<PAGE>
As filed with the Securities and Exchange Commission on October 9, 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. 11 [X]
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 13 [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)
<TABLE>
<S> <C>
[_] immediately upon filing pursuant to paragraph (b) [_] on ______________ pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(2) [_] on [date] pursuant to paragrapg (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2) [_] on [date] pursuant to pargraph (a)(2) of Rule 485
<CAPTION>
If appropriate, check the following box:
<S>
[_] This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
</TABLE>
<PAGE>
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.
<PAGE>
LOOMIS SAYLES FUNDS
Cross Reference Sheet
Items required by Form N-1A
<TABLE>
<CAPTION>
PART A
Item No. Registration Statement Caption Caption in Prospectus
<C> <S> <C>
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 Objectives and
Registrant Policies; More Information About the Funds' Investments
and Risk Considerations
5. Management of the Fund Cover Page; The Trust; The Funds' Investment Adviser;
Fund Expenses; Portfolio Transactions; Back Cover
5A. Management's Discussion of Fund More Information about the Funds' Investments and
Performance Risk Considerations; Performance Information
6. Capital Stock and Other Securities The Trust; Shareholder Services; Dividends, Capital
Gain Distributions and Taxes
7. Purchase of Securities Being Offered How to Purchase Shares; Shareholder Services
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B
Item No. Registration Statement Caption Caption in Statement of Additional Information
<C> <S> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Not Applicable
13. Investment Objectives and Policies Investment Objectives, Policies and Restrictions
14. Management of the Fund Management of the Trust
15. Control Persons and Principal Management of the Trust
Holders of Securities
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities How to Redeem Shares (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 Pricing How to Purchase Shares (Prospectus); Shareholder
of Securities Being Offered Services; How to Redeem Shares (Prospectus);
Redemptions; Net Asset Value and Public Offering Price
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 Performance Data Calculation of Yield and Total Return; Performance
Data
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
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.
<PAGE>
LOOMIS SAYLES FUNDS(TM)
The Power of A Passion(TM)
One Financial Center
Boston, Massachusetts 02111
(617) 482-2450
PROSPECTUS
December _____, 1996
The Loomis Sayles Funds - Stock Funds
Retail Class shares of:
Loomis Sayles Core Value Fund Loomis Sayles Small Cap Value Fund
(formerly, Loomis Sayles Growth (formerly, Loomis Sayles Small Cap Fund)
& Income Fund)
Loomis Sayles Growth Fund Loomis Sayles Small Company Growth Fund
Loomis Sayles International Equity Loomis Sayles Strategic Value Fund
Fund
Loomis Sayles Mid-Cap Growth Fund Loomis Sayles Worldwide Fund
Loomis Sayles Mid-Cap Value Fund
Loomis Sayles Core Value Fund, Loomis Sayles Growth Fund, Loomis Sayles
International Equity Fund, Loomis Sayles Mid-Cap Growth Fund, Loomis Sayles
Mid-Cap Value Fund, Loomis Sayles Small Cap Value Fund, Loomis Sayles Small
Company Growth Fund, Loomis Sayles Strategic Value Fund and Loomis Sayles
Worldwide Fund (the "Funds" and each a "Fund"), each a series of Loomis Sayles
Funds, are separately managed, no-load mutual funds and each Fund has its own
investment objective and policies. Loomis, Sayles & Company, L.P. ("Loomis
Sayles") is the investment adviser of each Fund.
The Funds offer two classes of shares: a Retail Class that is described
in this Prospectus, and an Institutional Class, with a higher investment
minimum for certain categories of investors and bearing lower expenses, that is
described in a separate prospectus. This Prospectus concisely describes the
information that an investor should know before investing in the Retail Class
shares of any Fund. Please read it carefully and keep it for future reference.
A Statement of Additional Information dated December _____, 1996, is available
free of charge; write to Loomis Sayles Distributors, L.P. (the "Distributor"),
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.
To obtain more information about the Institutional Class of shares, please call
the Distributor toll-free at 800-633-3330.
For information about:
. Establishing an account
. Account procedures and status
. Exchanges
. Shareholder services
Call 800-626-9390
For all other information about the Funds:
Call 800-633-3330
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.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF EXPENSES......................................................
FINANCIAL HIGHLIGHTS.....................................................
THE TRUST................................................................
INVESTMENT OBJECTIVES AND POLICIES.......................................
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS....
THE FUNDS' INVESTMENT ADVISER............................................
PERFORMANCE INFORMATION..................................................
FUND EXPENSES............................................................
PORTFOLIO TRANSACTIONS...................................................
HOW TO PURCHASE SHARES...................................................
SHAREHOLDER SERVICES.....................................................
HOW TO REDEEM SHARES.....................................................
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES..........................
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist an investor in understanding
the various expenses that an investor in a Fund will bear indirectly. The
information about each Fund shown below is based on annualized projected
expenses of the Retail Class shares for the period from the Retail Class shares
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>
Small
Core Cap International
Growth Value Value 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
Redemption Fees/1/................................. none none none none none
Exchange Fees...................................... none none none none none
Annual Operating Expenses (as a percentage of
net assets):
Management Fees.................................... .50% .50% .75% .75% .75%
12b-1 Fees......................................... .25% .25% .25% .25% .25%
Other Operating Expenses (after expense
reimbursements where indicated)..................... .75%/2/ .75%/2/ .50%/2/ .50%/2/ .50%/2/
Total Operating Expenses (after expense
reimbursements where indicated)...................... 1.50%/2/ 1.50%/2/ 1.50%/2/ 1.50%/2/ 1.50%/2/
Example:
An investor 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......................................... x x x x x
Three Years...................................... x x x x x
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Small Mid-Cap Mid-Cap Strategic
Company Value Growth Value
Growth Fund Fund Fund
Fund
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases
(as % of offering price)..... none none none none
Maximum Sales Load Imposed on
Reinvested Dividends (as % of
(offering price)............. none none none none
Deferred Sales Load
(as % of original purchase
price or redemption proceeds
as applicable).............. none none none none
Redemption Fees/1/............. none none none none
Exchange Fees.................. none none none none
Annual Operating Expenses (as a
percentage of net assets):
Management Fees................ .75% .75% .75% .50%
12b-1 Fees..................... .25% .25% .25% .25%
Other Operating Expenses
(after expense reimbursements
where indicated)............. .50%/2/ .50%/2/ .50%/2/ .75%/2/
Total Operating Expenses
(after expense reimbursements
where indicated)............. 1.50%/2/ 1.50%/2/ 1.50%/2/ 1.50%/2/
Example:
An investor 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 x x x x
Three Years x x x x
An investor 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 x x x x
Three Years x x x x
</TABLE>
______________________________
/1/ A $5 charge applies to any wire transfer of redemption proceeds from
any Fund.
/2/ Loomis Sayles has voluntarily agreed, for an indefinite period, to limit
these expenses to the percentages of net assets shown above. Without
this agreement, estimated annualized Total Operating Expenses for the
fiscal period ended December 31, 1996 would have been _____% for the
Growth Fund, _____% for the Core Value Fund, _____% for the Small Cap
Value Fund, _____% for the International Equity Fund, _____% for the
Worldwide Fund, _____% for the Small Company Growth Fund, _____% for the
Mid-Cap Value Fund, _____% for the Mid-Cap Growth Fund and _____% for
the Strategic Value Fund.
/3/ Under SEC rules, new funds are required to show expenses for the one-and
three-year periods only.
<PAGE>
FINANCIAL HIGHLIGHTS
(For an Institutional Class 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 the "Report of Independent Accountants,"
financial statements and notes thereto contained in the Fund's 1995 Annual
Report, which are incorporated by reference in this Prospectus and the
Statement of Additional Information. The information shown below is for
Institutional Class shares of each Fund; Retail Class shares bear higher
expenses than Institutional Class shares and are expected to have a lower total
return than Institutional Class shares.
<TABLE>
<CAPTION>
Growth Fund
-----------------------------------------------------------------
Six Months
Ended
June 30, Year Ended Dec. 31, May 16/*/
1996 to
----------------------------------------- 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 1.90 3.86 (0.45) 1.16 0.49 2.45
investments --------- ------- ------- ------- ------- -------
Total from investment operations 1.86 3.86 (0.47) 1.16 0.45 2.45
--------- ------- ------- ------- ------- -------
Less distributions --
Distributions from net realized capital 0.00 (1.09) (0.04) (0.60) 0.00 (0.44)
gains
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 ratio 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>
/*/ 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.
<PAGE>
<TABLE>
<CAPTION>
Core Value Fund
--------------------------------------------------------------------
Six Months
Ended
June 30, Year Ended Dec. 31, May 16/*/
1996 to
---------------------------------------- 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 ratio of operating expenses to 1.18/**/ 1.20 1.33 1.56 2.19 2.59/**/
average net assets would have been (%)
Net investment income per share would $ 0.12 $ 0.23 $ 0.15 $ 0.12 $ 0.07 $ 0.06
have been
</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.
<PAGE>
<TABLE>
<CAPTION>
Small Cap Value Fund
-------------------------------------------------------------------------
Six Months
Ended
June 30, Year Ended Dec. 31, May 16/*/
1996 to
-------------------------------------- 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)
-------- ------- ------- ------- ------- ---------
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 ratio 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>
- ---------------------------------------
* 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.
<PAGE>
<TABLE>
<CAPTION>
Worldwide
International Equity Fund Fund
-------------------------------------------------------------------- ----------
Six Months May 1,
Ended May 16/*/ 1996/*/
June 30, Year Ended Dec. 31, to to
1996 Dec. 31, June 30,
-------------------------------------- 1996
(Unaudited) 1995 1994 1993 1992 1991 (unaudited)
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 11.65 $ 11.61 $ 12.90 $ 9.64 $ 10.27 $ 10.00 $ 10.00
------- ------- ------- ------- ------- ------- -------
Income from investment operations --
Net investment income (loss) 0.11 0.14 0.15 0.11 0.10 0.08 0.06
Net realized and unrealized gain (loss) on
investments
0.82 0.87 (0.38) 3.61 (0.62) 0.29 0.06
------- ------- ------- ------- ------- ------- -------
Total from investment operations 0.93 1.01 (0.23) 3.72 (0.52) 0.37 0.12
------- ------- ------- ------- ------- ------- -------
Less distributions --
Dividends from net investment income 0.00 (0.14) (0.14) (0.10) (0.10) (0.08) 0.00
Distributions from net realized capital
gains 0.00 (0.83) (0.92) (0.36) (0.01) 0.00 0.00
Distributions from paid-in capital 0.00 0.00 0.00 0.00 0.00 (0.02) 0.00
------- ------- ------- ------- ------- ------- -------
Total distributions 0.00 (0.97) (1.06) (0.46) (0.11) (0.10) 0.00
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 12.58 $ 11.65 $ 11.61 $ 12.90 $ 9.64 $ 10.27 $ 10.12
======= ======= ======= ======= ======= ======= =======
Total return (%) 8.0 8.7 (1.8) 38.5 (5.1) 3.7 1.2
Net assets, end of period (000) $83,356 $79,488 $73,189 $56,560 $14,937 $ 6,916 $ 4,727
Ratio of operating expenses to average net
assets (%) 1.50** 1.45 1.46 1.50 1.50 1.50** 1.00**
Ratio of net investment income to average
net assets (%) 1.78** 1.16 1.30 1.20 1.64 1.55** 4.66*
Portfolio turnover rate (%) 162** 133 116 128 101 109** 31**
Average Commission Rate *** $0.0007 --- --- --- --- --- $0.0158
Without giving effect to voluntary expense
limitations:
The ratio of operating expenses to
average net assets would have been (%) 1.50** 1.45 1.46 1.72 2.77 3.66** 4.46**
Net investment income per share would
have been $ 0.11 $ 0.14 $ 0.15 $ 0.09 $ 0.02 $(0.03) $ 0.02
</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.
<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 Core Value 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 Value 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 stocks of solid companies
with reasonable growth prospects and that are attractively priced in relation
to the companies' earnings 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.
<PAGE>
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 Small Company Growth Fund
---------------------------------------
The Fund's investment objective is long-term capital growth from investments
in common stocks or their equivalent.
The Fund seeks to attain its objective by investing primarily in stocks of
small, rapidly growing companies that Loomis Sayles believes have the potential
for accelerating earnings growth and rising profit margins. 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 total
assets in larger companies. Loomis Sayles seeks companies that have
distinctive products, technologies, or services; dynamic earnings growth;
prospects for a high level of profitability; and outstanding management.
Current income is not a consideration in selecting the Fund's investments. The
Fund may engage in options and futures transactions, foreign currency hedging
transactions and securities lending. The Fund may invest any portion of its
assets in the securities of Canadian issuers and up to 20% of its assets in the
securities of issuers headquartered outside the United States or Canada.
Loomis Sayles Mid-Cap Value Fund
--------------------------------
The Fund's 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
with market capitalization between $500 million and $5 billion. The Fund will
normally maintain a median market capitalization between $1 billion and $5
billion. Loomis Sayles seeks to build a core portfolio of stocks that Loomis
Sayles believes to be undervalued by the market in relation to the issuer's
earnings, dividends, assets and growth prospects and that has a lesser emphasis
on special situations and turnarounds (companies that have experienced
significant business problems but that Loomis Sayles believes have favorable
prospects for recovery). Current income is not a consideration in selecting
the Fund's investments. The Fund may engage in options and futures
transactions, foreign currency hedging transactions and securities lending.
The Fund may invest any portion of its assets in the securities of Canadian
issuers and up to 20% of its assets in the securities of issuers headquartered
outside the United States or Canada.
Loomis Sayles Mid-Cap Growth 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
with market capitalization between $500 million and $5 billion. The Fund will
normally maintain a median market capitalization between $1 billion and $5
billion. Stock selection will be driven by identifying the companies that are
dominant in their markets, valuing each stock according to its appropriate
growth phase and diversifying according to the risk characteristics of each
phase. Current income is not a consideration in selecting the Fund's
investments. The Fund may engage in options and futures transactions, foreign
currency hedging transactions and securities lending. The Fund may invest any
portion of its assets in the securities of Canadian issuers and up to 20% of
its assets in the securities of issuers headquartered outside the United States
or Canada.
Loomis Sayles Strategic Value 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 substantially all of
its assets in common stocks or their equivalent that Loomis Sayles considers to
be undervalued by the markets. Stocks are selected based on a combination of
quantitative factors including historical, relative price-earnings ratios;
price-earnings ratios relative to growth rates; relative fundamentals and price
<PAGE>
momentum; and qualitative factors including the quality of management, position
in the industry, debt and balance sheet restructuring and product cycles. The
Fund's strategy is to have a relatively concentrated portfolio normally
consisting of approximately 35-40 securities that Loomis Sayles considers best
positioned to perform in the current and future environment. The Fund may
engage in options and futures transactions, foreign currency hedging
transactions and securities lending. The Fund may invest any portion of it
assets in the securities of Canadian issuers and up to 20% of its assets in the
securities of issuers headquartered outside the United States or Canada.
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 an 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 Fund may invest in fixed income securities of any maturity.
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.
Zero Coupon Securities
----------------------
The Worldwide Fund may 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 Fund 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
<PAGE>
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 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 Fund 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 may invest in securities of issuers organized or headquartered
outside the United States ("foreign securities"). The Growth, Core Value and
Small Cap Value 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 Small Company Growth, Mid-Cap Value, Mid-Cap Growth and Strategic
Value Funds may invest any portion of its assets in securities of Canadian
issuers, but will not purchase other foreign securities if, as a result, the
Funds' holding of non-U.S. and non-Canadian securities would exceed 20% of the
Funds' total assets.
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.
<PAGE>
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 a Fund 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 holdings 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 and Futures Transactions
--------------------------------
The International Equity, Worldwide, Small Company Growth, Mid-Cap Value,
Mid-Cap Growth and Strategic Value Funds may buy, sell or write options on
securities, securities indexes, currencies or futures contracts. The Small
Company Growth, Mid-Cap Value, Mid-Cap Growth and Strategic Value Funds may buy
and sell futures contracts on securities, securities indexes or currencies. The
Funds may engage in these transactions either for the purpose of enhancing
investment return, or to hedge against changes in the value of other assets
that the Funds own or intend to acquire. Options and futures fall into the
broad category of financial instruments known as "derivatives" and involve
special risks. Use of options or futures for other than hedging purposes may be
considered a speculative activity, involving greater risks than are involved in
hedging.
Options can generally be classified as either "call" or "put" options.
There are two parties to a typical options transaction: the "writer" and the
"buyer." A call option gives the buyer the right to buy a security or other
asset (such as an amount of currency or a futures contract) from, and a put
option the right to sell a security or other asset to, the option writer at a
specified price, on or before a specified date. The buyer of an option pays a
premium when purchasing the option, which reduces the return on the underlying
security or other asset if the option is exercised, and results in a loss if
the option expires unexercised. The writer of an option receives a premium from
writing an option, which may increase its return if the option expires or is
closed out at a profit. If a Fund as the writer of an option is unable to close
out an unexpired option, it must continue to hold the underlying security or
other asset until the option expires, to "cover" its obligation under the
option.
A futures contract creates an obligation by the seller to deliver and the
buyer to take delivery of the type of instrument or cash at the time and in the
amount specified in the contract. Although many futures contracts call for the
delivery (or acceptance) of the specified instrument, futures are usually
closed out before the settlement date through the purchase (or sale) of a
comparable contract. If the price of the sale of the futures contract by the
Funds exceeds (or is less than) the price of the offsetting purchase, the Funds
will realize a gain (or loss).
The value of options purchased by the Funds and futures contracts held by
the Funds may fluctuate up or down based on a variety of market and economic
factors. In some cases, the fluctuations may offset (or be offset by) changes
in the value of securities held in a Funds' portfolio. All transactions in
options and futures involve the possible risk of loss to the Funds of
<PAGE>
all or a significant part of the value of its investment. In some cases, the
risk of loss may exceed the amount of the Funds' investment. The Funds will be
required, however, to set aside with its custodian bank certain assets in
amounts sufficient at all times to satisfy its obligations under options,
futures and contracts.
The successful use of options and futures will usually depend on the
ability to forecast stock market, currency or other financial market movements
correctly. The Funds' ability to hedge against adverse changes in the value of
securities held in its portfolio through options and futures also depends on
the degree of correlation between the changes in the value of futures or
options positions and changes in the values of the portfolio securities. The
successful use of futures and exchange traded options also depends on the
availability of a liquid secondary market to enable a Funds to close its
positions on a timely basis. There can be no assurance that such a market will
exist at any particular item. In the case of options that are not traded on an
exchange ("over-the-counter" options), a Fund is at risk that the other party
to the transaction will default on its obligations, or will not permit a Fund
to terminate the transaction before its scheduled maturity. As a result of
these characteristics, the Funds will treat most over-the-counter options (and
the assets it segregates to cover its obligations thereunder) as illiquid.
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.
Securities Lending
------------------
The Small Company, Mid-Cap Value, Mid-Cap Growth and Strategic Value Funds
may lend their portfolio securities to broker-dealers or other parties under
contracts calling for the deposit by the borrower with the Fund's custodian of
cash collateral equal to at least the market value of the securities loaned,
marked to market on a daily basis. The Fund will continue to benefit from
interest or dividends on the securities loaned and will also receive interest
through investment of the cash collateral in short-term liquid investments. No
loans will be made if, as a result, the aggregate amount of such loans
outstanding at any time would exceed 33/1//\\3\\% of the Fund's total assets
(taken at current value). Any voting rights, or rights to consent, relating to
securities loaned pass to the borrower. However, if a material event affecting
the investment occurs, such loans will be called so that the securities may be
voted by the Fund. The Fund pays various fees in connection with such loans,
including shipping fees and reasonable custodial or placement fees.
Securities loans must be fully collateralized at all times, but involve
some credit risk to the Fund if the borrower defaults on its obligation and the
Fund is delayed or prevented from recovering the collateral.
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 indirectly owned by New England Investment Companies, L.P., a publicly-
traded limited partnership whose general partner is indirectly owned by
Metropolitan Life Insurance Company.
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 _________________, 1996, the Loomis Sayles Employees' Profit Sharing
Plan owned _____% of the Growth Fund and Loomis-Sayles Funded Pension Plan
owned 85% of the Worldwide Fund. Each of these shareholders may be deemed to
control the relevant Fund or Funds.
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 and the Mid-Cap Growth Fund since 1996. Jeffrey W. Wardlow, Vice
President of the Trust and of Loomis Sayles, has served as the portfolio
manager of the Core Value 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 Value 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 Value Fund since 1995. Christopher R.
Ely, Vice President of the Trust and of Loomis Sayles, has served as the
portfolio manager and Philip C. Fine and David L. Smith, Vice Presidents of the
Trust and of Loomis
<PAGE>
Sayles, have served as assistant portfolio managers of the Small Company Growth
Fund since its inception in 1996. Jeffrey C. Petherick and Gregg D. Watkins,
Vice Presidents of the Trust and Loomis Sayles, have served as portfolio
managers of the Mid-Cap Value Fund since its inception in 1996. Scott S. Pape,
a Vice President of the Trust and of Loomis Sayles, has served as a portfolio
manager of the Mid-Cap Growth Fund since its inception in 1996. Philip J.
Schettewi, Vice President of the Trust and Loomis Sayles, has served as the
portfolio manager of the Strategic Value Fund since its inception in 1996.
Daniel J. Fuss, President of the Trust and Executive Vice President of Loomis
Sayles, has served as the portfolio manager of the domestic bonds sector of the
Worldwide Fund since that Fund's inception in 1996. E. John deBeer, Vice
President of the Trust and of Loomis Sayles, has served as portfolio manager of
the international bonds sector of the Worldwide Fund since that Fund's
inception in 1996. 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 and of the International Equity Fund since
that Fund's inception in 1996. Each of the foregoing, except Ms. Champagne and
Messrs. Drexler, Ely, Fine, Smith, and Watkins 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. Prior to joining Loomis
Sayles in 1996, Mr. Ely was Senior Vice President and Portfolio Manager, and
Messrs. Fine and Smith were Vice Presidents and Portfolio Managers, of Keystone
Investment Management Company, Inc. Prior to joining Loomis Sayles in 1991,
Mr. Watkins was an investment manager with Comerica, Inc.
PERFORMANCE INFORMATION
Portfolio Managers' Past Performance
------------------------------------
The performance information presented in the graphs below relates to the
institutional private accounts managed by the portfolio managers of the Small
Company Growth Fund and the Strategic Value Fund that have investment
objectives and policies substantially similar to those of the relevant Fund.
The Funds are newly organized and have no performance record of their own. The
information below should not be considered a prediction of the future
performance of any Fund. The performance of the Funds may be higher or lower
than the performance of a fund or account that has substantially similar
investment objectives and policies. The performance information shown below
for the accounts described below is adjusted to give effect to the higher of
the level of the actual expenses of the accounts during the periods shown or
the annualized expenses projected for the relevant Fund's Retail Class shares
during the first fiscal year.
Small Company Growth Accounts
-----------------------------
Christopher R. Ely, Portfolio Manager of the Small Company Growth Fund,
and Philip C. Fine and David L. Smith, Assistant Portfolio Managers of the
Small Company Growth Fund, also serve, and have served, in those capacities for
other accounts that have investment objectives and investment policies
substantially similar to the Small Company Growth Fund (the "Small Company
Growth Accounts"). Prior to July 22, 1996, Messrs. Ely, Fine and Smith were
affiliated with another advisory firm. The following graph shows total returns
for the one and two year periods ended September 30, 1996 for the Small Company
Growth Accounts. The information presented in footnote (2 ) below the graph
represents the total return of the Keystone Institutional Small Cap Growth Fund
and Keystone Small Company Growth Fund II, which have investment objectives and
policies substantially similar to those of the Small Company Growth Fund and
which, from their inception through July 11, 1996, were managed by Messrs. Ely,
Fine and Smith in their capacities as employees of the firm with which they
were then affiliated. The performance information shown below is adjusted to
give effect to the higher of the level of the actual expenses of the Accounts
during the periods shown or the annualized expenses projected for the Fund's
Retail Class shares during the first full fiscal year.
<PAGE>
A bar graph appears here, illustrating the one and two year annual returns
for the periods ended September 30, 1996 for the Accounts (1)(2), the Russell
2000 Index, the Russell 2000 Growth Index and the S&P 600 Index. The data
points from the chart are as follows:
Accounts %
Russell 2000 Index %
Russell 2000 Growth Index %
S&P 600 Index %
(1) The annual total return for the Accounts for the period June 29, 1994
(inception of the Accounts) to September 30, 1996 was [ ]%. The Accounts were
managed by Messrs. Ely, Fine and Smith throughout the periods shown except for
the period July 11, 1996 through September 16, 1996 when the management of the
Accounts was in transition from the former adviser to Loomis Sayles.
(2) In the case of the Keystone Institutional Small Cap Growth Fund
("Institutional Fund"), the total return for the period January 1, 1996
(inception of the Institutional Fund) to July 11, 1996 (the date that Messrs.
Ely, Fine and Smith ceased management of the Institutional Fund) was [ ]%.
In the case of the Keystone Small Company Growth Fund II ("Fund II"), the total
return for February 20, 1996, the date of the Fund's inception, through July
11, 1996 was [ ]. The information relating to Fund II does not take into
account the sales charges of Fund II. The lower total return of Fund II
compared to the Institutional Fund and the Accounts is partially attributable
to certain tax restrictions.
