and general investment philosophies, strategies, processes and
techniques
[box] Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
[box] Industry conferences at which Loomis Sayles participates
[box] Current capitalization, levels of profitability and other financial
information
[box] Identification of portfolio managers, researchers, economists,
principals and other staff members and employees
[box] The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
[box] Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
[box] Current and historical statistics relating to:
-total dollar amount of assets managed
-Loomis Sayles assets managed in total and by Fund
-the growth of assets
-asset types managed
[box] Individuals who have achieved business, professional or personal success
through the "Power of a Passion." These individuals are not investors in
the Funds, do not have any other relationship to the Funds or its adviser
and their success is not attributable to the Funds or its adviser. In
instances where these advertisements describe successful business
ventures, the Funds or Loomis Sayles may or may not invest in these
ventures.
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<PAGE>
References may be included in Loomis Sayles Funds' advertising and
promotional literature about 401(k) and retirement plans that offer the Funds.
The information may include, but is not limited to:
[box] Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry trends
and forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Loomis Sayles may or may not have
a relationship.
[box] Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Fund as 401(k) or
retirement plan funding vehicles produced by industry authorities,
research organizations and publications.
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<PAGE>
Part C. OTHER INFORMATION
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial statements: See "Financial Highlights" contained in the
Prospectus.
(b) Exhibits:
1. Agreement and Declaration of Trust.(1)
2. By-Laws.(1)
3. Not Applicable.
4. Form of Share Certificate.(2)
5. Form of Investment Advisory Agreement.(1)
5(a). Form of Investment Advisory Agreement for the International
Equity Fund.(3)
5(b). Form of Investment Advisory Agreement for the Worldwide Fund.(4)
5(c). Form of Investment Advisory Agreement for the High Yield Fund.
6. Not Applicable.
7. Not Applicable.
8. Form of Custodian Agreement.(2)
9. Form of Shareholder's Servicing and Transfer Agent
Agreement.(2)
10. Opinion and Consent of Counsel.
11. Consent of Coopers & Lybrand L.L.P.
12. Not Applicable.
13(a). Investment Representation Regarding Initial Shares.(2)
13(b). Form of Organizational Expense Reimbursement Agreement.(2)
14. Form of IRA prototype documents.(2)
15. Not Applicable.
- ------------------------------
(1) Incorporated by reference to the similarly numbered Exhibit to this
Registration Statement as originally filed with the Commission on February 22,
1991.
(2) Incorporated by reference to the similarly numbered Exhibit to Pre-Effective
Amendment No. 2 to this Registration Statement filed with the Commission on May
6, 1991.
(3) Incorporated by reference to the similarly numbered Exhibit to
Post-Effective Amendment No. 6 to this Registration Statement filed with the
Commission on May 1, 1995.
(4) Incorporated by reference to the similarly numbered Exhibit to
Post-Effective Amendment No. 8 to this Registration Statement filed with the
Commission on May 1, 1996.
-1-
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<PAGE>
16. Not Applicable.
17(a). Financial Data Schedule for Loomis Sayles Growth Fund.
17(b). Financial Data Schedule for Loomis Sayles Growth & Income
Fund.
17(c). Financial Data Schedule for Loomis Sayles Small Cap Fund.
17(d). Financial Data Schedule for Loomis Sayles International Equity
Fund.
17(e). Financial Data Schedule for Loomis Sayles Worldwide Fund.
17(f). Financial Data Schedule for Loomis Sayles Bond Fund.
17(g). Financial Data Schedule for Loomis Sayles Global Bond Fund.
17(h). Financial Data Schedule for Loomis Sayles U.S. Government
Securities Fund.
17(i). Financial Data Schedule for Loomis Sayles Municipal Bond
Fund.
17(j). Financial Data Schedule for Loomis Sayles Short-Term Bond
Fund.
18. Not applicable.
19. Powers of Attorney.(5)
(5) Incorporated by reference to Exhibit No. 17 to Post-Effective Amendment No.
7 to this Registration Statement filed with the Commission on February 16, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Not Applicable.
Item 26. Number of Holders of Securities
-------------------------------
(1) (2)
Number of Record Holders
Title of Class (as of August 16, 1996)
-------------- ------------------------
Growth Fund 515
Growth & Income Fund 557
Small Cap Fund 1,719
International Equity Fund 729
Worldwide Fund 12
Bond Fund 6,570
High Yield Fund 0
Global Bond Fund 169
U.S. Government Securities Fund 171
Municipal Bond Fund 115
Short-Term Bond Fund 222
Item 27. Indemnification
---------------
Incorporated by reference to Item 27 of Post-Effective Amendment No.
