<PAGE>
LOOMIS
------
SAYLES
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FUNDS
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FIXED INCOME FUNDS
ANNUAL REPORT
DECEMBER 31, 1997
A FAMILY OF NO-LOAD FUNDS
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 482-2450
<PAGE>
LOOMIS SAYLES FUNDS
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[Photo of Daniel J. Fuss]
DANIEL J. FUSS
DEAR SHAREHOLDERS:
You may recall our mid-year discussion; it's time for an update.
We spoke in June about the world being a peaceful place, providing a friendly
environment for investors of capital. We reviewed our global economy, surrounded
by an ocean of liquidity. We commented on central banks contemplating their next
monetary tactics, without the necessary political and popular support to carry
them through. And we gave a play-by-play on the antics of mischievous hockey
players, who add risk to the market by trying to wrest incremental return. At
the time, I was struck by the truth behind an old Malaysian saying, "just
because the river is quiet does not mean the crocodiles have left."
In fact, the river turned out to be full of crocodiles. Not only have many of
them surfaced, they chased the hockey players and have been rather hard on some
of the slower moving ones.
The upset in Asia and the brief, but powerful, upset in Latin America forced
many of the hockey players off of the rink. The "yen/dollar carry trade" effect
moderated, but this basic arbitrage between very low interest rates in Japan and
higher rates in the dollar block countries, the United States, Canada, New
Zealand and Australia, continues to attract many investors. While speculative in
nature, this carry trade does lend considerable support to both the stock and
bond markets in North America. "Virtual hedging", where plans are made to sell
stocks when the market declines past a certain point, apparently continues
unabated. This could lead to trouble at some point; so far, it has not.
Valuations are still relatively tight in the developed world, with not much
return premium being paid for uncertainty. The collapse of the Asian currencies
and markets has created tremendous undervaluation in emerging markets and Yankee
bonds, which are bonds issued by foreign governments, but sold in the U.S. and
denominated in dollars. Risks have escalated, along with potential returns.
World economic growth prospects are not as encouraging as they were. The
currency and market turmoil is taking its toll. "Disinflation" is now the
optimistic word for product price trends. Thus, the inflationary pressure from
tighter labor markets in North America is being offset by lower product prices
worldwide. Except for Canada and a few minor adjustments in anticipation of the
European Monetary Union, we should not see any meaningful tightening by central
banks as long as the current uncertainty continues.
There is still ample liquidity to meet investment demands. Valuation levels on
U.S. equities seem high, particularly as earnings growth is likely to slow. Yet
lower bond yields provide powerful support and there are some good values now
available in some parts of the world.
Other than not getting too close to the river, as the crocodiles still lurk, the
current environment is still a good one for investing. However, a heightened
sense of caution is in order.
Thanks again for investing with us.
Sincerely,
/s/ Daniel J. Fuss
Daniel J. Fuss
President,
Loomis Sayles Funds
<PAGE>
[Photo of John F. Yeager, III]
JOHN F. YEAGER, III
DEAR SHAREHOLDERS:
WHAT DOES IT TAKE FOR AN INVESTMENT MANAGEMENT FIRM TO CONTINUE TO BUILD ON PAST
SUCCESS?
IT TAKES EXPERIENCE
Loomis Sayles Funds builds upon the experience of its adviser, Loomis, Sayles &
Company, L.P., which has been investing for demanding institutional and high net
worth clients for over seventy years. Loomis Sayles has been around long enough
to see all the ups and the downs of the market - the crash of '29, the recession
of '73-74, the crash of '87 - and we know how to respond in those markets. We
invest for the long-term and employ methodologies which are time- tested. We
don't go for the quick and easy return but take calculated risks, which we feel
should generate favorable returns. We've learned that investing with an eye to
the future, without fad techniques or "swinging for the fence", helps generate
more consistent performance. Our Fund portfolio managers have an average of 20
years experience in the investment industry and over 8 years tenure with Loomis
Sayles. Manager tenure on all but three of our Funds is "since inception."
IT TAKES A DISCIPLINED TEAM
Loomis Sayles is structured to take advantage of our institutional heritage. Our
Fund portfolio managers also manage money for large, institutional clients who
appreciate and demand the style consistency that follows from the disciplined
investment approach we employ.
Our Fund portfolio managers rely on our Research Group, which is one of the
largest in the business. We endeavor to provide superior investment performance
by taking advantage of inefficiencies in the market uncovered through solid,
unbiased fundamental research on companies and industries. Our firm commits
approximately $13 million annually to our Research Group and our analysts are
directly compensated for their long-term effectiveness. This is a place to build
a career within Loomis Sayles, not a starting point on the way to becoming a
portfolio manager.
IT TAKES GOOD MANAGEMENT
We offer our Funds with lower expense ratios and lower management fees than many
other fund companies and that helps you maximize your investment dollar. Our
portfolio managers look to keep expenses down by executing trades efficiently
and seeking to keep our turnover rate low.
IT TAKES A WILLINGNESS TO LISTEN AND DELIVER MORE TO BUSINESS PARTNERS AND
SHAREHOLDERS
At Loomis Sayles Funds, we listen to client and shareholder needs and respond to
them with focused products, timely information and quality service. We believe
this flexibility and responsiveness is paramount to providing viable solutions
to client demands.
Loomis Sayles Funds can't guarantee returns based on past performance, but we
can assure you that we've seen just about every kind of market that may come our
way, we're structured to invest for the long term, we're committed to bottom up
research and we won't be straying from our stated investment style. We'll be
working harder for you - investing based on tried and true methods, offering
additional fund choices, providing current information and business tools and
improving our service delivery.
WHAT DOES IT TAKE FOR AN INVESTMENT MANAGEMENT FIRM TO REPLICATE PAST SUCCESS?
IT TAKES LOOMIS SAYLES FUNDS.
Thanks for investing with us.
Sincerely,
/s/ John F. Yeager, III
John F. Yeager, III
President,
Loomis Sayles Distributors, L.P.
<PAGE>
THE LOOMIS SAYLES FUNDS ANNUAL REPORT
ECONOMIC AND MARKET OVERVIEW - 1997
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BOND MARKET OVERVIEW
The bond market was weak in the first quarter, due to a series of reports
showing remarkable U.S. economic strength. The Federal Reserve Bank (the Fed)
raised rates by .25% as expected, but not before market forces sent bond yields
higher on their own. While economic growth continued in the second quarter,
bonds reacted quite differently than they had earlier in the year. Subdued
inflation numbers helped spark a rally lasting from April to July. Investors
increasingly began to question the link between continued growth and rising
inflation. Foreign investors, including the Japanese, created strong demand
while supply was limited due to the Federal government's declining budget
deficit.
In the middle of the third quarter, bond yields rose again, as investors
refocused on a potential pickup in inflation and its negative effects on a fixed
stream of income. Once again, it appeared that economic growth and the resulting
historically low unemployment situation might ignite rising prices. On October
8th, testimony by Federal Reserve Chairman Alan Greenspan was interpreted by
many as a sign that the Fed was poised to tighten the money supply. However, the
economic and market crisis throughout Asia and some Latin American countries
quickly altered that condition. Rather than raising interest rates to fight
inflation, the Fed concerned itself with keeping liquidity in the market.
Long maturity bonds rallied in light of the prospects of slower worldwide
economic growth and cheap imports. U.S. Treasury bonds became a "safe haven" for
fearful domestic and global investors. For the year, U.S. government bonds as
measured by the Lehman Brothers Government Bond Index gained 9.59%. The Lehman
Brothers Government/Corporate Bond Index gained 9.76%, and the Merrill Lynch
High Yield Bond Index gained 12.83%. For the U.S. based investor, home was a
good place to be, as the U.S. bond market, after adjusting for currency changes,
outperformed nearly all other global markets. Surprisingly, despite the effects
of the fourth quarter on emerging markets debt, J.P. Morgan's Emerging Markets
Bond Index gained 13% for the year.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
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INSTITUTIONAL CLASS TOTAL RETURN(1) vs. LIPPER CATEGORY(2)
Global High
Bond Bond Yield
-------------- -------------- --------------
<S> <C> <C> <C>
ONE YEAR
Loomis Sayles .................................. 12.69 2.31 11.39
Lipper ......................................... 10.08 3.00 12.96
Rank ........................................... 6 of 102 71 of 139 136 of 181
Percentile ..................................... 6 51 75
THREE YEARS
Loomis Sayles .................................. 17.93 13.39 N/A
Lipper ......................................... 11.31 10.27
Rank ........................................... 1 of 63 17 of 96
Percentile ..................................... 1 18
FIVE YEARS
Loomis Sayles .................................. 13.97 8.81 N/A
Lipper ......................................... 8.51 6.84
Rank ........................................... 1 of 37 9 of 50
Percentile ..................................... 1 18
MODIFIED INCEPTION(3)
Loomis Sayles .................................. 14.24 9.32 10.50
Lipper ......................................... 9.81 7.24 13.30
Rank ........................................... 1 of 26 3 of 29 159 of 169
Percentile ..................................... 1 10 94
ACTUAL INCEPTION(4)
Loomis Sayles .................................. 14.05 9.23 11.13
Note: Past performance is not predictive of future performance.
(1) Total return assumes reinvestment of dividends and capital gains distributions. Total return
shown for periods of one year or less represents cumulative total return. Total return for
periods greater than one year represents average annual total return. Total returns shown
reflect, if any, the effect of fee waivers and/or expense reimbursements. Absent such fee
waivers and/or expense reimbursements, total return would have been lower.
(2) Lipper category total return represents the average total return for all funds in each Fund's
corresponding investment category, as determined by Lipper Analytical Services. Rankings are
based on the total return of each fund for the period from its modified inception relative to
the total return of all funds in that Fund's corresponding investment category.*
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
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Intermediate Investment
Maturity Grade Municipal Short-Term U.S. Gov't
Bond Bond Bond Bond Securities
- ------------------- ------------- ------------ ------------- -------------
6.43 14.51 9.83 7.14 12.74
8.57 10.08 9.11 6.19 8.84
190 of 195 1 of 102 43 of 235 13 of 101 5 of 180
97 1 18 13 3
N/A N/A 9.77 7.45 12.01
9.65 6.74 9.23
79 of 190 15 of 76 5 of 139
42 20 4
N/A N/A 6.89 6.18 8.80
6.84 5.49 6.31
49 of 111 7 of 44 2 of 78
44 16 3
6.43 14.51 7.86 5.88 10.29
8.57 10.08 7.69 5.30 7.46
190 of 195 1 of 102 36 of 96 7 of 34 1 of 64
97 1 38 21 1
6.43 14.51 7.89 5.88 10.28
(3) Modified inception reflects the nearest Lipper reporting period following
actual inception. Lipper performance is reported as of month end.
(4) Actual Inception Dates:
Bond Fund .......................................... May 16, 1991
Global Bond Fund ................................... May 10, 1991
High Yield Fund .............................. September 11, 1996
Intermediate Maturity Bond Fund ............... December 31, 1996
Investment Grade Bond Fund .................... December 31, 1996
Municipal Bond Fund ................................ May 29, 1991
Short-Term Bond Fund ............................. August 3, 1992
U.S. Government Securities Fund .................... May 21, 1991
*Source: Lipper Analytical Services
<PAGE>
LOOMIS SAYLES BOND FUND
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[Photo of Daniel J. Fuss] [Photo of Kathleen C. Gaffney]
DANIEL J. FUSS KATHLEEN C. GAFFNEY
PERFORMANCE SUMMARY
The bond market enjoyed a stellar year in 1997. Despite a surging domestic
economy and historically low unemployment, inflation remained relatively benign
throughout the year. Relative to its peers, the Loomis Sayles Bond Fund ranked
6th out of 102 funds in the Lipper BBB Rated Corporate Bond Fund universe. The
Fund also remained comfortably ahead of the Lehman Brothers Government/Corporate
Bond Index throughout the year posting a twelve month return of 12.69% versus
9.76% for the Index and 10.08% for the Lipper Average.
Cumulative Performance May 1991 to December 31, 1997
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Average Annual Returns (%)-Periods Ended December 31, 1997
Since
1 year 3 years 5 years Inception(a)
Loomis Sayles Bond Fund (Institutional) 12.69 17.93 13.97 14.24
Loomis Sayles Bond Fund (Retail) 12.36 NA NA 12.36
Lipper Average BBB Rated Corporate
Bond Fund(b) 10.08 11.31 8.51 9.81
Lehman Brothers Government/Corp.
Bond Index(c) 9.76 10.43 7.61 8.66
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LOOMIS LIPPER LEHMAN
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As of 5/31/91 $10,000 $10,000 $10,000
6/30/91 $ 9,850 $ 9,970 $ 9,990
9/30/91 $10,520 $10,550 $10,560
12/31/91 $10,930 $11,140 $11,130
3/31/92 $11,290 $11,030 $10,960
6/30/92 $11,840 $11,470 $11,400
9/30/92 $12,400 $12,040 $11,960
12/31/92 $12,490 $12,040 $11,970
3/31/93 $13,450 $12,670 $12,530
6/30/93 $14,160 $13,080 $12,900
9/30/93 $14,790 $13,550 $13,330
12/31/93 $15,270 $13,580 $13,290
3/31/94 $15,040 $13,130 $12,880
6/30/94 $14,610 $12,880 $12,720
9/30/94 $14,870 $12,980 $12,780
12/31/94 $14,650 $12,960 $12,830
3/31/95 $15,730 $13,580 $13,460
6/30/95 $17,410 $14,530 $14,340
9/30/95 $18,160 $14,880 $14,610
12/31/95 $19,330 $15,580 $15,290
3/31/96 $19,140 $15,260 $14,940
6/30/96 $19,450 $15,330 $15,010
9/30/96 $20,210 $15,660 $15,270
12/31/96 $21,320 $16,220 $15,740
3/31/97 $21,270 $16,100 $15,600
6/30/97 $22,510 $16,750 $16,170
9/30/97 $23,900 $17,380 $16,740
12/31/97 $24,024 $17,822 $17,273
Note: Past performance is not predictive of future performance.
(a): Inception date of the Institutional Class of shares is May 16, 1991.
Since Lipper and Lehman Brothers Government/Corporate Bond Index
performance data is not available coincident with this date, comparative
performance is presented from May 31, 1991. Inception date of the Retail
Class of shares is December 31, 1996.
(b): Source: Lipper Analytical Services.
(c): Lehman Brothers Government/Corporate Bond Index is a composite of
approximately 5,300 corporate and government issues with at least $100
million outstanding for government issues and $25 million for corporates,
and greater than 1 year maturity. The index returns have not been lowered
for ongoing management and operating expenses applicable to mutual fund
investments.
(d): Cumulative performance is shown for the Institutional Class of shares.
Performance of the Retail Class of shares would, due to the higher fees
paid by the Retail Class of shares, be lower.
PORTFOLIO REVIEW
Higher quality corporate bonds and longer Treasuries were among the strongest
performers in 1997. This was fueled in part by the Federal Reserve Bank's
decision to stand pat on interest rates for the latter part of the year as well
as a "flight to quality" that occurred as a result of the Asian financial crisis
that rocked global markets in mid October. Among corporate bonds, industrials
had a strong year boosted by the cable/media and tobacco sectors. Interest rates
declined sharply across the board, particularly on the long end of the yield
curve. The 30-year Treasury yield began the year at 6.64%, rose slightly after
an interest rate hike in March, then fell steadily ending the year at 5.92%.
There was a stark contrast between the first and second halves of 1997 for
emerging market debt. What began as a promising year ended with disappointing
results as several Southeast Asian countries had their sovereign debt rating
downgraded from investment grade to speculative status. Some bright spots
included Latin American debt such as Argentinian and Brazilian Brady bonds as
well as select Mexican credits. Structural reforms in Southeast Asia have helped
in stabilizing the region and, over the long-term, we believe the prospects for
growth remain positive.
PORTFOLIO POSITIONING
Concerns of an impending tightening by the Federal Reserve Bank have abated and
the emphasis has shifted towards a more deflationary trend in global markets.
This bodes well for the fixed income markets. The Fund remains well structured
for the current environment offering good yield advantage, call protection, and
a moderate degree of international exposure.
/s/ Daniel J. Fuss /s/ Kathleen C. Gaffney
Daniel J. Fuss Kathleen C. Gaffney
<PAGE>
LOOMIS SAYLES GLOBAL BOND FUND
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[Photo of E. John deBeer]
E. JOHN DEBEER
PERFORMANCE SUMMARY
The Loomis Sayles Global Bond Fund returned 2.31% in 1997, outpacing the 0.23%
return for the Salomon Brothers World Government Bond Index. This ranks the Fund
71 out of the 139 funds in the Lipper General World Income Fund category for the
year, and high up in the rankings for the three and five year periods (17th out
of 96 funds and 9th out of 50 funds, respectively).
PORTFOLIO REVIEW
The Fund's performance for the year benefited from our hedging actions. During
the year the Fund had almost no Yen exposure, and we hedged some of the European
currency exposure back into the U.S. dollar, leaving only about 20% of the
portfolio in unhedged European currencies. Given the strength of the U.S. dollar
during the year, this helped performance.
Cumulative Performance May 1991 to December 31, 1997
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Average Annual Returns (%)-Periods Ended December 31, 1997
Since
1 year 3 years 5 years Inception(a)
Loomis Sayles Global Bond Fund
(Institutional) 2.31 13.39 8.81 9.32
Loomis Sayles Global Bon Fund (Retail) 2.04 NA NA 2.04
Lipper Average General World
Income Fund(b) 3.00 10.27 6.84 7.24
Salomon Brothers World Government
Bond Index(c) 0.23 7.33 7.46 8.85
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LOOMIS LIPPER SB World
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As of 5/31/91 $10,000 $10,000 $10,000
6/30/91 $ 9,560 $ 9,830 $ 9,900
9/30/91 $10,530 $10,450 $10,710
12/31/91 $11,690 $10,940 $11,560
3/31/92 $11,110 $10,750 $11,170
6/30/92 $12,040 $11,220 $11,920
9/30/92 $11,850 $11,360 $12,660
12/31/92 $11,790 $11,330 $12,200
3/31/93 $12,360 $11,860 $12,850
6/30/93 $12,390 $12,290 $13,220
9/30/93 $13,190 $12,720 $13,950
12/31/93 $13,510 $13,090 $13,820
3/31/94 $13,010 $12,410 $13,820
6/30/94 $12,190 $12,120 $13,910
9/30/94 $12,160 $12,250 $14,070
12/31/94 $12,330 $12,150 $14,140
3/31/95 $11,970 $12,660 $15,690
6/30/95 $13,110 $13,380 $16,520
9/30/95 $14,180 $13,660 $16,350
12/31/95 $15,280 $14,310 $16,830
3/31/96 $15,400 $14,230 $16,520
6/30/96 $16,150 $14,540 $16,580
9/30/96 $16,790 $15,100 $17,040
12/31/96 $17,570 $15,770 $17,440
3/31/97 $17,490 $15,450 $16,720
6/30/97 $18,200 $15,910 $17,230
9/30/97 $18,550 $16,290 $17,450
12/31/97 $17,979 $16,306 $17,482
Note: Past performance is not predictive of future performance.
(a): Inception date of the Institutional Class of shares is May 10, 1991.
Since Lipper and Salomon Brothers World Government Bond Index performance
data is not available coincident with this date, comparative performance is
presented from May 31, 1991. Inception date of the Retail Class of shares
is December 31, 1996.
(b): Source: Lipper Analytical Services.
(c): Salomon Brothers World Government Bond Index is a capitalization- weighted
index which tracks the performance of 14 government bond markets. The index
returns have not been reduced for ongoing management and operating expenses
applicable to mutual fund investments.
(d): Cumulative performance is shown for the Institutional Class of shares.
Performance of the Retail Class of shares would, due to the higher fees
paid by the Retail Class of shares, be lower.
Our exposure to the markets of Asia, Latin America, Canada and New Zealand
dampened performance in the fourth quarter.
Portfolio duration did not stray far from 6.5 years during the year. Average
portfolio quality remained at A or higher, as is customary for the Fund. During
the year we increased the Australian, New Zealand and Canadian positions to 20%
of the Fund, due to the continuing strength of their fiscal situations. We
continued to keep the currencies for these countries unhedged because we believe
the long-term case for them remains strong even though the notable strength of
the U.S. dollar hurt their relative performance in the fourth quarter.
PORTFOLIO POSITIONING
At year end, the Fund's average portfolio quality was A, and duration was 6.5
years. Approximately 42% of the portfolio was in European bonds (mostly Germany)
and in December we removed all European hedges, since we believe the European
currencies are somewhat undervalued. We have deliberately purchased Asian
securities because we believe the financial market turmoil has produced some
excellent opportunities for value. At year end, the Pacific Rim was 26.7% of the
portfolio, Japan 4.7%, Australia 9.3% and New Zealand 2.2%. Bonds (in US$) of
governments and companies in Korea, Thailand and the Philippines comprised 10.5%
of the Fund.
/s/ E. John deBeer
E. John deBeer
<PAGE>
LOOMIS SAYLES HIGH YIELD FUND
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[Photo of Daniel J. Fuss] [Photo of Kathleen C. Gaffney]
DANIEL J. FUSS KATHLEEN C. GAFFNEY
PERFORMANCE SUMMARY
The high yield market enjoyed its third consecutive year of solid returns.
Demand continued to be strong as the yield spreads on high yield issues narrowed
versus higher quality securities despite a record amount of new issuance. The
Fund moderately underperformed its benchmark, the Merrill Lynch High Yield
Master Index, posting a 11.39% return for the year versus the Index's 12.83%
return.
Cumulative Performance September 1996 to December 31, 1997
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Average Annual Returns (%)-Periods Ended December 31, 1997
Since
1 year Inception(a)
Loomis Sayles High Yield Fund (Institutional) 11.39 10.50
Loomis Sayles High Yield Fund (Retail) 11.17 11.17
Lipper Average High Current Yield Fund(b) 12.96 13.30
Merrill Lynch High Yield Master Index(c) 12.83 13.59
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LOOMIS LIPPER MERRILL LYNCH
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As of 9/30/96 $10,000 $10,000 $10,000
12/31/96 $10,170 $10,330 $10,390
3/31/97 $10,150 $10,370 $10,500
6/30/97 $10,760 $10,920 $11,000
9/30/97 $11,660 $11,500 $11,430
12/31/97 $11,330 $11,670 $11,730
Note: Past performance is not predictive of future performance.
(a): Inception date of the Institutional Class of shares is September 11, 1996.
Since Lipper and Merrill Lynch High Yield Master Index performance data is
not available coincident with this date, comparative performance is
presented from September 30, 1996. Inception date of the Retail Class of
shares is December 31, 1996.
(b): Source: Lipper Analytical Services.
(c): Merrill Lynch High Yield Master Index consists of fixed-rate,
coupon-bearing bonds with an outstanding par which is greater than or equal
to $50 million, a maturity range greater than or equal to one year and must
be less than BBB/Baa3 rated but not in default. The index returns have not
been reduced for ongoing management and operating expenses applicable to
mutual fund investments.
(d): Cumulative performance is shown for the Institutional Class of shares.
Performance of the Retail Class of shares would, due to the higher fees
paid by the Retail Class of shares, be lower.
PORTFOLIO REVIEW
Within the U.S. high yield market, telecommunications issues were strong
performers for the year. Allocations to issues such as TCI, Nextel
Communications, Century Communications and other well known corporate issues
including Kmart and Apple, added significant value to the portfolio over the
year. The utility sector also performed well, and the Fund benefited from its
holdings in preferred issues. The Fund's allocation to convertible bonds (21.2%
of the portfolio as of 12/31/97) hampered performance during the fourth quarter,
as volatility in the equity markets lowered the appeal of these securities. Our
exposure to Yankee issues also proved to be a drag on performance as the Asian
financial markets fell in October and it became apparent that a quick turnaround
would be unlikely.
PORTFOLIO POSITIONING
At year end, the Fund was diversified across 98 issues, with a concentration in
Yankee bonds and the industrial sector. Despite the most recent market setback
leading to price deterioration in Southeast Asia, and to a lesser extent in
other emerging market issues, we believe the long-term outlook for these
positions is positive. The possibility of the Federal Reserve Bank lowering
interest rates in 1998 may bode well for the high yield market. As rates move
lower, there may be continued demand for higher yielding securities.
We will continue to look for attractive investment opportunities both in the
U.S. and abroad to maintain the diversity of the Fund and maximize total return.