Strategic Value Accounts
------------------------
Philip J. Schettewi, portfolio manager of the Strategic Value Fund, also
serves as portfolio manager for other accounts that have substantially the same
investment objective and investment policies as the Strategic Value Fund (the
"Strategic Value Accounts") . The following graph shows the total returns for
the period from __________ through ____________ for the Strategic Value
Accounts. The graph also shows the total return of the Standard & Poor's/Barra
Value Index for [each] [the same] periods.
A bar graph appears here, illustrating the __, ___, ___ year total returns
for ___________ to _______________ for the Strategic Value Accounts and the
Standard & Poor's/Barra Value Index.
Accounts %
Standard & Poor's/Barra Value Index %
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:
<TABLE>
<CAPTION>
Fund Fee Rate
---- ---------
<S> <C>
Growth .50%
Core Value .50
Small Cap Value .75
International Equity .75
Worldwide .75
Small Company Growth .75
Mid-Cap Value .75
Mid-Cap Growth .75
Strategic Value .50
</TABLE>
<PAGE>
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, 12b-1 fees, expenses of preparing, printing and mailing
prospectuses to existing shareholders and fees of trustees who are not
directors, officers or employees of Loomis Sayles and its affiliated companies.
Under a Distribution Plan adopted pursuant to Rule 12b-1 under the 1940 Act,
each of the Funds pays the Distributor, a subsidiary of Loomis Sayles, a
monthly distribution fee at an annual rate not to exceed 0.25% of the Fund's
average net assets attributable to the Retail Class shares. The Distributor may
pay all or any portion of the Distribution Fee to securities dealers or other
organizations (including, but not limited to, any affiliate of the Distributor)
as commissions, asset-based sales charges or other compensation with respect to
the sale of Retail Class shares of the Funds, or for providing personal
services to investors in Retail Class shares of the Funds and/or the
maintenance of accounts, and may retain all or any portion of the Distribution
Fee as compensation for the Distributor's services as principal underwriter of
the Retail Class shares of the Funds. Loomis Sayles may pay certain broker-
dealers or financial intermediaries whose customers are shareholders 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 Funds.
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 total operating expenses of the Retail Class of shares of each Fund to
1.50% of the Fund's average net assets. 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 Small Company Growth, Mid-Cap Value, Mid-Cap Growth and
Strategic Value Funds' portfolio turnover rate to exceed _____%, _____%,
_____%, and _____, respectively.
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
An investor 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
The minimum investment for the Retail Class of each Fund's shares is
$250,000 in that Fund. This investment minimum does not apply to purchases
through certain financial intermediaries including, but not limited to, certain
financial advisers, broker dealers, 401k alliances, wrap programs, no
transaction fee programs, bank trust departments, financial consultants and
insurance companies. The investment minimum will also be waived for
shareholders who invest less than $250,000 but sign a letter of intent stating
their intention to bring their balance to $250,000 in six months or less.
Loomis Sayles reserves the right to redeem the accounts at net asset value of
shareholders that have signed a letter of intent but fail to meet the
investment minimum within the specified time. Subsequent investments must be at
least $50.00.
<PAGE>
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. An investor who wishes to purchase shares by exchanging securities
should obtain instructions by calling (800) 633-3330.
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 State Street Bank and Trust Company. 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 an investor's order, Boston Financial Data Services, Inc.
("BFDS"), the shareholder servicing agent for State Street Bank and Trust
Company ("State Street Bank"), opens an account, 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, an investor 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 the investor's account number or name and
social security number.
Subsequent investments can also be made by federal funds wire. Investors
should instruct their banks 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 (Fund Name and
Retail Class), DDA #9904-622-9, Shareholder Name, Shareholder Account Number."
A bank may charge 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 presently 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 an investor pays 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.
Each Fund also offers an Institutional Class of shares that has a $1 million
investment minimum and bears lower
<PAGE>
expenses. Because of its lower expenses, the Institutional Class of shares is
expected to have a higher total return than the Retail Class of shares.
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 an investor opens an account unless an investor
elects on the application to decline the privileges. Other privileges must be
specifically elected. A signature guarantee will be required to establish a
privilege after an account is opened.
Free Exchange Privilege. Shares of the Retail Class of any Fund may be
-----------------------
exchanged for shares of the Retail Class of any other Fund or for shares
of certain money market funds advised by New England Funds Management,
L.P., an affiliate of Loomis Sayles. Exchanges may be made by written
instructions or by telephone, unless an investor elected on the
application to decline telephone exchange privileges. The exchange
privilege should not be viewed 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.
Retirement Plans. The Retail Class of the Funds' shares may be purchased
----------------
by all types of tax-deferred retirement plans. Loomis Sayles makes
available retirement plan forms for IRAs.
Systematic Withdrawal Plan. If the value of an account is at least
--------------------------
$25,000 an investor may have periodic cash withdrawals automatically paid
to the investor or any person designated by the investor.
Automatic Investment Plan. Voluntary monthly investments of at least $50
-------------------------
may be made automatically by pre-authorized withdrawals from an investor's
checking account.
HOW TO REDEEM SHARES
An investor can redeem shares by sending a written request to Boston
Financial Data Services, Inc., P.O. Box 8314, Boston, Massachusetts 02266. As
described below, an investor may also redeem shares by calling BFDS at 800-626-
9390. Proceeds resulting from a written or telephone redemption request can be
wired to an investor's bank account or sent by check in the name of the
registered owners to their record address.
The written request must include the name of the Fund, the account number,
the exact name(s) in which the 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
an investor's 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). Investors requesting that redemption
proceeds be wired to their bank accounts must provide specific wire
instructions.
If (1) an investor is redeeming shares worth more than $50,000, (2) is
requesting that the proceeds check be made out to someone other than the
registered owners or be sent to an address other than the record address, (3)
the account registration has changed within the last 30 days or (4) an investor
is instructing us to wire the proceeds to a bank account not designated on the
application, an investor must have his or her 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 the redemption
request, an investor should verify with the guarantor institution that it is an
eligible guarantor. Signature guarantees by notaries public are not
acceptable.
If an investor has requested certificates for the investment, an investor
must enclose the certificates and a properly completed redemption form or stock
power. The Funds recommend that certificates be sent by registered mail.
When an investor telephones a redemption request, the proceeds are wired to
the bank account previously chosen by the investor. A wire fee (currently
$5.00) will be deducted from the proceeds. A telephonic redemption request
must be
<PAGE>
received by BFDS prior to the close of regular trading on the New York Stock
Exchange. If an investor telephones a request to BFDS after the Exchange
closes or on a day when the Exchange is not open for business, BFDS cannot
accept the request and a new one will be necessary.
If an investor decides to change the bank account to which proceeds are to
be wired, an investor must send in this change on the Service Options Form with
a signature guarantee. Telephonic 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. Unless an investor indicates
otherwise on the account application, BFDS will be authorized to act upon
redemption and exchange instructions received by telephone from the investor or
any person claiming to act as the investor's representative who can provide
BFDS with the investor's 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, an investor 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.
Proceeds resulting from a written redemption request will normally be mailed
to an investor within seven days after receipt of the investor's request in
good order. Telephonic redemption proceeds will normally be wired to an
investor's bank on the first business day following receipt of a proper
redemption request. If an investor purchased shares by check and the check was
deposited less than fifteen days prior to the redemption request, the Fund may
withhold redemption proceeds until the 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 Funds declare and pay their net investment income to shareholders as
dividends annually. 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, 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.
Dividends and capital gain distributions will automatically be reinvested in
additional shares of the same Fund on the record date unless an investor has
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.
Income dividends and short term capital gain distributions are taxable as
ordinary income whether distributed in cash or additional shares. Long-term
capital gain distributions from all Funds are taxable as long-term capital
gains whether distributed in cash or additional shares and regardless of how
long an investor has owned shares of a Fund.
Each Fund 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 an investor (1) if an investor does not provide a
correct, certified taxpayer identification number, (2) if the Fund is notified
that an investor has underreported income in the past, or (3) if an investor
fails to certify to the Fund that the investor is not subject to such
withholding.
Certain designated dividends from the Funds are expected to be eligible for
the dividends-received deduction for corporate shareholders.
<PAGE>
State Street Bank will send each investor and the IRS an annual statement
detailing federal tax information, including information about dividends and
distributions paid to the investor during the preceding year. Be sure to keep
this statement as a permanent record. A fee may be charged for any duplicate
information that an investor requests.
NOTE: The foregoing summarizes certain tax consequences of investing in the
Funds. Before investing, an investor should consult his or her own tax
adviser for more information concerning the federal, state and local tax
consequences of investing in, redeeming or exchanging Fund shares.
<PAGE>
INVESTMENT ADVISER
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
DISTRIBUTOR
Loomis Sayles Distributors, 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
LOOMIS SAYLES
FUNDS
Stock Funds
Retail Class Shares
The Power of A Passion/TM/
Stock Funds
Retail Class
PROSPECTUS
AND
APPLICATION
December _____, 1996
One Financial Center
Boston, Massachusetts 02111
(617) 482-2450
<PAGE>
LOOMIS SAYLES FUNDS(TM)
The Power of A Passion(TM)
One Financial Center
Boston, Massachusetts 02111
(617) 482-2450
PROSPECTUS
December _____, 1996
The Loomis Sayles Funds - Bond Funds:
Retail Class shares of:
Loomis Sayles Bond Fund
Loomis Sayles High Yield Fund
Loomis Sayles Global Bond Fund
Loomis Sayles Short-Term Bond Fund
Loomis Sayles Investment Grade Bond Fund
Loomis Sayles Intermediate Maturity Bond Fund
Loomis Sayles Bond Fund, Loomis Sayles High Yield Fund, Loomis Sayles
Global Bond Fund, Loomis Sayles Short-Term Bond Fund, Loomis Sayles Investment
Grade Bond Fund and Loomis Sayles Intermediate Maturity Bond Fund (the "Funds"
and each a "Fund"), each a series of Loomis Sayles Funds, are separately managed
and each Fund has its own investment objective and policies. Loomis, Sayles &
Company, L.P. ("Loomis Sayles") is the investment adviser of each Fund.
The Funds offer two classes of shares: a Retail Class that is described
in this Prospectus, and an Institutional Class, with a higher investment minimum
for certain categories of investors and bearing lower expenses, that is
described in a separate prospectus. This Prospectus concisely describes the
information that an investor should know before investing in the Retail Class
shares of any Fund. Please read it carefully and keep it for future reference. A
Statement of Additional Information dated December _______, 1996 is available
free of charge; write to Loomis Sayles Distributors, L.P. (the "Distributor"),
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. To obtain more
information about the Institutional Class of shares, please call the Distributor
toll-free at 800-633-3330.
For information about:
. Establishing an account
. Account procedures and status
. Exchanges
. Shareholder services
Call 800-626-9390
For all other information about the Funds:
Call 800-633-3330
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."
<PAGE>
TABLE OF CONTENTS
SUMMARY OF EXPENSES..........................................................
FINANCIAL HIGHLIGHTS.........................................................
THE TRUST....................................................................
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS........
THE FUNDS' INVESTMENT ADVISER................................................
PERFORMANCE INFORMATION......................................................
FUND EXPENSES................................................................
PORTFOLIO TRANSACTIONS.......................................................
HOW TO PURCHASE SHARES.......................................................
SHAREHOLDER SERVICES.........................................................
HOW TO REDEEM SHARES.........................................................
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES..............................
APPENDIX A
DESCRIPTION OF BOND RATINGS........................................A-1
2
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist in understanding the
various expenses that an investor in a Fund will bear indirectly. The
information about each Fund shown below is based on annualized projected
expenses of the Retail Class of shares for the period from the Retail Class
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>
Bond High Yield Global Short-Term
Fund Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as % of offering price) none none none none
Maximum Sales Load Imposed On
Reinvested Dividends (as of offering price) none none none none
Deferred Sales Load
(as % of original purchase price
or redemption proceeds as applicable) none none none none
Redemption Fees/1/ none 2.00% none none
Exchange Fees none none none none
Annual Operating Expenses (as a percentage of net assets:)
Management Fees .60% .60% .60% .25%
12b-1 Fees .25% .25% .25% .25%
Other Operating Expenses (after expense
reimbursements where indicated) .15% /2/ .15% /2/ .65% /2/ .25% /2/
Total Operating Expenses (after expense
reimbursements where indicated) 1.00% /2/ 1.00% /2/ 1.50% /2/ .75% /2/
</TABLE>
Example:
An investor 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):
<TABLE>
<S> <C> <C> <C> <C>
One Year x x x x
Three Years x x x x
</TABLE>
An investor 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):
<TABLE>
<S> <C> <C> <C> <C>
One Year x x x x
Three Years x x x x
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Investment Intermediate
Grade Maturity
Bond Bond
<S> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases (as % of offering price) none none
Maximum Sales Load Imposed on
Reinvested Dividends (as % of
offering price) none none
Deferred Sales Load (as % of original
purchase price or redemption proceeds
as applicable) none none
Redemption Fees/1/ none none
Exchange Fees none none
Annual Operating Expenses (as a percentage of
net assets):
Management Fees .40% .40%
12b-1 Fees .25% .25%
Other Operating Expenses (after expense
reimbursements where indicated) .15% /2/ .15% /2/
Total Operating Expenses (after expense
reimbursements where indicated) .80% /2/ .80% /2/
Example:
An investor 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 x x
Three Years x x
</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 expenses to the percentages of net assets shown above. Without this
agreement, annualized estimated total operating expenses for the fiscal
period ended December 31, 1996 would have been _____% for the Bond Fund,
_____% for the High Yield Fund, _____% for the Global Bond Fund, _____% for
the Short-Term Bond Fund, _____% for the Investment Grade Bond Fund and
_____% for the Intermediate Maturity Bond Fund.
4
<PAGE>
FINANCIAL HIGHLIGHTS
(For an Institutional Class 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 1995 Annual Report, which are incorporated by
reference in the Statement of Additional Information. The information shown
below is for Institutional Class shares of each Fund; Retail Class shares bear
higher expenses than Institutional Class shares, and are expected to have a
lower total return than Institutional Class shares.
<TABLE>
<CAPTION>
Global 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 $11.39 $9.82 $11.06 $10.32 $11.38 $10.00
------ ----- ------ ------ ------ ------
Income from investment operations -
Net investment income (loss) 0.39 1.04 0.67 0.54 0.70 0.37
Net realized and unrealized gain (loss) on investments 0.26 1.31 (1.63) 0.96 (0.60) 1.31
------ ----- ------ ------ ------ ------
Total from investment operations 0.65 2.35 (0.96) 1.50 0.10 1.68
------ ----- ------ ------ ------ ------
Less distributions -
Dividends from net investment income 0.00 (0.78) (0.04) (0.49) (0.77) (0.30)
Distributions from net realized capital gains 0.00 0.00 0.00 (0.27) (0.39) 0.00
Distributions from capital 0.00 0.00 (0.24) 0.00 0.00 0.00
------ ----- ------ ------ ------ ------
Total distributions 0.00 (0.78) (0.28) (0.76) (1.16) (0.30)
------ ----- ------ ------ ------ ------
Net asset value, end of period $12.04 $11.39 $9.82 $11.06 $10.32 $11.38
====== ====== ===== ====== ====== ======
Total return (%) 5.7 23.9 (8.7) 14.6 0.8 16.9
Net assets, end of period (000) $11,633 $10,304 $25,584 $21,378 $9,968 $4,308
Ratio of operating expenses to average net assets (%) 1.50** 1.50 1.30 1.50 1.50 1.50**
Ratio of net investment income to average net assets (%) 6.66** 8.17 7.02 5.54 6.99 6.81**
Portfolio turnover rate (%) 147** 148 153 150 72 137**
Without giving effect to voluntary expense
limitations:
The ratios of operating expenses to average
net assets would have been (%) 2.35** 1.69 1.30 1.51 2.58 3.99**
Net investment income per share would have been $0.34 $1.02 $0.67 $0.54 $0.59 $0.23
</TABLE>
-------------------
* Commencement of operations
** Computed on an annualized basis
5
<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)
------ ------ ------ ------ ------ ------
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 23.0 (4.1) 22.2 14.3 8.9
Net assets, end of period (000) $333,258 $255,710 $82,985 $64,222 $18,472 $9,922
Rate 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 operating 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>
-------------------
* Commencement of operations
** Computed on an annualized basis
6
<PAGE>
<TABLE>
<CAPTION>
Short-Term Bond Fund
---------------------------------------------------
Six Months
Ended May 16*
June 30, Year Ended Dec. 31, to
1996 ------------------ Dec. 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 ---- ---- ----
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: 1.12** 1.03 1.33 1.55 3.74**
The ratios of operating expenses to
average net assets would have been (%) $0.26 $0.62 $0.63 $0.54 $0.11
Net investment income per share would have been
</TABLE>
-------------------
* Commencement of operations
** Computed on an annualized basis
NOTE: Further information about each Fund's performance is contained in the
Funds' semiannual reports to shareholders, which may be obtained without
charge.
7
<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.
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 20% 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 known as "junk bonds").
The Fund may invest in collateralized mortgage obligations ("CMOs") and
Rule 144A securities. The Fund may engage in foreign currency hedging and swap
transactions.
The percentages of the Fund's assets invested as of December 31, 1995 in
securities assigned to the various rating categories by Standard & Poor's Rating
Group ("Standard & Poor's") and Moody's Investors Services, Inc. ("Moody'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, options 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 may engage in
foreign currency hedging and swap transactions.
The Fund will normally invest at least 65% of its assets in fixed income
securities of below investment grade quality (commonly referred to as "junk
bonds"), 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. 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.
8
<PAGE>
The Fund may engage in foreign currency hedging and swap transactions.
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. The
Fund may engage in foreign currency hedging and swap transactions.
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.
Loomis Sayles Investment Grade Bond 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 normally investing its assets
primarily in fixed income securities of investment grade quality although up to
20% of its assets may be invested in preferred stocks. Investment grade
securities include those rated BBB and above by Standard & Poor's and those
rated Baa and above by Moody's and unrated securities that Loomis Sayles
determines to be of comparable quality. The Fund may also invest up to 10% of
its assets in fixed income securities of below invest grade quality, including
securities in the lowest rating categories and unrated securities that Loomis
Sayles determines to be of comparable quality. The debt securities in which the
Fund may invest include corporate securities, U.S. Government securities,
commercial paper, zero coupon securities, mortgage-backed securities,
asset-backed securities, convertible bonds and when-issued securities. The Fund
may engage in options and futures transactions, repurchase transactions, foreign
currency hedging transactions and securities lending. The Fund may invest any
portion of its assets in the securities of Canadian issuers and up to 20% of its
assets in the securities of other foreign issuers. The Fund may engage in
foreign currency hedging and swap transactions.
Loomis Sayles Intermediate Maturity 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 obtain its objective by normally investing at least 90%
of its assets in fixed income securities of investment grade quality with an
average dollar weighted maturity of between three and ten years. For purposes of
the 90% test, a security will be treated as being of investment grade quality if
it is rated by at least one major rating agency in one of its top four rating
categories at the time of purchase or, if unrated, is determined by Loomis
Sayles to be of comparable quality. The Fund may also invest up to 10% of its
assets in fixed income securities of below investment grade quality, which are
securities rated below BBB by Standard & Poor's and below Baa by Moody's and
unrated securities that Loomis Sayles believes are of comparable quality,
including securities in the lowest rating categories and unrated securities
determined by Loomis Sayles to be of comparable quality. The fixed income
securities in which the Fund may invest include corporate securities, U.S.
Government securities, commercial paper, zero coupon securities, mortgage-backed
securities, asset-backed securities, convertible bonds and when-issued
securities. The Fund may engage in options and future transactions, repurchase
transactions, foreign currency hedging transactions and securities lending. The
Fund may invest any portion of its assets in the securities of Canadian issuers
and up to 20% of its assets in securities of other foreign issuers. The Fund may
engage in foreign currency hedging and swap transactions.
All Funds
---------
For temporary defensive purposes, each Fund may invest any portion of its
assets in fixed income securities, cash or any other securities deemed
appropriate by Loomis Sayles.
9
<PAGE>
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
Debt and Other Fixed Income Securities
--------------------------------------
The Bond, High Yield, Global Bond, and Investment Grade 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 portfolio holdings may have maturities longer than three
years. The Intermediate Maturity Bond Fund expects to maintain an average dollar
weighted maturity between three and ten 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 ("GNMA"), 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.
Lower Rated Fixed Income Securities
-----------------------------------
The Bond, High Yield, Global Bond, Short-Term Bond, Investment Grade Bond
and Intermediate Maturity Bond Funds may each invest a portion of its assets in
securities rated below investment grade (that is, below BBB or Baa and commonly
referred to as "junk bonds"), including securities in the lowest rating
categories, and comparable unrated securities. The Bond Fund may invest less
than 35%, the Global Bond and Short-Term Bond Funds each may invest up to
10
<PAGE>
20%, the Investment Grade Bond and Intermediate Maturity Bond Funds each may
invest up to 10% 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.
- ----------------------------------
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 an 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.
Zero Coupon Securities
----------------------
The 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.
Mortgage-Backed Securities
--------------------------
All of the Funds may invest in mortgage-backed securities, such as GNMA
or Federal National Mortgage Association certificates, which differ from
traditional debt securities . Among the major differences are that interest and
principal payments are made more frequently, usually monthly, and that principal
may be prepaid at any time because the underlying mortgage loans generally may
be prepaid at any time. As a result, if a Fund purchases these assets at a
premium, a faster-than-expected prepayment rate will reduce yield to maturity,
and a slower-than-expected prepayment rate will have the opposite effect of
increasing yield to maturity. If a Fund purchases mortgage-backed securities at
a discount, faster- than-expected prepayments will increase, and
slower-than-expected prepayments will reduce, yield to maturity. Prepayments,
and resulting amounts available for reinvestment by the Fund, are likely to be
greater during period of declining interest rates and, as a result, are likely
to be reinvested at lower interest rates. Accelerated prepayments on securities
purchased at a premium may result in a loss of principal if the premium has not
been fully amortized at the time of prepayment. Although these securities will
decrease in value as a result of increases in interest rates generally, they are
likely to appreciate less than other fixed-income securities when interest rates
decline because of the risk of prepayments.
Collateralized Mortgage Obligations
-----------------------------------
The Bond, High Yield, Global Bond, Short-Term Bond, Investment Grade and
Intermediate Maturity Bond Funds each may invest in 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
11
<PAGE>
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.
Asset-Backed Securities
-----------------------
All of the Funds may invest in asset-backed securities. Through the use
of trusts and special purpose corporations, automobile and credit card
receivables are securitized in pass-through structures similar to mortgage
past-through structures or in a pay-through structure similar to the CMO
structure. Generally, the issuers of asset-backed bonds, notes or pass-through
certificates are special purpose entities and do not have any significant assets
other than the receivables securing such obligations. In general, the collateral
supporting asset-backed securities is of shorter maturity than mortgage loans.
Instruments backed by pools of receivables are similar to mortgage-backed
securities in that they are subject to unscheduled prepayments of principal
prior to maturity. When the obligations are prepaid, the Fund will ordinarily
reinvest the prepaid amounts in securities the yields of which reflect interest
rates prevailing at the time. Therefore, a Fund's ability to maintain a
portfolio that includes high-yielding asset-backed securities will be adversely
affected to the extent that prepayments of principal must be reinvested in
securities that have lower yields than the prepaid obligations. Moreover,
prepayments of securities purchased at a premium could result in a realized
loss.
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 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 High Yield and Bond 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 may invest in securities of issuers organized or headquartered
outside the United States ("foreign securities"). The Short-Term Bond Fund 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, Investment
Grade Bond, and Intermediate Maturity Bond Funds 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
12
<PAGE>
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 Bond, High Yield, Global
Bond, Investment Grade Bond, Intermediate Maturity 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
-------------------------------------
The Funds may engage in foreign currency exchange transactions 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 holdings
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.
Swaps
-----
The Funds may enter into interest rate or currency swaps. The Funds will
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities a Fund anticipates purchasing
13
<PAGE>
at a later date. Interest rate swaps involve the exchange by a Fund with
another party of their respective commitments to pay or receive interest (for
example, an exchange of floating rate payments for fixed rate payments with
respect to a notional amount of principal.) A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the relative
values of the specified currencies. The fund will maintain liquid assets in a
segregated custodial account to cover its current obligations under swap
agreements. Because swap agreements are not exchange-traded, but are private
contracts into which the Fund and a swap counterparty enter as principals, the
Fund may experience a loss or delay in recovering assets if the counterparty
were to default on its obligations.
Options and Futures Transactions
--------------------------------
The Funds may buy, sell or write options on securities, securities
indexes, currencies or futures contracts and may buy and sell futures contracts
on securities, securities indexes or currencies. The Funds may engage in these
transactions either for the purpose of enhancing investment return, or to hedge
against changes in the value of other assets that the Funds own or intend to
acquire. Options and futures fall into the broad category of financial
instruments known as "derivatives" and involve special risks. Use of options or
futures for other than hedging purposes may be considered a speculative
activity, involving greater risks than are involved in hedging.
Options can generally be classified as either "call" or "put" options.