1 to this Registration Statement filed on November 7, 1991.
-2-
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<PAGE>
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
(a) Loomis, Sayles & Company, L.P. ("Loomis Sayles"), the adviser
of the Registrant, provides investment advice to the eleven
series of Loomis Sayles Investment Trust, six series of New
England Funds Trust I, one series of New England Funds Trust
III, and three series of New England Zenith Funds, all of
which are registered investment companies, and to other
organizations and individuals.
The sole general partner of Loomis Sayles is Loomis, Sayles &
Company, Incorporated, One Financial Center, Boston,
Massachusetts 02111.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records
The following companies maintain possession of the documents required
by the specified rules:
(a) Registrant
Rule 31a-1(b)(4), (9), (10), (11)
Rule 31a-2(a)
(b) State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Rule 31a-1(a)
Rule 31a-1(b)(1), (2), (3), (5), (6), (7), (8)
Rule 31a-2(a)
(c) Loomis, Sayles & Company, L.P.
One Financial Center
Boston, MA 02111
Rule 31a-1(f)
Rule 31a-2(e)
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(i) The Registrant undertakes to comply with Section 16(c) of the
Investment Company Act of 1940 as though such provisions of the Act
were applicable to the Registrant.
(ii) The Registrant undertakes to furnish each person to whom a prospectus
is delivered a copy of Registrant's most recent annual report upon
request and without charge.
(iii) The Registrant undertakes to file a post-effective amendment in order
to furnish financial statements of the High Yield Fund, which need
not be certified, within four to six months of the effective date of
Post-Effective Amendment No. 9 to this Registration Statement.
-3-
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<PAGE>
********************
NOTICE
A copy of the Agreement and Declaration of Trust of Loomis Sayles Funds
(the "Trust") is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this Registration Statement has
been executed on behalf of the Trust by an officer of the Trust as an officer
and by its Trustees as trustees and not individually and the obligations of or
arising out of this Registration Statement are not binding upon any of the
Trustees, officers or shareholders individually but are binding only upon the
assets and property of the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment
to this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, in The Commonwealth of
Massachusetts on the 29th day of August, 1996.
LOOMIS SAYLES FUNDS
By: /s/ DANIEL J. FUSS*
------------------------
Daniel J. Fuss, President
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this amendment to the Registration Statement
of Loomis Sayles Funds has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title
--------- -----
/s/ DANIEL J. FUSS* President and Trustee
Daniel J. Fuss
/s/ MARK W. HOLLAND* Treasurer, Principal, Financial Officer and
Mark W. Holland Principal Accounting Officer
/s/ EARL W. FOELL* Trustee
Earl W. Foell
/s/ RICHARD S. HOLWAY* Trustee
Richard S. Holway
/s/ MICHAEL T. MURRAY* Trustee
Michael T. Murray
/s/ TERRY R. LAUTENBACH* Trustee
Terry R. Lautenbach
*By /s/ MARK W. HOLLAND
--------------------------------------
Mark W. Holland, for himself and as
Attorney-in-fact
August 29, 1996
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<PAGE>
EXHIBIT INDEX
EXHIBIT NO.
5(c) Form of Investment Advisory Agreement for the Worldwide Fund.
10. Opinion and Consent of Counsel.
11. Consent of Independent Accountants.
17(a). Financial Data Schedule for Loomis Sayles Growth Fund.
17(b). Financial Data Schedule for Loomis Sayles Growth & Income
Fund.
17(c). Financial Data Schedule for Loomis Sayles Small Cap Fund.
17(d). Financial Data Schedule for Loomis Sayles International Equity
Fund.
17(e). Financial Data Schedule for Loomis Sayles Worldwide Fund.
17(f). Financial Data Schedule for Loomis Sayles Global Bond Fund.
17(g). Financial Data Schedule for Loomis Sayles Bond Fund.
17(h). Financial Data Schedule for Loomis Sayles Municipal Bond Fund.
17(i). Financial Data Schedule for Loomis Sayles U.S. Government
Securities Fund.
17(j). Financial Data Schedule for Loomis Sayles Short-Term Bond
Fund.
ADVISORY AGREEMENT
AGREEMENT made this 30th day of August 1996 by and between Loomis
Sayles Funds, a Massachusetts business trust (the "Trust"), with respect to its
High Yield series (the "Series"), and Loomis, Sayles & Company, L.P., a Delaware
limited partnership (the "Adviser").