/s/ Daniel J. Fuss /s/ Kathleen C. Gaffney
Daniel J. Fuss Kathleen C. Gaffney
<PAGE>
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND
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[Photo of Anthony J. Wilkins]
ANTHONY J. WILKINS
PERFORMANCE SUMMARY
The fixed income markets enjoyed another strong year in 1997. Despite a surging
U.S. economy and historically low unemployment, inflation remained benign
throughout the year. The Loomis Sayles Intermediate Maturity Bond Fund posted
weak returns in its first year of operations, due primarily to a difficult
fourth quarter. The Fund's 6.43% annual return lagged the 7.87% return of the
Lehman Brothers Government/Corporate Intermediate Bond Index.
Cumulative Performance December 1996 to December 31, 1997
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Average Annual Returns (%)-Periods Ended December 31, 1997
Since
Inception(a)
Loomis Sayles Intermediate Maturity Bond Fund (Institutional) 6.43
Loomis Sayles Intermediate Maturity Bond Fund (Retail) 6.24
Lipper Average Intermediate Investment Grade Bond Fund(b) 8.57
Lehman Brothers Government/Corp. Intermediate Bond Index(c) 7.87
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LOOMIS LIPPER LEHMAN
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As of 12/31/96 $10,000 $10,000 $10,000
3/31/97 $ 9,990 $ 9,940 $ 9,990
6/30/97 $10,340 $10,280 $10,280
9/30/97 $10,630 $10,600 $10,560
12/31/97 $10,640 $10,860 $10,790
Note: Past performance is not predictive of future performance.
(a): Inception date for the Institutional and Retail Classes of shares is
December 31, 1996.
(b): Source: Lipper Analytical Services.
(c): Lehman Brothers Government/Corporate Intermediate Bond Index consists of
those bonds held within the Lehman Brothers Government/ Corporate Bond
Index which have an average maturity of 1-10 years. The Lehman Brothers
Government/Corporate Bond Index consists of approximately 5,300 corporate
and government issues with at least $100 million outstanding for government
issues and $25 million for corporates, and greater than 1 year maturity.
The index returns have not been lowered for ongoing management and
operating expenses applicable to mutual fund investments.
(d): Cumulative performance is shown for the Institutional Class of shares.
Performance of the Retail Class of shares would, due to the higher fees
paid by the Retail Class of shares, be lower.
PORTFOLIO REVIEW
U.S. intermediate corporate bonds within the industrial sector were strong
performers during 1997. The Fund's telecommunication issues were clear winners
and the portfolio benefited from holdings in Cox Communications, TCI and 360
Communications. Holdings in Time Warner and RJR Nabisco also played a positive
role in returns for the Fund. Intermediate Treasuries closed out the year with
strong returns due to a "flight to quality" that occurred as a result of the
Asian financial crisis in October. Throughout the first three quarters of the
year, the Fund remained ahead of its benchmark and within the top third of the
funds in the Lipper Intermediate Investment Grade Bond category. However, in the
fourth quarter the Asian crisis had a negative impact on the Fund's exposure to
Yankee bonds from a variety of countries, resulting in weak returns for the
year.
PORTFOLIO POSITIONING
As of 12/31/97, the Fund was diversified across 40 issues, with a yield to
maturity of 7.48%. Sector weightings continue to be focused in industrial,
finance, Yankee, and more recently government/agency issues to take advantage of
declining yields in the Treasury market. Despite the most recent market setback,
we believe the long-term outlook for the Yankee issues in the portfolio remains
positive.
We will continue to cautiously buy into today's volatile markets, searching for
issues we believe to be undervalued with strong fundamentals to maximize total
return.
/s/ Anthony J. Wilkins
Anthony J. Wilkins
<PAGE>
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
- -------------------------------------------------------------------------------
[Photo of Daniel J. Fuss]
DANIEL J. FUSS
PERFORMANCE SUMMARY
In its first full year in existence, the Investment Grade Bond Fund posted
stellar results, returning 14.51%, ranking it first among the 102 funds in the
Lipper BBB Rated Corporate Bond Fund category. The Fund also significantly
outperformed the 9.76% return of its benchmark, the Lehman Brothers
Government/Corporate Bond Index.
Although 1997 may long be remembered for the "Asian Flu" that spread through
global financial markets in late October, we should not lose sight of the fact
that 1997 was a banner year across the board for fixed income markets. The
economy enjoyed the best of both worlds, with strong growth, higher consumer
demand and very few signs of inflationary pressures. In addition, we also
experienced historically low unemployment. All of this boded well for the
investment grade market, which received an added boost from the "flight to
quality" that took place following the volatility in Southeast Asia.
Cumulative Performance December 1996 to December 31, 1997
- --------------------------------------------------------------------------------
Average Annual Returns (%)-Periods Ended December 31, 1997
Since
Inception(a)
Loomis Sayles Investment Grade Bond Fund (Institutional) 14.51
Loomis Sayles Investment Grade Bond Fund (Retail) 14.29
Lipper Average BBB Rated Corporate Bond Fund(b) 10.08
Lehman Brothers Government/Corp. Bond Index(c) 9.76
Loomis Lipper Lehman
- --------------------------------------------------------------------------------
AS OF 12/31/96 10,000 10,000 10,000
PERIOD ENDED
3/31/97 09,940 09,920 09,910
6/30/97 10,600 10,330 10,270
9/30/97 11,280 10,720 10,630
12/31/97 11,450 11,010 10,980
Note: Past performance is not predictive of future performance.
(a): Inception date for the Institutional and Retail Classes of shares is
December 31, 1996.
(b): Source: Lipper Analytical Services.
(c): Lehman Brothers Government/Corporate Bond Index consists of approximately
5,300 corporate and government issues with at least $100 million
outstanding for government issues and $25 million for corporates, and
greater than 1 year maturity. The index returns have not been lowered for
ongoing management and operating expenses applicable to mutual fund
investments.
(d): Cumulative performance is shown for the Institutional Class of shares.
Performance of the Retail Class of shares would, due to the higher fees
paid by the Retail Class of shares, be lower.
PORTFOLIO REVIEW
The Fund's allocation to long Treasuries contributed to its success, as yields
declined considerably throughout the year, particularly on the long end of the
curve. Among corporate bonds, industrial securities led the way boosted by the
strong performance of the cable/media and tobacco sectors. Yankee bonds slightly
underperformed in 1997, which can be attributed to the uncertainty in Southeast
Asia and the subsequent action taken by Moody's Investor Services and Standard
and Poor's, when they downgraded the sovereign debt ratings of Korea, Indonesia
and Thailand to speculative status. Select convertibles added to the Fund's
total return, buoyed by another successful year in the equity markets.
PORTFOLIO POSITIONING
The fears of inflation that persisted throughout 1997 have quickly abated and
discussions have now turned to the deflationary effect that might occur as a
result of the turmoil in Southeast Asia and the continued strength of the U.S.
dollar. The Fund's quality profile remains higher than normal as we wait to see
how the situation abroad plays out. While we do not attempt to time the future
direction of interest rates, the Fund's strategy continues to focus on long,
call protected bonds offering strong yield advantage.
/S/ Daniel J. Fuss
- -------------------------
Daniel J. Fuss
<PAGE>
LOOMIS SAYLES MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
[Photo of Martha F. Hodgman]
MARTHA F. HODGMAN
PERFORMANCE SUMMARY
The Loomis Sayles Municipal Bond Fund turned in strong performance in 1997. The
Fund returned 9.83% for the year, surpassing the Lehman Brothers Municipal Bond
Index's return of 9.19% and the Lipper General Municipal Bond Fund Average
return of 9.11%. The Fund placed in the top quartile of general municipal bond
funds with a ranking of 43 out of 235 funds. The Fund outdistanced the Lipper
average for much of the year, lagging only slightly in the first quarter, when
our longer duration strategy worked against us due to rising interest rates.
Cumulative Performance May 1991 to December 31, 1997
- -------------------------------------------------------------------------------
Average Annual Returns (%)-Periods Ended December 31, 1997
Since
1 year 3 years 5 years Inception(a)
Loomis Sayles Municipal Bond Fund 9.83 9.77 6.89 7.86
Lipper Average General Municipal Bond
Fund(b) 9.11 9.65 6.84 7.69
Lehman Brothers Municipal
Bond Index(c) 9.19 10.23 7.36 8.05
LOOMIS LIPPER LEHMAN
AS OF 5/31/91 10,000 10,000 10,000
PERIOD ENDED
6/30/91 10,010 09,970 09,990
9/30/91 10,420 10,370 10,380
12/31/91 10,780 10,730 10,730
3/31/92 10,780 10,740 10,760
6/30/92 11,240 11,200 11,170
9/30/92 11,540 11,450 11,460
12/31/92 11,790 11,680 11,670
3/31/93 12,180 12,150 12,110
6/30/93 12,630 12,560 12,500
9/30/93 13,070 12,990 12,920
12/31/93 13,150 13,130 13,110
3/31/94 12,420 12,410 12,390
6/30/94 12,580 12,480 12,520
9/30/94 12,610 12,540 12,610
12/31/94 12,440 12,340 12,430
3/31/95 13,260 13,220 13,310
6/30/95 13,500 13,490 13,630
9/30/95 13,830 13,820 14,020
12/31/95 14,500 14,480 14,600
3/31/96 14,230 14,220 14,420
6/30/96 14,280 14,300 14,530
9/30/96 14,600 14,620 14,870
12/31/96 14,980 14,960 15,240
3/31/97 14,900 14,890 15,210
6/30/97 15,440 15,400 15,730
9/30/97 15,100 15,860 16,210
12/31/97 16,460 16,310 16,650
Note: Past performance is not predictive of future performance.
(a): Inception date of the Loomis Sayles Municipal Bond Fund is May 29, 1991.
Since Lipper and Lehman Brothers Municipal Bond Index performance data
is not available coincident with this date, comparative performance is
presented from May 31, 1991.
(b): Source: Lipper Analytical Services.
(c): Lehman Brothers Municipal Bond Index is computed from prices on
approximately 21,000 bonds consisting of roughly 30% revenue bonds,
30% government obligations bonds, 27% insured and 13% prerefunded
bonds. The index returns have not been reduced for ongoing management
and operating expenses applicable to mutual fund investments.
PORTFOLIO REVIEW
The Fund's positive performance was largely attributable to our exposure to long
maturity non-callable bonds and long discount bonds, as well as lower rated
securities. In 1997, credit spreads narrowed dramatically. For example, at the
beginning of the year, New York City (Baa1/BBB+) bond yields were trading at 1%
more than AAA securities, but by year end the same securities were trading at
only 0.40% over AAA bonds. Over the last few years the spread between insured
AAA municipals and uninsured AAA issues has narrowed from between 0.15% to 0.20%
to just 0.10% at the end of 1997. Investors were willing to pay higher prices to
avoid the risk of reinvesting their money at lower rates in the future.
Structure became very important as the bond rally continued. Long-term
non-callable bonds, bonds that could not be retired prior to their stated
maturity date, traded at yields similar to those of AAA issues at year end,
independent of the level of their ratings.
PORTFOLIO POSITIONING
In 1998, we plan to continue our strategy of remaining fully invested. We
anticipate that the economy will continue to grow with limited inflation, which
implies stable to declining interest rates. Our non-callable and call protected
issues should be a benefit in this environment. As always, we will continue to
seek undervalued securities with attractive structures.
/s/ Martha F. Hodgman
Martha F. Hodgman
<PAGE>
LOOMIS SAYLES SHORT-TERM BOND FUND
- --------------------------------------------------------------------------------
[Photo of John Hyll]
JOHN HYLL
PERFORMANCE
For the year ending December 31, 1997, the Loomis Sayles Short Term Bond Fund
achieved a total return of 7.14%, outpacing the Lehman Brothers 1-3 Year
Government/Corporate Bond Index's total return of 6.66% and the 6.19% return for
the average fund in the Lipper Short Investment Grade Bond Fund Category.
PORTFOLIO REVIEW
The Fund's longer average maturity positively affected performance during 1997
as yields declined throughout the year. A heavy weighting in corporate bonds
also added value as yield spreads narrowed for most of 1997. The Fund's lack of
exposure to foreign or Yankee bonds proved beneficial as these sectors were hurt
during the fourth quarter as economic difficulties developed in Southeast Asia.
Cumulative Performance August 1992 to December 31, 1997
- -------------------------------------------------------------------------------
Average Annual Returns (%)-Periods Ended December 31, 1997
Since
1 year 3 years 5 years Inception(a)
Loomis Sayles Short-Term Bond
Fund (Inst.) 7.14 7.45 6.18 5.88
Loomis Sayles Short-Term Bond
Fund (Retail) 6.87 NA NA 6.87
Lipper Average Short Inv. Grade
Bond Fund(b) 6.19 6.74 5.49 5.30
Lehman Brothers Municipal 1-3 Year
Gov't/Corp. Bond Index(c) 6.66 7.56 5.72 5.58
LOOMIS LIPPER LEHMAN
AS OF 8/31/92 10,000 10,000 10,000
10/31/92 09,920 09,940 09,940
11/30/92 09,880 09,960 09,930
PERIOD ENDED
12/31/92 09,950 10,030 10,020
3/31/93 10,260 10,310 10,240
6/30/93 10,400 10,470 10,350
9/30/93 10,550 10,660 10,490
12/31/93 10,630 10,790 10,560
3/31/94 10,590 10,720 10,510
6/30/94 10,610 10,700 10,510
9/30/94 10,770 10,800 10,610
12/31/94 10,820 10,780 10,610
3/31/95 11,180 11,070 10,970
6/30/95 11,520 11,440 11,310
9/30/95 11,680 11,610 11,480
12/31/95 11,970 11,900 11,770
3/31/96 11,990 11,940 11,810
6/30/96 12,080 12,060 11,930
9/30/96 12,230 12,260 12,130
12/31/96 12,530 12,490 12,360
3/31/97 12,580 12,570 12,440
6/30/97 12,890 12,840 12,720
9/30/97 13,200 13,010 12,780
12/31/97 13,430 13,250 13,230
[Graphic Omitted]
Note: Past performance is not predictive of future performance.
(a): Inception date of the Institutional Class of shares is August 3,
1992.
Since Lipper and Lehman Brothers 1-3 Year Government/Corporate Bond
Index performance data is not available coincident with this date,
comparative performance is presented from August 31, 1992. Inception
date of the Retail Class of shares is December 31, 1996.
(b): Source: Lipper Analytical Services.
(c): Lehman Brothers 1-3 Year Government/Corporate Bond Index consists of
fixed rate debt issues rated investment grade or higher. All issues
have at least one year to three years to maturity and an outstanding
par value of at least $100 million for U.S. Gov't issues. The index
returns have not been reduced for ongoing management and operating
expenses applicable to mutual fund investments.
(d): Cumulative performance is shown for the Institutional Class of
shares. Performance of the Retail Class of shares would, due to the
higher fees paid by the Retail Class of shares, be lower.
PORTFOLIO POSITIONING
As of December 31, 1997, the Fund is positioned with 65% in corporates, 8% in
mortgages, 4% in asset backed securities and 23% in U.S. Treasuries. The average
maturity is 2.8 years, which is on the longer end of its three-year maturity
limit. The average yield-to-maturity is 6.2%.
We have positioned the Fund to take advantage of moderate economic growth and
low inflationary pressures. Continued emphasis will be placed on asset selection
to enhance yield and provide the potential for capital appreciation.
/s/ John Hyll
John Hyll
<PAGE>
LOOMIS SAYLES U.S. GOVERNMENT
SECURITIES FUND
- --------------------------------------------------------------------------------
[Graphic Omitted]
KENT P. NEWMARK
PERFORMANCE SUMMARY
1997 proved to be another excellent year for the Loomis Sayles U.S. Government
Securities Fund. The Fund was up 12.74% vs. the Lipper Average General U.S.
Government Bond Fund's 8.84% return and the Lehman Brothers Government Bond
Index's 9.59% return. For the one year period ending 12/31/97, the Fund ranked
5th out of the 180 funds in the Lipper Category. Falling interest rates were the
driving force behind our performance.
Cumulative Performance May 1991 to December 31, 1997
- -------------------------------------------------------------------------------
Average Annual Returns (%)-Periods Ended December 31, 1997
Since
1 year 3 years 5 years Inception(a)
Loomis Sayles U.S. Government
Securities Fund 12.74 12.01 8.80 10.29
Lipper Average General U.S. Gov't
Bond Fund(b) 8.84 9.23 6.31 7.46
Lehman Brothers Government
Bond Index(c) 9.59 10.05 7.34 8.39
LOOMIS LIPPER LEHMAN
AS OF 5/31/91 10,000 10,000 10,000
PERIOD ENDED
06/31/91 09,970 09,970 09,990
9/30/91 10,690 10,540 10,560
12/31/91 11,490 11,070 11,120
3/31/92 11,110 10,880 10,930
6/30/92 11,590 11,270 11,360
9/30/92 12,400 11,720 11,920
12/31/92 12,500 11,750 11,920
3/31/93 13,220 12,160 12,460
6/30/93 13,830 12,470 12,820
9/30/93 14,600 12,770 13,240
12/31/93 14,470 12,730 13,200
3/31/94 13,710 12,330 12,800
6/30/94 13,330 12,090 12,650
9/30/94 13,320 12,110 12,710
12/31/94 13,560 12,120 12,750
3/31/95 14,330 12,670 13,350
6/30/95 15,370 13,370 14,180
9/30/95 15,840 13,610 14,430
12/31/95 16,680 14,180 15,090
3/31/96 15,900 13,840 14,750
6/30/96 15,910 13,850 14,820
9/30/96 16,190 14,070 15,070
12/31/96 16,900 14,460 15,510
3/31/97 16,490 14,340 15,380
6/30/97 17,350 14,840 15,910
9/30/97 18,250 15,300 16,450
12/31/97 19,060 15,740 16,990
Note: Past performance is not predictive of future performance.
(a): Inception date of the Loomis Sayles U.S. Government Securities Fund
is May 21, 1991.
Since Lipper and Lehman Brothers Government Bond Index performance
data is not available coincident with this date, comparative
performance is presented from May 31, 1991.
(b): Source: Lipper Analytical Services
(c): 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. The index returns have not been
reduced for ongoing management and operating expenses applicable to
mutual fund investments.
PORTFOLIO REVIEW
Philosophically, the Fund has maintained a duration longer than most of its
competitors, and therefore was in a good position to capitalize on the bond
market rally that began in April and ran until December with only short
interruptions. The Fund had an effective duration of approximately 9 years at
the end of 1996 and ended 1997 with a duration of 9.2 years. As interest rates
declined, we shortened duration and invested in GNMA Pass-throughs and Treasury
Inflation Indexed Notes. The latter sector underperformed the Government sector
of the market, but the Fund's 43% weighting in long Treasuries more than
compensated for that shortfall. The majority of the Fund's holdings are call
protected, and we feel the remaining holdings offer attractive yield tradeoffs
vs. call risk. We believe this is even more important given the reinvestment
risk that bonds with low ratings present.
PORTFOLIO POSITIONING
While we expect to continue the long duration bias of the portfolio during 1998,
we are cautious about extending durations significantly further. When the
turmoil in Asia subsides, investors may turn their attention to the U.S.
economy. Our current view is that the U.S. economy is moderately strong, with
possible wage inflation in the wind. This could lead to weakness in the bond
market, making it difficult to produce returns of the same magnitude as 1997.