There are two parties to a typical options transaction: the "writer" and the
"buyer." A call option gives the buyer the right to buy a security or other
asset (such as an amount of currency or a futures contract) from, and a put
option the right to sell a security or other asset to, the option writer at a
specified price, on or before a specified date. The buyer of an option pays a
premium when purchasing the option, which reduces the return on the underlying
security or other asset if the option is exercised, and results in a loss if the
option expires unexercised. The writer of an option receives a premium from
writing an option, which may increase its return if the option expires or is
closed out at a profit. If a Fund as the writer of an option is unable to close
out an unexpired option, it must continue to hold the underlying security or
other asset until the option expires, to "cover" its obligation under the
option.
A futures contract creates an obligation by the seller to deliver and the
buyer to take delivery of the type of instrument or cash at the time and in the
amount specified in the contract. Although many futures contracts call for the
delivery (or acceptance) of the specified instrument, futures are usually closed
out before the settlement date through the purchase (or sale) of a comparable
contract. If the price of the sale of the futures contract by the Funds exceeds
(or is less than) the price of the offsetting purchase, the Funds will realize a
gain (or loss).
The value of options purchased by the Funds and futures contracts held by
the Funds may fluctuate up or down based on a variety of market and economic
factors. In some cases, the fluctuations may offset (or be offset by) changes in
the value of securities held in a Funds' portfolio. All transactions in options
and futures involve the possible risk of loss to the Funds of all or a
significant part of the value of its investment. In some cases, the risk of loss
may exceed the amount of the Funds' investment. The Funds will be required,
however, to set aside with its custodian bank certain assets in amounts
sufficient at all times to satisfy its obligations under options, futures and
contracts.
The successful use of options and futures will usually depend on the
ability to forecast stock market, currency or other financial market movements
correctly. The Funds' ability to hedge against adverse changes in the value of
securities held in its portfolio through options and futures also depends on the
degree of correlation between the changes in the value of futures or options
positions and changes in the values of the portfolio securities. The successful
use of futures and exchange traded options also depends on the availability of a
liquid secondary market to enable a Funds to close its positions on a timely
basis. There can be no assurance that such a market will exist at any particular
item. In the case of options that are not traded on an exchange
("over-the-counter" options), a Fund is at risk that the other party to the
transaction will default on its obligations, or will not permit a Fund to
terminate the transaction before its scheduled maturity. As a result of these
characteristics, the Funds will treat most over-the-counter options (and the
assets it segregates to cover its obligations thereunder) as illiquid.
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.
14
<PAGE>
Repurchase Agreements
---------------------
Each Fund may invest in repurchase agreements. In repurchase agreements,
a Fund buys securities from a seller, usually a bank or brokerage firm, with the
understanding that the seller will repurchase the securities at a higher price
at a later date. Such transactions afford an opportunity for a Fund to earn a
return on available cash at minimal market risk, although the Series may be
subject to various delays and risks of loss if the seller is unable to meet its
obligations to repurchase.
Securities Lending
------------------
The Investment Grade Bond and Intermediate Maturity Bond Funds may lend
their portfolio securities to broker-dealers or other parties under contracts
calling for the deposit by the borrower with the Fund's custodian of cash
collateral equal to at least the market value of the securities loaned, marked
to market on a daily basis. The Fund will continue to benefit from interest or
dividends on the securities loaned and will also receive interest through
investment of the cash collateral in short-term liquid investments. No loans
will be made if, as a result, the aggregate amount of such loans outstanding at
any time would exceed 331/3% of the Fund's total assets (taken at current
value). Any voting rights, or rights to consent, relating to securities loaned
pass to the borrower. However, if a material event affecting the investment
occurs, such loans will be called so that the securities may be voted by the
Fund. The Fund pays various fees in connection with such loans, including
shipping fees and reasonable custodial or placement fees.
Securities loans must be fully collateralized at all times, but involve
some credit risk to the Fund if the borrower defaults on its obligation and the
Fund is delayed or prevented from recovering the collateral.
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 indirectly owned by New England Investment Companies, L.P., a publicly-traded
limited partnership whose general partner is indirectly owned by Metropolitan
Life Insurance Company.
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 ______________, 1996, the Loomis-Sayles Funded Pension Plan owned
_____% of the Global Bond Fund, Loomis Sayles owned 26% of the U.S. Government
Securities Fund, Desert States UFCW Unions and Employees Pension Fund owned
_____% of the Global Bond Fund and Charles Schwab & Co., Inc. owned of record
_____% of the Bond Fund. Each of these shareholders may be deemed to control the
relevant Fund or Funds.
Daniel J. Fuss, President of the Trust and Executive Vice President of
Loomis Sayles, has served as the portfolio manager of the Bond Fund since its
inception in 1991, as the portfolio manager of the High Yield Fund since its
inception in 1996, and as the portfolio manager of the Investment Grade Bond
Fund since its inception in 1996. Kathleen C. Gaffney has served as associate
portfolio manager of the High Yield Fund since its inception in 1996. 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. 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.
Anthony J. Wilkins, Vice President of the Trust and of Loomis Sayles, has served
as the portfolio manager of the Intermediate Maturity Bond Fund since its
inception in 1996.
PERFORMANCE INFORMATION
Portfolio Managers' Past Performance
------------------------------------
The performance information presented in the graphs below relates to the
institutional private accounts managed by the portfolio managers of the High
Yield Fund, Investment Grade Bond Fund and Intermediate Maturity Bond Fund that
have investment objectives and policies substantially similar to that of the
respective Fund. The Funds (other than the High Yield Fund, which was organized
on September __, 1996) are newly organized and have no performance record of
their
15
<PAGE>
own. The information below should not be considered a prediction of the future
performance of any Fund. The performance may be higher or lower than the
performance of a fund or account that has substantially similar investment
objectives and policies. All performance information shown below is adjusted to
give effect to the higher of the level of the actual expenses of the accounts
described below during the periods shown or the annualized expenses projected
for the relevant Fund's Retail Class shares during the first full fiscal year.
High Yield Accounts
-------------------
Daniel J. Fuss and Kathleen C. Gaffney, portfolio manager and assistant
portfolio manager of the High Yield Fund, also serve in the same capacities for
other accounts that have investment objectives and investment policies that are
substantially similar to those of the High Yield Fund (the "High Yield
Accounts"). The following graph shows the total returns for the period from
_________ through ___________for the High Yield Accounts. The graph also shows
the total return of the Merrill Lynch High Yield Index for [each] [the same]
periods. The information presented in the footnote below the graph represents
the total return of the Loomis Sayles High Yield Fixed Income Fund, which has an
investment objective and investment policies substantially similar to that of
the High Yield Fund.
A bar graph appears here, illustrating the __, ___, and ___ year total
returns for _________ to ______________ for the High Yield Accounts* and the
Merrill Lynch High Yield Index. The data points from the graph are as follows:
Accounts %
Merrill Lynch High Yield Index %
* In the case of the Loomis Sayles High Yield Fixed Income Fund, the total
return for one year, three year and since inception period was __%, __% and __%
Investment Grade Bond Accounts
------------------------------
Daniel J. Fuss, portfolio manager of the Investment Grade Bond Fund, also
serves as the portfolio manager of other accounts that have investment
objectives and investment policies that are substantially similar to the
Investment Grade Bond Fund (the "Investment Grade Bond Accounts"). The following
graph also shows the total return of the Lehman Brothers Government/Corporate
Bond Index for [each] [the same] period[s]. The information presented in the
footnote below the graph represents the total return of the Loomis Sayles
Investment Grade Fixed Income Fund, which has an investment objective and
investment policies substantially similar to that of the Investment Grade Bond
Fund.
A bar graph appears here, illustrating the __, __, __ year total returns
for _____________ to ______________ for the Investment Grade Bond Accounts* and
the Lehman Brothers Corporate/Government Bond Fund. The data points from the
graph are as follows:
Accounts %
Lehman Brothers Corporate/Government Bond Fund %
* In the case of the Loomis Sayles Investment Grade Fixed Income Fund, the total
return for the one year, three year and since inception period was __%, __% and
__%.
Intermediate Maturity Accounts
------------------------------
Anthony J. Wilkins, portfolio manager of the Intermediate Maturity Bond
Fund, also serves as the portfolio manager of other accounts that have
substantially the same investment objective and investment policies as the
Intermediate Maturity Bond Fund (the "Intermediate Maturity Accounts"). The
following graph shows the total returns for the period from __________ through
____________ for the Intermediate Maturity Accounts. The graph also shows the
total return of the Lehman Brothers Corporate/Government Bond Index for [each]
[the same] periods. The information presented in the footnote below the graph
represents the total return of the Loomis Sayles Intermediate Duration Fixed
Income Fund, which has an investment objective and investment policies
substantially similar to that of the Intermediate Maturity Bond Fund.
A bar graph appears here, illustrating the __, ___, and ___ year total
returns for _____________ to ___________
16
<PAGE>
for the Intermediate Maturity Accounts* and the Lehman Brothers
Corporate/Government Bond Index. The data points from the graph are as follows:
Accounts %
Lehman Brothers Corporate/Government Bond Index %
* In the case of the Loomis Sayles Intermediate Duration Fixed Income Fund, the
total return for one year, three year and since inception period was __%, __%
and __%.
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:
<TABLE>
<CAPTION>
Fund Fee Rate
---- --------
<S> <C>
Bond .60
High Yield .60
Global Bond .60
Short-Term Bond .25
Investment Grade Bond .40
Intermediate Maturity Bond .40
</TABLE>
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 annual operating expenses to 1.00% of the average net assets of
the High Yield and Bond Funds, to .75% of the average net assets of the Short
Term Bond Fund, to 1.50% of the average net assets of the Global Bond Fund, and
to .80% of the average net assets of the Investment Grade Bond and the
Intermediate Grade Bond Funds. Under a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act, each of the Funds pays the Distributor, a
subsidiary of Loomis Sayles, a monthly distribution fee at an annual a rate not
to exceed 0.25% of the Fund's average net assets attributable to the Retail
Shares. The Distributor may pay all or any portion of the Distribution Fee to
securities dealers or other organizations (including, but not limited to, any
affiliate of the Distributor) as commissions, asset-based sales charges or other
compensation with respect to the sale of Retail Class shares of the Funds, or
for providing personal services to investors in Retail Class shares of the Funds
and/or the maintenance of accounts, and may retain all or any portion of the
Distribution Fee as compensation for the Distributor's services as principal
underwriter of the Retail Class shares of the Funds.
Loomis Sayles may pay certain broker-dealers and financial intermediaries
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 Funds.
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.
17
<PAGE>
Although it is not possible to predict the portfolio turnover rate with
certainty, Loomis Sayles does not expect the portfolio turnover rate of the High
Yield, Investment Grade Bond and Intermediate Grade Bond Funds to exceed 60%,
_____%, and _____%, respectively.
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
An investor 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
The minimum investment for retail class of the Funds' shares ("Retail
Shares") is $250,000 in that Fund. This investment minimum does not apply to
purchases through financial intermediaries including, but not limited to,
certain financial advisers, broker dealers, 401k alliances, wrap programs, no
transaction fee programs, bank trust departments, financial consultants and
insurance companies. The investment minimum will also be waived for shareholders
who invest less than $250,000 but sign a letter of intent stating their
intention to bring their balance to $250,000 in six months or less. Loomis
Sayles reserves the right to redeem, at net asset value, the accounts of
shareholders that have signed a letter of intent but fail to meet the investment
minimum within the specified time. Subsequent investments must be at least
$50.00.
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. 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. 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. An
investor who wishes to purchase shares by exchanging securities should obtain
instructions by calling 1-800-633-3330.
All purchases made by check should be in U.S. dollars and made payable to
the Loomis Sayles Funds or State Street Bond and Trust Company. 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 an investor's order, Boston Financial Data Services,
Inc. ("BFDS"), the shareholder servicing agent for State Street Bank and Trust
Company ("State Street Bank"), opens an account, 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, an investor 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 the investor's account number or name and
social security number.
18
<PAGE>
Subsequent investments can also be made by federal funds wire. Investors
should instruct their banks 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 (Fund Name and Retail Class),
DDA #9904-622-9, Shareholder Name, Shareholder Account Number." A bank may
charge 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 presently 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 an investor pays 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.
Each Fund also offers an Institutional Class of shares that has a $1
million investment minimum and bears lower expenses. Because of its lower
expenses, the Institutional Class of shares is expected to have a higher total
return than the Retail Class of shares.
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 an investor opens an account unless an investor
elects on the application to decline the privileges. Other privileges must be
specifically elected. A signature guarantee will be required to establish a
privilege after an account is opened.
Free Exchange Privilege. Shares of the Retail Class of any Fund may be
-----------------------
exchanged for shares of the Retail Class of any other Fund or for
shares of certain money market funds advised by New England Funds
Management, L.P., an affiliate of Loomis Sayles. Exchanges may be made
by written instructions or by telephone, unless an investor elected on
the application to decline telephone exchange privileges. The exchange
privilege should not be viewed 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.
Retirement Plans. The Institutional Class of the Funds' shares may be
----------------
purchased by all types of tax-deferred retirement plans. Loomis Sayles
makes available retirement plan forms for IRAs.
Systematic Withdrawal Plan. If the value of an account is at least
--------------------------
$25,000 an investor may have periodic cash withdrawals automatically
paid to the investor or any person designated by the investor.
19
<PAGE>
Automatic Investment Plan. Voluntary monthly investments of at least
-------------------------
$50 may be made automatically by pre- authorized withdrawals from an
investor's checking account.
HOW TO REDEEM SHARES
An investor can redeem 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 the investor in the form of a
check. As described below, an investor may also redeem shares by calling BFDS at
800-626-9390. Proceeds resulting from a telephone redemption request can be
wired to an investor's bank account or sent by check in the name of the
registered owners to their record address.
The written request must include the name of the Fund, the account
number, the exact name(s) in which the 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 an investor's 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). Shareholders requesting that
redemption proceeds be wired to their bank accounts must provide specific wire
instructions.
If (1) an investor is redeeming shares worth more than $50,000, (2) is
requesting that the proceeds check be made out to someone other than the
registered owners or be sent to an address other than the record address, (3)
the account registration has changed within the last 30 days or (4) an investor
is instructing us to wire the proceeds to a bank account not designated on the
application, an investor must have his or her 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 the redemption
request, an investor should verify with the guarantor institution that it is an
eligible guarantor. Signature guarantees by notaries public are not acceptable.
If an investor has requested certificates for the investment, an investor
must enclose the certificates and a properly completed redemption form or stock
power. The Funds recommend that certificates be sent by registered mail.
When an investor telephones a redemption request, the proceeds are wired
to the bank account previously chosen by the investor. 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 an investor telephones a request to BFDS after the Exchange closes
or on a day when the Exchange is not open for business, BFDS cannot accept the
request and a new one will be necessary.
If an investor decides to change the bank account to which proceeds are
to be wired, an investor must send in this change on the Service Options Form
with a signature guarantee. Telephonic 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. Unless an investor indicates otherwise on
the account application, BFDS will be authorized to act upon redemption and
exchange instructions received by telephone from the investor or any person
claiming to act as the investor's representative who can provide BFDS with the
investor's 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, an investor 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.
20
<PAGE>
Proceeds resulting from a written redemption request will normally be
mailed to an investor within seven days after receipt of the investor's request
in good order. Telephonic redemption proceeds will normally be wired to an
investor's bank on the first business day following receipt of a proper
redemption request. If an investor purchased shares by check and the check was
deposited less than fifteen days prior to the redemption request, the Fund may
withhold redemption proceeds until the 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 Global Bond Fund declares and pays its net investment income to
shareholders as dividends annually; the Bond, High Yield, Investment Grade Bond,
Intermediate Maturity Bond Funds declare and pay dividends [monthly]; the Short-
Term Bond Fund declares 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,
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.
Dividends and capital gain distributions will automatically be reinvested
in additional shares of the same Fund on the record date unless an investor has
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.
An investor's income dividends and short term capital gain distributions
are taxable as ordinary income whether distributed in cash or additional shares.
Long-term capital gain distributions from all Funds are taxable as long-term
capital gains whether distributed in cash or additional shares and regardless of
how long an investor has owned shares of the Fund.
Each Fund 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 (1) if an investor does not provide a correct,
certified taxpayer identification number, (2) if the Fund is notified that an
investor has underreported income in the past, or (3) if an investor fails to
certify to the Fund that he or she is not subject to such withholding.
Dividends derived from interest on U.S. Government securities may be
exempt from state and local taxes.
State Street Bank will send investors and the IRS an annual statement
detailing federal tax information, including information about dividends and
distributions paid during the preceding year. An investor should keep this
statement as a permanent record. A fee may be charged for any duplicate
information requested.
NOTE: The foregoing summarizes certain tax consequences of investing in
the Funds. Before investing, an investor should consult his or her
own tax adviser for more information concerning the federal, state
and local tax consequences of investing in, redeeming or exchanging
Fund shares.
21
<PAGE>
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.
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.
A-1
<PAGE>
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.
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.
A-2
<PAGE>
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-3
<PAGE>
INVESTMENT ADVISER
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
DISTRIBUTOR
Loomis Sayles Distributors, 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
LOOMIS SAYLES
FUNDS
The Power of A Passion(TM)
Bond Funds
Retail Class
PROSPECTUS
AND
APPLICATION
December __, 1996
One Financial Center
Boston, Massachusetts 02111
(617) 482-2450
A-4
<PAGE>
LOOMIS SAYLES FUNDS
The Power of A Passion
One Financial Center
Boston, Massachusetts 02111
(617) 482-2450
PROSPECTUS
December _____, 1996
The Loomis Sayles Funds - Stock Funds
Institutional Class shares of:
<TABLE>
<S> <C>
Loomis Sayles Core Value Fund Loomis Sayles Small Cap Value Fund
(formerly, Loomis Sayles Growth & Income Fund) (formerly, Loomis Sayles Small Cap Fund)
Loomis Sayles Growth Fund Loomis Sayles Small Company Growth Fund
Loomis Sayles International Equity Fund Loomis Sayles Strategic Value Fund
Loomis Sayles Mid-Cap Value Fund Loomis Sayles Worldwide Fund
Loomis Sayles Mid-Cap Growth Fund
</TABLE>
Loomis Sayles Core Value Fund, Loomis Sayles Growth Fund, Loomis Sayles
International Equity Fund, Loomis Sayles Mid-Cap Value Fund, Loomis Sayles Mid-
Cap Growth Fund, Loomis Sayles Small Cap Value Fund, Loomis Sayles Small Company
Growth Fund, Loomis Sayles Strategic Value Fund, and Loomis Sayles Worldwide
Fund (the "Funds" and each a "Fund"), each a series of Loomis Sayles Funds, are
separately managed, no-load mutual funds and each Fund has its own investment
objective and policies. Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the
investment adviser of each Fund.
The Funds offer two classes of shares: an Institutional Class that is
described in this Prospectus and a Retail Class, with a lower investment minimum
for certain categories of investors and bearing higher expenses, that is
described in a separate prospectus. This Prospectus concisely describes the
information that an investor should know before investing in the Institutional
Class shares of any Fund. Please read it carefully and keep it for future
reference. A Statement of Additional Information dated December _____, 1996, is
available free of charge; write to Loomis Sayles Distributors, L.P. (the
"Distributor"), 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. To obtain more information about the Retail Class of shares, please
call the Distributor toll-free at 800-633-3330.
For information about: For all other information about the Funds
. Establishing an account Call 800-633-3330
. Account procedures and status
. Exchanges
. Shareholder services
Call 800-626-9390
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF EXPENSES........................................................
FINANCIAL HIGHLIGHTS.......................................................
THE TRUST..................................................................
INVESTMENT OBJECTIVES AND POLICIES.........................................
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS AND RISK CONSIDERATIONS......
THE FUNDS' INVESTMENT ADVISER..............................................
PERFORMANCE INFORMATION....................................................
FUND EXPENSES..............................................................
PORTFOLIO TRANSACTIONS.....................................................
HOW TO PURCHASE SHARES.....................................................
SHAREHOLDER SERVICES.......................................................
HOW TO REDEEM SHARES.......................................................
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES............................
</TABLE>
2
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist an investor in understanding
the various expenses that an investor in a Fund will bear indirectly. Except in
the case of the Worldwide, Small Company Growth, Mid-Cap Value, Mid-Cap Growth
and Strategic Value Funds, the information is based on expenses of the
Institutional Class shares for the Funds' fiscal year ended December 31, 1995.
The Worldwide, Small Company Growth, Mid-Cap Value, Mid-Cap Growth and Strategic
Value Funds did not commence operations until 1996; the information about each
shown below is based on annualized projected expenses of the Institutional Class
shares 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>
Small
Core Cap International
Growth Value Value 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
Redemption Fees/1/........ none none none none none
Exchange Fees............. none none none none none
Annual Operating Expenses
(as a percentage of
net assets):
Management Fees........... .50%/(2)/ .50%/(2)/ .75%/(2)/ .75%/(2)/ .75%
12b-1 Fees................ none none none none none
Other Operating Expenses
(after expense
reimbursements where
indicated)............. .25%/(3)/ .25%/(3)/ .25%/(3)/ .25%/(3)/ .25%/(3)/
Total Operating Expenses
(after expense
reimbursements where
indicated)............. .75%/(3)/ .75%/(3)/ 1.00%/(3)/ 1.00%/(3)/ 1.00%/(3)/
Example:
An investor 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................ x x x x x
Three Years............. x x x x x
Five Years.............. x x x x
Ten Years............... x x x x
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Small Mid-Cap Mid-Cap Strategic
Company Value Growth Value
Growth Fund Fund Fund
Fund
<S> <C> <C> <C> <C>
Shareholder Transaction
Expenses:
Maximum Sales Load
Imposed on Purchases
(as % of offering price) none none none none
Maximum Sales Load
Imposed on
Reinvested Dividends (as
% of (offering price)... none none none none
Deferred Sales Load
(as % of original
purchase price
or redemption proceeds
as applicable)......... none none none none
Redemption Fees/1/........ none none none none
Exchange Fees............. none none none none
Annual Operating Expenses
(as a percentage of net
assets):
Management Fees........... .75% .75% .75% .50%
12b-1 Fees................ none none none none
Other Operating Expenses
(after expense
reimbursements where
indicated)............. .25%/3/ .25%/3/ .25%/3/ .25%/3/
Total Operating Expenses
(after expense
reimbursements where
indicated)............. 1.00%/3/ 1.00%/3/ 1.00%/3/ .75%/3/
Example:
An investor 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 x x x x
Three Years x x x x
An investor 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 x x x x
Three Years x x x x
</TABLE>
------------------
/1/ A $5 charge applies to any wire transfer of redemption proceeds from
any Fund.
/2/ The management fees shown in the table have been restated to reflect
a reduction in the management fees payable to Loomis Sayles.
Actual management fees for the fiscal year ended December 31, 1995
were _____% for the Growth Fund, _____% for the Core Value Fund,
_____% for the Small Cap Value Fund, _____% for the International
Equity Fund and _____% for the Worldwide Fund.
/3/ 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, estimated
Total Operating Expenses would have been 2.55% for the Worldwide
Fund, _______% for the Small Company Growth Fund, _______% for the
Mid-Cap Value Fund, _______% for the Mid-Cap Growth Fund and
_______% for the Strategic Value Fund. Actual Total Operating Expenses
for the fiscal year ended December 31, 1995 were 1.08% for the Growth
Fund, 1.20% for the Core Value Fund, 1.25% for the Small Cap Value
Fund and 1.45% for the International Equity Fund.
/4/ Under SEC rules, new funds are required to show expenses for the
one- and three-year periods only.
4
<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 the "Report of Independent Accountants,"
financial statements and notes thereto contained in the Funds' 1995 Annual
Report, which are incorporated by reference in this Prospectus and the Statement
of Additional Information.
<TABLE>
<CAPTION>
Growth Fund
----------------------------------------------------------------
Six Months
Ended Year Ended Dec. 31, May 16*
June 30, 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 1.90 3.86 (0.45) 1.16 0.49 2.45
investments --------- ------- ------- ------- ------- -------
Total from investment operations 1.86 3.86 (0.47) 1.16 0.45 2.45
--------- ------- ------- ------- ------- -------
Less distributions --
Distributions from net realized capital 0.00 (1.09) (0.04) (0.60) 0.00 (0.44)
gains
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>
__________________________________
* 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>
Core Value Fund
-------------------------------------------------------------------
Six Months
Ended Year Ended Dec. 31, May 16*
June 30, to
1996 -------------------------------------- Dec. 31,
(Unaudited) 1995 1994 1993 1992 1991
----------- -------- -------- -------- -------- ---------
<S> <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 1.18** 1.20 1.33 1.56 2.19 2.59**
average net assets would have been (%)
Net investment income per share would $ 0.12 $ 0.23 $ 0.15 $ 0.12 $ 0.07 $ 0.06
have been
</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>
Small Cap Value Fund
-----------------------------------------------------------------
Six Months
Ended Year Ended Dec. 31, May 16*
June 30, 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)
---- ----- ----- ----- ----- -----
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>
- ----------------------------------------
* 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.