WITNESSETH:
WHEREAS, the Trust and the Adviser wish to enter into an agreement
setting forth the terms upon which the Adviser will perform certain services for
the Series;
NOW THEREFORE, in consideration of the premises and covenants
hereinafter contained, the parties agree as follows:
1. The Trust hereby employs the Adviser to manage the investment and
reinvestment of the assets belonging to the Series and to perform the other
services herein set forth, subject to the supervision of the Board of Trustees
of the Trust. The Adviser hereby accepts such employment and agrees, at its own
expense, to render the services and to assume the obligations herein set forth,
for the compensation herein provided. The Adviser shall for all purposes herein
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust.
2. In carrying out its obligations to manage the investment and
reinvestment of the assets belonging to the Series, the Adviser shall:
(a) obtain and evaluate such economic, statistical and
financial data and information and undertake such additional investment
research as it shall believe necessary or advisable for the management
of the investment and reinvestment of the assets belonging to the
Series in accordance with the Series' investment objective and
policies;
(b) take such steps as are necessary to implement the
investment policies of the Series by purchase and sale of securities,
including the placing of orders for such purchase and sale with brokers
or dealers selected by the Adviser. In the selection of such brokers or
dealers and the placing of such orders, the Adviser shall always seek
best execution (except to the extent permitted by the next sentence
hereof), which is to place the Series' portfolio transactions where it
can obtain the most favorable combination of price and execution
services in particular transactions or provided on a continuing basis
by a broker or dealer, and to deal directly with a principal market
maker in connection with over-the-counter transactions, except when it
is believed that best execution is obtainable elsewhere. Subject to
such policies, if any, as the Board of Trustees of the Trust may
determine, the Adviser shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely
by reason of having caused the Series to pay a broker or dealer that
provides brokerage and research services to the Adviser an amount of
commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged
for effecting that transaction, if the Adviser determines in good faith
that such amount of
S:\FUNDCORP\AGMT.HI
1
<PAGE>
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Adviser's overall
responsibilities with respect to the Series and to other clients of the
Adviser as to which the Adviser exercises discretion; and
(c) regularly report to the Board of Trustees with respect to
the implementation of the investment policies of the Series.
3. All activities in connection with the management of the affairs of
the Series undertaken by the Adviser pursuant to this Agreement shall at all
times be subject to the supervision and control of the Board of Trustees, any
duly constituted committee thereof or any officer of the Trust acting pursuant
to like authority.
4. In addition to performing at its expense the obligations set forth
in section 2 hereof, the Adviser shall furnish to the Trust at the Adviser's own
expense or pay the expenses of the Trust for the following:
(a) office space in such place or places as may be agreed upon
from time to time, and all necessary office supplies, facilities and
equipment;
(b) necessary executive and other personnel for managing the
affairs of the Series (exclusive of those related to and to be
performed under contract for custodial, transfer, dividend and plan
agency services by the entity or entities selected to perform such
services and exclusive of any managerial functions described in section
5); and
(c) compensation, if any, of Trustees of the Trust who are
directors, officers, partners or employees of the Adviser or any
affiliated person (other than a registered investment company) of the
Adviser.
5. Except as the Adviser may otherwise agree from time to time, nothing
in section 4 hereof shall require the Adviser to bear, or to reimburse the Trust
for:
(a) any of the costs of printing and distributing the items
referred to in subsection (n) of this section 5;
(b) any of the costs of preparing, printing and distributing
sales literature;
(c) compensation of Trustees of the Trust who are not
directors, officers, partners or employees of the Adviser or of any
affiliated person (other than a registered investment company) of the
Adviser;
(d) registration, filing and other fees in connection with
requirements of regulatory authorities;
(e) the charges and expenses of the custodian appointed by the
Trust for custodial, paying agent, transfer agent and plan agent
services;
S:\FUNDCORP\AGMT.HI
2
<PAGE>
(f) charges and expenses of independent accountants retained
by the Trust;
(g) charges and expenses of any transfer agents and
registrars appointed by the Trust;
(h) brokers' commissions and issue and transfer taxes
chargeable to the Trust in connection with securities transactions
to which the Trust is a party;
(i) taxes and fees payable by the Trust to Federal, State or
other governmental agencies;
(j) any cost of certificates representing shares of the Series;
(k) legal fees and expenses in connection with the affairs of
the Trust including registering and qualifying its shares with
Federal and State regulatory authorities;
(1) expenses of meetings of shareholders and Trustees of the
Trust;
(m) interest, including interest on borrowings by the Trust;
(n) the cost of services, including services of counsel,
required in connection with the preparation of the Trust's
registration statements and prospectuses, including amendments and
revisions thereto, annual, semiannual and other periodic reports of
the Trust, and notices and proxy solicitation material furnished to
shareholders of the Trust or regulatory authorities; and
(o) the Trust's expenses of bookkeeping, accounting, auditing
and financial reporting, including related clerical expenses.