/s/ Kent P. Newmark
Kent P. Newmark
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
- -----------------------------------------------------------------------------------------------------
LOOMIS SAYLES BOND FUND
Portfolio of Investments -- as of December 31, 1997
Face
Amount Value (a)
- -----------------------------------------------------------------------------------------------------
Bonds And Notes -- 94.4% of Total Net Assets
NON-CONVERTIBLE BONDS -- 87.2%
Airlines -- 0.3%
<S> <C> <C>
NWA Trust, 9.360%, 3/10/06 ........................ $ 773,100 $ 859,277
United Airlines Pass Thru, 7.870%, 1/30/19 ........ 2,350,000 2,533,465
--------------
3,392,742
--------------
Banking & Finance -- 0.6%
First Union Institutional Trust, 7.850%, 1/01/27 .. 2,000,000 2,068,700
First Union Institutional Trust, 8.040%, 12/01/26 . 5,000,000 5,322,740
--------------
7,391,440
--------------
Broadcasting -- 0.1%
CBS, Inc., 7.125%, 11/01/23 ....................... 1,435,000 1,301,976
--------------
Canadian -- 19.9%
Canadian Government, Zero Coupon Bond,
6/01/21 ......................................... CAD 115,650,000 20,037,746
Canadian Government, Zero Coupon Bond,
6/01/22 ......................................... CAD 11,050,000 1,801,748
Canadian Government, Zero Coupon Bond,
6/01/25 ......................................... CAD 302,435,000 41,453,732
Clearnet Communications, Inc., Zero Coupon Bond,
8/13/07 (step to 11.750% on 8/13/02) (b) ........ CAD 40,000,000 17,844,022
International Semi-Tech Corp., Zero Coupon Bond,
8/15/03 (step to 11.500% on 8/15/00) (b) ....... USD 11,750,000 4,230,000
Province of Alberta, 5.930%, 9/16/16 .............. CAD 18,850,000 13,300,063
Province of British Columbia, Zero Coupon Bond,
8/23/13 ......................................... CAD 33,000,000 8,765,823
Province of British Columbia, Zero Coupon Bond,
6/09/14 ......................................... CAD 10,000,000 2,522,655
Province of British Columbia, Zero Coupon Bond,
9/05/20 ......................................... CAD 54,528,000 9,317,895
Province of British Columbia, Zero Coupon Bond,
6/09/22 ......................................... CAD 88,956,000 13,626,163
Province of British Columbia, Zero Coupon Bond,
8/19/22 ......................................... CAD 25,037,000 3,789,583
Province of British Columbia, Zero Coupon Bond,
9/08/23 ......................................... CAD 37,950,000 5,430,458
Province of British Columbia, Zero Coupon Bond,
8/23/24 ......................................... CAD 122,250,000 16,322,242
Province of British Columbia, Zero Coupon Bond,
11/19/27 ........................................ CAD 40,600,000 4,481,185
Province of British Columbia, 7.875%, 11/30/23 .... CAD 1,250,000 1,044,181
Province of British Columbia, 8.000%, 9/08/23 ..... CAD 7,000,000 6,008,327
Province of Manitoba, Zero Coupon Bond,
7/22/13 ......................................... CAD 2,500,000 659,686
Province of Manitoba, Zero Coupon Bond,
3/05/31 ......................................... CAD 34,600,000 3,067,646
Province of Manitoba, 6.500%, 9/22/17 ............. CAD 34,300,000 25,120,451
Province of Manitoba, 7.750%, 12/22/25 ............ CAD 39,245,000 33,258,219
Province of Ontario, Zero Coupon Bond, 7/13/22 . CAD 13,000,000 1,936,855
Province of Saskatchewan, Zero Coupon Bond,
4/10/14 ......................................... CAD 19,000,000 4,848,885
Province of Saskatchewan, 8.750%, 5/30/25 ......... CAD 11,735,000 10,876,462
Province of Saskatchewan (Certificate of Deposit),
Zero Coupon Bond, 2/04/22 ....................... CAD 2,350,000 364,245
Province of Saskatchewan (Certificate of Deposit),
Zero Coupon Bond, 5/30/25 ....................... CAD 25,055,000 3,147,107
Rogers Cablesystems Ltd., 9.650%, 1/15/14 ......... CAD 6,150,000 4,647,843
--------------
257,903,222
--------------
Communications -- 1.8%
Arch Communications Group, Inc., Zero Coupon Bond,
3/15/08 (step to 10.875% on 3/15/01) (b) $ 14,810,000 9,108,150
Century Communications Corp., 8.375%, 11/15/17 5,000,000 4,625,000
US West Capital Funding, Inc., 7.900%, 2/01/27 .... 9,035,000 9,887,362
--------------
23,620,512
--------------
Computers -- 1.8%
Apple Computer, Inc., 6.500%, 2/15/04 ............. 14,945,000 12,404,350
Seagate Technology, Inc., 7.875%, 3/01/17 ......... 10,000,000 10,401,200
Streamlogic Corp., 14.000%, 10/07/98 (c) (d) ...... 139,170 41,751
--------------
22,847,301
--------------
Electronics -- 1.7%
Pioneer Standard Electronics, Inc., 8.500%,
8/01/06 ......................................... 1,000,000 1,059,585
Westinghouse Electric Corp., 7.875%, 9/01/23 ...... 20,350,000 20,388,868
--------------
21,448,453
--------------
Entertainment -- 4.1%
Time Warner Entertainment Co., 7.570%, 2/01/24 27,170,000 28,423,895
Time Warner Entertainment Co., 8.050%, 1/15/16 7,825,000 8,452,252
Time Warner Entertainment Co., 8.375%, 3/15/23 14,160,000 16,159,109
--------------
53,035,256
--------------
Environmental Services -- 0.1%
Envirotest Systems Corp., 9.625%, 4/01/03 ......... $ 2,025,000 1,944,000
--------------
Food & Beverage -- 0.4%
Borden, Inc., 7.875%, 2/15/23 ..................... 5,500,000 5,533,990
--------------
Foreign Government/Agency -- 9.0%
BCO Central Costa Rica, 6.250%, 5/21/10 ........... USD 3,200,000 2,720,000
Escom, 11.000%, 6/01/08 ........................... ZAR 26,500,000 4,593,455
Petroleos Mexicanos, 9.500%, 9/15/27 .............. USD 9,300,000 9,137,250
Petroleos Mexicanos, Medium Term, 8.625%,
12/01/23 (e) .................................... USD 3,100,000 2,914,000
Republic of Argentina, 6.688%, 3/31/05 (f) ........ USD 1,128,000 1,008,206
Republic of Argentina, 9.750%, 9/19/27 ............ USD 8,650,000 8,269,400
Republic of Brazil C Bond, 8.000%, 4/15/14 (g) .... USD 27,423,253 21,527,254
Republic of Brazil, 10.125%, 5/15/27 .............. USD 42,481,000 39,825,937
Republic of Ecuador, 6.688%, 2/27/15 (f) (g) ...... USD 6,069,258 3,740,484
Republic of South Africa, 12.000%, 2/28/05 ........ ZAR 19,000,000 3,605,221
Republic of South Africa, 12.500%, 12/21/06 ....... ZAR 32,450,000 6,197,940
Republic of South Africa, 13.500%, 9/15/15 ........ ZAR 14,850,000 2,985,071
Republic of Venezuela, 9.250%, 9/15/27 ............ USD 11,000,000 9,806,500
--------------
116,330,718
--------------
Foreign Issuer -- 7.5%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 ......... $ 7,550,000 6,020,370
Bangkok Bank Public Co. Ltd., 8.250%,
3/15/16 (e) ..................................... 5,175,000 3,981,800
Bangkok Bank Public Co. Ltd., 8.375%,
1/15/27 (e) ..................................... 27,575,000 17,372,250
Espirito Santo-Escelsa, 10.000%, 7/15/07 (e) ...... 2,000,000 1,780,000
Export Import Bank of Korea, 6.375%, 2/15/06 ...... 1,000,000 760,000
Hyundai Motor Co. Ltd., 7.600%, 7/15/07 (e) ....... 4,000,000 2,840,000
Industrial Finance Corp. of Thailand, 7.375%,
1/14/07 (e) ..................................... 500,000 389,695
Korea Development Bank, 7.125%, 9/17/01 ........... 2,500,000 2,095,600
Korea Electric Power Corp., 6.750%, 8/01/27 ....... 1,500,000 1,185,000
Korea Electric Power Corp., 7.000%, 2/01/27 ....... 1,500,000 1,044,240
Korea Electric Power Corp., 7.750%, 4/01/13 ....... 2,000,000 1,520,000
Perez Companc SA, 8.125%, 7/15/07 (e) ............. 3,590,000 3,455,375
Philippine Long Distance Telephone Co., 8.350%,
3/06/17 ......................................... 4,950,000 4,096,125
Pindo Deli Finance Mauritius Ltd., 10.875%,
10/01/27 (e) .................................... 15,000,000 12,000,000
Pindo Deli Finance Mauritius Ltd., 11.750%,
10/01/17 (e) .................................... 1,500,000 1,290,000
Pycsa Panama SA, 10.280%, 12/15/12 (e) ............ 2,000,000 1,896,600
Quezon Power Philippines Co., 8.860%, 6/15/17 ..... 250,000 211,650
Samsung Electronics Co. Ltd., 7.450%,
10/01/02 (e) .................................... 1,500,000 1,167,450
Samsung Electronics Co. Ltd., 7.700%,
10/01/27 (e) .................................... 12,500,000 8,625,000
Samsung Electronics Co. Ltd., 8.500%, 11/01/02 1,000,000 850,000
Tata Electric Co., 8.500%, 8/19/17 (e) ............ 9,000,000 8,024,940
TFM SA de CV, Zero Coupon Bond, 6/15/09
(step to 11.750% on 6/15/02) (b) (e) ............ 7,150,000 4,433,000
Tjiwi Kimia Finance Mauritius Ltd., 10.000%,
8/01/04 (e) ..................................... 7,500,000 6,281,250
Total Access Communication Public Co. Ltd., 7.625%,
11/04/01 (e) .................................... 4,400,000 2,288,000
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 (e) .................................... 7,075,000 3,537,500
--------------
97,145,845
--------------
Government Agencies -- 4.4%
Federal National Mortgage Association, Zero Coupon
Bond, 10/29/07 .................................. NZD 84,250,000 24,473,124
Federal National Mortgage Association, 5.000%,
9/25/22 ......................................... USD 1,000,000 927,500
Federal National Mortgage Association, 6.000%,
11/25/08 (g) .................................... USD 3,734,969 3,521,366
International Bank of Reconstruction & Development,
8.000%, 5/23/07 ................................. NZD 19,000,000 11,299,722
International Bank of Reconstruction & Development,
Zero Coupon Bond, 8/20/07 ....................... NZD 55,250,000 16,212,710
--------------
56,434,422
--------------
Home Builders -- 0.5%
Pulte Corp., 7.300%, 10/24/05 ..................... 1,000,000 1,027,090
Pulte Corp., 7.625%, 10/15/17 ..................... 5,000,000 5,154,000
--------------
6,181,090
--------------
Insurance -- 0.1%
Sun Life Canada US Capital Trust I, 8.526%,
5/29/49 (e) ..................................... 800,000 883,232
--------------
Metals -- 0.1%
Midland Ross Corp., 6.000%, 2/15/07 ............... 1,400,000 1,146,740
--------------
Oil & Gas -- 0.6%
NGC Corporation Capital Trust I, 8.316%,
6/01/27 ......................................... 3,000,000 3,414,270
Seagull Energy Corp., 7.500%, 9/15/27 ............. 3,850,000 3,987,406
--------------
7,401,676
--------------
Rail - Transport -- 0.0%
Missouri Pacific Railroad Co., 5.000%, 1/01/45 .... 57,000 37,763
--------------
Real Estate Investment Trusts -- 0.5%
First Industrial, 7.500%, 12/01/17 ................ 5,000,000 5,058,000
Trinet Corporate Realty Trust, Inc., 7.700%,
7/15/17 ......................................... 2,000,000 2,045,540
--------------
7,103,540
--------------
Restaurants -- 0.4%
Flagstar Corp., 11.250%, 11/01/04 (c) (d) ......... 14,370,000 5,748,000
--------------
Retail - General -- 2.5%
Bradlees, Inc., 9.250%, 3/01/03 (c) (d) ........... 250,000 10,000
Bradlees, Inc., 11.000%, 8/01/02 (c) (d) .......... 250,000 15,000
Dillon Read Structured Finance Corp., 6.660%,
8/15/10 ......................................... 2,597,209 2,381,745
Dillon Read Structured Finance Corp., 7.600%,
8/15/07 ......................................... 231,409 220,995
Dillon Read Structured Finance Corp., 8.375%,
8/15/15 ......................................... 2,425,000 2,376,500
Dillon Read Structured Finance Corp., 8.550%,
8/15/19 ......................................... 500,000 491,250
K Mart Corp., 7.950%, 2/01/23 ..................... 14,365,000 13,880,181
Penn Traffic Co., 9.625%, 4/15/05 ................. 15,133,000 9,571,623
Woolworth Corp., 8.500%, 1/15/22 .................. 3,000,000 3,376,800
--------------
32,324,094
--------------
Steel -- 0.0%
Geneva Steel Co., 11.125%, 3/15/01 ................ 350,000 323,750
--------------
Taxable Municipal -- 0.1%
Orange County, California Pension Obligation, Zero
Coupon Bond, 9/01/16 ............................ 5,000,000 1,366,850
--------------
Telecommunications -- 6.8%
Hyperion Telecommunications, Inc., Zero Coupon
Bond, 4/15/03 (step to 13.000% on 4/15/01) (b) 6,000,000 4,395,000
Intercel, Inc., Zero Coupon Bond, 2/01/06 (step to
12.000% on 2/01/01) (b) ......................... 2,560,000 1,920,000
Intercel, Inc., Zero Coupon Bond, 5/01/06 (step to
12.000% on 5/01/01) (b) ......................... 1,940,000 1,416,200
Nextel Communications, Inc., Zero Coupon Bond, 8/
15/04 (step to 9.750% on 2/15/99) (b) ........... 2,500,000 2,225,000
Nextel Communications, Inc., Zero Coupon Bond, 9/
15/07 (step to 10.650% on 9/15/02) (b) (e) ...... 9,365,000 5,923,363
Nextel Communications, Inc., Zero Coupon Bond, 10/
31/07 (step to 9.750% on 10/31/02) (b) (e) 12,500,000 7,671,875
RCN Corp., Zero Coupon Bond, 10/15/07 (step to
11.125% on 10/15/02) (b) (e) .................... 4,350,000 2,729,625
TCI Communications, Inc., 7.875%, 8/01/13 ......... 12,850,000 13,821,074
TCI Communications, Inc., 7.875%, 2/15/26 ......... 44,252,000 47,905,888
--------------
88,008,025
---------------
Textile & Apparel -- 1.2%
Burlington Industries, Inc., 7.250%, 8/01/27 ...... 9,000,000 9,460,710
Fruit of the Loom, Inc., 7.375%, 11/15/23 ......... 3,000,000 2,850,420
Kellwood Co., 7.625%, 10/15/17 .................... 2,500,000 2,563,925
Phillips Van Heusen Corp., 7.750%, 11/15/23 ....... 1,000,000 979,840
---------------
15,854,895
---------------
Tobacco -- 7.6%
Loews Corp., 7.000%, 10/15/23 ..................... 3,500,000 3,407,530
Philip Morris Cos., Inc., 7.750%, 1/15/27 ......... 48,410,000 52,279,895
RJR Nabisco, Inc., 7.625%, 9/15/03 ................ 18,900,000 19,318,068
RJR Nabisco, Inc., 8.500%, 7/01/07 ................ 1,550,000 1,652,378
RJR Nabisco, Inc., 8.750%, 8/15/05 ................ 5,500,000 5,934,115
RJR Nabisco, Inc., 9.250%, 8/15/13 ................ 14,143,000 15,869,153
---------------
98,461,139
--------------
Transportation -- 0.1%
American President Companies Ltd., 8.000%,
1/15/24 ......................................... 1,275,000 1,280,304
--------------
U.S. Government -- 13.6%
U.S. Treasury Bonds, 6.000%, 2/15/26 .............. 75,125,000 75,031,094
U.S. Treasury Bonds, 6.250%, 8/15/23 .............. 71,200,000 73,336,000
U.S. Treasury Bonds, 6.500%, 11/15/26 ............. 18,750,000 20,015,625
U.S. Treasury Strips, Zero Coupon Bond, 8/15/20 14,000,000 3,592,260
U.S. Treasury Strips, Zero Coupon Bond, 8/15/23 19,000,000 4,126,610
--------------
176,101,589
--------------
Utilities -- 1.4%
AES Corp., 8.875%, 11/01/27 (e) ................... 5,000,000 4,787,500
Boston Edison Co., 7.800%, 3/15/23 ................ 1,000,000 1,049,577
Comed Financing II, 8.500%, 1/15/27 ............... 5,000,000 5,353,800
Commonwealth Edison Co., 4.750%, 12/01/11 ......... 952,000 774,976
GGIB Funding Corp., 7.430%, 1/15/11 ............... 6,754,281 6,808,180
--------------
18,774,033
--------------
TOTAL NON-CONVERTIBLE BONDS (Identified Cost
$1,081,453,168) ................................. 1,129,326,597
--------------
CONVERTIBLE BONDS -- 7.2%
Auto & Related -- 0.2%
Exide Corp., 2.900%, 12/15/05 (e) ................. 3,375,000 2,155,781
--------------
Broadcasting -- 0.2%
Comcast Corp., 1.125%, 4/15/07 .................... 4,750,000 3,063,750
--------------
Canadian -- 0.1%
Rogers Communications, Inc., 2.000%, 11/26/05 3,000,000 1,788,750
--------------
Chemicals - Major -- 0.1%
FMC Corp., 6.750%, 1/16/05 ........................ 1,175,000 1,057,500
Hexcel Corp., 7.000%, 8/01/11 ..................... 675,000 668,250
--------------
1,725,750
--------------
Commercial Services -- 0.0%
Molten Metal Technology, Inc., 5.500%,
5/01/06 (c) ..................................... 4,600,000 46,000
Molten Metal Technology, Inc., 5.500%,
5/01/06 (c) (e) ................................. 3,000,000 30,000
--------------
76,000
--------------
Computers -- 0.9%
Apple Computer, Inc., 6.000%, 6/01/01 ............. $ 3,190,000 $ 2,567,950
Cray Research, Inc., 6.125%, 2/01/11 .............. 635,000 504,825
Maxtor Corp., 5.750%, 3/01/12 ..................... 3,100,000 2,170,000
Softkey International, Inc., 5.500%, 11/01/00 ..... 6,965,000 6,146,612
Telxon Corp., 5.750%, 1/01/03 ..................... 500,000 528,125
--------------
11,917,512
--------------
Electronics -- 0.2%
Cirrus Logic, Inc., 6.000%, 12/15/03 (e) .......... 1,450,000 1,118,313
EDO Corp., 7.000%, 12/15/11 ....................... 434,000 355,880
Richardson Electronics Ltd., 7.250%, 12/15/06 ..... 450,000 369,000
Zenith Corp., 6.250%, 4/01/11 ..................... 1,755,000 1,026,675
--------------
2,869,868
--------------
Environmental Services -- 0.5%
Air & Water Technologies Corp., 8.000%, 5/15/15 1,250,000 976,563
Ogden Corp., 5.750%, 10/20/02 ..................... 1,750,000 1,666,875
Ogden Corp., 6.000%, 6/01/02 ...................... 500,000 456,875
Thermo TerraTech, Inc., 4.625%, 5/01/03 ........... 3,890,000 3,462,100
Thermo TerraTech, Inc., 4.625%, 5/01/03 (e) ....... 400,000 375,000
--------------
6,937,413
--------------
Foreign Issuer -- 2.0%
Advanced Agro Public Co., 3.500%, 6/17/01 ......... 1,625,000 1,300,000
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 ..... 7,400,000 2,405,000
Banpu Public Co., 2.750%, 4/10/03 ................. 5,030,000 3,219,200
Burns, Philp, 5.500%, 4/30/04 ..................... 4,480,000 2,643,200
Empresas ICA Sociedad, 5.000%, 3/15/04 ............ 3,700,000 2,918,375
Loxley Public Co., 2.500%, 4/04/01 ................ 7,700,000 3,850,000
Samsung Co., 0.250%, 6/26/06 ...................... 2,725,000 2,180,000
Samsung Electronics Co. Ltd., Zero Coupon Bond,
12/31/07 ........................................ 2,250,000 1,567,507
Sappi BVI Finance, 7.500%, 8/01/02 ................ 3,950,000 3,693,250
Siam Commercial Bank Public Co., 3.250%,
1/24/04 ......................................... 1,580,000 458,200
Ssangyong Oil Refining Co., Inc., 3.000%,
12/31/04 ........................................ 1,580,000 587,239
Total Access Communication Public Co. Ltd., 2.000%,
5/31/06 ......................................... 2,500,000 1,075,000
--------------
25,896,971
--------------
Health Care - Services -- 0.1%
Physicians Resource Group, Inc., 6.000%,
12/01/01 (e) .................................... 850,000 647,063
--------------
Home Builders -- 0.1%
Schuler Homes, Inc., 6.500%, 1/15/03 .............. 750,000 645,000
--------------
Oil & Gas -- 0.0%
Houston Industries, Inc., 6.000%, 3/15/12 ......... 447,500 407,225
--------------
Pharmaceutical -- 0.4%
Chiron Corp., 1.900%, 11/17/00 (e) ................ 1,000,000 888,750
Glycomed, Inc., 7.500%, 1/01/03 ................... 1,148,100 1,056,252
NABI, Inc., 6.500%, 2/01/03 ....................... 3,750,000 2,798,438
--------------
4,743,440
--------------
Publishing -- 0.1%
Scholastic Corp., 5.000%, 8/15/05 (e) ............. 1,800,000 1,577,250
--------------
Real Estate Investment Trusts -- 0.7%
Federal Realty Investors Trust, 5.250%, 10/28/03 2,250,000 2,092,500
Meditrust Corp., 7.500%, 3/01/01 .................. 750,000 906,562
Rockefeller Properties, Zero Coupon Bond,
12/31/00 ........................................ 7,000,000 5,022,500
Sizeler Property Investors, Inc., 8.000%,
7/15/03 ......................................... 1,175,000 1,128,000
--------------
9,149,562
--------------
Restaurants -- 0.6%
Boston Chicken, Inc., Zero Coupon Bond, 6/01/15 3,750,000 548,437
Boston Chicken, Inc., 4.500%, 2/01/04 ............. 2,000,000 980,000
Einstein/Noah Bagel Corp., 7.250%, 6/01/04 ........ 2,880,000 1,987,200
Shoney's, Inc., Zero Coupon Bond, 4/11/04 ......... 8,060,000 3,304,600
TPI Enterprises, Inc., 8.250%, 7/15/02 ............ 700,000 574,000
--------------
7,394,237
--------------
Retail - Specialty -- 0.2%
Bell Sports Corp., 4.250%, 11/15/00 ............... 500,000 423,750
CML Group, Inc., 5.500%, 1/15/03 .................. 1,224,000 918,000
Jacobson Stores, Inc., 6.750%, 12/15/11 ........... 540,000 454,950
--------------
1,796,700
--------------
Telecommunications -- 0.5%
Broadband Technologies, Inc., 5.000%, 5/15/01 ..... 9,800,000 6,468,000
--------------
Textile & Apparel -- 0.1%
Dixie Yarns, Inc., 7.000%, 5/15/12 ................ 300,000 264,750
Fieldcrest Cannon, Inc., 6.000%, 3/15/12 .......... 1,620,000 1,312,200
--------------
1,576,950
--------------
Trucking & Leasing -- 0.2%
Builders Transportation, Inc., 8.000%, 8/15/05 (d) 1,000,000 520,000
Preston Corp., 7.000%, 5/01/11 .................... 750,000 615,000
Worldway Corp., 6.250%, 4/15/11 ................... 1,463,000 1,067,990
--------------
2,202,990
--------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $112,390,744) .................. 93,040,212
--------------
TOTAL BONDS AND NOTES
(Identified Cost $1,193,843,912) ................ 1,222,366,809
--------------
Shares
- -----------------------------------------------------------------------------------------------------
Common Stocks -- 0.0% of Total Net Assets
Computers -- 0.0%
Streamlogic Corp. (c) ............................. 266,066 532
--------------
Telecommunications -- 0.0%
Nextel Communications, Inc. (h) ................... 3,873 100,698
--------------
TOTAL COMMON STOCKS
(Identified Cost $478,224) ...................... 101,230
--------------
- -----------------------------------------------------------------------------------------------------
Preferred Stocks -- 1.9% of Total Net Assets
Banking & Finance -- 0.1%
BankBoston Corp., 5.500% .......................... 11,700 1,102,725
--------------
Building Materials -- 0.2%
Owens Corning, 6.500% ............................. 62,500 3,062,500
--------------
Chemicals -- Major -- 0.0%
E.I. du Pont DeNemours & Co., $3.50 ............... 3,775 251,038
--------------
Computers -- 0.1%
Unisys Corp., $3.75 ............................... 27,300 1,230,206
--------------
Entertainment -- 0.0%
Time Warner Entertainment Co. 10.250% (g) ......... 297 333,866
--------------
Metals -- 0.4%
Aluminum Company of America, $3.75 ................ 10,000 $ 716,250
Bethlehem Steel Corp., $3.50 (e) .................. 99,050 4,110,575
--------------
4,826,825
--------------
Oil & Gas -- 0.1%
Kaneb Services, Inc., 8.600% ...................... 200 2,075
McDermott, Inc., $2.20 ............................ 20,500 779,000
--------------
781,075
--------------
Paper Products -- 0.0%
Stone Container Corp., $1.75 ...................... 5,000 73,750
--------------
Restaurants -- 0.0%
Flagstar Corp., $2.25 (c) (d) ..................... 432,100 164,198
--------------
Retail - General -- 0.0%
K Mart Financing Corp., 7.750% .................... 10,000 516,250
--------------
Telecommunications -- 0.2%
Hyperion Telecommunications, Inc. 12.875% (g) 3,000 3,022,500
--------------
Trucking & Freight -- 0.2%
Arkansas Best Corp., $2.875 ....................... 54,000 2,214,000
--------------
Utilities -- 0.6%
Central Louisiana Electric, Inc., 4.750% .......... 1,500 123,000
Central Maine Power Co., 3.500% ................... 300 13,575
Commonwealth Energy Systems, $4.80 ................ 3,282 259,278
Connecticut Light & Power Co., $1.90 .............. 2,925 67,275
Entergy Louisiana, Inc., 4.160% ................... 2,600 150,800
Jersey Central Power & Light Co., 4.000% .......... 1,120 67,480
Long Island Lighting Co., 6.875% .................. 15,000 386,250
MDU Resources Group, Inc., 5.100% ................. 4,480 402,080
Minnesota Power & Light Co., 5.000% ............... 200 15,250
Nevada Power Co., 4.700% .......................... 16,845 313,738
Niagara Mohawk Power Corp., 4.850% ................ 5,000 327,500
Niagara Mohawk Power Corp., 6.500% ................ 10,700 239,413
Niagara Mohawk Power Corp., 7.300% ................ 10,100 242,400
Niagara Mohawk Power Corp., 7.525% ................ 162,300 4,128,506
Niagara Mohawk Power Corp., 7.850% ................ 10,000 249,375
Niagara Mohawk Power Corp., 8.375% ................ 1,500 37,875
Northern States Power Co., $3.60 .................. 700 40,250
Public Service Co., 4.000% ........................ 360 21,240
--------------
7,085,285
--------------
TOTAL PREFERRED STOCKS (Identified Cost
$21,933,675) .................................... 24,664,218
--------------
- -----------------------------------------------------------------------------------------------------
Short-Term Investment -- 1.8% of Total Net Assets
Repurchase Agreement with State Street Bank and
Trust Co., dated 12/31/97 at 5.000% to be
repurchased at $22,857,348 on 1/02/98
collateralized by $22,715,000 U.S. Treasury Note,
5.875%, due 1/31/99 with a value of $23,308,884 . $22,851,000 $ 22,851,000
--------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $22,851,000) ................... 22,851,000
--------------
TOTAL INVESTMENTS --
(IDENTIFIED COST $1,239,106,811) (i) ............ $1,269,983,257
==============
(a) See Note 1.
(b) Step Bond: Coupon is zero or below market rate for an initial period and then
increases at a specified date and rate.
(c) Company in Chapter 11 Bankruptcy.
(d) Security in default.
(e) Securities exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers.
(f) Floating Rate Bond: Coupon is six month London Interbank Overnight Rate (LIBOR) plus
.8125%.
(g) All or a portion of income may be received as additional securities.
(h) Non-income producing security.
(i) At December 31, 1997, the net unrealized appreciation on investments based on cost of
$1,239,470,512 for federal income tax purposes was as follows: Aggregate gross
unrealized appreciation for all securities in which there is an excess of value over
tax cost and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value were $91,126,835 and $60,614,090,
respectively, resulting in net unrealized appreciation of $30,512,745.