7
<PAGE>
<TABLE>
<CAPTION>
Worldwide
International Equity Fund Fund
----------------------------------------------------------------- ---------
Six Months May 1,
Ended Year Ended Dec. 31, May 16* 1996*
June 30, to to
1996 Dec. 31, June 30,
1996
---------------------------------------- (Unaudited)
(Unaudited) 1995 1994 1993 1992 1991
----------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.65 $11.61 $12.90 $9.64 $10.27 $10.00 $10.00
------ ------ ------ ----- ------ ------ ------
Income from investment operations --
Net investment income (loss) 0.11 0.14 0.15 0.11 0.10 0.08 0.06
Net realized and unrealized gain (loss) on
investments 0.82 0.87 (0.38) 3.61 (0.62) 0.29 0.06
---- ---- ----- ---- ----- ---- ----
Total from investment operations 0.93 1.01 (0.23) 3.72 (0.52) 0.37 0.12
---- ---- ----- ---- ----- ---- ----
Less distributions --
Dividends from net investment income 0.00 (0.14) (0.14) (0.10) (0.10) (0.08) 0.00
Distributions from net realized capital
gains 0.00 (0.83) (0.92) (0.36) (0.01) 0.00 0.00
Distributions from paid-in capital 0.00 0.00 0.00 0.00 0.00 (0.02) 0.00
---- ---- ---- ---- ---- ---- ----
Total distributions 0.00 (0.97) (1.06) (0.46) (0.11) (0.10) 0.00
---- ---- ---- ---- ---- ---- ----
Net asset value, end of period $12.58 $11.65 $11.61 $12.90 $9.64 $10.27 $10.12
====== ====== ====== ====== ===== ====== ======
Total return (%) 8.0 8.7 (1.8) 38.5 (5.1) 3.7 1.2
Net assets, end of period (000) $83,356 $79,488 $73,189 $56,560 $14,937 $6,916 $4,727
Ratio of operating expenses to average net
assets (%) 1.50** 1.45 1.46 1.50 1.50 1.50** 1.00**
Ratio of net investment income to average
net assets (%) 1.78** 1.16 1.30 1.20 1.64 1.55** 4.66*
Portfolio turnover rate (%) 162** 133 116 128 101 109** 31**
Average Commission Rate *** $0.0007 -- -- -- -- -- $0.0158
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** 4.46**
Net investment income per share would
have been $0.11 $0.14 $0.15 $0.09 $0.02 $(0.03) $0.02
</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.
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 Core Value 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 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 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 Mid-Cap Value Fund
- --------------------------------
The Fund's 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 with
market capitalization between $500 million and $5 billion. The Fund will
normally maintain a median market capitalization between $1 billion and $5
billion. Loomis Sayles seeks to build a core portfolio of stocks that Loomis
Sayles believes to be undervalued by the market in relation to the issuer's
earnings, dividends, assets and growth prospects and that has a lesser emphasis
on special situations and turnarounds (companies that have experienced
significant business problems but that Loomis Sayles believes have favorable
prospects for recovery). Current income is not a consideration in selecting the
Fund's investments. The Fund may engage in options and futures transactions,
foreign currency hedging transactions and securities lending. The Fund may
invest any portion of its assets in the securities of Canadian issuers and up to
20% of its assets in the securities of issuers headquartered outside the United
States or Canada.
Loomis Sayles Mid-Cap Growth Fund
- ---------------------------------
The Fund's investment objective is long-term capital growth from investments
in common stocks or their equivalent.
9
<PAGE>
The Fund seeks to achieve its objective by investing primarily in stocks with
market capitalization between $500 million and $5 billion. The Fund will
normally maintain a median market capitalization between $1 billion and $5
billion. Stock selection will be driven by identifying the companies that are
dominant in their markets, valuing each stock according to its appropriate
growth phase and diversifying according to the risk characteristics of each
phase. Current income is not a consideration in selecting the Fund's
investments. The Fund may engage in options and futures transactions, foreign
currency hedging transactions and securities lending. The Fund may invest any
portion of its assets in the securities of Canadian issuers and up to 20% of its
assets in the securities of issuers headquartered outside the United States or
Canada.
Loomis Sayles Small Cap Value 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 stocks of solid companies
with reasonable growth prospects and that are attractively priced in relation to
the companies' earnings 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 Small Company Growth 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, rapidly growing companies that Loomis Sayles believes have the potential
for accelerating earnings growth and rising profit margins. 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 total
assets in larger companies. Loomis Sayles seeks companies that have distinctive
products, technologies, or services; dynamic earnings growth; prospects for a
high level of profitability; and outstanding management. Current income is not
a consideration in selecting the Fund's investments. The Fund may engage in
options and futures transactions, foreign currency hedging transactions and
securities lending. The Fund may invest any portion of its assets in the
securities of Canadian issuers and up to 20% of its assets in the securities of
issuers headquartered outside the United States or Canada.
Loomis Sayles Strategic Value 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 substantially all of its
assets in common stocks or their equivalent that Loomis Sayles considers to be
undervalued by the markets. Stocks are selected based on a combination of
quantitative factors including historical, relative price-earnings ratios;
price-earnings ratios relative to growth rate; relative fundamentals and price
momentum; and qualitative factors including the quality of management, position
in the industry, debt and balance sheet restructuring and product cycles. The
Fund's strategy is to have a relatively concentrated portfolio normally
consisting of approximately 35-40 securities that Loomis Sayles considers best
positioned to perform in the current and future environment. The Fund may
engage in options and futures transactions, foreign currency hedging
transactions and securities lending. The Fund may invest any portion of it
assets in the securities of Canadian issuers and up to 20% of its assets in
the securities of issuers headquartered outside the United States or Canada.
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
10
<PAGE>
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.
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 an 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 Fund may invest in fixed income securities of any maturity.
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.
Zero Coupon Securities
- ----------------------
The Worldwide Fund may 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 Fund 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
<PAGE>
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 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 Fund 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 may invest in securities of issuers organized or headquartered
outside the United States ("foreign securities"). The Growth, Core Value and
Small Cap Value 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 Small Company Growth, Mid-Cap Value, Mid-Cap Growth and Strategic
Value Funds may invest any portion of its assets in securities of Canadian
issuers, but will not purchase other foreign securities if, as a result, the
Funds' holding of non-U.S. and non-Canadian securities would exceed 20% of the
Funds' total assets.
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.
<PAGE>
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 a Fund 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 holdings 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 and Futures Transactions
- --------------------------------
The International Equity, Worldwide, Small Company Growth, Mid-Cap Value, Mid-
Cap Growth and Strategic Value Funds may buy, sell or write options on
securities, securities indexes, currencies or futures contracts. The Small
Company Growth, Mid-Cap Value, Mid-Cap Growth and Strategic Value Funds may buy
and sell futures contracts on securities, securities indexes or currencies. The
Funds may engage in these transactions either for the purpose of enhancing
investment return, or to hedge against changes in the value of other assets that
the Funds own or intend to acquire. Options and futures fall into the broad
category of financial instruments known as "derivatives" and involve special
risks. Use of options or futures for other than hedging purposes may be
considered a speculative activity, involving greater risks than are involved in
hedging.
Options can generally be classified as either "call" or "put" options. There are
two parties to a typical options transaction: the "writer" and the "buyer." A
call option gives the buyer the right to buy a security or other asset (such as
an amount of currency or a futures contract) from, and a put option the right to
sell a security or other asset to, the option writer at a specified price, on or
before a specified date. The buyer of an option pays a premium when purchasing
the option, which reduces the return on the underlying security or other asset
if the option is exercised, and results in a loss if the option expires
unexercised. The writer of an option receives a premium from writing an option,
which may increase its return if the option expires or is closed out at a
profit. If a Fund as the writer of an option is unable to close out an unexpired
option, it must continue to hold the underlying security or other asset until
the option expires, to "cover" its obligation under the option.
A futures contract creates an obligation by the seller to deliver and the buyer
to take delivery of the type of instrument or cash at the time and in the amount
specified in the contract. Although many futures contracts call for the delivery
(or acceptance) of the specified instrument, futures are usually closed out
before the settlement date through the purchase (or sale) of a comparable
contract. If the price of the sale of the futures contract by the Funds exceeds
(or is less than) the price of the offsetting purchase, the Funds will realize a
gain (or loss).
The value of options purchased by the Funds and futures contracts held by the
Funds may fluctuate up or down based on a variety of market and economic
factors. In some cases, the fluctuations may offset (or be offset by) changes in
the value of securities held in a Funds' portfolio. All transactions in options
and futures involve the possible risk of loss to the Funds of
<PAGE>
all or a significant part of the value of its investment. In some cases, the
risk of loss may exceed the amount of the Funds' investment. The Funds will be
required, however, to set aside with its custodian bank certain assets in
amounts sufficient at all times to satisfy its obligations under options,
futures and contracts.
The successful use of options and futures will usually depend on the ability to
forecast stock market, currency or other financial market movements correctly.
The Funds' ability to hedge against adverse changes in the value of securities
held in its portfolio through options and futures also depends on the degree of
correlation between the changes in the value of futures or options positions and
changes in the values of the portfolio securities. The successful use of futures
and exchange traded options also depends on the availability of a liquid
secondary market to enable a Funds to close its positions on a timely basis.
There can be no assurance that such a market will exist at any particular item.
In the case of options that are not traded on an exchange ("over-the-counter"
options), a Fund is at risk that the other party to the transaction will default
on its obligations, or will not permit a Fund to terminate the transaction
before its scheduled maturity. As a result of these characteristics, the Funds
will treat most over-the-counter options (and the assets it segregates to cover
its obligations thereunder) as illiquid.
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.
Securities Lending
- ------------------
The Small Company Growth, Mid-Cap Value, Mid-Cap Growth and Strategic Value
Funds may lend their portfolio securities to broker-dealers or other parties
under contracts calling for the deposit by the borrower with the Fund's
custodian of cash collateral equal to at least the market value of the
securities loaned, marked to market on a daily basis. The Fund will continue to
benefit from interest or dividends on the securities loaned and will also
receive interest through investment of the cash collateral in short-term liquid
investments. No loans will be made if, as a result, the aggregate amount of such
loans outstanding at any time would exceed 33 1/3% of the Fund's total
assets (taken at current value). Any voting rights, or rights to consent,
relating to securities loaned pass to the borrower. However, if a material event
affecting the investment occurs, such loans will be called so that the
securities may be voted by the Fund. The Fund pays various fees in connection
with such loans, including shipping fees and reasonable custodial or placement
fees.
Securities loans must be fully collateralized at all times, but involve some
credit risk to the Fund if the borrower defaults on its obligation and the Fund
is delayed or prevented from recovering the collateral.
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
indirectly owned by New England Investment Companies, L.P., a publicly-traded
limited partnership whose general partner is indirectly owned by Metropolitan
Life Insurance Company.
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 _______________, 1996, the Loomis Sayles Employees' Profit Sharing Plan
owned _______% of the Growth Fund and the Loomis-Sayles Funded Pension Plan
owned _______% of the Worldwide Fund. Each of these shareholders may be deemed
to control the relevant Fund or Funds.
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
and the Mid-Cap Growth Fund since 1996. Jeffrey W. Wardlow, Vice President of
the Trust and of Loomis Sayles, has served as the portfolio manager of the Core
Value 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 Value Fund since its inception in 1991, and Mary C. Champagne, Vice
President of the Trust and of Loomis Sayles,
14
<PAGE>
has served as a portfolio manager of the Small Cap Value Fund since 1995.
Christopher R. Ely, Vice President of the Trust and of Loomis Sayles, has served
as the portfolio manager, and Philip C. Fine and David L. Smith, Vice Presidents
of the Trust and of Loomis Sayles, have served as assistant portfolio managers
of the Small Company Growth Fund since its inception in 1996. Jeffrey C.
Petherick and Gregg D. Watkins, Vice Presidents of the Trust and Loomis Sayles,
have served as portfolio managers of the Mid-Cap Value Fund since its inception
in 1996. Scott S. Pape, a Vice President of the Trust and of Loomis Sayles,
has served as a portfolio manager of the Mid-Cap Growth Fund since its inception
in 1996. Philip J. Schettewi, Vice President of the Trust and Loomis Sayles,
has served as the portfolio manager of the Strategic Value Fund since its
inception in 1996. Daniel J. Fuss, President of the Trust and Executive Vice
President of Loomis Sayles, has served as the portfolio manager of the domestic
bonds sector of the Worldwide Fund since that Fund's inception in 1996. E. John
deBeer, Vice President of the Trust and of Loomis Sayles, has served as
portfolio manager of the international bonds sector of the Worldwide Fund since
that Fund's inception in 1996. 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 and of the International Equity Fund since
that Fund's inception in 1996. Each of the foregoing, except Ms. Champagne and
Messrs. Drexler, Ely, Fine, Smith, and Watkins 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. Prior to joining Loomis
Sayles in 1996, Mr. Ely was Senior Vice President and Portfolio Manager, and
Messrs. Fine and Smith were Vice Presidents and Portfolio Managers, of Keystone
Investment Management Company, Inc. Prior to joining Loomis Sayles in 1991, Mr.
Watkins was an investment manager with Comerica, Inc.
PERFORMANCE INFORMATION
Portfolio Managers' Past Performance
- ------------------------------------
The performance information presented in the graphs below relates to the
institutional private accounts managed by the portfolio managers of the Small
Company Growth Fund and the Strategic Value Fund that have investment objectives
and policies substantially similar to those of the relevant Fund. The Funds are
newly organized and have no performance record of their own. The information
below should not be considered a prediction of the future performance of any
Fund. The performance of the Funds may be higher or lower than the performance
of a fund or account that has substantially similar investment objectives and
policies. The performance information shown below for the accounts described
below is adjusted to give effect to the higher of the level of the actual
expenses of the accounts during the periods shown or the annualized expenses
projected for the relevant Fund's Retail Class shares during the first fiscal
year.
Small Company Growth Accounts
- -----------------------------
Christopher R. Ely, Portfolio Manager of the Small Company Growth Fund, and
Philip C. Fine and David L. Smith, Assistant Portfolio Managers of the Small
Company Growth Fund, also serve, and have served, in those capacities for other
accounts that have investment objectives and investment policies substantially
similar to the Small Company Growth Fund (the "Small Company Growth Accounts").
Prior to July 22, 1996, Messrs. Ely, Fine and Smith were affiliated with
another advisory firm. The following graph shows total returns for the one and
two year periods ended September 30, 1996 for the Small Company Growth Accounts.
The information presented in footnote (2) below the graph represents the total
return of the Keystone Institutional Small Cap Growth Fund and Keystone Small
Company Growth Fund II, which have investment objectives and policies
substantially similar to those of the Small Company Growth Fund and which, from
their inception through July 11, 1996, were managed by Messrs. Ely, Fine and
Smith in their capacities as employees of the firm with which they were then
affiliated. The performance information shown below is adjusted to give effect
to the higher of the level of the actual expenses of the Accounts during the
periods shown or the annualized expenses projected for the Fund's Retail Class
shares during the first full fiscal year.
15
<PAGE>
A bar graph appears here, illustrating the one and two year annual returns for
the periods ended September 30, 1996 for the Accounts (1)(2), the Russell 2000
Index, the Russell 2000 Growth Index and the S&P 600 Index. The data points
from the chart are as follows:
Accounts %
Russell 2000 Index %
Russell 2000 Growth Index %
S&P 600 Index %
(1) The annual total return for the Accounts for the period June 29, 1994
(inception of the Accounts) to September 30, 1996 was [_]%. The Accounts were
managed by Messrs. Ely, Fine and Smith throughout the periods shown except for
the period July 11, 1996 through September 16, 1996 when the management of the
Accounts was in transition from the former adviser to Loomis Sayles.
(2) In the case of the Keystone Institutional Small Cap Growth Fund
("Institutional Fund"), the total return for the period January 1, 1996
(inception of the Institutional Fund) to July 11, 1996 (the date that Messrs.
Ely, Fine and Smith ceased management of the Institutional Fund) was [_]%. In
the case of the Keystone Small Company Growth Fund II ("Fund II"), the total
return for February 20, 1996, the date of the Fund's inception, through July
11, 1996 was [_]. The information relating to Fund II does not take into
account the sales charges of Fund II. The lower total return of Fund II
compared to the Institutional Fund and the Accounts is partially attributable to
certain tax restrictions.
Strategic Value Accounts
- ------------------------
Philip J. Schettewi, portfolio manager of the Strategic Value Fund, also
serves as portfolio manager for other accounts that have substantially the same
investment objective and investment policies as the Strategic Value Fund (the
"Strategic Value Accounts"). The following graph shows the total returns for
the period from __________ through ____________ for the Strategic Value
Accounts. The graph also shows the total return of the Standard & Poor's/Barra
Value Index for [each] [the same] periods.
A bar graph appears here, illustrating the __, ___, ___ year total returns for
___________ to _______________ for the Strategic Value Accounts and the Standard
& Poor's/Barra Value Index.
Accounts %
Standard & Poor's/Barra Value Index %
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:
<TABLE>
<CAPTION>
Fund Fee Rate
---- --------
<S> <C>
Growth .50%
Core Value .50
Small Cap Value .75
International Equity .75
Worldwide .75
Small Company Growth .75
Mid-Cap Value .75
Mid-Cap Growth .75
Strategic Value .50
</TABLE>
16
<PAGE>
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 and 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
total operating expenses of the Institutional Class shares to .75% of the
average net assets of the Growth, Core Value and Strategic Value Funds and to
1.00% of average annual net assets for the International Equity, Small Cap Value
Fund, Small Company Growth, Mid-Cap Value, Mid-Cap Growth and Strategic Value
Funds. 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.
Loomis Sayles may pay certain broker-dealers and financial intermediaries
whose customers are existing shareholders 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.
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 Small Cap Value, Small Company Growth, Mid-Cap Value, Mid-
Cap Growth and Strategic Value Funds' portfolio turnover rates to exceed
_______%, _____%, _____%, _____%, and ____ %, respectively.
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
An investor 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
The minimum investment for the Institutional Class of each Fund's shares is $1
million in that Fund. An investment minimum of $2500 applies to shareholders of
any Fund who have accounts that have been in continuous existence since December
31, 1996 ( "Existing Shareholders"), the trustees of the Trust and investment
advisory clients of Loomis Sayles (and their directors, officers and employees)
and the parents, spouses and children of the foregoing and employees of Loomis
Sayles and their parents, spouses and children. The investment minimum may be
waived by Loomis Sayles in its sole discretion and will be waived for new
shareholders in the Loomis Sayles Funds who initially invests less than $1
million but sign letters of intent stating their intention to bring their
balance to $1 million within six months of the initial purchase. The Distributor
reserves the right to redeem the accounts at net asset value of shareholders
that have signed a letter of intent but fail to meet the investment minimum
within the specified time. Subsequent investments must be at least $50.00.
17
<PAGE>
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. An
investor who wishes to purchase shares by exchanging securities should obtain
instructions by calling 1-800-633-3330.
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 State Street Bank and Trust Company. 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 an investor's order, Boston Financial Data Services, Inc.
("BFDS"), the shareholder servicing agent for State Street Bank and Trust
Company ("State Street Bank"), opens an account, 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, an investor 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 the investor's account number or name and
social security number.
Subsequent investments can also be made by federal funds wire. Investors
should instruct their banks 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 (Fund Name and
Institutional Class), DDA #9904-622-9, Shareholder Name, Shareholder Account
Number." A bank may charge 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 presently 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 an investor pays 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.
18
<PAGE>
Each Fund also offers a Retail Class of shares that has a $250,000 investment
minimum and bears higher expenses. Because of its lower expenses, the
Institutional Class of shares is expected to have a higher total return than the
Retail Class of shares.
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 an investor opens an account unless an investor
elects on the application to decline the privileges. Other privileges must be
specifically elected. A signature guarantee will be required to establish a
privilege after an account is opened.
Free Exchange Privilege. Shares of the Institutional Class of any Fund may
-----------------------
be exchanged for shares of the Institutional Class of any other Fund or for
shares of certain money market funds advised by New England Funds
Management, L.P., an affiliate of Loomis Sayles. Exchanges may be made by
written instructions or by telephone, unless an investor elected on the
application to decline telephone exchange privileges. The exchange
privilege should not be viewed 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.
Retirement Plans. The Institutional Class of the Funds' shares may be
----------------
purchased by all types of tax-deferred retirement plans. Loomis Sayles
makes available retirement plan forms for IRAs.
Systematic Withdrawal Plan. If the value of an account is at least $25,000
--------------------------
an investor may have periodic cash withdrawals automatically paid to the
investor or any person designated by the investor.
Automatic Investment Plan. Voluntary monthly investments of at least $50
-------------------------
may be made automatically by pre-authorized withdrawals from an investor's
checking account.
HOW TO REDEEM SHARES
An investor can redeem shares by sending a written request to Boston Financial
Data Services, Inc., P.O. Box 8314, Boston, Massachusetts 02266. As described
below, an investor may also redeem shares by calling BFDS at 800-626-9390.
Proceeds resulting from a written or telephone redemption request can be wired
to an investor's bank account or sent by check in the name of the registered
owners to their record address.
The written request must include the name of the Fund, the account number, the
exact name(s) in which the 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
an investor's 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). Investors requesting that redemption
proceeds be wired to their bank accounts must provide specific wire
instructions.
If (1) an investor is redeeming shares worth more than $50,000, (2) is
requesting that the proceeds check be made out to someone other than the
registered owners or be sent to an address other than the record address, (3)
the account registration has changed within the last 30 days or (4) an investor
is instructing us to wire the proceeds to a bank account not designated on the
application, an investor must have his or her 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 the redemption
request, an investor should verify with the guarantor institution that it is an
eligible guarantor. Signature guarantees by notaries public are not acceptable.
If an investor has requested certificates for the investment, an investor must
enclose the certificates and a properly completed redemption form or stock
power. The Funds recommend that certificates be sent by registered mail.
19
<PAGE>
When an investor telephones a redemption request, the proceeds are wired to
the bank account previously chosen by the investor. 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 an investor telephones a request to BFDS after the Exchange closes
or on a day when the Exchange is not open for business, BFDS cannot accept the
request and a new one will be necessary.
If an investor decides to change the bank account to which proceeds are to be
wired, an investor must send in this change on the Service Options Form with a
signature guarantee. Telephonic 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. Unless an investor indicates otherwise on the account
application, BFDS will be authorized to act upon redemption and exchange
instructions received by telephone from the investor or any person claiming to
act as the investor's representative who can provide BFDS with the investor's
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, an investor 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.
Proceeds resulting from a written redemption request will normally be mailed
to an investor within seven days after receipt of the investor's request in good
order. Telephonic redemption proceeds will normally be wired to an investor's
bank on the first business day following receipt of a proper redemption request.
If an investor purchased shares by check and the check was deposited less than
fifteen days prior to the redemption request, the Fund may withhold redemption
proceeds until the 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 Funds declare and pay their net investment income to shareholders as
dividends annually. 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, 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.
Dividends and capital gain distributions will automatically be reinvested in
additional shares of the same Fund on the record date unless an investor has
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.
Income dividends and short term capital gain distributions are taxable as
ordinary income whether distributed in cash or additional shares. Long-term
capital gain distributions from all Funds are taxable as long-term capital gains
whether distributed in cash or additional shares and regardless of how long an
investor has owned shares of a Fund.
Each Fund 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 an investor (1) if an investor does not provide a
correct, certified taxpayer identification number, (2) if the Fund is notified
that an investor has underreported income in the past, or (3) if an investor
fails to certify to the Fund that the investor is not subject to such
withholding.
<PAGE>
Certain designated dividends from the Funds are expected to be eligible for
the dividends-received deduction for corporate shareholders.
State Street Bank will send each investor and the IRS an annual statement
detailing federal tax information, including information about dividends and
distributions paid to the investor during the preceding year. Be sure to keep
this statement as a permanent record. A fee may be charged for any duplicate
information that an investor requests.
NOTE: The foregoing summarizes certain tax consequences of investing in the
Funds. Before investing, an investor should consult his or her own tax
adviser for more information concerning the federal, state and local tax
consequences of investing in, redeeming or exchanging Fund shares.
<PAGE>
INVESTMENT ADVISER LOOMIS SAYLES
Loomis, Sayles & Company, L.P. FUNDS /(TM)/
One Financial Center
Boston, Massachusetts 02111 The Power of A Passion
DISTRIBUTOR
Loomis Sayles Distributors, L.P.
One Financial Center
Boston, Massachusetts 02111
TRANSFER AND DIVIDEND PAYING AGENT Stock Funds
AND CUSTODIAN OF ASSETS Institutional Class Shares
State Street Bank and Trust Company
Boston, Massachusetts 02102 PROSPECTUS
SHAREHOLDER SERVICING AGENT FOR AND
STATE STREET BANK AND TRUST COMPANY
Boston Financial Data Services, Inc. APPLICATION
P.O. Box 8314
Boston, Massachusetts 02266 December __, 1996
LEGAL COUNSEL
Ropes & Gray One Financial Center
One International Place Boston, Massachusetts 02111
Boston, Massachusetts 02110 (617) 482-2450
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
LOOMIS SAYLES FUNDS(TM)
The Power of A Passion(TM)
One Financial Center
Boston, Massachusetts 02111
(617) 482-2450
PROSPECTUS
December _____, 1996
The Loomis Sayles Funds - Bond Funds:
Institutional Class shares of:
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
Loomis Sayles Investment Grade Bond Fund
Loomis Sayles Intermediate Maturity Bond 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, Loomis Sayles
Investment Grade Bond Fund and Loomis Sayles Intermediate Maturity Bond Fund
(the "Funds" and each a "Fund"), each a series of Loomis Sayles Funds, are
separately managed and each Fund has its own investment objective and policies.
Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the investment adviser of
each Fund.