6. The services of the Adviser to the Trust hereunder are not to be
deemed exclusive and the Adviser shall be free to render similar services to
others, so long as its services hereunder are not impaired thereby.
7. As full compensation for all services rendered, facilities furnished
and expenses borne by the Adviser hereunder, the Trust shall pay the Adviser
compensation at the annual percentage rate of .60 %, or such lesser rate as the
adviser may agree to from time to time. Such compensation shall be payable
monthly in arrears or at such other intervals, not less frequently than
quarterly, as the Board of Trustees of the Trust may from time to time determine
and specify in writing to the Adviser. The Adviser hereby acknowledges that the
Trust's obligation to pay such compensation is binding only on the assets and
property belonging to the Series.
8. If the total of all ordinary business expenses of the Series or the
Trust as a whole (including investment advisory fees but excluding taxes and
portfolio brokerage commissions) for any fiscal year exceeds the lowest
applicable percentage of average net assets or income limitations prescribed by
any state in which shares of the Series are qualified for sale, the Adviser
shall pay any such excess. Solely for purposes of applying such limitations in
accordance with the foregoing sentence, the Series and the Trust shall each be
deemed to be a separate fund subject to
S:\FUNDCORP\AGMT.HI
3
<PAGE>
such limitations. Should the applicable state limitation provisions fail to
specify how the average net assets of the Trust or belonging to the Series are
to be calculated, that figure shall be calculated by reference to the average
daily net assets of the Trust or the Series, as the case may be.
9. It is understood that any of the shareholders, trustees, officers,
employees and agents of the Trust may be a partner, shareholder, director,
officer, employee or agent of, or be otherwise interested in, the Adviser, any
affiliated person of the Adviser, any organization in which the Adviser may have
an interest or any organization which may have an interest in the Adviser; that
the Adviser, any such affiliated person or any such organization may have an
interest in the Trust; and that the existence of any such dual interest shall
not affect the validity hereof or of any transactions hereunder except as
otherwise provided in the Agreement and Declaration of Trust of the Trust and
the Articles of Organization of the Adviser, respectively, or by specific
provisions of applicable law.
10. This Agreement shall become effective as of the date of its
execution, and
(a) unless otherwise terminated, this Agreement shall continue
in effect for two years from the date of execution, and from year to
year thereafter only so long as such continuance is specifically
approved at least annually (i) by the Board of Trustees of the Trust or
by vote of a majority of the outstanding voting securities of the
Series, and (ii) by vote of a majority of the Trustees of the Trust who
are not interested persons of the Trust or the Adviser, cast in person
at a meeting called for the purpose of voting on such approval;
(b) this Agreement may at any time be terminated on sixty
days' written notice to the Adviser either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Series;
(c) this Agreement shall automatically terminate in the event
of its assignment;
(d) this Agreement may be terminated by the Adviser on ninety
days' written notice to the Trust;
(e) if the Adviser requires the Trust or the Series to change
its name so as to eliminate all references to the words "Loomis" or
"Sayles," then this Agreement shall automatically terminate at the time
of such change unless the continuance of this Agreement after such
change shall have been specifically approved by vote of a majority of
the outstanding voting securities of the Series and by vote of a
majority of the Trustees of the Trust who are not interested persons of
the Trust or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval.
Termination of this Agreement pursuant to this section 10 shall be
without payment of any penalty.
11. This Agreement may be amended at any time by mutual consent of
the parties, provided that such consent on the part of the Trust shall have
been approved by vote of a majority
S:\FUNDCORP\AGMT.HI
4
<PAGE>
of the outstanding voting securities of the Series and by vote of a majority of
the Trustees of the Trust who are not interested persons of the Trust or the
Adviser, cast in person at a meeting called for the purposes of voting on such
approval.
12. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities," "interested person," "affiliated person"
and "assignment" shall have their respective meanings defined in the Investment
Company Act of 1940 and the rules and regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act. References in this Agreement to any assets, property or
liabilities "belonging to" the Series shall have the meaning defined in the
Trust's Agreement and Declaration of Trust and By-Laws as amended from time to
time.