</TABLE>
Key to Abbreviations:
CAD = Canadian Dollar USD = United States Dollar
NZD = New Zealand Dollar ZAR = South African Rand
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES GLOBAL BOND FUND
Portfolio of Investments -- as of December 31, 1997
<TABLE>
<CAPTION>
Face
Amount Value (a)
- -----------------------------------------------------------------------------------------------------------
Bonds And Notes -- 89.8% of Total Net Assets
Australia -- 9.3%
<S> <C> <C>
New South Wales Trust, 6.500%, 5/01/06 ............... AUD 1,400,000 $ 932,622
News America Holdings, Inc., 8.625%, 2/07/14 ......... AUD 1,240,000 833,380
QTC Global Aud Bon, 8.000%, 5/14/03 .................. AUD 200,000 143,086
QTC Global Aud Bon, 8.000%, 9/14/07 .................. AUD 1,600,000 1,167,487
-----------
$ 3,076,575
-----------
Canada -- 6.5%
Government of Canada, 8.750%, 12/01/05 ............... CAD 700,000 585,907
Province of British Columbia, Zero Coupon Bond,
9/05/20 ............................................ CAD 5,025,000 858,686
Province of Ontario, 8.100%, 9/08/23 ................. CAD 200,000 172,450
Province of Saskatchewan, 9.600%, 2/04/22 ............ CAD 525,000 520,243
-----------
2,137,286
-----------
Denmark -- 4.3%
Kingdom of Denmark, 7.000%, 11/15/07 ................. DKK 5,000,000 801,326
Kingdom of Denmark, 8.000%, 5/15/03 .................. DKK 3,800,000 626,371
-----------
1,427,697
-----------
Finland -- 4.0%
Republic of Finland, 6.000%, 4/25/08 ................. FIM 7,000,000 1,330,933
-----------
Germany -- 25.1%
Bayerische Vereinsbank, 6.000%, 1/23/06 .............. DEM 2,000,000 1,157,664
Deutsche Finance BV, 7.500%, 2/10/03 ................. DEM 2,300,000 1,403,570
Federal Republic of Germany, 6.000%, 2/16/06 ......... DEM 2,050,000 1,197,092
Federal Republic of Germany, 6.500%, 3/15/00 ......... DEM 2,000,000 1,163,446
Geberit International SA, 10.125%, 4/16/07 ........... DEM 1,000,000 603,297
Germany Unity, 8.000%, 1/21/02 ....................... DEM 1,500,000 933,470
Kreditanstalt Wierdarauf, 6.000%, 2/09/06 ............ DEM 1,100,000 638,061
Treuhandanstalt, 6.625%, 7/09/03 ..................... DEM 300,000 179,988
Treuhandanstalt, 6.750%, 5/13/04 ..................... DEM 1,700,000 1,030,426
-----------
8,307,014
-----------
Ireland -- 4.4%
Irish Permanent Plc, 8.500%, 7/15/04 ................. IP 600,000 990,265
Ulysses Securitization Plc, 7.625%, 8/18/06 .......... IP 300,000 479,077
-----------
1,469,342
-----------
Japan -- 2.4%
MBL International Finance, 3.000%, 11/30/02 (b) ...... USD 750,000 785,625
-----------
New Zealand -- 2.2%
Government of New Zealand, 8.000%, 11/15/06 .......... NZD 1,200,000 738,744
-----------
Panama -- 1.2%
Republic of Panama, 3.750%, 7/17/14 (step to 4.000% on
7/17/98) (c) ....................................... USD 500,000 385,625
-----------
Philippines -- 5.4%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 ............ USD 1,000,000 797,400
FLI Capital Cayman, 3.750%, 2/01/02
(step to 6.250% on 8/01/99) (b) (c) ................ USD 900,000 648,000
MBIA, Inc., Zero Coupon Bond, 12/18/01 (b) ........... USD 600,000 328,500
-----------
1,773,900
-----------
Poland -- 3.9%
Government of Poland, 4.000%, 10/27/14
(step to 5.000% on 10/27/98) (c) ................... USD 1,500,000 1,295,700
-----------
South Africa -- 8.0%
Escom, 11.000%, 6/01/08 .............................. ZAR 6,000,000 1,040,028
Republic of South Africa, 8.500%, 6/23/17 ............ USD 1,000,000 969,870
Sappi BVI Finance, 7.500%, 8/01/02 ................... USD 700,000 654,500
-----------
2,664,398
-----------
South Korea -- 3.0%
Korea Development Bank, 6.625%, 11/21/03 ............. USD 800,000 628,400
Samsung Electronics Co. Ltd., Zero Coupon Bond, 12/31/
07 (b) ............................................. USD 500,000 348,335
-----------
976,735
-----------
Thailand -- 2.1%
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 (b) USD 1,050,000 341,250
Loxley Public Co., 2.500%, 4/04/01 (b) ............... USD 700,000 350,000
-----------
691,250
-----------
United States -- 8.0%
Federal National Mortgage Association, 7.250%,
6/20/02 ............................................ NZD 1,300,000 738,048
K Mart Pass Thru, 8.990%, 7/05/10 .................... USD 250,000 265,337
RJR Nabisco, Inc., 9.250%, 8/15/13 ................... USD 500,000 561,025
TCI Communications, Inc., 7.875%, 2/15/26 ............ USD 1,000,000 1,082,570
-----------
2,646,980
-----------
TOTAL BONDS AND NOTES
(Identified Cost $30,763,706) ...................... 29,707,804
-----------
- -------------------------------------------------------------------------------------------------------------
Preferred Stocks -- 2.3% of Total Net Assets
Japan -- 2.3%
Sakura Finance, 0.750% ............................... 138,000,000 761,875
-----------
TOTAL PREFERRED STOCKS
(Identified Cost $1,048,041) ....................... 761,875
-----------
TOTAL INVESTMENTS --
(IDENTIFIED COST $31,811,747) (D) .................. $30,469,679
===========
(a) See Note 1.
(b) Convertible bond.
(c) Step Bond: Coupon is zero or below market rate for an initial period and then
increases at a specified date and rate.
(d) At December 31, 1997, the net unrealized depreciation on investments based on cost of
$31,811,747 for federal income tax purposes was as follows: Aggregate gross
unrealized appreciation for all securities in which there is an excess of value over
tax cost and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value were $1,123,482 and $2,465,550,
respectively, resulting in net unrealized depreciation of $1,342,068.
</TABLE>
Key to Abbreviations:
AUD = Australian Dollar IP = Irish Punt
CAD = Canadian Dollar NZD = New Zealand Dollar
DEM = Deutsche Mark USD = United States Dollar
DKK = Danish Krone ZAR = South African Rand
FIM = Finish Markka
Ten Largest Sector Holdings at December 31, 1997,
as a Percentage of Total Net Assets
Foreign Government/Agency 41.5%
Foreign Issuer 13.6%
Financial Services 12.3%
Banks 7.7%
Canadian 6.5%
Telecommunications 3.3%
Media & Entertainment 2.5%
US Government 2.2%
Tobacco 1.7%
Retail -- General 0.8%
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
LOOMIS SAYLES HIGH YIELD FUND
Portfolio of Investments -- as of December 31, 1997
<TABLE>
<CAPTION>
Face
Amount Value (a)
- -----------------------------------------------------------------------------------------------------------
Bonds And Notes -- 86.1% of Total Net Assets
NON-CONVERTIBLE BONDS -- 64.9%
Broadcasting -- 0.5%
<S> <C> <C>
CBS, Inc., 7.125%, 11/01/23 ............................... $ 50,000 $ 45,365
----------
Canadian -- 6.6%
Clearnet Communications, Inc., Zero Coupon Bond,
8/13/07 (step to 11.750% on 8/13/02) (b) ................ CAD 600,000 267,661
International Semi-Tech Corp., Zero Coupon Bond,
8/15/03 (step to 11.500% on 8/15/00) (b) ................ USD 400,000 144,000
Microcell Telecommunications, Inc., Zero Coupon Bond, 10/
15/07 (step to 11.125% on 10/15/02) (b) (c) ............. CAD 235,000 91,267
Rogers Cablesystems Ltd., 9.650%, 1/15/14 ................. CAD 70,000 52,902
----------
555,830
----------
Communications -- 4.9%
Arch Communications Group, Inc., Zero Coupon Bond,
3/15/08 (step to 10.875% on 3/15/01) (b) ................ $ 415,000 255,225
Century Communications Corp., Zero Coupon Bond,
3/15/03 ................................................. 250,000 160,000
----------
415,225
----------
Computers -- 1.0%
Apple Computer, Inc., 6.500%, 2/15/04 ..................... 105,000 87,150
----------
Electronics -- 2.4%
Westinghouse Electric Corp., 7.875%, 9/01/23 .............. 200,000 200,382
----------
Environmental Services -- 1.7%
Envirotest Systems Corp., 9.625%, 4/01/03 ................. 150,000 144,000
----------
Food & Beverage -- 0.7%
Del Monte Foods Co., Zero Coupon Bond, 12/15/07
(step to 12.500% on 12/15/02) (b) (c) ................... 100,000 57,250
----------
Foreign Government/Agency -- 19.9%
Escom, 11.000%, 6/01/08 ................................... ZAR 275,000 47,668
Petroleos Mexicanos, Medium Term, 8.625%, 12/01/23 (c) USD 145,000 136,300
Republic of Argentina, 6.688%, 3/31/05 (d) ................ USD 48,000 42,902
Republic of Argentina, 9.750%, 9/19/27 .................... USD 200,000 191,200
Republic of Brazil C Bond, 8.000%, 4/15/14 (e) ............ USD 285,065 223,776
Republic of Brazil, 10.125%, 5/15/27 ...................... USD 255,000 239,063
Republic of Ecuador, 6.688%, 2/27/15 (d) (e) .............. USD 492,102 303,282
Republic of Panama, 3.750%, 7/17/14
(step to 4.000% on 7/17/98) (b) ......................... USD 150,000 115,688
Republic of Peru, 3.250%, 3/07/17 (step to 3.750% on
3/07/99) (b) ............................................ USD 200,000 118,500
Republic of South Africa, 12.500%, 12/21/06 ............... ZAR 500,000 95,500
Republic of Venezuela, 9.250%, 9/15/27 .................... USD 175,000 156,012
----------
1,669,891
----------
Foreign Issuer -- 17.1%
Bangko Sentral Pilipinas, 8.600%, 6/15/27 ................. 250,000 199,350
Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 (c) ......... 200,000 126,000
Export Import Bank of Korea, 6.375%, 2/15/06 .............. 50,000 38,000
Hyundai Motor Co. Ltd., 7.600%, 7/15/07 (c) ............... 100,000 71,000
Murrin Murrin Holdings Property Ltd., 9.375%,
8/31/07 (c) ............................................. 50,000 49,500
Philippine Long Distance Telephone Co., 8.350%, 3/06/17 150,000 124,125
Pindo Deli Finance Mauritius Ltd., 10.875%, 10/01/27 (c) 360,000 288,000
Pycsa Panama SA, 10.280%, 12/15/12 (c) .................... 100,000 94,830
Quezon Power Philippines Co., 8.860%, 6/15/17 ............. 100,000 84,660
Samsung Electronics Co. Ltd., 8.500%, 11/01/02 ............ 100,000 85,000
Tjiwi Kimia Finance Mauritius Ltd., 10.000%, 8/01/04 (c) 150,000 125,625
Total Access Communication Public Co. Ltd., 7.625%,
11/04/01 (c) ............................................ 100,000 52,000
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 (c) ............................................ 200,000 100,000
----------
1,438,090
----------
Metals -- 1.0%
Midland Ross Corp., 6.000%, 2/15/07 ....................... 103,000 84,367
----------
Rail -- Transport -- 0.3%
Missouri Pacific Railroad Co., 4.750%, 1/01/20 ............ 30,000 20,663
----------
Restaurants -- 0.8%
Flagstar Corp., 11.250%, 11/01/04 (f) (g) ................. 160,000 64,000
----------
Retail -- General -- 2.1%
Dillon Read Structured Finance Corp., 8.375%, 8/15/15 ..... 65,000 63,700
Penn Traffic Co., 9.625%, 4/15/05 ......................... 175,000 110,688
----------
174,388
----------
Telecommunications -- 3.0%
Hyperion Telecommunications, Inc., Zero Coupon Bond,
4/15/03 (step to 13.000% on 4/15/01) (b) ................ 100,000 73,250
Intercel, Inc., Zero Coupon Bond, 2/01/06
(step to 12.000% on 2/01/01) (b) ........................ 75,000 56,250
Nextel Communications, Inc., Zero Coupon Bond, 8/15/04
(step to 9.750% on 2/15/99) (b) ......................... 80,000 71,200
Nextel Communications, Inc., Zero Coupon Bond, 9/15/07
(step to 10.650% on 9/15/02) (b) (c) .................... 35,000 22,137
RCN Corp., Zero Coupon Bond, 10/15/07
(step to 11.125% on 10/15/02) (b) (c) ................... 50,000 31,375
----------
254,212
----------
Textile & Apparel -- 2.9%
Phillips Van Heusen Corp., 7.750%, 11/15/23 ............... 250,000 244,960
----------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $5,538,240) ............................ 5,455,773
----------
CONVERTIBLE BONDS -- 21.2%
Auto & Related -- 0.8%
Exide Corp., 2.900%, 12/15/05 (c) ......................... 100,000 63,875
----------
Broadcasting -- 0.8%
Comcast Corp., 1.125%, 4/15/07 ............................ 100,000 64,500
----------
Canadian -- 1.4%
Rogers Communications, Inc., 2.000%, 11/26/05 ............. 190,000 113,288
----------
Commercial Services -- 0.0%
Molten Metal Technology, Inc., 5.500%, 5/01/06 (f) ........ 75,000 750
----------
Computers -- 1.4%
Apple Computer, Inc., 6.000%, 6/01/01 ..................... 100,000 80,500
Cray Research, Inc., 6.125%, 2/01/11 ...................... 50,000 39,750
----------
120,250
----------
Electronics -- 1.2%
Cirrus Logic, Inc., 6.000%, 12/15/03 (c) .................. 100,000 77,125
EDO Corp., 7.000%, 12/15/11 ............................... 25,000 20,500
----------
97,625
----------
Environmental Services -- 0.2%
Air & Water Technologies Corp., 8.000%, 5/15/15 ........... 25,000 19,531
----------
Foreign Issuer -- 4.5%
Advanced Agro Public Co., 3.500%, 6/17/01 ................. 125,000 100,000
Ashanti Capital, 5.500%, 3/15/03 .......................... 25,000 18,656
Bangkok Bank Public Co. Ltd., 3.250%, 3/03/04 ............. 100,000 32,500
Banpu Public Co., 2.750%, 4/10/03 ......................... 25,000 16,000
Burns, Philp, 5.500%, 4/30/04 ............................. 50,000 29,500
Empresas ICA Sociedad, 5.000%, 3/15/04 .................... 75,000 59,156
Samsung Electronics Co. Ltd., Zero Coupon Bond,
12/31/07 ................................................ 50,000 34,834
Sappi BVI Finance, 7.500%, 8/01/02 ........................ 50,000 46,750
Siam Commercial Bank Public Co., 3.250%, 1/24/04 .......... 150,000 43,500
----------
380,896
----------
Home Builders -- 0.2%
Schuler Homes, Inc., 6.500%, 1/15/03 ...................... 20,000 17,200
----------
Metals -- 0.4%
Battle Mountain Gold Co., 6.000%, 1/04/05 ................. 50,000 34,000
----------
Miscellaneous -- 0.6%
Veterinary Centers of America, Inc., 5.250%, 5/01/06 ...... 70,000 51,100
----------
Pharmaceutical -- 1.9%
Glycomed, Inc., 7.500%, 1/01/03 ........................... 75,000 69,000
NABI, Inc., 6.500%, 2/01/03 ............................... 125,000 93,281
----------
162,281
----------
Real Estate Investment Trusts -- 0.3%
Sizeler Property Investors, Inc., 8.000%, 7/15/03 ......... 25,000 24,000
----------
Restaurants -- 3.5%
Boston Chicken, Inc., Zero Coupon Bond, 6/01/15 ........... 500,000 73,125
Boston Chicken, Inc., 4.500%, 2/01/04 ..................... 50,000 24,500
Einstein/Noah Bagel Corp., 7.250%, 6/01/04 ................ 50,000 34,500
Shoney's, Inc., Zero Coupon Bond, 4/11/04 ................. 350,000 143,500
TPI Enterprises, Inc., 8.250%, 7/15/02 .................... 25,000 20,500
----------
296,125
----------
Retail -- Specialty -- 1.4%
CML Group, Inc., 5.500%, 1/15/03 .......................... 100,000 75,000
Jacobson Stores, Inc., 6.750%, 12/15/11 ................... 50,000 42,125
----------
117,125
----------
Telecommunications -- 0.8%
Broadband Technologies, Inc., 5.000%, 5/15/01 ............. 100,000 66,000
----------
Textile & Apparel -- 0.8%
Converse, Inc., 7.000%, 6/01/04 ........................... 50,000 28,625
Fieldcrest Cannon, Inc., 6.000%, 3/15/12 .................. 50,000 40,500
----------
69,125
----------
Trucking & Leasing -- 1.0%
Builders Transportation, Inc., 8.000%, 8/15/05 (g) ........ 75,000 39,000
Worldway Corp., 6.250%, 4/15/11 ........................... 62,000 45,260
----------
84,260
----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $2,023,564) ............................ 1,781,931
----------
TOTAL BONDS AND NOTES
(Identified Cost $7,561,804) ............................ 7,237,704
----------
Shares
- ------------------------------------------------------------------------------------------------------
Common Stocks -- 3.4% of Total Net Assets
Foreign Issuer -- 0.2%
Siam Commercial Bank Public Co. ........................... 16,500 18,847
----------
Telecommunications -- 0.1%
Nextel Communications, Inc. (h) ........................... 123 3,198
----------
Utilities -- 3.1%
Eastern Utilities Associates .............................. 10,000 262,500
----------
TOTAL COMMON STOCKS (Identified Cost $248,893) ............ 284,545
----------
- ------------------------------------------------------------------------------------------------------
Preferred Stocks -- 5.0% of Total Net Assets
Computers -- 0.5%
Unisys Corp., $3.75 ....................................... 1,000 45,063
----------
Metals -- 1.0%
Bethlehem Steel Corp., $3.50 (c) .......................... 2,000 83,000
----------
Restaurants -- 0.0%
Flagstar Corp., $2.25 (f) (g) ............................. 3,100 1,178
----------
Telecommunications -- 1.8%
Hyperion Telecommunications, Inc. 12.875% (e) ............. 150 151,125
----------
Utilities -- 1.7%
Central Maine Power Co., 3.500% ........................... 935 42,309
Cleveland Electric Illuminating Co., 7.000% ............... 100 9,500
Consumers Energy Co., $4.16 ............................... 200 12,700
Entergy Gulf States, Inc., 4.400% ......................... 140 8,155
Niagara Mohawk Power Corp., 3.600% ........................ 100 4,650
Niagara Mohawk Power Corp., 3.900% ........................ 100 5,100
Niagara Mohawk Power Corp., 6.500% ........................ 400 8,950
Niagara Mohawk Power Corp., 7.525% ........................ 1,000 25,437
Ohio Edison Co., 4.440% ................................... 400 25,600
----------
142,401
----------
TOTAL PREFERRED STOCKS
(Identified Cost $393,035) .............................. 422,767
----------
Face
Amount
- ------------------------------------------------------------------------------------------------------
Short-Term Investment -- 1.8% of Total Net Assets
Repurchase Agreement with State Street Bank and Trust Co.,
dated 12/31/97 at 5.000% to be repurchased at $152,042 on
1/02/98 collateralized by $155,000 U.S. Treasury Note,
5.875%, due 1/31/99 with a value of $159,052 ............ $152,000 152,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $152,000) .............................. 152,000
-----------
TOTAL INVESTMENTS -- (IDENTIFIED COST $8,355,732) (i) ..... $ 8,097,016
===========
(a) See Note 1.
(b) Step Bond: Coupon is zero or below market rate for an initial period and then
increases at a specified date and rate.
(c) Securities exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers.
(d) Floating Rate Bond: Coupon is six month London Interbank Overnight Rate (LIBOR) plus
.8125%.
(e) All or a portion of income may be received as additional securities.
(f) Company in Chapter 11 Bankruptcy.
(g) Security in default.
(h) Non-income producing security.
(i) At December 31, 1997, the net unrealized depreciation on investments based on cost of
$8,355,732 for federal income tax purposes was as follows: Aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax cost
and aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value were $403,784 and $662,500, respectively, resulting in
net unrealized depreciation of $258,716.
Key to Abbreviations:
CAD = Canadian Dollar
USD = United States Dollar
ZAR = South African Rand
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
- ------------------------------------------------------------------------------------------------------
LOOMIS SAYLES INTERMEDIATE MATURITY BOND FUND
Portfolio of Investments -- as of December 31, 1997
Face
Amount Value (a)
- -----------------------------------------------------------------------------------------------------
Bonds And Notes -- 93.4% of Total Net Assets
Banking & Finance -- 4.8%
<S> <C> <C>
Capital One Bank, 5.950%, 2/15/01 ............................ $ 200,000 $ 197,774
Capital One Bank, 6.830%, 5/17/99 ............................ 70,000 70,755
NationsBank Corp., 7.000%, 9/15/01 ........................... 55,000 56,281
----------
324,810
----------
Canadian -- 3.5%
International Semi-Tech Corp., Zero Coupon Bond, 8/15/03
(step to 11.500% on 8/15/00) (b) ........................... 250,000 90,000
MacMillan Bloedel Ltd., 6.750%, 2/15/06 ...................... 150,000 148,665
----------
238,665
----------
Communications -- 6.8%
360 Communications Co., 7.500%, 3/01/06 ...................... 280,000 292,547
US West Capital Funding, Inc., 6.850%, 1/15/02 ............... 160,000 161,801
----------
454,348
----------
Entertainment -- 2.4%
Time Warner Entertainment Co., Inc., 7.750%, 6/15/05 ......... 155,000 163,485
----------
Financial -- 8.6%
Associates Manufactured Housing, 6.475%, 3/15/28 ............. 50,000 50,515
Green Tree Financial Corp., 6.950%, 3/15/27 .................. 200,000 199,436
OSCC Home Equity Loan Trust, 6.025%, 6/15/08 ................. 297,067 294,919
Salton Sea Funding Corp., 7.020%, 5/30/00 .................... 31,536 31,816
----------
576,686
----------
Foreign Government/Agency -- 5.8%
Republic of Brazil C Bond, 8.000%, 4/15/14 (d) ............... 171,039 134,266
Republic of South Africa, 8.375%, 10/17/06 ................... 250,000 255,885
----------
390,151
----------
Foreign Issuer -- 9.6%
Espirito Santo-Escelsa, 10.000%, 7/15/07 (c) ................. 150,000 133,500
Gruma SA, 7.625%, 10/15/07 (c) ............................... 150,000 147,399
Southern Peru Ltd., 7.900%, 5/30/07 .......................... 220,000 225,544
Total Access Communication Public Co. Ltd.,
8.375%, 11/04/06 (c) ....................................... 220,000 110,000
YPF Sociedad Anonmia, 7.000%, 10/26/02 ....................... 31,053 31,231
----------
647,674
----------
Government Agencies -- 6.8%
Federal Home Loan Mortgage Corp., 6.000%, 4/15/06 ............ 55,000 54,863
Federal Home Loan Mortgage Corp., 6.250%, 10/15/07 ........... 55,000 55,086
Federal National Mortgage Association, 6.500%, 1/18/16 ....... 180,000 180,281
Federal National Mortgage Association, 6.500%, 8/15/16 ....... 165,000 165,257
----------
455,487
----------
Real Estate Investment Trusts -- 8.0%
American Health Properties, Inc., 7.050%, 1/15/02 ............ 65,000 66,167
Excel Realty Trust, Inc., 6.875%, 10/15/04 ................... 165,000 166,575
First Industrial, 7.000%, 12/01/06 ........................... 250,000 251,125
Trinet Corporate Realty Trust, 7.300%, 5/15/01 ............... 55,000 56,230
----------
540,097
----------
Retail -- General -- 1.0%
Woolworth Corp., 7.000%, 6/01/00 ............................. 65,000 65,829
----------
Securities -- 5.3%
Lehman Brothers Holdings, Inc., 5.750%, 11/15/98 ............. 190,000 189,226
Lehman Brothers Holdings, Inc., 6.125%, 2/01/01 .............. 60,000 59,558
Salomon, Inc., 6.700%, 12/01/98 .............................. 105,000 105,565
----------
354,349
----------
Telecommunications -- 6.8%
Cox Communications, Inc., 6.500%, 11/15/02 ................... 165,000 165,381
TCI Communications, Inc., 6.875%, 2/15/06 .................... 290,000 291,067
----------
456,448
----------
Tobacco -- 5.9%
Philip Morris Cos., Inc., 7.250%, 9/15/01 .................... 65,000 66,596
RJR Nabisco, Inc., 7.625%, 9/15/03 ........................... 65,000 66,438
RJR Nabisco, Inc., 8.250%, 7/01/04 ........................... 90,000 94,292
RJR Nabisco, Inc., 8.750%, 8/15/05 ........................... 160,000 172,628
----------
399,954
----------
Trucking & Leasing -- 3.1%
Amerco, 7.490%, 9/18/01 ...................................... 200,000 206,250
----------
U.S. Government -- 15.0%
United States Treasury Notes, 5.625%, 2/15/06 ................ 500,000 494,375
United States Treasury Notes, 6.250%, 2/15/07 ................ 500,000 515,935
----------
1,010,310
----------
TOTAL BONDS AND NOTES (Identified Cost $6,321,016)............ 6,284,543
----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Face
Amount Value (a)
- -----------------------------------------------------------------------------------------------------
Short-Term Investment -- 4.6% of Total Net Assets
Repurchase Agreement with State Street Bank and Trust Co.,
dated 12/31/97 at 5.000% to be repurchased at $306,085 on
1/02/98 collateralized by $305,000 U.S. Treasury Note,
<S> <C> <C>
5.875%, due 1/31/99 with a value of $312,974 ............... $ 306,000 $ 306,000
----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $306,000).................................. 306,000
----------
TOTAL INVESTMENTS -- (IDENTIFIED COST $6,627,016) (d)......... $6,590,543
==========
(a) See Note 1.