The Funds (other than Loomis Sayles U.S. Government Securities Fund and
Loomis Sayles Municipal Bond Fund) offer two classes of shares: an
Institutional Class that is described in this Prospectus and a Retail Class,
with a lower investment minimum for certain categories of investors and bearing
higher expenses, that is described in a separate prospectus. This Prospectus
concisely describes the information that an investor should know before
investing in the Institutional Class shares of any Fund. Please read it
carefully and keep it for future reference. A Statement of Additional
Information dated December _____, 1996 is available free of charge; write to
Loomis Sayles Distributors, L.P. (the "Distributor"), 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. To obtain more
information about the Retail Class of shares, please call the Distributor toll-
free at 800-633-3330.
For information about: For all other information about the Funds:
. Establishing an account Call 800-633-3330
. Account procedures and status
. Exchanges
. Shareholder services
Call 800-626-9390
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."
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
SUMMARY OF EXPENSES........................................................
FINANCIAL HIGHLIGHTS.......................................................
THE TRUST..................................................................
MORE INFORMATION ABOUT THE FUNDS' INVESTMENTS..............................
THE FUNDS' INVESTMENT ADVISER..............................................
FUND EXPENSES..............................................................
PORTFOLIO TRANSACTIONS.....................................................
HOW TO PURCHASE SHARES.....................................................
SHAREHOLDER SERVICES.......................................................
HOW TO REDEEM SHARES.......................................................
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES............................
APPENDIX A.................................................................
DESCRIPTION OF BOND RATINGS.....................................A-1
</TABLE>
2
<PAGE>
SUMMARY OF EXPENSES
The following information is provided to assist in understanding the
various expenses that an investor in a Fund will bear indirectly. Except in
the case of the High Yield, Investment Grade Bond and Intermediate Maturity
Bond Funds, the information is based on expenses of the Institutional Class of
shares for the Funds' fiscal year ended December 31, 1995. The High Yield,
Investment Grade Bond and Intermediate Maturity Bond Funds did not commence
operations until 1996; the information about each shown below is based on
annualized projected expenses of the Institutional Class of shares 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>
Bond Fund High Yield Global U.S. Gov't Municipal Short-Term
Fund Bond Fund Securities Fund Bond 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
Redemption Fees/1/................................. 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% .60%/2/ .40%/2/ .40%/2/ .25%/2/
12b-1 Fees......................................... none none none none none none
Other Operating Expenses (after expense
reimbursements where indicated).................. .15%/3/ .15%/3/ .30%/3/ .20%/3/ .20%/3/ .25%/3/
Total Operating Expenses (after expense
reimbursements where indicated).................. .75%/3/ .75%/3/ .90%/3/ .60%/3/ .60%/3/ .50%/3/
Example:
An investor 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......................................... x x x x x x
Three Years...................................... x x x x x x
Five Years....................................... x x x x x
Ten Years........................................ x x x x x
An investor 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......................................... x x x x x x
Three Years...................................... x x x x x x
Five Years....................................... x x x x x
Ten Years........................................ x x x x x
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Investment Intermediate
Grade Maturity
Bond Bond
Shareholder Transaction Expenses:
<S> <C> <C>
Maximum Sales Load Imposed on
Purchases (as % of offering price) none none
Maximum Sales Load Imposed on
Reinvested Dividends (as % of
offering price)......................... none none
Deferred Sales Load (as % of original
purchase price or redemption
proceeds as applicable).................. none none
12b-1 Fees................................. none none
Redemption Fees/1/......................... none none
Exchange Fees.............................. none none
Annual Operating Expenses (as a percentage of
net assets):
Management Fees............................ .40% .40%
Other Operating Expenses (after expense
reimbursements where indicated).......... .15%/3/ .15%/3/
Total Operating Expenses (after expense
reimbursements where indicated).......... .55%/3/ .55%/3/
Example:
An investor 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................................ x x
Three Years............................. x x
- -----------------------
</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/ The management fees shown in the table have been restated to reflect
a reduction in management fees payable to Loomis Sayles. Actual
Management fees for the fiscal year ended December 31, 1995 were _____%
for the Global Bond Fund, _____% for the U.S. Government Securities
Fund, _____% for the Municipal Bond Fund, and _____% for the Short-Term
Bond Fund.
/3/ 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, estimated total operating
expenses would have been 1.94% for the High Yield Fund, _______% for
the Intermediate Maturity Bond Fund, and _______% for the Investment
Grade Bond Fund and actual Total Operating Expenses for the fiscal year
ended December 31, 1995, 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.
/4/ Under SEC rules, new funds are required to show expenses for the
one- and three-year periods only.
4
<PAGE>
FINANCIAL HIGHLIGHTS
(For an Institutional Class 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 the "Report of Independent Accountants,"
financial statements and notes thereto contained in the Funds' 1995 Annual
Report, which are incorporated by reference in this Prospectus and the
Statement of Additional Information.
<TABLE>
<CAPTION>
Global 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 $11.39 $9.82 $11.06 $10.32 $11.38 $10.00
------ ----- ------ ------ ------ ------
Income from investment operations --
Net investment income (loss) 0.39 1.04 0.67 0.54 0.70 0.37
Net realized and unrealized gain (loss)
on investments 0.26 1.31 (1.63) 0.96 (0.60) 1.31
------ ----- ------ ------ ------ ------
Total from investment operations 0.65 2.35 (0.96) 1.50 0.10 1.68
------ ----- ------ ------ ------ ------
Less distributions --
Dividends from net investment income 0.00 (0.78) (0.04) (0.49) (0.77) (0.30)
Distributions from net realized capital
gains 0.00 0.00 0.00 (0.27) (0.39) 0.00
Distributions from capital 0.00 0.00 (0.24) 0.00 0.00 0.00
------ ----- ------ ------ ------ ------
Total distributions 0.00 (0.78) (0.28) (0.76) (1.16) (0.30)
------ ----- ------ ------ ------ ------
Net asset value, end of period $12.04 $11.39 $9.82 $11.06 $10.32 $11.38
====== ====== ====== ====== ====== ======
Total return (%) 5.7 23.9 (8.7) 14.6 0.8 16.9
Net assets, end of period (000) $11,633 $10,304 $25,584 $21,378 $9,968 $4,308
Ratio of operating expenses to average
net assets (%) 1.50** 1.50 1.30 1.50 1.50 1.50**
Ratio of net investment income to
average net assets (%) 6.66** 8.17 7.02 5.54 6.99 6.81**
Portfolio turnover rate (%) 147** 148 153 150 72 137**
Without giving effect to voluntary
expense limitations:
The ratios of operating expenses to
average net assets would have been (%) 2.35** 1.69 1.30 1.51 2.58 3.99**
Net investment income per share
would have been $0.34 $1.02 $0.67 $0.54 $0.59 $0.23
</TABLE>
- -----------------------------------
* Commencement of operations
** Computed on an annualized basis.
5
<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)
------ ------ ------ ------ ------ ------
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 23.0 (4.1) 22.2 14.3 8.9
Net assets, end of period (000) $333,258 $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 operating 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>
- ---------------------------------------
* Commencement of operations
** Computed on an annualized basis.
6
<PAGE>
<TABLE>
<CAPTION>
Municipal 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 $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 from net realized capital
gains 0.00 (0.04) 0.00 (0.15) (0.06) (0.02)
------ ------ ------ ------ ------ ------
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 operating 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 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 $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 operating 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>
- --------------------------------------------
* Commencement of operations
** Computed on an annualized basis.
8
<PAGE>
<TABLE>
<CAPTION>
Short-Term Bond Fund
-----------------------------------------------------
Six Months
Ended May 16*
June 30, Year Ended Dec. 31, to
1996 ----------------------------- Dec. 31,
(Unaudited) 1995 1994 1993 1991
----------- ---- ---- ---- ----
<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: 1.12** 1.03 1.33 1.55 3.74**
The ratios of operating expenses to
average net assets would have been (%) $0.26 $0.62 $0.63 $0.54 $0.11
Net investment income per share would
have been
</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.
9
<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.
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 20% 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 known
as "junk bonds").
The Fund may invest in collateralized mortgage obligations ("CMOs") and
Rule 144A securities. The Fund may engage in foreign currency hedging and swap
transactions.
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
Standard & Poor's Rating Group ("Standard & Poor's") and Moody's Investors
Services, Inc. ("Moody'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, options 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 may engage in
foreign currency hedging and swap transactions.
The Fund will normally invest at least 65% of its assets in fixed income
securities of below investment grade quality (commonly referred to as "junk
bonds"), 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. 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.
10
<PAGE>
The Fund may engage in foreign currency hedging and swap transactions.
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. The Fund may
engage in foreign currency hedging and swap transactions.
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.
Loomis Sayles Investment Grade Bond 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 normally investing its assets
primarily in fixed income securities of investment grade quality although up to
20% of its assets may be invested in preferred stocks. Investment grade
securities include those rated BBB and above by Standard & Poor's and those
rated Baa and above by Moody's and unrated securities that Loomis Sayles
determines to be of comparable quality. The Fund may also invest up to 10% of
its assets in fixed income securities of below invest grade quality, including
securities in the lowest rating categories and unrated securities that Loomis
Sayles determines to be of comparable quality. The debt securities in which
the Fund may invest include corporate securities, U.S. Government securities,
commercial paper, zero coupon securities, mortgage-backed securities, asset-
backed securities, convertible bonds and when-issued securities. The Fund may
engage in options and futures transactions, repurchase transactions, foreign
currency hedging transactions and securities lending. The Fund may invest any
portion of its assets in the securities of Canadian issuers and up to 20% of
its assets in the securities of other foreign issuers. The Fund may engage in
foreign currency hedging and swap transactions.
11
<PAGE>
Loomis Sayles Intermediate Maturity 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 obtain its objective by normally investing at least 90%
of its assets in fixed income securities of investment grade quality with an
average dollar weighted maturity of between three and ten years. For purposes
of the 90% test, a security will be treated as being of investment grade
quality if it is rated by at least one major rating agency in one of its top
four rating categories at the time of purchase or, if unrated, is determined by
Loomis Sayles to be of comparable quality. The Fund may also invest up to 10%
of its assets in fixed income securities of below investment grade quality
which are securities rated below BBB by Standard & Poor's and below Baa by
Moody's and unrated securities that Loomis Sayles believes are of comparable
quality, including securities in the lowest rating categories and unrated
securities determined by Loomis Sayles to be of comparable quality. The fixed
income securities in which the Fund may invest include corporate securities,
U.S. Government securities, commercial paper, zero coupon securities,
mortgage-backed securities, asset-backed securities, convertible bonds and
when-issued securities. The Fund may engage in options and future
transactions, repurchase transactions, foreign currency hedging transactions
and securities lending. The Fund may invest any portion of its assets in the
securities of Canadian issuers and up to 20% of its assets in securities of
other foreign issuers. The Fund may engage in foreign currency hedging and
swap transactions.
All Funds
---------
For temporary defensive purposes, each Fund may invest any portion of its
assets in fixed income securities, cash and any other securities deemed
appropriate by Loomis Sayles.
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
Debt and Other Fixed Income Securities
--------------------------------------
The Bond, High Yield, Global Bond, U.S. Government Securities, Investment
Grade Bond Fund 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
portfolio holdings may have maturities longer than three years. The
Intermediate Maturity Bond Fund expects to maintain an average dollar weighted
maturity between three and ten 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.
12
<PAGE>
Some U.S. Government Securities, such as Government National Mortgage
Association Certificates ("GNMA"), 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.
Lower Rated Fixed Income Securities
-----------------------------------
The Bond, High Yield, Global Bond, Short-Term Bond, Investment Grade Bond
and Intermediate Maturity Bond Funds may each invest a portion of its assets in
securities rated below investment grade (that is, below BBB or Baa and commonly
referred to as "junk bonds"), including securities in the lowest rating
categories, and comparable unrated securities. The Bond Fund may invest less
than 35%, the Global Bond and Short-Term Bond Funds each may invest up to 20%,
the Investment Grade Bond and Intermediate Maturity Bond Funds each may invest
up to 10% 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.
----------------------------------
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 an 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.
Zero Coupon Securities
----------------------
13
<PAGE>
The 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.
Mortgage-Backed Securities
--------------------------
All of the Funds except the Municipal Bond Fund may invest in mortgage-
backed securities, such as GNMA or Federal National Mortgage Association
certificates, which differ from traditional debt securities . Among the major
differences are that interest and principal payments are made more frequently,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans generally may be prepaid at any time. As a result,
if a Fund purchases these assets at a premium, a faster-than-expected
prepayment rate will reduce yield to maturity, and a slower-than-expected
prepayment rate will have the opposite effect of increasing yield to maturity.
If a Fund purchases mortgage-backed securities at a discount, faster- than-
expected prepayments will increase, and slower-than-expected prepayments will
reduce, yield to maturity. Prepayments, and resulting amounts available for
reinvestment by the Fund, are likely to be greater during period of declining
interest rates and, as a result, are likely to be reinvested at lower interest
rates. Accelerated prepayments on securities purchased at a premium may result
in a loss of principal if the premium has not been fully amortized at the time
of prepayment. Although these securities will decrease in value as a result of
increases in interest rates generally, they are likely to appreciate less than
other fixed-income securities when interest rates decline because of the risk
of prepayments.
Collateralized Mortgage Obligations
-----------------------------------
The Bond, High Yield, Global Bond, U.S. Government Securities, Short-Term
Bond, Intermediate Grade Bond, and Intermediate Maturity Bond Funds each may
invest in 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.
Asset-Backed Securities
-----------------------
The Bond, Global Bond, High Yield, Short-Term Bond, Investment Grade Bond
and Intermediate Duration Bond Funds may invest in asset-backed securities.
Through the use of trusts and special purpose corporations, automobile and
credit card receivables are securitized in pass-through structures similar to
mortgage past-through structures or in a pay-through structure similar to the
CMO structure. Generally, the issuers of asset-backed bonds, notes or pass-
through certificates are special purpose entities and do not have any
significant assets other than the receivables securing such obligations. In
general, the collateral supporting asset-backed securities is of shorter
maturity than mortgage loans. Instruments backed by pools of receivables are
similar to mortgage-backed securities in that they are subject to unscheduled
prepayments of principal prior to maturity. When the obligations are prepaid,
the Fund will ordinarily reinvest the prepaid amounts in securities the yields
of which reflect interest rates prevailing at the time. Therefore, a Fund's
ability to maintain a portfolio that includes high-yielding asset-backed
securities will be adversely affected to the extent that prepayments of
principal must be reinvested in securities that have lower yields than the
prepaid obligations. Moreover, prepayments of securities purchased at a
premium could result in a realized loss.
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
14
<PAGE>
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 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 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 Short-Term Bond Fund 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, Investment
Grade Bond, and Intermediate Maturity Bond Funds 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
15
<PAGE>
amount in such currency of such expenses at the time they were incurred.
In determining whether to invest assets of the Bond, High Yield, Global
Bond, Investment Grade Bond, Intermediate Maturity 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
-------------------------------------
The Funds may engage in foreign currency exchange transactions 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
holdings 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.
Swaps
-----
The Funds may enter into interest rate or currency swaps. The Funds will
enter into these transactions primarily to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities a Fund anticipates purchasing at a later
date. Interest rate swaps involve the exchange by a Fund with another party of
their respective commitments to pay or receive interest (for example, an
exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal.) A currency swap is an agreement to exchange
cash flows on a notional amount based on changes in the relative values of the
specified currencies. The Fund will maintain liquid assets in a segregated
custodial account to cover its current obligations under swap agreements.
Because swap agreements are not exchange-traded, but are private contracts into
which the Fund and a swap counterparty enter as principals, the Fund may
experience a loss or delay in recovering assets in the counterparty were to
default on its obligations.
Options and Futures Transactions
--------------------------------
The Funds (except the U.S. Government Securities and Municipal Bond Funds)
may buy, sell or write options on securities, securities indexes, currencies or
futures contracts and may buy and sell futures contracts on securities,
securities indexes or currencies. The Funds may engage in these transactions
either for the purpose of enhancing investment return, or to hedge against
changes in the value of other assets that the Funds own or intend to acquire.
Options and futures fall into the broad category of financial instruments known
as "derivatives" and involve special risks. Use of options or futures for other
than hedging purposes may be considered a speculative activity, involving
greater risks than are involved in hedging.
Options can generally be classified as either "call" or "put" options.
There are two parties to a typical options transaction: the "writer" and the
"buyer." A call option gives the buyer the right to buy a security or other
asset (such as an amount of currency or a futures contract) from, and a put
option the right to sell a security or other asset to, the option writer at a
specified price, on or before a specified date. The buyer of an option pays a
premium when purchasing the option, which reduces the return on the underlying
security or other asset if the option is exercised, and results in a loss if
the option expires unexercised. The writer of an option receives a premium from
writing an option, which may increase its return if the option expires or is
closed out at a profit. If a Fund as the writer of an option is unable to close
out an unexpired option, it must continue to hold the underlying security or
other asset until the option expires, to "cover" its obligation under the
option.
A futures contract creates an obligation by the seller to deliver and the
buyer to take delivery of the type of instrument or cash at the time and in the
amount specified in the contract. Although many futures contracts call for the
delivery (or acceptance) of the specified instrument, futures are usually
closed out before the settlement date through the purchase (or sale) of a
comparable contract. If the price of the sale of the futures contract by the
Funds exceeds (or is less than) the price of the offsetting purchase, the Funds
will realize a gain (or loss).
16
<PAGE>
The value of options purchased by the Funds and futures contracts held by
the Funds may fluctuate up or down based on a variety of market and economic
factors. In some cases, the fluctuations may offset (or be offset by) changes
in the value of securities held in a Funds' portfolio. All transactions in
options and futures involve the possible risk of loss to the Funds of all or a
significant part of the value of its investment. In some cases, the risk of
loss may exceed the amount of the Funds' investment. The Funds will be
required, however, to set aside with its custodian bank certain assets in
amounts sufficient at all times to satisfy its obligations under options,
futures and contracts.
The successful use of options and futures will usually depend on the
ability to forecast stock market, currency or other financial market movements
correctly. The Funds' ability to hedge against adverse changes in the value of
securities held in its portfolio through options and futures also depends on
the degree of correlation between the changes in the value of futures or
options positions and changes in the values of the portfolio securities. The
successful use of futures and exchange traded options also depends on the
availability of a liquid secondary market to enable a Funds to close its
positions on a timely basis. There can be no assurance that such a market will
exist at any particular item. In the case of options that are not traded on an
exchange ("over-the-counter" options), a Fund is at risk that the other party
to the transaction will default on its obligations, or will not permit a Fund
to terminate the transaction before its scheduled maturity. As a result of
these characteristics, the Funds will treat most over-the-counter options (and
the assets it segregates to cover its obligations thereunder) as illiquid.
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.
Repurchase Agreements
---------------------
Each Fund may invest in repurchase agreements. In repurchase agreements, a
Fund buys securities from a seller, usually a bank or brokerage firm, with the
understanding that the seller will repurchase the securities at a higher price
at a later date. Such transactions afford an opportunity for a Fund to earn a
return on available cash at minimal market risk, although the Series may be
subject to various delays and risks of loss if the seller is unable to meet its
obligations to repurchase.
Securities Lending
------------------
The Investment Grade Bond and Intermediate Maturity Bond Funds may lend
their portfolio securities to broker-dealers or other parties under contracts
calling for the deposit by the borrower with the Fund's custodian of cash
collateral equal to at least the market value of the securities loaned, marked
to market on a daily basis. The Fund will continue to benefit from interest or
dividends on the securities loaned and will also receive interest through
investment of the cash collateral in short-term liquid investments. No loans
will be made if, as a result, the aggregate amount of such loans outstanding at
any time would exceed 33 1/3% of the Fund's total assets (taken at current
value). Any voting rights, or rights to consent, relating to securities loaned
pass to the borrower. However, if a material event affecting the investment
occurs, such loans will be called so that the securities may be voted by the
Fund. The Fund pays various fees in connection with such loans, including
shipping fees and reasonable custodial or placement fees.
Securities loans must be fully collateralized at all times, but involve
some credit risk to the Fund if the borrower defaults on its obligation and the
Fund is delayed or prevented from recovering the collateral.
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 sole general
partner is Loomis Sayles & Company, Inc., which ia a wholly-owned subsidiary of
NEIC Holdings, Inc., 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 Met Life New England
Holdings, Inc., a wholly-owned subsidiary of Metropolitan Life Insurance
Company.
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 ______________, 1996, the Loomis-Sayles Funded Pension Plan owned
_____% of the Global Bond Fund, Loomis Sayles owned 26% of the U.S. Government
Securities Fund, Desert States UFCW Unions and Employees Pension Fund
owned
17
<PAGE>
_____% of the Global Bond Fund and Charles Schwab & Co., Inc. owned of record
_____% of the Bond Fund. Each of these shareholders may be deemed to control
the relevant Fund or Funds.
Daniel J. Fuss, President of the Trust and Executive Vice President of
Loomis Sayles, has served as the portfolio manager of the Bond Fund since its
inception in 1991, as the portfolio manager of the High Yield Fund since its
inception in 1996, and as the portfolio manager of the Investment Grade Bond
Fund since its inception in 1996. Kathleen C. Gaffney has served as associate
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.
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.
Anthony J. Wilkins, Vice President of the Trust and of Loomis Sayles, has
served as the portfolio manager of the Intermediate Maturity Bond Fund since
its inception in 1996.
PERFORMANCE INFORMATION
Portfolio Managers' Past Performance
------------------------------------
The performance information presented in the graphs below relates to the
institutional private accounts managed by the portfolio managers of the High
Yield Fund, Investment Grade Bond Fund and Intermediate Maturity Bond Fund that
have investment objectives and policies substantially similar to that of the
respective Fund. The Funds (other than the High Yield Fund, which was
organized on September __, 1996) are newly organized and have no performance
record of their own. The information below should not be considered a
prediction of the future performance of any Fund. The performance may be
higher or lower than the performance of a fund or account that has
substantially similar investment objectives and policies. All performance
information shown below is adjusted to give effect to the higher of the level
of the actual expenses of the accounts described below during the periods shown
or the annualized expenses projected for the relevant Fund's Retail Class
shares during the first full fiscal year.
High Yield Accounts
-------------------
Daniel J. Fuss and Kathleen C. Gaffney, portfolio manager and assistant
portfolio manager of the High Yield Fund, also serve in the same capacities for
other accounts that have investment objectives and investment policies that are
substantially similar to those of the High Yield Fund (the "High Yield
Accounts"). The following graph shows the total returns for the period from
_________ through __________ for the High Yield Accounts. The graph also shows
the total return of the Merrill Lynch High Yield Index for [each] [the same]
periods. The information presented in the footnote below the graph represents
the total return of the Loomis Sayles High Yield Fixed Income Fund, which has
an investment objective and investment policies substantially similar to that
of the High Yield Fund.
A bar graph appears here, illustrating the __, ___, and ___ year total
returns for _________ to ______________ for the High Yield Accounts* and the
Merrill Lynch High Yield Index. The data points from the graph are as
follows:
Accounts %
Merrill Lynch High Yield Index %
* In the case of the Loomis Sayles High Yield Fixed Income Fund, the total
return for one year, three year and since inception period was __%, __%
and __%
Investment Grade Bond Accounts
------------------------------
Daniel J. Fuss, portfolio manager of the Investment Grade Bond Fund, also
serves as the portfolio manager of other accounts that have investment
objectives and investment policies that are substantially similar to the
Investment Grade Bond Fund (the "Investment Grade Bond Accounts"). The
following graph also shows the total return of the Lehman Brothers
Government/Corporate Bond Index for [each] [the same] period[s]. The
information presented in the footnote below the graph represents the total
return of the Loomis Sayles Investment Grade Fixed Income Fund, which has an
investment objective and
18
<PAGE>
investment policies substantially similar to that of the Investment Grade Bond
Fund.
A bar graph appears here, illustrating the __, __, __ year total returns
for _____________ to ______________ for the Investment Grade Bond Accounts* and
the Lehman Brothers Corporate/Government Bond Fund. The data points from the
graph are as follows:
Accounts %
Lehman Brothers Corporate/Government Bond Fund %
* In the case of the Loomis Sayles Investment Grade Fixed Income Fund, the
total return for the one year, three year and since inception period was __%,
__% and __%.
Intermediate Maturity Accounts
------------------------------
Anthony J. Wilkins, portfolio manager of the Intermediate Maturity Bond
Fund, also serves as the portfolio manager of other accounts that have
substantially the same investment objective and investment policies as the
Intermediate Maturity Bond Fund (the "Intermediate Maturity Accounts"). The
following graph shows the total returns for the period from __________ through
____________ for the Intermediate Maturity Accounts. The graph also shows the
total return of the Lehman Brothers Corporate/Government Bond Index for [each]
[the same] periods. The information presented in the footnote below the graph
represents the total return of the Loomis Sayles Intermediate Duration Fixed
Income Fund, which has an investment objective and investment policies
substantially similar to that of the Intermediate Maturity Bond Fund.
A bar graph appears here, illustrating the __, ___, and ___ year total
returns for _____________ to ___________ for the Intermediate Maturity
Accounts* and the Lehman Brothers Corporate/Government Bond Index. The data
points from the graph are as follows:
Accounts %
Lehman Brothers Corporate/Government Bond Index %
* In the case of the Loomis Sayles Intermediate Duration Fixed Income Fund, the
total return for one year, three year and since inception period was __%, __%
and __%.