13. In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or reckless disregard of its obligations
and duties hereunder, the Adviser shall not be subject to any liability to the
Trust, to any shareholder of the Trust or to any other person, firm or
organization, for any act or omission in the course of, or connected with,
rendering services hereunder,
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its
High Yield Fund series
By:----------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By:----------------------------
Mark W. Holland
Vice President
A copy of the Agreement and Declaration of Trust establishing the Trust
is on file with the Secretary of State of The Commonwealth of Massachusetts, and
notice is hereby given that this Agreement is executed with respect to the
Trust's High Yield Fund series on behalf of the Trust by officers of the Trust
as officers and not individually and that the obligations of or arising out of
this Agreement are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and property
belonging to the Series.
S:\FUNDCORP\AGMT.HI
5
ROPES & GRAY
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
August 28, 1996
Loomis Sayles Funds
One Financial Center
Boston, Massachusetts 02111
Gentlemen:
We are furnishing this opinion in connection with the proposed offer
and sale by Loomis Sayles Funds, a Massachusetts business trust (the "Trust"),
of shares of beneficial interest of its Loomis Sayles Growth Fund series, Loomis
Sayles Growth & Income Fund series, Loomis Sayles Small Cap Fund series, Loomis
Sayles International Equity Fund series, Loomis Sayles Worldwide Fund series,
Loomis Sayles Bond Fund series, Loomis Sayles High Yield Fund series, Loomis
Sayles Global Bond Fund series, Loomis Sayles U.S. Government Securities Fund
series, Loomis Sayles Municipal Bond Fund series and Loomis Sayles Short- Term
Bond Fund series (the "Shares") pursuant to Registration Statement No. 33-39133
on Form N-1A under the Securities Act of 1933 (the "Registration Statement").
We are familiar with the action taken by the Trustees of the Trust to
authorize the issuance of the Shares. We have examined the Trust's By-Laws and
its Agreement and Declaration of Trust on file in the office of the Secretary of
State of the Commonwealth of Massachusetts and such other documents as we deem
necessary for the purposes of this opinion.
We assume that upon sale of the Shares the Trust will receive the net
asset value thereof.
Based upon the foregoing, we are of the opinion that the Trust is
authorized to issue an unlimited number of Shares, and that, when the Shares are
issued and sold, they will be validly issued, fully paid and nonassessable by
the Trust.
-1-
3150809.04
<PAGE>
Loomis Sayles Funds -2- August 28, 1996
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of such disclaimer
be given in each agreement, obligation or instrument entered into or executed by
the Trust or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the property of the particular series of shares for all
loss and expense of any shareholder of that series held personally liable solely
by reason of his or her having been a shareholder of that series. Thus, the risk
of shareholder liability is limited to circumstances in which that series itself
would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
ROPES & GRAY
Ropes & Gray
BDM/pdc:3150809.04
-2-
3150809.04
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Loomis Sayles Funds:
We hereby consent to the following with respect to Post-Effective
Amendment No. 10 to the Registration Statement on Form N-1A (File No. 33-39133)
under the Securities Act of 1933, as amended, of Loomis Sayles Funds (consisting
of Loomis Sayles Growth Fund, Loomis Sayles Growth & Income Fund, Loomis Sayles
Small Cap Fund, Loomis Sayles International Equity Fund, Loomis Sayles Worldwide
Fund, Loomis Sayles Global Bond Fund, Loomis Sayles High Yield Fund, Loomis
Sayles Bond Fund, Loomis Sayles Municipal Bond Fund, Loomis Sayles U.S.
Government Securities Fund, and Loomis Sayles Short-Term Bond Fund
(collectively, the "Funds")):
1. The reference to our firm under the heading "Financial Highlights"
in the Prospectus.
2. The incorporation by reference of our report dated February 7, 1996
accompanying the Funds' Annual Report for the year ended December
31, 1995, in the Statement of Additional Information.
3. The reference to our firm under the heading "Independent
Accountants" in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
August 30, 1996
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<NAME> LOOMIS SAYLES FUNDS
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<NAME> LOOMIS SAYLES BOND
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<CIK> 0000872649
<NAME> LOOMIS SAYLES FUNDS
<SERIES>
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<NAME> LOOMIS SAYLES GLOBAL BOND
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<CIK> 0000872649
<NAME> LOOMIS SAYLES FUNDS
<SERIES>
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<NAME> LOOMIS SAYLES US GOVT
<S> <C>
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<CIK> 0000872649
<NAME> LOOMIS SAYLES FUNDS
<SERIES>
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<NAME> LS-MUNI
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<ARTICLE> 6
<CIK> 0000872649
<NAME> LOOMIS SAYLES FUNDS
<SERIES>
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<NAME> LOOMIS SAYLES ST BOND
<S> <C>
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