(b) Step Bond: Coupon is zero or below market rate for an initial period and then
increases at a specified date and rate.
(c) Securities exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers.
(d) All or a portion of income may be received as additional securities.
(e) At December 31, 1997, the net unrealized depreciation on investments based on cost of
$6,627,784 for federal income tax purposes was as follows: Aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax cost
and aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value were $145,094 and $182,335, respectively, resulting in
net unrealized depreciation of $37,241.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
- -----------------------------------------------------------------------------------------------------------
LOOMIS SAYLES INVESTMENT GRADE BOND FUND
Portfolio of Investments -- as of December 31, 1997
Face
Amount Value (a)
- -----------------------------------------------------------------------------------------------------------
Bonds And Notes -- 87.5% of Total Net Assets
NON-CONVERTIBLE BONDS -- 81.9%
Airlines -- 1.9%
<S> <C> <C>
United Airlines Pass Thru, 7.870%, 1/30/19 .............. $ 60,000 $ 64,684
---------
Canadian -- 22.0%
Canadian Government, Zero Coupon Bond, 6/01/21 .......... CAD 150,000 25,989
Canadian Government, Zero Coupon Bond, 6/01/25 .......... CAD 940,000 128,843
Canadian Pacific Ltd., 4.000%, 1/29/49 .................. USD 15,000 9,225
MacMillan Bloedel, 7.700%, 2/15/26 ...................... USD 100,000 103,806
Ontario Hydro, 8.900%, 8/18/22 .......................... CAD 55,000 51,138
Province of British Columbia, Zero Coupon Bond,
8/19/22 ............................................... CAD 605,000 91,572
Province of British Columbia, Zero Coupon Bond,
8/23/24 ............................................... CAD 200,000 26,703
Province of Manitoba, Zero Coupon Bond, 3/05/31 ......... CAD 1,100,000 97,526
Province of Manitoba, 6.500%, 9/22/17 ................... CAD 25,000 18,310
Province of Manitoba, 7.750%, 12/22/25 .................. CAD 55,000 46,610
Province of Saskatchewan (Certificate of Deposit), Zero
Coupon Bond, 2/04/22 .................................. CAD 650,000 100,749
Province of Saskatchewan (Certificate of Deposit), Zero
Coupon Bond, 5/30/25 .................................. CAD 215,000 27,005
---------
727,476
---------
Communications -- 0.9%
Arch Communications Group, Inc., Zero Coupon Bond,
3/15/08 (step to 10.875% on 3/15/01) (b) .............. 50,000 30,750
---------
Computers -- 2.9%
Apple Computer, Inc., 6.500%, 2/15/04 ................... 20,000 16,600
Seagate Technology, Inc., 7.875%, 3/01/17 ............... 75,000 78,009
---------
94,609
---------
Entertainment -- 1.6%
Time Warner Entertainment Co., 7.570%, 2/01/24 .......... 50,000 52,308
---------
Foreign Government/Agency -- 2.5%
Government of Poland, 4.000%, 10/27/14 (step to 5.000% on
10/27/98) (b) ......................................... USD 25,000 21,595
Republic of Brazil C Bond, 8.000%, 4/15/14 (c) .......... USD 28,507 22,378
Republic of Brazil, 10.125%, 5/15/27 .................... USD 10,000 9,375
Republic of South Africa, 13.500%, 9/15/15 .............. ZAR 150,000 30,152
---------
83,500
---------
Foreign Issuer -- 6.5%
Bangkok Bank Public Co. Ltd., 8.375%, 1/15/27 (d) ....... 50,000 31,500
Pindo Deli Finance Mauritius Ltd., 10.875%,
10/01/27 (d) .......................................... 100,000 80,000
Samsung Electronics Co. Ltd., 7.700%, 10/01/27 (d) ...... 100,000 69,000
Tata Electric Co., 8.500%, 8/19/17 (d) .................. 25,000 22,292
Total Access Communication Public Co. Ltd., 8.375%,
11/04/06 (d) .......................................... 25,000 12,500
---------
215,292
---------
Government Agencies -- 3.9%
Federal National Mortgage Association, Zero Coupon Bond,
10/29/07 .............................................. NZD 100,000 29,048
International Bank of Reconstruction & Development, Zero
Coupon Bond, 8/20/07 .................................. NZD 250,000 73,361
International Bank of Reconstruction & Development,
8.000%, 5/23/07 ....................................... NZD 45,000 26,762
---------
129,171
---------
Home Builders -- 0.8%
Pulte Corp., 7.625%, 10/15/17 ........................... 25,000 25,770
---------
Oil & Gas -- 3.1%
Seagull Energy Corp., 7.500%, 9/15/27 ................... 100,000 103,569
---------
Paper Products -- 4.5%
Mead Corp., 7.125%, 8/01/25 ............................. 50,000 48,929
Westvaco Corp., 7.000%, 8/15/23 ......................... 100,000 99,682
---------
148,611
---------
Rail -- Transport -- 0.9%
Louisville & Nashville Railroad Co., 2.875%, 4/01/03 .... 1,000 825
Louisville & Nashville Railroad Co., 3.375%, 4/01/03 .... 10,000 8,707
Missouri Pacific Railroad Co., 4.750%, 1/01/20 .......... 10,000 6,888
Missouri Pacific Railroad Co., 5.000%, 1/01/45 .......... 21,000 13,912
---------
30,332
---------
Real Estate Investment Trusts -- 3.1%
First Industrial, 7.500%, 12/01/17 ...................... 100,000 101,160
---------
Telecommunications -- 4.1%
TCI Communications, Inc., 7.875%, 2/15/26 ............... 125,000 135,321
---------
Textile & Apparel -- 0.8%
Kellwood Co., 7.625%, 10/15/17 .......................... 25,000 25,639
---------
Tobacco -- 8.0%
Loews Corp., 7.000%, 10/15/23 ........................... 70,000 68,150
Philip Morris Cos., Inc., 7.750%, 1/15/27 ............... 120,000 129,593
RJR Nabisco, Inc., 9.250%, 8/15/13 ...................... 60,000 67,323
---------
265,066
---------
U.S. Government -- 10.3%
U.S. Treasury Bonds, 6.000%, 2/15/26 .................... 340,000 339,575
---------
Utilities -- 4.1%
Comed Financing II, 8.500%, 1/15/27 ..................... 60,000 64,246
GGIB Funding Corp., 7.430%, 1/15/11 ..................... 69,441 69,995
---------
134,241
---------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $2,596,381) ........................... 2,707,074
---------
CONVERTIBLE BONDS -- 5.6%
Environmental Services -- 1.6%
Thermo TerraTech, Inc., 4.625%, 5/01/03 (d) ............. 60,000 53,400
---------
Foreign Issuer -- 1.8%
Banpu Public Co., 2.750%, 4/10/03 ....................... 20,000 12,800
Burns, Philp, 5.500%, 4/30/04 ........................... 20,000 11,800
Samsung Co., 0.250%, 6/26/06 ............................ 20,000 16,000
Ssangyong Oil Refining Co., Inc., 3.000%, 12/31/04 ...... 15,000 5,575
Total Access Communication Public Co. Ltd., 2.000%,
5/31/06 ............................................... 30,000 12,900
---------
59,075
---------
Oil & Gas -- 1.6%
Houston Industries, Inc., 6.000%, 3/15/12 ............... 60,000 54,600
---------
Restaurants -- 0.6%
Shoney's, Inc., Zero Coupon Bond, 4/11/04 ............... 45,000 18,450
---------
TOTAL CONVERTIBLE BONDS
(Identified Cost $228,434) ............................ 185,525
---------
TOTAL BONDS AND NOTES
(Identified Cost $2,824,815) .......................... 2,892,599
---------
Shares
- -------------------------------------------------------------------------------------------------------------
Preferred Stocks -- 5.4% of Total Net Assets
Chemicals -- Major -- 3.7%
E.I. du Pont DeNemours & Co., $3.50 ..................... 1,200 79,800
E.I. du Pont DeNemours & Co., $4.50 ..................... 500 41,750
---------
121,550
---------
Utilities -- 1.7%
Duquesne Light Co., 4.000% .............................. 500 16,000
Entergy New Orleans, Inc., 4.750% ....................... 175 12,228
Houston Lighting & Power Co., $4.00 ..................... 79 5,056
New York State Electric & Gas Corp., 3.750% ............. 210 12,285
Northern Indiana Public Service Co., 4.250% ............. 190 12,540
---------
58,109
---------
TOTAL PREFERRED STOCKS
(Identified Cost $154,007) ............................ 179,659
---------
Face Amount
- -------------------------------------------------------------------------------------------------------------
Short-Term Investment -- 3.4% of Total Net Assets
Repurchase Agreement with State Street Bank and Trust
Co., dated 12/31/97 at 5.000% to be repurchased at
$113,031 on 1/02/98 collateralized by $115,000 U.S.
Treasury Note, 5.875%, due 1/31/99 with a value of
$118,007 .............................................. $113,000 113,000
----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $113,000) ............................ 113,000
----------
TOTAL INVESTMENTS -- (IDENTIFIED COST $3,091,822) (d) ... $3,185,258
==========
(a) See Note 1.
(b) Step Bond: Coupon is zero or below market rate for an initial period and then
increases at a specified date and rate.
(c) All or a portion of income may be received as additional securities.
(d) Securities exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to
qualified institutional buyers.
(e) At December 31, 1997, the net unrealized appreciation on investments based on cost of
$3,091,822 for federal income tax purposes was as follows: Aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax cost
and aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value were $223,368 and $129,932, respectively, resulting in
net unrealized appreciation of $93,436.
</TABLE>
Key to Abbreviations:
CAD = Canadian Dollar USD = United States Dollar
NZD = New Zealand Dollar ZAR = South African Rand
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
- -----------------------------------------------------------------------------------------------------
LOOMIS SAYLES MUNICIPAL BOND FUND
Portfolio of Investments -- as of December 31, 1997 -- continued
Face
Amount Value (a)
- -----------------------------------------------------------------------------------------------------
Municipal Bonds And Notes -- 96.4% of Total Net Assets
Alaska -- 1.2%
<S> <C> <C>
Alaska State Housing Finance Corp., 6.600%, 12/01/15 ......... $ 95,000 $ 100,974
----------
Arizona -- 1.9%
Phoenix Street & Highway User, 6.250%, 7/01/11 ............... 150,000 162,978
----------
California -- 12.7%
California State Department Water Resources, 5.625%, 12/01/12 100,000 105,229
California State Public Works Lease, 5.500%, 6/01/14 ......... 300,000 319,779
Foothill Eastern Transportation Corridor, Zero Coupon Bond,
1/01/23 .................................................... 500,000 128,790
Foothill Eastern Transportation Corridor, 6.000%, 1/01/16 .... 250,000 266,767
Fresno Sewer Revenue, (AMBAC Insured), 6.250%, 9/01/14 ....... 250,000 290,303
----------
1,110,868
----------
Colorado -- 1.4%
El Paso County, Zero Coupon Bond, 9/01/15 .................... 300,000 120,297
----------
Connecticut -- 5.0%
Connecticut State Resources Recovery Authority, 7.625%,
1/01/09 .................................................... 200,000 207,640
Connecticut State Special Tax Obligation, 6.125%, 9/01/12 .... 200,000 226,300
----------
433,940
----------
Florida -- 2.9%
Florida State, General Obligation, 5.250%, 7/01/15 ........... 250,000 255,467
----------
Hawaii -- 2.3%
Honolulu, Hawaii, General Obligation, 5.000%, 10/01/13 ....... 200,000 202,822
----------
Illinois -- 15.6%
Chicago Metropolitan Water Reclamation, 5.950%, 12/01/07 ..... 300,000 335,265
Chicago O'Hare International Airport, 5.000%, 1/01/16 ........ 300,000 292,698
Chicago, Illinois, General Obligation, (AMBAC Insured),
5.250%, 1/01/15 ............................................ 250,000 252,325
Illinois Development Finance Authority Pollution Control,
7.250%, 6/01/11 ............................................ 25,000 27,287
Illinois State Sales Tax Revenue, 6.375%, 6/15/14 ............ 150,000 165,569
Illinois State Sales Tax Revenue, (FGIC Insured), 5.000%,
6/15/16 .................................................... 300,000 296,115
----------
1,369,259
----------
Louisiana -- 2.4%
Regional Transportation Authority, (FGIC Insured), 8.000%,
12/01/08 ................................................... 200,000 211,344
----------
Massachusetts -- 5.9%
Commonwealth of Massachusetts Water Pollution Control, 5.000%,
8/01/14 .................................................... 300,000 300,249
Plymouth County Certificates of Participation, 6.500%, 4/01/01 200,000 213,322
----------
513,571
----------
Michigan -- 3.0%
Detroit, Michigan, (MBIA Insured), 5.000%, 4/01/06 ........... 250,000 259,725
----------
New Jersey -- 3.6%
New Jersey State Turnpike Authority, 6.500%, 1/01/08 ......... 200,000 230,534
New Jersey State Turnpike Authority, 6.500%, 1/01/16 ......... 75,000 87,466
----------
318,000
----------
New York -- 20.6%
New York City Housing Development Corporation, 5.625%,
5/01/12 .................................................... 150,000 155,156
New York City Transitional Finance Authority, 5.000%, 8/15/13 200,000 201,110
New York City, General Obligation, 7.000%, 8/01/98 ........... 5,000 5,083
New York State Certificates of Participation, 5.650%, 8/01/02 160,000 168,078
New York State Dormitory Authority, 6.375%, 7/01/08 .......... 200,000 220,378
New York State Dormitory Authority, 6.500%, 5/15/05 .......... 250,000 281,895
New York State Environmental Pollution Control, 5.150%,
6/15/13 .................................................... 125,000 127,356
New York State Environmental Pollution Control, 5.750%,
6/15/10 .................................................... 250,000 276,023
New York State, General Obligation, 5.250%, 7/15/10 .......... 200,000 208,128
New York Urban Development Corp., 5.625%, 1/01/07 ............ 150,000 157,375
----------
1,800,582
----------
North Carolina -- 1.3%
North Carolina Eastern Municipal Power Agency, 7.250%,
1/01/07 .................................................... 100,000 116,384
----------
Pennsylvania -- 1.6%
Pennsylvania Finance Authority Revenue Bond, 6.600%,
11/01/09 ................................................... 125,000 138,418
----------
Puerto Rico -- 2.9%
Puerto Rico Electric Power Authority, 6.125%, 7/01/09 ........ 225,000 254,304
----------
Rhode Island -- 2.9%
Rhode Island Convention Center Authority, (MBIA Insured),
5.000%, 5/15/10 ............................................ 250,000 258,387
----------
Tennessee -- 3.4%
Metropolitan Nashville Airport, (FGIC Insured), 6.600%,
7/01/15 .................................................... 30,000 32,635
Shelby County, General Obligation, 5.900%, 3/01/13 ........... 250,000 268,345
----------
300,980
----------
Washington -- 2.8%
Tacoma, Washington Electric Systems Revenue, (FGIC Insured),
6.100%, 1/01/07 ............................................ 225,000 247,568
----------
Wyoming -- 3.0%
Platte County Pollution Control, (MBIA Insured),
5.100%, 1/01/08 ............................................ 250,000 260,950
----------
TOTAL MUNICIPAL BONDS AND NOTES
(Identified Cost $7,901,587)................................ 8,436,818
----------
- -------------------------------------------------------------------------------------------------
Short-Term Investment -- 2.0% of Total Net Assets
Repurchase Agreement with State Street Bank and Trust Co.,
dated 12/31/97 at 5.000% to be repurchased at $175,122 on
1/05/98 collateralized by $140,000 U.S. Treasury Bond,
8.125%, due 8/15/19 with a value of $178,719 ............... 175,000 175,000
----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $175,000).................................. 175,000
----------
TOTAL INVESTMENTS -- (IDENTIFIED COST $8,076,587) (b)......... $8,611,818
==========
(a) See Note 1.
(b) At December 31, 1997, the net unrealized appreciation on investments based on cost of
$8,076,587 for federal income tax purposes was as follows: Aggregate gross unrealized
appreciation for all securities in which there is an excess of value over tax cost
and aggregate gross unrealized depreciation for all securities in which there is an
excess of tax cost over value were $551,992 and $16,761, respectively, resulting in
net unrealized appreciation of $535,231.
</TABLE>
Key to Abbreviations:
AMBAC: American Municipal Bond Assurance Corporation
FGIC: Federal Guaranty Insurance Corporation
MBIA: Municipal Bond Insurance Association
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
- -----------------------------------------------------------------------------------------------------
LOOMIS SAYLES SHORT-TERM BOND FUND
Portfolio of Investments -- as of December 31, 1997
Face
Amount Value (a)
- -----------------------------------------------------------------------------------------------------
Bonds And Notes -- 97.0% of Total Net Assets
Aerospace -- 3.0%
<S> <C> <C>
Lockheed Martin Corp., 6.550%, 5/15/99 .................... $ 570,000 $ 573,312
-----------
Airlines -- 6.4%
Delta Air Lines, Inc., 7.790%, 12/01/98 ................... 800,000 811,144
Northwest Airlines Corp., 8.375%, 3/15/04 ................. 400,000 411,816
-----------
1,222,960
-----------
Banking & Finance -- 6.2%
Capital One Bank, 6.830%, 5/17/99 ......................... 560,000 563,181
Household Bank FSB, 6.250%, 4/01/99 ....................... 625,000 626,981
-----------
1,190,162
-----------
Computers -- 3.5%
Comdisco, Inc., 5.760%, 1/19/99 ........................... 670,000 668,560
-----------
Consumer Services -- 3.0%
Loewen Group International, Inc., 7.750%, 10/15/01 ........ 560,000 583,374
-----------
Electronics -- 1.4%
Tektronix, Inc., 7.625%, 8/15/02 .......................... 250,000 259,512
-----------
Financial -- 10.3%
Chrysler Financial Corp., 6.500%, 6/15/98 ................. 200,000 200,426
Fleetwood Credit Grantor Trust, 6.900%, 3/15/12 ........... 436,530 441,502
Great Western Financial Corp., 6.125%, 6/15/98 ............ 605,000 605,266
Sears Roebuck Acceptance Corp., 6.950%, 5/15/02 ........... 340,000 348,242
World Omni Automobile Lease, 6.550%, 6/25/02 .............. 367,255 368,970
-----------
1,964,406
-----------
Government Agencies -- 8.2%
Federal Home Loan Mortgage Corp., 6.500%, 5/15/08 ......... 520,000 518,534
Federal Home Loan Mortgage Corp., 6.500%, 4/01/12 ......... 582,370 583,278
Federal National Mortgage Association, 7.000%, 12/01/11 ... 259,584 263,748
Federal National Mortgage Association, 7.000%, 12/01/11 ... 195,600 198,738
-----------
1,564,298
-----------
Media & Entertainment -- 6.1%
News America Holdings, Inc., 9.125%, 10/15/99 ............. 400,000 418,388
Time Warner, Inc., 7.450%, 2/01/98 ........................ 545,000 545,398
Time Warner, Inc., 7.950%, 2/01/00 ........................ 200,000 206,148
-----------
1,169,934
-----------
Oil & Gas -- 2.6%
Occidental Petroleum Corp., 5.850%, 11/09/98 .............. 500,000 498,775
-----------
Paper Products -- 1.9%
Fort James Corp., 6.625%, 9/15/04 ......................... 360,000 361,148
-----------
Real Estate Investment Trusts -- 1.1%
Oasis Residential, Inc., 7.000%, 11/15/03 ................. 200,000 202,844
-----------
Securities -- 9.0%
Lehman Brothers Holdings, Inc., 6.375%, 6/01/98 ........... 625,000 626,244
Salomon Brothers, Inc., 7.125%, 8/01/99 ................... 450,000 456,169
Salomon, Inc., 5.500%, 1/15/99 ............................ 640,000 635,482
-----------
1,717,895
-----------
Telecommunications -- 5.2%
Sprint Spectrum L.P., Zero Coupon Bond, 8/15/06
(step to 12.500% on 8/15/01) (b) ........................ 560,000 434,000
TCI Communications, Inc., 7.250%, 6/15/99 ................. 550,000 556,308
-----------
990,308
-----------
U.S. Government -- 22.8%
U.S. Treasury Notes, 6.250%, 1/31/02 ...................... 2,995,000 3,048,341
U.S. Treasury Notes, 6.250%, 2/15/03 ...................... 90,000 92,039
U.S. Treasury Strips, Zero Coupon Bond, 2/15/04 ........... 1,710,000 1,207,671
-----------
4,348,051
-----------
Utilities -- 6.3%
Detroit Edison Co., 6.340%, 3/15/00 ....................... 670,000 672,392
El Paso Electric Co., 7.250%, 2/01/99 ..................... 520,000 522,439
-----------
1,194,831
-----------
TOTAL BONDS AND NOTES
(Identified Cost $18,353,689)............................ 18,510,370
-----------
Short-Term Investment -- 1.7% of Total Net Assets
Repurchase Agreement with State Street Bank and Trust Co.,
dated 12/31/97 at 5.000% to be repurchased at $327,091 on
1/02/98 collateralized by $330,000 U.S. Treasury Note,
5.875%, due 1/31/99 with a value of $338,628 ............ $327,000 $ 327,000
-----------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $327,000)............................... 327,000
-----------
TOTAL INVESTMENTS -- (IDENTIFIED COST $18,680,689) (c)..... $18,837,370
===========
(a) See Note 1.
(b) Step Bond: Coupon is zero or below market rate for an initial period and then
increases at a specified date and rate.
(c) At December 31, 1997, the net unrealized appreciation on investments based on cost of
$18,681,400 for federal income tax purposes was as follows: Aggregate gross
unrealized appreciation for all securities in which there is an excess of value over
tax cost and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value were $177,948 and $21,978, respectively,
resulting in net unrealized appreciation of $155,970.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------------------------
LOOMIS SAYLES U.S. GOVERNMENT SECURITIES FUND
Portfolio of Investments -- as of December 31, 1997
Face
Amount Value (a)
- --------------------------------------------------------------------------------------------------
Bonds And Notes -- 99.2% of Total Net Assets
Government Agencies -- 26.1%
<S> <C> <C>
Federal Home Loan Bank, Zero Coupon Bond, 8/04/17 ......... $ 5,400,000 $ 1,145,880
Government National Mortgage Association, 7.500%, 8/15/26 . 633,230 648,681
Government National Mortgage Association, 7.500%, 9/15/27 . 2,191,171 2,244,570
Tennessee Valley Authority, 8.625%, 11/15/29 .............. 514,000 561,134
------------
4,600,265
------------
U.S. Government -- 73.1%
U.S. Treasury Bonds, 7.250%, 5/15/16 ...................... 3,125,000 3,559,563
U.S. Treasury Bonds, 7.500%, 11/15/24 ..................... 3,405,000 4,073,231
U.S. Treasury Notes, 3.375%, 1/15/07 (b) .................. 2,243,406 2,184,516
U.S. Treasury Notes, 5.750%, 11/15/00 ..................... 2,480,000 2,484,638
U.S. Treasury Strips, Zero Coupon Bond, 11/15/07 .......... 1,100,000 619,751
------------
12,921,699
------------
TOTAL BONDS AND NOTES
(Identified Cost $16,903,654)............................ 17,521,964
------------
TOTAL INVESTMENTS -- (IDENTIFIED COST $16,903,654) (c)..... $ 17,521,964
============
(a) See Note 1.
(b) Treasury Inflation Protection Securities (TIPS): Face amount of these notes will be
adjusted for changes in the level of inflation as indexed to the non-seasonally
adjusted consumer price index (CPI).
(c) At December 31, 1997, the net unrealized appreciation on investments based on cost of
$16,904,647 for federal income tax purposes was as follows: Aggregate gross
unrealized appreciation for all securities in which there is an excess of value over
tax cost and aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value were $618,236 and $919, respectively,
resulting in net unrealized appreciation of $617,317.