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:
<TABLE>
<CAPTION>
Fund Fee Rate
---- --------
<S> <C>
Bond .60
High Yield .60
Global Bond .60
U.S. Government Securities .40
Municipal Bond .40
Short-Term Bond .25
Investment Grade Bond .40
Intermediate Maturity Bond .40
</TABLE>
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
19
<PAGE>
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 annual operating expenses to .75% of the average net assets of
the High Yield Fund, to 1.00% of the average net assets of the Bond Fund, to
.60% of the average net assets of the U.S. Government Securities and Municipal
Bond Funds, to .50% of the average net assets of the Short Term Bond Fund, to
.90%of the average net assets of the Global Bond Fund, and to .55% of the
average net assets of the Investment Grade Bond and the Intermediate Grade Bond
Funds.
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 portfolio turnover rate of the High Yield, Investment Grade
Bond and Intermediate Grade Bond Funds to exceed 60%, _____%, and _____%,
respectively.
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
An investor 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
The minimum investment for the Institutional Class of each Fund's shares is
$1 million in that Fund. A $2500 minimum investment applies to shareholders of
any Fund who have accounts that have been in continuous existence since
December 31, 1996 ( "Existing Shareholders"), the trustees of the Trust and
investment advisory clients of Loomis Sayles (and their directors, officers and
employees) and the parents, spouses and children of the foregoing and employees
of Loomis Sayles and their parents, spouses and children. The investment
minimum may be waived by Loomis Sayles in its sole discretion and will be
waived for any new shareholder in the Loomis Sayles Funds who initially invests
less than $1 million but signs a letter of intent stating the shareholders
intention to bring his or her balance to $1 million within six months of the
initial purchase. Loomis Sayles reserves the right to redeem the accounts at
net asset value of shareholders that have signed a letter of intent but fail to
meet the minimum within the specified time. Subsequent investments must be at
least $50.00.
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. 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.
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
20
<PAGE>
realized upon the exchange by an investor that is subject to federal income
taxation, depending upon the investor's basis in the securities tendered. An
investor who wishes to purchase shares by exchanging securities should obtain
instructions by calling 1-800-633-3330.
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 an investor's order, Boston Financial Data Services,
Inc. ("BFDS"), the shareholder servicing agent for State Street Bank and Trust
Company ("State Street Bank"), opens an account, 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, an investor 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 the investor's account number or name and
social security number.
Subsequent investments can also be made by federal funds wire. Investors
should instruct their banks 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 (Fund Name and
Institutional Class), DDA #9904-622-9, Shareholder Name, Shareholder Account
Number." A bank may charge 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 presently 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 an investor pays 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.
Each Fund also offers a Retail Class of shares that has a $250,000
investment minimum and bears higher expenses. Because of its lower expenses,
the Institutional Class of shares is expected to have a higher total return
than the Retail Class of shares.
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 an investor opens an account unless an investor
elects on the application to decline the privileges. Other privileges must be
specifically elected. A signature guarantee will be required to establish a
privilege after an account is opened.
Free Exchange Privilege. Shares of the Institutional Class of any Fund
-----------------------
may be exchanged for shares of the Institutional Class of any other Fund
or for shares of certain money market funds advised by New England Funds
Management, L.P., an affiliate of Loomis Sayles. Exchanges may be made by
written instructions or by telephone,
21
<PAGE>
unless an investor elected on the application to decline telephone
exchange privileges. The exchange privilege should not be viewed 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.
Retirement Plans. The Institutional Class of the Funds' shares may be
----------------
purchased by all types of tax-deferred retirement plans. Loomis Sayles
makes available retirement plan forms for IRAs.
Systematic Withdrawal Plan. If the value of an account is at least
--------------------------
$25,000 an investor may have periodic cash withdrawals automatically paid
to the investor or any person designated by the investor.
Automatic Investment Plan. Voluntary monthly investments of at least $50
-------------------------
may be made automatically by pre-authorized withdrawals from an investor's
checking account.
HOW TO REDEEM SHARES
An investor can redeem 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 the investor in the form of a
check. As described below, an investor may also redeem shares by calling BFDS
at 800-626-9390. Proceeds resulting from a telephone redemption request can be
wired to an investor's bank account or sent by check in the name of the
registered owners to their record address.
The written request must include the name of the Fund, the account number,
the exact name(s) in which the 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
an investor's 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). Shareholders requesting that
redemption proceeds be wired to their bank accounts must provide specific wire
instructions.
If (1) an investor is redeeming shares worth more than $50,000, (2) is
requesting that the proceeds check be made out to someone other than the
registered owners or be sent to an address other than the record address, (3)
the account registration has changed within the last 30 days or (4) an investor
is instructing us to wire the proceeds to a bank account not designated on the
application, an investor must have his or her 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 the redemption
request, an investor should verify with the guarantor institution that it is an
eligible guarantor. Signature guarantees by notaries public are not
acceptable.
If an investor has requested certificates for the investment, an investor
must enclose the certificates and a properly completed redemption form or stock
power. The Funds recommend that certificates be sent by registered mail.
When an investor telephones a redemption request, the proceeds are wired to
the bank account previously chosen by the investor. 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 an investor telephones a request to BFDS after the Exchange
closes or on a day when the Exchange is not open for business, BFDS cannot
accept the request and a new one will be necessary.
If an investor decides to change the bank account to which proceeds are to
be wired, an investor must send in this change on the Service Options Form with
a signature guarantee. Telephonic 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. Unless an investor
indicates otherwise on the account application, BFDS will be authorized to act
upon redemption and exchange instructions received by telephone from the
investor or any person claiming to act as the investor's representative who can
provide BFDS with the investor's account registration and address as it appears
on the records of State Street Bank and Trust Company ("State Street").
22
<PAGE>
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, an investor
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.
Proceeds resulting from a written redemption request will normally be
mailed to an investor within seven days after receipt of the investor's request
in good order. Telephonic redemption proceeds will normally be wired to an
investor's bank on the first business day following receipt of a proper
redemption request. If an investor purchased shares by check and the check was
deposited less than fifteen days prior to the redemption request, the Fund may
withhold redemption proceeds until the 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.
Loomis Sayles may pay certain broker-dealers and financial intermediaries
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.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
The Global Bond Fund declares and pays its net investment income to
shareholders as dividends [monthly]; the Bond, High Yield, U.S. Government
Securities, Investment Grade Bond, Intermediate Maturity Bond 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, 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.
Dividends and capital gain distributions will automatically be reinvested
in additional shares of the same Fund on the record date unless an investor has
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), an investor's income dividends and
short term capital gain distributions are taxable as ordinary income whether
distributed in cash or additional shares. Long-term capital gain distributions
from all Funds are taxable as long-term capital gains whether distributed in
cash or additional shares and regardless of how long an investor has owned
shares of the Fund.
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 (1) if an investor does not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that an investor has underreported income in the past, or (3) if an
investor fails to certify to the Fund that he or she is not subject to such
withholding.
Dividends derived from interest on U.S. Government securities may be exempt
from state and local taxes.
23
<PAGE>
State Street Bank will send investors and the IRS an annual statement
detailing federal tax information, including information about dividends and
distributions paid during the preceding year. An investor should keep this
statement as a permanent record. A fee may be charged for any duplicate
information requested.
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 federal tax returns. However, if an investor
receives social security or railroad retirement benefits, the investor 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 the
investor as ordinary income whether received in cash or additional shares.
Distributions of long-term capital gains are taxable as long-term capital gains
whether distributed in cash or additional shares, regardless of how long an
investor has held the 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 the investor resides. 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, an investor should consult his or her own tax
adviser for more information concerning the federal, state and local
tax consequences of investing in, redeeming or exchanging Fund shares.
24
<PAGE>
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.
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.
A-1
<PAGE>
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.
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.
A-2
<PAGE>
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-3
<PAGE>
INVESTMENT ADVISER
Loomis, Sayles & Company, L.P.
One Financial Center
Boston, Massachusetts 02111
DISTRIBUTOR
Loomis Sayles Distributors, L.P.
One Financial Center
Boston, Massachusettes 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
LOOMIS SAYLES
FUNDS
The Power of A Passion(TM)
Bond Funds
Institutional Class
PROSPECTUS
AND
APPLICATION
December __, 1996
One Financial Center
Boston, Massachusetts 02111
(617) 482-2450
<PAGE>
LOOMIS SAYLES FUNDS
STATEMENT OF ADDITIONAL INFORMATION
December __, 1996
This Statement of Additional Information is not a prospectus. This Statement
of Additional Information relates to the Prospectus of each Series ("Fund") of
Loomis Sayles Funds that offers Retail Class shares of such Fund and the
Prospectus of each Fund that offers Institutional Class shares of such Fund,
each dated December __, 1996, and should be read in conjunction with the
Prospectus relating to the class of shares of the Fund in which investment is
contemplated. A copy of any of the Prospectuses may be obtained from Loomis
Sayles Funds, One Financial Center, Boston, Massachusetts 02111.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............... 3
MANAGEMENT OF THE TRUST........................................ 11
INVESTMENT ADVISORY AND OTHER SERVICES......................... 15
PORTFOLIO TRANSACTIONS AND BROKERAGE........................... 18
DESCRIPTION OF THE TRUST....................................... 20
HOW TO BUY SHARES.............................................. 21
NET ASSET VALUE................................................ 22
SHAREHOLDER SERVICES........................................... 22
Open Accounts................................................. 22
Systematic Withdrawal Plan.................................... 23
Exchange Privilege............................................ 23
IRAs.......................................................... 23
REDEMPTIONS.................................................... 24
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS.... 25
FINANCIAL STATEMENTS........................................... 26
CALCULATION OF YIELD AND TOTAL RETURN.......................... 26
PERFORMANCE COMPARISONS........................................ 28
PERFORMANCE DATA............................................... 30
APPENDIX A -- PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION... A-1
APPENDIX B -- ADVERTISING AND PROMOTIONAL LITERATURE........... B-1
</TABLE>
<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 Funds' Prospectuses under "Investment
Objectives and Policies" and "More Information About the Funds' Investments."
The investment policies of each Fund set forth in the Funds' Prospectuses 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 Funds' Prospectuses 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 each
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 each Fund's
Prospectuses, 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) With respect to 75% of its assets, 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) With respect to 75% of its assets, acquire more than 10% of the
outstanding voting securities of an issuer.
(7) 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 (9) 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.)
*(8) 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.
*(9) 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.
(10) 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).
<PAGE>
(11) 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.)
(12) 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.
(13) 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, Small Company
Growth, Mid-Cap Value, Mid-Cap Growth, Strategic Value, Intermediate Maturity
Bond, Investment Grade Bond Fund 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.
*(14) 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 (7) above; any borrowing permitted by
restriction (9) 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 (12) above.
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.
. 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.
. 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.
. "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.
. "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.
. "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
-4-
<PAGE>
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 Funds' Prospectuses, 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 Prospectuses, 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 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
-5-
<PAGE>
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.
Rule 144A Securities
- --------------------
Each of the 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 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
-6-
<PAGE>
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, Core Value, Small Cap Value, International Equity, Worldwide,
Small Company Growth, Mid-Cap Value, Mid-Cap Growth, Strategic Value, Bond,
Global Bond, Investment Grade Bond and Intermediate Maturity Bond Funds 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.
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.
-7-
<PAGE>
Options
- -------
As described in the Prospectus, the International Equity, Worldwide, High
Yield, Small Company Growth, Mid-Cap Value, Mid-Cap Growth, Strategic Value,
Global Bond, Investment Grade Bond and Intermediate Maturity Bond Funds each
may, for hedging purposes, 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.
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.
-8-
<PAGE>
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.
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.
-9-
<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.
--------------
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.
-10-
<PAGE>
SANDRA P. TICHENOR -- Vice President. 465 First Street West, Sonoma,
--------------
California. General Counsel and Vice President, Loomis Sayles. Formerly,
Partner, Heller Ehrmeyer 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>
<S> <C> <C> <C> <C>
(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
===================================================================================================================
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>
*No Trustee receives any compensation from any mutual funds affiliated with
Loomis Sayles, other than the Trust.
As of October 7, 1996 the officers and trustees of the Trust owned
beneficially shares of each Fund as follows: 81,634.024 shares of the Growth
Fund, 70,733.812 shares of the Core Value Fund, 128,292.804 shares of the Small
Cap Value Fund, 91,218.347 shares of the International Equity Fund, 66,800.994
shares of the Worldwide Fund, 463,832.088 shares of the Bond Fund, 103,201.992
shares of the Global Bond Fund, 42,421.505 shares of the U.S. Government
Securities Fund, 86,122.06 shares of the Municipal Bond Fund, and 59,552.991
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 October 7, 1996, the Pension Plan and the Profit Sharing
Plan, respectively, owned the following percentages of the outstanding shares of
the indicated Funds: 12% and 29% of the Growth Fund, 15% and 18% of the Core
Value Fund, 8% and 6% of the International Equity Fund, 22% and 7% of the U.S.
Government Securities Fund, and 30% and 10% of the Small Cap Value Fund. As of
October 7, 1996, the Profit Sharing Plan also owned 10% of the Global Bond Fund
and 6% of the Short-Term Bond Fund and the Pension Plan also owned 84% of the
Worldwide 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.
-11-
<PAGE>
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. Faulkner, 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, and as of October 7, 1996, except as noted below, no person,
owns more than 5% of the outstanding shares of any Fund.
<TABLE>
<CAPTION>
Shareholder Address Shares Held
- ----------- ------- -----------
<S> <C> <C>
Growth Fund
- -----------
Grosse Pointe Woods Employee Retirement System 20025 Mack Plaza 11%
Grosse Pointe Woods, MI 48236-2343
Loomis, Sayles & Company Employees'
Profit Sharing Retirement Plan* One Financial Center 29%
Boston, MA 02111-2621
Loomis-Sayles' Funded Pension Plan One Financial Center 12%
Boston, MA 02111-2621
Core Value Fund
- ---------------
Loomis-Sayles' Funded Pension Plan One Financial Center 15%
Boston, MA 02111-2602
Asbestos Workers Local 84 Pension Fund c/o Loomis Sayles & Company 8%
1533 North Woodward
Bloomfield Hills, MI 4830-2864
Loomis, Sayles & Company Employees'
Profit Sharing Retirement Plan One Financial Center 18%
Boston, MA 02111-2621
Small Cap Value Fund
- --------------------
Loomis, Sayles & Company Employees' One Financial Center 10%
Profit Sharing Retirement Plan Boston, MA 02111-2602
IATSE Local 33 Pension Plan 700 S. Flower Street 5%
Suite 250
Los Angeles, CA 90017
Charles Schwab & Co., Inc. 101 Montgomery Street 5%
San Francisco, CA 94104
Smith Barney 333 West 34th Street 6%
New York, NY 10001
Worldwide Fund
- --------------
Loomis-Sayles' Funded Pension Plan* One Financial Center 84%
Boston, MA 02111-2602
Loomis, Sayles & Company Employees' One Financial Center 14%
Profit Sharing Retirement Plan Boston, MA 02111-2602
Bond Fund
- ---------
Donaldson Lufkin Jenrette Pershing Division P.O. Box 2052 5%
</TABLE>
-12-
<PAGE>
<TABLE>
<S> <C> <C>
Jersey City, NJ 07303
Charles Schwab & Co. Inc. 101 Montgomery Street 7%
San Francisco, CA 94104-4122
Charles Schwab & Co., Inc. 101 Montgomery Street 37%
San Francisco, CA 94104-4122
Global Bond Fund
- ----------------
Desert States UFCW Unions and P.O. Box 9800 22%
Employers Pension Fund Calabasas, CA 91372-0800
Loomis, Sayles & Company Employees' One Financial Center 10%
Profit Sharing Retirement Plan Boston, MA 02111-2602
Loomis-Sayles' Funded Pension Plan One Financial Center 30%
Boston, MA 02111-2621
Kayman Corp. Master Trust Post Office Box 92800 16%
Rochester, NY 14692
U.S. Government Securities Fund
- -------------------------------
Loomis, Sayles & Company, L.P. One Financial Center 24%
Boston, MA 02111-2621
Loomis-Sayles' Funded Pension Plan One Financial Center 22%
Boston, MA 02111-2621
Loomis, Sayles & Company One Financial Center 7%
Employees' Retirement Trust Boston, MA 02111
Plumbers & Pipefitters Regular 1533 North Woodward
Welfare Fund Suite 300
Bloomfield Hills, MI 48301
Municipal Bond Fund
- -------------------
Elinor J. Rousseau 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
Sally B. Searle Kinship Capital 400 Skokie Blvd.,Suite 675 13%
Northbrook, IL 60062-7906
Short-Term Bond Fund
- --------------------
Charles Schwab & Co., Inc. 101 Montgomery Street 9%
San Francisco, CA 94101
Plumbers & Pipefitters Reg. Welfare Fund 1533 North Woodward, Suite 300 9%
c/o Loomis, Sayles & Company 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
High Yield Fund
- ---------------
Loomis, Sayles & Company, L.P. One Financial Center 47%
Boston, MA 02111
Daniel J. Fuss 44 Longfellow Road 47%
Wellesley, MA 02181
International Equity Fund
- -------------------------
Loomis, Sayles' Funded Pension One Financial Center 8%
Plan Boston, MA 02111
Loomis, Sayles & Company One Financial Center 6%
Employees' Profit Sharing Boston, MA 02111
Retirement Trust
City of Livonia Employees 33000 Civic Center Drive 11%
Retirement System Livonia, MI 48154
The Security Mutual Life Post Office Box 82248 5%
Insurance Company of Lincoln, Lincoln, NE 68501-2248
Nebraska
IATSE Local 33 Pension Plan 700 S. Flower Street, Suite 250 6%
Los Angeles, CA 90017
Misericordia Home 6300 N. Ridge Avenue 8%
Chicago, IL 60660
</TABLE>
-13-
<PAGE>
To the extent any of the shareholders listed above beneficially owns more than
25% of a Fund, it may be deemed to "control" such Fund. As a result, it may not
be possible for matters subject to a vote of a majority of the outstanding
voting securities of a Fund to be approved without the affirmative vote of such
shareholders, and it may be possible for such matters to be approved by such
shareholders without the affirmative vote of any other shareholders.
-14-
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
Advisory Agreements. Loomis Sayles serves as investment adviser under a
-------------------
separate advisory agreement relating to each of the Bond and High Yield Funds,
each dated August 30, 1996, relating to the Growth, Core Value, Small Cap Value,
International Equity, Worldwide, Global Bond, U.S. Government Securities,
Municipal Bond and Short-Term Bond Funds, each dated August 30, 1996, as revised
January 1, 1997, and relating to each of the Small Company Growth, Mid-Cap
Value, Mid-Cap Growth, Strategic Value, Investment Grade Bond, and Intermediate
Maturity Bond Funds, each dated December 1, 1996. The advisory agreements
relating to each of the Growth, Core Value, Small Cap Value, International
Equity, Worldwide, Global Bond, U.S. Government Securities, Municipal Bond and
Short-Term Bond Funds were amended effective January 1, 1997 solely for the
purpose of reducing the fees payable thereunder. 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:
<TABLE>
<CAPTION>
Fund Fee Rate
---- --------
<S> <C>
Growth .50%
Core Value .50
Small Cap Value .75
International Equity .75
Worldwide .75
Small Company Growth .75
Mid-Cap Value .75
Mid-Cap Growth .75
Strategic Value .50
Bond .60
High Yield .60
Global Bond .60
U.S. Government Securities .40
Municipal Bond .40
Short-Term Bond .25
Investment Grade Bond .40
Intermediate Maturity Bond .40
</TABLE>
-15-
<PAGE>
During the periods shown below, pursuant to advisory agreements in effect
prior to January 1, 1997 under which fees were payable to Loomis Sayles at the
following annual rates by the indicated Funds (expressed as a percentage of
average daily net assets): Growth, 0.75%; Core Value, 0.75%; International
Equity, 1.00%; Small Cap Value, 1.00%; Bond, 0.60%; Global Bond, 0.75%; U.S.
Government, 0.60%; Municipal Bond, 0.60%; Short Term Bond, 0.50%; Worldwide,
0.75%; High Yield, 0.60%, 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 12/31/93 Fiscal Year Ended 12/31/94 Fiscal Year Ended 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
- -----------------------------------------------------------------------------------------------------------------
Core Value 126,150 9,278 188,066 0 243,025 0
- -----------------------------------------------------------------------------------------------------------------
Small Cap Value 510,844 0 790,607 0 839,470 0
- -----------------------------------------------------------------------------------------------------------------
International Equity 342,180 74,582 670,041 0 781,765 0
- -----------------------------------------------------------------------------------------------------------------
Worldwide* N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Small Company Growth* N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap Value* N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Mid-Cap Growth* N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Strategic Value* N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Bond 258,919 0 511,925 0 917,444 0
- -----------------------------------------------------------------------------------------------------------------
Global Bond 124,151 923 196,543 0 106,447 26,849
- -----------------------------------------------------------------------------------------------------------------
U.S. Government Securities 92,507 44,697 106,524 39,088 107,644 39,836
- -----------------------------------------------------------------------------------------------------------------
Municipal Bond 23,685 87,687 36,708 83,642 45,872 77,750
- -----------------------------------------------------------------------------------------------------------------
Short-Term Bond 61,066 67,014 81,344 53,010 124,536 6,383
- -----------------------------------------------------------------------------------------------------------------
High Yield Fund* N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Investment Grade Bond* N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
Intermediate Maturity Bond* N/A N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
*The Worldwide, High Yield, Investment Grade Bond, Small Company Growth,
Mid-Cap Value, Mid-Cap Growth, Strategic Value and Intermediate Maturity Bond
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
-16-
<PAGE>
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 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 Prospectuses, 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, as well as to
Loomis Sayles Investment Trust, 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 NEIC Holdings, Inc., a wholly-owned subsidiary of
Metropolitan Life Insurance Company.
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.
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
-17-
<PAGE>
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. Coopers & Lybrand
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 each 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 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.
-18-
<PAGE>
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.
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1993
(1) (2) (3)
Aggregate Commissions
Brokerage Directed on Directed
Fund Commissions Transactions Transactions
---- ----------- ------------ ------------
<S> <C> <C> <C>
Growth $ 55,531 $ 42,446,050 $ 55,531
Core Value $ 37,310 $ 23,193,564 $ 37,310
Small Cap Value $144,907 $110,080,231 $144,907
International Equity $469,853 $111,972,892 $469,853
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1994
(1) (2) (3)
Aggregate Commissions
Brokerage Directed on Directed
Fund Commissions Transactions Transactions
---- ----------- ------------ ------------
<S> <C> <C> <C>
Growth $ 44,867 $ 35,606,334 $ 44,867
Core Value $ 50,131 $ 28,909,781 $ 50,131
Small Cap Value $179,677 $130,509,692 $179,677
International Equity $712,614 $158,862,963 $712,614
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1995
(1) (2) (3)
Aggregate Commissions
Brokerage Directed on Directed
Fund Commissions Transactions Transactions
---- ----------- ------------ ------------
<S> <C> <C> <C>
Growth $ 49,657 $ 43,318,381 $ 49,657
Core Value $ 55,978 $ 13,062,283 $ 20,980
Small Cap Value $584,643 $ 8,919,867 $ 21,655
International Equity $824,038 $198,137,121 $824,038
</TABLE>
-19-
<PAGE>
- --------------------------------------------------------------------------------
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 classes of
shares with such dividend preferences and other rights as the trustees may
designate. Shares of each Fund (other than the U.S. Government Securities and
Municipal Bond Funds) are currently divided into two classes, designated Retail
Class and Institutional Class. 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.
Voting Rights
- -------------
As summarized in each 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.
-20-
<PAGE>
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 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 each Fund are summarized in the
Fund's Prospectuses under "How to Purchase Shares."
- --------------------------------------------------------------------------------
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
-21-
<PAGE>
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: Christmas Day, New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, and Thanksgiving Day. 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
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.
- --------------------------------------------------------------------------------
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 each Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $50 or more from the
account of an eligible shareholder, as provided therein, 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.
-22-
<PAGE>
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
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. Exchange 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 each 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," each 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.
- --------------------------------------------------------------------------------
REDEMPTIONS
- --------------------------------------------------------------------------------
The procedures for redemption of Fund shares are summarized in each
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 each
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.
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.
-23-
<PAGE>
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 redeemed within one (1) year of purchase, if applicable. 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 of a concurrent purchase, each of the
redeeming shareholders will share, pro rata, in the reduction in redemption fee
caused by the concurrent purchase. 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."
-24-
<PAGE>
- --------------------------------------------------------------------------------
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
- --------------------------------------------------------------------------------
As described in each 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 Fund's Prospectuses) 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 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
-25-
<PAGE>
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.
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 1995 Annual
Report and 1996 Semiannual Report are incorporated by reference to such
Reports.
- --------------------------------------------------------------------------------
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
-26-
<PAGE>
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
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.
-27-
<PAGE>
- --------------------------------------------------------------------------------
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, Short-Term Bond, Investment Grade Bond and
Intermediate Maturity 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.
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 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.
-28-
<PAGE>
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
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 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.
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
-29-
<PAGE>
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 June 30, 1996, (ii) for the three-year period ended
June 30, 1996 and (iii) the five-year period ended June 30, 1996 and (iv) since
the commencement of operations (May, 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 June 30, 1996. No shares of any of
the High Yield, Investment Grade Bond, Small Company Growth, Mid-Cap Value, Mid-
Cap Growth, Strategic Value and Intermediate Maturity Bond Funds were
outstanding as of June 30, 1996.
-30-
<PAGE>
<TABLE>
<CAPTION>
PERFORMANCE DATA*
Average
Average Average Average Annual
Annual Annual Annual Total
Total Return Total Return Total Return Return
for the for the for the from the
Current One-Year Three-Year Five-Year Commencement
SEC Period Period Period of Operations**
Yield ended ended ended through
at 6/30/96 6/30/96 6/30/96 6/30/96 6/30/96
---------- ------- ------- ------- -------
FUND
- ----
<S> <C> <C> <C> <C> <C>
Growth N/A 23.6% 13.6% 15.1% 14.5%
Core Value N/A 20.1% 15.4% 14.6% 14.1%
Small Cap Value N/A 36.6% 17.2% 21.3% 20.3%
International Equity N/A 6.5% 12.7% 10.7% 9.2%
Worldwide N/A N/A N/A N/A 1.2%
Bond 8.0% 11.7% 11.2% 14.6% 13.8%
Global Bond 7.0% 23.2% 9.2% 11.1% 9.8%
U.S. Government 6.6% 3.5% 4.8% 9.8% 9.6%
Securities
Municipal Bond 4.8% 5.8% 4.2% 7.4% 7.3%
Short-Term Bond 5.9% 4.9% 5.1% N/A 5.4%
</TABLE>
*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, 15.0% and 14.4% for the
five-year period and the period since commencement of operations, respectively;
Core Value, 14.4% and 13.9% for the five-year period and the period since
commencement of operations, respectively; Small Cap Value, 21.1 and 20.2% for
the five-year period and the period since commencement of operations,
respectively; International Equity, 12.6%, 10.3% and 8.8% for the three-year
period, the five-year period and the period since commencement of operations,
respectively; Bond, 14.4% and 13.6% for the five-year period and the period
since commencement of operations, respectively; Global Bond, ____% (yield), and
22.7%, 9.1%, 10.7% and 9.3% for the one-year period, the three-year period, the
five-year period and the period since commencement of operations, respectively;
U.S. Government Securities, ____% (yield), and 3.3%, 4.7%, 9.4% and 9.2% for the
one-year period, the three-year period and the period since commencement of
operations, respectively; Municipal Bond, ____% (yield), and 4.5%, 2.9%, 3.9%
and 3.5% for the one-year period, the three-year period, the five-year period
and the period since commencement of operations, respectively; and Short-Term
Bond, ____% (yield), and 4.8%, 4.9% and 4.9% for the one-year period, the three-
year period and the period since commencement of operations, respectively.
**Inception dates of the Growth, Core Value, Small Cap Value, 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.
-31-
<PAGE>
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
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
Dorfman, Dan (syndicated column)
Dow Jones News Service
Economist
FACS of the Week
Fee Adviser
Financial 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
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
-1-
<PAGE>
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
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
WRKO
-2-
<PAGE>
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:
. Loomis Sayles Funds' participation in wrap fee and no transaction fee
programs
. Characteristics of Loomis Sayles including the number and locations of its
offices, its investment practices and clients
. Specific and general investment philosophies, strategies, processes and
techniques
. 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
. Industry conferences at which Loomis Sayles participates
. Current capitalization, levels of profitability and other financial
information
. Identification of portfolio managers, researchers, economists, principals and
other staff members and employees
. 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
. Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
. 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
. 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 their adviser and
their success is not attributable to the Funds or their adviser. In instances
where these advertisements describe successful business ventures, the Funds
or Loomis Sayles may or may not invest in these ventures.
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:
. 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.
. 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.
-1-
<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 Amendment No. 1 to Investment Advisory Agreement for
the Growth Fund.
5(b). Form of Amendment No. 1 to Investment Advisory Agreement for
the Core Value Fund.
5(c). Form of Amendment No. 1 to Investment Advisory Agreement for
the Small Cap Value Fund.
5(d). Form of Amendment No. 1 to Investment Advisory Agreement for
the International Equity Fund.
5(e). Form of Amendment No. 1 to Investment Advisory Agreement for
the Worldwide Fund.
5(f). Form of Amendment No. 1 to Investment Advisory Agreement for
the Global Bond Fund.
5(g). Form of Amendment No. 1 to Investment Advisory Agreement for
the U.S. Government Securities Fund.
5(h). Form of Amendment No. 1 to Investment Advisory Agreement for
the Municipal Bond Fund.
5(i) Form of Amendment No. 1 to Investment Advisory Agreement for
the Short-Term Bond Fund.
5(j) Form of Investment Advisory Agreement for the Small Company
Growth Fund.
5(k). Form of Investment Advisory Agreement for the Investment
Grade Bond Fund.
<PAGE>
5(l). Form of Investment Advisory Agreement for the Mid-Cap Value
Fund.
5(m) Form of Investment Advisory Agreement for the Mid-Cap
Growth Fund.
5(n) Form of Investment Advisory Agreement for the Strategic
Value Fund.
5(o) Form of Investment Advisory Agreement for the Intermediate
Maturity Bond Fund.
6. Form of Distribution Agreement.
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. Form of Distribution Plan.
16. Schedule for Performance Computations.
17(a). Financial Data Schedule for Institutional Class shares of
Loomis Sayles Growth Fund.
17(b). Financial Data Schedule for Institutional Class shares of
Loomis Sayles Core Value Fund.
17(c). Financial Data Schedule for Institutional Class shares of
Loomis Sayles Small Cap Value Fund.
17(d). Financial Data Schedule for Institutional Class shares of
Loomis Sayles International Equity Fund.
-2-
<PAGE>
17(e). Financial Data Schedule for Institutional Class shares of
Loomis Sayles Worldwide Fund.
17(f). Financial Data Schedule for Institutional Class shares of
Loomis Sayles Bond Fund.
17(g). Financial Data Schedule for Institutional Class shares of
Loomis Sayles Global Bond Fund.
17(h). Financial Data Schedule for Institutional Class shares of
Loomis Sayles U.S. Government Securities Fund.
17(i). Financial Data Schedule for Institutional Class shares of
Loomis Sayles Municipal Bond Fund.
17(j). Financial Data Schedule for Institutional Class shares of
Loomis Sayles Short-Term Bond Fund.
18. Form of Rule 18f-3(d) Plan.
19. Powers of Attorney.(4)
- --------------------
(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 Exhibit No. 17 to Post-Effective Amendment No.
7 to this Registration Statement filed with the Commission on February 16, 1996.
(5) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 9 to this Registration Statement filed with the
Commission on June 21, 1996.
(6) Incorporated by reference to the similarly numbered Exhibit to Post-
Effective Amendment No. 10 to this Registration Statement filed with the
Commission on August 30, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
Not Applicable.
-3-
<PAGE>
Item 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Number of Record Holders
Fund (as of October 7, 1996)
---- ------------------------
<S> <C>
Growth Fund 508
Core Value Fund 549
Small Cap Value Fund 143
International Equity Fund 715
Worldwide Fund 14
Bond Fund 7,535
High Yield Fund 14
Global Bond Fund 209
U.S. Government Securities Fund 163
Municipal Bond Fund 111
Short-Term Bond Fund 258
</TABLE>
Item 27. Indemnification
---------------
Incorporated by reference to Item 27 of Post-Effective Amendment No.
1 to this Registration Statement filed on November 7, 1991.
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
----------------------
The Trust's principal underwriter is Loomis Sayles Distributors,
L.P., the sole general partner of which is Loomis Sayles
Distributors, Incorporated.
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)
-4-
<PAGE>
(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.
********************
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.
-5-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the undersigned 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 9th day of October, 1996.
LOOMIS SAYLES FUNDS
By: 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
--------- -----
DANIEL J. FUSS* President and Trustee
- -----------------------------
Daniel J. Fuss
MARK W. HOLLAND* Treasurer, Principal, Financial Officer and
- ---------------------- Principal Accounting Officer
Mark W. Holland
EARL W. FOELL* Trustee
- ---------------------------
Earl W. Foell
RICHARD S. HOLWAY* Trustee
- ----------------------
Richard S. Holway
MICHAEL T. MURRAY* Trustee
- ----------------------
Michael T. Murray
TERRY R. LAUTENBACH* Trustee
- -----------------------
Terry R. Lautenbach
*By MARK W. HOLLAND
-----------------------------------
Mark W. Holland, for himself and as
Attorney-in-fact
October 9, 1996
-6-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO.
- -----------
5(a). Form of Amendment No. 1 to Investment Advisory
Agreement for the Growth Fund.
5(b). Form of Amendment No. 1 to Investment Advisory
Agreement for the Core Value Fund.
5(c). Form of Amendment No. 1 to Investment Advisory
Agreement for the Small Cap Value Fund.
5(d). Form of Amendment No. 1 to Investment Advisory
Agreement for the International Equity Fund.
5(e). Form of Amendment No. 1 to Investment Advisory
Agreement for the Worldwide Fund.
5(f). Form of Amendment No. 1 to Investment Advisory
Agreement for the Global Bond Fund.
5(g). Form of Amendment No. 1 to Investment Advisory
Agreement for the U.S. Government Securities
Fund.
5(h). Form of Amendment No. 1 to Investment Advisory
Agreement for the Municipal Bond Fund.
5(i). Form of Amendment No. 1 to Investment Advisory
Agreement for the Short-Term Bond Fund.
5(j). Form of Investment Advisory Agreement for the
Small Company Growth Fund.
5(k). Form of Investment Advisory Agreement for the
Investment Grade Bond Fund.
5(l). Form of Investment Advisory Agreement for the
Mid-Cap Value Fund.
5(m) Form of Investment Advisory Agreement for the
Mid-Cap Growth Fund.
5(n) Form of Investment Advisory Agreement for the
Strategic Value Fund.
5(o) Form of Investment Advisory Agreement for the
Intermediate Maturity Bond Fund.
6. Form of Distribution Agreement.
10. Opinion and Consent of Counsel.
-7-
<PAGE>
11. Consent of Coopers & Lybrand L.L.P.
15. Form of Distribution Plan.
16. Schedule for Performance Computations.
17(a). Financial Data Schedule for Institutional
Class shares of Loomis Sayles Growth Fund.
17(b). Financial Data Schedule for Institutional
Class shares of Loomis Sayles Core Value Fund.
17(c). Financial Data Schedule for Institutional
Class shares of Loomis Sayles Small Cap Value
Fund.
17(d). Financial Data Schedule for Institutional
Class shares of Loomis Sayles International
Equity Fund.
17(e). Financial Data Schedule for Institutional
Class shares of Loomis Sayles Worldwide Fund.
17(f). Financial Data Schedule for Institutional
Class shares of Loomis Sayles Bond Fund.
17(g). Financial Data Schedule for Institutional
Class shares of Loomis Sayles Global Bond
Fund.
17(h). Financial Data Schedule for Institutional
Class shares of Loomis Sayles U.S. Government
Securities Fund.
17(i). Financial Data Schedule for Institutional
Class shares of Loomis Sayles Municipal Bond
Fund.
17(j). Financial Data Schedule for Institutional
Class shares of Loomis Sayles Short-Term Bond
Fund.
18. Form of Rule 18f-3(d) Plan.
-8-
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<INTEREST-INCOME> 218,720
<OTHER-INCOME> 0
<EXPENSES-NET> 38,908
<NET-INVESTMENT-INCOME> 179,812
<REALIZED-GAINS-CURRENT> 32,241
<APPREC-INCREASE-CURRENT> (325,937)
<NET-CHANGE-FROM-OPS> (113,884)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (179,863)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38,810
<NUMBER-OF-SHARES-REDEEMED> (28,681)
<SHARES-REINVESTED> 11,672
<NET-CHANGE-IN-ASSETS> 21,801
<ACCUMULATED-NII-PRIOR> 437,660
<ACCUMULATED-GAINS-PRIOR> 34,481
<OVERDISTRIB-NII-PRIOR> 3,072
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23,345
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38,908
<AVERAGE-NET-ASSETS> 7,512,989
<PER-SHARE-NAV-BEGIN> 11.53
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> (0.43)
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.10
<EXPENSE-RATIO> 2.53
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000872649
<NAME> LOOMIS SAYLES FUNDS
<SERIES>
<NUMBER> 8
<NAME> LOOMIS SAYLES US GOVT
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 22,977,789
<INVESTMENTS-AT-VALUE> 22,020,150
<RECEIVABLES> 229,910
<ASSETS-OTHER> 42,555
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22,292,615
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 37,349
<OTHER-ITEMS-LIABILITIES> 43,196
<TOTAL-LIABILITIES> 80,545
<SENIOR-EQUITY> (1,475,829)
<PAID-IN-CAPITAL-COMMON> 23,687,899
<SHARES-COMMON-STOCK> 2,225,584
<SHARES-COMMON-PRIOR> 1,832,320
<ACCUMULATED-NII-CURRENT> 738,475
<OVERDISTRIBUTION-NII> 370,604
<ACCUMULATED-NET-GAINS> (888,794)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (957,639)
<NET-ASSETS> 22,212,070
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 854,200
<OTHER-INCOME> 0
<EXPENSES-NET> 115,745
<NET-INVESTMENT-INCOME> 738,745
<REALIZED-GAINS-CURRENT> (288,519)
<APPREC-INCREASE-CURRENT> (1,593,660)
<NET-CHANGE-FROM-OPS> (1,143,704)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (366,338)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 732,035
<NUMBER-OF-SHARES-REDEEMED> (374,361)
<SHARES-REINVESTED> 35,590
<NET-CHANGE-IN-ASSETS> 393,264
<ACCUMULATED-NII-PRIOR> 1,339,980
<ACCUMULATED-GAINS-PRIOR> (608,340)
<OVERDISTRIB-NII-PRIOR> 6,532
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 69,447
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 115,745
<AVERAGE-NET-ASSETS> 22,841,321
<PER-SHARE-NAV-BEGIN> 10.64
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> (0.83)
<PER-SHARE-DIVIDEND> (0.16)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.98
<EXPENSE-RATIO> 1.19
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000872649
<NAME> LOOMIS SAYLES FUNDS
<SERIES>
<NUMBER> 9
<NAME> LOOMIS SAYLES ST BOND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 18,386,224
<INVESTMENTS-AT-VALUE> 18,393,835
<RECEIVABLES> 1,080,081
<ASSETS-OTHER> 2,078
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,475,994
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 368,698
<OTHER-ITEMS-LIABILITIES> 44,722
<TOTAL-LIABILITIES> 413,420
<SENIOR-EQUITY> (480,893)
<PAID-IN-CAPITAL-COMMON> 19,543,467
<SHARES-COMMON-STOCK> 1,980,074
<SHARES-COMMON-PRIOR> 2,653,389
<ACCUMULATED-NII-CURRENT> 615,960
<OVERDISTRIBUTION-NII> 11,328
<ACCUMULATED-NET-GAINS> (499,832)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,611
<NET-ASSETS> 19,062,574
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 726,150
<OTHER-INCOME> 0
<EXPENSES-NET> 110,190
<NET-INVESTMENT-INCOME> 615,960
<REALIZED-GAINS-CURRENT> (126,414)
<APPREC-INCREASE-CURRENT> (315,727)
<NET-CHANGE-FROM-OPS> 173,819
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (612,698)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 389,014
<NUMBER-OF-SHARES-REDEEMED> (1,120,640)
<SHARES-REINVESTED> 58,311
<NET-CHANGE-IN-ASSETS> (673,315)
<ACCUMULATED-NII-PRIOR> 1,856,919
<ACCUMULATED-GAINS-PRIOR> (364,986)
<OVERDISTRIB-NII-PRIOR> (366)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 55,095
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 110,190
<AVERAGE-NET-ASSETS> 22,158,407
<PER-SHARE-NAV-BEGIN> 9.81
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> (0.18)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.27)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.63
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000872649
<NAME> LOOMIS SAYLES FUNDS
<SERIES>
<NUMBER> 10
<NAME> LOOMIS SAYLES WW
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 3,982,994
<INVESTMENTS-AT-VALUE> 4,002,373
<RECEIVABLES> 730,219
<ASSETS-OTHER> 25,098
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,757,690
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 30,106
<TOTAL-LIABILITIES> 30,106
<SENIOR-EQUITY> 48,249
<PAID-IN-CAPITAL-COMMON> 4,679,335
<SHARES-COMMON-STOCK> 3,982,994
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 30,228
<OVERDISTRIBUTION-NII> 30,228
<ACCUMULATED-NET-GAINS> (1,555)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,576
<NET-ASSETS> 4,727,584
<DIVIDEND-INCOME> 9,271
<INTEREST-INCOME> 27,437
<OTHER-INCOME> 0
<EXPENSES-NET> 6,480
<NET-INVESTMENT-INCOME> 30,228
<REALIZED-GAINS-CURRENT> (1,555)
<APPREC-INCREASE-CURRENT> 19,576
<NET-CHANGE-FROM-OPS> 48,249
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 467,128
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 467,128
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,480
<AVERAGE-NET-ASSETS> 4,382,701
<PER-SHARE-NAV-BEGIN> 10.0
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 0.06
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> 4.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its Growth Fund series (the "Series")
and Loomis, Sayles & Company, L.P., a Delaware limited partnership (the
"Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to
the Advisor pursuant to Section 7 of the Agreement shall be reduced to
0.50%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its Growth Fund series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 Growth 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.
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its Core Value Fund series (the
"Series") and Loomis, Sayles & Company, L.P., a Delaware limited partnership
(the "Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to the
Advisor pursuant to Section 7 of the Agreement shall be reduced to 0.50%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its Core Value Fund series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 Core Value 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.
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its Small Cap Value Fund series (the
"Series") and Loomis, Sayles & Company, L.P., a Delaware limited partnership
(the "Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to the
Advisor pursuant to Section 7 of the Agreement shall be reduced to 0.75%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its Small Cap Value Fund
series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 Small Cap Value 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.
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its International Equity Fund series
(the "Series") and Loomis, Sayles & Company, L.P., a Delaware limited
partnership (the "Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to the
Advisor pursuant to Section 7 of the Agreement shall be reduced to 0.75%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its International Equity
Fund series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 International Equity 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.
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its Worldwide Fund series (the
"Series") and Loomis, Sayles & Company, L.P., a Delaware limited partnership
(the "Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to the
Advisor pursuant to Section 7 of the Agreement shall be reduced to 0.75%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its Worldwide Fund series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 Worldwide 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.
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its Global Bond Fund series (the
"Series") and Loomis, Sayles & Company, L.P., a Delaware limited partnership
(the "Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to the
Advisor pursuant to Section 7 of the Agreement shall be reduced to 0.60%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its Global Bond Fund series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 Global Bond 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.
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its U.S. Government Securities Fund
series (the "Series") and Loomis, Sayles & Company, L.P., a Delaware limited
partnership (the "Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to the
Advisor pursuant to Section 7 of the Agreement shall be reduced to 0.40%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its U.S. Government
Securities Fund series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 U.S. Government Securities 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.
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its Municipal Bond Fund series (the
"Series") and Loomis, Sayles & Company, L.P., a Delaware limited partnership
(the "Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to the
Advisor pursuant to Section 7 of the Agreement shall be reduced to 0.40%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its Municipal Bond Fund
series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 Municipal Bond 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.
<PAGE>
Amendment No.1 to Advisory Agreement
------------------------------------
Amendment No. 1 dated December 1, 1996 to the Advisory Agreement (the
"Agreement") dated August 30, 1996 by and between Loomis Sayles Funds, a
Massachusetts business trust, on behalf of its Short-Term Bond Fund series (the
"Series") and Loomis, Sayles & Company, L.P., a Delaware limited partnership
(the "Adviser"). The Agreement is hereby amended as follows:
Effective January 1, 1997 the annual rate of compensation to be paid to the
Advisor pursuant to Section 7 of the Agreement shall be reduced to 0.25%.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
on the day and year first above written.
LOOMIS SAYLES FUNDS,
on behalf of its Short-Term Bond Fund
series
By:
----------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
----------------------------------
Name:
Title:
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 Short-Term Bond 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.
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this __ day of December, 1996, by and between Loomis Sayles
Funds, a Massachusetts business trust (the "Trust"), with respect to its Small
Company Growth Fund 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; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
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;
(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 ;
-2-
<PAGE>
(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;
(l) 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 0.75%, 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
-3-
<PAGE>
in accordance with the foregoing sentence, the Series and the Trust shall each
be deemed to be a separate fund subject to 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 Partnership Agreement 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.
-4-
<PAGE>
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 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.
-5-
<PAGE>
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 Small Company Growth
Fund series
By:_______________________________________
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:_______________________________________
Name:
Title:
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 Small Company Growth 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.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this __ day of December, 1996, by and between Loomis Sayles
Funds, a Massachusetts business trust (the "Trust"), with respect to its
Investment Grade Bond Fund 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; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
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;
(f) charges and expenses of independent accountants retained by the
Trust;
(g) charges and expenses of any transfer agents and registrars
appointed by the Trus t;
-2-
<PAGE>
(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;
(l) 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 0.40%, 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
-3-
<PAGE>
in accordance with the foregoing sentence, the Series and the Trust shall each
be deemed to be a separate fund subject to 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 Partnership Agreement 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.
-4-
<PAGE>
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 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.
-5-
<PAGE>
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 Investment Grade
Bond Fund series
By: ____________________________
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By: ____________________________
Name:
Title:
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 Investment Grade Bond 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.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this __ day of December, 1996, by and between Loomis Sayles
Funds, a Massachusetts business trust (the "Trust"), with respect to its Mid-Cap
Value Fund 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; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
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;
(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;
-2-
<PAGE>
(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;
(l) 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 0.75%, 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
-3-
<PAGE>
in accordance with the foregoing sentence, the Series and the Trust shall each
be deemed to be a separate fund subject to 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 Partnership Agreement 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.
-4-
<PAGE>
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 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.
-5-
<PAGE>
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 Mid-Cap Value Fund series
By:________________________________
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:________________________________
Name:
Title:
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 Mid-Cap Value 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.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this __ day of December, 1996, by and between Loomis Sayles
Funds, a Massachusetts business trust (the "Trust"), with respect to its Mid-Cap
Growth Fund 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; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
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;
(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;
-2-
<PAGE>
(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;
(l) 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 0.75%, 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
-3-
<PAGE>
in accordance with the foregoing sentence, the Series and the Trust shall each
be deemed to be a separate fund subject to 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 Partnership Agreement 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.
-4-
<PAGE>
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 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.
-5-
<PAGE>
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 Mid-Cap Growth
Fund series
By:
-------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
-------------------------------
Name:
Title:
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 Mid-Cap Growth 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.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this __ day of December, 1996, by and between Loomis Sayles
Funds, a Massachusetts business trust (the "Trust"), with respect to its
Strategic Value Fund 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; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
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;
(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 ;
-2-
<PAGE>
(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;
(l) 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 0.50%, 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
-3-
<PAGE>
in accordance with the foregoing sentence, the Series and the Trust shall each
be deemed to be a separate fund subject to 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 Partnership Agreement 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.
-4-
<PAGE>
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 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.
-5-
<PAGE>
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 Strategic Value Fund series
By:
-------------------------------------
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
------------------------------------
Name:
Title:
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 Strategic Value 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.
-6-
<PAGE>
ADVISORY AGREEMENT
------------------
AGREEMENT made this __ day of December, 1996, by and between Loomis Sayles
Funds, a Massachusetts business trust (the "Trust"), with respect to its
Intermediate Maturity Bond Fund 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; and
(c) regularly report to the Board of Trustees with respect to the
implementation of the investment policies of the Series.
<PAGE>
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;
(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;
-2-
<PAGE>
(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;
(l) 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 0.40%, 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
-3-
<PAGE>
in accordance with the foregoing sentence, the Series and the Trust shall each
be deemed to be a separate fund subject to 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 Partnership Agreement 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.
-4-
<PAGE>
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 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.
-5-
<PAGE>
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 Intermediate Maturity Bond
Fund series
By:
_______________________________________
Daniel J. Fuss
President
LOOMIS, SAYLES & COMPANY, L.P.
By: LOOMIS, SAYLES & COMPANY,
INC., its general partner
By:
_______________________________________
Name:
Title:
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 Intermediate Maturity Bond 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.
-6-
<PAGE>
Distribution Agreement
AGREEMENT made this 1st day of January, 1997 by and between LOOMIS SAYLES
FUNDS, a Massachusetts business trust (the "Trust"), and LOOMIS SAYLES
DISTRIBUTORS, L.P., a Delaware limited partnership (the "Distributor").
W I T N E S S E T H:
In consideration of the premises and covenants hereinafter contained, the
Trust and the Distributor agree as follows:
1. Distributor. The Trust hereby appoints the Distributor as general
-----------
distributor of shares of beneficial interest ("Series shares") of the
Trust's Loomis Sayles Growth Fund series, Loomis Sayles Core Value Fund
series, Loomis Sayles Small Cap Value Fund series, Loomis Sayles
International Equity Fund series, Loomis Sayles High Yield Fund series,
Loomis Sayles Worldwide Fund series, Loomis Sayles Bond Fund series, Loomis
Sayles Global Bond Fund series, Loomis Sayles Short-Term Bond Fund series,
Loomis Sayles Small Company Growth Fund series, Loomis Sayles Mid-Cap Value
Fund series, Loomis Sayles Mid-Cap Growth Fund series, Loomis Sayles
Strategic Value Fund series, Loomis Sayles Investment Grade Bond Fund series
and Loomis Sayles Intermediate Maturity Bond Fund series (each a "Series")
during the term of this Agreement. The Trust reserves the right, however, to
refuse at any time or times to sell any Series shares hereunder for any
reason deemed adequate by the Board of Trustees of the Trust.