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
Bond Global
Fund Bond Fund
------------------ ---------------
ASSETS
Investments at value:
<S> <C> <C>
Securities ............................................ $ 1,247,132,257 $ 30,469,679
Repurchase agreements ................................. 22,851,000 0
---------------- -------------
Total investments ....................................... 1,269,983,257 30,469,679
Cash .................................................... 940 75,421
Foreign currency at value ............................... 17 102
Receivable for:
Shares of the Fund sold ............................... 8,599,001 891,154
Securities sold ....................................... 0 739,264
Forward currency contracts (Note 1D) .................. 0 320,923
Dividends and interest -- net ......................... 23,328,424 820,391
Due from the adviser (Note 3) ........................... 61,597 42,570
Other assets (Note 1J) .................................. 574 485
---------------- -------------
1,301,973,810 33,359,989
---------------- -------------
LIABILITIES
Payable for:
Securities purchased .................................. 4,920,357 0
Shares of the Fund redeemed ........................... 904,031 51,852
Forward currency contracts (Note 1D) .................. 0 156,120
Dividends declared .................................... 0 0
Accrued expenses:
Management fees (Note 3) .............................. 651,148 16,713
Trustees' fees (Note 3B) .............................. 1,416 1,377
Accounting and administration (Note 3A) ............... 95,700 2,708
Other expenses ........................................ 251,324 36,408
---------------- -------------
6,823,976 265,178
---------------- -------------
NET ASSETS ................................................ $ 1,295,149,834 $ 33,094,811
================ =============
Net Assets consist of:
Capital paid in ....................................... $ 1,255,895,436 $ 34,331,365
Undistributed (or Distribution in excess of)
net investment income ............................... (72,275) (156,023)
Accumulated net realized gain (loss) .................. 8,517,775 114,281
Unrealized appreciation (depreciation) on:
Investments ......................................... 30,876,446 (1,342,068)
Foreign currency transactions ....................... (67,548) 147,256
---------------- -------------
NET ASSETS ................................................ $ 1,295,149,834 $ 33,094,811
================ =============
INSTITUTIONAL CLASS:
Net assets .......................................... $ 1,261,909,723 $ 28,400,780
Shares of beneficial interest outstanding, no par
value ............................................... 98,367,472 2,400,521
Net asset value and redemption price per
Institutional share* $ 12.83 $ 11.83
RETAIL CLASS:
Net assets ............................................ $ 33,240,111 $ 4,694,031
Shares of beneficial interest outstanding, no par
value ............................................... 2,592,203 396,765
Net asset value and redemption price per Retail
share* .............................................. $ 12.82 $ 11.83
Identified cost of investments ............................ $ 1,239,106,811 $ 31,811,747
================ =============
</TABLE>
* The redemption price per share for the Institutional and Retail Classes, of
the High Yield Fund for shares held less than one year is equal to net asset
value less 2% of the amount redeemed.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Intermediate U.S.
High Maturity Investment Municipal Short-Term Government
Yield Bond Grade Bond Bond Bond Securities
Fund Fund Fund Fund Fund Fund
- --------------------- --------------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$ 7,945,016 $ 6,284,543 $ 3,072,258 $ 8,436,818 $ 18,510,370 $ 17,521,964
152,000 306,000 113,000 175,000 327,000 0
------------ ------------ ------------ ------------ ------------- -------------
8,097,016 6,590,543 3,185,258 8,611,818 18,837,370 17,521,964
574 852 332 12,180 79 18,826
0 0 0 0 0 0
184,850 0 35,000 0 0 341
0 0 0 0 0 0
0 0 0 0 0 0
147,831 106,132 55,099 138,019 270,438 139,381
46,634 55,595 57,134 31,866 32,948 26,467
6,960 5,527 1,037 0 784 0
------------ ------------ ------------ ------------ ------------- -------------
8,483,865 6,758,649 3,333,860 8,793,883 19,141,619 17,706,979
------------ ------------ ------------ ------------ ------------- -------------
38,686 0 0 0 0 0
2,800 0 0 0 7,320 33
0 0 0 0 0 0
0 0 0 10,054 14,794 0
4,089 6,743 2,996 8,661 11,038 15,415
1,377 1,377 1,416 1,377 1,377 1,377
648 566 244 732 1,368 1,154
28,611 22,451 22,229 21,115 29,218 20,565
------------ ------------ ------------ ------------ ------------- -------------
76,211 31,137 26,885 41,939 65,115 38,544
------------ ------------ ------------ ------------ ------------- -------------
$ 8,407,654 $ 6,727,512 $ 3,306,975 $ 8,751,944 $ 19,076,504 $ 17,668,435
============ ============ ============ ============ ============= =============
$ 8,586,378 $ 6,741,690 $ 3,195,352 $ 8,200,244 $ 19,341,755 $ 17,963,235
(313) (768) (44) 0 (3,124) 3,216
80,356 23,063 18,408 16,469 (418,808) (916,326)
(258,716) (36,473) 93,436 535,231 156,681 618,310
(51) 0 (177) 0 0 0
------------ ------------ --------------- ------------ ------------- ------------
$ 8,407,654 $ 6,727,512 $ 3,306,975 $ 8,751,944 $ 19,076,504 $ 17,668,435
============ ============ ============ ============ ============= =============
$ 5,266,350 $ 6,305,000 $ 2,445,392 $ 8,751,944 $ 18,791,919 $ 17,668,435
520,335 628,544 230,810 748,307 1,926,614 1,651,559
$ 10.12 $ 10.03 $ 10.59 $ 11.70 $ 9.75 $ 10.70
$ 3,141,304 $ 422,512 $ 861,583 -- $ 284,585 --
310,430 42,123 81,343 -- 29,183 --
$ 10.12 $ 10.03 $ 10.59 -- $ 9.75 --
$ 8,355,732 $ 6,627,016 $ 3,091,822 $ 8,076,587 $ 18,680,689 $ 16,903,654
============ ============ ============ ============ ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1997
Global
Bond Bond
Fund Fund
-------------- ---------------
INVESTMENT INCOME
<S> <C> <C>
Dividends* ................................................ $ 2,009,993 $ 6,786
Interest .................................................. 71,767,785 2,009,694
-------------- ----------
73,777,778 2,016,480
-------------- ----------
Expenses
Management fees (Note 3) ................................ 5,460,675 178,622
12b-1 fees (Retail Class) ............................... 43,311 7,484
Trustees' fees and expenses (Note 3B) ................... 5,929 5,816
Accounting and administrative fees (Note 3A) ............ 449,885 11,644
Custodian ............................................... 328,497 75,735
Transfer agent (Institutional Class) .................... 333,172 25,267
Transfer agent (Retail Class) ........................... 33,873 21,667
Audit and tax services .................................. 29,122 25,091
Legal ................................................... 9,804 4,690
Printing ................................................ 138,721 3,777
Registration fees ....................................... 219,956 27,724
Amortization of organization expenses (Note 1J):
Institutional Class ................................... 0 0
Amortization of deferred registration costs (Note 1J):
Institutional Class ................................... 0 0
Retail Class .......................................... 13,394 11,343
Miscellaneous expenses .................................. 0 0
-------------- ----------
7,066,339 398,860
-------------- ----------
Less expenses assumed by the investment adviser (Note 3) (197,170) (123,445)
-------------- ----------
Net investment income (loss) .............................. 66,908,609 1,741,065
-------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments -- net ...................................... 27,841,001 699,462
Foreign currency transactions -- net .................... (159,264) 276,509
-------------- ----------
Total realized gain (loss) on investments and foreign
currency transactions ................................. 27,681,737 975,971
-------------- ----------
Unrealized appreciation (depreciation) on:
Investments -- net ...................................... 12,005,127 (2,303,180)
Foreign currency transactions -- net .................... (58,201) 154,594
-------------- ----------
Total unrealized appreciation (depreciation) on
investments and foreign currency transactions ......... 11,946,926 (2,148,586)
-------------- ----------
Net gain (loss) on investments and foreign currency
transactions ............................................ 39,628,663 (1,172,615)
-------------- ----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS ....... $ 106,537,272 $ 568,450
============== ==========
</TABLE>
*Net of foreign withholding taxes of $5,732, $1,696, and $182 for the Bond,
Global Bond, and High Yield Funds, respectively.
**Commencement of operations, January 2, 1997.
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate U.S.
High Maturity Investment Municipal Short-Term Government
Yield Bond Grade Bond Bond Bond Securities
Fund Fund** Fund** Fund Fund Fund
--------- -------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
$ 43,956 $ 0 $ 5,939 $ 0 $ 0 $ 0
507,793 298,034 151,002 469,008 1,127,685 948,463
--------- -------- -------- -------- ---------- ----------
551,749 298,034 156,941 469,008 1,127,685 948,463
--------- -------- -------- -------- ---------- ----------
34,062 17,125 8,585 34,082 41,211 55,096
4,264 342 885 0 449 0
5,816 5,540 5,729 5,816 5,816 5,816
2,892 2,158 1,097 3,960 7,470 6,187
63,118 51,290 56,182 46,480 60,751 36,450
19,019 17,690 18,951 21,061 23,997 22,052
20,947 16,502 18,251 0 18,437 0
21,091 14,175 14,175 21,091 23,091 21,091
4,527 4,534 3,433 4,557 4,615 4,593
2,325 1,790 1,784 1,337 2,900 2,493
31,176 18,055 18,651 15,057 23,483 15,953
1,545 0 0 0 892 0
10,657 20,550 21,851 0 0 0
11,385 481 3,670 0 11,140 0
0 1,760 2,013 0 1,884 0
--------- -------- -------- -------- ---------- ----------
232,824 171,992 175,257 153,441 226,136 169,731
--------- -------- -------- -------- ---------- ----------
(185,981) (147,955) (162,568) (102,318) (143,266) (87,087)
--------- -------- -------- -------- ---------- ----------
504,906 273,997 144,252 417,885 1,044,815 865,819
--------- -------- -------- -------- ---------- ----------
281,905 34,360 53,364 70,207 4,131 377,725
(451) 0 (150) 0 0 0
--------- -------- -------- -------- ---------- ----------
281,454 34,360 53,214 70,207 4,131 377,725
--------- -------- -------- -------- ---------- ----------
(263,120) (36,473) 93,436 291,399 82,076 420,082
(34) 0 (177) 0 0 0
--------- -------- -------- -------- ---------- ----------
(263,154) (36,473) 93,259 291,399 82,076 420,082
--------- -------- -------- -------- ---------- ----------
18,300 (2,113) 146,473 361,606 86,207 797,807
--------- -------- -------- -------- ---------- ----------
$ 523,206 $271,884 $290,725 $779,491 $1,131,022 $1,663,626
========= ======== ======== ======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Bond Fund
------------------------------------
Year Ended Year Ended
----------------- -----------------
December 31, 1997 December 31, 1996
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) ............. $ 66,908,609 $ 29,104,161
Net realized gain (loss) on:
Investments ............................ 27,841,001 9,916,047
Foreign currency transactions .......... (159,264) 14,349
Unrealized appreciation (depreciation) on:
Investments ............................ 12,005,127 1,541,729
Foreign currency transactions .......... (58,201) (4,455)
-------------- ------------
Increase (decrease) in net assets from
operations ........................... 106,537,272 40,571,831
-------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income .................. (65,355,045) (28,834,672)
Net realized gain on investments ....... (20,396,586) (10,362,123)
RETAIL CLASS
Net investment income .................. (1,374,734) 0
Net realized gain on investments ....... (518,253) 0
-------------- ------------
(87,644,618) (39,196,795)
-------------- ------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived from
capital share transactions ........... 735,013,367 284,158,620
-------------- ------------
Total increase (decrease) in net assets .. 753,906,021 285,533,656
NET ASSETS
Beginning of the period .................. 541,243,813 255,710,157
-------------- ------------
End of the period ........................ $1,295,149,834 $541,243,813
============== ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period .................. $ 537,972 $ 34,589
============== ===========
End of the period ........................ $ (72,275) $ 537,972
============== =============
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Global Bond Fund
------------------------------------
Year Ended Year Ended
----------------- -----------------
December 31, 1997 December 31, 1996
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) ............. $ 1,741,065 $ 1,015,932
Net realized gain (loss) on:
Investments ............................ 699,462 592,117
Foreign currency transactions .......... 276,509 256,616
Unrealized appreciation (depreciation) on:
Investments ............................ (2,303,180) 478,651
Foreign currency transactions .......... 154,594 25,112
-------------- ------------
Increase (decrease) in net assets from
operations ........................... 568,450 2,368,428
-------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income .................. (1,536,299) (1,502,252)
In excess of net investment income ..... (277,442) 0
Net realized gain on investments ....... 0 0
RETAIL CLASS
Net investment income .................. (205,307) 0
In excess of net investment income ..... (34,122) 0
Net realized gain on investments ....... 0 0
-------------- ------------
(2,053,170) (1,502,252)
------------- ------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived from
capital share transactions ........... 8,066,659 15,342,391
-------------- ------------
Total increase (decrease) in net assets .. 6,581,939 16,208,567
NET ASSETS
Beginning of the period .................. 26,512,872 10,304,305
-------------- ------------
End of the period ........................ $ 33,094,811 26,512,872
============== ==========
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period .................. $ (34,950) $ 130,782
============== ============
End of the period ........................ $ (156,023) $ (34,950)
============== ============
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
High Yield Fund
------------------------------------
Year Ended Year Ended
----------------- -----------------
December 31, 1997 December 31, 1996*
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) ............. $ 504,906 $ 37,520
Net realized gain (loss) on:
Investments ............................ 281,905 0
Foreign currency transactions .......... (451) (36)
Unrealized appreciation (depreciation) on:
Investments ............................ (263,120) 4,404
Foreign currency transactions .......... (34) (17)
-------------- ------------
Increase (decrease) in net assets from
operations ........................... 523,206 41,871
-------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income .................. (358,018) (36,708)
Net realized gain on investments ....... (122,085) 0
RETAIL CLASS
Net investment income .................. (165,367) 0
Net realized gain on investments ....... (77,373) 0
-------------- ------------
(722,843) (36,708)
-------------- ------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived from
capital share transactions ........... 6,653,668 1,933,717
-------------- ------------
Redemption Fees (Note 1I) .............. 14,733 0
-------------- ------------
Total increase (decrease) in net assets .. 6,468,764 1,938,880
NET ASSETS
Beginning of the period .................. 1,938,890 10
-------------- ------------
End of the period ........................ $ 8,407,654 $ 1,938,890
============== ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period .................. $ 8,960 $ 0
============== ============
End of the period ........................ $ (313) $ 8,960
============== ============
*Commencement of operations, September 11, 1996.
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Intermediate Investment
Maturity Grade
Bond Fund Bond Fund
----------------- -----------------
Year Ended Year Ended
----------------- -----------------
December 31, 1997* December 31, 1997*
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) ............. $ 273,997 $ 144,252
Net realized gain (loss) on:
Investments ............................ 34,360 53,364
Foreign currency transactions .......... 0 (150)
Unrealized appreciation (depreciation) on:
Investments ............................ (36,473) 93,436
Foreign currency transactions .......... 0 (177)
-------------- ------------
Increase (decrease) in net assets from
operations ........................... 271,884 290,725
-------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income .................. (261,480) (116,549)
In excess of net investment income ..... (21,107) (18,144)
Net realized gain on investments ....... (9,770) (26,811)
RETAIL CLASS
Net investment income .................. (12,922) (27,969)
In excess of net investment income ..... (1,154) (5,864)
Net realized gain on investments ....... (660) (9,286)
-------------- ------------
(307,093) (204,623)
-------------- ------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived
from capital share transactions ...... 6,762,701 3,220,853
-------------- ------------
Total increase (decrease) in net assets .. 6,727,492 3,306,955
NET ASSETS
Beginning of the period .................. 20 20
-------------- ------------
End of the period ........................ $ 6,727,512 $ 3,306,975
============== ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period .................. $ 0 $ 0
============== ============
End of the period ........................ $ (768) $ (44)
*Commencement of operations, January 2, 1997.
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Municipal Bond Fund
------------------------------------
Year Ended Year Ended
----------------- -----------------
December 31, 1997 December 31, 1996
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) ............. $ 417,885 $ 372,837
Net realized gain (loss) on:
Investments ............................ 70,207 54,589
Foreign currency transactions .......... 0 0
Unrealized appreciation (depreciation) on:
Investments ............................ 291,399 (147,252)
Foreign currency transactions .......... 0 0
-------------- ------------
Increase (decrease) in net assets from
operations ........................... 779,491 280,174
-------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income .................. (421,574) (372,889)
Net realized gain on investments ....... (76,418) (65,728)
-------------- ------------
(497,992) (438,617)
-------------- ------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived from
capital share transactions ........... (230,703) 898,750
-------------- ------------
Total increase (decrease) in net assets .. 50,796 740,307
NET ASSETS
Beginning of the period .................. 8,701,148 7,960,841
-------------- ------------
End of the period ........................ $ 8,751,944 $ 8,701,148
============== ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period .................. $ 3,777 $ 3,829
============== ============
End of the period ........................ $ 0 $ 3,777
============== ============
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
Short-Term Bond Fund
------------------------------------
Year Ended Year Ended
----------------- -----------------
December 31, 1997 December 31, 1996
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) ............. $ 1,044,815 $ 1,145,418
Net realized gain (loss) on:
Investments ............................ 4,131 (48,327)
Foreign currency transactions .......... 0 0
Unrealized appreciation (depreciation) on:
Investments ............................ 82,076 (248,733)
Foreign currency transactions .......... 0 0
-------------- ------------
Increase (decrease) in net assets from
operations ........................... 1,131,022 848,358
-------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income .................. (1,046,180) (1,145,361)
Net realized gain on investments ....... 0 0
RETAIL CLASS
Net investment income .................. (10,909) 0
Net realized gain on investments ....... 0 0
-------------- ------------
(1,057,089) (1,145,361)
-------------- ------------
FROM CAPITAL SHARES TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived from
capital share transactions ........... 773,904 (7,513,762)
-------------- ------------
Total increase (decrease) in net assets .. 847,837 (7,810,765)
NET ASSETS
Beginning of the period .................. 18,228,667 26,039,432
-------------- ------------
End of the period ........................ $ 19,076,504 18,228,667
============== ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period .................. $ 10,736 $ 8,066
============== ============
End of the period ........................ $ (3,124) $ 10,736
============== ============
See accompanying notes to financial statements.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- ------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
U.S. Government Securities Fund
------------------------------------
Year Ended Year Ended
----------------- -----------------
December 31, 1997 December 31, 1996
----------------- -----------------
FROM OPERATIONS
Net investment income (loss) ............. $ 865,819 $ 1,351,371
Net realized gain (loss) on:
Investments ............................ 377,725 (716,728)
Foreign currency transactions .......... 0 0
Unrealized appreciation (depreciation) on:
Investments ............................ 420,082 (437,793)
Foreign currency transactions .......... 0 0
-------------- ------------
Increase (decrease) in net assets from
operations ........................... 1,663,626 196,850
-------------- ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
INSTITUTIONAL CLASS
Net investment income .................. (857,571) (1,334,711)
Net realized gain on investments ....... 0 0
-------------- ------------
(857,571) (1,334,711)
FROM CAPITAL SHARES TRANSACTIONS (NOTE 6)
Increase (decrease) in net assets derived from
capital share transactions ........... 2,670,263 (4,169,172)
-------------- ------------
Total increase (decrease) in net assets .. 3,476,318 (5,307,033)
NET ASSETS
Beginning of the period .................. 14,192,117 19,499,150
-------------- ------------
End of the period ........................ $ 17,668,435 $ 14,192,117
============== ============
UNDISTRIBUTED NET INVESTMENT INCOME
Beginning of the period .................. $ (4,942) $ (1,533)
============== ============
End of the period ........................ $ (3,216) $ (4,942)
============== ============
See accompanying notes to financial statements.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Year Ended December 31,
<TABLE>
<CAPTION>
Bond Fund
--------------------
Institutional Class
--------------------
1997
--------------------
<S> <C>
Net asset value, beginning of period ........................ $ 12.38
--------
Income from investment operations -
Net investment income (loss) .............................. 0.86
Net realized and unrealized gain (loss) on investments .... 0.67
--------
Total from investment operations ........................ 1.53
--------
Less distributions -
Dividends from net investment income ...................... (0.86)
Distributions in excess of net investment income .......... 0.00
Distributions from net realized capital gains ............. (0.22)
--------
Total distributions ..................................... (1.08)
---------
Net asset value, end of period .............................. $ 12.83
=========
Total return (%)(c) ......................................... 12.7
Net assets, end of period (000) ............................. $1,261,910
Ratio of operating expenses to average net assets (%)(b)(d) . 0.75
Ratio of net investment income to average net assets (%)(b) . 7.36
Portfolio turnover rate (%)(a) .............................. 41
The ratios of expenses to average net assets without giving
effect to the voluntary expense limitations described in
Note 3 to the Financial Statements would have been (%)(b) . 0.77
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been: .............. $ 0.85
* From commencement of class operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Annualized for periods less than one year.
(c) Total returns would have been lower had the adviser not reduced its advisory fees
and/or borne other operating expenses.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the
period. Without this reimbursement the Fund's ratio of operating expenses would have
been higher.
(e) Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Year Ended December 31,
<TABLE>
<CAPTION>
Bond Fund
- ---------------------------------------------------------------------------------------------------------------
Institutional Class Retail Class
- --------------------------------------------------------------------------------- -------------
1996 1995 1994 1993 1997*
- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C>
$ 12.29 $ 10.05 $ 11.37 $ 10.36 $ 12.38
- --------- --------- --------- -------- ---------
0.86 0.82 0.83 0.84 0.84(e)
0.35 2.32 (1.29) 1.43 0.65
- --------- --------- --------- --------- ---------
1.21 3.14 (0.46) 2.27 1.49
- --------- --------- --------- --------- ---------
(0.86) (0.82) (0.84) (0.81) (0.83)
0.00 0.00 (0.02) 0.00 0.00
(0.26) (0.08) 0.00 (0.45) (0.22)
- --------- --------- --------- --------- ---------
(1.12) (0.90) (0.86) (1.26) (1.05)
- --------- --------- --------- --------- ---------
$ 12.38 $ 12.29 $ 10.05 $ 11.37 $ 12.82
======== ======== ======== ======== ========
10.3 32.0 (4.1) 22.2 12.4
$541,244 $255,710 $ 82,985 $ 64,222 $ 33,240
0.75 0.79 0.84 0.94 1.00
7.93 8.34 7.92 8.26 7.09
42 35 87 170 41
0.75 0.79 0.84 0.94 1.20
$ 0.86 $ 0.82 $ 0.83 $ 0.84 $ 0.82(e)
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Continued)
Year Ended December 31,
Global Bond Fund
--------------------
Institutional Class
--------------------
1997
---------
Net asset value, beginning of period ..................... $ 12.35
---------
Income from investment operations -
Net investment income (loss) ........................... 0.71
Net realized and unrealized gain (loss) on investments . (0.42)
--------
Total from investment operations ..................... 0.29
--------
Less distributions -
Dividends from net investment income ................... (0.69)
Distributions in excess of net investment income ....... (0.12)
Distributions from capital ............................. 0.00
Distributions from net realized capital gains .......... 0.00
--------
Total distributions .................................. (0.81)
--------
Net asset value, end of period ........................... $ 11.83
========
Total return (%)(c) ...................................... 2.3
Net assets, end of period (000) .......................... $ 28,401
Ratio of operating expenses to average net assets (%)(b)(d) 0.90
Ratio of net investment income to average net assets (%)(b) 5.88
Portfolio turnover rate (%)(a) ........................... 75
The ratios of expenses to average net assets without giving
effect to the voluntary expense limitations described in Note
3 to the Financial Statements would have been (%)(b) ........ 1.22
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been: ................$ 0.67
* From commencement of class operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Annualized for periods less than one year.
(c) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement the Fund's ratio of
operating expenses would have been higher.