2. Sale and Payment. Under this agreement, the following provisions shall
----------------
apply with respect to the sale of and payment for Series shares:
(a) The Distributor shall have the right, as principal, to purchase Series
shares from the Trust at their net asset value and to sell such shares
to the public against orders therefor at such net asset value.
(b) Prior to the time of delivery of any shares by the Trust to, or on the
order of, the Distributor, the Distributor shall pay or cause to be paid
to the Trust or to its order an amount in Boston or New York clearing
house funds equal to the applicable net asset value of such shares.
3. Fee. For its services as general distributor of the Series shares, the
---
Trust shall pay to the Distributor on behalf of the Series, a distribution
fee at the rate and upon the terms and conditions set forth in the
Distribution Plan(s) attached as Exhibit A hereto, and as
<PAGE>
amended from time to time. The Distribution Fee shall be accrued daily and
paid monthly to the Distributor as soon as practicable after the end of the
calendar month in which it accrues, but in any event within five business
days following the last day of the month.
4. Public Offering Price. The public offering price shall be the net asset
---------------------
value of Series shares. The net asset value of Series shares shall be
determined in accordance with the provisions of the agreement and
declaration of trust and by-laws of the Trust and the current prospectus(es)
of the Trust relating to the Series shares.
5. Trust Issuance of Series Shares. The delivery of Series shares shall be
-------------------------------
made promptly by a credit to a shareholder's open account for the relevant
Series. The Trust reserves the right (a) to issue Series shares at any time
directly to the shareholders of the Series as a stock dividend or stock
split, (b) to issue to such shareholders Series shares, or rights to
subscribe to Series shares, as all or part of any dividend that may be
distributed to shareholders of the Series or as all or part of any optional
or alternative dividend that may be distributed to shareholders of the
Series, and (c) to sell Series shares in accordance with any current
applicable prospectus of the Trust relating to the Series shares.
6. Repurchase. The Distributor shall act as agent for the Trust in connection
----------
with the repurchase of Series shares by the Trust to the extent and upon the
terms and conditions set forth in the current applicable prospectus(es) of
the Trust relating to the Series shares, and the Trust agrees to reimburse
the Distributor, from time to time upon demand, for any reasonable expenses
incurred in connection with such repurchases of shares.
7. Undertaking Regarding Sales. The Distributor shall use reasonable efforts
---------------------------
to sell Series shares but does not agree hereby to sell any specific number
of Series shares and shall be free to act as distributor of the shares of
other investment companies. Series shares will be sold by the Distributor
only against orders therefor. The Distributor shall not purchase Series
shares from anyone except in accordance with Sections 2 and 6 and shall not
take "long" or "short" positions in Series shares contrary to the agreement
and declaration of trust or by-laws of the Trust.
8. Compliance. The Distributor shall conform to the Conduct Rules of the
----------
National Association of Securities Dealers, Inc. ("NASD") and the sale of
securities laws of any jurisdiction in which it sells, directly or
indirectly, any Series shares. The Distributor agrees to make timely
filings, with the Securities and Exchange Commission (the "SEC") in
Washington, D.C., the NASD and such other regulatory authorities as may be
required, of any sales literature relating to the Series and intended for
distribution to prospective investors. The Distributor also agrees to
furnish to the Trust sufficient copies of any agreements or plans it intends
to use in connection with any sales of
-2-
<PAGE>
Series shares in adequate time for the Trust to file and clear them with
the proper authorities before they are put in use (which the Trust agrees
to use its best efforts to do as expeditiously as reasonably possible), and
not to use them until so filed and cleared.
9. Registration and Qualification of Series Shares. The Trust agrees to
-----------------------------------------------
execute such papers and to do such acts and things as shall from time to
time be reasonably requested by the Distributor for the purpose of
qualifying and maintaining qualification of the Series shares for sale
under the so-called Blue Sky Laws of any state or for maintaining the
registration of the Trust and of the Series shares under the federal
Investment Company Act of 1940 (the "1940 Act") and the federal Securities
Act of 1933, to the end that there will be available for sale from time to
time such number of Series shares as the Distributor may reasonably be
expected to sell. The Trust shall advise the Distributor promptly of (a)
any action of the SEC or any authorities of any state or territory, of
which it may be advised, affecting registration or qualification of the
Trust or the Series shares, or rights to offer Series shares for sale, and
(b) the happening of any event which makes untrue any statement or which
requires the making of any change in the Trust's registration statement or
its prospectus relating to the Series shares in order to make the
statements therein not misleading.
10. Distributor Independent Contractor. The Distributor shall be an
----------------------------------
independent contractor and neither the Distributor nor any of its officers
or employees as such is or shall be an employee of the Trust. The
Distributor is responsible for its own conduct and the employment, control
and conduct of its agents and employees and for injury to such agents or
employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employer taxes thereunder.
11. Expenses Paid by Distributor. While the Distributor continues to act as
----------------------------
agent of the Trust to obtain subscriptions for and to sell Series shares,
the Distributor shall pay the following:
(a) all expenses of printing (exclusive of typesetting) and distributing
any prospectus for use in offering Series shares for sale, and all
other copies of any such prospectus used by the Distributor, and
(b) all other expenses of advertising and of preparing, printing and
distributing all other literature or material for use in connection
with offering Series shares for sale.
12. Interests in and of Distributor. It is understood that any of the
-------------------------------
shareholders, trustees, officers, employees and agents of the Trust may be
a shareholder, director, officer, employee or agent of, or be otherwise
interested in, the Distributor, any affiliated
-3-
<PAGE>
person of the Distributor, any organization in which the Distributor may
have an interest or any organization which may have an interest in the
Distributor; that the Distributor, 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
transaction hereunder except as otherwise provided in the agreement and
declaration of trust or by-laws of the Trust, in the limited partnership
agreement of the Distributor or by specific provision of applicable law.
13. Words "Loomis" and "Sayles". The Distributor and its parent, Loomis,
---------------------------
Sayles & Company, L.P., retain proprietary rights in the words "Loomis" and
"Sayles," which may be used by the Trust and the Series only with the
consent of the Distributor. The Distributor consents to the use by the
Series of the name "Loomis Sayles Investment Grade Bond Fund" or any other
name embodying the words "Loomis" or "Sayles," in such forms as the
Distributor shall in writing approve, but only on condition and so long as
(i) this Agreement shall remain in full force and (ii) the Trust shall
fully perform, fulfill and comply with all provisions of this Agreement
expressed herein to be performed, fulfilled or complied with by it. No such
name shall be used by the Trust or the Series at any time or in any place
or for any purposes or under any conditions except as in this section
provided. The foregoing authorization by the Distributor to the Trust and
the Series to use said words or letters as part of a business or name is
not exclusive of the right of the Distributor itself to use, or to
authorize others to use, the same; the Trust acknowledges and agrees that
as between the Distributor and the Trust and the Series, the Distributor
has the exclusive right so to use, or authorize others to use, said words
and letters, and the Trust agrees to take such action as may reasonably be
requested by the Distributor to give full effect to the provisions of this
section (including, without limitation, consenting to such use of said
words or letters). Without limiting the generality of the foregoing, the
Trust agrees that, upon any termination of this Agreement by either party
or upon the violation of any of its provisions by the Trust, the Trust
will, at the request of the Distributor made within six months after the
Distributor has knowledge of such termination or violation, use its best
efforts to change the name of the Trust and the Series so as to eliminate
all reference, if any, to the words "Loomis" and "Sayles" and will not
thereafter transact any business in a name containing the words "Loomis" or
"Sayles" in any form or combination whatsoever, or designate itself as the
same entity as or successor to any entity of such name, or otherwise use
the words "Loomis" or "Sayles" or any other reference to the Distributor.
Such covenants on the part of the Trust and each Series shall be binding
upon it, its trustees, officers, shareholders, creditors and all other
persons claiming under or through it.
14. Effective Date and Termination. This Agreement shall become effective as
------------------------------
of the date of its execution, and
-4-
<PAGE>
(a) Unless otherwise terminated, this Agreement shall continue in effect
with respect to the shares of a Series so long as such continuation is
specifically approved at least annually (i) by the Board of Trustees of
the Trust or by the vote of a majority of the votes which may be cast
by shareholders of the Series and (ii) by a vote of a majority of the
Board of Trustees of the Trust who are not interested persons of the
Distributor or the Trust, 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' notice to
the Distributor either by vote of a majority of the Trust's Board of
Trustees then in office or by the vote of a majority of the votes which
may be cast by shareholders of the Series.
(c) This Agreement shall automatically terminate in the event of its
assignment.
(d) This Agreement may be terminated by the Distributor on ninety days'
written notice to the Trust.
Termination of this Agreement pursuant to this section shall be without payment
of any penalty.
15. Definitions. For purposes of this Agreement, the following definitions
-----------
shall apply:
(a) The "vote of a majority of the votes which may be cast by shareholders
of the Series" means (1) 67% or more of the votes of the Series present
(in person or by proxy) and entitled to vote at such meeting, if the
holders of more than 50% of the outstanding shares of the Series
entitled to vote at such meeting are present; or (2) the vote of the
holders of more than 50% of the outstanding shares of the Series
entitled to vote at such meeting, whichever is less.
(b) The terms "affiliated person", "interested person" and "assignment"
shall have their respective meanings as defined in the 1940 Act
subject, however, to such exemptions as may be granted by the SEC under
the 1940 Act.
16. Amendment. This Agreement may be amended at any time by mutual consent of
---------
the parties, provided that such consent on the part of the Series shall be
approved (i) by the Board of Trustees of the Trust or by vote of a majority
of the votes which may be cast by shareholders of the Series and (ii) by a
vote of a majority of the Board of Trustees of the Trust who are not
interested persons of the Distributor or the Trust cast in person at a
meeting called for the purpose of voting on such approval.
-5-
<PAGE>
17. Applicable Law and Liabilities. This Agreement shall be governed by and
------------------------------
construed in accordance with the laws of The Commonwealth of Massachusetts.
All sales hereunder are to be made, and title to the Series shares shall
pass, in Boston, Massachusetts.
18. Limited Recourse. The Distributor hereby acknowledges that the Trust's
----------------
obligations hereunder with respect to the shares of the Series are binding
only on the assets and property belonging to the Series.
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 Loomis Sayles Growth Fund
series, Loomis Sayles Core Value Fund
series, Loomis Sayles Small Cap Value Fund
series, Loomis Sayles International Equity
Fund series, Loomis Sayles Worldwide Fund
series, Loomis Sayles Bond Fund series,
Loomis Sayles Global Bond Fund series,
Loomis Sayles High Yield Fund series, Loomis
Sayles Short-Term Bond Fund series, Loomis
Sayles Small Company Growth Fund series,
Loomis Sayles Mid-Cap Value Fund series,
Loomis Sayles Mid-Cap Growth Fund series,
Loomis Sayles Strategic Value Fund series,
Loomis Sayles Intermediate Maturity Bond
Fund series and Loomis Sayles Investment
Grade Bond Fund series
By________________________________
-6-
<PAGE>
LOOMIS SAYLES DISTRIBUTORS, L.P.
By: Loomis Sayles Distributors, Incorporated,
its general partner
By________________________________
A copy of the Agreement and Declaration of Trust establishing Loomis Sayles
Funds (the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts, and notice is hereby given that this Agreement is executed with
respect to the Trust's Loomis Sayles Growth Fund series, Loomis Sayles Core
Value Fund series, Loomis Sayles Small Cap Value Fund series, Loomis Sayles
International Equity Fund series, Loomis Sayles Worldwide Fund series, Loomis
Sayles Bond Fund series, Loomis Sayles Global Bond Fund series, Loomis Sayles
High Yield Fund series, Loomis Sayles Short-Term Bond Fund series, Loomis Sayles
Small Company Growth Fund series, Loomis Sayles Mid-Cap Value Fund series,
Loomis Sayles Mid-Cap Growth Fund series, Loomis Sayles Strategic Value Fund
series, Loomis Sayles Intermediate Maturity Bond Fund series and Loomis Sayles
Investment Grade Bond Fund series (each a "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 of the Trust individually but are binding only upon the
assets and property of the Series.
-7-
<PAGE>
ROPES & GRAY
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
December __, 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 Core Value Fund series, Loomis Sayles Small Cap Value Fund series, Loomis
Sayles International Equity Fund series, Loomis Sayles Worldwide Fund series,
Loomis Sayles Small Company Growth Fund series, Loomis Sayles Mid-Cap Value Fund
series, Loomis Sayles Mid-Cap Growth Fund series, Loomis Sayles Strategic Value
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, Loomis Sayles
Short-Term Bond Fund series, Loomis Sayles Investment Grade Bond Fund series and
Loomis Sayles Intermediate Maturity 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.
<PAGE>
Loomis Sayles Funds -2- December __, 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
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Loomis Sayles Funds:
We hereby consent to the following with respect to Post-Effective Amendment
No.11 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 Core Value Fund, Loomis Sayles Small Cap Value
Fund, Loomis Sayles International Equity Fund, Loomis Sayles Worldwide Fund,
Loomis Sayles Small Company Growth Fund, Loomis Sayles Mid-Cap Value Fund,
Loomis Sayles Mid-Cap Growth Fund, Loomis Sayles Strategic Value 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, Loomis Sayles Short-Term Bond Fund, Loomis Sayles Investment Grade Bond
Fund and Loomis Sayles Intermediate Maturity Bond Fund (collectively, the
"Funds")):
1. The reference to our firm under the heading "Financial Highlights" in
the Prospectuses.
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 Prospectuses and the Statement of Additional Information.
3. The reference to our firm under the heading "Independent Accountants"
in the Prospectuses and the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 9, 1996
<PAGE>
Retail Class Distribution Plan
This Plan (the "Plan") constitutes the Distribution Plan relating to the
Retail Class shares of Loomis Sayles Growth Fund series, Loomis Sayles Core
Value Fund series, Loomis Sayles Small Cap Value Fund series, Loomis Sayles
International Equity Fund series, Loomis Sayles Worldwide Fund series, Loomis
Sayles Bond Fund series, Loomis Sayles Global Bond Fund series, Loomis Sayles
High Yield Fund series, Loomis Sayles Short-Term Bond Fund series, Loomis Sayles
Small Company Growth Fund series, Loomis Sayles Mid-Cap Value Fund series,
Loomis Sayles Mid-Cap Growth Fund series, Loomis Sayles Strategic Value Fund
series, Loomis Sayles Investment Grade Bond Fund series and Loomis Sayles
Intermediate Maturity Bond Fund series, each a series ("Series") of Loomis
Sayles Funds, a Massachusetts business trust (the "Trust").
Section 1. The Trust, on behalf of each Series, will pay to Loomis Sayles
Distributors, L.P., a Delaware limited partnership which acts as the Principal
Distributor of the Series' shares, or such other entity as shall from time to
time act as the Principal Distributor of the Series' shares (the "Distributor"),
a fee (the "Distribution Fee") at an annual rate not to exceed 0.25% of each
Series' average daily net assets attributable to the Retail Class shares.
Subject to such limit and subject to the provisions of Section 6 hereof, the
Distribution Fee shall be as approved from time to time by (a) the Trustees of
the Trust and (b) the Independent Trustees of the Trust. The Distribution Fee
shall be accrued daily and paid monthly or at such other intervals as the
Trustees shall determine. The Distributor may pay all or any portion of the
Distribution Fee to securities dealers or other organizations (including, but
not limited to, any affiliate of the Distributor) as commissions, asset-based
sales charges or other compensation with respect to the sale of Retail Class
shares of the Series, or for providing personal services to investors in Retail
Class shares of the Series and/or the maintenance of shareholder accounts, and
may retain all or any portion of the Distribution Fee as compensation for the
Distributor's services as principal underwriter of the Retail Class shares of
the Series. All payments under this Section 1 are intended to qualify as
"asset-based sales charges" or "service fees" as defined in the Conduct Rules of
the National Association of Securities Dealers, Inc. ("NASD").
Section 2. This Plan shall continue in effect for a period of more than
one year after January 1, 1997 only so long as such continuance is specifically
approved at least annually by votes of the majority (or whatever other
percentage may, from time to time, be required by Section 12(b) of the
Investment Company Act of 1940 (the "Act") or the rules and regulations
thereunder) of both (a) the Trustees of the Trust, and (b) the Independent
Trustees of the Trust, cast in person at a meeting called for the purpose of
voting on this Plan or such agreement.
Section 3. Any person authorized to direct the disposition of monies paid
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, and the Trustees shall review, at least
quarterly, a written report of the amounts so expended and the purposes for
which such expenditures were made.
<PAGE>
Section 4. This Plan may be terminated at any time by vote of a majority
of the Independent Trustees, or by vote of a majority of the outstanding Retail
Class shares of the Series.
Section 5. All agreements with any person relating to implementation of
this Plan shall be in writing, and any agreement related to this Plan shall
provide:
A. That such agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the Independent Trustees or by
vote of a majority of the outstanding Retail Class shares of the
Series, on not more than 60 days' written notice to any other party to
the agreement; and
B. That such agreement shall terminate automatically in the event of its
assignment.
Section 6. This Plan may not be amended to increase materially the amount
of expenses permitted pursuant to Section 1 hereof without approval by a vote of
at least a majority of the outstanding Retail Class shares of the Series, and
all material amendments of this Plan shall be approved in the manner provided
for continuation of this Plan in Section 2.
Section 7. As used in this Plan, (a) the term "Independent Trustees" shall
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the Act and the rules
and regulations thereunder, and the term "majority of the outstanding Retail
Class shares of the Series" shall mean the lesser of the 67% or the 50% voting
requirements specified in clauses (A) and (B), respectively, of the third
sentence of Section 2(a)(42) of the Act, all subject to such exemptions as may
be granted by the Securities and Exchange Commission.
-2-
<PAGE>
Exhibit 16
LOOMIS SAYLES FUNDS
PERFORMANCE CALCULATION
For the period from commencement of operations to June 30, 1996
<TABLE>
<CAPTION>
U.S.
Core Global Government Municipal Short-Term
Growth Value Small Cap Int'l Equity Worldwide Bond Bond Securities Bond Bond
Fund Fund Value Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial NAV $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
Initial
Shares 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000
Shares from
Distributions 16.575 25.833 45.479 24.976 0.000 59.162 34.141 59.855 29.055 27.329
End of
Period NAV 17.13 15.61 17.76 12.58 10.12 12.17 12.04 9.98 11.10 9.63
Total Return 99.7% 96.4% 158.4% 57.2% 1.2% 93.7% 61.5% 59.5% 43.2% 22.6%
</TABLE>
<PAGE>
LOOMIS SAYLES FUNDS
PERFORMANCE CALCULATION
For the five years ended June 30, 1996
<TABLE>
<CAPTION>
U.S.
Core Global Government Municipal Short-Term
Growth Value Small Cap Int'l Equity Bond Bond Securities Bond Bond
Fund Fund Value Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial NAV $9.90 $9.95 $9.89 $9.46 $9.83 $9.56 $10.00 $10.00 $
Initial
Shares 101.010 100.503 101.112 105.708 101.729 104.603 100.000 100.000
Shares from
Distribution 16.702 25.952 45.985 26.401 60.134 35.682 59.855 29.055
End of
Period NAV 17.13 15.61 17.76 12.58 12.17 12.04 9.98 11.10 9.63
Total Return 101.6% 97.4% 161.2% 66.2% 97.0% 68.9% 59.5% 43.2%
--------
</TABLE>
-2-
<PAGE>
LOOMIS SAYLES FUNDS
PERFORMANCE CALCULATION
For the three years ended June 30, 1996
<TABLE>
<CAPTION>
U.S.
Core Global Government Municipal Short-Term
Growth Value Small Cap Int'l Equity Bond Bond Securities Bond Bond
Fund Fund Value Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial NAV $13.13 $12.05 $14.01 $10.77 $11.58 $10.70 $11.39 $11.47 $10.03
Initial
Shares 76.161 82.988 71.378 92.851 86.356 93.458 87.796 87.184 99.701
Shares from
Distribution 9.521 16.361 19.242 20.844 27.297 15.206 28.090 14.697 20.889
End of
Period NAV 17.13 15.61 17.76 12.58 12.17 12.04 9.98 11.10 9.63
Total Return 46.8% 55.1% 60.9% 43.0% 38.3% 30.8% 15.7% 13.1% 16.1%
</TABLE>
-3-
<PAGE>
LOOMIS SAYLES FUNDS
PERFORMANCE CALCULATION
For the year ended June 30, 1996
<TABLE>
<CAPTION>
U.S.
Core Global Government Municipal Short-Term
Growth Value Small Cap Int'l Equity Bond Bond Securities Bond Bond
Fund Fund Value Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Initial NAV $14.85 $14.23 $14.41 $12.80 $11.75 $10.44 $10.28 $11.03 $9.74
Initial
Shares 67.340 70.274 69.396 78.125 85.106 95.785 97.276 90.662 102.669
Shares from
Distribution 4.823 6.688 7.491 6.526 6.674 6.541 6.409 4.628 6.215
End of
Period NAV 17.13 15.61 17.76 12.58 12.17 12.04 9.98 11.10 9.65
Total Return 23.6% 20.1% 36.6% 6.5% 11.7% 23.2% 3.5% 5.8% 4.9%
</TABLE>
-4-
<PAGE>
LOOMIS SAYLES FUNDS
YIELD CALCULATION
(CALENDAR MONTH - END METHOD)
30-DAY BASE PERIOD ENDED JUNE 30, 1996
YIELD = 2[(a-b + 1)/6/ -1]
---
cd
<TABLE>
<CAPTION>
Global
Bond Bond U.S. Government Municipal Short-Term
Fund Fund Securities Fund Bond Fund Bond Fund
---- ---- --------------- --------- ---------
<S> <C> <C> <C> <C> <C>
a = dividends and interest earned
during the month $ 2,333,193.90 $ 80,295.65 $ 136,499.76 $ 37,502.10 $ 104,772.48
b = expenses accrued during the
month $ 214,168.66 $ 13,953.89 $ 17,838.78 $ 6,425.17 $ 15,058.79
c = average dividend shares
outstanding during the month $26,745,063.635 $962,642.127 $2,226,853.648 $712,222.736 $1,915,697.655
d = net asset value price per share
on the last day of the month $ 12.10 $ 11.98 $ 9.87 $ 11.03 $ 9.60
FUND YIELD 7.98733% 7.00318% 6.56666% 4.79429% 5.92571%
</TABLE>
-5-
<PAGE>
LOOMIS SAYLES FUNDS
Plan pursuant to Rule 18f-3(d) under the Investment Company Act of 1940
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Effective January 1, 1997
Each of the series of Loomis Sayles Funds (the "Trust") managed by
Loomis, Sayles & Company, L.P. ("Loomis Sayles") (each a "Fund" and, together,
the "Funds") may from time to time issue one or more of the following classes of
shares: Retail Class shares and Institutional Class shares. Each class is
subject to such investment minimums and other conditions of eligibility as are
set forth in the Funds' registration statements as from time to time in effect.
The differences in expenses among these classes of shares, and the conversion
and exchange features of each class of shares, are set forth below in this Plan.
Except as noted below, expenses are allocated among the classes of shares of
each Fund based upon the net assets of each Fund attributable to shares of each
class. This Plan is subject to change, to the extent permitted by law and by
the Agreement and Declaration of Trust and By-laws of each Fund, by action of
the Trustees of each Fund.
RETAIL CLASS SHARES
Distribution and Service Fees
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Retail Class shares pay distribution and service fees pursuant to
plans (the "Plans") adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act"). Retail Class shares also bear any costs associated
with obtaining shareholder approval of any amendments to a Plan. Pursuant to
the Plans, Retail Class shares may pay up to 0.25% of the relevant Fund's
average net assets attributable to the Retail Class shares (which percentage may
be less for certain Funds, as described in the Funds' registration statements as
from time to time in effect). Amounts payable under the Plans are subject to
such further limitations as the Trustees may from time to time determine and as
set forth in the registration statement of each Fund as from time to time in
effect.
Exchange and Conversion Features
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To the extent provided in the registration statement of the relevant
Fund as from time to time in effect, Retail Class shares of any Fund may be
exchanged, at the holder's option and
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subject to minimum investment requirements, for Retail Class shares of any other
Fund that offers Retail Class shares, provided that Retail Class shares of such
other Fund are available to residents of the relevant state. Retail Class
shares may also be exchanged for shares of certain money market funds advised by
New England Funds Management, L.P., an affiliate of Loomis Sayles. The Funds
reserve the right to terminate or limit the exchange privilege of any
shareholder who makes more than four exchanges in a calendar year. The Funds
may terminate or change the exchange privilege at any time upon 60 days' notice
to shareholders.
Retail Class shares do not convert to any other class of shares.
INSTITUTIONAL CLASS SHARES
Distribution Fees
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Institutional Class shares pay no distribution fees.
Exchange and Conversion Features
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To the extent provided in the registration statement of the relevant
Fund as from time to time in effect, Institutional Class shares of any Fund may
be exchanged, at the holder's option, for Institutional Class shares of any
other Fund that offers Institutional Class shares, provided that Institutional
Class shares of such other Fund are available to residents of the relevant
state. Institutional Class shares may also be exchanged for shares of certain
money market funds advised by New England Funds Management, L.P., an affiliate
of Loomis Sayles. The Funds reserve the right to terminate or limit the
exchange privilege of any shareholder who makes more than four exchanges in a
calendar year. The Funds may terminate or change the exchange privilege at any
time upon 60 days' notice to shareholders.
Institutional Class shares do not convert to any other class of shares.
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