(e) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (Continued)
Year Ended December 31,
<TABLE>
<CAPTION>
Global Bond Fund
- ------------------------------------------------------------------------------------------------------------
Institutional Class Retail Class
- ------------------------------------------------------------------------------- ------------
1996 1995 1994 1993 1997*
- ------- ------- -------- ------------ --------
<S> <C> <C> <C> <C>
$ 11.39 $ 9.82 $ 11.06 $ 10.32 $ 12.35
- ------- ------- -------- -------- --------
0.44 1.04 0.67 0.54 0.63(e)
1.27 1.31 (1.63) 0.96 (0.37)
- ------- ------- -------- -------- --------
1.71 2.35 (0.96) 1.50 0.26
- ------- ------- -------- -------- --------
(0.75) (0.78) (0.04) (0.49) (0.69)
0.00 0.00 0.00 0.00 (0.09)
0.00 0.00 (0.24) 0.00 0.00
0.00 0.00 0.00 (0.27) 0.00
- ------- ------- -------- -------- --------
(0.75) (0.78) (0.28) (0.76) (0.78)
- ------- ------- -------- -------- --------
$ 12.35 $ 11.39 $ 9.82 $ 11.06 $ 11.83
======= ======= ======== ======== ========
15.0 23.9 (8.7) 14.6 2.0
$26,513 $10,304 $ 25,584 $ 21,378 $ 4,694
1.50 1.50 1.30 1.50 1.15
6.37 8.17 7.02 5.54 5.60
131 148 153 150 75
1.77 1.69 1.30 1.51 2.44
$ 0.42 $ 1.02 $ 0.67 $ 0.54 $ 0.49(e)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
High Yield Fund
----------------------------------------------------
Institutional Class Retail Class
------------------------------- ------------
1997 1996* 1997*
-------- --------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period .................... $ 10.11 $ 10.00 $ 10.11
-------- -------- --------
Income from investment operations -
Net investment income (loss) .......................... 0.83 0.20 0.85(e)
Net realized and unrealized gain (loss) on investments 0.27 0.11 0.23
-------- -------- --------
Total from investment operations .................... 1.10 0.31 1.08
-------- -------- --------
Less distributions -
Dividends from net investment income .................. (0.86) (0.20) (0.84)
Distributions from net realized capital gains ......... (0.26) 0.00 (0.26)
-------- -------- --------
Total distributions ................................. (1.12) (0.20) (1.10)
-------- -------- --------
Redemption Fees ......................................... 0.03 0.00 0.03
-------- -------- --------
Net asset value, end of period .......................... $ 10.12 $ 10.11 $ 10.12
======== ======== ========
Total return (%)(a)(c) .................................. 11.4 3.1 11.2
Net assets, end of period (000) ......................... $ 5,266 $ 1,939 $ 3,141
Ratio of operating expenses to average net assets
(%)(b)(d) ............................................. 0.75 0.75 1.00
Ratio of net investment income to average net
assets (%)(b) ......................................... 8.96 8.85 8.75
Portfolio turnover rate (%)(a) .......................... 68 0 68
The ratios of expenses to average net assets without
giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements would
have been (%)(b) ...................................... 3.81 12.06 4.79
Without giving effect to the voluntary expense
limitations described in Note 3 to the Financial
Statements net investment income per share would have
been: ................................................. $ 0.54 $ (0.05) $ 0.48(e)
* Commencement of operations on September 11, 1996, and January 2, 1997, for the
Institutional and Retail Classes, respectively.
(a) Periods less than one year are not annualized.
(b) Annualized for periods less than one year.
(c) Total returns would have been lower had the adviser not reduced its advisory fees
and/or borne other operating expenses.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the
period. Without this reimbursement the Fund's ratio of operating expenses would have
been higher.
(e) Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Intermediate Maturity Bond Fund
----------------------------------------------
Institutional Class Retail Class
------------------------ ---------------
1997* 1997*
----- -----
<S> <C> <C>
Net asset value, beginning of period ........... $ 10.00 $ 10.00
======== ========
Income from investment operations -
Net investment income (loss)(e) .............. 0.64 0.64
Net realized and unrealized gain (loss) on
investments ................................ 0.00 (0.02)
-------- --------
Total from investment operations ........... 0.64 0.62
-------- --------
Less distributions -
Dividends from net investment income ......... (0.56) (0.54)
Distributions in excess of net investment
income ..................................... (0.03) (0.03)
Distributions from net realized capital gains (0.02) (0.02)
-------- --------
Total distributions ........................ (0.61) (0.59)
-------- --------
Net asset value, end of period ................. $ 10.03 $ 10.03
======== ========
Total return (%)(c) ............................ 6.4 6.2
Net assets, end of period (000) ................ $ 6,305 $ 423
Ratio of operating expenses to average net
assets (%)(b)(d) ............................. 0.55 0.80
Ratio of net investment income to average net
assets
(%)(b) ....................................... 6.38 6.13
Portfolio turnover rate (%)(a) ................. 119 119
The ratios of expenses to average net assets
without giving effect to the voluntary expense
limitations described in Note 3 to the
Financial Statements would have been
(%)(b) ....................................... 3.66 14.56
Without giving effect to the voluntary expense
limitations described in Note 3 to the
Financial Statements net investment income per
share would have been: ....................... $ 0.29 $ (0.50)
* Commencement of operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Annualized for periods less than one year.
(c) Total returns would have been lower had the adviser not reduced its advisory fees
and/or borne other operating expenses.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the
period. Without this reimbursement the Fund's ratio of operating expenses would have
been higher.
(e) Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Investment Grade Bond Fund
----------------------------------------------
Institutional Class Retail Class
----------------------- ----------------
1997* 1997*
----- -----
<S> <C> <C>
Net asset value, beginning of period ............ $ 10.00 $ 10.00
-------- --------
Income from investment operations -
Net investment income (loss) .................. 0.65 0.62(e)
Net realized and unrealized gain (loss) on
investments ................................. 0.77 0.78
-------- --------
Total from investment operations ............ 1.42 1.40
-------- --------
Less distributions -
Dividends from net investment income .......... (0.63) (0.62)
Distributions in excess of net investment
income ...................................... (0.08) (0.07)
Distributions from net realized capital gains . (0.12) (0.12)
-------- --------
Total distributions ......................... (0.83) (0.81)
-------- --------
Net asset value, end of period .................. $ 10.59 $ 10.59
======== ========
Total return (%)(c) ............................. 14.5 14.3
Net assets, end of period (000) ................. $ 2,445 $ 862
Ratio of operating expenses to average net assets
(%)(b)(d) ..................................... 0.55 0.80
Ratio of net investment income to average net
assets (%)(b) ................................. 6.74 6.51
Portfolio turnover rate (%)(a) .................. 112 112
The ratios of expenses to average net assets
without giving effect to the voluntary expense
limitations described in Note 3 to the
Financial Statements would have been (%)(b) ... 7.59 10.95
Without giving effect to the voluntary expense
limitations described in Note 3 to the
Financial Statements net investment income per
share would have been: ........................ $ (0.03) $ (0.31)
* Commencement of operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Annualized for periods less than one year.
(c) Total returns would have been lower had the adviser not reduced its advisory fees
and/or borne other operating expenses.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses during the
period. Without this reimbursement the Fund's ratio of operating expenses would have
been higher.
(e) Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
<CAPTION>
Municipal Bond Fund
-----------------------
Institutional Class
-----------------------
1997
-----------------------
<S> <C>
Net asset value, beginning of period ......................... $ 11.29
--------
Income from investment operations -
Net investment income (loss) ............................... 0.56
Net realized and unrealized gain (loss) on investments ..... 0.51
--------
Total from investment operations ......................... 1.07
--------
Less distributions -
Dividends from net investment income ....................... (0.56)
Distributions from net realized capital gains .............. (0.10)
--------
Total distributions ...................................... (0.66)
--------
Net asset value, end of period ............................... $ 11.70
========
Total return (%)(a) .......................................... 9.8
Net assets, end of period (000) .............................. $ 8,752
Ratio of operating expenses to average net assets (%)(b) ..... 0.60
Ratio of net investment income to average net assets (%) ..... 4.90
Portfolio turnover rate (%) .................................. 50
The ratios of expenses to average net assets without giving
effect to the voluntary expense limitations described in
Note 3 to the Financial Statements would have been (%) ..... 1.80
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been: ............... $ 0.42
(a) Total returns would have been lower had the adviser not reduced its advisory fees
and/or borne other operating expenses.
(b) The adviser has agreed to reimburse a portion of the Fund's expenses during the
period. Without this reimbursement the Fund's ratio of operating expenses would have
been higher.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Municipal Bond Fund
- -----------------------------------------------------------------------------------------------------
Institutional Class
- -----------------------------------------------------------------------------------------------------
1996 1995 1994 1993
- -------- -------- -------- --------
<S> <C> <C> <C>
$ 11.53 $ 10.41 $ 11.54 $ 10.95
- -------- -------- --------
0.52 0.52 0.52 0.51
(0.15) 1.16 (1.13) 0.74
- -------- -------- --------
0.37 1.68 (0.61) 1.25
- -------- -------- --------
(0.52) (0.52) (0.52) (0.51)
(0.09) (0.04) 0.00 (0.15)
- -------- -------- --------
(0.61) (0.56) (0.52) (0.66)
- -------- -------- --------
$ 11.29 $ 11.53 $ 10.41 $ 11.54
======== ======== ======== ========
3.3 16.5 (5.4) 11.6
$ 8,701 $ 7,961 $ 7,270 $ 5,160
1.00 1.00 1.00 1.00
4.61 4.72 4.79 4.50
38 41 28 36
2.31 2.02 2.37 3.22
$ 0.37 $ 0.41 $ 0.37 $ 0.26
</TABLE>
<PAGE>
Short Term Bond Fund
---------------------
Institutional Class
-------------------
1997
------
Net asset value, beginning of period ........................ $ 9.70
-----------
Income from investment operations -
Net investment income (loss) .............................. 0.61
Net realized and unrealized gain (loss) on investments .... 0.06
-----------
Total from investment operations ........................ 0.67
-----------
Less distributions -
Dividends from net investment income ...................... (0.62)
Distributions from net realized capital gains ............. 0.00
-----------
Total distributions ..................................... (0.62)
-----------
Net asset value, end of period .............................. $ 9.75
===========
Total return (%)(c) ......................................... 7.1
Net assets, end of period (000) ............................. $18,792
Ratio of operating expenses to average net assets (%)(b)(d) . 0.50
Ratio of net investment income to average net assets (%) .... 6.34
Portfolio turnover rate (%)(a) .............................. 91
The ratios of expenses to average net assets without giving
effect to the voluntary expense limitations described in
Note 3 to the Financial Statements would have been (%)(b) . 1.19
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been: .............. $ 0.55
* From commencement of class operations on January 2, 1997.
(a) Periods less than one year are not annualized.
(b) Annualized for periods less than one year.
(c) Total returns would have been lower had the adviser not reduced its
advisory fees and/or borne other operating expenses.
(d) The adviser has agreed to reimburse a portion of the Fund's expenses
during the period. Without this reimbursement the Fund's ratio of
operating expenses would have been higher.
<PAGE>
<TABLE>
<CAPTION>
Short Term Bond Fund
- ----------------------------------------------------------------------------------------------------------
Institutional Class Retail Class
- ------------------------------------------------------------------------------------------ ------------
1996 1995 1994 1993 1997*
- ---------- -------- ------ -------- --------
<S> <C> <C> <C> <C>
$ 9.81 $ 9.46 $ 9.95 $ 9.87 $ 9.70
- --------- -------- ------- -------- -------
0.55 0.63 0.66 0.59 0.59
(0.11) 0.35 (0.49) 0.08 0.06
- --------- ------- ------- -------- -------
0.44 0.98 0.17 0.67 0.65
- --------- ------- ------- -------- -------
(0.55) (0.63) (0.66) (0.59) (0.60)
0.00 0.00 0.00 0.00 0.00
- --------- ------- ------- -------- -------
(0.55) (0.63) (0.66) (0.59) (0.60)
- --------- ------- ------- -------- -------
$ 9.70 $ 9.81 $ 9.46 $ 9.95 $ 9.75
======= ======= ======= ======= =======
4.7 10.6 1.8 7.0 6.9
$18,229 $26,039 $19,440 $15,226 $ 285
1.00 1.00 1.00 1.00 0.75
5.69 6.46 6.88 5.97 6.04
120 214 34 81 91
1.17 1.03 1.33 1.55 17.77
$ 0.53 $ 0.62 $ 0.63 $ 0.54 $ (1.08)
</TABLE>
<PAGE>
U.S.
Government
Securities Fund
-----------------------
Institutional Class
-----------------------
1997
-----------
Net asset value, beginning of period ......................... $ 10.08
--------
Income from investment operations -
Net investment income (loss) ............................... 0.63
Net realized and unrealized gain (loss) on investments ..... 0.61
--------
Total from investment operations ......................... 1.24
--------
Less distributions -
Dividends from net investment income ....................... (0.62)
Distributions from net realized capital gains .............. 0.00
--------
Total distributions ...................................... (0.62)
--------
Net asset value, end of period ............................... $ 10.70
========
Total return (%)(a) .......................................... 12.7
Net assets, end of period (000) .............................. $ 17,668
Ratio of operating expenses to average net assets (%)(b) ..... 0.60
Ratio of net investment income to average net assets (%) ..... 6.29
Portfolio turnover rate (%) .................................. 156
The ratios of expenses to average net assets without giving
effect to the voluntary expense limitations described in
Note 3 to the Financial Statements would have been (%) ..... 1.23
Without giving effect to the voluntary expense limitations
described in Note 3 to the Financial Statements net
investment income per share would have been: ............... $ 0.57
(a)Total returns would have been lower had the adviser not reduced its advisory
fees and/or borne other operating expenses.
(b)The adviser has agreed to reimburse a portion of the Fund's expenses during
the period. Without this reimbursement the Fund's ratio of operating expenses
would have been higher.
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Securities Fund
- --------------------------------------------------------------------------------------------------------
Institutional Class
- --------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
---------- -------- -------- --------
<S> <C> <C> <C>
$ 10.64 $ 9.22 $ 10.53 $ 10.45
-------- ------- -------- --------
0.68 0.66 0.64 0.64
(0.57) 1.42 (1.30) 1.00
-------- ------- -------- --------
0.11 2.08 (0.66) 1.64
-------- ------- -------- --------
(0.67) (0.66) (0.65) (0.65)
0.00 0.00 0.00 (0.91)
-------- ------- -------- --------
(0.67) (0.66) (0.65) (1.56)
-------- ------- -------- --------
$ 10.08 $ 10.64 $ 9.22 $ 10.53
======== ======= ======== ========
1.3 23.0 (6.3) 15.7
$ 14,192 $19,499 $ 17,341 $ 18,317
1.00 1.00 1.00 1.00
6.23 6.47 6.60 5.95
137 169 242 277
1.19 1.22 1.22 1.29
$ 0.66 $ 0.64 $ 0.62 $ 0.61
</TABLE>
<PAGE>
LOOMIS SAYLES FIXED INCOME FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. The Loomis Sayles Funds is comprised of seventeen no-load mutual funds (the
"Funds").
Each Fund is a series of the 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.
Each Fund is separately managed and has its own investment objective and
policies. Loomis, Sayles & Company, L.P. ("Loomis Sayles") is the investment
adviser of each Fund.
The Trust consists of the following Funds:
<TABLE>
<CAPTION>
Fixed Income Funds Equity Funds
- ------------------ ------------
<S> <C>
Loomis Sayles Bond Fund Loomis Sayles Core Value Fund
Loomis Sayles Global Bond Fund Loomis Sayles Growth Fund
Loomis Sayles High Yield Fund Loomis Sayles International Equity Fund
Loomis Sayles Intermediate Maturity Bond Fund Loomis Sayles Mid-Cap Growth Fund
Loomis Sayles Investment Grade Bond Fund Loomis Sayles Mid-Cap Value Fund
Loomis Sayles Municipal Bond Fund Loomis Sayles Small Cap Growth Fund
Loomis Sayles Short-Term Bond Fund Loomis Sayles Small Cap Value Fund
Loomis Sayles U.S. Government Securities Fund Loomis Sayles Strategic Value Fund
Loomis Sayles Worldwide Fund
</TABLE>
The Fixed Income Funds (excluding the Municipal Bond and U.S. Government
Securities Funds which only offer Institutional shares) offer Institutional
and Retail Class shares. Each class has equal pro rata interest in the assets
of the relevant fund and general voting privileges. The Fixed Income Funds
commenced sale of the Retail Class shares on January 2, 1997. On this date,
the original class of shares was renamed the Institutional Class. Retail and
Institutional Classes differ with respect to distribution and certain other
class-specific expenses and expense reductions. Retail Class shares are
subject to distribution fees at an annual rate of 0.25% of the relevant fund's
average net assets, pursuant to a distribution plan adopted in accordance with
Rule 12b-1 under the Investment Company Act of 1940. Retail Class shares have
exclusive voting rights with respect to its distribution plan.
On October 27, 1997, the Board of Trustees approved the creation of an
additional class of shares ("Admin Class") for the Bond Fund. These shares are
subject to distribution fees at an annual rate of 0.25% of the Fund's average
net assets, pursuant to a distribution plan adopted in accordance with Rule
12b-1 under the Investment Company Act of 1940, and to administrative fees at
an annual rate of 0.25% of the Fund's average daily net assets attributable to
the Admin Class. Beginning January 2, 1998, the Admin Class shares can be
purchased through certain broker dealers and financial intermediaries, who are
record owners of the shares.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The following summarizes the
significant accounting policies of the Fixed Income Funds:
A. SECURITY VALUATION -- Long term debt securities for which quotations are
readily available are valued by a pricing service, as approved by the Board of
Trustees, which generally uses the most recent bid prices in the principal
market in which such securities are normally traded. Municipal debt securities
are valued by a pricing service, as approved by the Board of Trustees, which
generally uses a computerized matrix system or dealer supplied quotations that
consider market transactions for comparable securities. Equity securities for
which quotations are readily available are valued at their last sale price on
the exchange where primarily traded or, if there is no reported sale during
the day, at the closing bid price. Short-term securities with a remaining
maturity of 60 days or less are valued at amortized cost, which approximates
market value. Other securities for which quotations are not readily available
(including restricted securities, if any) are valued primarily using dealer
supplied quotations or at their fair values as determined in good faith under
the general supervision of the Board of Trustees.
B. REPURCHASE AGREEMENTS -- The Funds engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Funds
take possession of an underlying debt obligation subject to an obligation of
the seller to repurchase, and the Funds to resell, the obligation at an
agreed-upon price and time. This arrangement results in a fixed rate of return
that is not subject to market fluctuations during the Funds' holding period.
The Funds, through their custodian, receive delivery of the underlying
securities collateralizing repurchase agreements. It is the funds' policy that
the market value of the collateral be at least equal to 102% of the repurchase
price. These securities are marked-to-market daily. Loomis Sayles is
responsible for determining that the value of the collateral is at all times
at least equal to 102% of the repurchase price. In connection with
transactions in repurchase agreements, if the seller defaults and the value of
the collateral declines or if the seller enters into insolvency proceedings,
realization of the collateral by the Funds may be delayed or limited.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of each of the Funds
(including those Funds that invest in foreign securities) are maintained in
U.S. dollars. The value of securities, currencies and other assets and
liabilities denominated in currencies other than U.S. dollars is translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of
the period. Purchases and sales of investment securities are translated at
contractual currency exchange rates established at the time of the trade.
Income and expenses are translated at prevailing exchange rates on the
respective dates of such transactions.
The results of operations resulting from changes in foreign exchange rates on
investments are not isolated from fluctuations arising from changes in market
prices of securities held. All such fluctuations are included with net
realized and unrealized gain or loss from investments.
Net realized and unrealized gains and losses on foreign currency transactions
represent foreign exchange gains and losses from the sale of short-term
securities and holdings of foreign currencies, foreign currency gains and
losses between trade dates and settlement dates on investment securities
transactions, sales and maturities of forward foreign currency contracts, and
the difference between the amounts of daily interest accruals on the books of
the Funds and the amounts actually received resulting from changes in exchange
rates on the payable date.
Certain funds use foreign currency contracts to facilitate transactions in
foreign-denominated securities. Losses may arise from changes in the value of
the foreign currency or if the counterparties do not perform under the
contracts' terms. The U.S. dollar value of foreign currency contracts is
determined using contractual currency exchange rates established at the time
of each trade. The cost of the foreign currency contracts is included in the
cost basis of the associated investment.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- Each Fund that may invest in foreign
securities may enter into forward foreign currency contracts, which are
agreements between two parties to buy and sell currencies at a set price on a
future date, 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 will be denominated.
Forward currency contracts are valued at the forward currency exchange rate
and marked-to-market daily. The change in market value is recorded as
unrealized appreciation (depreciation) on foreign currency transactions in the
Funds' Statements of Assets and Liabilities. Realized gains (losses) at the
close of a contract are recorded as realized gain (loss) on foreign currency
transactions in the Funds' Statements of Operations.
The use of forward foreign exchange contracts does not eliminate fluctuations
in the underlying price of the Fund's investment securities, but does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency exchange contracts limit the risk of loss due to a
decline in the value of hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Funds could be exposed to additional risks if the counterparties to the
contracts are unable to meet the terms of their contracts.
These contracts involve risks in excess of the unrealized appreciation
(depreciation) reflected in the Funds' Statements of Assets and Liabilities.
At December 31, 1997, the Global Bond Fund had the following open forward
foreign exchange contracts:
Local Aggregate Unrealized
Delivery Currency Face Total Appreciation
Date Amount Amount Value (Depreciation)
-------- -------- ---------- ----- --------------
Japanese Yen (sell) 1/30/98 170,000,000 $1,429,773 $1,309,214 $120,559
Japanese Yen (buy) 1/30/98 24,000,000 192,864 184,830 (8,034)
Japanese Yen (buy) 1/30/98 23,000,000 177,991 177,129 (862)
Japanese Yen (buy) 1/30/98 15,000,000 119,218 115,519 (3,699)
Japanese Yen (buy) 1/30/98 12,000,000 92,886 92,415 (471)
Netherland Guilder
(sell) 1/30/98 6,850,000 3,485,828 3,386,601 99,227
Netherland Guilder
(buy) 1/30/98 6,850,000 3,445,068 3,386,601 (58,467)
Deutsche Mark (sell) 4/28/98 2,346,615 1,365,502 1,313,609 51,893
Deutsche Mark (buy) 4/28/98 2,346,615 1,365,502 1,313,609 (51,893)
Netherland Guilder
(sell) 4/28/98 1,083,000 563,065 538,182 24,883
Netherland Guilder
(buy) 4/28/98 1,083,000 547,301 538,182 (9,119)
Netherland Guilder
(sell) 4/30/98 2,800,000 1,415,929 1,391,568 24,361
Netherland Guilder
(buy) 4/30/98 2,800,000 1,415,143 1,391,568 (23,575)
---------
$ 164,803
---------
E. SECURITY TRANSACTIONS, RELATED INVESTMENT INCOME AND EXPENSES -- Security
transactions are accounted for on the trade date (the date the buy or sell is
executed). Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Interest income is increased by the
accretion of discount. Discounts on zero coupon bonds, original issues, step
bonds and payment in kind bonds are accreted according to the effective
interest method. Interest income on the Municipal Bond Fund is decreased by
the amortization of premium. Premiums are amortized using the yield to
maturity method. In determining net gain or loss on securities sold, the cost
of securities are determined on the identified cost basis.
Most expenses of the Trust are directly attributed to a particular fund.
Expenses which cannot be directly attributed are apportioned between funds in
the Trust.
Investment income, realized and unrealized gains and losses, and the common
expenses of a fund are allocated on a pro rata basis to each class based on
the relative net assets of each class to the total net assets of the fund.
Each class of shares differs in its respective distribution and certain other
class specific fees and expense reductions.
F. WHEN-ISSUED SECURITIES -- Delivery and payment for securities purchased on
a when-issued or delayed delivery basis can take place one month or more after
the date of the transactions. The price of the underlying securities and the
date when the securities will be delivered and paid for are fixed at the time
the transaction is negotiated. Losses may arise due to changes in the market
value of the underlying securities or if the counterparty does not perform
under the contract. Each Fund instructs the custodian to segregate assets in a
separate account with a current value at least equal to the amount of its
when-issued purchase commitments. At December 31, 1997, the Funds had no such
commitments.
G. FEDERAL INCOME TAXES -- Each Fund is a separate entity for federal income
tax purposes. Each Fund intends to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies, and to distribute
to its shareholders all of its net investment income and any net realized
capital gains. Accordingly, no provision for federal income tax or excise tax
has been made.
At December 31, 1997, the following Funds had net tax basis capital loss
carryforwards of which may be applied against any realized net taxable gains
of each succeeding year until fully utilized or expired, whichever occurs
first:
Fund Amount
- ---- ------
Short-Term Bond Fund ............................................. $418,097*
U.S. Government Securities Fund .................................. 915,332**
*$129,507 and $288,590 will expire on December 31, 2002 and 2003,
respectively.
**$177,989 and $737,343 will expire on December 31, 2002 and 2003,
respectively.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Municipal Bond Fund and
Short-Term Bond Fund declare dividends daily to shareholders of record at the
time and pay dividends monthly. The Bond, High Yield, Intermediate Maturity
Bond, Investment Grade Bond and U.S. Government Securities Funds declare and
pay their net investment income quarterly. The Global Bond Fund declares and
pays its net investment income to shareholders annually. Distributions from
net realized capital gains are declared and paid on an annual basis by all of
the funds. Income and capital gain distributions, if any, are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences, which may result in
reclassifications to the Fund's capital accounts to reflect income and gains
available for distribution, are primarily due to differing treatments for
litigation proceeds, foreign currency transactions, capital loss
carryforwards, deferred losses due to wash sales and excise tax regulations,
non-deductible organization costs, and net operating losses. Some of these
classifications may include temporary book and tax basis differences that will
reverse in subsequent periods. Dividends from net investment income are
determined on a class level. Capital gains dividends are determined on a fund
level.
I. REDEMPTION FEES -- Shares held in the High Yield Fund less than one year
are subject to a redemption fee equal to 2% of the amount redeemed. For the
period ended December 31, 1997, the redemption fees amounted to $10,099 and
$4,634, for the Institutional and Retail Classes, respectively.
J. ORGANIZATION EXPENSE AND DEFERRED REGISTRATION COSTS -- In 1992, costs
approximating $7,800 were incurred in connection with the organization of the
Short-Term Bond Fund. These costs were paid by the Fund and have been
amortized by the Fund over 60 months to its Institutional Class.
In 1996, costs approximating $24,600 were incurred in connection with the
initial registration and organization of the High Yield Fund. These costs were
paid by the Fund and are being amortized by the Fund to its Institutional
Class as follows: $16,100 in initial registration costs over 12 months and
$8,500 in organization costs over 60 months.
In 1997, the following costs were incurred in connection with the respective
Fund's initial registration of its Retail Class shares which were offered for
sale beginning on January 2, 1997. These costs are being amortized to the
respective Fund's Retail Class over 12 months:
Bond Fund ............................................................ $13,968
Global Bond Fund ..................................................... 11,829
High Yield Fund ...................................................... 11,907
Short-Term Bond Fund ................................................. 11,924
In addition, in 1997 the following costs were incurred in connection with the
respective Fund's initial registration of its Institutional and Retail Class
shares. These costs are amortized over 12 months and allocated to each class
of shares on a pro rata basis:
Intermediate Maturity Bond Fund ..................................... $26,557
Investment Grade Bond Fund .......................................... 26,557
2. PURCHASES AND SALES OF SECURITIES -- (excluding short-term investments)
for each Fund for the period ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
Purchases
-------------------------------------
U.S. Government Other
------------------- ---------
<S> <C> <C>
Bond Fund ............................................... $181,709,574 $845,789,363
Global Bond Fund ........................................ 1,363,832 25,538,059
High Yield Fund ......................................... 474,531 8,989,267
Intermediate Maturity Bond Fund ......................... 4,496,490 6,433,545
Investment Grade Bond Fund .............................. 1,803,661 3,318,758
Municipal Bond Fund ..................................... 1,188,645 2,936,622
Short-Term Bond Fund .................................... 12,375,847 2,890,439
U.S. Government Securities Fund ......................... 24,026,000 0
<CAPTION>
Sales
-------------------------------------
U.S. Government Other
------------------- --------
<S> <C> <C>
Bond Fund ............................................... $ 66,480,221 $294,744,716
Global Bond Fund ........................................ 4,263,972 16,623,626
High Yield Fund ......................................... 461,488 3,111,676
Intermediate Maturity Bond Fund ......................... 3,044,132 1,603,979
Investment Grade Bond Fund .............................. 1,430,698 793,262
Municipal Bond Fund ..................................... 1,193,879 3,155,556
Short-Term Bond Fund .................................... 12,402,558 2,371,697
U.S. Government Securities Fund ......................... 21,467,253 0
</TABLE>
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES -- During the
period ended December 31, 1997, the Funds incurred management fees payable to
Loomis Sayles. Certain officers and employees of Loomis Sayles are also
officers or Trustees of the Trust. Loomis Sayles' 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. Separate management agreements for each Fund in effect
during the period ended December 31, 1997, provided for fees at the following
annual percentage rate of each Fund's average daily assets:
Annual
Percentage
Fund Rate
---- ----------
Bond Fund ................................................... 0.60%
Global Bond Fund ............................................ 0.60%
High Yield Fund ............................................. 0.60%
Intermediate Maturity Bond Fund ............................. 0.40%
Investment Grade Bond Fund .................................. 0.40%
Municipal Bond Fund ......................................... 0.40%
Short-Term Bond Fund ........................................ 0.25%
U.S. Government Securities Fund ............................. 0.40%
Loomis Sayles voluntarily agreed, for an indefinite period, to reduce its
advisory fees and/or bear other expenses, to the extent necessary to limit the
total operating expenses of the Institutional Class shares of each Fund to the
following percentage rate of the Fund's average daily net assets:
Annual
Percentage
Fund Rate
---- ----------
Bond Fund ................................................... 0.75%
Global Bond Fund ............................................ 0.90%
High Yield Fund ............................................. 0.75%
Intermediate Maturity Bond Fund ............................. 0.55%
Investment Grade Bond Fund .................................. 0.55%
Municipal Bond Fund ......................................... 0.60%
Short-Term Bond Fund ........................................ 0.50%
U.S. Government Securities Fund ............................. 0.60%
Loomis Sayles also voluntarily agreed, for an indefinite period, to reduce its
advisory fees and/or bear other expenses, to the extent necessary to limit the
total operating expenses of the Retail Class shares of each Fund to the
following percentage rate of the Fund's average daily net assets:
Annual
Percentage
Fund Rate
---- ----------
Bond Fund ................................................... 1.00%
Global Bond Fund ............................................ 1.15%
High Yield Fund ............................................. 1.00%
Intermediate Maturity Bond Fund ............................. 0.80%
Investment Grade Bond Fund .................................. 0.80%
Short-Term Bond Fund ........................................ 0.75%
Loomis Sayles may change or terminate these voluntary agreements at any time,
but the relevant prospectus would be supplemented at the time to describe the
change.
A. OTHER EXPENSES -- Through May 31, 1997, New England Funds, L.P. (a
subsidiary of New England Investment Companies) performed certain
administrative, accounting and other services for the Trust. The expenses of
those services, which were paid by the Trust, include the following: (i)
expenses for personnel performing bookkeeping, accounting, internal auditing,
financial reporting functions and clerical functions relating to the Funds,
and (ii) expenses for services required in connection with the preparation of
registration statements and prospectuses, shareholder reports and reports and
questionnaires for SEC compliance. For the period ended May 31, 1997 these
expenses amounted to $66,997 for the eight Loomis Sayles Funds presented
herein and are shown separately in the financial statements as Accounting and
Administrative fees. Effective June 1, 1997, Loomis Sayles contracted with
State Street Bank and Trust Company ("State Street") as Administrator to
perform these services.
B. TRUSTEES FEES AND EXPENSES -- The Trust does not pay any compensation
directly to its officers or Trustees who are directors, officers or employees
of Loomis Sayles, The New England or their affiliates. Each independent
Trustee is compensated by the Trust on behalf of each Fund at the rate of
$1,250 per Fund per year, plus travel expenses for each meeting attended.
C. SHAREHOLDERS -- At December 31, 1997, Loomis Sayles held 14,104 shares of
beneficial interest in the Municipal Bond Fund and 56,715 shares of beneficial
interest in the High Yield Fund and 108,128 shares of the Investment Grade
Bond Fund. In addition, Loomis Sayles Funded Pension Plan and Trust and the
Loomis Sayles & Company Incorporated, Employees Profit Sharing Retirement Plan
held shares of beneficial interest in the Funds as follows:
Profit
Pension Sharing
Plan Plan
------- -------
Bond Fund ............................. 661,193 1,102,859
Global Bond Fund ...................... 641,304 233,906
High Yield Fund ....................... 0 150,409
Intermediate Maturity Bond Fund ....... 205,192 118,589
Investment Grade Bond Fund ............ 0 62,927
Short-Term Bond Fund .................. 52,284 223,551
U.S. Government Securities Fund ....... 538,396 266,466
4. CREDIT RISK -- The Bond Fund may invest up to 35%, the Global Bond and
Short-Term Bond Funds each may invest up to 20%, the Intermediate Maturity
Bond and the Investment Grade Bond Funds each may invest up to 10%, and the
High Yield Fund will normally invest at least 65% of its assets in securities
offering high current income, which generally will be in the lower rating
categories of recognized rating agencies. These securities are regarded as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations and will generally
involve more credit risk than securities in the higher rating categories. In
addition, the trading market for high yield securities may be relatively less
liquid than the market for higher-rated securities.
5. FOREIGN SECURITIES -- Each Fund (except the Municipal Bond and U.S.
Government Securities Funds) may purchase securities of foreign issuers.
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
U.S. companies and securities of the U.S. government. These risks include
revaluation of currencies and the risk of appropriation. Moreover, the markets
for securities of many foreign companies and foreign governments may be less
liquid and the prices of such securities may be more volatile than those
securities of comparable U.S. companies and the U.S. government.
6. CAPITAL STOCK TRANSACTIONS -- The tables below summarize the transactions
in Fund shares for the periods ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Loomis Sayles Bond Fund
------------------------------------------------------------------------
Period Ended Period Ended
December 31, 1997 December 31, 1996
----------------------------------- -----------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued from the sale of shares .... 63,069,086 $809,023,819 30,770,089 $380,541,907
Issued in connection with the
reinvestment of:
Dividends from investment income .. 4,161,568 53,391,457 1,888,855 23,025,701
Distributions from net realized
gains on investment ............. 1,331,267 17,074,295 704,026 8,749,675
Redeemed .......................... (13,902,007) (177,561,664) (10,467,220) (128,158,663)
---------- ------------ ---------- ------------
Net change ........................ 54,659,914 $701,927,907 22,895,750 $284,158,620
========== ============ ========== ============
<CAPTION>
Retail Class Shares* Shares Amount
- -------------------- ------ ------
<S> <C> <C>
Issued from the sale of shares .... 2,944,758 $ 37,693,272
Issued in connection with the
reinvestment of:
Dividends from investment income .. 88,526 1,140,035
Distributions from net realized
gains on investments ............ 35,722 457,759
Redeemed .......................... (476,803) (6,205,606)
--------- ------------
Net change ........................ 2,592,203 $ 33,085,460
========= ============
*From January 2, 1997 (commencement of class operations).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Loomis Sayles Global Bond Fund
----------------------------------------------------------------
Period Ended Period Ended
December 31, 1997 December 31, 1996
------------------------------ --------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued from the sale of shares .... 450,349 $5,703,587 1,525,167 $18,653,771
Issued in connection with the
reinvestment of:
Dividends from investment income .. 141,324 1,676,109 92,817 1,145,834
Distributions from net realized gains
on investments .................. 0 0 0 0
Redeemed .......................... (338,278) (4,226,586) (375,310) (4,457,214)
------ ---------- -------- ----------
Net change ........................ 253,395 $3,153,110 1,242,674 $15,342,391
<CAPTION>
Retail Class Shares* Shares Amount
------ ------
<S> <C> <C>
Issued from the sale of shares .... 568,889 $7,115,633
Issued in connection with the
reinvestment of:
Dividends from investment income .. 18,404 218,453
Distributions from net realized gains
on investments .................. 0 0
Redeemed .......................... (190,528) (2,420,537)
-------- ----------
Net change ........................ 396,765 $4,913,549
======= ==========
*From January 2, 1997 (commencement of class operations).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Loomis Sayles High Yield Fund
--------------------------------------------------------------
Period Ended Period Ended
December 31, 1997 December 31, 1996*
------------------------------ ------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued from the sale of shares ............ 345,923 $3,577,772 189,979 $1,915,483
Issued in connection with the reinvestment
of:
Dividends from investment income .......... 30,218 313,530 3,048 30,815
Distributions from net realized gains on
investment ............................... 10,940 111,043 0 0
Redeemed ................................... (58,540) (600,500) (1,234) (12,581)
------- -------- ------ -------
Net change ................................. 328,541 $3,401,845 191,793 $1,933,717
======= ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
Retail Class Shares** Shares Amount
- --------------------- ------ ------
<S> <C> <C>
Issued from the sale of shares ............. 343,422 $3,602,850
Issued in connection with the reinvestment
of:
Dividends from investment income ........... 13,730 142,625
Distributions from net realized gains on
investment ............................... 6,441 65,308
Redeemed ................................... (53,163) (558,960)
------ ----------
Net change ................................. 310,430 $3,251,823
======= ==========
*From September 11, 1996 (commencement of operations).
**From January 2, 1997 (commencement of class operations).
</TABLE>
<PAGE>
Loomis Sayles Intermediate Maturity Bond Fund
---------------------------------------------
Period Ended
December 31, 1997*
------------------------------
Institutional Class Shares Shares Amount
- -------------------------- ------ ------
Issued from the sale of shares ............. 713,449 $7,196,630
Issued in connection with the reinvestment
of:
Dividends from investment income ........... 25,621 260,248
Distributions from net realized gains on
investment ............................... 875 8,824
Redeemed ...................................(111,401) (1,136,539)
------- ----------
Net change ................................. 628,544 $6,329,163
======= ==========
Retail Class Shares Shares Amount
- ------------------- ------ ------
Issued from the sale of shares ............. 40,713 $ 419,211
Issued in connection with the reinvestment
of:
Dividends from investment income ........... 1,346 13,686
Distributions from net realized gains on
investment ............................... 64 641
Redeemed ................................... 0 0
------ ----------
Net change ................................. 42,123 $ 433,538
====== ==========
*From January 2, 1997 (commencement of operations).
<PAGE>
Loomis Sayles Investment Grade Bond Fund
----------------------------------------
Period Ended
December 31, 1997*
------------------------------
Institutional Class Shares Shares Amount
- -------------------------- ------ ------
Issued from the sale of shares ............ 217,283 $2,218,354
Issued in connection with the reinvestment
of:
Dividends from investment income .......... 11,908 125,624
Distributions from net realized gains on
investment .............................. 2,308 24,442
Redeemed .................................. (689) (7,042)
------ ----------
Net change ................................ 230,810 $2,361,378
======= ==========
Retail Class Shares Shares Amount
- ------------------ ------ ------
Issued from the sale of shares ............ 80,460 $ 849,980
Issued in connection with the reinvestment
of:
Dividends from investment income ........... 3,126 33,280
Distributions from net realized gains on
investment ............................... 842 8,918
Redeemed ................................... (3,085) (32,703)
------ ----------
Net change ................................. 81,343 $ 859,475
====== ==========
*From January 2, 1997 (commencement of operations).
<PAGE>
<TABLE>
<CAPTION>
Loomis Sayles Municipal Bond Fund
----------------------------------------------------------------
Period Ended Period Ended
December 31, 1997 December 31, 1996
------------------------------- -------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued from the sale of shares ............ 146,945 $1,692,152 130,141 $1,455,513
Issued in connection with the reinvestment
of:
Dividends from investment income .......... 23,982 273,619 23,403 263,016
Distributions from net realized gains on
investment .............................. 5,018 58,244 4,717 52,895
Redeemed .................................. (198,471) (2,254,718) (77,656) (872,674)
-------- ---------- ------- --------
Net change ................................ (22,526) $ (230,703) 80,605 $ 898,750
======= ========== ====== ==========
</TABLE>
<TABLE>
<CAPTION>
Loomis Sayles Short-Term Bond Fund
--------------------------------------------------------------------
Period Ended Period Ended
December 31, 1997 December 31, 1996
--------------------------------- ---------------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ------ ------- ------ ------
<S> <C> <C> <C> <C>
Issued from the sale of shares ........ 1,184,127 $11,497,925 1,283,882 $12,426,078
Issued in connection with the
reinvestment of:
Dividends from investment income ...... 94,766 918,722 106,059 1,027,017
Distributions from net realized gains
on investment ....................... 0 0 0 0
Redeemed .............................. (1,232,069) (11,926,660) (2,163,540) (20,966,857)
---------- ----------- ---------- -----------
Net change ............................ 46,824 $ 489,987 (773,599) $(7,513,762)
====== =========== ======== ===========
</TABLE>
<PAGE>
Retail Class Shares* Shares Amount
- ------------------- ------ ------
Issued from the sale of shares ........ 45,040 $ 436,711
Issued in connection with the
reinvestment of:
Dividends from investment income ...... 1,073 10,404
Distributions from net realized gains
on investment ....................... 0 0
Redeemed .............................. (16,930) (163,198)
------ ----------
Net change ............................ 29,183 $ 283,917
====== ===========
*From January 2, 1997 (commencement of class operations).
<TABLE>
<CAPTION>
Loomis Sayles U.S. Government Securities Fund
------------------------------------------------------------
Period Ended Period Ended
December 31, 1997 December 31, 1996
------------------------------- ---------------------------
Institutional Class Shares Shares Amount Shares Amount
- -------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Issued from the sale of shares .......... 444,723 $ 4,676,742 864,647 $ 8,983,613
Issued in connection with the
reinvestment of:
Dividends from investment income ........ 77,074 792,744 129,259 1,274,113
Distributions from net realized gains on
investment ............................ 0 0 0 0
Redeemed ................................ (277,818) (2,799,223) (1,418,646) (14,426,898)
-------- ------------ ---------- -----------
Net change .............................. 243,979 $ 2,670,263 (424,740) $ (4,169,172)
======== =========== ========== ============
</TABLE>
<PAGE>
1997 U.S. TAX AND DISTRIBUTION INFORMATION TO SHAREHOLDERS (UNAUDITED)
A. CAPITAL GAINS DISTRIBUTIONS -- Pursuant to Internal Revenue Section
852(b), the distributions set forth below have been designated as capital
gains distributions for the fiscal year ended December 31, 1997:
28% Rate Gain 20% Rate Gain
Amount Amount
----------------- ---------------
Bond Fund ............................... $5,325,149 $10,190,111
Global Bond Fund ........................ 0 38,826
High Yield Fund ......................... 30,674 0
Intermediate Maturity Bond Fund ......... 0 0
Investment Grade Bond Fund .............. 0 0
Municipal Bond Fund ..................... 48,100 4,463
Short-Term Bond Fund .................... 0 0
U.S. Government Securities Fund ......... 0 0
On August 5, 1997, the Taxpayer Relief Act (the "Act") of 1997 was enacted.
Under the Act, the maximum capital gain rate for individuals on net gains from
investment activities was reduced from 28% to 20% (10% for persons taxed at a
15% rate) depending on both the holding period of the investment and the date
the investment was sold. Capital gains realized from transactions that do not
meet the prescribed transition and holding period rules of the Act will
continue to be taxed at a maximum rate of 28%.
B. CORPORATE DIVIDENDS RECEIVED DEDUCTION -- For the fiscal year ended
December 31, 1997, a percentage of dividends distributed by the Funds listed
below qualify for the dividends received deduction for corporate shareholders.
These percentages are as follows:
Qualifying
Percentage
----------
Bond Fund ................................................... 2.71%
C. INCOME DERIVED FROM TREASURY OBLIGATIONS -- Of the dividends distributed
during the fiscal year, the percentages as indicated below by Fund, by
obligation type, was derived from U.S. government, or its agencies. Income
earned on these obligations may be exempt from state income tax as applicable:
<TABLE>
<CAPTION>
Global High Intermediate Investment
Bond Yield Maturity Grade
Bond Fund Fund Fund Bond Fund Bond Fund
------------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Obligations (a) .. 6.55% 0.47% 0.19% 5.20% 3.82%
Other Direct U.S. Government
Obligations(b) ............... 0.00 0.00 0.00 0.00 0.00
Other Indirect U.S. Government
Obligations(c) ............... 1.53 1.52 0.00 9.66 0.77
----- ----- ----- ------ ----
Total U.S. Government
Income ....................... 8.08% 1.99% 0.19% 14.86% 4.59%
</TABLE>
U.S. Government
Municipal Short-Term Securities
Bond Fund Bond Fund Fund
------------- ------------ --------------
U.S. Treasury Obligations(a) ... 2.46% 12.28% 68.45%
Other Direct U.S. Government
Obligations(b) ............... 0.00 0.00 22.63
Other Indirect U.S. Government
Obligations(c) ............... 0.00 7.50 7.06
---- ----- ----
Total U.S. Government
Income ....................... 2.46% 19.78% 98.14%
(a) Treasury obligations include bills, notes and bonds.
(b) Other Direct U.S. Government Obligations includes Federal Farm Credit and
Federal Home Loan Banks.
(c) Other Indirect U.S. Government Obligations include Federal Home Loan
Mortgage Corporation, Federal National Mortgage Corporation and Government
National Mortgage Association.
D. EXEMPT INTEREST DIVIDENDS -- Of the dividends paid by the Municipal Bond
Fund from net investment income for the taxable year ended December 31, 1997,
94.77% constituted exempt interest dividends for Federal income tax purposes.
<PAGE>
LOOMIS SAYLES FIXED INCOME FUND
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of the Loomis Sayles Fixed Income Funds:
We have audited the accompanying statements of assets and liabilities of
the Loomis Sayles Fixed Income Funds (consisting of the Loomis Sayles Bond
Fund, Global Bond Fund, High Yield Fund, Intermediate Maturity Bond Fund,
Investment Grade Bond Fund, Municipal Bond Fund, Short-Term Bond Fund, and
U.S. Government Securities Fund) (collectively, the "Funds"), including the
schedules of portfolio investments, as of December 31, 1997 and the related
statements of operations, statements of changes in net assets and financial
highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
the Loomis Sayles Fixed Income Funds as of December 31, 1997, the results of
their operations, the changes in their net assets and the financial highlights
for each of the periods indicated therein, in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 23, 1998
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
- ------------------------------------------------------------------------------
BOARD OF TRUSTEES
EARL W. FOELL
DANIEL J. FUSS
RICHARD S. HOLWAY
TERRY R. LAUTENBACH
MICHAEL T. MURRAY
OFFICERS
PRESIDENT
DANIEL J. FUSS
EXECUTIVE VICE PRESIDENT TREASURER
ROBERT J. BLANDING MARK W. HOLLAND
VICE PRESIDENTS ASSISTANT TREASURER
JEROME A. CASTELLINI NICHOLAS H. PALMERINO
MARY C. CHAMPAGNE
E. JOHN DEBEER SECRETARY AND
PAUL H. DREXLER COMPLIANCE OFFICER
WILLIAM H. EIGEN, JR. SHEILA M. BARRY
CHRISTOPER R. ELY
QUENTIN P. FAULKNER ASSISTANT SECRETARIES
PHILIP C. FINE MARGARET W. CHAMBERS
MARTHA F. HODGMAN LAURIE M. GALLAGHER
JOHN HYLL BONNIE S. THOMPSON
JEFFREY L. MEADE
KENT P. NEWMARK
SCOTT S. PAPE
JEFFREY C. PETHERICK
PHILIP J. SCHETTEWI
DAVID L. SMITH
SANDRA P. TICHENOR
JEFFREY W. WARDLOW
GREGG D. WATKINS
ANTHONY J. WILKINS
JOHN F. YEAGER III
<PAGE>
For Information about:
o Establishing an account
o Account procedures and status
o Exchanges
o Shareholder services
PHONE 800-626-9390
For all other information about the Funds:
PHONE 800-633-3330
TO REQUEST ANY OF THE FOLLOWING, PRESS OR SAY THE NUMBER
[1] LITERATURE AND INFORMATION
[2] NET ASSET VALUES AND YIELDS
[3] SPEAK TO A MARKETING REPRESENTATIVE
[4] ADVISORY AND BROKER/DEALER SERVICES
[5] INSTITUTIONAL AND HIGH NET WORTH
OPERATIONS, TRADING AND CLIENT SERVICES
As always, we are interested in your comments about the job we are doing and
in answering any questions you may have. Please do not hesitate to give us a
call at the phone number listed above, Monday through Friday, 8:45 to 4:45
p.m. EST.
INVESTMENT ADVISER
Loomis Sayles & Company, L.P. o One Financial Center o Boston, MA 02111
TRANSFER AND DIVIDEND PAYING AGENT AND CUSTODIAN OF ASSETS
State Street Bank and Trust Company o Boston, MA 02102
SHAREHOLDER SERVICING AGENT FOR STATE STREET BANK AND TRUST COMPANY
Boston Financial Data Services, Inc. o P.O. Box 8314 o Boston, MA 02266
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. o One Post Office Square o Boston, MA 02109
This report has been prepared for the shareholders of the Funds and is not
authorized for distribution to prospective investors in the Funds unless it
is accompanied or preceded by an effective prospectus.
LSF802108
